JF2414: Bounce Back & Rebuild in Real Estate with Jason Moss

JF2414: Bounce Back & Rebuild in Real Estate with Jason Moss

Jason is a real estate broker, a home builder, a developer and an appraiser. With more than 20 years of experience he has the foundation for what properties are worth and can help you get familiar with the real estate industry. Gaining over 160 rental units and 120 flips in wholesale, he too has his career ups and downs. He has an exciting story to tell explaining how he crawled his way to success!

Jason Moss Real Estate Background

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“Don’t be afraid to buy old. Just get started. Because that if I were to tell if I convinced myself years before that, you know this has all happened within the last four years.” — Jason Moss


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Jason Moss. Jason is joining us from San Tan Valley, Arizona. He’s a real estate broker, a homebuilder, a developer, and an appraiser. He’s got 20+ years of real estate investing experience. His portfolio consists of 160 rental units and 120 flips and wholesales. Jason, how are you today?

Jason Moss: I’m great. Thanks for having me on. It’s fun.

Ash Patel: Good. Before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Jason Moss: Sure. I started out as a real estate appraiser in Las Vegas. I got the foundation for what things are worth and just started to get familiar with the real estate industry. I’d actually did my first house hack back then, that’s how I got started, and went from there. I just loved investing; I invested in stuff while I was doing my nine to five appraisal job. Not nine to five, it was more than that, but… I did a lot of investing, got a lot of creative financing deals going, worked my way up, got wiped out in the crash, and came back, I got back into real estate investing, and here I am now.

Ash Patel: What year did you start appraising in Vegas?

Jason Moss: This was in 2001.

Ash Patel: Okay, so you saw the rise of that crazy market out there in Vegas; it was insane. The prices just went through the roof. Is that what prompted you to get in on the other side of real estate, on the investing side, when you saw those property values rise?

Jason Moss: No, I have an uncle who lives in Utah, and he’s a developer. Ever since I was 14 I was like, “I want to be a developer.” I thought that was so cool. But it’s not as easy to become a developer as I thought. So I just always loved real estate, and as soon as I got my appraisal license, I wanted to buy a house, so I bought a house. And yeah, I saw the values going up, so that was definitely a part of it, but I was also in the Utah market, the Arizona market, and the Montana market at that time.

Ash Patel: As an appraiser or an investor?

Jason Moss: Well, not the Montana market, but I had my appraisal license in Arizona. This was a couple of years later, like 2002 or 2003. It took a couple of years to get my license. But then I immediately got my license in Arizona and Utah. I had [unintelligible [00:02:55].11] that was a great gig back then. You could have interns and they were just churning as fast as we could do the appraisals they were doing. So that was a great income boost for me.

And I would be driving 200 miles every other day, doing these loops around the valley. Ron Legrand was my first real estate training course that I took; it was like 500 bucks. I went on those high-pressure seminars, where they’re like “Come to the back and order the thing.”

So I bought those, 500 bucks, and 40 hours worth of audios, DVDs, and stuff – I just listened to those things and just consumed them. I love the idea. And I was in the industry, so I started to see these deals. At a certain point, I had the knowledge, and I just couldn’t not do it. I just had to get past that fear and finally do my first deal, and I never looked back.

Ash Patel: What year was the first deal?

Jason Moss: Well, I don’t really count my first house hackm, because I had to have somewhere to live. But I bought one in — I think it was 2002 when I bought my first wrap deal, subject-to.

Ash Patel: What’s a wrap deal?

Jason Moss: A wrap deal is where there’s a mortgage in place, and somebody needs to sell their house for whatever reason, and I come in and I’m going to take over that mortgage. This is how I did this particular deal anyway. I went over and took over this lady’s mortgage. She needed to move, for whatever reason; she still owed like $80,000 on the house. I came in and I took over her payments. I didn’t assume the responsibility for the loan, but I took over payments and she deeded me the property; so I owned the property. She went ahead and basically left, and I paid her whatever down payment she wanted. I can’t remember what it was at the time… And I took that over. So what I did is then I resold it to somebody else on seller finance.

