Live Coaching call w/ Accredited Investor Lawyer

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Any lawyers out there – simplepassivecashflow.com/lawyer

John used to be in our Incubator group and now in our Mastermind

Remote Investor Incubator & eCourse – SimplePassiveCashflow.com/incubator

-Professionals looking to build your network with others on starting this journey to financial freedom
-11 modules in a closed membership site plus 2 bonus modules and download kit
-Bi-weekly Zoom Video calls (Plus all past turnkey rental recordings)
-We walk you through best practices for Tax and legal so you acquire your first remote rental in our 5 month program
-Staffed membership coordinators for extra support to get over the sticking points and to connect you with the right people in the group (if you are shy)
-Access to our ever-changing rolodex of top turnkey companies, brokers, property managers, and insurance companies

0:41
So tell us a little bit about yourself. Um, we met like about a year, year and a half ago, but you know, just just sort of people listening out there. Maybe cut them just give them a sense of you know where you’re at. So when we go through your personal financial sheet and your mindset went through this coaching call they can kind of, you know, certain people will resonate with this. Yeah, sure. So thanks for having me on. So yeah, we did meet about a year ago at the time, I was just so I’m a lawyer by trade. So at the time, I was switching jobs from, like a big law firm, so more like intense work to house positions. So that kind of after law school, I did, like five years at a big law firm and that’s like a very intense 80 hour a week job. So you don’t see much of friends, family and all that. So trading your time and and all that it gets it gets that, you know, brings you down. And so I started listening to podcasts maybe three years ago, and then I came upon yours probably two years ago, on six months before we met, and then so just educating myself and why don’t I get kind of out of the rat race, that whole mentality like everybody does, and reading rich dad and all that, like it’s not but I knew I couldn’t really I didn’t have the time to spend on investing other than listening to podcasts and reading books. There, but eventually I found once I made this switch, job wise, it freed up a lot of my time. And then kind of alongside with that I on the family fun I like, you know, had a kid and started to settle down more. So then it’s starting to be mobile, you know, sustainable environment like I’m not. I wasn’t like, you know, stuck chained to my desk per se, but I still wanted to pursue investing more seriously, you know, about a year ago. So then I’ve been since then we’ve been kind of talking about getting my first turnkey property. That’s something we’ll probably talk about today. And so that’s kind of my background, you know, having the high wage, but, you know, now time constraints with family and then also just having to grow my portfolio organically. That’s, you know, that’s my position.

2:45
So when we first started, you had written like little Memoirs of a lawyer thing for me. What were some of the I thought that was pretty powerful. I didn’t know that’s how it really was in a lawyer. My journey was You know, being a construction supervisor, that’s how usually engineers start out, work some of the best stories that we can throw a teaser in there, and they’ll link up the article that you put together for me kind of here.

3:12
Yeah, so it was, I mean, it’s when you get to law school, you can go a couple different routes, and one of the more popular routes to pay off like yours, you know, we have like, at least 160 in debt is a common number, like 60,000. So and, you know, for me, like it was even more than that. So, you know, you try to get high paying job and they call like, a big wall job. And these are the firms that you know, it’s kind of like the equivalent of you know, high finance type thing. So, for me, it was like representing like, these big m&a guys private equity guys who you know, they’re working also 80 to 100 hours a week grinding and but you’re like, even you know, you’re servicing their needs. So you’re on call all the time you don’t see your friends and family and you can’t really make plans, you know, so it becomes frustrating on a personal front but also like, you can See the partner track. And that was something that really just to satisfy me, you know, you see guys who kind of get the golden handcuffs mentality you come in, you’re making, like I think starting now is even higher, but it was something like, I think currently is like 180,000 to start so you can imagine like, they’re paying you that money much money with zero experience other than going to law school like they’re gonna pretty much only own you, right? So like, you’re sitting there like Friday night, you know having dinner with a family that, hey, this weekend, we got a deal coming in, you’re done like you had come in. And it’s like that for like, you know, and then you don’t know when it ends, you know, I’ve taken multiple trips where, you know, I just go like on a four day binge, like up to another office and you’re just working 24 hours a day, and it’s really high stress. It’s not just like being there and like turning paper. It’s like, it’s very high stress. Like, I’ve never actually had to go through that kind of like

4:51
stress. Do they ever like I mean, when I was at my job, like, I was telling my wife the other day, like, you know, they would tell us Oh, that’s pretty poor planning, they will literally say stuff like that and they just like be super mean to you. And yeah, that’s that’s horrible leadership. Right on the farm Lucius was initially just talking to me like that. But yeah, no, that’s not

5:13
you know you can imagine like a stressful environment that’s exactly the stuff that happens to you right like not only dealing with like the work itself and then like not being able to see your friends family then once a while like people get like testy, right. Like, I was fortunate not to have too much of that, but like, there was some times where you’re like, you know, there’s some clashing and then you’re just like, dude, like, now you just hate your life, right? Pretty much just miserable. And like, I can’t leave you feel the sense of like, I can’t leave, right. So it’s like, I have this deal that’s there. Like it’s gonna lead me to my desk for the next two months, right? And it’s like, Oh, great. And and now I’m like feuding with somebody on the team. It’s kind of you know, that happens. So, I mean, it’s, it’s tough, like emotional. I mean, just talking about in the abstract, it seems like okay, it’s fine. But like, one of the things I think I mentioned, that article was like, we were dealing with a closing or something for a deal that didn’t work out for like Two months. And then the night before, like, the, the partner I was working with, and he’s like 20 years old. I mean, like, and he’s just like, you know, how can you like we’re like the smartest. Like, we think we’re the smartest guys in the room, but there’s like a client there who’s like, he slept like four hours ago. And it’s like, 2am now and he’s gonna wake up in the morning get paid like 10 million. And like, I’m gonna have to close another deal tomorrow night. And he’s like, this is like, not the best career to get into. But like just hearing that from somebody who like you think made it right. He’s making probably like, one 2 million a year or something, which is great, but he’s like, he’s working 100 hours a week all the time. And I always go into that stress. I was like, Why? Why not beat the client? Right? That’s, that’s just something everyone would probably think about. But it’s not easy to do that, of course, but sometimes, like I had the opportunity to think outside the box because I’m younger, you know, I don’t want to get down that road where like 20 years from now I regret everything.

6:50
Right, right. So I’ve got your your personal financial sheet for those of you listening in, or watching on YouTube little follow On the visual aid, I got the personal financial sheet. So currently you’re making about 13,000 a month, which, but how much was it back in the day when you’re at that crappy job much higher?

7:14
It was higher. So it was, um, it’s probably and see, this is like 140. Yes. I think it was like, like 16,000. So,

7:25
yeah, see some 16,000 to high 12 Do you notice the difference? I mean, yeah,

7:34
yeah, you do. Okay.

7:37
Yeah, I do. I mean, like, back then you’d like used to seeing like a big paycheck and you’re like, oh, man, like, Great. I’ll use that someday, you know, but now it’s like, oh, I want to use it for investing. It’s like, Oh, well, it’s not that much. I have to save some of it for you know, the kid and the wife and then you know, the rest of it. I guess I have to try to figure out how to best it.

7:56
There it is on on cue in the background. And that’s the other big thing right? You lost the secondary income to win. Yeah,

8:04
that’s another thing. Like my, my wife was in the same profession as me. And then once we have kids by a year and a half ago like she stopped and so you can imagine we were saving putting away a lot of money and then we end up getting you know, house here in California, which is expensive real estate to live in. We can talk about that some more. But that was all planning to have a kid and then she stopped working. So now we’re kind of like, in a more, you know, stable environment, just my job. But yeah, there’s not a lot being saved. So it’s tough.

