JF2085: Fake it Till You Make it With Aaron Fragnito

Aaron is the Co-Founder of Peoples Capital Group and the Host of New Jersey Real Estate Network. Aaron is someone who developed a plan to become a real estate investor and went after it right away. He shares his journey from no experience to a realtor, wholesaler, flipper, and now syndicator. He shares some of the mistakes he made with management companies and how he is able to keep his 4 core investors even when he was making mistakes to now 30 investors.

 

Aaron Fragnito  Real Estate Background:

  • Co-Founder of Peoples Capital Group (PCG)
  • The host of New Jersey Real Estate Network
  • A Licensed NJ Realtor and a Full-time real estate investor.
  • He has Completed over 250 real estate transactions, totaling more than $40M, Fixed & Flipped over 50 houses, wholesale 100+ properties, and Manages an 8 Figure Portfolio of Private Real Estate holdings
  • PCG Works with qualified investors to create passive returns through local commercial real estate.
  • Say hi to him at: https://www.peoplescapitalgroup.com/
  • Best Ever Book: Mel Robbins books

 

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Best Ever Tweet:

“I am always educating” – Aaron Fragnito


TRANSCRIPTION

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

Aaron Fragnito: Very good, Theo. How are you doing today?

Theo Hicks: I’m doing great, thanks for joining us. Looking forward to learning more about what you’ve got going on. Before we get into that, let’s talk about Aaron’s background. So he’s a co-founder of Peoples Capital Group, PCG. He’s the host of New Jersey Real Estate Network and is a licensed realtor in New Jersey as well as a full-time real estate investor. He has completed over 250 real estate transactions totaling more than $40 million. This is included over 50 fix and flips, over 100 wholesales, and he currently manages an eight-figure portfolio of private real estate holdings. PCG also works with qualified investors to create passive returns through local, commercial real estate. You can learn more about his company at peoplescapitalgroup.com. So Aaron, do you mind telling us a little bit more about your background and what you’re focused on today?

Aaron Fragnito: Sure. So I got started in real estate about ten years ago. Initially I was turned on to do it by Rich Dad, Poor Dad, of course. I’m sure everyone says that same story. I hear it all the time. So I read Rich Dad, Poor Dad around senior year of high school. I was an entrepreneur, major at Rowan University, wasn’t exactly sure what I wanted to do with my life, but I figured I did have a passion for real estate, and after reading that book, I recognized that the tax code is actually in favor of people who pay themselves through ownership of real estate. So I figured that out, and then I started reading David Lindell and Trump University, and I think I even looked into some Joe Fairless stuff at the time.

About ten years ago, Joe was getting started, the syndication space was really new then as well. So I knew I want to own a lot of real estate and want to make passive cash flow throughout, but just didn’t know how to get there. So I made a list and I said, “Okay, I want to own $10 million real estate and have a net worth of a million with $100,000 passive cash flow in ten years.” So that was about ten years ago; that was my goal. I wrote it down, and I said, “Okay, well, I’m gonna work backwards from here. I need to make connections, learn the industry, save some money, figure out how real estate syndication is created and run… And to do that – maybe I’ll get my real estate license to start.”

At the time, I actually moved out to Colorado to teach kids how to ski for six months after I graduated college, read a bunch of books on how to start a real estate investment company, they all made it look so easy, moved back to Jersey, got my real estate license and started executing on that plan.

I made a lot of mistakes, teamed up with the wrong people for my first fix and flip, lost a little money, did a lot of the wrong things, didn’t do the right due diligence, hired the wrong contractors – I got tons of stories – hired the wrong management companies getting started, ended up having to develop our own management company… But a couple years into the business, working as a realtor, you learn short sales and start to make some money.

I started working with Seth Martinez who is my business partner today, and we really complement each other’s strengths and weaknesses. So he’s great at operations and management of the real estate and improving our systems and strategies here in our business, and I’m more on the branding and fundraiser investor relationship side. So we work really well together. We bought a six family from a We Buy Houses sign that used to work really well, that I would staple on telephone poles in a suit and tie in the middle of summer. I’d get a bunch of listings and deals with those We Buy Houses signs. So we’ve had a six family back in 2013 or so, I bought it for about $220,000, put $50,000 into it, bought, renovated, refinanced out, it appraised for well over $400,000, got our money back and a little bit on top, and raised some capital and built on to the next level and got up to about 100 units over five years, all while flipping a lot of houses as well, and wholesaling at the same time with our residential division. So pretty busy and engaged so far.

Theo Hicks: That’s great to hear, and we do apartment syndications, so we’ve got a lot in common and I’ve got a lot of questions for you. Let’s talk about your first syndication deal. So did you syndicate that six-unit deal?

Aaron Fragnito: We didn’t actually syndicate it. Our first syndication deal was a 25-unit in South Jersey, and we put together four investors who all brought in $100,000 each, and we bought a 25-unit for below market value. We took the cash flow from it, put it back into the building, hired a few management companies. One was stealing money from us, it was a disaster, we had to take them to court. Another one just really over promised and under delivered. So by doing that 25-unit, we learned that sometimes you want something done right, and if you’re going to build a big portfolio in one central location, it makes sense to actually have your own management company.

So we developed our own management company through necessity with that first 25-unit, because like I said, the two management companies we hired, one was bad, the other one was worse. So we were like, “Well, if we switched to a third management company and they screw us too, we’re going to look really bad to our tenants in this building, and we’ll go downhill.”

So we developed our own management company about seven years ago, and that is our competitive edge now today that allows us to really reposition these buildings like a fine-tooth comb. So many moving pieces when you buy a mismanaged apartment building, and you’ve got to really knock it out of the park for your investors. So relying on other management companies was a risk I found and a flaw in the overall syndication model. So we tried to correct that with developing our own management company here. It does limit where we can buy, but we love this North Jersey market, and we do very well here with this North Jersey market.

Theo Hicks: You’re really good at proactively answering my questions. I was gonna say, “Oh, what are some of the pros and cons of having a management company?” but you answered all those for me. So we’ll talk about the investors instead. So your first 25-unit deal, you said you had four investors. Who were they and how did you get them to invest?

Aaron Fragnito: Well, let’s see. One of our first investors– great story. Well, the first monies I raised in real estate was actually for fix and flips, but those investors, I rolled them into buying the apartment buildings over time… Because in the fix and flips, we weren’t successful. I would like fail at a fix and flip, and be like, “Here’s what I did wrong. Here’s how I corrected and I got rid of that partner etc” They would reinvest me, so I salvaged those relationships. I also wrote checks to the closing table to make sure no one ever lost money as I was learning the business… But what I did is I went to real estate networking event and I made a beeline for the owner of the event, and I said, “Let me talk about what I’m doing. I’m learning short sales, I’m getting into a fix and flip, and my topic is going to be Fake It Till You Make It.” So I literally did a presentation called Fake It Till You Make It, and it was probably not a very good presentation. By the way, my wife today was in the crowd. I met her that night, ended up marrying her few years later. So just a wild story. The first presentation I did in real estate ended up being about how I met my wife, but different story…

So there were some people in the crowd that were intrigued with what I was doing, and I always enjoyed public speaking. They saw my passion for this industry and they decided to invest, and that was how I got one investor around $100,000 and another investor was from Seth’s network, actually. He knew a very wealthy individual in New York City that owns his own real estate, that he had worked with before in the medical building industry. So Seth had sold a medical building company, and he knew this doctor. Yeah, it’s great business to meet doctors. So just because Seth knew him through medical building and that relationship, it didn’t mean he couldn’t convert that trust into investing in us in real estate. Even though it was our first syndication and we, really looking back now, didn’t really know what we’re doing and had a lot of challenges in front of us.

So again, one investor I had messed up with a flip and made good on it, and she decided to reinvest in me. Another guy was a doctor I knew from a whole other industry, and doing business with years earlier, and just cultivated that relationship into investing them, and then one was actually some people on Seth’s family as well, and then just another investor, but I think it was actually one of Seth’s aunts. So luckily, Seth was a little older and had a little more capital and had good resources there. So I think, actually, three out of the four investors were from his network and I brought in one investor as well. That’s why it’s so important to have partners that have great networks and complement what you’re doing so that you can make sure you raise the capital and have those resources of private investors that Seth brings in and I bring in as well.

Theo Hicks: So for your first deal, you had about four investors, you said, and you mentioned how you found them. That was five years ago, you said?

Aaron Fragnito: That was back in 2013.

Theo Hicks: Okay. So six, seven years ago. How many investors do you have now?

Aaron Fragnito: Over 30.

Theo Hicks: Over 30 investors. So do you wanna talk about how you grew from 4 to 30?

Aaron Fragnito: Sure. Well, it was quite a journey; a lot of hard work behind the scenes. Just recently, I have really, in the last two years, made a conscious transition in my business to not only just stop working so much in my business and more on my business, because as any entrepreneur, I get really caught up answering emails, moving deals, and I’ve really got to focus on my systems overall, and what’s my main goal five years down the road… So in the last two years we really redeveloped our branding system into being more of a thought leader, more polished and professional, but also aimed at just high net-worth individuals, people in this area in North Jersey here. There’s a lot of wealth, and we do events in our office.

I have an office here in Berkeley Heights, and I used to throw a lot of money into fundraising. I’d go into the Hyatts, fancy hotels; I’d put down $3,000, get everyone dinner, and I would do a lot of networking events in there, and that was great; we raised a lot of capital that way. So we started a real estate networking event. We went on meetup.com, we started New Jersey Real Estate Network, and this was about eight years ago or so as well, and I started raising capital that way.

So I would do dinners every month at a hotel and people would come, and I don’t think I made any money on the events. I would charge money to get in, I’d have some sponsors, and at certain times, it felt like I was more of an event planner than a real estate investor, but those events really helped us build our brands. I would then go out and speak in other REIAs. Again, I would go to networking events, I’d make a beeline for the owner of that group, and a lot these guys, they need investors, they need people to come in and speak. They want people to speak at the events, they need a new speaker every month. So even if you’re starting, that could be a great story. Talk about your first fix and flip or whatever it is, your first gig you’re doing, and that’s how I would also meet investors. So I’d speak at events, I’d be honest, I’d talk about my starting points and then my struggles there, but how I powered through them and made good to my investors, and I built the brand that way.

I’d get people to come to my event, I’d feed them dinner, I’d tell them about what we’re doing, and I’d raise capital, and quite frankly, it was very easy to raise capital for fix and flips. So I kind of got off track for about three or four years with Seth, and we did about 50 fix and flips. We had some crazy projects going on, and we got off track with that, but it was a great way to bring in a lot of investors, because people love the idea of getting a first lien position, getting a 12% interest rate and getting their money back in a year or they could take the property back. It’s a pretty good position and it’s pretty quick turnover for investors.

So we raised a lot of capital that way and flipped a lot of houses and made some money and lost some money, and around 2016 or so, we started to recognize that scaling up a house flipping business is, in my opinion, really not all that profitable. It’s not the most profitable part of the business. What’s the most profitable part of real estate is being a listing agent or owning apartment buildings, in my opinion. So we realized that and about two to three years we focused on our apartment building syndication business. As we sold that 25-unit, we made a nice profit, our investors were very happy, and we said, “Wait a minute. It’s actually easier to buy and reposition a 25-unit than it is to flip a dozen houses in a year, and we make the same amount.”

So what we figured out was we want to really double down on that, and then I changed our brand a little bit to attract longer-term investors who were looking for a passive investment, and that’s really a different person than the house flipping individuals you meet at REIAs and such. They’re looking to be more hands-on, and they’re looking to really do a quick investment, get in and out, maybe make an interest rate. What works better for us are individuals that are busy working nine to five, maybe they’re a doctor or a banker or just a high net worth earner, or they just have an IRA with $30,000, they can self-direct into a syndication with us, and they’re looking more for a longer-term passive investment. It’s a different type of investor than the ones you might find in a real estate networking event.

So I had to consciously convert my fundraising brand and my fundraising message to attract the right type of investor over the last two years, which has been one of the bigger challenges for me, not only raising capital, but figuring out who I want to get in front of, what’s that ideal investor I want, and then getting in front of them, whatever that means. Facebook ads, marketing ads, whatever it takes to get in front of that person in the right professional manner, and then know what to say when you finally meet with them.

Theo Hicks: So for the fix and flipper investors, you’d find those at the meetup groups like in-person events, and then for these longer-term passive investors, you’re finding them through online ads?

Aaron Fragnito: Correct. Facebook marketing. I do four seminars a month here in my office in Berkeley Heights. I do six webinars a month as well. I teach how to self-direct your IRA, I go over case studies, I go over current offerings we have on buildings, I have realtor events, I have luncheons, I have evening events, we feed you here as well. So I do roughly the same seminar twice a week or so, but I get all new people coming in to see it, I put different spins on it, but I am just always, always educating. Fundraiser in the syndication space is really just an educator. Now we don’t sell education, we don’t sell books or CDs, we focus on just selling one product we have here which is a turnkey investment into New Jersey apartment buildings, but I’m always educating and it’s all free, and that’s how we raise capital. We build relationships with investors, they come to our events, they see us here, they see another 12 or 15 investors here at the luncheons and whatnot, and it’s chance to ask a lot of questions, listen to a 60 minutes seminar, and about half the crowd usually decides to fill out a form to move to the next step, and that’s a great turnaround, I think, as far as sales goes.

Theo Hicks: Yeah, thanks for sharing that. So we focused a lot on the raising money. The other thing I wanted to talk about a little bit more was the property management company. So I’m going to merge that together with the money question. So what is the best ever advice you have for– well, I guess, a little more context. I know a lot of syndicators will do third party, and you mentioned why you don’t do third party, but now I want to talk about the how to start your own management company. So what’s your best ever advice to an apartment syndicator for starting their own in-house property management company?

Aaron Fragnito: That’s tough; there’s so many moving pieces to a management company. I’d say, the first thing is working with good technology. We do work with AppFolio, which is a very helpful technology, and there’s tons of things like that. We feel like AppFolio is one of the best, so we went with that, and that really helped organize our business and it  allows us to scale up to managing 100 units without having to staff up. It’s almost like bringing on a staff member. Secondly, I have a phenomenal property manager. I have a phenomenal employee, A. Delgado, who does all of our property management, and she’s one of those individuals who, I think, was born to be a property manager. She’s so organized, she’s so good with the tenants, she’s so patient. I couldn’t do what she does. It’s really hard to be a property manager, it’s a thankless job, and there’s so much little nitty-gritty detail to it, and of course, tenants are going to lie to you and break your heart and it’s a tough gig. Same like working with contractors; Seth’s really good with that and I’m not.

So a good system overall also, just not only working with AppFolio, but working with our systems here in office. When work orders come in, working with the right contractors – that took years. I used to have a really good contractor, then I’d put him on payroll and started paying him hourly, and all of a sudden, the jobs took twice as long and cost me twice as much. So I realized you’re actually better off having the contractors as independent contractors, get multiple quotes, make sure they understand they’re not always going to have a job here, they’ve got to give us good production, good service and show up on time and get the job done properly. So we have a lot of good boots in the ground, great contractor relationships here. We’ve got the right small handymen, mid-level handymen, plumber, electrician etc, the right people for the right things… And then just the small guys too that bring out the garbage and clean the hallways. When you have enough units in one place, you have economies to scale, so I can have someone do all that, shovel our walkways when there’s snow, for a lower price, because we have a bunch of units in one area, and these individuals will work for us for a better price because of that.

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

Aaron Fragnito: I think so.

Theo Hicks: Let’s do it. First, a quick word from our sponsor.

Break: [00:19:32]:04] to [00:20:18]:04]

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

Aaron Fragnito: That’s a tough one. I get that a lot on podcasts. I never really have a good answer. The book I’m reading right now is by Mel Robbins. My wife actually turned me on to her. She dragged me to a thing in the city that she was doing the other week, and I actually enjoyed it and got the book and I’ve been reading it a little bit. So Mel Robbins is a self-help coach, and her thing is when you’re grounded by anxiety or stress– and there’s a lot of stress and pressure being an operator, being a syndicator, having to raise the money in time, find the right deal and execute on your projection, so it’s a stressful gig; it’s not for everyone. She does this thing where you count down five, four, three, two, one to get yourself moving in the morning or get yourself not thinking about an issue and just move on. So it’s a lot about just motivating yourself to take action.

One thing I loved about what she said, you’ll never feel like doing it. “If it’s the right thing, you’ll love it every day and you’ll always feel like doing it.” Well, no, that’s not it. I love real estate, I love what I do, but there are days that I don’t want to be here. It’s a tough job. I work 60 hours a week, I got a luncheon on Sunday. I don’t want to be here on a Sunday. I want to go be with my family and friends, but I work hard at it, and I have a passion for it. So not every day’s fun, and that’s what she’s saying. You just got to go for it, get yourself moving, and just keep that mental focus, and she’s like just count down from five, four, three, two, one whenever you’re in a spot and you’re stagnant to get going.

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

Aaron Fragnito: Well, first of all, I have a ton of real estate equity. So we do stress tests here. How much can the market drop? What if rents just stopped growing? What if this deal didn’t work out? So I have a good amount of real estate equity. So everyone’s like, well what if the market drops out? Well, we just buckle down the hatches and keep collecting cash flow. Our business is based on actual holdings of real estate, so I could slow down now and still be okay. The North Jersey real estate market is strong, the demand is strong. If there is such an economic collapse or New York City gets nuked or something and disappears, then we have bigger problems than our real estate values.

So whenever people say worst-case scenario, what if there’s no demand to live around Manhattan anymore? Then I say, well, honestly, where would your stock market be then? What’s this terrible, terrible scenario where no one has any money anymore and no one can live around Manhattan? So we do think we’re pretty recession-resistant. I’m not sure what will cause our business to fall, but we don’t have to sell any widgets. We have the buildings with the cash flow. We’re not selling coaching, we’re not selling anything else. So really, at the end of the day, we just have to keep raising capital and buying buildings, and if we decided to stop doing that, we could just maintain our holdings and maintain our rent growth there through time.

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

Aaron Fragnito: We give back in a lot of ways. I personally donate about 10% of my income between my church and different things like World Vision and Compassion International, which is great. If you go to their website, you can actually sponsor specific kids in third world countries. It’s really crazy stuff. So I love it. It’s such a great feeling. I have almost a dozen kids I sponsor between those two things. And there’s also in general here at Peoples Capital Group, we give back to Mission Clean Water, which brings clean water to Africa, and we are a member of three different Rotary clubs, donate to all the Rotary clubs and different events they have going on, and we sponsor lots of Rotary events, things like that locally. So big Rotarian here.

Theo Hicks: Then lastly, what is the best place to reach you?

Aaron Fragnito: Our website is peoplescapitalgroup.com, and you can check us out there. I have a podcast myself called The Passive Cashflow Podcast, but our website peoplescapitalgroup.com has information about our business. You can apply to qualify for an upcoming investment opportunity. We actually have buildings people can invest in in the next 30 days. So again, that’s our website, peoplescapitalgroup.com to qualify for that investment.

Theo Hicks: Perfect. Alright, Aaron. You’re [unintelligible [00:24:14].26] full of knowledge. I’m gonna try to summarize it, but I’m not going to look at everything because you said so much, and just a lot of solid advice. Everyone who’s listening should definitely relisten to this podcast. We talked about raising money and we talked about private management companies, but we first talked about how you got to where you are today; started off with Rich Dad, Poor Dad, you had made a list of what your goals were – own $10 million with the real estate, $1 million net worth, $100,000 passive income, and then made your plan of action to get that. You started with your real estate license and fix and flipping, and then moved into syndications. We talked about your first syndication – a 25-unit with the four investors and how you’ve had issues with your management company and eventually started your own.

You found your first investors from your fix and flips. So this is your first syndication – from your fix and flips, and then your business partner had a doctor and then this aunt or someone in the family invested, and then one of them came from your Fake It Till You Make It seminar, which also resulted in your wife. That’s awesome. Then we talked about how you grew from four to 30 investors, and you talked about the differences between raising money for fix and flips and raising money for syndications, and you realized that the type of person who’s interested in investing in fix and flips is different from the kind of person who’s investing in syndications. So you had to redevelop your brand in order to start targeting those people who are interested in longer-term, more passive investments, as opposed to the fix and flip investors who are more interested in higher returns, being active and getting their money back early quickly.

So you said that going to meetup groups, and REIA meetings was good to get fix and flip investors, whereas doing something more personal seminars and webinars and lunch and dinner events, Facebook ads and marketing ads to get the passive investment leads.

One thing you did say that was interesting was that these meetup groups and REIAs are always looking for a new speaker. They need a new speaker every single month or week or however often they’re doing it. So just because you haven’t done a ton of deals doesn’t mean you can’t speak at these events. If you’ve done one fix and flip offer, talk about your fix and flip, and then that will help you get the ball rolling on your brand.

You talked about your management company, which you started six-seven years ago, and your four pieces of advice on starting on time management company was one, make sure you’re focusing on technology. So you use the app Appfolio. AppFolio helps you scale without having to bring in a bunch of team members. Number two is have a great property management company, and the characteristics were organized patient and works well with tenants, and your property management company, you said, was born to be a property manager. You talked about having independent contractors as opposed to having one GC on staff, and then you talked about the advantages of having a scale by having a lot of units in one area. So you could have one handyman apply to all properties, one person shoveling snow and raking leaves and things like that. So again, jam-packed with information, definitely worth a relisten for Best Ever listeners. Aaron, thank you again for joining us today. Best Ever listeners, as always, thanks for listening. Have a best ever day and we’ll talk to you soon.

Aaron Fragnito: Thank you.

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JF2041: Wholesale Fail to Rental Success With Michael Glaspie

Michael served in the US Army Special Operations and is a commercial real estate broker who also invests in real estate holding over 35 rental properties, with over $1.5M assets under management. He started out house hacking his first property and gradually went into wholesaling where he actually lost money. This lesson helped him grow and pivot into focusing more on rental properties which led to him getting his license and partnering with a realtor.

 

Michael Glaspie Real Estate Background:

 

Best Ever Tweet:

“There are many creative ways to acquire real estate.” – Michael Glaspie


TRANSCRIPT

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Michael Glaspie. How are you doing, Michael?

Michael Glaspie: I’m doing great, Joe. How about yourself?

Joe Fairless: I’m doing great as well, and looking forward to our conversation. A little bit about Michael – he’s a commercial real estate broker, also served in the U.S. special operations; thank you, sir, for keeping us all safe when you were in the Army, and a thank you to your colleagues as well. He invests in real estate himself too, and in fact, holds over 35 rental properties, with over 1.5 million assets under management. Based in Fayetteville, NC.

First, Michael, how about you give the Best Ever listeners a little bit more about your background and your current focus? Then we’ll go from there.

Michael Glaspie: Absolutely. I am based out here in Fayetteville, NC. I’ve been active duty military for a little over 11 years. When I first started investing, it was in 2014, and I purchased a standard single-family home, 3-bedroom/2-bath, 1,200 sqft. Now, I know many people listening are thinking “That’s not an investment, that’s a liability.” Well, at that time – single soldier, I was young, I rented out each one of the rooms to other people in my unit. And I didn’t know it at the time, but obviously I was house-hacking.

During that period I was looking for many different ways to create revenue, so MLMs, Uber driving, Lyft driving, whatever the case may be… But as I began to do  more research, I saw that real estate was a common denominator in many people’s success stories. So I just dove all in and I started to wholesale during that time, because from all the research, it seemed like just the natural progression. Well, the first two wholesales I completely bombed, lost a lot of money on those. I learned a lot of good lessons…

Joe Fairless: How do you lose money on wholesale?

Michael Glaspie: I’m gonna tell you how. Here in the market, now working with wholesalers – they exchange money upon the signing of the initial contract with the seller. And as long as they put down any type of money, it’s considered a valid contract. Here, they’ll put down a dollar. But me, being so anxious getting started, I’d put down $500, $1,000 on a home that I obviously had under contract for way more than I should have, because I couldn’t pay a buyer to take if off me.

And it actually ended up being pretty bad, because not only did I lose the money during the contract, but I had asked the seller to force her brother who was living in the property out of the property to make it more marketable. So I’ve learned a lot, and I apologized profusely to her back then. Hopefully she’s not still mad at me many years later.

Joe Fairless: So you’ve lost money AND karma points.

Michael Glaspie: And karma points. A lot of karma points. So I stuck with it a little bit longer and I ended up doing (I think) two more successful deals where collectively I made a little over 5k… But ultimately, I realized that the reason that I got into real estate in the first place was to create that passive income, and ultimately I wanted to do that through buy and holds. So I really started to focus on “Okay, the wholesaling thing – that’s fine. But if I’m gonna continue this energy and this focus here, then that needs to be my primary objective”, so I decided to just go ahead and focus on buy and hold.

At that point in time I didn’t have capital, so I started to research more creative ways to acquire real estate. Luckily enough, being here in a military town, we have something where the military forces you to move from location to location. We call it a PCS (permanent change of station), and there was a couple who bought  a house one year, the next year they refinanced it, and the third year the military forced them to move, so they had zero equity on the property. If they were to sell it, they would have to pay somewhere around 10k in closing costs, realtor commissions etc. So I decided to go ahead and approach them with a subject to, or a deed in lieu of… And it worked out in our favor.

Joe Fairless: How did you know about subject-to’s at that time?

Michael Glaspie: Just research. When I started, I read a lot of blogs, read a lot of books, but I went to a lot of local real estate investor meetups… And there was one person who mentioned it at one of the meetups, and he said “Have you ever thought about subject to?” And as soon as he said that, I just deep-dived into it [unintelligible [00:04:50].09] was my best friend then; Bigger Pockets was instrumental in that development as well, and… It kind of worked out.

Now, the way it really worked out was I had an attorney. I knew that I couldn’t really figure this out by myself throughout the whole process, so I found a local attorney who practiced subject to regularly, and I had him actually carry me  and the client (the seller) at the time through the entire process. So it worked out in all of our favors. But once I’d accomplished that, I said “This is a no-brainer. There’s many creative ways to continue to acquire real estate.”

So I continued to go forward. I do multiple – subject to, owner finance deals… I did a VA live-in-flip. Essentially, I used my VA loan to purchase a foreclosure. I fixed it up while I lived in there, and I sold it in less than a year. At that time I made a pretty decent net profit; a little over 20k. But when I looked at the closing disclosure, I noticed that I paid my friend and my realtor at the time very close to $12,000. That was the time that I decided to go ahead and get licensed.

I got licensed as an agent, so I continued to invest myself, but I actually partnered with my current business partner now. She was a dominant real estate agent in the area, that focused primarily on investors. So once we kind of joined forces, we decided to go ahead and build the team as it stands now to cater to not only investors, but to fellow veterans to kind of educate them on the whole mindset of passive income.

Joe Fairless: So you’ve got 1.5 million in assets under management. 35 rental properties. What property is worth the most in that portfolio?

Michael Glaspie: I would say it’s probably an 8-unit that we have. It’s a little over $500,000. Right around $550,000. But when we purchased it, we purchased it collectively in a 21-unit portfolio. It was two 8-units and a 5-unit that we collected all at once, from the same seller. But I would say that that one eight-unit property is probably the most expensive.

Joe Fairless: And how much is that worth?

Michael Glaspie: That’s a little over $500,000. I think last it appraised for $535,000.

Joe Fairless: And will you talk to us about how  you came across that deal and what the business plan is with it?

Michael Glaspie: Yeah, absolutely. We started off cold-calling. We all come from a background of being investors first… So I actually drove by a beautiful little 5-unit in a small subdivision that I constantly drove by throughout my time here in the area… And I decided one day I’m just gonna cold-call them.

I cold-called. Nice, elderly lady, who was just going through a situation where her husband had just passed. She wanted to let go of the property, she didn’t really know how to go about it, she didn’t really trust realtors in the area… So we kind of just — over the course of about six months we continued the negotiations until she was finally ready to accept our offer. Once we got that property under contract–

Joe Fairless: How do you continue the negotiations over that period of time, and not be a pest, but also still be relevant?

Michael Glaspie: Yeah, so I found a good medium of about every 2-3 weeks we’d follow up, but every time I followed up, I tried to provide a solution for her. As I mentioned, her husband had just passed; she was trying to go through some of the tax liabilities involved with that, and getting next to her daughter who lived in California, which is across the country… And there’s so many different things going on that every time I called her, I tried to provide her with a new solution. I gave her contact information for CPAs, I gave her contact information for 1031 specialists. I offered to help her move some of the equipment from one of her properties to another one of her properties… And I just continued to provide as much value as possible.

Over time, I believe that that rapport was built up enough that she just wanted to continue the conversation… And then she became accepting or trusting in me and what my intentions were.

Joe Fairless: That’s a great tip. That’s really good. So I interrupted you… You were negotiating and staying in touch with her in a relevant way by providing a solution every time you talked to her, every 2-3 weeks… And then what happened?

Michael Glaspie: From there, once we got it under contract, I made sure that I took the burden to handle everything – coordinating with the tenants, getting the inspectors in there, getting the attorneys on both sides on board… I coordinated everything, and I ended up making it so easy for her, and so smooth, that she actually came to me and said “Hey, I have more properties that I’d be interested in selling.” And she actually owned quite a few, but we were only interested in a select few of them.

So we identified those other two 8-units, and once we started the process with the first 5-units, we just continued forward and closed them all up. Now, how we financed them – that’s a different story. We did find a commercial lender who was willing to do 25% down, 30-year amortization, so that was good. Interest rates were a little under 6%, so a little higher than normal, but not all too bad… And collectively between me and my partners – there’s four partners – we just raised the money any way we could, because we still didn’t have the money when we were starting to acquire those.

So we took lines of credit, depending on which partner’s approach — some of us took out lines of credit, some of us just had personal money from friends or family… Whatever we needed to do to raise that 25% down payment, and the reserve requirements… And we closed.

Joe Fairless: How did you divide and conquer the responsibilities among four partners?

Michael Glaspie: That’s a really good question. It actually came through some headaches in the beginning. As I’m sure everybody out there knows, once you work with other individuals there’s a lot of opinions that may go around. But what we decided to do was we highlighted everybody’s strengths. Then we just essentially made an organizational chart. And I have to thank the military for that, because that’s how we were groomed, and all four of us are all from the military, so we understood this very well.

Once we divided those tasks based off of our strengths,  we made that organizational chart. We then had monthly follow-ups where that individual was ultimately in charge for that section. For example, when it comes to the accounting and the bookkeeping, that’s my realm. So I talk specifically to the bookkeeper and the accountant about these properties, and I report back to my partners about the results. And so on and so forth.

We have another individual that’s specifically in charge of coordinating with the property management company, and so forth and so on.

Joe Fairless: What do the other two do?

Michael Glaspie: We call that investment relations, and the reason why is because we’re looking at bringing in more investors to invest in that specific LLC. So we currently have 21 properties in that LLC and we’re looking to acquire. I’m sorry, we have 24 properties now in that LLC. It was a 21 acquisition just that time. So he’s constantly bringing in more and more investors to potentially partner with that. And the second one is just capital. He was the only one that was extremely liquid, and we used him. [laughter]

Joe Fairless: Well, did I hear you correct, that you have over 20 properties — I think you said 21 properties owned by one LLC?

Michael Glaspie: Let me rephrase that – it’s 24 doors.

Joe Fairless: Owned by one LLC.

Michael Glaspie: That is correct.

Joe Fairless: Why not have one LLC own one property?

Michael Glaspie: We’ve thought about this long and hard.

Joe Fairless: I bet you have, yeah.

Michael Glaspie: Individually, we have our own portfolios as well, so those are divided up however those individuals chose to divide it up. The reason we wanted to keep it all under one LLC is because our strategy is not to hold these indefinitely. We’re actually looking at repositioning a few of them and then selling them.

We didn’t really see the necessity to do that with such a short turnaround. We’re looking over the next 3-5 years to sell off at least two of the four; because they’re four different locations. So we’re looking at selling off at least two of them. And then from there, we gave the option for some of our partners to actually be bought out as well. That’s built into our operating agreement.

So because we really wanted the flexibility of how we can kind of move around, we wanted to keep it under one roof, because we don’t expect them to stay there that long. We do understand the risk involved in that, and that now all doors are subject to any sort of lawsuit or claims against us or whatever the case may be… But it was a collective decision where we sat down and said “Maybe it won’t be too bad.”

Joe Fairless: What’s been the most profitable property to date?

Michael Glaspie: Actually, for me in my personal portfolio is was one straight off the MLS. It was priced at 60k. I got the seller to pay all the closing costs. It was turnkey, for all intents and purposes. I bought it for 15% down using a regional lender, and I rented it out in less than three weeks at $975/month. That’s been my best cashflow.

Joe Fairless: Do you still own it?

Michael Glaspie: Yeah, I still own that one.

Joe Fairless: Is that in Fayetteville?

Michael Glaspie: Yes, it is.

Joe Fairless: What about the least profitable, other than the two wholesale deals?

Michael Glaspie: The least profitable would still be that first property that I purchased originally. It’s still, to this day, the least profitable. I used a VA loan on it, so there’s still barely any equity in it, back in 2014, and it rents out now for $1,100/month. The mortgage is somewhere around $900, so it’s a very low cashflow margin.

Joe Fairless: What’s a part of your process that you’ve optimized over the last year or so?

Michael Glaspie: For me, I’ve really learned how to optimize the leverage. There’s many different things going on – still active duty currently; I’m on my way out the door, but that’s still an obligation. We do have the business that we’re running as real estate brokers, we have our portfolios that we’re overseeing, and I’m also currently working on my MBA…

Joe Fairless: Dang.

Michael Glaspie: So there’s a lot of different — hands are in the bucket everywhere. So what I’ve learned is you have to leverage and you have to lean on others for support. I would not have been able to accomplish anything up to this point without my partners, without finding key individuals. And yes, that comes at a premium. I do pay for my leverage. But ultimately, when you double down on your strengths and you leverage out your weaknesses, you find that you become ten times more productive and efficient.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Michael Glaspie: Best advice ever is that there is no such thing as no. If I would just accept no at face value from somebody who said “No, that’s not possible. We can’t do that. That’s not within the scope of our work” etc. then nothing would ever get accomplished. I’m a firm believer that there’s always a how to anything. So yes, we may not be able to go directly with the standard approach of  a transaction, but there’s always a workaround. And if you’re willing to do the work and the research, there’s always a how. Don’t take no for face value.

Joe Fairless: Will you give an example of how you’ve applied that in your life?

Michael Glaspie: Absolutely. Wholesaling – here’s a great example. We had actually switched firms. As I’d mentioned, we’re investors first, and we work primarily with investors, so we have a lot of internal wholesalers on our team, we have a lot of other attorneys and things like that who specifically know these investing strategies of subject-to’s, owner financing, auction properties, you name it.

The last firm that we were at, they actually  pulled us in the office and they said that we couldn’t do wholesaling, because wholesaling is illegal. Obviously, we know that wholesaling isn’t illegal; it’s just about how you perform it. Especially as a real estate professional, we have to disclose what our current position is.

So that right there was a simple no, and if we had just accepted that no at face value and said “No, we cannot do a wholesale”, or the way specifically they said “As a realtor, you cannot conduct a wholesale” – we know that to be false. But if we had accepted it as a no, then we would have stopped all production in that part of our business and we would have lost a lot of business… Because that’s a large chunk of our revenue.

Instead, what we did was we went to many different attorneys until we found a local attorney who was very well-versed in wholesaling specifically. And he knew all of the documents that were necessary, all of the rules and regulations involved around it in the state of North Carolina, and then we developed and designed that portion of our business based off of his insight. That’s more so what I mean by “Don’t take No’s.”

And then we also switched firms… Because obviously, that broker in charge was just not willing to evolve with the times. So we switched firms to somebody who could understand it, we explained it to them, we partnered up with an excellent real estate attorney, and so forth and so on. That’s just kind of an example.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the best ever lightning round? Let’s do it. First, a quick word from our Best Ever partners.

Break: [00:17:04].29] to [00:17:49].27]

Joe Fairless: Alright, best ever book that you’ve recently read?

Michael Glaspie: The Go-Giver by Bob Burg.

Joe Fairless: What’s the best ever resource that you use in your investing business, that you think might be helpful for others to know about?

