I believe the best way to learn the business of real estate investing is to hear how others have done it. When these interviews were recorded, I asked the interviewer to ask questions that would help the viewer see how these folks got started.
I wanted to hear the struggles, the successes and a clear path and explanation of what they had to do to make these deals happen. I did NOT want them to be a bunch of people telling you how wonderful Joe Crump was. I wanted content, examples and real life experiences.
I hope we succeeded.
Case Study – Patricia L. Red Hawk, M.D. – Philadelphia, PA
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I Left My Medical Practice To Become A Real Estate Investor Full-Time
Patricia: I am Patricia Red Hawk and I currently live in Philadelphia, Pennsylvania, and I’m originally from northern California, Bay Area. I’ve been a real estate investor for many years now. And I’m sort of constantly tinkering with my portfolio, tinkering with the tactics that I use. I think that one of the things that we learned through the 2008, 2009 debacle is that those investors that were savvy enough to have multiple tools in their tool belt actually didn’t take a bath as badly as a lot of folks did. So, I’m constantly adding to sort of the arrows to my quiver as it were, to make sure that I can continue my business and make money wither the market’s hot or whether the money, the market has cooled down.
Patricia: And so I stumbled onto Joe’s YouTube videos, I think, and talking about lease options and other kinds of creative financing techniques that could be used.
Patricia: Joe has a lot of YouTube videos out and I’ve actually viewed every single one of them. And some of them more than once. So, I tend to have a kind of leave no stone unturned approach when I’m picking the mentors and coaches and teachers that I’m willing to invest with. And so, I’m relatively new to Joe but I feel like I’ve viewed all his material.
Patricia: As I mentioned, I have sort of multiple strategies that I employ, but one of those sort of classic ones I do, because it’s so easy for people to understand is I buy houses in my local market and other emerging markets and I buy them at deep discounts. And so, and that could be, I might buy them from other investors, I might buy them from home sellers who inherited something or something like that. Or, I could buy them at tax sales, too. But, in any case, I buy houses at deep discounts. And these are houses that have many, many years of deferred maintenance.
Patricia: So I go in and I do a full gut rehab. So, let’s say I buy something for thirty thousand dollars and let’s say I put fifty, fifty-five thousand dollars into it. So I’m all in, let’s say at eighty-five thousand dollars. And then I put a tenant in it. The tenant might be paying say $1,500 a month rent. And then I go in and refinance. So, I happen to know that I can pull out, so let’s say the house reappraises at $150,000. Well, I bought it for $30,000 and I put $55,000 into it, so I’m into it for $85,000.
Patricia: I’ve got a tenant paying $1,500 a month rent and there are a number of asset-based lenders that will lend on, say, 70% or 75% of loan to value. So, they’ll, they’ll put a mortgage on $150,000 valued house at 70% of that value. So I happen to know off the top of my head, $150K house, I can pull $105, 000 out.
Patricia: And I know that with a tenant paying $1,500 a month rent, their rent will cover my principal, my interest, my tax and insurance, plus property management fees and still throw off positive cash flow for me. So, basically I do those, I do those all day every day. And it’s, has it’s own kind of ecosystem within my own portfolio and company and so we do that day in and day out. And I’m primarily targeting, as I said, some emerging markets in the Midwest as well as the counties surrounding Philadelphia.
Patricia: It’s a little difficult to assess. So, because I’m not, for instance I’m not flipping houses. My portfolios are buy and hold. So, if I use money to buy it and then also fix it up, and I put $85,000 say, or $90,000 into it, and then I’m putting new financing in place to pull my money out, you know, one way you could look at it is my profit is the difference between what I put into it, $85,000 or $90,000 and $105,000 which is, you know, the 70% of loan to value on this $150K house. So that’s one way you could look at what my profit is.
Patricia: So, maybe my profit might be $10,000, $15,000 or $20,000 per house. That’s one way to look at it. But the other piece of that, too, is you know, I’m also getting a positive cash flow every month as well. And, I have no more money in the deal. I have all my money back. So, you know, the classic trick question is, well, what’s my return on investment? Well, my return on investment is infinite. I have no more money in the deal. I’ve gotten all my money back. So, this is why I say it’s little difficult to say, you know, because I’m not a flipper and I can’t say, well, gee, I make an average of $45,000 on a house. So, that’s kind of a difficult answer to give.
Patricia: Again, kind of harkening back to the idea that the more tools you have in the tool belt the more able you are to solve problems. And that’s really what I do. So, when I meet with folks who have a house problem or, you know, a property problem of some sort, the more things that I’m able to do, the more solutions I’m able to bring to the table the more likely I am to be able to help somebody and do the deal.
Patricia: And so it’s, I’m fairly straightforward. I’m super straightforward, actually. You know, I have those kind of common sense kitchen table conversations. And if I, if I have a broad ranging conversation with the house seller, I can typically figure out what’s the sort of easiest way or what the kind of range of options are that they have. And I’m, it’s got to be win-win. So, you know, I have no problem educating the seller saying, look, it looks to me like this maybe are your four options. And if you’re interested in working with me I can help you with option A, B or C, but option D, there’s no place for me to make money so I’m not going to be able to help you in that regard. But, you know, I give everybody all the information because the need to make the best decision for them.
Patricia: You know, when you’re transparent like that, it’s instant credibility, credibility, and people know that when you’re, you know, trying to mess with them or screw them and I’m not interested in doing that. So it’s super straightforward to you know, kind of lay out folks’ options and you know, I’m actually a physician by training and so one of the things that I do is I actually use this skill set from being, from practicing medicine, from being a doctor, with potential house sellers, too. And I go in with really broad open-ended questions because I want to hear, you know, what’s the story of the house? Why are we here?
