JF2428 Mistakes Do Not Signify the End of Your Career-Defining Journey with Matthew Tortoriello

JF2428: Mistakes Do Not Signify the End of Your Career Defining Journey with Matthew Tortoriello

Matthew started his real estate journey at 16 when he purchased a two-family home with his grandmother’s money. Four years later, he bought another property that was a challenge to manage. That experience taught him a lot of lessons that he applied later in his career.

With two other partners, he acquired a two-family house that he managed and renovated. After buying several more units, getting a construction license, and founding a property management agency, they were still looking for new opportunities. That’s when Matthew met a new investor and future partner who helped them take the business to a new level.

 

Matthew Tortoriello Real Estate Background:

  • Full-time real estate investor and property manager
  • 25+ years of real estate experience
  • Portfolio consists of 250 units, flipped 100, & wholesaled over 200
  • Based in Springfield, Mass
  • Say hi to him at: www.yellowbrick.org 
  • Best Ever Book: Recession Proof RE Investing

 

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Best Ever Tweet:

“Don’t focus on learning everything because you’ll never learn everything. You’ll learn a lot along the way” – Matthew Tortoriello.


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Matt Tortoriello. Matt is joining us from Springfield, Massachusetts. Matt, how are you today?

Matthew Tortoriello: Good, Ash. Thanks for having me on.

Ash Patel: Thanks for being a guest here. Matt is a full-time real estate investor and landlord that has over 25 years of real estate experience. Matt’s portfolio consists of 250 units, and he has flipped and wholesaled over 300 units. Matt, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Matthew Tortoriello: Sure. I actually started when I was 16 years old. I got a duplex working with my grandmother as a hard money lender, and I flipped it a couple of years later, had a little profit. Then about 12 years ago, I was still interested in real estate, but didn’t really know where to go, and I kind of started with my best friend Kevin. We started buying in Springfield, Massachusetts, basically a whole bunch of foreclosures, just fixing them up, renting them out, building a team around it, making all these different mistakes, and learning as we go, and just kept going.

Ash Patel: Man, how did you get the real estate bug at 16 years old? You were in high school, right?

Matthew Tortoriello: Actually, no. I was in college. I graduated high school very early, so I started college when I was 15. I went to a small college out in Great Barrington, Massachusetts. There was even a 12-year old at my college… So it’s kind of a crazy and interesting in college.

Ash Patel: Let me revise the question. How did you get the real estate bug when you were in college with all those distractions around you?

Matthew Tortoriello: Well, my dad owned a restaurant, so I always had an entrepreneurial mind… I always saw him working really hard, so I was always looking for what could be different. Someone referred me to check out Rich Dad, Poor Dad, which everyone talks about that book… It was very inspirational, but I was lacking a lot of knowledge from it. Then I started going to landlord meetups out in Pittsfield, Massachusetts, and met a bunch of landlords and started asking them a million questions, and they were all like, “Wow, who’s this little 16-year old asking all these great questions.” Some of them took me under their wing, they taught me a few things, and I learned from there. I made a bunch of mistakes, but mostly a success.

Ash Patel: Alright, I’m blown away… You were doing extra reading in college?

Matthew Tortoriello: Oh, yeah.

Ash Patel: And then you went out and spoke to a number of real estate people to further your knowledge in real estate. What did you go to college for? What did you want to do?

Matthew Tortoriello: Pre-med. I minored in business a little bit. I originally was also focused a little on Chinese. I was learning more about the culture and stuff like that. The way I learned early on was I needed to go to school for my passion and not for a job. So whatever intrigued me, I was like, “I want to learn that.” That’s how it all kind of segued in.

Ash Patel: Okay, so you weren’t passionate about pre-med, or were you?

Matthew Tortoriello: I was. That’s why I was going; I was passionate. My brother was born with a brain tumor, so that led me into learning more about science and stuff like that. He’s my young brother… After going to the hospital, talking to the doctors there, and kind of finding out more about it, I just dug in and started getting in anatomy, physiology books, oncology books, and just kind of researching, and so that’s my passion there. The same thing with real estate; whenever I find something I have any kind of interest in, I just start digging it.

Ash Patel: Okay, a great source of inspiration. At some point, did the real estate inclination starts to outweigh the pre-med?

Matthew Tortoriello: It did. After the first two-family in Pittsfield, I definitely got the bug and it seemed like it really worked. So I was like, “What can I do next?” I made the mistake of trying to do distance. I bought a four-family out in Saginaw, Michigan, and lost everything. I got robbed by a property manager. It became vacant, it was more than 50% vacant, so therefore my insurance company refused to cover any loss. They had stolen everything, I had to foreclose on it…

I made a lot of mistakes and learn from that, but I kept researching and reading. I got a short-term job in the meantime, and then basically in 12 years, it just happened that the stars aligned and I got back in with my best friend Kevin. Whatever it takes, we’re going to make this work. And here we are.

Ash Patel: After 12 years? What happened in those 12 years?

Matthew Tortoriello: 12 years from 2008?

Ash Patel: Well, you reconnected with your best friend, you said after 12 years… Oh, from your childhood on?

Matthew Tortoriello: 12 years, from 2008 to now.

Ash Patel: Okay. What was the journey of those last 12 years?

Matthew Tortoriello: Well, the journey was we started with a two-family house. We bought it, did the BRRRR strategy before the BRRRR strategy was coined. We kept flipping that money into another two-family, a three-family. We worked with a couple of local realtors, finding any REOs that we could at the time. We were doing tons of short sales. I was doing gymnastics at the time, I wanted to learn the backflip, so I met this other investor who had just sold a bunch of property in New Mexico. He was intrigued by my interest and passion that he basically jumped on board and brought a bunch of money. So now we just kept expanding, because we had a lot more capital, and we just kept putting offers in. I think we were putting out over 100 offers a week for a while. A lot of them started coming back, so we were like closing, closing, closing.

Then I got my GC license, my lead license, my asbestos license… I’m like “Crap, I’ve got to figure out how to work with all these different contractors and managing contractors.” Now we had a bunch of tenants, “Crap, we need to figure out building a team around the tenants”, because we couldn’t find a good management company in the area. So we just started working long hours, and probably didn’t do it the right way. We should have had a plan before. But we figured it out, and we have a phenomenal team these days. We’re ready for the next correction so that we can even grow farther, faster.

Ash Patel: Okay, so we’ve established you’re one of those rare people that actually have more than 24 hours in every day.

Matthew Tortoriello: I try to. Yes.

Ash Patel: Okay, let’s bring it back to college. Did you diverge from your pre-med path at some point?

Matthew Tortoriello: I did. Honestly, I started meeting with a bunch of doctors out at Dana-Farber in Boston. My brother was going out there constantly. I started interviewing the doctors, asking them about their life, asking about what they invested in, all that kind of stuff. I found out that most of them didn’t have a family life, they weren’t happy, they wished they had just stuck with research and not focusing on ecology or neurosurgery. I kind of got a little disillusioned that this wasn’t the path for me, because these were people that I wanted to aspire to be and they weren’t happy. And yet, I had met all these landlords and investors and stuff, and they were super happy. Tons of free time and constantly with their family. I’m like, “Okay, wait a minute. Let me look over here more.” So I kind of started shifting my focus more to real estate and stopped focusing on the college aspect.

Ash Patel: Interesting. So now you’re all-in on real estate and backflips. Did you change your major to business or real estate?

Matthew Tortoriello: Nope. I finished four years and then just couldn’t continue on for my masters. I just decided to just focus on real estate and started growing from there.

Ash Patel: So Matt, by the time he graduated college, how many deals had you done?

Matthew Tortoriello: I had done four. Four deals by the time I graduated college. I was around 18 years old and I’d done a few deals then. Then I took a little time off while trying to figure things out, and I had that bad deal in Michigan.

Ash Patel: Okay. Were those four buy and holds?

Matthew Tortoriello: They were short-term buy and hold. Yes, they were buy and holds. They were planned to be buy and holds, but at the time it made sense for me to sell them. So I sold them, made some cash, and then, unfortunately, I put it all into this Michigan property and it didn’t work out.

Ash Patel: Let’s hear about that. You know we’re diving into that one now… You already teased us about that, so let’s go.

Matthew Tortoriello: Sure. I was researching different markets and I wasn’t finding a lot of deals in my area. So I’m like, “Oh, I can do this from a distance.” I flew out there and I met a local property manager that was also a realtor. I talked to him and he showed me a couple of properties. I found this beautiful, newer construction four-family that was mostly tenanted at the time. I had met with a couple of other people to kind of get things going. He said he’d managed it for me and I’m like, “Great.” I signed the paperwork, did most [unintelligible [00:09:11].29] back home, signed a few more paperwork for the closing, and I was all excited. I was learning trying to manage a property manager from afar. I kept asking all these questions, but was not getting answers.

It turns out he just up and left and had stolen some money from me, so I had to scramble to find another property manager. I went to one of those big companies; some are like “Great, a better company. They’ll be safer.” Well, they didn’t focus on the property, and they let it sit vacant for a long time. Then eventually at some point — I don’t know what exactly happened, but maybe the last tenant left and stole the furnaces, the toilets… Literally, the kitchen sink. So I tried to file an insurance claim and they denied my claim, because it was more than 50% vacant for three months. So I had to foreclose on myself, I got foreclosed on, and tried to do the best I could with the bank to [unintelligible [00:10:01].14] they pretty much ended up foreclosing on me. I had to take a little time off, trying to regroup and figure out what I did wrong, what I could have done better. That led eventually into 2008.

Ash Patel: Okay, so knowing you for the last six minutes, I’m assuming you now decided you’re going to start a property management company. Is that a wild guess — did I hit it?

Matthew Tortoriello: That is correct. You are right.

Ash Patel: Alright. So you saw how there were no good property management options out there. Now you collected yourself, your mindset is “Okay, I’m going to fix this problem that exists.” Am I still on track?

Matthew Tortoriello: You are on track.

Ash Patel: Alright, take it from there.

Matthew Tortoriello: We found, in our area — there were a lot of great guys out there, but didn’t meet the needs that we saw that were needed in the area, didn’t have that attention to detail. So Kevin and I started building a team around that. It wasn’t for property management for other people. At first, it was all about just for us, because we were going a mile a minute, we were buying so much property and we didn’t have the capacity to start taking other people on and having to deal with owners. We were already dealing with a bunch of tenants. So we were just focusing on that.

But about a year and a half ago, things are leveling off, we’re not buying as much property right now. So we opened our doors to property management, and now are starting to actually work with some local investors from out in Boston, we’re doing some commercial property management as well with a couple of people… So we’ve started expanding that.

Ash Patel: Alright. Matt, how many years ago was it that this property got foreclosed on?

Matthew Tortoriello: The property got foreclosed on now that would have been about 15 years ago.

Ash Patel: Okay. What was your next acquisition after that foreclosure, and where did the funding come from?

Matthew Tortoriello: It was a two-family on Union Street in Springfield. We bought it for $70,000. I worked with a hard money lender that Kevin had met from Boston. He funded 90% of the purchase price, as well as most of the rehab. I think it was 15% and three points, so it was kind of steep at the time. Then Kevin and I had a little bit of fun saved up, so we use that, and then it was mostly me doing a lot of the work. Kevin had a job at the time as a used car salesman and I didn’t  have a job. So I was like, “I’ll do all the [unintelligible [00:12:19].05] the floors. I will roll the sheetrock, mudding, sanding etc.” We just kind of worked late hours together, and Kevin would, after work, we’d knock it out. We got everything done in about a month and a half, had it rented out pretty much almost instantaneously, and we started the refinance, paid off the hard money lender, pocketed an extra 30,000 that we then leveraged into the next two-family.

Break: [00:12:44][00:14:46]

Ash Patel: Through no fault of your own, you got kicked in the teeth, but here you are, a college grad, you’re riding this up wave of making money off real estate, and all of a sudden your world comes crashing down. So you picked yourself back up, and at any point, did you think you would just go work for somebody and get a job? Or were you all-in on real estate?

Matthew Tortoriello: I was all-in. We had a lot of ups and downs throughout the years, but not once have I thought of ever actually looking back and trying to get a job. If everything crashed tomorrow and I lost everything, I would find and start another company. I’d probably do real estate because I love real estate, but I would start any other company. I love being an entrepreneur, I love being self-employed and a business owner… So I think that’s definitely something I would still focus on.

Ash Patel: Very inspiring. Alright, so you’ve made the 30 grand and now your next deal was… Did you say a two-family or four-family?

Matthew Tortoriello: It was another two-family.

Ash Patel: Another two-family. Okay. And that, I’m assuming, went smooth?

Matthew Tortoriello: I think we underestimated the rehab by about $10,000. The main stack was actually cracked, which we couldn’t see because it was behind the walls. It was cast iron, so we had to bring it up to code. We had to take it out, put PBS back in, and have it all replumbed, which costs about $10,000 that I wasn’t anticipating. But we still turned a profit on that, and now leveraged that and bought a four-family on Belmont. That was the next one.

Ash Patel: Okay. And that was a win as well?

Matthew Tortoriello: That was also a win. We owned that for nine years and then sold it for a crazy profit.

Ash Patel: Okay. Now I’ve known you for about 12 minutes, and I know that this isn’t enough. You’ve got three wins and in your mind, you’re thinking “How do I supercharge this business model?” Am I correct?

Matthew Tortoriello: Yes.

Ash Patel: Okay, let’s keep going through the journey.

Matthew Tortoriello: Basically, that’s around the time we met with that investor in gymnastics class. That was kind of the next step to supercharge, “We need more capital to be able to put more offers out.” We’re putting more offers out, but some them were coming back and I had to deny the offers because I didn’t have enough capital. That was when he came in. He brought in about another million dollars and we were able to basically leverage that with all these deals. At that time, there were short sales like crazy, so we were just putting offers out and we were finding maybe a month or two later that those short sales were coming back. Some took six months to close, but either way, it was just all about how many offers can we put out. At one point, I was looking at maybe 10 to 12 properties a day, just driving out, looking at the properties, writing up scopes, figuring out what we should bid on it, and really just kind of kept going with that with this one realtor who was just amazing; she just took me and drove me everywhere. We were working Saturdays and Sundays; it was non-stop, so it was awesome.

Ash Patel: How did you find this investor? And then more importantly, how did you convince them to give you essentially a million-dollar line of credit?

Matthew Tortoriello: It was actually in gymnastics class. I’m just a very open guy, I’m an open book. I like talking about what I’m doing. We were at gymnastics class, he was there, I just started talking about what I was doing that day, and how I was renovating this house. “Oh, we just bought this.” And he’s like, “Really, I’d like to hear more.” So he invited me over to jump on his trampoline. So I went over there and we were flipping on his trampoline. We just started shootin’ the s**t about everything and one thing led to another. He’s like, “I’d like to invest with you.” So I’m like, “Okay, let’s figure out how that would work.” I dropped an operating agreement and he became an actual… Not just a line of credit, but he was a partner. He kind of invested in as a partner.

Ash Patel: Was he hands-on at all or just passive?

Matthew Tortoriello: Originally, he was passive. So once again, making a lot of mistakes. We had another person at the time that was kind of helping. It turned out he was actually stealing money from us. We found out that a little bit later. This investor became a little bit more active at that time, because he wanted to correct himself. He actually became more active, and we all kind of worked a little bit more diligently after we got rid of that person, and moved from there.

Ash Patel: Not to change the subject… Did you finally learn how to do a backflip or no?

Matthew Tortoriello: Oh, yes.

Ash Patel: Perfect.

Matthew Tortoriello: Round off, back handspring, back tuck… Oh, yeah.

Ash Patel: Awesome. Okay, so now you’re turning and burning with this partner investor. What systems do you have in place to allow you to do all of this?

Matthew Tortoriello: We have 25 employees. We have an on-staff electrician, an on-staff plumber, HVAC techs. We use a couple of different systems and software. We have Rent Manager as our accounting/property management software, which has been phenomenal. If there was one thing we should have started right from the beginning, I’d have really good property management software. Early on we were using spreadsheets and QuickBooks. Oh my god, I wish we had done that just from the beginning; great property manager software. There’s a lot of them out there, Rent Manager was ours, and it’s been phenomenal for us. We use Asana project management software, so that we can work in-house with everyone. We also use Google Docs consistently, and do have outside spreadsheets for a lot of different things with vendors.

We’ve been working a lot with Home Depot. A lot of people don’t know this, but they bought this company called MarginPoint which is inventory management software. We basically have our own warehouse. It used to be called the optics program through Home Depot. So they have a mini Home Depot in our warehouse. We have about 200 SKUs of common items that our maintenance guys use. So when my maintenance guys come in, I delegate the work orders, they then go into our warehouse, use their phones to check out all the different stuff, and then they go right out into the field. They’re not going to Home Depot, Rockies, or any of these stores where they have to spend an hour in line or wherever. They can really grab the stuff from here, and when it gets low in inventory, it sends a signal to Home Depot that we’re below the min, set up an order, send me a text to confirm, I confirm, they drop it off, we restock our shelves.

Ash Patel: You just blew me away. That’s a lot of systems. Let’s rewind to when you’re ramping up. What kind of growing pains did you have and what systems did you implement at that time?

Matthew Tortoriello: One of the biggest things at first was we were working with a lot of subcontractors and managing subs. What I found was, it was easier for me to actually have employees, just because of the laws and stuff like that, what you can and can’t tell a sub to do versus an employee. So early on, it was getting some good staff and learning to manage the staff, because that wasn’t something I had a background in doing. Then t was having them check in and using a timesheet software to just track all that, so that they’re actually following all the work orders, you’re making sure you’re getting stuff done.

I think we also have to make sure we were calling up our tenants, because one of the other issues that we were having was we were running around so much that we would find that work orders weren’t getting always completed. Maybe they mudded the wall, but they haven’t gotten it sanded and painted. And then we were just like, “Oh, we got to get this done.” It was just a little too sporadic. So it was more about having someone in the back end, making sure we’re following up, making sure the work orders were all getting completed, making sure we had documentation.

Especially in Massachusetts, it’s a very tenant-friendly state. We need to document everything. “I want before and after photos.” So it was also putting all that together, which is where Rent Manager really helped… Because they can have a tablet, they could take a picture, upload it to the work order, it’d be on our server-side and the back end, so we can all see that. Then Kevin or I would report, we had all that history, all the work orders, all the pictures, and could kind of present that to the judge so they understand that we were doing the right thing.

Ash Patel: Matt, what’s an example of something you can’t tell a sub that you could tell your employee?

Matthew Tortoriello: Well, you can’t tell them how to do something. You can tell you what you want to do, but you can’t tell them how, essentially, that’s kind of the big difference. Because if you start telling them how do you stop, essentially the way in Massachusetts –I’m not sure in other states– from an insurance perspective they’re looked at as an employee. So now you have to actually [unintelligible [22:41] general liability and stuff like that. I have to say that they’re my employee, so therefore I have to pay on top of that. Even though they might have insurance, it might not be covered based on the way I was transacting with them. As well as they’re 100% dedicated to me all the time, they don’t have other clients. That can also be construed that they’re really an employee and not a subcontractor, so I can’t really 1099 them. I’ve got to make sure that I’m following all the rules, otherwise, it can bite me.

Ash Patel: That’s interesting. I’m going to go out on a limb and I think that’s a law unique to your area, and maybe some more other states. But very interesting. Alright, so now you’re turning and burning. And again, you’re not done, you’re going to supercharge it again. What’s the next step?

Matthew Tortoriello: At this point, maybe about four and a half years ago, we partnered with another gentleman. He’s been doing it all by himself; he was looking for someone to build systems and that’s what we do. That’s what we specialized in. So we teamed up with him to start buying more foreclosure properties. At that time, there were so many foreclosures going on, auctions… So we built a system where we created some software where we were scrubbing all the different websites for auctions. Because Massachusetts is a non-judicial state, whereas Connecticut’s judicial, so we were able to pull all that information together.

Ash Patel: What does that mean? What’s the difference?

Matthew Tortoriello: Oh, so a judicial state is they ask you to go in front of the judge to be foreclosed. Whereas in a nonjudicial, they have certain paperwork they have to do, but they don’t have to go in front of the judge. Like right now, with the moratorium and everything, a judicial state, if it’s gone through the judge, it’s clear. You have a clear title, you don’t have any concerns. Whereas right now, if you were getting foreclosed in Massachusetts, there are so many loopholes that can happen, especially with the moratorium, that you want to make sure you have a clear title, because it doesn’t go through a judge. You just got to make sure everything’s covered. That’s some of the biggest differences.

Ash Patel: What’s your bottleneck right now? Is it deal flow? Is it capital? Is it employees? Subs?

Matthew Tortoriello: Subs, definitely. I’m finding that there’s a lot of people… My subs I do have, a lot of their employees aren’t coming back to work. Maybe they’re collecting unemployment. That’s been a big issue, especially during COVID. The other thing I find is the capital’s not so much of a problem, it is the deal flow, because foreclosure auction was a large portion of our acquisitions. We’ve been shifting into buying more tax lien certificates, tax deed states, we’ve been also buying non-performing notes… We’re working on negotiating one right now, a big package. Then we’re shifting into commercial, which is one of the deals we just locked into the other day, which I’m really excited about.

Ash Patel: Tell me about that.

Matthew Tortoriello: So it’s a shopping plaza in East Longmeadow. They haven’t been run very well. There’s a lot of deferred maintenance, roof, siding, leaks everywhere. But it has some good tenants in there and the location is perfect. We were actually going to the auction, willing to bid at 2.6 million, and we got it for 2.2, so a win. Once we reposition everything and get all the tenants in there, the value should be about 4.5 to 5 million. And we’re probably gonna have to put in another $300,000 in rehab.

Ash Patel: What makes this a perfect location?

Matthew Tortoriello:  Well, it’s, it’s right near a great rotary in East Longmeadow. East Longmeadow has also lots of job growth. There’s high net worth in that area as well. There’s tons of traffic going through as well, so you have a lot of good storefront traffic… and it’s just an up-and-coming market.

Ash Patel: Matt, you said there are some good tenants there. What are those good tenants?

Matthew Tortoriello: We’ve got a bakery that’s doing really well, a nail salon, a beauty salon, there’s a really nice restaurant that’s there, a jeweler that’s been there for about 30 years, and one of the anchor stores is this cafe that has seven other shops all around the area. That one brings, honestly, probably the most traffic. I was there over the weekend with my fiancee and there were just so many people flooding to that one spot.

Ash Patel: What’s your plan on improving it?

Matthew Tortoriello: Well, the first thing is obviously fixing all the deferred maintenance. I want to get the roof done, we’re going to be upgrading all the air handlers, there is an issue with a couple of units where they’re splitting electricity, so we want to sub-meter it out. We’re going to upgrade the facade. It’s very dated. There’s a building right next to it that’s been updated, and ours sticks out like a sore thumb. I want to clean off that facade, there are some pillars, I want to put these stone pillars to really draw the eye there. There are these old awnings that hide half the windows for the front sore, I want those gone. I want brand new signs for all the businesses that match these other signs. And just really draw the attention for all the traffic that drive through. Nobody would want to go there, it just looks rundown.

Ash Patel: Is there any vacancy there now?

Matthew Tortoriello: There are a couple of vacancies. There are actually two buildings; second floor, both buildings, there are some office spaces that they were renting out to a couple of law firms and I think one was a bank. They all vacated, so we’re talking to a local commercial realtor; we’re going to do these micro offices which have been really phenomenal in our area. They’ve been going really well. You can get like $25 to $30 per square foot. So, I’m looking to do that.

Break: [00:27:58][00:28:39]

Ash Patel: Are you geared more towards commercial in the future now that you saw what you can accomplish with it?

Matthew Tortoriello: Well, the bank that foreclosed on this one happens to have these three medical offices that are right around the corner in Longmeadow, even a nicer area…So we are having to talk to them a little bit about it. Yeah, we’re a little intrigued about it.

Ash Patel: I understand you’re new with commercial, but from what you’ve seen, how do you compare residential to commercial in terms of managing, investing, landlording?

Matthew Tortoriello: I definitely see a little bit of lower return. A lot of our stuff has generally been in C plus and B plus areas. You can get a good return on investment with residential. But there is a lot more hands-on. So far, what I’m seeing – and also talking to some of my friends that also got shifted into commercial – a lot of these are going to be triple net leases, so it’s a lot less hands-off. We’re mostly there to keep the common area and the cam areas in good shape and the general structure of the building, the envelope so to speak.

What I love about commercial is that value is based on the income approach, not the market approach. Therefore, I can force appreciation very easily by, like I said, with this one property, basically getting a couple of good tenants in there and improving some of the facades, I’m able to increase all the rents. That right there is what’s going to increase the value of that property. I don’t have to wait are a whole bunch of other houses to sell and bring up the market.

Ash Patel: Now, you mentioned the return is lower. Are you talking about cash flow or internal rate of return? But what if you factor in the sale? Because you’re going to make over a million dollars on this sale if you were to sell it after you improve it. So overall IRR, commercial versus residential?

Matthew Tortoriello: From my perspective, yeah, it would be higher if you do an IRR. You’re correct. But the cash on cash turn, I’m seeing it is a little bit lower, at least at this point.

Ash Patel: So you’re not convinced to go into non-residential commercial just yet?

Matthew Tortoriello: We want to go into it a little bit. I need to learn it first; so this is the first foray into it. We’ll see, maybe we’ll put both feet in once we get into it.

Ash Patel: Okay. The reason I harp on that is I’m a full-time non-residential, commercial investor. Another thing that I love about it is you deal with business owners, versus residential tenants, and you often deal with people who improve their space versus destroy it.

Matthew Tortoriello: I completely agree.

Ash Patel: So what’s next? You’ve got the commercial going on… I want to back up a little bit. You said your bottleneck was dealing with subs and getting enough good help. I’m going to, again, venture to guess after we’ve now known each other about 25 minutes, you started some kind of contracting company where you get to control subs and hire subs… Is that right?

Matthew Tortoriello: We have a construction company.

Ash Patel: Okay. Alright. Tell me about that. Do you lend out your subs to other jobs, other landlords?

Matthew Tortoriello: As we started doing a little bit of project management, we did start expanding a little bit into that. We have an on-staff electrician and he has also his apprentice, as well as we have a master plumber and she has an apprentice… So at this point, because that’s one of the bottlenecks with most of my friends and colleagues out there, so today, we’re actually out installing a brand new intercom in a seven-unit building for a guy. So as my guy has downtime, generally, I prioritize our stuff first and my clients for the property management. But I have picked up a few — actually, Home Depot has also been throwing us work. There’s a church conversion out in Pittsfield that we just put a bid on, that is converting to a 48-unit complex. So Home Depot, because we have very good ties with them, with all the others, they’ve actually asked me to bid on the electrical work.

Ash Patel: That’s great. You seem to make this look easy. But I know it’s not. What advice would you give people that are in the beginning stages where they maybe have one, two, or three properties under their belt and they want to supercharge their business as you did? What advice would you give that person that’s starting out?

Matthew Tortoriello: I would think that the first thing, like I was saying a little bit earlier, was getting good property management. That basically comes down to having good systems. The only way to really scale is that you need systems to be able to go, because you only have so much time. Yeah, maybe I have a little bit more than 24 hours sometimes, but for the most part, I’m still only one guy. And even if I hire a couple of other people, they need to have systems, and you have to also learn to be able to delegate and accept that — that’s one of the hardest things, was accepting that I’m not always going to get 100%. I know I’ll go crazy with everything doing what I want to do, but I need to accept that these people are going to help me grow, and they’ll get me to get 80% of what I could accomplish. That now allows me, if I had that person doing 80%, that personally 80%, now that I’m only able to do this, it allows me to scale that way. So I think learning to delegate and having good systems in place is key.

Ash Patel: Matt, where does your capital come from today? Is it all internal that’s recycled? Or do you still have the same investors? Or do you have additional investors?

Matthew Tortoriello: For the most part, it’s the same investors at this time that we’ve had, the same people. A lot of it has been, as we’ve grown, we’ve put lines of credit and built, stuff like that. Just like we were talking about the commercial, one of the ways we’re looking at doing it – we don’t want to pull out all that equity, we’ll probably fix the property up, have it reappraised, and then what I’d like to do is put a line of credit on the difference, so that we’ll have another million-plus to play with it for another deal.

Ash Patel: And is there a certain percentage return that you can assure your re-investors, or — what’s that conversation like? If somebody comes to you, what kind of return can you promise them?

Matthew Tortoriello: We’re not working with outside investors, but these investors that we have are actually partners.

Ash Patel: Okay, so they partner on specific deals with you.

Matthew Tortoriello: Correct.

Ash Patel: Okay. And are most of them passive, or are some of them active?

Matthew Tortoriello: There’s only two, and they’re active.

Ash Patel: Are you looking for additional investors?

Matthew Tortoriello: At this time, we’re not. Maybe if we expand more into the commercial realm, as the deals get bigger, that might be something we’re going to look into. But at this point, we have enough capital to have our hands in.

Ash Patel: The reason I asked that, Matt, was I wondered if from your earlier experience talking with all of those doctors and saw that they don’t have time for investing, maybe they don’t make the greatest decisions on investing because of that… I wonder if you saw a niche there where you could present opportunities to very busy medical professionals that don’t have — oh, you’re laughing. Okay, come on, tell me.

Matthew Tortoriello: There’s a group of doctors that I’ve been talking with. They’re two doctors and two dentists. That’s exactly what we’re talking about. They’ve been reaching out to me and I’m working on helping them potentially buy an industrial building.

Ash Patel: How would that work? They came to you, they wanted to buy industrial and you’re going to essentially source and manage it?

Matthew Tortoriello: Well, I do have my brokerage as well, so of course, I’ve got a real estate license too, just because why not?

Ash Patel: Why not?

Matthew Tortoriello: Essentially, through a connection – someone reached out to me with a kind of a pocket listing or something… They had been talking to me for the last year. So I thought about them; it wasn’t something that I was interested in. So essentially, the way it would work, at least at this point in time, is I would refer them to it and I would basically get a small part of the pie of ownership. Then they asked me possibly to manage it as well. I would add it into the management portfolio, and I guess, a little piece of the pie.

Ash Patel: That’s a great win-win. You also mentioned earlier that you are expecting a downturn in the economy. How are you positioning yourself for that?

Matthew Tortoriello: Right now we’re focusing on making sure we tighten up our ship with any loose ends. We’ve been selling off some of our more troubling properties. We did have up to 500 units, we’re now down to 250. We’ve gotten rid of some, paid off some debt, as well as passing capital on the side. The other thing – we’re making sure we’re reaching out to banks and getting as many lines of credits signed up and ready to go for what we see is hopefully a buying opportunity.

Ash Patel: Where do you see your business in five years?

Matthew Tortoriello: Right now I’m really intrigued and excited about the commercial stuff. I’d love to hear more from you at some point time. But maybe 20% of our portfolio more into commercial, and I’m hoping to buy more residential as well. I do love more B classes, I’d like to get into apartment complexes. Harold Grinspoon was an inspiration for me. He actually lives in Longmeadow. I’m not sure if you know Harold at all.

Ash Patel: I don’t, but I’ll look him up.

Matthew Tortoriello: Aspen Square Management, the largest privately-owned residential company in the United States. I think he’s got like 40-something-thousand units.

Ash Patel: Wow, interesting.

Matthew Tortoriello: That’s amazing.

Ash Patel: Man, I’ve got to circle back again on another question… You were jaded on remotely managing that property that ended up foreclosed on. How are you feeling about that now? Are you okay with remotely managing properties, or is everything within a driving vicinity of where you live?

Matthew Tortoriello: I’ve been expanding a little bit into that, dabbling my toe in the water, so to speak. I have done some turnkey investing. I found some stuff in Memphis, Tennessee, I’m looking into Gary, Indiana, and a couple of other markets that I’ve been researching. I’m finding good turnkey operators that have phenomenal systems, and focusing a little bit on the returns, but it’s about people there, what systems they have and what team they have, and if I feel comfortable with them.

Ash Patel: Okay. So you know how to grow capital. Why are you investing in other people’s deals?

Matthew Tortoriello: It’s more of a hobby. It’s fun. I like going with it and also helping a couple of my friends — there is a little mastermind that we grew, so it was part of that.

Ash Patel: That’s great. So Matt, what an incredible interview… What’s your best real estate investing advice ever?

Matthew Tortoriello: Build systems and learn to delegate.

Ash Patel: Matt, are you ready for the Best Ever lightning round?

Matthew Tortoriello: Sure.

Ash Patel: Let’s do it. Matt, what’s the Best Ever book you recently read?

Matthew Tortoriello: The Best Ever book I recently read was Recession Proof Investing by Jay Scott.

Ash Patel: What was your biggest takeaway from that?

Matthew Tortoriello: Understanding market cycles and really understanding lines, so you can position yourself, especially in an inefficient market like real estate, way ahead of time, and really profit from the downturn.

Ash Patel: Fantastic. Matt, what’s the Best Ever way you like to give back?

Matthew Tortoriello: Well, we actually have a YouTube channel and our Tiktok. We basically go live multiple times a day, we go live at our foreclosure auctions. We teach others what we’re doing and show them our mistakes on our YouTube videos and try to help them learn from everything we’ve done over the years.

Ash Patel: That’s great. And Matt, how can the Best Ever listeners reach out to you?

Matthew Tortoriello: Well, we have a great YouTube channel called Two Guys Take on Real Estate, as well as the same on Tiktok. They can definitely reach us there and that’s the best way.

Ash Patel: Matt, thank you so much for being on the show today. You’ve given us incredible advice, taking us along on your journey from pre-med to getting the real estate bug. You’ve built this incredible enterprise with some hard lessons learned along the way. Again, I can’t thank you enough for sharing your time with us. Have a Best Ever day, and Best Ever listeners, thanks for joining us on today’s episode.

Matthew Tortoriello: Thank you, Ash.

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JF2425: Attaining Your Passive Income Goal with John Soforic

John grew up in a blue-collar area just outside of Pittsburg; his family had coal miner and farmer roots. At the age of 24, John graduated college with $200k worth of student debt. By the age of 30, John had a wife and two kids to take care of, and the same student debt to pay off.

Real estate turned it all around for him. His goal was to attain $20k in passive income, and he pursued it one house after another while having a full-time job as a chiropractor. Later he wrote a book called “The Wealthy Gardner” where he talked about winning financially and taught others life lessons on prosperity.

John Soforic Real Estate Background:

  • Attained a net passive income of 20,000/month
  • Now a full-time property manager and author
  • 25 years of real estate experience
  • Portfolio consists of 110 doors freely owned (no loans), and has flipped 75 properties while working full-time
  • Based in Mount Pleasant, PA
  • Say hi to him at: www.wealthygardener.com 
  • Best Ever Book: The Checklist Manifesto

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Best Ever Tweet:

“I stopped reading books that I liked. I stopped watching TV that I liked. You sacrifice.” – John Soforic.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today, we’re speaking with John Soforic.

