# Alex Hormozi's Advice on Real Estate Investing

Channel: Real Estate Skills
Video: https://www.youtube.com/watch?v=S58s6LQxA9A
Duration: 16 min
Language: English
Words: 3500
Transcript page: https://viewrankai.com/tools/youtube-transcript/S58s6LQxA9A

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[0:00] I lost $50,000 on my first real estate deal ever. That one sentence right there could save you $50,000 because Alex Hormozi went on to become an incredibly successful real estate investor. His company deposits cash into a real estate portfolio that ACQ real estate website currently values at more than $420 million. But his very first deal, total disaster. He lost 50 grand. Here's the truth. I've been part of over a thousand real estate transactions 14 years and I've trained more than 6,000 students and investors. And the difference between Hormozi's first deal and that same portfolio today comes down to one thing and it has nothing to do with money. So I

[0:35] pulled three different videos Hormozi's put out about real estate. In one he explains why real estate has made so many millionaires. In another he walks through exactly how he lost that $50,000 and in the third he reveals that one of the main places his company actually [music] reinvests all of its cash today is right back into real estate. Put all three of them together and it give you [music] one of the simplest, clearest paths I know for actually becoming a real estate investor. Stick with me to the end because my goal is to make [music] this one lesson worth way more than 50 grand to you. And that one thing, I'll show you exactly what it is. Before we get to

[1:05] how he lost the money, you need to understand why he was in real estate in the first place. And in another video he draws this huge line between how millionaires and billionaires actually get made. The majority of millionaires are made in real estate. The majority of billionaires are made in private equity. And the point of this video is to walk you through the money making process that they use to make tons and tons of money for themselves, tons and tons of money for their investors and most importantly accelerate value in a business. Let's deal with the private equity part right away because Hormozi's right. At the absolute highest level business and private equity

[1:35] can produce returns real estate normally can't. I mean a business can grow 10 times, 50 times, [music] 100 times and of course most single properties are not doing that. But here's the truth. Most of you watching aren't trying to build the next Blackstone. You probably want to replace your income like I did or you want to own assets or you want more control over your time and you want to build something that you can actually pass down. And that's exactly why real estate has made so many millionaires. It gives a normal person a simpler, more understandable path [music] to actually get there. Private equity has a higher ceiling,

[2:04] but real estate has that clearer road. Now, watch how he explains the actual model because he's about to describe almost every stage of becoming a real estate investor. So, let's walk through an example that everyone probably understands. So, if you were to buy a house and you wanted to use this as a real estate investment, then you make money on this in two main ways. One is that the

[2:23] value of the house goes up, so let's say it's worth 1 million, it becomes worth 2 million. Great, we had appreciation. The other is that you get checks for $1,000 a month from the tenants, right? But, the point is is that you're going to get paid every month for some sort of production from a renter and the house is going to go up in value. Now, if you just did your own house, then you're just not paying this, so you're just paying the bank for your mortgage and whatnot, and you're pretty much just going to make your money in appreciation. There are some things that you can have appreciation that's just happens over time, and the other's kind of forced appreciation,

[2:50] which is where you fix the stuff, you clean the windows, you add a kitchen, you you know, you you do work, right? And that it increases the value of the thing because somebody else might be more likely to pay for it or buy it, all right? Very, very simple. So, Hermosi just gave you two main destinations. You own a property that pays you every month and appreciates over time, that's buying and holding. Or you actively improve a property and force its value up, that's fixing and flipping. But, here's the truth, and there's one thing he skipped, there's a skill underneath both of those that he didn't name. You have to know how to find and buy a good deal in the first place

[3:23] because you can over-renovate a house perfectly and still lose money if you paid too much. And you can hold a rental for 10 years and it can still be a bad investment if the numbers never work from day one, right? You make your money when you buy, and that [music] skill of finding, analyzing, and

[3:37] acquiring good deals is exactly why the evolution of a real estate investor starts with wholesaling. Now, hold that thought because I'm going to show you the whole evolution in just 1 second. Now, the thing about real estate and why I think it makes so many millionaires, it's a really simple business model. Like, you buy the house, you put a certain amount down, you take a loan for the rest, as long as you put a tenant in that can cover that. Now, I'm obviously simplifying this, but that's because that's the point. I'm simplifying it for the point of a video. Plenty of people have lost their asses in real estate, but because it is a reliable thing, they're not making any more

[4:07] land, and they do keep making more people. Over time, as long as population growth continues, uh real estate will be really good investment. Now, I love that he calls it a simple business model. And notice he did not say easy. He said simple. And even says plenty of people have lost their asses. So, keep that in your back pocket because it's about to matter. Because I've spent the last 14 years trying to simplify this whole journey down to something that you can actually follow. And it comes down to three stages. Stage [music] one, you wholesale, and you get paid to learn to find great deals. Stage two, you keep wholesaling and cherry-pick the best deals to fix and flip. So,

