In this week’s episode of Freedom Fast Lane, Ryan Daniel Moran interviews master real estate investor, Josh Cantwell. This podcast not only covers cash generation through the use of leverage, but also how Josh buys and sells houses for income. Whether you’re in real estate, Internet, Amazon, or a traditional business, you will get a lot out of Josh’s strategy for leveraging money.
Main Questions Asked:
- Talk about the house flipping process for an income.
- What are your goals in order to generate $40K on each flip?
- Do you see flipping as investing or cash generation to get seed money for other things?
- How do you acquire the deals for so little money?
- How do you maintain enough deal flow and manage the temptation to marry the first deal that comes along?
- How can people leverage other people’s money to seek opportunity?
- Do you have a list of potential investors, or do you manage this different to your other deals?
- Talk about 40K Flips.
Key Lessons Learned:
- The first step in Ryan’s Wealth Triad is to separate hours from your dollars, e.g. flipping houses.
- Ryan doesn’t consider flipping houses as investing, but does consider it cash generation that you can put it into other areas.
- Josh has been flipping houses for 10 years and has been involved in 685 real estate investment deals (mostly flips).
- Josh views flipping houses as a cash generation strategy and investments as more of a ‘set and forget it’ longer term approach for a specific ROI.
- The flipping process involves buying a property, outsourcing the improvements, launching and selling the property, and generating a profit of $30-50K.
Ways to Find a House to Flip:
- Invest in bank and government foreclosures.
- There are ‘on market strategies’ and ‘off market strategies.’
- The best deals are ‘off market’. They are not on multiple listing services, e.g. vacant homes, probate (going through inheritance process), and short sales.
- Information can be acquired through a list broker.
- This is all about relationships and finding people who have a problem that you can solve personally.
- If you have access to money then it’s all about going and telling people (relators, other investors, or real estate wholesalers) that you are looking for a good deal.
- As you drive through a neighborhood, look for vacant houses. It can be as easy as seeing houses with a foot of tall grass and stacked newspapers at the door.
- Tell your ‘center of influence’ what you do.
- Josh uses multiple strategies, including calling, direct mail, and relationships.
- Always have a middleman (use an agent or an attorney so you can remain emotionless). The seller and buyer shouldn’t negotiate directly.
- Getting emotionally involved is an easy way to pay too much and lose a deal.
- Run your numbers, know what you want to pay, and start 25% below what you are willing to pay.
- You need to make sure you have enough options and not just focus on one deal.
- Sometimes you’ll have to make offers on 15 houses to buy one.
- After finding a deal remember the following:
- Good deals sell quickly
- Be ready to close quickly.
- Have the capital to close
- Put yourself in a situation where you have access to capital to close in 1-3 weeks.
- Create a great partnership
- This should be someone in the field who knows the market and is constantly looking for deals.
- Your best bet is with a buyer’s agent or an acquisitions manager.
Leveraging Other People’s Money:
- There will always be a partner who wants to get their money in play and get a good double-digit passive rate of return.
- If you use someone else’s money, your return is infinite. If you use your own money, there will be a fixed interest rate (how much put in versus how much you get out).
- The stock market has generated approx 9% return over past 100 years. Over the last 10 years, it has averaged 8%.
- If you can, offer a money partner a certain interest rate per year (better than market, e.g. 10-12%, plus a small piece of the action). You will find investors.
- Investors are looking for yield and to get the principal back, plus some yield on principal.
- Investors want to know “When am I going to get my money back?” Followed by, “When will I get a return?”
Jobs Act of 2012:
- Removed 80-year ban on ability to advertise your offer.
- If you want to offer people a piece of your business or return, you can now advertise that to the public if you have the correct disclosures and are compliant. E.g. “I pay 13% fixed return.”
- This is a 506C securities registration.
- Raise private capital (debt financing or equity financing).
- You can have a ‘B’ fund and take money from non-accredited investors.
On your iPhone? Listen on iTunes here.
Links to Resources Mentioned
How to Develop Your Success Network (previous podcast)
Growth Hacking 101 (previous podcast)
Perfectly Passive Income
2 click to tweet links (clicktotweet.com)