Let’s Take A Moment To Bust The Most Common Myths And Misunderstandings Holding Investors Back From Reaching Their Full Potential

This is by far the most damaging myth that makes so many investors miss out on this vast marketplace. There is nothing stopping you from building a multi-property real estate empire in one year, with a $1 million plus market value, using less capital than it takes to buy a new car. And I’m not talking about putting up a down payment to take out a loan or any such financial leverage. In fact, when you’re just beginning, you should try to stay away from any sort of debt financing. Instead, use the techniques you learn here to leverage small amounts of your capital into controlling interest over an expensive property.

For example, with just $5,000 in initial cash, and sometimes even less depending on your local marketplace, you can gain title through a Home Owner’s Association (HOA) foreclosure and rent the property out for years while you delay the lender’s foreclosure. Then easily outbid everyone when the place eventually goes to auction because of your surplus right’s assignment. I’ll cover all the details on how to pull this off in Phase Two.

If you have a little bit more cash, I’ll show you how to find off-market, pre-foreclosure “distressed” properties before everyone else. Then you can go straight to the homeowner and take title to a $200,000 home for $10-20k. Add in a bit more to get the place up to selling standards, but the big ticket expenses like paying off the mortgage and other debt isn’t your problem. The buyer you resell to will take care of that. You’re leveraging their mortgage instead of your own to keep your capital outlays at a bare minimum.

Sure, there are many real estate investing niches and styles, and some of them are quite risky. The strategies I’m laying out here though don’t involve any speculation. Luck, the general marketplace or whims of buyers don’t play a role when you follow a data-driven, equity-focused approach to investing. Best of all, since this is all a numbers game rather than an art, I can teach anyone who is willing to invest a few hours of their time how to do this.

We’re hunting existing equity, so we know we can sell our inventory at a guaranteed profit in a hurry. Essentially, we’re looking for arbitrage-like opportunities, rather than just discounts. As long as you only invest in properties with plenty of equity, you will always be in low-risk positions and hold semi-liquid assets that will sell in short order at some level of profit.

Contrast that strategy to playing the stock market. On Wall Street, all equity is incredibly overpriced. Every penny of equity you can find is selling for a major multiplier over its value, even in a bear market. So is stock XYZ really a good buy at 20x it’s P/E ratio, just because today it happened to trade below the 50-day moving average? You’re still spending $20 to buy every $1 worth of equity, just in the hope that someone else is going to come after you and pay even more. You can point to all the technical indicators you want to justify that gamble, but at the end of the day it’s still just speculation. You’re completely at the mercy of the broader marketplace and don’t have any edge over anyone else. Your only safety margin is how much you can tolerate losing while waiting impotently for the price to swing in your favor.

How about playing a different game? One where you set the rules. Instead of spending $50,000 to purchase a $2,500 stock equity stake and gamble that the price will go up soon, why not just buy guaranteed real estate equity for an immediate discount? That same $50,000 you were going to stick in an ETF or whatever can land you real property with $100,000 or more of equity available between the immediate sales price and the debt owed. No speculation, lucky rabbit’s foot nor sleepless nights required.

This one holds a kernel of truth, but it misses how easy it is to manage the risk. We’re not shooting from the hip when we purchase real estate. We’re data-mining thousands of off-market property records every month and then plucking the diamonds from the rough. And we’re doing so before the competition comes calling and starts a bidding war. With this approach, you can stack the deck in your favor before you ever sign on the dotted line.

When you have a 1,000+ potential leads in a city but only enough capital to invest in one or two properties, you can be quite selective. You only touch the cream of the crop: those investments with the most available equity, the fewest risk factors and located in the highest demand neighborhoods. In short, the safe bets that will pay off even if the market suddenly tanks. Really, this business only gets risky when you’re managing so much capital that you have to target lower equity homes just to put all your money to work. But isn’t that a good problem to have?

The “market” has nothing more to do with equity hunting than the price of venison at the grocery store affects the hunter’s aim. What does it matter to you how many investors are cruising Zillow and the MLS looking for deals? They aren’t your competitors. You’re stalking a completely different hunting ground.

