JF2323: A Little Push Into a New Journey With Ragan Mckinney

Ragan Mckinney started her own brokerage in 2019 and for the year was named The Southern Ohio Association of Realtors “Top Sales Team”. Along with being recognized for having the most sales as a team, Ragan McKinney Real Estate was also awarded the Platinum award for the fourth year in a row. In the past 5 years, Ragan has been involved in over 600 real estate transactions and is focused on growing her business and becoming the local one-stop spot to service anyone’s real estate needs. 

Ragan Mckinney Real Estate Background:

  • Full-time real estate investor and broker 
  • Has been investing for over 20 years
  • Portfolio consist of 19 rentals, 1 vacation rental, and has flipped 11 properties a year 
  • Based in Hamersville, OH
  • Say hi to her at www.raganmckinney.com 

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Best Ever Tweet:

“Don’t fix them as if you’re going to live in them forever” – Ragan Mckinney


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, Ragan McKinney. How are you doing, Ragan?

Ragan McKinney: I’m good. How are you?

Joe Fairless: Well, I’m doing well, and I’m glad to hear that you’re good. A little bit about Ragan. She’s a full-time real estate investor and broker. She’s been investing for over 20 years, has a portfolio of 19 rentals, one vacation rental, and has flipped 11 properties, based in Hamersville, Ohio. With that being said, Ragan, you want to give the Best Ever listeners a little bit more about your background and your current focus?

Ragan McKinney: Sure. So I basically started when I was 20. My grandparents, they flipped houses before it was popular on HGTV and everybody was doing it, so I picked up a knack for it from them. I’ve always been self-employed, I come from a self-employed family, so that was a source of my potential retirement… And I just grew to love it. So spending Friday nights at Lowe’s or Home Depot, picking out tile and things like that has turned into a full-time gig over the last 20 years. I flip about 11 a year, and I did many more than that over the last 20 years… But basically got started from  – my grandparents who taught me how to do it, and I’ve just grown it from there.

Joe Fairless: So you at first started doing what, and then how has your investing approach evolved since then?

Ragan McKinney: So when I was 20, getting ready to get married, I wanted to go buy the standard house in a subdivision, with the white picket fence, that’s already ready… My grandparents steered me into a different direction, pulled up into a property; it looks like it should be a haunted house. The grass was four feet tall. And basically, they persuaded me to buy that. So we did.

We did all the work ourselves on that one, and lived there two and a half years, and flipped it and made 42,000. Basically that’s where I got my taste, applied that 42,000 to my next property, and I’ve just continued to do that with the home I live in, all the way up through. We’ve lived in six different houses since, and then and then started adding additional properties, doing the same thing. That’s probably one of the better investments I made. It was a nice profit on the very first one to get my feet wet. They’re not all that lucrative, but I’ve done better and worse.

Joe Fairless: Wow. Yeah, right out of the gate. After two years, 42k. What did you learn from that first deal, from a renovations standpoint? …if you can recall; I know it’s been 20 years.

Ragan McKinney: I do remember. So it’s “Don’t fix them all as if you’re going to live in them forever.” I still struggle with that, trying to go in and pick things not the best/highest dollar, versus picking out what I like.

Joe Fairless: What are some specific examples of that? Just to bring it to light a little bit.

Ragan McKinney: Everything from flooring, to adding details. Right now the modern farmhouse is in, so I tend to steer towards shiplap. I like the nicer countertops when we get into courts and things like that, but we can go with a lower grade granite. In the market that I’m in, the buyers don’t necessarily care as much about what type of granite or, whether it’s quartz or solid surface; they just care that it’s new and that it’s not Formica. So for me, I go in and tend to have — my dad would have always said, “Champagne taste on a beer budget.” So I’ve always went in and tried to pick out the nicer things, and things that I think I would like, and that at the end of the day for the bottom dollar isn’t profitable.

Joe Fairless: What’s the next step up from Formica that you can get by with?

Ragan McKinney: Probably a Grade C granite.

Joe Fairless: Grade C granite. And about what’s the price difference?

Ragan McKinney: Now things are starting to change, because some of the Formica is fantastic. Probably a couple of thousand dollars to go from picking the Formica to the granite. Now, where I really see the difference is when I go into the showroom and I start picking out countertops, for example, I’m gravitating to what I like first, which typically tends to be a Grade A. Now you’re talking several thousand dollars difference. And there’s just not a big enough return in selecting the higher grade versus the lower grade. So it’s not necessarily just a difference in Formica to granite, but coming down to what the dollar amount is and knowing how much more return I can get on a specific property based off of the countertops.

Joe Fairless: So what grade do you go with?

Ragan McKinney: Typically it’s C.

Joe Fairless: And the price difference is – you said a couple of thousand?

Ragan McKinney: No, that would be from Formica to granite. From maybe C to A you’re talking anywhere from eight to 12,000, depending on how many feet you need.

Joe Fairless: Yeah, how much you’re buying. Got it. Significant difference.

Ragan McKinney: Yeah, it’s a big difference especially when it’s coming out of your net dollar.

Joe Fairless: Approximately how many deals does it take to really settle in on “Okay, this is what the market will bear. And that I shouldn’t go over; this is right at where I need to be. So I need to be at grade C granite, versus something nicer, or something worse.”

Ragan McKinney: So you’re asking how many deals you need to do to figure that out?

Joe Fairless: Yeah.

Ragan McKinney: An honest answer to that is I think there are lots of people out there that are willing to help and lend advice. So if you’re working with a realtor, take that advice. That would lower your number. I’m a slow learner when it comes to that, because it’s been my way, but I would say it took me four or five years to figure out, “Okay, I’m not going to live in this property. This is just as nice, and it’s going to put more money in my pocket at the end of the deal if I choose this.” So I don’t know that for me it’s the number of deals, but more surrounding yourself with good contractors and with a good GC, or general contractor that’s going to help guide you and kind of… I always say he checks me on, “Hey, Ragan, you don’t really need to do this.” Because we know when we buy a property and then we go in and walk through, we know what it’s going to take. And we do allow for some areas, and if you get into something unexpected, we kind of pad it for that. They always say I tend to spend my budget in the tile shop and on the flooring store. [laughter]

Joe Fairless: So the first deal you mentioned, you killed it. And then you said, “Oh, but some have been better and some of them worse.” So let’s talk about those extremes. Let’s talk about the deal that you’ve lost the most amount of money on; tell us about it.

Ragan McKinney: Buying sight unseen. I eat, sleep, and breathe real estate, so if I’m not selling it professionally, then I’m looking online for a deal or an auction, or I’m going to the Sheriff’s Sales. So the one that I would say I got burnt on or lesson learned would be one that I purchased unseen. The first time we walked through, it didn’t look terrible, but when we started pulling away the drywall, lots of molds and rotten [unintelligible [00:09:44].17] It was basically a rebuild and I joke that I paid the people to buy that house. So it was definitely a loss – probably $18,000 in the red, without having that file right in front of me.

Joe Fairless: You paid people to tear down…

Ragan McKinney: No, it was — basically, that was my loss.

Joe Fairless: Okay. $18,000, you said?

Ragan McKinney: Mm-hmm.

Joe Fairless: In the grand scheme of things, in two decades, an $18,000 loss… Bravo to you. That’s pretty good, right?

Ragan McKinney: I don’t know. Like I said, my grandparents and then even my parents — I just feel like I’ve been super fortunate in being guided in the right direction… Whether it’s been houses or it’s been cars, my dad owns a salvage yard… And this kind of goes back a little bit off of real estate, but it kind of will give you a background of the way I think – we don’t go buy brand new cars; we would buy them, he would fix them up. So I’ve never paid full price for anything. And I’ve always been able — even with a car, I’ve been able to drive it, and then still make money on it. So the same thing with my houses – it was a really hard pill to swallow to come in and say, not only are you going to not make money, you’re going to lose money. That’s a lot. It’s more of mental for me and a blow to my ego than the dollar amount.

Joe Fairless: Mm-hm. You bought it sight unseen. How many properties, if you know, have you purchased sight unseen before?

Ragan McKinney: More than I should admit. In the 20 years, probably eight to 10.

Joe Fairless: Eight to 10. And about what number was this, on the eight to 10 range?

Ragan McKinney: This would have been right out of the gate probably the second one.

Joe Fairless: Okay. What were the circumstances where you bought it sight unseen?

Ragan McKinney: It was an auction, and there was people bidding against me, and I was younger, and I thought, “Well, if all these other investors want it, it has to be a great property. Somebody has to know something.” It’s really important, probably the biggest lesson I’ve learned, is to do my own due diligence. Yes, I have a big support system that I can bounce things off of, but I know how to make a deal and how to set it up to where I look like a fantastic buyer. But there’s a lot of mistakes I’ve made that have cost me, and that would be A, sight unseen, B, waiving inspections, not using my due diligence, period, things like that.

Joe Fairless: But one out of eight to 10, your batting pretty good there.

Ragan McKinney: Don’t jinx me.

Joe Fairless: Right. [laughs] So the sight unseen actually has been successful for…

Ragan McKinney: It is, and I’m not scared of it.

Joe Fairless: How do you mitigate that risk?

Ragan McKinney: Well, I don’t believe — and I know this is cliché, but no risk, no reward. I actually have one under contract right now. I’m steering kind of away from the residential, single-family, and getting into multi-family, and also into the vacation rentals. I just bought my second vacation rental on Norris Lake Tennessee, sight unseen. How to mitigate that risk is my contract allowed the due diligence period. I am getting the inspections and following it through top to bottom, just so I know what I’m getting into… Because I tend to operate on a deal based off of the purchase price and knowing what I can do… But I always like to forget that middle part of what it cost to get it there. It’s not enough to scare me, but I am being smarter about how I get there.

Joe Fairless: I want to spend a little bit of time talking about where you’re headed and why that shift in your focus. But before we do, I mentioned earlier, let’s talk about the extremes. Most you’ve lost, 18k. What deal have you made the most money on?

Ragan McKinney: Well, the most money I’ve made is — I buy and sell real estate all the time, so I have bought them and I have other investors that I work with that decide that they want to go ahead and flip it. So instead of me taking the time, I have to weigh my options of “Can I fix this?” And I now pay contractors to do all the work, wherein the very beginning, I was doing a lot of the work myself with my family. So to offset the cost, the best deal – and I don’t just weigh the net dollar, it’s how much work was invested, as you know, being able to buy something and then turn around and flip and sell it… And that was for $52,000.

Joe Fairless: $52,000. So you found the deal, and then you sold it to a client of yours who fix and flipped it?

Ragan McKinney: Correct. I actually bought it, and I was going to flip it. So I–

Joe Fairless: You bought it.

Ragan McKinney: Yeah, I bought it. Super sweet deal. I had bought a lot of the material for it… And then how that worked is they came to me, they were looking for one… I don’t have the time, now that I am where I am in real estate, so basically, the market had shifted. It did sit for a period of time, and then I sold it to them.

Joe Fairless: Got it. Okay, that was a sweet deal.

Ragan McKinney: It was a sweet deal.

Joe Fairless: If you got a $52,000 profit before they even touched it, and then they fixed it up, flipped it, and then my assumption is they made money…

Ragan McKinney: Oh, yeah, they made money. And then I get to list it as well.

Joe Fairless: Oh, bravo!

Ragan McKinney: Mm-hm, yeah.

Joe Fairless: Wow.

Ragan McKinney: So… Keep your investors happy.

Joe Fairless: Yes, it reminds me of the lease with an option to purchase, where people make money in many ways with those types of deals – on the front end, on the back end, and during the middle. Alright, so let’s talk about your shift in focus. You said vacation rentals and multifamily. I believe I heard that correctly. Did I hear that right?

Ragan McKinney: That’s right.

Joe Fairless: Okay. Why? You’ve got a good thing going, with flipping about 11 properties a year. You’ve got some rentals. You’re a broker, you’ve just opened the brokerage about a year ago. Why are you shifting?

Ragan McKinney: I just think the market is changing, and also, it’s for my own personal… The flips – everybody’s getting into flipping. When you turn on HGTV or TLC and everybody has a home renovation show… So there’s a lot of people out there that are just getting their feet wet. So the competition to buy the property at a price that you can go in and do the work to make the profit worthwhile – that’s the first issue.

The second issue is I have to look at, “Okay, if I’m going to take a smaller profit on a flip, can I make more money doing something else?” And right now I can’t selling real estate, because the profit margin for the flips just aren’t what they used to be.

As far as going from residential single-family into multifamily and the vacation homes, as far as single-family goes, I’m just really struggling getting really good renters. I feel like the turnover is starting to be more than I would like, and I can get more of a return on a multi-family. And the vacation rentals so far have been fantastic. And I don’t know if it’s due to COVID; more people were camping… And like I said, both of them are on North Lake, booked completely out. And not just for the summer months. People are doing this at Thanksgiving, they’re going just for a weekend getaway, something different than maybe the Gatlinburg or the Pigeon Forge. And it’s somewhere you don’t have to fly, because a lot of people are from Norris, or are coming from the [unintelligible [00:16:25].02] area, so a lot of locals. And the profits have been way better than my single-family, with less headache.

Joe Fairless: Let’s talk about the profit. So what’s the last vacation rental that you purchased, or are about to purchase?

Ragan McKinney: So the first one I purchased was two years ago, with no intentions to rent. It was going to be just our place to get away. To kind of recap I went in, bought it through an estate, got a really good deal.

Joe Fairless: How’d you find it? MLS?

Ragan McKinney: No… It doesn’t matter where I’m at, I’m always shopping real estate. So we were on vacation at Norris… And I want to know what’s for sale, and I go and I talk to people, and ask, and I ended up meeting with a realtor. He said he had this come in, it wasn’t yet listed, it was an estate. There were four kids that were split four different ways, so it worked to my benefit.

It did need work, but we’ve put a year and a half worth of just our sweat equity into it, and we started running it this year. It was a pretty decent experience, with the exception of one… But as far as what the return is, we started in March and we ran it through Labor Day… And it was kind of a test run, because like I said, this was designed to be my family lake home, so something where we could go when we want… And I didn’t like that it cramped my schedule, but as far as money goes, it was about 28,000.

Joe Fairless: 28,000 that you got in for rental income?

Ragan McKinney: Mm-hmm.

Joe Fairless: And what did you buy it for?

Ragan McKinney: I bought the property for 430k.

Joe Fairless: 430,000? And about how much did you put into it, knowing that it was you doing the work… But what about supplies and stuff?

Ragan McKinney: I would say 50k.

Joe Fairless: 50k, got it. So if you had hired a contractor, what – double that? 100k?

Ragan McKinney: 100k, yeah.

Joe Fairless: Okay. Two follow-up questions. You said something like it worked out except for one. Was there something that didn’t…

Ragan McKinney: Well, rentals can go either way. People are on vacation with their families, and they can go in and treat it like their own, or they can go in there and it can be like a frat party. So that’s kind of what the last one was. Luckily, we did get deposits and things like that. But you have to think about your time to go in. And that income – we didn’t fully rent it, because I did leave it open for myself. The one I’m purchasing is going to be strictly a rental. And right now as it sets with the current owner, it’s $52,000. That’s what their gross rental income is.

Joe Fairless: Oh, really? Over the course of 12 months?

Ragan McKinney: She doesn’t rent in the winter, because they go down. So that was from February through October.

Joe Fairless: Dang. And how much are you buying that for?

Ragan McKinney: 285k.

Joe Fairless: Wow. Yeah, that’s a killer.

Ragan McKinney: I found that one on my morning run. Yeah. So…

Joe Fairless: Okay, that’s what I want to dig into. We’re going to come back to the morning run in a moment. On the first deal, you said when you go places, you want to know what’s for sale, so you talk to people… You met a realtor, and then the realtor told you that he had this off-market thing that was coming up. Who did you go to? When you say you talk to people, did you just randomly come across someone, or did you look at the brokerages, and you make it a point to call them? What did you do exactly?

Ragan McKinney: So exactly what happens is we were down there, the people that we were renting the property from… Like I said, I always am talking about real estate just by default… So let them know that I’m a realtor. We were looking to book another weekend; everything was completely full, so when the kids were out at the lake and we were just kind of chilling, I was on my phone and looking for rentals so we could come back in a few weeks… And everything was booked. I come across an email, reached out to the guy, and just said, “Hey, do you have anything?” And he said, “Everything’s completely booked. But I have one I’ll sell you.” And I thought, “Okay.”

So the next weekend, we drove down just to look at that property. That one wasn’t a fit for us. However, we drove four and a half hours to look at one property that I had intended to write a contract on and turn around and leave… So we ended up getting a hotel and reached out to a few agents. It was a Saturday, and they said, “We’re booked.” And finally, I just called agents until somebody that could meet me an hour. “Hey, we have X amount of dollars to spend, and we’re here to spend it this weekend. What do you have?” And he was fantastic, “I’ll meet you in an hour.” He showed us two properties.

Then after meeting with him, he said, “Well, I have this one, but it’s not active yet. But we might be able to get you in.” So he did, and I knew it was a perfect fit. Wrote a contract, and then just maintained that relationship.

The one I just bought, now that I’ve owned that property down there for two years – you start to meet people in the community and you start to look for life changes. Some people are finished down there, or some people have outgrown, or need to downsize… So I’m always looking for life changes, as I like to call them. And I go for a morning run every day, and happened to notice a house that was needing a little love, so we started looking on the county websites, and who owns it, and I send a letter, or I Facebook message, and reach out, “Have you thought about selling?” And eventually, you get a hit. And then you look at it.

This one I haven’t looked at. I’ve seen the outside, because I have ran by it several times… But we are under contract. I am during due diligence period, and we do have home inspections. So hopefully everything checks out. But what I have found is people that have bought the vacation rentals, most of them have owned them for several years, and a lot of them don’t understand what the market’s doing… Or they’re just done. They don’t want to rent anymore. They don’t want to deal with the headache of that. Or there’s some kind of life circumstances to where they just want to get out of it.

North Lake is a place that real estate is just booming. It’s booming everywhere, but people that bought lots for 30,000 ten years ago are selling them for 300 today. So like I said, I don’t know if it’s COVID, or if it’s just the market, a combination of everything, but there’s a lot of activity. And not just North Lake, any of the ones you can get lakefront homes on.

Joe Fairless: Did you send this person a Facebook message, or did you send them a note?

Ragan McKinney: Both. I sent a note and…

Joe Fairless: Which one did they respond to?

Ragan McKinney: Facebook.

Joe Fairless: They responded to the Facebook message. Got it. Thank you for those stories. That is beneficial for people looking for deals in hot markets. Taking a step back, what is your best real estate investing advice ever?

Ragan McKinney: Don’t ever be afraid to go after what you want, or to ask for something. The worst that anybody’s going to tell you is no, and I feel like the best deals have always come from the most unexpected situations. And if you’re looking to do it per a playbook or how you think it’s supposed to be – yes, realtors (because I’m a realtor) can get you fantastic deals. But most of them are going to come from homework or just paying attention to your surroundings. A lot of times the best deals are right in your own neighborhood, and that’s where I really like to focus… And like I said, the vacation house is two doors down from my other one. Most of my deals are right here in the middle of my hometown… Because you know people’s life changes, and it just presents an opportunity.

Joe Fairless: We’re going to do lightning round. Are you ready for the Best Ever lightning round?

Ragan McKinney:  I’m ready.

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

Break: [00:23:36][00:24:16]

Joe Fairless: What’s the Best Ever deal you’ve gotten in the most unexpected way?

Ragan McKinney: Best Ever deal in the most unexpected way? I would probably say the lake house. I went down there expecting to get something, I immediately felt disappointed, and ended up with something better.

Joe Fairless: What’s the Best Ever way you like to give back to the community?

Ragan McKinney: I’m big, big into my local community. Big, big advocate for giving to the people that take care of me. I like to turn back and give it back. So police, fire or paramedics. I’m big on that, and then all of our military.

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

Ragan McKinney: They can check me out on my website at raganmckinney.com, or they can go to any of my social media, Instagram or Facebook.

Joe Fairless: Ragan, thanks for being on the show. I enjoyed our conversation. Thank goodness for your grandparents, and that conversation they had with you 20 years ago, when you were going to buy that white picket fence house, and look at the path that they helped you get on, and then you’ve blazed the trail from there.

I love hearing about the resourcefulness and just the tenacity for how you’re uncovering deals, and that will be helpful for a lot of people. And also the shift in focus, and why you’re shifting with your focus. So thanks for being on the show. I hope you have a Best Ever day and talk to you again soon.

Ragan McKinney: Thanks so much for having me.

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JF2314: Jump In and Learn With John Evans

John works as a supply chain manager and a part-time investor. He has been investing for a little over a year and already has a portfolio of a duplex, a single-family, one flip, and two commercial properties. He shares today how he has recently started and why he quickly sought out an experienced mentor to help him through his first multi-family property.

John Evans Real Estate Background:

  • Works as a supply chain manager and part-time investor
  • Has been investing for 1.5 years 
  • Portfolio consists of 1 duplex, 1 single family, 2 commercial properties, & 1 flip
  • Currently partnered with a local investor to complete his first multi-family property with 30-60 doors
  • Based in Florence, SC
  • Say hi to him at john@bedrockinvestmentgroup.net
  • Best Ever Book: Go-Giver

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Surround yourself with people who are doing it” – John Evans


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 John Evans. John, how are you doing today?

John Evans: I’m doing great, Theo. Thank you very much for this opportunity and having me on the show today.

Theo Hicks: Oh, no problem. Thank you for taking the time to speak with us today. A little bit about John – he works as a supply chain manager and as a part-time investor; he’s been investing for a year and a half, and his current portfolio is a duplex,  a single-family, two commercial properties, and he has done a flip. And he is currently partnering with a local investor and they’re looking to complete their first multifamily property, between 30 and 60 doors. He is based in Florence, South Carolina, and you can say hi to him at his email, which is john@bedrockinvestinggroup.net.

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

John Evans: Sure. Recently, I’ve just ended up partnering with a guy that basically — since I’m new to this, coming in and using leverage with him understanding and knowing the market. He is a realtor for the state [unintelligible [00:04:19].01] and also an appraiser, so he has some of the knowledge that I don’t have.

When I started really looking at doing this, I got on Bigger Pockets and a lot of good websites, obviously I used your guys’ website a lot, took the advice to learn for at least a year or so. I read a lot of books, educated myself, and then decided to partner with someone in the real estate space as a professional… And then also, we have recently just joined a mentorship with Robert Beardsley. So we’re doing that now, and I’ll tell you, that’s been a real big help for helping us understand really how to go about looking at the data and letting the data speak. I think it’s very important in this space – whenever you’re going out to raise the money, you definitely don’t wanna make a mistake with someone else’s money, including your own, because we’re gonna invest right beside our investors. So getting in that mentorship has been very key, and that’s what we’re doing right now.

We’ve also been kind of gearing up our social media presence, if you will. That was one thing that Rob has led us to do. You have to make sure you’re  telling people what you do, and the connections, and that’s been very important recently for our plan of action.

Theo Hicks: Perfect. So the local investor you’re partnered with, the realtor and the appraiser – the plan would be to buy a multifamily using other people’s money, correct? So you’re going to syndicate.

John Evans: That’s right.

Theo Hicks: Perfect. Okay. So let’s focus on that aspect of the business first. To start, how did you meet your partner?

John Evans: We’ve been friends for a while, we’ve met through some mutual friends. Our wives actually know each other as well.

Theo Hicks: And then how did the partnership come to be? Did you just one day ask him “Hey, I wanna do multifamily. Let’s partner up”? Or was it organic? Maybe walks us through how that happened.

John Evans: Sure, that’s a good question. He basically heard me talking about it one night; we were all together, and he had always wanted to buy an apartment complex on one campus, basically. So when you hear talking about an apartment complex, and then also doing syndications, and raising money to be able to help go and give someone else a return on their money – for someone who may not wanna actually be in the day-to-day operations of owning an apartment complex, that really intrigued him. He was like “You know, I’ve always wanted to do that.” So he said “Tell me what you know about it.”

I started explaining to him all the math, all the finance behind everything I’d learned, and then I started talking about Bigger Pockets. He didn’t know anything about that, so he started doing his own research. It was probably about a month after we initially talked about it, and he called me up and he said “Hey, let’s go out to dinner one night.” So we did. We had a quick meeting. We went out and we kind of discussed what our goals were and what we wanted to do, and then just kind of took from there.

Theo Hicks: What are the roles that you two are playing?

John Evans: It sounds like? Is he getting more of the money, and you’re gonna be more of the worker?

Theo Hicks: I actually do the finance underwriting piece, or the day-to-day process, or the day-to-day driven operations, and he’ll do more of the market type analysis, and then doing a lot of the research, finding the deals… It was kind of integrated; we both kind of play — not necessarily the same roles, because you can’t as you know, but he knows more the market side of things, and I know more of the finance and day-to-day operations types of things.

I manage my current duplex as well, and he’s actually managed his portfolio in the past also.

Theo Hicks: Did you break up those duties based off of who was better at what, basically? That’s what it sounds like.

John Evans: Exactly. We talked about what we both thought we’d be good at. I have more of an engineering/operations background from the manufacturing sector, and he’s always owned his own business, so he kind of has a good mix of knowing real estate, and also knowing how to operate a business.

I have an MBA, and majored in finance as well, so I kind of have the numbers side of the game, but I also don’t mind getting my hands dirty, doing the day-to-day operations as well.

Theo Hicks: So you mentioned that one of the things that your mentor focuses on is the data, so I’m assuming that means understanding how to underwrite the deals. So without getting into too much detail, because underwriting is a very complicated process, maybe tell us what’s the number one or the top few things that I should be looking at when it comes to data when I’m underwriting an apartment deal.

John Evans: You wanna look at definitely the return on investment for your investors, especially if you’re raising money. As far as before you even start underwriting, you wanna look at neighborhoods, you wanna look at demographics, you wanna look at the rents history of that area, and also crime rates; we look at that. We kind of have a five-step process.

Then once you go into the underwriting, you wanna load your data – we use his software. So it’s really good – you go and plug all your numbers in, and then you get an output. So you wanna go look at that output and see if the deal actually makes sense. Is there gonna be enough meat on the bone there to actually raise the money from someone else in order to give them the right returns? So it’ll give them a good picture of what they’re gonna make on their money; it’s one of the biggest things we look at.

Theo Hicks: You said there’s a five-step process… So step one was looking at the market. Step two was loading the data, and step three was looking at the output. What are the other two steps?

John Evans: So then we look at — if the deal makes sense, we go into submitting an LOI. That would be the next step. And then after that, if that offer comes back and it’s accepted, we go straight into due diligence pretty quickly. So that would be the next step.

Theo Hicks: And then the other thing that you mentioned  — well, you didn’t really mention this, but for raising the capital for these deals… So you guys are actively looking for a deal. Do you have some verbal commitments from investors already, and that’s how you determine the size of deal you can take down, or is the plan to get the deal first and then leverage that deal to raise capital?

John Evans: We have friends and family currently. There’s a group of around four people that we do know, that have a lot of interest in what we’re doing and they wanna place some money. Basically, they’re kind of done with the stock market and the volatility.

So when we started going and talking to them about what we were doing, they were very interested in it. Two out of the four definitely said they wanna do it. So we have friends and family, and then those two, and then two more potential already.

Theo Hicks: So you said family and friends, and then you’ve got the group of people that want to invest, that are differentiated from the family and friends… So how did you meet these people? Or how did they learn about your business?

John Evans: Knowing them from our local area, we approached them and told them what we were doing. And then we knew their background as well from being around us in the area… But once we approached them and laid out what we were doing, they were in.

Theo Hicks: And something else you mentioned – you’ve been focusing on the social media presence. Maybe walks us through that – that types of things you’re doing, what works, what doesn’t work, and what’s the ultimate purpose of the social media presence.

John Evans: Yeah, so usually, using Facebook it’s putting yourself out there. But first it was — and it still is a little bit – it kind of gets you out of your comfort zone. So it’s kind of challenging… I like it because it’s a challenge, and it makes me think… So meeting new people, creating a network is the main reason we’re using it right now, and just meeting a lot of people that’s actually doing this; surrounding yourself with the ones that are doing it, so you can learn more.

I really use it as a two-sided type deal, because I’m adding value to someone else, and I’m looking for the value they’re adding to me as well. I always go into our conversation with someone that I meet on, say, LinkedIn, because I’ve had some success in meeting a lot of syndicators on LinkedIn, and also some passive investors, which – I utilize that to be able to find out what are they looking for, what do they want out of a return from someone that’s actually syndicating and pulling them into their deal.

Theo Hicks: What types of things are you doing on LinkedIn and Facebook to add value to other people?

John Evans: One, for Facebook it’s posting non-traditional type thoughts. What I often find – I’ve had a few people that reached out to me lately – is they’re in the traditional mindset; go to school, get a job, all the good stuff that the Rich Dad, Poor Dad tells us that we should think differently; it kind of change our  mindset, which is one way that I was able to obtain the mindset to go out and try to do something non-traditional, so to speak.

I’m posting things that are non-traditional; I’m trying to get them thinking of a different way, and also adding value by doing like  a Thursday book recommendation based around investing, based around real estate, and then also the Best Ever Apartment Syndication Book – that type of stuff, that maybe someone that I know in my network that wants to do this, but they’ve never really studied it and they don’t really know about all of the tools and tricks that are out there in order to do some of this.

Theo Hicks: Alright John, what is your best real estate investing advice ever?

John Evans: Surround yourself with people that are doing it. When I first started, my banker owned real estate, my attorney owned real estate, down to the guy that I used to go in and fix the air conditioners in our units if they ever go out – he actually owns real estate; my CPA owns real estate. Interview people, find out what they’re doing, find out how much they know about this stuff, because you can gain a lot of value from those individuals, and they’re always willing to help you is what I’ve found.

Theo Hicks: Alright, John, are you ready for the Best Ever Lightning Round?

John Evans: Absolutely.

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

Break: [00:13:01].10] to [00:13:51].06]

Theo Hicks: Okay John, so you mentioned you did the Thursday Book Recommendation, so this should be a pretty easy answer… What’s the Best Ever book you’ve recently read, or recommended? Either one.

John Evans: Absolutely, Theo. The Go Giver is my go-to. That book has changed my life. It’s by Bob Burg and John David Mann. The Go Giver book.

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

John Evans: Start another business, always. There’s a  lot of opportunity out there, a lot of things that are being done today that you can go in and make better, and I believe that’s exactly what I would do. I’d follow the same path and start another business.

