Ever feel like you could make more progress in your real estate investing endeavors if you just had more CASH? Sure, many investors do as well. But it turns out that in most cases, you probably don’t need quite as much cash as you may think you do. In this episode, Jeff explains why when you feel like you have a cash problem, you usually don’t really have a cash problem. Instead, what you have is an acquisition and finance strategy problem. Jeff explains the problem and what to do about out it.
Cash. What a topic among real estate entrepreneurs and real estate investors. This one is constantly vexing people. They’re constantly feeling like they don’t have enough. And if they only had more than they could make more progress. But I don’t think that you really have a cash problem. I think you have a different kind of problem. And I don’t think that you need as much cash as you think you need. So in this episode, we’re going to talk about what the real problem is if you feel like you don’t have enough access to cash, so Let’s cue up the theme song. We’ll jump right in. 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 a 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 a thoughtful our e.com/e 147 Please do us a HUGE favor by hitting the subscribe button in your podcast app. It really really, really helps fellow thoughtful real estate entrepreneurs to find this show because the platforms know that you are listening. Thank you so much for that onward with today’s episode. And I want to talk with you today about cash. So you know I get the pleasure of talking to a lot of people who are real estate investors either established just getting started or wanting to get started. And I like to ask a lot of questions to help understand what’s on people’s minds. And the more questions I asked the more I realized that while there are a few things that they feel like are troubling them or preventing them from making the progress they want to, I would say the number one thing is it comes back to cash. People feel like if I had more cash, I could make more progress. But I believe from my own experience, as well as that of coaching other people that you probably don’t need as much cash as you might think that you need. And I want to talk with you about that today and kind of unpack that conversation. And as I like to do reframe it for you. So that maybe you leave this episode, feeling like you know how to tackle the problem, but that maybe the problem isn’t exactly what you thought it was. So let’s just talk about this idea of cash. Right, let’s start with the end in mind. Why are most of us investing? Well, I can’t speak for you exactly. But again, you know, survey says generally the answer is people want financial freedom, they want autonomy. They want the other things that financial freedom brings them like freedom of time, and how they spend their energy and what they spend themselves doing. And so freedom is this idea. Independence, of course, is another word that we hear about a lot financial independence. So that’s what people are looking for. They’re looking for a rental portfolio that will set them free. Well, if they want to be free, then what do they need? Well, they they’ve decided people in this path have already decided that they want real estate to be the thing that sets them free, right. But there’s obviously other ways you can set yourself free, different types of businesses or different types of investments. But everybody listening to this show has pretty much decided already that they want their vehicle for freedom to be real estate. So if we backup from real estate, then what is the thing that allows us to buy more real estate? Well, what we think the thing is that allows us to buy more real estate is cash. And that’s how we find ourselves. At this this point, this conversation where we’re feeling like the first domino, the cat is cash and cash is gonna lead to real estate and real estate is going to lead to freedom. But if we don’t have enough cash, we’re feeling like we can’t make progress. But I will tell you, in my own life and business, I consistently buy real estate, and I don’t really keep a lot of cash on hand. I don’t save up for the next deal. Really. I don’t just have a huge balance just sitting around waiting for something to happen. I figure it out and make it work every time I find an opportunity that I like whether I feel like I have the cash available or not. I figured out how to make it work. So I want to talk with you today about that. Now, I also want to say just as a disclaimer, I’m not talking we’re not going to get into a bunch of like cheesy Zero downpayment, find a distressed seller, you know, take the deed from them at the kitchen table for $1, kind of stuff like that that’s lowbrow. That is not what we do. And I’m also not talking about partners, right? Because you might look at this and go, oh, sure what he what he’s gonna say is just find a partner who brings all the money and you provide the other stuff. That too is not what I’m talking about. I don’t really do partners at all, I don’t have any partners except for my wife and any of our properties or deals. So with that said, we’re not talking about cheesy low down stuff. We’re not talking about partners. Let’s get in and kind of talk a little bit about what’s going on if you feel like you don’t have enough cash. So when you think about what you need cash for, let’s list out those things, right? Well, maybe the list is long. You know, the list probably includes lots of things like reserves, and all sorts of stuff like that. However, let’s just keep this list simple. The first thing that most people feel like they need cash for is down payments, they need to have a certain amount of money to put down on a property so that they can get the loan. The second thing