Ash Patel: Was that essentially like buying a note?

Jason Moss: No, I wasn’t really buying the note… I was taking over the borrower’s position. The difference between selling a note or buying a note is you’re taking over the bank’s position. I was taking over the seller’s position.

Ash Patel: And how do you come across a deal like that? It seems like a win.

Jason Moss: They’re actually easier to find than just straight owner finance deals. You probably know what those are, those are pretty common. But the problem with owner finance deals is somebody has to own the house free and clear in order to do it. Otherwise, it gets tricky. And if they don’t, then you can do a wrap too. That’s the same type of scenario where if somebody owns a property free and clear and they want to sell it to you on terms [unintelligible [00:05:00].04] and pay you a thousand bucks a month for five years or whatever, and then you go out and you sell to somebody else. You bump up the price, you bump up the interest rate, you bump up the down payment… So you make a little bit on the down payment, make a little bit monthly, and make a little bit on the back end.

So it’s kind of a wrap because you have this mortgage, and then it’s wrapped in a new mortgage that you’ve created on the outside of that. So you’re ultimately responsible for the underlying mortgage, but the new buyer is paying for your mortgage. So they call it a wrap because you’re wrapping around that existing mortgage with another mortgage.

Ash Patel: Yeah, it makes sense. So you said they’re easier to find than owner financing. How do you go about finding them?

Jason Moss: So owner finance, they have to own the house free and clear. These are elderly people who’ve owned their house for 30 years, and a lot of times, they don’t have 30 years left in their life to want to do an owner finance deal. So they’re going to want two or three years. So these other type of deals – they’re called subject-to, and they’re easier to get, because you can find people that are in a motivated situation where they may not care about the credit. Maybe they’re already late on their mortgage, so you’re going to come in and you’re going to take over the mortgage. You’re actually going to fix their credit by coming in and actually making the payments on time and eventually cashing them out… But ultimately, they don’t care, because they’re going to go into a rental.

So they’re easier to find in the fact that you’re not just narrowed to older people with their house paid off, or that young person that was aggressive and is probably pretty darn savvy, and probably isn’t in a motivated situation… So it opens up the world to everybody with a mortgage to do this with. It’s not necessarily a wrap, but it’s a subject-to wrap, which is kind of what I’m specifically talking about.

Ash Patel: Got it. So you mentioned earlier that you got wiped out in 2008. We’re still back in 2001 with this story… So bring me up to the 2008 mark; tell me your deals that you’ve done and how you evolved.

Jason Moss: Yeah, so I house hacked that first house. I had my office in there and then I had my room. I thought “You know what? I’m going to do this other house,” and it worked great. I was super scared, but I did it. I made 20 to 30,000 bucks on that deal.

Then I bought this other house and I house hacked that one. Actually, I moved into the master bedroom closet. I just had a bunch of buddies and I was never there, because I was going from Arizona to Montana and all over the place. When I was there, I’d just sleep in the closet. I didn’t need a whole lot. I grew up – not necessarily poor, but I didn’t really have a whole lot, so I didn’t need a lot and slept in the closet.

Then I bought a house in Utah — I actually bought some land in Arizona and I actually flipped that for a hotel. Well, that was right after the crash, so I just jump ahead of myself… But I did some flip deals; I didn’t do any buying holds at that time, I didn’t really see the value in that.

I had amassed a million bucks by the time I was 26, and most of that was through real estate investing. I mean, I had a good wage as an appraiser; I made 150k to 200k as an appraiser, but when it came down to it, the investing is really how I was able to build my nest egg up to a million bucks. All my buddies were buying 12 houses at a time and then they would refinance them immediately, sucked out all the equity, and buy 12 more… So it was this race to see if you get too many houses.

I knew this market was going to collapse. Me and a handful of buddies knew this was going to collapse. I was keeping my mortgages at 50%. I’m like “I’ve got to be safe and smart about this, because I know this is going to collapse.” I thought 50% would be a good number, but nobody expected what happened to happen. I had a house that was 330,000 that ended up selling at an auction for 90,000. That’s how hard we were hit. And these are in the fast-growing areas. If you’re in an established area or in the Midwest, you weren’t hit that bad. But man, we got wiped out. I ended up $250,000 in the hole, negative.

