Jason Bramblett Real Estate Talk Show. 

Live Saturday's at 9:00 AM on 94.5 FM WPTI

Expert insight into today's Real Estate Market.  Serving High Point, Greensboro, Winston Salem and the 35 cities and towns surrounding. 

 

 

Aug. 31, 2019

RE Investing Episode 8

Real Estate Investing: Episode 8

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast

Jason: Good morning, Triad.  You are listening to Jason Bramblett Real Estate. Hope everyone is doing great today. We are live in the studio, doing all things real estate. Digging in, diving into selling, buying and well, we have been talking about investing for several weeks.  We are going to continue our series in real estate investing, digging in a little bit deeper. Going into some of the questions that we have been getting via phone, email, all those things.  Keep those coming. You can go to Jason Bramblett dot com. Click on the email icon there. Shoot us a message, and we will be more than happy to answer your question. But also, if it is a question in which we know there may be some folks out here that have the same question, we are going to fire that off out here on the radio and get that in. We have just been selling like crazy in the Triad, which is awesome. Another great month has been conquered, and we are very thankful for all the families and clients that use us throughout the entire Triad region.  We do service about a 70-mile radius from the center here of Greensboro. Mecca, if you will. So if you took a circle, drew it around the airport, go out 70 miles, that is where we are. Except that would take you to Virginia. We do not work in Virginia, but we have some fantastic partners that we can set you up with in the Virginia market. We are going to dig into the nuts and bolts and just go a little bit deeper into our investment strategies.

So last week, just to recap, we talked about the failed landlord experience and how that is, it is one of those things, what is the saying, it looks good on paper. Right?  That is the key.  Looks good on paper. Sometimes when you get into the experience, it does not necessarily go just the way you had thought. We had a lot of people give us a call and say hey, I am that guy, I am that gal. We bought a rental two or three, and it was a lot different than what we thought. So we are helping some folks through that.  Whatever it is. If you are in a rental situation where it just did not pan out the way you thought, we have got multiple options. Some of those properties, we are going to help them manage. We do have a property management division of our company, and they just simply need some help. Some of those we are actually going to buy and take over the property 100%, and there are a few that actually we will sell.  They decided it is just not a good fit period, and they just want out, and we are able to help them do that as well. It is just, there are always options. So we know in real estate it is not one size fits all. You have got to have multiple layers and multiple options out there because just selling the house sometimes is not the right answer. Sometimes it is we need to look at it from a different viewpoint. So we have the ability to be able to do that. You can touch with us at the office. It is 553-0796 or go to Jason Bramblett dot com.  Joining me in the studio today, Mr. Keith is pushing all the buttons, making stuff happen, and we are going to go a little deeper into our conversation on real estate investing. It is good to have you with us today, sir.

Keith:  Thank you, I am excited to be in my new home.  Thank you to you guys for all the things that you did with us and my wife and getting us in that new home.  It was a great experience.

Jason: Good deal. Good deal.  Yeah, Keith, is one of our new clients from one week ago. Right?

Keith:  Yeah. Closed last Thursday.

Jason:  Closed last Thursday, and it is a whirlwind. His muscles are bigger today.

Keith:  I am sore.

Jason:  All the fun stuff with moving.  The first thing he said to me is I am sore in places I did not even know could be sore. Right?

Keith:  That is absolutely true. I was listening to the show the other day. You were discussing dead money being money that I have saved and maybe even invested, but with the current market and everything it is just not really doing anything for me. You talked about being able to partner with you. How is that money secured so I know that that money is going to be safe?

Jason:  Absolutely. Just to kind of recap. Dead money, what is dead money?  Well, whatever.  Maybe you have got a hundred or $200,000 just sitting around in a very low-performing account. It could $50,000.  It does not matter.  The money is just not doing what it needs to do. Dave Ramsey is one of my mentors. He has got a great program of helping folks get out of debt, and one of the things that he teachers, one of his foundational things is you have to tell money what to do. If you do not, it just disappears.  It just leaves. Money without any kind of plan it just vanishes.

Keith:  Especially now.

Jason:  Yeah.

Keith:  It is cray.

Jason:  It is. It is. It is just like pixie dust. Especially when you buy a new house. If you do not tell the money what to do, and you do not have a plan, all those little trips to the Lowe’s and the Home Depot and these other places, it adds up.

Keith:  $7 at a time.

Jason: That is right. That is right. Before you know it, $700 is –

Keith: That is right.

Jason: Because you probably will make 100 trips.  It is amazing.  Really what we are looking at is savings account rates.  .000025 nothing. Even if you have money sitting in a CD, maybe you are committed for 6 months, a year, 18 months, whatever, you are still looking at 2%, maybe just a touch over. It is still dead money. Even at 2% you are not even keeping up with inflation. So you are basically, if you are very fortunate, you are getting to zero, and zero is not a good number. It is not a good number.  We have many ways that we secure our investment partners. So all the funds that we, we really just follow the process the banks do.  It is pretty simple. We do a promissory note. It is for a certain period of time. Most of the time it is eight months. Some projects may go a little bit longer, but we keep right to the eight months. We record a deed of trust that is your security.  It securitizes that note to the property just like all the banks do.  It really is the exact same method. I am all about not creating the wheel, Keith. It is out there.  It is simple.  Real estate has been around a long time. Why do something different?

Keith:  Well, there are so many things out there that are difficult to understand, so that if you make it simple enough that everybody understands what they are getting into, that just makes it a whole lot easier.

Jason: Absolutely.  It is just a very, very simple process. So now you have a securitized lien, a deed of trust against the property. Then what that prevents us from doing is anything with that property as far as a transfer goes without you being 100% cashed out of the deal. If we sell the property, obviously whoever buys it does not want to have you tag along just like the bank doesn’t. So when you sell your home, the mortgage is paid off.  The bank is paid off. That deed is cancelled. They get their money, and it moves onto the next owner.  It would be the same way with us. Or if we refinance the property. So a lot of properties we keep in our portfolio.  We will buy them, rehab them, fix them up, rent them out, and then we will refinance our investors out of those.  Or we even refinance ourselves out of the deal. We put our own cash into every single deal that we do, just as the bank, so that deed of trust would go away.  You get your money back, and then you have options. You can go put it back into the dead vault or you can reinvest it with us, which many of our investors do. Some of them have been with us well over ten years, and we just keep that partnership going.  It makes sense.  They love real estate, but they do not like the phone calls at two o’clock in the morning when the toilet backs up or whatever it is. So we have a whole entire division that just deals with that kind of stuff, through our property management company. Maybe this is something you might be interested in.  If it is, you can shoot us over some information. We are happy to share anything we can with you. Go to Jason Bramblett dot com.  Again, click on that email icon. You can shoot us a message or give us a call.

We have had many, many folks, a lot of our investors are past clients and listeners just like you.  People that have been with us on the radio for over a decade now on the radio, talking about real estate in the Triad. We have developed some friendships with great folks out there, and it is just another vehicle for you to be investing in, what I love about it, too, is you are investing locally. With the stock market, and not to say that it is a bad thing, but it is very intangible. You cannot drive by Wall Street and see your investment. You can see a building, but you will not see your investment. And a lot of times that money is not reinvested in the community that you live. We buy property in every single city in the Triad, so you are helping promote and prop up and keep going our local economy, which is always a good thing to do. It is doing pretty well right now.

One other added protection we do is attorneys handle everything. We pay for all the legal fees. You have no costs in that. We take care of that. We do not touch the money. The money goes straight to the attorney just like the banks do. They do not pass it to the buyer and then the buyer passes it to the attorney. Right?  They want to make sure they just kind of cut out that little trail, so money goes from the bank straight to the attorney, you get a house.  It is the exact same with us. We do not touch the money either. That is just an extra level of security. That way they have one person that goes straight to the trust account in North Carolina, and that attorney is responsible for that money to make sure it goes exactly where it is supposed to, as agreed by all parties. Just like all the big banks do.  So again, we have not recreated the wheel. This has been around for as long as real estate has been around to be honest with you. So we just utilize the tools that are there, and this allows us to fix a lot of things. One great thing about that formula is it is nothing I created. It is just something, like I said, that has been in real estate forever, and a lot of real estate investors, everybody from Dave Ramsey to Robert Kyosaki to all these different well-known people out here that are in the real estate world, it is a formula in which they use, and hey, why recreate the wheel.  Right? Just follow the proven system.  That just makes life easy. Right? It is kind of like sit ups.  If you do them, you will get abs.  If you do not, you will not.

Keith:  Well, you mentioned the local thing.  I think it is also nice because I can actually know where my money is.  Sometimes unless you are really, really smart or really financially educated, you can invest in certain things and not really know kind of what it is. It is this enigma, and you just kind of sit and look at the newspaper every day and hope your money went up.

Jason:  Just up and down and up and down and up and down.  One thing I do like about real estate is the constant.  We do not buy anything for the short term.  Even our flip properties we approach them as we will keep it as a rental should we need to.  Really a lot of times now, we look at it as we will keep it as a rental first, but does it make sense to actually resell the property.  Sometimes it does, but a lot of what we do we are looking at holding those assets for a certain period of time. So who would do this?  Who would want to do this?  One thing that is interesting is about 30% of Americans want to sell their home but they do not want to do it the traditional way. They do not want to call a real estate company, put a sign in the yard, have their home and all the photos put all over the world and the internet. Right?  Because that is how we get the word out. And just for many reasons that does not appeal to them.  Maybe they are a private person. They do not like strangers walking through their house, whatever the case may be. 

And there are some houses out here that simply will not qualify for bank financing due to lack of maintenance. We have run into situations where it is a couple that have run into financial struggles and all they have been able to do is keep up with the payment but not keep up with the maintenance. That is okay for probably a short period of time, but when you do that for a decade, it becomes issues.  And now you get a home that may not qualify for most traditional-type bank financing, which is where we can step in. We can pay cash for the property, and we do not have those hurdles. They could be that they are physically just not able to do the things that need to be done to a house. One of the largest segments of our population, the Baby Boomers, are getting older as everybody knows, and probably some of you are feeling today. They are just not able to keep up with the things like they used to be able to do. We find that these folks are great candidates for our program in that they want to sell, but it is just exhausting to them to think about getting the home ready. Getting the home in a condition in which they may want to appeal to the masses, if you will. They have a tremendous amount of equity in their home, and they would just prefer the convenience of selling the house, having one showing, one person come through it, and be done with it.

Some of them are hoarders.  We have a few of those out there, too. It is interesting. I have been in some homes where this has certainly been a circumstance that we have run into.  They know it, and they are embarrassed, and they do not want anybody to know. That is fine. It is your home.  You live the way that you want, but we can help you in that situation. We have looked at homes. It does not matter the price range. It could be $150,000 or a million five. One of the largest homes in Greensboro in one of the most, I guess, prominent subdivisions in Greensboro was actually featured on Hoarders.  Amazing, amazing property. It has been a few years back, but it was one of their episodes, and the person that owned the home was just that.  This house was completely slam-packed with stuff. And it was a massive home.  So it really does not matter. 

The economic status, the price point, none of those things make any difference. It is just simply some folks get into a situation where they like to collect things. But they realize that is not going to appeal to just anybody walking through the home, and they do not have the energy really to go back out there and empty it out and do what needs to be done. Maybe you are one of these heirs that have inherited one of these properties because that does happen a lot.  We deal with a lot of estates, and almost all of them have some element of this, and we are able to step in there and just really help out the heirs.  A lot of them do not live here. They are out of state. They are out of the area, and they just do not have the local connection and time it takes to deal with getting a home ready when they are living in whatever Texas. So we are able to step in there and help them through that process.  It really does not matter to us what the situation is. We do have a solution for every single one of them out there. It is one of the benefits to being in business for 20 plus years is we pretty much have seen it all.

Keith:  Well Jason, I have some questions about some of these things you were talking about. Do you want to take a quick break and then come back –

Jason:  Yeah. Let’s do that. Then we can hit a fresh topic right out of the break.  That sounds good.

Keith:  That works.

Jason: And welcome back to the Jason Bramblett Real Estate Show. So we are digging into all things real estate investing today. If you have any questions, you can give us a call at the office at 553-0796 or go to Jason Bramblett dot com. Click on that email icon and shoot us your question right over.

Keith: You were talking before the break. You were talking about 30% of people would prefer not to sell their home through the traditional route, and I can tell you from experience that about a year ago, the house that I was renting at the time was up for sale. I just remember that we wanted to do right by our landlord, but you could be out in two hours. Somebody coming through. It did not matter what you were doing. I was joking that all of our stuff is still on the internet and will be on the internet for the next 10 years. There are a lot of different people that would have an issue with that, I would think. I am shocked that it is not higher than 30% to be honest.

Jason:  Yeah, it is.  It is growing actually to be honest with you. It is interesting. With social media and video and everything that everybody does online that says hey, look at me, right. People are actually getting more and more reserved about that now. So I do not know if it was, maybe some of the excitement of that is starting to wear off.  But it is amazing the stats and the statistics of what we see.  You are exactly right. There are many, many other reasons that people want to just sell their home. A lot of times it has to do with what we talked about.  The maintenance.  Simply, the traditional way of selling is not the best route for them.  It could be that they financially just do not have the money to do the repairs or get the property fixed up or whatever. Some people just want to be done with it. They just love the fact that look, I know that I am going to get a different price than opening the home up to the entire free world to get to the highest bidder, but I am okay with that because I just do not want to have that experience.

Keith: Convenience.

Jason: And convenience. It is the bottled water.  You go to the gas station. You buy a bottled water for $1.50 or you can go to the big box store and you can buy 50 of them for $3.  Right? So you pay for the convenience of getting your gas, walking in, having that glacier cold ice water in that perfectly contaminated plastic bottle. Right?

Keith:  Yes.

Jason:  Yes, that is what some folks would say.

Keith:  It is cold though.

Jason: It is cold, and it is right there.

Keith:  It is easy.

Jason:  It is easy. Absolutely.

Keith: We pay for convenience all the time.

Jason: All the time. Fast food, everything. It is all convenience.  We have purchased many homes, all shapes, different sizes, whether they are in perfect condition, in horrific condition.  It really does not make any difference. We have some folks that have a perfectly fantastic property. They simply just like their privacy, and do not want folks walking through it. That is perfectly fine.  It is one showing to us. We will make an offer. If we have got a deal, we will move forward.  We will close, and actually the great thing is you can actually pick when you want to close. Close anytime you want.  It does not matter. We do have one requirement. You do need to leave when we buy the house.  That is still one of the requirements. But outside of that, if it is maybe, maybe it is something where you need to close quickly. But what we find is a lot of times, people really do not really need to close quickly.  They need to close in 62 days to make everything work out perfectly for whatever is going on in their life. That is very easy for us to do. Convenience is certainly something that we recognize that the public wants, our clients want, and we are there and ready to offer that. So we can definitely help you out.

Keith: So just to be clear. So if somebody wants to sell their house the traditional way, you can absolutely help them out. This is just another service that you can offer and a value that your group can offer to somebody.

Jason:  100%, yes, that is correct. We still sell homes every single day. Our goal is always to push on the top dollar through using our home-selling system, and yeah, this is just one arm or one option that we have. There are a lot of companies that do not have the ability to do that. That is one of the benefits of us not being a franchised cookie cutter-type business that we can actually adapt and change and move much quicker than some of the more traditional real estate companies simply because well, we can change the rules.  Right? We can change with the client and service the client where if you go, let’s just say to McDonald’s, and you go down there and I do not think they have one on the menu, but maybe they do, and you say hey, I would just like to have a Philly Cheesesteak, it does not fit their franchise model.  Right?  No, we do burgers, we do fries, we do shakes.  This is what we do.  And there are real estate franchises and companies out there that they do not have these other options because that is just what they have. Right? But maybe you need something different.

That is where we have the flexibility that, you guys have heard me for years on the radio talking about our guaranteed sales program. Simply it is our corporate relocation program, if you will. I did that for a decade, and again, not trying to recreate the wheel, but I observed corporate relocation properties sold for more all the time than the traditional real estate sales companies were selling them for. I would look into it and say what in the world are they doing that helps them achieve a greater value for the house? And really what it came down to was the preparation and the steps in which they basically put out there to get the property ready to go to where they had buyers that would walk in with really great confidence knowing they were buying a great house and they knew exactly what was right and what was wrong with the property. The great thing about the re-lo companies is they had never seen the house, and so they had to do a bunch of investigative work to figure out what they were selling.  Right?  They got that information typically from us. We would share it with them, and they said okay, now let’s just be transparent. They would just share what was right and wrong with the property with the consumer, and they would pay more because the element of surprise was removed. You can do that, and a lot of people do this with a home inspection. Right? You buy a home. You get it inspected. From the buyer’s standpoint, that is a very smart move, and we highly recommend it. From the seller’s standpoint, you should actually get that done first because if you do not, now you are in a reactionary mode to anything that may come up. And when you react to things typically it costs more money.

Keith:  That makes perfect sense because it might be cheaper to fix something yourself as opposed to have it found out in inspection and then have to barter back and forth with –

Jason:  Either bartering or maybe with something very, very simple, but let’s face it. I do not know Keith. I do not know what his abilities are.  Even though it is a 5-cent washer that any human being could fix, I do not want to trust that because when the house floods, it will not be Keith’s home anymore. It will be mine.  So I want a licensed, quality plumber company or whoever to go over there and do this. So going from a 5-cent washer and a $7 trip to Home Depot, now we are at a $200 plumbing bill, and it costs the seller more money. These are things that we looked at and we adapted into there. So if you would like to get more information about selling your home, you can go to Jason Bramblett dot com or be one of our investment partners, click on that email link icon over there.  Shoot us a message or give us a call, 553-0796.  Everybody have a safe and wonderful Labor Day weekend, and we will be back here next week.

Posted in Radio Show
Aug. 24, 2019

RE Investing Episode 7

Real Estate Investing: Episode 7

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast

Jason:  Good morning, Triad.  I hope everybody is doing well.  Survived the storm last night.  That was something else. I tell you what. It got serious down in our area for sure. So hopefully, everybody fared out pretty well. Today we are going to dive deep into the real estate investing topic we have been covering.  This is episode four for you guys that have been following along.  And of course, if you do not have time to make notes, jot it down, whatever, you can hit the website, Jason Bramblett dot com. Click on the blog, and we have got the audio saved there for you as well as a written version, transcription of the show. So you can follow along and read along, whichever you want to do.  Fact check me. Whatever.  You just check it out.  It is there on Jason Bramblett dot com. Hit that blog site, and it will take you right to it. So just to recap. We have walked through several things. What to buy, where to buy, how to buy.

Mikell:  Okay.

Jason:  All right. Just kind of walking you through the whole series here.  How to actually evaluate the opportunity to see if it makes sense to purchase the property, and then how to structure the purchase. Not only is the house the right fit, is the financing the right fit, is the property condition aligning up with the price, does the property condition line up with it being a rental home, does the location line up with it being a rental and or a flip property. So we looked at all those different things. Now we are dealing down in how to be involved in real estate investing if you do not want to be the landlord, if you do not want to be the one out there doing the work and flipping the property. We talked last week about taking your dead money, money that is just sitting around doing nothing, and how to get that moving. Dead money for us is just money that is sitting in a savings account earning basically nothing, and or is maybe in a CD that is earning 2% on a good day if you are lucky.

Mikell:  Absolutely.

Jason:  The downside with that is it is locked in, and of course, there are penalties for unlocking it. So most people do not want to do that. They want to have the freedom of flexibility and not tying that money up. But essentially, they do not also want to put it in the traditional stock market retirement accounts because then you can lock it up for a long time, and there are some very hefty penalties depending on the type of product you put it in, you may not be able to get that money out for a very, very long time unless you make a considerable donation to our lovely IRS.

Mikell:  That is very true.

Jason: They would love for you to do that. Desperate times call for desperate measures, and when you look who is the recipient of that, the IRS fares very well in an economy that tanks and people panic and pull their money out of stuff that they should not.  The tax consequences are severe. So you can end up with a situation where you are making a really nice donation of 30, 40, and 50% of your money in taxes because you unplugged it too soon, or you came out of the, basically you broke the agreement that you had by cashing out of the product, and it is going to cost you money.  So dead money again for us is just money that is sitting in a savings account, checking account, and you do not know what to do with it.  You do not want to put it in the market. You know that you do not want to be a landlord, and you know that you do not really want to do all the fixup. So we have got a place for you. What it looks like is this. We take your dead money, and we acquire real estate.  We rehab the property, and upon completion or eight months, so our terms are always eight months. Whichever is sooner we will cash you out at 100% plus whatever our agreed upon interest is, which right now, I think is about 7 ½% depending on the deal that we are doing. So if you had $100,000, you would get $7500 in interest, and that would be either when the house is sold or refinance.  A lot of the properties we keep, and we do not sell them. We do not flip the properties, but it is a really good tool in which if have got the capital and you want it to move, we can help you do that. So it is a way to become a real estate investor without having to do all the heavy lifting, if you will.

Mikell:  So they can get that within eight months?

Jason:  Yes.  We are going to cash them out in eight months no matter what. Whether the house is sold, not sold, it does not matter. They will be cashed out in eight months.

Mikell:  With the interest?

Jason:  Yeah.  Exactly.

Mikell: That is amazing.

Jason:  We keep it very, very simple, and we create a lot of opportunities.  It creates opportunities for us. The reason why we do this is because the bank never can move as fast as we need them to move.

Mikell:  Absolutely.

Jason:  Opportunity typically comes with pain, and when people are in pain, they want it over, and they want it over quick. Most banks that we deal with, and we deal with a lot of different banks, they simply do not have the speed in which we need them to move at. That is pretty much, that is nothing bad about the bank. It is just their product does not line up with our timeline. So we have to use cash, and we have to move quick. That is why we convert it later to a more long-term financing. We will refinance ourselves and the investor out of that property or out of that product. It is a fast-moving world, as they say. Speed, when you have issues, well, I will give you an example. We have people that do not plan for foreclosure, believe it or not. In America, when you miss a payment, if your payment is due on the first, they do not throw you out on the second.

Mikell: No. They give you a grace period.

Jason: They do. Then even after, they do not throw you out at 30 days. They typically do not throw you out in 60 days, 90 days, 120 days.  We just bought a house that they have not made a payment in three-and-a-half years. So the bank –

Mikell:  Really?

Jason: -- yeah. Your deadline of when you are going to be moving is pretty well known.

Mikell:  Their credit has to be terrible though.

Jason:  Oh yeah, their credit is destroyed. Absolutely. But it is not a surprise date.

Mikell:  Okay.

Jason: But yet, we have some folks that contact us and they will say hey, it is Monday. My foreclosure is on Friday. Can you help me out? Well, yes, we can, but I cannot do that with a traditional bank. There is no way in the world I can set up a loan process with a traditional bank to be able to buy a property or contract a property on a Monday and close it on a Friday, but if I have the cash, I can do that. Actually, I can close very, very quickly. And then we can switch it over to some other kind of long-term financing.  But we have a lot of people that contact us for, and it is not just us. I am sure they are contacting many different real estate companies, and there really is not much that can be done with that kind of short notice. These folks did not get seven-days notice. They have had months of notice.

Mikell:  Absolutely.

Jason:  They have just procrastinated for whatever reason to make a decision until they actually have to make a decision.

Mikell:  I think it is denial.

Jason:  It is for sure. It is. For whatever reason, they think if they stick their head in the sand and it will all go away.

