An Interview with Buddy Broome

By Christina Suter on Jul 27, 2019 at 10:37 AM in Real Estate Issues
An Interview with Buddy Broome

Buddy Broome is a practicing California attorney who learned and succeeded through failure in real estate. He faced the pain of failing and redeemed himself and his property became the first step on a journey that included books, seminars, and mentors. Broome instills the knowledge of financial principles of investing and the knowledge of the financial calculator. Buddy offers classes that show others, in a non-intimidating and easy to understand way, how to apply his principles to their investing and in their every day lives. Buddy still purchases and manages properties and specializes in difficult to manage properties. 

I asked Buddy to expound on using real estate and investing to break through to financial freedom. "Everyone is looking to have cash flow and that means looking at one's monthly expenses today and 5-10 years from now. Cash flow comes from owning an asset that produces cash flow like a note or a rental property. If your monthly net is $20,000 how big does your monthly net have to be to have that amount of cash flow and what value can you make that net worth work at? Once you figure out your needed net worth number and how much assets you have, you realize you have to get some sort of return that's in the 15%-20% realm and to do that in a typical investment is hard." He says what he's found to be the secret is to figure out leverage because that's how he's been able to build wealth in real estate. The goal for everyone, he says, is to maximize leverage and minimize risk.

Buddy's 5 questions to ask when looking at an investment:
1. How much money is coming out of my pocket?
2. When is that money coming out of my pocket?
3. How much money is coming back to me?
4. When is the money coming back to me?
5. What happens when things don't go as expected; how bad will it hurt?

I told Buddy that he's the only person I've encountered who has people calculate their earning goal-- where they write down where they're starting and where they want to go and what it'll take (how much in capital, assets, or equity) for them to get there. People know they want to be rich when they're new to real estate but they don't know how rich, how fast they can get there, or what to use. Concretizing the fantasy and coming up with a plan is how people achieve the riches they desire. 

How do I get leverage is a question Buddy says people often ask him. He walks those people through techniques or tools such as seller financing, lease options, or another of others that allows them to avoid going to a bank. 

"Investing should be boring." -Buddy Broome

People who spend 20+ years buying a house and then renting it out when they buy their next house, that's boring and that's exactly how it should be-- excitement is for skydivers. Excitement goes up and down and is reserved for other areas of life; money should be lockstep and boring. 

I wanted to know why, as a practicing lawyer, what enlivened Buddy to want to be financially free. He said it started when he was young, his dad, who was also a lawyer, exposed him to the idea that owning real estate was a good idea. His dad knew someone who was selling a building and proposed he pay the seller monthly until he paid him off and the seller agreed. Buddy's wife came across the book, Rich Dad Poor Dad, when he was starting law school and suggested he read it. He initially rejected her suggestion but one day he picked it up, read it, and immediately told himself he had to figure out how to get into real estate. "Once you see that there's a chance--oh I can have a little bit of control of my financial life it's very cool." He says one of the things that interested him from Rich Dad Poor Dad is having that freedom of knowing he didn't have to spend 10 hours away from home a day and a wife and kids he barely knew. 

"There's a sense of security in knowing what you're making. If you have your own garden in your backyard and you're planting your own plants and you know what they are and where they come from, it keeps you healthier for longer. The flip side of that is people saying, I have this money from my job, I'm going to give it to this person who wears a suit who gives it to another person and another person who in return gives you a sausage and then you eat that sausage long enough, you don't know what it contains, and you get sick. That's what happened in 2008 when people had all these securities and no one knew what was in them and when the sausage went bad they were sick with no money left. There's greater peace of mind in having control of your finances."

Buddy will be speaking at my upcoming FIBI Pasadena meeting on the topic of How to Beat High-Tech by Being Low-Tech. He explained that there are a lot of platforms that have access to tons of sellers and are in the home-buying business. These are mega-tech giants competing against people who want to flip or buy rental properties. His topic will discuss tools you can use to get around platforms like Zillow's Instant Offer it's going to be hard to offer a better price than them; their margins are smaller and they can close quickly. Seller financing is a low-tech tool that high-tech tools like Zillow instant offer can't compete against because it requires a personal touch.

Buddy can be reached at www.buddybroome.com







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