JF1881: Learning From Our Real Estate Investing Mistakes #SkillSetSunday with Kent Clothier
Kent is back on the show to talk to us about his latest project as well as mistakes he has made throughout his career. He’s working on making home selling and buying more accessible to everyday people and investors looking for discounted property. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“They put their property on the platform and in less than 24 hours they will have 50-100 cash buyers bidding on the property” – Kent Clothier
Kent Clothier Real Estate Background:
- Founder and CEO of Real Estate Worldwide
- Was previously part of Memphis Invest, a real estate investment firm that has bought and re-sold more than 5,000 residential properties
- Listen to his previous episode: JF440: Live Your PASSION by Having the End in Mind with Kent Clothier
- Based in La Jolla, California
- Say hi to him at www.kribbz.com
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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, Kent Clothier. How are you doing, Kent?
Kent Clothier: I’m doing good, brother. How about you?
Joe Fairless: I’m doing well, I’m looking forward to it. Best Ever listeners, you know Kent, and one of the reasons why you know him is because you’re a loyal listener, and back — let’s see… Episode 440 – wow, that’s a lot of days ago… This is like episode 1900, or something. So he was on the show, and the title is “Live your passion by having the end in mind.” So if you wanna hear his best ever advice, then go ahead and check out that episode, episode 430.
We’re not gonna talk about his best ever advice; what we’re gonna talk about today are the mistakes he’s made, and what he’s learned from them. So we’re gonna make this a Skillset Sunday episode. I imagine there’s tons of skills that are coming from the lessons that he’s learned.
Just a refresher on Kent, and then we’ll get into it. He’s the founder and CEO of Real Estate Worldwide. He was previously part of Memphis Invest, which is a real estate investment firm that has bought and resold more than 5,000 residential properties. With that being said, Kent, do you wanna give the Best Ever listeners just a little bit more about your background and your current focus?
Kent Clothier: Absolutely. As you said, I’m the CEO and founder of Real Estate Worldwide, and my family and I started Memphis Invest many years ago, which has become one of the premier real estate investment companies out there. It flipped over 5,000 single-family homes, and it continues to flip 8,00 to 1,000 properties every year.
Real Estate Worldwide is a company that I’ve founded back in 2008, that provides not only real estate education, but real estate tools to the investing community. And then recently, in fact getting ready to launch – we have been largely focused on our newest project, which is called Kribbz, which is a buying and selling platform that we’re bringing into the real estate industry at large, that we are extremely excited about… It’s gonna kind of make the entire process a lot easier, a lot more efficient, and ultimately a lot less expensive. So that’s kind of what I’m all about. If it’s real estate, I’m in it.
Joe Fairless: Well, I wanna learn about mistakes and lessons you’ve learned, but I am curious about Kribbz. It’s a buying and selling platform, it’s gonna make the process easier… What exactly is Kribbz?
Kent Clothier: Well, you’ve been doing it as long as I have; the real estate process is extremely cumbersome, especially if you’re a direct home seller; largely, you get into the transaction without completely understanding all the costs, all the time, effort and energy involved in it, and many times you show up to the closing table and what you think you’re going to get versus what you do get is radically different. So we set out a couple years ago – my co-founders and I – to solve that problem; create a situation where a seller can sell a house, and sell it basically fee-free, and in turn go directly to the most ravenous buyers that are out there, which are cash buyers in the market right now, that wanna buy — they largely make up over 35% of the market, in any many market. Most people don’t realize that… But 35% of all transactions that are happening on the real estate market today are being done with cash.
There’s just no good way to get the cash buyers connected to these home sellers in any kind of way, and proved real value to both of them. So Kribbz does that. basically, it is a bidding platform where sellers go on, and in less than 24 hours they have multiple cash offers from a variety of different buyers that are sitting in the market, and they can pick and choose… Maybe think of it like a Kayak, when you’re buying a hotel room or you’re buying a plane ticket; it’s very similar – you’re picking and choosing which cash offer you want to take, or none of them, and can close in as little as 7 to 14 days on a deal, all completely fee-free.