is, well, I’m often buying properties that need some improvement, right or have some opportunity to add value. So we might need to have cash for repairs, and cash for improvements. and things along those lines. And the other thing, too, that we often think about is that we need cash, so that we can compete with other buyers who have cash, right? Because the mentality is right now, especially that, gosh, if I’m out there making offers and my offers got, you know, financing involved, there’s a financing contingency, that that offer is never as competitive as one that has no financing contingency, and just cash well. So that makes us feel like we need cash in order to be able to compete with other buyers, right. So down payments, repairs and improvements, competing with other buyers, we need cash. But let’s take a look at each of these three things I just mentioned the down payments, repairs and improvements and competing with other buyers. When I hear somebody say, I need more cash, I can’t move forward until I have more cash because I don’t have enough for a down payment. That actually says to me, you don’t have a problem with not having enough cash for a downpayment, you have a problem with the types of loans you’re getting that are requiring really large downpayment. So again, I’m not talking about cheesy zero down down payments. But there’s a big difference between having enough cash for a 10% down payment versus a 25% down payment. So when someone says I don’t have enough cash for down payments, I actually hear them say, I have a problem with the type of loans I’m getting that require really large down payments. When somebody says the second thing, I need a bunch of cash so that I can do repairs, and improvements on the properties that I buy. Again, I actually hear a lending problem. Now it might be a lending problem with that exact property that they’re going to buy, maybe again, they have to make a large downpayment, and that leaves them with no cash left over for the repairs and improvements. Or maybe they aren’t able to wrap repairs and improvements into some type of a loan for that property. Or maybe they’re not really able to tap into the equity that they have in other properties very well, to get the cash out that they need to repair the next property right. If you own properties, A, B and C and have equity in those and you want to buy property D it’s sure nice if you can get to the equity in properties A, B and C so that you can work on property D as well. So again, what I actually hear there’s you have more of a lending problem, you have more of a deal structure problem, you have more of a of a access to your own equity problem in the form of not having the tools for the loans that you need. And the last thing is that people say I need a lot of cash so that I can compete with other buyers have cash. And what that tells me when they say that what I actually hear is them saying I have a problem with how I generate and secure leads. Because I’ll tell you, I don’t have a problem personally, with not having cash so I can’t compete with other buyers. I don’t compete with other buyers. And that’s speaking to lead strategy. So all of that together. I don’t think therefore that you have a cash problem. I would say you have an acquisition and finance problem. You have a problem that takes the form of how you find and secure opportunities and how those opportunities get financed, and how the ongoing financial management of that portfolio happens.
I think you don’t have a cash problem, you have an acquisition and finance problem. So let me ask you this. What if you had sellers? Who were your leads that nobody else knew about? So there’s no competition, if nobody else knows about it, you don’t need to be worried about other buyers showing up with cash offers and the differences in their contingencies or not. If you don’t have competition, you don’t have a problem as it relates to competing with cash. What if you had sellers who are naturally incentivized to actually finance the property for you? I’m not saying they’re willing to finance the property for you. I’m saying that once they realize that they want to, slash perhaps even insist on financing the property for you. What if you had sellers who did that, then that would mean, you wouldn’t have the loan problem that would require such a large downpayment. And what if those same sellers didn’t want or need, and maybe even really didn’t want a large downpayment, right? What if you had sellers that nobody else knew about? Who were naturally incentivized to finance the deal for you, and who didn’t even want a large downpayment, because it’s not in their best interest to get a large down payment from you, then you’d be off to the races with a strategy for acquisition and finance. That would make you feel like you don’t need so much cash. Now, what if you had those sellers. And on top of that, if you already owned real estate, you had the tools to be able to tap into the equity and the cash flow that you already had in those other properties that you could harness that. Instead of it just being locked away, right? For a lot of people. They say, Yeah, I do have property A and B, and C right now. And it has equity, and it has cash flow. But I can’t get at that equity and cash flow, I can’t harness it. Because when I go down to the bank, they say, Oh, we don’t do second position loans, home equity loans on non owner occupied properties. Or I could get the equity option, it’s gonna take four months and a half to do a full cash out refinance. And my debt to income ratio is not good enough to do that, right now. So a lot of investors have equity and cash flow that’s just trapped in their existing holdings that they can’t get to. So what if you had sellers who nobody else knew about? Who didn’t want or need a