Mikell:  Absolutely.

Jason:  It does not.

Mikell:  Nope.

Jason:  It only gets more intense. You will leave. I promise you. They will send the sheriff or the highway patrolman –

Mikell:  Unfortunately.

Jason:  -- and they will change the locks, and you will not be in the house any longer. It is just the reality. That is what you agreed to. You agreed to give the house as security for the loan that you took out. And when you stop paying your obligation, the bank has the right to recoup their asset to sell it to get some of their money back.  Hopefully. Typically, they get a good bit of their money back. Sometimes, wow.

Mikell:  Sometimes the bank does lose money.

Jason: Oh, there is no question.  Absolutely. Sometimes they should in my opinion. But just because your creative loans that you come up with, but in the most part, if the situation is correct, where the buyer told the truth, the lender gave a good product, okay, everything being equal. No three-card monte on either side.  All right?

Mikell:  Okay. Okay.

Jason: All things being equal, then yeah, the bank certainly has the right to come back and take that asset.  They should. They do all the time, as a matter of fact.

Mikell: All the time.

Jason:  So with investing, what we are looking for in properties, we will get into that a little bit here.  We are going to talk about that. Some of our opportunities just do not work with regular bank financing. So we created an opportunity for people that want to be in the real estate investment side, but they do not want to do any of the legwork. They do not want to be the landlord. They do not want to deal with all the stuff, so that is where we step in and take care of that.  But they love the fact of having their money in the real estate market and actually seeing that grow. We have got investors who have been with us for over a decade. They understand our process. They understand how we work. It is usually very, very quick, very, very simple, and we are always looking for opportunities. So we are going to talk about that.  Foreclosures, estate sales, probate, tax sales, all those things that, those are all the opportunities we look at out there.

Mikell:  I can only imagine. It is like you said. Jason, this is a product that is tangible. You can see my sweat equity. You can see the finished product. You can see the process.

Jason: Absolutely. Absolutely. It is not always a foreclosure type of situation.

Mikell:  Absolutely.

Jason:  Some people look at foreclosures like that is the only way to –

Mikell: Make money in real estate.

Jason: -- well, whatever they think their perceived deal.

Mikell:  Okay.

Jason:  It is amazing what the word foreclosure does to the psychological processes of people.  Just because it is a foreclosure does not mean it is a deal. We have had a lot of people over the years contact us about buying one, and we take a look at their financial situation, and it is like you are not set up for this. You do not have the means to be able to fix a home up, and depending on, a lot of times the product that they are looking at, it really is, they are not getting it at the right price. They are going to put $20,000 into it, and by the time you figure out what they pay, what they are putting into it, it is retail.

Mikell:  Okay.

Jason:  Basically, they are getting right back up to where the market is. They are not getting any equity or any benefit to doing all the work. So you might as well just go buy a house that is already to go. But there is something in the brain that triggers I got a deal with the word foreclosure. I have seen more people overpay for properties, buying foreclosures, thinking that they were getting a deal because the price was lower than the subdivision average.  But by the time you factored in what you put into it, sometimes you paid more than the house you could have bought down the street.

Mikell:  Absolutely.

Jason: Do not get tricked into the word foreclosure because it does not mean deal. It just means the house is foreclosed on. That is the only thing it means.

Mikell: Gotcha.

Jason:  Whether it is a deal or not, that is to be determined. We buy a lot of failed rentals. There are a lot of landowners out here or property owners that thought they wanted to be in the real estate game and just made really bad decisions.  They have a good house, but they made some really poor decisions. They typically rented it too cheap. They did not have enough cashflow, and then when something goes wrong with the house, what they do to save themselves is they defer the maintenance. So every single year the house keeps going in a downward spiral until where it is so bad nobody will even rent the house.  We see that over and over again. There are some landlords out here. I think it is a strategy for them where they just defer maintenance until the house is trashed, and then they just sell it and go buy another one and do the same thing over and over and over again.

Mikell:  That is terrible.

Jason:  It is not really a good business plan. I have never really figured out the logic or the math in that, but we classify some of those folks as the term slumlords, and that does not necessarily mean they are in the bad part of town. I have seen them in some of the nicest areas in the Triad, and typically what it is is a desperation. They have got the wrong tenant in there, and or they rented the property too cheap because they could not hold out to get the right person, and if you cannot do that, then definitely real estate investment is not for you. If you have to buy a home, fix it up, and you have to rent it in a very, very short amount of time, you do not have what we call patience money to find the right tenant then, and not only find the right tenant, but have multiple options of great tenants, real estate investing is not for you.

Mikell:  You do hear the saying that some money is better than no money. So you are saying do not feed into that.

Jason:  Some of those folks, if we had them talk to us on the radio show they would say that statement is false in that sometimes some money is the only money they ever got. When you have tenants meeting you and they have a big wad of cash, and they want to advance pay rent two or three months, I know that sounds like you won the lottery, but guess what? That is probably all the money you are ever going to see. Then you have to wonder why do they have cash. Do they work for tips or do they just work off the grid? You want to make sure you are in good selection with the people you have coming to rent your home because it is your asset, and you want to protect that.  Now the hat shifts, and you have to think not only like an owner, but a property preservation manager, and you want people that are going to take care of the property. There are some fantastic tenants out there. We have some great tenants. We have folks that actually take care, in my opinion, they take care of the property better than the previous owner did.

Mikell:  Wow.

Jason:  They keep up with it, and they treat it as if it was their own house, and they just have that pride of I am going to leave this better than what I got it. Now, you do have the other side of that where you have people that just they stay until it is so bad that they do not even want to live there anymore, and then they move. Again, patience money, you can weed those people out pretty quick.  That is a lot of what we see, and we buy a lot of these type of properties. Sometimes we cannot even make the math work. We just had a lady call from a small town outside of Winston and the house was rented out of desperation, rented way too cheap, and she has no money to fix it up.  Got some major structural issues, and it is a sad situation. She needs the money to pay the mortgage, and she is probably not going to be able to do that for much longer because the house is probably in such a condition now it really should not be rented. So the tenant probably just for safety reasons needs to vacate the property.

Mikell:  You have to think about what are you doing with those rent payments. Some of the proceeds need to go back into the house.

Jason: Absolutely. You need to create what we call it a sinking fund. But basically all the properties that we own, we set aside a portion of the rent every single month for stuff.  Emergency fund. Whatever it may be. Roofs do not last forever. Water heaters do not last forever.

Mikell:  No.

Jason:  You have got two choices. You can plan for those things knowing they are going to happen.

Mikell:  Or you can get a loan when they happen.

Jason:  Or you can get a loan or you can go to Mr. Visa or Mr. AMEX –

Mikell:  There you go.

Jason:  -- which really is not a good financial plan. If Visa and AMEX are your backup, that is not a plan. That is a reaction, and reactions typically do not work out well.  They are very, very expensive. So you want to have a plan. You want the property to work for you, and you not work for it. There is a big difference in that statement. You need to make sure that you are setting yourself up. It is just not only the bad tenants sometimes. Sometimes it is bad management. Some people do not need to manage property. They cannot even manage their own household. So you have got to have systems in place and processes in place to protect your asset, but also to make sure you are taking care of your tenant. That is your responsibility as a landlord to provide safe housing. Now you will have some people who will work against you in that, and then there are means that you have legally that you can take to fix that. But it all comes in, it is selection up front, and it is choosing the right person. Let’s do this. We are going to take a quick timeout. We are going to go pay some bills because hey that is the responsible thing to do. But we will be right back. We are going to dig into a few more and talk about security and your money. We will be right back with the Jason Bramblett Real Estate Show.

And welcome back to the Jason Bramblett Real Estate Show. We were digging into the dos, the don’ts, the hows, and what not to do. Do not get yourself in a desperate situation. I see a lot of times folks forcing deals, and that is the worst thing you can do. When you want to buy a house so bad, you want to be a real estate investor so bad, that is when I see most issues really kind of –

Mikell: What do you mean forcing deals?

Jason:  Force the deal. When you are financially not ready to do it.

Mikell:  Oka.

Jason:  You either financially do not have the funds or you do not have the discipline.  It is like Kenny Rogers. You have got to know when to hold them and know when to fold them.  Right? Unfortunately, I see too many people get caught up in the hype and excitement.  A lot of these seminar things you go to that are in these hotels, and they get caught up in stuff that just mathematically, if you stopped at looked at it from about a 30,000-foot view you would know it is not going to work.  But they get too close to the deal, and they get too emotional with it. I think that is one of the things that has been beneficial to me with real estate is being able to remove the emotional piece out of that. Because everybody that is selling their home is emotionally tied to it.

Mikell:  Absolutely.

Jason:  I am able to come in and help them get past that, get past themselves, and look at it very much from a mathematical process.  We tell a lot of people no. You should not do this. You should not buy, and you should not sell your house. We have a lot of folks where it just does not make sense.  Some of them still do it; they just do not do it with us. We just do not participate in stupid if we can help it. I do not want to be associated with that. So we will tell people no, and we will walk away from the deal, whether they are buying or selling. That is pretty rare in our industry because most people will sell anybody anything. We just do not sign up for that.

Mikell:  Let me ask you a question. Say someone wanted to rent their property, would you help them basically be their landlord as well? Say they wanted to rent, and you get a percentage, your company gets a percentage?

Jason:  Yes, we have a property management division of our company. We do full property management services.  Carolina Rental Management is our rental arm of that, and yeah, we absolutely take care of everything. So you could own a property and still not have to deal with anything. There are decisions you have to make, but as far as the how to and the tenant selection and screening and all that, we do all that.  Check backgrounds, everything.

Mikell: The reason why I asked is because you said a lot of the people were taking rent that was not what they needed to. It was too cheap. You are someone who will not settle.

Jason:  That is true. But most of those people do not use our services either.

Mikell:  They should. They should though.

Jason: If not us, they should use a professional property manager. Most people have a problem with the word no, and when somebody calls, everybody has got an excuse for everything. Some people are just too soft.

Mikell: Absolutely.

Jason: And they should not be landlords because you can get yourself into a situation where you get taken advantage of.

Mikell:  Yeah, they put the kids in the story.

Jason:  Absolutely.

Mikell: And I am having a hard time.

Jason: Absolutely. Like is about hard times.  That is exactly right. You are not the government. Now if the government allowed me to hook my printer up to the printing press and just print my way out of my problems, I would be happy to let anybody stay anywhere they wanted as long as they wanted to regardless of whatever excuse Mama has.

Mikell:  Not a problem.

Jason:  But we do not have that luxury, and so we have to make good business decisions. Sometimes tough love is good love. We have to help some people through their problems. We approach everything with a plan. My property manager, Elizabeth, is phenomenal. She actually sits down with people and will help them work out their finances.  Help them get a budget established if they need to.

Mikell:  Awesome.

Jason:  Some people never had that education.

Mikell:  Absolutely.

Jason:  And they will do it, but somebody just has to tell them and give them a guideline. We can help them through that. Well, we were talking about money, investing, and obviously when you put up money, you want some type of security. Right?

Mikell: Right.

Jason: Everybody wants some type of security. The security you get in the stock market, I do not know what that is. I guess if you can push the button fast enough and sell fast enough, you do not lose as much. Right?  You can have a perceived security in that you can invest in things that typically have a lower return, but they are also more secure. You could also just leave your money in the bank. Right? That is pretty secure.

Mikell: That is very secure.

Jason:  It is FDIC-insured up to $250,000. It does not do anything. It just sits there and looks at you, and it is pretty secure.

Mikell: And that is comforting for some people.

Jason:  It is. It is. Security in our situation is what we do. It is just the same thing as the banks. We secure everything with a recorded deed of trust in the county where the property is at. If you give us $200,000 to invest, it is going to be a secure lien of trust against that property, and then we will not be able to do anything with that property until you are cashed out basically. So we cannot refinance the house, and we cannot sell the home until you get all of your money back. That is a public record recordation in the county, so it is about as secure as you can get. Of course, if we did not pay you back, you could always foreclose on the house because that is what a deed of trust lets you do. Then you would have a really good deal on a house because I only buy houses that make mathematical sense. So it is a good deal for everybody. If you would like to get more information, you can go to Jason Bramblett dot com. Next week we are digging deeper into how to get into real estate investing.  So everybody have a great weekend.  We will see you next week right here on the Jason Bramblett Real Estate Show.

Posted in Radio Show
Aug. 17, 2019

RE Investing Episode 6

Real Estate Investing: Episode 6

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast

Jason:  Good morning, Triad.  I hope everyone is doing good. It is one of those wonderful, ridiculously humid August days. It is going to be, what, 200% humidity pretty much.  Hot, 90 plus, but if we did not have the weather to talk about, some days we would not have anything to talk about. Right?

Mikell:  To complain about.

Jason:  There you go.  Complain.  It is always too something. 

Mikell:  Yes.

Jason:  It is never too perfect.  That is for sure. I have been in some very perfect climates before though.  For me. Now everybody has got their own temperature.  Right? So me and my wife we are about five degrees variance.  It is not too bad. It is better than 20 for sure. We can deal with five degrees.  We are digging into the real estate investment series that we have kind of been going through the past, well actually, this is show six of the real estate investing. Today, we are diving into really the nuts and bolts of the how-to. Not so much in the how to get the house ready and all that, but the money side of it. How does this math work?  How does this thing come together? If I have some money, what should I do? I am thinking about being a real estate investor. I am a real estate investor. I am out of cash. I need more cash. Where do you get cash? All those types of things. You have heard the acronym OEM, other people’s money.  Well, we are going to talk a little bit about that.  The risk, the rewards, and all those things in between. If you have a pen and paper, grab it.  You want to make some notes.  If you do not, do not worry about it. We will podcast this show up to our website. You go to Jason Bramblett dot com, click on the blog, and you can listen and read all at the same time.

Mikell: Awesome.

Jason:  So it is there for you. The only thing we do not have is my smiling picture, but you can probably google that and find it. So if you need somebody in front of you while you are reading it, hey, there you go.  You can find me out there. Just recapping over last week and kind of where we are so we have some context. So last week we ended with talking about dead money. Dead money is money that you have sitting in your account that is doing nothing for you. You basically are earning than 2% on this money. Okay? So it is just sitting there.  More than likely it is .00025. You know what I am talking about if you get that check for six bucks in your interest account.  It is not exciting. It hardly will get you a, what is the biggest drink they have at Starbucks?  Grande? Venti? Something like that.  Whatever. Extra large. How about that?

Mikell: I just say large when I go.

Jason:  There you go. There you go. Just a large drink over there. But what we want to do is figure out ways to get that money moving so it is not sitting in that dead account and it is just sitting in there staring at you. The downside with dead money is that sometimes it disappears.  Dave Ramsey talks about this.  If you do not tell money what to do, it will figure out where to go on its own. Sometimes you end up with some cash and then well, 90 days you look back and it is like where did that go? There is no Bentley sitting in the driveway. Right?

Mikell: Not likely.

Jason:  And it just sneaks away. So you have got to purposely tell this money where to go, what to do. And just to be clear, we are not talking about equity.  We are talking about cash. So this is not money you can get your hands on through a HELOC. Okay. That is other people’s money, all right, just to be clear. That is borrowed money. That is not what we are talking about. We are talking about dead money, actually cash.  And for some of you, we probably are talking about cash in your little safe, or under your mattress, or in a coffee can in the backyard. Do not put a survey flag by it. But you get the idea. So what are we going to do with it? We want to get this money moving. We find that there are people that just do not want to be in the market because, depending on the type of account you put it in, it can tie it up for a long time.

Mikell: It can. And actually, to get that 2%, you are going to need to tie it up.

Jason:  Oh yeah, absolutely. You are not getting that sitting in a savings account.

Mikell: No.

Jason: At least none that I am aware of. I will not ever say never. There may be one person out there that is doing that, but it is probably in a CD which has got a time commitment to it. Let’s dig into the example. So let’s just for easy radio numbers, let’s just say you have got $100,000 sitting in the bank. Okay. Just to make the math easy.

Mikell:  That you do not need.

Jason:  That you do not need.  It is extra.  It is I have tapped out everything I can do. I am still investing in my SEP or my Roth or whatever it is, but now, maybe I sold something.  Maybe I inherited $100,000.  Whatever it is. You have got $100,000 sitting in your account, and you do not want to put it into a market, or you do not want to tie it up, but you are ready to start investing.  You want to get that money moving because that .00025 interest rate is not exciting.

Mikell:  Not at all.

Jason:  So the target is we need to find a property that we can buy, and at the end of the day, it needs to end up being somewhere in that $130,000 range or more, but let’s take in radio numbers, and we will the math easy. Let’s just say I can buy it, fix it, and at the end of day, it is worth $130,000 when it is rented.  And that is what I am looking to do.  I am looking at buying and holding this property, and so really where you need to be on the price is somewhere in that $75,000-$80,000 range.

Mikell:  Okay.

Jason:  Now, some people will say, Jason, it is a seller’s market. It is ridiculously hot. Houses are selling in hours.  There is no way you are going to find a $130 or $140,000 house for $75,000. Well, you are not going to find 100 of them.  But you do not need 100 of them.  You need one.  That is all that we are looking for. I can assure you there is one out there.  Somewhere in America. It may not be right here in your backyard, on your street, or in your city, but I would imagine somewhere in the Triad there is a house that you can pick up this way. I can assure you there is one in North Carolina somewhere.  I will promise you there is one somewhere east of the Mississippi.  Okay?

Mikell:  Okay.

Jason:  There is a property out there in which you can do that. You cannot do it with all of them.  And we are going to talk about this in the show and why people sell and why people sell the way that they do.  You are thinking like a retailer.  You are thinking of the person down the street that lists their home, puts it on the market, and they got the most money. That is not what we are talking about here.  We are talking about folks that are selling for lots of different reasons and different ways in which to find these properties.  And we are also talking about buying a home that is not in good condition.  Okay? So we are going to buy the home at a discount because it is in not great condition. It is not retail, if you will. And for our radio example, let’s just assume it needs $25-$30,000 worth of work. So we have a purchase price of 75 and just to make it easy, you are going to put 25 grand it, so all in 100% is hey, magically, $100,000. Which is exactly what we have.

Mikell:  Okay.

Jason: All right. Let’s say we get that house rehabbed and even with the $25,000 worth of work we got that done. It looks great. It is beautiful. It is ready to go. It is in the right place, the right location, and we get it rented for $1300 or $1400 a month, which is very doable to do on a $130-$140,000 home. You can typically rent it pretty easily in our area for 1% of whatever that value of the house is.  Now, what I want to do is to go find a bank partner that can cash me out of the property. You can do that through what we call a cash-out refinance. Most banks will do it somewhere 75-80%. So if they did it at 80% and the house actually appraised for $130 or more, you would get 100% of your money back. You would get all of your $100,000 back. You would have a tenant in the property paying $1400 a month, which would more than pay for the mortgage at $100,000 with today’s interest rate.  You would actually be making money and actually have some cashflow, and then you would have your money back, and you could go do it again.  All right? And because now I have my $100,000 back, I am ready to go find another property and do the same thing over. There are some banks that may not do it at 80%.  Maybe you do not have a proven path.  You do not have any experience, and they are going to be a little bit apprehensive maybe. Most of them will do 75, so at the worst-case scenario, if you had $100,000 in it, and you were only able to get, let’s just say it was worth the 130, you can only do the 75% of the value. Well, you have got $5,000 of your dead money invested in a property that is worth $130 or $140,000 with a renter in there that is probably cashflowing somewhere between $3-400 a month.  So in a very, very short time, like in the first year, you will have your $5000 back.

Mikell:  So Jason, let me ask you this question. Your tenant pays you.  Do you give some of those proceeds to the bank now?

Jason:  Oh yeah, you are making a payment.

Mikell:  Okay.

Jason:  In essence, your tenant is paying for your house.

Mikell:  Okay.  Gotcha.

Jason:  So we are using the tenant’s money, and we are paying the mortgage, the interest, the taxes, and hopefully, if we did everything just right, there is a little bit left over for us, for Pampers.  Right?

Mikell:  Right. Right.

Jason: For whatever it is we have. Now, that formula works no matter what the price point. I just did $100,000 because it was simple, easy radio math. But it works if it is a $200,000 house, a $150,000 house, or a $7 million apartment building. It makes no difference.  The math works. You can force appreciation in certain products by buying them in not so perfect condition. You cannot do this if you are paying retail, but we are not talking about paying retail. So you could buy a $7 million apartment community. You could put $3 million in it. Now you have got $10 million invested in this property, but because you fixed it up, you are able to charge more in rent.  And now you are thinking your $10 million apartment community is now worth probably maybe 13, 14, 15 million. Whatever the case may be, and you can refinance it out and get all your money back and go do it again.  Now, some of you will say that is just great. I am just short I do not know $7 million. Well, right. Exactly. You have got to crawl first, and then walk, and then run, and then sprint. You can exponentially build on these numbers. You may never be able to do the apartments, but it does not matter.  You could do it with a duplex. You can do it with single-family homes. You can do it with a six-plex. You can do it with a ten-unit apartment building. You can do it with anything really that is basically you can buy right, rehab it right, and rent it.  And then refinance it out. That formula works all the time in every single city, in every single town in the United States.  I do not know if it works outside the country based off what I know about investing outside the country. I would not necessarily say you should do that with all your money or the money that you have. I have heard some stories where certain governments of certain countries liked your idea, so they just took your stuff.

Mikell:  Oh wow. 

Jason: Well, they do not have the same rules we do like private property rights.  America is unique in that you actually own the property and you have a deed.  In certain countries, you may have the illusion that you own the property before the government takes it back because it is theirs. This formula is not mine. It has been around for decades and decades and decades and decades and forever.  Probably ever since there was something built. This is a very tried and true formula. This is not Jason Bramblett Real Estate formula.  This is just a formula that works in the industry. It worked in 1910 when the Rockefellers and all these folks were in business. It worked in 1980. It worked in 1970, and it still works in 2019. As long as there are people renting property, this formula will always work. So whether it is residential, actually it works in commercial, and as we talked about multifamily or apartments, it works in that really, really well. The key is it has to be rentable.  Does it work on land?  Probably not because most people will not pay that much to rent land.  It could potentially in certain locations, bigger cities. If you go into the Chicagos and New Yorks and some of the bigger cities, you will find that some of the buildings, although you may think that one person may own it, but typically not.  One person owns the dirt, who rents the dirt to the person that owns the building. The person that owns the building rents the building to many, many different companies, and sometimes even those companies within those rentals sublease to other companies like Regents would be a perfect example.

Mikell:  Okay.

Jason:  They rent 5000 square feet. They break it up, and then they do little office rentals to multiple people.  Perfect example of subleasing. So there are lots of ways you can slice up real estate to create value.  It is not a one-size fits all type of business. There is lots of creativity within real estate.  The great thing I love about real estate is it is tangible.  You can touch it and feel it.  You can burn it to the ground if you want to. You can rebuild it. You can bulldoze it. You can do whatever you want with it because it is a tangible product. We have folks sometimes that will call and tell us hey, we want to sell this land, and to justify their ridiculously high price they want, they will say, hey, you do know, Jason, they are making anymore land.  In theory, that kind of sounds right.

Mikell:  It makes sense.

Jason:  Yeah, but then you call DH Griffin and then he just removes whatever is on it, and then all of a sudden, guess what? I just recreated some new land.

Mikell:  Okay.

