Episode Transcript
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Speaker 1 (00:00):
Welcome back everybody to the Deep Dive.
This time we're taking a closerlook at real estate investing.
Speaker 2 (00:05):
Sounds exciting.
Speaker 1 (00:07):
It is, and specifically, we're going to be
diving into creative financingand some unique investment
strategies.
You know we've gotten a ton offeedback from all of you
listeners and this seems to besomething that everyone's really
interested in, so we'vegathered a whole bunch of
resources to help us unpack itall.
Like we're on a treasure hunt,yeah a treasure hunt, yeah, a
treasure hunt for financialfreedom.
Speaker 2 (00:26):
I like it.
Speaker 1 (00:27):
Speaking of experts, you know, this whole topic kind
of reminds me of Robert Flowersand his work with AI in real
estate.
Oh yeah, remember, we did adeep dive into his research.
We're all back, yeah, and nowhe's come out with this brand
new book.
It's called AI Strategies forReal Estate Entrepreneurs.
Speaker 2 (00:45):
Oh, wow.
Speaker 1 (00:45):
Have you seen that?
Speaker 2 (00:46):
I haven't gotten my hands on it yet, but it's
definitely on my list.
Speaker 1 (00:49):
For sure it's a must read Flowers.
He always seems to bring afresh perspective to the
industry.
Speaker 2 (00:55):
Yeah, he does.
Speaker 1 (01:01):
And speaking of fresh , perspectives and innovative
approaches we have to give ashout out to our sponsor,
absolutely Flowers andAssociates Property Rentals.
They're doing some amazing workwith special needs housing.
Speaker 2 (01:08):
Yeah.
Speaker 1 (01:08):
Really creating passive income while making a
real difference.
Speaker 2 (01:12):
And that's a really crucial need right now.
Speaker 1 (01:15):
Huge need.
Speaker 2 (01:15):
You know, providing housing for individuals with
special needs, and it can besuch a rewarding investment
strategy.
Speaker 1 (01:22):
Absolutely, both financially and personally, for
sure.
So for anyone listening who'sintrigued by this type of
investment, you can reach out toFlowers and Associates.
Their number is 901-445-8148.
Awesome.
Now let's dive into the heartof our deep dive Creative
financing.
What are we talking about here?
(01:42):
What are some of the keyadvantages of exploring these
alternative financing options?
Speaker 2 (01:47):
Well, especially in today's market, I think
flexibility is key and a lot ofthese creative financing methods
offer more adaptable terms thanwhat you would find with a
traditional bank loan, and thatcan be a real game changer for
both buyers and sellers.
Speaker 1 (02:01):
So we're thinking outside the bank Exactly, not
just sticking to thattraditional mortgage route.
Speaker 2 (02:05):
Exactly yeah, and one example that really stood out
to me in the research is sellerfinancing.
Speaker 1 (02:11):
Okay.
Speaker 2 (02:11):
Where, instead of going through a bank, the seller
of the property actually actsas the lender.
Speaker 1 (02:17):
Interesting.
Speaker 2 (02:17):
And they can often offer more flexible payment
plans or potentially even lowerinterest rates.
Speaker 1 (02:23):
I see.
Speaker 2 (02:24):
We found a case study where a first-time buyer they
actually saved thousands ofdollars over the life of their
loan through seller financing.
Speaker 1 (02:31):
Wow.
Speaker 2 (02:32):
Because they were able to secure a lower interest
rate than what any bank wasoffering.
Speaker 1 (02:36):
Okay.
So that's a real-world exampleof how creative financing can
actually make a difference.
Speaker 2 (02:42):
Right.
Speaker 1 (02:42):
What are some of the other options that we uncovered
in the source material?
Speaker 2 (02:46):
Another one that's pretty interesting is subject to
financing.
Speaker 1 (02:49):
Subject to have you heard of that one.
I have not so.
Speaker 2 (02:52):
basically, the buyer takes over the seller's existing
mortgage.
Speaker 1 (02:56):
Okay.
Speaker 2 (02:56):
So it can be a good option for buyers who might not
qualify for a traditional loan.
Speaker 1 (03:01):
I see.
Speaker 2 (03:01):
But it's super important to understand the
risks involved.
Okay, you know.
For example, if the lenderfinds out about the transfer and
the mortgage has what's calleda due on sale clause, they could
demand full payment of the loan.
Speaker 1 (03:13):
Oh wow, so that sounds like subject to financing
is something that requires, youknow, careful consideration.
Speaker 2 (03:20):
Definitely.
Speaker 1 (03:20):
Expert legal advice.
Speaker 2 (03:21):
Lots of due diligence .
Speaker 1 (03:22):
Yeah, to navigate those potential pitfalls.
What about something a littleless complex, maybe an option
that kind of serves as astepping stone to ownership?
Speaker 2 (03:31):
Yeah, there's lease options.
Sometimes they call them rentto own, okay when the buyer
rents the property with theoption to purchase it later.
Speaker 1 (03:40):
Okay.
