JF970: How Options We are Given in Life Serve Us to Fight Fear
He’s done every deal in the book and fought adversity in the market. Now he helps others get over their fear of making real estate decisions.
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Mark Collard Real Estate Background:
– Founder & CEO of the Outback, a seminar/empowerment company for real estate investors
– Travels and speaks internationally on real estate
– He hosts events all over the US for real estate professionals and real estate investors
– His mission is to fundamentally change thinking in real estate from fear-based to empowered
– Based in Las Vegas, Nevada
– Say hi to him at http://www.coachcollard.com/
– Best Ever Book: Outwitting the Devil
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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 fluff.
With us today, Mark Collard. How are you doing, Mark?
Mark Collard: Hey, I’m doing great. Thanks for having me.
Joe Fairless: My pleasure, nice to have you on the show. A little bit about Mark… He is the founder and CEO of the Outback, which is a seminar/empowerment company for real estate investors. He is a full-time real estate investor, as well as he does coaching. His mission is to fundamentally change thinking in real estate from fear-based to being empowered. You can say hi to him at his website, CoachCollard.com. Based in Las Vegas, Nevada… With that being said, Mark, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Mark Collard: In 1999 I got started in real estate, but I actually started as a mortgage loan officer. I spent about a year really learning the mortgage business, and it kind of propelled me into things. I had done a little bit of study back in the day on [unintelligible [00:03:08].17] no money down program, and what I realized pretty quickly was that my finance knowledge, understanding traditional finance kind of gave me X-ray vision (that’s what I called it) into a transaction, into people’s contexts and their situations, and I realized my finance knowledge was a competitive edge and it helped me put deals together.
I started buying real estate, I started with subject to’s and lease options, bailed a few people out of foreclosure, and it just started going from there. I’d done everything wide, I guess you could say, on the highway of real estate, from note buying to commercial discounts, short sales, foreclosures, subject to’s, lease options… That’s just my thing nowadays, that’s what I do.
Early on, I realized that a lot of people deal with fear that freezes them up, or they get in the middle of a transaction and they don’t know anything, so they just go on to this story in their head, and it’s fear-based. You and I both know that fear doesn’t serve anybody, so part of what I’ve done is put the Outback together… The Outback is a mindset decision to seek solutions at all costs, and you don’t quit; you just continue to look and consider what options are there. Consider everything, but you won’t do anything… So I’ll consider unreasonable options and I’ll entertain those ideas, and in there I’m generally able to find a solution for somebody that helps me to put a creative real estate deal together. That’s the quick version.
Joe Fairless: I’m curious, when you were a mortgage officer and you saw that the finance knowledge gave you a competitive edge, what did you apply specifically, or what did you learn that gave you that edge?
Mark Collard: It was really understanding the trustee sell process. At the time I happened to be in Arizona… My little triangle, my place where I play now is Arizona, California and Nevada, and all of those locations have a [unintelligible [00:04:52].08] so it’s a non-judicial process, it’s a pre-defined statutory 90-day or a little more process in every day… Mastering that process or learning that process through the lending business and seeing people going to foreclosure – it allowed me to see through the transaction. Most homeowners, when they go delinquent, immediately are like “Oh my gosh, what am I gonna do? I need to call the bank and ask them what they can do or what I can do.”
Joe Fairless: Yep.
Mark Collard: And the bank’s only gonna tell you their process on how to prevent you from going delinquent or how to take your property back when you don’t pay it. What I realized is they’re just as misinformed as the homeowner is, and being in the mortgage business just allowed me to see through that, so I was able to put together solutions based in reality, rather than “Oh my god, I’m gonna lose my home!”, because as soon as a homeowner goes there, they lose their empowerment, and everything I do is about staying empowered; you’ve gotta continue to make decisions in the face of diversity, you can’t just go into fear. [unintelligible [00:05:46].13] authority over to the lenders.
Joe Fairless: Let’s talk about that… As an investor now, knowing what you know through the process of being a mortgage loan officer, how did you approach it with the homeowner and how did you provide a solution for them?
