JF1332: How Being Passive In Deals Can Lead To Doing Your Own Syndications with Sarah May

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Sarah is based in Denver and has purchased a 100 unit apartment community in there. She learned how to be a syndicator by investing passively in other syndications, and seeing first hand how to properly do syndications. There are a lot of nuggets for us to pick up in this episode. If you’re wanting to put together a syndication, Sarah has excellent tips for completing your first deal. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Sarah May Real Estate Background:

  • Managing Partner at Regency Investment Group
  • Built up a rental portfolio of 125 actively and over 600 passively
  • Helping people move their money out of the stock market and into real estate. When not looking at deals
  • Former aerospace engineer who became passionate about real estate investing
  • Based in Denver, Colorado
  • Say hi to her at https://www.regencyinvestmentgroup.com/   
  • Best Ever Book: ABCs of Real Estate Investing by Ken McElroy

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TRANSCRIPTION

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, Sarah May. How are you doing, Sarah?

Sarah May: Good, Joe. Thanks for having me on your show.

Joe Fairless: Yeah, my pleasure. Nice to have you on the show. You and I met in Denver; I was in town for my conference, and I also spoke at a local meetup, and you and I were both on the same panel. I really enjoyed what you were talking about, and invited you to be a guest on the show, so I’m grateful for that.

A little bit about Sarah – she is a managing partner at Regency Investment Group. She initially was investing passively in syndications, and now is an active multifamily syndicator. She’s built up a rental portfolio of 125 units actively, and she is invested in over 600 units passively. She is a former aerospace engineer who became passionate about real estate investing. Based in Denver, Colorado.

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

Sarah May: Sure. I’ve started out while working a full-time job; I mainly bought two to four-unit properties. I tried to buy a couple a year with traditional financing; I did that for five or six years. Then a couple years ago I wanted to scale our side-gig into more of a business, so I started Regency Investment Group and got involved with syndication, and partnering with other people to do bigger deals. Last year we purchased a 100-unit apartment building here in Denver with our partners, and we’re looking for the next deal.

Joe Fairless: You started investing passively – what did you learn from that experience that then you applied towards your 100-unit that you syndicated?

Sarah May: Passive investing is great for getting all the benefits of real estate ownership without the hassle. There’s really minimal ongoing management of the investment as a passive investor. You can diversify your portfolio outside of your local market. I’d say what I learned from being a passive investor was just how important the communication was from the sponsor. I was in several different deals, and every sponsor did things a little differently, but I really appreciated the ones who communicated on a monthly basis, gave simple financial summaries, and then kept to their business plan that they presented initially. So that was big for me – I knew I wanted to communicate with our investors for the deals we put together as efficiently as possible, so we’ve put some tools together to make it very efficient… Monthly newsletters for our investors letting them know how we’re performing; not just the management report, but also comparing that to our proforma that we presented when we first raised the capital.

Joe Fairless: What are some of those tools that you mentioned you’ve put together?

Sarah May: Most of this is done in Excel, but I take the key data from the 300-page property manager financial report, I plug it into Excel which runs some basic calculations to get metrics on income performance, expense for performance, how we’re tracking to our budget, capital expenditure, rent per square foot… Things like that.

Joe Fairless: You identified an opportunity to then go from passive to active. You said you started out while working your full-time job as an aerospace engineer… Did you close on your 100-unit while you had your full-time job?

Sarah May: No, I actually was on a leave of absence. I didn’t immediately resign from my position. I took a 12-month leave of absence to essentially test out real estate. I’m an engineer, so I hedged my bets [unintelligible [00:04:24].28] being risk-averse. This was over a year and a half ago now, and I was able to essentially educate myself while still working a full-time job, and go to lots of conferences, and then I think the biggest piece was finding a mentor who I felt confident would be able to help me meet my syndication goals, and then also finding business partners who had a depth of experience doing what I wanted to do and partnering with them.

Once I had those pieces of the puzzle together, I felt a lot more confident leaving my job to focus full-time on real estate.

Joe Fairless: So you basically had income, then you didn’t have income for 12 months. What did you think about that? Are you married?

Sarah May: I am, yes.

Joe Fairless: And what did your significant other think about that? “…income to no income, and now I’m gonna just see what happens over 12 months.”

Sarah May: I think the income part was tough, but we had those passive cashflows from our other investments, so it wasn’t going to be a pinch, which was — we were grateful for that… But it was more of an identity crisis, because when you tell people “Oh, you’re an aerospace engineer and you work on spacecraft”, people kind of get the idea you don’t really have to say much else… But then when you tell someone “Oh, you buy apartment buildings and work with investors”, it’s something most people haven’t heard of, and it takes a lot more explaining; my identity for  10+ years had been an engineer, so it was kind of a reinventing myself a little bit, which I think was the scariest in the beginning.

Joe Fairless: Any tips for someone who has a significant other who they want to propose this to, where they leave their job and don’t make money, but they wanna pursue this?

Sarah May: I would just say make sure that you’re passionate about the business and wanting to stick with it in the long-term. I thought things were going to happen immediately after I quit my job. I thought I had everything together, but it still took almost a year before we bought our deal with our investors, so… Hard work and persistence are key, and if you know your own investor DNA and know that multifamily is where you wanna be, you know that you want to raise capital and be the ringleader for this sort of deals, go for it. I think that your passion and determination will win over your significant other.

Joe Fairless: You said you had an identity crisis… People knew you as an aerospace engineer, and you said that’s a pretty simple thing where people understand it – you talk to smarter people than me; I have some follow-up questions for you on that, but now is not the time or place for that follow-up line of questioning… As far as changing the perception that people have about your from an aerospace engineer to someone who partners with investors and buys apartment communities, how did you do that?

Sarah May: I think a lot of it was just networking, as I got more and more connected with the local real estate industry… That’s how I started to be viewed by others, and that’s how I started to view myself. In real estate syndication, as we know, there’s a large team of people that you have to build around you to be successful, so you know, talking to the brokers, the lenders, the attorneys, the investors, and kind of putting together that team around myself.

As I did that, it felt like just a natural transition into being a real estate investor full-time. I think that was the biggest — it eased the transition the most for me.

Joe Fairless: Let’s talk about the 100-unit. What were you personally risking by putting that deal together?

Sarah May: I think the biggest difference between these large commercial deals and smaller multifamily deals is putting down hard money at the beginning of the contract period… But that’s not like a hard money lender, but hard money is essentially non-refundable earnest money, where even if you discover a major defect in the property or the financials, the seller gets to keep the money.

I personally had $50,000 on the line for the deal that we were syndicating, and that was my money, that was investors’ money… And the first time you do that it’s a little intimidating; I did things to mitigate the risk, but that felt like a big risk at first, as well as it takes a lot more upfront costs for due diligence, and application fees, and things like that. So financial risk felt a little bit more extreme, but actually managing the property and seeing it go really well – it’s been a really non-stressful experience, thankfully.

Joe Fairless: Yes, I’m knocking on wood for you right now, by the way. We do non-refundable earnest money day one as well, and there’s three scenarios where it would become refundable. One is something wrong with the title; two is something wrong in the environmental, and then three – seller default. Did you have those three in there, or is it just non-refundable?

Sarah May: We did. We had the title defect and the seller default language in there. I don’t remember about the third one, but we did have that.

Joe Fairless: But otherwise, if it’s 95% physical occupancy and you go in and you do a lease audit and it’s 60% economic occupancy, you got 50k in and you’ve gotta figure out what to do, right?

Sarah May: You’ve gotta make the deal work somehow.

Joe Fairless: What gave you the confidence to put $50,000 on the line? And I know $50,000 is a lot of money at any point in time in life, to Warren Buffett or to a high school student who has never had a job, in those savings account, but how significant was the $50,000 to you at that point in time in your financial wealth standpoint?

Sarah May: It wasn’t gonna change our financial situation one way or the other if we had lost that money, but we just had never done an investment where it was that easy to lose your money if one thing went against your favor. But still, it’s a lot of money, but the deal size that we were doing – it really was not unreasonable at all to put that much in. I think some deals that size – it’s more like $150,000 non-refundable earnest money, so in that sense we were getting a good deal, only having to do 50k…

But how I got the confidence to move forward with that was just knowing I have the team, knowing I have the business partners who were experienced, knowing we had a great lender lined up and had done our due diligence beforehand. We had an early access agreement on the properties, which means we had our HVAC technician, a roofer, a plumber, a general contractor – all go out to the property and inspect the major systems before we signed the contract. That at least gave us a little more confidence on the physical condition side.

Joe Fairless: Will you elaborate on that, in case that’s a new term or clause, to a Best Ever listener?

Sarah May: Sure. I don’t think it’s very common in residential real estate, but when they’re putting down this hard earnest money on day one (at the contract signing), usually you’ll have a couple weeks beforehand where you’re negotiating the contract. During that two-week period, sometimes you can get the seller to agree to let you go on the property for a day, poke around, and see if there’s anything wrong with the property before you both spend a lot of money drafting up the full contract and moving forward… So they let us do that.

We weren’t able to do unit-by-unit inspections during that early access day, but we were able to get access into a few units and look at the general structure.

Joe Fairless: What’s the incentive for the seller, besides the initial legal fees, which would be pretty nominal, when drafting the PSA over the first couple days? What’s the motivation for a seller to allow you to do that?

Sarah May: In my perspective, I think it’s just the surety of closing the deal. If they’re willing to let you do that and you get comfortable with it, there’s that much more probability that you’re gonna go see the contract through the entire way and buy the property. If they didn’t let you do that, you might find something day 30 into the contract and still be within your right to terminate. And yes, they get to keep your $50,000, but now they have to start from scratch and find a new buyer, so to them I think it’s just more assuring a successful close later on.

Joe Fairless: You’ve been passively investing in over 600 units… Have any of those sold?

Sarah May: The first one is probably gonna sell in about a month.

Joe Fairless: Okay. So you’re still in all of those deals. What have you seen that’s gone wrong?

Sarah May: There’s always things that go wrong. On the multifamily side, I think most of the deals I’ve done have been value-add deals, so it can take longer to get the riff-raff tenants moved out of the property, it can take longer to find a good, reputable contractor to renovate the units, property manager issues, getting inspectors on one property… All they wanted to do was renovate the office, but apparently, the city had some very stringent codes, that they had to do it all to code, and it took months just to get the inspector to agree to let them remodel the office.

Other issues – I think the biggest one honestly is the physical condition of the property. It’s tough to know what the plumbing lines look like, what the electrical system’s condition is, how long the boilers are going to last, if there’s foundation issues… I mean, there’s a whole laundry list of items that can go wrong, and some of them are not easily seen. So I think that’s the biggest pitfall in somebody’s passive deals – the sponsors have done the best they could, but there’s an issue with the boiler or the [unintelligible [00:14:22].14] and we have to fix the issue.

Joe Fairless: As a passive investor, what type of communication — I know we talked about things like monthly simple financial summaries, keep the business plan etc., but specifically when something goes wrong, what have you seen as a communication approach that has worked, and what have you seen that is a bad approach?

Sarah May: I think the best tactic that sponsors can take is just being completely transparent with the investors. If something major happens that is $10,000 or more in unexpected costs, just let them know right away, and ideally let them know the plan to take care of the issue and how you’re gonna pay for it.

On the opposite side of the spectrum, I think the worst approach is just not communicating problems, or not communicating at all with the investors, leaving them to wonder what’s going on. I definitely over-communicate, even on the negatives, and I really have a plan of action to address the problems.

Joe Fairless: You’ve got 125 units; 100 you syndicated, 25 your own portfolio… What’s next for you?

Sarah May: Right now our major focus is finding another apartment deal that we can syndicate. We have lots of investors anxious to get another property in the Denver area. It’s tough finding deals with the market being so tight, so that’s our number one priority; simultaneously, I’m still running our other rental portfolio and managing the business plan for our Fairview Apartments that we’ve syndicated, and making sure that everything stays on track there.

Joe Fairless: You said you’re running your other rental portfolio – does that mean you’re self-managing?

Sarah May: No, no, but we’re always doing projects. We buy B and C class properties, so we’re always renovating a property, renting out a property, trying to find new properties, selling properties… The asset management side.

Joe Fairless: Okay, I’m with you. How did you find the 100-unit deal you closed on?

Sarah May: That was really traditional to begin with. It was a listing that one of the large apartment brokers in town had out, and it was a journey  getting the property. We did the open market competition – this was right at the end of 2016, when the elections happened and interest rates spiked… And I think some of the would-be buyers also got cold feet, but unfortunately the seller also got cold feet and decided he wanted to hold on to it for a little while… So even though at that point in time we had been the highest bidder, we kind of had to wait on the sidelines, and then five months later just by keeping in touch with the broker and asking about the property, we found out that the seller had wanted to sell again, and we were able to make an offer without any other competition from other groups.

Joe Fairless: Hm, the story of perseverance… What tactics are you using to find deals right now?

Sarah May: Mainly through brokers. Also, going [unintelligible [00:17:24].25] looking at tax-distressed properties and potentially reaching out directly to owners, that might be one way of doing it… And then just networking, a lot of networking. I go to several meetups every month, maybe every week… I do apartment associations, and then I’m also part of another investment group based out of Dallas, where my partners are located. So lots of networking, and we can find good deals that way, too.

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

Sarah May: I will answer that in a few different ways. I think it depends what stage you are in investing. I’d say step number one – make sure you know what you want to be doing; you might call this your investor DNA. Do you wanna be an active investor or a passive investor? Do you wanna be flipping houses, wholesaling, in multifamily? Does it meet your lifestyle and financial goals with what strategy you want? Let’s say that’s step one, and in my case, we want to syndicate large multifamily apartment buildings.

Then step two, make sure that you have that passion for the business, because like I was saying, it does take a while to build up the team, and the reputation in your local market to get started.

Then number three, once you are doing deals, just trust but verify everything that you see. For instance, brokers do a great job putting together the OMs and all the property details, but the way that they analyze properties is different than how you as a syndicator should analyze properties. There’s additional cost for closing costs, we have dollars in working capital, and things that brokers don’t usually list because they can fluctuate based on the investor’s business plan and what they wanna do with the property… So trust but verify, and be passionate for the business.

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

Sarah May: It sounds great!

Joe Fairless: Alright. First, let’s hear from our Best Ever sponsors.

Break: [[00:19:23].23] to [[00:20:05].08]

Joe Fairless: Best ever book you’ve read?

Sarah May: On real estate I love The ABCs of Real Estate Investing, by Ken McElroy. It’s a great introduction to syndication and how to put together bigger deals. And on personal development, I’ve just read the book The Power of Habit, by Charles Duhigg, which is a great book that kind of explains why we do what we do and why society has certain ones as well. It’s really interesting.

Joe Fairless: Best ever deal you’ve done that wasn’t your first and wasn’t your last?

Sarah May: A deal we did was downtown Denver, a little bit of a C/D neighborhood, but close to where things were happening; it was a three-unit, a long time ago. We bought it right before the 2008 recession, but what we learned from that was we still were making money every month from the cashflow, and the market went up over time, and we sold with a 200%-250% profit just on the equity gains… So buy markets with sound fundamentals, and multifamily will decrease your risk in times of economic downturn.

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

Sarah May: I would say having conflicts of interest with other people. The one and only fix and flip I did, the contractor was the same as the contract with the broker – he sold us the property he was using – and he was also a fix and flipper, and we found out that the contractor wasn’t working on our property, because he was working on our broker’s property all the time… So yeah, avoid conflict of interest and have strong contractual language; that actually would have saved us in the deal… We could have taken the contractor to court for every day he was late, for $250, but he decided to eventually get his act together and finish the project.

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

Sarah May: I love Junior Achievement; I’ve volunteered with them before. Their mission is essentially to educate young people in financial areas. Our school system doesn’t really do a good job educating students, and the fact that 75% of Americans live paycheck to paycheck means that most adults aren’t able to educate their children on financial matters. I would love to see more financial education in the schools, and Junior Achievement has been doing that for a long time.

Joe Fairless: I share your love for Junior Achievement. Best ever way the Best Ever listeners can get in touch with you?

Sarah May: Sure, the best Ever listeners can contact me probably the easiest through my website, www.regencyinvestmentgroup.com, on the Contact Us page. Or you can just reach out directly, and my email is Sarah@regencyinvestmentgroup.com.

Joe Fairless: Sarah, thank you so much for being on the show, talking about the evolution of your real estate ventures, from the 2-4 units to syndicating 100-unit apartment communities, how you started investing passively… You learned how important communication is as a deal sponsor, and the different aspects of that communication – certainly, helpful for the Best Ever listeners who are looking to eventually syndicate deals. If they’re investing passively, they’ll want to invest with a syndicator who is a good communicator, and a way to test that is perhaps asking for reports on other properties that they’ve recently sent out, just so you get a sense of how they communicate; that way, you can verify that, since that is such an important aspect for when you eventually do become full-time doing this.

Congrats on the 100-unit being not an issue. Again, I’ve knocked on wood for you on that one, and I’m really grateful we got to meet in Denver, and looking forward to staying in touch.

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

Sarah May: Thanks, Joe. Great being on.

JF1325: Closing Your First Self Storage Deal At 22 Years Old with Allison Kirschbaum

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Allison has always been an entrepreneur, with her first business being a pet sitter at 9 years old. After different entrepreneurial ventures, Allison had a desk job, was making great money but was not fulfilled. She went back to being an entrepreneur and got into real estate investing. She got her first private investor at age 22 who invested $100k in her very first self storage deal. Allison has a ton of information to share with us today about being an entrepreneur and self storage investing. From raising money to managing the assets, there is something for everyone in this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Allison Kirschbaum Real Estate Background:

  • CEO of Luo Media Group, providing targeted marketing services for real estate private equity funds
  • Success Obsessive with 16 years of sales, marketing and business expertise
  • Master of capital-raising for new investors and rapidly scaling RE businesses through effective systems
  • Based in Denver, Colorado
  • Say hi to her at www.allisonkirschbaum.com
  • Best Ever Book: Three Feet from Gold

Join us and our online investor community: BestEverCommunity.com


Made Possible Because of Our Best Ever Sponsor:

Are you committed to transforming your life through real estate this year?

If so, then go to CoachWithTrevor.com to apply for his coaching program.

Trevor is my real estate, business, and life coach. I’ve been working with him for years. Spots are limited, so be sure to apply today!


TRANSCRIPTION

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, Allison Kirschbaum. How are you doing, Allison?

Allison Kirschbaum: Hey, Joe. I’m doing awesome, how are you?

Joe Fairless: I’m doing awesome as well, nice to have you on the show. A little bit of background, Best Ever listeners – I met Allison two years ago at the Best Ever Conference in Denver. She asked the best, most intimidating questions out of any person who attended, and then last year she delivered on that once more. And she wasn’t – I don’t think, Allison, you were asking to be intimidating, but your questions are so pointed and well-researched, it just blew me away… So every time I saw Allison stand up this past year at the conference when she attended, I started sweating if I was on stage, because I didn’t know what she was gonna ask. Fortunately, none of them came my way… But a little bit about Allison – she is the CEO of Luo Media Group, which provides targeted marketing services for real estate private equity funds.

She is a master of capital raising for new investors and rapidly scaling real estate business through effective systems. Based in Denver, Colorado… With that being said, Allison, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Allison Kirschbaum: Sure, absolutely. And just so you know, no, I was not asking those questions to be intimidating; I was doing it because I was afraid that I would ask a stupid question, and I wanted to be as good as possible. I had several mentors in my lifetime, and one of my earliest ones was a digital mentor, John Maxwell, that I listened to on CD while I was driving back and forth from work, as a 16-year-old… And he always said “Prepare when you’re gonna take your mentor’s time.” You and all the other people that get up on the stage of Best Ever, you work so hard to make it THE best ever, so if I’m gonna stand up and take your time and take a question spot away from somebody else that could have had a great question, it’s gotta be a really great question… So I’m so glad that you guys thought that was the case.

Joe Fairless: You delivered on that.

Allison Kirschbaum: Thank you, I appreciate that. I have to make that a branding thing – “The girl who asks great questions.” [laughter] My background – I’ve been an entrepreneur since I was 9. I started my first services business at the age of 9, I was a pet sitter. We lived out in the country, so I’m not talking about just running to the neighbor’s house and feed the cat, we’re talking like four cats, and five dogs, and horses, and goats, and chickens, and if they mix with each other, they’re gonna eat each other…

So it was a huge amount of responsibility for a nine-year-old when you live in the country and you’re a pet sitter. But things really started getting kicked off when I was 12 and I started my first products business selling handmade jewelry and soap. I would go door to door, I would chase down the garbage truck that came through our neighborhood because I knew the owner of the company drove, and I said “Hey, I’ve got this great incentive program, especially for your female drivers. You can get these great gifts to give away as incentives from my little business.”

I thought myself how to cold-call so that I could put my goods in. I eventually ended up with ten shops that were selling my [unintelligible [00:03:50].08] I think I called like 80 or 90 shops in my area, as a 12-year-old, and I eventually ended up with 10 that were selling my product for me… And I also learned how to speak from a stage and sell to small groups when I was around 15 or 16, and my parents were into network marketing, and they got me into it just to get into the entrepreneurial mindset.

That continued after I’d been in the corporate world for a little while. I was 21-22. I had been a sales trainer, the sales manager for all of the currency exchanges in the state of Texas, for the world’s largest foreign currency exchange brand. I’m the little 19-year-old kid running around training people twice my age on how to be a better salesperson, because I was that good. I loved sales that much, and I had a really entrepreneurial spirit.

But after that job, I got my first ever desk job, and it paid a ton of money. I’m this 22-year-old kid with no degree, and I’m making 76k, 77k a year. It was unheard of.

Joe Fairless: Wow.

Allison Kirschbaum: But I’d sit down in that grey, lifeless cubicle, in that deathly quiet office. Do you know what that feels like, Joe? It’s like being in a morgue; it just suffocates you. So the first day I sat down in that cubicle – it was my first and last ever desk job. I told myself, “I’ve gotta be an entrepreneur again.” So that night I went home and I looked at my bookshelf, and I’m one of those people, Joe, that my books take over everything. I’ve always got like half a dozen books all over my bed, there’s never any room to sit or relax.

I’ve got dozens and dozens of books on bookshelves everywhere in the house… And I went through all my books and I’m like “What have I studied or what have I read before that would be a great entrepreneurial venture to take on as an adult?” and my eyes landed on Robert Kiyosaki’s book Cashflow Quadrant, and I said “That’s it! Real estate. Robert’s a smart guy, I’m good at sales, I’m sure I can do this. Let’s try real estate.”

Nine months later I bought my first rental property. I ended up buying a single-family here in Denver and running it like a multifamily, because as you know, Joe, real estate in Denver is super expensive. I didn’t want to buy a multifamily as a 22-year-old kid; I could afford a multifamily at $100,000 a unit, that was just too much for me. So I ended up renting out this little six-bedroom house to young professionals coming into the city to take jobs in Denver by the room, and I ended up making double the rent on that house than I would have made if I had rented it out as a single-family… And I would be able to leverage that expertise and creating that unique approach into getting my first private investor as a 22-year-old.

It was not family, it was not a friend, it was somebody I’d met through my broker. He believed enough in my business plan for a self-storage facility to become my first private investor for over $100,000. He’s still my investor today. That was eventually what led to running private equity funds in the other systems that you talked about earlier.

Joe Fairless: First private investor – and you’re how old now?

Allison Kirschbaum: I’m 25.

Joe Fairless: 25. So three years ago your first private investor – he invested $100,000 into it. You said self-storage?

Allison Kirschbaum: Yes. A little self-storage facility outside of [unintelligible [00:06:34].20] Kansas.

Joe Fairless: And is that all the equity that was needed for a self-storage facility?

Allison Kirschbaum: Yeah, that was it. It was kind of a special deal. The bank was local to the area. They only needed 15% down, and they actually lowered that from 20% on the day of closing. I’m sure that’s the only deal I’ll ever do where the bank lowers the amount you have to put down on the day of closing. But that was all we needed to get into that deal.

Joe Fairless: How did you find that deal?

Allison Kirschbaum: To be perfectly honest, Joe, I’m not sure I remember. I think it was actually through LoopNet. Yeah, I’m pretty sure it was LoopNet.

Joe Fairless: So why do you think other people didn’t buy it, especially if it was on LoopNet, but then you did?

Allison Kirschbaum: Well, I know LoopNet’s reputation, but every now and again you find a diamond in the rough. This one – it wasn’t exactly a diamond; maybe it was a ruby. It’s not a spectacular property, but it had a lot of things that appealed to me. Number one, it was in a secondary market; I only buy storage in secondary and tertiary markets, because that prevents me being basically stomped out by the big guys, like Public Storage and Greenbox [unintelligible [00:07:27].26] It had a lot of room in operational upside; in self-storage, that’s what we refer to when we’re looking at raising rents and increasing efficiency of operations.

We had about 30% to go from the way the rents were currently being charged at that facility to the market rate. We’re not even talking about “Hey, let’s be the highest-charging facility in the market in this little town of 30,000 people”, or whatever. We’re talking about 30% to go from where those rents were, to market rates, to where everybody else with completely comparable facilities, almost identical facilities were charging.

So we saw a huge amount of upside, and I had – and still have to this day – a great operating partner who has more years of experience in self-storage than I have even being alive, so… [laughs] It was just a great combination for us.

Joe Fairless: And that operating partner is different from the private investor, correct?

Allison Kirschbaum: That is correct, yeah. Her name is Pamela Alton. She runs Mini-Management Storage, management services, and any of you that are in the storage industry, any of your Best Ever listeners that are listening to this that are in the storage industry will probably know Pamela. She’s been an industry fixture and expert for 27 years now.

Joe Fairless: How did you come across Pamela?

Allison Kirschbaum: I called her with a cold call; I went through the Inside Self-Storage website looking for somebody to do a feasibility inspection on the property to make sure that it was a good property, that I knew what I was getting myself into, and Pam and I just kind of hit it off; she came in and inspected the facility for me, and she actually approached me about four months later when we ended up at the Inside Self-Storage Conference that goes in Vegas every year… And she asked me “Hey, you’re going great places. I wanna partner with you, I wanna go those places with you”, and that’s a partnership we have to this day.

Joe Fairless: Is she based in Kansas?

Allison Kirschbaum: No, she’s actually based on the East Coast. She’s as far away from me as you can possibly get. She’s on Chincoteague Island, Virginia.

Joe Fairless: Okay… I’ve never purchased self-storage, so roll with me on this… But if she’s not local, then why would she be the best operating partner to do the due diligence, versus a local group?

Allison Kirschbaum: Number one, self-storage is a niche industry in many ways still. There was no way to find somebody who was expert enough, close enough to the property to make that connection. I either would have had to use a feasibility group out in Texas, or maybe one from Colorado, or one from the East Coast, which ended up being Pamela. There was nobody (so to say) local enough to Kansas to warrant that switch. Like I said, Pam is an industry leader; she’s been speaking at conferences, writing articles for national magazines, coaching people on how to run their self-storage and operate their self-storage for 27 years.

The reason that I kept working with Pamela and the reason that that worked for us is because the vast majority of our properties, specifically the ones in the private equity funds, are run without managers on site. They’re not run in the traditional way where you think of a nice little lady who sits in an office and takes your payment for you on the first of the month. They’re run with kiosks, so we were able to cut in half the operational margin that most self-storage facilities have, which is already ridiculously low.

Joe Fairless: So that was three years ago… How many deals have you done since then?

Allison Kirschbaum: Oh, boy…

Joe Fairless: A lot?

Allison Kirschbaum: You know, people ask me this, and it’s embarrassing, but I lose count, because we’ve  got two funds running right now, and then we’ve got another two — there’s so much demand for self-storage investors… We’ve got another two that we’re starting out, so maybe 40-45 deals.

Joe Fairless: 40-45 deals. Are they all self-storage?

Allison Kirschbaum: They’re all self-storage, yes.

Joe Fairless: All self-storage. Okay. How are you finding these deals?

Allison Kirschbaum: We use a proprietary method right now. We started out like everybody else does – we talked to brokers and we went through LoopNet, and I had a CoStar subscription, and that’s what we were dependent on. And I still do have CoStar. It’s a very helpful program. But right now we’ve brought together a bunch of techniques over the years that are serving us a lot better than working with brokers, because it allows us to not only get off-market properties and to negotiate them on our own, which is the [unintelligible [00:11:07].12] but also to take very specifically the deals that we want and kind of carve out the areas of the market that we want without too much competition.

For example, we like properties that don’t have a lot of the standard self-storage accouterments. We don’t like parking, we don’t like retail, we don’t like other pieces of stuff tacked on the storage.

And if we are working without a broker, we found that it actually is easier to kind of carve pieces of that off and either leave it with the owner, or take it to another investor, or whatever it is… Because we don’t have somebody who’s vested interest is in making that one deal work with us specifically, you know what I mean?

Joe Fairless: How much equity have you raised for your funds?

Allison Kirschbaum: It’s coming under right now about 20-25 million between me and my partners together. I can’t take credit for all of that, because I do have other partners that have raised quite a bit as well, but the fund is overall about 20-25 million.

Joe Fairless: How many partners do you have and how is the responsibility divvied up?

Allison Kirschbaum: It’s soon to be five partners. We’re taking on a couple for some of our other funds. I have a partner who’s just a whizz with Excel. She’s our CFO in one of our funds. The interesting thing about the way we split up the partnerships on our funds is that they’re always people that already have specialties in something else as well. For example, two of my partners – they run a very successful flipping company here in Denver, so in the fund that we run together they are COO and CFO, but they’re not COO and CFO for the other funds that we run.

In another fund that we have we have a CFO that knows COO, so we fill that gap with employees, or in some cases Pam can take over some of the duties, and it’s a custom situation for each fund. Eventually, I think we’ll probably get to the point where I can just hire employees for each division and we won’t have to trade between partners, so to speak, but right now that’s what we’re doing.

Joe Fairless: Let’s just keep it at the three versus the other two, just for my own purposes… For those three, you said one’s good at Excel, so is that underwriting that she’s responsible for?

Allison Kirschbaum: Yes. We have a  very specific VA system where we’ll have virtual assistants basically roll in all of the analysis info that she needs, prep it in a specific spreadsheet, and then she goes over the numbers and qualifies or disqualifies things. Then that allows me and our acquisitions person to go out and actually create the deals.

Joe Fairless: Okay. So you’ve got you, the underwriting lady, and your acquisitions person. Acquisitions – they negotiate, they go find deals etc., right? Underwrite…

Allison Kirschbaum: Yes, they mostly help with negotiations. They don’t really do any underwriting; they provide the info back to [unintelligible [00:13:39].12] to put into Excel and make sure that the numbers still work and that it still matches up with our parameters, and that kind of thing. But our acquisitions person goes out and actually takes care of the acquisition of the property. They make sure that we get all the right inspections, that we have all the right paperwork… If there’s something out of line with the deed, or the title, or whatever, they’ll go with a lawyer; they’ve got the ability to talk to them for us and just kind of feed the most important information back to me and [unintelligible [00:14:02].12] so we can maximize our time and we can focus on the things that we’re better at.

Joe Fairless: And then your responsibilities primarily are what?

Allison Kirschbaum: Marketing, and I guess you might call it CEO. I provide the direction for the fund, I provide a strategy, I build the overall operations process and marketing processes that we use in order to get both deals and investors, and also to run the properties as a whole. Then Pamela helps [unintelligible [00:14:25].14] in addition to our maintenance people, which work kind of as the side-helpers, so to speak. Then we’ve got a couple of people behind the scenes that are VA’s, just helping feed us information, answer customer calls, be customer service, all that good stuff.

Joe Fairless: And those VA’s are also helping you with the initial underwriting of the deals?

Allison Kirschbaum: They are, yes. We worked a very long time — although I guess I wouldn’t necessarily call it underwriting in terms of their judging the deals for us. They’re just going out and getting the info. For example, we have a very detailed spreadsheet that shows us the population of a very specific area around each facility, the age of the facility, their current rents, the rents for the market area, current unemployment rate… I think the last time there were about 84 different data points that go into underwriting each facility, just from the very basic “Hey, do we even wanna negotiate this top line?” kind of deal. And over many months, we’ve created a very detailed spreadsheet that shows the VA what kind of information they need to put in each cell, where the information has to come from, what the specifications for the information are…

At this point there’s almost no gaps that we could possibly get incorrect info from.

Joe Fairless: What’s gone wrong?

Allison Kirschbaum: There are obviously times when people mess up. On the first deal that I was telling you about – the deal in Kansas – we almost, due to me misreading the title paperwork, because we didn’t have the system in place at the time (it was my very first deal), we almost accidentally closed on a wrong lot that was across the street from us, instead of the lot that was actually meant for parking on our side of the street. And thankfully, my lawyer convinced me to read everything again, he was like “You really should read it one more time.” I’m like, “Dang, man, we’ve already read it so many times”, but sure enough, it saved our butts.

Joe Fairless: And why didn’t your lawyer catch that?

Allison Kirschbaum: You know, I was asking myself that, but at the end of the day I said “It doesn’t matter”, and I switched real estate lawyers after that.

Joe Fairless: [laughs] Fair enough. Got it. Of the 25 million that your group has raised, approximately how much would you attribute your portion of that to?

Allison Kirschbaum: Me personally I’d say it’s around almost exactly a third; between 7 and 10 million. Some of our investors are in multiple deals, in multiple funds. They’re kind of the type that’s like, “Hey, let’s commit a little bit more when you’ve got another signing with different parameters.” It could even be a little bit higher, we just don’t have all of that money subscribed yet.

Joe Fairless: Yeah, alright. Well, we’ll just round up for conversation purposes – let’s say 10 million. In three years you’ve launched a company and you’ve personally been responsible for raising approximately 10 million dollars… Approximately how many investors does the 10 million consist of?

Allison Kirschbaum: Around 140-150, something like that. Our average subscription amount is between 100k and 150k. And a lot of people like to do that in tranches. They’ll commit 100k, and then they might come back a couple months later, a year later while the fund is still open, commit another 100k, something like that.

Joe Fairless: And of those 150 investors, what are the ways that you met the ones who invest the most?

Allison Kirschbaum: I think the most prominent examples are usually the people that I do either meet initially in person, or they’ve had some kind of touch with me that feels more personal. For example, I do webinars, or Facebook Live, or Reddit Ask Me Anything –  that kind of thing, where people can ask me specific questions about self-storage and I can answer them back. On video, real-time, and even if they’re not physically sitting there in front of me, they feel like they have a real conversation with me. I’ve gotten some very large investors that way, in person.

I do speaking gigs, paid and unpaid, on real estate training, self-storage training… I do very limited coaching; I don’t have time for a lot of coaching clients, but I do coach on real estate and self-storage… And all of those are obviously personal touches. Or I’ll meet somebody at a networking event, something like that. So there is a lot to be said for that, but that’s from the initial amount invested.

If somebody commits $50,000 and you’re making them 12%-14% or whatever it is in their first year, and it’s self-storage funds, which is something that we can do, they’re obviously gonna be a lot more willing to come back later and say “Hey, here’s another 200k out of my savings” or “I sold some stocks, here’s 200k”, or whatever it is. We can still end up with roughly the same amount of invested money from either somebody that I didn’t meet in person the first time around, or somebody that I did. You never know.

Joe Fairless: If there was one approach that you would fight someone for if they told you you can no longer do that approach, because it’s so valuable to you, what would that approach be?

Allison Kirschbaum: It would absolutely be webinars, or Facebook Live, something like that. Something where I can be on video, online, in front of people… Because think of a room full of 100 people, or 50 people, like the panel that you did here in Denver that day before Best Ever. In that room you’re talking to 50 people, and even if you have an amazing conversion rate – let’s say you convert 10% of those people into doing something with you, whether it’s buying an eBook, buying some kind of content that you have, that shows your expertise in the niche, or whether they invest with you – if you get an amazing conversion rate of 10%, you’re still only talking about five people out of those fifty in that room… Whereas if it’s 200, 300, you’re talking 20-30 people.

On a webinar, especially with the software that I have, which is a little bit advanced, you can fit up to 1,000 people on a webinar. And if my conversion rate, which is typical for webinars of any type – if my conversion rate is 10% of 1,000 people, we’re talking 100 people that are either going to purchase from me and become investors today, or they’re gonna buy a little bit of content, or they’re gonna get a consultation for coaching and they’re gonna become investors later.

So we just have so much more potential to reach people in a personal way through a webinar or a Facebook Live or what have you, something like that.

Joe Fairless: The thought process for most people isn’t “Okay, great, I can have 1,000 people”, the process is “How do I get 1,000 people?” So how do you get 1,000 people to be on those webinars?

Allison Kirschbaum: It is not instant. The best way to start – and this is something that I teach all of my private equity clients and all of my personal branding clients to Luo Media Group as well… You need to start with some paid traffic. Everybody thinks “I wanna go organic. It’s sleazy to do paid traffic.” It’s not sleazy. You open up your Facebook feed every single day; I guarantee you there are hundreds of people paying for your eyes to fall on their ad, and I guarantee you’re clicking on some of them.

So people do it all the time, every day; it’s not sleazy, and it’s really the only way, unless you already have a great list of loyal people that are reading your content, they read a blog, they read your LinkedIn updates, whatever it is, or they listen to your podcast, something like that… Unless you already have that list of people or you can borrow it from someone, that’s the best, fastest way to get a jumpstart on it. Then as soon as you’ve got people on your e-mail list, they’re getting your newsletter, they’re reading your blog, whatever it is – as soon as that begins to snowball for you, then it’s very simple to get a thousand people on a webinar. Not just once a week or once a month, but multiple times a week. Imagine the multipliers on that, Joe.