Michael Glaspie: Bigger Pockets. The calculators in the forums are paramount.

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

Michael Glaspie: Two ways. We do have a local investor meetup, that we call Pints and Properties. We do that once a month, and that’s really to share and support any of the local real estate professionals. The second way is any time we do a charitable benefit, our charity of choice is the Green Beret Foundation. It’s a military foundation specifically for the special forces operators out there in the world.

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

Michael Glaspie: You can reach me on Instagram at @michael.s.glaspie, or you can go directly to the Five Pillars Website and you can get in contact with me, or anybody else on my team.

Joe Fairless: Michael, thank you for being on the show, thanks for talking about the large deal that you have, as well as how you structure that partnership, where you highlight the strengths, and based on those strengths everyone has certain tasks. Then there’s monthly follow-ups. Such a simple, but effective process. I’m a simple-minded person, so I like simple processes… And especially if they’re effective, even better. So thank you for that, and thank you for talking about how you’ve built a portfolio with partners, as well as your personal portfolio.

I really appreciate you being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Michael Glaspie: Thank you very much, Joe.

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JF2030 : Property Management and Wholesaling With Isaac Barrow

Isaac is the general manager of Parrot Property Group. He started in real estate in the back half of 2015 when his brother needed help managing a few rentals then slowly he started to go into wholesaling, getting his licenses in real estate, and managing bigger property groups.

Isaac Barrow Real Estate Background:

 

Best Ever Tweet:

“Maintain your relationship with people and eventually you’ll look up and see you have a great reputation.” – Isaac Barrow


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Isaac Barrow. How are you doing, Isaac?

Isaac Barrow: I’m doing great, how are you?

Joe Fairless: I am doing well, and glad to hear that. A little bit about Isaac – he’s the general manager of Parrot Property Group. Parrot Property Group is a family-owned business with 80 years of combined real estate and construction experience. They help investors find properties and manage properties in the Indianapolis area. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Isaac Barrow: Sure. I started in real estate in late 2015. It wasn’t at all my background, but I got started just — my brother needed somebody to manage a few rentals. He had at the time only a few rentals. I started managing those, and then it just sort of springboarded into a bunch of other different things, like wholesaling, and managing at a higher level, managing more properties, since I obviously got my real estate license… So yeah, I’ve been doing it for about four years, and now I’m doing it full-time, obviously. Full-time wholesaling, full-time management, brokering, and lots of partnerships… Yeah, that’s pretty much how it’s all come full-circle.

Joe Fairless: Okay. Let’s talk about Parrot Property Group. What do you all do exactly?

Isaac Barrow: We try to be sort of a one-stop-shop. Primarily, our focus is wholesaling. We started really jumping into that after I started… And we try to find houses for investors, we do a lot of marketing for that… So we primarily focus on wholesaling, but we’ve done management, we’ve actually done some private lending… We have our own brokerage, so we do some on-market brokering transactions as well…

So we try to do a little bit of everything, but anytime people ask what exactly we do, it’s always gonna be focused around the wholesale off market. That’s primarily what we focus on and try to hammer down on. We network with competitors, and stuff like that. So primarily wholesaling, but a lot management and brokering and stuff like that.

Joe Fairless: Tell us about your lead generation system for getting wholesale deals.

Isaac Barrow: Well, we try to canvas everything. We have done some stuff on the MLS. It’s a little harder to find a good wholesale price on the market, but we’ve done some of that. What we’ll also do – obviously, we do a lot of the direct mail marketing that a lot of people do, whether it be postcards, whether it be letters… We’ve also done email campaigns, we’ve done social media marketing… We try to do pretty much everything we can to get leads. I would say most people would probably tell you that most of the leads come from the postcards and the letters, because there’s just so much of it… There’s really an unlimited amount of direct mail marketing you can do at one time.

So direct mail marketing, social media, driving for dollars is definitely something we’ve done in the past, where we see a “For sale by owner” sign… Or sometimes we just meet people… There was a time – I think about two years ago – I met this guy in a little Deli and he told me he wanted to sell his house. We ended up buying it, and selling it, and doing pretty well on it. So I try to do a little bit of everything, but I think everybody else who does this will probably tell you that the most successful route is either skip-tracing or direct mail marketing.

Joe Fairless: Let’s talk about skip-tracing, and then we’ll go from there. For anyone who’s not familiar with skip-tracing, what is it, and then how do you implement it in your business?

Isaac Barrow: Well, skip-tracing is basically, for example — there’s all kinds of databases you can use, where if you’re looking for somebody who owns a house… Let’s say you look at a house across the street, in a  nice area, but the house is dilapidated, nobody lives there, and you wanna just find out who owns the house… The best way to go about it – you could just enter all the information you have. It’s not that hard to find out who owns the house, but you can just enter all the information you have, and some database will spit out a bunch of possible phone numbers, a bunch of possible emails… And then you could just start hitting the phones and  calling people.

Now, in a lot of cases it is kind of difficult to find a really reliable batch of data for one person who you don’t really know where they are, you don’t really know where they’re living, if they’re even alive… So it’s just a good method, and a lot of people don’t do it. I think it’s picked up in popularity, especially over the last couple of years… But it’s basically just a way to cold-calling. You can cold-call. There are all kinds of databases you can pick out, with people who own rentals, people who own stuff free and clear, and you can just call them. You can have a VA do it, you can have an assistant do it… It’s definitely something we’ve utilized, especially in the last year or two.

Joe Fairless: Where do you hire your VAs?

Isaac Barrow: Honestly, we haven’t actually done it yet. We’re looking into it; we actually haven’t had a VA at any point, so we haven’t done it. We have hired an assistant before, and she was doing a lot of that for us. That was her primary role; she would just come in and just make calls. The list was so long… You could spend a year just calling that list. A lot of people wouldn’t answer, but even if  your success rate is low, if you hit one, that’s a good deal. Obviously, just cold-calling people doesn’t cost anywhere near as much as sending out postcards, or even doing driving for dollars. You might think “Well, that doesn’t cost anything”, but it does cost a lot of time, and driving around, and spending money on gas, and all that.  So it’s just a very cost-effective way. Now, it is work, for sure, but it’s a very cost-effective way of finding new leads.

Joe Fairless: Now, you mentioned you had an assistant, so that leads me to believe that you no longer have one… Is that correct?

Isaac Barrow: Yes.

Joe Fairless: Why not, if it was working?

Isaac Barrow: Well, we’re just looking for different things. We’re probably looking for something a little more full-time. It was just one of those things where we just weren’t getting enough time, and we wanna get somebody more full-time.

Joe Fairless: Okay. So it’s not that the responsibilities are not being undertaken in the future, it’s just a different vision for what the person wanted versus what you wanted.

Isaac Barrow: Basically… The calling was going well. The whole week she would just be calling people, and it seems to be something more people are doing… Because honestly, I get calls all the time from wholesalers, saying “Hey, I saw you have this house on Main Street” or whatever. And they’ll ask “Do you wanna sell it? Are you interested in maybe seller financing?” And obviously, I’ll say no, because I’m not interested, but it definitely shows me that other people are doing it, too.

Joe Fairless: Is that all you say, is no, and that’s it, or is there something else you do?

Isaac Barrow: Sometimes I’ll ask how they got my number and they won’t really give a great answer… They’ll sort of say the same thing I’ll say, which is “I got it from a database. We’re just calling people who we saw own houses in Indianapolis.” So usually I’ll just say “No, I’m not interested”, or “No, I’m an investor too, so I’m not really interested in selling at a wholesale price.” Usually, I don’t really entertain it too much. And I also noticed that it’s kind of the same 3-4 people, so they kind of know that I’m not interested anyway… So I think I’ve been taken off some of those people’s lists already.

Joe Fairless: Okay. I was wondering if you had a way to flip that, so that you would then partner up with that wholesaler on other deals… Because you mentioned earlier that you network with other wholesalers.

Isaac Barrow: Yeah, I sure said that. I also will tell them “Hey, I’m a buyer, so put me on your list on any deals you have.” I haven’t really gotten anything from those particular ones… But yeah, I’ve definitely done a lot of networking over the last four years, with local wholesalers of varying levels of experience.

Joe Fairless: What’s a deal you’ve lost money on?

Isaac Barrow: One of the first deals I did. It was little one bed double, in a pretty marginal, suspect area. I just wanted the deal. I was so convinced that we can make money on it. We didn’t even pay much, and we didn’t lose much either, but… We paid 14k, and I should have just held strong at 11k, but we went up a little bit, and then we sold it for 12k. So it’s not like we lost a ton of money… We still had to pay broker’s fees, and all that, and we had to sit on it for a long,  long time. Longer than I thought. I thought it would move pretty quickly… But it was just a rookie mistake.

Joe Fairless: How long did it take to move?

Isaac Barrow: I wanna say it took like 3,5 months, something like that. I thought it would go in 2, 3, 4 weeks tops… Because it was an area that at that time was moving pretty good, but it was just not the best part. And again, it was a one-bed double…

Joe Fairless: What’s a double?

Isaac Barrow: Just a duplex.

Joe Fairless: Oh, a duplex. Okay. It was one side of a duplex?

Isaac Barrow: No, it was a full duplex, but there’s only one bed on–

Joe Fairless: A full duplex, $14,000?

Isaac Barrow: Yup.

Joe Fairless: For a duplex that has a one-bedroom on each of the sides?

Isaac Barrow: Yeah, on each side.

Joe Fairless: Huh. Okay.

Isaac Barrow: People are always amazed when I tell them stuff like that, what the prices are… But if you showed it to people around here, they’d be like “Oh yeah, that makes sense.” Because it’s just a one-bed double. Just not that attractive. The rent’s low, the houses are small, the resale value is pretty marginal… Best-case scenario you fix it up really nice and then you could sell it to a house-hacker for 60k… But that  house needed everything. That house probably needed to be gutted, to be honest with you. So we just didn’t negotiate that well on that deal, and we learned from that.

So that’s the one I can think of where we lost money. I think we’ve only had 2-3 where we lost 1k or 2k. Nothing crazy.

Joe Fairless: So the most you’ve lost on any deal is about 2k?

Isaac Barrow: Yeah, I think so. There’s like one or two that come to mind, but I think even on those we broke even. And those were all really cheap deals, where we bought a gutted house, pretty shortly before that deal, for $9,000 and we sold it for $9,800, and then I think after broker’s fees I think our net was $9,200, so I think we made $200. [laughs] But yeah, that double is the one that sort of sticks out as the one that we lost money on.

Joe Fairless: Any common theme among the handful that you have lost or broke even on?

Isaac Barrow: Just wanting the house a little too much, thinking “Oh, this is gonna work. I like this house. I think it’s worth it.” I  think the one thing I’ve learned from this is it’s just not about you, it’s not about what you would pay for the house if it was in good shape. You have to take a numbers perspective to it and just remove the opinion from it. You have to look at “Okay, well, what are houses actually going for? What’s a realistic way of looking at it?” I liked that house – that double that I mentioned – because I thought the rent would actually be a little bit higher, and I thought the area was coming up… But when you actually looked at the numbers, you would come to the conclusion  that even at 11k that’s probably pretty topped out for that spot.

So the common theme I would say is — I would sometimes see competitors getting in and looking at it, and I would say “Well, I wanna get it, because if competitors are offering  similar prices, then it’s probably worth more, because that’s what they’re gonna do. They’re gonna try to sell it.” So just not thinking enough about “Okay, what are the actual numbers?” And that was, like I said, very early on, and I’ve learned from that by now… But I think that was a mistake I’ve made, just looking at it too much like speculative, and sort of projecting, as opposed to looking at the actual hard data at the time, as opposed to what I feel the hard data could become. So just projecting too much.

Joe Fairless: When you look at that hard data, what are the key things that you’re looking for, and where are you finding for?

Isaac Barrow: Well, I’m an agent, so I have access to all kinds of ways to pull comps… So I’ll jsut look at comps, and if it’s a two-bed in good condition, I’ll look at two-beds in good condition. I try to look at houses that were sold in the last 360, sometimes 540 days… Because sometimes you have areas that just aren’t moving, and that could mean one of two things. That could mean either the area is just low turnover, and people buy there, and then they don’t move, so it’s a homeowner area, which is good… But it could also mean people don’t wanna buy there.

So I try to look over the last year and a half what’s happening, how have prices changed, what are houses that are really dumpy and need a lot of work done for, what are houses that are kind of rental-grade going for, and what are houses that are at least close to or at least at homeowner-grade, what are those going for… So I try to look at those things and then I’ll make an evaluation based on that.

Joe Fairless: What’s something that you’ve changed in your process as a business over the last 12 months?

Isaac Barrow: I’ve been doing this now four years… I think I need a lot less in terms of asking people “What’s your opinion of this? What’s your opinion of that?” I just have a lot more confidence now about just the knowledge perspective of things… But in terms of the actual business, I would say before I was running less of the sales side of the things, and now I’m running that pretty much by myself… So I’m running more things now from the day-to-day perspective, and my brother is still helping me out with the day-to-day big-picture strategy-type stuff. I’m doing more of the operational systems and stuff like that.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Isaac Barrow: My advice would probably be to just stay adaptable, don’t get set in your ways, and just look at the market and look at what that’s telling you. One example I would have of that is in the beginning, when I started doing this, the whole goal was “We’re just gonna buy rentals.” Our goal was to get 50 rentals, 100 rentals, and just go from there… And we’ll sell some of them obviously, but that was the goal. But as prices began to rise, we started doing wholesaling, and then wholesaling took off and has done really well for us; we sort of stepped away from rentals… We still have rentals, but we sold off some of them, and wholesaling has been our focus.

So just staying adaptable I think has been huge. And I guess I can’t give two snippets of advice, because that would defeat the purpose, but…

Joe Fairless: Why not? Let’s do another. One more.

Isaac Barrow: Another would be just leverage  your relationships with people. Instead of just working with people and doing these one-off type deals, try to have partnerships with people. We have a relationship with a group here where at first we were just selling houses to them here and there, and then as they began to trust us and vice-versa, we sort of launched a partnership with them. So just start partnerships and maintain your relationships with people, so you’ll look up and then eventually you’ll have a great reputation. So just making sure you’re working with people and having good rapport with everybody you work with.

Joe Fairless: We’re doing a lightning round. Are you ready for the Best Ever Lightning Round?

Isaac Barrow: I am.

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

Break: [00:15:42].24] to [00:16:33].22]

Joe Fairless: Alright, best ever book you’ve recently read?

Isaac Barrow: I recently read  a book called Traction, which is just a book about how to make your business really sustainable. I’m forgetting the author, but it’s a great book. It was a recommendation. I actually went to a meetup and talked to a  guy who has been doing business for 10-11 years, and every once in a while I just go to him for advice; he actually had the book at the meeting, so I didn’t really have to ask him anything… But I was just asking general business questions, because I’m more of  a hands-on person.

I actually asked him “When you started your business, how long did it take you before you really started delegating things?” and he just recommended the book. He gave me a few nuggets, just saying “If your goal is to stay in the business, then stay in the business. But if you wanna delegate, do that.” And he gave me the book and I’ve enjoyed reading it. I haven’t read all of it, but I’ve read most of it.

Joe Fairless: Best ever deal you’ve done?

Isaac Barrow: Best ever deal I’ve done… I would probably say — there’s a suburban house we bought not too long ago (three months ago). We bought it, and our goal was “We’re gonna buy it, we’re gonna paint it, we’re gonna put some carpet in it, clean it up a little bit and sell it.” And it sold to a fund within two days, all cash. It was the easiest deal we’ve ever done by far, because we painted it in carpet, and within two days we had to hold the house for a total of ten days, I think… And we made really good money on it. So that was definitely the best one.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about already?

Isaac Barrow: A mistake I’ve made on a transaction… I had an MLS deal a year ago; I had some lease addendum with a tenant, and I just totally forgot about it, until a few days before closing. I didn’t even tell the buyer, because I didn’t even remember… And the lease addendum really said nothing. It was basically just like “Oh, well if the tenant gets a job in another state, he can give notice.” And it didn’t kill the deal, but it could have been a huge mistake, because it could have killed the deal. If the buyer wasn’t cool with it, he would have been totally reasonable to just say “I don’t want any part of that.”

That’s the first one that comes to mind. I’m sure there’s some other mistakes I’ve made, but that’s the first one I can think of.

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

Isaac Barrow: You can visit our website, which is ParrotPG.com. Or if any of your listeners wanna just give me a call and talk, my phone number is 317-204-2900.

Joe Fairless: Isaac, I enjoyed our conversation, I enjoyed learning about how your position has evolved, how your role in the business has evolved, the challenges on the couple deals that you’ve lost a little bit of money or broke even, and wanting the house too much on those, and now really focusing on looking at the hard data… As well as learning about the success that you’ve had too, and the different lead generation touch points that you have, with skip-tracing, postcards, meeting people at Delis, and getting deals, and all sorts of other things.

Isaac, thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Isaac Barrow: Thanks for having me on.

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JF2016: Sacrificing Short-Term Satisfaction For Long-Term Happiness With Mark Owens

Mark Owens is from Baltimore and has been an active full-time real estate investor for the past 14 years, owns over 100 units, 200 wholesales, and self manages all of his units. Mark believes his secret to having success and having more options than most investors is all due to the way he views decision making. He shares some great examples of how he has been able to separate himself from the heard of real estate investors when it comes to making decisions. 

Mark Owens Real Estate Background:

  • Active full-time real estate investor for 17 years
  • Owns over 100 units, has done around 200 wholesales, self manages all units
  • Units comprised of single families and 7-18 unit multifamilies
  • Based in Baltimore, MD
  • Say hi to him at https://markowens.com/

Best Ever Tweet:

“Manage your properties like a business, not a hobby. ” – Mark Owens


TRANSCRIPTION

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

Mark Owens: Good, Theo. Thank you for asking. Thank you very much.

Theo Hicks: Absolutely. Before we begin, a little bit about Mark – he is an active real estate investor and has been full-time for 14 years. He owns over 100 units, has done around 200 wholesales, and he self-manages all of his units… So we’ll definitely be talking about strategies on how to self-manage your properties.

His units range from single-family homes, all the way up to 18-units and everywhere in between. He’s based out of Baltimore, Maryland and you can say hi to him at MarkOwens.com.

Mark, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Mark Owens: Sure. Thank you for the introduction. I was actually in the IT field when I started buying rentals in 2002. I made a bunch of money in that, and I wanted to invest it, and I wasn’t really sure where. I just knew that the stock market wasn’t a good fit for my personality type. It was more like a casino than anything else… And real estate just seemed like a much safer, controllable investment, where worst comes to worst, I’ve always got the house. I can go live in the house if I have to, and you really can’t say that with the stock market or most other investments.

So that was my life before the rental properties. When I first started buying them, I really had no intention of getting to where I’m at now. The original intention was I wanted to make enough money off some rentals so that in the event that something happened to me and I couldn’t work, that I would have enough money coming in to pay my minimum bills – the mortgage on my home, my utilities, put food on the table… Just like the minimal amount. And once I’d hit that point, I realized that “Man, if I just keep doing what I’m doing, in a few more years I’ll be able to quit this job. I’ll be able to get out of the rat race.” That was even before Kiyosaki and Rich Dad, Poor Dad and all that. I knew I was in the rat race, but I didn’t really know that that’s what it was called at the time; I just knew that I depended on other people to put food on my table, and I didn’t like that feeling. And that is kind of how things got started.

The second part to your question was — let me ask you, what was the second part, Theo?

Theo Hicks: The second part is what are you focused on now?

Mark Owens: Yeah, what am I focused on now… Sorry, I get so caught up with the excitement of talking about the business that it’s easy to lose that stuff. What I’m focused on right now – it’s an interesting thing, because at this stage I’m thinking about downsizing some of my stuff, and I just had an opportunity across my desk yesterday, and it’s something that could significantly add to the number of units that I have, and I can’t really say a whole lot about it right now, because I have agreed to a non-disclosure agreement, so I can’t really give any details about it… But right now I’m just enjoying myself. I’m just keeping the guys that work for me busy full-time, managing my tenants… Right now I’m just happy where I’m at.

I’ve realized recently, and I think most people get caught up in this – that you say “I’ll be happy when this happens. I’ll be happy when that happens.” Well, by the time those things happen, you’re always pushing your happiness into the future, thinking that “Once I accomplish some magical, then I’ll be happy.” I’ve realized that just recently, and I try to put a lot more focus on where I’m at today, and it seems like it’s lifted a big weight off my shoulders. Right now I’m just trying to focus my attention on what I have, and how grateful that I am that I have what I have… And that’s it. I know it’s not really a directly real estate related question, but that’s where I’m at right now with my mindset.

Theo Hicks: I think that’s very wise advice, always pushing your happiness to the future… So you said you were thinking about downsizing… I understand that you’re happy where you’re at right now, and you’re gonna continue to manage your properties, manage your employees, and kind of just enjoy your current situation, but what do you mean by downsizing, and why are you considering downsizing? What does that mean? Are you still gonna have your properties, are you selling the business and moving to the beach?

Mark Owens: The thoughts were — my wife and I, we bought a condominium in the Cayman Islands last year. We’ve got like 3-4 more years and our son will be out of school; my wife works, she’s gonna retire from her job, so we’re thinking in a few years possibly buying another house on the Gulf Coast of Florida… And the plan is to spend four months in Cayman, four months in Florida, and the other four months just kind of bumming around the planet, just seeing what also is out there… And part of that would be to sell maybe two-thirds of my portfolio, own a third free and clear, have a bunch of money in the bank, let somebody else manage the ones that I own free and clear… And it’s really just to get stuff off my plate, to give myself more freedom to do everything that I wanna do. So that’s kind of the goal.

Of course, that’s always subject to change. Any time I make a decision about something, I always give myself the option to change my mind at any point in the future, because the decision that I make today is based on the information I have today. I can get an information tomorrow that doesn’t fit into the goals that I’ve laid out for myself, so I always give myself the flexibility to change my mind about anything, at any time.

Theo Hicks: That is interesting. When you first started out back in 2002, did you have the goal set to do this, to sell a portion of the portfolio, to hold the rest free and clear, and kind of just do whatever you wanna do? Or did you plan on just doing it forever? And to give a little context for my question – some people obviously have the plan to eventually quit their job and then do real estate full time… But then what happens after that? It sounds like you’ve got a plan right now that is gonna come to fruition in a little bit, so I was wondering if you could explain a little bit about the thought process of when to know when it’s the right time to step away from your portfolio and have the freedom to do what you wanna do?

Mark Owens: I think the answer to that question is different for everyone. There’s no right or wrong answer. I met a guy for lunch yesterday that’s a pretty well-known local guy that’s 71 years old. I don’t wanna put too much information out there, because I don’t want people to identify him, but he owns a significant portfolio size, and he has no plans of selling anything any time soon. He’s 71 years old… And I’m significantly younger than that, and I just have a different plan.

As far as how long I’ve had these plans, I guess it’s always been — since I became full-time a few years into the business, I always knew that eventually I wasn’t gonna wanna do this; I wasn’t gonna wanna be 80 years old, taking people to rent court. So I always knew that at some point things were gonna change… And I welcome that change, and the thing that I did that was smart was I ran a really good business that gave me a lot of options.

There are some people that could be 50 years old and they have to keep their properties for another 30 years, because they cash-out-refied, spent all the money, and now they’re upside down. I never made those types of mistakes. I always ran my business smart, I always ran it looking towards the long run, instead of the short-term gratification… And as a result of doing that, 17 years into the business I’m lucky to have a lot of options available to me. And again, as I’ve said before, these things are always subject to change. I could have some deals land in my lap where I just say “Man, I love this business. I don’t wanna go anywhere”, and then I’m gonna be fighting with my wife for five years…

This is one of the things in this business that can drive people crazy – it’s kind of like going to Baskin-Robbins. Sometimes you just want chocolate ice cream, and then you’re going to Baskin-Robbins and they’ve got 32 or 33 flavors and you go crazy; you’re sitting there, trying to figure out which one you want. I kind of like those options.

One of the great things about real estate in my mind is that I can look at any deal or any scenario and I can see 15 different ways to do it. That thing drives some people nuts. Some people just wanna go in, they know how it’s gonna happen, and then they walk away. I like to have options.

And when you have a career like I have, with those options, just about every scenario that I can think of, when I reach a point where I have to make a decision on those options, just about all the time I’m looking for what’s in my best interest for the long-run, not the short-run. If you get caught up with the short-run thing, then you’re always chasing the next shiny object, and it’s really difficult to get ahead. If you think more long-term and you do things that are better for you in the long-run, then in the long-run you’re gonna have a lot more options at the end of the day… I’m approaching the end of the day, and it’s good to have those options.

So again, to answer your question, there’s really no concrete black or white answer, because everyone’s situation and goals and dreams are different. For me, mine worked out well, mostly because of the emphasis I’ve placed on making the best decisions for the long run.

Theo Hicks: Can you go into more specifics on what you mean by this long-term thinking versus short-term thinking? Maybe give some specific examples of things that you should do if you wanted to be thinking long-term, and then things you shouldn’t do, which are more short-term thinking… Because I know you’ve mentioned a few, but could you go through a list of examples?

Mark Owens: Sure. A great example would be if you’ve got a bunch of equity in a property, some people will say “Man, you should refi that out, pull $50,000 out and do whatever you wanna do. Go on vacation, buy the watch and the car, and all that stuff.” My philosophy is if I’m gonna pull $50,000 out in a cash-out refi, I’m gonna take that money and invest it in another cash-producing asset. I’m not gonna take it and spend it on consumer goods. So that’s one thing where I think in the long-run I’ve done very well. I’ve done several cash-out refi’s where I’ve literally walked away with several hundred thousand dollars, but I immediately took that money and bought other properties that made me even more money.

Some of my friends don’t have that type of discipline all the time. It’s very easy to fall into the trap of “I’m gonna go on vacation for a month, and I’m gonna buy the new Tesla”, and all that stuff. I think that that’s one example of something that I’ve done that has enabled me to have the success I’ve had.

Another great example would be my friends are shocked when they find out that I still live in a townhouse. My wife and I bought a townhouse 23-24 years ago. I paid it off 15 years ago. A lot of people think “Man, why do you live in there? You could go buy a $700,000 house.” I could, but then that’s gonna put me in a cashflow crunch some months, because I’ve got this fat mortgage… And the happiness that you get from buying that big house or that expensive car – it doesn’t last. Anytime you go buy a consumer good, whether it’s a house or a car or a watch or a pair of shoes, you get that initial happiness from it, but then in the long-run, a few months later, six months later you’re not any happier than you were before you ever bought that thing.

So one of the things that I’ve done that’s enabled me to have this kind of success is by being able to ignore that need for immediate gratification where you say “Man, I want it now, I want it now”, and I’ve been able to look at that and say that that’s my enemy right there. That is my long-term enemy, having to have it right now.

So that’s a discipline issue. A lot of people don’t have it. But if you sit down and you look at the numbers and you look at what’s in your long-term best interest and you make decisions, whether it’s a cash-out refi, or buying the big house, or buying the expensive car, if you look  to see what’s in your best interest in the long-run, then you’ll probably make similar decisions to what I’ve made, that are gonna give you a much better chance of having long-term success and financial independence.

Theo Hicks: Another piece of very wise advice. Alright, so the money question, which is what is your best real estate investing advice ever – but I did wanna ask you about self-managing, so maybe you can answer the question “What is your best real estate investing advice ever for self-managing your own properties?”

Mark Owens: Oh, man… That’s a loaded question there, because I could answer both questions with some good information. My best real estate investing advice for managing your own properties would be to manage your properties like a business, not a hobby. This your livelihood, this is how you make a living, and sometimes that means making tough decisions. That means taking people rent court that you don’t wanna take to rent court, it might mean selling a house that you like, but it’s not in your financial best interest to keep it… So that would probably be it. But there’s a lot more to it than that.

One of the things as far as self-managing that has made it really easy for me is that everybody that knows me trusts me 100%. If I’m in the Cayman Islands on vacation and I have a furnace that breaks in the middle of the winter, and my HVAC guy goes over there and he knows that “Man, I’ve gotta replace this furnace. It’s gonna cost $2,500”, and he knows I’m not gonna be back in town for two weeks, he won’t hesitate to replace that furnace on his dime, knowing that I’m gonna pay him; the day I get back he’s gonna get a check in the mail.

So building these relationships with  your contractors, with your tenants, with everybody in the business, where they know if you’re not in town, the day you get back they’re gonna get paid – that’s one of the things that has really made it easy for me… Because I do like to travel a lot… So having those relationships gives me the peace of mind knowing that if the crap hits the fan when I’m not around, I have a lot of people who are gonna have my back, because they know I’m gonna have their back as soon as I get home.

So there’s a lot of different pieces of advice I can give as far as the best advice ever for self-management… Those are a couple of them that I’d like to touch on.

Theo Hicks: Okay, Mark, are you ready for the Best Ever Lightning Round?

Mark Owens: Man, bring it on!

Theo Hicks: Alrighty. First, a quick word from our Best Ever sponsor.

Break: [00:14:33].22] to [00:15:27].27]

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

Mark Owens: The best ever book I’ve recently read… It would have to be Rocket Fuel.

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

Mark Owens: [laughs] [unintelligible [00:15:35].18]

Theo Hicks: What deal did you lose the most money on?

Mark Owens: This is gonna be hard for people to believe, but it is true. I have only lost money on one deal; I lost $5,000. It was a 15-unit building. 13 apartments, 3 commercial spaces. I partnered up with someone that had no idea what they were doing. They wouldn’t let me buy them out of the deal, and after 9-10 months I told the guy I wanted to auction it. I auctioned the property, absolute auction. We ended up losing $10,000 on it. I lost 5k, he lost 5k. I walked away happy, and he walked away pissed, but… He only saw the building twice; I was doing all the work, and  he wasn’t doing anything. I was getting tired of it. So that’s the only real estate deal that I’ve ever done that I lost money on.

Theo Hicks: What types of things did you implement in your business to make sure that never happened again?

Mark Owens: Great partnerships.

Theo Hicks: Simple. So let’s go on the other side of the coin – what is the best ever deal you’ve done?

Mark Owens: The best ever deal I ever did was I bought a ten-unit vacant building. It was a listed property. I was gonna keep it as a rental… I renovated the property, and this was at the top of the market, around 2007… And I decided that the property was too far from my house, and I just got this gut feeling of like “You know what – I don’t want this property.” I really couldn’t put it into words, but it was just my gut talking to me.

I listened to my gut, I sold the property to a DC investor that was doing a 1031 exchange. I made 195k on it, and I delivered the property vacant. That 195k paid off my house, paid off my car, paid off my credit card… I saved 50k and went on vacation. That was probably the best deal I’ve done.

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

Mark Owens: Helping other people.

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

Mark Owens: Probably my website, because if people go there, then they can find me on Facebook, they can get my email address, all that stuff. It’s kind of like a one-stop-shop. There’s not a lot of information on there, but I think there’s buttons — I’ve got a coaching page… Mark Owens REI  on Facebook. I’m easy to find; I’m on Bigger Pockets, LinkedIn, all the other stuff. My website is probably the easiest way to find me.

Theo Hicks: Perfect. Alright, Mark. I really enjoyed the conversation, lots of wise advice. The two big takeaways for me was when you talked about you’re happy where you’re at now, because you see a lot of people always pushing their happiness in the future and saying “Once I do this, I’ll be happy.”And then when they do that–

Mark Owens: Yeah, I’ve been guilty of that myself.

Theo Hicks: We all are, but just knowing that definitely helps us get over that a lot faster. And then the second thing that I really liked was when you talked about immediate gratification being your biggest enemy… And the reason why – you’re at the point where you could potentially sell a large portion of your portfolio, own the rest free and clear, and then use some money that you have saved up, the cashflow from those properties, and have the freedom to do whatever you want – it’s just because you’ve defeated that enemy more that it’s defeated you throughout your business career.

You gave some specific examples of things you can do to have long-term thinking for your business, versus short-term thinking. The two examples are if you have equity in your property and you decide to pull it out, don’t spend it on personal things like vacations or cars. Instead, invest that into another cash-flowing asset.

The other example was that you live in a townhouse that you bought 20+ years ago, paid off quickly… Sure, you could buy a massive, million-dollar house, but again, going back to that immediate gratification and realizing that happiness is typically not going to last when you’re buying a consumer good.

And then lastly, you gave your best ever advice on self-managing, which is 1) make sure you’re managing your properties like a business and not a hobby, which requires making tough decisions, taking people to rent court, selling a house that you like that’s not cash-flowing… And then also number two was to focus on relationships. In your business everyone trusts you 100%, so if something were to go wrong at your property, for example, the contractor won’t wait for you to get back from vacation to fix a really big leak because they don’t know if you’re gonna pay them or not. Instead, they’ll go ahead and take care of that issue, knowing that once you get back, you will pay them in full.

Again, I really appreciate the conversation. If you guys wanna say hello to Mark, his website again is MarkOwens.com. Have a best ever day, and we’ll talk to  you tomorrow.

Mark Owens: Thanks, Theo!

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JF2004: 2000 Deals a Week With Zack Boothe

Zack Boothe owned a window cleaning business and use to listen to our show while working and now is on our show! Zack shares his marketing strategy to find deals that you can wholesale, flip, or hold for the long-term. He uses a unique system that helps him find 2,000 distressed property every week with just one 30 hr part-time driver who is driving for dollars. 

Zack Boothe Real Estate Background:

  • Left his window cleaning business in 2017 to become a real estate investor
  • On track to do over $1 Million in 2019, teaches others how to find properties for $.50 on the dollar
  • Based in Salt Lake City, Utah
  • Say hi to him at www.DFDmastery.com

Best Ever Tweet:

“The difference that I have with the systems and the software that we’re using is, you can go with one part time guy and find thousands of distressed properties every single week.” – Zack Boothe


TRANSCRIPTION

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

Zack Boothe: I’m doing awesome. Super-awesome to be here.

Theo Hicks: Yep, I’m excited to have you and looking forward to finding a little bit more about you. So Zack left his window cleaning business in 2017 to become a real estate investor. He’s on track to do over $1 million in 2019, and he also teaches others how to find properties for 50 cents on the dollar. So you better believe we’re going to talk about how to do that. Zach is based in Salt Lake City, Utah, and you can say hi to him at dfdmastery.com. So Zack, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Zack Boothe: Yeah. So like you said, I was a window cleaner, and it’s actually surreal to be on this podcast because as a window cleaner, I would listen to this podcast all the time. So it’s pretty weird how life happens and it takes you in certain directions.

But like you said, I was on that window cleaning business, and I ran that for almost 10 years, and towards the end of it, that was 2016, I was just burnout in the industry; not something I aspire to do anymore, even though I had had a ton of success there. I had YouTube videos with over a million views. One of my YouTube videos got used on the History channel, so I ended up on the history channel because of window cleaning, and had a great business that I’d worked so many years on… But I wanted to be in real estate and I had dabbled in it, done a couple deals – some amazing, some I lost money, but I needed a change of pace. So I hired a coach who’s actually the second coach I had hired, but I really got traction with this coach back in 2017, the very beginning of it.

The coach is Tom Krol and Cody Hofhine, and they taught me about something known as wholesaling. I believe some of your people are familiar with the process, I’ve heard it on your podcast a few times… So for those that don’t know what it is, essentially you’re finding properties at a discount, people that want to sell for speed and convenience, you put those properties under contract, and those contracts are assignable, meaning I can sell that purchase agreement to a flipper or to another investor and they close on that contract and pay you a fee to sign the contract to them. So I started learning that strategy, and I actually sold my business. At the time I actually just told my partner, “I quit, you can buy me out, but I’m done. I have to move on.” And that was March 2017, I had just purchased their course…

I went as hard as I could and did my very first wholesale assignment fee in April of 2017. I made $10,000 on that first deal. So that was a mind-blowing proof of concept. From there, I worked really hard that year and did a little over $100,000 by the end of 2017. By the end of 2017 I knew I needed to do something different as far as marketing. I wanted to have a business that profit margins on $100,000 — I wasn’t netting, I wasn’t bringing in $100,000, not even half that. So I was making much less than the window cleaning, and I didn’t quite know where to take it or how to grow it, and I read a book called Multifamily Millions… Not sure if you’re familiar with that book, Theo. Have you seen that book before?