John, how are you doing today?

John Soforic: I’m doing fine, Theo. Thank you.

Theo Hicks: Well, thank you so much for joining us today. Looking forward to our conversation. A little bit about John—he obtained a net passive income of $20,000 per month and is now a full-time property manager and author. He has 25 years of real estate experience and his portfolio consists of 110 doors freely owned, no loans. He’s also flipped 75 properties, all while working a full-time job. He is based in Mount Pleasant, Pennsylvania, and his website is https://wealthygardener.com/.

So John, do you mind telling us some more about your background and what you’re focused on today?

John Soforic: Sure. I thought it was also funny to hear it said, because when you say “property manager” – yeah, I’m a property manager of my own properties. I’ve managed my teams, I’ve managed my people… I don’t know what to call myself, though. I’m an owner? Yeah, but I manage my stuff. So yeah, that’s what I am.

Who am I? I grew up in a blue-collar area just outside of Pittsburgh. My grandfather was a coal miner. My other grandfather was a farmer. My parents, when they got together, they moved into half of a trailer, not a full trailer. So I’m the first person in my family to ever go to college. I graduated as a Chiropractor at the age of 24. What that meant, Theo, is I graduated with $200,000 worth of student debt. So from day one, I have no income and $200,000 for the student debts. Within a year, I’m married, within two years, after marriage, we have two kids, and you’re in it. My wife stayed home with the kids.

It took me till about 30 to realize that I’m not getting off this treadmill, because all of a sudden, I’m just paying for food, shelter and clothing and this big enormous student debt that nobody sees. So it was looking a little helpless at the age of 30 for me, and that’s where real estate started happening in my life. It became an avenue where I was able to get one house after the other; I just started slow.

I made a big goal. The big goal was that $20,000 net passive income. So I took that swing and I got busy. And because my mind was directed, my body followed that. By the age of 50, I was able to attain that goal. And at that point, I wrote the book, The Wealthy Gardener, because my son was coming out of college and he was going to face exactly what I had just faced. And this was going to be my book though, The Wealthy Gardener – it was just between he and I, about how to win financially in the real world. How to be a gardener, meaning a garden is a metaphor for your life, how to be a wealthy gardener. So it was just between he and I.

Long story short, when that was over, we published the book. The book took off and it was translated in six different languages. It was taken over by a publishing house in New York, they gave me a six-figure advance… It’s a big deal, and that’s why we’re here today.

Theo Hicks: Thank you for sharing that. So Wealthy Gardener is a book; you mentioned how you set that goal to attain $20,000 per month in passive income, and you did all this while working full-time. So right now, you’re full-time in real estate, but when did you leave your job as a chiropractor? Was that right away when you were 30, or did you wait until you achieved your goal first?

John Soforic: No, not at all, Theo. I needed the W-2 income. I see that you’ve talked about the BRRR technique with other guests on your show… Well, that was mine, right? So I would go in and I would buy a distressed property, and then I would fix it up and rent it and refinance it. And we were doing that repeatedly, over and over, until I ran out of money; then I started flipping and doing that. So that doesn’t happen unless you have a job, right? I’m the only job in the family, so I need a W-2, because I walk into a bank without a W-2, I’m not getting a loan. Nothing happens without that 40 hour work week for me. So when I say I retired, I retired at the age of 49 from chiropractic.

Theo Hicks: Got it.

John Soforic: When you say I’m full-time into real estate right now, it’s 10 hours a week. So that’s full-time. That’s my kind of full-time, right?

Theo Hicks: There we go.

Break: [04:37] to [06:38]

Theo Hicks: A big question that we get a lot is – I’m sure you get this a lot, too – is how do I get started? How can I use real estate to quit my full-time job? And what’s kind of assumed in that is that you have a full-time job, and so the real question is, “How do I do this while I’m working a full-time job? How do I invest in real estate? How do I quickly scale my business while I’m spending 40 plus hours a week doing something else completely?” So you mentioned that you’re doing BRRR and rehabs and fix and flips, all while working as a chiropractor… So what are some tips you have for people who are listening to this, who have a full-time job, want to get out of that full-time job through income through real estate? How can they accomplish that, practically? When did you work on your real estate business, and how are you able to do time management and make sure you’re spending enough time in there? And what happens if something happens while you’re working, things like that?

John Soforic:  Oh, no doubt about it. Let’s look at it though,  break down a week. Let’s really talk about turning off that TV. Let’s talk about all the frivolous things that we can do. I had to do that. I stopped reading books that I liked, magazines that I liked, I stopped watching TV that I liked… You sacrifice. There’s people out there that have two jobs; pretend you have two jobs. And you know what, live a lifestyle as if you lost one of your salaries in the house. I can tell you this – that’s exactly what I did. We saved 50% of my income. And then even though we had more and more and more — people say, how do you do it? Well, that’s how you do it. Without money, you don’t do anything. At least I can’t speak of it. Somebody might have a no-money-down technique out there. That’s not me. Mine was earning, and mine was saving, and I was buying used cars from other people when people bought new cars. And so it just works out gradually where you’ve got to get the money in the bank, and then once you can do that, you can buy a property, and that’s how it happens.

I was just talking to kid the other day, he said, “How did you get into real estate?” He knows I have a big business. I said, “Well, how much money you’ve got in the bank?” “Nothing.” “Well, you live with your parents. You’re making $70,000 a year. Save your damn money, and within one year now, you’ll be qualified to become an owner.” Now, who wants to hear that? Nobody. Sorry, that’s how it works in the real world. You have to earn it; it isn’t given to you. Now, I don’t know what else to tell people.

So I wrote a book for my son, I wanted to have him understand the hard truths. I want him to understand – yeah, you’ve got to put the money in the bank. It’s all about getting the money in the bank, not how much you earn. And that’s the problem. You’ve got to be frugal, you’ve got to have profitability in your house. And I’m saying this, I’m sure there’s people out there saying, “Well, I don’t have any money at the end of the month.” Well, change your expenses; there’s just no other way. Change your expenses, change your income. That’s the key to real estate investment, right there. You have to have money in the bank to be an owner of anything.

Theo Hicks: Yeah, it sounds like it’s more of a—obviously, practically changing your spending habits. But something else that you said in the beginning is how you had this moment when you were 30, and then you didn’t retire until you’re 49. So 19 years you spent patiently saving money, doing a deal, grinding, until you achieved your goal, right? 19 years. Someone hears that and says “I don’t want to wait 19 years.” So what’s your advice for someone who maybe has that instant gratification hump that they need to get over? Is it just hard truths, or is it something they can practically do to start to be more patient think longer term?

John Soforic:  I would say I’m okay with that, Theo. To be honest with you, I was too, you know. People with an ambition, they’ll feel that agitation, and that’s okay, no big deal. That’s called constructive discontentment. And I say use that, make that your friend. And yeah, you put a path there of 19 years. I get that. But I won’t tell you like I’m an ox in the middle of a field, grinding away with sweat rolling off my back, just being miserable for 19 years. I will tell you this, that there is joy in progress. And in my 20s, when I wasn’t having any progress, I was miserable. I wasn’t getting anywhere. But in the direction, when you have financial direction, there’s a joy in the days of that. Your ambition is being fed through your results, and there’s goodness there. It’s not as bad as you think. In fact, it’s good, it’s fun.

I look back at those times and I kind of miss them a little bit right now, when I’m on top of the world, and “Get out of my way, I’m ready to run through this wall, now!” And you’ll say, “Well, you didn’t have your goals then.” “Yeah, man, but I was powerful then.” And that was a good time. That’s what it feels like when you’re winning. So you just have to start winning; it’s fun to win. That’s all.

Theo Hicks: [unintelligible [00:10:55].18] you talk to a lot of people who are aspiring real estate investors; what would you say would be the one thing that you’ve seen hold people back the most from either getting started or once they’ve gotten started, continuing to scale and getting closer and closer to that goal?

John Soforic: One thing… I would say the one thing that prevents people from pulling the trigger and buying their first one, I would say they’re afraid. My first property, I can tell you that my hand shook, and it was a small property; my palms were sweating. I didn’t sleep that night. That’s how it starts. But you have to feel the fear and do it anyway. I would say that people aren’t really in touch with their worst financial fears, sometimes. What’s the worst thing that can happen in your life? Sometimes you’ve got to use your fear, sometimes you’ve got to use your dreams. What’s your why? What do you want for your life? I don’t know, man, it seems like that bounces off people’s heads and they don’t hear it, but that’s exactly what I did. I got in touch with what I wanted most and I’d trade a lot of things I want right now for what I want most. So no excuses. You either step up to the plate or you don’t get ahead. You can just be a procrastinator for life, and you normally will, because you’ll never say, “I’m never going to do this.” You say, “I’m going to do it someday.” And someday is where dreams die. So that’s what happens, it’s really dangerous thing to do.

As far as scaling up, I think they just get busy and they run out of money. Quite frankly, they stop earning. I get that, I ran out of money myself, and then I started transitioning, since I had nothing to do and to buy anymore, I transitioned into flipping, because I was using this BRRR strategy, so it seemed to be a natural approach for me.

And keep in mind, when I say I’m doing all this stuff, I have workers working for me; I am a full-time chiropractor, I have a family, we kept intact, I am still married… And there’s just a lot of that going on. And you can gain money through outside sources if you turn off the TV; it just gets back to that — I am a guy that believes in sacrifices, and I don’t tolerate excuses.

Theo Hicks: It’s kind of actually a good transition into what I want to ask you next… So this is going to be more for established investors, but maybe not… But you mentioned how a problem with scaling is running out of money. And you mentioned that earlier about with your book, and how I’m sure that’s been a pretty good source of income for you.

So what advice do you have for people who have a lot of expertise, a lot of knowledge on what they’re doing – what are some things that they can tactically do to create and replicate the success you’ve had with your book? So how to basically create a best-selling book. How do I know what to write about? Is there a certain tip you have on writing a best-selling book? And then once it’s done, any tips on marketing the book to make sure it gets a lot of exposure, and things like that?

John Soforic:  I would say write something that you care deeply about, that you won the game in. That gives me credibility to be able to write about money. And I’m sitting there thinking, before I wrote a book like, does the world need another book? I think about that… No, probably not. But what can I say?

Well, I can say this – I’ve learned a lot along this really tortured path. I’ve learned this, and there’s a lot of people with financial pain. So what’s the pain point that you can solve? And I would say that, if you’re looking to make money, I would not go the direction of books, that’s for sure. I did get rewarded with a $100,000 advance from a big company, all that kind of stuff, and the book is doing well and all that… But it’s really a small amount per book that an author really takes home as far as royalties.

I would say that what you could do maybe more profitably with your knowledge is can you make a course? Can you make a course that is remarkable to other people; like, not remarkable to you, but remarkable to others? And then you have something. Because courses – you have a 90% profit margin on that kind of stuff. Books – geez, man, you’re getting into the sea now. And anybody can write a book; you can self-publish anything. If you can put a sentence together, you could write a book and call yourself a published author. But I would say, Theo, that if you’re looking to make money, get out of the book business; real estate’s a great place to scale and just learn your way through it. You guys have an interesting platform right here, and I noticed your book has 91% five-star reviews. That’s impressive. So maybe they should look there as far as earning money; read your book, the book on syndication.

Theo Hicks: I always love it when people plug that syndication book. Alright, John, what is your best real estate investing advice ever?

John Soforic: My dad, he had just a couple duplexes, but he always just drummed in my head that it’s not about what you earn, it’s about what you keep, period. It’s about what you keep. That’s the best advice I have for me. That’s the best advice I have for others. And you’ve got to get your lifestyle in line to make that happen. It’s about what you keep. That’s the score.

Theo Hicks: Okay, John, are you ready for the Best Ever lightning round?

John Soforic: Let’s go.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [15:33] to [ [16:12]

Theo Hicks: Okay, John, what is the best ever book you’ve recently read?

John Soforic:  You know what, I think one of the more helpful books that I have read – and I read a lot, I read a couple of books a week – is a book called The Checklist Manifesto. And I promise you this, anybody that’s out there listening, right next to The Wealthy Gardener—let me plug my book—the Checklist Manifesto will speak to you, because it’ll get you in line for systems, man. And I’ll tell you what, you’ve got to get your systems together; a checklist, 1, 2, 3, 4, the bigger you get, the more complicated things get. It sounds like a small idea. I promise that book will revolutionize your thinking. It’s a good, good book.

Theo Hicks: Yeah, I love checklists. I always have my little checklist right next to me for things that I need to get done. And it feels good to cross it out, too. As you said earlier about — there’s joy in progress and results.

John Soforic: You’re one of those guys, Theo, that will get something done, and at the end of the night, you’re going to put it on your list just so you can cross it off, aren’t you?

Theo Hicks: Yeah, there you go. “Stand up from my chair, check!”

John Soforic: [laughs]

Theo Hicks: Okay, John, if your business would collapse today, what would you do next?

John Soforic:  I think that at this stage of my life, I would have to be a writer. And the reason I say that, Theo, is I am a big believer in finding those things that are [unintelligible [00:17:21].05] but you get feedback from the world and you get a positive feedback in. Keep in mind, I’m a self-published author; I’m nobody, and I wrote a book for my son, and it was rewarded pretty heavily by a New York publisher. These are the kind of dreams that full-time writers think about. And so that tells me that maybe there’s a knack there for me. So I would follow that and pursue that, and I kind of enjoy that. So I’d be a writer.

Theo Hicks: Tell us about the best ever deal you’ve done?

John Soforic:  Best ever deal. There was a group of seven duplexes in my town, and I did a BRRR on the whole damn block. I call it the block; one of the nicest blocks in my town. I offered them half price; the people were overseas, it was an estate sell. Half price, zero contingencies, I’m just going to take them no matter what, and they took it. Long story short, I went through a process of fixing those things up, and when it came time to refinance, what happened there was I refinanced all my costs into it and I took another 100,000 out of it.

Theo Hicks: Okay.

John Soforic: And when it was all said and done, that block, earned me $3,000 and still does every month of my life, even though I took $100,000 more than I put into it. And so that was probably the most astonishing deal for me. The people around the town looked at it and said, “Man, that folk must have some money,” and I think, “You guys don’t understand. They paid me to do this. This was better than free to me.” I got $100,000 back and $3,000 a month for life. So that was my best deal, no doubt about it.

Theo Hicks: On the flip side, have you ever lost money on a deal? How much did you lose and what lessons did you learn?

John Soforic: I am not a calamity guy. I always operate from the point of fear. So I don’t have that big calamity story that some people might. I had a bad stretch, I think, at one point in my career. I went through three flips in a row and at the end of those nine months I ended up netting nothing. My contractors, my painters, everybody – they made more money than me.

So what I was doing at that point was trying to keep a team intact. Sometimes what you’ll find is, when you get busy, if you don’t have a next project, then you don’t have work for your guys, they’ll splinter off and go into different directions. And then when you do get a project, they’re not back with you anymore. So I was always trying to keep properties one in front of the other, so I would have continual work for the people working for me. And sometimes I was buying marginal properties because the good ones weren’t around. So that was the mistake for me. I lost money on three in a row; that was a painful time. Because I would have been better off net cash inflow if I just sat around and watched TV. So that was it; don’t buy marginal properties. Even if you have to try to keep your team intact, you just can’t do it. Don’t break the rule of your criteria.

Theo Hicks: What is the best ever way you like to give back?

John Soforic: I believe in teaching people how to fish. So instead of giving them a fish, I like to teach them how to fish. My way to give back, Theo, is to write the book, The Wealthy Gardener, that was a lot of giving. That was three years, full-time. Sometimes people write in the margins of their life. This was 50 hours a week for three years, man; this was my sacred effort of my lifetime, and that was a serious giving back, first to my son; I couldn’t have done it without him. So he and I were sharing ideas back and forth; that was giving back to me. And whoever reads that book, they just live with me for 400 pages of that book. I can tell you that there’s a lot of people that cry when they read this book. So that was my giving back.

Now, the next one is called The Wealth Essentials, that’s my second book and my last book. So I give back through my time, energy, effort. I try to give my soul back. That’s what I do.

Theo Hicks: And then lastly, what is the best ever place to reach you?

John Soforic: Right now, it’s just https://wealthygardener.com/. That’s where I am, https://wealthygardener.com/.

Theo Hicks: Perfect, John. Well, thank you so much for joining us today and providing us with your best ever advice. Lots of practical advice given today, as well as mindset advice.

So we talked about some tips and tactics you have for attempting to, in a sense, achieve financial freedom while you’re working a full-time job. And I think if I could wrap it up in one word, it would just be sacrifice. We also talked briefly about writing a book, and that don’t necessarily do it if you’re trying to make money. If you do want to figure out how to leverage your knowledge for money, you can focus more on a course that will be remarkable to others. But if you do want to write a book, make sure if something [unintelligible [00:21:50].18] something that you’ve won the game in.

And then you also gave your best ever advice, which is very simple, but definitely powerful, which is it’s not about what you earn, it is about what you keep; again, playing into that theme of sacrificing.

So, John, thank you so much for joining us today, I really enjoyed our conversation. Best Ever listeners, as always, thank you for tuning in. Have a best ever day and we’ll talk to you tomorrow.

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JF2413: Becoming Your Own Bank With Chris Naugle #SkillsetSunday

Chris grew up in a low-income family, but he learned to dream big. His business experience ranged from creating a clothing line and opening a chain of snowboarding shops to working on Wall Street and being one of his firm’s top three financial advisors.

After the stock market crash, Chris started focusing on his real estate portfolio, which was more of a side project at the time. By 2014, he had a sizable portfolio and several other things in the works. Unfortunately, that’s when he learned that banks aren’t always friendly, so he started to find ways to fund his ventures by becoming his own bank. Now Chris mentors others and helps them take charge of their finances.

Chris Naugle  Real Estate Background:

  • Co-founder and CEO of FlipOut Academy, The Money School, and Money Mentor
  • 16 years of real estate investing experience
  • Portfolio consists of 500+ real estate deals – flips, wholesales, rentals
  • Based in Buffalo, NY
  • Say hi to him at: www.chrisnaugle.com 
  • Best Ever Book: Profit First

 

Thanks to our sponsors

Best Ever Tweet:

“If we didn’t need a conventional bank anymore, what would life look like?” – Chris Naugle.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Chris Naugle.

Chris, how are you doing today?

Chris Naugle: I’m doing great. Thanks for having me on.

Theo Hicks: Yeah, thanks for coming on again. So Chris is a repeat guest; his episode hasn’t aired yet when we’re doing this interview, so make sure you check out his first interview; we go and do a deep dive into his background and what he’s focused on today; just go to https://joefairless.com/, type in his name.

Today is Sunday, so we’re doing a Skill Set Sunday. So we’re talking about a specific skill set that Chris has a deep dived into that and how you can apply that to your investing business as well, and it’s going to be on becoming your own bank.

So before we get into that, just a refresher on Chris. He is the co-founder and CEO of FlipOut Academy, The Money School and Money Mentor. He has 14 years of real estate investing experience and has done over 500 real estate deals. He is based in Buffalo, New York, and his website is his name, https://www.chrisnaugle.com/.

So Chris, before we get into today’s skill, could you just kind of quickly give us a refresher on your background and what you’re focused on today?

Chris Naugle: Sure. So background – I just grew up in a very lower-lower-middle-class family. I was a kid that was brought up by my mom to dream big. We didn’t have money, so everything was just a dream; and I turned those dreams into reality. First big dream that came to light was I wanted to be a pro snowboarder; even in Buffalo, very hard place to make it into that pro arena, I was able to do that by doing what everybody else was unwilling to do; it was one of the greatest accomplishments of my life.

And then, at a young age, I decided I didn’t want to trade hours for dollars, so I started a clothing line, which turned into a chain of skateboard/snowboard shops; I ran those from 19—Gosh, 1994. It’s so weird to say that… All the way up till 2010 when I sold them.

In the midst of that I hit a couple of recessions, like the dot-com crash, that forced me to actually enter the workforce again, and I landed in Wall Street of all places, and I became a financial advisor  in what was supposed to be a part-time job to get me through those recessionary years; it ended up being something that I loved. I rose to the top, became one of the top three advisors in the firm I was at, all the way up to Great Recession time, 2008… I was crushing it. I was making great money, doing the snowboard thing… And then all of a sudden, in 2008, I started doing a lot of real estate.

I was developing a strip mall using hard money when the great recession hit, and that’s the first time that I was literally brought to my knees, and I saw the signs of – I was going bankrupt. And if it wasn’t for my girlfriend who just moved in, paying the utilities, paying the mortgage, allowing me to move two friends into this house that I lived in, I wouldn’t have made it through that.

And that kind of catapulted me to change my focus a little from all the stuff I was doing with the shops, focus now over to real estate. I started in real estate in 2006 with the first flip, but in 2009 through 2014 I was heavy in real estate; buying apartment buildings, renovating them… And things were going great. I got up to 36 units, I was making good money, still doing the advisory thing and the snowboarding thing…

And then in 2014, I was faced with the harsh reality that banks aren’t always friendly. And they called one of my mortgages, they froze my lines of credit and they told me no, because I didn’t fit their little square box… And again, you know, 2008, I lost it all, and in 2014, I lost it all again. So I had to sell all those properties, and that was the most humbling period of my life. But that’s what got me to where I’m at today… Because at that moment, I went to a real estate training, a three-day training, because they were giving away an iPod Shuffle… And at that training, I met two people; and these two guys were rock stars. One had a show on A&E, the other was the bank.

They started talking about money, which was my space, on Wall Street. And what they were talking about was something so different than anything I’d ever heard about in all my training, all my high-level years doing the advisory thing… I remember thinking to myself, “If I don’t know this, what else do I not know? What do the wealthy know that I don’t?” And that began my journey. That was 2014, we’re in 2021. I’ve made it my mission from that point forward to learn the secrets of the wealthy, to learn the patterns of “What do the wealthy do that you and I don’t?”

And today I’m known – that’s not self-proclaimed, I always like to say that, but I’m known as America’s number one money mentor. My wife and I had a show on HGTV called Risky Builders, we were flipping houses, and… Gosh, so much other stuff, but it’s all hearsay. But today, I teach people the truth about money and what the wealthy do with money that every single person listening to this can do by just adding one step.

Theo Hicks: And is this one step that the wealthy do ultimately becoming their own bank?

Chris Naugle: 100%

Theo Hicks: Okay.

Chris Naugle: It is understanding that general philosophy that you have to be in control of the banking functions in your life. That is it. And it does involve just changing one thing, and that one thing is where your money goes first.

Break: [00:05:50] to [00:06:56]

Theo Hicks: So the money goes into life insurance, correct? Is that the strategy here?

Chris Naugle: Correct. Yep.

Theo Hicks: Can you give a high-level rundown of exactly how this process works from someone who already has the cash flow coming in or has the capital to do this, and they’ve never heard it before, they don’t know what you’re talking about? How do I become my own bank by investing in life insurance? That doesn’t make sense to me.

Chris Naugle: Yeah, and it shouldn’t make any sense, because you’ve never heard about in your life, just like I never heard about it. And I was an advisor; you would think an advisor would know about this, but we don’t, because advisors are taught to do traditional financial things. So let’s just keep it really simple here.

So in other words, being your own bank is not about a product, okay? A lot of people when I say, “become your own bank,” or “privatize banking,” they instantly think if they know about it, this life insurance plan; it’s really not, it’s a process. And it’s a process of doing nothing other than mimicking exactly what a bank does every single day with the money you deposit there. That’s where the basis starts.

So let me kind of just dive in. Now, the machine that we use is a very, very specially designed and engineered whole life insurance policy. But when I say the whole life insurance, a lot of people have a pre-conceived notion of what whole life is; they think it’s life insurance and indeed it is. But the way that it was created for banking, the way that banks use it, the way that corporations like Samsung, Apple and so many others use this, and the way the Rockefellers and the Rothschilds used it way back in the day, is not using life insurance for its intended death benefit use. So what you do is we built the whole life policy to almost work just like your savings account does.

So let’s start there. All of you, you get paid, you make money… And again, you mentioned, Theo, that this isn’t for everybody, and absolutely not; this is not something that will work for everybody. This is not the silver bullet. But this will work for somebody that’s saving money, that has a little bit of extra money that they’re putting away and saving somewhere. So I want to make sure I pointed that out.

So you get paid and you go to the bank and you deposit your money in the bank, you exchange your best dollars, your good, valuable dollars to the bank, just for that warm and fuzzy feeling, because that’s what we’ve been taught to do.

Now, what does the bank do with your money? Does the bank take your dollars that you deposit, put them in a little box in the back that has your name on it, and just leave it there so that when you come back you take it? No, the bank doesn’t do that. The bank immediately, when you make that deposit, is lending that money out to somebody else. And what is that lending for? How about somebody buying a car, somebody buying a house, somebody paying off credit cards or financing something? Well, let’s focus on that, right?

What if there was a very simple way for you to take back all of those banking functions that you use a traditional bank for? That’s really the basis, that’s the process. If we didn’t need a bank, a traditional conventional bank anymore, what would life look like? Well, I’ll tell you, it would look amazing, because banks make 400% to 1,300% more than you do on the deposits you leave there. You can check https://www.powerfinancial.com/en/ if you want to verify that.

But you go to a bank—and let’s just use a car, okay? Let’s say you want to buy a car; you go to the dealership, you find the perfect car, your dream vehicle. Then all of a sudden you go to the bank or they bring you to their banks, and what do they do? The bank comes back with a monthly payment, which includes principal and interest, and you’d sign the dotted line and they give you the keys to the car, and what do you do? You exchange monthly payments to someone else’s bank. And over the course of that time, you pay the car off, but who wins in that? You have the car, which is depreciated, but the bank has all that money, all the control of that money, and they didn’t even use your own money.

And then we were going to be the bank.  And instead of depositing our money in their bank, we changed and we’ve put our savings, the money that we would put into a traditional bank, that would be i.e. your savings, or money you’re putting in a 401(k) or an investment account – let’s just say we just changed one thing in what you do today, and we change where that money went first. What if we put it into this very specially designed and engineered whole life insurance policy that I’m talking about, commonly called privatized banking policies?

In doing that, let me tell you what would happen. First off, you change the name on the check; it doesn’t go to your conventional bank, it goes to the insurance policy. Now, when it hits that insurance policy, you get a contract from a mutually owned dividend-paying insurance company. And that contract says a few things; it says, number one, that the insurance company as per 2021 – this will be changing in 2022, but as of right now – they guarantee you an interest rate of 4% on your money. Now, unless your current savings account is paying you 4%, already we’re better, right? We’re better making 4% than we are making 1% or less than 1%. So that’s already a plus.

But then, the insurance company also says in this contract that if they have surplus, if they have extra profits at the end of the year – because these are mutually owned – they are willing to share it, to return it, in other words, to you in the form of a dividend, because they’re mutually owned company. So there’s no stockholders; there’s just you, the policyholder. So every year, they pay you a dividend.

Now, let’s just use 2021 numbers; that dividend can be anywhere from 1.65% to 2%. So now let’s just use the 2%—you’re making 6% on your money. That’s way better than any conventional bank. But now we got a problem, because now in the bank, the reason you put money in a savings account is if you need it, you can just go take it. That’s why we use bank accounts.

Well, what if this specially designed and engineered whole life allows you to put the money in there and immediately, within the first 30 days, take that money out as well. Now, you won’t be able to take all of that money. The way these plans are built – and I’m just going to give you a range, because it’s all in the plan design – depending on your needs, your goals and what we’re doing for you, that could be between 60% and 92% that you have access to.

So let’s say 90%. You put 10,000 bucks in this specially designed whole life, and then you need that money, so you take out $9,000 of that money immediately in the first 30 days. Now, the most important thing is if you had access to that money, what would you do with it? Well, you could take that money out.

Now when you take the money from this specially designed and engineered whole life, you’re not using your own money; that $9,000 that you just got in your hand, that you’re holding, that you took out in the first few days, that’s not even your money. The insurance company made a loan to you and you didn’t have to qualify for this loan, you didn’t have to have your credit pulled; you just click a button and within 36 hours, the money’s in your hand. True statement.

So now you got $9,000. That $9,000 is the money from the insurance company’s general account that they just gave you without really anything. Why would they do that? Well, simple. Your $10,000 that you deposited there is still sitting with the insurance company, is still making 4% plus the dividend. So you’re making uninterrupted compound interest, because there’s nothing interrupting that compounding effect on your money, because you’re not using your own money.

So where did this money come from? Well, the insurance company had it in their general account. So why would they just give it to you? Simple, they gave you an advance of your death benefit. Remember we’re talking about a whole life; there is a death benefit. Money that will be paid out to somebody upon your graduation. The insurance company just gladly says, “Hey, we’ll let you use your cash value anytime you want, and we’ll give it to you in the form of a loan, and when we give you this loan, we’re just going to take that loan amount, that $9000 away from your death benefit.” So literally, you’re leveraging your death benefit while you’re living.

Now, what’s the downside to this? The downside is the insurance company is going to charge you interest on this loan. But this loan that they just gave you, which is an advance of your death benefit, never technically needs to be paid back, because they just keep it from your death benefit. So the interest they charge you on this is 5% simple. So let’s just do a math equation, right? How much did I say they’re paying you on money that’s still in your account sitting in the insurance company? 4% guaranteed, plus we’re using a 2% dividend. That’s 6%. But now they’re charging you 5% in the first year. That means now you net 1%.

So how many of you would love to have a bank that pays you 6%, allows you to take some of your money out, 60% to 90%, anytime you want, and they still will pay you another 1% on the money, even though you’re holding most of it in your hand? How many of you think that would be a good use of money?

But let’s get into what the wealthy really know. That equation is just to explain how the machine works. Now, that $9,000 in your hand, this is where the important part comes in. This is you taking back the banking functions in your life. Now, most people that I come across have some form of debt – car loans, student loans, credit cards, things of that nature. So let’s just say this example that I’m using, they put $10,000 in there, $9,000 in their hand, what are they going to do with the $9,000? Because we want to use that $9,000 to make more money. Well, let’s just say you owed Visa $9,000, hypothetically. Let’s take the $9,000 that we just took as a loan from your banking policy and let’s pay off Visa. So now Visa is paid off and paid in full; the $9,000 that the insurance company loaned you from your death benefit pays Visa off. But weren’t you making monthly payments to Visa? You were. Let’s just call that $200 a month; you were paying the minimum interest payment to Visa every single month for $200 a month. And Visa, let’s just hypothetically say there were [unintelligible [00:16:14].22] a 20% interest.

Well, if you were going to take back the banking functions, the most important part in this process is now that $200 you used to give to Visa, if you use your bank, your $9,000 that was from your bank, it’s important that you treat your money the same as you treat the bank’s money, or the credit card company’s money. You had to make monthly payments to Visa, $200 a month, when you owed them money. You’re now no longer owe Visa money because you took a loan from your bank and you paid off Visa. So now what you should do to be an honest banker, to treat your money the same as you treat the bank’s money, is change the name on that $200 check every month.

So instead of writing Visa a check for $200 a month, you write your bank a check for $200 a month. So all the money is the same; you haven’t spent any more money, you haven’t worked any harder, you haven’t given up control of money, you haven’t taken on any risk… And if you change that $200 a month payment and you pay it back to yourself every month – just set up a bill pay, and now $200 every month is going back into your specially designed and engineered whole life as a loan repayment.

You know what just happened there? Let’s go back to the beginning. We were making a 1% spread on our money; the arbitrage, right? 6 minus 5 is 1%. But then we paid off Visa, and the $200 a month was 20% interest that you were paying Visa. But now that $200 a month is going back to you. So did you not just recycle and recapture the equivalent of a 20% interest rate? You did. You were giving Visa 20%, and now you’re paying yourself back 20%. So now you’re net in the first year is 21%, and you didn’t do anything different besides change one thing – you changed where your money went first.

So that’s the general consensus. You can do this with credit card debts, cars—if you did this with cars and instead of financing your cars, you took loans from your banking policy, bought the car and made those monthly payments that you pay right now to somebody else’s bank back to yours, I will tell you what will happen – and I have a great video on my website that shows this. You will get all the money back for every single car you ever buy, drive and own. Now, doesn’t that sound too good to be true? Maybe, but it’s not. And I can prove it mathematically in that video.

How about real estate? So I’m a big real estate investor. And in those early years when I was doing all that real estate, do you know how I was funding a lot of the renovations, a lot of the down payments on those rental buildings? You guys got it. I was doing it by using my banking policy. Me and my wife have done hundreds and hundreds of flips when we had our TV show. Do you realize a lot of that money that I used for those flips, for those down payments, for those renovations, for those overages – everything came from me making loans from my bank; not somebody else’s bank, my bank, to myself. All I would do is I would take loans from my bank, lend it to my company at a rate of 6% and make monthly payments back to my bank.

Folks, I’m just giving you what would be the equivalent of the pimple on the elephant’s butt right now. The grand scheme of how much you can do with this privatized banking system – they call it infinite banking concept, which is a process of taking back the banking functions – is unlimited. I’m just trying to help you understand the concept of you just change one thing and that’s where your money goes. And then everything else is you just following a process and this is the result.

I showed you a credit card. I told you you can get all the money back for all the cars you’re going to buy, drive and own. If we start talking about private lending, buying rentals, buying flips and doing it all with your bank versus somebody else’s bank – this is life-changing. It changed my life, folks.

In 2014 I was done. I was hundreds of thousands in debt. I couldn’t even see the light at the end of the tunnel. Today, I’m not going to get into that, but I live a pretty good life, and all I did, folks, is I changed one thing, I did one thing different, and I stuck to it, and I followed this process.

So Theo, sorry… Hopefully, I didn’t go too long into that, but I wanted to kind of take you full circle on it.

Theo Hicks: Oh, yeah. Thank you so much. I love all the different examples you gave as well. Now, one follow-up question I do have, that kind of personally had me confused in the past… So going through that example, you said, where I invest $10,000 into full life insurance… Can I just invest $10,000 one time and then just continuously use that? Get a loan, pay it back; get a loan, pay it back; get a loan, pay it back. Or do I need to continuously deposit money into that account, with more money than a loan each year? Or can I just do one investment and then just sit on it, or does it depend?

Chris Naugle: Great question, Theo. So you can’t just make one deposit. There’s a lot of rules and a lot of the rules are IRS rules. So all the money that’s in these banking policies is potentially tax-free. So if you just put money in one time, it would never work. So how we structure these plans is we build them around your current savings program. So if you’re currently saving $500 a month or $1000 a month or whatever you’re saving, we just changed where your savings goes. But we’re not going to just — you used the word investment. We’re not investing money here, because remember, there’s zero risk. You’re putting money, you’re saving money making i.e. deposits into this specially designed and engineered whole life; it’s not an investment because you can’t lose money… But you can’t just put money in once.

