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If there’s one thing we’re usually keenly aware of, it’s what we’re lacking—the missing puzzle pieces keeping us from doing the deals we want to do. But instead of focusing on what we are missing, what if we focused instead on what we HAVE (or will have), and then asking ourselves the question: “How can I convert what I DO HAVE into what I WANT?
In this episode, Jeff breaks down the many ways we can convert what we already have into what we want so that we keep moving forward toward our goals.
As humans, one of the natural capabilities that our brain has is it has the ability to look at a picture and see what’s missing as the ability to look at point A, where we are looking at point B, where we’re trying to go and figure out what is missing, what’s going to get in the way. And that ability is helpful, I’m sure in some evolutionary sense, but in the context of trying to get deals done sometimes that gets our focus so much on what we don’t have, rather than focusing on what we do have. And in today’s episode, we’re going to talk about how when you need something, to get a deal done, how you should focus on converting what you do have or what you will have, into what it is you need. And when you’re able to do that on an ongoing basis, you’ll not feel as stuck. So let’s keep the theme song or and jump right into this important mindset shift.
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 are just looking for quote, motivated sellers to make lowball offers. 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.
Thanks for joining me for another episode of Racking Up Rentals. Show notes for this episode can be found at www.thoughtfulre.com/e88. Wow, those numbers are getting big! That’s exciting — Episode 88. Please do us a big favor by hitting the subscribe button in your podcast app, it would really help fellow thoughtful real estate entrepreneurs to find us honored with today’s episode.
Now as I mentioned in the intro, we’re really good at identifying what’s lacking in the vision of where we’re trying to go. You know, we see where we are, we see what we’re trying to get to, and we see kind of what the missing ingredients are. And that can get us really focused on what we don’t have. But when you’re focused on what you don’t have, that’s pretty literally the definition of scarcity mentality, right? Where we are focused on what we are missing and what is scarce versus being focused on what we have and what is abundance. Now, there are times when, of course, we do need something and we feel powerless to create that thing we need. Sometimes we need some money to do a deal. Sometimes we need some other types of resources, there are things we need. That’s a reality of the real estate entrepreneurship business that we are pursuing. But there’s a difference between feeling the need to go and create that thing you’re lacking versus converting what you do have into the thing that you need. And in this episode, we’re going to talk about having a focus on converting what you do you have into what you don’t have now there’s really two kind of questions or two levels that we can make about this. What do you have now? Or what will you have? In other words, if you were able to do this project to accomplish this deal? What will you have? As a result, let me just give you a real simple example.
If I am buying a property, and I need, let’s say $100,000 to put down on that property. Once I put $100,000 down, I might be sitting there thinking, Oh, I’m now $100,000 lighter in the wallet than I used to be fat hurts. But what do I have instead? Well, actually, now I have at least $100,000 of equity. I’ve just bought $100,000 of equity. So I didn’t really get rid of the cash I had I just converted it from liquid cash into equity. So the same thought process applies in the other direction as well. Now, as you might remember, a couple episodes ago, I made the argument that lack of money is not the problem that you are facing. A lot of people feel like oh my gosh, I just had more money, then everything would come together. And I made the argument that lack of money is not your problem. It’s really that you don’t know exactly what you would do with the money if it magically showed up. And I gave you this example, which I think is really appropriate. Again, here, this metaphor, this analogy. If you were going to bake some cookies, and you didn’t have the sugar so you get all the materials out all the ingredients out on your counter. You start getting ready to make the cookies you oh shoot. I don’t have the sugar I need, what would you do? Would you just throw up your hands and say, “Oh, well, I guess I can’t make cookies, I have no sugar.”? Or would you try to find a way to get the sugar? Well, if you’ve got a neighbor, you could go to your neighbor and say, “Hey, neighbor, can I please borrow a cup of sugar? Or you might say, Can I please trade you for a cup of sugar?” Because once they give you that sugar, what will you have? You will in about 45 minutes have cookies. Once you get that ingredient from them, you will have cookies. So wouldn’t it make sense to go to that neighbor and say, “Hey, neighbor, can I have a cup of sugar and in return in about an hour after they’ve cooled, I’m going to bring you back a dozen cookies.” That would be converting what you have, or in this case, what you will have to what you need. And that idea that mentality, that thought process is such an important one when we think about our real estate investing endeavors as well. So I thought it would be really helpful just to look at three real life scenarios in which you want to do something and you are lacking something that you need to do that. But we could have the thought process together about how would you convert perhaps what you had into what you needed.
