All Forum Posts by: Alan Brymer

Here are my observations:

1) You have to get a bigger discount, whether you're wholesaling or not

2) There appear to be fewer buyers to wholesale to now who have cash, so work harder at building a list of real players

3) Private lenders are a little more wary of loaning on real estate, but you can just show them in more detail how you buy at big discounts and they understand. Use the analogy of how the Rockefellers made their fortune in the depression, etc.

4) With making offers, I would make ridiculously low offers with a straight face, as I hear about so many people getting smoking deals for 50% of today's value

I think it's preposterous and tampering with the free market.

I believe that one of the reasons we're in this mess is because the Fed forced rates to stay low for so long after they were due to increase, which led to the buying spree, inflated prices, and further blowing the bubble.

Here are my thoughts on some of the responses that have been made to my original post. I disagree with some, of course, but everyone seemed to put thought into it. Thanks for your interest!

Quote: I am educating my children to believe in modest living, free markets and social responsibility. I am teaching them how to become stewards. I hope that they take any wealth I leave to them (not likely to be a big pile of cash, by the way, more likely to be business and investment assets) and increase it geometrically.

Response: I think that’s the ideal thing to do, if you can somehow guarantee that it can be done successfully.

Quote: They have many acres of property in California, that have been held for 4 generations and have been offered millions for it by builders.

Response: I have never understood why families keep land for generations and never sell it. What good is it, then? You might as well not have it if you never use it.

Quote: And what kind of inheritance does a child receive when Dad 'could've' helped out but didn't because 'he said I didn't deserve it?'

Response: What I mean is that the world doesn’t owe them anything. They shouldn’t expect the money. They do not deserve to inherit money. How can you deserve a gift? Do I deserve to get a birthday present every year? I do think they deserve to inherit food, shelter, knowledge, love, support, etc, though, because that is my moral responsibility.

Quote: To tell you the truth, I don't see many charities that deserve any money, either. Quite often, your money doesn't go towards what you think you are giving it to. I didn't bust my butt all my life to give some charity a bigger advertising budget and another luxury summer home for their director.

Response: I couldn’t agree more. There are probably only a handful of really good charities where most of the money is spent actually helping people. You better believe I will do my research first before choosing one.

Quote: I think it's horrible that a parent would rather give their money away and hurt his children so deeply.

Response: What person can honestly say they need the money more than a tsunami victim who has lost everything? I pity whoever would be “hurt” if their parent chose to keep someone from starving to death over handing out money to them.

Quote: It maybe different if you have looser kids, but then again. Who's fault is it that your kids are losers?

Response: My concern is that the money would corrupt them. It happens all the time.

Here is something I've learned over the years that I wish I had realized when I was starting out--that real estate is not so much an investment as it is a business. Once I realized this, I learned the following things about exit strategies I thought I'd share:

Businesses, like real estate, can be planned, built, finished, and sold for a profit. But what if you own a business that buys and sells real estate? It's not the same. The best you can do is sell the real estate that you've bought, and that's the end of it. No one will buy your business and pay you several times your current yearly profits, as they would other businesses. Stinks, doesn't it? I'll go into the details of why this is, but also offer this self-coined truism as a consolation prize:

"You'll never sell your real estate business, so you might as well automate it."

I. Other Businesses' Options and Exit Strategies

Other industries have it good, or at least some of them. If you were to start a company that, for example, sells chairs, you would make your initial investment and get to work. You'd test ways to find people who buy your chairs, and you'd develop relationships with retailers who buy from you in bulk and resell your chairs to the public. Once you make enough money to survive, you grow the business by reinvesting profits, borrowing, or raising capital.

Then you get bigger, sell more, make more, and before you know it, you have a track record of several years. You could now sell your business to someone else. But, of course, the more profitable your company is, the more someone will pay for it. Each industry has its own rules of thumb, but for the most part a buyer will offer you a multiple of your company's yearly earnings (hopefully several times).

Other things besides earnings can increase your company's sales price, such as systemizing it. If you can show a buyer how your company runs itself without you (the owner) having to do anything, you can imagine how much more attractive it will appear to them. Who wouldn't want to own business that spits out money year after year without much work? It's worth paying more for.

People and companies who buy businesses also want to buy something that is scalable. This means that they should be able to grow it without having to hire a ton of people. Law firms can't do this, because each attorney can only bill so many hours, and in order for the firm to make more money, they will have to hire more attorneys. Compare this to a software business where people can download the products from a website-you could potentially sell hundreds or thousands more copies per year before you have to hire someone new.

So, selling it gives you a lump sum of money that you can use to start a new business, invest somewhere and retire on, or whatever. Most businesses don't sell because they wouldn't sell for a substantial amount, but it's still many entrepreneurs' dream to build a business, sell it for a huge amount, and get the heck out of Dodge. I know a few people who have done this, and I am insanely jealous.