We’re pulling our investments out of the wilderness and bringing them to the marketplace for the first time. Whether renting or flipping, sustainable success comes from smart bidding at foreclosure, HOA and tax auctions, or finding and finessing distressed homeowners that aren’t yet selling their homes to transfer title and let you do that for them.

As for inventory, if there isn’t enough on-market housing to meet local demand, then that’s even better for you. Less competition and you can command higher prices for the “meat” you brought to market.

If there’s a local seller’s market, with way too many homes up for sale, then an equity jaeger is also sitting pretty. With all the data about recent and pending sales available, it’ll be even easier for you to estimate a fast selling price and only hunt the “big game” properties that will return plenty of equity when you take them into this crowded market.

Sure, there are many real estate investing niches and styles, and some of them are quite risky. The strategies I’m laying out here though don’t involve any speculation. Luck, the general marketplace or whims of buyers don’t play a role when you follow a data-driven, equity-focused approach to investing. Best of all, since this is all a numbers game rather than an art, I can teach anyone who is willing to invest a few hours of their time how to do this.

We’re hunting existing equity, so we know we can sell our inventory at a guaranteed profit in a hurry. Essentially, we’re looking for arbitrage-like opportunities, rather than just discounts. As long as you only invest in properties with plenty of equity, you will always be in low-risk positions and hold semi-liquid assets that will sell in short order at some level of profit.

Contrast that strategy to playing the stock market. On Wall Street, all equity is incredibly overpriced. Every penny of equity you can find is selling for a major multiplier over its value, even in a bear market. So is stock XYZ really a good buy at 20x it’s P/E ratio, just because today it happened to trade below the 50-day moving average? You’re still spending $20 to buy every $1 worth of equity, just in the hope that someone else is going to come after you and pay even more. You can point to all the technical indicators you want to justify that gamble, but at the end of the day it’s still just speculation. You’re completely at the mercy of the broader marketplace and don’t have any edge over anyone else. Your only safety margin is how much you can tolerate losing while waiting impotently for the price to swing in your favor.

How about playing a different game? One where you set the rules. Instead of spending $50,000 to purchase a $2,500 stock equity stake and gamble that the price will go up soon, why not just buy guaranteed real estate equity for an immediate discount? That same $50,000 you were going to stick in an ETF or whatever can land you real property with $100,000 or more of equity available between the immediate sales price and the debt owed. No speculation, lucky rabbit’s foot nor sleepless nights required.

I have to admit I fell for this myth myself when first starting out. Oh, I was so intimidated. Probably would have thrown in the towel before closing on the first deal if my partner hadn’t steadied my nerves. I felt like some primitive little primate scurrying between the stomping legs of dinosaurs, doing my best to hustle a few scraps while not getting flattened.

At least at first. It didn’t take long to see why the mighty reptiles are extinct and we evolved into the ultimate apex predator.

When I actually started duking it out with the big money players at auctions, negotiating deals directly with banks and mortgage servicers or fighting foreclosure lawyers in court, I realized these lumbering dinosaurs didn’t stand a chance against me.

Not because I’m some sort of real estate ninja, but simply because I have two insurmountable advantages in my corner that the “big boys” could never match. And you’ll have these powers as well, regardless of your starting skill level.

1) The Power of Focus. All the big players, from investment fund asset managers to the bank reps themselves, are working hundreds, if not thousands of deals at a time. There’s simply no way they can give each investment the hands-on research, evaluation and shepherding it requires. There aren’t enough hours in the day. So either they’re delegating crucial details to less experienced assistants or they’re skipping the minutia all together.

Contrast that with a nimble entrepreneur like you, who will only be working one, or at most a handful of deals at a time. Unlike the overworked big companies, you have time to manually check the comps and not rely exclusively on 3rd party software. You can drive out to your prospective properties and see them with your own eyes. Walk around with your home inspector and contractors and let them show you what they’re talking about instead of just skimming a report in your office.

