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If you’ve ever felt like your lack of cash is holding you back in your investing efforts, this two-part episode series is for you. In this series, Jeff explains the concept of the five currencies we have at our disposal in real estate investing. While we are usually totally focused on the one currency we are most familiar with—the currency of money—there are actually four more non-cash currencies we can harness to buy rental properties. In Part 2, Jeff explains how all five currencies are utilized in the process of real estate investing, how to focus on Relationship Currency—the infinite resource—and ultimately how to convert Relationship Currency into deals.
Welcome back to part two of our conversation about how to use the other four currencies. So yes, that means if you didn’t hear part one, go back and listen to that. That’s episode 130 immediately before this episode, because it’ll make a whole lot more sense. And in these two episodes, we’re talking about what to do when you feel like you are constrained in your real estate investing efforts by your lack of financial capital. And in these episodes, we’re talking about the fact that there are actually five total currencies that are available to us in our real estate investing endeavors. And if you feel like you’re short on the first one cash, then that’s okay, because there are other ones to work with, as well. So in part one, we talked about the introduction of this concept, and here in part two, we’re gonna continue to flesh it out further. So let’s keep the theme song. And we’ll jump right into part two of this conversation about the other four currencies. 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. Hey, thank you for joining me for another episode of racking up rentals show notes for this episode can be found at thoughtful ar e.com/e 131. Please do us a HUGE favor by hitting the subscribe button in your podcast app. It really, obviously make sure that you don’t miss the next episode, but also sends a message back to the podcast platforms that help them spread this show to other people like you fellow thoughtful real estate entrepreneurs who are looking for these ideas and this community. So thank you for doing that. Onward with today’s episode. And as I mentioned, today’s episode is the second part of a two part series about the other four currencies and how to use them. So in part one, we talked about what I call the direct relationship capital method. And this is all about you developing relationships directly with the people involved in your deals, like for instance, primarily, the sellers, themselves, no intermediaries, no brokers, no agents, nothing like that. No wholesalers, you’re sitting face to face with your seller. And that gives you the ability to utilize the currency of relationship in your real estate investing endeavors. So I talk to you about the four other currencies that you might not think about all the time, right, the one you think about all the time is of course financial. And that’s the one that we tend to feel like is constraining us. But there are other four currencies as well. time, energy, relationship, and expertise. So we introduced those five total currencies. And we just sort of started thinking about it. Yeah, you know what, these five currencies are used every single day by all of us all the time, we’re constantly trading one currency for another. So step one is really just to identify, you know, what, there’s actually five currencies to work with. Maybe if I’m super worried and freaked out, and just all keyed up about feeling scarce in one, maybe we should focus on the other for themselves as well. Then the next thing we did in step two is we sort of took an inventory of the resources that we had to work with, and I gave you the visual of a piggy bank five piggy bank sitting in front of you, each labeled with the five currencies, financial time, energy, relationship, and expertise. And I lead you through a few questions that helped you figure out what’s the sort of account balance in each of those piggy banks, you know, is the financial one feeling a little light in terms of its balance, but perhaps the time bank account is filled with time because you have perhaps availability you perhaps have bandwidth to go and throw at your investing endeavors. Maybe you have a lot of relationship skills, maybe you have certain types of expertise. So you self assessed your own account balance within each of those five different piggy backs. And now today, what we’re going to talk about is just really understanding and recognizing how the five currencies are needed in success. For real estate investing, so investing in real estate involves, as you know, a lot of different activities, you have to find deals, you have to finance them, you have to build or repair the physical structures associated with those properties, you have to manage the properties and tenant relationships, and a whole bunch more stuff. And while, of course, every project is different in every project is unique. There’s a basic sequence of things that you need to focus on, right? Obviously, you don’t have to worry about management until you have a property that has already been built, you don’t have to worry about building a property until you have found the property that the structure