JF2317: InvestNext With Kevin Heras

Kevin is the co-founder at InvestNext, a software that modernizes the way real estate syndicators raise and manage capital. Prior to funding InvestNext, he was employee #2 at the college career network startup, Handshake, where he contributed to initial product development efforts. Handshake is currently valued at over $400 million and it is the leading college-to-career recruiting platform in the nation. Today, Kevin is honored to be part of the season team of software engineers and a real estate professor.

Kevin Heras Real Estate Background:

  • CEO & Co-founder of InvestNext, software that modernizes the way real estate syndicators raise & manage capital
  • 5 years of real estate experience
  • InvestNext platform has hosted 230+ syndications worth over $1 billion
  • Based in Detroit, MI
  • Say hi to him at www.investnext.com 
  • Best Ever Book: Crossing the Chasm

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The benefit of InvestNext is being able to manage and raise your capital” – Kevin Heras


Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with Kevin Heras. Kevin, how are you doing today?

Kevin Heras: Good, Theo. How are you doing?

Theo Hicks: I am well, thanks for asking and thanks for joining us. I’m really looking forward to this conversation. We’re gonna talk about Kevin’s InvestNext apartment syndication/real estate syndication software platform. So he’s the CEO and co-founder of InvestNext, a software that modernizes the way real estate syndicators raise money and manage capital. He has five years of real estate experience, and the platform has hosted over 230 syndications worth over a billion dollars. He is based in Detroit, Michigan, and you can say hi to him at InvestNext.com.

Before we get into what InvestNext is, do you mind telling us some more about your background and then what you’re focused on today?

Kevin Heras: Sure thing. To give context on InvestNext – as you mentioned, real estate investment platform geared towards your private network of investors, manager investors, on that platform. But ahead of InvestNext I was kind of going through the corporate track. I worked at a consulting firm and we implemented CRMs, ERPs, accounting systems and so forth… So I got exposed to a lot of different enterprise-level clients, as well as even real estate clients ahead of that… So that was kind of my systems background.

Ahead of that, really one of the most formative parts of my life was actually my time at Handshake. Handshake, for context, is basically what you might call the LinkedIn for college students. So it’s a career network. I was involved there when it was just a dorm room founded startup. Today they’re over a half billion dollar company. I was employee number two, working with the co-founders, building out the product, going to university career centers, getting shut down, going back, building more… The rest is history.

That being my third year of college was pretty formative in what I’m doing today, and I knew at that point that I really wanted to be involved in the tech space; I wanted to build something meaningful that solved a systemic problem.

Fast-forward to a few years back, when I met my co-founder, Michael Gisi; he was working on this interesting side-project, working for a real estate investment firm that was really just trying to streamline the way they interacted with their investors, they were they reported and communicated to them. It was a tool that was meant to be a one-off tool for that firm, but we got people knocking on the door, saying “Hey, would you mind deploying something like this for our group?” And we’d been talking about it for a while, and that was kind of the a-ha moment, and pretty much the founding moment of InvestNext. We realized at that point that there’s a massive gap in this space, how people go out and they syndicate and manage their capital partners and investors. From that point on, the rest is history.

Theo Hicks: Sure. And then InvestNext – was that five years ago when it started?

Kevin Heras: Yeah, proof of concept, product – that would be five years ago; we were really just getting into this space, exactly.

Theo Hicks: Okay. Are you a coder?

Kevin Heras: I’m on the product team. I stay away from the code. I did the design portion of it. I let Michael and his team work through that stuff, but I am heavily, heavily involved in the side of the workflows and the product.

Theo Hicks: So he was essentially working for an existing company, created something for them, and then other people were asking for the same things, so that’s where you identified the need.

Kevin Heras: Exactly. It was pretty serendipitous from that standpoint.

Theo Hicks: How did you meet the co-founder.

Kevin Heras: I think back to how this all came together, and really, at my last company where I worked at, it was an indirect connection. One of my customers said “Hey, my good friend’s working on a side project. Maybe you guys might be able to connect, or interact on this.” So there was really no presumption on what we’d be working together, or especially on what we’d be  building.