Jason: So you can get rid of stuff. Mother Nature sometimes does that. Right?

Mikell:  Right.

Jason:  She will come through and just wipe out a whole block.

Mikell:  Yeah, unfortunately.

Jason:  So you cannot necessarily make the dirt, but you can sure remove what is there and start over again. So you can kind of make new land. So the numbers simply really do not matter.  Whether it is $100,000 or $50 million you have sitting, if it is dead money, it is dead money, and you want to get that moving.  There are ways you can do that within the real estate world that does not tie up your money for a long period of time. Then you can cash out, start over, and redo that. We are going to do this. Let’s take a quick timeout because I am going to dig into some more numbers, and I want to make sure I have plenty of time to run through that without a commercial break. So grab a pen, grab that paper, come back.  You are listening to the Jason Bramblett Real Estate Show. We will be back in just a minute.

And we are back.  You are listening to the Jason Bramblett Real Estate Show. So before the break we were talking about the numbers, the math, and how to do this, and how do I take my dead money that I have in my account, put it into a property, and then how do I get it back so I can do it again. Because a lot of people think well, if I paid cash, I am stuck. Well, no you are not stuck.  There are instruments out there in the lending world that can help you get your money back. So you can do a cash-out refinance, which is what we were talking about, which would allow you to get your $100,000 back so you can go do it again. It will allow you to get your million dollars back so you can go do it again. It will allow you to get your $10 million back so you can go do it again.  Again, the zeroes do not matter. It is the formula that works.  Now, of course, you cannot do this with a 219 credit score.  Right?

Mikell: Right.

Jason:  You have to have some income.  Right?

Mikell: Right.

Jason: Because the bank, just because the math works on the deal, if you have got a 580 credit score and it is some shady income, probably not going to work out so good for you. Right?

Mikell: Right. And if you have repossessions or anything else like that, it is not going to be good.

Jason:  Right.  There are still some qualifications. It is not a magic pill here. It is just the formula works, but you also still have to have other responsible things within your credit.  Right?  So you cannot just do this, and do not get mad at me if you go over there and you have a 522 credit score and no job and they will not give you your money back.  Right? Well, they will not even do the loan. So you need to know that going into it. Right?

Mikell:  Absolutely.

Jason:  They may give you a $5000 loan on your $140,000 house maybe.

Mikell:  Maybe.

Jason: But you are not going to benefit from this program. So you do need to have some income and some credit to be able to do the refi. Here is the great thing. You can know all that before you do anything. Go to the bank and talk to them. Say hey, I heard this crazy guy on the radio who said I could do this.  Can I do this? They will pull your credit.  They will look at your financials, and they will tell you yeah or no. No way. No, we would not even loan you $10, or you may go there and find out that they would do this as many times as you want.

Mikell: Right.

Jason: So everybody is going to be a little bit different. But you do not have to go out and do it and then find out. Go find out first, and then come up with your plan. Here is what I wanted to get into. Some of you own rental property and you are just not cut out for this.  Some people are like hey, I do not like confrontation, and I do not like dealing with people. I do not even like people. I would rather own a cactus. Right?

Mikell:  I know people like that.

Jason: Absolutely. So this may not be for you. Being a landlord may not be for you. Now, if you buy the property right, you could hire someone. It is going to cut into your cashflow, but if you follow our system and formula, you probably could actually do that and still be okay and still have that covered and have somebody there. But there are some owners that we talk to or some investors that have this money sitting in this account, this dead money, and it is really in this category called no headaches, meaning yes, I am earning nothing. My money is dead, but it does not bother me. It does not talk to me.  It does not give me any kind of conflict. It does not tear up my house. It does not do anything.  It just sits there. I look at it. It looks at me, and nothing happens.

Mikell:  That is a fearful mindset though.

Jason: It is, but sometimes it is through bad experiences that they have had.

Mikell: Absolutely.

Jason:  They are paying the price for that.

Mikell: Absolutely.

Jason:  As long as you are okay with that, leave your money where it is. And this probably is not for you. If you do not want to deal with people or tenants or all those type of things, it is not going to work. But what we have come up with and what we have been doing for 15 years or longer, we have clients, we have sold their home, and they are like hey, Jason, I really do not need this $300,000. What should I do with it?  I really do not want to put it in the market because I do not want to tie it up. I need to keep a little bit in case of an emergency, or I need to put it in something short term.  Most of the time what they would do is they would go put it in a CD, and they would probably earn whatever the rate what was.

Mikell:  The 2%.

Jason: Yeah, the 2%.  Whatever it may be.  You tie it up for a year for 2% or something like that. They wanted to get a little bit better than .00025, but 2%, which is not really exciting because 2% basically is zero.  Especially when you look at the inflation rate. So it just makes you feel better.

Mikell: And then you have to pay taxes on the one that you gained.

Jason:  So the 2% just makes you feel like you are actually doing something, but realistically it is zero because inflation is definitely at least 2% if not more. So you could actually be going backwards. What you want to do is get that money moving. We have partnered with a lot of our past clients and real estate folks around the Triad and actually all around everywhere that have dead money that they want moving.  They want to be in real estate. They just do not want to do it. So we have a system within our holding company where we actually buy properties and do just this.  We have partners that come alongside of us. They provide the capital. We provide the knowledge and the purchase and the headaches and deal with the tenants and all that, and we buy the deal, and then we cash them right back out very quickly.

Mikell:  Okay.

Jason: So they are in and out of the deal. They are earning somewhere between 7-15% on their money, and we keep the terms very, very, short. It kind of looks like this.  You have got dead money sitting in this account, and you want to do something with it. So we take the money, we go buy a property, we rehab it. Upon completion or in 8 months, whichever it is, typically what we find is it is a little faster than 8 months depending on the disarray of the home.

Mikell:  Yes.

Jason:  I had somebody call me the other day and gave me some really interesting adjectives about the home that they own.  I think that one might take a little longer than 8 months.  I had to look up some of those words to see what they were talking about.  So they have some problems over there. It is everything from we have had some that are $30,000 in structural issues. We have actually had to pick the house up, yank the foundation out, repour new footings, put a foundation back under, set back the house back down and start over.

Mikell:  Do you stay away from those type of houses?

Jason:  No, we love those type of houses. So if you have one that is really bad, if your house is leaning just a little bit to the right, we would talk to you.  Absolutely. There is really nothing that we will not look at. We do buy some that are just simple paint and carpet. That is just not that big of a deal. But most of what we look at are houses that have been neglected or not maintained or sat vacant for years or whatever the case may be. Our investors are tied into the property with us for about 8 months, and then we cash them out, and then they can keep going.  They can go to another property with us. They can just sit on the sidelines for a while. We have owners that do all kinds of different things.  I have one particular owner, every time they do a house, they go on vacation. They do not need the money.  It is dead money. The money moves. They earn say $15,000 in interest, and they go on a really sweet trip every single year. That is awesome.

Mikell: That is nice.

Jason:  It is great.  Works great for us. It works really, really good for them. I think they are actually getting the better end of that deal because I have look at some of the places they have gone, and they are really nice. But this is money that is moving for them that they are not having to do anything, but they are earning interest, and they are earning some experiences, some really cool things they are doing with their life.  Instead of this money sitting there dead, they are taking interest and living life and enjoying themselves.

Mikell:  So for the people who do not want to go to that bank route, they can just call your office and talk about that partnership?

Jason:  Absolutely.

Mikell:  Awesome.

Jason:  Yes, you can go to Jason Bramblett dot com. Shoot us an email. We will get in touch with you. We will walk you through all this. It is very secure. It is very safe. We do everything with attorneys. We do everything with a deed of trust, so you have a very, very secured position. We have been doing it for a very long time, so it is something we can walk you through many different options and many things we have done. But maybe you own a house that qualifies for this. It is kind of rough. It needs some love. Maybe the tenants were not so nice to you. We would love to talk to you about that as well. So next week, we are going to dig further into this. Everybody have a phenomenal weekend.  Stay cool out there and stay out of that humidity. You are listening to the Jason Bramblett Real Estate Show, and you can visit us at Jason Bramblett dot com.

Posted in Radio Show
Aug. 10, 2019

RE Investing Episode 5

Real Estate Investing: Episode 5

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast

Jason:  Good morning, Triad.  Hope everyone is doing fine on this Saturday morning.  Get your sunblock and your coolers full of ice because it is going to be hot, hot, hot today.

Mikell:  That sounds amazing.  Sunblock. Cooler full of ice.

Jason:  Sunblock or just stay inside.  Either one.  If you are going to stay inside though, I have got some homework for you today. How about that?  We have been talking about real estate investing, and now we are going to dig into the next stage of that, and that is the how to.  The nuts and bolts. How to break it down. What is the formula? Where to start? How do I begin?  Who has got my money, and where in the world can I go get some and all that stuff?  So we are going to dig into that to get you started.  If you have been following us along, and there have been several thousands of you, it seems, following us along, which is awesome. 

Mikell:  Awesome.

Jason:  Thank you for that.  Keep sending in the emails.  Go to Jason Bramblett dot com.  Shoot your questions over. We have had some great engagement and questions and things I had not thought about that we are going to dig into and share with you on the air. So if you will go grab a pen and paper, if you are driving down the road, hey do not worry about this thing is recorded, and you can hit the blog site later today and take a listen. So we are going to dig into evaluating the properties, but also evaluating the money, which is important as well. I tell our new agents. You have got to explain to people so they understand. The most expensive thing about buying a home for most people is not the house. It is the money. The mortgage is the most expensive part of buying a house. Right?

Mikell:  Absolutely.

Jason: You have got to make sure that you got that right and you get the right type of loan for what your family situation is.  Recapping, just to kind of look ahead.  Where have we been and where are we going. So we talked about why should you invest, why real estate is good, and there are lots of things to invest in.  I love real estate because I can touch it, feel it, see it, drive by it, and I cannot do that with Wall Street very easily.

Mikell: No.

Jason:  I can go to Wall Street, but I really cannot touch the paper I own because it is just kind of in the Cloud.

Mikell:  And it is really not paper.

Jason:  It is really not. It is just your name on a piece of paper, fakey paper.

Mikell:  There you go.  Like you said, it is in the Cloud.

Jason:  You are on a ledger somewhere. How about that? It is like bitcoin but just not as cool.

Mikell:  Absolutely. There you go.

Jason:  There you go. We talked about you bought your first house. You are living in it. You have converted maybe your first home into a rental property, which is what we suggest because typically the first property you buy is perfect for a rental.  You typically bought it in an area that you want to live and other people want to be there, too.  It is not a mansion; therefore, it makes sense to rent it. Right?

Mikell:  Absolutely.

Jason:  All these things make for really good rentals. Now here is the rub for house number two. If you have the discipline to not move up, and this is a challenge, but if you can keep the discipline to stay in the same type of property, now you can take your owner-occupied self with a new owner-occupied loan, converting your property you are in now to a rental and buying your next home. Why is that a good thing to do?  Well, owner-occupied homes you have to put less money down. They are also easier to qualify for because you are going to live there. So these make it very easy to enter into that. If you do that, let’s just say every couple of years, in ten years, you can acquire five, six homes pretty easily that way.

Mikell:  Last week you were saying that for an investment home, you have to put 30% down?

Jason:  Every bank is different, but typically –

Mikell:  Around that.

Jason:  Yeah, it is somewhere between 20-30%.

Mikell:  So you save a lot of the down payment?

Jason:  Oh yeah, absolutely. Absolutely.

Mikell:  Oh, okay.

Jason:  Interest rates are more favorable –

Mikell:  Okay.

Jason:  -- for owner-occupied properties. Investment money or investment properties typically have a higher rate, so you have converted, so when you bought the home it was owner-occupied, and that loan was fixed.

Mikell: Absolutely.

Jason:  It was a guarantee by the bank that said hey, we are going to do this, and we will not change your interest rate. Well, when you move out in two years, three years, four years, whatever it is, and you go buy the next property, that loan is still fixed.

Mikell:  That is true.

Jason:  It is true.

Mikell:  That is very true.

Jason: Okay?  It is a way in which you can enter the real estate investment world very affordable.  It is a step-by-step thing.  Now some people say that is going to take way too long. Well, it is a marathon, not a sprint.

Mikell:  The way you just described it, people do not get into the fixed mindset where you have to be rich to get into real estate --  

Jason:  Oh absolutely.

Mikell:  -- and do that process.

Jason: Well, we are going to show you how to do it with no money.

Mikell: Awesome.

Jason:  Even better. Right?

Mikell:  My situation.

Jason:  So we are going to see. This is not the seminar dudes rolling around in the hotels.  All this other people’s money garbage and all this stuff.  Okay. There is a right way to do it, and the right way to do it is through relationship. We are going to talk about that today and dig into that. Some of these other people’s money, they are out here using AMEX at 19%.  You do whatever you want. To me, that is beyond my risk factor.

Mikell:  Yeah.

Jason:  I have this other, some people call it spider sense. I just call it common sense. It is beyond my common sense to do those things. But I know people who have bought homes on their AMEX. Okay? To each his own.

Mikell: That is not the first time I have heard that.

Jason:  It just depends on what your threshold of risk is. Okay?  Some people have a real high tolerance for risk. I just keep it real simple. I figure if I keep it simple, simple is just the right pace for me.

Mikell:  I like that.

Jason:  The other thing nice about simple is it is very duplicatable.  If I was going to be hey, the best way to buy a house is to get your AMEX card and buy one. I just lost like 99.99% of you.

Mikell:  Absolutely.

Jason: Because it is not, it is such a small amount of people that will do that. It is just a risk you do not need to do. So we have converted house one. Now we have house two. The discipline is not moving up. That is the thing.  Most people want to change. They want more space, bigger house, next step.  Right?

Mikell:  That is hard.

Jason:  It is hard.  Anyway, if you can do it and keep that discipline, you are in there.  But let’s just assume hey, it is life. You are not going to listen to me. You are not going to do that. Because Mama is like no, we are not going to do that.

Mikell:  Absolutely. That is exactly what I was thinking about.

Jason:  I want another bedroom.  I want a bigger yard. I want this and that.  That is real life, and that is the real deal, and husbands, you are just going to lose.  And do not even go to her and say Jason said.  No, no, no, no because that is not going to work either. Here is the big thing. That is not an option.

Mikell:  Okay.

Jason:  So how do we get the money? Right?

Mikell:  Right.

Jason: So now that is not an option.  How are we going to get the money? How are we going to do this? You have got to start saving. Right?  You have got to figure things out.  Down payment money for these investments. There are lots of ways you can do it. I will share with you some of the ways that some of the people that I have coached over the years. I had a young gentleman that worked for UPS. He said I am going to be a real estate investor. I drive neighborhoods all day long. I see all these amazing opportunities on my routes. I have no money though. How can I do this? I said well, you look like you are physically fit. You sling boxes all day, man. You are in great shape.  What I would do is I would go buy me a self-propelled lawnmower, a big old tank of gas, and the neighborhood you walk in, I would just go to your neighbors and say I have got a phenomenal deal for you.  I am going to cut your grass so cheap you cannot say no. And guess what? They all said yes. And he ended up cutting about 30 lawns. There probably was not even 90 houses in his neighborhood.  He had 30% of the market share.  Most of them were side by side, so he could just cut them all at one time.  Bought him a, not a landscape business. He did not go get a $16,000 zero-turn mower. I think he invested about $1000 in a really good quality Busch or self-propelled mower –

Mikell: Okay.

Jason:  -- and he walked the lots and walked the yards and cut the grass very, very simple, and he charged $35 a week or whatever it was.  $35 every time he cut it. Now, I know all my landscape friends are saying yeah, that is the problem is we have got people undercutting us.  Look, he is looking for an opportunity.  He is willing to do something that most people are not willing to do. His reward was in one summer he earned enough money to have a down payment to buy his first rental.

Mikell: Wow.

Jason:  And then we taught him how to snowball that. So he was able to cut those 30 or 35 lawns for a whole entire summer.  Guess what? He does not have to do it anymore. He just went in there and ripped the band-aid off and busted it out and did it.

Mikell:  I may have to do that.

Jason: If you live in a neighborhood that has got a couple of hundred houses, you do not need all of them. Basically, his rule of thumb is if I can walk the mower to the yard, that is who my target client is. I am not driving all over town because that is time, money, and energy.

Mikell:  Absolutely.

Jason:  Just right in his yard. Right in there, and he just said hey, would you like to take the summer off.  I will cut your grass.  It is $35, and most people were like yeah.  He was very clear with them.  This is temporary. I am only doing this to save money to get a down payment.  Next year, you are on your own.  Cut your own grass. Hire somebody else. Whatever you want to do, but he had a goal, and he hit it, so he could be done. What do you do?  I do not know.  In that case, he was cutting 30 yards at $35. The guy is making almost $1000 a week, and he saved his money really quick.  Now did it take him a lot of time? Absolutely. Did he work probably some 16 and 18-hour days? Absolutely.  He probably worked every Saturday and every Sunday for 10 or 12 hours.  Absolutely. But guess what?  He only had to do it for a short time, about 90 days, and he does not have to do it anymore at all.

Mikell:  Wow.

Jason:  What else could you do though? Uber, Lyft. Right?  You could do those things. I do not know what they pay or what the money is.  I am just saying those are ideas.  You could wait tables. You could work at a really nice restaurant, make a couple hundred dollars a night. You could find a side job in whatever field you are in.

Mikell: Absolutely.

Jason:  Maybe you are a plumber or an electrician or whatever. Here is what I know for sure. If you want it bad enough –

Mikell:  Absolutely.

Jason:  -- the how always shows up.  100% of the time. If you want it bad enough, the how is always there.  The opportunity will be there. If you do not want it bad enough, it will seem like work. And it will be no fun, and it will be a pain. But here is the thing. If you pay the price now while some of you who are listening that are young, you will not have to do this stuff when you are old.  I will promise you. He is not going to be cutting his grass when he is 60 years old and retired.  He will have somebody doing it for him. Why? Because he has paid the price now to leverage his time to buy assets that create what we talked about several weeks ago – passive income.

Mikell:  Absolutely.

Jason:  Money in which you earned that you did not have to put any effort in to.  Or your put effort into it a long, long time ago, and the benefit is there forever.  The great thing about rental property, unless it burns down, it will pay you for the rest of your life.

Mikell:  Right.

Jason:  And the cool thing about that is you have other people paying down your investment for you, and so it makes it really a sweet, sweet thing.  All right. So you pay the price?  Is it worth it? Absolutely.  If you are a young person, and you have got a little bit of, I do not know, muscle behind you or just youth.  You do not even have to be young. If I had today, for whatever reason, if real estate did not go the way I thought it was going to be going in the future, if I needed to, I would go buy $1000 push mower and make it happen.

Mikell:  Absolutely.

Jason:  You just do what you have got to do. But you do not want to be in that have-to situation.

Mikell: No.

Jason:  It is better to be in the I choose-to situation. The have to’s are no fun. Earning money is much better than borrowing money.  Now you could skip steps and you could borrow the money.  Everything that you do different from that is going to be a higher risk.  Hence the word OPM – other people’s money. That is what a lot of the seminar guys like to talk about because what do they realize? The audience that is in front of them does not want to work. They want to just take the easy route.

Mikell:  Absolutely. No sweat equity.

Jason: No sweat equity.  Exactly.  Yeah, because sweat equity has this word that they call sweat. It takes effort.  Right?  They would rather just talk about it –

Mikell:  There you go.

Jason: -- then go out there and do it. So you can leverage it with other people’s money.  The best place to start, in my opinion, is with people that you have relationships with.  Typically, this is friends and family and those people.  Well, it is not your friends. Your friends do not have any money to give you. It is your family, which is okay, but you have to make sure that the relationship is clear.  Because now it has changed.  It is not a mom and dad relationship.  It is either a partnership, but when you owe people money, as Dave Ramsey says, you become slave to the lender.  Right?  That is from Proverbs, if you guys want to look that up. But when you have that indebtedness to them, the relationship changed. It does not change with an institution. The big bank out there?  Their relationship with you is not emotional.  It is transactional.

Mikell: Absolutely. 

Jason:  We are going to give you this if you do that.  When you stop doing that, we take your stuff back.  Right?

Mikell: Exactly.

Jason:  That is not the same way it works with mom and dad because there is this crazy thing called, well most of the time, love in there.

Mikell:  There you go.

Jason:  And they care, but that is where relationships can get kind of screwed up, too. So you have got to be careful. You have got to set the right boundaries, especially the closer the people they are to you.  A lot of the homes that we sell every year in the Triad are from broken relationships, and a lot of times it is broken businesses, where it was a family business and then finally, it just imploded.

Mikell:  Oh wow.

Jason: And a lot of times it is because the right boundaries were not set within that relationship of hey, you are my brother or my sister, but in this situation in writing here is what each of us do. There are no clear lines, and it ends up just going not in a good way.  What do we do?  We sell the properties because there is a dispute about whatever it is. Let’s do this, Mikell.  Let’s take a quick time out. We are going to go pay some bills, and when we come back, we are going to talk about who has got your money because it is out there. And we will dig into that.  We will be right back. You are listening to the Jason Bramblett Real Estate Show.

And welcome back to the Jason Bramblett Real Estate Show. So we have been digging in all things real estate investing. And why real estate investing?  Well, it is pretty much all I know. The other stuff I call the other professionals, and they have got shows on here, too.  Some of them are actually very, very good at what they do. Is there a right way or a wrong way?  A lot of it is just choice.  Does it all work? I think a lot of it does work. It is about having the right team behind you and the right product.  Why real estate for me?  I just like a tangible product.  To me, it is just something about driving around and seeing what you own.  It is just what I have always enjoyed. We have talked about the benefits of owning real estate and so from a leverage of your time and money and creating passive income, now it is like okay, that is great. I am already working 14 hours a day. Unless I get paid for sleeping, there is no way I can make any money.  Okay, so now we are looking at partners.  Other people’s money.  The best partnerships are the ones that you have the best relationships with.  All right? You are not going to typically walk up to a stranger on the street and say, hey, I want to buy a house. Do you have $100,000?  Right?  No. They have institutions for that.  Banks. But banks sometimes are not always the best place to start. Sometimes the best place to start because you have never done this before is with family or friends or relatives or whatever. The interesting thing about America is there is about $3 trillion sitting in savings accounts in America. It is ridiculous.

Mikell:  Oh wow.

Jason:  Idle money that is doing nothing.

Mikell:  Oh wow.

Jason:  So it is a lot, a lot of money.  People have got $10,000, $30,000, $75,000, whatever it is just sitting in savings accounts, and most of it is earning .0025 in interest.

Mikell:  If that.

Jason:  If that. Right?  So that means basically most people are getting like five bucks a year. 

Mikell:  Absolutely.

Jason: That is about it.  Because of that you can create a huge opportunity for that money to be shifted and to be used as a partnership in real estate and pay a much, much higher rate of return for those people that have that money parked, that is just sitting there. My first rule, and I think it should be your first rule, that money needs to be parked.  It is excess money of that person you are talking to. They are not going out and borrowing that money. So the first thing I have when somebody comes to me is we get a lot of people every week to say hey, we want to be a partner with you. We want to invest. I want to own real estate or I want to be in the real estate world, but I do not want to do anything.  Okay. They want to be a passive partner.  We have that opportunity to do that. If you have got 100, 200 or 50,000 or whatever it is sitting there doing nothing and you want to be in the real estate business, but you do not want to do the real estate business, well, we have an opportunity for you to work with us in one of our businesses. That is outside of our sales company. The reason we created that is because we had lots of people who would sell their home and one of the things they would always ask is okay, I have got this $300,000 cash, what do you think I should do with it? They had no plan. They just sold a property. They own another one free and clear, or they do not ever plan on owning again. It is like what am I going to do with this money? And so, we help create an idea, an opportunity for them to invest, invest in real estate and be a partner with us. That is a different conversation. We are going to walk you through that later. But right now, you need to look at the relationships you have with the people that you have, and typically, this is family.  Again, you need to have a good agreement with them, a clear understanding. I would suggest it is in writing.

