JF1757: Money Isn’t Everything (Or Is It?) Millionaire Coach Explains How To Live Wealthy & Happy with Krisstina Wise

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She was very sick, and had to spend $250,000 to save her own life, at that time, money was everything because it was needed just to continue living. Krisstina had money saved fortunately, and was able to bounce back from being sick. Now she helps people earn more money, or learn how to manage and live with money in a better way, leading to happier lives and thriving businesses. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“It’s more about learning and growing than it is about making more money” – Krisstina Wise


Krisstina Wise Real Estate Background:

  • Real estate investor, Millionaire coach, and creator of several multi-million dollar businesses
  • Author of the Amazon Best-Seller Falling for Money
  • Based in Austin, TX
  • Say hi to her at https://wealthywellthy.life/
  • Best Ever Book: Dollars and Sense


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


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, Krisstina Wise. How are you doing, Kristina?

Krisstina Wise: I’m doing great, thank you.

Joe Fairless: I’m glad to hear that, and looking forward to our conversation. A little bit about Krisstina – she is a real estate investor, a millionaire coach and creator of several multi-million-dollar businesses. She’s the author of Falling For Money, and she’s based in Austin, Texas. You can go check out her website, there’s a link to it in the show notes page. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Krisstina Wise: My background was in real estate, so that’s my claim to fame. I had a leading real estate brokerage, nationally known as the real estate destructor, innovator. I played that game for a long time. I got really sick in 2013, fell off the grid because I needed to go into life-saving mode. Coming out of that, I had this really a-ha moment on my proverbial and literal deathbed. Number one, money matters more than anything, because in my case, money saved my life. And not earning income that most people talk about business income, earning income, how to make more money, how to grow your business, how to scale your business, how to 10x your business, whatever the case is – it’s that I was able, because I had a great business going, that was leveraged and could work without me, 1) I had some income coming in, but 2) because I had liquid cash and other (maybe not so liquid) assets, I was able to save my life, have the money and have access to what ultimately saved my life. It cost me a quarter million dollars to save my life unconventionally.

At the same time, I also realized that life isn’t just all about the money either, because I was so money and investment and passive income focused, and business focused, and success focused, and achievement focused, I was missing my life. Then all of a sudden I realized “Holy cow, I’ve been so focused on achievement, I’ve not really even enjoyed my life. In fact, I don’t even know what enjoying my life means, other than to make more money.”

So I really went on this search after that to figure out “Okay, what am I good at outside of real estate? What do I wanna do for the rest of my life if I get another chance?” and it just kind of came to me that I love teaching people about money – the importance of it, how to earn it, how to save it, how to invest it, and the meaning behind that. And just kind of get out of this grind and out of this game of more, and just getting content with “How much is enough? What are we after? How do we get there? How do we enjoy our life while we’re creating and producing and building and growing our balance sheet?”

Joe Fairless: At what point did you write that book, “Falling for Money”?

Krisstina Wise: I wrote that right after I came out of being sick… And funny enough, in 2012, before I got sick, if anybody had said “Christina, you’re gonna be a financial author, you’re gonna teach money, money mastery, money investing… This is what you’re gonna do”, I’d have been like “You’re crazy. I’m in real estate sales, brokerage, technology, advisory, that type of thing. This is my world.” So I would have said, “No, there’s no way.”

After I came out of being sick, I actually just sat down to write a blog article for the few people that – after I fell off the face of Earth – still were wondering who I am… Which, by the way, is very humbling, because we think we’re really important, and then once we’re out of the game for a few months, people go on to the next person that’s important. So it’s really humbling… “Wow, I’m not as important, or great, or amazing as I thought I was. The real estate world went on just fine without me.” But the few people that were still maybe hanging on and wondering, I thought “I’ll sit down and write a blog article, say how I’ve been really sick, I’ve been out of the game, but I’ve come back.” Just a little bit of an update; I wasn’t giving the full story, but giving an update.

And just the most amazing thing happened. Also, if somebody would have said “You’re gonna be an author and write a book”, I’d be like “I can’t write. I’ll never be an author. That’s not on my goal sheet.” And I sat down, and a book came out of me. The muse took over, a book came out of me, and it was all about money and this journey and how important it is. That was my message, that says “Alright, Krisstina, this is your next phase of your life, is to help people get really good at money, and investing, and to work towards financial freedom, for real.”

Joe Fairless: In your book, it talks about establishing a healthy love affair with money. Will you define that a little bit, to talk about what that means?

Krisstina Wise: Yeah, the way I think about money – it’s really looking to have an intimate relationship with it. We tend to be so screwed up when it comes to money. One, people either have a mindset that they’re not worthy, or that they can’t do it… So we either have under-achievers when it  comes to money, meaning they just can’t quite earn enough, no matter what, and then we have over-achievers with money, meaning they bury themselves through just earning more money, and they get caught up in that, and really with this dialogue that “I’ll just go make more money.” But one way or another they’re just in a grind, and there’s no real meaning to it, other than just love of having more. So our egos get attached to having more money, and then what money can buy, and being on that achievement track, and just that external validation track.

So really where I wanted to take the reader was how could we reverse-engineer it, and just get really good — like, what is our definition of  a good life, and what is meaningful, and how much is enough to live that good life, meaning how much is enough to live the lifestyle that we’re good, and content, and we have space, and time, and we’re just not overwhelmed, and stressed, and after the More game. And then with that, just really learning to love the money and what it can do, and having really positive emotions about it, that are healthy, and we’re connected to a really healthy narrative and healthy goals… And our body, our number one asset as well. A big part of our investing isn’t just in real estate, isn’t just in some type of assets to build our net worth and our balance sheet. But if our body is our number one asset — one of the reasons that I got so sick is that I just lived a life that was unsustainable. I was just on the go all the time, and I didn’t even slow down, because I was in the race for more.

So if our body is our number one asset, it’s like “Okay, how do we even organize our thoughts and feelings and real dollars around investing in us, investing in our well-being, investing in our health, mental, physical, emotional health, investing in what’s important to us, experiential… And again, getting closer and connected to a narrative we build of “What truly is a good life outside of this concept of More?”

And then with that, we can be very grateful for the money that we have and that we earn, and make it a life journey to grow. We never wanna stop growing, we never wanna stop learning, but it’s more about growth and learning and experience than it is about money. But then at the same time, make no mistake, it’s getting really good with the money for the right reasons, because we have a really positive relationship with it, and we’re after money for the good it can do, for ourselves, our families, our legacies.

Joe Fairless: So what are some practical tips, if the listeners are nodding their heads like “Yes, that sounds great. I want to be more about growth and experience, and when I think about money, I want to have positive associations with it, so that it empowers me and propels me into things that are better for me health-wise, and I’m able to do more good, versus just chasing after a dollar for the sake of increasing my ego, either consciously or subconsciously?” So assuming they’re nodding their heads “Yes”, what are now some practical tips that we can do to act on that?

Krisstina Wise: Well said, and that’s just it. I think step one or tip one is recognizing whether or not we’re in the chase, and what I call “In the grind.” I have a lot of people, for example, that work with me, and they’re earning a million dollars a year take-home from their business, or usually that high income from business… But they still are after the chase, meaning it’s just “Where do I go from here? Well, I guess I’ll make two million dollars, and live that lifestyle.” So it’s just start from A and going to Z, and then figuring out “Where do we get to the place of enough?” and the answer is there’s never enough with that model, because wherever we are, there’s someone else to compare to that’s doing better, or has more. So all we can do is never be satisfied, never reach a place of enough.

So my tip is to start backwards. Again, it’s really sitting down and looking at “What does my life look like to have a good life, that isn’t stressed out, that isn’t overwhelmed, isn’t building a bigger business, with more employees and more problems? Where is my happy spot? What do I see myself doing, for real?” And it takes a while; it’s not necessarily easy to do, because it takes space and time to even sit down and conceptualize this. So it’s looking at that and then it’s quantifying it. Then it’s like “Okay, how much money does it cost to live that life?” And I like to say, take out the mortgage payment; if you don’t have a mortgage, you don’t have any car payments or credit card payments… We’re kind of taking out the debt. So if we don’t have debt payments, how much would it cost on a monthly or annual basis to live the life that I want, that includes some travel, it includes whatever your good life looks like? Quantify that.

My philosophy is we don’t need car payments, we don’t need all these other payments. We should be debt-free anyway… Like consumer debt; business debt is fine. Maybe we have a mortgage we can add on that, but then it’s just very easy to quantify, how much does it cost to live my good life? And that’s the goal number. Maybe we’ll surpass it. We probably will, when we look at this, but number one, the number is probably a lot smaller than we think it will be when we do that exercise and do that work.

So then we can look at “Okay, that’s my net worth number that I’m after.” Then we can work backwards and we create a plan as far as “How much money do I need to invest, over what time period?”, to hit that “good life” number as quickly as possible, whatever timeframe that is. Then from reverse-engineering, now we’re looking at “What’s my investment strategy? What type of investments am I looking at? Is it a short game or a long game? Do I need to do this over the next ten years, or do I have 20 years to play with?” We can work this backwards, and that’s all getting to what I call that “good life” number, that financial freedom number… Because the money game, when we know how much money is enough that we’re kind of after, hopefully we can blow it out… But that number alone can take some of the stress out, and then we’re living and working and building towards hitting a number that has real meaning, that’s attached to a real future narrative that we really want. It doesn’t have to be exotic, and luxurious, and [unintelligible [00:10:56].21] and yachts and caviar… I mean, it can be, but I think for most people that’s not what they would want anyway. It can be much simpler and much more meaningful for some.

Once we know that, then that’s what we’re working towards, since sometimes when we’re looking at the earning game, we don’t have to build a 30-million-dollar business to hit that number. Maybe we can get  to a 5 or 6 million dollar business and not have the stress or the headaches, because maybe I don’t want the trade-off of having 50 employees or 100 employees, or that type of thing. I want space and freedom and time and I want to be able to have as few obligations as possible.

So for me, when I’ve done that number, and what I value  most is my time and flexibility and freedom to do when I want, what  I want and how I want, with whom I want, then that means for me my business numbers are smaller than maybe somebody else’s, my business goals.

So once we work back, again, it just gives us more meaning, it gives us more direction, it gives us real numbers, so we know what we’re working for, and it keeps us mostly out of the More game, it helps us not overspend and not live lifestyles that ultimately will probably get us in trouble and steer us away, and send us on a different trajectory than the one that we’re after.

Joe Fairless: What if after we create the plan to hit the “good life” number, as you call it, it’s clear that we are going to need to, based on our current approach, have a company that has 30-40 employees, but we don’t want that, but in order to hit our number we have to build that up? What would you say?

Krisstina Wise: Well, our business is one way to get there. It’s ultimately however you’re going to generate enough income to produce, to have enough money to invest, so that you can start to build your asset value, build your net worth… Because ultimately, the money game, if we’re after financial freedom, the only real financial freedom means the cashflow or the income from our assets replaces our working income. So when non-working income replaces working income, then we have our freedom. That means I don’t have to go to work today if I don’t want to. I can close my business tomorrow if I want to, because all my assets are generating enough money to be able to pay for my cost of living. So that’s where I am, and that was my goal – I just wanted to get to the place where I earned enough, invested enough and had my plan to get me to a place of financial freedom as quickly as possible. And I got there quicker because my lifestyle expense isn’t as high as maybe a lot of people in my income bracket.

So my current lifestyle – it’s a great lifestyle; I’m by no means done, I’m still in the earning game and I’m still growing, and I got divorced last year and lost half my net worth, so I have to be back in the earning game anyway… But the idea is that all my assets, all my real estate passive income and my other asset income, and everything that I’m doing – that amount of money from those assets pays for the cost of my life. So now I get to choose what I’m gonna work on, and how much time I’m gonna spend in that type of thing. And if I wanna increase the cost of my lifestyle, I wanna add more to it, that means now I need to go earn a lot more, to invest a lot more, so that my assets are gonna grow to match my upscaled lifestyle.

It’s an ongoing game, but ultimately it’s all about how much income do we need to earn, and what are the methods for earning that income, that we have enough surplus to invest to build our balance sheet, assuming that our business isn’t our exit strategy, which is really risky, and/or we don’t have a trust fund that somebody else put all that money away for us to live off of.

Joe Fairless: Which we would just lose it later anyway…

Krisstina Wise: Exactly. [laughs]

Joe Fairless: So what are some successful investments or approaches that you’ve taken that have turned out well for you?

Krisstina Wise: Well, I’m always looking at my overall portfolio, and we’ve all heard the word “diversification”, and that type of thing… But why I love your show, and conversations like this, is to really try to help people break out of conventional wisdom and conventional planning and just conventional advising, meaning “Put money in the stock market, do some index funds”, that type of diversification, with bonds etc. And just whatever that more traditional retirement type old-school mentality is – that’s not the way we build wealth and get rich.

These conversations – it’s in the alternative investing world. When I’m looking at diversifying my portfolio, 1) I like to talk about – our balance sheet is a living organism, meaning the old school finance, set-it-and-forget-it, put the money in those “retirement accounts”, let these money managers take their fees and manage it, and hopefully you’ll have enough at this thing called retirement… That’s very risky, it doesn’t work anymore, and there’s a lot of other options. There used to not be other options, but now there are.

So when we’re looking at an alternative, this is a living, breathing balance sheet – that’s how I like to talk about it and look at it; it’s always changing, you’re always in it and working it, and saving and investing for the next day, and looking at different options in this alternative realm of investing, that is way outside of convention.

So obviously, real estate is an alternative investing. We love real estate, for many different reasons. But I don’t wanna be over-leveraged in real estate, because anything that is not diversified is a little risky. So I’m looking at my living thing like any type of investment; I’m always saving to have enough money to make that next installment in some type of investment. Usually in $50,000 chunks is what I’m looking at. So I might put 150k in, or 250k, or 350k. [unintelligible [00:16:10].25] I like to think in 50k chunks of savings.

So then I’m looking at — alright, well if I’m looking at my portfolio and think of it as a pie chart, and I’m looking at my overall let’s say 60% real estate… I am heavy in real estate, because I’m in real estate, I love real estate, and I get it, and it’s my passion, and maybe a buy/hold type cashflow… But I’m always gonna have a percentage that’s a little riskier that I might into other businesses, business ventures where I might have some influence and maybe can do some advising, and that meet my criteria for more private equity… And not traditional private equity, but private equity meaning investing in companies or people that I know that are starting businesses or going — I usually don’t like seed capital, but looking for growth and need some capital for scale and some growth.

I’m looking at some alternative stuff like life settlements or things that tend to be a little bit more on the growth side. I’m always looking at maybe putting in some funds — I have money in a big real estate fund, a women’s entrepreneurs’ fund, and things where I’m investing a percentage in the fund and let the fund managers try to go for an exit, kind of a VC-type model.

There’s just so many different options that are available today that are really exciting, and it’s fun to learn about these things, and have money in different places. Some of these, like a real estate fund that I just exited out of – it was a seven-year play; it was a great investment, by the way, because it was when the market was really down, and  invested in Phoenix and Florida when everybody said “Stay away from those markets.” They had great investments, and then those developments, that fund just sold out, and it was a beautiful check that landed in my bank account.

So those are looking at “Okay, this is probably a 5 to 7 year play.” I may collect a little bit of cashflow or dividends, but I’m really for the growth and the ROI on that, as opposed to cashflow… So I’m just looking at balancing out how much cashflow, how much growth, how much private equity, how much is pretty risky, how much is pretty safe… I’m a big believer in whole life insurance as a cash savings vehicle… And again, I’m just always building [unintelligible [00:18:11].11]

I’ve just put in — in fact, I’m right in the middle of it… I was just online right before we were talking in fact, and I’m ready to put in a $250,000 investment installments; one in an oil and gas opportunity, and another one in a life settlement opportunity, and looking at those. That’s taken out of cash, and I’ll save some more and build those up, and look for the next investment.

Again, it becomes very normal and fun, and you learn a lot when you have great options and advisors and people around you. You make some mistakes, but you learn with time.

I guess I’ll complete by saying that I just really encourage people to love their money, to be very intimate with it, know where every dollar goes, get really great at saving, so that you start learning to invest… There’s many options, like you guys, out there. Just work on growing your balance sheet to get closer to that good life number, that freedom number, and live the life you want, don’t live somebody else’s.

Joe Fairless: And then taking a step back and just thinking about it from your overall experience as an investor and as an entrepreneur, what is your best real estate investing advice ever?

Krisstina Wise: Just get started, just invest. Find great people. The biggest thing is that people don’t invest. They’ll talk about it, they’ll do research, they’ll read the blog, they’ll listen to your podcast and they just won’t take action. My advice is invest, just take action; get your feet wet and learn as you go.

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

Krisstina Wise: Let’s do it, let’s see what you’ve got.

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

Break: [00:19:42].18] to [00:20:27].23]

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

Krisstina Wise: Dollars and Sense, by Jeff Kreisler. Great book on how people misthink their money. That’s one of my latest reads, and what I recommend.

Joe Fairless: Best ever deal you’ve done?

Krisstina Wise: Best ever deal I’ve done… My best deals have been buying real estate in Austin, Texas.

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

Krisstina Wise: Oh gosh, I’ve made so many mistakes… My biggest mistakes are not reading the fine print.

Joe Fairless: Any particular fine print that you can think of that got you?

Krisstina Wise: My piece of advice to this would be hire experts, hire real attorneys and spend money to read the fine print. [laughs] I try to save the money and think “Oh, I don’t need those attorneys”, and they’re worth their weight in gold, so… Hire the experts.

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

Krisstina Wise: I love teaching money. I just really love to help people learn, and how to apply financial concepts that can get them out of the rat race.

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

Krisstina Wise: Probably the best way – my book is called Falling For Money, so just go to fallingformoney.com and get a free download for your audience. My name is Krisstina, so Krisstina.com. You can read my blogs, or find my podcast… Plenty of info out there if anybody wants to see what I’m up to.

Joe Fairless: You have Krisstina.com?

Krisstina Wise: I do, with a k and two s’s.

Joe Fairless: Yes, unconventional spelling, but still, it’s impressive to have just your first name .com. Nice. Well, Krisstina, than you so much for being on the show and sharing the approach that you take from a mindset standpoint with finances, and how you think about it. We talked about this in depth already, but I love the practical tips too that you gave. You really laid out the step-by-step process, which I have not read your book, but I have read a summary of your book, just whatever is on Amazon, and I know you have that laid out in detail in your book… So Best Ever listeners, if you want that more in detail, then go grab her book.

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

Krisstina Wise: Thank you.

JF1722: First Deal Was In Russia, Now Provides Investor Funds For Over $300 Million In Real Estate with Mike Krieg

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Mike’s real estate career started off a little unusual compared to most, as his first deal was in Russia. After that deal, Mike started buying duplexes and small multi’s in Texas. He wanted to get out of the landlord life, so he sold half of his portfolio. Now Mike is raising capital for deals, and has helped investors acquire over 3,800 multifamily and self storage units. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Real estate investing is a relationship business” – Mike Krieg


Mike Krieg Real Estate Background:

  • Co-founder of Steeple Rock Partners, LLC
  • Has been investing in real estate for 14 years
  • Has helped provide investor funds to purchase 3,800 apartment and self storage units worth $300M
  • Based in Austin, Texas
  • Say hi to him at https://www.steeplerockpartners.com/
  • Best Ever Book: Think and Grow Rich


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


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

Mike Krieg: Doing well, thanks Joe.

Joe Fairless: Well, I’m glad to hear it, and you’re welcome. A little bit about Mike – he is the co-founder of Steeple Rock Partners. He’s been investing in real estate for 14 years. He’s helped provide investor funds to purchase 3,800 apartment units and self-storage units worth over 300 million dollars. Based in Austin, Texas. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Mike Krieg: Yeah, I am in Austin, married, three kids. In addition to real estate, I am also an executive director of a non-profit (and the founder) called Storyline. With that we train and mentor young leaders from more than 25 countries around the world, so it’s a big passion of mine.

Primarily, with Steeple Rock Partners on the real estate side we raise capital for deals that we like, that our partners are personally investing in, so we invest alongside of our investors… And we primarily operate with multifamily apartments, self-storage and mobile home parks.

Joe Fairless: You’ve been investing for 14 years… What did you start out doing?

Mike Krieg: My very first purchase was actually in Russia. I had never bought anything before that. I was out of college, probably three years out of college, and bought a place in Russia, and 2,5 years later I sold it and we did really well. That’s a whole story I could tell you; we probably don’t have time for that.

Joe Fairless: Give us the cliff notes version. Anything worth saying can be said in a couple minutes, so what’s the cliff notes?

Mike Krieg: We were gonna be there for five years. My wife and I moved over there and we were mentoring college kids in one of the major cities over there, and we decided “You know what, the rents over here are going up $100/month, from $700 to $800…”, it was crazy the inflation… But all these things were selling for about 50k, 60k, 70k, and there were no taxes, so we just thought “What if we could buy one of these, and even if the market crashed and we lost 50% of our value, we would still come out ahead relative to renting?”

So we did all the research, and interviewed a bunch of folks… We had a bunch of American business folks that said “Hey, do not do this. The mafia is here. They take businesses. They’ll come in with AK47’s and force you to sign over your business”, or whatever… But what we realized was a lot of the Americans had never done it. There was a French business guy who had done it, so we followed his lead.

We raised some capital. We couldn’t borrow anything from the Russian bank; the rates were about 20% plus. So we raised capital in the U.S, wired it in and bought our flat. It was incredible. So that was my first purchase ever, and I had no idea how to do it in the U.S, so I came back here, and with all the costs associated with it — I was pretty bummed, because I literally paid $500 to an attorney in Russia to close it, and that was all of my closing costs.  So yeah, you can imagine the disappointment when I came back here and bought my first house in Austin.

Joe Fairless: You sold it and made a profit?

Mike Krieg: I did. We bought it during those years when oil was going up quite  a bit. They introduced the mortgage market for real estate during the time that we were owners, so it went up about 2.3x. It was a nice profit. Plus some of the loans I got were very low-interest loans. We had a few friends who gave us 0% interest loans. I think the effective right on the total loan amount was like 2.2%. So we paid off that loan pretty quickly.

Joe Fairless: That was the deal in Russia, and then you got back… Then what were some of your next purchases?

Mike Krieg: We came back to Austin and I bought my home here, and eventually we ended up turning that home into a rental property. I think that was probably the more difficult step, and really kind of when we shifted into becoming real estate investors, having a property, managing a tenant, going over there trying to figure out “Hey, do I fix that fan, or do I hire someone to do it? What kinds of things can I fix myself?”

We moved really about ten minutes away from the property, so there were quite a few things that we could do ourselves… But it was a pretty expensive property, it was a nice property. Then after that we refinanced it a couple of times and we bought other properties, primarily in San Antonio, Austin. Even back 7-8 years ago it wasn’t exactly a great cashflow market, so we went down in San Antonio [unintelligible [00:05:21].23] started buying duplexes, and houses, and things like that.

I kind of focused more on the nicer properties, so my portfolio wasn’t huge, but I really wanted to get nicer tenants, nicer properties. I was a landlord, and over time what happens, obviously – that becomes a part-time job. Some weeks it feels like a full-time job, and while it’s great building equity and it’s a great way to build a financial foundation, you realize that it doesn’t scale well. I know you’ve heard this and everybody talks about this, and a lot of our investors mention this as well – at some point you begin to think about commercial.

That’s when I began to think about “Hey, how do I invest in multifamily apartments?” I sold that portfolio and been investing alongside of our investors in bigger deals.

Joe Fairless: How much did you make when selling half the portfolio?

Mike Krieg: How much equity have I pulled out?

Joe Fairless: Yeah.

Mike Krieg: About a quarter million.

Joe Fairless: And when you say “pull out”, those are refinances, or did you actually sell them?

Mike Krieg: We sold… I had a property that I bought that was giving me a lot of trouble…

Joe Fairless: Which one?

Mike Krieg: It was a triplex in San Antonio. I didn’t like that experience; it was a mistake that I had made. Not a great market. That’s one of the lessons that I learned – when you buy something, you really wanna pay attention to the market. It was an earlier purchase, and I had a lot of issues with tenants, so I sold that one. Then I sold our very first one, which is our single-family house.

Joe Fairless: How much did you buy the triplex for and how much did you sell it for?

Mike Krieg: I bought the triplex literally off Craigslist.

Joe Fairless: Oh, wow…!

Mike Krieg: Yeah… And this is, again, where you’ve gotta be careful. Just because the numbers make sense does not mean you should be in that deal. The numbers were amazing, but the market was tough. I bought it for 130k, and it was an interesting deal because it was a seller finance, and the seller thought he could take the note and go into the secondary market and sell that, and get pretty much dollar for dollar with it. Once he realized he couldn’t do that, he came back to me and he shaved 10k off the price. So really I got it for 115k, and I ended up selling it for about 160k.

Joe Fairless: So you made money on that deal.

Mike Krieg: I did make money on it.

Joe Fairless: How much did you put into it? I guess I should have asked that question.

Mike Krieg: Yeah, I’ve put about 15k into it.

Joe Fairless: Okay. So you were all-in around 130k, and you sold it for about 20k-30k more than that.

Mike Krieg: Yeah. And it was cash-flowing, it was producing pretty well. But again, with the amount of time I was spending with it, I didn’t think it was worth it.

Joe Fairless: Instead of selling it, why not keep it and do a cash-out refinance, and then put a property management team in place?

Mike Krieg: Yeah, I just didn’t wanna deal with it. This is what we’ve found here – there are certain properties that property management companies just don’t wanna touch, and there’s certain areas that they don’t wanna deal with, because they see what kind of tenant is in there. So this was a difficult property even for them, and the very first year I bought it/owned it we did have property management on it, and they actually fired me. They called me at the end of the year and said “Yeah, we don’t wanna do this anymore.” [laughter] I’m like, “Oh, no… This is terrible!”

So I ended up dealing with it for another 2,5-3 years, and I just decided “You know what, this is just time to sell. We’re gonna let go of this and move on”, so that’s what we did.

Joe Fairless: That single-family house – what did you buy it for and how much did you put into it, and what did you sell it for?

Mike Krieg: Bought it for 274k, sold it for 412k. What we put into it — we lived in that house; that was our primary home for about 4,5 years, so I’m not exactly sure what we’ve put into it. It was…

Joe Fairless: Not much?

Mike Krieg: Not a whole lot.

Joe Fairless: Okay. I assume that the appreciation that you mentioned, almost 150k – is that just “Congratulations, you bought in the right market at the right time?”

Mike Krieg: Yes, that’s right.

Joe Fairless: Okay, cool.

Mike Krieg: Austin has been growing pretty significantly, pretty robustly for quite a while. At the time we bought – it was 2008 – I thought “274k? You’ve gotta be kidding me.” This thing was a 2,000 sq. ft. 3/2 house. We had two kids, and I’m thinking “This is nuts.” We needed to be buying something that’s about 50k less, but you know, it’s a  school district, it’s South-West Austin, it’s a great part of town, and now 400k was probably a good deal for that house. It’s all relative.

Joe Fairless: So you took that money and you started investing in what?

Mike Krieg: We began investing in larger deals, apartment communities, apartment complexes. We got a new opportunity in San Antonio to start. My partner and I at Steeple Rock Partners – basically, we began a private investment company and team up with several operators; obviously with you, and Dave Thomson, and other folks, and started investing… And also some self-storage deals. We like storage for a lot of reasons.

For me personally, it really began with “Hey, this is gonna make sense for me.” I can be truly passive, having underwritten several deals. Initially, we were gonna buy our own deals, and we were underwriting 20 and 30 and 40-unit deals here in Texas… And decided that space, about 100 units, is just not a space we wanna be in. It’s a little bit more difficult, the scale; you’re paying the same legal costs for something like that that you would for 200+ unit deals. So we didn’t like that space, and we just decided we didn’t wanna invest in that middle ground… So we just teamed up. Commercial real estate is a team sport, and we decided that’s the way we wanna go.

It really began with “Hey, this is something we wanna invest in”, and every deal – we look at it that way. “This is where I wanna put my capital, this is how I wanna develop passive income.” I’ve got friends and family and others who are interested in this as well, and over time that group of investors grows steadily over time. That’s how we’ve been operating.

Joe Fairless: Tell us a deal that hasn’t gone according to plan.

Mike Krieg: So far in commercial I would say we haven’t had that experience yet. We haven’t seen something go sideways at all. The deals that I’ve done, something that didn’t go to plan — I think I would probably have to go back to residential landlording days for that, and it’d probably be the triplex that we talked about. I had tenants getting pulled over by the police because there’s a drug house next door; I had sex acts being performed on the back lawn, and tenants calling me saying “Hey, what’s going on here?” Terrible things like that. Again, at the end of the day I made money on it, but that’s not the kind of business I want.

I did however get pretty involved with the community there and got pretty involved with the police department. We ended up cleaning the house out, which was quite an interesting experience, and it kind of feels good to think you’re kind of cleaning up a street. But it wasn’t exactly what I had planned to do. [laughter]

Joe Fairless: “I was gonna make some monthly cashflow…”

Mike Krieg: I don’t want them making monthly cashflow on my property like that.

Joe Fairless: [laughs]

Mike Krieg: But anyway, I had a deal, too — I had a contractor who was gonna do a wholesale deal, or something. He was working with me on this triplex and I gave him 3k, and he just completely disappeared. I never saw him again. I was like, “Okay, well, we need to be more careful about some of these guys.” That was a ways back; some of those early birds are healthy for you, and you realize “You know what – I’m never gonna do that again.” And thankfully, that was 3k here, and a couple hundred bucks over there… So yeah, I’m thankful to have learned some of those lessons early.

Joe Fairless: On that $3,000 contractor thing, not to put salt on wounds, but what gave you the confidence to give him $3,000 up front?

Mike Krieg: Well, we had done some work together. He had done several projects on time, and he was very faithful, and he did good work for me on about 3-4 different projects. He was also a friend of my brother. My brother actually introduced me to him. I found out later my brother didn’t really know him that well… He had known him, I guess, just from the restaurant that he used to own… But we had some history, and everything. I guess I just didn’t know him long enough. Sometimes I think it’s just time, when you begin to see a person’s character, and you begin to see some of the things they’re dealing with in their life.

I think part of it is he had some life challenges. He had a wife who was going through some sickness, and stuff like that. I can see where a person like that can kind of decide “Mike’s doing well, I’m not. This is gonna be fine.” I think he just sort of justified that, kind of  a thing… So I’ve forgiven him. We obviously don’t do business together anymore, and I tried to reach out to the guy and say “Hey, listen, I understand. You’re going through something difficult, and I forgive you”, but he hasn’t gotten back in contact.

Some of that stuff happens, and you learn from it, and in the future really getting basic things like a W-9 from someone — I did not do that in his case. And those are things that when you’re starting out in business you don’t think about; maybe nobody tells you this, but those are things that are very important, and you need to be getting information on the people you work with.

Joe Fairless: Yeah… It brings up such a good point. When we get a referral from someone, just simply asking them “Hey, how well do you know this person?” Because I am guilty of referring people to others, who I don’t know very well. I may or may not have done business with them, or maybe they’re just someone who I’ve heard of, and perhaps whenever I give referrals I should also qualify “Hey, here’s someone who I’ve heard about, but I personally haven’t worked with them.” And then on the flipside, if I’m given referrals, just to ask a follow-up question, “How well do you know the person again?” I think that brings up something that would be very helpful for everyone.

Mike Krieg: Oh, yeah. I had a contractor I was working with, and on Bigger Pockets somebody asked me “Hey, who’s a good contractor?” and I actually put his name in a forum post…

Joe Fairless: Oh, no…

Mike Krieg: And it’s terrible, because what happened was he did a couple of really great projects for me, and then [unintelligible [00:15:38].04] kind of flaked out. And I’ve been getting e-mails for about a year and a half… “Hey, who is this guy? Can I have his contact?” So I have to continually go in there and say “Hey listen, he flaked out. I can’t recommend this guy. I’m sorry.” So I have to continue to do this… But that post is on there for eternity. So hey, if you’re a Bigger Pockets person and you’re hearing this, don’t e-mail me about Carlos, because it’s [unintelligible [00:16:00].29]

Joe Fairless: Well, you could post on that at the very bottom and say “Hey, I no longer recommend this gentleman.”

Mike Krieg: Yeah, you’re right. I can go find that–

Joe Fairless: That way it’ll stop– or discontinue most of the messages. I had a similar experience… I worked with someone who consulted me on apartment investing when I got started, and I was complimentary of the person on Bigger Pockets at the time, but shortly thereafter I realized I should not be complimentary of the person… So then I went in and I updated it, and I didn’t bash the person, but I just simply said “I can’t recommend this person any longer”, and that has not stopped the messages about that person, but it decreased the amount of messages I get about the person.

Mike Krieg: That’s good advice. I’ll have to follow up on that. That’s great.

Joe Fairless: What is your best real estate investing advice ever?

Mike Krieg: I think real estate investing is a relationship business, so I think for me if you serve other people the way you wanna be served, if you put the interest of others above your own, I think you’ll do well. Sometimes that means not doing something that is in your interest, because it’s not in the interest of somebody else’s… But I think for me that applies to a tenant, or a resident, investors that you’re bringing into a deal… That’s just age-old advice that I think goes a very long way.

Joe Fairless: Do you currently have a full-time job?

Mike Krieg: Yeah, I am working as the executive director for a non-profit, Storyline… So I’m really kind of two-timing it.

Joe Fairless: Yup. And the reason why I ask – I was wondering how the skills you use in that position have helped you in your real estate career.

Mike Krieg: I think that’s it… I really think that being in the non-profit world — it’s all about people, and our entire organization, the whole purpose of it is to build young leaders and to build people. So when we have investors, it’s not just about getting people into a deal, we really want to get to know and build a team and build a community around our people. I have a desire to have relationships with our investors and with our investor community, and get to know them, and had just wonderful visits over dinner, and lunches, and coffees, and getting to know them and their families… We’re all a team, and everybody’s accomplishing something, and real estate is really just a means to a greater purpose that we have. I don’t think it’s about a number, I don’t think it’s about some net worth amount… It’s really a means to an end – who are the people that are in your life and in your community and in your family that you’re called to serve? I think that’s really what it’s about.

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

Mike Krieg: Yeah.

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

Break: [00:18:46].28] to [00:19:53].07]

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

Mike Krieg: I like Napoleon Hill’s Think and Grow Rich. I know it’s primarily about building wealth, however I do think that there’s lots of stuff in there, whatever goal you have in life. It could be just simply being a better father, being a better husband. I think there’s a lot of stuff in there that is super-useful for anybody. I love that book.

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

Mike Krieg: Not paying attention to the market or the submarket.

Joe Fairless: And will you elaborate on that? I guess the San Antonio deal, the triplex, right?

Mike Krieg: Yeah, it just wasn’t changing fast enough. It was an area that was close to downtown, but… Assuming it’s gonna change a lot faster than it actually did.

Joe Fairless: Best ever deal you’ve done?

Mike Krieg: I would say probably my Russia deal.

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

Mike Krieg: Again, I’d say through the organization that we’ve founded, Storyline, and mentoring young leaders around the world.

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

Mike Krieg: You can contact me at mike@steeplerockpartners.com, or on my Bigger Pockets.

Joe Fairless: Mike, thank you for being on the show, talking about the Russia deal, the triplex in an area that was very challenging, and what you did as a result of that to get it to be the best situation possible. And then the single-family home, buying in a very good, appreciating market, as well as how you’ve evolved your approach to multifamily, as well as self-storage, and the contractor thing, too. It’s a good referral story, where we’ve got to make sure when we get referrals to ask them how well do they know these people. Because they might think they’re doing us a favor for giving us referrals, but in reality it might turn out to be the opposite of a favor, because they might not know the person well, and then we’re gonna get in some trouble.

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

Mike Krieg: Thanks, Joe.

JF1698: Need Help Managing Leads? Listen To This Episode with Dan Schwartz

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Best Real Estate Investing Crash Course Ever!

Leads – they can make or break your business. Not so much the leads themselves, but how you follow up with those leads. Dan is an expert in that area, and that is what he does with his business. He now helps investors get leads, and follow up with them, in exchange for a 50/50 split of deals with his trusted partner. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Cold calling is harder, the harder it is to scale, the better it will be and less people will be doing it” – Dan Schwartz


Dan Schwartz Real Estate Background:

  • CEO of InvestorFuse, a lead management workspace for real estate investors
  • Has helped hundreds of investors automate part of their business
  • Based in Austin, TX
  • Say hi to him at https://www.investorfuse.com/
  • Best Ever Book: Rocket Fuel


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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,  Dan Schwartz. How are you doing, Dan?

Dan Schwartz: I am doing really well, thanks for having me.

Joe Fairless: Yeah, my pleasure. Nice to have you on the show. A little bit about Dan – he is the CEO of InvestorFuse, which is a lead management workspace for real estate investors. It’s helped hundreds of investors automate a part of their business. He’s based in Austin, Texas, and the website is investorfuse.com, which is also in the show notes page. You can click through there.

With that being said, Dan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dan Schwartz: Absolutely. It’s been a while since I’ve been on the show, but I was on very early on… Things have rapidly changed since then. My background is as a wholesaler; I started flipping houses right after I graduated from university, with a marketing degree, and realized that having an infinite income is much better than a salary… So I got into wholesaling, while simultaneously playing music on the road, which essentially forced me to get really good at building systems and figuring out how to fire myself from the local tasks that I couldn’t physically do, because I was on the road all the time.

That sort of led to the creation of InvestorFuse, which is essentially a CRM to help investors automate a lot of their lead management duties that plague most investors, who really aren’t that good at follow-up, which is like the essential thing that you need to have in place in order to consistently do deals. That has spawned a really nice community of investors who are systems-minded. Our whole goal is to help investors fire themselves from their business, so they can focus on the essential tasks in their business and in life. That’s where we’re at now. Over 600 companies on the platform.

Joe Fairless: Cool. Well, congrats on the growth. How long have you had the company?

Dan Schwartz: I started it in 2015.

Joe Fairless: 2015, and we are in the early stages of 2019, so about four or so years. You’ve got how many companies, you said? 650?

Dan Schwartz: 650 on the platform. There’s a legacy version which is on Podio, which a lot of your listeners might be aware of… And the new platform is rolling out as we speak, InvestorFuse 2.0. About half are on that now.

Joe Fairless: Cool. So what have been some lessons you’ve learned over the last four or so years as a CEO of a real estate software company?

Dan Schwartz: Well, I’ve learned that real estate investors require simplicity. Complexity, basically, is the killer of real estate businesses. People have analysis paralysis when there’s too many systems and tools. Most investors just wanna put deals together and not have to worry about technology, or processes, and systems. I think it’s important just to create as many simple processes in your business as possible, and remove yourself from a lot of the tedious stuff.

Joe Fairless: What are some examples you’re referencing when you say “Real estate investors require simplicity”?

Dan Schwartz: Well, a big thing that we believe is the 80/20 principle. 80% of your results are gonna come from 20% of your activities. If you really think about your day in terms of what actions are actually bringing in revenue, those are typically the actions that you should be architecting your business around, so that you’re only doing those actions.

For instance, negotiating major deals, hiring amazing team members, designing systems to remove yourself from a lot of the activities in your business, educating yourself, taking care of your body – those are the essential things that really people should be focusing on. Those are kind of — I wouldn’t say simple things, but those are the high dollar/hour activities. And then a lot of the tedious stuff that still needs to get done, like doing your marketing, analyzing the deals, pulling the comps, writing up the offers, managing the VAs – all that stuff needs to get done, but not necessarily by you. So it’s just creating an awareness around the actions in your business that actually bring you money, and trying to remove yourself from everything else… That’s kind of the long-winded answer to that.

The simple way to do your deals is just do the things that you’re good at.

Joe Fairless: And knowing that you have that insight as a lesson learned over the last four years with your company, how have you applied that to your business?

Dan Schwartz: I realized that I am not good at the details part of things. I’m sort of a more visionary type in my business… So I’ve surrounded myself with folks that are better at the details, that are better at handling the technical side of things, and the customers, with my software company.

In my real estate company, how I did that was – again, it’s just kind of hiring folks that are gonna compensate for your weaknesses. I have a good book recommendation that kind of dives into this, if you’d like me to share…

Joe Fairless: Sure.

Dan Schwartz: There’s a really good book called Rocket Fuel, which is essentially a book that talks about the dynamic between business partners – the visionary and the integrator. I think that is an essential piece to my success – having a business partner that compensates for my weaknesses. I sort of play offense as the visionary, and he plays defense as the integrator. You see that as a pattern across a lot of the most successful companies.

Joe Fairless: How did you meet your business partner?

Dan Schwartz: We did a lot of work together. We “dated” before we got “married”. We worked together, essentially helping investors build systems and automate their CRMs using Podio. I had a lot of clients that needed my help, and he had some skills that I didn’t have to actually build out systems for people. He was doing this by himself, as a consultant. I had a bit of a following at that time as a wholesaler and systems guy, and we started working together, just helping investors out. Eventually, it just made sense that “Man, we work really well together. Let’s turn this into an actual scalable company.” I would say that’s a good strategy for folks – do some deals with some people, just as partners or consultants or JVs before you actually partner up and split equity in your organization.

Joe Fairless: Are you still wholesaling deals?

Dan Schwartz: I am doing some marketing on the side, where I generate the leads and split the deals 50/50.

Joe Fairless: Okay. So you’re still involved in the transactions, you just focus on a particular area of the transaction, and you’re doing 50/50 profit splits.

Dan Schwartz: Right.

Joe Fairless: Does that go back to the 80/20 thing, and focusing on things you enjoy?

Dan Schwartz: Exactly. I enjoy setting up the mechanism for leads to come in, and I don’t wanna be involved with the process after that. Also, just from a time standpoint, I’m pretty busy running InvestorFuse, so I don’t have time to be actively talking to sellers and doing deals, and such… So with the systems and information I know, I’m just leveraging that… Doing the most modern forms of lead generation, sending those leads to a trusted partner in Baltimore, and then splitting the deals 50/50.

Joe Fairless: And what are the most modern forms of lead generation?

Dan Schwartz: Well, right now it’s cold calling. It’s pulling a very targeted list of direct sellers, getting their phone numbers via a skiptrace service, and then one by one cold-calling them, using systems like Mojo Dialer, just to get these potential sellers on the phone, and determine if they have a house to sell or not very quickly. And if they do have a house to sell, that lead gets piped over to my partner, and he converts that into hopefully a profitable deal.

Joe Fairless: Why do you think cold-calling — I feel like it’s come back; it’s the thing. Why do you think that is?

Dan Schwartz: It’s because it’s harder. I’m noticing a trend with real estate marketing, that the harder it is to scale, the better it is gonna be, and the less people are doing it. Two years ago there hardly was anyone doing cold-calling. Everyone was doing direct mail, and then they noticed that direct mail responses were going down, so… What’s the harder thing to do? Well, it’s to reach out to these people one by one, via the phone, and figuring out the systems to use for that.

Well, two years later, now the systems are much easier for cold-calling. You can use a tool like PropStream and within five minutes get a whole list of phone numbers for vacant houses in your target market. So now it’s basically whatever the harder form of marketing is, that’s where you wanna be looking. I think if I were to make a prediction, now that everybody is cold-calling, the next thing is gonna be door-knocking, because that’s gonna be the next progression of the hardest thing to do, right?

Joe Fairless: It all comes full circle.

Dan Schwartz: Yup, cycles.

Joe Fairless: Knowing that that’s your prediction, have you done anything to get ahead of the curve?

Dan Schwartz: No, but I’m thinking about it. I’m thinking about what tools and systems we can create to make that an even easier process. I guarantee you that those types of tools — there’s already a lot of bird-dog tracking tools…

Joe Fairless: Just buy some drones, and have a mechanical hand that will knock… [laughter] And just fly them around the neighborhoods.

Dan Schwartz: It knocks and then drops off a little flier.

Joe Fairless: Exactly. What were you gonna say? I interrupted you…

Dan Schwartz: I was gonna say, you’re gonna see a lot of door-knocking gurus over the next year or so… So a good thing to get ahead of the curve is just to get a really targeted list of sellers; high equity, vacant, or even owner-occupied, which is frequently ignored… And maybe try doing some door-knocking campaigns. You’re gonna reach that person and connect with them in a way that your competitors aren’t by just sending mail or cold-calling.

Joe Fairless: And you mentioned a couple systems when you were talking about cold-calling… I wanna make sure I heard you correctly; to get a list, a service you recommend or at least mentioned was something called PropStream? Is that correct?

