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Real Estate Investing School Podcast
210. REAL DEAL: How to Force Cash-Flowing Deals in 2025 with Megan Ahern
00:50:05
Welcome to the Real Estate Investing School Podcast. In this episode, Brody Fausett and Megan Ahern dive deep into the art of "forcing deals" in today's challenging real estate market. Megan, a seasoned investor with over 80 deals under her belt,...
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- [00:00]
Megan
I see people, a lot of times they get burned on like their first split because they get halfway through the remodel, they run out of money and then they're just like, I guess I gotta fire sale it and sell it on a loss and never do real estate again. It's like, no, dude, just bang it until it makes a profit. Like, get it done.
- [00:20]
Brody
Megan recently did an awesome deal. And Megan's actually Cam talked to us before. It's probably been, I don't know, it might have been about a, a year or two. Megan, what do you think?
- [00:32]
Megan
I think it's been a while. At least a year.
- [00:35]
Brody
Yeah. Yeah, it's been a minute. She's awesome. Lived in Maui for a while. Is back in Maui today this week for a real estate event. But like, awesome, awesome journey. Her and her husband do real estate together. They've done over 80 deals, which is so cool. She's young, she's a hustler. They have a really cool story. But like what's been powerful about their whole story or one of the pieces I think is they just, just like you and me, like normal person, just decided to try it out and make it happen. And it's just kind of been really cool to see what's happened since then. It's been how many years since you, you did your first deal?
- [01:17]
Megan
Oh man, probably since 2016 was our first one and then 2018 full time.
- [01:24]
Brody
So cool. Yeah, I love it. So cool. So today, like we'll focus specifically on the deal that you're. That you're doing right now. Just because I think it's unique and interesting and I have some questions for you and whatnot. But yeah, anything else you want to add your, to your, to your bio intro, Go for it. And then let's just dive into your deal, kind of give us an overview on it and then we'll kind of pick it apart so people can understand it. Sound good?
- [01:50]
Megan
I think this whole forcing deals thing is so cool too. I'm glad you're like really honing in on this because right now, like, you don't just find good deals, you really do have to force them and just like grab them by the balls until they make money and get really weird with it. And so instead of just flipping or buying like long term rentals, we've just been having to force so many in so many different ways. So that's good that you're teaching your people that for sure.
- [02:19]
Brody
I agree. No, thank you. And I think that that's like you look at like any Real estate investor now that's, you know, doing it at a higher level and they're really good at that. Right. Like they have to go figure out a way to go force these deals and you can't sit back and just like sit on your heels and hope that it, hope that it works out. Like maybe back in the day you could.
- [02:39]
Megan
Yeah, for sure. So for this one here, this is going to be a primary residence for us. We bought it on the mls, but the main thing that we did is that we had our hard money lender purchase the property. And so he financed it 100% and he also financed the rehab 100%. And then when we're done fixing it up, we purchased it back from him on a VA loan so that it's 0% down so that we're able to finance 100% of the purchase and rehab this, this beautiful fixed up house that we wanted with none of our money out of pocket. And so live in flipping kind of sucks, but I love the idea of it. I don't like living in a construction zone anymore, so I like to do the construction up on the front end and then enjoy it for two or three years before selling it instead of just doing construction for two or three years. So that's kind of how we force this one.
- [03:40]
Brody
Cool. And this is, this is fun. And I like this for lots of reasons. I'm like the, the like lifestyle investor guy, right? Where like everything for me, I, I just love like creating and, and controlling my lifestyle and doing that like through real estate investing specifically and having your, your passive income cover a lot of the active expenses so you can live life on your own terms. And so part of that like I love the environment stuff and I love like the primary residence, it's just, I don't know if it's just me, I just get like this high from it. It's so fun because it's where you live, it's where you wake up. Like, like if you're inspired when you wake up, I feel like you're gonna go and produce inspirational work, right. And be inspiring for other people. And so what's cool about this aside from, you know, getting into it with no money, all of those pieces because it's your primary residence. Like I think it's pretty rad because you're essentially get to go and fix up this place that you get to go live in. Not only you're gonna have equity in it and it's going to be an investment down the road, but also it's like A fun, exciting thing because you get to go enjoy it now.
- [04:44]
Megan
Yeah, like every morning I wake up and I'm like, oh, I love this place. Like I love where I live and it makes it worth it because a lot of parts of real estate sucks. A lot of parts of being an entrepreneur kind of sucks. And so when you get to see like the fruits of your labor and just be like, yes, this is good, this is beautiful. And I get to live here. When I was flipping houses like just constantly and they were all better than my houses, I just like, I want to keep this one. I want to keep this one. And so now I have like this super dope house. Wouldn't have my own money in it.
- [05:16]
Brody
So I love it. Can you break it down for us a little bit? Just like, I know you just give us a quick overview but talk about maybe where it's at, the, the price of this, maybe how you found it a little bit and then yeah, we'll kind of dive deeper from there because I want to, I want to really like pick apart how you actually did this.
- [05:35]
Megan
Yeah, so I, I live in Lincoln, Nebraska. So it's there. It's in a super special neighborhood because it backs up to a bike trail which I think is super fun. Backs up to a park, is right by my parents house. But it's also in a neighborhood that doesn't turn over very regularly and is like a very, very nice neighborhood. We bought it off the MLS. It was listed for 460 and then it dropped to 430. We came in and offered 420 for it, which it was a really.