Theo Hicks: It sounds familiar, but I’ve not read it myself.

Zack Boothe: It’s a great one, and he said something in there that really caught my attention. So he’s talking about doing large syndications, a lot of what Joe talks about, and something that I aspire to do. He said that you are not in the business of real estate, your business is not real estate. You’re in the business of marketing and your product is real estate. It really got me thinking how important my marketing was and how I really needed to change things up a little bit.

So I started doing what’s called driving for dollars. It was a marketing strategy that I thought that I could make some big improvements and really scale a business around it. It was just a test, I wasn’t 100% sure if it would work. So what drive for dollars is, if you don’t know what it is, is you drive around neighborhoods looking for houses that have any physical signs of neglect, because the goal is to find someone that wants speed and convenience for their house. You want to be a pawnshop for people that want to just get rid of that house.

So I was trying to find physical signs in neglect, I was driving around neighborhoods, writing down addresses, looking it up on county records and reaching out to those people through a phone call or piece of mail… And I started getting results. I quickly learned that writing down the addresses — there’s a much better way, there’s apps out there that you can add properties quickly to an Excel spreadsheet with the data, and there’s data searching ability with third-party companies, and I really started to learn the system.

Towards the end of 2018 we did about $450,000 or so in sales, and that’s mainly assigning contracts. We did flip a few houses, but it was just turning over our inventory quickly. I was so excited about it; I was pulling a profit margin and my life was changed. I was making a certain amount of money at that point, my profit margins were much higher than my window cleaning business at that point, and I was able to go on vacations and have freedom that I had never had before, and it was pretty life-changing.

You might be thinking like, “How does this have anything to do with you listening? Why would you even care about this story?”, but that’s where everything changes. This is where I started focusing more on others and focusing on bringing more value to people, and the reason that I’m actually on the podcast today. So that was an awesome year for me, and towards the end of it, I had a goal and something that was silly from the time I was a little boy… My family – I grew up working hard, and I had a lawn mowing business, and I remember asking my dad — while I’m mowing lawns at this giant house, and I remember asking my dad how much money they made, and if they were a millionaire… And he said, “Yeah, I’m sure they’re millionaires, and they probably make $300,000, $400,000 a year.” I remember thinking to myself, “One day, I’ll make a million dollars in a year,” and that’s stuck with me ever since.

So I had this inner ambition to do a million dollars in a year, and I didn’t know how I could get my investment business bigger. I felt like I had tapped out my marketing channel and I wanted to get it to that next level. So I was racking my brain, and when you focus on something, when you truly write down a goal and focus on it, how opportunities come… I had a friend reach out to me that I met through a real estate meetup, and he invited me to join him and be an accountability partner on a self-help journal called Living Your Best Year Ever by Darren Hardy. So I did that, and one of my big goals was to generate a million dollars in revenue in 2019, and we’re October now, 2019, and we’re on track to hit that. But in there, when you create that goal, it talks about the importance to give away whatever you’re trying to receive. I definitely did not have a million dollars in my pocket to give away, and I wasn’t even sure how that was even possible to give away a million dollars before I had a million dollars… So I really started racking my brain, and in November 2017 I came to the conclusion that I needed to bring on some students, just a handful, teach them my marketing channel, and help them put a million dollars into their businesses by implementing my marketing system that I was using, and that’s where everything changed.

So many of these guys that I brought in — I made sure I brought in some very experienced investors, some very new investors, and I wanted it all across the country, because I wanted to make sure this worked everywhere; what apps, what systems didn’t work and did work. I’ve spent just about 12 months perfecting the system with my beta testing students, my guinea pigs that believed in me and trusted in me enough to do this. And with their intelligence and their intelligent questions, we were able to perfect a marketing system that changed my business. And that’s essentially what I’m doing now, is I’ve been able to build a team around this marketing system that’s servicing all of my contracts. I haven’t signed a contract myself in a little over 12 months now. All of it’s done by my team, and it’s allowed me to focus 100% on helping other people build out a marketing channel that they can build their business around.

So that’s really what I’m focused on, that’s really what I’m working towards, and it’s been so rewarding to see the success of my students. And it’s been awesome to hit my goal, and to be working towards my own goals, but it was really surprising to me how much more fulfilling it is to bless someone else’s life than really to focus on my own. So it’s been an incredible journey to this point.

Theo Hicks: Thanks for sharing that. So do you mind just going over that marketing system that you were just mentioning? I’m assuming it’s for wholesaling, so marketing to find deals… You said that you teach others how to find properties for 50 cents of the dollar, so maybe you could walk us through what your process is to find a lot of these parameters, so if I have a large amount of deal flow coming in of properties, that you’re able to put under contract at 50 cents on the dollar.

Zack Boothe: Great question. This is for finding single-family homes and small multifamily is what this works for. It’s probably not the best strategy for finding large syndications or large apartment complexes, but it’s a great strategy for smaller investments.

It doesn’t matter if you’re wanting to flip the houses or if you’re wanting to wholesale them or assign the purchase agreements, or if you’re wanting to pick up rentals, small single-family or small multifamily. If you’re trying to pick up rentals, this marketing strategy is for that purpose. How you make money off these leads, that’s not something that I’m as focused on.

So driving for dollars is not new. It’s one of the most proven, most used over the course of real estate investing. It’s everywhere on YouTube, you can look it up; driving for dollars is everywhere. The biggest difference is the scale and the system that we’ve been able to put together. So traditionally, to go out and find 50 houses in a week that are distressed that you go then market to, that’s quite a bit. In the past, you’d have to pay quite a bit of money or a large percentage of the profits to what they would call bird dog, or to the person that would go out and find these properties. The difference that I have with the systems, the software that we’re using, is you can go with one part-time guy and find thousands of distressed properties every single week.

Our marketing – we have a goal of over 2000 properties that we add, that have physical signs of distress, to our marketing list every single week, and we do that, like I said, with one 30-hour part-time driver. So the ability to scale it at a profitable rate is the biggest difference in what we’re doing, and then our course talks about that – the importance of hiring the right person, managing that person; that’s a huge part of the course. But also, obviously the setup of how to use these apps and the software systems…

The app is a public app, you can buy it; it’s called DealMachine. I actually have a discount that I’ll make available to the Best Ever listeners out there. So if you want to try out the app, it’s called DealMachine, and the discount code is PIN. You’ll get some extra credits and so forth with that discount. But we’re using that, and then also the systems and part of the apps that we use, our marketing, as far as how often we reach out to those people, how we reach out to those people, we use a combination of mail and cold-calling. In the course, I break out exactly the timeframe and everything that’s there.

Theo Hicks: So you said you add 2,000 properties every single week with one 30-hour a week, part-time driver.

Zack Boothe: Exactly.

Theo Hicks: That’s a little bit over 60 properties an hour, so over one property a minute. So how are they doing that while they’re driving around their car?

Zack Boothe: Isn’t that incredible? So the data, as far as pins per hour, as we call it, or houses that get added per hour– yes – it is a lot. It’s 60 per hour. We’ve seen anywhere between 20 to 80 properties per man hour that can be added through this system. And the differences are [unintelligible [00:13:17].19] how many you add is your criteria (it’s a big one), but also the market that you live in.

So the beauty of Utah is we have a very gridded out system. The way the city has been developed and the neighborhoods have been developed, it is a very nice, organized grid system. So it’s very easy to go up one street, down the next, up the next and down the next. So we’re able to find properties much faster.

So one of my students said — let me give you an example [unintelligible [00:13:45].12] South Carolina – his streets aren’t as organized, there’s lots of hills, and he’s only pinning about 20 per hour because of that. The houses are a little more spread out. It’s a county that’s not as populated, the houses are a little bit more rural, there’s two, three-acre lots and things like that.

But the cool thing is it doesn’t matter the size of the market. A larger market – you’re gonna have more deals, but more competition, more investors, and then in a smaller market, you’ll have less investors and less deals, but it still makes sense. This marketing is working in every market.

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

Zack Boothe: If you want to be an investor, focus on your marketing. I think that people don’t realize it, but you need to be a marketer if you want to do really well in this business.

Theo Hicks: Yep, and you said the advice you got from that book, Multifamily Millionaires, is that you’re not in the real estate business; you’re in the marketing business and real estate is your product. So it makes sense, and that is your best ever advice. All right, Zack, are you ready for the best ever lightning round?

Zack Boothe: I am ready.

Theo Hicks: Perfect.

Break: [00:14:42]:05] to [00:15:28]:08]

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

Zack Boothe: Recently. 30Days.com, it’s been incredible.

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

Zack Boothe: Real estate. [laughs] I’d get right back into it, it’s never going anywhere.

Theo Hicks: What deal did you lose the most money on and how much did you lose?

Zack Boothe: My very first flip. It’s been about six years now. I can’t remember the exact numbers, but I remember it was just shy of $20,000 is what I overall lost.

Theo Hicks: This is you unique to you. What is the highest window you ever cleaned?

Zack Boothe: The highest window? Man, I avoided high risers. Probably three stories, I didn’t do anything too crazy.

Theo Hicks: Those high rise cleaners – I don’t think I could do that. I’d be too afraid.

Zack Boothe: Yeah, and I never did the bosun chair, whatever they called it. I never did any of the high rise stuff. That’s scary, no.

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

Zack Boothe: You can reach me through the online link, dfdmastery.com. There’s also a link for a live and replay webinar, where I talk about marketing and more about the course. So if you’re interested in that, you can go there. If you want to just reach out to me personally, I’m pretty active on Facebook, Zack, Boothe, so you can shoot me a private message that way too.

Theo Hicks: Thank you for sharing that, and Zack, thank you for coming on this show and sharing your story with us. To summarize, you went from window cleaner to a wholesaler, to coach, and you walked us through how that process evolved pretty quickly from 2016 to today, going from cleaning windows and running a window cleaning business to achieving your childhood goal of generating a million dollars in sales this year. So congratulations on that. Not many people can do that for the first few years, so that’s great to hear.

Then you also talked about your marketing system for finding single-family residences or small multifamilies for 50 cents on the dollar, and your strategy is driving for dollars, and in combination with various technologies and hiring the right part-time person, you’ll be able to find at 20 to 80 properties per man hour. You mentioned that in addition to obviously finding the right person and using the correct technology, is making sure you’ve got your criteria set and then the amount of property you’ll find is going to be based off of the setup of the markets. So there’s a very easily drivable market with a high concentration of houses; pretty easy if you drive streets. You can find a lot more than if houses are spread out and you can obviously drive a lot longer in between homes.

Then your best ever advice, which as you live by, is to focus on your marketing, and again, that great quote from Multifamily Millionaires is that you’re not in the business of real estate, you’re in the business of marketing, and your product is real estate. Thanks again, Zack, for coming on the show and sharing your advice with us. Best Ever listeners, thank you for listening. Have a best ever day and we will talk to you tomorrow.

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JF1994: Wholesaling for Consistent Cash Flow with Dustin Seyersdahl

Dustin Seyersdahl is an active real estate investor in Cincinnati. He started in real estate through contracting and eventually started flipping homes and falling on his face a few times. You will learn the lessons he learned from the early mistakes he has made. He also shares some of the reasons he has been able to rapidly grow his wholesaling business.

Dustin Seyersdahl Real Estate Background:

  • Active real estate investor in Ohio specializing in retail flips and runs a rapidly growing wholesale operation
  • Flipped multiple properties in his first year of investing
  • Wholesales over 10 properties per month, with plans to double the volume in 2020
  • Based in Cincinnati, OH
  • Say hi to him at https://cash4ohiohouses.com/ 

Best Ever Tweet:

“A Couple of days ago somebody had been sold a property and it was on a Demo List, they would have never known unless they would have pulled a title search. I strongly suggest working with title companies and learning that side of the business.” – Dustin Seyersdahl

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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.

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JF1891: How To Wholesale 70+ Deals In One Month & One Market with Jamil Damji

Jamil and his company have a tremendous operation, and have their eyes set on more. Already completing 70+ deals per month, they want to keep it going until they are the largest volume wholesaler in the country. Jamil will share how he built the company to what it is today, and how he will continue to grow it moving forward. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Wholesaling has been given some blemishes” – Jamil Damji

 

Jamil Damji Real Estate Background:

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jamil Damji. How are you doing, Jamil?

Jamil Damji: I’m awesome. How are you, Joe?

Joe Fairless: I am awesome as well, and looking forward to our conversation. A little bit about Jamil – he specializes in wholesaling, and in fact, he wholesales 70+ deals a month, in one market, and that one market is Phoenix, Arizona. With that being said, Jamil, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jamil Damji: Absolutely. Thank you so much for the introduction, Joe. Yes, my name is Jamil Damji, I am one of the owners and co-founder of Keyglee. We are a wholesale operation based out of Phoenix, Arizona. Our goal is to be the largest volume wholesaler in the country. I think we’ve hit that at this point right now, but we’re always hearing of and learning of new cats in the space that are crushing it, and we welcome them.

Joe Fairless: Okay, your goal is to be the largest volume wholesaler in the country… Why not have a goal of having the highest margin wholesaling company in the country, and not be focused as much on the volume?

Jamil Damji: That’s a great question, and I think in terms of margins versus volume, we’ve definitely seen margins shrink… I think the reason why we’re more of a volume-based versus a margin-based operation is because of our focus. Typically, wholesale companies are very strategically focused on acquisitions… And because of that, many operations in and around our state – and other states as well – are lacking in their dispositions, or their capacity to sell their deals. What that’s created in the wholesale space is some grey area, obviously, right? You hear of wholesalers locking deals up, not performing on those obligations, and creating all kinds of havoc for sellers, and expectations in terms of their time, and what they thought was gonna happen in a deal, and because of that, wholesaling has been given some blemishes.

So what we saw a few years ago when we entered this space was we would show up to a buy appointment with a seller, and there’d be ten other people there, for the same appointment. That was driving the prices up… But what we were also finding happening were those deals weren’t closing. So these wholesalers were going in, they were tying these deals up, and then just not performing on them. And that set off a light bulb in our heads to realize that “Well, maybe if we focused on being able to connect with more qualified buyers, who could take those deals, we’d be able to add value to the space. And that’s exactly what we did. So we focused our operation on building out really heavy dispositions of product, where other wholesalers would bring us their deal, we’ll evaluate it based off its investment worthiness, and if it’s a deal we feel we wanna put resources behind in terms of manpower to market and sell, then we’ll option the deal and go to town and sell it.

So great question, Joe. I love that you got right to the meat of it, because that doesn’t allow us to have very high margins, just in the sense of our model being more of a service for other wholesalers than going and buying super-deep.

Joe Fairless: Very interesting. Well, there’s money to be made in every type of business, that’s for sure, from the Walmarts to the Neiman Marcuses. So when you are partnering with other wholesalers, what type of joint venture structure do you have with them?

Jamil Damji: Typically, we work off of an option. The reason why we do an exclusive option is, first of all, it protects us from our seller or  a partner not then performing  on the option or not. Saying afterwards “Hey, look, I don’t wanna sell this deal anymore”, we’ve gone and spent time marketing it. So in order for us to gain equitable title and marketable title for us to then shop to  our buyers list, we use the instrument of an option.

Joe Fairless: And for someone who’s not familiar with how the mechanics of that works, can you elaborate?

Jamil Damji: Absolutely. A part of wholesaling is marketing your contract. Your contract is your purchase contract when you go to buy a property, be it a house or a building. And that, if you’re the principal on that deal, gives you some opportunity, and you can actually market that contract to people to essentially purchase from you… But in order to do that, you need to have that purchase contract. Now, us being a third-party, not the original party to that first purchase contract, in order for us to be able to send this deal out to our buyers list, we need to have what’s called an option. And that option is basically an option to purchase, so we are then optioning to purchase that contract from the original contract holder, and through that instrument we now have the legal right to market that contract or that property.

Joe Fairless: And then how are they compensated, versus how you’re compensated?

Jamil Damji: It’s typically just the assignment. So our seller, or our deal supplier, or our JV partner – however you wanna phrase that – will bring us a deal, we’ll option it from them, and then once we find a buyer, so  if we’re successful in finding a buyer, which nine times out of ten we are, we will then turn around to our partner and exercise the option. So that exercising of an option would then trigger an assignment to be drawn up between ourselves and our deal supplier. So we would then convert the option to an assignment, so our original contract holder will receive an assignment fee at closing. Now we’re the contract holder, so then we would then assign our rights to the end buyer. Typically, we’re talking about HUDs that show two assignment fees, if that makes sense.

Joe Fairless: Yup. So let’s talk about a typical deal, or maybe even better, a specific deal, and what the wholesaler who brought it to you made, and how much you made.

Jamil Damji: Awesome. I’ll give you an example of a deal we just did yesterday. Our wholesaler in town brought us a deal in Tempe, Arizona, a  great little city in our spot here. It was a hoarder house, so not financeable to the retail public… Just completely trashed on the inside. A lot of deferred maintenance, potential mold, biohazard… You know, the whole nine. Your nightmare property.

So the newer wholesaler goes and contracts the property for 200k. And we see ARV (after repair value) on that property to be somewhere in the 330k(ish) range. So he has a good buy; at 200k he has a good buy. So he tried unsuccessfully for about 2,5 weeks to sell that deal, and sent it out to a few buyers, he posted it on Craigslist, he went on Facebook, he tried and tried, was unsuccessful, brought the deal to us… We auctioned it from him at 220k. So his potential profit would be 20k.

We then marketed it to our buyer pool at 235k. We were successful yesterday in finding a buyer, so our buyer opened escrow. We then converted our assignment with our supplier, so he’s gonna make $20,000 at close, we will make $15,000 at close, and our buyer is extremely happy because he has a new property in his inventory to go and flip.

Joe Fairless: Wow. In that example, about how much do you think it would take to turn that puppy around and get that property move-in ready?

Jamil Damji: The beauty about hoarder houses is they look a lot worse than they are. So I would say just based off of square footage — because we’re seeing cosmetic remodels coming in at around $25/sq.ft. typically right across the United States right now. That’s not including biohazard, or not including structural problems. So this is just straight up cosmetics. So I imagine based on square footage that property is gonna cost around $30,000 to renovate, probably another $5,000 in cleanup and biohazard. So about 35k total.

Joe Fairless: Okay. Yeah, so they’re still gonna have easy 50k in equity. Okay… It’s an interesting model. So really, the reason why you all are having the success you are is because you’re a place that has access to a bunch of people who have money. So you have qualified buyers, so if a wholesaler has a deal, but doesn’t have the list to get that deal closed, then they come to you — or you also find your own deals, and then share them out with qualified buyers, right?

Jamil Damji: Absolutely. So we source our own deals, I’d say — in a month we’ll do anywhere between 70 and 90 houses. So out of that, 10 to 15 of them will be our own sourced deals. So that just kind of tells you, it’s not a big portion of what we do.

Joe Fairless: Cool. I was gonna ask that, so thanks for mentioning that. Let’s talk about how you build the qualified buyer list, since that’s the key…

Jamil Damji: Awesome.

Joe Fairless: How did you do that?

Jamil Damji: So we like to think of ourselves more of a technology and data company than we are a real estate company… Although that’s what we trade in. So what we did is we really focused in on looking at the buyer profile. What type of buyer have wholesalers been typically going after, and then trying to find the periphery around that. And those were a lot of fancy words; I’ll get into more detail about it.

Your average fix and flip buyer – they wanna come in, buy the property dirt cheap, completely run down, turn it, make a profit, and make 30k to 50k. Well, there’s also a lot of buyers out there that are just interested in cash-flowing equity. So we deal with hedge funds, we deal with REITs, we deal with portfolio owners, and they will pay actually a higher dollar price than your average rehabber. So what we do in terms of our capacity to build that list is a lot of outreach. We’re looking at buyer profiles, we’re looking at social media accounts, we’re looking at Facebook, Instagram, LinkedIn, and just assessing a person’s capacity to potentially be a real estate investor. I’ll  give you an example of what I mean by that…

So if you’re on Facebook and we notice that in your profile picture Joe is standing in front of a Ferrari, he also likes Rolex, and he also likes the duPont Registry… So now we’ve got some factors here that show us that you might have access to disposable income, or you might be the kind of person that would gain access to disposable income. So what we’ll do is we’ll send an outreach message. Typically, that’s just an introduction, introducing our company–

Joe Fairless: Outreach on Facebook?

Jamil Damji: Yeah, it would be on Facebook, LinkedIn, Instagram…

Joe Fairless: Like an instant message.

Jamil Damji: Correct, correct. So we’ll reach out through either social, or we’ll try to find an email account through a skiptrace service… And once we have made that initial outreach, not everybody responds. A lot of people just ignore the message. But a good 30% of folks will actually respond, because what we have to offer to a person who is in the business, who is — like yourself, for instance. I know that you invest in apartments, in syndications. So if I was to find a multifamily property, or have access to a multifamily property that would be a great value-add opportunity for you, if one of my outreach or one of my intake specialists sent you a message and said “Look, our business is identifying distressed property in the multifamily space. Would you be interested in talking about or seeing some of our deals?” there’s a high likelihood that you’re gonna answer “Yes.” You’re gonna very quickly look at what we have to offer, and suss out if you think we’re a waste of time or not, but that at least starts the conversation.

Joe Fairless: Is that what the message basically says? “Hi, we’re such-and-such. Would you be interested…?”

Jamil Damji: “We’re such-and-such. Our company specializes in finding distressed property that has some great equity potential, or potential value-add opportunities. It looks like you could be a potential real estate investor, and if you are, we’d love to hear from you. If you’d like to opt into our list, you can do so here. Or you can respond and we can carry the conversation further.” That’s essentially what that message says.

Joe Fairless: What tools do you use to identify the audience that you’re reaching out to initially?

Jamil Damji: Searches. On Instagram hashtags are awesome. We’ll look at #azdoctor, #azlawyer, #azaccountant. We look at high value professions, and we work from there. We go vertical and lateral in our searches. We’ll look at “This profession has a higher likelihood of having higher net worth individuals”, and then once they’ve exhausted that category, they’ll start a new one. So searches on social media, hashtags, Facebook groups…

Also, when we’re looking at Facebook, who you’ve liked, what commonalities we have. Our Facebook accounts that we have for our intake specialists – they’ve all liked those Ferrari, Rolls Royce, Lamborghini, and so when there’s a shared like between two individuals, that’s made known to you as a Facebook user. So if you like Rolex and I like Rolex, and you and I are potential friends, when I come to your page and add you as a friend, or try to message you, I’m gonna be notified someway on Facebook that you and I both like Rolex. So that’s gonna tell me that this is a man who understands timepieces. You might potentially then be a real estate investor.

Again, we’re taking leaps here, but we’re looking at commonalities that we see in this space, and then moving from there.

Joe Fairless: Sure. Do you have people doing individual searches, or is there some sort of software that you use?

Jamil Damji: Both. It starts off with the software that we created, where we’ll sift through and we look for specific types of images. Once that’s all filtered down, then it’s actually a human being doing the rest of that. So we filter a lot  through bots, and our own software, and then once we get into actually doing the outreach, that’s when it’s a person.

Joe Fairless: Okay. So your software identifies the list of people, and then your people do the outreach.

Jamil Damji: Correct.

Joe Fairless: And when the software identifies a list of people, does it give you the Facebook URL, or does it give you the person’s name, and then your human being has to go search for that person’s name? How does that look?

Jamil Damji: Depending on the…

Joe Fairless: Social platform?

Jamil Damji: The social platform, exactly. On Facebook it’s a name, on Instagram it’s a handle… LinkedIn is a little more difficult, and I don’t know the exact procedures, because I personally haven’t done any of the LinkedIn outreach… But I know we do really well on it. They’ve just got so many more filters and so many more ways to protect people from communication. It’s LinkedIn’s way, right…? But again, we are a real business, doing real things, so we’re no blocked from communicating; we just have to go through a  couple more steps.

Joe Fairless: Do you all pay LinkedIn, for example — do you pay for their extra services, where you can send those LinkedIn messages, that are sponsored, or that get to people’s inbox?

Jamil Damji: I would imagine that a few of our accounts do, yes.

Joe Fairless: Okay, got it. What’s something that you all have done, that did not work, when trying to build a qualified buyers list?

Jamil Damji: The one fail that I could really look at was — when you’re looking at real estate, it’s tough to just go in and say “Okay,  if you have purchased a property before with cash…” and that’s like the go-to for everybody in our space; they’ll go check tax records and they’ll say “Okay, these people all purchased in cash, so these people would be real estate investors.” That was probably one of our biggest fails, because we went into a new market in Las Vegas, and we tried just searching through tax records and the usual data sources to build our buyers list, and we found our conversion rates were just dismal.

So for us, what we saw really working was going outside of the box. So not going strategically to “Look, I’m gonna go find cash buyers, and reach out to cash buyers, or people who have purchased in cash before”, but finding guys on the periphery, finding people who really haven’t entered the space yet. I think that’s where we gained our most success… But doing the opposite is where we had our biggest failure.

Joe Fairless: Based on your experience as a real estate investor and entrepreneur, what’s your best real estate investing advice ever?

Jamil Damji: Do it. I got involved in wholesaling because I saw a need; these homebuilders were looking for these specific types of properties, and I knew that they were having a hard time finding them. So instinctively, I thought “Well, maybe I should call these people who have for rent properties in these neighborhoods, and see if they might be potential sellers.” And just kind of trying to connect the dots… I think we overthink how hard it is to make money in this business.

There’s all kinds of people selling coaching programs for hundreds of thousands of dollars, and that’s great for them, but I think that for your average person who wants to get involved and is really desperately trying to find a niche in real estate, I think they need to look at the space, just connect the dots in front of them and behind them, see where they’re going and where they might have been, and find a way to create value. Find a way to bridge those thoughts. And the best thing that you can do is take action and make mistakes. If you’re not taking some action and if you’re not making mistakes, you’re not learning, I think it’s just time that people stopped talking about what they wanna do and just take the first step. If you take the first step, it’s amazing how the world opens itself up for you.

Joe Fairless: What were you doing prior to founding this company?

Jamil Damji: I was in Los Angeles, trying to be a comedian.

Joe Fairless: Oh, I didn’t expect that.

Jamil Damji: Yes, yes. I know we have something in common… I checked you out a little bit, Joe; I did a little homework, but–

Joe Fairless: You just used one of your bots.

Jamil Damji: [laughs] I didn’t. I actually did it myself, but…

Joe Fairless: Oh, okay…

Jamil Damji: …I was an improviser, so I spent years in Los Angeles writing sketches, performing at UCB, and trying that out. I think it did a lot for me in terms of confidence, it did a lot for me personality-wise and just being able to be lighthearted, and really to play games with things. So that’s what I was doing prior to this. It’s a complete 180.

Joe Fairless: Which is not anything related to tech and data… So one fo your co-founders…?

Jamil Damji: Yeah, one of my co-founders brought to the table some great technological skills, and really innovative thinking. I have always been a great connector. I connect with people well, I network very well… So I kind of stumbled into this space, and while in this space, I looked around and saw people just thriving. And because of that, I engulfed myself into the model, and talked to and connected with as many people as I could… So what I brought to the table when we founded the company was just a network of individuals who were already doing business with me. So plugging that network into the systems that my other partners brought to the table was what allowed us explosive growth.

Joe Fairless: I love it. How many qualified buyers do you all have?

Jamil Damji: We’re probably pushing around 80,000 at this point.

Joe Fairless: Holy smokes. When you send out an email to them, what’s the open rate?

Jamil Damji: We’re at about 30% right now. We’ve had some times when it was low. We had moments when we were down to like 12%, and our bottom line was suffering for it tremendously. But through better engagement, and just having more conversations with our buyers… Our staff is constantly on the phone, constantly reaching out and communicating with these qualified buyers… So that communication, and building those relationships is what’s creating that open rate. That, and also knowing what time of day do you send your blast out at. We see an 8% differential between sending a blast out at 10 AM versus 1 PM.

Joe Fairless: Which one’s better?

Jamil Damji: 1 PM.

Joe Fairless: 1 PM Arizona time?

Jamil Damji: 1 PM Arizona time, correct.

Joe Fairless: Okay. 4 PM Eastern time… Are you mountain, or are you–

Jamil Damji: We’re mountain, we’re mountain.

Joe Fairless: Okay, so 3 PM. Got it. Cool, that’s interesting stuff. With that list, what do you send them (if anything) other than a new deal?

Jamil Damji: Nothing.

Joe Fairless: Strictly deals, that’s it.

Jamil Damji: Strictly deals. That’s what they’ve opted in for. I know we’re sitting on a  goldmine of data; it’s one of those things that I’m sure there’s gonna be a point where we figure out how to monetize it beyond what we’re doing right now, but at this point we’re just focused on wholesale deals.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jamil Damji: Let’s do it.

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

Break: [00:21:42].24] to [00:22:23].11]

Joe Fairless: Alright, best ever book you’ve recently read?

Jamil Damji: The Autobiography of a Yogi.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Jamil Damji: Not having the original seller’s initial on one page.

Joe Fairless: What happened as a result of that?

Jamil Damji: We didn’t have a valid contract and they were able to resell to somebody else at a higher price.

Joe Fairless: Best ever deal you’ve done?

Jamil Damji: A land deal in Chandler, Arizona. I bought the land for a million dollars and we sold it for 2.6.

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

Jamil Damji: I really like driving around and handing out cash to homeless people. Not in a way that’s for social media or for anyone’s benefit, but I just like to get out, connect to people, see what’s going on in their life, shake their hands, give them some money… I’m not doing it in judgment, I’m just doing it because I care.

Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing and getting involved with your company?

Jamil Damji: You can find me on Instagram at @jdamji. You can learn about our company… We actually teach our models, so if you went to www.astroflipping.com/jamil, you can find out how to learn what we do. And if you just wanna buy our deals, go to www.keygleehomes.com, and if you wanna sell us your house, go to www.keyglee.com.

Joe Fairless: What’s Keyglee? How did you come up with that?

Jamil Damji: Give us your keys and we’ll make you happy. [laughter] It’s pretty simple.

Joe Fairless: Alright, I didn’t see that coming…

Jamil Damji: [laughs] I’m surprised, because you should have been able to catch a bad pun.

Joe Fairless: I know, right? Yeah… I like it. I like that. And it’s “glee”, it’s not like “happy” or “excited.” I like the word “glee.” I think the word “glee” is not used enough in the English language, so thank you for doing it more.

Well, Jamil, thank you for being on the show, talking about your company’s business model, how you’ve gotten success being the wholesalers’ wholesaler, and how you partnered up with wholesalers, specifically on the JV side, what a deal looks like, and then how you’ve built your qualified buyer list, just through software and then also through manual outreach.

Thanks for being on the show, I really appreciate it. I hope you have a best ever day, and we’ll talk to you again soon.

Jamil Damji: Awesome, thanks so much.

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JF1668: Buy & Hold Investor Got His Start By Wholesaling with Ryan Dossey

Ryan and his team were focused on wholesaling and then flipping, and then got into buy and hold investments. He’s built a good sized real estate business and is here today to tell us how he’s been able to have great success. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“One of our acquisition guys gets 10-12% of the commission on something we sell” – Ryan Dossey

 

Ryan Dossey Real Estate Background:

 


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TRANSCRIPTION

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

Ryan Dossey: Doing good, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Ryan – he is a buy and hold investor with assets in Indianapolis, Louisville and St. Louis. He’s also the founder of Call Porter and Ballpoint Marketing. He closed on 73 units last year using the BRRRR method, and he’s based in Indianapolis, Indiana. With that being said, Ryan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ryan Dossey: Yeah, absolutely. I’ve been doing real estate for about four years now. I started out like most folks with wholesaling, did  a yellow letter campaign, got lucky on our first one… From there, we kind of transitioned into some other remodeling stuff; I did a couple and realized I really didn’t like it, and then in 2017, towards the end of the year, we transitioned more over towards buy and hold.

Currently, we’re actually now focusing on two units and up, reason being eventually we wanna push our team the multifamily direction, so we’re basically not letting them do single-families after this quarter, then duplexes, triplexes, and eventually just five on up.

It’s been working really well for us, because most of the single-families we were keeping; they’re like your hedge-fund-esque, “everybody wants” kind of deals… So we’ve started to sell those off and just start to focus more of our marketing efforts towards the small multifamilies.

Joe Fairless: You started wholesaling, then remodeling, and then in 2017 focus was on buy and hold…

Ryan Dossey: Yup.

Joe Fairless: In my mind, wholesaling and remodeling – that is a way to earn income, whereas buy and hold, you earn passive income, but you need income to buy those properties; so in my mind, those are almost like two separate things. One, you’re making money, and then second is buy and hold as you’re making money, but you have to put money upfront.

So did you reach a tipping point with cash reserves, where it’s like “Okay, now we can just focus on buy and holds” or you earning income other ways to acquire more buy and holds?

Ryan Dossey: Good question. Wholesale was not really a  process I super-enjoyed; the typical wholesale anyway, of throw it under contract and hope to find a buyer. So we actually ended up partnering up with a group that’s called Stewardship Properties. They’ve got a pretty large pool of private money raised, so we’re using private funding paying cash, and then we’re using some wholesaling and some flipping to cover things like operating costs as we go. Last year alone we had like $97,000 in holding costs just on our BRRRR deals, during construction, prior to lease-up.

Joe Fairless: Okay. I think you explained that very clearly, but I think I’d still like clarification, just for my own purposes…

Ryan Dossey: Sure.

Joe Fairless: So you are partnering with a group that is bringing private money to your buy and holds, and then – is the business plan for you to improve those properties and refinance them out?

Ryan Dossey: Correct, yeah. All of these properties are like A and B-class. Our typical formula – we go 75% minus repairs, minus an additional 5k to help cover any surprises, holding costs, any of that kind of stuff. We’re targeting a minimum of a 1.2% rent-to-cost ration. So your typical BRRRR deals.

Joe Fairless: Okay. So your macro-level business plan is you find a property that has equity in it and that you can repair, so that you can cash out the private funding person or group, and hold on to that property in the long-run and make money off of the rent.

Ryan Dossey: Correct, yeah. Ultimately, we use the analogy that we’re flipping capital, not flipping properties. Most of our private money is about 8% interest-only. We do a two-year renewable term. Most of our banks have a 6 to 12-month seasoning. We’re working with one right now that actually has no seasoning requirements at all, so we’re basically getting the properties turned, leased, and then passing them over to our bank.

Joe Fairless: Okay. Is it  a local community bank/credit union?

Ryan Dossey: Not a credit union, but kind of a local — they’re in a couple markets, but they’re kind of a smaller community bank.

Joe Fairless: What bank is it ?

Ryan Dossey: The banks is called Busey.

Joe Fairless: Busey… Okay.

Ryan Dossey: Yeah. They’re in Indiana, Central Illinois and St. Louis.

Joe Fairless: And you’re based in Indianapolis, but you have properties in a couple other cities… How did you get into those other cities?

Ryan Dossey: I’m originally from St. Louis. I lived there for about ten years before I came out to Indi. I’ve only been out in Indi for a little over three years now.

Joe Fairless: What brought you to Indianapolis?

Ryan Dossey: My wife, actually. She is going to school, she is getting her doctorate in Psychology.

Joe Fairless: Okay.

Ryan Dossey: Yeah, so that’s actually where I originally started with real estate. My first year I think we bought two rentals that I ended up selling my interest in to a partner there where I moved out here… So we basically just have ground partners that are equity owners in our portfolios in both of those markets. So I support them from here with marketing, systems, our admin does some of their stuff for them, and then I’m out there probably about once a quarter.

Joe Fairless: What’s been a challenge of your as you’ve evolved your approach from wholesaling to remodeling to now flipping capital, as you call it?

Ryan Dossey: Good question. I think most of our challenges have people-related, just making sure we have the right people in the right places, and kind of dealing with some of those interpersonal, if you have an equity partner and holding them accountable to things, and really kind of making sure everybody’s working towards the same common goal.

Joe Fairless: It’s interesting, because you’re doing the BRRRR method at scale, and I traditionally think of it as a…

Ryan Dossey: Onesie-twosie?

Joe Fairless: Yeah. It’s interesting to hear that. So one challenge that you’ve overcome is the seasoning period for financing, and you’re using Busey Bank for that.