Speaker 2 (03:40):
So that can be a good way for someone to build credit
or save for a down paymentwhile they're actually living in
the property.
Speaker 1 (03:48):
Gotcha.
That makes a lot of sense,especially for first-time buyers
who aren't quite ready to jumpinto a full mortgage.
Speaker 2 (03:54):
Right.
Speaker 1 (03:55):
Now let's talk about private and hard money loans.
Speaker 2 (03:58):
Yeah.
Speaker 1 (03:58):
What makes those different from traditional loans
?
Speaker 2 (04:01):
So both private and hard money loans come from well
what we call non-traditionalsources, often individuals or
private lending companies.
Speaker 1 (04:08):
So not the big banks.
Speaker 2 (04:10):
Right, Not your typical bank.
So private money loans thosetypically come from personal
connections.
Speaker 1 (04:15):
Like family friends.
Speaker 2 (04:16):
Exactly Family or friends, okay, whereas hard
money loans, those arespecifically for short-term,
higher-interest loans, oftenused for investment properties.
Speaker 1 (04:26):
So it's more about speed than credit scores.
Speaker 2 (04:28):
Yeah, hard money lenders are usually more
interested in the profitabilityof the deal.
Speaker 1 (04:32):
Okay.
Speaker 2 (04:33):
Especially in scenarios like a fix and flip,
where time is of the essence.
Speaker 1 (04:37):
Right.
Speaker 2 (04:38):
So they're less concerned with credit history
and more focused on the value ofthe property itself.
Speaker 1 (04:44):
Gotcha.
So it seems like each financingoption has its own unique
characteristics, right?
Speaker 2 (04:49):
For sure.
Speaker 1 (04:50):
And it caters to different needs and situations.
Speaker 2 (04:52):
Yeah.
Speaker 1 (04:52):
What are some other creative financing tools we
should explore?
Speaker 2 (04:55):
Well, we also found information on wraparound
mortgages.
Speaker 1 (04:58):
Okay.
Speaker 2 (04:59):
Have you ever heard of those?
Speaker 1 (05:00):
Wraparound no.
Speaker 2 (05:02):
So in this setup, a new mortgage is created that
wraps around the existing one,so the buyer makes one payment
to the seller, who thencontinues paying the original
mortgage.
Speaker 1 (05:11):
OK, so what would be the benefit of doing that
compared to other options?
Speaker 2 (05:15):
Well, it can be advantageous when the seller has
a low interest rate that theywant to preserve, ok.
However, just like with subjectto financing wraparound
mortgages, have you knowpotential legal complexities
Right?
Both parties really need tounderstand the terms and make
sure everything is donecorrectly.
Speaker 1 (05:33):
It seems like having legal counsel is a recurring
theme, definitely With thesecreative financing approaches.
What about contracts for deed?
How do those work?
Speaker 2 (05:41):
So in a contract for deed the seller actually retains
ownership of the property untilthe buyer makes the full
payment.
Speaker 1 (05:49):
I see.
Speaker 2 (05:49):
So the buyer makes payments directly to the seller,
okay, and while it does offersecurity for the seller, buyers
need to be cautious because theydon't gain full ownership until
that final payment is made.
Speaker 1 (06:01):
So contracts for deed could be a viable option.
Speaker 2 (06:04):
Yeah.
Speaker 1 (06:05):
But again, buyers need to understand the potential
risks and have a solidagreement in place.
Definitely, what about equitypartnerships?
Speaker 2 (06:12):
Oh yeah.
Speaker 1 (06:13):
Are those another form of creative financing?
Speaker 2 (06:15):
They can be.
Yeah so equity partnershipsthey basically involve teaming
up with investors who contributecapital in exchange for a share
of ownership or profits.
Speaker 1 (06:24):
OK.
Speaker 2 (06:24):
This is particularly common in larger commercial real
estate projects common inlarger commercial real estate
projects.
Speaker 1 (06:34):
So it's a way to leverage other people's
resources and expertise to kindof get a project off the ground.
Exactly, Especially when you'redealing with.
You know, larger investments.
Speaker 2 (06:39):
It's all about collaboration and shared risk
and reward.
Speaker 1 (06:43):
Yeah, exactly.
Speaker 2 (06:44):
Okay, so now let's kind of shift gears a bit and
explore some of the investmentstrategies that we uncovered in
our deep dive.
Speaker 1 (06:51):
Yeah, let's do it.
Speaker 2 (06:52):
It's like choosing the right vehicle for your real
estate journey.
Speaker 1 (06:55):
I like that analogy.
Speaker 2 (06:56):
So let's start with the reliable sedan of real
estate investing.
Speaker 1 (06:59):
Okay.
Speaker 2 (07:00):
Buy and hold.
What makes the strategy soappealing to investors?
Well, buy and hold reallyfocuses on generating long-term
passive income.
So you purchase a property, yourent it out and you benefit
from that consistent cash flowwhile the property appreciates
over time.
Speaker 1 (07:16):
And you mentioned tax advantages earlier.
What are some of the taxbenefits associated with real
estate investing, particularlywith a buy-and-hold strategy?
