Street Smart Real Estate Investing With Lou Brown
There’s a battle raging between would-be millionaires. One side feels like playing the stock market is the best place to invest, while the other side feels that real estate is that hands-down winner.
Who is right?
We know that real estate is a fixed-sum investment and is generally lumped into either commercial or residential property. You can pick any city, state, or country and they only have so many acres to sell or to build on. Whether investors buy, hold, sell it, or carve it up into pieces, land doesn’t go away.
That is very different from stocks. When it comes to securities in general, you can basically take everything we just said and reverse it.
The common denominator between stocks and real estate is that shares of stock represent a percentage of something fixed and finite. You can create smaller and smaller percentages of ownership, but a company can only sell up to 100 percent of itself.
The REAL question here is which one is better for you to focus on if you are looking for the financial win?
Well, that is the topic of this Wednesday’s LIVE STREAM with Lou Brown. Lou has been an investor and mentor for over 40 years. Thousands and thousands of people have come to Lou to learn his unique approach to real estate investing. Tune in and participate in this LIVE discussion that will help you create the kind of financial freedom you desire.
0:09 – Introduction – “Let’s talk about the difference between investing in real estate vs. investing in wall street!”
0:36 – No control in investing in the stock market
2:40 – Investing in something that people need: Real Estate
4:57 – Path to Home Ownership Plan
6:30 – Path to Home Ownership: Real People, Real Stories
9:25 – Wall Street Involving In Real Estate Business
13:36 – Get Connected With Your Community
18:31 – Bank restrictions to qualify for a mortgage
21:00 – Relationship is Key!
22:32 – What is the best play if I want to make a few thousand dollars fast?
30:00 – Lou’s final thoughts this week: Knock a door or two today, maybe you will find a deal!
If you are JUST getting started in real estate investing, you NEED to attend my ONE-DAY virtual training. I teach it LIVE over ZOOM, and it’s only $1 (yes, one dollar) for SIX HOURS of solid how-to training! https://www.wealthbuilderworkshop.online
If you’re ready for a more in-depth experience, then you owe it to yourself to investigate my THREE- DAY Millionaire Jumpstart Event. I host it four times a year in various locations, and you can attend LIVE and in person. I’m your coach all three days. Find out more at https://millionairejumpstart.com/
You’ll discover how to start investing in real estate (or do it easier and more profitably) at either Wealth Builder Workshop or Millionaire Jumpstart.
Here is an overview of my proven and practical approach to investing in real estate.
Need help deciding which power-packed “one-of-a-kind” training on making money in real estate investing is best for you!
Call 1-800-578-8580 or visit us online at https://www.streetsmartinvestor.com
Visit our YouTube Channel: https://www.youtube.com/user/StreetSmartInvestor
Listen to our Podcast:
Wall Street vs. Real Estate Investing, The Battle Royale
Welcome, everybody. We are going to talk today about investing in real estate versus investing in Wall Street and some distinctions that you want to hear.
So you could be an investor in Wall Street. A lot of entrepreneurs invest in a number of things they consider to be diversifying so that you’re in a safety zone. Something might happen in one arena that won’t happen in another arena. One arena’s going up while the other arena’s going down. There’s so many different things that are happening out there in the world that it does make sense to be in multiple arenas. Personally, I like being in the real estate arena in multiple places inside the real estate arena because I haven’t found anything better than that. Now I used to be a stock market investor. I did that for many years. And one thing I discovered and just kind of embraced at one point was that I really have no control over my stocks in the stock market.
That those markets are manipulated. In fact, they actually disclose it to you. If you’ve ever seen a stock being promoted to you, the brokerage house actually will say something like so-and-so Goldman Sachs or whomever, it might make a market in this stock, or make some market in this security. And that says to me, well, what does that mean, “makes a market?” Well, about what that means is we’ve got this stock. We are going to put our arms around it. We’re going to love it and care for it and cherish it. And we’re going to sell it to all of our customers. In other words, we’re going to force the value of this up because we’ve already got a market to sell to. And to me, that’s manipulation. That’s not me looking at a stock and deciding that they have good financials and they have a good future.