- [06:12]
Brody
A.
- [06:12]
Megan
Really, I call them little old lady houses. Like they're really well taken care of when something goes wrong. They buy like they pay the highest bid of the contractor to get like the best roof and the best H vac. So it's well taken care of. But it was 50 years outdated. So I love those kind of houses, especially when they're for me. And then we kind of walked it and decided it would take about $50,000 to do everything that I wanted to do to it and make it perfect for us. So we're going to be all in at 470. And then I just wanted to be able to get that loan for 470 from the VA. So we had kind of set that up. I think one of the most important things if you're going to do something like this is know that you can qualify for the 470 VA loan before getting in and doing the construction because it would suck to get to the end of it and then not qualify for that final loan product. So we did that. We knew we were qualified for it. Actually just Jeff, my husband by himself was qualified for it, which on paper it actually looks like I make more income than him. But we didn't want to have to buy the house together. We wanted him to just purchase it himself, but he qualified for it, so we just went about doing it. We reached out to a lender that we worked with on a lot of our flips and so they're usually the bank in that situation and we own the house, but we just structured a little bit different so that he's actually buying the house and then just giving us all the money up front to rehab it.
- [07:53]
Brody
Okay, super cool. So maybe like talk about that. Like, is that. Because that's not a normal thing, right? Typically to have a hard money lender that's, that's going to buy it for you and essentially you're, you're buying it back. Is that just completely unusual or is that something where there's just a high level of, of trust? You've worked with this hard money lender for a while. Is it possible for people to even replicate something similar?
- [08:21]
Megan
I. That is highly unusual. I don't think he's done it with anyone else, but he's done it with us twice. So there's like a little bit of a difference between like hard money lenders, especially like the national ones, like they're fully going through underwriting and doing all that. And then there's like private money lenders who know you personally and lend to you personally. He is kind of like a hybrid. I call him a hard money lender, but he knows us personally. He's in the town, but he does run it more like a business, but there's a lot less underwriting involved. So I think that's the only reason why he would do something like that. But essentially you could do that with anyone that's, you know, maybe in business or is a doctor, high income earner, someone that has cash, they would be interested in lending to you at 12 or 15% interest and doing it in this way. I think that the important thing for them would be if you don't perform on it, are they going to be able to sell it for more than what you have into it? And, and you have to be able to trust that person too. So there's a lot of trust happening there because, you know, I've just gone through and completely remodeled this place and I don't own it at all. If he wanted to just be a complete jerk about it, he could just sell it at the end and it'd be a perfectly remodeled house that I have no real like stakes to. If you don't like super explicitly trust that person. But definitely get some paperwork written up about it. But we just did it on a handshake deal. Probably not the wisest thing ever, but yeah, there's a lot of trust happening there.
- [09:58]
Brody
Yeah. Cool. Awesome. Yeah, I know, like, and it's always good. It's nice, you know, maybe that you're not related in certain ways or. I know there's just different things for people to look into or be aware of with, you know, like an arm's length transaction and stuff like that. You know, to make sure people aren't initially or intentionally inflating the price. Right. And then go and get in getting a loan based on, you know, someone selling you a higher price. So. So it makes more sense for you financially, et cetera. Right.
- [10:27]
Megan
So yeah, if it was like a mom or a dad, it definitely probably you wouldn't be able to buy it from them on a VA loan because it's not that arm sling transaction, but because it was a friend or whatever lender, it, it was arm's length, but that's definitely something to watch out for. Even with that being said, it got a little bit messy at the end because I already had like insurance set up in my name and I already had utilities set up in my name. I already had all these different things. And so this kind of started kept coming up with the title company and I co owned the title company. So I was able to tell them like this is what's happening but like don't tell the lenders. And so there's a little bit of gray area there. Not that I think it's mortgage fraud, but it was kind of weird to be on all mixed into every side of the transaction.
- [11:16]
Brody
Yeah. You just taken over Lincoln, Nebraska?
- [11:20]
Megan
Yeah.
- [11:22]
Brody
Don't you have a staging company too?
- [11:24]
Megan
Yes. Yep. And I'm a realtor and Jeff's a realtor.
- [11:28]
Brody
There you go. That's awesome. So. So with that, like how does that work when it comes down to. Well, I guess first, what was the ARV on the house? Maybe let's start there because I think. Yeah. How much you said it's 50k is going into. Into. Into the rehab. What do you think it's going to be worth after that and what are you purchasing it for? Essentially?