8:35
Yeah, so dual income, no kids instagramming traveling all over the world went to single income. And then the student loans stayed the same. So yeah, let me see where that is. It’s under page three here. Somewhere in here. You’ve got about 2300 Hundred in loans per month? Yeah, what’s the principal on that thing? Or the total?

9:08
I think it’s the total. I’m not saying balance, right. It’s like, still got 170 left to pay. Okay. Okay. So the first thing, you know, I think we got this done when we just put this on the format, right? Or not different, but just the least as possible, which is a lot. Now we tried. Yeah, so that’s something that we started out talking like, immediately, a year ago, you said try to negotiate and see if I could get a longer term on it. Like for me, unfortunately, I was already like, in a weird spot with my loan where there wasn’t technically qualified as a student loan, like in terms of the government, they wouldn’t let you refinance into another student loan. So even if I found a better rate, I have a really good rate, right? Like, although you say that doesn’t matter. Like that’s what drew me in three years ago, when I refinanced it, I gotta get a rate and then then I tried to refinance it last year. It’s a personal loan now. So but a lot of other guys out there who listen We’re trying to do this, like if you if you can refinance it like, I’ve talked to a lot of the major like student, student loan like lenders, and I think the best you could get is like 15 year term. So like, I’m still like, on, I like six and a half years left. So it started originally like 10 years. But I think like you were saying spread it out as long as you can. So that 2400 a month becomes like 1200. If you can, that’s feasible, our cash flow.

10:27
Yeah, most people will be focused on getting rid of debt. But that’s maybe not the best thing to do. Right, the cash flow for you to save to buy properties is probably more important. Yeah. Because right now, yeah, you’re making a ton, but you’re also spending a ton. Your net cash flow is you’re barely able to save 20 grand a year. Right. And you go on vacation that wipes that out? Yeah. Yeah.

10:57
So I guess one last question on the whole students thing is that

11:02
is that why, like you hear all these guys like refinancing and stuff like that? Is that the the new answer that if they’re refinancing from like a government subsidized loan to a private loan? Yeah, that’s right. Yeah. And that’s why there’s like, I don’t know my wife came out yesterday and one of her boneheaded friends was like, Oh, the, we will refinance all this this student debt and now it’s 3.5. And I was like, it doesn’t seem right to me. something going on here is that so that’s the thing that’s going on, right? Well, no. So

11:38
I think now like if you did it, I think that is right. It sounds like too good to be true type thing, right? Like something real is happening. So it starts at 7% thing around for government when you put all those different loans together. Yeah, a lot of these guys they’re getting it for like 3.5 for 10 years, or whatever it is. And that’s obviously to anybody seems great, right? But like again, like I didn’t realize that I should choose a longer term if possible, and you can always pay more. Right? Like, that’s something that I learned from you. Okay. Okay.

12:06
So that the ammeter ization schedule a lot shorter.

12:10
Yeah, as long as a 10 year, right. And that’s, that’s the problem. So it’s 10 year or something like you can go to as long as five years. Some people do that, like, they think like, Oh, I’m gonna go through residency in med school, I’m gonna get out and make 200 grand, I’m gonna pay it off in five years, but like, that five years, not guaranteed, right? You know, that’s the problem. And same with my job, right? When I got out of default five years was like, barely able to do it. And so that’s the thing, if you could, right, you would try to do a 15 year and I think they used to do even 30 year that’s like, that was pre recession now. But I think now 15 point along as you can get, and like, okay,

12:45
okay, now No, no, I see exactly what’s happening and I can rebuttal. But yeah, nobody, none of those guys ever listened to me.

12:53
Yeah, they go on to the rain, I thought was what I went to, like, chase the rain, because great I could pay it off. But that’s like you You’re paying still $2,000 a month. That’s like a whole?

13:03
Yeah, no. Yeah, I mean, the, for those of you guys, I mean, go check out my article, simple, passive, casual, calm slash debt. So it was in my articles in Forbes. And I wanted to get in Forbes because nobody listens to me, but they just have Forbes. But it’s not all about debt or interest rate. sophisticated investors don’t look at interest rate or debt, they look at your impact in your network. So in this case, if he can go for a longer amortization schedule, for free up more cash flow to invest in more assets, like rental properties, that will have a bigger, positive impact on his network at the end of the day. So also looking at this, you know, why is your cash flow so low? I mean, obviously, it’s here. It’s living expenses. So you live in California, and you own your own home. We can talk about that. A little bit here, I think. So I was like, dude, you gotta get why you read Why you bought bought a home? And so why did you buy a home? This like,

14:06
it’s probably half cultural and half. More than that. I mean, culturally like everyone around here like that’s kind of like all my friends and family that’s like what you do right when you get to this point in life, like so there’s that brainwashing aspect of it and then like, there’s like for me personally, it was like having a kid that was a big part of it. So once we knew I’d be like starving for a house. I think a lot of my friends and colleagues are doing that too. Like, no matter what you say, like renting is better type thing. Everyone has a sense of like, Oh, god, oh, my own home, right. So it’s kind of hard to convince anyone otherwise. You know, it’s weird. It’s just at least for where I’m at. And the people are like, my friends who are high pay professionals, whatever. That’s kind of what everyone’s thinking.

14:49
Yeah, yeah. I mean, you guys the article there simple passive, casual, calm slash home. If you guys want to take a look at that it’s better to rent in primary markets, like California, Hawaii, Seattle, all east coast. But you guys, you know, do the numbers yourself because numbers don’t lie. But one thing I did ask john here was like, one observation I’ve been having is the spouse whether the spouse is male or female doesn’t even matter if they have come from a place of financial scarcity, like they didn’t have too much money growing up. A lot of times what I noticed is the house is super. They cling on to that. Yeah. But I remember for you is kind of the opposite, right? I mean, but yes, I don’t know if that’s right. Right. A lot of this is like pseudoscience and I kind of am been at this for too long, but just a little observation of why that is. Because people want security and safety.

15:54
Yeah, I think that’s what it is. And I mean, it’s for some people, like some of our friends are good majority of them. They think that it’s like your California and appreciating markets. So they think that’s investing too, right? Obviously, we’re not like, trying to get in for the appreciation, but like, some people think oh, it’s like I’m putting money in a piggy bank growing at a greater percentage than my savings. And I think it’s safer that way. Right.

16:17
Majority think that way. So yeah,

16:18
and then they talked about like, the tax deductions and all that and like yet, you’re still paying 65% of that. Yeah. So But yeah, I think like still like, yeah, it’s more comfortable living for sure. But it’s like, you know, like, it’s a it’s definitely an expense in my eyes, like, you see, like, it’s a liability. It’s but for some people still think of it as like, Oh, I’m gonna buy this great asset.

16:40
So that’s another

16:42
mistake. I guess a lot of people make in my age in this area, at least. Yeah,

16:46
but what’s done is done. And you know, you got the kids so you can’t really move around. You got to mobile, but there’s enough breathing room here that we can, we can move around a little bit. Yeah. So that’s where we are, you’re able to save about 20 grand a year at most. But hopefully once you start to get going, you know, you can definitely put a turbo charge in the savings and maybe your pay will go up a little bit and your you might tighten the belt and expenses. So that’ll be that’ll be helpful. All right, so where are we at today? You know, your assets, how much liquidity do you have on hand? You’ve probably got like, right about 40 I told you to save like 30,000 for is like a down payment on a good B C class property. That’s like 100 grand. And then you’ve got a little breathing room 10 grand for other cash reserves. So you’re ready to go there. Let me see how I mean so your home is 920,000 and your current mortgage on that is six 600,000 about you got to lock in that you you go check that out.