So if we toko that $10,000 example and we built the plan to hold $10,000 a year, here’s how it would work. You’d make a $10,000 deposit — or maybe you don’t have $10,000, you just want to make monthly payments, right? $10,000, you make monthly payments of whatever you want into the plan equal to $10,000 per year. So I believe that’s $833.34 per month. You could do that every single month to get to $10,000.

But let’s just say year two, you set it up to hold $10,000 a year, and usually, what we’re going to do is we’re going to build the plan to hold $10,000 a year; that’s the most you can ever put into the plan. You can never put $11,000 or $12,000, and you’re going to be [unintelligible [00:22:01].13] The Modified Endowment Contract rules – it’s an IRS terminology. So $10,000 is the max you can put in. But let’s just say year two, for some reason, you don’t have the $10,000; you just can’t make that $10,000. Things happen and you just didn’t have it. Great. All the plans that we built have flexibility, and you can reduce from $10,000 down to $4000. We can even build it to have a fluctuation of going from $10,000, all the way down to $1,000. So we can build all that flexibility in, but there will never be a plan that we build that only allows you to put money in once. The shortest period of time we can build a plan to hold money is for 10 years. So you’re going to be putting deposits into this system for a period of 10 years. But you can fluctuate the amounts anywhere from what you start, all the way down, depending on how we build it, let’s just say to 60% to 90% lower.

Theo Hicks: You’ve proactively answered my question, too… It was “Do you need to keep doing that 10k forever?” So you said the shortest amount is going to be 10 years, and then I imagine up to whatever. Super fascinating stuff. So Chris, you said that, this is the—I like your analogy, “a pimple on the elephant’s butt”. So where can we get the whole butt? Where can we learn more about this strategy more, about the specific rules, if there’s something that people are listening are interested in learning more about?

Chris Naugle: Yeah, so I give everything away for free. So you just go to my website, https://www.chrisnaugle.com/, and just go to the free resources tab. There’s so many videos on there, showing you everything from how to get the money back for all the cars you’re going to buy, drive and own, how to use it for real estate and to do private lending from it… And then if you really want a deep dive, go to my YouTube channel, which is @thechrisnaugle, and oh my goodness, there’s everything. We have tons of case studies; professionally done and edited case studies of our students and our clients actually going through, using this. And you guys, if you’re in real estate you would love — there’s one [unintelligible [00:23:50].14] called “Solving the money problem in real estate.” He shows you how he uses his banking policies to get and make money five different times on the single deal he was doing; he was doing a BRRRR deal, and he’ll walk you through exactly how he does that, and it’s all on the YouTube channel.

Theo Hicks: Perfect, Chris. Well, thank you so much for joining us today and walking us through this process of becoming your own bank through these specialized life insurance policies. We went over specifically how it works. We went over examples and we went over how banks, corporations, the Rockefellers used this to become super-wealthy. And I like how you position it – it can be something where the only change you make is where you’re depositing your savings; instead of depositing it in [unintelligible [00:24:31].28], you deposit it in this bank. And then from there, there’s an infinite number of things you can do to use that money to become your own bank. Or you can just simply use it as — I know you said as an investment, but as a way to make a guaranteed return on your money that’s better than a savings account.

Chris Naugle: That’s a big thing right now, capital preservation. People are scared of what’s coming, so they’re looking for just a way where they can preserve their capital that they have. So I’m glad you mentioned that.

Theo Hicks: Good point, capital preservation. So Chris, thank you so much. People listening, if you want to learn more about this, https://www.chrisnaugle.com/ and then make sure, again, make sure you check out his earlier episodes. So Chris, thank you so much for joining us today and kind of breaking this down for us.

Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

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JF2398: Niching Down By Writing A Book To 4x Your Conversion Rate With Max Keller

JF2398: Niching Down By Writing A Book To 4x Your Conversion Rate With Max Keller

Operating in a crowded market has its challenges. In 2017, the return on Max’s adspend was growing smaller and smaller, and Max started looking for alternative ways of attracting clients in Dallas. Having a ton of competitors and the same list of clients as everyone else made him feel like he was worth a dime a dozen. That’s why he started niching down to the senior market and creating additional value for the deals with the help of a referral list and senior housing information. After a while, he wrote a book for his ideal client that helped him get exclusive deals and expanded his customer base.

Max Keller Real Estate Background: 

  • Real estate investor, speaker, and mentor
  • 5 years of real estate experience
  • Max’s unique marketing approach landed him onstage with Robert Kiyosaki & the 2019 industry innovator of the year award
  • Flipped over 100 houses 
  • Based in Dallas, TX
  • Say hi to him at: https://dealschasingyou.com/fairless 
  • Best Ever Book: Deep work

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Best Ever Tweet:

“I’m not trying to help the whole world; I’m trying to help the people that I’m most situated to add value to” – Max Keller.

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JF2393: How To Turn 6 Months Of No Business Into A Winning Streak With Anthony Mann

Anthony got started in real estate straight out of school. His parents were in business for over 40 years, so it was a natural progression.

Anthony got his license in June 2007. First, several months of his career were great. But once the market crashed, he didn’t have a single listing for 6 months. He took that time to build relationships and rapport with people who could help him with his work. The first property he sold gave him a chance to look at the investor side of the real estate world, and Anthony was hooked.

Anthony Mann Real Estate Background: 

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Best Ever Tweet:

“I gave up a little bit of income in the short term to be guaranteed income for the rest of my life” – Anthony Mann.


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m here with today’s guest, Anthony Mann. Anthony is joining us from Huntington, New York. He’s the CEO of Social Strategy and has 13 years of investing experience. Anthony, you’ve got a portfolio that consists of 200 flips, and you currently own 42 properties. Before we get started, tell us a little bit about your background and what you’re focused on now.

Anthony Mann: Absolutely. Thank you so much for having me on the show today. I got started in the industry right out of school. My parents have been in the real estate business for over 40 years. My dad’s been an agent in the RE/MAX office for a long time. It was really a natural progression for me to get into the business. I went to school for econ, came out of school, got my license I guess in June of 2007… So I basically walked into the worst market ever. Those first couple of months were great, I sold a couple of houses, and I was totally hooked on a commission that I was making. Unfortunately, within 9 or 10 months, the whole world basically fell apart in 2008. There were vacancies everywhere, and people weren’t selling their homes, and people were underwater… And I realized that selling individual residential properties was just not going to do it for me. I actually happened to love the commercial side of real estate even more than I liked residential. So that was where my focus was. If anybody was around in 2008 in the market, you know that there were vacancies and people couldn’t sell their buildings. It was just a total mess in 2008. I quickly realized that selling individual properties, whether commercial or residential, was just not going to be a way for me to make any sort of money.

I got on the phones and I started calling every single – they’re called vendor managers, and they work at every major bank in the country, and other people who handled REO listings or foreclosure listenings. I spent six months literally calling and calling and calling and – I tell the story all the time… About six months go by, and I’m calling, I haven’t gotten a single listing, I haven’t made a sale, and I’m just on the phone. I called the same guy every day, I don’t mention his name ever, but he was the one who got me into the business. Basically, I called him every day between 12 and [12:15]. It was to a point where he’d be like, “Anthony, I don’t have anything for you today,” and he would just hang up on me. So it was like a running joke.

One day, he picked up the phone and he’s like, “Anthony, it’s your lucky day.” And I’m like, “Oh, my God, he’s about to give me a listing.” So he’s like, “Listen, I’m pissed at this agent.” It was another agent in my market, there are only about 15 guys who handle all the REOs in my market. He says “I’m going to give you 30 days to sell this listing. I’m taking it away from this guy. You’ve got 30 days.” I was like, “Listen, if I can’t sell it in 30 days I’ll buy it myself. Consider this thing sold.”

So in a typical agent fashion, a week later we would do an open house, and we got a couple of offers, and immediately the thing sells. That was my first foray into working with an investor and watching them purchase a house, rehab the house, and then flip that house, and I got the listing back. That got me into the investing side of the business. I was like, “Wow, there’s this whole other side of the business stuff I didn’t even know existed. I didn’t know that there was this much money that can exist on the side.” So fast forward about a year, in 2009 I did my first flip, it was about a year after that. That property we sold — I bought it, and it was sold literally after we bought it. I think 42 days later from the time we purchased, to rehab, to a new contract, the title being done to sale. It was about 42 days, and we made $193,000 on that flip. It was the coolest experience I’ve ever had. I thought making a 10 or $12,000 commission being an agent was cool, but when I saw almost 200 grand come in on a single flip, I was a whole other level of hooked on investing.

Ash Patel: So tell me more about that deal. What was the purchase price?

Anthony Mann: This deal was crazy. I had a few dollars in the bank, but I didn’t have a couple hundred thousand bucks. I was able to get by and pay my rent… So the purchase price of this property all said and done, including closing costs, was 525,000. All I had was the downpayment for that property, I think I put $5,000 down. Again, I’m 23 years old, it was all the money in the world to me. So I get into contract and I’m like, “Well, now I’ve got to go find the money.”

It took me a little bit, but I wound up finding a guy who literally walked into closing that day with a certified check for $525,000, and the rest is kind of history. He made a really nice interest rate on it. Obviously, I didn’t realize $193,000 – there were a lot of costs that went into that. But yeah, we wound up selling that property in about two weeks. We had very minor rehab on it; we did some paint, we changed the appliances out. The house was great, it was just really undervalued. Then someone gave us an offer for — I think it was like 740-ish thousand. Then they wound up doing the inspection and they wanted like 20-ish grand worth of interest on the credits, no problem. That property closed shortly after that. It was absolutely insane, the way the whole deal went down.

Ash Patel: Okay, so that’s an incredible win. You went from a mindset of six months of probably doubting yourself, wondering what you’re doing, being persistent nonetheless, and then you had this incredible win. What are your next steps? Because right now you’re on cloud nine. I mean, you’re loving life, things are good.

Anthony Mann: Yeah, so that’s what got me into the holding business. Now I had a real chunk of change in the bank, and I said, “Okay, I really don’t want to be taxed on this money, just give half of it away to the government. What can I do with it?” The first thing I did, and this is again, back in 2009 – I was on Zillow at the time, because that’s really where you could find properties in other areas. You could call an agent but there was no easy way to search online. So I found literally blocks of property, eight, ten properties per block in Detroit, Michigan, going for a $2,000 property. So I was like, “This could be cool. What if I can go get 10 to 20 properties, do some minor rehabs, and then Section 8 them back to the city of Detroit?” That’s what we did.

We bought blocks of property, we went in, we did very minor rehabs on them, made them up to code for Section 8, we approached the city of Detroit and we said, “Hey, listen. We have these properties. We’ve got them up to what you’re looking for. Can you send an inspector out there? We’d love to rent these to people as Section 8 properties.”

People get the time were like “You’re crazy. Don’t do section 8. You can make more money. Why would you ever do that?” I looked at them and I was like, “What am I going to make? An extra 100 bucks per property, a few hundred dollars per property?” We’re doing two things here – we’re helping people who don’t have homes, and we guarantee our income. I’m never worried about the city of Detroit paying their bills. They’ve never been late. On the 10th of the month the money’s in my account.

Fast-forward to 2020, it was interesting — I still own a lot of these properties, and it was interesting because a lot of my friends who were investors, their tenants stopped paying rent. “We can’t afford it. We lost our jobs.” On the 10th of every month, the city of Detroit deposits the money. It was one of those things where I almost gave up a little bit of income in the short term to have guaranteed income for the rest of my life. That’s basically what I did with that money and that’s propelled me into purchasing more and more and more properties across the country.

Ash Patel: Alright, I’ve got a lot of questions for you just based on that. Let’s back up a little bit… You purchased blocks of properties. How do you purchase a block of property?

Anthony Mann: Literally, that’s how they were being sold. There would be like 10 properties, $12,000. And I was like “Per property?” “No, no. 12k total.” I was like, “Okay, I’ll take it.”

Ash Patel: And you’re leveraging your experience calling these banks… What was the word for the bank person?

Anthony Mann: They were called vendor managers at the time. They have a very specific language that they speak. If you understand their language, they don’t mind having a conversation with you. The way we got through to that was, we were able to identify the properties we wanted, I was able to identify the bank, and then by this time, I was about a year and a half in the foreclosure business – I had contacts at every major bank in the country. So now I’m calling the person at that bank that I already have a relationship with, they answer the phone for me, and I’m like, “Hey, I’m interested in doing this.” They were like, “Hey, call John Smith at this desk, they’ll take care of you.” So I call that person, I’m like, “Hey, this person just referred me over to you, I’m looking to do this.” He’s like, “Sure, I’ll send you the list, I’ll send you the price out.” Literally, those deals got done in three or four days. It was the quickest thing you could ever imagine.

Ash Patel: You’re still in New York at this time, right? So all of this is being done remotely.

Anthony Mann: Completely remotely. To this day, I haven’t even seen every single one of those properties.

Ash Patel: Okay, I’m baffled here. Explain to me… By the way, it’s awesome that you leveraged those six months; you are actually building your database or building a rapport with all of these vendor managers. So explain to me the challenge in buying blocks of properties, getting them rehabbed, getting Section 8 tenants in there… I want to hear all about it.

Anthony Mann: Yeah. Really, what it came down to was my biggest concern, was what’s the rehab going to cost? Because we only had a certain amount per property that we were willing to do. Obviously Detroit, Michigan, and especially at that time, the rents are not $3,000 a month. The rents are $700 a property, they’re not huge rents. So granted, taxes are very low there; I think the taxes are $1100 a year or $1200 a year per property there. They are small taxes, but there’s not a huge amount of income per property, so we have to make sure that we don’t overspend on the rehab. That was my biggest concern.

I had inspectors go out, I want to make sure there are no foundation issues, the roof didn’t need to be replaced for the next two years… There were certain things that I was very cognizant about because I had experience in the REO side of the business and I looked at what my investors were concerned about; they became my concerns when I started purchasing my own property.

So I had inspectors out there, I had property management companies that basically handled the day-to-day. They hired their friends, family, people they knew that worked with contractors, and those people did the work. Again, this is 2009, when there’s a ton of people out of work. It’s very similar to 2020 we were just in, where there are millions and millions of people out of work and there’s a huge financial crisis. So I didn’t care who you’re hiring as long as they were insured and they were doing good work. I always said these got to be up to code, we have to get them approved by a Section 8 inspector…

So those rehabs took a couple of months and we did it property after property. We did one property, we had the inspector come in, we got it rented out. And the next property, and so on. So we did it one by one by one. It took months to do, but over time it was just clockwork. We knew what to expect, how long the rehabs are going to take, how long the inspections are going to take, what we can almost guarantee that the inspectors are going to say when they come in… We were just proactive about it. We developed a relationship even with the city of Detroit, because we knew what they wanted and what they expected.

Ash Patel: Anthony, who’s “we”?

Anthony Mann: I’d say “we” is my company. The people that I work with. So me as the owner of the company, my property managers, my inspectors, my real estate agents that work with me… When I say we, it’s the collective of all the people that basically make this happen.

Ash Patel: Okay, so you built a team to help you manage, acquire, and deal with all these properties. So what was your next step after that?

Anthony Mann: I was still selling real estate on Long Island. We were growing and growing like crazy. By 2010 we were selling 250 properties a year; we were a powerhouse on the REO side. But 2013 or 2014 was rolling around and I quickly realized that as a mid-20-year-old guy– I was 24 or 25 years old– I didn’t want to be telling people, walking up to their homes and telling them news they already knew. They haven’t paid their mortgages in two years, their sheriff is going to show up any day, and I can offer you $3,000 to move out in 30 days. It gets really old really quick and I said to myself, “The money is good, but I don’t want to do this for the next 40 years.” So I started looking at ways that I can get out of that side of the business. While we still do some business with certain banks, we certainly don’t do nearly the volume that we used to. So I got more into the investing side and I actually started a real estate tech company in 2014.

A really funny story – so I get a property that’s totally undervalued in Dix Hills, New York. If anybody knows what that is – a very nice area in New York. It was about $300,000 undervalued. And I do an open house. I used to do one-hour open houses, because I was like “People are either going to come or they’re not going to come.” This one — this is going to be a wild open house. We have 70 to 80 investors show up at this open house in an hour; there are people everywhere, people are signing in, and I, like an idiot, got this piece of paper that people are writing the name, phone number, and email address… An hour and a half goes by and everybody’s gone. I’m going down the expressway and I’m doing 70 miles an hour, the window is down… It was probably like May, I got the windows down, and no joke, these pieces of paper catch the wind and go flying out the window… Like, gone. And I’m doing 70 miles in the expressway – you’re not stopping, you’re not getting these papers back ever. I was like, “Well, this is dumb.” So I’m mad at myself the whole way home. I’m like, “How am I this young and I’m using a pen and paper. What am I thinking? There’s got to be an app for this.” And the app store was there. There were apps, but it wasn’t like it is today, where there’s an app for everything.

So I get home and I’m starting to look, open house app, open house ledger… I was going through, and I find a couple. I’ve always been a CRM guy. I have a database of people that I’ve talked to since 2007. I can go back to the first person I ever spoke to in my database. And I was “Why wouldn’t somebody create a simple product that would just push the information into my CRM?” I don’t need it to do anything except collect information, push it into my CRM. A very simple product, and it wasn’t available. The only products that were out were self-contained, meaning if I use it to sign in, the only place I can see those records is if I go into that app and I go look in there… And that’s fine, except if you have two or three iPads at the same open house; now you have two or three iPads that you have to look for people that sign to the open house, so they didn’t sync across each other.

So I was like, “You know what? This is crazy. We’ve got to do something about this.” So I basically made that app. It was called AM Open House, it was in 2014, and we launched that 90 days later, so on July 14th of 2014 we launched that app. It was kind of an instant hit. We had about a couple of hundred users the first month, we were up to 1,000 after a couple of months, by the end of the year we were at 5,000, and by the end of the next year, we had over 125,000 people across the country and Canada using that app.

So I started to find ways to leverage my previous experience of being in real estate, being an agent, being an investor, to saying How can I start to develop technology that agents can use to better their business?” I never wanted to be the person to replace any single product, I just wanted you to be able to insert what we offered into what you already have, and make no additional changes to your business.

Ash Patel: You sound like somebody that doesn’t sit still and you move on from one challenge to the next. Do the fix and flips and the real estate deals – does that still excite you today?

Anthony Mann: Yeah, the flips are totally exciting. Obviously, the rentals are exciting, too. It’s great to add income or whatnot. But the flips are definitely exciting, especially right now. The markets are out of control. You can’t even buy property right now, it’s so insane with the way the numbers are. So when we get a property now, it’s that much more exciting. It’s like, “Well, we got one we could actually make money on.”

Ash Patel: What are you doing now to find these deals?

Anthony Mann: We’re just putting in tons of offers. We have people out there sending us listings every day, and if the numbers make sense, we just throw offers in. Well, for every 100 offers we put in, we get 99 people who say no, and we expect that, especially in today’s market. It’s probably even higher than that; it’s probably for every 150 we’re putting in, we’re getting one right now. It’s just a crazy market.

I have a client in San Diego, and he sold a house for $300,000 over the asking price. What do you mean $300,000 over the asking price? That’s unfortunately the market we’re dealing with right now. So once it levels off, I think the fix and flip market will come back pretty strong. But right now, people are trying to move out of the city, and home sales are just absolutely incredible.

Ash Patel: How do you find a competitive edge when you’re putting these offers in? Because you have one of many offers? What do you know–

Anthony Mann: At the end of the day, they’re numbers. If the numbers work, we’re glad to take it; no contingencies, all cash, all that stuff. But if they don’t, even if it’s $5 more, if the numbers don’t work, the numbers don’t work. We’re pretty strict about our criteria.

Ash Patel: Where do you get your data from to evaluate these properties?

Anthony Mann: We have agents that we partner with in every market that we purchase in, so we leverage them. When there’s a good deal out there, we have them send us all the comps that we need. And again, we’re very specific; if it’s a cape or if it’s a split, don’t send me colonials to comp that against. Be real. I don’t care if it’s a year old or six years old, get me real comp so I can get a real number.

The agents know that after we rehab them, they’re going to get the listings back, they’re going to get all those things… So they don’t want to fight the relationship to make five extra grand, it doesn’t matter to them. Because they have a lot more on the back end coming to them. As long as they do right by us, we’ll always do right by them.

Ash Patel: So you’re leveraging all of your relationships, which is originally what got you successful in the first place, the six months of building relationships. That’s been the theme throughout your investing career. Awesome. So what’s in the future? If you think the market is superheated now… Obviously, the market is going to come down at some point. How do you adjust your strategy and what’s next?

Anthony Mann: I think there are two parts to that. I think that the market is going to level off, if not the end of 2021, I think early 2022. I think we got some time in this market still. Inventory is super-tight. I think there are 42 days’ worth of inventory across the country right now. So for anybody who follows those numbers, typically there’s four months’ worth of inventory. There’s about a third of that available, which is why prices are being driven up. But when inventory levels do come back up and prices start to level off, I think that’s going to be coupled with interest rates going up, so I think we’re going to see a decrease in home value relatively quickly after we level off as well. Let’s hope the stock market stays where it is.

But how do we pivot from that? We’ve been very structured since 2009 or 2010 when we really started doing this. So to say that we’ll pivot – I don’t necessarily know that we will. We still want to know what’s it going to sell for, what we can afford to buy it for, how much the rehab will cost… I don’t think that’s going to matter. Where I think things are going to change is things like the costs of the rehabs.

Right now, lumber costs are up 80% from where they were a year ago, which makes a huge difference, $10,000 is now $18,000. It’s a massive difference in what it costs to redo a basement, let’s say, or take down walls, or reconfigure a living area. I think the way we look at costs for rehab is going to change drastically. I don’t necessarily think the buy and sell part of it will really change for us, but I think the rehab portion, I think for everybody is going to change pretty drastically.

Ash Patel: So Anthony, you have a machine with single-family homes. You’re turning and burning these things, and you’re holding a good number of them as well. Would you look at other asset classes – multifamily, commercial, non-residential?

Anthony Mann: 100%. And I actually look back and I wish in 2009 I knew what I know now. I would have started with commercial property. My problem then was that I was brand new in the business, and all I saw was commercial vacancies. But now I look back and I say, “I wish I would have done the multifamily thing. I wish I would have done commercial strips.” Because we need those, everybody needs them. It doesn’t matter where they are in the country, they’re necessary parts of everyday life. If I can go back, that’s what I would do. I would have never bought a single-family home. Buying doors is great and they’re good income. As I said, we Section-8 them so we treat it more as a business than the traditional landlord out there. Because we have one tenant for all our properties. It’s the city that we’re in. So it’s a little different than the traditional landlord who looks at it and says, “Oh, I have 10 or 15 or 20 tenants out there” that they have to physically deal with. So if I would have definitely done things a little differently, I would have gone to the multifamily asset class 100%.

Ash Patel: Alright, so now that you know that, you can’t go back in time… So what are you doing so that you can implement that going forward? What are you doing to acquire those strips of the multi-families?

Anthony Mann: We’re in the process currently of starting to liquidate the single-family homes and 1031 them into multi-use buildings. So ideally, what I’d like is four to six units on top of three to four units of retail. That’s what I’m looking to purchase. I think that it’s a happy medium between the two, where commercial rents – you’re going to get good retail rents at the bottom, and then because of the nature of any business, you want to have those “single families” or individual people renting on top. It keeps income consistent. You lose one tenant or you lose a commercial tenant, you don’t have to worry about what’s going on with the world or the economy right now. So if you have both things together, I think it’s where we want to go. So we’re going to start liquidating those probably over the next two years or so, 1031 them into these multi-use assets.

Ash Patel: That’s a great outlook. I’m a big fan of those as a good transition from somebody coming from single families wanting to get into multifamily or commercial. That combination of having retail and apartments above it is a great transition, because you still have that comfort factor of bringing in guaranteed rents. Awesome, man. What’s your best real estate investing advice ever?

Anthony Mann: Somebody told me this back in probably 2008. They said, “Never worry about finding the money. If you find the deal, the money will find you.” It proved true; in that first deal that I told you guys about, it proved true. I had the deal, we knew what we were going to sell it for, we knew everything about it. I didn’t have the money; I got into contract, I put my own money at risk, and the money found me eventually. The deal made sense. So never be scared to make the deal before you find the money.

Ash Patel: That is a great piece of advice, but I want to elaborate on that a little bit. I was on a real estate forum and there were a lot of newer investors. One person started a forum post that said, “Hey, guys. Does anybody else think it’s nonsense that people say, if you have the deal, the money will come?”  You wouldn’t believe how many people responded and said, “They’re full of it. That’s not true.” I’m blown away, because I’m in the same mindset as you – if you have a great deal, the money will come. So what would you say to those people that don’t believe that?

Anthony Mann: Get out of your own way; honestly, just get out. Stop listening to everybody else, go find the deal, and you’ll find the money. I always say sales cures all. So when you make a deal, that’s when you’re making a sale on that property, you sold that person to sell you the property for the price that you wanted it. You already know that if you bought it for that price, you can sell it for X dollars more. So if you can close those deals every single time, the money will always follow behind you. And don’t get me wrong, if you just put the deal on paper and you don’t go ask people for money, the money’s not going to find you. But if you have the deal, go out there and tell people you have the deal. “It’s locked up, all I need is this, this is what we’re going to make out of it.” If you don’t have money, make the investor a sweetheart deal. On that first deal that the investor walked in with a check for 525,000, this guy didn’t know me from a hole in the wall. He made $60,000 in 42 days, and I was fine with that, because I didn’t have the money to close the deal.

So make them a sweetheart deal. It doesn’t have to be only towards you, it doesn’t have to be 12% a month or whatever hard money is going for today. Give the guy a sweetheart deal, let him trust you; he’ll start doing more and more deals with you and giving you better and better rates. Just get the deal done and the money will find you.

Ash Patel: That is incredible advice. I guess it’s not magical, the money is going to come in; you just have to put it out there. Another great point that you brought up – somebody else asked me, on my first syndication or joint venture, “What should my return be? What do I get out of it?” My answer to him was, “That’s the wrong way to look at it. Who cares about your return? This is your first deal.” Like you said, “Reward the investors first, build your credibility, build your track record.” That’s incredible advice. Thank you for sharing that.

Anthony Mann: To this day I still call that investor sometimes. And he doesn’t even question it. He just wires money. We’ve built a rapport; it has been 11 years now. He knows that we’re going to do good business, he just wires it. He’s like “Fine, pay me back when you pay me back.” No term, no, nothing; he just knows that’s how we do business. It’s very important to build that rapport with people who have money. It’ll change the way you invest in real estate.

Ash Patel: And you’ve just reiterated your underlying theme, build relationships. Anthony, are you ready for the lightning round?

Anthony Mann: I am. Let’s do it.

Ash Patel: Awesome. First, a quick word from our partners.

Break: [00:26:18][00:26:40]

Ash Patel: Anthony, what’s the Best Ever book you’ve recently read?

Anthony Mann: I just read Pitch Anything, Oren Klaff. A great book, great sales strategy on how to speak to people, how to really understand what people are selling, and how you can sell them on anything.

Ash Patel: Very cool. Anthony, what’s the Best Ever way you like to give back?

Anthony Mann: I’m a big charity guy. I go to a ton of charity events; obviously, this year has been a little different. But I’m a very big proponent of giving back to not only charities when you can, but also the community, especially in your local community. I’m a big shop local guy. I don’t like going to big box stores. If I can support the local drugstore, the local restaurants, and the local bars, that’s what I do. I try to stay away from chain restaurants and any of these big names stores, the Targets, and whatever are out there. It’s just who I am. I want to support local businesses, because every dollar that goes into local business supports another person in your community. Every dollar puts food on the table for their children, pays their mortgage payment, and it’s hugely important to me.

Ash Patel: That’s a great outlook. Anthony, how can the Best Ever listeners reach out to you?

Anthony Mann: Two ways. LinkedIn, @anthonymann, or Facebook, facebook.com/anthonymann85. Facebook message me, I will get back to you. It might take me a day to two, but I’ll get back to you.

Ash Patel: Anthony, thank you for being on the show and that great advice. You showed your persistence early on, where if you had not been persistent for that six months where you didn’t have a single deal, the outlook of your life would have been drastically different. So your persistence, building relationships, building a software company, buying blocks of homes remotely 1,000 miles away, and building an incredible empire.

Thank you again for such great advice. Good luck to you in the future with commercial real estate. Once you get into those apartment buildings in the mixed-use, we want you back on the show. I want to hear all about how you transitioned.

Anthony Mann: Sounds good. I’d love to come back and thank you so much for having me today.

Ash Patel: Awesome, Anthony. Have a Best Ever day. Thank you.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

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JF2392 : Finding Deals Through Your Website With Melissa Johnson #SkillsetSunday

Melissa started out by doing flips and creating owner finance notes. After being in the business for over 17 years, she is now transitioning into the coaching space. Melissa teaches other real estate investors her skills and helps them customize and apply her guidance to their business.

Melissa was finding up to 80% of her real estate deals with the help of her website. Its biggest advantage is that motivated clients come to you as opposed to you seeking leads via traditional marketing. In this interview, Melissa describes a step-by-step process of finding deals on the website if you don’t’ have any online presence yet.

Melissa Johnson  Real Estate Background:

  • Full-time real estate investor, and the Co-Founder of San Antonio InvestHer meetup group
  • 17 years of real estate experience
  • She has completed over 1000 flips, and has a portfolio of rental properties and notes
  • Based in San Antonio, TX
  • Say hi to her at: www.themelissajohnson.com  

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Testimonials are great for credibility” – Melissa Johnson.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Melissa Johnson. Melissa, how are you doing today?

Melissa Johnson: I’m great. How are you?

Theo Hicks: I am doing great as well. Thanks for asking. Thank you for joining us again. Melissa is a repeat guest and, as of this recording, her episode actually hasn’t aired yet, so maybe in a few months from today, or probably a few months before this episode goes live, it will have aired already. So make sure you check that out, where she goes into more detail on her real estate investing background and what she’s focused on.

Today we’re going to talk about something more specific. Today being Sunday, this is a Skillset Sunday, so we’re going to talk about a specific skill that she has that you can apply to your real estate investing business, and that’s going to be finding deals through your website. So that’s going to be the main topic of conversation today. But before we get into that, a reminder – Melissa is a full-time real estate investor and the co-founder of the San Antonio InvestHER Meetup group. She has 17 years of experience and has completed over a thousand flips, and also has a portfolio of rental properties and notes. She is based in San Antonio, Texas. Her website is themelissajohnson.com. So Melissa, before we dive into that skill set, do you mind just quickly telling us more about your background and what you’re focused on today?

Melissa Johnson: Sure. So like you mentioned, I’ve been in the business for about 17 years now. I started out with flips and creating owner finance notes, which I really like. I bought a few rental properties, and then as the years have gone by, pretty much stayed with that. We did start wholesaling several years ago when the market was really good for that, so we’ve kind of thrown that exit strategy into the mix. That’s pretty much what I’ve been doing… Raising my kids, I’ve got five kids, and I’m still doing real estate, but I am also moving more into a coaching space. I’m working one on one with clients, just teaching them how to do what I do, very specifically to what their goals are. So it’s very individualized and it’s been a lot of fun; I’ve really been enjoying that.

Theo Hicks: Perfect. So let’s jump into the skillset today, and just to kind of set the foundation, could you maybe mention how many deals you’re generating through your websites, and maybe an absolute number, but also in relation to any other strategies you’re doing? Is it half your deals, is it all of your deals, or somewhere in between?

Melissa Johnson: It’s one of those things, I think, as with all marketing, it’s cyclical. There are times where it’s very effective and times where it’s less effective, just like with anything else. At my peak of doing deals, finding deals online, I would say about 80% of my deals were coming from the website, which was a very high percentage. And those are so great, because the difference between just shotgunning out a bunch of direct mail versus working with a website is when people are online, they’re searching for you, so their motivation is pretty high. So those deals, actually — we got more deals that way, and we were able to convert more deals that came from online more than any other channel than we’ve ever done.

That has slowed down a little bit, mostly just because I’ve kind of taken the gas off of that for a little bit. But it is still a very effective way to get leads and deals, especially from motivated sellers.

Theo Hicks: Let’s start from the beginning. I want to start finding deals online, and I don’t have an online presence. What’s my first step? What’s the first thing that I need to do just start to get the ball rolling here?

Melissa Johnson: When you get started with this sort of thing, obviously, the first thing you want to do is get a website. There’s a lot of companies out there that provide websites for you. Some people have completely custom websites built, and  that can get very expensive. There’s also some great sort of out-of-the-box things, like Investor Carrot, LeadPropeller… Those companies provide websites for real estate investors… So those are a great place to start. You’re obviously going to want to have a domain, because you won’t be online without that, so that’s important to have… And then there’s a lot of other things. Do you want me just to jump into what to do?

Theo Hicks: Yeah, let’s just jump in. Well, really quickly. What are your thoughts on the domain names? Obviously, you have yours as themelissajohnson.com. So should it be my personal name? Or should it be my company’s name? Should it try to be something really catchy? What are your thoughts on the actual name of the website?

Melissa Johnson: There are different schools of thought on that, and it really just depends on you. This is, again, to like the coaching thing, this is kind of something that I coach people through with, is how do you want to be known? Do you want to be known as an individual out there? Or do you want to be known as a company? Do you want to build your company brand, or do you want to build up just who you are? I think they both can work. The thing is, though, to have something personal about that, something that people will remember.

So it really depends on what your goals are as to how you should name your website and how you should start that branding process. A lot of people do it Their Name Buys Houses, like Chris Buys Houses, something like that. Those are really good, because they indicate what you’re doing, but also puts a name to it; so I really like those names for things. But then some people want to use their company name, and I think that’s okay, too. Just make sure it’s something that’s easy to spell and easy for people to remember. It’s not something that’s a super complicated or a super long domain name, with underscores and weird things like that in there. You want to make sure that it’s something just concise, clean, and fits with your brand, whether that’s personal or company brand.

Theo Hicks: Oh yeah, that last point is key. I always like whenever I read people’s bios, if I don’t have to spell it out then I know it’s a good website.  If I have to spell out and be like, “Is that a dash or an underscore? What’s that thing called?” That totally makes sense. Alright, so I’ve got my website. Now, what do I do?

Melissa Johnson: Now you want to make sure that you’ve got some key elements on that website. The first thing you want to make sure of is that you’ve got very clear call to actions in multiple places through the website. Starting that, you want to make sure that you have an area, it’s called above the fold. That came from an old newspaper term, when you buy a newspaper and it’s folded in half, that’s the first thing people see. It is the same thing with your website.

