JF1037: Beginner Wholesaler Does 80 Deals in his First Year!!!

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Have you made the jump into real estate investing yet?  If not, wholesaling is a great way to get started, even if you have some experience, I’m sure you can still learn from Raul.  At only 23 years old, he is doing more deals than a lot of people twice his age.

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Raul Bolufe Real Estate Background: ‎
-President at Capital Rise Investments LLC
-Have done over 200 deals since beginning wholesaling in 2014
-By age 23 he has wholesale over $15M and made $355K off of the MLS
-Now has a team of 7 people and 3 agents working with the company and growing
-Based in Miami, Florida
-Say hi to him at capitalriseinvestments.com
-Best Ever Book: 10x Rule by Grant Cardone

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff. With us today, Raul Balufe. How are you doing, Raul?

Raul Balufe: What’s up, man? Thanks for having me, Joe.

Joe Fairless: Nice to have you on the show, my friend. A little bit more about Raul – he is the president at Capital Rise Investments. He has done over 200 deals since the beginning wholesaling in 2014. By the age of 23 he has flipped over 15 million dollars of property and made 365k off of the MLS – we will get into that. He is based in sunny Miami, Florida. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Raul Balufe: I started investing a couple years ago, about three years back. It was a scary transition, because especially in this market it’s really competitive, but I figured “Hey, if other people can do it, I think I can do it, too.” I was actually selling cars at my dad’s dealership, and then I saved enough money and I bought my first rental property and I figured “Hey, I could do this again.” So I started listening to podcasts, reading books, and I got into it.

I got a mentor down here, and I started with the MLS, learning how to send offers, learning how to find buyers, and that’s pretty much how I got my first deal. Now I’m just running with it… We still do MLS, but now we’re doing a lot of mail, we’re doing some bandit signs, we’re doing some internet marketing, websites, and we’ve kind of grown to a team of about eight men, and doing some deals.

Joe Fairless: You’ve got an eight-men team… Walk us through who does what.

Raul Balufe: I’ve got an assistant secretary – she pretty much answers the day-to-day calls and does the checks and pretty much the organization. I have an acquisitions manager for MLS, then I have a sales manager that pretty much does all the sales, I have two acquisitions members, I have one sales guy, and then I have an office manager and two VAs. I don’t know if I lost you there, but…

Joe Fairless: No, you didn’t… [laughs] I’ve been taking notes. Who did you hire first?

Raul Balufe: My first hire was actually one of my first VAs.

Joe Fairless: And how did you find your VA?

Raul Balufe: Online, through Upwork.com. I think before it was oDesk, or something.

Joe Fairless: Yeah… What did you have the VA do?

Raul Balufe: I had the VA send offers for me. I kind of showed him how to fill up the contracts using freedom soft, and I had the VA tell him what [unintelligible [00:04:54].02] and then I would send him the information that would do it.

Joe Fairless: What type of training process did you do at the VA?

Raul Balufe: I actually got some of the training process from another podcaster, Joe McCall… He has some training thing for that, of what to have VAs do. I used the backbone of that, and then I kind of just implemented my own little strategy with them. But usually through e-mail or through YouTube video – I’ll make a little video of how to do it, and they would do it.

Joe Fairless: And how much do you pay them an hour?

Raul Balufe: One VA – I have him at $3.33 and the other one at $4.50.

Joe Fairless: For someone who has a wholesaling business and wants to make that first VA hire, what would you recommend to them? Either a lesson you’ve learned, or ways to get out of the gate strong.

Raul Balufe: What I would recommend is make sure that you yourself know how to do the task very well first, before you can get someone to do it… Because since it’s not in person, you can’t really show them, so it might take a lot of explaining and videos and training to really get them to do it. So make sure you really know how to do it perfectly before you get someone to do it.

Joe Fairless: So before we try and automate our process, we actually have to know the process – is that what you’re saying?

Raul Balufe: Yeah, man… It makes it a lot easier. It’s just so much easier to be able to train somebody on something that you know how to do in and out, so they can sense that you know how to do it.

Joe Fairless: 15 million dollars worth of properties that you’ve wholesaled, right? Not fix and flipped, but wholesaled?

Raul Balufe: Wholesaled, correct.

Joe Fairless: Okay. And how old are you now?

Raul Balufe: 24.

Joe Fairless: And when did you get started? In 2014?

Raul Balufe: Yeah, correct.

Joe Fairless: So 2014, this is 2017 – so in 2016 you were 23 and in 2014 you were 21. So you started when you were 21 years old, and in two years you had wholesaled over 15 million dollars worth of property, right?

Raul Balufe: Yeah… I’m right around 26 million now.

Joe Fairless: What was the first property you wholesaled?

Raul Balufe: The first one I did was actually — I was doing a technique that I learned from Joe McCall, actually… Pretty much texting landlords on GoSection8.com, asking them if they wanted to sell their house. I got a hold of a property manager, and the property manager introduced me to the landlord. That’s pretty much how I got the first deal. I said, “Hey, are you looking to sell?” He said “Oh, I’m not, but my landlord is. I manage his properties.” He put me in contact with him and he gave me a lot of information about his properties; I made him an offer, and I actually got two under contract. That’s how I got my first deal.

Joe Fairless: Where are these properties located?

Raul Balufe: South Florida.

Joe Fairless: Can you give us the numbers on that first one?

Raul Balufe: I was getting it for 62k and I assigned it for 68k. So I made about 6k there.

Joe Fairless: And you mentioned GoSection8.com – obviously, it’s a website. I haven’t heard of that one.

Raul Balufe: That’s pretty much a website where landlords and potential tenants can go and view properties that are Section 8-ready… Pretty much properties that the landlords only want to rent to Section 8 tenants.

So the tenants can create an account as if they’re the tenant, and they’re able to view these properties. The landlords create an account like if they’re landlords, and they can list their properties there. And it’s free.

Joe Fairless: Okay. And you went online and you texted the number, you got a hold of a property manager who then introduced you to their client, the landlord, and then you wholesaled his property.

Raul Balufe: Correct.

Joe Fairless: $62,000, and you signed it for $68,000… You gotta do a lot of those to make up 15 million in two years. Help fill in some of the gaps there.

Raul Balufe: When I say 15 million it’s worth of properties, not 15 million profit.

Joe Fairless: No, I get it. I was with you on that. [laughs]

Raul Balufe: Yeah, okay… I’m like “Damn [unintelligible [00:08:55].22] I’d be next to Donald Trump, or something.” So basically our average property now is about 120k. Basically, we do about 80 deals a year.

Joe Fairless: Okay, I’m with you.

Raul Balufe: Do you kind of see how I got there? So the 60k one is one on the lower end.

Joe Fairless: That was your first property.

Raul Balufe: Yeah, it was my first one. So now our average wholesale is from 140k, 160k, something like that.

Joe Fairless: What are you doing with the profits? Are you investing them into long-term holds, or are you just putting them all back in the business, or are you buying cars, or what?

Raul Balufe: No, not cars, man… [laughter] Maybe a little bit. So a big portion of it in the beginning (in my first two years) was going into buying rental properties. I accumulated a little portfolio of single-family homes – I’ve got about ten of them now. After I did that, I started putting more of the profits back into the business: hiring new people, sending more marketing… That’s when I got more into mail and online advertising, and hiring more staff to help me grow.

So to answer your question – yes, in the beginning more towards buying properties for rental income, and then now the majority going back into the business.

Joe Fairless: What’s been the best investment that you’ve made back into the business and what’s been the worst investment that you made back into the business?

Raul Balufe: That’s an awesome question. [laughs] I like that question. Okay, so the best investment made back into the business was reinvesting in mail marketing. I’m sure you hear – and probably everybody listening to this probably hears a lot of podcasts or reads books, and they hear that mail goes up, it goes down, but if you’re consistent, mail works. At the end of the day it’s just the way I’ve seen it.

I might have a month that I get a 2% return, I might have a month that I get a 6% return. It just all depends, but being consistent with the mail has helped me out a lot. And apart from getting deals through it, it builds a lot of credibility, because you’re getting off-market stuff, and buyers love that.

When I get an off-market deal and I’ve got them through mail, it really builds a lot of hype towards the properties that we’re getting, and it shows that we’re active out there. We’re not only getting deals that are on-market, but we’re also really hunting for those deals that are off-market.

Joe Fairless: No one else has mentioned the “building the credibility because you’re getting off-market deals”, and I’m glad that you did, because I never thought of that.

Raul Balufe: I saw that happening, because I’d be like “Man, this house’s price is the same as the ones that are on the MLS, but we’re getting three times the amount of calls.” So as I start talking to these people, they’re like “Yeah, but I haven’t seen this deal before. How many more of these do you get?” I’m like “I’m actually getting them more frequently now because I’m doing a lot more marketing.” They’re like, “Okay, make sure you put me in your VIP list. Make sure you get me on there.” I’m like, “Alright man, will do.” I started noticing that… And it gets more buyers, and you can then turn those buyers into people who buy other properties.

Joe Fairless: I like that. And what about the worst investment you’ve made back into your business?

Raul Balufe: The worst investment that I made back into my business… Great question. Well, I would have to say it was maybe spending it on systems that I didn’t need. I don’t wanna name any names, because I’m not out here to bash anything, but mainly just systems that you don’t need. Try to simplify your business.

Obviously, you need a CRM, or you need certain sheets or computers or software or whatever, but don’t get over-hyped on all that stuff. Get stuff that works for you and that makes it simple to buy and sell houses, or whatever your business is. So maybe that was a big spending mistake.

Joe Fairless: I’m not asking you to name a name of the system or the software or whatever, but I would be curious to know – and I’m sure the listeners are as well – what functionality did that have that you were like “I don’t need that.”

Raul Balufe: Well, functionality maybe not so much, but more like — for instance, I had one CRM for buyers, one CRM for sellers; I had another CRM for contacts… But one CRM could have done all three, if you can find a way to customize it, or whatever. So I was kind of like falling in love with “Oh, this CRM has this feature, this CRM has these features”, but do I really use all those features? I’d rather just put in one platform and customize it as best as I can, even if it takes a little bit more labor… But really get it on one system so it’s just more organized, more clean. You go to one place to find all your leads, one place to do your follow-ups… It works a lot easier.

Joe Fairless: What CRM do you use? Because obviously you’re happy with it if you’re using it.

Raul Balufe: I use FreedomSoft. I’ve been using it since I’ve started. It made a lot of good changes recently. I know Rob Swanson took over not that long ago. I really like it; it works perfectly for me. For buyers, sellers, you can put your contracts on there… I like the new leads tab; you can get phone numbers, and stuff… It’s pretty cool. I don’t even use all the features, but it has a ton for me to use and it’s really user-friendly. It’s nice, I like it.

Joe Fairless: Best Ever listeners, you can listen to our interview with Rob Swanson, episode 772, how he scored ten million dollars at the bottom of the real estate market.

What is your best real estate investing advice ever?

Raul Balufe: My best advice is pretty much staying consistent. I was actually talking to somebody today – it’s really easy to give up in real estate. Real estate was never made to be a short term gain type of business; it’s always been like a buy and hold business, or buy your home, resell it in a year, or whatever. If you stay consistent, constantly talking to leads, sending mail or whatever way you like to get leads, and you take the right actions, you can succeed; you will succeed. You just have to be consistent.

Joe Fairless: How do you educate yourself? Because your mind has evolved more than other early 20-year-olds that I’ve come across, so clearly you’re into personal development, and you’ve mentioned some podcasts… Where do you get that information from, and have you always been that way?