17:56
I did I put that somewhere down below and I’m continuing liabilities are something I think maybe it’s not reflected. It’s on the it’s the extra hundred on my, on top of my student loan payment that’s 2460 under under uses of cash but down below, see 2460 above that? Yeah, right there. So that’s like I think it’s like 140 or so month in terms of healing payments, it’s like outstanding balance of 16,000 is it was a $20,000 healing because I got it right as soon as I bought the house so they were like, you can only afford $20,000 healing you know, at the time. Okay, okay. I used it I maxed it out for me like no, we renovated house we went all in and

18:39
you went all in and then some

18:41
Yeah, and then so Exactly. So very happy with real living but paying for it now. Right. But yeah, the he likes it interestingly 10 year loan. So like, that’s not something I’m worried too much about, you know, like 10 years from now student loan will be gone. I’ll have a lot more to pay it off. All that it’s not that much. But it doesn’t really give me much flexibility there. Right. It’s not like an open line of credit it’s I got three four grand on that I could use if I need to for emergencies, but I’m slowly paying down like $100 a month.

19:08
So that’s 2020 grand of this $900,000 house is just barely 5% Yeah, I mean what have you thought about going out and getting like one of these teaser long teaser rates for like 80% LTV? No I haven’t and then going out and because how much did you take out for the HELOC? 20 grand yesterday? Did you actually use I think we use all that at first but now it’s down to 16 days outstanding. Okay, I mean effect is that still the 20 but like you could probably you’ve got $300,000 here. They, they’ll usually give you 80% I mean, you could probably get a HELOC for like 150 200 I guess guessing and then you pay off the 1617 grand you check out that the site simple password Cash Flow calm slash key lock. Okay. But here in Hawaii, there’s like three or four banks that because we only have six banks here there’s three or four banks that are always competing for HELOC business. So they’ll give you like these one or two year. Key locks at like, like one or 2%. And what you do, it’s a little game and I have sort of the instructions there like you can hop from one to the other to the other. Yeah,

20:30
they have like the minimum hold periods. And that’s mine was at least, like minimum periods in which it has to be open or something.

20:37
Yeah, but I mean, you’re a lawyer figure it out. It’s not too hard. But the whole point is not not so much the rate, right? Because like I said, sophisticated vessels don’t care about the interest rate as much, but it’s now you have access to like, $200,000. Yeah, you just a fraction of that extinguishes. 17 grand. That’s a lot You got another big chunk to use to go out and buy? Let’s just see a 200 you could buy 12348 rentals to create $2,000 a passive cash flow a month. Yeah, I think that’s the that’s one of the next steps after buying this first rental because you can use your liquidity right now. That’s no problem. But yeah, put that on your action item list for sure. Okay, cool. Because there’s gotta be like the teaser rates in California, just look around for them or Screw it, just pay the 5% or whatever it is, whatever the market rent rate is. But the important thing is you’re getting on the 80% of the value of the available budget balance, right. I know I’m saying it wrong. But yeah,

21:46
so that is like if I took a HELOC, let’s say let’s just say for example, $150,000, he lock and then I use, let’s say 30,000. Next property, I’d be paying interest on a 30,000, let’s say a 5%, or whatever right? And then I just had to make sure the numbers work where when I run the numbers through my rental property calculator that at the end of the day, the cash flow can service that as well. So it’s positive. That’s the whole idea.

22:10
Yeah, I mean, you can even put like the 100 200, grand and HP and you’re making 5% still netted out, right? Obviously, I don’t really want you to do that, because that’s kind of putting too much eggs in one basket. But that’s just a theory. Right? That’s actually a good idea. Because you can, you can find find the sweet spot, like you’re saying, right, like, get a good chunk that you know, is gonna pay off in those nodes. It’s guaranteed and the rest of it is deployed. And just make sure it’s positive cash flow on these turnkeys. Right, right. So I mean, what kind of transition more granular stuff right now but you know, once you get your first rental, now you’re dead in the water right. So the next step would be to get the HELOC going. Just English that that first mon $17 in the current keylock. And then now you have way more money to play with Right at $20,000 one, it was like a sucker deal that’s like then giving you a free appetizer where you got to pay for two freakin entrees. I know. Yeah,

23:10
yeah, that was the same bank to that my mortgage with. So they’re like, we don’t care, you know like,

23:16
yeah, yeah. So the banks will actually the other banks are more than willing to walk you walk you by the hand and how to do this? Yeah, yeah.

23:28
Cool. That’s great man. I mean, I knew there’s a ton of equity going to be stuck in this place because it’s part of the deal. But I just didn’t know how to access it. I was like, I don’t know what they’re gonna do that he walked in. I didn’t really think too much about either too much hassle to refinance or whatever it might be called, where you get a HELOC to extinguish this.

23:47
Yeah, yeah. So that that’ll be I would start that in the next month. But right now the task on hand and what we’ll kind of talk about now is you’ve been doing some work on you know, calling around to some turnkey providers. I gave you a list of some guys I’ve worked with. And then yeah, maybe give us an idea where we’re at now and then we can kind of roll through this sheet.

24:10
Yeah. So I’m, I’m looking in the, in Alabama in Birmingham, that’s one of the two places that you mentioned. There, Atlanta, so I just kind of focused on this one from cash flow. And so then, I don’t know, this is probably over six months ago, I started calling some of your providers and and people you’ve worked with in the past just to get just to, you know, make a relationship. And then they started sending me properties, you know, and then I put them at analyzing money, your deal analyzer spreadsheet, which I think you have somewhere. And that was super helpful, like that thing allowed me to create data points and like, start to compare, right? Because until you start doing the analysis you like, you don’t know that 1% of the whole like with any of these properties look like? So I started doing that a while back and then I kept a log of maybe 4050 properties over time. time that I started looking at and just most of them just didn’t really make sense they didn’t cash flow under your at least your setup at least like in terms of they didn’t get the red minus more you know pie and then also minus all the reserves they just didn’t have positive cash flow so there’s only a handful that did and so now I’m at the point where and I was able to network with some people that you that you knew too and and you connect to me with it so one of the investors uses this current provider I’m pursuing their property under in Alabama and that’s where I’m hoping to lock down the next week or so.

25:39
Yeah, and that and that’s like one thing I tell every investor that books a call with me that like you got your job is to go find other passive investors where they’re, you’re buying turnkey rentals or looking for syndication deals. I mean, the the network is the most critical thing in your network work is your net worth is the same and I mean, I can only help you so far. But it’s the other relationship with other people that are gonna be there doing the same thing. And on the same level as you are critical.

26:07
Yeah, it’s really cool to invalidates everything, right? Because like, of course, like one success story when you’re telling other people it’s like, you know, you think like, oh, maybe Lane just got lucky or something, you know, like, people who listen to you probably don’t think that but like, if you’re new to the game, you might think, Oh, it’s just somewhere I lucky. But then once you start networking with these people, like, man, there’s a lot of people out there who are doing exactly what I want to do and what Lena said to do. And they’re doing really well apparently, because they’re just still chugging along, right, then find their fifth sixth property. So that really helped to like just kind of, just to sell it to me, you know, and then also now I can sell to others if I can do it, right. But

26:42
yeah, yeah. And sometimes I’ll try and find this guy who’s pretty. He seems really dumb just to make you guys feel better.

26:53
I mean, that’s what I got. When I got started. I was kind of like, Man, this guy can do it. Yeah, I can do I can be okay. Yeah, yeah, no. I think that’s, you know, whatever. It doesn’t get you motivated, right?

27:05
Yeah. For sure. Like people who like you think like, Oh, you gotta have a lot of money or whatever it is, like, a lot of it’s hustle, right? That’s what I’m learning like, I just need that’s a lot of it’s like having the time to hustle on the side like and do this. That’s the hardest part.

27:20
Yeah, I mean that part of it. I mean, that’s the guys signing up for like the one on one coaching. It’s like, like, for example that he loved we just talked about right, like, at the end of the day, sometimes it’s just accountability. And it’s just like, john Did you freakin go and like get that talk to the bank for five minutes? No, man, I didn’t you know, why not? You know, would you rather like work for another six years at 20 grand positive cash flow a year to get that hundred 20 grand. Would you rather spend 10 freakin minutes to go get that he locked and get 120 grand that way? Yeah, that’s great.