He just happened to know that I had experience with Handshake, I’d been in the startup world, and perhaps I could lend some advice. So an indirect connection, and then we really just hit it off from that point.

Theo Hicks: Nice. I always like hearing about how partners met each other, because it’s traditionally pretty random.

Kevin Heras: It really is… And again, something I always think back to is just the serendipity of it all. You really just never know the doors that you can keep open, and you never know who you meet… So absolutely.

Theo Hicks: Exactly. Perfect. So let’s talk a little bit about InvestNext now. I have experience with syndications, so in my mind, when it comes to investors, it’s really finding the investors, and then it’s getting the money from the investors, or raising money for a particular deal or for a fund, and then the investor relations part. Obviously, your business focuses – from what I’m understanding – on helping with the actual process of raising the money for a particular deal or  a particular fund. Then once that deal is closed on, helping with the investor relations portion.

Let’s start with the raising money part first, and then we’ll talk about the investor relations second. So how does InvestNext help the syndicator raise money? You do help them find more money, but help them manage that process.

Kevin Heras: Yeah, so the concept around this is that whether  you’re a first-time syndicator or you’ve already done this many times, our intent with the platform is you have a single workspace to manage the very beginning lifecycle of that syndication to start with. So that’s everything from you have a CRM, of course, to manage prospective investors, capital partners, just people that you are interacting with. That ties in directly into what we call an online deal room. So when you’re ready to go live with your offering or your deal, it’s really housing that digital tear sheet, that presentation. You can send it out to your groups, they can view that full offering, and then of course, commit online, run the entire transaction, subscription docs and everything through the actual deal room.

So that’s the big, major component to begin with, is just streamline that entire initial transaction with the investor, and of course, saving you time at the end of it all.

Theo Hicks: So it has a CRM that I have to track all my investors that I have. Would that also be like “Here’s ones that are potential, and here’s ones that have invested, here’s how much they’ve invested, and here’s the deals that they’re in”?

Kevin Heras: Exactly. It’s really being able to manage your entire pipeline of prospective capital. And again, it’s from the very onset; we work with groups that are doing their first deal, and they know that “Okay, perhaps we may not land on something for the next few months”, but at the very least they wanna start building up that pipeline, building those relationships. So they’re just tracking those relationships in the CRM, tracking their pipeline. And then of course, when the deal hits, they put together all their collateral, all their documents in the deal room, and of course, when they’re ready to actually present that, it’s as easy as sharing that.

Theo Hicks: So you said there’s an online deal room. So I have a  deal… A big thing is obviously keeping your investors up to date on where you’re at, when are funds due, when do you need to submit the documents, getting that information to them. So is there some sort of email service you’re connected to, that I can say “Okay, I want to send an email every week to remind them about funding. People who have funded will get one email, people who haven’t funded will get another email.” Is it capable of doing all that stuff, too?

Kevin Heras: That’s exactly it. So when you go live with the deal — first and foremost, what we wanna present to the investor is… Call it that kind of single source of truth. So they can go back to the deal room and say “Hey, what’s the status of anything that’s happening?” And within that deal room they can see all the updates of what’s been going on. So that’s kind of the inbound approach, so the investor knows — instead of digging through their email chain and looking for what was the last update, it’s all in one place.

The second part to that is yeah, there’s the intelligence built behind this, so that when the sponsor goes out, they market the deal, they have all their commitments in, they can transact the capital, transact the funds… And of course, who’s left in the previous sequence to that. So then from there, there’s intelligent reminders to follow up with those investors. That’s a very common scenario that we see, especially when you go on a capital  raise.

Theo Hicks: As an investor, how am I getting access to this?

Kevin Heras: Multiple ways. Different groups have different approaches to how they’re gonna interact with their investors. Some groups are very “by invitation only.” Of course, this can live behind a security layer that you can only be granted access to the deal room, and of course, once you’ve been verified, you can go in to view the deal. Other groups – call it maybe like a 506 open format fundraise; you can literally open it up to the internet as a whole. So varying groups do varying open access to the deal room.

Theo Hicks: So would I need to share a link with my investors, or would I input their email into InvestNext and then they’d get the “Here’s  how you set up your account” email from InvestNext?