And from the buyer’s standpoint – we’re solving a problem on that side as well. The buyers want the inventory, want to deal directly with the sellers, but it’s a very costly proposition for them from a marketing standpoint, from a going out and visiting with motivated sellers, all that kind of stuff. So from their standpoint, they get to sit on a platform and have great deals brought right to them, that have all been vetted, they’ve all had a Kribbz representative walk through the house, take pictures etc. and they can bid on the property very confidently and get charged roughly $3,000 to ultimately close on a deal that if they had done it themselves would have easily cost them $5,000 to $7,000 just in marketing costs and soft costs, going out and visiting the property etc.
Joe Fairless: The single-family space… I’ve only purchased four single-family homes; I do apartment communities, so this isn’t my area of expertise. But from the little I know, if I want to sell my house all-cash, then first off, cash buyers will likely want some sort of discount, my guess is. It doesn’t matter what the percentage is, but some sort of discount. So if I’m wanting to sell my house cash, then I’m in a position where I’m going to sell it at some percentage of discount. And if that is the case, the challenge that I’d love to hear your thoughts on is it doesn’t seem like you’d have a lot of repeat sellers on the platform, so you’ll constantly have to find new sellers… Because if I’m selling my house all-cash for a discount, it’s not a really good business model for me, I don’t think. So it’s not like I’m a big-time landlord; I’m probably someone who’s a motivated seller, therefore I might not be a repeat customer of yours. So how do you plan on growing the side of the business where you’ve got a lot of cash sellers?
Kent Clothier: Well, you actually have a couple different dynamics working. So in order for 35% of the market to be cash buyers right now, cash transactions, roughly 162 billion dollars a year is what this very segmented part of the real estate industry represents today. So in order for you to buy cash, somebody has to be selling cash. So largely, that is a problem that we don’t have to solve. It’s happening right now. What Kribbz is doing is providing a way for a seller to have multiple cash offers, versus getting locked in with somebody that they saw a bandit sign, or they saw a piece of direct mail, or a Google ad, or whatever the case may be.
Instead of having to go through any of that process, they simply put their property on the platform, and in less than 24 hours they will have somewhere in the neighborhood of anywhere from 50 to 100 cash buyers bidding on their property, and we will display to them the top three that they can pick and choose from. They can negotiate directly with the buyer, and/or they can just reject the offer. There’s literally no cost and no obligation whatsoever for them. So that’s a problem that we don’t really have to solve.
But even bigger than that, Joe, is the simple fact that if you think about it, we all are hearing about the iBuyer phenomenon that is taking the industry by storm. So again, just thinking about it from an agent’s perspective, one of the biggest fears you have out there today is that as a listing agent you are now competing — you’re not only competing against other agents for the listing, but you’re competing against these iBuyers like Opendoor, Offerpad, Knock, whoever it is… Coming in and basically trying to sweep this listing out from under your feet, and again, locking into one company.
Well, our clients – not only is it the direct seller, but it is also the real estate agent who can confidently go into any listing and say “Not only can I potentially list your house for retail, but inside of 24 hours I can have three cash offers for you right here, and at no obligation.”
Joe Fairless: Right, “I can guarantee three cash offers.”
Kent Clothier: Yeah. So our go-to-market strategy, as you’re kind of outlining, is the simple fact that we are solving a big problem for multiple people. Not only direct sellers, but also real estate agents that are just trying to figure out how to compete, and we’re offering a really good solution for that.
Joe Fairless: Got it. On the first point, I understood how the sellers benefit, I just didn’t know how you’d continue to get new sellers to come back, because your repeat customer would probably be low… But I get it now, with the second part you mentioned, with the real estate agent, because…
Kent Clothier: Yeah, the agents are having to do it today, right? If they don’t do it, quite frankly, they are a dinosaur. It’s not a matter of if they’re gonna lose, it’s a matter of when. So we are providing a really good solution for them to compete very competitively, in real time.
Joe Fairless: Cool. When is Kribbz available in — I think you said Phoenix?