Speaker 2 (07:23):
Oh, there are several .
So, for example, rental incomeis often taxed at a lower rate
than earned income, and you candeduct expenses like mortgage
interest, property taxes andmaintenance costs.
And then real estate investorscan also take advantage of
depreciation, which allows youto write off a portion of the
property's value each year,further reducing your tax burden
(07:43):
.
Speaker 1 (07:44):
Okay, so that's really helpful information.
It sounds like the taxadvantages alone can make a
significant difference in theoverall return on investment.
Speaker 2 (07:50):
Yeah, absolutely.
Speaker 1 (07:51):
Now what about those investors who are looking for a
more hands-on approach,something with a bit more action
and potentially quicker returns?
Speaker 2 (07:58):
Yeah, if you're drawn to that fixer-upper mentality,
fix and flip might be a good fit.
This strategy involvespurchasing undervalued
properties, renovating them andthen selling them for a profit.
Speaker 1 (08:11):
So it sounds exciting , but also potentially
challenging.
What are some of the key skillsor knowledge areas that are
essential for successful fix andflip investing?
Speaker 2 (08:19):
Well, you definitely need a keen eye for spotting
those undervalued properties, asolid understanding of
construction and renovationcosts and the ability to manage
projects effectively.
Market knowledge is alsocrucial to ensure you're buying
and selling at the right pricepoints.
Speaker 1 (08:35):
So it's not just about swinging a hammer and
slapping on some paint.
No, not at all, it's amultifaceted strategy that
requires a lot of expertise.
Speaker 2 (08:42):
It really does.
Speaker 1 (08:43):
And let's not forget about risk assessment.
Fix and flip investing can belucrative, but it's not without
its risks, Right, you knowunexpected construction delays,
unforeseen repairs or a suddenshift in the market.
All of those things can impactyour bottom line Absolutely.
Now let's talk about househacking.
It's a strategy I've alwaysfound intriguing.
Can you explain how it worksand why it's become so popular,
(09:04):
especially among newer investors?
Speaker 2 (09:07):
Yeah, House hacking is all about turning your own
housing costs into an investmentopportunity.
So essentially, you purchase amultifamily property, live in
one unit and rent out the others.
Speaker 1 (09:18):
Okay.
Speaker 2 (09:18):
The rental income helps offset your mortgage and
other expenses, and you'rebuilding equity in the property
at the same time.
Speaker 1 (09:25):
So you're essentially getting paid to live in your
own home and build wealthsimultaneously.
Speaker 2 (09:29):
That's the idea.
It's a fantastic way to enterthe real estate market,
especially if you don't have ahuge down payment, and it's
especially popular among youngerinvestors who are comfortable
being landlords.
Speaker 1 (09:40):
It definitely sounds like a strategy worth exploring.
Now, what about the BRRR method?
Speaker 2 (09:45):
The BRRR method.
Speaker 1 (09:47):
It seems to be gaining a lot of traction in the
real estate investing world.
Can you break it down for us?
Speaker 2 (09:52):
Yeah, brrr stands for Buy, rehab, rent, refinance,
repeat.
It's a strategy focused onbuilding a real estate portfolio
relatively quickly.
Speaker 1 (10:01):
So how does the process work?
What are the key steps involvedin successfully executing the
BRRRR method?
Speaker 2 (10:08):
Okay.
So first you purchase aproperty that needs some work,
often a distressed property thatyou can buy at a discount.
Then you rehab or renovate theproperty, increasing its value.
Next you find a tenant andstart generating rental income.
Once you've built up someequity, you refinance the
property to pull out cash andthen you use that cash to
(10:29):
purchase another property andrepeat the process.
Speaker 1 (10:32):
Wow, it sounds like a clever way to leverage the
equity you build in one propertyto fuel the purchase of another
.
Speaker 2 (10:36):
Exactly, but it does require careful planning and
execution.
You need to be savvy withrenovations, understand
financing options and beprepared to manage rental
properties effectively.
Speaker 1 (10:47):
MARK MIRCHANDANI.
Now let's move on to a strategythat doesn't actually require
owning property wholesalingMELANIE.
Speaker 2 (10:51):
WARRICK.
Speaker 1 (10:51):
Wholesaling, yes.
Mark MIRCHANDANI, Can you tellus how wholesaling works and
what makes it unique compared tothe other investment strategies
we've discussed?
Speaker 2 (10:57):
MELANIE WARRICK.
So wholesaling is all aboutfinding great deals and
motivated sellers with eagerbuyers.
You essentially act as amiddleman, putting a property
under contract at a low priceand then assigning that contract
to another buyer for a fee.
Speaker 1 (11:11):
So you're profiting from the transaction without
actually owning the property.
Speaker 2 (11:15):
Yes, that's the key difference.
Wholesaling requires minimalcapital, but strong networking,
negotiation and marketing skills.
You need to be able to spotdeals, build relationships and
move quickly.
Speaker 1 (11:27):
Sounds like a fast-paced and dynamic approach
to real estate investing.
Speaker 2 (11:31):
It is.
