Latest / Cash Flow for Life / Chapter 1: Walk the Talk for Lifetime Cash Flow

Transcript

Chapter 1: Walk the Talk for Lifetime Cash Flow · Cash Flow for Life

• 0:00
  Michael Sarracini: Keyspire presents Cash Flow for Create Lifelong Passive Income Through Real Estate, written by Michael Sarracini and Scott McGillivry, narrated by Michael Sarracini. Before we get deep into this book together, I want to take a moment and thank you for being here. Scott and I have worked very hard in creating this book, assembling our experiences over decades, and putting them right here in this book for you. I've spent countless hours recording this book with my voice because I want this to be a truly authentic and inspiring experience for you. By downloading this audiobook, you bring meaning to what I do and help support my purpose of helping people create a fully passive income lifestyle.
• 0:47
  And for this, I thank you. I want to congratulate you for deciding to invest in this audiobook. And really, if you think about it, invest in yourself. You'll see that by the time you've completed even part one of this book that the few bucks you spent here is nothing compared to the value you will receive, and most importantly, the passive income potential that will be created inside of you. No matter where you are in your life right now, the strategies and tactics in this book will make an impact.
• 1:19
  The readers of our books and clients of our programs are just like you and come from all different places and stages in their life. Some are renting their home right now, and they want to buy their first home. Some own their home. They got a great job, making great income. But they have the question, what if?
• 1:37
  What if there's more? How can I get some passive income and eventually get to a point where my passive income covers all of my expenses? And then we have clients that own multiple properties, and they want to leave their job. They're ready to run a full time real estate investing business. I should also tell you that I like to riff a little bit when I talk, so there's some bonus content in here.
• 1:59
  All the resources for this book are available for you right now at the audiobook webpage. There are many calculations, charts, graphs, and other things in this book that can be a little challenging to fully understand over audio. So my team has set up a dedicated web page for this book and put an amazing resource together for you. You can find it at www.keyspire.com/cashflowforlifeaudiobook. Go there now.
• 2:30
  Download the resource and bonus content and follow along as I read. Plus, I've also added some quick start bonus content for you and technology resources and recommendations to help automate your business immediately. One more thing before we dig into the book. I should mention that if at any time throughout the book, you need more help, you want some handholding through the techniques you are learning, You want one on one attention and guidance as you implement what we're teaching you. Don't be alarmed.
• 3:00
  This is absolutely normal. We're only human, and we want it done faster. Scott and I recognized this need over a decade ago. And to help fill this gap, our company, Keyspire, provides direct coaching for real estate investors just like you. If you'd like to work with a coach to create shortcuts, hold you accountable, and increase your confidence, you can go to our site, keyspire.com, and browse our coaching programs and see if there's anything that's right for you.
• 3:29
  If direct coaching isn't right for you, we also have specialty programs in everything from raising private money to Lifestyle Freedom Day. Check it out. Okay. Let's talk about this book, Cash Flow for Life. Our goal with this book is to focus you on a long term investment strategy that will provide passive income for you for the rest of your life.
• 3:52
  What does this mean? To us, it simply means that all the money you need to live the lifestyle you desire comes from passive income and not having to go out and work at your job. We call this point at Keyspire Lifestyle Freedom Day. It's the day that our clients no longer have to work because their passive income from real estate pays all the bills, pays for the trips, the gadgets, the lifestyle, whatever else you require in your life. I want this for you, and we'll be moving you closer to your Lifestyle Freedom Day in this book.
• 4:27
  This book has three parts. Part one, we call laying the foundation. This will be, as it sounds, the foundation for everything you're going to learn in the rest of the book and in your real estate investing business. Now laying the foundation doesn't sound like a lot of fun when you're building a house. It's really the second story and the third story and all the fun stuff that people wanna see, the results they wanna get.
• 4:50
  But just like a house with a poor foundation, if you lay a poor foundation to your real estate investing education, then the first story and the second story of the house, they're not going to be stable. So laying the foundation is critical. Go through the activities. We walk you through exactly what to do chapter by chapter to build this business right. In part two, we're gonna have a lot of fun.