Kent Clothier: We’re going to Phoenix on September 24th, and then it’ll roll out to Las Vegas, Atlanta, then Dallas, and then by the end of the year we will go nationwide. We’ve got some things to prove in three or four pretty challenging markets, so we’re stress-testing our systems to make sure we’ve got it all lined up, and then the plan is to roll it out nationwide.
Joe Fairless: How did you pick those markets?
Kent Clothier: They are good markets, where there’s a lot of competition from a cash buyer perspective. In my Real Estate Worldwide business we aggregate a great deal of data. One of the software products we provide to the industry, that has 15,000 subscribers now, is a data product where we mine a lot of data, and provide seller leads and buyer leads etc. So we have this 10,000-foot view where we can see where most of the cash transactions are happening, markets that are ultra-competitive, where we can provide a lot of value, and so those are the first four that we can clearly see there’s a lot of competition, there’s a lot of value we can bring right in there very quickly.
Joe Fairless: And why did you pick Phoenix to start?
Kent Clothier: Well, Phoenix is arguably one of the most competitive markets out there right now with cash buyers. Roughly 40% of the market is being done with cash, all of the major iBuyers are in Phoenix, including Zillow, and ironically, we are not a competitor of the iBuyers; we are somebody that provides value to them as well. They want the inventory, they wanna buy as much as they can… So we’re very agnostic, we kind of play in-between.
So being able to know that we have a lot of buyers, a lot of demand on one side, while we can also create a lot of supply on the other side is a very good place for Kribbz to play… And Phoenix represents that in a very big way.
Joe Fairless: What one mistake that you’ve made was a big pivot for you, that then you are where you’re at now?
Kent Clothier: Well, we’ve probably touched on it a little bit the last time we spoke. The single biggest mistake I’ve ever made in business quite frankly is focusing on business versus family… And I know that may not be exactly where we wanna take this, but you’ve asked the question, so I’ll answer it very directly. At the end of the day, when I was a young entrepreneur, from 17 to 30, I was consumed with business. I was that hustler; we all see it on social media, we see all the BS that’s out there about “Go, go, go, go!” at the expense of all – well I was that guy. I wore it as a badge of honor, to sit there and be the guy that was the first one in the office at 5 AM, and the last one to leave at 10 PM. That was by far the thing I lived for, and I loved being that guy.
And without question, without hesitation, without doubt, the single biggest regret and/or mistake that I have — I mean, I learned a lot; I learned a lot about what not to do. I was very, very successful at that. I built an almost two billion dollar a year company by the time I was 30 years old. Seventh largest privately-held company in the state of Florida. But I did it at the expense of family, did it at the expense of friends, did it at the expense of a life, quite frankly. And luckily, I got a second lease on life and figured out that you can actually do both. That there is a way to go out and create passive income, which I know you are a huge proponent of, there is a way to go out there and build the business with the end in mind, there is a way to build the legacy and to have everything without having to sacrifice everything along the way.
So I would tell you that for your listeners, when you are out there — when you’re young and you’re getting into the business, yes, you have to hustle; yes, you have to go; yes, you have to sacrifice… But at some point the tables start to turn, and you start to realize that life is a lot bigger than a P&L, or a checking account, or a car, or a watch, or a vacation. It’s more about the people that you’re impacting and the legacy that you leave, and do you matter, and creating something where — I’ve said this many, many times… That today, as I’ve gotten older and as I’ve built many successful companies now, the pendulum starts to swing and you start to understand that – this is gonna sound a little morbid, but it’s actually what I think about – “Who’s gonna show up at my funeral? Who’s gonna show up and say ‘Dude, that guy mattered. That guy actually made a difference in my life. That guy actually provided value to me and my family, that I’m never gonna have to worry about how to make a buck. He taught me the lessons, he taught me the skills, he gave me the things in my life that actually help me get to the next level.” That to me is much more fulfilling and much more [unintelligible [00:13:50].28] about what life is really about than the P&L. And ironically, when I made that shift – which I made that shift when I was about 40…
Joe Fairless: How old are you now?
