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How Did You get Started And Where Did You Learn Your Zero Down Techniques?
Joe: Hey, this is Joe Crump and welcome to a new series of Q&A videos. I’ve got a bunch of questions to answer from emails that you guys have sent me. This first one is from Fred Danisk from Minnesota. He says, “How did you get started and where did you learn your zero down techniques?”
Joe: I got started back in California and the very first property that I bought was in Lancaster, California. I bought it as a brand new construction for full market value in a time when the market was going up like crazy. And I just got lucky. When I bought it, by the time that I was done, it had gone up twenty percent in value, just in the short time that I owned it. So I turned around immediately, sold it, and I bought another property, this time it was a VA foreclosure property that I got a little bit under market value.
Joe: And I figured, hey, if I made money on it, you know, just by selling it, I could probably, if I bought it less than market value and did some fix up on it, I might make some more money. So I did that and I fixed it up and I turned around and sold it and I made money on that.
Joe: And then I got into building new construction and I started using loans and the loans is where things got screwed up. Because I started building these properties, the values were going up like crazy in California at the time. This was 1986 or so. And by the time 1990 came around, or so, I was building a lot of construction. I had about $17M worth of properties up and running with you know, a margin of equity in those properties and the crash came in 1991, the S&L crash came in 1991. The values dropped about thirty percent. I got caught in that.
Joe: And the banks came to me and said, hey, you’ve got to put more money into these deals, otherwise we’re going to call the loans due. And I didn’t have the cash to do that because I was so heavily leveraged into all these properties. I was trying to build too fast, too quickly, using loans and doing construction. And it could have worked out, if I could have finished and the values had kept going up, everything would have been great. But that’s not what happened.
Joe: So, I lost all the properties. I ended up filing bankruptcy, you know, lost everything that I had and you know, paid out every vendor that I possibly could pay out until I ran out of money. And you know, after that happened, we moved back to Indiana, I became a real estate agent because I no longer had any credit, I no longer had any cash, and I didn’t really have a clue on what to do next. And I was deeply, deeply depressed.
Joe: So I had to start over again. And at the same time, we had just had, Nancy and I had just had our first son, he was thirty days old, we’re flying back to California with a thirty-day old and we’re moving in with my parents. I’m thirty-five years old and we’re moving in with my parents because we didn’t have any money. My brother loaned me his car. So it was demoralizing, depressing, it was a blow to my ego, you know, I thought I was the golden child, you know, really doing well in business.
Joe: But I didn’t really have a clue because I was using loans and I’ve heard this story from so many of my students that have done the same thing where they go out there and they think that leverage is going to be kind by getting, you know, loans through Fannie Mae and through other sources and it’s not the best way to do it.
Joe: So I became a realtor, I learned how to talk to people, I learned how to sell to people. I learned how to you know, do the real estate agent thing which was good and I was good at it and I made a lot of money. And that started taking off within about a year. I was doing really well. And I started doing that and became one of the top producers in the company that I was working in, but I started finding people that couldn’t actually sell their properties because they didn’t have enough equity in the property. They had owned it only a short period of time and the values hadn’t gone up because in Indiana the values creep up instead of jump up.
Joe: So it takes a few years before you can turn around and sell them. And so I noticed that these people couldn’t sell their properties. I was going out there and doing what was called a market analysis on your home, I’d give them a value of the property, tell them how much it’s going to cost them to sell it, and end up telling them, well, it’s going to cost you $10,000 to sell this property, is that okay? Is that going to work for you?
Joe: Well, no, we don’t have $10,000 and we can’t sell it and do you have any other ideas? And I didn’t. I didn’t have any other ideas at all. Until I thought, you know, what if we did a lease option on these properties? We could get these people out of it, wouldn’t cost them any fees, you know, I could take a lease option fee as my fee and I could probably end up doing pretty well with that. So, that’s where we started doing lease options.
Joe: And then we started, I wanted to keep the properties, so I said why don’t you just deed me the property. I’ll take over your payments, I don’t have to qualify for your loan, I’ll just promise to make your payments for you, or we could do a land contract, another way of taking over a property without taking the deed. It’s not quite as secure as doing the deed.
Joe: So we started using all these techniques and I started learning that there’s a hierarchy to these techniques that gives you more control if you are in one over the other. So if I’m in a subject to and I take the deed, I have a lot more control as a buyer of that property, of an owner of that property, because I have the deed. If I buy a property on a lease option, I have a lot less control, the seller has all the control. So, I started to look at these zero down structures and say, well, which one’s going to give me the most control. What is the hierarchy, you know, if this one, and it ended up being subject to, multi mortgage, land contract or contract for deed, lease option and then assignable cash deals.
Joe: And you had control over those properties based upon which structure you’re in, and you would buy or sell based on that structure. You know, we always have to assume that we’re going to be the most ethical person in the room. We’re going to do the right thing. We have to count on ourselves to be, you know, moral and ethical in these transactions because we could take advantage of people if we don’t. So we have to make sure that we are doing the right thing.
Joe: But in order for us to do the right thing, we have to be in control. That’s where the zero down hierarchy came from. It shows everybody how, it shows my students, how you can have the most control in any transaction. So, that was where all this came and that’s the path that I came down.
Joe: And then I started buying properties and I started building a portfolio and I started flipping properties and you know, business became consistent and regular and I started using techniques and found new ways to do, to find new leads and to put new deals together and different lead sources that we used. And now we’re using, we developed a piece of software called the Automarketer, the Pushbutton Automarketer, and it allows you to get leads that are interested in doing zero down structure deals. And makes it possible for you to be able to a deal without any cash, without any down payments, without any credit, without you know, any income verification. All you need is the approval of the seller and the buyer and you can do a deal.
Joe: And we’re not only doing deals with nothing down, we’re actually not even closing a deal unless we make cash at closing. Sometimes we keep the property for our portfolio, sometimes we flip it into the next deal. So, that’s the basic structure of, you know, where I was, where I came to, and why I think that this technique makes so much more sense than using loans or using cash. They say you need money to make money. But I say that if you can’t make money with no money, you probably can’t make money with money.
Joe: The people that I’ve seen that have jumped right into this business and start spending their money, a lot of times they’re going to lose their money, or they’re going to put so much effort into it that they money that they do make is miniscule. They might as well be working at the McDonald’s.
Joe: So what I want to do is teach you how to do this without money, without credit, and learn how to do it without risking any of those things. Really, there’s nothing at risk in these transactions that I’m teaching at all except your ego. You’ve got to get on the phone and you’ve got to ask for something. And you have to learn how to do that.
Joe: Anyway, that’s how I got started. That’s the process that we’re doing and if you go to my blog you can find a bunch of information about how we do it. I’ve also got some books on Amazon that you can look at. Just type my name in. And of course I’ve got a mentor program and I’ve got other things where I teach these things as well. The Automarketer has good training in it. There’s a lot of good material that is either expensive or is free. So go check out my blog and you’ll find out more information about it.
Joe: All right – hope that helps. Good luck.