Mikell:  Absolutely.

Jason:  Even if it is with your mama. It does not matter. Put it in writing. Whoever it is, and that way everybody is clear, and we are all on the same page. But it needs to be idle money, and it needs to be not loaned. Okay. Or they are not borrowing money.  I do not want to go to my mom or dad or friend or whoever it is and say yeah, hey I have got $100,000 equity in my house, I will do a HELOC and pull that money out.

Mikell:  No.

Jason:  You are not a good partner because if something changes in your life, and you need that money for an emergency, it is also difficult to get cash out of real estate quickly. It is not what we call liquid. It can be liquidized really fast, or sometimes fast, but there is a word in real estate that we use when we need to sell property at a discount, and it is called cheap. You do not really want to be involved in that. Right?

Mikell:  No.

Jason:  If I need to move something quick, the way that I do that is I have to exponentially discount it to create huge, massive opportunity to get people there that can cash me out quick.  Because I cannot get the highest price in the shortest amount of time.  Typically, if it is an emergency situation.  So we do not want partners that have to borrow money to be involved in our transactions. We want people that have idle cash that is doing nothing. The other thing, too, is you do need to check with a CPA and there are rules about all this stuff. You do not need 100 people with $5000 and then you do not want to put all that money together because now you are dealing in government stuff.  Okay?  This is simple relationships of one person, maybe a friend, a family member, and you are in business and partnering together.  This is not you creating a real estate investment trust with hundreds of strangers that you have never met, and you are going to dump all the money in one big pool and see what happens. I will tell you what happens.  Bernie Sanders is what happens. Right? And he is sitting over in Buttner in North Carolina.  Not a good plan.  Okay?  It worked for a little while for old Bernie over there, did I say Bernie Sanders? Bernie Madoff.  All right?

Mikell:  Okay.

Jason:  Sorry. Wrong Bernie.  Maybe.  No, that is a different show, too. But anyway, you have got to be careful in how you do. So there are federal laws that you need to apply.  You cannot just dump and pull people’s money together without being, have the proper credentials behind you.  Okay?

Mikell:  Okay. Okay.

Jason:  It can be done. You just need to do it legally. You cannot do it legally on your first house.  Okay?  You are not an institution.  There are regulations that you have to follow, and therefore, you are simply looking for a partner.  One, probably somebody close to you, a family member or friend, and you are creating an opportunity with idle money in which they do not know what to do with. And it is cash sitting in a bank account somewhere. That is the perfect person that we are looking for. Because if they are only getting .0025 on their $60,000 they have sitting in the bank, and you come to them and let’s say you plan to flip a house, and you can pay them X amount of percent for X amount of months that it is going to take you to flip that property. It creates the opportunity, and it allows you to do that.  Or maybe you are going to do a buy and hold situation where you are going to keep it as a rental. Now, you can pay them a certain percent. Whatever you guys agree on.  There is actually no regulation. You can charge whatever.

Mikell:  Okay.

Jason:  Or they can charge you whatever for the money.  Then maybe you are going to pay it over a period of time.  Maybe you are going to borrow $60,000, and you will pay it over five years, three years, ten years. It is whatever you guys agree to.  Then you want to amortize that out so they are getting interest and principal every single month. Just like you would with a bank.  Right?

Mikell:  Right.

Jason:  Same type of situation. So there are different ways in which you can do that whether you are going to hold the real estate or you are going to flip the real estate, and all that is up to you.  We are going to dig into more of this next week and talk about the type of product, the type of loans, how to set these up. Not only how to set it up once, but how to set it up for 100 properties, over and over and over again. So you are listening to the Jason Bramblett Real Estate Show.  You can hit our website Jason Bramblett dot com if you have got questions. We will be back here next week.  We will see you then. Everybody have a safe and wonderfully cool weekend.

Posted in Radio Show
Aug. 3, 2019

RE Investing Episode 4

Real Estate Investing: Episode 4

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast

Jason:  Good morning, Triad.  Hope everyone is doing wonderful today.  We are going to be jumping into all things real estate as we have been doing for the past several weeks, but also digging into how about a little golf today.  How about that golf tournament we have got going on?  Got a headliner, Mr. Jordan Speith, in the house.  So welcome to the Triad, sir. Hope everything is going lovely at Sedgefield. Outside of firecrackers and thunderstorms and I do not know, what, 14 inches of rain since the guys have been here.  All in all, a pretty fun tournament. Hope you guys go out and check it out.  I understand they have got lots of tickets and lots of opportunity to go out there and support the Triad, but also support the golf and the tournament.  It brings lots of great opportunity and business to the area, so hope you guys can do that. But we are going to continue our series of real estate investing and jumping into that.  So what you want to do is grab a pen, grab a piece of paper.  We are going to dig in. Where we left off last week was talking about turning your home into, the home you are in now, your first home, into your first rental property. We are going to talk a little bit more about that, walk you through step by step.  In addition, a little bit of discipline, too, because it takes discipline in order to achieve some of those goals.

Mikell:  Absolutely.

Jason:  So discipline over time is a very good thing. Most people do not like the word discipline, Mikell.  They think discipline and punishment sometimes –

Mikell:  See, that is where my mind went when you said that, so okay.  Punishment, okay.

Jason:  I think you are the same camp with a lot of people there.

Mikell:  Absolutely.

Jason: But it is not necessarily true, and it does not have to be punishment.  Good discipline over time can end up being a great thing.  Some of you guys have disciplined very well, sitting on the couch, eating potato chips.  And the results, well, look down.  It is right in front of you.

Mikell:  There you go.

Jason:  There you go.  Right?  And there are other disciplines that you can get into that will reverse that goal.  Or reverse that pouch in front of you.

Mikell:  That does not sound fun.

Jason:  Yeah, I know. The great thing about the discipline though is once you do it for a while, it becomes like breathing.  You do not think about it.

Mikell: There you go.

Jason:  It is just getting into that day-to-day habit and making it happen.  It is a challenge.  Not everybody is cut out for that.

Mikell:  Absolutely.

Jason:  It is something that is a practice. It is actually an intentional practice that you have to do in order to develop that discipline. All right.  You have got your pen.  You have got your paper. Let’s do this thing.  We have got the benefit of turning that first rental, or I’m sorry, your first home into a rental.  One of the biggest things is how you bought it.  The financing.  You have had, with an owner-occupied property, you have had multiple options in which to buy. You could have bought it with cash.  You could have done a 100% loan, meaning you put no money down.  You could put as little as 3 ½% down, 5 or it is unlimited after that.  Most people fall in the 3 ½-5% camp.  That is typically what they put down on their first home.  You cannot do that with investment properties. The banks, for the most part, want somewhere between 20-30% down on investment properties, and most people say well, why? A lot of folks think it is to reserve the game field for the rich in that the rich are the only ones that could come up with the 20-30% anyway.  Therefore, the rules are written for them.  Well, kind of.  Really the rules are written for the bank. The bank realizes this – if you have two homes, one of which you live and one in which you do not, the likelihood of you not paying on the one you live in is a lower probability.  Right?

Mikell:  Absolutely.

Jason:  Therefore, they, by assumption, believe that hey, they probably will pay for the one does not, they do not live in and does not hurt them first. Right?

Mikell: Absolutely.

Jason:  Well, psychologically, I guess, if you will, they also figured out if they get 20-30% of your money, it will make it much harder for you to walk away from that property losing that money that you put in.  So if it was a $100,000 house, that is thirty grand. 

Mikell:  And that is quite a bit.

Jason:  That is quite a bit.  $200,000 house, now we are talking $60,000.

Mikell:  Sheesh.

Jason: Most people, not willingly, will not walk away from $60,000.

Mikell:  I am not sure if I know anyone who would.

Jason:  I do not either.  Let’s face it.  If I dropped a briefcase of $60,000 out on I-40, somebody would probably stop and pick it up.

Mikell:  I would wreck my car.

Jason:  Absolutely.  There would be a lot of car wrecks.  By the way, it is not out there, so do not go looking. The other thing is that is the psychological piece.  The second piece of that is if you put, let’s just say you put $30,000 down on $100,000 house, and the home is worth $100,000. If things really started to go south, and whatever job change, loss, whatever it is, if you needed to sell that home, you are also in a position to be able to do that.  I think most people would agree you could pretty easily sell $100,000 home for $90,000, if you had to. Right?

Mikell: Absolutely.

Jason:  It is a bargain.  It is savings, and so you could get out of the situation and the bank still is okay and you actually will be okay.  Yes, you would take a $10,000 loss, but you would not take a $30,000 loss.  So you could actually get out of that property.  If they allowed you to do 100% loans and something happened with your primary income and you needed to unload that house and you had no savings.  Let’s say you needed to do the same situation.  You needed to do the $100,000 house at 90.  It is still a bargain, but if you owe $100,000, who is coming up with the $10,000.  Probably nobody.

Mikell: That is true.

Jason:  Because you did not have any money to put down to begin with.

Mikell:  Absolutely.

Jason:  That is the logic behind why the bank does what they do. So you think about those things, and there are always methods and reasons to the madness, and that is just a little insight of the psychological piece and also the math piece. So they are going to reduce their risks.  They are going to get that down payment from you, but the benefit in converting primary to rental is that you are able to buy it under owner-occupied terms. Check with your mortgage company. There are certain loans that require you to stay in the property for a certain amount of time before you can convert to a rental property.  You cannot use a primary home loan for a rental property.  That would be fraud.  Okay? I have seen it happen, and it is not smart to do that.

Mikell:  I have witnessed people trying to do that as well.

Jason: There are no secrets, guys. The banks today are very savvy. When I started in this business, you made your loan application. If you could do what you said you were going to do then, nobody ever checked behind you. Now, all the way up to, sometimes the final hours before you close on a home, someone is checking behind to see if everything is exactly the way in which it was when you applied for the loan.  One big thing they check, just by the way, is that you are still employed with the company in which you said you worked with when you applied for the loan.

Mikell:  Absolutely.

Jason:  I know that seems like a no brainer.  I know that seems like well, Jason, you have got to be kidding me. What idiot in the world would try to buy a house without a job?  You would be surprised.

Mikell:  Well, things change every day.

Jason:  Every day.

Mikell:  Unfortunately, and especially with employment.  So you never know.

Jason:  And some of those are not by their choice.

Mikell:  Absolutely.

Jason:  The bank is going to check.  They are going to check your credit, and then they, in the past ten years, they have snuck this other little thing in at the closing table, and it is basically your application again, in which you are signing off saying everything that was true when I applied for the loan is still true today or better.  Then they are having you sign it one more time.

Mikell:  What would change?

Jason:  Well, in this case, it could be that maybe you did not switch companies, but you changed jobs within the company.

Mikell:  Okay.  Okay.

Jason:  Perhaps you were full-time and now you have been RIFed down to a part-time position.

Mikell: Okay.

Jason:  So those type of things.  Or just flat out do not have a job. That is another one. Or you did something really smart and you went and leased that Rolls Royce. Yeah, that is going to show up on your credit, by the way.  Do not do that. Also, just while we are talking about things that can sabotage your sale or your purchase, okay, so if you go to the big box stores that sell furniture, and you buy furniture and you, so you are going to move in on the 30th, so on the 15th you go buy the furniture, but it is not going to be delivered until the first, and you think you are okay. If you are financing that, they probably pulled your credit, and if you have purchased with a later delivery day, that could mess up your debt-to-income ratio. Right?

Mikell:  Okay.

Jason:  Because it is credit. It is money that you are borrowing.  Even though the furniture is not going to show up until after you own the home, it very well could be that those ratios now put you in jeopardy of not even buying the house.  It is not a good thing to have your washer, dryer, refrigerator or all your new living room and bedroom stuff show up to a house that you do not own.  You do not want to do that, folks.

Mikell:  I am sorry. That is funny.

Jason:  Think about those things. Then, of course, that begs the question is do those people really need to buy a home at all. You have to make that determination for yourself. Mortgages have a seasoning period.  At the end of the day, make sure you check with your bank too, that you can turn your property into an actual rental based upon what we are talking about today. But most of the time, you certainly can. Every mortgage is different.  Of course, if they have special terms in fine print, you want to read all those things, too.  There are other options that you have that maybe if you do not have the down payment money, but you like the fact of other people paying for your stuff.  We talked about this before, but roommates.  Roommates can be very good.  I know that there are folks that have maybe had mom or dad help them purchase a home. It is really mom and dad’s rental property, but the intention is, basically what they do is mom and dad conned you into this.  Hey, we are going to buy this house for you while maybe you are in college, and then you can get people, roommates, and they will pay for it –

Mikell: Absolutely.

Jason:  But really the truth of the matter is this.  You are the cheap landlord for mom and dad who own the house.  Right?

Mikell:  Absolutely.

Jason: At the end of the day. It may be, just may be, if you take care of their asset and do not turn it into a frat house or whatever those things, you know what I am talking about.

Mikell:  Absolutely.

Jason:  Maybe they actually do give it to you one day. Potentially.

Mikell:  If you earn your keep.

Jason:  If you earn your keep. That is right.  That is right. So maybe it is a good test.  Roommates can be really good. I know situations where folks that own, actually they own the house, and they have roommates, and the roommates actually pay 100% of the payment for them.  That is not for everybody, and if you are married and have kids, probably not a roommate situation is going to work out real well.  Do not go to your wife today and say hey, I heard this guy on the radio. He had a great plan. You know that extra bedroom we have?  We are going to rent that out.  You did not hear that from me. Okay?  Do not throw me under the bus with your creative ideas here.

Mikell:  Oh, darn it.  I was going to try it, Jason.

Jason:  I know. I know.  Trust me, if you want to stay happily married –

Mikell:  Key word.

Jason: -- do not go with that option.  But if you are single, it is something you are looking to diversify a little bit, you can do that.  Another one is a duplex or a quadplex or something along those lines.  One building that has multiple units in it. It is kind of the same situation as roommates.  You are all under the one roof, but you have each have your own little part, your little condo part, if you will.  Something like that.  It can still work in that way, and the really cool thing about anything multi-family in the duplex, quadplex, anything like that is you actually can still get an FHA loan.

Mikell:  Okay.

Jason:  This is an interesting thing. So this is an exception to the rule in that you can actually buy a four-unit building, and as long as you occupy one of the spaces as your primary residence, you can purchase that with a minimal down payment. You do not have to have that 20, 30% to put down. You can actually put down 3 ½%. So you could actually buy a four-unit building, have three of them be rental, and you live in one, and you can actually reduce your down payment.  Now the downside in the Triad is we do not have a lot of those to offer. There are some out there.  One thing I would say is be careful of the zoning. There are some of these that are for sale. They were really big houses, a lot of times, in downtown areas. So maybe in Winston, Greensboro, High Point, and they have converted them to a duplex, quadplex, triplex, but they are not legally zoned for that type of housing.  So they are really a single-family home in which somebody has illegally –

Mikell:  Okay. Okay.

Jason:  -- converted to multifamily.  Okay. So just because it is what it looks like, it does not mean it is a duck. Okay?  It may look like a duck, but it is not a duck. It is a chicken.  So make sure that you check the zoning because you could buy a mess.

Mikell:  Gotcha.

Jason: Or you could buy something that nobody knows really what is going on, but with the change of ownership very well could make a difference, and then maybe somebody that does not like what is going on there notices and then all of a sudden you really just bought yourself a house when you thought you were buying a triplex.

Mikell:  Okay.

Jason: Double check that.  Do your due diligence. That is the key.  Check everything out. Make sure it is legal. Make sure the zoning is correct, and then just be truthful about everything because could you buy one that is not legally zoned. It happens every day, but some people get caught when the bank goes out and they do not like the fact that you have not represented truly what they have collateralized.

Mikell: Absolutely.

Jason:  Okay?  Makes a big difference.  All right. We are going to take a quick time out. When we come back, we are going to dig into more multifamily. Apartments.  Man, apartments are an amazing source of income. So do not go anywhere.  We will be right back.  You are listening to the Jason Bramblett Real Estate Show.

And welcome back to the Jason Bramblett Real Estate Show. So we are digging into all things investing. Of course, we are also talking about real estate investing as well. So a couple things we have talked about is keeping that first home that you purchased, turn it into a rental.  We have talked about duplexes, triplexes, and quads and all these other things.  And now apartments.  Apartments are, in my opinion, one of the most superior investments that you can make.  The downside with apartments is it does take considerably more money to get into this particular step in the real estate investment world. But the cool thing about that is now you have basically, let’s just say you have one roof or maybe you have multiple roofs in multiple apartments, but you have a lot of people, paying for your investment. So you are well-diversified within each building that you own. So you may have 10, 20, maybe even 100 people that are contributing to paying down this debt for you. Not only are they paying down the debt, more than likely, if you purchased it properly, you are also earning some income along the way. Now with apartments comes greater investment, greater risk, but at the end of the day, the risk assessment on it is much, much better than owning single-family homes.  The downside with single-family homes is they are scattered.  It is very rare that you just buy everyone right down the neighborhood.  So you have got one here, one there, and one everywhere. If I own twelve single-family homes, I have 12 roofs to take care of, 12 properties with lawn maintenance, all those things in 12 different locations.  If I buy one apartment building that has 12 units, I have got one roof, one location –

Mikell:  That is true.

Jason:  -- limited number of lawn maintenance. It is not 12 times.  That is for sure.  So from just a time standpoint, a risk assessment standpoint, it is far superior to have all your ducks as close as you can. Now if you own 100 single-family homes, different story because you are probably not the one out there doing it.

Mikell:  No.

Jason:  You employ people this time to do that.

Mikell: Absolutely.

Jason: But when you are getting started and you have one here and one there and one there, if you are like me when I started, all my properties, none of them could be in the same place, in the same city, for that matter. So they are scattered all over the place. You have got to run from this town to this town to this place. Apartments alleviate a lot of that.  So it is great to have them there. It gives you really tremendous cashflow in the apartment business.  If you look at some of the wealthiest people in America, they own apartments.

Mikell:  Absolutely.

Jason:  They own hotels.  They own commercial buildings.  They may own single-family homes, but they do not own hundreds of them most of the time.  They have converted to something that consolidates their map essentially.  I am sure there are people out there that owns thousands of homes, everybody has got their own desire to do whatever. I am just saying from a time standpoint having everything in one location is superior. The downside, capital.  You have got to have some bucks, man.  Apartments are not cheap.

Mikell:  Not at all.

Jason:  An apartment building in our area is about $8 million.

Mikell:  Okay.

Jason:  So you do the math on that, you need some jack. That is it.  You need some money.  Let’s just say, we will make it easy math.  If it is $5 million dollars, you are going to need about $1 million cash to be able to put down to borrow because one thing that banks do not do in the apartment business is 100% loans.

Mikell:  Okay.

Jason:  The other thing they do not do is they do not finance them for 30 years typically.  There are some lenders out there that will finance them for 30 years.  I typically find them on the west coast, and I think maybe that is because well, an apartment building on the west coast maybe $100 million. Simply because of the cost of living.

Mikell:  With renters though how soon is it easy to pay it off?

Jason: Well, some of that depends on how much you put down. Of course, location, occupancy, rent, how much you are getting and all those types of things.  But apartment buildings cashflow very, very quickly. Most of them that I have looked at have anywhere between an 8-12 year payback period –

Mikell:  Okay.

Jason:  -- depending on the location. So you think about that. If you today had like just make it ten years, if you had $5 million, if you were able to borrow $5 million to buy an apartment building, in ten years’ time you have $5 million equity, meaning you owe nothing.  If you sold the place, well hopefully you would sell it for $8 million. Right?

Mikell:  Absolutely.

Jason: If you would ever want to, and that is a decision you have to make. Some of these things, the money coming in is so nice, why get rid of it.

Mikell: And that is what I was thinking about when you said most of the wealthiest people own apartments because people do not want to buy their apartment. They want to buy houses.

Jason:  That is right.

Mikell:  You fall in love with the houses even if you are renting it and you want to stay there. 

Jason: You do, but there is always a need for apartments.

Mikell: Absolutely.  Absolutely.

Jason:  It is always a stepping stone. We have built 9000 apartment units in Greensboro in the last 7 years.

Mikell:  You said built?

Jason: Yeah.

Mikell:  Wow.

Jason: These are new.

Mikell:  That is incredible.

Jason:  That is a lot.  I do not know what Winston-Salem’s numbers are, but I would speculate that they are probably somewhere close and probably at least 5000. So if you say 10,000 in Greensboro, five, that is 15,000 apartment doors with 15,000 people that are renting.  Now, some of those have traded up.  They went from a class B property to a class A property, a nicer property.  More amenities and those types of things.  That is usually what people are looking for.  It is interesting. Sometimes we have folks that are building and we sell their home before they are done, and they decide I am going to take the summer, for whatever the reason it just happens to be the summer a lot of times, and we are going to rent this apartment, and when our house is done, we will move in.  We will do a three-month lease and whatever. And almost 100% of the time, when they have owned a home for 10 or 15 years and maybe they are building a new one, they call me and they say hey, do not hurry on the house.  We are kind of enjoying the apartment life in the fact that we have got a pool we do not have to maintain. We have a lawn we do not have to cut.  Actually all we have to do is just come home, cook dinner, relax.

Mikell: That is it.

Jason:  Do not have to worry about pulling weeds.

Mikell:  Maintenance is taken care of.

Jason:  Maintenance is taken care of.  Almost every single person, we had one lady that moved into a hotel for a week and stayed for three months.  She was like this is awesome. I wake up. Breakfast is ready for me in the morning. I got Wi-Fi, coffee 24/7. 

Mikell:  This is the life.

Jason:  This is the life.  There are always new people.  I love talking to people. This is great.  There are new families.  I have breakfast with different people every single day. She was like this is great. I do not care if I ever buy a house again.

Mikell: Wow. But living in a hotel is expensive.

Jason:  It is expensive. It is not for everybody.  But in her situation, it was not only her housing, it was her entertainment, a good portion of her meals.  Right?

Mikell: Absolutely.

Jason:  Her fitness. They had an exercise room.

Mikell:  They do.

Jason:  They have got a pool. They have got a hot tub. So it is her spa. So you start putting all the amenities together and you go this is not too bad.  Now, you cannot have any stuff. That is one downside with a hotel. It is still a hotel room.

Mikell:  That is very true.

Jason: You are not having plants and all those types of things, but anyway, so it is not for everybody. But it is interesting. Folks that transition, they kind of like the fact of no responsibility for a while.

Mikell: We all do.

Jason:  Absolutely.  Absolutely.  Go to Jason Bramblett dot com.  You can get more information.  We have investments out there.  If you are looking for apartments, we can help you. If you are looking for a rental property, we can help you.  And we will be back next week.  We are going to dig in more investing in real estate.  You are listening to the Jason Bramblett Real Estate Show.