Ryan Dossey: We’re using them in one market. We’ve got other smaller banks, one in St. Louis and one in Kentucky, and actually our bank in Kentucky is like no seasoning, they’ll go up to 80%, and they’re even potentially interested in funding stuff in Indianapolis for us. So it’s kind of a little bit of a white whale there.

Joe Fairless: So one challenge was seasoning, you’ve resolved that; another, I imagine, is finding the opportunities to do this with… So how are you finding the opportunities?

Ryan Dossey: Really inventory sourcing is not an issue for us. We have the number one ranking “we buy houses” site here in Indianapolis, just organically through Google. We do 10k to 15k pieces of mail a month, just here in Indianapolis [unintelligible [00:09:01].11] calls, we have an acquisitions manager that’ll actually book appointments; he goes and runs the calls, makes the offers… So really the sourcing inventory hasn’t been that big of a struggle for us, honestly.

Joe Fairless: “We buy houses” – is that something you had to pay to participate in?

Ryan Dossey: No, no… When I say “We buy houses”, I’m just talking the keyword. If you google “we buy houses”, which is what most sellers are looking for, we come up before the franchises.

Joe Fairless: [laughs] Nice. How did you do that?

Ryan Dossey: …thanks to whoever won that lawsuit. [laughter] I think that was Brad Chandler. [laughs]

Joe Fairless: I didn’t know that someone sued and was like “Hey, you can’t own WeBuyHouses”, and they won.

Ryan Dossey: Yeah, they did. It was a pretty big, pretty expensive court case. It had to do with trademark infringement stuff, and Brad ended up winning.

Joe Fairless: Oh, okay. And how did you get to be number one?

Ryan Dossey: I wish I had a “do this, do that” for you. There was a guy that I used to work with back in my day job who reached out to me when I started in real estate investing. He was like, “Hey, I’m doing this SEO thing. I’d like to try it for an investor.” And he quoted me like 2k a month. At the time, I was like “That’s insane. There’s no way.” But then I started to think about. I mean, if I get one deal a year, it’s more than paid for itself… So we started paying him; we got to month three, still nothing. Month four, we started to see some movement, and then by month six we were actually first for most of our keywords. I think I’m first for like 18 or 19 different cities, kind of in my farm area, in the nine counties I’m in now.

Joe Fairless: That’s great. So you hire someone who is focused on that…

Ryan Dossey: Someone way smarter than me. [laughs]

Joe Fairless: Yeah, yeah. You know what the lifetime value of a customer is for you, and then as long as that math works for what you make on a deal, then you can invest in it and see how it goes.

Ryan Dossey: Yeah. And we actually brought him in as a partner in a different venture, so he only works on my stuff now. We had a couple friends try him out, and he got some friends of mine the first or second in Miami in like three months… So I was like, “Hey, this guy knows what he’s doing… Let’s lock him down.” [laughs]

Joe Fairless: I get that. You’ve talked about how you got inventory, we’ve talked about the loan aspect, with the seasoning and getting the right financing… What else would a Best Ever listener need to know in order to scale from, as you said, a onesie-twosie BRRRR approach, to buying 70+ BRRRRs a year?

Ryan Dossey: So it’s definitely cash-intensive, right? You can start to do the math. We’re dropping 10k-15k pieces of mail a month; we’ve got two full-time acquisitions guys, we’ve got a full-time leasing/admin person, and that’s just here in Indianapolis. So it’s one of those — you’re gonna need to have some source of capital. Whether that’s private funding, whether that’s money you’ve saved up, or if it’s buying and selling wholesale properties. That’s actually how I found my Kentucky partner; he hit me up through Instagram, and — I’m sure you get this stuff all the time… “Hey, teach me how to invest.” And I was like, “You know what, I’ve got some time today.” I ended up on the phone with him for about an hour, I gave him some really advanced tips, and then got off the call, thought “He’s probably not gonna do anything with that”, but I gave back a little…

And he reached out to me 45 days later; he was like, “Hey man, I really appreciate it.” He wholesaled two houses, made like 34k. I was like, “Okay, you have my attention.”

Joe Fairless: That’s awesome. So you’ve got the inventory, seasoning, and just the amount of money that’s needed to get going and keep that business going. Anything else that you think you should mention to scale a BRRRR approach?

Ryan Dossey: You really have to know your numbers of have somebody who knows them. The actual bookkeeping side of stuff really surprised me as we’ve started going, realizing “Hey, what are we all-into some of these properties for?” It’s not as simple as “purchase plus repairs.” What did your marketing cost you? What kind of commission did you have to pay your acquisitions manager? And making sure you’ve still got a deal that you can effectively BRRRR out of.

For us, we try to focus on the stuff that everybody wants. Most of our rentals actually are built newer than 2000. Three beds, 2,5 baths, or larger, attached two-car garage, vinyl or brick, in kind of those newer neighborhoods. They’re a lot less work than some of the lower-end stuff.

We bought a duplex that we probably never should have bought. It was an absolute steal, fell into our lap, and I think it took us four months to find a tenant that we approved of for our screening criteria.

So I think it’s of those just – be cognizant of where you’re operating in, don’t necessarily go for the B and C-class areas; I think it’s good to have a mix. But I’ve actually got a house that I literally sell tomorrow – bought as a BRRRR deal, and we ended up into it for about 165k; the house was worth 210k-220k. The problem is we finished right after schools went back. So most people that reached out weren’t interested in moving until basically the next year. We had people that were like, “Hey, can you hold it for me?”

Long story short – holding costs on it started to just rack up; we had a pipe freeze over winter… Nothing major, it was an exterior deal, but we ended up at the point where “Okay, we’re into this thing for 180k now, and it’s just been sitting.” So we decided this is a nice enough house, let’s sell it. We threw it on the MLS, and we’re actually gonna walk with somewhere around 20k-25k after it’s all said and done.

So I would also say just have multiple exit strategies. Don’t have it be something that it has to appraise — I saw a thread on Bigger Pockets today with a guy talking about doing a slow BRRRR, where he bought a deal for 90% of what it’s worth, and he’s hoping appreciation unburies him in three years… I was like, “That’s terrifying.”

The big thing with just about everything I own is I’m fairly confident that we could sell it on the MLS for more than we’re into it by quite a good margin tomorrow, if we needed to.

Joe Fairless: That’s what I was wondering about… Because when you are doing the BRRRR method, you’re basically getting your money that you put into it back out of it, and — there might be a spread there too, but on average, I don’t imagine there’s a huge spread after you get all your money back out, and really the goal here (it sounds like) is to build that rental income for the long-run.

So the thought I had was, well, I love that approach for the long-run, but if you have a team, then that rental income – it’s gonna take a long time to build up, so that you can pay the team… So you’ve got to also be doing some other deals on the side to get chunks of cash to pay the team. Am I thinking about that accurately?

Ryan Dossey: Yeah, it’s kind of cheesy, but we use the expression “Keep the best, wholesale the rest.” Part of the reason we decided to start offloading new single-family leads that come in – I’m not selling any of my current inventory, but new stuff that comes in – is there’s such a high demand for this quality of product that we’re sourcing. We had a deal that we set up, kind of a group showing, and a guy reached out and was like “I’ll give you your asking price, cash, as is, site unseen if you cancel the showing.” I was like, “Alright, done. I’ll do that all day long.”

So we’re doing some of that… The other way to potentially do it – my maintenance guy, we kind of hacked his salary. We realized we didn’t have really enough demand for a maintenance guy, yet we needed one. I think we picked him up when we were at 35 or 40 units. Well, we talked to our GC and we figured out “Look, we can actually have him use some of our tear-out, and that’s gonna lower our renovation costs by more than enough to cover his salary, and then the rest of the time he’s free to run calls.” We do all of our management in-house.

So we do that, and then with our acquisitions guys, we go 70%, minus repairs, minus an extra 5k. That’s their MAO, and they’ll shoot below that sometimes. So a lot of the times my big thing is our team has to be paying for themselves, myself included. If I’m gonna pull out of our cashflow to pay myself, I have to be pulling in more than that amount of cash; that’s the way I look at it.

Joe Fairless: Do you have a multiple that you look at?

Ryan Dossey: We don’t…

Joe Fairless: I’ve always thought about that with team members – you’ve gotta be paying for yourself, but if you just pay for yourself, then there is no business.

Ryan Dossey: Well, yeah… I mean, it’s–

Joe Fairless: It’s like two times multiple, or you’ve gotta bring in three times… And maybe it’s not telling them that, but just…

Ryan Dossey: Having that metric… Yeah, it’s a great idea. It’s probably something we should spend some time figuring out on our end. But when I say “paying for themselves”, I’m talking substantially so. Typically, one of our acquisitions guys is gonna get 10%-12% of the commission on something that we decide to wholesale or wholetail off… And realistically, if they do a deal a month, they should have more than paid for themselves and covered their base salary.

Joe Fairless: Sure. What’s your best real estate investing advice ever?

Ryan Dossey: My best ever – have people that you can bounce deals off of, that aren’t there, they haven’t looked at it, they haven’t met with the homeowner, they’re not wanting the deal – to give you serious, honest feedback.

That deal I mentioned that we’re selling off, one of the gals on our team was like “Hey, I don’t know about this one…” And I ended up “No, I think this is a good one. We’ve got multiple exit strategies. Let’s try it.” Ultimately, she ended up being right. Had we closed on that house and just resold it right away, we would have made an extra $20,000.

So surrounding yourself with people that aren’t afraid to give you their feedback, whether you want it or not. [laughter]

Joe Fairless: We’re gonna do a lightning round. Are  you ready for the Best Ever Lightning Round?

Ryan Dossey: Yup.

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

Break: [00:18:48].08] to [00:19:54].27]

Joe Fairless: Best ever book you’ve recently read?

Ryan Dossey: Best book that I recently read… It’s probably been mentioned on here a ton, but I’m gonna go with Extreme Ownership.

Joe Fairless: Who wrote that?

Ryan Dossey: Jocko Willink and Leif Babin.

Joe Fairless: Right, right, right… Navy seal?

Ryan Dossey: Yup. I listen to it on audio, and it was about one of the most interesting books that I think I’ve ever listened to.

Joe Fairless: Okay. Best ever deal you’ve done?

Ryan Dossey: Best deal I have ever done… Alright, so this is kind of cool; not a numbers thing at all. Totally just a personal thing. So I got into real estate because I’m a car guy. I got to the point where I could afford something nice, and then didn’t want it on my credit, didn’t wanna throw out that amount of cash… So I actually got a house under contract, and a buddy of mine owns a somewhat high-end car rental company, and they decided they wanted to get into real estate investing. So I wholesaled them the house, made 8k, and in return got an Alfa Romeo 4C for a year at no cost to me. So I got paid on it, and got a car out of it for the year.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Ryan Dossey: School districts… [laughs] I did a flip in a super high-end neighborhood; I bought a house for 110k. I was like, “This is gonna be a home run.” Our remodel ended up being 200k, which was the largest single-family remodel I’d done at that point… And comps had us at 450k all day long. So we listed at 450k, nothing happened. We ended up dropping by 10k, dropping by 10k… Ended up finally selling at 390k. The issue we ran into – the comps we’d pulled, even though they were a tenth of a mile away, were on the other side of the school district line.

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

Ryan Dossey: The best way I like to give back… To the world in general, or the investment community in particular?

Joe Fairless: However you wanna take that question.

Ryan Dossey: For me, I like to help people get from where they are to where they can be. I run a small, free Facebook group and we do a lot of stuff in there, showing people really complex stuff and breaking down things like how to get press releases and stuff done. We recently did a giveaway in there, and one of our guys – we gave out like 2,000 pieces of mail – ended up wholesaling two houses, made 50k, and launched his investment career… So it was pretty cool.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Ryan Dossey: They can reach out to me through Facebook, Instagram or YouTube. I think you guys have all of those links.

Joe Fairless: Well, thank you so much for being on the show, Ryan, and talking about how to scale a BRRRR method. There are multiple takeaways; it was really interesting to me how you’ve managed to buy over 70 properties last year using the BRRRR method, and the challenges that we’d have to overcome in order to do that – finding inventory, the loan and the seasoning period, having the money that’s required in order to do this, as well as knowing your numbers and scaling the team, while having multiple exit strategies… So thanks again for being on the show, talking about your background and what you all are doing.

I hope you have a best ever day, and we’ll talk to you soon.

Ryan Dossey: Thanks for having me, guys.

 

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Joe Fairless and Michael Quarles

JF1510: Fastest Way To Scale A Wholesale Or Wholetail Business #SkillSetSunday with Michael Quarles

Michael is a well known name in the real estate world. A huge part of what Michael does, and why it can be so attractive to investors, he never sees any of the houses he buys. Every house he buys is done virtually with help of others, in different states. Learn how he has scaled to the point of never seeing the properties he buys. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment for you called Skillset Sunday, where we’re gonna talk about a specific skill that can help you with your real estate endeavors. That specific skill is how to scale your company, and in particular, if you are a wholesaler or a wholetailer – especially a wholetailer – then this will be relevant to you, because we’ve got Michael Quarles on the show today, and he’s gonna talk to us about how he has done that. How are you doing, Michael?

Michael Quarles: I’m doing good, thanks for having me back.

Joe Fairless: Well, my pleasure. Nice to have you back. You recognize Michael’s name because you’re a loyal Best Ever listener and you heard episode number 72. Wow, that’s like 1,500 or so days ago. I don’t know what episode this is airing, but about 1,500 days ago I interviewed Michael. The episode is titled “Why wholesalers wholesale houses is beyond me.” Then I interviewed Michael on episode 564; the title for this one is a little provocative – “How a murder house turned into a deal.” I’m not sure if that’s politically correct or not, but that’s what the title is.

We’re gonna talk today about how you have turned your virtual wholetailing business into a system and how you got a complementary company. Do you wanna catch us up to speed first with your background just a little bit, so we have some context as a refresher, and then we’ll get into it?

Michael Quarles: Sure. I fell in love with dirt as an adult teenager. Gosh, I’m 56, and that was when I was 19, so you do the math – a long time ago… And it’s been fun. I’m a general building contractor in California, a real estate broker in California, and I buy a bucketload of houses… And the cool part about my houses that I buy is I never see them. I never knock on the front door, I never grasp the hand of the seller, I don’t say hello to the closing company or the escrow company… All I do is look at the check that goes into the bank account. And that’s the cool part about real estate investing to me.

Joe Fairless: How do you buy houses without any of that stuff?

Michael Quarles: It all starts with marketing, one form or another. I’m a big fan of direct mail, and a big fan of pay-per-click. Not so much a big fan of the other digital marketing out there, but those two drive someone to call me, and then we have an “Alex and Ryan and Angel” system. Alexes answer the phone. Alexes are typically female, although they could be a male, because Alex is a dual name… And they ask a series of questions. These gals are in their 20’s, they’ve never bought a house, never wanted to buy a house, never imagined buying a house or being an investor… We have just trained them to follow a script, they ask a certain amount of questions a certain way, the response then takes it to either a follow-up cycle, or a Ryan, which starts the negotiation cycle.

The Ryans negotiate for cash or moderate terms. If we find that moderate terms won’t work for us or the seller, we may get some advanced terms and those go to the angels. Again, all of these people are young adults, who have never bought a house for themselves, never intended to buy a house; however, through systematization, we can put someone in a chair and in four hours they can make appointments for someone to buy a house.

We buy one pretty much every day. Now, that doesn’t mean we close on one every day. That means we put one under contract, based upon the assumptions that we have with the seller and their answers to our questions. Then once we have an agreement to purchase, we then go out and hire a realtor, we get a broker’s price opinion for $150… It’s kind of cool, because that person will go out to our house no matter where it’s at in the country, take pictures of the inside and the outside, do a market analysis, tell us what it will sell for today [unintelligible [00:06:56].12] what it’ll sell for in the market conditions in 30 days, and what the possible repairs will be to take it to an ARV model.

We never consider ARV, however, we’re wanting that BPO. From there, we get a home inspection, that home inspector is gonna tell us what’s wrong with the property, and that just justifies what the seller has told us or – or does it? One or the other… And then from there we’re gonna get a full-fledged appraisal form an appraiser in the marketplace, and then ultimately we’re gonna get a preliminary title report that shows us who the seller is, and making sure that the person that signed our contract can actually sell us the property.

It costs me about $1,000, and I can get that done in a week. So within a week of contract, I can now determine if in fact I wanna move forward and buy the house. The moment I buy the house, then I’m gonna start marketing the house… It’s a good plan, and I like it, because let’s face it, I’m buying a house at 65 cents on the dollar. A realtor in each of these markets, they’re working for 6%. So I’m gonna let them work for 6% and let me work for 35%, and I know 35% is better than 6%, and they’re gonna be my boot on the ground; I rely upon them greatly. I don’t get emotionally involved in determining value, because we’re all systemized. And it’s kind of a cool approach.

Now, with that – I keep saying systemized. That’s the big part of it. I’m a big fan that if you have a good system, the system should be better than the person utilizing the system. So we’re not looking for superstar folks, we’re looking for superstar systems, and it just works for us.

Joe Fairless: You said 65% loan-to-value, right?

Michael Quarles: I’m sorry, 65% of as is value.

Joe Fairless: Of as is value… So you’re really working for 29%, not 35%, right?

Michael Quarles: Right, because I’m gonna subtract 8,25%, because that’s what my costs are from the realtor fees and the double-close fees, so I’m gonna have two title policies, two escrow or closing fees, two transfer taxes, typically… Those kinds of things. And that’s 8,25% of the 35%, so now–

Joe Fairless: 26,5%.

Michael Quarles: And I don’t mind that. If anybody wants to argue that point, I can argue it, but it’s a great number to me.

Joe Fairless: A couple follow-up questions… You said Alex answers the phone and asks questions, and then they either follow-up or they pass them along to Ryan, who negotiates for cash or moderate terms. If you need to do advanced terms, then they go to an angel… What are moderate terms versus advanced terms?

Michael Quarles: As an example, moderate terms might be a Subject to. Let’s assume for a second I’m buying $100,000 value piece of property for $65,000. I have a $50,000 underlying mortgage that I’ll take Sub to, and I’ll give the seller $15,000.

An advanced terms would be mixing seller financing, Sub to financing… Maybe instead of a seller carryback we’ll do a wrap, and that’s a little bit advanced for a Ryan. Not advanced for us, but it’s an advanced for a Ryan, so the Angel gets involved.

As an example, to kind of put this in physical terms, the script for the Alex is 16 pages long, because every time the Alex asks a question, depending upon the answer, they have to now go with that answer, so they have a series of questions based upon that answer.

The Ryan script is 23 pages long. The Angle’s script is a book; it’s many, many pages, because every possibility has another possibility. If I’m gathering seller financing on [unintelligible [00:10:27].23] on a 15-year note, a Ryan is not going to do that. When you look at substitution of collateral, when you’re looking at first right to purchase the loan if they indeed sell the loan to an underlying market – when you look at some of those terms, the angels are gonna get involved in those terms.

Really, we’d never wanna do a subordinated deed unless you’re going to fix and flip it or you see something that they have to rectify prior to sell. But in our model, we rarely, if ever, do anything to the property. The most we’ll do is trash out; most of the time we’re not doing that. So we’re buying it as is and selling it as is.

Joe Fairless: With the Angel team members, my initial thought is having a whole book as your go-to reference guide is going to, obviously, educate them and give them some competitive advantages if they were to go and do this theirself… So my question is do you have a higher degree of turnover with the Angels compared to the Alexes and the Ryans?

Michael Quarles: No, because the Alexes start from a temp serv.

Joe Fairless: What’s tip serve?

Michael Quarles: Temp serv, like a temporary —

Joe Fairless: Oh, temp serv. I thought you said tip. Temp service. Got it.

Michael Quarles: So they’re gonna work for us for 767 hours (I think) as an employee of somebody else, and when they’re done with that, we’ll graduate them onto our payroll. Our Ryans are born out of our Alexes, and our Angels are born out of our Ryans. However, to answer your question, keep in mind, these are young adults who never wanted to be a real estate investor. They’re not entrepreneurial-minded. They’re your average individual out there who wants to put widgets in order, or stock shelves, or whatever the mundane thing in life that some people enjoy doing, that’s their mindset. So they’re very happy at what they’re doing; they don’t wanna go out there and be an investor.

I invite every one of my co-workers to be an investor in my marketplace. Some of them take me up on it, some of them choose no, they don’t wanna do that. I’m fine either way. I believe in an abundance and prosperity mindset, so I can’t lose what I don’t have, and all I can do is help someone gain what they don’t have.

Joe Fairless: What’s the compensation range for each of those three positions?

Michael Quarles: None of them are working over $16/hour. However, on each transaction, they get a different split of the transaction. Where an Alex may get $50 for a closing on a set appointment, an Angel might get $1,000 on that closing of that contract, if that makes any sense. And then the Ryan is in the middle of that.

But then I also share with my transaction coordinators and my lead negotiators that are helping with this workflow. In fact, my share is less than 50%, so I share the majority of the deal with my co-workers, because I believe in that, and I believe if you pay your folks well, they’ll stay, and then if you pay them well enough, then they can buy a house, and they can really enjoy the benefit of being in the real estate business, which, like I said, some of them take me up on it.

Joe Fairless: Are they remote employees?

Michael Quarles: No, they’re all here. So I get to say hello… I bought 26 McDonald’s sandwiches for breakfast this morning, and I gave each one of them one. I like it, I shake their hand, I ask them how they’re doing… We have an environment here at my office. We have about 7,000 square feet… We’re just a big family. There’s a room that has  a TV, a room that has a pool table in it, a room where they can play Atari, they have a full kitchen…

Joe Fairless: You’ve got Atari?

Michael Quarles: I guess. I don’t do it.

Joe Fairless: It might not be Atari. Maybe it’s a Playstation. [laughs]

Michael Quarles: They go in there and they sit there and they play these guitars, and it shows on the widescreen… I have no clue what they’re doing.

Joe Fairless: Okay. [laughs]

Michael Quarles: I think that you have to appreciate folks that you work with. I never like being considered the boss. I hate that word; to me it’s a slave term. I never want anybody to believe that they’re that. So we just get along, we have fun.

Is it for everybody? No. We find that an Alex — as soon as an Alex starts trying to figure a better way to do it, they’re no longer an Alex. They can’t be an Alex anymore. Because we’re not looking to change something that’s working really great.

Now, with all that said, again, it’s system-driven. As an example, when my phone rings, for an Alex, it knows who’s calling them… Our phones are built into our CRM, so our CRM pops up as soon as that phone rings; they can hit the correct for that they need to start filling out based upon the type of call that’s coming in, and it’s seamless. All of the communication, be it telephone, e-mail, texting, web forms – any of the communication we have with our prospect is seamless inside of our CRM, so we never lose data… And then it’s all campaign-driven. As an example, when an Alex answers the phone and they go to the Alex script, and they don’t make an appointment for the Ryan, as they close out of that call, it will initiate a series of campaign items. One will be an e-mail back to that seller, one will be a text, and one will be a call follow-up. We send 29 e-mails, we sent five texts, and we called them on 3,5, 7, 10, 15, 30, 60 and 90 as follow-ups, and our system drives all of that stuff.

It’s all calendar-based, so if a call doesn’t come in, they have a call to make out… Because we know that we make seven calls for every inbound phone call on average. The system works great.

One of the things I like about it, and it took us quite a few years to put it together, is I can take someone that doesn’t know anything about answering a real estate phone, and in four hours train them to follow a script. So if my workload gets heavy, I just call my temp serv, and tomorrow I’ll have a person that sits in that chair, and I like that. Then if I go to a new market, I can turn that marketing on, so I can turn my direct mail on. If I go to Florida, I can turn pay-per-click on; I’m in California, so I can market all over the United States and have a pretty good water faucet business.

Joe Fairless: How do you do that four-hour training to get them up and running that quickly.

Michael Quarles: They mirror — so they sit in a chair with a trainer, and they’re both on the phone. The trainer starts the first hour, shows them a system, but then they start listening to the trainer answer the Alex calls… And slowly that trainer starts letting them take the call, and now the trainer is listening to the calls that are coming in. Basically, we have two operators on the same call. The prospect doesn’t know there’s two operators on the same call, but that’s our learning curve where we can talk to the ear of a new Alex without the seller hearing that communication going on… So if an Alex asks the question the wrong way, the trainer can say “This is how you ask that question next time” kind of thing.

Then everything is recorded, and I’m a big believer in our business model today where consumers are okay with being recorded. We play “This call is being recorded” on outbound and inbound calls; everything’s recorded, we use that for training purposes and for reward purposes. As many times as we have to use them for training, we can use them for a reward, because they did a great job.

Joe Fairless: With the comment you made about “if Alex is looking for a better way to do things, they’re not an Alex” – does that mean that they’re now a Ryan, or does that mean they’re out the door, not getting any McDonald’s sandwiches in the morning?

Michael Quarles: Right, they’re out the door. One of the biggest issues that real estate investors have is they try to do it the way they think it should be done. Here’s the analogy – you have a Formula 1 race car; you take the right front tire off of that and you put it on a stock car. Then you have a big truck – you know one of those big trucks that smash stuff at the [unintelligible [00:18:21].02] you take the left front tire and you put it on that race car. Then you take a motocross tire and you put it on one of the back-tires.

Joe Fairless: [laughs]

Michael Quarles: That car is not gonna go down the road, right?

Joe Fairless: Right.

Michael Quarles: Well, when someone starts trying to manipulate the systems, we know that their mind, as good as it is – they might make a great entrepreneur, but we’re not looking for great entrepreneurs in the Alex role. We’re looking for a person that enjoys putting the widgets in a row, whatever it is the task that they have to do… Whatever it is, that they enjoy that. We need those people.

Joe Fairless: With your company, I believe you have a complementary company that ties into this. Is that correct?

Michael Quarles: Yeah. For the longest time we used to use a texting service for all of our texts. One of our marketing media’s types is shortcode, so we used a texting company. We use e-mails, and we use a phone, naturally. We use a CRM… And those were all separate types. So we had to parse all the data together, or use other programs to put it together, and sometimes just manually put it together.

Well, we created Call Text, and with Call Text it is a CRM that inside of that CRM has a phone service, a texting platform, an e-mail platform, all of the web forms, all of the scheduling forms… Anything you need to do to manage a business, it’s all-inclusive, so now when we look at a history with a prospect, we don’t lose data; we know exactly how long it takes from the time a seller calls, to the time on average we’ll get a contract, or how many communication pieces we’ll have to have with that person… Where in the old days we were fighting technology.

We spent about three years solving for it, and people can utilize Call Text, it’s out there; it’s $19/month. For us, it works great, because again, it manages the transaction. When the Alex hits the form when a call comes in, to ask and answer all those questions, it just pops up. We don’t have to do anything, it’s all inside, embedded in the system, and we can buy a lot of houses this way.

The worse thing that we can do is real estate investors or any business owner type out there is write something down and not remember where we wrote it. We’ll write something down and forget about it; we’ll write something down and not remember why we wrote it down… Because the cost of having that phone ring in the first place — everybody should know the cost to that phone ringing, and everybody should know the value of that phone ringing. So there’s a cost and a benefit.

So if it costs $200 to get the phone to ring, but you make $4,000, you would wanna spend $200 as many times as you can. When you spent it, you’d wanna make sure that you captured it correctly, and you did something with those leads that is appropriate, so we developed Call Text.

Joe Fairless: What’s the challenge that you’ve come across with developing a company like Call Text?

Michael Quarles: The hardest part, because it wasn’t out in the world — there were CRMs and there were telephone companies and there were e-mail companies and texting companies, but no one had put it all together… So the biggest challenge was to figure out how you could put it all together. Because a phone works differently than an e-mail, and a text platform works differently than a phone company, even though they’re similar. And of course, then CRMs, and then inside of your CRM, what do you need your CRM to do?

As an example, I use my Call Text to schedule appointments that people wanna talk to me, they can go and use my exterior to schedule a time to say “Hello, Mike.” I use it for all the web forms, so if you go to the website and you wanna sell your house, you can fill out a form. If you go to the website and you don’t wanna fill out a form, you don’t wanna pick up your telephone and call us, you can go and do website chat; we all now chat nowadays, where you wanna know more information about the product you’re looking at, you can just hit the button that says Help, and now talk to someone live.

I’ve bought two houses this year because of chat. I would never think that chat would buy a house, but we have to have the communication style the prospect is wanting to use. That’s our job.

As an example, our shortcode is 818181, so if you text “house” to 818181, you’ll instantly get back a thank-you text on your cell phone. I have now captured your information, because you opted in. You’re gonna get another text that sends you to a web form, you’re gonna fill it out and say “This is the address and this is my contact information.” Once you do that, now you’re in the series of touching you back with e-mails and texts and phone calls… And I have yet to touch you as a human being during that process. Well, we just have to utilize those things because we know that if you go anywhere, most people are using their phone to text, they’re not using their phone for phone. We have to have that ability as well, so we just built it all in.

Joe Fairless: Anything else as it relates to creating a company and creating systems that we haven’t discussed that you think we should, in the last couple of minutes?

Michael Quarles: Yeah, the biggest part of systems is to realize every system creates another need, for another system. All system-oriented businesses have to have someone in systems, because it’s the hardest part about a business, is knowing what an employee should be doing when this or that happens. As you start building your systems, you start someplace and then you back up because you realize “Well, there needed to be a system before I started this system”, and there’s going to be a system after it… So it’s all system-oriented.

Read the book The E Myth. It’s a great book to get you started on the mind frame of systemization. They have some E Myth masteries, and those kinds of things; there’s some programs that you can go through to learn systemization.

The reality is a system is a check and a balance, and you have to write a system in a way that anybody you wanted to that sit in a desk could follow it without knowing where they’re going to. That’s the system. If it takes a personal intuitiveness to know what they’re doing, that’s the wrong system. The system has to answer all of the questions for the person, and once you have that system in place, then your business can multiply, it can have exponential growth. The truest type of passive income is exponential growth, and although I’m not a passive income earner, I have passive earning businesses because I’m a massive earner, and I can predict my result through the systemization. Without Call Text I couldn’t have done it.

Joe Fairless: You decide to walk away from your business as soon as our interview is over, and you never step foot back in the door of your company – how long does your company run without you?

Michael Quarles: Well, it’s always the ego involved in that question? My ego is gonna say “Tomorrow I’ll have to come back.” The reality is if I stop the ego issue, it should run as it should run, meaning as long as there’s a person managing the system, it’s gonna run forever. It’s the truest type of business, and I haven’t talked to a seller in years. I get reports – I think there’s 12 questions you should get a day, kind of thing – about what we did today, but I’m not involved in doing it today. My goal in my life today is to help the person that I haven’t yet met. That’s what I get excited about, and knowing that I have people that are following procedures allowed me to do that. It’s a  great thing.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Michael Quarles: MichaelQuarles.com kind of tells my story, and then it shows all the companies that we have. I’m pretty open. If anybody has a question, they can always reach out. We had a short period of time to talk about 35 years or so of — so there’s a lot to it, that I would hope that everybody wants to push themselves to doing things on purpose. Last thing if I could before we ran out of time…

Joe Fairless: Please.

Michael Quarles: There was a change that happened this last year, and I always try to share this change in life. This last year I’ve decided to stop using four words: want, hope, need, wish… And replace them with the word “require”, because I think a lot of people that wanna become successful get rid of the J.O.B. – they hope they can, they wish they could, they want to, they need to, but they don’t necessarily require it. And when we start requiring action, then success happens. So if people could change their mind frame and just say “I’m gonna get out of the bed today and I’m not gonna HOPE I got to the gym, I’m not gonna HOPE I cold-call for two hours, I’m not gonna WISH I could go out there and meet 20 people that I don’t know, I’m gonna REQUIRE that I do these things”, and success will come a lot faster.

Joe Fairless: Yes, I’ve heard it phrased similarly, where if we hope for something, just thinking about and feel the feelings that we feel when we hope for something, versus when we expect something to happen. It’s just a different feeling, a different mindset, and…

Michael Quarles: There’s a lot of fear when you hope something will happen.

Joe Fairless: Yeah, little butterflies in your stomach, that sort of thing. But when you expect it, it’s like “Alright, let’s make this happen. I will make this happen.” It reminds me of shoulds versus musts. Tony Robbins talks about that – what are you shoulds? Is it a should or is it a must?

Michael Quarles: Yeah, it’s a different mind frame. People wouldn’t be listening to you if they didn’t wanna become super-successful and [unintelligible [00:27:31].17] They just wouldn’t spend the time trying to change their mind frame. It’s a little exercise that’s easy to change… Although, as Tony Robbins said, until the pain of changing is exceeded by the pain of not changing, one won’t change.

Joe Fairless: Right.

Michael Quarles: So it has to hurt, but it has to hurt more if we don’t.

Joe Fairless: Yup, absolutely. Well, thank you so much for being on the show. Very practical advice, as well as you went conceptual, too — which is practical, but it’s also good to work on our mindset… But from a nuts and bolts standpoint, I love the details that you got into, with the Alex, the Ryans and the Angels on your team, how you structure the training for them, how you compensate them, how you structure your company and how it flows from one to another, and then the way you have a complementary business too that you launched because you saw a need.

Thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you soon.

Michael Quarles: Thank you so much.

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The Best Show Ever flyer for how to do over $15M in wholesale

JF1485: How To Do Over $15 Million In Wholesales In Just One Year with Steven Libman & Adam Rae

Steven and Adam teamed together to build a huge wholesaling business. They also transitioned over to commercial real estate to secure some passive income. If you want to know how to wholesale A LOT of deals and/or want to know more about commercial real estate investing, listen to what they have to say in this episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Steven Libman & Adam Rae Real Estate Backgrounds:

  • Two of Three of the Managing Partners of Integrity Capital Group
  • Steven Libman Real Estate Background:
  • Has spent over 10 years in real estate as a broker at first, then an investor
  • Managing Partner at one of the largest private investment companies in NJ, doing over $50M in transactions, and over 150 deals a year.
  • Based in NYC, NY
  • Say hi to him at https://www.integritycapitalgroup.com/
  • Best Ever Book: Never Split the Difference
  • Adam Rae Real Estate Background:
  • Has spent most of his career in real estate
  • In 2017 his company, Integrity Invest LLC had grown to be the largest Wholesale Acquisitions Real Estate Investment Firm in Southern Colorado, coordinating the sourcing and deployment of over $9,000,000 into the market over 12 months
  • Based in Colorado Springs, CO
  • Say hi to him at http://www.integrityhg.com/

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com


Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


TRANSCRIPTION

Joe Fairless: Best ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Steven Libman and Adam Rae. How are you two doing?

Steven Libman: Doing well.

Adam Rae: Thank you so much for having us.

Joe Fairless: Yeah, my pleasure. A little bit about these two – they are two of the three managing partners of Integrity Capital Group. Steven spent over 10 years in real estate as a broker at first, then an investor, and he’s been a managing partner at one of the largest private investment companies in New Jersey, doing over 50 million in transactions and over 150 deals a year. Based in New York City.

Adam has spent most of his career in real estate. In 2017 his company, Integrity Invest LLC, had grown to be the largest wholesale acquisitions real estate investment firm in Southern Colorado. He is based in Colorado Springs, Colorado.

We’re gonna be primarily talking to Steven, but you’ll hear Adam as well, because I know it’s tough to follow voices with three people on a podcast… With that being said, Steven, do you wanna tell us more about your company’s background and focus?

Steven Libman: Sure. Integrity Capital  Group was established just this year, actually, because we both (Adam and I) run very similar business. We have a wholesale/fix and flip business in New Jersey, and he does the same thing in Colorado. We actually met through a mastermind, and we’re both on track to do probably 15-20 million dollars in each state.

The name of our company is Integrity Holdings Group, the name of his is Integrity Invest, and the goal has always been to get from wholesaling into commercial real estate and multifamily. Just through meeting over the last year, and being of like mind – he is cut from the same cloth – we decided “Hey, why don’t we attack this together?” and in a very short order of time we’ve gotten thrust into a couple of pretty large multi-million-dollar commercial deals, and we just kind of hit the ground running.

So here we are, and our business model is to raise capital from private investors and deploy that into safe, securitized, and providing higher than expected returns on commercial real estate deals.

Joe Fairless: The primary reason why you two partnered up is so that you could go into commercial deals?