Joe Fairless: With your approach, I imagine you registered the fund so you can publically advertise it?

Allison Kirschbaum: Oh yeah, absolutely. We always use 506(c) funds, yeah.

Joe Fairless: C as in cat?

Allison Kirschbaum: C as in cat, yeah.

Joe Fairless: Cool. Yeah, because then you’re able to shout on the top of the mountain, “Hey, this is what we’re doing.” I’m thinking through this with the stuff I do, because we always do 506(b), so I can’t publically advertise the funds. Clearly, you’ve thought through pros and cons of b versus c, so why not b and why c?

Allison Kirschbaum: I have two main reasons for liking 506(c). The first one is that it’s much riskier as a syndicator in a lot of ways to use unaccredited investors who may or may not be sophisticated. An accredited investor, as you know, Joe, is somebody who has a very specific net worth, a very specific income, and they basically are ruled with the SEC, a setup that says “If you make over X amount per year or you have over X net worth” – this is something the Best Ever listeners can look up online as well, it’s all over the internet, the definition of an accredited investor… If you are over this threshold, the SEC basically thinks “Hey, you’re a smart enough person. You’re qualified to be in a little bit more advanced investments”, and that means that there are a lot more investors open to accredited investors than non-accredited.

And that’s not always the case. Sometimes somebody inherits money and they’re not any smarter with money than some people who’ve never made a dime to their name… But unaccredited investors, in a lot of cases, simply don’t have as much financial experience. Maybe they’ve never invested in funds before. Maybe they don’t even own real estate. Maybe they ended up with an insurance settlement from a death in the family (God forbid something like that), and they’re renting right now, and they want to invest in something because they’ve been told that’s what they should do. And even if they seem like a  really great candidate overall for the fund – if they’re smart people, if we have a good rapport, and if they check out in every other way, it tends to be harder on the investor and harder on the syndicator to work with unaccredited investors, for most of those reasons.

Joe Fairless: I’m with you on that. I only do accredited investors, even though I do 506(b), so what’s the other reason?

Allison Kirschbaum: Oh, do you?

Joe Fairless: Yeah.

Allison Kirschbaum: Okay. Well, the other reason – and this is the reason that I think 506(c)’s are the only way to go, but this is just me… 506(c), you can advertise any way you want to. You can stand on a stage at a conference and say “Hey, this is what I do.” You can put up a billboard on the side of a highway; you can do social media ads. There’s some restrictions as to what you can and cannot say on those ads, but nevertheless… Where if I was a (b), you can’t even put up an ad, you can’t even say “Hey, we’re the experts in self-storage investing. Come talk to us and learn more.”

That’s all we can sometimes do with our ads because of those restrictions, but we can at least put it out there. We can reach millions of people, versus with other types of funds they’re either much more expensive, like a Reg A+, in order to get the same kind of reach, or you can’t do that kind of advertising at all, like with a 506(b). That’s why I love 506(c).

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

Allison Kirschbaum: My best investing advice ever is to read on a subject until it starts to repeat itself, and then keep reading until you find something that refutes what’s repeating itself.

Joe Fairless: Will you give an example?

Allison Kirschbaum: Yes. So when I was first starting to learn about creative deals — creative real estate generally has two or three different topics that you would read about: lease options, seller finance, or wrap. Everywhere you go, everybody talks about creative real estate as being those three things. So I read and I read and I read; I read for hundreds of hours a year, trying to find other ways to do creative deals. I said “This can’t be all that’s out there.” So I read until it started repeating itself, which is the point at which you realize that you’ve probably read enough; you’ve read enough to get started, you’ve read enough to know what you don’t know and to be careful. And then I kept reading, because I wanted to know what else was out there. Because the weird thing about any industry is that the it’s the people that tend to go against the grain of the industry, the people that take a niche market, the people that work outside of hot areas, whatever it is, in any industry – they tend to be the people that have some kind of expertise that nobody else knows. They’ve got like the secret sauce.

So I wanted to find that secret sauce for creative deals. And I kept reading, and I kept meeting random people, and I kept just pushing forward, looking for that thing, until I met a broker who was actually advertising a property on Craigslist; he was a totally legit broker, he’d been in the industry 30 years, his expertise was in 1031 exchanges… I met him at this property, and we spent about 30 minutes looking at the property and two hours talking about creative deals… It turns out there’s a whole society of really experienced brokers called The Society Of Exchange Counselors that focus on creative deals. And there are literally hundreds of ways to do a creative deal… And I never would have figured that out if I had stopped at just reading lease options, seller finance, wrap mortgage.

Joe Fairless: What’s one approach that you didn’t know through the reading, but you learned from that gentleman?

Allison Kirschbaum: I learned that you can use what’s called OPS, or other people’s stuff – it was a kind of parallel to “other people’s money” – as a down payment. In a deal that me and my dad were looking at doing about a year ago, it started out as a seller finance deal, and then it got even a little bit more creative, because a story that I had heard from this broker was somebody had put down as a down payment a Camaro for an apartment building. I don’t remember the exact details, but I know the down payment was a Camaro. The guy selling the building was seller-carrying it, and the guy wanted a Camaro, and it worked out perfectly.

So my dad has this great truck, and the seller of this property was like “Hey, what about the truck as part of the down payment? We’ll cut out some cash.” That didn’t end up the way that we went, but that’s the magic of what happens — we still ended up with a great deal… 5% down at the time of buying, 5% down a year later, and then a complete seller carryback deal; there was no bank financing whatsoever. So even though we didn’t go quite as creative as using the truck as a down payment, that was an option; that’s just an example of the magic that can happen when you have a creative seller and a creative buyer working with each other.

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

Allison Kirschbaum: I’m ready, Joe. Hit me.

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

Break: [[00:27:02].26] to [[00:28:08].10]

Joe Fairless: Okay, you read a lot of books, you’ve got them all over where you live… What’s a couple best ever books that you’ve read recently? …or in life. It doesn’t have to be recent.

Allison Kirschbaum: Oh, my… Well, most of my best ever books are technically not about real estate, they’re more about mindset or about business in general, because I believe that if you’re great at business in general and you have a great mindset, whether you’re in real estate or whatever it is you branch out to, you’re gonna be great at it. So one of my favorite books is Three Feet From Gold.

Joe Fairless: I love it.

Allison Kirschbaum: It was endorsed by the Napoleon Hill Foundation.

Joe Fairless: I love that one, yeah.

Allison Kirschbaum: I loved it too, because it’s one of those books that no matter where you’re at in life, it makes everything better, because it’s exactly what it sounds like. You could be in the middle of the worst storm you’ve been in, and you can think “Hey, I might be three feet from gold. I’m gonna get through this and I’m gonna hit gold.” Or you could be having the time of your life, you could be on top of the world and get lots of deals, lots of capital, and you can say “Hey, I could be three feet from gold. I could be three feet from getting even better.”

Then another book that I’ve been reading lately and that I really enjoyed [unintelligible [00:29:05].25] 10X Conference in Vegas last week (Grant Cardone 10X Conference) is a book called Relentless, by Tim Grover. It has also an amazing mindset point – people think that perseverance is all about Braveheart; they think of Braveheart when they think of perseverance, or something like that. You’re just on the top of the mountain, yelling, screaming, “I’m gonna do this! You can’t stop me!”, whatever it is. Relentless is about taking that calm, cold, icy center of yourself that’s so sure of yourself, it’s so sure you’re gonna get it done, whatever it is, that you don’t need to yell and scream. You’re just sure of it. You just walk into the room like you already own it, and you do that deal. That’s relentless.

Joe Fairless: What’s the advice you gave to people you were training who were two times your age for how to be a good salesperson?

Allison Kirschbaum: The only objection the customer has is trust. Yes, they can say that they don’t like the price, they can say that they don’t like the terms, whatever it is. That is all overcome by trust and like. So if you can overcome that barrier, you’re good as gold.

Joe Fairless: What about if they don’t have the money?

Allison Kirschbaum: If they truly don’t have the money, then you should probably help them figure that out as fast as possible nicely, so that you’re not wasting each other’s time.

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

Allison Kirschbaum: I have all my answers scripted out, Joe. You throw me for a loop.

Joe Fairless: [laughs] Good, I want to!

Allison Kirschbaum: I made a mistake when I bought into an industry that I thought I knew. I thought I’d done everything right – I bought into an assisted living property; four of them, actually. It was about eight months ago. I had all the right experts, I thought I knew everything about it. When I go into an industry, I read about it like crazy. I read 100 books a year. When I wanted to learn social media marketing, I read over 65 hours of content in eight days. I read 32 books in eight days to learn social media marketing and various other stuff.

So when I wanted to learn assisted living, I did the same thing – I attacked it, and I thought I knew everything there was to know, and I hired the best experts to manage the property. We get into the property, and I thought my perseverance is gonna pull it out; I thought I could be relentless enough to make it work, and it just didn’t. It kind of all fell apart really fast, all at once. In a way, I’m not sorry about it, because it’s led me to some other really great breakthrough things that — as my mom likes to say, “When you get squeezed, but you get to see what’s in ya…” I found some great things that I’m capable of that I didn’t know I was capable of until this happened. But at the same time… You know this – if you ever had a deal fail, you keep going over it in your head, like “Man, what could I have done differently? There’s something else I should have known. If it’s my fault, then there’s something else I should have done.”

So that’s a mistake I’ve made, and apparently, even with all my preparation, I didn’t prepare enough.

Joe Fairless: I love the quote from your mom, by the way. I wrote that down, among other things. How much money did you lose on that one?

Allison Kirschbaum: I have still yet to find out. This happened really recently, but it sounds like it’s gonna be around 280k, something like that. It could definitely be a lot worse.

Joe Fairless: How do you make money in your fund?

Allison Kirschbaum: How do we make money as sponsors?

Joe Fairless: Yeah, as sponsors.

Allison Kirschbaum: We take an equity share in each of our funds, and each person that invests with us gets an equity share based on the amount that they initially invest. And the more they invest, the bigger the equity share they get. So we end up owning between 45% and 50% equity in each fund. We also get a buy, refi and disposition fee, because we have a structure where we refi fairly frequently in order to be able to buy in cash and then pull that value out and redistribute it to other properties, instead of using loans upfront, because it’s much faster that way. It makes the process a lot smoother for everybody.

Then we also have a disposition fee, because in most cases, for the funds that we have now, we’re gonna have to sell at some point, unless we change the structure somehow, and we’re not planning to at this point. I’m just leaving an option open there.

So we make money through the acquisition, refi and disposition fees, and through the ownership of equity. In one of our funds we take a management fee, in the other we take a salary, so that can vary just based on your preferences as a sponsor.

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

Allison Kirschbaum: I really like – and I end up doing this a lot… This is how I got into coaching, actually; I find myself mentoring people that just didn’t know anything about real estate and they would hear me talking to somebody maybe at a networking event or whatever about something that I do. And most of what I do is really different, and I’ve engineered it that way. I specifically, when I got into real estate, told myself, “No offense to anybody out there who does this, but I don’t wanna be just another single-family investor or just another multifamily investor, because that’s Red Ocean.” People who read the book Red Ocean, Blue Ocean… Red Ocean is a place in the market that’s really saturated; there’s a ton of competition, there’s a ton of really good people out there, and I don’t wanna compete with the people in the industry that were already real good as a 21- year-old kid with no credibility in the industry. So I wanted to specifically take a niche that not a lot of other people were in, which led me to self-storage. Now, obviously, I’m in private equity, I’m in marketing for private equity… None of those things are extremely common.

When I sit down at a networking event and I’m talking with somebody, and I throw out those words, inevitably at least one or two other people at the table that are kind of new or are brand new will lean over to me and say “Hey, I’d really love to learn more about self-storage, or this, or that, or whatever it is you do… Can we sit down and have a conversation?” and I would end up having literally between five and eight 30-minute free conversations with people per week, just educating people, because I’d love to educate people.

And that’s obviously what I do now through content and books and white papers and blogs and podcasts and all of this stuff… But I was taking up so much time doing it, spending it on one person, I said “I’m gonna continue to do this, but I’m also gonna start doing it as a paid service, so that people who value their time can value my time, and show that they are by paying me a little fee.” But I still like to do that for certain people; I still meet people, especially young people, my age or a little bit younger, millennials that show that they have initiative and wanna get into this industry, and they just need to know a little bit more; they need to know some of the options they’re not familiar with.

Every time I go to a networking event, which is very frequently – I went to one last night – I’ll pick a new person in the room and I’ll sit down next to them and I’ll get to know them and I’ll make them feel welcome, and I’ll find out what I can tell them that they don’t already know about the industry, I’ll kind of open their eyes a little bit.

I sat next to a wonderful lady last night who didn’t know what capital raising was, what private equity was, and as soon as I explained it to her, she was like “That’s what I wanna do in real estate. Thank you for opening my eyes.” So that’s what I like to give back, is just sharing my knowledge.

Joe Fairless: That’s cool, and you’ve certainly taught me a lot during this short conversation; I’m sure most Best Ever listeners have gotten a lot of value from this… And the ones who didn’t, they probably just were maybe distracted, or something. So how can the Best Ever listeners get in touch with you?

Allison Kirschbaum: I am very easy to find, I’m all over social media. I have multiple brands, as well as my personal brands – all over Twitter, LinkedIn; I’m on LinkedIn as Allison Kirschbaum. I have my personal website, AllisonKirschbaum.com. If you wanna learn a little bit more, get some great free content on how to market your private equity funds, maybe some tips on how to get out into social media yourself if you have a 506(c) fund – you can visit us at LuoMediaGroup.com. And for the people that wanna learn just a little bit more, listen to one of my podcasts or get some free content like “The Top 10 Mistakes That Self-Storage Investors Make and How to Avoid Them” – you can get resources like that at my website, YDKSS.com (which stands for You Don’t Know Self-Storage), which you’ll know after you read the site. And you can also find us for more general real estate investing advice like “Why do I need an LLC?” or “How do I find my first investor?” at YDKRE.com, which of course stands for You Don’t Know Real Estate.

Joe Fairless: Awesome. Allison, thank you so much for spending some time with us and talking about your funds that you have put together, how you got to this point, how you make money in those funds, lessons learned when you’ve taken different directions… I love the quote from your mom, “When you get squeezed, you get to see what’s in ya…” That’s actually very profound.

Also talking about how with the funds that you have, or the investors, you’ve raised approximately 7-10 million of the 25 total, and how you found them, how you’ve developed those relationships; you are able to publically advertise because you do 506(c), so then you’ve got the  webinars and Facebook Live, as well as some other things… And then many other things that I didn’t even summarize, but those are some of the things that I’ve put in bold in my notes.

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

Allison Kirschbaum: Sounds great. Thanks for having me, Joe.

JF1300: Using The Best Data & Analytics To Optimize Airbnb Properties & Returns with Scott Shatford

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Scott saw a huge lack of data and information in the Airbnb area of investing. He set out to scrape all the data he could and provide nice, easy to understand information for investors. Scott also used to be an investor himself but sold his properties to focus on this business full time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Scott Shatford Real Estate Background:  

  • CEO and Founder of AirDNA, an Airbnb data & analytics company specializing in Airbnb intelligence
  • An Airbnb pro, author, vocal advocate and industry expert in short-term rentals
  • Utilizes his 15 years of experience as a data analyst
  • Recently launched Market Minder, a competitive intelligence tool built to empower both beginners and seasoned Airbnb entrepreneurs worldwide with the data to make smarter decisions
  • Based in Denver, Colorado
  • Say hi to him at www.airdna.co

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TRANSCRIPTION

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 Shatford. How are you doing, Scott?

Scott Shatford: Really good, Joe. Good to be here.

Joe Fairless: Nice to have you on the show. A little bit about Scott – he is the CEO and founder of AirDNA, an Airbnb data and analytics company specializing in Airbnb intelligence. He utilizes his 15 years of experience as a data analyst to then launch the company, and recently launched Market Minder, a competitive intelligence tool built to empower both beginners and seasoned Airbnb entrepreneurs worldwide with data to make smarter decisions.

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 Shatford: Sure. I spent 10 years in corporate America, working in data and analytics, data warehousing and how do you present data to make it consumable by executives. I was laid off from that job, and kind of fell into the Airbnb space. I grew a portfolio of Airbnb properties, and realized there was really no data out there to help people make decisions on where to invest or how to optimize those properties… So I kind of set out to figure out how to scrape the world of Airbnb, analyze that data and make sense of it to help people target investment properties and how to price their properties more effectively, and how to compare their performance versus their peers.

Joe Fairless: So what are some specific things that you’ve learned since launching the business that would be helpful for real estate investors?

Scott Shatford: The short of it is that there’s a massive opportunity there that still hasn’t been tapped. I think there’s a huge margin between what properties are valued at, both as purchases and as leasing properties, to what they’re able to earn on the short-term rental market.

A lot of our focus is on how to figure out where those arbitrage opportunities exist and where real estate is undervalued based off of what its earning potential is on Airbnb and other short-term rental platforms.

There’s lots of specifics in that, obviously, by how to target the right types of properties, and what types of properties are under-supplied, and [unintelligible [00:04:25].15] are performing really well… But in general, that is kind of the thesis of the business – properties undervalued based off of their Airbnb potential.

Joe Fairless: For targeting the right types of properties – does that vary based on the market?

Scott Shatford: It does, and the market is maturing a bit. There’s 40,000 properties in New York, and 28,000 in L.A. We’re used to being able to kind of just throw up any old property pretty much anywhere and you get some demand. You have to be a little bit more thoughtful about it. What is the competition doing? How much competitive supply is in different markets? But also getting down to the property level – when would a property be undervalued as kind of a real investment, like a single-family home investment? When is it undervalued as a short-term rental?

Just to kind of give you some tidbits on that – what if it’s in a bad school district? Short-term rentals don’t care about it. What if it’s on a busy street? People don’t really care about that as a short-term rental. What if you have a train track running through the back of it? People don’t really care for a three-night stay. So there’s lots of these little components about properties that make it really attractive short-term rental investments, but don’t make them really good investments for people that wanna live there full-time.

Joe Fairless: Yeah, that’s really interesting. That something that I hadn’t heard talked about. Did you go in thinking or knowing those sort of things, or based on the data that you scraped that’s some things that you discovered?

Scott Shatford: It’s stuff that we discovered over time, talking to people that have gone pretty deep into how to analyze properties and markets in this space, and that’s definitely some of the ideas that I’ve come talking to some of my customers over time.

For me the original idea was that hotels are over-priced, there’s not enough competition for hotels, and the one-bedroom apartments were undervalued based off of the hotels that were right across the street. So my investment thesis to start off with was I wanna buy everything across the street from the Four Seasons. High-end hotels are charging $400/night, and I’m gonna put on a bigger space, with a washer and dryer and a balcony, and twice the size, and I wanna price it at half the price… And how can a consumer not say yes to that?

Joe Fairless: Right.

Scott Shatford: So that was kind of the original thesis… And a lot of the ways that people are still investing is that hey, this hotel has 88% occupancy, has an ADR of $380, but this nice, new high-rise condo complex went up across the street and I can make a lot of money by running that at $300/night and offering a lot more amenities and space.

Joe Fairless: Yeah, that seems like a no-brainer right there. Do you also invest and buy properties across the street from hotels, or have your own Airbnb rentals?

Scott Shatford: I have like seven Airbnb rentals in Santa Monica… I ended up getting rid of those properties really to focus on this business. It’s a full-time growing business, it’s doing pretty well; we’re about 25 people and trying to add another 25 this year… I’m totally focused on the data and how to empower other people to make these decisions.

Joe Fairless: And how does your company make money?

Scott Shatford: We sell that Market Minder report that you mentioned. It’s a subscription product, you can buy for over 30,000 markets around the world; you can subscribe to it for anywhere between $20 and $150/month. We also sell to corporate America. We sell to the major hotel chains, we sell to the hedge funds, we send to DMO’s (destination marketing organizations) and a laundry list of other people that are really interested in how Airbnb is impacting or disrupting traditional lodging and opportunities that it’s creating in the real estate space.

Joe Fairless: What else haven’t we talked about as it relates to the data that you are uncovering, that’s relevant to real estate investors and we should talk about?

Scott Shatford: That’s a good question. What our core technology does is it really looks at every single Airbnb property and tries to uncover via the activity on the account of that property exactly how it’s performing – the seasonality of that property, revenue-generated occupancy rates… So really just trying to replicate traditional hotel stats for the short-term rental market.

One of the tools that we’re trying to develop with all that data is really first automated valuation model for short-term rental properties. We’ve titled that The Rentalizer, that’s what we’re calling that product, and that’s where we see the future of our business – people don’t wanna think too hard about overall market data and historical trends; they wanna put in the address and see what the comps look like and what that property could earn as a well-run vacation rental. That’s kind of the direction that we’re heading as a business, is being able to do that and do that well globally.

Joe Fairless: And what are some trends in certain markets? Because I’m sure you look at different markets. Anything interesting across the U.S. in certain markets or regions that you’ve noticed?

Scott Shatford: I think the people are starting to get out of the major markets for these investment opportunities. They’ve become saturated, there’s a lot of hotel development in these major markets… So what we’re seeing is a flat growth in San Francisco, New York, Chicago, New Orleans – these markets that were really hot for the last five years – and they’re looking for opportunities in these secondary and tertiary markets where there just aren’t a lot of properties… Maybe like a Louisville, Kentucky, or something of that nature.

People are trying to figure out 1) how to get into these smaller markets, and 2) I think the trend right now is how to capitalize on the growth in group travel. This is millennials traveling for a bachelor party, 20 people showing up for whatever sort of event… There’s a lot of money being made on buying 4 or 5-bedroom homes in some of these cheaper markets and renting them out for $1,000/night on the weekends to the group travel.

I think there’s been a big transition from trying to replicate hotel supply (1-bedroom or studio right in the middle of town) to — I think the new opportunity has been in larger places… Larger homes, in smaller towns.

Joe Fairless: With the larger homes in smaller towns – maybe not even specific to that, but what type of data points are at the core of what someone should look at when assessing the opportunity for if they should do Airbnb or not?

Scott Shatford: We have a separate product, it’s called Investment Explore. We think the real basics are “What is the average home cost in a zip code, of different sizes, versus what the average property is making on Airbnb on average?” That really simple, basic comparison of what properties cost and what they’re earning on Airbnb is obviously the best place to start.

The Investment Explore product allows you to explore different markets in your state or in the country to identify where that arbitrage opportunity is the best. In terms of other data points, a lot of people use some data points that we don’t even have, which is [unintelligible [00:10:53].21] People really are using Airbnb because the location of hotels isn’t great for where they’re going. If it’s a college graduation or visiting a relative in a hospital… There’s a lot of places that don’t have hotel supply, and so what a lot of my investors are doing is looking at where are people going, and is there a lack of hotel supply there? A lot of these are in suburban areas where there is still demand, but not for like the traditional business travelers.

So that is a huge advantage for Airbnb and Airbnb investors – hotels are gonna take five years to build something from the ground up, and they’re not really gonna add a hotel that’s like a 30-key hotel and buy a hotel, but an Airbnb host can buy five properties there pretty easily and flip them into lodging supply in three months. There’s a lot more speed to market for an Airbnb investor than a hotel can ever do.

Joe Fairless: What’s been a major challenge of your since launching the business?

Scott Shatford: It’s such a rapidly changing marketplace, and we rely on data sources both that we are scraping from websites, and both that we are getting delivered to us via some third-parties. Just the speed at which things are developing makes it more and more complicated to be able to aggregate and make sense of that information and make sure it’s all accurate… Let alone that websites change, and Airbnb is doing crazy stuff, and there’s a cat and mouse game about how we can continue to get all this data at scale. Also, there’s lots of different API changes and different — just getting data in this sort of manner, at this sort of scale, it becomes challenging.

Joe Fairless: And how are you solving that or attempting to solve that?

Scott Shatford: Spending more money on more engineers. One good thing is that vacation rentals used to be dominated by this very fragmented market, where there was like an individual property manager in every little ski town and every little beach town, that had their own little kind of silo of information. Now that the market is dominated by HomeAway, Airbnb and Booking.com – those are three major sources you can go to to grab 70% of all vacation rental properties around the world…

So it’s easier today to get a good idea of the full market size of vacation rentals and what they’re doing, but the way that we have to get this information — Airbnb is not nice enough to ship this data to us on a daily basis… So analyzing, scraping, algorithms, machine learning models – all that stuff needs to be built to make sense of that data.

Joe Fairless: And I’m just curious, with your name, AirDNA and a different company that you help others with Airbnb – two different companies, no overlap in ownership… How are you able to have that name? Just help me understand that, I’m just curious.

Scott Shatford: You just think it’s too similar to the Airbnb name?

Joe Fairless: Yeah. It’s good for you, that’s a good thing, but I’m just curious if you heard from them at all, or if that’s just bulletproof from a legal standpoint.

Scott Shatford: Everything’s pretty bulletproof on our legal standing. We don’t do anything that Airbnb does, we don’t rent places… If we were trying to rent accommodations on our AirDNA site, there might be an issue.

Joe Fairless: Right.

Scott Shatford: Since our services are complementary and completely different, we don’t really think we get into any grey area in terms of our naming.

Joe Fairless: Cool… Just curious. How can the Best Ever listeners learn more about your company? Where should they go?

Scott Shatford: Our website is obviously our best resource. It’s AirDNA.co. We provide a lot of free information there, so search for your city, search for your neighborhood… We cover pretty much every square inch of the world. Some places in Africa are lacking, but we try to cover pretty much everywhere that there’s an Airbnb property – we have data on that area.

We also have a great blog. It’s a great resource where we throw in a lot of data-driven stories about the best places to invest. We have some blogs that had over a million views, that really talk about what is the best investment opportunities at the city-level for Airbnb investments… So that’s a good place to start.

Joe Fairless: Cool. How come not .com?

Scott Shatford: We were a startup and cheap, and we’ve been trying to wrangle it from some guy in China, but he’s not very responsive these days, so… But we’re working on it.

Joe Fairless: Fair enough. Well, Scott, thank you for being on the show and sharing your entrepreneurial journey. Also some tips for some Best Ever listeners who have properties in a bad school district, or on a busy street, or next to a train track – well, look at doing Airbnb and then you can get some data from AirDNA.

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

Scott Shatford: I appreciate it, Joe. Thanks a lot.

1260: BiggerPockets Analyst Tells Us His Life-Hacking Story with Craig Curelop

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Craig tells us about his lifestyle of financially maximizing his own duplex and car. We’ll hear the pros and cons of house hacking on an extreme level. His role at BiggerPockets is to keep track of all of the finances, but he is also an investor. An interesting story that surely has value for all different levels of investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Craig Curelop Background:

-Financial Analyst at BiggerPockets full time

-Real Estate Investor, known as “Life Hacker” – Realizing maximum efficiencies on investments

-Closed on first property in June 2017, a duplex that he’s currently house hacking.

-Purchased a duplex, rents out the top and AirBnb my bedroom

-Would like to partner up with someone and purchase another multifamily property this year  

-Say hi to him at www.biggerpockets.com

-Based in Denver, Colorado

-Best Ever Book: Never Split the Difference

 


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TRANSCRIPTION

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, Craig Curelop. How are you doing, Craig?

Craig Curelop: Doing well, how are you?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Craig – he is a financial analyst at a little-known website called Bigger Pockets. He is a real estate investor, he’s also known as a life hacker, and we’re gonna talk about that.

He has a duplex and he is maximizing the earning income potential of that duplex. We’re gonna talk about how he’s doing that. He’s based in Denver, Colorado; that’s where BP is headquartered. With that being said, Craig, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Craig Curelop: Yeah, absolutely. I’m relatively new at this real estate game. My first property I closed on in June, but I just started getting interested in real estate probably last year around July. I just did a bunch of research and all that stuff, and it just seemed to make a lot of sense. After about six months of doing research and all that stuff (BP was a huge help for that), I decided to kind of take the dive in and buy my first duplex here in Denver.

Joe Fairless: Tell us about the duplex.

Craig Curelop: It’s a top-bottom duplex, it’s about a mile and a half from my office. What I do is I rent out the top half conventionally (it’s actually a two-year lease) and I Airbnb my bedroom out… And I kind of made like a quasi-bedroom out of my living room. So basically it’s a [unintelligible [00:03:34].04] duplex, and I’m kind of trying to maximize the amount of cashflow I can get from this property at this time.

Joe Fairless: You rent out the top conventionally – that’s what, a 12-month lease?

Craig Curelop: Yeah, it’s a 24-month lease.

Joe Fairless: Does the rent increase after 12, or is it one amount for all months of 24?

Craig Curelop: I’m happy with the amount of rent I got. I always felt fine with just kind of guaranteeing those 24 months without having any vacancy in between, so I kept the same amount.

Joe Fairless: And what’s that amount?

Craig Curelop: It’s $1,750 for the top.

Joe Fairless: $1,750, okay, and you’ve got that on a 24-month lease, and you do Airbnb the bottom bedroom…

Craig Curelop: Correct.

Joe Fairless: How much is that on average?

Craig Curelop: So obviously that changes… In the summertime it’s probably around $1,500 or so, and then as the months get colder, so does the cashflow, and it’s probably about $1,000; that was the lowest month I’ve had thus far.

Joe Fairless: Okay. How much did you buy it for?

Craig Curelop: I bought it for 385k. The mortgage payment on that with — I used an FHA loan, so I’m gonna have the PMI and all that stuff; so the whole PITI mortgage payment at the end of the month is just shy of $2,300. With the top being $1,750 and the bottom just say average about $1,200-$1,300, I’m clearing the mortgage by about $1,750. I set aside $250/month for all the reserves and all that kind of stuff, and the rest is just cashflow that I just put back into my investment and it will help me buy my next property.

Joe Fairless: And I don’t want this to be passed over by me during our conversation… You also live at this duplex, right?

Craig Curelop: Yes, correct.

Joe Fairless: You live there… And you live in the living room?

Craig Curelop: Yeah. The way I look at it is — I know it’s probably not the most ideal situation for a lot of people, but I’m still relatively young and I feel like you kind of have to do things that other people aren’t willing to do to be successful later on. I’m thinking, “Okay, how can I hustle? How can I get the most out of this right now?” I made a nice — I have still a comfortable place to sleep, it’s just behind the curtain instead of behind the door.

People always make fun of me for it, but I really do enjoy it. I get to meet people from around the world, I talk to people every day, and the best part is that you have that roommate, so you have that person to talk to; then they leave in two or three days, so anything that annoys you is just out the window. So I really do enjoy it, and it’s really not much of a sacrifice to me.

Joe Fairless: Well, I love your approach, that’s for sure. I didn’t go as extreme as you… How old are you?

Craig Curelop: I just turned 25 last week.

Joe Fairless: Okay, happy belated birthday. I wasn’t as extreme as you’re doing when I was in New York City, but I always had a roommate. My friends made fun of me, they said I was living like a college kid; I had a dorm-style refrigerator, had literally no living room… But you’ve taken it to another level. If I had taken it to your level, the only way I could have done that is — since I didn’t have a living room, I could have maybe had two twin beds in my room, and I guess bunked up with a random stranger, where they have one twin bed, I have another…

Craig Curelop: Yeah, it is kind of difficult if you’re sharing a bedroom with someone… I don’t know.

Joe Fairless: It would get a little awkward.

Craig Curelop: It would, yeah.

Joe Fairless: So you live in a living room, you’ve got a curtain instead of a door, and you have the top rented out, you have the bottom as a revolving door, and you’re making maybe a couple hundred dollars a month; more importantly, you’re covering all of your expenses and you’re building equity in this property.

Craig Curelop: Yeah, absolutely. And to top it all off too, it’s also a mile and a half from where I work, so I can easily bike to work in the morning… So my transportation costs are next to nothing. I buy a tube every once in a while for my bike, and that’s pretty much it.

Joe Fairless: Do you bike to work when it snows?

Craig Curelop: Yeah. The only time I don’t bike to work is if I really need to do something after work that involves a car…

Joe Fairless: Do you have a car?

Craig Curelop: Yeah, so I do have a car; I’m not sure if you heard about…

Joe Fairless: Mr. Money Mustache?

Craig Curelop: Mr. Money Mustache, of course; one of the things he says is for every asset/liability that you have, you should have a form of income from that. That’s kind of how I view it, so I also rent out my car, too.

Joe Fairless: Oh, really? What service or app do you use?

Craig Curelop: It’s called Turo, and it’s basically just like Airbnb, but instead of renting an apartment, you rent a car. People rent it sometimes for a couple of weeks, sometimes it’s for a day… But it is [[00:08:04].07] day, so it’s not like someone’s just gonna come for an hour, run an errand and then come back.

Joe Fairless: And how much do you make on that on average a month?

Craig Curelop: This is super volatile. In the summer months I was making $500, $600, $700/month after I set aside $100 for reserves for the car every month; now that it’s getting colder, I’m kind of just hitting that $100 of gross a month… So I put aside $100 and that’ll pay for some of my expenses as they come. I’ve got a Toyota Prius, so the expenses on that shouldn’t be too high.

Joe Fairless: Tell us an interesting story, and perhaps one that maybe will scare other people away from doing this, that way we really understand the downside of living in the downstairs with a curtain separating you from strangers coming in and out of your house every three days.

Craig Curelop: Honestly, the stories aren’t that scary. Sometimes you hear a little too much about what’s going on in the bedroom. That is probably one thing that you’re gonna have to get used to.

The other thing is that I actually had a couple from England come by, and I walk into the house and it’s like 85 degrees or something, and I’m like “What the hell — why is the heat so high?” He was like “Oh, sorry…” – they didn’t know Fahrenheit, so they just put it up as high as they felt like they could. I was like, “Oh… Whatever. I guess I can’t blame you for that.”

That’s kind of like the horror story, and it’s really not that often that I feel uncomfortable or there’s any bad situations happening. Usually, you have great conversations with the people that are coming in. I’m a traveler myself, and seeing people travel and talking to these travelers kind of satisfies my travel bug without having to go anywhere… So I think that’s really great, too.

Joe Fairless: Do you have a significant other?

Craig Curelop: I do not. In the event that I do get one, then I will question whether the Airbnb makes sense, or then I have the option of staying at her place, so… We’ll absolutely cross that bridge when we get there.

Joe Fairless: To me it’s pretty clear the pros grossly outweigh the cons. With the pros – you meet interesting people, you create new friendships and you have the financial upside for having this arrangement. And the cons – you come across sex noises and you have utilities that sometimes can be high because people don’t know the difference between Fahrenheit and Celsius.

Craig Curelop: Yeah, exactly.

Joe Fairless: It’s a pretty compelling case for doing this, but given your circumstances where you don’t have a significant other, it’s a lot easier to pull this off, compared to if you did, so… Props to you for doing this. I’m really grateful that you are sharing your story.

What’s the next deal? How does this evolve from here?

Craig Curelop: So I’m gonna continue working hard here at Bigger Pockets and I’m gonna continue saving as much as I can, and next year after I have completed the criteria for my FHA loan, which is living in a property for a year, I’m going to try to buy the next one. It’s either probably gonna be another multifamily and I’ll do something similar, or I might buy a single-family home, because I know you can do the 5% down conventional loan on a single-family and maybe renting out by the bedroom. Here in Denver, that seems to make a lot of sense, renting out by the bedroom, as long as you know the cons of that… You may be living with four or five different people, so it’s kind of just like a [unintelligible [00:11:22].03]

Joe Fairless: You’re okay with that, though; you won’t shy away from that.

Craig Curelop: No, no. I enjoy that, honestly. I kind of like living with people. I guess I’m an extrovert.

Joe Fairless: Well, we all have a need for community of connection, regardless if we’re introverts or extroverts; we all need human interaction and connection, it’s just different levels that we all need it, in my opinion.

Craig Curelop: 100%, yeah.

Joe Fairless: The title that you have at Bigger Pockets is financial analyst. I understand what that is, but what specifically do you do?

Craig Curelop: I just kind of call myself a finance guy here. At the end of the day, Bigger Pockets is a business, and it’s really a tech business, so my main thing is to kind of keep track of all the finances, put together the financial model, make sure where our revenue stands, if we’re making money on a month-over-month basis; if metrics are down, figure out why they’re down, and kind of share that information in with Josh and Scott and all those guys.

That’s kind of like the core of what I do, and then I’m also out there exploring new revenue opportunities as well. One of the things we’re launching over the next few months is we’re launching out some state-specific landlord forms… So we’ve basically gathered a fleet of lawyers from each state and had them look over and review landlord forms and we plan to give access to these forms to our users, so that they can be protected without paying thousands of dollars to have a lawyer look them over.

Joe Fairless: Wow, that’s outstanding. Will they be available for everyone, or do you have to have a certain membership level?

Craig Curelop: It will be available to everyone, but they will be for purchase, so I think it’s gonna be like $100 or $99 to purchase the whole set of landlord forms. It’s still at least a tenth or a twentieth of the cost of actually getting this done yourself, so we feel like we’re providing value, as well.

Joe Fairless: Very cool. Based on your experience with your duplex and being a thrifty and resourceful guy, what is your best real estate investing advice ever?