27:58
Yeah, I think people like It’s like, it’s the lack of Yeah, like we just don’t know, right? Obviously, you don’t know what you don’t know. And then also, like, you don’t think about it the way that you might write, you’re like, oh, man, that’s like getting another loan. I’m not ready for another loan, but you don’t realize that that’s a good debt. Right? Like in the scheme of things at least. So until you said it 10 minutes ago to me on the call. I didn’t you didn’t click with me because I’m still pointing into the hole. You know, like always thinking?

28:22
Yeah, I mean, that’s why the personal financial sheet is is so powerful, right? Because I can see the whole picture. Yeah. Yeah. It’s really cool. So yeah, so the first thing here, the purchase and sale agreement. What’s up here?

28:40
Yeah, so I can give a little Do you want me to give a little background on this? Yeah, sure. So um, so pretty much I talked to this specific provider and they have this pretty short form purchase and sale agreement. And I think you mentioned laying that like for you, there’s MLS deals and there’s not in last deal. So unless there’s a form right, that’s already like everyone’s It agrees to I guess if you bought the MLS so it’s more mutual here, if you’re going to the turnkey providers on learning is that they provide their phones, which makes sense to the seller. And it’s gonna be probably more favorable than in terms of being like skinny. So they have less reps or, or whatever representations or whatever they are saying that you’re gonna get with the deal. So it’s kind of like, I’m gonna, like I’m in the wild west, I need to figure out what I need to include in here that doesn’t look overly oily either, right? Like, I can’t just add on 20 pages to this thing.

29:31
Yeah, yeah. And it’s good that, you know, this is why I bring you guys on because a lot of the stuff I forgot about, but Yeah, it is. I remember talking about this in one of the first podcasts, the first 20 podcasts are all about turnkey rentals and this kind of stuff. And I mentioned, you know, you can buy properties three ways versus through the turnkey provider. And it is sort of the Wild Wild West you’re buying it. It’s so I don’t know if it’s MLS transaction. You know, I don’t know I’m not a licensed real estate guy. So I can’t advise on that. is not legal advice, but you know, you’re signing these like, kind of wild wild west one page documents that are probably more. They’re not very neutral, I’m guessing. But, you know, like I said, if you’re working with good people, you know, you don’t need contracts my opinion. Yeah, right.

30:21
And so long as I’m learning to like from, from this, like, it’s hard for me because the lawyer I’m gonna if I were representing me, you know, in this deal I would probably go harder on this but like knowing kind of the relationship that stay here and like, a lot of goodwill between the investor friend that you that’s a mutual friend who referred me to this provider, like that’s, you know, I can’t really rock the boat too much. You can only ask for the bare minimum like what I actually need economic terms.

30:48
Yeah, and I’ll kind of correct myself real quickly because I’m sure someone’s like head exploded on that one. Like, I do contracts. Don’t get me wrong. But like you said, it’s the relationship right? Because the thought is You’re going to be working with the sky into the future. And hopefully that person wants you to work with them that, you know you have a contract, but it’s like, hey, let’s treat each other fairly. And let’s go in with, you know, good faith that, you know, this is what I think we’re going to buy, what kind of property we’re going to buy, and this is how we’re going to work through the transaction to both come to a mutually agreements. Yeah, yeah. Yeah, so the other couple ways of buying a rental is going through the MLS, or getting a like kind of like a, you know, just going to getting a broker and then also the other way is like, kind of finding a more turnkey property yourself and getting another broker to represent you on it. In both cases, you’re typically doing that MLS transaction, we’re using the Moore’s this, whether it’s the state’s forms, very neutral document a lot longer, maybe even seven pages or something like that. But I mean, I In the beginning, I felt more comfortable with the MLS stuff.

32:03
Yeah, I mean, when I bought my primary residence is like 810 pages and my agent walked me through and I was like, Okay, I didn’t even try it. I didn’t negotiate any of it other than like, maybe the price stuff but, you know, that’s like when you’re a piano I guess primary residence you that’s what you expect, right? But here it’s like okay, now no one’s gonna protect me when I’m buying from the provider. So I really got to think about how this works around this issue, like I’m trying to figure out what’s, what are some things that absolutely should ask for, like I know about contingencies? Maybe we could talk about that a little bit.

32:38
Yeah, yeah. So some of the contingencies I like to use our our roll running down here. inspection, contingency appraisal, contingency and financing contingency. If you don’t, you don’t know what that is. I mean, I’m not a lawyer. So I really want to stay neutral here. But these are ways of kind of giving yourself an out out of the trend transaction. Obviously, you want to know that you’re financially solvent to get a loan. So you don’t have to pull that financing contingency because that’s not cool, right to go into the cycle, but we’re talking about when to go on good faith. You know, some some turnkey providers will will make you sign something saying hey, if this property comes up not appraising, which means like, let’s say you buy a property at $100,000, but the appraisal comes back at 90 grand. And there’s a difference there. So sometimes you write it the right you can back out but the turnkey provider may may have something well if you’re within 5% too bad, so sad, your stop. Yeah, or they may make you waive it altogether. And then you know, the inspection you a big part of this is going through the inspection, getting an inspector in there and making sure you’re not buying a lemon. And then that gives you an out, but also you gotta you know, on top of this, the big the big, overarching thing is like as a turnkey provider, you’re very you got turnkey providers lining up around the block. And I’ll tell you, like, when I started doing this in like 2014, going out of state, there, there were a lot of us, but now it’s ridiculous how many people are like, like, I can’t find cash flow in California? Well, duh. And everybody’s figured that out. It’s been a bull market in real estate for the last dozen years. And everybody wants real estate now. So I mean, some turnkey providers have like lists of people. And you don’t get to see a single property until you come up on up in the queue like three, four months later. And then they’re like, Alright, you have two hours to decide if you want this. Yeah, you know, I really recommend that that type, but, you know, that’s that kind of is how the game is.

34:52
Yeah. Yeah. So I find myself kind of fortunate with this one, like, I mean, a lot of goodwill obviously between the investor And this turnkey provider, I think she has like over five, six properties with this, this provider. But But yeah, like so on top of just like the trust part of it this, you know, I think they didn’t ask so this contract just like getting into the nitty gritty, they didn’t really ask for like an earnest money deposit like, just that that’s non refundable anything is actually there’s nothing like that in there. So I could technically walk away after signing this contract. You don’t want it to right. Of course, I’ve burned that bridge if I did it for no reason, right? Yeah. So I guess I just want to see like, what kinds of things I should try to push in now I’m trying to finalize the contract before I take on leaving, like traveling soon. So I’m trying to finalize before I leave so that I can get my inspector.