II. Why Real Estate Investment Companies Are Different

The reason I'm jealous is because not all business types are able to do this. Some businesses rely so much on the owner and their specialized expertise, that it would be hard for a new owner without that same expertise to jump in and make it work. Like a law firm. Or a doctor. Or, regrettably, a real estate investment company that flips and/or holds property.

The best that we can hope for is to sell whatever assets we've accumulated. For doctors and law firms, those assets are customer lists, supplies, and maybe the building they are in. For us investors, it's our properties and that's it. Our companies are only (perceived to be) worth whatever we can sell our properties for.

I think that an investment company is scalable. I can picture a company that buys and sells 100 houses per year and only has a tiny office of staff. But when is the last time you've heard of a real estate investor selling their business? I haven't. It just doesn't happen. Instead, we're just looked upon as individuals with real assets that we could sell off, and I doubt any investor would pay market value for them.

III. But at Least You Can Automate It

You can even write systems for your real estate company and get it to the point where it practically runs itself without you. But no one cares. So, if you can't sell your company, you might as well make life as easy as possible and systemize it for your own benefit. Map out who does what, write the systems, and hire the right people to run them for you and give you reports.

And, if it's creating cash and equity profits year after year anyway, this may not be such a bad thing. You just need to know what you're getting into. So while individual houses have multiple exit strategies, your investment business as a whole has two:

Sell off all of your properties and liquidate the company.
Own the business forever-keeping your properties, maybe buying more, maybe selling some.

I opt for #2, but encourage you to make your business as easy as possible to manage for your own sake.

I'd like t get everyone's thoughts on handing over one’s wealth to their children and grandchildren after passing away. The practice has infuriated me for as long as I can remember—mostly because:

1) I am not one of those children or grandchildren,

2) The wacked-out principles behind such gifts, and

3) What often happens to the money and the recipients.

All four of my grandparents as well as my father had passed away before I was out of middle school. I don’t remember receiving any inheritance, and I didn’t care about one then or now. I’m sure that if someone in my family died and bequeathed a substantial amount of money to me, I would graciously accept it and do my best to put that money to work and not blow it on stupid stuff. But that still doesn’t make it the best use of their funds and I’ll be darned if I do the same with mine.

Of course, someone’s wealth is theirs to spend however the heck they want to spend it before and after death. I just can’t understand why people feel the need to give money to children who have done absolutely nothing to deserve it. Yes, you heard me. I don’t believe anyone deserves to inherit anything. It is a gift that someone may choose to give to their children, or they may find some place to give it that is even more wise and beneficial.

Let’s say I die when I’m old and have an estate worth millions of dollars:

1) What service have my children provided that justifies such a substantial compensation? If anything, I think children should pay their parents to reimburse them for all of the time and hours spent teaching them, cleaning poo, and keeping them alive.

2) What special needs do they have that justify hundreds of thousands or even millions of dollars? It would be one thing if they had a major medical condition that could be cured with a sizeable inheritance. But if this were the case, I’d likely use the money for that purpose before dying and not after.

I can hardly believe that my children need the funds from my estate more than starving people somewhere else in the world. In all likelihood, my kids will grow up in middle-class neighborhoods, go to college, stay out of debt, and be able to provide for themselves. Hopefully they will listen to what I have to say about becoming wealthy, but if not, I have no reason to believe they will not be at least middle class, (assuming there still is one in 20-30 years).

So what on earth would make me believe that these privileged, self-supporting, and independent sons and daughters of mine need money more than people whose homes were destroyed by tsunamis through no fault of their own? Or breadwinners in less-advantaged countries who could finally escape the shackles of poverty by starting a small business with the help of a micro-loan?

But instead, people must think, “I love my kids. I want to give them stuff. When I die, I’m going to hand over to them on a silver platter everything that I, in comparison, have had to scratch, scrimp, save, and toil for my entire life.” Dumb, dumb, dumb, dumb, dumb.

I’ve had to work for every dollar I’ve earned—why should they be any different? The idea of handouts is appalling. Million-dollar handouts? Gag me with a spoon.

3) Will they even know what to do with it? Do I even need to go into what happens the vast majority of times when the 2nd and 3rd generation receive money earned by the 1st generation? It gets blown and the kids come out rotten. I’ve seen it among my contacts, and there are several books and plenty of research on the subject.

For these reasons, I might give them a nice bonus or something when I kick the bucket, like a down payment on a house. But even then I’d make it conditional, according to the rules of my living trust, upon at least the following:

A) Their mortgage payment is 1/3rd of their income or less,

B) They have no consumer credit card debt, and

C) They have not willfully misspelled any of their children’s names on purpose, just to be different (another pet peeve of mine).

But any wealth I still have at that time, provided I didn’t spend it all on $1000/pill prescription drugs, is going to micro-loans or some other place where at least 90% of donated funds will go to recipients who really need it.

