Interesting times we are dealing with out there, right? Well, I brought on an interesting friend of mine who’s going to join us on the show, Mr. Eddie Speed. Eddie has been known as a note guy, a creative deal structuring guy, and a deal architect. This is great stuff to know with the economy that we are about to lead into. I went to Eddie’s training just a few months back to prepare for the next down market, not knowing that just a few months later we would be here. Today, we are going to look back at the history of the last four or five downturns in the market and what Eddie has learned from it. Lots of opportunities out there for us today and we are going to learn the road map.
[00:00:00] Hey everybody, welcome back to today’s show. Interesting times we’re dealing with out there, right? Well, I brought on an interesting friend of mine, mr Eddie speed. He’s going to join us today. Eddie has been a note guy, but he’s really known as kind of a creative deal structuring guy, kind of a deal architect, and that is the economy that we’re about to lead into.
The truth is, I actually went to one of Eddie’s. Training’s here just a few months back, kind of preparing for the next down market, not knowing that just a few months later we would be here and certainly not knowing, uh, the way that we would get here. So that’s, we’re going to talk about today. We’re actually going to look back at the history of the last four or five downturns in the market.
What Eddie learned and learned from it to teach you how to move ahead. That’s how we move ahead as we rely on wisdom from people that have been through that experience before to move forward. Lots of opportunity out there for us today, we’re going to learn the roadmap. How. Welcome to real estate investing secrets.
We’re all looking for freedom and the opportunity to live better, more fulfilling lives, but most of us were trained our entire lives to work for someone else and chase their [00:01:00] dreams. How can we use real estate investing as a vehicle to achieve financial freedom? My life is dedicated to answering your real estate investing questions and helping you build an investing business that allows you to change your life and the world around you and to enable
Eddie: [00:01:15] you to turn your dreams of financial freedom
Mike: [00:01:18] into a reality.
My name is Mike Hambright from flipnerd.com and your questions get answered here on the real estate investing secrets show. Hey Eddie, welcome to the show.
Eddie: [00:01:30] How are you Mike?
Mike: [00:01:31] Good. Good, good to see you buddy. It’s funny, we always joke about this. I see you more on podcasts and other things. We are actually in the same market for the most part.
And uh, you know, don’t, don’t see often enough in person, but good to see you, my friend. Yeah,
Eddie: [00:01:45] well, unfortunately we can’t see each other right now. Right? That’s right.
Mike: [00:01:48] Now for maybe the first time in history, we just technically should not be seeing each other in person. So, um, it’s an interesting market, right?
You’ve been doing these workshops for a while. Now. I mean, obviously I’ve been a note guy for a long time [00:02:00] and I know that you kind of put two and two together, maybe a year, a year and a half ago and said, Hey, you know what? You know the note side, I mean, maybe you could, maybe you explain it better than me.
You kind of knew the note side, but you’re like, how do you, how do you convert? Or how do you teach a single family investor how to understand note architecture? Because that’s really what we’re going to be talking about today. Here is how to do deals creatively, right? How to structure them that are just cash transactions.
Eddie: [00:02:26] Well, you know, the, the, the modern day real estate investor, what I call the Ninja real estate investor, right? You’ve heard me refer to that. The guys that buy 50 or a hundred or 300 houses a year, they’re great marketers. They’re the best marketers the industry has ever seen, and they’re actually great psychologist at the co closing table, you know, they all.
They’ve all followed these lineages that have the great marketing strategies and the great, you know, the John Martinez of how to close them at the table and all that stuff. And so they really, really got good at that. And I, [00:03:00] you know, been around the space a very long time, but I think this modern day real estate investor is, you know, excessively better than in the past.
Mike: [00:03:08] But that’s how evolution works, right? We get better, we get better. And then, you know, when you go through a down market, you gotta pull back in your bag of tricks and say, let me, let me pull out that playbook that, that worked back then. Right?
Eddie: [00:03:21] Yeah. So it’s interesting, a couple of years ago, I’m in these masterminds and, and uh, you know, listen to all these guys and their chronic crying, the blues cause their conversions are dropping, right?
