You're about to discover how to turn a little into a lot with real estate. It's the question on many prospective real estate investors' minds. They want to know how to parlay a small amount of money into a whole lot of money through the power of real estate investing. And specially, they want to know how they could do it, in today's market, step by step. In the following two video series, I will walk you A to Z through how you can start with a small amount of money and safely and efficiently parlay it into a fortune with real estate. In the first video, I'll illustrate the traditional way to accomplish this goal and then in second video, I unveil how to do the creative way. If you have read my book or watched some of my trainings before, these two videos will bring together many missing pieces and you may leave this with an "ah-ha" moment. It may all "click" in your head as to exactly how myself and my apprentices do what we do. This two part video series is perfect for anyone looking to grow the money they have using real estate as their investment vehicle. And if you love it, please share it with your social networks. This is the kind of message that everyone who has any interest in real estate needs to hear so that they get started on the right foot from the very beginning.
How to Turn a Little into a Lot with Real Estate PART 1
Traditional Investing in Real Estate
I like to teach my real estate students the differences between traditional and creative real estate investing. Traditional is the "90%", or what most people will tend to do and interact with when investing in real estate. Let's break down this type of investing.
Deal Sourcing
This is where you ask yourself, "where did the deal come from?". There are two different "A's" where a deal can be sourced from.
Agents
Agents in traditional real estate investing are hired by investors and buyers to go out into the market place to find deals.
Auctions
Real estate brokers may also be sent out to attend different auctions as another way to find a deal. Even beyond in-person events, there are websites that auction off real estate as well, such as Auction.com.
Funding Loan (80%)
The typical traditional investor has a loan that will take up the majority but you still have to bring some money, or "skin in the game".
Down Payment
The down payment in a lot of situations, from an investor standpoint, will be at least 20%. There is also closing costs which make up about 2% of the money that you will have to contribute yourself. Part of the down payment that is given up front is called earnest money/deposit, which is about 1%.
In the traditional side of investing, these payments are required to be in the form of cash.
Profit
Rental Properties
The majority of investors, in order to turn a profit, will rent the property. While renting the property, the hope is that they receive a positive cash flow.
Fix and Flip Properties
I have a free training on the Biggest Mistake with Fix and Flip Properties that goes in to more detail. Most traditional real estate investors have difficulty doing more than one or two of these in a year, as the timeline is quite long.
Let's move on to the pros and cons of traditional investing.
Pros of Traditional Investing
#1. It Does Not Require A Lot of Experience
This only applies so long as you are working with competent and good people who know what they are doing and will not take advantage of your time and money. Traditional investing is great because you don't need a lot of education or training to succeed. The key is to connect with people who can help you and let them do the part of real estate that does require intelligence.
#2. No Costs for Deal Sourcing
In traditional investing, you will not have to worry about physically going out to search for deals. You will outsource this task to a real estate agent who you will hire to find the deals for you.
Cons of Traditional Investing
#1. Rigid Structure
Think of traditional real estate as being similar to a box. If you do not fit into this box, then you do not get in! You have to close on a deal with someone's money, leading into our next con, Hard Money!
#2. Hard Money
These deals will be required to close with money, whether that be yours or someone else's. You will need to qualify for a loan, which is very difficult. You've got to have the money! I have a training available that dives deeper into Hard Money Loans.
#3. Marginal Deals
Traditional real estate deals tend to be marginal, meaning that anyone can do them, and you are unlikely to get a good deal on something. There are not many barriers to entry because of how simple traditional real estate investing is.
#4. Lots of Competition
When there are low barriers to entry and a lot of people with a little bit of money, there will be lots of competition in the market. What this means for you is that you will not get great discounts on your deals, leading to you needing to take out a loan.
#5. When Things Go Wrong...
When things go wrong, they can go really wrong in real estate! There are a lot of cons to traditional investing and you've really got to look to find a good deal, because bad deals are all too easy to find.
#6. Slow Moving
With traditional real estate, all aspects move much slower. Everything takes so much time to complete in order for you close your deal.
How to Turn a Little into a Lot with Real Estate PART 2
Creative Investing in Real Estate
Creative investing is the other 10% of real estate. Most people tend to shy away from this type of investing, with some even believing that it is illegal. I am here to clarify exactly what creative real estate investing means for you.
