How To Think Like A Real Estate Investor

How To Think Like A Real Estate Investor

Joe: Hey, it’s Joe Crump. This next video is How To Think Like A Real Estate Investor. A lot of people think like renters. They take the money that buy their properties with or that they live in and they rent and they give that money away and they’ve got nothing to show for it after that. Eventually, though, you start thinking, you know, what if I was able to keep this property?

Joe: So, you start thinking like a homeowner. And you start putting money into a mortgage or you buy a property and you start paying it down. And every month it goes up in value a little bit and you also pay down the mortgage a little bit and you start building equity over time. And eventually you pay that property off and you have a nice investment that’ll help you with your retirement. And everybody should own their own property.

Joe: And then the third way is when you start thinking like a real estate investor. Where you actually not only buy your own property to live in, but you also buy multiple properties to live in. And you’re no longer constrained by what you need as far as where you want to live or what school system you want your kids in, or how close it is to your job or any of those things. Suddenly you have the freedom to buy in any place in the country and to look for good deals. So, you’re going to start looking for equity and you’re going to start looking for cash flow. Those are the two major things that you need in order to build that portfolio. You’re also going to be looking for different structures that you can use, business structures that you can use that’ll help you offset your taxes, protect your assets and also help you build a retirement account using maybe a Roth IRA. So, there’s a lot of different ways that you can do that to make that happen.

Joe: So, the big difference between thinking like most people do and thinking like a real estate investor is you’re thinking about building an asset base. An asset base of real product. Now, I know that a lot of people invest in the stock market and they have mutual funds and all types of public companies. But, one of the things I love about real estate over those things is it’s a real business that you have control over, with a real product and you’re not dependent upon some CEO. You’re not dependent upon really the market much. Because once you own a property and you have structured your financing properly, even during rough times people still need a place to live. And they’re going to continue to rent those properties.

Joe: And as long as you can structure your deals and put them together in a way that you have enough cash flow in there so that even if rents drop a little bit you’re not going to be put into a very difficult situation. Also, if you build a little bit of a reserve by doing lease options and taking those lease option fees and sticking them into a bank so that you have some reserve money in case that property goes vacant, and you have to – or, maybe they stop paying because the corona virus made them lose their job and now they can’t make payments to you anymore, and you’ve got to wait a few months before you can get your money.

Joe: If something like that happens, you need to have reserves to be able to protect your investment. So, you have money in reserve all the time when you keep these properties. The biggest problem that brand new investors have is not having reserves. Because you’re working so close to the edge you’re just barely able to get a property, barely able to afford to buy that first property.

Joe: I had a friend, actually one of the people that got me interested in real estate investing, way back in the eighties in California. And she was buying properties – I was living in California – and she was buying properties in Las Vegas at the time. And they were selling for $100,000, which is an incredible price these days in Las Vegas. But she had to come up with $10,000 for a down payment and then she’d go out and get a loan and she’d have a $90,000 loan and she just kept buying these properties. Every month she’d buy an extra property. And they were brand new properties so she didn’t have to do very much.

Joe: She had a property manager who was taking care of it. They were cash flowing properly. And it turned out to be a really good investment for her for the long run. Especially since she bought in Vegas because the values went up so crazy, you know, after that. So, you know, she’s done very well for herself over that time.

Joe: But, it’s also very risky by taking out mortgages like that. You have to be very careful if you take out a mortgage. Also, Fannie Mae will only allow you to have so many mortgages. It fluctuates. Right now I think it’s at four, but it’s gone all the way up to ten in the past. So, it’s hard to get more than that many mortgages.

Joe: So, if you get to that limit, then you want be able to use that model anymore and buy anymore properties unless you change the way you do your financing. And that means go to the zero down structures that I teach. You know, subject to, multi-mortgage, land contract/contract for deed, assignable cash deals and lease options. Although I wouldn’t recommend that you buy on lease option. Sell on lease option; it gives you too little control if you buy on a lease option.

Joe: Thinking like a real estate investor changes the way that you’re going to live because it makes you think about how to build an asset base. And that’s maybe the most important take away from this process. So many of us live day to day, week to week, try to put some money in the bank, try to put some money in the stock exchange. We don’t see much of a return. But when you can start buying properties and at the beginning maybe you start flipping those properties and you make chunks of cash. Maybe only make $5,000, $10,000, per deal. But you take that money and the next time you make another $10,000. So now you have $20,000. And the next time you make another $10,000, you have $30,000. And over three, six, you know, twelve months, suddenly you’ve got $50,000 in your pocket that you didn’t have before you started.

Joe: Maybe you’re still working a full time job and you’re doing this eight to ten hours a week. That’s realistic to think that you can do that. And then you can take that money and you can start buying zero down properties. You can start keeping some of these properties. Then maybe you want to put five grand into getting some new carpet, or putting a new roof on a property. And you’ll start building that portfolio and if you start buying subject to properties, or land contract properties for $50,000, $100,000 apiece, you know, once you have ten, once you have fifteen, once you have twenty of them, now you’re going to have a million, two million dollars’ worth of property.

Joe: And that eventually pays for itself over time if you’ll allow it, and give you cash flow during the time that you have it. Plus, when you sell those things on lease option, then you’ll still have a tenant in the property that’s giving you cash flow, you’ll have the lease option fee that you can put into an escrow and not live on, but keep it as a reserve in case you have a vacancy which you will have a vacancy because less than 30% of the people that do these options actually exercise them, so you’re probably going to get that property back.

Joe: You’re going to sell it again, probably for more money next time. Also during that time, you’re going to be getting the buy down on the note as you make payments every month, so you’re going to be, all the principal that goes towards that note is going to be paid down. That’s why it’s nice to buy on a land contract with zero interest because all that payment goes towards principal and pays it down a whole lot faster.

Joe: If you take a $100,000 property and you pay $1,000 a month, it’s going to pay off – and that $1,000 goes towards the principal it’s going to pay off in 10 years or less. If you do a 30-year mortgage with 5% interest, that $1,000 a month is going to take 30 years to pay off. So, three times as long because of the interest. It’s the banks who are making the money in these deals when you use a mortgage. So, what you want to do is try to structure these deals in a way that you don’t have those banks.

Joe: I’m not saying don’t, you know, get rid of them entirely. I’ve made plenty of money using bank loaned money. But, I make so much more money and so much faster if I do it with zero interest loans from the seller. And sellers are a lot more willing to do zero interest loans than a bank would be, which they don’t do them at all. So.

Joe: Anyway. So, that’s how you start thinking about working as an investor. Get your mind around those ideas of building a portfolio.

Joe: All right. I hope that helps. Subscribe to the channel, go to my web page JoeCrumpBlog.com and check out and sign up for my free newsletter and check out PushButtonAutomarketer.com for my automation. Shows you how to find these properties. You also might want to look at my Mentor Program. I’ve got a six-month personal mentor program where I work with you personally. It’s costs about as much as going to college for a semester, so it’s not cheap, but you can go to ZeroDownInvesting.com and check out that program as well.

Joe: All right – good luck to you.