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Stash Cash For The Crash!

SHOW SUMMARY:

In this week's show, Larry and Kandas talked about the possibility of a real estate crash, what they’ll do when it happens, and what one can do to prepare for a similar scenario. In addition, they also talked about some of the deals they have done over the past week.

SHOW HIGHLIGHTS:

  • Share Sponsor Contest
  • Deal of the week
  • Are we going to have a crash?
  • Cycles of real estate
  • Longer days on the market
  • Signs of crash in 2007-2008
  • On buying below the market
  • What they are doing in preparation for the crash
  • Buying power
  • Using private money or seller financing
  • Growing a small retirement account

QUOTES:

  • ""Real estate has cycles."
  • "We only teach what we do."

RESOURCES AND LINKS FROM THIS SHOW:

SHOW TRANSCRIPT:

It’s time to BRAG, Be Rich and Generous. BRAG Radio is cohosted by bestselling real estate investing author Larry Goins and co-host Kandas. For the next hour they will show you proven and effective ways you can be successful in real estate. From the WBT Studios, the flagship station of the Brag Radio Network, here are your hosts, the rock stars of real estate, Larry and Kandas.

Larry: What’s happening? Live from Lake Wylie South Carolina, it’s the BRAG Radio Show. Right, Kandas?

Kandas: Yeah. You got too much junk on my side. Oh, the thing.

Larry: Look over here.

Kandas: Oh! This mess is on my side.

Larry: Kandas, what are those blue folders?

Kandas: These are property folders.

Larry: Those are deals, right?

Kandas: Yup.

Larry: Those are deals.

Kandas: They are property folders.

Larry: And then those are the deals that we’re working on right now to come back in. We got a ton of stuff going on, guys. Welcome to BRAG Radio, live from Lake Wylie South Carolina. We got 1, 2, 3, 4, 5, 6, 7… What about those right there? How many are right here?

Kandas: Four.

Larry: Seven, 8, 9, 10, 11 right here. These are just the deals we’ve written up this week, right?

Kandas: Yeah.

Larry: So guys, we got a lot of stuff going on, we got a lot of stuff to talk about. Thanks so much for being on. We appreciate you. Thank you for being here.

First of all, let me just share a couple of things with you. If you are kind of brand new, you can get an Investors Kit. If you’d like to get a free Investors Kit, you can call that number 877-LARRY-GO, it’s live right now. Zenobia will answer the phone, right?

Kandas: Yup, she will. She’s ready.

Larry: She will. And what do they get in the Investors Kit?

Kandas: There is a digital copy of the HUD Homes Half Off book, a digital copy of the Real Estate Day Traders Book, some links to some other education, to a Filthy Riches webinar, a HUD Mastery, Ultimate Buying & Selling Machine. So it goes through a couple different trainings on our models, on our exit strategies, things like that.

Larry: That’s cool. Now, if they would rather text than call, they could text BRAG to that number right there 803-89760-63. Right, Kandas?

Kandas: Yup.

Larry: Right, Kandas?

Kandas: Yup, it’s the same thing. You just don’t get to talk to Zenobia.

Larry: Yeah, you don’t get to talk to Zenobia. She’s a sweetheart though.

Kandas: Mm-hmm.

Larry: I really like her. So first thing we're going to do, we're going to talk about the Deal of the Week. That’s what we're going to talk about first. Okay?

Kandas: Yay!

Larry: Well, before we do that though, what we need to talk about is Share Sponsor. You can be a sponsor of the show, right, and you can get a chance to win a Real Estate Day Trading Jumpstart Course. Right? It’s a home study course that talks all about what we do, buy and sell houses the same day using the internet. Okay? That’s what we do, it's what we teach. We teach other things that we do as well like HUD and Seller Financing, but for the most part, it's exactly what we do.

Look, Brent Walker’s live online. What’s up, Brent? How are you doing? Yo, yo!

All right. So if you want to be a share sponsor, all you got to do is share this video. That’s all you have to do. Just share the video and we're going to pick a winner from everybody who shares. You know, it’s not like there’s hundreds of people sharing yet. Right?

Kandas: Not yet, yeah.