Ash Patel: So when 2008 hit, was that a personal bankruptcy moment?

Jason Moss: It’s funny, because most people say 2008, but it really happened in 2005 for me. What I mean by that is in the very fringe areas, where the new developments were happening, that’s when things first stopped. That stopped in mid-2005, is when the bell curve started to wane. And 2008 is when it kind of started to go down the other side, because people held out for a couple of years thinking “Oh, the market is going to come back.” People weren’t desperate at that time. But then the longer time goes by, then they start to get desperate, then they started to foreclose on their houses. It took a couple of years for that to flush through.

This was in 2005, and by 2006 I had had that million bucks made, and I was like, “Okay…” Me and my buddy, we saw the drop coming, he dropped his house by 60 grand, and he was the last person to sell on our street.

As an appraiser, I’m in the numbers and the stats every day, so you kind of see this coming… I was selling each house, I was like “Oh man, the values are going down, down, down. I’ve got to sell this one. I’m going to go upside down if I don’t sell it.” So I would sell these properties as they were going down. Eventually, there was no more to sell. I ended up getting foreclosed on two houses. I’ll probably talk about that later, but one of them was down here in Arizona, which we ended up living in for a minute. The other one was a property in Montana that I had.

So I ended up 250,000 in the hole. My parents at the time had sucked out the equity line of credit and they were trying to help me save the empire, so they borrowed me that money. When I was 250 grand in the hole, I couldn’t just file bankruptcy. So now I’m in negative 250k at the age of 27.

Ash Patel: And then what?

Jason Moss: That was the hardest time of my life. That was really rough.

Ash Patel: So what’s the next move?

Jason Moss: I licked my wounds for a little bit. I still was an appraiser and I got my real estate license shortly after, because I was always hustling deals, I never really stopped. But I tried to start a windshield company, because that was my business in high school, I had a windshield repair company. I thought maybe I could resurrect that, because real estate was just… There were no appraisals going on, and there were no real estate sales… The only thing that was available was investor fix and flips and investor-type deals. Those were everywhere, and they were ridiculous. But I didn’t have any money and I had no credit, because I just got wiped out. So I was relegated to do these types of subject-to deals that I was talking about, where I didn’t have any money. I had several people that gave me their houses, because they were going into foreclosure, but they owed right about what it was worth… So I came in, I did my magic and I actually made money on some of those. But those were few and far between, so I was looking for other ways to make money. That’s kind of how I kind of creep and crawled back.

This is what I told you about that land I had in Arizona. I think it was 50,000 bucks and it didn’t even have an easement. It was landlocked, so I negotiated with the neighbors. It was actually really easy. I thought I was going to have to pay him some money to get an easement to this property. But I ended up just talking to him and his little boy and he said, “Oh, yeah, I’ll give you an easement. No problem. Just let me sign the paperwork.” So he gave me an easement.

So I took that piece of land that I had and I took it to a guy that really wanted to sell his hotel up in Park City, Utah. I said, “Hey, I’ll trade you this piece of land” which honestly was not worth a whole lot of that time, because the market was crashing. I was going to do a palm tree farm on this, I was going to get some water, and I was going to grow palm trees for the next 25 years. He ended up trading me the down payment on that hotel for the piece of land, and I took over his mortgage and did a subject-to on that hotel and we flipped it.

Break: [00:11:21][00:12:27]

Ash Patel: Alright, wait a minute… So if I want to buy something subject-to, how do I go about doing that?