Craig Curelop: My best advice is just to — don’t be afraid to be uncomfortable. I think being uncomfortable allows you to grow and it allows you to kind of live a life that no one else is really going to live. It’s all uncomfortable, right? Making an offer on that first deal – it’s not comfortable doing it, but you have to do it. So once you kind of get comfortable being uncomfortable, that I would say is the best ever advice that I received, that I kind of try to carry on each day.

Joe Fairless: Normally, I ask “Can you give an example of how you’ve applied that in your life?”, but we’ve been talking about the entire example of how you apply it in your life, so thank you for that. It certainly reinforces our conversation.
Are you ready for the Best Ever Lightning Round?

Craig Curelop: Let’s do it.

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

Break: [[00:14:08].13] to [[00:14:58].15]

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

Craig Curelop: Never Split the Difference by Chris Voss.

Joe Fairless: What’s the reason why we shouldn’t split the difference?

Craig Curelop: The reason why we shouldn’t split the difference? That book is just a great book; basically, it’s a negotiation book and what Chris does is — he used to be hostage negotiator, so it’s an extremely entertaining kind of like sit on the edge of your seat type book; he also then takes it and then applies it to real-life situations. Some of the advice in that book — I think I paid ten bucks for that book, and the book probably has made me (or saved me) over $20,000. So I would just go out and buy the book right now.

Joe Fairless: Done. Alright, I’m buying it as soon as we get done talking. What’s a mistake you’ve made on your duplex?

Craig Curelop: I made the mistake of allowing a pet. For the up and down duplex, the noise – it’s not very sound-proof, so you can always hear the dog walking and jumping off the couch or whatever it is. Even the tenants told me that the dog doesn’t bark, which is stupid–

Joe Fairless: All dogs bark.

Craig Curelop: Yeah, yeah. It’s like saying a human doesn’t talk, you know? [laughter] So I believed him… And when they’re home — the dog actually doesn’t bark when they’re home, but when they’re away from home, the dog pretty much just constantly barks. These guys are bartenders, and so they’re not home until 3, 4 in the morning, so that’s kind of a mistake I’ve made, allowing a pet in a property before understanding the sound and all the acoustics of the place.

Joe Fairless: Do the two people who live upstairs have to go through the living room and pass your curtain whenever they get home at four in the morning from bartending?

Craig Curelop: No, it’s different units, different doors.

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

Craig Curelop: I love to write for the blog; basically, anytime I get information – I like to do a bunch of research and then I like to kind of share that with the world. I write for the Bigger Pockets blog and I try to share that with as many people as possible. I do try to donate a couple hundred bucks a month to various charities. I’m not (I guess) loyal to anyone, but usually I see friends that are raising money for something and I’ll always put in $100 here and $100 there for them.

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

Craig Curelop: You can find me on Bigger Pockets, you can find me on Facebook or LinkedIn; you can follow me on Twitter, but I never tweet and I’m rarely on there, so I would say Facebook or LinkedIn or Bigger Pockets are the three best ways.

Joe Fairless: Okay, noted. Well, Craig, thank you for being on the show and talking about how you’re making it happen on your first deal, and you really are maximizing the earning potential and the human experience to go along with it. You’re living a full life through this duplex, that’s for sure, from getting to meet all sorts of interesting people, making new friends and enjoying the financial rewards that come with owning a duplex and renting out the top and bottom.

Thanks for being on the show and sharing this with us, as well as some of the miscellaneous things you talked about, about other ways you are able to maximize your bottom line. I hope you have a best ever day, my friend, and we’ll talk to you soon.

Craig Curelop: Awesome, thank you. You too.

JF1238: From Seller Financing To Loan Mods – Getting Creative For More Deals with Adam Adams

Listen to the Episode Below (22:35)
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Adam and his company specialize in creative real estate investing, hence the name of his podcast “Creative Real Estate Podcast”. He’ll also help struggling owners stay in their homes by helping them negotiate a loan mod. If you want to learn more about creative financing strategies in real estate, listen to Adam on this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Adam Adams Real Estate Background:

-Multifamily investor with BlueSpruce Holdings, LLC and Host of the Creative Real Estate Podcast

-Started investing through Tax Deeds in 2005, became property manager 2006, then started a remodeling company

-2008 he bought his first multi family apartment building

-Claim to fame is ability to negotiate win-win scenarios through structuring creative ways to buy and sell real estate

-Owns portfolio of owner financed and private lender rentals

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

-Based in Denver, Colorado

-Best Ever Book: Rich Dad, Poor Dad

 


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TRANSCRIPTION

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, Adam Adams. How are you doing, Adam?

Adam Adams: I’m doing great, how are you?

Joe Fairless: I’m doing great as well, nice to have you on the show. A little bit about Adam – he is a multifamily investor; they’ve bought a five-plex, a fourplex, a three-plex, and they’ve got almost a dozen homes. His company, Blue Spruce Holdings is based in Denver, Colorado. In 2008 they bought the first multifamily building, and they own a portfolio of owner finance and private lender rentals.
He and his business partner DJ are the hosts of the podcast called Creative Real Estate Podcast. With that being said, Adam, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Adam Adams: Yeah, definitely. I come from Utah and I focused most of my efforts in the beginning because my dad made me do real estate against my will, in college, when I didn’t save money, like he was trying to make me do, so I had to get into creative real estate. That’s why so much of what we do is owner finance things, some lease options and subject to’s, is mostly out of necessity, but I’ve found that even when we had money in the bank, it just seems easier to think a little bit outside the box. You can create a win/win pretty well.

I’m well-versed in real estate, and that’s why we have the Creative Real Estate podcast, at RealBlueSpruce.com, that DJ, Manny and I run.

Joe Fairless: Outstanding. Let’s talk about some creative real estate deals. Can you tell us about one deal that’s top of mind, what the challenge was and then how you ended up structuring it so it was a win/win?

Adam Adams: Definitely. The first one that comes to my mind, the challenge was that I didn’t have two years tax history; I was making good monthly income, but I was not able to qualify it for a traditional bank loan. The way that I structured it to make it kind of work is I offered a friend of mine to buy out the whole triplex with cash and partner with me, and to loan me the rest of the money, and put a mortgage note against the property that I would pay regularly every month. It did work, so it was a no-money-out-of-pocket deal. I was able to close on a multifamily property in a time that it was difficult to, regardless of my credit standing. I had a good credit score at the time, but you just need that two years.

The seller sold it for the price they wanted to sell it, a friend was able to make some money as we go, I was able to be a multifamily owner years and years ago, so it really helped.

Joe Fairless: So you found a deal and you liked it, you weren’t able to get a loan, so you went to a friend, the friend purchased it all cash, and then they acted as the bank, where you are paying them a monthly (essentially) mortgage payment… And you are the owner of that property, but they’re the bank, or how does the ownership actually work?

Adam Adams: It was a joint venture agreement. They were a 70% owner and I was a 30% owner. My portion of the property was done by an owner-financed bank note, so they put a mortgage against the property or a deed of trust, and then we filled out a promissory note that I’d pay  a certain amount for a certain amount of time, and we were partners.

Joe Fairless: Okay. So they still will retain ownership after you pay off what you borrowed to get the 30%, correct?

Adam Adams: Exactly, for that one property, and the end of — if I would have paid off, because I’ve already sold that a  long time ago, but if I would have just stayed in it and stayed in it, and not given him his portion back when I moved to Florida, then in that case I would have owned 30% with no note, and he would have owned 70% with no note.

Joe Fairless: Got it, cool. Very clear. How about another deal?

Adam Adams: A large portion of all the times that I’m talking to sellers that are in a foreclosure situation and offering them a lot of different strategies, most of the times it always ends up that I’m really good at selling them on  a way for me to contact their bank for them and to help to structure a loan modification. Most of my transactions that don’t count towards my portfolio, but they count towards creative real estate, happen to be because I was able to talk their bank into restructuring their loan for them, so they could stay in the house. Unfortunately, on a lot of those I didn’t make money, but I was able to help the homeowner with a creative strategy with loan modifications.

Joe Fairless: And you actually call the bank on their behalf and negotiate the modifications for them?

Adam Adams: Yes, and every bank’s slightly different, and actually every person at the bank is slightly different, but yes, I call… Sometimes we get power of attorney, sometimes the owner is just with me and they just have to say to the bank “Adam can talk, and I’m right here, just while Adam figures this out.” Then we’ll just kind of talk to them for a while, and ask if a lease option would work, if a subject to would work, try to make solutions with the bank… And a lot of times the bank just says “You know what, let me drop the loan” or “Let me forget 20k or 30k that’s owed, and if you start making your payments again you don’t have to pay the arrears.”

There’s been about a dozen of those, where they’re all a little bit different, but the loan company will modify it enough to keep the homeowner in the property, and the property owner can still pay. With that said, what I like about that is should there ever be another problem where they fall behind again, I think they’ll trust me, I think they’ll call me and see if I could help out. In that case, maybe we’ll take a property over subject to or do a lease option, because they understand that I started out with their best interest.

Joe Fairless: Yeah, that’s phenomenal to approach it that way. Now I’m putting on my business hat and I’m wondering, to put it point blank, what are you getting out of it, other than warm fuzzies? From a business standpoint is that it, just the warm fuzzies?

Adam Adams: Mostly the warm fuzzies, because I like to actually just help, but I know that if they tell their friends, and their friends tell their friends, eventually we’ll do enough subject to rentals, or maybe we have the story to go on your podcast, and it will be more than just a warm fuzzy… Maybe somebody who’s going through foreclosure right now will say “I’ve never even heard of a loan mod. Let me call my bank.”

Joe Fairless: Right. Well, we’ll take it. Just staying with that business angle though, have you seen business results as a result of you doing these modifications and going with someone to the bank and reworking — have you seen something come out of it from a monetary standpoint?

Adam Adams: There have been two times that because we worked with somebody, somebody else heard about it or they told their friend and we got a call, said “I heard that you’re the one who can solve this.” One of the times we did a lease option; I offered a subject to, but it ended up being a lease options structure where we did a fix and flip, we just paid the guy’s mortgage while we were doing it, we put in $50,000 while we were doing it, we sold the property, gave him his price that he wanted in the beginning that we couldn’t do ahead of time because there was $20,000 that we would have had to give to a hard money lender, and then when we sold it, he got his price and we were able to make a decent amount of money (about 30k) on that one.

So to answer your question shortly, yes, I do believe that because we do it, we do and will continue to make a little bit of money here and there.

Joe Fairless: How many modifications would you say you’ve done, or attempted to do?

Adam Adams: Attempted, between 10 and 12, I believe. I don’t have a number, but about a dozen.

Joe Fairless: Okay, that’s pretty good. And again, warm fuzzies aside – I get that part of it, and believe me, I’m with you, but just also looking at it from an analytical standpoint, from a business standpoint, if you’ve helped out or attempted to help out about a dozen, and that has resulted in good stuff for most of those people, but then also a couple deals that have come your way where you’ve made on average, how much, on those couple deals that you’ve mentioned?

Adam Adams: Maybe like 15k on one of them, and about 30k on another.

Joe Fairless: There you go, $45,000. So basically, if we look at it – and again, you’re probably thinking “Why are you talking about it from a business–“, I’m just looking at it from a purely analytical standpoint. So basically, every time you go with pure intentions – and hopefully I’m not tainting your pure intentions by doing this analysis… But every time you go with pure intentions to go help rework a loan for someone, it’s netting you $3,750, because so far it’s resulted in $45,000 profit as a result of your pure intentions. So basically, you could make the case that you’re getting paid $3,750 to go help these people for free.

Adam Adams: It makes sense, I like the way you look at it.

Joe Fairless: And I know you don’t look at it that way, but I was just wondering how that works from a business standpoint. Okay, cool. What’s the last deal that you’ve purchased?

Adam Adams: The last deal that I closed on was a fourplex in St. Louis. I didn’t have quite enough money in the bank to close it, and I didn’t realize on a Friday that we were supposed to close on a Monday, so I had to call up a couple private lenders and say “Hey, I need you to do this and I’ll give you a good return”, and both people said yes, and I went with the one that gave me the better terms. So it was a $50,000 note for 15%. They closed it in one day, so we were paying them $625/month, and cash-flowing really, really well on that fourplex.

Joe Fairless: Wow. How long do you plan on having that 15% interest rate on the 50k note?

Adam Adams: It’s a three-year interest-only note, and I plan on refinancing it about a year early.

Joe Fairless: [unintelligible [00:12:39].19]

Adam Adams: We’re making a lot of cashflow… The property – just how much is it ensured for is 600k+. We bought it for 60k, so I came out with just a few grand… We got a really, really good deal on it, or else I wouldn’t have been able to just call anybody up and say “I need 50k, I’ll give you 15% interest” and know ahead of time that I was gonna be able to pay them that and still cash-flow really well.

Joe Fairless: Did you say it’s ensured for 600k but you bought it for 60k?

Adam Adams: The purchase price was 60k. In the area right now it costs more to build than you can buy, so because we want to have a replacement cost insurance policy, it’s ensured for around 650k, but our purchase price was 60k. It’s probably worth around 100k, 120k right now.

Joe Fairless: That’s interesting. I’m glad you talked us through that. You’re in Denver, right?

Adam Adams: Yes, sir.

Joe Fairless: This is in St. Louis… How did you find it?

Adam Adams: A long time ago I was researching wholesalers, and because we have a couple of other houses there through a wholesaler, our property manager knew what our criteria was and they came to the table and said “Hey, here’s a fourplex. It makes plenty of cashflow, would you like to close on it?” I said yes, and I forgot about it until the — the business day before, I was like “Oh, crap…!” I still haven’t financed my houses, so I have a couple of houses that we own cash, and I was planning on getting a loan on those, so I could close on the fourplex, and we got so busy I never did that.

Joe Fairless: The part where you said you didn’t realize you were supposed to close on Monday – can you elaborate on that part?

Adam Adams: The property manager gave me a call and he said, “Hey, Adam, I just wanted to make sure that you were good to go to close on Monday”, and I was like “We’re closing this Monday?” He goes “Yeah.” I go, “Give me 20 minutes.” So I hung up the phone, went and called the private money lender, said “I’ve got 26k in the bank right now. This is like 60k. I’m gonna need a little bit of liquid”, so I said “If you could give me a $45,000 note, I will give you 18% interest.” They said yes.

Then I called the next one and I said “If you can give me a $50,000, I’ll give you a 15% interest.” They said yes, so… We just got our butts kicked really hard, because we’d been trying to buy larger apartment complexes with Blue Spruce Holdings, so…

Joe Fairless: Wow. Great story, thank you for sharing that. Based on your experience as a very resourceful real estate investor and team that you all have, where you were putting together some deals in truly a creative way, what is your best real estate investing advice ever?

Adam Adams: I would say follow up. That would be the biggest one. I think that most people lose out on what they do because they’re not following up with sellers or following up with brokers. That would be the biggest one. If you wanna be successful, be relentless and go out and do it, follow up. The fortune is in the follow-up.

Joe Fairless: Tactically speaking, what do you have in place that helps you with the follow-up process?

Adam Adams: A team, because I can’t do it very well on myself. We hire or bring in partners or employees that are really good at that kind of stuff. They’re good at systems, like Podio and other online systems to kind of make sure that you’re actually going through to the next step with people. But I can’t do it on my own, so I have a group of people…

Joe Fairless: Based on the follow-up process, what’s one lesson that you’ve learned along the way that you’ve optimized your approach?

Adam Adams: Well, it’s pretty simple… The lesson that I’ve learned is that how important following up is just because sometimes somebody will think that you’re done with the situation, nobody’s ever gonna call back. I’ll tell that sales person, the acquisition person, I say “No, you’ve gotta keep calling until they either tell you no, or you just keep calling.” I’ve had salespeople mad at me and upset; they’re like, “No, but this is really not going anywhere.” I go, “Seriously, if it was me, I would just call-call-call.” So they call again, and the result is a sale. That’s the lesson that I’ve learned with my team – even if you don’t really have full faith in the scenario working out for you, just follow up anyways until they say “Don’t call me again.”

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

Adam Adams: I’m gonna try to be ready.

Joe Fairless: I think you’re ready… You’ve got a podcast, you’re ready for it! First, a quick word from our Best Ever partners.

Break: [[00:17:34].23] to [[00:18:23].17]

Joe Fairless: Alright, Adam, best ever book you’ve read.

Adam Adams: Definitely… Um, what is it? I say “definitely” and then I can’t even think of it. Rich Dad, Poor Dad, by far… By far.

Joe Fairless: Best ever deal you’ve done that’s not the first one or the last one?
Adam Adams: The best ever deal I’ve done – it’s similar to some other people on your podcast, and it’s so true… It’s the ones that you walk away from. it’s when you realize that it’s not gonna work out and you walk away and you don’t lose money.

Joe Fairless: Which one specifically? Can you give us a specific example?

Adam Adams: Yes, there was a 2,246-unit, seven-building complex that my company was working on, and I think that we were just in over our heads to be able to close it for 180 million dollars. I think we would have had a really, really bad lesson. But there was a lot of equity in it, and we really believed that we could just do a refinance in a few months and pull out many, many millions. But I think by walking away and going to one that we were more comfortable with, we were able to solidify that we’re not losing a whole bunch of money on making a transaction like that.

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

Adam Adams: Letting my tenants live in my property.

Joe Fairless: What?! [laughs]

Adam Adams: I had friends be my tenants…

Joe Fairless: Okay, I was like “Wait a second…” Alright, so don’t rent to your friends.

Adam Adams: I would say it was very bad for me to rent out to a family member, to a friend that I was close with, because when they can’t pay, it was very difficult for me to keep it business. And that won’t be the case for everybody, but that was my first mistake – letting one of my best friends come and move in with me and pay all this rent… And I continued to support him when he lost his job and stuff like that. That was definitely the biggest one. I would rather just keep it business, let a property manager manage the property, have them bring in the people, have them put in the three days notices, and you never have to worry about me with my big heart saying “It’s okay, okay. You’ll give it to me Friday, no problem”, and doing that for months and months and months.

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

Adam Adams: Through the podcast and through our group at Downtown Denver. I love offering to bring these strategies to other investors. So for me right now it’s just running a free meetup group and running a free podcast to help other people understand the strategies that have helped me get to where I am.

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

Adam Adams: If they’re interested in apartment investing things, that’s just BlueSpruceHoldings.com. Or if they just wanna see the podcast, it’s RealBlueSpruce.com.

Joe Fairless: I really enjoyed our conversation, Adam, and thanks for talking about specific examples of deals that you all have done, and the challenge and how it was overcome through creative financing, whether it was the joint venture, the first deal you’ve talked about, or the deal where you borrowed money from someone who paid all cash, or the transactions where you go in with good intentions and you’re able to help others out with the loan modification process, and then we just reverse-engineered your actual profits on that, which you weren’t doing before, which is great, because that’s what keeps your intentions pure, but you really are doing well on that, helping others and then also benefitting through deals that come from it.

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

Adam Adams: Thank you, Joe.

JF1148: Which Markets Have The Best Rental Yields? With Dennis Cisterna

Listen to the Episode Below (21:12)
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With a background in just about every area of real estate, Dennis can tell you just about anything you want to know. Currently the Chief Revenue Officer for Investability, he can provide you with everything you need as a SFR investor. They run many reports, one of which can tell you where the best rental markets are. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Dennis Cisterna Real Estate Background:

  • Chief Revenue Officer of Investability Real Estate, Inc., an online marketplace for single-family residential property investors
  • Hosts a weekly podcast, The Real Investor, to help real estate investors become more efficient and empowered in the residential investing space
  • Has over 16 years experience and leads all revenue-related functions, including sales, marketing and strategic planning.
  • Based in Denver, Colorado
  • Say hi to him at https://www.investability.com/
  • Best Ever Book: The First 100 Days

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TRANSCRIPTION

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,  Dennis Cisterna. How are you doing, Dennis?

Dennis Cisterna: Doing great, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Dennis – he is the Chief Revenue Officer of Investability Real Estate. You can go see his company’s website at Investability.com, a link is in the show notes page. He also hosts a weekly podcast, The Real Estate Investor to help real estate investors become more efficient and empowered in the residential investing space, which lo and behold ties into Investability’s platform, which is an online marketplace for single-family residential property investors. Based in Denver, Colorado. With that being said, Dennis, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dennis Cisterna: Yeah, I’m happy to. I have been in the real estate investment sector for my entire career, which is almost 18 years now, and I have held a variety of positions, starting out as a housing market analyst, I’ve been a homebuilder, a land developer, an acquisitions guy, an investment banker, a lender, and now running this comprehensive platform for real estate investors, focused on the single-family in the residential investment space.

I have done it all and seen it all, and been in up markets and down markets, and I think we’re in a very unique spot in real estate’s history right now, where I think there’s a tremendous amount of opportunity right now to invest in a lot of markets, and I think the long-term outlook for real estate investing as an asset class when it comes to these residential properties is better than it’s ever been.

Joe Fairless: Why do you say that?

Dennis Cisterna: Well, you have a confluence of different factors going on that are both economic and demographic where we have an economy that’s been in a resurgent form for 6+ years where we’ve added back all the jobs we lost during the recession plus some. We have a nation that continues to grow from a population perspective, and yet we’re not adding houses to keep up with that demand; there’s a big inventory shortfall, which in and of itself would be a good opportunity for investors, since somebody always needs a place to live… But when you factor a lot of these other market constraints like a lack of available financing for a large percentage or the market, the fact that people aren’t saving as much money as they need to because they’re spending more money on housing – all this leads towards a longer-term rentership for this country more so than ownership.

Joe Fairless: Your background – holy cow! You mentioned like seven different roles that you’ve had… You certainly have a lot of different reference points throughout your career you can pull up in your mind and say “Okay, based on my experience as a homebuilder, this is an approach that I learned”, and as an investment banker, as a lender… I was trying to write down all of them, so say those again, will you? Because I was writing them down but I couldn’t type fast enough. I’ve got homebuilder, investment banker and lender.

Dennis Cisterna: Housing market analyst, land developer… I’ve also, probably like a lot of listeners in your audience, done a lot of direct investing myself, flipping properties and having rental properties as well.

Joe Fairless: Okay, let’s talk a little bit about what your company does now, and then we’ll back into some of these other jobs that you’ve done and how that applies to what you’re doing now.

Dennis Cisterna: Sure, absolutely. Investability is part of a larger publicly-traded company called Altisource Portfolio Solutions. Altisource is a large, vertically-integrated real estate service provider. They acquired Investability and our sister company called RentRange, which is a data analytics company, to be able to expand our presence in the real estate investment sector, and to be able to offer a lot of those services that they already had in house to this growing class of investors.

Investability not only leverages our existing data suite of products and our existing real estate brokerage, but it also takes advantage of a larger suite of services as part of Altisource. So whether you’re looking for your initial market research and analysis, or you’re looking to buy your first home or sell your investment property, or anything in between, we are a comprehensive service provider. So data company, brokerage, general contractor, property manager, title company, insurance company… We do it all.

Joe Fairless: And what is your specific role?

Dennis Cisterna: The Chief Revenue Officer – I run all of our sales, our marketing, our strategic planning, and I focus more on serving our larger institutional clients, guys that own 500+ houses and are continuing to expand their portfolios, where a lot of our solutions are geared towards smaller investors as well.

Joe Fairless: Okay, so an ideal smaller investor — how do you define smaller investor first off, and your ideal smaller investor is looking to do what with you?

Dennis Cisterna: A smaller investor is someone that owns between three and ten properties and is looking to either grow their portfolio or become more efficient at the properties they do own. When it comes to smaller investors, what most folks do with us is they purchase our RentRange reports which gives you an estimate of what your property should be renting for using our proprietary modeling and algorithm. So think of  a rentals estimate on steroids, where there’s more data in it, it’s used by rating agencies and Wall-Street investors to make decisions about what their properties should rent for or what the properties that are secured by securitization should rent for… And it makes sure that you’re maximizing your rental value, not under-charging through your properties.

Other folks will come to us for something as simple as just testing out if they have the proper property insurance for their investment property. Other smaller investors will come to us looking to either expand their portfolio or maybe trim the fat away from it and trim down what they hold.

Joe Fairless: How much does a RentRange report cost?

Dennis Cisterna: $14, and the more you buy of them, the cheaper it is. I think it’s pretty reasonable. If I can figure out a way to let your listeners understand how they can essentially charge an extra $25/month, it’s certainly worth that $14 for that report.

Joe Fairless: That’s a no-brainer, yeah. Now let’s talk about your different types of experience, because that truly is unique, or at least it’s not as typical. Why aren’t you still building homes, if you said earlier we’re not adding enough homes to keep up demand? It sounds like a pretty good business to be in.

Dennis Cisterna: It is, but it’s a tough business to be in. The reason I’m not building homes is because basically the entire home-building market imploded in 2007-2008, and myself along with about 93% of my colleagues that were employed by large private and public builders were laid off. That market didn’t even come back into any kind of real production until probably about two years ago, and even then they were still building at a fraction of what they should. And it’s not the builders’ fault necessarily, because part of the problem here is that there needs to be land that is available to them at a reasonable price, and then they need to build a reasonable house, and a lot of the publicly-traded homebuilders got absolutely destroyed prior to the recession, because they took on too large of land positions, kept building bigger and bigger houses when there was no real organic demand for it… It was just kind of MacMansion theory of building a bigger house on a smaller lot, and that was a way for a homebuilder to maximize their revenue, but obviously at the end of the day those properties need to move off their balance sheet and into a homeowner’s hand, and that became harder and harder to come by.

Now you have builders building at a much slower pace. In fact, we’re building the same number of single-family homes this year as we did when John F. Kennedy was in office, and at that time the population of the U.S. was only 200 million, not 340 million.

Joe Fairless: Wow, where are you getting this data from?

Dennis Cisterna: That information is available at the Census Bureau; a lot of it is tracked through the Department Of Housing And Urban Development.

Joe Fairless: Got it. So you just go to census.gov?

Dennis Cisterna: That’s right. I think they have a housing tab that you can look under that will give you a ton of that information.

Joe Fairless: It shows how many permits are being pulled… Cool. I have done that, and it’s definitely a good resource, especially if you’re looking for a particular submarket to see what type of competition you’ll have.

Dennis, based on your experience in real estate and wearing a lot of different hats, what is your best real estate investing advice ever?

Dennis Cisterna: Well, I learned this piece of advice from Bob Toll, who is the founder and former CEO of Toll Brothers, which is one of the largest luxury homebuilders in the country… He told me “No matter what you’re looking at, any kind of real estate, you can’t fall in love with it, because then you are prone to make bad investment decisions.” That is something I’ve stood by my entire life. No matter how attractive something might look, you have to have the ability to be able to say no if everything doesn’t line up the way you need it to, and that’s something that I think a lot of amateur investors have a problem with – really showing that restraint when necessary.

Joe Fairless: As an investor yourself – you said you do direct investing – what’s the last deal that you did?

Dennis Cisterna: The last deal that I did – I bought a piece of an 80-unit portfolio of single-family properties in Indiana. It was a portfolio that a relative of mine owns, and they needed to liquidate a portion of that to bring some cash out, so I was able to step in something that was already fully occupied, had a nice amount of cashflow, and for me, because my day job is running Investability, I don’t have as much free time as I would like, to be able to do as much directed investing and really being more of an activist investor than I have been in the past. So it was a good opportunity for me to get in there, get into the market, and still remain relatively hands off.

Joe Fairless: So you work for a company that you all provide these RentRange reports (among many other things), so you have access to a lot of data… What are some markets that you’re seeing right now that would be good markets to invest in for, say, the next five years?

Dennis Cisterna: Great question. I think if you’re looking for a longer-term investment, like you mentioned, somewhere in the 5+ year category, you should be focusing on markets where the economy is growing, but you’re also gonna wanna look for good in place rental yields today, so that eliminates some of the markets that have rebounded very strongly… For example, I don’t see as much opportunity in Phoenix or Southern California as I did a few years ago because the prices have been outstripping the rent growth by a pretty significant margin.

I’m seeing very attractive yields in a number of markets in the Midwest, in the South and South-East, in the North-East. A couple of those that come to mind are Cleveland, Cincinnati, Indianapolis, Dallas, Orlando, Tampa, Atlanta, Buffalo, Pittsburgh – all those markets are above the national average for yields. They typically are declining in terms of their vacancy and all of those markets are adding jobs right now, which is really the most important thing.

A lot of people are so used to investing in their own backyard, they don’t really understand what drives the housing market, and what really drives the housing market is having an economy and a population that’s growing.

Joe Fairless: You mentioned the rental yields – where can a Best Ever listener find that data?

Dennis Cisterna: That data is not as easy to find; that’s actually something we sell within our RentRange reports. It’s not something that’s tracked by someone like the National Association Of Realtors, which is a good source of free data, but unfortunately they don’t track that. But anytime you’re purchasing a RentRange report we give you a larger snapshot of what’s going on in that market as well, including what the top-performing zip codes are in terms of their yield and whatever market you happen to purchase the property report in.

There are other resources out there where you can find general information about what’s happening on a market level. We do a ton of press releases that highlight that data at a market level or what the highest-performing ones are. If you type in “RentRange” and click on the News in Google, you’ll get a lot of free and good information on that. Same can be said with RealtyTrac, if you’re familiar with that website.

Joe Fairless: Good stuff, thank you for that, and some good action items for us. Are you ready for the Best Ever Lightning Round?

Dennis Cisterna: Absolutely.

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

Break: [[00:14:23].14] to [[00:15:24].14]

Joe Fairless: Best ever book you’ve read?

Dennis Cisterna: Best ever book I read… I would go with The First 100 Days, which is a book about the first 100 days of FDR in office and exactly how he really revolutionized his presidency in those first 3 months.

Joe Fairless: Best ever deal you’ve done that you haven’t mentioned?

Dennis Cisterna: The best ever deal that I’ve done was actually as an investment banker… I was able to recapitalize a giant masterplan community in California, where I was literally able to save my client close to 10 million dollars in a single deal, and I also made a very pretty penny on that myself.

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

Dennis Cisterna: I’ve made lots of mistakes on transactions, I think any seasoned investor will tell you that… But certainly one of the first mistakes I made when I did my very first investment property was… One of my brothers and a partner – we went in there, we paid the right price for the property, but we really underestimated how long it would take us to finish the construction. Where we thought we’d be in and out of the property in 60 days, once we got in under the drywall, we realized this was closer to a six-month process, and when you have your own capital at risk, getting that capital back as fast as possible is key, so that was a bit of an unfortunate mistake… But we learn from those mistakes, and now I’m a lot more diligent about how long things will take.

Joe Fairless: Well, it’s better that you had your own capital than a hard money loan where the interest rate kept ticking up and up and up.

Dennis Cisterna: I couldn’t find a hard money lender in 2008 that wanted to give me any money; it was lean times.

Joe Fairless: What’s the best ever way you like to give back?

Dennis Cisterna: I like to give back by supporting local charities as much as possible, whether it’s local schools or other endeavors like that. Anytime someone asks me to chip it, I’m in, whether it’s something as simple as giving a donation or volunteering for an event. I like it. I’m not tied to a particular type of philanthropic cause; I think there’s tons of good causes, and because of that I always try to keep myself open to whatever opportunities are presented to me.

Joe Fairless: How can the Best Ever listeners get in touch with you and/or learn more about Investability?

Dennis Cisterna: The easiest way is Investability.com. We’ve got a ton of great content on there, a good idea of the scope of services we provide, and all of our contact information is available there as well… So Investability.com, certainly the easiest way to learn more about what we’re doing and how we might be able to help your listeners.

Joe Fairless: Dennis, thank you for being on the show, and with your background and the different types of jobs and tasks and responsibilities that you had in the industry, it’s important to listen to someone with your eclectic experience. As you mentioned, you said the long-term outlook for real estate has never been better, or it’s better than it has ever been, and you listed reasons why, and I was writing those down… One is the economy is in resurgent form. Two is the population continues to grow. Three is that we’re not adding enough houses to keep up demand. Four is the lack of financing that is available for more — and you didn’t mention this, so I might take it to a next level, and correct me if I’m wrong… I don’t wanna speak for you and put words in your mouth, but especially for people who don’t have as good of credit, it’s tougher for them to get financing right now because of what 2008 did. Would you agree with that?

Dennis Cisterna: In parts of society, yes. What’s actually really interesting is there’s a lot of really good programs for first-time homebuyers that most people just aren’t familiar with. Through FHA – they have some tremendous first-time homebuyer programs. A part of the problem is those don’t really jive with where people wanna live right now; it’s a challenge if having the right product for the right people in the right market. But what you’re really seeing is the total erosion of financing available for the middle class.

Joe Fairless: Thank you for that. And then lastly, I think you mentioned this – you said people not saving as much money as they need to.

Dennis Cisterna: That really comes down to rising costs because of three things – not necessarily because people aren’t trying to save more money, but even though inflation has been relatively slow across most of the major parts that make up the consumer price index, when you look at what impacts people’s life the most today and why they can’t save money, it really comes down to three things. They’re having to spend more on housing than they ever had, even if they’re renting. They’re having to spend more for healthcare, and they’re having to spend more for education. Those three things combined have dramatically altered the average person’s ability to save money for that down payment for their first home.

Joe Fairless: Well, I think a lot of real estate investors, Best Ever listeners who are listening to this, are like “Heck yeah… Let’s keep going, baby!”, so thanks for the shot in the arm. I appreciate you spending some time with us. I hope you have a best ever day, and we’ll talk to you soon.

Dennis Cisterna: Thanks so much, Joe. I appreciate it.

JF1127: Josh Dorkin, Founder & CEO Of BiggerPockets Is Back For Part 2 Of Our Interview!

Listen to the Episode Below (12:39)
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We’ve got some listener questions for Josh today. Get to know Josh as he dives into his morning routines, and explains the most underused aspect of BiggerPockets. He also tells us about how the BiggerPockets podcast came to be. Josh’s #1 piece of advice is to find your why, something he says that without it, you will struggle. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Josh Dorkin Background:
– ‎CEO & Founder: BiggerPockets.com, Entrepreneur
– ‎BiggerPockets Publishing, LLC
– BiggerPockets boasts more than 825,000 members, produces the top-rated real estate podcast on iTunes, and last year raked in $7 million in revenue through advertising
– Bigger Pockets made the INC 500, came in at #400 in August 2017
– BiggerPockets added a publishing arm, which released Set For Life on April 23, 2017
– Based in Denver, Colorado
– Say hi to him at: BiggerPockets: The Real Estate Investing Social Network

 


Made Possible Because of Our Best Ever Sponsors:

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, 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 fluff. With us today, the founder of Bigger Pockets – how are you doing, Josh Dorkin?

Josh Dorkin: What’s going on, man? You’re a crazy man… I don’t know how you do it every day.

Joe Fairless: Prior to our conversation I asked some Best Ever listeners what questions they would have for you. You’re gonna like this, by the way… [unintelligible [00:01:33].02] asks “What feature of the Bigger Pockets platform does Josh think is most underutilized?”

Josh Dorkin: I don’t like this… [laughter] The most underutilized feature on the platform I would have to say is member notes. As Joe nods his head and up and down, wondering what the hell I’m talking about… [laughter] Here’s what member notes are – you can go to anybody’s profile and take a note on them. I can go to your profile, Joe, and make a note and say “Yeah, Joe and I on 28th August had a conversation about X, Y and Z.” Only I can see it, nobody else can see it on the platform. It’s almost like a mini CRM, right? The next time I come back and the next time I interact with you I can be like, “Hey, Joe… Remember we talked about X, Y and Z the last time we connected?”

I think partially that’s due to people not knowing what it is. We have not updated that in a very long time; we are working on some really nice and sexy redesigns of certain parts of the site, including user profiles and our onboarding, and as part of that, I think we’re gonna be creating a little more clarity in that tool. I think it’s extremely useful, I use it all the time. I talk to you about whatever I talk to you about, I put it on there, and the next time I come back and I’m ready to talk to you again, I know exactly what we chatted about.

Joe Fairless: I am on your profile right now, in the member notes section, writing in Jerry Springer.

Josh Dorkin: That’s great. [laughter] Way to torture me, man. That’s really nice of you, Joe.

Joe Fairless: So clearly, I don’t wanna know what you’re writing about me right now…

Josh Dorkin: “What a jerk!!”

Joe Fairless: [laughs] This is from Julie, and this implies something – if the implication is not accurate, then forget the question.

Josh Dorkin: Sure.

Joe Fairless: When you were considering starting Bigger Pockets, what was a number one fear holding you back from starting?

Josh Dorkin: There was no fear that held me back from starting, which is what you were getting to. I didn’t start Bigger Pockets to create a business. I started Bigger Pockets to help me stop screwing up in real estate. So my biggest fear was continuing to screw up in real estate.

There was nothing that was kind of “Alright, if I create this thing and nobody shows up, then nobody shows up. I’ll figure something else out, I’ll find my answers in some other way.”

Joe Fairless: Evan H. has a question about podcasting and how that has enhanced your business and opened up doors and connections that you wouldn’t have had otherwise?

Josh Dorkin: I think by having a big show that has a big audience, it gives you the ability – as you well know – to talk to and reach out to people who you may not have had the opportunity to do that with. So it builds your name, it builds your brand, and especially if you do a good job and stay true to who you are and what you’re doing, then ideally that continues.

Look, I’ve gotten to talk to authors that I may have not otherwise met; I’ve gotten to — I don’t know, just getting to talk to even you, when you came on the show… There’s not a show that we have where I don’t learn something. So for me as a person not affiliated with Bigger Pockets, it’s so powerful. And as the CEO of Bigger Pockets, obviously having those people and those stories inspire other people is also so powerful.