Dan Schwartz: Yes, PropStream.

Joe Fairless: And then to call people, I think you said Mojo Dialer.

Dan Schwartz: Correct, Mojo Dialer.

Joe Fairless: What about the skip-trace service?

Dan Schwartz: That is built into PropStream, actually.

Joe Fairless: Okay, cool. Any other vendors that you’d recommend be incorporated into this?

Dan Schwartz: Yeah, you can check out Call Porter. They can actually make your outbound calls. CallPorter.com can make your outbound calls, and there are real estate trained lead specialists.

Joe Fairless: Cool.

Dan Schwartz: Between those three tools right there you can set up a cold-calling campaign within a day, which is kind of crazy.

Joe Fairless: Yeah, that is. Leave me off the list, please… [laughs]

Dan Schwartz: Yeah, yeah.

Joe Fairless: With the three services that you’ve mentioned, which one takes the longest to acclimate to if you’re starting out and you’ve never done this before?

Dan Schwartz: Let’s say they’re all pretty basic tools, but PropStream has a lot going on inside in terms of list creation. You sort of have to know what all the terms mean – tax delinquent, absentee owners… There’s a lot of different filters, and stuff. There isn’t like a “Click this button and get a list.” You have to go in and determine what kind of list you wanna pull based on your market. Maybe you have a lot of vacant houses in your market, maybe you have a lot of tax delinquencies, but it helps to have a little bit of experience in your market, or to ask other investors what the motivated seller’s situation looks like in your market, and then using that information to create a really filtered list.

I think in this market, since everyone has access to the same leads, that the more targeted your initial data list is, the better you’re gonna be. That’s just part of it. The other way you’re gonna compete is just by having the best possible follow-up system to actually monetize those leads once they come in. That’s sort of what I’m all about.

Joe Fairless: So you’ve got a couple ways to rise above the pack. One is a targeted list, two is having a great follow-up system… So ideally you’ll do both, but if you were to look at your business, you’re more towards the follow-up system, because you’ve got InvestorFuse, is that correct?

Dan Schwartz: Yeah, exactly. And I believe that even if your marketing isn’t as good as your competitor, but you’re able to follow up and stay on top of your leads in an organized, systematic way, more than your competitor, then in the long run you’re gonna win… Just because the majority of your deals are not gonna be from that initial phone call. By definition, your deals are all gonna be follow-up, right? They’re all gonna be that post first contact negotiation…

Joe Fairless: Are you able to track that, to see how many leads are completed after a certain number of follow-ups, across your whole system?

Dan Schwartz: Yes, you can track that.

Joe Fairless: But are you able to see it from a big-picture…? I’m just looking for some data points, how many leads are converted into sales after the first, second, third, fourth, fifth etc. follow-up.

Dan Schwartz: It’s funny you mention that… There’s only one study right now, the Harvard Business Review that says you’ll have a 90% higher close rate after the sixth or seventh touch point… But that hasn’t really been checked yet. Part of my vision with InvestorFuse is to actually get more accurate data for that, for the investor community… And I think we have to scale to actually get that type of data. But the Harvard Business Review says 6 to 7 touch points gives you a 90% higher chance.

I have a bunch of more of these stats on one of our eBooks, if you don’t mind me sharing the resource…

Joe Fairless: Yeah, what is it?

Dan Schwartz: It’s called The Ten Commandments… You can download it on our main website, InvestorFuse.com. The Ten Commandments of Lead Management. It gives you the essential stats and rules that you should follow in order to maximize the most out of your marketing.

Joe Fairless: Harvard Business Review is just talking about business in general though, right? They’re not talking about real estate specific…

Dan Schwartz: Yeah, it’s sales stats, generally speaking…

Joe Fairless: Yeah. Okay, cool.

Dan Schwartz: Like, if you don’t respond to your lead within five minutes, that type of stuff. I would guess that that is actually less than five minutes now, because the study was five years ago. People’s attention spans are lower.

Joe Fairless: Right. I think it also depends on what type of lead it is too, because… I don’t do this type of business, but my target audience is accredited investors, and when they submit a form on my website to get to know us and they fill out the information, I imagine if we were to reply literally within five minutes – which we don’t do, but it’s that same day – it would be a little weird if we replied immediately… Because then it’d seem like a robot was replying to them, not an actual person.

Dan Schwartz: Yes.

Joe Fairless: But with single-family homes, and buying the properties – I totally get that. If someone’s calling with an issue, or they’re looking to sell, you’d better capture that lead immediately, otherwise they’re gonna go to someone else.

Dan Schwartz: Right. So you need to have some sort of mechanism in place to notify you as soon as those leads come in, so you can actually capitalize on that… Because they’re still in that “buying” state when they’re entering their information, and you can talk to them when they’re still in that state, thinking about selling their house.

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

Dan Schwartz: Get a team. My best real estate investing advice is you can’t do this alone. If you are overwhelmed and feel like you’re the jack of all trades right now, you’re never gonna be able to scale and truly own a business. So hiring a team not only is a forcing function for you to grow as a person and a leader, but it’s a way that you can enjoy your business more, because you’re gonna be focusing on the things that you’re good at, instead of struggling with the minutiae that you might not like.

There are people out there that are good and enjoy the minutiae that you don’t like, and it’s important to understand that. So I think hiring that first employee, or virtual assistant, or even a business partner, is the best move you could possibly make. That’ll help you scale much quicker.

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

Dan Schwartz: Let’s do it!

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

Break: [00:18:00].10] to [00:19:01].25]

Joe Fairless: Best ever deal you’ve done personally?

Dan Schwartz: I would say it’s one of the JV deals that came in. I just received a $25,000 wire and I didn’t have to do anything.

Joe Fairless: And by nothing – you did the marketing to get that.

Dan Schwartz: Yeah, and I set up the initial systems, and then that was it. The systems didn’t even require me to manage it, or anything. It was a $50,000 deal and we split it 50/50.

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

Dan Schwartz: My biggest mistake I’ve made was not getting back to the seller in time, believe it or not. When I was more actively wholesaling in Baltimore, we were just using spreadsheets to manage our leads, and I called this guy back – he said he just talked to someone right before I called him, and he put it under contract… And it was in a really hot neighborhood in Baltimore, that I could have made about a 30k-40k wholesale fee on… And he told me, “Hey, if you got to me sooner, I would have probably given it to you.” And that was the impetus I needed to take systems a little more seriously.

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

Dan Schwartz: I like to share what I’ve learned. If you got the InvestorFuse Blog, there’s a ton of epic how-to guides about how to structure deals, how to generate leads, lead management, all that stuff, just for free.

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

Dan Schwartz: You can check us out on Facebook, if you search for InvestorFuse; you’ll find me on there. I’m happy to answer people’s questions personally. If you shoot me a message on Facebook through the InvestorFuse page, or from my personal page, I’m more than happy to help people.

Joe Fairless: Well, Dan, thank you for being on the show. I enjoyed learning how your business has evolved, from when you started InvestorFuse to today. I really liked hearing about some specific vendors that you recommend using for cold-calling, and also you think door-knocking is the next thing… Because — I love the insight that you gave, and that is “the harder it is to scale, the less people doing it, so that tends to be an area of opportunity.” So if you can find a way to scale something that’s hard to scale, and refine that system, then you could have a competitive advantage… And on that competitive advantage you mentioned a couple things to rise above the pack. One is to have a highly targeted list, and two is to have a follow-up system.

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

Dan Schwartz: Thank you!

JF1690: What Are The Challenges You Faced Starting Your Syndication Journey? #FollowAlongFriday With Whitney Sewell & Ryan Cox

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We’re throwing you a curveball today, neither of our usual hosts are on this episode. We do have two outstanding real estate investors and fellow podcast hosts (bios and podcasts below) with us to share what are the biggest challenges they’ve faced, and what they would tell their younger selves as they were starting this journey. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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“Done is better than perfect” – Whitney Sewell


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Whitney Sewell Real Estate Background:


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Whitney Sewell: Hello, Best Ever listeners! How are you doing? Welcome to the best real estate investing advice ever show. I’m Whitney Sewell. This is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

This is Follow Along Friday. Theo and Joe are out today, but I am honored to be with you, and also with us is Ryan Cox. Thanks for being on the show, Ryan!

Ryan Cox: Yeah, excited to be here. Hello, Best Ever listeners.

Whitney Sewell: Ryan and I were asked to talk about some challenges that we faced getting started in the real estate syndication business, and we just wanna go through some of those challenges, because we know you are facing them or going to as well, and how we have worked through those.

A little about me – I’m also the host of the Daily Real Estate Syndication Show, and have invested in numerous deals now, and raised capital for numerous deals, and doing our own deals as well, under Life Bridge Capital. Ryan, give the listeners a little bit about you and let’s get right into some challenges we’ve faced.

Ryan Cox: Yeah, sounds great. Ryan Cox, Founders Grove Capital. Previous to investing in multifamily and working in syndication I was in enterprise software sales for about ten years, selling software and hardware to the mid-market, companies between about 1,000 and 5,000 employees.

I’ve been in the multifamily syndication business for a little over three years, and leaps and bounds from where I’ve started, but a long way to go.

Whitney Sewell: Awesome. Ryan, why don’t we just get right into a challenge that you wish you had known when you started? And I’ll do the same.

Ryan Cox: Yeah, I think two things really stand out as I think about what I would do differently, or that I wish that I had known in the beginning. Number one, I have a podcast as well called The Real Estate Innovators, where I interview founders of technology companies that are focus on innovating in commercial real estate, so I have an opportunity to talk to a lot of founders, venture capitalists – those types of folks that are really making a lot of interesting business models or technology that will impact commercial real estate.

I think that I had some hesitancy about jumping on the microphone and interviewing people, and just a little bit of nerves about that, and I just wish that I had started that much, much sooner. It has been an awesome way for me to build relationships, but it’s also been a tremendous way for me to learn from a bunch of really smart people, and help me think about not only how I’m operating my business today, but what the business is going to look like in the future. So I would have dismissed any of those fears and thoughts about creating that platform, because it’s really been so beneficial for my education, and I think it’s been a really good platform for founders to be able to tell their story about their business, and it’s been great for discovery for anybody who’s in commercial real estate and wondering about how technology is gonna change it… So that’s been awesome.

I think the other thing that I knew going in, but was a challenge for me was really getting outside of my circle of friends and family in terms of raising capital, and creating a system to be able to do that consistently.

So my two things are start some sort of thought leadership or group, TODAY. You don’t have to be an expert to do it. If you take a leadership role and start that, it’ll prove beneficial in helping you build relationships.

And then number two, getting outside of just your immediate circle; coming up with daily, weekly, monthly activities that you can measure yourself against, that’ll help you build an investor network and relationships, as well as daily, weekly, monthly goals in terms of underwriting deals, looking for deals.

Whitney Sewell: I like that a lot, and I can relate a lot. One of the things I was also going to talk about is wishing I had started a thought leadership platform earlier, the daily real estate syndication show… And obviously, that was influenced by Joe as well, and just the success that he’s had.

You said you had some hesitancy, you wish you had started sooner… What actually was it that really pushed you to get started? When you had all those thoughts about “Should I start now? When should I start?”, what really made it click for you?

Ryan Cox: I think like a lot of folks I was still in enterprise software sales when I started investing in real estate, so I was straddling two different worlds, which gave me some hesitancy about starting something. In hindsight, starting a podcast, having a group meetup, or doing anything in that respect would not have been in conflict with my day job, but it would have been a really fast jumpstart into a weekly/daily motion in terms of building a community and building relationships, and starting to get myself out there, like “Hey, this is the job that I’m working towards.”

So the thing that really just got me going was more or less hold your nose and jump into the deep end, and start figuring out how to swim, and that’s what I did. The first podcast I listened to – I hated my voice, I hated the questions… But the feedback that I got from people who listened said “Wow, it’s well-produced; those were good questions”, so I just kind of blindly kept going down the hallway a little bit further, towards the light, so to speak.

So there was some trial by error, and at the end of the day I tried not to pay attention to my voice or what others thought, but just trying to produce good content and be really curious. I think curiosity was a big driver that helped me push through any fears that I had.

Whitney Sewell: That’s awesome. I can relate to everything you’re talking about. I bet I get three calls a week, people asking about how to do a podcast, or how I’ve done it, or things like that… And I was very hesitant as well to pull the trigger, to launch the show, and to really commit, because I  was worried about the sound, I was worried about all these things, all these details… You know, about the show, about doing it the best that I can… So I was very hesitant.

I was talking to a mentor – Joe Fairless, I’ll say – and he helped remind me that done is better than perfect. Done is better than perfect. It really helped change my mindset. I also hated the way that I sounded, but I hired somebody to edit my audio just so I didn’t have to listen to it… Because I understood that if I listen to them, I’m probably not ever gonna launch. I’m just not gonna like the way that I sound, I’m gonna hear the um’s and ah’s and all these things, and I’m not going to think it’s as good as it should be… But I had to tell myself, I had to remember that the only way I’m gonna get better at this is just doing it, so I’m gonna have to get through that initial 20-30 shows before I really fall into using a mic, before I really fall into being recorded… And I still mess up all the time, but I’m getting better, and I understand that it’s gonna take many more shows; I’m getting better all the time. But if I hadn’t launched – guess what? I’d still be in fear of those first 20 shows.

Ryan Cox: Yeah, no doubt. I think the podcast is a good metaphor for any entrepreneur’s journey. Those first 20 or so times that you do it, it feels awkward, it feels uncomfortable. But committing to doing it — I publish every Thursday, so I’ve got a weekly show, and just the clock is kind of ticking; every Thursday, here are the 6-7 things that I need to do to make sure that I get a good show out the door.

And I guess I talked earlier about the daily/weekly/monthly, what are you measuring to make sure that you’re moving forward in your business. I think that thought leadership, whether it’s a monthly event that you’re hosting, or a podcast, whatever that looks like, getting committed and putting yourself out there is an excellent metaphor for the same type of discipline and work that you need to do to go out and put together a real estate deal.

Whitney Sewell: Ryan, what were some systems that you developed to help you make this happen? Initially you were hesitant and you hated the way you sounded, but you kept moving forward, you pushed through that… But obviously this added a lot more work to your day or your week, trying to make this happen, so what were some systems that you did to make it happen, and then also to measure the success or the growth?

Ryan Cox: Well, from a podcast perspective, I outsourced as much as possible. I batched that work; I record on Monday afternoon for an hour and Friday afternoon for an hour. I outsource all of the editing to Fiverr; I’ve got a guy that I work with on Fiverr. We’ve got another guy on Fiverr who does all podcast transcription or transcribing… So I try to outsource as much of that work as possible.

While I know that thought leadership is important and actually being on a production schedule is really important to me, the thing I wanted to be really conscious of is that this is not a six or seven hour/week job, that this is a two to three hour/week job. So it’s two hours a week in between my 8-to-5, and then I work on it at night. So typically on an average week it’s about three hours’ worth of work.

Whitney Sewell: Nice, nice. And how often are you publishing your show?

Ryan Cox: Every Thursday.

Whitney Sewell: Okay, awesome.

Ryan Cox: How about you?

Whitney Sewell: Obviously, it’s daily… So it did increase my workload tremendously; when you get that many shows done a month… But just like you, I outsource everything that I can. And I would stress to the Best Ever listeners, if you haven’t looked into hiring a virtual assistant, I’m not sure what you’re waiting on. I use UpWork. I’ve used Fiverr for different things, but I use UpWork a lot and I’ve learned some skills to be able to find people on there that work really well for me and for the tasks that I need.

Initially, I found somebody that their specialty was audio editing, or I found somebody that’s just good at show notes, somebody that’s just good at video. Then those have changed a little bit. My entire team has changed recently, but we’re improving all the time. But initially, it was such a big undertaking to get all that done that I had to outsource; there just wasn’t any way around it… And now I feel like if I hadn’t outsourced, if I was trying to do it all myself, I may have never got started, or I may have never launched, because the workload was so large. But it calls me to grow, it calls me to get out of my comfort zone, and just to make it happen.

I wanted to go back – if you’re watching this, you see behind me is a green screen. And just today we couldn’t get the green screen working the way we’re recording today, but we’re just gonna go on with it and we’re gonna make this happen; that really hindered me in the beginning, because I would have been really worried about that. I would have been really worried about that and thought “Oh, no, we can’t do it; we can’t publish this. It’s not the best that it can be.” But I understand that done is better than perfect. What about you, Ryan?

Ryan Cox: Well, just keep moving forward. I think as we talk about outsourcing and having a team help you to do the podcast, I think that, again, it serves as a metaphor for just the business and entrepreneurship in general. One of the quotes that I heard in the beginning that I have really made a part of my daily life has been when something comes up that says “How do I do this?”, I potentially would get stuck, and would put something off, or just never get around to doing it. When I switched that question around to “Who can help me do this?”, I found that one of my talents is building teams; I love collaborating with people. The more that there’s kind of a group that’s participating in something, the more energy that I get.

A lot of times, if I was stuck in doing the things that were brand new, it was “How do I do this? I don’t know.” But when I started thinking about “Who can help me do this?” and building a team around what I was trying to accomplish, I tended to have a lot more fun and got things done a lot faster, because I was putting in the action, and I’m very much a learn-by-doing individual… And I got the opportunity to see and watch and learn by others doing. So I think that that’s been a valuable tool for me, to take that question “How do I do this?”, flip it on its head, and ask “Who can help me do this?”

Whitney Sewell: I really like that a lot. I find now — as I think of stuff where I used to get my pen and paper out and I’d try and make lists so I didn’t forget things… But now I just send an e-mail to my assistant saying “I need this done” or “Can you please do this?” Now it’ll be done, instead of me having to go back and look at that list, hoping I’d get it done… Now it’s taken care of.

Ryan Cox: Yeah, I think it’s so important to build support around you, whether that’s outsourced support to help you with some of the detail work or mundane work. I think it’s important to build a real estate team around you, whether that’s others that have led and sponsored and been on the general partnership side of a deal, or have experience with property management, finding deals, doing the asset management… Any types of those roles, the more people that you can put in your world to help you learn by watching them from their experience, I think the more value and the faster that you’ll grow in the business.

Whitney Sewell: Yeah. Are there any other team members that you’ve found that you’re working with to help grow the business? Outside of thought leadership.

Ryan Cox: Outside of thought leadership, I tend to partner on the real estate side I think anywhere from two to three partners. Very simply, the job of putting together a real estate deal is 1) finding the deal, 2) operating the deal, and 3) bringing equity and debt to the deal… So it tends to be a three-person job; it can be a two-person job. That configuration is — we’ve done deals here locally, and in Dallas-Fort Worth… It tends to be a configuration of two or three individuals that are acting as a team to get a big job done.

Whitney Sewell: Nice. And any other ways that you’ve found productive or useful to measure — we’ve talked about your growth, or maybe your team, or anything like that.

Ryan Cox: How do I measure growth?

Whitney Sewell: Yeah.

Ryan Cox: There’s this book that I keep coming back to, it’s called “Measure What Matters”, by John Doerr. Have you ever heard of that book?

Whitney Sewell: I haven’t.

Ryan Cox: John Doerr is a famous venture capitalist in Silicon Valley. OKRs have been made famous by the Googles of the world, and those types of guys… It’s Objectives and Key Results. You can set those on a monthly basis, or a quarterly basis… But again, it comes back to “Hey, what are you doing on a daily basis to help you move forward in the work that you’re doing?”, whether that’s thought leadership, whether that’s finding a deal, whether that’s building your investor network.

What I’ve found especially in the beginning is a lot of ups and downs emotionally in terms of trying to build a business and get it started… But if you have written down what a good day looks like, what a good week looks like, what a good month looks like to help you get to your key results, you could always look back and say “Hey, no matter how I’m feeling, I did these five things which I know that if I show up and do them consistently, I’m gonna continue to build my business and do it in a very smart way.”

I know that if I look at the sheet and say “Man, I didn’t do any of those things” and my calendar was running me, and I wasn’t in control of my calendar, I know that I’m off track. So having that written down has really helped me measure my progress… And know that it very much is a process, and that there is no recipe for overnight success.

Whitney Sewell: I like that a lot. Could you give us a couple examples of maybe things that you’re gonna make sure are written down, making sure that you’re doing every week, or on a monthly basis, and how you’ve done that?

Ryan Cox: Yeah, my goal is to have anywhere from 15 to 20 new investor calls a month, so then I’ve got a subset of activities that helps me bring new investors, start those new relationships, start building relationships with investors. I tend to find that probably anywhere from about 90 days to potentially a year or two years that I start building a relationship and we find that we’re a fit for each other, before we bring on a new investor into the group.

So it starts with how am I making/reaching/building relationships with new investors, and then once I do establish that new relationship, how do we work through – whether that’s education about myself and about Founders Grove, and what we’re trying to accomplish, or identifying that the investor needs education on alternative investments, passive investments, find out if multifamily is even the right asset class in real estate for them… So those are the things that I really focus on – starting at the top, trying to build relationships with new investors, and then over the course of anywhere from 3 months to 12 months really have a plan that I can add value to their thought process if they’re thinking about an alternative in passive investment.

Whitney Sewell: Nice. I like that. And I like that you set that number. I wanted to ask you, is that 15 new contacts a month, or is that just following up  possibly with other contacts or particular investors that you’ve already met?

Ryan Cox: Yeah, my math is it takes me maybe 15-20 new conversations to find two or three. So maybe 10% of those conversations I find that we’re a fit for each other, that we can add mutual value to what we’re trying to accomplish, I have an investment opportunity and a thesis that makes sense to the investor… And the investor kind of checks accredited investor or some of those types of things, and we’re mutually aligned on what we’re both trying to accomplish.

So I would say for every 20 investors that I talk with, one to two are a fit. Then from that one to two that are a fit, I know that I’m in an education period over the course of 90 days to 12 months; it gives me an opportunity to build a relationship and add value to that conversation.

Sometimes it may be a lot of relationship building and we find out we’re not a fit for each other, or multifamily is not the right investment for them. I just kind of think of that as sales karma. Well, maybe they’re a better fit for somebody who’s local to them, or they have a relationship, or they wanna invest in self-storage or small retail, and it’s just “Hey, I don’t want to invest in multifamily in Austin or Dallas.”

Whitney Sewell: How are you finding them in the first place? What have you found to be the best way to connect with these potential investors?

Ryan Cox: I focus primarily on LinkedIn. As my background was enterprise software sales and hardware, I had very extensive connections through a lot of big technology companies – Microsofts, Ciscos of the world – and I started just going back through and sending notes to contacts, primarily technology, some in healthcare. I just look to connect for 15 minutes, tell them a little bit about what I’m doing. If they’re able to get on a call, then that goes back to “I need 20 calls to find one or two that are a fit.”

So I set up a 15-minute call, I learned a little bit about them, I try to understand what they’re hoping to get out of the call; typically, they wanna learn a little bit more about me and what I’m doing. From there, we say “Hey, this does make sense. Let’s set up a little bit of a longer call to talk about business strategy, what we’re trying to accomplish, and how we can work together.”

So LinkedIn is my primary resource for setting up new investor relationships… But that is a lot of empty responses, no responses, or no thank-yous. In typical sales you’re getting way more no’s than you are yes’s, but that’s been proven to be the best channel for me to get outside of my immediate circle, to develop new relationships, which I know are the lifeblood of continuing to grow the business.

Whitney Sewell: Awesome. Tell me about  how that conversation has changed, maybe from when you first started raising capital to how it is now? I do a lot of the same things, and believe it or not, a lot of my investors I’ve found at real estate conferences… And I’ll put that out, because a lot of people go to these things assuming that there’s no passive investors there, and I say you’re wrong… Because I’ve met numerous, at many events. They’re there to meet syndicators… But anyway, so how has that conversation changed, or what do you wish you had known about how to control or how to talk through that conversation back then, that you know now?

Ryan Cox: I always wanna give that conversation an out… So I tell everybody, “Hey, this might not be a fit for you, and if it’s not a fit for you and this is something that you’re not interested in, please just tell me so. I don’t wanna fill up your inbox with unwanted e-mails, newsletters, any deals that I’m working on, any kind of educational material, if it’s not a fit. If this is not a fit and this is not something that you’re interested in, it’s okay to tell me so.”

I think giving those potential cold calls, new prospects/investors just a really easy way out, and for them to say “No, this is not a fit for me”, saves both of us a lot of time. Ultimately, I’m trying to get to those one or two that are really excited to either learn more, or know that they want to invest in a multifamily deal… And that’s who I’m really trying to connect with, so I’m just saving both of us time and just having the confidence to let whoever I’m talking with on the other end go “You know what, Ryan, I appreciate you sharing about what you’re doing – it sounds like you’re doing really cool things – but this is not for me”, and that is okay.

Whitney Sewell: That’s just showing respect for them, and while they may say right now “I’m not interested”, things change. I find that investors – right now it may not be a fit, they might not like multifamily for whatever reason (something they’ve read who knows where), but then six months from now their situation has changed, or something else has changed their interest about multifamily, and then all of a sudden they hear your podcast again, and they’re like “You know what, I remember him; he’s very respectful, he wasn’t pushy. I like that about him”, and they’re gonna come back. Would you agree, Ryan?

Ryan Cox: I totally agree. I think that my mindset is try to do what’s in the best interest of all parties. I’ve had a number of opportunities where there’s just things that I don’t do, but I have relationships that could help that investor potentially get what they’re looking for… So I just try to pass those opportunities off to other investors that I know that are doing different types of projects, that could get those two people together and could add value in some way… And that might potentially not be the bottom line, or to add value to the group of investors that I work with, or to a specific deal, but if I can put others before myself and add more value than I take, I think that I’m doing a good job every day.

Whitney Sewell: You had also mentioned about educating the investor… So you’ve had that call, and now you want to educate them, you want them to understand what they’re investing in. Could you just tell us a little bit about how you’ve done that? Or maybe even how that’s changed. It’s harder to educate initially, because you’re still learning the business, but now that you’re much more experienced, how do you educate them now, so they understand what they’re investing in?

Ryan Cox: One of the things I did when I was in software sales and when I made the move to real estate – in both roles I had a sales journal. So I listen to what objections people had, what were the questions, and I just continued to write that down, so that I was either a) better prepared to overcome an objection, or b) I was better prepared to answer a question.

So I just started kind of building my own database, whether it was very deal-specific questions that I needed to be able to answer, or whether it was just generally about the business. That education phase is kind of taking people through — I think number one is “Hey, here’s what the process looks like. Here’s what you could expect when we do work through a deal together. Here’s how I’m gonna introduce the deal, here’s what an investment summary looks like, here’s our business strategy”, all the way up to funding and a private placement memorandum (PPM).

So there’s a little bit of education of “Hey, here’s what the process looks like”, understanding the timelines in that process, and helping prepare them for “Here’s how you would need to act and how you’d be able to move through that process to do a deal. Get an understanding of what their timeline looks like and how that would potentially fit.

Once we understand the process, then start kind of peeling back the layers on helping them understand the investment and what they’re trying to accomplish with the investment, and then the conversation from there takes shape on “How does this work? How does that work?” So I just kind of view that as a continuous conversation and let that unfold. I’ve developed some kind of FAQs and some stuff like that, like “Hey, here’s high-level stuff”, that can help push them along, but I always encourage “Hey, give me all the questions that you have. You can text me, call me, send me an e-mail”, and I just try to respond with timely answers to their questions.

I think I’m getting better at the process to try to manage that, but… I guess I would ask you the same question – how are you educating potential investors and current investors?

Whitney Sewell: I would say that entire thing has been a growing experience for me, from meeting the investor, to — I would say the follow-up is key; your speediness in getting back to them. Initially, it was difficult for me to track those things. Find a CRM; there’s so many to choose from. I did a lot of research trying to figure out which one I wanted to use… But at least use one, so you can track when you’re following up to people, and making sure that you’re following up, that you’re staying top of mind.

I’m answering questions quickly, or after I meet them I’m following up, I’m sending them information about the company, about who we are, about why we do what we do, and then I’m also wanting to book a call with them. If they don’t book a call, guess what – I’m gonna call them… Because they’ve shown interest; they’ve either signed up on the website, or I’ve reached out to them and they’ve shown interest in talking with me.

From there, they’re gonna get e-mails just about the business, and about what we do, different parts of the business, maybe some YouTube videos, or obviously the podcast shows… If there’s an investor who has a question about taxes, or a specific thing, or something in the syndication business that I’ve had a show where I’ve interviewed somebody on that topic, I may send it to them, and say “Hey, I thought this would be of interest to you” or “This is what you were asking me about, what we discussed, and this goes a little more in-depth”, just to show them that they’re not just another number; I actually cared about our conversation. I documented what was important to them, and I’ll try to provide value to them through that, or get them some more information if I see there’s some way.

Ask what their goals in investing are, what they are looking for, and really listen to what they tell you, listen to what’s important to them. I try to focus on that, and I try to provide value, things in the business that they don’t understand, or questions that they have. So yeah, follow up. If you don’t have that information yet, it’s important to follow up, stay in touch.

Ryan Cox: Yeah. I think about three-and-a-half years in, the thing that I would encourage everybody to have confidence to say is “I don’t know, but I’ll find out”, and deliver a timely response. I think the last thing you wanna do is get yourself in the trap of maybe getting out over your skis, and talking a little bit too much about a topic that you might not have all of the details about, or can’t speak to with authority. A critical phrase I think for everybody is “I don’t know, but I’ll find out.” When you do find out, send a timely response.

I think that in terms of developing relationships with investors or your partners or whatever that team looks like for you – that could be in all facets – having a lot of discipline around communication and follow-up is critical to building a successful business. That’s something that I took from the corporate world and I’ve put into this business, and feedback from investors of all types of sizes has been “Hey, you communicate as well as anybody that we’ve worked with.” So as you’re trying to get the edge, when you’re working with new investors and how you do that, and potentially competing with somebody else who’s doing the same job for investment dollars, one thing that everybody can do from day one, regardless of your experience, is create a system to effectively communicate in a timely manner. If you show up to do that consistently, the level of trust that you’ll be able to develop with partners in a real estate deal or investor partners will be much faster than if you communicate poorly, don’t respond at all, things like that. I can’t stress enough just how important it is to have a very good strategy to communicate effectively with potential investors, current investors, real estate partners, anybody in your network and team that is helping you build a real estate business

Whitney Sewell: Great. Ryan, unfortunately we are out of time, but I hope the Best Ever listeners have enjoyed the show today, I hope you’ve learned a lot as we’ve been talking about some challenges we’ve faced, just the hesitancy that we’ve had starting a thought leadership platform, and wish we had both started sooner… But as Ryan said, we held our nose and jumped in, and it’s been great, and I’d encourage you to do the same of some type of thought leadership platform. You’re gonna hate your voice anyway, so just get it over with. Hire that VA, hire people to help you, build your team, build your systems.

Ryan, I really liked how you talked about building a system, a way to track your growth and measure your activities and those goals, those weekly things that are gonna move you forward, and writing those down… And then even the 15 investors calls a month – I liked that; you can track that, you can see that you are moving forward, and you know 10% or so are going to invest with you or become investors and partners in your own deals… And just how you got started, the conversations, how those have changed, but then also educating, and how you kept a sales journal; I like that. You’re documenting those objections, so you know how to improve. You’re going back and looking at that thing, how you can do that better. Then educating investors on the process, the business strategy, from funding to doing the PPM.

Ryan, thank you so much, and it’s an honor to be here on the show today.

Ryan Cox: Yeah, thank you. You’ve been an excellent stand-in host. I appreciate you leading the conversation and sharing about your experience. Moving forward, I think that we really admire anybody who’s started thought leadership stuff; I know it’s tough to do. The ironic thing is how tough it is to get started, but how much fun it is once you do get started. It’s something that I really look forward to.

I would tell everybody that it doesn’t have to be a podcast. Starting a meetup on a monthly basis, or some sort of event that happens in your city, to help you build relationships and have a platform… A blog, all types of things can be considered thought leadership platforms, which is very much an action of doing and not thinking. So commit to a time you want to publish a blog post every week, or have an event each month or quarter – whatever that looks like, and whatever you feel empowered to do, you should definitely take the bull by the horns and go do it.

I would encourage you to have as much fun as you possibly can in the process, because at the end of the day, the more fun you have, the more energy that you put into it, and the more the others are gonna gravitate towards that event, the podcast, what have you.

Thank you, Whitney, for being such a great host. I enjoyed being on the show. And thank you, Best Ever listeners, I appreciate the time. I look forward to speak with you guys again soon.

Whitney Sewell: What’s your website? How can people get in touch with you, Ryan?

Ryan Cox: Sure, you can find me at FoundersGroveCapital.com, or therealestateinnovators.com. Founders Grove is the real estate firm, Real Estate Innovators is my podcast. Feel free to hit me up on LinkedIn, send me an e-mail; I’d love to chat.

Whitney Sewell: Awesome. Again, I’m Whitney Sewell. You can reach me at LifeBridgeCapital.com, or whitney@lifebridgecapital.com is my e-mail. I’m happy to talk to you or schedule a call with anyone. Ryan, thanks again. Best Ever listeners, I hope you have a best ever day. Joe will talk to you tomorrow.

JF1629: Passive Investing In Commercial Real Estate #SkillSetSunday with James Kandasamy

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Today we’re welcoming back James to share some passive investing knowledge with us. He recently wrote a book on the subject, and has spent a lot of his real estate investing career dealing with passive investors himself. If you are a passive investor, you’ll want to tune in and hear how to vet sponsors, deals, and other aspects to evaluate before handing over your hard earned cash. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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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.

Well, I hope you’re having a best ever weekend, first and foremost… And because today is Sunday, we’ve got a special segment for you called Skillset Sunday. The purpose of Skillset Sunday is to help you hone or acquire a skill that you might not have had before, or to the degree that you will have honed it after this conversation.

Here’s the skill – our Best Ever guest today has recently published a book on passive investing in commercial real estate. In fact, it’s called “Passive investing in commercial real estate: Insider secrets to financial independence.” So here’s looking at you, passive investor; we’ve got some information for you that will likely help you make better decisions – or even better decisions, I should say – on what you choose to invest in.

With us today to talk about that, James Kandasamy. How are you doing, James?

James Kandasamy: Hey, I’m doing very well, Joe. Thanks for having me back on the show.

Joe Fairless: Yeah, my pleasure. Nice to have you. You mentioned “have you back on the show” – Best Ever listeners, episode 1273 James was interviewed and he gave his Best Ever advice; that’s 1273, titled “Deep value-add apartment syndications”, and James was gracious enough to talk about how he is getting off-market deals and closing on off-market deals, and his whole approach. He went through that approach in detail. If you are an active investor, I highly recommend listening to that episode, 1273.

James is the owner of Achieve Investment Group, he’s a multifamily sponsor owning approximately 1,000 units in central Texas, focused on value-add deals, and as I mentioned, he recently published the book “Passive investing in commercial real estate: Insider secrets to financial independence.”

With that being said, James, since you already went over your background in the previous episode, we won’t touch on that as much… How about let’s just dive right into it – how did you structure your book? And then we’ll take it from there.

James Kandasamy: The way I structured my book – it’s a very good read in terms of it’s exactly like you’re having a conversation with me. The reason I wanna do that is because I’m an engineer, [unintelligible [00:04:35].14] very well, but I chose not to do that, because a lot of passive investors are not engineers, they’re not gonna be going into bullet by bullet, right? So the way I structured it – there’s seven chapters in this book, with all the key information that a passive investor needs to know to get started and to be a smarter passive investor. It’s a very conversational book, and we [unintelligible [00:04:57].29] right now, and we’re getting very good reviews from the seasoned passive investors.

Joe Fairless: So it’s giving tips for secrets to — as you said, you have insider secrets for financial independence… What are some insider secrets that you can share with us?

James Kandasamy: Yeah, absolutely. Some of it is like “How do we get started?” There’s a lot of ways to get started. Some people get started in commercial real estate, especially where we focus – multifamily syndication – just because they were introduced to a group, but that is not the only way to get started. There’s a lot of other things where you can get started. You can get started in online forums, like Bigger Pockets, or Facebook, or just going to a meetup, and how do you introduce yourself in a meetup; what are the questions to ask in an online forum, or how do you introduce yourself in an online meetup, or the meetup itself.

There are things that a lot of people didn’t know because they hear one advertisement on the radio, or through Facebook, or somewhere – they heard about real estate, and they went for the two-day weekend, and they thought that’s the holy grail of multifamily syndication… But if we look at it, there’s a lot of other ways to get started. So that’s one thing.

The other thing is the two big chapters in this book is basically how do you [unintelligible [00:06:08].10] a deal? Passive investors sometimes are so green in their approach to real estate investing; sometimes they like the deal just based on numbers, or based on the group… Sometimes they put too much hope on the group, that some group is gonna save all their money and is gonna take care of their money, but they forget that all the syndications are basically private LLCs, who is responsible [unintelligible [00:06:29].19] by the deal sponsor.

And also, how do they look at a deal sponsor, how do they choose different types of deal sponsors, and what do they look for in that deal sponsor, how do they match that deal sponsor’s skillset with the deal itself? Because not all the deals are the same – there’s deep value-add, there’s value-add, there’s also [unintelligible [00:06:47].18] which is basically focusing on the cashflow.

And what’s the investment cycle? For example, someone who is just starting out, who has a W-2 job, in their 30’s, what kind of deal should they be looking for, versus someone who is in their 60’s and is almost retiring, or they retired, really hoping on that  cashflow to come in to sustain their life – what kind of deals should they be looking for, what kind of sponsor do they need to align?

So a lot of reflection back into the passive investor itself, and get them to choose the right deal for themselves, rather than just looking at the deal, going through a webinar, or being part of a group and thinking that that’s all it is, and “I can invest in any deals.”

These are the two big chapters that I have, and there’s a lot of other chapters too, like with the process itself, and how the whole process works… Because a lot of people starting out as a passive investor – they do not know how do they communicate with the deal sponsor, and where [unintelligible [00:07:39].01] Some capital source may not be the best source for that deal, or may not be the best source for them – which one have taxes, which one doesn’t have tax, and how do you avoid all this tax? There’s a lot of secrets that people like us know that not every passive investor knows.

I’m surprised — and I have a lot of passive investors investing with me, and a lot of them need to know all this information.

Joe Fairless: What are some of the things that you mention (maybe pick out one or two) that when you shared those things with your passive investors, it was eye-opening to them? Because I’m sure that could be eye-opening for others too, during our conversation.

James Kandasamy: Sure. [unintelligible [00:08:17].03] like for example as passive investors I know right now multifamily is hard, but multifamily goes in cycles, and I did put in a lot of data that I researched myself, 15 years of data, in terms of different asset  classes. We take a market, like for example I took Austin in this case, and I did analyze, looking at different cycles of commercial real estate, and I can bet you nobody has that data in any other book or anywhere else, because I did the research myself – 15 years of data, different asset classes, put into a cycle, converting to a chart, and I show them in chart to say what each asset class does, especially in Austin, Texas. Same thing you can do for any market, but I took Austin, Texas, and I just showed them sometimes what you think is the best investment or what the gurus are telling you may not be the best investment advice.

For example, for passive investors – they can invest in any asset class, because they’re passive. And what should they look for, specifically look for good operators in that asset class. So that’s one thing, on top of many other things.

Joe Fairless: How do you define “good operator”?

James Kandasamy: I would say a good operator depends on what kind of deals they’re doing. If they’re doing deep value-add, there’s a lot of skills that they need to have for deep value add: strong property management, strong project management, strong budget management, and also the capabilities of finding that kind of deals and turning around. That’s a skill that a good operator needs to have in a deep value-add deal… Whereas on [unintelligible [00:09:42].17] deal it’s a different skillset. Some of the skills may not be strong, and they need to be able to manage the property management to a lesser degree. They need to be able to identify which market has that cashflow potential and able to go on for longer-term.

A good operator depends on what type of deals they’re doing, and [unintelligible [00:09:59].23] operators can’t really do deep value-add. I think you can always go from deep value-add to [unintelligible [00:10:06].25] because the complexity becomes much less, but you can’t go the other way around.

And also the other skills that good operators have – do they have good leadership skills? Operators are strong leaders, and need to be able to fire a property management company if they are not doing very well; they need to be able to go and identify different aspects of the deal, like what marketing is working, what marketing is not working. So you need strong leadership skills, strong business experience – what business have they done in the past? Not everybody from W-2 can do this job, because in W-2 you are not a business person, you are more of an intrapreneur. When you’re an entrepreneur and you are running a business on your own, the whole show is on yourself… So you need to be able to make that quick decision when you’re doing the syndication on multifamily or any commercial real estate, because you are the captain of the ship, and not everybody can be a captain of the ship… Sorry to say, guys, but it is what it is.

So a strong business experience, strong leadership experience and an ability to identify timings of the market, because different asset classes have different timing requirements, and identifying different locations, where is the demand, how they’re able to analyze submarket demand is key as well.

These are some of the things that a strong operator needs to have. I did lay it out very in detail, in tabulated form, in my book, to say which type of deal needs what type of operator, and what are some of the skills that a strong operator needs to have.

Joe Fairless: In terms of if a deal is right for the passive investor, there are so many different types of deals, so many different types of asset classes, and so many different types of structures that a deal can have – preferred return, no preferred return, equity investor, debt investor… What are some questions that the passive investor should ask himself/herself to then determine the type of deals that they should be investing in?

James Kandasamy: That’s an awesome question. I’ve covered in depth in my book – at a high level, on a  syndicated commercial real estate, there’s two types of compensation. One is called more of a profit split, or carried interest, or equity split – that’s one thing; the other one is more of a waterfall, pref return type of deal. Both have pros and cons, and neither is better than the other… But a lot of people are just exposed to one and they think that is the superior compensation model, and that’s the best way to do deals. So it depends – there’s pros and cons on both sides of the deal type in terms of structure.

And for investors, they really need to look at — for example, for a pref return deal, the good thing is the investors do have a base return coming back to them, but the part is that’s also… Say they’re getting an 8% return, including the operation, and let’s say there’s a potential of doing 10% cash-on-cash doing the operation, the 2% — let’s say you do a 70/30 split, out of 2% of 70/30 is only 30% of 0.6% going to the sponsor, so I think it’s less motivating for the sponsor to really push on the cashflow… It’s more heavy on the fee side of it; it’s a small — beneficial for the sponsor to be at the starting point and at the end point, rather than on the operation side of it. Whereas on the equity split it’s a lot more focused on the operation, because if you make a lot more profit, then the sponsor makes more money, so the sponsor will be more motivated to make more money throughout the whole operation.

But the bad part about equity split is if the deal is not doing very well, the investors are not gonna get anything; they’ll probably get like 2%-3%. The base return is not there. So there’s pros and cons with both, and it depends on the deal, whether it’s a value-add deal, whether it’s a cashflowing deal. It really depends. I hope I made sense.

Joe Fairless: Yeah, and as an equity investor – every investor should know prior to being an equity investor the pros and cons of that. And I know the preferred return mitigates some of that, because they’re getting first in line on the returns.

James Kandasamy: Correct, correct. And you’d be surprised about how many people don’t know the difference when they talk “Oh, this person’s taking a 70/30 split and the other person is taking 80/20, and the other person is taking 90/10.” Nobody really understands “What are you talking about here?” I did a lot of analysis on both structures, and I realized it’s both the same, but it does motivate the sponsor and protect the passive investors at different points of time in the whole deal. I outline that in the book.

Also some structures are more debt, rather than equity; some people don’t understand that, too. So rather than being an equity partner, they become a debt partner, but they do not know… So I did outline that a bit more.

Joe Fairless: Anything else that you think we should talk about that we haven’t discussed, before we wrap up?

James Kandasamy: I would say there’s a lot of things in the book, and it’s a bit hard to go through in the podcast. Some of the things I covered from the capital standpoint, like do you take IRA, do you do QRP, or do you do cash, which one is the best way. Because IRAs do happen on UBIT and UDFI taxes, which not many people know… And how do you get away with that tax, using QRP. And in Texas there’s another way to take out your 401K while working, so I did outline that as well; it’s crazy, not many people know that, but I think as a passive investor it’s good to know that that’s an option, to take out your 401K while working, as long as you’re married.

Joe Fairless: James, how can the Best Ever listeners get your book and learn more about what you’ve got going on?

James Kandasamy: My book is on Amazon right now. I have Kindle, Audiobook and paperback all released. We are a best-seller right now; in fact, we were a best-seller for the past two days.