Raul Balufe: I’ve always been very curious and I kind of wanna know how everything works, so that was kind of like in my nature, but podcasts have helped me a lot. You can just find so much information on podcasts… Your podcast – you have a ton of interviews with very interesting people, successful people… A ton of all these other real estate podcasts – I mentioned Joe McCall, Sean Terry, Matt Theriault… If you just listen to a bunch of these podcasts, you get a lot of knowledge… Way more than you even need. So that definitely helps a lot.

I read books… I know you’re big on books; you ask for everybody’s favorite books at the end of this show… So I love books, podcasts, YouTube, webinars… A little bit of everything. There’s tons of free education out there.

Joe Fairless: What are some of your favorite go-to resources?

Raul Balufe: Well, I purchased some of the courses from Sean Terry and Matt Theriault – I’m constantly going back to those courses. I like to refeed that material back in me; even if it’s like the basics, it’s always important to know the basics. Once you fully understand that, you can really start thinking like “Okay, in my business how can I implement the basics again?”, whether it’s sending mail, or… However you get leads – MLS – you always gotta go back to the basics, buying and selling. That really helps me a lot.

Podcasts – I listen to your podcast, I listen a lot to Matt Theriault and Epic Real Estate…

Joe Fairless: Now I wanna go back to the direct mail marketing, because you said that’s been the best investment you’ve made back into your business, and you’re consistent with it. Will you define what consistent is as far as frequency and how many you send out?

Raul Balufe: I’ll get a list and I will send once a month for six months minimum. Whatever list that may be and however many people, I’ll send for a month, every month, six months straight… And different pieces of mail. I’ll send a postcard one month, a letter the next month, then another postcard, then another letter… All different for six months. I think that anybody hitting a list should at least hit it three months back-to-back-to-back, and for ultimate results, six months.

Joe Fairless: And have you looked at how many leads you’re getting from the one, two, three, four, five and six-month mailers and have you seen which mailer generates the most leads as far as one through six months?

Raul Balufe: I have tracked that, however I will say — that’s kind of a good question, but what I see is that I get easier sales or easier acquisitions months four, five and six. Maybe the leads won’t be the same amount, but it’ll be a lot easier to get that house under contract, because they’d already seen my name for three months or four months; I don’t know if that makes sense.

Joe Fairless: Yes, that does. Are you ready for the Best Ever Lightning Round?

Raul Balufe: Yeah, let’s do it.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [[00:18:08].15] to [[00:19:00].00]

Joe Fairless: What’s the best ever book you’ve read?

Raul Balufe: The 10X Rule by Grant Cardone.

Joe Fairless: He’s a Florida guy, isn’t he?

Raul Balufe: Yeah, he lives in Miami. He lives in [unintelligible [00:19:06].27]

Joe Fairless: Best ever deal you’ve done?

Raul Balufe: The second property I bought – a single-family home. I bought it for like 47k, put in like 20k; I’ve been renting it for three years and I just got it appraised for like 150k.

Joe Fairless: Congratulations. How did you get the money to buy that single-family home?

Raul Balufe: I had already wholesaled a couple houses, so I had some money saved up. Then I got a hard money lender.

Joe Fairless: Do you still have that hard money loan on the property?

Raul Balufe: I do, I have renewed it for these years, but I am in the process of refinancing it with a conventional bank.

Joe Fairless: Best ever way you like to give back?

Raul Balufe: I actually enjoy teaching and mentoring people who are not as fortunate or maybe not as savvy with information or school. I like to kind of just speak motivation to them as much as I can, and share with them any secrets or anything that helped me along the way or keeps helping me in my business. I like to help people who kind of see things a little bit differently.

Joe Fairless: What is a mistake you’ve made on a transaction that you can think of?

Raul Balufe: On a transaction… Definitely with buyers – collect their escrows. That sounds simple, but man, these buyers are sharp.

Joe Fairless: Will you elaborate on that?

Raul Balufe: So if you’re selling a wholesale deal, a lot of times for me if I’m doing [unintelligible [00:20:35].05] I gotta put that escrow; so I’ll sell it to a buyer, I’ll get the contract signed, and in the beginning I kind of put it off, like “Okay, it’s a done deal…” But then a week will pass by, they never followed up, they never sent deposit, and they’re like “Okay, I don’t want the deal anymore for some reason”, and now I have to rush and find another buyer, do this, do that… That will all be avoided if you collect the deposit or have them sent to the title company when you sell the property to them.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Raul Balufe: They can go on our website or our Facebook, Capital Rise Investments LLC, or CapitalRiseInvestments.com. I have my office number there and my e-mail – all that information if you guys wanna get a hold of me.

Joe Fairless: Raul, thank you for being on the show and talking about how quickly you’ve gotten out of the gate in real estate, in two years, from 21 to 23, having wholesaled on average over 15 million dollars, which I think was on average like 200 or so houses (I think) when I did that math…

Raul Balufe: Right. 80 houses a year.

Joe Fairless: Yeah, 160… Yeah, I knew that didn’t sound — yeah, 160. I was doing the math off of the 68k, so that’s what it was. But it’s very impressive what you’ve done and the team that you’ve built, and how you have put a premium on the learning and then applying what others have done and then replicating the model. I think that’s the storyline for this conversation – you’re not recreating the wheel, you’re simply implementing what’s been proven that other people have done and you’re taking massive action and you’re scaling along the way.

Raul Balufe: A mix of education and action is definitely the way to go in any type of business or in anything you do in life; as long as you learn the right things from the right people and implement the action and you do it consistently, you’re set up for success. You cannot fail.

Joe Fairless: You summarized that much better than I could. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Raul Balufe: Thanks, Joe. I appreciate it. Take care!

 

 

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JF1024: The 2008 Crash Turned Him Into A Real Estate Investor!

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Luis has a civil engineering degree and was working on skyscrapers when the market crashed.  Laid off and without an income, he turned to wholesaling and lease options. Hear how he went from wholesaling to flipping apartment complexes!

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Luis Carrera Real Estate Background:
-Real Estate Investor at Innovative Property Group and IP Group
-Currently raises capital for larger apartment complex purchases
-Started real estate in lease options to eventually doing wholesaling, and flipping
-Born 4,713 miles away from the market he currently invests in
-Prior to investing he was a civil engineer and built skyscrapers
-Based in Durham, North Carolina
-Say hi to him at 973-902-7203
-Best Ever Book: Be Obsessed or Be Average

 

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Luis Carrera. How are you doing, Luis?

Luis Carrera: I’m great. Thank you, Joe, for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Luis – he is a real estate investor at Innovative Property Group and IP Group. He currently raises capital for larger apartment purchases. He started in real estate in lease options and eventually doing wholesaling and flipping, and he is based in Durham, Raleigh area, North Carolina. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Luis Carrera: Sure. A little bit about my background… Basically, I immigrated with my family from Spain in the ’80s and we moved to New Jersey, primarily Newark, New Jersey, and then to Harrison. I was pretty much raised in that area.

I went through the typical family process… We had to go to college, so I went to college – Rutgers and [unintelligible [00:03:33].01] where I got a civil engineering degree, both a bachelors and a masters. Then I went on to work for a large contractor, and did a couple of skyscrapers and whatnot.

Then the economy hit and I was laid off in 2008. That’s when I started really investing in real estate, with lease options and then eventually wholesaling to some flips until I started getting private investors in 2010 to actually blow up my capital, so to speak.

Joe Fairless: Yeah, so let’s talk about 2010 to today. How are you making money?

Luis Carrera: Basically I’m making money with a combination of things. First and foremost, I’m a big believer of marketing. We do Google AdWords, yellow letters – postcards not so much, because they don’t help out much in this area – and a lot of referrals, basically through door hangers and word of mouth.

We do a lot of wholesaling still, and the [unintelligible [00:04:33].06] we actually keep. And during the same time, I realized that capital is the most important thing in real estate. You could always find capital, but deals are a little harder to come by, but it’s all about networking. So now I raise capital for these smaller projects, for smaller investors, for flips, or maybe turnkey solutions for them, or we raise capital for apartment complex purchases so we could flip them.

Joe Fairless: Alright, let’s talk about the last thing you said – you raise capital for apartment complexes so you can flip them. Are you on the general partnership side on that deal?

Luis Carrera: Yes, that’s correct.

Joe Fairless: Okay. Can you give us a case study of one that you did?

Luis Carrera: We did one in 2010… One of my first flips was an 8-unit. It was pretty interesting, because I had an investor that wanted to invest in real estate but didn’t have time or experience, and he knew I was doing some work, so we hooked up, and he insisted on a multifamily. I had never done a multifamily until that point, so we bought a small 8-unit complex in Kearny, New Jersey, for about 75k, and we used his 401k money; we rolled it over into a self-directed IRA and we worked on that one.

After ten months it sold for about 550k, and we rolled it over into the next project. He wasn’t gonna pay taxes anyway, but the only way to actually use leverage for a self-directed IRA was to 1031 it. So then we moved on to the 28-unit complex, and then eventually we did the same process, sold it after another year, moved on to a bigger complex, an 86-unit in South Carolina.

Rinse and repeat, did it again, and now last year we placed it into a 250-unit in Greenville, South Carolina. So between 2010 and last year, in less than 7 years he went from 240k in his IRA to over 2.25 mil.

Joe Fairless: …worth of value, right? Not actual profit, but value of property that he’s controlling with that original money…?

Luis Carrera: Well no, that is his original money now. What transferred over from that IRA was that amount.

Joe Fairless: So what did he originally put into the 8-unit?

Luis Carrera: 240k.

Joe Fairless: And he now has how much cash?

Luis Carrera: Now he has minimum cash, because we placed that money into another complex. But the transfer was 2.25 mil.

Joe Fairless: Wow, that’s incredible… So clearly we need to dig in here. So you went from an 8-unit – you had that for one year, you said?

Luis Carrera: Less than a year, actually.

Joe Fairless: Less than a year. Okay, I wanna get the lay of the land and then I’m gonna go deeper into each of these. So the 8-unit has less than one year, then you went to a – what unit?

Luis Carrera: It was a 28-unit. We had that for two years, actually; with the transfer it was less than two years. We sold it for 2.2 mil and moved it over to an 86-unit.

Joe Fairless: You sold the 28-unit for 2.2 million dollars?

Luis Carrera: Yes, and it was an acquisition of 1.2 mil.

Joe Fairless: Okay. And then you went into an 86-unit?

Luis Carrera: Yes, which was a 4 million dollar purchase price, and then four years later (last year) we sold that for 5.6 mil, and that’s what helped us 1031 that into a 7.9 mil over a 200-unit property in Greenville.

Joe Fairless: You being a civil engineer I knew you’d have the details… The 250-unit in Greenville, purchase price was 7.1?

Luis Carrera: 7.9

Joe Fairless: 7.9… So you went from a purchase price with an 8-unit of 550k, right?

Luis Carrera: Well no, we purchased it for 75k. That’s how we got a great jump. We purchased that for 75k and sold it for 530k.

Joe Fairless: That’s a great start right out of the gate. And then you went 28-unit, bought it for 1.2, sold for 2.2, and then the 86-unit, bought for 4, sold for 5.6, and then the 250-unit you bought for 7.9 and that’s what you’ve got right now.

Luis Carrera: That’s correct.

Joe Fairless: What’s the key to flipping these in such a relatively short amount of time?

Luis Carrera: The smaller units were a lot easier to relatively flip, just because the competition is a lot greater for those units. I think we were a little — I can’t say fortunate, but we bought a property… They weren’t in the best areas; they were in C areas for the most part, but we gave them a good, finished, quality product. And once we rented it all out and leased it all up, they were typically in those areas 100% leased, so after six months it was pretty simple to actually just put it on the market and provide additional investors some meat on the bone.