I don’t know, we did the podcast on — I’m gonna say a lark, which is not true, but it’s funny… I look back in the past couple of months and I came across a note that I had written to myself years before I even started the podcast, and one of the things I had written down was “Start a podcast.” And I never did it because there wasn’t much of an audience, the technology wasn’t as pervasive, and so I never did it. But when Brandon came on, we were like, “Hey, maybe this will catch on. Maybe people will like the medium for the dissemination of real estate information in a way that is not already being disseminated by other people… Let’s give it a shot”, and what we found is that people do in fact like what we do and how we do it. There are people who absolutely hate us, but there’s people who hate you too, and you’re a really nice guy, so you can’t worry about that. You just have to do the show that you believe is the right show, and that’s what we do.

Joe Fairless: Your podcast has influenced my life personally in many ways, both as a listener and then also a guest. One e-mail I received after being a guest on the Bigger Pockets podcast – and it was actually probably about two and a half months after being on the podcast – was an e-mail from a fund that has over one billion dollars worth of assets under management, saying that they would like to talk to us (myself and my business partner) about creating a fund of 100 million dollars investing in our projects. And last week I was actually in Dallas, touring with them our properties in DFW, and talking to them about creating a fund. It was because the woman who heads up the fund, her niece is a listener to the Bigger Pockets podcast, and since, the woman who I met with – she listens as well now… And it was all because of being on the show.

Josh Dorkin: That’s awesome, man. That’s great. Cool. When you start that fund, I’ll take my 1% and we’ll be good. [laughter]

Joe Fairless: The last question…

Josh Dorkin: Wow, no answer there, just “Moving on to the next question… [laughter] Yeah, I’m gonna ignore that as much as I humanly can.”

Joe Fairless: I’ll buy you a beer when I come to Denver this February.

Josh Dorkin: Woohoo!

Joe Fairless: This is from Taylor L., and he asks “What are your morning routines or daily practices that you do on a regular basis?”

Josh Dorkin: I go back and forth with a miracle morning – or non-miracle morning – routine; it depends how spent or burnt out I am. But I like getting up, I like stretching… I don’t ever get up and then go to my phone, or go to my internet or anything like that. I like to get up, I like to stretch. On the good mornings, I like to exercise. This is all before anyone else in the house is awake.

Then get up, get dressed, do my thing, take care of my kids, get them ready for school, driving to school, and then at that point I will look at work. I don’t do work before my kids are off to school; I’m there, I’m present… I’m not playing on my phone, stressing about e-mails, dealing with any of that stuff. The morning is for me, followed by family, and then I head to work, and then work begins. After work, when I get home – four, five, six o’clock, whenever it is, I’m present again; phone’s away, not working. I may jump on social media from time to time, because it’s a hobby, but I’m not doing work per se until my kids are asleep. Family time is family time, and then when the kids go to bed, I usually like to thaw for a little bit, and then maybe I’ll do some work, as needed.

It’s very different than had you asked that question four years ago, which would have been “I get up, I work, I take a shower, I work some more while my kids are getting fat (or whatever) and then I leave to work, and then I come home and I work, and then I work through dinner, and then after dinner I continue to work, and even though I’m with my family, I’m not there.” I came to the realization that I was doing that, and hated myself for it, and said “This is just not who I wanna be. I am a father first and foremost, and my family is the most important thing to me and my life, so I’m not gonna let anything, especially my company, get in between that.” So I think that’s it.

On those good mornings, when I’m fully miracle-morning-ing, I don’t actually do the full miracle morning, which refers to a book called The Miracle Morning by Hal Elrod, for those of you who don’t know… But I’ll stretch, I’ll do some meditation, I’ll do some exercise, and I’ll do some reading. Those tend to be the four things that I do.

Joe Fairless: And parting words for the Best Ever listeners – what’s your best real estate investing advice ever?

Josh Dorkin: I would say figure out your why. Why is it that you’re getting into this for. If you don’t have a strong why, then you’re not ready to begin. If you’re already an investor and you’re thinking about scaling your business or growing your business, what’s the why? What’s driving you? What’s motivating you? Because if you don’t have it, do you know who’s not gonna have it? Your partner, your spouse, your family. So you’d better have a solid why that everybody can buy into, because otherwise there’s gonna be opposition at every step from those people who should be supporting you. I think that would probably be the first best piece of advice I would offer.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and either get in touch with you or learn more about your company and get involved?

Josh Dorkin: Just go to BiggerPockets.com, you can check it out. We’ve got the Bigger Pockets podcast, you can find it on iTunes, YouTube or wherever else. Podcasts are found! Go on the site, play around, look around… There’s just unbelievable amounts of information to help you out. Beyond that, for me personally, I don’t necessarily connect with people I don’t know off of Bigger Pockets. I would say follow me on Twitter, @JRDorkin. You should follow Bigger Pockets, @BiggerPockets… But until I really get to know somebody, I don’t tend to do the Facebook or LinkedIn or other connections. It would be impossible and unwieldy for me to do that. So give me a shout on Twitter…

Joe Fairless: I can tell you that you should definitely follow him on Twitter if you wanna continue to see the insect-eating that he regularly does at the Butterfly Pavilion in Denver. Thanks for being on the show, Josh. I hope you have a Best Ever day. I enjoyed it, and we’ll talk to you soon.

Josh Dorkin: Thanks, Joe. Take care.

 

JF1120: The History of BiggerPockets And Its Founder Josh Dorkin – Part 1

Listen to the Episode Below (41:40)
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I really don’t think I need to say much here – you know who Josh Dorkin is, and you know about BiggerPockets – if you don’t, you should. Today we get to hear about how BiggerPockets has become what it is today. We’ll learn about customer complaints, new tools that have been released throughout the years, and if they were a success. Josh also tells us about himself, his past and current role with BiggerPockets. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Josh Dorkin Background:
– ‎CEO & Founder: BiggerPockets.com, Entrepreneur
– ‎BiggerPockets Publishing, LLC
– BiggerPockets boasts more than 825,000 members, produces the top-rated real estate podcast on iTunes, and       last year raked in $7 million in revenue through advertising
– Bigger Pockets made the INC 500, came in at #400 in August 2017
– BiggerPockets added a publishing arm, which released Set For Life on April 23, 2017
– Based in Denver, Colorado
– Say hi to him at: www.biggerpockets.com


Made Possible Because of Our Best Ever Sponsors:

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 http://www.fundthatflip.com/bestever to download your free negotiating guide today.


TRANSCRIPTION

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 fluff. With us today, the founder of Bigger Pockets – how are you doing, Josh Dorkin?

Josh Dorkin: What’s going on, man? You’re a crazy man… I don’t know how you do it every day.

Joe Fairless: I am a crazy man, that is for sure. That is really interesting, because I have video proof of you being a crazy man. I was on your Twitter handle, I was looking at different tweets you’ve made, and I have a question for you – are you ready for this?

Josh Dorkin: You scare me now… [laughter]

Joe Fairless: You tweeted it, baby… “What tastes better – a grasshopper, a mealworm or a cricket?”

Josh Dorkin: Oh… You know, I stuffed them all in my mouth at once, so I couldn’t tell you… [laughter] So what he is talking about – I went to the butterfly museum here in Denver (it’s between Denver and Boulder) and they basically have this thing, like “Hey, try out insects.” It’s super high in protein content, and the carbon impact of eating these insects is far lower than if you’re eating comparable mammals. So I’m with my kids, I’ve gotta be brave, I’ve gotta show them that I can do this (Superdad, right?) and they have these three things that you could eat, and I’m like “Alright, you know what? I’ll do it!”

The problem is this – they went and they seasoned all of these things. They put some powder on each of them, each with its own flavoring… All of the flavors of the powder were horrible. So if you were just eating these insects, it would have just been crunchy and fine, but the powder was disgusting.

Joe Fairless: Now, have you isolated that, where you do know the powder was actually the part that was horrible and not the actual insect itself?

Josh Dorkin: The insect was fine. Yeah, I had no problem eating the insect. The powder was just kind of gross.

Joe Fairless: 17th June 2017, Josh’s Twitter handle – go look at that and you shall see the video. It’s very impressive, you don’t flinch. You just eat it and you’re like, “Hm, okay. Next. What else have you got?”

Josh Dorkin: I’ve got this! I’ve got this!

Joe Fairless: Well, what we’re doing today is we’re gonna learn more about you, and perhaps some things that some Best Ever listeners, who I’d say 99.9% are all members of Bigger Pockets, and that 0.1%, shame on you! Go join. We’re gonna learn more about you and Bigger Pockets and your road to where you’re at now and where Bigger Pockets is.

Best Ever listeners, a slightly different format for this interview. We’re going to do more of a long form and we’re going to separate it out into two episodes. This will be part one.

Here’s what I’d like to start with – prior to our conversation, I asked some Best Ever listeners what questions they would have for you, and I think you’re gonna enjoy how we start out, because based on my conversations with you in person and just what I’ve read about you and interacted with you on Bigger Pockets, you take pride in helping Bigger Pockets members, and how it’s a community and we’re all in this together.

So here’s together – this is from Kendra B., and she asks “Is there one person that sticks out in your memory as having been helped by Bigger Pockets in all the work that you all have done?”

Josh Dorkin: The one person that sticks out, the instant answer to that is Brandon Turner. Those of you who are unfamiliar, Brandon Turner is co-host of The Bigger Pockets Podcast. He works for us, and initially, when I came to know Brandon years and years ago, he was a user on our platform; he was trying to find financial freedom or whatever it is that he was trying to find, and used the Bigger Pockets platform to get there.

He was the pure representation of who we were and what we strived for. He was this guy living in the Pacific North-West who had been kind of floundering around in his life – I think that might be an unfair characterization of Brandon, but regardless… You know Brandon — so he was trying to figure it out, like the rest of us. He came across Bigger Pocket and the idea of real estate, and used Bigger Pockets to help him build this passive portfolio of real estate.

Of course, living in the area that he lived in, he was at a point where he no longer needed a job. He had created that freedom for himself. He was writing for Bigger Pockets, and at that time I was in need of help. I needed to hire somebody to come and join me as my first employee, and we got to know each other and I brought him on.

Brandon really just is that pure representation of who we are, but there’s countless stories. Not a day goes by where we don’t hear from somebody who’s like “You guys are transforming my life. You guys are helping me out. You guys have helped me quit my job” or “Helped me retire” or “Helped me build income for my family”, or whatever it is. That’s why we do it. We’re here to help people succeed.

Joe Fairless: How many members are on the site now? Like 725,000?

Josh Dorkin: I think it’s like 830, somewhere around that.

Joe Fairless: It depends on what day, right? Every day it gets more and more. 830,000 members… I’m sure that with the positive feedback you get some gripes. How do you determine what to listen to and what to filter out that that’s just how things are when you get to a certain point and you reach a critical number of people, you’re just gonna get gripes?

Josh Dorkin: People who gripe – I have like three people. [laughter] People always wanna complain about something. You know, that’s really a good question. I would say staying true to yourself and knowing who you are and knowing what you’re doing and why you’re doing it, and making sure everyone on your team is aware of that. From time to time situations will arise where somebody has a gripe and you’re like “Oh, we never actually thought about this. Let’s think about it. Is this something we wanna be reactive to, or is this something we wanna deal with? Do we wanna change how we do certain things, change policies, whatever it is? Or is it a one-off situation?” It’s hard, man… I think the same goes with anything in business, whether it’s somebody flipping a house or buying rental property or running a Laundromat – there’s always gripes that come at you, and I think the way to best deal with it is really know who you are, really have your values spun out, and make sure that you’re staying true to yourself and what you stand for, and ultimately your customers.

No matter what, we cannot please everybody. Impossible. Whether it’s me, or Amazon, or Tesla, or any other brand, like Apple… The big guys. I’m not amongst those big guys. There’s no way you’re going to please everybody, so I think coming to acceptance on that and understanding that you can [unintelligible [00:08:01].00] to have a customer forward-looking business… Like Zappos, Tony Hsieh – they don’t  think of themselves as a shoe business, they think of themselves as a customer service business. I think we’re not as outwardly stating of that, but I do believe that is core to who we are. We’re here to help people be successful, we wanna take care of people, we wanna do right by people, and that’s who we are.

Joe Fairless: How do you communicate that amongst the team so that is present with them on a daily basis as they’re interacting with Bigger Pockets members and building Bigger Pockets?

Josh Dorkin: I don’t need to, because everybody who communicates with our users knows that. If they don’t, and somebody interacts with somebody in a way that doesn’t feel right, let us know… But ultimately, that’s part of our training, that’s part of how we do things – making sure that those folks that interact and communicate, they know that we’re here for you guys; we’re here for our listeners, our users, and our job is to do our best to play an unbiased intermediary in a platform where people can come together, where people can share information and where folks can help each other. At the end of the day, I see us as this democratization platform — that’s a hard word to say…

Joe Fairless: That’s a tough one, yeah… I never get it right.

Josh Dorkin: But that’s kind of who we are, so I think that probably answers —

Joe Fairless: Yeah, and has there been a gripe that you can think of that has changed a policy or you all have changed maybe a product or a feature on the site as a result of it?

Josh Dorkin: Man, we get gripes every day, and then our team takes them, looks at them, evaluates them, decides if something needs to be altered, tweaked and modified and they do it. I don’t even know about all the tweaks and changes that happen. We empower the folks within the team to be able to do that.

Anytime we do anything, we piss people off. Remember when Facebook did that last redesign? No, we all forget it, but when it happened, everyone was like “Oh, screw Facebook! I’m done, I’m never gonna go back again. This is it!” We all went back. You’re used to something; you get used to how things are done, and when something changes, it’s off-putting, until you either decide that you like it or you really don’t like it. At that point, we can then look at it and say, “Oh, well is this something that is affecting more than just one person?” And we test stuff; we create test groups… We don’t ever just say “Oh, hey, we’re gonna make a change because this is what we think”, and we put it out there. We talk to users. We have years and years of collective wisdom, plus we talk to our users on a daily basis, and anytime we make radical changes we always bring folks in and kind of work through to make sure that we’re doing it in the best way possible.

Is there any one thing? Let’s see… We came up with a product that I thought was gonna be amazing, unbelievable, which was we had created a live chat so users can chat with each other, kind of like a Facebook chat or something like that. So if you’re logged in, you go to XYZ’s profile and it will tell if they’re online, and then you can just start chatting with them.

We launched it, I was pumped — this was like two years ago… And it was an abject failure. Complete and utter failure. People didn’t like it, didn’t use it… It might have been execution, it could have been one of a hundred different things, but total failure. After a couple months we ultimately killed it, but that was something that we were able to measure. We’re not just gonna say “Oh, there’s one person griping”, it’s “Nobody is actually using this. [laughter] The people that are using it are using it incorrectly… It is a failed product. Alright, we’ll try again with something else.”

Joe Fairless: And what is your best guess, if you had to pick why that didn’t work?

Josh Dorkin: I think because it was another platform. People already had their platform of choice for chat, whether it was Skype or AIM or Facebook, and just creating another one… It creates confusion. It’s just another thing you’ve gotta do, another place you’ve gotta go.

Look, I still stand by the product. I think it was a good decision to make that product, I think there was a ton of value in it; I used it when it was around and I found it very helpful… And not just as Josh CEO, but as user-to-user I thought it was fantastic. But you live, you learn.

Joe Fairless: Yeah. As Josh CEO, what are your main responsibilities that you focus on now?

Josh Dorkin: Me? Today, my main responsibilities are ensuring that my team leads all are on the same page, ensuring that we know where we’re going, we know what we’re working on, making sure that the people side of things is working really well, staying on top of our culture, making sure that people feel good, people feel valued, people have clarity in who we are and what we’re doing… I am definitively still the chief advocate of Bigger Pockets, the face, the brains, the beauty… No, just kidding. [laughter]

I’m the guy that — I talk to other companies… I’m not the only one, but I’m out there advocating on our behalf, I’m the one out there trying to create relationships. I look at all the options, too. As the owner of the company, you need to know other businesses in your industry, you need to think about things like “Hey, do we raise money, do we not raise money? If we’re gonna have an exit, how do we do that? How does all that work?”, because as the owner and CEO – I’m both; there’s actually two roles there, right? But sometimes they conflict. But I have the responsibility of knowing and understanding all these different things and factors that are out there, and sometimes I have to fight myself on “Hey, what’s best for the company? Is it the same as what’s best for Josh, owner of the company? How does that work out?” Thinking all that stuff through – it’s complicated.

I think that’s probably the gist of what I do. I love getting my hands dirty on product. I love working with our design guys and guiding my vision through them; I like working with our marketing people…

Joe Fairless: You mentioned the question of “Do we raise money, do we not raise money?” – have you raised money for Bigger Pockets?

Josh Dorkin: Never.

Joe Fairless: And why is that?

Josh Dorkin: When I started the company, it was a hobby site. I was just doing it for fun, and — well, I don’t know how much fun I was having, but it was a hobby site still. Eventually it became this lifestyle business, and in the first number of years I did think a lot about raising, not raising. It was the cool thing to do. “Hey, I’ve got a tech company. I should raise money”, and then “I have this valuation, and now I’m worth all this money” — you know, all that stuff that the tech press and everybody else kind of perpetrates. I’ve definitively perseverated, but at the end of the day I’ve always decided not to raise, because I never wanted to have over my shoulder, telling me “Hey, this is how this company needs to be run. Hey, Josh, you’d better get an ROI in the next three years, or you’re gonna be out of job and we’re gonna shut your company down.” For me, that would be a travesty.

This company is too important, not just to me, but to so many people, that I can’t possibly have somebody who doesn’t get it directing what we do and how we do it in order to just eek out some kind of return. So that’s been it — but look, there’s use in raising money, there’s value in raising money, based on strategic objectives. Do we wanna go and acquire a company? It might be helpful. Hey, do we need to drastically improve our headcount in order to create or modify some kind of product? That might be a reasonable use. But there’s other ways to do it, too – there’s loans, and things like that. But right now we’re good, and I’m not necessarily looking… Though, you know, if somebody comes in and says “Hey, I’m gonna give you some F U money to buy a piece of your company”, I might have to have a conversation with them for sure, but I’m not necessarily seeking out a capital raise right now for any particular product or objective.

Joe Fairless: You mentioned some of the aspects of your responsibilities that you focus on that you really love, like the product, working with the marketing people etc. What’s the least favorite part of what you’re responsible for?

Josh Dorkin: Talking to you. [laughter] I mean, this show is great… [laughter] Look, we’ve got 20-something people in our office. Once you start getting more than a  handful of people, personalities come in and people drama kind of happens. It’s inevitable, no matter how good you are at hiring, no matter how hard you try…

Joe Fairless: No matter how many ping-pong tables you have.

Josh Dorkin: Yeah, we’ve got two.

Joe Fairless: I know.

Josh Dorkin: But that really is the one thing that drives me nuts. I’m kind of the old school like “Can’t we all get along? I may not think you’re a particularly good person, but I’ll work with you.”

Joe Fairless: That’s not your opening line when you attempt to resolve an issue… [laughs]

Josh Dorkin: Correct.

Joe Fairless: “You’re not a particularly good person, but hey, I’ll work with you on this.”

Josh Dorkin: That is me acting as somebody who may have a squabble with somebody else. That is not me as me. Look, I’m from New York; when I don’t like somebody, I tell them “Hey man, this isn’t working. I don’t like you.” I don’t have that at the company and I don’t see that at the company, because — I would hang out with everybody at the company if I  weren’t their boss. Everybody here I like, and they’re all good people, but look, again, that’s irrelevant – you may have different mindsets, different mentality, and you may not get along super well with somebody, but be a pro. Work through it and figure it out. Most of the time that happens here; 99% of the time that happens here, but when the drama comes up, which is inevitable, I hate dealing with it.

Joe Fairless: Your first hire, Brandon, did well there, clearly… How do you help set your team up for success on subsequent hires? That’s a good question again. Wow, look at you.

I would say having a very clear idea of the kind of culture we’re trying to create, having a very clear idea on job objectives and roles and responsibilities, and making sure that we have team buy-in. One of the things that we do is we have a “family interview” where a potential hire — you’re gonna go through all the regular rigmarole, make sure that they’re skilled and capable and they can do the job… But are they somebody that the team as a whole can get along with? Are they somebody that shares the mindset that the family does?

If you’re an engineer, you’re gonna be sitting down with a customer service person, folks from all different areas of the company who may not directly even work with you, but the idea is that by doing that we can do clear objectives, we can get clarity on who this person is. And frankly, we also have a no A-hole rule, so it also really helps to vet out the A-holes that may be coming through, because four of us may not see it, but the fifth person may be like “You didn’t see that? That lady was a total A-hole/that guy was a total A-hole.” “Can you clarify that?” “Yeah, blah-blah-blah…” “Yeah, okay. You’re right. Good catch!”

Joe Fairless: Is there any direction given to the family interview for the people who are doing the interviewing?

Josh Dorkin: Yeah, our HR makes sure that they’re asking legal questions and doing it all in the way that they’re able to, so yes.

Joe Fairless: Got it, fair enough.

Josh Dorkin: We’re not asking “So how many kids do you have?”

Joe Fairless: Yeah, I wasn’t implying that, I was more along the lines of…

Josh Dorkin: Hey, Joe, are you Christian? Because we don’t hire Christians here. [laughter]

Joe Fairless: Is there was a particular format, or is it just a roundtable and then it’s just “Okay, here’s all this people and they just start asking you questions…”?

Josh Dorkin: I think it’s fairly loose.

Joe Fairless: Fair enough. Alright, so let’s talk about what we were touching on earlier, and that is Bigger Pockets as a business. What are your top three revenue streams?

Josh Dorkin: Sure, so our top streams are advertising, memberships, and our publishing business.

Joe Fairless: Okay. And what do you see the most potential for in the future of those three?

Josh Dorkin: Actually, the most potential is not one that has been named. I think connecting our users with service providers through lead-gen is definitively one of the biggest opportunities for us.

There’s so many people that are looking for X on the platform, and X is usually like “Hey, I need a great agent”, “I need a great lender”, “I need a property manager”, all these things, and I think servicing that is going to create a monster opportunity for us from a financial standpoint, and I think it’s also going to create a massive opportunity for our users to get their needs serviced, to help people find what they want, find what they’re looking for, and solving that. That’s one of the biggest opportunities for us going forward.

Yeah, business — look, as the site grows, all of our different media grow; you have the opportunity to grow that, but over time, when I started the company almost 13 years ago, our revenue per thousand eyeballs was five, six, seven times what it is today. That’s kind of where things have gone in online advertising, which is great, no problem… Which is why we’ve also created other means for driving revenue, otherwise we would have been out of business a long time ago.

Joe Fairless: In terms of your focus as a CEO on Bigger Pockets, what’s something that keeps you up at night? Either it excites you or it is a concern of yours?

Josh Dorkin: What keeps me up at night…? I would say the things that I really ponder are how do we touch more people? How do we tell folks who don’t already know about us – or not even us… How do we help tens of millions of people out there that don’t even realize that they have an opportunity to go forth and build wealth through something other than their 9 to 5. Because we do a really crappy job in this country in teaching people financial wellness; we don’t teach them financial wellness, they don’t learn that stuff in school… Maybe few and far between do, but we don’t teach that, so the average person might learn about banking, maybe they learn about a savings account; some of them don’t trust it and put their money under their pillow anyway.

Folks who have jobs that give them 401k’s may know that they have a 401k and know that their contributes to it and that they should put their money in the market, but they may not know what that really means, they may not understand “Okay, what does buying a stock actually mean? What does buying a mutual fund actually mean? What is an ETF?” And then all the way down to real estate. Most people look at real estate and they say “Well, that’s for rich people. Only rich people can buy real estate. Only really wealthy people have an opportunity to do that”, and we say that’s not true. We say “Well, how do we solve this?” Because I think it’s a real problem in our society.

I’ve just talked to so many people who are like “I don’t have a chance, I don’t have an opportunity. I can’t get out of whatever it is that I’m in. My life, my lifestyle, my place in society… I’m stuck.” Unfortunately, the second you have that mindset, you’re stuck, you’re done; you’re not getting out. So how do we change it, how do we alter that, and how can I, through Bigger Pockets, touch as many people as possible? And pass the message that it may not be real estate. Look, if we can use our voice in some way, shape or form to help somebody who thinks they’re stuck get unstuck, and they never go into real estate, then we succeeded. If it’s “I’m unhappy with my job and Bigger Pockets helped me realize I’m unhappy with my job so I’m gonna go find another one that just best suits who I am and what my truth is”, then I just did my job, and we’re solving in need.

That’s the stuff that I’m always just trying to crunch through – how do we do that, how do we impact…? And again, I think that problem is a lot bigger than Bigger Pockets. I think we’re here to help solve it, but we can’t solve it alone. I think there’s societal things that we need to do, or schools need to make change, or – as much as I hate to say it, our government needs to get involved; I think they should play a role. I think teaching financial wellness and teaching people to not rely on the system only creates a more productive society.

Joe Fairless: It kind of ties into what you were talking about just a second ago, the connecting users to service providers via lead generation… Perhaps not a service provider, but just connecting people from “they have a challenge” to “here’s your solution.”

Josh Dorkin: Yeah, I think that’s fair. The big issue I always have is there’s never one solution, and I think one of the reasons Bigger Pockets is successful is because we were never so bold as to say that we know there’s one answer for everybody, “This is what’s right for everybody”; a very anti-guru mentality that we have. Instead it’s “You, Joe, come on Bigger Pockets and you have a question or an issue or a concern”, and you get 10 people, 15 people, 20 people with 10, 15, 20 different ideas and what works, and then you have an opportunity to go through and say “What works best for me?” I think that’s why organizations like YPO, which I’m not a part of, but I contemplate joining all the time, are so successful. They’re organizations where people aren’t telling you what to do… Well, people do tell you what to do on Bigger Pockets, you just don’t have to listen to it. [laughter] But it’s “Hey, I’m gonna share my story, and through my story you can kind of extract and answer”, or maybe after hearing two or three stories you can extract what’s true for you.

I think the beauty of Bigger Pockets is you get altering opinions, and those opinions are there to guide you.

Joe Fairless: Whether it’s something you read on a post on Bigger Pockets, or whether it’s just something you’ve come across as an entrepreneur, what’s the worst advice that you’ve seen or have been given personally?

Josh Dorkin: The worst advice… “Trust me.” [laughter] I think the most dangerous or worst thing that I see is typically — I don’t think I see this, I just know that people do it… People not taking responsibility for doing their own homework, doing their own due diligence. That can be in anything, whether it’s “Hey, I’m gonna go buy a property from a turnkey company and I’m gonna trust their numbers” or “I’m gonna buy a rental property from an agent and I’m gonna trust the numbers from the seller”, or “Hey, I’m gonna partner with somebody, but I’m not gonna do background checks and I’m not gonna make sure that they are who they say they are.” I think that’s the one thing that I see over and over again which blows my mind… Even on Bigger Pockets – there’s people on Bigger Pockets that have been around for years and years, and have written maybe tens of thousands of posts, and they’re wicked smart, and I wanna trust the hell out of them, but if I were gonna get into bed with them, if I were gonna partner with them, I’m gonna go through every ounce of due diligence check that I would with anybody else that I didn’t know at all, and I think that’s the one thing that people do that drives me nuts.

Do your homework, do your due diligence… Look, at the end of the day there’s shitty people out there – sorry, I don’t know if I’m allowed to curse on your show (bleep me), but there’s people out there that take advantage of people in society, in the world, and unfortunately everywhere else, and so it is incumbent upon us to make sure we are protecting ourselves and our families and our nest eggs by being careful.

I think that’s not necessarily something that I see, but something that I know happens all the time, on or off the site, and I think it’s just so important that people do their homework.

Joe Fairless: On the due diligence note and doing your homework, a question that Dave M. asked is “What are the likes and dislikes for owning a business versus owning real estate, and which one do you enjoy most?”

Josh Dorkin: I think the dislikes are the same on both. The dislikes are the people – not that I dislike my people, but I dislike people drama. I’m a relatively low drama kind of guy, so people drama, I just don’t like it. Likes, I would say they’re very similar. You’re embarking on some endeavor to reach some kind of goal, and real estate it’s “Hey, I wanna buy some property with the means to build wealth in some way, shape or form.” In business it’s the same, at least for me… I always have the “How do I do better? How can I do a better job than I did before? How can I not make this mistake again? How can I improve my processes? How can I serve more people in a better way?” If it’s rental property, “How do I treat my tenants better?”, whatever it is.

For me, the likes are in the challenge of doing better. The dislikes are in the challenge of people who are difficult, or could be difficult, from time to time.

Joe Fairless: I have identified your own personal version of hell… Are you ready for it?

Josh Dorkin: Yeah-no [unintelligible [00:30:26].08] [laughter]

Joe Fairless: It is if you were trapped in a room with a big screen TV, playing Jerry Springer on loop.

Josh Dorkin: Yeah, that sounds pretty terrible. [laughter] People who are griping and griping and griping would pretty much be my version of hell, yeah.

Joe Fairless: [laughs] Alright. You and Brandon interview a bunch of people, and high-achieving real estate entrepreneurs, as well as people who are just getting started… So you benefit from getting a front seat in hearing about how people are achieving certain things, and what works/what doesn’t work… Where do you see the future of real estate investing industry going, or just real estate in general going? Is there anything that you see in the future that is coming to light?

Josh Dorkin: Yeah, there’s so many new companies trying new stuff… Man, I think it’d be nice for some of the process to be simplified. Let me think about this for a second here. At the end of the day, there’s two groups of people, right? There’s homeowners, and then there’s investors, and I think you have to group them separately, because their mindset is typically very different.

New investors I think are gonna think like a homeowner, experienced investors are gonna think like a business owner. From the homeowner perspective – look, you’re gonna buy a house, you’re gonna wanna walk that house, you’re gonna wanna walk through it, you’re gonna wanna feel it, you’re gonna wanna experience it and get a vibe for it. There’s all these prognostications and development of technology for “Hey, let me put on some VR goggles and walk around a property…” I don’t know, I’ve never worn VR goggles, so I cannot even imagine how that would be; well, I can imagine, but I just don’t know what it’s like, but I can’t imagine it giving you the same experience as walking through the property that you’re gonna buy. There’s a smell, right?

Joe Fairless: There is a smell.

Josh Dorkin: There’s a vibe, there’s an energy, there’s a feeling, inside and outside, that you’ll never in a million years get from VR. I think people buying houses, no matter what, are gonna have to always go — at least the vast majority, that’s the vibe that they want; they wanna feel it. So I don’t know that there’s any way to bypass that.

Now, for that group, “Hey, can we make financing easier? Can we make the paperwork easier? Can we make the process easier?” – that’s a definite yes. Why do I have to sign eight thousand sheets of paper? There’s ways that can all go.
From the investor perspective, I think just facilitating information flow, and I think the same goes for regular homeowners as well. There’s still just so much bad information out there. We rely on a seller’s agent to provide accurate information, which they may not be privy to or they may not necessarily wanna have full disclosure of, right? How can we centralize this stuff? I know very little about blockchain, but I think blockchain can be a very good technology for real estate information, because once that accurate data is in the chain, if somebody messes with it, everybody knows. So finding a way to ensure that accuracy and truthfulness is passed along…

I bought a house a couple years ago – my primary – and there had been water damage in the living room, and they had repaired that water damage. It was not disclosed at the sale, and the cause of the water damage was actually never fixed. So there was water damage on the floor, the floor was fixed, the cause was not repaired… I bought it, I didn’t notice it, and two, three months later my floor started warping and coming apart. Clearly, the homeowner knew, there was a high likelihood that the agent knew, but at the end of the day nobody disclosed it. So I end up with all this damage, and it’s a lot of money – this is on the order of probably 10k+, and that never in a million years should have happened.

The second that person went and fixed the floor, that should have been disclosed or added to some kind of thing… Like a CARFAX, right? Something that would pass along, so I know what the deal is. “Hey, these homeowners did X, Y and Z. These homeowners did all these modifications and changes, and it’s part of the permanent record.” I think stuff like that would be really valuable and really helpful.

At the end of the day, there’s always gonna be a demand for real estate, there’s always gonna be a demand and a need for people to own property. Hey, crowdfunding came along and suddenly crowdfunding is gonna dominate and take over everything in real estate – meh… It’s another way to raise money, it’s another way to finance a property, it’s another way for people with money to get a return, but people are still buying and selling and getting loans. The basics are always gonna be the same. I can’t imagine the basics ever changing; I just think we’ll come up with creative ways for making different parts of the process easier and better and more accurate.

Joe Fairless: I agree. I think that when you talk to institutional guys and gals, who have a more macro level than I do, and who look at it from a much more institutionalized reference point, real estate investing – they say that real estate investing is broken, it’s a fractured industry, and there’s not a lot that connects the dots among all the properties, unlike other industries that they invest in, and I think that what you’re talking about, the CARFAX for properties, that is some sort of national or statewide database, is needed and would certainly be helpful. I do see that coming; it’s just inevitable with the amount of technology and smart people that are in the world. So yes, I do agree.

Josh asks “What are the 3-5 most important things in your experience to growing and scaling a company?”

Josh Dorkin: The most important things to growing and scaling a company… One, having a good idea that’s scalable – start there. So having an idea, having some kind of plan, whether or not it’s written… I don’t think you need necessarily a written plan from zero (I didn’t). So one, an idea, two – a plan. Three, your business has to solve some kind of need for the customer that somebody else is not serving. I say that out loud and I think about McDonald’s versus Burger King. Burger King is solving a need, McDonald’s is solving the same need, but now it’s flavor choices, right? So do you like A or B better? But having a USD (unique selling proposition), something that is unique or that you believe to be unique about what it is that you’re doing – you’re building, you’re offering service, products, you name it.

Three – being passionate, or having a team of people that are absolutely passionate about that idea. It’s pretty rare to see successful companies where — companies get to a point of success where the founders or creators or people running the show that don’t have some kind of passion for it, it’s too hard; it’s too much work, it’s too difficult to struggle through that without having that passion. Having a dedication to people and to your own people… You can’t build a scaling company without taking care of people, and I’m saying that and I can think of examples of companies where they have a really crappy culture and I’m like “Hm, maybe not…”, but at the end of the day I think what goes around, comes around.

I think those are the keys, and especially in 2017 when we’re recording this, I think something that we didn’t do in the past – and by “we” I mean businesses in general – is becoming very data-oriented… Metrics and data and understanding your business from a data perspective. I think you often see small businesses where they don’t get it struggling a lot.

Knowing your numbers — let’s take real estate investors. If you’re a real estate investor and you market by mail, if you don’t know your send and open rates and your cost per send and your funnels, you’re just throwing money out the window. You don’t know what you’re doing, you have no way to measure whether or not what you’re doing is successful or not.

A pizza restaurant – what’s our cost per ingredient? Can we drop that down? And measuring our volume per day and being able to predict… Most restaurants fail because they can’t buy correctly, they can’t manage their costs and all the waste. All of that is knowing and understanding the numbers. I think that’s probably one of the biggest things.

Joe Fairless: Hey, Josh, thank you for being on the show, from talking about the overall approach that you take to business and how to build a company, the process or the things that we need to pay attention to when we build a company – have the idea, have the plan, make sure we’re solving something with a unique selling proposition… Be passionate, have dedication to our people, and know our business from a data standpoint – that right there is the blueprint for creating not only a real estate investing company, but just a company in general. Also, you’re speaking to a Bigger Pockets member, and I am now going to start using the member notes section, so Best Ever listeners, go check out the members notes section; it sounds like a really cool feature.

From an overall entrepreneurship and mindset standpoint, I noticed one thing that you honed in on when you were talking about the overall vision, and it’s not saying “I can’t do something” or “I don’t have access”, it’s HOW do we do something, and really coming at it from an abundance mentality and a solutions-oriented mentality, which is what a true entrepreneur would do.

Then the family-style interview. Culture is incredibly important it’s obvious to you, and how much emphasis you put in that, and don’t bring no drama.

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

Josh Dorkin: Thanks, Joe. Take care.

JF1042: Simple Networking Has Made Him Over $100,000!!!

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If you’re struggling to find your next deal, try attending meetups – or even start your own! That’s exactly what Anson has done and he credits the meetings to over $100,000 in revenue from deals he would have missed out on otherwise. Something so simple that anyone can do, can have major returns!  If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Anson Young Real Estate Background:
-Owner of Anson Property Group LLC Real estate investor with over 10 years experience
-Specializes in wholesaling and flipping with a robust background in construction
-Launching first real estate investing book
-Based in Denver, Colorado
-Best Ever Book: The Obstacle is the Way

Click here for a summary of Anson’s Best Ever advice: How to Make Over 6-Figures with This Simple Networking Strategy

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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, Anson Young. How are you doing, my friend?

Anson Young: I’m doing great, how are you, Joe?

Joe Fairless: I’m doing well, nice to have you on the show, and looking forward to diving in. A little bit about Anson – he is the owner of Anson Property Group LLC. He is a real estate investor with over 10 years experience; he specializes in wholesaling and flipping with a background in construction, and he is based in Denver, Colorado, home of the Best Ever conference last February, and then coming up again this next February (probably early February). With that being said, Anson, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Anson Young: Absolutely. Like many people, I got laid off back in the mid-2000s from an IT job and I had to make this decision of what the heck I wanted to do with my life, if I wanted to keep letting companies lay me off and put my financial security in jeopardy, or if I wanted to do something else. It took me a little bit of time to figure out what that something else was.