Joe Fairless: Congratulations on that.

James Kandasamy: Thank you. Usually, people go to a best-seller for a blip, and then they often disappear, and people take a screenshot, but we’ve been a best-seller for two days, so… [laughter]

Joe Fairless: You can take a video.

James Kandasamy: We can take a video, exactly. [laughter] And you can reach me at AchieveInvestmentGroup.com. My e-mail address is James@AchieveInvestmentGroup.com.

Joe Fairless: Well, James, thank you for sharing with us some thoughts as a general partner that the passive investors should think through whenever they’re investing in deals – what to consider prior to investing, how to think about the deal sponsor, what questions to ask the deal sponsor, and what deal is right for the investor… Because ultimately, there’s all sorts of different opportunities out there, and there’s all sorts of different personalities, and risk profiles, and appetites for risk… So there’s not necessarily a deal that is structured incorrectly, but it might be structured incorrectly for what you want as an investor, at the point in time that you’re investing, and what you’re looking for. Thanks for talking through that, James.

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

James Kandasamy: Thank you, Joe.

JF1616: Software Developer Gets Into House Hacking & Continues To Grow His Investing Business with Diego Corzo

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Diego came to the United States as an immigrant with his parent when he was nine years old. He is a DACA recipient and is successfully working full time while building his real estate business. From his first house hack, to strictly investment properties, and even some AirBnb’s, Diego has a vast range of real estate knowledge to share with us today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Diego Corzo Real Estate Background:

  • 28 year old DACA recipient
  • Bought first house at 23, started house hacking, now owns 18 doors
  • Based in Austin, TX
  • Say hi to him at http://diegocorzo.com/
  • Best Ever Book: Dot Com Secrets


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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, Diego Corzo. How are you doing, Diego?

Diego Corzo: Very happy to be here. I am doing well.

Joe Fairless: I’m glad to hear that, and looking forward to our conversation. Diego bought his first house at the age of 23, and started house-hacking, and he now owns 18 doors. He’s based in Austin, Texas. With that being said, Diego, will you give the Best Ever listeners a little bit more about your background and your current focus?

Diego Corzo: Yes, for sure. Right now I am a realtor in Austin, Texas. I am 28 years old. As you mentioned, I do own 18 doors, but I started young, I didn’t know what I was doing; I read the book Rich Dad, Poor Dad when I was 21 years old, and that definitely changed my mindset of how I wanted to build wealth here in this country. I am originally from Lima, Peru, and I came to the United States when I was nine. My parents overstayed their visas, so now fast-forward years later, I am a DACA recipient; I am one of those Dreamers that people read on the news right now, and I wasn’t able to work or drive legally until the age of 22, but I was able to still make it happen and be able that by 23 I bought a property, and then 28 I have all those other ones, and I do have passive income that pays for most, if not all my living expenses.

Joe Fairless: Since you have been 23, you bought your first house, so that was five years ago, and you started with house-hacking and now you’ve got 18 doors over a five-year period of time… How did you buy your first house?

Diego Corzo: The first home that I bought in Austin, one of them was a four-bedroom home. This was while I was working as a software developer at GM. I bought a four-bedroom home, I lived in the master bedroom, rented out the other three rooms, and the rent from my roommates paid for my mortgage.

I was able to buy that home by putting down 5% with a conventional loan, and ever since then I haven’t had to have a mortgage payment from my pocket, and that’s what has helped me continuing buying properties more and more. The good thing is that by house-hacking, by living for free, it gave me the opportunity to save money and repeat the process, because I was able to qualify for another owner-occupant loan a year later, and that’s how I’ve been able to grow my portfolio.

Joe Fairless: So what lenders are you working with?

Diego Corzo: At first it was really hard to get a loan, but now I’ve been able to work with some that are local here in Austin, with CMG Financial. Then I’ve got in a couple with Quicken Loans. They are able to do loans for the Dreamers with DACA, so I’ve been able to use them… And because of my situation, I’ve also had to partner up with people, so I was able to buy some homes cash with my dad, or with another friend, and then we either do a cash-out refinance, or we just invest cash.

Joe Fairless: So you’ve got 18 doors – are they all in Austin?

Diego Corzo: No. Right now I own two single-family homes that I’m renting out by the rooms here in Austin. I own a few other properties in Florida, and they are mostly in the C areas; they cost me between 30k to 50k. The ones in Austin, of course, cost me a lot more. My first one was 170k, and another one that I bought was 280k.

Joe Fairless: Wow.

Diego Corzo: And then I’m also doing some Airbnbs in Tennessee. I just started doing the Airbnb thing, and so far we’re remodeling some of the properties, and next year we should be going all out with those units and cabins and condos over there in Tennessee.

Joe Fairless: Wow, so you live in Austin, you’ve got two homes in Austin… How many doors do you have in Florida?

Diego Corzo: In Florida I would say around ten doors.

Joe Fairless: Okay, ten doors. How many properties is that?

Diego Corzo: That is four single-family homes, a duplex, and a quadplex.

Joe Fairless: Okay. What city are those in?

Diego Corzo: The two single-family homes, the duplex and quadplex are in Jacksonville, Florida, and then I own two other ones in the Sarasota area.

Joe Fairless: Okay. And then what about in Tennessee, how many units and where in Tennessee?

Diego Corzo: In Tennessee I own four doors, two are condos. The two condos – those are studio units, and then I just recently bought two cabins, so that adds another two doors. The two cabins – each one was 90k.

Joe Fairless: Okay. Where are the cabins?

Diego Corzo: They are in the Gatlinburg area, in the Smoky Mountains. I was just there for the first time a couple of weeks ago and it was beautiful.

Joe Fairless: It is beautiful, yeah. That’s a great place to go vacation for a family. You were just there a couple weeks ago – was that the first time you were there?

Diego Corzo: That was the first time I was there as an investor, yeah. I went there years ago as a kid, with my family, but this time it was nice.

Joe Fairless: So did you purchase the properties prior to visiting them?

Diego Corzo: I did. What happened was I’m a realtor here in Austin, and I was helping one of my investors; he bought two properties here in Austin, and then he began wanting to buy out of state. He bought a couple of cabins in Tennessee and then he ran out of cash, so that’s when he reached out to me, and we’ve been buying some doors over there.

Joe Fairless: So you’ve got property in Tennessee, in Florida and in Texas. How did you end up in Florida?

Diego Corzo: In Florida – that’s where I’m originally from. I moved to Florida when I was nine years old. I lived there for about 14 years, went to college there, went to school there, and my brother is a wholesaler in Jacksonville. I helped him get started in real estate over there, so he runs a wholesaling team, and then he sells homes to his investors, and I happen to be one of his investors… So that’s how I was able to get started over there in Jacksonville.

He introduced me to a property management company… Basically, we buy the homes that are 30k to 50k, and then they are renting out for $650-$700.

Joe Fairless: When you think about your business plan, what’s been most profitable for you – renting out the rooms in Austin, or renting out the duplexes, or the quadplex, or perhaps now the vacation rentals that you’ve just purchased in Gatlinburg?

Diego Corzo: Right now, from all the properties that I’ve been able to do, the most profitable has been renting out by the rooms here in Austin… Because for example my mortgage is around $1,500 on one of them, but I’m able to rent out each room for about $600 or $650. One home, as an example, brings in around $2,400, so it gives me a nice cashflow of $700-$800 after some expenses. But I was able to buy that property, for example, with less than 10k, so the cash-on-cash return I feel has been great, and fortunately here in Austin because of the way that there are so many companies that are moving here, a lot of the roommates work for either General Motors, or Samsung, Intel, Applied Materials, so they have great income; I also do background checks, I find them on Craigslist… So I ask them the right questions, and then fortunately I haven’t had many issues with the roommates so far, and I’ve been doing it for years.

Joe Fairless: What has been a challenge that you’ve come across on one of your properties?

Diego Corzo: On the roommates side, there was a lady – she lived in the master, and then there was another guy living in one of the other rooms… And that guy had his girl over, and I guess they were being very loud at night, so one of the other roommates was complaining to me, and then the guy was saying that she got jealous, and all this other stuff.

They were arguing and I had to get involved, but it just happened that one of their leases was ending soon, so then one of them just left, and after that everything went well with the home… But it’s definitely something to consider if I would be having different types of roommates at the house.

Joe Fairless: What’s a deal that has disappointed you the most so far? It doesn’t mean it’s a disappointment, but it just disappointed you the most relative to your portfolio.

Diego Corzo: Yeah, I would say there was one house that we bought with my dad. It was 27k, and at that point we didn’t put insurance on it, and there was a hurricane that happened in Florida, so we had to pay 4k or 5k to take care of some stuff on the roof, remove a tree, and just make a couple of repairs that needed to happen. For example, that was something that wasn’t expected, so it just happened… I wouldn’t say it’s bad timing, but it just happened, because we didn’t put insurance on the property.

Joe Fairless: And when you take a look at your portfolio, what direction do you wanna take it? Because you’ve got vacation rentals you’re renting out, single-family homes, and you’ve also got the traditional duplex or triplex approach…

Diego Corzo: Right now, because of everything that’s going on on the immigration side of things, I’m still working on long-term investments. My goal right now is to get to $10,000/month passively. If I can do that, I will be extremely happy. I plan on probably buying — so if I continue to invest in Austin, I’m only gonna be doing the renting by the rooms, just because it’s a lot more profitable. The market here in Austin has skyrocketed, which means that there’s very little cashflow (if at all) if people are gonna be investing here, on the residential side if you get a home from the MLS or anything like that. So I see myself continuing investing and using the house-hacking strategies, or continuing doing Airbnbs with other partners.

Joe Fairless: About how much does 18 doors bring in a month passive, since 10k is your goal?

Diego Corzo: Right now I would say I have about 5k-6k coming in a month.

Joe Fairless: It’s 18 doors, so that’s about $305/door; I think I did $5,500. So essentially doubling the amount of units then is what you’re looking to do.

Diego Corzo: Yeah, that would be ideal.

Joe Fairless: In terms of renting rooms versus the actual home itself – let’s just use one of your Austin homes for example… What do you make on one of the homes, and then what would you make if you just rented it to a family?

Diego Corzo: In my Austin home – I’ll use the first one that I bought… I bought it for 170k. Right now I’m getting around $2,400/month, so I’m making a spread (subtracting the mortgage) around $1,000, or $900. If I were to just put a family there, put it on the MLS, I’m guessing that it would rent out for $1,650, so it would not be cash-flowing much in that sense, once you allot for either expenses or property management. The ones that I have in Austin, I manage them myself, so I’m able to get something that the normal investor would cash-flow $100/month in that sense, and I’m house-hacking it in a way that I’m able to make around $900.

Now, the idea is to do that multiple times, so that for somebody that has a full-time job and wants to get started in real estate, I would say buying a home, living with roommates, and then continuing doing that, because people are able to buy it putting 3,5% with an FHA loan, or 5% on a conventional loan… So the barrier of entry is pretty low for somebody that wants to reduce their expenses and be able to live with roommates, or that they can either have extra cash to travel, or have money to start their own startup, or get the car that they really want.

Joe Fairless: What type of management process or update should be considered when determining if we should rent out rooms, versus rent it out to one family?

Diego Corzo: I would say that renting out by the rooms there is definitely more involvement, I would say… Because I’m the one that buys the furniture for the common areas, for example… So I buy the sofas, the furniture, and stuff like that, and then the roommates will bring their own furniture for their rooms.

As far as having the roommates, each of them have their own lease, and they end at different times. From my experience, there are some roommates that wanna stay for like a year, others are okay with three months or six months, so there’s definitely more involvement. So if you’re able to [unintelligible [00:15:42].20] There’s a property management company here that does it for 11% or 12% of the gross rent, and there’s other companies that would do just the house, put a family in there for 6% or 10%. So it will cost you a little bit more if you were to hire a property management company to do it, but I would say if you wanna manage it yourself, there’s just a little bit more involvement.

There are different ways to make it – for example, I put the ads on Craigslist, I get a lead that wants to live in the property, I schedule a call, I ask him a couple of questions, and then I send them a YouTube video of the house of me doing a walkthrough, so that if it’s really the house that they wanna live in, then I schedule a time for me to show it to them… Because I don’t wanna waste my time, drive to the house, and then they walk in and they’re like “Actually, I don’t wanna live here.”

Then another thing that I do is if I have three or four people that want to see a room, for example, I schedule them all within an hour, so that as they’re coming in, I’m only there one hour, I talk to four, and then I create urgency. Then I send them a link to apply, and it becomes first come, first served, at that point.

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

Diego Corzo: My best real estate investing advice is invest for cashflow, don’t hope on appreciation… And try to just get to first base, rather than hitting a home run on your first deal. Because a lot of people trying to hit a home run in their first deal get them afraid of not even getting started; then they just wait, and wait, and wait… And while I’ve had friends or clients that wait, I already bought multiple properties.

Joe Fairless: Yeah, and your first comment about cashflow, not appreciation is so true… Because if and when a market correction takes place, that’s gonna be an important part of a real estate portfolio – a cash-flowing property, versus just hoping that appreciation is continuing.

Diego Corzo: Yeah, that’s for sure.

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

Diego Corzo: Let’s do it!

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

Break: [00:18:05].22] to [00:18:55].27]

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

Diego Corzo: Best ever book I’ve recently read… I would say DotCom Secrets, by Russell Brunson. I’ve just read that one.

Joe Fairless: What’s the best ever deal you’ve done that we haven’t talked about in detail already?

Diego Corzo: I would say the quadplex. The quadplex cost me around 100k, and I bought it cash with a friend of mine, and it grosses around $2,100. We did a cash-out refinance recently and we got around $70,000 back. For me, I have very little money in the deal, and it’s cash-flowing great.

Joe Fairless: How do you structure that with your friend, on that 100k cash purchase?

Diego Corzo: This is an interesting situation, because at that point I had 70k and he had 30k, but I knew that in the future I allowed him to buy another property with his own money, and just add it to our portfolio. For example, I put in a lot of the money on the quadplex, and then we bought a duplex for 30k, we put in 20k, and right now we’re gonna be putting it on the market, but he put in all that 50k. So now we’re sort of 50/50, and I was able to add another two properties in my portfolio, while I’m the owner of 70%. I make 70% of the money, but now that we are gonna be adding more properties in our portfolio, that’s when we structure the earnings to be 50/50.

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

Diego Corzo: A mistake I have made… I would say recently it was me not asking — because I invested out of state, there was this one property that had a detached garage, and I forgot to ask the inspector if he actually was able to get into that. I forgot to ask him, and when we got the crew to go out there to give us a bid, it added another (I believe) 3k. They had some stuff to do in the garage, so… I just had to cut the losses there.

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

Diego Corzo: Best ever way I like to give back… I would say by sharing my story, because I came from not being able to work or drive until I was 22, to not the properties that I have, to give them a sort of inspiration, and to teach millennials that it’s definitely possible to house-hack, to get started in real estate at an early age, so that they don’t have to just be focused on their retirement account once they’re 65, they can actually achieve financial freedom in their 20s or 30s.

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

Diego Corzo: They can actually go to my website, HouseHackingClub.com. That’s where they can check out a little bit more videos of all of my projects, and just get more detail on how to get started with house-hacking.

Joe Fairless: Diego, thank you so much for sharing your story and the types of investing that you’re doing, from renting out the rooms in single-family homes in Austin, to purchasing vacation cabins in Gatlinburg, Tennessee, and doing the more traditional thing in Florida, in Jacksonville and in Sarasota, as well as talking about your thought process for why you approach certain things the way you do, and how you structure deals creatively with business partners too, and getting into the specifics there.

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

Diego Corzo: Thank you very much, Joe. Have a good day.

Joe Fairless and Will Deane

JF1418: Using Digital Marketing to Increase Your Real Estate Investing ROI with Will Deane

Listen to the Episode Below (14:59)
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Will became an expert in his field by happenstance. In his words, becoming a digital marketing expert “just kind of happened”. We’ll get tactical advice from Will of what we can do to expand our business and/or brand. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Will Deane Background:

  • Successful entrepreneur as a digital marketing and eCommerce Expert
  • Has built and scaled several multi-million dollar businesses
  • Say hi to him at https://www.unstoppable.co/
  • Based in Austin, Texas

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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.

First off, I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a special segment, like we normally do, Situation Saturday. Here’s the situation – you need to do a better job at digital marketing.

We today have a guest who is an expert in digital marketing. He has built and scaled several multi-million dollar businesses. He’s a successful entrepreneur as a digital marketer and e-commerce expert. How are you doing, Will Deane?

Will Deane: I am doing great, Joe. I really appreciate you having me on your show.

Joe Fairless: Yeah, looking forward to our conversation. So I guess it would be good to start if you could just let the Best Ever listeners know a little bit more about your background, and then we’ll get into using digital marketing to increase our real estate investing business ROI.

Will Deane: Absolutely. So I’ve always been an entrepreneur, and I never woke up once like “Oh, I wanna be a digital marketer.” It kind of happened by chance. I’ve built an e-commerce company in 2011 that I ended up selling after a couple years, and throughout that process — which was in the building industry… But throughout that process I was always hiring different contractors and marketers and people to kind of help us scale, and I realized that the only person that can really be in charge of their destiny, of their company, or growing, is myself.

So I’ve decided to take that role on, on learning everything I could back in the day about buying traffic, social media marketing, to get clients and customers. Then once we ended up selling the business, I would get a  lot of colleagues and friends asking me “Hey, how did you do that? Could you help me with ours?” and really what it turned into was I had to hire to help other businesses, and then it kind of turned into an agency on itself.

So that’s the short story of how I got to where I am today and how I fell into the marketing scene.

Joe Fairless: What’s your area of expertise as it relates to digital marketing?

Will Deane: I would say it’s pretty vast. When we first started, it was more so on the performance side. Really a lot of e-commerce brands came to us because they wanted tangible ROI… And after we were able to prove ourselves, like “Hey, we’re gonna be your best salesmen online”, we got heavy into the brand side of things… Because brand establishes trust, and ultimately trust is one of those things that makes people want to buy from you or want to work with you.

So we do brand, we do e-commerce, we do local business, we do pretty much everything you can think of if it involves online and scaling online… But a lot of people think digital marketing really is traffic, and it’s way more than that. It has to do with building relationships online, so there’s a lot of different pieces that go into it.

Joe Fairless: Yes, I love that approach. So what are some tactical things that we can do to build relationships online, based on your expertise?

Will Deane: I think that putting a personal touch on things is probably the most important. A lot of the brands you see out there, whether infomercial late-night, or you’re getting targeted online – they’re using a character or some type of avatar to establish trust. There’s a spokesperson per se, and that spokesperson is somebody that’s supposed to relate to the customer, or at least establish a personal connection between the business and the consumer or the other business that’s ultimately gonna buy or work or use their service.

So I always tell people, don’t try to go out there and sell… Go out there and try to add value, and then establish a personal connection. And I know that’s easy to say and harder to do. I would say try to not think too far ahead when getting online and doing any type of marketing. Try to just work in the Facebook groups or work with your e-mail list or work with your connections or Instagram or locally, and actually get to know them and start a conversation… Because that’s where it really goes – it’s all in the conversation that’s gonna help you grow anything online.

Joe Fairless: How do you start a conversation with an e-mail group?

Will Deane: I wouldn’t say e-mail group, but like your e-mail list. Let’s say that over time you’ve been able to collect an e-mail list because they’ve been interested in your service… You know, one of the best ways to do it, even though you’re a business or a contractor or somebody offering a service, is to not go and reach out to your e-mail list with that service first. Go reach out to them with something that might help them.

If you’re in real estate, for example, and you had a listing – or whatever it is – as opposed to just telling people about the listing or telling people about a new construction that you have going on, tell them about something in the area that’s interesting, that might pique their interest about how the rates are lower.

Give some value to people to get them to pay attention… Otherwise, you just are approaching them so much so with “Hey, listen to me, buy from me, work with me” versus “Hey, I’ve got really good insight on this stuff. I’m gonna help you out. Even if you don’t work with me, I’m still here to help”, and that ultimately is gonna create a deeper relationship and then clients.

Joe Fairless: Do you have a case study or example about it, that illustrates that point?

Will Deane: Yeah, sure. On the building side I wouldn’t say as much so, but I can definitely correlate that to an e-commerce site, and I’ll even go as far as to clients that we have. Almost every single client that we have is a personal referral. It’s somebody that’s been told by their friend, “Hey, you’ve gotta work with these guys. They’re really honest, really straightforward.”

So whenever I go out and I prospect or I decide to go look for more clients or more business, usually what happens is I find that I’m approaching somebody after I’ve seen their marketing. So I see somebody online that I’ve been targeted by, or maybe there’s something not right about it and I’ll reach out and say “Hey look, I love what you’re doing, I love your brand, I love everything about it. I’m not here to tell you how to run your marketing or any of that stuff, but I have some extra time and I’d love to point you in the wrong direction, because I think you could be doing this a little bit better.

If you ever need somebody to lean on to help you kind of gauge that stuff, I’ve been in your shoes  before and I’ve built a business, so I would be more than happy to help you on your way. Don’t think I’m soliciting my services to you, because I’m not trying to charge for this… I’m just literally coming to you and trying to point you in the right direction because I think you could be doing something better.”

Obviously, it’d be great if they worked with me, but I’m genuinely coming from a point of “I wanna help these guys out”, and what ends up happening is that comes back to me. Almost every single client I’ve got has been able to lean on me for questions and ultimately they wanna work with us, because we’re very transparent and we do provide that value-first approach, if that makes sense.

Joe Fairless: How scalable is that approach?

Will Deane: I think that on a corporate level it’s not as scalable. It depends on what the product is. I think that it does kind of tie back to — so I’m giving you a use case that’s like me personally getting clients… So at a corporate level, at very large scale, if we had a 100-person team, maybe not… But from a business perspective, I think that a lot of businesses are so focused on just selling the offer, when they could be providing really deep content to their community, and because of the content that they provide, they become a trusted source in the community. Becoming a trusted source ultimately allows people to trust you.

Mine was super specific, but this kind of idea about not just trying to sell people, but actually helping them and providing value – which I wouldn’t say lowers the trust threshold, but really people are more attuned to opening the e-mail, because they’re not just getting a sales e-mail. They’re more attuned to paying attention, because they might actually learn something from it, as opposed to being sold at.

So as a business, a corporate business or whoever you are, trying to help or provide value actually seems to work really well, and I do believe is kind of the turning point in the next few years of how businesses are going to be able to scale.

Joe Fairless: I love the approach. Let’s say that a Best Ever listener is listening and they’re like “Yes, I’m on board, Will. I agree, the brand establishes trust, I wanna build the relationships, and I am confident that over time that will result in the business.” So let’s go one level deeper and more specific… What are some tactical things that we can do to implement that advice?

Will Deane: Some tactical things are get to know your niche and your customer better. I think that depending on what real estate niche you’re in – is it just investing, is it building, is it all the above? …really understanding the customer, the area, what you invest in, and then trying to come up with — I guess trying to be a resource for the people that you’re working with. Don’t just try to sell them.

Obviously, if you have a great offer, that’s gonna sell itself, but try to find things that are gonna help the people you could potentially work with, and that will kind of help you grow. I know I’m being a little vague when I say that, just because there’s so many different niches within the real estate investing side of things, but trying to go deeper… If I put myself in somebody’s shoes that I guess was looking for investing in housing communities per se, I would try to find who are the people that are buying these properties, and I would try to be a resource of information to help them make those decisions… And ultimately, because we’re a trusted source, helping those people, they’re coming back and they’re taking a harder look at our company and what we provide and what we offer, if that makes sense.

Joe Fairless: What are some ways that we can get to know our customer better, that you’ve implemented?

Will Deane: Aside from the value-first approach, I think that a big thing that I’ve seen – and I’ve worked with a lot of people – is personal branding. So you have a company, but people are ultimately working with a human, so getting your face out in front of your business is really important. Otherwise, people are just reading a piece of paper or a web page, and I think that a lot of realtors, a lot of investors that I’ve talked to and I’ve worked with – they close more deals when they are sitting down in person with their clients. That’s a personal touch.

One of the ways that that kind of relates back to marketing and some of the guys I’ve worked with before is you keep advertising your company, which is great, you should, but when is it time for you to put your face out there as well? I think that doing that really adds that personal touch and people are more attuned to that and they’ll give you their information, their phone number they’ll fill out a lead form, or they’ll come to you and ask you questions. Being able to connect with people on the other end is gonna get you those deals.

Joe Fairless: Anything else that we should talk about as it relates to increasing the ROI of our business through branding and digital marketing that we haven’t discussed?

Will Deane: We could talk about specific platforms. I think a lot of people — I don’t know how skilled everybody is at digital marketing, but Facebook is a really great platform for people to start finding different projects or buyers or lenders in the real estate side.

I used to work with a very highly talented hard money guy in Los Angeles, and his main source of clients and transactions and deals off the MLS really came through digital stuff we did on Facebook. So if you’re just starting out or you don’t really use digital marketing or online resources, I would say look into Facebook, look into your local community, join a bunch of different Facebook groups. There’s tons of information in different real estate Facebook communities and groups that can help you kind of get a leg up… And then find some professionals or somebody you trust or a personal resource or referral that could help you guide you on how you might be able to use the Facebook platform to increase your leads or deals.

Joe Fairless: How can the Best Ever listeners get in touch with you and learn more about your company?

Will Deane: Absolutely. Unstoppable.co. Follow me  on Instagram, @willdeane, or just google me. I show up pretty quick. I’d be happy to help and point you guys in the right direction if I can help in any way.

Joe Fairless: Will, thank you for being on the show, talking to us about how we market ourselves online and how by focusing on building relationships, taking a long-term approach, we’re gonna get more business. And the tactical one-two punch for how to do that is first we’ve got to get to know our niche and customer better, and then once we do that, it’s simple – we’ve gotta be a resource for people that we’re working with… Help them get whatever they’re looking for, whether they work with us or not… We’ve got their back. When we approach it that way, things are gonna work out.

I’m really grateful that you were on the show and talked to us about that… So thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Will Deane: Absolutely, Joe. Thank you for having me. I really appreciate it.


Scott Smith and protecting your investments

JF1275: How To Protect Your Investments & Hide Ownership Of Assets with Scott Smith

Listen to the Episode Below (20:44)
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Scott and his colleagues realized that there is a massive amount of bad information on the internet when it comes to asset protection. He set out to find and teach others a better way. Today Scott is here to tell us about setting up a series LLC to protect your assets, hide ownership, and not cause you a headache with your taxes. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Scott Smith Background:

-Owner of Royal Legal Solutions, provides business, tax, and legal solutions exclusively for real estate investors

Spent 8-years deconstructing real estate investing, developed strategies to protect your assets from devastating lawsuits, maximize tax savings, and more

-Prior to RLS he was an aggressive litigator who brought suit against major insurance companies

-Say hi to him at https://royallegalsolutions.com

-Based in Austin, Texas

-Best Ever Book: Four Hour Work Week by Tim Ferris


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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, Scott Smith. How are you doing, Scott?

Scott Smith: I’m doing great today, Joe. Great to be with you.

Joe Fairless: Well, nice to have you on the show, my friend. A little bit about Scott – he is the owner of Royal Legal Solutions. They provide business, tax and legal solutions exclusively for real estate investors; estate planning, asset protection – all that good stuff. Based in Austin, Texas. You can say hi to him and his company at their website, which is in the show notes. With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Scott Smith: I’m a real estate investor myself, and 100% of my clients are real estate investors. And what we started doing was we realized that there’s a lot of really bad information all over the web, that really conflicts on different types of legal strategies and what not, so my company was founded to really just help people that are real estate investors, because there’s just enough there to tackle, instead of going super broad.

So the one niche thing that we really reined into is how do you protect your assets using company structures, and hide your ownership of the assets and of the company, and do that in a way where it’s not gonna cause you a headache with your tax preparation, accounting and what not.

The idea is to say that as investors we make the most amount of money finding really good deals, so let’s have a system for our taxes and our company structure that we can do almost like a set it and forget it type piece. Because you don’t make any money by being really good at law as an investor, right?

Joe Fairless: So how do we protect our investments, hide the ownership and not cause headaches with taxes?

Scott Smith: The number one way to do that is gonna be using a series LLC, which you can establish in a couple of different states. I like to establish them through Texas, not just because I live here, but because Texas is the cheapest and has the best protections. A great thing that a lot of people don’t know is that you can establish a company structure in one state and use it in any state.

I commonly hear “Well, I can’t use an LLC in my state, because I live in Alaska”, but the truth is what you can do is establish something here in Texas, and use it anywhere. That’s really gonna buy the best protection for you, because a series LLC is really awesome in that it allows you to scale infinitely with the best protections at no additional cost. How awesome is that?

Joe Fairless: No additional cost meaning you don’t have to create new LLCs…?

Scott Smith: That’s right. And it doesn’t complicate your taxes at all, because everything streams up through one tax ID number. So if you have 15 properties, you’re not having to look at 15 different EIN numbers and bank accounts and whatnot, that you would if you had individual LLCs.

Joe Fairless: And then I’m sure the common question you get is “That doesn’t trigger a domino effect if one property gets foreclosed on, or someone sues it…? Is it not a domino effect for the others?”

Scott Smith: That’s really the biggest benefit of the series LLC, is that each individual child series that it creates is treated like an individual LLC. So every property is compartmentalized. A lawsuit against one property doesn’t affect any of the others.

Joe Fairless: What are some of the other advantages of it?

Scott Smith: The biggest advantage is the scalability and the cost savings and the ease of being able to scale with it. When you combine that with the anonymity trust… And that works on two levels. There’s two levels of anonymity that every investor should be using. There’s a really expensive way to do this, and there’s a cheap way to do it.

The really expensive way to do it is to have the company owned ultimately by a Nevada or Wyoming LLC, because they don’t have public disclosures on who the ultimate owner is, which is the client’s name we’re trying to protect… But that means you’re gonna have to start paying for all these additional LLCs and yearly costs associated with each one of them.

The cheap way to do it that’s just as effective is using a trust. You can have the trust that will own the LLC, and that allows you to be able to accomplish all of the anonymity with none of the ongoing costs associated otherwise.

The second important piece of the ownership for the assets is gonna be what happens at the property level. So each individual property would also need its own anonymous land trust associated with it. What that does is that prevents anybody from being able to search the property records and find out that that property is connected to you, or to your company… Which is really the first piece of stopping litigation. Because if people can’t find out that you own stuff, they don’t think to sue you.

Joe Fairless: If there was someone who was on this call, and they weren’t a fan of a series LLC, what would they be saying?

Scott Smith: The number one critique is that the series LLC is “untested” inside of courts. There’s not a lot of court cases that treat it, and people erroneously think that because there isn’t a lot of court cases that we don’t know whether they’re a good and viable entity. This information is flat wrong, and it’s what everybody is saying.

The reality is the law is what the legislator passed, and we call those statutes. And the statues are very, very clear on exactly what they mean. You can pull them up online, read it yourself. Any layperson can even understand what the legislator is writing in terms of the series LLC statute. The reason that you don’t have court cases is because courts can only interpret the law. If the law is very clear, then it’s not worth the $50,000 or $60,000 it’s gonna take to take a case up through appeal, to argue it… So you’re not gonna find court cases there.

So it’s actually the reverse – people say “We don’t know whether it will be held up because we don’t have court cases”, I say “The law is very clear.” What you should really be focusing on in effect is nobody has even tried to challenge it, because the law is so clear. It bolsters the strength, it doesn’t weaken it.

Joe Fairless: How much does it cost to put together a series LLC?

Scott Smith: The typical points that we’ve looked towards for asset protection – they say you should never be spending more than 3% for an asset protection structure to protect how much equity you have. So if you have $100,000 in equity, don’t spend more than 3k to set up everything that you’re gonna need there. When we look to say “What does every individual need?”, it’s really particular… I would say you could go as low as $1,000 to $1,500, depending on your state, to upwards – more of the series LLC with all the anonymity structures, you might be looking at more to the $4,000 to $5,000 range in the marketplace of attorneys that are like me.

Joe Fairless: So you’re an attorney…

Scott Smith: That’s right, I’m an attorney and this is what we do as part of an offering that we do.

Joe Fairless: From an estate planning standpoint – so we talked about asset protection, and a bit about estate planning… What other suggestions do you have from an estate planning standpoint?

Scott Smith: So estate planning – a lot of people do it where it actually requires a lot of maintenance every year, Joe… Because what they’re doing, Joe, is that they take all of their assets and they’re gonna deed them directly into the name of their living trust. Because every estate plan, you’re typically using a living trust, and a second piece called a pour-over will. The living trust is the piece that actually controls all of the assets. So people will deed all the properties to the living trust, but throughout your life, you’re changing around what assets go where, what’s the bank account numbers, buying and selling properties etc. So this is actually a really poor strategy to just have the living trust in place, because it’s a constantly changing scope of what assets are actually being held by the trust, versus being held in your personal name… And there’s no protection associated with the living trust itself for your estate plan.

The better solution is to establish an LLC or a series LLC to be your asset holding company, then all of the assets are going in and out of your asset holding company during your life, just like you’re normally gonna do to run your business and manage your affairs while you’re alive, and then what you use is your estate planning piece of the living trust to say “My son is gonna get 25% of everything that’s part of my living trust. My daughter is gonna get 50%, because I love her just a little bit more.” That way, you never have to modify anything more than you would have to do anyway during your life, because you’re gonna be managing the assets of your asset holding perfectly, so you don’t ever have to think about “Oh, I need to update these estate planning documents every six months because we’ve done all these changes.”

Joe Fairless: Got it. You might update the ownership of the series LLC, but you won’t have to update the items within it.

Scott Smith: Yeah, so the estate plan piece, the living trust – you don’t have to update anything with that, because that’s kind of like a set it and forget it, unless all of a sudden your son decides that he wants to marry that floozy that you never liked and you wanna disinherit them, then that’s where you would nail him on that one.

Joe, let’s say you had ten properties that were going in and out of your LLC that you used to hold all of your assets. You would be managing the buying and selling of those properties out of your LLC anyway during your life, because that’s how you’re gonna conduct your business. Your estate plan is just gonna say that your son gets the 25% of that LLC, and your daughter is gonna get 50% of the LLC, so there’s no change of ownership documents that are happening. All of this extra work that would have to be done on updating documents doesn’t happen because everything is accomplished on moving the properties in and out of an LLC, they’re not done by changing ownership of the LLC itself.

Joe Fairless: Got it. You’re staying higher-level on what you’re updating, and that’s only in circumstances where you give someone more or less equity or you bring someone else in…?

Scott Smith: Yeah, that’s right.

Joe Fairless: Okay. You mentioned in the beginning – and you probably talked about some of these items, but I’m wondering if there’s anything else that we haven’t talked about that is relevant… That there’s a lot of bad information out there. What are some other bad information that’s out there?

Scott Smith: Another common piece I hear about is that people seem to think that insurance coverage is enough, and you’ll hear this from CPAs and a lot of keyboard warriors; they’re very famous. They’re saying, “Oh, you just run your business right and insurance will take care of you and you’re fine.” There’s a fundamental disconnect here, because these people that are saying this actually don’t even understand the nature of the risks that they’re engaging in.

The insurance protects you against different kinds of risk than a company structure does. Insurance protects you from accidents, like somebody slips and falls on your property – that’s a great one to have insurance take care of. I always have great insurance because of that reason. Insurance is designed for that.

Insurance doesn’t cover you for catastrophic events that could happen. So anything that would happen in the buying and the selling of a property – not covered by your insurance. Grandma falls through the staircase and has permanently disabled – definitely not gonna be covered by insurance. You know why? Guess what business the insurance companies are in the business of? They’re in the business of collecting premiums and denying coverage when it gets expensive. So when you have catastrophic events that are happening, the insurance companies will find a reason to deny you coverage.

So the insurance is important because on all of the small things that might happen, they’re gonna take care of that piece of our life and we don’t wanna have to deal with those low-level nuisance issues. But the company structure protects you when something really catastrophic happens, and the company structure provides a stop gap to say “I know the extent of my loss is gonna be limited to exactly this, no matter what.” That’s what you want. Because one lawsuit is enough to wipe out millions of dollars, and all it takes is one to get through for that to happen, and I’ve seen it happen, unfortunately.

Joe Fairless: You said you’re a real estate investor, so with how you have things set up – you’ve got a series LLC and you’ve got the… I think you call them “child LLCs” – did you call them that?

Scott Smith: That’s right, yeah. What you refer to is that you think about the series LLC as a parent/child structure. It has this parent LLC that’s filed with the state, and then this parent LLC can have as many children as it wants, and each child we call a child series. It’s a plural name, but it’s an individual thing. So you’ll have series A, series B, series C – that’s all inherently part of this series LLC, and each child, just like human children, are free to create.

Joe Fairless: And what’s the ongoing fee to maintain that? Is it just what a normal LLC would be?

Scott Smith: No, there’s no fee. No matter how many individual child series you get, there’s no additional fees; no matter how big you scale. The only fee that’s associated with it is the same fee you would associate with any other LLC, because the parent itself has to have a registered agent and file franchise taxes… But that’s the same as our traditional LLC, the normal one that you would think of.

Joe Fairless: And I imagine that’s how you have your stuff set up.

Scott Smith: Of course, yeah. I have all of my stuff set up with a series LLC and anonymity. You’re not gonna be able to find my name attached to anything, and that’s how I like it, except for I have operating companies that I use to shield any liability let’s say that a contractor wanted to sue me, or a tenant wanted to sue me… All of those business dealings are always done through a shell LLC, and that’s just a normal, traditional LLC that we have set up to be able handle those types of liability. Because what I want is people to only be able to sue the entity that has nothing. So if I’m not a member of the contract but my LLC is, if something goes wrong, they can only sue the LLC, they can’t sue me.

Joe Fairless: Based on your experience – we’ll stay on the legal front, versus you as an investor, but certainly that helps with the conversation… Based on your experience with asset protection and estate planning, what is your best advice ever for real estate investors?

Scott Smith: The best advice I can give you is to work off of one platform that you can understand, implement once and then use for forever. What I see people that end up in trouble is they try to set up systems where they don’t fully understand them at the front end; they never quite fully understand them, and they will end up doing things that are wrong, that have adverse tax consequences.

So really what you want is a really flexible system that allows you to be able to change what it is that you’re higher operating, without having a bunch of costs associated with it.

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

Scott Smith: I’m ready.

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

Break: [00:16:59].17] to [00:17:51].25]

Joe Fairless: Best ever book you’ve read?

Scott Smith: The 4-Hour Workweek by Tim Ferriss.

Joe Fairless: Best ever deal you’ve done as an investor?

Scott Smith: I made $150,000 just by being able to coordinate two people to buy, as a broker. Basically, I wholesaled a deal inside of ten minutes.

Joe Fairless: How did you find that deal?

Scott Smith: I had a contact. I had a good network, they knew that it would take somebody like me to be able to negotiate with one of the parties, because they were an exceptionally difficult person to deal with… But that’s one of my talents – being able to talk to people.

Joe Fairless: Best ever negotiating tip?

Scott Smith: Always make them make the first offer. You never know what people are gonna be willing to accept.

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

Scott Smith: I didn’t verify all of the fundamental paperwork. It was a bank, and that person was saying that they were gonna be able to get financing on a particular deal to close on it, and I didn’t verify it with the bank, to be able to make sure that all of the terms were correct… So I got defrauded.

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

Scott Smith: I run groups to be able to help entrepreneurs, to be able to hone their businesses that are giving back to the local community. People don’t know this, but every non-profit, at some level, is actually a business, and I find that the more that I can help those people, the more good that they can reach out and do.

Joe Fairless: And how can the Best Ever listeners get in touch with you and learn more about your company?

Scott Smith: We have the website, RoyalLegalSolutions.com. You can also reach out to me personally at Scott@RoyalLegalSolutions.com, or we have a hotline set up for you to call. It’s 512-757-3994. We help people all over the United States, no matter where you live or what type of real estate endeavor you’re going into. We can either help you or point you in the direction of people that can.

Joe Fairless: Well, Scott, thank you for educating myself, and perhaps some Best Ever listeners, on the pros and cons – primarily pros – of the series LLC and how you use it in your own investing endeavors, and how it can be applied to ourselves, as we go about wanting to limit our liability and make sure our asset protection is not only as protected as we can be, but also as maintenance free as possible, in a simple way to understand things.

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

Scott Smith: Great, Joe. Thank you.

Bruce Petersen and Joe Fairless

JF1274: Challenges That Syndicators Face When Executing Their Business Plans with Bruce Petersen

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Bruce started his career as a stock broker. Around 1991 the market changed some and he was not able to make a lot of money in his career anymore. After an 18 year stint in the retail industry, Bruce started educating himself in real estate. His very first deal was a 48 unit syndication in Austin, Texas. Now he only looks at 200+ units and shares his experiences on podcasts for people to learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Bruce Petersen Real Estate Background:

– Owner of Bluebonnet Asset Manager  

– Serial syndicator of large multi-family properties ranging in size from 120-292 units.

Awarded the Austin Apartment Association Independent Rental Owner of the Year for 2016

-Awarded the National Apartment Association’s Independent Rental of the Year for 2017

-Say hi to him at www.apt-guy.com

-Based in Austin, Texas

-Best Ever Book: Rich Dad, Poor Dad


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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, Bruce Petersen. How are you doing, Bruce?

Bruce Petersen: Good, man. How are you?

Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Bruce – he is the owner of Bluebonnet Asset Manager. He is a serial syndicator of large multifamily properties ranging in size of 122-292 units. He was awarded the Austin Apartment Association Independent Rental Owner of the Year in 2016, and the National Apartment Association’s Independent Rental Owner of the Year. Congrats on those two awards! You can say hi to him at his website, which is in the show notes page. Based in Austin, Texas… With that being said, Bruce, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Bruce Petersen: Sure. My background – I’ve started my work career as a stockbroker, believe it or not, in the early ’90s. I was the guy that went to college because he was supposed to go to college; he should have not gone to college. I was going for a finance degree, and I wasn’t the best student in the world. I applied for a job, and I got a job as a stockbroker, so I’ve decided to quit school and never went back.

That lasted for a little while, until the market kind of changed on me in ’91. I wasn’t saving any money, so I was going hungry as a full-commission stockbroker. I did that for a little while, and I had to get out of that because I was not eating. I fell into retail, actually, which was not exactly fun, but I did it for 18 years, finally hit a wall in the end of 2007… I decided I couldn’t keep doing the 90 to 110-hour weeks, I walked away from that, and started doing —

Joe Fairless: What retail were you doing?

Bruce Petersen: It was big box store retail. I ran stores from Best Buy, Bed, Bath & Beyond, [unintelligible [00:03:53].17] I did that for a long time. Like I said, I basically drilled myself into the ground. I guess you’d call me somewhat retired at 43. I was a Dave Ramsey guy that lived way below my means and invested my money wisely, so at 43 I was able to walk away from the retail gig and started educating myself on real estate… Because you always hear about real estate, but I didn’t know anything about it.

So I educated myself, got rolling in 2012, bought my first property as a syndicator, a 48-unit property in North Austin, sold it two years and four months later for about a 300% profit, and it’s just been the best thing I’ve ever done. We’re up to — currently, we own 860 units spread over four properties as syndicators, and we are a partner in a 250-unit here in Texas also.

Joe Fairless: The 43-unit, the first one that you did in 2012, why did you syndicate it versus doing a joint venture partnership?

Bruce Petersen: Because as a syndicator, the way I structure my deals, the people that invested with me, they still had a life; they had a family, they had a job to go to… They didn’t want any part of operations, they didn’t want any role in the company at all, so they were willing to be silent investors or basically limited partners. It just made for an easier deal for them, an easier deal for me… I was the sole operating partner, so I could move quickly and do the things that I needed to do without having to consult with anybody else.

Joe Fairless: What is the threshold for when you do a syndication versus a partnership or neither, because it wouldn’t be worth your time?

Bruce Petersen: The only thing I ever do is syndication, so I can’t really speak to the other stuff. Now, the one thing that I would do is just be an independent owner without a syndication behind me, but [unintelligible [00:05:42].27] on joint ventures because typically joint ventures are partnerships; there’s equal say at the table, it’s hard to make moves a lot of times, you get things locked up… I’ve seen friends around me do it, and it can work and it can work very well, but it also has the tendency to get kind of bogged down because you can’t come to a consensus. So the syndication is all we will ever do, unless we go out and start buying our own stuff at some point.