is going to be built on for instance, right. So I like to think of this, like a series of dominoes. And you line up the dominoes in the order. That makes sense for real estate, right. So the very first domino is that you’re going to identify opportunity, when you line up these dominoes. And you knock over the first one, then it knocks over the second one, and the second one knocks over the third one, etc. And more or less, they follow a fairly predictable sequence. But when we look at the the different steps of investing in real estate, we can actually start to associate what are the currencies that are used and needed in each of these steps. So let’s just talk about the steps. First, here are six dominoes that I see generally being lined up and stood up in the following order. The first one is the identification of opportunity. Secondly, is the negotiation and the securing of that opportunity, right. So you find the opportunity, you identify it and then you actually have to go and negotiate and, and tie that opportunity up so that it’s yours to buy, then the next thing you have to do is you have to structure the deal, you have to figure out what series of numbers and dollars and prices and terms and all sorts of things are going to come together in a way that actually works, then you have to finance the property in order to close it, then you’re going to build the property or maintain what’s already there, repair what’s already there. And then once it’s all done, you’re going to manage it on an ongoing basis. Okay, so there’s six dominoes in a certain order. Let’s talk about which currencies are involved. In each of these six steps right now, to some degree, you could say they’re all involved in every step. And I think that that’s largely true, but let’s just kind of focus on the key things that have to happen at each step. Okay, so the first step, identify opportunity, the currencies you’d need, you’d need expertise, you have to know what opportunity looks like, time and energy to go and, and put the time and the work into actually finding these things, right, they’re not usually just going to fall in your lap, you actually have to go to them and find them. And relationship, right, you might be finding these opportunities, and identifying the opportunities because of your ability to form relationships with the people who are kind of the gatekeepers to those opportunities, of course, like the seller, and by talking to the seller, oftentimes you can identify different types of opportunity than maybe you saw when you were just kind of walking by the property on the outside. So identifying opportunity involves expertise, time, energy, and relationship. Negotiating and securing this is the second Domino. Negotiating and securing the opportunity involves energy, certainly, and expertise and relationship, negotiating and securing it involves a ton of relationship, in fact, and the better you are developing that relationship, the better your negotiated terms and price and everything will be the third step, structuring the deal involves a currency of expertise, you really need to know how to structure the deal you might this is where you might use your very technical real estate knowledge and your understanding of what a rap note is, versus a lease option versus trust deed and promissory note installment sale kind of concept, what it means to flip a property this is where you bring out your technical toolbox. So you have expertise and again, you have relationship to so to structure the deal directly with the seller, your structure will be dependent on what you can negotiate with them. And that’s very dependent on your relationship. As you go to finance the property, the fourth Domino, the currencies involved are financial currencies, obviously, that’s the one you’re already thinking about a lot, but relationship as well. In the case of seller financing, or any type of creative financing or creative deal structure. For finance, you’re going to need to have relationship with that person so that you can negotiate the right terms. Moving on to the fifth of the dominance building or maintaining the property, the structure that’s there, that’s going to take expertise. It’s going to take time and energy, right someone’s got to swing a hammer, someone’s got to put the time into it, someone’s got to organize the project and know how it comes together. And it often takes financial resources as well or basically always take some level of financial resources. And then the last one of managing the property, the currencies involved, there are expertise, you have to know how to do it, you have to be able to know how to handle the different situations, the technical side that people side and energy, it takes energy to manage a property. So as I look at this list, I look back and I see all of the currencies represented a whole lot, right? So if you were to look at your account balances now and say, Well, I have the most of this particular currency or these three currencies, I feel like I have the most of where in that process did those currencies most show up? Right? If you said, Well, I’ve got a lot of time, well, where did time show up? Well, time showed up in the step number one, identifying the opportunity time showed up in number five, building and maintaining it. And so then you might say, Great, that’s how I should