Speaker 1 (11:31):
What about short-term rentals?
With the rise of platforms likeAirbnb, this seems like a
popular option, especially forinvestors who enjoy hospitality.
Speaker 2 (11:39):
Yeah, short-term rentals can generate higher
returns compared to traditionallong-term rentals, but they also
require more active management.
You're responsible for bookings, guest inquiries, cleaning,
maintenance and often furnishingthe property.
Speaker 1 (11:53):
It sounds like a great option for someone who
enjoys creating a welcomingguest experience and is willing
to put in the extra effort.
Now let's shift our focus tocommercial real estate, which
seems like a completelydifferent world compared to
residential real estate.
Speaker 2 (12:06):
It is Commercial real estate, or CRE, includes
properties like office buildings, retail spaces and large
apartment complexes.
It often requires significantcapital and specialized
knowledge.
Speaker 1 (12:17):
So it's not typically an entry-level investment
strategy.
Speaker 2 (12:20):
Not usually, but the potential rewards can be
substantial.
Cre offers diversification,stable cash flow and long-term
appreciation potential.
Speaker 1 (12:30):
What are some of the key differences between
investing in commercial realestate versus residential real
estate?
Speaker 2 (12:35):
Well, commercial leases are often longer term,
which provides more stableincome, and the properties
themselves tend to be larger andmore complex, requiring a
different level of expertise.
Speaker 1 (12:45):
Now I want to circle back to special needs housing, a
topic we touched on earlierwhen discussing our sponsor
Flowers Associates PropertyRentals.
Can you elaborate on why thisis considered a unique and
potentially rewarding niche inreal estate investing?
Speaker 2 (12:58):
Yeah, Special needs housing addresses a growing
demand for quality housing forindividuals with disabilities
and it combines social impactwith a reliable income stream.
Speaker 1 (13:08):
So it's an investment that can generate financial
returns while also making apositive difference in the lives
of others.
Speaker 2 (13:15):
Exactly, and there are often government programs
and nonprofit organizations thatprovide funding and support for
special needs housing, whichcan make it a more stable and
secure investment in some cases.
Speaker 1 (13:25):
We've covered a lot of ground, from creative
financing options to a widerange of investment strategies.
It's clear that real estateinvesting offers a lot of
diversity and opportunities forthose willing to learn and take
calculated risks.
Speaker 2 (13:38):
Absolutely.
There's a path for everyinvestor, from the beginner
looking to house hack their wayinto the market to the seasoned
investor building a portfolio ofcommercial properties.
The key is to find the rightstrategy for your individual
goals and risk tolerance.
Speaker 1 (13:51):
It's been quite a journey exploring all these
different avenues, but before wewrap up, what are some key
takeaways or insights you thinkour listeners should keep in
mind as they start exploringreal estate investing?
Speaker 2 (14:02):
I think one of the most important things is just to
do your due diligence,understand your local market
trends, connect with someexperienced investors and just
thoroughly research anyfinancing or investment
strategies that you know reallypete your interest.
Speaker 1 (14:17):
So knowledge is power Absolutely.
It's not just about jumping inhead first, it's about being
informed and prepared.
Speaker 2 (14:25):
For sure, and you know it's also wise to seek
advice from, you know, financialadvisors and legal
professionals.
Just make sure you reallyunderstand the tax implications
and all the legal complexitiesinvolved in real estate
transactions.
Speaker 1 (14:39):
That makes a lot of sense.
Now, with all this knowledgethat we've unpacked, what's the
biggest takeaway for someonewho's feeling inspired to you
know?
Start their own real estatejourney.
Speaker 2 (14:49):
Well, I think you know real estate has the
potential to generate passiveincome, build wealth and create
a lasting legacy.
But it all starts with takingthat first step Right and
educating yourself.
Find your niche, you know,develop a solid plan and don't
be afraid to seek out mentors orjoin communities of you know
like minded investors.
Speaker 1 (15:10):
It's amazing how many different paths there are
within the world of real estate.
I know right it's not a onesize fits all approach.
Speaker 2 (15:16):
Definitely not.
It's all about finding theright fit for your individual
circumstances and committing tothe journey.
And remember there's a wealthof resources available to
support you along the way.
Speaker 1 (15:26):
Well said, this deep dive has been incredibly
insightful and I hope ourlisteners feel empowered to
explore the world of real estateinvesting with confidence.
Speaker 2 (15:35):
Me too.
It's been a pleasure divinginto these topics with you.
Speaker 1 (15:38):
Absolutely.
Before we sign off, is there,you know, one thought-provoking
question that you'd like toleave our listeners with?
Speaker 2 (15:45):
Yeah.
Speaker 1 (15:46):
As they embark on their real estate adventures.
Speaker 2 (15:48):
Hmm, now that you've unlocked all these possibilities
, ask yourself this what type ofreal estate investor will you
become?
Speaker 1 (15:56):
I love that.
It's all about defining yourown path Exactly and creating
your own success story.
We can't wait to see what ourlisteners accomplish.
Thanks for joining us on thisdeep dive and we'll see you next
time.