- [11:53]
Megan
Yeah. So we're all in at 4:70. And so I wanted to purchase at 470. Okay? The problem with this neighborhood, because it's so, like, extra specialized, it's like really nice neighborhood. And then everything else around it is not. And because I'm an agent, because I know the market super well, I know that, like, I could sell this house for $600,000, I think is the ARV. And there is a house, okay. But they don't turn over very often in this neighborhood. People keep them for like 40 years. And so it's super hard to pull comps in this neighborhood. And also the. The neighborhoods directly outside of it are like $200,000 less. And so we had one house that was like a perfect comp in that neighborhood that had just sold for 470. Completely outdated. And I went and talked to the lady because she's flipping it, like, when are you going to be done? What are you listing it for? She's like, I think high sixes. And I all right, hurry up and get it done, because I want to use this as a computer. But she didn't get it done in time. I got mine done faster. So we didn't get to use that as a comp. But when somebody, the appraiser came to appraise it, he did not know the Lincoln Market. He was from like an hour outside of town, didn't know this, like, intricacies of the market. And so the appraisal came down, came back low, actually. And so that kind of screwed us over on the whole plan. I still think it's worth 600,000, but it ended up appraising for the 470, which is fine. That's kind of what we wanted to be all in anyways. But when we purchased it, my hard money guy got kind of confuddled on the numbers, and he ended up find funding the loan for 490. He thought I needed 70 grand or something. So we got the full 70? Yeah, the full 70 up front. Only used about 50 of it. And then at closing, had to pay that $20,000 back to get the loan for 470, if that makes sense.
- [13:57]
Brody
Gotcha. Okay.
- [13:58]
Megan
Yeah.
- [13:59]
Brody
So would the. Would there be a scenario where, if it actually appraised for, you know, let's say the 600, where you would actually borrow more money? I don't know. I'm thinking through the logistics of this and, and the maybe the pitfalls of it, but where you'd actually borrow more money and essentially get access to more, because even if you didn't use it on the rehab because you're, you're really, you're really refinancing out of it, right?
- [14:27]
Megan
Yeah, it's essentially like a cash out refi that you've never purchased yet. But yeah. And so that's when I did the paperwork. I did the paperwork for 490 since I had already pulled that extra 20,000 bucks and thought, oh, I'll just end up keeping that put into other deals, but then how to give it right back anyways. But I, I do think that makes sense. Like there's. It's kind of six of one, half dozen of the other. But a lot of people like to pay down their mortgage because it makes them feel a little bit safer or so that they have more equity in it, they have a smaller payment, whatever. But with this, I got a 5.75% interest rate that's way better than any other money that I'm borrowing. Right. Like on my flips, I'm paying 12 to 18 interest right now. And even on my rentals, I'm paying 8% interest. So if I could have got an extra 100,000 bucks, I would have taken it because it's the cheapest money that I can get my hands on. Which might be an option six months down the road to just do a cash out refi.
- [15:28]
Brody
Yeah.
- [15:29]
Megan
But, yeah, at least we got it on the low interest rate now instead of continuing to pay hard money until then.
- [15:35]
Brody
Yeah, no, that's, that's good. I'm glad you touched on that just because I think that that's. It's important for people to understand that and follow it because, like, it's like, I mean, I say this all the time and, and hopefully it relates, but it's like the difference of learning how to fish versus like somebody fishing for you. You know, like you can come across a good real estate deal every once in a while that somebody sends you or something like that, and it's like, cool, it's great. But like, that's going to be few and far between, as opposed to just understanding the basics of like, how to fish and where to fish and what bait to use or whatever. Now you can go like feed yourself whenever you want to. And it's the same thing with real estate because once you understand the principles of like, how to force a deal, how to create a deal, how the math works, how to run the numbers, then you can go take something like this because you understand it and you look at it from, hey, I'm looking at the highest return. You know, I can step back and not look at it emotionally, but, like, what is it going to be if I take this extra 20 or 50 grand, you know, and I pay down this five, five, whatever percent, you know, debt that I have on it, or can I take that and go leverage it somewhere else and roll that into another deal? Because it's cheap money and it's going to, you know, turn into more. More of a return and be able to leverage it a lot better. And so same thing with, like, essentially, you know, cash out, refi, or even getting like a HELOC and tapping into that equity a little bit more. And so it's like, what are you going to go do with that? But those are little pieces that a lot of people don't think through. And it just comes back to, like, what you said. Oh, no, like, I just want to pay off my house, you know, and so that's like, the only focus. And then you might miss out on other opportunities.
- [17:18]
Megan
Yeah, it also. It feels like more comfortable or safe. And so I think that's like a kind of a poverty mentality of, like, people that they buy a house and then the only thing they want to do is pay off that house, like, before they retire. In all reality, like, doing what we do, this is gonna sound so bad. I apologize in advance. But let's talk about worst case scenario.
- [17:39]
Brody
This is. This is Megan. No, no, this is me.
- [17:42]
Megan
No filter. Worst case scenario, you go bankrupt and they start taking your properties or whatever. Right. If you have $200,000 of equity in your primary residence, they 100% will make you sell your house and pay back those debts. All these real estate loans, like, we're personally guaranteeing most of them. Right. But if you have $27 of equity in your personal residence, they're not going to just kick you out on the street to get that $27 of equity. So it's almost safer to have no equity in your primary residence. It just feels very backwards.
- [18:20]
Brody
Yeah.
- [18:20]
Megan
Would you agree with that, Brody? Or is that. Is that a crazy statement?