I bartended for a bit, and that speaks a lot to my social skills – I love talking to people and hanging out, and getting paid to do that is great… And my wife and I decided “You know what? We’re gonna move down to Phoenix for a couple years.” My brother was living down there, they’d just had a baby… I was laid off, so I didn’t have anything keeping me here, so we decided “Hey, let’s just make a change.”

With a new city came a new opportunity. I read Rich Dad, Poor Dad in the moving truck on the way down there, and I basically said “You know what? I’m just gonna start doing this real estate thing.” It did take me about a year before I got my first deal, but it pretty much opened my eyes to “Yes, I can be my own boss. I don’t have to rely on a company to decide whether they wanted to lay me off or not”, and kind of go from there. That was 2005, and I really haven’t looked back since.

Joe Fairless: Just to get an idea of either volume or the type of transactions you do – what can you tell us about within the last 12 months in that regard?

Anson Young: You did ask about focus, and my focus these days is mainly fix and flipping. I’ve kind of gone back and forth over the years, whether it was full-time wholesaling, full-time fix and flipping… Now I kind of do a mixture of both.

In the last 12 months I’ve done 10 fix and flip projects and probably about the same in wholesales, and then this next year I’m hoping to get that fix and flip number up to about 20, and the same for wholesales.

The Denver market is crazy, and I think next to the Bay Area, San Francisco market, it’s probably one of the harder markets to not only break into, but even veterans are kind of feeling the squeeze on deal inventory.

Joe Fairless: How are you getting your fix and flip projects?

Anson Young: Mainly through off-market channels, networking, referrals, direct mail, a little bit of internet stuff… Basically shaking down every tree that I can and diving as deep as I can get to get in front of motivated sellers to get them to sell me their property, basically.

Joe Fairless: The last fix and flip project that you did – where did you get that from?

Anson Young: The very last one I did was actually a referral through somebody who I met at my meetup through Bigger Pockets. He was brand new to the business, he’s more of a turnkey guy and has some properties in another state… And he had a family member who got moved into long-term care and the family didn’t know what to do with the property; it wasn’t in horrible shape by any means, it was just severely outdated and needed some systems upgraded… So he turned to me and said, “Hey, I have this property; what can you do?” I ran the numbers and presented them to his family, and they said yes and we moved forward on that project. So referrals and network is huge.

Joe Fairless: What were the numbers?

Anson Young: The numbers on that – we bought it for 230k, we put in 45k, I think (that was the final number) and we sold it for 340k.

Joe Fairless: Okay, so you were all-in at 275k and you sold it for 340k. In what period of time did you get the $65,000ish profit?

Anson Young: It was exactly at 90 days. With the FHA 90-day flip rule, in order to avoid extra appraisals and extra headache, and FHA underwriter won’t allow the resale of a property from 90 days. Basically, from the time we closed it, we did all of our work — the work only took four weeks, maybe five. Then about 30 days on the market… We had to wait about 15 days so we can not have to do another appraisal, all that fun stuff.

Joe Fairless: And is that 90 day rule in effect when you put it under contract, or when you close on the back-end with the sale?

Anson Young: When you close. You can close on day 91 if the underwriters know what they’re doing and the lender’s good.

Joe Fairless: Okay, cool. You said that you have a meetup and you met this individual who referred the house to you via your meetup. Is that an in-person meetup that you have organized?

Anson Young: It is. It is a monthly pure networking meetup. We don’t do any speaking or pretty much anything besides get together, have a beer, find somebody who does what you wanna do or that you wanna find out more from, tackle them and pick their brain as much as possible.

It was probably the first organized meetup through Bigger Pockets, and it was just a place to get together, share ideas openly, and honestly, have a couple beers.

Joe Fairless: How often do you meet, how many people usually attend and how long have you been doing it?

Anson Young: We’ve been doing it for right about three years, and we meet once a month, and we’re actually really outgrowing our space that we have. We’re close to about 70 people who show up… And it’s only advertised on Bigger Pockets, so for limited exposure, we actually get a pretty good number of people each month.

Joe Fairless: And you host it, and you’ve mentioned beer a couple times, so is it at a bar?

Anson Young: It’s at a beer hall that’s attached to a bicycle cafe. Denver being very health-conscious, but we also love our beer, basically there’s a bike shop right next door, they serve coffee and beer and food over there, and they opened up this whole new side that’s just a beer hall, and we meet on that side.

Joe Fairless: Do you have to pay to secure the space?

Anson Young: We actually don’t. We got a pretty good deal going, where — Monday night was just a slow night for them, and so they love having 70 people coming on an off night. They don’t charge us, they don’t hassle us… It was all born out of — we kept getting kicked out of kind of a shared workspace… We had an agreement with them, but we kept showing up and they’d be like “We have this Google event. Sorry guys, you can’t meet up!” and there’s 30 of us out on the street going “Now what?”

This bicycle cafe has been great. We’ve never had any issues or problems. We just take over their area and have fun for about three hours.

Joe Fairless: Do you have a section reserved that they rope off?

Anson Young: I think technically we have the entire beer hall… I’m pretty sure that people who show up on Mondays that we meet and don’t wanna talk real estate, they kind of go next door to the quieter cafe side and they have a beer over there. We technically have the whole side to ourselves.

Joe Fairless: How many leads have come through this meetup?

Anson Young: I like to say that I’ve easily made six figures just by running this meetup… Probably in the neighborhood of 15 deals that I’ve done… In three years you’d say “Oh, 15 deals isn’t that much”, but for the time invested  – I basically post a note saying “Hey, this is all the dates that we’re meeting up for the whole year.” Every month I just create a new thread, I show up for three hours and… Honestly, my voice is gone, I’m exhausted because I talk to a lot of people, answer pretty much any questions that anybody has about nearly anything, and provide that value, but at the same time people come back to me and say “Hey, yeah, you helped me out and I’ve been driving for dollars or I’ve been knocking on doors or whatever it is, and I came across this deal and I don’t know what to do with it”, so I’m more than happy to partner up with them, help them with ARV, help them with repair numbers, contractors, whatever they need to be successful, and a lot of times we partner up and do that deal together. It’s very beneficial.

Joe Fairless: Yeah, and six figures in three years – it’s still $33,000/year extra income that’s coming in from those relationships, not to mention the actual relationships, which is much more valuable than the $33,000 average per year. And as you said, you’ve at least made six figures from it, so I’m just using $100,000, but it sounds like it could be even more than that.

Anson Young: Yeah, it’s probably in the neighborhood of 150k, but either way, it’s not a bad deal.

Joe Fairless: Why did you start the meetup?

Anson Young: It initially came about with the Bigger Pockets conferences that they did – my memory’s bad… I wanna say it was 2012 or 2013 maybe, and that was here in Denver. One of the nights there was 30-40 high-level investors just talking shop at the bar at the hotel, so I was like “This is freakin’ awesome. All the other meetups and events that I go to, it’s nothing like this.” Josh Dorkin, who runs Bigger Pockets happened to be standing next to me and I said “Why don’t we just do this once a month?” He basically just said “I don’t have time to do any of that. If you wanna do it, just do it.”

Literally, a week later I just posted “Hey, we’re gonna meet up and we’re just gonna hang out, we’re just gonna talk and we’re just gonna network.” It just kind of grew from there.

Joe Fairless: Very cool. Last question on this and then we’ll move on to some other stuff, but you don’t make any announcements to the large group at the beginning? There’s nothing other than you walk in the door, you go grab a beer and you go grab a buddy and you start talking one-on-one?

Anson Young: Yup, that’s pretty much it. I’ve kind of toyed with the announcement thing or introductions or anything like that, and I just feel like it would kind of slow down the pace of the meeting. I do try to facilitate or I try to meet pretty much everybody who’s there. If I know that you are a fix and flipper and you’re having a hard time finding a contractor on the East side of the town, and I go across the room and I find somebody who knows somebody, or somebody who is a contractor, I basically try to link everybody up, so that you’re not just blindly walking around with 70 people there. There’s at least one or two of us who’s walking around and trying to connect people who have needs.

Joe Fairless: Just for context for the Best Ever listeners, and probably also you, Anson, because you might be like “Why the hell does he keep asking me about this meetup?” – the reason why is because 1) you’ve made over six figures from hosting this meetup. 2) You’re learning along the way. 3) You are creating relationships and perhaps even friendships, and you’re becoming more valuable to the deals that you currently work on. I suspect there’s also some revenue that you’ve made on projects that didn’t come from the meetup, but either through relationships or lessons learned from conversations with people in the meetup you’ve optimized some sort of approach… It’s just low-hanging fruit for any Best Ever listener who wants to get more traction, make more money, learn more… Start a meetup. It’s very simple. You’ve been doing it for three years – just once a month you go grab some beers, very loosely organized, and you’re a living proof that it’s incredibly effective from a financial standpoint, from a learning standpoint and from a relationship standpoint.

Anson Young: Yeah, absolutely. I always say, if you wish something like that was in your area, why don’t you just started? Like you said, I’m the living proof that it works. And yes, I have friends who I’ve met just through there, and we’re friends or we’re partnering up on things now, and we wouldn’t have that opportunity if I didn’t just say “Hey, let’s just see what happens if I start it up.”

Joe Fairless: Now let’s talk about — maybe one of the issues that you’ve already identified if someone is having a problem finding a contractor on the East side of town… Let’s just say they’re having a problem finding a contractor in general, that way we’re applying it to the Best Ever listeners in addition to your Denver people. What would your recommendation be for finding a good contractor, knowing that you do have a background in construction?

Anson Young: I would say that the first thing that I go to always is referrals. I try to keep a pretty decent network inside of my meetup and outside of it… So other kind of loosely related meetups — basically, a referral is gonna be that first line of defense; it’s gonna be somebody else who has a personal recommendation, like “Yes, use Bob. He’s great.” I don’t have any projects going… I wanna make sure that Bob is feeding his family, so that the next time I do have a project, I can use Bob. So “Use Bob!” That is always my number one go-to, it’s saying “Hey, who has a great landscaper? Who has a great drywall guy?” etc.

Honestly, that gets me 90% of the way there. I can usually get two or three recommendations, and then vet them out from there. If that fails, I think the extreme old-school way of basically showing up to Home Depot at 7 in the morning, going to the Pro Desk — if you’ve been working with the Pro Desk or their managers, they should know you by now… Going up to them and saying “Who’s in here every day? Who shows up early? Who would you trust with your projects?” A lot of times they wanna see their contractors be successful, because they come in and buy more product… I’ve got a few guys that way, too – just basically kind of going straight to the people who they buy from and say “Who do you recommend?” A lot of times they have some pretty great contacts.

Joe Fairless: What would you say you’re especially talented in from a real estate standpoint? Because we’ve all got one or two really special talents if we’re honest with ourselves… What are yours?

Anson Young: I’d like to say building rapport is what I’ve worked on almost the most… Not only just tracking down and finding deals – I was gonna say that, but I think that personal aspect of getting to know the people who I’m working with, motivated sellers (or even unmotivated sellers), getting them on my side, letting them know that I’m a real person, I’m not out to rob them blind, I wanna create a win/win scenario… Building that rapport often times wins me deals, even if I’m not the highest price.

So going into it with the mindset of “I’m here to help.” This is a real person in a real crappy scenario – most of the time with motivated sellers, right? So I wanna treat them like a person, with respect, I wanna build rapport, I really do wanna get to know them. A lot of times, like I said, that does win me deals, even though I’m not the best price. They go “We have a higher offer, but we like and trust you and we know that you’re gonna get it done.” I’d like to think that that’s my super power.

Joe Fairless: What are some of the questions that you ask to get to know them, build rapport, treat them as a real person?

Anson Young: A lot of times, especially in person, it’s kind of easy to get lost in “Let me take a quick walk through… I’m just gonna mark down everything that’s wrong with your house and then I’ll hand you a piece of paper that says how much I wanna pay.” Often times the first 20-30 minutes of our meetings are talking about their family, their kids or their grandkids, or the house and the memories that they’ve had at the house, or what’s going on in town, or some of the hot issues that maybe they bring up, whether it’s something in the news… Basically, not making it all about the house and the deal. It’s making it about them, and their family and their stories and their situation, and how we can hellp, and basically kind of take it from there.

The house is obviously why I’m there, but if I show up and show interest in them, then it pays off in the long run for sure.

Joe Fairless: What’s a project that has been the most challenging for you?

Anson Young: I would say there’s been a few hoarder houses that I’ve bought that have been extremely challenging in that 1) it’s a very interesting scenario when you go in — and honestly, the hoarder houses that I’ve dealt with have been mostly mentally unstable type people who have lived in that situation for way too long… So a lot of times I’m dealing with them and their families, and everybody wants to do what’s best for everybody.

At the same time, we’re buying these houses with five feet of stuff in it, and you can’t get down and you can’t see if there’s any structural issues and you can’t see if there’s mold growing underneath 20 years of stuff… So it’s kind of this combination of very tricky, intricate personal problems, mixed with you’re kind of buying it site unseen, unless you’re trying to clear it all out and then kind of work on price.

I’m dealing with one right now, so that’s why it’s on the top of my mind. I’m kind of dreading it, but later this week I’m gonna put on a hazmat suit or the best equivalent that I can buy, and kind of wade through – I’m not even exaggerating – about six feet of stuff in a house that’s been closed up for two years and the roof is very sketchy, and it’s been raining and snowing for the last two days.

It’s one of those things where I need to get in there and find out what’s going on, so I can get the best price to the owner and treat them with the respect that they deserve.

I try to keep my word – “I’m gonna get back to you this week” – but I have to get down there and I have to get actually all the way down to the basement to make sure that there’s no structural issues or problems, so that when we clear out the stuff, all of a sudden there’s a $45,000 problem that we didn’t see.

Joe Fairless: When you’re down in the basement looking for structural issues, you’ve got your hazmat suit on, what are you looking for specifically to identify structural issues?

Anson Young: In areas that have basements, I’m looking for any water intrusion, any large cracking or heaving of the foundation walls… Some of that would look like a folded piece of paper that looks like it’s buckling… Any horizontal cracking, any heaving of the floors or the subfloor is all jacked up… Which makes it really hard when there’s five feet of stuff in there.

So yeah, basically making sure that there’s not water, making sure that the foundation walls are actually secure and standing. Then, usually on the other floors you can tell if there’s any issues going on in the basement just by the waviness of the floors on the other levels.

I’ve done this in two-storey houses where the top level was like a fun house based on all the stuff that was going on in the basement. Usually, those big problems have a tell. Something on the other levels or the exterior is gonna show it, too.

Joe Fairless: With the deal that you’re referring to right now, what do they want? What do you think it’s worth as of now? How much would you put into it and what would you sell it for?

Anson Young: I think the last number that we threw around was about 170k, and that’s why I’m going over there, to try and figure out what all needs to get done. But I think I budgeted for at least 100k-110k, if not higher. It could get pretty crazy, up to about 150k if there’s issues with the foundation. Then the exit is about 420k on that one it’s obviously being sold at a huge discount, because it’s in a really nice area of a suburb of Denver… But it’s easily the worst house in ten miles.

Just pulling up and kind of looking at the outside… There’s about three neighbors who come out and they have all the stories about the house the last 15 years of how it got that way.

Joe Fairless: Oh, I’m sure they do. Well, with the negotiations on that, any tips you would have for a Best Ever listener who is going through a situation where there’s a house, it’s completely a mess and there are more expenses and issues that come up – how to have that conversation with the seller and basically negotiate a better price?

Anson Young: The earlier in your interaction the better that you can kind of set up the scenario where you basically say “I can get you a price, but obviously you’re going in unknown. There’s a lot of unknowns going in.” If it’s a vacant house with all the stuff cleared out, it’s pretty easy to figure out what’s going on. But if it’s full of stuff, they have to understand that if something gets uncovered and we have to bring it back to the negotiation table, that they can’t really get offended.

If they buy a car, they’re gonna wanna know what’s going on under the hood, and this is a much bigger purchase. If we uncover bigger issues along the road, getting that expectation upfront of saying “Hey, this is kind of how we work. If there’s something that happens mid-way through that we discover, we might have to talk about price again”, only because it’s gonna be an issue whether they try to sell it to someone else, or if we buy it. So either way, we’re gonna have to talk price again.

It’s kind of like setting that expectation upfront of how this is gonna go – it helps when two or three months down the road you actually have that phone call, they remember “Oh yeah, we talked about this. It’s not a surprise.”

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

Anson Young: I think that mine is definitely focus on finding deals, because anything else that you do in real estate is going to basically build on that. I say that because if you’re the world’s best wholesaler, you can then use those skills — obviously, your job is to find deals that are better prices than the next guy. So if you want to go on to be a fix and flipper or a landlord or find apartment buildings, anything else in real estate (be it a developer), you already have the skills set up from the beginning to find better deals than the next guy.

I say that because when I transitioned from wholesaling to fix and flip, a lot of fix and flippers rely on an agent or a team of agents… They are kind of wrapped up on the construction side or the money side and they don’t run a marketing department, they don’t run direct-to-seller game, and where I did, I can come in and buy properties for a better price than they could, because back in the day I had to sell them those properties, so I had to have a built-in spread.

This way, if I wanna be a landlord in Kansas City, I have 95% of the skills to get me there. I just have to know the market, I know how to direct-market and I know how to negotiate… So I can kind of apply those skills wherever else I want in this real estate business.

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

Anson Young: I’m ready.

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

Break: [[00:26:13].22] to [[00:27:11].22]

Joe Fairless: Best ever book you’ve read?

Anson Young: The Obstacle Is The Way by Ryan Holiday.

Joe Fairless: Best ever deal you’ve done?

Anson Young: I wanna say numbers to some extent just becomes a measuring contest. I like to think that my best ever deal was helping one of the hoarder ladies out of her house, make a win/win scenario so that she didn’t have to have her house torn down and get no money. I could come in and save the day… And I still talk to one of her sisters even now; we kind of text back and forth every now and then. Building that relationship and actually helping was probably my proudest real estate deal, for sure.

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

Anson Young: Definitely not knowing my numbers well enough on development deals. When I first started trying to wholesale land to developers I probably missed out on  easily a couple hundred thousand dollars over the course of a couple deals, just not really understanding the numbers, just leaving more money than I should on the table. Obviously, I want to provide value for the next guy and make sure that they’re making money, but when you underprice a property by $100,000 because you don’t know what you’re doing… That hurts, too.

Joe Fairless: It does hurt. What’s the best ever way you like to give back?

Anson Young: I like to support a few charities. My favorite one fights human trafficking. It’s PolarisProject.org – it’s something that I feel very strongly about.

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

Anson Young: I think that the best place honestly is probably Facebook. I’m on there probably way too much. I just have a bunch of groups going on there that I like to check in with. It’s just Facebook.com/ansonyoung. That’s how you can reach me.

Joe Fairless: Anson, thank you for being on the show and sharing your expertise in fix and flipping, networking and relationship building and construction, talking about getting the meetup off the ground three years ago and how you’ve made six figures from that meetup, even though that’s probably not the reason why you’re doing it in the first place… But the reality is we always wanna know what type of results have come from actions, and that’s why it’s important to note that. But more importantly, it would be the relationships and probably the lessons you’ve learned from those conversations and applied it to your business and evolving the business over time and determining which ones to fix and flip, which ones to wholesale etc.

Then the hoarder house example and how to approach that, as well as your focus on finding the deals… So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Anson Young: Thanks, Joe. I really appreciate it.

 

 

 

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JF1026: How to Make Money in a HOTTT Market

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Mark and his team quit buying rentals in the Denver market and have 16 flips going on right now!  From poor project managers to bad floor plans, hear Mark’s story of how he made it to where he is today.  He also has a massive 250,000 sq. ft. project going on now, listen in for this one!

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Mark Ferguson Real Estate Background:
-Founder of Invest Four More, one of the top real estate blogs with over 100,000 visitors a month
-Over the last three years his real estate company has sold over 500 homes
-Avid Real Estate Investor, does 10-15 fix and flips a year and owns 15 long-term rentals
-Runs the Ferguson Team at Pro Realty, which has a team of 10
-Based in Greeley, Colorado
-Say hi to him at https://investfourmore.com/

Listen to last interview where he gave 6 tips to manage contractors successfully: https://joefairless.com/podcast/jf480-6-tips-to-manage-contractors-successfully-situationsaturday/

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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. I hope you’re having a best ever weekend.

Because it is Saturday, we’ve got a special segment for you call Situation Saturday, and here’s a situation… Our best ever guest is in a hot, hot market, therefore he has decided not to buy any more rentals and he’s focusing the majority of his efforts on flips. In fact, he has 16 flips going on right now. We’re gonna talk about that.

How are you doing, Mark Ferguson?

Mark Ferguson: I’m doing great. Thank you for having me on the show, Joe. I’m looking forward to it.

Joe Fairless: Yeah, my pleasure. Nice to have you back. A little bit about Mark… Holy cow, he was on episode — get ready for this… Episode 57! We’re in the thousands now. Man, I love my titles, but I think I was — maybe I had a couple beers after I wrote this title, but the title of your original episode was “Peek-a-Boo I See You: Overlooked Costs on Fix and Flips.” Wow… Then we interviewed you on episode 480: “Six Tips To Manage Contractors Successfully”, and today we’re gonna be talking about how to approach living in a hot market.

A little bit about Mark – he is the founder of Invest Four More, one of the top real estate blogs. He gets over 100,000 visitors a month. In the last three years his company sold over 500 homes. He is an avid real estate investor and he is based in Greeley, Colorado, which is just North of Denver, Colorado. With that being said, Mark, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Mark Ferguson: Right now, like I said, flipping is my focus. I started flipping in 2001 with my father, right after college. I think I’ve completed over 120 flips. I’ve got 14 rentals now. I sold a couple this last year, but I’ve bought 16 in total. I have a real estate team with six licensed agents.

My focus in real estate as an agent was REO and HUDS selling foreclosures, but those are gone in Colorado, so mostly I invest and my team sells houses. I love writing, I’ve published a few books… I keep myself busy, but always looking to do new things and keep things exciting.

Joe Fairless: A recent book that just came out is a book that you wrote with Jay Scott. What’s it called?

Mark Ferguson: It’s the book on negotiating real estate – Expert Strategies For Getting The Best Deals When Buying And Selling Investment Property. We wrote this book together; Jay si an awesome writer, awesome flipper and it’s just all about how to negotiate, how to get a great deal on real estate, and really negotiating anything.

Joe Fairless: One of the things I like about the book – I endorsed it and they said “Hey, we’ll mail you a copy” and I said “No, I wanna buy my own copy and I wanna support your cause”, because I love what you guys are doing; they gave me a sneak preview of the book with the manuscript. So I read through that, endorsed the book, and then I bought it, I’ve got it. Since then I’ve read through some of it, not all of it. One of the things I really like about that book are the real world stories that you two have put in there from your experiences as fix and flippers and real estate investors. I highly recommend going to get that book, Best Ever listeners.

Now let’s talk about living in a hot market and how you focus on now fix and flips. You just said that you’ve sold a couple of your rentals… Does that tie into the hot market thing?

Mark Ferguson: Yeah, for sure. I have a goal that I wrote out to buy 100 rentals in 10 years, starting a few years ago, and… Things change. You set these goals… I was not expecting the market to take off like it has. In 2011 our median price in my town was 110k, and now it’s approaching 280k. It is crazy. In the past, you could buy a house for 100k, put 20k of repairs into it, rent it for $1,200-$1,300. Our taxes are super low, which is nice here, but rents have not kept up with prices. Now you can buy a house for 200k, put 20k into it, and it might rent for $1,600. The cashflow does not make sense for rentals anymore here.

Joe Fairless: And out of the homes in your portfolio, why did you choose to sell those specific homes?

Mark Ferguson: When the market was getting tougher – in 2015 was when I bought my last rental, and the last few I bought I started to really stretch my criteria. I love single-family homes just below the median price range. I bought a college rental, I bought another property that had a really weird floor plan, it was really hard to rent, so since the market was doing so well, I’m like “Hey, I’ll sell a couple of my worst-performing rentals and the ones that I don’t like as well, and I’ll just keep the ones I really like, and I’ll use that money from the rentals I sold to just buy more flips and improve the flipping business.”

Joe Fairless: And the last question on that, and then we’ll focus on the flipping stuff… The weird floor plan – what did you learn from that that you can share with us so that we don’t do the same thing?

Mark Ferguson: It was a really good deal, I bought it for $88,000 in 2012, but it had no dining room. It had a really small living room, but no dining room. There wasn’t really a place to eat in the kitchen, and it took us like three months to rent the house in a market where it should have taken five days. It also had a weird addition where you had to walk through one bedroom to get to another bedroom… So it was sort of a four-bedroom, but not really; more like a three-bedroom. There were just some weird quirks about it where — I didn’t think about it at the time I bought it; I’m like, “Hey, it’s a great market for rentals… People will just rent it”, but it really caused some problems, and it caused a few problems trying to sell it, too.

That’s one thing I always look at now – when I buy a house, when I buy a rental, there must be some kind of place to sit down and eat, because if there’s not, it can cause some problems.

Joe Fairless: Now let’s talk about your focus… You’ve got 16 flips going on right now. You’re not buying any rentals… Are you doing these in Denver?

Mark Ferguson: They are all within about 35-40 miles of Greeley, where I’m from. I’m about 50 miles North of Denver, so I’m just outside the Denver market; I don’t quite get in there. And yeah, we’ve been anywhere from 15 to 19 flips at once so far in 2017.

Joe Fairless: Let’s talk about — how are you managing 16 flips right now, and how far away are they from driving distance from where you currently live, just to give us an idea?

Mark Ferguson: Most of them are within 10 miles of me, but there’s a few that are 30. But I would say 75% of the ones I have are within 10-15 miles, not too far away.

I hired a project manager a couple years ago to help me with my flips… Failed miserably.

Joe Fairless: Why?

Mark Ferguson: He was an ex-contractor, I thought he’d be perfect for the job, I liked him, but he just did not work. He would not do what I asked him, he would do his own thing, and we had some problems. I didn’t keep a good enough track managing him and making sure he’s doing things, so for a while there I took them over myself again, and then at the start of last year I hired Nicky, who’d worked with me for six years doing REO work to manage them, and she has been awesome. So she’s my project manager; she manages the contractors, finds new contractors, keeps track of expenses… There’s no way I could do this many flips on my own.
We kind of take turns driving around, looking at properties, and we also picked up a new program called Realty Pilot this year to manage everything: pictures, notes, bids, invoices… It’s all online in one place, and we’re not chasing down text messages and e-mails from six months ago to figure out what’s going on.

Joe Fairless: Who created that software program?

Mark Ferguson: It was a John Murray who was one of the best real estate agents in the country; he sold over 1,000 in a year a couple times. He created it with some other guys to help with REO listings for banks to manage foreclosures, and then he’s kind of opened it up to other investors too that manage their properties on it.

Joe Fairless: What are your main responsibilities right now? You’ve got Nicky, who — I love how you said Nicky, because it’s like “Oh, Nicky!” Well, I’ve never met Nicky, I don’t know who Nicky is, but okay, so we’ve got Nicky, who’s your project manager. What are you doing?

Mark Ferguson: I’m trying to focus on the things that I really love to do. I always say I’m addicted to buying houses, so I’m still out there driving, looking at deals if I’m buying it from a wholesaler or the MLS… Kind of managing some of our direct marketing stuff we’re trying to implement, and I love to be out in the field and get out of the office. So I’m really hands-on with buying properties. That’s what I love to do.

I’ll also go out there and shoot videos of them before and after to put on the blog, and different things. And I like writing, too. I’ll write all the articles still on my site, I like creating the books… My main focus now is buying houses, high-level management over the team, and the writing side of it.

Joe Fairless: You switched from buying properties to fixing and flipping the properties… What indicators – and you mentioned the median home prices – are you keeping track of so that you know when to switch back to buying properties for rentals?

Mark Ferguson: Whenever I bought rentals, I’ve always looked at cashflow first. I’ve always wanted to make at least 15% cash-on-cash return after paying all the expenses – maintenance, vacancies and all of those allowances. So when I couldn’t get that anymore, I started to take a really hard look at my market and if I wanted to buy rentals here. Prices have shot up since then even too, and I don’t know if we’re ever gonna get back to that really, in my market. So what I’ve done instead of kind of sitting around waiting for this market to change is I have looked at other markets like Florida, and I’ve also looked at different property classes here, like commercial.

Multifamily is crazy expensive here for residential, but there’s some opportunity here on commercial, like true industrial properties, warehouses, and I actually have a 2.4 million dollar property under contract right now… I just got it yesterday.

Joe Fairless: Congratulations!

Mark Ferguson: Yeah… It’s a bit out of my comfort zone. That will be my project for the next couple months here.

Joe Fairless: What can you tell us about it?

Mark Ferguson: It’s a 250,000 square foot old Hewlett Packard manufacturing plant…

Joe Fairless: Oh my gosh, you’re going all in on the stretching your comfort zone…

Mark Ferguson: It’s been vacant for 12 years, but it’s right in the path of growth, and my plan is to get a few investors in it with me, split it up into smaller spaces and lease out 5,000-10,000 square foot spaces to individual businesses, and kind of revitalize the property. They’re building a new McDonald’s, new banks, new health centers all around it. It’s a big project, but it should be fun.

Joe Fairless: How do you plan on getting financing for that?

Mark Ferguson: I’ve talked to some banks. Some banks are willing to do a part of it, and then I have one partner already and I’m hoping to get maybe two or three other partners to chip in. It’s gonna need probably almost two million dollars in repairs and renovation. So that’s the challenge right now – I wanted to get it under contract before I open my mouth up too much about it around town, and now that I’ve got it under contract, it’s time to get to work.

Joe Fairless: A couple questions… How long do you have until you need to close, and do you have an out clause so that if doomsday happens and you aren’t able to get bank financing or equity partners, then you can escape out without losing a lot of money.

Mark Ferguson: I have 85 days for my inspection and due diligence, and it’s 50k in earnest money. So I can get that back… Basically, I have three months to figure it all out. I have an extension clause too, where I can pay another $50,000 for another 90 days, but then that is non-refundable. So I’ve got about three months to figure it all out.

Joe Fairless: And your 50k earnest money is refundable within those 85 days?

Mark Ferguson: Correct.

Joe Fairless: So why not, right? [laughs] I’m used to putting offers in Texas where the day I put the offer in and it gets accepted it’s non-refundable, like six-figure style, so that’s where I’m like, “Well, shoot…!” [laughs]

Mark Ferguson: A little stressful…

Joe Fairless: Yeah, exactly. Okay, good stuff. And what do you think — after you put in two million… So you’ll be all-in roughly 4.4 million, what will it be worth?

Mark Ferguson: If you get it fully leased out, it sounds crazy, but it’s probably a 12-17 million dollar building. Cap rates here are super low for commercial. It would bring in close to two million gross a year before expenses, and probably a million after, being conservative on those numbers. There’s no space for lease here, that’s the thing… There’s so little space for lease…

Joe Fairless: How long do you expect the project to take to get to that point?

Mark Ferguson: At least two years probably to get all the way there… Maybe longer. But I figured if you start small and start building one space at a time, you can get it partially leased maybe six months, and then kind of slowly lease it out over the next year or two.

Joe Fairless: That’s gonna be a major focus of yours.

Mark Ferguson: Oh, yes. [laughter]

Joe Fairless: What do you see for your role and your other equity partners’ role in the deal?

Mark Ferguson: I wanna set it up so that I have complete control. I’m a bit of a control freak and I think in a project like this one of the biggest dangers is having too many cooks in the kitchen and people not agreeing. I wanna set it up where I have complete control, I have the majority of the equity and then maybe two or three partners have between 30%-45% of the equity together, in that range… Depending on how much investment they have. So that’s my plan right now.

Joe Fairless: What about this project — is this the largest transaction for your personally to spearhead?

Mark Ferguson: By like five times.

Joe Fairless: By five times, okay. What gave you the confidence to go five times larger than what you’ve previously done?

Mark Ferguson: I’ve been looking at commercial for a year and a half now just because there was no residential for me. I knew nothing about commercial before I started looking at it, and when I saw some of these properties, there was another one I was interested in at 2.5 million which was in much better shape, half the size, but I saw it was under rented and half the space was vacant. It’s kind of like the apartment building that you, where if it’s mismanaged there’s so much potential to increase value and increase rents, and I saw that potential in these commercial places, and I’m like “Man, I really wanna look into this more.” So I just kept looking for a few properties…

Most of this stuff was so expensive it just didn’t make sense, but then there’s a couple properties that need work, and this one is actually off market; it wasn’t listed. So there was just a huge opportunity there that I think is pretty rare to find.

Joe Fairless: Why wasn’t it listed if it’s completely vacant?

Mark Ferguson: It’s got a crazy story. Hewlett Packard left in 2001. They sold it to a group of investors; at that time it was 145 acres with this building, and those investors paid 8 million for it. They lost a ton of money, ended up selling it to another investor in a couple years for like 6 million… So it got a really bad stigma about it being a losing deal.

The new investors went through, split up the land, sold off the land, one acre to McDonald’s, one acre to a car wash, one acre to a bank… To get a subdivision for multifamily, another one for single-family… They made all their money back just selling off this land, so they’ve been concentrating on that for like the last five years and just left this property sitting there. Everyone who’s owned it has wanted to put one big, giant user in there, and I think that was their big mistake. There’s not many people who want 250,000 square feet in a dilapidated building [unintelligible [00:18:06].16]

I think splitting it up is gonna make it so much more valuable and make it much easier to rent. And I don’t know why they didn’t list it. I would have…

Joe Fairless: How many acres?

Mark Ferguson: 19,5, and it comes with about $500,000 in water too with it.

Joe Fairless: What do you mean by that?

Mark Ferguson: 13 acre feet of water to water the land, and then a three-inch water tap. Water in Colorado is so expensive, so if you were to sell that water on its own, it would be worth probably around $400,000-$500,000.

Joe Fairless: You’re speaking in a language that I don’t know what you’re talking about… So you said it comes with $500,000 of water in it. Is that a reserve, or what is that?

Mark Ferguson: It’s just water that’s been allocated to that property. Water is so expensive in Colorado… If you wanna build a new house, you’re probably gonna pay $40,000 for a water tap, just for one single-family house. We’re kind of top of the mountain where there’s nobody above us where water comes; we’re in a very dry climate, so it’s very valuable. If you have water with land, you can sell that water separate from the land. If you have water rights to a certain ditch or to a lake, you can sell that water. Then if you build any kind of subdivision in the town, you have to have a certain amount of water allocated to it or buy water, so that you can have water available for the houses. It’s very complicated, I’m just learning all about it now, but you have to have water to be able to develop here, and it’s very expensive.

Joe Fairless: Now I’m understanding the parallels, because I am from Texas. When you say “water rights”, now I’m thinking of your oil or gas rights with your property, and that’s an apples to apples comparison. Now I get it.

Mark Ferguson: Yeah, very similar.

Joe Fairless: Okay, cool. Besides the equity and the debt partners, I imagine you’ve got an architect… Who are the team members that you need to fill out your team?

Mark Ferguson: Honestly, I have been very quiet about this. Because it wasn’t listed, it wasn’t on the market, I didn’t want to let anybody else sneak into it. So there are a couple huge, massive commercial contractors in my town: Roche Construction [unintelligible [00:20:12].23] are both headquartered here, so there’s a couple people I can talk to there. I’m actually building a charter school right next to this property where Roche Construction’s working on it, so there’s a couple contractors there I can talk to that I wanna get involved. I don’t have an architect yet… It was kind of a seat-of-the-pants, get it under contract, and now the time comes to run like crazy and figure everything else out.

Joe Fairless: Besides their names though, just like the actual titles or responsibilities – you need an architect, you need general contractors… Who else are the main team member roles?

Mark Ferguson: I’m an agent myself, but I used a commercial agent in town to do this deal for me, so he’s a big part of it, because I knew that wasn’t my specialty. He’s got a ton of connections; he’s kind of been a huge help on figuring out lease rates potential. So the commercial agent was huge. The lender, of course… There’s a couple of banks in town I’ve discussed this with and they’re both like “Well, get it under contract and we can talk more.” So banks are huge, the contractor, as you say, is gonna be huge… Those are the main players: the banks, the contractor, the agent, and the architect, designer… It’s not gonna be crazy complicated for designing, so I don’t think that’ll be a huge problem, but a big thing will be the electric, the heat, getting all that working and set up right.

Joe Fairless: When doing an inspection — and again, not the actual person’s name, but how do you find the right inspectors?

Mark Ferguson: I think on something like this I would go to the contractor, because there aren’t exactly inspectors out there who specialize in buildings like these, especially in this area. But I think I would have the contractor go through it with me, and then I actually have a contact for the person who used to manage all the maintenance on this property for 20 years, so I can get some inside information from him on the pros, cons of the building and what to look out for.

Joe Fairless: Yeah, for better or worse you know that person, because considering the state that it’s in now… Alright. Well, this has been a conversation that took a couple of twists and turns that I didn’t anticipate, but I’m glad that they did. What else, if anything, would you like to share as it relates to either your approach now as an investor in a hot market – which really the 2.4 million dollar property ties into that… So anything else that you’d like to discuss as it relates to being in a hot market and shifting your focus?