Steven Libman: Correct. Our businesses still operate kind of on their own now, and are — Integrity Capital Group was established specifically for commercial.

Joe Fairless: You both have, it sounds like, flourishing wholesale companies, 15-20 million in each state, if I heard you correctly… Why did you choose to partner with an individual who has similar experience, versus choosing to partner with someone who has commercial experience, since you wanted to get into commercial deals?

Steven Libman: Great question. That’s kind of one of the things that has always driven us, is to find like-minded people and find people of different skillsets. The experience level in commercial was both where we wanted to go, but it was more important to find people that were kind of similarly minded when it came to values and relationship, and where our family goals were, and things like that. So that was the most important piece of the puzzle for us when creating a team, and we all have different skillsets… So Adam’s genius zone is different than mine and different than mine, and different from Travis’, who’s not on the call today… But the three of us meshed really well, and that’s why we started the company. But to your point, the deals that we are involved in are co-sponsoring with guys that have a ton of experience. Collectively, they own about 2,000 units, and we’re building a self-storage facility down in Orlando with one of them, and acquiring 152 units in Arizona for another one… So we certainly get the value of partnering with people with that experience. For our core group and what our company was gonna be doing, we just decided that the three of us would make the best fit.

Joe Fairless: 15 million dollars on track this year – that’s great for anyone who’s listening, but especially it’s inspiring for people in that particular area. How much money do you make when you do 15 million dollars in wholesaling?

Steven Libman: So that’s just total transactional volume, and you skew statistics to make them sound really good, and that’s that one. But to put it in perspective, in 2016 we did 16 deals for $240,000 in revenue. This year we’ll do about 180 for 2,4 million dollars in revenue. So it’s been an extremely quick growth curve for us.

Adam, I forget what your numbers look like from two years ago till now…?

Adam Rae: Two years ago we did 21 deals for about $400,000 in revenue (just under, 380k). And this year we’re on track to do 88 deals with like 1.4-1.8, somewhere in there.

Joe Fairless: And just so I’m clear, revenue is the total amount of income, not necessarily the profit, correct?

Steven Libman: Correct. About a 35% profit margin.

Joe Fairless: Okay, so like for the 1.4 now we do 35% of that, and that’s about where you’re netting out from a profit standpoint.

Adam Rae: Yeah. My profit margin is about 33.76%, roughly…

Joe Fairless: About…? [laughter]

Adam Rae: Yeah, I’m a numbers guy.

Steven Libman: It depends if you’re in growth mode, too. So when we were doing extreme growth mode, that might have dipped down to 20%-25%, because we were pumping money into new markets, and new marketing channels, and things like that. So it fluctuates, but that’s the goal.

Joe Fairless: Interesting. I never heard that type of percentage expressed as a profit just for wholesalers; that’s great to know. When there’s a certain amount of revenue, then approximately — well, I don’t remember the percent that you gave, Adam, but approximately 35% of that is profit. That’s pretty cool.

Why go into commercial? Why not just continue to scale from 15 to 20 million to 100 million in wholesale?

Steven Libman: I think we’ll both have the same answer for this, and we’ve discussed it a lot, obviously, before we went into commercial. It’s because of passive income. Cashflow ebbs and flows significantly in a fix and flip business and in a wholesale business. And at the beginning of every month you hit the reset button… So you’re sending marketing pieces out, you’re spending more money on pay-per-click, you’re sending your acquisition people out on new appointments, and it’s just a heavy-lift at the beginning of every single month.

As entrepreneurs, I think we always wanted something that would create some passivity in our lives, and commercial offers that. We’re watching other guys that are building their businesses, and now that we have a business that’s kind of printing some cash that we can turn into passive income, that was always the goal for us.

Adam Rae: And then the second thing is Steven and I were headed down the path of partnering to build a monster single-family portfolio in different regional locations we were scouting, different cities around the country, trying to look at local partners, and I’ve got a small 23 rental portfolio in Colorado, so I have some experience with our passive income and growing that one house at the time, and we just looked at the amount of energy that it takes to source, find, fix and then deploying that capital, even in a small amount, into a  single-family house across the country… And then also looking at analyzing the numbers of a large, large commercial project.

To be honest, we’ve both done a lot of residential deals and we looked at our time commitments and said “My goodness, I can add three zeroes to this deal and it’s about the same amount of work as flipping three houses and buying two rentals”, but the payoff on the back-end has a couple extra zeroes on it, and then we can actually scale if we combine both of our ability to build businesses together. And we are talking every day anyway, so…

Joe Fairless: It sounds like two things. One is the endless heavy-lifting cycle that is wholesaling, because you’re constantly ramping up the machine, and then the time commitment in terms of opportunity cost too, and being able to scale.

When you two made that decision to go into commercial, what were some of your first steps?

Steven Libman: I would love to say that it was methodical, and I would love that we sat and wrote our plans of what we were going to do, but the truth of the matter is that we were at a mastermind together in Baltimore not more than 60 days ago, and a sponsor that I had been communicating with reached out and said “Hey, if you guys wanna get involved in this deal and you can raise six million bucks, then let’s talk about that.”

I went, I found Adam, I said “What do you think? Do you think we should paint ourselves in a corner and commit to doing this?”, and…

Adam Rae: Yes.

Steven Libman: He said “Yeah, I think we should.” [laughter] So we did, and just last week we closed on 14 acres of land with 1,193 approved self-storage units on it, just outside of Orlando.

Joe Fairless: Wow.

Steven Libman: And we just closed on the two million dollars of the land last week, and we’re in the process of closing out the second round for the 12 million dollars worth of construction cost for that. How did we get started? It was a violent shove into it, and our eternal need to say yes to things kind of got us in there, and then that just really opened the door for us to go side by side with a sponsor who has a lot of experience with 100 million dollars of assets under management, and to just learn and watch and figure it out… We’ve been raising money for a long time with our single-family fix and flip business, so we thought it was achievable, and it was, and now we get to take the ride.

Joe Fairless: What was something that surprised you as you got started having those conversations with investors?

Steven Libman: I think first it’s how many people are really interested in creating some passive income for themselves. When you’re paying double market returns to your investors, they get excited about that. So I would say that it was not easier than we thought, but initially the conversations were a little bit different, where “Hey, we’re gonna deploy your capital now for 3-5 years, versus 3-6 months” and people were excited about that. So the people that we’ve already had relationships with were saying “Yeah, that’s kind of what I was hoping you guys would do.” So it turns out it was the right move.

Joe Fairless: New development… I heard that right, correct?

Adam Rae: Correct. Ground-up.

Joe Fairless: Ground-up development. You definitely got into this with a violent shove, as you described, Steven. Did  you get any pushback on ground-up development?

Steven Libman: No. We actually have some experience in that. Travis, our third partner, is from the underground utility and site development world, so he has a lot of that background, so we’re confident that we can oversee that project with a solid fiduciary responsibility to our investors. Then also in New Jersey in 2018 we’ve taken down some, divided and either improved or approved over 100 lots for single-family development, so… It’s not that different, except storage doesn’t have any kitchens and baths. Well, maybe one or two baths, but it’s a little bit different of a process, so it goes much quicker than that larger single-family development stuff.

Joe Fairless: You’re working on another project, too. I think you said you’ve got that and something else, right?

Steven Libman: Yeah, so in just about 30 days we’re getting ready to close on 152 units in Yuma, Arizona. That’s a little bit different. It’s a cash-flowing asset already. We’ll make some changes to it cosmetically and operationally that will create some value… But yeah, we’re still in the middle of raising the final round for that as well. That’s a really exciting project as well.

Joe Fairless: And how much are you bringing into that deal?

Steven Libman: 2.6.

Joe Fairless: How long does it take you to raise 2.6 million?

Steven Libman: Hopefully less than 30 days.

Joe Fairless: It’s in process, it sounds like.

Steven Libman: Yeah, exactly. It’s in process, doing two projects side by side, with different risk tolerances. Ground-up means a different risk tolerance than the stabilized asset, so… Different investors, lots of conversations, but we’ll see. I wish we had a better dataset for that.

The goal moving forward is to continually meet with investors that like what our portfolio is turning out to be, and then as those deals pop up, we don’t have to play behind the 8-ball, because right now a little bit we are.

Joe Fairless: What have you noticed you’ve had to give more attention to as it relates to your wholesale business that you thought was on auto-pilot, but then not so much?

Steven Libman: For us, and I think for Adam too in the next couple of months, the goal is — for us, we’ve already identified and are starting the onboarding process for a COO, so that they can take the operations day-to-day off of our hands. But as much as we like to say everything’s on autopilot, you don’t need a COO if it’s on autopilot. Nothing’s really ever on autopilot. Marketing changes, your response rates change, your appointment quality changes, acquisitions people sometimes get sick or go on vacation so you’ve gotta step in and the business still has to run… But I think we’ve done a really good job, and I know that Adam has too in his wholesale business created a really good culture of accountability and team play where everybody knows that they are part of the [unintelligible [00:16:42].09] where we all hold each other up. If you have that type of accountability to everybody on the team, then everybody works really hard and that’s the culture that we’ve created, and that has been the biggest win for us in terms of making sure that things continue to run… Because if they don’t wanna run it for themselves, they wanna run it for their teammates, and nobody’s ever wanted to run it just for us; that’s been really helpful.

Adam Rae: One of the big surprising things on my end has been as I’ve started to shift my focus, I’ve realized I’m less important to my business than I actually thought.

Joe Fairless: That’s good.

Adam Rae: Not in the sense that I haven’t given a lot to it and made a lot of things work, but at the end of the day if I take an extra 24-48 hours to get back on a problem, by the time I get back to if I’ve noticed over the last couple of months somebody on my team has taken that opportunity to step up, usually, and has solved that problem prior to me being able to get to it. Actually, that’s been the most surprising thing, and exciting to see some of those team members step up into situations that you didn’t know that they could handle… But now my attention being pulled in another direction has given me the opportunity to see them do that, and my trust in that is growing, for sure.

Joe Fairless: What’s the short to medium-term vision in terms of asset class? Because you’ve got a couple different asset classes in commercial right now.

Steven Libman: We like multifamily and we like self-storage… The reason being is that during the last great recession, storage was the only asset class to continually gain throughout the recession, and multifamily because we like to have impact on people’s places that they live. People always need a place to live, and if we can impact that in a positive way, I would say that it’s arguably one of the other stable asset classes. If you buy those things right, and you manage them properly, then you can do a really good job and win. Not that we know how to run a self-storage facility, but CubeSmart is gonna sign on, and they are the ones that are gonna be running that facility for us. Then we have great asset managers and property managers to help us run those other multifamily assets.

Joe Fairless: What’s been a surprising challenge as it relates to getting into commercial and having those investor conversations that you didn’t think you’d come across, or maybe questions that they asked that you didn’t think you’d come across?

Steven Libman: First, I think it’s a slower process. I think that what makes the two deals that we’re in right now significantly more challenging is timeframes. People need time to discuss a property with you, they need to figure out where their investment moneys are coming from. If they’re rolling it over from a 401K or an IRA, that’s not a one-week process.

We have self-directed IRA companies that work with us often and they can do it in between two and three weeks, which is really fast… But I’d say that that’s been in my mind the biggest challenge – just making sure that you’re consistently having these conversations, because if it’s not this deal for an investor, it will be the next one… And making sure that you’re continually keeping them involved and updating them with where we’re at with the current project, and when they get excited for that, to make sure that they’re ready for the next one.

Joe Fairless: How do you grow your list of investors?

Steven Libman: I’m sure you can answer that better than we can at this point… [laughs]

Joe Fairless: Well, I’m not being interviewed though… [laughter]

Steven Libman: That’s been a strategy point for us over the last couple of weeks, figuring out exactly how to build those relationships… But I think like anything else in your business that you find has been really successful, it’s based on relationship, and making sure that you’re out there meeting people, getting connected, and just letting people know what you’re doing.

There’s a book called Getting the Money, and she talks about how she’s not Wonderwoman, but her and Wonderwoman have never been seen in the same room together,  and her point was don’t forget to tell people who you are and what you do… And I find that most of our investors work with us more for who we are than what we do. It’s great that we can provide good returns to them, and certainly, it’s better than what they have seen in the past… But it’s mostly about who we are and why we do what we do.

I think as you continue to build that base of good investors, they have friends, they have family, they have other people that they want to introduce you to, because you’ve done a good job for them, and they trust you, and you just continue to build that relationship.

Joe Fairless: And the self-storage investment near Orlando – if you can think about the one investor who invested the most amount, how did you meet him or her?

Steven Libman: By asking the question of the people that we know “Who else should we know that you think should be in this deal?”

Joe Fairless: Wow. And they introduced you to this person who wrote the biggest check.

Steven Libman: Yeah. It was one point of separation, and we said “Hey, this is what we’re doing.” They were involved in the deal themselves on a lighter scale, and we said “Who else do you know that we should be talking to?” and about an hour later we had the largest commitment that we had. So it’s our warm network.

Joe Fairless: Wow, that’s incredible.

Steven Libman: That’s the key – making sure that people know what you’re doing, and then asking those questions, “Who else should we be talking to about this?”

Adam Rae: But it’s also positioning yourself. We’ve done due diligence on this, we have a partner who his job is to blow up deals for us… Because we’ll get excited about something and we’ll send it across Travis’ desk, and he spends 36 hours in the numbers and says “Hey guys, here’s three yellow flags. We need to resolve these before we go any further.”

When we’re having conversations with people, we’ve found something that is intriguing, enticing and exciting, and we’re not even gonna take it out to somebody unless we feel like this is something we’re gonna put our own money into, that we’re excited about, and that truly has a great opportunity… So positioning ourselves as the prize, and just asking for who else possibly would be interested in something like this, and people are excited to share it.

So just capitalizing on that relationship and warm network, because you have built the trust and you have that relationship with someone and they’re excited to bring somebody else in that they know, because they trust you.

Joe Fairless: Based on your experience, what is your best real estate investing advice ever?

Steven Libman: For me it’s build the team. We started our business in 2011, the wholesaling side, and for five years I built a great job… But you heard the numbers – in 2016 they weren’t great, and now they are. The fear that I had and that was holding me back was I didn’t wanna be responsible for other people’s income. When mentors of mine told me that the value of our business is going to be predicated upon the talent of the people we bring in, it really changed my mindset to say “Wow, if I build a really good team, then I don’t really have anything to worry about.” That changed everything for us.

We started hiring people, and not all of them have worked out, but being able to confidently go in and say that building a rockstar team is gonna build a great company – that’s been the best advice I’ve gotten.

Joe Fairless: Adam, do you have any thoughts?

Adam Rae: Yeah, I would say for me it’s check your ego at the door, and just try and find somebody who’s doing what it is that you wanna do, and model. Just don’t try and recreate the wheel; it’s not complicated, but it’s not easy. So just keep your head down and try what someone else is doing, and stay long enough to really figure it out, and that takes checking your ego.

Joe Fairless: We’re gonna do a lightning round. Are you two ready for the Best Ever Lightning Round?

Steven Libman: Let’s do it.

Adam Rae: Let’s do it.

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

Break: [00:24:54].17] to [00:25:41].19]

Joe Fairless: Best ever book you’ve recently read?

Steven Libman: Never Split the Difference.

Joe Fairless: Best ever deal you’ve done?

Steven Libman: It’s gotta be so far this over a thousand-unit self-storage development deal.

Joe Fairless: What about a deal that has gone full cycle, best ever deal you’ve done?

Steven Libman: Probably the 24-lot subdivision, from entitlement to completion.

Joe Fairless: What’s a mistake you’ve made on a  transaction?

Steven Libman: So many. Probably making sure that we haven’t touched and felt every piece of it… That’s more in the single-family world, where we had less of a stringent timeframe with the due diligence, and we’ve uncovered some stuff in the deal that we should have known before the deal… Luckily, we still made money on it, but that’s a learning curve for sure.

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

Steven Libman: We work with Samaritan’s Purse, and we donate a portion of the proceeds from every property that we’re involved in to their Clean Water project, digging wells in third-world countries.

Joe Fairless: Best way the Best Ever listeners can get in touch with you two and learn more about what you’ve got going on?

Steven Libman: IntegrityCapitalGroup.com. My name is Steven, that’s Adam, and our e-mail addresses are just our first name, @IntegrityCapitalGroup.com.

Joe Fairless: Thank you so much for being on the show, talking about how you two have built  wholesaling businesses that are thriving, and now going into commercial deals – two primary reasons why… One is the heavy-lift at the beginning of every month; basically, just ramping up every month, because you’re starting fresh, and two is the opportunity cost, and I believe as Adam said, you could spend the same amount of time, but then you add three zeroes to the deal and it’s a significantly bigger payday for your time…

And the projects that you two talked about, and holy cow, that question that secured the largest investor in your recent deal… That question is “Who else should we know who should be in this deal?” and you’re asking that to a current investor. Now, you already have that rapport build up, and Adam, as you said, it’s not a magical question; when you ask that, people get into a trance and then say “Talk to my uncle Billy. He is a billionaire. He’ll give you money.” [laughter]

Adam Rae: Sometimes… [laughs]

Joe Fairless: Maybe, sometimes… I haven’t met uncle Billy yet, that is a  billionaire, but I’m sure he’s out there… But it is a question that once you have positioned yourself properly, then that question can help you get to another level. Thanks so much for being on the show. I hope you two have a best ever day, and we’ll talk to you soon.

Adam Rae: Thanks, Joe. You too.

Steven Libman: Thank you.

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Pete Barrow and Joe Fairless

JF1479: Finding Off Market Deals, Managing Rentals, & Wholesaling with Pete Barrow

Pete and his team do a little bit of everything. The leaders of his business are himself and his sons, and they have a great system in place. One son is the deal finder, the other is the property manager, and Pete over-sees as well as being the head of marketing, networking and growing the business. Tune in to hear how she pays $0 on capital gains! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Pete Barrow. How are you doing, Pete?

Pete Barrow: Hi, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Pete – he is the owner of Parrot Homebuyers. He buys homes anywhere in Indianapolis, takes pride in closing extremely fast, and you can say hi to him at his company website, ParrotPropertyManagement.com. With that being said, Pete, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Pete Barrow: Sure, Joe. I should start by saying I’m one of the owners; it’s myself and my two sons, Sam and Isaac. Our background is this – we all lived in the Maryland suburbs of DC. I lived there for 35 years, and I was a cabinet maker, carpenter, handyman, and I always day-dreamed about getting into real properties, back before it was cool even… But on the East Coast the costs are very high, I’m sure everybody knows.

My older son Sam always wanted to leave there anyway, so he saved up his pennies, he quit his job and he just started driving around the country for a place he might like. I don’t actually know anyone who ever did that, but… He just drove to cities, and spent some time there. And I thought it was kind of strange that he settled on Indi, but I came out here and saw it, and we loved it too. It’s affordable, the people are nice… My son is a tech guy, so he ran all the numbers and he said the economy is steady and reliable; it never booms, it never busts. So he bought a beautiful little house out there for about a fifth of what it would have cost in DC, and then we bought another, a foreclosure, and then we bought another… He’s a web design guy, and he was building his own little company at the time, so he would just sit on the couch all day with his parrot on his shoulder and worked at building up his company.

I started coming out here and spending 4-5 months a year working on the houses, and then Sam joined his brother Isaac, moved out here, too. He’d been managing a family pizza place, and that turned out to be useful. Now, here’s the good part. I was back in Maryland, finishing up a job for a long-time customer, and she just spontaneously asked me if we could use some money for our rental business. I called Sam, and he found a package of 13 of these beautiful old Midwestern foursquare duplexes in a nice upcoming area. My old customer bought them, and we managed them and repaired them and shared the profit. So that was the beginning of Parrot, which started out as a property management company just for those properties.

Now, we also found  a package of four other duplexes at the same time, which my son resold and made 20k, which we all found astonishing. That’s where we realized that wholesaling was a thing, so my son started working at building that up.

Over the next year, suddenly my old customer started to realize that real estate is not as passive as everyone says, he wanted to take his profits, so we bought a bunch of those duplexes back from him. They made a nice pile of money, we got 20 units in one bite, and we discovered wholesaling… So that was a pretty good year. What made it work was we just knowing these people forever, and them having some trust in me, and my son being very good at digging up off-market deals, and then my younger son being very good at management. So we just started– sorry, go ahead.

Joe Fairless: I didn’t mean to interrupt. Feel free to…

Pete Barrow: No, I’ll talk all day if you don’t interrupt.

Joe Fairless: [laughs] Well, that’s why–

Pete Barrow: You’d better stop this thing…

Joe Fairless: That’s why you’re a good interview guest. That’s great. It’s much easier to work with someone who can talk versus the opposite, whenever it’s an audio interview. How was your son finding these duplexes? For example, the package of four where the profit was 20k.

Pete Barrow: Oh, those duplexes actually came from another wholesaler. And like I said, most of them we wound up buying, and four of them he resold. Things were a whole lot cheaper just a couple years ago, so there was still room to buy from a wholesaler, and the wholesale on to someone else. It’s getting a little harder to get things like that.

Joe Fairless: And speaking of getting harder to get deals like that, how are you all currently doing it, since it is more challenging?

Pete Barrow: We do the usual, unimaginative stuff like send out postcards. I think we sent 100,000 postcards so far this year. Not all to the same person, to different people. We also go to meetups, and we network, and we just try to meet everybody… But we’re also doing a lot more sort of boots on the ground stuff. Some of our best deals, in fact — I was sitting in a restaurant six months ago and I overheard some guy talking on the phone, and it became obvious he was talking to a tenant who was trying to buy his house. And the tenant was not coming through, and he was getting frustrated, and I just went over and introduced myself and gave him a card. I didn’t think we’d get the house; I thought he would be a guy who’d sell retail, but I just sat there and talked about real estate for like an hour, and told him everything I could that I thought would help him. Well, he called up and sold us the house, and we made like 20k on it… So that paid for my sandwich. Since that happened, my son is expecting me to do that every day, but I’ve never done it since.

Joe Fairless: Yeah, every day at lunch, right? It was a $20,000 lunch.

Pete Barrow: Mostly at lunch I just wanna sit there and eat my sandwich and not be bothered… But it is part of my role now to just go around and talk to people, and I’m doing quite a lot of that. I have made it a habit now. When I’m sitting in a restaurant, if it’s at all possible to go over and introduce myself to the table of old guys that look like they might own houses and wanna leave town, I’ll go and do that.

Joe Fairless: And what do you do? Will you describe that scenario in detail for how you make that happen?

Pete Barrow: Well, let’s see… I was in a little grill the other day downtown, and there were these four old guys sitting and talking, and they were all hilarious. One of them was talking about how he knew some people who dug a well on their property and something went wrong with the well, and after a while I went over and I said “Hey, I don’t mean to be listening in, but we had a house that was fed by a spring when I was a kid, and at one point it started poisoning us all.” [laughs] Of course, when you get sick, you wanna drink more water, so that took a while to figure out… It took a while to figure out what was really wrong with that. That was the way to start the conversation, and… Don’t try this if you’re not the type of person, but I like talking to people anyway.

That’s one of the nice things about this town. If you try to do this in some places, I think you’re gonna get rudely rebuffed, but… In Indi, I’ve been astonished at how easy it is just to go up to people and say “Hey, how did you get those Azaleas to look so good?” and they’ll just stop and talk to you. That makes it a whole lot easier.

Joe Fairless: When you were in the restaurant, having your $20,000 sandwich, what did you do to introduce yourself to the gentleman who you thought was talking to his tenant, who was looking to buy the house but didn’t end up doing it?

Pete Barrow: I don’t remember… I think I just went over and apologized upfront. “I’m sorry to eavesdrop, but this is a tiny little room and it was hard not to just hear that conversation. We’re landlords too, and…” I don’t remember how I eased into it, but it must have been fairly slick, so… [laughs]

Joe Fairless: Of course, of course. Totally smooth operator. So it’s you and your two sons… Who does what again?

Pete Barrow: Well, my job has been – because I was a carpenter forever – to fix up our new acquisitions and help maintain our old acquisitions… And that’s not just me; we have a really good little crew of two who make it easy. But now I’m supposed to be transitioning into the public face of Parrot, which is going around bothering people in restaurants, and going to meetups, and stuff.

My older son, Sam, is sort of the idea guy who kind of just paces the floor all the time, and then wakes you up at two in the morning to tell you what he’s figured out. He’s the one who kind of comes up with stuff, and he’s also a technical wizard, and he’s written a lot of software that we use to mine the data. I think he said some of that he’s gonna make available to the public; if people are interested, go on our website and inquire. But that’s his role.

And then my younger son, Isaac, who had management experience – he does the books, he shows the units, does the leasing, he handles all the calls, and it’s incredibly nice to have that in-house, because nobody cares more about you getting a good tenant that you do. Once he took that over completely, problems with tenants just about completely ceased. So he’s very good at keeping our stuff full, and keeping good people in there, and managing the problems.

Joe Fairless: And anything in particular that he did that you’re aware of, that helped with quality residents?

Pete Barrow: Let me mention also he does all the wholesaling; he does every bit of that, from going and looking at the houses, dealing with the sellers, dealing with the buyers… What did he do to get quality residents? He finds them on social media a lot, which I have no understanding of even what that is… I just know the word “social media” and I’m supposed to say that. But he just screens them; it’s not that hard now to find out everything a person ever did. He can do these skip-trace reports — I don’t know if that’s what he does, but for $10 you can get 150-page printouts that tells you every car someone ever drove, every phone number they ever had…

So he looks at rental history, and income, and especially evictions and penalties and stuff.

Joe Fairless: With your role in the company, generating the leads, as well as you used to be the primary point person for fixing them up and overseeing the team, what was a challenging project that you worked on?

Pete Barrow: Well, we’re in the middle of two of them right now, and they’re just dragging on forever, which doesn’t speak to well for me. We bought a hoarder house, which was — I can’t literally to the ceiling, because to me “literally” means literally… It was a couple of feet short of the ceiling… But we found stuff in there that I would even ask my crew to touch. It was just too nasty to have someone to do…

Joe Fairless: What was it?

Pete Barrow: Can I say it on the air? A big plastic bin full of fermented urine.

Joe Fairless: Okay…

Pete Barrow: Actually, one of my crew had to help me carry that out, and it sloshed all over our boots… But just food that had been in bags for three months, and stuff. But the house was great; it was beautiful, and solid, it was in a really promising neighborhood that’s already nice, and it’s coming up, that stylish people are moving into. Not super-stylish, but just a really good, solid house, and also it’s a two-bedroom with one floor and a full unfinished basement and a full unfinished attic, which is very easy to get into a house like that and totally redo the plumbing and wiring and just deal with all the problems, and then not hear any maintenance calls.

Most of the ones that we get to go in and go over like that, we just get really no maintenance calls. That’s what I like. We wanna grow a much bigger portfolio. We wanna get to 100 houses, 150 doors.

Joe Fairless: How many are you at now?

Pete Barrow: 42 doors, I think.

Joe Fairless: Okay. That hoarder house, how much did you buy it for?

Pete Barrow: 11k.

Joe Fairless: What are you putting into it?

Pete Barrow: Well, my son was yelling at me about this the other day… I think we’ll probably be into it for a total of 55k-60k when we’re done. Part of that is a new air conditioner, and we’re gonna tear the driveway up and redo it. That’s 10k right there.

Joe Fairless: And then what’s it gonna sell for? Or you’re holding on to it…?

Pete Barrow: We’re gonna keep it. The stuff we redo, we redo for ourselves. Everything we buy and sell [unintelligible [00:14:55].07] We could probably sell it for 75k-80k. So we didn’t get a huge bargain on it, but what we’ve got now for less than market value – we’ve got a house that will need zero maintenance for many years. You really can’t buy that.

Joe Fairless: And is the model you wholesale houses, get chunks of cash, then take that cash and reinvest it into buying fix and hold properties?

Pete Barrow: Something like that. It’s all a little sloppier than that right now, because we’re too busy to really be that precise about what we’re doing… But yes, we’re getting money from the rentals, we’re getting money from the wholesales, we’re pulling it out, distributing it to ourselves, and then putting it back into the process of acquiring and fixing up more stuff… And it seems to work. The stuff we wanna get  – I love getting these little places that are really in terrible shape, and then go in and just basically start at — we don’t gut them, but being able to redo all the mechanicals… Everything that moves in the house: every wire, every pipe, every light switch, every light fixture, every water faucet… Everything that can go bad is pretty much new, and decent quality. That’s our model.

Joe Fairless: You mentioned two projects… Maybe I missed it. You said the hoarder house, and–

Pete Barrow: No, you didn’t miss it. There’s another one that we got that is in a wonderful spot; it’s worth a lot more than we paid for it, but it’s in a floodway; just the last three feet of the yard is in the floodway… And I can’t really say it’s been a problem, because right now I’m at the stage of not really doing anything about it, but I’m just dreading doing anything about it, because I know I’m gonna be spending a lot of time walking from one office to the other, making phone calls to try to get it straight that we can abate that by filling it in somehow. Also, it has no driveway, and right out in front of the house is a bike path.

People have told me “You can’t do that”, other people have told me “Yeah, you can, but you need to get an engineer, and get a drainage plan…” So I’m thinking between those two things, I’m gonna spend 100 hours just walking from one office to the next… But maybe not. Bureaucracy is not as bad here as it is in a lot of places. You can get your driver’s license renewed in ten minutes. It’s a lot nicer [unintelligible [00:17:12].13]

Joe Fairless: Based on your experience, what is your best real estate investing advice ever?

Pete Barrow: Well, it would be a generality. First of all, what I said about this house I got at the restaurant – just start locally. If you’re trying to be wholesaler, which I assume a lot of listeners are, start with your own community, start with people you know. There’s probably some little old lady who wants to sell her house and move back to Alabama. That’s a specific, but just in general, just be calm and don’t get too excited. Don’t go to these meetups where people stand up and pump their fists and scream “Financial freedom!” It’s just a business like any other, and you work really hard to get good at it. So a lot of work and a lot of [unintelligible [00:17:54].27]

Joe Fairless: What’s a smart area to put work into and focus into if you’re in your business?

Pete Barrow: I’m not sure what you mean?

Joe Fairless: Where do you spend time that is effective in your business?

Pete Barrow: I guess that’s kind of what I’m learning right now. I’ve been avoiding the business side and just doing the fix-up work, and my sons have been pleading with me to go out and develop the business… And what they say is meeting people, going around and developing relationships with people. So yeah, I would say it’s a good way to spend time. And that could be anything from going to meetups, where you’ll meet mostly buyers, to just walking around the streets, and going into stores, and dropping cards, and [00:18:40].28] That’s kind of what I’m working on now.

Joe Fairless: The last deal that you got under contract, how did you find that property?

Pete Barrow: We do so much stuff I don’t know what the last deal we did was, but the last deal we bought, we just got it from a postcard. That’s not very exciting, I know, but we got it from a postcard. A woman just wanted to get rid of it and move into a condo. We got a very good deal on it.

Joe Fairless: Do you remember the numbers?

Pete Barrow: We paid 20k for it. We don’t go into the hot new area and [unintelligible [00:19:13].19] in the center of it. We don’t have the money to do that on a big scale. But both of my sons have an encyclopedic knowledge of the city and all the areas, so we’re finding stuff that’s right on the fringe of those places, right in between two of them, and right in the path of where the good stuff is… And this fits that description perfectly – it’s right on the fringe of a neighborhood called Irvington, which is very nice and very hip.

Joe Fairless: You’re buying it for 20k… How much are you putting into it?

Pete Barrow: We’re not gonna put too much into this one right away because we’ve got too many other things in fix-up mode right now. We’re probably gonna spend 8k-10k just getting it decently rentable.

Joe Fairless: And  what’s it rent for?

Pete Barrow: Probably eight or nine…

Joe Fairless: Wow.

Pete Barrow: So we’ll have 30k into it.

Joe Fairless: And $800 for a 30k house – that’s really good.

Pete Barrow: Yeah. Well, that’s the funny thing – a lot of investors pour money in here from California, and they’re just delighted that they can meet the 1% rule. We have a lot of places that are like that. The monthly rent is 3% of the total cost. It’s not easy to find stuff like that, but if you’re wholesaling and you’re looking at hundreds of houses, you’re maybe buying and selling 70-80 a year, then you keep one or two.

Joe Fairless: The hoarder house – you were all-in for 60k; what’s it gonna rent for?

Pete Barrow: That one we also think $800 or $900. I think $900 might be a little high, but probably $800.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Pete Barrow: I don’t know, Joe. I guess let’s just find out. [laughs]

Joe Fairless: We’ll just throw ourselves into it and see what takes place.

Pete Barrow: Just put me to the test.

Joe Fairless: [laughs] First, a quick word from our Best Ever partners.

Break: [00:20:57].25] to [00:21:37].12]

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

Pete Barrow: I assume you want  a business book…

Joe Fairless: Well, whatever, any book.

Pete Barrow: The best book that’s even moderately relevant – I read a biography of Rockefeller. It’s called “Titan”, and it’s terrific. What that guy did, and start from less than nothing, is amazing. Not only what he did for himself, but what he did to build up the country. All his those 19th-century robber barons did wonderful things, for all of us, not just for themselves.

Joe Fairless: Best ever deal you’ve done that we have not talked about already?

Pete Barrow: We got a little place out towards the suburbs, but not quite… You know, there’s nothing to distinguish this house; I don’t know why it worked out so well, but the guy was highly motivated, he was happy to get his 20k, and somebody was delighted to buy it for 50k, so everyone was happy… So there’s a 30k deal. I don’t have any million dollar deals to talk about.

Joe Fairless: What was his motivation?

Pete Barrow: I think he was old and I think he had some kind of drug problems; I’m not really sure.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Pete Barrow: A mistake… Probably the one I was telling you about, the one that’s in the floodway, and the driveway problem. We’re gonna have a lot more money in that house than we should, but it’s probably still worth twice what we’re gonna have in it, so that’s not a very bad mistake.

I think there’s one deal we actually lost money on, and we lost like $500, so that counts as our worst deal. We just bought this little one-bedroom double because it was cheap, and we didn’t stop to think about whether anyone else was gonna want it. It was just cheap, so that was the early days. So a $500 loss for your worst deal… It can be worse than that.

Joe Fairless: Take that all day long. Absolutely. What’s the best ever way you like to give back?

Pete Barrow: I think the business itself is a way of giving back. We hire people, we buy stuff from people who wanna sell it, and we sell it to people who wanna buy it, and we provide nice places for tenants, and we put them in good shape, and we maintain them, and everyone gets along… I don’t know, I guess I should have something better than that. Maybe that’s what I got from this Rockefeller book – he amassed billions of dollars, but when he started this business, kerosene cost 58 cents. By the time he got done, it cost 7 cents a gallon, and that was a huge blessing to the working person, in an era when a working person made a dollar a day.

That’s the thing about capitalism – if you’re doing it right, you’re  not just getting some money; you’re providing something people want.

Joe Fairless: Best way the Best Ever listeners can get in touch with you?

Pete Barrow: The website is ParrotPropertyManagement.com. You can call us at 317 202 1211. That’ll get you directly to my son, Isaac.

Joe Fairless: Thank you so much for being on the show and talking about your experiences, how you and your two sons have formed this company, and roles, responsibilities, some challenging things that you’ve come across, having buckets of pee splashed on you at the hoarder house, to some better things, where you have $20,000 sandwiches… So you certainly went from one end of the spectrum to another.

Pete Barrow: Well, thank you for having me here. You’re a terrific interviewer, you make it easy. You might be the best ever interviewer.

Joe Fairless: I appreciate that. I am grateful that you were on the show, and talking about – in addition to those extreme examples – one lesson is that $500 loss. You bought it because it was cheap, and cheap doesn’t mean necessarily good… Plus the opportunity cost with your time, so there’s probably more to the loss than that. But when you apply that lesson to future projects, then it’s awesome, because now you’ve saved time because you’ve learned that lesson… And that’s why I love doing these interviews, because now if a Best Ever listener is considering a super cheap house just because it’s cheap doesn’t necessarily mean it’s a good opportunity, and perhaps this story can save them from something similar.

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

Pete Barrow: Thanks, Joe.