When people go to your website, you want to have as much relevant information and actionable things as you can above that fold, which means the point before they start scrolling. So right when you go to someone’s website you want to be able to see the call to action, whether it be a form – usually there’s a short form. Something that describes who you are, what you’re doing, and then just some way for them to contact you. Again, whether it’s a form, whether it’s “Call Now” with a phone number, or a text sort of situation.

Videos are also really great above the fold for ranking. If you can have some kind of short little video talking about what you do, I think those are fantastic. Because one, it puts your name and your face out there to people. So you’re starting to build trust right away with people; they can see your face, they see who you are, and then you have the opportunity to tell them what you’re doing, instead of reading through a bunch of text. Videos’ where it’s at right now. So if you can have a nice video and a very clear call to action above the fold, I think those are two really good things to have.

You also want to make sure when you’re getting started with your website that you’ve got relevant content. You don’t want to put a bunch of fluff and stuff like that in there. People want to hit the key points, so you want to make sure those key points are very clear, concise, not too wordy, things like that. You want to make sure that the content is relevant to what you’re trying to do.

Another thing that I usually encourage people to do is credibility. Even if you’ve never done a deal, you can get people to give you a character reference as a testimonial, or somebody that you’ve done business with. Maybe you’ve never actually closed a deal, but you’ve done some bird-dogging, maybe having some other people that you’ve worked with, with wholesalers, title companies, or loan officers, just anybody that can give you some kind of a credibility boost. And then of course, as you do deals, you want to make sure that you’re getting testimonials from all your customers.

So testimonials are great for credibility. If you’ve been featured in something, if you’ve been featured in a real estate magazine, or a podcast or something, those things are helpful to have in there, also just for the purpose of backlinks. But it also does create some more of that credibility, like you’re a reputable person, you’ve been doing deals, it just shows that you’re knowledgeable about what you’re doing. Then any reviews too, so Facebook reviews, Google reviews. There’s a great tool, it’s called Broadly, that you can use. That is something that we were using in the past. I really liked it, because it actually sends a link. So when we would close a deal, we would send that seller a link to our Broadly, and it would go directly in an email to them, so that they could type up a Google review, and then it would automatically post it on the website for you. So that was a really, really cool, handy little thing to have.

So just some things like that… And then also just make sure that you’ve got a clean design and everything’s easy to read. Don’t use some kind of funky font, that when you look at it, it’s like “I can’t really read that.” I think clean, simple is always the way to go as far as design. So those are some key things that I think are really important when you’re building that site initially.

Theo Hicks: I like that Broadly tool; that could be used for more than just when you’re fix and flipping. If you’re an apartment investor, you can use that whenever you have a new tenant, send them a link to Broadly to review and start working on your reputation. So we might have to start using that tool. Thanks for sharing that. I want to dive deeper into the relevant content, but I just wanted to ask – so are these all things you would have above the fold? Or is this just what you want to have on the website in general?

Melissa Johnson: You want to make sure above the fold that you’ve got at least one call to action, and that video if you can, or something that says about what you’re doing. The rest of it can fall underneath that, but you don’t want to scroll too far to get that stuff either. So you want to have a definite call to action at the top… But keep sprinkling in that call to action throughout the page; don’t just leave just at the top. Have it in multiple places, because you never know at what point somebody is going to say, “Oh, that’s the thing” that triggers them to contact you. They might read something and say, “That is exactly the situation that I’m in. I need to call this person right now.” If you’ve got it right there, then it’s good.

So you can’t pack everything to the top of the fold, but as a minimum, have a call to action, have a video, or even if you can’t do a video right now, just something that says who you are, and have a picture of yourself, or your company, your team, whatever up there also.

Theo Hicks: The two things I want to talk about in our remaining time would be diving deeper into the type of content, and then you’ve got a really nice website, you have all these key elements on your website, you’ve got great content. But then how do people actually find your website and get there. So I want to bring those both up now because I’m not sure if they are related to each other. You create content and you’re sharing in the right spots, or you write the right kind of content… So those are the two things I want to talk about in the end. Let’s first talk about the relevant content, and that ties into getting people to your website, and then, obviously, you can talk about that, too. But what type of content should I be creating in regards to video, audio, written, a combination? What should I be writing about? How often should I be writing? And then what do I do with that content once it’s written or created? So, lots of questions.

Melissa Johnson: Yeah, my head’s spinning. [laughter] Let’s see. Well, I think, first of all, just basic, relevant content; just stating, again, what’s your process. When somebody comes to your website, usually they want to know how it works. So you want to make sure that that’s laid out. That’s relevant content, for sure. This is what we do, this is how we do it, these are the type of people that we help, these are the situations that they’re in. So then you can start to go into more detail with that on a blog, for example. You can have a blog page set up on your website. This could be a video too if you wanted it to be. It doesn’t have to be like a written blog. But think about the situations that your sellers find themselves in, especially when you’re going on appointments or taking phone calls. Take notes about what they’re saying and use that for content.

Especially this is great too if you’re recording your phone calls. We record all of our phone calls with the sellers, so we can go back and actually listen and pull things from those conversations to use for content. But you want to make sure that you’re creating content that speaks to their situation, something that’s helpful. Don’t make it all about you and what you can do for them, but make it to where “Hey, this is a valuable resource. This person helped me and they don’t even know me, but this was really helpful for me.” So stuff like lists of moving companies in the area, or what does the probate process looks like in your state, or what does the eviction process looks like in your state. Any kind of free little tools that you can give them through a blog post is also relevant content that’s really helpful. So any little things that you can provide to the sellers that are helpful, pulling from things that they’ve actually said is just a really good place to start with all that.

Well, let me go back to – if you buy an out-of-the-box sort of website, you can customize those. Say you get like a Carrot website or a LeadPropeller website – a lot of them come loaded with content already on it. But that’s the same content that a lot of other people have. So you want to make sure that you go through and customize that to you and your company, your location, things like that. And then those blog posts are also going to separate your website from the 50,000 other websites that are just like it. So having that good content in there, in the form of a blog or something, is good. Thenyou want to make sure that you’re doing that regularly, putting out content on a regular basis. So maybe you start doing it once a month to begin, maybe, and then ramping that up as you talk to more people, you get more ideas for content, I would say bump that up to like once a week. And then of course, you’re mixing this with all the other things that you’re doing, like on social and things like that, you can pull micro content from that bigger content that you used in small posts and things like that. But everything goes back to the website. That’s where your meat really sits, if that makes sense. All the good stuff is there. So when somebody goes to your website, they can click on that and say, “Okay, this is an article I need to read right now, because I just inherited this house, I don’t really know what to do with it. Where do I start?”

Theo Hicks: And then once I have this content or while I’m creating this content, do I want to maybe keep in mind writing in a certain way, or using certain keywords to make sure that it’s easily searchable? Or are you attracting people by sharing it on social media and stuff? How are you getting people to read these blog posts once they’re written?

Melissa Johnson: So it’s both. Like I was saying, you can write a nice blog post, and then if you’ve got somebody on your team or if you can do this yourself, chop that up into smaller content that can be put out as Instagram posts or quick LinkedIn posts. But you can always link those blog posts back also. So if you share it on Facebook, if you share it on LinkedIn, if you share it on YouTube, if it’s a video, TikTok even I guess, all these different platforms – it just makes it easier to have it in that one place and then sharing it out through.

And also having it work back the other way too. That was something I was going to talk about too, is just ranking your site, like driving traffic to your site and then checking to see what’s happening with that. Because they’ve got all these great tools and stuff out there now where you can see your analytics for your sites. So that’s going to help you figure out what content is hitting, how your site is performing, and there’s a lot of things that go into that, too.

Like you were saying with the keywords, you want to make sure that when you’re writing something, that it is keyword rich, but not overly so, because there’s so much to SEO. I’m definitely not an expert in that area, but I know enough to probably be dangerous. I know that there’s a lot to keywords and things like that. You don’t want to have too much, I think, of certain things, because it can hurt you, but then not enough can also hurt you. So you’ve got to figure out what that medium is, and looking at the analytics really helps with that. And the more specific you can be with your keywords, the better, too… Especially with regards to location and situation, I think. So the more you can put in there, like inherited a house, or dealing with probate, or dealing with a problem tenant. There are resources out there, they’ll give you the good keywords to use and you want to make sure you’re peppering those throughout your website, so that that helps you become more easily found.

Another thing you can do too is driving traffic to your site through paid resources like PPC… You can do paid SEO, but you can also do things organically that don’t cost any money, to drive traffic to your site. That’s what I encourage people to do when they first get started. Because you need budgets to do AdWords; you need a budget to have somebody working the SEO on your site. But there are things that you can do yourself that don’t cost anything. So one of them is putting out good content and sharing it, another thing is — I like to add my website to all my mail pieces and anything that I send out. So if I send out a direct mail piece, I’m giving them the option also to go to another site, that way they can see that. You could put it on your bandit signs, if you’re putting signs on your car, put it on your car, put it on your business cards, flyers, brochures, door hangers, if you’re doing those. All those are places where you’re doing that marketing anyway, so you may as well throw your website on there too, and drive some traffic to it. That’s very low cost and easy to do.

Theo Hicks: Those are all great. Is there anything else that you have that you want to talk about that we weren’t able to hit, that you want to mention before we sign off?

Melissa Johnson: Yeah, there’s a couple of really quick things… One of them is if you don’t have a Google My Business Page, get one. That pulls you up on the map search. So if somebody says “I need to sell my house in San Antonio,” if you have a Google My Business Page, it’ll make you pop up on the map, and that’s free. So that’s a nice thing to have. Another thing is just make sure that your page load speed is good. If your website loads too slow or doesn’t load right, that can be a problem. Make sure all the external links, all those are working, and make sure that your website is mobile optimized. There are ways to check that, too. A lot of times with these site builders, you can actually click and see what your site looks like on desktop, what it looks like on mobile phones, what it looks like on a tablet… So you just want to make sure that everything looks good in mobile, because most people are doing searches from their phones these days. So it needs to look good and load fast on a phone.

One last tip that I have that is a super, super cool thing… There is a tool called Hotjar; I always want to say heat jar, but it’s Hotjar. It’s a really cool thing that you can use; you can put it on your computer and it actually tracks people’s movements on your website. So it’s kind of like a heat map, if you’re familiar with a heat map. This actually records where people are going on your site, so you can actually track them and see, “Okay, where are they hanging out? Where did they click? How long they spent this much time on this thing?” That will start to tell you if something’s confusing or unclear, or if they’re abandoning the site… Maybe they start filling out the form and then they abandon, or whatever – you’ll have all that information captured. You can even see what sort of device that they’re on, looking at your site. So it’s a really cool thing to help you improve the user experience on your site and to see how things are converting.

Theo Hicks: Perfect Melissa. Thank you so much for joining us again and doing a deep dive into finding deals through your website, growing traffic on your website. So I’m not going to try to summarize everything we’ve talked about. We’ve talked about so much, but we went from, “Hey, I want to find deals on my website, but I don’t have a website”, to very specific tips once the website is done. You’ve got all the key elements, you’re creating the content, how do you actually get people to your website? You also talked about a lot of different tools that you can add to your computer to help you along the way. So thank you so much.

Again, her website is themelissajohnson.com. I guess that’d be another thing, is go look at her website and see what she’s doing. Because I’m sure she’s doing all these things on there, plus more. Thank you so much for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2390: Using A Creative Approach When Starting and Scaling A Real Estate Business With Lauren Cohen

Lauren Cohen loves real estate and fills many shoes. She’s an international lawyer, real estate investor, and a coach. She also has a non-profit organization that helps single moms invest in real estate. 

She often works with first-time investors, introducing them to the world of real estate and helping them form a new passive income stream. At the same time, she also works with experienced investors, helping them buy properties not only in their countries but also across borders.

Lauren Cohen  Real Estate Background:

  • Serial entrepreneur, international lawyer, realtor, and cross-border expert
  • 15 years of real estate experience
  • Experience with flips, wholesaling, rentals, and subject-to on hundreds of properties
  • Based in Boca Raton, FL
  • Say hi to her at: www.ecouncilglobal.com/investintheus   
  • Best Ever Book: Take control of your life

 

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“You have to unpack the package and look at what is right there in front of you” – Lauren Cohen.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Lauren Cohen. Lauren, how are you today?

Lauren Cohen: I’m great. How are you?

Theo Hicks: I’m doing well, thanks for asking, and thanks for taking the time to speak with us today.

Lauren Cohen: Of course, it’s my pleasure.

Theo Hicks: Let’s go over Lauren’s background really quickly. She’s a serial entrepreneur, international lawyer, realtor, and a cross-border expert. She has 15 years of real estate experience with flips, wholesaling, rentals subject-to’s on hundreds of properties. She is based out of Boca Raton, Florida. Her website is ecouncilglobal.com/investwithus and we’ll put that in the show notes. She’s also going to be doing a free giveaway which we will mention at the end of the show. So make sure you listen all the way to the end. Lauren, do you mind telling us some more about your background and what you’re focused on today?

Lauren Cohen: Sure. So I am an international lawyer and a realtor, and I’ve been investing directly and helping clients invest in real estate for almost two decades now. Mainly in the US, but also in Canada. There are still opportunities there so we do have a lot of clients in Canada. I’m also a real estate coach. So I love investing in real estate and helping others be exposed to it. I actually have a nonprofit that’s focused on helping struggling single moms and mompreneurs to find a way to invest in real estate, because at the end of the day, that’s your ticket. Really, there’s no other ticket that’s better than real estate investment.

Theo Hicks: Awesome. So you help people do investing and you invest yourself. Which one’s your main focus of those two?

Lauren Cohen: It’s kind of a split. It really depends, because I’m often joint venturing with my clients. There’s really not one at any given time. Right now, I think the focus is on helping my clients, but through COVID it was on actually investing, so it just depends on the day, really, and the demand.

Theo Hicks: Do you typically work with people who’ve never done deals before?

Lauren Cohen: Often. That’s going to be more of the non-profit side of what I do, to help people find their way of doing a deal, teaching them how to do a deal. Our coaching program is called Creative Real Estate Academy. My partner is an extraordinarily creative real estate investor from Calgary, Alberta, in Canada. So we work with people literally from all over the world, helping them to create structures. We work with people that are starting and that are moving along the spectrum, some people that are just expanding their investment opportunities across borders. My tagline is helping people invest, live, work, and play across border. So it’s all about just opening doors, really.

Theo Hicks: So based on your experience – this is kind of a two-part question… Based on your experience, what would you say is the biggest obstacle holding people back from –the first part of the question is getting started in general, from no deals to just getting started, and then once you’ve actually started, what’s the biggest obstacle holding them back from scaling and growing?

Lauren Cohen: I think to start, it’s fear. It’s fear of the unknown. It’s fear of taking your money and investing it in a place; no matter how safe it is, there’s still a risk. People that have never invested in real estate before are afraid that they’re getting bad advice, or they’re not going about it the right way, or they don’t know what they’re doing, so why would they invest, or they don’t want to be landlords, so they don’t know what other options are available.

When they’re trying to scale, the challenge is that they did their first investment or two without creating a structure around that that could allow them to scale. So my key focus when working with other investors is to help them from the get-go to create that strategy that’s going to allow them to build a strong foundation from which they can scale, grow, and invest all over their own country, as well as expanding their investments across borders.

Theo Hicks: Could you elaborate on that second point a little bit? So I just got my first deal, and I want to start scaling, and I’m working with you… When you say a creative structure, what specifically would you have me do?

Lauren Cohen: Well, there are eight elements that I look at when I’m creating a success blueprint for each of my clients, from location, to budget, to joint venture, if you want to joint venture or work with partners, to the types of properties you want to invest in… We go through an analysis of where you come from, your own background, how much money you want to invest, how much you have available to risk, and we create a strategy around that structure and we develop a plan. Do you want to invest close to home? Do you want to invest over the border, whatever border that may be? Do you want to invest overseas? What’s your budget for that? Do you want to have a turnkey business? Do you want to run the business? How involved do you want to be? All of those questions are considered when we develop this success blueprint for them.

Theo Hicks: Something else you mentioned too was about your partner, and they are very creative investors. Could you give us some examples of some of the things that they have done in the past or something that they do consistently that’s that creative aspect of the deals?

Lauren Cohen: Well, first, I think you need to have my partner Carolyn on the show. She’s actually in Cabo right now. Her creativity allowed her and our other partner to invest in a development in Cabo. So they are building this out and offering opportunities in Cabo, San Lucas. Her name is Carolin Ricciardi. What makes her so creative is she’s created a model that’s based on agreements for sale, which as I say, are similar to subject-to’s here in the US, where you basically knock on doors, almost, essentially, knock on doors to find opportunities, to take over mortgages before they go to foreclosure. So you don’t have to qualify for the mortgage.

There’s one client that we have, she and her husband both lost their jobs at the beginning of COVID. She’s now eight months pregnant, she was obviously just pregnant at the time… And they now are in their fourth property investment and they netted over six figures already, just in the opportunities that they’ve looked at in the first three. That’s because you have to unpackage the package a little bit and look at what is right there in front of you. Sometimes people are just looking at traditional options, whereas this is a very non-traditional way of going about things, where you create documents and contracts that may potentially have more risk attached to them. But obviously, the more risk, the more reward, right?

Theo Hicks: Thank you for sharing that. Let’s talk about what you do for your investments. As you mentioned, you help people half of your time… What do you invest in? What’s your main focus right now?

Lauren Cohen: It’s on buy and hold and creating that ongoing wealth and cash flow, and eventually selling. So it’s buying distressed properties, buying properties that have mortgages that aren’t being paid, finding those needles in the haystack. Obviously, as a realtor, I have access to pocket listings and opportunities that others may not. Then of course, I bring my legal hat into the mix and make sure that legally everything is kosher, so that we can invest in the property and create that ongoing stream of income. So the key is passive investment and passive opportunities.

I like to find properties that are already tenanted or that are in areas that are going to have very good tenant tenancy and occupancy ratings, because you want to make sure that your property stays tenanted obviously, so that you’re not going to have a headache. That’s the last thing that I want. I like the least headaches for myself and my clients.

Theo Hicks: How many different markets are you in currently?

Lauren Cohen: Well, it depends. If it’s me, personally, I’m in two markets, but if it’s me through my clients, probably about 10.

Theo Hicks: Okay. I’m imagining one of them is in Boca Raton, or are they both out of state?

Lauren Cohen: No, we do invest in South Florida. It’s not Boca specifically. So far Boca doesn’t have many distressed properties, although we did see one the other day, but it was very distressed. But there are a lot of parts of South Florida within a quick drive of where we are. Orlando is a big market and we’re going up there this coming week to look at some opportunities. Tampa, the multifamily opportunities are there… Atlanta, Nevada, Texas, Ohio, obviously, Chicago is one place that we look at as well… And Detroit, the Raleigh-Durham area as well is a big opportunity zone for us.

Theo Hicks: Something that I’ve just thought of… So you said you partner with your clients on a lot of these deals. Is it just anyone you’ll partner with? Or what do you do when you’re screening these people before you decide to partner with them?

Lauren Cohen: They’re going to come in, they’re going to become our clients, they’re going to work with us, we’ll go through our coaching program, learn how to invest in real estate with us. Then if they come to buy a good opportunity, then we are going to offer, if the timing is right, and they have been through our due diligence process, to joint venture with them to give them access to capital to invest in those opportunities. So this way, they can have more volume and we also have access to that volume without it having to be too much of a headache. We have the systems in place so that we can manage the properties and turn them around and rent them out, if needed.

Theo Hicks: Okay. So you said after they’ve gone through the program, as long as the deals good, then you’ll JV?

Lauren Cohen: Yeah, we’ll go through deals with them. We have a deal vetting program that we do within our group coaching and our one on one coaching. We go through each deal and analyze the numbers with them to do the due diligence. I’m going to look at it from a legal perspective and we bring in our numbers person to make sure that deals make sense. It’s not like we just joint venture with everybody that has a deal, or we would be joint venturing a lot. And I also set up a lot of joint ventures, like people that are just getting into the business, for example… I have a client here in the States who is originally from Canada, but he’s just getting into real estate investing. So he really needs a partner to guide him through and make sure that he doesn’t just throw his capital away. And also, the partner that I’ve connected him with has access to financing, so that opens another door too.

So you just have to know — one of my superhero powers is connecting the right people together, and having them go through that process with me, working with me, allows me to vet them and make sure that they’re the right partners for each other, hopefully.

Theo Hicks: Another thing that I get a lot from people who want to get started in real estate, or they have a full-time job, they hate it, and they want to get into real estate investing, and they realize it’s not going to happen instantly, so they want to become a real estate agent to get started. They quit their job, be an agent, then eventually quit that and invest full time. So as a realtor, what are your thoughts on that strategy?

Lauren Cohen: Join my company. [laughs] Okay, so I’ll be honest, I’ve had my real estate license for almost 13 years. I joined a cloud-based brokerage just under a year ago. It’s been life-changing for me, because it’s allowed me to connect with other realtors — I think 30 realtors in my company were on my webinar that I just did an hour ago– and to really build my real estate practice, as opposed to being just a real estate investor.

Being a realtor is definitely going to help you access deals, because you can pull comparables, you can access information that’s not on the market, you can connect with prospective buyers and sellers that you may not otherwise be able to connect with, and you can also earn referral fees from the properties that you buy and sell in other jurisdictions. So there’s a lot of advantages to getting your real estate license when you’re a real estate investor.

Theo Hicks:  Okay, so you’re on the side of “Yes, get that license” and then come work for you.

Lauren Cohen:  And then come talk to me. Exactly.

Theo Hicks: There you go. Alright, Lauren, what is your best real estate investing advice ever?

Lauren Cohen: You asked me to think about this, and the best real estate advice ever that I could give is just do it. It’s kind of like Nike’s swoosh, just do it. Because the longer you wait, the harder it becomes. There are people that are investing starting at 50 starting at 60 and starting at 20. Now, wouldn’t you rather have built your wealth and amass your wealth by the time you’re 50 or 60, rather than having to start investing then? Start when you’re young and don’t hesitate. But make sure you have a mentor. Do not try to just run into it. Have a mentor to guide you through. So I guess that’s two pieces of advice combined, right?

Theo Hicks:  Yeah, Best Ever advices, I guess. Not all people will give multiple pieces of advice, but the more the merrier when it comes to that question.

Lauren Cohen:  I don’t follow instructions well, apparently. [laughter]

Theo Hicks: Well, you ready for the Best Ever lightning round?

Lauren Cohen: I think so…

Theo Hicks: Okay, first, a quick word from our sponsor.

Break: [00:15:52] – [ [00:16:14]

Theo Hicks: Okay, what is the Best Ever book you’ve recently read?

Lauren Cohen: The best book that I recently read was Take Control of Your Life by Mel Robbins.

Theo Hicks: Okay, if you’re business were to collapse today, what would you do next? I guess in your case it would be business-es.

Lauren Cohen: My business did collapse.

Theo Hicks: What did you do next?

Lauren Cohen: Haven’t a lot of our businesses collapsed? My main business did collapse when COVID started, and I pivoted and helped people get money. They call me the Pivoting Queen. I’m not too worried about that.

Theo Hicks: What is the Best Ever deal you’ve done?

Lauren Cohen: I would say the one that we did recently, which was we bought a property and we were renovating it, planning to rent it, and ended up flipping it within 24 hours.

Theo Hicks: How much did you make?

Lauren Cohen: 80k.

Theo Hicks: On the flip side…

Lauren Cohen: The worst?

Theo Hicks: Yeah. The worst deals or a deal that you had lost money on. How much did you lose and what lessons did you learn from that?

Lauren Cohen: Okay, well, I can talk about that. It was my first investment, which was a single-family home. It was too distressed, and I ended up having so many rampant problems… This was before I was a realtor and before I was a lawyer. Well actually, I was a lawyer, just not in the US. I just was trying to get into something and I did it with a partner. The partnership was a disaster, and it was just a disaster all around. I lost about 50,000 in that deal and I also lost a lot of faith in myself, which I had to regain. So that was a harder lesson.

Theo Hicks: What is the Best Ever way you like to give back?

Lauren Cohen: I have a non-profit, as I mentioned, it’s called Find My Silver Lining. I started it a couple of years ago, I haven’t really done very much with it. However, that’s my plan right now, is we are just about to relaunch it and it’s going to lead into Creative Real Estate Academy. So we’re going to bring people into the non-profit and offer them scholarships to use our services and learn how to invest in real estate. So that’s really exciting, because it’s for struggling single moms and mompreneurs that really don’t have the money. I’m a single mom, and not everybody has a law background, and not everybody can go get a degree. Some people are not so privileged and it’s hard. It’s hard even with that, being a single mom; it’s a struggle. So my son just turned 10, and it gets easier, but I really feel very strongly that that’s important, to make a difference and have an impact.

Theo Hicks: I love it. That’s awesome. The last question is what’s the Best Ever place to reach you? And then you can also mention the giveaway that you have for us.

Lauren Cohen: Absolutely, the best place to reach me is LinkedIn. I have a lot of activity going on on Facebook, but LinkedIn is always going to be your best place to reach me. However, my LinkedIn profile is full, so we can’t add any more connections. We might be able to scam in one each day. But you can always find me on Facebook, it’s Lauren ESQ is my handle in most places. My giveaway is – maybe you’re gonna share it in the show notes… It’s how to invest in real estate across borders; it’s going to teach you the eight elements of investing across borders and how to make sure that you cover your, you know what – assets – as you’re investing across borders. That’s super important, and I think that people don’t realize – when you are investing in any other country, even in your own, but in any other country, there’s so much more to think about, and people ignore it. That ends up causing them huge heartache and loss of a huge amount of income. It’s a disaster.

Theo Hicks: Yeah, so we’ll have that in the show notes, the link, and then there’s a coupon code that you can enter. Lauren, thank you so much for joining us today and providing us with your Best Ever advices, as well as walking us through your journey and some other tips as well. We talked about the biggest obstacles holding people back, starting out being fear, scaling, and being in that structure. You gave us some tips on what you do to help people create that structure based off of the eight elements for the success blueprint.

You talked about your partner, who we’ll definitely have to have on the show, and her example for creative investing, which is the agreement of sale, which is essentially knocking on doors to take over mortgages before they go into foreclosure.

You talked about what you invest in, and some of it is fully you, other is partnering with your clients. You talked about how that process works, of due diligence and partnering. You talked about the advantages of getting your license as a real estate agent. You mentioned the cloud-based brokerages… So it sounds like you don’t have to actually have brick and mortar place to be a brokerage. That’s interesting, I didn’t know about that.

And then your Best Ever advice is just do it, because the longer it takes, the harder it is, but also, the less you can benefit from it. As you said, do you wanna start when you’re 20 or when you’re 50? Both are fine, but a 30-year headstart is much better.

And then obviously, have a mentor was your last piece of advice. Again, make sure you go to the show notes everyone and take advantage of that free course. So Lauren, again, thank you so much for joining us today. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Lauren Cohen: Thank you.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2384: Scaling Through Trial And Error with Matthew Tortoriello

Matthew started his real estate journey at 16 when he purchased a two-family home with his grandmother’s money. Four years later, he bought another property that was a challenge to manage. That experience taught him a lot of lessons that he applied later in his career.

With two other partners, he acquired a two-family house that he managed and renovated. After buying several more units, getting a construction license, and founding a property management agency, they were still looking for new opportunities. That’s when Matthew met a new investor and future partner who helped them take the business to a new level.

 

Matthew Tortoriello Real Estate Background:

  • Full-time real estate investor and property manager
  • 25+ years of real estate experience
  • Portfolio consists of 250 units, flipped 100, & wholesaled over 200
  • Based in Springfield, Mass
  • Say hi to him at: www.yellowbrick.org 
  • Best Ever Book: Recession Proof RE Investing

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Don’t focus on learning everything because you’ll never learn everything. You’ll learn a lot along the way” – Matthew Tortoriello. 


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Matthew Tortoriello. Matthew, how are you doing today?

Matthew Tortoriello: Good. Thanks for having me on, Theo.

Theo Hicks: Yeah, thank you for taking the time to speak with us today. A little bit about Matthew. He’s a full-time real estate investor, as well as a property manager. He has over 25 years of real estate experience and his current portfolio is at 250 units. He’s also flipped 100 units and has wholesaled over 200 units. He is based in Springfield, Massachusetts. His website is yellowbrick.org. So Matthew, do you mind telling us some more about your background and then what you’re focused on today?

Matthew Tortoriello: Sure. Thanks, Theo. I actually started getting involved in real estate when I was 16 years old. I kind of read Rich Dad Poor Dad, got all excited, and I went and bought a two-family house —  I borrowed money from my grandmother actually– in Pittsfield, Massachusetts. I kind of got my feet wet, where I wanted to learn everything, try to manage it, and fix everything… About a year later, I sold it, and learned a lot of lessons there. What not to do, basically, how not to manage… It was definitely education. I broke even on everything, but it was more of an educational experience.

Then four years later, I got into some multi-families out in Michigan, and to be honest, I lost my shirt there. I hired a property manager because I thought “Alright, now I’m going to hire a manager and learn from the last experience.” Unfortunately, it was hard to manage from afar and I got taken advantage of. Eventually, the four-family got completely robbed – the toilets, the heating system, everything gone. The insurance company refused to pay for it, so I had to take a full loss there, which sucked.

Forward a few more years back in ’07, I said, “Alright, I’m going to try this one more time.” Because I’m a glutton for punishment. I convinced my business partner now –my best friend at the time– Kevin, and also my girlfriend at the time, to buy a two-family. I’ll spend all the time, you guys keep working, we’ll fix it, we’re going to make tons of money. So we bought it two-family in Springfield, Massachusetts, and basically I spent a whole bunch of time — I learned how to renovate everything, I went and got my contractor’s license, we spent many hours renovating that two-family, and then rented it out. We’re like, “Alright.” We refinanced it and pulled out the money. We bought another two-family and did that a few times. We got to a point where we’re like, “Alright, we only have so much money. How do we grow from there?”

While I was actually at a gymnastics class, I was just chatting about what I’m doing and this gentleman who had just sold some property down in Mexico was interested in reinvesting, as well. We got involved together and he started investing. That’s when we kind of started blowing up and putting offers in on a lot of stuff, and kind of growing from there, where we got up to about 500 rental units. We actually had built a management company around it, because we couldn’t find a good management company in the area… So we kind of just figured out, “Alright, we’ve got to put these people here [unintelligible [00:06:26].01] this system there.” In Massachusetts, it’s a very tenant-friendly state, I guess, it’s the best way to say it, so there’s a lot of legal battles you’ve got to fight and a lot of hoops you have to go through to make sure you can get your tenants evicted, if need be, or just everyone paying your rent. So we just had to build systems around it, and how to handle and how to screen your tenants really well.

Over the last couple of years, we’ve actually shifted into doing some more wholesale deals, flipping some houses, as well as selling off some of our portfolio that were not the best-performing, I guess. So now, as Theo said, we’re down to about 250 units we have right now; we’re still wholesaling and flipping about 70 to 80 deals a year. That’s kind of our focus right now.

We’ve also started managing for a few other people, because people have been approaching us over the years, “Hey, could you manage our stuff?” Before, we were like, “No, no, no. We have our own units. We’re not really interested in that.” But we have actually a really great team, we’ve sold off some of our units, so we have the capacity… So we said, Alright. Why not?” We’ve taken on a few management clients. We’re kind of picky and work on being selective on who we’ll manage for, and we just want to make sure that we’re all like-minded.

Other than that, we actually started also a YouTube channel to give back to the community, because we found that it was really pivotal on our growth, was that other landlords in the area were willing to share their knowledge and advice and help us not make the same mistakes they made. So we want to do the same thing for future generations.

Theo Hicks: Great, Matthew. Thank you for sharing that background. So a few follow-up questions… You said you met the guy, Theo, actually, at a gymnastics class. Was it really as simple as just talking about it and then he’s like “Oh, I’m in”, and then the next day he wrote a check? How did that relationship develop? Also secondarily, at that point, how many deals have you guys done?

Matthew Tortoriello: So first, we were on our third deal. That was our third duplex actually. I’d been going to the class for about a year; actually, he was the one who kind of started the adult gymnastics class. I’m just a talkative guy, so I was just sharing what I was doing, just talking about it, how excited I was, and he was very intrigued by my passion, so he asked if I would have lunch with him, and we sat down and we had lunch. I told him a little bit more about what we were doing… And I still didn’t think that we were going to be an investor, or anything like that; it was just more just shooting the breeze with this guy. Then he invited me over and we jumped on his trampoline, we’ve talked more, and then all sudden he’s like, “Well, hey, I just sold some property in Mexico. I’m looking to redeploy some money. Would you guys be interested in having me partner with you?” I’m like, “Well, yeah.” At that point, we were like “How are we going to keep growing?” We didn’t have a huge background with banks and stuff like that, and a huge financial background, so we thought that leveraging his other business as well as his funds would allow us to grow to that next level. So we kind of went from there.

Theo Hicks: So you had three duplexes. How long had you been doing this for, at that point?

Matthew Tortoriello: In that stage of the business, about three to six months.

Theo Hicks: That was really fast.

Matthew Tortoriello: Yeah. We got the first duplex and we got it renovated. I was spending late, late nights until two or three in the morning –I don’t really sleep anyway– just working on it. We got it rented right away as we were renovating it. People kept coming up to us, “Hey, when’s that ready for rent? When does it rent?” So we rented it right away. At that time, we already had a hard money lender lined up, so we just kind of segued into the next one… Therefore it was the BRRR strategy. We BRRRd it or refinanced it with a local bank and just kept rolling it from there. It was kind of a snowball effect for the first three, but then we were like, “How do we keep growing?” Because we could only get so many loans at that time.

Theo Hicks: It’s a good idea of the capability that you had – so you had three duplexes in three to six months… Then once he said, “Hey, I’m going to invest,” and he heard the number, how many deals did you know you’re able to do? Was it pretty easy to find those number of deals, or did you have to change the way you were finding deals at that point?

Matthew Tortoriello: We had actually teamed up with a local realtor. She was the only person in the area that was willing to go into some of these dilapidated buildings. There were just tons of dilapidated buildings in Springfield and the surrounding towns that either had vagrants living in there, a lot of homeless people… It was at some point dangerous, to be honest. So that was a key member that we found.

And once we knew we had the financial backing, basically, we just started shooting offers out. It was about how many properties can we see that were REOs, and running our numbers… Because at that point I had a good idea, I could walk through a property and figure out within a reasonable approximation of how much it’s going to take the rehab. Then we’d just basically throw out a lowball offer to make sure we have plenty of room there.

I think at one point, we were throwing out maybe 80 offers a week at all these different properties. Maybe 10% comeback, we thought, or maybe less. All of sudden, we started getting quite a few back, so we had to kind of cherry-pick the best ones… Because more were coming back that we were saying “Yes, we’ll move forward.”

Theo Hicks: Are these all duplexes?

