How to Buy Big Things With Little Money⏐Ep. #273

Chris Koerner (0:00)

One of the questions I see most often in my messages is, Chris, I want to start a business or I want to buy a business, but I don't have any money. And you know what I would say to that? Good, because constraints equal creativity. And that's what this whole episode today is about. I'm going to call it How to Buy Big Things with Little Money. Whether that's a piece of real estate, maybe you're buying a business, maybe you're buying equipment or assets needed to start a business, maybe you're trying to buy equity for a business that you work for, you want to buy a franchise, I don't care. This episode is where you will go to learn how to buy big things with little money. And I would know because A, I grew up poor, B, I'm cheap, I don't want to pay full price. And if I do a whole bunch of research and I come to the conclusion that this initiative that I'm looking at is not as risky as it looks from the outside, then I'm going to be willing to take some risk to make sure that I get what I want. So if you're looking for an episode where you talk about, Oh, have you heard of Kickstarter? Have you heard of seller financing? No, this isn't going to be generic. This is going to be creative and it's going to be very tactical. And everything I'm about to tell you, I actually have experience with guys. I've been buying real estate for 17 years. I've been buying RV parks and mobile home parks for the last seven years. I bought an $800,000 business for $50,000 down. I invested in my best friend's business that was worth $2.2 million. He only put 10% down and he financed almost all of that from friends and family. I have been in the weeds of buying big things with little money my entire career. So if you're looking for just a video where I just regurgitate things that ChatGPT tells me, then go somewhere else.

Before I get into these tactics, I want to tell a couple stories to illustrate where I'm coming from here. When I was 21 years old, I had just spent the summer reading books about entrepreneurship and real estate and I had moved to Alabama. I just got married and I was fired up to make something happen, to start a business, to buy real estate, whatever. Turns out 2008 was not a great time to buy real estate, especially if you are a broke college student with student loans, waiting tables for $2.13 an hour plus tips. But sometimes ignorance is a superpower. My wife and I started looking on Zillow. We found a house, this house right here if you're watching, 1805 21st Avenue East and it was $90,000 and we bought it for 3.5% down. We used grants from the government to pay for it, plus a little bit of savings from our serving job at a Thai restaurant. We bought something big with a little money. And then President Obama had a first-time home buyer tax credit, which basically meant you got $8,000 cash after you bought your first home. And so about nine months later, we got a check in the mail for $8,000. And we put that towards a home about five minutes away, our first rental home. We were still broke college students, still making $2.13 an hour, but we owned two homes. We just kept talking to bankers until we found one that said yes. So we finally found a bank that said yes, but they said, Chris, you're going to have to pay PMI. What is PMI?

It's mortgage insurance. It's going to bring your payment from $535 to $700 a month. Now, as a broke college student, that extra $160 a month was just a non-starter. I said, well, I don't want to pay that. How can I get around that? Well, you can't. You have to pay 20% down if you don't want to pay PMI. And I was just like, no, I read that I don't have to pay that. And they were like, all right, I don't think it's going to work, but let me see if there are other options. Guess what? Magically, there were other options. I got to pay 3.5% down.