And therefore I’m going to put my money where my mouth is. I’m going to go ahead and put my money in this particular stock and the operation of this stuff. Now, we contrast that with the world of real estate and in my world, I absolutely love it because what I’m investing in is something that people need and I can control it. You see, I can’t control anything that happens on Wall Street. So whatever those people choose to do, decide to do, one day, the stock is a loved, cherished item, the next day, it’s trash under their feet and they’re onto the next thing. And so all of a sudden the stock was here and the next day it’s there. I don’t like that. That’s not what I’ve seen in my real estate world. I’ve never seen a house go from here to there overnight. Right? So what does happen though is I’ve got dependable, predictable, monthly income because I’ve got these nice folks living in the house.
They get up, they go to work. So I don’t have to. They get up and go to work. They make their money and they pay for the space that they’re purchasing or renting from us. I like that. I think that’s a good business model. I think it’s a safe business model for real estate investors. For really, any kind of investor because you are providing housing, something that’s a basic human need and something that people are gonna appreciate because of the fact that you are providing it to them. So we add to that in our world because taking away all the pain and suffering of management is one of the things that I had as a goal years ago, when I discovered that I had this great thing called “real estate” and this great sustainable business that could last for decades and even generations to come.
I said, “What a great thing!” However, there’s all these challenges of management. And if I do something different, if I give my residents an incentive, if I give them an opportunity to change their lives for the better, then I’ve really killed two birds with one stone. I found customers that really want a better life for themselves. And therefore they’re likely to take better care of the property. And they’re likely to be more inclined to pay and to pay on time. So certainly that was a shift that we made in our business when we started offering the Path To Home Ownership Plan, where we help deserving families, regardless of credit or financial background, to end up with home ownership. So as a result of that additional shift and change in our business, then we were able to monetize our assets in such a way that we could really have our cake and eat it, too.
Now, what do I mean by that? I mean, through appreciation, that money every year is always worth less. It’s always worth less. You can see it, Bureau of Labor Statistics has an analysis of inflation and what it does to our money. So a dollar at the beginning of the year, it’s 97 cents at the end of the year. So that’s always the truth. Given what money is now, I think that’s going to be even more impactful with the amount of capital that’s being pumped into the economy right now, as we speak. What are we also seeing correspondingly? We’re seeing inflation occur. So if you are an owner of real estate, then you are benefiting greatly from how things are today. And so congratulations on that decision. And I just invite you to embrace the anti-landlording model that I use, to give people an opportunity at home ownership.
Very cool, Lou. So, you’d mentioned the Path To Home Ownership. Can you share a couple of stories about people that were unable to loan, like the bank wouldn’t let them get into a home, but you were able to help them?
You know, there’s actually so many that I’m very pleased and blessed that I was able to please and bless a lot of great folks that came into our world. They saw what we were offering, called the Path To Home Ownership. And so they were able to move in at one of the levels that we’ve created in the Path To Home Ownership. We’ve got rent, rent-to-own, owner financing, cash sale. So they were able to move in at one of those four levels. And when they join us, what happens is that every month they’re building up towards moving to the next level. And at the same time, they’re building up their credit so that they can qualify for a loan at a traditional lender. So one of the ladies, Ishey, that I’m thinking about, just a hard working person who had her own kiosk at a mall and doing her thing, making her own soap, making her own perfumed-soap, and lotions and things like that and selling it to people.
And she struggled. She worked hard. And in fact, a lot of her soap-making occurred at the property that we actually ended up selling to her. But over time she got with us, she stuck with us, she built up her credit. She built up her downpayment working hard as an entrepreneur. And she came to us last year and she said, “I’m ready. I’m ready to move from the rent-own level to the in-house financing level,” which is our gold level. And sure enough, she did exactly that. She’s been a wonderful client. She’s paid on time. She’s built up her credit and she can do anything she wants to in her future. Now that she’s purchased the property from us, under our agreement-for-deed program, that property’s actually worth a lot more than we sold it to her just a year ago. So she could turn around tomorrow and sell that property and make about a hundred thousand dollars on that property. And I’m so pleased and proud that she embraced the program, took advantage of it, and now she’s got equity for herself that she could monetize in an instant. So that’s a great story about Ishey.
I’m trying to get her to come back into the office. She’s so busy all the time. I want to get a picture with her and what have you, but she’s one of our great clients that moved up to the gold level.