So here’s scenario number one: You don’t have the cash that you would need for a down payment, but you want to buy a rental property. Okay, you know, you want to buy a rental property, but you’re looking at your checking account balancing, I don’t have enough. So the question is, what do you have? So let’s say that you have time, and you have energy that you could use to go find an opportunity, okay, so you don’t have money, but you do have time and energy to go find an opportunity. So how do you convert what you do have to what you need? Well, there’s also somebody out there who at this very moment in your world, if not directly, at least tangentially has money. But they don’t have time and energy. They’ve got money, they love to put into a deal, but they do not have the bandwidth that takes or maybe the expertise to go out and find that opportunity. And so that gives you the opportunity now to create a synergistic collaboration with them, where you bring the deal itself, and the opportunity that you have found and negotiated, and they bring the money. And now you go and you buy a property with a partner. There you go, you’ve now converted what you have time and energy into what you wanted, which is ownership in a rental property deal.
Let’s take another look at a second example. Something also pretty relatable, perhaps for some of you. Let’s say you own a property right now. And you want to build more on that property. You want to build an accessory dwelling unit on that property, but you don’t have the cash to build the accessory dwelling unit, the ad you. So let me ask you this. What do you have? Or in this case, the question is, what will you have? Well, the answer is, once you build the ad, you will have more income, you will have more cash flow, and you will have more value and equity in that property. In other words, you will have more property that provides excellent collateral and return to a private lender to a private investor. So how do you convert what you have to what you need?
Well, one thing you could do is you could go get a second position loan secured by that property based on the future post construction, financial. So you go to your private lender, a person you already have a relationship with, and you say, I am going to have an extra $200,000 of equity here, an extra 15 $100 a month of revenue and an extra, say $900 a month of noi, and that allows me to now borrow more money for you. And you have money that you need to put to work that needs a return and it needs excellent collateral. And now I can secure that loan with what I’ve just created with the money you have loaned me. There you go again, you have now converted what you have, which is a property a plan, the ability to expand the property that you already own. you’ve converted that into what you needed, which was the money to do the project, because you will have something in the future that you can exchange and convert into what you needed in the present.
Let me give you one more third simple example. Let’s say you want cash flow. But you perhaps live and work in a market like mine where rents are not low but compared to values are low. Where there’s no such thing as the 1% rule, for instance, so you have got a bunch of equity, but you don’t have cash flow. And you really want cash flow. Well, what do you have that you could work with converting? What do you have? The answer is you have equity. So how could you perhaps convert some of that equity, what you do have into what you want, which is cash flow? Well, there’s probably lots of ways. But here’s one way that immediately came to my mind. What if you could borrow some of that equity out of the property, you borrow some of that equity out of the property with a home equity type of a product, second position loan, and let’s say you borrow that money at 5%, then you take that money that you just borrowed at 5%. And you lend it to another real estate entrepreneur who’s doing their project at 10%. With two points. Now you have taken your equity, the thing you had, and you’ve converted it into more cash flow through this method of borrowing, and then re lending the money.
So these are just three specific examples. And there are just three of what could be 1000 examples. And even each of the challenges that I shared with you, there’d be lots of different ways to solve those challenges. But the key idea is how do you convert what you do have or what you will have into what it is that you need. So here is the bottom-line takeaway for you. And the thing I just want you to think about as you exit this podcast episode, which is when you are feeling like you need something to do your business with to do a project with to do a deal with. It’s good to identify what you need; you can’t move forward unless you’ve identified what you need. But don’t let your focus, get fixated on what you don’t have. Put your focus on what you do have and let your creative brain go to work. Figuring out how you can convert what you do have or what you will have as a result of this project into what it is you need to get it done.
So that is it for today’s episode of Racking Up Rentals. Again, show notes for this episode or at www.thoughtfulre.com/e88. Please do us a big favor by hitting that subscribe button and your podcast app. Super, super helpful. Take a second to rate and review the show. I personally see them all and I’m so grateful when you do that.
Did you know too that we have a Facebook group for us thoughtful real estate entrepreneurs? It’s called Rental Portfolio Wealth Builders, and we’d love to have you join us over there. You can either search for that in Facebook, of course, or you could just type in group.thoughtfulre.com. We’ve got it set up so you will be redirected right to the group page and you can join.
If you liked this episode, please take a screenshot. If you’re listening on your phone, post it to Instagram, you can tag us in your post! We are @thoughtfulrealestate. Hey, 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 a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.
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