The number of offers they make and closings was going down and their margins were slipping. You know? And so, you know, there’s, they’re, they’re flipping houses, they’re wholesaling houses to either a hedge fund for the most part, if a hedge fund or an HGTV buyer. Right. Well, I know words. Let’s be, let’s be fair about it.
The guy in the middle. In the old days of flipping houses or wholesaling contracts was the least experienced, and he was sold selling a house to a [00:04:00] guy like you, right? Well, now that changed in the most seasoned guys, the middle, and they’re flipping the contract off to an amateur, right? An amateur house buyer, which is an HGTV lover, and a, anyway, in the middle of that, they’re kind of talking about their margins are shrinking and shrinking and stuff.
And so I said, well, just go buy on terms. And I’m like, what. And like, you know, just structure these crazy terms, you know, and really give them the price they want, but you’re not really paying them today. You’re paying them tomorrow. And the way you structure the terms, you could kind of overpay and make it a bargain of the way you paid them back.
Right. And you’ve been to, you’ve seen all
Mike: [00:04:38] this. Yeah,
Eddie: [00:04:40] they do step I do on the whiteboard and staff.
Mike: [00:04:42] Yeah. And you say voodoo. It’s, it’s good stuff. The truth is, is like, you know, it’s just a more sophisticated way to buy. It’s like, if you can buy on terms, we’re gonna talk about some different levers you can pull, um, and structure the deal differently.
You can, the truth is, is you can turn deals that you were [00:05:00] passing on in the past and to actual deals, sometimes more profitable than, than if you had paid cash for it, depending on what you do with it. Correct.
Eddie: [00:05:08] So I just did it. I just did that as a gap. Seeing these guys having to overpay for houses and figuring out a way how they get essentially overpaid, but make it a bargain.
Right? Cause they’re paying the equity tomorrow and there’s all kind of different ways to negotiate interest and when you start interest in, in all of that kind of stuff. Right? Yeah. Well, in that process, I have a lot of those really seasoned guys say, boy, I’ll bet you in the next market. That’s going to be unbelievable.
I’ve said, of course it will, right? I learned all this stuff in the stress markets, learn any of this stuff in great markets. It was always when something went wrong that it forced me to go figure out something new.
Mike: [00:05:51] That’s how we all learn. I’ve been talking, you know, I’ve been doing this silver lining series three times a week here.
By the way, if anybody hasn’t registered for that, it’s filipino.com/america we’re doing these [00:06:00] live 90 minute segments. I’m bringing in kind of like a new show every 20 minutes. I have a new expert coming in and we’re talking about stuff, and I’ve said that several times. Like, what makes somebody an expert?
Well, it’s like, well, they’ve been punched in the face a lot and shot in the back with a few arrows. Right? That’s, that’s really how you learn is by learning what not to do or how to pivot when something does happen. Right. Yeah, that’s true. Yep.
Eddie: [00:06:20] Yep. So anyway, you know, I learned buying on terms. Originally I’m thinking, I bought my first house on terms in like 1983 my wife Martha and I were young and moved to Dallas Fort worth to be entrepreneurs in the note and creative finance business and stuff.
And you know, interest rates were 14% and we were self employed. Wouldn’t be bankable. If on a bat, no matter what interest rates were for all the reasons there, no way we could buy a house except we just came up with terms that we would pay for a house and the interest rate and how we paid them back.
And that was probably our first seller finance [00:07:00] experience. And that was because there was no other way to make it work. We were in, in the desire to do something and buy a property. The only way we could do it was get the seller to work with us.
Mike: [00:07:12] Yup. Yup. Well let’s go back cause you, you just use aged yourself there.
I try to stay away from comments at age myself. You know, you’re better than that Eddie. But you basically just said, Hey, you started doing deals on terms roughly 37 years ago I think is what I just calculated there. Um, I did that without a calculator, my friend. So we’re going to kind of go through what you learned in the early eighties, you know, 86 when the market crashed, 86, 87, like all these different timeframes and what you learned along the way.
And I definitely people to listen now because, um. There’s some great learnings here, right? You, Eddie said something before we started recording that now’s when the time when you want to learn from people that have gray hair and a, I’ve got a bunch of gray hair coming on here if you haven’t noticed. So I got some wisdom myself before we jump into this guys, I don’t, I’m kinda kind of normally wait until the end to share any links for anything.
