Hey, it’s Joe Crump.
Three Successful Real Estate Investing Tips for 2021.
I wanted to pick something that may be a little bit different than you know, the sort of the
normal real estate tips and what’s going on, so I wanted to talk a little bit about
first, loans.
Don’t get loans.
Especially when you’re getting started.
Don’t go out and take out loans.
Use seller financing.
Yeah, technically they’re loans, too, but don’t use conventional financing.
Don’t use banks when you’re starting out in this process, or any other type of lender,
you know, hard money lender when you’re doing this.
Because there’s just so much risk involved when you do that.
Especially when you’re getting started.
Once you know how to make money and you know all of your expenses and you know how to value
property properly and you know how to put together a deal that makes sense, that you
know you can turn around and sell or keep and create cash flow, then loans are okay.
And even then I would you know, make sure that you have the proper cash flow to handle
them.
Because there’s going to come a time in your real estate career, I think it’s going
to come sooner than later, where the market takes a hit.
And you start to lose tenants and you start to lose value on the properties.
And if you’ve got loans that are more than the value of your property it can create a
lot of problems for you.
And I’ve seen so many people go through this.
I went through it back in 1991 when everything crashed for me and I was completely leveraged
out and I had a huge business, but I had a lot of leverage in that business.
I saw it happen again to a lot of the people that I knew that are investors back in 2008.
And you all know what happened during that time.
It’s probably, we’re going to see another year in that cycle probably coming up in the
next year or two or three years.
I think it’s going to come sooner than later, but we’re going to see another drop in the
market.
And we’re going to see people that are having to move out of their homes because they can’t
afford to live there.
So you’re going to not have the income that you were expecting on that property.
So make sure you build in a fair cushion if you do take loans so that you can maintain
those properties.
One of the things I saw back in 2008 down in Florida values were going up like crazy.
They went up 50% in one year between 2006 and 2007.
I saw people buying these $400K condominium buildings and they would go in and they’d
put y, 20% down, $80K down on these properties and they’d wait for them to get built and
the values would go up from $400K to $600K in the year that they were waiting.
So it looked fantastic.
The problem was the crash came and the values dropped down to you know, $200K, $250K. They
couldn’t sell them because they’d lose all their money if they did that.
They wouldn’t even have enough money to pay the loan off so they’d have to come
to closing with extra money.
And those condos only rented for $1,200 a month.
That wouldn’t come close to paying the monthly mortgage.
They’d have to come out of pocket to do that.
And a lot of them got easy loans and they weren’t able to make those payments.
So don’t do that.
At the same time during that time, I was selling some new construction properties as well,
but we bought in areas that were more sustainable so that they could buy a property for $120K
or $150K or $175K.
But it was a low enough price so that the market rent for the properties in those areas
was enough to cover the mortgage.
Even when the market dropped.
Then the only thing you had to do was make sure you had enough reserve to take care of
the vacancy.
Now, my vacancy rate in 2008 went from 3% across my entire portfolio to 20%.
That was a substantial increase, especially because I had a lot of subject to properties
that had mortgages on them.
Now, those mortgages weren’t in my name so I didn’t have that much risk on them,
but I didn’t want to lose them either.
I wanted to make sure I could fulfill my end of the bargain.
So I always kept enough reserve to make sure that I could make those payments during that
time.
And you’re going to want to have the same thing.
And be aware of the fact that you might lose that money.
Now, I knew what I was doing as far as what properties I bought, where I bought them,
how I bought them – all those things.
I had the experience.
So when those times came and I had the reserve, I was safe.
Now, if you do something with conventional loans where you work on the edge of your financial
capability and then a bad time comes like that you’re going to be in a very difficult
situation.
Or, and I’ve seen this happen even in good times, where values just didn’t rise enough
in order to protect an investor because they were counting on the values going up rather
than buying the properties properly in the first place.
And that’s what I did back in 1991.