Welcome back everybody to the Deep Dive.
This time we're taking a closerlook at real estate investing.
Speaker 2 (00:05):
Sounds exciting.
Speaker 1 (00:07):
It is, and specifically, we're going to be
diving into creative financingand some unique investment
strategies.
You know we've gotten a ton offeedback from all of you
listeners and this seems to besomething that everyone's really
interested in, so we'vegathered a whole bunch of
resources to help us unpack itall.
Like we're on a treasure hunt,yeah a treasure hunt, yeah, a
treasure hunt for financialfreedom.
Speaker 2 (00:26):
I like it.
Speaker 1 (00:27):
Speaking of experts, you know, this whole topic kind
of reminds me of Robert Flowersand his work with AI in real
estate.
Oh yeah, remember, we did adeep dive into his research.
We're all back, yeah, and nowhe's come out with this brand
new book.
It's called AI Strategies forReal Estate Entrepreneurs.
Speaker 2 (00:45):
Oh, wow.
Speaker 1 (00:45):
Have you seen that?
Speaker 2 (00:46):
I haven't gotten my hands on it yet, but it's
definitely on my list.
Speaker 1 (00:49):
For sure it's a must read Flowers.
He always seems to bring afresh perspective to the
industry.
Speaker 2 (00:55):
Yeah, he does.
Speaker 1 (01:01):
And speaking of fresh , perspectives and innovative
approaches we have to give ashout out to our sponsor,
absolutely Flowers andAssociates Property Rentals.
They're doing some amazing workwith special needs housing.
Speaker 2 (01:08):
Yeah.
Speaker 1 (01:08):
Really creating passive income while making a
real difference.
Speaker 2 (01:12):
And that's a really crucial need right now.
Speaker 1 (01:15):
Huge need.
Speaker 2 (01:15):
You know, providing housing for individuals with
special needs, and it can besuch a rewarding investment
strategy.
Speaker 1 (01:22):
Absolutely, both financially and personally, for
sure.
So for anyone listening who'sintrigued by this type of
investment, you can reach out toFlowers and Associates.
Their number is 901-445-8148.
Awesome.
Now let's dive into the heartof our deep dive Creative
financing.
What are we talking about here?
(01:42):
What are some of the keyadvantages of exploring these
alternative financing options?
Speaker 2 (01:47):
Well, especially in today's market, I think
flexibility is key and a lot ofthese creative financing methods
offer more adaptable terms thanwhat you would find with a
traditional bank loan, and thatcan be a real game changer for
both buyers and sellers.
Speaker 1 (02:01):
So we're thinking outside the bank Exactly, not
just sticking to thattraditional mortgage route.
Speaker 2 (02:05):
Exactly yeah, and one example that really stood out
to me in the research is sellerfinancing.
Speaker 1 (02:11):
Okay.
Speaker 2 (02:11):
Where, instead of going through a bank, the seller
of the property actually actsas the lender.
Speaker 1 (02:17):
Interesting.
Speaker 2 (02:17):
And they can often offer more flexible payment
plans or potentially even lowerinterest rates.
Speaker 1 (02:23):
I see.
Speaker 2 (02:24):
We found a case study where a first-time buyer they
actually saved thousands ofdollars over the life of their
loan through seller financing.
Speaker 1 (02:31):
Wow.
Speaker 2 (02:32):
Because they were able to secure a lower interest
rate than what any bank wasoffering.
Speaker 1 (02:36):
Okay.
So that's a real-world exampleof how creative financing can
actually make a difference.
Speaker 2 (02:42):
Right.
Speaker 1 (02:42):
What are some of the other options that we uncovered
in the source material?
Speaker 2 (02:46):
Another one that's pretty interesting is subject to
financing.
Speaker 1 (02:49):
Subject to have you heard of that one.
I have not so.
Speaker 2 (02:52):
basically, the buyer takes over the seller's existing
mortgage.
Speaker 1 (02:56):
Okay.
Speaker 2 (02:56):
So it can be a good option for buyers who might not
qualify for a traditional loan.
Speaker 1 (03:01):
I see.
Speaker 2 (03:01):
But it's super important to understand the
risks involved.
Okay, you know.
For example, if the lenderfinds out about the transfer and
the mortgage has what's calleda due on sale clause, they could
demand full payment of the loan.
Speaker 1 (03:13):
Oh wow, so that sounds like subject to financing
is something that requires, youknow, careful consideration.
Speaker 2 (03:20):
Definitely.
Speaker 1 (03:20):
Expert legal advice.
Speaker 2 (03:21):
Lots of due diligence .
Speaker 1 (03:22):
Yeah, to navigate those potential pitfalls.
What about something a littleless complex, maybe an option
that kind of serves as astepping stone to ownership?
Speaker 2 (03:31):
Yeah, there's lease options.
Sometimes they call them rentto own, okay when the buyer
rents the property with theoption to purchase it later.
Speaker 1 (03:40):
Okay.
Speaker 2 (03:40):
So that can be a good way for someone to build credit
or save for a down paymentwhile they're actually living in
the property.
