How to Get Started Investing in Real Estate | Ask Clay Anything

Audio Transcription

You have questions. America’s number one business coach has answers. It’s your brought up from Minnesota. Here’s another edition of ask clay. Anything on the thrive time business coach radio show

yes and yes. Paul Hood. You’re looking good, my friend. Hey buddy of Phil and good to good to be here. I haven’t seen you in the box here for, for, for quite awhile and in the studio because you’ve been a busy man. You’ve, you’ve bought a house. Yes. You bought a commercial property. Yes. Tell us all the things that have been going on in the world of Paul Hood. Well, you know, a lot of times people think that for, especially for CPA, the end of the year, it’s kind of a slow time, but the reality is, is the best time for me to buy an accounting practice is at the end of the year. Because once people give us a chance, they stick with us. Uh, and when you buy it, a practice and accounting practice or a tax practice in, in December, and then you send them a letter out and they get it in December and January, they don’t have time to go look for somebody else.

Now they exist the chance. So you are a, you’ve bought an accounting practice. Yes. Can you share what to a city in Katusa? We now have offices in Bartlesville, Tulsa Katusa Claremore we have about clients in about 40 different States now. So you bought an accounting practice and did you, did you also buy a commercial building? Yes. So I actually called this lovely lady, uh, about buying her practice and she said no. And so then I found out what building she was in. Yeah. So I bought the building. So you bought the building? So I was going to be her neighbor. Yeah. And we both do the same business. So then she decided to go ahead and say, Oh, there it is. Okay. So you’re good. So you bought a practice. Yes. Did you buy a building? Yes. You buy two practices or one practice? Well, we’ve, uh, um, let’s see.

I bought one earlier this year. We bought three this year. Yeah. Okay. So you bought three this year. Andy bought this is all since the last time we were on the shelf. Yes. And you also, uh, moved into your new house? Yes, we have been a busy day. Yeah. It was fun. How was the party? It was great. People everywhere. I understand Michael Levine attended the party. Did, was it these keys? A touchy feely guy, you know, that big tall guy from California? Just Michael Levine has been the PR consultant of choice for Michael Jackson for Nike, for prints. And uh, he, he is a, a, a man who likes to hug. He does. He likes to hug and, and everything is real philosophical, right? He compares it to chess and checkers and life in general. He, he’s a, he’s at a different level. He is at a different level. Now on today’s show, we have some questions from some Thrivers.

What I’m going to do is, because we have Amber and Charles Cola here with us. Charles, good to see him, my friend. Merry Christmas to you. Oh yeah. Maker’s miss view. Ms Amber, how are you doing? Fantastic. You getting back in the swing of things now that you’re back from the cruise? Absolutely. Okay. Well how did they get on the cruise ship that ran into each other? Where was that? Yeah, there was a couple of cruise ships or NHI. I figured I could just see Charles, his big muscles standing on one side of the ship and it kinda causes it to sway a little bit and runs into another ship. I pushed it out of the way.

Is this very recent? That is really to carnival. I think there were carnival not too long ago. Oh, I do see it. It’s just a pair of carnival cruise ships have rammed into each other and the Harbor of Cozumel. Mexico causing damage to both vessels. The collision happened around eight 50 Friday morning. The carnival glory was coming into the dock when it pulled into the carnival legend already. Morde Shunda. Okay. This, Justin, if you are driving a cruise boat, you want to make sure to look both ways before pulling out. But this, this Justin, make sure you look both ways if you are driving a cruise boat. All right, here we go. Now the first question from a thriver for Paul Hood, is this, what is the best way to get in store to get started investing in properties? All right, well, you know, you’ve got to figure out whether you want to go big or you want to go small.

You got to figure out how much active involvement you want to have into it. Uh, you know, and what’s a, the real estate you’re going to be for. Um, so believe this particular thriver, he and his wife earned about a hundred thousand dollars a year total combined income and he’s never had an investment properties before. Well, here’s, let me tell you how I got involved with it. Um, I decided if I was going to do it, I wanted to go fairly large because I wanted to have enough to where I didn’t get a call in the middle of the night. You know, my, you know, toilets stopped up or whatever. And so I started looking at, um, [inaudible] people around the community that owned multiple homes that may be were close to retirement or past retirement that really wanted to, because clay, when you have real estate, uh, there’s always a pain in the butt factor, you know, [inaudible] it’s not like just putting money into a, uh, an investment account or whatever you’re dealing with people, you’re dealing with things that break and, and there’s a pain but factor.

