DUMB MONEY & LAZY MONEY: Please Don’t Make these Mistakes and become the Dumb and Lazy Money

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good morning good afternoon good evening

folks michael zuber one minute at a time

back with the man the myth the legend

and a friend of the channel omar how you

doing buddy good what’s happening

michael what’s up everybody hey you know

something you and i have been talking

about because again we’re both in the

real estate game 20 some odd years we

really do this business deals every

month

uh you know i think i think it’s fair to

say that we’re late cycle

and i don’t know about what yeah yeah

yeah flight cycle

and uh i don’t know about you but every

time late cycle and again i’ve been

through through a couple of these

lots of dumb money comes in right

because they think it’s easy or they’re

chasing this or that

and i just wanted to talk about some

things we have seen dumb money do in the

past do you have an example of dumb

money

yeah tons of examples

i know back in in 2000 uh

2007 the heyday yeah when

market was just absolutely on fire kind

of like the way it is now but

there the demand is still going strong

now but before then it was just a little

different it was fake money yeah um i i

could say and i saw a lot a lot of

people

uh you know make hundred hundred and

fifty thousand dollars a flip uh

a new construction they were making a

buck and a half

every single house i know i i there were

condo communities where people in my

neighborhood were flipping the contract

right they got in they got a lottery

they got it that thing flipped three or

four times before the thing was built

everybody made 50 grand it was like

yeah exactly i mean a buck fifty two

hundred thousand dollars on yeah on on

new constructions and stuff profit

so what did i see i saw boats i saw uh

this is this is the crazy part though

and

i saw boats i saw hummers i saw

extra vacation houses

everything right based on the income

that they were producing big difference

the income that they were producing

were buying the liabilities now what we

talk about is we have assets that buy

the liabilities that doesn’t affect our

income we’re not buying these

liabilities with income it’s with

passive income because we invested in

real estate so big difference so i did

see a lot of dumb money back in 2007-8

before the crash

and it’s just done yeah and everything

was on sale after that yeah so there’s

there’s two things that jump out at me

when i think about dumb money and

unfortunately i think they’re happening

again right now

right there’s i live in the silicon

valley there’s a lot of stock money

there’s people that sell their companies

and

there’s there’s cash where i live

and i remember one time i think i wrote

this in my first book

somebody said hey i like what you and

olivia are doing

right you’re down in fresno can you make

some introductions i do what i do right

i make some connections i plug people in

and i catch up with this person like a

week later just to say hey how’d your

trip to fresno go did you like my team

what you got any feedback and he goes

hey i just want to let you know we wrote

three offers and got two deals uh and

and we’re closing uh i think we’re

closing on one or one or two you know

tomorrow or the next day i’m like are

you kidding me

are you freaking kidding me you go down

there for one day you see three houses

you write two offers

and and you’re closing you don’t know

what a good deal is you don’t know what

an average deal is yes i introduce you

people that i trust but i’ve been

looking at markets for at that point

years

and you’re there for seven seconds and

you think you walked into some good or

great deals what are you doing

dumb money

is lazy money

hey michael this is spot on

like

i i like this a lot because this lazy

money this is the because everyone wants

to be the investor so this is the new

thing now yeah everybody’s getting

invested garyvee

and everybody wants to buy a house now

or buy or flip a house or or buy a

rental

and that right there

that right there is the ingredient of

the dumb money because you don’t like

you just said three houses and they made

two offers and they got two acceptances

yeah no you know who’s the who’s

laughing is those sellers yeah

yeah or i’m gonna laugh because i know

you’re gonna have a negative cash flow

or an alligator and you’re done you just

blew your wad you’re out of the market

you’re oh by the way when you do stupid

things like that when you are lazy and

dumb money you’re going to get in you’re

going to have a bad experience you’re

going to have no cash flow you’re going

to dip into your pocket and you will

become the frustrated landlord that

sells to me at a loss later

or or me in my own first round yeah

coffee call me

for sure yeah so again dumb money to me

is lazy money right i i provide a course

called how to get started one ritual at

a time which you are in and recommend

and part of and all that great 100

it’s focus daily discipline 60 and 90

days if you go anywhere and you look for

three days and you think you got a great

deal you’re the sucker right if you play

poker and you don’t know who the fool is

or the fish you are the fish you’re the

fish yeah

not good so the second thing that really

strikes me that’s happening right now

is

uh burr projects

burr has so much risk in a flat market

right it’s not like this anymore

where you could be a horrible

buyer horrible remodeler and still come