Joe Fairless: Let me rephrase the question – what is the lowest threshold, whether it’s unit size or price point or whatever, that you would do a syndication, versus you wouldn’t do the deal?

Bruce Petersen: I gotcha. Really, I would syndicate anything. Where we are now though, we’re not looking to do anything below 200 units. But again, my first deal was a 48-unit. I’ve got friends that get started in the business with a 12 to an 18-unit property and they’ll syndicate that just to get a ball rolling, because once they get some experience, they can start getting into a little bigger and better loans, some non-recourse debt… So a lot of people will actually syndicate their very first deal on very small stuff, but again, for myself, we’re only looking at 200 units and above now.

Joe Fairless: I’m surprised on the 12-unit, because there’s legal costs involved in putting together a private placement memorandum and all of that, so I would think unless it’s a high price point per unit, I would think that the cost would  be prohibitive to do a syndication on a 12-unit, but clearly they’re finding a solution for that. Do you know how they’re able to find a solution for that?

Bruce Petersen: First of all, the guy that I use – and it’s the person that I’ve turned them on to for attorneys – we can get a PPM, a full offering placket together for about $8,000, which is still not cheap when you’re talking about a 10-15 unit property. What they typically find is that’s just their starter property, just like mine. It’s not gonna come close to paying their bills, but as long as that legal fee and all the structural costs don’t hurt the deal so much to where they can’t return an 8% to 10% cash-on-cash to their investors – again it’s a stepping stone.

It’s a good way too to build a loyal following. You bring people in on a 12-unit, you prove yourself to them on that 12-unit, they’re more likely to start following you into the 50, and the 100, and the 150-unit properties. So again, it’s a small step toward that snowball.

Joe Fairless: What has been a challenge since 2012 to today with a particular property, and how did you overcome it?

Bruce Petersen: A challenge… We did have a property that we own – a 250+ unit property in San Antonio. We bought it last August, so right now we’ve had it for about 15-16 months… But we’ve bought it in August of ’16, so what happened in August, September, October and November of ’16 was a very, very ugly presidential race. Everybody I talked to, usually election cycle years things get a little squirrely; people start moving around or stop moving around, sales aren’t as often and as plentiful, you don’t have as many people looking for apartments, because everybody’s trying to figure out what’s happening in the political environment. Then with the people we had running this past cycle, on both sides, it tended to freak a lot of people out.

We saw a drop in occupancy throughout the state of Texas. Austin was fairly well spared, but San Antonio, Houston, Corpus Christi – a lot of the Texas markets saw a really marked drop in occupancy… So it kind of threw us all for a little bit of a loop.

Joe Fairless: Where were they going?

Bruce Petersen: That’s the thing, I can’t find anybody that could tell me where they all — I mean, how did they all just stop going anywhere? Because in my neighborhood, for this property, we were the highest occupied property in the neighborhood, and we were still barely cranking 90%. Most of our submarket was well into the 80%. So I don’t know what happened… I’ve talked to all the brilliant people that I can find around me, nobody really can kind of figure out what exactly caused it, other than the election cycle. But again, it’s not like they all left the country.

Since that, we just kept our nose to the grindstone, we doubled down on our marketing efforts, which to me is key. Don’t freak out in the face of adversity. You have to push through that adversity. I think the natural thought for people would be “Oh, we’re not as occupied as we were. Our cashflow is not what it was, our income is not what it was, so we’ve gotta pull back on marketing.” No! That’s exactly opposite! So we started throwing more and more parties at the property, we were hitting up social media like crazy, using the internet listing services like TheApartmentGuide.com, all that… So we doubled and tripled down and we made it through. Right now, in the fourth quarter of this year, we’re comfortably above 97% and doing really well.

Joe Fairless: When you are in the middle of that challenging time — I guess first off, for some context, are you self-managing? Do you have your own management company, or do you have a third-party?

Bruce Petersen: We self-manage.

Joe Fairless: Okay, you self-manage… What is your approach with the staff? Do you just simply say “Hey, double down on each of these things”, or is there a different conversation that takes place with the staff on site?

Bruce Petersen: With the staff I actually wear the hat of regional manager in our company. We haven’t brought in a regional yet, we probably will on the next property or two… Basically, I’m the one data mining; I’m the one looking at all of my lead sources, where I’m getting traction, and we start doubling down on that up in our marketing spend with the channels that are working properly. And just making sure the staff completely understand their role, how to sell the product. Because what I tell every one of them from the day we take over a new project, ‘My job as your boss, as your regional is to give you a great asset to sell, but now I need you as trained as you are to go out and sell that asset.”

Basically, again, I’m just data-mining P&L, looking at leads, where we’re getting traffic, and just exploring those, working on some move-in gifts… A lot of my neighborhood, they were giving away first month’s free and a 50-inch TV. Like, what?! We never did that. We’ve got a big enough social media presence, really high reviews. We really cultivate that stuff, so we fortunately did not have to do any of that crazy stuff.

Joe Fairless: What are some ways that you cultivate your social media presence so you get the traction and the gold, which is the reviews?

Bruce Petersen: Right. The main thing we use is Facebook. We don’t do a lot of Snapchat or Instagram… I’m a 50-year-old guy, I really don’t understand those two; I need to bring somebody into my ecosystem that does. But we use Facebook a lot, and what we’ll do is we will say — well, first of all, basic stuff. We do a toy drive every December for our properties. We do a food drive every November for every one of our properties. And what we’ll typically do is say “Look, if you will bring in an item, we will enter you into a drawing… If you bring in the item and you like our page.” Or we’ve also done — this is a goofy thing, but it really works… We bought a little garden gnome, we gave the garden gnome a name, and we told the residents “Go find the little garden gnome. If you find the little garden gnome tomorrow, take a selfie with it in the picture, post it to your timeline and mention us or like us or tag us, and we’ll enter you into a drawing.”

So we do all kinds of fun stuff like that. It gets them engaged, they’re having fun, they’re getting some gifts cards (sometimes it will be a turkey dinner for Thanksgiving), and it helps spread the word and that helps us with our social media stuff. I believe right now our Facebook review is either a 4.8 or a 4.9, so it really works well.

Joe Fairless: Yeah, that does work well. Very creative, and it gets that organic word of mouth going. When you applied for the Apartment Association award and then you ultimately won it, what were some of the bullet points that you think put you over the top that differentiated you from the other applicants?

Bruce Petersen: What we do on everything we do, it’s all based on community. This is not just a business; we are providing people’s homes for them. Our goal is to provide community; create a place that they want to live, they know their neighbors, they like their neighbors, so we’re always looking for ways to give back… And what really was the tipping point on this year – one of our properties in North Austin, a 120-unit property – very working class neighborhood; we have an elementary school on both sides of us in this property… What we did is we reached out to all the local elementaries and middle schools and said “By grade, I want a list of your school supplies data for this year.”

So we went to Walmart, we went to Amazon, we went to Target, we bought all the school supplies for every child – 83 of them on our property. We bought backpacks for them, we had an event day where we set up in a vacant unit and we ordered pizzas for the residents that came through. So they would stand at the door, they’d be let in one or two at a time; first up, they’d go get a piece of pizza from my daughter; my daughter is in the kitchen, passing up pizza. They go over to a table with my wife and the manager of the property, and they stop there, they get their little backpack, they get to choose boy or girl, choose which one they want, then they leave that spot and they go into one of the bedrooms where my autistic 21-year-old daughter is in that room, and she’s asking what grade they’re in and she hands them their packet. They get to put it in their backpack, and they run out with a pizza in their hand, with the biggest smile you’ve ever seen on their face, because now they don’t have to go to school and be embarrassed or be behind because they don’t have what they needed, because their parents couldn’t afford $20 to provide that. We were told directly that was probably the biggest part that got us that award.

Joe Fairless: That’s incredible. How does that idea come about?

Bruce Petersen: We believe firmly in work ON, not IN our business, so we’re above the [unintelligible [00:16:10].14] We’re able to sit there and brainstorm these great ideas. We have quarterly manager meetings and we’re always looking for ideas. I don’t have the best ideas in the world, my wife doesn’t either, so we’re always tasking our staff to help us plan the next big event, the next big outreach thing that we’re going to do.
Now, that one was actually the brainchild of mine and my wife. We just decided “What can we do to help them?” because the better life we help create for our residents, the less likely they are to move, and of course, the less likely they are to move, the more profitable we get. So it was just a brainstorming session one day.

Joe Fairless: Is that gonna be an annual thing now, or you —

Bruce Petersen: Absolutely. Yeah, we did it in 2016, we also did it in 2017 now, so we will do it going forward. Now, not every property lends itself to that; this is very working class, and it was a very big need, and the residents asked the second year “Are you gonna do it again? Are you gonna do it again?”

On some of our B, B+ assets, a little higher end properties, we don’t do that kind of stuff. We just figure out better ways to have big parties with DJs, and food trucks… So each property is its own individual animal, and we treat them that way.

Joe Fairless: What is a challenge that you came across whenever you’re executing a plan like that?

Bruce Petersen: The biggest challenge is logistics… Trying to figure how to get enough supplies for each place that we have to hit; we have to go to three, four, five different Walmarts and just rip everything up that they have off the shelf. That’s logistically tough. But other than that, for the most part we empower our on-site staff to help with a lot of it, and we get the kids involved. Our kids love being involved; they’re invested in the deals, but our 18-year-old daughter actually works for our management company, and she helps accommodate a lot of that stuff; she helps us with the books… So it’s a group effort.

Joe Fairless: From the in-house property management company’s standpoint, what are some things you recommend to a multifamily owner who’s scaling his/her business and they do want to have their in-house property management company? What are some things you’d recommend to them?

Bruce Petersen: Well, the biggest thing — I’ve heard a lot of people say “Well, you can’t really do a management company. It doesn’t make financial sense until you get up to 300-400 units, so I really can’t get there to get the management company–” Look, grow it organically. If you wanna do this, you have to be willing to wear a lot of hats yourself. I didn’t start a management company with a regional in place, with an accountant in place, with an ops director in place… We didn’t have all that. We were all of those roles until we did finally get to scale; now we have an ops director, now we have a bookkeeper, now we have a personal assistant. We have all these people to help take a lot of the load off of our shoulders, but until we got to the scale where it supported that payroll, I was the regional. My wife is a CPA, so granted, we’re a little luckier there than most, but she was the bookkeeper, she was the accountant, she did the tax returns — well, she did it on the first one, then we pulled it away from her and gave it to an outside company… But I would say get in there, do the job yourself until you can afford to hire. Because we’ve been profitable with our property management company from the very first day, because we were doing all the roles.

Joe Fairless: Why apartments and not storage units, mobile homes, retail etc?

Bruce Petersen: Well, I looked around and I was trying to figure out what did I really wanna learn? So I first started thinking about single-family homes, and I realized “No, that’s way too much work. I’ve got the money, I’ve got the time… Let me go after some apartment complexes instead.” And the reason that instead of a trailer park and a storage unit or a strip center, I saw this, especially for somebody never having done this before – everybody needs a place to live. If I go out and buy a strip center and we have another market correction, we have another hiccup in the economy, some of the smaller tenants in a strip center – I imagine; I’ve never been in that space, but this was my thought process – they might go out of business. If they go out of business, now I’ve got a lot of vacancies I’ve gotta deal with.

The last thing somebody’s going to give up before they’re living under a bridge is the place they live, so to me it was just the safest, most rational thing I could find to put my money into… And so far, it has been by far the best thing I’ve ever done.

Joe Fairless: From a building your business standpoint, what’s been a challenge? We’ve talked about a challenge earlier on a particular deal, but just from building your business, what’s been a challenge?

Bruce Petersen: The biggest challenge really is just trying to juggle it all, because I’m not gonna lie, it’s not easy, especially when we wear all the hats. My wife, like I said, is the accountant, the controller; I’m the regional manager, I’m the acquisitions guy, I am the rehab guy… So I do every step of everything in-house. Most people I think in this industry, it seems, they will have like a 3-5 person general partner (GP) group that goes out, and everybody has their specialization and it works fantastically well. We go about it a little different. We raise all of our own money, we do all of our own marketing, I’m the face of the company… So everything’s in-house; it makes us more profitable.

Now, I might not be able to grow as fast as some of these other people, but you know what, we’ve still got four properties and 860 units in two years, so it’s working really well for us. But the biggest thing is trying to juggle everything at once; you’re trying to close on a property while still running a rehab on this property… Well, that property over there lost two staff members for whatever reason; well, now I’ve gotta go over there and help them interview and let’s get some people restaffed. So it’s just keeping all the plates in the air. It’s very doable, but it’s a challenge.

Joe Fairless: What type of system do you have that makes it doable, versus all the plates coming crashing down?

Bruce Petersen: [laughs] Well, again, the biggest thing I can point to is just I’m really good at delegation, putting smarter people than me around me… By that, I mean at the beginning when it was just us, I’ve gotta make the right hire on the property. A lot of people have heard this, but it’s so true; hire slow, fire fast. That sounds cruel (fire), but if somebody’s not working out, you’ve gotta understand quickly, and you have to move.

My job would have been miserable and just about impossible if I had really sub-par staff. We take a long time to make sure the right person is in that position, then we give them everything they need to do that job… But for whatever reason, some people are just not a good fit, and we have to separate quickly and then start looking for that next person.

Joe Fairless: You said earlier that when you speak to your staff, you tell them that your job – you meaning you – is to get a great asset for them to sell, and then their job is to then go sell it. What are some effective ways that you either tell them about how to sell it to potential residents, or that they’ve come up with for how to sell it to potential residents?

Bruce Petersen: Everybody’s got basically the same process. You have your little tour, you walk them by the gym if you have one, you walk them by the clubhouse, and the model, and all that stuff… But it’s about the mentality. Sales is all about belief, it’s about a mentality and it’s positivity. You have to know that what you have is the best thing in this market, and that’s my job – to try my best to position this as the best asset in the entire market. So now they have to go about this with confidence. I talk to them all the time about this, because in this industry – like every industry – costs go up, so prices have to go up. Rents have to go up every year, they have to, because my taxes go up every year, so I have to work with them to know that “Look, this year we’re gonna be bumping rents on average, say, 3%, 4%.” That might be a $30-$50 rent bump, and instinctively they go “Oh, ugh… I don’t wanna have that conversation…” Look, you have to understand that this is the best product in the neighborhood; you have to understand also that you absolutely are the best staff in this neighborhood, and they get you when they move in here. You have to sell that, but don’t go “You know, the rent – it’s $1,100 for this two-bedroom…” – no. Say, “You know what? You get all this stuff, and it’s only $1,100.” It’s all a mentality.

Joe Fairless: I appreciate you talking about that. That’s helpful. What is your best real estate investing advice ever?

Bruce Petersen: That I give or that somebody gave me?

Joe Fairless: Either one.

Bruce Petersen: That somebody gave me was “Don’t go into single-family.” It’s not that it’s a waste of time. You can make money in single-family. You can have a decent life in single-family, but thank goodness, at the beginning of my educational journey, I listened to somebody that said “Look, don’t tie yourself up with single-family.” Three and a half years ago I married into a duplex that my wife had when she came into the marriage. That duplex took more of my freakin’ time to run than my 120-unit property in the same city. So that was the best thing that I got – to have somebody tell me not to go the single-family route if I didn’t have to. It’s a good route if that’s the way you need to go, but it wasn’t for me.

And then the best advice that I give is basically you’ve gotta get out of your own head, get out of your own way, but you have to be self-aware as well. A lot of people that I come into contact with, they wanna do what I do. I have a lot of fun doing what I’m doing; it’s pretty lucrative, I’m not gonna lie, and it’s very rewarding… So they tell me, “Man, I wanna do what you do.” Okay, that’s fine. It’s a blast, but it’s a lot of work. You’d better make sure that you have the stomach and the intestinal fortitude to get bloodied in the mouth, take a punch in the mouth and keep going, because it’s gonna happen no matter how good you are, how perfect you think you are, your systems, your processes – something’s gonna happen. You’re gonna have a death on your property, you’re gonna have a fire, you’re gonna have a Hurricane Harvey hit you. Can you deal with that? Can you mentally be okay with that, pick yourself up and keep going? If you can’t, you probably just need to find somebody to invest with.

Joe Fairless: What’s an example of where you metaphorically got bloodied in the mouth on something?

Bruce Petersen: I’ve got two big ones that I like to talk to people about. It was probably about 3-6 months ago now; I was sitting in the office and I get a text from one of my lead maintenance guys on one of my properties here in Austin, and he thought he was doing me a favor by sharing this picture with me… Well, it’s not a picture I cared to see, and honest to goodness, it kind of screwed me up for a couple of days emotionally… But I had to keep going. He sent me this picture of what he found when he went to work that day. He went to clean the pool and there was a gentleman on the bottom of the pool…

Joe Fairless: Oh, my…

Bruce Petersen: …straight up, with his eyes open. He jumped the fence at four o’clock in the morning – we have him on camera, on video – and he was stumbling about, you could tell he was impaired… And he decided to go swimming. Well, he never made it back out. So that’s rough. I’m dealing with my own emotional stuff when this happens, right? I’m a caring human being, and it sucks that somebody lost their life on my property. We didn’t do anything to contribute to it, we did everything we can to make sure it’s a safe environment; we had the pool locked, he climbed the fence… But I have to go up to the property now and just sit with him for a good day and just make sure I’m there for them to listen to my staff, to be there for them to lean on, and to see if they — you know, “Hey, seriously guys, do you need some professional help?” There’s no shame in that. This is very traumatic.
Then we needed to reach out to the family that still lived on the property and kind of work with them through it… That was pretty dramatic.

Joe Fairless: Legally, is there anything that you also cover off on, or from an insurance standpoint that you do?

Bruce Petersen: Well, we’re protected… We have liability insurance, we have an umbrella insurance policy to cover everything over top of everything, so we’re really well insured, but we have all the proper signage up to make sure that they understand there’s no lifeguard on duty, no diving, no kids… That kind of thing. It’s closed down after ten, we had locked the pool… So we did everything that we could to mitigate the risk of somebody getting injured, but unfortunately the guy did lose his life, but we didn’t do anything wrong. We sent pictures, the police came out, they notated everything, we sent everything off to our insurance company, and we were just trying to be human for the family that was still there on the property. We’ve done everything we can to mitigate the risk, but things are still gonna happen.

Joe Fairless: Okay. And then the other incident?

Bruce Petersen: The other thing is just as syndicator, the stuff that happens. We were closing on a 250-unit property in San Antonio. Go to the bank at 9 o’clock in the morning, execute my wire transfer of 5.2 million bucks. Drive down to San Antonio from Austin to hang out waiting for the go-ahead on site, to say “Okay, it’s funded. You now own the property, now you can go to the property.” Well, we were waiting around and we noticed that the previous management company had gone in the night before, they took all the computers, all the phones, so the staff is just standing there looking at each other, and they can’t do anything – they can’t get any phone calls, they can’t do a thing.
So I finally thought, “Look, it’s gonna fund anytime now, so let’s just go and get everything set up. This is our newly-inherited staff, they need to be able to do their freakin’ job.” Well, I get a phone call at 11 o’clock in the morning now (two hours later), they still don’t have my wire. Like, what?! Well, it will be there soon.

They call me another hour later, they still don’t have the wire, so now I call the bank and I’m like “What’s going on?” They said, “No, I see at [9:30] it was sent to the Federal Reserve, so it’s out of our system.” Okay, so then I call my attorney back and say “Look, tell them that it should be there any minute.” So another two hours go by and still nothing.

I get a phone call from my attorney, “Get out.” “What do you mean, get out?” “You don’t own that property.” Like, “Oh, you’re right… I don’t own the property.” So we had to break everything back down, load up all of our computers and phones and pull out.

Well, what had happened – nobody knows where this money went. 5.2 million dollars is gone, and I don’t have a property. So this is where it gets tough. Be self-aware – can you handle now having to go back and tell all of your investors “Yeah, I know I told you we would own this property today. Well, guess what? We don’t own the property. And double guess what? I don’t know where your money is.” That 5.2 million bucks is not my money. Part of my money is in there, but I’ve got 40-50 investors and I don’t know where their money is. Luckily, the president of the title company finally figured it out that there is a division of (I think it’s) Homeland Security called OFAC… When you send a wire off, it goes to the Federal Reserve before it gets to its end user. The Federal Reserve looks at it, then so does OFAC; they come in and they look for it. What OFAC is checking – they’re checking the name of the sender and the receiver against a database of known bad actors. The name of this property was the same name as a known terrorist in Columbia. Uh-oh… So they see that and they kind of freak out, so they took my 5.2 million bucks; they don’t tell me they’ve taken it… We just have to kind of start poking around ourselves and we finally found it, and it finally did fund, but for a few hours that day we had no property, we had no money, and we were just stuck.

Joe Fairless: So it funded later that day?

Bruce Petersen: No, it never funded that day. It was Friday, and we left — they finally figured it out at [5:30], but by this time everybody’s gone, so it funded first thing Monday morning.

Joe Fairless: Oh, that’s fun… You had to wait over the weekend…

Bruce Petersen: No, that was not fun at all.

Joe Fairless: Got it. So what does your e-mail say to the investors? Or was it phone calls?

Bruce Petersen: There was a lot of them, so I just sent out a bulk e-mail to say “Look, guys, I know today was the day, but unfortunately we don’t own the property.” By that time, I did have some information that Homeland Security had it, OFAC had it… But they could legally hold it for up to two weeks while they researched this is what I was told, so I was like “Look, we know where it is, we hope to get it resolved really quickly, but as of right now we don’t own the property, and it might take two weeks to get all this stuff cleared up.”

Joe Fairless: How did you know where it was, versus you seeing that and being like “Oh, well maybe the Federal Reserve has it?”

Bruce Petersen: Well, none of us had ever seen this happen; my attorney had never seen this happen, their attorney had never seen it – nobody had ever seen this happen, so nobody even thought to think about that… But the president of the title company that was handling this for us was like “You know what, I do think I remember something like this happened 5-6 years ago”, so he started making some phone calls and he finally figured out that “Oh, OFAC grabbed it, and they’re sitting on it while they do their research”, but again, they don’t have this warm and fuzzy little customer service department to say “Dear Mr. Petersen, I took your money and this is why, [unintelligible [00:32:51].01] is gone”, but we finally found it.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Bruce Petersen: Sure.

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

Break: [00:33:01].09] to [00:33:53].14]

Joe Fairless: Best ever book you’ve read?

Bruce Petersen: Best ever book I’ve read now… I’m just gonna go business, and it’s gotta be Rich Dad, Poor Dad, right? It’s [unintelligible [00:34:00].16] that got most of us started, so easily that book.

Joe Fairless: Best ever deal you’ve done, not your first, not your last?

Bruce Petersen: Best ever deal, not my first, not my last… It would be the one in San Antonio. We had the big, big hiccup, but we’ve got the best staff in the world at that place, reviews through the roof (great reviews, that is), highest rent in the neighborhood, highest occupancy in the neighborhood, so by far that one.

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

Bruce Petersen: I lost a lot of money. I went into a deal and it was a 132-unit property I was gonna buy, and we had to renegotiate the deal because toward the end we found something massive that was really gonna screw up the deal; it just didn’t work. So I pushed back, said “Look, I need to come down from 9 million to 8.65 million” and we just got hung up. The guy finally at the last minute decided “Oh, I don’t wanna sell it anymore.” I was like, “Oh, okay… That sucked.” So we lost $30,000 on that deal. We got all of our earnest money back and all that… We got our $90,000 back – so we got that back, but what we lost were all the due diligence sunk costs, all the inspections, the PPM… Now, we could recharacterize the PPM for another property, so that wasn’t a big deal, but there were sunk costs of about 30k that we ate.

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

Bruce Petersen: That whole thing with the kids – anything we can do to help kids… It’s just such a rewarding thing to see their little faces. And secondly, something we’re working toward – my 22-year-old stepdaughter is an adult with autism, so what we’re going to be working on over the next five years is creating an autism home for adults with autism and Aspergers, because I know you know this, but believe it or not, even adults bully people… And when you’re different, which you are if you have autism, you tend to get bullied even by adults, so it’s hard for them to live in the general population, so we’re looking to start about a 24-36 unit apartment complex that we will have three shifts of caregivers that are with them at all times to help them cook, drive them to the store, to the library, all that stuff, and give them a safe place to not feel bullied. We’re gonna do it on an affordability scale – if you can’t afford anything, you get to be there for free. If you can afford market rent, we’ll charge you market rent. That’s what we’re looking to do in the future to give back.

Joe Fairless: Best ever way the Best Ever listeners can get in touch with you and learn more about your company?

Bruce Petersen: The website, it’s apt-guy.com. Or you can e-mail me at info@apt-guy.com. You’ve gotta get the dash in there or I won’t get it.

Joe Fairless: Bruce, thank you for being on the show, giving us some advice and really some case studies that we could replicate to generate positive reviews and build a positive and large and engaged social media following relatively speaking within a community, and some cautionary tales on some things that have been challenging with your properties, as well as the approach to take with the on-site staff from a mindset standpoint.

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

Bruce Petersen: Alright, my friend, thank you so much.

James Kandasamy and Joe Fairless

JF1273: Deep Value Add Apartment Syndications with James Kandasamy

Listen to the Episode Below (28:45)
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James has recently bought two apartment communities, rehabbed the units and refinanced all of the capital out of them. What’s more impressive is that he acquired these properties by texting the owners! A lot of great tips for all investors in this episode, especially for syndicators or want-to-be syndicators. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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James Kandasamy Real Estate Background:

-Owner of Achieve Investment Group

-Multifamily Sponsor owning 340 units in Central Texas Area with a focus on value add deals

-Syndicate large Multifamily Apartment properties by raising money from accredited private investors

-Say hi to him at http://achieveinvestmentgroup.com/

-Based in Austin, Texas

-Best Ever Book: Think and Grow Rich


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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, James Kandasamy. How are you doing, James?

James Kandasamy: I’m doing very well, thanks for having me here.

Joe Fairless: My pleasure, and I’m glad you’re doing well… And of course I’d love to have you here, because you are closing on large deals, and you’re doing apartments, and well, selfishly, I wanna learn more about what you’re doing, and I’m sure a lot of the Best Ever listeners do as well.

A little bit about James – he is the owner of Achieve Investment Group, which is a multifamily sponsor owning 340 units in central Texas, with a focus on value-add deals. You can say hi to him and learn more about his company at his company’s website, which is in the show notes; you just click that. He’s based in Austin, Texas. With that being said, James, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

James Kandasamy: Absolutely. So we started – “we” means we and my wife – with single-family houses; we bought 13 houses, starting from 2013. We bought 13 houses within two years, built up almost 400 equity, which resulted in more than 30% cash-on-cash return and more than 500% equity capture… Then before moving on to multifamily in 2015; almost to the end of 2015.

So we’re focusing a lot on class B and C value-add. We’re basically syndicators, which means we raise money from private investors, and our focused market area right now is in San Antonio, and that’s where all our deals are. Up to now, we have bought like 45 units in South San Antonio, 174 and 115 units, which was recently closed, maybe like 2-3 months from now.

The 45 units, when we bought it, the value at which we bought was 35k/door, and then it went up to 58k/door, within 12 months of operation. We were able to refinance almost 110% into a long-term Freddie Mac loan. That deal, just because of the refinancing, very quickly, within one year, and then we still expect it to continue paying double-digit returns to our investors. The IRR is expected to be above, more than 40% for a five-year investment cycle.

The second deal we bought is 174 units. This is in San Antonio, as well. We bought it at 39k/door, it was appraised more than one million on day one of closing… And we’re putting rehab of almost 9k/door for this property. It’s a deep value-add. The property looks really good, the bones are really good, and the current valuation, after 11 months of operations — keep in mind, we bought it at 39k/door, and right now after 11 months it’s almost 72k/door.

Joe Fairless: Wow, and you’re all-in about a little under 50k.

James Kandasamy: Correct. What do you mean 50?

Joe Fairless: 50k/door. You said 39k a door you bought, and put 9k into it a door, so you’re roughly almost 50k a door into it, and it’s worth 72k/door.

James Kandasamy: Exactly. And right now we are looking at refinancing that property, it’s coming soon. The other interesting fact in this deal was once we bought it, the occupancy dropped from 89% to 77%; that happens a lot in the deep value-add space… And within six months, we brought it up from 77% to 90%. It was a lot of hard work going in – a lot of rehab, a lot of turning around the properties.

Joe Fairless: You said 77% to 90% occupancy?

James Kandasamy: Yes.

Joe Fairless: And that’s the 174-unit?

James Kandasamy: The 174-unit. That’s the physical occupancy.

Joe Fairless: Physical occupancy, okay. You said it was a deep value-add; you stressed the “deep” part. What does that mean exactly?

James Kandasamy: Well, with value-add – there’s two types of value-add. One is you buy a cash-flowing property and then as the tenants turn around, you basically go and rehab the interiors and you bring up the rent… Whereas in deep value-add, you buy almost a distressed property, and then you start changing the interior units very quickly, you’re doing exterior rehab very quickly, and you’re also changing the demographic of the tenants. Usually, on the normal value-add we probably put in like 3k/door, maybe 5k/door, but when it goes to deep, it can go up to more than 5k, to 20k/door. So in this case we’ve spent like 9k/door, which is quite significant for that property.

Joe Fairless: Where are you at from a timeline standpoint with the 174k units?

James Kandasamy: We’re 11 months into the operation.

Joe Fairless: Okay, 11 months into it. You bought at 39k/door, it’s in San Antonio, you’re rehabbing about 9k a door… How did you find the property?

James Kandasamy: Both of my first two properties were bought directly from the seller. We use our own strategy to get in touch with the sellers and work directly with them. That’s the primary point on why we were able to get it at a good price/door.

Joe Fairless: Oh, wow. So how do you do that?

James Kandasamy: The way we do it is basically we look at the rent roll of all the property owners, from websites, like the BCad, which is the county tax website, and also there’s another website called [unintelligible [00:07:30].05] where you can basically go and download all the property information, and then you have to do a skip-tracing to find the owners. And once you do a skip-tracing, you basically try to contact them using mailing, using cold-calling, using texting, and it’s a lot of work… But the amount of work gives you some of the best deals.

I think in this hot market it’s just so hard to hope on brokers to bring you deals, because brokers do have fiduciary responsibility to make sure that they get the highest price for the sellers as well. And there’s a lot of sellers out there who have other problems that they don’t wanna bring it to market. These two deals – the sellers didn’t wanna go to brokers, and they were able to trust me because I built a relationship with them. Once you do enough marketing, you build relationships with them and they’re able to trust you and they’re able to allow you to buy it at a good price.

Joe Fairless: As far as the owner goes in this situation, you walked us through the process for how you track them down, but then do you remember if there was a phone call or a text? It was a text?

James Kandasamy: Yes, correct.

Joe Fairless: And what did your text say?

James Kandasamy: The text said basically “Hi, I’m an apartment investor in this region (Central Texas) and I saw your property at XYZ, and I’m interested in buying it. You can sell it directly to me, without any broker’s commission. Would you like to talk further?” That’s a very expensive text, because you get really good deals with that text.

Joe Fairless: [laughs] What did they text back?

James Kandasamy: They would say “Why not you talk to this guy?” So you would have sent maybe 500 texts and you might get less than 1% response, but within that 1%, you might have a 0.1% acceptance ratio, and you’re able to basically work on that deal from that point on. But apart from an immediate response, you also build relationships with these people. Sometimes they do come and ask you some more details about you, and they may say they are not selling right now… They may say they are not selling, but at least you know you have the contact of that seller, and you’re able to follow up from time to time.

So the key to this off-market strategy is basically persistence and following up and consistency in contacting them. A lot of people try to do this on their own, and they do it once and they forget about it. However, the market is getting hard. A lot of sellers who want to sell off-market are also having trouble buying a replacement property, even though they wanna sell it to people like me at a good price, but they’re having difficulty in buying the next property. That’s a problem right now, but I think if you hustle and you’re persistent in your approach, you should be able to find a ton of good deals out there.

Joe Fairless: What was the reason why the seller of the 174 units didn’t go to a broker?

James Kandasamy: Well, that’s a good question… The reason they didn’t wanna go to a broker is because they have a partnership issue within the seller and his partners. One partner wants to sell and the other partner didn’t wanna sell. The partner who wants to sell has a relationship with me, and he was trying to force the other partner to sell through me, than bringing it to the market. So basically they trust me and they want to get it over with, and they just were comfortable enough to sell it to me. And keep in mind, I bought it at a 6% cap rate when I bought it at 39k/door; it was just a badly mismanaged property, even though it’s one of the largest property management companies. It was mismanaged, and I bought it at a market cap rate 6%, but within 11 months we increased the cap rate to 12%, and right now we are working on a refinance at a 6% market cap rate again. So the market didn’t compress, it’s just the value – you just increase the building equity.

Joe Fairless: Because of that — because a lot of people get caught up with the going in cap rate, but in your case it doesn’t sound like you did, because that was just how they were operating, and not necessarily how you were operating it… So how important are cap rates to you when you initially evaluate a property?

James Kandasamy: It’s not important at all. I was looking at a 3% cap rate deal a few days back, and I thought it was an awesome deal. People get caught up with cap rates just because they’re looking at — actually, I’m not sure what they’re looking at… [laughter] The entry cap rate really doesn’t make sense, it really doesn’t matter. I’d rather buy a low cap rate property with a low price per door, versus a high price per door at a market cap rate, because I know most of the time, in fact, a lot of properties have property management issues.

My wife and I, we do A to Z – we do property management, we do general construction and we also do asset management, so we know once we go in, we can run the property at the highest efficiency. We know we can fix it and bring it up to the normal property management standards. So we don’t really care about the entry cap rate, even though it’s 2%, 3%. It doesn’t matter, as long as the price is not ridiculous.

There are a lot of sellers which put a very high price on a low cap rate that doesn’t make sense, but there are some realistic sellers who know that they have to sell at a lower price per door just because the income is slow for that property.

Joe Fairless: It’s fascinating that you’re getting these deals through your own persistence and being consistent about it, so let’s dig into that a little bit more. What does that mean exactly in terms of how frequently you’re doing outreach? Can you just help us understand how much you’re doing and what you’re doing?

James Kandasamy: Basically, what we do is we do a marketing campaign using mailing. The way I was doing it, I was doing it every six months, because every time I’d get a deal and I slowed down — because we do end-to-end; we do property management, we do rehab… So I don’t do anything for the next six months, until I’m [unintelligible [00:13:56].28] and I start doing again. So I know that is not an efficient model I think the best model would be every three months you should send out some mailing, some touches to the sellers. In that perspective, they’ll be always touched by you, and it’s all about timing and when they wanna sell.

This is the same strategy that the wholesalers and all the commercial brokers are using. I’m just cutting the middleman in between, and I’m going directly to them. As I said, it’s a lot of work, but you get some of the best deals out there.

Joe Fairless: What would be some suggestions you have for people who are going to start trying to find off-market deals in whatever city they’re in, in terms of a process?

James Kandasamy: I think in terms of the process, if they can start with identifying the target area that they wanna look at, and if they want to — basically, once they identified the target area, they have to identify the classes (B, C etc.). Third of all, they have to go to this websites where you can download LLC’s of all the owners that meet that criteria. Primarily, you wanna look at properties which are more than five years being owned, and you can do that on some of the websites like for example List Source or ProspectNow… You can do that from there. Because most of the time the sellers who are selling the property within the past two years or three years, they didn’t build enough equity to give you a good deal, but the owners who have the property for more than five years, they may have bought it at 15k/door or 20k a door, but they don’t mind selling it to you at 40k/door, because for them it’s a good deal, even though the market is at 50k/door.

So you wanna screen out all the people that didn’t sell for the past five years, and focus on them, and start mailing them. But to get to the right seller — because most of the LLC’s have contacts with property management companies or has contacts of the LLC (it should be some office suite)… So to find the right seller’s contact, you wanna do skip-tracing. You can use LexisNexis or TLO to find the owners, and then from there you wanna start marketing to them. That’s the process.

Joe Fairless: How much is it to do skip-tracing through LexisNexis or TLO?

James Kandasamy: I believe LexisNexis is a monthly subscription; I believe it’s like $700/month. I didn’t use LexisNexis…

Joe Fairless: $700/month?

James Kandasamy: Yes, correct. It’s not cheap.

Joe Fairless: That’s a chunk of money.

James Kandasamy: It’s a chunk of money, but when you’re playing in the commercial space where you’re making millions of dollars, it’s okay to spend that money.

Joe Fairless: Yup.

James Kandasamy: And for TLO… It’s a bit hard to get into these two systems, just because there’s a lot of requirements. TLO is $1/search, but you have to be really good at it. It takes a few months for you to be really good at it, and you have to identify who’s the owner, and once you start marketing, you will know that “Oh, you made a mistake. You shouldn’t have seen this result, you should see the other results.” It’s a hidden maze, but it’s the best way to find the direct owners. As I said, the response rate and the success rate is really low, but I think it’s the best way for a newbie to start. Most of the brokers are not gonna take your calls, are not gonna listen to a newbies who have never done deals, because the market is so hard, even the experienced guys are finding it hard to find good deals. So for the newbies, I think that’s the best way. You have to hustle and be persistent in finding your own deals.

Once you do at least one deal, then you will be in a credible page with the brokers and they’ll be more than happy to send you more deals. So my first two deals, I did it with communication directly with the sellers. My third deal – I bought it from a broker.

Joe Fairless: Okay. I wanna talk about the third deal, but before we do, on the first deal (45 units) why didn’t they go through a broker, because they ended up going with you off-market?

James Kandasamy: That’s a good question. I guess they probably wanted to save the broker’s commission. They wanted a price for that deal, and I gave them the price; they were happy with the price, so they just went ahead and did it. I don’t see any other reason on why they sold it that way. In fact, the seller, in the first call with me and the guy who was working me – he had some kind of agent who was working with me – he told directly on the phone call “Actually, I’m not sure why I’m selling it to you… I never thought about selling.” [laughter] But yeah, I don’t know.

And I was thinking – it’s not like you can send e-mail, or send mail, or do cold-calling and you’re gonna get a deal. You have to have many other things – you have to have a marketing strategy, you have to have listening skills, you have to have empathy… You have to be able to build trust with people. That’s the whole sales process, I guess. I’ve never done sales, but you build that relationships and they are willing to sell it to you.

Joe Fairless: Now your latest deal. Can you tell us about that?

James Kandasamy: So the latest deal is 115 units; it’s a fully rehabbed property. I bought it from a broker. I bought it at 44k/door, which is a really good price for this deal, because when we bought it we put in 1.8 million, and it was appraised around 1.1 million more when we bought it. We just captured the equity (60%) at closing, on day one. So we bought it at a really good price.

So we bought the property… It went under contract a few times and it dropped out of contract; many investors looked at this deal and they did not pursue it, because the problem with this property — it’s very clean, it’s fully rehabbed interior/exterior, but there’s a problem with a parking space shortage. There’s only 1.06 parking ratio, because this property was built in 1965; at that time people didn’t have two cars in their household, so they had a shortage on parking.

I always believe either you’ll be the first one – which is basically direct marketing; be the first one – or the last one. This property was on the market for two months and nobody really looked at it. I just sent a mail to the broker and said “Hey, is anybody looking at this deal?” They said “No.” He was also not marketing it, but it is on the website, anybody can go and see. And I gave them a very aggressive price. I said “If you give me this price, I’ll buy it.” I gave them two weeks feasibility, which is very short, but I know I can do it within two weeks. But I gave them really good terms…

And what I did on the other hand is I looked at the land beside this apartment, which allows me to be an additional parking lot. We contacted that owner and we put the land under contract for another 300k.

Joe Fairless: Wow.

James Kandasamy: So we basically have a solution. There’s two different assets side by side, and we took a huge risk in this case. We bought the apartments, put them under contract, and we also put the land under contract, and we said “Let’s do it.” The apartment side I was very clear, “I don’t wanna know anything about the land, it’s your problem. I don’t want my contract to be contingent on that contract”, and the land person really didn’t care, because they didn’t see the land for the past 20 years, so they were okay to sell it off.

So basically, we bought these two assets. The apartment was bought at 44k/door and the land was for like 300k, and we’re gonna build additional parking lots… But we had to go through a lot of replan and rezoning processes which we are going through with the city right now. All seems to be really good right now.

The other problem with this deal was it was always 80% for the past five years; the occupancy has been always 80%, and nobody could solve this problem. We closed on this deal about three months ago, and right now we are at 91%.

Joe Fairless: Wow. And with a strong economic occupancy?

James Kandasamy: With a strong economic occupancy, absolutely. When we visited this property, we basically went to the office, and by experience you can see how much marketing is being done by the current property management. There was zero marketing for this; no phone calls coming in. This property was also nearby to my 174, so I know in my 174-unit the phone keeps on ringing, because we do a lot of marketing to lease up as quickly as possible.

So we know there’s a management problem in this 115-unit… So I know that, and I know there’s a parking problem, and we can solve that. So right now we’re going through the process of replan and rezone, and we’re gonna do some construction to build 35 parking spots to solve the parking issues there.

Joe Fairless: What is your best real estate investing advice ever?

James Kandasamy: The money you make is a direct correlation to the value you provide. For me, it’s always you have to solve some problem to get extraordinary returns. If you are doing a deal which is stabilized you may get a good deal, but you’ll get a much better deal if there’s a problem in that deal and you’re able to solve it. That’s the reason I really like deep value-add or properties that people don’t wanna touch. It’s more risky for them, but I think for me the upside is very important… Because with that upside, I’m not really depending on the market appreciation, I’m basically just realizing that upside just by fixing the management, or just increasing the rent to the market rent.

And always do what you call Buy, Rehab, Rent, Refinance and Repeat strategy. That’s where you make the most money. Always buy deals with potential upside, always be the first one or the last one to look at a deal. I almost always avoid market-advertised deals, because there’s too much bidding war going, and you’re probably over-paying at the end, even though you win the bidding war. You’re probably the guy who paid the most for that.

Joe Fairless: You win the battle, but you lose the war.

James Kandasamy: Yeah, correct. In a strong market like right now, like in Austin and Dallas – the market is so strong, you don’t have to have a lot of property management skill or you don’t have to have a very strong property management company, because the market itself is swinging you up in terms of rent increase. But that’s not gonna be all the time. When the market turns around, you have to have some kind of buffer to make sure that you take care of the returns.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

James Kandasamy: Sure.

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

Break: [00:24:41].11] to [00:25:33].23]

Joe Fairless: Best ever book you’ve read?

James Kandasamy: Think and Grow Rich. It’s all in the mindset.

Joe Fairless: Best ever deal you’ve done?

James Kandasamy: Best ever deal I’ve done… My 115 units. We bought it at a really good price, we stabilized it within three months, we captured 60% of the equity on day one of closing… There’s not much work in that property, but with the addition of the land, it’s gonna be increasing the value manifold.

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

James Kandasamy: The mistake – I think in the beginning before my first deal where I went into contract with single-family homes, I didn’t have any mentor or any education, so I was doing a comp of a property, and I know that the comps of single-family homes need to be done by the surrounding properties… So I could not get the value I wanted on paper, and I used a button to evaluate the comps on square footage, and “Oh, okay – this property is bigger, it’s gonna give me a lot more money.” It’s basically a mistake in doing the wrong comps for appraisal.

I’ll always make sure that I am very diligent in doing any comps in terms of rents for my multifamily, and in my single-family home which I [unintelligible [00:26:45].20] I always make sure that I look at the comps very carefully.

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

James Kandasamy: We give back 10% of our earnings to Orphan Life International. It’s education for orphans in Africa. Currently, we are sponsoring 150 children for their education – these are orphans in Africa; I think it’s Liberia and Kenya – on a monthly basis. That gives us joy. And I also do coach and mentor aspiring new syndicators to find deals.

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

James Kandasamy: I can be reached at James@achieveinvestmentgroup.com. You can go to my website at achieveinvestmentgroup.com.

Joe Fairless: Very impressive, and I love how you got into the details with us on how you’re finding these deals. That’s a number one challenge a lot of people have, myself included – finding good deals right now. And you just walked us through in detail how you’re doing it, and even told us the text message that you wrote that’s been effective. I’m really grateful for that. I know the Best Ever listeners are gonna get a lot of value from our conversation.

I know this was the first podcast interview that you’ve done, and boy, you nailed it. You added a lot of value, and thank you for that. I hope you have a best ever day, I appreciate you spent some time with us, and we’ll talk to you soon.