But Eddie’s offered a book. He actually just finished this book buying on terms [00:08:00] and the electronic version of ebook that you can get for free. So if you go to flipnerd.com/buying on terms buy ING. On terms, uh, we’ll get you a copy of that. So I’ll make sure flipper.com/buying on terms, we’re going to kind of jump into it here, but for those of you that, that, uh, might bail out at some point, I want to make sure that you get some value there.
So go ahead. So let’s talk about early eighties, kind of when you started, some of the lessons that you learned at that point that are very much as applicable today as they were back then. So,
Eddie: [00:08:29] um, Amit. My wife’s, she, she was my girlfriend. They, I made her dad who got me in the business. You know the story, 1980 as a kid, I was 20 years old.
Right? And here’s the first thing I would say to you is I entered the business and we were buying seller finance notes, which was. Just the Oklahoma land rush, right? And I mean, we were killing it. And every realtor that had been in the business for 20 years, or banker or mortgage guy or [00:09:00] home builder, and at 1980 was going broke.
Interest rates were 20% and I’m like, Oh my God, it’s the best thing I can ever imagine. So the first thing I would say to you as a very young age in this business is attitude. Is everything. Because I had a great attitude. I didn’t know when he, I was too dumb to know any different and, and the truth be told, you know, these other guys, you know, they were kind of scarred up and it stopped them from finding the next opportunity.
Right? Yeah. Okay.
Mike: [00:09:32] We’re seeing that right now, right. Is the people are, the times get times get tough and they just moved to the sideline when. You know, I kinda use this, uh, analogy here a minute ago of like, that’s when you go to the library and you’re like, okay, let me pull out the playbook and pull out the, the, a downward market playbook.
Right? And that’s, this is what you do as a mature real estate investors. You have different levers, different tools you use in different markets, right?
Eddie: [00:09:57] It’s in, once again, it’s, it’s [00:10:00] attitude is everything or, or, you know, listen, we’re not, this is stressful. Right? Anybody said it in this, you know, they’re just lying or they’re a full one of the two.
But you know, also, I was just telling you before we started taping, I mean, these, these, these government programs are pretty amazing. I mean, like, if you’re not, like, if you don’t really know what you’re eligible for, you’re, you’re not paying attention. Because, I mean, there’s some cool stuff and I’ve got an executive team that’s been working deeply at, at implementing those processes.
All right? So I entered the market. Real estate is dying because interest rates are 20% Mike, 20% okay. And, uh, seller financing becomes a thing. Okay. Now, what I thought was by 1985. When the interest rates [00:11:00] dropped to like 10% which sounded ridiculous today, but that was a true statement I thought that nobody would ever sell or finance.
Again. What we learned in that cycle is that people found uses for seller financing that they’ve now continued with 40 years later.
Mike: [00:11:14] So
Eddie: [00:11:15] we, we learn things that otherwise we didn’t know. But two, two things I learned in that cycle. First of all was attitude. And I saw mature business people that that could not understand why I was so happy.
And that’s cause I was going down a lane that was working and they were going down a lane that was failing. . Right. And then the second thing is, is seller financing became a necessity and it was buying own terms, Mike, in 1980. Yup. Right. Okay. Well, I moved to Dallas Fort worth and, uh, you know, I’m a country boy from Mississippi, right.
And drive up here and big high rise buildings and Martha nine live in North Dallas, and Oh my goodness. And all of a [00:12:00] sudden there’s like 60 of those, you know, Wolf cranes, they call them those gigantic cranes that build the glass buildings. And then around 1986, there was like zero. Yeah. And the most profitable company in town was a company that changed the names out in front of the signs of the banks, the sign company.
So, uh, anyway, it’s just crazy times. And we, and that’s where we learned about nonperforming notes. A little,
Mike: [00:12:26] a DFW joke when you talked about North Dallas there at back and in North Dallas was Northwest highway. Right now it’s about 20 miles North of there, but yeah,
Eddie: [00:12:37] exactly. So, you know, I learned about nonperforming notes in that era, and then we would Bob these defaulted notes and then use seller finance strategies to resell the property.
