Do This, Not That!: 10 Critical Decisions That Can Make Or Break Your Real Estate Investment

0:00 OK, So you know, if you're listening to this, you're probably thinking about real estate investing or you're already doing it and and you want to get better at it. So we are diving deep today into a book called Do This, Not That. Oh yeah, I've heard of this. By Michael Lantryp and it's all about real estate investing secrets. And he has some pretty interesting counterintuitive advice. Like you know how everyone always says cash is king? Right. Yeah. He digs into when it's truly best to use it and when other strategies might actually be smarter.

0:32 Yeah, it makes you think twice about some of those old sayings, Yeah. Exactly. To help us unpack all of this, we've got a real estate expert here with us today. Happy to be here. So what do you think about land trips approach in this book? I think what's great about his writing is that it's practical. Yeah. You know, he cuts through all the hype, gets straight to the point, actionable advice. Yeah, and that's what you need in real estate. Yeah, for sure, especially for, you know, first time investors, people who maybe haven't, you know.

1:00 Definitely, yeah. You can avoid a lot of mistakes. Yeah, exactly. Yeah, All right. So right off the bat, he tackles this question, do you cash out when you have a property or go the lease and purchase route? Right. It's that, you know, choice between getting all that money at once or maybe hanging on for even bigger games later. It is it is tough, you know, and I think that that's something that every investor wrestles with that quick cash out or the the long play, you know. What are your thoughts on navigating this?

1:31 Yeah, what? What? What do you think? Well, you know, I think cashing out is great for, you know, if you, if you want to minimize your risk and you want to, you want that liquidity, but the lease purchase is where you spread the risk out over time, potentially higher returns. You know, I think if we connect this to the bigger picture of, you know, your own financial situation, it really boils down to risk tolerance and your investment goals. Yeah. So it's not a one-size-fits-all. Never is, never is.

1:59 Yeah, you have to think about yourself. Exactly. Yeah, OK. Speaking of risk, LAN Trip throws a little bit of shade on the mortgage pre approval process. He does, and I, I, you know, I think he's right too. What is? That about. A lot of first time investors especially, they get that pre approval and they think, oh, I'm good to go. Yeah, I'm ready. To go I can buy anything I want. Exactly. Yeah, it's not the whole story. Yeah, it's like thinking you won the lottery just because you bought a ticket.

2:27 Right. Yeah, you've. Passed the first round, yeah, but you haven't won the prize yet. Yeah, for sure. So what would you say is the most crucial step for someone to avoid a pre approval disaster? Preparation. Prepare, prepare, prepare. Before you even think about applying. Get all your ducks in a row. Gather all your documents. Double check everything. Don't be afraid to ask questions. The more you know, the smoother the process will be. OK, good advice, good advice. All right, Now here's a topic that can make people's heads spin, OK, Me versus LLC, right?

3:02 Yeah. Can you break down the essentials of using an LLC for real estate? OK, so I think the biggest draw is the liability protection. OK? You're creating a wall between your personal assets and your real estate holdings. OK, So God forbid something goes sour, right? Your personal finances are shielded. So it's like a safety net. It is. It is. But I'm guessing there's a catch. There's always a catch. Yeah, they do add a little bit of complexity to things. Yeah. Paperwork, potential costs and tax implications.

3:37 OK, so is an LLC a must have? That's a good question. It depends. Yeah. There's no one-size-fits-all answer, right? So if you're serious about it, yeah, I would say talk to a professional, OK? Talk to a tax advisor, maybe an attorney, OK. They can help you figure out the structure that makes the most sense. Yeah. OK. So you're not just doing this on your own? No, never. Yeah, OK, good advice. All right. I think a lot of people, myself included, find it appealing to own a property outright. No mortgage payments, right?

4:05 Just that sweet feeling of ownership, for sure. But Land Trip dives into the power of leverage. He does. Which is a totally different approach it. Is a different approach. You explain that. So leverage is essentially using borrowed money to control more assets than you could on your own. So let's say you have 100,000 to invest. You could buy one property with cash or use that as a down payment on multiple properties. So if those properties go up, the returns on your initial investment would be much higher.

4:36 Interesting, So it's like amplifying your gains? Exactly. But I'm sure there's also a risk of amplifying your losses. That's the key. You have to remember it magnifies both yeah, OK, gains and losses. So it's not a magic bullet. No, it's all about balance. Yeah, OK. Risk and reward, yeah. Right now, this next topic makes me a little nervous. OK, Personal guarantees, Yeah, land trips sounds the alarm bells on this one. I've always thought of a personal guarantee as kind of like Co signing on a loan but with way higher stakes.