James Kandasamy: Sure. Thank you, Joe.

Stevie Bear and Joe Fairless

JF1264: How To Make Shipping Containers Into Homes & Profit with Stevie Bear

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Stevie started by learning construction and building homes. She moved onto flipping homes, and eventually container buildings. What was supposed to be a retirement project, turned into a full blow real estate investing business. Make It Modular has taken off in the last year, Stevie and her team don’t see any signs that will change. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Stevie Bear Real Estate Background:

-President/ CEO – Make It Modular, Owner of Community Real Estate Investing

-Managing Partner at UP Capital Funding, Broker/ Owner of Four Directions Realty

-4th generation in Real Estate

-Been involved in Texas real estate since 1997, and has been a licensed Broker/REALTOR  in Texas since 1998

-Say hi to her at http://makeitmodular.com/

-Based in Austin, Texas

-Best Ever Book: Road Less Traveled by Scott Peck


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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, Stevie Bear. How are you doing, Stevie?

Stevie Bear: Great, how are you?

Joe Fairless: I am doing well, and nice to have you on the show. Stevie is the president and CEO of a company called Make It Modular. This can be interesting, it’s a shipping container that is a home, and I’m sure I’m grossly simplifying that, so Stevie can educate us more so on it… But MakeItModular.com is the website, and Stevie is in the fourth generation of real estate in the family. Based in Austin, Texas… With that being said, Stevie, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Stevie Bear: Yeah, like you said, I’m a fourth generation that’s been involved in real estate; my family and my great-grandfather came over on a boat from Norway, and they were farmers and builders; that’s what they did, and my grandfather continues that tradition. My father is in his early seventies and is still flipping houses today… So I kind of came by that honestly, although I did take a detour in the social services; that was a good thing for me actually, and I was very appreciative of it. It taught me a lot about how to work with people, and that’s been very important in the work that I do, especially with the way this recent company is taking off… So it’s been good.

I’ve spent most of the last 22+ years in real estate; I have a brokerage company, of course, Four Directions Realty. I kind of started doing real estate because I bought a house and it fell down, and I talked to my dad and he said “You know, you just have to figure out what happened”, so in the course of figuring out what happened, I went and took builders classes, got my real estate license, took inspectors’ courses, figured out what happened, rebuilt that house from the ground up, essentially, developed a taste for contracting out of that and a contracting crew, and then ended up building and rebuilding a lot of people’s houses for them. I did, of course, 15-18 years of flipping houses.

A couple of years ago I was in San Antonio doing a historical home, which was a lot of fun. When I was about three quarters away through that I decided I’m gonna go do my passion project, what was supposed to be my retirement project, and it has turned into the biggest thing I’ve ever done in my life, and that is the container building.

It was kind of prompted by a lot of things, but I saw containers being used commercially and residentially some 3+ decades ago, and just had a sense even then, though I wasn’t involved in real estate at the time – even then I knew that there was something to it. Fast-forward a few years, as I’ve gotten involved in real estate and started to study building and contracting and all, I started studying container building as well. After a dozen or so years studying container building, I felt like I was ready to kind of try my hand at what I thought could be an answer to a lot of problems, and as it turns out, yay, it is an answer to a lot of problems.

So we are a container-based building solution company. We do residential, we do commercial, we do a lot of development… We’re doing a lot of dev work now, and we literally went from being barely scraping by and paying the rent this first year, to next year we are bumping up deep into nine figures for the company as far as what we have on our plates. This is my fifth company; I’ve never seen anything like it. Nothing has captured people’s attention the way that we have designed our product.

We have people from all over the country, all over the world seeking us out and asking us to produce this product for them, and we couldn’t be more excited.

Joe Fairless: Who’s your typical customer?

Stevie Bear: That’s a good question… I wish I could say I had a typical customer. We kind of land in the millennials space, or so it seems, but we quite literally have several thousand people in our database right now, after just a year and a half, and we are building for people from their mid-twenties up until their early eighties. So a typical customer – they are looking for something different; they recognize that the product that we build, while we can make it anyway you want it to look quite literally, inside and out, your imagination and your pocketbook is really the only limitation; we can make it any way you want it to look… It’s still gonna be buried in that look, all the inherent, wonderful qualities that container building can bring to the product. So the people that are looking for it, the people that recognize that inherent ability, the affordability, the durability, the sustainability, the ability to stand up to anything that nature or man can throw at it and still be standing at the end of the day.

Particularly this past year, when you look at all the natural and even some of the man-made disasters, people have been crawling out of the woodwork and coming to us and saying “I need a house that’s gonna stand up to the next hurricane, I need a house that’s not gonna burn up in the next wildfire. I need a house that’s not gonna flood”, and we can do that. We have the ability to provide them that, and save homes, save businesses and save lives in the process, and basically, we’re just thrilled to be able to do that.

The people that are seeking us out are the people that recognize that and want that and need it, and the other people are just seeking it out because they just like it; it’s a cool product.

Joe Fairless: It is completely something that’s not typical, that’s for sure, and Best Ever listeners, I recommend you maybe pause right now and go to MakeItModular.com, just so you kind of have visual reference for what we’re talking about. At least I would have a hard time visualizing what we’re talking about, but once you see it, then hit play again and come back to our conversation.

Stevie, you said it’s protective from a hurricane, but if water rises to six feet and your container has six feet of water then all your stuff’s ruined, just like it would be a house, right?

Stevie Bear: Well, you would think so, but that’s not really how this product works. It’s a water-tight and air-tight environment, and the way we build with it, we keep it as much that was as possible, and we also take into consideration the environment that we’re building in. For example, our products that we’re building down at the coast – we’re raising those up on steel piers, 14-16 feet, depending on the area.

Then the container itself is built in such a way – the way we do the door and windows structures – that it is pretty darn water and airtight; it is airtight, and it’s pretty darn watertight. It’s so airtight as a matter of fact, if you are to light a candle and turn off your air system, which acts as an air and heating and wicks moisture out as well, and we use an HVR/EVR – it’s sort of like a minisplit system that also handles the moisture.

If you were to turn off that system and light a candle and go to sleep, you might wake up gasping for air, because that candle will probably suck all the air out of the room; it’s that airtight of a system.

Joe Fairless: Wow… That’s a little scary. How do you address claustrophobia, and people who have that fear in the scenario that you’ve just described? Or is that not a thing…?

Stevie Bear: Well, we make sure that the air systems that we use to [unintelligible [00:09:33].13] fresh air in there – it’s almost like the air that you get in there feels like you’re in the middle of a forest; it’s really a wonderful air system that we use. The air handlers that we use on this product are superior air systems and they’re really a wonderful product, and you do kind of have that fresh air feeling without the humidity, without any of the particulates and allergens that create issues for people.

And for the height on these, we use what we call high cubes, and; they’re 9,5 feet high. The first reaction when people come to see them, even the small ones that we have built out here in our headquarters in Austin on our lot, they get inside them and inevitably the first comment out of their mouth is “Oh my god, they’re so much bigger than I thought. Wow, they’re so much taller than I imagined.” They’re ingeniously designed, where space and room is really not an issue. People that are used to living in 1,500-1,600 square feet are quite happy living in 800 to 1,000 now, because of the design and the way we use the space. So downsizing is not out of the question for people, because the use of the space and the design of the product allows for that; it’s really a sweet thing.

As far as the water, the entering of water, that’s the same thing that keeps it airtight, it keeps it pretty watertight, so whether you’re raised on stilts or not, if you have three feet of water outside your door, some of that water might [unintelligible [00:10:53].19] in along the seam of the door frame, but you’re not gonna have three feet of water standing in your house… So you’re not gonna have as much water in your house as you have standing outside it, which is a real benefit to all of our friends down in Houston. By March we will be on the ground in all four major cities on the coast here in Texas, with residential and commercial products… So anybody in the Texas area will have a chance to view that, and we are making inroads into a couple other states as well [unintelligible [00:11:22].21]

Joe Fairless: Is there a zoning or code restriction that would prevent someone from having a container home?

Stevie Bear: That’s a question we get asked a lot, and that goes back to we can make it look any way you want. When we run into an HOA or a situation, a scenario in a neighborhood, a subdivision where that becomes an issue, what we do is we go in there and we show them the architecturally-designed product that we have and we ask them what it is that they need us to do to fit into that neighborhood. Generally speaking, what they want us to do is match up to what is currently going on in that neighborhood, and that’s not a hard thing for us to do. We can site these things just about any way they need to be sited, and we can site them in such a way that it does not penetrate the skin of the container itself, which is fabulous, because it’s less ways for water to find their way inside the container.

We have a siting system that doesn’t need to have stucco, doesn’t need to have rock trim, doesn’t need to be brick, doesn’t need to be hardie… We can do any of that. So we can literally make it match up to whatever you want us to match it up to, and still maintain all those positive benefits that the container building brings to the table.

Joe Fairless: And what about insulation?

Stevie Bear: Yeah, insulation is really a great thing. We exceed all of those conditions… Of course, we build by the international code of both business and residential, obviously, in our [unintelligible [00:12:51].09] codes, and then we also build to whatever code in the areas that we’re building in. Thus far, we have exceeded all the insulation and green expectations for all the areas that we’ve built in, and one of the reasons we started here in Austin aside from it being one of my homebases is it’s one of the top five or ten hardest places in the country to get permitting, so we knew if we could get permitted here, we could pretty much take it anywhere we wanted to… And we have been permitted here multiple times.

The insulation we use is a [unintelligible [00:13:21].28] water-based closed cell spray foam insulation, and [unintelligible [00:13:26].17] You can’t really determine its value by R-value alone, but in R-value alone we tend to exceed R-value by 2-5 points just based on the current requirements in Austin, by the IRC codes.

Joe Fairless: How much does it cost?

Stevie Bear: You know, we have struggled with that a little bit in our startup early on, because we wanna produce that affordable factor for everyone, so what we worked on really hard this past year was being able to get a formula that allows us to build at sticks and bricks cost in whatever area we go into. So we will go into an area, find out what current sticks and bricks cost is building for, and we will build you our design for that same cost or less.

That includes all the benefits of the container itself, as well as our special roofing system that we have, that is a solar-friendly roofing system that also acts as a rain catchment system, which can truly give you a big leg up on going off grid or just cutting your bills down, if that’s what you desire to do.

Joe Fairless: So you go in and you basically let the market determine what the price is for the container in that particular area, right?

Stevie Bear: Well, yeah, sort of… In Austin, our average sticks and bricks cost is about $150/sq. foot, whereas up in Dallas it’s $95 to $105. Down at the coast right now it’s about $165. In Houston we’re looking at $115-$120. So even here within our Texas market, obviously, we have a wide range. Some of that has to do with supplies in the areas, a lot of it has to do with labor in the areas, so that’s why we try to ascertain when we go into the area what is it that we’re dealing with locally, so that we can give you a fair price. I don’t wanna give you a price in Dallas for Austin, and get up there and say “Hey, it’s gonna be $150 a square foot”, because if sticks and bricks up there is $105, you’re not gonna wanna work with my product.

The container being our main building block and providing the base – your walls and floors and ceiling – gives us a great advantage price-wise… But we don’t have a lot of control over the local labor cost or cost for transporting materials that may not be available locally. But if we know what the local sticks and bricks building cost is, we know that we can achieve that using our product, and give you a superior quality product for the same price as you’re accustomed to in that area for a sticks and bricks build.

Joe Fairless: Okay. The approach that you’re taking now with the company is to both do residential and commercial right now with your business… Which one are you doing more revenue for?

Stevie Bear: I’d say we’ve got about 10%-15% in custom residential right now, another 10%-15% in custom commercial, and then we have (I would say) — the other 60% is probably split about evenly in commercial development and residential development.

Joe Fairless: Educate me on the difference between custom residential and residential development.

Stevie Bear: Sure. When we first hit the ground, we kind of thought, well, being a startup and bootstrapping ourselves through private investment money that we kind of launched off of my investment company CREI,  which did a lot of the rehabs and flips and things like that previously… So we brought a lot of those investors on board and kind of bootstrapped ourselves that way. But it was a building company and I really had no idea what it took to build a building company; it was a learning process for me, and it still is. But we brought those people along, and having somewhat limited resources – about a million bucks is what we started with – we thought, “Well, we’ll build a spec house or two, and then we’ll try to take in some custom clients that we’ll build other houses for, and we’ll do what they call additional dwelling units (ADUs)”, which are those little he-and-she sheds, mom-and-pop shacks, kids home from college shacks that you can drop in the backyards.

In the Austin area and in a good deal of Texas we can drop up to 1,100 square feet in somebody’s backyard, so you have a primary home and then a home behind it. So we thought that would be our bread and butter really, so we started going after that market. It’s a good market, but in a custom build, 3-5 months probably, you’ve got 2-3 months in development with your architect/design team (maybe up to 4 months) and then you have the 3-5 months in permitting, so you’re 8-10 months just in the planning phase.

Now, a 1,500 square foot home – I can knock that out for you in 4 months, which is a third to half the time of sticks and bricks building, which is another cost savings for our clients, of course, and a time and cost savings for us. But when you add up the time of the architect and design team and the time for permitting, you’re well into a year to develop that project and get it built. We can look at that and say that we were gonna starve to death doing it that way, so we said “How can we survive as a company while we’re trying to get enough of these on the ground and enough money in the bank to live?” and the easy answer was development, because while sticks and bricks building — while custom building for people is great, the price tag on that is considerably higher, because you’re doing a single build on a single lot, but you’re having to bring all the same infrastructure in, all the same time in, the same time with an architect… It’s very time and cost-intensive to do one, whereas if you do five or ten or a hundred at a time, you can drive the price down.

So as we started bringing clients into our headquarters here, we definitely had people that wanted [unintelligible [00:19:31].28] in their backyard, we definitely had custom builders, but we also had people coming in that they were on a budget, and we wanted to be able to meet that budget. The affordable part was really important to us, and we realized the only way to really meet a budget for people was to drive the price down to where that affordable part really worked for people that were apartment dwellers and needed something that could get them out of that apartment, but not quite a custom home. We needed that development space, that neighborhood space. We didn’t think that it was attainable, but we connected up with a good financial advisor and a team of deep money people that made it happen for us, and we developed a great lending package that allows us to have to pocket very little out of our own pockets (5%-10%), work with developers who have land that they’ve already done some inroads on, and we can come in and subjugate their land, take our 10% down, and with that money build 100 houses at a time instead of one or two. By doing that, instead of building a custom home at, say, $265 to $325/sq. foot, we can now get that price down in that neighborhood to the $140-$150/sq. foot that the big box builders are building for, and again, deliver you that container home, make it look any way you want, get your solar and your rain catchment system on it, have it be affordable, durable, sustainable, and deliver that product to you in a neighborhood where people that are average Joe’s on the lower income/middle income scale can afford to be there, because we’ve driven it into the neighborhood.

So custom is one-offs on your own lot, which is great, and dev work is those neighborhoods that we’re building where anybody can afford to be there.

Joe Fairless: If you had started this company 20 years ago, what mistakes would you have made that you haven’t made since you have the experience that you have – you’ve got 15-18 years of flipping homes and you’ve got a real estate practice or a brokerage… So what mistakes would you have made that you didn’t make in this launch?

Stevie Bear: Well, I don’t know if I could have done it… The path that I took to get here – I didn’t realize this is where it was leading me; once I had a notion of that’s where I was gonna go, I really kind of focused on gathering the skills as needed… The knowledge of construction, knowledge of how to work with steel, the people that work with steel and what they now… Steel reacts differently than wood, so having that knowledge is so very valuable, and just creating the right team, having the project managers, having a good vice-president of construction, having people that know how to run numbers to do a neighborhood in.

Figuring out how to do one project, one single house is one thing, figuring out how to do hundreds of them – that’s on a whole other level, and even with a college background and real estate background and the family background I had, 20 years ago I didn’t have nearly the knowledge. I didn’t have what it would take and I would have been too darn scared to do it. I always people, don’t ever let what if get in the way of what is, but I didn’t have nearly enough skills or knowledge to do it 20 years ago, and I hope that my common sense would have said “Yeah, you can’t do that… Don’t do that. Go get the knowledge to do it.”

Building one house is one thing, building hundreds of houses, and change the way people live, work, play and create, so that we can all have a better future at the bottom of it all, that’s what we’re trying to do, and that takes a whole other level of skill. And while I’ve thought of this as a retirement job, it’s becoming a whole different thing now, and I’m really proud of what it’s becoming, of the team we’ve created to bring it to life and to actually make it happen… But it takes that 20 years of experience to get here.

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

Stevie Bear: Don’t ever take no for an answer, and dream big. There’s a lot of things that need to be done out there, we all have a part in it, and we all should be doing that part… So don’t ever take no as an answer, dream big, and don’t let money ever be why you don’t do it. You have everything you need to do it with, just find the people, connect up and get it done.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Stevie Bear: Absolutely.

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

Break: [00:24:11].06] to [00:25:03].16]

Joe Fairless: Best ever book you’ve read?

Stevie Bear: Best ever book I read… Oh gosh, that’s a hard one. I like The Road Less Traveled…

Joe Fairless: Oh, I do, too. Scott Peck.

Stevie Bear: Yeah.

Joe Fairless: I love that whole series. The Road Less Traveled, The Road Less Traveled and Beyond, Further Along the Road — he really got carried away on The Road Less Traveled series…

Stevie Bear: Yeah, yeah…

Joe Fairless: Great book series.

Stevie Bear: Absolutely.

Joe Fairless: Best ever deal you’ve done?

Stevie Bear: Best ever deal I’ve done… There’s a big deal that we’re doing right now with a large international multimedia conglomerate that is gonna be announced in January, and I’m pretty proud of it. It’s going to be a game-changer for this company. So far, that might be the best one I’ve pulled off.

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

Stevie Bear: I’ve always been a giver, from the time I was a child… Collecting for hurricane victims and doing good deeds. One of the things we’re doing with Make It Modular is giving homes and businesses, creating spaces in the communities that we’re working in and giving them to the communities, and I’m really proud of that solution. So far, that’s the biggest thing – giving actual buildings to the communities that we’re working in. That’s a pretty big deal and I’m pretty proud of that.

Joe Fairless: Yeah, it is a big deal. How can the Best Ever listeners learn more about what you’ve got going on and your company and get in touch with you?

Stevie Bear: Visit us at the website, where you’re gonna find all the things we have coming up this next year. Our marketing firm is redoing the website, but visit us at the website, give us a call or come visit us here in Austin and see what we’re doing. We love to entertain people and we love to talk to people about what it is we’re doing.

Joe Fairless: Large shipping container homes and the business model about how to make that happen and make it into, as you said, nine-figure revenue – is that what you said?

Stevie Bear: Yeah…

Joe Fairless: What is that? That’s close to a hundred million dollars?

Stevie Bear: A couple hundred million dollars next year, that’s what we have on the table.

Joe Fairless: Wow, that’s impressive. Thank you for being on the show with us, thanks for talking through your approach; it’s incredibly impressive, and I’m excited to see where you take the company in the future. I hope you have a best ever day and we’ll talk to you soon.

Stevie Bear: Thanks for having us.

Best Real Estate Investing Advice Ever Show Podcast

JF1174: Writing a Book For Your Brand And Business #SkillSetSunday With Honorée Corder

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Today’s guest has written several books. Honorée says that writing a book can separate you from the crowd, and  you’ll become the go to expert in your field. She likes to help other entrepreneurs write and publish their own books. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!  


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Honorée Corder Background:

  • Chief Writer and Author, TEDx Speaker – ‎Honorée Enterprises Publishing, LLC.
  • Hal Elrod’s business partner in The Miracle Morning book series
  • Coaches business professionals, writers, and aspiring authors who want to publish their books to bestseller status
  • Author of several books, including The Prosperous Writer book series and Vision to Reality
  • Based in Austin, Texas
  • Say hi to her at www.HonoreeCorder.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.

Because it’s the weekend — so I hope you’re having a best ever weekend, first and foremost, and because today is Sunday, we’ve got a special segment for you, like we normally do on Sundays, called Skillset Sunday. We’re gonna talk about a specific skill, so that by the end of our conversation you will come away with a skill, or at least hone an existing skill related to this that you already have. The skill today is about writing a book for our own brand and to help us with our own platform, so that as real estate investors and entrepreneurs we can get the word out. I’m sure there’s lots of other benefits that today’s guest is gonna talk to us about – Honorée Corder, how are you doing?

Honorée Corder: I am fantastic, how are you?

Joe Fairless: I’m fantastic as well, nice to have you on the show. A little bit about Honorée – she is the Chief Writer and Author, she is a TEDx speaker of Honorée Enterprises Publishing. She is also Hal Elrod’s business partner in The Miracle Morning book series. Hal has been on the show as well, as I’m sure, Best Ever listeners, you remember our conversation with Hal. She is the author of several books; one of them is called “You Must Write a Book”, right?

Honorée Corder: Yes!
Joe Fairless: So very straightforward, not reading in between the lines there. Based in Austin, Texas… With that being said, do you wanna give the Best Ever listeners a little bit more about your background? Then we’ll get into the focus of our conversation.

Honorée Corder: Sure. I’m a serial entrepreneur, motivational speaker, and I have written – as of this morning – 27 books. 26 of them are published. Then I’ve done another dozen with Hal, and then I work with senior level professionals to help them to write and self-publish and launch their books, so that they can boost their brand, get more business, and become the go-to expert in their field.

Joe Fairless: So the focus of our conversation is writing a book – benefits, and how to do it. When you first engage with a client of yours, how do you approach it? What’s the conversation sound like?

Honorée Corder: Well, first I wanna make sure that they understand that it’s a commitment to write and publish a book, the expectations that I know that they need to have, helping them to set their own expectations, and then figuring out what the focus of the book could be, and it’s usually what they are finding their conversations with their ideal clients are centered around.

Joe Fairless: For example.

Honorée Corder: Okay, with real estate agents – everyone is a real estate agent… Almost everyone, right? And there are two different categories of real estate agents. There are professional realtors, and then there are hobbyists, people who have their license for one reason or another, and you’re frankly competing with all of those people.

When you’re talking to someone, you have to differentiate yourself from your competitors, so you would pick a topic as a real estate agent that would engender you as the expert to them. You could write a book on being a first-time homebuyer, or on being an expert in a particular neighborhood… Does that make sense?

Joe Fairless: It does, yeah.

Honorée Corder: So we just kind of drill down to what is the most logical topic for them to express their expertise in, and how is that going to fit into their business, how is that gonna position them.

Joe Fairless: Can you give maybe a case study of someone you’ve worked with and the book that they did, just so that we’ve got some context? And sorry for the background, that’s my dog… My fiancée just got home riding her bike, so he gets really excited.

Honorée Corder: What’s the dog’s name? You need to give it a shoutout.

Joe Fairless: Yeah, a shoutout to Jack. Well, now he’s quiet, even better.

Honorée Corder: Excellent. Jack is like, “Wait, dad’s on the phone. I had better be quiet.”

Joe Fairless: Exactly.

Honorée Corder: Alright. Well, I’ve worked with a lady named Beth Walker, and she wrote a book “Never Pay [00:05:03].14] For College.” We’ve been friends for a long time and she actually reached out to me and said “You’ve been saying for a number of years I need to write a book, I need to write a book, and I’m gonna write a book now. What do I put in the book?” So she put in her book the advice that she could give her ideal in client, in general brush strokes… Keeping in mind that obviously the advice that I give or that you give or that she would give to any individual set of parents would be specific to their situation.

When I wrote “You Must Write a Book”, I gave about 85%-90% of the advice that I would give to any person who wanted to write a book, and there’s that 10%-15% that I advise someone when I can get into their particular situation.

Joe Fairless: I love that. That right there is the approach – just write a book about advice you could give to your ideal client, and even if you don’t try to do general brush strokes, you have to, because everyone’s situation is somewhat different than your case; maybe it’s 10%-15% different across the board, but you can give the general advice, and then that ultimately would attract people to your ideal clients, and then they would engage you in whatever way that you’ve got set up.

Honorée Corder: Yes, and a book does so many wonderful things. If someone out there is considering, “Hm, I haven’t written a book… What should go in my book should I write a book?” A book differentiates you. It is the last thing that  really differentiates someone in their field. If you hand someone a business card, you’re basically handing them a piece of paper and asking them to throw it away for you, but if you hand someone a book, I don’t know anyone who would actually throw a book away. They might donate, they would pass it on to someone, but they definitely aren’t gonna throw it away. So you are differentiating yourself, and I myself have gotten second and third and fourth-degree referrals.

I give my book to someone, they say “Oh, this is fantastic”, they hire men. Then they pass it on to their colleague or their friend or one of their strategic partners, and then that person calls me and says “Okay, you can’t help Joe and not help me… I want in on the gig.” So what happens is your book becomes an evergreen piece of marketing material which is unlike a flier or a brochure or a business card.

Joe Fairless: One thing that I do with my investors – so my main clients are my investors in my deals – is I send them a signed copy of my book with a little personal note to them, and you’re right, it differentiates… And I doubt people throw it away. They might not ever read it, and they might tuck it away or just stuff it in their junk drawer, but I personally couldn’t make myself throw a book away; there’s just something about it that I wouldn’t do.

Honorée Corder: Right. There’s something wired in us as people that books are in some way sacred, so we might give it away, or we might keep it forever in a box, but we definitely wouldn’t throw it in the trash. And at that time when it’s needed, they go “Wait a minute, I met that guy who was an expert in real estate investing…” or someone says “Do you know anyone who’s an expert in that particular field?” and they say “You know what, I do.” And they go in and find your book, and they pass your book on. It’s fantastic.

Joe Fairless: What are the common challenges and solutions to those challenges that someone has when writing a book?

Honorée Corder: Time is a big excuse that I hear… [laughs]

Joe Fairless: In legitimate reason, right?

Honorée Corder: No, I don’t think it’s legitimate at all, because when I have someone do an accounting of their time, most people spend an inordinate amount of time doing things that are not important, and failing to do the thing that they know that they need to do or that they want to do, something that’s important.

So when we do a time  audit, I can find minutes every day, or an hour every day where they could write their book. I actually have a book called “The Nifty 15: Write Your Book In Just 15 Minutes a Day”, because you can write 100-250 words in 15 minutes, and a non-fiction book runs between 30,000 and 50,000 words, so you can do the math backwards and it’s only gonna take you a couple hundred days, even at 100-250 words a day to write an entire manuscript. So when someone says “I don’t have the time”, what they could be saying is “This is not a priority for me.” But when you make it a priority, then you carve out the time and it’s on your calendar, and you do it day in and day out, week in and week out until you have a finished product.

Joe Fairless: Did you write The Nifty 15 at 15 minutes a day?

Honorée Corder: I actually did. My goal was to write The Nifty 15 in 15 minutes a day over the course of 100 days to prove that it was possible, and my co-author in that book wrote a 70,000-word fiction book in 100 days, writing 15 minutes a day.

Joe Fairless: Wow! Was it your co-author’s first book? That sounds like that would be the job for someone who’s written at least a couple books to pull that off, the 70,000-word one.

Honorée Corder: Yes, yes. [laughs] The 70,000-word book was not his first book, it was probably number six or seven. But it was a full fiction book, and he posted in [unintelligible [00:10:04].29] digital version, so people could read what a rough draft reads like also. So that leads us into what’s another problem – a lot of people want to write a perfect first draft. I would love to say that after so many books I sit down and just write this brilliant, shiny prose. And every time I turn my manuscript over to my editor I know it’s gonna come back to me looking like a crime scene.

It comes back with notes and corrections, and I’m fine with that. That’s the expectation, so that is the expectation I set for anyone who is writing a manuscript – know that you will use the advice of professionals, in this case professional editors and proofreaders, to make your book a lovely read for the reader.

Joe Fairless: How do you find the right editor and proofreader?

Honorée Corder: By recommendation. This is my acid test – someone who has “Editor” on their tax return.

Joe Fairless: Got it.

Honorée Corder: So you don’t want someone who is an English teacher or someone who does editing on the side. You want someone for whom editing is their full-time gig.

Joe Fairless: How much does that cost?

Honorée Corder: Editors usually charge by the page or by the word, so for one of my 30,000-word manuscripts I might pay between $800 and $1,000. For the longer non-fiction manuscripts of The Miracle Morning we’ve had manuscripts between 50,000 and 70,000 words, and that will cost around $2,000, $2,500 for the full edit and the proofreading.

Joe Fairless: Got it, okay.

Honorée Corder: Editing is gonna be one of your two major expenses. There are four main expenses of producing a book, and the most expensive one is going to be most likely your editing and proofreading.

Joe Fairless: Okay, please elaborate on the four.

Honorée Corder: So the second one is your book cover. When we say “Don’t judge a book by its cover”, well, we do. [laughs] You have to get a quality cover; you don’t wanna go to Fiverr… If someone says “I’ll do a cover for you for $100”, run screaming in the other direction. Don’t do it.

Find someone who is a graphic designer and does book covers, and have them do your book covers. I can recommend a couple people.

Joe Fairless: Roughly how much does that cost?

Honorée Corder: Between $1,000 and $2,000. If you have someone to do the front cover, full cover… So you have a front cover for your digital book, your full cover for your print version. If you choose to do hardcover, then that will be another version, and then your audiobook requires a square version of your cover. So there’s definitely three, possibly four different covers, and you need someone who understands the dimensions and all of the nuances of that.

Joe Fairless: Is that including the back cover, in the rough estimate that you said, between 1k to 2k?

Honorée Corder: Yeah, the full covers. When you do an eBook, the only thing you need is the front cover, but I would never tell a professional just to do an eBook, I would always advise that they do a paperback at the very least. So that’s the full cover, which is the front, the spine, and then the back cover, which includes the back cover copy, probably a mini bio… All sorts of fun things that make a book look professional.

Joe Fairless: So editor proofreading, one category; book cover is the second category. What are three and four?

Honorée Corder: Three and four are the interior design of your book. You’ll want someone who does professional interior design. You can get a very basic design for the inside of your book for a couple hundred dollars. You can pay between $500 and $1,000 for a custom interior design, which is fantastic… So that includes images, custom fonts, or specially designed fonts, front matter and back matter… Front matter is “Thank you for reading my book! Please join my e-mail list.” As professionals, we’re adding people to our newsletter lists. The back matter is your bio, and any invitations to things, whatever you would put in the back, and that varies by person.

The final thing – number four – is the copywriting. So writing is one skill, copywriting is a completely different skillset, and I don’t leave my book description/sales copy to chance. The wording that goes on the back cover is a very specifically written set of words that if you’re looking at a book on Amazon, that’s your sales copy; it’s the description of the book. So that a little bit edited is what goes on the back cover. So you hire someone to do that, and that will cost around $200 or $300. It doesn’t cost very much, but it sure makes a difference.

In fact, I’ve read statistics that say it’s the number one conversion. So if you get someone to look at your book cover and they think your book cover is great, if your copy is bad, they’ll pass. You’ve gotta have great copy.

Joe Fairless: So all-in, what would it cost?

Honorée Corder: All-in top number for those four things – it should cost $6,000 or less to have those elements included in your book. You just have to know the right people and the guidance to give them.

Joe Fairless: What are your thoughts on Amazon’s Create Spaces, and Book Baby, and other platforms like that?

Honorée Corder: I don’t know Book Baby, that is not an Amazon platform, but Create Space is where you can get your print books if you’re not buying in quantity, so up to 250 books. So you can go to a traditional printer and get a perfect bound document, which is what we call a paperback book, if you’re going in quantities of 250 and up. But I use Create Space for all of my books. I was the queen of the third car garage, it was full of all of my different boxes of books, and I was delighted when Amazon introduced Create Space and I could get a quality book, and then if I wanted ten copies, I could order ten copies. I need 400 for a speaking engagement I’m giving in a couple of months, so I’m ordering 400 books and shipping them right to the hotel; I don’t have to do anything, it’s fantastic.

Joe Fairless: Yeah, I used Create Space for my second book, and I liked that a lot better than what I mentioned earlier, Book Baby, which basically would be their competitor; most people, I imagine, buy books via Amazon (that’s the number one way), so you might as well get them with the Amazon publishing platform, because I’m sure there are other residual benefits as well.

Honorée Corder: Sure. If you’re publishing on Amazon specifically – and this is more of a tactical decision, but if you’re exclusive to Amazon in terms of your online sales, then you enroll in KDP Select, which is the marital partner, if you will, of Kindle Unlimited, where people pay to read for free books, but they’re paying the $10/months and the authors get paid for the pages that are read. You get more promotion kick from that.

Joe Fairless: What haven’t we talked about that you wanna mention as it relates to getting the book published and why we should write a book?

Honorée Corder: Well, I think it’s important for everyone to consider what they want out of their business and what their goals are in terms of their business and their life, and one of the fastest ways to move the needle is to have a book to market their business with, to pass that out and to create conversations and to create relationships and to referral partnerships with other professionals. So if you’re on the fence in terms of “Should I write a book or shouldn’t I write a book?”, I highly encourage you to write a book.

I wrote my first book because Mark Victor Hansen, when I met him, he said “What do you do?” and I said “Oh, I’m a business coach and a speaker”, and he said “Haha… Everybody’s a coach and a speaker. You must write a book.” I had no idea what any of that entailed, but I took the advice, I sat down and took another piece of his advice, which was to take a popular presentation that I had and turn it into a book, and I did that.

Then I had a book, and then I was an author, so when someone would ask me for a business card, I would say “I don’t have a business card, but I do have a book” and they went “Oh, you’re an author…!” and there was just something about that that made a difference. It’s still a big deal, and this was 2004 for me, so 13 years ago was when I published my first book, and since then being able to say I’m author, entrepreneur, speaker, coach – I go down the line, but I always start with author, because that’s the thing that differentiates you from your competitors.

So if your goals are to double your revenue, you need a book. If your goals are to work less and make more, you probably need a book, because it can be marketing on your behalf, while you’re not there.

Joe Fairless: Honorée, where can the Best Ever listeners get in touch with you, or how can they get involved?

Honorée Corder: Sure, so I am at HonoreeCorder.com, and I am @Honoree on every social media platform known to [unintelligible [00:19:03].14] except Snapchat; I’ve drawn the line.

Joe Fairless: Oh, forget Snapchat, yeah.

Honorée Corder: I’m not doing the Snapchat, but everywhere else I’m @Honoree.

Joe Fairless: Sweet. Alright, well thank you for being on the show. Thanks for talking about why we’ve gotta write a book and the benefits to it, as well as some very tactical examples for what costs are involved, and then getting into the details there. So the four major expenses – editor and proofreading, the book cover, interior design, the copywriting… All-in about 6k. The advice for approaching writing a book – I loved this, and that is that we should write a book that gives advice to our ideal client in general brush strokes. So you must write a book that has about 90% of the advice anyone can use; 10% obviously needs to be personalized to that individual, so it’d be impossible to do that.

And then The Nifty 15, for any Best Ever listener who is looking to write a book, but doesn’t think that they have enough time, then as you mentioned, it’s about priorities. We spend our time the way that we prioritize our time. We all have the same amount of time to spend during a day, so what are our priorities? When we prioritize it, then we can knock out a book in 15-minute increments a day, and The Nifty 15 is an example of that. And then lastly, forget the business card, and give out a book.

Thanks a lot, Honorée, for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon.

Best Real Estate Investing Advice Ever Show Podcast

JF1111: Can Real Estate Be An Unnecessary Distraction For Some People? With Noah Kagan

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Noah was one of the early guys with Facebook. He’s created multiple multi-million dollar businesses. Buying real estate never made much sense to him because his time was best spent on his businesses, where he was making a lot of money. After 10 years of looking, he did finally buy some properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Noah Kagan Background:
-Founder product marketing platform, SumoMe & AppSumo.com (daily deals for entrepreneurs)
-Host of popular business podcast, Noah Kagan Presents
-Created four multi-million dollar businesses
-Based in Austin, Texas
-Say hi to him at www.okdork.com/podcast

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Fund That Flip provides short-term fix and flip loans to experienced investors. If you’re looking for a reliable funding partner, their online platform makes the entire process super easy, and they can get you funded in as few as 7 days.

They’ve also partnered with best-selling author, J Scott to provide Bestever listeners a free chapter from his new book on negotiating real estate. If you’d like to improve your bestever negotiating skills, visit www.fundthatflip.com/bestever to download your free negotiating guide today.


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff. We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad, and a whole bunch of others. With us today we’ve got Noah Kagan. How are you doing, Noah?

Noah Kagan: Noah Kagan’s good today, man. I thought you said Noel for a second. I’m great, I’ve just told you I got from the dentist [unintelligible [00:01:26].05] and I’m gonna go get my chest waxed in an hour.

Joe Fairless: Sweet, you’ve got all sorts of body conditioning things happening, and I’m glad in-between those things we’re able to have a conversation. This is going to be an interesting perspective, because I was talking to Noah before we started recording, based on your background — I’m gonna give you a little bit about Noah… He’s the founder of the product marketing platform SumoMe and AppSumo.com. He is the host of the popular business podcast Noah Kagan Presents. He has created four multi-million-dollar businesses. You can say hi to him at his website, which is in the show notes page.

We were talking before, and I asked “What’s the best approach, based on your area of expertise?” and he said “Well, I’m not sure if real estate makes sense for me, because I can make a lot more money running my internet business”, so we’re gonna talk about “Is real estate an unnecessary distraction to some people?”

With that being said, Noah, do you wanna give the Best Ever listeners a little bit more about your background and your current focus and then we’ll dive into it?

Noah Kagan: What’s up listeners, all up in your earlobes? I worked at Facebook, I was one of the early guys there, I helped do marketing at Mint.com… I’ve been in tech 17 years, I’m like a dinosaur. Now I run Sumo.com, which is free tools to grow your e-mail list, and then AppSumo.com, which is a Groupon for geeks and small business owners. I spend a lot of my day doing Noah Kagan Presents podcast where I present just different business people I find super interesting, or write about it on OkDork.com.

I’ve done real estate — you know what’s crazy about it? I’ve been interested in real estate… I grew up in the Bay Area, where it’s always been really expensive and interesting… So I’ve been trying to buy and thinking about it for like 14 years give or take, and only in the past four years have I bought four places. But it’s been definitely something I spend a lot of time thinking about.

Joe Fairless: Four years you’ve bought four places – let’s start there. Let’s start with the places that you have purchased, because I think as you describe those places, I suspect you’re gonna talk through why you bought them and your thought process.

Noah Kagan: Yeah, I’ve read Rich Dad, Poor Dad, I’ve read a lot of those real estate confessional books and a few of these other ones, and I just never really felt that comfortable. I think what dawned on me is “How do I really wanna spend my time?” I think if I had a traditional job like my stepfather, who’s an engineer, who makes 100k or 75k a year, you know, the best way that you can really grow your money for some period of time, it’s probably gonna be real estate… Because you can’t control the dial of income, you’re kind of limited.

For me on the other hand, I’ve started businesses. I’m not saying everyone should be able to start a business, but the best use of my time was actually running businesses and trying to grow money that way, where like with AppSumo it’s like “Well, if we promote more products, I can make more money a lot better.” One deal can make 20k, where a great real estate property will make 10k in a year, and that’s doing well.

I think one thing that people don’t think about is I’ve spent 10 years kind of looking at real estate for a long time, and only when the numbers really lined up did I make a decision on it. The decision was we were running our company, and it was like “Man, it’d be great to own the building.” [unintelligible [00:04:14].01] has a great quote where he said “A dentist didn’t get rich being a dentist, he got rich owning the building that he had his dentist practice in.” I’ve always really liked that quote, it’s really resonated with me, so I was like “Well, we need a new office. Let me go try to find one.”

I found a loft that I could work out of. It was 300k, and I saw it, and actually the interesting thing about it was that it was for rent. And I was just like “Hey, are you interested in selling it to me?” and they said “No.” But I think one of the ways you get a good deal – at least my mindset with real estate is the only way to get a good deal is when it’s not on the market, and that’s just kind of like this mentality that I’ve really stuck with; maybe I’m dumb, maybe I’m not, but I find that if you can get a pre-market or pre-build or off-market or creatively reaching out or through referrals, you’ll probably get a better deal on it.

That guy didn’t wanna sell it to me, but his neighbor actually literally that day was like “Hey, I’m putting mine on the market”, so I bought it that day.

Joe Fairless: How did the neighbor know that you were asking about the other person’s property?

Noah Kagan: Yeah, it was crazy… So I went to the building and checked out this unit, and the neighbor put out a sign and he was about to go put it on the MLS the next day… But he put a sign out, and I just called him and I was like “Hey, I’ll buy it.” He was like “Okay.”

That was the first one I’ve ever bought, and the reason I was able to make that decision so quickly was I interested in the math of it. I was like “Well, I’m already paying 6k/month in rent. A 300k building – I can rent it to myself for 3k, and the mortgage + HOA and all that stuff all-in will be like 2k. So I’m making 1k profit, and it’s half the rent that we’re paying now, so it’s good for the company and it’s good for me.”
Funny enough, a year later the neighbor (the original one) – I hit him up and I was like “Hey, we’re growing really fast. Can I buy your unit now?” and he said “Sure.” So I was able to get his unit as well, so we have the two units next to each other.

Joe Fairless: What did you buy that one for? You bought the first one for 300k…

Noah Kagan: Yeah, that was 315k, and I still rent it to ourselves at 3k. I think the thing I wanted to consider is not like — I guess I look at it like doomsday, like even if our company goes out of business, could I rent it for this much? And I personally have always tried to target 1%, meaning if I buy something for 300k, can I at least rent it for 3k? And that’s kind of the stupid formula that’s worked for me.

So those are the first two I bought in the first year, but I think one thing I just wanna share with your listeners is that that was after ten years of looking, especially in Austin, in the Bay, wherever I traveled… And I think the big lesson I learned from that – it has to be the right time and you have to be ready for it. You have to be able to say “Alright, I’m ready to go make this decision.” I think — would I have done it sooner? Maybe, but I just wasn’t ready for it until that moment.

Joe Fairless: So those are the first two properties, and they’re in Austin, both of them?

Noah Kagan: Everything’s in Austin.

Joe Fairless: Okay, cool. Those are the first two properties, and that was after ten years… What year was that?

Noah Kagan: That was only three or four years ago. 2013, I think.

Joe Fairless: Okay, 2013. And what about the other two?

Noah Kagan: It’s interesting… I think two things that I love — my friend Jay Papasan from The One Thing and the Keller Williams Group, he said something really clever to me, and I loved it. He said “Never drive to work the same way twice if you’re trying to do real estate”, and I thought that was so true. If you’re going to work, just drive different routes and you’ll find out about the area and you’ll find out about properties.

So I go to work, and then I know East Austin very well, and I saw a building that I just love the architecture. When I buy something, I’m more about “Would I wanna live in it? Am I excited about it?” more so than “It’s just a good investment.” That’s not a strategy others do. I think they’re like, “Oh, can I make money? Am I gonna be a great slumlord? Can I raise the rents and kick out the poor people and put in the rich people?” That’s just not what I do; it’s not the approach or what I’m interested in. What I’m interested in is like I just love what it is and it’s something that I wanna be a part of and try to share.

So this building I just thought was gorgeous, and I was like — it was on a Tuesday, and I said “If it’s ever on the market, I’ll buy a unit in it.” And on Thursday one went on the market, and I bought it that night.

Joe Fairless: Was that a condo?

Noah Kagan: Yeah, all the ones I own are condos. I’m like the condo king. The condo kid. Not a king at all [unintelligible [00:07:59].01]

Joe Fairless: Yeah, we’ll call you the Condo Kid, I like that.

Noah Kagan: Condo Kid, yeah. The reason I bought that one is 1) I loved the architecture, and the location was just amazing for where Austin is, and 2) I just really wanted to learn about Airbnb and short-term rentals. This was 2014, and I just wanted to see what the math looks like. That place was 315k as well, and for 60k it’s interesting enough for me to put up that much money (or 70k; whatever, 20%; 65k) and learn what short-term rentals look like. So that kind of made the decision easier, and it turned out I make at the end of the day between 7%-10% cash-on-cash return for my down payment.

Joe Fairless: And you said that you bought that one for how much?

Noah Kagan: That was 315k.

Joe Fairless: 315k. Okay, got it. So Airbnb – you decided to go that route. Did you run the numbers initially not using the Airbnb model?

Noah Kagan: I ran both. I wanted to make sure if Airbnb got kicked out of here or if there’s ever legal issues with it in the city – which there actually was – that I could at least break-even. So I ran the numbers and I was like “Alright, if I can make 2k/month all in, then I can cover my costs and I’m fine with it”, because I just loved the location.