Theo Hicks: What is the best ever deal you’ve done?

John Evans: I’d say the duplex that I currently own in the portfolio. I’m right at about 27% ROI on that one, and it cashflows $280/door.

Theo Hicks: If you’ve lost money on any deals, how much money have you lost and what lessons did you learn?

John Evans: I haven’t lost any money. That’s rule number one, don’t lose money.

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

John Evans: Going to community events that’s for a good purpose, that align with our purpose and our way. And then another thing we really like to do – and a lot of this is silent – I love to give back to feeding the hungry. That’s one of my purposes; it really touches home.

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

John Evans: You can reach me at John@bedrockinvestmentgroup.net. Also, I always like to give out my cell. It’s 843-858-1274. I’m also on LinkedIn and Facebook.

Theo Hicks: On LinkedIn and Facebook it’s just your name, John Evans?

John Evans: That’s correct.

Theo Hicks: Alright, John, thank you for joining me and walking us through your journey and what you’re focused on today. We talked about partners and how your business partner is someone you had known for a while. They’re a realtor and appraiser, and have a lot more knowledge than you, and you were able to get them on board with your multifamily plan by being educated and really telling him what you plan on doing, your knowledge about apartments or raising money, and then you mentioned that the duties were split up based off of your strengths. Some of those are overlapping, whereas some of the stuff is only done by you, or only done by him. He’s more of a marketing guy, and you’re more of the underwriting, number cruncher.

You talked about your five-step for underwriting deals, analyzing the market, looking at things like demographic, rents, crime rates, loading that data into a customized cashflow calculator which you got from your mentor, analyzing the output, and the important number to look at would be the ROI to the people who are investing, and making sure that it reaches their investment goals. And then step four was making an LOI, step five would be the due diligence.

You talked about raising money, how most of it is family and friends, plus a group of people that you’d met in the past, you approached them, told them what you were doing, and at least two of them are very interested in investing.

We talked about your social media presence and how you use Facebook and LinkedIn to not only add value to other people through things like posting your non-traditional thoughts, getting people thinking in a different way, different types of themes to post, like your Thursday book recommendation, but you’re also using it to add value to yourself, to educate yourself by meeting with apartment syndicators, meeting with passive investors and seeing what they want… And then this kind of links into your best ever advice, which is to surround yourself with people who are already doing what you’re doing. So in your case, surrounding yourself with other syndicators who have raised money for apartment deals in the past.

John, I appreciate it. Thank you for joining us. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we’ll talk to you tomorrow.

John Evans: Thank  you, Theo.

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JF2306: Starting With 130k With Will Clark

Will Clark is a full-time student at Vanderbilt University and has recently started in real estate focusing on wholesale and flipping properties. In the past 12 months he has earned $130,000 from 7 properties and today he will be sharing how he got started.

Will Clark Real Estate Background: 

  • Full-time student at Vanderbilt University
  • Recently started his real estate journey with 12 months of experience
  • Has grossed $130,000 in wholesale & flipping profits from 7 properties
  • Based in  Nashville, TN
  • Say hi to him at willclarkbusiness@gmail.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Quit procrastinating and organizing, trying to make things perfect, don’t be afraid to make mistakes” – Will Clark

 

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JF2303: Insurance Broker and Investor With Nathan Britten

Nathan is a full-time insurance broker and part-time real estate investor with five years of experience. He went to school to study entrepreneurship and eventually found a calling in insurance which led to insuring houses to now focusing on growing his own portfolio while working full-time. 

 Nathan Britten Real Estate Background:

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Find a project with the lowest barrier of entry and with the highest return” – Nathan Britten


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 Nathan Britten. Nathan, how are you doing today?

Nathan Britten: I’m doing great. Thanks for having me on, man. I appreciate it.

Theo Hicks: No problem. Thanks for joining us. A little bit about Nathan, he is a full-time insurance broker and a part-time real estate investor with five years of real estate experience. His portfolio consists of two flips and one rental. He is based in Oklahoma City, Oklahoma, and his website is www.pi-ins.com/nathan-britten. Just go to the show notes and click on his website. It will be easier that way.

Nathan Britten: [laughs] Yeah, I’m sure everybody’s writing that down, letter for letter.

Theo Hicks: Alright, Nathan, do you mind telling us some more about your background and what you’re focused on today?

Nathan Britten: Yeah. So I graduated from OU in 2014, with a degree in entrepreneurship, and that’s not a very common degree, but generally speaking, it’s kind of general business… Essentially, we started companies basically each semester and pitched to investors and banks and tried to prove viability, stuff like that. So that gave a lot of good background and training into sales and general business. After I graduated, I started a CNG conversion business with my dad, which was converting vehicles to run on natural gas. We sold that about two years once oil and gas was going down, and got out of that.

I knew of a guy who worked in insurance in Oklahoma City, and I was just kind of exploring all my different options, and interviewed with them. It was kind of the entrepreneurial spirit of being able to create your own book and go out and build your own thing, but kind of under the scope of a company, but have a lot of freedom and a lot of freedom to do whatever you do in a great business. So with that, I got into running a lot of property for insurance, a lot of single-family investors, large schedules, apartment schedules… And being in Oklahoma, that’s a little bit more challenging than other places to ensure things. So with that, I met a lot of good contacts, I got involved a lot in real estate investing groups, and kind of learned from them and picked up some things along the way, and decided to kind of do my own things.  It really came out of needing a place to live… And it’s like, “Well, I guess we’ll just buy a house.”

[unintelligible [00:05:40].21] I guess what brought me to there, but I got into a deal that was a short sale. It was terrible, kind of a drug house almost, not in good condition; I turned that into basically a flip property. That was my first endeavor in that, and that’s kind of where it got me to this point of what I do now… And obviously, full-time as an insurance broker for a lot of property risks… And then now I just basically do it in my free time, just looking for deals and flips and other rentals.

Theo Hicks: So for your insurance job – that’s providing insurance for real estate, right?

Nathan Britten: Primarily, yes.

Theo Hicks: Interesting. It’s the first time I’ve heard of someone getting into real estate through insurance.

Nathan Britten: It’s an unusual path, and really, because a property is not everyone’s favorite thing to do for insurance. It’s just something that I was kind of naturally drawn to. We’ve got a really great program now that we write nationwide; we probably have about 20,000 rental properties in there, and a great apartment program as well… So I’ve got to get my own plug in here – anybody looking for single-family rentals or apartment quotes, I’m your guy.

Theo Hicks: So when people are kind of first starting off, there are usually two philosophies. The one philosophy is after they’ve gotten interested in real estate, their main focus is to quit their job and then do real estate full time. And then there’s the other philosophy that’s “I’m going to keep working, and then do real estate part-time, because of the benefits of having a full-time job.” So from your perspective, is your plan to eventually do real estate full time? Or do you plan on doing it with this full-time job? And then whatever your answer is, why do you select that route?

Nathan Britten: I think there’s a line that you cross once you either have a certain amount of funds, or you have a model that you’re going after, and a situational job that would force you to go full time into real estate investing. Insurance is one of those, where – as I was mentioning earlier – there’s a lot of flexibility, a lot of freedom. And that’s what allowed me the two flips that I’ve done thus far. Granted, they were pretty close to my office, but I was spending primarily all my time during the day managing contractors and projects at the houses, and I can still get most of the insurance stuffs done through my phone. So it gives me that kind of freedom.

But eventually, I do enjoy investing in real estate and doing those types of projects more than insurance… But that’s the thing that provides me my money to do that. So there’s a line, I think it’s probably a money line; not to say you can’t go out and raise some money and partner with people, different ways to do that. But for now, what works best for me, and kind of how I see it for the foreseeable future is to keep the insurance boat rowing, and invest in real estate on the side, and kind of have the best of both worlds.

Theo Hicks: What would be your recommendation to someone who wants to get started in real estate, and they have a full-time job, but it’s not like yours, where it’s very flexible. Let’s say they have a full-time job and they’re in an office; they have a non real estate related full-time job. They’re in an office – I guess not now technically not in the office, but they need to be in front of their computer or in an office starting at eight o’clock, and they can’t get off until five o’clock. What would be your recommendation to them to get started?

Nathan Britten: Well, you’re going to have to delegate a little bit; if you buy a rental, you’re probably going to have to hire a property manager. I don’t have a property manager personally, just because I’ve just got one rental and I handle that pretty well, and they’re five minutes from my office if they ever needing anything. You’re going to have to put in some overtime. You can’t be looking for deals and meeting with people during your work hours. That’s a little bit of conflict of interest. The boss probably wouldn’t appreciate that.

But after hours – the internet is 24/7, so you can get a lot of stuff done on the internet, I’m sure you know, Theo. And as far as a lot of those real estate investing clubs – they meet after hours, and you can learn a lot there. Obviously a lot of books and articles and websites like BiggerPockets, where we connected… You can get a lot of information that way. As far as if you were to do a flip, that’s pretty tough, because I personally like to be very hands-on… And I don’t know everything off the top of my head, to tell you, “Hey, go do this and do it this way.” I need to be there. And if you ask me a question, I can answer it, say how I want it. But that’s going to be a lot more hands-on, so I probably wouldn’t go with the full flip… Otherwise, it’s going to either take way too long, or it’s going to be way too troublesome, I think, if you’re not actually there.

Theo Hicks: So obviously, it’s very difficult to do the flip. So if you did not have this insurance job, would you have not done the flip? Or would you have been willing to change to a more flexible job to do flips?

Nathan Britten: I would have found a way. I’m just kind of a problem solver by nature; this just happened to be the way I did it. I think if I was tied to a desk, eight to five, I don’t think I could do that for very long. I would probably be out in I would say less than a month, of that kind of situation. And I think I would have gone more towards drop that eight to five, go full-in on real estate, because obviously, I’m young, I can take a few more risks… I would figure out a way to raise some money and partner with people, and… I’m just a problem-solver by nature, so whatever situation I feel like gets thrown at me, I’d figured out a way to solve it and make it work.

Theo Hicks: Let’s talk about your rental. So you mentioned the first flip – did you go in with the intention of living there and it turned into a flip?

Nathan Britten: Yeah. I actually did live there for a bit.

Theo Hicks: Was it like a live and flip?

Nathan Britten: Yes. I got it on a short sale, which I had no idea what that meant, and I don’t think my realtor really did either. So I wasn’t very well-prepped for it. And I had a lease ending this month, and it ended up taking much longer to get the property actually closed. And once we did, I was like, “Man, we were right on the line here.” [unintelligible [00:11:48].18]  $30,000 and basically a full remodel of this place into one month. And we ended up doing it. And I was there pretty much all day, every day. It was definitely trial by fire… And I really enjoyed it, I thought it was awesome. And then it turned out exactly how I wanted it.

I kind of combined a few different of the entryways into real estate investing… I had a buddy who’s in med school, he was renting from me and basically paying my mortgage for it too at the same time, once we got it finished. So we did that for a couple of years and ended up selling it for basically double for what we had into it. So it was a good deal.

Theo Hicks: And then after that flip, was the rental next, or was the rental the third deal?

Nathan Britten: The rental was next. It was actually a place next door, and I just had been keeping tabs on it. It was a great area. I essentially did my exact same deal of how I bought this house, the first flip, and just bought the one next door. It was in even worse condition, and I had a little more time to evaluate the area… And obviously, now I have my contractors that I trust and know they can do good work, and more of an idea of what it would take to do this. So I got that fixed up and ready. Not as nice as the first one, because I knew I was going to be renting it, but I’ve had pretty much the same tenants in there for coming up on three, four years now.

Theo Hicks: You said it was next door… Was this something that you kind of just waited for it to go on the market? Or did you actively pursue this deal?

Nathan Britten: I did actively pursue it. I knew that they were renting it, and I didn’t like the neighbors. I didn’t like the renters. They were terrible. I think it was a drug house. And it was just a situation poorly kept, and I just reached out to the guy who owned it, found him online and was like “Hey, man. I live next door. I like this house, I’d like to buy it from you.” And it just turned out to be a situation where they were kind of a hassle for him. So we bought it, got some new renters in there and it worked out. But I definitely had to pursue him.

Theo Hicks: Did you use the same contractors on that deal that you used in your first deal?

Nathan Britten: Most of them. They’re not general contractors, but I just know a lot of people that do a lot of that type of work. As for bigger companies, I’d say ‘Hey, man. Do you know anybody that can do this?” And then they would refer me to someone that way. But for the most part, it’s kind of the same crew; a couple of different changes, but kind of the same crew.

Theo Hicks: So those contacts – that was from your insurance shop?

Nathan Britten: I’ve grown up in Oklahoma City my whole life, and my dad was in sales, so he just knows a lot of people around town… And that’s kind of how I came into contact with other people. And then they were nice enough to say “Hey, yeah. This guy’s great for this. Go ahead and use them.” It wasn’t really interfering with their business; he was one of their subcontractors,

Theo Hicks: Circling back to the rental really quick. So you call the guy, was he “Yeah, I’ll sell it to you right away”, or did it take some convincing?

Nathan Britten: Oh, it took some convincing. And I really kind of overpaid for what I thought was market, but it was a deal I saw long-term value in. I knew there was a commercial development going into the end of the street, and really that was my main driver. I was like, once this actually gets approved, then everything on the street – it’s really going to increase the value. So I was like “Well, I’ll overpay now for the market value, and I’m going to hold it for a long time, and I’ll be covering my holding costs anyway…” So yeah, it made sense to me.

Theo Hicks: That was my next question – so eventually he agreed to sell it. How did you determine the price? You said it was a little bit over the market. So a two-part question – how did you figure out the market, and then where did that over-the-market price come from? Was that just what he wanted?

Nathan Britten: I’m not extremely educated in real estate. So there’s a lot of terms, and outside factors, and equations, probably that I’m not familiar with… What I always boil it down to is, okay, what’s our average price per square foot around here of what sold recently, and then what’s on the market below that? And I’m not scared of an ugly-looking house, where nothing works. I think the two that I’ve done are some of the worst that you can do, as far as keeping the existing structure, and not just knocking the thing down and building it back up. So that’s never deterred me at all.

So I really just look for the worst house in the neighborhood, and if the price per square foot is right, then what I’ve done in my past is basically use a construction loan to do the costs. And then I know that my after renovation value is going to be enough to get my equity, and I’ll be set that way. So I boiled it down to price per square foot in the area and tried to find the crappy ones, and then go from there.

Theo Hicks: And what about the rehab cost? Do you typically know that before you buy? Or is that something that’s more narrowed down after you put the property under contract? Or is it not until after you buy it?

Nathan Britten: I can ballpark it before, depending on the projects that are needed. A lot of stuff you can research online and make a couple of calls to your contractors, and if you have the right people come out and inspect it beforehand, you’ll know exactly what you’re going to do before. And I try to jam in as many people as possible. Realtors hate me, because I try to jam in as many people as possible in that inspection period, and I try to extend the inspection period for as long as possible, so that way, I’m basically risk-free in my evaluation of this house, and I can just basically have all my guys come in and bid it during the inspection period. So that’s my plan about it.

Theo Hicks: Yeah. And then the construction loan, the down payment – is that just money you have saved up from work?

Nathan Britten: Yeah. I’ve got saved up from work and we sold our business, I had some funds there… And I just always lived pretty cheap as it is, so yeah. And I’ve got pretty good banking relationships as well around here, so been kind of flexible with me on down payment stuff as well. So it’s really just — if you find a good banker that can do that kind of stuff for you, that’s really, really valuable.

Theo Hicks: Okay, Nathan. What is your best real estate investing advice ever?

Nathan Britten: I could go basic and say buy low, sell high, but… I guess figure out the lowest barrier of entry, with the highest ceiling at the end of the project; that’s probably what I would say, especially just starting out. And anybody who invests in real estate kind of has the same mindset of “I want to make money in a way that’s passive. I want to make money in a way that is a little bit unconventional.” So the end goal, I think, for most people is making money. So if you’re just starting out especially, just find that lowest barrier of entry with the highest upside… So that’s the expanded buy low sell high.

Theo Hicks: Alright, Nathan, are you ready for the Best Ever lightning round?

Nathan Britten: Let’s do it.

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

Break: [00:18:34][00:19:17]

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

Nathan Britten:  Recently read… I kind of went back into the archives a little bit and re-read How to Win Friends and Influence People, Dale Carnegie. And that’s not necessarily real estate focused, but the practices in there of dealing with people – you have to deal with a lot of people in real estate and just in life in general, and learning how to understand people and how to treat them, that’s key.

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

Nathan Britten: So if insurance collapsed… Yeah, I think I would probably partner up with my family and we would probably start a real estate empire. I’d just go full bore at it.

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

Nathan Britten: Probably my favorite was Big Brothers, Big Sisters. Great national organization, still really involved in Oklahoma. It’s just awesome giving back to kids that haven’t been really been given a fair shot, for whatever reason, and being able to mentor them, and just be there for them to talk to them. Really cool, really rewarding.

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

Nathan Britten: Probably my cell phone. 405-802-9930.

Theo Hicks: Alright, Nathan, thanks for joining us and walking us through your journey from entrepreneurship degree in college, to insurance, to real estate. We talked a little bit about how to navigate getting into real estate while you have a job. So if you have a flexible job, then you’ll be able to work on things like flips during the day. If you don’t have a flexible job as a nine to five, and you’re not like Nathan, you [unintelligible [00:20:52].23] at the desk, then you have to put in time after hours, put in overtime, have property management. But if you’re like Nathan, you don’t like nine to five, and you’re young, and you can take risks, then you could just not work at all and go straight into real estate.

We talked about a few of his deals; his first deal with a short sale, a kind of live and flip that he sold for two times what he had into it, and his next deal was a rental that was actually the property next door. So I don’t think I’ve talked about this in a long time, but a really good way to find off-market deals is to buy the property, whether it’s a single-family or massive apartments, buy a property on that same street, because you kind of already have that credibility from owning something there. So they can look at this property –  and I’m sure in Nathan’s case, seeing a dump turned into a really nice property, they’re more willing to sell to someone like that than some random person they’ve never met before.

So he kind of walked us through his business plan with the construction loan, bringing as many people as he can during the inspection period to make sure that the rehab costs are super accurate, having good banking relationships to get those good loan terms, and then to determine the offer price using the average price per square foot on recent sales. So the sales comparable approach, in a sense.

And then lastly, his Best Ever advice was for those looking to get started, find that lowest barrier of entry, so that $30,000, $50,000 house that’s in horrible condition, because it has not only the lowest barrier of entry, but also the highest best potential exit, and the most upside. And then he gave us his phone number; if you want to learn more about him and his business, talk to him, text him.

So Nathan, thank you for joining us. Appreciate it. Enjoyed our conversation. Best Ever listeners, as always, thank you for listening. Have a Best Ever day, and we’ll talk to you tomorrow.

Nathan Britten: Awesome. Thanks, Theo. I appreciate it.

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JF2300: Flipping To Multifamily With Terrance Doyle

Terrance is a full-time real estate investor who founded “The Value Add Real Estate Company” called VareCo. He started his real estate journey in 2008 with two teammates from college, and in 2014 he branched off and started his own company VareCo.

Terrance Doyle Real Estate Background:

  • Full-time real estate investor and founder of “The Value Add Real Estate Company” VareCo
  • Started investing in 2008 with two college friends
  • Portfolio consists of $60M in single-family and Multifamily under management, approx. 500 apartments, and flipped 600 single-family homes from 2008-2014
  • Based in Denver, CO
  • Say hi to him at: www.thevareco.com 
  • Best Ever Book: Best Ever Syndication Book

Click here for more info on groundbreaker.co

Best Ever Tweet:

“With perseverance and discipline you can do anything” – Terrance Doyle


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 Terrance Doyle.

Terrance, how are you doing today?

Terrance Doyle: I’m doing super-well, Theo. I’m excited to be on. This is one of the podcasts I listen to on a regular basis, so I’m really excited to be here.

Theo Hicks: We appreciate you listening and thank you for joining us and looking forward to our conversation. We’ll talk about raising money as we were just talking about before we started the show. But before we get into that, let’s go over Terrance’s background—he is a full-time real estate investor and founder of “The Value Add Real Estate Company” aka VareCo. He started investing in 2008 with two college friends. He did 600 single-family flips from 2008 to 2014, and then transitioned into multifamily, where he now has approximately 500 apartment units. He is based in Denver, Colorado, and his website is www.thevareco.com.

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

Terrance Doyle: Absolutely. So I grew up in Des Moines, Lowa, so just really solid Midwest town, kind of good old America. My mom is an immigrant from Bogota, Colombia. She came to the United States as an exchange student. My dad was a hockey player from Canada, so I like to say they basically met in the middle of the continent from where they both were from. And my dad didn’t end up graduating college, and my mom, English was our second language; even though she did graduate, she was just a full-time mom.

So I just came from a really solid, where we were a middle-class family. But what I feel like I got from growing up was just really great core values of just work ethic, integrity, and just being really self-aware of what was going on around me, and just the amount of gratitude I had for having two really loving parents. I spent a lot of time growing up in Bogota, so I speak fluent Spanish, which has really helped me in real estate. I basically went to school half the year in Bogota from 1st Grade to 8th Grade. I had a really good childhood, was fortunate enough to play college basketball; I like to say that I got paid to sit on the bench and keep the team GPA up to par. So I played college basketball.

And then in college, I started my first company with a couple buddies. It was a franchise, we franchised it and we had some pretty good success. We grew pretty well in the first couple years, so I made a couple bucks. And then in 2008, during the Great Recession, basically, of our lifetime, we started buying foreclosures. I had another college teammate come to me – and this is just an early 2008 – and he was like, “Hey, there’s this opportunity to buy foreclosures.” At the time, I was renting with my two best friends and had no idea what a foreclosure was, I had no idea what real estate was. and I was basically their first investor. We bought a house for $60,000 that I invested, and we sold the house for $96,000, roughly 9 weeks later.

And we were making pretty good money at the time, but I was like, “Wow, that was amazing.” That was like my first taste of real estate. I couldn’t believe how quickly and pretty much easy it was to buy and sell a house and make $30,000+.

So from there, I helped to raise some money, but I was just a third partner. The two guys that brought me in were full-time, they were doing it inside and out, and knew everything. I just really understood the money, so I helped raise the money, helped connect some other operators.

I really had a passion for sports, so in 2009, I became an NBA sports agent and I ended up representing 5 or 6 guys in the NBA, and then 20 to 25 guys overseas, that played in Europe and Asia, and I did that till 2014. And basically, one of the stories I like to share is that my top client that played on several big championship teams and was a really good player, we had made a bunch of money together, and he had a rough season in 2013, and in the summer — I remember waking up in June of 2013 and he had sent me an email basically saying he was going a different direction with his representation, and it broke my heart. This is someone that I had spent so much time with, talked to every day for 5 or 6 years, traveled with… Just as close as you can be to someone.

So that was a really hard time for me, and it really opened my eyes. I was dating my now-wife, we were about to get engaged, and it just rocked my world. And I was basically committed to myself — I didn’t want my income to be dependent on any other person. And that was through a series of events, I ended up deciding to focus on real estate from there. So I branched off from my other two partners. And we had a really great relationship, we still do, but we just kind of wanted to do different things… And that’s kind of where my jump into multifamily started, and just started building it brick by brick.

Then I started investing in Des Moines with my brother and my dad in 2015, and that’s where we have our largest holdings. We have about 400 apartments in Des Moines that we just own ourselves, we don’t have any outside investors there. And then in Denver, we currently have about 200 apartments, and we have started to syndicate in Denver as of 2020. So up to 2020, before this year, I had just funded everything myself and with another partner kind of inside of our company. So we didn’t have LPs, we just had some lenders that lent us money, and a bank, and we funded all the equity. So that’s kind of been my story to real estate. It’s been, I think, the best decision I’ve ever made, and learned a bunch along the way.

Theo Hicks: Fascinating background, by the way. But before I ask you about what you’re doing now with the money-raising, I’m just curious – when you were doing that sports agent stuff, were you also still flipping homes at that time? Were you doing those two things at the same time? Or did you stop flipping and then go into being a sport agent?

Terrance Doyle: I helped to raise money for the flipping, and I was the third partner, I was the minority partner. That’s kind of what funded the sports agency. So anyone that understands sports knows it takes a lot of money to get started. We probably invested close to a million dollars over the course of 3-4 years, from having an office and recruiting… You just spent a lot of time traveling… Basically, recruiting is very similar to raising money, so I think that’s the skill that has kind of translated into what I do now, with meeting with potential investors… But just a lot of time and money on traveling, meeting with families, going to watch their college games, and all that.

So I was still flipping houses. We were doing about 100 a year, and that’s kind of what funded the sports agency. But I was just a minority partner and I didn’t understand it. I didn’t know how to comp a property. I didn’t know how to do construction. I understood basically zero. All I understood was that our returns were phenomenal and you can make a lot of money, but my passion was really in sports and that’s kind of what I focused on. So I spent very little time on the real estate side. But that is what basically made us the most money.

Theo Hicks: Got it. So once you stopped doing this sports agent and you got back into real estate, why did you pick multifamily instead of fix and flipping?

Terrance Doyle: So I did a couple flips on my own… I started from the ground zero, Theo. I even remember calling some of our hard money lenders that we had used during flips, and these are lenders that had lent to us on 300 or 400 properties in Denver, some close friends. I actually introduced them to my partners in 2010, maybe. So these are close friends, and we had done a bunch of deals… And I remember one of the most awkward phone calls was calling them and asking them what their criteria was to lend, and that I was going up on my own… I was basically asking them every entry-level question you can ask. And it was very humbling. And it was kind of ironic and awkward, all at the same time. So I started ground zero, I was meeting with brokers, I was meeting with wholesalers, I had some door knocking going on, and I did about eight to 10 flips on my own, kind of got my feet wet.

I started to learn construction and see that Spanish really helped me on the construction side, so I was able to assemble a team of Hispanic contractors to do the plumbing, the electrical, the framing, the drywall, countertops, the tile… Every single trade. And I was able to build a pretty good crew pretty quickly, and learn — just kind of built an assembly line of doing the same paint, same tile, same materials on every project.

Then it was a buddy of mine actually had a family that wanted to sell four duplexes and a fourplex, and I looked at it just as like 16 small little flips; I was doing 16 bathrooms, 16 kitchens. I was like, “Yeah, let’s do it.” And then I quickly learned that — when we bought it, I think the rents were $600, and when we re-leased it ourselves, we were getting $1,250. So I quickly learned the power of cash flow and the correlation between rents and cap rate, and basically had the equation that every $100 of raised rent in Denver equal $20,000 on the backend of value. So if I was able to raise rents $600, I actually increased the value of that one unit by $120,000. And if I was able to do that four times, I actually made $480,000. So really quickly, I just put it all together and was like, “Multifamily is the best place for me to spend my time and money.” So I still did a couple flips here and there, but by 2015 and 2016, my focus was virtually 100% on multifamily.

Theo Hicks: So you said you started from ground zero – what types of things did you do to kind of educate yourself on this process? You said you were using your own money to do these deals. I know a lot of things that we talked about on this show is brokers aren’t going to necessarily give someone deals unless they know they’re going to close. I know the first deal you got from a friend, but I’m just curious, what were you doing to educate yourself on the process, to kind of build that credibility in the eyes of these brokers and the lenders, and understanding the lending lingo, and things like that?

Terrance Doyle: It’s hard. It took a lot of time and patience. I think one of the things that helped is that I started getting very aggressive in multifamily in Des Moines, Iowa, in 2015. Once I stumbled upon multifamily in Denver, I bought those duplexes for an average of $250,000 and sold them for around $450,000 in the same year, and then we bought that fourplex for $400,000 and sold it for $800,000 eight months later. So I was like, “Man, that was amazing.” But it was kind of a fluke, because it was just a friend of a friend from church, and it was like a family trust estate, and they were selling, liquidating everything, and they just happened to trust us… So that was more of a fluke.

In Des Moines, I started building relationships with a couple of brokers that I knew, that I’d grown up with, and I just said, “Hey, send me every duplex and fourplex”, because that’s what I was used to. ”Send me every duplex and fourplex, I want to look at them.” And I bought my first fourplex in Des Moines for $40,000, and it was a complete dump. I think we had to hire a company that wore hazmat suits to demo it and clean out the sewer line. It was really, really bad. I actually just sold that deal for, I think, $300,000 this year. So we had stabilized it, collected cash flow, we had done the whole thing for 5 years.

So I just started out doing those smaller deals and just really trying to buy very distressed, very heavy value-add, just for the sake of very low risk. Just buying it, what the renovation cost was going to be, what the rents were going to look like…

So I started out like that, with just local real estate brokers just on the MLS. They were friends that knew I had the capital close on $40,000, $50,000 or $60,000 properties… And then actually, the first broker from CBRE that I spoke with was in 2016, and he saw me post a project I’d done on LinkedIn… And he was a new broker. I think at the time, he might have been 23 or 24. Now he’s one of the top guys in the Des Moines. And we just built a relationship from there, and he brought me my first 42-unit in Des Moines. We ended up buying that for $20,000 a door. It was pretty distressed, it was actually a hybrid. It was an extended stay, and it came with some vacant land and a restaurant… It kind of operated like an apartment, and they just paid weekly and bi-weekly, so I just knew that I could figure it out. And then from there, we worked on a couple other deals, we ended up closing a 50-unit a year later, because he saw me close on the 42 unit…

And then from a banking standpoint, what I’ve found is that local lenders are actually very willing to help educate you, and I think that’s one of the tips – if you’re ever in doubt, local lenders can really help you with underwriting, they can help you with connecting with other brokers… So I just basically found a couple of local banks in Des Moines and said, “Hey, this is what I’m trying to do. What would it look like? What kind of loan would you give me for this kind of property? How much cash would you need? What would you want to see?” And they were very helpful in educating me kind of along the way… And I just think it’s one of those things where you’re crawling, then you’re walking and stumbling, and then you’re stumbling less, and then you get to a nice little jog, and then you just run. You’re constantly growing and evolving.

Even now, when I’m speaking with agency lenders, I’m still learning; it’s just a different conversation, there’s different terms with non-recourse loans versus recourse when you’re dealing with local banks… And there’s constantly a learning process, but I think that local banks are really friendly. It’s just a very easy place, I think, to learn, is dealing with local banks. I found that to be a safe place, I guess, in the industry to get help and to learn and to really grow your acumen.

Theo Hicks:  So kind of transitioning into now… I think you said you met the CBRE broker in 2015,  you said?