5:04 Yeah, that's a good way to put it. Yeah, so am I, am I wrong? You're not wrong. You're putting your personal assets on the line for a business debt. Yikes. So when are these typically required? When you're seeking financing. OK. Especially if your business is new or doesn't have a strong track record, landlords might ask for it. Yeah, from Pennis. Sometimes lenders want it. Yeah, in real estate deals. OK, so let's say you're in a situation where it's unavoidable. OK. What can you do to minimize the risk?

5:37 Well, I always say negotiate, OK, try to limit how much you're liable for, OK? Maybe set a cap on the liability. OK, Negotiate a release clause so that after a certain time or certain conditions are met, you're released from that obligation. So don't just blindly sign you ever. Read it carefully, get an attorney. This is serious stuff. Yeah, OK. All right. He also talks about ironclad agreements when you're forming LLCS or partnerships. He does, yeah. That's important. Why is such a big deal? You know, it's like a prenup for your business because partnerships, it's like any relationship can get complicated.

6:15 So you need to spell everything out. Who's responsible for what? How profits and losses are split? What happens if someone wants out of the partnership? Yeah, so this can prevent a lot of headaches. Major headaches, Yeah. I've seen partnerships fall apart over the smallest things. Really like what? Splitting maintenance cost, Who gets to make major decisions, Wow, all that stuff. OK, so this is really important, essential. Yeah. Now this next part is where things get really interesting. Investing in property that you don't actually own outright.

6:46 Yeah. So this is where we're talking about, you know, lease options, joint ventures, things like that where you have a financial stake, but you're not the sole owner. Right. So can you give some examples of how that might play out? Sure. So with a lease option, you have the right to buy the property in the future, but the current owner could sell it to someone else before you get the chance. Or in a joint venture, you know you're partnering with someone else, yeah, to purchase and manage it, right?

7:11 So you're sharing the risk and the reward. So it's all about understanding the nuances of the ownership. Exactly. Yeah. What advice would you give to someone who's considering this type of investment? Due diligence, Due diligence, Due diligence. OK. Investigate thoroughly the property, the owner, the terms of any agreements. Don't be afraid to ask tough questions. Get legal advice, make sure you're protected, OK? And, you know, remember, it's OK to walk away. Yeah. If something feels off or too risky, you don't.

7:44 Be afraid to walk away. Exactly. Yeah. All right. That's some solid advice I try. So we will be back in Part 2 of this deep dive to explore even more of Land Trip's strategies, including seller financing. Looking forward. To it all right. See you soon. See you then. Welcome back. All right, so last time we kind of left off with a bit of a cliffhanger. Yeah, Land Trip has this whole section on seller financing and I'll admit that always seemed like a more advanced strategy it. Would be a little intimidating.

8:10 Yeah. Is it really as complicated as it sounds? The basic idea is pretty simple. OK, Instead of the buyer getting a regular mortgage from a bank, yeah, you the seller, you become the bank. OK. You're providing the financing directly? So it's like I'm giving the buyer a loan to buy my property. Exactly. Wow. And you know what's really interesting? What it can be a win, win. Really. For both sides, yeah. For both the seller and the buyer. How so? Well, for sellers, it opens up your pool of potential buyers.

8:42 OK. Not everyone can get a traditional mortgage right? So you might attract buyers who wouldn't qualify otherwise. That's. True, yeah. And for the buyer, yeah, they might get better terms. Than they would from a. Bank exactly. You have the flexibility to structure the loan terms right in a way that works for both of you. So maybe like a lower down payment or? Potentially lower down payment, Yeah, more favorable interest rate. OK. Or a payment schedule that fits their budget. Interesting. It's about finding creative solutions.

9:10 But I got to say there have to be some downsides to this. Of course. It feels risky taking on that responsibility of collecting those mortgage payments. Yeah. I mean, you're right to be cautious. Yeah, it's not risk free, right. As the seller, you need to do your homework on the buyer. So it's. Just like if I was a bank. Just like a bank would. Yeah, OK. You know, check their creditworthiness, right? Make sure they have a solid history of paying their debts on time. So really important to do your due diligence.

9:39 Is that you're essentially acting as the lender. OK. So those responsibilities come with the territory. It's not for the faint of heart. Definitely not. You really need to be comfortable with the potential risks. Yeah. OK. All right. Moving on, Lantrip is strongly against this idea of a deed in lieu of foreclosure. I always thought of that as like a relatively easy way to get out of a tough spot if you were facing foreclosure. Yeah, a lot of people think that. Yeah, why is he so against it? Well, here's the thing.