35:46
I think you will always be traveling when a transaction is happening. So that’s just how life it is. Yeah. But so I would do the instance inspection and the financing and I mean, the appraisal was up to But I think those those two are very common. Okay? But you know you’ve built you’ve built a rapport with the seller and in you know, he, your your fair guy that’s why I like you. Like you know, as long as things don’t come up too ridiculous I’m sure you’ll just go through the transaction or maybe even get like a little concession work on a concession but just you know that’ll just grease the transaction and that’s where I think if there’s only there’s one place in the whole process where one on one coaching or just signing up an hour of my time is super critical is during once you get that inspection report or even a little bit before getting an inspection report to coaching council then spectrum what you want. That’s that’s where experience comes in. Yeah, um, yeah, I was trying to try to write up like an inspection tutorial in the mastermind page, paid coaching page the other night and I’m like, I just can’t do this. This is more experience and feeling out the relationship and how much you can push. Right? Yeah. Um, so But that said, I don’t think that you can really get, you know, these turnkey providers will, will have a list price. And that’s pretty much the price Dude, you might be able to get $500 off, if they’re desperate, maybe even 1000 if they’re really desperate, but the price is the price, but you just have to go into the transaction and spend your $500 and getting an inspector to get you some evidence that the property is not up to par. And then you work the way through the transaction. One just one aspect is like, let’s say the roof, right? Say the roof has. It’s like a 15 year old roof and there’s only like, the inspector says, well, it’s kind of in bad shape. It’s only gonna last for a few more years. A remedial action could be replacing the whole thing or two Putting up shingles and spending like, you know, a couple thousand dollars on that. Right? I think in that case the you know these turnkey properties it’s not to say that you’re going to have a new roof right but you’re going to you should have a roof that should last you maybe about at least 10 years. So whatever it gets you up to that length of lifespan. So that may mean this situation that a couple thousand dollars of repairs and crews afternoon of work to get it up to that standard is fair game. That’s what you should ask on your inspection report. Or you know, when you come back to then go negotiation tape, I think that is fair. You don’t want to be one of these terms, providers that are turnkey buyers who think that that’s you owe them the world and the moon because you’re gonna get fired as a customer you know, and never want to work with you again. You want to be fair and reasonable, but But yeah, then again, you’ve never done this before. You don’t know what fair and reasonable is.

38:58
So like the way I approached it. Without knowing I mean, just learning through what you provided, like those resources you have on your page and stuff. What I kind of saw I further down there when they sent me, I asked for the scope of work on what he did to rehab this property. And then I thought to myself, like probably like when you have that initial conversation with the inspector, it’s probably like, mixture of these items are what they say they are. Is that is that the right approach? Like Like they say they have a new roof New Age back, I think like refinish floors and all this stuff. Like those are the high like, I think you have somewhere in your page. And those are the biggest capex expenditures.

39:33
Right, right. Like plumbing. Electrical. Is it the right electrical? Yeah. All that kind of stuff. Right? Yeah.

39:40
Big, big dollar issues that might like screw you over in the long run when the cap x time hits you. Like those are the kinds of things I figured I would ask the inspector to focus on. Right?

39:50
Is that am I thinking about that the right way? Right and and this is super critical. When you’re talking to the inspector. You want to build up a rapport with that guy. Because it usually is a dude. And he’s usually want to find the older ones because I mean, that’s that’s in my opinion, like you can’t really tell who is the good ones are the bad ones. Yeah, you can go on Yelp and whatever. But years of experience, unfortunately reign supreme in that industry. But the more important thing is that you can talk to the guy. And he’s not just like, he understands that you’re just not another residential owner occupied owner, right, which are 99% of the characters. He works out there. You want to tell him say save the space of the report and don’t put any others garbage like, Oh, this concrete panel for the sidewalk is not level with this concrete panel or this point, still dangerous. You know, like you want the big stuff so that you can he can build up ammo for you to go to the negotiation table. But if he fills up that report with all a bunch of noise and junk, now you look like an idiot at the negotiation table. Right? Right. Yes. So he needs to be on The same page as you and I know you’re like, Oh, you know, john, I know exactly what you want, right? Like, you want the big stuff. And now I can focus in on that for you. And then, you know, maybe build the rapport enough to be like, Hey, you know, like if you were buying this as a owner on non owner occupied rental, like, what would the big things you would ask for? Like, would you buy this property? Now this is kind of on par with whatever you’re selling out there.

41:24
Alright. Cool. That’s good. That’s a good approach. Yeah. So I guess I should send that to him. Right, like the scope of work that the turnkey providers sent me like, send that to him, and then have a call and say, Hey, before you get in there, this is like, what I’m focused on, and then ask him that question, like, what would you focus on and see what he says? Make sure he’s thinking about it that way, right.

41:44
Yeah, yeah. And then, you know, we’ve talked in you saw that mastermind call where, you know, different nuances like, you don’t connect the turnkey provider with Inspector, right. You want to play the quarterback. A lot of guys, they’ll just say it Here, Inspector, here’s the phone and contact for the provider, right? Like not to say people aren’t going to do, you know, are not dishonest, but you know, that’s a good situation where you have conclusion behind your back. So try and, you know, tell the turnkey provider say, hey, when are you busy? All right, Tuesday at eight o’clock it is and then you call your Inspector, right? Tuesday, eight o’clock, be at this place, talk to this person. And then minimize all that. This is how you do this without ever flying. They’re just doing it smart. But again, at the end of day, you got to trust professionals. Right? And you know, it’s kind of a shame that this this guy is so critical. You’re only paying like 300 500 bucks, right?

42:45
Yeah, yeah. So yeah, that thing that was really important I think this guy was I end up choosing someone on the on a list of one of your like, referred providers had to, like send me their vendor list. When I had a call with them, I don’t know eight months ago, I haven’t found a good property through them yet but this guy was on that list and then the investor friend refer this inspector and same with this provider. So it’s like I got enough objectivity that I’m not worried that it’s just someone this providers paying off right? So I was able to book discounts and more confidence and then I just need to talk to him.

43:22
Yeah, talk to the man right? relationships is important.

43:26
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44:30
Well, that’s a light bill.

44:37
All right, so moving on to item four here property management, right.

44:43
This one was you want me to jump into this one?

44:47
Yeah, sure.

44:48
So this one’s a little tricky for me because I think a lot of

44:53
a lot of the providers, you know, if someone’s been looking out for providers, a lot of them do in house, right? And so there’s that whole argument like is Are the incentives aligned or not? They’re selling you something just to get the property management on it or versus are they selling you something? And they want to make sure it does well, right. So then in my case, so that’s like the whole, like, it’d be in house property management or not for turnkey. In my specific case, this provider doesn’t have in house per se, but they have a relationship with two property managers. That’s kind of like part of their system is what I’m understanding as I talk to them more about into the investor fan. I’m learning that it’s it’s kind of like this provided uses two different managers puts a lot of his clients investors like, properties with them and his own portfolio, and then kind of was able to play them off each other and be like, hey, not playing law, per se, with the Hey, this guy’s doing it this way. Maybe you should try it like this just to get the best out of each of his two property managers. And he’s selling that as part of the system to me, so I didn’t understand that at first, I think I talked to you earlier about in the process about bringing your property managers that you had recommended. But then as I raised it to him on the call, I think that kind of got the sense that he was saying, and then I talked to the investor friend later, like, you don’t get his guarantees and his work product, his stamp of approval and hand holding afterwards, if I go with someone outside of that his world, the property manager, so he can’t really like, he’s like a cost control is a big part of what I’m selling you. So like, if I sell you a good property as it is today, I stand behind that work. And then I’ll continue to service it with my teams at a cheaper rate than you would get if you went with someone else outside other property managers, because I guess he’s saying to flex a little bit of muscle, because he has so much, you know, at stake with these property managers. So that’s kind of where I’m leaving, like, okay, I should probably use who he recommended as opposed to going with your guy, but it’s still like, I want to make sure that seems to be the right choice for me at this point. But I kinda want to get your thoughts on like this whole how this whole thing works, and maybe it’s helpful for listeners to because I feel like there’s different ways that this property management stuff works with turnkey providers, like they’ll have it in house. They’ll have it way, my situation is where they outsource it, but like having some kind of control over, and then they can go a completely third party like I just pick my own like I like if I went with yours, and then there’s like levels of accountability there, right?