Kent Clothier: I’m 49 now.
Joe Fairless: Okay, so nine years ago you made the shift…
Kent Clothier: I made that hard shift, and it really kind of hit me hard… And when I made that shift, then – here’s the craziest part about it… When I stopped focusing on the money part and started focusing on the actual providing value to people, and really trying to create an impact and all that, the money only multiplied. I’m much more successful now than I’ve ever been at any point in my life, by far, by every measure, not just the money. The money is there, the family, the commitment to my children, the commitment to my wife – all of that, every aspect of my life is better versus 20 years ago, when all I cared about was money-money-money-money, business-business-business-business. I just wanted to prove something to everybody, and I had a big chip on my shoulder. And it got me to a point, but it never got me to the point where I am today, if that makes sense.
Joe Fairless: So can you elaborate and maybe give a specific example of what providing value to people — when you’re like “Alright, you know what – it’s worked to a point, but I’m not fulfilled. I’m going to really provide value to people.” So how did that–
Kent Clothier: Sure. I’ll give you a great example of this. Back in 2008, when the market was shifting, and Memphis Invest — we were very focused on working directly with cash buyers, and the timing just worked out perfectly… We were mining data, we were going to public records, finding people… And the way we were doing this back then was very manual. We were going into public records and looking for all the recent transactions that had just happened, and we were also balancing up against those transactions where a mortgage or a lien hadn’t been recorded at the time of the transfer. So we would deduct; we would say “Okay, the lien wasn’t recorded, the mortgage wasn’t recorded, the promissory note wasn’t recorded… Then that transaction was cash.” We’d take those people and we’d really focus all of our marketing to that person, to nurture them and bring them over to where they would buy properties from us. And that worked beautifully in our investing business.
It’s part of the reason why Memphis Invest became so successful. We were really marketing hard to these people. And I shared it with a few people. Than Merrill, FortuneBuilders – everybody knows Than Merrill; we’re very, very close. And at that time he was like “Man, you have to tell all the people what you’re doing. The banks are not lending anymore, people are going out of business… You have to share this.” And I was petrified of doing that. I had that big scarcity mentality. “Oh my god, I’m gonna share with people how I got and create my customer list. I’m effectively telling people how to go find all of my customers right now.” And he convinced me to do that, and that was a really scary proposition, not only for me, but for everybody around me.
But we built a piece of software that did that, and went off and basically pulled all of that data from every county, everywhere in the United States, and said “Here are all of the people in your market currently paying cash. You do not have to go out of business. You don’t need banks. These are the people. These are the ravenous buyers in your market right now. Just market to them. In fact, we will actually give you the marketing piece that we use at Memphis Invest, the very letter we use right now, to get them to start dealing with you, so you don’t have to go out of business.”
That was an extraordinarily challenging thing to overcome, as you can imagine. We were basically not only giving people our customer list, “Effectively, here’s all the cash buyers in every market, including our own market”, but “Here’s all the marketing that we use to get them to do business with us. You can see in all of our data every property that we’ve been selling to these cash buyers. Can you imagine going to your competition right now and saying “Here’s my customer list, and here’s my training manual. Just go do it.” That was very, very challenging to overcome…
But in the end, two things happened. 1) We became, in a lot of people’s minds, heroes, for helping them and getting them out of this very desperate situation… And ultimately, that’s what kind of pushed us to the forefront. People believe that we routed for the greater good, which we were. And ultimately, it also made Memphis Invest and our family much, much better, because it made us sharpen our skills, because we clearly knew that our competition had everything. They had all the information they needed to beat us, and in spite of it, we were still not only competitive, but we were thriving, and ultimately excelling and doing much better than all of them made us be better as well. So as the saying goes, the rising tide raises all ships – I wasn’t necessarily a believer of it at that point, but ultimately that’s exactly what happened.