Jason Moss: The biggest thing is to find a motivated seller. They’re everywhere, at anytime. There are motivated sellers now, there’s a forbearance wave, a forbearance with all the foreclosures and the COVID… There’s this pent-up pool of people… I don’t think it’s as big as everyone’s saying it is, or I don’t think it’ll flush out that way. But anyway, there’s this pool of people that are not in a good position right now. And if you can find those people, whether that’s knocking on doors, notice the default list, or however you find them, if you can get in front of them, 9 times out of 10, if you can get past those initial smokescreens that they throw up, they’re going to tell you “Hey, I’m in the spot. I can’t pay my mortgage.” Maybe “I’m upside down by 10 grand.” Or “I just can’t pay my mortgage or whatever, I don’t have enough to pay a realtor to get out.” Those are the ones you’re looking for. You can get in and basically give them 100 bucks or 1000 bucks and they’ll just give you the house and walk away. Because that’s what they’re doing anyway. The bank is taking it back, so if you can step in and save them…

We’ve come in with 5, 10, 15, $20,000 in back payments for people and we’ll reinstate their mortgage. They’ll be like, “Hey, we’re days away from foreclosure.” “Here’s 20 grand, let’s get this thing back rolling.” Then we work with the bank to resurrect the deal, and then we do our magic with it and then sell on the backside.

Ash Patel: And the banks don’t require you to own some part of the debt?

Jason Moss: If they knew… [laughs] Well, the thing is, in every note mortgage since 1987 there’s a due on sale clause, or an alienation clause is what it’s called… Basically, that says that if you transfer the mortgage to somebody, we can call the loan due. Some people think this is illegal, and it’s weird, but it’s not. It’s not illegal, but it’s against the terms of the original contract. So if the bank found out that this deed transferred, which they don’t, but they don’t even care when they do, because all they care about is getting paid, but… If they found out, they do have the legal action to go ahead and foreclose on a property and call everything due. In that event, I would have to scramble and figure out a way to pay that bank off so I could keep the property and protect my assets. But ultimately, we’ve had plenty of lenders find out about this, and the only couple of times where it’s been an issue –I’ve talked to title companies and they’ll back me up on this– it’s usually when there’s an equity line of credit. So it’s something that the owner can go and draw money on – that’s going to be a big red flag, because they don’t want me drawing on an equity line of credit on something, and I wouldn’t want that either. So I don’t even buy properties that have an equity line of credit. Or I make sure that the owner goes and closes that out and can’t be reopened. That, or possibly an FHA deal. I’ve done plenty of FHAs and never had a problem. But I’ve heard of it being an issue with some FHA deals.

Ash Patel: Jason, do you run a title search to make sure that you know about all the loans that are out there?

Jason Moss: Yeah, I’ve got a pretty good relationship with my title company. I’ll give them a call and be like, “Hey, is there anything crazy on this deal that I’m not seeing here? Because I’m just seeing the first mortgage. Or is this one taken over?” And I’m okay. I’ve never had any kind of weird IRS lien come in after the fact. But if there’s nothing recorded as of the date that they deed it to me, I’m not too worried about it, because I’ll be like “Hey, whoever this new lender is, they don’t own the property anymore. It’s mine, so you need to remove this lien” and they’ll do it.

Ash Patel: So 2008 hit, and you now traded a worthless piece of land for a hotel. Tell me about the hotel.

Jason Moss: I just got married four months before… We were living in Utah, doing this flip. Newly married, my wife got a full-ride scholarship to the college there, and “This is a bad idea. Don’t do this. Don’t get married and then live in a fix and flip.” But we did, and then we move from that fix and flip into this hotel. It was a 15 room hotel. But basically, it’s like doing 15 flips at the time. My wife calls it the Dark Ages in our marriage.

We couldn’t leave, because we had daily people coming in and out for the hotel; we didn’t have a manager yet, we were dealing with drug people, we were trying to get everybody out of this property, we were trying to clean it up, and we were doing 15 rehabs at the same time. So there weren’t a lot of date nights or anything like that. It was a little rough during that time… But that’s kind of what we did, we flipped that hotel and then we moved to Arizona. We’ve been here ever since, since 2007.

Ash Patel: How long did it take to flip the hotel?

Jason Moss: It wasn’t too long. I think was about a year, or a year and a half.

Ash Patel:  So that was a year and a half of you guys playing front desk, playing maid, playing rehab, doing it all?