Mark Collard: Literally, my second transaction ever – a buddy of mine called me and said, “Hey, I’ve had my property listed for a year… It hasn’t sold, and I need to get rid of it. I can’t afford it anymore.” I said, “Well, rather than get rid of it, can I just take it over for you?” He said, “Sure. What does that look like?” I said, “Well, I’ll bring the paperwork over. You don’t have any equity, so just give it to me and I’ll figure it out.” And he says, “Well, I’m already delinquent, so my credit’s shut.” I said, “Well, that’s in both of our favor, so I’ll figure it out from there.”
He owned [unintelligible [00:06:29].05] on a first FHA loan, and he has a second with Green Tree. He didn’t know what to do, he thought he was stuck. He had it listed for 118k, which is the amount he owed to both lenders, for like a year. Relatively quickly, I was able to negotiate a second discount with Green Tree mortgage. I thought it was actually a short sale at the time, I actually didn’t know what I was doing; I just knew to go-go-go.
So they discounted it down $1,500, I purchased the —
Joe Fairless: Holy cow, I wanna pause right there… Green Tree lowered their second mortgage from 118k to $1,500?
Mark Collard: No, actually the Green Tree second was 17k, and the first with [unintelligible [00:07:13].29] was 101k.
Joe Fairless: Oh, I thought you said he had it listed for 218k, which is what he owed…
Mark Collard: 118k.
Joe Fairless: Oh, 118k! Okay, I misheard that. Alright, so they went from 17k and change to about $1,500?
Mark Collard: Correct. I actually made them an offer officially… I calculated my numbers and justified how I was gonna make my offer, and I made an $1,100 offer. They said no to it immediately, and I basically sat on my thumbs for three weeks, just saying, “Hey, I don’t really know what to do.” Three weeks later they just called me and sent over a fax and said, “Hey, we’ll take it.” So I basically effectively bought my own second mortgage, because now I owned the property; I bought the second mortgage for $1,500, but it had a lien for $1,700, so I just created an arbitrary $15,500 in equity. [unintelligible [00:08:00].14] it was just all the taste I needed, and I just went gangbusters.
I’ve done deals like that where we discounted debt 300k-400k, and freed up half a million dollars in equity.
Joe Fairless: Wow… So how do you go about reaching out to a lender? What do you do? Do you just call the 1-800 number and say “I’ve got a mortgage”, or what?
Mark Collard: Yeah, you literally start with that, but again, my mortgage background gives me context for everything… So depending on the circumstance, if I’m the homeowner or if I’ve already got the property subject to, I don’t do something like that unless I get the original homeowner to sign a bar’s authorization to give me access to enquire on their behalf.
I usually have our P’s and Q’s in order, so I’ll just call and say, “Hey, I’m calling about this property and this loan. I have a bar’s authorization I need to send you so that you’ll talk to me.” They’ll give me a fax number, I’ll fax it in… Anywhere from 24 hours to ten days, depending on how inefficient they are, I’ll get in contact with them again and we’ll start having a dialogue. A lot of times I’ll just throw a hook in the water, so to speak, and fish with no worm, so to speak, trying to find the right person… Sometimes it’s the asset manager with [unintelligible [00:09:07].18] sometimes it’s a higher up VP that I have to get to… It’s always different; every lender is different, every scenario is different, every circumstance is different. It’s really about just being diligent and imposing our will on them, and it takes time.
Joe Fairless: Yeah, I imagine it takes time just because there’s a lot of red tape with lenders and a lot of process, right?
Mark Collard: Lots of red tape. I think they’re the originators of red tape.
Joe Fairless: [laughs] Any tips? You just gave some great ones as far as “Be patient, know it’s a long process, get to the right people…” Any other tips before we change gears a little bit, as it relates to working with lenders and negotiating down the mortgages?
Mark Collard: Be willing to not take no for an answer and be willing to be somewhat unreasonable about your request. You have to approach them with a “I know more than you” or “I’m gonna do more than you” attitude. A lot of time we acquiesce to the person that answers the phone and their position and we buy into their lack of authority and the fact that they have to follow what I call “procedure number 9.”
I have a permanent script that’s built into me that says, “Hey, Mr./Mrs. Person That I’m Talking To, I totally appreciate your position and the fact that your corporate policy says XYZ, and procedure number 9 won’t allow you to do that, but in my world I’m actually in your position and I’m the owner of the business, so my procedure is bigger than yours, my corporate policy is bigger than yours, and we can do this one of two ways: I can run directly through you on the phone, it can be a very ugly and difficult conversation, or you can accommodate me and help me get to the right person, which is probably, starting off, your manager.”