Spanx will make an lungs. Right? And so we came in like we were just the smartest cats you’ve ever seen. And trust me, I know myself. I don’t think I’m smart, but we just had been so ingrained and understanding how this could work and, and so we [00:13:00] really, bam, I mean, here we were, you know, using creative financing, you know, we were buying defaulted loans and we would foreclose or get a date or just modify the customer and let them pay again.
Right, right. Same thing I was doing a few years ago in 2008 so a lot of these things kind of came back. Now they’re all, they’re never quite the same, but I certainly, that changed my perspective of the market, and I would say that we saw seller financing grow exponentially in Texas. Texas is the biggest seller finance state in the United States, and I believe there’s a 100% result of the ROTC days.
Mike: [00:13:39] Hmm. Yeah. Yeah.
Eddie: [00:13:40] Because people just learned that they didn’t have to depend on the banks. Right, right.
Mike: [00:13:45] Yeah.
Eddie: [00:13:46] Anyway, the market goes along and I set up the note system for, for my old friend Ken, that that founded home investors and all that in the early nineties. And we really kind of set a formula to the business, right?
No real estate [00:14:00] investors didn’t really have a recipe or a formula of how to create seller financing. So that’s what we did. We set a real standard to the business, and by the way, the biggest buyer or seller finance notes in 1992 or three would have been the associates and they were buying about $75 million worth of loans a year.
I launched the home vestors system. And of course there was a, you know, 300 other real estate investors that weren’t home investor franchises that copy it. And all of a sudden you look at associates three years later and they’re buying $250 million in seller financing. That’s a year. Yeah.
Mike: [00:14:38] So real estate investors had adjusted to buying based on, right.
You know, typically what real estate investors do or have been doing is they’re buying at a certain percentage of the after repaired value. They know what they can sell it to a landlord or a hedge fund or, or a rehabber for. And back then it was buying it on terms that they knew were, [00:15:00] um. Standardized enough to where it wasn’t a complicated, I mean, I know that was part of the process too, was getting, getting the terms a set so that somebody would want to buy it, but effectively they knew what the note buyers would pay for it and they were, they would lock it up and then just basically trade that to associates.
Eddie: [00:15:18] We w they would sell or finance a property, but they would sell our finance to an underwriting matrix, which nobody had ever really done before. Right. So we taught the private lender how to underwrite to a lending box, right. Certain ratios depending on the credit and other variables and stuff. And then all of a sudden, then they knew they could sell it.
And we were real successful at that. Sure. So by 1995 or six, um. All a lending came to the business. Right? They didn’t even call it fault a lending back then, but it was like, like hedge funds and insurance companies said, Hey, we don’t have to do Fannie Mae, Freddie Mac loans. [00:16:00] We’ll do somebody just adjust miss customer.
Right? And so then
Mike: [00:16:05] they may kind of distress nodes, but not that bad.
Eddie: [00:16:08] Exactly. Or not. If you
Mike: [00:16:09] kind of like, look at the stress notes, they’re like. Like you said, they missed a payment or they’re, they’re never paying, like there’s this spectrum of how, how, how stinky is that produce, right.
Eddie: [00:16:19] That actually was pretty decent product and stuff they were doing in 2006 was nuts.
Right? But, and so they were, so we’re packaging these loans and selling them on wall street mortgage backed securities. Right. Right. And so that market really built up by 2008 the mortgage backed securities market. This was the first time, and you really grown to be such a. A giant piece of the market. It blew up.
So about by 1998 a real estate investors were like buying houses, you know, rehabbing them, selling them to a consumer, and they were getting one of these less than perfect lungs. And they were, that loan was getting sold on [00:17:00] wall street, and boy it was a machine and it was really relevant and all of a sudden, boom, it died.
Yeah. And so the guys that survived. Went back to seller financing, right? The old guys that you know, you and I know well, even around Dallas, Fort worth, everyone, I’m, if you want to know why they were, they were, they, they could adapt and went back to seller financing, right?
Mike: [00:17:24] Yeah.
Eddie: [00:17:25] So all of a sudden, you know, the mortgage business gets back that wheels back underneath it, and by probably 2001 or two, the mortgage backed securities thing and it just got hotter and hotter and hotter and hotter, right?