Terrance Doyle: Yeah, 2015, he reached out to me. Yeah.

Theo Hicks:  Okay. So that’s when you started doing kind of your bigger deals for the past five years, that you were funding all of your own money. And then now you’re transitioning into raising money. So why did you make that decision, unless it was just to get more money? And then maybe walk us through how you’re raising money, where you’re finding people, what types of things you’re saying to them to get them to invest, maybe how much money you’ve raised so far, things like that.

Terrance Doyle: So one of the things I’ve learned this year, Theo, is that I think I was afraid to raise money on deals in the past, and on larger multifamily… Because I wasn’t really sure how it was going to turn out. I still thought things could go bad, and I don’t really want to lose anyone’s money. I’d rather risk my own. So from 2016, 2017, 2018 and 2019, I bought and sold hundreds of apartments in Denver and Des Moines just with my own capital and my partner, and we did well, and I think I got more confidence.

And then as I was posting, I’ve really enjoyed connecting with people on social media. I’ve been able to do some things with Bigger Pockets here in Denver, and I’ve been on numerous podcasts here locally in Denver. So I think just, you know, being able to post and to document the story and the process of, “Here’s what it looked like when I bought it, here’s what I put into it, here’s what the rents are…” I’m really passionate just about — coming from where I come from, with immigrants and a low-income family, and being been able to create really massive amounts of cash flow and equity and net worth, that I want to help other people do the same thing, because I think that’s one of the beautiful things about real estate, is that anybody can do it, if you have the amount of determination and discipline, anybody can do it. It’s one of the incredible things about our country and real estate in general, is that there’s unlimited opportunity for everybody. So I’m really passionate about that. So I’ve just been documenting basically my journey since 2016.

Throughout that journey, there’s a bunch of people that have contacted me and said, “Hey, if you ever have a deal, we’d love to invest.” I never had the structure, I never knew how to structure it, I didn’t have legal documents, I didn’t really want to deal with attorneys… And honestly, in my own world, I just was moving so fast. I didn’t really have the time to sit there and underwrite a deal as if I was having to sell it to other people, and bring on investors, and the subscription docs, and all the things that are needed when you’re going to do it the right way as a syndication.

So I had a mentor that saw me grow with doing these projects, and he had wanted to invest… I think the first time I met him was in 2017, he was an Ex-Morgan Stanley guy. And he, as a friend, just came alongside me and said, “If you ever want to grow and take this to the next level, outside of this mom-and-pop thing, and you want to build a real company that’s sustainable and that outlives you, and that has real income and you can hire a team, you’re going to want to be more of an asset manager, as opposed to just an operator.” And I didn’t really understand what that meant at the time, and slowly but surely over this past year my eyes have really been open to what that looks like as far as looking at myself as more as an asset manager now, as opposed to just purely a multifamily operator.

So he really helped me open my eyes to what that looks like…. And I would say that the first deal that I syndicated was an $845,000 deal in Denver. It was a six-unit. It was an off-market that ended up going to-market. We tied it up maybe like a week before it went to market. And it was $845,000, it had washers and dryers in the units… I had just sold a 22-unit down the street. I’d bought it for $2.4 million and sold it for $3.7 million within 16 months, with my own money.

So I knew the area, I knew the tenants and I knew what the rents were going to look like, I understood the construction of the building, it was the same builder, same kind of building, garden-style, two-level, brick… This one actually had larger units and had washers and dryers in the unit, so I even felt more confident about the rents. So we underwrote it really conservatively, basically the same rents as the building I had just sold, even though these were larger units and had washers and dryers… And we put together a deal memo, and I sent it out to about 20 people and didn’t get any responses. So I was like, “Whoa, what’s going on here? This is a killer deal.” So then I actually had to pick up the phone and I called six people and five out of those six invested.

So when I walked them through the deal, I told him what was going on… The average investment was $50,000, so I raised it and I invested as well. So I think the total raise was $250,000. And we’re actually under contract — so this will be the first indication I’ve purchased and sold… And I was just doing something that I knew I could sell quickly to get confidence of investors to perform, to get some audited financials out there that I could show… Because over the last 5 years, even though I have numbers of properties that I’ve purchased and sold, it hasn’t been audited. We haven’t had really strong bookkeeping, because it’s been our capital. So I wanted to have something I could perform in a short amount of time, get some financials that were verified, and to get confidence of people and to be able to document that process. So we’re under contract at 1.23, so it’ll be roughly a 35% IRR, and it’ll be a really good deal for people.

So that was the first deal that I did. And then since then, I’ve done a $10 million 95-unit in Denver, we’ve closed on a 25 unit, we are closing on a 17 unit, and then we’re working on a 400 unit deal right now that’ll be $25 million; that’ll be the largest raise.

So to date, we’ve raised roughly $12 million of LP capital and we’ll probably raise another 10 by the end of the year.

And it’s been hard. It’s not sexy. It’s very humbling. Actually, two or three weekends ago I had one of our largest investors call me and tell me he was going to pull out of a deal that we were set to close two weeks later, and he had committed $500,000. He called me and just basically said he was really nervous about the pandemic, he was unsure about the market moving forward… He really believed in me, and he’s invested several million dollars in other deals with me, so we have a really healthy relationship… But he basically just said, “Look, I’m really worried. At my age, I don’t want to take unnecessary risk. I don’t think this thing’s getting any better, and I’m going to pull out and I want to give you enough time to go and raise the money and fill my spot.”

So there’s been a lot of hard things that come up, especially during a pandemic, raising money when people feel like the world is crashing, and there’s all these negative headlines that only makes it even more difficult. But I think net-net, it’s been a great learning experience to really force me to sharpen my pencil, get better at underwriting, get better at managing people…

Now we have a staff, we have a full-time CFO, we have a full-time bookkeeper, I have a full-time project manager, construction manager that’s on-site all day, we have a girl that’s in the office every day, she’s kind of the office manager. And so it’s allowed me to hire quality A-players that are really talented and build a team so that we can execute better and do more deals.

I think it was a really great transition, but I don’t think I could’ve done it without the experience from the last 5 years of doing it with my own capital and having that confidence that I can get through virtually anything, with tenants or the city or seller. There’s just so many little wins along the way that give you that confidence to sit in front of someone and just say, “Hey, look, I can execute on this. You can trust me with your capital.”

Theo Hicks: Alright, Terrance, what is your best real estate investing advice ever?

Terrance Doyle: The best advice I think is perseverance. With perseverance and discipline, I think you can do anything. And that’s kind of have been my story.

Theo Hicks: Alrighty. Are you ready for the best ever lightning round?

Terrance Doyle: Let’s do it.

Theo Hicks: Alright.

Break:  [00:23:11] to [00:23:55]

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

Terrance Doyle: Disclaimer, you guys didn’t pay me to say this, but a year ago, I read The Best Ever Syndication Book, and I’ve probably given that to 6 or 7 people. And I think anyone that wants to get into multifamily, that’s the best syndication book out there. I think, from an entrepreneurial standpoint, my favorite book is Shoe Dog by Phil Knight. It’s his autobiography on Nike. So I’d say those are two of the books that have, in the last year or two, really made an impact on my life.

Theo Hicks: Well, we appreciate that, thank you very much. If your business were to collapse today, what would you do next?

Terrance Doyle: I think I would still do something in real estate, but I think parallel to real estate. I’m very passionate about education, and my brother and sister graduated college with six figures in debt and they’re still paying that off, and they actually work for me full-time now. So I’ve just seen the damage that having debt does to being able to have financial freedom and invest in real estate, so I’m really passionate about education. I think I would want to do or build some kind of trade school where we train people on real estate, or even plumbing, electrical, HVAC, and allow people to create a really strong income without having so much debt getting out of college.

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

Terrance Doyle: I don’t know best deal… I’ve done some really good deals. I think my favorite deal is one that I spent three years sourcing in Des Moines. It was in an area that I grew up in, pretty close to downtown. It was a 52 unit deal. I actually had it under contract in 2016, and then I just didn’t understand a deal that complex at that time, so I terminated it. And then afterwards, I was like, “Dang it, that was a killer deal.”

So we ended up purchasing it in 2018, and I basically bought it for $1,2 million. It just appraised for 2.6. I will be able to pull all the capital out; it net cashflows after debt and management, everything, about $12,000 a month. So not only was it a great financial deal, but it was also just a great story of perseverance and staying with the seller and really trying to convince them that we are the right buyer. And it’s an area that I really believe in, in Des Moines. So that’s a deal that sticks out.

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

Terrance Doyle: My wife and I are very involved in our local church. We’re really passionate about our faith and we specifically work with an organization called The Denver Dream Center. We try and help kids that are at risk or come from unhealthy homes, and those are things we’re really passionate about.

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

Terrance Doyle: I’m pretty active on social media, and I have a show on YouTube with Bigger Pockets that basically highlights a lot of our deals. So you can find me on YouTube, you can find me on LinkedIn or Instagram, and it’s just @TerrenceDoyle, my name.

Theo Hicks: Awesome. Terrance, thank you so much for joining us today and walking us through your journey. I think the biggest takeaway people are going to get – because you went into so much detail on how you started, how you got to where you are today – that is really just a grind.

You said your best advice was perseverance and discipline, and you can do anything. And you kind of showed us there really is no shortcut; you have to take it one step at a time, from doing deals with your own money yourself, to educating yourself, to eventually getting to the point where you’re confident enough to raise money from people.

More specifically, you talked about a great way to get education is from local lenders. You can ask them questions about what they’re able to do for you funding-wise, types of financing they have, what they need from you. You said the brokers are a good source for learning how to do things like underwriting, or ask them to send you every deal, so you can learn how to underwrite, and at the same time building that credibility with them.

You talked about the importance of a thought leadership platform, documenting and posting what you’re doing. You met the first broker contact that way, from a LinkedIn post that you did. And you talked about how you generated a lot of interest from investors from your YouTube documentation of your journey.

And then lastly, when you talked about how you were fearful of raising money at first, but doing deals yourself with your own money and doing deals successfully gave you a lot more confidence to be a lot more comfortable raising money from people and using their cash… In addition to the conversation you had with your mentor about if you really want to grow and get big, you have to focus less on being the operator and more of the asset manager and working on the business, instead of in the business.

So I really appreciate our conversation. Thanks for joining us, and 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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JF2289: Shifting Focus to Turnkey With Alexander Cruz

Alexander aka “Xander” is a full-time real estate investor with 7 years of experience. He is also the director of CR of Maryland where they have 350 single-family properties in Baltimore owned and under management and will currently rehab and sell 140+ turnkeys in 2020. 

Alexander Cruz Real Estate Background:

  • Full-time real estate investor for 7 years
  • Partner of CR of Maryland a real estate company
  • CR of Maryland Portfolio consists of 350 single-family owned and under management, sell 140+ turnkeys in 2020,  completed 400+ flips, and 400+ wholesales
  • Based in Baltimore, MD
  • Say hi to him at: https://crofmaryland.com/ 
  • Best Ever Book: Relentless

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Focus and stick to one area” – Alexander Cruz


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 Xander Cruz. Xander, how are you doing today?

Alexander Cruz: I’m doing great Theo, how are you?

Theo Hicks: I am well, thanks for asking, and thanks for joining us today. A little bit about Xander. He is a full-time real estate investor and has been for seven years. And he’s a partner of CR of Maryland, which has a portfolio of 350 single-family homes that are owned and under management. They also project to sell over a hundred and forty turn-keys in 2020, and they’ve also completed over 400 flips and over 400 wholesales. He is based in Baltimore, and you can say hi to him and learn more about his company at crofmaryland.com. So Xander, do you mind telling us some more about your background and what you’re focused on today?

Alexander Cruz: Sure. I’ll take you all the way back, I’ll keep it brief. I got into real estate back in 2011; I actually was hired by chance as an admin position for a broker. Quickly found out I wasn’t cut out for admin work, but I fell in love with real estate really fast. I did that for about a year and then I was an independent agent for about two years. And then that’s when I met my current business partner, who I still work with today. At the time that I met him, he was creating a new company in Maryland to be known as CR of Maryland, which is where we’re both from, we’re both Baltimore residents. At the time, our focus was just fix and flip. So at that time, it was me, Craig, and a project manager, and we were going out trying to buy homes, get them rehabbed, and then sell them.

So that grew a lot over time, we evolved a lot along the way. We went from being just a fix and flip company to focusing heavily on buying and renovating rental properties that we would keep for ourselves, so we built a pretty substantial rental portfolio here in Baltimore, and then of course also grew our property management team to oversee and manage it. And then that led us to last year, where we were reaching our intended limit of how many rentals we would personally have… And somebody said to us, “Well, why don’t you keep buying and renovating them, but instead of keeping them you can turn-key them? So you’re selling the property to another investor, but you retain the management.”

So it kind of clicked in our head and we made a big shift in our company, and that became our main focus. So probably about 90% of our time and energy is put into what we call our turn-key business. And like you said, we’ll deliver over 140 single-family properties this year in 2020 to turn-key investors from around the country, that we will buy ourselves, renovate ourselves and then continue to manage for many years to come. So it’s a really exciting part of the business… And we cover a lot of other aspects, we have a wholesale division, we have a retail real estate team… But our primary focus really is the turn-key business and property management.

Theo Hicks: How did you meet your business partner?

Alexander Cruz: Good question. Also a little by chance. So taking one step back again to the beginning… When I was in the admin role, I wasn’t good at it, but I worked hard and I maintained the relationship with my broker. So she’s the one that about two years later or whatever it was, that introduced me to Craig… Because I maintain a good relationship with her even though at that time I was no longer working for her; I was an agent in her office and she said, “Hey, I’ve got a guy coming in. I want you to meet him.” She had known him for years and she said, “I think you guys will work well together. I want you guys just to meet and talk and see what happens.”

And then over seven years, we became business partners, and depending on the day, our relationship can vary from best friend, to father-son, to business partner, and everything in between. But we have a really good relationship and it was all because of that introduction.

Theo Hicks: If you don’t mind diving deeper into that… So he obviously was doing his thing and you’re doing your thing, you guys came together, how did you decide how to structure the partnership in regards to compensation, and roles or responsibilities and things like that?

Alexander Cruz: Yeah, I would compare it to — not to sound weird, but let’s compare it to dating. So we didn’t go straight to a marriage. So in the beginning, our relationship was almost exclusively like agent and investor. Although we were working very closely together, I would get paid a commission when we would buy something and sell something. That’s how it started. So eventually it evolved, and we quickly figured out which of us was good at what. Again he’s a little bit older than I am, so he already had a pretty good base knowledge, but needed boots on the ground. We really had to hit the streets and find homes, and deal with contractors, and just do all the stuff that happens along the way. I was doing more of, I’ll say, that kind of heavy lifting, and I was the front-facing person, so I would deal with customers, agents etc, and he was more on the back end, building the business. So it was relatively easy for us to kind of define the roles, and then from there it just grew into a partnership, and we re-arranged pay and ownership and everything like that at the time.

Theo Hicks: So you were admin, and then you were a broker, and then you were a part of this company. And that’s when you started buying deals, right? So how does CR fund their deals? Maybe walk us through the evolution of that, so how you were doing it at first, and then what you’re doing now, and then how you got from A to Z.

Alexander Cruz: In total honesty, the blessing of my partner was that he had come from the business world already, and we had a pretty big amount of capital to work with. So for us, raising capital wasn’t the issue, it was more so how to use it and how to use it successfully. So that’s where the challenge of finding deals and having the right strategy in place to profit off of the deals – that was honestly the biggest challenge, because we’re in a competitive market and it has always been that way for as long as I’ve been in it.

Theo Hicks: So when you partnered up, he had a big book of people that he could just reach out to whenever he needed money?

Alexander Cruz: Correct. So I actually — and part of what I skipped in this story was he already had built and was running and owned a successful flipping company in Pennsylvania; even though he was from Baltimore he worked up there, because that’s where his previous business life was. So he was basically coming down here to recreate the same company, and already had a person in place, a PA that was running it day to day. So he didn’t have to be there every day, he spent all his time here, and wanted to do it in Baltimore. So that’s where it got grounded and started. So fortunately for us, the funding was in place.

Theo Hicks: Okay. So the harder part was finding deals to place that capital in. And so what is the best way to find deals, in your opinion?

Alexander Cruz: Yeah. And one thing that just caught my eye as you said that – the hard part was finding deals, but then also just growing, it’s really hard. We went from me, him, and one project manager, and today we have about 28 employees and team members. So this growth is super challenging; you hit that wall over and over again, and you have to revamp and adjust systems, and improve and implement systems. So in the beginning we had no systems.

Aside from that, the question was how do we find deals… So when we first started it was a lot easier, you could still find deals on the MLS pretty regularly. That quickly changed I’d say in 2014 or 2015; that’s when we started doing our off-market marketing is what we call it, so direct to seller marketing. The best strategy I can say is to cast a wide net. There are some months where certain things work better than others, and obviously, if you have the ability to market, you’re going to have to spend money on marketing. If you’re going to do that, I would talk to people who are already doing it and find out what’s working for them and what their strategies are. Don’t try to reinvent the wheel. There’s plenty of guys doing it and probably talking about it in podcasts or wherever else, so you don’t have to start from scratch. But we still do some mail, we still do some skip tracing, we do some outbound calls and texts, we have SEO, we have Pay-Per-Click, we have a Facebook page… Facebook you don’t really get many more seller leads from, but you can still create some awareness. So you have to cast a wide net and then constantly be evaluating your numbers. We look at numbers every single week, so we can tell what’s working, what’s not working and we can tinker and adjust. But you have to be consistent, you can’t just do something for a month and then give up.

Theo Hicks: Have you seen an increase or decrease in leads over the past six months?

Alexander Cruz: It’s been a bit of a wave. When COVID hit in March – I’m sure everybody talked about this, but it got pretty quiet for a few weeks to a month. And then right after that it, seemingly just started to spike back to normal again. I mean, it’s been very consistent for us for the past few months.

Theo Hicks: So out of all things you’ve mentioned over the past, say, six months, what’s been the number one source of deals?

Alexander Cruz: I think we’re getting our best value out of outbound right now. And when I say outbound, that’s calling and texting people. It seems to get the best response. We still do get a response from mail, and what’s interesting is actually some of our best overall deals sources back to mail. And I think a lot of that has to do with that we’re a legitimate operation. So it sounds silly, but our postcard has the Better Business Bureau logo on it, because we’re registered, or affiliated, or whatever it is… And that makes a difference to some sellers. And then they google us and they can see it, “Okay, they are a real company. They have 200 reviews and a website and everything else.” And at that point, there is a comfort level that you don’t always get out of everybody else.

Theo Hicks: Do you think that people can still replicate this professional persona without having to have a full-fledged company? Like what are some things they can do to gain that credibility if they don’t have a company like yours?

Alexander Cruz: Yes, sure. The biggest thing is just professionalism. We’ve talked to so many people over the years that say they called three other investors that never called them back. If you’re going to pay for leads, you’ve got to answer the phone and call people back. And then on top of that, you have to create a follow-up system. There is a local wholesaler we know well that he’s doing a ton of deals right now, and he doesn’t have a big operation; it’s like him and two other guys. But they are meticulous and I would say obsessive about their follow up. That is the biggest part of success, especially in the competitive market. Because half of it is just timing and luck. It’s when does the seller answers the phone, and then once you have them on the phone, are you doing a good job with them?

So you don’t have to have a big operation to establish legitimacy; you just have to treat people right, know what you’re talking about, and pick up the phone and call people back. If you say you’re going to call somebody, you’ve got to call them.

Theo Hicks: Is selling the turn-key deal in the back end a challenge at all, or is it pretty smooth?

Alexander Cruz: I’d say it’s pretty smooth. I don’t want to say that the product sells itself, but the combination of the product. So we have a really good market, the rent to sale price ratios are great, the returns are really high. And then on top of that, we go really crazy on our renovations. So we target homes that need everything, and then we do everything. So it’s as close to new construction as you’re going to get. These are full rewires, they have all new ductwork, brand new roof, windows, plumbing, and then of course kitchens and bathrooms are always brand new. So you have good numbers, you have a really solid product, and then the last part of it is you have us that’s going to properly manage it, and we’re local, we already own and manage well over 300 properties, we understand what has to happen, we have the systems in place, and we have the people in place.

Theo Hicks: What type of returns are these people who are buying these… If I want to buy a turn-key house from you, what should I expect to pay? And then what ROI should I expect?

Alexander Cruz: Our typical price point for a renovated house is going to be between $140,000 and $200,000. And then in that price point — when we build out our portfolio we actually show a 5% vacancy and a 5% maintenance and reserves. So we’re taking 10% off the returns off the top. Even after that, our cash on cash returns is typically 12% to 14%. So they’re pretty strong numbers, and I’m told consistently by potential buyers that our numbers are pretty much on the top that they see as they shop in different markets around the country.

Then the other nice thing is our market actually does have some appreciation. It’s nothing crazy like Dallas and Tampa and some of these other really hot markets; we’re pretty modest, 3% to 6%, but it’s a good number to have in addition to your cash flow.

Theo Hicks: Do most people, most of your clients, are they in Baltimore, or do they just buy it, it’s sight unsee, and they never even see the property and just kind of [unintelligible [15:04]

Alexander Cruz: Yes. Most of our clients come from outside of town. We’re involved in a couple of networks now that that’s kind of what they do, is educate and produce these buyers that are seeking renovated turn-key product and they’re considering areas all around the country. A lot of times they live in California, or Atlanta, New Jersey, just more expensive areas where they wouldn’t buy a rental locally, because it’s so expensive it doesn’t make sense. So we do get a lot of those. We have some local investors, too.

Theo Hicks: Alright, Xander, what is your best real estate investing advice ever?

Alexander Cruz: The best advice ever, and something that we’ve at times struggled with, is to stick with and focus on one area that you’re good at or can be good at, and not get distracted and try to do too much. We’ve all done it as we fall for like the shiny object, and you start getting away from what you’re really good at. So for us, it’s buying and renovating, it’s really what we’re good at. So to spend a lot of time – and I’m sorry if anybody from the retail team is listening, but to spend 80% of our time on the retail team, that’s not where we get our best return on investment, and it’s honestly not what we’re great at. We’re good enough and we have a team in place and it provides us an extra outlet for leads and can take care of people in different ways there, but the vast majority of our energy is spent where we make our most money and can get our best return.

Theo Hicks: Awesome. So are you ready for the Best Ever lightning round?

Alexander Cruz: I’m ready.

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

Break: [00:16:33][00:17:14]

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

Alexander Cruz: I always go back to Relentless by Tim Grover. He was the trainer of Michael Jordan for many, many, many years, and then Dwayne Wade and several other amazing athletes. It’s all about mentality and your mental approach. And it’s applicable in sports of course, but also in business and life. I remember that book a lot, I love that one.

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

Alexander Cruz: I would probably, honestly, hop right into real estate sales. It’s the one thing that no matter what the economy is doing, is still happening. And you have the most control over your own success and you determine how much you work, how many leads you get, you can create that on your own… You really have the most control of your destiny there. So that’s probably where I would head.

Theo Hicks: Out of all the deals your company has done, what’s been the Best Ever deal?

Alexander Cruz: The Best Ever deal… It’s been a couple of homes that we have flipped… We actually have one this year, we just got a really good deal on it, off-market, in the wintertime. And there was an older couple, they needed seven months to move… They didn’t need that long originally, but then COVID, hit so the settlement got pushed out months while they were waiting to move into their retirement home… And we had a good price — they were ecstatic, because they got to be flexible when they moved. The house also had [unintelligible [00:18:27].25] So we then finally got them moved out, but the house was meticulous; so we literally just cleaned it up and put it back on the market, fixed the septic, and the market is stupid hot right now. So we actually made six figures on that. That’s one of our best deals ever.

Theo Hicks: On the flip side, of all the deals your company has done, tell us about a time that you lost money on a deal and then what lessons you learned.

Alexander Cruz: Ah, which ones? This actually ties back to what I said earlier… There’s an infamous street named Allendale, and I bought a house in Allendale that had, I kid you not, a hole in the roof that was probably about seven feet in diameter. And actually, the guy was still living in the house like this for years. So when we finally took possession, the hole and the water damage went all the way down to the basement. So we said, “Well, let’s tear the house down”, it was a rancher, “and we’ll build a two-story house on the foundation.” We’re good at rehab, we’re not good at building.

So really long story short, this dragged on for over a year. By the time we were ready to go, we had to tear the foundation out and build a new one. Then we decided to try and get a variance for the building’s set back lines so we could add a garage; we spent months and thousands on attorneys to do that, and the variance got denied. So we have no house, we have a hole in the ground, we are way upside down at this point, and we still have nothing after a year. Neighbors hate us, “What are you doing with the lot?” and finally, we’re like, “Let’s just sell the lot. We sell to a builder that knows what the heck they’re doing.”

So we finally did, and that nice profit I just talked about on the other deal, is about what we lost on this deal. It was just a total disaster. The lesson is, like I said earlier, stick to what you’re good at. If you don’t know how to build homes, don’t go and try to build a house, especially when it’s going to be expensive. Or if you’re going to do it, find somebody that knows what they’re doing, and you need to partner with them or pay them to guide you through it. Don’t try to reinvent the wheel; find an expert, and rely on them.

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

Alexander Cruz: Sure. So my girlfriend is a school counselor at a title one school locally, and they have a lot of underprivileged kids. So we partnered with a local charity called Baltimore Hunger Project, and they serve kids in elementary school all over the Baltimore area that are what they call food insecure. These are kids that go home from school and might not have dinner that night at all, and might not have breakfast until they get to school the next day. So what Baltimore Hunger Project does is provide meals to these kids every week, and they’ll send them home on the weekends with a big pack of food, so that they’ll have food through the weekend, and hopefully gets them until Monday.

When the pandemic hit and schools closed, the Baltimore Hunger Project, I forget — the number is crazy; they went from serving 600 kids a week to over 2,000 kids a week, and they continue to grow. Because now they’re not going to school, they have no way to get this food. So it’s been a huge operation to expand it, and we’re really honored to say that we’ve been able to help them financially and also with time, so that I can still, in a way, get back to the kids at my girlfriend’s school, and then also other kids in the Baltimore area.

And then recently we also partnered with them to purchase 30 laptops for kids at an elementary school nearby that didn’t have them. It’s a small private school, so they weren’t given like they were at the public schools. These kids just didn’t have laptops, so we were able to provide 30 laptops to them. So that’s an ongoing thing for us. We really are huge in giving back to the kids in the community here.

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

Alexander Cruz: Sure. So the easiest way is to go to crofmaryland.com. There’s a Contact Us tab that’s super easy, you can just do that. Or you can click the turn-key tab and click over to that page, there’s a Sign-Up link there was well that’s specific to the turn-key properties. You can always reach us there. You can sign up on the page to automatically get dumped into our system, and then we’ll reach out to you to schedule a call and discuss things further.

Theo Hicks: Perfect Xander. Well, thanks for joining us. Lots of solid advice given in this episode. A few of the takeaways that I got was how you make a business partner and the importance of not, I guess, burning bridges at any…

Alexander Cruz: That’s it.

Theo Hicks: …any job that you do in the past…

Alexander Cruz: It’s huge.

Theo Hicks: Because you never really know when some relationship that you created will result in, for you, a massive business.

Alexander Cruz: Yup.

Theo Hicks: And then you also talked about how you are finding deals. That at first it was in the MLS, and then now you do off-market marketing. And why it’s important to cast a wide net, because what works one month or one year might not work the next month or the next year. Results are what’s important also – track, and then not try to reinvent the wheel and just kind of see what other people are doing that works for them and do the exact same thing.

So you do mailing, skip tracing, hop on calls, SEO and Pay-Per-Click. And you get the most deals from the outbound call and texts. But the best deals come from the mail. And you talked about why it’s important to be a professional, right? You’re a professionally run company, so you got the Better Business Bureau logo on the mailers and then they look you up and they see all the reviews on your website… So they know they’re working with a professional company, but you don’t have to necessarily be a company to still have these same professionals. And you gave the example of the wholesalers – they’re a small crew, but because they’re meticulous in their follow-up, they’re still able to do a lot of deals. And so follow up is key here.

And then your Best Ever advice was to not fall on the shiny object syndrome, and you mentioned that everyone does it and you gave us an example of your worst deal. But to focus on what you are good at. And then when you’ve got your business and you’re doing the one thing you’re good at, you are kind of studying further within that to focus on the areas that result in the greatest ROI.

So you’ve talked about in the podcast before, a dollar an hour, 10 dollars an hour, a hundred dollars an hour, and a thousand dollars an hour job, and making sure you as a CEO are focusing on those higher dollars per hour jobs, and contracting up everything else. So Xander, I appreciate it. Thanks for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Alexander Cruz: Thanks, Theo.

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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JF2282: Austin Flipsters With Lincoln Edwards

Lincoln is the owner of Equity Boost Real Estate, a real estate investment group based in Austin, TX. He’s successfully completed multiple flips and started a popular Youtube Channel called Austin Flipsters with his friend, Lauren, where they show how they flip houses for a profit: The before, after, and all the drama in between. 

Lincoln Edwards  Real Estate Background:

  • Owner of Equity Boost Real Estate and founder of a popular youtube channel Austin Flipsters
  • Bought his first investment in 2007
  • His company flips 12-20 luxury properties per year and wholesales another 50 
  • Based in Austin, TX
  • Say hi to him at: www.austinflipsters.com 
  • Best Ever Book: How to Win Friends and Influence People 

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Creating our Youtube channel has helped us in many ways to meet investors, create new deals, and grow our marketing” – Lincoln Edwards


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 Lincoln Edwards.

Lincoln, how’re you doing today?

Lincoln Edwards: Hey, doing good. Thanks for having me.

Theo Hicks: Absolutely. Thanks for joining us. A little bit about Lincoln’s background—He is the owner of Equity Boost Real Estate and founder of a popular YouTube channel called Austin Flipsters. He bought his first investment in 2007 and his company now flips 12 to 20 luxury properties per year, in addition to wholesaling another 50 deals. He is based in Austin, Texas, and his website is https://www.austinflipsters.com/.

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

Lincoln Edwards: Sure. Well, like I said, thanks for having me on. I’ve been investing in real estate, like you said, since 2007. That was kind of my first deal, was really just house hacking, renting out to my buddies. I got started seriously investing full-time in 2011 first in commercial real estate, and then in residential redevelopment stuff. And we launched a grand experiment, this YouTube channel Austin Flipsters in 2018, and then kind of have been growing it. And there we take people along for the journey on our fix and flip projects here in Austin, Texas, along with my partner, Lauren. We’re kind of HGTV meets Youtube, and it’s been kind of a fun wild ride getting out there and interacting a lot and building an audience.

