JF2521: 7 Steps to Better Financing with Henry Washington

Henry Washington spent most of his young adult life with little to no savings and less than great credit, until one day when he realized he didn’t have the means to fund his future. When he decided to buy his first rental he found out he was $19K short, so he got creative. Henry talks about how he bought that property with no money down, and his step-by-step process for getting better financing today.

 

Henry Washington Real Estate Background:

  • Owner of Independence Realty Group
  • 3.5 years of investing experience
  • Portfolio consists of 67 rentals, 32 flips
  • Based in Northwest Arkansas
  • Say hi to him at: www.henrywashington.com
  • Best Ever Book: The Alchemist

 

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TRANSCRIPTION

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

Henry, how are you doing today?

Henry Washington: I’m well, how are you?

Theo Hicks: I’m well too, thanks for asking, and thanks for joining us today. A little bit about Henry. He is the owner of Independence Realty Group, with three and a half years of investing experience. His portfolio consists of 67 rentals. He’s also done 32 flips. He is based in Northwest Arkansas, and his website is gumroad.com/independence.

So Henry, do you mind telling us some more about your background and what your focus is?

Henry Washington: Yes, absolutely. So I’ve been investing in, like you said, 3.5 years, getting close to four years now. My journey started way back when, when I’d recently gotten married and I had a great W-2 income, but I just wasn’t smart with my money, so I didn’t have any savings and I didn’t have great credit. And when I found myself married, because I got married pretty quick, and we start having conversations about kids and buying our dream house and all those things, I quickly realized that I didn’t have the funds to be able to provide my family with the life that I felt like they deserved. So in a panic one night, I woke up and started just googling “how to make extra money” or “what are some good side hustles?” And I kept seeing articles on real estate, and it intrigued me and I ended up reading some articles.

I watched a TED talk about a kid who had 20 somewhat doors and he was financially free, and I just thought to myself, “Okay, I’ll do that. And so I went back to sleep, the next day I talked to a commercial broker friend of mine, and told her what I was thinking about doing, and she gave me a box of books. In that box, I found Rich Dad, Poor Dad, I read that and that got me super motivated, and I started doing a bunch of research. And maybe about three months after that, I bought my first rental property. Now, I didn’t have any money. So I had to get pretty creative with how I bought it, but one of the first steps in my journey was to just tell people that I was a real estate investor. I had made the decision that that’s what I was going to do, so at that point, I just started telling people that that’s what I did, and because I put that energy out there, it helped bring me deals, and that’s how I landed my first deal.

So then I had to figure out a way to come up with $20,000 for a down payment; I only had $1,000 in my savings account, so I was about 19 grand short. And through relationship building and networking within the real estate investing community here in Northwest Arkansas, I found a friend/business partner who helped me brainstorm ways to do it. And I didn’t understand how to use creative financing or how you can use multiple types of financing to buy a deal at that time. But what I did was – he pointed me in the direction of leveraging a 401(k). And my wife had a 401(k), I did not, because as I said I was bad with money and credit. So we took a loan out against my wife’s 401(k) and got the money we needed for the downpayment, bought the rental property, kept the same tenant in it, raised the rents and immediately it started cash flowing.

And it was an eye-opening experience for me, because that was the moment where this idea became a reality. And then it also helped me see how powerful real estate was, because I was able to leverage these different strategies in order to buy a property that immediately started paying me. So at that point, I just wanted to figure out how do I do this again, a lot. And so I started doing direct mail marketing at that time, and I ended up doing a flip around that same time… And so all of these different avenues in investing just kind of all happened at once for me. And then, from there, I just continued to accumulate doors, so what I did was I’ve set my business up as one that was good at finding deals. So as an investor, I would say my strategy is mostly buy and hold. But as a business, my strategy is find good deals. Because if you can figure out a way to constantly bring good deals to you, then you can always figure out a way to make money, no matter what strategy you want to use. So I quickly learned that that was going to be beneficial for me. So that is how I built my business. It’s all-around marketing and keeping a consistent deal flow, and then figuring out how to monetize those deals as they come in.

So that was consistently what we’re doing. That’s how I was able to accumulate doors, that along with leveraging — I mostly use portfolio, small bank type commercial loans to finance my deals, and I just learned a lot along the way about how to build relationships with small banks and how to leverage those relationships to get good financing. So a lot of the times, I have it structured to where I don’t even have to bring down payments when I buy deals. So if I’m buying a good deal, that means I can potentially get into it with no money, and then either flip it or use it as a rental and do the BRRR strategy and refinance. And I’m able to continue to keep doing that and make money without having to spend money on the down payments.