So that’s what we did – instead of asking for a 6 cap or a 6.5 cap, we went to like a 7, 7.5 typically, and they would go under contract immediately. Some of them were a lot easier. Obviously, the renovations were a lot quicker for the smaller units, but once we got into the 86-unit it took a lot longer… It was almost 4 years, just because we needed to upgrade every single unit.

We had a plan in place, but the very important key that we had was the management side of our team. We needed to get a manager that was experienced in actual repositions. That was key. We had to – not fire, but we had to let go of the original manager, because we wanted to bring that up from a C to like a B- property. So we put a manager in place that had experience so we don’t have to be there every single day. That was an important part of our learning curve, really.

Joe Fairless: For all these properties, are they self-managed, meaning you’re basically overseeing the property manager directly?

Luis Carrera: Yes, that’s correct.

Joe Fairless: How influential has that been, versus hiring a third-party management company to do these for you?

Luis Carrera: Well, just because we don’t have much volume, it’s easier to manage 3-6 properties every year, just by putting the right property manager in place and just making sure the numbers are coming in properly through the P&L and the rents coming in… We just have to make sure that there’s no [unintelligible [00:11:21].23] defects when it comes to the P&L, like why this month we’re down 7k, as opposed to the last month.

We always make a phone call immediately if something goes wrong or there’s any delays in the repositioning. We always have a weekly meeting, even if it’s a conference call or a face-to-face. We go to the asset every single month, and every week we have a meeting with the property managers to make sure that the renovation is up to speed and up to date and there’s no delays.

Joe Fairless: With the 250-unit, how many team members do you have on-site? Can you go through the staff?

Luis Carrera: Yes, we have about four team members on site: the property manager, a leasing agent, a full-time maintenance, and another assistant maintenance guy. They are in charge of running the project. And I think we have a part-time during the summer for the leasing agent, and a part-time as well for the management just in case there are any issues. But obviously, we’re renovating those units as we speak.

Basically, once these units are renovated, they need less maintenance than the other units. We only have about four full-time and two part-time on staff, and we make sure to keep track of all the work orders coming in, and to see if there’s another need to actually force the renovation on a couple of units that are problematic units. That’s what we typically do.

Typically, for a 250-unit we only have four people on-site, but for every 50 to 100 units more or less, we just subtract a team member. If it’s 100 units, we’re not gonna have anybody really on-site, maybe just a property manager. But once we go above 100 units, we’ll have a full-time team on-site.

Joe Fairless: With the 8-unit, the $75,000 purchase price – was that paid all cash with your investor’s self-directed IRA?

Luis Carrera: Yes, that’s correct.

Joe Fairless: How did you make money on that 8-unit? How were you involved?

Luis Carrera: Basically, I took the same concept as the flips. I would over-leverage on the front-end, which included repairs, included the purchase price, insurance, holding costs, and my fee. So that’s how I got paid on the front. Then during the course of the renovations, obviously we didn’t have it rented for at least two and a half months, but after that we had a general split. I took 25% of the equity, and my partner took 75%. That’s how we worked the deal out. We gave him an equity split.

Joe Fairless: Okay, so at the 8-unit you got a fee at closing, and then you got 25% equity in the deal.

Luis Carrera: Yes.

Joe Fairless: What percentage of the purchase price, or how much was the fee, just so we have an idea of the structure?

Luis Carrera: Basically, we were all-in for 240k. The fee I took was only like 15k. I was basically the asset manager, so once we closed, I got a check for X amount. I think it was like 160-something. I got a check for that amount, in which I just held 15k-20k as my fee, which was disclosed. Then after that we used everything else to repair.

Joe Fairless: Cool, so it was like  6.25% of total capitalization – that was your fee at closing, and 25% equity. That’s the 8-unit…

Now, let’s fast-forward all of the way to the 250-unit. What’s your structure there? Is it the same?

Luis Carrera: It’s a little different, because I worked with another team that I met over the years, and they had the asset. They’re controlling the asset, so I just take part of the management side, just because I brought the one investor to invest into the entire asset.

So in that case, yes, we did have an acquisition fee. I think it was 3% or 3,5% acquisition fee on the front-end, which I took 0.75% of that, and my equity position is about 11%.

Joe Fairless: Cool. That sounds great. You mentioned there’s another group – how did you all structure it? I thought you said they control it… Will you elaborate?

Luis Carrera: Yes. Just because they have the asset. In order to grow in this business, I felt that “Okay, under 100 units I can handle easily. Over 100 units, I may need somebody else to help me with the loan, with sponsorships and what not”, so that’s what I went about.

I do network a lot, I go to all the [unintelligible [00:16:16].17]

Joe Fairless: Yes, absolutely.

Luis Carrera: That’s where I met other teams. With these networking events I would create teams and I would actually try to work with the ones that are best situation with future connections, and I would tell them “Hey look, I’m pretty good at raising capital. If I were to raise capital now, could I be a part of the management team?” and most of them usually always say yes.

Now I decided to change my position, just similar to what I did with the 250-unit in South Carolina, so I found the people that needed money, money. I said to myself, “Alright, this is a lot easier. I can get deals in my inbox, and all I have to do is raise capital. I prefer just doing that instead of going crazy and finding additional deals and overworking.” My goal now is just raising capital for teams that I feel confident in.

Joe Fairless: And then you get to be on the general partnership side.

Luis Carrera: That’s correct.

Joe Fairless: Have you looked at it from a standpoint of if you raise a dollar, how much projected profit do you want to have returned for being on the general partnership side?

Luis Carrera: It just really depends on the asset. The first couple of times I tried to just network with them; even if the raise is like 5 mil, I’ll try to bring somebody at 1 mil for a certain percentage of it. And if the general partnership is 75/25 split, for example, and I bring half of the capital, I do expect to get half of the acquisition fee that’s not gonna be used for repairs, or renovations. And then the equity position, I don’t mind taking a smaller piece, just because there were more people involved that actually found the deal and actually got it funded through a primary lender. I know it also takes a lot of work on both sides – raising capital, and then the other side, which is making sure to get the loan from the lender. And that’s how I structure it.

I prefer working with five teams a year, doing ten deals a year, instead of just doing one deal and only getting side percents of every deal. I’m fine with that. As long as my investor is happy with the rate of return he’s getting, I’m happy, because they’ll keep on coming back and they’ll keep on referring me to other investors.

Joe Fairless: What is your best real estate investing advice ever?

Luis Carrera: Just start out small. Go to all the networking events you possibly can, because a lot of these investors are at networking events like [unintelligible [00:18:47].19] or REI groups, and just show your thing – start telling people what you do, and eventually a lot of people will say “Hey, I wanna work with you. Let’s see what you can do.” But I’m still not confident in apartment complexes because thats’ out of my reach at this point. They’re a little [unintelligible [00:19:04].23] So what I do is I work on a flip with them. Once the flip goes well, we’ll continue to do more deals. Once they do more deals, then I can convince them to “Hey, instead of putting 400k into two flips, let’s protect some of that money and put 200k in an apartment complex. You still get the return you wanted for the long haul.” They’ll get an equity position on this property, so you could get even massive benefits. And then I still do flips with them.

I continue to build those relationships in order to eventually put them towards my goal, which is an apartment complex. That’s’ what I do.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Luis Carrera: Sure. I’m not sure I’m prepared, but…

Joe Fairless: [laughs] Well, then you’re gonna give the best answers if you’re not prepared. Usually it’s better if you’re not prepared. First though, a quick word from our Best Ever partners.

 

Break: [[00:20:04].23] to [[00:20:58].24]

 

Joe Fairless: Best ever book you’ve read?

Luis Carrera: Best ever book I read? I really like Grant Cardone’s book…

Joe Fairless: 10x? Probably something 10x.

Luis Carrera: Yeah, Be Obsessed Or Be Average. It psyches me up. And M. J. DeMarco’s “Millionaire Fastlane.” It’s just such a quick read that I can just pick it up and read it and just make sure to be on track to be on the fastlane instead of on the sidewalk.

Joe Fairless: Best ever deal you’ve done?

Luis Carrera: Best ever deal I’ve done… Probably the 28-unit flip, because that netted me a pretty good penny. I’m not into many homeruns, but I just like building up to that. Where I am now based on equity it’s pretty good.

I haven’t really done a big home run, where you see some people online that they have these 250k checks now. I’m all about singles and doubles.

Joe Fairless: What’s a mistake you’ve made on a deal that you can think of?

Luis Carrera: When I first started flipping I never paid attention to landscaping, and I realized landscaping is not a big, big deal, but it gets the property sold a lot quicker than if you forget about landscaping. I try to incorporate landscaping budget into all my flips now.

Joe Fairless: What’s the best ever way you like to give back?

Luis Carrera: I give back every week, I am a volunteer for Meals on Wheels. I give some hours of my time to do that. I do a volunteer every month for Salvation Army as well at the food bank. I also just created a non-profit which is Solar For Hope. It’s gonna be providing solar power to low-income housing in the South-East.

Joe Fairless: Very cool. How did you get involved with that last venture?

Luis Carrera: I was doing these Meals on Wheels, and then every time I dropped food off or spoke to these homeowners, they always told me that they have these bills to pay, it’s usually electric, and it’s subsidized housing, but in some of these places in the conditions that they live in – it’s not the best, so I was like “Okay, how could I help them out by lowering some bills and doing something else that’s more creative, and something that’s needed for future generations?” So I decided “Why not do solar power on this low-income housing?” If anybody could do solar power for their 250k home, why can’t we just do a small system for a hundred families a year and help them out with their bills and trying to get them off the grid, or at least creating a neighborhood feel where these individuals feel pride, and actually contributing to a cause which is making this world a better place for everybody?

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Luis Carrera: Either through Facebook… My business site is IPGroupNC.com, or they could give me a call on my cell phone or text me at 973-902-72-03.

Joe Fairless: Luis, thank you for being on the show. Holy moly, this 8-unit flip that turned into a 250-unit monster… Congratulations to you, your investor and everyone who is associated to the original and the latest; from a $75,000 purchase to a 7.9 million purchase through value-add, selling the 75k property where you were 240k all-in for 530k… You started out strong and then you just kept the momentum building from there. You talked through some practical ways that you have increased the value of the properties and then how you’re getting compensated along the way. That tends to be a question that I receive a lot, “How do I structure deals with partners?”

Thanks for getting into that and thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Joe Fairless: Thank you for having and good luck with everything. I hope to speak to you guys soon with our next deal.

 

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JF1022: Why You are MISSING OUT on Sweet Deals and How to Wholesale Outside of Your Local Market

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He likes to be lazy. Okay, he’s not “lazy” per se, but he looks for the low hanging fruit through creative finance and “subject to” property takeover. He is also reliant on other markets to close wholesale deals. Hear how he is able to network with outside markets!

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Paul Lizell Real Estate Background:
– Real Estate Investor, JP Homes, Inc.
– Virtual wholesale bank REO properties
– Wholesale between 30-50 deals a year and rehab between 5-10
– Started with fix and flips then went into wholesaling in 2009
– Over 16 years experience in real estate investing
– Based in Philadelphia, Pennsylvania
– Say hi to him at http://www.housedealsamerica.com
– Best Ever Book: Rich Dad, Poor Dad

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.

With us today, Paul Lizell. How are you doing, Paul?

Paul Lizell: Great, how are you doing, Joe?

Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Paul – he virtually wholesales bank-owned REO properties. He’s wholesaled between 30-50 deals a year, and rehabs between 5-10. He started with fix and flips, then went into wholesaling in 2009. He has over 16 years in the business. Based in Philadelphia, Pennsylvania.