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JF1407: How To Market Like A Wholesaler with Jerry Puckett

Jerry never had any intentions of owning a marketing company. When he was stuck with the task of finding work from home, he worked with a friend answering phones and talking to people because she was great at everything but talking to people. Once he did his first wholesale, he was hooked. Jerry learned how to do marketing and went out on his own. Now he helps investors keep deals in the pipeline.

 

Best Ever Tweet:

 

Jerry Puckett Real Estate Background:

  • Founder and managing partner at New Refined Images
  • Helps clients source deals through direct mail and internet marketing
  • Sent more than 1 million pieces of mail to more than 90 markets in 2017
  • Say hi to him at www.marketlikeawholesaler.com
  • Based in Fort Worth, Texas
  • Best Ever Book: The Speed Of Trust

Best Ever Listeners:

We have launched bestevercauses.com  

We profile 1 nonprofit or cause every month that is near and dear to our heart. To help get the word out, submit a cause, or donate, visit bestevercauses.com.


TRANSCRIPTION:

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

Jerry Puckett: I’m doing well, Joe. Thank you for inviting me onto the Best Ever Show. I appreciate it.

Joe Fairless: My pleasure, nice to have you.  A little bit about Jerry – he is the founder and managing partner at New Refined Images. He helps clients source deals through direct mail and internet marketing. He sent over one million pieces of mail to more than 90 markets in 2017, and you can learn more about his company at MarketLikeAWholesaler.com. Based on Fort-Worth, Texas, Cowtown, where I’m from. With that being said, Jerry, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jerry Puckett: Sure, you bet. I did not start off to have a marketing service; that was not my goal, that was not my plan. I just wanted to be a wholesaler. In 2010 my wife was diagnosed with breast cancer, and I needed to find something that I could do from home, so that I could take care of her. It was either quit my job, stay home and take care of her, or it was to hire somebody else to stay home and take care of her, and I just couldn’t see me doing that… So I ended up falling in with  a friend of ours who had a very small real estate company, and all she wanted me to do was answer the phone for her.

So it went from that to — just the long story short, she really had no people skills; she could analyze a number up, down, backwards and sideways, but she could not talk to people. So I was talking with them on the phone, and she’d go out there and ruin the deal every time. They’d say “Well, we’ve spent 20-30 minutes on the phone with Jerry. Where is he?” So she started bringing me along to her appointments with her, and I found out that I had a knack for negotiation.

At one point we had two fully executed contracts and she only had enough money to close on one, and we didn’t know anything about creative financing at the time. She was like “Oh my goodness, what are we gonna do with this other one?” and I said “Well, I’ve been reading Bigger Pockets. Why don’t you let me wholesale that thing?” She said “Wholesale? What’s that? I don’t know anything about wholesaling. I said “That’s okay, I do”, because I’d been reading Bigger Pockets.

I made a couple of calls, I sold the property, I made a $10,000 fee in just a few minutes, and I was hooked. Wholesaling is cool, it’s really easy, or so I thought at the time. What I didn’t really factor into my equation at the time was that she had done all the work ahead of time of setting up the marketing campaigns and everything else like that… So when I actually got out on my own, I had to learn how to do all of that stuff for myself.

I had a colleague from — my very first Bigger Pockets colleague; his name is John Claus. He was kind of watching over my shoulder as I got better at wholesaling here in DFW. He was like “You’re doing  a really good job competing there against some of these big guys… Could you do a campaign like that for me down in Austin?” I’d drank the Bigger Pockets Kool-Aid a long time ago and I wanted to pay it forward, so I said “Sure, no problem. We’ll just set it up and I’ll run it like I do with my own systems, and all you’ll have to do is pick the calls and make the deals.”

He thought that sounded pretty good, so within five months he had three deals under contract and he had netted six figures off of each. So what does he do? He gets back on Bigger Pockets and starts shooting his mouth off about it – “Hey, six-figure income from a yellow letter.”

Next thing I know, my phone is ringing off the hook. “Hey, Jerry, can you help me with my marketing? Can you…? Can you…?” So that’s how the marketing service was first built.

I ended up going out to a Bigger Pockets conference out in Denver that year, and people all over the place were saying “Hey, can you mentor me? Can you mentor me?” There were folks out there that were charging 10k-15k a pop upfront, just to teach people regurgitated crap that you could get anywhere for free. So I just saw the two things kind of dovetailed. There’s nothing I can really teach you unless you’re actually out there talking to sellers, and you’re not gonna be talking to sellers unless you’re doing your own marketing, so hey, why don’t you use my marketing pieces, and the least I can do is teach you how to go from there. So that’s how the wholesaler thing got started… Dovetailed exactly at the same time when the MLS dried up for investors and they weren’t able to find products on the MLS anymore, so that a lot of them would say “Jerry, you always have product, how come I don’t have product?” I said, “Well, you’ve gotta market like a wholesaler.”

And one thing just kind of led to another and one market after another, one investor after another, one state after another, people were coming to me, I was doing their marketing for them, and it just kind of grew from there. If you check out my profile over at Bigger Pockets you’ll see we’ve got something like 7,000 positive reviews from people that are out there making money off of what we’re doing.

I don’t try to reinvent the wheel, I just kind of stay sharp and in front of  the different trends; you learn  a lot by split testing with over a million pieces in 90 markets, so I almost feel like I’m cheating, but that’s the way we do it. Everything we do is custom and boutique.

Joe Fairless: Split testing that many tests, for a lack of a better word, you’re gonna learn a lot… What  have you learned?

Jerry Puckett: Well, the funny thing is I can take all the data that we get from the mailings and I can kind of put it on a heat map of sorts; Google’s got some pretty amazing features. So I start to see trends, I start to see something that happens out in California or over in New York and I know that it’s gonna spread. I see from the results of the mailings that some language choices work well, while others don’t… So it’s just something that you pick up along the way. We monitor every response that comes, so everything that we write is done custom. We don’t use templates that are just stale. I don’t write letter two until I see the results from letter one etc.

So I see trends a lot of times before they happen, I know when an area is getting hot, I know when an area is drying up, I can see it shift from one place to the other, and hopefully when you examine all of that you can get in front of it. I think that’s one of the advantages that we have – we’re able to stay in front of the market as it were, and stay out in front of everybody else.

Joe Fairless: What are some language choices that work well?

Jerry Puckett: Well, you’ve gotta be somewhat particular to your market in that. For instance, the things that I say in Austin absolutely wouldn’t work in Denver, and the things that I might say in Southern California could probably get you locked up in New Hampshire. You wanna kind of focus in on the vernacular. It’d be kind of hard to do it nationally, but for example when I’m in Texas I say things like “Y’all”, “Circle the wagons”, mustangs on the mail piece itself… People love horses out in Texas…

Joe Fairless: [laughs] Oh, I thought you were talking about the car.

Jerry Puckett: Oh, no, no, no. Not at all. Mustangs. We’ve done some studies on that, the psychological profiling of American people; they’ve always wanted an American kind of royalty and people have an affinity for horses or mustangs. It’s a real subtle psychological thing, but if you put a picture of a mustang on the outside on your envelope, your open and read rate is gonna jump way up. It’s sometimes just that simple.

Joe Fairless: What do you put in New Hampshire? You mentioned New Hampshire, you got me curious about that state.

Jerry Puckett: New Hampshire – they’re Yankees, right? And they think that everybody is out to kind of scam them, and there are a lot of — well, I guess I’m just gonna say there are older folks that if… There’s certain things that you must do. You must put your full name on the return address; if you don’t, they’re just going to assume that you’re a scammer and they’re gonna call the cops on you, or they’re gonna report you to the district attorney, or something like that.

You must do that, you must be absolutely polite, you must Mr. And Mrs. when you address somebody, no “Hey, Dave” or “Hey, Bob.” It’s got to be very formal, it’s got to be very polite, and you’ve got to assure them somewhere along the course of the way that you are not trying to scam them, that you really do want to buy their property… And “Please give me a call” and then have the number be one that works well, and not at all try to be anonymous. That’s the thing when you’re over anywhere in New England – if you try to be anonymous in any kind of way you’re automatically gonna be targeted as a scammer, and they will call the police on you quickly.

Joe Fairless: What happens when they call the police?

Jerry Puckett: Well, usually the police will call you and say “Hey, we got a report from so-and-so that you’re running some kind of a scam.” You’re not doing anything wrong, you’re not doing anything illegal, so you’ve got to explain to them exactly what you’re doing, how you go the address and everything else, and they’ll usually just leave it with “Okay, but take so-and-so off your list” and I’m like “Of course.”

Joe Fairless: [laughs]

Jerry Puckett: I don’t wanna have anything else to do with them. But if you’re in this business for any length of time, something like that’s gonna happen. I’ve listened to quite a number of older posts that Michael [unintelligible [00:09:52].25] would put out; he’s got recordings of people who have called him and threatened to shoot him in the head and different things like that. I’ve got a few snippets of those myself. You get all kinds of interesting calls, with people who wanna do all kinds of crazy things to you. They get mad; I don’t know why they get mad, but they get mad.

Joe Fairless: Conversely, Southern California – what’s the approach there?

Jerry Puckett: Man, Southern California is a bear to get anybody to notice you at all. We’re lucky if we get a 1% response rate out there. That is the toughest market anywhere. So the approach there is you’ve gotta kind of be bold and over the top, and you have to exude a frame of mind that says that you have money, and that you’re able to move quickly.

I know that that sounds kind of like Captain Obvious sort of thinking, but it’s not, because in a lot of markets you want people to think that you’re just the guy next door.

Joe Fairless: That’s Texas.

Jerry Puckett: Yeah. Here in Texas I get in the door by being the guy next door.

Joe Fairless: Yup.

Jerry Puckett: I just do a couple of deals a year to help buy Christmas presents and groceries, but in California if you take that kind of — I guess you would call it a kiss me approach… If you take that kind of approach in California, you’re never gonna get a call. No one is ever gonna call you. So the best thing you can do there is show them pictures of other deals that you’ve done, maybe put some of your numbers out there, anything that’s gonna be visually appealing and speak to their heart immediately. They can’t be overdone; it’s still got to be  a short and a sweet message, but we’ve gotten traction just by saying “Hey, here’s the last deal that we did” or point them to a website where you might have testimonials… “Here’s what so-and-so had to say after doing a deal with us”, and just have that be something easy that they can get to and listen to. That will capture their attention sometimes, and they’ll give you a call just to check you out and kick your tires, and if they’ve done that, then you’re in the door, so to speak. You’re in play.

Once anybody’s called, that’s one of the biggest things that folks will do wrong – they don’t follow up. I can have somebody call me and say “Take me off your list” and that’s fine, I’m gonna take you off a list, and I’m not gonna waste any more money mailing to you, because now I have your phone number. I can reach out and touch you any time that I want for free, and you’ve already opened the door by calling me.

So the way I work any given market – I continue to stay in touch with people until one of four things happens. They either will sell me their property, sell it to someone else, tell me to go to hell, or die. And if they die, then I’m gonna follow up with their executors and the heirs until they sell me their house, sell it to someone else, tell me to go to hell or die.

Joe Fairless: Wouldn’t the “Take me off your list” be basically telling you to go to hell? So wouldn’t that already take them off the list?

Jerry Puckett: No, no. “Go to hell” means literally “I’m gonna shoot you in the head, leave me alone.” They’ll get mad. If somebody’s rude, if they’re at the point where they’re rude on the phone, I won’t ever speak to them again, I’m done. But if somebody is just “You know, I’m not really interested, take me off the list” – that’s okay, because people’s circumstances change frequently. The people who are in distress this month, last month they didn’t have a clue what was going on, or that they were gonna fall into something where they needed some help.

The people who are gonna be in distress next month, right now they’re cruising along like everything’s fine. So when I reach out — I usually just use text. I will reach out and text somebody maybe 3-4 times a year if they’ll say “Take me off the list.” One of about four things can happen. And I’ll just say something like “Hey Bob, it’s been a while since we’ve talked… Has everything been okay?” I don’t ask about the property specifically; polite society being what it is, their only point of reference for speaking with me in the first place is their property, so when I reach out to them like that, they can either answer back and say “Jerry, I’m still not interested, but thanks for checking on me.” And that’s fine, then I’ve deepened my rapport with them, and I’ve reconnected my name with selling their house.

Or they could say “Jerry, I’m not interested right now, but I know somebody who is… And didn’t you offer me a referral fee?” So they can refer me to somebody. Or at that point they can tell me to go to hell, leave them alone, don’t ever contact them again.

So if any of those things happen, that’s fine, it pushed my agenda a little bit more forward. And they could always say “You know, Jerry, things have changed. I’m interested in hearing your offer now.” And that happens more often than you would think. People’s circumstances change, they change quickly; if you’re somebody that’s been in contact with them and that stayed in touch with them over time, then when it’s time to do something, you’re gonna be the one they call.

That’s why everybody who does this just preaches about being persistent and consistent, and that’s why. The more persistent and consistent you are, the luckier you get. You’re gonna be the one they call.

Joe Fairless: And when you were talking about the different states and the vernacular that you use, or the approach – that’s not just your off-the-cuff thoughts, that’s based on quantifiable split testing research, is that correct?

Jerry Puckett: That’s correct. We have a system that we use for everybody that we work with that allows them to track their responses. It really kills two birds with one stone; I call it a lead tracker, but it’s not quite sophisticated enough to be software… It’s a spreadsheet with a lot of bells and whistles built into it. While it allows the client some place to track their calls, set appointments, take notes and everything like that, it also keeps my master mailing list updated in real time, so that I don’t have to nag anybody to do it. But part of keeping track of the calls is that I ask them and try to teach them how to take good notes when they’re talking to people, and if they happen to record calls, then that’s something I can hear too, and I can actually listen to the way people talk.

But yes, in any given market, I will keep track via that lead tracker which version of the text that I used for which segment. That gives me back information on the back-end; I can see who responded to what. With this many different pieces to play with, I’ve done things as small as moving a comma to see if it helps or it doesn’t help. I know that sounds silly, but you really have to test something to death.

Joe Fairless: I’ve heard that when you put in a comma, it makes the amount look larger, but when you remove the comma, then it makes the amount look smaller.

Jerry Puckett: Yeah, anything that gives more wide space on the page is gonna be helpful. But then on the other hand, if you don’t use a comma, sometimes when people are reading it they don’t take a breath as they’re reading the message in their mind where they should, so if you meant to pause for emphasis, then it’s not there. So there’s a lot of different things to take into consideration.

I tell people all the time that just because you have a printer on your desk and you know how to use mail merge that doesn’t mean you’re a marketer any more than having a set of tools out in your garage makes you a mechanic. So there are a lot of things to take into consideration if you’re trying to crack a market open and you’re really trying to succeed.

Joe Fairless: I do have some tools in my garage and I am definitely not a mechanic, so I understand that… The direct mail that you do – do you work with any investors who purchase medium to large apartment buildings?

Jerry Puckett: I have worked with people who have bought up to — I think the largest any of my clients has bought is like a 50-unit, so I guess that would probably be small to you, considering the things that you do, but I think it was pretty big to them. Where would you put 50? Is that small or medium?

Joe Fairless: I don’t know, we’ll say medium; we’ll call it medium. So what is the approach for the 50-unit, compared to what you’re doing with the single-families?

Jerry Puckett: Oddly enough, a lot of the messaging is the same. Messaging when you’re trying to buy something is usually just different iterations of your contact information plus the benefits of working with you plus a strong call to action. If you apply that formula, it’s the same thing. But with the apartment owners, and also with mobile park home owners, you want to convey to them that you really know what you’re talking about.

So if you start talking about the rent rolls, or separately metered — different things like that… You want to let people know that you know what you’re talking about, and that you are a fellow landlord. And if nothing else, so “If you’re not interested in selling, I certainly would like to network with you, I’d like to know more people like you.” Often times it’s a matter of just getting them into your network.

A community of people who own properties like that is much smaller, so if you’re networking with everybody, these folks also see each other a bit different — oh gosh, what’s the word for it? They network with each other in different ways, so if you get into somebody’s network, there’s a good chance that you’re gonna be able to reach out to somebody else, because they’re involved in the same association, they go to the same sorts of meetings, they deal with the same sorts of issues… So conquering that smaller market is actually a lot easier than when you’re doing a single-family house – to hit all the prospects that you need to, that’s usually a pretty huge prospects, and most people’s budgets don’t carry that kind of wallet to it. But when you’re looking at the apartment buildings, the community is much smaller, so you try to capture all of them and get all of them into your network.

Joe Fairless: Based on your experience as a real estate entrepreneur, what is your best advice ever for investors?

Jerry Puckett: Don’t cheap out. If you want to make money in this business, don’t go cheap. There’s just too many people out there that try so hard to pinch a penny that they’ll the make the things scream. I was brought up with the notion that the harder you squeeze a watermelon seed, the more likely it is to slip right out of your fingers. I’ve seen people try to outsmart people that have been doing this for years, I’ve seen them try to come up with uber-laser-targeted lists that nobody else has thought of… They’ll bend over backwards trying to save money, instead of counting the cost of what it’s gonna take to actually get to where they wanna be.

So my best advice that I can give to your best ever listeners would be really consider what it is that you wanna do and count the cost. Don’t cheap out on it. Sink some money into it if you’re gonna make some money back on it.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jerry Puckett: Oh, the Best Ever Lightning Round… Okay, yes!

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

Break: [00:20:28].22] to [00:21:32].06]

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

Jerry Puckett: Best ever book I’ve ever read… I guess if it’s a business book, I’m gonna say The Speed of Trust, by Stephen Covey.

Joe Fairless: What’s the best ever business transaction or real estate deal you’ve done?

Jerry Puckett: The best one was the first one that I told you about earlier. It happened so easily and fell together so nicely that it was purely addictive. Man, a couple of phone calls and I made $10,000, wholesaling a property that I didn’t have enough money to buy.

Joe Fairless: What’s a mistake you’ve made in business on a transaction?

Jerry Puckett: The biggest mistake that I ever made was not conveying my vulnerability. In other words, the biggest mistake that I ever made was at one point in time I was not 10)% honest with somebody that I was working with, and that came back to bite me more times than I could count.

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

Jerry Puckett: I love helping people on Bigger Pockets. I love to spend time answering people’s questions, and I make myself available to people who have questions trying to get started. I’m there all the time, hit me up.

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

Jerry Puckett: The Best Ever listeners can get in touch with me by going either to BiggerPockets.com and looking at my profile, Jerry Puckett, or they can go to my website at www.marketlikeawholesaler.com. Fill out that Contact form and I’ll be in touch with you.

Joe Fairless: Jerry, thank you so much for being on the show, talking about best practices for direct mail, the differences, not only in regions, but also in states and the locations within the states… You talked about Southern California, you talked about the difference between that and (it sounds like, according to you) the polar opposite, New Hampshire. With Texas, having it all in there – mustangs (the horse, not the car) on the envelope, that sort of stuff. Really interesting, because it’s based on research and data, not opinion, and that’s what’s most interesting to me… It’s simply what’s working, and that’s the kind of stuff that I really love learning about, and it will be helpful for any Best Ever listener who is doing direct mail to pay attention to the word choices that we’re using.

Then also you talked about that 50-unit and how to approach that larger property… So thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Jerry Puckett: Thanks, Joe. It’s been great. I appreciate you.

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A Best Ever Show flyer featuring guest James Hawk

JF1382: Leaving Great Income Behind To Start Your Own Wholesaling Business with James Hawk

James was making good money as a W2 worker with benefits and a comfortable life. He looked into real estate investing, started wholesaling, did two deals, and left his job. His family thought he was crazy and so did his friends. Now with his company being worth multiple millions of dollars, clearly he made the right choice. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

James Hawk Real Estate Background:

  • Owns and operates a multi million dollar real estate investing business in North and Central Florida
  • Full time real estate investor since 2010, has purchased over 1,000 properties
  • Bought and sold over $40 million worth of real estate
  • Say hi to him at: www.flipmorehouses.com
  • Based in Jacksonville, FL
  • Best Ever Book: Traction

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TRANSCRIPTION

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

James Hawk: Good, man. How are you? Thanks for having me on.

Joe Fairless: My pleasure. I am doing well, and nice to have you on the show. A little bit about James – he owns and operates a multi-million-dollar real estate investing business in North and Central Florida. He’s been a full-time real estate investor since 2010, and has purchased over 1,000 properties. He’s bought and sold off 40 million dollars worth of real estate, and he’s based in Jacksonville, Florida.

With that being said, James, will you give the Best Ever listeners a little bit more about your background and your current focus?

James Hawk: Sure, sure. Primarily, we wholesale. I would say that our business is broken down into about 90% wholesale, 5% rehabbing, a little bit of wholetail, and then we also do a little bit of new construction, as well… But not that much.

Basically, I got started in 2010. I was working full-time for a bridge company. We actually did the Woodrow Wilson in Washington DC. We’ve been featured in Mega Builders, and a lot of other cool stuff like that.

Joe Fairless: Wow, cool.

James Hawk: Yeah, that’s pretty cool… But I learned pretty quickly that it was “Where am I really going?” I was making decent money; I wanted more out of my life. At the time, I had a friend that was a full-time real estate investor. He really wouldn’t share too much with me; I had just seen that he was successful and he was making a lot of money… And I said I was gonna be an agent.

So instead of going the agent route, I think it was on — man, you know back then… I know you were in the game as well probably, you couldn’t just go to YouTube and five million videos showed up, or anything like that… So what I did is I stumbled across I wanna say a blog about wholesaling. I think it was actually an REI club, or something like that. I had never heard of it before, and I just took the concept and basically just went out — I just went until I figured it out, more or less.

It was about 5-6 months before I actually did my first deal for $4,000. My second one was for 20k, and then I quit my job and went full-time.

Joe Fairless: Wow, there you go. You did some research, made it happen, and now here you are.

James Hawk: Yeah. I’d say everyone thought I was crazy, obviously… It’s the same story…

Joe Fairless: Who’s everyone?

James Hawk: My family, my friends… I wasn’t making a ton of money, but I had a regular middle-class job, good benefits and everything else. It’s just something that — I don’t come from an entrepreneurial family like everyone… They go to school, they get a good job, and they live out their lives. For me to do that, it was just a lot different than what I grew up around.

Joe Fairless: How old are you now?

James Hawk: 31.

Joe Fairless: 31. So how old were you when you left the bridge company?

James Hawk: I think I was 22.

Joe Fairless: You were 22 then… Were you married at the time? I don’t wanna make assumptions. No. Okay, I thought it was kind of young to be married, but I just wanted to make sure. Okay, so you weren’t married… So your family and friends thought you were crazy, because you left the decent salary job, as you said, and started your own venture. Now 90% of your business is wholesaling, and then you’ve got miscellaneous stuff… Why did you choose wholesaling over rehabbing, wholetailing and new construction? …the other aspects of the business you do, but not nearly as much.

James Hawk: Right, and what’s interesting – it’s kind of been a rollercoaster over the last 8 years, bouncing back and forth between “Alright, we’re gonna be…”– you know, I have a business partner, by the way, now. I didn’t at first, but since 2013 I have. But we went back and forth, like “Alright, we’re gonna rehab everything. Now we’re wholesaling everything.” We’ve gone through just the common hurdles that most people that have been doing this for a fair amount of time probably have, as well… Then we finally settled in the last couple years on the model that we have now, just simply because it’s just so much easier.

Anyone that has rehabbed a substantial amount of houses knows dealing with the contractors and just the invoicing and all that stuff is really a pain. There’s a lot of money in it, and we’ve brought people in-house, had project managers… We’ve done it a lot of different ways, but at the end of the day for our time and the lifestyle that we were looking to have in this business, wholesaling has just made the most sense for us.

Joe Fairless: I hear you. If I didn’t do what I did and I was still doing real estate, wholesaling would be the next option I’d focus on. The only reason I didn’t get into wholesaling originally is I didn’t really know about it… Otherwise I might be in it, because the risk per deal is, like, nothing… Right? You’re not risking your own money, so if you don’t sell it, then you just don’t sell it, right?

James Hawk: Yeah, and that’s pretty much it. That was a great point. There is, it’s very minimal risk. I will say this – we focus very, very much on customer experience and branding and creating that “We’re the authority” in any market that we’re in; that’s what we try to portray and we try to live up to it. We never try to put anything under contract that we don’t wanna close on or we don’t have the ability to close on… We always make sure that we can.

The only issues that we might run into every once in a while is that maybe one of our salespeople that gets the contract, and for whatever reason it just doesn’t really work – it’s rare, but it does happen… Then we usually use an inspection period and then we’ll just either have to back out or renegotiate.

Joe Fairless: Customer experience and branding is the focus according to you. How do you apply that and bring that to life?

James Hawk: Well, in a lot of ways. From everything that we do – from the marketing standpoint, from the time that we talk to somebody… We answer the phone first and foremost, always. We’re basically gonna make sure that they’re treated like family when they call us. That’s how everyone in here is. We’re really close, and we just do a lot of stuff that not necessarily every other company that wholesales would do. We’ll send them packages in the mail after the appointment, thank you packages… Just a lot of different stuff like that, that I’ve never seen anyone else do.

We have a charity program, it’s called “Houses Help.” If we buy your house, we basically will donate up to $1,000 to the church, or a charity of the seller’s choice. We have another move-in program… Just different stuff like that that really helps us stand out amongst everyone else.

Joe Fairless: The being treated like family part whenever they call you – will you elaborate on how that’s executed?

James Hawk: Sure. Let me say it like this – whenever they call, it doesn’t matter what they say to us… This happens all the time – they call from (let’s just say) mail, or whatever, and they’re super, super upset. We’ll just kill them with kindness until it turns around… And this happens, I’m telling you, probably once a week, where someone will call and they’re super upset; we’ll just focus everything on really digging into why they’re upset, trying to turn that around, trying to help them understand our position, and then basically getting that appointment and going out there and meeting with them. Once we do that, typically, at least 40%-50% of the time they’ll buy that house.

Joe Fairless: Yeah, there’s a difference between what I call the customer service smile, where it’s just fake… You’re calling with an issue and they’re smiling, but you know it’s just a front, versus what you said, where you’re asking questions to get to the root of why they’re feeling that way… And why is it? Why are they calling you super upset, by the way?

James Hawk: Just to echo what you’ve just said – that’s exactly right, and I should have said that… It’s being really genuine, as well; that’s another great point to that, just being really genuine. And I would say the only time people would call and they’re really upset is off of mail. We have a lot of different marketing channels – we do radio, we do mail, we do Facebook, Google… But the mail is the only time that we’ll ever get a call from someone that’s upset, and that’s simply because they go out to their mailbox every day and there’s 10, 15, 20 postcards and letters.

So even though we write all of our own and try to really stand out, at the end of the day some people just get frustrated that they’re getting so much mail… And then we’re just talking to them and letting them know why we’re doing that, and being genuine with them, and they usually appreciate that. Half of the other people, like they tell us, don’t even answer the phone.

Joe Fairless: Do you answer phones 24/7?

James Hawk: Not 24/7, but any time between 8 AM and 2 AM.

Joe Fairless: Oh, that’s pretty close.

James Hawk: Yeah, we’re close… Not quite 24/7, but yeah, between 8 and 2.

Joe Fairless: If I call at 1 AM, where is the person located who I’m talking to?

James Hawk: The person at 1 AM would be in the Philippines; that would be a VA. But we will answer the phone.

Joe Fairless: [laughs] Your marketing – you touched on it. You said customer experience and branding tend to be the focus… So we’ve just talked about customer experience… What about branding and — I’ll group in marketing there. You said radio, direct mail, Google… What else do you do?

James Hawk: We also do Facebook ads, and we’ve really spent quite a bit of money and really dialed in Facebook. Something that I hear quite often — I’m in a couple high-level real estate masterminds, and the common theme is “Facebook for motivated sellers is just very difficult. The lead quality isn’t that great, it’s really expensive…” And this is just every day, on average, we spend for a lead, let’s just say direct mail, $100 or maybe a little over $100 for a direct mail lead. On Facebook, we can bring in leads for about $40, so less than half of a direct mail lead… And typically, they can even be higher quality, because they’re actually taking the time to submit the form, and in essence, we’re kind of more in the driver’s seat versus with direct mail… They’re just responding, so that’s reactive instead of proactive.

Joe Fairless: What about radio? What are you getting per lead?

James Hawk: Well, radio is interesting… We’ve just started testing radio the last three weeks. We are getting calls. We haven’t got a deal off of radio yet, but we’re gonna see. We have a local, very popular DJ that’s endorsing us, and I’m curious to see what happens. We’re also gonna test TV, but the majority of our money goes into Facebook, Google, direct mail and relationships and networking.

Joe Fairless: What’s your cost per lead on Google?

James Hawk: On Google we stay around $175 or so for AdWords… The lead quality is always extremely high. What we do tend to find though is if you get a lead on AdWords, 9 times out of 10 they also went to five other sites, which we really don’t mind, because we go out and we have a full-blown presentation that we give them; we have a leave behind folder with a credibility kit we send them when we book the appointment… They’ll get a link that will show a video of who’s coming out to their house, with an introduction…
So we do all these little cool things that we really don’t see anyone else doing, that for us just seems like it’s business fundamentals.

Joe Fairless: You bring up an interesting point – I never ever thought about where it’s not just about cost per acquisition, it’s also about where those individuals are coming from, and if that platform lends itself to them also easily reaching out to your competition… And you mention that it’s not a big deal, but ideally, it would be nice if it was a platform that they weren’t naturally coming across your competition, right?

James Hawk: Sure.

Joe Fairless: That’s interesting, I’ve never thought about that. So you said 175 – I assume it’s 175 dollars, not $1,75, right?

James Hawk: Right, right. Yeah.

Joe Fairless: That’s what I thought, I just wanted to make sure.

James Hawk: [unintelligible [00:13:34].14]

Joe Fairless: So there comes my next question – with Facebook being $40/lead and you said it’s pretty high quality, why not just go all-in on the Facebook ads and not do direct mail, radio, TV or Google?

James Hawk: Well, I’ll tell you why, and that’s a very good question. The reason why we wouldn’t do that is just simply because we like to at least have a few lines in the water… You just never know. I recommend to everyone, make sure at least you have three or four marketing channels, just simply because you just never know what might happen. If something with that channel dies, or Facebook changes their algorithm, or whatever it is, that could really affect your business.

An example would be even direct mail. Back in 2011-2012 I felt like we were the only postcard or letter that these people were getting; it was very rare that we even had much competition at all, because things really hadn’t picked back up. But now – geez, every single day we go to appointments and there’s 30-40 postcards just stacked up on their counter, and that’s what my salespeople tell me all the time… But yeah, that’s why. I highly suggest that you just don’t have one resource that your entire business is depending upon.

Joe Fairless: Let’s talk about your team… How do you structure the team?

James Hawk: We have eight people now. We have two outside sales, we have one lead coordinator that’s during the day, and then we also have a lead coordinator/data specialist that’s at night. We obviously have my business partner, we have a full-time marketing person on staff, and we also have a full-time dispositions manager as well. I think that’s everybody; don’t tell them I said that… [laughter]

Joe Fairless: I think you got it. Your business partner – how do you divide up roles and responsibilities?

James Hawk: That’s a great question as well. What we do is we’re like “Look, you’re gonna focus on this side of the business, and I’m gonna focus on this side”, and we base that around what our strengths are.

My strength is more on the sales and marketing side, so that’s what I focus on. His strength is more on the going out and raising money, managing any construction… That’s what he focuses on. It’s a divide and conquer model.

Joe Fairless: Yeah, you complement each other.

James Hawk: Right, absolutely.

Joe Fairless: How did you meet your business partner?

James Hawk: We both had our own wholesaling business, and this was like at the end of 2012 – we just kept running across each other on Craigslist, looking at each other’s properties that were for sale, and then we’d call on them, not realizing it. After that happened like 3-4 times, we were like “Hey, let’s just meet up.”

I just happened to have a lead in a phenomenal area in [unintelligible [00:16:33].13] and I was like “Hey, why don’t you meet up with me and let’s take a look at this house that I think I’m gonna get.” So he met me over there, we walked the house… We just hit it off really well, our values aligned, and it just made sense. We made an agreement that it’s “Okay, I’ll go out and I will lock up this contract on this house. You go out and raise the money, and then we’ll just rehab this house together and see what happens.”

It was on a whim, to an extent, I guess you could say. And we did that house, and we absolutely crushed it. It was probably the best worst thing that could happen. We actually made over 100k on that house…

Joe Fairless: Wow.

James Hawk: …and that was our first rehab. We just happened to do it together, and it was the first rehab for each of us. Then we decided “Hey, why don’t we just partner up and do this?” $100,000 will get you really excited, so you’re ready to partner with everybody.

Joe Fairless: It does. Now I have to ask this question – you focus on wholesaling, but you made $100,000 on rehab, and that was how you and your partner did your deal… So why did you get away from rehabbing?

James Hawk: We still do…

Joe Fairless: But 90% is pretty — you said 90% is wholesaling, and 5% is rehabs.

James Hawk: It is. Well, here’s the thing, and this will put it in perspective for everyone… We actually make a good amount of money, even on our wholesale deals. Our average profit per wholesale deal is around 23k-24k. Obviously, every rehab can’t be 100k. We actually had two wholesale deals last year that were over 100k.

Joe Fairless: Wow.

James Hawk: So we just look at it as like “Okay, if we can make 23k-24k or whatever that is right now, versus maybe 35k-40k if we buy it and rehab it…”, that’s kind of the way that we look at it. If it’s substantially more, if we can at least double our money rehabbing it, then we will.

Joe Fairless: We’ve got to talk about these two wholesale deals last year where you made over $100,000 each. Let’s talk about each individually. Pick whichever you want first.

James Hawk: This is one before we had salespeople, at the beginning of the year. I think it was like February 2017. It was the Atlantic Beach, which is a highly desirable area; the seller called, I went out to the appointment, and he had literally stuff stacked to the ceiling throughout the entire house. His mother was living with him and she had just passed away, and he had some financial hardship.

I worked with him, I released some money early, helped him move out, and really walked him through the process. That deal – we actually sent out and it was within an hour we actually got over what we were asking for it. I wanna say we sold it for 272k, and we had it for 169k under contract. It didn’t close though for a couple months, but yeah, that was a good one.

Joe Fairless: How did you find it?

James Hawk: That one came from direct mail.

Joe Fairless: Okay. What about that other one?

James Hawk: The other one was actually direct mail as well. It was in another highly desireable area called [unintelligible [00:19:45].19] There’s like an equity membership just to be in there; I wanna say it’s 20k or 30k that you need to put up front just to live in that community… And we got a great deal on the house. From the hurricane, it had flooded it a little bit, and they had already relocated to a different location, so the house was just sitting there. This one was one of our salespeople.

By the way, we always try to get video testimonials, just because we love getting the social proof, and we love being able to show that to everyone else, and for anyone that’s skeptical, they can see that it’s real. So we also got him to do a video testimonial, but we also sold it to someone that lived in that neighborhood.

One of our buyers lived in there, and he was looking for another house in that neighborhood. We got it for 370k, and then we sold it to him for (I think it was) 483k. So the final check was just over like 101k that we made on it. He ended up buying it, and he fixed it up to live in it, and then he sold his other house in that same neighborhood.

Joe Fairless: Based on your experience, what is your best real estate investing advice ever?

James Hawk: The best real estate investing advice ever – I would say that it goes in line with marketing. Someone once told me always to be consistent, and don’t always make it about you. It’s always about what’s in it for whoever your prospect is.

Joe Fairless: That is so true, and in the world of social media a lot of people get away from that. There’s a lot of chest-pounding out there, versus thinking about how that content will be valuable for the people receiving it.

James Hawk: 100%.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

James Hawk: I’m ready.

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

Break: [00:21:42].24] to [00:22:20].00]

Joe Fairless: Okay, best ever book you’ve read?

James Hawk: Traction, by Gino Wickman.

Joe Fairless: Best ever deal you’ve done that you haven’t discussed on this show yet?

James Hawk: Best ever deal I’ve done that I haven’t discussed on the show – obviously, I would go back to that $100,000 wholesale deal, but I’ll tell you what, we’ve just completed a project… It was just a lot – we tore down the house, and it was actually a double lot. We’re gonna be right at $100,000 on that. It was minimal effort, minimal time, and it’s 100k, so that was a great deal.