Joe Fairless: What was it renting for? What was the projection?

Noah Kagan: With long-term renting it was around 2k-2.3k. With Airbnb I was projecting somewhere between 3k-5k/month, depending on how our big holidays do here. We have these big conventions and parties, and a lot of bachelor parties and stuff like that.

Joe Fairless: Okay. And then the fourth property from the Condo Kid?

Noah Kagan: Yeah, the Condo Kid – that’s cool. So I lived in an East Side loft and I rented for six years, and I actually had a chance to buy it, and it would have gone up, and I just didn’t want to. I think that was kind of an interesting sign, I think it was telling… I wasn’t really excited about the place. So there was a building coming downtown that was right next to the water plant, and it’s like this power plant that was downtown and it was the only one in the whole city. It’s very historic, and there’s a building being built there.

I knew it was being built about two years before, and I didn’t have a connection, so one tip that I would learn for myself or teach everybody else there is to hit up the developer or hit up the agents that have exclusives on properties. Just be persistent with them.

Basically, what happened in this building was that two years ahead of it, the agency who had the exclusive on it, he hooked up all his friends with the best units and the best prices and the best parking, and then all the riff-raff people like myself got the scraps. And I’m super happy to be in the building, I love the location, but the only reason I got it was I spent a year calling every week to get on the waitlist. I was on the waitlist for not getting it, and so I called every single week for one year, until eventually they were like “Alright, stop annoying us. We’ll give you one.”

I think in retrospect if I was running the building, I would hook up my friends too, so I don’t blame them.

Joe Fairless: Yeah. When you call, what would they tell you before they said “Okay, fine, you’re in”, what was the response?

Noah Kagan: It was the same thing, it was like “You’re still on the list, you’re still on the list.” My mom has this quote and I love it, it’s “The squeaky wheel gets the grease”, and it’s damn true. I think one of the most things in business that people are afraid of is asking. If you’re doing real estate, go practice your asking muscle. I always recommend the coffee challenge, which is going to Starbucks and asking for 10% off. No one will do it. Maybe 1% of you will do it, and that’s why you’re getting what you want. But you’ve gotta go ask, you’ll get rejected and you’ll be like, “Hey, guess what, I’m still alive.”
I think with real estate and in almost all aspects of life you have to go ask for things, get rejected, then keep going, and realize you’re still alive, and persist.

Joe Fairless: Now going more high-level, you’re a successful entrepreneur, and as you mentioned earlier, it was 10 years before you got your first real estate deal, and intentionally… Can you talk a little bit more about the formula that you look at or your thought process in terms of, okay, you still didn’t invest passively in a deal for all those ten years that you could have?

Noah Kagan: Yeah, so I’ll tell you what I learned and where I’m at now. I think where I’m at now is probably more relevant to everyone else, so I create spreadsheets for every single one. I use the stupid simple spreadsheets, and I’ll send you an example so you can put it in the show notes… But basically I’m like “How much is my cost? How much is my mortgage? How much is the revenue I’m projecting and then what’s my yearly ROI?” and if I can get somewhere between 7%-10%, I’m super happy.

What happened was about two and a half years ago I was spending about half my day looking at real estate, and it takes a lot of time if you wanna get a good deal, because the money is made — I think a lot of people may know this, and I still think I really know it, but you make money when you buy it, not when you sell it. So I was spending like half my day looking at this, and I ran the numbers and I was like “Alright, if I buy a property, at most I’ll make 10k/year. If I run my business better, I can make 100k or more a year. What’s the better use of my time?” I’m like, “Um, my business…? So let me spend my time doing that.”

Where I’m at now is a few things. One, I use PeerStreet.com. Basically, it gives a chance for regular people to go invest in real estate without having to do the work, and you get first lien on the property, so if they ever default — basically, if people wanna buy a property, they’ll go to PeerStreet and say “I wanna buy this as an investor. Who wants to put up the cash?” Then I can spend my time on my business and where I’m great at, and then people who are investors can go be great at that, and I can get my 7% return from there.

So I’ve put in like 60k on PeerStreet, and so far it seems to be giving me good returns. I do most of them within one year, so it’s all these loans that are about a year out… So it’s not like super long. If the economy goes down I’m like “Well, within a year I think things should be okay.”

The second thing I’ve done is looked for real estate investors to learn from. If people are young out there – I don’t know what your audience demographics are like… My landlord is a real estate guy and I was like “Hey, can I just buy you lunch?” That was a great way, and I said “Hey, if you ever have any deals, can you e-mail me about them?” So that’s kind of where you start building out your network. Now maybe every few months I’ll get an e-mail if there’s things I’m interested in.

Two years ago there was a restaurant building that someone – because of a lunch like that – said “Hey, do you wanna get in on it?” and I got in on it. I can’t say the deal has been amazing yet, but I did that deal specifically because I wanted to learn what the economics look like for a commercial real estate developer, and they shared all their numbers with me, because I was an investor.

Joe Fairless: Let’s go back to the lunch thing where you reached out to the investor… You just met up with — is it a him or a her?

Noah Kagan: It was a him.

Joe Fairless: You just met up with him, you sit down… What do you ask?

Noah Kagan: His name is Alan, he’s my parking landlord… And I was like “Hey, I looked up your website, it looks like you guys really cool stuff…”

Joe Fairless: What’s a parking landlord?

Noah Kagan: Oh, I think people don’t value their time very well… Whenever you buy a condo, just a few things to check – check your cell phone reception and check your parking spot. I was on G9, and it takes five minutes to get up and down, which doesn’t sound like a lot… They’re like, “Oh, no [unintelligible [00:14:09].24].” It’s like, “No, that’s five minutes times five days a week, in and out.” So that’s now an hour of my life every week for a whole year; now that’s a week of life that I’ve been driving up and down this building. So how much is a week of your life worth? A week of my life is worth a few hundred bucks, at least, a month… So I paid that to a guy, because I posted, “Hey, I wanna get a parking spot.” So he responded and said “Hey, I’ll give you a parking spot.” I saw he worked at real estate, and I said “Hey, can I take you out to lunch?”

At lunch what I was curious about was like how did he end up there, and then how does he evaluate deals? The thing that was interesting was that he was actually an entrepreneur who sold his company; he was bored and he was like, “Well, let me do real estate”, so what he did was he went and partnered with people and followed on the money. They would come up with a deal and he was just giving cash, and then over time he was like “Well, let me try to do it myself.”

I think that’s what I’ve noticed with real estate – a lot of people start small and they just keep building up and up and up, and over time they kind of specialize in some type of category. He specializes in like 30-100 unit apartments that are kind of needing to be gentrified.

I called him out a little bit, I was like “Dude, do you ever kick out the people that get gentrified? Do you ever evict them yourself?” and he was like “No.” I kind of think you need to do that yourself to really see what’s happening and what you’re doing with the properties. Most people are like “I make $100/month, who cares what happens to the people?” I just don’t agree with that personally.

Joe Fairless: What action items or what (if any) direction did you change after having the conversation with him?

Noah Kagan: It was two things. One is find people that are doing investing, and specialize what you’re great at. If you’re not a great at real estate, go partner up with someone and be their gopher. If you are great at business, specialize in business and find someone to do the real estate.

So it was kind of like “Focusing on your sweet spot” was number one, and I think everyone should be aware of that. If it’s not real estate, fine. Do you want it to be real estate? Go learn, listen to this podcast all the way through, go on Bigger Pockets forums, go actually find realtors – realtors will meet with a lot of people – and just be like, “Hey, can I shout out you? Can I put up your posters?” and be friends with realtors; that’s how you learn from it.

The second thing that I’ve taken away from that experience was that as I’m doing property for myself, I want part of my formula, besides that the math looks good, I wanna be excited about what I’m buying. For example, one of my ideas now — and I don’t look at real estate as like “How do I just create passive income?”, I like it to be interesting income, personally. One of the things I’m looking for is “How do I buy a ranch?” I’m excited about a ranch, because I think it’d be cool to create a corporate retreat center, so companies can go and have retreats and meetings and stuff like that.

So from meeting with him I realized I wanna specialize in creating properties that I would live in myself and I’m interested in myself… Not necessarily just “Oh, I can buy those and fix it up and flip it and things like that”, that’s not necessarily what I’m interested in. That was one of the bigger takeaways from how I wanna evaluate real estate from meeting with him.

Joe Fairless: One question that’s more geared towards your background and the success that you’ve had in your businesses – what part of your experience that you got through your businesses have you applied towards helping make your real estate more profitable?

Noah Kagan: I think a few things… I’ve done online businesses – AppSumo.com, Sumo.com… I think a few things. One, hiring – I’ve hired people; now at AppSumo we have over 50 people. So I immediately hired a property manager for the Airbnb unit… And some people are like “Well, you’re making less money”, and it’s like “Well, I don’t even wanna think about it. I don’t even wanna have to know about it”, and that’s something [unintelligible [00:17:21].15] “Okay, that’s a good use of time.”

The second thing — it’s funny, the building I’m living in now, I was looking at buying another unit, and the way I found the other unit was that I actually didn’t just wait for MLS… I think if you’re waiting for MLS you’re probably gonna get a bad deal, especially as an investor, but I actually posted on our message board, like “Hey, I’m looking for another place. You’ll save 6% realtor fees, plus I can pay a lot in cash”, and it actually got me a few people that showed me their units that weren’t even on the market. And I think what I realized for my own business and how I used it in that application was that if you wanna get ahead in business, you can’t be doing what everybody else is doing. If you wanna do marketing, you can’t be doing the same marketing your competitors are doing.

So that way, I went a little bit off-market angle and I actually got three or four people saying “Hey, I’m interested”, so I’ve been checking them out over the past few months.

Joe Fairless: Great stuff. Anything else that we haven’t talked about, Noah, that you think we should talk about as it relates to your experience in real estate, and then also reflecting on your business success that you’ve applied towards real estate?

Noah Kagan: I think there’s two things. One, I came up with this formula called TST – or this theory – which is Test Shit Out. The idea with that is I was about to buy this old unit in our building; it’s about 700k or 800k, and I was about to buy it, and I was like “Is there a way just to test this out?” Because I bought an expensive car last year and I was very unhappy the whole time, and I ended up selling it and lost a lot of money to get a 2004 Miata, which I’m so much happier about. And it was good lesson, and it’s something I wanna share with everyone – if you’re thinking about something to actually live in, is there a way that you can test it out? Can you ask them to Airbnb it? Can you ask them to rent it for a weekend, instead of having to do a full commit? So that’s one thing that’s been an interesting approach, where especially if you wanna live in it, can you consider that?

Number two, try to be a little creative. One thing is that you don’t have to own the whole thing – can you own part of the thing? When we bought the church in San Antonio, I didn’t buy the whole thing. This guy put together the deal, and he just got all these investors and he actually didn’t even end up putting in that much cash, because all the investors did. We’ve applied that – we bought a place in Budapest, because there’s a lot of these foreign countries that are really cool, low taxes, really cheap and fun… So my friend got people, we each put in 10k, and now we own a place in Budapest. Maybe that will turn into an Airbnb, or for now at least, all of us can have our friends visit there when we go.

So that’s something [unintelligible [00:19:35].14] real estate in general. I wanna own a place in Venice Beach, but to some extent, do I really need to own it? Can I focus on making a lot of money with the internet stuff and then just either Airbnb when I go to Venice or HomeAway, or am I really wanting to actually own something that I can always come back to? And that’s something that I’m still exploring.

Joe Fairless: Yeah, I remember talking to my roommate when I was in college, we were on the porch drinking some beers, and I told him “The first real estate property I’m gonna buy is a house by the beach, so I can see the waves crashing in”, and now knowing what I know, I will rent it when I go there, I’ll do Airbnb, and then I’ll have other people clean up after me and then I’ll leave and I don’t have to worry about the place, and I’ll make money in other areas of real estate.

Noah Kagan: I think that’s the great part – find your angle; either find the area of your town, or find the type of real estate that you’re excited about… Maybe it’s creating hostels, or maybe it’s doing hospitals, or restaurants, or whatever it is, and specialize in that.

I think part of the thing for me is — and I think it’s hard for everyone, but it’s letting go of the ego. The greatest thing about real estate is that it’s real, and everyone can see it and you can show it off. “I have ten units” or “I have 100 units” and I’m bragging… And I think that’s kind of the interesting about like what do you really need to have when you’re gonna be in the ground, and how is this real estate helping you accomplish the actual goals you want, versus just making more money? And I think kind of just reflecting on that, for me it’s like “Well, it doesn’t actually really make me feel that much better. I don’t think I’m adding that much to the earth. Let me not spend as much time on that.” Let me just do the real estate vision I have – my vision is own a place on the beach in Venice, have my downtown pad here, and then get my ranch. I don’t know when it will happen, but at least I have that vision, and everything else then is just like “Let it go.” And that part is hard. It’s hard not to be like “Well, I can make more money doing this.”

I think what people don’t realize is that you can make more money, but it also takes time away from something else that’s probably more important.

Joe Fairless: Great stuff, Noah. Where can the Best Ever listeners get in touch with you?

Noah Kagan: Whaddup, Best Ever listeners! If you wanna hear more of me, check out Noah Kagan Presents Podcast. If you wanna grow your business, we have a bunch of free stuff at AppSumo.com or Sumo.com. Those are the two companies I help run.

Joe Fairless: Outstanding. I’m 85% positive that my website uses AppSumo, or some form of one of your companies, because I’ve been focused on getting more conversions for the traffic that I get sent to my site, so… And I’ve heard a lot of good things about your companies, that’s for sure. So Best Ever listeners, go check it out.

Noah, I really enjoyed our conversation. I was taking notes the entire time, and I wrote down six keys that you’ve used from your lessons learned in business and applied towards real estate.

One is if you want to get ahead, then don’t be doing what everyone else is doing, and your MLS/off-market thing is an example.

Two is hiring intelligently – we didn’t really dive into it that much, but nonetheless, right out of the gate, you immediately hired a property manager for Airbnb, and you’ve scaled your company as well.

Three – test it out, or TST, as you have that acronym.

Four is “Can you partner on it?” Does it have to be you doing the whole thing, or can you partner on it and go in together and mitigate the risk, and still get what you’re trying to accomplish?

Five is specialize in what you’re great at, or as you so succinctly said, focus on your sweet spot.

Six, do what gets you excited, and that’s one of your key tenets in how you approach real estate.

Noah Kagan: I love it, man. That was great.

Joe Fairless: I’m listening, baby…

Noah Kagan: You’re definitely listening. Can we do a bonus one? Because you just got me so excited…

Joe Fairless: A bonus — six plus the bonus one from the Condo Kid. What’s the bonus one?

Noah Kagan: Condo Kid. Are most of your listeners just starting out or are they super rich with a bunch of real estate?

Joe Fairless: It runs the spectrum, it really does.

Noah Kagan: I’d say two things. One, build your network, and here’s the easiest way to build your network – look at any building that you really like, or any area, or anything specifically that you like, and just find out who the agent or the owner is. That for me has actually been a great way I’ve built my network in Austin, where I found the guy who’s selling a lot of these condos and now I’m friends with him. And I found the guy who develops a lot of the East Austin, so I’m friends with him. So you just hit up these people, you’ll be shocked what you can get for a $30 lunch and what kind of ROI and relationships you can build from that.

The second thing is you can meet a lot of those people going to charity events. I went to this poker thing – it was $100, and I was like “$100? It’s crazy”, but at that even I met a bunch of people, and guess what? All these people hook up their friends. They’re like “Hey, wanna do a deal?” “Yeah.” “I’m gonna hook you up”, versus trying to find stuff on the market, or things like that where there’s not as much opportunity. So those are kind of the two ways I’d say.

If you’re just starting out, or even if you’ve already got something going — I think about this for my business, it’s like “How can I build my network and my relationships so I can have an advantage with that?”

Joe Fairless: Love it, Noah. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon!

Noah Kagan: Joe Fairless, I love you, dawg!

Best Real Estate Investing Advice Ever Show Podcast

JF1106: How to Find Owner Financing Deals with Daniel Ameduri

Listen to the Episode Below (26:32)
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When properties have issues that everyone else is scared of, it’s time to look deeper. Specifically dealing with foundation issues in this episode – Daniel has found a niche. When a property has a foundation issue, he has no competition, and can usually buy those properties by simply taking over the payments for the distressed seller. These are creative ways to buy when all other options won’t work – and anyone can apply! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Daniel Ameduri Real Estate Background:
-Co-Founder of the Future Money Trends Letter, FMT Advisory, and the Wealth Research Group
-Over 40 transactions  owns 15 rental units, 7 homes, 2 duplexes, 1 four plex
-Investor in private commercial REIT and involved in over 200 first trust deeds, he is partial owner/investor
-In ‘07 forecasting market and mortgage collapse, he started his own YouTube channel, VisionVictory, which has received 10 million video views During ‘08 mortgage crisis, helped people buy
-Put Options on Countrywide Mortgage (saw gain of 1,400%) Been featured in Wall Street Journal, ABCWorldNews, and RTTV, with platform is over 200,000 subscribers
-Based in Austin, Texas
-Say hi to him at www.futuremoneytrends.com
-Best Ever Book: Laws of Success by Napoleon Hill

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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 of that fluffy stuff.

With us today, Daniel Ameduri. How are you doing, Daniel?

Daniel Ameduri: I’m doing great, thanks for having me on your show.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Daniel – he has over 40 transactions; he bought his first rental property at the age of 18 years old and he now owns 15 rental units, seven homes, two duplexes, and one fourplex. He is the co-founder of Future Money Trends Letter and he’s been featured on all sorts of media publications. With that being said, Daniel, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Daniel Ameduri: Sure. I was always interested in investing; when I was a child (five years old) I was selling things out of the garage, going door to door, and it turned into really my hobby. I was just always fascinated with money; never into the materialism part of it, just fascinated with money. It was like a video game – just keep going and going and going. I ended up becoming an avid reader in Barnes & Noble as a teenager, and at 18 years old, the first chance I got, three months out of high school, I started buying real estate.

Ultimately, I had a very successful real estate investment full-time career in my young 20’s. I had a big crash as well, and all of this, along with the other investments I made with public companies and private businesses, I started the FutureMoneyTrends.com letter, where it’s essentially personal finance ideas, investment ideas. A lot of it comes from the stories I have, so that people can hopefully, just like when they listen to your show, either not make mistakes, or improve on some of the things that I’ve done successfully.

Joe Fairless: Alright, well I wanna focus on the Future Money Trends Letter and the insights that we can get from that and lessons that you’ve learned, but before we focus on that, obviously I have to ask you about 18 years old, three months out of high school, you bought a property – where did you get the money?

Daniel Ameduri: Well, I’ve gotta tell you, it was just from savings. I only had to use $3,000 – this was in the year 2000…

Joe Fairless: That’s a lot of money for an 18-year-old.

Daniel Ameduri: It was, but I was a hardcore saver. That’s one of the things I can tell you – with personal finance, becoming a relentless saver is key. So I had used this $3,000 and got a loan; this was in the early days of basically the real estate boom, and I happened to be Southern California, so I was in one of the best spots to do this… And I did it three months out of high school because I really didn’t know that I wasn’t supposed to be able to do this, so I just went out and did it. I skipped going to college.

My second purchase was about nine months later at age 19, and that one was the first time I ever did creative financing. That one’s probably a little more interesting just because I used the broker’s commission — I had her exempt me of the commission, and then I used that as my down payment. It became a lien on the previous property, but of course, she got reimbursed as soon as she got paid.

Joe Fairless: How did you come up with that idea?

Daniel Ameduri: As corny as it sounds, worse than the word “corny” itself is Carleton Sheets. I watched that stuff and I ate it up. Of course, I probably didn’t apply 99% of it, but that was one thing that he said that I picked up on. I tried it, I asked a few different brokers, most of them locked me out of the room, and then I met an 81-year-old broker who said “You’re how old?” I’m like “18.” She’s like “You own a rental property already?” I said “Yes.” And she was like “Let’s do it.”

Joe Fairless: [laughs] That’s great. Alright, let’s talk about your Money Trends Letter that you send out… What are you investing in right now?

Daniel Ameduri: Well, FutureMoneyTrends.com – its main focus is income ideas. Right now some of the real estate investments that we focus on, we do advocate that people look into single-family homes in good areas, we offer ideas on how to flip or rent, and we really advocate for some of these owner-financing deals. I’ve done almost exclusively owner-financing since 2008. A lot of people think they’re not there, but they’re everywhere, to be perfectly honest with you, and they’re more accessible than ever because of the internet.

So we do focus on people having trouble or not having a large enough down payment, and we teach different ideas on how to get these owner-financed deals. Outside of that in real estate, we do like buying first trustees; again, that’s easier than ever because of things like PeerStreet, where you can buy liens.
We also do some sort of private [unintelligible [00:05:40].08] where you can buy and invest in commercial real estate. And then with a small portion of our portfolio, 90% is income, 10% is speculation; that’s where we invest in micro-cap stocks and private businesses and pre-IPO-type companies.

Joe Fairless: Well, you certainly piqued my curiosity, and I’m sure some other Best Ever listeners when you said owner-financing, you’ve been doing it since 2008 and they are everywhere and accessible. Please elaborate.

Daniel Ameduri: Okay, so again, this comes from these seminars you go to or books you’ll read about owner financing. You kind of look around, or first off you’d ask a realtor – they’re always gonna say they’re not around. The realtors are the worst people to ask because they’re kind of in their mindset. They know 1+1 can only happen one way. They don’t realize 0,5+0,5, or 0,75… There’s all kinds of different ways to get there, but the realtors — I’m not doubting them, but typically they’re not even gonna try because there’s a lot of laziness involved… You have to go out and do it yourself. They’re everywhere.

First off, you should find the bird dogs in your city; they’re everywhere, and they’re called wholesalers. You usually can find them on Craigslist, and usually the wholesalers can help you find creative financing, can help you find owner-financing.

Another way I was able to find a lot of owner-financing deals was simply looking for the distressed deals. Originally, I knocked on doors and [unintelligible [00:06:59].23] and we try to do assumable mortgages, or with different reps and stuff. Eventually, for me, I was able to kind of — as you look for these deals, you ultimately will find those one out of 5,000 realtors in that city who will actually be like an expert in owner-financing. They’re in Vegas, they’re in Phoenix, they’re in Dallas, they’re in Austin, Houston… I come across them all the time.

Once you find them, then it’s a matter of simply telling them what your criteria is, and “Hey, keep me notified.” One thing I always did was I was always quick to jump on any deal that was in my criteria. Of course, I went just from being somebody on their e-mail list to somebody who was a priority, because I was buying. My criteria a few years ago, probably 2009 to 2011, was I was just looking for rental property. In the last three or four years I’ve only been looking for flips.

So those realtors that can find me those owner-financing deals have been the source of probably half of those deals. The other half have come from wholesalers themselves, which are in almost every city, I believe. You can just get on their list and let them know what you’re interested in, and you can find these owner-financing deals.

Now, most of the owner-financing deals I have done, you do need some cash. You’re gonna need anywhere from $5,000 to about $30,000, but they are there, they are available to you.

Joe Fairless: The myth – and I had this thought too, so please tell me that there’s another way… My thought was that wholesalers only want people who can buy for cash, and then be done with it.

Daniel Ameduri: That’s what they want, but the fact is the cash buyers have very select criteria for these people. Look, they’re inevitably going to have to get creative. If a bird dog/wholesaler is successful, he’s gonna have too many deals on his hand, and those are exactly the kind of deals you want.

I’ll give you a great example – I’ve been in situations where a wholesaler has locked up a deal and it’s now three days from foreclosure, so they call me and they say “Look, it’s Wednesday. On Friday, this house goes to foreclosure. Can you get me $25,000? I’ll fly it up to Wells Fargo in Dallas and we can save this property and it will be yours.” Those are the types of deals I’ve been able to do. So maybe they didn’t want to do business with me because I’m not the all-cash buyer, but at some point in time if they’re willing to get creative, and especially in states where I’ve been investing like Texas and Tennessee, you can simply do an assumable very easy – you’re paying the person’s mortgage… And a lot of times I’ll do a contract where I’m only paying it for a year and then [unintelligible [00:09:39].12] refinance or sell the property, in which case I’m almost always selling… And those are the type of deals I’ve done with different wholesalers.

And by the way, I’m not doing this full-time. If you’re doing this full-time, you’re gonna have to find more ways, you’re gonna have to be way more active than me. I’m a lazy [unintelligible [00:09:53].11] investor; I’m waiting for people to call me. I’m just putting my name out there and my phone number and my criteria, and I’m only doing let’s say maybe 2-3 deals a year on the flipside, and maybe I buy 1-3 rentals a year.

Joe Fairless: I’m a wholesaler, you reach out to me or you come across me in some event… I ask you “What are you looking for?” What’s your response?

Daniel Ameduri: Right now I would tell you my response is always “I want what nobody else wants.” I want what everybody else hates. That is my standard reply to anybody. Any realtor or any wholesaler I speak to, I tell them I wanna be the guy that buys the thing that nobody else wants to buy. I want to get the things that are hated. I don’t care if it’s fire damage or foundation – what are people scared of, what do they hate, what does nobody want, what can no one get a loan for? I’m that guy.

Joe Fairless: Okay. And then what would be a specific example of a transaction you closed on that fits that criteria?

Daniel Ameduri: Here in Texas it’s foundation problems. I really like those. Without a doubt, my niche little market that I found here that I can’t believe there’s zero competition virtually – maybe not after this show though… But look, here’s the deal with the foundation problems – no one can get a loan. Bam! Right there, you just got rid of all your paint/carpet/blind fix and flippers. They’re gone. Most people are ignorant of what it takes to fix a foundation. Okay, there you go; you got rid of a ton of cash buyers and a ton of other investors. So now it’s you and a handful of people.

In my case, I don’t even know if there are a handful of people in central Texas doing this, but I’m on several realtors’ lists and several wholesalers. Many times if it’s a foundation problem they know that I can’t wait to get my hands on it, because what I accidentally discovered when I purchased my home was that a foundation problem is not a $50,000 problem, it’s a $3,000-$5,000 problem. That amazes me, because for $3,000-$5,000, that’s a problem for every single problem who has to get a loan.

Now, I’m speaking as if I’m buying cash, if you’re listening, but I’m not. Instead, what I’m doing is I’m approaching that homeowner who cannot sell his house; he is stuck. The only option for him is a cash buyer, that’s what [unintelligible [00:12:09].20] but what I tell him is “What do you ultimately need from this deal?” That’s where I start the negotiation. Maybe they need $5,000, maybe they need $30,000. If I can be agreeable to that, the rest is easy, because all I have to do is an assumable transaction; I take over the loan and I tell them “Look, I need 18 months to fix and flip this house or refinance it. I can get the foundation people almost immediately, I can have the foundation repaired within six weeks, and then I just need to finish the rest of the property.”

I still have an assumable loan, so I’ve never even applied for a mortgage at this point. I’m simply making the payment of the previous owner, but I am legally on the deed; I am the owner, I just don’t have the mortgage in my name. I continue making those payments, and that distressed seller – he’s long gone. And I then sell the property, and hopefully – and usually it works, in this case; and I say actually always it works so far – I’m able to sell the property in under six months… Paying off that loan, so that guy is happy, and I get to make the cash. I never have to go through the nightmare of an application of getting a mortgage, I never had to come in with [unintelligible  [00:13:14].13] to write a $200,000 check to buy the property cash… I usually got into the property for less than $25,000, and probably put another $25,000 to fix it up.

Joe Fairless: This is a strategy that every Best Ever listener can pick up, and that is identify the main issue in your market that scares people away, research the solution, and then you’re the guy or gal who is the go-to person for when people come across that type of property.

Daniel Ameduri: It’s so true. And the great thing about, let’s say, the central Texas foundation issues, is in Texas these are lifetime warranties, so once repaired – let’s say I’m in a community and there’s foundation problems known in this community… You happen to be now listing the only home that has a lifetime warranty on this foundation. And of course [unintelligible [00:14:05].05] unintended benefit, but there are some communities in central Texas where I fixed and flipped one foundation problem, and then I ended up getting called by two of the other home owners in that area within the year, because I was that guy who was willing to fix that problem… Because again, unless a cash buyer is aware of how small of a problem this is, it scares the hell out of everybody else and no bank wants the loan on it.

Joe Fairless: How did you find the solution to the foundation issue?

Daniel Ameduri: It was an accident. I’ll be honest with you – in Southern California I came across a foundation problem and I ran. In central Texas I wanted to buy a home for my family to live in, and they said “It has a foundation problem.” Because I didn’t have my investor mindset on, I didn’t run. I became an entrepreneur problem-solver, which that’s what I should have been as an investor. Because I wanted to live in that home, I said “Well, I’m gonna find out how much it costs”, and to my surprise, the bids were coming in at $3,000, $3,500, and I was like “Wow!” Here I was, thinking this was a $50,000 problem… Because it’s about the logistics – they’re literally digging holes around the property, jacking it up… Typically, if it’s a two-storey, it will burst some pipes or break some things [unintelligible [00:15:19].00], so a lot of times you have to fix the piping as well, which is another $3,000 on let’s say a 2,000-3,000 square foot home.

So I actually originally discovered this whole problem that was solvable with the purchase of my own residence. Then once I knew that, I smelled the blood; I was hungry. I told that very realtor and everyone I could get in contact with – “If there’s a foundation problem, from basically all of central Texas to San Antonio, I wanna know about it.”

Joe Fairless: I might be splitting hairs here, so if I am, tell me so… When I asked you what you would tell me as a wholesaler what you’re looking for, you said “I want what nobody else wants. I want what everyone hates, what people are scared of”, but you didn’t specifically mention foundation… So why didn’t you just say “I want any property that has foundation issues?”

Daniel Ameduri: Because even though I have not had the chance to do one where a gas has burst in the property or the kitchen has fire damage or the roof has fire damage, I am interested in that… Because I have a feeling and I suspect – and maybe you’ve had other experts who have done this – that I will have the same profitable experience investing in something that has fire damage, in something that has a foundation problem… Because again, it eliminates 99% of the competition and I can probably structure the same sort of deal. I’ve rehabbed plenty of properties, and I know what it costs to rehab a kitchen or redo a roof, so that to me is not a problem at all.

It’s not so much the type of repair I’m looking for, it’s that I’m looking for scenarios where I eliminate 99% of the competition.

Joe Fairless: Please tell us the numbers of the last deal that you purchased.

Daniel Ameduri: Last deal I purchased was for $120,000, and it was in central Texas, it was a foundation issue. It happened to have some icing on the cake in the sense that it was also a distressed seller situation. The property was behind on payment, the person I bought it from owned it – he was the original owner, but his ex in-laws were living in it… And it had a foundation problem. So this house was just oozing with problems.

I went out there, looked at the property, had a foundation person look at it… The bid was $3,500 to fix it. It probably needed an additional $15,000-$20,000 in repairs at the time when I looked at it. The garage was literally buckling away from the house, and then the back of the house was literally buckling the other way. So the house was literally like being split; you’d see cracks in the concrete.

I approached the owner and I said “What do you need?” The owner was very straightforward – they needed out. They wanted someone to get the ex in-laws, and they really only needed about $5,000 to make them happy, and what blew me away about this deal was that there was a second mortgage HELOC on it with a $50,000 available credit line, and I’ve gotta tell you, when I was signing, I just couldn’t believe it. I was like “This doesn’t even make sense. This is so solvable for this guy, and he must have not even tried.”

He could have done it, he had a $50,000 HELOC that he had access to, he could have totally written that check, but he took $5,000 from me. I brought the property current, which was only about $6,000, so now the property is current with $11,000. I took ownership of the property, but in the terms I wouldn’t take ownership until the property was vacated, so it kind of put a little pressure on him; he had to also help me get the in-laws out.

So we got the in-laws out, closed the next day once the property was vacant. I literally had the foundation people in there, they fixed the foundation for $3,500. Because it was a 3,000 square foot home that was two storey we did have some issues with the pipes, but that was only about $1,200 to repair the pipes. Once the pipes were fixed, we had everything else come in, and I did the normal paint/carpet/blinds because of course they literally dug a five-foot hole in the middle of the house – it was probably 3×4 feet – when they were fixing this house.

It was a newer house, too. It was built in about 2003. So this property was then sold for $255,000. After real estate commissions etc. I wanna say there was about $70,000 in profit.

Joe Fairless: That’s outstanding. How long from when you first visited the property to when you were depositing the profits into your bank account?

Daniel Ameduri: The property was purchased in late November, and it was sold in the middle of March… So four months total, because I also went down there and looked at it, of course, before we closed it. [unintelligible [00:20:13].18] as far as closing these things – I’m closing these things anywhere from five days to two weeks. And look, I’ve just told you, some of them I’ve discovered it on Wednesday and closed it on Friday. When you’re not introducing a new bank, a new lender, an underwriter, appraisals and all that BS that I just hate — it’s funny, one of the things I hate is paperwork, so I forced myself to figure it out without doing it… And you just go straight to the guy who’s got the mortgage, and if you’ve got a distressed seller or somebody who can’t sell to conventional financing people, these deals can happen very quick. It’s a matter of calling an escrow company, getting a purchase agreement together, and making the mortgage payments.

Joe Fairless: What is your best real estate investing advice ever?

Daniel Ameduri: Best real estate investing advice is probably what I’ve already told you, and that’s “Buy what everybody else doesn’t want to buy.” Because you’ve gotta find some edge. There’s too many people out there investing in real estate. If you really want to see significant profits — because some of these foundation issues, I’ve kept these as rentals. You’re getting them on the cheap, they cash-flow, huge equity capture… And again, not that much, but my best advice is buy what everybody else doesn’t want to buy.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Daniel Ameduri: I am.

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

Break: [00:21:31].18] to [00:22:30].14]

Joe Fairless: Best ever book you’ve read?

Daniel Ameduri: The Law Of Success, by Napoleon Hill.

Joe Fairless: Best ever deal you’ve done that you haven’t talked about?

Daniel Ameduri: The best deal I’ve ever done that I’ve never really talked about is the fourplex. It had a small foundation problem; I did not want to get a loan for this fourplex, but I wanted to keep it as a long-term portfolio hold because I knew I could get a huge equity capture and it was a cash cow. All in, principal interest, all that stuff was $1,500. It was bringing about $3,000. I knew I could even raise the rents to make more, which I am now.

Now, the reason it was the coolest deal I’ve ever done is not because of how much money I’ve made monthly on it or the equity capture, but because when I went to do the assumable – my typical thing that I do – the bank freaked out. They didn’t want us doing this, so here’s what we did – I got lucky. It was owned by an LLC, so we went right around the bank, and all I did was buy the LLC. I never actually bought the property, I just bought the LLC that owned the property.

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

Daniel Ameduri: The biggest mistake I’ve ever made on a transaction is hoping for appreciation… Those go into my early days, in 2000-2006, but who could blame me? At 18 years old I had only experienced success and appreciation in Southern California, and I had confused a bubble in a bull market in real estate for brains. So buying because I believed the property was going to appreciate – huge mistake.

Joe Fairless: I don’t think too many people can fault an 18-year-old for approaching it that way or having that mindset as an 18-year old and then not seeing the difference until something crazy happens.

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

Daniel Ameduri: I do have several charities and several people I like to support, but I will tell you this – with my FutureMoneyTrends.com letter I reached out and I do phone calls with people, I answer every single question that comes in. One guy – he’s an Israeli – in 2010 reached out to me through the FutureMoneyTrends.com letter; fast-forward today, we’ve been on a few vacations. Now he’s a business partner of mine [unintelligible [00:24:33].05].

I love pouring out my heart and soul, and I’m very focused on over-delivering with the FutureMoneyTrends.com letter. So that is I guess not the most charitable way to give back, because it is a profitable business, but I absolutely love what I do, and if I got paid almost nothing, I probably would still love to do it, because I’m having too much fun.

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

Daniel Ameduri: You can just go to FutureMoneyTrends.com, you can subscribe for free to our weekly digest where  you’ll get our personal finance ideas each week. You can always go to the Contact Us page, as a question; it will get to me, and I will respond.

Joe Fairless: Well, there’s a clear theme here, and that is, as you mentioned with your best ever advice, buy what everyone else does not want to buy. So for every Best Ever listener, a good exercise, a very simple exercise is to identify the main issue in your market. If you don’t know, then ask someone… And ask many people who are actively doing deals, what are the main issues that they’re seeing; perhaps it is not a characteristic of a property, but perhaps it’s something in the process that they’re seeing as an issue. Maybe it’s a software platform or something that you come up with… But identifying what the main issue is, research the solution, and then after you have the solution to those problems (or that problem), then you just enjoy the flow of opportunity that comes your way.

Thank you for talking to us about the deals that you’re doing, walking us through specific transactions. Daniel, I hope you have a Best Ever day, and we’ll talk to you soon.

Daniel Ameduri: Thanks very much.

Best Real Estate Investing Advice Ever Show Podcast

JF1087: Imagine Buying a Property, Only to Have it Taken Back Because of a Clouded Title with Dave Krieger

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Dave has spent 9 years researching and working on his book Clouded Titles. He has saved investors thousands of dollars by helping them avoid properties and titles with issues. In this episode, he explains what to run from when you see it on a title, or if you’re brave how to go about working around the red flags. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Dave Krieger Background:
-Currently serves as paralegal, analyst and consultant for attorneys that handle real estate matters
-Author of Clouded Titles – MAYDAY EDITION Former major market radio news reporter and news director
-Won national and state news awards from Associated Press
-Based in Austin, Texas
-Say hi to him at http://cloudedtitles.com/
-Best Ever Book: The Big Short

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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, Dave Krieger. How are you doing?

Dave Krieger: I’m doing great, Joe. Thanks for having me on.

Joe Fairless: Nice to have you on the show.

Dave Krieger: I appreciate the invite, this is great.

Joe Fairless: Great. Well, nice to have you on the show. A little bit about Dave – he currently serves as a paralegal, an analyst and a consultant for attorneys who handle real estate matters. He is the author of four books, one of which is titled Clouded Titles. He has won national and state news awards from the Associated Press.

He’s based in Austin, Texas, and he’s a real estate investor. With that being said, Dave, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dave Krieger: Sure, not a problem. I started investing in real estate when I was young. Back in the late ’80s I bought my first piece of property with $2,000 down. Basically, what I did was I picked up on somebody else’s mistake and what they didn’t bother to do – it was a real estate agent who didn’t bother to do his homework, and the very first time that I started getting into the listing itself, it was a 14.2 acre farm with an 1882 two-story Victorian. Do you remember The Money Pit? Shelley Long and Tom Hanks?

Joe Fairless: Oh, yeah.

Dave Krieger: Well, this was The Money Pit. 1882 two-story Victorian… We thought we were getting a great deal, and we actually did. We bought it for $2,000 down, we got a deed in lieu of foreclosure, and we took over the payments of $360/month. That means it was a heck of a deal. To us it was, anyway. That was my first foray into real estate investing, getting a deed in lieu of foreclosure.

Obviously, the bank had the sellers transfer the title to me, because the real estate agent no longer had a listing, and so he basically got cut out of the loop. That was unintentional, but it just happened that way. The funny thing about it is when I approached the real estate broker about this deal, he told me “Oh, go talk to the bank, maybe they’ll finance you.” [laughs] And I thought “Oh, this has gotta be the craziest thing. Wait till he finds about this…” Well, the real estate broker wasn’t too happy [unintelligible [00:04:29].22] his commission, but since then I’ve purchased probably over 16 actual pieces of real estate, not to mention dozens of tax deeds that I bought and sold over time, and it’s quite an experience, every investor, of course, so all your Best Ever listeners, obviously you have a great story to tell.

I basically have been spending the last nine years of my life doing research and compiling this book and working with a network of attorneys across the country in dealing with real estate issues, foreclosures, quiet title actions, chain of title assessments… And that’s why we came up with the name Cloud Titles. We have a website, CloudedTitles.com.

Joe Fairless: Yeah, that link is in the show notes page. So let’s talk about — if it’s been the last nine years of your life compiling this book, then I think we should spend a little bit of time on this interview talking about the book and what it’s all about.

Clouded Titles – I have seen the cover, and I am reading… It says “Over 70 million titles to properties are clouded. Is yours one of them? This book will help you find out.” Tell us about it.

Joe Fairless: Well, basically what happened is back in the day of what we call the Glass-Steagall era – this was when the stock market crashed in 1929 and the Securities and Exchange Commission over time came up with the act of 1934, and basically what it did, Joe, was it restricted the big banks from getting into the securities business. So over time, what ended up happening was the big banks said “There’s gotta be a better way to make money.” So what they did through some investment strategies of their own was they devised what’s called a real estate mortgage investment conduit. In order to be able to facilitate a REMIC, which is what that stands for (real estate mortgage investment conduit), they had to have something that was quicker than the regular land records process, because the American Land Title Association (who they got in bed with) basically agreed with them, that “Oh, the system of recording ownership interest and assignments and whatnot is too cumbersome.” And Joe, they had to do something to fix this!

So they came up with an electronic database called Mortgage Electronic Registration Systems Inc. Its parent at that time it was created was called MERSCORP Inc. Now, today it’s known as MERSCORP Holdings Inc. It kind of went through a metamorphosis on February 3rd of 2012. They’re both Delaware Corporations. The Mortgage Electronic Registration Systems Inc. is basically just a standalone shell that has no assets, no liabilities, no employees, no income, nothing. They’ve got nothing, it’s a shell. It has a board of directors. It’s one of the only ones I know that’s a shell with a board of directors, and MERSCORP (its parent) runs everything. They have 70 employees, they’re headquartered in Reston, Virginia.

So they come up with this database plan, and they actually patented this plan with the U.S. Patent and Trademark Office, and it was ready to launch in 1999. Now, what significant thing happened back then? In 1999 the Gramm-Leach-Bliley Act was passed. And when that bill was signed into law by then-president Clinton, they repealed the Glass-Steagall Act. And when the Glass-Steagall Act of 1934 was repealed, it let the banks in on the game. So the banks immediately started to go out and they started looking for investors and they drafted these documents called 424B5 prospectuses, and any of you investors out there obviously know what that is – it’s like their sales pitch. And these particular sales pitches were anywhere from 250-400 pages in length, and they just ran you around in circles. And when they whipped one of these on you, you just said “Yeah, yeah, we trust you. You’re the big bank, why would you screw us?” Well, unfortunately — this is why they made the movie The Big Short, and the book, by the way, is one of my favorites; it’s at the top of my best read list; for those of you Best Ever listeners who have not actually had a chance to read The Big Short, you need to get a hold of that book, because it will explain a lot of why these 70 million titles to property were clouded… Because when Mortgage Electronic Registration Systems Inc. was put into practice and they started to record the first deed of trust or mortgage in the land record, all of the subsequent assignments disappeared, which means there was no way to know who actually owned your property, and that’s where this whole thing started out.

I started doing the research, and as I started to release my research, I was contacted by attorneys who were saying “You know, I’m running into this problem and this particular issue, I’m seeing a lot of it in my court cases that I’m dealing with. We can’t explain this chain of assignments, that all of a sudden starts at the beginning and ends up at the end; it goes from a) to d), but where is b) and c)? They’re missing.” So this is why you may have some issues with your titles to property, and this is one of the investor pitfalls that I talk about when I lecture to investor groups – the first and foremost thing, if you find a piece of property that you actually love, you’ve gotta step back, take the emotion out of it, and the best advice ever I can give you there is always research the chain of title. Don’t get stuck on the deal; you can fall in love with the deal, but if the chain of title doesn’t pan out and there’s something wrong with it and MERS is in the title, there’s a problem. That’s the big issue with clouded titles – having mortgage electronic registration systems anywhere in the public land record involving the piece of property you’re dealing with.

Joe Fairless: So the takeaway is to research the chain of title, and if you see what in it exactly? You said MERS…

Dave Krieger: Yes, you’ll see on the very first page of the mortgage or deed of trust – sometimes it falls on page two, depending on the form; I’ve conducted audits for county land records, Joe, where counties have actually paid myself and my team to go in and audit their land records, and sometimes even the court records… We did one in Florida where we found criminal behavior, and we actually had an attorney go in and review our work and actually write an opinion on the document, and we basically asserted in this report and the attorney agreed with us that this MERS system is one step shy — it’s kind of like the getaway driver in criminal RICO. Everybody knows what RICO is – Racketeer Influenced and Corrupt Organizations.

