Speculative Investing (Bitcoin & Stocks) VS Non-Speculative Investing (Real Estate)
Gambling investing, what some people call speculative versus non-gambling investing. Many of us are coming from the school system, in college, what have you; when you think about investing, the very first thing we think about is risk. When somebody think about starting a business, the first thing that comes into your mind, your family’s mind or your friend’s mind is risk. So I want to take this time to explain different type of risk, of course everything is risky, it’s kind of the world we live in; if you want to go to your mom’s house, there’s a risk getting in your car, if you want to eat food and get food caught up in your throat and die, what is the probability?
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You got to figure that out. But when it comes to investing, there is two ways, two boot camps. I want to go ahead and break this down to you guys, speculative versus non-speculative and kind of break this down because once you understand the difference, it’s going to make you a lot wealthier no matter what type of investment are you doing; if you’re doing real estate, if you’re doing bonds, if you’re doing stocks, if you’re doing gold.
One thing I want you to understand is that when you do a non-speculative investing, when you fulfill the transaction, when the transaction is completed, you’re in a way safer positioning than when you do speculation. Let me give you an example; as a real estate investor I want to buy a house, this house is on the market which means like if I drive around and it has a for sale sign on it, it’s on the market for hundred thousand dollars, I can hire a realtor and they’ll look at it on the website if it’s $100,000. Everyone else is using this route, this is a family and their kids and what they did is they’ll find a realtor and they will also find a bank and then they buy the house and they’ll going to pay that price because it’s retail. It’s like if me or you goes to Macy’s or you and I go to a high end retail store, you’re going to pay top retail price, now that’s normal. If you can get the same quality shirt if you go to China and you that you paid at Folly for a polo for a hundred bucks, in China for 10 bucks, 5bucks but that’s a real different story than what a real estate investor does. For me with this family with their little dog will buy this house using this traditional method which is getting a loan, getting in debt putting 10-20% down to get an FHA or something and they’re going to buy this home for 100k. That’s retail, that’s not investing, these people that are going to live in this home, this is their dream home they’re going to grow their kids up in it; but as an investor, what I would do as a non-speculative the same exact story, I will buy this home instead of a hundred, for 60k and when I buy this home for 60k when in the market it’s worth a hundred, I instantly made money; if the market goes up, I’ve made more money, if the market stays the same I made my original 60 if the market goes lower, I’m still ahead; it could go 10%, 20%, 30%, I’m still ahead. It depends on what I’m going to do with this property, if I’m going to quickly turn around it and flip it like the TV shows Glamourize or if I’m going to be a buy and hold guy or if I’m going to put it on Airbnb, the strategies are different. The story is about speculation and non-speculation and non-speculation with real estate investing, here is a great example; the house is worth a hundred, I find a motivated seller and buy their house at 60, that’s not speculation because right then and there, everyone and their momma is paying this much and I’m paying 60. Why am I able to pay 60? First of all is because I market differently, what I do is I market to a pool of people that have all different homes that are motivated, why are they motivated? Maybe they are going through a divorce, maybe they’re motivated because they lost their job, maybe they’re motivated because they just relocated at the state because they work for X corporation and they demanded them to move. Now they moved out the state, they have this new home and old home and they’ll have to make two payments and they don’t want to do that anymore, maybe they’re motivated because they inherited their home, there’s a lot of reasons that make these people motivated and if you want to know why they become motivated, get in my blog, my real estate dojo, put this up to the community; I want you guys to be your dream, this is why I do this, I want you to be your dreams, I want to help you get you where you want to go, I’m not an attorney or CPA, I’m not giving you financial advice but I just want to put up what I’ve done out there so if you want to emulate or follow that, you can. So going back to the story, I market and find a motivated seller and when I find a motivated seller, I negotiate with them, I put the deal on the contract and then I fund it one way or another. Now a lot of people think “man I don’t have that kind of amount of money to buy a $60,000 cash home” now this is the great thing with America and I think other countries like Canada is because they use same exact funding system, lending system, all central bank system which is basically the same, they create a note, one way or another. So basically what I’m saying is you don’t have to use your money, you can use the seller’s pre-existing mortgage or the seller’s pre-existing loan; if they own it free and clean, then you can use them to lend you the money. Two things happen when you meet the seller when you market; one, they own the house free and clear, you have a jackpot, two they have a mortgage on their home, you hit a jackpot. The question is how you structure these deals to make the seller want to give you the owner financing which I teach again on my blog for free that’s why I do this for you. If you haven’t seen it, you get up there, we do things like master leases, subject to, owner financing, wraps, things of that nature. So on here I spend money on advertisement, I find a motivated seller and then I closed with a cash and buy it at a deep discount. The same exact house some people will buy for a hundred, I find diamonds and I get it for 60. Not only me, many, many investors around America and I’m sure other countries are doing this guys, they are now aware about it. So when I buy a house at $60,000, I’m not speculating, today’s market it’s worth a hundred.
