Video Closed Captioning:
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