• 5:13
  It's about buying and managing properties. We're gonna expand your success team. We're gonna give you the formulas you need, the checklists. We're gonna give you the techniques you need to go out and start buying and managing properties right now. In part three, we're gonna put some rocket fuel on that, and we're gonna learn how to create a business through sustainable growth rate and all of the things that you would do to automate and set up your business.
• 5:34
  Really exciting chapter. Altogether, these three chapters create cash flow for life, the book and the system that we want you to use to get to your Lifestyle Freedom Day. Okay. Well, that's the overview of the book. Again, thank you for being here.
• 5:48
  Stick with it. Stay committed to yourself. Get this book completed, and I promise you'll be closer to your Lifestyle Freedom Day. Okay. Let's get started.
• 5:58
  Acknowledgment. We want to thank the Keyspire team for making this book and this company possible, not only in the creation and production of the book, but also in the countless hours of trial and error over the years we had to endure to gain the knowledge and experience contained in this book. We want to thank the many mentors and coaches we had throughout our lives. Because of you, we'll never underestimate the value of coaching for ourselves or our clients. Chapter one: Walk the Talk for Lifetime Cash Flow.
• 6:34
  When we first met in college back in 2000, the phrase lifetime cash flow had not even entered our minds. Cash flow is definitely a prominent consideration for two students of limited means working their way through school. But our cash flow considerations were week to week, with no cash flow thoughts beyond making next month's rent. At that time, we didn't have much of a relationship together beyond a casual recognition of each other's existence. We were two Type A personalities.
• 7:06
  We found ourselves clashing in debates and classroom discussions. We had no plan to build on our testy relationship. However, one day we realized something. We were both entrepreneurial, and we both wanted to make money for the present and for our future. We both wanted to make an impact on the world.
• 7:26
  We did our research and found no better way to consistently grow your wealth than, you guessed it, real estate. On top of wealth building, we thought that real estate would be challenging, fun, and put us in control. Real estate investing became these things for us and much more. So we had a vision: to start and build a real estate investment company focusing on student rental properties to start. With us being students, it was perfect.
• 7:57
  We had the inside scoop on all the tenants. We plowed into the task with productive synergy that soon began to produce results and create not only a productive partnership, but a close friendship as well. We got jobs as waiters at the same restaurant, and we could usually be found on breaks and after our shifts on the restaurant patio sharing ideas to flesh out the vision. Over a couple beers, we would write notes and ideas on cocktail napkins. We shared tables and helped each other in the restaurant and then spent late night hours studying and developing the project.
• 8:32
  We continued to pick up as many shifts at the restaurant as possible and decided to move into a house together with three of our other college friends to split the rent. Money for rent, tuition and books pretty much exhausted our entire disposable income. Well, the great thing about the restaurant job was that we could bring home leftover potatoes for dinner and eat them for lunch the next day. One of our monthly tasks was to take turns collecting the rent from the other three tenants and depositing them in the landlord's bank account. We were sitting there on our old couch that was left in the house by the previous tenant, dining over leftover potatoes.
• 9:10
  No one else was there, but if they had been, we're sure they would have enjoyed seeing that light bulb come on over our heads when the conversation turned to making the rent. Hey, Michael, there's another hole in the couch. Maybe we should buy a cover for it. Well, Scott, unless you're hiding a bank account somewhere, I think you can forget about buying anything this month. I just collected and deposited the rent for the landlord, and we're broke again.
• 9:35
  I'm getting very tired of potatoes. Yeah. Menu change at the restaurant would add some variety to our lives, wouldn't it? I never really paid attention before, but isn't this monthly rent deposit about $500 more than our landlord is paying each month for the place? Scott, we've been working on this in class.
• 9:53
  He has the supply, and we provide the demand. So I guess that's his reward for getting it right. Michael, are you thinking what I'm thinking? While we're eating leftover potatoes on a ratty old couch, our landlord is sitting in another city putting $500 into his pocket every month. Yeah.
