Most real estate investors look at a potential deal, then look at the resources they have to work with—such as their cash available—and think, “I can only get this deal done if it’s within the resources I have available.” Thoughtful Real Estate Entrepreneurs, on the other hand, think “how can I negotiate a deal that makes good investment sense, regardless of the resources I personally have to work with at this moment?” In this episode, Jeff discusses how to upgrade your mentality from the scarcity perspective of “I have limited resources” to the abundant perspective of “I will find the resources once I’ve negotiated a great deal.”
When you enter a new conversation with a seller, you can go into it with one of two perspectives and frames of mind. The first one is the perspective that says, “Here’s what I have to work with, let me see if I can find an opportunity that works within my means.” Or Secondly, you can say, “Let me create a deal that makes sense and then I will go and I will assemble the resources needed to capture that deal.” Both ways are common. But the second way is far better if you want to be a Thoughtful Real Estate Entrepreneur. In today’s episode, we’re going to talk about how you can shed the perspective of I only have XYZ to work with, I need to make a deal within those parameters. So let’s play the theme song- we’re gonna jump right into it.
Welcome to racking up rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans. nor are we posting We Buy Houses signs, we’re just looking for quote, motivated sellers to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out Win-Win deals without agents or any other obstacles and buy properties nobody else even knows are for sale. I’m Jeff from the thoughtful real estate entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me, and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.
Thank you for joining me for another episode of racking up rentals. Show Notes for this episode can be found at thoughtfulre.com/e95. Please do us a big favor by hitting the subscribe button in your podcast app. It really does help fellow Thoughtful Real Estate Entrepreneurs like you to find this show. Now onward with today’s episode.
I have the pleasure of working one on one and in groups with coaching clients. I found myself recently having a similar conversation with multiple people. I realized this is actually something that really affects most real estate entrepreneurs and it’s easy to understand why, but it also can be a major limitation. I would like to see you shed that limitation. So, when I talk to my coaching clients, I’ve realized that in many cases they enter a new seller conversation, meaning a seller has responded to their marketing, in most cases. They are talking to this new seller and they’re entering the conversation with a mindset of: I have to make this work within the means I have available to me. That normally means an amount of money that they could put down on a property right and they’re searching for seller financing. But let’s say they have $15,000 to work with. So, the internal narrative in their mind says I have to make this work with a super low-down payment type of negotiation, because I only have $15,000 to work with, but if I can’t make that work, then there’s no deal to be had there. In other words, it is like they have put a filter on their ears and their eyes, a filter of $15,000 of resources. And that means that they can only see or hear paths that could possibly work with $15,000 of cash on hand. So, they are having this conversation, but their filter is filtering out any other potential scenario whether it would make sense or not; that would require more than $15,000 cash to make it work. Right? It’s like they’re opening up their backpack, they’re seeing that the backpack is virtually empty except for this one thing, which is $15,000 and they’re saying, “Well, I have to make it work with $15,000, or I can’t make it work at all.” What that means then, of course, is that they can completely miss any potential win that could come in this deal. That would require more than $15,000. Right? Because all they’re seeing are the opportunities in which they could do it with $15,000 or less but there could be huge wins to be had that might take 50 or $100,000. They completely disqualify those completely, discount them, and literally don’t even see them, notice them, or realize they were there because of this very dangerous filter that’s on their eyes and ears. We don’t look for situations that our conscious or subconscious mind deemed to be completely impossible, right? I don’t look for situations where I could, you know, step off of a rock wall and not have gravity take effect because that’s not even a possibility in my mind. My mind filters those situations out completely, because I think it’s ridiculous. Well, in the case of gravity, maybe it is ridiculous because it’s a law of physics, but in the case of negotiation and ways to put a deal together, that makes sense. If you are only seeing the opportunity that passes through your filter of, I only have $15,000 to work with, then you very well may be accidentally moving past, missing, stumbling over opportunity that could be done with more resources. Because as you say, “I don’t have those resources.”
So how is this relevant? Here’s what I would like you to practice doing. Practice, suspending your disbelief, about your resources, practice, forgetting about the fact that when you open up your backpack, all you see there is $15,000 and nothing more, let’s say that the resources in your backpack there are now irrelevant. Instead of worrying about what we could do with the resources we have available, let’s instead try to simply negotiate a deal that makes sense. Simply negotiate a deal that makes sense, where the seller would be getting what they want, of course, that’s what’s going to make the seller want to say yes to it. But also, where a buyer would get a win from this deal, as well. Now, this deal that you just negotiated, that is a win, might require resources that you don’t have right now. But we’re not worried about whether you have those resources right now we’re just worried about creating a deal that would make sense; then we can find the resources later.