So the market blew up, and in 1998 people went back to creative financing. Then all of a sudden the mortgage market came back every time creative financing fill the gap, conventional lending didn’t fail. Yeah. Right. Well, by the way, all the hard money lenders went broke in 2019 98 okay. Everybody, I know that was hard money [00:18:00] lending virtually went broke in
Mike: [00:18:02] 1998 yeah, and as of right now, I mean, a good number of them right now are just so many uncertainties are there.
They’re a radio silent right now. They’re, they’re are they just levered their fees way up to say, well, we’ll lend to you if. You’re willing to pay $4,000 initiation or origination or whatever. So
Eddie: [00:18:20] yeah, I want to, I want to be careful. I’m not some crazy smart, good lenders that are hard money lenders, so I’m not fixing to go plain of black.
You know, Mark, I would ever want to have them.
Mike: [00:18:33] No. But what happens is over time, whether it’s the federal government, FHA type loans, or um, or hard money loans, like people just get sloppy over time, right? They’re doing some stuff they probably shouldn’t do. What you start to get to this point where you’re like, I can’t really lose, or the risk of me losing is so small that let’s just kind of, uh.
Be willing to do some loans that we maybe weren’t willing to do in the past. I mean, it’s this site. That’s why there’s a [00:19:00] cycle, right? As we get sloppy, we make bad decisions, and then stuff pops,
Eddie: [00:19:05] proven fact card, money lending. As the market gets hotter, they lend and land more money and they lower their rates, lower
Mike: [00:19:14] rates, right?
Eddie: [00:19:15] And then that property, if it takes more than about 145 days to cycle. The fees on that loan start making it where it will never mathematically work out. Right. And so if you go back in history and look at the hard money lending space, and you and I had a conversation about this the other day, that’s the pattern.
Yup. So then we got to the roaring two thousands okay. And everything. Everybody is running with money in both hands. This sounds familiar. Kate make a mistake. If we don’t bond now, we’ll never be able to afford it when they, when they say that you need to run for the Hills, right? And so in to [00:20:00] the degree that, you know, we’ve never seen real estate so pricey and we’ve never seen lending some loose, right.
And of course, the 2008 debacle happened. And, um, and then all of a sudden the note. Space, creative financing, buying nonperforming notes on financing. You know, structuring deals with private money to finance your deals and stuff. It wasn’t just a good idea. It was impossible for you to survive. If you could not do that.
Absolutely possible. And let me just say something. I’m making it sound like I may have figured it out every step of the way, but let me tell you something. I got clobbered. A lot. I mean, like I tried to fix some major things every time the next cycle happened because, and one thing that always killed me, and that’s because why done all these tens of thousands of note deals is I was selling them to the institutional investors, right?
That’s why I could do such a volume. [00:21:00] Well, I swore after 2008 I was never going to be reliant on institutional money because it had been so traumatic. For me in the past when that wasn’t available. Yeah. I became highly focused from 2008 until today with for private money. Right. And I believe that’s going to be good for me because private money is going to be desperately looking for an investment, no doubt.
And, and so it’s a matter of structuring a really safe deal that they can feel comfortable with. And, uh, you know, I, I don’t know. I mean, you know, we’re early in this thing, you know, uh, you know, I, I told my son in law, my son, and my daughter is a professional ballet dancer, and so they, they, they live in Denver and he works for us.
And so they got shut down in downtown Denver all of couple of weeks ago. They came down here. And so he’ll tell me he works with us. So, you know, he and I spent a lot of [00:22:00] time together and stuff, and I said, well, let me tell you something. I’m not going to watch Nightline anymore. I can tell you right here.
I’m done watching Nightline after last it was because they just scare the crap out of you. The unemployment is going to be twice as bad as the great recession or depression. So here’s what I’m though we are going to have an impact in the market. I think that. The way you structure the financing around your real estate deal is going to be super critical to your success or failure.
Because up until now you just had to put a house under contract. And I’m not saying that it’s easy, but you had to put a house under contract and go find somebody that was enamored with real estate. Cause I like TV, right? And and go flip that contract to them and you made a good margin in the middle.
Buy low. Sell high. Right. But yeah, but I don’t believe the [00:23:00] HGTV buyer’s going to be quite so enamored with buying real estate. And, uh, so there’s a lot of things about the market and. And, um, I, I think you and I are kindred spirits of this. We’re not laughing or gloating. We’re just saying the God that’s the got the survival in is the God’s going to go on to
Mike: [00:23:17] thrive.
