Sarbo and Peter explain why real estate investors often get paid last: the bank takes its cut from rental income first. They argue investors should "become their own banker" to capture banking-like returns instead, pointing to Nelson's book and the Bankers Vault channel for details.
You're taking all the risk. You're managing the property, you're making sure everybody else gets paid. And then the last person that gets paid in this transaction is you.
So if you're not first, you're last.
If you're not first, you're last.
You ain't first, you're last.
Today's video, we're going to talk about that very quote you've probably heard a million times from many different people. If you're not not first, your last. And we're going to talk about in relation to the process of becoming your own banker. And today we're going to go through an example of a real estate transaction. And to see how really that phrase plays out, Sarbo, let's dive in.
If you're not first, you're last. Like Peter mentioned, keep that in the back of your mind as we go through this example. So let's consider an individual, he or she, their real estate investor. And their objective is to buy a property for the purpose of producing profit on the transaction for yourself or for someone who's depending on you. If you are looking to buy a property and the first thing that you have to do is you have to start saving capital. You have to save money, you have to save your down payments. You are the first one into the transaction, not just financially but also mentally, you start putting that money aside. And once you have enough money saved for the property that you're eyeing, the property that's going to be perfect fit for your real estate portfolio, you start saving money for the property because you don't have all the money to buy the property. So you are going to be relying on someone else's pool of capital to finance the remaining of the value for the property. Now let's assume you're buying a property for $500,000 and you've saved 10% down. And now you go to the bank and the bank is going to qualify you for the loan based on your debt to service ratio, based on your income, based on your other assets and based on your other liabilities. You have to check everything on the list of the bank for the bank to lend you the money, the difference between your down payment saved and the purchase price of the property, that difference is going to come from the bank and then you use all that money to buy the property. So so far in this transaction, Peter, who is the first one into the deal?
Well, at the end of the day, you're the one who's starting the process. So you're first into the deal.
So you meaning the investor. Because it's all about you, right? Your objective, it's your why. So you have to begin within the transaction with saving money. So you're the first one into the deal, and then the bank is gonna lend you money. So let's assume transaction is good. You qualified bank gave you all the money and you took all the money to buy the property. Now the objective is to do what? The. The objective is to produce cash flow from the property.
For who?
For you.
For the investor. You the investor. Now you put a tenant in that property and you're charging tenant rent. Every month. The tenant pays you a gross rent set by you. Now, who gets paid first on that rent?
That's a good question. So the rent comes in from the tenant. You put it in, you take that check and you deposit it into your bank. It's not your bank, but you're depositing.
In the bank first, and then that deposit is there. And the first one that you are always budgeting to be paid from the rent that you collect is the bank. The first person who gets paid on that rent is the bank. And then you may set aside some money to cover some utilities, property taxes, income tax, whatever it is. So other people get paid. Then after everyone's paid, then what's left behind is what you get paid as the investor. You started the whole transaction. You were the first one into the transaction. The bank was the second person into the transaction. You bought the property. You put a tenant in the property. The tenant is giving you rent. The first person or the first entity who gets paid on that rent is the bank or the banker. You are the last person who gets paid as the investor. You're managing the property. You're making sure everybody else gets paid. And then the last person that gets paid in this transaction is you.
So if you're not first, you're last.
And who was the first in this transaction, Peter? Who is the first entity or the person who gets paid? The first.
Yeah, the first person that stepped into this, started the process, was the investor. It's you.
But the first person who got paid, Peter, is the banker.
Right?
You started the transaction, but you're the last one to get paid. How does it make you feel? And the reason why this is happening is because you may not have thought about this the way we are explaining today.
You may not have considered the transaction based on being the banker in addition to being the investor. You've always been an investor. It's time to change the way we think. Think about not just being the investor, but think about being the investor and the banker in that transaction. And how do you do that?
Well, if you haven't had an opportunity to read Nelson's book titled becoming your own banker, then you have an opportunity today. The link is in the description and you can order a copy of the book. We'll ship it to where you are. But also make sure that you check out other videos on becoming your banker on our Bankers Vault YouTube channel.