Speaker 1 (03:48):
Gotcha.
That makes a lot of sense,especially for first-time buyers
who aren't quite ready to jumpinto a full mortgage.
Speaker 2 (03:54):
Right.
Speaker 1 (03:55):
Now let's talk about private and hard money loans.
Speaker 2 (03:58):
Yeah.
Speaker 1 (03:58):
What makes those different from traditional loans
?
Speaker 2 (04:01):
So both private and hard money loans come from well
what we call non-traditionalsources, often individuals or
private lending companies.
Speaker 1 (04:08):
So not the big banks.
Speaker 2 (04:10):
Right, Not your typical bank.
So private money loans thosetypically come from personal
connections.
Speaker 1 (04:15):
Like family friends.
Speaker 2 (04:16):
Exactly Family or friends, okay, whereas hard
money loans, those arespecifically for short-term,
higher-interest loans, oftenused for investment properties.
Speaker 1 (04:26):
So it's more about speed than credit scores.
Speaker 2 (04:28):
Yeah, hard money lenders are usually more
interested in the profitabilityof the deal.
Speaker 1 (04:32):
Okay.
Speaker 2 (04:33):
Especially in scenarios like a fix and flip,
where time is of the essence.
Speaker 1 (04:37):
Right.
Speaker 2 (04:38):
So they're less concerned with credit history
and more focused on the value ofthe property itself.
Speaker 1 (04:44):
Gotcha.
So it seems like each financingoption has its own unique
characteristics, right?
Speaker 2 (04:49):
For sure.
Speaker 1 (04:50):
And it caters to different needs and situations.
Speaker 2 (04:52):
Yeah.
Speaker 1 (04:52):
What are some other creative financing tools we
should explore?
Speaker 2 (04:55):
Well, we also found information on wraparound
mortgages.
Speaker 1 (04:58):
Okay.
Speaker 2 (04:59):
Have you ever heard of those?
Speaker 1 (05:00):
Wraparound no.
Speaker 2 (05:02):
So in this setup, a new mortgage is created that
wraps around the existing one,so the buyer makes one payment
to the seller, who thencontinues paying the original
mortgage.
Speaker 1 (05:11):
OK, so what would be the benefit of doing that
compared to other options?
Speaker 2 (05:15):
Well, it can be advantageous when the seller has
a low interest rate that theywant to preserve, ok.
However, just like with subjectto financing wraparound
mortgages, have you knowpotential legal complexities
Right?
Both parties really need tounderstand the terms and make
sure everything is donecorrectly.
Speaker 1 (05:33):
It seems like having legal counsel is a recurring
theme, definitely With thesecreative financing approaches.
What about contracts for deed?
How do those work?
Speaker 2 (05:41):
So in a contract for deed the seller actually retains
ownership of the property untilthe buyer makes the full
payment.
Speaker 1 (05:49):
I see.
Speaker 2 (05:49):
So the buyer makes payments directly to the seller,
okay, and while it does offersecurity for the seller, buyers
need to be cautious because theydon't gain full ownership until
that final payment is made.
Speaker 1 (06:01):
So contracts for deed could be a viable option.
Speaker 2 (06:04):
Yeah.
Speaker 1 (06:05):
But again, buyers need to understand the potential
risks and have a solidagreement in place.
Definitely, what about equitypartnerships?
Speaker 2 (06:12):
Oh yeah.
Speaker 1 (06:13):
Are those another form of creative financing?
Speaker 2 (06:15):
They can be.
Yeah so equity partnershipsthey basically involve teaming
up with investors who contributecapital in exchange for a share
of ownership or profits.
Speaker 1 (06:24):
OK.
Speaker 2 (06:24):
This is particularly common in larger commercial real
estate projects common inlarger commercial real estate
projects.
Speaker 1 (06:34):
So it's a way to leverage other people's
resources and expertise to kindof get a project off the ground.
Exactly, Especially when you'redealing with.
You know, larger investments.
Speaker 2 (06:39):
It's all about collaboration and shared risk
and reward.
Speaker 1 (06:43):
Yeah, exactly.
Speaker 2 (06:44):
Okay, so now let's kind of shift gears a bit and
explore some of the investmentstrategies that we uncovered in
our deep dive.
Speaker 1 (06:51):
Yeah, let's do it.
Speaker 2 (06:52):
It's like choosing the right vehicle for your real
estate journey.
Speaker 1 (06:55):
I like that analogy.
Speaker 2 (06:56):
So let's start with the reliable sedan of real
estate investing.
Speaker 1 (06:59):
Okay.
Speaker 2 (07:00):
Buy and hold.
What makes the strategy soappealing to investors?
Well, buy and hold reallyfocuses on generating long-term
passive income.
So you purchase a property, yourent it out and you benefit
from that consistent cash flowwhile the property appreciates
over time.
Speaker 1 (07:16):
And you mentioned tax advantages earlier.
What are some of the taxbenefits associated with real
estate investing, particularlywith a buy-and-hold strategy?