Matthew Tortoriello: No. We started with duplexes, we bought a bunch of fours and sixes, we even have a couple of 16 family buildings. Then over the last, maybe back in 2015, we started buying quite a few single families – I think we own right now maybe about 30 single-family homes – and rented those out which have been fantastic rentals.

Theo Hicks: What was the thought process? Because usually, people go two, four, six, 16, 32, 100 units… Whereas you kind of went two, four, six, sixteen, and then back to single-family. So what was the thought process behind that?

Matthew Tortoriello: Well, the thought process was at the time we were started going to foreclosure auctions in 2015, and most of the stuff that was foreclosing at that time was a lot of single-families, and we were able to get them really cheap. We got one single-family home for $200. So at that point, it needed maybe $40,000 worth of work. It was a fantastic rental, because a single-family home, we could rent for about $1,500 to $1,600, so the cashflow is fantastic.

But the other thought process was going into more single families was they were less hands-on. We could also hold the tenants more accountable, given the fact that if there was a pest problem, well it’s the tenant. Whereas when we had our 16 family buildings and we had multiple pest problems, even though we were treating quarterly for all our pests, we’d go in front of a judge and the judge would always hold us accountable… At that point, we’re also seeing bedbugs on the rise in the area, so we were having these massive treatments done, that cost $1,000 a unit. So we were trying to figure out a way to combat the extra costs that we were seeing.

Theo Hicks: Another question I have for you… So you mentioned that this time a few years ago you were at 500 units, and now you’re at kind of half… So I’m kind of wondering, what’s the thought process behind knowing when it’s the right time to sell, how much to actually sell, and how much to keep… Just the philosophy or the conversations you have with your partners when it came to selling such a large portion of your portfolio?

Matthew Tortoriello: Well, one of the things was we wanted to pay off some debt we had borrowed, and the prices were going up. But the other thing we were looking at – well, some of our lower cash-flowing properties we could sell, it would take maybe 10 to 15 years in cash flow for what we could get for capital right then, by selling it. We felt that it made more sense, instead of holding it that long term, use that capital to redeploy into maybe lowering debt, or 1031-ing into other properties, or just getting ready to hoard cash a little bit for what we kind of see that might be coming down in the next year or year and a half.

Theo Hicks: Okay. And then going back to this initial investor person, is he still with you? Is he’s still your only investor, or did you raise capital from other people along the way?

Matthew Tortoriello: I think we got up to $4 million in capital that we raised from a couple of other investors… But for the most part, Theo, he is still with us. We’re basically the three partners – it’s Kevin, Theo, and myself. We have teamed up with a couple of other people as far as flipping, but for the most part, we are the primary partners.

Theo Hicks: Okay, Matthew, what is your best real estate investing advice ever?

Matthew Tortoriello: Just get started and don’t focus so much on learning everything, because you’re never going to learn everything, and you’ll learn a lot along the way.

Theo Hicks: And allso start an adult gymnastics class. That’s what I’m going to do, right when we get off. [laughter] Alright, Matthew, are you ready for the Best Ever lightning round?

Matthew Tortoriello: Yes.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:14:53][00:15:15]

Theo Hicks: The first question is, what is the Best Ever book you’ve recently read?

Matthew Tortoriello: I’ve actually been rereading Recession Proof Real Estate Investing by Jay Scott. Just given what’s going on in the economy right now, I kind of want to prepare myself, and he’s a really smart guy.

Theo Hicks: What’s the top takeaway you’ve gotten from that book, that applies to what we’re currently going through with the pandemic and everything?

Matthew Tortoriello: Building up the lines of credit in different ways just to prepare yourself for having a lot of capital to redeploy as things are ready to buy, because banks might be tightening up a little bit.

Theo Hicks: If your business were to collapse today, what would you do next?

Matthew Tortoriello: I thought about this a little bit. Honestly, if I had to start all over from scratch, I would do something along the lines, maybe, I would focus on a little side hustle, reselling the Home Depot wares, or something like that, where you buy stuff in bulk and then splitting it apart. Once I had enough capital, I would start getting into real estate again.

Theo Hicks: That’s the first time I’ve gotten that as an answer, so thank you for that. So these two questions are going to be related, and kind of the opposite. So we’ll start with, I guess, the negative one first, which is have you ever lost money on a deal? And if you have, how much did you lose and what lessons did you learn?

Matthew Tortoriello: Okay. Yes, we have lost on a few deals. One particularly stands out… We went to an auction down in Wilton, Connecticut, which is about two hours away. [unintelligible [00:16:33].01] it’s the first one we’ve ever done. We lost by the end of it, probably about $200,000. Really, what we learned was to stick in our core area, within an hour of our home base, as well as never negotiate with a buyer that you’ll do work after the fact; just get everything done, set expectations right then, otherwise, it just turns into sometimes a legal battle.

Theo Hicks: Okay, and on a more positive note, what’s the Best Ever deal you’ve done?

Matthew Tortoriello: We bought a two-family for $1.

Theo Hicks: $1?

Matthew Tortoriello: $1. We were part of a receivership program. We actually were the number one receiver in Springfield for numerous years; we did over 50 receiverships. We became a receiver on this two-family, and the bank just wanted nothing to do with it, and they said, “Hey, will you take it off our hands?” I’m like “Sure. We were going to offer them more than that, but they said “Just $1, let’s just get it done.” We’re like, “Sure.”

Theo Hicks: Wow. It’s amazing. What is the Best Ever way you’d like to give back?

Matthew Tortoriello: We actually started a YouTube channel, Two Guys Take on Real Estate. There we’re all about paying it forward for all the lessons we’ve learned over the years. We want everyone else to be able to learn from that.

Theo Hicks: And what was that YouTube channel called again? Two guys paying it forward, you said?

Matthew Tortoriello: Two Guys Take on Real Estate.

Theo Hicks: Two Guys Take on Real Estate. Got it. The last question is what is the Best Ever place to reach you?

Matthew Tortoriello: Besides the YouTube channel, Two Guys Take on Real Estate, you can also reach us on yellowbrick.org.

Theo Hicks: Perfect. Well, thank you, Matthew, for joining us today and providing us with your Best Ever advice. We talked about your progression from starting at 16 years old to some struggles in the beginning, to obviously ultimately now having a solid business with rentals, flipping, and wholesaling properties every year.

We talked about how you raised money for your first deal. I always love to hear stories like that, just kind of really random, just talking about it to everyone you meet and eventually just meeting the right person at the right time, and it seems to have worked out very, very well for you.

We talked about how you found your deals, the types of deals you targeted, and then why you went back down to single-family homes, because of the advantages of it being less hands-on, you could hold tenants more accountable, and your state being a pretty tenant-friendly state… As well as being able to get them for so cheap, like 200 bucks, or I guess the duplex was $1. But still, 200 bucks is pretty cheap for a house.

We also talked about the thought process behind selling off properties, like when do you sell, how do you know when to sell, which property should you sell… Then you gave your Best Ever advice, which is to get started, and then also to not fall into analysis by paralysis in a sense, or just educating yourself to the extreme, and using that as an excuse to not really take any action. I couldn’t agree more on that, Matthew.

Thanks again for joining us today. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2379: How To Expand Your Market Reach By Going Virtual With Lauren Hardy

Lauren started working in real estate right out of college. Her journey began in a corporate environment, and she was mostly dealing with commercial properties. Once she had a child, Lauren decided to leave her job and work for herself. At the time, her brother was flipping houses, and he offered her to join the business. In 2016, she started looking for properties outside of the competitive southern California market in order to expand her business. Now, Lauren has a coaching program for those who’d like to go virtual and reach markets all over the country regardless of where they live.

Lauren Hardy Real Estate Background:

  • Real estate investor, coach, and host of wholesaling Inc. Podcast
  • Over 10 years of real estate experience
  • Has invested in 100s of properties, including developing spec houses, and flips
  • Based in Orange, CA
  • Say hi to her at: https://www.wholesalinginc.com/virtual/

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Flipping the house opened up a lot of ways that you could get ripped off by contractors” – Lauren Hardy.


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. This is Ash Patel, and today I’m speaking with Lauren Hardy from Orange County, California. She’s a real estate investor, a coach, a podcast host and has 10 years of real estate experience, where she has invested in hundreds of properties and developed spec houses.

Lauren, how are you today?

Lauren Hardy: Hey, I’m good. How are you?

Ash Patel: Good. You’ve got a crazy amount of experience. I want to hear it all. Tell me your background, how did you get started with real estate?

Lauren Hardy: Well, I got started right out of college. I started working in more of the corporate real estate space in commercial. I graduated college the day we went into a recession, so it was an interesting time to be in commercial real estate, because it was really getting hit. So that’s where I got my start.

When I was working though at the corporate world, I had my first kid, and I learned very quickly that working corporate life and having a child is very, very difficult… So it became my mission to become self-employed any way I possibly could. I really didn’t care what I was going to do. And it just so happened that my brother was flipping houses at the time. I think he had flipped maybe three or four houses in Southern California. So he just made the suggestion, “Why don’t you look into flipping houses? You probably only have to flip a couple of these things a year and you’d make the same amount of money you’re making in your corporate job.” So that’s where it all began. It really evolved in the last eight, nine years. It’s evolved to a whole different thing, but that’s where I got my start.

Ash Patel: So did you go to college for commercial real estate?

Lauren Hardy: Yes, sort of. I was a finance major and I did take real estate courses within that major. I went to a college that offered it; not all the colleges do. So I did take some real estate courses. But yeah, I knew I was going to get into real estate.

Ash Patel: And you took your brother’s advice and started flipping houses during a recession?

Lauren Hardy:  Yes. Well, let’s speed up a little bit. So I graduated during the recession. When I started working corporate real estate, that was mainly in the recession, when we were really at the bottom. I didn’t start flipping homes until we started coming back up around 2012.

Ash Patel: Okay, so the timing was perfect for flipping homes.

Lauren Hardy: It was perfect.

Ash Patel: Okay, and how did flipping homes evolve into your next step? And what was that next step?

Lauren Hardy: So the first goal I had was I wanted to quit my full-time job. So I started flipping houses on the side, while I was working a full-time corporate job. The goal was flip enough houses, make enough money to save up a year salary so I can quit. It took me a year, but I did it. And after then, it was definitely difficult. I thought it would be easier than it was. I had a new baby. So I had my first daughter already, she’s now two and a half, and then I had had a baby during this time.

So my whole thought process was, “I’m going to stay home with my kids, and I’m going to flip houses. I’m totally going to be able to do this. It’s going to be awesome.”

Well, it was not. It was very hard to be at home with two little babies and also manage the direct-to-seller marketing that I was doing. I was getting these deals via direct-to-seller marketing, so it was a lot of direct mail, talking to sellers, making offers every day… So I had thought I could juggle all that while the kids were taking naps, but it turns out that kids don’t take naps just like we take them… So it was really hard. But it really did evolve. I started out with just sort of flipping a few homes here and there. Slowly, I started pushing my kids into daycare, as I realized it was getting a little bit unmanageable.

But the real turn in my business came around 2016. By the time 2016 hit, we were doing pretty well in our real estate market in California, and there was less and less distressed inventory. So to put it into perspective, when we were in a recessionary time, like 2009, 2010, 2011, you could go to the courthouse steps and pretty much pick up a distressed property if you really wanted to; if you had the cash and the means to do it, you could just stand there, raise your hand and pick one up. By the time 2016 hit, it was very competitive at the courthouse steps, there wasn’t very many distressed homes, and there was a lot of hungry investors. So it became really difficult to buy houses that had enough of a margin where I could flip it for a profit here in Southern California, where I lived.

So I had to make something work. I had two options – I could either quit and get a job again, which felt like death, or I could figure out how to make this business work in another market. Because I noticed I had friends in other areas, other territories that were not having the same issues that I was having. So I made that choice to change and to go virtual. And my first market I chose was Nashville, Tennessee. And the first projects I worked on were spec houses, so I was buying lots and building homes ground up.

Ash Patel: Wait a minute, hold on… You could have just bought houses, turnkey, but you decided, in Nashville, to build spec houses. Help me understand that decision process.

Lauren Hardy: Okay, so that—

Ash Patel: Because, you know, there’s an easier route with real estate – just buy ready-made homes.

Lauren Hardy: Okay, so that was the name of the game at the time. That was the way to make money in Nashville. Nashville was going through a development boom. So the way it all came about – and I’m telling you, it was the most random story. I just happened to be vacationing in Nashville, and I’d had this idea that I need to go to another market, because California is getting really hard. So I thought, “I’m going to drive around and look at some houses that appear to have been flipped.”

I pulled a list off of ListSource and I pulled every home that was purchased by investors, like, LLC corporate-owned in the last month. And I got those addresses down, got my rental car and I started driving around. I started noticing something, I was like, “Wait, this neighborhood is strange.” There’s these old homes, but then there’s homes being knocked down where it said there was a purchase, but now there’s no house… And they were in all various stages of construction on these streets, all over the place. And I, coming from Southern California, had never seen anything like this before. It was really weird to see an old home built in 1920 and then right next to it, you would have two tall skinny houses right next to it, brand new.

So I kept driving, and I found a construction crew outside. And I found a guy that appear to look like the project manager, so I just pulled over and said, “Hey, what is going on here?” And he’s like, “Do you not know that Nashville is number one real estate market right now and this is the hottest neighborhood? So developers are just hungry for lots and they’re buying lots and we’re building homes, as many as we can fit on each lot.” So they were maximizing the value of every lot that they could buy.

Ash Patel: So to me, that seems like it’s more competitive than Southern California. How did you score a deal in a super hot market?

Lauren Hardy: Okay. At the time, I didn’t know that, because I thought, “How can anything be more competitive than California?” And the house prices were still, to be fair — these brand new homes were going $350,000. So California, at that time, on average house price was maybe $650,000.

Ash Patel: Okay.

Lauren Hardy: So there was still a big discrepancy there. So I’m telling you, it all started on the side of the road. And I’m talking to this guy, I’m like, “What are you, a general contractor?” He’s like, “Yeah, I’m building this house for this investor, but I’m an investor, too. I’ve got projects in the same neighborhood. Let me show you around.”

So I follow him. I didn’t get into his car, because that’s creepy. But I’ve followed him around and he took me to four job sites. And I said, “Okay, review the numbers with me. You bought the lot for what? How much did it cost to build how many homes, and you built four homes on this lot?” I was just doing the math and I  wrote it down on my piece of paper. And I was like, “Oh, my gosh, these returns are crazy good.”

And then the key question I asked was, “How are you getting these deals?” He’s like, “Oh, there’s this guy that does this secret marketing stuff and he gets these things under contract, and then this other guy tells me about them, and then we just buy it from that guy.” So that was literally how he described it. And I was like, “Oh, like a wholesaler.”

So then that told me, okay, there’s still an opportunity here, because he’s able to buy them from wholesalers and he’s not making it sound like it’s that difficult. So I sized the guy up. I said, “Okay, if he could do it, so can I.” Right?

Ash Patel: Awesome. Yeah.

Lauren Hardy: So I looked at him and I said, “Hey, Phil, find me some lots. And I’ve got money.” And that was it. I had California money, I had a ton of private money investors.

Ash Patel: Yeah.

Lauren Hardy: So he found me some lots, just like that, from a wholesaler. And then he built them for me. And it was so much easier than, say, flipping a house from a distance, because you have no ways that contractors can lie to you and say, “Oh, we didn’t see that in our first inspection.” The first bid is the first bid. There shouldn’t be very many change orders after that when you’re doing ground up, unless you didn’t accurately price out the fixtures that you were going after. Maybe you decided to go higher-end and you start changing your mind, but I [unintelligible [00:12:55]

Ash Patel: Right.

Lauren Hardy: He built enough of these things where I said, “Just make it look like those”, and it was actually ridiculously easy.

Ash Patel: So did you get your friends or colleagues or acquaintances to be joint ventures on these deals? Or did you syndicate it? Or did you just give them a fair return on the deals?

Lauren Hardy: I just gave them the returns. So I got construction loans, because in Nashville, they were giving out crazy good construction loans; very low-interest rate loans. So I got a construction loan for the bulk of it. And then any remainder, I was just getting my private money lenders — what I would do is, I would tie their funds in with a deed or trust, and I would offer them hard money rates. Anywhere from maybe 10% annualized return.

Ash Patel: Got it.

Lauren Hardy: So it worked.

Ash Patel: And how many years did you continue developing in Nashville? Or are you still doing it?

Lauren Hardy: Not doing it anymore. This business – it takes you for a lot of turns. So this sweet spot that I got in was perfect. It was great. But then, like anything, the news got out that Nashville was exploding, and every Tom, Dick and Harry started building in Nashville; even people that had zero experience in real estate, if they owned a lot, they’d just build some homes. They would figure it out how to do it and did it. So it was like the hot thing to do. I got in, made some good money.

But what that led me to do was wholesale other lots to other people. So while we were developing these homes, I started doing the direct-to-seller marketing and wholesaled lots, other houses, I worked outside of Nashville, the other areas… There were hedge funds buying there too, so there was just a lot of business to be done at that time. So I worked it for a couple years. But it then started feeling very similar to California vibes. And I was thinking, “Okay, it’s starting to feel like I just went from one California to another California, except for now this place is really far.”

Ash Patel: Yeah, so what was appealing about wholesaling? Why did you go that route?

Lauren Hardy: Okay, so I tried wholesaling, I tried flipping and I tried developing. So we’ve got the three exit strategies. Developing, that was actually pretty easy. Wholesaling, pretty easy. Flipping the house – it opened up a lot of ways that you could get ripped off by contractors. So you’re buying an old home, you’re not even there to inspect it. So you have your contractor go there, he could lie to you about what it needs right then and there, or he could undercut to get the job, and say, “Oh, no, I could do this for $50,000,” whatever. You go, you buy the deal, because your contractor verified that price.  The next thing you know, once you start construction, the contractor starts finding things in the walls and finding things with the foundation and the plumbing. And that just kept happening to me when I kept flipping homes over there. After a while, I just got so over it and I said, “Okay, I’m either doing ground up or I’m wholesaling these things and that’s it. I don’t want to flip another house.”

Ash Patel: And do you wholesale in California, or everywhere?

Lauren Hardy: Now, I wouldn’t say everywhere, but I am in some key markets in the Midwest and in the South. And right now, I’m not very focused on California, just because of where we are in the market. I’m getting better returns on my marketing dollars spent in other markets. But at this time, yeah, I was wholesaling in California as well, wholesaling in Nashville, and then I started trying out different markets.

Ash Patel: So how does somebody go about wholesaling 2,000 miles away from where you live? How do you make that work?

Lauren Hardy: You know, it’s not that hard. A lot of people have this limiting, belief like, “Oh, man, that must be impossible; that must be so difficult, because don’t the sellers want to meet you in person before they sign a contract?” And I thought that as well. But I was fortunate when I was doing business in California to have the experience that I did, which was, I was talking to sellers that owned properties all the way in LA, and I lived in Orange County.

So LA, if you know – I don’t know if you’ve ever visited, but it could be two hours in traffic to get to that seller’s home, because traffic is so bad on the 405 freeway. So I got to a point where I wouldn’t really meet the seller or agree to meet with the seller unless they gave me their word that they were going to accept my offer the day I met them. And I would let them know, “I’m going to have to drive in traffic, it’s going to be two hours, so I really want to make sure you’re firm on this price, and if I come with a contract, you’re going to sign this.”

So it started with that. I started honing in on my negotiation skills and learning how to take control of the conversation to where the seller just goes, “Oh, well, this is just how she does it.” And they don’t even question it. So years of doing that, I really refined that script and now I can train my team on that script. I literally have the script down of how you’re going to take control and tell them how things go. You just tell them how it goes. “This is how we work. I don’t get out of my desk until we have an agreement signed.” So it turned in from ‘I have your word’ to now ‘I don’t leave until you sign the agreement.’

Ash Patel: So I grew up in New Jersey, you’re from California, do you think that being on the coast, with that coastal mentality helps you deal with people in the Midwest a little easier?

Lauren Hardy: People in the Midwest are way nicer than people California.

Ash Patel: Yeah.

Lauren Hardy: If you want to have a bad day, go send some direct-to-seller marketing to a California seller or go start cold calling on a California list and you will want to kill yourself by the end of the day. They are mean. We always joke around within my company, my team, like anytime somebody new comes in, “At least you never had to talk to California sellers.” They’re so I mean.

So there are some competitive advantages that I noticed, especially in the South, too. California – we’re faster; we answer the phone. If a seller leaves us a message, we call them back within an hour or a couple hours. We wouldn’t let four days go by. But our competition – slower pace, slower-paced culture in the Midwest and in the South. So our competition will take few days to call sellers back, but we already locked up the contract by that.

Ash Patel: So you’ve got the edge?

Lauren Hardy: We have the edge.

Ash Patel: Awesome. So you mentioned the team – tell me what systems you have in place to help you with this wholesaling?

Lauren Hardy: Oh, lots of them. So right now me, personally, I’m not very active working in my wholesaling company or in my investment company. I actually have a coaching program and I host a podcast, so I’m pretty split. So I have some key implementers on my team that really help me out. I’ve gotten really lucky using virtual assistants as well. So I can touch on that, if you’d like to talk about—

Ash Patel: I’d love to hear about that.

Lauren Hardy: —VAs for life. My VA game is strong.

Ash Patel: I want to hear everything about that.

Lauren Hardy: Okay, so I do have an implementer. He’s the guy that’s worked with me for six years. And he’s my right-hand man; I think of him like family. He knows everything about the business. So he really has taken place of myself in my company. So I’ve been able to know that the business is still running and making money with him watching over it and I can work on my coaching platform and hosting the podcast and everything. So I’m very, very lucky on that. My investment company – I maybe work five hours a week dedicated to that company.

So I have virtual assistants that do a lot of different things for me. I have some that are based in the Philippines, and they do everything from checking my email and just flagging that ‘these are the things you need to see’, and that’s it, and letting go of everything else, deleting everything else, or answering the questions if they know the answers.

So for our marketing, we do a lot of cold calling and a lot of text message blasting, so she sets up all the campaigns in there and all the phone numbers stuff, and she checks the voicemails… We have all the voicemails get dumped in one voicemail box, from every single campaign we do, so she’s checking the voicemails and making sure that they get called back by one of our sales reps… So she’s doing all sorts of things behind the scenes, backend stuff that I don’t even know how to do anymore. If you said, “How do you load a campaign in Mojo Dialer?” My eyes would glaze over, I wouldn’t know what to tell you. I’d say, “You ask my virtual assistant how do you do it.” So we have a lot of support with VAs.

I also have VAs that – they’re Mexico-based, but they did live in the United States at one point. So they have very good English and understand our culture very well, and they’re doing a lot of the cold calling and the pre-qualifying with the seller. So kind of like the frontend acquisition, or some people call that role like a lead manager.

Ash Patel: Okay.

Lauren Hardy: It depends on how you want to slice and dice it. I actually now came up with the term sales rep. So I call them sales reps. So I work with them, and then I do have a sales rep that’s US-based here; I have two girls here. So I am trying to lean more into the virtual stuff, for obvious reasons.

Ash Patel: So you have an incredibly well-oiled machine… Lauren, what were some of the growing pains or the pain points that got you here? Because you didn’t think about doing the VAs early in your wholesaling. Was there a lot of pain that you went through to get to this point where you offloaded these tasks? Or were you very smart about it in the beginning and knew that you’re going to need help and brought people in?

Lauren Hardy: Honestly, it’s such an organic process and evolution, really. I would not say I was very smart. I’m not smarter than anybody. I definitely had a lot of growing pains. In fact, I still have growing pains. It’s never perfect. I’ve noticed with a sales team, a company that is based primarily with sales representatives, outbound sales in particular, even inbound – you’re managing people. And managing people is very hard, because there’s a lot of variables. And they’re things that they can do to manipulate systems, to make it look like they’re working when they’re not, and then you find that you’re playing investigator to figure out what they’re doing and how they did it and why you’re not seeing the results that you should be… So it’s difficult. I don’t want to make it sound like I have it all put together and that it’s easy, because this is my Achilles heel, managing the sales staff.

Ash Patel: So that’s your bottleneck right now?

Lauren Hardy: That’s the bottleneck. Right.

Ash Patel: So Lauren, you mentioned you had an integrator that’s your right-hand person. Out of curiosity, did you read the book Rocket Fuel?

Lauren Hardy: No, but I heard the term integrator from someone else that read Rocket Fuel.

Ash Patel: Yeah. So the book talks about you being the visionary, and the visionary cannot be successful without an implementer or an integrator. I’d love to hear about this person; what they do for you, how you came about hiring for that position…

Lauren Hardy: Okay, I hate the term, but I’m going to say itl it’s going to make me barf… I hate “serial entrepreneur”.

Ash Patel: Yep.

Lauren Hardy: I hate that term. You’ll never hear me saying that. But I need it just for the sake of this podcast – I have multiple businesses now. It wasn’t always like this. Two years ago, I only have my investment company. We now have a coaching program, I’m launching some software companies, so I’m now a serial entrepreneur. I hate that.

So the growing pain where I stand right now is I need multiple integrators… So I’ve found the integrator for that sales focus business. Like, real estate investing, wholesaling, flipping – it really is sales and marketing. It’s not this HGTV life that is portrayed in TV, it’s sales and marketing, that is it. So I’ve found an integrator who is so thick-skinned in sales, it blows me away. He is so emotionless when it comes to rejection… He does not care.

Ash Patel: That’s a talent. That is a talent.

Lauren Hardy: It is a talent. It does not ruffle his feathers at all. He can ask sellers for a price reduction, like it’s not a big deal. He doesn’t get embarrassed. He can lowball a seller, it doesn’t give him that feeling in his stomach that still gives me. So I found the perfect integrator personality for the sales company. Where I am today is now I’m working on integrators for all the different companies. My social media – I’ve found a creative; she’s creative, but she’s also very good at figuring out Instagram, what’s the social platform that I need to be on, what’s the trendy thing that I need to be doing right now and dropping videos on right now… I’ve found that girl integrating that side of things. So she is – I call her my creative director for the coaching program and the podcast and everything. So I think you can have multiple integrators. You’re not going to just find this one person that can do, for the serial entrepreneur, the multiple different businesses. I don’t know if you’re going to find that one person. If you know them, please let me know. But—

Ash Patel: That’s a great point, because I always assumed it’s the right-hand man or woman would be one person. But having multiple is even better. That’s a great perspective.

Lauren Hardy: And you know what someone recommended to me actually a week ago – because I actually reached out for some help, because I was going through growing pains. I was going, “Okay, I’ve got Hailey,” she’s the integrator for social media coaching, podcast, that side of things. I’ve got [unintelligible [00:26:47].21], who’s with the investment company… There needs to be someone managing them.

Ash Patel: A VP of Ops.

Lauren Hardy: A VP of Ops, right?

Ash Patel: Yeah.

Lauren Hardy: So I’m thinking like, “Gosh, this must be a very expensive person that I’m going to have to pay something. This is going to be someone that I have to pay six figures to.” So I reached out to someone that I know, that has this sort of person in mind, I reached out to that girl, I got in contact with her, and I said, “Tell me everything you do for him. What do you do? And let me share with you my issues right now. These are my big rocks, help me.” And she’s like, “Oh, you need an operations manager.” Oh, that’s what they’re called. Okay. Operations Manager. What does an operations manager cost?” And she’s like, “You can easily find someone who’s virtual for probably $20 an hour.” “Wait, what? I was thinking this was a $200 an hour person.” She’s like, “No, you just need somebody who is very operationally minded, they can pull your KPIs, they get you organized… That’s it.” So I think that’s my next hire; maybe ask me in a year and see if I’ve done it and tried it out.

Ash Patel: I would love to. Yeah, you’ve got an amazing ride that you’ve been on so far. So tell me more about the coaching. What got you into that?

Lauren Hardy: Nothing ever in my life has ever fell in my lap. I’ve had to go find it. For Nashville, I had to get out of the car and talk to some stranger. The coaching thing was an amazing opportunity that I still to this day pinch myself. So I was wholesaling virtually, and I reached out to my good friend Brent Daniels, and I said, “You know, I saw they’ve been on the Wholesaling Inc podcast and you host it… Why have I not been on that thing yet?” And he’s like, “You’re right. Let’s get on a schedule.”

So Brent’s a coach with Wholesaling Inc and he’s got this awesome program called TTP, a lot of you guys probably know or heard about it.  And I got on the podcast and I just talked about all things virtual wholesaling. And virtual wholesaling was a needed coaching program within that platform, because there were a lot of students in high-priced markets that were having a very difficult time implementing these same strategies that everybody else was in the nation, but they weren’t working in California. New Jersey – I’ve got clients in New Jersey, New York, Miami, Seattle, high-priced areas, the students were going “Help, we need help, we can’t be in this market.” So they needed a virtual coach.

After that podcast launched, one day I got a text message from the owner of the podcast, Wholesaling Inc, his name’s Tom Kroll and of course, I knew who Tom was. I was like shocked to get this text message; I almost like fell over. He’s like, “Hey, we need to talk.” I was like, “What about?”

And so he gets on the phone with me and just says, “What do you think about coaching virtual? Would you put together a coaching program?” And I was like, “Okay, yeah.” He’s like, “You’ve got a week to think about it. But that’s it. Yes or No, you’re in or out?” I think I thought about it for 24 hours. I was like, “Yeah, I’m in. Great idea.”

So I put a coaching program together, we beta-tested it for a while, made sure we had success, coached students for free on the platform… And then we actually officially launched the program March of 2020. So we’re almost coming up on my year.

And I’m hosting the podcast as well… So I do one day a week on the podcast, we’ve got a cool YouTube channel if you guys want to check out our videos… So a really, really great group. I’m super-honored to be a part of it.

Ash Patel: That is incredible. So what’s next for you? You need another giant challenge to keep this thing going.

Lauren Hardy: I’m literally a masochist. I’m always like, if you cannot say yes to one more thing, you’re done. This is it. I’ve said yes to two more things, there’s two more things I’ve said yes to, and I’m done for the rest of this year. I’m not saying—I’m not opening up any more businesses, I’m not—. So there’s a couple software companies that we’re not releasing just yet, that I’m very excited about. One is something I’ve worked on over a year; it should be launching very soon. And then there’s another one that just came about… And they’re partnership opportunities. So it wasn’t me behind the operations, but I’ve kind of the creative vision, and very excited.

Ash Patel: Visionary.

Lauren Hardy: I’m the visionary, I am.

Ash Patel: Yeah.

Lauren Hardy: Like, I am so good for ideas, but when it comes to actually executing them—I’m very good at getting the energy to like, “Let’s execute it!” and then like, “Okay, but you do all the details.” Like—

Ash Patel: Yeah.

Lauren Hardy: I’m not very detail-oriented. But I am very much a visionary, for sure.

Ash Patel: So we have to have you back in about a year or probably less to see what else has come your way. Lauren, what’s your best ever advice for, I would say real estate people, but your background is so varied, so for just people in general. Best ever investing advice, growth advice, real estate advice… You pick.

Lauren Hardy: Honestly, seek help. Anytime I ran into an issue or a problem, whether it was personal, whether it’s business, real estate, house flipping, find someone who’s killing it in that area and ask for their help. Ask them a question, whatever it is. Offer to pay them, “I’ll pay you $1,000 to talk to me for three hours.” I’ve done that. I’ve done that this entire time. Every time I needed help, I’d say, “Hey, I’ll do whatever I need to do, I’ll pay you whatever. Help me solve my problems.” Don’t try to go in alone and just solve your own problems. It is so much easier to just cut the learning curve, go straight to an expert, and in one hour, you could probably figure out the solution to your issue or problem, and you will then be able to overcome it, and then exponentially grow much faster than if you tried to do it all yourself.

Ash Patel: That is great advice. I know that would have helped me a lot, and I’m sure it’s going to help a lot of other people out there. Lauren, are you ready for the best ever lightning round?

Lauren Hardy: Okay.

Ash Patel: Awesome. First, a quick word from our partners.

Break: [00:33:05] to [00:33:29]

Ash Patel: Alright, Lauren, what’s the best ever book you read recently?

Lauren Hardy: The Road Less Stupid by Keith Cunningham.

Ash Patel: Tell me about that. What did you learn from that?

Lauren Hardy: Other than Keith Cunningham, is hilarious, his writing style is very funny and engaging, it’s just advice from a CEO of a multi-million-dollar company. So it’s just advice, how to not be stupid. Stop paying dumb taxes. And it really boils down to one daily practice that anybody and everybody can do… And it’s thinking time; just taking time to think. It’s amazing how many stupid mistakes we make because we didn’t think something through and—

Ash Patel: I’m adding that to my list. Awesome.

Lauren Hardy: I call it five-figure mistakes. All my five-figure mistakes were because I just didn’t take an hour to maybe say, “What if this goes wrong?”

Ash Patel: Right.

Lauren Hardy: Or “What’s very likely that could happen?” So… Thinking time.

Ash Patel: Great advice. And Lauren, what’s the best ever way you like to give back?

Lauren Hardy: Well, recently, I gave back to a charity. One of my students – oh man, great guy… He got into wholesaling houses because he wants to make enough money so him and his wife don’t have to take from their charity. So they have an amazing charity in India, it’s called The India Mission. It’s orphanages for children in India, they help clothe, feed the hungry… It’s an amazing organization that they’ve put together, and they have these children’s homes, these poor children in India… But as they run a charity, they have to take a salary. It’s not much…

Ash Patel: Yeah.

Lauren Hardy: …but they have to. So he got into wholesaling houses so they hopefully will not have to take their salaries out… And I couldn’t even imagine a better cause, right? So it was really cool to be able to donate a proceed of my profits to his charity this year.

Ash Patel: That’s great. Lauren, how do the Best Ever listeners reach out to you?

Lauren Hardy: I am pretty active on my Instagram. If you guys want to follow me, my handle is @thismomflips. If you guys happen to be interested in the coaching program, check it out at http://virtualinvestingmastery.com/ and I host the podcast wholesaling Inc if you guys want to check me out there.

Ash Patel: This is an incredible podcast. Did you ever thank your brother for getting you into real estate?

Lauren Hardy: Oh yeah, for sure…

Ash Patel: You’ve had an amazing ride with the initial fix and flips, the Nashville spec houses and the wholesaling, the systems you’ve put in place, a software company… We have to have you back. Thank you so much for your time.

Lauren Hardy: Thank you so much for having me.

Ash Patel: Have a great day, Lauren.

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JF2366: Using Old-Fashioned Tactics to Find Buyers and Sellers with Frank Iglesias

From the music industry to IT, and then to real estate, Frank has always been fond of receiving education and learning something new. While working in IT, he picked up a few properties on the side. In 2011, he walked away from the corporate world and became a full-time investor.