[4:38] you're learning [music] how to improve these types of deals. And stage three, you reinvest those profits into long-term cash-flowing real estate. You now own the great deals. So, [music] find them, improve them, own them. Wholesaling creates active income, but it teaches you how real estate actually works. Flipping makes bigger profits, but takes on more risk, construction risk, holding costs, and market risk. And buying and holding uses everything you built to create passive income and long-term wealth. Simple, but as we know, simple does not mean automatic. You still need to be educated. Contracts, due diligence, discipline, and the ability to understand what you're actually buying. And Hermosi's first deal is the perfect example of what happens when you

[5:16] skip that part. So, let's finally see how he lost that 50 grand. So, buddy mine's like, "Hey, I've got this guy. He sells houses in Ohio. And so, you can buy these houses in cash for like 50 grand. Each house can make you like six grand a year in cash flow. And there's a guy who would he All he does he specializes in finding these particular houses, and then he'll basically give them to you, and he'll set you up with a property manager." But I said, "Why don't I just buy one of these houses and see what happens." The papers transferred. It turned out that the house was not, in fact,

[5:43] a three-bedroom. It was actually a two-bedroom house. And the third bedroom was actually in a closet that they'd put a mattress into. The house did not actually have electricity. They were running it from the neighbor's house illegally. The driveway was so in shambles that the people couldn't actually park on it. A friend of mine who is in real estate looked up the county records or whatever and found out that the guy who had sold it to me actually bought the house for $19,000. I

[6:06] end up selling the house for $20,000. Now, there's a $50,000 lesson buried in one sentence of that. His friend, who's actually in real estate, looked up the county records and that's what exposed this whole entire thing. Here's the truth. On every single deal we do, one of the first steps is to verify the facts. Who legally owns it, what the public record say, the record bedroom and bathroom count, the prior sale price, and whether the story you're being sold actually matches the paper. If the county records had said two bedrooms and someone was willing to sell to me as three,

[6:37] I would have immediate questions. Where'd the third bedroom come from? Is it even permitted? Can an appraiser count it? Can a lender count it? Can a tenant legally live in it? In his deal, the third bedroom was a closet with a mattress in it. The electricity was being run illegally off the neighbor's house. The driveway couldn't be parked on, and the guy bought it for 19 grand and sold to him for around 50. Now, these aren't cosmetic issues. All of these hit the value, the income, the financing, and the exit. This wasn't an intelligence problem. Alex Hormozi is one of the smartest business operators alive. It was a specialized real estate knowledge and due

[7:08] diligence problem. And this is exactly where most people lose their money. So, this part absolutely matters. The reason Hormozi lost that 50 grand is simple. He didn't run the numbers appropriately before he bought it. So, I built a deal calculator that runs the exact math for you, the due diligence that he skipped, and I'm giving away for free. You can plug in a deal and it tells you fast whether the numbers actually work or not. So, you stop guessing where you're going to lose money and where you're going to make it. The link's in the description. Grab it and then come right back because next I'm going to show you what Hormozi actually does with all of his money today. So,

[7:37] how does one of the smartest business people on Earth lose money on a house? Because being smart in business does not automatically make you skilled in real estate. And being great at finding houses doesn't automatically make you great in business. I see both sides constantly. I see real estate investors who can spot an amazing property, but cannot manage people for the life of them, and cannot track their numbers, and can't build a darn system. And I see brilliant business people who understand sales and marketing and operations, but they have no idea how to verify

[8:04] public records, estimate repairs, read title, or protect themselves inside a real estate contract. Business intelligence and real estate are two different skill sets. [music] The strongest real estate entrepreneurs eventually develop both. Hermosi had the business side handled, what burned them in the beginning was the real estate side. But this is a skill that you can actually learn, which is exactly why the evolution starts where it starts. This is why I believe wholesaling is such a smart first stage. You're not just chasing assignment fees, you're learning how real estate actually [music] works on somebody else's risk. By actively wholesaling, you learn how to find these opportunities, pull property info, verify the ownership,

[8:40] read public records, run comps, estimate repairs, talk to agents, negotiate and review contracts, spot title issues, and then structure the best exit. And when a wholesale deal's structured correctly with the right contingencies, you can evaluate a deal without taking on the same capital exposure as buying the whole property. Now, it's not always risk-free, and nothing really is, because you can spend money on marketing, earnest money, I mean, it goes on and on. But you can structure it so you're not risking 50 grand on a property that doesn't survive due diligence. Now, when I started, I didn't have $50,000 to lose. I needed to learn real estate in a way where I was

[9:12] making money while gaining my skills, and that's what wholesaling let me do. I was getting paid to build the judgment I'd later use to actually fix and flip houses and to buy rentals. And here's the truth, every wholesale deal I do, it teaches me something new. Every flip is built on that. Every investment builds on the deals before it. You're not just compounding your learning, you're compounding your judgment. Now, Hermosi didn't lose 50 grand and decide real estate was a scam. He learned and kept building active income. [music] And today, real estate is one of the main places his company puts its cash. As the revenue comes out the other side here,

[9:44] right? And we have revenue that comes in from our media as well, right? And books also create revenue and school also gives us revenue. But all of these things then shuttle to money on this side, right? All of these are in some ways revenue producing. Once we have this revenue, we then redeploy this revenue into various buckets. So, one of them is ACQRE. So, that's our real estate arm. This is where we buy real estate properties, typically multi-family. We have a good