utilize my currency is by I should focus on contributing as much as I can to identifying the opportunity and to building or maintaining the opportunity. But chances are, that when you were looking at all of the currencies you had, chances are, especially if you’re a listener of this podcast, especially if the thoughtful real estate entrepreneur approach resonates with you, chances are the currency that you felt like you maybe had the most of was relationship. And that’s the one I want to focus on. Because as I just went through this series of six steps, identifying the opportunity, negotiating it and securing it, structuring the deal, financing it building or maintaining it and managing it. The word relationship shows up the most, it’s the it’s the the currency that is utilized the most throughout the whole process. And that’s why we’re now going to focus on step four, which is diving deep on the idea of relationships, and relationships are the infinite resource. So what do I mean when I say that relationships are the infinite resource a relationship currency is an infinite resource? Well, what I mean is that relationship currency is not a zero sum game, there’s no finite amount of relationship, skill or ability that you can have. Now let’s look at the other currencies just as a contrast, right? If you have a bank account full of dollars, that’s a finite resource, if you use the dollars for something, they’re not available for something else, time is similar, right, we all have the same amount of time, every single day, we all have 24 hours in a day. Now, if you have chosen to allocate some of your time to other things, like a job, or parenting or exercising, or sleeping, or whatever it is, then you know, you have less time available, you’ve got 24 hours to work with, and you allocate it as you want, but it’s not really a renewable resource. expertise is also a zero sum game. But however, expertise is not something that you can create immediately, it takes time to build up that expertise, it takes reps, it takes practice, it takes energy and time, overtime to build up that expertise. However, relationship, on the other hand, is a totally renewable resource where there is no limit. Just because I have a lot of relationship with you doesn’t mean I have less relationship to give my wife or just because I have a lot of relationship with my dog doesn’t mean I can’t have also a relationship with my cat, you know, it’s like they say with love. Just because I love somebody doesn’t mean I have less love to give somebody else relationship capital is very much the same. And if you have some of the natural innate types of orientations towards being a people oriented person, or if you’re taking the time to learn some of the skills of having people skills and and being able to connect with people and develop rapport with them, relationship is infinite. And it’s very, very scalable. So as I look at all of your five resources, I look at this and I say wow, relationships shows up in a lot of places in the real estate investing process and it is the most infinitely accessible and non zero sum game currency that you possibly have to work with. So why would we not just double down on utilizing the power of relationship currency as As much as we absolutely possibly can. So let’s take a second and just dig deeper into your relationship currency. So I want to take relationship currency and just break it down into a few more specific things that you can help assess within yourself. Similar to how a few minutes ago, we looked at the different currencies, and you assessed how big your bank account balance was, in that piggy bank for each of these currencies. Now, we’re going to do the same type of thing. But we’re going to dig deeper and a little bit more granularly into relationship currency itself. So picture like a table full of coins sitting on them. And I’m going to list out some of the things that represent those coins, I want you to metaphorically figure out, could I pick up that coin and deposit it into my relationship, currency? bank account? Here’s a few things. Do people ever say, Hey, you’re really easy to get along with? Pick up that coin, put it in your relationship, currency piggy bank? Do people find you likeable? Generally, without you even trying? If so, pick that coin up, put it in your relationship currency. piggybank? Do people often refer to you as a leader? When you were a kid? Did your teachers call you a leader? If so? That’s a coin of relationship, grab it? Are people naturally confident in you? Do you inspire confidence in them? Right? Do they look at you and say I bet that person’s a do what they say they’re going to do? kind of person that makes me confident? Is that something that happens for you? Great. There’s a coin, stick it in your piggy bank? Do you feel like you can talk to people? Well, like you can have a common type of normal, smooth conversation? Do people consider you a good conversationalist? Perhaps that’s a coin, put it in, put it in the bank account? Do people feel comfortable with you? You know, when you show up? The way you are vibe and your your energy and your look comes across? Do people tend to feel comfortable with you? Or do they put their guard up? If they tend to feel comfortable with you naturally? There’s a coin, put it in the relationship currency piggy bank