I was able to buy because properties were appreciating like crazy in the late 80s in
California where I was working.
And I didn’t have any fears at all that I wouldn’t be able to sell those properties.
But that’s because I didn’t understand where markets could go.
And I learned a hard lesson because of it.
And I don’t want to see you have that same experience.
So that one thing that I’d really pay attention to in 2021 because of what’s going on.
Now, one way to replace it the second idea, which is getting zero interest loans.
Now, zero interest loans are not something you can go to a bank and get.
They have to be seller financed.
And typically they have to be from sellers who own their properties free and clear.
You can do it with people that have some mortgages on the property but have a lot of equity as
well.
And you can get at least part of the financing zero interest.
But if you can take a property, let’s say low priced properties in the $75K range, and
you can make payments on that property that’s principal only, you’ll pay that property
off in 10 years rather than in 30 years.
Just take for an example a 5% interest rate on $100K mortgage on a 30 year amortized deal
that you can get in a conventional loan.
If you can get zero financing on that same deal, you’re going to pay that off with
the same payment in 10 years instead of 30.
It’s a huge, huge difference.
30 years is a long way away, but 10 years will go by in a flash for you.
And when you own a property 10 years and it’s completely paid off, plus it’s gone up in
value plus you’ve got good tenants who’ve been making payments and you’ve been making
income on it over that whole time, that’s a wonderful, wonderful thing.
So start thinking about how can I get more properties with zero interest and buy them
and have them so that they’ll pay off and build my wealth in a much shorter period of
time.
One-third of the time that it takes to do with a conventional loan.
The third thing that I would suggest is completely different than financing.
It’s about automation.
Make your business an build a business that is almost entirely automated so you don’t
have to do anything and the people that you hire to do the work that the automation doesn’t
do will be a very small bit.
What I have done with Pushbutton Automarketer is – and you go to PushbuttonAutomarketer.com
to find the software, but what we’ve done with this software is build it in a way that
90% of your work as a real estate investor is already done for you.
Your marketing, your follow up, keeping track of everybody.
Going through that whole process, making it possible for the people that work for you
to work as a team and to have a process set up.
And systematize your entire business.
So that’s what the Automarketer is and you ought to go check out how that works.
Because if you can automate 90% of your busines that means the other 10% you or somebody else
has to do.
And it’s pretty easy to outsource about 9% of that 10% that’s left and leave you
with just 1% of the work that needs to get done.
That leaves you in a position of being able to work on your business rather than work
in your business.
That means you can sit back and you can look at it and make sure all the pieces are working.
Yeah, you’re still at the wheel, you still have to drive it, but everything else is running
for you.
And all you have to do is check the meters, check the speedometer, check the brakes, you
know, every once in a while you just have to make sure that it’s all going.
And you know, you’re still going to be involved when it comes to signing checks and you know,
signing the deeds and all those types of thing as well.
But that’s a very small and insignificant part of your business if you’re doing it
with automation.
So those are my big three tips.
There’s plenty of other things that you’re going to learn.
I’m going to be sending out more videos here in the future, but those are three good
things to be thinking about for 2021.
I wish you the best.
It’s going to be an exciting year no matter what happens in the market whether it’s
going up or whether it’s going down.
I think it’s going to be interesting.
And I’m going to talk a little bit more in some future videos about where the market’s
going and what we can expect from that as well.
Anyway.
If you like this channel, subscribe, hit the subscribe button.
You can hit the little bell and it’ll send you a notification every time I put out a
new vide.
Also hit the like button if you will and go check out my website.
I’ve got a mentor program, a six month mentor program where I teach people how to invest
and I work with you to help you build your business, ZeroDownInvesting.com, so check
that out.
PushbuttonAutomarketer.com is my automation system.
And then if you just want to get more details and more free information go to my blog which
is at JoeCrumpBlog.com.
There are over 700 training videos for free on that blog that I think you’d find valuable.
All right.
Thank you.
Take care.