• 10:12
  And while he's sitting there checking his bank balance, we're studying and working fourteen hours a day and don't have a dime left over to spend after we send him that rent. Man, it just got a little brighter in this room. We need to buy a house and fill it with student tenants Like Bob Bond. It all came together in that conversation. The rent receipt, our long hours of work and study, empty pockets, and the class business model.
• 10:42
  That evening, we went from not a clue to a blinding flash of the obvious. We needed to go out and buy a rental house. We needed to be on the other side of the rent equation. Why should we be putting $500 into our landlord's pocket every single month when we could be putting that money into ours? All we'd have to do was buy a house nearby and rent it to students.
• 11:09
  Of course, then we would need to buy another and another and another and keep doing it, multiplying that $500 a month into a real estate business cash flow. We took the hard way. Now you reap the benefits. Who are Michael Saracini and Scott McGillvery? And why are we able to claim that we'll move you through the process to Lifetime Cash Flow?
• 11:34
  First of all, we're record keepers. We've made a ton of mistakes building our real estate investing business. What is more important to you is that from the first day, we documented virtually every lesson learned and every tweak of our system. Our journals of activities, mistakes and successes became the plan we had, as well as our encyclopedia, our reference of investing. If we came across a problem or situation a second time, we simply referred back to our journals to see how we handled it successfully the last time.
• 12:08
  Then, we applied the same process to the new situation. What is just as important is that we can look back and see how not to handle this situation, because we had also documented our failed or money losing situations. Jumping right into business without experience wasn't an easy process. What we found when our feet hit the street was that we were hyped up but didn't have the tools or knowledge to implement a foolproof plan. We had a handshake introduction to real estate investment when we really needed a mentorship relationship to guide us.
• 12:45
  We needed someone who could walk the talk with us. We're not suggesting that we wanted someone to be with us to offer on the spot advice. Instead, our need was for an executable plan. We needed a plan developed around a well set of defined goals, and we needed the knowledge and tools to implement the plan successfully. Half of that plan would need to include what to do to ensure real estate investment success.
• 13:12
  The other half of that plan was just important. We needed to know what not to do. We needed the experience of trial and error, with someone else making the errors. A great deal of our life experience comes through trial and error. We make mistakes, and hopefully we learn from them.
• 13:30
  We also hope that the mistakes aren't too painful and too costly in relation to the value we receive. One thing we can tell you for sure: mistakes when you're learning real estate investment through trial and error cost money, and sometimes a whole lot of money. Although we didn't really find that formal mentor, we forged ahead anyway. We leaned on each other and supported each other. We had successes, and we made mistakes.
• 14:00
  Through it all, we kept records of both. Because of our obsession with documenting every success and mistake, we feel comfortable with setting a goal for how we will help you succeed. It's simple. Our goal is to eliminate for you the expensive process of trial and error. Let's talk about goals for a moment, because we will be setting investment goals throughout this book.
• 14:26
  We just gave you the first one, which is the need to eliminate trial and error in your real estate investing process. This is our goal, and three words explain our attitude about goals. Goals are mandatory. It's an attitude that will work for you if you develop goals realistically. Setting goals shouldn't be a haphazard process.
• 14:50
  Goals should be carefully thought through. Setting realistic, attainable goals allows you to consider them mandatory. If your goals are realistic, based on your financial abilities and the time you have to invest in the business, then you're much more likely to attain them. We didn't set that first goal of eliminating trial and error for you without thinking it through very carefully and making sure that the resources were available to make it happen. If you wanna get our goal sheet, make sure you visit the resource page for this book to have our downloadable goal sheet.
• 15:24
  That's www.keyspire.com/cashflowforlifeaudiobook. That's www.keyspire.com/cashflowforlifeaudiobook. That's where you'll find your SMART goals worksheet. The Pareto principle. The Pareto principle is named after the Italian economist, Vilferdo Pareto.