Theo Hicks: Nice. So is your main focus on that YouTube channel now, or is the main focus the flipping business and then the YouTube channel is kind of a secondary thing?

Lincoln Edwards: Well, really, our primary business has been our own fix and flips, and in the wholesaling company that you mentioned, Equity Boost Real Estate, was really the original offshoot of that. We’re spending a lot of time just sourcing deals, and there’s just so much that goes into that; once you turn on that marketing machine of generating deal flow, you don’t want to turn it off. So since to build our equity boost and wholesale—once we had all our capital tied up in projects, we work with other investors here in the greater Austin area so that we keep that marketing machine going and we don’t miss out on these opportunities.

And then the YouTube channel, Austin Flipsters, has been kind of another offshoot. I look at that as sort of our marketing for our business, both wholesale as well as the fix and flip. So we’ve looked to find a direction. At first, it was just sort of like figuring out, “Okay, how do we make the most out of social media and see where this thing can go?” And really, it was like filling a void. I started realizing and reading about people that were building real brands and businesses on the back of social media, but YouTube in particular… It sort of blew my mind when I read about a 6 year old kid who was bringing in 100 million dollars a year talking children’s toys… And it kind of blew my mind.

So I’m digging a little bit deeper, and I thought, “Man, I wonder who’s doing this. I wonder who’s the fixer-uppers of YouTube,” and there was nobody doing it. It was a real void. And so we thought, “Well, why not? It could be an experiment.”

And it’s been a great experience, just sort of learning on that platform as we go and, just the amount of connections that it’s opened. Like I said, it’s really been amazing, and it’s basically free marketing. We’re not paying to advertise, we’re getting distributed on these platforms, and a lot of opportunities have come our way just by getting out there. We’ve bought and sold properties from our audience base, we’ve got a lot of wholesale clients… We’re both licensed realtors as well, so we’ve gotten regular traditional clients that way. It’s just been kind of crazy. So it’s Wild West out there.

Theo Hicks: Yeah, so I’m looking at your channel now and you’ve got 90,000 subscribers, and then some of your videos have — a video with 536,000 views… And these are the very, very heavily edited. So do you mind walking us through how you were able to grow such a large following on YouTube?

Lincoln Edwards: Yeah, yeah.

Theo Hicks: Everyone listening, I’m sure they would love to have 90,000 followers and 100,000+ views on their videos.

Lincoln Edwards: Yeah, that was a real learning experience. You know, there are people on YouTube talking about real estate obviously, but it’s really heavily focused on people that want to invest directly, that are kind of more hardcore. And it’s in the weeds…. It’s about the numbers, and refinancing, and that sort of thing. And when we first started out, we thought we would do a little bit of that, and we would make each project sort of drawn out into long episodes, and had a lot of struggles getting started, getting anybody to watch it… And we kind of realized, “Look, there’s not a lot of payoff to come watch us do one small aspect of the house.” So we really doubled down and said, “Well, look, let’s put all our eggs in one basket, let’s do a full HGTV style, highly edited, high-quality video that takes you all the way from purchasing a property to renovating it, and shows you the big payoff at the end.” And that was the secret sauce for getting engagement.

But when you’re starting on YouTube, it doesn’t matter how high quality your video is, at first, nobody is going to watch it. And there’s a million tips and tricks on how to get it out there. None of them seem to work. And then one day I said, “Why don’t we just run our first episode? Why don’t we just run that as an advertisement.” So you can go on YouTube and you can click on a regular ad, and we just had an entire video; it wasn’t selling anything. It wasn’t pitching to subscribe to our channel, it was literally just, “Hey, this is an episode.” We invested a few hundred bucks in just getting it out there, and that got our first few hundred subscribers. And from there, it just took off organically. We never had to really advertise it again, because it’s all based on this algorithm. Once they kind of figure out that, oh, okay, this is getting organic engagement from real people, real viewers, then it actually starts to promote you. But up until that, it doesn’t have really that feedback loop to say like, “Oh, this is a channel people will engage with.” So that was the spark that ignited it, and making the videos as high quality as we possibly can… And it’s just engaging and entertaining. I think that’s been the secret to it taking off.

Theo Hicks: Who’s editing these? Is it you, or are you hiring someone else to do all the editing? I’m assuming you’re hiring someone else, so maybe walk us through your mindset for creating one of these videos. Do you just have hundreds of hours of recordings that you send to an editor, or do you know ahead of time specifically what you want to record? I’m looking at a video here and — is this your wife in the videos?

Lincoln Edwards: No, my friend and partner, Lauren.

Theo Hicks: Okay. So I see pictures of you guys like in a restaurant, I see you guys in the field… I was just going to ask you what the format is for creating these episodes.

Lincoln Edwards: They’re all centered around a house that we’re renovating, obviously… And we’re really just trying to focus on, “Okay, what is going to make this specific house stand out, or a little bit unique?” And it’s been an adaptation, because whereas before we were kind of copying and pasting designs from house to house because nobody would notice the difference, nobody was seeing our channel… And now it’s like, you really have to put out something fresh.

So we basically take, “What do we want to focus on this episode? What do we want to highlight?” And then we kind of batch our filming around check-ins, because it’s a real challenge… You mentioned a full-time videographer and editor, Joey, who is awesome, and is really the star of the show in terms of like getting it produced and getting it high quality… But then we work as a team on the direction, the edit, the storyline, the whole thing. So we batched the shooting; we dedicate one day a week to getting everybody to the projects, filming, and highlighting what we want to highlight, and then we spend the rest of the week actually running our business. And that’s the way to do it. Because at first we didn’t really know what we’re doing. We’re just like, “Okay, let’s literally film everything and anything,” and there’s just way too much footage and it makes the edit near impossible.

Theo Hicks: And then if you don’t mind, how expensive is it to make a video?

Lincoln Edwards: A real expense is our videographer. So he is on a salary; he’d probably don’t want me putting his salary out there, but a market rate salary for somebody like that… And then beyond that, it’s our time and just camera equipment, editing equipment. So you’re talking a few thousand dollars per video.

Theo Hicks: And then, do you do 12-20 flips per year, so those would be 12 to 20 videos per year?

Lincoln Edwards: Yeah, exactly. We’re trying to make at least one video. And we slowed down during the pandemic; we kind of took a step back. We’re gearing back up now, so we’ve got several more episodes that are kind of in the pipeline that we’re working on at the moment.

Theo Hicks: I see you released one six days ago from when we’re recording, and it already has 260,000 views. So that’s awesome. And then you mentioned before that you’ve gotten a lot out of these videos – relationships, things like that. So are you getting deals from these videos? Are you getting investors from these videos? How are these videos, besides the advertising dollars you make on them – how is that helping your fix and flip business?

Lincoln Edwards: So like I said, the episode before last, the one you just mentioned, that came out a few days ago – the one previous to that we bought from a subscriber who reached out to us, sold us that deal, and it was a house that we flipped as well as five vacant lots that we ended up working with another developer on those. And then yeah, we’ve gotten several clients and sold several wholesale deals for our wholesale business.

We’ve got an episode in the works where we’re going to actually highlight a project that we worked with some first-time investors on. We sold them the property wholesale and we’re going to kind of document the progress of that flip in an episode. And we’re also going to showcase – I think in that same episode actually – some clients that moved down to Austin from New York, we met through the channel, helped them purchase their property; it’s not wholesale, just traditional retail, and then we’re helping them remodel part of the house.

So we’re trying to showcase on the channel in a way that’s entertaining and visually interesting the interactions we’re having with our audience, but that’s just part of the strategy with YouTube marketing and one of the ways that it pays back the time and investment in growing that social media.

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

Lincoln Edwards: Wow, superlatives. Man, you guys are all about the best. I think for me, I would advise getting out there and growing your network as much as possible. Even if you’re not doing it on social media, just actually getting involved locally with other real estate investors, wholesalers, diverse [unintelligible [00:13:43].17] and actively growing on a weekly basis.

We dedicate, like I said, one day a week towards marketing, towards getting out there, and the returns on that are sort of exponential. And in today’s environment, it’s the easiest thing in the world to turn on your camera, create an Instagram account and just talking through your journey; you’ll be amazed at the sort of connections that can come just from building a small following and interacting actively in your local market, to deal flow, to joint ventures, to growing a bigger business. At least that has been a key to success for us.

Theo Hicks: Okay, Lincoln, are you ready for the best ever lightning round?

Lincoln Edwards: I am so ready for this.

Theo Hicks: Perfect. Alright, first a quick word from our sponsors.

Break: [00:14:27] to [00:15:09]

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

Lincoln Edwards: It’s a standard, it’s a classic, but I re-read once a year How to Win Friends and Influence People by Dale Carnegie. I’ve got an audible membership. I read a lot of books, but I’ve found re-reading the best ones has an even higher return on investment than reading something new.

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

Lincoln Edwards: I would take six months and do nothing. I don’t think I would rush into anything. I would talk to a lot of folks and I would mostly relax, decompress, and then figure out where the next opportunities are.

Theo Hicks: Tell us about the best deal you’ve done; not money, but one that got the most views on YouTube, like, what the story was.

Lincoln Edwards: Our best deal has probably the least views, because it’s the least entertaining. It’s a house that we just bought — it was 130 grand under market value and we just bought it and relisted it and sold it, and it made for a not very compelling YouTube video. And the one that’s got the most views is just sort of random, and it’s a very traditional fix and flip; one that we got, I think, off of a mailer. It’s got over a million views, and to be honest, I think it’s one of our worst videos. I don’t know how the algorithm works. But I think our latest video, the one you mentioned, that came out a few days ago – it’s tearing it up. I think it’ll eventually become the most viewed video.

Theo Hicks: And what about a deal you’ve lost money on, or maybe a YouTube you thought was going to do really well, but didn’t?

Lincoln Edwards: You know, they say it’s better to be lucky than good, and I’ve been really lucky in Austin, Texas, because you can make some pretty dumb mistakes and the market just goes up and bails you out. So you never want to get that confused, but one of the deals I learned the most on was a deal I made money on. I renovated a house and then a developer bought the house from me, ended up putting a condo regime on the lot and building a second unit on the back of that house. They probably sold it and made $200,000 to $300,000… And that’s not a loss. That’s not me losing money, but that’s definitely an opportunity cost. I learned a lot just watching somebody — I thought I had added the maximum amount of value and I watched somebody come in and make money where I could have easily — you know, I owned the property and I controlled it, and I just wasn’t creative enough, I wasn’t flexible enough and I hadn’t done my homework enough to realize that that was an opportunity. So I really look at that as costing me a few hundred thousand dollars, and I’ve learned from that mistake. Now we do AB condos and we look for the absolute highest return that we can get out of these properties.

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

Lincoln Edwards: When we started the YouTube channel, it really was kind of about our wholesale business and working with brands. But we had so many people reaching out just trying to get started and asking for advice… We started out by just kind of answering those questions, one-off here and there, and it got to be overwhelming. People asked us for an intro course. So we created a House Flipping for Beginners course, and that’s been really rewarding to watch people go through that… And it is a paid course, but during the pandemic, we offered scholarships for people that have been laid off due to Corona, and that’s been really rewarding, helping other people start their journey in real estate investing.

Theo Hicks: And lastly, what’s the best ever place to reach you?

Lincoln Edwards: Well, first, you should subscribe to our YouTube channel. It’s youtube.com/austinflipsters. But if you want to get in direct contact, you can DM us on Instagram @austinflipsters or you can send us an email hello@austinflipsters.com.

Theo Hicks: Well, Lincoln, I really appreciate you joining us today and talking about your YouTube channel. I can’t stress this enough, you guys have to check out his YouTube channel; just from understanding what it takes to make content, the fact that he’s got these 20+ minute-long YouTube videos that looks like there’s an edit every three to four seconds. I’m sure it takes a long time, but it looks really, really good… And I can tell that they’re entertaining. So you guys can watch those and take some tips on how to improve your content as well.

And so Lincoln told us how he was able to grow his channel, and it really just started off with looking at other similar fix and flip channels to see what they were doing, and they identified something that was missing, which was these full HGTV type shows from the beginning to the end, as opposed to getting very detailed, in the weeds in one specific aspect of the flip. And he said that they got their first jump by running the first episode as an advertisement; so not creating a special advertisement for the channel but just advertising episode… Spent a few hundred dollars got their first few hundred subs and from there it grew organically, due to the high quality.

He says that when they’re making a video, they do one per house, and they’ll identify what would be the story or the unique thing about this flip. And then they dedicate one day per week to filming for the project. So whenever they go do the property check-in, they do their filming. And they also have a full time editor and videographer who is on salary to help with these videos.

And he mentioned that he benefits in lots of ways from this YouTube channel, that he’s actually bought homes from subscribers, clients for his program he mentioned the end, wholesaling deals to subscribers, and then being able to, for one example, create a YouTube video of that wholesale deal and how that deal was progressing.

And his best ever advice was to focus on networking, get out there and grow your network as much as possible, whether on social media or just locally, and then make sure you’re dedicating a certain time during the week to do this. So for Lincoln, his business is that one day per week doing the videos. For you, it might be something else, but making sure you’re focusing on networking.

So Lincoln again, thank you for joining us. Congratulations with the YouTube channels. I hope your most recent video surpasses that 1 million mark again. And Best Ever listeners, as always, thank you for listening, have a best ever day and we will talk to you tomorrow.

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JF2281: From Shadowing To Full-Time Investor With Jon Schoeller

Jon is a real estate investor out of Charleston, WV. Over the past 4 years, he has flipped over 150 houses with his partners and he has an additional 100 in his holding company. He owns, operates, and partners in 8 different businesses. His passion is teaching others how they can reach financial freedom while doing what they love. 

Jon Schoeller Real Estate Background:

  • Full-time real estate investor, co-owner of multiple business, and financial coach
  • Has been in real estate for 3.5 years and 13 years in business, coaching for 6 years
  • Portfolio consist of 115 flips and over 100 rent-to-own 
  • Based in Charleston, WV
  • Say hi to him on Youtube at Jon Schoeller
  • Best Ever Book: The subtle art of not giving a F

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Networking, don’t just shake hands, get around successful people and stay around them” – Jon Schoeller


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 Jon Schoeller.

Jon, how are you doing today?

Jon Schoeller: Good. I appreciate you having me on.

Theo Hicks: Absolutely. And thank you for joining us. A little bit about Jon’s background — he’s a full-time real estate investor, a co-owner in multiple businesses, as well as a financial coach. He’s been in real estate for three and a half years and business coaching for 13 years. His portfolio consists of 150 flips, as well as over 100 rent to own. He is based in Charleston, West Virginia, and you can say hi to him at his YouTube channel, which is just his name, Jon Schoeller.

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

Jon Schoeller: Yeah, so I guess real quick, to clear up one thing, I haven’t been in business coaching for 13 years. I’ve been in business for 13 years. I’ve probably been coaching people or helping people with their finances and business for six years now. But yeah, I got started when I was probably 21, 20-21 with my first company, it was a moving company. The funny thing is actually just on my Instagram story yesterday somebody asked if I ever had a full-time job or a W-2 job. And yes, I had several before I turned 21; at Burger King, and Arby’s, and a golf course, and as a mover for another moving company, and a dishwasher… And I got fired from all of them. I was not a very good employee. And I tried to go to community college to get my business degree, because I knew I liked business, but I was very poor in school. I just couldn’t pay attention, couldn’t sit still.

So I was working for a moving company at the time. They were a startup and they were behind on payment. They weren’t managing it very well. They probably hadn’t paid me for two months at this time. And one of their contracts said, “Hey, Jon, we like you a lot. If you go get your own truck, we’ll give you this contract.’ And I took the gamble. I borrowed $5,000 from my best friend at the time, still my best friend and I went bought a truck a couple states away, brought it back, pulled it up the door; it was a mattress company that the moving company was delivering for. I took that contract, and then slowly took pretty much every other contract as they slowly died off, the other company, and built that into a pretty sustainable and pretty substantial moving company. I ran it for about nine years. I sold that to a friend.

I traveled around the US, around the world really, but around the US, living with my wife, who was a nurse and who was doing travel nursing. I was in mini-retirement; that was not sustainable for my mindset and how I can’t sit still; I need to feel useful. It didn’t matter about the money, if I had money or not. I needed something to work on. I had always researched real estate a little bit. I started diving into it more. I tried to dabble in it while we were travel-nursing, but we were travel-nursing in places like Maui, Palo Alto, California, San Francisco, LA… And I had money—we used to joke, we had money, but we didn’t have Maui money.

So from there, we came back home and she applied to [unintelligible [00:06:15].22] school. She got into nursing [unintelligible [00:06:18].02] school, we went backpacking in Thailand and Europe in the meantime. We knew she got accepted here in Charleston, West Virginia, I researched the market before we came. I ran across a few flippers; Steven Andrew, my now partner, was being one of them. I asked if I can meet up with them just to talk one day; that led into me asking if I could shadow him for a couple days. I went in one day to shadow them, never left; three and a half years later we have flipped 120 homes together. They were operational before I got there; they had flipped about 30 or so home before I got there, so 150 in total. We have 100 homes that are rent to own, and we’ve just grown from here. And we have several employees and an office space, and now the thing that is holding us back—well, not really holding us back, but the next step to grow is we’re looking for more private money so we can keep buying more deals.

Theo Hicks: Perfect, Jon. Thank you for sharing your background. Let’s talk about the rent to own first. So most people know what rent to own means. Do you maybe want to explain exactly how you are doing it? Because I know that some people have different rent to own strategies… So what’s your strategy? You find a deal and then you decide that you’re not going to flip it, you’re going to rent to own it… What do you do at that point?

Jon Schoeller: So like I said, I have two partners, Steve and Andrew, and the rent to own part of this business was Andrew’s brainchild. When Steve and him got together, he brought those into the company and we’ve grown it to what it is now. And like you said, there’s multiple ways to do rent to own; it’s also called a land contract. It depends on where you’re at and what you want to call it. It’s interchangeable for the most part, until you get down to the nitty-gritty.

But yeah, you’ve got a couple ways – you can just do straight rent to own if you actually own it outright. You can do a land contract that way too, where you just basically let somebody give you a down payment on a house that you own outright, and you let them essentially pay payments to you, and you give them a year or two to refinance. If they don’t refinance, then you have to move on to the next one, depending on how [unintelligible [00:08:12].23] you are, and you collect another down payment and do the same. Now, the goal was to get them to refinance.

The other option, which we do a lot of, is where you find a house and you can’t flip it, there’s not enough equity, it won’t work for that area, whatever the case may be, and you take over the mortgage and taxes of the original seller and you assume all that responsibility, and then you in return find a buyer to come in and essentially do the same, but for a margin. So if you agreed to buy the house from the first seller for $50,000 and cover their mortgage at $400 a month, you need to turn around and find another buyer for $70,000 and $700 to $800 a month, and there’s your spreads and that’s how you make the money on these deals.

Now, everything I just said is way easier said than done. There’s some legality to it, there’s some complications to it, there’s always the possibility of the bank calling the note, which you should not ever have to worry about if you are paying the bank on time, no reason to call loan due if the bank’s happy. So you do need to have all your ducks in a row to do this. I call this a more advanced strategy. This is not something I tell most people to get started with. I usually steer them towards wholesaling or flipping to get started, or even a small rental portfolio or multifamily. But this is just something that kind of just grew organically, and we’re in a very good area for it.

Theo Hicks: Perfect. So you will rent to own out your properties, as well as you will acquire properties. I actually hadn’t heard that second one before. It’s kind of like a rent to own wholesale type deal, isn’t it?

Jon Schoeller: Yeah, it is like a rent to own rent to own.

Theo Hicks: Yeah. [laughs]

Jon Schoeller: Well, it’s essentially what’s called a land contract where the current mortgage is still in place from the first people. Again, the definitions vary state by state. There is a set definition for them, but people just call them different things. Most people when they think of rent to own, they think their money that they pay each month is going towards the potential ownership of the house, and they’re buying that directly from the owner themselves. But the way we do it, a ton of other people do it, too. In fact, Andrew learned from a guy that has thousands of them. So we’re not the only ones doing this. It’s nationwide. But you do have to be careful because some states are not as lenient as others.

Theo Hicks: Let’s talk about your coaching business for a second. I want to talk about it from the perspective of someone who’s listening, who has some experience in real estate and wants to start teaching others. So they don’t want to have a coach, they want to be a coach; maybe walk us through the conception of your coaching business. Did it just kind of happened organically, or did you set out to say, “I want to start coaching,” and that’s how it started?

Jon Schoeller: A little bit of both. So with 13 years of business experience and my passion for teaching and just educating others, I just do it anyway. Anytime somebody asked me a question, I help. And after a while, you’ll notice you’ll get more and more and more questions, which means that’s your demand. And anytime there’s a demand, you want to give us a supply; that’s how businesses are created. So I knew I had a demand there, so I offered my services.

Now, this is very part-time for me because of how busy I’m. Jon Schoeller Consulting – initially, the idea of that was to do that full-time, just go business-to-business. Well, that’s kind of how I came in with Andrew and Steve, and that grew into a full-time partnership to doing that full-time, so I really couldn’t take on dozens of clients. I have multiple now, but I have to know you’re serious and want the coaching. I’m not as expensive as some of the guru’s, but I’m not cheap either. I know the value I bring and I know if you listen to me, your ROI will be through the roof. But I need to know that they’re serious.

I used to charge $50 a phone call and then $200 to help you for a month, just because it was side money. Well, I don’t want to sound arrogant, but eventually, you don’t need that side money as much anymore; your time becomes more valuable. That’s how everybody should grow and how I tell everybody to grow.

So now if somebody wants it, they have to pay for it. And it could be one consulting call and it could all lead to a six months checking basis to get your business off the ground or corrected. I also come in hands-on on some businesses and I help them straighten out the books.

My strength is finances and strategizing with money. Next would probably be marketing and relationships. And then after that, brand awareness and stuff which could fit inside of marketing… But my main strength is finance. That’s what I teach the most. And I do just coach people on their individual finances. So I call it finance and business coaching all in one. And if you want to do it, you need to just tell people that that’s what you’re doing; people won’t just assume you’re doing it. You need to tell people that you’re doing it. What you charge will be very arbitrary.

Theo Hicks: So a few follow-up questions there… So you said that, it kind of started off where people would ask you questions and then you would be happy to help, you’d answer them. Then you started getting a continuous increase in questions, and recognized that as a demand, and then the supply would be your coaching.

So I kind of want to get more specific, because if I wanna to start a coaching program, obviously I need to have this demand. So where were these questions happening? You weren’t just walking on the street and some random person was like, “Hey, Jon, how do I invest in real estate, or how do I start a business?” So this thing’s on social media? And then where are these people coming from, that are asking these questions originally?

Jon Schoeller: Yeah, so like I ended my last statement with, you have to let people know. That can be as simple as a Facebook post. Just make sure that you have some credibility. Look, if you only been in business on your first business for three months, I’m not saying you don’t know anything, but there’s a lot to learn out here. I probably know about 20% of what somebody that’s 40 that has been doing this longer than me. You can constantly be learning, but you need some sort of wealth of knowledge before you start steering people, especially when you’re talking about their livelihoods. Because at the end of the day, that’s what you’re coaching. If you’re teaching people about their finances or about their business, this is their livelihood. And if you give them the wrong or incorrect information, you could cost them years of their retirement or years of their life of investing in a business and steering it in the wrong direction.

But yeah, social media is huge. I’m all over Instagram and YouTube and Facebook, and I’m constantly giving free advice. And if you give value, you will receive value. And I’ve always believed that. Gary Vaynerchuk talks a lot about that. So I’m constantly giving the advice. And then of course, it’s all general advice. Like, I can tell people to save money, but they don’t know how to save in their specific situation. I can tell people to contribute to an IRA, but they don’t know how to contribute to an IRA for their specific situation.

So by giving away information, I’m still not giving away all of it, because everybody needs their own individual advice. So people who are scared to like, “Oh, if I’m not going to give this information out for free then I’ll never have clients.” That’s not the way it works. Clients have individual needs, and that’s why they come to you. They don’t come to you because you gave general advice. The general advice shows that you have credibility and you know what you’re talking about.

Theo Hicks: So you got to a point you’ve got people wanting to hire you as a coach, you said that now since your time is very valuable, you can’t just take on everyone. So what types of things do you do to screen people to make sure that they actually are serious?

Jon Schoeller: So the first thing I say to somebody is email me, and usually you can knock out about 90% of inquiries just that way, because people won’t take the action to actually email you. The next thing I do is a follow-up email. So I’ll ask questions in that email and I see how long it takes you to respond. So if you send me the email, great, I’ll write back, and I’m somebody who’s very diligent about responding, to my timelines. I don’t know if I’ve ever missed an email for more than 24 hours… Unless, of course, I might go on vacation or out of service or something. But I get back to you. And if it takes you a week to respond to me, you’re not serious.

And look, there is outside circumstances like, “Hey, I got in a car accident right after I messaged you.” So then of course. But if you’re just willy-nilly just answering emails a week later, you’re not going to stay in business very long. So I need to know that you’re serious, and that would be the first advice I would give them back. And sometimes I do that; free advice right away – respond quicker to your clients and to the people you’re networking with. People want diligence, they want you to be on time and punctual.

So once they respond to that second email, I will offer them a service of a consulting call; the consulting call does cost – I usually say like 100 bucks or something like that. That’s an arbitrary charge. I used to charge nothing for consulting. But then sometimes I would set up a call like this at six o’clock and nobody shows up. My time is valuable, so if you don’t show up, at least I have $100 for my time. And it also keeps you accountable. If you pay $100, when you’ll show up, you’ll probably get more value out of it. So I do charge for the consulting call. I give a ton of value in that consulting call. I’ve solved many people’s problems just in that consulting call, which cost me money in the long term. But I do that. And then we just start from there – if you need one more in-depth call, or if you need something like weekly calls for six months, and that’s the call that determines that.

Theo Hicks: Very, very interesting. All right, Jon, what is your best real estate investing advice ever?

Jon Schoeller: Networking, and let me dig into that for a second because I know that that term is very general and overused. Don’t just go shake hands; get around these people and stay around them. I would not be where I’m at today if Steve and Andrew did not accept my invite to come shadow them and I did not reach out to them. So credit on both sides. But if I was not with those guys and asked to shadow them and I didn’t stick around in the beginning for as long as I did, I could be down to two flips, four flips instead of the 120 and the over 20 something that my wife and I have invested on personally.

So get around the people that are doing what you want to do. If you keep talking about it with somebody not doing it, y’all will do that inevitably. Get around the people that are doing exactly what you want to do and stay around them, whatever that takes.

Theo Hicks: All right, Jon, are you ready for the best ever lightning round?

Jon Schoeller: Okay, let’s do it.

Theo Hicks: All right.

Break: [00:17:52] to [00:18:16]

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

Jon Schoeller: It’s hard to say a best ever book, but the two that I suggest lately – because I feel like a lot of people get stuck in their own head, including myself… But there’s two books, I have to beep out both of them, because it’s on a podcast, but it’s The Subtle Art of Not Giving a F*ck and Unf*ck Yourself. Both books are phenomenal. A lot of us carry with us a lot of baggage from being young, or we were picked on in school, self-consciousness issues, we’re not good enough, imposter syndrome, where even if we are good enough, we don’t think we are… You’ve got to get that stuff out of your head. I work on this on a daily basis. I’m not perfect at it, but I think that people read those books and should read them at least every six months or so, or read through the notes. It really helps you get out of your own head and get out of your own way. Because at the end of the day, sometimes we’re our own biggest obstacle.

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

Jon Schoeller: Impossible. They might collapse in the way they look today, but you have to be able to maneuver, you have to be able to bend with the market and move, and that goes for any business. Now, I say impossible because I don’t want to think of that. I guess it is possible. But you need a quick plan B and you need alternate sources of income if you have a business, and that’s something you should be constantly working to. Look – at first, when you start a business, you’re all in, and you should be; you should be completely focused on that.

Another great book is The ONE Thing. Stay focused until you have mastered that thing, and then move on to another one. But you should eventually build alternative incomes and diversify yourself. So if one business were to collapse, you have something else to lean on until you can build that back up again, or move on. But you just need to be constantly malleable with the market and the changing times.

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

Jon Schoeller: The best ever deal we’ve done is probably under contract right now. I don’t want to get ahead of ourselves, but it’s going to be our largest profit I think to date, on a flip. Some people see these profit margins on every flip. But we’re in an area where it could be $80,000 to $100,000 for us, and we’re in an area where that’s few and far between. Our average margin is $30,000 to $40,000 per flip; that’s why we have to do so many. It’s not because of our lack of expertise or our skillset. That’s just the market and how it dictates what you can make around here… Because a medium house around here is 150k grand. If you’re in California, you’ve got to put out $500,000 to $1 million or $2 million. Of course, you’re going to see how our margins, but you’re not going to do 120k usually. So it’s going to probably be about $80,000 I think. [unintelligible [00:20:42].06] extra time because the guy squatted in there… It was a foreclosure auction, but it came out amazing. It’s one of our best before and afters to date, and it’s going to be a good payday.

Theo Hicks: What about the worst deal you’ve done? Maybe a deal you’ve lost money on, and then what lessons did you learn?

Jon Schoeller: So I am fortunate that I’ve never lost money with my personal investments. But we have lost some within the company. And I believe that we’ve left $20,000 on the table before. And what did we learn? Whoa, what didn’t we learn?

This was a couple years ago and the house sat for a little while. But we trusted multiple contractors, we paid contractors ahead of time, we trusted a new project manager too early… It wasn’t so much what we did wrong, I guess, — well, I guess you could say that. We didn’t manage correctly. We trusted what people would say to us and the people that didn’t have any skin in the game for us, and they bit us, and that cost us timeline, it cost us budget, missing material… You name it, we went through it.

And it’s not the only house we’ve lost on. If you’re watching this, if you flip 120-150 houses, you’re going to lose eventually. Now, we’ve lost on a very small percentage. We’ve never lost any investor money, we’ve always made them whole. We’ve done all of our deals on private money. We’ve never touched bank or private money, so we’re very proud of that, and the fact that an investor has never lost money with us in almost six years, three and a half, almost four of me being a part. But yeah, we’ve lost money… And sorry, that might have been too much detail for what you’re asking, but I was just wanting to give some detail.