Speaker 2 (07:23):
Oh, there are several .
So, for example, rental incomeis often taxed at a lower rate
than earned income, and you candeduct expenses like mortgage
interest, property taxes andmaintenance costs.
And then real estate investorscan also take advantage of
depreciation, which allows youto write off a portion of the
property's value each year,further reducing your tax burden
(07:43):
.
Speaker 1 (07:44):
Okay, so that's really helpful information.
It sounds like the taxadvantages alone can make a
significant difference in theoverall return on investment.
Speaker 2 (07:50):
Yeah, absolutely.
Speaker 1 (07:51):
Now what about those investors who are looking for a
more hands-on approach,something with a bit more action
and potentially quicker returns?
Speaker 2 (07:58):
Yeah, if you're drawn to that fixer-upper mentality,
fix and flip might be a good fit.
This strategy involvespurchasing undervalued
properties, renovating them andthen selling them for a profit.
Speaker 1 (08:11):
So it sounds exciting , but also potentially
challenging.
What are some of the key skillsor knowledge areas that are
essential for successful fix andflip investing?
Speaker 2 (08:19):
Well, you definitely need a keen eye for spotting
those undervalued properties, asolid understanding of
construction and renovationcosts and the ability to manage
projects effectively.
Market knowledge is alsocrucial to ensure you're buying
and selling at the right pricepoints.
Speaker 1 (08:35):
So it's not just about swinging a hammer and
slapping on some paint.
No, not at all, it's amultifaceted strategy that
requires a lot of expertise.
Speaker 2 (08:42):
It really does.
Speaker 1 (08:43):
And let's not forget about risk assessment.
Fix and flip investing can belucrative, but it's not without
its risks, Right, you knowunexpected construction delays,
unforeseen repairs or a suddenshift in the market.
All of those things can impactyour bottom line Absolutely.
Now let's talk about househacking.
It's a strategy I've alwaysfound intriguing.
Can you explain how it worksand why it's become so popular,
(09:04):
especially among newer investors?
Speaker 2 (09:07):
Yeah, House hacking is all about turning your own
housing costs into an investmentopportunity.
So essentially, you purchase amultifamily property, live in
one unit and rent out the others.
Speaker 1 (09:18):
Okay.
Speaker 2 (09:18):
The rental income helps offset your mortgage and
other expenses, and you'rebuilding equity in the property
at the same time.
Speaker 1 (09:25):
So you're essentially getting paid to live in your
own home and build wealthsimultaneously.
Speaker 2 (09:29):
That's the idea.
It's a fantastic way to enterthe real estate market,
especially if you don't have ahuge down payment, and it's
especially popular among youngerinvestors who are comfortable
being landlords.
Speaker 1 (09:40):
It definitely sounds like a strategy worth exploring.
Now, what about the BRRR method?
Speaker 2 (09:45):
The BRRR method.
Speaker 1 (09:47):
It seems to be gaining a lot of traction in the
real estate investing world.
Can you break it down for us?
Speaker 2 (09:52):
Yeah, brrr stands for Buy, rehab, rent, refinance,
repeat.
It's a strategy focused onbuilding a real estate portfolio
relatively quickly.
Speaker 1 (10:01):
So how does the process work?
What are the key steps involvedin successfully executing the
BRRRR method?
Speaker 2 (10:08):
Okay.
So first you purchase aproperty that needs some work,
often a distressed property thatyou can buy at a discount.
Then you rehab or renovate theproperty, increasing its value.
Next you find a tenant andstart generating rental income.
Once you've built up someequity, you refinance the
property to pull out cash andthen you use that cash to
(10:29):
purchase another property andrepeat the process.
Speaker 1 (10:32):
Wow, it sounds like a clever way to leverage the
equity you build in one propertyto fuel the purchase of another
.
Speaker 2 (10:36):
Exactly, but it does require careful planning and
execution.
You need to be savvy withrenovations, understand
financing options and beprepared to manage rental
properties effectively.
Speaker 1 (10:47):
MARK MIRCHANDANI.
Now let's move on to a strategythat doesn't actually require
owning property wholesalingMELANIE.
Speaker 2 (10:51):
WARRICK.
Speaker 1 (10:51):
Wholesaling, yes.
Mark MIRCHANDANI, Can you tellus how wholesaling works and
what makes it unique compared tothe other investment strategies
we've discussed?
Speaker 2 (10:57):
MELANIE WARRICK.
So wholesaling is all aboutfinding great deals and
motivated sellers with eagerbuyers.
You essentially act as amiddleman, putting a property
under contract at a low priceand then assigning that contract
to another buyer for a fee.
Speaker 1 (11:11):
So you're profiting from the transaction without
actually owning the property.
Speaker 2 (11:15):
Yes, that's the key difference.
Wholesaling requires minimalcapital, but strong networking,
negotiation and marketing skills.
You need to be able to spotdeals, build relationships and
move quickly.
Speaker 1 (11:27):
Sounds like a fast-paced and dynamic approach
to real estate investing.
Speaker 2 (11:31):
It is.