Awesome story, Lou. So, we talked a little bit earlier about Wall Street versus Main Street. And one of the things that’s happening is there’s all of this cheap money and it all seems to go to Wall Street and now they’ve put their sights on real estate investing. And everyone’s talking about how houses are being bought for 10, 20% over what they’re being listed for. Supply is low. So is Wall Street involved in this aspect of real estate investing?
Well, it’s almost like a spotlight got turned onto our industry in the last downturn. In the last downturn, of course, houses went upside down. The government, in their infinite wisdom, said, “Look through the Community Reinvestment Act. We’re going to cause banks to have to lend to people that have poor credit.” And instead of helping those folks get in a position to win, well, they just, if they could fog a mirror, Wall Street was lending money to them. And so what happened was a lot of that got concentrated in certain neighborhoods. So as a result of that, a lot of those went upside down when the loan products that they had, which was called a “two and 28,” it was a 30 year loan. Two years, they had a really super low interest rate. And then for 28 years, it went to market. Well, as a result of that differential, a lot of people found themselves, “Hey, wait a minute.
My property didn’t recover in a significant amount of time. And my job didn’t increase my income that much.” So as a result, they got themselves in trouble because they took a bad loan product for no other explanation than it was a bad loan product. It was a failed policy. And so as a result of that, they were actually in a position and got foreclosed. Well, all those properties coming back to the market at the same time caused prices and values of those properties to drop dramatically. All of a sudden, anybody like myself saw that you can buy this asset for these dollars and still get this much rent. Wow! That’s an incredible return on investment. So sure enough Wall Street saw that, too. And they came in and started buying up properties in droves. So it literally created a whole new industry. Wall Street in our backyard and our back pockets, too.
So, individual investors used to buy these properties and offer them in their local communities. Wall Street came in and started buying them in droves. So, reading an article last week, Lennar had a whole subdivision of brand new homes in Houston, and Wall Street came in and bought the entire subdivision. 124 houses. So it never made it to the marketplace for good people with good enough credit and good enough downpayment to be able to qualify and make that a community for themselves. No, that whole community now is going to be a rental community. And, frankly, Wall Street came in and paid too much for those houses. But as a result of return on investment and their cost of funds is so low, they’re able to do anything they want to, and they really don’t have to perform at a high level for their investors because their investors have no other place to put their money. So whenever you trust your money to Wall Street, don’t expect a huge return on that, but sure enough, they have made a market in real estate as well. And we’ll see what that brings, but certainly a whole lot of people that would love to own a home are now being exed-out of the market because of Wall Street.
Excellent summation of what’s going on with Wall Street. So, Lou, I know that you would probably not consider yourself a Wall Street-level investor. And certainly everyone that you teach is usually a mom-and-pop level sort of investor as well. Although they could have 10, 20, a hundred houses by the time they’re done working with you. But what would your strategy be like? So I’m a real estate investor. I’ve been around for a couple of years. I’ve dabbled here. I’ve dabbled there. Let’s just say, I have three houses. And I spent some time with you at some of the live events and you lit a fire under me and I’m thinking, “Holy smokes, I’ve been playing small! Look what he’s doing. Look what other people that are here at the events are doing, I want another” let’s just say, I say, “The next couple of years, I’m going to stretch from my three to 10 houses or my three to 20 houses.” What, from what you just said, it’s hopeless.
Well, no, it’s not. It’s not. And the reason is that we have a different approach to the marketplace. So Wall Street is going to do what Wall Street does. With their crazy money and their low cost of funds, they’re hiring every real estate agent around every property that hits the market. Boom, it’s being sold to Wall Street. And so “institutional buyers” is what they call them. So what happens is that that leaves less for individual entrepreneurs to be able to acquire and build their own network. Well, what Wall Street doesn’t understand that I understand and that I’ve been teaching my clients for years, is to get connected with the community-based relationships, get connected with all the different civic organizations, get on the city council or the county commission, or get connected with those folks. Meet the mayor, meet all the politicians and who they are and what they do and tell them who you are. Now in our world, we’re Certified Affordable Housing Providers, and we help people to end up with home ownership regardless of credit or financial background through our Path To Home Ownership Program.
