Real Estate Investing School Podcast
Episode 210: REAL DEAL: How to Force Cash-Flowing Deals in 2025 with Megan Ahern
Release Date: November 14, 2024
Introduction of Guest: Megan Ahern
In this episode, Megan Ahern joins host Brody to discuss her impressive journey in real estate investing. Megan, alongside her husband, has successfully closed over 80 deals since 2016, demonstrating relentless hustle and strategic thinking. Having lived in Maui and now back for a real estate event, Megan brings a wealth of experience and a unique perspective on navigating the real estate market.
Brody introduces Megan warmly:
"Megan, what do you think?" [00:19]
Megan responds reflecting on her journey:
"I think it's been a while. At least a year." [00:31]
Overview of Megan's Current Deal
The core of the discussion revolves around Megan's latest real estate deal, which exemplifies the concept of "forcing" cash-flowing deals—a strategy essential for thriving in today's dynamic market.
Megan explains the strategy:
"I think this whole forcing deals thing is so cool too. I'm glad you're really honing in on this because right now, 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." [01:49]
Forcing Cash-Flowing Deals
For Megan, forcing a deal involves innovative financing and strategic property management to ensure profitability without significant upfront investment.
Detailed Breakdown:
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Purchase Strategy:
Megan and her husband purchased a primary residence listed on the MLS. Initially listed at $460,000, the price dropped to $430,000. They offered $420,000, targeting a $50,000 rehab budget to enhance the property's value. -
Financing the Deal:
They employed a hard money lender to finance 100% of both the purchase and rehab costs. After renovations, they planned to secure a VA loan to purchase the property back, enabling them to finance 100% of the purchase and rehab with 0% down, eliminating out-of-pocket expenses.
Megan summarizes:
"We purchased it at 470 from the VA loan so that it's 0% down so that we're able to finance 100% of the purchase and rehab this beautiful fixed up house that we wanted with none of our money out of pocket." [02:18]
Financing Strategies: Hard Money vs. VA Loans
Megan delves into the nuances of different financing options, highlighting the importance of understanding loan structures to maximize profitability.
Key Points:
- Hard Money Lenders: Typically offer quick, short-term financing but at higher interest rates. Megan's lender was unique, acting more like a private money lender with personal relationships and flexible terms.
- VA Loans: Provide favorable terms like 0% down and lower interest rates, ideal for long-term investment strategies.
Megan emphasizes trust in financing:
"There's a lot of trust happening there because, I’ve just gone through and completely remodeled this place and I don’t own it at all." [08:20]
Challenges and Problem-Solving
Every real estate deal encounters unforeseen challenges. Megan shares her experience with appraisal discrepancies and lender confusion.
Challenges Faced:
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Appraisal Issues:
The property was expected to appraise at $600,000 post-rehab but was appraised at the purchase price of $470,000 due to an appraiser unfamiliar with the local market nuances. -
Lender Confusion:
The hard money lender initially funded $490,000, anticipating a $70,000 rehab cost. However, only $50,000 was utilized, requiring a $20,000 repayment to align with the final purchase price.
Megan Reflects:
"When the appraiser came, he was not from around there and he pulled like 100-year-old houses, which are not true comps at all." [26:50]
Strategies for Long-Term Success and Wealth Building
Brody and Megan discuss the importance of cash flow versus equity and appreciation. They argue that while traditional views emphasize long-term appreciation, immediate cash flow can significantly impact one's financial freedom and lifestyle.
Brody asserts:
"Real wealth is built on equity and appreciation... but first, let's start with what if you could just have real cash flow that's going to cover your expenses and change the way you live right now." [20:10]
Megan counters the notion that rentals no longer make sense:
"I think you can still force it. It’s just a little bit different." [21:44]
She shares her duplex strategy:
"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." [21:44]
Advice for New Investors
Megan offers invaluable advice for newcomers, emphasizing preparation, flexibility, and resilience.
Key Recommendations:
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Backup Plans:
Always have contingency strategies in case the primary plan falters, such as alternative financing or exit strategies.Megan:
"You have to have the ability to pivot and know what your backup plan is." [30:13]
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Building Relationships:
Cultivate strong relationships with local bankers and lenders to secure favorable terms and support during crises.Megan:
"Local bankers are the nicest guys ever. They have a lot of wisdom and knowledge." [40:28]
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Persistence:
Adopt a mindset that refuses to accept 'no' for an answer, finding creative solutions to overcome obstacles.Megan:
"I’m just dumb enough to just try whatever and force it through." [32:36]
Resilience and Mindset
Both Megan and Brody highlight the critical role of resilience and a proactive mindset in overcoming the inevitable hurdles in real estate investing.
Brody:
"That's the attribute for life success. It's no different with real estate." [37:09]
Megan:
"Every time you come up to like a no, you're like, I just said, don't tell me no, tell me, how can I do it?" [34:32]
They discuss how setbacks, such as Megan's initial deal complications, can be transformed into successful outcomes through determination and creativity.
Hard Money and Private Money Lending
The podcast delves into the distinctions between hard money and private money lending, offering insights into selecting the right financing partner.
Definitions:
- Private Money: Personal connections such as family or friends willing to lend money, often at flexible terms.
- Hard Money: Typically national companies offering structured loans with higher interest rates and points.
Megan:
"Private money is somebody that you know, right? Your mom, your rich uncle... They usually charge like 12% interest." [40:14]
She cautions investors to fully understand all aspects of the loan, including interest rates and fees, to accurately incorporate financing costs into their deals.
Building Relationships with Lenders
Establishing strong relationships with lenders can open doors to favorable financing options and support during challenging times.
Megan Shares:
"I have this one guy, his name's Kevin... he's lending me a bunch of money and gave me wisdom during Covid." [40:28]
Brody Adds:
"It's the power of... you start to build these relationships, and then over time, a lot of things work out in your favor." [47:53]
Final Thoughts
The episode wraps up with reflections on the importance of creativity, perseverance, and strategic planning in real estate investing. Megan and Brody encourage listeners to embrace challenges as opportunities to innovate and grow their investment portfolios.
Megan:
"Just have a backup plan. You have to keep plowing through with it." [31:49]
Brody:
"Understand all these strategies and executing them. There’s always a way to make it happen." [45:51]
Key Takeaways
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Forcing Deals:
Proactively structure deals to ensure cash flow and profitability, even if it requires unconventional financing methods. -
Flexible Financing:
Utilize a mix of hard money, private money, and traditional loans to optimize investment outcomes. -
Resilient Mindset:
Persistence and creativity are crucial in overcoming obstacles and achieving success in real estate investing. -
Strategic Relationships:
Building strong connections with local lenders and financial partners can provide valuable support and favorable terms. -
Comprehensive Planning:
Always prepare backup plans and thoroughly understand all aspects of your deals to mitigate risks and maximize returns.
Notable Quotes:
-
Megan at [00:00]:
"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." -
Brody at [01:49]:
"You're going to 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 and enjoy it now." -
Megan at [32:36]:
"I'm probably just dumb enough to just try whatever and force it through, you know." -
Brody at [45:51]:
"The entire concept of understanding how it all works and understanding the numbers... the entire picture."
This episode with Megan Ahern provides a comprehensive look into the strategies and mindsets essential for successful real estate investing. By sharing her real-world experiences and practical advice, Megan underscores the importance of adaptability, strategic financing, and unwavering determination in navigating the complexities of the real estate market.