Larry: Yeah, not yet. It’s not like there’s hundreds of people sharing. So share this video right now, right, share it right now and then we’re going to pick one person next week and we're going to announce you right here next week same time and let you know that you won. Right?

Kandas: Yeah!

Larry: Cool, cool. So that’s that with that. Right?

Kandas: That’s that with that. It's the famous words.

Larry: Exactly. Okay, we're going to talk about the Deal of the Week first. We’ve done a lot of deals recently and we're doing a lot of direct mail. Okay? A lot of direct mail. We're making the phone right off the hook and really, Kandas and I are in the trenches. She is getting the leads, she’s setting up the deal and then she’s teeing it up to me and then I get on the phone and close them over the phone. Right? And we’ve been sending out. It’s like I get depressed at the end of the day if I don’t have a deal yet, right?

Kandas: You are depressed about a month if you… We couldn’t even go get lunch today before we had a contract sent out, it was ridiculous. And yes, you get into like this funk now if you don’t have something out like going out all the time. It's crazy.

Larry: I know. I know yesterday I didn’t leave the office until like, I don't know, 7 or 7:30. But by the time I left, I had two deals sent out, so two contracts sent out. Right? That they agreed to accept my offer. So I was really, really excited about that. And so we’re getting one or two a day right now, it’s really cool. I’m loving it.

Kandas: It is, is. So what is your favorite one that we’ve done?

Larry: Okay, I did a deal I believe it was yesterday where I had the two deals, but I negotiated. This guy has several rental properties and he wanted to get rid of some of them. And so he was wanting like, I don’t remember, $25,000 or $30,000 a piece for each one. So what I did was I negotiated both of those deals. One is rented out for 350 a month, the other one is rented out for 400 a month, and so that’s 750 a month coming in and I negotiated both of those houses $30,000. Thirty grand for both of them. So that’s not a bad deal. All we’re really going to do is probably wholesale them for 40 grand and think about it, if you've got a property that already has a tenant in it paying 750 a month, that’s worth 40, right?

Kandas: Yeah, it is great.

Larry: Absolutely, absolutely. So I really do love that. It’s got long-term tenants, it’s down in Gaffney, South Carolina and we’re marketing now in about… we’re marketing in about…

Kandas: Are you trying to count the counties?

Larry: Yeah. I’ve got, let’s see, we’ve got Gastonia. I got to throw Britt’s thing up here, that’s pretty cool.

Kandas: Why are you…

Larry: Thanks, Britt.

Kandas: You always need such validation.

Larry: I do know that.

Kandas: It kills me.

Larry: Thanks for sharing. That’s awesome.

Kandas: Oh, my goodness.

Larry: So we’re mailing in Gastonia, we’re mailing in at Cleveland County and Lincoln County, Rutherford County, Catawba County, and York County, South Carolina, and Cherokee County, South Carolina. Now Cherokee County, South Carolina is that’s where Gaffney is. It’s just above Spartanburg. Okay? Right down 85 of Charlotte, North Carolina. But those are good little deals, right? And it’s bringing in 750 a month and we picked them up for 30 grand. All we’re really going to do is just wholesale them for $40,000, right?

Kandas: Forty thousand, yeah.

Larry: For 40 grand. So that’s a pretty good deal right there. The next thing I want to talk about which is really the part of the show that we want to talk about is…

Kandas: The main topic.

Larry: Stash Cash for the Crash!

Kandas: Yeah. This phrase is so funny. We came up with this phrase this past weekend while we were at an expo talking to some guys, and it stuck. And then that was like the phrase for the rest of the weekend.

Larry: We were talking about it the whole time.

Kandas: With anybody that we talked to, yeah.

Larry: Stash Cash for the Crash!

Kandas: Yeah. It made perfect sense. That’s what we're doing right now.

Larry: I love it, I love it. It is exactly what we’re doing right now. Now, some of the things I want to talk about here is about, number one, are we going to have a crash? Right? Well, I will tell you this: My crystal ball is a little foggy. I don't know when it’s going to happen but there is going to be a crash. Okay? I don’t think it's going to be near as bad as it was back in ’07 and there’s several reasons for that, and I’m going to go into those here in just a few minutes. But I want you to think about something, guys. Real estate has cycles, okay? Trees don’t grow to the sky. Right? Trees do not grow to the sky, and real estate has cycles; they go up and they go down. They go up and they go down. Right?