large downpayment and actually wanted or maybe even went so far as to insist that they finance the property for you. And you had the tools of financing deal structure tools, to without a bank’s permission, go and tap into the equity and the cash flow you have in your existing portfolio? If you had that, I would tell you, you don’t need as much cash, as you think because now you have adopted an acquisition and finance strategy. That simply does not require so much cash. Does it require some cash? Yes, absolutely. But it does not require as much as you might think, certainly allows you to recycle the cash that you have better by having those tools that allow you to get back out the equity that you create in your properties. Now, I realize you might be thinking, Well, Jeff, yeah, that sounds great. I’d love sure I’d love to have a list of sellers, who nobody else knew about who wanted to finance the property for me and didn’t want a large downpayment. But those people don’t exist. And I would say, I’m glad to hear that you’re asking those questions. And I’m also even more glad to tell you that fortunately, that’s not true. There are those people out there. Now, it’s not just every Joe seller, you’re not just going to go walk around a neighborhood and start tapping people on the shoulder and say, Hey, are you the kind of person who doesn’t want competition when you sell your property and will finance it for me without a large down payment? That’s not how it works. That’s a random process. But once we understand the attributes of that person who has that situation, then we can go find that person. And you start to see, it is not really that uncommon at all. And that is exactly really what we do in the deals workshop is we reverse engineer an entire strategy, so that we can go find properties off market and buy them with seller financing, but we don’t go out and market for properties and then start randomly asking these people, if they will do seller financing. We start with the end in mind and we say who is the perfect person who can sell us a piece of property that we’d want to buy off market with seller financing. Let’s go find them and then talk about their real estate. So, in sum, I want you to Know that if you feel like you have a cash problem, or if you feel like cash is a bottleneck for you. First of all, you’re not alone. But you probably know that you’re not alone, because you probably had moments when you’ve commiserated a bit with other real estate investors who have felt similarly. But here’s what I want you to take away from this. If you feel like you have a cash problem, and you are trying to solve that cash problem, by somehow getting your hands on more cash, well, that’s one way to do it, I guess. But as soon as you use that cash, you’re going to be right back to the same spot, which is, you’ve got a cash problem again. And I would encourage you to think about it like this, maybe you don’t have a cash problem. Maybe what you have is an acquisition and finance problem, where your acquisition and finance strategy that you’re currently using is one that just requires too much cash. And I encourage you to believe in the idea that maybe there are other acquisition and finance strategies that don’t require so much cash. That’s exactly what we teach and work through with people in the deals workshop, so that you can scale your portfolio at the rate and the pace that you want to without needing all the approval of banks and the competition of the market and maybe as much cash as you think you need. If you are curious about learning that art, go to the deals workshop.com. And you can find out more. And with that, we conclude another episode of racking up rentals. My hope is that this episode, like all episodes, but this one is on my mind right now, for obvious reasons, makes you feel empowered. That’s kind of my goal. That’s a word that I’ve been focusing on a lot lately, myself, I feel like my job, my mission with you, is to empower you to be able to build the portfolio that you want to build. However, you want to do it as fast or as slow as you want to do it. Instead of feeling like you are at the mercy of the system as I would call the big real estate machine at the mercy of the system to tell you when it’s okay for you to buy another property. And when there’s finally not enough competition, so that you can actually get a deal. And that when you qualify for a loan, and when you have enough cash and when your credit is good enough and when your debt to income ratio is right. I don’t really want there to be so many of those when’s that you are waiting for somebody else to tell you, you’ve got the green lights, I want you to have the tools to go buy property tomorrow, if that’s what you want, or next month, if that’s where you want or next year, if that’s what you want. Instead of being at the mercy of what the system the big real estate machine tells you, you can. So that’s it for today’s episode of racking up rentals. Again, show notes for this episode or at thoughtful rt e.com/e 147. Please do us a big favor by hitting the subscribe button and your podcast app and rating and reviewing the show. You know I see every single one of those and I’m super grateful for everyone and that also helps spread the message of this show too. Did you know we have a Facebook group for thoughtful real estate entrepreneurs. It’s true and you need to be there my friend go to Facebook and look up rental portfolio wealth builders or if you want the shortcut just type in group dot thoughtful rt.com into your browser. And we will redirect you right to that page. If you liked this episode, take a screenshot of it post it to Instagram and tag us we are at thoughtful real estate. I’ll see you in the next episode. And 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.