- [18:24]
Brody
No, I agree with that 100%. Yeah, I. The way I explain it, too, is like, like. Yeah, I won't say names, but I had a conversation with. With somebody about this, and I'm like, look, at the end of the day, like, your. Your rate's so low, right? And you can go tap into this money. I'm like, you. Even if. Right, Even if, like, so they had 200 grand sitting aside, and they have $200,000 left on their mortgage, and they're going to take that and pay off their mortgage so they can get rid of $1,000 payment, right? Or I think it was like $800 payment or whatever, right? So essentially you're, you do the math on that and the return that you're getting. One, everything's like, comes down to numbers and the numbers don't lie, right? Because it's very logical. And so just look at the numbers. But to like, now what happens if, let's say, okay, you got rid of that, you know, $800 a month payment, but you also lost all of your savings. So now if you run into like, tough times, right, like, yeah, maybe you don't have $800, it's saving $800 a month. But like, you still have to live. You stop to put food on the table. You still have like, what if an emergency comes up? What if somebody gets hurt? What if something happens and now you can't tap into any of that savings. So like, I even look at it as, even if you are just having it sit there, which is probably not a good way to look at it. But like, also, even if it's just sitting there and you're not even leveraging it the best way, like, to me, that's, that feels more like safe and secure than like getting rid of your mortgage. You know what I'm saying?
- [19:56]
Megan
So, yeah, I always say, like, you can't buy groceries with equity. Like, yeah, it's cool, we're all millionaires. Woo. But you can't buy groceries with equity. So you have to like pay, you know, sell on or do whatever if something catastrophic comes up.
- [20:11]
Brody
Yeah, yeah. And obviously it's, it's liquid, but it's not, it's not as liquid as cash flow, right? Like, it doesn't. Takes a minute to tap into and it's volatile. Like, you, you don't know what it's going to be from one time to the next, which I don't know. This is like a good like, topic because I think that, I think real wealth is built on equity and appreciation. Like, like real big wealth, right? But like, also, most people and most, most of you guys on this call, most, most people in the world, like, they're never even going to get to that point where they're like, everyone's so focused on like, oh, yeah, well, appreciation is where the real wealth is built. And it's like, yeah, but first, let's start with what if you could just have like, real cash flow that's going to cover your expenses and like, change the way you live right now, not in 50 years, you know, And I think that there's so much of this focus on like I've just seen so much of it lately. Maybe it's just what I've seen. But like, like Ryan Pineda has talked about it a ton and like, like real estate isn't passive and not even. And I agree with a lot of pieces of that, but more so like rental properties don't make sense. Like it doesn't make sense to buy a rental anymore. Like you need to have an active, inactive real estate business, which is. I know, I know you have an active like real estate business, Megan. But like I don't know. Have you heard that more and more just like rentals don't make sense. Like cash flow, nothing cash flows. It doesn't work right now. Like it has to be the, the long term appreciation game.
- [21:44]
Megan
Yeah, I think that's kind of just a laziness thing though. And I think that some of those guys, guys that have been in it for a while that were buying in like 2014 and you could buy a single family turd and like infinite bur it and just put it on long term lease and it would cash flow, they're just like, oh man, you can't do that anymore. So they're all down on it. But I think that you can still force it. It's just a little bit different. Like right now we bought a duplex and we're putting a third unit in the basement and then we're midterm renting out the top two furnished and it's in a cash flow like crazy, you know. But we can't just buy it and put long term tenants in it and just leave it as a duplex.
- [22:24]
Brody
It wouldn't work 100%. Yeah, I, I just, I'm selling a property. I just want our contract on it. And anyhow, but the, the buyer before that like he, we were under contract fill out a contract but he was, he was looking at it. He's like, yeah, like it just doesn't pencil. And I'm like, well how are you like running the numbers? And it's like, oh well, yeah, based on just doing this, this and this. And I'm like look, that doesn't work. Like of course, like nothing pencils. If you're just looking at it at face value and like if it did pencil at face value, then everybody's buying it. Right? Like that's what's happening. And so this is the way you need to look at it. Like this back is going to be rented out like this, this is separated and turned into this. And I think that's what like one makes real estate by school special because it, that's what we focus on, like extracting stuff like this from people like you, Megan, where it's like, yeah, you got to get creative, you got to hustle. But it's powerful because it changes your life and only takes a few deals. And every time I've seen people talk about that, right? Where we're like you said, it's laziness. And I think sometimes too it's just like you don't know what you don't know. And every time they give an example, they're like you know, buying 10 rentals that cash flow, you know, $100 a month and then you take out capex and then the AC goes out and it's like, well yeah, I wouldn't buy it at 100, $100 cash flow either. You know, like we're focusing on like the high, high cash. And if I, if I am, then guess what, I've done a cash out refi, I've pulled out all my money plus some and then maybe it cash flows a little bit, you know what I'm saying? And so I think that's the piece that a lot of people are missing. But that's how you do it is stuff like this that we're talking about. Whereas like, you know, like the property that this deal that we're diving into with you, it's so cool and I hope people are like grasping these pieces of it because essentially what you're doing is eliminating as much risk as possible to where the downside is very, very low, meaning you're not into it any cash. Right. You have a low interest rate on it and then the upside is really, really high. Where you're walking into equity, you have a long term play, you force the appreciation and it'll cash flow if you decide to rent it out. Right. And at that point it's a 100 plus percent cash on cash return because you're into it. No money.