When you do speculating let’s say stocks, or Bitcoin, in America there’s a lot of words for soft and the truth like they call it undervalued; basically what they’re saying is they’re buying it here and they’re hoping that it goes up. If it is undervalued and most people will see it, if the thing is worth 100k and it was for 60, only one person or two will see that, that’s what they’re looking for on the exchange. So the point I’m trying to make is when you do stocks or Bitcoins, you’re buying it the same price that Joe buys it, you buy it, the corporations buy it at the same price, everybody buys it for the same price unless you’re the accredited investor that you can buy it before it goes public at the IPO’s. That’s where Bitcoin comes in the play with ICO which is initial coin offering, I did a video about this a couple of days ago, if you want to watch it go to my blog myRealEstate DOJO, that talks about how ICO is empowering me, you, Jose, Bob, Sally for the little guys to put 10 bucks, 20 bucks, hundred bucks, ten thousand or whatever you got into this new companies like IPO’s used to with accredited investor, it’s a very powerful thing but it’s a different story.
So the point of the story I was trying to make is that if you do speculation investing, it’s very risky because everyone, it doesn’t matter if you know how to negotiate, you know how to sell, everyone has to pay this same exact price of interest. If you don’t believe me, let’s look it up. If Bitcoin right now is worth $10,000, I have a time to wait to find somebody that’s willing to sell me their Bitcoin for 6,000, I haven’t, if majority of people that will have Bitcoin to get into the exchange at click of a button to buy gold, fiat, whatever; if somebody inherited that, maybe they don’t know what to do, maybe, but I haven’t find anything like that, does that make sense? But in real estate, situations like that happen because it’s not equitable fast. In this situation with the house, you have to hire a realtor, you have clean the house, there’s so many people involved in it; you need to have it inspected, you have appraisal. If the house didn’t passed the inspection, the buyer can’t get a loan because they’re not a cash buyer, they have to borrow money from the lender. So it’s a lot moving pieces, that’s what people make motivated; for example, someone lived in a different country or state, parent’s live in different state, they have to come here, they got to go to work, they only have 30 days to sell their home, it just takes 30 days if you go with the traditional banking and the buyers have perfect credit, there’s no hiccups on the title but usually there’s hiccups and it takes longer. So the seller, and that inherited house may want to sell to a cash investor like myself, like you, what we teach at the dojo or to a creative investor that doesn’t even have cash because that’s the power of real estate, you don’t have to have cash. Here’s another good example; if I want to do real estate, I don’t have to have cash, if I want to get to Bitcoin, I need cash, if I want to get in stocks, and I need cash. So real estate is a great investment tool, because it’s not speculation, if you buy it right, there are some other investors out there that in 2006 fourth quarter, they were buying property and before they close, they are making money and other people are trying to do the same thing and then the music stopped and they were all stuck with the hot potato because they were speculating. But majority of the people that do fix and flips, it’s a very quick transaction, can a flip and flipper get stuck too? Yes, if you’re a buy and hold guy, it doesn’t matter. Now, the point I was trying to make is if you buy right as a real estate investor, it’s not speculation because you made money instantly right then and there, and if you buy deep enough, if the market goes down, then you’re still in a safe position; where in stocks or Bitcoins, you have to buy it under value which means it’s the same thing as everyone else gets it, there’s no other way around that, everyone is getting it for X then you got to get it for X, there’s nothing you can do; you got to get it for X and then you got to “please” there’s a name on the “Huddle” you got to hold it on for a dear life or something, I’m not sure if the economic is 100% but huddle is pretty funny, that’s what they have, you got to huddle this and it’s like roller coaster and you have no control.