With that being said, Paul, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Paul Lizell: Sure. I started rehabbing back in 2001. I was rehabbing probably anywhere from 5-8 deals at a time, going on until the end of 2007, early 2008, when the market really started to drop. At that point I got out of the rehab game because I was losing money on a lot of these different deals, and I decided to shift my focus to wholesaling. This is all in the Philadelphia market – I switched basically from rehabbing to wholesaling; still doing some rehabbing, but on a very small scale. We were limited to maybe doing 3-4 deals a year rehabbing, and the rest of the deals we were wholesaling. At this point we exclusively shifted to bank-owned properties as well.

We started doing it more remotely in 2011. We started buying out of state, out in Ohio, Indiana, New Jersey, Delaware, Virginia… We continued to expand out as we got more comfortable in these markets, and just kept on growing and growing and growing. Now I buy all over the country and we do anywhere from — a lowman year is 50-100 deals a year. That’s kind of where it stands now.

Joe Fairless: Why shift from local to national?

Paul Lizell: Basically, it was more for inventory purposes as much as anything. If you find a good deal, obviously, no matter where it is, you’re still gonna be able to move it, in my view, and I enjoy learning new markets and going into different areas. It’s actually just something I really enjoy doing – I like traveling, so I don’t mind going to an area and spending three days  there, learning a little bit about the market and then I start to buy in that market.

It gives you more inventory to choose from, right? If you’re just in your hometown or within a couple hours of your house, you’re only limited to a certain basket of properties. If you open it to the whole country, then you’re open to a heck of a lot more opportunities.

Joe Fairless: When you come across a deal that’s in another market, even if you’ve been there for 2-3 days, I’m sure it’s still challenging to know that specific area, so how do you determine how much the property is worth and what you want to sell it for?

Paul Lizell: That’s a really good question. That’s the tricky part, because in any market you have good zip codes and bad zip codes to find; even if I’m only there two or three days, I’m not gonna learn anywhere near the whole market; I’m gonna learn about a small percentage of the market.

So I actually rely heavily on other wholesalers in those markets and other rehabbers. You can match up with these guys on Craigslist and just find out what zip codes their buyers are actively buying in, what zip codes to stay away from… The guys that have been doing wholesaling for a while are the ones you wanna rely on, not the guys that are just new to the game.
And as far as rehabbers, I’ll tell you exactly what areas they buy in, what areas they don’t buy in and why. So those have been my best resources.

Realtors are an okay resource; they’re really your best resource for comps, obviously, but you’re not necessarily gonna get that zip code by zip code area – the good, the bad and the ugly – from a realtor as well as you will from a wholesaler or a rehabber.

Joe Fairless: That’s great input. Say you’re going to a new city… You’ll go on and you’ll visit it for a couple of days; now you’re coming back, now you’re getting some deals… You’ll go on Craigslist and identify wholesalers and rehabbers and see where the wholesalers are selling properties and the rehabbers are rehabbing them.

Paul Lizell: Yeah, absolutely. And if I’m planning on going to that market – say I’m going to St. Louis – I’ll actually go on Craigslist beforehand, trying to phone interview a few of these guys and maybe meet one or two of them while I’m out there, so that way I’m not doing it twice. I’d rather just go out there once, meet with these guys, find out what their buyers are looking for, do some joint venture deals…

We’ve done a lot of joint venture deals with a lot of different wholesalers out there, and that’s been a big part of our business, and it helps lower your risk for mistakes when you’re doing it that way.

Joe Fairless: What is a tough deal that you would have to wholesale?

Paul Lizell: That would be deals that we get in more rural areas, the ones that are out there, the ones that are not in the cities, not in the direct suburbs to places, and less buyer pool, obviously. Those end up being the harder deals to move, that is for sure.

Joe Fairless: I ask that question because I actually came across a wholesale deal in a very rural area of Pennsylvania and I don’t wholesale; it’s just someone who I knew and he had a portfolio of like 20-25 single-family homes in a town. A Wal-Mart gets more traffic than the amount of total population for this town, in one day. And it’s not my business model, so I talked to a couple people who I knew wholesaled, and none of them were able to move it because it was in such a small town… So who is your buyer for a remote town with a property?

Paul Lizell: This is one of those interesting things to find out… Because these places are more remote, you also don’t have great Wi-Fi access in those areas, and you have an elderly population. We sell the majority of our properties through newspaper ads in those markets, believe it or not. Newspaper ads do the best, much better than Craigslist or any of those things, and direct mail marketing.

We direct mail to cash buyers lists in those areas, wherever is close to it. Those are our best buyers. When we get buyers through Craigslist, we generally are getting somebody who is looking to live in that property, not necessarily to do it as a rental. Most of the time we get somebody who’s looking to owner occupy the property, and they happen to have some cash.

But yet, newspaper ads, believe or not. It’s the most expensive; it’s not cheap to do newspaper ads, but they work pretty darn well in rural areas.

Joe Fairless: That’s a great tip.

Paul Lizell: Anywhere there’s an elderly population, newspaper ads work well, because they still read them. We’re online doing stuff, they’re still reading the print.

Joe Fairless: Paul, you’re doing 30-50 deals a year, rehabbing 5-10… Are the rehabs local?

Paul Lizell: Most of my rehabs are local. However, I have two that I did down in Southern Florida – my dad lives down there – and I have four that I’ve done this year in Tucson, Arizona, that have been rehabbed… Some of them just paint and carpets, some full rehabs. The only reason I do that in that area is because I have a really good agent who basically runs the whole rehab for me. I pay him a little bit extra, especially on the commission side and off the side… But that’s the only reason I do that in that market. If I don’t have somebody like that, I won’t do that, because that’s remote rehabbing, and it gets really hard, and it gets really tough to monitor and control. I try to keep most of my rehabs within about two hours from where I live.

Joe Fairless: What’s a lesson learned as you’ve scaled your business, with wholesaling in particular, and you’ve gone from local to now national…? What can you tell us about something you’ve learned along the way?

Paul Lizell: Best lesson learned is don’t buy those ugly piece of junk super cheap properties, because they can be really difficult to move. I guess last year I did four or five of them… I lost money on a couple of those, and they just drew so much of my time; they’re so difficult to move because of the amount of work needed, so I’ve gone away from those properties that need a ton, and just tried to go to the ones that need your more basic rehab, not ones that need everything done – foundation issues, or anything like that. That’s a bit lesson learned there on that.

Joe Fairless: Why does that matter if you’re wholesaling it?

Paul Lizell: On two of those properties in particular we’ve had buyers under contract three separate times on both of them, and they all fell off. Then we had to lower the price to get it to a really good, attractive number, to where somebody stuck with it. I think it was just too much time to think; they were looking at it, seeing how many repairs it needs and it gets above what they’re looking to do and they just bail out.

Then we got some deposits on that, which helped, but [unintelligible [00:10:16].17]

Joe Fairless: Paul, what’s your best real estate investing advice ever?

Paul Lizell: I’m gonna make it to this market right now…

Joe Fairless: Okay.

Paul Lizell: The interesting thing about the market we’re in – we’re in a different market than we’ve been in since 2005-2006, where you can make money almost doing anything. It’s not quite as good as it was then, but still pretty good.

Right now a lot of my wholesale deals I’m getting, I’m listing in the MLS in different areas, flat fee listing agents, and we’re moving them at higher dollar amounts than we would if we were just going on Craigslist or sell them through direct mail marketing, or sell them to our cash buyers list. We’re actually doing better there than we are on your traditional sites. Right now that is a really good market to hit, as well as just doing your wholesaling, where you just make it mortgageable. Just do some paint and carpet, make it look good, make sure you don’t have any chipping paint or anything like that… That is a good one right there.

I have other things I could probably give as well, if you wanna hear the…

Joe Fairless: Yeah, please do.

Paul Lizell: Another great resource for me – I’m not big fan of rentals… I’ve had rentals, I sold all of them off; I’m down to one and that one’s gonna be sold over the next…

Joe Fairless: Why?

Paul Lizell: I hate the hassle of them is what it comes down to. The hassle of them just drives me nuts; they’re such a time suck… I try to be lazy with my business. Lazy in this way – I wanna get the most out with doing the minimal effort. I think everybody wants that life, right?

Joe Fairless: Mm-hm…

Paul Lizell: Rentals, they just drag every little bit of energy out of you. They can be difficult, but they can be really fruitful long-term. So I’m losing something long-term, but what I’ve switched to is an owner finance model, and I’ve done this a lot with investors right now to avoid the Dodd-Frank Act, but I also still do owner financing to owner occupants as well.

Those are far less maintenance, I don’t have to worry about it if the toilet breaks, or if something goes wrong with the dishwasher [unintelligible [00:12:01].04] That’s not my issue, I’m just collecting the note and I don’t have any other headaches with it. My only headaches are making sure that taxes are paid, that insurance is there covering and protecting me, and that they pay. That’s pretty much it.

Otherwise, they’re low-maintenance, they’re nice and easy, and that steady monthly income is good. Even though it’s only set for a fixed period of time, I really prefer those over rentals… But there are tax drawbacks to them, obviously.

Joe Fairless: Yeah, thank you for mentioning the pros and cons. I love how you’ve said this objectively. So on the tax disadvantages, what are they?

Paul Lizell: With rentals you get to write off depreciation, you get to write off your interest expense, your real estate taxes, your insurance. On the note, I’m not really getting to write off anything. I don’t have any depreciation; it’s all pure income coming in, so it just adds to my tax liability, unfortunately. But if you can put some of those notes into your IRA, then you kind of avoid that. Then you’re kicking it down the road.

It’s great for building IRAs. I really am a big fan of using them to build your wealth in your IRA or your 401k, and you’re not worrying about the tax ramifications; it’s down the road you’ll have to worry about that.

Joe Fairless: What is your end game then, if it’s not having a portfolio of properties that are eventually paid off and bringing in monthly rent checks? What are you doing for the long-term?

Paul Lizell: My long-term goals is I have two of them that I wanna get into, and this will be a little less maintenance. One, I wanna get into self-storage facilities; that would be the rental income I’d like to have. They’re much lower maintenance. There’s maintenance, but there’s nowhere near the same kind of maintenance as there is on a traditional rental. That’s one source.

The other one – I may get into apartment investing. That’s a little more maintenance, obviously, but…

Joe Fairless: Yes, it is… A lot more maintenance. [laughs]

Paul Lizell: Yes, yes. You’re gonna have costs, you’re gonna have so many more added costs on that… Which is why I prefer, rather than do the apartments [unintelligible [00:13:56].17] worry about the toilets, you’re gonna have maintenance, you’re gonna have people, you’re gonna have to constantly have calls to make repairs… Self-storage isn’t nearly as bad, and they’re pretty profitable, but they’re pretty expensive right now.

Joe Fairless: Yeah. With my single-family homes – I only have three single-family homes, but they are so turnkey it’s ridiculous, and it’s because of the management company. Compared to apartments, holy cow… That is much more active. So if you have these two options and your focus is on being passive, go self-storage!

Paul Lizell: I totally agree with you, Joe. And the single-families are far better than the duplexes. I’ve had duplexes, quadruplexes, triplexes, and they’re much more of a time suck and they cost a lot more money and there’s a lot more turnover of people. The single-families I’ve had – I’ve had people in there for 5, 6, 7, 8 years at a time. I’ve just [unintelligible [00:14:49].03] on our house, which is part of the reason I sold off some of my rentals, to pay for the addition here, and I just got tired of some of the maintenance on some of them, and some of the turnover on certain ones.