Mark Ferguson: I would just say we’re focusing on the flips now, but I see a lot of investors who in a hot market kind of pay higher prices, assuming the market will continue to get hotter and hotter; I’ve never liked that philosophy, I think that can get you into trouble. When we are flipping, I’m still looking at the current market’s prices for my ARV. I’m not assuming it’s gonna go up; I’m still very conservative, very careful to protect myself, because you never know how long that market’s gonna be hot, and things can cool down in a hurry.

Joe Fairless: Well, thank you for being on the show, Mark. This has truly been a lesson in how to shift our focus when we live or are investing in a hot market; instead of buying buy and hold properties, you are fixing and flipping, taking that cash… I assume you’re probably putting a decent chunk of it in this 2.4 million dollar property, but then also the shift in the focus as you talked about earlier with this 2.4 million dollar property. This is gonna be a major project for you. It sounds like it’s got some incredible potential, and I’m glad that you walked us through the thought process for why you got it under contract and now what you’re gonna be doing moving forward to asses out the situation and qualify it while you have the 85 days of due diligence.

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

Mark Ferguson: Sounds great. Thanks for having me, Joe.

 

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JF967: Why You Should Use Your REALTOR to Manage Your Rehabs

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If you’re flipping in multiple markets and you decide to pull the trigger to hire contractors far from you, it may be wise to have a second pair of eyes ensure that the job gets done… And who better than someone who is constantly reminded to protect their fiduciary duty to you, that’s right… Realtors! She fixes and flips properties in two markets, Denver and SoCal, hear how she leverages other professionals to get the job done!

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Susan Eliya Real Estate Background:

– Full-time real estate investor
– Over the last 5+ years, we have completed more than 70 deals utilizing various strategies in many markets
– Her strategy is to flip in hypermarkets and create passive income utilizing the profits from these flips
– Based in Denver, Colorado
– Say hi to her at 201.424.0247
– Best Ever Book: Chase the Lion by Mark Batterson

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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 fluffy stuff. With us today, Susan Eilya. How are you doing, Susan?

Susan Eilya: I’m great, thank you, Joe. Thank you for having me.

Joe Fairless: Nice to have you on the show, and looking forward to digging in. Susan is a full-time real estate investor. Over the last five years she’s completed more than 70 deals, utilizing various strategies in a bunch of markets. Her primary strategy is to flip in hyper markets and create passive income utilizing the profits from those flips. She’s currently based in Denver, Colorado.

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

Susan Eilya: For sure. As you said, I’ve done about 70 deals going on — this is my sixth year in it. My husband and I started this business, jumped all in about six years ago. We do everything from basic cosmetic rehabs of 15,000, all the way to brand new builds and to scrapes. My examples also include condo and single-family rentals, as well as I’ve done some short-term and vacation rentals. Always looking for another strategy… The focus is to master one strategy, keep that going, keep those systems in place and then jump to the next and jump to the next, and create various streams of income.

Joe Fairless: Yeah, the good stuff. So what are you doing right now as far as the main types of projects that you’re working on?

Susan Eilya: I’m mostly doing fix and flips. I live in Denver, it’s a really hot market. I also do fix and flips in California and San Antonio… Just focusing on those three main markets. I’ve done stuff in other areas, so trying to hone in there. That is the focus, but I think the ultimate goal, like a  lot of us real estate investors is – the flips are fun, but ultimately owning rentals and multi-units for that passive income, and really building that wealth.

Joe Fairless: Yeah, so that is the fix and flippers and wholesalers – to take those profits and then invest them long-term into something. You’re doing flips in Denver, which is a hot market… You mentioned California, I suspect… Where in California are you doing flips?

Susan Eilya: Mostly Southern California, outside of L.A. A few years ago you could pick up a property for a couple hundred thousand, paint the cabinets white and still make 20% on your money… It’s changed over the last few years, but the market’s still there, despite the prices increasing [unintelligible [00:04:30].14] and the profits are still there. So mostly Inland Empire, Southern California area. I’ve done everything from Pasadena, all the way to La Quinta in Palm Desert. Big area.

Joe Fairless: You’re based in Denver, but you’re doing it out of state in California… How are you finding those deals?

Susan Eilya: Actually, when we started I was living in the DC Metro Area, and that was when the California market was hot, so we started doing deals out of state, which is rare for most people. Like anything, it’s just having a solid P. My realtors there are invested just as much as I am, because they know if they find me a good deal, they’re gonna sell it a few months later, so they’re double dipping on the commissions; also overseeing my GCs… It’s all about teams, and I’m  mostly getting those deals on the MLS, whereas in Denver almost all of my deals are pocket deals or directly from the sellers, just because the way the market is here.

Joe Fairless: What did you say about the general contractors?

Susan Eilya: I was just saying that your team is everything, and my realtors in California, for example, are overseeing my GCs as well; they’re just as hands-on as I am or my partner is, or my GCs, because they’re just as invested as far as they know that they’re gonna be able to make money on the front end and the back end.

I’ve got a few sets of eyes – not just my GCs, but then I have my realtor sort of GC-ing the GC to make sure that things are moving smoothly, because again, we all have something to win in that project.

Joe Fairless: Wow, that’s fascinating. You have your real estate agent oversee the general contractor… How official is that and what are their specific responsibilities?

Susan Eilya: Well, they just make sure that the project is still moving. We have the GC who’s got the teams, but we’re out there fairly often. I don’t do much traveling; my husband does most of the business traveling. I’ve actually done a lot more in the last several months or so… But they just make sure that the project is moving on, and what I tend to do too is I actually, because of my relationship with my realtor, I actually will send him funds to distribute to the workers, because we’ve had a six-year relationship and I trust the guy, and we’re also discussing even making him part of my California entity, so he’s actually making profits out of the profits as well. So again, another level of commitment on his end, because of what he’d be gaining as well.

Joe Fairless: And why send the funds to the real estate agent to give to the GC? Why not just do it directly to the GC?

Susan Eilya: Well, in California my GC in particular is managing that, and he’ll say “Hey, here’s the bid”, let’s say for the kitchen, and I don’t pay anything until the work is done anyway, but a lot of times I’ll send some money to him just so that it’s available immediately to pay to the guys once it’s done. But just like any state, I’m not generally paying anything obviously until it’s done. You’ll get in trouble when a GC asks you for 50% down. I see people do that all the time… Give them 50% and then wonder why the project’s not done a week later, or hasn’t started. When you hold the money, you hold the control.

Joe Fairless: How do you structure your contracts with general contractors, knowing that your beginning, which is incredible – you were in Washington DC, but had flipped projects in California… How do you structure that with GCs?

Susan Eilya: You know, in the beginning of any business or any location that you’re cranking out your business or whatever, you really need to be present… So you’re building the teams there, and in the beginning we were out there for two weeks every four to six weeks, so we were out there very often, building those teams. And just like any other business, you have to consistently build those teams.

We’ve been present a lot, but once you get those teams in place, it’s a little easier to manage and run the projects. I’m sorry, I went off topic there and I don’t think I answered your full question.

Joe Fairless: No, you were on point, but how do you structure it? Maybe the payouts and what documentation do they need to provide you before you pay them?

Susan Eilya: First of all, we always have a contract between us and the GC. Additionally, yes, they can send pictures, but I always like a second set of eyes and get my realtor to send pictures of completed work as well. I get bids all the time. I also get invoices… I have my GC actually in San Antonio – he’s probably one of the most organized GCs ever… He’ll send an invoice with what was done, what is pending and what we need payment for for the next week. It’s like clockwork, every Monday I’ll get this invoice and then I will wire what was completed, and then either get the invoices for what was already paid for and reimburse that, or I’ll just pay for items directly.

A lot of times I even pay for items directly to the suppliers, whether it’s the window guy, whether it’s Home Depot or Lowes, or the kitchen designer… Generally, a lot of times I’ll pay for that directly so that I know the vendors are paid, and then the labor is paid to the contractors.

Joe Fairless: You’ve done 70 or so flips utilizing different strategies in many markets… Whenever I’m reading your bio and it says “different strategies in many markets” – what does that mean?

Susan Eilya: So I’ve done 70 deals… You said flips, and I just wanna clarify – those 70 include fix and flips, they include rentals that I picked up, they include properties that I renovated and refinanced and held, they include wholesale deals… I guess that’s mostly the strategies.

So anything from flips to new builds to buy and hold, or buy renovate, hold and refi, and even small wholesale deals. I don’t wholesale much, but I usually just wholesale for guys that I know that can close if I have a few extra deals. So those are most of the strategies that I do.

Joe Fairless: Are there any types of strategies that you’ve done before, that you wouldn’t do again because you got burned or you just don’t think it’s a good one after doing it?

Susan Eilya: You know, what I love about real estate is that you can either make it a business or a hobby, and whether the market is good or not, you can always find a strategy that’s good for your market. So despite what CNN or the news is saying about real estate, there’s always a strategy. So really, no, there’s not a strategy that I’ve ever done that I felt like wouldn’t work…

And frankly, if I got burned on something, I’m not gonna let that one bad experience deter me from creating a portfolio of wealth and great projects. So no, I really don’t have anything where I can think off the top of my head where I didn’t like that strategy.

Joe Fairless: You just roll with whatever the market’s giving you and you implement it based on what makes sense?

Susan Eilya: It’s that for any business, whether it’s you running your podcast or your rentals or other businesses that are unrelated to real estate. You have to constantly adjust to your market, whatever that is. I’m doing different strategies in different markets because of what it’s providing me. I’ve done some stuff in Chicago and I know people in Chicago are picking up these cheap properties and just renovating them 30k-40k, all in less than 100k (even 90k) and then they’re putting in section 8 tenants, and that’s a great strategy for that market. You’re buying low and you’re renovating it as a rental, and then you’re putting a renter in… So there’s just strategies in every area.

Areas like [unintelligible [00:11:29].10] which have a tremendous amount of foreclosures, or areas like Colorado where inventory is so tight and the population keeps growing… People can’t even find anywhere to live, whether it’s rentals or flips or whatever it is.

Joe Fairless: With the money that you’re getting from the flips, where are you investing those dollars for your long-term holds?

Susan Eilya: I’m mostly putting them back into some of the things that I have in Denver. I do love Texas, I’d love to own some multi-units down there. I’d love to own multi-units period, as long as the numbers are good. So I care about the numbers, I don’t care about really anything else. But I’ve been reinvesting a lot of that cash in my current deals, but I’m starting now to kind of just push on the side and not reinvest them and put them into longer term holds, because I do sometimes put them in flips.

Joe Fairless: Let’s talk about the last deal that you took from start to finish. Can you tell us the numbers, the story about the deal and give us the details on it?

Susan Eilya: Sure, actually I’ve got two selling at the end of this month. I picked up a property from an owner directly, and I’m actually buying two more from him. It was a 142k purchase, put about 18k-20k in… Let’s just say 20ish, so we’re all in at 160k, and I put it on the market and sold it for — I’m getting two mixed up, but they’re exactly the same… It’s under contract for 215k.

I have two of the exact same deals. For the first one I had two offers that went over list, and in Denver you’re giving a lot of multiple offers, people are losing out on deals… They’re both actually VA loans, so they’re both veterans, which was really cool for me. They both went over list; the second person felt like he missed out, but the cool thing was I was able to say “Look, you didn’t win out on this one, but I have the same exact property a block away, the building next door, and I’m gonna list it for this and that” and we ended up putting it under contract actually for five less than I was gonna list it. So whereas he felt like he was gonna miss out, he actually won, because he got the exact same product… Though I actually like that one a little better, just because I like the flooring and it had a parking space.

So basically we’re looking at — as far as an ROI, I sold it for… When all is said and done — I’d have to kind of pull up my numbers, but we’re still looking at a double-digit ROI, and we were in and out in a matter of months, about six months.

On average, my investors are making double-digit annual returns, whether it’s on one deal or we do a couple in a year, whatever, but when you annualize it, they’re making double-digits easy, every time.

Joe Fairless: And that was the next question, and you segued perfectly into it – how are you financing these deals?

Susan Eilya: Most of my deals have been with private cash partners. When I started, I really didn’t have much… I put everything in to start this business, so where my credit was amazing, it kind of got a little hit… But most of them are cash partners. I started to use a little bit of unconventional lending, because my goal is to stay a little more liquid and leverage the funds that I have. So instead of raising $300,000 on a deal, I could bring in a lender at a reasonable rate for hard money, and then only have to raise 50k or bring in the 50k myself, so I’m making a little more cash.

With my equity partners, I tend to give up more of the profits than I would if I had brought in a lender, when we kind of look at the numbers. But for me, giving up more equity to build a relationship with a creditor, cash partner for the long-term is totally worth it. I’m not here to do one deal, obviously… This is my livelihood, it’s a career that I’m building and wanna keep for a long time, so for me to have those partners that I have year after year that wanna keep their funds moving deal after deal, it’s worth giving up a little extra equity if I have to.

Joe Fairless: What type of terms are you offering or have you offered in the past to partners?

Susan Eilya: A lot of times I just go 50/50 on the deal. They bring in all the capital and we have the teams, the opportunity, the deal, we do the work, we do everything; they just kind of send the wire, sign some documents, and then I’ll go 50/50 on the profits. They get their capital back, and  then we just go 50/50 on the profit. That’s usually if I have one partner who wants an equity partnership on the deal.

I have some people that have said to me “Susan, I just wanna make 6% annually.” I’m like “Great, I can absolutely do that.” Depending on how much money they have, I can put it to work.

So yeah, I have partners who are like “Just send me a check quarterly”, so I borrow their funds as working capital, and I put it into play wherever I need it, and then I pay them out quarterly with their interest payments. The benefit to that for me is that the funds are always turning and I don’t have to write a check each month, an interest check. Then I have some partners that are like, “Hey, Susan, I wanna jump on this deal” and I’ll just give them a flat return on the deal. Generally my deals are 6-8 months. The ones I’m doing now are six months. Then they make their flat return at six months, we [unintelligible [00:16:22].00] most of these people, to the property, and then after sale they get their principle and interest, and if they’re happy, they do it all over again, which most of my partners do. And again, we’re averaging significant returns annually.

Joe Fairless: For someone who’s looking to bring in private money into their fix and flip business but they haven’t yet, what advice would you give them?

Susan Eilya: I think one of the biggest fears of new fix and flippers is they feel like they’re asking for money, and they have to remember that they have an incredible opportunity where their partner can make a really nice rate of return that is secured, and a rate of return better than what they’re gonna find anywhere else.

A lot of times I talk to these new flippers and they’re like “Well, I don’t wanna ask for money” and I’m like “You’re not asking for money. You have an incredible deal in your hand, you’ve got a great opportunity, and you’re securing these people’s funds to an appreciating asset. And frankly, if something happens and you strategy is to fix and flip it and for whatever reason you can’t sell it, you’ve created equity in it and you can actually refinance their cash out of it and pay them out, or you can put a renter in and still make money one way or another.”

There’s various strategies, but I think that – to really go back to your question – a lot of times they feel like they’re asking for money when they’re not; they’re really presenting an opportunity which is secure, and that’s the key there… They’re presenting an opportunity that most people don’t have and can’t find, and probably can’t manage themselves.

Joe Fairless: Once we internalize what you just said and then apply that within our approach, it’s gonna have a tremendous difference. If we think we’re asking for money, then we’re not gonna be successful. It is about giving investors an opportunity that is, as you said, secured by an appreciating asset in most cases… So yeah, thanks for that.

I found the same thing when I speak to people and they ask “Well, what if I’m not good at sales?” You don’t have to be good at sales, you just have to have a good opportunity that you believe in and you wanna help others by sharing it with them.

Susan Eilya: For sure… I get that all the time, “I’m not good at sales…” If you feel like you’re asking for money, you’re gonna look desperate, instead of focusing on what a great deal it is. Like you said, if you have a great opportunity, you’re gonna find funders.

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

Susan Eilya: I’d have to say to jump in. Do your due diligence, but jump in. You have to move fast in this business. In an instant, an opportunity can be taken away; if you don’t jump in, someone else will and you’ll lose out on the opportunities. Like I said before, I don’t care if the market is good or is bad, real estate is always good. You just have to find your niche and hammer that strategy.

Joe Fairless: There was a quote… I forget who said it, but it was a guest on the show and he said, “Every deal is a good deal in 50 years”, and it’s so true. I mean, of course, there’s exceptions to every generalization, but just going with that, most deals are good deals in 50 years. I think he actually said 20 years, which I’d still agree with.

Susan Eilya: Are you’re saying that you’d have to wait 20 years to benefit from it, or you’re gonna look abck 20 years later and say “Damn, I should have kept that!” or “I should have done that deal!”

Joe Fairless: Yeah, the latter.

Susan Eilya: Okay… That’s what I figured. [laughter]

Joe Fairless: Yeah, you don’t wanna lose money for 20 years and be like “Okay, finally I’m making profit on this…” No, it’s just holding on to it for as long as you can, because in 20 years it likely will be a good deal.

Susan Eilya: Amazing… And there are definitely deals that I’ve looked at even a couple years ago and just go “Oh, I should’ve kept that…!” but at the time what I needed to do was sell it, and it’s okay, I’m always gonna have another great opportunity. It’s not like there’s just one a year.

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

Susan Eilya: Yes, let’s do it!

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

Break: [[00:20:03].18] to [[00:20:45].21]

Joe Fairless: What’s the best ever book you’ve read?

Susan Eilya: I’m actually currently reading a book called Chase The Lion by my pastor in DC when I lived there years ago, Mark Batterson. It focuses on the fact that if your dream doesn’t scare you, it’s too small. It’s something that my husband and I are both reading and kind of go in each chapter together… It just kind of pushes you to the limits, it’s great.

Joe Fairless: Best ever deal you’ve done?

Susan Eilya: It would have to be the two that I spoke with, that I’m gonna close both on this month. On one I received two offers that went over the list price, and the second-place guy felt like he lost out, but instead I was able to come to him and tell him I have an identical property that I was gonna list that next week.

To me, that’s one off the top of my head. I was generally more excited for the second buy than he probably was, but I loved knowing that I could help him out, help veterans out and also put a deal under contract in zero days.

Joe Fairless: What is the best ever way you like to give back?

Susan Eilya: I feel like a lot of times we wait until something happens before we can give back; I don’t need to wait until my career has hit a certain number or mark to give back. We can give back daily, which is what I do, whether it’s helping someone learn this business and make a little extra on the side, or whether it’s me [unintelligible [00:21:55].19] who’s taking care of the much less fortunate… I’m grateful I can do something to help. I give back every day by doing what I do, which is why I love this business – I create jobs, I make homes beautiful, again… They were once beautiful and I’m making them beautiful again and I help new owners create beautiful communities.

Joe Fairless: What’s a mistake you’ve made on a deal, that comes to mind?

Susan Eilya: Well, the biggest mistake I was thinking would just be not to start sooner, but I can’t really focus on that because I’m here now, and I’m making the best of it. But if there’s a mistake… There’s always hurdles in this business, you just have to adjust to them. I guess for me maybe just this one deal – I took the owner’s report for the sewer, instead of doing my own sewer scope, and then I had to kind of change it.

After the whole project was done, the new buyers did a sewer scope and there was a crack, and I had to spend another $10,000 to fix it and change it. Maybe that one… I mean, there were still profits in the deal, and that’s 10k out of my pocket; my investors made every dime that they were promised… But maybe just not getting that sewer scope done sooner…

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Susan Eilya: You could call me directly… I kind of prefer the phone, although I’ll e-mail and text sometimes. I like meeting people in person, and I think that this really is a people business. So the best way they could contact me is either my phone number. Do you want me to share it? It’s a Jersey line, don’t judge me… I am in Denver, but haven’t been in Jersey in 10 years… Hopefully I’ll get a business line…

Joe Fairless: What’s wrong with the Jersey line?

Susan Eilya: Nothing, it’s just every time I call someone they’re like, “I wasn’t gonna answer because it said New Jersey…” So that was my cell, and I do have a business line, but it comes to my cell anyway, and I just kind of work out from this one. My number is 201 — and I can’t ever get rid of that 201… 201 424 02 47. Or they can shoot me an e-mail at Susan@greenstarrising.com. I did not realize how long that would be when we first created that entity two years ago… [laughter]

Joe Fairless: Well, Susan, thanks for being on the show. I enjoyed our conversation, hearing how you’re structuring deals with investors, the advice you have for fix and flippers who are wanting to take on private money, but are concerned about asking for money… Well, it’s not about asking for money, it’s about presenting an opportunity that is secured by an asset, and having that mind shift. So thanks so much for being on this show… I hope you have a best ever day, and we’ll talk to you soon!

Susan Eilya: Excellent, thank you so much!

 

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JF965: Why He SOLD All He Had, Went to War, then Returned to Develop Land and Syndicate BIG Deals

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He found the best and highest use of real property, and brings it to life! This exciting episode showcases the complicated yet rewarding nature of syndicating and developing deals. Scott, our guest, literally sold all he had and went to war to be a soldier, he learned leadership and initiative, and came home to build an empire. This is a must listen!

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Scott Lewis Real Estate Background:

– Co-founder of Spartan Investment Group, LLC
– In 24 months, SIG has completed 4 projects totaling $2.5M with an average ROI of 36%
– Currently has three more projects underway, and raised over $3M in private equity
– Led several successful real estate developments ranging from single-family flips to raw land development
– Based in Denver, Colorado
– Say hi to him at http://www.spartan-investors.com
– Best Ever Book: It’s Your Ship by Michael A

 

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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 fluffy stuff.

With us today, Scott Lewis. How are you doing, Scott?

Scott Lewis: I’m doing great, Joe, and Best Ever listeners.

Joe Fairless: Well, nice to have you on the show and I’m glad you’re doing great. A little bit about Scott – he is the co-founder of Spartan Investment Group. In 24 months his company has completed four projects, totaling 2.5 million dollars, with an average ROI of 36%. Currently, he has three more projects under way, and has raised over three million dollars in private equity for those projects. He has lead several successful real estate developments, ranging from single-family flips to raw land development. Based in Denver, Colorado… With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Scott Lewis: Sure, thanks Joe. Best Ever listeners, my background really started Chemistry and Marketing major coming out of Michigan State University. I went into the corporate world for a little while, I had a regional sales job with a biotech firm, and kind of got sick of that, so I did the crazy thing and sold everything I owned and joined the army and went off to war, which actually was a really good experience. It got me some really good leadership training and what not, and when my active duty time ended I came out, I went into government service, which gave me some additional really solid training – less on leadership, but more on strategic planning, which I’ll talk about… Which ultimately lead me to build the strategy for my company. Currently – Spartan Investment Group. We’re real estate syndicators and developers. We go out, we find deals and then we put together the money for them. We also develop deals as well.

Joe Fairless: Real estate syndicator AND developers… When you say “develop”, are you talking about ground-up development?

Scott Lewis: Absolutely. We specialize in taking raw land and then developing it. As I’ll get into a little bit later, we look in two different areas. There are larger single-family developments with multiple units, or self-storage, but we like to focus on raw land.

Joe Fairless: Larger single-family development or self-storage… The four projects totaling 2.5 million that I mentioned earlier – what were they?

Scott Lewis: They were all single-family flips. We started, like a lot of folks do, in renovating single-family homes. I will say that I was a little bit non-traditional in that the smallest renovation budget we’ve ever worked with is $165,000 on an 850-square-foot house in Washington DC. One of the houses of those four projects was a raw land development, and that’s kind of what wet our appetite for that. This is a little bit more difficult, so there’s a little less competition in that asset class.

Joe Fairless: It is a little bit more difficult, that’s for sure, the raw land development. It’s interesting… We talked in Denver, and Scott was a speaker at the Best Ever conference, and I really enjoyed getting to know Scott, and I took a lot of notes whenever he was talking. We had some drinks afterwards, and one of the things that I’ve noticed with all of the interviews I’ve done is when I ask a developer “Okay, you’ve been developing for a certain amount of time – is it really worth the risk vs. reward?” and sometimes they’ll say “You know what? I just like doing it. I don’t know if it’s worth the risk versus reward, because there’s so many uncertainties and so many grey hairs that I got through the development process.” What are your thoughts on that?

Scott Lewis: Joe and Best Ever listeners, it’s definitely true. There’s a lot more risk in the development side of the house, but with risk comes reward… And maybe I’m just a glutton for punishment like some of the other developers, but I really enjoy doing it because that’s where the real money is made. Once somebody has figured out the best and highest use for a property, and then entitled it so that it’s ready for the construction phase, they can suck a lot of the juice out of the deal because they’ve done the real work, they’ve done the real risky work.

Being able to go in and do that work and then take it all the way through to fruition to whatever the project is, whether it’s a single-family home, ten townhouses, a four-phase condo development  – whatever it is, that’s where the real excitement is, and then also the real payoffs.

Joe Fairless: So let’s talk about a specific project, any one of those four that total 2.5 million on the four over the last 24 months. Can you give us some numbers and just tell us about the project?

Scott Lewis: One of them was the development deal, and it was not quite raw land… A hole had been dug in the ground, so not quite raw, but our contractor that we’ve partnered with over the last six years had a stuck project that he had kind of started and stopped, and we got in there and we helped him look through a [unintelligible [00:07:02].08] which anybody that got the fluorescent tag on their door once in a while knows that that’s a bad place to be.

So we helped him work through that, we did kind of a partner deal. He owned the land already, so he brought the land, we brought the money, split 40/60, 40% going to him 60% going to us. [unintelligible [00:07:21].19], I wanna say we were in at about $450,000 for development and construction and sales and everything, and the out was about $750,000. So we made about $300,000 with $450,000 in, and split – 40% going to the contractor because he did all the work at cost, and then 60% going to us for bringing all the money and helping him work through the city and the utilities and all of the other tangential things that go with development that aren’t there during construction.

Joe Fairless: What would be a couple things – knowing what you know now – if you were presented with those same scenarios on a future deal, that you would do differently?

Scott Lewis: Joe, that’s a great question, and Best Ever listeners… That scenario was presented to us in July of this year and then again in December. Joe, at the Best Ever conference I referenced a deal that I had two different raises on, at two different time points, and which we kind of combined them because we took two pieces of land that were just raw, and one had a house on it that we were going to demolish and get rid of. But the two pieces of land, independently, could get a total of seven townhomes, but combining them and leveraging a special zoning exemption where we were building, we were able to actually get 11 homes.

So one of the things that we’ve done right upfront is we’ve started engaging the utility companies, because that was one of the things that we waited on for our first development project, and it caused us a 60-day delay because those guys were just so backed up, and anyone that’s worked with utility companies in the past knows they are not the most motivated and efficient folks. They’re incredibly burdened, they’re under-staffed, coupled with just how it is out there, that can really stop a project. So in any of the development projects now, after we make sure we’re good with zoning and the tax guide and everybody else from the government, the next thing we do is get everything we need to do with the utility companies going right away, so that we can adhere to their traditional timelines and not be worried about delaying the project.

Joe Fairless: What type of timeframe do you have to allocate for the utility companies?

Scott Lewis: We just got a notice back from the gas company that their timeframe is 8-12 weeks. [laughter] So we’re doing another project that’s a condo conversion, and we’re basically taking a single-family home and we’ve dug out underneath the house and it’s a row home… So there’s a row of probably five or six homes; our property is the second in from the end, so we’re actually digging underneath the two other houses, on the walls and underpinning and going out the back, but we’ll also have to dig out the front a little bit to have an egress to the seller’s condo, and with that there’s a gas line there, so we have to do what’s called gas line abandonment.

The gas company has to come out and [unintelligible [00:10:17].29] and then take it out so that we can dig out, and that’s 8-12 weeks… Which is fine; this isn’t a surprise to us, we knew it was coming, so it’s built into our timeline.

Joe Fairless: How much does that cost?

Scott Lewis: The gas line – they just have to come and turn it off, and then our contractor does all the digging. So it’s just part of our construction cost, it’s not a ton to us. But sometimes the utilities can be upwards of $30,000 if you have to bring new service in… We don’t have the final bill yet, but we have to increase the size of the water line from the street because of the new sprinkler system requirements, and we don’t have the final cost there. We usually budget around $30,000-$35,000 for our projects per unit for utility cost, so it can be pretty significant.

Joe Fairless: Yes, they can be. Let’s talk about the three projects you have under way and have raised three million dollars in private equity for those projects. Have those projects closed as far as you’ve bought them, you’ve got the equity and now you’re implementing the business plan?

Scott Lewis: Yeah, so one of them is actually closed, constructed and sold. Last Friday we just closed on the property. That one went pretty well, it took a little bit longer; we missed our timeline by about two months, so we gave our investors a 2% equity bump just for us missing our timelines. So that one went pretty well other than the timeline. Our budget came in as we wanted it, so that was good.

Joe Fairless: What type of project was it?

Scott Lewis: That was a single-family flip. That one was actually a favor to our contractor. He owned the house since 2006 and he came to us and asked us to help him put it all together and get it ready, just because he didn’t want to. We put some of our money in it, we went to some of our really close investors, and just asked them if they wanted to be in it. Three of them jumped in. We raised $200,000, so not very much for that one, but it was projected to be a six-month timeline for a 10% return. We actually gave the investors 12% because of the eight months… So pretty close to a 24% annualized.

Joe Fairless: What was the all-in price, what was the exit price?

Scott Lewis: The all-in price was about $630,000, and the out price was $785,000. That normally doesn’t meet our 30% ROI criteria, but because of a favor to our contractor and the short timeline, we decided to do it.

Joe Fairless: Cool, $185,000 profit in eight months. Let’s talk about project number two.

Scott Lewis: Project number two was the condo conversion. We’ve been working on that — our plans went in in June 2016, and we actually split those plans into foundation plans and building plans, so that we could go ahead and get started with all the underpinning and foundation work that we needed to do, while the [unintelligible [00:13:04].00] was running its course through the normal application process.

That one is kind of our gold standard, we got a pretty sweet deal on that. We worked on it for about 18 months, trying to track down the owner, and just a random, fortuitous meeting at a corner bakery with an attorney to talk about another project, he referenced having a client with a property on L Street, and we immediately knew who it was. We had talked to the owner a couple of times and she had told us that she had an attorney and we didn’t think that it was even remotely possible, but it turned out it did. The financials are pretty good, we’re gonna be all-in at a million and out at 2.6 million.

Joe Fairless: Condo conversion – is it just one condo?

Scott Lewis: No, so we’re actually taking a single-family and we’re digging out underneath it and we’re adding a floor and a half, so when we’re done we’ll have four two-bedroom, two-bath condos. Three of them will be about 1,000 square feet, and the third one will be about 1,300 to 1,400 square feet.

Joe Fairless: Wow… Okay, I wanna make sure I understand that. You have a single-family house and you’re converting that into four condos?

Scott Lewis: Yes. The real sweet deal about that is we acquired the property as a single-family home, but because we’re converting it to condos, that allows the financials to change a little bit, and that’s where the deal is. It’s a big thing that’s going on in the district of Columbia right now – the condo conversions, because the housing is so limited… And DC – there’s a number of reasons the housing is limited in DC, but one of the things folks are doing is they’re row houses, so you can’t really go out to the sides, and you don’t really wanna go out to the back too much, because you kill the property, and sometimes the lots are really small, so the other way is to go up and down.

Some folks have taken it to an extreme – those are called pop-ups, and they look pretty bad. We probably could have gotten a six-condo out of it, but it would have looked really bad. We’ve actually made the top choice to go with what’s better for the neighborhood and just do the four condos. And even on the fourth condo, we’re only going half a floor, so that it still holds the charm from the street.

Joe Fairless: And you said your all-in price was a million – did I hear that correct?

Scott Lewis: Yeah, the all-in, after everything is done, is about 1.5 million, to include acquisition, construction…

Joe Fairless: And what are you projecting it will sell for once all four condos are sold?

Scott Lewis: Right around 2.6.

Joe Fairless: Nice! What do you do if anything while you’re building it to secure the condos’ sales?

Scott Lewis: That’s kind of a balancing act. As soon as we get the drywall up, we’ll go through and we’ll start soft-marketing them… But with condo conversions there’s a lot of documentation that needs to get approved before you can get your certificate of occupancy, so there’s only so much that you can do prior to the certificate of occupancy.

With this particular one, our agents work consistently in this particular area of Washington DC, so probably maybe 45 days out or so we’ll start letting them pocket-list it, and then once we get the certificate of occupancy then we’ll really go full bore, because we can’t close before that comes in anyways, so we don’t wanna market them too early.

Joe Fairless: You mentioned it was a fortuitous meeting, that you knew exactly who your attorney was talking about when he mentioned the other client… You said before that you had tried for 18 months to track down the owner – what were you doing and why didn’t it work?

Scott Lewis: We were just using the traditional methods that a lot of wholesalers and direct marketers use. We weren’t doing anything crazy. We do have an aggregation process that we use to bring a lot of different data sets together to identify sellers. Whenever we do direct marketing campaigns – which we’ve actually stopped doing – we only do maybe 50 letters at a time, but those 50 letters have been vetted through multiple levels within our organization, so it probably takes us as much time to hit 50 people as some of the wholesales could hit 2,000 people, because we take a very focused approach, versus a wide blast of mailers. Every one of our letters is personally written to the person that we’re trying to get at, and we’ve actually got really good response rates that way.

This one was no different. We got the person’s phone number, we actually talked with her and she confirmed who she was… We met her later because one of the things that we do for any of our sellers is we help them try to reduce any client’s fees/taxes; it doesn’t help us at all, because our contract price is our contract price, but the mission of Spartan Investment Group is to improves lives through real estate, and we’ve had some pretty good luck working with the District. We’ve saved one of our sellers $50,000 in bad taxes and fees; it didn’t go to us, it just gave her $50,000 more. She was a DC firefighter, so that really helped change her life.

This particular seller, she was in her late seventies, her husband had died quite a while ago, and it was probably pretty intimidating to have us call her on the phone. But once we actually got in contact with her lawyer and he vouched for us and verified who we were… I actually went over to her house a couple times and took her down to the District of Columbia, so she would be there in person, and we were able to save her about $10,000 in fees and fines. That was 10k that went right back into her pocket that she wouldn’t have gotten.

Joe Fairless: So your process which does work for other deals didn’t work initially when you were reaching out, because they might have been intimidated, or for whatever reason, but when you talked to her attorney, that proved to be the door that opened up and you were able to get the deal done. As a result of that, do you now make a more focused effort on speaking to attorneys about clients they have and just reverse-engineer that process?

Scott Lewis: We’ve actually moved away from going after the probate guys or the estate attorneys. We’ve got a couple attorneys that will occasionally pitch us deals, that we have relationships with, but we made a strategic pivot in October 2016 to kind of get out of the single-family and direct marketing. Just too much competition down there in that red ocean market, so we recently haven’t even been engaging.

We’ve got relationships with two attorneys that occasionally send us projects that they have as estate attorneys, but other than that we really haven’t even been engaging sellers.

Joe Fairless: So let’s talk about what you are doing and the shift that you’re making. What are you shifting towards? I would suspect it’s self-storage, right?

Scott Lewis: Yeah, Joe, that’s it. We’re 100% going after self-storage, and we are using some of the same methodologies. Lindsay, who is our director of business intelligence, comes from the Intelligence Community in DC, so she takes some of the methodologies that she used there to do the same thing for our business, to identify sellers and to identify pieces of property that we wanna go after.

We found that when we’re going after commercial deals, it’s not a big deal if we contact the sellers, because commercial deals are based on numbers, there’s no emotion involved. I mean, occasionally there is, but the vast majority is based on numbers, so that as long you present a reputable front from your company and that you are reputable yourself, we found that it’s much easier to deal with sellers for commercial deals.

Joe Fairless: Have you gotten a self-storage deal under contract?

Scott Lewis: Yes, using our research methodology we identified a piece of land in Washington state, went through the whole process and engaged — the seller was using a broker, so he pointed us to the broker; we engaged the broker, and now we’re under contract and we’re in the due diligence period now. It’s a piece of raw land, so it’ll be ground-up development.

Joe Fairless: How many storage units would be able to be built?

Scott Lewis: That’s a good question, Joe, and it’s one of the things that we’re trying to look at right now. There’s wetland on the property, so we had our biologist out there last week, and he is delineating the wetland on our survey, and then he’s also classifying them; there’s various classes of wetlands, and depending on the class, they can either be easily moved, or you have to go through board of zoning approvals to get an exemption to move them

Once we figure out what we can do with the wetlands, we can then go ahead and develop our site plan so that we know our unit mix and how many units we’re gonna put there.

What we did initially was we looked at if we couldn’t use any of the wetlands, and we could only use what turned out to be about 40% of the acreage that we’re buying, is this deal still feasible? Could we still pull this off? And the answer to that question was yes, which is why we wrote the contract, and the contract is contingent upon the biologist’s report on the wetlands.

Joe Fairless: Okay. When I was trying to interrupt you, you read my mind, so I’m glad I didn’t interrupt you… [laughs] That’s what I was gonna ask, how you identify what you make an offer if you don’t know how many units can be built? Let’s just say you cannot use any of the wetland area… Do you know how many units can be built just for that 40%?

Scott Lewis: We could do approximately 50,000 square feet of self-storage. Again, we haven’t done our unit mix yet, we’ve just used averages at this point, which a lot of folks might say we’re treading in dangerous waters, but we have the contract written as such that we can kill the contract if necessary if we can’t get what we need, so that’s why we’ve decided to go this route, versus having the complete feasibility studies, which usually include the unit mix, which we’ve done kind of in heuristics to see whether the numbers would work out… And there’s also some self-storage land acquisition heuristics that are out there that kind of point the needle at what your per-square-foot land cost needs to be based on your monthly cost for a 10-by-10 and a 10-by-15 unit.