Kevin Heras: Both ways. Basically, imagine if you’ve had a mass communication out  to a group of investors – you could actually grab that shareable link; you can say “Hey everyone, feel free to access the deal room right at this link.” And of course, when they jump in, they can view all the details there.

On the other side of that, whatever you wanna do with that – you can post it on your website, you can send it out… And of course, back to that “by invitation only”, you can select a certain group of investors and directly send them an invitation to that deal room.

Theo Hicks: Perfect. Okay, so I think we hit on that front part pretty well… So deal is closed, investors get the email that the deal is closed, and then now let’s talk about the investor relations aspect. So how does InvestNext help me manage my communication, and then getting the proper information to my investors about the deal?

Kevin Heras: That ties in directly into what we call the investment part of the product. First of all, that’s all connected. Once you’ve actually received those contributions, those investments, that’s now being tracked on the cap table. You can now set up your waterfall structure around this. So it’s a full drag-and-drop builder, exactly as you see it in your operating agreement; you model it right in the system, and then moving forward, when you’re running your distributions, whether that’s monthly/quarterly schedule, that’s being all run through the system. Investors are getting paid out.

On the flipside of that, on the investor relations side, of course investors gain access to their portal, they can view their full portfolio with you, distributions to date, return metrics etc. So that’s where we now carry into the investor relations part.

Theo Hicks: What about reporting? So do I upload my own reports? Am I inputting individual line items for data? How does that work?

Kevin Heras: One of two ways that can be done. Individual investor reporting… Since InvestNext houses the entire investor transaction data – so again,  contribution amounts, distributions – we are now the calculation engine for a lot of the investor performance metrics. So maybe you’re sending out a quarterly batch of statements out to your investors… You can generate those in the system; those can get placed outbound to the investors. Or the investors can log in at any point, as they would with their Charles Schwab account, they can view those in live… And then the other side of that is if you have any sort of property-level reporting or any sort of asset-level reporting, we’re working through integrations with systems.

So if you have an asset-level — we’ll call it your standard property management software, we can actually connect right into that and marry that data into your reporting. That’s especially useful for groups that, again, maybe at scale you’re working with multiple property managers, and each one of those may utilize a separate system. So what we need to be able to do is connect the data from each one of those systems and then aggregate those up both for internal reporting, as well as external reporting for investors.

Theo Hicks: So you’re saying that InvestNext can connect to ABC Property Management Company’s software, so that you’ll have instantaneous access to the reports for my property…? Like rent rolls, profit and loss statements, and things like that.

Kevin Heras: That’s exactly it. We’ve facilitated many of those integrations in the past, and that’s really the vision around all this stuff – again, we aggregate the very asset-level data, and not only for the sponsor, but for the investor, that’s now presenting an added layer of transparency, exactly.

Theo Hicks: And then the last question – so not sending distributions, not sending the reports, but sending monthly or quarterly update emails with specifics on current occupancy rates, and renovation updates, things like that… So would I need to do that somewhere else, and manually type in my explanations of what’s going on, or is there some sort of automation for that as well?

Kevin Heras: Yeah, so we have this — and maybe I’ll get a little into the nuts and bolts or techy about this, but we have this concept known as merch variables. The idea here is that when you’re drafting up a new communication, or even in our system, what we call a post, you can actually carry in as part of your natural language, as you’re typing out your summary or so forth, you can actually include metrics that you can embed into that paragraph line. So it could literally pull metrics in from the system that are already being automatically calculated. Of course, you can set that as your template moving forward when you’re doing your monthly or quarterly cadence reporting… And again, two different formats, as I just mentioned.

One way is I’m gonna send out a mass communication or mass email out to my industrial park investors. Of course, the system already knows who your industrial park investors are, it knows their actual reporting metrics… But then the other side of that is we have this concept of posts. When you do that, you basically can post an update to the investor portal; the investor logs in or they can receive that on their phone and they can view it in a rich-format text, as you would an online blog.