It’s just like a stock portfolio, you’re getting rid of your dogs… And now I’m getting rid of one that has a very good cash flow, but it’s turning into a note. So I’m getting my money back on the down money that the buyer is putting in there, and then I’m having a note on the property, so I’ll be getting long-term income from it that way.

Joe Fairless: Okay, very cool. Nice, creative approach. I sold off one of them because it just wasn’t like the others, and kept the other three. Alright, Paul, are you ready for the Best Ever Lightning Round?

Paul Lizell: Oh, absolutely.

Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.

Break: [[00:15:33].04] to [[00:16:26].21]

Joe Fairless: What’s the best ever book you’ve read?

Paul Lizell: Rich Dad – it’s truly the best one.

Joe Fairless: What’s the best ever deal you’ve done?

Paul Lizell: A rehab where we made a little over 100k. That’s a good one.

Joe Fairless: Can you elaborate on how you were able to do that?

Paul Lizell: It was a bank-owned property. We picked it up for 60k, we put about 40k into it, but I we sold it for about 230k on that one. It was just a really, really good one. We were just kind of lucky. It was sitting on the market for a little while, it was listed much higher, they took our low bid and we ran with it. We really did it up; we really put some good money in and really had some nice upgrades on it. We finished off the attic, which we made a big master suite up there. We added a full second bathroom and another half bathroom, and really expanded the kitchen. So it really just made the place beautiful and sold pretty quickly.

Joe Fairless: Best ever way you like to give back?

Paul Lizell: Coaching. I coach travel baseball. I coach my middle son now; last year I coached my older son. I coach basketball. My 12-year-old team, we’re going to Cooperstown this summer, and there’s nothing like giving back to kids and teaching them how to get better at sports and correlating sports to life; that’s my favorite way to give back.

Joe Fairless: Did you say they’re going to Cooperstown?

Paul Lizell: We’re going to Cooperstown. Every 12-year-old team is eligible to go to Cooperstown; you have to get on the waiting list there. Luckily, our township has had it every year, so we’re there and we’re hoping to get two teams in there next year. It’s a lot of fun. It’s very expensive, it’s like $1,000 a kid, plus the pins, pants, and all these different expenses that come in there, but it’s a ball, it’s so much fun.

Joe Fairless: What’s a mistake you’ve made on a real estate deal that you can think of?

Paul Lizell: Okay, so this goes back to when I was rehabbing about eight at a time in 2007-2008, when the market started to tank. I had some properties where I was pouring in 75k-100k into these rehabs, and the market just totally tanked. I lost money on six out of the eight. What it thought me is 1) to scale back and pull back on what you put into a rehab, and also spread yourself more even. I wanted o diversify my portfolio, which is why I got into wholesaling… So you always have income coming in, rather than waiting for just these flips to close, which is taking you 3-6 months by the time you fix that are resell it.

Joe Fairless: Yes, or stagger them a little bit.

Paul Lizell: Yes, exactly, so you’re not always so cash-strapped and waiting for the next check. The great thing about wholesaling is every week we’re selling something and we’re getting income coming in, so it’s great. It’s only maybe 10k, compared to the 30k-40k that you can get on a rehab, but still, it’s constantly turning and you’re not doing anything to the property.

Joe Fairless: Yeah, and you don’t have a lot of risk with that property, because it’s just marketing costs and whatever your teams costs, right?

Paul Lizell: Exactly.

Joe Fairless: What is the best place the Best Ever listeners can get in touch with you?

Paul Lizell: They can reach me by e-mail. It’ll be my first and last name – PaulLizell@gmail.com.

Joe Fairless: Do you have a website?

Paul Lizell: I do. It’s HouseDealsAmerica.com.

Joe Fairless: That is in the show notes, for the Best Ever listeners… You can click on that, or just e-mail Paul directly. Paul, you taught us how to wholesale a property in a remote town, and that is you simply pick up the phone, call the newspaper ads department and place some ads, because there are older populations, and if you’re catering to an older population in a small town, then that’s where they’re consuming their news. You’ve been very successful and had some success with selling properties via newspaper ads in small towns; that’s a real-world lesson for me… When I was trying to do that about a year ago, or whenever that was when I came across this one portfolio randomly.

Then also your lesson at the end: 6 out of 8 homes, lost money when things shifted in the marketplace… So we should diversify our portfolio, and there’s many interpretations of that, one of which is to stagger them; another would be to diversify your portfolio and what you invest in, and then other ways. Then lastly, scaling outside of your local market into national markets and how you identify good areas and good team members, and that’s initially through Craigslist, seeing where rehabbers are rehabbing properties and wholesalers are wholesaling properties, in what zip codes.

So thanks so much for being on the show, Paul. I hope you have a best ever day, and we’ll talk to you soon.

Paul Lizell: Thank you so much, Joe. I appreciate it.

 

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JF939: He Netted OVER $1 MM WHOLESALING Last Year

Listen to the Episode Below (31:14)
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It’s safe to say that this is one of our most motivating and instructional episodes of wholesaling we have had. Our guest was able to net over $1 million in wholesaling last year, and he talks about how it all started. Hear his step-by-step case studies and what he did to grab over $20,000 on his first deal.

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Matt Garabedian Real Estate Background:

– Owner of Royal Realty, a full service Real Estate Brokerage, Buyer Representation and a Full Service Property Management Division
– Wholesaler and Flipper and creator of Matt Buys Houses Cash
– Recently started a new brand Phenomenal Investor, that is just rolling out
– In 2016 did just over $1mm in profit
– Based in Fresno, California
– Say hi to him at http://www.rrfresno.com

Click here for a summary of Matt’s Best Ever advice: http://bit.ly/2nkixYe

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today – Matt Garabedian. How are you doing, Matt?

Matt Garabedian: Hi, Joe. How are you doing?

Joe Fairless: I’m doing well, and boy, am I excited to talk to you, because… Well, Matt did over one million dollars in profit last year. He is the owner of Royal Realty, a full-service real estate brokerage and full-service property management division. He’s a wholesaler and flipper, and creator of Matt Buys Houses Cash. He’s based on Fresno, California. With that being said, Matt, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Matt Garabedian: Sure, thank you. Yes, I’ve been in real estate since 2009, and kind of a funny story… I remember getting into the business – this is right after the markets essentially crashed and the values were depressed, and there were foreclosures everywhere. I remember I was excited to get into the business, but a couple people, just in discussing it with them, were asking me, there were saying, “Matt, why the hell would you be getting into real estate right now? Everyone’s making a mass exodus out of the industry and out of the business, and who’s gonna buy real estate?” So it kind of hit me by surprise, and I was thinking “Am I making a bad decision here?”

At the time I couldn’t really afford to make any bad decisions, because I was pretty much broke. But I really focused on getting into the business, and I trusted my instincts and I really felt that this is where I belonged. I got into the business on the traditional side, as a regular broker, and quickly figured out that driving around and showing people houses and talking about neighborhoods really wasn’t my cup of tea, if you will.

So I started looking into selling properties to investors, where you’re looking at apartment complexes, and I enjoyed putting together a net operating income and talking about cash-on-cash return and cap rates. I enjoyed those conversations more because the guys were focused on bottom line, as opposed to a neighborhood or the layout of the kitchen or something esthetic. I really enjoyed that, and did that a few times in terms of selling some good deals on our apartment complexes… But I started asking myself, “How do I get on the other side of the closing table?”, if you will.

The guys that I was selling properties to were finding these deals, cash, and I asked myself, “Can I ever get to their side of the table where I was buying property?” At the time I was selling properties that were a good-sized deal with maybe $600,000, and I wasn’t selling those consistently; the average one was $200,000-$250,000. And although those were pretty decent commission checks, when you start reverse engineering it, I would have to do like a hundred Escrows a year to save some money to be able to be in that position to buy a property.

So I started researching other options, and we’ve all come across videos and guys like Preston Ely, or these other guru guys, if you will, and I started researching wholesaling. At that time, that lead me to a fortune builder, and it’s kind of ironic that those guys were all originally from Fresno, as well. I think they had just moved back from Connecticut to the San Diego market and just started launching their fortune builders mastery programs.

I got on the phone with one of the sales reps over there and they’re telling me about how they could teach me all of these practices and principles of how to become a wholesaler, but the [unintelligible [00:05:56].07] was gonna be $12,000, and I didn’t really have $12,000 to spend on any more education. I went home to my wife after really getting excited about it, and I said “I think this is gonna be a great opportunity for me to learn about another strategy where I could make some good money and possibly be able to get into the investing side of the business.”

She said, “Well, why do you need to spend money? You’re already a broker, you kind of know how to do deal.” I said, “Yeah, but this is different.” I had never heard about this strategy before, and I see guys posting these enormous checks; I’ve got all this real estate knowledge, but I’m just getting commissions. So I kind of got her blessing in a sense, and I scraped and scratched some money together and I bought into the mastery program.

To be honest with you, it was really great content, but I never really immersed myself in it, because I kind of went back to the “Let me get comfortable just making my commissions.” I didn’t pursue that and dive wholeheartedly into the wholesaling side until about 2012. I remember this like it was yesterday – I was just up late at night, just kind of pounding my head against the wall again, and really wanting to get into something that was gonna create a future for me… Just looking online again and seeing guys that are posting these big checks and having success. I said, “You know what? I’m just gonna do it.”

I went out, did my first direct mail campaign – I think I sent out like 300 letters, got a call from a guy… And again, I probably wouldn’t recommend this advice now, but I remember someone telling me “If you’re comfortable with the offer you’re making, it’s too much.”

I remember sitting in front of this house – I really had no idea what I was gonna offer the seller, but I kind of forced myself to make such a ridiculously low offer that I was uncomfortable telling him what I was gonna pay. I had to work up this courage to give the offer, and I think I ended up offering this guy $18,000 for his house. I kind of felt that the property was worth (fixed up) maybe $60,000. So I worked up the courage to give him the offer, and he told me “Well, that’s not gonna work, but how about we do $24,000?”

I was so excited just to get a counter… I said, “Okay!” and I wrote up the deal, got it under contract, and then I asked myself, “Boy, now what do I do with this?” because I didn’t really have the cash buyer for that particular property type, or I didn’t know who would be interested in buying it. So what I did, because I was a broker, I had access to the MLS and I kind of researched the neighborhood and I found a couple comparable properties that sold recently, and looked on the data and it showed that it was a cash transaction. I couldn’t find the actual buyer of the property – they just had the tax record just show the address – but I had the phone number to the agent that sold the deal.

So I called the agent and I said, “Hey, I noticed that you sold the property in the area recently. I have a house right down the street – do you think that this particular buyer would be interested in another one?” He said, “What have you got?” Knowing that I had the property under a contract for much lower than what the comps were, I kind of just shot for the moon and I said, “Well, I could sell this property for $52,000.”

I remember he told me, he said, “Don’t tell anybody about this property. We’ll have the money in Escrow in a week.” I said, “Oh my god, one call, one kill…? Like, one shot, one kill deal? This is too good to be true. This is not gonna really happen.”

Joe Fairless: It happens every time, doesn’t it? [laughter]

Matt Garabedian: Exactly, right! So I remember stressing and sweating… I was like, “Is this guy gonna show up with the money in Escrow? Is the seller gonna actually show up to the title company and sign the deed?” So I’m calling my title rep, they’re supposed to be here at two o’clock, and I tell them to let me know if they show up.” I remember at about [2:30] she e-mailed me, seller came in, signed the deed… I said, “Did he ask about any of the profs that I was making?” She’s like, “No, nothing came up.”