So the main strategy is just to accumulate as much as possible, hold what I feel like fits my criteria, and then sell what I feel like doesn’t. And that has helped me grow tremendously, and leveraging the small bank relationships is really kind of what’s helped to make that possible. So that’s kind of have been what our focus is. It slowed down a little bit when COVID happened, but we didn’t stop; we kept going we kept pushing forward, we kept marketing. The only thing that we changed was, I would say, we’re just more strict on our numbers now, because there’s a little more uncertainty out there as far as what the future is going to hold. But I’m a firm believer in the best time to buy real estate is five years ago and right now. So we’re just going to continue to buy, we’re just more strict about making sure we hit the right numbers.

Break: [06:25] to [08:26]

Henry Washington: Wow, and so—

Theo Hicks: You said you have 67 rentals, are those all single families and a combination of multifamily, single-family? What types of properties are you targeting?

Henry Washington: So I target anything from singles to small-size apartment communities. And like I said, I do that for a reason because I’m more concerned about the deal, less concerned about how many doors. If it’s a good deal with lots of doors, I try to keep it, if it’s a single-family, that’s a good deal, I may look to sell it, but we market from small apartments down to single families. And my portfolio is built of mostly duplexes. I’ve got a couple of triplexes, I’ve got a quadplex and eightplex and a twelveplex, and then the rest are singles.

Theo Hicks: When you’re marketing, is the marketing different when you’re targeting single-family homes versus the 12 unit for example or an eight unit? Or are you just sending out the same marketing piece to every piece of real estate that’s below a certain number of units? Who are you targeting for your marketing, and then is it different depending on the property type?

Henry Washington: Yes, and no, it’s mostly all direct mail. But the type of direct mail or I should say the message on the direct mail is different if it’s corporate-owned versus owner-occupied or an absentee owner. So if it’s owner-occupied, I have a more personalized message on the direct mail, because I make the assumption that I’m talking to the homeowner that’s living there. So a more personalized message I find gets a better result. And if it’s an LLC or a corporation or a corporate-owned property, I have a more business-type approach wording on the direct mail piece. And I’ve found that that works a little better.

Theo Hicks: For that 12 unit, who did that come from? Was that a corporate-owned, owner-occupied or absentee owner?

Henry Washington: It’s funny, it was actually an owner-occupied. He was living there when I bought it, so that was an owner occupied letter and it worked well. When he called me, he told me, he read the letter and it made him smile, and that’s why he called me.

Theo Hicks: Something else you mentioned too, that I’m sure perked up a lot of people’s ears, was your ability to secure no downpayment financing from these small banks you’re working with.

Henry Washington: Yes.

Theo Hicks: Obviously, I’m not going to walk into a bank right now that I’ve never worked with before and get that, but maybe walk us through the process or the steps that people need to take to go from walking in the door for the first time, and how that first conversation goes, and then what types of things that we need to do in order to, maybe not necessarily get zero down payment loans, but get better financing.

Henry Washington: The small banks are portfolio-type lenders, right? And so in a nutshell, all that means is the banks will provide a commercial type loan and they keep those loans in-house, versus selling them. So because they keep them in-house, there’s a little more flexibility that they have with terms that they can provide. So what that means is, if you can find a bank that you like to work with and that likes to work with you, you can build a relationship, and then leverage better financing. So some of the things to think about when you’re out there looking for a small bank to finance your deal is set yourself apart, right? You want them to see you as someone who they want to do business with. And the best way to do that, whether you’ve done a deal or not done a deal, is to help the process along by making sure you’re organized and making sure that you know what you want.

So what I like to do is I have a portfolio or a folder on my computer, I have all my LLC docs in one place, I have a personal financial statement that I keep up to date every month, I have my tax documents and I’m able to get and pull my bank statements quickly, because these are the documents that they’re going to ask you for once you’re ready to move forward with trying to get some financing. And if you’re able to just either walk in the door with a packet of that, and hand it to them, or able to send it to them in a matter of minutes, it shows that you’re organized and you know what you’re doing, and it’s going to paint you in a light of someone who they want to do business with, right? And if you’re organized about your documentation and how you’re approaching the banks, they’re going to translate that to you being organized about how you’re investing and the types of deals that you may be purchasing and what you may be doing with them.

So there’s little things like that that you can do to help kind of set you up and to help you get the best financing. So knowing the documentation that you need and having it ready, and then having an understanding of what their loan products are and what types of terms and rates and things that you want. I’ve also found that it works best for me when I call a bank, especially if it’s a new bank, to have a deal in hand. So I’m not calling them and saying, “Hey, I’m an investor, I’m working on trying to find some deals, what can you do for me?” Because that puts all the pressure on them to say to you what they can do for you. But if you go to them and you say, “Hey, I’ve got XYZ property under contract, I’m purchasing it for this price, I want to spend this much on the rehab, I plan on selling it when I’m done for this price… And I would like to get a loan with an interest rate around this number, and amortized over this many years. Is that something that you’re able to do for me?”