Jason Moss: Not exactly. We bounced after about six months. [unintelligible [00:16:32].05] So we got a manager to come in and take over the day-to-day. Even though they called me up one night and they’re like, “We’re leaving.” I’m like, “Okay, well, that’s fine. We’re working it out over the next couple of weeks.” And they’re like, “No, no, we’re leaving right now. Like right now.” They were leaving, so I got in my car and I drove eight hours or 12 hours off to Utah, I had to break into my own hotel, so I could be there in the morning when people woke up and started to check out of the rooms. We had a couple of managers and we finally ended up selling it to a guy on owner finance. So it worked out in the end; it was just stressful.

Ash Patel: And what was the amount of profit on that hotel?

Jason Moss: Not a lot. Again, this one – everything was falling apart. And I was happy — I think we made about 50 grand on that hotel, which wasn’t a lot in hindsight. I thought it would have done a lot better, and I think it would have if we could have held on to it, honestly. If we had been there for a couple more years, we would have made a lot of money, because our finances would have been a lot better. But we had to get out of that situation, it just wasn’t healthy for us. And we couldn’t manage it from out of state; we were just too naive in this hotel space. If I had to do it again now, I think it’d be a whole different ballgame. But we ended up selling at that time and we were happy to be done with it.

Ash Patel: Alright. So I’m assuming you didn’t do any more hotels, and you probably don’t even want to stay in a hotel after all that.

Jason Moss: It was a motel, so it my wife’s sore spot. But we’re looking at them now just because they’re in distress. We’re looking at the possibility of converting some of those into multifamily units, and things like that, because that’s a kind of niche right now that we’re looking at.

Ash Patel: Okay. Back to the rebuilding phase… What are you doing? Are you doing fix and flips right now to get back on your feet after you left the hotel?

Jason Moss: I was trying to do appraisals in Utah and I was trying to do fix and flips, but the market was just different up there. I wasn’t doing nearly as many appraisals. Again, I guess my point was in telling you that I made about 50 grand, but I also paid $50,000 to my realtor to sell the thing. And like, he didn’t do any work; I did all the work. I basically found the guy, I even reviewed the contract… I  was like “I am paying this guy 50 grand and he spent probably a total of eight hours.” I’m like “I’m getting my real estate license.” So that was the catalyst for me getting my real estate license. Now I’m a broker and I’m an appraiser, so I’ve got a little more clout under my belt. Right after that, we moved to Arizona, so I started to build that up, and I did that for a while.

Ash Patel: Alright. The way you feel about realtors is how I feel about appraisers. When I do a commercial appraisal, I have to pay $2,000 for that.

Jason Moss: Okay, this may make you feel a little bit better – I don’t even do appraisals right now, because it’s such a headache. There is a book called the USPAP, it’s Uniform Standards of Professional Appraisal Practice. It’s this book that changes every single year. It’s basically all the hoops you have to jump through as an appraiser. All you see is the report that they send you at the end, it’s like 46 pages. It looks like they put some work into it for sure, but you don’t see all the work files and all these hoops you have to jump through as an appraiser. It’s not worth even 500 or 600 bucks for me to do an appraisal right now, it’s just a lot of work.

I was never a great appraiser; I was always very good at getting values, but I wasn’t great at filling out that work file and doing all the things that the state wants me to do. As an appraiser, there’s a lot more work that goes into it than a realtor. Because I’m both now, I can see both sides. If I list the house, it literally takes me five or six hours from start to finish to get that deal done. Whereas an appraiser would probably cost me the same amount, but I’m like — a commercial appraisal is a different story, but a residential appraisal will take me four or five hours to do that and I’m making 400 or 500 bucks, versus a realtor, the same amount of time, I’m going to get $15,000 or something like that.

Ash Patel: Alright, that makes me feel a lot better. Thanks for sharing that. So you saw how much money realtors are making, and in your case, for not a lot of work. So you got your realtor’s license. Take me through that journey.

Jason Moss: I actually did pretty good with that. I would do about 50 to 70 a year, which I think is pretty good for a realtor. I was doing appraisals as well at the same time. They married perfectly with each other, because I could be out in the field and I’d do a loop and [unintelligible [00:20:17].01] because it’s hard to get a constant flow of real estate deals and you’re always out hustling. Sometimes you’re just spinning your wheels trying to find that next deal, where during that time I was actually appraising. So I actually made some of my best money during that time.