One thing about non speculation investment like real estate is I’m in total control, when I buy this house and rent it out, I’m in total control; I can scan renters, I can only get the one with best credit, I can decide what kind of AC’s guy I’m going to put in my house to fix my AC, am I going to hire the most expensive, the middle one, the lowest one. I’m in total control, when I’m going to sell, when I’m not going to sell. When I buy stocks, I don’t have a control, I don’t have a stirring wheel, I’m just like waiting for my dear life, I am going to go up, am I going to go down? Same thing with Bitcoins, when I buy it I’m like “please go up, please go up” I have no control, I’ve never invested in speculation gambling because I’m not a gambler, I’m a refugee to America I have to work for every penny, I’ve never borrowed any money so I don’t want to risk it to get the biscuit in that sense but I’m willing to invest everything I’ve got if I truly believe in it and it’s not a speculation, if it’s non-speculation game. Let me put something else on here, besides that real estate is not speculating, the other point that I want you guys to understand is that with real estate you can get in business without money, in stocks or Bitcoin, you cannot get in it without money, you got to have money to get into stocks, you got to have money to get into Bitcoins, you can’t just do a sweat equity, you can’t do it for free. Some of us are getting old like me, getting white hair and they don’t want to do all this work because it takes hustle, you got to advertise, talk to a phone, go up there and seal the property etc. There’s this little thing like opportunity called whole selling where people like buy and hold guys or flip and flippers that will pay this whole sellers in any industry, place this whole sellers to bring them inventory, how much do they pay? Like anything from $3,000 to 20 grand and more, it depends on if it’s commercial, residential, how much equity it is, if it‘s a $50,000 versus $150,000 versus a $3,000,000 deal so the more, the more money and so in this sense, people with no money can do real estate and get in to non-speculating investing without money, just sweat equity; you can’t do that with stocks, you can’t do that with Bitcoins. So this is why I love real estate because refugee like me or anyone with no money or limited amount of money if they’re willing to put the time to learn, they’re willing to put the sweat equity in, then they can do deals, they can go find motivated sellers that are going through divorce, lost their jobs, what have you, negotiate the deal, put it on contract and then sell it to an investor like me and make that whole selling. That happens in car business, big car dealership they have whole sellers that sell them inventories because the whole sellers don’t deal with retail people, they just buy deal at auctions in different states and ship it to different dealerships, the dealerships the one that sells to people, all that stuffs, they deal with all the customers, there’s a guy that sells it to the retail business and the retail business deals with the retail customers, that middle man called the whole seller is an all business that supplements the whole business. People that buy stuff from the manufacturer they hold it, some of them are distributors and whole sellers, not only they buy it they also hold unto it, huddle it in a sense, so I don’t want to get into that guys.