Deal Sourcing
Do Your Own Marketing
In creative investing, rather than hiring a real estate agent, you will be doing the marketing yourself. Go directly to the sellers to negotiate creative terms.
Creative Terms
This is simply the absence of banks and loans. This can include Subject To, where the borrower's loan stays in place and the property title is transferred to you. Owner financing is another method where the seller agrees to become the bank. A Lease Purchase is an option some choose because you can lease a property with the option to purchase later on. Another way to creatively structure a deal is to get it under contract and flip it, assigning the contract to a new buyer. If you do it right, it is legal, but if not, it can be considered practicing real estate without a license.
Let's Talk Money in Creative Real Estate
Earnest Money
I typically do a $10 earnest money. People like to tell me this doesn't work, but it in fact does. if you are working with the right sellers, or "motivated sellers," then this will be no issue.
Cons of Creative Investing
#1. It Requires Knowledge
Unlike traditional real estate investing---the 90%----the creative side requires extensive knowledge and experience. The knowledge that can be gained from creatively investing is invaluable to you, and unfortunately, not many people possess it. The signal of this business is RARE. This knowledge costs money. Welcome to the real world! This knowledge does not come for free, it always has a price tag. Some people think that they can learn it for free, and discover that this simply isn't true, the hard way.
#2. Be Ambitious!
You have to be ambitious in this type of investing. There is a degree of business sense required to negotiate and coordinate tricky deals. You'e got to be great with clarifying difficult things. Sometimes it can help to position yourself to work with people who are already interested in doing something creative with their deal, but this is not always the case.
#3. Not Many Openings
There are not many motivated sellers out there in the real world. With creative deals, it can be hard to find sellers that are interested in creatively structuring a deal.
#4. No Dabbling
What I mean by this is that you cannot and it is impossible to "dabble in" creative real estate deals. Now, dabbling works great for traditional investors. It can be very helpful to start on small deals when going the traditional route. Investors who are looking to take the creative path must have an extensive amount of knowledge before starting their first deal.
If you keep doing what you’re doing, you’ll always get what you’ve always got.
Take the jump and use Phil and his team. Worth every penny.
Thanks for sharing. Very informative. Trying to learn as much as I can since I am a complete novice in RE.
The competition is pretty strong in this market just as if is conventional.
Very Informative
Excellent videos!!!
How are you mentoring people. Without you physically being with me. I ‘m desperate, I need to be your greatest success stories. I’ve had over a thousand dead end jobs and I’m losing my hope and trust in everyone. Please make me a believer in humanity again. I need u
And to be honest, I have nothing but six kids and a dream to leave them a legacy. I won’t be surprise if you can’t or won’t help .
GOD BLESS YOU ANYWAY,
Deena
We coach many of the most successful real estate investors in areas of the Country and Canada that are unfamiliar to us and we do this remotely. Consider making application to our Apprentice program to see is this is a right fit for you!
Hi Phil a friend of my father passed away and left him the home he does not want the home so he would like to sell it a friend of his was going to purchase it and had it appraised and an inspection done his friend was the appraiser an appraised it low at 55,000 so he could get it cheap. The assessment is 104,000 comps in the area sale between 95 and 115,000. The previous buyer over extended his self and could not get the loan so it was offered to me I have the money and was going to buy it out right the question is we have no paperwork between us contract or anything else I trust him he trust me my bank is in the process of doing the title and deed Work and I am only out $350. Do you think I should get some kind of contract between me and the seller just for security reasons. thank you enjoyed your videos this will be my first home purchase and I am looking to flip it. Only needs cosmetic interior work
Nanette
Has this home cleared probate?
I’ve been disabled for 18 years but I will do the best I can to learn more to make money.
i am enjoying reading your book that you have sent me thoughmail thank you Velma Hicks
Do you have any successful apprentices in Puerto Rico?
Not since the hurricane. We were doing well up until that hit down there.
Good afternoon Phil i had a question, how much would property tax a year be depending on the value of the home and if that could be affect cash flow?
It depends on the area and property taxes play a huge role in cash flow.
Hello Phil, how does a person become an apprentice?
Have you considered making application to our apprentice program to learn more?