Luckily, I got on a panel for Fannie Mae, which was really very eye-opening for me as an appraiser, and as a realtor, and as an investor. Because what they wanted us to do is they wanted us to this give them an as-is value. Remember, this was 2009, 2010, 2011. So Fannie Mae has this massive amount of properties and they don’t know what to do with them and they’re trying to sell as fast as they can, but they’re realizing that all these properties are nasty, and then all they can sell them to is investors… So they started to ask us appraisers and said “What would these properties be worth as-is, and then also after repairs?” Of course, as an investor, we all know this, it’s the ARV. Back at this time, no lender ever remodeled a house. It just didn’t happen. If they got a property back, [unintelligible [00:21:11].01] So we did this and they would start to see that if they put in a $3,000 granite countertop, it would bump the price by five to $10,000, and it would only cost them three. So they remodeled all their houses, and I had this queue of 10 appraisals. As fast as I could get them back to them, they would send me more. So I made hand over fist money during that time, and I was able to dig myself out of that $250,000 hole that I had dug myself in. And then I got a little seed money. I need about 40 grand to start investing more heavily again. Then I started into that again.

Ash Patel: Into the fix and flips?

Jason Moss: Right. I had also done one here or there, maybe two or three a year at that time, so it wasn’t a ton. But I was starting to get more money so I could do that more… Because that’s where I’d get my chunks of money, I’d do a flip and get 30 to 40 grand and do another one. I wish I could have bought 100 houses right then, I just didn’t have the capital.

Ash Patel: Yeah, that would have been great to go back in time and do that. So how did that evolve into your buy and holds?

Jason Moss: About 2017 I partnered up with a guy around that time, and we started doing fix and flips. We were doing like six at a time and we were churning them out. It was a great time for buying properties at the auction. Now it’s kind of got overrun with all the fix and flip shows and the auction shows, it’s kind of got overrun and it’s kind of crazy. But during that time, it was great to do fix and flips. And we started to see those margins get less and less.

We wanted to make about a minimum of $20,000 on a flip, because it was me and a partner. We’re like “It’s getting tighter and tighter. Why don’t we try and hold one of these?” We had gone to a John Burley boot camp that was about lease options, and we’re like “This is interesting, let’s give this a shot. What the heck?” We didn’t make a whole lot, we made like 50 bucks a month on the cash flow on our first deal. It was a small $80,000 house, it wasn’t a big deal. But we were like “That wasn’t that hard to do. If we had like six or seven going on at a given time, and we convert all these to lease options, what would happen?” So we did, and we haven’t flipped a house since, because we ended up making two to three times the amount we’d make on a lease option, versus what we would have made on a flip.

Ash Patel: And if you do sell those houses, it’ll be capital gains instead of ordinary income.

Jason Moss: That’s part of it. We don’t pay realtor fees, because we’re selling it to the tenant that’s owning it; we’ve got cash flow every month, we’ve got the mortgage paid down, we can sell it for a premium because it’s a lease option and there’s not enough of them, so people are willing to pay a premium on the price, and a  premium on the rent. And then the depreciation, and the capital gains. There are so many things that two to three times is probably conservative, really, for what we make on a lease option.

But the difference is, with a flip you get 20 grand right now, versus a lease option, we get it spread over three years. But if I start stacking these up, me and my partner are starting to see the vision. We’re like “If we start to stack these up, that [unintelligible [00:23:37].16]” Now we’re pushing to 200 properties now and we’re like, “This is looking pretty good.”

Ash Patel: Play the long game. Yes.

Jason Moss: And that was our worst deal, at 50 bucks. Now we try to target about 200 bucks a month cash flow on our properties.

Ash Patel: So right now your 160 rental units. Is that all single families or is there multifamily in there as well?

Jason Moss: Did you say 160?

Ash Patel: Yes.