I learned that in my area the titles companies send out two different closing statements: one for the seller and one of the buyer. So the buyer is the one that really sees the assignment fee on there, and the buyer was due to bring in the money the next day. Sure enough, he came in and funded it, and I ended up making like $24,000 on that first deal, and I never looked back. I said, “Wow, this is amazing.” I never thought that could get this type of deal done. That was late 2012, and I’ve been grinding at the business ever since.

We just finished our 2016 year as just so blessed and profitable and excited… I’m giddy, I love the business.

Joe Fairless: On that first deal, also, were you asking if the buyer had mentioned anything about the assignment fee that you were making, and how concerned were you about that?

Matt Garabedian: Oh my goodness, I was stressed. I had heard people that would walk away from a closing if they saw what you were gonna make, and I had heard advice from people online that if you were making more than ten or fifteen thousand just to close Escrow and resell it. I didn’t have the money to close anyway, so I just figured “Hey, I’m gonna give it a shot.”

But I quickly figured out after that transaction and several more that if you are delivering value to the buyer, then it really didn’t matter what I was making. If I was making $200 or $20,000, if it was a good deal for them and they had an opportunity to acquire it, then it’s a good deal for them and they’re happy.

Joe Fairless: Do you still use the tactic of reaching out to cash buyers in the area where the house is that you have under contract to find your buyer?

Matt Garabedian: I still will do that from time to time, but over the years I’ve been able to develop some great relationships with cash buyers. I hear a lot of people saying “Go out and build your cash buyers list and get 500 names.” I did that, but I think the honest truth is most of us do our deals with two or three guys; that works for me. I’ve got a huge cash buyers list, but I’m consistently showing my deals to two three investors that I have, and they’re friends. We go to lunch and I tell them, “Here’s what I’ve got… What do you think? Here are the numbers”, and we usually do deals over lunch. Sometimes I’ll just send a text message and say, “Hey, I’ve got this deal. What do you think?” and I send them pictures. “Yeah, we’ll take it.”

So it’s gotten to the point where I’ve got relationships now so I can make these deals happen pretty easily.

Joe Fairless: How much negotiating goes back and forth between you and them when you send them an opportunity?

Matt Garabedian: Well, sometimes we negotiate, but for the most part, if I have a guy that is a friend and I’ve sold six deals this month already, and they all went to one guy, we’ll go and look at each deal, and if I can help him out because he’s buying volume from me, I’ll take three, four, five thousand dollars off of a deal just so that he feels like he’s getting value from me. I like to do that, because it’s much easier for me to sell them to a guy that I know a) he’s gonna close, b) he’s gonna show up and get the paperwork signed, I’m not gonna stress about him bailing on the deal or having his money fall through, or have a change of heart or trade price with me at the last minute… So I rarely have to renegotiate once we strike a deal.

I do a very good job up front doing my due diligence, I understand my comps, I understand my ARVs… I’ve flipped properties, I’m a property manager, I’m a landlord, so I’ve been on all sides of the table, if you will, so I can kind of put together a realistic rehab budget that’s pretty on point. So when I present a deal, it’s pretty accurate as to how it’s gonna go down. I don’t really have to trade price too much.

Joe Fairless: How did you meet the person who has bought the six deals this month from you?

Matt Garabedian: Well, this particular company – it’s two guys that run the company, and one of them I’ve known since I was 16 years old. We actually played baseball on traveling teams together, so I had a relationship with him from back when we were young guys. He got into the real estate business a little bit before me, and in my area in Fresno we’re a big agricultural farming community, so he does a really great job at selling agland, and he developed relationships on that side of the business. So I’ve always known him, and for the fact that he was in real estate, and a few years ago I found out that they were buying properties to buy as rentals or to flip, so it was kind of an easy partnership, if you will, because we had some history and known each other.

Other guys that I didn’t have a relationship with before, it’s a matter of just picking up the phone and introducing yourself and telling guys, “Hey, I’ve got deals. I’m interested to know if you’d like to hear about them.” It’s really as simple as that. I think money follows the deal. If you can concentrate on acquiring good deals, I think the money part usually will just be attracted to that.

Joe Fairless: And just to hone in on that a little bit… You said you have 2-3 people that buy the majority of your deals; we just heard how you met that one individual, since you were 16 years old… Let’s just think of the next person who’s bought the most amount of deals from you – what was the original meeting place for how you got introduced to that person.

Matt Garabedian: Well, I do some of my research, and I’ll find guys that are what I call “professional investors.” These are guys that are buying property on almost a daily or a weekly basis. When you start to see repetition and the same LLC or the same entity buying properties, you know that they’re in the business and they’re professional in how they build out their business. I’ve done a couple things – one thing I’ve done is I’ve actually showed up to the auction, and I would go up and introduce myself to that particular person and say, “Hey, I’m a wholesaler in the area, and I come across great deals. I know you’re at the auction consistently. Here’s my business card, can we have a cup of coffee?”

Another one would be just sending a letter and introducing myself and saying, “Can we meet up and talk?” I like meeting face-to-face and getting to know people, and explaining what it is that I do, what kind of value I can bring to them. It’s just a natural relationship at that point because you know that they’re looking for deals and I’m looking to sell deals, so it’s not a hard relationship to establish if you’re truly bringing value to the table.

Joe Fairless: If you had no buyers at this point, and you have a deal – what would be the number one way that you would go find your buyer?

Matt Garabedian: I would go straight to the auctions. You know that a) these guys are cash buyers, b) they’re actively looking for property because they’re standing at the courthouse steps every day, fighting over a few deals that end up going to a third-party, and they’re amongst competition. So if I have a deal under contract, I think that’s just the natural way, to go directly to a buyer. You can pull courthouse auctions; for my area I use Property Radar, and Property Radar will give you the actual location and time of the auction date. If you get there 20-30 minutes prior to the auction starting and you just go up and introduce yourself and pass out cards… Or I’ll do like a one-page brochure of the potential benefit to the buyer.

Say “I’ve got a property on a one, two, three main street; here’s the ARV. I’m selling it for this. The rehab is this. Give me a call” – I think that’s an excellent way to get in front of a cash buyer right away.

Joe Fairless: You started out by doing direct mail – is that the number one way you’re getting these deals, or is there something else?

Matt Garabedian: Yeah, direct mail is my bread and butter, absolutely. I do deals from my online marketing, but I would definitely say direct mail is the go-to source for me.

Joe Fairless: For someone who’s looking to go from good to great in deal flow via direct mail, what would you tell him/her?

Matt Garabedian: Know your KPIs. That took me a while to understand that. It’s never advisable just to throw money out the window without being able to track your response rate. You need to be able to track inbound calls, appointments, contracts and closings. Those are the main KPIs that I track. It all starts with having a proper CRM. I’ve spent thousands and thousands of dollars to develop my CRM. We use a custom Podio, and I’ve integrated CallRail, and other sources to be able to properly track. I can split-test my direct mail now and see based on what type of mail piece I’m using… For instance, if I’m using one mail piece to an absentee owner, I’ll split-test it with even the color of the letter or the postcard to see what’s getting the best response rate.

If you could dial in a) your CRM and b) your KPIs, which are both equally important, I think that’s gonna be a huge advantage to anybody out there that is competing against other investors or wholesalers or other investors in the area, because you’re able to look at your KPIs and say, “Well, I’ve sent out x amount of letters to this mail type and I’ve sent x amount of letters to split-test sample B, and sample B for whatever reason is returning much more. So I’m gonna focus on that and maybe look at what I could tweak on sample A to get a better response rate.”

Joe Fairless: And for anyone not familiar with KPI – key performance indicator, and Matt just went through what he looks for with those, what indicators he looks for.

Last question, and then I’m gonna ask you the money question. The last question is what type of direct mail piece have you found is most effective? You said you do split tests for colors of the card or the letter and all sorts of things… What’s you bread-and-butter direct mail piece look like?

Matt Garabedian: Well, that is a little proprietary, but I use three or four different direct mail pieces. The biggest thing that I’ve learned about a direct mail piece is it’s meant to extract the potential caller, if you will. I never wanna buy a piece of property over the phone, and I never try to buy a piece of property on my message on my direct mail. I want that person to be intrigued in us, to call me.

I think that is where I’ve been able to separate myself, because if you look at a typical yellow letter, if you will, it’s “Hey, my name is Matt. I’m looking to buy properties cash. I buy it as is. I’ll close within ten days. Call me.” Those are a dime a dozen, because anyone can send those out. If you can kind of tweak your message and have that person pick up the phone because they’re intrigued, then I think you’re putting a leg up against the competition. I’m sure I’ve got competitors in my area that are sending the typical yellow letter or a postcard. The yellow letter is not as effective as it was five years ago. I think it’s kind of played out now, and so if you can tweak your message on your direct mail piece, then it’s gonna stand out from your competition.

Joe Fairless: What is your best real estate investing advice ever?

Matt Garabedian: My best real estate investing advice would be to be aggressive, but always have an exit strategy, and be okay with the worst-case scenario. So if you analyze the deal and you assume that all hell was gonna break loose and the numbers were gonna go the opposite way of what you hope and anticipated, you’re still okay with the deal and you have an exit strategy once you figure out how you’re gonna go about your disposition.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Matt Garabedian: Let’s do it.

Joe Fairless: Alright. First, a quick word from our best ever partners.

Break: [[00:23:05].12] to [[00:23:47].02]

Joe Fairless: Best ever book you’ve read?

Matt Garabedian: Two of them: Secrets Of The Millionaire Mind by T. Harv Eker, and The One Thing by Gary Keller.

Joe Fairless: Best ever personal growth experience and what did you learn from it?

Matt Garabedian: Getting a mentor. I like to call it leveling up. I have a mentor and we’re a part of a mastermind group from very successful real estate investors all across the country. What I learned from that is you never want to be the smartest or the most successful guy in the room. When I became a part of this particular group I was amazed by the amount of golden nuggets and knowledge that I was able to take from very successful people. I recommend anybody out there that’s looking to level up – get around guys that are doing better than you, because they’re gonna help and force you to stretch, to push yourself, to dream bigger, to have bigger goals, to expand your business, and it’s awesome to have that type of accountability for guys that are in the same industry.

Joe Fairless: Can you mention which group you’re in?

Matt Garabedian: Yeah, I’m in a group with a guy by the name of Mark Evans DM. They call him the Godfather of virtual wholesaling, but he’s in the turnkey industry. It’s a private group, there’s about 15 guys in the group now. I definitely would recommend anyone to explore that if they’re looking for a mentor; Mark is one of the best in the game.

Joe Fairless: Best ever deal you’ve done?

Matt Garabedian: The best ever deal I did was a 17-unit apartment complex. I did the deal subject to… The scenario was the owner was an absentee landlord. They were in NOD, and they were basically on their way to losing the property. I was able to structure the deal subject to the existing loan, and it was one of those deals where everything lined up perfectly. The mortgage balance was 50% below market, the interest rate was excellent, and they were motivated. They were over 120 days delinquent, and I was able to provide a win/win scenario by paying their mortgage currents, paying their taxes currents, and then giving them some cash to do the deal. It worked out that we acquired the property for just under $560,000; total cash out of pocket was $25,000 and total rehab was about $100,000. After about 14 months we sold the property for just over a million dollars.

Joe Fairless: Wow, that’s a good one.

Matt Garabedian: Yeah, yeah.

Joe Fairless: What is the best ever way you like to give back?

Matt Garabedian: I love to give back to my family. I grew up in a middle-class family; my parents did the most that they could do for us, but we certainly were never in a position to get ahead or to invest in real estate or to put money away. It was kind of a paycheck-to-paycheck deal. My mom is the hardest-working person I’ve ever met. She’s worked every day of her life and never complained about it once, so last summer I called her up — it was actually on the 4th July, and my mom always drove kind of like a beater, if you will.