[10:11] partnership through ARC. Um and we've raised funds to do these properties in these deals. And we can also solicit back to the front of our audience and say, "Hey, would you like to do deals alongside us?" But this is one of the primary methods that we reinvest [music] cash um the cash that we have. And part of this is because it's also tax efficient for us as a business. Um and so, that's one of the places that we put the money. The next places that we that we put the money. And this is obviously outside of more people, more infrastructure, more tech the the reinvestments that we put inside of the business. The excess cash um goes into ACQ

[10:46] Ventures. Now, watch the order there, because most people miss it. He does not take every dollar his businesses make and rip it straight out. First, he reinvests into the active income engine, the people, the infrastructure, the tech. He keeps the machine that makes the money pretty darn healthy. Then he deploys the excess cash into other assets, and multi-family real estate is one of the primary ones. That's almost exactly like the evolution of a real estate investor. Wholesaling becomes your active income engine, then fixing and flipping increases the profit you pull from the best deals, then you take a portion of those profits and put them into real estate that cash flows

[11:20] and appreciates. You never kill the machine that feeds you. You feed the machine and you deploy the excess into assets. That's how active income turns into long-term wealth. And here's the truth, the evolution is not just about deploying more capital. It's about becoming more qualified to deploy capital. Look at the proof. Alex's ACQ real estate website, it currently [music] states its portfolio value is over $420 million across 2,068 units, mostly class A multifamily. And their site says they review thousands of deals before making an investment decision. Now, compare this to his first deal. Then he trusted the guy selling him the investment and lost 50 grand. Now, a dedicated

[11:58] real estate arm reviews thousands of deals with a disciplined process. That's an evolution. Now, let's go back to that private equity comparison because later in the same video, he gives real estate an even stronger endorsement. And here's one of the other big things that people don't get with private equity is that with a house, you can't build a house from scratch. I mean, you can build a house from scratch, but it's going to cost you money. But a business, you can start with nowadays almost nothing. You can start selling your time, and then you start making some money,

[12:23] start paying other people all off cash flow in the business, which the business can start for free. And so, you can have something that literally costs you $0 that becomes worth billions. And there is no piece of real estate on Earth that you can build for $0 and then it will someday be worth billions. And so, the reason that private equity makes more money than real estate at the highest levels is because it requires more skill. Because there are more skills required in order to do it. Now, to be fair, this is in some ways just as strong as an advocate of real estate is

[12:56] that it's a simpler business model. Now, people still lose money in real estate all the time. Just got to look at the forums. People lose money all the time in real estate when they get greedy. But in terms of reliably giving people returns over years and years and years, it has worked provided population continues to grow. So, if you are going to buy real estate,

[13:13] try and buy it in areas where people are continuing to either move to or have more kids. This is the nuance that makes this whole argument credible. He's not saying real estate beats private equity everywhere. He's saying private equity has the bigger ceiling because it takes more skill, but that exact fact is also an argument for real estate, because real

[13:30] estate just is simpler and more understandable. Simpler, but not effortless and not guaranteed. And Alex's own $50,000 loss proves that. But, the ways in real estate you create value are visible. You buy it right, you improve the property or the operations or both, generate income, pay down debt, hold in a market with real demand, and sell or refinance when it makes sense. So,

[13:52] put all three videos side by side, real estate has made an enormous number of millionaires. Real estate is one of the primary places Hermosi deploys his own cash today. And real estate can punish even a genius when he invests before he understands what he's actually buying. And the way he reacted to losing that 50 grand, it tells you exactly why he made it. I called the guy up who sold me the house. You know, I was like, "I just want to let you know I'm really grateful that you taught me this lesson for so cheap." that. He took responsibility, he pulled the lesson out, he applied it. Basically, it's badass. But, most people watching this can't afford

[14:22] to spend $50,000 learning to check the freaking county records, and you shouldn't have to. So, here's the answer. The difference is not that real estate became safer, it's Hermosi became more qualified to invest in it. On his first deal, the capital showed up before the judgment did. Today, he's got the capital, he's got the operators, the underwriting, the due diligence, and the discipline. It's the same asset class, but now he's a completely different investor. And judgment is the one thing you can actually go build starting this week. That's what the evolution of a real estate investor is built to give you. It's a place to start, a path to progress, and a

[14:55] destination worth reaching. If you want the exact system that started my own evolution, I've got a free training link below. It's going to show you how we find distressed deals, how we analyze them, talk to agents and sellers, and lock up deals the right way without having to spend thousands of dollars on marketing. Because the goal is to never solely wholesale forever. The goal is to actually build the skills and the income and the judgment to grow wholesaling into wholesaling and flipping, and one day into owning cash flowing real estate. So, watch that free training, and if you want my team and I to help you apply to your market and your goals, book a call with us

[15:27] after and we'll map out your next stage. Now, if this video saves you from even one bad deal, hint, check the county records, it was worth way more than 50 grand. So, this is Alex Martinez with Real Estate Skills. Happy real estate investing. Time to make it happen. I'll see you in the next one.

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