• 15:50
  In 1906, he observed that roughly 80% of the land in Italy was owned by 20% of the population. He noted that there must be some correlation to other earthly things, because 20% of the pea pods in his garden contained 80% of the peas. Some people have come to call this the eightytwenty rule, and we see this relationship in many areas of the natural world. Sales trainers like to cite this rule, telling wannabe salespeople that 20% of them will end up making 80% of the money. Whether in real estate, used cars, or retail, many people believe there is validity to this rule.
• 16:30
  Now we're not here to tell you that 20% of real estate investors make 80% of the money, though the rule may apply. Instead, we have our own rule, our own ratio to give you. The ten thirty sixty rule of real estate investment success. In our discussions with attendees at our seminars and with the clients in our courses, it's very clear that few of them are there because they have a lot of love for real estate. They're there because they have a definite idea of the lifestyle they want, and they want to learn how to create that lifestyle.
• 17:07
  Real estate investment is that vehicle that will carry them from where they are today to the destination of their lifestyle freedom day. You are probably reading this with many of the same lifestyle goals and questions. You want to know how real estate can be used to provide a comfortable or even wealthy lifestyle. From our early seminar and learning experiences, followed by trial and error, we have come up with our own rule that will ensure your success in attaining that lifestyle. Our rule is the ten-thirty-sixty rule for real estate investment success: 10% motivation, 30% education, 60% implementation in coaching.
• 17:50
  Motivation. First, we believe that you're motivated, or you wouldn't be reading this. However, motivation doesn't come from just being told that you can do this. Motivation builds on that belief that you can do this, but the bricks and mortar of that building are the knowledge and the tools that reinforce your belief that you can successfully create lifetime cash flow from real estate. You want to learn whether real estate investment can improve your life.
• 18:18
  And if you believe that it can, you want to go out and get started. We want to feed that motivation and make it stronger. We'll accomplish our goal for you through a plan and realistic goal setting process that will soon make it clear to you that this will happen. The 10% motivation part of our rule is straightforward because you come to this book motivated already. It's also easy for us because we don't have to try to figure out what to write or teach you that will motivate you.
• 18:47
  We know what motivates us: getting successfully past our mistakes and repeating our successes. Education. While education isn't the major requirement of our rule, that doesn't mean we don't value it. It's imperative that you learn about your market area, real estate investing principles, and how to actually use your knowledge and not just amass it for the sake of bragging rights. In this book, you're going to be thoroughly schooled in everything from market research to valuation and property purchases, and even on how to be a successful landlord.
• 19:22
  Education is a super critical component of our program and to your success. The only reason you're less than halfway to success with just motivation and education is that the proper focus on your motivation and the right implementation of your education are absolutely critical. Implementation and mentorship. Logically, you might argue that if you're motivated and if we provide you with a thorough real estate investment education and the tools, you will end up successfully managing properties for lifetime cash flow. While that's true for some people, it's not true for all.
• 19:57
  If that were true for all people, then most of the real estate investing courses out there would be turning out the majority of their students as highly successful investors. But they aren't. It's like losing weight. How many people start a new year with a resolution to lose weight and shape up? It's a very large number.
• 20:16
  Many buy some diet and exercise books, and many more join a gym with a plan to work out regularly and drop those pounds. They're motivated, they have some education, and the gym provides equipment for weight loss. Yet how many successfully lose a significant amount of weight? That number is much smaller. However, when we look at a TV show such as the biggest loser, we find a high percentage of the participants losing a lot of weight.
• 20:44
  Even those who don't make it all the way to their weight loss goals generally have lost a lot of weight, though not as much as the winners. What's the difference here? The diet books and eating advice are exactly the same. The gym equipment is exactly the same. The motivation is the same.
• 21:02
  There's one critical difference. The huge difference is in group participation and the mentorship and coaching of the trainers. Success comes from the support and the experienced help of others. This is what we are going to bring to you in your real estate investing activities. In this book, we are your mentors.
• 21:22
  We're here to help support you and move you forward. The 60% piece of success plan is the mentorship, coaching, planning, and goal setting. We are here to provide this piece for you, both through this book and through our follow-up coaching programs and resources. Avoiding mistakes by capitalizing on our experience and recordkeeping will get you started right and make your real estate investment for cash flow much more profitable, you will need a great deal of experiential information. Knowing what is likely to happen if a certain course of action is taken can be learned through trial and error.