Joe Fairless: Yeah, I get it. Theo on my team does Syndication School where we share the blueprint for how to do apartment syndication, and how we raise capital, and people are very appreciative of it… And a lot of times they’re like “Dude, why are you sharing all this stuff?” I was like, “You know what – a world of abundance. Things work out.”
Kent Clothier: Amen. That’s what it is. And again, it’s hard to make that first domino fall, if you will, but when it falls, it’s shocking how much it all comes around in the end.
Joe Fairless: What’s a recent mistake you’ve made?
Kent Clothier: A recent mistake I’ve made in business… We make a lot of mistakes, I’ll just say that. We make a lot of bad hires, we take a lot of risk in my businesses. I think that’s inherent. If you’re gonna be successful, you’ve gotta be willing to push in on a lot of things, a lot of times, and a lot of them don’t work out quite frankly.
One of the mistakes we’ve certainly made is that a couple years ago we thought we could go in and basically redo search engine marketing. We hired a company to build a platform where we could go off and build a website that was very robust, and we thought we could license it off to a lot of different people and really get good at search engine marketing. We surrounded ourselves with what we believed were all the best people, and in the end none of that played out the way we wanted it to be. It was a multi-million-dollar — I don’t wanna say it was a mistake, but it was certainly a multi-million-dollar lesson that just didn’t work out the way we wanted it to work out. But it is what it is.
I think that if you’re not willing to push all-in on stuff and you’re not willing to challenge yourself and push outside of your comfort zone, then that’s a very, very limited world. It’s hard to become the best version of yourself or the best version of your company if you’re not willing to push those boundaries.
So we make a lot of mistakes that don’t cost us millions of dollars, but that’s one that I will tell you in the last couple of years cost us multiples of millions of dollars… And getting out there, licensing the brand, licensing the opportunity to a lot of people, we generated a lot of leads, but nowhere near what we believe that we could at the time… So ultimately we ended up having to shut that business down.
Joe Fairless: Anything else that you think we should talk about as it relates to lessons learned and mistakes that we haven’t already, before we wrap up?
Kent Clothier: I would just say this… Lessons learned would be that — I had a mentor tell me a long time ago that there’s only one way to coast, and it’s downhill, if you’re not pedaling. If you’re not going uphill, then you’re going in the wrong direction. I think about that all the time. I think that the lessons that we learned and the mistakes we’ve made are just that – it’s a part of the process. I appreciate you asking the question, I appreciate you really putting out there for people. It’s a valuable part of the journey. When you’re going into the business and you’re trying to make something happen, you have to structure failure, structure lessons correctly. It is not about losing, it’s about just learning the lesson and moving on, and that’s the biggest thing. You have to do it. It is a part of the process, period.
Joe Fairless: I like that… There’s only one way to coast, and that’s downhill. I like that a whole lot.
Kent Clothier: Yeah. I didn’t appreciate it when he shared it with me when I was 25, but now, 25 years later, I get it. I get it completely.
Joe Fairless: Yeah, and I’m thinking — it’s true, just thinking through it even more, because when you’re going downhill and you’re coasting, you don’t have to pedal, and then even as the hill flattens out, you can still coast a little bit, but ultimately you’re gonna come to a stop.
Kent Clothier: That’s right.
Joe Fairless: And that’s so true. That’s not what you want. [laughs]
Kent Clothier: Right? That’s not what any of us want. You’ve gotta be pedaling, you’ve gotta be trying to find the new hill to climb, because if you’re not, then you’re just going in the wrong direction. It’s that simple. And it sounds very straightforward and simple, because it is, right?
Joe Fairless: Yeah. I like it. Well, Kent, thank you for being on the show. How can the Best Ever listeners learn more about what you’ve got going on?
Kent Clothier: Yeah, I’m easy to find on social media. Just go to Facebook and look up Kent Clothier. I’ve got an Instagram, find me @kentclothier, or you can also go to kentclothier.com, or even visit kribbz.com.
Joe Fairless: Kribbz?
Kent Clothier: You got it.
Joe Fairless: Cool. Well, Kent, thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Kent Clothier: Thanks for having me, brother.