Jason Moss: I think when I filled out the form initially, that’s what it was. We’re pushing 200 now. I think we have about 70 to 80. It’s hard to keep track, because the machine is kind of rolling forward. But I think we have about 70 to 80 single-family homes, and most of those are on lease options. We have a chunk of those that are rentals, and then we have a good chunk of multifamily properties, and then we have six mobile home parks as well.

Ash Patel: On your lease options, what are some of the mistakes that you’ve made that you wish you could have corrected?

Jason Moss: Honestly, I wish I would have done it sooner. For the longest time, all the way up to about 2016, my partner basically bent my arm into doing one. I just didn’t want to be a landlord, because I don’t want the calls on Christmas Eve having to fix the toilet. It was so many misconceptions that I had built up in my mind that just weren’t so, that once we started doing it, I was like “I could have been retired 20 years ago with cash flow.”

Me and my partner argue all the time about net worth. I think net worth is dumb, he loves net worth. I’m all about cash flow. I could care less about how much I’m worth on paper, I really want that cash flow. So I wish I would have just started this sooner, honestly. There hasn’t been a whole lot of errors that we’ve made on these. We just had three people exercise their option… Because now we’re three to four years into our lease, so people are starting to exercise these options. One guy walked into $100,000 equity.

Ash Patel: A lot of people — do you think they’ll exercise the option, or do you think they’ll end up walking away because they can’t get financed or they just don’t want the house?

Jason Moss: Well, I don’t think anyone will walk away because they don’t like the house, because the markets have gone up so much… As I said, the guy that just did walked into $100,000 equity. But historically and statistically, I think about 15% of the people exercise their lease option.

Ash Patel: So if somebody has one of your lease option houses, and they’re at the end of their lease period, but they can’t finance the property, is there something that you would do to help them out, or would you just start over again?

Jason Moss: We may reset the price, but we’ll keep them in the property. If they still want to buy it, we may just reset the price, or reset some of the terms, or… We can really do whatever we want. We’ve had people that have moved to Oregon and were like, “Hey, here’s your option fee back.” We’re okay, we’ll take the property, because the property’s gone up by 30 to 40 grand since then. It’s like, “We’d be glad to take that back.”

But yeah, to answer your question, not everyone’s going to be able to do this. A lot of you will just procrastinate. We actually try to work with these people and try and get them to buy the house, we really want them to. Now it’s kind of hard because they’ve got so much equity in them and we’re like, “We don’t really care if they exercise it or not.” But we’re not going to step in their way by any means. We’re going to still help them. If they reach out to us and they want help, we’ll help them. But we’ll see. We’ll see how many shake out. Every single one of them may buy, or they may not, and we’re okay with that, because we went in from the start knowing that — say the house is worth 200,000. We would market it for 210. We got $10,000 more than what it was worth at the time, so if we were to do a flip, we would have got way less. So we’re happy either way.

We could have structured that a little bit differently where we could have had some price increases and capitalize on some of that, but by not doing that, we’ve had great tenants. Our one office manager handles all of those 80 properties and she has a couple of calls a month. Because these are buyer mentality, not tenant mentality. It’s just a different mindset.

Ash Patel: So Jason, are these leases set up as a typical single-family rental? Or are the tenants responsible for more, such as HVC, plumbing problems, drain backups?

Jason Moss: They are. It is a typical lease, but there’s also an option agreement that sits alongside it. The option agreement says, “Hey, you can buy it for this price. Here are your responsibilities. You take care of the property. Any minor repairs under 200 bucks you take care of. Anything over that, we’ll go ahead and take care of. We’ll come in and replace an AC unit or a roof. We’re just going to add that onto your option fee.” So none of that capital expenses or reserve replacements that people have to factor in – we don’t really have to factor those into our matrix, because we’ve kind of exited ourselves out of that.

Ash Patel: That’s a great way to hedge against unexpected expenses.

Jason Moss: Yeah. Technically, as a landlord, we have to do certain things. We have to replace their AC, we have to keep that property safe and sound. So technically, we are on the hook. But contractually, they have the motivation to keep the property nice, because it is theirs.

Ash Patel: You mentioned earlier you were trying to do subject-to with hotels. Have you had any luck or have you approached any hoteliers?