I’m professional about it, but I’m very stern, and I can talk circles around most people that aren’t bank presidents… In some cases bank presidents, so I’m gonna get my way, it’s just gonna take time. So just be patient.
Joe Fairless: Now let’s talk about — how about the last deal you did, can you tell us about it?
Mark Collard: Actually, I’m working on one right now… It’s in process, it just hasn’t completely gone through, and I think that’s probably the highlight of everything.
Joe Fairless: Oh, really?
Mark Collard: Yeah, I’m working on a mobile home park right now, and the scenario is there’s an older gentleman that’s ready to retire; he’s got a mom-and-pop run (so to speak) mobile home park. I learned through reading and I went through a bootcamp on mobile home parks and that type of thing… They basically are mom-and-pop run and they’re very run down and always underperforming.
He shows a certain amount of money, he claims a certain amount of money, he’s got his gross expenses and his gross income, but his reality is different than what he shows on paper. So if that price is 300-400k more than it’s actually worth, that’s being nice… But recently I ran across a technique from a guy, just two weeks ago he was at an REI club here, and we like to attend the other ones to gain knowledge and network. He gave me a creative finance technique I’d never seen or used before, and immediately I understood it… So I put that on the board with this gentleman last week. It’s been about two-and-a-half months since we last talked, and he’s entertaining the idea right now.
Joe Fairless: Really? That’s cool… Isn’t it nice to learn some stuff and then immediately implement it?
Mark Collard: Well, what’s really cool is I pride myself on my finance knowledge, my creative finance techniques and I have a lot of experience with it; I constantly challenge myself, but I didn’t know this event was gonna be like that. My buddy told me, he said, “Hey, this guy’s got something a little bit different, you might wanna check it out.” Sure enough, it blew my doors.
He’s got this technique — I think he labels it incorrectly… He calls it a “zero percent down creative finance.” I think “zero percent”, saying that to somebody, even a seller, it turns people off. But effectively, he’s willing to listen to them… He calls it an “avatar seller” – he has a certain type of seller with a certain motivation, and he says “If they’re at a price where they hadn’t sold in a while, their motivation is getting stronger and stronger”, and it’s not unreasonable; go ahead and give them their purchase price, go ahead and give them their unreasonable number. Pay 300-400k more.
Basically, here’s what the deal’s gonna be: offer them their price or even more, offer them no money down terms, take over their loan, but basically you’re gonna do a seller carry, and whatever you pay them on a monthly, it’s gonna be 100% applied to the equity or to the payoff of the loan. So he basically says, “Mister Seller, I will give you (I’m just gonna use arbitrary numbers) $7,500/month for 12 years.” If you calculate that out, that’s gonna work out to be 1.1 million, which is the asking price. “You’ll be completely paid off and out of the picture, and I’ll own the property free and clear.”
Basically, their motivation is like “Wow, this guy’s gonna pay me X every single month…” They don’t think about whether it’s gonna pay down the mortgage, they’re just saying “That works for me”, and it gives them their price that they wanted. Basically, I’m gonna own a property in 12 years if he says yes.
Joe Fairless: Okay, I see.
Mark Collard: Now, that’s [unintelligible [00:14:11].01] all the due diligence, but that’s the effective concept of it.
Joe Fairless: Yeah, thank you for sharing that.
Mark Collard: It’s a gentleman named Chris [unintelligible [00:14:20].10] He’s an attorney and a creative finance guy, and I’m very impressed with his program.
Joe Fairless: Thanks for giving him a shoutout; I don’t think I’ve interviewed him. Maybe I should interview him. I just wanna recap, though…
In this scenario, it’s a no-money-down seller finance scenario, where you pay them their asking price – if they’re being unreasonable, pay them their asking price; or even if they’re not, you still could use this, but this is particularly good for that. You give them, say $5,000 a month, times 12 months in the year, say, for ten years… And whatever that amount is, whatever that total is, that’s their overall purchase price that gets paid to them.
The money that you pay them, you said it goes to the principle payment of what you owe – is that correct?