Speaker 1 (11:31):
What about short-term rentals?
With the rise of platforms likeAirbnb, this seems like a
popular option, especially forinvestors who enjoy hospitality.
Speaker 2 (11:39):
Yeah, short-term rentals can generate higher
returns compared to traditionallong-term rentals, but they also
require more active management.
You're responsible for bookings, guest inquiries, cleaning,
maintenance and often furnishingthe property.
Speaker 1 (11:53):
It sounds like a great option for someone who
enjoys creating a welcomingguest experience and is willing
to put in the extra effort.
Now let's shift our focus tocommercial real estate, which
seems like a completelydifferent world compared to
residential real estate.
Speaker 2 (12:06):
It is Commercial real estate, or CRE, includes
properties like office buildings, retail spaces and large
apartment complexes.
It often requires significantcapital and specialized
knowledge.
Speaker 1 (12:17):
So it's not typically an entry-level investment
strategy.
Speaker 2 (12:20):
Not usually, but the potential rewards can be
substantial.
Cre offers diversification,stable cash flow and long-term
appreciation potential.
Speaker 1 (12:30):
What are some of the key differences between
investing in commercial realestate versus residential real
estate?
Speaker 2 (12:35):
Well, commercial leases are often longer term,
which provides more stableincome, and the properties
themselves tend to be larger andmore complex, requiring a
different level of expertise.
Speaker 1 (12:45):
Now I want to circle back to special needs housing, a
topic we touched on earlierwhen discussing our sponsor
Flowers Associates PropertyRentals.
Can you elaborate on why thisis considered a unique and
potentially rewarding niche inreal estate investing?
Speaker 2 (12:58):
Yeah, Special needs housing addresses a growing
demand for quality housing forindividuals with disabilities
and it combines social impactwith a reliable income stream.
Speaker 1 (13:08):
So it's an investment that can generate financial
returns while also making apositive difference in the lives
of others.
Speaker 2 (13:15):
Exactly, and there are often government programs
and nonprofit organizations thatprovide funding and support for
special needs housing, whichcan make it a more stable and
secure investment in some cases.
Speaker 1 (13:25):
We've covered a lot of ground, from creative
financing options to a widerange of investment strategies.
It's clear that real estateinvesting offers a lot of
diversity and opportunities forthose willing to learn and take
calculated risks.
Speaker 2 (13:38):
Absolutely.
There's a path for everyinvestor, from the beginner
looking to house hack their wayinto the market to the seasoned
investor building a portfolio ofcommercial properties.
The key is to find the rightstrategy for your individual
goals and risk tolerance.
Speaker 1 (13:51):
It's been quite a journey exploring all these
different avenues, but before wewrap up, what are some key
takeaways or insights you thinkour listeners should keep in
mind as they start exploringreal estate investing?
Speaker 2 (14:02):
I think one of the most important things is just to
do your due diligence,understand your local market
trends, connect with someexperienced investors and just
thoroughly research anyfinancing or investment
strategies that you know reallypete your interest.
Speaker 1 (14:17):
So knowledge is power Absolutely.
It's not just about jumping inhead first, it's about being
informed and prepared.
Speaker 2 (14:25):
For sure, and you know it's also wise to seek
advice from, you know, financialadvisors and legal
professionals.
Just make sure you reallyunderstand the tax implications
and all the legal complexitiesinvolved in real estate
transactions.
Speaker 1 (14:39):
That makes a lot of sense.
Now, with all this knowledgethat we've unpacked, what's the
biggest takeaway for someonewho's feeling inspired to you
know?
Start their own real estatejourney.
Speaker 2 (14:49):
Well, I think you know real estate has the
potential to generate passiveincome, build wealth and create
a lasting legacy.
But it all starts with takingthat first step Right and
educating yourself.
Find your niche, you know,develop a solid plan and don't
be afraid to seek out mentors orjoin communities of you know
like minded investors.
Speaker 1 (15:10):
It's amazing how many different paths there are
within the world of real estate.
I know right it's not a onesize fits all approach.
Speaker 2 (15:16):
Definitely not.
It's all about finding theright fit for your individual
circumstances and committing tothe journey.
And remember there's a wealthof resources available to
support you along the way.
Speaker 1 (15:26):
Well said, this deep dive has been incredibly
insightful and I hope ourlisteners feel empowered to
explore the world of real estateinvesting with confidence.
Speaker 2 (15:35):
Me too.
It's been a pleasure divinginto these topics with you.
Speaker 1 (15:38):
Absolutely.
Before we sign off, is there,you know, one thought-provoking
question that you'd like toleave our listeners with?
Speaker 2 (15:45):
Yeah.
Speaker 1 (15:46):
As they embark on their real estate adventures.
Speaker 2 (15:48):
Hmm, now that you've unlocked all these possibilities
, ask yourself this what type ofreal estate investor will you
become?
Speaker 1 (15:56):
I love that.
It's all about defining yourown path Exactly and creating
your own success story.
We can't wait to see what ourlisteners accomplish.
Thanks for joining us on thisdeep dive and we'll see you next
time.
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