So it’s kind of the historical concept where maybe you sent out a mass email, you attached a PDF or an Excel, just kind of saying “Hey, this is what’s going on.” It’s a bit more of a richer format, where you can even embed YouTube videos or whatnot.

Theo Hicks: Like pictures, and stuff?

Kevin Heras: Yeah, exactly.

Theo Hicks: This is very neat. Alright, Kevin, what is your best real estate investing advice ever? Or your best advice ever for running a business?

Kevin Heras: I always say “Focus.” It seems pretty standard, but for me personally, focus has been an incredible paradigm to go after. Just understanding that when you’re building something, it’s really about becoming really good at what you do… And it’s, again, just staying focused on the core problem you’re trying to solve. And again, that’s from the paradigm of a problem-solving platform and a software. So focus is my big statement here.

Theo Hicks: Perfect. Alright, Kevin, are you ready for the Best Ever Lightning Round?

Kevin Heras: Sure thing.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:17:26].14] to [00:18:17].21]

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

Kevin Heras: I’d say one I’ve revisited is “Crossing the chasm”. Again, primarily related to product building, product development, but I think it’s extremely applicable to any business. So it’s just about as you’re getting started, it’s being able to handle that initial growth, and at the same time it’s being able to keep yourself disciplined on what the problem is that you’re trying to solve. You’re not gonna build a business that solves everyone’s problems. They use the landing beach analogy; when you land on your beach, focus on that area, really own that area, and then of course, later on you can always expand your business. So… Crossing the chasm.

Theo Hicks: If your business were collapse today, what would you do next?

Kevin Heras: I would definitely have to ask myself what led to the point that the business collapsed. After that, it’d just be a matter of reflecting on what led to that moment, what inflexibility caused the business, unless some act of God… But if the business fell apart, I’d say I’d still be in real estate, I’d still be solving the problems in that space, because for us I think it is truly the final frontier for a lot of the stuff that’s happening in the world economy around real estate.

Theo Hicks: Besides this particular need of apartment syndicators needing technology for managing investors, what’s the other biggest pain point or biggest need that could be solved by tech that you see in real estate?

Kevin Heras: We really think that the entire transaction of real estate still  is yet to be disrupted, because just the process of acquiring real estate, all of the stakeholders involved, we have literally barely  scratched the surface on that side… And I think that’s very much so open for disruption. So the whole acquisition side is a very interesting problem to solve.

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

Kevin Heras: As you stated earlier, we’re a Detroit-based company, and we’ve made it our internal mission — Detroit is our home, and when people think about Detroit, you get this sense of “It’s seen better days/It’s grungy” and whatnot… And it really is, for us — I’m a transplant to this city, I’m not a Detroiter, but I’ve moved here five or so years ago and I’ve seen the place rebuild itself. A lot of big tech companies moving in; they’re seeing the opportunity. So our focus is hiring local talent, as well as just giving back to the local community here. So that’s kind of our mission locally.

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

Kevin Heras: Best ever place – you definitely can reach me directly at my email, at Kevin@investnext.com. Of course, you can hit me up on the website; there’s a little chat bubble and you’ll likely see my mugshot on there. Likely me or one of the people on our team that will get to you… But yeah, kevin@investnext.com is the perfect place.

Theo Hicks: Awesome, Kevin. Thanks for joining us today and walking us through the capabilities of the InvestNext platform. Very fascinating. We’ve talked about, first of all, how you met the co-founder of the business, and how it was kind of just random, and keeping in mind — this is pretty common, that I get people who have partners and just realizing that really any relationship that you have, or any action that you take could lead randomly down the line to a deal, to a partnership… You never really know. So keeping all of your doors open is always a smart play.

And we talked about the two main areas that are addressed by the InvestNext software – the raising money and the investor relations. And really, it covers everything that I can possibly think of, that is involved in the raising money part of it, from when you first touch someone who’s interested in investing, to the deal closing, and then from the investor relations standpoint, once a deal is closed, until the deal is sold. It’s seems as if it’s capable of covering all of that in one centralized location.

So anyone who’s interested in raising money, or has raised money, or is currently raising money, definitely check out this InvestNext.com. So definitely check that out. I’ll be checking it out as well after this interview.