This MERS system has allowed the banks to basically jump over the entire chain of title; the mortgage loan servicers are creating documents, and we know that the documents are being created and that the securities have been failing ever since they got started, because the [unintelligible [00:11:35].14] of the investor lawsuits being filed on Wall-Street now indicate the failure rate is 100%, which means that they never did the paperwork the way it was supposed to, and the sad state of affairs is – and this is the truth – that after they got done uploading the copies of the mortgage in the note into the database at MERS, they shredded the note. They didn’t need it anymore, they had an electronic copy of it.

So then people say “Wait a minute, what happens if I stop making my payments?” Well, then the Bogeyman jumps out of the closet, because once this loan is securitized, it’s like a Coke bottle – you drop a Coke bottle on the floor, it shatters into 10,000 pieces. You have no idea where your loan is. You have no idea who owns it or what piece of it might have been sold off during the Taylor Bean and Whitaker bankruptcy case… Bank of America actually came to the court and admitted to the bankruptcy judge in the Middle District of Florida and Ocala that they had multiply pledged these loans. My god, Joe, that’s scary! Because if you or I did that, Joe, we’d be in jail. But yet it’s okay for the banks to do this, and this is what’s so scary about not knowing what you’re investing in because you didn’t check the chain of titles.

Joe Fairless: Yeah, clearly the takeaway is check the chain of titles, but let me bring it just from a more practical standpoint just for an investor who’s listening… But interesting background, I appreciate you telling the story about that. From a practical standpoint, when I’m reviewing the chain of title, what words or what entity — I heard MERS, but what’s the acronym that we will see on the chain of title and that will be a red flag?

Dave Krieger: Okay, on the first page or so of your mortgage or deed of trust when you’re looking in the courthouse records (because that’s where you’re gonna find this),  either under paragraph C or paragraph E of definitions, you will see the word MERS (Mortgage Electronic Registration Systems Inc.), that’s what you’ll see. When you see this, all of a sudden red flags should go up and you should question what the chain of title looks like.

Now, I know that the property might be just a wonderful thing, but you have to understand, Joe, way back when you had companies like Countrywide Home Loans, IndyMac Bank, Washington Mutual Bank, Option One Mortgage… All of these companies are just mortgage — they all were basically giving loans to anyone who could fog up the mirror. And the problem is that even though your Best Ever listeners want to go out and find these properties, we’re basically saying look at the properties that basically have been held by senior citizens, because the ones that are basically transacted or consummated back in the ’80s and early ’90s probably don’t have those chain of title issues, and those are the kinds of properties you wanna focus on, unless you’re prepared to spend gobs of money going into court and [unintelligible [00:14:27].01] title to the property.

Now, I’m not saying you can’t do that… The other backside advice to this whole thing is if you suspect there’s an issue – say you’re going out and you’re buying a Fannie Mae HomePath or Freddie Mac property… I will never ever buy a property from either one of these two GSE’s, because they’re liars. And when you look at the addendums on all of what these banks sell you as an investor, it basically says it’s your responsibility to check the chain of title out, and “We’re not responsible if the chain of title doesn’t [unintelligible [00:14:54].07]

If you find out you’ve got a clogged up chain of title and you end up like Ford Francis [unintelligible [00:14:59].29] up in Haverhill, Massachusetts, buying a piece of property and getting a quick claim deed from U.S. Bank… He goes to court, he quiets the title or tries to, the judge looks at the chain of title and says “Mr. [unintelligible [00:15:11].09] I’m so sorry, but U.S. Bank didn’t own that property when they sold it to you.” You’re like “Wait a minute, they foreclosed on the home.” He says “Yes, Mr. [unintelligible [00:15:18].28] the judge said they did. However, the problem is that U.S. Bank didn’t record the assignment until after they took the property, so therefore the entire foreclosure is a sham, and that means you don’t have [unintelligible [00:15:34].08] and then he dismissed the case with prejudice, which that’s not a good thing; you basically closed the door.

Mr. [unintelligible [00:15:41].03] got mad and appealed all the way to the Massachusetts Supreme Court, and in January 2011, Joe, it set major precedent-setting case law, and what the Massachusetts Supremes did is they sent it back down to the Land Court judge and they said “Look, dismiss this without prejudice, because he’s clearly got a suit against U.S. Bank, who sold him a piece of property they didn’t own. He’s definitely got a broad claim, he needs to get his money back.”

And I’ve saved so many investors from making mistakes, buying homes from GSEs and entities that I felt after looking at the chain of title didn’t have the right to sell the property. Remember, in the investment world it doesn’t matter who you are or what you are, you can’t sell something you don’t own.

Joe Fairless: Awesome. Can I ask you just a couple of quick-hitting questions, really short responses from you? I just wanna make sure I’m getting the process down. Does that work for you?

Dave Krieger: Sure.

Joe Fairless: Okay. When I’m buying a property, and I want to make sure that the chain of title is not clouded, then I need to go to the courthouse to look that up, correct?

Dave Krieger: Yes, go to the County Land records.

Joe Fairless: Okay, I go to the County Land records, I look it up, and then on the first page or so I look for Mortgage Electronic Registration Inc. or MERS, correct?

Dave Krieger: MERS, yes, or Mortgage Electronic Registration Systems Inc., yes. If you see either one of those, you have an issue with your title.

Joe Fairless: And if I do see either one of those and I do have an issue with my title, then what is the most appropriate next step?

Dave Krieger: Well, there’s two options. One, if you’ve got enough money to litigate the thing, and whoever you’re buying the property from, if they’re willing to give you – and this isn’t legal advice, but this is what I know that some other investors have done which I’m gonna share with your Best Ever listeners… The circumstances are you wanna get some sort of a stipulation to judgment to where they will not contest your quiet title action, because it will so eliminate the amount of money spent on a quiet title action if you can show the judge that there’s nobody else that’s claiming an interest in the property, and he will quiet the title in your name.

Now, that’s provided the fact that you get a good title. If you get a warranty deed, that’s the best kind of deed to get. If you only get a quitclaim deed, that’s pretty shaky. Bargain and sale deeds, which are very common in New York, and quitclaim deeds – basically, they pass nothing. It basically says if I give you a quitclaim deed, Joe, it say “Well, I might own it, I might not. But if I do, I’m deeding it to you.” Now, that’s not a real sound investment, is it?

Joe Fairless: Right, okay.

Dave Krieger: Another thing you have to look for in the chain of title is those quitclaim deeds; that’s shaky ground.

Joe Fairless: Okay. You said two options – first option, if they’re willing to give you a stipulation they won’t contest your quiet title action.

Dave Krieger: You wanna go ahead and quiet the title of the property, that’s the first option.

Joe Fairless: Okay.

Dave Krieger: The second option is to run like hell. Go the opposite direction and find something else.

Joe Fairless: Got it. Because if you buy it, then there’s a chance that there will be issues with you actually being the real owner of it, and you could get the property taken away.

Dave Krieger: That’s right, and it’s happened for people who had paid cash in property. We have several cases that I’ve been researching in Florida where a property was foreclosed on by two different lenders within 30 days of each other, and the judge ended up consolidating the case, because nobody could make up their mind who owned the property.

We had a couple that paid cash for a property, and six months later Bank of America is foreclosing on them.

Joe Fairless: And then as far as the quitclaim deed, that would also be in the courthouse records?

Dave Krieger: Yes, that would be in the chain of title, and you can always look these up by the grantor-grantee index. And the beauty about this, Joe, is when you go down there at these County Courthouses, you’re not alone; they have clerks, and records of deeds, registers of deeds that are actually there, the agents, deputies that are paid to help you. It’s their job to help you look up what you need to look up, and as time-consuming as it might be – and I’m hoping that when you go into some of these places, they’ve consolidated these into electronic files on a computer that makes it very easy to track. I know that there’s a lot of places you can sit in the comfort of your home, and you can go online and look this stuff up yourself. But when you have to go down to these small county courthouses, sometimes you may be spending an entire day there researching title.

Joe Fairless: Based on your experience – I have a feeling I know what the topic’s gonna be on when you say your best advice… Based on your experience, what is your best real estate investing advice ever for investors?

Dave Krieger: Well, the first thing is make sure you read all the paperwork, make sure you understand what it is that you’re purchasing, especially… If I had to say what big mistake I made, it was taking on a note and deed of trust or mortgage not fuly understanding all the terms, only to find out later I had a balloon payment. Know the terms, know what’s going on.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Dave Krieger: I’m ready, go for it.

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

Break: [00:20:45].14] to [00:21:44].01]

Joe Fairless: Dave, what’s the best ever book you’ve read?

Dave Krieger: I would say right now The Big Short tops my list.

Joe Fairless: Best ever deal you’ve done?

Dave Krieger: Negotiating with a bank on a piece of property that I got for about $200,000 less than what it was listed for.

Joe Fairless: How did you do that?

Dave Krieger: Basically, the property was a construction loan, and I went to the bank, they said “We’re about to foreclose on a property”, and they said that the property is way under market. I said “Look, here’s what I wanna do. I don’t want you to put this in the MERS system, I don’t want you negotiating a sale of the note. I want you to keep it and I want you to service it; I don’t want you securitizing it.” In the closing there was a piece of paper with all those terms to that effect, which I signed, and the deal was done.

You can actually negotiate with the lender if they’re desperate enough to get rid of it.

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

Dave Krieger: I have a program called Financial Education Services, and if you e-mail me through my CloudedTitles.com website, I’ll explain how I can help you. This is helping your investors directly, that are listening to this program, how they can help their people buy a property… Because a lot of these people in this day and age are credit challenged, and I have ways that I can help your investors help them give back, and put them into affordable housing.

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

Dave Krieger: I would  have to refer back to taking on a note without understanding I was signing a balloon.

Joe Fairless: I just loved that piece of property so bad I had to have it; it was a great deal, and all of a sudden, seven years later, I find out “Wait a minute, what do you mean there’s a balloon payment?”

Joe Fairless: [laughs] What happened to it?

Dave Krieger: I ended up having to liquidate it to pay it off.

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

Dave Krieger: If they go to the CloudedTitles.com website, that’s the easiest way – just click on the Contact Me. I get the e-mails right in my inbox, at CloudedTitles@gmail.com. That website and the e-mail have been set up since 2010, and I’m happy to entertain any questions from any of your Best Ever listeners.

Joe Fairless: Thank you for being on the show; you have given us a due diligence item that I suspect was not on a lot of the Best Ever listeners’ radar, and that is to look at the chain of title. Go to the courthouse, look for specifically the Mortgage Electronic Registration System Inc. on there, or the acronym that stands for what I’ve just said. You have two options if you find that – one is to run away as fast as you can; the second is to quiet the title, and if you haven’t bought it yet, then make sure that the seller is willing to give you a stipulation that they won’t contest your quiet title action. Additionally, look for if there’s a quitclaim deed on there as well.

First off, did I summarize that correctly?

Dave Krieger: You did, that was excellent. What a great student, Joe Fairless! [laughter]

Joe Fairless: Alright, great. Well, thanks so much for being on the show; I hope you have a best ever day, and we’ll talk to you soon.

Dave Krieger: You do the same, sir. Thank you!


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JF1031: From $0 to $6,000,000 in FOUR YEARS!

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He was always curious about real estate.  When both of his parents had health issues, Andrew and his brother knew it was time to begin investing.  Find out how they were able to scale their business so quickly.

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Andrew Campbell Real Estate Background:
-Founding Partner of Wildhorn Capital Real Estate Investor and Entrepreneur
-In 4 years he and his brother Mark have built a $6,000,000+ portfolio of 72 units
-Prior to full time investing he was a partner at an award winning app developer
-BS in Advertising from The University of Texas at Austin and an MBA from Baylor University
-Based in Austin, Texas
-Say hi to him at www.wildhorncap.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, Andrew Campbell. How are you doing, my friend?

Andrew Campbell: I’m doing good. How are you, Joe?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Andrew — you’re gonna love this, Best Ever listeners… In four years, him and his brother have built a six million dollar plus portfolio of 72 units, and he’s had a full-time job along the way. He’s transitioning into doing real estate full-time right now.

He’s a founding partner of Wildhorn Capital, so you better believe we’re gonna get into the details of how he’s built the portfolio of 72 units while having his full-time job. Based in Austin, Texas… With that being said, Andrew, do you wanna give the Best Ever listeners a little bit more about your background your current focus?

Andrew Campbell: I appreciate the introduction. I came into real estate just out of curiosity. I didn’t grow up in a real estate household. I was always the guy that would pick up fliers when we were on vacation, and I just always had an interest for it.

I went to business school and had business cases about developing a block of homes… It was just always something that interested me. In 2007 my dad had a big stroke, and I was living out of state, and I moved home to kind of take care of him. That really changed the trajectory of my life and where my focus was. I realized I had to step away from my corporate job and I realized I didn’t have the flexibility or the time to take care of him and be able to deal with whatever life would throw at you.
I think that really turned my curiosity and interest into a passion. It took me a couple years more before we actually took the plunge and started investing. Our focus was “Hey, we need to create some more flexibility in our lifestyle and create some passive income that we can deal with life when something like that happens.”

Joe Fairless: I wanna get into the details of the deals, but before we get into the details of the deals… In those couple years that you knew you wanted to transition to real estate but you didn’t buy something, what were you doing?

Andrew Campbell: Mostly being scared. I think I read some books, and I had a friend that had a few duplexes. I didn’t have that push over the top. It was an accidental landlording of a condo; my brother had moved out of state and he was renting out his house, so we were sort of doing it, but I’d say we were dabbling and we weren’t committed investors. It took a couple years before we said “Hey, let’s sell the properties we have to generate capital and go buy intentional investment properties.”

Joe Fairless: Do you remember the moment in time or the timeframe when that happened, and if so, what made the switch from accidental landlording, not having the push, to “Okay, now let’s sell this and then get into something…”?

Andrew Campbell: It was very clear… Our mom was diagnosed with cancer. In 2007 our dad had a stroke, and in 2011 she was diagnosed with cancer, and that was sort of the straw that broke the camel’s back. It was really like “Okay, we got the message loud and clear; we’ve got to turn this from a hobby into a business and really hammer down.”

That was when we decided, “Okay, let’s sell both of these and do it very intentionally and purposefully.”

Joe Fairless: First off, thoughts are with your family on that; that’s first and foremost.

Andrew Campbell: I appreciate it.

Joe Fairless: So in 2011 – that’s when you sold (I guess) your condo that you were accidentally landlording…?

Andrew Campbell: It was 2012. We both liquidated those properties, and in 2013 we bought our first investment properties.

Joe Fairless: Okay, so you didn’t do a 1031.

Andrew Campbell: No. I didn’t know enough to do that.

Joe Fairless: Okay. So in 2012 you sold a condo… What did your brother sell?

Andrew Campbell: He had a single-family house.

Joe Fairless: Okay. Was he living in it, or it was an investment property?

Andrew Campbell: No, at that point he was also sort of accidentally landlording. He had moved to Denver, and the house was in Austin. He had been gone for a couple years and then got tired of leasing it, and it wasn’t an intentional property either.

Joe Fairless: Do you remember what you bought them for, what were your all-in costs and what you sold them for, each of those?

Andrew Campbell: I can’t remember exactly his place. I know we bought our condo — it was in these new developments in Austin and I bought it for 275k and ended up selling it for about 360k.

Joe Fairless: Nice. So it took about a year… What were you doing between 2012 and 2013 after you sold the property?

Andrew Campbell: I think once we sold the property, we were then getting more back to the intentional word, being kind of studious about what we wanted to do and the types of properties. We were talking a lot with — we had a friend who kind of got us into the business; we had a joke that he’s our crack dealer. He told us that “Watch out, investing in real estate is like crack” and it totally is true; we’ve been completely addicted.

But we were talking to Tim a lot and really kind of studying neighborhoods, looking at comps, just kind of figuring out what exactly the strategy was gonna be and where we wanted to be.

Joe Fairless: And what did you end up deciding?

Andrew Campbell: So we diverged a little bit. My brother did foreclosed homes; he ended up buying like five foreclosures in a town just South of Austin, kind of a growing suburb.

Joe Fairless: What town?

Andrew Campbell: [unintelligible [00:07:38].14]

Joe Fairless: Okay.

Andrew Campbell: A little suburb just South of Boston, between here and San Antonio. We went to small multifamilies. We bought a duplex and a fourplex within a month of each other, and a mile from each other, kind of just South Austin, but definitely in [unintelligible [00:07:53].11]

Joe Fairless: So your brother was buying foreclosed homes, and then you and your brother bought a duplex and a fourplex in South Austin?

Andrew Campbell: Sorry, my wife and I did the duplex and the fourplex, and he was doing his… So we were always doing it together and talking about it, but we had kind of separate portfolios and slightly separate strategies.

Joe Fairless: Which one ended up making more money, between your brother’s approach and your approach?

Andrew Campbell: I think all-in they were probably pretty similar. He got some really good deals on the foreclosures side, and had seen some incredible appreciation in that area. We had a lot better cash flow from the onset, and we’d also seen some ridiculous appreciation. I think a benefit of being in Austin is we’ve just had a great run in the last really seven years or so. So neither one of us have lost, that’s for sure.

Joe Fairless: And you bought a duplex and a fourplex – you and your wife did. What makes up the six million dollars now? I’m gonna fast-forward all the way to today. You had a duplex and a fourplex, and now you and your brother have 72 units… What does that comprise of?

Andrew Campbell: So there’s still about a dozen single-family homes, and then everything else is small multi… Mostly fourplexes; there’s a couple of duplexes in there. A couple years ago Austin has gotten pretty tight and I think a little bit overheated, so we started buying in San Antonio. I’ve got down there — I guess between the 72 units it’s pretty evenly split at this point. All of the acquisitions in the last two years have been in San Antonio.

Joe Fairless: How are you funding the purchases of the new acquisitions?

Andrew Campbell: Just the saved up capital from the cash flow that we generate. Then in the last year we both did a refinance and pulled out some of the equity that built up in the properties.

Joe Fairless: Can you give us the numbers on the last deal that you closed on?

Andrew Campbell: The last deal that we closed on… I bought two duplexes in San Antonio; that’s on an acre and a half of land, and it was kind of an interesting property… It’s three separate lots. The middle lot kind of served as a driveway, it’s unusable. We bought all three lots [unintelligible [00:10:02].23] two duplexes, so four total units. We paid $190,000 for it, and current rents are $750/unit.

Joe Fairless: So $1,500 and 190k all in…

Andrew Campbell: It’s $3,000, because there’s four total.

Joe Fairless: Oh… I got my calculator. I was like, “I don’t think this math is gonna look friendly…”, but okay. Got it. That’s great. That’s 1.5% rents to all-in price.

Is there anything you can do with the acre and it being three lots and two duplexes?

Andrew Campbell: Yeah, it’s zoned very favorably. Each lot is zoned for up to six units… I think it’s six units; it might be four… But I’ve been talking with the city and we’ve got basically the back acre that’s at this point just an expense because I’ve gotta keep it [unintelligible [00:10:54].18] every couple of months.

Yeah, we plan to put three duplexes on the back of that, so kind of one on each lot.

Joe Fairless: And for the Best Ever listeners who are familiar with San Antonio, where in San Antonio are these duplexes?

Andrew Campbell: Just South of downtown, kind of along in the Mission District, off of Roosevelt Road, in kind of Harlandale, South San Antonio. It’s pretty close to downtown.

Joe Fairless: And is that an up and coming area, blue collar…?

Andrew Campbell: It’s pretty blue collar, and it kind of fits our tenant profile [unintelligible [00:11:24].21] our portfolio. We’ve been pretty focused on workforce housing and B and even C areas.  Largely, our tenant base is the hardworking folks, a lot of Hispanics. We’ve got really low turnover. We try to take good care of them, and a lot of them have never moved in the four or five years that we’ve had them. So we kind of look in those neighborhoods, and this was a good match for that criteria.

Joe Fairless: The cash out refinance that you did – have you done multiple of those, or just one?

Andrew Campbell: We’ve just done one.

Joe Fairless: Can you tell us the numbers on that, what your all-in price was and what it appraised for afterwards and how much you were able to get out?

Andrew Campbell: Yeah… We were able to do it with a community bank, and one of our goals — as we’ve bought these, they’ve all been conventional financing with 30-year fixed rates. One of the things that — we didn’t do it sooner because we didn’t wanna lose that, and we didn’t wanna do kind of a portfolio trade-up and get turned on to a 20-25 year schedule… So we found a community bank that would actually let us do the cash out and then they resold them to an investor.

We were able to keep the 30-year schedule, but each property had its own loan. I think the day we closed we were in there for like 4-5 hours, because we had five or six separate closings; they all took place simultaneously.

Joe Fairless: Will you explain that again for me? I didn’t catch exactly what you did.

Andrew Campbell: So in our understanding, when you traditionally come to a cash out refinance, you’re gonna end up rolling all of your loans together and the bank’s gonna take that and look at your whole portfolio and cash you out. But when they do that, you’re gonna get a commercial loan.

Joe Fairless: And you’re talking about multiple properties, not just one.

Andrew Campbell: Correct.

Joe Fairless: Okay, so you did a cash out refinance on your portfolio of properties.

Andrew Campbell: On like half of them. It was a decent chunk of our portfolio.

Joe Fairless: Okay, got it. Please continue.

Andrew Campbell: So we didn’t want to get into a commercial loan that had a floating mortgage rate or a shorter amortization schedule… So we found a community bank that would actually do each property individually… Appraise that property, we pull the equity out of that property, and then they refi that into just a new 30-year conventional loan. That was important for us, because I think that’s been part of our strategy, having those 30-year fixed rates. Actually, on some of the loans the rate actually went down from where we had even bought… So it worked out really well.

Joe Fairless: That’s outstanding. So you have one mortgage payment for a chunk of your portfolio.

Andrew Campbell: That’s the interesting thing – they all are still individual. We still have a dozen – or whatever it is – different payments. Each property has its own loan. We were able to do that and keep the traditional permanent financing on it.

Joe Fairless: I thought you rolled them all up into one… You said the bank would do it individually, but then they did a 30-year conventional loan. I know I’m being dense here, but I’m a little confused.

Andrew Campbell: That’s fine. Each property had its own loan; when we bought it, it had a conventional 30-year fixed rate. When we went and refinanced, each property still has its own loan, conventional 30-year, fixed rate, but we were able to pull the equity out and [unintelligible [00:14:35].01]

Joe Fairless: Oh, okay. Alright.

Andrew Campbell: So they all are still individual…

Joe Fairless: Got it — but you got one cash out payment that was from all those properties… Okay, I’m with you. I’m just curious… I guess it’s better to have each property being on an individual loan versus one, because that’s less risk for you if one property —

Andrew Campbell: Yeah, it gives us flexibility to peel them off one at a time if ever wanna end up selling them (I don’t think we will). Then for us, again, keeping that 30-year schedule was really big.

Joe Fairless: What community bank did you use?

Andrew Campbell: It’s called First Lockhart. Lockhart is a little town famous for barbecue, about 45 minutes South-East of Austin.

Joe Fairless: Alright… They’re famous for barbecue – the community bank is?

Andrew Campbell: The town of Lockhart. [unintelligible [00:15:19].28] three pretty famous barbecue spots.

Joe Fairless: Got it… I was like, “I think you should read through those loan documents very carefully if the bank’s famous for their barbecue.” [laughs] Alright, cool. So that portfolio — when you did that cash out refinancing on half of them or so, was that a big tipping point for your investing, where you had a lot of free cash to then go buy some other stuff?

Andrew Campbell: Yeah, it was, and we took the majority of that cash and we closed on a package of eight fourplexes down in San Antonio, which kind of [unintelligible [00:15:58].29] doubled our portfolio. We closed that earlier this year. That definitely helped catapult this to the next level.

Joe Fairless: How did you decide which ones to do the cash out refinance on?

Andrew Campbell: A little bit based on the longevity, how long we had been in there, where we felt like there was the most equity; also looking at which ones we might look at selling. We’ve been (I think) shifting strategies a little bit, and Mark’s got some of the single-families, and I think we’ve grown to appreciate the efficiency of the multifamily space, and we’re probably looking at selling some of the single-family tier… But we didn’t wanna touch any of those.

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

Andrew Campbell: Find partners. I think my favorite thing about this business is that everybody is very friendly and willing and wanting to help. Find people that are experienced and wanna help. When we started out, it was a friend who had five or six duplexes, and we literally just drafted on his business plan and trusted him and his advice.

As we’re moving into the multifamily syndication space, it’s working the same way. People are willing to help; find those partners that will help you and use them.

Joe Fairless: The focus for Wildhorn Capital, your company, is what?

Andrew Campbell: It is multifamily syndication. We are focused on executing the same business plan that we’ve been… Buying small multifamilies, but buying bigger properties, and taking everything we’ve learned and looking for properties that are in Texas. We feel like Texas is a good place to be. We’re native Austinites and native Texans, so it’s raising money and partnering with folks and buying bigger properties.

Joe Fairless: You’ve got 72 units, and a portfolio that’s worth over six million bucks; why do syndication? Why not just keep doing what you’re doing and have fewer partners, own it yourself, and not have to answer to outside investors?

Andrew Campbell: I think one of the things that’s happened for us — we got into the business and the goal is “Let’s make passive income and play golf and be on the beach.” That’s with the comment about real estate being like crack – it gets you completely addicted and looking to trade the current jobs for a new job and a new career path. It’s something that we’re both super passionate about… It’s all we talk about and all we talk to our friends about and I think it’s wanting to share that knowledge and that ability to generate wealth with our friends and people that we know. It’s just a passion that we can’t turn off, so we wanna explore it and take it as far as we can.

Joe Fairless: What’s a deal that hasn’t gone according to plan?

Andrew Campbell: We had what I call a near-miss… My brother had a fourplex under contract, and it was kind of to the last hour and they say it’s not gonna be able to close. There was some [unintelligible [00:18:44].08] on a credit card he didn’t even know he had and they weren’t gonna let him close. Being partners, I was able to come in and close it in my name and just kept the terms like we had it and saved the earnest money and swept in. We joke now that we have our conference room and we’re gonna have that first dollar framed — but it’s not gonna be the first dollar we made, because the credit card charge was literally one dollar on some recurring thing that we don’t even know about. It almost cost him the deal and it turned out to be a really good deal for us.
We were glad to keep it in the portfolio, but it was not paying attention to some of the details — it almost caught us.

Joe Fairless: What do you have in place now that will attempt to remedy that from happening?

Andrew Campbell: Well, just make sure you know all of the different credit cards you’ve got, and closing down the ones that you don’t keep open. I think that that was almost a really painful lesson and a very easy one to correct.

Joe Fairless: Yeah… I have an Experian subscription, so I’m able to see all my stuff there.

Andrew Campbell: Yeah, I do Credit Karma, and I definitely look at the e-mail every time they send what’s happening with the credit score.

Joe Fairless: Alright, Andrew, are you ready for the Best Ever Lightning Round?

Andrew Campbell: Yes sir, let’s do it

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

Break: [00:19:59].22] to [00:20:51].13]

Joe Fairless: Best ever book you’ve read?

Andrew Campbell: Millionaire Real Estate Investor – it got me on the path into the business.

Joe Fairless: Best ever deal you’ve done?

Andrew Campbell: Other than that fourplex that we saved for my brother, our very first duplex. We bought it for 212k, we fixed both sides, and we got it refinanced last year; I think it appraised at 365k. It’s a cash cow for us.

Joe Fairless: How much did you put into it? You said you bought it for 212k.

Andrew Campbell: We bought it for 212k, we got 225k total into it, and last year when we refinanced it we took 100% of our cash out.

Joe Fairless: You said you fixed it up… Did you two swing the hammers?

Andrew Campbell: No… Back to leveraging partners – our realtor friend had a team and some guys, and we just leveraged them. He actually [unintelligible [00:21:37].14] It was part of our deal when we bought it. He helped us get it all done. We didn’t lift a finger.

Joe Fairless: In addition to what you’ve mentioned earlier, what’s a different mistake that you can think of that you’ve done on a deal?

Andrew Campbell: I don’t know if there’s been many mistakes on the deals we’ve done. I think we’ve missed out on deals, which I would look at back now as a mistake, because we were afraid of having to do work on it, or it didn’t quite meet some of the early criteria that we had. We didn’t really know what we were doing… Being afraid to pull the trigger in those early days – looking back on it now, it was a big mistake.

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

Andrew Campbell: Our neighborhood – we’ve got a dads club that gets together and is really active, and once a month we kind of get together and watch games and drink beer, but we have two big fundraisers. One at Christmas time and one in the spring. We donate all the money to Make A Wish, and they sponsor a couple of kids that are going through rough times, and sponsor their wish.

Joe Fairless: When you first started saying “Dads club… We hang out and drink beer”, I was like, “Wait a second… That’s not what I meant!” [laughs] Then you did the “Make A Wish” and I was like, “Okay, sounds good!” Where can the Best Ever listeners get in touch with you?

Andrew Campbell: They can find me on Bigger Pockets at Andrew Campbell. Also on our website… It’s WildHornCap.com, and e-mail is just andrew@wildhorncap.com.

Joe Fairless: Andrew, thanks for being on the show, talking about how you’ve built a six million dollar plus portfolio in less than five years (about four years), doing the cash out refinance on a decent chunk of your properties, how you did that with the community bank, how you did them individually so that you have the flexibility, and thank you for walking me through that slowly. I’m sure a lot of Best Ever listeners were like, “Dude, don’t you understand what’s going on, Joe?” but thank you for walking me through that, and the approach that you’re taking now…

Also the duplex in San Antonio, the last deal that you’ve bought – just giving us a sense of the type of deals that you’re getting… Or the two duplexes that you got in San Antonio, with the all-in purchase price 190k, 3k rent, so about 1.5% when you do the rent divided by the all-in price.

Thanks for being on the show. I wish you the best with Wildhorn Capital, and I hope you have a best ever day. We’ll talk to you soon!

Andrew Campbell: Thanks a lot, Joe. I appreciate it.

Subscribe in iTunes and Stitcher so you don’t miss an episode!   https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Best Real Estate Investing Advice Ever Show Podcast

JF991: Being a GURU is GOOD and Why You Should Educate Others

Listen to the Episode Below (25:07)
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Should you teach what you know about real estate? Afraid of being a GURU? So what?!? Our guest preaches why you should give your audience a platform to learn your failures and successes in real estate.

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Heather Havenwood Real Estate Background:

– CEO of Havenwood Worldwide, LLC
– Entrepreneur and is regarded as a top authority on digital marketing, sales coaching, and online publishing
– Named Top 50 Must Follow Women Entrepreneurs for 2017 by Huffington Post
– In 2006 she created an online marketing publishing company that went from 0 to $1 million in sales in less than 12 months – Based in Austin, Texas
– Say hi to her at http://heatherhavenwood.com/
– Best Ever Book: 48 Laws of Power

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real estate guru advice


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, 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, Heather Havenwood. How are you doing, Heather?

Heather Havenwood: I’m good, thank you for having me!

Joe Fairless: Yeah, nice to have you on the show, and looking forward to getting to know you and diving in. A little bit about Heather – she is the CEO of Havenwood Worldwide. She’s an entrepreneur regarded as a top authority on digital marketing sales, coaching and online publishing. She’s named top 50 must-follow women entrepreneurs for 2017 by Huffington Post, and she is also a real estate investor, based in Austin, Texas. With that being said, Heather, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Heather Havenwood: Absolutely. I’ve been in the information market industry and real estate industry since 2001, so I’ve been through a couple cycles, as they call them, in the real estate industry. But mainly, from 2001 to 2007 I traveled the country teaching buying and selling real estate, doing more foreclosures, short sales, and then actually produced over 450 seminar events in the real estate industry. I worked for Robert Allen, Ron LeGrand, all the big names back then, and really learning two pieces: learning real estate investing, and then learning what I call the publishing of real estate information, the educational conversation.

So I’ve been doing that for a long time, and then I got caught up in the boom and bust in 2006-2007, lost all my houses, foreclosure, the whole nine yards… The movie The Short – did you ever see the movie The Short? That was my life. I’ve lived that world, because I was in central Florida… And then here I am in Austin, Texas. I now run four online companies and also invest for myself. I have a podcast as well, and just on and on it goes. I’m a full-time online information publishing author with real estate investing.

Joe Fairless: You said something interesting before we started recording, that every real estate investor should have an education piece they are building, and I’d like for you to talk about that because I mentioned when you said that that this has potential to be a polarizing topic, because there’s a lot of anti-guru people, and you should invest and learn from your mistakes and not pay people or pay for content, and then other people say that you should…

First, the statement of “Every real estate investor should have an education piece they are building” that you said earlier – can you elaborate on that?

Heather Havenwood: Yes. It sounds like you like to go truth, so I’m gonna be a little honest here. It’s like politics, there’s the good part of the politics and there’s the dirty side of politics. Just the same here in what I call the education side of real estate. There’s a lot of good that happens, and there’s the dirty side, and I’ve seen both, and I’ve been around both. There’s definitely a negative conversation out there about the guru side, and some people that only know how to teach and they don’t know how to do… There’s a lot there, and some of it is true and some of it is not, but here’s what I say to anybody who’s done more than 10 or 15 houses themselves; they’ve done something in the real estate market, whatever that is… I think that they all should teach what they have learned through their mistakes. It’s actually through the helping other people, it’s also through the teaching that piece, also sharing their story that 1) they’re gonna get more business, 2) they’re going to help other people, and 3) there’s a cashflow there.

That is why a lot of the real estate investors get into the education conversation – because they wanna buy more property and it’s a great cash maker to create cash to buy more property. Why are you getting mad then about that, right? Because think about it – I’m doing real estate, I wanna buy more real estate, I educate people about what I’m doing, I make money from that and I buy more real estate. I don’t think that’s awkward, I think that’s actually very smart in a capitalist world, which I’m a capitalist.

So if you look at it that way, then you can see how there’s a logic to that. What happens when I go to REA meetings or I meet what I call “old-school” real estate investors – they have this kind of arrogance about “Well, I just sit in the background and no one knows who I am. I just do my thing.” I’m like, “I can see that, I guess that’s respectable, but why wouldn’t you help other people? Why would you not do a small workshop locally, or why don’t you get on a podcast and share your story about how you got started and all the mistakes that you made? Why not help other people through that process?” Because I feel like real estate investing specifically – not realtor – is kind of the secret little society sometimes; even though people are out there constantly teaching it, it’s still this secret little society that people think is hard to get into, or they don’t know how, or it’s confusing. It’s not something you get taught in the university.

So this is why, Joe, I think every real estate investor that’s had some success and some failure should be out there helping the people and teaching and sharing their story.

Joe Fairless: I agree, you made some really great points. When we do share our story, we help other people, we get more business, and if we monetize that – like this podcast, for example, where I have monetized it by bringing advertising sponsors – then there’s potential to make money. And along they way I would imagine that the Best Ever listeners who are listening to this episode, they are getting a lot of value from this platform, which to them is free to consume the content. So I agree… There’s different approaches out there, but I agree with your thoughts and I’m glad you shared it. Point by point, that was really interesting. What type of platform do you have?

Heather Havenwood: I do a lot of podcasting actually, I was gonna share that. A couple of years ago I started a podcast, and it’s what I call “in the graveyard of iTunes.” Feel free to go check it out, it’s called “Sexy Boss” and it’s in what I call the graveyard of iTunes because I did four interviews, I put them all up online the same day. I didn’t know what I was doing… [laughs] And then I was like, “Where is the audience?” I didn’t know what I was doing. So I took on the role of “You know what? I’m gonna first add value. I’m gonna go on other people’s shows and I’m going to add value and share my story.”

Number one, I had to learn to share my story. People don’t wanna hear your resume, they wanna hear your story, it’s very different. Number two, I had to learn “What am I gonna add value to them? How can I add value to your show?” because at the end of the day, Joe, this is your show. This is your audience, and I’m here as a guest. So I had to really look at “How am I gonna add value?” I focused on that for a year and a half, and up until this point when you and I are talking, I’ve been on over 210 shows as a guest. What did I learn from that? I learned a couple things – I learned what it takes to be a really great host, I also learned how to really launch a really great podcast, so back in June I launched my first show, and it’s exploded, and I’m now on three networks, and it’s been amazing, in less than a six months timeframe… Because I learned first how to give value, and then I went and launched it.

It’s the same conversation with real estate investors. I think even if you’ve only had 10 houses or 2 houses or one apartment building, whatever it is, being out there on podcasts – because it’s a “free medium” at this moment – being out there and sharing your story helps other people. Because people don’t wanna hear your “When I was ten I did this, and when I was 20 I did that…” – no one cares. They wanna know how you got to where you are today and where is the success story, and where is the failure. So I talk about my book Sexy Boss because that book is about my biggest failures in life.

The movie The Short that came out, I literally lived that movie. No kidding. I remember watching the movie and going “Oh, I remember that, and I remember that…” I remember being in Florida and all the houses in the entire four, five blocks was completely for sale. I lived that life, so how am I gonna take that failure and make it a success?

I remember, Joe, at a very important time when that happened – it was 2007. This is about six months after I learned this is happening, my houses are going down, my bankruptcy is going down, and I really had to look at that. And a dear friend of mine who was a multi-million dollar investor (very successful guy), we were just having a chat, he was kind of coaching me, and he said to me in a not so loving way, because he’s not that kind of guy, he said “Grab a pen and grab a piece of paper, and I want you to write everything I say.” He told me to write this as he says it: “I, Heather, give myself full permission to fail”, and I couldn’t even write it. I was like, “NO!” I was literally in tears, and he looked at me and he goes “You’re never gonna succeed in life again until you give yourself full permission to fail.”

And the challenge with what I call the real estate gurus out there is they show success after success after success after success, and I know with real estate investors that the real ones are failure-failure-failure-success-failure-failure-failure-success-success-failure. That’s a reality, and I think that that’s the challenge people have with the “guru-ism”, and that’s why I think they should all be out there teaching themselves, so they know what it’s like to share their failures, to share their successes with people. It makes a difference.

Joe Fairless: It does make a difference, and it’s almost an obligation that we all have. It’s less about an opt-in, but it’s more about an obligation if we’re gonna be part of the real estate community – and it is a community; at least the Best Ever listeners have a community within this show… And it is almost an obligation where we need to share not only our success stories to inspire, but also the failures that we have.

I actually have a presentation I make at different conferences when I speak, and it is “Top 10 mistakes I’ve made in multifamily syndication”, and they could be more, but they only give me like 45 minutes to talk, so I condense it in these top 10 things. It’s important, because there’s a lot of ways to learn from the mistakes and the failures, more so sometimes than the success. I’m glad that you mentioned that, and I completely agree with your approach and your mentality.

I do want to ask, with your investments now that you do, knowing that you were in Florida and the sky crashed on you and you went through bankruptcy, what do you do now differently that you weren’t doing…?

Heather Havenwood: Way more conservative.

Joe Fairless: Specifically how?

Heather Havenwood: I don’t play the game of “Oh, it’s been going up 25% every year, year after year, so it’s gonna continue.” I like bread and butter, I like boring homes, and what I mean by that is just a place where the home is 60k, 70, 80k, really basic, and it’s a working class area; people live there and they get settled there and they don’t move.

I also have a philosophy, and this is from a friend of mine who was a major real estate investor in Arizona – he still is today – he said, “You’re not a tree, you can move.” So just because you live in California or just because you live in New York doesn’t mean you have to invest there. Go invest that makes sense for you. I’m also with long-term play; I do wholesaling, and I do holding. I look at it more long-term.

When I was in the real estate industry back then, it was a lot of get-rich-quick; buy these spec houses, hold them for two years, sell them for 50% higher. Or buy a million dollar property. A lot of flash. And the people that did survive without throwing away all their housing — I knew friends of mine who literally had 12 houses in foreclosure. They were just walking to the bank like “Here’s your 12 keys, see you later.” It just happened.

The ones that survived all that were the ones that went slow and methodical, and didn’t try to be flashy. And if you look at our current president today, who is a real estate investor, he did the same thing, believe it or not. Don’t get me wrong, he went big, but he went methodically, and he thought it through, and it was always a long-term play.

Joe Fairless: With your properties, your buy and holds, what type of financing do you do?

Heather Havenwood: If I buy and hold, I’m doing a deed; I buy on the deed. I just take over payments.

Joe Fairless: You just take over payments, okay.

Heather Havenwood: No money down, take over payments.

Joe Fairless: And that’s probably because of the bankruptcy thing, it’s tough to get a loan?

Heather Havenwood: No, I don’t wanna put any money down.

Joe Fairless: Can you tell us the numbers on the last deal you did like that?

Heather Havenwood: The house was worth 60k, they owed 30-35k, I just took over payments, and then I just got a renter in there; it’s not anything more complicated than that. It’s bread and butter, it’s kind of boring. [laughs]

Joe Fairless: House was worth 60k, they owed, say, 35k, and you are taking over the mortgage payments, and then they exit.

Heather Havenwood: Correct.

Joe Fairless: Why would they do that?

Heather Havenwood: Because they are in financial constraint, they can’t afford it anymore. That was what I was told by Ron LeGrand back in 2002. You just take over their payments.

Joe Fairless: How do you find them, and then walk us through that conversation with the person who has $25,000 worth of equity in their house that they just let you take over their payments.

Heather Havenwood: I do bandit signs, they called on it, talked a little bit over the phone, asked a couple questions, see what their situation was, what they needed… They needed a little cash to move out, so I gave them a little cash to move out. They just didn’t wanna wait for putting the house on the market and just waiting. Not every property is gonna end like that. It’s a specific kind of property, a specific kind of person that’s ready to say, “I need to walk away.” They knew that it cost me a little work, so I had to put money in and do a little work, and then rehab it. That’s pretty much the numbers.

Joe Fairless: How much cash did you give them to move out?

Heather Havenwood: $1,000.

Joe Fairless: And how much did it cost to get that work done?

Heather Havenwood: $1,000 paint, little carpet, just kind of spruce it up, clean it up… Nothing major.

Joe Fairless: Your phone rings, it’s this individual who saw your bandit sign… Walk us through that conversation.

Heather Havenwood: One of the things about real estate investors is they forget there’s a human being who has the other side of the fence. Why did they go with me versus others, why do they call me versus others, why did they say yes? Because I cared. I cared about them. I didn’t just go, “Okay, what’s your numbers? What’s your numbers?! You’re just a person, I need your numbers!” I’m like, “What’s going on in your world, what’s happening? Why are you not waiting to get the equity? What do you really need?” They share their life, what’s going on in their world, health issues and all this kind of drama. I just gave them an offer and I was like “Can this help if I give you cash now and take over the payments and move in 30-60 days? What works for you? How can I help you in your life, so that you can get on your own two feet and move forward?” It’s not always about just taking over a property for greed… And I think people can feel that, because I just really cared about them, and they were afraid that they’d started making the payments, that it was gonna go into foreclosure… They didn’t want that on their credit, so now they don’t have that on their credit. They’ll be able to walk away…

You look at it like “Oh, they’re walking away from $20,000 equity! Oh my god, it’s crazy!” Not really when you’re sometimes in the situation where you’re like “I need to be able to be free of this, and I need to be able to take a little cash and start over.” If you look at it from a humanistic/humanity perspective, sometimes it’s just really helping somebody out, versus just taking over a property.

Joe Fairless: Do you go visit the property before you talk numbers with them?

Heather Havenwood: Sometimes I do… I’d like to, I’d prefer, but it doesn’t always work out, because you’ve gotta close the deal. I also know people are out there marketing to them all the time. Now, if they’re not in foreclosure, they’re not getting the marketing, but if they called me, they called other people, so I have to really keep that in mind. It’s like in any kind of sales situation, you don’t wanna let them off the hook, right? You really wanna build that relationship as fast as possible and really connect with them on a heart-to-heart level. I know it sounds like not what they teach you in real estate school, but that’s what really people want to do business with. They wanna actually act like someone cares.

Joe Fairless: What paperwork is involved when you do that transfer?

Heather Havenwood: I don’t really share my paperwork… Just a 2-3 page deal we go through, and it’s a deed. It’s a deed transfer.

Joe Fairless: Just simple stuff.

Heather Havenwood: Yeah, it’s simple stuff. I know it’s not very sexy, but I really think after being at over 450 events – that’s a lot of hours of listening to a ton of real estate investors (some of them are no longer around, some are dead broke), I learned that real estate investing can be extremely sexy, but the winners are just consistent and keep it really simple.