You won’t be sending out mass direct mail flyers, instead you’ll be engaged in long, detailed conversations with distressed homeowners, learning deep insights into the property, finding their pain points and building rapport. My goodness, you even have the luxury of actually reading the contracts you’re signing! To say nothing of sitting down with your lawyer face to face and going through your options point by point.

Time to take your time is something that money can’t buy and experience can’t replace.

2) The Power of Motivation. Not only will you have the luxury of taking your time to study carefully everything you’re doing and seek advice for things you don’t understand yet, you’ll be far more motivated to do so in more detail and more often than any big competitor. If you think that’s a quaint notion, take a look at the lenders you’re negotiating with or the other cash investors you’re racing against. Never mind the company’s reputation. Think about the individuals managing particular deals.

Despite their experience, these people are just employees of a large corporate machine. There’s no personal motivator to their work and investments, other than general professional pride and a broad drive to advance their career. It’s not like their money and reputation are on the line when they sign a deal, so where’s the pressure to go the extra mile? The only pressure they have comes from their management and partners, constantly pushing them to hurry up with current tasks and move on to the next Big Priority. Even if they’re earning commissions, they’ll still be ever conscious of the time they’re putting into a particular project. The urge to wrap things up fast and move on to something else, no matter how much they earn, is always at the back of their mind and sapping their motivation.

Compare that mindset to your hunger. You’re not a corporate equity hunter working by the hour or for a cut of the harvest. You’re hunting equity to eat. For professional survival. That means you’ll dive into every detail of a deal and do whatever it takes to minimize risk and maximize profit.

And since risk management and return on investment in this business all comes down to who is willing to put in the most time to gather more data on a property, you’ll have a vast advantage in every deal. A hungry amateur with the time to crunch the numbers and the passion to learn will always outperform the busy, distracted professional who just needs to hit some minimum performance metrics every quarter to keep the boss off their back.

While a lot of people use the terms interchangeably, “bringing properties to market” and “fix and flip” are two separate niches, each with their own unique strategies. We’re focusing on the safer rehab of buying off-market properties and unlocking their equity by bringing them on-market. Here, we find homes that are in a livable, if not quite sellable state already, where the main problem is that they’re occupied by “distressed” owners that don’t have the means nor interest to sell the place or rent it out.

Our goal is simply to get the properties up to selling or renting standards as fast and cheaply as possible. Yes, some strategic and precise “rehab” work is always required. Minor stuff such as fixing wear and tear issues, worn carpet and outdated appliances, and then enhancing curb appeal through quick landscaping and paint jobs. But we’re not trying to create new value through significant renovations, only maximizing the home’s current value in the most cost-effective way possible. While there are some exceptions, as a general rule of thumb, if you’re investing more money into rehabilitating a property than you spent acquiring it, then you did something wrong.

This whole process is not as “fun” or “sexy” as buying dirt-cheap damaged properties and nursing them back to life. Instead of tiling a bathroom or knocking down walls, you’re creating value by poring over Excel spreadsheets for hidden equity and negotiating with creditors for a cheaper payoff. No one is going to make a reality TV show about a flipper who spends 99% of their work day on the phone or glued to a computer screen. So I hope you aren’t looking for fame in this business, but you can at least take solace in the fortune.

When you’re purchasing existing equity at a discount and bringing the property to a sellable state, instead of trying to create equity through new construction and renovation, then you’re taking on far less risk. Maybe your per-deal rate of return is smaller, but your overall business will flourish. You can make smaller but safer deals far more often and compound your returns in no time at all. No offense to the amazing fix ‘em and flip ‘em entrepreneurs out there that make it work. I admire what they do, but that niche isn’t for me. I’m not that sort of risk-taker.

I don’t know about you, but I’ll stick to just rehabbing ok properties into good sellers, since we can do that faster, cheaper and more frequently than someone who’s fixing up disaster properties into great sellers.

The Ultimate Step By Step Guide To Off Market Real Estate

3d book cover