So we have a wonderful, amazing message that we can give to the community very quickly. You know, almost like an elevator speech and they go, “Wow! That sounds fantastic!” And they’re so impressed. They’re excited about it and they want to know more. And so what happens is, now it opens the door for us to have a conversation with them. Oh, by the way, if you know somebody that’s looking to sell a home, we’re buyers of houses for our buyers, the people that are on the Path To Home Ownership. So we definitely want to know about those. And by the way, if you know somebody whose family has somebody that passed away and they’ve got real estate they want to get rid of, or somebody is in trouble and they can’t make their payments, hey, that’s another group of folks that we help.
There’s a whole variety of people that we help. Maybe somebody doesn’t have the funds to fix up their property. We can come in and buy the property as is. Maybe somebody has a situation, health issues, things like that. They don’t want a bunch of people going through the house. They don’t want to clean up the house. We could come in and buy the house. So that’s a community-based conversation that can be had. And as a result of that, many of the properties that we buy are never on the market. Nobody ever sees it. Wall Street doesn’t see it. Real estate agents don’t see it. We’re able to do that through our community relationships. So I always encourage my folks, “Look, ignore Wall Street, do your own thing.” Join the Chamber of Commerce. Join the BNI, which is Business Networking International. Join the Jaycees, the Rotary Club, get connected with the community because one of the great things that happens is people now share your information with other people. They’ve seen you. They know you, they like you. And therefore they want to put your message out to other people that may be looking to sell a house, maybe looking to buy a house and they can’t qualify for a loan the traditional way. Well, you come in and definitely can help those folks. So get your message to the market, get connected with your community. And you’ll have some amazing deals that Wall Street will never know about.
So what I hear you saying, Lou, is there’s a bunch of people that, over a year ago, had no problems getting a mortgage. Today, 70% of them can get a mortgage. In other words, 30% of the people who still have the same jobs, same down payments, same credit rating, same everything. The bank manager says, “Sorry, you know we’ve changed our rules and you don’t qualify.”
No, Scott, it’s the opposite. 20 to 30% can get a mortgage at the low interest rates, 70 to 80% cannot. So there’s qualifications that are required at the bank, are pretty stringent, and you’ve got all kinds of issues. You’ve got income issues. You’ve got length of time on the job. You got debt-to-income ratios. You have a lot of different factors that cause people to get a setback and not be approved for a loan. So that doesn’t mean that they don’t have significant down payment money. That doesn’t mean that they don’t have income, verifiable income. They do, but the banks’ guidelines restrict them due to regulations, restricting them from being able to offer folks the opportunity at home ownership. Well, we’re a lot closer to those folks. So we can look at their overall picture and make sure that they are qualified for the property.
Make sure that they’re a good risk for us. The last thing we’re looking for is trouble. We want people to be able to afford the property that they move into. So we screen them very closely as well, but we make sure that their income is stable. We make sure that they have enough income. Sometimes they combine their income with other people that are moving into the property. So there’s enough income on the table to qualify them, but we get applications from everyone and we go through our own guidelines to make sure that this is a good move for these folks. And when it is, then we can work with their credit, work with their down payment over time and help them build up to the point that they can get a new loan from the bank.
I want to do a quick shout out to Blake. He’s made a couple of really good comments. “This man, Lou Brown, helped me into retirement the Street Smart way that he’s talking about now, with what he’s talking about now. Thanks, Lou!”
Blake, oh, Blake. My friend up in Blowing Rock, North Carolina. I hope you are doing fantastic, man. Looking forward to seeing you again soon. Thank you! Thank you for that comment!
Yeah. And as he said, really, as you said, “Relationships are key.” So that’s really important.
And Blake, he’s an avid relationship kind of guy. He gets out there, he’s very outgoing and nobody is a stranger to him. And that’s a great way to be. Blake is a good example of how to be out there in the world. Just open yourself up, tell people who you are, tell people what you do. People want to help you. We all want to help each other. We are in this game together, aren’t we? We are social beings. And I say, you are a social being, be social. Don’t find strangers out there. Find people that potentially can be lifelong friends and get to know them, get to know what’s going on in their world. Have them tell you about their family. And one thing leads to another. They’re always going to ask you what you do. And that leads now to the opportunities that can connect all kinds of different things that aren’t on the market. And aren’t listed with agents.
Lou, I have a question that came directly to me that I wanted to make sure that we covered. So what is the best play if I need to make a few thousand dollars fast? Pop it into a stock?