47:12
So this guy, he’s referring to a couple people are those people in his company or? No, they’re they’re outside his

47:19
company, but he owns he says he owns a large portfolio of properties. And he like splits it 5050 with each of those guys. So he’s able to say like, he has some power over them, and he refers to each of those two. So he’s kind of like saying, like, hey, they’ll listen to what I say type thing. And also, like he says something about like, having his own crews like being able to do like smaller things, right? Like, if AC goes out, for example, here’s like, if an AC goes out, instead of a property manager, just calling an AC repair guys. 150 bucks says come and look at it. He can get his own crew to be like, because I copy him on work orders I have to the property manager, right. And then, and then this tracking provider would copy and he’d be like, wait a minute, let me see. Just go send my guys out there, I pay him like 25 bucks an hour anyways, they’re on my payroll. So they can look at it and they’re on my rental team so they can look at it and fix it if they need to in like an hour and then also spot other things on the property that might be wrong. And then like that way he can keep a pulse on the properties. And from what I understand, the investor friend said that system worked really well for her like she has, like over six properties with him. And he’s, you know, it’s been working really well that way.

48:27
Well, I guess one thing, like the turnkey providers, I don’t like using their property manager, I feel like it’s too much power conflict of interest. Because what if that property is a piece of junk? Well, that that in house property management is going to kind of hide the dust under the rug for you, right? Because you want to be able to have a third party person being telling you when you want to buy another property from this guy. You want to ask your property manager like Hey, is this a good area is even good property right? So that relationship is is key, and then the asset to you and you kind of for gold that when you kind of work with these collusion type of I’m not saying it in a bad way but and of course, there’s I’m sure there’s kickbacks and all that kind of stuff happening to you. But at the end of the day, if these guys give you the level of service you’re you’re wanting that’s, you know, I have no problem with that. That’s just it is what it is. I don’t know. I haven’t been in the conversations you’ve had, but based on what you tell me, I would maybe it sounds like I’ll just try them out. I mean, right. Yeah, that’s, that’s how I’ve done it. Like, just try them out and sort of what makes me fire them is like when I get these ridiculous like $800 Plumbing Repair, that’s just a freakin leak. And what I can and on is like, what is the hours of the work order? If it’s 12 hours to fix a toilet leak? Goodness gracious, like, what do you guys doing? Like watch a TV on my couch and like there’s tool you know, What the heck was patty cake all day long, you know, trying to get my toilet unplugged. And sometimes it’s ridiculous, right? And that’s when I move. And that’s when your network is so critical that then you can ask your your buddy, like, Who are you using at that point? Okay, yeah, that’s it. I mean, I would say, I would just say just try him out, please kind of put you in a hard position, right? He’s like, hey, john, like, Look, man, I really suggest using these guys. And you know, just to kind of grease the transaction a little better. Kind of like, Alright, well, we’ll see how it goes, you know? Yeah, that’s true. But then I again, I did have my guy go check out the property for you. So, you know, obviously, that’s time out of his schedule. I know. Right? So yeah, but he gets it. You know, my, my guy gets it. He does it for a lot of my clients too. So it’s, you know, a lot of my guys will go with him too. Yeah, but

51:01
Yeah, so that’s why I figured like I didn’t that was the sensitivity to where I like after I talked to your guy who’s a good guy, like I didn’t, I can, you know, it’s just tough to be like, I took someone’s time, and he did me a favor to look and say, you know, this looks good. This property looks good to buy, you know, give me a thumbs up there. So like, I think I’ll have to have a conversation with him probably, and just let him know, like, this is how the system is working with this provider. And then just let him know, like, hey, you’re like, anything else has provided your online top of my list? I want to work with you. Right?

51:31
So yeah, yeah, I mean, I guess I think with 70% certainty, you will be calling my guy in the next three years. For something else, right. I don’t know. Maybe, maybe send them like $100 gift card or something like that. Yeah. You know, if anything, maybe in the next property, he could, like, you know, do a drive by for you. Yeah,

51:56
that’s something anything outside of this kind of arrangement. That’s what I’m learning, right. I’m obviously My first time like even doing this out of state thing, so it’s like, you it’s it’s you’re juggling a lot of different pieces. And I’m like, man, I, like have too many wheels in motion. I just don’t want to like be wasting people’s time. So that’s a good idea like I should. I should you know anything outside of this system. I feel like, obviously, he’s the one to work with. But also like, I should probably talk to him and let him know how much

52:23
another idea I had, like when you actually head down to this place because you’d never you’d never been to Birmingham, right? Yeah, you don’t need to and there’s not much to see out there. But, I mean, if you ever went down there, I was gonna say, well, maybe you take them out to lunch. But you know what, like, a lot of us guys in real estate, we don’t want to have frickin lunch. I guess time is more important as like the father us, you know,

52:47
he’s gonna take that as a more of an offensive. And I’m not gonna,

52:50
you know, like, I mean, I’ll say here, right? Like, you know, people come to Hawaii. And I’m like, Look, yeah, you sign up for the hoodoo pipeline come with DeGeneres. Invest with me. Lunch at you, you know, we’ll have a call, well, I can wash my dishes and like, you know, pick up after my dog in the meantime and do something else. So we have a 15 minute conversation, but the time is valuable, right. So that’s why my idea is like giving like a gift card or something like that. Yeah, that’s good. I think a lot of people are just like, I don’t know what, where they get their manners from, but they’re just like, Oh, it’s a favor that I get to take them to lunch.

53:30
I can buy my own lunch, you know? Yeah.

53:36
Nice, but just, yeah. So it sounds like a good idea. And then I got a Yeah. To see what the property management agreement was with my turnkey guy. So

53:48
cool. So insurance is an excellent what’s

53:50
going on there. So I haven’t started on this road. yet. The investor friend mentioned that she could give me her contact. But I also wanted to know if you had someone and like at what stage Right like I know you obviously have someone but like what stage do I when I’m dealing with all this other stuff exciting the contract game Inspector? And when do you engage the insurance person?

54:08
Well, you might want to do it right after the purchase and sale agreement is done because then you give them the address and then they you know, that spreadsheet, that analysis spreadsheet, right? That’s when you start those are all guesses still, right? Like I can get like a certain percentage of the purchase price right? Now you go to the address to the insurance guy and say, Hey, give me a quote. So I can fill in that with an actual right I’ve got kind of some podcasts on that and you know, the the you know, in the Facebook group I really shy away from giving recommendations for tax legal and whatever because it changes from time to time. Yeah, I’ll leave it at that make sense? Yeah, there there are that you know, there’s there’s companies out there that definitely be watching out for their what they do. This is like this master lease. trick, or mass not massively master policy lists. So they’ll they’ll ensure all the small claims and like 25,000. But on the bigger one, they’ll kind of like, I don’t know what the word is, like subcontract the claim out to somebody else. So that’s something nasty you should watch out for. And that’s why they’re cheaper. Right? They’re gonna fight you extra hard on the bigger stuff, because it’s not you and them. It’s you, them and another third party. That’s really the one showing you, right? And then just

55:30
since I’m like totally new to this, maybe this is a question for me to ask the insurance person, right? is it and why is this going to be the same type of insurance that we’ll talk about like instead of doing an LLC, whatever to protect your savings, getting brella insurance to protect yourself if you’re starting out and it’s not worth? For me California paying $800 a month for an LLC out of state then maybe it’s better to just get a bigger policy. Is this the same? policy I’m negotiating? No, this is not an umbrella umbrella is on top of This one. So this one ensures this one property then if you would like, Oh, I don’t know, one recommendation, I do think it was nice to have on top of this, right? It’d be the same person giving me that quote, or

56:14
same or different. Okay. And then same thing with the tax to write because you’ve got it now you just have a placeholder for the taxes. Yeah, I had another mastermind member, he did all this calculations on what the taxes would be. And I’m like, you know, I’m not going to start to tell you what it is. Every city, every state, every county has a different calculation and it changes all the time. There’s no way of knowing, right, really, and then a lot of times, what you really got to watch out for is these properties, especially if it’s turnkey. Like this property might be worth 50 grand on Zillow. Right? And that’s why I say never look at Zillow, because it was a piece of junk a year ago, it was a crack house potentially. Right. And now when you buy it in two years, the market value could Double, or triple. And that is what the property texts are based on.