So what I did was I found, uh, an elderly gentleman that had about 10 rental properties and I just every about every three, four months, I’d just ask him, Hey, you want to sell those yet? You want to sell those yet? And in, of course he did, but he didn’t want the tax consequences, which was even better because he was willing to carry the note. So one of the things that I would do is, is if somebody wants to get into it and start decently big is find somebody that already owns them that might want to sell it and carry the note because it’s a whole lot easier to work with in a bank and then you refinance them after about five years and then you’re off and running. Now I have a three little tips I want to, I want to, I want to tap into Charles your wisdom on this here.

But um, step one I would say I would encourage you, I’ve, I bought a lot of properties and I’ve messed with it and help people flip houses and done that whole thing. I would look at 50 properties. I would just say before buying anything, look at 50 properties. Um, Charles, I mean you guys are opening up new locations for Cola. How many properties did you look at, whether it be digitally or in person that weren’t a good fit? Oh wow. We’ve, we went through hundreds. Hundreds. Yeah. We’ve got a list that we literally were, what was it, 50 a week that we were looking at across the country? We’ve just settled on two, but yeah, hundreds. Yeah, hundreds before buying one before buying one before leasing one hundreds. Okay, so again, step one, I’d look at 50 properties while establishing a hard rule for buying at a discount.

As an example, you might say, thou shalt never buy a property that’s not a undervalued by anywhere less than 30% you know? So if you’re looking at houses, as you said, the house is worth 100,000 I won’t even buy it ever unless I can get it for 30,000 off. And that way you’ve got a hard rule step to buy undervalued properties in nice neighborhoods. Now this is a rhyme, but it’s not a positive one. People going through a divorce are always a good source. And a Paul, why is that? Because well, a lot of times the cause one or do want to be vindictive, a lot of times they just need to clear off the that asset or that debt off of their, their situation. Absolutely. Now, step three, buy one before buying 10. And I disagree with Paul, what he said about going in big.

Sure. I’m just telling you this, I, my wife and I did the rent house thing and you know the one thing I don’t like about rent houses, Paul, uh, dealing with people. Yeah. The people who rent the houses. Yeah. Cause it says something about a man. And again, if you’re out there and you’re in a, in this spot, I’m not judging, I’m just trying to help you. This show’s all about helping you go from where you are to where you want to be. But if it says something about you, Charles, what does it say about somebody who’s 45 years old who cannot afford to buy a house? What does it, what does it say about, I mean again, out of great people out there find themselves in a bad spot. But what does that really say? In your opinion? If you’re 45 years old and you can’t afford to put any money down or your credit score is so low, you can’t buy a house.

Personal discipline, personal mastery first and financial frozen. So you need a little business coaching. Yup. I mean, Paul, if somebody has a, you know, 400 credit score at the age of 45 what does that say? That says they’ve made some poor choices probably in their life. And people change. Seldom we believe in change, but it’s one of the things that’s tough is that when you have renters, you get a lot of people reaching out to rent and they always have a story, right? It’s always like, the reason why I can’t afford to buy right now is because I, I’m, I’m getting a divorce or because I am going to be in town just for six months. So there’s always a story, right? And when you get to the end of the story, usually you find that half of it’s true, half of it’s not. And then you still have a mortgage that you have to pay.

So you find a renter and you agree you’re going to pay $1,000 a month in rent and your mortgages, you know, six 50 a month. Well, you know, it’s all good month. One month, two month, three month four, they’re a little late, a little late month five, they’re really late and they kind of can’t pay it all that month. Sit out. Month six they can’t afford to make two payments and they say, Hey, if I can pay half, I can pay up front. And then you start dealing with it. So I would just say buy one before buying 10. Sure. And to Andrew bloomer, one of our thrive time show teammates here, this crazy guy, he does the group interview for renters. Oh wow. So he actually had all of the potential candidates show up at the same time and he found a great render and had no problems. So that’s a powerful move to move. Now here’s a question number two from the thriver it says Paul Hood. Do you recommend financing to build an investment portfolio or is there a better strategy? I guess he’s saying, do you recommend paying cash or financing?