Posted in Radio Show
July 27, 2019

RE Investing Episode 3

May 13, 2019

Real Estate Investing: Episode 3

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast 

Jason:  Good morning, Triad.  I hope everyone is doing great on this Saturday. Last Saturday of July, I believe, if my calendar is correct.

Mikell:  Yes, it is.

Jason:  It is it.  Well, hey, more than halfway through the year.  It is crazy.

Mikell:  It is scary a little bit.

Jason: It is.  School is getting ready to start –

Mikell:  Yes.

Jason:  -- pretty quick here. I know my kids are going to be sucking up as much of the summer that is left as they possibly can.  I hope you guys are enjoying this beautiful weather and enjoying North Carolina.  So we are going to dig into our series.  We have been talking about real estate investing and where to put the money but also how to get started.  Last week, we talked a little bit about passive and earned incomes. So earned income was something that you did to actually earn the money.  Most people would call that job. And then passive income is something that you really were not involved with.  You did not have to do anything and money came into you.  There is a term out in the business world they talk about.  They call it mailbox money. Right?  It just shows up every month, which is a great thing, but it is also something that you want to strive for.  You want to create and leverage yourself, your time, and your energy to create this passive income.  That way, you are not physically out there having to do all the work and do not have to work all the way until they put you in another place.  So that is what we want to do.  We want to create that passive income with our investments. We talked about creating a spring of income, income that is coming in every month.  It replenishes itself, and it is something that just continues all the time.  So this week we are going to dive in a little bit deeper. We kind of set up what different types of investments there are and how they pertain to real estate.  So where to do we start?  We touched on this just a little bit about making your first home your first investment, which typically, this is really a discipline thing is what this is.  The first home you buy, normally, is set up pretty much perfect for rental, and typically because you are not buying a 6000 square foot house.  You are not buying a $400,000 home.  There are always a few anomalies out there, but most folks are not. Most folks are buying pretty close to maybe what they have been renting or somewhere in that. So the discipline comes in that is in keeping that house. So in America, we have come up with this system where we buy a home, we keep it maintained.  Hopefully, it gains equity.  We go to sell that house. We take that equity and we go buy a bigger, better deal. A bigger, better house.  The problem is all we are really doing is exchanging equity, and we are really not gaining anything.  You have increased your debt normally because you bought a bigger home.  So you may have only, we will just use an easy number since it is radio.  You had a $100,000 mortgage on the first house, and then you doubled to 200.  Well, you just doubled down on your debt.  Right?

Mikell:  Right.

Jason:  So whether you carried the equity for your down payment or whatever it is. So you are really not gaining a lot in that you are just swapping out your equity. And then we are going to talk a little bit about what is good and bad about doing that and what is good and bad about equity. Now, there certainly are other benefits to buying a bigger home.  One is keeping Mama happy. That is for sure.

Mikell:  That is most important.

Jason:  Yeah, there are lots of other things in life outside of having rental property.  Keeping Mama happy is good. And I get that, but it also comes back to that discipline of what I am attempting to do for the long term?  It is the little decisions that we make kind of early in the process that set us up for success down the road.  So it is the little daily habits that have the massive huge scale as we go down the road.  Typically, those snowballs keep gathering snow. They become bigger. The habits you create now, if you keep them throughout your lifetime, typically can turn out well.  You can also develop some really crummy habits, too.

Mikell:  That is right.

Jason:  And those keep you in the ditch as opposed to getting you out of the ditch.  Not that you are in a ditch now. Hopefully you are not if you are driving your car. If you are in the ditch, it was not my fault.

Mikell:  Do not blame us.

Jason:  Do not blame us.  Do not blame us. You have maybe swapped up in house and you now you have created this additional liability.  This is where the argument lies is that your home is an investment.  And we have talked about this.  It is an investment, but the acid test that we did last week is whose investment is it?  If you want to find out really quick, if you have a loan on your property and you stop paying it, you will find out quickly that it is no longer your investment.  It actually is the bank’s investment.

Mikell:  Absolutely.

Jason:  What the bank has done is created passive income.

Mikell:  Absolutely.

Jason:  I am going to loan you money, and you are going to send me money and interest.  That is passive.  They are not really doing anything.  There is no physical activity.

Mikell:  No sweat equity.

Jason:  No sweat equity there. Right?

Mikell:  None at all.

Jason:  So that is what you want to do.  If you really want to get excited when you go to buy your home, in two different ways. We used to call it the Truth in Lending, but it is basically your closing disclosure.  If you look at the numbers, there are two on there.  Most folks think that the buying of the house is the most expensive thing in the process.  It is actually the loan, and so if you look at the closing statement, you will see two numbers. One is what you are paying for the house and then one is what it is costing you. Those numbers are different.  Right?

Mikell:  Okay, okay.

Jason:  Now, it is not near as dramatic as it used to be when I started because the interest rates are so low. You look at money is so cheap right now.  You can borrow a lot of money for just a little bit of interest.  Fifteen, twenty years ago, and there are folks that are listening that can tell you about the good old days back in the 80s when interest rates were 16%.  You bought a $100,000 home, and you ended up paying four hundred grand for it.

Mikell:  Wow.

Jason: The cost of that money was ridiculous.  Now it is ridiculous in the other way.  It is really, really cheap. Now that does not mean just go borrow all you can. There are lessons to be learned there.  Make sure you can pay for what you borrow or have other people pay for what you borrow, which is a better idea.

Mikell:  Absolutely.

Jason:  The lie being told is your house is an asset.  Your house is a liability unless it is generating income.  Now, I have not figured a way to get my kids to contribute enough to the housing allowance to really turn that into a profitable thing. Some of you may have and you need to write a book. We can all learn from that.

Mikell: There you go.

Jason: But there are ways in which you can do it. You want to make sure that you have got the right vocabulary and that you are using the right terminology. So assets, a lot of real estate people, lenders, real estate agents, all of these folks out there will tell you that your home is an asset, but if you look at it on a balance sheet, not so much.  Not so much.

Mikell: Not so much. It is definitely a word that is thrown around a lot.

Jason:  Absolutely. Well, the term is you do not want to throw your money away.  Stop paying rent and throwing your money away. 

Mikell:  Okay. Yes.

Jason:  Okay. Maybe, but sometimes paying rent is smart money in that depending on financially where you are in your life, the great thing about, let’s just say $1000 a month rent.  At the end of the year, all you have lost is $12,000. It is 100% guaranteed.  You will not lose any more than that.  If you agreed to pay $1000 a month, and you paid $1000 a month, you have $12,000 gone.

Mikell:  Sure.

Jason:  If you buy a home, there is no guarantee of that.  Yeah, my mortgage payment may be $1000 a month, but what if my $250,000 house goes to $200,000.  What if the asset that I have or I thought I had, that I paid 250 for because I was excited about it, kept Mama happy, the market shifts and now all of a sudden, it is only worth $200,000?  Where is the $50,000 going to come from if I need to get out of that deal?  If you do not have the $50,000, you are stuck with two options:  stay and get over it, or you are looking at two other options which are, well three, I guess.  You could turn it into a rental.

Mikell:  Okay.

Jason:  You could do nothing and walk away, and it is the bank’s problem.  Or you could do another process called short sale.  So there are things you can do, but almost all of those are negative. Right?

Mikell:  Yeah, absolutely.

Jason:  So this is why we do not ever want to buy investments based upon equity appreciation, and we will dig into that.  But if you stopped paying your mortgage you would find out whose asset it is.  This is not a show in do not pay your mortgage. Not a good idea because you do not get to stay typically.  You can stay for a little while, but you do not get to stay for very long.

Mikell: And then your credit is ruined.

Jason:  Yeah.

Mikell:  It is not good.

Jason:  It is not good.  It is not good. So you can also gain equity in the property.  That is different than an asset. So you are gaining equity.  If you really want to look at what real estate is, the home that you are living in, the right, I think, mindset to have is it is a really, really crummy savings account. That is what you have created.

Mikell: Okay.

Jason: You have a shelter, which is, we all need shelter.

Mikell: Absolutely.              

Jason:  All right. And then you have created a really pretty poor savings account in that you are paying down principal, so it is forcing you to save money.  Every single month you make a payment, unless you have an interest-only loan, you are paying some principle down. So it is forcing you over time to pay that debt off.   All right? So it becomes just pretty much that.  A really poor savings account.  What you do not want to do is get to the very end and then all you have is that paid-for house. There are many, many people that we help in the Triad that that is exactly what they have.  They get to that retirement age and they still need the money, but all their money is in their home.  So they get into a situation where they are physically maybe not able to work any longer, not able to bring in income, and so they need to sell their home. Surprisingly, most of them do not want to do that because they have been there for 20, 30, or 40 years.  It is home.  It is the nest.  They do not want to get rid of it, but they have no choice because they do not have any other type of passive income, money coming to them.  Let’s face it.  Social Security, although it is something, it is not enough –

Mikell:  Absolutely.

Jason:  -- for most people to keep their head above water or to live.  You are not going to Aruba on Social Security more than likely.

Mikell:  Not at all. 

Jason: You gain some benefit of owning a house in that you have some tax deductions, which those typically are debatable.  None of that is good, bad, or indifferent.  I am just not attached, so I will leave the tax guys up to that. But you are creating a savings account, which is not bad.  Now, if you did that with your first home, let’s just say it was a 3-bedroom, 2-bath, 2-car garage, a very rentable home in our market for sure, now you can flip that property into becoming an investment and now all the math changes.  Instead of you paying for the house, now we have a tenant paying for the house. Now, it has actually become a true asset.  Other people paying for my stuff.  And if the house is paid off, then it is pure profit. If there is still a loan on it, then they are paying your debt plus profit.

Mikell:  Absolutely.

Jason: Which is not a bad thing.  So why we do not want to hedge on appreciation is because we do not have control over it.  It is kind of like putting the money in the stock market and thinking you are going to control what it does. 

Mikell:  I love that.

Jason:  One person does not do that.  Right. Yeah, one person does not matter.  The same is true with real estate.  If you hedge only on appreciation, there are too many factors outside of, you cannot control.  If the market drops $50,000 and you were hedging on $50,000 in appreciation to do whatever it is you wanted to do in your life, you just lost.

Mikell:  So Jason, let me ask you a question.  Say I buy a house.  I finance it for 15 years and I want it to become an asset. I want it to become a rental property. Tell me what do I do, where do I stay now.

Jason:  Right.

Mikell:  If you can explain that next process.

Jason:  The benefit of the owner-occupied home and loan is it is less money down.

Mikell:  Absolutely.

Jason:  Right.  So what you have to do is, typically what happens is in that first home, we start to make more money.  Right?  It is that entry-level house. 

Mikell: Okay.

Jason:  And so hopefully, my income is increasing. All right?

Mikell:  Okay.

Jason: And what I have to do is save my down payment for the next home outside of that.

Mikell:  Okay.

Jason:  I cannot use the equity.  Right?

Mikell:  Absolutely.

Jason:  I need to save it because I want to keep the equity in that because I want that thing to be paid for someday.

Mikell:  Exactly.

Jason:  Or at least paid for by somebody else.  So what I want to do is save that money and then hopefully, I qualify for whatever the next loan may be. A five or a ten or a three-and-a-half-percent-down loan, which is a lot better than an investment property where you are putting 20-25 or 30 depending on the bank and all different situations. So it allows you to move into another property by converting the other one to a rental. All right? So that is what you have to do.  You have to have that discipline.  You have to have the income.  You have to be able to do that. It is not attainable for everybody.  So just as there is a certain percentage of homeowners that do not need to own a house, there is also a percentage of people that do not need to be landlords. Okay? 

Mikell: I understand that.

Jason: This game is not for everybody.  If you do not like that risk or you do not like that upkeep or whatever it is, then probably real estate is not the right vehicle for you.  Maybe it is annuities.  Maybe it is stock. Maybe it is whatever. I do not know. That is your choice, but there is a product out there that you need to put something into to ensure that you have some passive income down the road. The downside of being a human is these bodies do wear out eventually, and we do not want –

Mikell: This is true.

Jason:  -- to do all the things that we were able to do when we were young, and some of you I know are in great shape. 100 years old, running marathons, awesome.

Mikell:  Vegan.

Jason: Vegan. Whatever it is.  Whatever you are doing.  That is great, but it is probably a choice in which you want to do, and not a choice in which you, well, you have no choice. It just has to be the way that it is. As we age, I am finding out that my body does not want to move or do the things that it did 25 years ago.

Mikell: Okay.

Jason: I am using some wisdom and discipline thinking if it is this way now, in 25 more years, I probably will not want to be doing what I am doing today to earn money. Right?

Mikell:  This is true.

Jason:  So you have to have that plan.  We are going to dig into that. We are going to do this. We are going to take a quick timeout. Grab your pen.  Grab your paper. You are listening to the Jason Bramblett Real Estate Show. When we come back we are going to talk about some of the reasons why we would want to do this. Why we want to invest outside of just getting old and tired.  We will be right back.

And we back.  You are listening to the Jason Bramblett Real Estate Show.  So we have been talking about real estate investing.  Basically been setting this up for a couple weeks just to make sure you understand the process.  There are a lot of decisions that go into creating investments, and you want to make sure you create the right kind of investment. A lot of what we are taught unfortunately growing up going through school is not exactly 100% accurate with what, it is not that it is not accurate.  It just does not meet up with a lot of your goals that you may have for creating passive income.  If you want to get a job, school is a great thing.  If you want to become wealthy, not so much.  You might want to start switching your education and learning from wealthy people.

Mikell:  Absolutely.

Jason:  Wealthy people do not do a lot of physical activity for earned income, but they own a lot of things that pay them money. So that is what we want to share with you and show you there are ways out there that you can do that. We talked about our first home becoming our first rental. Typically that is a 3-bedroom, 2-bath, maybe it has a 2-car garage, maybe it does not. You should at least have three bedrooms and 2 baths. We find that 2 bedrooms homes typically have one bath. A lot of them were built in the 60s. They really do not appreciate at all. Most of them just ebb and flow with the market.

Mikell:  Okay.

Jason:  The other thing is rents are typically lower because the homes are smaller. So the floor plans are different. They are not exactly what people are looking for today, so if you are going to invest, invest in a 3-bedroom, 2-bath would be our recommendation for sure.  Then what you want to figure out is okay, the other products that are out there. Condos and townhomes. Condos and townhouses can actually be very good first-time investment properties.  If you started in a condo, you may want to consider keeping it. The only rule of thumb I have for that is you need to make sure it is managed well. Right? Because that is something you do not control. One person in the HOA, so one owner of one condo in a 100-unit building does not have 100% control.

Mikell:  Right.

Jason: They have 1%.  Right?

Mikell: Right.

Jason: They have one vote.  That is all. If the other 99 are idiots and they keep changing things and raising the costs, it is going to affect your investment over time. So what I look for is a well-managed HOA and below market or below normal HOA dues, what you pay every month. So my benchmark is kind of $130 a month or less is what I look for in investment properties.  I like condos and townhomes because if during that transition when the tenant moves in and out, I do not have to worry about the exterior maintenance. I do not have to worry about getting a landscape guy over there.  If you are a do-it-yourself person, you do not have to schlep all the way over there with your lawnmower and cut the grass and do all these things.

Mikell:  That’s very true.

Jason:  You can, of course, pay someone to do that, but it raises your costs.  I find the transition in townhomes, condos to be much simpler to keep the property up. Properties that are vacant unfortunately go down really fast.  It does not take that much time. If you leave a house vacant, you would think well, nobody is there. Nothing can happen.  Well, there is stuff there.  It is just typically things you do not want like spiders and stuff that take up residence.  A vacant home can go down in value or just down in maintenance really fast if you do not stay on top of that. We are not attempting to create another job for you, right, where you are pushing a mower around all the time. So you may want to take a look at condos and townhomes.  Again, they need to be well-managed.  I look at some of the HOAs out here, and we have got the same exact product. A two-bedroom, two-bath condo in one area of town and the dues are $219 a month, and then in a different area, it could be right down the street, and those are $140.

Mikell: Wow.

Jason:  What is the difference?  It is the management.

Mikell: Okay.

Jason:  Or lack thereof, I should say, of management, which increases those things. The other thing, too, let’s face it. Not all tenants are created equal. Sometimes they quit mowing the grass before they move. The yard ends up looking like something you do not want to deal with. It takes a lot of time, energy, and effort.  So condos and townhomes can be very good long-term investments.  Now, they do typically not appreciate as much as single-family homes. But again, what is our goal in the investment?  Are we buying appreciation or are we buying cashflow?  I am always going to move first to cashflow. Appreciation is basically the gravy. I will take appreciation, but I am not going to hedge any of my bets on appreciation because again it is too big of a number in which I have no control over. If the real estate market crashes today, you will have no control of your equity unless you sell, cash out as fast as you can. And then you have a whole bunch of money with what to do with it. Right?

Mikell:  Right.

Jason:  And typically what happens is people sit on the sidelines and they wait to find the bottom.  The problem with finding the bottom is nobody knows where the bottom was until the market starts to go back up. Right?

Mikell:  That is true.

Jason:  It is a lag measure. So it is nothing you can predict because it lags the real reality of the market.  We do not know the market has rallied until it has rallied.  Right?

Mikell: Right.

Jason: And we have metrics there.  We do not know the real estate market has improved until well, it has already improved.  It would be nice if we could just set an appointment and say, on August first it is going to be the bottom.  Everybody buy that day and we are good to go.  It just does not work that way.

Mikell:  That would be awesome.

Jason:  It would be awesome. Probably the returns would not be as great because there would be predictability in that.  There are lots of ways in which you can look at investing in real estate.  The key thing is to have a plan and to actually do some studying.  Read. The great thing about real estate is that it has been around forever, and there are hundreds and hundreds of books on it. Many, many people, you probably know people that own real estate, and it is a great way to learn.  Get out there and talk to people that have actually done what you want to do, which is always a good thing.  That way you are kind of not the guinea pig.  Right?  Because most people do not like to be the guinea pig.

Mikell:  Not at all.

Jason:  As you get out there and you start talking to people you will see wow, there are more people than I thought that actually owned real estate that are investors. Again, we want to buy for cashflow long term.  You cannot necessarily live on appreciation long term because it does not keep happening.  Appreciation is a one-time thing.  I only get the benefit of it when I cash out of the investment.

Mikell:  Right.

Jason: Now I have the cash, but unfortunately what we lack with cash a lot of times is this thing called discipline.  Right? And we have big pile of cash and no discipline, and then we end up with no pile of cash.

Mikell:  That is very true.

Jason:  Lottery winners prove this theory all the time. How do you win $140 million and not only be broke in three years, but bankrupt? You actually owe money.

Mikell:  Worse than you were before.

Jason:  Worse than you were before. There is always an exception, but for the most part, that is how it works.  So we want to have a cashflow plan. Next week we are going to dig into getting that cashflow coming to you every month, creating that passive income. Tune in next week. You are listening to the Jason Bramblett Real Estate Show. You can go to Jason Bramblett dot com for any questions and or to search for houses.  We will see you next week.

Posted in Radio Show
July 20, 2019

RE Investing Episode 2

Real Estate Investing: Episode 3

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast 

Jason:  Good morning, Triad. Welcome to Triad Real Estate 911 and also the Jason Bramblett Real Estate Show.  I hope everybody is doing fantastic on this Saturday morning.  It is hot.  It is humid.  It is the south. It is what we love.  Well, not really, but it is where we live.  It is what we have got to deal with.  Right?

Mikell:  Absolutely.

Jason:  So last week we started a little series that we are doing on real estate investing or just investing in general.  Of course, I have a little real estate spin to it. Obviously, being a real estate guy.  But I am just going to walk you down that path, and we are going to continue that for the next several weeks and teaching you really some of the things just to be aware of.  I am not really going to teach you how to do it, but I am going to give you some principles that work.  They are proven and I have watched them work not only for myself but other people that we have worked with and buy a lot of real estate.  So, last week we kind of broke down the why, and we are going to continue to move through that each week.  We are going to tackle a step, if you will, every single week.  So if you missed a show, you can always go to Jason Bramblett dot com, click on our blog and the radio show notes are there, but also the streams.  You can listen in.  So you can listen and read at the same.  Hopefully, those match.  It would be good if they did.

Mikell:  Yeah, there you go.

Jason:  It is always a plus when the words match the audio. And hopefully that is the case.  It should be.  And then you can always fact check me and send me those wonderful emails I get.  Right?  Which we love.  Keep sending them because hopefully we learn from those and we get better each and every week.  Reasons for investing. It is very, very important to know why.  Why you want to invest.  What is the purpose behind that?  And most investors that I come across or that reach out to us for the first time fall into probably looking for the quick buck type investor.  Okay?

Mikell:  Absolutely.

Jason:  This is the group of people a lot of people call flippers.  Right?

Mikell:  Right.

Jason:  There are a lot of seminar guys that get you into the hotel or wherever they are sending you, and they are there to sell you a product or a system or something.  How to flip, and they love to use this term other people’s money.  It works.  They fill them up.

Mikell:  It does.  I have been to one.

Jason: They have been doing that forever. 

Mikell:  If you want to make $50,000 or $100,000, come here.

Jason:  In your spare time. Because that is all anybody has got. Spare time. Right?  There are actually those little signs that they put out on the road, they are called bandit signs.  You will see the ones that are on the corners and they will say part-time investor needs apprentice.  Make between $50-100,000 a year. That is a big swag.

Mikell:  Wow.

Jason:  Think about that.  If you went in to apply for a job and they said look, we have got a great opportunity for you.  You can run this forklift and we are going to pay you between $7 and $21 an hour, but we will let you know what we are going to do.  Right?

Mikell:  Wait a minute.

Jason:  It is a pretty big swag.  Right?

Mikell:  Yeah.

Jason:  Most people are going to be like wait a minute, I would like to have something a little bit more with confidence behind it.  Right?

Mikell:  There you go.

Jason:  I would like to know what that check is going to look like at the end of the month.  It is kind of that way with there are these enticing things to draw our attention, but house flipping, it has been going on for a hundred years.  HGTV just really put it on the map.  Now I do not even know how many shows are on HGTV about flipping and flopping houses, but it is a lot. 

Mikell:  At least 4-7.

Jason:  Yeah, it is a bunch. It is like the Food Network.  Ninety different ways to cook chicken.

Mikell:  Absolutely.

Jason:  Everybody has got something.  It is not bad.  And really, it is just not great either.  It is good, but not great to flip a home. And the reason being is it is really the same reason that real estate sales is good but it is not great.  And the reason being is once you flip the home or once you sell the house, you are out of business.  You are back to zero. Right?

Mikell: Right.

Jason:  And you have to start that process all over again.  We do it every single day.  We sell people’s homes. They hire us to provide them a service to market their home to get them as many options or offers that they can possibly look at in whatever time period that is. But at the end of the day when we sell that home, they do not need our services anymore.  So therefore, we have to go find new people.  We have to keep going out there and finding new people to sell their homes, to provide that service to them. It is not bad.  It has actually been really, really good for us. But it is not great in that –

Mikell: Right.

Jason:  -- it does not repeat itself. When you look at an investment, you want to invest in something that is great. The best thing that you can invest in to start with is you because there is only one of you. You are unique, so the best place to start is pouring in as much information and education in a positive way that you possibly.  I listened to a podcast this past week.  Jim Rohn, one of the most famous guys out there.  Just a humungous mentor.  When he was 25, he would wake up in the morning, get a cup of coffee and read the paper.  It was all war, break-ins, just horrible things.