Mark Collard: That’s correct. Starting month one, 100% paydown.
Joe Fairless: Say they want $500,000 for their property – then you could pay them $60,000… It would be eight years and three months. So a $500,000, for $5,000 a month… “I’ll give you $5,000 for every month for eight years and three months”, and then obviously, when we run our numbers, we have to conservatively project that it’s going to cash-flow above and beyond all the expenses, which are including this $5,000 right?
Mark Collard: Correct.
Joe Fairless: And the way we come up with the amount we can pay them a month is by identifying how much we can conservatively expect to receive for the property, and then maybe half it… Or we can make it 50 years, or whatever it is.
Mark Collard: Sure, he actually has a spreadsheet he uses, and everything… I didn’t go to his actual class, I was just in that 45-minute share he did. My mortgage knowledge allowed me to pick that up and get it, and I’ve got so much experience applying similar stuff that it just made sense to me. I don’t have to scrutinize it for hours and hours to know it works. I’ve talked to those sellers for years and years and years, I know they’re out there.
Joe Fairless: Yeah, that’s cool. How did the conversation go when you went back to the mobile home park person?
Mark Collard: It was exactly as Chris had said it would be… It was identical. The motivations were there, all his issues were there. He had a couple of other issues; he needs a little more money on the front side, and he explained to me why, and those were personal reasons for himself, so… That won’t be a deal breaker, it would just money in, and we have a smaller number to play with or less time to pay on it… But he didn’t blink at the idea of 150% paydown on the mortgage, and he was more focused on his needs, and “Hey, I just need a bigger chunk of cash upfront.” That’s kind of our negotiation point right now.
Joe Fairless: That’s a fun share, thanks for that.
Mark Collard: Yeah, you bet!
Joe Fairless: Alright, what’s your best real estate investing advice ever?
Mark Collard: Best real estate investing advice ever is – and I’ll say this to anybody, no matter how long they’ve been in the business – Robert Kiyosaki says that if you buy real estate for it to only go up in value, you’re a speculator, and I’ve stuck to that. So you do not have to buy real estate… You can buy real estate, and when you get to a place like me, you can [unintelligible [00:17:33].28] anything, but just because you can doesn’t mean you should.
You’ve gotta see your entrance, your acquisition strategy, and you’ve gotta be able to see money on the backside, either cash flow or through a discount. So you don’t have to buy real estate. Learn to say no. There’s several pieces of his advice in there.
Joe Fairless: Yeah, absolutely. And what is an example of a property that you said no to, if you can think of one?
Mark Collard: One of my favorites… Actually, my partner today – his name’s John Lee, he’s here in Vegas and he runs the Outback with me – when I was training him and kind of getting him into the Outback mode he brought a property to me, and one of the fundamentals that I practice is that we buy based on a particular MAO, and we don’t deviate the MAO. I’m sure you know what that is…
Joe Fairless: No, what’s MAO? I don’t know what that is.
Mark Collard: It’s a Maximum Allowable Offer. It’s a predefined [unintelligible [00:18:21].19] the ARV or the actual value of the property of what we think we can sell it for. So one of the things that I’ve learned, especially being here in Vegas, is that dollars and dollar signs and numbers make us intoxicated, but percentages never lie. I always translate my profit to a percentage, so the percentage doesn’t get me intoxicated; it’s not very sexy, it’s just like, “Hey, if I’m gonna make 13% return on investment in a couple months – cool.” If I keep that number a number, and it says “Hey, you’re gonna make $82,000”, I’m like “Wow, that’s a lot of money”, right?
Well, in this particular case, the $82,000 translated to a percentage that was way under our profit model, so I stopped in kind of mid-sentence, so to speak. And he says to me, “How does this not make sense?” I said, “Well, it makes sense from the standpoint of you’re looking at the dollar amount. Yes, $82,000 is a lot of money, but you just blew the model out of the water. Do we invest that way?” and he looks at me and almost gets in tears, and he was like “No, we don’t. You’re right, this is no deal”, so we said no.
He was already counting dollar signs in his head, but it was an exciting and permanent learning point.