Kandas: Yeah.

Larry: Are you making fun of my—

Kandas: It’s just funny, yeah.

Larry: But I want you to think about this, you know. Where are we right now? If the real estate market goes like this and when it reaches the top then it starts to go down, where do you think we are? Do you think we're here? Do you think we’re up here? Do you think we’re already… Now think about this. Things have already started to slow down, right?

Kandas: They definitely have.

Larry: It has started to slow down and the first thing that happens when things start to slow down is there’s a longer term of days on the market especially on the higher end properties. The expensive properties? There’s longer days on the market. Okay? So that’s the very first thing that starts happening, right? Longer days on market. And then, there starts to be where the prices aren’t going up as much, they’re not being pushed up as much. You know, it takes a little longer to sell and sometimes sellers start offering incentives to get on the sale and then the prices start doing down. Now, in ’07-’08 there were so many things that were screaming crash, right? I mean, lenders were making crazy loans, right? Negative Am loans, interest-only loans, buyer—

Kandas: Which we don’t have too much of that right now, yeah.

Larry: Liar loans. No, they’re not doing that anymore. Banks are a lot more cautious now. Remember the 125 loans?

Kandas: Mm-hmm.

Larry: 125% of equity. Right?

Kandas: It's ridiculous. I don’t even know who that makes sense to.

Larry: They don’t do that anymore, right? So just remember guys that trees don’t grow to the sky but also, I don’t care where we are in the cycle. If we’re here or up here at the top or coming down, if you're always buying below, and I know this looks a little odd but if you're always buying below the market, you always have a cushion, and that’s where we are. That’s where we are.

Kandas: And that’s what you teach.

Larry: That’s exactly… we only teach what we do. That’s it, right? So what are we doing now? I’ll tell you what we’re doing now. We are pretty much selling everything unless it’s in a retirement account. If it’s in a retirement account, I’m keeping it because I’m still buying right here. Okay? Now there’s nothing wrong with fix and flips, there’s nothing wrong with being a landlord. Lease options, seller financing, any of that stuff. But right now what we’re doing is we're trying to stash cash for the crash. That’s exactly what we’re trying to do. Right? I’m not saying you shouldn’t, you know, wholesale properties. I’m not saying you shouldn’t, you know, seller finance or lease option properties. I’m not saying you shouldn’t fix and flip. But what we’re doing ourselves is it it's outside of a retirement account, we're selling it. If it’s inside the retirement account, we’re keeping it. Right? Now we may sell one every once in a while, but if it’s inside the retirement account, we’re keeping it. Does that make sense?

Kandas: It does to me.

Larry: There you go. Good job, good job. And why would be doing that right now? Why would be doing that right now? Think about that. If we’re buying houses right now, like we just picked up a brick ranch house in Gaffney, South Carolina, a nice 3-bedroom, maybe it’s even a 4; 3- or 4-bedroom, 2-bath house in Gaffney, South Carolina. A brick ranch house, we picked it up for $35,000. Okay? It’s rented out for 675 a month. Now that’s a pretty good deal even right now. It’s a pretty good deal, 35 grand. However, once the market turns, then what’s going to happen is we’ll probably be able to pick up that same house for 20 grand, maybe 25 but probably closer to 20 grand. Right? We’ll be able to pick up that house. So think about that. If I could wholesale three deals and make $35,000, right now I can buy one of those houses to keep or I can wait and I can buy 1 ½ house, right? So my money is going to go half again as much. So if I’ve got X amount of money and I can buy 50 houses with it, free and clear, if I wait until the crash then I can buy 75 houses with the same exact amount of money. And if they’re bringing in, say $500 a month just to keep it simple, if they’re bringing in 500 bucks a month, that extra 25 houses is going to be an extra 12,500 a month. Twelve thousand five hundred dollars a month. Right?

Kandas: Mm-hmm.

Larry: Pretty cool, huh? So think about this. Think about what are you doing. Are you buying inside a retirement account or outside a retirement account? And are you stashing cash for the crash? That’s very, very important. Because interest rates have been going up a little bit a smidge but you need to be looking for private money. If you're buying properties to hold right now, you need to use 1 of 2 things. Right? Either private money or seller financing. We got two deals this month with seller financing.