Well, so and, and you’ve heard of Robert Kiyosaki’s got a couple of books called rich dad poor dad. We had his coauthor on the show. Yeah. And another book called cashflow quadrant. And so clay, the theory is, um, there are investments or certain, certain investments are good cash flow products and some are good at building equity, building wealth. And the reality is is real estate is typically in the early years, um, are more of a early years of life, are really more of a equity building or an asset building business. And then once you get them paid off, they become a cash flow. And so the theory with Robert Kiyosaki and that I prescribed to is, is I, if I have a a hundred thousand dollars and I go buy $100,000 a single property versus taking out 100,000, use that for the 20% down to buy $500,000 worth of property, I’m going to have less cash flow per property. But in total should be about the same if not more. But what happens is I’ve got, I’ve leveraged that $100,000. Now that I have five renters, they’re paying my equity down or building me equity in real estate or in then if one of them becomes vacant than I have four to help cover carrot, carry the note. So I would absolutely, if you’ve got limited cash, you want to finance because to create wealth you could have to leverage time people or money and and so in real estate you can leverage money by doing that way.

So when you are going to buy your first investment property, was this listener out there, how much money down is he probably going to have to put in or is he and his wife gonna have to put in to get that first? You know your, your non-residents you need, it’s not the house that he lives in. How much minimum should he have down is as a percentage?

Well, banks typically always want 20% but if you have a, if you don’t have the experience, a lot of times they want 25 or 30% down. And so that’s why I’m saying a lot of times is if you get your first one, maybe you’ve got an uncle or you’ve got a grandparent or you’ve got a friend’s mom that you know has a property. And so, um, I think some of the diamonds in the rough you find are not, it’s harder to find a property that is, meets a lot of the criteria that we have that’s advertised with a realtor. And so a lot of times it’s just knocking on doors or asking, finding out who’s got what and when they’re tired of messing with the people. Go ahead and say, and a lot of times they’ll carry the note for a period of time because it’s better for them taxes. And when they carry the note, you typically may be have to put down 10%

now, Paul, we have another, we have another question from a thriver about saving money. They said, what advice would you have for someone who struggles to save

money? I would say just do it. So, um, I would recommend, yeah, I mean just do it. Because what happens is there’s a psychological thing that goes on with us that we spend the money that we have. And so it’s not like you open your wallet and say, Oh, I got 60 bucks. I got to warrant. Where’s this money? I gotta go spend it. It just happens. And so we teach in clay, in, in you teach in your workshops that you save before you spend ocean. And then you typically your spending adjust to your lifestyle, your lifestyle just to what you have. And, and I would recommend a book called the richest man in Babylon. And eh, I don’t, I have people that come and talk to me. Clay, they’re in, you know, up to their eyes and debt. And the first thing I say to them is start saving 10% because you have to, um, our boy Michael Levine said, your best decisions, your best choices, got you to where you are today. So you have to change what your choices to change your lifestyle. And the very first thing you do is you’ve got to start saving immediately. And you say before you spend, and then you’ll, you’ll adjust. And so what happens is you create, you learn to create a lifestyle that you live on, 70 to 80% of what you make.

Charles Cola, you had a hot take.

Yes, Paul, you always would say about automating that. A lot of people that don’t have the discipline to do it, but if you set it up so it’s automatically taken out, first thing, you’re not thinking about it. So when you get that income checking is automatically goes it directly into savings. It’s mind freedom. You don’t have to think about it. So there’s no cognitive dissonance or mental dissonance with trying to pay Dan or trying to say that it’s right. Just automate it. Yeah. And there’s two things that way you do that, do that with a 401k, you know, that comes out before you pay. But a lot of times if you have direct deposit at work, you know they can put it in two different accounts. So before you get it, you have them direct 5% or 10% to a savings account. The rest of it into your checking account and you don’t see it. And so it takes a, a takes positive effort or action to go dip into that savings. And so you flip that on your, on its head. So, uh, the other way is it takes positive discipline to write a check to savings. And so if you can change the dynamics to where you actually have to go get it instead of having to go put it in, it works.

Yeah. We, we interviewed, uh, David Bach who wrote the book called the automatic millionaire and Devin, if we could put a link to that on the show notes there. I’m David Bach again, the bestselling author of the automatic millionaire. Uh, he’s been featured on Oprah numerous times. He’s been a nine time New York times bestselling author and he hammers home the importance of automating your savings. Now w Clement stone, a bestselling author also says, if you cannot save money, well then the seeds of greatness are not in. You, says if you cannot save money, the seeds of greatness are not in you. My next poll, another question from a thriver is, do you recommend flipping a home or flipping rental properties and why?