Joe Fairless: What’s a mistake you’ve made on a transaction?

James Hawk: A mistake… [laughs]

Joe Fairless: You haven’t made any of those yet, have you?

James Hawk: Oh, man… I would say that a big mistake that you can make in wholesaling, that I’ve made so many times, is typically we use with a wholesale deal our buyer’s funds; now we always have our funds there, just to back it up… But before we didn’t do that, so if the buyer’s money don’t show up or they back out at the last minute, then you’re in a bad situation.

Joe Fairless: What happens if you don’t have money and they don’t have money, but you’re supposed to close? I don’t think I know that answer.

James Hawk: Typically, we always do have the money; it just might not be there at the time, or whenever we did it that way… If they fell out at the last minute, or the lender didn’t send their money or whatever the case may be, then now we’re scrambling, trying to go to the bank, talk to our lender or whatever we have to do to get that money over there.

So typically, we would just go to the seller and say “Hey, there’s an issue, but we’re gonna get the money over there as soon as possible. Work with us.” Luckily, it hasn’t gone severe, but that’s always an uncomfortable situation, and I would highly suggest — now, we always even have our buyer send in their money 24 hours in advance as well, just for a comfort level.

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

James Hawk: To our Houses Help program. That’s really cool, we love that.

Joe Fairless: What is it?

James Hawk: Like I said earlier, it’s the program that we offer to all the sellers.

Joe Fairless: Oh, sorry, yeah. If you buy the house, you donate up to $1,000 to charity… Or if you buy their house, you donate up to $1,000?

James Hawk: Yeah, of their choice. It could be a choice, a charity… Whatever they choose, then we would donate the money. And it’s at closing, so we show up on the HUD and they would see it happen.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and get in touch with you and your company?

James Hawk: You can find me almost everywhere @flipfuel – Instagram, Facebook, YouTube… @flipfuel, you can find me.

Joe Fairless: Excellent. And your website is linked in the show notes. James, thank you so much for being on the show, talking about your business focus, which is wholesaling, as well as getting into the details – I love it; you got into the cost per leads for Facebook ($40), direct mail ($100), Google ($175) and some pros and cons for each of those. You got into the team, and then got into two case studies for those 100k wholesale deals.

Thanks again for being on our show. Really valuable stuff for the listeners. I hope you have a best ever day, and we’ll talk to you soon.

James Hawk: Thanks, man. I appreciate it.

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JF1335: How To Wholesale Apartment Communities #SkillSetSunday with Luis Carrera

Luis has been on the show and has shared his Best Ever Advice in the past (link below). After the 2008 crash, he turned into a real estate investor. Now Luis is wholesaling apartments and has a very interesting strategy and tips to share with us today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Listen to his Best Ever Advice:

https://joefairless.com/podcast/jf1024-the-2008-crash-turned-him-into-a-real-estate-investor/

 

Luis Carrera Real Estate Background:

  • Commercial wholesaler & real estate investor – ‎Innovative Property Group
  • Currently writing a book on a step by step guide to commercial wholesaling
  • Currently raises capital for larger apartment complex purchases
  • Started real estate in lease options to eventually doing wholesaling, and flipping
  • Based in Raleigh, North Carolina
  • Say hi to him at 973.902.7203

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a Best Ever weekend. Because today is Sunday, we have a special segment for you, and the segment is Skillset Sunday. The skill we’re gonna be talking about is how to wholesale apartments. Interesting, right? We have a guest who wholesales seven apartments last year, and he’s gonna talk us through how to do it, and he’s also writing a book about it… How are you doing, Luis Carrera?

Luis Carrera: Hey, Joe. How’s everything? Thank you for having me again.

Joe Fairless: My pleasure, nice to have you back on the show. Luis said “again” because he was on episode #1024, titled “The 2008 crash turned him into a real estate investor.” You can learn more about him and his background and his best ever advice by listening to episode #1024… So we’re not gonna talk about that. We’re gonna talk about the nuts and bolts of how to wholesale apartments, but just a little bit more context about him, so you can be caught up to speed if you didn’t memorize what we talked about last time.

He is a commercial wholesaler and real estate investor. His company is Innovative Property Group. He’s based in Raleigh, North Carolina, and he is writing a book on how to wholesale apartments. He did seven last year. With that being said, well, how do we wholesale apartments?

Luis Carrera: Well, Joe, once you know the nuts and bolts about it, it’s not that hard, just because you have to target different properties, basically mainly under 80 units, but… Could I give you a quick back-story in regards to how I got to wholesaling apartments?

Joe Fairless: Please.

Luis Carrera: Perfect. Basically, I used to obviously do flips and wholesaling in my market in New Jersey, and now in North Carolina in the Raleigh market. I ran into different opportunities, and I always wanted to invest in apartment complexes, so much so that I did join a few groups and I actually did training with Dave Lindahl – I’m not sure if you know Dave Lindahl, Joe…?

Joe Fairless: Yup, yup.

Luis Carrera: So basically, I was in his program, studying, making offers, going back and forth with brokers and with private sellers… His program is basically — let’s just call it there’s a holy trinity; you have to hit certain markets in regards for it to be a home run deal. But the Dave Lindahl program, he makes you partner up with other investors. So… Great! I would love to partner up with other investors if it provides potential cashflow, but then working on his holy trinity, there was a lot of offers I made. I think I made about 60-65 offers, and I was laughed at all the time, just because they were so low, so they never had me in the run-in for each offer… So then I’m like, “Okay, let me change this up a bit…” Let me start getting more competitive on my offers.

Once I started doing that, I started getting more properties, at least with an accepted LOI (letter of intent). So with that letter of intent and essentially the contract down the road, I would take these offers to my investors. But then I would tell them, “Hey, I wanna jump in with you, and we could split the deal. You’re giving me 25, or 50, and you keep the rest.” Well, for most of these deals, all these investors said “Hey, Luis, this doesn’t work for us together.” I’m like, “What do you mean?” “Well, the margins are too tight. I could find this on my own, without you”, and I’m like “Oh, great.” So I’m scratching my head, I don’t know how to find a solution; I just keep on pounding the pavement and continue to figure out a way around it.

Joe Fairless: Just to pause there, so I’m making sure I’m tracking properly… You initially were making offers based on predetermined criteria that wasn’t competitive with the market, so you were getting laughed at. You then switched your approach, became a little bit more aggressive, then you started getting accepted LOI’s (letters of intent), and then you went to other investors to partner with them, so they brought the money and experience, I imagine, and they said “I don’t think so. Margins are too small. We could have found this on our own.”

Luis Carrera: Exactly. And it wasn’t only me. Every time I went to these multifamily events – it could be Dave Lindahl, it could be somebody else – everybody was having very similar issues, and I’m like “How could I bridge that gap between what we’re looking for and a home run? There has to be singles and doubles.” So it didn’t really quite occur to me until I found another deal which I brought to an investor… It was only a 26-unit deal. I’m like, “Alright, it’s first year returns of 7%, and then it goes up to 12% year five.” I provide it to the investor, and the investor again said “It doesn’t work for us, but it works for me”, and I’m like “What do you mean?” I’m like, “Look, you see this deal? I want it, because it’s a small complex, I could buy it cash, but I can’t split any profits with you [unintelligible [00:06:19].07] How about this – you see that assignment fee that’s written in there of 20k? I’ll give you that assignment fee, you just give me the deal.”

And that’s how I guess the light bulb went off, and I started saying to myself “Wow, so I don’t even have to jump on the deal, I have to just find good deals for investors to come in, and I’ll just assign them the deals to them, and they do most of the work when it comes to the due diligence. Bull’s eye.” So that was just groundbreaking for me. Then I started sharing this information, and there’s a lot of people that really wish they had, because then they would have gone after more deals, more singles and doubles. So that’s why I’m writing this book.

Joe Fairless: How do you decide what that assignment fee is?2

Luis Carrera: Well, typically it’s a percentage of the overall sale price. It’s kind of like a broker fee, so to speak, but you can’t really call it that, so we call it an assignment fee, and it’s anywhere from 1% to 5% of the overall sale price. So let’s just call it a five million dollar deal, 1% is what – 50k? So if we do 2%, that’s 100k. So if you find a good deal and you’re willing to work with other people, and willing to give it up just for some cash, then great. Move on to the next one that you could partner on with somebody else that has better margins.

That’s what I like about wholesaling apartment complexes, because yes, you might find less deals than typical wholesale deals, but there are more zeroes on the back of the assignment fee.

Joe Fairless: What’s the largest assignment fee you’ve gotten with an apartment deal.

Luis Carrera: 126k.

Joe Fairless: And what percent was that of the deal?

Luis Carrera: 3,5%.

Joe Fairless: Got it. And how did you approach the negotiation of getting 3,5%?

Luis Carrera: Well, I assumed it. [laughter] Yeah, exactly. So instead of offering my investors “Here’s the sale price, plus these fees for closing” and whatnot, I already figured it into my price and did the five-year analysis based on that. So they were happy with their returns… Yes, it was a large complex – over 180 units – and they moved forward. These were Chinese investors, obviously, but they had a 90-day due diligence period, which everything turned out pretty good, with not a lot of bumps in the road… Then the final [unintelligible [00:08:48].20] Actually, it wasn’t assigned; they bought the shares of the LLC off of me. That’s how we figured it into the deal.

So that was the biggest one, but on average it’s anywhere — because now I’ve decided to target under 100 units, because you could move them a lot quicker… So the assignments are anywhere from 20 to let’s just call it 50k each.

Joe Fairless: Under 100 units — you said 100, right?

Luis Carrera: Correct. Under 100 units are the best ones to move, because there’s just more investors with some cash that could actually purchase that alone. If you have to start doing syndications, then it becomes a little bit harder. If you wanna move a lot quicker, target from 20 to 100, and get them sold quickly. That’s what I try to do.

Joe Fairless: Have you assigned it to a group that syndicated it?

Luis Carrera: No, I haven’t assigned anything to a group that syndicated just because after that large deal I just focused on the smaller ones, because they’re a lot simpler to handle.

Joe Fairless: And that large deal – I did some math, and that’s 3.6 million dollars purchase price…?

Luis Carrera: Yes, it was around there. But they paid cash.

Joe Fairless: Okay, yeah. 3.5% of 3.6 million is 126k… So you did a 180-unit and it got you your biggest payday; I heard you, what you said – you move a lot quicker, and that sort of thing, but why not stick to the larger ones, because they got you your biggest payday?

Luis Carrera: I agree with you, but like I said, that’s a home run; there’s not many home runs. In the meantime, why don’t you start building your cash reserves, or making some deals with some smaller ones?

Joe Fairless: It makes sense.

Luis Carrera: So you make the smaller ones, you find the big one that you can jump in, and you put what you’ve made before into a larger one and you’re already a step ahead of the game.

Joe Fairless: How did you find that 180-unit?

Luis Carrera: It was on the market, through a broker… Marcus & Millichap.

Joe Fairless: It was on the market, you reached out to the broker, and then what do you tell the broker to get agreed upon LOI?

Luis Carrera: Well, basically for the most part, the brokers that you speak to, you just have to build some type of relationship with them. It doesn’t have to be much, but especially in certain areas, if you wanna do — like, in our area we have the triangle… From Raleigh, all the way down to Spartanburg, and Charleston; that’s the area I focus in. So I always reach out to these brokers to ask for — not deals, but “Hey, what do you have listed that I could go after?” and then they’ll start sending you things, and you just start submitting offers through an LOI. Eventually, one or the other gets approved. I would say before doing any of that, you should have at least a few investors that could purchase these properties, because if you go in without any help, then that’s where problems start, just because you can’t close.

So that’s another reason why I like targeting smaller units, because then I know I could move them a lot quicker than with the larger units.

Joe Fairless: Let’s say you reach out to me about another 180-unit deal. I am going to assume that I’m gonna sign an NDA (non-disclosure agreement), number one, before seeing the deal, and then number two, that you don’t have it under contract yet, but you just have an agreed-upon LOI with the terms. Is that accurate?

Luis Carrera: That is correct. I don’t market anything or shoot it out to any of my buyers without it having some firm footing, like an approved LOI. Once I have an approved LOI, I’ll start making phone calls or sending out a few emails just to get the ball rolling.

Joe Fairless: How do you know what terms to agree upon with the seller on the LOI? Because that could be a deal-breaker for a lot of investors, if you agree to certain things that they wouldn’t agree to in due diligence, or earnest money, or whatever else.

Luis Carrera: Well, I try to keep it as typical as possible. So let’s just say for example the LOI period would be 5-10 business days for the contract to be written up and approved, a 1% earnest money deposit, and then typically if I have the funds and I’m very confident in the deal, I’ll put it in escrow, and then I’ll find a buyer. But then typically what the buyer has to do is they’ll have to replace those funds, so to speak.

Joe Fairless: Then what do the broker and seller do once you assign it? Because they used to be working with one buyer, and now they’re working with another one.

Luis Carrera: Well, their interest is also like my interest, to get it moved… So as long as it closes, I haven’t had any issues, except for the 180 – the guy complained a bit. However, he got it sold, he got his commission…

Joe Fairless: [laughs] What guy, the broker?

Luis Carrera: Yes. They’re gonna scoff at it, but it is what it is. At the end of the day, if they move it, they’re happy. If you move it, you’re happy. And the terms are typical. Let’s just say the LOI will say “Look, 30 to 90 days due diligence period in order to review all the financials and inspect the property…” It just depends on the size. Typically, 60 to 90-day turnaround for a close. Two months for financing contingencies, typically. So I try to write everything in with some outs, so that the investor that’s coming in is satisfied with that.

Joe Fairless: Take us back to when the Marcus & Millichap broker called you up the first time, after you had made him aware of another group buying it. How did that conversation go?

Luis Carrera: Ar first he was upset, but then I told him “Look, I was gonna be on the deal with them… However, they noticed that their margins are gonna be too tight, and they just want me to walk. I’d be glad to take on another property from you.” So at the end of the day, he still sends me favorable deals before anybody else.

Joe Fairless: How did you meet that group of investors who ended up buying at 3.6 million in cash?

Luis Carrera: Well, they actually used to do flips with me. They provided funds for flipping properties, I did a pretty good job for them, and then eventually I convinced them to think bigger, and they had the finances to do a larger deal. Actually, they asked me “Hey, do you have any multifamilies available? Because we wanna jump in on the multifamily.” At first I said “No”, but then once I found what they were needing, then I actually targeted a few properties, made a few offers, got a couple accepted – one of them they didn’t like, the other one they did, and we moved forward.” But for the most part, it’s people I’ve worked with in the past, or that they know me from previous flips or other investments… Just because they need that peace of mind to know who they’re working with.

The beautiful thing about this is let’s just say you have a buyers list and you’ve sold a few properties, maybe you could do like a stepping stone of 20-40 units to one of these investors… And if you’ve worked with them in the past, they’re more agreeable to working with you in the future.

Joe Fairless: As far as the compensation goes, when you get to a certain level of property, say a 15 million dollar property, 1% would be 150k – would you cap out at, say, 50k or 75k or 100k if you were to find a larger property, or would you push for still 1% of the property purchase price?

Luis Carrera: I would actually push for that 1%, as long as the numbers make sense. If you see that the numbers don’t make sense, then yeah, maybe you could cut down your fee a bit… But if the numbers make sense, I would totally go for it. At 15 million dollars, you’re already talking to a price range of investors that could only purchase between 10 and 25 million, and then above that it’s typically institutional, so your pool of investors is a lot smaller.

Right now I’m not targeting those deals yet, because I know based on experience that anybody that goes in on that is typically a syndicated deal, or it’s just an institutional investor parking their money somewhere.

Joe Fairless: I would think the challenging part for you – well, one of the main challenging parts; I’m sure there’s many – is the timing… Because you’ve got to time it just right, where you have an agreed upon LOI, and then you assign it to another group before your contract period ends… So how do you approach that?

Luis Carrera: Well, for the most part I always put it under contract under my name — well, the company name, that I’ll use. Typically, when you do buy a property of this size, you’re gonna create an LLC for that property. Typically, most multifamily deals are under a separate LLC, so during the contract, yes, it’ll say my name, and then this contract is assignable based on an agreement, and once we create the LLC, before closing, we’ll just assign everything towards that LLC. I’ll have a fee written in the assignment sheet, or I’ll assign it to the corporation and through the operating agreement they already have saved and used, it’ll say that I have to sell my shares at the time of closing, as another separate transaction. So that’s typically what I do when it comes to assigning or purchasing the shares to a new LLC.

Joe Fairless: And what about the timing standpoint, where you have to find someone to then assign your shares to? When do you start talking to potential buyers of the property for you to assign?

Luis Carrera: Well, basically I’m always having a conversation with them beforehand, and I’ll keep them posted at several deals that I’m in the running for… But not until I get that LOI will I call them all, saying “Hey, I have this under LOI. Are you ready to move forward? Because you’ve been asking me for a couple months now that you’re looking for a 30-unit, or a 40-unit.” I keep everybody up to date on what I’m doing, and my progress. The more I do it, the more investors I have, which obviously I’ve been blessed because of that… But when you continue to speak to people, more and more people show up, that they have the need for a 20-unit, they have a need for a 50, or 60… Then you just ask them to write a proof of funds or any other projects you worked on, and they will certainly be glad to provide that, just because half of them or most of them don’t have the time to look for a deal.

I already have a group of investors – maybe up to 40 – that I have them targeted… “Okay, these five are between 20 and 30 units. These seven are between 30 and 40”, and I continuously speak to them in regards to these deals that I’m making offers on, just to get them excited so that when something does come out, they already know about it.

Joe Fairless: Of the seven that you assigned last year, how many were not broker-represented?

Luis Carrera: One. For the most part, the best deals are usually broker-represented.

Joe Fairless: How did you find that one deal that didn’t have a broker?

Luis Carrera: Oh, while doing the — because I still do a lot of wholesaling and flips on the side… It came through my yellow letters. I sent it to an owner of a tax default list. The property that I targeted was their primary residence, and they said “Look, I’m trying to sell my assets.” I think he lost his job… And one of the units was a 42-unit property, and he just needed to move it, and I was glad to offer him a solution. That was the only one, and that just happened through yellow letters.

Joe Fairless: Do you still do yellow letters, even though you’re focused on apartments now?

Luis Carrera: Yes.

Joe Fairless: Is that the primary way that you market your services to owners?

Luis Carrera: Yes, yellow letters, and from time to time postcards… But I prefer yellow letters.

Joe Fairless: Anything else that we should be aware of as it relates to wholesaling apartments?

Luis Carrera: Right now I think it’s the best time for wholesaling apartment complexes. Just because we’re at a good market, it’s tougher to find deals where anybody could jump in, just because the margins are tighter, and there’s a lot more people out in the market now… So as long as you find the buyers, you could find the deals. But continue to keep a list of buyers, just because everybody’s getting anxious out there. Margins are tighter… What you could get for 8% last year, this year is 6% or less. More people are jumping into deals, and the quickest way to sell a deal is through wholesaling. The tighter the property, your best bet is just to move it, and continue gaining those singles, so that once you find a good deal that you could jump on, and do it either yourself or with a couple other investors, then just take advantage of that.

Joe Fairless: On one of the large deals – say the $126,000 that you got for the 180-unit deal, did you consider taking, say, maybe 100k of that and then put 26k of that towards equity?

Luis Carrera: Well, no, because the investors didn’t want me in on it. Some of them are gonna be particular, some of them want you in or they want your experience… I would say if you wanna jump in on board, you could say “Look, just pay me a monthly fee, or give me 5%-10% and I’ll manage it for you.” You can jump in that way, with minimum risk. I like preaching that – the less risk, the better, because you never know what’s gonna happen around the corner.

Joe Fairless: Really interesting, I’m grateful that we caught up again and you talked about wholesaling apartments and gave us all these details… How can the Best Ever listeners get in touch with you?

Luis Carrera: They can get in touch with me at my page book on Facebook at www.facebook.com/ipgroupnc, or they could contact me personally – my phone number is 973-902-7203. It’s either through those two avenues, or through email. I could send you my email so you could put it on the notes.

Joe Fairless: You can either say it right now, or forever hold your peace.

Luis Carrera: Okay, well my email is innovativeholding@gmail.com.

Joe Fairless: Sweet. Well, thank you for being on the show again. Some interesting things – one of the things was that you target 80 units or lower, because you can get an assignment fee and you get more volume that way, versus working with people who are syndicating… The one that you did have an exception, with the largest one, where they bought all cash, the 3.6 million dollars… Also, the terms that you do and just the overall approach and the inner workings of it. I’m glad that you talked to us about it, and for anyone who wants to wholesale apartments, you’ve got a book coming out too, right?

Luis Carrera: Yes, that’s correct.

Joe Fairless: Sweet.

Luis Carrera: We’re currently editing it.

Joe Fairless: Do you know the title of it?

Luis Carrera: It’s Apartments – How To Make Millions Off Wholesaling Apartments.

Joe Fairless: Cool, easy enough. Well, thank you again for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon.

Luis Carrera: Thank you for having me, Joe.

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Switching to Wholesaling with Brad Chandler Best Ever Show Flyer

JF1302: Switching To Wholesaling After Flipping Over 2000 Houses with Brad Chandler

Starting in 2003, Brad and his company have flipped over 2100 homes. With so much capital out, he decided to switch to the wholesaling model. Figure out what it takes to flip a high volume of houses, and what it takes to build a wholesaling business that does 200+ deals per year without your assistance. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Brad Chandler Real Estate Background:

  • Co-Founder and CEO of Express Homebuyers, one of the largest home buyers in the entire country.
  • Successfully flipped over 2,100 houses since 2003
  • Passionate about real estate investing in 9th grade, he read a book about how to buy a home with no money down
  • He has been able to build a real estate investing empire that does 200+ deals per year without his assistance
  • Based in Fairfax, Virginia  
  • Say hi to him at https://www.bradchandler.com/
  • Best Ever Book: High Performance Habits by Brendon Burchard

Join us and our online investor community: BestEverCommunity.com


Made Possible Because of Our Best Ever Sponsor:

Are you committed to transforming your life through real estate this year?

If so, then go to CoachWithTrevor.com to apply for his coaching program.

Trevor is my real estate, business, and life coach. I’ve been working with him for years. Spots are limited, so be sure to apply today!


TRANSCRIPTION

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

Brad Chandler: I’m doing awesome, thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Brad – he is the co-founder and CEO of Express Homebuyers, one of the largest homebuyers in the entire country. He has successfully flipped over 2,000 houses since 2003. Based in Fairfax, Virginia. With that being said, Brad, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Brad Chandler: Sure. So I could go way back, but we’ll go back to ninth grade – I read a book in the ninth grade on how to buy real estate with no money down. I had some financial challenges as a kid and knew that I wanted something that would generate unlimited income. I had an investor buy my neighbor’s house in 2002, and I went and talked with him. He said, “Yeah, I buy houses at 20%-30% below market, I fix them up and I resell them”, and I go “That’s what I’m gonna do!” I always knew I wanted to do real estate, but I thought you got rich in real estate by putting down 20%, paying off a house with the rent check over 30 years and hopefully it appreciated.

So after eight long months, I bought six houses in July and August of 2003, quit my full-time job in October 2003, and basically rehabbed, fixed and flipped up to last December. Then we said “You know what? We’ve lost so much money renovating houses that I’m gonna switch my model to wholesaling, get rid of renovations.” So this past year we wholesaled just shy of 200 houses, just in the DC market; we had our best financial year ever, and here we are today… I decided to start a coaching company to teach people exactly how we do it. We started that about six months ago.

Joe Fairless: Well, I certainly understand going from fix and flip to wholesaling. I always tell guests when we talk about fix and flipping versus wholesaling, if I was doing one of the two, I would 100% be wholesaling, versus fixing and flipping. Just less risk, better return on time, in my opinion… Unless you really get fulfillment by doing fixing and flipping. Wholesaling to me is a much better approach.

Brad Chandler: You are so right, and it requires so much capital if you’re gonna do rehabbing on a big scale. We had tens of millions of dollars out.

Joe Fairless: Well, with your process, you all wholesaled, as you said, 200 homes last year. Do you also invest into properties for long-term holds for your own portfolio?

Brad Chandler: In 2010 to 2012 we bought approximately 80 single-family houses in the DC Metro area. We found that we were not making the yields that we thought because they were all single-families; it was low, low single digits, and we were borrowing money for the rehabs, so the cost of capital was around 10%-12%, and we’re thinking “Does this make any sense? We’ve got a couple million dollars tied up in rentals that are earning us let’s say 1% or 2%, but yet we’re paying 10%-12%.”

So we actively decided the time is right to sell, so we’re in the process — we’ve sold probably 65 of the 80. Then probably at some point in time — my wife and I are doing some investing on the side, and we’ll likely get back into it. My actual degree in Virginia Tech from an undergrad standpoint was residential property management, so I would love to own apartments, just never have gotten around to doing it… Yet.

Joe Fairless: Yeah, I’m with you, okay. The reason why I ask is wholesaling is a job, whether it’s automated or however you have it set up, it’s still a transaction-based business, so that’s why I was wondering when you do make that money, are you then investing it for more of a long-term play, so that you’re not chasing the transaction?

Brad Chandler: Right now we’re investing it into growth. We’ve launched in six other markets, we’ve done some test launches and we’re gonna see how that works, and if that works, we’re just gonna continue to take our excess cash and fuel it to growth.

Joe Fairless: Got it. So I wanna give you a scenario… I’d like to hear your thoughts on this, because it’s a tactic I’m playing with and I’d just like to hear your opinion. So I buy apartment buildings, and you’re wholesaling primarily 1-4 unit properties?

Brad Chandler: All one-units, really.

Joe Fairless: Okay, all one-units. If I were to come to you and pretend I’m just some random person you never came across, you don’t know me from anyone else, and I met you at a local meetup, and I heard that you’re wholesaling, and you are wholesaling at an amazingly high level, and I said “Hey, I’ve got some apartment buildings and I’d like to buy some more. I know you’re likely doing direct mail – first off, is that assumption correct?

Brad Chandler: It is correct.

Joe Fairless: Okay, so you’re likely doing direct mail… What if the direct mail leads that you’ve got – what if you asked them one extra question, and that question is “Do you own any larger properties?” And if they did, if you sent them my way, then I would give you some sort of referral fee if we close on a transaction. What would you say to that?

Brad Chandler: I would say it’s fine. I hope my acquisition staff is actually asking, because that’s a question I learned long ago – ask everyone you know and come in contact with, “Do you have any other properties you are looking to sell?” So I think it’s a good idea. I’m not sure how — it’s like a needle in the haystack… Of all the people who’d call us, I don’t think there’s gonna be a ton of them that have a multi-unit, but maybe.

Joe Fairless: Cool, so you’d be open to it. I’m testing this tactic out, by the way, so you are my focus group… How would you structure that so that it benefits you, or so that you know that you’re getting compensated? Would you want a percent, or would you want just a flat fee, or how would you structure that?

Brad Chandler: We’ve given a lot of leads out free over the years, and we typically ask for a percentage… A much larger percentage than I would ask for an apartment. So yeah, we’ve asked for a percentage of profit, but this would be much tougher. It would probably be a small percentage of the purchase price. Just something easy, that’s not gonna take a bunch of brain damage to figure out each time.

Joe Fairless: Yeah, fair enough. 200+ wholesale deals last year – how do you get to that volume?

Brad Chandler: Well, processes is really what it is. There’s probably 30 people now on our team, when you include our virtual assistants. I started out in 2003 with a negative $80,000 net worth and bought six houses in two months, and then just scaled it. As we needed more people to do more jobs, we would systematize the position, and then we would go out and hire really great people, and then we would just reinvest profit into marketing.

We were spending like $200 marketing budget per month when I started, and now we’re well over six figures a month in marketing. It’s just a process of scaling, one month at a time.

Joe Fairless: 30 people on the team, including VA’s… Can you tell us what categories of departments they’re in?

Brad Chandler: And we’re growing, by the way. So we’re looking to hire eight different people, not here in Springfield, in Orlando, Tampa, L.A. and Seattle. Departments – so we have accounting, that have two people; we have a marketing department that is two people, looking to put a third person in that… We’ve got acquisition and sales, which is ten people; myself, my partner… What else am I forgetting? I think that’s it.

Joe Fairless: And then VA’s across the board?

Brad Chandler: Yeah, there are like 10 VA’s [unintelligible [00:09:45].10]

Joe Fairless: Right. What are your VA’s doing?

Brad Chandler: They’re doing a lot of nurture. They’re actually screening — we get leads on a nationwide basis now, so they’re actually screening those calls and seeing if there’s a level of motivation, and if there are, they’re handing them over to our acquisition staff.

Joe Fairless: And where are those VA’s located?

Brad Chandler: They’re in the Philippines. However, we’re just about to hire three more people – one in Tampa, one in the Texas area and one in the state of Washington. Those were found through Upwork. Those are obviously US-based folks.

Joe Fairless: Sure. All of them found through Upwork?

Brad Chandler: Those three were found on Upwork.

Joe Fairless: What about the Philippines?

Brad Chandler: Everyone else is through MyOutDesk.

Joe Fairless: MyOutDesk?

Brad Chandler: Yeah, they’re a VA company that specializes in virtual assistance for the real estate industry.

Joe Fairless: Okay, got it. I had not come across them before. Cool. Did you say six figures a month marketing?

Brad Chandler: Yes.

Joe Fairless: So you’re spending over $100,000 on marketing every single month?

Brad Chandler: Yes.

Joe Fairless: How do you allocate that budget?

Brad Chandler: We are spending approximately $50,000-$60,000 on internet, both pay-per-click and organic. We’re likely spending about $60,000 on direct mail, and then we’re spending about $30,000/month on television.

Joe Fairless: Okay. How do you evaluate the effectiveness of television, and what are you doing on television?

Brad Chandler: Ironically, Joe, TV has been our bread and butter for years. I started TV advertising I think in like October/November 2003, so it really was our only marketing source for so many years… So that’s how we evaluated it. Now we do our best with tracking numbers to see what’s coming in, and we also are able to look at the Google Analytics now. We’re setting this stuff up now, where we run a commercial and see if there’s a spike in internet traffic.

Joe Fairless: And with the internet allocation, pay-per-click and organic, how do you know your marketing dollars are being invested effectively?

Brad Chandler: We’re really good at tracking everything. Obviously, pay-per-click is really easy because you actually see the returns. SEO is accounting for about 600 of our out-of-area leads. We track everything with what’s called UTM parameters.

Joe Fairless: What is UTM parameters?

Brad Chandler: Wow, so this is pretty technical… When you go to Google, it’s like Google.com and it has a long string of numbers and letters, each one of those is tracking, so anytime anyone clicks on something and it goes in our database, we can see where it’s coming from.

Joe Fairless: How did you build that team out? Or is that your area of expertise?

Brad Chandler: I would say my expertise is marketing, but I’m more of the high-level “Hey, I know the consumers’ behavior and what makes them buy and purchase…” Things like that that are very technical – we just hire people with that know-how.

Joe Fairless: How do you know you’re hiring the right people?

Brad Chandler: We have a pretty exhaustive interview process, where it’s very, very intense. We run through a [unintelligible [00:12:36].17] analysis, as well as the behavioral test. We ask for lots of references and we go really deep in the reference checks, and then we literally spend about three hours with each candidate. When you spend that long and you do that much testing, you really have an idea. Of course, you wanna look for past success and previous positions and previous accomplishments in their life.

Joe Fairless: What’s the behavioral test?

Brad Chandler: Behavioral test – we had actually used something that helped Keller Williams grow. It’s a small company in [unintelligible [00:13:02].04] it’s called an AVA. It’s a little bit different than a personality test; the report that it gives really tells you your behavior, and what you’re good at and what you’re not good at.

Joe Fairless: Got it.

Brad Chandler: And if anyone is hiring people and not using those tests, you’re really missing out.

Joe Fairless: If I wanna give the test to someone, how do I get access to it?

Brad Chandler: It’s through a small company called Corporate Consulting in [unintelligible [00:13:24].12] Virginia. But there are several products, Joe, as you probably know, on the market, like the Myers-Briggs, and… There’s a number of them.

Joe Fairless: So you are investing over 100k in marketing, and then once you get a lead, what are some things that you have evolved over time? Because you’re getting a high volume in your process.

Brad Chandler: We’re getting ready to recreate everything now to make it simpler and flow smoother, but approximately in 2010, 2011 and 2012 we kind of looked back and said “Gosh, we’ve probably lost millions of dollars not following it properly.” So we implemented Infusion Soft, which is pretty complex, and for the normal homebuyer I would not recommend using it… But we implemented it.

My COO did a deep dive and really learned the ins and outs of it; he got training from one of the ex -founders or one of the first guys at Infusion Soft, and we just have become so good at follow-up. We touch them 15 times in the first four days, and then we never let a lead go. We closed leads last year that were seven years old. In 2017 I think we closed like ten deals just from calling back missed phone calls… So we’re all about follow-up.

Joe Fairless: What are the 15 ways – and obviously, you don’t need to mention all of them, but can you talk more about that? And four days, 15 times…?

Brad Chandler: It’s just simply a combination of voicemails, phone calls, text and e-mails.

Joe Fairless: What part of that is automated?

Brad Chandler: It’s semi-automated. Let’s say a lead came in today; it would trigger saying “Hey, give him a call.” So we automatically give him a call. When we push the button that said “Did not answer”, they would get an e-mail fired off, and then a couple hours later they would get a text fired off. When they came in the next day, it would say “Hey, you’ve gotta call Johnny back”, and the same process would start – call, if you didn’t get him… And we’re soon gonna have a technology where we just — well, we kind of have that now, where we can push a button, it leaves a voicemail, and then an e-mail would go out and then a text would go out.

Joe Fairless: What’s something else from the evolution of your company – not necessarily marketing-specific, just the evolution of your company – that you’ve learned that could help other Best Ever listeners who are wholesaling and looking to build, or even just an investor looking to build their company?

Brad Chandler: I’ve gotta mention the follow-up again. That’s probably the single most important thing.

Joe Fairless: [laughs] Yup.

Brad Chandler: Something I’ve known, but I just didn’t do it – I’ve always known how important people were, but I was never able to pull off a team that just every single person is an A player, and after 13 years of going through a lot of bad candidates and a lot of bad employees, we have got a team now that there’s not one person that I’d say “Oh, if he/she left, I would care…” – we don’t wanna lose anybody. Good people make everything a lot simpler, so make sure — even if people may be listening to this and saying “You know what, I’m getting ready to make my first hire. I don’t spend $150,000/month in marketing, I don’t do 200 deals a year… I just need someone to help me out, so what I’m gonna do is I’m gonna put an ad on Craigslist, I’m gonna put an ad on Monster.com, hopefully I’ll get three candidates and I’ll just pick one.” That’s the worst thing that you could do, because a bad hire can absolutely ruin you.

Whether you’re hiring your first person or your hundredth, make sure that you do a detailed, detailed interview, and make sure that you’re selecting someone who you really, really want to. If red flags come up, really research those or just discount them and move on.

Joe Fairless: Do you do a test period with your potential hires?

Brad Chandler: We’ve done it in the past, but it’s not protocol. Virginia’s an at-will state, so we’ve got really strict KPI’s and we’re looking at people on a monthly and weekly basis – are they performing? And if they’re not performing, they just don’t stick around.

Joe Fairless: What’s an at-will state?

Brad Chandler: At-will means the employer has the ability to fire at any time, without repercussions, without cause.

Joe Fairless: What is your best – and you might have just mentioned it, the follow-up process… But what is your best real estate investing advice ever?

Brad Chandler: We’re marketers, really. Anyone in the homebuying business, they’re a marketing and follow-up company that just happens to buy and sell houses, so I think I’ve just mentioned it – marketing, follow-up and just people.

Joe Fairless: Got it. Okay, cool. Are you ready for the Best Ever Lightning Round?

Brad Chandler: Sure.

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

Break: [00:17:27].01] to [00:18:01].19]

Joe Fairless: Best ever book you’ve read?

Brad Chandler: I think I just may have read it, and that was High Performance Habits by Brendon Burchard.

Joe Fairless: Best ever deal you’ve done?

Brad Chandler: We wholesaled a deal in 2005 where we made $300,000 on it. It was a small building… Actually this was a multifamily, like a three-unit in Adams Morgan in DC.