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

Jon Schoeller: Teach others; each one, teach one.

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

Jon Schoeller: Youtube or Instagram. Youtube, like you said, it is Jon Schoeller, just my name, and then on Instagram, you can find me that way too, but I’m The Frugal Investor on Instagram.

Theo Hicks: Perfect, Jon. Thanks for joining us today and walking us through your background of where you started with your moving company, all the way up to your real estate business today. We talked about your rent to own part of the business and how you follow two rent to own strategies. The first one is for someone to rent to own a property that you own and let them give you a down payment and then monthly payments after that for a certain number of years. And then at that point, they have to refinance or you get to keep all that and then you refresh and do it with someone else. And the other one, which I thought was very interesting, is you find a house and then you rent to own it by taking over the mortgage and the taxes and you’re giving the down payment, and then you find a buyer who will also rent to own it at a higher rate, si it’s kind of a rent to own rent to own strategy, and then what you make is that margin between the down payments and the monthly payments. And so you said that this is a more advanced strategy, but still very interesting nonetheless.

And then we talked a lot about your coaching and how it started organically, where you were out there giving out free information on Facebook, on YouTube, on Instagram, and eventually from this content, people would ask you questions, you would answer the questions, and more and more questions came in the more you did it, and then you identified that as a demand, and then the supply was [unintelligible [00:23:44].13] your coaching business.

So the way to generate interest in your coaching business would be to create free content, but you said you’ll give away general advice for free, and then that’s what builds your credibility. And then they see that and then they’ll work with you to get more specific, individual advice, and that’s where the money comes into play.

You mentioned that—and I actually really liked this, and I totally agree… That when you see if someone’s serious or not, you just say “Email me”, and then most of them never ever even do that. So that kind of eliminates most people right there. And then when they do email you, you’ll send a follow-up email with some general questions and then you’ll see how long it takes them to respond. And if it takes them a week to respond, you also know they’re not serious. And then the third phase is to offer them a consulting call for an arbitrary amount, say $100, to see if they pay that. And then from there, you’ll have a better understanding of how serious they are, and then that could be the one call, it could be another call, it could be a multiple month type of deal. But yeah, I totally agree with this, and that’s why a lot of people get confused of “Why do you give away so much great information for free?” It’s because, well, most people aren’t going to take action on it. You kind of mentioned that with the email.

And then you also said it’s very important before you start a coaching program to actually be knowledgeable on the subjects that you’re going to teach, because people are putting their livelihoods in your hands, whether it be their mental livelihoods or their financial livelihoods, and you need to make sure you’re actually able to follow up and take care of them.

And then your best ever advice was to network. So get around people who are doing what you want to do and then do whatever you can to stay around them.

So, Jon, I really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening; make sure to check out Jon on YouTube and Instagram. Have a best ever day and we will talk to you tomorrow.

Jon Schoeller: Thank you, Theo.

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JF2275: Fast Growth With Dan Perez

Dan is fairly new to real estate investing and yet has already accomplished owning 27 rentals, 5 flips, and also a limited partner in a 32-unit complex. He shares how he initially started from developing proof of concept to building a team and process that have enabled them to scale in a short time period. 

Dan Perez Real Estate Background:

  • Full-time corporate tax accountant for Qualcomm
  • Started investing in 2018
  • Portfolio consists of 27 rentals, 5 flips, and a partnership in a 32-unit complex
  • Based in San Diego, CA
  • Say hi to him at: danieljperez562@gmail.com 
  • Best Ever Book: Tax-Free wealth

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Stay consistent, keep underwriting deals, keep learning because when the right opportunity comes, you will be ready” – Dan Perez


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 Dan Perez. Dan, how are doing today?

Dan Perez: Doing great, Theo. Thanks for having me on.

Theo Hicks: Awesome, well thanks for joining us. A little bit about Dan. He is a full-time corporate tax accountant for Qualcomm and started investing in real estate in 2018. His portfolio consists of 27 rentals, 5 flips, and a partnership in a 32 unit apartment complex. He is based in San Diego, California and you can say hi to him at his email, which is danieljperez562@gmail.com. So Dan, do you mind telling us a little bit more about your background and what you’re focused on today?

Dan Perez: Definitely. Yes, my wife and I live in San Diego, California, and we primarily invest out of state in Indianapolis, Indiana. We started at the end of 2018 and we’ve really grown since then. We went into real estate investing primarily for rental properties, but based on the market we’ve also taken down a couple of flips over that amount of time.

Based on the amount of capital that we have available to us, we actually used the BRRR method to start out using other people’s money to invest in rental properties, buy them, fix them up, add some value and appreciation to the property, so that we can refinance the money out and continue to scale. Our goal going into this was to allow us a bit of financial flexibility moving forward. We plan to have kids in the next couple of years, and our whole goal in real estate was let’s generate some passive income to help us out down the line, if one or both of us would like to stay home and raise our kids, or just provide another opportunity for us; we figured this would be the fastest way to get us there. And as you mentioned, we’re not only in Indianapolis with single-family rental properties, but we are also limited partners in a 32 unit apartment complex in Kansas City, Missouri, which is going well, and our goal moving forward is just to keep generating passive income.

Theo Hicks: Thanks for sharing that. So your first deal, did you use other people’s money?

Dan Perez: For our first deal we actually used a Home Equity Line of Credit on our primary residence. We actually did that on our first three properties; what we did is we want to have a proof of concept where we can work out the kinks and also just be ready for anything that maybe we didn’t think of going into this investment journey. And for us, after going through 3, potentially even 4 deals with our own money, what we did is then we were able to take our concept and pitch that to other investors to give them some comfort around, “Hey, here’s what Dan and Kelly are doing, it’s working. They’ve worked out some of the kinks.” You know you can’t figure out everything on your first couple of deals… But at least we were able to give them a level of comfort that says “They know what they’re doing, their process works, they’re going to get better and better with each deal. We’re ready to invest with them and they’re also making a good return on their investment.”

Theo Hicks: So you said you started in 2018 and you owned 25 rentals and then 5 flips. That’s like 32 and it has been 2 years, so what is that? 16 per year? So one per month. So I’m just curious, are you doing multiple deals at once now? Have you always been doing multiple deals, or did you do one at a time upfront first, and then did multiple deals?

Dan Perez: So at the end of 2018 where we actually spent most of our time was building out our teams. We’re both very meticulous in how we put together what we’re doing, our process and procedures, and then also we’re extremely picky about who we surround ourselves with, because we know that could really make or break what you’re doing in the investment market.

So for us, what we did is we spend about 3 or 4 months just building out our team, meeting people, calling other investors, asking them who they worked well with, who they didn’t work well with, and why. Because everyone works differently with their vendors. So for us, at the end of 2018 we actually didn’t even take down our first deal, it actually happened at the beginning of 2019. But just the amount of time and effort we put into building our team allowed us to scale at a fairly quick pace.

We actually picked up — I believe it was 20 or 21 deals in 2019, and we were doing multiple deals at once. So the first few we took a little while; we had to get comfortable with our teams and we had to figure out, “Okay, how quickly do we want to go?” Because we do have W2 jobs as well. So we didn’t want to take on too much at once. But once we had our team built out and were familiar with their processes, I think our busiest month we took down 9 properties at once and all 9 had rehabs going on. So that was probably our busiest month, it was august of 2019. But by that time we were comfortable with our team, they knew how to work with us, and it was difficult at times but we got through it.

Theo Hicks: How much money did you make have when you first started, that you used for those first 3 deals?

Dan Perez: So we had a home equity line of credit, I believe it was $180,000 to $200,000. But the house is in Indianapolis; you can pick up some solid three-bed, one-bath properties that need some work in the range of $40,000 to $55,000 in 2019; the prices have grown up a little bit since then. So that gave us the ability to take on those homes and the rehabs with our own money. So that is the beauty of the Indianapolis market – it’s very affordable to get into the market, and the rental rates are strong as well. So it is very conducive to having rentals.

Theo Hicks: Yeah. So if that for the first 3 to 4 months you focused on building your team… Who did you bring on? And then since you weren’t actively doing deals that time, and you hadn’t done a deal in the past, what type of things did you say to them to bring them? Or did they just say, “Yeah, I’ll work for you.” Or did you need to sell to them, in a sense, on your ability to actually do the deals, since obviously, they get paid whenever you actually do deals?

Dan Perez: That’s a great point you bring up. It was difficult with some of the vendors I was reaching out to without having done a deal. It is difficult sometimes to get people’s attention, because there are so many investors reaching out to agents, wholesalers, property managers on a day to day basis. A lot of times if you haven’t done a deal, some people  quite frankly do tend to not take you seriously, as compared to if you have done a deal or two. So keeping that in mind, I tried to respect that; I know everyone is extremely busy, and so if they didn’t have the time to work with me at that given time, so be it. I would have to move on. But at least I would try to pick their brain a little bit and say, “Here are a couple of questions. Can you at least help me to answer them or point me in the right direction?” So if I at least got them on a call, I wanted to make the most of that time with them.

But when we started out, I tried to keep my calls as short and succinct as possible, because I did not want to waste their time upfront. I knew as a new investor I could come off with doing so. So what I did is I had a list of vendors that we wanted to bring on to our team, starting with the property manager, deal finders, agents, and wholesalers. We needed to find someone that could provide insurance for us; contractors are in an extremely big one when you are using the BRRR method.

So we wanted to start with our core solid team, and what I did is I just had a generic set of questions that I would ask each, to figure out who worked well with us, who didn’t. But I think what I actually gained the most value was speaking with other investors, who are my competitors as well, in the Indianapolis market… Just saying, “Who’s working well for you?” Because I think that’s where you’re actually going to get the most honest feedback. What I’ve found is anytime you call a vendor, they tend to have pretty good answers for you. And everyone sounds good over the phone, but you get the most honest feedback from the investors that are actually working with these vendors.

Theo Hicks: And then it sounds like the other person on your team is your wife you said?

Dan Perez: Correct. Yup.

Theo Hicks: What advice do you have on making sure that that goes smoothly?

Dan Perez: That’s a good question, Theo. For us, what we did is we said we’re going to segregate the duties, so that we’re not stepping on each other’s toes, but also so we’re not duplicating work. The point of us going into this together is one, we both really enjoyed real estate. But the other thing is we want to make it as easy and seamless for us as possible, so it’s not necessarily a burden. It’s supposed to be as passive as possible, which takes time and effort, but with the two of us, I think it has honestly allowed us to scale a little quicker than maybe if you’re going in on your own.

So what we did when we started out is we said, “I am going to be more on the acquisition site, and managing the property managers, managing the day-to-day rehabs.” Whereas Kelly was going to be more on the back end; she’s a corporate controller, so she’s managing more of the finances, the re-finances on our properties, which is a huge undertaking. She’s managing the books, she’s working with our CPA’s, she’s doing a lot of the business side on the back end. We always joked that I get all the glory up front, and I get the Facetime with all the fun people, and then she’s on the back end doing the difficult task. But it takes a lot of pressure off me and allows me to scale with the deals that we’re taking on.

Theo Hicks: And do both of you have full-time jobs that are structured 9 to 5? Or do you have some flexibility that allows you to work on the business during the day? Or is it just all at night and weekends?

Dan Perez: I would say that our jobs are pretty structured; with both of us being in accounting, I would say our typical hours are about [8:30] to [6:00], or [6:30] at night. So we’re working about 50 hours a week. But what we do is with us being in San Diego, our team being on East Coast time, we’re able to wake up early in the morning, get the necessary emails. We prioritize any emails that we need to get out immediately, we get those out the door before we start our day jobs. And then we tend to sync up with our teams during our lunch break. And then after work, even though our team is probably home and eating dinner with their family, we’re catching up on other emails that maybe weren’t as urgent. So we do fit it in around our day jobs, but in the morning is typically when we get the most done.

Theo Hicks: And how are you finding your deals? You mentioned the agents and the wholesalers – are they the ones who are solely sending you your deals? So MLS and then wholesalers?

Dan Perez: Correct. When I started out, I was looking at Redfin I would say 30 to 45 minutes a day. One, just to see what deals are out there. But two, I was practicing my underwriting, trying to get comfortable with the rent rates in certain neighborhoods. Figuring out what the ARV’s might be, because that’s extremely important for using the BRRR method. So for us, looking at Redfin, looking at Zillow, figuring out rent rates and what homes are going for, I felt like it gave me a competitive advantage, because now I can look at a map of Indianapolis or any market that I’m looking at, I can more or less tell you if it’s a good deal or not upfront.

Now of course things can come up in due diligence, but at a high level I can usually run a real within 2 to 5 minutes and say, “Yes, this is one that we at least want to look into.” But after doing this for 6 to 8 months, and I became comfortable with it, my team started pretty much sending me every deal. I no longer have to look at Redfin or really go on any sites. My real estate agent will send me deals that he knows meets our criteria, and then we’ve made good relationships with wholesalers in the Indianapolis market, and now they send us deals that they know we will take down. And I think that that all goes back to we built the relationships upfront, and we say what we’re going to do, we act on it; we don’t drag our feet. If we liked a deal, we say “Yes, this works for us.” And we deliver on it. I think that the Indianapolis wholesalers now respect us for that, and they know that we will take down deals if we say that we want it.

Theo Hicks: But for your first deals, did you have those yourself on Redfin and Zillow?

Dan Perez: Correct. I would say the first 5 or 6  deals I found on Redfin. I sent it to the agent we were working with at that time, saying we’re interested. He helped us draft up the purchase agreement and then we worked with our contractors and our inspectors to get in there, do due diligence. You might need to go back and forth with the seller a little bit, based on new information that became available during the inspection, to get it to a price that now works for you. And then from there we would close on the deal and start the process. But yes, the first couple were deals that I was just looking all over Redfin, Zillow, Trulia, and I reached out to my agent and said, “Can we please draft up an offer?”

Theo Hicks: Alright, Dan, what is your best real estate investing advice ever?

Dan Perez: I would say my best real estate investing advice would be to stay consistent and take action. I think a lot of people think that taking action only means putting in offers and buying properties, but there are other ways that you can take action. You can really build your team, build your network, you can learn. I know with COVID going on right now sometimes the deals might slow down. So I would say stay consistent, keep underwriting deals, keep learning, and when the right deal pops up, you’ll know that it’s a great deal to take down, and you’ll be ready for it.

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

Dan Perez: Let’s do it.

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

Break: [15:27] -[16:08]

Theo Hicks: Okay Dan. What is the  Best Ever book you’ve recently read?

Dan Perez: Tax-Free Wealth by Tom Wheelwright.

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

Dan Perez: I would figure out what I or my team did wrong, figure out how we can fix it, and I would go right back to doing the same thing I am now, picking up rental properties.

Theo Hicks: What is the Best Ever deal you’ve done? Either in terms of money or something else?

Dan Perez: I would say it was actually one of our first couple of deals. The agent we were working with identified a deal, more or less right up the purchase agreement for us. By the time I got into the office at 9 in the morning, it was in my inbox. I signed it, we had it under contract about an hour later. We were all into the property for $59,000 and it’s renting for $1,025.

Theo Hicks: Something I forgot to ask you earlier… Have you visited the market?

Dan Perez: I have. I’ve been three times and I’m actually flying out in a week.

Theo Hicks: Okay. And then on the other end, tell us about a time that you lost money on a deal. How much you lost and what lessons you learned.

Dan Perez: Fortunately we have not lost money on a deal. But I would say our most unsuccessful deal was a deal that we went into – it was a larger property that we were looking to flip. It was with an agent we were working with in the beginning, that we’re no longer working with. We went into this property as a flip, so we did very nice finishes on this property; it ended up not selling or even getting offers anywhere close to what would work for us. So we actually had to pivot and turn it into a rental property, which we’re not making the rental numbers that we would hope to, but we’re still cash flowing a small amount each month. We will look to either flip it in the future, or figure out another strategy with it. But I would say that that was the deal that went the most in the wrong direction of the deals we’ve done so far.

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

Dan Perez: Speaking to new investors, hands down. I love talking with new investors, helping them underwrite deals, helping them learn the market, helping them build their team… Whatever I can do to help give back. I had a lot of experienced investors that really took me under their wing when I was first starting out, and Kelly and I like to give back by having quick calls or Zoom sessions with newer investors and try to provide as much guidance and knowledge we can to them.

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

Dan Perez: The Best Ever place to reach me would probably be on Instagram. It’s @paperrouteinvestments. I tend to check that pretty frequently. And if people have questions I’m happy to give back to them and help however I can.

Theo Hicks: What types of things do you post on the Instagram page?

Dan Perez: We’re still building it out, but for now, we’ll post our properties that we’ve purchased, the areas that they’re in… Sometimes I’ll post the other interviews that I’ve done with different companies. So we try to post things here and there. I’m still getting better at that; I would say it’s probably one of the weaker parts of our investment journey right now, but in the future we’re going to work to build it out. Maybe post some case studies on BRRR deals that we’ve done, and anything that can provide value to people.

Theo Hicks: Awesome, Dan. Well, thanks for joining us and walking us through your journey of how you were able to build up this rental portfolio while working a full-time job, with your wife of course. So you went over how you’re funding your deals, especially with the HELOC on your home. And then you did that to create a proof of concept with your own money, and then you were able to pitch that to other investors for the rest of your deals.

You mentioned that you didn’t just jump in right away and do deals. Instead, you focused on building the team first, building that foundation, which is what allowed you to scale so quickly. And you mentioned that the best way to find these team members and to pre-qualify them is to reach out to your competitors, other investors, and see who they’ve worked with in the past and if they worked that well, and then ask them why, to make sure that you [unintelligible [00:19:42].29] with them.

You gave us some tips on working with a significant other, which can be really be applied to just business partners in general… Which was making sure you’re segregating the duties, you’re not stepping on each other’s toes, but you’re also not replicating the exact same things; as you mentioned, the breakdown of duties between you and your wife.

You mentioned how you were able to spend time on the business while working a full-time job… So waking up early, working during your lunch hours, and then working at night. And then finding deals upfront, you were finding your deals online, Zillow, Redfin, but you were also looking at those deals to practice underwriting as well. Those were your first 5 deals. And after that your team members, the agents, and the wholesalers you’ve built a relationship with would send you deals, because you were known to not drag your feet and would do what you say you’re going to do.

And then lastly your best ever advice, which was to stay consistent and take action, and realize that action isn’t just putting in offers. Action is learning, action is networking, action is building a team. Those small steps that are ultimately leading you to doing a deal. So Dan, thanks 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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JF2272: Experience Gives Perspective With Arn Cenedella

Arn Cenedella started his real estate career in the 1980s after graduating from the University of Michigan. During this time he invested locally and remotely in Charlottesville, VA and Austin, TX. After 36 years as a broker, he decided to leave Silicon Valley and head to Greenville, SC with his girlfriend in November of 2014. He now has 8 rental properties, 3 subdivisions, 2 condo conversions, and 3 residential lots permitted for single-family development. 

Arn Cenedella Real Estate Background:

  • Full-time real estate investor
  • 34 years of real estate investing experience
  • Portfolio consist of 8 rental properties total 13 doors, 3 residential lots, 15 completed flips, 3 subdivisions, 2 condo conversions, and 4 passive investments
  • Based in Greenville, SC
  • Say hi to him at: www.investwithspark.com  
  • Best Ever Book: Building a Story Brand by Don Miller

Click here for more info on groundbreaker.co

Best Ever Tweet:

“I believe if you approach real estate with a long term perspective, you can ride out the inevitable ups and downs of economics” – Arn Cenedella


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 Arn Cenedella. Arn, how are you doing today?

Arn Cenedella: I am doing great, Theo. Glad to be here and pleased to have the opportunity to talk to your Best Ever audience.

Theo Hicks: Absolutel,y and thank you for joining us. Before we hop into that conversation, a little bit about Arn’s background. He’s a full-time real estate investor with 34 years of experience. His portfolio consists of 8 rental properties (13 doors), 3 residential lots, 15 flips, 3 subdivisions, 2 condo conversions, and 4 passive investments. So he has done it all. He is based in Greenville, South Carolina, and his website is investwithspark.com. So Arn, do you mind telling us some more about your background and what you’re focused on today?

Arn Cenedella: Sure, I’d be happy to. So like many of your listeners, I went to college, I planned to become a scientist or an educator, got a master’s degree in chemistry from the University of Michigan, but then I went into the real estate business back in 1978. So I had the good fortune to grow up on the San Francisco Peninsula, basically above Silicon Valley, and went to work for my father who was a great mentor, taught me the brokerage business as well as the investing aspect of real estate… And I had the good fortune to work there for 35-40 years in probably one of the best real estate markets in the world.

Theo Hicks: So you have seen a lot of market cycle ups and downs, so I think maybe a good place to start would be how do you see what’s going on right now, since we’re recording this on August 19th… So how do you compare what’s going on right now to previous recessions? And maybe kind of talk to us about the mindset you have after experiencing a lot of these recessions, as opposed to someone who just started investing in real estate in 2009 or 2010 and has only experienced growth, and hasn’t seen the other side?

Arn Cenedella: That’s a great question and hopefully I can help your listeners feel okay about what’s going on. So certainly, COVID is something new to me. I think it’s new to all of us. But I can tell you, I bought my first house in 1980 and paid 11 and 3 quarters percent on my mortgage. And I was happy to get 11 and 3 quarters; it seems like a lot today, but 6 months later rates were up to about 16%. Been through the dotcom boom, through the dotcom bust, various cycles, Resolution Trust… Not many people remember the S&L crisis, I believe, in the early 1990s.

So there have been various cycles, and in general, I’m an optimistic person and I believe if you approach real estate from a long-term perspective, you can ride out the inevitable ups and downs of economics and just what happening in the world. So I’m optimistic about the future, I’m continuing to invest. Fortunately, my rentals have done well on collections and have had no issues there, and I think by and large from what I understand, rent collations on most residential multifamily properties has remained pretty good, even though the COVID issue.

Theo Hicks: So kind of three options – you either don’t do anything, you don’t buy, you don’t sell, you just chill. The other option is to sell something or all of it. And the other option is to buy. So based off of your experience again with these previous real estate cycles, what are you doing and what would be your advice to people?

Ard Cenedella: So first of all I would say, “don’t panic”, that will be rule number one. And I think hunkering down, getting a read on what’s going on is good, but I also believe that there are always opportunities to buy and sell, depending on your particular situation. I would say if you’re in good real estate investments, cash-flowing, you’re properly capitalized, you can ride out the downtimes while still be looking for opportunities. Right now, what I’m doing is I’ve started to transition my actively managed rental portfolio into passive investments. So over the last 6 months I’ve probably made 4 passive investments in multifamily syndications, primarily in the Southeast, but also elsewhere in the United States. And I generally sold one of my rentals and made a passive investments. So I think there are opportunities to transition one’s portfolio at any time, and I think it’s just a matter of keeping your wits about you and evaluating and making good decisions.

Theo Hicks: Before I ask you about the passive, you’ve mentioned something about– you said if you approach real state from a long-term perspective, then you’re going to be able to ride out the ups and downs. You kind of mentioned cash flowing and being properly capitalized… Is that what you mean? …that you buy properties for cash flow and don’t be over-leveraged. Is that what you mean by long term?

Arn Cenedella: Well, what I would believe is if you invest in real estate and you have a long-term perspective, which is 5 to 10 years, I would say the overwhelming majority at the time those investments will prove to be a positive factor in your life. Certainly, you don’t want to get over-leveraged, because if you are in a situation where you’re over-leveraged, you may be put in the situation where you have to sell when the market is not ideal, and I believe people can get themselves in trouble that way. But if you have good, solid properties, properly leveraged, that are paying for themselves, then yes, time is on your side and you can just ride out the down cycle.

Theo Hicks: So as I mentioned in the intro, you’ve got your active investments, but you also have passive investments. You said that you made 4 passive investments recently. So is this something that you’re doing because you just don’t want to be an active investor anymore, or you’re doing it because you think that’s it’s a better use of money being invested passively in this larger apartment syndications, as opposed to doing your own deals?

Arn Cenedella: It’s a great question, and I would say it’s a combination of both. I’m 65 years old now, and I do not want to be as involved in the day to day management of the property. There are a lot of things I want to do. I have several passions that I enjoy. I’ve loved actively managing my real estate portfolios over the last 30 years. But I’m just at a point in my life where I want less day-to-day responsibility.

So I think freeing up my time is one part of the answer. The other part is – generally coming from the San Francisco Bay area, most of my investments have been more in appreciation markets than cash flow markets. And in looking at my return on my equity on a cash flow basis, it is lower than what I can achieve through the multi-family syndications. So my purpose of transitioning my portfolio is to free up my time and also increase my cash flow. So those are the two main things. And I’d like to help other investors who have a similar history to me. I’d like to help them perhaps consider transitioning into more passive multi-family investments.

Theo Hicks: Are you able to do these passive investments? Because you said that you sold a property. Is that a 1031, that is the passive investment? Is that kind of like your strategy?

Arn Cenedella: It’s pretty difficult to 1031 into a passive investment, so I have to pay Uncle Sam a little bit of money. But we pay Uncle Sam on every dollar we ever make, and real estate gets taxed less than our typical ordinary income. The other thing that will help me is most of these syndications I’ve invested in have a large first year– I believe it will be called bonus depreciation… Where in the first year I’ll receive a K-1 with a relatively sizeable tax clause. Since I am considered an active real estate professional, I’m able to apply that passive laws against any other income. So in my particular situation, I’m hoping the bonus depreciation, which by the way expires I believe in a year or two, will be used to offset some or most of my capital gain. Yes.

Theo Hicks: I just interviewed someone – he’s a GP, and he had a deal under contract before the COVID outbreak, I think he said February. And then COVID happened and he lost the previous lender, and he was able to get an agency loan with a really low interest rate, but he was also able to negotiate a pretty large discount in the purchase price. So from your perspective, when you’re analyzing these passive investment deals, and I’m assuming they’re doing the same thing, they’re getting a discount in there, and they’re assuming some sort of reduction in income that first year or something, do you think that the returns that you’re seeing projected are going to be lower than what you actually see once things turn around?

Arn Cenedella: Well, that’s a 64 million dollar question. And of course, it all comes down to the skill and integrity of the operator, of the syndicator, and how he or she goes about his or her business. So I would say most of the passive investments I’ve made, price reductions have been able to be negotiated. Probably not as big as people think. What I’m kind of seeing is maybe 3, 5, 7 percent off pre-COVID pricing. So there’s no fire sale, at least not yet; there’s no panic. So I believe the prices have been negotiated down a little bit. I think the underwriting has been tightened up. I’m looking at one possible investment now where the operator’s projecting a decrease of $100,000 year one in rental income. So not only are they projecting flat, they’re actually projecting a decrease, and I appreciate the integrity of an operator who does that.

I think what counterbalances is it all out is the unbelievable interest rates you can get on agency debt. One of the partnerships I’m in I believe we got 2.88%, ten years, with maybe 3 or 4 years of interest only. So I believe the rates — and again, I bought my first house at 11 and 3 quarters. So when you’re talking 2.88%, 3%, it’s like they’re giving money away. So I think the financing available now compensates for the potential issues. Eventually, we’ll work our way through COVID, and I’m optimistic about the future. So even with these passive investments, I’m looking more 5, 7,10 years down the road, where am I going to be. Not as concerned about what’s happening 3 months from now.

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

Arn Cenedella: My Best Ever real estate advice – and this may go counter to many of the people on your podcast – would be slow and steady wins the race; consistent investment over time will lead to financial freedom. In my investing, I focused on solid [unintelligible [00:15:43].28] base hits. I’m not interested in the grand slam. I kind of don’t trust that. I’d rather do it slow and steady. So I believe there’s kind of a logical sequence to investing, to gaining knowledge, and that sequence is beneficial over time.

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

Arn Cenedella: I think so.

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

Break: [00:16:11][00:16:50]

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

Arn Cenedella: Well, since I’m starting a new investment group, Spark Investment Group, the best book I’ve recently read is Building a Story Brand by Donald Miller, which gives some good advice on how to best brand oneself and so forth. So it is a fascinating book and is been a big help for me.

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

Arn Cenedella: Honestly, and I say this without trying to be flippant, I’d probably go play golf. Because after all isn’t the point of this real estate investing, passive investing, is to create a passive income, to create financial freedom.  And over four decades of real estate investing I’ve been fortunate enough to be able to do that. So I’d probably get bored playing golf at a certain point, and then maybe go back to selling houses like I did 20 years ago.

Theo Hicks:  Tell us about the Best Ever deal you’ve done?

Arn Cenedella: The Best Ever deal was a flip that a wholesaler sent me. The property was an old beat-up house, fairly good size, but it was on an acre. And I had a good feeling it could be subdivided, so I bought the house, we subdivided the land, created two additional lots, fixed up the house, sold that… I sold the two lots I created to builders, and probably had about a 30% return over 18 months. So that was one of my better ones.

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

Arn Cenedella: Well, I’ll return to golf; so I’ve played golf since I was 8 years old, and it’s a passion of mine, so I now volunteer at the First Tee of the Upstate, which introduces young kids to golf, but even more importantly, uses golf as a way to instill core values, principles, character, integrity, honesty. So it’s a great program and I love being involved with youth in sports.

Theo Hicks:  And lastly, what is the Best Ever place to reach you?

Arn Cenedella: Best ever place would be my cell, 650-575-6114, or my email which is arn@investwithspark.com.

Theo Hicks: Alright Arn, thanks for joining us today and proving us with your wisdom on how to–

Arn Cenedella: Not sure about that, but okay. [laughter]

Theo Hicks: …how to continuously thrive in real estate through the various ups and downs. So you talked about you bought your first house at an 11.75 interest rate. And then you said that it actually went up 16. I knew that but it is just funny, because now you say that you’re in a deal where the interest rate is at 3%. So it’s a huge difference between what you started off, to where you are now. And you said you went through all the various ups and downs and that it’s really about having a long-term perspective on real estate, thinking in terms of 5, 10 plus years, as supposed to thinking what’s going to happen a few months from now.

So you said that it means not being over-leveraged and it means making sure the property can at least pay for itself, so you’re not forced to sell. In regards to what’s going on now with COVID, you said that hunkering down is totally fine, but you also think that there are always going to be opportunities, to sell, depending on where you’re at in your business. And you mentioned that right now you’re transitioning from active to passive; you made 4 passive investments in the past year… And that the reason why is: one is to free up your time, but two, because a lot of your deals are in this appreciation markets.