Yeah, you got it. If nothing else, if you, you know, I’m not saying wholesaling’s dead, but you gotta be more principled. You can’t pay 70 to 75% for house, try to sell it at 85% like that. That stuff’s drying up because people that are paying 85% and then rehabbing it. Our nuts, like that never made sense.
But again, people get sloppy. So you got to go back to buying deep when you can get them. And I think largely what we’re talking about here is if nothing else, having this be a tool in your tool belt, it’s like, get that cash off or it doesn’t work. Then it’s like, okay, well how else can we structure the deal to a still.
Make the seller happy enough to be able to do the deal and with adjusting terms, still make it a good deal for you. [00:24:00] Right. So when we don’t have a ton of time, but David, maybe you could share a couple of quick, like examples of, of things that you know come to mind with something that I know you could make these deals as complicated as you want to, but it also don’t need to be that complicated, right?
So maybe kind of share a couple of examples of. Deals that somebody can’t do, they can’t get deep enough, but here they could still make it work if they do, if the seller agrees to these terms. Right?
Eddie: [00:24:25] Well, one market condition that we know is going to exist more than it ever has is to burn out landlord factor, right?
There’s so many. There’s, what is it? They’re 18 million residential doors, more than there were 10 years ago, and obviously you don’t have 18 million happy landlords. Most of them are amateurs. They have five units or less. And there’s going to be a huge opportunity to buy those properties and from them and resell them, but instead of buying them and paying cash, they wanted cash flow.
[00:25:00] So you can structure a deal and let them carry terms. You could take over the underlying mortgage. You can wrap that you get, I mean, there’s, there’s a lot of different ways you can go about doing it doesn’t have to be free and clear. It doesn’t have to be leveraged up to the Hill. It can be somewhere. It can be on either and or somewhere in the middle.
There’s different ways you can structure it,
Mike: [00:25:18] right?
Eddie: [00:25:19] You, you and I’ve talked about those things a lot. So I think that’s one obvious thing is. A burnout landlord factor is where the capital’s going to come from to fund my note business.
Mike: [00:25:31] Yeah. There’s no doubt there’s going to be, we’ve been talking about this at the time.
We’re recording this just for just for, uh, to be straight with everybody. That’s three 31 so rents are due tomorrow by the time this comes out. We’ll be a couple of days. What will be about a week later? So it’s going to be really interesting. I, I own a portfolio. I’m an investor and a bunch of multifamily.
Uh, with hundreds and hundreds of doors. It’s going to be interesting to see what happens with rent collections here. But I think, no doubt we’ve been talking about this a lot. The landlord, there’s always been the, the, [00:26:00] um, distressed landlord or the burned out landlord to go after, but I think there’s a bunch of people that have bought turnkey or they bought him in a way over the past couple of years where rents kept going up.
They were getting paid like clockwork, or we’re not, we’re not having a lot of disruption. And now they’re faced with. You know, potentially multiple months of lost rent on some, if the thing is, is if, like you said, a lot of people have one, two, three doors, like a lot of people that are not, not everybody’s, these big companies, it’s a husband and wife that decided to start buying some real estate and they got a couple of deals under their belt.
So when you have a portfolio, you can generally, you can weather the storms cause they’re all not going to not pay. But when you have two or three, like if one or two of them is not paying, or God forbid all of them, you know, you feel that. Pain a lot, a lot more. Right.
Eddie: [00:26:48] Yeah. So that’s, uh, that, that’s, that’s going to be a gigantic thing for sure.
And they’ll carry the payments for you longterm. You know, they just want out of the brain damage of being a landlord and they’re not, you know, [00:27:00] listen, let’s be fair about it. They have five units or less. They’re not really committed to the business like we are. And I’m not saying they should be. I’m sure they’re great at what they do every day, but this is their, they’re finding out really quick that they’re amateurs in a professional market.
Yeah. So that’s one. Like screamer. To me, that jumps out. And the other thing is, and I want to be clear about this because I’m very, very, very good friends with a lot of really professional, hard money lenders. But let me just tell you, if I’m, if I miss this one, you can go back and Mark this presentation and go, boy, Eddie first April, he missed this prediction completely hard.