• 22:00
  Or for a much less expensive lesson, you can learn from others and benefit from their mistakes and successes. First, it's a lot less painful financially and emotionally to learn from others' experiences. Second, it's a lot faster. If I've been able to see further than others, it's because I have stood on the shoulders of giants, sir Isaac Newton. Sir Isaac Newton's statement shows that he clearly understood why he was able to make such rapid scientific advancements.
• 22:33
  He learned what others did and then advanced their actions. He didn't start from scratch or reinvent the wheel. You're going to learn what we have done. You're going to learn how to implement it and how to advance from your experiences and ours. Now you know why implementation and mentorship are 60% of our success rule.
• 22:56
  They take your motivation and education to the next level. They provide help in implementing the plans, setting achievable goals, making those goals a reality, and holding you accountable. Motivation and education get you only so far, 40% of the way. Implementation and mentorship take you all the way. You'll get all three of these in this book from our mentorship, but in the proportions that will ensure your success.
• 23:26
  Learning from our mistakes. Sitting on that ratty couch and hatching the idea as we did is an example of a dream, not a plan. However, we weren't discouraged, and we began to talk to everyone, including all the real estate agents that happened to come to lunch at the restaurant where we worked. It seems that real estate agents go out for lunch a lot, so we ran our plan past someone almost every day. While they were nice people, most of them seemed to be a bit careful about providing encouragement to two college students with no money who wanted to buy a, at the time, dollars 200,000 home as a rental property.
• 24:06
  We understood. They were protecting us, we think. But we kept explaining the plan to anyone who would listen. Negativity kills success. While most real estate agents were not interested due to our apparent lack of experience and lack of cash, there were others we encountered who were downright negative about our goals.
• 24:27
  Whether family, friends, or college acquaintances, there were plenty of people around who believed that there was little to no chance for us to succeed. They had horror stories about failed ventures, negative press about real estate market activity, and plenty of negative sentiment about our lack of experience and our lack of money. You know the type. When you hatch an idea and verbalize it, the first thing out of their mouths is a statement as to why it can't work. It's just their nature.
• 24:57
  And maybe they have firsthand experience. Maybe they are extremely risk adverse, and the thought of investing in rental property is so scary for them. However, that's their nature and their experience. You must put all of this negativity into its proper place, the trash. We had our big picture plan, but we knew we needed more information and some help to get it going.
• 25:22
  We went to seminars, events, workshops, and even the renovation university at Home Depot on Sunday mornings. We wanted to learn everything we could as fast as we could, and nobody's negativity was gonna slow us down. Finding a helping hand. When we finally found a real estate agent who either was really hungry or took pity on us to help us, the hunt for that home was on. Our journaling nature came in handy as we looked at house after house after house.
• 25:54
  We learned something new in each of them, and we kept those for notes. Each encounter, each experience was a learning moment that we did not lose. Of course, being the very renter types who would end up as our target tenants, we knew the features of a house that would make it rentable to a college student. We quickly learned the values of properties and had a very clear idea of just what the perfect house would be for our purpose, for our plan. Using our projected business model, we plugged in the numbers for the property we wanted.
• 26:32
  The profitability and return on investment numbers looked great. Though family and friends were less than enthusiastic about our purchase, we managed to scrape together enough cash to buy our perfect home. By the time we closed on the house and owned it, we had already had multiple rental ads, both online and in print. Our business model made it clear that vacant time is a drag on profits, so we wanted to get that house rented quickly. This brings us to lesson number one as recorded in our journals.
• 27:07
  Lesson number one, don't set up multiple showings at the same time. We ran an ad and stated a time for potential tenants to come meet us at the house. While it seemed efficient to us at the time to have everyone come at the same time, when we arrived for our first showing, there were four groups of five people each waiting to get in. That's 20 people standing in front of the house. While that was bad enough, over the next fifteen minutes, seven more groups of five people showed up.