- [24:48]
Megan
Yeah. And you know, with live in flips, it's so forgiving. Like I could buy this on the market, it may not be like a killer deal. I probably didn't get it as low as I would have got it if I was just going to flip it like in a couple of months. But because I know I'm going to keep it for three years, it's like for sure it'll be worth 100 grand more than that. You know, three years from now and, and maybe the market crashes, I don't know. But it's just when you have that timeline really long, it's so much more forgiving.
- [25:19]
Brody
100%. I gotta, I got a couple just like rapid fire questions for you if that's cool.
- [25:27]
Megan
Yep.
- [25:27]
Brody
You ready?
- [25:29]
Megan
Yeah.
- [25:29]
Brody
Okay, so this deal specifically, if you could go back and, and change like one thing on it, what would it be and why?
- [25:37]
Megan
So when we went to actually purchase it at the end, I would have listed it on the MLS because I think that appraisers will appraise things off market differently than they appraise things on market. So if I had, let's say my assistant, buyer's agent, whatever, list it even at 0% commission and then one day on market it goes off with a full asking price offer, he would have viewed that differently than he would have just viewed like this off market transaction that looked a little bit wonky, like this guy just bought it and then two months later he's selling it off market. So it looked weird to the appraiser. I, I may have even had some kind of a bidding war because then I think people, appraisers will say, well, something is worth what the market is willing to pay for it, but because it didn't go to market, he just doesn't have that kind of to fall back on. I think that would have been the biggest, biggest difference.
- [26:41]
Brody
Yeah. Did they, did they appraise it based on the ARV or did they appraise it like before you did, did the rehab.
- [26:51]
Megan
No, they appraised it without the rehab. They appraised it when it was done. Yeah. And so I gave them like all the information about what was done on the rehab and, and all that. Although I didn't meet with him, which I would usually always meet with appraisers and give them my own comps and I should have, but I was, I was in Alaska, so it didn't happen. But the guy was not from around there and he pulled like 100 year old houses and it's a 1968 house, which I think are not true comps at all. And he pulled houses that are completely not in that neighborhood. And so it really kind of screwed us over.
- [27:30]
Brody
Yeah, yeah, something too. Like I just remembered I did a house where the hard money lender is also like a long term lender and they funded both transactions. So it was a 12 month hard money loan. And then, then they came out and appraised it again. Right. Which it appraised for more than what they initially Praised it for, with the ARV and everything and, and, and then I did a cash out refi with it and it was a, and yeah, cool, cool loan product. But like I felt like to your point, like it was the same appraiser, right. That like does a bunch of them for this company and so the house for sure worth that, but you have that going into the back pocket, your back pocket where like they, they essentially been part of the whole process and they want, they're kind of like rooting for you in a, in a weird way. Right. Especially where they do a lot of business with that same, same lender a bunch. But that was kind of cool. Super helpful. And then I was able to cash out more than I thought and got all my money back out of the deal and then they, they kept the, the long term note on it, which is cool.
- [28:47]
Megan
Yeah, I think that, you know, we do a lot of bank financing that kind of does that like a spec appraisal on the front end. They'll tell us like what they think the ARV will be and they'll finance based off of that. But I think those spec appraisals oftentimes come in low because the appraisers aren't like super good at picturing what it will look like at the end or if maybe you're not going to do very good finishes or they kind of think you're just going to put lipstick on the pig or whatever. And then once you actually do it, they're like d Brody, you made this nice. Then you get that higher ARV on the back end usually.
- [29:20]
Brody
Yeah, yep, 100%. Yeah, that's exactly, exactly what happened. And it was cool too because it was a, it was a cash out DSCR loan. So it just made it so nice. It like penciled from that angle. Like I didn't have to, you know, essentially qualify for it in certain ways. And yeah, just super cool all around. Similar to, like this in a. Interesting, similar way just from the standpoint of, you know, it's the, the lender sold it back to me in a sense. Right. Obviously a lot different, but essentially that's exactly what happened. Okay, so let's see. What's one piece of advice you wish someone had given you before you started this deal? If it's different than the last answer.
- [30:13]
Megan
Yeah, probably just that I think we really pooped the bed on that thing. But other than that it went pretty smooth super fast. Rehab and everything. I think if you're new going into this, this is probably the advice I would give you is. This is not like really a level two kind of a play here because a lot can go wrong. So, like, if you're just gonna go out and buy a fixed up, nice house VA loan, it's like level 2 out of 10, right? So easy. Get your realtor, everybody deals with everything. It's fine. This is like level six, level seven, like, a lot of stuff can go wrong. You can get to the end and not qualify for the mortgage. We've actually done this twice, and the first time, that's what happened. We got to the very last day we were supposed to close, and they were like, oh, actually, you don't qualify. And I'm like, I already live here. I already sold my last house. Like, this is terrible. And so you have to have the ability to kind of like pivot and know, like, what is your backup plan? Or like, how do you fix things that might come up in the process? So definitely just have, like, have a backup plan. Does it cash flow? You know, can you just sell it? If it doesn't work out for whatever reason with the financing, can you get financing a different way? You have the cash that, if you have to put it back down, like my 20,000 bucks, what if I just spent that on a new car, you know, and then I'm like, oh, crap, it didn't, it didn't actually work and I have to bring that 20,000 bucks back and I've already spent it, so you have to be a little bit careful and have some backup. Backup plans for sure.
