A Karate Master’s Unconventional Approach to Real Estate Investing
The longer you’ve been in the real estate game, the better you become at identifying the differences between smart, successful investing strategies and the ones that are a fad and that result in failure.
Sensei Gilliland has over two decades of real estate investing, so he has done it all – the great strategies and even the not so great ones! In our recent conversation, he summed up decades worth of real estate experience into one simple piece of advice: have an unconventional approach to real estate investing.
Summing Up a Decades Worth of Experience
Sensei summed up his over two decades of experience in one piece of simple advice as: there is always an unconventional way to acquire properties and deals that can reduce or eliminate your risk.
How does one think unconventionally? Sensei says, “I would get away from conventional thinking. Become that archeologist and start digging for unconventional ways, because conventional ways is where all the masses [are].”
What’s the big deal with following the masses? “Typically, when there’s a mass of people, then you’ve got your competition,” Sensei said. “I also tend to find that wherever the masses are, they’re always wrong, so I like to veer off and go in the other direction and say, ‘where is less competition? What can I do that is different.’”
You can easily find examples of unconventional companies, like Uber, a transportation company that doesn’t own car, and Airbnb, a real estate company that doesn’t own any real estate. These types of businesses, Sensei said, “have gone a totally unconventional way and real estate investors can do the same thing.”
Turning the Conventional in the Unconventional in Real Estate
Let’s take wholesaling, which seems to be the most conventional real estate investing strategy there is. In wholesaling, it is all about equity. Since rehabbers need to buy deals with existing equity and since wholesalers supply deals to the rehabber, they must find deals that have significant existing equity. If the deal has no equity or is on the edge, then what would be a conventional wholesalers course of action? Most likely, they would pass up on the deal.
When Sensei first started wholesaling, he had this conventional approach. If a deal didn’t have equity, he would move on to the next deal. But eventually, Sensei says, “I discovered all these deals that I have that are just on the fence but aren’t making sense as a rehabber. Well, who is picking up those deals? What can we do with them?” His conclusion – learn about the purchase-option side. Purchase options are strategies like lease-options, sandwich lease-options, subject-to financing, and land installment contracts. Now, instead of passing on these sub-standard, no equity deals, Sensei could “turn around and gobble them up” since he now understood the purchase-option strategy. “There are a lot of different strategies that we can use to where we can pick up properties that lack equity, have no equity, or are upside-down in equity, and still put those properties under-contract and flip them out and make some money off of it. That’s where the masses are not.
Sensei attributes his ability to adopt this multi-strategy approach to allowing him to survive the great recession. “Real estate is cyclical, so when the market is good, it’s great for the wholesalers and rehabbers. When it starts to shift…those deals become a little bit more difficult. Then the wholesalers and the rehabbers tend to fall off…and they come back when the market is good again. It’s important that you have a balance in your arsenal to where [you can say], ‘hey, if it doesn’t work as a wholesale deal, I can definitely make a deal out of nothing and pull money out of thin air.’”
Have Multiple Income Streams
Sensei’s Best Ever advice is to never rely on one source of income. Sensei started out as a rehabber – income stream #1. Once he understood that markets constantly change, he “didn’t want to be that one linear investor where I only know how to rehab.” That is when he picked up wholesaling. Sensei could cherry-pick the best deals to rehab himself and wholesale the rest – income stream #2. Once those two income streams were performing well, he learned about purchase-options – income stream #3. At that point, Sensei says, “everybody wanted to learn about what I was doing, because they saw all the changes that were happening in my life for the better, and then that’s where I started offering my educational course and consulting course” – income stream #4. He was also offering rental properties – income stream #5.
With five different income streams in five different real estate niches, Sensei is able to balance out his risk. He also has income streams across multiple industries. Real estate is his main source of income, but he also owns other types of businesses. “I find that if you like to have a balanced real estate portfolio, you also have to have a balanced income source.”
Be unconventional and don’t follow the masses. Sensei’s unconventional approach to wholesaling was educating himself on purchase-options so that he could flip deals with little, no, or upside-down equity, while the conventional wholesaler only executes on deals when they have significant equity.
Sensei’s Best Ever Advice is to never rely on one source of income. In doing so, you decrease your risk during ever-fluctuating market conditions, and increase the number of deals and opportunities you can take action on.