She had this Ford Taurus and it was always breaking down on her. I never liked the fact that it was just like an unreliable car for her, and I’ve got two little boys, so I wanted her to have something that she could take the grandchildren around and take them out or whatever they wanted to do… So I just called her up and I said, “Hey, I’m gonna come pick you up” and I drove her over to the Honda dealership in town and I said, “Mom, I just wanna let you know that I appreciate everything you did for me and I wanna buy you a car. Whatever you want, please pick it out.”

For me, it was a blessing to be able to do that for my mom, because at that point her whole face lit up… She couldn’t fathom the idea of being able to go and pick out any car and not have to worry about the price or the payment. That for me was just a total enjoyable experience. So my big why in this business is to take care of my family and set up a generational opportunity for my kids. That for me is why we can get up every day and do this business.

Joe Fairless: What’s the biggest mistake you’ve made on a deal?

Matt Garabedian: Biggest mistake I’ve ever made on a deal…? To be honest with you, I’ve never lost money on a deal, thank goodness. I thought about this question, and I think the biggest mistake I’ve made earlier in my career was not understanding my value that I was bringing. I would tend to give away a lot in the deal just to please the other person or approve my worth to others.

I think now as I have gotten more entrenched in my business and learned more of the value that I bring, I’m a little bit more apt to negotiate and make it a two-way street, if you will. I try to provide value at all times to my clients, but I never want to give away too much.

Joe Fairless: How many people do you have employed with your company?

Matt Garabedian: Right now I’ve got three. I’ve got acquisitions, dispositions and marketing. Now I’m looking to hire a CFO.

Joe Fairless: What is the best place that the Best Ever listeners can get in touch with you?

Matt Garabedian: The best place – I’m on Instagram at @phenominvestor. I constantly update stuff that I’ve got going on on my Instagram account. They can e-mail me at matt@phenominvestor.com.

Joe Fairless: And your website, just in case they wanna check that out?

Matt Garabedian: I’ve got several, but you can find me on FastCashCloser.com.

Joe Fairless: Perfect. Matt, thank you for being on the show. I really enjoyed your story that you talked about. You told us how you were starting out and your a-ha moment, and then how you were able to get the cash buyer by looking at who bought a property, who was buying a property in that area, and got the deal done… And how with your direct mail you want the person to be intrigued enough to call you. That’s an interesting differentiation.
Then also having the approach of, if you for whatever reason lost all of your buyers, then the next thing you would do would be go straight to the auction and find the buyer for your wholesale deal, assuming you had a deal.

So thanks so much for being on the show… Lots of really good insight. I hope you have a best ever day, and we’ll talk to you soon!

Matt Garabedian: Thanks for inviting me, Joe. I really appreciate being on the show as well. I really enjoy listening to your show, it’s really well put together.

 

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JF937: Why Picking the RIGHT Partnership is Key in Wholesaling

Listen to the Episode Below (23:46)
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Our guest is doing many types of deals, but he does them with a partner makes up for his weaknesses. If you have any weaknesses, which I’m sure you do, you need someone there to compensate for your loss and leverage what you can’t or shouldn’t do, get a partner!

Best Ever Tweet:

Travis Daggett Real Estate Background:

– Owner at CornerstonePropsCo, a Premiere Real Estate Redevelopment & Renovation Company
– Full-time real estate investor for five years
– Made 5 figures on his first wholesale deal..correction: 4 figures…you’ll hear about it in the interview 😉
– Married 19 years and has three amazing kids
– Based in Eugene, Oregon
– Best Ever Book: Visioneering

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Travis Daggett. How are you doing, Travis?

Travis Daggett: Doing great, thanks Joe!

Joe Fairless: Nice to have you on the show, my friend. Travis is the owner at CornerstonePropsCo, a premier real estate redevelopment and renovation company. He’s been a full-time real estate investor for five years. He made five figures on his first wholesale deal. He’s married 19 years and has three amazing kids, and he’s based in Eugene, Oregon. With that being said, Travis, do you wanna give the best ever listeners a little bit more about your background and your focus?

Travis Daggett: Yes, sure. Well, the five figures doesn’t really sound that impressive… However, I did start with literally no money, so that was a deal where I think I had an earnest money deposit in the deal, and I netted $7,000+. So it was a little better… That could be a $1,000, that’s no big deal, but for my first deal, it was alright.

Joe Fairless: Well, five figures would be $10,000+, because that would be five numbers.

Travis Daggett: Yeah, see…? This is the truth, that you don’t have to be a genius to be a real estate investor. [laughter] There’s a lot smarter people doing all kinds of things, but they’re not necessarily making more money, and sometimes they’re too smart for their own good.

Joe Fairless: [laughs] Alright, so you made 7,000 on your first… Let’s start there, how about that? Let’s start with your first wholesale deal. You made $7,000 on it. Can you tell us the story about that a little bit more?

Travis Daggett: Before this I was a sales trainer for an insurance company, and I was traveling all over… They’ve laid off about a quarter of the staff, so that was the blessing in disguise. I just started learning everything I could. I had a couple of rentals before, and that was about the extent of my real estate investing experience. I started learning about wholesaling, specifically HUD properties. This was 2011 when there were a lot of HUDs, and there was just a little loophole where you could make bids every single day on HUD properties, and you really could do it yourself. You could just find an agent that was sympathetic, I guess, and get their login information, essentially, work with them as their assistant if you needed to be an unlicensed assistant, and make bids every single day… So that’s what I did.

I got a property under contract, and then I found the buyer and did a back-to-back closing, because the HUD won’t allow assignments. So I bought it for seven and sold it for seventeen. All I had was the earnest money deposit out of pocket, which I think was $500; I had some closing costs, and type of a thing, so I think I netted over seven.

Joe Fairless: Alright, that was your first wholesale deal. Catch us up to speed, from then until what you’re doing now.

Travis Daggett: Well, 2012 was great, because there were a lot of HUDs, and I started thinking (mistakenly) that I was in the real estate investing business. At that point I really wasn’t in the real estate investing business, I was more in a tech business and real light on the real estate investing. That lead me to think I knew more than I knew, and started buying at the auction… Which, of course, was okay and I did alright, but then I thought I could get into rehabbing without really understanding it.

2013 is when I bought a property or two wrong – when I say “bought wrong”, I made the first and maybe the most deadly mistake in real estate investing, which is just buying for too much. It’s really hard or impossible to overcome that mistake.

So I made some mistakes along the way, and then HUD dried up, as a lot of people probably know. Auction properties dried up – by that I mean the supply went down, competition went up, so I needed to learn to source my own deals directly from sellers. I started doing that in 2014, and it’s been a rollercoaster, both results-wise, and when you’re self-employed, it’s an emotional rollercoaster too, but I’ve been really fortunate to partner with somebody that knows more than me and learned from him for the past couple of years.

We haven’t bought off the MLS since 2013, I think, and we sourced our own deals for the last two or three years.

Joe Fairless: And what type of volume are you doing on a monthly or annual basis?

Travis Daggett: Nothing crazy… I used to think that was the goal, to do more deals, but now I’d rather do less deals that are more profitable. Probably the average is a deal a month, but we did have one deal that was over six figures, and we had a wholesale deal that was almost $50,000, so we’ve been able to get some more profitable deals, and focus on that instead of volume.

Joe Fairless: And since you are selective with the properties that you end up working on, what is your criteria that you look at for a property to pass the test?

Travis Daggett: Well, we have two main targets or lists that we’re going after, because most of our deals come from direct mail… So the first one is properties where we’ve actually driven through neighborhoods, seen the property, wrote down the address, looked up the owner information, sent him a letter… That’s really the most valuable and valuable list that you can have – at least we believe – because we don’t have to guess at whether the property is a property that we wanna buy. When we’ve marketed to the absentee owner list in the past, we got people calling, they have a move-in ready house, and really that’s not good for them, not good for us. There’s really no way for us to create value or margin in a transaction like that, because we’re not real estate agents looking for listings.

So the first target is residential properties, mostly single-family, and we just call it our “driving for dollars” or our neighborhood list. The second is foreclosures, when the bank has filed either a notice of default for non-judicial foreclosure, or a lis pendens for a judicial foreclosure, because in Oregon we have both.

We’ve gotten a number of deals that way, targeting that list. That’s a lot more labor-intensive for each transaction.

Joe Fairless: Will you walk us through the process for how that works, and your role, and what data resources you need to have access to?

Travis Daggett: When I started in 2011 on HUD properties, again, it was real admin-heavy, it was really more of a tech business, and thankfully that’s an area where I’m stronger… So I started using virtual assistants, and I couldn’t have done what I did then without them, and I couldn’t do it now. We use virtual assistants to do a lot of the scrubbing on our lists. We’ll go out and drive through a neighborhood… Let’s say we take a day and we come up with a few hundred addresses, and then the VAs – they’re usually overseas, they’re in India or the Philippines – during the night (over here), they’ll use Property Radar (or whatever other site we need for that county) to find the owner’s names and their mailing address, because they may be different, and that completes our list.

With the foreclosure properties, we just get those from the title company, that’s free. There’s scrubbing involved there though as far as prioritizing the properties that we’re gonna go after more heavily in the beginning. Equity, for sure, a property with a good interest rate in case we wanna assume the mortgage or purchase it subject to the existing mortgage, that type of thing.

Joe Fairless: Will you tell us about the last deal you did? Give us the numbers and tell us which one of these paths allowed you to find it.

Travis Daggett: Yeah, sure. The final numbers aren’t in on that, but that’s fine, we can go through the process pretty well. The property that was on the foreclosure list, it was non-judicial foreclosure. We always have to have a cooperative seller, of course, or a cooperative homeowner. We wanna help them, they have to want the help, and it’s really a win for the bank too, if you understand negotiating for the bank. They’re not in the business of property restoration, or property management, or really anything to do with properties, so it’s a win for them.

So there were two loans on the property, we went through a number of rounds at the bank of negotiating, and we were able to postpone the sale a couple times, which helps us. In this case, we actually worked successful in negotiating a discount with the first lender, but we knew even if we purchased it for the amount of the first mortgage and the second it’d still be a deal, so we went ahead and paid off the first – they were the ones foreclosing – and then we continued to negotiate with the second, even though they really had no reason to negotiate with us… But we thought we’d just give it a shot, and ended up getting it for the amounts in the first and the second. But it was still a deal, especially when you consider the market here, where it’s less than two months of inventory, so it’s very competitive.

Prices are going up — we’re not buying for speculation, but were all in on our purchase I think at 140, and as it sat, it’s probably worth in the upper hundred, and then with a renovation of probably 30,000 (nothing major), it’d be worth in the low two-hundreds, and we’ll probably rent it out for 1,500/month, I would guess.

Our aim high is definitely a 1% rent-to-cost ratio. In that Eugene area we also have appreciation, so we’ll go anywhere from 0.75 to 0.8%, up to 1% rent-to-cost ratio.

Joe Fairless: Is your goal to buy and hold these properties?

Travis Daggett: Right, so my partner has a property management company, and that’s our partnership: I find the properties, so I’m in charge of the marketing and finding the deals, and then at that point he really takes over as far as the property management side. That’s what we’ve done on all but one; we’ve wholesaled one, but everything in the last couple of years, we’ve held on to through this property management company.

Joe Fairless: And do you just split the costs 50/50?

Travis Daggett: Well, cost of the marketing — again, I was really fortunate to find a guy that really knows this stuff and he’s honest. We met at a real estate investing REIA group (Real Estate Investors Association). So yeah, we basically split the costs upfront for the marketing, and then since we’re not cashing out the property so to speak, we just did an appraisal on the property, because usually we’re gonna finance out of it with a bank loan… So now we have an appraisal, we know what we’re all into it, so we have our equity in the property.