57:05
Yeah. And what and what I learned, like looking at this property specifically and trying to dig into how they got their tax them, that provider gave out, it’s like, you go on the county assessor’s website for this specific property right in whatever county in Alabama, and then you look, when you read the numbers, and they show you like property taxes over the years, it’s only like a certain assessed value that gets taxed. And I don’t even know how to come up with that number. It’s like some percentages, like it was something like 5% of the total purchase price. And then they tax that assessed value, like at point 05, or whatever it is, I can’t remember, but then they get their tax from there. And so you kind of see the trend over time, but those those percentages change, right? Like over time, it used to be 5%. And now it’s 5.5%. And then the assessment changes. So it’s like, it’s hard to tell by looking at Zillow and be like, it’s double the value. Like, you know, it’s gonna be double the value when I buy it. But then that doesn’t mean that the assessed value is going to double Right. Yeah.

57:57
And what what I mean, like the calculations get like are really coming Using sometimes like 27% of the 15% of this state or like, of this of the land value 5% of the land value, but 95% of the property value, you know, it’s like all these weird things. Yeah, that but on the analysis spreadsheet, I think it’s like set like two to 3% or something like that a purchase price is usually what it is. But when you’re looking from like, like Chicago, I think it’s a big tax state for Alabama is very lower taxes, I think it’s mean on my properties, like hundred thousand dollar properties. I think I might even pay on like, 1500 a year or something like that. So yeah, this is all like the detective work, right? That you have to do while you’re in due diligence on the side of doing the inspection. So there’s a lot of parallel paths going on. Right? Um, but it is forgiving, right? I mean, yeah, you totally screw it up. And you know, maybe that’s just an extra thousand dollars a year right? Not gonna. It’s not gonna make not gonna ruin everyone’s day. At the end of the decade, yeah, to chillax about it, just know that it’s a head and shoulders above the stock market, right?

59:09
Yeah, for sure. So, financing, well, maybe for financing, it’s pretty plain right? Like I talked you, you had some lenders I talked to them got my dog Sam got pre approved. And then one thing I wanted to ask you is like, I think something on a podcast, you’re done with the lender talking about, there’s like this 2% cap for seller credits, closing credits. And so that’s something I was thinking about earlier on in the purchase agreement thinking about negotiating in because it doesn’t do anything to the turnkey providers. So for the example is like let’s say it’s $100,000 property, and I want to do I want to get the lender to finance the part of that closing costs up to 2%. I mean, I’m not saying that right, but pretty much I can get $2,000 that they can raise it right 102,000 now the turnkey providers Getting an extra $2,000 but now I’m only paying 20% of that, and then on the back end refund me 2000 of those dollars to my closing credits. And so I’m wondering like, what, that’s probably something that’s not even a big deal to the turnkey provider. Right. So if I asked for it, should I be able to get it?

1:00:17
Yeah, yeah. So you gotta, you know, like cuz this seller pay we’re talking about seller played, paid closing costs based if you’re getting a Fannie Mae Freddie Mac loan, there’s different restrictions where they they have a cap on it. So for example, your primary residence it’s a really big cap. Yeah, I think you can put like four to 6% in it. So with non owner occupied I think right now it’s 2%. But this changes all the time. So talk to your lender. So the game here is like let’s just say you close on a property and or not, you have to purchase a sale contract for 100. You both both sides. Agree to 100 and then you spend like two minutes on the phone explaining what you’re doing here and saying, Hey, mister turnkey provider or Mr. seller, can you bump up the price by to, you know, two grand or 2%. And then just right in there, that seller pay seller will pay 2% closing costs for buyer. And most times, it’s a lot very logical and they’ll be like, Alright, cool, whatever for them. It really doesn’t make any difference. I think as long as it appraises, right?

1:01:29
I guess that’s the only Yeah,

1:01:30
and that’s where you have to have the understanding, right? Because now you’re running more risk of it not appraising right by 2%. They may want something in writing to maybe even waive the financing contingency because you’re doing that but I mean, this works wonders on primary residence, right? Because if you can, like say, let’s say the cap is 5%. Now, if you bought like a $100,000 home and now you Can credit back 5% you just raise the price to 105 and get back 5% and especially if like you’re going in with like a 5% down payment, like this is how you get in with like zero money. Right? And I don’t know if that’s exactly how it works for primary residence, but that’s, you know, that’s how it starts, the conversation starts. Yeah. And most lenders You know, this is where it’s important to work with the right lender because most lenders will just be like, What? Oh, man, you know, I don’t understand what you’re doing and this is seems like fraud to me, you know, they just they just don’t know how to do this stuff and they’re just confused. That’s why you never it’s like a big bang work with people who are competent. But that’s just you know, that’s helps a little bit right because especially when, you know that’s that may be the difference from you know, you got like I said, we have $40,000 of liquidity to go at this. You buy the first one maybe you squeak out at just $25,000 out of pocket, right where would have been like 27 or 28? Yeah, now might need a difference between of few months of buying a property earlier on the next one. Exactly. Yeah,

1:03:09
that’s a figure that’s important to ask like, why not? It’s easier to get if I can get them to agree, right?

1:03:14
Yeah, yeah, of course, this stuff all changes all the time, right? The lending requirements, and you know, what you can, what you can do with this stuff changes.

1:03:23
So I guess the idea is, if I could talk to the provider, or get into the contract, and then get it signed, and send it to the lender, then they could tell me, Hey, you can’t do this, then I can go back to the cell and say, Hey, they changed the rules. I can’t do this right and get it out early, rather than later when they’re already underwriting it.

1:03:38
Yeah, yeah. But any other questions from here that we skipped over?

1:03:45
No, I think you you hit them all. pretty helpful. So I just needed some action items. Obviously, I got to do but it’s all like in parallel. So

1:03:55
yeah, I think you know, kind of going back to the bigger picture. Got this closing on a property? that’s a that’s a big one. And then that key lock Dude, that’s a big one. Yeah. Yeah, we did a nice thing. The nice thing about key locks are like you can set it up, but you don’t have to use it right away.

1:04:17
Does it affect?

1:04:18
Just at a high level? Does it affect your credit? The bigger the? I mean, maybe not so much at all. Like, I don’t think so. Because you’re not tapping it.

1:04:26
Right. Okay. But I don’t know. I mean, like, if your credit score, as long as you have like a 650 or 680, you’re getting the best score. Yeah.

1:04:38
Because it kind of just caps out after that

1:04:40
tapers off. Yeah, yeah. And if you if you’re like at 620. I mean, you can do like these things called tradelines and just become an authorized user at somebody’s account and I think that bumps your score up 50 points or even 100 points. You can usually like, pay like three to 500 That’s a little trick to kind of get you over the dotted line. But you know, I don’t recommend holding on to these properties for more than three to seven years. So it may not even matter. But that definitely helps somebody like who is not qualified to get qualified for that credit score requirement. All right, you guys can learn more about that simple passive cash flow, calm slash trade lines, which is more for, like, if you were at like 500 or something like that, I think you need a credit score 620 or so let’s just say at 620. And you are like 590, I could put you as an authorized user on my credit card. All the state charge you, right? Because it’s like, there’s always a fee for stuff that you would pay about $500 right, but this is what I’m doing. Like, I let people go on my credit card, I use a third party. So they make it all clean and stuff like that and kind of protect people’s privacy a little bit, but you would pay the company $500 and they would pay me 300 to do that.

1:05:58
That’s cool. Get people over the bumpers Nice.