Kandas: Right, yeah.

Larry: Two deals. A hundred percent financing, no money down.

Kandas: And that’s something that too often suggests whenever you aren’t able to meet the price that the seller is wanting.

Larry: Right, right.

Kandas: So it’s either cash or terms.

Larry: That’s exactly right. Hey, look. V’s on.

Kandas: Hi, V!

Larry: V is a very, very successful real estate investor. She does fix and flips, high-end stuff. You ought to see her properties, follow her. She’s awesome.

Kandas: Beautiful.

Larry: She is. V, be sure and share this post. Right? Because I am talking good about you. Right? So we talked about buying power, later versus now. You want to have a lot more buying power. Trees don’t grow to the sky. We’re stashing cash for the crash right now. It doesn’t mean we aren’t keeping deals. Right? We’re keeping it on our retirement accounts.

Kandas: Special place.

Larry: It is a special place. That’s a special place.

Kandas: Yeah.

Larry: Look, V needs seller financing. V, we got two deals just this month with seller financing. A hundred percent seller financing, no money down. Long-term 20-year financing at 5 percent interest. That’s pretty cool.

Kandas: We're buying these properties on those terms.

Larry: That’s pretty cool.

Kandas: That’s what he means to say.

Larry: That’s pretty cool. That’s awesome, that’s awesome. Yeah, V is a sweetheart. I love her to death. Okay, so let’s see here. What else are we going to talk about? Growing a small retirement account. A lot of people say “Yeah, Larry, but I don’t have a retirement, you know, like maybe you guys to be able to grow it right now.” So how can you grow a small retirement account? Okay? So think about this. There’s a lot of different ways you can do that and I want to share some of those ways with you right now. Okay? So number one, could you assign a contract in a retirement account? Could you do it?

Kandas: Yes.

Larry: Yeah, absolutely could. Now remember guys, the IRS does not want you to create what’s called a business in your retirement account, so you can’t wholesale a ton of deals. It’s okay to maybe wholesale a few of them but don’t be wholesaling a ton of deals. Okay? You're going to end up paying what’s called UBIT (unrelated business income tax). Alright? You're going to end up paying that. So it’s okay to flip a few, wholesale a few but don’t make a business out of it. Don’t be wholesaling 10 or 20 or 30 deals in your self-directed retirement account. Okay? Some other ways you could use a small account. The second way you could do that is you could also do options. You get a property under option. Right? I’m doing that with a guy right now where he gave me an option. I put up 500 bucks, he gave me an option on the property and I have the option to buy it at this particular price and all I’m going to do is sell my option, right, and I’m doing that in my son’s ESA (education savings account). So another thing you could do is be a hard money lender. Now, a lot of people think “Well, I can’t be a hard money lender because I don’t have any money.” It’s okay. You don’t need money. All you need is a little bit of money. So let’s say for example you got some private money lenders and they will loan you money at, say, 10 percent interest. You make a loan to another investor, let’s say 12 percent interest in 5 points, so you've got somebody that’s going to borrow money from you, 12 percent in 5 points, and then you're going to go to your private money lender and they’re going to put up let’s say it's $100,000 loan. You're going to have them put up $98,000, you're going to put up $2,000 as an example, you're going to get the points. What’s 5 points on a $100,000 loan? $5,000. You just turned a $2,000 investment into $5,000, right, plus you're making a spread on the interest between 10 and 12 percent. So if it’s a year-long loan, 100,000 and 10 percent is 10 grand, 12 percent is 12, you made $3,000; in points you made another 2,000 in interest. Plus the other cool thing is you could charge points at month 6 and month 9 and month 12 if you wanted to.

Kandas: If they roll that long.

Larry: If they roll that long, right? But in today’s market most properties are very, very hot. Right? So you’re going to be able to sell them very, very quick. So there’s another thing that you could do if you have a small retirement account. These are great landlord loans. Check this out. I call it “10 for 12”. I didn’t make it up, I learned it from—

Kandas: 10 for 12.