Patricia: And I’ll get a lot of information but it also helps me understand sort of where they are and sort of what are the challenges that they’re facing. And if I have, if I have a good idea of what that is, I can sort of connect the dots and then figure out sort of, of all the things that I’m able to do, you know, or all the options that exist for the seller, period, some of which I can help them with. That’s kind of a broader conversation and ultimately more helpful for them because they have all the information, not just for instance, only the information that a real estate agent wants them to have. So I feel like the more tools I have in the tool box the more solutions I can provide to sellers.
Patricia: Here’s what I don’t want. I don’t want someone to look at this video and think, oh, well, she’s a doctor and she’s got special training and blah blah blah. That’s not really it. What I want people to hear is, there are ways in which you work in other aspects of your life and look at those skill sets – what is transferrable to those kitchen table conversations when you’re talking with the seller and you’re trying to help them solve this problem? And that’s really it. People should be able to draw from other aspects of their life and bring that to the table quite literally.
Patricia: Because you know, the kind of listening that you do with your kids or your family or your friends, those are the same listening skills you need to bring to the conversation. If I know what I’m able to do, and I also know, have a sense of sort of what the range of options are for the seller, I can more easily you know, kind of lay it all out for them. And they’ll pick the stuff that works for them. And I even try to sort of prioritize. It’s like, you know, even if it’s to my disadvantage, that’s a lot of credibility. I can say the most money you’re going to make is maybe this. And it might be an option in which they don’t work with me. Or, you know, I don’t get paid, or, you know, something like that.
Patricia: So, I have no problem, you know, having that conversation. But, again, the skill set comes from other areas as well. And folks should be, they should know that they probably have that skill set. You need be really conscious of it and considering it and how they can bring it into their real estate investing role.
Patricia: I’m, I specifically look at Joe’s techniques because I want to be able to increase my income. So, I’m able to, you know, buy properties and I’m a buy and hold investor in large part. But many of the techniques that Joe teaches are ones in which I can actually increase my income right now. And I don’t have to pull money out of, say the passive income I’m able to generate from the rental income. And that can circulate right back into the business and help grow that. So, I actually look to these techniques to help me increase my income and that way I don’t have to leach off of other monies in my company and I can just basically survive on these techniques.
Patricia: I have to say being a real estate investor is the most fun I have ever had. There’s a level of creativity associated with solving problems and putting together the deals that is fantastic. But I have a lot of control over my time. I’m able to have a super-flexible schedule. I spend more time with friends and family. I don’t have to pay malpractice insurance. That’s very nice. So it really is, I’m happier, I make more money and I have a better lifestyle. So I’m actually able to craft the kind of life that I really want to lead. So, it’s the freedom, the range of options and choices that real estate investing allows me.
Patricia: Yeah, the Automarketer in particular is going to let me automate the parts of my business that need to be automated. I mean, if I can reduce the amount of time that I’m doing that kind of stuff, and it’s, you know, that’s how you’re able to leverage your time. My company makes money when I am in my zone doing the things that I’m really, really good at. So, going out and doing the lead generation and reaching out on an automated basis, that’s not a good use of my time. So I’d much rather outsource that to software and leverage technology to be able to do that. I can get my time back for that. And they’re much more efficient at it than I would ever be.
Patricia: So I have really two things. One is you have to commit yourself to financial education. And there are tons of websites out there, lots of podcasts, YouTube channels, et cetera, and read books – the old fashioned thing. I am a huge believer in education and I will tell you that I typically in any given week I listen to fifteen to twenty hours of educational podcasts every single week. I do that because I’m listening in my truck as I’m driving around and doing my job.
Patricia: Not too many people can really touch that. I consume a lot of educational information. And what I would say to newbies is two things. There are plenty of ways in which you can get into real estate without money. We all know that. But you’re going to pay with time or you’re going to pay with money. So, if you don’t have money, you’ve got to make sure you’ve got the time. Make sure you’re spending that time efficiently in the areas that will give you the best results and the greatest yield.
Patricia: You won’t know what those are unless you have financial education. And then you keep adding to it. Once you start to get a little bit of success, and you’re practicing your craft, you have to stay in your lane. Don’t get distracted by shiny penny, oh, shiny syndrome. Super easy to do so. Stay in your lane. Get really good at that one thing and commit yourself to it and all the education you can possibly consume. Stay in that. Get good at it. And use that as a stepping stone to the next series of techniques.
Patricia: There’s another piece of advice I would give potential real estate investors that I don’t think people are talking about. Lot’s of folks will say just what I said. Financial education, find a mentor, that’s always a great one, too. Talk to other people in your local network. Start, you know, intersecting yourselves in those local real estate investor groups. And all that’s pretty classic kind of advice.
Patricia: But the thing that I would actually recommend, even before that, is clean your own house. And what I mean by that is understand your own budget. Literally. Your own finances. Understand where your debt is. Pay down debt. You know, it’s kind of like training. You want to do some, a lot of practice and a lot of training for a real estate investment career and if you’re personal finances are messy and scatted and all over the place and you don’t have your act together when it comes to your own personal finances, it’s gong to make that process even more difficult and a lot less likely that you will succeed or succeed well, or succeed right away. So, really step one I would say is clean up your own house first. Take care of bad debt. Start to take care of the other financial aspects of your life that you know might need to be cleaned up. Do that first. That might take three to six months.
Patricia: At the same time you’re doing that you should be pouring on the financial education as well. So, three, six months, you know, down the road, you’ve got a ton of education under your belt, your personal finances and your personal life is tight and clean and kind of taken care of. You know, that way you can launch from a very solid platform and then move forward with some confidence.