There we go with the stock market again, but the thing about a stock is unless you’ve got insider information, I’ve already told you that stocks are manipulated and you just don’t know about musical chairs when they’re going to stop the music. And are you the one left standing? So, I don’t ever bet my money in the stock market if I want a quick turn. Now, another thing you can do though that can produce a deal pretty quickly is just going out there and knocking on doors and asking people, “Hey, do you know of a house for sale in this neighborhood? We want to buy a house in this neighborhood.” And the person might say, “I know I don’t,” or they might say, “What about mine? I’ve been thinking about selling my house.” Boom, you’ve got an opportunity. It’s not on the market. You’re not in competition with anybody else. So that’s a quick way that you can get a deal. You can get it under contract and then you can open it up to investors. Maybe one of those institutional investors or someone like myself who buys houses all the time for our folks that are on our Path To Home Ownership. So definitely, we’re interested in anybody’s property. If you’ve got it under contract, you can make a quick, few thousand dollars in an afternoon, simply by finding a property and putting it out to people like myself.
Lou, I’d like you to take a few minutes and tell the folks a little bit about our Wealth Builder Workshop. I know there’s one coming up pretty soon.
Well, actually, this coming week, I’d like to tell you about the upcoming Massive Passive Income event. It is a four-day event where I go soup to nuts through what I’ve been talking about today, which is the ability to not only find property, but “buy right, buy cheap.” The big thing is once you get the property, how do you monetize that in such a way that’s so different from landlording? So typically, landlords make the difference between what they owe on the property and what they rented out for. And if a roof or a water heater goes out, man, your cash flow can be eliminated for a year or more. But what I talk about is to pick up from there and talk about 25 different profit centers that we’ve developed over and above that, that are services to our clients, that are our gifts and support for our clients.
So as a result of doing that, we’re able to make a lot more on each property by providing beneficial things, to our leads and to our clients that are already in homes. So we definitely are excited about sharing that with folks. We have a four-day event where I break down the marketing to attract these folks. What to say, how to say it. We get into the paperwork, the standard rental agreement, the option agreement, the agreement for deed, the sales contract. So many different aspects of what we do to take advantage of those profit centers. There’s many, like I said, there’s 25 different profit centers. In fact, we’ve got a profit center calculator that I’m going to be giving you. And on top of that, we’ve got our entire closing package that we do with our clients. We’ve got that on what’s called “auto-fill.” And so we give you special software where you fill in one page and it automatically fills out all of the paperwork.
It’s awesome. It’s a work of art. It makes your job so much easier. Your life is so much easier as an entrepreneur because most entrepreneurs do not love the paperwork. Do not love the details of this business. Well, we’ve got all the details dialed in and we’ve got it automated for you. So once we go through the four-day training, you’re actually going to be presented with that as a bonus for coming to the event. So we’ve got a lot of great things. We’ve got some gifts for you, as well. If you call 1-800-578-8580, I’ve got a $500 bonus that they will tell you about. Just call in +1-800-578-8580, or go to StreetSmartMPI for massive passive income. StreetSmartMPI.com. And you can learn more about that upcoming event.
It’s a great thing. I only give this training one time per year. So I encourage you to definitely get there and learn about the big money that we have in this business on a residual income basis. The idea is to buy right, buy cheap, and now monetize that property for up to 43 years. Imagine just a single property, you can have income for 43 years, but I’m going to show you exactly how to do that. And now imagine having 10 of those properties. Imagine having 20 of those properties. It’s an amazing cash flow. It’s an amazing future. It’s an amazing retirement plan. And definitely one, even if you’ve got properties already, you can convert to this model and have yourself the most beautiful exit strategy you’ve ever imagined in your life.
Lou, we have a comment from your buddy, Blake, which we have to put up here. “MPI is the way Lou got my cashflow up the wazoo! Massive Passive Income is why I could retire.”
Yeah, baby! I love getting that feedback. Thank you, Blake, for sharing that, I love getting that feedback from my clients. A lot of people have been following me for decades and they’ve built multi-million dollar businesses doing exactly what I’m telling you about. And there’s lots of them. They’re all over the country. A lot of them are actually going to be there at the event because they come to get recharged every year, so that they can get the new information, the latest information. What we’re doing as a result of COVID, what we’re doing to be able to help people that have gotten behind in their payments, how we’ve been able to access some government funds to pay for those things. We’re going to be covering all that during that event as well.