The cash flow that you get in these markets is not nearly as high as the cash that you can get on these vacation deals, so that’s why, as you mentioned… And sometimes it makes sense to buy, sometimes it makes sense to sell, or do both during these types of economic environments.

We talked about what these sponsors are doing to conservatively underwrite their deals, price reductions, underwriting, lower year one incomes compared to T-12’s, and then the fact that the interest rates are just insanely low.

And then your Best Ever advice was, “The slow and steady wins the race.” Being consistent over time, following that logical sequence will result in financial freedom. And that you’re a base [unintelligible [00:21:11].18] kind of guy as opposed to the home run grand slam. You don’t trust the grand slam; you like the consistent, steady investments.

So, Arn, I appreciate you coming on and speaking with us today. Best Ever listeners as always thank you for listening. Have a Best Ever Day and we’ll talk to you tomorrow.

Arn Cenedella: Thanks, Theo.

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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JF2268: Nice Guys Buying Houses With Terry Burger

Terry is a full-time real estate investor with 19 years of real estate experience and founder of “Nice guys buying houses”.  Terry will be sharing some great information around how to find leads, to strategies in how they separate themselves from other real estate companies such as focusing on the Better Business Bureau and focusing on a specific customer. He also was open to sharing how he comps markets by focusing on micro-markets, schools, and other ways. 

Terry H Burger Real Estate Background:

  • Full-Time real estate investor
  • 19 years of real estate experience and 5 years of investing
  • Portfolio consists of 6 rental properties and flips 30-40 per year
  • Based in Atlanta, GA
  • Say hi to him at: https://www.niceguysbuyinghouses.com/ 
  • Best Ever Book: Traction

Click here for more info on groundbreaker.co

Best Ever Tweet:

“If you have that warm fuzzy feeling when you find your first deal but not sure about the numbers, then you need to be careful” – Terry Burger


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 Terry Burger. Terry, how are you doing today?

Terry Burger: I’m doing great, Theo. Thanks for having me on today.

Theo Hicks: Absolutely. Thanks for joining us, looking forward to our conversation. A little bit about Terry. He is a full-time real estate investor, with 19 years of real estate experience and 5 years of investing. His portfolio consists of 6 rental properties and he does 30 to 40 flips per year. He is based in Atlanta, Georgia and his website is niceguysbuyinghouses.com. So Terry, do you mind telling us some more about your background and what you’re focused on today?

Terry Burger: Yeah, no problem. So I am a trained classical musician, turned middle school band teacher, turned realtor, turned real estate investor. So I spent about 9 years teaching public education and then went into residential realty or real estate for about 16 years, and then made the transition around 2013 to investing full-time. And that’s a little bit of my background. Kind of my claim to fame is my superpowers comping property and knowing what the consumer wants.  I have probably walked through 10,000 properties, I probably had 5,000 moms in my car at any given time. So I kind of feel like I’m the house whisperer when it comes to knowing what the retail consumer wants. So that helps me in my flips for sure.

Theo Hicks: Well we’ll definitely talk about those two things. So the comping properties and the knowing what people want. But before that, so you do flips and you do rentals. So which one is your main focus?

Terry Burger: So we flip to buy and hold. We like to generate cash through our flips and then we can save the best ones with the most cash flow as a rental properties. So we’d pick up two, maybe three a year, if we can.

Theo Hicks: What’s your main way to generate leads?

Terry Burger: Let’s see, the main way to generate leads is direct mail at this time; we buy some online leads as well. Those are our two primary.

Theo Hicks: You buy online leads. Do you buy like lists?

Terry Burger: Yeah. So there are companies out there that have great organic traffic. So you could either do Google pay per click – we have done that before – and drive traffic to your own site. Or you have these companies out there that have really great SEO and they appear in top search results in just about every market and they get plenty of leads. So we basically just pay for leads from them.

Theo Hicks: Interesting. So you have like an ad on their website? Like if I go on a website, on the corner it will have an ad for you buying houses, or how does that work exactly?

Terry Burger: No. It’s not an ad at all. It’s kind of like they go in, and because these companies have national SEO presence they just go in, and let’s say somebody clicks Greenville, South Carolina, I have a house to sell in Greenville, South Carolina, then I buy that lead.

So if you think about how Service Master does it for storm-damaged and water-damaged houses, it’s just a national website and it’s a lead collection service, and then there are a multiple of people that buy leads. I can give you the company names if that would be helpful, Theo.

Theo Hicks: So you buy it and then they will send you a list of people who said “I want to sell my house in this market”?

Terry Burger: Yup. Let’s say Suzy Smith hits their website, and they know that I’m going to pay X amount of dollars for this lead, call it a hundred bucks, a hundred and fifty, two hundred dollars… Then they send that lead over to me and they just ping my credit card per lead.

Theo Hicks: Okay, and what are some of the websites that do this?

Terry Burger: There’s a needtosellmyhousefast.com, is the most common one, and then fasthomeoffer.com is the other. A lot of people, I think, have heard of fasthomeoffer.com.

Theo Hicks: And then for the direct mail, what’s your criteria for that? What type of people are you mailing to have you found to be the most receptive to direct mail? And then what type of messaging are you putting on these letters?

Terry Burger: I think the best messaging is just consistent messaging. What is it that your company has that might separate you from other people? So we have done a really concentrated effort to get Better Business Bureau reviews. So we leverage those Better Business Bureau reviews against our competition, and we hear this all the time, “We went with you because you were BBB rated,” or “We called you because you were A+ rated on the BBB.” That seems to help us a lot, so that kind of messaging – we get that out all the time. And then in terms of the type of person that we mail to, just like everybody else, they need to have equity, and we’re just trying to figure out who is motivated.

We have personally, I don’t think, ever bought a house from anybody under 40; so we go 40 and up. We just kind of look at our avatar customer, who is it. The problem with us sometimes is – I remember buying a house from an attorney couple one time. So typically he wouldn’t be our avatar customer, but they hated realtors. Really, honestly, Theo, that’s really what it boils down to. If they don’t like real estate agents, they call us. And I think from an investor’s perspective, a lot of times that’s what makes the investor a really good option for people, is because a lot of people have this bias against real estate agents sometimes. And that usually stems from a bad experience along the way.

And look, I was an agent for 17 years, I sold over a thousand houses, and I was a really good agent, but did I make everybody happy all the time? No, I didn’t. So that one person that I didn’t make happy, or they didn’t have the experience they thought they would have, they may reach out to an investor.

Theo Hicks: So, you’ll have on the direct mailing a stamp that says “A++ Better Business Bureau”? [unintelligible [00:08:33].23]

Terry Burger: “And if you hate realtors, call me.” No, I don’t put that on there.

Theo Hicks: Well it’s funny, because I talked to people before who would put that they’re an agent on there, and say that’s like a benefit to them that they’re an agent. But it’s interesting, they said sometimes people don’t even like agents. That could potentially hurt you as well. So thank you for sharing that.

So you send out your direct mail and leads start coming in. Now you said that you are the master comper. So how are you able to determine what the offer price is without having to go and inspect every single property?

Terry Burger: Yes, so during COVID-19 we have switched over to in-person and phone appointments, and I think a lot of people have shifted that way, right? So our biggest obstacle is how do we evaluate the property when we can’t see it. So, I’ll tell you what we do.

Let’s say we put a house under contract over the phone.. Then of course I teach comping to my team so they kind of get how to comp a property; we could talk more about comping if you want, but the process that we used to do it virtually like this, especially during their phone appointment era that we’re in, is we send our home inspector there and we also send our photographer at the same time.

So we give our photographer a big checklist of things to look for, in addition to just looking for problems in general. So our home inspector is there going all over the house, and it takes a couple of hours for him to do that. And then our professional photographer is in there with wide-angle lens and  micro-lens, and she’s shooting videos, she’s shooting photographs, and she sends them back to us in high resolution. So I can get on my Mac or whatever and I can zoom in really, really tight on things; as long as you get that stuff back in high resolution, you can zoom in on something really detailed without having to be at that house. And that’s how we do it right now.

Theo Hicks: Okay, can we take a step back… Because this is what you do after you got it under contract, but how do I know what that contract price is, how do I know what to offer?

Terry Burger: So, the way we comp properties is our philosophy is we comp in micro markets. So if you think of the city of Greenville, South Carolina, that’s kind of micro-market to the whole country right? But it’s more of a micro-market regionally… So we drill down a little deeper and say, “Okay, this neighborhood right here,” Judson Mill for example, “is its own micro-market. It has its own set of values, its own set of people that live there, they buy there, and all that”, right? So one of the easiest micro-markets that we use are main roads; we won’t cross over a main road, we’ll stay within the boundaries of main roads and we’ll try to stay inside of a little neighborhood pocket that we know is how are we going to grab our comps.

The second trick that I teach people – this is an old agent trick… You’re going to at your values based on the elementary school. So you could do a zip code search which gets you kind of big picture, you could do an elementary school to search, which kind of drills you down a little deeper… Or if you want you can go into the MLS, or PropStream or whatever program you’re using, and you draw out a little polygon based on the area that you want. So we employ the polygon method, and we employ that elementary school method, particularly when you’re in the suburbs.

Theo Hicks: And then is that… Is the number like dollar-per-square-foot? Is that what you are looking at?

Terry Burger: If we can find houses that are all very very similar, we look at the values and we can ballpark it. But yes, very wildly in square footage, which in some of our areas they do… Then we are looking at 2 values – the market value cost per square foot, which would mean a normal residential retail sale, and then hopefully sometimes we can find current condition comps of houses that needed to be fixed up and sold in the MLS.

Theo Hicks: So my second question, how do you know without seeing the property if it is going to need $5,000, $20,000, $30,000 in renovations?

Terry Burger: We use a home visit sheet that I came up with. It’s got a lot of the numbers on it; so if our acquisitions manager is looking at the comps and they see that the ARV includes new kitchens and it’s basically flips, if they see that, then we are going to estimate our rehab based on those comps. We only look at the comps when we estimate rehab.

Theo Hicks: So you just assume that if the comps have a new kitchen, then you’re going need to put in a new kitchen; if the comps have whatever else, you’re going to need to do that. Okay.

Terry Burger: Yep. It’s interesting, in some markets they just paint the cabinets white. They don’t put in new kitchens. In Atlanta a lot of new kitchens go in, but in Greenville, they just paint the cabinets. So we look at those comps and go, “Okay, two out of three of the comps have painted cabinets. Why don’t we just paint the cabinets?”

Theo Hicks: What about the major cap-ex things like a roof, or painting the outside a house, air conditioning, HVAC – how do you know if you’re going to need to replace any of that stuff?

Terry Burger: So in our home visit sheet, HVAC for example – is it older than 10 years? If it is, we automatically replace it; we budget for a replacement. The same thing with the roof – if it’s a 30-year architectural shingle and they’ve got 20 years on it, we’re going to budget to replace. If it’s a 15 and has 10 years on it, we’re going to budget to replace.

Theo Hicks: Who does the home visit? Is someone from your team doing this? Or are they sending this to the owner to fill out?

Terry Burger: So our lead intake people do it during that screening call that comes in, and then our acquisitions department goes a little bit deeper on the phone, asking them questions like that.

Theo Hicks: So the next thing that you’re an expert in is knowing what a buyer wants. So if you’re flipping most of these, and you’re keeping some yourself, what do you mean when you say that you know what they want? And what step in the process does that come into play?

Terry Burger: Well, I’ll tell you a funny story… Clients are always asking me, would you buy this house? And that’s one of the most popular things real estate agents get asked by their clients. Would you buy this house? And over the years, what I’ve seen, particularly in the residential suburbs, – so I’m in the North West suburbs of Atlanta, and then we’re in the suburbs of Greenville, we’re also in downtown Greenville as well… But I asked three words; so I said, “If I’m sitting on my deathbed in a hospital and somebody asks me what’s the secret to real estate, I have 3 words for you: backyards sell houses”, period.

So in Georgia, for example, we are in a very hilly area, in North West Atlanta, kind of the foothills of the North Georgia Mountains, so there’s a lot of topography changes. So you’ll have a big family-friendly, 2-story traditional house, but your kids can’t pick a soccer ball in the backyard, because it’s hilly, or it’s steep, or whatever. So I always told my clients, “Look for a nice backyard first. You can fix up the house, but that piece of dirt is always going to sell that property.” So that’s the biggest one for us, particularly around here, is a nice backyard.

Theo Hicks: Alright Terry. What is your best real estate investing advice ever?

Terry Burger: A lot of people say this, but gosh, it’s so true, Theo. You’ve got to buy it right, and you cannot get emotionally involved in the buy. You have to keep your wits about you, be numbers focused only, and buy that house right.

Theo Hicks: In your agent days when you were dealing with clients buying a home, this seems, at least from my perspective, to be more relevant when someone’s buying a single-family house. How do you communicate with a client who is emotionally invested and wants to buy this house that’s either overpriced, or it’s going to cost too much money to fix up? What’s some advice that you’d give to them, and then think that you’re talking to a Best Ever listener who might be emotionally involved in a deal and how to get them to relax a little bit and calm down.

Terry Burger: Yeah, those first few deals are pretty emotional. I remember my first deal, the butterflies were in my stomach; I ran the numbers on a napkin at a Chick-fil-A… But I knew it was a great deal. I think inside, at least for me that first deal or two, I was so giddy about the deal, I couldn’t wait to get the ink on the paper, because the deal was so good.

Now I’m numbers-oriented; that’s not everybody. So I was emotional about it because I knew I had a great deal, because I analyzed the numbers. So if you have that warm fuzzy feeling because you found your first deal but you’re not sure about the numbers, you’ve got to be careful there.

I would always tell my retail real estate clients, “The numbers don’t lie.” So for example, if you’re going to buy a home for you and your family Theo, you’re going to look at it and go, “Well, this one is priced $20,000 more than the one that sold down the street last month. Why? Why is that?” “Well, it has a pool.” “Okay, so how much was that pool?” “It was a hundred thousand dollars.” “So you’re telling me I can get that pool for 20 grand?” That’s a good deal if you want a pool.

So it’s just looking and comparing the facts with all of the houses, just like an appraiser would. And just looking at those things and analyzing them. And knowing your numbers, knowing what stuff costs.

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

Terry Burger: I’m ready.

Theo Hicks: Okay. First, a quick round from our sponsor.

Break: [16:57]-[17:33]

Theo Hicks: Okay Terry, what is the Best Ever book you have recently read?

Terry Burger: Right now I’m reading — we have a pretty big team so I’m trying to learn how to lead my team better… So I would say lately, in the past 6 months, two:  Traction by Gino Wickman, and then the Who Method For Hiring by Geoffrey Smart. Those two.

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

Terry Burger: Oh, wow… Thanks for planting that seed in my brain. I would figure out how to do it better. I love real estate; I’d figure out how to do it better so it didn’t collapse again.

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

Terry Burger: My first deal was really sweet. The guy had an old Porsche 911 that he wanted to fix up. The house sat empty for 9 years after his ex-fiancé moved out… And he had just got a wild hair that he was going to fix up this 911 and it was going to cost him 40 grand, and he needed 40 grand. So I gave him 40 grand for a house that was worth a lot more and fixed it up. And even to this day — we have made $65,000 on that property. Probably one of our best flips ever.

Theo Hicks: I wanted to ask you one more question – who is your favorite classical musician, classical composer, and classical artist?

Terry Burger: Composer would be Gustav Mahler. And I was a trumpet player, so my all-time favorite trumpet player is Philip Smith in the New York Philharmonic. He teaches at the University of Georgia now.

Theo Hicks: When you said that in the beginning, I wanted to ask that question, because I always listen to classical music while I work.

Terry Burger: Mahler is like the Led Zeppelin or The Kiss of that era. It’s just lots of brass music.

Theo Hicks: How do you spell it?

Terry Burger: M-A-H-L-E-R.

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

Terry Burger: My wife and I like to give. She’s a giver, and I like to make the money so she can give. So we support our church, we support missions organizations… One time we were trying to give away 20% of our income. It might be that way now, I’m not sure, but we give away a significant portion. I am passionate about Operation Underground Railroad. Their sole purpose is to free children from sex slavery or any other type of slavery all over the world. And that’s one of the causes I really care about right now.

Theo Hicks: Do you know who Bill Allen is?

Terry Burger: Yeah. He’s a good friend of mine, in fact, I’m now the Chief Operations Officer of 7 Figure Flipping.

Theo Hicks: I just talked to him right before we got on.

Terry Burger: Oh, that’s awesome. I talked to him earlier today too, he didn’t know I was going to be in your podcast.

Theo Hicks: Wow. And then I talked to someone else on his team yesterday, Beka Shea. It’s a small world.

Terry Burger: Yeah, good friends of mine. And Mike Simmons… Those guys, we kind of grew up in this business together, Bill, Beka, and I.

Theo Hicks: Small, small world. Alright, last question. What’s the Best Ever place to reach you?

Terry Burger: The best place to reach me, probably Facebook. For somebody who’s just reaching out to me it’s Facebook; just private message me, Terry Burger, and you can reach out to me there.

Theo Hicks: Perfect, Terry. Well, thanks for joining us and walking us through your step by step process for flipping homes, starting from your direct mailing strategies, as well as buying leads from websites like needtosellhomefast.com and fasthomeoffer.com.

We talked about how you create your offer, which is by doing comps based off of the micro-market, so a neighborhood with the major roads as the boundaries, as well as looking it up by elementary schools. And then from there, you do phone conversations with people once these leads come in.

The biggest obstacle is evaluating without seeing the property, so you will send the inspector as well as a photographer who will have a checklist of the things you look for, and then make sure that they take high definition pictures, so when you get the pictures you can zoom in to see any issues that you want to investigate further.

And you mentioned something else too about knowing what the buyer wants, and that the secret to real estate is backyards sell houses. You can’t really renovate a house and add a backyard, unless you cut the house in half. I don’t know what you would do. So look for the backyard, and then you can make the inside of the house really wherever you want it to be.

And then the Best Ever advice was to buy it right and don’t get emotionally involved on your numbers. Act as if you were an appraiser. So thanks Terry, again, for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we will talk to you tomorrow.

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JF2264: Investor Agent With John Chin

John is the co-founder of Investor Agent where they have done 2,800 rentals and flips. He started at 19 in the military by picking up real estate courses where he could barely understand the terminology but through perseverance and hard work he now manages over 470 cash flow rentals.  

John Chin Real Estate Background:

  • John is the co-founder of Investor Agent
  • You’ve done 2,800 rentals and flip properties (mostly short sales, foreclosures, and REOs)
  • Closed over $260 Million residential investments
  • Currently manage over 470 cash flow rentals
  • Based in Orlando, FL
  • Say hi to him at:  www.investoragent.com 
  • Best Ever Book: Power vs Force

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Start working with investors, one investor client will change the trajectory of your future” – 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 John Chin.

John, how are you doing today?

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

Theo Hicks: Absolutely. Thanks for joining us. Looking forward to our conversation. A little bit about John. He’s the co-founder of Investor Agent. They’ve done 2,800 rentals and flip properties, mostly distressed residential properties. They’ve closed over $260 million worth of residential investment and they currently manage over 470 cash flowing rentals. He is based in Orlando, Florida, and his website is www.investoragent.com.

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

John Chin: Yeah, man. So we have a traditional brokerage background. I’ve been doing traditional residential sales for a long time. I started when I was 19 years old while I was in the military, serving in the Air Force, didn’t like turning wrenches that much, didn’t see myself doing that forever… Although it was a good experience, I wanted to get into real estate investing.

So I think a lot of us — to kind of date me a little bit… A lot of the listeners know Carleton Sheets and picked up that ‘No Money Down’ course; it was when it was like a three-inch thick package of audio cassette tapes. And I couldn’t get past the first chapter, because I didn’t know the language as a 19-year-old; I’d never bought or sold the house. So I got my real estate license to learn the course. And then started accidentally selling houses to my military friends.

Then had kind of a fortuitous pivotal moment when I sold a house to an investor who had multiple rental properties. And he kind of took me under his wing and that kind of changed the trajectory of my career in real estate, which is now about 25 years. And I just focused at that point forward on residential real estate properties.

So you fast-forward to today and now we work with licensed agents who want to get into the residential investment space, so that they can do more closings with clients who want to buy rental properties or flips and that sort of thing.

Theo Hicks: So you said that you want to help them work with investors, or you want to help them invest themselves?

John Chin: We helped them to work with investors first, and as a byproduct of working with investor clients and being in that space — it’s kind of like being in the commercial world, but in a residential space… Then as a byproduct of that, you pick up key relationships with investors who then you do JVs with, and you start investing yourself; capital doesn’t become an issue anymore, you have unlimited funding, essentially, with your deals…

And so licensed agents, typically who have an interest in real estate investing will, in our opinion, do it the wrong way. So they start trying to learn how to invest in properties, do coaching programs… You could spend 20 $40,000 pretty easily trying to learn how to invest in real estate and not ever make a penny.

Well, our view is, if you’re a licensed agent, you have access to the MLS, and we teach you how to hack the MLS to find deals; then you work with investors first. You learn as you go, you’re making money as you learn, and then you keep the cherries along the way. So it’s like joining the military, you get to make money while you learn a trade, and then you get out, as opposed to going to college, where you’re paying to learn,  and then you’re trying to make money after you graduate. It’s a little bit of a paradigm shift.

Theo Hicks: Yeah. I was actually talking to someone earlier this week who has a corporate job. She caught the real estate bug, she wants to get out of that job, and her thought is to become an agent, start up being an agent in order to generate income from selling homes in order to make enough money so she can quit her job, and then ultimately start investing. It sounds like you work with people who are already agents, but would you recommend that if someone is in that position, if someone wants to get started in real estate and they have no experience whatsoever, they’re working a job and they want to get their feet wet – do you recommend their first step being getting their license?

John Chin: Yeah, 100%. It’s funny, there’s two schools of thought about that. A lot of estate investors don’t like to get their license, because they like to operate in what I call the gray, where they don’t want to be liable or be in front of a judge saying that, “Oh, you’re taking advantage of the public, you’re a licensed professional,” and they don’t want to deal with the disclosures, and all that kind of stuff. But our school of thought around that is that if you’re a licensed agent, you have that kind of educational base and all the tools to access inventory, like the MLS and you have a broker to guide you and keep everything compliant… That’s, in our perception, a good foundation to start from.

And then if you’re doing investing the right way anyway, then you shouldn’t be afraid of disclosures and investing in real estate as a professional. So that’s our take on that. And if you start that way, with the intention of doing residential sales, but then focus on working with investor clients and—there are cash investors right now that are closing multiple transactions a month on almost every MLS in the whole country. So if you find out how to identify those people, why not work with less clients, do more transactions, not have to deal with buyers and sellers who have finance contingencies and a lot of the hiccups that you deal with emotional buyers and sellers? …that by the way, they’re only purchasing every 7 to 15 years, right? When you think about somebody who’s buying or selling a home.

And if you’re a licensed agent, you’re lucky if you get both of those transactions, the buy and the sale. So why not work with cash investors who are buying a lot of times sight unseen, that don’t have any finance contingencies and they’re closing multiple transactions a month? So we try to accelerate somebody’s success and their money-making opportunity by working with investors, as opposed to your traditional retail client is what we call that.

Theo Hicks: Sure. So you said two things there. One, was identifying the cash buyers, and then two was – you said this earlier, I think, about hacking the MLS. Let’s talk about the ID and the cash buyers first. I kind of got two questions there, answer both or whatever… But the first one is, from an agent’s perspective, how am I finding these types of cash buyers? And obviously, that’s going to apply to wholesalers or anyone who needs to find cash buyers in general.

John Chin: Yeah. Yeah.

Theo Hicks: But then secondly, kind of flipping it around. If I’m an investor and I want to work with an investor-friendly agent, what types of things are agents looking for in their ideal investor client? Will they take anyone who says, “Hey, I want to invest”, or are they looking for a specific person with a specific background and specific ability before they begin to work with them and give them access to their hacked deals?

John Chin: It’s interesting… I think the second question is a lot easier and faster to answer. And the answer there is to anybody who’s been on floor time as a licensed agent who got a call from a “investor”, you want to run the other direction, because most of them are tire kickers. They have you on this wild goose chase and you’re sending them MLS listings and you have no idea, number one, what to look for. You don’t know how to qualify them. But if you know how to qualify an investor right – it’s basically  just two things. They have a track record and a history of closing on deals. If they have a track record and history – that’s the first thing we’re asking them on the phone – and they have realistic criteria on what they’re looking for, then yeah, they’re worth working with. But we’d rather work with someone we don’t have to qualify.

That comes back to your first question, is how do you identify these cash investors that are buying multiple properties? Well, on any MLS search, you can do a search for cash transactions. If you know how to on the MLS pull up all the cash transactions within a certain window – we like to go back like 60 days, 90 days – and then you then append that information with absentee owners, so where the mailing address is different than the property address, and you see someone doing that three and four times the same party, then you know they’re an active cash investor in most cases. Unless you’re in a place like the mountains of Tennessee or in Orlando, for example, or maybe Vegas… Chances are those aren’t vacation rentals. Those are probably long-term rentals and they’re building a portfolio. So then it’s just a matter of contacting those folks, finding out what their criteria is.

And here’s the thing. The number one turn-off with investor clients for licensed real estate agents is that they have unrealistic expectations and they want huge discounts, which as you know, today’s competitive environment seller’s climate, you’re not going to find those kinds of discounts.

So what’s nice about working with people who have tons of transactions and a history of cash deals on the MLS is you’re talking about inventory that’s on the MLS. You don’t have to be a specialist at finding off-market deals, which my partner Ron and I have a lot of experience with that.

Ron’s background is wholesaling, where him and his group – they were closing 50 to 60 transactions per month wholesaling, right? So that’s his background. You complement that with my background, taking possession of properties and full-cycle flipping them, and funding them and so forth… All of the stuff that we’ve done in the past has been a mix of off-market and on-market MLS deals. But when we’re working with licensed agents, we’re helping them utilize a tool that they already pay for, the MLS, to find those investors and find the deals already buying that’s on the MLS.

Theo Hicks: So let’s transition into that… You told me how to find the investors… How do I find the deals now on the MLS?

John Chin: It’s easy. Literally, if you do the first part – we call it our investor launchpad sequence. Picture that a rocket ship is taking off. You’re newly licensed and you want to work with investors, you don’t know where to start. I’d tell you to start by looking at the MLS, doing the search I just described; that surfaces the active cash investors that are buying multiple properties. Well, by virtue of those search results, you see the kind of properties they’re buying. So if you contact those investors and find out that, okay, these are the addresses they bought, that translates usually to a yield requirement they have.

So if you look at what they paid for the properties, and you can easily research what they rent for, those are the same assumptions that these guys are making to get to their yield requirement… And you know that, okay, they’re looking for at 12% gross yield, for example. That’s kind of a rule of thumb to start your search.

There’s a misconception that a lot of agents have – it’s that to work with these private equity firms and companies that are doing these transactions, you have to be very sophisticated with analysis. You don’t. Because they have all their own people that crunch the numbers, right? All you have to do is find the addresses that meets at most a gross yield, which to you and me, we don’t think a term of gross yield; we think cap rate or net income, right? Or cash on cash return if we’re doing a leveraged purchase and financing. But these guys think in terms of, “Look, the only burn I’m going to put on that agent is you just research a realistic [unintelligible [00:13:14].10] number and an address and a price that meets a certain rent multiplier. Send that to us. We’ll do number crunching and get granular with it and then we’ll give you a yes or no.

Theo Hicks: So I’m just trying to make sure I’m getting this right. So I search all these cash buyers, I find the types of properties that they’re buying, and then from that, I know what yield they want. So what’s the next step from there? Going through the MLS and looking for properties that match that criteria? Is that what you’re saying?

John Chin: Exactly. So they’ll have some input process or a team that will take the addresses that you want to send them and then they’ll do further analysis on them. And then they’ll tell you yes or no, and then you represent them on the transaction on that buy.

It’s so overly simple that it’s mind-boggling that agents aren’t doing more of this, right? So if you don’t know what their yield requirement is, you will literally just put an address in, and then you’ll have some sense of what they’re looking for, based on what they’ll tell you their gross yield requirement is… And most institutional investors today are going to be anywhere between the 12%, maybe 15% gross, and then they’ll have some geographic criteria they’ll have on where they won’t buy. Usually, it’s exclusionary. They won’t tell you where they will, but they’ll tell you where they won’t.

So based on that geographic criteria, usually they’ll tell you their requirements on the specs of the house; maybe minimum three bedroom, they’ll have a vintage or a year built requirement. They won’t go back more than 15 years. They won’t do heavy rehabs maybe. They’ll have their exclusionary geographic criteria, but they’ll tell you what that criteria is. And because there are so few agents who know how to work with them, for you to be able to approach somebody like that and say, “Look, I’m a licensed agent. I want to work with you. I can help you find these properties,” they’ll send you their template or their “buy box”.

Theo Hicks: So essentially how that works – you search MLS, cash transactions, absentee owner, multiple transactions. I call them, say, “I’m an agent,” say, “I want to work with you, what’s your criteria?” They send me their criteria and then I search the MLS, I find a list of all the properties that I think meet their criteria, send them an Excel spreadsheet and then it kind of goes from there?

John Chin: Yeah, they’ll usually have one point of contact that you’re working with, somebody on the ground, and sometimes it’s even another agent; or maybe it’s somebody internal, at their ivory tower. And they’re never, by the way, local. Maybe if you live in Phoenix, you’ll be working with them locally or something like that. But usually, there’s five investors that have probably purchased 30% of — we’re in Central Florida, right? So in central Florida MLS, we have about 30,000 property listings; of all the cash transactions, they’re probably purchasing between 25 and 30 percent of all these cash transactions, five different buyers. And they all operate very similarly to what we’re describing right now.

Theo Hicks: And then at what point as an agent — how long they do this for until I start to transition into doing my own deals?

John Chin: If you are into wholesaling — and I have to kind of switch hats for a second here. I’m so into working with licensed agents who are working on the MLS and they have to conform with the brokers requirements and that kind of stuff… But if I’m starting with an investor’s perspective, somebody who’s potentially wholesaling deals and they know that game, then a lot of times it’s a matter of you just contracting the properties yourself. And a lot of times, these buyers – they don’t care how they get them, they just want to get their yield requirements. So if you have to do an assignment or a double closing, they’re fine with that, because they’re paying cash, there’s no underwriting requirements… It’s a pretty easy game. You just have to make sure that their rehab numbers aren’t out of this world and they meet what you expect them to look like.