Joe Fairless: How did you find that deal, do you remember?

Brad Chandler: I bet you it came off of a TV ad.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Brad Chandler: In 2005 we bought three development deals in one month, thinking that we were the smartest people in the world and knew everything about real estate, and we ended up losing three million dollars collectively on those three deals.

Joe Fairless: Oh, that’s fun. That’s a good lesson.

Brad Chandler: Oh, great lesson. [laughs]

Joe Fairless: When presented a similar opportunity, how would you approach it now?

Brad Chandler: Well, we have had similar opportunities and we’ve actually turned it around and made great profits. We didn’t know what we didn’t know back then. We should have done our due diligence, we should have had an attorney involved in the process… So just before you go hard on a deposit, make sure that you’ve got all the approvals that you need.

Joe Fairless: Is that what happened – you went hard on a deposit, but didn’t get the right approvals for breaking ground?

Brad Chandler: That was the problem on two of them, and the third one was just a complete debacle in every way, shape and form.

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

Brad Chandler: I am finding it very fulfilling to teach people what I do, and starting to change people’s lives by teaching them how to invest in real estate.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Brad Chandler: I’ve got a book titled “Wholesaling Secrets: Discover This One Technique We Use To Close Over 200 Wholesale Deals Every Year Consistently.”

Joe Fairless: That’s a mouthful.

Brad Chandler: Yeah, I know. The next book I’m gonna shorten… Simply text the word “invest” to 855-999-1616, and they can go to BradChandler.com for my coaching programs.

Joe Fairless: Cool. And I’m kidding about the mouthful, because my podcast is The Best Real Estate Investing Advice Ever Show, and I always tell people “It’s tough to say, but great for Google searches.”

Well, thank you for being on the show and talking to us about how you have scaled your wholesaling company, how you are in marketing and you happen to be selling houses, so it is about the follow-up and it is about the people that are on your team… And how you’re allocating your marketing budget – 40% towards internet, 40% towards direct mail, and 20% towards television… And then how you screen potential candidates for your company.

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

Brad Chandler: Thanks so much, Joe.

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how to wholesale real estate

JF1289: How To Wholesale Over $250 MILLION Of Property In 10 Years with Jason Lucchesi

Jason bet on himself in 2008 after losing his job at a mortgage company (gee I wonder why) and no other places would hire him unless it was 100% commission. He started his real estate investing company and never looked back. Today we get expert tips on building a buyers list, finding deals, and technical, time-saving ideas. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Jason Lucchesi Real Estate Background:

Founded real estate investment company Global Fortune Solutions in 2008

Has been involved in $250,000,000 of closed transactions

-He’s a #1 bestselling author, speaker, mentor and coach to thousands of students across the country.

-Say hi to him at www.noflippingexcuses.org

-Based in Indianapolis, Indiana

-Best Ever Book: The E-Myth

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Jason Lucchesi. How are you doing, Jason?

Jason Lucchesi: Good. How are you doing, Joe?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Jason – he founded a real estate investment company called Global Fortune Solutions in 2008. He’s also got a non-profit, and the website there is NoFlippingExcuses.org. He’s been involved in over 250 million dollars’ worth of closed transactions, and he’s based in Indianapolis, Indiana. With that being said, Jason, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jason Lucchesi: My background is I got started in 2008 as a full-time investor, and the main reason for that is I got started because I didn’t have a college degree and I was just coming out of a really bad spot from being in the mortgage business… That’s when the collapse just started. I didn’t have a college degree, I was doing really well at the place I was at, which was Countrywide Home Loans, and essentially, as soon as I got out of the mortgage business, I couldn’t find anywhere that wanted to hire me, unless it was 100% commission. So I decided to go all-in on myself, and not have a back-up plan. I went all-in with real estate and decided to make it happen.

What I’m really focusing on today is mainly wholesaling. I do about 10% of the business is rehabbing, 65% of it is wholesaling, and the remaining portion is buying properties that we could put into the portfolio, that produce income.

Joe Fairless: Sweet. Between 2008 and today, how has that percent breakdown changed?

Jason Lucchesi: It’s been somewhat around the same… I would say rehabs have gone from 20% to 10%. It’s just something that I don’t really enjoy doing, even though I’ve completely systematized it to where I don’t really have to be there anymore. I don’t like having our capital out for a long period of time, either it be our own personal acquisition capital or private funding… I just don’t like having that funding out for a certain period of time, especially with rehabs. You never know what’s gonna come up and what delays you’re gonna foresee, especially since we’re in several different markets, so we could hit a little bit of a snag and it becomes somewhat of a problem. We try and just keep our capital in projects that we know aren’t gonna take long periods of time.

Joe Fairless: Yeah, if I was in your business, I would be doing the same thing… I mean, why risk your capital on a rehab if you can get similar, or as great, or even greater profits in some cases on wholesales?

Jason Lucchesi: Oh yeah, absolutely.

Joe Fairless: Yeah, it’s a no-brainer. So let’s talk about your approach to wholesaling, since that’s 65% of your business… What can you tell us about the way you approach the business?

Jason Lucchesi: So I actually promote it from a backwards position. Whenever I get into any deal – we have a pretty large buyers list now, but for a lot of folks that we work with — we have a lot of training where we train folks, and we always tell individuals “Start off with getting your buyers first. Find out exactly what they want”, because if they don’t want 4-bedroom 2-bathroom homes, there’s no reason for you to be looking at 4-bedroom 2-bath homes.
So we approach it in a way to where we know exactly what our buyers want, so we only go after deals that we know that if we get them at the right price and we could sell them at the right price, we know that deals are gonna go quickly. So we like to find the buyers in advance, and we like to know what our buyers want. With that being said, we approach deals in a way where we’re going after properties that are absentee homeowners; we’re still going after short sales, but short sales that actually have equity in them… And we’re also going after probates and properties directly from hedge funds and banks.

Joe Fairless: Let’s talk about getting your buyers first… What are some tactical ways that we can build our buyers list?

Jason Lucchesi: The three easiest steps I would recommend – and you don’t have to leave the comfort of your own home, or if you have a day job. This is something that I did – I used Facebook, YouTube and LinkedIn to build my buyers list… And you really don’t need a big, gigantic buyers list. So I would find other real estate investors on LinkedIn, I would see how active they are, what type of groups they’re in… That would really help out with finding — there’s literally any type of real estate investor on LinkedIn, and there’s gonna be millions on there that are real estate investors.
Same thing goes for Facebook – I would find people in real estate-related groups on Facebook, I’d reach out to folks… Not be salesy. I’d actually wanna get to know the person before I started doing some sort of a pitch. I like getting to know people first, before letting them know “Hey, I’m coming across deeply discounted, off-market properties. Would you be at all interested?”

Same thing goes for YouTube – most people don’t even think about this one, but you type in “We buy houses” on there, or you wanna do it from a geographical standpoint, “We buy Indianapolis houses” and you look at all the channels that are on there, you’re gonna find people that are already looking for properties. Or they could be potential partners, like [unintelligible [00:07:59].04] Their e-mails, their phone numbers – they’re all gonna be available, so you don’t ever have to leave the comfort of your own home. Or some people like to work at coffee shops – you don’t have to leave the coffee shops.

So it’s very easy to get them, and then what we do from there, Joe, once we find some people that are good, we like to find out their title companies, because those could be good title companies that we wanna close at, but instead of asking for a proof of funds right off the bat, we talk to their title companies and find out when is the last time they’ve actually closed on a transaction. If it’s crickets on the other end of the call, we know it’s probably not a real individual that has access to capital to where they could close on deals if we do send them deals. So that’s a way that we vet people too, without having to ask for a proof of funds, which a lot of new investors face, and they don’t know how to overcome that.

Joe Fairless: Yeah, that’s a nice tip. With YouTube, LinkedIn – you talked about that… I might have missed your Facebook example for how to build our buyers list on Facebook.

Jason Lucchesi: Sure. So what I do is we go on Facebook, and in their little search engine area I just type “real estate”, and it will automatically pop information up for you… But what I do is I just click on the little magnifying glass there, and what I do is I click on groups, and it’ll bring up all of the real estate-related groups on Facebook, and there’s literally thousands if not millions of groups on Facebook. You can just start going after — I like just going after regular groups, and if you’re looking in a geographical area, you could put “real estate indiana” or “real estate chicago”, or whatever it may be, wherever you’re at. It’s very simple to find folks in a geographical area, just from looking at the Facebook groups. You go on there and you could just start looking at other members, and it’s very easy to join groups. There’s an unlimited number of groups that you could join on Facebook, compared to LinkedIn. LinkedIn is at 100. But still, you could go on Facebook and you could look at all the members that are in that group, and you could just start sending them messages… And I recommend that you don’t send off spammy messages, but just messages like “Hey, I wanted to reach out; I saw that we’re in the same group together, and I wanted to see if we could potentially do business together.” You know, just a simple message like that, Joe, really goes a long way and starts building up relationships with people.

Joe Fairless: If I got that message – and I know I’m gonna be picking apart words – I think “spam”, because I don’t know who you are, and “potentially do business…” I have no idea what that means. But does that type of message work with other people and is it just me, or is that not the exact message that we should be sending?

Jason Lucchesi: It works I would say about 6 out of every 10 times. But like I was saying, I would make sure that it’s gonna be personalized. So I wouldn’t just say “Hey.” I would put “Hey, Joe. My name is Jason Lucchesi. I saw that we’re a part of the Real Estate Indianapolis Group here on Facebook. I wanted to reach out to you, I’m doing some business here – I’m coming across some deeply discounted off-market deals and I wanted to see if you would be interested at all in looking at any of the deals that we’re coming across.”

Joe Fairless: Okay.

Jason Lucchesi: You could change up your messaging to whatever suits you as a professional, but we try and make it in a way where it’s gonna get them interested and wanna respond back. Normally, when I send off a message that’s just like I said, the response rate is actually between six, seven out of every ten people that we send the message off to.

Joe Fairless: On the second part, if I was interested in buying homes like that, I would be inclined to respond back, for sure. “Yeah, put this e-mail on your e-mail list and let me know.”

Jason Lucchesi: Yeah, absolutely.

Joe Fairless: With your business, can you tell us maybe the last wholesale deal? Let’s talk about a case study, the last wholesale deal that you did.

Jason Lucchesi: Yeah, it’s actually a pretty good one. It was a probate transaction, it was a referral from our attorney, and he made an introduction for us; the executor of the estate is out of the state, and she was interested in selling the home… She didn’t know the best way to go about it, she didn’t know if she should have it listed with an agent or if she should try and sell it by herself, like a for-sale-by-owner.

So what happened was the attorney said “Hey, I’ve got a real estate investor, he’s been working with me for the past couple of years… I’ve sent him some folks that have gone in a similar situation like yourself, they just wanted to sell the property” and next thing you know, we’re having a conversation, me and the executor of the estate. She was letting me know “Hey, I wanted to sell the property and everything that’s included with it.” She was including the personal property in there as well, so I went and took a look at it… I noticed there was a car in the garage; it wasn’t like an awesome car, but it was a nice car.

We ended up picking up the property right around 60% of after-repair value, which was a really good deal for us, because the car – we ended up taking it to CarMax, and CarMax gave us a $6,000 check right on the spot… Because we bought the property with personal property included, so the title of the car transferred over to our company as well. Then we had some random stuff in the house that ended up being like close to $1,000… Some old magazines and some memorabilia that people wanted and we just sold those on Craigslist.

We ended up wholesaling the property — we ended up buying it, but we did a wholesale still on it. So we still sold it same day, we just wanted to sell those other things before we got the A to B, B to C transaction. So we bought it for 60 and we sold it for 70, but keep in mind, we got a $6,000 check from CarMax and around $1,000 from some of the goods that we sold in the house.

So we ended up making after closing costs – it was a little over $16,000, and it was a deal that literally took maybe about 17 days from start to finish.

Joe Fairless: That’s a fun one. It’s got a couple of wrinkles that aren’t typical, with the CarMax thing and with the $1,000 in memorabilia that you sold.

Jason Lucchesi: Yeah, absolutely. And to be honest with you, Joe, we find a lot of folks don’t wanna go back to mom and dad’s house and go through all that stuff themselves, so they end up wanting to do a lot of the “Hey, I just want to sell you everything.” We go over there and take a look at it, and if it makes sense we’ll do it.

Joe Fairless: Who goes through the stuff in the house and cleans it up and identifies what to sell, what not to sell, then takes pictures of it, puts it on Craigslist? Because there is time involved in that.

Jason Lucchesi: Oh yeah. It’s typically my acquisitions manager that goes over there and does all of that. That’s how they get paid – they get a base salary with the company, and then I also pay them a percentage of the transaction. They get about 10% from transactions closed, and then they also get a base salary from me.

Joe Fairless: Does the attorney receive a referral fee?

Jason Lucchesi: No, we can’t do that. We can’t send them any type of a referral fee here in the state of Indiana. I haven’t done that in any other states, but typically what I do is I send all referrals to him as well. Then we also have him listed on all of our sites, so he gets plenty of business from us in return, so that we can do business that way. Then every once in a while too I’ll send him a really nice gift card to a nice steakhouse, or something like that. That’s completely legal.

Joe Fairless: Based on your experience as a real estate investor since 2008, what is your best real estate investing advice ever?

Jason Lucchesi: I would say keep it simple. So many people do the whole analysis paralysis thing. They read so many books, they take so many educational courses, they become doctors when they go on Google… I like to just say keep it extremely simple. If you wanna wholesale, get 8-12 cash buyers, start going out finding deals, and then go and get those deals closed. I know it’s easier said than done with what I just said, but the less complicated you make it, the easier it’s going to be. And especially for brand new people, once they get through 5-10 transactions, then you can really start implementing systems in your business to where you’re not working in the business, you’re working on the business. Because if you’re always gonna be working in your business, you really don’t have a business, you have a job.

My big thing is, yeah, it’s good to get educated, you need to get educated, but there’s a point to where you get yourself too educated and you really don’t take that leap of faith, knowing that this business is gonna work. That’s some of the best I would give – just keeping the business really simple, especially in the beginning.

Joe Fairless: Now let’s talk about as you went through your beginning stages and then scaled and worked on your business, not in your business – as you were doing that, who was the first person you hired? I don’t need a name, but what was their role? And then what were the subsequent hires?

Jason Lucchesi: Sure. The first person I hired was an acquisitions manager. He went around, he would do the door knocking, he would be responsible for doing the direct mail marketing, he would be responsible for taking inbound calls and also making outbound calls, he would be responsible for getting deals under contract. From there, I would still have my hand in the jar by – once we get deals under contract, I would get them sold to our buyer, so that’s when I brought on our liquidations manager and taught them how to properly sell deals that made financial sense for us… Especially if we get a deal under contract, how do we get that deal sold for the maximum amount of money, but also make it a really great deal for our cash buyer to make sure that they continue to buy deals from us, not just one-off transactions.

So the liquidations manager would have a role as well; not as big as the acquisitions manager, but they still had to maintain our current cash buyers list and also increase that cash buyer portfolio and database as well.

Then as we started to scale a little bit more, I started hiring an assistant to help out with day-to-day operations to make sure that the acquisitions and liquidations manager was getting deals and everything was going through the system properly from a day-to-day.

Then the liquidations manager eventually started adding on to where they’d start making sure the title was clean, and closings were being scheduled, and all parties were notified, and that they would show up at the scheduled time that we had for the closing. And to get a little off the plate, I did hire somebody just to do marketing from a part-time basis, to run some pay-per-click ads for us, to be responsible for doing our direct mail marketing, which we started outsourcing that to another company. We started using GoBigPrinting.com and also YellowLettersComplete.com to outsource that, so we wouldn’t have to do that manually anymore.

Then I also hired somebody just to keep our books clean and making sure that we are operating the right way. The bookkeeper would only come in like 1-2 times per week, and they were just paid when they would come in.

Joe Fairless: That’s outstanding. Thank you for talking through that and also giving the marketing vendors that you use, because I was gonna ask about that. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jason Lucchesi: [laughs] I’ll do my best at it for you.

Joe Fairless: I know you’re ready, I can sense you’re ready. Alright, let’s do it. First though, a quick word from our Best Ever partners.

Break: [00:20:28].06] to [00:20:58].11]

Joe Fairless: Best ever book you’ve read?

Jason Lucchesi: The E-Myth.

Joe Fairless: Best ever deal you’ve done that wasn’t your first and wasn’t your last?

Jason Lucchesi: My short-sale.

Joe Fairless: Can you tell us about that deal?

Jason Lucchesi: Sure, it was a deal that we were able to find and we got it negotiated and we were able to have the auction that was going to be going on the next day stopped, and we were able to close on the transaction and the individual homeowner didn’t have to have a foreclosure on their credit.

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

Jason Lucchesi: Not having private money lined up. My very first deal could have brought in six figures easily, but I didn’t have a private money lender lined up, so I ended up making right around $3,500 because of a lot of mistakes that happened with closing costs. But having a private money lender, even if it was a hard money lender, I still would have made close to six figures with a hard money lender.

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

Jason Lucchesi: Best way to give back right now is giving back to folks that have a disability and they need help getting around from room to room. Right now we’re working with a gentleman that’s a quadriplegic, and we are remodeling the whole entire house for him to make it wheelchair-accessible. It was probably about 3-4 weeks ago for the first time ever in their house… We had heat turned on and we were able to get them hot water. Now we’re gonna be working on the foundation to where he can actually go and use the shower, and we’re gonna make the transitions from room to room easier for him, since he has a power chair. That’s just one of the individuals that we’ve worked with. We’re working with several others to do the same thing. That’s what our organization is all about.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Jason Lucchesi: The best way I would recommend is I’m on Facebook, I’m on Instagram, and also we have NoFlippingExcuses.org, you can check us out there. We’ve got a ton on content as well on YouTube, and hopefully I’ll be able to have Joe on our podcast as well, which is The No Flipping Excuses Show. Maybe we can line that up to have you on there, Joe.

Joe Fairless: Well, I believe in the approach of having no flipping excuses, so I would love to be on that show.

Jason Lucchesi: That’s awesome, man.

Joe Fairless: Well, thank you for being on this show and sharing your experience, and also your lessons learned. The approach that you take, from choosing to wholesale primarily (65% right now of your business is wholesaling), and some tips for beginning wholesalers on how to build your buyers list – Facebook, YouTube, LinkedIn… Just being resourceful, and then some messaging that you can send your potential buyers, and then how to qualify them without getting a proof of funds, so just talking to the title companies about when was the last transaction they closed…

Then for a more experienced investor that is listening, who is wholesaling, how to scale your wholesaling company, and the hires you brought on and the sequence in which you brought them on – acquisitions manager, liquidation manager, assistant, marketing (you started doing some automation on the marketing), and then the bookkeeper.

Thanks for walking us through a process that talked to us about beginning, and then also if we’re looking to scale from a wholesaling standpoint. I hope you have a best ever day. I enjoyed it, and we’ll talk to you soon.

Jason Lucchesi: Thanks, Joe.

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JF1243: Wholetailing and SEO For More Profit #SituationSaturday with Jason Buzi

He’s been investing for 13 years, since 2013 he’s been making 6 figures in the business. He has a couple interesting strategies and tales from previous deals we can all learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Jason Buzi Real Estate Background:

-Real estate investor and developer

-Gained worldwide publicity as the founder of Hidden Cash, which set up scavenger hunts worldwide

-Regularly do double closings for 6 figure profits in a competitive market.

-Began in 2005 with no money, focused on wholesaling until 2010, has been making six figures since 2013

-Buys, builds, and fixes up houses throughout the San Francisco Bay Area.

-Say hi to him at info@areacodeseo.com

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

I hope you’re having a best ever weekend, first and foremost, and because today is Saturday, we’ve got a special segment for you with a returning guest. You know what the segment is – on Saturdays, we do Situation Saturday. Our returning guest is Jason Buzi. How are you doing, Jason?

Jason Buzi: Good, how are you?

Joe Fairless: I am doing well, and nice to have you back, my friend. Best Ever listeners, with situation Saturday what we do is our guest Jason is gonna talk about some challenging situations and deals that he’s been in recently, and how they’ve turned out. He’s gonna talk through that…

A little bit about Jason — by the way, you can hear his other episode where he gave his best ever advice; it’s episode 443, and it’s titled How To Focus On Off-Market Deals For One Million Dollars Plus a Year. He is a real estate investor in San Francisco, California. We’ll give you his e-mail address, it’s info@areacodeseo.com (that will be in the show notes), so you can e-mail him afterwards if you’d like to talk to him.

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

Jason Buzi: Yeah, absolutely. First of all, thanks for having me back on, it’s an honor and a pleasure. I do mostly high-end deals, partly because of the nature of the market that I’m in, which is the San Francisco, Bay Area where home prices are well in excess of one million dollars… And I say that if you’re not making a million dollars a year minimum in a market like this, you’re probably doing something wrong.

For years, I was doing something wrong – I limited myself to wholesaling. Wholesaling is great, but when I started out in 2005 I was wholesaling, and I made about 250k in my first year. I was very happy with that, but I was still doing the same thing five years later, and that was a mistake. What got me out of it was the opportunity to joint venture with family members. Basically, they convinced me to partner with them on a deal, and we made 400k, which was a lot more than the wholesaler assignment fee that I had always gotten.

That kind of created a mental shift in me where I looked at each property and sought to maximize my profit on it. There have been multiple properties where I’ve made 300k, 400k, 500k, either by rehabbing the property, by partnering on new construction, or by using my favorite method, which is wholetailing (or double-closing; people use different terminology for that). That just means you take title to the property, you don’t do a full rehab on it – we do little to nothing on it – throw it back on the market or sell it to a buyer, whether it’s a retail buyer or an investor, and make a large profit, hopefully. So again, you’re just buying, you’re closing, you’re taking title in your name, and then immediately reselling it. So it’s similar to wholesaling, it’s sort of a hybrid between wholesaling and rehabbing, with sort of the best of both; you get the upside that you can get in rehabbing without having to do the work, and you get to do it really quick, like wholesaling, where you get to recapture your profits very quickly. So that’s sort of my preferred method, and I actually have a story about one that we did recently that I think you’re gonna like.

Joe Fairless: We will dive into the stories of the ones you’ve done recently… I know when we were talking before we started recording you gave me the e-mail address and it’s areacodeseo, so clearly you’re involved in some sort of search engine optimization business. How does that align with wholetailing, what’s the crossover?

Jason Buzi: Well, I’ve been looking for a long time to improve my internet marketing presence; I’ve done a lot of direct mail, I’ve done a lot of networking, but I was kind of weak with the online marketing. Then I met a guy in this market which is very competitive, here in the San Francisco area, who is just crushing it with internet market. So we got together, and I said “I see that you’re ranking in the top five and you haven’t even been doing it that long, for a lot of keywords”, and he said “Yeah, I’m getting leads, I’m getting deals from it, I’m getting constant leads from it…” I said, “Is this something you can do for me?” and he said “Yeah.”

Then I came to him with a proposal and I said, “Well, what if I invest some money and we partner? Is this something that you can offer other people? Because I have a lot of people asking me about it.”

Search engine optimization, for those who don’t know, is a way to get your site basically ranked higher in Google when people search for common words like “We buy houses” or “Sell my house fast” or “Cash for my house.” He was able to get a very high ranking in this very competitive market for keywords. I said, “Can you do this nationally?” and he said “Yes”, and he showed me how he was doing it.

I said, “Okay, well let’s partner on this and we can offer it to people”, and everybody gets one area code — to be clear, not a zip code. So 415 if you’re in San Francisco, 202 if you’re in Washington DC, 214 if you’re in Dallas… You get that entire area exclusively, not sharing with anybody, and search engine optimization is done to get your site ranked highly. So if you’re interested in that, please send an e-mail to info@areacodeseo.com. Again, it’s a business (I wanna disclose) I’m a partner and I have equity in. It’s sort of a side-business of mine, but I believe in it, I see what he’s done. It’s info@areacodeseo.com.

Joe Fairless: Any of the deals you’re gonna talk about – did you get those deals from SEO?

Jason Buzi: Yeah, one of them recently was from it.

Joe Fairless: Perfect segue then. Do you wanna tell us about it?

Jason Buzi: That one was a rehab, not as exciting as the double-close deal that I’ve mentioned to you. Let me tell you about the double-closing, because that was kind of a unique, challenging type of situation. A guy that I know that lives in San Francisco, he was driving by and he saw some firetrucks and he referred me to this lead. And I said, “Okay, sounds good. Let me follow up on it.”

It turned out that they already had an agent; the agent was enlisted for 800k, and that seemed like a really good deal for a duplex in San Francisco. The value was at least two million. And I said, “Okay, we can do it for 800k.” So the first challenge was he said “No, that’s not 800k that we’re willing to sell it for. That was just kind of the teaser price”, because what they do here very often is they deliberately underprice properties with the hope and the expectation that it’s gonna sell for way over.

So we said, “Well, okay, how much do you want in order to sell it now without going on the market?” and he said 900k. I said, “Okay, let’s do that.” We got in contract for 900k. Now, this property was fire damaged; there had been a pretty serious fire. I mean, it wasn’t burnt down to the ground, but there was visible fire damage and everybody had to leave the building. So that was the first challenge – it was hard to comp what it’s worth; it’s not like your standard rehab. There was some major stuff that could be structural, could be electrical, plumbing probably that you had to replace.

I know the ARV, but I don’t know what the property is worth today, because this is not my regular type of paint and flooring deal. So that was the first challenge, how much is it really worth in its present condition. It’s gonna take us a lot of time, a lot of money to fix it up.

The second challenge was being San Francisco, even though the tenants left, there are very strict tenant protection laws, very anti-landlord, so all those tenants – it had three of them; it was a duplex, but one of the two units had been ilegally divided into another two units, so…

Joe Fairless: Oh, man…

Jason Buzi: …it was basically three tenants. So we have an illegal extra unit; it really should have been a duplex. We have tenants that are below market rent and they have a right to come back, or you have to buy them out. We talked with an attorney, and there’s a lot of rights protecting the tenants and not a lot protecting the landlord, so you could spend all this money, fix up the place, and your tenants could still come back, so that was the second challenge. We had to buy them out.

Well, long story short, I said “Why don’t we just try to sell it as is? Put some teaser price out there and see if there’s buyers.” So I put it out there for like 1.1, 1.2, and we were pretty confident that if we got interest at that price – go ahead and close. We got interest at that price, we kind of blasted it out while we were still in escrow before closing. So I went ahead and closed on it for 900k, and then just didn’t put it on the MLS because I thought it would be good for an investor. I put it all over Facebook and Craigslist, and any agent in that area that had done a deal and any agent that specialized in that type of property in San Francisco (duplexes).

We got a lot of interest, but a lot of people didn’t want it, mostly because of the tenant situation. They were actually more concerned about that than about the fire. But finally we got somebody to buy it that didn’t mind. We got a 1.35, so 450k more in about two weeks after buying it. 450k spread.

Basically, I had to push them really hard to get the payoff in time because it was such a fast split that I don’t think they’d even gotten the loan over to their servicing department; they got a private loan on that. So 450k was the difference. The profit was slightly less, because we paid a little bit of commisison, so we made about 400k in two weeks, not doing anything to it. Just buying it and selling it. That basically came from being creative and saying, “Okay, I may not wanna deal with the tenant situation, but there’s somebody out there that doesn’t mind. There’s somebody out there that’s willing to take over a problem that I may not wanna do.” That’s a very important lesson in this.

Joe Fairless: Where did the lead come from that eventually closed? Was it through a broker?

Jason Buzi: It was through an agent. What listeners need to understand is – and I say this many times when I do public speaking ocasionally; I have a book out which I don’t think was out yet when we last spoke, but it’s called Smash Your Alarm Clock. If you go to Amazon.com and look up Smash Your Alarm Clock, or look up Jason Buzi, you’ll see my book. And I talk about this… If you’re in this business — and I know we have kind of a love/hate with real estate agents as investors, but if you are not utilizing agents to your advantage, you’re leaving a lot of money on the table, because they want the deal to happen. At the end of the day, a real estate agent is compensated only when a transaction takes place, so you can use them to find new deals, you can use them to comp your deals, and you can use them to find your buyers.

In this case, a real estate agent was able to bring a buyer, persuade them to pay our price, and they got a commission, and we got our profit, and everybody’s happy. That buyer is willing to spend the time and do the work that I would not be willing to do. So utilize real estate agents in this business if you’re an investor. I know that some of the best deals come directly from sellers, but if you’re not utilizing agents in these three capacities – finding you deals, bringing you buyers and helping you evaluate properties and tell you what’s going on in the marketplace – I think you’re putting yourself at a disadvantage.

Joe Fairless: Do you know what the buyer was planning on doing with the property?

Jason Buzi: They had something called the Ellis Act, which is an exception to having the tenants back in. You’re basically signing a guarantee that you will live in the property and not rent it out for 3-5 years. If you do that, then you don’t have to let the tenants back in. That’s the exception, and it’s called Ellis Act. So I think they’re gonna do that, and then fix it up and then live in there. They may have family members living there… They’re looking long-term, and they’re just looking at it as an asset to buy and hold on to.

So the lesson here is just because I wouldn’t do the deal, that doesn’t mean somebody else wouldn’t do the deal. I’ve passed up deals that I’ve been able to sell to others, and sometimes they’ve done very well on them.

Last night I was hanging out with somebody who I’d sold properties to that’s a builder, and they’ve made almost two million dollars on a property that I thought was basically a “dog.” It was a busy road, it was across from a church… It’s in a high-end area, but I didn’t like the location. But you know what? They bought the house, and they sold it for 4.3 million dollars. I got it to them for 1.7.

I’ve worked with a lot of developers, so this was sort of a luxury home. Even though it was on a busy street, they had no problem selling it. So just because something doesn’t appeal to me personally… I’ve learned to say, “Look, just because it’s not for me, that doesn’t mean there’s not a right buyer for that out there.”

Joe Fairless: Yeah, especially with the wholetail approach. It’s one thing if you are putting it into your own portfolio… Then there’s reasons why you have the different filters. But if you’re wholetailing it or wholesaling it even, there’s no harm, no foul, assuming all parties are aware of what’s going on. You send it out to your list, and then if it works, it works; if not, then it didn’t work, and you move on.

Jason Buzi: Correct. And I wanna say, we did lose buyers because of that tenant situation. There were buyers that backed up, but we ended up finding one who said, “Okay, I’ll deal with it.” And we’d have lost buyers on the busy road as well, but it still worked out for the buyer that I did find. So even though it’s a challenging property sometimes, if the numbers make sense, a lot of times you can find a buyer for it.

Joe Fairless: Quickly, is there another deal that you wanted to talk about, or was that the one?

Jason Buzi: Yeah, I’ve got a lot of deals I could talk about. Recently I just got kind of red-tagged by the city because the previous owner who sold me the house left the garbage on the side of the house; I kept asking when they were gonna take it, and it was the next day, the next day, and finally they took it away… A day later I get a call from the city that “Oh, your garage has been converted illegally.” I said, “How did they even find out about that?” and that was done by the previous owner. They said, “Well, one of the neighbors complained, because you’ve got all this garbage stacked up, and we went to see what’s going on with the house, and we saw this illegal garage [unintelligible [00:16:24].17]

So that was something that never happened before and wasn’t very pleasant, but now I’m gonna make sure that we don’t have a bunch of garbage sitting out there, because we’ve got these nosy neighbors that can complain. Also, a bunch of people were gonna see the house while it was in escrow, so just… That was kind of a rude awakening there.

My favorite type of deal these deals is really just the example of the San Francisco duplex, where I can buy it, I know there’s enough value there that I can sell it and not necessarily have to do a lot of work, but I’m also working on entitlement projects, where it’s gonna be a much longer horizon. I have a friend that bought a car wash and got it permitted to build about 40 condos, and made a lot of money selling that to developers. So I’m working on deals like that right now, but I don’t have one completed yet to talk to you about.

I like the bigger deals. I saw somebody asking online “How many deals did you do? 100, 200, 150?” I’m not the guy trying to do hundreds of deals; I’m trying to make a few million bucks a year, but I don’t think I need to do 100 or 200 deals to do that. I’m looking to do big deals. 300k, 400k, 500k, a million dollar profit deals.

Joe Fairless: On the entitlement projects – I know you haven’t completed one yet, but I also know based on what I know about you that you’ve thought through the business plan already. With your wholetailing, you don’t have skin in the game. Are you able to structure it similarly with entitlements, since you’re gonna likely be having it under contract for a much longer period of time?

Jason Buzi: Yeah, I could structure it that way when I get one, which I’m working on a couple potential ones now… I’ll kind of decide, “Okay, how much of my own money do I wanna put in?” Honestly, I have people that wanna invest with me, so I’m sure that I could structure it with no skin in the game. And how much I wanna put in, I haven’t decided yet. My bank account fluctuates between deals. I may put in 100k or 200k of my own money.

I’ve met a guy recently who rehabs and puts none of his own money and does like 100 deals a year rehabbing, and puts none of his own money; private money funds 100%. I could probably get that easily if I wanted to, because of just contacts that I have, but I’m not sure yet how I will structure that. But that’s a much longer horizon type deal; we’re talking about a year or so.

Joe Fairless: Jason, how can the Best Ever listeners get in touch with you?

Jason Buzi: They can send me an e-mail at info@areacodeseo.com. You can put Jason in the subject line if you have a question for me. If it’s about the SEO, you can just say “SEO.” I also have a Facebook group called Living The Dream; it’s the one with a picture of a smashed alarm clock. I know there’s quite a few groups with similar names, Living The Dream. We have about 12k or 13k members now I think, and it’s just a picture of a smashed alarm clock.

And get my book. I don’t really make any money from it. It is on ly $11 on Amazon, but it’s called Smash Your Alarm Clock. I give a lot of my tidbits away, that we can’t capture them all obviously in this brief time… But can I leave your listeners with some final thoughts?

Joe Fairless: Sure thing.

Jason Buzi: I just wanna say always be growing and learning. I’ll be depressed if in five years from now I’m doing exactly the same things I’m doing today. This business of real estate is infinite, with infinite possibilities, and you just wanna keep learning and growing and improving your skills. My biggest regret in this business is that I didn’t move on from wholesaler for almost six years. Literally, I left millions of dollars on the table. There were deals that I could have made ten times what I did; where I made 30k, I could have made 300k or 400k.

And in around 2010 or 2011 – I think it was 2011 – I said “Okay, I’m not a wholesaler, I’m a real estate investor. Wholesaling is a tool, it’s a skill, it’s one of the things I wanna keep using, but that’s not what defines me. I’m a real estate investor.” And going forward from there, it was only about a year later that I had my first seven figure year, where I broke a million dollars net, and I attribute it all to changing that mindset, first of all, and then strategy following that. Okay, I’m gonna maximize my profit on the deal, I’ll rehab when it makes sense, I’ll double-close when it makes sense, and I’ll wholesale when it makes sense.

For me, the rule is if I’m confident that I can net 100k or more — and again, sometimes I miss the mark… But if going into it I think after all the expenses and closing costs I’m gonna net 100k or more, then I’m going to close on it. I may rehab it, I may resell it right away, but I’m not gonna wholesale it. It just gives me more leverage and more power and more ability to make money.

Every year I have several deals that I make 250k or more, so that at the end of the year it’s a really nice seven-figure year, and this year it’s no exception.

Joe Fairless: Well, thanks for sharing some of the case study examples of actual deals that you’re closing on, in particular the fire-damaged house. And I also enjoyed the part where it was 800k, and then you said “Okay, fine, let’s do 800k”, and then they said “Well, we just did that to generate interest.” “Okay, fine, now what do you want?” “900k.” “Okay, fine, we’ll buy it for 900k.” Just that little piece of info right there, to know what we might come across in situations like that…

And then obviously the property itself, with the challenges – the illegal unit, the three tenants, the favorable landlord tenant laws towards tenants, and the fire damage. And as you said, just because you wouldn’t do the deal doesn’t mean others wouldn’t, so you got it under contract, made it happen, and later about $400,000 was the profit.

Thanks for being on the show. I hope you have a best ever weeked, Jason, and we’ll talk to you soon.

Jason Buzi: Thank you, Joe. I appreciate it.

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