Back then, he started by utilizing the power of tried and true methods of reaching people such as direct mail and networking. In 2020, people are still happy to share what they do in a casual conversation and get on the phone to discuss a deal, so old tricks do work when used properly. 

Frank Iglesias  Real Estate Background:

  • Full-time investor 
  • 11 years of investing experience
  • Portfolio consist of several rentals, construction projects, has completed 100s of deals as a wholesaler & flipper 
  • Based in Atlanta, GA
  • Say hi to him at: www.buyinvestmentassets.com 
  • Best Ever Book: Think and Grow Rich

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Surround yourself with the best people you can afford” – Frank Iglesias.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Frank Iglesias. Frank, how are you doing today?

Frank Iglesias: I’m doing outstanding.

Theo Hicks: Great. That’s good to hear and thank you for joining us today. A little bit about Frank. He’s a full-time investor with 11 years of investing experience. His portfolio consists of several rentals and construction projects. He has also completed hundreds of deals as a wholesaler and a flipper. He is based in Atlanta, Georgia. His website is buyinvestmentassets.com. So Frank, do you mind telling us some more about your background and what you’re focused on today?

Frank Iglesias: Absolutely. Thank you for having me on the show, I just appreciate the opportunity to share my background. I was actually a music guy when I was younger, in high school, in college, and went to college for music… I thought I was going to rock the world on drums and that sort of thing. Then we realized that maybe that wasn’t the best avenue or the best chance of success, so when I left college and actually got into the IT industry. So for all intents and purposes, I was a computer geek for 15 years. I kept the music up on the side, so I did a lot with education. I’ve always been around the education aspect of whatever I’ve been involved in. Even in the IT space I did, along with the engineering that I got involved in, I was also a consultant, and when you’re a consultant there’s a lot of education involved. So that’s kind of been a consistent thread between those careers.

In a nutshell, I actually started getting bored with IT. We were part of a really great team, and it got to where the joke we had internally was if we do this much better, we’re going to automate ourselves out of a job. You hear that sometimes in the world today, and you’re like “Wait, that actually can happen”, and I realized the challenge was no longer there. Around that time, I’d actually picked up three or four properties by then, just while working my IT days. Like so many investors, I heard about Rich Dad, Poor Dad. I actually don’t even remember how I heard about it. I went to the seminar, of course, it got the bells and whistles turning in my head, and light bulbs going off… Once I left the IT industry, I really dove into real estate full-time. It has been quite a roller coaster since then. Certainly a journey and adventure, very different than corporate life. That’s how I got to today.

Theo Hicks: Perfect. Thanks for sharing that. How long ago was it that you left the IT world and started real estate investing full-time?

Frank Iglesias: At the end of this year, we’ll be at nine and a half years. It was the beginning of July of 2011. Right smack in the middle of the year we walked away from that world. Back then I had heard of Preston Ellie, and he was talking about preaching freedom. And I literally came home, and my children who were young at the time took LEGO blocks and they built the word freedom and put it on our mantle. It was a really cool experience as a dad.

Theo Hicks: Nice. So nine and a half years ago you left the IT world, and at that point you said you had three to four properties?

Frank Iglesias: Yeah, we had learned the wholesale a little bit, but primarily we were buy, fix and rent. It might have been five or six – I’d have to go back and look – that we had rented. Back then you could rent them and I had a full-time job so the banks like lending to you. You were the ideal person to give a mortgage to under great terms. That was in the middle of the crash, of course.

What was interesting was, as the market was crashing, I really didn’t understand it. I would hear that the stock market was crashing, because that would be what my corporate clan would talk about… But nobody really talked about the real estate market crash. I didn’t really start to understand that until once I was in it full-time. Up until then, it was “Oh, look. Oh look, we could buy houses, they are kind of cheap. This is cool.”

Theo Hicks: Yeah. So a lot of people I talked to who transition from working a full-time corporate job to real estate, they either have built up a portfolio so that they were generating enough cash flow to replace their corporate income and then they jump into it full-time… Or the second one is usually the case where they kind of just burn all the bridges and just jump into real estate, and they just figure it out. Which of those two categories do you fall into? Are you somewhere in between? Like, were those three to six properties giving you enough income that you felt comfortable leaving your job? Or was it less of a financial decision, more of like “I’ve got to get out of this IT world?”

Frank Iglesias: You know, it really was a little bit of both. We had some savings, we had a little bit of passive income, and we had done a few wholesale deals. Back then wholesale was still kind of new to us, so it was like, “Oh, look, I could just go do this and make five or 10 grand, or whatever.”

But I was bored in IT. I remember walking into my manager’s office and I said, “This is a fantastic place to work. Great job, great benefits, great opportunity, and I’m bored, so I know it’s time.” It wasn’t just time to leave the job, it was time to leave the industry. So it was definitely a mix of things. But you’re absolutely right, to your point.  You’re right, most people do the latter, they just dive in. I would actually add a third option and say they get fired. I know a couple of guys that just got let go and said “Forget it. I’m just going to stay fired and go for it.”

Theo Hicks: So after you had left your job, what was your first main focus in order to grow your real estate business?

Frank Iglesias: My focus for the first few years was heavy on wholesaling. We really focused really hard on that. I really had a good time, I did very well with that. I wish I had known how to scale, because that’s probably what I would’ve done. I would have done more of that in retrospect. But that was fun, that was really a lot of fun, just really diving into wholesaling. I learned from Lee Kearney how to do it, and to this day, I still use most of his techniques for wholesaling and it just works. So that’s been really nice. We still did some rehabbing though; we never not rehab it’s always just been a matter of to what degree.

Theo Hicks: Okay, do you want to go over some of those wholesaling tactics you talked about? Maybe kind of walk us through, from beginning to end. How you find the deals, and what type of thing you’re doing to get them under contract, negotiate the right price, and then how are you finding the buyers in the back end.

Frank Iglesias: Obviously, there are different techniques. Direct mail used to work really well back then, now it’s a little bit more of a different approach. But the one thing I would say that worked for buyers in particular and for sellers was just networking. Really telling everybody what you do.

When I say networking, I mean actually talking to them. Not texting them, not emailing them. Literally, picking up the phone, and talking to people. It’s so powerful. I feel like as technology has evolved, that still gets lost more and more. I don’t know, maybe people have other experiences, but I’ve never met someone that’s like, “Sure, I’d love to do $200,000 worth of business,” over text messaging. I just have not had that experience. It just always seems to go back to getting on the phone with people and just being real with them. People sense sincerity, people sense when you’re real with them. It’s just built into us as humans. So when I’m talking to other wholesalers or sellers, sometimes sellers will refer someone… There are so many people that you talk to you that will send you a great deal, just because they feel like they can do business with you, and same on the buyer side.

Just this year, as an example, someone wholesaled to us just a great deal, someone that I had spoken to and had a good conversation with several months ago. It’s been quite some time. He literally calls me out of the blue and sells me this wholesale deal. I couldn’t believe it, it was a unicorn deal, because the deal had 100 grand in equity. I’m like “Who wholesales me a deal with100 grand in equity?” I said that’s relation right there. Because my average email that comes from someone I don’t know doesn’t have those kinds of figures. And they made good money on it. They just negotiated an outstanding deal, and gave me an outstanding deal, and I’m like, “That’s all networking right there.”

Theo Hicks: I definitely understand the talking on the phone and networking. But kind of taking it just one step back, how do you know who to call, or how do you get the contact information? Who are these people you’re talking to? Give us an example. Are they wholesalers? So you’re finding out who the other wholesalers are and talking to them? Or is there another strategy you have?

Frank Iglesias: I always made it a point to talk to every wholesaler. A lot of people tend to write off new wholesalers. I love talking to them, because for every 10 new wholesalers you talk to, you’ll find one or two that are really, really eager to learn, and it’s great to connect with those people. So I always say, talk to all the wholesalers.

In all the years I’ve been doing this, the wholesale deals I get from people are not great deals, that’s never changed. That’s okay. Just keep talking to them, because you’re going to find the ones that do good, and they’re willing to learn, and they’ll start sending you deals more and more.

I just had someone from Chicago, send me one today. It actually looks pretty decent, so we’re going to look into that. But beyond that, how do you find them? Obviously, there are forums, you have Facebook, and all that. But really, the best place I like to go is into the public records. Because everybody talks, but when you go on public record, you can start seeing “Who’s closed 100 deals in 2020? Who closed 100 deals in 2019?” I’m just picking 100 as an arbitrary number. You can actually see it in the public record. I’m in Georgia, so it will actually sort, “Here’s who the biggest buyers are in descending or ascending order”, so I can see who they are. And what was interesting when I did this a few years ago, the biggest buyer in Atlanta right before the hedge funds came in, the biggest buyer in Georgia actually lived 10 minutes from me. If I told you his name, you’d probably know who it was. But a few years ago, he was the biggest buyer, and he bought hundreds of properties. I’m like, “Oh my gosh, I had no idea.”  I would have wholesaled him a few deals, nut I had no idea he was buying that much. What I have learned is a lot of the busiest people don’t tend to be out there, they tend to be much more quiet. That’s my experience.

Theo Hicks: Hm, interesting.

Frank Iglesias: Now again, a lot of this was pre-social media. Social media now has changed that dynamic a little bit, but it still seems to me that the people that do the most business, you don’t tend to hear about them a lot. But they’re in the public record and if you get in there, skip trace them, nowadays, you can skip trace companies so you can find these people. It’s pretty cool. Technology is making this business so much easier to find people. There’s a lot of people quite honestly that do like to be found when they sense that “Hey, this guy is real. This guy is sincere.”

Theo Hicks: Okay, Frank, what is your best real estate investing advice ever?

Frank Iglesias: My best advice ever? Well, if there’s one thing I can say I’ve learned, and there’s nothing revolutionary about it, but I’ll echo it because I would agree, is surrounding yourself with the best people you can afford. I can’t put into words how valuable that is. And having a coach. We’ve had some great experiences, but I will tell you that not having a coach at some specific points in our career, that’s cost us a lot of money that we could have had on the right side of the bank account. So I think to surrounding yourself with the best people and having a solid coach. I cannot emphasize that enough.

Theo Hicks: I think I might know the answer to this question, but answer it anyway, which is how do you find these people? How do you find your coach? How do you find the best people you can afford?

Frank Iglesias: Oh, it’s actually a good question. It’s not easy. I am a huge believer in the 80/20 rule. 20% of people do 80% of the business, that sort of thing. I would say 20% of the people are really good at what they do, and the other 80% – I don’t want to say they’re bad at what they do, but they’re not your top tier. I would even say, it’s probably more like 90/10 or 95/5.

I’ve just learned that really, really good people are really hard to find. It takes talking to a lot of people. Like many investors, I’ve seen no shortage of webinars, and ads, and that sort of thing. As an example, the builder I use for our new construction projects, we were building houses for five years before I found them. Once you have them, you’re like, “Oh, my gosh, where were you four years ago when I needed you?” But that’s okay. It’s part of the evolution.

So it takes a lot of talking and just really exploring a lot of avenues… Not just real estate avenues, I would even say look at other business avenues. Sometimes your best people may not be completely all about real estate.

For example, I’ve got a business coach, and we talked a little bit about real estate, but really, it’s more about this is how you run a business. When I hired him – it’s been over a year now that I’ve been with him – it’s completely changed how we look at our business. Things that, quite frankly I never heard in real estate circles, all of a sudden became very, very real. He’s got a different perspective on it.

So I’ve got a real estate coach, I’ve got a business coach, I’ve got a life coach… I think you need those specialists to help you — start with real estate because that’s what you’re doing, but then as your business grows, get that business coach. Make sure you get that life coach, so you don’t lose perspective on things, because things can get crazy in this business, as you know.

Theo Hicks: Alright Frank. Are you ready for the Best Ever lightning round?

Frank Iglesias: Best Ever lightning round. Sure.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:17:12][00:17:52]

Theo Hicks: Okay Frank, the first question is, what is the Best Ever book you’ve recently read?

Frank Iglesias: I recently read, Think and Grow Rich again. I think that book is truly timeless. What I would say is don’t just read it, really apply it. When you really apply what Napoleon Hill is talking about, it will challenge you, but it really opens your eyes, especially if it’s not the first time you’re reading this. It gets more impactful every time I read it.

Theo Hicks: If you’ve ever lost money on a deal before, how much did you lose and what lesson did you learn?

Frank Iglesias: Oh, my. Yes, I’ve definitely lost money on a deal before. I think that’s an experience. No one wants to lose money on a deal, but we also learn a lot when we go through tough experiences. We lost over $100,000 on a rehab. The biggest lesson I learned from that was – I worked with a designer who also did project management at the time. She was an excellent designer, by the way; she was absolutely excellent. It was kind of a trust a little too much, but not enough verification… And that design thing can get away from you. It totally got away from us. We actually had a house design, and in a nutshell, once the design came back, she literally said it’s ugly. I kid you not, it was that simple. It’s ugly. So she really wasn’t excited about it. And the market was appreciating at the time.

Instead of just doing it, because ugly houses sell every day too, everything doesn’t have to be the Taj Mahal… We actually ended up delaying the whole project, changed it to a pretty house. By the time we built the pretty house, it was more complicated. And it was a nicer house, but more [unintelligible [00:19:31].26] way over budget. At the end of the day, we lost 100 grand. Whereas if we built the ugly house, we would have made money. It was crazy.

Theo Hicks: And then on the flip side, what’s the Best Ever deal you’ve done?

Frank Iglesias: I think my favorite deal I’ve ever done, that’s the best – because some of the ones I bought back in the early days of 2009, 2010, there was nothing glamorous about them, but I held them. In fact, we sold one earlier this year that we owned for nine years. For nine years we created 150,000 in equity, and we were able to do a 1031 exchange into something better. So when I look at all the other deals I’ve done, I’m like, that to me is the best deal. I just had a handful of those; buy and hold, build that equity, because it’s really nice what it can turn out. Now, of course, you want to make sure in a market where that can happen, and across Atlanta has been that market. But that’s what I would say.

Theo Hicks: What is the Best Ever way you’d like to give back?

Frank Iglesias: I have a background in education, I’ve always been involved to some degree, and I enjoy teaching real estate, I enjoy speaking, I can do the hype thing and be excited, but also when I share, at a lot of meetings, I like to just get real with people. Because a lot of people again, just want the sincerity, “Hey, what really happens. This is not HGTV. There’s a lot of real work that goes into this.” Nothing wrong with HGTV, by the way, but there’s just a lot you don’t see. So when a new person is coming in particular, they really want to know what’s happening. Or if you have someone that got involved and they got burned, they still want to do real estate, they’re excited about it, but they really don’t like the feeling of being burned, “Can you help me?”

So I love sharing in those types of situations in particular, because it really allows you to connect with people, you feel their pain, they understand that you understand them…  And it gives them a lot of confidence, a lot of hope, and really restores their, “Yes, I can do this.” That’s really rewarding.

Theo Hicks: And then lastly, what’s the Best Ever place to reach you?

Frank Iglesias: The best place to reach me – you can email me, it’s frank@workingwithhouses.com. Or you can call our office at (678) 408 2228. Those are the best ways. You can message me on Facebook as well, or Instagram, but email and phone are definitely much more likely to get me.

Theo Hicks: Awesome, Frank. Well, thank you so much for joining us today and providing us with your Best Ever advice. We focused a lot on wholesaling, but I think most of the things we talked about, if not all of them, can be applied to any real estate niche.

At first, we talked about you leaving your job, and the two options, and you added the third option, for people to leave their jobs, which is they have enough money to leave their job, they burn the bridge, or they get fired. So you were the got bored with what you were doing at your work and jumped into real estate full-time.

And then those timeless universal tactics that you talked about for wholesaling was networking, so talking to everyone you know about what you’re doing, and then actually talking to them on the phone, as opposed to just text or email or social media, things like that. Making sure you’re honest, you’re real because people can sense that. Making sure you’re talking to everyone, not just the established guy, but also the newbies, just because you might find that one out of 10 person who ends up being a real go-getter and brings a lot of business.

Then you talked more tactically specifically about wholesaling and finding buyers, like just go into the public record and seeing who’s closed on the deals, find the biggest buyers and skip trace them. And then your best ever advice was to surround yourself with the best people you can afford and having a coach. You kind of talked about how you start off with a real estate coach, but eventually when you find a specialist for business, and then a life coach as well. And you did mention that it’s really hard to find these best people. But just like you mentioned him with networking, you’ve got to talk to a lot of people. Then something I really liked was that you don’t necessarily have to just focus on talking to real estate people, because some other business might also be a good fit for you, whether they be a mentor, or a partner, or someone that’s going to work with you.

So a lot of solid advice was given in this episode. We really appreciate it, Frank, and thanks for coming on. Best Ever listeners, as always, thank you for listening. Have a Best Ever day, and we’ll talk to you tomorrow.

Frank Iglesias: Thank you.

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JF2364: How To Go From A Commission Chaser To A Problem Solver With John Chin #SkillsetSunday

John cut his teeth as a traditional real estate broker. He escaped the “hamster wheel” of chasing sales thanks to a mentor who put him on the fast track to investing. That paradigm shift made him see licensed agents as problem-solvers for homeowners rather than just salespeople.

Now John teaches real estate agents how to leverage their license into creating 8-10 various income streams as opposed to relying on commission alone. In this episode, he talks about his lead intake process that helps licensees make the most out of their leads.

John Chin Real Estate Background: 

  • John and Ron are the founders of Investor Agent
  • Together they have done 2,800 rentals and flip properties (mostly short sales, foreclosures, and REOs)
  • Closed over $260 Million in residential investments
  • He currently manages over 470 cash flow rentals
  • Based in Orlando, FL
  • Say hi to him at www.investoragent.com 

Click here for more info on groundbreaker.co

 

 

Best Ever Tweet:

“You’ve got to look at your listing as just one tool in your tool chest. It’s not the main driver of your business ” – John Chin.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with a repeat guest, John Chin. John, how are you doing today?

John Chin: I’m doing awesome, man. Thanks for having me again.

Theo Hicks: Yeah, no problem. Thanks for taking the time to speak with us. And today being Sunday, we’re going to be doing a Skillset Sunday. We’ll talk about a specific skill set that can help you in your real estate business, and we’re going to talk about how you can go from being a real estate agent who chases commissions to being a real estate agent wolf. John’s going to explain what that means, where the word wolf comes from, because he told me a really funny story before we got on. I want him to tell again where it came from, to have this concept hit home for you. Before we get into that, a refresher on John’s background.

He is the founder of InvestorAgent, and InvestorAgent has done 2800 rentals and flips, mostly short sales, foreclosures, and REOs, closing over 260 million dollars in residential investments, and currently manages over 470 cashflow rentals. He’s based in Orlando, Florida, and the website is investoragent.com. So John, do you mind telling us a little bit more about your background and what you’re focused on today?

John Chin: Yes. I cut my teeth in traditional residential real estate brokerage. Then, like a lot of us who end up in the investment business, where we’re flipping houses, buying rental properties, building cash flow portfolios, and serving investors to do the same thing, there was a pivotal relationship in our past – we met somebody, and they kind of set us on a fast track of doing deals, and kind of got us off of that. We call it the sales hamster wheel, where you are in perpetuity unemployed and chasing the next closing or closings. So I was fortunate enough to have that kind of relationship, and pivot the trajectory of my real estate career to actually doing deals, and then using my license as a way or just a tool to solve problems for sellers. So it’s kind of a paradigm shift.

That whole wolf story came from Pulp Fiction, where we kind of liken ourselves to one of the characters in Pulp Fiction, Mr. Wolf. Anybody who’s listening who saw that movie, there was that accident in the back of the car, they ended up at Quentin Tarantino’s character’s house, and he was going through the roof, he was upset because he had a dead person in his garage… So the boss guy sent his problem solver to the house to fix that problem, and his name is Mr. Wolf. He shows up in the tuxedo at the front door, and he says, “Hi, I’m Mr. Wolf. I solve problems.” And he comes in and cleans up the whole situation. So that’s what we kind of do for sellers.

I think the biggest paradigm shift I had that helped me transform from being somebody who just tried to chase more closings and more listing and buying commissions, to somebody who was actually building wealth, was the paradigm shift from being a salesperson to being a true problem solver for homeowners or property owners. This means that you go from only being able to make money one or two different ways as a licensed salesperson, to actually being able to make money maybe eight to 10 different ways on a property, while solving problems for homeowners that are a little bit more flexible, that most licensed agents can’t do. So you end up making more money, you end up getting more deals for yourself, and you end up solving more problems for sellers.

Theo Hicks: Perfect. Then you were talking about in order to start this process of solving the homeowner’s problem is to properly doing the seller intake. You talked about a form that you have, that people use. Can you explain at what point of the process is this used? Is it when I find a lead? And then maybe tell us what people usually do if they’re not doing seller intake.

John Chin: If you get into the mind of a traditional licensed agent who’s working what we call the retail business,  that’s all they do exclusively – they work with buyers and they work with sellers. When you talk to a homeowner in that space, what you’re trying to do is turn that phone conversation into a listing presentation or an appointment at the seller’s house or at your office to list their property. And to do a CMA form a lot of times, you do your formal listing presentation… Basically, how I can help you sell your house as quickly as possible, for the highest net proceeds as possible, that’s kind of the goal.

Everybody heard the expression, if you’re a hammer, everything looks like a nail. Well, everybody looks like a nail to a licensed commission salesperson who’s just trying to do that all day. So we bring in this process like the number one thing that helps you shift from being a commission earner to being a problem solver dealmaker is when you do that initial intake call a little bit differently.

So if you just do this one thing really well, number one, you’re going to look a lot different to that seller… Because most people aren’t coming to them as an advisor/consultant capacity. What they’re really trying to understand from that seller, “Look, you’re at point A right now and you’re trying to get to point B in your life, and your house is a mechanism to help you get there.” That’s the difference, the way you’re looking at that situation with the seller, as opposed to somebody who says, “Okay, I know you’re just trying to sell your house as quick as possible, for as high proceeds as possible.” That conversation looks different than the former. So if you do a proper, what we call a lead intake consultation with the seller… And this is the template that we use. I’ll kind of walk through what we’re trying to accomplish in that template. But it’s just a different line of questioning.

If you follow that line of questioning in a specific chronology or a specific order, then number one, you’re going to sound like a consultant, a lot different than most agents, because you’re really trying to get deeper into the life situation of the seller. Then the house just becomes a tool or a mechanism to help them get from point A to point B.

Theo Hicks: That makes sense. Let’s talk about this lead intake consultation form. So just explain, if you’re on the phone with the seller, do just read straight through it? Or is there I guess a script that you do? Or is it like, if they say this, then you say this, like a logic tree type of deal? How does it tactically work?

John Chin: Okay, so it’s a worksheet. And I always have a paper copy printed up, and it’s a front and back worksheet. So I literally can just print one up and I can fill out the front and I can fill in the back. All of the students that we work with, our trainees and our licensed agents that we support, they literally fill this out, take a picture of it, the front and the back, and then they can send it off, and now we can huddle to figure out how to best solve a problem or turn that into a deal. Or maybe it’s a better short sale listing, or maybe it’s a better traditional listing… But the sheet helps you get there, to that if-then prognosis, if you will.

So to answer your question, you just start at the top of the sheet, you go down and you just fill in the blanks. Now, the blanks just prompt you of the type of information you want to ask. As you get skilled at using the sheet, the second and third-level type questions will follow the answers you get from just the blanks. In other words, the sheet serves as a wedge for you to get what we call first-level answers from these sellers.

For example, I could ask you, “Why are you selling the property?” and someone says “Well, because I just evicted the tenant. The place is kind of trashed, and I want to get rid of it now”, for example. Well, then I don’t just stop there, even though the sheet just prompts me to find out why they’re selling. What I want to do is then go second and third level, because that’s where the juice is, that’s where you get the real nuggets that are going to help you find out what the true problem is for that seller, and help you monetize that deal.

In that situation, it would prompt me then to not just leave it with that answer, but then for me to ask, “Well, tell me about that experience with your last tenant. What happened there? How’d you end up getting that as a property, as a rental?” So all kinds of solutions come out of the info you get when you go second and third level with the sellers.

It’s a huge paradigm shift, because most people want to just get facts. And a lot of investors too, they want to just get facts, because they want to get to understand is there equity in this house? Or is there no equity in this house? They just want to go for the jugular and they take five to 10 minutes, because they’re spending more time qualifying than they are actually trying to solve a problem for somebody.

So that’s the benefit of what we do as licensees are. We have so many tools in the tool chest; you’ve got to look at your listing as just one tool in the tool chest. It’s not the main driver of your business, for example. That’s the major shift from people who are on the hamster wheel to actually evolve into problem solvers and dealmakers. But you could almost look at this sheet as a marriage between what cash investors who are looking for motivated seller leads, what they do on the phone, combined with what your typical licensee does on the phone with the seller.

You combine the two because they both offer unique solutions that they both bring to the table. But even your cash investor who talks to motivated sellers – they’re a hammer too, because all they’re trying to do in most cases, they’re trying to find out how much equity you have, build rapport, and then make a lowball offer and throw a bunch of spaghetti against the wall with maybe 15 to 20 sellers to get the deal or the discount they want. Well, if you’re a licensee and you take a consultative of approach, you can monetize maybe three or four of those out of 15 or 20, as opposed to just one out of 15 or 20. That makes sense.

Theo Hicks: Yeah. So is that where the eight to 10 different ways of making money comes from? You’re going to have a higher success rate? Or are you saying that there are eight to 10 different ways to make money on a particular deal?

John Chin: Both. So the former is what we emphasize, because of the latter. In other words, because you’re able to solve a problem a few different ways with the seller, there could be two or three ways to make money with the seller. Now there’s only one ideal way that’s a happy marriage or medium between what they’re trying to accomplish in life and the profit motive you may have as a real estate professional. So you want to find that one highest and best answer, if you will. If you’re able to have multiple ways to do that and there’s a highest and best answer, then to the latter point there, you can take more leads and turn more leads into deals.

So if you’re concerned, like a lot of us are, about our lead generation spend… Because you know, depending on where you are on the spectrum – if you’re a cash buyer, you’re spending anywhere from low competitive market $50 to $100 per paid lead, up to $200 or $300 per paid lead. If you’re in the retail sales space, you’re spending anywhere from 20 bucks a lead, five bucks a lead, on up to $100 or $200 a lead, too. So if you’re in a business that you’re trying to scale, and you’re sensitive about your lead gen cost, then you want to take as many of those leads and monetize as many of those leads as possible. Well, if you’re a hammer and you only have that one solution, whether it’s on a cash buyer side or on the listing side, you can’t monetize many of those leads. So it’s both.

Theo Hicks: Got it. I wanted to circle back to that… But I first want to hit on what’s actually on the form. I don’t want you to walk us through every single question, but what are some of the ones that are pretty unique, that maybe people don’t typically think about asking?

John Chin: Okay, let me give you the overarching philosophy here. We call it the four Ps. When you’re using the form, what the form does in two pages with about 50 different questions, or lines of questions, or fields that you have to fill in – what that does is it actually just answers or addresses four Ps that we’re trying to uncover. The first two Ps – and I’ll break them down, because it’s an acronym for four different things that you’re trying to uncover. The first two Ps you get done in the first few minutes of the phone call, and that’s “Is it a property type that I can deal with?” In other words, if you don’t do vacant land, then you don’t have solutions for vacant land or commercial properties, then you want to qualify that right upfront. It’s kind of a knockout question.

Second thing is, “Are you talking to the person,” that’s the second P, “who has control of that property? Are they entitled to the property? Or are you talking to a friend of the owner?”, for example. So you have to not waste your time and obviously address those right up front. Those are the two easy ones.

The second two Ps are a little bit more in-depth. And the sheet – it does a couple of things. Number one, because of this line of questioning, it allows you to build rapport with somebody by virtue of your seeking to understand them with a line of questioning they’re not used to from commissioned salespeople. You build rapport with them and it helps you agitate some pain and urgency, because you have to break this inertia of them doing nothing with their property, to get them to act… And that involves people getting emotional, and getting into what we call that negative fantasy that keeps them up at night when they’re worried about what this property, if they don’t get rid of it, is going to do to them in life.

The second two Ps are pain and profit. That’s what really takes up the bulk of the sheet. The magic behind the methodology is the profit is self-evident, it’s obvious. If I want to find out what kind of profit potential I have on this as a dealmaker, then I’ve got to understand what the cashflow opportunity is, are they willing to leave the loan in place, for example, on a subject-to acquisition? Is there potential, because they don’t need to sell it right, now for us to lease option it? What would the spread be between what market rent is and my carry costs on the property if I was going to structure something like that for a cash flow deal, for example?

So the profit potential, that line of questioning gives you permission and helps you build rapport naturally, and gives you the actual facts that you need to determine if there’s profit potential from a cash flow perspective and/or equity position.

Then the other P is pain, or urgency. The questions are designed so that you want to agitate the pain to build the urgency to get them off the couch, for example, to actually take action, whether that’s getting the property listed or getting it under contract. You have to agitate that pain, because if you’re going to get a deal, people only leave equity or cash-flowing deals if they’re making an emotional decision, so you have to stir the emotion. And that’s where I think people fail the most.

Our typical lead intake is going to take anywhere from 30 to 45 minutes, assuming we know the first two Ps we have checkmarks with – they are in control of the property and it is the type of property that we want to deal with, that we can monetize. If we know those first two Ps, then the rest of the conversation should take about 30 to 45 minutes if you’re doing it correctly. I’ll tell you that when it relates to the pain portion of the questionnaire, the type of questions that elicit that pain and agitate the emotions to get them to take action – I’ve asked somebody what they want to get for their property on the front end of the phone call, and I’ve compared it to what I can get them to sell their property for at the end of the phone call. It’s like a 10 to $15,000 difference, just by virtue of making that pain front of mind for them.

I’ll give you an example, coming back to your initial question, what are some questions on here that maybe somebody doesn’t ask; or maybe they do ask, but they don’t take it third level. So for example, somebody says they just inherited the house. You’re going to see a lot of that; we have two million houses in the probate pipeline with the boomers dying off right now. There’s a lot of heirs or siblings that don’t want to contend with those properties. If you’re talking to somebody, for example, who just inherited a house, they’re in another state, and they’re trying to unwind the legacy of this property owner, their deceased family member, or parent… And they’re telling you that that is how they have the property. Then what I’m not going to do is just leave it there. I’m going to say, “Well, what happens if you can’t sell it? Who’s helping you with this probate case, or to help liquidate all these assets?” And then they’re going to tell me — I’m going to uncover more of their pain and more of their situation that is going to be more agitating to them. So it’s not even the questions on the sheet, it’s kind of the mindset you have. The sheet gives you permission to go second and third level to agitate pain, to get them to take action.

Theo Hicks: Very interesting. You mentioned that once this sheet is completed, then what are the next steps? It sounds like for you, you have people that use this and they can kind of come back to you and your program and talk through it. What about people who don’t have access to this? What should they do once they’ve finished out their intake?

John Chin: That’s a good question. So as you evolve as a licensed agent, [unintelligible [00:18:55].07] having somebody you can link into that can help you put all this information together into a practical solution. I’ve never had that question before, because the people that we work with, we work with on a consistent basis. They’re around the country; so I don’t want to get into a pitch here, but… If you don’t have somebody that can help you put those tools together, I guarantee you the way you find them is you can just do on Google and find people who are spending big money for leads like this, that have dealt with sellers in urgent situations. So if you’re a licensee and you want a quick low-hanging fruit way to find those people, you can go to your local REIA meetings and find somebody who helps people with different deals, that does coaching programs. They’d gladly get on the phone with you to help you unpack one of these after you finish it, so that you can get their feedback on how to do it. Because a lot of times, they’ll either provide the funding for it, or they want to JV with it, or there’s an incentive there to turn into a deal, and to take you by the hand and walk you through that process.

Another way to do it is to go on Google and just type in “sell my house cash,” and you’re going to see all the people who pay big money for Google AdWords to be found by sellers who you’ve already started working with. You can collaborate with that person, and they’d be happy to do it, because the incentives are there to partner with you on a deal. I’d say that those are the two easiest ways to do that.

You could also just look at the mail you get at your own house. A lot of people get direct mail from people who will pay cash for houses. Or just google cash for houses in your local area and you’ll find people who market in your geography that want leads like this, that will partner with you. So I would say lean on somebody like that.

If I was in that situation, and I had one of these done… By the way, I’ll walk through the structure of the type of information you’re getting without going into the exact questions… If I had that already done and I could take a picture of it, the front and back of that sheet, and send it off to that experienced cash investor or that deal maker, and then I jump on the phone with them, they have everything they need right there to unpack the deal. Because I’m actually collecting more information than chances are they’re even getting on their intake phone calls.

Theo Hicks: That makes sense. I’m glad we talked about this, because I think this clearly applies to real estate agents, but as you kind of mentioned a few times, it really applies to anyone who’s talking to owners and attempting to get them to sell their house. So that applies to anyone who’s generating off-market leads.

Some of the big takeaways that I got is – first of all, this is kind of obvious, but making sure that right off the bat on the phone call, you’re asking the questions that will automatically let you know if you’re talking to the right person and if this deal meets your criteria. That way, you’re not going to waste time in the meaty part of the conversation which is the profit potential, and then the pain and urgency.

It sounds like, in a sense, you’re trying to tap into what would make them motivated to sell the property, or why they’re motivated to sell the property. It’s most likely going to be some emotional reason, that’s going to be an emotional decision, which is what’s going to help you not only get leads, but get the best types of deals. And then overall kind of shifting your paradigm from just intaking a bunch of facts and then leaving it there, as opposed to approaching and saying, “Hey, you said you’re at point A and you want to get to point B. Let’s figure out how we can use your house to get to that point.” And then going through a solid seller intake form, but not just relying on those questions only, but using those questions to catapult into the second level and third level questions. You kind of gave us an example of that.

Then you talked about how can you create this form, and then once you have this form, how do you know what to do with it? Well, you really need to find someone who’s the expert. I like the advice you gave, you can just Google “sell my house cash,” and you’ll find all the companies that are trying to capture these leads, and you can work with them. So John, is there anything else want to mention before we sign off?

John Chin: Yeah, I’ll give you one last juicy tactical nugget. It’s the setup of that phone call. So literally, when you first talked to that seller on the phone, my question is have you ever worked with a licensed professional who takes more of an advisory approach to solving problems as opposed to only listing houses? Right off the bat, that sets a different tone with you. So they say, “Well, no, I haven’t.” Because they never have. “Well, let me tell you what I do. I solve problems for sellers, in various situations, various scenarios, in various life situations, whether it’s divorce, or they’re missing payments on their house, especially in today’s environment. Sometimes listing your house isn’t the best thing. My intent with this phone call is to get as many of these puzzle pieces on the table of information about your situation where you’re trying to go and what you’re trying to accomplish, so that we can together put our heads together and figure out how to put these pieces together to get you from point A to point B. So with your permission, I’d like to ask you some questions about your house and your situation, and then we’ll be able to solve this problem for you. Is that fair?” That’s the intent statement that we use to set up that actual phone call. Then you have permission to go into everything, because they know what you’re trying to accomplish now, and you clearly are different than your competition.