The other thing I want to talk about that you can’t do with speculation investing is majority, you can get dividends with stocks but it’s so little unless you have so much stocks. But if you look at real estate, the same exact house, there’s two ways I can buy, there’s two ways that I teach my students buy real estate is that you can buy it with all cash which requires a big discount so you can get it at big discount; which in that situation if it’s 100, you can get it at 60. The other thing is that you can pay full price, and full price means you can give them the fair market value. For example, I like to buy property full price, which sounds like oh my God, how are you going to do that? But it has to be all my terms. Like for example, if this property that we talked about is worth a hundred, if the mortgage payment for the property is let’s say to make things easy is $1,000 a month which we call PITI (Principal Tax Insurance), and the market rent is let’s say $1,400; I don’t mind if I buy this house for a hundred thousand, if I talked to the seller and the seller owns this house free and clear, or if the seller has a debt of a hundred thousand or if the seller owes 60%, has 40% equity, it doesn’t matter to me, I’m only giving 100% because I can get $400 a month, monthly cash flow from this. But the thing is I can’t give him all the cash today because I’m giving him the asking price, I’m a cash investor and I’m only buying house at a deep discount. But to help this seller, I’m going to buy it at full price; why am I buying it at full price? Well the very first thing is he’s going to owner finance me, he’s going to carry a note, however you want to call it, he’s going to do a wrap, creative financing, he’s going to do that for me. That means two, I don’t have to go to a bank, I don’t have to put my social security up, I don’t have to put my company EIN number up, none of that stuff, he’s going to take care all that stuff for me. And why does he want to do that? Because A, he’s motivated, and B, I’m giving him full price; now why am I want to do that? I just explained to you I don’t have to get a loan, when somebody puts my social security in there the loan does not attach to me, so it means that he has the loan, if he doesn’t have a loan it’s even better, he’s not a bank he’s not going to report to the institution. I have a house without a debt and what I mean to debt is non-recourse debt which means that my company EIN number or my social security is not attached to that debt, so if I default, which I never tried to default, the only thing they can come after is the property versus my credit or if you go to the Bank of America, Wells Fargo, whatever all these banks, they want you to sign two things; a promissory note which basically makes you responsible or makes you a cosigner in a sense if you want to say that, because if you default, when you go to traditional way, not only they are going to come after your credit, they are going to come after your property; in non-recourse we agreed to that they are only going to come after your property not me, so it’s a very powerful strategy but not that I’m trying to use it in a dark way because I’m willing to pay that seller the 100% when normally I just give them 60. And if they want to go to 100 then they have to go to a realtor and wait how many days as required in sub-divisions sales and go and make sure the house passed inspections, make sure they have the money to put in, all that stuff, I don’t have problem about it, this is America there’s other people that want my money; just like the pawn shop, I’m the pawnshop of real estate. So one of the cool things why I’m willing to give the seller full asking price unlike the pawnshop is because I’ll make massive cash flow, I’ll make $400 a month, that’s more than $4,000 a year, that’s not bad, not bad at all. And I’m not going to give them very low money down, very little, maybe nothing, just pay for his closing maybe grand because I’m giving him his asking price or we could negotiate something more but I’m not going to give him 10%, 3% or 2% because I can just buy his house in cash. That’s the power of real estate where I can’t do that with speculation investments like stocks or Bitcoin, this thing goes up in price, Bitcoin goes up in price, that’s appreciation in a sense, and real estate goes up, it’s not appreciation but in one sense it is, house goes up if you buy in the right area, not even if the market goes up; just because of the inflation that uncle Sam and the federal reserve ideas they have which is printing money and printing money.
So to summarize it up, real estate investing is powerful because you can get into the business without any money, it’s so powerful because you can buy properties which everyone buys, 90%-95% buys it for 100 and you can buy it at 60, it happens all the time, 95% of people don’t do this strategy but it does happen, does it take work? Yes, it’s not as easy as showing up to your realtor and then driving around, it doesn’t work like that. And it doesn’t work like if you want a purple house with pink wall and this kind of fence, then no you’re not going to find a home like that, that’s for retail, this is for business, it’s an investment, you’re getting whatever you’re getting in the area you want that’s good and the painting on the wall you’re going to take care of, it’s not going to be your home where you’ll live in, it’s just business. So you can get a house without using your own credit, you can get a house with no money or letting the seller fund you, you can buy a house at a deep discount, you can buy a house at a full price because it gives monthly cash flow if the house justifies, I’m not going to pay the seller 100 if the rent in the area is 900, it doesn’t make sense, the rent in the area is 900 his monthly