We’ve done that projection, and if that’s correct, then there’s actually a lot of value in this land already, so we’re okay.

Joe Fairless: How much does it cost your company to qualify a deal like this before you can actually say yes or no definitively?

Scott Lewis: That’s a good question. We’ve done our internal feasibility studies. Lindsay, our director of business intelligence, does our internal feasibility studies, so currently it hasn’t cost us anything, other than her time. And feasibility studies cost anywhere from $3,000 for a desk audit where folks don’t actually travel to your site, up to $7,000-$8,000 if folks travel to your site to do the feasibility study.

Joe Fairless: Didn’t you say you had a biologist or someone going out to look? Aren’t they charging you something?

Scott Lewis: They are. We think we’re gonna put about $10,000 on the line before we actually know whether we can do this or not.

Joe Fairless: And the bulk of the $10,000 comes from where?

Scott Lewis: All of our money, we don’t use investor money.

Joe Fairless: No, I mean what are the expenses that make up the 10k?

Scott Lewis: There’s three major ones; four in this case, but normally it’s three. In this case we need a civil engineer to give us an initial site plan to take to the city. Then we need our biologist to go out there to delineate the wetlands and any protected or invasive species of plants or animals. We need a geotech report, so they can go out there and test the soil and tell us what type of soil it is, so that we can then have the civil engineers calculate the concrete mix, and for this particular area, we actually need a mine hazard report, because there’s some old mines that are there, so we have to make sure that there is no mines underneath. With all pooled, it’s probably gonna be about $25,000, but $10,000 of it is probably money that we’ll have to spend before we make a decision. The mine and the geotech we really don’t need to do before we make a decision, but the biologist and the civil engineer we do, to see what the site plan is, and then ultimately the unit mix. Then we can tighten up our proforma.

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

Scott Lewis: Best Ever listeners, the best advice is broken down into two categories. One is just starting out, and if you’re just starting out, take some time to learn yourself before you start. There’s some personality assessments out there… DISC and Myers-Briggs are two that are out there. I really recommend you go out and you figure out what type of personality you are. Then once you figure out what type of personality, build your tribe around your weaknesses.

Myself, I’m a DISC D, that means I’m a driver – I just wanna get stuff done, I don’t really pay attention to details. So I went out and I found a partner who is very into details and he’s very detail-oriented. The two of us, plus a couple other members of our team kind of really round that out.
Once you figure out your team, then start with an education period. Just figure out what asset class you wanna focus on, and then go. For those of us that have been out there and have been in the trenches, constantly challenge your assumptions and operating models.

We recommend a devil’s advocate. The Israeli Mossad, which is their version of the CIA, they call that the 10th man. This person is just the person on the team that disagrees with everything that’s going on. What that does is it ensures that groupthink doesn’t cause you to make a bad decision.

Joe Fairless: Does that person rotate on the dissension, so that they don’t get punched in the face eventually?

Scott Lewis: Absolutely, Joe. So Best Ever listeners, there’s two key components actually. One is (absolutely, Joe) they have to rotate. Somebody else has to come in and be that person. And then second, there is no personal attacks on that person whatsoever.

Joe Fairless: Makes sense, yes. Alright, are you ready for the Best Ever Lightning Round?

Scott Lewis: I am.

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

Break: [[00:26:44].16] to [[00:27:26].08]

Joe Fairless: Best ever book you’ve read?

Scott Lewis: “It’s Your Ship” by Michael Abrashoff.

Joe Fairless: Best ever deal you’ve done?

Scott Lewis: Our condo conversion in DC. There’s a million dollars of profit in that one.

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

Scott Lewis: Mentoring and education.

Joe Fairless: What’s the biggest mistake – or any mistake you can think of – you’ve made on a deal that? One that you haven’t mentioned earlier.

Scott Lewis: We had the opportunity to buy a church that was right behind where my partner and I lived when we were in DC, and at the time they needed two million bucks to make the deal work, and we were pretty novice and had no idea about raising money, and we’ve been able to raise two million dollars in like two hours over the last couple months… So that deal, the guy that bought it is building 36 units there that will probably have a sales price of probably 22 million dollars for that deal. We could have had it, but we didn’t know how to raise money.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Scott Lewis: Best Ever listeners, if you have any questions about what I said, you can reach me at my e-mail address, which is Scott@spartan-investors.com, or our number is 202 827 5483.

Joe Fairless: I enjoyed our conversation in Denver, and I enjoyed this one just as much, because we’re talking just about you; it was less back and forth, and I was learning more about you and I really enjoyed that, and I know the Best Ever listeners got a lot out of it as well, specifically some of the takeaways…

Utility companies – they are slow; we’ve got to allocate in the timeline for the amount of time that they need (in your case 8-12 weeks). And condo conversion – holy cow! – 18 months to track down the owner, and eventually it ends with you getting in touch with their lawyer coincidentally, and then using that as a conduit into the deal that has over a million dollars in profit, that is yet to be realized but looks really good.

Then the self-storage evolution that you’ve taken in your company. As you said, the red ocean versus the blue ocean strategy – I think it’s a book, I’ve just heard a podcast on it – where there’s not a bloodbath and a feeding frenzy, and that is in self-storage and ground-up development. And the amount of money that you have on the line prior to making a go/no-go decision on that deal.

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

Scott Lewis: Joe, Best Ever listeners, thank you very much!

 

 

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JF956: Why He Traded Billboards for MOBILE HOMES!

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Undoubtedly, he is a mobile home park authority. The fifth largest mobile home buyer in the US is dropping knowledge on occupancy, acquisition, and how mobile home parks create true wealth. This is a niche unlike other niches… but there are definitely riches. Tune in!

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Frank Rolfe Real Estate Background:

– Co-founder of Mobilehomeuniversity.com
– Ranked, with his partner Dave Reynolds, as 5th largest mobile home park owner in the U.S.
– Over 250 communities spread out over 28 states worth over $8,000,000
– Commercial real estate investor for over 30 years
– Based in Denver, Colorado
– Say hi to him at http://www.mobilehomeuniversity.com/
– Best Ever Book: The Man Who Bought the Waldorf

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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 fluffy stuff.

With us today, Frank Rolfe. How are you doing, Frank?

Frank Rolfe: Hey, Joe. I’m doing great, how are you doing?

Joe Fairless: I’m doing well, nice to have you on the show. We’re gonna be talking about mobile homes, because Frank is the co-founder of MobileHomeUniversity.com. He is ranked with his partner Dave Reynolds as the fifth largest mobile home park owner in the U.S. They’ve got over 250 communities spread out over 28 states.

His company is based in Denver, Colorado. He’s been a commercial real estate investor for over 30 years. Frank, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Frank Rolfe: Absolutely, Joe. Basically, I went to Stanford University and got a degree in Economics; I got out a year early. Back in that day, if you were going to go to a good business school, you wanted to start a business and write about that as your essay on your application. So I had to start a business that I could start, build and shut down within one year. The business I came upon was a billboard business.

I started a billboard company. In the first year I had [unintelligible [00:03:27].12] signs, but I had seven more pending, so I decided to go one extra year to get those closed out. You can guess what happened – I never went to graduate school, I kept building the billboard business. Then 14 years later I was the largest private owner of billboards in Dallas-Fort Worth, and I sold to a public company in 1996. A few months later I started buying mobile home parks, and I’ve been buying those for the last 20 years.

I teamed up with my partner, Dave Reynolds about a decade ago, and we’re now together the fifth largest owners in the U.S., which we built just one property at a time. We were the only people to ever build something as large as we’ve got just one property at a time.

That’s basically the background, Joe. I’m just basically very heavily invested, both monetarily and personally and time-wise in the whole affordable housing industry.

Joe Fairless: I know looking back on it, you can identify why mobile homes make sense… But if you can, if it’s possible, I’d love for you to think about when you sold your billboard company to when you bought your first mobile home or mobile home park – why did you go to mobile homes at that point in time, instead of other types of real estate?

Frank Rolfe: Well, I’ve always liked stuff that the rest of the world’s not doing… That’s why I liked billboards, because when I was doing billboards, there was only a handful of people that had any interest in it. I guess being an Economics major, I’ve been a big believer in supply and demand. I like to go where nobody else goes. That’s kind of been my life theme.

When I had had the billboard company, I built two billboards on a mobile home park, and I check on the signs, and the guy that owned the park would often call me up and ask me to do weird things like could I knock on the manager’s door and ask him why he won’t ever call him back, things like that…

I thought, “Man, what a weird business.” I’d never heard of it, I’d never knew anyone growing up who lived in a mobile home park or in a mobile home, so it was kind of like “Well, this is kind of different.” Then I also noticed when I was doing the billboards that billboards – people don’t realize, it’s a federally regulated industry. You can only build billboards in certain zonings and certain spacings from other signs, so you get very familiar with zoning maps; you’re looking at zoning maps all the time.

The MH zoning class in Dallas was the smallest zoning category I ever saw. I saw more zoning for lead smelters than I did for mobile home parks. So again, thinking supply and demand, I thought we’ll always be in the rarest zoning that exists, and this has gotta have some value in it. That’s really what got me into it. I was just kind of fascinated a) with how weird it was, and the fact that nobody else was in it, and then b) how scarce it was.

Joe Fairless: Now let’s fast-forward to today… You’ve got 250 communities across 28 states; what do you focus your time on now?

Frank Rolfe: That’s a good question, Joe. I basically probably go wherever the weak spot is and try to fix it. Basically, I kind of float around. Right now I’m very much focused on trying to fix occupancy issues and our most lagging 20% of the properties. I work on collections issues… I work on just about anything. Property condition… Just about any role. The size that we are — it’s kind of like being the [unintelligible [00:06:49].14] on an assembly line, you’re just trying to find which parts of the assembly line are not working efficiently and fix those.

Joe Fairless: That’s great. That’s very helpful, and it gives us a lot of stuff to talk about. Let’s go with the occupancy issues and the most lagging 20% of the properties. What does an occupancy issue look like, and then how do you solve it?

Frank Rolfe: We have a lot of demand because affordable housing right now is the hot topic. Basically, it’s very simple math when you have a mobile home park. Every three calls typically leads to a showing; every three showings lead to a sale or a rental. So you’ve gotta have the phone ring about nine times to make something happen. Our goal is to find all the properties that have the phone ring at least nine times every week.

The first problem you have is if a property is not hitting nine; if it’s hitting three or four, you’re trying to figure out, “Okay, how can we fine-tune the marketing?” In some cases what happens is managers get dependent on Craigslist, because it’s free and it’s easy, but the problem is Craigslist is only really effective in the larger urban markets; it’s not that great a tool in some of your medium and smaller-sized markets. Although it does work well in some of them, it doesn’t work in all of them, so you then have to expand your horizons on the marketing channels of how you’re trying to reach people. So that’s problem number one.

Joe Fairless: For example…? How do you expand?

Frank Rolfe: Lots of ways. Ads [unintelligible [00:08:09].21] are by far the best. You can do such items as apartment direct mail, it’s very effective; you can do such items as more signage on the front edge to your property, more referral letters to tenants, what we call tear sheets, which are eight-and-a-half by eleven sheets of paper with your phone number vertically  in the bottom that you cut with scissors, and put those in Laundromats and grocery stores.

There’s all kinds of different avenues you can do; you just try to figure out what works in that market. So that’s problem one.

Problem two is… Another reason you can have problems selling or renting is that people just don’t like your product. That can be because you’re not rehabbing it to a high enough level, or it can be that you are missing such basics as just having it smell good and be clean. So it’s the same issues that come up with single-family, so that’s another thing that can block you.

Third is if the manager is any good at sales. Are they even showing up for showings, and when they show up, do they care and seem enthusiastic, or do they just give you a look like “Why are you even here?” and hate everyone? So that could also do it.

Another issue can be pricing. You may be priced out of the market. You may say, “Well, our deposit on this home is $1,000”, and let’s say the home market can only afford $500; you’ll never sell much.

So those are typically the occupancy issues we have; they are falling into one of those categories, so I try to go out to the property and meet with the manager and figure out which the problem is, and then fix it. It’s no more exciting and complicated than that.

Joe Fairless: And just so I’m clear on the nine times a week… It takes nine phone calls to get one sale or rental, so if you have multiple mobile homes, then you’d multiply nine by the amount of mobile homes that you have vacant or needing to be purchased, right?

Frank Rolfe: Yeah, exactly. Most of these properties fall into a rhythm just based on the size of the market. In other words, if you are in Des Moines, Iowa, you could score 50-100 calls a week there; the homes fly out the door and you really don’t have any vacancy.

If you’re in a market that, let’s say, gets nine a week, that means you can do a home a week. So there’s some properties we have that can do a home a day, we have some that do a home a week, some that would do basically a home a month… This kind of gives you an idea of what the velocity should be. We don’t have any that would need more than one a month. We try to only buy stuff that can do one a week.

Joe Fairless: So you said another weak spot that you identify and then you dig into are collection issues…

Frank Rolfe: Collection issues are huge in the affordable housing business, because the very nature of customers that need affordable housing – they don’t have a lot of money. You probably have read, Joe, that 70% of all Americans don’t even have $1,000 total. What that means is when you’re living in a world without any savings at all, you’re flying an airplane at about a thousand miles an hour about two feet off the growth, and the slightest little thing will crash the plane. All that has to happen is the brakes go out on your car, and to get the brakes fixed it’s $700, and now you can’t pay your rent. Or you have a medical emergency, you go to the hospital, you could break your arm… There’s a million options.

So what happens is when you’re in an environment like that, it’s always hard to get everyone to pay. Now, our prices are very low, so they typically can always afford to pay; it’s sometimes a priority issue, and sometimes a timing issue. But you won’t get paid unless you have a pretty firm program, which most community owners call “No pay, no stay.” That’s true pretty much throughout the affordable housing industry. What it means is if you don’t pay, you can’t live there, so people have to make that choice – do they want to have a roof over their heads, or do they want to buy the big screen TV?

A lot of times you’re having to retrain people into doing what they need to do and not what they want to do. Sometimes what happens is the community managers loses sight of that, because often they live in the community, it’s often some of these people are their friends, and they’ll basically start relaxing the program to make friends, and what ends up happening is it screws the whole property up, and you have to go in and fix it.

It’s something you have to stay vigilant on every month, because even if you get everyone perfectly trained to pay the rent like clockwork, if you for one month stop pushing it, they all go backward again. It’s kind of like pushing a ball up a mountain, or something; if you don’t keep pushing, at some point it’s gonna roll all the way down the mountain again.

Joe Fairless: I know that you all train the on-site person initially – “Hey, it’s no pay, no stay. Here’s the process”, and it sounds like that needs to be continually reiterated, just because of the nature of the business. Do you have a process that you implement on an ongoing basis for those on-the-ground people to reinforce that “No pay, no stay”?

Frank Rolfe: Yeah, we even built an online — like a defensive driving course that we give all the managers on the frontend, and then we back that up, we’re talking to them constantly. Despite all of that, you still have to — typically, when you have as many properties as we have, you have to stay on top of everything, because there are certain people in there who will forget their training or just start doing things they shouldn’t do, which they know they shouldn’t do, but they do out of convenience or to make friends, or whatever.

It’s the greatest training program in the world; our program is about as good as you can get on the training side, but it still won’t solve all your problems.

Joe Fairless: Speaking about the on-site people – how many people do you need to oversee mobile home park? It’s a fairly broad question because I didn’t tell you how many spots there are or whatever, so take it however you want.

Frank Rolfe: Most of our properties have just one manager, and then some of the properties have what’s called a maintenance man, and that’s about all you need.

Joe Fairless: Regardless of the size?

Frank Rolfe: Well, no… In other words, until about 100 to 150 lots, typically your entire staff is potentially two people or one person. When you get beyond that, say you have a 250-space community, then you might have a manager and an assistant manager and a maintenance man. But our industry is relatively low maintenance, because the nature of the business on the park side – you’re just renting land, so it’s very low maintenance. The home side – not that much breaks in the stuff, because most people have in their agreements… The customers do all the small stuff, and we do the large stuff; large stuff doesn’t break that often. So I guess we’re like the Maytag repairman – we still don’t have a lot to do, and that’s why we can staff things without as many people as you might have to have for example in multi-family. It’s just not that much that goes on.

Joe Fairless: The last thing you mentioned earlier when you said you’re looking to find the weak spot and fixing it was the property condition. If you haven’t implemented the whatever renovations you’ve already budgeted for, then how do you approach that if you don’t have the money allocated already, because it sounds like that would be a surprise in this scenario, that the property condition is deteriorating?

Frank Rolfe: Well, in property condition, most of that is free. In other words, what it is is enforcing the rules; the whole community has rules, guidelines that people have to live under, and those items include you can’t have junk in your yard, not running vehicles, home has to be kept up to a certain standard, the grass has to be mowed. Those items are free to the park owner; those are things that the residents are supposed to be doing.

The park owner is in charge of the common areas. We’re in charge of the entry signage, mowing the common areas, things like playgrounds if we have them, and then roads, which typically we do a pothole repair once a year. So the biggest part of property condition is just making sure that the manager is staying on top of the rules violations, and that we’re mowing the property effectively. Those are kind of the keys.

The way we do it these days, Joe, which is different than the old days (20 years ago) to stay on top of property condition, you have to drive the property yourself. Today we do everything based on HD videos. Each manager has a Polaroid Cube camera and a suction cup mount. Monthly you put that on the roof of your car, and you push the button and you start about a thousand feet away from the property, so you can see even the front entry, and they drive the entire property; then they take the card out of the camera and they send the card in, and then we download the video, and we watch the video.

Now, the only problem is as large as we are, to watch the videos it’s 16 hours, so it’s a lot of video watching…

Joe Fairless: …for all the properties.

Frank Rolfe: Exactly, correct. But it’s an extremely effective tool, because while it’s not identical to what you see if you go drive, and it is only that one day in time, it looks pretty darn similar, and you can spot problems quickly and easily. You can view all your properties every time you do that. If you wanna take it to the next level, you can actually put that in a GoTo Meeting webinar and you can drive the property with the manager, like you’re in the car with them, and discuss it as you go, and stop and rewind… It’s a super effective tool. That has improved our lives by a trillion percent, because now we can just go out and physically go to the ones that are really of concern, which rarely on property condition there’s enough concern that you’re really freaking out.
The number one issue you have with them traditionally is gonna be in, say, a hundred-space community you might have a couple non-running cars, which means the manager failed to recognize running from non-running, or was trying to maybe help a friend, or something. Then THE most common is that the grass is not getting mowed. So basically, through the entire winter season, life is bliss because there are relatively no problems. But right now we’re entering into our hardest time of the year, which requires mowing.

Joe Fairless: Other than those two things – and maybe there aren’t any, but I bet there are – other than non-running cars — how do you know if a car is non-running by looking at it on a video?

Frank Rolfe: Well, a non-running car – when we talk a true non-running car – will be sitting there on flats, for starters. One item we’ve seen more and more in the industry is that people to either save money or to make it more convenient, wanna create their own self-storage sometimes in the mobile home park, so what they do is they buy a van or a pickup truck and they park it there, and they use that as their own self-storage. The car doesn’t even run. But you can always spot them, because they’re always on all flats, with trees growing up between axels, or something.

We try not to be too picky on stuff that’s just minus the tags. A non-running vehicle, by definition, based on towing regulations, is something that does not have all its tags up to date. So if your inspection sticker is off by a month, you could theoretically have it towed for being non-running. But that’s crazy, because there’s people in McMansion subdivisions that forgot to get their tags renewed, right? So that’s a crazily high bar to set.

Basically, as long as the car is being driven, even if the tags are out of date, we do not call that a non-running vehicle. In fact, if you were to tow that, what’s gonna happen is then the resident — you’ve just created the three-foot-off-the-ground plane crash; now they can’t get to work and they can’t pay the rent. So we try to be very user-friendly, particularly in automobiles, because they’re very expensive to upgrade. We don’t wanna give people more problems than it’s worth, but we can’t afford to have people pulling in a van and letting it sit there rusted on all flats because they like to use that as a mini-storage vehicle.

Joe Fairless: My last follow-up question on this particular topic – when you watch the video with the property manager and they’re not as experienced, besides non-running cars and grass isn’t getting mowed, what’s something else that you might point out to them?

Frank Rolfe: We actually have a whole thing for them – it’s an 11-step process, and it ranges from all signage (we own all the signage on every property)… You want all the signage to look good. That means that — obviously, your entry sign is the key one that kind of sets your first impression, but we do not allow any signs that are bent or rusted or weathered or have graffiti on them. For example, if you’ve got a Stop sign and somebody spray-painted something on the stop sign, you’ve gotta replace the stop sign, or you’ve gotta get it off. But you can’t get i off, so you’re gonna replace the Stop sign. So signage is one of their items.

Mowing is one of their items, non-running vehicles is one of their items, the general condition of the residence, homes and yards is one of the items. You’ve got trash dumpster areas – you don’t want any mattresses and junks sitting in those, that’s one of the items. You’ve got the common area appearance of like club houses or any structure – make sure that it’s painted and looking attractive. If you have playgrounds or basketball courts – those are all painted and in good condition. The basketball court has nets on it… It’s those kinds of items.

It’s not rocket science, but the problem is if you let it slide, it hurts the overall community feel, and it irritates people and there’s no purpose. And the worst part you have with property condition is what you sometimes have is you’ll have all these people that keep everything immaculate, and then you’ll just have this one person that just ruins it for everyone. You can see them in most any mobile home park. If you go to any mobile home park, you’ll see that of every 20-30 houses, there’s that one person. That’s not fair to the other people; they have their property looking fantastic, and then here’s this one person who’s home is beat to death, the cars are atrocious and there’s junk everywhere… When we first buy the properties, often they’ve got three pit bulls on ropes in the yard… That’s what we’re really striving to eliminate.

That person either has to move on to another property that says living like that is okay, or they have to clean up their act. That’s one of the key items.

Joe Fairless: Frank, what’s your best real estate investing advice ever?

Frank Rolfe: Are we talking on a macro level or just in my industry?

Joe Fairless: Let’s talk about your industry, let’s keep it focused.

Frank Rolfe: On the industry there are five key things that you have to know about a mobile home park purchase, or you’re gonna get in trouble. We call it the IDEAL system. The I is for infrastructure – you have to make sure the thing has solid infrastructure; typically city water, city sewer, good working water and sewer lines, power system is in good shape, roads are good… That’s the first step

Second one is called density – that’s the D. Density means you have to have lots that are large enough that you can bring new homes into, because the industry has changed dramatically over time. In 1954 the biggest mobile home was 8 by 40, and today it is 18 by 100, so that’s changed hugely. So you have to make sure that your lots — as soon as they can’t hold the largest homes now made… They have to hold at least about 14 by 46, which is a two-bedroom, one bath.

The E is for economics. Clearly, obviously, you have to have a handle on what kind of net income the property produces, what it can produce going forward, and make sure you’re buying it at a price that makes sense based on its net income.

A is for the age of home. We’re probably the only industry in America that tends to favor the older stuff more than the newer stuff, and that’s because an older home is paid for. It really just depends not so much on the age of the home, but whether it’s paid for or has a mortgage on it. When you have customers where the home is paid for, you typically have a customer for life, because there’s no place that they can possibly live cheaper than the mobile home park. So if they own the home and we own the land, they’re like stakeholders in the business. We like our residents to own their own homes free and clear.

The L is for location. There’s two locations that work in the mobile home park world. One is a nice suburban area in a good school district; that comes as no shocker. But the other style which many people find a shocker is that kind of gritty urban living that millennials now choose in their own apartments. People wanna live downtown, and there’s a certain number of people in the mobile home park world that like to live where the action is, in downtown. Those are those mobile home parks you sometimes drive by just outside of downtown or in downtown, and you think, “Oh my god, who would live there?” But shockingly, if you look at a market like Denver, the highest rents in Denver are those gritty urban parks; those get like $700/month lot  rent. The rural areas, even the nice school districts get like $300-$400.

I’d say that those five items are key. If you flunk any of the five items… For example, if density is too high to fit new homes on… The only way you can buy a park if one of those five is bad is if one of the other five is good enough to offset that. So it’s kind of like the scales of justice. You can only really buy a property where they’re all balancing, and if they don’t balance, you shouldn’t buy it. If they’re beyond balance on the good side, you should definitely buy it.

Joe Fairless: Wonderful practical information, and thank you for sharing that. Are you ready for the Best Ever Lightning round?

Frank Rolfe: Sure, absolutely. Go ahead.

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

Break: [[00:26:11].11] to [[00:26:53].15]

Joe Fairless: Okay, Frank, what’s the best ever book you’ve read?

Frank Rolfe: The Man Who Bought The Waldorf, the story of Conrad Hilton.

Joe Fairless: What’s the best ever deal you’ve done?

Frank Rolfe: A park in Iowa, we paid nine million for it, sold it for 19.

Joe Fairless: Over what period of time and how much did you put into it?

Frank Rolfe: Three years; additional capital put in – probably about 1-2 million.

Joe Fairless: What’s the best ever way you like to give back?

Frank Rolfe: Basically, I am all the time talking to people getting in the industry on how to do it properly. I’ve got a design to it that works and it’s a win/win. What I do is I drive a lot between properties, and when I’m on the road I just turn my phone on speakerphone and I return the gazillion calls I get from people and try and tell them my constructive ideas on parks they’re buying, or valuations on parks they’re doing. It keeps me awake and lively while I’m driving, and it’s a good way to give back to them to help them get their mobile home park thing going.

Joe Fairless: What’s the best ever way for someone who wants to get started in mobile home investing to find a deal?

Frank Rolfe: The best way… There’s probably four ways to find them, and it varies. They’re all fairly effective. First one is online. Go to mobilehomeparkstore.com. There’s about 800 parks for sale on there. When you do that, you have to understand that only probably 25% of those are deals you would wanna buy. That’s the first place most people go.

Broker pocket listings are big… That’s where half of all of the properties we buy these days come from – pocket listings. These are listings that brokers have that they don’t publicly discuss, because the seller typically won’t let them, because he’s afraid of scaring the residents or the manager, or it’s because the broker could talk about them publicly, but he doesn’t want to because he doesn’t want to talk to other brokers, only to buyers who are not represented, so that he gets the entire commission.

Third level is direct mail. We do that all the time. You basically send postcards or letters to people who own mobile home parks, saying “Hey, I wanna buy a mobile home park. Are you interested?” Like any direct mail, we get typically a 1% response rate.

The fourth is cold calling. You basically just call people up and say, “Hi, I’m interested in buying a mobile home park. Is yours for sale? If so, at what price?” Those are the four most standard ways. There’s a fifth way which is called “drive and talk”, where you pull into a mobile home park and just try and strike up a conversation with the owner, but it’s very time-consuming and half the time it’s of no value, because all that’s there is the manager.

Joe Fairless: What would be a mistake you’ve made on a particular deal, thinking back through the deals you’ve done?

Frank Rolfe: The biggest mistake I ever made was not understanding what makes the business work. In my early, early career I bought some properties in Shreveport, Louisiana that I should not have bought. Fortunately I came out of all of them whole, so I didn’t lose any money on it; I learned a lot. The problem you have is to create affordable housing you have to have expensive housing. Today I call that contrast.

If you’re looking at a market where the median home price is $40,000, nobody needs a mobile home, or a mobile home park. And I didn’t know that. Early on I just thought, “Oh, there’s a mobile home park… Why would it be any different that another one?” I’ve learned over time that there’s huge issues in the market that make some markets desirable and some not. The desirable markets to us are basically 100,000+ population, median home price of about 100,000 and up, a three-bedroom apartment rent of about $1,000 and up… We also like to see market vacancy – the U.S. average of 12.5% or lower… All these stats you can get off BestPlaces.net (that’s where we get them all).

Beyond that, we like to buy what we call recession-resistant economies. That means that they have the bulk of the jobs based on either healthcare, or education, or in government. Markets that are heavy in that – an example would be Kansas City. Kansas City has more federal jobs than any city outside of Washington DC. It also has a huge amount of healthcare, and it also has a huge number of colleges. St. Louis has the same…

If you look at the U.S. economy based simply on how safe is the employment, you’ll find entire regions that are very risky… For example, when you go way out, far East Texas it’s all about oil and gas, right? West Texas is also all about oil and gas… A lot of your Midwestern, Great Plains markets are pretty much well diversified in healthcare and colleges and government, and that’s what we like.

We like the cities where you can have the 2007 Great Recession and nothing changes.

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

Frank Rolfe: You can always reach me at my e-mail, which is frank.rolfe@gmail.com. That’s typically the best starting spot. I am very accessible, because again, I’ve got it now where I’m basically talking to people, and typically everywhere I go in life today I take my laptop with me… Whether it’s to any event, or watching TV, or whatever. So anyone who’d like to contact me, always feel welcome to do so.

Joe Fairless: Outstanding. Frank, I have literally a page and a half of notes from our conversation. This has been just a great crash course on mobile home investing, from ways to solve the occupancy issue – you broke it down very tactically, which was helpful… Then how to find deals, and then overall how to look for it using the IDEAL acronym (Infrastructure, Density, Economics, Age of homes and Location).

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

Frank Rolfe: Sounds great!

 

 

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JF945: How to Make Real Estate Your Business Instead of a Hobby

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Turn it up a notch! OK we’re not cooking anything in the kitchen, but we are about to cook up some recipes for success in real estate. From flipping, to meet up, to networking, it’s all necessary to be well-rounded and self-reliant. Hear what our two guests have to say about getting started in taking the business to another level.

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Bill Bronchick & Bobby Dahlstrom Real Estate Background:

– Co-founder of the Colorado Association of Real Estate Investors
– Nationally known attorney, author and public speaker
– Say hi at bill@bronchick.com
Founding board member of the Colorado Association of Real Estate Investors, leader of Northwest group
 Well-known investor, entrepreneur and real estate broker
 Based in Denver, Colorado
 Say hi to them at www.legalwiz.com and www.alpenlux.com
 Best Ever Book: Think and Grow Rich

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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 fluffy stuff.

With us today, Bill Bronchick and Bobby Dahlstrom. How are you two doing?

Bobby Dahlstrom: Great, thank you.

Bill Bronchick: Doing great, thank you.

Joe Fairless: You’re welcome, both of you, and nice to have you both on this show. I’m really looking forward to digging in. They are based in Denver, Colorado. They are co-business partners in real estate deals, they co-authored a book called “The Business of Flipping Flips” – did I write that down correctly?

Bobby Dahlstrom: The Business of Flipping Homes, Joe.

Joe Fairless: [laughs] I don’t know how I wrote that… You know, I do like “The Business of Flipping Flips”, though… That’s pretty catchy. “The Business of Flipping Homes” – they co-authored that book. With that being said, do you two wanna give the Best Ever listeners a little bit more about your background and what you’re focused on?

Bobby Dahlstrom: Wow, that’s a long silence. I hope we didn’t lose Bill. I will start in… This is Bobby, and I started investing full-time — I’d been a marketing consultant and started investing in real estate full-time back in the mid-nineties. Bill and I met each other and did several projects together, and were involved with the group that he founded, called The Colorado Association Of Real Estate Investors.
Over the years I’ve done hundreds of flips and had many joint ventures with Bill, and we also wrote another book around 2001 that was a best-seller, called Flipping Properties.

Bill Bronchick: Great. This is Bill Bronchick. I’ve been investing since 1992, I’ve been practicing law as a real estate attorney since 1990. I quickly figure out after about two years of practicing law that it doesn’t matter how much you make an hour, it’s how much you make an hour when you’re not working, so I got quickly into real estate and my client’s deals, and I soon discovered that the law of practice pays the bills, but you get rich in real estate.

I did a lot of deals pretty much full-time since 1992, weaving in and out of my law practice and the association in Colorado. I’ve done just about every type of deal you can imagine – residential, commercial, flips, wholesales, lease options… Just about every type of deal, but Bobby and I fell into a nice little niche together flipping homes, and we wrote the best-seller in 2001 called Flipping Homes. Our brand new book is “The Business of Flipping Homes”, which is a business approach to the real estate strategies.

Joe Fairless: Well, let’s talk about a business approach to the real estate strategies of flipping homes. Walk us through the premise of the book.

Bill Bronchick: The premise of the book basically is using certain real estate techniques to run a business. A lot of people do it as a hobby or a part-time thing, or really haphazardly… Real estate investing, in my mind, is not like stock market investing – you don’t throw money at it and wait for something to happen; you have to be active as a participant. And it’s like any small business, you have to worry about things like cash flow, marketing, keeping your books and records, and so forth. So what we do is we give a blueprint on how to run your investing like a business.

Joe Fairless: Let’s talk about that. What are some ways to run your real estate business like an actual business, and not a hobby?

Bobby Dahlstrom: One of the first things that people need to do is realize it’s gonna be a time commitment. There’s a lot to learn, and you need to surround yourself with other successful people and build a team that you trust, that you can work with on a repeat basis. That’s kind of the basic place to start. Then you have to go out and start looking for your first deal.

Many people get lost in trying to find the perfect deal, which probably doesn’t exist. You need to find one that makes sense, go with that, learn from your mistakes, which hopefully we will help you to avoid, and then move on to the next one, as you grow.

Bill Bronchick: Also, one of the most important things in a business I mentioned earlier is cash flow. You have to make sure that you have enough money to not only run your business on a daily basis, but to fund the deals you’re working on and don’t get all your money tied up to the point where everything is hanging on a couple of deals, and if they don’t go through you’re broke. It’s like any business, you have to anticipate your expenses and your cash flow needs.

Joe Fairless: And with flipping, how do you look at cash flow?

Bill Bronchick: We talk about two types of flipping in the book – wholesaling and retailing, retailing being the traditional stuff you see on TV, buy, fix and flip… Wholesaling being more of a short-term deal and selling it to another investor as is.

Wholesaling will bring you short-term income, and the fix and flipping will be every three or four months, but you have to be able to anticipate your projects. For example, if you’re in the middle of two fix and flips and they went over budget and you’re feeding it and feeding it, and all of a sudden you have to pay other expenses of your business, like your phone in your office and all the things like that, you have to make sure that you have enough cash on hand so you don’t run out of cash for your deals.

Joe Fairless: Earlier I heard that you want to avoid the mistakes… What mistakes have you two come across, either personally or through the investors you know that you wanna share, so that the Best Ever listeners listening can avoid those mistakes?

Bobby Dahlstrom: To continue on our train of thought sort of along the lines of cash flow, let’s talk about cash flow mistakes. There’s various ways to control a property and then purchase a property. If you’re going out and getting a new loan for it and it’s gonna be a flip, most likely what you’re doing is because flipping’s become so popular, [unintelligible [00:07:38].23] money that would be considered hard money loans. And those can make sense, you can get in and out quickly. But a lot of times these hard money loans have a little upfront cost, as you’d expect; they also have, however, a high interest rate, and usually a balloon payment in six months or so. So you wanna be realistic… Most flips that we do, we get it from purchase to ready to sell in, say, three to six weeks, so even with the hard money loan, that would work out.

If for some reason you’re planning to do an addition, or something, or you don’t have a crew and a seasoned, experienced contractor that can get the work done quickly, and you think it possibly might take longer than that – and it’s really not just when you finish, but when you get is sold – then especially be careful, be aware that that balloon payment is coming, and the carrying cost is much higher than what you might expect for just your traditional home payment.

Now, ideally, you’d be able to fund the deal with your own either savings, or you might have some money tied up in a retirement account to utilize – which is a whole different strategy; that’s a little more advanced – but also just your own lines of credit. Even though they have less upfront expense, they are probably gonna make sense… It just depends on your state of mind, if you’re comfortable using your own credit line in this business.

I think sometimes people don’t realize how long it’s gonna take and they get their money tied up… And like Bill mentioned, if you’re trying to juggle more than one deal, it gets complicated because you’re having to get your resources, including yourself, to two different places. It’s usually better, like in most things, to start slowly, one deal at a time.

Bill Bronchick: Right. And just to add to that, a lot of people do get hard money loans for their fix and flips, and they don’t realize that, let’s say they have a six months loan – after six months, the interest rate goes into default, which means it might step from 12% to 20%. Then all of a sudden it’s racking up at 20% while you’re trying to get your closing done on the backend, and all of a sudden your profit is eaten up to be nothing or even negative.

But even though it only takes a couple of months to get a rehab done and ready for resale, you could have delays, you could have contractor problems, you could have weather, you could have more often than not a buyer that says, “Yeah, I’ll buy” and then a month-and-a-half later, right before closing, they can’t buy, so then you have to put it up and get another buyer.

The six months may seem like a long time, but what I recommend people do is make sure if you’re got a loan that’s due in six months, you have the right to buy an extra two or three months, otherwise you’re either getting hit at the default rate of interest, or potentially foreclosure by the lender and you’re gonna lose the house.

Joe Fairless: Earlier you’d mentioned building a team you trust… What team members need to be on this team for fix and flippers?

Bill Bronchick: Us two. [laughter] An attorney, a contractor, a real estate broker, a title or Escrow company rep, a good insurance person, an accountant, an inspector… Just all the players — and it’s not like you have to have every one of them lined up before you make your first offer, but that’s one of the things you wanna do right up front, start getting your things lined up so that you don’t end up having some bad experience because you’re just rushing to get something done with someone.