10:11 It can hit your credit score just as hard as a full foreclosure. Oh really? Yeah. So it's not the escape route it might seem. Right. And those consequences, yeah, are nothing to sneeze at. Yeah, that's true. It can make it tough to buy a car or even rent an apartment. It can affect so many things. You know, renting an apartment, getting a car loan, yeah, even landing a job in some cases, your credit score is a big deal. So if you're facing foreclosure, what's the best course of action? Talk to your lender, OK?

10:40 The sooner the better. Don't just ignore it. No, don't avoid those tough conversations. Because, believe it or not, lenders don't want to foreclose. Really. It's costly and time consuming for them. That makes sense. They would much rather work with you. To find a solution exactly like what kind of solutions? Well, you might be able to modify the terms of your loan. OK, Get a temporary break from payments or even do a short sale. So there are options even when things feel hopeless. They're always options.

11:11 OK, good to know. All right, Land Trip also dives into the world of partnerships, specifically what happens when it's time to go your separate ways. You know buying out or getting bought out, right? It's like any relationship, right? It could be great when it's working, yeah, but splitting up can get messy, yeah. Especially when there's money and property involved. Exactly. Emotions can run high. So how can you navigate this as smoothly as possible? I think the best advice I can give is to be proactive, OK have those difficult conversations early on.

11:46 Before things get bad. Exactly. Don't let those resentments and frustrations fester. It's always easier said than done. It is, but if you're starting to have doubts or you're thinking about dissolving it, have an open and honest conversation. OK. And when you do have that conversation, where do you begin? Figure out what the property is actually worth. Get an appraisal from a qualified professional. So don't just rely on your bet feeling. No. You need an objective valuation, and once you have that number you can start discussing a fair buyout price.

12:17 And put everything in writing. Absolutely. Get it all down in a clear written agreement. Terms of the buyout payment schedule, any contingencies, how you'll handle any outstanding debts or obligations. So it's like a road map for the whole process. Exactly. Treat it like any other major business transaction. OK dot your IS and cross your T's. Even if it's with someone you're close with. It might feel formal, but it's essential. To protect everybody? Exactly. Yeah. What if you just can't agree? Sometimes you need outside help.

12:48 Yeah, Consider bringing in a mediator or an attorney. Neutral third party can help facilitate the conversation. So it's like having a referee. Exactly. Sometimes you need that outside perspective right to reach a resolution that works for everyone. This has been incredibly insightful. We'll be back in Part 3 to wrap things up and discuss some of his final words of wisdom. Until then, keep those brains churning and those investments growing. See you soon. All right. Welcome back to our deep dive into Do This Not That by Michael Lantrip.

13:21 It's been a great conversation. We've covered a lot of ground, yeah. A lot of different strategies. From leverage to LLC's. Personal guarantees. They're so. Scary personal guarantees, and what's great is that Lantrip really breaks these complex concepts down. He does, yeah. Makes it easier to understand. He makes real estate investing feel accessible. Yeah, exactly. And one of the themes that runs through the entire book is this idea of risk assessment. Yeah, risk is always there. It seems like every decision, every strategy, comes with its own set of risks.

13:54 Absolutely. Real estate is not for the risk averse, right? But the key is to understand those risks, quantify them, and then come up with a plan to minimize them. And Lantrip doesn't shy away from that. No, he's very straightforward. He talks about the potential downsides. You have to acknowledge them. Yeah, but then he also gives really practical advice. Yeah, actionable steps. On how to protect yourself, yeah. So what are some of the key ways he emphasizes mitigating risk? Due diligence is huge.

14:25 Yeah. Do your research thoroughly. Vet properties and don't be afraid to seek expert advice. He also cautions against letting emotions drive your decisions. Yeah, it's easy to get caught up in the excitement. It is, especially in a hot market. Yeah, you got to step back, look at the numbers and make sure the investment aligns with your goals. Absolutely, and that's where having a trusted team of advisors can be so valuable. Yeah, like who are we talking about here? You know, real estate agent, an attorney, a financial advisor.

14:55 They can offer different perspectives and help you avoid those costly mistakes. Yeah, a good team is essential. It really is. O as we closeout this deep dive into do this, not that, what's the single most important piece of advice you would give our listeners? You know, I think it all comes down to this. Knowledge is power. OK. The more you understand about real estate investing, the strategies, the risks, yeah, the legal and financial complexities, yeah, the better equipped you'll be to make smart decisions.

15:23 That makes sense. And achieve your goals. And this book is a great starting point. It's a fantastic resource. Yeah, Land Trip provides a clear framework for thinking about real estate strategically. He does, and making those informed choices. He encourages you to be proactive, to ask questions, to challenge assumptions. Yeah, and never stop learning. So if you're serious about real estate investing, yeah, grab a copy of Do This, Not That. You won't regret it. And until next time, keep exploring, keep learning, and keep diving deep.

15:55 Happy investing everyone.