At that point, I can either say, “Well, okay, I’ll take the equity as a payout right now” or I can say “Well, I’ll stay in the property and we’ll just split the cash flow.”

Joe Fairless: Oh, okay. Alright. Either one of you have the flexibility to cash out your equity at closing and be done with that property, and the other person holds on to it, or you both have ownership and enjoy the cash flow and appreciation…

Travis Daggett: Yeah. I mean, it’s really more of his choice than mine. I’m fine with that, of course, because he’s got the property management company. But it’s just one of those — I’m sure people have been in bad partnerships (and good ones) and it’s probably pretty rare (I’m thankful for that) that there hasn’t been that tension when we feel like we’re on opposite sides of the table. For the most part, we feel like we’re on the same side of the table; we’re not negotiating against each other, so it’s been a good situation.

Joe Fairless: Yeah, it’s refreshing when you have a business partner like that. Just for point of clarification, you said it’s really up to him on that… I don’t understand that point. Can you elaborate?

Travis Daggett: We have different ways of looking at who controls a deal, and whose it is, so to speak, who owns it. So since I’m finding most of the deals, I could say “Okay, these are my deals.” However, early on, just because of the nature of our partnership and relationship, we both just agreed all the deals we just throw into the pot.

We were in a situation where I was saying, “Okay, here’s the deal. How much do you want for it?” It’s a traditional wholesaler type of attitude. I said, “Here’s the deal, let’s see what we can do with it?” A part of it is he has access to a lot more capital than I do (at better rates, at least), so he’s funding the deals, so I’m happy to give him a lot of the decision-making that way, too.

Joe Fairless: That makes sense.

Travis Daggett: Yeah, we’re both in agreement. It’s not like I’m saying, “Hey, we should flip this thing because we’re gonna make six figures just after doing floor and paint” and he’s saying “No, I wanna hold to this.” Most of them it’s pretty clear when we buy it it’s gonna be a rental.

For example, we purchased one for a few hundred thousand in Eugene, so that one we know it’s gonna be a flip when we’re done with the rehab.

Joe Fairless: Okay. The point I had missed was that he was financing them and you were finding them. Once you said that, it made a lot of sense.

If you partner were to move away – for whatever reason – and you had to find a new partner, how would you qualify that new partner so that you would attempt to have the same caliber or partner that you have now?

Travis Daggett: Tough question. In partnerships in business, and I’m sure just generally in life, it’s usually (from my experience) more of the intangibles or the character issues that damage partnerships or damage businesses, as opposed to people’s aptitudes. I think we all know really smart, skilled people that can self-destruct and destroy partnerships.

In the case of my partner, I was able to thankfully observe him for a couple of years just through the REIA and just through some acquaintances, and watching him and his business, and seeing that he was someone that did what they said they were gonna do. He had a track record of success in partnering with other people… Without that knowledge, it’d be really tough to find a partner or to choose a partner.

I’d have to start with somebody that plays to my weaknesses… Kind of like a marriage – if you have the same strengths and weaknesses, that can be a little bit of a challenge. So it should be somebody that is strong where I’m weak, and maybe where they’re weak, I’m strong. In our partnership now, I’m certainly not strong in negotiating and funding. I’ve gotten pretty strong in admin and stronger in marketing… So I’d say somebody that’s strong in the funding side and the construction side, that’s who I’d look for.

Joe Fairless: What is your best real estate investing advice ever?

Travis Daggett: I kind of alluded to it earlier… I’d say don’t be confused about what business you’re in and what your strengths actually are, because I think pride and arrogance and blindness in that area can really destroy you.

Joe Fairless: Now, are you ready for the Best Ever Lightning Round?

Travis Daggett: I’m ready!

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [[00:18:26].14] to [[00:19:07].24]

Joe Fairless: Best ever book you’ve read?

Travis Daggett: Visioneering, by Andy Stanley.

Joe Fairless: Best ever deal you’ve done.

Travis Daggett: A deal in Eugene… It was a short sale, over six figures in profit.

Joe Fairless: Now, is that six figures, is that seven, or is that five or four or three? I have to ask you now a second time.

Travis Daggett: I got it straight now, this is tax season. [laughter] I gotta nail it.

Joe Fairless: Best ever way you like to give back?

Travis Daggett: I think it’s just the lifestyle, it’s really plan. All of us can give emotionally when we see the kid on TV with the belly sticking out, but I think giving is really a lifestyle, so it’s planned. We plan that we’re gonna give a certain amount, we’re not just surprised at the end of the year when we do our taxes.

Joe Fairless: What’s the biggest mistake you’ve made on a deal?

Travis Daggett: Well, I think I talked about this one earlier, but I’ll relive that painful memory again… Bought at auction, so of course, it’s done, paid cash; trusted a partner who unintentionally — he just was outside of his area of expertise as well… Then we made it worse by over-rehabbing it by about double, then we made it worse still by selling with seller financing — not that that’s a bad strategy in general, but just delaying our misery… And then ended up taking the loss I think two years after we bought it. We should have just swallowed the poison a couple of years earlier and taken a loss.

Joe Fairless: Tell us about the six-figure profit that you made. Tell us the numbers on that one.

Travis Daggett: Really desirable area near [unintelligible [00:20:41].28]. It took over a year to finish it, to close on it. When we first shot – short sale, direct mail marketing, they called us… As soon as we looked at it, even online, looked at comps and stuff, we knew that it was a great area property, we really wanted to have it. Even before we looked at it, we said “If we can get this anywhere near 300,000, it’s a deal.” So we met with the sellers, they were very cooperative – he was actually a patents attorney, so he knew a little bit about the legal process. It took a long time, a lot of handholding – I don’t mean that in a condescending way – just walking him through the process and negotiating with the banks, meeting the VPO agent there, dealing with all kinds of liens that popped up with credit cards, and just going through that whole process.

We ended up buying it for 244,000 I think, so just right out of the gate we had probably 50,000 in equity, and then it was a light rehab… Of course, over the years, from when we started to when we finished, that area went through the roof even in property values; it probably went up double digits, so we ended up with over a hundred thousand dollars in equity when we ended up closing on it, finished rehabbing and then appraised.

Joe Fairless: That’s great. How much did you put into the rehab?

Travis Daggett: About 30. Maybe less. Maybe 25.

Joe Fairless: And what did you sell it for?

Travis Daggett: No, we held on to this one, because it’s a hot campus rental area. I really don’t know off the top of my head what we rent it for, but I would have to guess it’s in the twos. I couldn’t see it renting for less than 2,000/month.

Joe Fairless: Yeah, sounds like a great buy and hold, that’s for sure. Where can the Best Ever listeners get in touch with you?

Travis Daggett: The e-mail address is selltocornerstone@gmail.com. That’s my business, Cornerstone Properties Eugene is the name of the business.

Joe Fairless: Travis, thank you for being on the show, and talking about the deals that you’ve done, how you’re getting those deals, the hundred-thousand dollar in equity that you have as a buy and hold, how you found it and the short sale process… Along with the partnership stuff, because that’s really important. Real estate really is a partnership and team environment, and we have to be careful who we partner with.

I love the approach that you take. It is really about having someone who plays to your weaknesses, and I found out the same thing with my partners that worked out – they are strong where I’m not, and I’m strong where they’re not, and it makes for the best partnership.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon!

Travis Daggett: You’re welcome. Thanks, Joe!

 

 

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JF870: How to Go from $3,000 to 80 Deals in a SHORT Period

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She made a $3000 check and game over! She partnered up with a friend and chased the deals! Hear about the mentality she had when chasing the deals and how you need to think.

Best Ever Tweet:

LaShannon White Real Estate Background:

– Full time wholesaling real estate investor & Founder of Wholesaling Real Estate Coaching Program
– Began in real estate in 2004 with no prior experience, leaving her full time job
– Closed over 80 deals
– Heavily involved with the Georgia Real Estate Investors Association
– 1997-2004 was the Owner/Operator of Sunshine Staffing Services
– Based in Atlanta, Georgia
– Say hi to her at dreambiggerwealthbuilder@gmail.com
– Best Ever Book: Think and Grow Rich by Napolean Hill

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF866: How to Find the BEST Deals with the LEAST Amount of Marketing #skillsetsunday

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Arguably the greatest question of all time, how do we get the best deals with the smallest overhead marketing budget? Or how about how do we get the best leads with the least amount of marketing in general? Today you’re going to find out how to find the big dogs in your market, try any market in the US. Next he will take you step-by-step on where the deals reside and how to recognize a deal in that niche market, half the battle is finding the type of buyer that will purchase in that niche. This is an episode you do not want to miss!

Best Ever Tweet:

Alex Joungblood Real Estate Background:

– Co-founder of 1-800-Fairoffer
– Co-host of The Real Estate Investing Mastery Podcast
– He does between 3-5 wholesale deals a month in three different markets
– Based in Hampton Roads, Virginia
Get More Wholesaling Hacks Here

Click here for a summary of Alex’s Best Ever Advice: http://bit.ly/2jYsht7

– Listen to his Best Ever Advice here:

http://joefairless.com/podcast/jf400-75000-reasons-why-you-should-wholesale-real-estate/

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF855: Beginner Wholesaler is CRUSHING It with 9 Properties!

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Two properties under contract in her first 30 days! She is extremely positive and an action taker in the DFW market. This episode is for those who might lose hope starting their wholesale ventures, keep the faith and remember that it’s all about your attitude and network.

Best Ever Tweet:

Brandy Johnson Real Estate Background:

– Owner at Turner Investments, a multi-service company that has the ability to buy, sell and wholesale properties
– Began investing in August 2016, now has 3 available properties, within 30 days had 2 signed contracts
– Based in Thomasville, North Carolina
– Say hi to her at buynchousescheap.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF812: 25 WHOLESALE DEALS a Month is Possible Using this Trick

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25 deals a month is not impossible, in fact our guest simply does one thing and does it very well. He create partnerships all over his market and strategically places himself in first position on each deal. Hear what he does to market for these leads and how he closes each transaction.

Best Ever Tweet:

Phillip Vincent Real Estate Background:

– CEO of Rematch, a real estate solutions company and has done over 500 transactions
– Specialize in helping Seniors who want a stress free sale of their home
– Marketing and acquisitions for serious real estate investors
– Based in St. Louis, Missouri
– Say hi to him at phillip@rematch.com
– Best Ever Book: The Big Rich by Bryan Burrough

Click here for a summary of Phillip’s best ever advice: http://joefairless.com/wholesale-25-deals-month-spending-0-pocket-marketing/

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Click here: http://www.adwordsnerds.com to schedule the appointment.

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JF807: How to Make $250,000 PROFIT in Your First Year of Wholesaling

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Only making $19,000 won’t cut it in any business, and before wholesaling that was his reality. Cody jumped into the flipping business by surrounding himself with mentors, extremely successful connections, and systems and was able to profit over $250,000 in his first year!

Best Ever Tweet:

Cody Hofhine Real Estate Background:

– Founder of Investor Grit and Utah Sell Now, LLC.
– Introduced to Wholesaling and now collaborates with Tom Krol
– In first year of wholesaling real estate, did over $500,000 in assignments
– This year on track to break a million
– Based in Salt Lake City, Utah
– Say hi to him at http://investorgrit.com/
– Best Ever Book:The Compound Effect by Darren Hardy

Click here for a summary of Cody’s Best Ever Advice: http://joefairless.com/wholesale-way-250000-profit-one-year/

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Click here: http://www.adwordsnerds.com to schedule the appointment.

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