Mikell:  Nothing positive.

Jason:  Nothing positive.  And then he goes then I would read the back page and look at the obituaries.

Mikell:  Obituaries.  There you go.

Jason:  He was like how do you think my day went?  Right? Because it started off with negativity.  It started off with things that are not positive.  I have a rule that myself, I do not touch my phone for the first two hours that I am awake.

Mikell: Wow.

Jason:  I will deal with whatever is in that thing after I get myself in the proper mental frame to deal with whatever may be on there. Good, bad, or indifferent.  It does not matter.

Mikell: I like that.

Jason:  I am not going to take the risk of derailing my day and dealing with something that could be negative right off the bat. Whatever it may be.  It may be a newsfeed.  It may be a real estate agent.  It could be a family member, but I am going to get myself in the right frame of mind and positively ready to deal with whatever comes my way.  The really cool thing about that is when you can get rid of that phone and put it to the side, all that stuff, and you really get your mind right, man, this stuff it is not even difficult.

Mikell:  Not at all.

Jason:  It is not even difficult to do.  Now, I know some of you will say but my phone is my alarm.  Well, go buy a $3 alarm. Get an alarm for your bedroom and throw your phone as far away from you as you can, and that way it is not the first thing that you go to in the morning.

Mikell:  Well, honestly, you can just hit stop and then walk away.

Jason:   That is right.

Mikell:  That is not hard either.

Jason:  It is all habit and behavior. And think about this. It takes 21 days, they say, to create a habit.

Mikell:  Absolutely.

Jason:  It takes a lot longer to break one.  Especially one that you are as addicted to it as you are like your telephone.  Right? 

Mikell:  Yeah.

Jason:  Because it is not the device. It is the feeling that it gives you. Right?  Because you look on Facebook and you are like wow, so and so is my friend, and so and so is an idiot.  And so and so is really cool.  Anyway.  How does that apply into investing?  It is coming up with a game plan and you have to have the right mindset.  You have to have the right plan in real estate investing and investing in general is the same.  It does not matter if it is real estate, dog houses, widgets.  It does not make any difference.  You have got to have the proper plan.  So if you get into sales and you flip homes, so when you sell it you are out of business. Right? You have to start it over.  It is really the product. It is not long lasting. Right?  Because there is a finale to it.

Mikell:  So how do people consistently flip houses?

Jason:  Well, the interesting thing about consistently flipping homes, you are on a treadmill.  Right?

Mikell: Okay.

Jason:  You can never stop it.

Mikell:  Right.

Jason:  Where is, and what I wanted to get into and we will talk about is the real way to create wealth is not through buying a product and flipping it or selling it or whatever.  It is actually when you create an asset and you have an asset and you hold it.

Mikell:  Right.

Jason:  If you hold that asset for, well, you can hold it for infinity.  It makes no difference.  As long as it is returning capital to you and returning revenue to you, why would you ever want to sell it?  Right?

Mikell:  No, not at all.

Jason:  It does not make any, sometimes you sell them because things happen maybe in your life or maybe there are shifts that happen in geographical locations where this location was good 20 years ago and now it is not so good and the city has changed and all those things. But holding it for 20 years, that is pretty good. That is not bad. Most people have about a 4-second timespan that they think about, so 20 years is like eternity.

Mikell: That is forever.

Jason:  The power of accumulating over time is huge.  That is, most people that are flipping the home, they can make the now money, if you will, but again, the now money, there is nothing wrong with it.  I know people that do it for a profession. But really what you have created is a job, not an investment.

Mikell:  Okay.

Jason: All right.  So that investment, because you are getting rid of it every well maybe 30 days or however long it takes you to do.  Keys to investing really is to get assets that pay you money in which you did not have to do any work for. That is the type of asset class that you want to create. So if you go to work every day, and most of us do, this is what we call earned income. I did a task. I got paid. I did something. I got paid. I added value. I earned income.  That is what you did.  You earned it.  What we are looking for is an income called passive which means I did no work at all and the income came in.

Mikell:  Absolutely.  I could be sleeping, and I still get this money.

Jason:  You could be sleeping, and it would show up in your what used to be your mailbox. Now it is your telephone. Right?  As long as it hits your bank account –

Mikell:  There you go.

Jason:  -- it doesn’t matter.  Right?  But that is the type of goal that you want to establish for yourself to create assets long term that deliver passive income.  This is where why wealthy people pay almost zero to no taxes.  The highest tax rates in America are for earned income.  Employees.  People that work.  They pay the most taxes out there. They may not pay the most in total money, but they pay the most in total percentage of their money.  Most people do not realize that every time they get a paycheck they have this person, there is a silent partner in there. 

Mikell: Unfortunately.

Jason:  And that silent partner is FICA –

Mikell:  Yep.

Jason:  and the I, the R, and the S.  Right?

Mikell:  And they just wrap it up and call it your favorite uncle.

Jason:  Your favorite uncle.  There you go. I had hired a young person for the first job that they ever had and an interesting thing happened.  They came to me. They got their first paycheck and they said I do not want, I would like to opt out of this FICA thing.  I really do not want to do that.

Mikell:  Wouldn’t we all.

Jason:  I said, yeah, that is not insurance.  That is called taxes, and they are not optional typically.  That is why they get their money first.

Mikell:  Absolutely.

Jason:  You have lots of different things to think about.  Passive income is something that you really want to home in on.  It is really what you want to concentrate on.  I know we are taught differently.  We are not taught this.  We are not taught how to think wealthy.  We are taught how to become an employee.

Mikell:  Absolutely.

Jason:  If this sounds familiar to you, go to school, get a good job, get or stay out of debt, save money, and everything will be okay.  And I will promise you that is not the truth. I have sold many, many, many homes where people did just that.  They had a good job.  They saved their money and everything that they ever had was stuck in their house. So they had no real assets and they had nothing that was going to pay them.  The only asset they had was a paid-for house, which they found out really wasn’t not an asset because they found out there was still this thing called taxes and insurance they had to pay.

Mikell:  Absolutely.

Jason:  Unfortunately, they get to the end and there is not enough.

Mikell:  So let me ask you this.  Would you suggest to someone who maybe kids have gone to college or moved out of the house for them to get tenants maybe?

Jason:  I am all in favor of other people paying for your stuff.

Mikell: Okay. Okay.

Jason:  So yes.  Now you have to check your zoning and make sure your neighborhood and all this stuff.  Make sure it is legal.  You cannot create a boarding house maybe in some neighborhoods. Right?

Mikell:  Okay.

Jason:  But you can have roommates.  And of course, roommates can contribute. We have sold many homes to young, ambitious college folks that they bought the home, they got two or three roommates, and they lived there for free, and they owned the house.

Mikell:  Wow.

Jason: That is a very, very smart move in my opinion if you do not mind living with people.  Right?

Mikell:  Absolutely.

Jason:  There is a trade-off there. Right?

Mikell:  There you go.

Jason:  Someday, well hopefully, they will probably graduate in less than five years or seven or whatever the track record is now, but if they keep that home, it will become a great rental property.  And that rental property is passive because other people will be paying for it, which is what you want to do.  You want to create that.  That is how you create wealth.  A lot of people get mad at the wealthy people because they do not pay their fair share in taxes.  Well, they do. They just get their income from a different source, and the tax rate is actually favorable to them.  Right?

Mikell:  Right.

Jason:  So you pay more when it is earned income.  But if I do not get any of my money, or any of my money comes to me from earned income, it comes from passive, and I pay the tax rate that I am supposed to pay on tax, I am following the tax code, and I am actually using the system exactly how it is designed.  The system actually is designed to create jobs and to give benefit to people that create jobs.  And when you do that, you pay lower taxes. But when you go out and you just get a job and a check, you pay a very high percentage of your income for that, I guess, type of income status, if you will.

Any time you can move, and here is the thing. The tax code actually is really favorable to big companies, people that are investors, and those things.  So copy that.  Figure out a way to shift your income.  You have to have earned income to keep your head above water, but stop increasing your lifestyle and take your money to buy assets that can become passive, and then someday down the road, you will not have any earned income, and therefore you will pay a very, very low tax rate.  I think it was Mitt Romney, I believe, when he was running for President, he paid several millions of dollars in taxes, but his tax rate was only like 13%.

Mikell: Wow.

Jason:  And people were like well, that is not fair.

Mikell:  Yeah, they were upset.

Jason:  But he is not earning income like you are. His income is passive from investments.  Your income is earned, and it is taxed at a very high rate. If you would switch your, the money that you receive to passive, you could be in the same 13% or whatever it is. It is not that the rich do anything wrong.  It is just that they do things differently.

Mikell:  If you think about it, passive income is not as guaranteed as earned income would be, if that makes sense.

Jason:  It can and it cannot be.  Right?

Mikell:  Okay, that is true.

Jason:  It can be somewhat guaranteed if it is diversified, but there is nothing 100%. Right?

Mikell:  Right.

Jason:  Other than taxes.

Mikell:  Yes. Yes.

Jason:  That is it.  So there are things that can be, there is still risk in most things. But if you build it right, then you can minimize the risk. We will talk a little bit about that.  Let’s do this.  Let’s take a quick timeout.  We are going to go pay some bills.  You are listening to the Jason Bramblett Real Estate Show.  We are going to take a quick timeout.  We will be back in just a minute.

And welcome back to the Jason Bramblett Real Estate Show.  I hope everybody is doing well.  So before the break, we were just kind of digging into different types of income.  You have got earned income, passive income, which one is better.  Well, I think most would agree that passive is good because passive means I did not really do, not that I did not do anything.  I just physically did not have to get out there and do something. Right?

Mikell:  Absolutely.

Jason:  I had already done it.  I had purchased an asset or I already invested the money.  Now I have this income coming to me which does not take my sweat, if you will.

Mikell:  The sweat equity is working for you.

Jason:  There you go. The sweat equity is working for you.  You have got to understand a little bit about money, too, and one thing that is interesting that I have noticed about wealthy people is they do not save money.  And the reason why is because they understand what that paper is.  If you read it the definition of it is currency. And currency is it needs to move. It needs to be active. It needs to be engaged.  It needs to be pushed out into the economy.  Basically, it is product that we use to exchange something of value.  Right?  We give currency, this note, this paper, and people either perform a service or give us food or do something.  Right?  But if it just sits, it is actually worthless.

Mikell:  So let me ask you this. I am a homeowner.

Jason:  Yeah.

Mikell:  And, of course, it takes maintenance to keep up a home.

Jason:  It sure does.

Mikell:  Instead of saving it in a savings account, I invest it? Or do I save it?

Jason:  No.  There are two terms there. So you could be calling it an emergency fund.  We call it a sinking fund.  There are things that are going to be happening.  So basically by putting that money in an account, you are preparing for the end.

Mikell:  Absolutely.

Jason:  Eventually, the heating and cooling system will need to be replaced.  There are two ways in which you could do that. You can take that dead money essentially and park it and be prepared for when that happens, which is, in my opinion, the right thing to do. 

Mikell:  Okay.

Jason:  Or you have no plan, and the only way you can get that fixed is through using Mr. Visa or AMEX or whatever.

Mikell:  Oh, yeah, that is bad.

Jason:  Then there is really dead money, dumb money on that because now you are paying interest.

Mikell:  Absolutely.

Jason: So even though the money was not earning anything, it also was not costing you interest.  Right?  So you do need to have a sinking fund or you do need to have some money set aside for things that we know are going to happen.  Right?  Mama used to call it a rainy-day fund.  You need to have money sitting aside for things that are coming along and things that are going to happen.  But just to save to save, you will never accumulate enough to make it.  Inflation, everything, by the time you save today for 30 years from now, the math does not work.  And 30 years from now everything generally costs more, and the money that you saved will not compound.  That is what you need.  You need compounding.  The banks have figured it out.  Right?

Mikell:  Right.

Jason:  You ever seen that credit card bill? Compounding interest calculated per day?  Right?

Mikell:  Absolutely.

Jason:  That is what you want your income doing.

Mikell:  Okay.

Jason:  Compounding daily and making it passive.  So if you just flipped the credit card bill.  Instead of you paying the interest you were receiving the interest, the passive, that is what you want to create with your assets. You want to create to where that money comes in.  But you cannot leave currency sitting around.  It becomes, things that sit around get stagnant, and then they kind of develop this scum on top of them.  Right?

Mikell:  Right.

Jason:  And they start to stink a little bit. Nobody wants to be around anything that is stinky and scummy for very long.  Right? 

Mikell: Right.

Jason:  If you think about, if you need a word picture, like a pond that is just sitting there.  Right?  You want the money moving.  I am from Missouri.  We have lots of springs and different things there.  So one of the things there, if you go to a spring, if you to the head of the spring on a river, the really cool thing you will notice is the water is just as crystal clear as you can imagine.  It is freezing cold, too, so just do not jump right in. But there is just some amazing things you can learn from that visualization.  You go watch that spring. It never stops.

Mikell: Okay.

Jason:  You rarely to ever hear of a spring going dry. Almost never. Where I am at in Missouri there is a river called the Current River.  You go to the head of the river, and the spring is there.  It is just billowing out this amazing, pure, clear water. It is freezing cold.  You can get in for a minute. That is about it. But they say that that thing is almost two miles deep. It is amazing to see. That is what you want your money doing. You want to create that spring to where you have got that passive income all the time. That spring does not have to think about producing water. It just happens naturally.  That is what your income to do.  You want it to be passive.  You just want it to happen naturally. There are things in which you can invest in that make that happen.  Real estate definitely is one of those. The thing I love about real estate, we talked about it last week is I can go touch it and feel it.  I can move into it if I had to.

Mikell:  Absolutely.

Jason: Whatever the case may be. I cannot do that with a bunch of stock certificates.

Mikell:  No.

Jason:  Paper or whatever it is. Those are the things that I like to see in an investment.  Things that I can do once, get paid forever.  Here is the great thing about passive income.  If it is built correctly, it becomes legacy building. Meaning if it never stops, how many generations of your family have you set up for success.  Now I will say typically it is three. I do not know why, but the third generation always sells.  But anyway, pretend that they did not, and you set up legacy wealth for your family for a long, long time.

Mikell:  Absolutely.

Jason:  It is really cool. So things to think about with your money and creating passive income. You can get more information if you go to Jason Bramblett dot com.  You can check out the website, check out the blog, go there, and listen to the show.  We will be back next week. You are listening to the Jason Bramblett Real Estate Show.

Posted in Radio Show
July 13, 2019

RE Investing Episode 1

Real Estate Investing: Episode 1

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast 

Jason:  Good morning, Triad. You’re listening to the Jason Bramblett Real Estate Show.  Who was the crazy guy on the weather just a minute ago?  Good night.  We are just testing a few things like my voice, my mic.  But I hope everybody is doing good.  Hey, today we are going to start a new series on investing in real estate. So if you have ever thought about taking the plunge as they say.  Watching those great shows out there on HGTV, the flips, the flops –

Mikell:  Absolutely.

Jason:  -- and all those things.  So we have got some interesting ways in which you may have never thought about real estate or investing and kind of just going to dig into that.  But before we put in that piece, there has always got to be this question that has to be answered which is why. Typically, it is why, how, and what.  Right?  Those are the reasons that we process things psychologically in pretty much any decision that we do.  Why do we want to do this?  How is it going to work, and what is the overall outcome going to be?  Whether it be investing in a business, real estate, your house, everything, getting married, new cars, all that.

Mikell:  Absolutely.

Jason:  The interesting thing about most Americans is we put more time into planning the perfect vacation than we do a lot of our financial futures.  And if we actually ran our day in kind of the same manner in which we planned a vacation, it would be amazing the difference in our success in everything that we do.  Because you think about how do you prepare for that vacation? You make sure you have got whatever.  The dog sitter, the pets are taken care of, you go out, you plan in advance where we are going to be at what time at what specific day.  Whether it be we are going to this theme park this day and the next day we are going to a new one, or we are going to do nothing this day and the next day we are going to float down a river or whatever it is.

Mikell:  That sounds wonderful.

Jason:  Yeah, right?  Just relaxing.  Or even if you have one of those vacations the all-inclusive things where I love all-inclusive because I do not have to make any decisions about money.

Mikell:  Absolutely.

Jason:  Right?

Mikell:  Everything is taken care of.

Jason:  Everything is taken care of, but there is still the decisions of the activities or events of the day.

Mikell:  Yes.

Jason:  Most people just do not say I am going to go sit in Chair 2B for seven days and do nothing.  No, there is whatever activity that it is.  Then there are the excursions. Right?

Mikell: There you go.

Jason:  Get you off the boat so you can get swiped by somebody down, no, I am kidding.  Do not do that.  But those are things that we planned, and if we planned our financial future, and I think sometimes it is because we do not have a plan, so there is no excitement.

Mikell:  Well, financial planning is not exciting at all.

Jason:  Right.

Mikell: I want to go back to the vacation.

Jason:  Yeah, right.  Exactly.  Yeah.  And it is much slower.

Mikell:  Yes.

Jason:  It is much slower, but here is the thing.  If you do the financial planning right, instead of having a vacation that lasts for a week, two or three, whatever you are fortunate enough to get, what if you live your life that way down the road? 

Mikell:  Oooo.

Jason:  So that is a much different way to think about it.  Right?

Mikell:  Not an instant satisfaction.

Jason: Right.

Mikell:  I like that.

Jason:  This is just what we do.  I have several friends that have achieved retirement, and they tell me I am going on a vacation.  I am like no you are not.  You are just living your life somewhere else. You are not on a vacation.  You do not work.  You have paid your dues.  You have done it right.  Now you just live your life in a different location.

Mikell:  So Jason, let me ask you this. Since we are talking about investing, of course, everyone talks about how to get rich fast on investing in real estate.  Is that the secret you are going to give us today?

Jason: Yeah, right.  Well, yeah, the only problem with fast is there is usually this other word that follows. It is called temporary.

Mikell:  Okay.

Jason:  Normally, what we see, and if you need an acid test for this, just google idiots that all lost their money after they won the lottery. 

Mikell:  Oooo.

Jason:  Yeah, because that is get rich quick, and then almost, I think it is like a 90% fail rate. 

Mikell:  Yes.

Jason:  And so 90% of the people are not only broke, but actually in debt within three years.

Mikell:  You turned out worse than you were before.

Jason:  You turned out worse than you were before.  We not only see that with people that won the lottery.  We see that with a lot of professional athletes.  We see that with folks that have achieved success that they really were not prepared for it.  Professional athletes really fall victim to this for whatever reason. And some of it is you become who you associate with. So if you associate with a bunch of knuckleheads that blow their money, then you do the same thing.  So the guys that really do well are the ones that have the financial discipline to kind of set that aside and prepare themselves and understand that knowing that this is temporary.

Mikell:  Absolutely.

Jason:  There are no 60-year-olds playing sports, at least in the NFL or the NBA at a high level.  At least none that I know of.  If I am wrong, I am sure somebody can correct me. I get those emails all the time.  But to my knowledge, there are not any nose guards that are 60 years old in the NFL.

Mikell: No, no.

Jason:  It is typically a young man’s sport, and for the most part, the guys, it is just so few that make it past five years.  It is so low.

Mikell:  I was looking at some celebrities on social media, and they are were buying hundreds of thousands of dollars in jewelry.  I commented that I would love to be your accountant. 

Jason:  Right.

Mikell:  Really.  I would love to give you some financial advice.

Jason: Yeah, well, if it were real gold, maybe it will hold some value.

Mikell:  But still, the money that you are getting now is only temporary like you said.

Jason: Exactly. You can see guys that have done the right things with it where they have invested the money in the proper places, but most of the time we do not. So we have the get rich quick, the temporary fix is really what that is because most people cannot handle that wealth that fast because well, one, they do not have a plan, and two, they think the money is not going to run out.  And the money is gone really, really quick. 

Mikell:  Yes.

Jason:  So if you want to build a life down the road to where you are not on vacation anymore, you are just living your life in Aruba or you are living your life wherever on that Alaskan cruise, but it is just what you do. It is just you experience the world in a different location.  You can do that. It is just now you have to make plans.  Of course, we want to do it now –

Mikell:  Yes.

Jason:  -- but that is not –

Mikell: Like right now.

Jason: That is not reality for most folks.  So why real estate?  And what do you want to accomplish?  What is the goal?  There are several points to this.  The series will probably go three to five weeks depending on the questions that we have, I am sure, and all the corrections that I will get sent in emails.  But I am going to share with you my experience, what I have seen 22 years in this business.  I have seen people do it right, and I have seen people do it wrong many, many times over. So you want to build it to last.  That is the key.  So let’s dig in. Grab a pen.  Grab a paper. We are going to get into this, but I think the first question that we need to answer is why real estate. Most people would say oh well, you are a real estate guy, so of course, real estate.  No, I was actually a real estate investor before I was in the real estate business. I believed in the product.  I believed in what was out there, and so, it was really kind of simple.  I was fortunate enough to get, I guess, some advice early and young from people who were far more experienced than I was.  And basically, the story I was told I will share with you, and so, it was kind of easy.  I really deal with common sense, logical stuff. Right?  If it walks like a duck, typically it is a duck.

Mikell:  It is a duck.

Jason: It is not a chicken. And so, I am just real practical, logical. What I figured out real quick is if everything went really, really bad, I did not really want to go glue all my stock certificates together and try to form some kind of shelter to live in because paper really is not that fun.

Mikell:  I was wondering. What?

Jason:  So, if you buy lots of stock and you do not even get paper anymore, but you used to actually get a certificate.  I do not even know if they do that. I think they just email you and say you are in the club. But you could not glue enough of those together if everything went bad because that is all you had was the piece of paper that said you owned the stock. But if the stock went to zero, all you had was the piece of paper. Right?  So I could not glue all that together to actually build something that I felt comfortable that I would like to live in. Right?

Mikell:  Right.

Jason:  I do not dislike the stock markets.  Do not get mad at me for all you guys making millions of dollars in the stock market. Great.  I hope it works long term.  Everybody has got their little widget, niche, that is it.

Mikell:  There you go.

Jason:  Everybody has got their little niche. The thing with me it was almost like going to Vegas, in my opinion.  It was just legalized gambling in which you are taking a gamble.  You are sending your money to a company in which you have zero control of in the hopes that they are actually going to do what they say they are going to do which is give you a return.

Mikell:  And most of the time, you do not even have much knowledge about this company.

Jason:  You have no knowledge, but one thing is for sure.  You have no decision-making power whatsoever.

Mikell:  Absolutely.

Jason: So if they want to change something, they do not send out an email like what do you guys think?  Sometimes we see those decisions have repercussions.  Again, my opinion, shoot the messenger, which would be me.  Do not get mad at anybody else.  This is just my opinion.  But really the story I was told and kind of the acid test for me was if you walked into any big bank in America and said hey, I want to borrow $50 million, the first question they are going to ask more than likely is what do you need $50 million for? Right? It would be a question I would ask for sure. Here is the thing.  If you told them say hey, I believe in you guys.  I love your CEO. I love the fact that you guys have been in business for 100 years.  You have got a great image in the United States.  I love the leadership.  I love every single thing about your big box bank, and I am going to take that $50 million and I am going to buy your stock.  I believe in your company so much. Most, I would say 100% of the time, the answer is no.  We do not do that. Not only would they not loan you $50 million to buy their stock, they wouldn’t loan you $50 million to buy any bank’s stock.