So if you’re a wholesaler, to answer your question, if you want to get into doing your own deals, what ends up happening is you come across in this exercise of serving that investor and making commission’s on them, you start coming across cherries that you end up wanting to keep yourself. What also will surface is your mid-tier investor clients and your Mom-and-Pop investors who also want to play that game, but not to that scale, that you’ll end up serving and finding deals for as well.

So in our experience, when you’re working with those Mom-and-Pops and those mid-tier folks, they end up becoming JV partners on deals… Our own flips – we never fund or put any money into our own flips. We never even do hard money loans. By virtue of working with these investors that trust us, and they know we have contractors and property management operations in place, and we have all the mechanisms on the assembly line to take that residential property and to monetize it as a flip or rental property, they want to fund our deals.

So we get 100% funding, we typically offer these investors—because think about it, you’re a cash buyer and you’re looking to build a rental portfolio. And let’s say today, a good cap rate might be 7% or 8%, if you’re in a decent area. Do I want to do that and make 7% or 8% on my cash at the end of the year, or can I give Theo,  an investor agent, some of my cash for him to fund a flip? Maybe be exposed to 80% of the ARV so I’m pretty safe, I have some margin of safety there. But I give you 100% funding and you give me in return — our typical term is about 8% interest preferred return on my money, and maybe a 15% clip on the profit beyond that. So it’s kind of like a CD with a lottery ticket attached to it as a little bonus, right? Profit kicker.

And then now if you make me 10% in a six-month span, and you can do that for me twice in a year, I’m at 20% return on my cash. Why won’t I just keep doing that and be completely liquid after every transaction? So it’s very easy then for you to graduate from being an investor agent – good credit, bad credit, no money, maybe you have some money, but to convert a lot of these investors into private money.

Theo Hicks: Alright, John, what is your best real estate investing advice ever?

John Chin: It’s easy. One investor client will change the trajectory of your future because of what they teach you, the access to resources and how they shorten your learning curve. So if you’re working with investors, you make friends, and one or two of those friends are going to become your mentor. So just start working with investor clients. Don’t worry, everything else will take care of itself.

Theo Hicks: Alright, John, are you ready for the best ever lightning round?

John Chin: Yeah, let’s do it.

Theo Hicks: Alright.

Break: [00:19:07] to [00:19:54]

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

John Chin: That’s easy. David Hawkins, he wrote the book Power vs. Force. The more recent book is The Pathway of Surrender: Letting Go, by David Hawkins. It could be the most important book you could ever read and the only book you ever need.

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

John Chin: I’d throw a dart at the map, and as long as I had a phone and a laptop computer, I’d probably go out there, start finding some cash buyers and then start finding deals for them and reverse wholesale.

Theo Hicks: Is there a time that you or a client you work with lost money on a deal? How much did they lose and what lesson did you learn?

John Chin: Many times, actually, including myself. The most recent one I’m thinking of is about $80,000 on one flip that we’re still contending with right now, because after the transfer of the title – because we purchased the property subject to – the IRS filed a tax lien even though there wasn’t one in place and we’re still contending with that, with an IRS that’s shut down right now, in some of the departments. So anyway, we do it all the time.

And the lesson you learn from it is, in every single case, the common denominator on losing money on a flip is because I put too much trust in somebody and never validated. And I didn’t control it and micromanage that deal with somebody maybe that I haven’t done business with before. Almost every case, whether it’s contractors who messed up, competence or character-wise, or it’s somebody who was overseeing a rehab… It always comes down to someone who in many cases are well-intended, but incompetent.

Theo Hicks: On the flip side, what about the best ever deal you’ve done, either monetarily or some other reason why it was the best deal?

John Chin: The best deal I’ve ever done was probably — we love lease option sandwiches, just controlling an asset and not having to deal with the rehab; we do quite a few of those. None of them stand out. One of them where we made about $80,000 when you combine the option money that we got up front, the spread and the cash flow for the year and a half we had it, and then the amount of money we made on the sale price between our buy and the sale… That one comes to mind. It wasn’t the most money we made on a deal, but it was so easy. So those are the ones that kind of stand out.

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

John Chin: Well, Ron and I, we both are coaches, youth coaches, that is. I coach the lacrosse, ron coaches football and soccer… And both have young kids. And number two is we kind of take our coaching to a level that [unintelligible [00:22:16].26]  just the games and things like that. So we kind of serve as mentors of the kids that we coach and love.

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

John Chin: The easiest place to find us is https://www.investoragent.com/ because we’re offering credentials, the content and the tools and the community to support to a licensed agent who wants to get their foot in the investment world.

Theo Hicks: John, I really appreciate you coming on the show today and walking us through this very simple but very effective step by step process for new agents to not only grow their real estate agent business, but also ultimately transition into doing deals themselves.

And essentially, the process is that you go to the MLS, you look up the cash transactions with an absentee owner, so they don’t live at the property they bought, and they’ve done multiple other transactions in a month or in a year. And then you reach out to that person, because you assume that they’re an investor, confirm they’re an investor, determine what their criteria is, and then go through the MLS and find deals that meet their criteria, send them the address, send them the price, and send them the rent you’ve done, and they’ll take it from there.

And if you do this process enough, you’ll start to build up relationships with people, you’ll start to learn what a good deal is, and then eventually you can start to cherry-pick those deals yourself or start to partner with people, start to have people invest the capital into your deals, assuming you’ve kind of got the relationships with the contractors and the lenders and the property managers. And it is that simply, you said.

And you said that if your business were to collapse today, you would just throw a dart at a place on the map and just do that there.

John Chin: Pretty much. I would say too another way of saying what you just said – because that was a very good summary – is focus on the who, the investors. The what and the how – that comes as a by-product of just serving investors. It’s very simple.

Theo Hicks: And then your best ever advice was to, as you mentioned, focus on the client. And that one client, one mentor can change the trajectory of your future. Like for you, that person can be your one mentor, two mentors, three mentors that guide you towards whatever your investing goals are.

So thanks, John, for joining us and sharing this fantastic strategy with us. I’ll definitely tell the person I talked to listen to this episode. Perfect timing. This is exactly what she was looking for. So I can just say, “Hey, listen to John’s episode.” And anyone else who wants to do the same thing, who wants to get started in real estate, can just listen to John’s episode.

So thanks again, John, for joining 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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JF2245: FireFighter & Teacher Grabbing Hold Of Real Estate With Will Pritchett

Will Pritchett is a full-time firefighter and real estate investor with 8 years of real estate investing experience. He has a portfolio of 18 rentals, private lending, and a couple flips a year. His wife was a teacher but now runs their real estate portfolio full time and they both believe if a teacher and firefighter can do this, that anyone can. They started this journey into investing because they wanted to supplement their retirement and help for future college tuition however they quickly found out they can use this to change their lifestyle.

 

Will Pritchett Real Estate Background:

  • Full-time firefighter and real estate investor 
  • 8 years of real estate investing experience
  • Portfolio consist of 18 rentals, private lending, and a couple flips a year
  • Based in San Antonio, TX
  • Say hi to him at: www.homeagainsa.com/blog/ 
  • Best Ever Book: The Go-Giver

 

 

 

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Best Ever Tweet:

“The power of private lending is what changed our business and accelerated it dramatically” – Will Pritchett


TRANSCRIPTION

Theo Hicks: Hello best listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today we’ll be speaking with Will Pritchett. Will, how are you doing today?

Will Pritchett: I’m great. Thank you, Theo.

Theo Hicks: It’s good to hear, and I’m looking forward to our conversation. Before we get into that, a little bit about Will. He’s a full-time firefighter and a real estate investor. He’s eight years of real estate investing experience. He has a portfolio that consists of 18 rentals. He’s also done private lending and does a couple of flips per year. He’s based in San Antonio, Texas and you can say hi to him at his website https://www.homeagainsa.com/blog/.

So, Will, do you mind telling us a little bit more about your background and what you’re focused on today?

Will Pritchett: Yeah, Theo. I’m a full-time firefighter, as you mentioned, and my wife was a full-time high school administrator. We decided to try rental properties as a supplement to our retirement and to help pay for kids’ college. We have two kids. And after a couple of years of doing it kind of the old fashioned way, scraping together down payments, we decided that we could change our lifestyle and my wife might be able to stay home. After proving the process, we learned about the BRRR strategy and using private money, and it was a complete game-changer.

My wife quit her job about three years ago. She loved her job, but she was away a lot of hours from home. Now she’s with the kids and I, and she runs our business day to day from home. Real estate has changed our lives, so we spend a lot of our time sharing what we’ve learned with other friends and acquaintances to try to help them get started, because we feel if a firefighter and a teacher can do this, anyone can do this. And it’s very powerful. It’s been life-changing to us. We’re on the road right now, about a month of travel this summer in the continental US, with our kids, just exploring the country and it’s changed our lives.

So we’re currently looking for more single families and multifamily properties. We are doing a little bit of private lending. We’re teaching some classes through the brokerage that my wife has her license with, and just continuing to grow the portfolio in whichever direction that might be. This year, we attended The Best Ever Conference and learned a lot about syndications, and that’s definitely on the table for us now. We started with single-family because it was accessible and it was a way for us to get our foot in the door. We did a net worth calculation one day and realized that we had become accredited investors, almost by accident. And that was a powerful moment. And we realized we were able to invest in some of these syndications and so forth. So single-family houses have gotten us started and we’d just like to share what we’ve learned with other people.

Theo Hicks: So those 18 properties – are those are all single-family rentals?

Will Pritchett: All except one. We have one with an accessory dwelling unit in the back. But the rest are all single families in San Antonio.

Theo Hicks: Are you a private money investor yourself, or are you raising money from other investors for these deals?

Will Pritchett: Both. It was really neat when we learned about private money. We attended a conference and we were asked to speak on the BRRR strategy, and before it was over, people had come to us, wanting to lend to us, if we ever needed a lender. We already had some private lenders, but we saw the power of private lending. So they became private lenders of ours, and then later they needed private lending and we lent some IRA money back to them. So we’ve been on both sides of the transaction now. We were often the borrower and we’re just beginning to dabble in the lending side. But the power of private lending is what changed our business, and just accelerated it dramatically.

Theo Hicks: Sure, so you had mentioned how you found this private money… Do you mind walking us through how these deals are structured? Maybe you could tell us by giving us an example of the first deal that you did with a private lender.

Will Pritchett: Sure. So the way we attracted private money originally was completely by accident. We were doing this the old fashioned way. We had turned my bachelor pad into a rental to try it out, and it was way better than everyone had told us about the horror stories of rentals. We had a great tenant, and we saved for down payments, but we saw it can be a slow growth.

So after two more rentals that we bought the old-fashioned way, one of which—the first one we bought needed paint and baseboards, I think… And we were pretty sure we deserved an HGTV show. We were overwhelmed and we thought we’d done this major renovation. Since then we’ve been complete gut rehabs. But starting out, that was pretty intimidating. But we talked with enthusiasm about what we were doing with people; we just thought it was powerful. And some friends from church mentioned that they had some money they’d love to invest if we ever had a deal we wanted to partner on.

So I read up on private lending and presented to them a 10% interest-only arrangement. And because my confidence wasn’t that high, I wanted to borrow less than I needed to give them more confidence, or lower loan to value. So we borrowed less than the purchase price and used our savings to pay for the renovations and part of the purchase price.

After that first deal, those lenders have come back repeatedly, and they always get first dibs on our projects because they were there and took a risk on us. Now, they’ll fund purchase price and renovation altogether and they don’t ask questions. So the private relationship has been great, but they’re really investing in us more than they are the property. So we saw the value there.

These other investors that I mentioned at a conference reached out to us and offered to lend, and we used their money when our primary lenders money was tied up into other deals and we needed a third lender, so we used their money. And they have been the recipient of two loans from us, from our IRA. So learning how to lend and how to teach people that they can lend their IRA money is really powerful. For those people that are listening and looking for private money, don’t ever assume you know who has money. A lot of our friends, they don’t fit maybe what we might picture as someone with a lot of money, but they have money and they’re interested in investing.

So the last two deals we have funded have been from my wife’s IRA. So all of those gains are coming back into your IRA and treated like gains from any other source of investment, whether it be mutual funds or other investments in an IRA. So that was extremely powerful to start, to build that account. So all of our lending has been out of IRA. Some of our borrowing has been from IRAs and some has been from people’s cash they had on hand.

Did that answer the question you’re asking, Theo?

Theo Hicks: 100%. Just a quick follow up question though. So you are offering a 10% interest only. Is that one year term? Does that expire once the deal is sold? What’s the term on that? When do they get their money back?

Will Pritchett: Yeah, great question. And I’ve got some articles on my blog about this for the ones who want to dig deeper into it. But basically, we’ll ask for a year term… And I try to be real upfront with our lenders, because we want a great relationship. We want them to know what they’re getting into, and I want them to feel that their investment is as safe as any investment they can make, which I believe it is.

So a year term, amd we’ll tell them that we’re probably going to refinance them in about seven months. And the reason for that is if you do the BRRR strategy and refinance with a conventional lender, most of them want you to season that loan or hold the property for six months before you refinance. So in six to seven months, I’ll be refinancing and paying off that lender, but that year gives me some wiggle room. I like to have multiple exit strategies. So if a BRRR doesn’t work, which is a rental, we could flip it and sell it and then pay them off at the end. Most of our lenders, we pay them monthly, simple interest, 10% interest, and we pay the principal at the time of refi, or if we were to sell the property, we’ll pay the principal at that time.

We also include a three-month prepayment penalty on ourselves. That kind of sweetens the deal. In case someone came and bought the house a month later, we want the investor or the lender to get at least three months worth of interest just for their hassle factor. So anything you can do to keep this investment that they’re going to want to come back and do more of, is a great thing. And it’s amazing how you only need a couple of lenders if you’re recycling that same money. And our experience after an investor gets their money back, they want to come back and lend again.

Theo Hicks: How do you officially make these partnerships? Is it the contract that you created yourself, do you download it offline, do you have a lawyer? How does that work?

Will Pritchett: That’s a good question. So early on, I was overwhelmed when I started learning about real estate, about all these terms… And then I realized, there’s professionals that do these things every day, and let’s just lean on them. So what we do is we have a great attorney at our title company, and he writes up a note and all the legal paperwork, and they are a debt partner. The lender is strictly a debt partner. They don’t have any say in how we manage the rehab or what we do to the property. All the terms are written out and agreed upon… And that has worked great for us. We’ve never had to rely on the legal documents, but it’s been a great system for us. It’s very inexpensive to have them write up these documents. And we do all of our closings at the same company, so they’ve become a team member, if you will, of ours.

Theo Hicks: How much do they charge you for these contracts, if you don’t mind?

Will Pritchett: I want to say it’s about $300 to $350. It’s pretty negligible, in my opinion.

Theo Hicks: So in effect, except for those first deals, these are no money out of your pocket, right?

Will Pritchett: You’re right. So we divide them into perfect BRRRs and imperfect BRRRs. And we have several that we did leave a little bit of capital in, a little bit of cash in… But none of that money came from our pockets. It either came from a flip we did, or the business — after the first three rentals, we have not put a penny of our own W-2 income into this business. It’s all been reinvested.

So an imperfect BRRRs is where you don’t get all of your capital back. If I leave $5,000 or $10,000 in the property, it’s a heck of a lot better to me than leaving $35,000 or $40,000 in it. And on the best cases, we have gotten all of our money back. In the recent market, it’s been tougher and tougher to do a BRRR where we get every penny back, but it does still happen.

Theo Hicks: So for that first deal that you had a private lender on with an individual from your church, how much did they loan you?

Will Pritchett: It’s about $75,000 or $70,000 if my memory serves, and they had done some other investing and much higher risk investments that didn’t pan out. And we presented them kind of a deal deck I guess you would say on this particular deal; photos, estimate ARV. After that first deal – it was so formal and we were all kind of nervous, I think – they started to trust what we were doing so much that we would just text them an address and an amount, and they would wire the funds. It really became that easy.

I think that all comes back to your reputation and doing exactly what you’re going to say, and considering the other person’s perspective in every transaction, whether it’s a purchase or a loan. If my lender is happy at the end of the day, they’re going to come back and lend to us again. So there again, you don’t need that many lenders if you’re doing one or two deals at a time.

Theo Hicks: How many deals had you done yourself before you had this individual invest?

Will Pritchett: We had one house that we already owned, that was kind of my bachelor pad. And then we bought two more where we scraped together every penny. I was working overtime, and as a firefighter, overtime means you’re gone from home three full 24-hour periods out of four. So I was away from my young kids way too much, but I was scraping together every penny to put towards the down payment for this renovation. And it was exciting but it was also been discouraging, because we thought we were going to grow pretty slowly, and that’s where that private money was like turning on a faucet or something. Our growth was one property every couple years, and then in those last four years, we’ve done most of our growing. And it was a game-changer. So I can’t emphasize the importance of private money enough in our business.

Theo Hicks: Is your plan to ultimately follow your wife by quitting your job and doing this full time?

Will Pritchett: That’s a good question. Theo, I love being a firefighter. A lot of days I wake up and think I get to have every little kid’s dream. And it does allow some flexibility. Like I mentioned, we were on the road for about a month this summer; I work for a great department, and I’m very proud of my profession. So I’m not itching to leave my profession, but I definitely want to have that option. I don’t think I’m quite there financially yet. And even when I am there financially, I don’t know if I’ll take the leap. But I think it’s great to have the option. I think that’s what I’m after more than anything. It’s to know that I have that freedom should I need it or want it at some point in time. But I still love my job, and I still love real estate investing, so I can have the best of both worlds.

Theo Hicks: What is your best real estate investing advice ever?

Will Pritchett: It’s cliché to get started, but I’ve listened to podcasts and read books, and I’m a major consumer of education… But I think my wife has balanced me in that she’s an action taker. So I might still be reading books and not taking action if it wasn’t for her. You have to have both. And if it was just her, we might have made some investments we shouldn’t have made, so I think I’ve balanced her, too. But I think you have to get started.

When we were doing that first deal and we thought we were Chip and Joanna Gaines, and we thought “We might lose a little money…”, we asked my 92-year-old grandmother at the time, “What happens if we lose money?” And she says, “It’s just tuition.” You pay tuition to go to school to learn, and if you lose a little money, you won’t make that mistake, again. It’s just tuition.

I would say take action. There’s certain lessons you can’t learn until you do something. As much as you read, try to learn online and listen to things. You’ve got to take action, and if you do lose money, it’s just tuition, and keep going.

The only thing I would say is get started and take action.

Theo Hicks: Alright, Will, are you ready for the best ever lightning round?

Will Pritchett: I am.

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

Break: [00:17:15] to [00:18:07]

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

Will Pritchett: The best ever recent book was the Go-Giver. And it’s almost a parable type. It’s about the value of just giving other people what they want. And I have found that to be so valuable. When we teach these classes for free and just give out information, we write this blog to share what we’ve learned, good things happen. And that’s basically the synopsis of the book, The Go-Giver, but I totally recommend it. It’s not about real estate investing as much as it is about a business principle that I believe in.

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

Will Pritchett: I would start right over. I had a good friend, we were growing and growing and, I was like, “What if we’re going too fast? What is going to happen?” And he’s like, “How long did it take you to build this?” And I told him, and he said, “Do you think with all you’ve learned you could do it faster next time?” And I thought, “Absolutely.”

So I would start over with exact same model. Once we learned about private money, it didn’t take much of our own capital, and we would grow faster this time. And I would lean on those relationships. Our business is based on relationships and reputation. I would lean on those reputation and relationships that we’ve fostered over these years.

Theo Hicks: What’s the best ever deal you’ve done?

Will Pritchett: The best ever deal I’ve done, I like to call it “the midnight infomercial”, because one day if I have a cheesy – they don’t sell DVDs anymore, I guess – commercial in the middle of night, it would be this house.

We were renovating a house on the street and we always knock on the neighbor’s doors. One of the neighbors said they were interested in selling, but their house was pristine; it wasn’t a distressed house. And I looked at it and I advised them they probably should list it with a realtor. They were retirement age. And I think it’s always good practice to give people options, and sometimes I’m the best one and sometimes I’m not, but my offer was about 70 cents on the dollar. And I didn’t hear from them for a while, and assumed it was a done deal, they sold it to a realtor. And then they called me back and said they’d like to sell to me. And I said, “Well, you remember, my price was pretty low, and I told you you could sell it as it is, or quite a bit more.” And they said they understood that, but they wanted to stay in the house. They wanted to rent the house back. So they essentially wanted access to their equity, because they had no heirs.

So we gave them a cash offer. Our rehab budget with about $10 for a doorknob. This house was beautiful. They’d lived in it for about 20 years. So they got their access to a big chunk of their equity, and we agreed to not raise rent, other than a percentage based on the property tax increases. That deal was a zero money down deal. We walked away from several hundred dollars. It was a $10 rehab, and they’re still there to this day, and it was a true win-win, including a private money lender who won on that deal. So a win-win-win deal, which we love to do… But it was almost too good to be true. That’s the best deal I think we’ve done to date; the easiest, smoothest. We’re dragging our kids to that house, and they got to know our kids… It was a great deal. I wish I could find more just like it.

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

Will Pritchett: We love to teach and share what we’ve learned. As I mentioned, if I’d started it earlier, I’d be so much further ahead. And I talked to people who discouraged real estate investing, I talked to some realtors… They’re great realtors, but they didn’t understand real estate investing, and they kind of discouraged me when I was younger. I didn’t take advice from the right people. I listened to the wrong people, and I want to be a voice that says, “You know what? Being a landlord can be really great.” We have great tenants; our tenants are amazing, and they’ve been our customer, so we treat them right and they treat us right. And if you provide a good product, you can attract good customers.

So we like to teach and share as much as possible. It was in-person, now, a lot of it is online due to the COVID crisis. We’re teaching classes on property management, on private money, showing people how accessible private money can be. We write about it on our blog… So teaching, blogging, sharing as much as possible about this, because we think it can change lives. We know it can change lives. It’s changed our life… So we’re kind of on a soapbox about it. But we want to inspire other people that are on the fence to say, “Hey, give it a try. It’s a lot better than a lot of people will tell you, and it’s changed our lives.”

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

Will Pritchett: I would say probably to reach us directly on Facebook @HomeAgainProp. And then our blog is where I post a lot of the things we’re learning. I don’t sell anything. I just post stories about what we’re learning and the deals we’re doing, and that’s https://www.homeagainsa.com/blog/. We’d love to help anybody that’s on the fence or has questions about private money or about how to manage your own properties. We self manage everything, and we like to help people and it’s amazing when we see someone we’ve helped go through and do a deal that’s successful. So please reach out to us.

Theo Hicks:  Perfect. Will, thanks for joining us today and telling us your best ever advice and your journey, your tips for raising private money. So we talked about how you were able to raise private money. It really came down to just talking about what you were doing with enthusiasm. So you’d only done two deals before you were able to raise that $75,000 from someone at your church.

You mentioned that on that first deal with them you were kind of nervous. You had a formal presentation, a formal package where you had case studies and things like that, and then after that investment, because you did what you said you were going to do, because you gave them their money back, it got to the point where now you just text them an address and they’ll wire you the funds.

And then you also mentioned that you’re able to raise money from people who actually came up to you at a conference you presented at, and you’ve also invested in their deals as well. You mentioned that these earlier lenders get first dibs on their deals. [unintelligible [00:23:56].08] the purchase price, they fund the purchase price and renovation. So you’re not putting your own money in the deal.

You mentioned more specifics on the structure. So 10% interest only, with a one-year term. Typically, refinance within six to seven months to pay them back. You have multiple exit strategies, so you can flip it and sell it. If you’re unable to do the refinance, you pay them monthly, and then you have a three-month prepayment penalty because you want to make sure you provide them with at least three months of interest.

You said that you have an attorney at a title company that you use for closings that helps you write up the note and all the required paperwork, and it’s about $300 to $350. You mentioned that there’s the perfect BRRRs and then there’s the imperfect BRRRs. And for the imperfect BRRRs, you might put a little bit of money in there.

You also mentioned that when you’re going out there raising money, don’t assume you know who has money and who doesn’t have money, because you never really know who can be your next investor.

And then your best ever advice which is twofold— or actually, it was threefold. Number one was to get started. Number two was to have that balance of education and action. If you have too much education and not enough action, you’re not going to go anywhere, but too much action and not enough education and you’re likely to make a lot mistakes.

And then lastly, your lesson from Grandma, I believe it was. You asked her what happens if we lose money and she’d say, “Well, it’s just tuition.” [unintelligible [00:25:11].29] pay a lot of money, and probably a lot more than what you lose on a real estate deal to go to college in order to get the education that they in turn can turn into money in the future. So Grandma told you to think of real estate the same way that you’re doing these deals, and ideally, you make money or at least breakeven… But if you do lose money because you made a mistake, then the lessons learned from that mistake will help you in the future.

So the lesson there is that – going back to the education versus action balance – some lessons you can really only learn by taking action, and sometimes that means you’re going to lose money.

So, Will, I really appreciate you taking the time to speak with us today, especially on your vacation in a hotel room. 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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JF2239: Real Estate Is Not My Passion With Stephen Davis

Stephen is the Founder of Real Wealth Academy LLC, and started investing at 27 with wholesaling. He has experienced flipping, buying rentals, and now holds over 4,000 apartment units. He now focuses on consulting and mentoring people to help them begin in real estate, and today he shares advice, lessons, and what he believes people should have before looking for assistance.

Stephen Davis Real Estate Background:

 

 

 

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Best Ever Tweet:

“I love my real estate, but I don’t like managing it” – Stephen Davis


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 are speaking with Steve Davis.

Steve, how are you doing today?

Stephen Davis: Excellent. Thank you so much for having me.

Theo Hicks: Thanks for joining us. Looking forward to our conversation. A little bit about Steve – he is the founder of Real Wealth Academy. He started investing at 27 with wholesaling. He also has experience in flipping and rental properties and now holds over 4,000 apartment units. He is based in Houston, Texas and you can say hi to him at his website, which is https://getrealwealth.com/.

Stephen, do you mind telling us a little bit more about your background and what you’re focused on today?

Stephen Davis: Well, I’m really focused on consulting at this point. That’s where I spend all of my time. I love my real estate, but I don’t like managing it. People are shocked when I say I don’t like real estate… But that’s just managing. It’s not my passion. Would I ever sell my real estate? No, only under one circumstance – to start another business or to buy more real estate. I love having a second stream of income. But my passion is teaching.

The last 30 years or so, I’ve been a consultant and teaching people how to do what I did. The motivation came from the suffering that I went through when I was working 60 hours a week and struggling… And I won a national sales contest; my reward was they cut my pay by 20 grand a year. That pain of realizing that having a job is the highest risk position you can possibly be in, and that you have absolutely no control. I understand that people are suffering. I understand that people don’t understand money, because it’s not taught in high school or college. That is my mission, is to help ease the pain by teaching people how to use real estate to build wealth, to build passive income, to build that second stream of income, and I love it. That’s where I spend all my time.

Theo Hicks: Perfect. Let’s focus on the consulting. How long have you been doing this consulting for?

Stephen Davis: I’ve actually been mentoring and consulting for 30 plus years.

Theo Hicks: Okay. Do you have a program, or it’s a one on one type situation? Is it the group mentoring?

Stephen Davis: I do a combination. I start people off in group mentoring. But some people, that’s not enough for them. It wasn’t enough for me. I had to get mentors one on one to drive me towards my goals. I do a tremendous amount of one on one. I don’t like to work more than 40 hours a week. But I would say that I’ve done 25 hours of consulting and I love it. It’s not even like work. It’s just sitting with people and seeing their eyes light up when they realize there is hope, that there is something that they can do differently to make a difference financially for them and their family.

Theo Hicks: Do you think people need a requirement to have a mentor or a coach of some sort in order to be successful?

Stephen Davis: Yes, because if you want to learn it on your own, in other words, you say, “Look, I’m not going to pay somebody, I can figure this out on my own” it can take five to 10 years to learn what I can teach them literally in a one eight hour session. And not just me, there’s a tremendous number of great mentors and consultants out there. But I can cut 5 to 10 years off the learning process for people in a one-day class.

Theo Hicks: We did a blog post about mentorship, and one of the things that we focus on is making sure that you’re in the right position or you’re actually prepared to have a mentor… So what are some of the things that you found of people who maybe come into your program and end up not being successful? Is there a thread or a common theme with these individuals? Can they just get a mentor whenever, or are there things that they need to do first  in order to set themselves up for success?

Stephen Davis: I think that there is something that they have to have first. It’s got to be a burning desire to change, because building a second stream of income is work, just like your job is work. If you don’t have that burning desire to do it, a clear understanding that you have to do it, then the mentor can’t instill that. They can share all the facts, they can show you the mechanics of investing, they can show you the mechanics of building that second stream of income, but it’s up to the individual to decide and make a strong commitment that they want it.

For me it was the pay cut. That pay cut was the impetus. When I saw the guy who gave me that pay cut, I wanted to hug him, because it changed my life. If he had not cut my pay, I might still be working 60 hours a week broke. We call it our ‘Why’. Why do you want to do this? Is it more time with the family, more time for romance, more time for travel, more time—and he goes, “Man, here’s my why. My wife of the last 20 years has come down with dementia, which will eventually lead to Alzheimer’s.” He said, “I’ve got to leave her enough money that she will be taken care of.” There’s his burning desire.

Other people, it’s just they want a better life for their children. You’d be amazed how many people enroll in my group because they want to teach their kids this material so that their kids don’t suffer with the same fears and insecurities that they did about money. So they’ve got to have a big enough ‘why’.

I actually turned down a guy who wanted to buy a program from me. I sent him home, because all he talked about was money. Money, money, money, money, money. I’m like, ‘Money’s not going to change your life, unless you have a plan for that money.” I sent him home with my goal setting workshop and said, “Fill this out. Come back next week, and we’ll talk about it.”

You’ve got to have a huge burning desire.

Theo Hicks: I’m not sure what your structure is, but let’s just say you do an hour a week with someone for a year. How much is that talking about the actual mechanics of, “Hey, here’s how you find a deal, here’s how you negotiate, here’s how you underwrite, here’s how you manage it” versus mindset, focusing on having the right mindset to actually go out and do these things?