Joe Fairless: What are the best ways to meet the attorney, the contractor, the real estate broker, the title company person, the insurance person, the accountant and the inspector?

Bill Bronchick: Local real estate investment groups is one good way, ask for referrals.

Bobby Dahlstrom: That’s where I was gonna start, too. Almost every city has some type of a real estate organization that’s sort of a creative thinking, like-minded people type get-together scenario, they’ll meet monthly. You can find those online, and sometimes going to some of the seminars, whether they’re free seminars or a paid weekend event like I believe we have coming up – those kinds of things are a great place to meet other people and just get a sense of what this flipping is all about. Then also, as you read and learn more about the different people that you’re gonna need in your group, when you speak to, say, a real estate broker – and I’m a broker, I’m also a contractor…We don’t all think alike and we don’t all have the same experience. It’s not that difficult to become a real estate agent. So you wanna start looking for the ones that have worked with investors and ideally own investment properties themselves, so they understand what you’re trying to accomplish.

Bill Bronchick: Meetups are also a good place to find groups. If you go to meetup.com, there’s dozens in your town.

Joe Fairless: What are some lessons learned as far as creating a real estate group or meetup? Because Bill, I know you are the co-founder of The Colorado Association Of Real Estate Investors and you did that in the late ’90s, I think you said… Or early 2000s? Mid-nineties, and you’re still active. What are some tips that you have for someone who wants to do something like that?

Bill Bronchick: Well, you’ve got to be able to have an organized organization that’s gonna help… Maybe get some volunteers in the beginning, so you don’t have to spend money on employees. Some of these groups are run like a board, like government, and they have a board. Mine was run as a benevolent dictatorship, and therefore was much more efficient, just having one person or two people be the point people to run everything and make the decisions.

You’re gonna have to build an e-mail list, you’re gonna have to find some place that’s fairly reasonable, but reputable, to have your meetings, and most importantly, you just gotta make it interesting with the topics. A lot of these groups have speakers who come in and sell things – sell seminars, books and CDs… Which is okay, but if they have that every month, you’re not getting a lot of information.

Joe Fairless: One other follow-up question — I know I’m kind of going back in a kind of scattered approach, but I was taking notes as you two were talking, and I wanna make sure we address all these items. You mentioned earlier, Bobby, that there will be a time commitment; that’s the first thing that you said. For someone looking to get started and going full-time, what type of time commitment should they expect?

Bobby Dahlstrom: Well, I think as a minimum you’re probably looking around ten hours a week. In our previous book we spent more effort of gave more emphasis on the idea of wholesaling, which basically you don’t necessarily need any money to do. If you go out and identify a property that’s a good deal, then with a little effort you’re gonna find someone who will definitely take that off of your hands. So the idea as a wholesaler is you spend your time looking for bargains, and you’re probably not gonna find it by just having your real estate broker go out and look for you. That is one way to identify deals, but usually it’s really pounding the pavement and being creative… But it’s hard work, so that’s gonna take some time to go out and find that deal, and then you need to secure it.

If you’re starting kind of skipping that step and you’re willing to work with people that have already found wholesale deals, or with real estate brokers, or buy foreclosures at the trustee sales, those kinds of things, then in some ways it takes less time to find a deal, that’s true, but then you still have to manage the actual process of getting it from under contract to closed, to then fixing it up and then selling it.

To really be successful, you need to spend time on your education along the way, too. So again, even if you’re not wholesaling, and you just skip that step and you’ve got the money to do your own deals, it’s still gonna probably be, let’s say – and this isn’t a rule of thumb I’ve set in the past, but Bill, you can chime in – ten hours or so a week would be a good place to start. If you have more time… We see a lot of people get into flipping that have the money tied up in the stock market, and maybe they’re empty nesters… They still have another career – we don’t advise people to go and just leave their existing career, but maybe in addition to that, or if they’re sort of semi-retired, they can work their way into the investing at their own pace, if you will.

Bill Bronchick: Just to add to that, I would agree, ten hours a week is a good place to start. I think the approach that people need to have is that after they come home from five o’clock from their regular job, it’s time to go do the second job. Like I said, treat it like a business. You’re setting aside two or three hours a day, and that’s just your second job for a while, and you’re gonna have to get your family and friends to understand that and accept that. At some point, maybe when you get up to 15 or 20 hours a week, you’re gonna have to decide which job is more important. If you’re doing it right, the job that’s more important is gonna be the real estate, because it’s gonna make a lot more money.

Joe Fairless: Alright you two, what is your best real estate investing advice ever?

Bill Bronchick: My best real estate investing advice ever… My knee-jerk reaction would be “make a lot of offers.”

Joe Fairless: Why is that?

Bill Bronchick: Well, I think too many people dance around it, they look at it, they research it, and then they haven’t even made an offer yet. You can’t buy a property from a seller in a good deal until you find out what the seller’s problem is. You gotta sit down with them and get personal and get them to open up, and go “What’s the real reason you’re selling?” Not because you wanna sell the house, but there’s some problem attached to that that you need to find and get to the bottom of, and then solve that problem and buy the house; if you solve their problem, you make money.

It’s not always price they’re looking for. It might be speed – closing quickly, it might be closing later, it might be terms… You just don’t know. So make lots of offers, but don’t make an offer blind, without knowing what the seller’s needs are – their personal needs, not the property needs.

Joe Fairless: I love that.

Bobby Dahlstrom: Yeah, I agree. I would say — we’re not inventing this one, so I’m not gonna count this as my best advice, but what really does matter is you have to buy it right; you just can’t overpay for a property… So where my advice might come in from there is don’t take things personally. People get really attached to one potential deal, and they try and make it work; they go backwards and forwards and try and make it work, and get all these other people involved, when maybe it’s just not a deal. Or maybe it will be a deal in a year, so you can always leave a verbal offer with the potential seller in a respectful way, maybe they’ll come back to you. That comes back to really making more offers.

People get really caught up also in the renovations, so they start doing things the way they would want to do it for their own house. If I happen to like light blue interiors for my house – which I don’t  – that would be fine, but I don’t wanna use that in a flip. We wanna be a little creative, get most bang for the buck – that’s part of the fun of the business – but don’t try and project your personal case and your personal opinions too strongly into each deal.

Joe Fairless: I love that. Are you two ready for the Best Ever Lightning Round?

Bill Bronchick: Go for it!

Bobby Dahlstrom: Sure!

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

Break: [[00:18:21].02] to [[00:19:03].01]

Joe Fairless: Best ever book you’ve read?

Bill Bronchick: Think and Grow Rich.

Joe Fairless: Best Ever deal you’ve done?

Bill Bronchick: Oh, there’s so many…

Bobby Dahlstrom: Bill and I were partners on a duplex in Washington Park which went against the grain of some of our typical deals. It worked our really well, we bought half a duplex.

Joe Fairless: You bought half a duplex…

Bill Bronchick: Right, we bought half a duplex for a 100k, put 80k into it, sold it for 263k in eight days, cash.

Joe Fairless: How did you find the buyer?

Bill Bronchick: The buyer was easy, because it’s Washington Park, the most desirable neighborhood in Denver… So that wasn’t hard. We put it on the MLS and we had it sold in a minute.

We found the seller’s property was vacant for eight years, and it was a disaster. 1,200 square-foot, half a duplex, we put 80k in it – that’s a lot of work for a little half a duplex.

Bobby Dahlstrom: That’s right. We purchased it from another investor who… Really, they were new, and it would have been a little too much for them to take on. As I recall, Bill felt bad a little bit that we made so much and he paid for a vacation for her, in addition to the money we had already agreed upon for the purchase.

Joe Fairless: Nice.

Bill Bronchick: Yeah, that was good. And just one other thing I just wanted to mention with that deal… This deal in particular – it was a wholesale from another investor to us, and then we sold it retail, so it was kind of back-to-back. It was half a duplex, so there was another side to it, and the other side looked terrible… So we had to actually fix up both sides in front, so it matched, otherwise it would have looked like the monsters with [unintelligible [00:20:30].02], one half good and one half bad. [laughter]

Joe Fairless: And did you have to get their approval to do that? Because I imagine they didn’t pay for those renovations… You just paid for it to help your investment.

Bobby Dahlstrom: We’ve done that in the past, as well… We kind of encouraged the neighbor, with their houses dilapidated, and said “Look, we’ll do a little renovation while we’re here, just to help you out, too. It’s win/win.” An awkward conversation, and then after that, it usually goes just fine.

Joe Fairless: What is the biggest mistake you have made on a deal?

Bobby Dahlstrom: Well, if I stick with deals with Bill, it might be the time that he verbally told me we had one ready to go, and I got a crew in there over the weekend and then found out that we actually didn’t have the deal signed. We had already done all kinds of demolition and emptied the place out, took out some [unintelligible [00:21:19].16] walls, that kind of thing. But it worked out… We luckily didn’t lose anything too valuable of the owner’s, and we worked it out.

Bill Bronchick: If we’re talking about the one in Baker district, my biggest mistake was selling it to Bobby for a quick 10k cash, and then he fixed it up and made the lion’s share of profit. I was greedy. I was looking for a new car and he flashed cash in my face, so I sold it in two days after I had it, to Bob.

Bobby Dahlstrom: Oh, that’s right.

Joe Fairless: What is the best place the Best Ever listeners can get in touch with you two?

Bill Bronchick: The best way to get me is my website, legalwhiz.com. Bob…?

Bobby Dahlstrom: You can send me an e-mail, Bobby@alpenlux.com, or go to my website, alpenlux.com.

Joe Fairless: Alright, Bobby and Bill, this has been an educational conversation. Thank you for being on the show, thank you for talking about the best ever advice that you have, which is to make a lot of offers – don’t dance around the property, just make offers. I loved the “solve the problem” – I think that really resonates with me even more… Identify what the seller’s problem is and solve that problem, because we are dealing with people, we’re not dealing with properties. We’re in the people business.

And Bobby… I think I have your voices down, by the way, at this point, but correct me if I’m wrong – I believe you said, Bobby, “Don’t project our personal taste into the deal”. I love that. That is a mistake that I have heard a lot of beginning flippers make. Then lastly, when you two mentioned paying to renovate the outside of your neighbor’s property – in this case it was a duplex; in other cases it might be just your neighbor, if it looks really bad… It’s a win/win – that certainly is a win/win/win: you win, they win, and the neighbors all win. Everyone wins, all the way around. Really interesting stuff.

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

Bill Bronchick: Great, thank you.

Bobby Dahlstrom: Alright Joe, you have a great day! Thanks.

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JF944: How to Get to 75 Rehabs a Year and 10 Employees

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Big business, it all started thinking big. Our guest has a 50-50 partner with responsibilities of his own, that is how they know who does what… That is how they scale. Hear how he was able to do 75 rehab the year.

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Brian Elwood Real Estate Background:

– Business Coach, Real Estate Investor, Entrepreneur
– Does 75+ rehabs per year and owns 25 rental properties in Middle Tennessee but resides in Denver
– Passionate about business development and helping entrepreneurs
– Based in Denver, Colorado
– Say hi to him at BrianEllwood.net
– Best Ever Book: 4 Hour Work Week by Tim Ferriss

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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 podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Brian Ellwood. How are you doing, Brian?

Brian Ellwood: I’m great, Joe. How are you?

Joe Fairless: I’m great. Nice to have you on the show, and looking forward to digging in. Brian does 75+ rehabs a year and owns 25 rental properties in Middle Tennesse, but lives in Denver, Colorado. He is a business coach, real estate investor and an entrepreneur. You can say hi to him at his website, which is in the show notes link.
Brian, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Brian Ellwood: I lived in a bunch of different states growing up, but Tennessee from sixth grade on, went to the University of Tennessee, graduated and moved back to Nashville, and that’s where I started my real estate business. That was 4+ years ago or so from now, and two years into it we started to build the business to where we can run it from our houses, without having to leave our house, but investing in the same city.

Then we decided to test that theory and moving across the country. Now I live in Denver, and we have a team of about 10 people that live in Nashville. Not everybody does… The marketing guy would not need to be local, but your sales guy would; certain people are boots on the ground, other people are not.

I really have a passion for creating passive income and for teaching other people, helping other people get into this business and create the lifestyle that they want to live.

Joe Fairless: I wanted to talk about your responsibilities now, as someone who does 75 rehabs a year and owns 25 properties and employs 10 people. How do you spend your day?

Brian Ellwood: I have a 50/50 business partner, so the work is divided up between the two of us. I am over marketing and finances and operations, and he is over sales and renovations, so we kind of divided it down in the middle. It’s kind of like we have two CEOs on our org chart.

My day is basically spent working with our marketing director, working with our CFO and our COO. I know these sound like big, fancy titles; the marketing guy and the COO are the same person, okay? [laughter]

Our COO, he spends one day of the week working on operations and four days on marketing, because marketing is more important to a business of our size. So I’m on the phone with them for several hours a week, and I’m focusing on our vision for the year and holding them accountable to getting certain results done by certain times.

I should also throw in there that 75 rehabs sounds really intense, but we don’t do expensive rehabs. We have, and we have a couple more going on right now, but over time we’ve decided that $10,000 or less is the sweet spot for us. We focus on being a marketing and sales organization at our core, so the backend monetization has to be kind of simple, because you can’t really be great at every part of it, at least not in the beginning… So that decreases the simplicity a lot.

A lot of times we’ll just do five, seven thousand dollars… Just trying to get properties in rent-ready condition, put it back on the market; either a landlord would buy it, or someone who wants to move in and finish the renovation will buy it.

Joe Fairless: So you’re staying away from the big time distressed properties and you’re looking for something that just needs some lipstick?

Brian Ellwood: It’s not that we wouldn’t buy a big kind of distressed property, as long as there’s equity in it when we buy it, as long as we can get it for a discount. It’s just that we’re only gonna put the first ten grand or so that it needs into it, and then put it back on the market.

If it was really distressed and needed to be torn down, we wouldn’t do anything to it. We would just buy it and list it as is. Sometimes it doesn’t make sense to put any money into a property, but in our experience, running a business virtually is tough when you’re putting $110,000 into a rehab and they’re opening walls and finding all kinds of different stuff.

We have a great team there, the project manager and another guy who oversees all the projects, but we’re just trying to create a more focused business model. I always hear the mantra that “Focus makes you rich”, so we’re not trying to be great at everything.

Joe Fairless: What usually comprises of the five to ten-thousand-dollar rehab budget?

Brian Ellwood: It’s probably like paint, carpet, [unintelligible [00:07:13].28] just cleaning it, taking out all the trash, doing some landscaping… It could be like windows, if the windows are broken out. If the property is gonna be listed and it’s gonna be sold to a homeowner, someone who’s gonna live there, then you’re gonna just do the first $10,000 worth of work that’s gonna make it livable, for someone to buy. But if an investor’s gonna buy it and do like a rehab on it, then we may just clean it up and not do much to it.

Joe Fairless: That’s an interesting model. I haven’t come across this model where you’re doing the initial part of it, or you’re just doing the five to ten thousand dollars worth, and then flipping it to either the end buyer or another investor. Did you start out that way?

Brian Ellwood: We started out wholesaling, and we kind of over time have just come to think that closing on everything is the best strategy – just closing on it, listing it on the MLS, selling it with a realtor. We still focus our efforts on marketing and sales, but instead of signing a contract to an investor, we decided to put the resources in place to allow ourselves to close on every property and sell it the traditional way, because then not only can you sell houses to investors, but you can also sell them retail, which means you can expand your business to a lot of other zip codes, or maybe investors aren’t looking, because you’re selling everything to retail buyers.

Joe Fairless: You mentioned that a lot of your conversations — or maybe not a lot, but you mentioned a priority of yours is holding the team members accountable to get the results done. What results do you outline for them to accomplish?

Brian Ellwood: Just as an example, our marketing director’s key indicator, of whether or not he’s doing a good job, is how many leads he generates each week. Of course, there’s a lot of other variables that go into that, like cost per lead, but that’s the main thing that we look at. And he has goals for each quarter, to get to a certain point.

Our CFO is actually responsible for maintaining a certain profit margin – net profit margin – in our business and forecasting the revenue that we’re going to make against the expenses and saying “Hey, the next quarter does/does not look good, so we need to make this or that budget cut of this amount to maintain our healthy margin where we wanna be.” Sales guys – there would be appointments attended and contracts signed. Another position we call our CRO, which would be chief revenue officer. He is responsible for pipeline revenue added, and we have one other that we call our brand commitment score, and that is something that our COO — he calls every customer after the property has closed and surveys them on how good of a job we did creating a certain experience for the customers, and it’s on a scale of 1 to 10. That gets reported. There’s a lot of other KPIs, but those are the main ones that we focus on.

Joe Fairless: Do you have a software program where you log in every week and just check the software program, or do you have a spreadsheet that you created and each of them fill out what they accomplished? How does it work?

Brian Ellwood: Each team member has their own dashboard where they have all their KPIs clearly displayed, that we look at on our call each week. We also have kind of like an assistant position, and one of the things she does is takes the KPIs that I mentioned, the core ones that we feel drive our business, and puts those in a little report that she posts to our KPI Slack channel each week, just so it’s front and center for everyone on the team to see how everyone else is doing in terms of hitting their numbers. Every person is responsible for tracking their own KPIs on a simple Google spreadsheet.

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

Brian Ellwood: Well, I struggle a little bit to come up with a great answer for this, but what I wanna say is to start with lifestyle as your number one goal when you’re going into business. What that would look like would be write out your perfect day in detail, like where you are, who you’re with, what you’re doing, how much time you’re working, how many hours do you work etc. and figure out what that lifestyle that you’re imagining costs, and figure out what type of business model would allow you to live that lifestyle, and then work backwards from there to building your business.

I’m sure you’ve read the Four-Hour Workweek, right?

Joe Fairless: Yup.

Brian Ellwood: It’s probably the most mentioned book on your show, if I had to guess.

Joe Fairless: Rich Dad, Poor Dad.

Brian Ellwood: Okay… Yeah, I thought about that one, too. [laughter] Well, in the Four-Hour Workweek he talks about the difference between being a CEO that makes 500k/year working 80 hours a week and he’s gone all the time, or a dude who makes 50k/year working ten hours a week from a coffee shop, doing something that he loves. Two extreme ends of the spectrum, and there’s no wrong answer as to where you should be on that spectrum, but it’s just a really important question to ask, because there’s way too many stressed out, unhappy billionaires out there in the world.

What intrigued a lot of people about our business is “How do you do this virtually and you seem like you sit at home and you must be laying on the couch, watching soap operas?” Well, I’m not, but I don’t do a lot of stuff that I don’t enjoy, and I had to be intentional about creating this day-to-day experience, instead of just saying “I wanna make a million dollars and not thinking about what it’s gonna take to make the million dollars.”

A lot of people will sacrifice lifestyle for money, but they want the money because they think that will give them a certain lifestyle… It doesn’t work that way, unless you’re intentional about it.

Joe Fairless: That’s so true. What a great point. Are you ready for the Best Ever Lightning Round?

Brian Ellwood: Let’s do it.

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

Break: [[00:13:36].25] to [[00:14:19].17]

Joe Fairless: The best ever book you’ve read?

Brian Ellwood: Four-Hour Workweek.

Joe Fairless: What’s the best ever personal growth experience, and what did you learn from it?

Brian Ellwood: One of my biggest personality flaws is that I have shiny objects [unintelligible [00:14:27].16] really bad, the visionary type, and if I see new ideas coming across my plate, all over the place… Every time you scroll Facebook there’s a new piece of software that’s supposed to connect to your business, or something. For the first four years we were in business we changed our direction a lot. “Well, let’s focus on this. Oh, you know what? Let’s change. Let’s invest in this other market. That didn’t work out… Let’s try to do new construction. Oh, that didn’t work out.”

I learned over time that you never get anywhere if you keep changing direction, so now what we do is we develop a vision for the next year and we stick to it. One year is about all I can commit to, because I still have issues… But once that yearly vision is in place, we don’t sway from it. We can make tweaks to it, but that’s what we do the whole year, even if great ideas come up and try to make us change course, and we get a lot more results from being focused.

That was the hardest and best growth experience I think I’ve had to go through.

Joe Fairless: Yeah, that’s probably some advice I should take myself… Thanks for sharing that. What is the best ever deal you’ve done?

Brian Ellwood: The best deal… We bought a house for $35,000 and it was in an area where new construction and things were maybe 10 to 15 streets away at that point; the area was still pretty rough, but the growth was spreading towards it, and we held it as a rental for about three years, and then sold it not too long ago for $225,000. So we bought it for $35,000, sold it for $225,000. The house was on two lots, and each lot was good for two houses, so four houses total, and it sold for land value.

Buying on the fringes of areas that are gentrifying I think is the easiest money you can make.

Joe Fairless: What’s the best ever way you like to give back?

Brian Ellwood: I’d say two things… One is that inside of our company culture we have — I mentioned the idea of living your perfect day in the beginning of this interview, and we have what we call our Perfect Day Crew where we meet quarterly and everyone goes over what their perfect day is and what’s holding them back, and we all give them feedback and advice. In between those quarterly meetings we are assigned an accountability partner. They hold their partner accountable to doing these things that they set out to do, to move them more towards living their ideal life. So I help not only our team members to do that, but friends and family as well.

Another thing I’ll say is that I really like to donate to Kiva – have you ever heard of Kiva before?

Joe Fairless: No.

Brian Ellwood: It’s a nonprofit… Some guy in San Francisco started it, and it’s micro-loans for people in third world countries that need money for things like water filters and building toilets, and stuff… And they actually pay you back. They have like a 90-something percent repayment rate. An $800 loan can buy a clean water filter for an entire village of people, and they collectively can pay you back in a year or so, and they even pay I think a little bit of an interest.

I like to throw a few hundred bucks a week to my Kiva account, and there’s always money coming back when I’m getting repaid, and I just keep pushing it back and it kind of creates a snowball.
I really like the idea of the money getting paid back. There’s something about that, because then I can just keep redeploying it. I think Kiva is a great organization, and I tell people about that a lot.

Joe Fairless: What is the biggest mistake you’ve made on a deal?

Brian Ellwood: Probably not doing enough due diligence, not getting a professional home inspection on the deal, and then thus overlooking major foundation issues that cost us $20,000… Basically, taking the deal from being profitable to just barely breaking even. So not doing thorough due diligence I’d say would be the biggest mistake.

Joe Fairless: Since you live in Colorado, your properties are in Tennessee, what safeguards have you put in place to prevent that from happening again?

Brian Ellwood: Well, we do a home inspection every time now. We have a contractor go out there and give us an estimate. We have a member from our team that we call the renovation manager go meet the contractor. Then we get a professional home inspection and a termite inspection on every single deal. We also have photos and videos uploaded to Google Drive that we can check out. That’s about all the due diligence I need to be comfortable. That’s our current system now.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Brian Ellwood: The Best Ever listeners can visit my website, it’s BrianEllwood.net. They can also feel free to send me an e-mail, Brian@BrianEllwood.net. I’d love to hear any of their questions and I’d be happy to help them out if they feel like there’s anything holding them back.

Joe Fairless: A couple major takeaways for me… One is your philosophy, and that is be intentional about your day-to-day experience, and you certainly have lived that and are walking the walk because of how you built your business. The other is how you are holding team members accountable because you have a different type of lifestyle where you are working remotely. I love how you went through the majority of the people on your team and what they are being held accountable for, and then lastly, the best ever deal, where you’re buying on the fringes of areas that are gentrifying is the easiest money you can make, according to you.

Thanks so much for being on the show. I really appreciate you sharing your advice with the Best Ever listeners, and we’ll talk to you soon.

Brian Ellwood: Thanks for having me, Joe. I enjoyed it!

 

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JF925: TOP Reasons to Start an REI Club and How a Mountain Man Turns to Investing

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The Breakfast Club! OK this one is all about real estate and it happens to be in Denver, but our guest is still officiating this group and shares the top reasons and benefits for having this collective. Hear about how he got into real estate investing from only making $30,000 a year in the mountains and what he’s up to now!

Best Ever Tweet:

Tim Emery Real Estate Background:

– Owner of Invest Success, a coaching and mentoring company
– Invest Success teaches people how to fix and flip in Denver
– Host of The John Fisher Breakfast Club
– In 2004 started working as a Broker Associate with Stix and Stones Fine Colorado Properties
– 2011 he built Stix and Stone Property management company
– Based in Denver, Colorado
– Say hi to him at http://www.invest-success.com
– Best Ever Book: Centennial by James

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JF898: How He Made $30,000 on a Flip with NO MONEY Down

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BiggerPockets.com was his resource to find private capital and Hardmoney. He does flips in Chicago yet lives in Denver, and you’re probably curious how it’s possible. You don’t want to miss this one!

Best Ever Tweet:

Benjamin Lapidus Real Estate Background:

– Founder and Managing Partner of Indigo Ownerships, Indigo Home Buyers, and Indigo Investments
– With over $2M AUM in the Richmond, VA the 2017 focus is expanding the business in the CO front range
– Built multi-million dollar study abroad company, which, after selling, was seed to launch his investment businesses
– Based in Denver, Colorado
– Best Ever Book: Richest Man in Babylon

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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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JF875: Closing on 8th Property in a 1.5 Years WITH a Job!

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You read the title correctly, she’s closing on her eighth property in only a year and a half from reading just a blog on financial freedom through real estate. And yes, she is still working a job. It can be done, and here is how!

Best Ever Tweet:

Sarah Pritchett Real Estate Background:

– Captain working for the Air Force as a Program Manager and Instructor, and independent real estate investor

– Specializes in single family buy and hold rentals

– Completed 8 deals; Four townhouses in FL, two condos in CO, duplex in MI

– Began real estate in 2015 after reading Mr. Money Mustache’s blog in December 2014

– Based in Denver, Colorado

– Say hi to her at https://www.biggerpockets.com/users/SarahP7

– Best Ever Book: Who Took My Money 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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Best Ever Show Real Estate Advice from experts

JF823: How to Delegate Everything and Become a Nomad While Running Your Business #SituationSaturday

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Have you ever wanted to live outside the country while still running your business? Seems impossible doesn’t it? It’s not, it’s a matter of selecting the right team to hire, setting an expectation, and preparing yourself in the business accordingly. Hear how our guest had closed her biggest deal while living in Thailand.

Best Ever Tweet:

Micki McNie Real Estate Background:

– Owner, Broker, Investor at 33 Zen Lane, a Denver real estate team that focuses on “investment-minded” clients
– A commercial leasing broker and a residential broker
– Owns rental properties, hold notes, and flip houses
– Based in Denver, Colorado
– Say hi to her at www.33zenlane.com

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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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JF781: He Funded a HOSPITAL Deal and HAD to FORECLOSE on the Property #SituationSaturday

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This may be the most complicated situation we have had on the show! Our guest funded a hospital deal, was forced to foreclose on the investors, realized that he still owned a piece of it, and lawsuits fly around on both sides of the city and our guest… This is a very entertaining interview!

Best Ever Tweet:

Rob Swanson Real Estate Background:

– Owner of Freedom$oft; A successful real estate investing software
– Has flipped houses in over 20 states for over 15 years
– Currently writing a book called CASH IN, What To Do Before, During & After The Next Housing Market Crash
– Based in Denver, Colorado
– Say hi to him at http://www.freedomsoft.com

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JF:772 How He Scored $10 MM at the BOTTOM of the Real Estate Market

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Rob Swanson is an icon in the real estate investing world and owner of the CRM Freedom Soft. He was able to convince a group of individuals to lend him $10 million in 2008, or at least he was able to create a fund. In this show he shares what he did with the cash and how he structured his overall operations in a weak market. Turn up the volume!

Best Ever Tweet:

Rob Swanson Real Estate Background:

Owner of Freedom$oft; A successful real estate investing software
Has flipped houses in over 20 states for over 15 years
Currently writing a book called CASH IN, What To Do Before, During & After The Next Housing Market Crash
Based in Denver, Colorado
Say hi to him at www.freedomsoft.com

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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.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice from experts

JF764: How He Rolled His Capex Into a Multifamily Loan and Earned HUGE Cash on Cash Return

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Are you nervous about dumping your capital into fixing up your brand-new purchase? Today’s Guest enters deals very safely as he includes the cost of all capital expenditures into the loan. Hear how he ran into some road bumps but was covered due to the terms of his loan and check out his cash on cash return!

Best Ever Tweet:

Mark Walker Real Estate Background:

– Founder & President of Luxmana Investments LLC, which focuses on residential and multifamily investments
– Active real estate investor since 2004; began part-time while holding full-time job in high tech
– Built a multi-million dollar portfolio in less than four years
– Acquired 22 properties with an average cash-on-cash return greater than 20% in the first year
– Own property in four different states
– Based in Denver, Colorado
– Say hi to him at www.luxmana.com
– Best Ever Book: Rich Dad Poor Dad by Robert Kiyosaki

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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.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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JF699: He’s BRAND NEW and On His 6th Deal!

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This guy took action. Nothing special here, just HARD WORK…which is pretty special. He is a network nut and opens his mouth to build more buyers and sellers. He markets to distressed sellers through cold calls, FSBO’s, and direct mail. Hear how he’s doing it!

Best Ever Tweet:

Daniel Versteeg Real Estate Background:

– Owner of Millennial Property Investments
– Started 4 months ago and onto his 6th deal
– Based in Denver, CO
– Say hi at millennialpropertyinvestments@gmail.com
– Best Ever Book: Secrets of the Millionaire Mind by T Harv Ecker

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

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. Learn more at http://www.fundthatflip.com/bestever.

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JF690: How to Successfully Enter a New Market #situationsaturday

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When you are thinking to move into a new market, you may be surprised that your tactics don’t work. You may need to switch it up! Today’s guest shares his story of moving into a new market and adjusting his marketing. Hear how he did it!

Best Ever Tweet:

David Corbaley Real Estate Background:

– CEO of Marketing Commando
– Was a Green Beret
– Hear Best Ever Advice on Episode 144
– Based in Denver, Colorado
– Say hi at http://www.therealestatecommando.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

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. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
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JF657: How He Creatively Controls Properties with No Obligation

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Today’s guest is a highly creative real estate investor in the Colorado market. Although his first deal only earned him a $100 spread, he mastered the creative financing deals, and now owns over 20 properties. Hear how he also raised millions.

Best Ever Tweet:

Kevin Amolsch Real Estate Background:

– President of Pine Financial Group
– Owns more than 20 units
– Based in Denver, Colorado
– Say hi at kevin@pinefinancialgroup.com
– Read his book at: https://www.amazon.com/gp/aw/d/0692501193?keywords=45day%20investor&pc_redir=T1&qid=1456187644&sr=8-1

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

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. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF600: How to BOOST Your Apartment/Multifamily Marketing to Rack Up Occupancy #skillsetsunday

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Want exposure selling or occupying your properties? Today’s guest is a pro when it comes to branding apartment communities and other properties. He ensures that signs, brochures, websites, and other tools are top notch and attract all people to investigate the space. Hear how important it is to set up a great brand on your multifamily property.

Best Ever Tweet:

Doug Backman real estate background:

  • Managing Director at DB Marketing
  • Seasoned advertising agency executive who, among other things, helps clients with the branding of their apartment communities
  • Based in Denver, Colorado and say hi to him at http://dbmarketingltd.com/

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Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

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 learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF547: What this Music Artist Does Day to Day to Invest in Real Estate

Our guest is in the top 100 billboard music artists and he loves to invest in real estate. He got in during the crash and purchased a cash flowing four Plex in which he was able to pull equity from to fund the acquisition and rehab of multiple dwellings. Hear how he handles his fixing flips and what he’s doing now!

Best Ever Tweet:

Austin Schalhamer real estate background:

  • Active real estate investor who is currently doing nine flips, two developments and owns a couple rental properties
  • He’s a top 100 artist and is involved in software development and is a serial entrepreneur
  • Based in Denver, Colorado
  • Say hi to him at corecrowdfunding.com
  • His Best Ever book is: Stop Acting Rich by Thomas Stanley

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
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JF522: How NOT to Handle Evictions #situationsaturday

He made some mistakes in the eviction process, as do most first time land lords. He learned quickly and doesn’t waste time when rent is late—notice will be posted that day. Hear his advice about the whole process and be educated!

Best Ever Tweet:

Bill Shaffer real estate background:

  • Him and his wife buy are buy and hold investors and have 14 properties with 36 units in Colorado
  • His properties range from single family homes to an 8 unit Him and his wife own 10 properties with 22 units and they have been investing since 2002 and is based in Denver, Colorado
  • He’s a real estate agent and has a brokerage called Reliant Real Estate
  • Say hi to him at: ibuycoloradore.com and http://evictioninformationdenver.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.

– Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF467: The Next Crash and the Next Boom from a Real Estate Market Researcher #skillsetsunday

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

You have to hear what’s going on with apartments right now! Our Best Ever guest is a real estate market cycle expert and he claims that there are two sides to a cycle, physical and financial. He shares how everything is connected and what you should know regarding the future. Listing in!

Best Ever Tweet:

Dr. Glenn Mueller’s real estate background:

  •  Over 35 years of real estate industry experience including 26 years of research
  • Professor for the Burns School of Real Estate and Construction Management at Denver University
  • Research experience includes real estate market-cycle analysis, real estate securities analysis and among others
  • He is an investment strategies at Dividend Capital Group where he provides real estate market-cycle research and investment strategy
  • Competitive water skier

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

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JF373: How She Bought a Condo UNEMPLOYED!

Cash flow is KING! Our Best Ever guest is creative, which is why she was able to make the cash FLOW from start to finish in a hot market! She shares her Mid-West flips, locally owned acquisitions, and her most exciting project that will transform an old retail building into a unique space you wouldn’t have expected…tune in!

Best Ever Tweet:

Micki McNie’s real estate background:

             

  • Real estate investor who focuses on buy and holds, rehabs, and note buying
  • Started career as a tenant rep for commercial leases then moved to help clients buy and sell residential properties
  • Based out of Denver, Colorado
  • 33 Zen Lane
  • Say hi to her at www.33zenlane.com

     

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Made Possible Because of Our Best Ever Sponsors:

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

 

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JF355: Why to Focus More On the Relationship Than What the Contract Says #skillset Sunday

Ever wonder why this show sounds SO clear? Well, you have today’s best ever guest to thank for that! He is our best ever audio engineer, and shares with us why relationships with people are so much more important than what is written on the paper.

Best Ever Tweet:

If something comes up, you have someone on your side who is gonna work with you.

Toby Lyles’ business background:

–           Founder of TwentyFour Sound and is based in Denver, Colorado

–           Been an entrepreneur for 12 years

–           He knows what an audio bit rate is and how to use it

–           Sound and audio engineer and has millions of people listening to their work right now

–           Does work for Pat Flynn

–           http://www.twentyfoursound.com

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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

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JF219: Flipping Houses and Apartments Is the Same, Right?! WRONG!

Today’s Best Ever guest saw a side of real estate sales that was damaged, and set out to fix it. Dropping out of high school, he found his passion for real estate at a young age and had incredible successes and failures along the way. From losing OVER 7 FIGURES in one deal, to completely revolutionizing the way real estate is sold, he has incredible experiences. Let’s listen up!

Best Ever Tweet:

 Joshua Hunt’s real estate background:

           Founder, Managing Broker and CEO of TRELORA, based in Denver, Colorado 

          Started in real estate in 1997 at RE/Max where he was recognized as Rookie of the Year

          He joined Keller Williams ten years later becoming top producing agent before taking on roles of Managing Broker

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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 

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JF163: Wanna Raise Money? Here’s How to Do It Properly.

Today’s Best Ever guest shares how to use a turn-key model to raise money and get your paperwork in order. You want to use OPM (other people’s money)? Then, listen up my friend!

Best Ever Tweet:

Douglas Ruark’s real estate background:

–        Principal at Regulation D Resources based in Denver, Colorado

–        Recognized expert in Regulation D offering programs

–        Say hi to him at http://regdresources.com/

–        And…he’s a descendant of Scottish royalty

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Sponsored by 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

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JF 68: Optimism is Great…Just Don’t Buy Based on It

My glass is always half full but today’s Best Ever guest cautions to not buy based off of optimism. Listen to what you should be buying off of…

Tweetable quote:

Theresa Bradley-Banta’s real estate background:

–        Founder and CEO of Theresa Bradley-Banta Real Estate Consultancy

–        Flipped properties from 50k to 2.5MM across the nation

–        Investor in a development deal in Mexico

–        Author of Invest in Apartment Buildings: Profit without the Pitfalls

–        2012 winner of the Stevie Award for Entrepreneur of the Year

–        Her company has won 11 American and International real estate awards

–        Visit her at http://theresabradleybanta.com/

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Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

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JF 57: Peek-a-Boo I See You: Overlooked Costs on a Fix and Flips

How much did it cost to fix up? What did you pay for it? How long did you hold it? What did you sell it for? Those four questions are the four that are typically asked when evaluating the success of a fix and flip deal. However, today’s Best Ever guest shares with us secret, hidden and…spooky (ok, not spooky but it is Halloween season…) expenses that usually get overlooked.

Tweetable quote:

Mark Ferguson’s real estate background:

–        Real estate agent since 2001

–        Fixes and flips between 10 – 15 properties a year

–        Runs a team of ten that has sold an average of 200 homes a year over the last four years

–        Owner of 11 investment properties

–        Founder of Invest Four More (http://www.investfourmore.com) – a real estate investing blog

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Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

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