Mikell:  No, because they are not guaranteed to get that money back.

Jason: They are not guaranteed to get the money back.  So what they want is something tangible.

Mikell:  Absolutely.

Jason:  I like to walk out the door, see the bank does not even want to glue all their stock certificates together.  Right?

Mikell:  No. No.

Jason:  They do not want to build their next bank out of paper physically if you will. They do well building their banks out of paper for sure.  Is it really there?  That is the question, right?

Mikell: True.

Jason:  It is interesting that most people think you go to the bank to get a loan. There is no money in the bank.

Mikell:  No. We just send it to you digitally.

Jason:  That is right.  It is just digital.  Exactly. There is some there to make change.

Mikell:  Yeah.

Jason:  But that is about it.  But not enough change to, if you walked in the door and tried to take what was there it would not, well, you would change your location where you are going to live for the next 20 years, but it would not be where you want to be.  Right?

Mikell:  Exactly.

Jason:  Going back to this though.  You kind of have to look at why.  This is the story the guy told me.  It goes back to the physical.  Now, if I walk in there and say I want $50 million to buy houses, apartments, business, brick and mortar, things that are tangible, things that have deeds to them, things that are a substance in which they could physically see, then this whole conversation switches.  Now it is not so much I am trying to talk them into loaning me the money; they are trying to figure out a way to make it happen because that is what they are in the business to do. They want to get that money moving, and they want to invest it in things that are secure.

Mikell:  Exactly.

Jason:  Whether it be businesses or the actual brick and mortar of a business.  So if Honda Jet or one of the big companies, Heiko, Volvo, these big companies that we have right here in the Triad, they go to the bank with an idea. We need to branch out. We need to expand. We are going to create jobs.  We are going to create opportunities, and we want to borrow $10 million to do X, Y, Z.  The bank does not sit there and try to fight them on that. They try to figure out a way to make that happen.

Mikell:  Absolutely.

Jason:  They believe in that is a good asset within a good corporation or good company, and we want to figure out how to say yes. The flip side of that is if any of these big companies went to these big banks and said hey, we just want to invest in you and we want to buy your stock, we want you to borrow the money to do that, the answer is going to be no even for those large companies. It was a pretty simple story. It was very basic.  It clicked with me. It resonated.  It made sense. So if I was going to put my hard-earned effort of all the years that I am going to work. 20, 30, 40, 50 years, whatever that is depending on who you are, I want to be able to put it into something that I can go out there and it is tangible.  If something really, really terrible happened, I could move into one of my rental homes if I had to.  Right?

Mikell:  Right.  Okay.

Jason:  I would have a place to live.  I would have a place to be safe, if you will.  I think, at the end of the day, that is what we look at is most humans want shelter. It is just something that is innate within us.

Mikell:  Absolutely. 

Jason:  Most of us do not choose to live under an overpass. Right?

Mikell:  No. No.

Jason: It does not matter if it is a trailer, if it is an apartment, if it is a house, double wide. It does not matter what it is. The product does not necessarily make a difference. It is just that we want that physical shelter. We want to know that that product is there.  And here is the really cool thing.  It is always in demand.

Mikell:  Absolutely.

Jason:  It is always in demand.  There is never, well, I should not say never, but in my knowledge, there has never been a group of people in the Greensboro area, a whole subdivision, that walks out. Just imagine like Adams Farm. There are 1100 homes over there.  If one day they all just walked up and said no, we give up. We are going to go live under I-40. Probably this is not going to happen.  Right?

Mikell: No.

Jason:  You are probably not going to see a movement like that where people just get mad and walk out of their house.  Right?  One of the reasons why is it is hard to carry all your stuff on your back.  Right?

Mikell:  And the rain, storms.

Jason:  So real estate made sense to me logically.  It is sustainable. It is a product which I can go physically touch, see. I can also change it.  I can paint it. I can add to it.  I can enhance it.  I can improve it. And it is in really, really high demand, and not only is it in really, really high demand in Adams Farm, in Greensboro, Winston-Salem, High Point, it is in the state of North Carolina and actually the entire world.  It is in high demand all over the place.  So it is a product in which the sustainability is everlasting.  It is not going to go away.  And the good thing is we keep producing people, and guess what, young people want shelter.

Mikell:  Absolutely.

Jason:  And so, we always have a migration of, we have 38 million millennials that are all starting to come into the age of hey, we would like to not live at Mom and Dad’s house anymore, not to live at the college.

Mikell:  No.

Jason: We want our own place, whether it be apartments, whether it be buying their homes, whatever it is, but they are looking for this product.  It creates a golden opportunity for investing. Let’s do this. We are going to take a quick timeout.  We are going to run through some more notes. We are going to set up the next four or five shows to really break down real estate investing.  Stay tuned.  Stay with us.  We will be right back.  You are listening to the Jason Bramblett Real Estate Show.

Hey, and welcome back.  You are listening to the Jason Bramblett Real Estate Show.  So we are talking about real estate investing, talking about investing in general.  We are going to dig into all the different aspects of real estate investing and the different types and how and why would I and where would I get the money and all these things.  So over the next several weeks, we are going to dig into these.  Stay tuned into this series.  Here is really, what is the reason, and this is very important, what is the reason I want to invest. Most, I find, especially with real estate right now, and part of this is because the media and what is being pushed in the media. I get it because it makes for better entertainment, better things to watch, but most people are looking for the quick buck. Right?  They are the flippers and the floppers. Right? Sometimes those flips turn into flops if you do not do them right, if you do not do the right amount of due diligence.  It is also one of the highest risk categories in real estate and investing is to flip a property because most of them you buy sight unseen.  If you buy a home at a courthouse anywhere in North Carolina, and you have been in that home prior to you buying it at the courthouse, if you did not know the owner, previous owner personally, and they did not invite you in, you trespassed.  Some of you broke in. Some of you have excellent degrees in B&E.  You just have not got caught yet.

Mikell:  Yikes.

Jason:  And you will actually, when you go to fill out a bid, and you will get, and even in the contract in which, if you win the contract, the bank or trustee says do not under any circumstances enter this property prior to you owning it.  If you do, you are trespassing.

Mikell:  Wow.

Jason: So you are buying this sight unseen.  Now, some of my amazing guru house-flipper guys out there will be saying well Jason, that is kind of more a guideline.  Yeah, it is a guideline until you get caught.  It is trespassing and it is against the law.

Mikell: That is just a gray area.

Jason:  Yeah, it is gray.  Exactly. I do not know, but just for whatever reason my store card always seems to open the lock just perfectly.  Yeah, that is called breaking and entering and it is illegal, and you should not do that. I do not advocate anyone breaking into anybody’s home just to be clear, but it is something that I see that it does happen. It is the way it is. But because of the risk, and even the most professional house flipper does not want to take that risk. That is why they sneak into the house to get there, to somehow figure out what am I buying outside of what is behind these windows. Right?

Mikell:  Absolutely.

Jason:  They do that to hopefully minimize their risk.  Maybe they do not, now that I know what is on the inside, I do not even want to bid on this house.  But if you do it legally, you are buying it sight unseen.  You are taking all the risks no matter what has happened inside that house unless, by chance, you knew the previous owner and they let you in. But a lot of times, these homes are abandoned, and they have been abandoned for a long time.  Many have them have sat through winter months, not properly secured.  Some of them are missing parts and pieces.  I bought a home in Kernersville.  All the math was perfect.

Mikell:  Okay.

Jason:  It was just like this was a great deal.  We did not have a lot of competition.  The house was pretty, pretty, in need of love, but we did the math.  It made sense, but we did not go in.  We actually did not break in the house.  So we do not do that.  We actually do it the right way.  Sight unseen.  Everything was awesome until we finally got the bid, won the house, closed, we are now the owners.  We get to go walk in for the very, very first time, and the house is great condition it is missing something.  The entire kitchen is gone.

Mikell:  Wow.

Jason:  Like there is none.

Mikell:  Like gone.

Jason:  Like no cabinets, no appliances.  You assume that it is just, even if the cabinets are ratty, they will be there.  No.  Pipes sticking out of the floor.  That was it.  That is a $6-7000 difference.  So you go from doing oh really, really well to okay to holy smokes, are we even going to make a dollar.  Well, I guess we are going to keep it.

Mikell:  Or we can just break even.

Jason:  Or we could just get to zero.  Right? And those are some of the unknowns that you would say, and most of you guys that do this for a living say well, you idiot, you have got to go look in the windows.  Right?  You have got to at least, you just have got to put your eyes on it.  You cannot buy a house without a kitchen.  Well, you can buy a house without a kitchen if you cannot see it from the window.  Right?  So what you think was there was not. So anyway.  You live, you learn, you prepare for the unexpected.  But house flipping, it has been around for a hundred years.  As long as we have had real estate it has been around.  It has become very, very famous and very much a fad now that with the HGTV craze and stuff that is going on.

Mikell: Can I ask you a question?

Jason:  Sure.

Mikell: Really quick. There are a lot of companies out there that says hey, you can do house flipping and you do not have to invest your own money.  Is that a scam?

Jason:  It can be.  Sure.  Well, anything can be a scam.

Mikell:  Absolutely, but –

Jason:  There are definitely ways in which you can buy real estate with no funds.

Mikell: Okay.

Jason:  It is higher risk.

Mikell:  Okay.

Jason:  Not necessarily for you, but somebody has got to have the money. 

Mikell:  Gotcha.

Jason:  It depends on who is carrying the risk in the deal.  There are ways to do that, and we are going to dig into that as we move through this series.  We are actually going to talk about buying real estate with other people’s money.  It is something you could do.  You actually, if you own a home today, you bought that house with other people’s money if –

Mikell:  That is true.

Jason:  -- you borrowed anything from the bank.  This is the acid test to prove is your home an asset or is it not?  If you want to disprove me because a lot of people disagree with me, and I say the home you live in is not an asset, and I am here to say that it is.  Anyway, you are listening to the Jason Bramblett Real Estate Show.  We are going to be back next week, and we will answer that question.  Do not go anywhere.  Go to Jason Bramblett dot com.

 

 

Posted in Radio Show
June 29, 2019

Getting to Sold Episode 2

Getting to Sold - Episode II

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast 

Jason: Good morning, Triad.  I hope everyone is doing well today. You are listening to the Jason Bramblett Real Estate Show. Got your Fourth.  Got your fireworks.  Your diesel fuel, gasoline, road flares, whatever it is you are going to be throwing up into the sky.  Just whatever you do, be careful.  Do not burn any of our listings down please.  We need those houses.  We have got to sell those things.

Mikell:  Absolutely.

Jason:  It is challenging to sell a house with some sparkler residue on the roof.

Mikell:  I believe so.

Jason:  Most people are not looking for scorched homes even though it has been hot enough to just scorch them on your own out here.  It has been crazy.  We are going to continue this week with getting that house sold.  Really what we are talking about is the reasons why.  A lot of it has to do with deferred maintenance.  Things that we have kind of put off.  I just saw a picture on my Facebook feed of a client, past client of ours that is an HVAC business, Southern Homes, and he was sharing some neglected HVAC systems.  They do have filters, folks.  You do need to change those things.  Just taking them out, that is not a good plan either.  They are actually there for a purpose. Not just to drive you nuts, right?

Mikell: Right.

Jason:  And also, you definitely want to make sure that you get those things taken care of.  We talked last week about the market being a price war and a beauty contest, and so that is exactly what it is. It is the right price with the right product and having the thing that the market is looking for is key.  The folks that are out there buying today are not looking for problems.  They are not looking for fixer uppers. They are not looking to take over your issues. So today we are going to break that down.  Make it real simple, real easy.  Give you a plan.  You can go blow up Home Depot and Lowe’s.  Get your to do list together.  But if you have got two left thumbs, you may want to call a professional in.  Take on what you can do.  I am all about taking care of stuff yourself.  Some of you need to hire professionals.  That is a key thing.  We see a lot of homes with a lot of DIY or do-it-yourself stuff, and sometimes it is really the re-do that we are looking at.  We have talked about paint. We have talked about all these things that well some of you guys get a little creative with.  That is fine for you.  But just understand when we go to market the home, we want to put the property in front of the people and what they are looking for and not what you like. Sometimes those are two different things. So grab your pen and paper. We will get started.  If you have got any questions, you can shoot them over to Jason Bramblett dot com.  Just click on the email link, and we can share your questions on the air.

So we are going to dig into that price war.  Here is the key.  Prices have moved up all across the United States, and what we are seeing now is a major pullback, a major slow down, which is good, because if you rise too quick, you create an artificial ceiling, and when that happens, and at some point in time, the banks will either slow it down or the market in general.  This is actually both.  Folks are being hesitant now because they are seeing the prices are going up too quick and everybody is still remembering the last housing crash.

Mikell:  Absolutely.

Jason:  And so, people are not wanting to go as high as the market will bear, and of course, the banks have really put the breaks on in that they are not going to stick their necks out like they did last time.  Or get real creative like they did last time.  You will notice that there is I can breathe so give me a loan loans out there as if there was in the past.  You actually have to prove that you, outside of being physical in living, you have to prove that you can actually pay back the loan.  That was a problem back in oh-four, five, and six is that they just did not really care.  And they just made up a lot of stuff.  I say they.  It is not just the banks.  It was pretty much everybody was involved in that from real estate people to appraisals to banking systems.  But there were no rules either.

Mikell:  Okay.

Jason:  And when there are no rules, it is just kind of whatever reality you live in. The good thing is we have those today.  Hopefully, they will stay in place and not everybody will get desperate to sell.  But this beauty contest part is the real issue that we see. The buyers in this market just do not want to take over these problems, so they are looking for finished product.  And this is why you will see new construction is doing very, very well right now.  As a matter of fact, they cannot even get enough homes started to meet the supply and demand.  It is not so much that, a little bit of it is there is a shortage in some product.  But really it is what is available is not what they want, so they migrate to new.  But you cannot just go tear down trees and start throwing up houses.  We have planning and zoning and all these different ordinances and things that we have to do, and it can take a year, year-and-a-half, two years, and sometimes even three years to get a project off the ground.

Mikell:  Wow.

Jason: It takes a while to get those things moving forward. If you are going to do something of a substantial project of say 50, 60, 70, 100 homes, that is not the world that you can control, and that is not the world that you are living in.  What you are living in is what is around you, your house.  So we are going to dig into what in the world can I do to get my home ready. Think about what you, what I train our agents on is always put yourself in the other person’s shoes. All right?

Mikell:  Okay.

Jason: So if you were buying a home or selling a home, think about it from that perspective. Because if you think about it from that perspective, then it is really easy to relate the situation that the folks are in.  Even if you have not been in it, and a lot of you have not been in those situations before. Remember, most people have either never done this or they did it ten years ago.  Right? 

Mikell:  Right.

Jason:  They have never bought a home or they did it so long ago they really do not remember what that process was.  It is like asking you what you had for lunch last week.  No clue.

Mikell:  No clue.

Jason:  Unless it was really, really good or really, really bad, you might remember that. But if I said on July, no this is June still.

Mikell:  Still June.

Jason: I am in the future, man.  I am ahead of the game.

Mikell:  I like it.

Jason:  June 28th, right?

Mikell:  Right.

Jason:  Feels right.  That sounds right. So if I said what were you doing on June 28th, 2016 –

Mikell:  Whoa.

Jason:  Most people will not have any idea.

Mikell:  Not a clue.

Jason:  Very, very few will have an idea, and the same thing with buying or selling cars, homes.  We do not do it frequent enough to really have the memories of that experience. As you go through this, you need someone to coach you through the process, someone that is dealing with buyers every single day.  A quality real estate company to help guide you through that.  Since we are dealing with hundreds and hundreds of transactions a year, I feel we are very competent to be able to give you good advice because we have our ears to the ground, and we know what people are looking for. So we can give you very clear advice to say yes, do this, no, do not do that. Do not spend your money there. It does not matter. Or spend your money in this area.  It makes a huge difference.  Some of what has been done in the past and things that people used to want, it is an irrelevant point. What a lot of buyers are wanting to have taken care of are big ticket items.  Roofs, HVAC, hot water heaters.  Those kinds of things.  Most home sellers migrate to simple things.  Paint, carpet, changing out door knobs, those type of things. And that is all well and good. It may need to be done as well, but you really need to take a look at these systems.  The most difficult homes on the market to sell are always the ones in that 15-19-year range because everything is starting to get to end of life.  The roof, the heating and cooling.  These are not small-ticket items, and they are not really items that are fun to put your money into.

Mikell: Not at all.

Jason:  Nobody really wants to put seven, eight, $10,000 in a roof, but if it is leaking you do. And that is what the buyer is looking at. The buyer is looking at going you told me you had a 25-year shingle.  It is year 19. I am living here ten years. Guess who is putting the new roof on?  They are. And so they have got to factor those things in.  They are thinking about those.  Now, does that mean you have to pay the entire amount of the roof?  Not necessarily.  But this is where the negotiation comes in. But it does to make it difficult. Those 15-19-year old homes are the most challenging to sell, no question about it. It simply comes back to they know they are going to have to have cash to do this.  Now, most of the home buyers today are not paying cash.  Most of them are financing the properties, and most of them are putting down as little money as possible.  It is not because they are choosing to put a little money.  It is because they have no money to put down. Okay?

Mikell:  Absolutely.

Jason:  If I am looking at home and somebody is bringing say $10,000 to closing, and it took them three or four years to save that up, and the roof is going to be $9,000, right, down the road.

Mikell:  Right.

Jason:  Now, we want to help you create what we call a sinking fund. A place you put your money that way you will have the cash to do that. And we will coach you how to do that as a new homeowner. However, the other issue that we have is that people buy all that they can buy, and then there is no room to squeeze out anything for a budget for repairs coming down the road.

Mikell:  Okay.

Jason:  The broker you are, one you have to ask the question why are you even buying a house, first of all. But if you still choose to move forward with that, you really need to look at a new product. All right?

Mikell:  Okay.

Jason:  So the broker you are, the newer the house.  Why?  Warranties.

Mikell:  Absolutely.

Jason: Things are not going to break, hopefully.  If they do, they are covered by a warranty.  If you buy a new home, you do not have to worry about a roof probably for 25-30 years.  Okay?  If you do, something bad happened, and you probably have insurance that would cover it.  So the less money you have to put down, the newer or better condition of the home you need to buy.

Mikell: Really it just helps you because really what is going to happen is you get the home and then like you were saying on the last show, it sets you up to go ahead and get that home equity line because you are going to need it in a year or two.

Jason:  You very well could.  You very well could.  So hopefully, that is for improvements –

Mikell:  Only.

Jason: -- on the house. Not the Suburban.  Okay?  Not the private school. Although those things, there is nothing wrong with any of those, but how you pay for them does matter. Okay?

Mikell:  Absolutely.

Jason:  Because the worst thing for us to walk into a situation is we see if somebody has been in their home for ten years, and then we pull the data that we have, and we see that they have an equity line on there, and then we drive up to the house and they have an equity line because there is a 2018, 2019 $75,000 vehicles sitting in the driveway.

Mikell:  Absolutely.

Jason: That was not really a good plan because now you are probably upside down on your house. You cannot turn the car back in --

Mikell:  No.

Jason:  -- and get anything for it, and now you have got a situation in which who is coming up with the money to sell?  Now, you could say well, I just will not sell. And that is fine.  But what if you just got a job transfer?  There are certain things that are outside of your control.  In this market, having a good, solid-paying job is premium.  So when the boss says hey, I have got great news, we are going to give you a promotion or we are just going to transfer you to Texas, and there is a great opportunity for you there.  Some people cannot do that because they are upside down on their house.  Not because the house is worth less.  It is because they sucked all the equity out of it.  We see that time and time again. Then they come to us and they say well, we do not want to lose money.  Well, you have already taken all your profit out of the deal.

Mikell:  Absolutely.

Jason:  All I am trying to do is get you do zero and I cannot do that because you over-leveraged the house.  Some people are like well, how can that happen?  I had an appraisal. The house should be worth X.  And you can check with the bank, check with an appraiser. The type of appraisal done for a home equity line versus a purchase are totally different, totally separate underwriting guidelines. The purchase appraisal is always scrutinized much more than the home equity line appraisal.  Why?  Ask a banker.  I do not know.  I have a suspicion it is called we want to do the loan. All right?  So we want to make the math work. You have been there for ten years. You have paid on time every month.  You are probably not going anywhere.  Speculative, but let’s just assume that.  So they are more liberal in that, and for most people, it works until it does not.

Mikell:  Absolutely.

Jason: Until an opportunity comes up that you cannot take advantage of.  So, you have got a 19-year-old roof.  You have got an old heating and cooling system, and what we are seeing today is the folks do not want to deal with those issues.  So you need to take a look at is it time to upgrade that system or systems in order to get the house sold.  Some people use the terminology lipstick on a pig.  Right?

Mikell:  Yikes.

Jason:  And that is where you come in and you have a nice home in as far as appeal and paint and fresh carpet and nice floor coverings. But then we look beyond the lipstick and we see a 21-year-old roof, a 19-year-old heating, cooling system, a 21-year-old hot water heater or whatever the case may be.  The deck is 17 years old. Right? All these things wear out over time.

Mikell:  Absolutely.

Jason:  The appliances may not be whatever, the best. Those things change so fast I cannot even keep up with them. We have got TVs with the milk now so you do not miss anything. That way when you are going to get your ice cream you can watch the TV in the frig or whatever.

Mikell: Do not miss a second.

Jason:  Do not miss a second. Whatever.  It is a bell.  It is a whistle, and some people got sucked in.  I am seeing refrigerators, $7000 for a refrigerator.

Mikell:  Absolutely.

Jason: It is unreal.  The idea was to keep the food cool or frozen.

Mikell:  Yes.

Jason:  That was it.

Mikell:  But it shows you what you have in your refrigerator so you will not stand there for five minutes.

Jason: Right.  Because you might waste 16 seconds or 16 cents of power –

Mikell:  Yeah.

Jason:  -- opening the frig. It goes back to turn the lights off.  Do not stand there with the refrigerator open. All those kinds of things because we are just throwing food out by the truckloads from leaving the refrigerator door open too long.

Mikell:  Absolutely.

Jason:  You stood there so long the ice cream, now you have got milkshakes and not ice cream.  Right?

Mikell:  Definitely.

Jason:  Some of that, I think that story does kind of speak to how we are programmed though.

Mikell:  Absolutely. 

Jason:  The repetitiveness of show me anybody that has retired wealthy by turning the lights off.  I would love to meet them. I would love to meet them who saved a whopping $4 a month on their power bill by turning off the extra bedroom light.  I have yet to meet them.

Mikell:  No.

Jason:  But our parents and grandparents turned the lights off.  Do not stand there with the refrigerator door open. Why?

Mikell: Why?

Jason:  Is it going to change my life? 

Mikell:  No.

Jason:  How about this?  Just go make more money. Take the door off the refrigerator. If you go out there and earn enough money you do not have to worry about some of these trivial things that our parents and grandparents told us.  So roof issues, people hate to put them on.  Just like septic.  I have a client right now they put a brand-new septic in the ground.  It needed it.  It is kind of required. Unfortunately, it just does not do a lot for resale.  Right?

Mikell:  Okay.

Jason:  One, you cannot see it.  You dug a hole and you buried it.  What is that worth? Right? Now, it is good to have the reassurance of hey, there is a new septic and hopefully nothing will go wrong again. Right?