• 27:40
  It seemed that running a specific day and time ad wasn't the best way to execute our plans. While it was a trying experience, the results were awesome. Eight of the groups wanted to rent the house on the spot. This means that we got it rented that same day. Now, that's reason for celebration, but we were actually quite disappointed.
• 28:02
  This experience clearly showed us there was demand far exceeding our single house supply. Really, what we needed was seven more houses that day, and they would have been all rented. We knew we needed to buy seven more houses. Lesson number two. When there's demand exceeding supply, do something.
• 28:25
  We went right out and looked for another property that day. We had a business model that was validated by our first purchase. We had proven it, and we had the numbers to prove it, too. While buying two homes that first year seemed super ambitious to us, we already had renters, and we didn't want to waste the opportunity. When we found a suitable house not long after, we called the seven groups who lost out on the first one and offered it before we'd even buy it.
• 28:53
  We had committed renters before we even had signed the purchase contract for the new property. Lesson number three. When something works, keep doing it. When something doesn't, make a note. From these first two houses, we leveraged our knowledge and kept building on our cookie cutter approach.
• 29:15
  Cookies are a great example, not only because they're delicious, but because a recipe doesn't always work, whether the ingredients are due to preparation errors or whatever. Sometimes it works and sometimes it doesn't. We definitely made errors. Some of those errors were really costly. And they weren't all errors in either the valuation or purchase process.
• 29:37
  We also made mistakes as landlords in property management, even in rent collection and eviction when things don't go well. During the following years, we were committed to documenting our failures and our successes in our journals. These journals became an encyclopedia reference and really the origination of the content of this book and our very first course, The Successful Landlord. Where are you now? Let's get back to the ten-thirty-sixty rule.
• 30:08
  Motivation. You're motivated. Maybe even more so now because you've seen that two broke college students can build a major cash flow real estate rental business from being renters themselves. If you're here, you're 10% of the way to Lifetime Cash Flow. Education.
• 30:27
  Now you know that we have a ton of content of notes on our processes, failures, and successes. We have the education you'll need to replicate our success, and we're going to share a huge body of educational rental property investment information with you here in this book. You've just increased your progress towards success to 40%. Implementation, mentorship, and coaching. Remember our goal in serving your needs.
• 30:54
  Our goal is to eliminate for you the expensive process of trial and error. And don't forget that we consider our goal to be mandatory. We are committed to providing you with the motivation, education, tools, and resources to go all the way in achieving 100% success in real estate investment. Evolution of a successful business model. In this first chapter, we shared our college living and financial experience with you to set as a baseline for your future success.
• 31:29
  You simply can't get any more broke than we were. We had negative money. And you can't have less knowledge about rental property investing than we did when we had that conversation on that ratty couch. Since 2000, we've bought and even sold a great many rental properties, interviewed countless tenants, and made a whole lot of trips to the bank with rent checks. We've produced countless live events, training courses, and educational experiences part of our holistic investor training approach.
• 32:02
  We have the world's best real estate coaching team on standby to help our clients get to their Lifestyle Freedom Day. Combining the wide reach of our television and online audience with the highly rated quality concepts of our education and our unique tools, we've been able to help tens of thousands of people in more than 15 countries realize the potential of real estate and use it to change their lives. More than that, we've helped them realize the potential in themselves and see their amazing capacity to take what we have taught them to become wealthy real estate investors. Get ready, because now it's your turn. Action steps.
• 32:48
  Really quickly, take out a pen or pencil and write down your idea of what success in real estate investment means to you right now. Then make a bullet list of your assets that will help you achieve that success. No great detail is needed now, just an overview. A list of things like the following. Number one, I have x amount of dollars to invest.
• 33:12
  Number two, I am willing to move cash from other investments, such as stocks, bonds in the public market. Number three, it's time for me to set a serious goal and build a plan. That's all you need to do right now. It's an exercise in clarifying why you want to become a cash flow real estate investor and why you believe you can be successful. What's next?
• 33:42
  If you aren't totally convinced that real estate property is where you should be placing your money and investing your efforts, the next chapter will make it crystal clear for you.