I didn't have to pay PMI because they had to choose between that and losing my business entirely. And in the wake of the financial crash, I'm sure they were thrilled to even have this tiny $90,000 mortgage. That was one thing that I remembered from all those books that I read at Barnes & Noble. Many loans require you to have PMI, but almost all banks have other loan options that don't require that. They don't want to give you the option of those loan packages because it's not as profitable to them. But if they have to choose between losing your business and giving you a less profitable loan, they're going to give you the loan you want. I ended up owning that house for 11 years and renting it for 9 of those 11 Fast forward about 8 years and we were in the middle of building our dream house with a custom home builder, the one I'm sitting in right now. And I'll never forget, I was getting this office designed and they had already laid the foundation, I think the drywall was even up and they were about to lay carpet. And I realized at the last minute that I wanted a floor plug right in the middle of the room because I knew my desk would be right here where I'm sitting today and I wanted to plug my MacBook in the floor. So I went to the builder and I said, Hey, is it too late to add a floor plug? Because like, doesn't that need to go in the foundation or something? I don't know how it works. And he said to me, we can reverse, change, fix, add anything at any stage in the build process. Literally anything can be fixed or changed. The only question is, how much are you willing to pay? And for whatever reason, that line stuck with me. Everything is figureoutable. Everything. Whether it's buying a home on 213 an hour as a broke college student with no assets to your name or adding a simple floor plug at the point your house is almost finished. Constraints equal creativity. Now just one more analogy before I get into the tactics. Vexillology is the study of flags. Now when a flag designer is designing a flag, they have to start designing it on an index card. They have to shrink it down all the way to an index card. Because if your flag doesn't work or if it doesn't look good when shrunk down to the size of an index card, then it's not going to look good as a flag. It has to make sense in one second. It has to look good while flapping in the wind. It has to be stitched and not printed. It has to be drawn by a child and it has to be recognizable from far away. So we're not doing tiny details or gradients or clever explanations. It's got to be simple. Shout out to my friend Bill for that analogy. So trying to buy something that's very expensive or invest in something when you have no money or almost no money is the index card. You can't rely on big down payments or perfect credit or standard financing terms. You're forced to ask better questions. What does the seller actually want? What part of the steel is flexible? What part is negotiable? What part isn't? Instead of adding cash, can I just remove some risk? Can I change the timeline instead of the price? Can I change the terms instead of the price? You've probably heard the phrase my price, your terms, or your price, my terms. That's just a small part of what we're talking about here. And this is why I am so adamantly against raising money for your startup in 99% of cases, because it removes the need to be creative. That's why venture funded startups statistically have no better chance of succeeding than bootstrap startups, because once you get a few million bucks in the bank, you don't have to be creative. Let's hire a marketing guy. Oh, we need our profit and loss statement. Yeah, let's hire a CFO. All right, so let's start covering these tactics. And I'm going to save the very best for last. Number one, do it publicly. A while back, I had an episode with my friend, Isaac French, and he built this property called Live Oak Lake just outside of Waco, Texas. It's, I think, seven beautiful cabins. They're Scandinavian style. He bought kits. He shipped them overseas. He dug out a pond. This property was like five to ten acres and it had these mature oak trees on it. Long story short, two years after building it, he sold it for seven or eight million dollars and his cost on all of it was like one and a half or two million. So one deal that took two to three years of his life provided him life changing money, enough money for him to retire and he had very, very, very little money to put in. Guys, if you're liking this so far, please hit subscribe or follow or whatever. Share with a friend. It would really mean a lot. Now, if you want to hear that story, I'll link to it below. But this tactic I'm telling you about is actually from one of his friends that wanted to do something similar. They wanted to build these beautiful short-term rentals, but they didn't have any money. So what did they do? They started an Instagram account with zero followers and they just started documenting their process with their iPhones. No fancy editing, no fancy equipment, just talking to the camera, showing what they were doing. Hey, we're building a property. We want to document our journey. And this guy built an Instagram following of 130,000 people, just showing them what the process was like of dreaming, building, planning, trying to raise money for this short-term rental property. By the time he was actually ready to launch, he had tons of people ready and willing to give him money to launch his project or to be his first customers at his project, to go stay in his property. If you bring the world along with you through these free media platforms like Facebook, Instagram, TikTok, whatever, then you can skip the line. The downside to this is its public accountability. You might fail. You might feel embarrassed if it doesn't go well. Maybe the algorithm never picks up your videos and you feel like it was a waste of time, but this is an asymmetric bed. There's a lot more upside to posting free videos on the internet, spending a little bit of time doing so, than there is downside. Now, one of the most valuable things you can do is to start following a bunch of people that are doing this on Instagram. What are they doing? What are their hooks? What background music are they using? How often are they posting? What days are they posting? What type of asset are they building or buying? And what do the comments say?