account? Do you feel like you communicate? Well, maybe have other people said to you before that you’re a good communicator? Maybe going back to school again to teachers ever say Yeah, you’re good communicator? Like they might have said you’re a leader? If so, that’s a relationship currency coin? Do you tend to make people feel good about themselves? Do they? Do you tend to make people feel happy when they’re around you? There’s a coin for you. Do people feel like they can relate to you? Right? Do people look at you and say that person’s kind of like me, or I can see myself in them? Or if you’re talking to somebody older than you, I can see that that person is me 20 years ago, does that ever happen to you? If so, there’s a coin. Now, I could go on and on and on. And that might get a little bit redundant and boring. But you can see, there’s a lot of different things that are kind of coins that you can put in your relationship, currency, piggy bank account, that sort of represent your ability to develop relationships. So of those ones that I just listed. How many of those coins that you pick up off the table and put in your piggy bank? Maybe there’s other coins? I didn’t mention that you’re thinking yeah, actually, that’s another feather in my cap another coin in my piggy bank about relationship currency. So here’s the takeaway I want you to have from this fourth step, your relationship currency is not just something that’s nice to have. It is a very valuable and renewable and a scalable resource. In other words, you know, if you have relationship oriented talents, you can basically just decide at the drop of a hat, you can just decide to have a full or maybe even overflowing piggy bank of relationship currency all the time. It’s that easy for you to summons and just turn it into a valuable asset. This coins are just sitting there waiting for you to grab them off the table and put them in that piggy bank. Now, so we’ve established that you probably have a pretty full piggy bank of relationship, currency, but you might be wondering to yourself, well, that’s great, but how do I use that to buy rental properties? Right? I mean, I can’t make a downpayment that’s full of smiles, warm handshakes, hugs and making people feel comfortable, right? Just like you might say, I can’t go to the Safeway, and buy a dozen eggs with, you know, a compliment to the person working at the check stand. And while that’s true, we do need to just step back and understand how we can actually convert relationship currency into deals and how relationship currency can impact an O overall deal. Because here’s the simple idea that I want you to take away from this. The more relationship capital currency you have, the less of the other currencies you will probably need. Now, it’s not to say you will not need any of the other currencies. But it is to say absolutely, that you will need less of those if you have more relationship, currency. And the cool thing about relationship currency is it doesn’t really get spent. I’m using finger quotes here in the air, right now it doesn’t really get spent, it gets utilized because it’s a renewable resource. And just because I use some of my relationship, currency doesn’t mean I now have less. And that’s a really important distinction, because when you utilize your relationship currency, you’re not reducing your account balance. So let’s think back to the dominoes for just a moment. When you look at that series of dominoes take notice, where did relationship currency tend to show up the most, I would argue that it showed up the most in the first several dominoes the earlier steps in the overall process. And to me, this brings us to a really important point, which is that there is no deal to be invested in by anybody, until that deal is found, negotiated, and structured. There is no need for knowing how to swing a hammer really well until there is something to swing a hammer at. And there won’t be anything to swing a hammer at until that deal has been found and negotiated and structured. And guess what? Finding negotiating and structuring our relationship based activities, right. So if you focus your efforts here, you will add value to a deal. Because here’s the simple truth when when when you are a relationship oriented person, you can negotiate deals that nobody else can. Literally, you listening to this right now can negotiate deals that I cannot negotiate. You can negotiate deals that the next listener cannot negotiate. You know why? Because nobody on the planet is you, you are a 100%, one of a kind person. There’s nobody else who can do it just like you now there are other people, including me who have high balances in their relationship currency accounts. Yeah, absolutely. But my coins in that balance in that piggy bank are different than your coins. Because I’m different than you. So nobody in the world, literally nobody can go and create the experience for a seller that you can and nobody else can negotiate the things you can because nobody else is you. So let’s just get literal for a moment. How do you turn your relationship currency into an actual real estate deal, right. And like I mentioned, the goal is not to not ever need any of the other currencies. But the goal is to offset the amount of other currencies you need, like let’s say, cash financial currency. By utilizing more of your