Money lending is gonna become excessively different. And when you do this is when you’re going to have to become a lot more skilled at structuring private money deals. Now, here’s the good news. You’re going to find that you make more money, but it’s, it’s, [00:28:00] you’re going to have to be, you’re going to have to become more skilled at figuring out how to structure acquisition money to buy a property.
And that’s a zillion different ways you can do it. But here’s an easy. There’s just some easy math, like, okay, just easy math. You get a private lender and he’s going to loan you 50% of the cost of the property. Okay, so he, you do, he does a first mortgage property cost a hundred he loans you 50 then you get the seller and he loans you the other 50 and he gets 50,000 at the closing.
Right, because that hard money lender funded 50,000 and the lender says, I’m alone you half the money you’ve got to get, you’ve got to position it so that they’re okay with this, but this, it can be fairly easily done. Then he loans it to you on soft terms. Right? So he lends it to you at below market rates and deferred interest and maybe deferred payments and all [00:29:00] kinds of different things.
It can be negotiated and you wake up and figure out and then you can resell this property on a rap note and now you got a good down payment when you sell it. And then you get a cash load for 20 years and you’re like, man, this real estate debacle turned out to be great for me.
Mike: [00:29:19] Well, those are silver line.
I mean, the truth is, is, and you know this, and every downturn, we all get punched in the face. And, but for those that run away, you know, there is no upside for those that say, okay, what’s the recipe for this? How do I do this? What tool do I use for this? Is there’s always opportunity here as well. I mean, whenever, you know.
There’s certain industries that will be changed forever from certain certain downturns. There’s always industries that get wiped out, or people just like, for example, the movie theater industry, that thing has been a ticking time bomb forever. Stuff like this is like the nail in the coffin, right? It’s like, I just want, I could watch these things at home in my media room or on Netflix or prime or whatever.
Like that’s just a [00:30:00] matter of time. And truthfully, even in this downturn, they’re putting new releases on prime. You can just, you can rent them for like 20 bucks because those movies that worth the theater. There, they went to zero, you know, unless you do something like that. So I think that industry is right for the changing.
At the end of the day, the real estate market changes all the time, but there’s people and they need shelter and that’s, that’s never going to change, right. How the deals are structured is going to change and how things play out is going to change. But housing is not going away and people aren’t going away.
So there’s still an opportunity for us here.
Eddie: [00:30:30] Yeah, I agree. Aren’t my net worth changed more in the in the downturn markets than it ever did in the upturn markets? So just, you know, I mean, once again, I’m, I’m like everybody else. I’ve got lots of employees. I’ve got. You know, I’ve got people that are owed us money on a mortgage.
I mean, I’ve, I’m not Pollyanna in like, there’s no disruption. Sure. But you know, if you’re, if you’re mentally prepared for the disruption and you’ve got a structure that can handle it, then you know, the sun’s going to come out [00:31:00] again and you kind of, I’m already, I’m already deep into that play of what that
Mike: [00:31:05] may look like.
Yeah, yeah, absolutely. For those of you guys that did it, that missed this up front. Eddie is a creative, um, deal architect, and he kind of teaches people how to monetize deals that you couldn’t just pay cash for, that this doesn’t work. So you could use terms to negotiate. I mean, if you think about this, the average homeowner, you know, these numbers better than me, Eddie, but if you go buy a a hundred thousand dollar house, they get a hundred thousand dollar mortgage, let’s say, over the course of 30 years, depending on interest rates of course.
But Hey, you’re paying. Not a hundred thousand you’re paying 250 $300,000 with all the interest in there, right? That’s, and that that is all revenue for somebody or multiple people, right? And it’s because it’s on terms, it’s what happens over time. So when banks lend to you, they Mark that up. They’re borrowing at a lower rate and they’re, or they’re selling that, they’re selling that note off and they making money from the loan part of it, the interest over time, [00:32:00] the terms, right?
That’s what we’re talking about here is how you can effectively become the bank. Uh, or the architect with maybe turning other people into banks and you’re making, you’re making deals happen in the middle.