Larry: I learned it from Jeff Watson, that’s who I learned it from. Attorney Jeff Watson. So it's 10 for 12. Let’s say, I mean landlords, they always got properties but they’re always cashed for. Okay? So let’s say a landlord needs to put a roof on one of their rental properties. They need $5,000. Okay? They need $5,000. So you loan them $5,000 and you tell them all you need to do is just make me 12 payments of 500 a month. It’s $5,000, 500 a month. Now you would think okay, 5,000, you know, that’s 20 percent but if you amortize that loan, it’s really 33 percent return on your money. Right? You put up 5 and you got your 6 back, right? But it's really 33 percent return on your money because of the amortization. Let me just pull this up here and show you real quick. It’s 30-something percent. This is an HP-12C. You can get one for your phone or you can buy them. This one is like from the ‘80s. Can’t you tell?

Kandas: Oh, I can tell.

Larry: It’s all scratched up. I’ve had this thing since the ‘80s.

Kandas: He’s a packrat. He saves everything.

Larry: Shut up. Okay, so like 500 is the payment amount and you got 20 payments and you have a $5,000 investment, 5,000 and you got 12 payments. Let’s see if my calculator is working today. Thirty-five percent, 35.07 percent return on your money. So you can literally loan out 5 grand, get back 6, and it’s 35 percent return on your money because of the time value of money because you get back some interest, some principal every single month. It’s called 10 for 12. You give them 10 times 500, then you get back 12 times 500. So those are many different ways that you can grow a small retirement account, be a hard money lender, be a hard money broker. You get the points. You can do a RAP loan. Like I mentioned before you borrowed it at 10, you loan it out at 12, you get the points. You can do options. You can do seller-financed deal. Let’s say you find a property that you get 100 percent financed loan. You get 100 percent financed loan. You get it under contract. Make sure that the loan terms, make sure in your contract—and in our contracts it says if we’re getting seller financing, it’s a no-recourse loan, a non-recourse loan. That’s very important. So make sure you get a non-recourse loan. Anyway, so then what you do is you turn around and you go sell that property with the owner financing in place and you can put up say 100 or 200 or 500 bucks and then you turn around and sell that property. We just did a deal where we’ve bought up for 82,000 and we’re selling it for 99,999. Then we had it sold for 99,999 but last minute the borrower or the buyer backed out because they had some funding issues or something. So that property is still available. If you want to see the property, go to investorsrehab.com. Investorsrehab.com. And that’s pretty much it. What else do we have for today’s show?

Kandas: I think that was it. You wanted to talk about stashing cash for the crash. We went through your favorite deal this past week and talked about the Share Sponsor.

Larry: That’s it. Make sure you share this video. If you're watching it right now and you haven’t shared it yet, going to share this video and you get a chance to win a Real Estate Day Trading Jumpstart. We’re going to pick a winner next week. Okay? Also, if you would like to apply to work with Kandas and I and our team one-on-one, we have what we call our Apprentice Partner Program. It’s not coaching. It’s a mentoring program where we partner with you on deals and our portion of the profits go to charity. It's not where I’m going to get paid. I mean, yeah, there is a fee for it upfront and it’s not cheap but it's working with me and my team personally one-on-one and it starts with three days right here in our office. I’m going to work with you to help you close your first 3 deals, to help you close your first 3 deals and out of those 3 deals a third of your tuition for the Partner Program goes back to you and the balance of each one of those deals, we split. You get half and a charity of my choice gets half. And we have absolutely cool charities that we want to help. So I’m looking for other partners that we can work with and team up with and help them go out and close some deals. So we appreciate you guys watching. Thank you very much. Be sure and share this video and we’ll see you next week right here on Brag Radio Live. Right, Kandas?

Kandas: Yup.

Larry: Bye-bye! See you, guys.

Sounds great. Thank you so much Kandas, thank you Larry. And tune in again next Saturday for BRAG Radio as bestselling real estate investing author Larry Goins and co-host Kandas teach you the latest techniques the pros use to make money in real estate.

If you’d like more information about what Larry and Kandas talked about on today’s show or like that free investor’s kit or to schedule a tour of the office call 877-LARRY-GO, that’s 877-527-7946. You can also text the word BRAG to 803-897-6063. It’s BRAG Radio, be rich and generous on News Talk 1110993WBT.

[End of Recording] [21:50]