Well. Okay. So, um, the only difference is home and, and rental properties, they’re me. They’re both real estate. The big difference would be, uh, and builders do this sometimes, so they’ll buy a house or in, and you don’t have to be a formal builder, but if you buy a house and it is your primary residence for two of the last five years, you can sell that bad boy clay and, and exclude up to $250,000 of gain. And if you’re married, $500,000 will again, repeat that one more time. That’s powerful. Sure. So if I was to buy a house and I’m going to flip it, but I move into it and work on it as I’m living there and I’m there for two years as my primary residence, I can sell that house and have up to a half a million dollars for the gain, not paying taxes. But it’s actually better than that clay because the, the geniuses in Washington, D C instead of, let’s say I only lived there one year, so if I only live there one year, then they index the 500,000 so I can still have a $250,000 gain on a house. It’s my primary residence and I only lived there one year. So if you’re actually doing the work or you can stay in the construction, it’s a great planning tool to actually move into that flip house and you can do it tax free and you do this over and over and over and over again. So from a tax standpoint, and of course if we can save the taxes and that’s great and it’s not deferring it into the next house, clay, it’s tax free.

You know, we interviewed a, a guest, a Michael Corbett and Michael Corbett is an actor who has done very, very well for himself. You’ve seen him in like star Trek or he’s won Emmy awards for daytime television. And uh, he, he wrote a book called find it, fix it, flip it. And his book is, is phenomenal. And it’s, it’s how to make millions in real estate, but just one house at a time. Sure. One small win at a time. And if you want to learn more about that, just go on the show notes and you can find a link to it. Or just do a search right now for how to flip houses. It says do it. Do a search right now for a fix it, flip it, make millions in real estate and thrive time show. Just do a search for fix it, flip it, thrive time show and you’ll find it in Google. Click the link. Boom. You can listen to the show right there. That gets into more detail. Paul. Next question, can I roll my 401k over into an investment property without a penalty?

Okay, so this is a common thing that’s out there and you have to be very, very, very careful. So what they, what they typically do is people think you can take your 401k and you put it into what’s called a self directed IRA. And in that self directed IRA, they buy real estate. And so in theory, you can take your IRA and invest in real estate. The problem is if you do anything there, if you receive any economic benefit, for instance, if out of your funds, you buy a hammer, a hammer, and you go and you add to use on that Jay, that rental property that’s in your IRA, but you hang that hammer in your garage, you’ve just received an economic benefit and they can disallow your entire IRA. So that little $3 hammer can cost you tax on half.

So this just did, don’t, uh, get $3 hammer

and hang it up in the wrong spot. Is that our tip? You could look at it that way. The bottom line is, is if you’re going to take your IRA, your 401k and put it in a self directed IRA, you should hire somebody that does everything. You shouldn’t collect the rent, you shouldn’t call repair people. You shouldn’t go and fix things yourself. Um, and you can accomplish that by investing in things called real estate investment trusts or different things like that. But a lot of people try to circumvent that. They want to invest in real estate, but they want to use their IRA money and that’s great, but you have to be extremely careful with that. If I want to be careful, do I have to work with an accountant like you to be careful or what? What do you mean by be careful. Yeah, be careful is yes, you want to work with somebody like me and come and ask me before you do it.

Because a lot of times I’m trying to unwind her or try to figure out how to make this work. Hey, how fun is it to deal with the IRS? I mean we, we love the IRS. We love, they collect the taxes we love cause you’ve got to have taxes to pay for the roads and the schools and the bureaucracies and the open the missiles. That’s right. And the weapons in the military and the bureaucracies and you’ve got some, we, we know the IRS. These are people that it’s their job to enforce the taxes when there’s a lot of squirrely entrepreneurs that aren’t paying their taxes. But what happens if somebody gets in a bind and then they reach out to you for help? But do you have any prayer of helping these people? You know, it depends if once you, it depends on where you’re at in that whole, um, uh, timeline.

If, if we get to them early enough and they’re not actually in collections because, uh, the collections folks, um, they can be fairly firm. Yes. Um, unenjoyable um, but you know, that’s their job. I feel, feel sorry for him cause they deal with people all day long. Anybody in collections, whether you work for the IRS or not, people lie. I don’t know if you know this clay, but people sometimes lie this just in people lie. Don’t buy a $3 hammer and put in the wrong place and do not, do not fail to look both ways. I mean, make sure you look both ways before you pull out your, your carnival cruise boat. You don’t want to run into another bus. Right. We’re making a list today. This is a list of practical tips. Yeah. But no, we can help them. And there there’s different things. I’ve had clients that that owed millions of dollars to, to pay, you know, get out of it, get off the IRS is checklists for for 300 bucks.