Joe Fairless: You have a skill for marketing and branding… As I mentioned earlier, you were named top 50 must-follow women entrepreneurs in 2017 by Huffington Post. For someone who wants that type of designation, how do you recommend they go about obtaining it?

Heather Havenwood: That’s a weird question, I don’t know how to answer that. I didn’t wake up one day and said, “I wanna be known from Huffington Post.” One day someone told me I was… So I don’t even know how to answer that. I think honestly this industry is not about ego. If you go into it for “I wanna be known for… I wanna be known, I wanna be the best, I want everyone to see me and look at me” – that’s very ego-driven and you’re not gonna go anywhere. Believe me, I’ve seen a lot of people come and go in this industry, and the ones that are ego-centric didn’t last that long. The ones that were value-centric and add value to the marketplace and add value to the people and help people and teach people, they’re still around; they’re the ones [unintelligible [00:19:28].16] that are actually still filling up a room and being on great stages, they’re the ones actually helping people.

But I definitely don’t go out there and go “One day you’re gonna see me.” I just went out and started helping people and focused on supporting people and helping people and adding value as much as I possibly can, and I was acknowledged, I guess, for that.

Joe Fairless: Heather, based on your experience as a real estate investor, what is your best real estate investing advice ever?

Heather Havenwood: It’s a question that was actually given to me, that someone asked me to ask myself, and that question is “Does this feed my confusion, my strength and my clarity?” I think with real estate investment we get attached to the deal, versus actually looking at “Does this deal, does the situation, does this relationship feed my confusion, my strength and my clarity?” and sometimes we get so attached to the deal (we’ve gotta make it work!!) that we’re trying to force it, versus really look at “Does it really add clarity or add confusion to the situation?”

One thing I learned – you can’t be attached to a deal. We get attached to the deal if we get attached to people; it’s not a person, it’s actually just a deal. It works, it doesn’t work, it may work, it might not work… And you focus on winning in life and winning, but you don’t put so much attachment to who you are, your identity to the deal.

Joe Fairless: Are you ready for the Best Ever Lightning round?

Heather Havenwood: Sure!

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

Break: [00:20:49].15] to [00:21:38].10]

Joe Fairless: Best ever book you’ve read?

Heather Havenwood: Best ever book I read… Think and Grow Rich by Napoleon Hill and The 48 Laws of Power.

Joe Fairless: Oh, I love The 48 Laws of Power. Best ever deal you’ve done?

Heather Havenwood: My own short sell to my own property back in 2006. [laughs]

Joe Fairless: Why is that the best ever deal?

Heather Havenwood: Because I called three of the banks, and I finally just said “I’m gonna short sell my own deal. Give me the number that I know I need”, and he gave it to me and I pretty much did the whole deal, so it was kind of interesting. It’s not normal you actually do a short sell for your own property that you own, so it was just an interesting deal.

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

Heather Havenwood: Helping other people and sharing my stories and sharing my failures. I this that’s something that’s overlooked in today’s society’ we’re taught at a young age, when you’re in second grade, “If you fail, you don’t go to third grade”, and I think a lot of young people today, they’re all focused on winning, winning, winning only, and it’s only when you give yourself full permission to fail that you give yourself full permission to succeed. And when you share your failures, that’s when you can share your successes.

Joe Fairless: Thinking back on some deals you’ve done – and it’s something that you haven’t mentioned already – what’s a tactical mistake you’ve made on a deal?

Heather Havenwood: I tried to play the market “Oh, look, the market’s going up 25% every single year! I’ll play that game and buy the property, and in one year I’ll just sell it for 25%!” It’s probably the worst game you can ever play in real estate… Hoping that the market’s gonna go up. It’s very much a gamble. It might work, but it’s not the best play. I did that and it didn’t work.

Joe Fairless: At closing, for all future properties, do they cash-flow for you?

Heather Havenwood: No, not all of them, and not always, because things change. Property taxes sometimes change, things change, but I try to make them all cash-flow… That’s why I look at more of a long-term strategy.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Heather Havenwood: HeatherHavenwood.com.

Joe Fairless: Well, Heather, I enjoyed our conversation. Thank you for being on the show, talking about how in the earlier years things didn’t happen as you planned with the crash, nor did it happen as most people planned for the crash, and how your mentor said for your to write down the phrase “I, Heather Havenwood, give myself permission to fail”, and then how you’ve used that as the way that allows you to give yourself permission to succeed, as you’ve mentioned earlier. And then, if you have done something, you should teach what you have learned and teach the mistakes that you learned along the way. It’s almost an obligation that we all have, and we also benefit from it, because we could make money from that, but more importantly, we’re helping people and we’re helping our business because we’re getting the word out about what we’re doing within a very relevant group of people, and I think that’s really the key, which leads to the business and leads to more cash flow. And then your approach for taking over payments in the case study that we’ve talked about, and being value-centric not ego-centric.

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

Heather Havenwood: Thanks, Joe.



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best ever real estate pro advice

JF974: Take Notes about NOTES and Debt!

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Taking notes? That’s okay if you’re not, but you should at least buy notes! You’ll hear all about it in this episode! Good debt, bad debt, whatever… Notes are extremely profitable and if purchased correctly, may be one of the most ideal passive wealth generators in investments.

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Scott Carson Real Estate Background:
– CEO of WeCloseNotes.com and the creator of the Note Buying for Dummies workshop
– Purchased over half a billion dollars in distressed debt for his portfolio and assets in over 30 states
– Note Buying Workshop focuses on the 3 F’s of Note Buying…The Find, Fund and Flip
– Speaker on distressed debt, the 2014 Note Educator of the Year, and featured in The Wall Street Journal
– Active real estate investor since 2002 and solely focused on the note industry since 2008
– Based in Austin, Texas
– Say hi to him at http://www.weclosenotes.com


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Real Estate Note Advice


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 podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Scott Carson. How are you doing, Scott?

Scott Carson: I’m doing great, Joe. Thanks for having me.

Joe Fairless: Nice to have you on the show, my friend. A little bit about Scott – he is the CEO of WeCloseNotes.com and the creator of the Note Buying For Dummies workshop. He is a speaker on distressed debt, and the 2014 Note Educator Of The Year; he’s been featured in the Wall-Street Journal, he’s an active real estate investor, been one since 2002, and has solely been focused on the note industry since 2008… So guess what, Best Ever listeners? I think you know what we’re gonna be talking about, don’t ya?

You can say hi to him at his website, WeCloseNotes.com. With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Scott Carson: We focus directly on buying distressed debt, only non-performing and first liens on residential and commercial properties all across the country, from banks and hedge funds. We’re buying for our own portfolio, we buy for students, but we’ve been doing that since everything hit the fan in 2007-2009.

My background – I started off like a lot of real estate investors, [unintelligible [00:03:24].15] Flip This House on AMC TV, we decided we could be landlords; I thought that was a cool idea. We bought our first investment property in 2002, the second one in late 2002 as well, and then the market changed here in Austin, Texas.

Dell Computers laid a lot of people off who were ideal tenants, and the market went South for a little bit. [unintelligible [00:03:45].11] and I was a distressed borrower very quickly. I was pretty lucky enough to get rid of those deals and get hooked up with a couple real estate investors here locally, who taught investing, taught the traditional way of doing things, and I was pretty lucky there to learn real estate the right way – options, subject to deals… They also taught [unintelligible [00:04:06].10] owner financing, things like that. So for 3-4 years I got to work as basically an apprentice and sponge up so much quality information from them.

Then when the market went South again with everything in the mortgage industry, I saw the opportunity and stopped focusing on short sales and subject to deals and fix and flips here in Austin, and I started buying debt all across the country.

Joe Fairless: You’ve been focused on note buying since 2008… What are the pros and cons of note buying, compare to buying rental properties, adding those into your portfolio? Because you’ve been on both sides.

Scott Carson: Yeah, I’ve been on both sides… It’s a great question; we get that a lot. First off, there’s a lot more inventory out there. There are still 6-7 million defaulted loans out there right now. Second, we’re often getting better pricing on the distressed debt than people are buying for rental properties. And then the third thing, you don’t deal with toilets and tenants. When was the last time you called Bank of America (if you got a Bank of America mortgage) for them to come unclog your toilet, or to fix your water if it goes out? You don’t have to do that with a bank, and that’s the beautiful thing about buying debt. We’re buying at a fraction of what most people are buying properties, at 50% of value or less.

We’re working to create win/win scenarios with the borrowers, trying to keep them in their properties by modifying the loan, doing a forbearance plan, and we’ve got a lot of exit strategies, but our biggest bang for the buck is when we can modify the loans, keep them in the property, and they start paying on time for 12-18 months and then we just either keep it for cash flow at a high ROI, or sell that loan off to another investor who’s looking for cash flow.

That’s what I like about it – instead of it being mailbox money, it’s wire money. I get an invoice every month from our servicing company telling me who has paid, and if they don’t pay, they don’t stay.

Joe Fairless: Cool. I wanna talk more about the pros, but then I also want to have – as objectively as you can look at it – the pros and the cons. Obviously, there are cons compared to buying rental properties. What are the cons?

Scott Carson: The cons is you’re the bank. There’s a lot more that goes into a distressed note than buying a property that you can put a renter in. When you buy a rental property, you own the real estate, so you can put a renter in there, you deal with all the management stuff or hire a property management company… When you buy the note, you don’t own the property. Now, you control it, but if you’ve got people that won’t pay, the biggest con is gonna be basically that you’re either gonna have to foreclose, or hire an attorney to reach out to that borrower to try to get him to do something.

Like I said before, they don’t pay, they don’t stay, but in some states it can take a little while to foreclose. In Florida it can take 12+ months to foreclose; in New York/New Jersey you’re looking at 2-3 years sometimes. There are states that are fast foreclosures, states like Texas, Georgia, Arizona, Nevada – they are easier to buy notes in, because you can foreclose so quickly.

I always tell people to expect to probably have to put 3k-5k in expenses along for attorney fees, servicing costs when you’re buying a note, because you’re gonna have to take over that bank’s nightmare.

That’s really the biggest con – you don’t know exactly which way the deal is gonna go. We’ve had deals that we thought would be easy modifications that turned into extended foreclosures of 12-18+ months. We’ve had others that we were getting ready to foreclose on that turned into the borrower just signing the property over to us and walked away, and left the property in clean conditions.

It’s the biggest frustration, but some people dealing with notes try to have one business model “I’m gonna foreclose all the time.” Well, it doesn’t always work that way. That was the biggest mistake I made early on – I started buying notes, Joe… I planned to foreclose in everything, and I left a lot of money on the table and spent a lot of money, when I could have modified loans initially, had cash flow coming in, not had to put up repair costs, not had to put up foreclosure attorney costs, and start making money immediately.

Joe Fairless: Can you walk through an example of what a foreclosure process would look like, compared to a loan modification process? Just trying to get an idea of the costs and the people involved in each of those.

Scott Carson: Okay, well let’s start with a loan modification. Once you’re buying out, you’re reaching out to the borrower. Half the states will let you do that yourself if you want to, other states wand you to be a licensed mortgage broker. I always recommend that you have a licensed servicing company do this; you don’t wanna do this yourself. So you have your servicer, they’re making 4-8 phone calls to reach out to the borrower; hopefully the borrower responds. If they don’t respond, they’re also sending direct mail campaigns out – certified letters, “Hey, give us a phone call.”

We’ll hire a realtor or a door-knocking service to go out and make contact with the borrower. Our biggest goal is within the first 30 days to make right party contact with the borrower and find out what their plan is. If they’re gonna tell us to pound sand or go do something else, that’s fine, we’ll send it straight to the attorney and start the foreclosure process.

If they decide to modify, then it’s a matter of figuring out “Okay, what was [unintelligible [00:09:03].02] payment?” What’s market rent for that same type of property is what I like to look at, because that’s gonna basically be what the borrowers are looking at – “Can I move out and rent something similar?”

We use the market rent rates of the property to figure out, “Okay, your mortgage payment is $1,500, market rent rate is $1,800. You should probably just start making your payments on time. We’re not really gonna adjust that down much for you, because if you moved out, you’re gonna go pay more, so it’s better for you to work with us.”

Then we’re sending the documents for him to sign and send back in. The trial payment plans will be anywhere from 3, 6 to 12 months, depending on what the borrower and we can come to an agreement. Sometimes we’ll reduce the interest rate, sometimes we’ll make them pay 6-12 months on time before we reduce principal [unintelligible [00:09:48].00] but there’s all sorts of creativity with those modifications of trial payment plans to really get some home runs as far as ROI.

We’ve had borrowers bringing anywhere from $500 to the table or $10,000 to modify that loan.

Joe Fairless: One question about that process… Who’s doing the negotiations with them? You said “Hire a licensed servicing company to reach out to the borrower.” Are they also negotiating with them on your behalf?

Scott Carson: They are. They’re notifying us, “Hey, I spoke to John Smith today. Here’s what they would like to try to do. Does that make sense for you?” and we’re going back and forth either via phone call, conference call or e-mails.

When I buy notes, I tell the services what I’d like to do, then I give them some guidelines of what I’m looking for.

Joe Fairless: For example?

Scott Carson: For example if the borrower can’t bring at least four months of back payments to the table, we’re not gonna modify. We’re gonna offer cash for keys at that point. If they bring four months to the table, great, we’ll look to keep them in the property. But if they can’t bring that, they don’t have any skin in the game… Any time that you modify a loan or do a trial payment plan and the borrower doesn’t bring any skin into the game, they end up defaulting later on and you’re on to foreclosing.

So I’d rather just “Hey, instead of us fighting over this, let’s just make this a win/win. If you can’t really afford it based on what you’re telling me your financials are, let me just give you some cash to walk from the property and let you start over.”

Joe Fairless: Okay. That’s helpful, thank you. So you said if they decide to modify, then you figure out what the market rent is and then you either charge them that, or if their principal payment and interest and everything is lower than that, then they might as well just pay that, versus the market rent, because they’re gonna have to pay higher if they were to leave. Then what’s the process?

Scott Carson: If they decide to leave, Joe?

Joe Fairless: Yeah, if they decide to leave.

Scott Carson: Yeah, if they decide to leave, then it’s basically just getting to one of our local attorneys in that state or that city, deciding over documents — we always run title reports to make sure there’s not any other junior liens behind ours. If there is liens, then we may have to do a foreclosure, or we’ll get the bar to agree to a consent to judgment to speed up the foreclosure timeframe.

If there’s no other liens behind the property that we don’t wanna negotiate down or are glad to pay off, like weed liens or even some credit card debt, stuff like that – we’ll just pay those liens off to take the property back, depending on what we paid for the property.

It’s a pretty simple process. They show up [unintelligible [00:12:07].00] they leave the keys with our attorney, then our real estate agent goes by and changes the locks to the property, and we follow documents, now it’s an REO to us and we do whatever we want with the property at that point.

Joe Fairless: I know this is gonna be a tough question because it depends on the particular opportunity, but roughly what are the costs involved with the loan modification process? And I’m gonna ask the same question about process and cost for the foreclosure process.

Scott Carson: Right. Modification – I’ll say you’re probably gonna pay about $1,500 in servicing fees and paperwork. You have to pay an attorney to create the modification documents, to get that filed… You’re probably gonna see $1,500 roughly. If you’re gonna foreclose, you’re probably gonna see somewhere between $1,000 to foreclose in a state like Texas, all the way up to $5,000 on average in Florida, which is like 12-18 months to foreclose.

We have had situations where it took longer… I’ve had one asset take two years to foreclose in Florida. It cost me 6k in foreclosure fees, and then I also paid 10k to the borrower to expedite it and quit fighting with him. I was buying the asset at 35k, it was worth 100k, so it made sense for me to pay him 10k to walk away.

Joe Fairless: In that case… In Florida, as you mentioned, it does take longer, but how does it get strung out to two years?

Scott Carson: [laughs] That’s a good thing. One is sometimes they hire attorneys that will drag stuff out. Now, Florida was taking about 12 months or this timeframe, which is you’re just waiting on a judicial foreclosure timeframe. The attorney for the borrower filed a couple delays. My attorney showed up to court one day and didn’t have all the original documents that she needed to have to proceed, so that delayed it 90 days.

Joe Fairless: Oh, gosh…

Scott Carson: Yeah, especially they requested me to fly out there and show up as a witness. So it was a little frustrating, because I had some airfare costs and hotel fees, but it was still a win/win, because we bought the note at such a cheaper price. But you have delays that happen like this… Sometimes you’ve gotta re-file assignments. Now, we’re foreclosing a couple properties in Chicago right now… I call it Crook County, because it’s just taking forever to foreclose, the judges have given the tenants and the borrowers extra time upon extra time upon extra time, the sheriff doesn’t want to enforce the evictions of the tenants… I will never buy another note in Chicago. I’ll buy in other areas in Illinois, but never in Crook County again.

Joe Fairless: Yeah, it’s interesting how different counties and states approach this process.

Scott Carson: It is. Some are really easy, some will do everything online, show up, bam! It’s easy, done. Other times you’ve gotta show up in person and drag stuff out… But that’s what keeps it so interesting, Joe. There’s a lot of great things. I always tell people to start investing in five states, pick up five states. You’ll learn a lot about the different foreclosure laws and things like that, but you also have plenty of opportunity with deal flow, as well.

Joe Fairless: I believe you have access to distressed notes, and you mentioned earlier that you have people who invest, or your students, who go in the process… But let’s just assume your program doesn’t exist. For an investor who’s listening to this and they wanted to do distressed note investing, where do they go to find those notes, and where do they go to get the licensed servicing company?

Scott Carson: Really easy – there’s specific departments inside of banks and mortgage companies all across the country. That’s what I started off doing – calling these banks, and real estate funds and mortgage companies. If people get one thing out of this podcast with you today, they should get this – the individuals inside of the banks, they go by the names of either special asset managers, or secondary marketing managers. They also have a chief credit risk officer… It’s often sometimes the name of the department. So those three names: special assets, secondary marketing and chief credit risk officer.

You’re not going to call customer services. You can go to LinkedIn and search for special assets managers or secondary marketing, and literally, LinkedIn will show you close to 8,500-9,000 special assets managers from banks and lending institutions all across the country.

I like reaching out to those guys and gals because they are the people who handle the portfolio, they know what’s performing, what’s non-performing, they know the nightmares, loans that the bank is looking to get rid of, and that’s a great source to find assets. We do it on a regular basis here, and it’s actually helped us build a large database of bank asset managers that we reach out to on a regular basis.

Servicing companies – all you have to do is google “loan servicing companies.” You’ll find them all across the country, there’s hundreds of small companies that will service loans just in that state, or other larger companies that will service loans all across the country. They’re there to help assist you in getting your loans performing; they’ll also handle performing loans, if you set up on payment plans.

Those charges will run you from $20-$75/month/loan. If you’ve got a performing loan, the servicing company will charge you $15-$20 just to collect the payments and set up the statements. If it’s a non-performing loan, they’re gonna charge you somewhere between $75-$100/month to handle [unintelligible [00:17:11].23]

Joe Fairless: It seems really inexpensive.

Scott Carson: It is when you consider what your time is worth. [laughs] Some people – I won’t say a lot – try to do that themselves, and when the CFPB and the Dodd-Frank laws and all that stuff — you don’t wanna mess around with it. So if you’re not a licensed mortgage broker or a licensed debt collector in a state, your time is better spent finding assets or raising capital and closing deals.

Joe Fairless: What questions should you ask a loan servicing company that you reach out to about doing this for your distressed note?

Scott Carson: Good question. 1) What states are you licensed in? There are some services out there that aren’t licensed in all the states, but they’re still trying to service loans, which is a big, messy thing. 2) Do they have a list of real estate attorneys across the country that you can use? 3) Can you speak to the real estate attorneys that they recommend? Some servicing companies wanna be the go-through, where you’ve gotta deal with an account rep and they’re the middle man to give any information. I will not deal with servicing companies that want to be that filter. I wanna speak to the real estate attorneys directly. I’ll often hire my own real estate attorneys; I use attorneys I’ve been using for years, and the servicing company will just charge me $35/month to board their loan and wing in all the loss mitigations to our attorney’s offices.

Joe Fairless: Do you still look for new loan servicing companies?

Scott Carson: I actually have three different loan servicing companies right now that are managing our portfolio. I do get bombarded with new companies here and there… It depends on the situation. If I’m buying loans from a source that was with a new servicing company that I am not currently using, it depends on where it is in the foreclosure process. If it’s almost all the way through the process of being foreclosed on or less than 90 days out, I’ll just leave it with that existing servicing company.

Servicing companies are a lot like vendors – sometimes they’re good, sometimes they’re bad, like anything else. Sometimes you do start looking for other vendors, especially if your servicing company starts to lag behind, starts goofing up on sending out documents and notices and things like that.

I haven’t had to look for a new one in some time, because I’m pretty happy with the two out of three that I’m using right now. The third one, basically they’re just boarding our stuff and we handle everything with our attorneys on a direct basis.

Joe Fairless: Just to get a sense of the type of typical profits that you’ll make on a deal… Can you give us a case study of just not your best, not your worst, but a typical deal, and the amount of money you make?

Scott Carson: I’ll give you a very simple formula that we look at doing. We buy assets at — I don’t go above 50%-55% of value. 55% is when you add in taxes owed. If I’m gonna be at 55% and I’m gonna end up having to foreclose, I’m probably gonna see another 3-5% in fees, so I’m gonna be at somewhere around 60%.

If I sell it 90-95 cents on the dollar, either a foreclosure auction, or if I have to take it back and sell it, I’m gonna see somewhere around 15%-20% of fair market value profit. Now, that’s often a really good return, because a lot of times we’re doing this in six months or less, so it’s doubling up our ROI when you annualize it. That’s via the foreclose.

If I’m gonna modify, I’m always looking to see around 20%-25% yield on the payments that are coming in for 12 months. That’s what makes it worth my time, that’s what makes it worth my investor’s time, any joint venture partners that we work with, if we’re having to split payments on that stuff.

So we’re looking for a 20%-25% yield on a modified or a potential modification, all the way up to a 25%-30% yield on our money, if we have to foreclose in a 12-month timeframe.

Joe Fairless: You mentioned earlier 3-12 months of trial payments – why only 12 months? Why not 36 months, or something even longer?

Scott Carson: Usually after 12 months they’re gonna wanna change; borrowers are gonna want some change to happen. Either the market value of the property is gonna go back up, or the property value may decline. So anytime we try to do a  36-month trial payment plan, it never succeeds.

Another important thing is once you’ve gotten 12 months of payments on time, that loan is now considered a reperforming loan again, and the value of it is much better or higher now, it’s worth something more. You’ll have people that will pay 85-90 cents on the dollar for a reperforming loan with 12 months of seasoning. If it’s got 36 months of seasoning – that’s great, but after 12 months you can sell that note off at, like I said, 85%-90% of value, pretty fast. Plus, I’ve been in [unintelligible [00:21:42].01] I’ve helped plenty of people modify the loans; 12 months they’re paying on time, they’re taking care of the property, they like it now that they really kind of own that property again and the bank is working with them, especially if they brought some skin in the game; if they brought four months of payments or 5k down to reinstate that loan, then they’re much more willing to work with. They have some private ownership again and they’re taking care of the property, keeping the insurance paid on it, and dealing with some stuff.

If you start looking at three years of trial payment plan, that’s tough for people sometimes. I’m not saying people are always gonna be on time; there’s times people are gonna go late anyway, especially around Christmas or January… What we have built into our modifications is we [unintelligible [00:22:19].23] and forgive the December payment if they pay in advance for 12 months, and I tell them “Go have a Merry Christmas on us.”

Joe Fairless: I have found that with my properties also, with the apartments…

Scott Carson: Yeah, exactly.

Joe Fairless: And then in March the money all comes back, because they get a tax refund…

Scott Carson: Yeah, exactly. It’s always funny — that catch-up usually comes around the middle of February, after they gather their tax returns.

Joe Fairless: Yup, absolutely. Last question and then I’ll ask you the money question… When you have the 12 months of payments that was on a distressed, non-performing note and now it’s performing – okay, you’ve got it; where do you go to sell it?

Scott Carson: Good question! There’s a variety of different hedge funds out there that are looking for just reperforming loans; they like the yield. There are banks that will buy reperforming loans, there’s a lot of IRA investors looking for a solid, steady return inside of their IRAs… We’ve sold our performing loans anywhere from like a self-directed IRA event, like Quest IRA or NewView, all the way to even listing it on Craigslist, say “Hey, we’ve got a performing note that’s been performing for 15 months. We’re looking to sell it at 50k. It would be a 15% return on investment based on the payment stream to an investor, if you’re interested. It’s pretty easy going to local real estate investment clubs, LinkedIn in the different real estate groups, Facebook groups… We’ve sold performing loans in a variety of places.

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

Scott Carson: Best real estate investing advice ever – I would say be focused… [laughs] A lot of real estate investors go to different workshops and seminars and they’re trying to do 3, 4, 5 things, and they can never get any traction because they never focus on one thing. We see that a lot… We see people going “Oh, I like the idea of notes. I’m a landlord” or “I’m a fix and flipper, I wanna buy notes for fix and flips.” Well, they never get around to being focused on one thing to develop those relationships, develop those habits, develop the systems to find success. It’s the whole 80/20 rule – if 80% of your income is coming from 20% of your focus, well if you were to focus all your focus on it, your income would be basically 400-500 time what it is. I think that’s the best advice I can give anybody.

Notes aren’t always for everybody. If you like the tangible side of going out and using a hammer and a nail, you’re rehabbing a property, you like apartments, you like things like that – that’s great, stick to that. If you’re having trouble with that, notes might be a great way to do it if you don’t wanna deal with the headaches and toilets and tenants or the fix and flip aspect.

Joe Fairless: I love that advice. Alright, are you ready for the Best Ever Lightning Round?

Scott Carson: I am, hit me up, Big Ben! [laughter]

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

Break: [00:25:03].20] to [00:25:44].25]

Joe Fairless: Alright, here we go – what’s the best ever book you’ve read?

Scott Carson: Very easy, Outwitting The Devil.

Joe Fairless: Really?

Scott Carson: Yes! Outwitting The Devil, by Napoleon Hill and Sharon Lechter. It is an amazing book. We give dozens and dozens of this book away to our friends and family [unintelligible [00:25:59].04] It goes in line with what I’ve talked about earlier, my best advice about being focused. The book talks about – if you’ve never read it before – how Napoleon is having a conversation with the devil, and why is he so successful at having people fail. The devil says, “Well, I’m successful because I get people to drift. They get the shiny object syndrome, they’re never focused… They’re never able to achieve that type of success if they aren’t focused.” That’s hands down my favorite book of all time, Outwitting The Devil.

Joe Fairless: Alright. I’ve read that, and there have been multiple people on the show who have mentioned that book. I just couldn’t get into it, but maybe I need to relook at it, because clearly some smart people are enjoying it.

What’s the best ever deal you’ve done?

Scott Carson: Best ever deal we’ve done… Man, I’ll say probably the biggest deal we’ve done individually – we bought a portfolio of 200+ assets that were worth about 12 million that we picked up for just over a million bucks. It’s been great, we’ve been modifying those loans, we had some that we foreclosed on, but it’s been a really growing period, going from buying one-off loans to small pools… That’s been one of our largest pools so far of assets that we’ve bought.

Joe Fairless: What’s the number one risk for an investor? Say you found another 12 million dollar portfolio, you bought it for a million and you brought in one investor with a million dollars. When she asks you “What’s the number one risk?”, what do you tell her?

Scott Carson: The number one risk is not knowing our property values or checking taxes. There’s three things with notes that you’ve always gotta double check. You’ve gotta make sure your property values are accurate – and that doesn’t mean going by Zillow photos; that means literally having somebody drive by the property.

We made a mistake early on in our business where we trusted a realtor to drive by. She took great photos of three sides of the property, but she missed the big, gaping hole on the other side… [unintelligible [00:27:50].18] So using realtors, making sure that we tell them, “Hey, please look at all sides.” We wanna make sure it’s a Blazing Saddles house. That’s the biggest thing, knowing your values.

Second thing is double-checking taxes. You’ve always gotta double-check the taxes owed, and you wanna make sure that the borrowers’ name on the note matches up with who’s on the county records. If it’s a different name, that property was probably gonna [unintelligible [00:28:11].24] and your note is now worthless.

And third thing is checking title. That’s pulling a title report, or as we call it, an O&E report – Ownership and Encumbrance Report is kind of a watered down title report that just shows us what the condition of the lien history is and if there’s anything else on title that might be blocking our ability to foreclose. Those three things are the biggest things.

Having your vendors in place is also critical. If you buy a lot of notes, you wanna make sure you have your systems down, because you don’t wanna sit around for 6-12 months figuring things out while your fruit is [unintelligible [00:28:42].13]

Joe Fairless: The 12 million dollars worth of property, you said over 200 assets, so I assume over 200 homes…?

Scott Carson: Yeah.

Joe Fairless: How long did you have from when you were notified that there was a potential to buy to when you actually wired the money?

Scott Carson: We had 60 days. 60 days to do the due diligence, and then we also wrote into the contract a six-month buyback period. We had six months to finish up our due diligence. This was an end-of-year closing, so we had to fund by December 27th… And we had six months to review the assets. If they were trashed out, [unintelligible [00:29:19].17] We also got a credit for the taxes owed over that six-month period if we had to send them back. That was a really nice [unintelligible [00:29:26].29] this property is trashed out or just an empty lot now, we swapped it out with new assets.

Joe Fairless: And you said you’re still in the process of turning that thing around, so you don’t know what your returns are as of yet?

Scott Carson: Our returns have been very, very positive. The investor got their money back in the first six months after our six-month timeframe. So within 12 months we got their  money back, and we’re splitting profits on this stuff. I still own some of the assets still to this day, and they’re performing; we’ve got some that have been performing for a while that we’ve sold off, others that we have taken down and foreclosed and kept them as rentals or turned them in REO sales. So it’s been a very phenomenal return.

The assets I still own are worth – on my side – four million, and I don’t have a penny into the game. It was all with private money when we funded the deal, so I got basically four million dollars worth of assets for nothing.

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

Scott Carson: Best way I like to give back – we have a big, big passion for two sets of individuals: we work a lot with young kids, we always like to donate to Toys For Tots at the end of the year, along with different children’s charities. We do a lot with a [unintelligible [00:30:31].29] in San Diego where they go out and perform surgeries for children with face deformities, and we also have a big passion for helping past and present military and first responders. We love working with those guys, whether it’s Wounded Warriors or other charities that help out with our past and present military.

We provide education classes for free to those guys, and just really love helping those out because they’ve done a big job in helping us have the freedoms that we have today.

Joe Fairless: What is a mistake you’ve made on a deal, that you would do differently if presented the same opportunity?

Scott Carson: I think probably a couple of those would be with our Chicago deals. We bought stuff and we foreclosed on stuff in Chicago before, around Chicago, Illinois… I would probably have talked to my attorneys a little bit more [unintelligible [00:31:18].02] and what they expected the timeframes to be, and double that timeframe. If they said six months, plan on a year; if they said a year, plan on two years.

We’re still gonna come out making our money back and giving our investors a good return on their money, but some of the things that have happened up there have been outside of our control and outside of our trainees’ control. It’s just kind of ridiculous.

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

Scott Carson: The Best Ever listeners can get a hold of me at WeCloseNotes.com.

Joe Fairless: Well, I loved our conversation. I am always educated whenever I talk note buying with someone, and you certainly educated me a lot, from questions we ask loan servicing companies to the three primary things we look for during due diligence, which is the property values, the taxes and the title, as well as the cost implications and timing implications for loan modification versus a foreclosure, and then even sprinkling in some of the states that are more and less friendly to the process.

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

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real estate pro advice

JF863: How to Find $50,000 at the Last Second to Close a Deal

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After raising $450,000 our guest was $50,000 shy of a purchase on a property. After having many people committed, he found creative ways to utilize their cash and still make the deal happen, hear how he did it!

Best Ever Tweet:

Nick Yarnall Real Estate Background:

– Principal at Old Three Hundred Capital, LLC; a real estate private equity firm
– Specializes in Multifamily, SFR, Land
– Acquisitions & Development
– Formerly a real estate agent for New York City’s largest residential brokerage
– Graduated with a BA in economics from Rollins College
– Based in Austin, Texas
– Say hi to him at http://www.othcapital.com/
– Best Ever Book: The Big Short

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real estate pro advice

JF854: He Increased Rents by ~$700 and Retained the Tenants!

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Not a customary purchase, he bought a duplex in North Austin which is an up-and-coming area and decided to charge market rent. Apparently the previous owner didn’t charge market rent, so he evened the playing field yet retained his tenants.

Best Ever Tweet:

Tim Landy Real Estate Background:

– Real Estate Advisor & Investor at Twelve Rivers Realty
– Represents investors from single family, multifamily and development
– Runs an investment company that focuses on rentals and syndication
– Helped raise $150,000 in charitable donations for the LLS
– Graduated Cum Laude from Saint Louis University
– Based in Austin, Texas
– Say hi to him at www.twelveriversrealty.com
– Best Ever Book: Think and Grow Rich by Napolean Hill

Made Possible Because of Our Best Ever Sponsors:

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real estate pro advice

JF853: Only 4 Criteria Matter to this Lender in Getting You Funded

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She had personally funded over $56 MM in 140 loans since she began. She helps people get into rehabs and get the deal closed, hear about her four criteria she is most concerned about before getting the deal done.

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Kelly Smith Real Estate Background:

– Account Manager for Streamline Funding, a hard money lender
– Provide rehab and new construction financing
– Has funded over 140 loans and over $56.5M since her time with Streamline
– Over 15 years of real estate investment experience
– Based in Austin, Texas
– Say hi to him at http://streamlinefunding.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever


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real estate pro advice

JF837: Don’t Go WITHOUT a Team!

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He was able to put together the fastest million-dollar earning real estate professional team, and he was able to do so because he had the systems in personnel in place! Tune in and start applying these principles and your team, and if you don’t have one… Get one!

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Chris Watters Real Estate Background:

– Real estate broker ‎at Watters International Realty, LLC
– His team is #1 Agent in Austin
– Austin Business Journal Inc 500
– Experience includes title insurance, acquisition, hard money lending, and mortgage banking
– Graduate of Texas State University
– Based in Austin, Texas
– Say hi to him at www.christopherwatters.com
– Best Ever Book: Awaken the Giant Within by Tony Robbins

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever


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JF795: Know What Really Matters and Never Compromise Your Self Worth with Your Net Worth #SituationSaturday

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Some live to invest, but others invest to live. Keeping your priorities straight is extremely important especially when other people are vested partners in real estate deals, and these are people you love. Today we will hear from someone who was extremely successful before the crash but made some mistakes that ended up costing him and the others that surrounded him. Don’t make the same mistakes and keep your pride in check.

Best Ever Tweet:

Damion Lupo Real Estate Background:

– Founder and CEO of Total Control Financial, Inc.; A FinTech startup
– Owner of an 8 figure real estate empire and has more than 30 businesses and companies
– Author of 6 books – Raised a million dollars in 85 days
– Founded his own martial art company, Yokido™
– Based in Austin, Texas
– Say hi to him at http://hello.totalcontrolfinancial.com/bestever/

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JF788: How to Save a Deal from the IRS! #SituationSaturday

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You checked all the boxes and you were about to close on the wholesale transaction until you notice that there are issues with taxes… Liens and other fun stuff. Hear how today’s guest worked very closely with the title company to get these problems resolved!

Best Ever Tweet:

Dominic Gauchat Real Estate Background:

– Real Estate Investor at Texas All Cash Home Buyers
– Has 40 deals with a mix of fix and flips and wholesaling
– Over 10 years experience in broadcast and digital media, product development, marketing and sales
– Prior to being investor worked in Sydney Australia in production including Fox Sports
– Based in Austin, Texas
– Say hi to him at dom@austinallcash.com
– Best Ever Book: The Closer’s Survival Guide by Grant Cardone

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Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

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Best Ever Show Real Estate Advice from experts

JF784: How To Trade Your Solid REI Expertise for a CONTINUOUS Lead Generation Stream

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Do you struggle at lead generation? There is a way to trade expertise or deal profit incentives for more leads and today’s guest does just that! He is not savvy with computers or SEO, but he definitely knows who he is and how to structure a deal between him and them. Here how we set up a meet up group with over 500 attendees!

Best Ever Tweet:

Guy Gimenez Real Estate Background:

– Founder of Globe Assets; A real estate investment company
– Completed more than 50 flips
– Texas real estate licensee in 1999, broker since 2007, and Investor since 2000
– Current focus on wholesaling to other investors
– Former Dallas Police Helicopter Pilot for 17 years
– Based in Austin, Texas
– Say hi to him at http://www.globeassets.com
– Best Ever Book: Think and Grow Rich by Napolean Hill

Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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Best Ever Show Real Estate Advice from experts

JF776: How He Raised Over $1MM On His FIRST TWO Syndicated Deals!

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Being new in the deal syndication game, it’s not likely that you would be able to raise over $1 million on the first two deals, but today’s guest did! He gives credit to a few networks that you need to hear about, turn up the volume and learn who you need to talk to!

Best Ever Tweet:

Dave Thompson Real Estate Background:

– Full time multifamily real estate investor
– Raised $1 million on his first two multifamily deals
– Over 5 year’s experience in purchasing single family properties before switching to multifamily
– Left full time high corporate position last year to pursue full time investing
– Based in Austin, Texas
– Best Ever Book: The One Thing by Gary Keller and Jay Papasan

Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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Best Ever Show Real Estate Advice from experts

JF747: How a 24 Year Old MILLIONAIRE Mastered Marketing, Sales, and Connections #skillsetsunday

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Today’s guest is 24 years old and made his first million before that, he is a pro at marketing and business building. He knows what sells and who to connect you to in order to increase your ROI, tune in to hear how your marketing and sales scheme could improve and how to garner more followers and attention.
Gallant Dill’s Background:
– CEO of Instore Connection
– Makes over $20,000 a week and builds companies
– Consulting agent for over thirty product lines in thousands of stores
– Based in Austin, TX
– Say hi at www.gallantdill.com
Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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JF601: What a HUNGRY Software/RE Entrepreneur Does to Attract Millions and Pave a Success Path

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Today’s guest owns cash flow properties, but that’s just the tip
of the iceberg. He is a software entrepreneur that has organized,
built, and sold programs for millions and has also invested in real
estate. He’s the podcast host of The Top Entrepreneurs, and
surrounds himself by only the most brilliant minds with
cutting-edge products, you must hear the show!

Best Ever Tweet:

Nathan Latka real estate background:

  • Currently owns 9 beds and started investing when he was 21
    years old
  • Host of the propular podcast, The Top Entrepreneurs
  • Based in Austin, Texas and say hi nathanlatka.com
  • Text “Nathan” to 33444 to get the financial statement

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Ever Show
 in iTunes. 

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Need financing?

Are you a buy-and-hold investor or doing fix and

I recommend talking to Lima One Capital. A Best Ever
Guest told me about them after I asked how he financed 10
properties in one year. They are an asset-based lender with unique
programs for long-term hold and fix and flippers.

Click to
more or, better yet, reach out to Cortney Newmans at Lima
One Capital. His cell is 404.824.6121.

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multifamily and raising money tips:

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JF533: Why You Need to go ALL IN TODAY and What It Requires

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He went shopping with Pat Hiban in the downslide. Our Best Ever guest owns a large Keller Williams, principal owner in the 20th largest real estate company in US with 2,100 agents responsible for over 19,000 transactions and $4.5 billion in sales. He is a big player in the real estate field and he shares how he took action and why you need to go ALL IN!

Best ever tweet:

David Osborn real estate background:

  • Principal owner in the 20th largest real estate company in US with 2,100 agents are responsible for over 19,000 transactions and $4.5 billion in sales
  • Investor in 5 Keller Williams Regions and owns 20+ related ventures and is principle of a REI private equity group and the operator of 35 profitable
  • Based in Austin, Texas
  • Say hi to him at davidosborn.com

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

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Best Ever Show Real Estate Advice

JF403: $500 Cash to Begin Your Millionaire Mobile Home Empire #situationsaturday

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Low on funds? No problem! Most areas of suburban cities provide mobile homes…double wide manufactured cash cows! Our Best Ever guest shares a skill that will put your five Benjamins to the test…and here’s the kicker, he’s sure that you will pay off the mobile home in a matter of months…100% ROI!

Best Ever Tweet:

John Fedro’s background:


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Best Ever Show Real Estate Advice

JF357: Wanna Invest In Mobile Homes? Here’s Everything Ya Gotta Know

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The Forrest Gump of mobile home investing shares with us everything there is that we need to know. We cover mobile investing of every facet you can think of.

Best Ever Tweet:

Remember that you are buying a business.

John Fedro’s real estate background:

–           Full time real estate investor for 12 years focused on mobile homes

–           Say hi to him at http://www.mobilehomeinvesting.net

–           Based in Austin, Texas

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JF340: How to Find Multifamily Deals without Brokers

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Today’s Best Ever guest conducts 80% of his deals through cold calling. So today, listen up, as he shares with us the step by step guide to cold calling and all the answers to the difficult questions.

Best Ever Tweet:

Juan Maldonado’s real estate background:


–        Acquired 560 apartments and closed on over $26,000,000 worth of real estate

–        Raised $7,500,000 for 10 transactions

–        Based in Austin, Texas

–        8 of the 10 were sourced by cold calling

–        Say hi to him at http://jocopartners.com/

       –        His dog has lived in 3 different continents 

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Made Possible Because of Our Best Ever Sponsor: 

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF212: Here’s a Brainteaser that will Forever Change How You Look at the Money You Make (and Lose)

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From doing the stuff that matters most to concrete real estate investing advice on making money on your properties, today’s Best Ever guest is a best-selling author and shares with you priceless advice you can implement TODAY.

Plus, he’s going to give you a brainteaser that will change how you invest your money and view profitability.

Best Ever Tweet:

Jay Papasan’s real estate background:

·        VP of Publishing and the Executive Editor at Keller Williams Realty

·        Best-selling co-author of The Millionaire Real Estate Agent, The Millionaire Real Estate Investor and most recently he co-authored The ONE Thing with Gary Keller which appeared on more than 170 national bestseller lists, including #1 on the Wall Street Journal

·        Co-owner of a top-producing real estate sales business, The Papasan Team, and partner in private equity firm, Keller Capital and is based in Austin, Texas

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Made Possible Because of Our Best Ever Sponsors:

Norada Real Estate Investments – Having a hard time finding great investment properties?  Unfortunately, the best deals are rarely found locally. Norada Real Estate’s simple proven system provides you with the best deals across the U.S. to create wealth and cash-flow.  Get your FREE copy of The Ultimate Guide to Out-of-State Real Estate Investing

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF167: One FANTASTIC Tip for Finding an Emerging Area in ANY Market

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Ever wanted to invest in Austin, Texas? Or, ever wanted to know how to find an emerging submarket? Today’s Best Ever guest shares with you where you should invest in Austin, Texas and how to identify the emerging areas in ANY market.

Best Ever Tweet:

Shawn Rooker’s real estate background:

–        An agent at Realty Austin based in Austin, Texas

–        Been a real estate agent for almost 6 years

–        Specializes in condos and single family houses

–        He started in a down market and since then has expanded by at least 50% every year

–        Former Army Ranger who has served two combat tours and…has landed in a tree

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Best Ever Show Real Estate Advice

JF47: Follow the Well Worn Path to Success

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Learning the ropes from those who have successfully done it before is a proven success model. Today’s Best Ever guest speaks about that and shares with us details on how successful deals he has done.

Tweetable quote:

Jeff Greenberg’s real estate background:

–        Managing Partner of Synergetic Investment Group

–        Invested in over 700 multifamily both as an active and passive investor

–        Runs three REI clubs in California

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JF31: Scale the Top of the Real Estate Mountain by Learning This One Skill

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What if, instead of specializing on a particular niche in real estate investing, you raised money for the deals and partnered with experienced real estate investors who actually manage and execute the deals?

Today’s Best Ever guest considers himself a money manager.  He believes raising and organizing money is the top of the real estate mountain and thinks other investors should learn the skillset. I agree.

Tune in to listen to his Best Real Estate Investing Advice Ever!

Bryan Hancock’s real estate background:

– Currently has over 40 development projects in Austin, Texas

– His funds have raised more than $13,000,000 for real estate development in Austin, Texas over last 2 years

– Plans to raise $25,000,000 in the next year

– Founder of Inner 10 Capital (http://www.inner10capital.com/)

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