mortgage is 1,000, I’m going to be losing a hundred dollars a month, I wouldn’t do that deal; but if the rent is 1,400 and if the guy is motivated and willing to do owner financing and if this was in the area that I like and I feel like it’s going to appreciate then I’m going to possibly think about doing this type of deal with the seller even though I prefer to buy at 60 percent. Now, do you want to bring $60,000 cash or do you want to give this guy a thousand bucks for his move and own this house and make $400 a month and it’s under your name just like if you went to a traditional bank with hardly no money, that’s like no money, if you get 100,000 with a thousand bucks, that’s like no money. Because if you just go to a traditional bank, you have to spend thousands of dollars down, escrow fee, title policy; with creative financing, sometimes I don’t even buy title policy because they’re cookie cutter homes, brand new homes and I’m buying it from the original owner, I’m buying with two owner down the chain, so it gives me control. The point of real estate, it gives me control, I can get it with no money, I can do it buying at a deep discount, I can pay in full price, I can get it with just sweat equity and then I get to control and not speculating; with stocks, with Bitcoin I’m lining up like every other herd and I’m just praying to God that it just goes up, a lot had made millions of dollars with Bitcoin because it’s a new technology and it’s revolutionary and I just recently became a believer of it, if you would ask me 6 months ago, I would think it was a scam, I will still be in the process of evaluating it, I’ve been studying it for almost a year or a year and a half but now I’m a believer of it. I’m a believer of block chain technology, I feel like I didn’t understand it earlier so I just made my own mind deception, I just discriminated, I didn’t do my research, after a year and a half of research I think that it’s revolutionary. I don’t have a crystal ball, I don’t know if it’s going to go up, just like stocks, I don’t know if it’s going to go up or down. I don’t really do speculation investing because it’s risky as gambling, I don’t like to gamble, when I buy a house worth a hundred at 60, I’m not gambling. When I buy a house that’s worth a hundred at a hundred, some of you will think I’m gambling if the market goes down, no I’m not because I’m getting $400 a month positive cash flow, if the market goes up or down I don’t give a F because I’m getting a monthly cash flow. The best thing that’s going to happen is when the market goes down and foreclosure goes up higher, people lose their home and they now become renters which means it’s going to push up my rental price; for 400 a month to 1,600 a month, 1,800 a month two or three years goes by. So either way I’m in good control because I buy it at a deep discount or I have total control of the terms or the owner financing terms that allows me to buy a house with no interest or whatever the seller’s mortgage is, so whatever their mortgage is, if they have six percent or three percent, whatever bank they went to, the seller’s previous credit or whatever loan they have just assume it in a sense, I don’t want to assume it, I do a subject to and wrap but I hope you guys understand, you kind of like jump into their shoes and make monthly payments, it doesn’t make any better or you could do whole selling where you don’t even have to make the payment, you just find a property, find a motivated seller, put it on the contract and then find a cash buyer and you get the difference, it’s just kind of like when you buy something on Craigslist and you turn around and sell it on EBay and you get the difference, pretty simple stuff guys; simple but it takes a lot of hard work, that’s why people like to do stocks and Bitcoin because real estate takes work, I’ve been sitting here for the last week and just buying stuff on Bitcoin and it’s really simple, I just sit here and let me buy some of this, let me buy some of this, it’s the most simplest thing that I did in my life; but for real estate, I’ve got to advertise, I’ve got to figure out follow ups, got to figure out sales, negotiations but it’s big time money but it’s not big time level as Bitcoin because it’s a new technology. But real estate I buy houses in the last recession, I got it for 2 or 3 grand, 6-7 years later sold the same house, made a hundred thousand, I could have made 220 but I was motivated and I wanted to sell so I put it a lot of meat in the table but I still made 100k that included my monthly cash flow. I did many deals like that where I find motivated sellers, I targeted them, they called me, I talked to them, we met them, we met their family over at one month we decided we want to do the deal and I saved their home, I saved their credit; from fire fighters to city workers, all types of people. And it’s a great feeling because I was in total control and I was helping someone else and I was making money.
With Bitcoin I don’t know who it is or who the characters are and in the stocks, I kind of know who the president is but I don’t really know what’s going on and I have no control. I’m not dissing speculation investing and I’m not saying this one is better, it’s both risky but I’m in the camp of non-speculating because I’m a refugee to America and I don’t want to lose my money and I know I can make good money with this, like when I started business, it’s really not speculation, I studied it and I know that I’m going to win with it, I don’t have any other choice so my mind determines my outcome so it’s not speculation for me, for many people when they started business, speculation because they listen to their momma, their girlfriend, their family, their cousin, the TV, the Radio and so it’s speculation for them. It all depends on your mindset guys.