Jason Moss: You mean if right now we’re looking at that as a strategy?

Ash Patel: Right.

Jason Moss: No, we’re not looking at necessarily subject-to as a strategy for that. We’re just looking at buying hotels. You said, “You probably would never touch a hotel.” I said, “Well, I may now, because that’s a good niche.” Now, I love the subject-to, but those are probably a little different. That’s a commercial mortgage; they may call that due. I’ve never wrapped or done a subject-to a commercial mortgage, but I’d be willing to try it. But no, we’re just looking at hotels in general.

It’s like some of these mom-and-pop motels we see outside of town, we’ll come in, we’ll buy them, rehab them, and make them into a little six-unit apartment complexes and then operate it that way versus a hotel.

Ash Patel: What kind of systems do you have in place to keep your machine turning and burning?

Jason Moss: We use some software. The one we’re using currently is called Buildium. So I find the property… I’m kind of the real estate aspect of our team. I’m the real estate guy, and my partner is the financial guy. He’ll go out, he’ll get all the money, get all the loans, and things like that.

So I’ll find a property or he’ll find a property and be like “Okay, what about this one?” I’ll do the value. As soon as that’s done, we basically just send an email out to everybody that’s involved – our title company, our insurance guy, my office manager, his office manager; everybody gets looped in, and then everyone knows their part, and they just go do it. That’s kind of the acquisition side.

As far as the management side, as I say, for these lease options, which is a good chunk of our portfolio, they don’t take a lot of maintenance or month-to-month management. But the mobile home parks, that’s kind of a beast unto itself and those do take a little more. That’s where the Buildium comes in, and the systems, those kinds of automatic payments, the automatic deposits, and things like that that we encourage our tenants to do, and we actually incentivize them to do, to really make things work smoothly. The lease options kind of take care of themselves, really.

Ash Patel: Yeah, we covered a lot. I think we’re going to have to do another episode and dive into the mobile home parks. Jason, what’s your Best Ever real estate investing advice?

Jason Moss: Just do your first deal. If you haven’t done a deal, do your first deal. That’s it. And don’t be scared of buy and holds. Just get started. Because if I had convinced myself years before that… This has all happened within the last four years. So 2001 — 2017 is when we started, now we’ve got over 200 properties. We both could probably retire right now and have residual income until these properties are gone. I would have rather done that when I started and four years later I could be in a totally different position now. So that’s my advice.

Ash Patel: That’s great advice. Jason, are you ready for the lightning round?

Jason Moss: Sure.

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

Break: [00:30:36][00:31:12]

Ash Patel: Jason, what is the Best Ever book you’ve recently read?

Jason Moss: Atomic Habits was really, really cool for me. But I think Slight Edge kind of filled in the gap. So those two combined. Slight Edge and Atomic Habits kind of go hand in hand. They’re not even by the same author, but they kind of are circling around the same thing.

Ash Patel: What’s your takeaway from those books?

Jason Moss: Just a way to set up habits and to push through and to keep things moving.

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

Jason Moss: Right now I’m trying my hand at YouTube, trying to share my knowledge the best I can. I’m also looking to start up a non-profit as soon as this cash flow machine ramps up all the way. We’re going to be breaking off a piece of that income and doing a non-profit with that. I’m not sure what we’re going to do yet, but it’ll be fun I’m sure.

Ash Patel: I’m sure it will be fun. Jason, what’s the Best Ever way that our Best Ever listeners can reach out to you?

Jason Moss: Probably YouTube. I watch those comments like a hawk. Real Estate Getting Started is the channel, and you might have to add my name on there, Jason Moss. Or LinkedIn. That’s probably a less effective way but you can still reach me there.

Ash Patel: Wonderful. Jason, thank you for being on the show today. You shared some great advice and you’ve taken us on your journey with you. The rise up until 2008, and then how you got back on your feet after that downfall. So great advice with the lease options. I learned a lot about the wrap around mortgages. Thank you again, have a Best Ever day.

Jason Moss: Absolutely. I appreciate you having me on. This was a blast.

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