Stephen Davis: That is the best question I’ve ever gotten in an interview. And you know, the answer is probably 60/40. 60% of the time I’m working on their mentality and 40% or less on the mechanics, because real estate is easy. I was hard. It was hard for me to get myself to do it. I had read multiple books on real estate investing, and guess how much real estate own? None. Because I couldn’t get myself to take action. Then when that pay cut came and I ended up with bad credit and no money, that motivated me. I just wish everybody would be smarter than me. Don’t wait for a financial catastrophe. Do it before the financial catastrophe.

Theo Hicks: What’s the most common mindset block you’ve seen that people have from—maybe let’s not even say getting started, but—well, it could be getting started. I guess I’ll let you answer that any way you want. What’s the biggest mental obstacle you found in the people you’ve consulted?

Stephen Davis: Self doubt is the number one. A lot of times, people have tried other things. I’ll pick on multi-level marketing, even though multi-level marketing works for certain people. They tried multi-level marketing and they failed. They tried maybe even a franchise and failed. As Anthony Robbins says, “What people start believing is that the past equals the future.” It doesn’t. You just haven’t found the right consultant, you haven’t gotten the right support. They doubt themselves because of past failures.

My lesson is that that is not failure, it’s simply a result, and what you do is you analyze your results, and change or modify your behaviors so that the next result is different. It may not be perfect, but it’s going to be better than the first result. It’s got to be self doubt. That breaks my heart, when people who I know are smarter than me, better looking to me, better built than me, and I’m like, “You think you can’t do it and I did it? Come on.” I was a dumb 27 year old kid, bad credit, no money. If I can do it, you can do it.

Theo Hicks: I know a lot of people I’ve talked to who are consultants/mentors, or have consultants and mentors – really, if you kind of break down really anything, it comes down to what you’re doing every single day.  So what is one of the most important habits you think people need to have or successful people have? What’s that one thing that people do every single day that you’ve found common between everyone who’s successful? And on the other hand, something that people who aren’t successful aren’t doing.

Stephen Davis: I think that successful people wake up every day and they either have their goals written down or they have their goals memorized in such a way that it’s the forefront of their thought, when they wake up in the morning. It’s at the forefront of their thought when they go to bed.

I’ve got to refer to Stephen Covey. He talks about one of the habits is, “Put first things first, and put the big rocks in your life first, then the pebbles,” if you’ve seen that video. The successful people put the big rocks in first. They put their family, their romance, their travel, their work. I like to break finance into two parts of a balanced life. There’s career and there’s wealth, and they’re two different things. But those are both big rocks, they go in first. They don’t watch a lot of TV, they don’t waste time. They’re constantly focused on those big rocks. Then people who I see fail are focused on the pebbles. They’re focused on television, they’re focused on anything to distract them from getting to the first things.

I borrow again from Stephen Covey – people get caught up in the thick of thin things. They’re wasting their time. People who succeed don’t let that minutiae get in the way of their big rocks, their big goals and their focus is on those every single day.

Theo Hicks: What’s something that someone can do before they have it memorized, before it’s become a habit, a routine, to have that momentum? What’s something they can start doing to remind themselves of this? I know some people use Post-it notes, and some people have vision boards. What have you found to be the best way to remind themselves of this every single day?

Stephen Davis: I kept a journal. I have to admit that I don’t anymore. But when I was between 27 and probably 40, I had a journal with my goals written down. When I first wrote them down, I would review them every morning. That was probably for six months or longer. And then I would review them about once a week. And I’m not sure how long that was – it wasn’t very long, maybe a year or two – before they became ingrained, and I knew exactly what I wanted and what was important. I think writing your goals down is paramount to beginning this process.

Theo Hicks: I liked your rock and pebble analogy. When you were explaining that, I just thought of  having a massive five foot stone in my house with whatever my goal is written on it and every time when I wake up, I look at this massive rock with my goal on it, and maybe like little pebbles that have the words TV and Netflix or whatever on it. I wonder if anyone does that.

Stephen Davis: I wouldn’t doubt it. If you go to YouTube and look up Stephen Covey on the big rocks, there’s a video in there where what he does is he pours all these pebbles into the bucket and then says, put all the big rocks in. Well, they won’t fit, because there’s so many pebbles. He says, “But what if you changed your paradigm; started with an empty bucket and put the big rocks in first and then poured the pebbles in?”

See there is time for TV. There is time for movies and entertainment and all that. But not if you put those in first; those are secondary. I actually like your idea. It’d be cool to have lined up the eight big rocks; family, fitness, relationships and romance, travel, career, right on your sideboard or chest of drawers right as you’re walking out the door every day. That’s a pretty neat idea.

Theo Hicks: Yeah, I know people learn in different ways, but that visual you were talking about, with the cup and the rocks – I’ve definitely seen that before. That’s a really good analogy.

Alright, Steve, what is your best real estate investing advice ever?

Stephen Davis: Man, you told me that and you gave me a good warning and I’m not prepared. I’m going to have to go with, “Never give up”. That’s the best advice that I can give you. When you get to your first two or three rental houses or you invest in your first two or three apartment complexes or strip shopping centers or whatever you choose, don’t stop.

I met a guy the other day and he goes, “Well, I’ve had two rent houses for 10 years.” He bought both those rent houses the first year that he started investing. What happened? He stopped. He lost his vision. He didn’t pay attention to his goals. Never give up. Keep moving forward.

Theo Hicks: Alright, Stephen, are you ready for the best ever lightning round?

Stephen Davis: Yeah, you told me about this, but I’m not sure what it is.

Theo Hicks: Well, you’re about to find out after this quick break from our sponsor.

Stephen Davis: Okay.

Break: [00:17:02] to [00:17:55]

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

Stephen Davis: Okay, it’s got to be the Seven Habits of Highly Effective People by Dr. Stephen Covey. That is not a real estate book. It’s a mindset book. But when I finished reading that book, my life was different. It’s an amazing book.

Theo Hicks: If your business, whether it be your consulting business or your real estate business, were to collapse today, what would you do next?

Stephen Davis: What would I do next? I’m not allowed to do either of those, huh? Probably teaching.

Theo Hicks: No, you can choose to do one of those again. There’s that option.

Stephen Davis: I’d go right back to it. Yeah, I would go right back to it.

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

Stephen Davis: Teaching is my favorite way. I honestly feel proud that I give more than I charge for. The second way is just financial. It’s getting that 10% or more of your earned income out to charities that you believe in.

Theo Hicks: Lastly, what’s the best ever place to reach you?

Stephen Davis: I love email, asksteve [at] getrealwealth.com.  And you can email me any questions 24 hours a day, I’ll get back with you.

Theo Hicks: Perfect. Well, I really enjoyed our conversation, Steve. I don’t get to have these types of mindset conversations a lot on the show, so they’re always very enjoyable.

Just to kind of summarize some of my biggest takeaways… The first one was, why do people need a mentor, and you said very succinctly that if you do something on your own, it’s going to take you a year, five years, 10 years to learn a specific trade… Whereas if you have a mentor, they can teach you that in one session or in one week or in one month or however long it takes, but it’s not going to be as long as it would have taken for you to do it on your own. So a huge time saver.

We talked about when is the right time to get a mentor or what type of preparation you need before you have a mentor, and you said that people need to have a burning desire to change, and that comes down to having a strong why. You gave a couple of examples of your why, which was when you got your pay cut, you gave an examples of someone’s wife who was sick, and people who want better their lives for their children. And then you also mentioned what a bad ‘why’ is, what a weak ‘why’ is, which is just wanting money.

You mentioned that when you’re teaching your clients real estate, it’s actually 60% mentality and 40% mechanics. I really liked what you said, “Real estate is easy. I am hard.” That was a really good quote.

Stephen Davis: Thanks.

Theo Hicks: You talked about the biggest obstacle being self-doubt. You talked about the best habit being putting the big goals first which you said were finance being broken into the career and the wealth, as opposed to the small things, like basic things that are kind of a distraction. And then you gave your best ever advice, which was never give up. Once you start, do not stop.

Again, Steve, I really enjoyed this conversation. Best Ever listeners, I’m sure you enjoyed this conversation as well. Make sure you take advantage of him providing you with his email address. 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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JF2229: Wholesaling Deals With Emilio Basa

Emilio Basa is a full-time investor with 6 years of real estate investing experience who started off by wholesaling his first property within 4 months of learning how to wholesale. He consistently will wholesale about 3-5 a month and with this experience, he shares how he goes about growing his business so you can take the same steps.

 

Emilio Basa Real Estate Background:

  • Full-time investor
  • 6 years of real estate investing experience
  • Portfolio consists of 5 rentals, 2 flips, and over 30+ wholesales
  • Based in Detroit, MI
  • Say hi to him at: www.quickpropertysolutions.co 
  • Best Ever Book: Traction

 

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Best Ever Tweet:

 

“I network with other wholesalers to share deals and grow my business” – Emilio Basa


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 Emilio Basa.

Emilio, how you doing today?

Emilio Basa: I’m good, Theo. How are you doing?

Theo Hicks: I’m doing good as well. Thanks for asking and thanks for joining us. Looking forward to our conversation. A little about Emilio; he is a full-time real estate investor with six years of experience. He has five rentals, two flips and over 30 wholesales under his belt. He is based in Detroit, Michigan, and his website is http://www.quickpropertysolutions.co/.

Emilio, do you mind telling us a little bit more about your background and what you’re focused on today?

Emilio Basa: Absolutely. I’ve been doing it for six years. When I started, I primarily was strictly wholesaling. When I first started, I say six years, but to be honest, the first two to three years, I was doing it part-time because I was always doing other businesses. I did web design. I was also a musician in the Detroit area, so I was still doing gigs and things like that. I really was doing wholesaling just to try it out and just to do it part-time.

And then just over the years, I just started realizing that—I kind of took to it really quickly. I think I did my first deal in—after learning wholesaling, I did my first deal in four to five months. It wasn’t like a big deal. For me at a time, it was a lot. It was a $1,000 assignment. I started doing wholesaling. And then what I started doing was I started gradually trying other investing methods like rentals and flips, and I’m actually doing my first note this year, and just trying different strategies. But the core of everything has always been wholesaling for me.

Theo Hicks: How many wholesales are you doing per year or per month or whatever frequency is you wanna say?

Emilio Basa: It really depends. Consistently, I’m doing three or four a month right now. I think in December and January, I think I did six a month. It comes and goes. I think with the COVID thing too, we kind of slowed down a little bit.

Theo Hicks: Sure. What’s your preferred method for finding these deals to wholesale?

Emilio Basa: Funny enough, 70% to 80% of my business was actually joint ventures. In my market, you’ve got to be careful with some wholesalers, because some of them are kind of shady and they kind of try and steal the contract from underneath you. But I’ve always been somebody really easy to do business with and I always worked really hard to get a deal sold. A lot of the times people just started bringing me deals, and then more and more, I guess word got out because people just started reaching out to me.

I wanted to say, the last two quarters of last year, almost all my deals were joint ventures. I focus on [unintelligible [00:05:48].21], joint ventures, direct mail… That’s been trailing off. I don’t really do cold calling. And then Lately, I’ve been doing text blasting, which has been working phenomenal, actually.

Theo Hicks: I definitely want to talk about the texting, but I want to circle back to the JV. You said that people are bringing you deals.

Emilio Basa: Yeah.

Theo Hicks: What does that look like? They’re coming to your house? They’re calling you up? How do they know who you are?

Emilio Basa: They just call me up. Yeah, they just call me up. What I do is, whenever I have a deal, I put it on every social media platform you can think of, and then people reach out to me. When people reach out to me, I’ll just ask; are you a cash buyer? Are you a wholesaler? Most of the time people will say, “I’m a wholesaler looking for deals for my client.” And then I really just kick it with them, and just talk about their business and how their wholesale deals are going. And then I just pretty much say, “Hey, I’m growing my buyers list and I’m very transparent. I’m fair.  I’m easy to do deals with.” And then I really just pitch the pros of doing deals with me, which that’s pretty much it. Everybody works hard together to get the deal done, and people just like doing deals with me. So people just started bringing me deals.

To this day — the one deal that we’re closing on now, it’s three houses, online contracts; that came to me from another investor that I did a wholesale deal with. They’re actually his houses, and we’re doing that deal together right now.

A tip for a lot of people too is if you’re trying to build your wholesaling business, whenever you see, “We Buy Houses” signs in the road,—I read somewhere some people take those signs and they take them out, they throw them in the trash. I call all those signs and then I just say, “Hey, are you a wholesaler? Because I’m a wholesaler and a buyer.” I call all those signs. And then a lot of the times you find some really good people.

Theo Hicks: Nice. Basically, you’re networking with other wholesalers, so that a wholesaler brings you a deal. And then you’ll put it on social media and then another wholesaler will reach out, and you’ll kind of JV together to sell that deal.

Emilio Basa: Yes.

Theo Hicks: Okay, I just wanted to make sure I had that right. Is it just a 50/50 split of the assignment fee?

Emilio Basa: It depends on what the deal is. That’s the thing. It’s like, when you’re doing a deal, you just wanna be transparent with everybody. Whoever has it in the first position, you say, “Hey, how much do you have it under contract for?” If they trust you and they want to do deals with you, they’ll tell you. At the end of the day, I’ll tell them, “I don’t care how much you make. You can make 20 grand, 30 grand. If I make two, then I make two. But if it’s a good deal, and I could find a buyer, then that’s what it is.” Because some people won’t tell me and then some people are like “I want 10k, and I’ll take nothing less.” I’m like, “Okay, that’s fine. Well, I’ll try and do this. And I’ll try and work the deal this way.” And then what I do is I have a JV agreement.

What I used to do was either splits, or I had two contracts; one was a 50/50 split, and the other one would be where I’d add my fees on top. And usually, that worked out pretty well, until sometimes with some deals, I’ve had up to six wholesalers on one deal. It was definitely—it was a daisy chain, that’s for sure, because one guy had it, and then another guy told me about it, so he wanted to cut… And then I told another guy about it, who told somebody else and that somebody else brought the buyer.

Theo Hicks: Oh, man.

Emilio Basa: I know, it was a big mess. The way I work out in my JV contract, I literally have six blank lines. And then I put down everyone’s LLC, and then next to the LLC, you write the amount down, and then at the bottom, it says ‘total’ and then everyone has to sign it. So then when you take that agreement, you send it to the title company. There’s two ways you could do it – everyone could get paid straight out of the settlement statement, or one person can take the lump sum check, and then pay everybody out. But that takes a lot of trust. A lot of people won’t do that. They rather would be on the settlement statement, on the HUD, and get paid out that way.

Particularly, I don’t like doing daisy chains, but sometimes some deals that’s what happens. It just unfolds that way. If you have a deal and no one else is buying, but this one guy found a buyer, but it’s not his buyer and it’s another one’s buyer, at the end of the day I’m like, “Dude, let’s work it out.”

Theo Hicks: Yeah, so it sounds like it’s pretty negotiable, right? It’s kind of like what people want.

Emilio Basa: It is. Yeah, yeah.

Theo Hicks: Okay.

Emilio Basa: The tricky thing is that when you’re dealing with two people like me and another wholesaler, our values pretty much match up. Everybody just wants to do a smooth deal. No one gets too greedy, things like that. And then the more people you add, the more personalities you add. So sometimes somebody actually might get really greedy. If you get one person that kind of messes up and messes up the deal, then that’s where it could kind of derail the deal. But for the most part, especially when they start finding out how many people are involved, there’s not a lot of meat on the bone, but everyone wants to get a deal done, so let’s get it done.

Theo Hicks: Sure. Let’s transition to talking about the mass texting you do. Walk us through that.

Emilio Basa: I just started doing it. I’ve probably been doing it for two months now. I’m not going to lie, I pay about $3.50 a bandit sign, and I used to put them up myself. But now I’ve got one guy that delivers them for me, so I pay him three bucks. So my cost per bandit sign is usually $6.50 or $7 a sign.

My response rate was, let’s say 10-15 percent, and sometimes I get some pretty good deals. But with text blasting, it’s 20 cents a text and you could send out 1,000 texts. If you just get one deal, the cost per lead is extremely, extremely low. You’re spending $200 to close out on a contract as opposed to doing like a bandit sign or direct mail. Let’s see, I’m closing one today and that was from a text blast from four weeks ago. I closed one, two weeks ago, that was also from a text.

Theo Hicks: Are these text to wholesalers or are these to the actual sellers?

Emilio Basa: The tricky thing is for text blasting wholesalers, a lot of them are already on my email blast. If ever I need a deal, I’ll either just send out an email blast and just say, “Hey, wholesalers, anybody got a deal that you’re looking to sell, reach out to me,” or when I call people on the bandit signs, I’ll say, “Hey, what’s your name,” and then his name’s Jason. I’ll put in Jason-wholesaler. So whenever I need a deal, I’ll literally go on my iPhone, type in wholesaler, and maybe like 50 wholesalers pop up, and I just text them all the same message. I just copy and paste it and I say, “Hey, I need a deal, what do you got?” And then I paste it to the 50 wholesalers, and you’ll get a deal by the end of the day for sure.

Theo Hicks: Nice.  So for the 20 cents per text, though—

Emilion Basa: That’s to the seller.

Theo Hicks: Because you’re going to find a deal to put under contract. How are you getting their numbers? Is there like a service that does it all for you, who you’re targeting? Walk us through that.

Emilio Basa: I just started using Prop Stream.

Theo Hicks: Sorry, what’s it called?

Emilio Basa: Prop Stream.

Theo Hicks: Prop Stream. Okay.

Emilio Basa: Yeah. Prop Stream is a software where you can look up different lists. As a wholesaler or as an investor, your best deals come from motivated sellers. What you want to do, instead of targeting a blanket area, let’s say you’ve figured out one county’s got 80,000 leads or 80,000 people that own homes. But then what you want to do is you want to find the motivated list out of there. There’s either pre-foreclosures, there’s bankruptcies, divorces, things like that.

With Prop Stream, what you could do is you could type in a county or a city and then you could start adding different attributes to filter down to your criteria of what you’re looking for. You could target specific lists, so you could target — absentee owners is a really popular one. You could do absentee owners. And then what you could do is you could filter down by—if you only buy three bedrooms and up, so you could filter that.

An important one that I do is I get rid of all the LLCs. I do individual owners only. So that filters out a lot of LLCs. And then what you’ll do is you’ll get a list at the end of it. What you could do is you could export that list. What I do is I take that list, and you can either skip trace it in Prop Stream, but whatever text blasting service you use, and there’s a ton of them. I think there’s one called Roar, there’s one called Sherpa, there’s Batch Leads… You could take that list, and then you could put it in your text blasting software, and then you just start sending it out and then see who’s interested.

Theo Hicks: So you’re having a lot of success with that. You’ve done two deals so far. What was the assignment fees in those?

Emilio Basa: One was 15 and this other one that was a double close, it’s a five.

Theo Hicks: How quickly are you able to get these deals under contracts after someone reaches out to you? Is it pretty quick? Is it that day? Or does it need a little bit more work?

Emilio Basa: No, it depends on their motivation and it depends on their situation. Ideally, I would love to get it under contract after the first call. But a lot of the times the sellers – some of them might be motivated, but they’re not really motivated to close that day. A lot of the times, you really have to work a lead by just following up with them, and then just building that rapport.

I’ve got a deal right now – it’s in Moore, Michigan. The lady, I probably called her four or five times. Really all it is, is just like you catching up with her to see how things are going. One thing that I’ve changed this year is I actually learned wholesaling from a few people, but the one that it’s honestly is like my mentor and my largest influencer is Sean Terry. A lot of people that know Sean Terry – that’s the Flip to Freedom students… With Sean Terry, he’s a really good salesman. I don’t want to say it’s the hard sell, but when he goes into an appointment, he’s leaving with a signed contract. That’s the goal. A lot of the times if somebody isn’t terribly motivated, or they’re in a situation where they’re kind of getting to that point, there’s no point in trying to do a hard sell.

What I’m doing lately is I’m actually not trying to do a hard sell. If listing it with an agent might be better for them. I actually don’t think I’m the right buyer for you. I actually think an agent is better for you. Have you tried being an agent? Have you tried doing this? Have you tried doing that? What happens is is that whenever you start suggesting them other options than you buying it—because they’re on pre-foreclosure list, they’re used to people bombarding them trying to really pitch him to sell that day. When they talk to somebody that honestly says, “I don’t think I’m the right buyer for you,” it kind of puts their guard down, and they could start talking to you as if you’re not trying to sell the house, you’re really just giving them your honest opinion.

They appreciate the transparency more than somebody that’s just looking for that person that’s truly motivated, because I think some wholesalers – if they’re not truly motivated, they’ll really probably just walk away from the deal. But a lot of the times, if you just build that rapport, and you’re there, and you call them up and just see how things are going, they appreciate that more than somebody that’s just trying to buy their house.

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

Emilio Basa: I would say be uncomfortable, which means I talked to a lot of newer investors, and a lot of them, they’re making that first call or they’re doing their first walkthrough, and sometimes — I know a ton of them that have a bunch of calls that they have to make and they just stare at the phone… Or bandit signs. They have to put up a bandit sign. I was just talking to somebody the other day. They ordered 50 bandit signs and they were ready to go and then they went out that night and literally they didn’t do it. A month later, the bandit signs are still in their garage, just sitting there. That’s the thing – be comfortable with being uncomfortable. Because when you start off with one thing like wholesaling, wholesaling is to me the—I don’t wanna say kindergarten. It’s like elementary. It’s like the basics of real estate investing.

What you’re going to do is you get out of your comfort zone and then when you start graduating up to other things, like when you start doing your first flip, or doing your first rental, you’re going to do things that are very uncomfortable, and you have to get used to that, because by you being uncomfortable, you’re stretching out and you’re growing as a person, as an investor.

Theo Hicks: Okay, are you ready for the best ever lightning round?

Emilio Basa: Sure, do it.

Theo Hicks: Okay.

Break: [00:16:48] to [00:17:39]

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

Emilio Basa: A book by Gino Wickman called Traction. That’s a really, really good book. I just started it, I haven’t finished it, but it’s a really good book about scaling out your business and trying to put a team together and creating a vision for your business. It’s just been a great book so far.

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

Emilio Basa: I’ll be honest, I’d probably would start the same business. I’d just starting another same business. That, or — I was a musician before. If I could try and make money as a musician, then I might go back to that.

Theo Hicks: Tell me about your best wholesale deal, your biggest assignment fee. Kind of walk us through how you found it, who you sold it to, things like that.

Emilio Basa: Well, I got two that are tied. My biggest one was in Detroit. It was a double close. We made about 26k on that one. That came off of a bandit sign lead. That was an amazing deal because I didn’t even have to negotiate the price. He said his price and I was like, “Holy crap, that’s a really good price.” I was like, “I’ll meet you there tomorrow,” and he met me up there. I built the rapport… It took them a week to sign it, but that was a pretty good one.

But I think honestly one of my favorite deals, my best deal that I remember was – I do virtual wholesaling too, and I was doing deals out in Washington, out in Seattle. I wasn’t doing houses, I was doing vacant land. I remember I just bought the course on how to do virtual wholesaling land, and then three months later, this deal pops up and that one was a $20,000 assignment off of virtual wholesaling.

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

Emilio Basa: I give a lot of advice over the phone. I don’t really mentor, but I get a lot of wholesalers that are new to the industry, and I love to just talk to them about how to grow their business. Any advice I could give. Oh plus, I also have a YouTube channel where I cover Detroit real estate investing. It’s https://www.youtube.com/quickpropertysolutions. I also look out for out of state investors that are buying in Detroit, because a lot of them get burned or get their money stolen or something like that. I created a YouTube channel where I’m starting to give advice on that channel as well.

Theo Hicks: And then lastly, what’s the best ever place to reach you probably just reach you?

Emilio Basa: Probably just reach out to me — I think the YouTube. I’m very active on YouTube. If anybody was interested, they could go on there and leave a comment, or just go to my website, http://www.quickpropertysolutions.co/, or the YouTube, which is https://www.youtube.com/quickpropertysolutions. I’m on Instagram too and Facebook, so they could pretty much find me anywhere.

Theo Hicks: Well, thanks for joining us, Emilio. I really enjoyed our conversation; lots of interesting takeaways. I definitely like your mindset. It seems like you go against what most other wholesalers do, which is helping you be successful.

A few of the things I hold from this was I liked how you mentioned how some wholesalers see a bandit sign, they want to yank it out of the ground and throw in the trash, light it on fire.

Emilio Basa: Oh my God…

Theo Hicks: Whereas for you, you actually call them up because you found a lot of success doing joint ventures with wholesalers. It’s kind of like 70% to 80% of your deals have been JVs, you put your deals on social media, and you’ll have people reaching out to you that actually happen to be wholesalers, and those are people that will do deals with.

You also mentioned that you do text blasting, so you kind of walked us through that and why it is kind of a much lower cost per lead.

You said if you use a Prop Stream as a software, you talked about how to create the list, make sure you’re targeting a specific county, find motivated sellers list, like pre-foreclosures, delinquencies, divorces, absentee owners; you can filter by the number of bedrooms. You’ve personally filtered out all the LLCs, you only want to target individual users. Then you export that list into the text processing software that will send text messages to all those people.

I also liked how you said whenever a wholesaler calls you from a bandit signs or whatever, you’ll save their name in your phone as wholesaler. So whenever you need a deal or you have a deal, you just have your own kind of customized text blasts with your cell phone, you just blast all the wholesalers in your phone.

You also mentioned that when you’re talking to them, you don’t do the hard sale. Instead, you kind of just build a rapport and be honest, even if that means that you believe you don’t have the best option for them. By doing that, you found that they open up a lot more and are willing to work with you a lot more.

Lastly, your best ever advice, which was to be uncomfortable and you gave a lot of examples about that.

Emilio, again, thank you so much for joining us today. 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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JF2226: 7 Figure Flipping With Brad Smotherman

Brad Smotherman is a full-time real estate investor with a 7-figure flipping business and 11 years of experience. He started as a realtor at 17 years old after finishing highschool and he saw how the successful realtors started to struggle after the 2008 crash and he quickly decided that he did want to deal with that himself in the future when he was near retirement so he decided to pivot to focus on investments. His long term goal is to become the bank and own all of his properties on paper through owner financing.

 

Brad Smotherman Real Estate Background:

  • Full-time real estate investor who owns a 7-figure flipping business
  • 11 years of real estate investing experience
  • He’s completed 550 transactions focusing on flipping
  • Based in Nashville, TN
  • Say hi to him at: www.bradsmotherman.com 
  • Best Ever Book: 12 Rules of Life 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Focus on your mindset first to make sure you are ready and willing to pay the cost of success” – Brad Smotherman


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 Brad Smotherman.  Brad, how are you doing today?

Brad Smotherman: Very good, Theo. I appreciate you having me on.

Theo Hicks: Absolutely. And thanks for taking the time to speak with us today. A little bit about Brad. He’s a full-time real estate investor who owns a 7-figure flipping business. He has 11 years of real estate investing experience, and he’s completed 550 transactions, with a focus on flipping. He is based in Nashville, Tennessee, and you can say hi to him at his website, which is https://www.bradsmotherman.com/.

Brad, do you mind telling us a little bit more about your background and what you’re focused on today?

Brad Smotherman: Certainly. I got involved in real estate when I was 17 years old. I woke up one morning and decided to get my real estate license. Now, Theo, I have no idea what made me do that. I didn’t go to bed thinking about real estate, but I woke up and I was like, “Well, I’ll do this.” And I was just finishing high school, so I got my real estate license. I sold real estate through college. That worked out extremely well until the crash happened.

What I saw in middle of the real estate collapse was that the real estate agents that I knew that had done extremely well in 2004, 2005 and 2006, had once again began to struggle. I didn’t want to do that in my 50s and 60s. The people that I saw that weathered the storm the best, were the people that had long term assets with long term cash flow, so I decided, well, I’ve really got to become an investor some way, somehow.

In 2010, I retired my real estate license to do investment. From that point, we went from startup to success to scale, and at this point, we’ve bought in 21 states and we’ve had a lot of fun doing so. That’s kind of a recap of my previous 15 years.

Theo Hicks: What is your focus now?

Brad Smotherman: In terms of the focus, a lot of what we do now is we create owner finance notes. We’re buying creatively, we’re selling with owner financing, we get a down payment, we get a note, and then we get cash flow in the interim.

Theo Hicks: You’re buying properties and then you’re fixing them up, and then you’re selling them to people using owner financing, so you’re basically a lender in that case?

Brad Smotherman: Yeah, we’re becoming the bank. And my long term goal is to own most of my net worth in paper. I have this idea that property equals problems and liability. If I owned everything in a file cabinet, which was my notes and deeds of trust or my notes and mortgages, then I’d be extremely happy. But one caveat there, we don’t really fix the properties. Whenever we’re doing owner financing, one thing that I found is that there’s more money in financing than in fixing. If we look at the tallest building in any major city, I have yet to see the tallest building in a major city be a construction company. But I’ve certainly almost always seen it be a finance company, either a bank or an insurance company. We’re trying to get more into the interest income and the note side of the business versus owning property and fixing property.

Theo Hicks: Okay. Do you buy just straight up notes too or are you just focusing on this right now, where you buy the property and then do owner financing?

Brad Smotherman: Yeah, I’m not really much on buying notes. The reason for that is, it’s really cash-intensive. Whenever we’re creating notes, we’re able to do that with very little cash in the deal, and that just makes it to where our yield is, I hate to say the word obscene, but we have very, very high yields on our notes because we keep cash out of the deal. Whenever we understand negotiation deal structure, then we can do these kinds of things that are pretty high level.

Theo Hicks: Can you walk us through an example of one of these deals?

Brad Smotherman: Sure. Certainly. My first deal ever, and I still remember when the lead came in because this was August of 2010… A very hot day, gas was $4 a gallon, I barely had money to put gas in my truck, I had a Dodge Ram at the time, and for those of you guys that are pickup truck owners, you know what I’m talking about.

I still remember the lead came in and I thought, “Gosh, I just don’t want to deal with this person.” I’d had eight months of failure. I hadn’t bought a house, and I was just really struggling. But then I checked my commitment.  I was like, “Okay, well, Brad, you wanted to do this business, and you quit accounting to do this business. So let’s go do this business.” The voicemail was not unlike any other, just a basic, “Hey, I have a house I need to sell. Call me back.” I called him back, set the appointment, it was a divorce situation.

Here’s kind of the numbers behind it. In first position on this deal, the sellers owed $97,000. And they were 100% fine with me taking over payments on that 97k. What I did before I closed on the deal—and there was no walk away. The purchase price was $97,000, and what was owed was $97,000, s