I’ve been reading your material; still absorbing but it sounds good so far!
I am so serious in taking advantage is this opportunity.
Hi Phil,
I like what your doing! Thanks for the jewels you’ve drop for me.
Phill, here in Southern California that 100k home is more like 1million, 500 homes. Can you still do this here?
Our strategies absolutely work in California. The higher the values, the higher the profits.
Love your videos wish I had someone like you in my arsenal to brainstorm with you really seem on the ball and get me excited to get out and try some of these techniques
The comments are a blast. I agree there’s always good deals for creative financing because I’ve had a few. Love all the info in your videos. Thanks
Phil i purchase my first deal the traditional way over 9 years ago as a personal home for me and the family things has changed and now im the only one living their im a truck driver who wants to be in the real estate business as well what I’ve been through as a mortgage payer has shown me alot about the way things should work in real estate in just a few minutes of watching your videos I’ve learned what mistakes i had made In purchasing my property in the fashion that i did i guess im seeing things the slow way but now heres where things has changed my house was flooded and now the flood insurance is doing repair/replacement to the property im willing the use my own personal home to get started in real estate which was my plan from the beginning but didnt have funding but had the property to start with i need a starting point and your mentorship thanks
Your next step is continuing your education.
Freedom Mentor Free Video course
Is this blog real? Because anytime i ask a question i get no response.
Real
Hi Phil I had dreaming about the real estate for a long time but I am have problem with understanding how to really get it right because I am hard of hearing and lot of video don’t have close caption for me to understand so it pretty hard for me to start can u help me I really want to do this thank u for reading this
Many you tube videos have setting options to add captions. Play around with these & good luck!! KMC
Hi phil,
I’ve saved about $20000 and i want to use this money as a deposite or down payment for the loan i’m borrowing from the bank to start my 4 unit apartment business. A real estate agent has shown me a couple of 4 unit apartment already but his closing cost or fees is expensive. My question is that is it the right approach for a beginner like me and can I skip dealing with real estate agent to avoid paying their closing cost fees.
Thanks
Search for deals yourself and through an agent and after about 6 months to 1 year, it will be very clear to you which direction will yield the best deals.
Hi phil, I have a friend that owes $208,000 on an investment property that is tenant occupied. The home was appraised for $190,000 and she is paying the monthly mortgage with the rent money but she is not making any money. She is willing to do a subject to. My question is is it worth it for me to do the subject to with her, try another technique, or do nothing with her?
Hey,I thank you so much for this video,I had learn a lot, I enjoyed,keep doing what you doing and God will bless you because you are sharing with others the blessing that God had given to you,prosperity is in your way,may God Bess you. Thank you for your talent and inspirational skills.
I’ve viewed several of your vidios,and
they are very good and insightful,but,
these two are “SUPER GOOD”. They really
hit home for me. Very well done… Thank.
Franklin
Hi Phil. When you say “Subject-To”, is that the same as assuming the loan?
No.
I don’t understand what the difference is. can you please elaborate more on this subject. I am confused. God Bless Phil! Thanks!
Phil, loved your video. I am 59 years old. Just got my real estate license in January of this year. At the present time I am working in the Metro Detroit area selling real estate. Love what I’m doing but would love to learn more about real estate investing but I have no money.
I had my real estate license but didn’t renew it after 2014. If I renew it and pay the costs associated with that and do any continuing ed classes that are needed, what is my best way to be allowed to get to MLS to work exclusively as a real estate inventor? I’m in Massachusetts. I need to join up with a real estate company to be my broker, correct?
I don’t want to be involved with any of the real estate office functions, as have office time, etc. I would be looking the the least expensive way to under that broker’s company for the ability to earn commissions when they are available.. What is the best firm to join . . the one with the best splits as the one I was with Keller Williams?
Hang your license with an investor friendly broker that does a 100% commission split.
Hi Phil and Friends,
The attorneys in my area charge $250 an hour. How much might I expect to pay for them to do all the paperwork? I already started with a real estate agent before I found these videos so just wondering if it is worth it to end our current contract and our friendly terms by wasting her time. Thanks!!
That’s a very reasonable hourly rate for an attorney. The real issue is how skilled they are in this topic. If they are, the paperwork can be done in just a few hours.