relationship, currency. So relationship currency can translate really quite literally and directly into needing less financial currency to get a deal done. So let me just give you a few examples of how relationship currency can help. Relationship currency allows you to negotiate a lower purchase price, that’s probably the the most obvious type of place to start, the more relationship you have, you can often negotiate a better price, you can then also have the opportunity to negotiate seller financing loan terms, loan terms, you would not be able to negotiate if you weren’t in the process of creating that strong relationship with the seller. Relationship currency allows you to avoid things like credit checks, and time consuming and invasive and brain numbing, blown applications, things like that. It allows you to negotiate lower down payments on those seller financing terms that you have negotiated using your relationship currency. It allows you to negotiate lower interest rates on those seller financing terms. It allows you to negotiate other creative, flexible elements of your seller financing terms, it could be a million different things, tiered interest rates, deferred interest rates, unique and creative payment structures, supercharged seller financing terms, if you’re familiar with that, and so many other things. And so when we look at our ability to create relationship that converts directly into our ability to structure deals that do not require as many other currencies, especially the financial currency. So here’s my encouragement to you. I want you to start owning your relationship currency. I want you to start owning that you have superpowers in the category of developing relationships and decide right here and right now. How you will choose to use your relationship currency to create your next deal. I want you to think this through, I want you to say to yourself a statement, you know, like this, like my next deal will be one that nobody else on the planet could negotiate except for me, I will use my relationship currency and my skills to negotiate a better purchase price, a lower purchase price on the property, far less than somebody else would need to pay, who didn’t have that relationship currency through my excellent people skills, I will negotiate seller financing, I will only have to put 10% down, that’s 10%, at least less than I would normally have needed to put down with a bank loan because the sellers like and trust me so much, I will only spend five minutes quote applying for the loan at all, it will be that simple. And that easy. So here is what I want you to take away from this. If you can use your relationship currency to find negotiate and secure deals, that puts you in the driver’s seat of those deals, it won’t be hard for you to get the other currencies that you need, because you’ve already brought the most valuable parts to the deal. Now, if you create a deal that you’ve just structured and negotiated, nobody else on the planet could do that. And it still takes you know, the $20,000 that you don’t have your ability to go and get that $20,000 from somebody else, like a partner or a lender is going to be so much easier because you’ve already done the hardest and most valuable part which is creating an opportunity that is so great that nobody else could possibly have created it using your unique talents and your unique relationship currency. So what is the summary of this? Here’s what I want to leave you with. If you employ the direct relationship capital method, which I would say is the headline for this whole concept, you really don’t need as much money as you might think you need to buy rental real estate. If you strategically cultivate and intentionally use these other four currencies than non cash currencies, especially that relationship, you can often get deals done with way less financial currency. And the best news is this if you are naturally a relationship oriented person, the the direct relationship capital method is so learnable you have the natural talents just waiting at your disposal. That concludes today’s episode of racking up rentals and wraps up our two part series on the other four currencies and how to use them. I hope you’ve enjoyed this as much as I’ve enjoyed sharing it with you again shownotes for this can be found at thoughtful art e.com/e 131 Please do us a HUGE favor by hitting the subscribe button in your podcast app and rating and reviewing the show. Did you know that we have a Facebook group for thoughtful real estate entrepreneurs also, it’s called rental portfolio wealth builders. We’d love to have you join us there you can search that on Facebook of course. Or if you want to just type group dot thoughtful our e.com into your browser, the internet and it’s magic will take you right to that page and you can just hit the join button. If you liked this episode, I sure hope you did take a screenshot of it on your phone. post that to Instagram and tag us we are at thoughtful real estate. So I’ll see in the next episode until then, this is Jeff from the thoughtful real estate entrepreneur signing off. Thanks for listening to racking up rentals where we build long term wealth by being when when dealmakers remember solve the person to unlock the deal and solve the financing to unlock the profits.
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