And it’s so, but you have certain parameters and, but yeah, the, the main thing is the IRS wants you to get back into compliance and all of that. And a majority of the people I work with are at the IRS or you know, they’re pleasant. It’s just you get into collections and that’s where the fun happens. Well, Paul, we are now going to go interview a wonderful guest here, uh, named Sam DeRosa and she was the, the uh, guest, um, on the show called song land. Let me play a little, let me queue up a little, a teaser of, of Sam DeRosa. She is a, a absolutely talented songwriter. Just got signed and she was on the show song land and this is a, her performance on the show song with what? But just a little portion of it here. Here we go. Let me CUDA. I should

be drunk right now. Tense him with strangers, kissing new faces. But it’s 1:00 AM I’m thinking I don’t want to be too [inaudible] still messed up halfway. [inaudible] how to get over.

Well, her voice is as good as your voice. Like come on. She’s the same level. How many times I’ve saying to somebody I should be drunk. I cannot count how many.

Whoa. I spoke. We’re going to be interviewing her next. That’s all going to interview aJ T McCormick who founded scribe media based in Austin, Texas. And then we’re going to come back and ask you more accounting questions. Love it. I am so excited. But you have to end today’s show with a boomer. You psychologically prepared to right there. I’m ready to go. Are you ready to end with a yes, very, very. Devin, are you prepared to him in the boat? Let’s do it. Here we go. Three, two. Could you share, uh, the name of your company a little bit more about what you guys do at living water irrigation, where the name comes from?

Absolutely. Positively. So a living water, irrigation. The most important part of that to me is John seven 38. So the, it’s mentioned in the gospel a number of times, uh, where the living water. But our specific scripture that we drew our name from John seven 38, it says, whoever believes in me rivers of living water will flow through him. We have a very distinct vision as a company on who we are and what we want to do. And I believe that I was put here to go make some money to give it away.

How long has this particular business been around? I’ll even around just two years, sir. Two years. And you guys, uh, we first met, how did we first meet? So it would have been

October or November of 17.

October or November of, of of 17. Yes sir. And in terms of your, uh, growth as a company, how have you, how much have you grown this year? Uh, so this year we’re up 450% year over year. So now that you’re implementing this program, you’re getting more calls, right? Are you get more calls? Absolutely. Sales are going up. You’re gathering reviews from your real customers, adding content to the website, adding a gallery of work. So I’m going to actually take a minute and make you really uncomfortable. Nice. I don’t think I want this to happen,

so cause I know how humble you are and I know you don’t want to hear this kind of stuff. It’s only my paleness that keeps me humble. So when we started with y’all, it was awesome. We had a little company, just me and one dude and one little vain. Yeah. And a 17 was great. I ate more than ramen noodles, but not much more. Um, 18 was really good. We started to implement the systems, got start here, got the boom book, went to a couple of conferences and said, okay, I’m going to buy in, I’m going to sell out. We went to the business coaching, got business coached by Marshall and Victoria and started to implement as opposed to just listen to actually be doers. It’s in James, it says, don’t just be here’s of the word, be be doers as well. And so we implemented scripts, we implemented systems, we implemented checklist, we implemented, um, a proforma for quoting and all these things that you talk about. And so just as a real person, and I’m real, I promise you, there’s a bunch of Josh Wilson’s out there. Like I’m a famous baseball player and football player and a gospel singer. Oh, Whoa. Wow. But this Josh Wilson just digs ditches for a living. But I just want to say

thank you

standing here for all the systems. I encourage everybody out there. Go pick up, start here, go pick up the boom book, the stuff you hear on this show. It actually sincerely works. It’s not just some nonsensical guy sitting in an awesome man-cave who’s bored. So he wants to record a show. Um, and then from there, here’s another super duper move for you. Schedule your day. Oh wait, wait, wait, wait. Isn’t that right? There’s a hot,

Oh God. Schedule your desk.

So I was listening just a few months ago and I was running all over the Tulsa Metro area from Glenpool till also to broken arrow back to Allosso to jinx to Midtown. And I’m like, man, why am I getting nothing done? Why am I getting nothing done? Well, your issue is that you’re running places. You’ve got to drive. Well, obviously I wouldn’t have this belly if I was running Jonathan. So my wife says to me, Hey, how was your day, honey? Oh, I worked all day. I did all these things, and I’m like, wait, I have nothing to show that I did anything. So super moved. Number one, you’ve said it’s 17,000 times whatever gets scheduled gets done. So now my day is scheduled. Come on now. So if it’s not on my schedule, yep, Nope, it doesn’t happen.

Listen here, here’s a little secret. You can become successful. You have the tools needed to start and grow a successful company, but you’ve got to implement the best practice systems. You have to implement the proven systems, checklists, and processes that have been shown to work time and time again.