- [31:50]
Brody
Yeah. Cool. I think that's, that's great advice on, on that note, like, it seems like you are very resilient when it comes to stuff like that and, and bullish and, and maybe that's just you and your personality. I know everyone's different, right, with their level and, and how conservative they are, etc, but like, yeah, it's, it's something to, like, be said. I. And I think that it's, it's allowed you to, to bounce back in a lot of areas. It's allows you to just like, power through certain things. But overall, like, were you. Have you always been this way or do you feel like that's come over, over time or what advice do you have to people who are hearing that and they're like, oh, that's scary. Like, no, thanks. I'm not even gonna, I'm not even gonna try.
- [32:37]
Megan
Yeah, it, I'm probably just dumb enough to just try whatever and force it through, you know, um, just strong enough to keep going through the Tears, I guess. But it is, it's totally scary. And like, because it, we had an issue with the first one when we tried to do it again the second time, I was like, this isn't my house. This isn't my house until the ink is dry on the paper. Because I'm, I'm not falling in love with it, but obviously fall in love with it, you know, through that process of like picking all the things and making it exactly what you want. But I think so much of real estate is not like, can I do something? It's like, how can I do it? And so every time you come up to like a no, you're like, I just said, you know, don't tell me no, tell me, like, how can I do it? Like, how can I bend the rule? How can I break it? The first time when we, we didn't qualify for it, like, we got pre approved, we sent in all of our, our financials and then we got to the very last day and the lender's like, sorry, you guys don't qualify for it. And I'm like, no, I'm not taking that for an answer. So I called every single bank in town that I knew and just said, hey, this is what I try to do. It didn't work. What's the best loan option that you can give me? It's my primary residence. You know, they made up a loan that was like 10% down, pretty low interest rate, and like amortized over 30 years with a balloon in 10. Just like the weirdest loan ever. But all I needed was to get out of the hard money so that I could wait six months and then refi back into a VA loan or, or you know, sell a property and pay off instead, or do whatever. I just needed a little bit more time. And so I'm just gonna not take that no for an answer. I think you have to look at all of your real estate deals like that. Like they're not going to go perfectly. They're scattered to be some crap that happens and just keep plowing through with it.
- [34:32]
Brody
Yeah, I love that. I think that's like the definition of like forcing deals in a sense, you know? And it's, it's, it's exactly what you said. It's, it's when things come up, it's not asking like taking it at face value. Oh man, like, I wish I could. I tried. Instead it's asking though, like, how can I make this happen? Like, how, how, how? And what needs to be done? As soon as you ask that you have to solve different problems. And so as soon as you start solving different problems, you get different answers. And I think that so many people are only trying to solve one little problem. And as soon as one person tells them it can't be solved, they take that and then they. They walk away and they leave. And I think that. Man, that just like, that sums it up a hundred percent. And I think that it's interesting looking at this deal specifically and hearing. Because I didn't know. I didn't know all the details, but essentially, like, it didn't work out as planned, you know, that what. Where it kind of ended was not the plan you came into the deal with. And it's just cool seeing how it's still an awesome deal and it's still pencils, and it still, you know, is awesome because you didn't have to put any money into it and all these different pieces. But that's not the plan originally, right? You had to pivot. You had to do something. I think most real estate deals are like, that a lot of people just don't see. And my wife and I say it all the time. We're like, like, why does this happen on every single deal? Like, is. We're always pushing it right on the deadline. Like, it's always way more of a headache than you plan on. Like, there's never, ever just this smooth process where you're like, oh, cool. That's exactly how we planned it. And I think people don't see that. And so because of that, they, like, and that starts to happen. It's like, oh, this isn't normal. I'm. I'm doing something wrong.
- [36:22]
Megan
And the worst thing that you could do, like, as a newbie, that's like, in that spot where it's like everything's growing to crap. Like, the sky is falling. It's not working out like I thought it was going to. It's just like, shove your head in the sand and be like, well, I tried, like, reach out to other investors, reach out to bankers, reach out to, like, everybody who's gone before and be like, if you're in this situation, what would you do? Like, how do I get creative with it? Because there's always some way to kind of, like, finagle it. But I see people, a lot of times they get burned on, like, their first split because they get halfway through the remodel, they run out of money, and then they're just like, well, I guess I gotta fire. Sale it and sell it on a loss and never do Real estate again, it's like, no, dude, just bang it until it makes a profit. Like get it done.
- [37:10]
Brody
Yeah, yeah. It's cool hearing you say that because that's, that is the, the attribute for, for life success. But it's no different with real estate. And it's cool seeing like all the ups and downs you've been through, but then it's, you're still here, you're still doing it and it's still worth it, you know, and so the, the good definitely outweighs the bad. And I think that you're real and raw about it, which is, which is refreshing and it's good for people to hear that. But also just understanding that like it's still, still worth it. You just got to, to get through it. And the good makes up for the, for the bad. And there's always a way to kind of see it through, to make it happen.
- [37:44]
Megan
So yeah, for sure.
- [37:46]
Brody
Would you prefer to do a cash out refi or a HELOC to get access to the equity? Maybe this is like down the road.
- [37:54]
Megan
Yeah.
- [37:56]
Brody
And maybe it's different having a VA loan. Does that change things?