out ahead we are going into a flat

market

real estate slow down we’ve talked about

it coming it is here or will be shortly

and burr projects are some of the

riskiest things to try in a flat market

in my opinion and just because you read

a book or you watch somebody who’s you

know done a few of them you got to

remember they were doing it when the

market was like this and they want to

sell some books so it’s it’s

very very very tough time today

yeah can i add on that michael yeah

please on this on the bur aspect of it

it’s you know i’ve done a few you have

to we’ve pulled out our money you know

but we’ve always done them in a flat

market

and and since i think last year i did

something as well but what i tell you

everybody wants to hurry up and buy a

place fix it up um and then hope that

that appraisal value comes in high

enough to get the 70 ltv right or 75

loan of value yeah but the problem is

that if you don’t have any cash flow

from other performing assets

to offset anything just in case

you know that and your and your cash

your reserves right to reinvest the

money

what happens is you may not get that

valuation that you want in that bur

project and then if you don’t get the

valuation you want you’re going to be

left with not all your money back you’re

going to be left with 50 60 000 left in

that house okay because the ltv didn’t

you know conform

yeah to what you wanted and then if you

were banking on that 50 60 k for your

next deal you just shot yourself you

have a good asset great but go make some

more money so then you’re able to go do

another one another one but that’s the

problem that there isn’t enough people

focusing on their producing income

to withstand anything like that that’s

going to happen yeah equal difference

even worse

people are selling this vision of burr

as the next no money down thing it

scares the hell out of me

right if you are really doing projects

that you really need the maximum ltv to

get out and you know all of that and you

know you get a deal done and you have 10

or 15 grand left in and you can’t cash

out because you borrowed hard money or

private money or whatever it is

it’s not the time to do that flat

markets are not the time the best time

was 2012 to 2018. it ain’t that time

anymore

yep

or or 19 and 20

no 20 to 12 the end of 2021

maybe because you know how we had that

yeah the little run-up yeah that’s great

yeah we we said right go back and look

at your playlist you have an amazing

playlist on this channel that people

need to go check out i think it’s just

omar

and um we we said that i think it was i

think it was yeah a year ago right now

february march last february

best time ever to flip because it was

lipstick flips it wasn’t even anything

crazy so

very very cool you got another the other

thing about lazy money or dumb money

here that i wanted to ask you about

because i’ve never done it you have

is airbnb

i think there’s a lot of people that are

seeing these great reports about airbnb

and this and that and yeah you can do

some amazing things but so many people

are once again lazy they see the

headlines they see lake havasu they see

water view and they go buy some

substandard product

you know elsewhere i think there’s a lot

of dumb money jumping into airbnb today

is that am i wrong you know what i’ll be

honest with you um it’s uh it grabbed me

as well

um you know i’m not gonna lie

and in my first few out in arizona in

lake havasu and they were performing

phenomenal

and and then i opened up to to big bear

um so we have the the couple in big bear

and now we’re doing a couple in in

landers and yucca valley

but this is good because

i will share with you if you don’t have

income from other sources

again let me rephrase that if you don’t

have income from other sources other

performing assets with cash flow

to withstand your airbnb rental because

you still have that payment and by the

way it’s a little bit more of a rehab

because you’re rehabbing the project to

make it look super nice yeah plus

plus you’re furnishing it plus you’re

spending the extra money on like nice

things so your property rents out you’re

adding a spa you’re doing a a fire pit

you’re adding extra

right which increases costs you know

yeah sure your payment might be a couple

grand but if you’re not booked

that’s your rehab money and everything

your your expense your

your your furnishing money plus the

payment

and

if you got the money great

but i’m saying like it it could change

in a minute because to me i think it’s a

fad if you go to a wrong area

yeah for me again i talked to some

people that anna kelly who’s with me on

wednesday she does airbnb on the water

right she’s a she’s like she’s like

she’s got her niche million dollar

properties on the water but she talks

about all the time people go in like

substandard areas and this and that and

the neighbors aren’t great

yeah that might work for a minute but

people are changed and people will go to

hotels again i think there’s a lot of

dumb money every

anytime people perceive easy

fast

dumb money races in because they don’t

want to do the work they’re just i don’t

know i’m going to call it lazy again

it’s just it’s there man it’s really

there yeah crazy stuff yeah well if

people want to follow you get part of

your team see what a real real estate

entrepreneur is about what should they

do

guys follow me on ig at omar underscore

alfaro or go to my website omar

alfarou.com thanks buddy

thank you

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