Theo Hicks: Yeah. Instead of just going straight into the questions. That totally makes sense; making sure you have that solid intro to set the foundation for the conversation. Thank you for sharing that, John. Well, alright Best Ever listeners, thank you for listening. You can learn more about john at investoragent.com. Thank you for tuning in. As always, John, thanks again for joining me today. I enjoyed our conversation. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2357: Attacking Old Goals With New Methods With Matthew Faircloth #SkillsetSunday

Matthew is a returning guest from episode JF1432 and today he talks about figuring out new ways to accomplish old goals. Matt has been a full-time investor for 15 years and in that time has successfully completed projects involving dozens of fix and flips, office buildings, single-family homes, and apartment buildings.

Matt Faircloth  Real Estate Background:  

  • A full-time investor for 15 years 
  • Completed dozens of flips, office building, single-family, and apartment deals
  • He started with a 30,000 private loan and has completed over $40 million in transactions
  • A previous guest on JF1432
  • Based in Trenton, NJ
  • Say hi to him at www.DeRosaGroup.com

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Move forward with faith and take action” – Matt Faircloth


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? 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 where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Matt Faircloth. How are you doing Matt?

Matt Faircloth: I’m awesome, Joe. So great to be with you today.

Joe Fairless: Well, I’m glad to hear that, and I’m looking forward to our conversation. Best Ever listeners, because today is Sunday, we’ve got a special segment for you called Skillset Sunday. And first off, a little refresher about Matt, and then that will help tee this up. So Matt’s a full-time real estate investor. He’s completed dozens of flips, but also now focuses on office buildings, commercial real estate, apartment deals. He just had a rather large closing that he and his team done. Yeah, woohoo, nice work on that! And that actually leads into our conversation.

The conversation and the outcome of this conversation for you Best Ever listeners is to learn about some ways to have some stretch goals and to try new methods to reach old goals. So maybe you’ve been trying to reach certain goals, you have not achieved them – well, we’re going to talk about the thought process to take to try new methods to reach those same goals that you’ve been trying to achieve. So with that being said, Matt, what’s the best way to start out this conversation?

Matt Faircloth: Well, I’ll tell a little bit of the backstory to lead us up to the point where I hit that pivot where I said “Okay, I can stretch myself, or I can keep doing what I’ve been doing.” So let me give you a one-minute background story. So my company, as your business is too, we are regionally focused on specific territories. We are not a company that will buy anywhere in the continental United States. That’s not what we do. We are focused on North Carolina and Kentucky. That’s it. So a deal came up in a market we had been shopping in North Carolina, in Winston-Salem, and it came across our plate… And we have been a company that’s been able to put together say, I don’t know, maybe $5 million to $8 million transactions. In the apartment building world, that requires an equity raise of somewhere in the two to three million dollar range. We’ve gotten pretty good at that. So I’ve got a really good mechanism down for raising two to three million dollars for a real estate transaction, to the point where I can repeat it over and over again, as often as I need to, for deals. And we had built a pretty good wheelhouse of doing it.

So this deal in Winston-Salem comes up and the numbers work, everything checks the boxes, the location is phenomenal, everything’s awesome about it… And it’s an $18.5 million purchase, which is more than double anything else we’d ever put together before. 336 units, so more unit count than we’ve done, more equity we need than we’ve ever done, more loan amount than we’ve ever done, more everything.

Joe Fairless: What was the highest amount of equity you’d raised up until that point? On one deal.

Matt Faircloth: Just over three. Like three and a half.

Joe Fairless: Three. Okay. And how much was this one requiring?

Matt Faircloth: We’re doing this a little differently… This one is a total of $12 million in equity, but because the bridge debt world has changed and it’s very hard to get construction dollars from banks, what we’re doing is we’re going in with the Freddie floater product, which is a floating rate mortgage, lower loan to value, and we’re going to raise construction dollars as we need them during the process. So we don’t have all the money we need at closing, we’re going to get it as we go, which is an interesting process as well.

Joe Fairless: So in total 12… But how much to close it out?

Matt Faircloth: To close the deal. Eight.

Joe Fairless: Eight? Okay.

Matt Faircloth: To close the deal. Yes.

Joe Fairless: Got it. So a significant jump from three to eight, and ultimately 12. Okay.

Matt Faircloth: Right. There was some faith in there, and just crossing my fingers and knowing, “Okay, listen. I’ll just get in and do it.” That was the crossroads that I was at, Joe. It was the fork in the road to say, “Okay, do I tell my team that worked very hard to find this deal, do I say, “You know what, guys? A little too big, we probably should refer it to a larger outfit that can take down something like this, that has a long track record on taking down something like this.” And that conversation did come up. Are we okay? Do we want a stretch like this? And we decided to take it on and to go for it and we’ll figure it out. And that’s really what you and I were talking offline about, it’s about the growth that happens when you get into something where you’re not exactly 100% sure how you’re going to make it happen. But you got to move forward in faith that it’s going to work out. You’ve got to take action, too. But I decided to go for it and just had the confidence that me and my team would figure it out. I was just crossing my fingers.

And what’s interesting, Joe, is what happened was we put it under contract, and we tried the method, amd we went, “Okay, let’s go raise money.” Well, I used my method that I know to raise two to three million dollars. I did that, and guess what? We raised two to three million dollars.

Joe Fairless: What are the things that you do to raise two to three million like clock–

Matt Faircloth: There is a number of emails you need to send out to enroll people in your webinar. What we’ve been able to do is develop a pretty good magnet of people that reach out to us, that say “Hey, I want to invest in real estate with you.” So you call the last couple months worth of folks that called in… So the hot leads, if you will – we phone call those folks. We came in and we sent out two announcements to a webinar, and saying “Okay, we’re having a webinar.” We had 300 people show up on the webinar. Not show up, they registered. Because you know how these things go, right?

Joe Fairless: Yup.

Matt Faircloth: So they registered for the webinar. They watched the recording, and everything like that. Just webinar, and then present the whole deal, and then send out the recording, and that with some phone call follow-ups, in our world has been what we needed to do to raise two to three million dollars.

Joe Fairless: How many days in advance do you give them notice that there will be a webinar?

Matt Faircloth: We give them a week’s notice. About a week, a week and a half. And we just did a general presentation on the deal. “Hey, guys. This is what we’re going to talk about. Here’s the deal, here’s this, here’s that, here’s the opportunity, and everything like that. It was just here “Here’s everything.”

Joe Fairless: And you said phone calls, too. So you called the hot leads, but do you only call them? Or do you call everyone in your database? How do you approach that?

Matt Faircloth: We don’t call everyone in our database. That’s the two to three million dollar method, Joe. We didn’t call everybody in our database. We’ll talk about them…

Joe Fairless: Okay. Alright, alright. Cart before the horse. Okay.

Matt Faircloth: It’s okay. I love it. We can talk about the newly-discovered and soon to be patented $8 million methods that I had to come up with. [laughter] But the two to three million dollar method is you call your hot leads. Because I’ve had people that called me up that they were hot, and I didn’t have a deal.

This is a true story. I’ve never told you this story, but it’s a true story. A guy called me in August, and he was like, “Okay, I want a deal. Ready to go.” This isn’t this August. This was August a couple of years ago. And he said “I want to invest with you. Find me an opportunity.” That’s great. “Okay, listen. Hang out. I’m going to go find you an opportunity, my friend.” So October comes around. And not just for this person, but we put a deal under contract and I did my hot lead method and called back through my hot leads that had called the last couple of months… I had called this person up that called in August, and you know what he said?

Joe Fairless: “It took too long.”

Matt Faircloth: No, “I gave that money to Joe Fairless.”

Joe Fairless: Oooh… [laughter]

Matt Faircloth: I swear to God, it’s what…

Joe Fairless: So you did take too long.

Matt Faircloth: I said, “Well, it’s in good hands.” That’s what the point of that story is – that when people call, they’re not just shopping. Sometimes they’ll tell you this, “Well, I want to invest in a year or two.” But a lot of times when people call, they’re looking to place capital now. And if you don’t have something that’s available now… And it’s okay that you don’t. But if you don’t have something available now, they’re likely going to go — below Matt Faircloth’s name on the list is somebody else. And so if I don’t have anything at that time, they’re likely going to keep going. And that’s what he did. And God bless, he had money he had to put to work. And he did, and he put it to work. It’s in good hands, and all that. So I was happy for him. I said “Great. Joe’s a friend. That’s great.” But it’s that call the hot lead method that these folks hopefully have not gone somewhere else by the time you’d launched that webinars, so you let them know about it ahead of time; that was my two to three million dollar method. Then you do the webinar. Then you email everyone the recording to the webinar, and then you do a follow-up phone call to folks that were on the webinar.

Joe Fairless: So only those that were on the webinar that you were doing follow-up phone calls, for the first method.

Matt Faircloth: Yes.

Joe Fairless: Okay. Got it.

Matt Faircloth: Then you also had some sort of means for them to do a soft commit on a webinar. For us, back then, it was a Google doc saying like, “Hey, this is my name. This is if I’m accredited or not. And this is how much money we want to put in [unintelligible [00:11:02].00] list, whatever.” And that Google Form was the soft commit that they did. And that right there, given the database that we have, will get you two to three million bucks, and we had gotten pretty good at that. And also, the presentation on the webinar was solid enough that we could produce that. So we did that for this deal, and then we got two to three million dollars. And I said, “Oh, okay. We’re a quarter of the way there. That’s great. So now what?”

And we called that database again, and called the folks that are on the webinar again, and had another webinar, the same webinar, we just did the same show again. We had 50 people sign up this time instead of 300, because a lot of our database had already seen the first one, so why would they want to go to the second one? So we got it up a little bit. And my team and I, we had to drop back and punt and have a huddle up. We’ve got to try something different. So again, we’re in the middle of Corona, crazy, COVID, potential recession, all this other kind of stuff right now… So what we realized is some investors are looking for something that’s a bit of a hedge, or want to know a little more detail about the deal that has to do with how the deal is recession-proof, or how it’s COVID-resistant, and everything like that. So we said “You know what we’re going to do? We’re going to do a webinar that’s just on that – how is this deal COVID resistant and recession-proof” That’s an interesting conversation. So we came up with those bullets, and we came up with a way tighter webinar. The first webinar, the one with the 300 people, went two hours. That’s another mistake. That’s too long a webinar. With the presentation, with Q&A, it went two hours.

Joe Fairless: What’s the right amount of time?

Matt Faircloth: I think that you should be presenting the opportunity in 30 minutes or less. And then another 30 minutes for Q&A, and then wrap it up.

Joe Fairless: Got it.

Matt Faircloth: People are busy, man. Get to the point, don’t spend too much time on the fluff or on spending 10 minutes introducing your team and everything like that. Just get going, because people are busy, and you want to respect that. So we tightened it way up and did a 30-minute thing on COVID and the recession. Now, we had a way bigger turnout for that one, because people were curious about that.

Joe Fairless: So this is a third webinar?

Matt Faircloth: Yes.

Joe Fairless: This is the third webinar about the same deal. Okay.

Matt Faircloth: About the same deal, but we did two things. We cranked up our email activity. I went to my assistant and I was like, “I want you to do an email every other day. Just stay on people’s radar.” Because again, maybe we needed to just kind of — given everything going on… And maybe just to raise a lot more money, you’ve got to kind of scream and yell a little bit louder.

Joe Fairless: Were you concerned about people unsubscribing from your list as a result of that?

Matt Faircloth: Sure. And I’m sure they did, and that’s okay, because if they really are not that concerned — if they really don’t want to hear that much from Matt, then that’s okay, they unsubscribed. And I think it’s a risk you have to run if you’re going to wave your hand in the air. I think list attrition is something that happens all the time, if you use your list; not that you have to email every day, but if you email every couple of days or once a week or whatever, you’re going to have attrition. Because people just might not want to hear what you have to say. And you can’t make that a reason why you don’t send emails, I don’t think.

Joe Fairless: And how long did you email every other day?

Matt Faircloth: We did that toward the last 30 to 45 days of the deal. We were every other day emailing. And what we did – we took snippets of the COVID webinar… And I’m jumping around a little bit. We did a COVID webinar, and we did a tax savings webinar, because we’re doing a cost segregation study. We’re hiring Yonah Weiss, if you know him… We’re hiring Yonah to do the cost seg.

So we realized that some investors know what cost seg is, and some investors know how it helps, other investors don’t. So I interviewed my CPA and took some video clips from him, took video clips from an interview I did with Yonah, and I took those two video clips and assembled them into a dozen emails that we sent out on a drip campaign about what is depreciation and why is it important. We had one couple invest in this deal, they came in later, after we started this cost seg conversation… They had sold a business and the wife was filing taxes as a real estate professional. And we saved them $200,000, because they put a significant amount of money into the deal; they were able to pretty much save every nickel that they were supposed to pay in income tax; it got deferred through cost seg and through the negative K1. Incredible. What a difference we get to make in this business. So I touted that in the email, obviously…

Joe Fairless: I remember reading it.

Matt Faircloth: Yeah. Leaving the personal information out. Think about the tagline on that one. We got a big open rate on that email, because it’s interesting, “Wow, $200,000. That’s crazy.” Now, it takes a specific investor under specific circumstances to get those savings, but it’s still at least a good conversation.

So we started thinking outside the box on ways to get people’s attention. And I think that lesson learned, a few lessons I got out of this whole thing, was to raise a lot of money you’ve got to get a lot of attention. And people care about different things. So some people cared about the hedge, about like, okay, recession and COVID-proof. That webinar got over 100 registrants.

Joe Fairless: And it was the third one.

Matt Faircloth: Yeah. So my registrations went up…

Joe Fairless: Right. From the second one.

Matt Faircloth: …because we had this conversation. Yeah. And Joe, we had people that had gotten in after the first webinar. They increased their investments after that one, because [unintelligible [00:16:06].09] “I like what you guys are doing.” “I see what you guys are doing.” We had one guy go from 100k to 200k because they saw that we had really thought this thing out. And we had a lot of new investors come in.

But the biggest thing was being willing to have conversations with people in a manner that they cared about. “Yeah, I care about taxes; that’s my main thing.” And realizing that people that invest in real estate, they may want all the different things that real estate offers, but likely they want one thing or two things, and the other stuff is all just gravy. So we got connected to what people really want out of what syndicators can offer, so we pumped out emails that spoke to those specific conversations.

We also got a lot more personal. I got each of my team members to record a three-minute video and talk about what you love about this deal. And I got one of our investors, who is one of our larger investors, to record a three-minute video on what he loves about this deal. A lot of our investors are doctors, so he was in his scrubs, the mask, and everything, talking about what he loves about DeRosa Capital 11. So through all those efforts, we were able to clear a benchmark.

Joe Fairless: What are the categories of things that people care about? You mentioned you pivoted with the COVID-resistant, and recession-proof, and tax savings… What are they?

Matt Faircloth: Well, let’s go COVID-resistance beyond what that really is… Because people say, “I want something that’s recession-proof, or whatever.” What do you really want? You really want security. So I think that we as syndicators – and this is to your audience – if they’re able to address the security question on “Is my money safe?”, that’s really what they want to know. So if you can explain to them in their language how their money is safe – and in today’s world, that means are you recession-proof? Are you COVID-resistant? People ask the same security question. Maybe they’re asking in a different language, where they’ll say, “What kind of collateral do I have?” These are folks that have done a lot of private loans, but have never invested in equity, so they want to know, what kind of security do I have in your deal? What kind of collateral do I have? I don’t have a mortgage on the property; what do I have? So you explain what equity and ownership in an LLC gives you. So that was one conversation. Security.

And then the other thing is general taxes. Folks that earn a lot get it that it’s not about how much you make, it’s about how much you get to keep. So that tax level conversation is something that some investors don’t care about. Interestingly enough, anyone with an IRA was like, “Next, let’s talk about security. I don’t want to talk about taxes.” Because they know that the IRA does kind of defends them against that already. You have to watch who you’re talking to. If they have an IRA, don’t even bring up the tax savings, because they really can’t take advantage of it. So we went there; we tried some of the things ongoing to our personal story. Other people care about the market, because like, “Tell me why Winston-Salem, North Carolina is a great place to invest.” There were some folks that cared about that, too, so we did some e-blasts on why the markets amazing. So to answer your question, Joe, people also want to know why should they invest with you, the syndicator, and why should they invest in that market, and then why should they invest in that particular deal. And typically, it’s in that order that they want to know it. You can answer those questions in that order, and then there’s the security and the tax questions that come on top of it, too.

Joe Fairless: So I’m on your list, and I got 15 emails in the month of September. So it looks like you were doing it…

Matt Faircloth: We were busy.

Joe Fairless: ..,every other day. Yeah, you were busy. Every other day in the month of September, basically. Did you take a look at what your subscriber list was before and then what it was after, and just see what type of unsubscribe rate you got from that?

Matt Faircloth: What attrition we had. It’s good to know. I wish I could tell you that.

Joe Fairless: So it wasn’t a red flag with your team, like, “Hey, Matt… We can send out another email, but you realize we’re going to lose 20% of our database? Because yesterday we just lost 20%.” It wasn’t anything like that?

Matt Faircloth: No, I don’t think so. I don’t believe it was, and I don’t think that we lost anywhere near what folks would suspect that you would. Because at end of the day, people just auto-delete, skim through it, and everything like that. They tend to just look past emails, sometimes they go through the effort of unsubscribing, but at the end of the day, it does take a little bit to unsubscribe from something, versus just taking the time to delete. It’s not a big deal, you can just delete the email.

Joe Fairless: I ask that because I think some people would be concerned about the investors that we brought on to the list – it’s so precious, because we’ve worked so hard to get them, and then I don’t want to send them all these emails. But in your case, it worked. And that’s a surprising lesson that I learned from this conversation, in addition to other lessons, too.

Matt Faircloth: I have an admin that was sending out those emails, and I know she would have flagged it. And I’d be willing to bet that it was very low on attrition. If you give me one second, I’ll give you the number on what it was, because I’m able to log in here while we’re looking. You know what it is, Joe – I hope I can use this word when you show… People worry too much about pissing people off, and everything like that. And I think obviously, once folks are investors, you really don’t want to do that, but I’m thinking if people worry about from a marketing perspective about shouting too loud or anything like that… We obviously don’t want to be bold or audacious or too over the top on things, but at the end of the day, I think that we’re also looking to get noticed. And when you get noticed, it’s okay that some people are like, “I don’t want to pay attention to that guy.” So we lost about 4%.

Joe Fairless: That’s nothing.

Matt Faircloth: Yeah. Regular attrition is less than that. Maybe 1% or 2%. But we lost four during the lifecycle of that campaign. It’s okay, people are going to do that. Sorry, if I went there, but I think that people worry too much about ticking off people on your list. Because at the end of the day, if they’re just on your list out of general curiosities, they’re likely not going to do much with you if you email them a lot. If you email them a lot, they’re either going to get interested or they’re not. If they’re not interested, but they want to see what else Matt has to offer in the future, they’ll probably just delete the email and wait till the next one comes around.

I’ll tell you one thing – it did confuse some people that were already in the deal. “Hey, why are you still emailing me? I’m already in this opportunity.” So you can’t just do a general shotgun email everybody. You’ve got to watch to see who’s on your email list. Take the folks that have already…

Joe Fairless: Segment it.

Matt Faircloth: Yeah, we learned that one. People were getting confused. “I’m in, man. You already have my [unintelligible [00:22:28].02] thing. Why are you still emailing me?” We had to watch who we’d already emailed. We also took out people that had roundly said they weren’t interested, just out of respect. So we’ve learned that you’ve got to segment, you can’t just literally blast everybody.

Joe Fairless: This has been a productive and such an educational conversation because of you and what you’ve shared with us. Thank you so much for that, Matt. Before we wrap up anything that we haven’t talked about, that you think we should, as it relates to this topic?

Matt Faircloth: I think that you and I got into the nuts and bolts and all that, which is awesome, because I think your investors are going to get lots of great nuggets. I think the big thing for them to take home, in general, is that if you don’t stretch yourself, you’re not going to grow. There’s a book called The Way of the Superior Man; it’s good for everybody. But The Way of the Superior Man – there is a chapter in that book that talks about being okay with a little bit of fear. And people sometimes won’t engage in change or won’t engage in growth because it makes them a little bit afraid.

What I’ve learned through reading that book, and just by living my life – that if I’m not a little bit afraid, a little bit scared about where I’m stepping, that I’m not stretching myself enough. Because fear is the indicator that I’m beyond my comfort zone. And I was a little afraid of this deal, of being able to take it down, and what happens if I don’t… But because I move forward anyway, I was able to bring things to the next level in my company, and I think that a lot of people don’t realize that the only way you’re going to grow, is by feeling the fear and acting anyway. Getting into it and jumping in and figuring things out. And hopefully these nuggets here on how to raise your equity game, too. Yeah, I agree, this has been an awesome interview.

Joe Fairless: Yeah. And regarding the faith and being comfortable with fear, I’m coming at it from a logical perspective too, or standpoint, because you had a lot of pieces in place that gave you the confidence to be comfortable taking a couple of steps, really, that are beyond where you had been. Whereas if someone’s starting out, then they’re looking at a $9 million equity raise, then that fear is very healthy, because they don’t have those pieces in place that you had already had.

Matt Faircloth: You would say reasonable steps.

Joe Fairless: Reasonable steps. Right.

Matt Faircloth: But you’ve got to know that the possibilities are there somehow. So I’m not saying “never invest in real estate before you go take down a $9 million equity raise and figure it out.” Again, don’t hear what Joe and I are saying the wrong way here, audience. I think you understand you’ve got to take reasonable steps forward into growing your business, and that a little bit of fear is good. A lot of fear is probably a sign that you probably shouldn’t be stretching that far. So you’ve got to find that even marriage where it’s outside your comfort zone and it’s a little bit of uncertainty; that’s healthy. But too much of it is probably a sign you’re not ready. You’ve got to know the difference.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Matt Faircloth: They can get a hold of us at our website, which is derosagroup.com. Everything’s out there – copies of my book can be purchased, you can connect with us, you can learn from us, you can invest with us. Everything’s out there.

Joe Fairless: Matt, a pleasure, as always talking to you, and learning about what you’ve learned… I can be educated too, I love learning this stuff, so thank you for sharing that. I hope you have a Best Ever weekend and talk to you again soon.

Matt Faircloth: Thanks Joe, for having me.

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JF2356: Educating Students To Flip Homes With Paul Tompkins

Paul has 7 years of real estate investing experience and currently completes 30-50 fix and flips per year. He also teaches students how to fix and flip and how they can create wealth with rentals to change their life.

Paul Tompkins  Real Estate Background:

  • Full-time real estate investor with his wife Kelsey
  • 7 years of real estate investing experience
  • Portfolio consist of 30-50 flips per year and holds 5 rentals per year
  • Teaches students how to flip homes and create wealth with rentals
  • Based in Tallahassee, FL
  • Say hi to him at: www.flippinexperts.com 
  • Best Ever Book: Capital Gains

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Take a step. Focus on taking one step at a time. Take a step.” – Paul Tompkins


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with Paul Tompkins. Paul, how are you doing today?

Paul Tompkins: I’m awesome, Theo. Thank you so much for having me on the show. I love you guys and I appreciate it.

Theo Hicks: Oh, well, that’s good to hear, and thank you for joining me today. A little bit about Paul. He’s a full-time real estate investor with his wife, Kelsey, with seven years of real estate investing experience. They do 30 to 50 flips each year and then hold five rentals each year as well. And Paul teaches students how to flip homes and create wealth with rentals. He is based in Tallahassee, Florida, and his website is flippinexperts.com. So Paul, do you mind telling us some more about your background and then what you’re focused on today?

Paul Tompkins: Sure, Theo. Again, I appreciate it. Thank you for having me. My story is like a little bit of a crazy one, because I bounced all over the place. I didn’t mean to, it’s just kind of the way I was raised and what was in my heart. But I actually started out 18 years old, since I was an adult, and I always wanted to serve people, I always wanted to give back to the community. I didn’t know what it was, but in my heart, I always wanted to be a police officer. I saw cops and robbers, and I saw cowboys and Indians when I was young, and it was big — that’s what you watch when you’re a kid; and that kind of ages me, but whatever. That’s okay, Theo. I had always wanted to be the good guy, riding in to save people, riding in to help people when they were in need… And that just transitioned into what I wanted to do, was be a police officer. But I couldn’t do that till I was 21 years old, so I was like, “Hey, what can I do to still make an impact in the world?” And it was to serve my country. So I became a United States Marine, and I did that for four years and loved it. I was overseas three years out of the four, but it was time to go be a police officer. So at the age of 22, I started doing that, and started getting into what does it take to be in law enforcement, applying, and all that. Then I became a Florida State trooper, and did that for about nine years.

And about six or seven years in, Theo, that entrepreneur bug kicked in again. It was awesome chasing people; they gave me a gun, a super-fast car, and they’re like, “Go catch bad guys, and we’re going to pay you.” And I was like, “I’m in.” But after six years, I’m like, “I’m working this really bad part of town, and I’m always into something, literally.” My sergeant kept saying, “You keep looking for the boogeyman, one day he’s going to find you.” And that kind of always stuck with me. And I said, “You know what? He’s right.” And I’m putting a lot at risk. I’m doing shift work, which means 28 days I’m on a day shift, 28 days I’m on a night shift, the next 28 days I’m on  a midnight shift. So family time – you can forget about it. Not seeing my spouse, missing son’s football games… And all this for $36,600. I was like, “There’s got to be something better.” And then my entrepreneurship started kicking back in and I’m like, “Okay, let me see what’s out there.” And I started looking at real estate, because everybody that I saw that had millions or billions of dollars had some connection to real estate. And I’m like, “Okay, that’s a clue.” And that’s all I needed.

And I started diving into real estate. And back then there weren’t online courses, and YouTube, and all these things where you can just learn from, and sit here and have a conversation like we’re having. I just had to do it grassroots way. I tried to meet with a local guy in town, and I’m like, “Hey, show me some, and you show me some.” And I’m putting it together, I’m making mistakes, but I’m still making money. And the first two years I did it, I was still a trooper full-time, 40 hours a week, still being a trooper, and on the part-time side of it, I’m making $300,000 a year in real estate. And I’m like, “Okay, after my second year,” I said, “it’s time to leave being a trooper. I got my feet wet enough, let’s do this.” And my coach at that time, the guy who was kind of showing me a little bit, he’s like, “Hey, man. Just get a little bit more training, get a little bit more flips, and get a couple of rentals, figure it out more”, and then boom, ’08 hit, and the floor came out on everybody.

Tt that time, I had never been through something like that. I didn’t know how to protect myself against something like that. I literally had 12 to 15 deals going on at a time, and they all had mortgages of about $900 on, because they were lines of credits. So I’m talking 12 to 15 grand due a month, and the floor falls out. And let’s just say I learned a lot of valuable lessons with that.

I went through that, and I got rid of those properties, and I took a break for a while… I ended up going to Afghanistan for a little bit as a police contractor and helping overseas over there for a while… And then when I came back, I was like, “Hey, what am I going to do? What do I really want to dive into?” And I had met my beautiful new wife at church, and me and her hit it off. We always had a heart for giving back to people, especially the kids. We both were very much into just serving kids.

We teamed up with a local church, we helped them buy this $7 million property, and we were going to run it as a youth center for the churches in the area. We did that for a year, and then one day the church said, “Hey, we’re going to go a different direction with this business, because it’s so expensive. It’s a lot of money. It’s not just a couple hundred thousand. You’re talking seven million or eight million dollars.” And they decided to go in a new direction in a single day. Literally, the CEO drove up… Because we had moved out of town to help start this. We had moved out of town, sold our house, everything… The CEO shows up one day out of nowhere, he says “Hey, I’m coming up tomorrow. I want to meet with you guys at nine o’clock.” And I’m like, “Okay, that’s weird, because you hardly ever come up.” And we knew there might be some shifting, but they’d always guaranteed us a job, employment, we knew them… And they say “Hey, we’re done. We’re shifting, we’re moving it. We don’t need your employment anymore. Please have all your stuff off the property by five o’clock. And we need your keys.” And Theo’s, my wife just started crying. I actually can’t believe how well I held it together, but I’m talking to the CEO, and he’s asking me questions, and I’m actually helping them, which I’m under no obligation to… And my wife’s crying… I think it was probably a relief in my heart like, “Hey, this wasn’t where I was supposed to be probably anyway…” But both of us lost our jobs. 100 grand plus gone in an instant.

We think about COVID, and we think about stock market crashes and all that, and people losing jobs… We were there. And it wasn’t just my paycheck or just my wife’s paycheck. All of our money ceased in a matter of a day. I think we had 13 days left on our insurance. We couldn’t move back home. We didn’t have proof of income to go buy another house. So we were literally stuck. And I just remember saying okay, “We’re going to sit here for 30 days and we’re going to really figure this, out because we’re never going to ever, ever, ever let somebody control our destiny again.” No boss, no company. I want to control my own destiny. And during that 30 days, real estate just kept coming to mind. Real estate, real estate, real estate. I had fun doing it. My wife was in design, she understood staging, and all these different things which I wasn’t that good at. I’m a dude, so I just go in and do paint stuff, and I thought it was good. So she brought that huge aspect. And then we said, “Hey, let’s do this.” And within two weeks, we had two deals under contract, and we were already flipping again. So kind of a crazy story…

Theo Hicks: It is very crazy.

Paul Tompkins: … but it all came back to real estate. And real estate has always proven to me, and to, obviously all these millionaires and billionaires that have their money tied up in it… It’s a long term thing. It’s an asset. It’s something you can touch, you can feel. Somebody can’t take it away from you overnight. You own it, it’s yours… So that’s kind of my story in a nutshell.

Theo Hicks: When you and your wife both lost your jobs and were taking that 30-day pause to figure out what you’re going to do and then decided to do real estate, did you have funds saved up at that point? Did you have a savings accounts? Where did you start when you started this now business of the flips and rentals?

Paul Tompkins: Yeah, I think we probably had 15 or 20 grand in the bank. Nothing major. Mortgages are $1500, car payments, all that. So I knew I had a little bit in the bank… But I knew from doing it previously, when I was a trooper, that I could borrow hard money, that I could have a partnership with someone where they would fund it, and I would do the renovation, because I’ve done so many of them. I had a track history of just doing an excellent job. And every house I was doing, I was making $40,000 to $60,000 profit. So it helped me a little bit.

Theo Hicks: So you’ve got 15k to 20k in the bank, 30 days, we’re going to do fix and flips… I think you said you quickly got two deals. Tell us about that. So tell us how did you find these deals, how did you fund these deals, what was the business plan, and how much money you made?

Paul Tompkins: I don’t know if there was even time, Theo, to create a business plan; because once we said let’s go… The great thing is I had already done it before. My wife hadn’t, she had no idea. She didn’t know the first thing about real estate. She didn’t know how to flip anything. She didn’t know what a flip was. So kind of getting her up and going… She picked it up very fast. I guess you would say she’s kind of like my first student. There wasn’t really a business plan, but I knew in the past, I had borrowed hard money. So I already knew how to do that. I knew the connection that I had a couple of hours away, and money’s money. So I was able to contact my hard money lender again and say, “Hey, here’s where I’m at. Here’s what I’m doing. What do you want to do?” “Yep, I’m still lending money, Paul. You’ve already done 40 houses with me. I’m good to go, just send me the paperwork.”

So literally, getting financing started that quickly. I know normal money lenders now, you’re talking seven to 10 days, so it’s still not a very long process… But I had already had a relationship. I also reached back out to a gentleman I was doing deals with already in the Jacksonville area in Florida and said, “Are you interested in partnering up on some deals?” And he’s like, “Actually, I’m exiting with the guy I’m with right now. He wants to branch out on his own. And I have a couple million dollars. I’d love to partner up with you.” To be honest with you, it just kind of fell on our lap. We were proactive, we made the phone call… And we still do deals together today. Two hours ago we just put an offer in on a $444,000 house together. So those kinds of connections, I always keep them; they’re very valuable to me. I treat them with respect, and they always end and start.

Theo Hicks: So the hard money person, the person you reached out to, who just happened to be exiting a partnership – is he who brought the deals in, or how did you find the deals?

Paul Tompkins: No, I actually found all the deals. Some of them were auctions, some of them were on websites or county options. We had cash, so with him having a couple million dollars cash, we’re able to do certain auctions that other people can’t do. Like county foreclosures, short sales… I also immediately reached out to wholesalers in my area, and immediately went to meetups. And here in Tallahassee, Florida they have meetups all over the place and real estate investors networks, and I just immediately walked in the door and started making contact with wholesalers. Wholesalers do amazing things for us… And it was pretty easy to get those first two deals. I found one and then a wholesaler brought me one.

Theo Hicks: Okay, what year was this?

Paul Tompkins: Yeah, that’s a great question. I’d probably say three or four years ago.

Theo Hicks: Okay, so three or four years ago. Okay.

Paul Tompkins: Yeah, ’16 maybe.

Theo Hicks: So how many deals — again ballpark here. You said you’re doing 30 to 50 a year now. But the first year, the second year, the third year, and the fourth year, what was the fix and lips?

Paul Tompkins: When I was part-time, I was probably doing 15 a year, consistently. 12 to 15 first year, second year. And then when I went full-time, I would say I was probably 15 my first year, the second year’s probably 25, the third year’s probably 40, and then the fourth year full-time is probably 40 to 50.

Theo Hicks: Okay. When did you start doing the rentals?

Paul Tompkins: Probably my third full year. And I didn’t jump into it. I encourage people not to just jump into rentals, because you’re tying money up, and your return is not as big. So the way I see it, Theo, is my business model is I flip, flip, flip, flip to get those big returns. Those 40k, 60k, 70k, 80k checks, and I fund my rentals through them. So I’ll flip, flip, flip, flip, have enough money saved up to go buy a rental with cash. So that’s kind of my business model. I probably buy one out of every seven or eight, I keep as a rental, and I get to cherry-pick them. And that’s what I like. Because all of them are coming in as fix and flip deals, so I’m buying them at 60 cents on the dollar. I get to do the renovation myself, so I know there’s a new roof, I know the A/C is good and warrantied, I know the flooring is a luxury vinyl plank, or tile, or whatever it may be. So when I turn it into a rental, it’s turnkey. I’m not going to have to touch this thing for a long time, unless it’s just simple cosmetics or something like that. So it allows me to cherry-pick and go after them, versus somebody saying, “Hey, there’s not a lot of equity in this, but it’s great as a rental because it’s making $300 a month.” That doesn’t do anything for me, I won’t buy it. I need a lot of equity in it, as well as a great rental per month.

