Real Estate Investing: Episode I

Jason Bramblett Real Estate Show Podcast 

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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.