And now they have all the information they need to then go back and start to be able to look and see, can they provide you the financing that you’re trying to get? It’ll save you a lot of time, a lot of back and forth, and it’ll make you seem desirable and somebody that they want to work with.

Theo Hicks: I love that. Thank you so much for sharing that. Alright, Henry, what is your best real estate investing advice ever?

Henry Washington: I’m going to direct this towards the newer investors. So my best real estate investing advice ever for new investors is what I talked about earlier. Don’t try to figure it all out when you’re first starting out. Do I have to build a team, or do I start my LLC? Or do I go find some contractors? There’s a million things you could spend your time trying to get lined up and get perfect before you get started.

I would say the thing that you should do first is learn how to find good deals, and go and find a good deal. That’s where you should start. Because finding a good deal is the ultimate motivator, no matter what strategy you want to use; if you’re going to wholesale, if you’re going to flip, if you’re going to be a landlord, if you’re going to wholetail, the thing that you need for each one of those strategies to work well is you have to have a good deal. And if you’re going to wholesale, you’ve got to have a great deal if you want to make money.

So if you can focus on finding that good deal, then all the other things that you need in order to close on that deal or to monetize that deal, you will be so motivated to get those things done once you’ve got that good deal on the line, that you will be laser-focused on getting them done. Whereas if you’re doing it when you’re starting out, you’ll feel overwhelmed or you might feel kind of scatter-brained about what you should do next.

So my best advice, learn what a good deal is in your market. Once you know what a good deal is in your market or in the neighborhood you want to buy, learn what strategy you’re going to use to find those good deals, implement it and go find a deal. Once you’ve got a deal under contract, the rest will be easy to find. You need money — if you got a good deal, somebody’s going to give you money. Title companies, contractors, lenders, all those things are easier to find when you’ve got something on the line for them to be able to base a bid or provide you business on, and it’s not just they’re hoping they might get your business in the future.

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

Henry Washington: Let’s do it!

Theo Hicks: Okay. First a quick word from our sponsor.

Break: [16:15] to [18:16]

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

Henry Washington: Best Ever book I’ve recently read, my favorite book — I’m more of a… I don’t know if you can tell by the way I’ve been talking, but I’m more of a mindset kind of person than I am an X’s and O’s kind of person. So a book I really, really love is the Alchemist, right? Because it’s about understanding what your purpose is and implementing and following the steps of your purpose. And if you do those things, then all of the other things you’re concerned about will fall into place if you’re following your purpose and your passion. And so that book is super motivating to me and it kind of helps keep me focused on what’s important, so that I can yield results.

Theo Hicks: If your business would have collapsed today, what would you do next?

Henry Washington: If my real estate business collapsed today, what I enjoy is this – it’s talking and teaching. So I would use the experience or the knowledge that I have to then be able to teach or share with others and build a business around teaching how to do real estate. And obviously, I’d slowly start to build real estate again. I’m just so passionate about it. But the aspect of building a business around education and teaching people how to do this is exciting for me.

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

Henry Washington: The best ever way I like to give back is — we are pretty active in tithing to our church/school that we are on the board of, and they provide opportunities to educate underprivileged youth, and we love giving back to that organization. We also always try to find a way to help anyone we come in contact with. That’s kind of the cornerstone of our business. It doesn’t matter if you’re a seller or a contractor, we’re always looking for ways to improve someone. It doesn’t matter if I’m going to buy your house or not. If I can figure out a way to help you solve a problem, even if it costs me money, that’s okay, because I want to add value to people. And I found that if you’re always adding value to people, regardless of what you may or may not get out of that person, that the business aspect takes care of itself.

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

Henry Washington: The best ever place to reach me is Instagram. You can find me at @independencerealtygroup on Instagram; you can send me a direct message, I’ll try to answer as many as possible. But that’s the best ever place to reach me and access the information that I put out.

Theo Hicks: Perfect, Henry. Thank you so much for joining us today and providing us with your best ever advice, which was to not attempting to figure it all out when you’re first starting out, and focus on the one thing, which is learning how to find good deals, and then go out and actually find a good deal.

We talked about your background, and again, you’re living out your best ever advice, which was you went out and found those good deals because you can always figure out how to make money with those good deals. And then we focused on your marketing, how you use your messages depending on who you’re reaching out t, and then you gave us some very practical advice and how to start those relationships with those local commercial banks in order to get those better financing.

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

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