I’ve leased back to sellers a number of times successfully, but have grown weary of it (as you will see) and will never do it again because of when it has blown up in my face despite my best efforts. There are more than enough other ways to make money in real estate without having to defend your very existence on the planet.

Because what tends to happen when you lease back to sellers is what I call the “Prostitute Principle.” This law is defined as this: “The value of your services completely diminish as soon as your service has been provided.”

I have seen this happen to real estate investors time and time again who lease back to sellers. As soon as they ethically and legally help a seller avoid foreclosure, and do everything they promised to do on time, the seller will turn on them and start complaining about some perceived injustice, calling them a con artist.

If you can live with being treated like garbage by the very people who would have been thrust out on the street like vagabonds in the middle of winter without two pennies to rub together were it not for you bending over backwards and risking your butt to save them with an overly generous arrangement that’s better than 99% of other investors would ever consider doing, then by all means, go ahead.

If the irony of explaining something multiple times in clear, direct language, and having them read and initial every paragraph of a painstakingly understandable, notarized CYA letter, contract to SELL, and Lease Agreement, only to be threatened with legal action because they claim they didn’t know they were selling their house does not make you ashamed to belong to the same human race, then proceed.

If you’re going to do it, just know the following things:

1) No matter how intelligent, sensible, and responsible you believe a seller to be, they will mutate into something else entirely the very second you advance funds and solve their problem, to the same extent, and with the same speed and ferociousness as Bilbo Baggins in the first Lord of the Rings movie.

2) You will go from benevolent savior to despicable con artist within 1 week after closing.

3) They will almost always stop returning your calls once you have solved their problem, which makes collecting rent or qualifying them for a loan more difficult.

4) They will understand the terms of the sale and lease with 100% certainty, until the closing has occurred, at which point something which scientists do not yet comprehend alters the chemistry of their brain and supplants their true memories with false ones. From then on, they will either forget A) That they agreed to sell their house, B) That they agreed to pay rent, or C) Everything else they promised to do, or D) All of the above.

5) They will miss 2-3 rent payments per year, on average.

6) Having a good CYA letter is not enough to prevent a lawsuit. They will always find an attorney to represent them no matter how clear it is that they are wrong.

7) A good CYA letter is not enough to keep you out of a long, exacting, and expensive court trial that could last 2 years and cost tens of thousands.

8)A judge has it within his power to completely ignore the paperwork and everything the seller signed and undo your transaction from having happened. It is all based on his whims and fancies.

9) Your transaction might be considered predatory lending even when it’s plain to see that they sold their house and are renting it back again (which, interestingly enough, is done all the time with commercial property by business owners who wish to raise capital without relocating).

10) You will have to have a ton of equity in the house when you buy it, if you ever plan on selling it back to them, because they will only be able to get a loan (if at all in today’s lending market) for 70-80% of the market value, which will probably be lower than it is now if you’re in a declining market.

11) If you buy it subject-to, their credit will improve quite a bit from you making the payment on their loan. If you pay their loan off, there will be a verification of rent to qualify them for a loan, so kiss their chances goodbye if they miss even one payment in the next 12 months (which they will).

So if you can live with all of this, go ahead and do it. If you’re like me, you’ll miss the good old days when two people could make an agreement, shake hands, and both do what they promised.

Josh, I think the video is excellent, as is the whole social media/viral videos strategy behind it. It is nice to see real estate investing join the 21st century, as I'm tired of gurus and promoters taking themselves so seriously and having archaic websites.

Thanks for having such a progressive site, and making it so much fun to come back to.

I've met and spoken with Pete a few times at investor events, and he really knows his stuff and is very honest and it shows. The information is great and thorough. The details of rehabbing was not a strong suit of mine and it's good to hear the facts from a contractor that isn't trying to work for you on your renovation.

I don't see anything wrong with shopping for estimates. Just because you compare the first few estimates to other ones doesn't mean that one of the first few estimates will not be the lowest price. Plus, you can always go back to the first few guys who gave you estimates and see if they will go lower. If they will, they have the chance to get your business.

I'd have to say these three for these reasons:

1) Rich Dad, Poor Dad -- For making me want to get started

2) The E-myth Revisited -- For inspiring me to learn how to run it like a business using systems, and

3) The 4-Hour Workweek -- For showing me what life could be like and helping me cut my working hours WAY down.

I wouldn't put anything in your ad to screen people out, unless it's a letter or postcard, in which case you have more space and can slip in a sentence saying something like, "I'm not going to give you some ridiculous lowball offer like the We Buy Houses guys will. But I do have to make some kind of profit, so please understand that I can't pay full market value without losing money."

Or don't say anything at all, which might be better, as it only takes 1 minute on the phone to tell if they are motivated or not.

My preference is to get a live answering service to ask them the basic questions and email the notes to you. Then you only have to take a few seconds to pre-screen the seller without having to waste time leaving multiple messages, getting a returned call in the middle of dinner, etc, with a person whose house you already know you won't be buying.