Joe Fairless: That makes a lot of sense to me. The one question I have where I can see someone going and taking the opposite argument is if there is, let’s say, million dollars worth of profit, and it’s like maybe a 8% return… But then you could in theory get 16% return on a bunch of smaller deals, the ease of transaction of management of this one, albeit less return, and the risk, where you’re not having to do a lot — well, I guess it could be argued both ways, because all your eggs are in one basket, versus being spread out… But the point is you might be able to get the same amount of return or less return on only one deal, whereas you have to do a lot of other deals to get a faster return.
Mark Collard: Yeah, and I wouldn’t disagree with your logic in your statement, but the reality for me is that risk is relative to what you know; I learned that from Kiyosaki, as well. For me, it’s about what you have at risk. If I have to put a lot at risk to get that 8%, it’s not worth it because that’s beyond my model.
I know a lot of people can justify “Hey, for $100,000 deals maybe you say no, but that’s a big chunk of money”… No, everything for me works the same, and I learned that in the mortgage business. If a lender loans 80% LTV and they want 20% down, there’s a reason… And just because it’s a big deal doesn’t mean you can fudge the numbers. Percentages always worked the same. The market can shift 5%, 10% on a million-dollar property just like it can on a small property, and the percentages and the models keep you safe and prevent you from making mistakes.
Joe Fairless: I like it.
Mark Collard: I can understand the logic, but I’m committed to not doing that.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Mark Collard: Yeah, let’s do it.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Mark Collard: Outwitting the Devil by Napoleon Hill, his most recent one.
Joe Fairless: Best ever deal you’ve done?
Mark Collard: It’s a scratch & dent lender, I bought a property subject to… Within 90 days I put up 100k and I got half a million back in 89 days.
Joe Fairless: What’s a scratch & dent lender?
Mark Collard: [laughs] It was back before the meltdown — actually, it was in the middle of the meltdown. It was a lender that goes out and buys subprime debt that never gets paid. So it was a 1.4 million dollar loan and it never made one payment.
Joe Fairless: And how did you make that money?
Mark Collard: I discounted the debt. I called the lender, the lender said “Hey, we’ve already sold this loan off”, and I said “Well, who did you sell it to? It just now went delinquent.” They said, “Yeah, there’s a scratch & dent lender out of New York.” They gave me the number, I called them and I negotiated… It took 89 days and we were able to sell the property and discount the property by close to half a million dollars.
Joe Fairless: Best ever way you like to give back?
Mark Collard: My time. We call ourselves investors in man and land, in that order, and I always consider that a relationship is way more important than a deal, so we always put people first in the transaction. We meet tons of people, we give our time. We have a statement that we say, “Everybody’s worth five minutes”… And you encourage them, you give them ideas, you share your resources and you never know what’s gonna come back.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Mark Collard: Getting intoxicated and basically buying too many properties too fast. I’ve done that twice.
Joe Fairless: You were literally drunk?
Mark Collard: [laughs] No, intoxicated is not so much an actual inebriation, it’s buying real estate with your ego versus your models.
Joe Fairless: You live in Vegas, I wasn’t sure. I had to clarify. [laughter] A lot of fun stuff happening over there.
Mark Collard: Understood.
Joe Fairless: It makes sense. Where can the Best Ever listeners get in touch with you?
Mark Collard: They can reach out to me at any time, coachcollard.com, or you can e-mail me at firstname.lastname@example.org. My phone number is 702 625 21 07. Please, just give me some grace, because I don’t call people back very quickly. Feel free to text.
Joe Fairless: Alright, well you’re the exact opposite of me… I hate text messages. I hate them with a passion. Mark, I did love our conversation though, on the opposite end of that… Holy cow, some really practical piece of advice. Three things are standing out in my notes. One is on your second transaction, how you negotiated with the lender from $17,000 to $1,500, and you gave some examples for how to do that.
Two is the mobile home park that you’re working on, with the zero money down, seller financing structure, and you discussed how to approach it that way… And then three is your percentage thing. I like your quote, “Just because you can buy, doesn’t mean you should buy”, and translate the profits into a percentage – I love that stuff. We talked about how we might think of it differently, but how you’re holding steady with your thought process and appreciate that.
Thanks so much for being on the show, Mark. I hope you have a best ever day, and we’ll talk to you soon.
Mark Collard: You as well, thank you very much. I enjoyed being on the show.