- [38:01]
Megan
Would be, probably does change things. When you do a cash out refi On a VA loan, you can only get 90%, but when you do a purchase on a VA loan, you can get 100%. So that changes the numbers, which is one of the reasons why I wanted to just purchase it at 100%, then do a cash out refi at 90. But I think just in general, if you have equity in your property, do you want to take a HELOC or do you want to take a cash out? I think if you know that you can put the money to work, take the cash out refi, you're, you're getting a fixed rate on that product then. And a HELOC is going to, the rate is going to float. So you have really no control over that. And the HELOC or the bank could pull the HELOC if you're not using it and the market shifts and everybody, the banks get wonky and their buttholes tighten, then they could just take your heloc. They can't take your cash if you've already done the cash out refi. But if you're kind of like new and you don't know that you're going to use that money, then maybe it would be a waste to be paying the extra interest on it just to have like some money sitting in the bank. But I'm definitely buying and like, I know that I can make 20, 30, 40% return on my money because I'm forcing appreciation and doing things. So like I want all of my money working for me. I would have no problem pulling it out on a, on a cash out refi. Cool.
- [39:31]
Brody
Yeah. Awesome. I love it. Why, like what, what's the process for a lot of people that haven't done. Because you use hard money quite a bit. Yeah. Private money. Hard money. Yeah, like it's pretty, pretty natural part of your business. How, how does somebody that hasn't used hard money or private money a lot. What's like the first steps for them? They might be thinking like, oh, one, there's a lot of risk in that. Like that's scary. And then like, you know, two, who's going to loan me money? Like I'm, I'm still new at this, I don't have a big track record. Um, and then this is like loaded. And then maybe three is like, oh, like I would never use hard money because the high interest rates just doesn't make any sense.
- [40:14]
Megan
Yeah, so there's a lot of different kinds of like hard money and private money. Private money is more like, you know, the person. Hard money is usually like a national brand. So they usually have lower percentage.
- [40:28]
Brody
Say that again. So people catch that just so they understand.
- [40:32]
Megan
Yeah, so private money is somebody that you know, right? Your mom, your rich uncle Kevin, your whatever. They usually charge like a percentage. So maybe you would pay 12% interest to Uncle Kevin and he doesn't charge any points. But then there's national companies that are hard money companies. They run it more like a business. They have marketing, they have systems, they get appraisals, all these things. They usually try to trick you into thinking that it's cheaper than your Rick rich uncle Kevin because they'll say, well, it's only 10% interest, but it's usually like 2 points in 10% interest. So the fees are much bigger with that. And then they're also going to require like more of a down payment usually whichever way you go. We also have a hybrid one that's like local hard money in our area that's just like no points, but it's maybe 18 or 20% interest. But whichever way you go, I would just reach out to like all the different options that you know of and see where are people at and then ask them, you know, what are the points, what are the fees? What is there going to be an appraisal like what's the process associated with it so you can fully understand that. And then when you Get a deal. You already have that knowledge of, like, okay, I can go to this person and they'll only charge me 12%. Or if I go to this person, it'll be this, which we use all of those options. We use bank financing, private money, hard money. I paid 20% interest on this primary residence because it was a weird deal, and he bought it for me, you know, so it. It doesn't really matter the interest as long as you know what it is, know how long it's going to take you, and you can just kind of factor that into your number. So I'm going to spend $20,000 on the money cost. It's going to be like any line item on your budget. Like, the roof is going to be 10,000 bucks. You're not mad that the roofer is making money on that, so don't be mad that your lender is going to make money on it, but you got to be able to account for those in your deal correctly.
- [42:39]
Brody
Yeah, exactly.
- [42:40]
Megan
Does that answer your question? Did I just get distracted and wander off?
- [42:43]
Brody
No, no, it's good. I just think. I think that. I think that's, like, a scary territory for a lot of people that haven't done that. And so it's just. It's good. We actually have, like, a preferred hard money lender that you guys will have access to. This is, like, all new stuff, but it'll be inside of, like, RS 2.0 where you can just click and you can see all the. All the rates and whatnot. But I think it's also important to understand a lot of people look at it as, like, them doing you a favor. Right? Like, it's like, almost like they're giving you money and it's. It's like, yeah, it's what's happening, but it's a business, and it's benefiting them just as much as it's benefiting you. Right. Or else they wouldn't do it. And so you also have to look at it that way and not just this. Oh, like, it's so hard for me to go find money. It's like, no, it's. It's actually super easy. And there's a lot, a lot out there, a lot available. And it just comes down to, you know, making sure it's worth it. And I think that, man, if anything from this, and hopefully because we hit on this stuff so much, it's starting to, like, sink into everybody and get more and more, like, ingrained. But just the entire concept of, like, understanding how it all works and understanding the numbers and not just taking something at. At face value because an interest rate is a certain amount or like. Like, you know, or they want to charge a certain. A certain amount of points or whatever. Like, it's just. At the end of the day, it's the entire picture. And it's almost like one thing that frustrates me is you ask somebody if, let's say, like, you know, you pulled up to the gym in your vehicle, and someone says, hey, like, sweet car. Like, is that for sale? What's. What's the response? Probably 95 of the time.
- [44:25]
Megan
Everything's for sale. Yeah.