You may have heard me talk before about the difference between being an investor in your mentality and being an entrepreneur in your mentality. Investors are very focused on their resources. The investor says, “I’ve saved up these resources, now I’m looking for a vehicle into which I can place these resources.” An entrepreneur, on the other hand, goes out into the world and says, “I have created opportunity and now that I have created in secured opportunity, I’m going to go and assemble the resources needed to capture this opportunity.” So, in other words, an investor is somebody who’s very confident in their resources, whereas an entrepreneur is somebody who’s very confident in their resourcefulness. In this situation, you very well may likely be bringing an investor mentality, you’re saying, here are the resources I have available, I want to place them into real estate, I have to find a way to place these $15,000 into real estate in a way that will only require $15,000. But the entrepreneur says, I’m going to go out and I’m going to negotiate a deal that makes sense and then I’ll worry about where the resources come from later.
I want to give you a quick analogy that I think is helpful. I’ve used this to explain this to my coaching clients recently as well. Let’s say that you want to bake some cookies tonight to have with your family; they are going to be chocolate chip cookies. So, you’re planning to bake, say two dozen cookies, so you have a few extra for the next couple days. You open up your pantry and you start getting the stuff out of the pantry. There’s the flour, there’s the sugar. Good, we’ve had some chocolate chips here, we’ve got some butter, whatever else you might need. Then you go to open up the fridge and go, ah, dang it. We don’t have any eggs… Well, in that moment, would you just throw up your hands and say, “well, we don’t have any eggs. I guess I can’t make the cookies…”? No, you wouldn’t do that you would say how do I acquire the missing ingredient to the missing resource that I need? Right? Your first thought is probably I will go to the grocery store and I will buy eggs. So, what is buying eggs? Buying eggs is trading what you have- i.e., a $5 bill, for what you need i.e., a dozen eggs and saying I will convert what I have into what I need. Thus, I will get the eggs that I need.
Another version of this story is you might say okay, well, once I do assemble these resources and get this last ingredient, these eggs, what will I have as a result afterwards? Well, I’ll have a couple dozen cookies. Okay, well, for whom would a couple dozen cookies create value? Oh, maybe there’s a person like let’s say, a neighbor, who has a couple eggs sitting around and has zero cookies sitting around, but they would like to have a few cookies sitting around instead of these darn eggs. So, you go and you knock on your next door neighbor’s door and you say hey neighbor, I’ve got a proposition for you. I need a couple eggs to bake this batch of cookies. If you give me these couple eggs that I need, I will bring you back eight delicious and beautiful still warm cookies in an hour on a plate, what do you think? Does that sound good to you? In this case, again, you’re taking what you have or what you’re going to have and you’re converting it into what you need by trading what you have for what you need, right? Again, you would never just open up the pantry and then look at all the ingredients, say, “Oh, I’m missing one. I guess we’ll never make cookies tonight. Maybe never again, because it’s going to take a long time to get some eggs, we’re going to go get some chickens, so they can lay some eggs so that eventually we can make cookies”? No, you say, “I will do what it takes to get the resources I need to bake the cookies.” Here is a very important point that you’ve heard me reflect in a few other episodes on this show – whatever you need, somebody else has it. It’s not like it doesn’t exist on the planet. You don’t have it; we understand that part, but it does exist. Somebody has what you need. The flip side, the correlating idea that is, is there’s somebody who needs what you have, right? So, somebody has what you need, and somebody needs what you have.
If you go out into the world, and you tee up a great deal, and that great deal is going to take $50,000 to close, not $15,000 you might look at that and say, “Well, how do I get it done?” There’s lots of different ways, right? You might be able to borrow money from somebody else who has money, but they don’t have a return on that money. You borrow their money, and you give them the return that they need. And now you’ve got the other 35 grand that you need to put this deal together. Or you maybe do a kind of a wholesale concept. You call somebody you know who is looking for a property, who has more cash available, and you say, hey, guess what? I’ve just teed up an amazing deal. We’re buying this property for below market value. We’ve negotiated this great financing. How would you like to come in and be my partner? Or, how about I hand this deal off to you so you close on it. At the end of the day, you have created a valuable thing, which is a deal that makes sense. Now you can figure out how to assemble the final resources you need to consummate that deal and to get it closed.
Here are my closing points, my summary and what I hope you will take away from this. Focus not on your resources, focus on becoming really good at making deals that make sense. Find those people have those conversations, understand your seller, solve the person, solve the deal, and craft a proposal that is truly a win for both parties. Then once you know you’ve got a deal that makes sense, focus on assembling the resources, but don’t limit yourself to what you think that you have to work with. That my friends is it for today’s episode of Racking up Rentals. Again, Show Notes for this episode can be found at thoughtfulre.com/e95.
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I’ll see in the next episode. Until then, this is Jeff from a thoughtful real estate entrepreneur signing off.
Thanks for listening to Racking Up Rentals where we build long term wealth by being a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.