Recently, I was able to go live with my good friend Reggie Perryman here in Michigan. He knows his stuff about real estate, and I know my stuff about the stock market. We dropped some knowledge bombs as we compared investment opportunities – you got to take a listen below.

A bit about Reginald Perryman:

Originally, Reggie wanted to get into music or another similar career BUT his Grandmother was always very influential on him and encouraged him to pursue real estate.. When she passed, she had a few rental properties that Reggie took on managing, and it sky rocketed from there. He worked for Century 21 for 10 years, then ran his own brokerage company for 12 years. Recently, he has been working with Keller Williams for the past 3 years.

“Dealing with investors taught me a lot about money… and being commission based only, you have to learn about money and start making your money work for you” 

What’s possible with Real Estate

When we think about real estate… we know the “fix it and flip it” game. Someone buys a house, improves it, and sells it.

BUT THERE IS ANOTHER SIDE…

Reggie prefers to be the bank when it comes to real estate with seller financing. He may buy a home, and instead of fixing it up and flipping it, he will finance it for another buyer. The buyer will now pay HIM a down payment and a monthly payment. This would use a Land Contract – an agreement between buyer and seller, buyer is putting a down payment and paying monthly.

So literally instead of someone going to the bank and asking for a loan, Reggie now becomes the bank.

“The buyer has to have some knowledge of the market in order for it to be fair for everyone.”

Let’s say the market in the area is $200,000. The seller might put it on the market at the similar price or hold to paper and get payments overtime with interest. There are benefits with that because of capital gains taxes.

The key is… YOU CAN BECOME THE BANK. And we aren’t necessarily taught that at home!

What we are taught is… go buy a house and pay the mortgage for 30 years, and for some reason we get all excited to pay the mortgage BUT we end up spending double for the house. If I am a bank, that makes sense! Now YOU can be that person. You can only do that if you have money and have your finances right. The average person cannot lend out money for 30 years.

And you can be the bank on a smaller home as well – either price of the home, you can do it IF you have your finances in order. 

The house is collateral in this process – if the buyers stop paying you, you take the house back and start the process all over again. 

“One way to eliminate risk is to get a larger down payment”

Reggie also says that if you are buying in the right type of area and market, you can find more secure buyers.

WHOLE SALING in real estate…

Let’s say you have a property, and you want to sell it but you are selling it below market value. And I am willing to come in and purchase it for $100,000, even if it is worth $150,000. I am buying it at $100K because you are distressed and you’re selling it and am willing to pay cash. I will close within 30 days, but I also have an agreement that I can sell my interest to a 3rd party. I have an investor who will come on board, will buy it for $110K and me as the whole-seller doesn’t have the money. I am selling to this 3rd party and I will make $10K because I am under contract to sell the house to you for $100K, the 3rd party is buying it for $110K knowing he will make $150K on it eventually, so under that contract I can get the extra money. As the middle-man of this deal, I didn’t have to come up with any money. 

On the Stock Market side…

Here’s how I see it with the stock market…

I could take that same $100,000 in real estate and have to find a niche individual who can put a payment down, collect my money, hopefully they pay for a certain amount of time, etc… 

The same thought process that goes into that with the stock market – let me go buy AAPL or FB stock. Because these companies have real estate, employees, etc that’s bringing in money. 

So the same way that in real estate you are trying to find a buyer that would be an ideal candidate, I am looking at the stocks in the same way – people will not stop using Facebook anytime soon, for example. 

Instead of me finding someone on the real estate side, I bring it over to the stock market side – finding good companies to do business with. 

Buuuut on the stock market end, when things do not start to look so good and the stock is falling, I push a button and say “Give me my money back”. 

TRADING OPTIONS in the market…

I do trade long-term with ETFs and everything… but I also trade options. For example, I recently put in $100,000 and it took me 10 days to make $20,000 – so I closed out $120,000. And this was a PUT option, so I made money from the stock FALLING and doing poorly. And this is because stocks rise more slowly than they fall. It could take 3 months for the stocks to move up 5 bucks, but only 2 days for it to fall that same 5 bucks. If you’re curious how put options work, you can check out our other blog post here or our Options Explained course here. But the gist is: with options, you are either making a profit from the market OR the commitment that you have with someone, as you control the stock for a period of time without actually buying it. 

Similarities

They both have incredible potential and there are so many ways to invest in the stock market and in real estate. But of course, there’s always some risk… 

With real estate, you need to ensure that you find a buyer that is going to pull all the way through and deliver his monthly payments. 

In the stock market, companies face earnings, they are affected by world situations, and sometimes you do not know what you will wake up to. 

BUT with both of them – you can REDUCE your risk, too. For example, whole sales and option trading for each investment respectively, as explained above. 

In both investment opportunities, you hope the value appreciates. You hope the house value will increase, and you hope the stock company will continue to go higher. 

Differences

Of course, there is the obvious “it’s two different markets” – one is with charts and the other is with buildings.

But also… with real estate, you typically are dealing with more people than in the stock market. You have to develop relationships with people and also ensure that you are finding the right people to purchase your investment house. With trading, you are on the computer and pretty much do all of your investing with just clicking buttons. 

There is no “oh this one is better” – at the end of the day, it remains the same:
HOW ARE YOU USING YOUR MONEY TO MAKE MONEY? 

And in actuality, you do not have to be “married” to either way to invest. For example, Reggie also trades in the stock market and he recounts when the stock market was doing poorly a few years ago, some stock investors pulled their money out and got into real estate. When the market did better, they went back to trading. So having the understanding of which market is doing better can help make wise investing decisions based on that opportunity. You’re just “married” to your money working for you – no matter where it is at. 

The IMPORTANT thing is – that you realize there are many other ways to have your money work for you and your only option is NOT working hourly or salary. 

If you are in the stock market, the same knowledge transfers over to real estate and if you are in real estate, the same knowledge transfers over to the stock market. You have to remove the excuse that either one is too difficult to learn – you are really doing the same thing with different strategies. There are many ways to approach either one. You can get paid in one – if not BOTH. 

Be sure to check us out on iTunes or Stitcher, and check out Reggie’s website here www.ReggieIsRealEstate.com