Eddie: [00:32:11] Yeah. And there’s a lot of different ways you can do it. You don’t have to do it one way, but, um, you know, creative financing is, is going to be a huge factor.
And a, I believe a lot of people have had income disruption and they’re not going to fit a conventional mortgage. Uh. Underwriting box, but that doesn’t mean they’re bad people. And, uh, so we, we’ll figure out lots of antibody ways to do it. So yeah, it’s it,
Mike: [00:32:37] there’s always people. And, and why would people buy on terms instead of an FHA loan?
Why would they pay higher rate? Well, maybe they’re not credit worthy. Like Eddie said, some folks don’t have any established credit. Like they just, they just never had credit card to get a credit score before. Right. And not kind of credit worthy. And then the truth is, is there’s always people that. You know, went from making $1 million a year down to [00:33:00] $500,000 a year, and there’s a bankruptcy there.
So they still make a lot of money, but on paper they look like they’re there. They’re not somebody that a traditional bank would lend to, right? Or entrepreneurs, right. You generally, until you have two years tax returns, like you’re not going to get a traditional loan. So there’s a lot of reasons why people would use a loan the same.
It’s the same reason why when I, I’m a Dallas stars, a season ticket holder, of course seasons a on pause right now. Same reason I pay $5 for a, for a 20 cent bottle of water is I, I have to, that’s my only option when I’m there. Right? So, um, well guys, uh, Eddie, be any, let me give out this link one more time.
flipnerd.com/buying on terms as where you can get a copy of that ebook. It’s going to teach you some fundamentals about buying on. Uh, terms and how to structure some deals. Eddie, any kind of final words of wisdom for folks that are listening right now that haven’t been through a downturn before and you know, might be scared of it?
Um, you and I both know there’s a silver lining here, but any kind of words of a wisdom, my friend, it’s
Eddie: [00:33:58] additive. [00:34:00] It’s, it’s what I learned as a kid when I started this business, 20 at 20 years old in 1980 is that the people that, that all he could see, the black could never figure out how to reinvent themselves.
He came into the business not knowing any different. So I didn’t have to reinvent myself cause I didn’t have, I wasn’t, you know, Mar Dan with those thoughts. And I just think, you know, we are going to have to reinvent our sales and, uh, attitudes. Everything.
Mike: [00:34:26] Yeah. Yeah, and I think it’s always asking the question and you know, you hear about this type of stuff, not in a context we’re in now, is instead of saying this doesn’t work, or, you know, I can’t make this work anymore, it’s turn it around and say, how do I make this work?
Right? There’s always, there’s always an asterisk next to what we do. There’s always a way to make it work, especially with terms like you can pull some other levers that aren’t just priced like cash only, right? It’s you get a, you get out some precision tools and you find a way to make it work. That’s, see it.
Awesome. Well, good to see you, my friend. Appreciate you. Everybody [00:35:00] that’s listening right now. There’s some really good information in this book, ed. He’s been around for a long time. I actually went to a boot camp that he had here just a few months back and learned some great things. And I’ve been doing this for a long time.
And uh, cause honestly, I, and everybody else that was there in that workshop knew they were really preparing for a downmarket. None of us knew just a few months later that it would be hitting. We all know it’s coming. We’re all . Honestly, a most of us are a bit surprised it hadn’t happened yet. Nobody knew the way it would come out that we kind of kickstart off your bio virus.
But at the end of the day, uh, we’re here. We don’t know how long and how wide this thing’s going to be. We’ll find out. But this is a great tool for you to have in your tool belt at anytime. So make sure you check out that link. flipper.com/buying on terms connect with Eddie on Facebook. He shares a lot of great information out there in social media.
If you haven’t yet subscribed to our show yet, please do. Whether you’re on iTunes, YouTube. Uh, of course, watching everything on flipper.com where we have over 1500 shows that we’ve created over the past six and a half years. So appreciate you guys a ton. Stay safe, stay strong. And, uh, it might be time to get a little bit [00:36:00] creative.
See on the next show. Thanks for listening to today’s show. There are three ways I can help you start or grow your real estate investing business if you’re a new investor. In just getting started, the FlipNerd investor coaching program is the most effective program in America. I’ve been coaching and mentoring new real estate investors for 10 years.
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