Hi Phil – (Part 1) In a Sub-to situation, how does the existing seller deed the house to me? Do we go through a title company, attorney or county appraisal district? How long does it take?
All that really has to happen is the seller must sign a Deed in front of a notary and then you can physically bring the Deed to the recorder’s office. That’s it.
Work @ a full time job and am a slave to the weather, therefore needing to keep as much $$ as possible for the winter months for any emergency that may arise…..In the onset, will there be teachings that will allow me to make deals w/o very much money in order to build me up to larger deals later ? Thanks for the help..I`m a newly accepted apprentice, and am more than motivated !! Love the videos
thanks for inspiring me. But i want to start
Thanks Phil for another inspiring video on realistate transactions with a little money. I like how you break everything down to see every step in making the deal from start to finish. An also the pro an cons in the deal.I look forward seeing other videos from you , thanks again Dan
Hi Phil. Your videos are interesting. Are you required to tell everyone that you are a real estate agent even on the Creative side?
Would you recommend to be a real estate agent to gain more KNOWLEDGE ?
Watch this video: Should Real Estate Investors Get a Real Estate License?
hey phil i have a question. I’m in a situation where i am trying to this this property which is a 3 family house and fully paid off. the only dilemma is that an agent is involved in selling this property. this has stumped me a little. my question is can i still get an assignment fee if i already have a buyer who’s willing to buy it cash and if not what can i do to get this property.
MUCH harder to do creative deals with an agent in the middle. Go find deals that don’t have agents involved.
Hi phil, i am currently on training on a real estate course, I have invested some money in an education but because of the conversion ,6.5 to 1 usd ,I am in a bit of finance squeeze. My aim currently is to do some wholesaling to gain some income to continue persueing my goal. Phil can you show me the fastest legal way to get a property in a contract and contact possible cash buyers? Your training is fantastic and i wish i can be as skilled as you in the near future.
Thank you , GOD bless you to continue giving to us for your progress and the world to benefit.
Phil, thanks for all of your great info. You’ve inspired me to pull my Bible off the shelf and read Proverbs. Thank you for that! You’re one of the few of the many out there, possibly the only one that I feel I could trust. All the best to you and yours.
hey Phil how will i get that video please i want to watch so that can be motivated and join you in your business
Phil, in the fix and flip example. How did you obtain the $50,000 back ($22K down-payment + 25K rehab). I understand how you obtained $30,000 from the sale but not the extra $50,000.
You started with $50,000 cash. The video was illustrating what you do when you have some money to start with.
In Australia rental is weekly. $250 outside of city…in the city around $400 and more on a weekly basis positive. The chinese are flooding the real estate market right now. Thought someone might keen in investing overseas;)
Hello Phil.In asking for non-refundable funds from a prospected buyer,how long is the inspection period?
7 days is reasonable
Phil how is everything this is James up here in VA I just wanted you to know I love your videos and could you please send me more of them I’m really trying hard to get started in the real estate business I need all the help I can get.
phil thank you good information. I do have a questions what happened when a seller is losing their home and there is no equity on the house you just walk away or there is any other way to help this home owner I used to do some subject to but it was equity in the house around 7 years ago ok
Equity is dependent on the exit strategy. Sometimes you can sell a house on a rent to own for much more than straight retail on the MLS. So maybe go subject to and sell to a rent to own tenant buyer OR if it is really underwater, do a short sale
You have a really change my life tonight I’m 20 years old working a 9-5 and iv reach the ”crucible” which is the time in your life when you can either be your own business man or follow the crowd and ”earn money” for whatever service you just to do for the rest of your life ,I’m going to make it my business from this day on to be a creative seller I will truly pray tonight that there’s and opening .. I’m so excited is midnight and I probably won’t sleep
hi Phil this is the 20th video that I have watched of yours and I am very motivated to be your apprentice and I will join you if you accept me.you have helped me in this past year and a half of watching you be so encouraged to be a millionaire that I’m beginning to get edgy. I will talk to you soon . thank you very much.
Part 2 question- What do you look for if u only have $20000 for creative investing?
A motivated seller.
Also once I negotiate a deal how to close? Do I hire attorneys for the paperwork or type a contract myself and have it notarized?