1:06:02
Yeah, well, I mean, that’s, you should actually, that’s actually a good thing that you might want to look into. You got a whole bunch of credit cards. Mm hmm. Like if you were one of those guys in your 20s doing all that travel hacking garbage. Now you got a lot of credit cards, but now you can like harvest a lot of money from you’re basically renting out your credit. Wow. And I mean, I can make like 1020 grand a year doing that kind of stuff. And that, you know, when your cash flow is no right on the bubble at, what, 20,000 a year, that’s, that might be the difference. That’s huge. Yeah.

1:06:37
That’s really cool. I never heard of that, does it? I mean, is there any risk to you, like privacy wise are these companies protect

1:06:44
as well, so they send you the credit card of the authorized user. And suppose that never gets sent out to the authorized user. So I’m always kind of thinking Alright, if I was authorized user and I really want to scam this other guy. Maybe I could call the clinic In a car company, but you never have the card number, so you can’t really get access to it. So maybe if they hacked something and got the card number, or find out where you live, then intercepted it. Yeah. I’ve also heard that, you know, if you go to the bank that somebody, this is why your network is so important. Somebody actually called the bank and asked them like, they went into the, you know, somebody went into the branch, you know, at chase or whatever, and tried to do this, like they they’re not gonna let them do it. Yeah. You know, because you’re the master on the line. I think it’s pretty smart. I think it freaks most people out. But you know, hey, that’s, that’s like anything in life, right? If it freaks people out, it must be something you might want to look into. Right? Like buying properties out of state that you never seen before. That’s crazy. Yeah. Who would want to do that or put 50 grand into a syndication deal. And don’t get any like certificate back or whatever. That’s crazy. Who would want to do that? That’s interesting.

1:08:02
I gotta look into that. Yeah. You said there’s a link somewhere now.

1:08:05
Yeah. And I and I post, like, all the money I make doing it. And it’s like really fun because I’ll get these emails and be like, Oh, you got you got you got somebody wants to buy your trade line. Like it’s kind of fun.

1:08:17
Yeah, it’s like getting a referral. Like, it’s that’s pretty cool.

1:08:21
Yeah, I mean from one you get, the more longer the age of the line. And the bigger the credit line sit needs to be a credit card or than two years. Like so like, if you have a credit line that’s like $5,000. And like a couple years old, you can get like 100 bucks every month. Wow. You can have two of these authorized users. But they have to stay on there for two months, and then you cycle them out and you can do it again. But like I have like cards like 2007 that’s like 20,000 $30,000 a credit those I can get like almost $400 Wow her So it’s to to authorize users at a time. Again that cycles out but you can make you know, just from a one card you can make like three $400 a month and that’s like a turnkey rental. Right. That’s a really good you know, with no money down. Yeah, that’s like a turnkey rental. Yeah, you don’t get the mortgage pay down appreciation or taxman is from it, and it is active income. Your thing I haven’t got I haven’t got any tax forms yet, because I just started doing it. But cool, you know, a lot better than driving Uber. Yeah.

1:09:30
Cool. Yeah. Any anything else you wanted to chat about before we get going here?

1:09:34
I’m just moving really quickly. I mean, this by benefits others but we’ve talked about in the past, your ideas on tapping the 401k right, like we talked about the past like that’s the second after the HELOC is probably the next big liquidity piece I have. So that’s like obviously take the 10% penalty and then the tax hit but drawing that over time would be another source for future turnkey rentals, right. Buy it.

1:10:00
Yeah, let me see where you have that. It’s a page. Usually, the first comp, right? Is this Oh, here, here, here here. Right? So the first question is, is this from an old employer? I know it is right? Because you left this guy a while ago. I mean, when I did it, I had about the same thing a little less, but I just thought it was better to just take it out and pay the taxes. But here’s the game that’s being played. And I’ve done this before on another coaching call, because you’re trying to stay above that next tax bracket, right? So you figure out where your AGI falls. And if you take this all at one year, you’re obviously going to go above that, that next tax bracket climb. So it’s a game of just taking enough out to stay under it. So I think for you, I don’t know figure out where you are in the tax brackets married filing jointly, or Because maybe if you you have your order of operations is to use this 40 grand first and then use the healer next the healer is going to keep you burning for a long time that that likely will get you do 2020 21 maybe. So you technically don’t need to take this out but I would rather take use this money to invest then the keylock if that makes sense because I feel I personally feel in my humble opinion that this is more of a wrist at this point of going down I don’t know what you have it in my life

1:11:45
expands I think.

1:11:46
Yeah.

1:11:48
But most people if you just turn into the the coaching call now and you’re not you haven’t been into this tribe for a while. You think taking money out of your deferred comp retirement. Plan is absolute sin. And we should shut down this YouTube channel and I should never be allowed to talk ever again. No. I mean, it’s like,

1:12:12
I talk to people about and they’re like, You’re crazy, but I even found it like it’s in like Tom wheelwrights book, right? Like, it’s there. Just

1:12:20
it’s in a book. It must be true, right? It’s on the internet. It must be true.

1:12:25
Yeah, well, it’s a free country, I can say what I want. So here’s what I how I would play it. If you kind of trust me here, I would take money out of the deferred comp first. Right that’d be the order operation for the next rental property. But I let’s just say I don’t know. I would be strategic and high. Take that out. Because right now your AGI is somewhere in that hundred hundred 50 range. Yeah, so let’s just say the next tax bracket is starts at 200 right? I don’t Know what it is you got to figure it out on your own and get your tax guy on board. That’s where I stopped I help you with the strategy but those exact numbers where you get your guys involve your team. So there’s this hurdle here right 200,000 in your like 150 or whatever, you have 50,000 of delta between there so of the hundred 38,000 of deferred comp, just to say in 2019 you take 50 out to get you right up to that amount no more and then 2020 you take another whatever to to get to that level again. So may take you three years, four years to take this whole hundred 38 out. Right But if you want if you if you’re not doing anything, you want to pick up another property or going to a syndication deal. Screw it maybe just take it all out or take it all in two chunks. Right. So that this is the game that’s been playing. Yeah, yeah. I mean like the

1:13:59
the worst The worst thing that could happen once you get into the next bracket, I guess it’s all incremental anyways, right? I just guess this depends on the percentage, john. So it goes from like 30 to. I don’t know, I don’t know the numbers right now. But let’s say it goes from 25 to 30%. Yeah, you’re paying 5% more tax on the incremental dollars above that bracket. Right. But you’re not that’s like the risk. That’s the worst that could happen.

1:14:23
Yeah, yeah. But But like, I think what it’s gonna be, it’s gonna be like, there’s no black and white way of doing it, you’re gonna have to get up to that amount, right? Say it’s 50 grand gets you to that amount and then take money from the headlock. Because that’s, you know, paying taxes on it. You’re just taking a loan from herself. Right? Right. If you need more money, yeah. So if there’s five deals that come up, now you’re taking from the HELOC after that, but then come 3020 now you can start seeing from when the deferred comp taking the withdrawals from there up to that the next tax bracket, right or doing or taking a Hilo? Yeah, well, let’s just say you exhausted all the Hilo, which is I don’t know how you’re going to do that that’s a lot of money. Then you just say Screw it. Let’s just take it all out go on the next tax break. It’s not the end of the world, like you said. But there’s a strategic way of doing this to optimize it. Right. Right. That’s what we’re all about being smart. Not working hard. Right. So cool. Yeah. I mean, you know, what hard work is this is only 10 minutes of hard work and thought going about it. So this is this is easy and simple. Compared to other stuff you do. But yeah, thanks for doing this. If you guys like that, more of this. Jon’s in our mastermind group mastermind. So if you guys like this stuff, we have calls on this every other week and get to meet cool people like him and build your tribe that way. But yeah, thanks, john, for joining us, man.

1:15:56
Yeah, absolutely. Thanks, Lee. Thanks for all the help so far. And this is hopefully this is helpful to someone it definitely is for me so cool man

1:16:03
Talk to you later. All right take care

1:16:09
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