Mikell:  Right.

Jason:  There are those things that are out there that do give you some assurances, but let’s face it.  Whatever money you put, you put it in the ground, and that is where it is staying. You are not going to be able to up the price of the home because of a septic or a roof or HVAC. All those things will make the home sell quicker.  You will outpace your competition, but you will never get 100% of your money back. All right. When we get back, we are going to take a quick timeout. When we get back, we are going to dig into what buyers are looking for. And I am going to tell you how to find out.  So do not go anywhere. We will be right back. You are listening to the Jason Bramblett Real Estate Show.

And welcome back to the Jason Bramblett Real Estate Show. So before the break, we were talking about well, lipstick and pigs.  You figure out which one you may need or may have, I should say.  So the question we get is I do not know what to do.  At the end of the day, that is the question that really hits home.  People calls us out like I have no idea. And if you do not, that is fine.  I am going to give you some tips and some ideas of some things to do, but if you know you are going to be selling your house in the next 1-5 years, give us a call.  We do not care when you are thinking about it.  It may be four years from now, five years from now.  Let’s get a game plan together now so you do not have to pack everything into the last 30 days.  So we can come up with a plan to help you. There are certain things you are going to want to do as you get closer to putting the home on the market, but let’s have that action plan.  Let’s come up with a game plan.

So what can you do to go ahead and get started taking a look at that.  And one of it is go visit model homes. Builders, especially the large builders, your national builders, they spend millions and millions of dollars on research.  They are not just throwing these boxes up on a street to see what happens. Okay?

Mikell:  Not at all.

Jason:  They have researched traffic counts, drive-bys, the employment in the area.  These guys have got this stuff down to a science.  The other thing that they have down to a science is what people are looking for.  So they have got a great team of people and designers that they are in communication with every type of store that is out there.  So every big box retailer, when you check out the item, it registers and it is in a database. We know that one million of these widgets sold.  We know that out of all the paint colors purchased at these big box stores, these were the three top colors.  Okay?

Mikell:  Absolutely.

Jason:  They are not what you have in your house probably. Okay?

Mikell: And you all do some of this research as well, right?

Jason:  Absolutely.  We keep our ears to the ground, if you will, and our eyes peeled for these opportunities because if you are going to go through all the pain and spending the money of doing the task, let’s make sure you are doing the right thing.

Mikell:  Absolutely.

Jason: It is horrific when we have to go over to somebody’s home and they just put carpet it, and it is like well that is what you put in a $100,000 house. Yours is 450. The only thing I can say about this carpet is it is new, and whoever buys this house is probably going to tear it out because it does not match.  The quality does not match. It would be like going, you have got a $70,000 BMW, and the steering wheel breaks and you go over and buy a Honda Civic steering wheel and put it in the car.  You are not going to do that.  Right?

Mikell:  Not at all.

Jason:  So if you did, it is going to change the value that somebody is going to want to pay even though it is a brand-new steering wheel. It does not match the quality of the vehicle or the house.  So you cannot go cheap when you are trying to get top dollar. This is a mistake that I see a lot of folks make.  Go to the builders and look what they are doing. It takes 30 minutes of your time.  Run through a subdivision.  Walk through the model home.  Yeah, there are salespeople there. That is what they are there to do.  They are there to sell and educate.  So they are going to educate you, and who knows, you may end up buying a new house. I do not know. That depends on whether you can say no or yes. I cannot fix that problem. You have just got to be able to go in there and look and see.  Most of the time there are open houses.  They are available to the public.  You can come in and check it out.  Greensboro and Winston-Salem have amazing home shows.  You can go there and figure out what is the trend.  What are people looking for. What is the up and coming color schemes and products and these things?  It would be like putting Berber carpet in your home today.  I can assure you that would be a mistake.  You can still buy it, and you can still get it new. The issue is nobody wants it. Okay?

Mikell:  Okay.

Jason:  So just because it was new does not mean it was smart. So we want to do smart and spend your money in the right place. Visit these model homes. Take a look at this stuff. Now, if you are going to sell in ten years, things will change.  You need to be ahead of time but not light year ahead of time. Do not be in July like me.  Back up to June.  If you are thinking about selling in ten years, well, okay, we can come up with a budget and help you get ready for that, but you may not want to change everything now because in ten years’ time, who knows what we will be looking at.  We were talking about TVs in refrigerators earlier. They may come with an assistant, a robotic arm that you push a button like a vending machine, and it gets the milk for you and then shoots it through the door telepathically or something. Who knows?

Mikell: That sounds awesome.

Jason:  The microwave changed the kitchen, and there are other gizmos and gadgets that have not even been invented yet that are going to do it again. So if you have no clue what to do and where to get started that is what we are here for.  We can walk you through the process.  We can help you make sure that you are spending money and investing money in the right things.  So many times I see owners that have spent thousands and thousands of dollars all in the wrong place.

Mikell: And real quick with the roof and the HVAC, what is the percentage you said you will get back on that in return?

Jason:  You are looking somewhere in the 60-70% range on a roof and potentially on the HVAC, and this will depend on what type of system it was to begin with. So if it was really old, like 25 years old, you will get a good 80% back.

Mikell:  Okay.

 

Jason: If it was seven years old, and it was just junk, well, you are probably not going to get anything back.  Some of it was generational.  How many generations are we skipping up in our process?  And then the efficiency rate of these heating and cooling systems makes a difference. So there is different what they call SEER rating in the industry.  So anyway, go to Jason Bramblett dot com. We can help you get a plan.  Remember, having no plan is still a plan.  All right?  Give us a call, 553-0796 or Jason Bramblett dot com.

 

Posted in Radio Show
June 22, 2019

Planning to sell your house?

Jason Bramblett Real Estate Show Podcast 

Click here for link to podcast 

Jason:  Good morning, Triad.  Hope everybody is doing well today. So kicking off your Saturday with a little bit of real estate radio.  If you need to sell that house, you definitely want to stay tuned.  We got some stuff coming your way.  It should help you get on the right track.  Of course, you can always go to Jason Bramblett dot com.  Shoot us any message you have, and what we do is we share those on the air when we feel that it will benefit the Triad listeners.  So we always have some good questions coming in actually every day.  You guys have some great questions out there.  Just life and stuff and things that are happening.  So it is always a good thing to get information. So before you cut that wall down, give us a call. Before you rip out that bathroom, maybe –

Mikell:  Yikes.

Jason:  You might want to make sure you have got another one you can use. That is always a good idea.

Mikell:  Absolutely.

Jason:  Because taking a bath in the kitchen sink not so much fun.

Mikell:  No.

Jason: Are you frustrated in not getting that house sold? So we are going to talk a little bit about that.  Really there are two reasons most of your homes are not selling, and it has to do with these two things.  It is price war and a beauty contest.  You are not winning one of the two or both of them perhaps.  So we are going to dig into that.  There are lots of other ways in which those things can go, but those are the main two topics that we are going to kind of get into those things, so it is time to get real for some of you folks out there.  It is interesting.  About 20% of the population that own homes actually probably should not. Part of the reason is that they forgot about this word that goes with owning a home.  It is call maintenance. Maintenance. Houses need maintenance. They do not, well, there are certain pieces of them that will last, well, I would say forever, but they will last longer than you will be here.  But there is a lot of pieces and parts to the home that have to be maintained, that have to be taken care of.  This is where a good percentage, about 20% of homeowners fall off the radar on this.  So it really puts you in a backpedaling situation when you go to sell.  So we are going to talk a little bit about that.  The transient owners actually feel this the most. These are the people that move the most often, and when you are moving something quicker, you need to make sure it is more up to speed with what people want.  So if you are going to be in your house for 30 years, it does not really make any difference because whatever is going on today will not be the same in 30 years.

Mikell:  Not at all.

Jason:  No way. If you have got long-term plans and you do not care to keep up with the times, that is fine.  But if you are thinking of selling from a retirement position or a moving up position, and you know you are going to do that in the next 5-7 years, you do not want to wait because these things compound.  So we are going to talk about that today. The best place to start is really you have got to understand ownership and why you even want to do it.  Why do you want to own a home and what is the purpose behind it?  We have been talking about different things with sales and those types of things for the last couple of weeks in a little series that we did, but the real reason to own a house or one of the reasons behind owning a house is it is a forced, horrible savings account.  Right?  It is forced in that you really have almost no chance to not to save money because there is a thing in there called principle.  Right?  You have got principle and interest. So the bank puts in place a way in which you can save money.  It is forced on you.  It is included in your payment.  You are paying down that debt every month.  Now obviously if you did something really, well, I better watch my words. How about this? If you did an interest only loan, then you are not getting anywhere.

Mikell:  Not at all.

Jason:  You are simply just mailing the bank a check.  You are essentially renting the house from the bank at that point.  If you are not putting anything towards principle, you are not even in the situation where it is a good, forced savings account.  You are simply renting from the bank.  We do not see a lot of those loans any longer.  There are not many of them.

Mikell:  They actually kind of phased out.

Jason: Yeah, they did.  Definitely.  Well, it was a high-risk deal for the bank because the whole hoping that is the house actually goes up in value.  Well, we kind of learned from the last crash maybe that is not a bed we want to, because just as all things go up, the saying is what, they must come down. And when they come down and you have no principal saved, it hurts.  You have no equity, or your equity gets sucked up by a market correction. The second reason is to raise a family or just have a place that you enjoy.

Mikell:  Absolutely.

Jason:  Those are the two things.  So it is a really poor savings account, but it is also a place that you can enjoy.  And that is it. There is no other means behind owning a home. Those are the only two goals that it accomplishes.  Shelter and a really horrific savings account. Better than what you are getting in your savings account at most banks, but it is still not great. But at least does force you to put some money aside. I cannot tell you how many hundreds and hundreds of houses we have sold and we meet with the folks, and all the money they have in the entire world is their paid for house.  Had they not had that, they would destitute.  They would be below poverty.

Mikell:  Absolutely.

Jason: Completely bankrupt.  So even though it is not a great return, for some folks, it is all that they have in the world because they never saved a dime in their life other than paying off the house forced them to save money.  In some cases, that is all there is, and sometimes that is still a good thing.  As we look through this and why you would own a home, here is why it is not the best investment in the world.  It consumes your revenue.  Right?  You only make X amount of dollars and X amount of dollars goes toward your housing.  It does not pay you anything.  Right?  So this is why in a, it is kind of an oxymoron.  A lot of these big-time bankers and people will say buy a home.  It is an investment.  Well, technically it is not an investment.  It is a savings account.

Mikell:  Okay.

Jason:  Investments pay your money. It is called cashflow. Now if you own a house, a single-family home, and you get a check every month and you live there, come talk to me because you have figured something out. Now you probably have a thing called roommates –

Mikell:  Yes.

Jason: -- and that is okay, but that is not for everybody. Most married couples that have children do not have roommates.

Mikell:  Not at all.

Jason:  And parents, if you figure out a way to get your children to pay rent, then definitely we would like to talk to you there, too, because that is a great strategy.

Mikell:  Absolutely.

Jason:  Not your 50-year-old son living in the basement.  He needs to go away, but I am talking about minor children.  Right?  Okay, so it is not an investment that pays you cash or cashflow.  So when you look at a balance sheet, it is always a negative. Right?  Because it is costing you money to be there.  As we look through homeownership, we have got to decide is it right for me at this time in my life?  For some of you, it is in the fact that you cannot save a dime.

Mikell: I am sorry. That is funny.

Jason:  So you need a forced behavior.

Mikell:  Absolutely.

Jason:  You need a forced way to do that, and owning a house is a forced way to do that.

Mikell:  Absolutely.

Jason:  The money is being saved which is a good thing. That is your equity.  Right?  But just like all investments, there are risks involved in all this.  The property goes down in value.  You are going to lose some, if not all, if your money, and you cannot control that. Your one house, your island that you have does not have, the economy does not revolve around one singular thing.  Even though you own it, it is still, there is still some risk out there.  Now you can destroy the investment, and some of these banks out here love to do that, and they have created this lovely thing called a HELOC, which is a home equity line of credit. Meaning hey, we noticed something.  You paid a lot down on your mortgage.  You have this thing called equity.  You do not want to do that. That is just wasted money.  You could borrow that equity at a really, really tremendous interest rate –

Mikell:  And one thing I would tell you, Jason, is a HELOC quote unquote a second mortgage.  A lot of people get tricked in that name, and so they really do not know what it is.

Jason:  Absolutely.

Mikell:  It is pretty pointless.

Jason:  We will talk about the goods and the bads and all that stuff of these particular tools that are out here.  But the problem is what happens is it wipes out your equity, so everything you just saved, you just borrowed. Okay?  And they put these really amazing interest rates on there, but most Americans use this money for cars and boats and college and vacations, and all these things are depreciating. They get no, there is no return.  Your car is not going to pay you a check every month.  Right? Even if you pay for it.  I have people call the office, and they want to invest within our group we flip houses and buy and hold real estate.  The first thing I ask them is where did the money come from.  And if they borrowed the money against their home, we reject them. We will not let you invest with us with borrowed money.

Mikell:  Wow.

Jason:  And the reason why is it is way too risky for you.  It is really money that you need to keep it where it is at.

Mikell:  It is not yours.

Jason:  Well, right.  And essentially, it has to be paid back and life changes.

Mikell:  Absolutely.

Jason: And when your life changes and you need to get a hold of that money and it is invested in an apartment building, it is difficult to get that out quick. 

Mikell:  Absolutely.

Jason:  Emergencies do not wait on you.  They happen. That is why they are called emergencies. Right?

Mikell:  Absolutely.

Jason: It is one of those situations. We have many, many folks that invest with us.  We have got several millions of dollars that we turn through every month.  But that money is idle money that is not sitting in people’s homes.  It is sitting in their checking accounts, and they are earning 0.00000, I forgot how many zeroes. It is a lot of zeroes, two five.  Right?

Mikell:  Yeah.

Jason:  It is almost nothing.  Those are the people we want to talk to you that get that dead money moving and get them a return on the money.  But we do not work with people that pull money out of their home or borrow money to invest with us.  We do not do that either. It has to be cash.  Cash that you have parked that you do not need that you just like to see something get returned on it.

Mikell:  Absolutely.

Jason:  Now, that is who we like to work with.  Actually, that is the only people that we work with.  Rarely do I see owners using that money to actually grow investments when they do a HELOC. They end up buying things like cars and boats and those types of things.  The set up on the bank’s part is brilliant. That is what they are there for.  You are not going to the bank, a lot of us, they have taught us like it is a big favor that they are doing to loan us money.  Right?

Mikell:  It is part of their reward program.

Jason:  Yeah, it is their reward program.  Right? No, it is the only thing they have.  It is their product.  They sell debt.  That is what they do.

Mikell:  Absolutely.

Jason:  You have got to think about who you are going to talk to and what the purpose is behind what they do. Right? They sell debt.  They want you to borrow money. That is how they make their money. They say things like hey, it is your money.  It is your equity.  Why don’t you get that working for you?  And here is what we find out.  Here is typically what happens.  Like I said, it is a great rate.  It is usually below 2%.  It is a teaser rate.  The first 12 months are amazing, then sometimes they escalate after that.  Sometimes they are locked in for five years. Whatever the case may be.  There are lots of different ways that you can skin the cat. But instead of buying something that may be a good idea, maybe it is a rental property that is actually going to give you a return.  We see folks taking way too much risk or buying things that do not make any sense like cars. You do not win by going to the car dealer and saying I am paying cash.  No, you are using the equity from your home in the form of a loan.  That is not cash. Okay?  And the other thing is that car is going to drop like a rock the minute you drive it off the lot.  Right?

Mikell:  Absolutely.

Jason:  So you look at the depreciation on a car in three years it is ridiculous.  I have been fascinated by Tesla mainly just because it is interesting to me. Electric car.  It goes amazingly fast, really, really quick. It does not make any noise.  It is neat.

Mikell:  The design is awesome.

Jason:  It is. But I have been looking at some of them.  You go order one online it is $160,000. You go look at one that is three years old, and it is 70.

Mikell: Wow.

Jason:  It is a pretty substantial amount of depreciation. Most cars are that way as well.  Maybe not quite as significant as something like a Tesla or something that is a novelty or something new.  But it is interesting how fast these things depreciate.  You look at, if you are thinking about buying a new one, go look and see what one that is three years old looks like.  It did not go up. Right?

Mikell: No, not at all.

Jason:  Some of them do.  They have horses on the front of them, and they easily cost $300,000 or more, and they are for a very, very small percentage of people.  The other thing I notice about those cars with horses on them that go up in value, you do not see them driving around too often.

Mikell:  No.

Jason:  Yeah, very low miles, very limited use. Those guys are not driving those things to work every day for a reason.  You put the miles on them they are not worth much anymore.  Anyways think about things before you borrow money.  You have got to think about these, where you can dig yourself, what kind of hole you can get yourself into. So we are going to take a quick break.  When we come back we are going to talk about what happens when you have a HELOC and the boss says we no longer need your services. We will dig into that when we come back.  You are listening to the Jason Bramblett Real Estate Show.

And welcome back to the Jason Bramblett Real Estate Show.  So we were talking about the trap sometimes for some folks of the HELOC and sucking up some of your equity.  There are sometimes when every product is good, but every product does not work for everybody.  And where it does not work is when you make plans and those plans get changed and you had a great amount of equity in your home, and you borrowed it to go whatever it is you want to do with it.  And then you get the call which is the boss saying hey, we are downsizing.  We are no job, no equity.  It is all gone.  Right?  And it is not a good place to be. Or the spouse says hey, I am moving on.  And you went from two incomes to one income to how I am going to pay for this house, and my whole entire world is shook up.  Right?

Mikell: Wow.

Jason:  Just a side note on divorce, too. Ladies, you are getting killed when you keep the house.  Twenty-two years of doing this, some of the most devastating sales I have had is when the wife in particular wins the house in the divorce settlement, and they do a HELOC or they do some type of loan to cash the other spouse. That is not what you want to do. I know it sounds like you are winning because you stuck it to him or her, and you got to keep the house.  I promise you when you go to sell it, it is never, ever is how you think it is. And part of the reason why is because you are basing the number, it is made up.  It is fake.  You get an appraisal done with no buyer, therefore, this appraisal is not market value. It is an opinion of what maybe the bank would loan on the house if there was a buyer.  You need to sell the property and move on.  Then you equally distribute the pain and the equity.  Okay?  I know that is not what a lot of you want to do because everything in your world is upside down.  The home is the safe place.  The kids’ lives are upside down and you think that is going to give them some type of stability.  It does not. They are screwed up.  Okay? Just get over it.  It is the way that it is.  Divorce screws up everything, and you are not, by keeping your home, you are not going to insulate your children from it. Okay?  Because they have their own little safe place room is not going to make any difference.  You need to financially look out for your best interests, which also is probably your children’s best interests, and when you go to sell this home, I will promise you, very rare, like I cannot even think of one time off the top of my head, where this has actually come out good for the spouse that got the house through the divorce settlement. Okay? Just as a side note.  Note to self if it ever happens, sell all the assets.  Split all the money, and then that way, you have equal distribution and not made up equal distribution.

Mikell: Absolutely.

Jason: All right. So, we have got the boss.  We have got the HELOC. We have got no spouse.  We have got something that it is going on in our life, and now we have no equity.  And this is where the problem comes in.  We cannot do anything.  We cannot move quick because we do not have any equity.  The other thing, too, is a HELOC or a home equity line of credit is very easy to qualify for.  It does not have the same underwriting guidelines as when you purchase a home, and we find that the appraisals are a little bit more liberal on the HELOC side.

Mikell:  They are.

Jason: You could actually be very, very much upside down in your property.  Meaning you could actually borrow more than it is worth, which is not a good place to be. Right?  Because if you need to do something quick, emergency, think about that.  Blue light, red lights, doctors, all that kind of stuff. When you do not have mobility, and you have no money, it is hard to get out of things.  So if you use your equity for your home purchase, you need to make sure it is earning money.  So if you buy a rental house with the home equity, make sure whatever you do with it, it returns capital back to you.  It should return the money you borrowed plus profit.  That is what an investment does. It does not just return your principle. It returns principle and profit. Both.

Mikell:  Now, I did work in banking for a little bit.  I know that some banks would deny if you would do that with a home equity because they are selling debt.

Jason:  Yeah.

Mikell:  So they did not want you to actually buy rental property, so you cannot really say that when you are doing the home equity loan.

Jason:  Yeah, they would much rather you go buy a Tahoe because that is smarter. 

Mikell: Yes.

Jason: Yeah, right exactly.  And to Mikell’s point, if they actually ask the question, which some of them just do not, you get the money, and you go do whatever you want with it. Originally, it was supposed to be for what, home improvements.

Mikell:  Absolutely.  Yes.

Jason:  No question about it. The interesting thing about that is I have sold a lot of homes with a lot of HELOCs, and I did not see a lot of improvement.

Mikell:  No, you do not.

Jason:  It is kind of a, especially for as big as some of those HELOCs are, your house should be amazing. Not so much.  Now I will tell you that the ride in the driveway is looking pretty good, or the boat in the garage. Or at the lake or whatever it is.  There are rules. They are just not enforced well.  We will just put it like that.

Mikell:  Yes.

Jason:  The other thing that we see is you get this money, you buy the depreciating thing, or you start a business.  What we typically see, and this is what we talked about a few weeks ago is no proof of concept. Really what you are doing is you are borrowing money for an idea or a dream or something like that or a hobby.  But you need to make sure it returns the money that you are borrowing.  Right?  Hopefully at a very fast rate. That is what businesses should do. But normally what we see is a hope, a prayer, and whatever. And unless you are inventing the next new iPhone, and you are like 100% sure this thing is going to fly, you may not want to go all in because that is what you are doing.

Mikell:  You were talking about entrepreneurship in our previous episodes.  You will fail in the beginning.

Jason:  That is it.  Absolutely. How I have made it is I have been told no more than anybody else.  How I became successful I took risks when nobody else would do it. I stuck my neck out there further than other people were willing to do.  Right?  I have been told no a lot, and I have made mistakes, and I just kept trudging through. Right? At any one of those times, I could have quit.  It does not even necessarily make you a failure, but it did not work.  Right?

Mikell:  Right.

Jason:  And you would be doing something else.  That is why I said in the previous radio shows it does not take money to start a business.  It does not take money to make money.  It takes courage to do both of those things. If it was just borrow the money, everybody that had a HELOC could go out here and start a business, and I do not know.  Everybody would be selling widgets on every corner.  Right?

Mikell:  That is true.

Jason:  It does not work that way. So it takes courage to go through the pain of whatever it is you are doing to earn that. So just be careful.  Especially in these situations where they are highly emotional.  We see people make the most mistakes in real estate when they act out of emotion.  Unfortunately, that has a lot to do sometimes with divorce and death and different things.  Hopefully, that is what I can bring to the table is a level head, some math, some numbers, take the excitement out of it.  We are going to look at this from a real numbers’ perspective and what is best for you because that is, at the end of the day, the only thing that matters in the whole deal. Sometimes just because it works does not mean it was good.  Right?

Mikell: Right.

Jason:  And we need to make sure we have somebody there that can help us with that. So next week we are going to dig into getting that house ready to sell and what I need to do to win this price war and this beauty contest. You can hit Jason Bramblett dot com any time. All of our homes are there. Send me a question.  We look forward to speaking with you.  You are listening to the Jason Bramblett Real Estate Show.

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