Theo Hicks: Okay Do you buy them all cash and then you pull the cash out? Or does that cash stay in there?

Paul Tompkins: About half and half. I’m getting to where I’m leaving it all in there now. It’s just that the further along I get, I’m able to do that, and I don’t need as much cash. If I can leave it in there, I do. I can always pull a line of credit against it. And everybody thought I was crazy. Like two years ago, I went to this big conference out west, and there were all these mega flippers in there, and we went around the room, and they’re like talking about it, and everybody’s paying cash and pulling it right back out, or they’re doing money loans, or they’re doing this… And for me and my wife, our company, I’d rather feel like I’m broke right now while I’m young, and leave money in because then I get that whole rent check. If it’s a $1500 rent, I’m getting that whole rent check. It’s not, “Oh, I’m paying a $1200 mortgage, I’m getting $300, and then after taxes and insurance, I’m getting 100 bucks.” That’s just not worth it to me.

So when COVID hit, that’s where everybody understood where I was coming from. And they’re like, “Now we see.” Because I didn’t have a bank come to me and say, “Hey, we’ve got to do this,” or “Hey, this line of credit is going away,” or somebody can come and take my house. I never want it to where… Like 2008, when that happened, the bank was in control of my life. They said, “I want my $900 per mortgage, or we’re taking the house back.” When I leave my cash in it, no one can do that to me. So it’s just where I’m at in life. Other people, they’re just getting started, they’re, “Hey, I just want to pull that cash out, go do another one…” I have enough cash to where I’m doing enough flips right now, that I don’t need to do more flips. Or I really don’t even desire to hit 100 or 200, because that’s a lot more stress. I’d rather find bigger spreads. I’d rather find better deals than more deals.

Theo Hicks: How do you know how much money to take out for yourself to live off of? Is it just the rental income? Is it a portion of the flip profits? Do you live off the profit of a flip per year? How do you approach that?

Paul Tompkins: That is an awesome question. I’ve never had anybody asked me that man, that’s great. The funny thing is, when we first started, we said, “Hey, we know we can live off this dollar amount. So for the first so many years, we’re not going to increase our salary.” So if I know I can live off $80,000, me and my wife, why would I live off like I’m making $4 million? So what we did is we actually hired a payroll company that writes us a check, takes all our taxes out, like I’m a regular employee for my own company. And she gets a check, and I get a check, twice a month. So there is no, “Hey, I just made 80 grand on this house. It’s my cash, it’s my money.” No, that’s already reinvested. Because when I sell that house – let’s say I make $80,000 – I already have a percentage set aside that goes towards my next fix and flips. And I have another percentage set aside for my rentals. And as I get older, my rental side is going higher than my fix and flip. Because my fix and flip, I always have that money; so I’m doing more rentals, to where I have more mailbox money coming in. I consider it like retirement money.

Theo Hicks: That’s fantastic. Is it pretty easy to set that up with the payroll company? You can reach out and…

Paul Tompkins: It took me 30 minutes. It’s a payroll company here in Tallahassee. They say “How much do you want to pay yourself?” I think I started at $2,500 a month, and then my wife was getting $1,500 a month. So we were making four grand, we were around the $50,000 mark, and I think we’ve only increased it once.

For us, we’re okay living like that. Now I do write a lot of my travel, and expenses, and stuff off through my business, because it’s obviously real estate related. But as far as personally, you never keep that money; that money, that profit, when it goes on the HUD, it says my company name and this amount of money – everybody sees that, the IRS sees that, and that that just goes right back into my company. So it never comes out into Paul’s pocket. It’s reinvested.

Theo Hicks: Really quickly, before the money question; I always ask people this question when they are in business with their significant other… What are some of the pros and the cons of working with your wife?

Paul Tompkins: Is she going to listen to this?

Theo Hicks: Yeah, act like she’s not going to hear any of this.

Paul Tompkins: Okay.

Theo Hicks: Just me and you.

Paul Tompkins: Actually, I get a lot of people ask me that stuff, and I didn’t realize how many people are married in real estate. I think it’s so cool. So pros… She does things I don’t want to do. And I don’t mean that in a bad way. She loves design, I don’t. She’s on Pinterest, she’s on design sites. She’s drawing out kitchens and knocking walls down, and showing me “Hey, Paul. This is what I want it to look like.” And then I’m kind of executing on that. Whereas I’m a guy… And I see a lot of our students do that. If it’s just a single guy in the business, they do it like a guy. They’re not going to knock the wall down, they’re not caring if the kitchen is beautiful and gorgeous. And just by changing knobs and hinges, how much it can change certain rooms, and stuff like that. I don’t think about putting all the doorknobs in the same color as the hinges, the same color as the doorstop. We’re guys, we’re like, “I don’t know, go to Ace Hardware and buy some doorstops. I don’t care what color they are.”

So she brings that excellence, I think, to our brand, into who we are. And she’s good at things that I’m not good at. And then I handle a lot of things that she doesn’t want to touch. She doesn’t care how the wall comes down. She doesn’t care about the engineer coming out. She doesn’t care about this, this and this, or the finance side of it. I’m doing budgets, I’m doing rehabs, I’m going in houses before we buy them and inspecting them. She doesn’t want to do that. She doesn’t feel safe sometimes doing it by herself.

So we just really complement each other, and the ball just kind of goes back and forth. I think one of the hard parts about it is you live with them, you work with them, you go on vacation with them… So it’s a balance you have to set up from the beginning, and saying, “Listen, I’m going fishing with the guys once a month. I’m going camping, I’m going this. When I’m doing that, you go do your thing. You go to the spa, you go hang out with your family, you could take a girl’s trip to the Bahamas.” And having that time… Her family lives two or three hours away, so she could go there on the weekends. I’m still here, I’m out hunting, doing my thing, she’s there with her family, she’s getting refreshed, I’m getting refreshed, doing what I like… And it’s just balance.

Theo Hicks: Okay, Paul, what is your best real estate investing advice ever?

Paul Tompkins: Take a step. And it sounds so simple… My students, I’m just like, “Take a step, take a step, take a step.” Whether it’s the very first one, or it’s like “How do I go from 10 houses at a time to 20?” Take that initial step. And I know it sounds simple, but it’s the same as going to the gym. Like “Well, I need to go to the gym.” Take a step, go get a membership. Take a step, fill up your car with gas so you can make it to the gym. Take a step, eat a protein shake. So for us, it’s take a step, no matter what it is. If it’s in your first rental, “Well, I don’t know how to do it.” “Take a step, go buy an online course. Go listen to a podcast. Do something that gets you closer to your dream.” And for us, if we just take a step every day, that’s 365 steps a year. That’s a lot of steps towards your goals.

Theo Hicks: Yeah, that’s solid advice. Alright, Paul. Are you ready for the Best Ever lightning round?

Paul Tompkins: Let’s do it. I didn’t even know there was a lightning round. Yeah, I did [unintelligible [00:22:47].16] [laughs]

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:22:52][00:23:39]

Theo Hicks: Okay, Paul. What is the Best Ever book you’ve recently read?

Paul Tompkins: Oh, Capital Gaines by Chip Gaines.

Theo Hicks: The guy in HGTV?

Paul Tompkins: Yeah. You can see where he came from, what he’s still going through, but he also has a lot of vision for the future. And I like that. A simple read kind of guy, but it’s packed full.

Theo Hicks: If your business were to collapse today, what would you do next?

Paul Tompkins: Start it up again.

Theo Hicks: What’s the deal you’ve lost money on? How much did you lose and what lessons did you learn?

Paul Tompkins: Yes. I only lost money on one deal. I had just got done the renovation and listed it, and a week later a hurricane hit and flooded the house four feet. So I had to do the renovation twice. And I only lost $8,000.

The lesson I learned, which I don’t even know if I learned it, because you can’t buy hurricane insurance in every single house, especially when they’re not near the water… So I don’t know if I would still put insurance on the property, and I still don’t… I still carry insurance on all my properties though. If you’re near water, get hurricane insurance, I guess.

Theo Hicks: On the flip side, what’s the best deal you’ve done?

Paul Tompkins: For me, it’s more about my students. What’s the best deals they’ve done. I just had a student make $98,000 two weeks ago on a deal. For me, I do deals where I make $100,000 or $200,000 twice or three times a year. When you do that many deals… But for my students, I love it when they crush it. I have a student getting ready next week to make about $130,000 on a spread. And this is pure profit. So for me, it’s when my students win, I win. Because I know I’m teaching them right, I know they’re getting value out of what I’m teaching, and there are relationships there… So, them winning is huge.

Theo Hicks: What’s the Best Ever way you like to give back?

Paul Tompkins: Oh, good one. We have an outreach that we do, it’s called Flipping to Impact; it kind of matches our name. And we’ve always done it. It’s something that’s been in our DNA. And it doesn’t matter what somebody needs, we’re there for them, especially in our own community, where when COVID hit and schools shut down, there were kids that couldn’t get meals. And we went up to a local restaurant that was struggling… I live in a small town outside Tallahassee, so there are not that many restaurants; I think three. And one of them was struggling real bad, and I’ve made a partnership where I said, “Hey, you make all the meals and you feed all these kids that don’t have any food, and we’re going to fund it and pay for everything.” So things like that.

We build wheelchair ramps in our community for elderly people, and stairs, and fix some houses. So we’re constantly giving back, and I think that’s where we get our blessings from. I know somebody is looking down on us saying, “Hey, if they’re just going to keep giving and giving, I’m going to keep blessing them.” And I don’t do it because of that. I feel like that’s just who we are as people.

Theo Hicks: And then lastly, what’s the Best Ever placed to reach you?

Paul Tompkins: Oh… Social media is the easiest. Flippin Experts – go on Facebook, YouTube, Instagram. Our website, if you’re interested in anything real estate that we just talked about, they can go on our website at flippinexperts.com; there’s no g, pretty simple, flippinexperts.com. Check out what we have. If we can help them, we will. Happy to give them a discount on your behalf of 10%. So I’ll send you that information, and you can put that in your show notes and all that. But any way we can bless them; we have a lot of free training, we have other training that they can pay for at a monthly subscription that’s very cheap… So it’s just any way we can help them, we’re all about it.

Theo Hicks: Perfect, Paul. Well, thanks for joining me and telling us about your interesting, unique journey to where you are today. I always love hearing the origin story. We also talked about a lot of practical things as well. We talked about the power of connections and how once you’re ready to get back in the game, it was almost like a flip of the switch because of all the connections you had, with hard money and previous wholesalers. You also talked about how you find your deals, auctions because of your ability to buy all cash; wholesalers, meetup groups…

And then you talked about your business plan is basically cherry-picking the best fix and flips to keep as rentals, buying them all cash so that you get that big rental check… But also going back to the lesson you learn from ’08, from your previous business being closed down, is to not be controlled by somebody else. That’s why you buy properties all cash, and it paid off during COVID, that’s for sure.

And we talked about how you pay yourself, with the payroll company. And then you gave us some advice on how to work with a significant other, which I think that advice can apply to just relationships in general, about setting expectations.

And then lastly, your best advice was to take one step every single day, whether you’re starting out, or a step to scale your business. So Paul, thanks again for joining us, I enjoyed our conversation. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Paul Tompkins: Thanks, Theo.

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JF2355: The Benefits Of Hosting Real Estate Meetups With Megan Greathouse

After leaving the Marine Corps, Megan used the GI Bill to finance her MBA. With her savings, she and her husband invested in their first house. When they moved into their second home, they rented it out and then sold it. They acquired and flipped several types of properties since then.

A career in real estate gave Megan the flexibility she needed to spend more time with her family. Just a few years into this business, she now has an impressive portfolio. Megan also hosts a local real estate meetup that has awarded her new professional relationships and opportunities.

Megan Greathouse Real Estate Background:

  • Real estate investor and mom
  • In 2019 she left her W2 to focus on family and building her real estate portfolio
  • She started by turning her first home into a rental in 2015 & buying her first outright rental in 2017
  • Portfolio consist of 10 rental units, farmland, 2 flips, & 1 wholesale
  • Based in St. Louis, MO
  • Say hi to her at: www.linkedin.com/in/mkgreathouse/

Click here for more info on groundbreaker.co

Best Ever Tweet:

“There’s a lot of power in having a very strong network” – Megan Greathouse.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? 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 where we only talk about the best advice ever. We don’t get into any of that fluffy stuff. With us today, Megan Greathouse. How are you doing Megan?

Megan Greathouse: I’m doing awesome, Joe. It is so exciting to be here. Thank you.

Joe Fairless: Well, I’m glad to hear that, and looking forward to our conversation. A little bit about Megan. She’s a real estate investor and mom. In 2019, she left her W2 to focus on family and building her real estate portfolio. She started by turning her first home into a rental in 2015, and then buying her first rental outright in 2017. Now she’s got 10 rental units, she’s got some farmland, she’s done two flips, and one wholesale deal. Based in St. Louis, Missouri. With that being said, Megan, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Megan Greathouse: Sure. To go way back, I grew up as a military kid, and then after college, ended up joining as an officer in the Marine Corps myself. So I did four years of active duty. And while I was there, I was reading a lot of books about personal finance. I was very interested in what do I want to do after the Marine Corps and what do I want to do long term for myself and my future family, and real estate kept coming up. So after leaving the Marine Corps, I actually used my GI bill to get an MBA, and after saving a lot in the Marine Corps, especially during a deployment, and then saving a lot from my nicely paid post MBA job, we felt like we were in a good position, my husband and I, to buy some real estate. I really was interested in educating myself, so I took the lead on that.

We tested the waters, like you said, by turning our first home into a rental for a couple of years when we moved to our second home, and then ultimately sold that because it didn’t cash-flow as well as we’d like. But it was the learning opportunity we needed to move on.

And then after that, I just started buying small multi-families. And the big catalyst for me to actually get started was having our first kid back in 2016. That was what, despite liking my job, liking my career, liking the people I worked with, really motivated me to find a way to create wealth and a career for myself that was completely flexible and on my own terms. Because I wanted more time with these kids.

Joe Fairless: Okay. And first off, thank you for those four years that you spent in the Marine Corps and going overseas to help keep us all safe. I just spoke to an active duty marine gentleman right before you. So I don’t know what the theme is… I’m glad to be talking to you, and I was glad to be talking to him. So let’s talk about something that stood out to me when I introduced you, because it’s in your bio… And we’ll backtrack too, but I just want to ask about this right now. I said 10 rental units, two flips, one wholesale deal. And then what else did I say?

Megan Greathouse: Farmland.

Joe Fairless: Farmland, what is going on with farmland? So tell us about this farmland investment.

Megan Greathouse: This one was a little more of an experiment for us, I guess. We’ve always liked the idea of having some lands that we could use for our family eventually. And my husband likes hunting. So we decided, especially during COVID, when things were kind of shut down, and just working differently, that we were going to look into some of it. And we said, “You know what? We could go in and we could look for some land to flip. We could look for some land where the income from the farming kind of helps out…” Generally, what we’ve seen in our area is that it doesn’t cover everything, but obviously, the farming rent helps. And potentially, we could even find something where we go and spend time with our kids on weekends and such. And what we ended up finding was more of a short to mid-term property, 60 acres, about an hour and a half from St. Louis. And we thought eventually, we could potentially build something here. It’s kind of vacant farmland, so it doesn’t have a house on it for weekends with family or anything. And that would be a way to flip it. Or we happened to meet a great broker who really knew the values and was able to bring us something under market value. So we said, “Or we can test this out and kind of flip it more short term.”

So right now, we’re deciding what we do with that going forward, but that one is a lot more of an experiment and it’s a lifestyle thing, and it’s one of those cool things where you get yourself into real estate, you start to understand how it all works, and you get to try new and interesting things, and you get to do things that also have a lifestyle benefit because you understand the power of the options created by real estate. So that’s what we’re doing with that one right now.

Joe Fairless: So you own it and you’re in the process of trying to flip it?

Megan Greathouse: Yeah. So we’re going back and forth between, do we build on it, and then flip it when we’ve put some more money into it and created more of a getaway kind of place? Or do we go ahead and just flip it pretty much as it is. We did some basic cleanup of the land, because the people who owned it previously had not paid much attention to it recently. So we might end up going with the shorter term option right now, just because we’ve got some other opportunities on the horizon, that using that money more quickly would help with.

Joe Fairless: Got it. Alright. So numbers on that are what?

Megan Greathouse: We bought that in just a handful of months ago, at 240. And it’s one of those things where we could turn around and sell it for probably 270 or 280 if we wanted to, in fairly short order, and it wouldn’t be some huge amount that we’d make back on it after commissions… But we’d get a chunk of money back that we could use for other things. And now we’ve got our foot in the door with understanding buying and selling land.

Joe Fairless: What would you do differently knowing what you know now when you purchase the next farmland?

Megan Greathouse: We really do like the idea of holding farmland a little bit longer term and having some personal use component to it. We bought this one thinking, “Sure we could try building something on it.” And then with how far out it is, we realized that’s a pretty big task with everything else we have going on. So I think a future purchase, we would definitely look for something that already has a property on it. If anything, we’re just improving the existing home, because then there’s a lot more personal utility that we can enjoy while we hold the property in the future.

Joe Fairless: Let’s talk about the two flips that you’ve done. Have you exited both of those?

Megan Greathouse: Yeah, those were somewhat earlier on. I definitely prefer buy and hold over flips. But they were kind of those things where as you learn, you try different things and you take advantage of opportunities when they come.

Joe Fairless: And in order to buy and hold, you need money coming in, obviously, as we all know… So if you’re not flipping and wholesaling actively, where’s the money coming from, since you left your W2 job to continue to build on that 10 unit portfolio?

Megan Greathouse: Right now, fortunately, we’ve been able to renovate properties that we bought for long-term buy and hold, and increase rents. So I’m actually in the process right now of refinancing pretty much everything, because we’ll be able to get cash out of those and have lower monthly payments, thanks to these insanely low-interest rates right now. So it’s a pretty sweet deal there. But yes, I did do a couple of flips, because to your point, if you want to keep building capital for more buy and holds, that’s one way to do it. And you already know real estate, and it can be a fun process, so why not?

Joe Fairless: With the new loans that you’re putting on your 10 rental units, is that a portfolio loan? Or are you getting individual loans? What type of service are you working with?

Megan Greathouse: We’re just working with the same lender that we’ve used since the beginning for the one to four-family space. So everything we have is in that space. And these conventional loans, obviously, have some of the best terms out there. So we’re working with the same people we’ve worked with in the past, we have a great relationship. By the time we’re done with these refinances, we’ll have done probably a dozen loans with them, of different types. So yeah, no portfolio loan. We looked at a line of credit, but with the rates as low as they are right now for conventional loans, and the fact that we were a point and a half higher on our current rates, it made sense to do the full-on refinance.

Joe Fairless: Is that a local lender?

Megan Greathouse: It is, yes.

Joe Fairless: Okay. So it was like a credit union or community bank.

Megan Greathouse: It’s a local mortgage lender, and they actually, on top of having just worked with us for three or four years now, the loan officer that I work with is actually one of the sponsors of my local St. Louis real estate meetup, as well. So we have a relationship that works for both of us in many ways.

Joe Fairless: Why do you host a St. Louis meetup?

Megan Greathouse: I think there’s a lot of power in having a very strong network, and I think that in real estate you really have to create that for yourself. When you’re working a W2 job or you work in an office, it’s around you; people are around you, colleagues around you all the time. That’s not the case with real estate investing most of the time. And I am a very outgoing and relationship-driven person, so pretty quickly – I think it was right after I bought my first four-family, I started posting things on the BiggerPockets forum, I got enough people interested in chatting that I said, “Let’s all get together as a group for a beer and talk.” And it naturally evolved over time. And on top of giving me a great resource of people to work with, it’s offered opportunities for me to help others. I’m just a handful of years into this, and it’s really easy for me to talk to some of the newbies at this point and share what I’ve learned just in the few years and be relatable to them right now. And then it’s also created a bit of, I guess, a reputation for me in the area too, because I’m someone who hosts a fairly well-attended meetup at this point and a fairly well-known meetup. And I think it helps me, and it helps me help others and a lot of different ways.

Joe Fairless: Just to learn a little bit more, for someone who’s thinking about starting a meetup. And during the pandemic, obviously, we’re just going to put an asterisk on this conversation, because we’re not having an in-person meetup; I don’t imagine that you’re having in-person meetups.

Megan Greathouse: No, not right now.

Joe Fairless: But just during a time when there’s no pandemic, what specific cause and effect business benefits that you’ve seen as a result of hosting the meetup?

Megan Greathouse: I’ve had a lot of folks come to me with different deals that they’ve found that they think might fit what I’m looking for. I’ve been able to strengthen relationships with some of the folks that I work with for real estate. So my lender, my contractor, my insurance company, my title company – they’re all sponsors, and I think that keeps me kind of top of mind for them in some ways, and allows me to give back to them in ways that keep our relationship really strong, and that makes things easier on me when I work through my real estate deals. And then I’ve met people who will be potential future partners as well. So it’s done a lot. I could probably name three or four other things too.

Joe Fairless: On the fix and flips, going back to those… Did you make money on both of them?

Megan Greathouse: Yes. One of them I made a whole lot less than I anticipated, and I would say that was my true fix and flip. Like I said, I’m a buy and hold investor. So both of these, they started as rentals that I kind of quickly decided I wasn’t going to keep them long term. They were single-families, and I liked the small multi-family space better. But they had multiple exit options when I got into them, so then I went the fix and flip route pretty quickly after buying them and holding them for a short term as a rental.

Joe Fairless: Can you talk about the one that you made a whole lot less on than you thought?

Megan Greathouse: Oh, yes. I actually love this property and this story. And no regrets, because I learned so much… But it was a two and a half story, 1910 build, in an amazing neighborhood in St. Louis City. Walking distance to one of our major universities, Washington University in St. Louis. And I found it actually on BiggerPockets forums. So it was an off-market deal. Another investor was looking to offload it because he was getting ready to invest in another market. And I reached out to him out of curiosity — even though I kind of prefer duplexes and four-families — because his rent was so high. He mentioned is his rent was so high, and we started talking, and it was because he was renting to students and he had kind of a unique model.

So I knew going into it that I probably didn’t want to do the student rentals, but I figured I’ll buy it, I’ll let these students finish their time in the home, and then I’ll renovate it, because there are so many beautiful homes surrounding it that have been updated and maintained and they’re historic. And I was expecting to make about 40,000 at the end of the day. And by the time we finally sold it, after many many delays, I think I eked out 10,000. And that was with my contractor accepting some of their mistakes and taking a hit on their side.

Joe Fairless: Knowing what you know now, what would you do differently, if you were presented a similar opportunity and you decide to buy it?

Megan Greathouse: Knowing what I know now, I think I would be much, much tighter on my timelines and the way that I set those up. And then much tougher on the management of the contractor as well. And I potentially would have switched contractors halfway through if I needed to. Because the vast majority of what came up was major delays that cost money, and holding costs, and everything. And that’s what really ate into my profit at the end of the day.

Joe Fairless: What are some specific things with the contractor in this case that took place?

Megan Greathouse: The contractor actually went through three different project managers during the time of my project. And every single time we switched over, it was just more delays, and more learning curves, and changing of how things were happening.

They also were not on top of their subcontractors. So there are multiple times when I reached out to them and said, “Hey, where are we? Are we done with XYZ?” And they said, “Well, no, because we’re still waiting on the plumber.” Or, “We’re still waiting on this guy or that guy to come in.” And I’d asked them about that. And it’d take two or three weeks before that person who was supposed to come in a couple of days was finally there and getting done what they needed to do. So it just continued to drag out. And I tried to stay on top of my contractor, but I couldn’t seem to make them stay on top of their subcontractors. So that was something I needed to improve. I need to be better at finding contractors who are more on top of it, and/or being willing to fire and hire someone new when those things come up.

Joe Fairless: 10 rental units. On average, what does a rental unit generate in profit each month?

Megan Greathouse: Each of my units net cash-flows after everything about $300 per month is probably where we’re averaging out at this point.

Joe Fairless: And what’s the average price point for what you purchase, each unit?

Megan Greathouse: Yeah. In St. Louis – it can certainly range by neighborhood, of course – anywhere from 50 to 80,000 per unit at purchase. And it definitely varies by neighborhood.

Joe Fairless: Yeah, I get. Let’s talk specifics. Let’s talk about the very last deal that you bought. How much was it?

Megan Greathouse: This one I bought for $132,500, and it’s a duplex in a really awesome and popular neighborhood of St. Louis called Dogtown.

Joe Fairless: Dogtown. Alright. Is that an artists and hippie area?

Megan Greathouse: It’s actually more of like old Irish pubs and walking distance to Forest Park and all its attractions.

Joe Fairless: Okay. $132,000 for a duplex. And what’s the rent for each of the units?

Megan Greathouse: So one side, the previous owner had done some basic cosmetic updates… And these are one bed one baths, by the way.

Joe Fairless: Okay, thanks.

Megan Greathouse: They did some basic cosmetic updates, it was nothing too special. But we currently have 700 in rent per month on that one. On the other side, I put about 20 to 25 to really open it up and create a bigger kitchen, and a better flow, and nice cosmetic updates… And that one is currently renting for $900 per month, which I think we were filling that one during COVID. I think we could easily get $1,000 for that one next time around.

Joe Fairless: How do you look at ROI when you’re looking at doing a $25,000 renovation? What must you have from a return standpoint, if any, to justify those cap-ex dollars?

Megan Greathouse: For this one, I knew I was going to do it, because while the one side had been kind of updated, the other side was in really rough shape. So for that one, the side that I updated previously had been renting for I right around $500, maybe 550. And I knew I could get 900 maybe more if I updated it. So that monthly is $300 or $350 per month, maybe more, that I would get on top of if I just rented it as it was. So annually, that’s like $4,200. So if I put in $25,000 to get an extra $4,200 per year, that’s like a 16% or 17% return. So my cash on cash return, I like off the bat when I’m buying something to have greater than 10% cash on cash return. And then when I’m putting work in, I hope I’m getting into the mid-teens on cash on cash return, and then eventually able to refinance out a lot of my money and push that return rate even higher on the cash that I have left in, if any.

Joe Fairless: Do you self manage?

Megan Greathouse: I do.

Joe Fairless: Well, you’ve got some interesting stories for us then, from that…

Megan Greathouse: Indeed. [laughter]

Joe Fairless: What’s something that comes to mind?

Megan Greathouse: So I actually just had my first issue with bedbugs recently. That has never happened to me before and it was a little frightening, honestly. Especially because I had just been in the unit not that long ago. I actually do my best to not go to my units personally as much as I can. I have a really great handyman, a great contractor, a great leasing agent, so I outsource the things that require a lot of run around and time physically at units. And they are excellent about reporting back to me on what’s going on. But I just so happened to have been at this unit previously. So of course, I had, first of all, just the heebie-jeebies for about 48 hours after I found out… And then it’s not cheap.

Joe Fairless: You were in the Marine Corps, right?

Megan Greathouse: I was. I was. But I didn’t ever get bedbugs in the room. [laughter]

Joe Fairless: I know a Marine’s kryptonite now. Thank you.

Megan Greathouse: [laughs] Yeah, I’ve got two young kids. And I just was having these horrible images of dealing with bedbugs in my own home, with a four-year-old and a one-year-old… So I think that’s probably been the worst of it honestly… When you’re dealing with things like that, it’s expensive. It’s one of those things that in a single-family, I think it would 100% make sense to bill it back to a tenant. In a four-family, it’s a little harder, because you just don’t quite know for sure how these things could have spread… So we did our best to maintain boundaries with the tenant and make sure they kind of had some responsibility, but that we also took responsibility, and cleared it up before it became a problem for the whole building. And it was cleared up pretty quickly, and we haven’t had any issues since, but that was probably one of the biggest pit in your stomach feeling when you get the call from someone saying, “I’m going crazy. I’m all itchy and I think I have bedbugs.”

Joe Fairless: Yeah, well. Was it [unintelligible [00:21:35].18] treatments? Is that what they did?

Megan Greathouse: They actually did a heat treatment on it.

Joe Fairless: Heat treatment. Okay.

Megan Greathouse: So there are two units top and bottom on the left, two units top and bottom on the right. They inspected the right and saw no issues. On the left side of the building, they did do chemical treatment in the upstairs unit. In the bottom unit they did the full-on heat treatment, and then they went back for two checks after that.

Joe Fairless: How much did it cost?

Megan Greathouse: I think we were at $1,500 for that.

Joe Fairless: For all of it?

Megan Greathouse: Yeah, for all of it. Well, this is in one of the areas where rents are a little bit lower. And even though these are slightly bigger units, that particular tenant only pays $525 per month. So when you look at the amount going into that unit just in one month from bed bugs that, frankly, they probably brought into the unit, it kind of stinks. But you’ve got to do what you got to do. I’m not going to be a slumlord.

Joe Fairless: There’s a pro tip that I came across, and I learned the hard way with bedbugs… If you’re looking at a property, and the owner has a spray bottle, and it kind of smells like rubbing alcohol, and they spray themselves before and after they go into the unit, then there’s probably a bedbug issue. I didn’t pick up on that until later. Fortunately, I didn’t ever get them, but it was missed in an inspection early, early on in my real estate days… And that spray bottle, I was like, “Wait a second.” And I did a Google search. “Yeah, rubbing alcohol, doesn’t take out an infestation, but it kills them.” That’s why he was spraying his legs before and after.

Megan Greathouse: Oh my gosh, wow. Yeah, there’s your sign now, I guess.

Joe Fairless: There’s your sign. Yep. spray bottles. So what’s your approach when you have a unit that is vacant? Do you have any leasing tips that you’ve come across that have been really helpful for you to fill your units quickly?

Megan Greathouse: Yeah, we actually have a pretty solid process with my leasing agent. And this was one of the issues that I had with property management companies. I’ve worked with a few before I took over and self-managed. And none of them were bad, but I always felt like I had vacancies for a little too long. So I found a really awesome leasing agent who’s just kind of a hustler, and he’s willing to do things my way, and not just stick to something that he’s been taught elsewhere.

So I have written into my lease that we’re allowed to enter the unit to do showings within 30 days of a tenant leaving. And generally, this is happening when it’s a solid tenant, and they’re moving on just because they are moving in with a roommate, or moving for work or something. If it’s been a hairy situation with a tenant, you might not want to actually show while they’re still there. But so far we’ve been able to.

So I have files with pictures and descriptions of all my units, and if I haven’t done any major changes to the units, I’ll just use those existing pictures for the leasing agent to get his advertising out there. And he’ll list the unit three to four weeks before my current tenant leaves, and then about two weeks before the current tenant leaves he will usually ask for an hour or two on a Sunday to do a few showings. Usually, he’s done decent enough phone screenings that by the time he’s done with those showings, he is sending me one or two applicants. I will run them through my own application process. It’s all online. It’s very easy. I do it through [unintelligible [00:24:48].24] so they fill everything out online. We do the background and credit checks all online. And oftentimes, I have a new tenant who has been approved, has sent me their security deposit, and is ready to move in within a few days of the old tenant moving out. So they’re usually lined up and ready for it before my old tenant moves out. And then I get my occupancy inspection done and the cleaning done the day after my old tenant moves out. And a day or two later, the new tenant comes in. So my vacancy is a few days.

Joe Fairless: I’m glad I asked you that question. Thank you for sharing that.

Megan Greathouse: Yeah, sure thing.

Joe Fairless: Taking a step back, what’s your best real estate investing advice ever?

Megan Greathouse: I think use time to your advantage. And with that one, I actually mean, not moving super fast, but the amount of time that you have to build with real estate is always helpful. So for instance, a property that I bought four years ago, just by naturally taking care of it and increasing rents as tenants turned over is now worth almost 50% more than it was when I bought it, thanks to buying in kind of an up and coming area, taking care of it, and increasing rents. So all of a sudden, even though cash flows were maybe early on $100 per door per month, and then $200 and then $300 – the cash flow has grown, but my value has also grown and I’m able to refinance and take cash back out and put that into other rentals. And it’s just amazing, the snowball effect that you have over time with real estate. It’s not “get rich quick,” but it’s quicker than just throwing money in a savings account forever. And there’s a lot of power behind it. You make money in a lot of different ways. So time is actually very helpful in real estate.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Megan Greathouse: Very ready.

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

Break: [00:26:37][00:27:24]

Joe Fairless: Best Ever book you’ve recently read.

Megan Greathouse: I feel like every other book I read, I’m like, “That’s my favorite book ever.” But I just read Twelve Pillars by Jim Rohn. It was something someone gave to me years ago and I put it on the bookshelf and just recently found it. And it was really great; just mindset and mentality for a successful well-lived life.

Joe Fairless: Best Ever way you like to give back to the community.

Megan Greathouse: I really like to be a networker. Someone who can connect people, someone who can also teach and help others… So I run my real estate meetup, I try to answer all the questions that I get from people who are starting out in this game, or who are pivoting in some way in the field… And then I also co-host a podcast with Josiah Smelser called Multi-family Mavericks. As we’re both looking to scale into larger multi-family, we are taking others who are in the same place along with us and interviewing a bunch of multi-family investors to give everyone a leg up.

Joe Fairless: What’s a bad piece of advice you’ve gotten or heard?

Megan Greathouse: I think anybody who tries to tell you there’s one way to do something is giving you bad advice. Generally speaking, there are many ways to do almost everything in real estate. There are very few black and whites in real estate. And if someone who’s talking to you isn’t giving you the perception that this is what works for them and here’s why, they’re just telling you this is right and that’s wrong, it’s probably bad advice.

Joe Fairless:  I love that. So, so true. Not just real estate, right?

Megan Greathouse: True.

Joe Fairless: Just life in general.

Megan Greathouse: Everything.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Megan Greathouse: I am kind of all over the place, but I have an Instagram called @parttimeempire where I really chronicle what I’m doing with real estate. My goal here is not to scale the biggest, fastest. I do want to scale and grow big, but it’s about the lifestyle for me. So @parttimeempire is where you can see how I balance being a mother, being an entrepreneur, being a real estate investor, and having fun along the way.

Joe Fairless: Well, thank you for being on the show. We talked a little bit about farmland, which I was really curious about, so thanks for talking about that. Will you be writing about the exit of that whenever it happens? In Instagram or wherever else?

Megan Greathouse: Yeah, I’ll need to share it. Like I said, we’re still getting the details nailed down, but I’ll have to share it for sure.

Joe Fairless: And then the flips as well as the reasons why you do a meetup, the benefits, some specifics on the duplex that you’ve recently purchased, and why one of the flips didn’t make as much as you wanted because of some management optimization that has since taken place for future deals… So thanks for being on the show. I hope you have a Best Ever day. Talk to you again soon.

Megan Greathouse: Thanks, Joe. You too.

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