- [44:28]
Brody
What would they say, though?
- [44:30]
Megan
Everybody else would say, no.
- [44:31]
Brody
Yeah, you could say that, right? I would say that. I'd be like, sure, yeah, for the right price, it's definitely for sale, you know, Absolutely. Like, just depend on the price. You know, there's a. There's a number that makes it worth it at some point. The problem is, all of a sudden, we start looking at real estate investing, and that mindset goes out the window, and we just look at, like, a deal on the market, and it's for sale for X amount of dollars. We might analyze it, underwrite it, and it doesn't pencil. We move on. And it's like, no, it is for sale for a price. Right? So what if I submitted an offer that's gonna make that price worth it to me and make my numbers work? What if I got financing on it and got creative to where I didn't have to come in with any money? Now, guess what? That makes my numbers work. Because even if I'm cash flowing a little bit less, I'm into it. No money. And so all of these little things are like, specifically with this deal with Megan, it's like, oh, wait, if I can now buy back the property, and I'm taking advantage of all the equity that I forced into this thing, and that's allowing me to fix it up the way that I want to have equity and appreciation and not buy it at a premium and be into it. No money. Like, it's all those pieces, right? So, like, this is just one strategy that hopefully you guys are, like, taking and just putting, like, in your quiver.
- [45:52]
Megan
What?
- [45:52]
Brody
Like, all these different strategies to go out and make something happen and just understand that it's not. It's not. Hey, it's not for sale because it doesn't pencil. But it's. No. There's always a way to go out and make it happen. You just have to get creative. And the way to go and do that is by understanding all these strategies and. And executing them. Right.
- [46:09]
Megan
Yeah, I love that too. About the lenders. Like, they want, they want. That's their business. That's how they make money. They want you to call them. They want to, like, they want to lend to you. So don't feel like you're going at them like, oh, I need this money, blah, blah. It's like, no, it's like, do you want this opportunity that I'm bringing to you? Do you want to finance this deal and you're going to make a bunch of money on it? Like, that specific lender has lent me millions of dollars and has made probably $200,000 off of me. Like, he's. He's super stoked to hear from me when I call him, you know, And I think that even, like, local banks, bankers are intimidating. Like, you gotta give them all your paperwork. They. You feel like they're judging you and stuff. But local bankers are like, the nicest guys ever. If you can get in, take them to lunch. Just talk to them. They are always the ones that know, like, about the economy, what's going on, about the market. Like, I have this one guy, his name's Kevin. He's like 80. He should have retired already, but he hasn't. And I'll just take him to lunch every once in a while. He's lending me a bunch of money. But also when, like, Covid hit dude, I call that guy. I'm like, what is this? What's going on? Is the market going to crash from this? Should I stop flipping? And he's like, nah, chill. It's not like that. And I'm like, I don't want it to be like, 2008. He's like, even in 2008, it only dropped 20% in this market. And he has all this wisdom and knowledge. Bankers, they're super conservative and kind of annoying sometimes, but they got a lot of wisdom and you should meet with them.
- [47:44]
Brody
Yeah, yeah, yeah. It's good stuff. Yeah, Luke was. Luke and his family were at my house last night. You'll see. Luke, this, this.
- [47:52]
Megan
Thanks for the invite. I saw it on Instagram.
- [47:54]
Brody
I was like, yeah, he invited himself, so I. I can do about it. So. No, you're always invited over. You know that. I know how you feel about the west side. Just.
- [48:06]
Megan
Yeah, I was surfing Okamahame in the morning down there.
- [48:09]
Brody
What?
- [48:10]
Megan
Yeah, I'm gonna go right now too.
- [48:12]
Brody
I assume that you were not on this side when you said you were surfing, so that changes everything. So Hit me up if you're coming back this way. But was gonna say, oh, yeah. He. He was just like, he has a good relationship now with his, like, local bank. And he was like, I on this project. I forgot that anyhow, he needed, like, 200 grand, and they're already, like, starting to pour foundations and everything. And so he needed it in two weeks. And he's like, I just texted my banker and I was like, hey, like, I Forgot I needed 200 grand for this, but I need it in two weeks. He's like, okay, we'll get it done. You know, it's like, obviously that's not normal, but, like, that's the power of. Like you said, you start to build these relationships, and then over time, like, you get a lot of things that work out, work out in your favor. But, Megan, this has been awesome. You got some value. I think it's. It's always important to share stuff you're learning. It helps you remember it, and it also allows people to know what you're doing. I know a lot of people on here have gotten deals from social media, even though they don't have a big following or anything like that, just from sharing that they're learning certain things and diving into this and that. They're investing in real estate anyhow. So share what you're learning. Share some takeaways. Take sure to make sure to tag us on Instagram. And Megan, this has been sweet. Thanks for. Thanks for taking the time. There's all these things you could do in. In beautiful Maui, but you're here with. You're here with us, so thanks for being here.
- [49:38]
Megan
Yeah, yeah, no problem. Anytime.
- [49:41]
Brody
And thank you guys. Much love. We will see you next time. See you inside. RAS 2.0. Go get access to it if you haven't yet. Ris2.com if you don't have the link and. And go do it right now if you haven't done it. So much love. And we'll see you guys next week. Thanks, Megan. Bye.