Kevin, thanks again for joining us. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we’ll talk to you tomorrow.

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JF2229: Wholesaling Deals With Emilio Basa

Emilio Basa is a full-time investor with 6 years of real estate investing experience who started off by wholesaling his first property within 4 months of learning how to wholesale. He consistently will wholesale about 3-5 a month and with this experience, he shares how he goes about growing his business so you can take the same steps.


Emilio Basa Real Estate Background:

  • Full-time investor
  • 6 years of real estate investing experience
  • Portfolio consists of 5 rentals, 2 flips, and over 30+ wholesales
  • Based in Detroit, MI
  • Say hi to him at: www.quickpropertysolutions.co 
  • Best Ever Book: Traction


Click here for more info on groundbreaker.co



Best Ever Tweet:


“I network with other wholesalers to share deals and grow my business” – Emilio Basa


Theo Hicks: Hello, best ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, we’ll be speaking with Emilio Basa.

Emilio, how you doing today?

Emilio Basa: I’m good, Theo. How are you doing?

Theo Hicks: I’m doing good as well. Thanks for asking and thanks for joining us. Looking forward to our conversation. A little about Emilio; he is a full-time real estate investor with six years of experience. He has five rentals, two flips and over 30 wholesales under his belt. He is based in Detroit, Michigan, and his website is http://www.quickpropertysolutions.co/.

Emilio, do you mind telling us a little bit more about your background and what you’re focused on today?

Emilio Basa: Absolutely. I’ve been doing it for six years. When I started, I primarily was strictly wholesaling. When I first started, I say six years, but to be honest, the first two to three years, I was doing it part-time because I was always doing other businesses. I did web design. I was also a musician in the Detroit area, so I was still doing gigs and things like that. I really was doing wholesaling just to try it out and just to do it part-time.

And then just over the years, I just started realizing that—I kind of took to it really quickly. I think I did my first deal in—after learning wholesaling, I did my first deal in four to five months. It wasn’t like a big deal. For me at a time, it was a lot. It was a $1,000 assignment. I started doing wholesaling. And then what I started doing was I started gradually trying other investing methods like rentals and flips, and I’m actually doing my first note this year, and just trying different strategies. But the core of everything has always been wholesaling for me.

Theo Hicks: How many wholesales are you doing per year or per month or whatever frequency is you wanna say?

Emilio Basa: It really depends. Consistently, I’m doing three or four a month right now. I think in December and January, I think I did six a month. It comes and goes. I think with the COVID thing too, we kind of slowed down a little bit.

Theo Hicks: Sure. What’s your preferred method for finding these deals to wholesale?

Emilio Basa: Funny enough, 70% to 80% of my business was actually joint ventures. In my market, you’ve got to be careful with some wholesalers, because some of them are kind of shady and they kind of try and steal the contract from underneath you. But I’ve always been somebody really easy to do business with and I always worked really hard to get a deal sold. A lot of the times people just started bringing me deals, and then more and more, I guess word got out because people just started reaching out to me.

I wanted to say, the last two quarters of last year, almost all my deals were joint ventures. I focus on [unintelligible [00:05:48].21], joint ventures, direct mail… That’s been trailing off. I don’t really do cold calling. And then Lately, I’ve been doing text blasting, which has been working phenomenal, actually.

Theo Hicks: I definitely want to talk about the texting, but I want to circle back to the JV. You said that people are bringing you deals.

Emilio Basa: Yeah.

Theo Hicks: What does that look like? They’re coming to your house? They’re calling you up? How do they know who you are?

Emilio Basa: They just call me up. Yeah, they just call me up. What I do is, whenever I have a deal, I put it on every social media platform you can think of, and then people reach out to me. When people reach out to me, I’ll just ask; are you a cash buyer? Are you a wholesaler? Most of the time people will say, “I’m a wholesaler looking for deals for my client.” And then I really just kick it with them, and just talk about their business and how their wholesale deals are going. And then I just pretty much say, “Hey, I’m growing my buyers list and I’m very transparent. I’m fair.  I’m easy to do deals with.” And then I really just pitch the pros of doing deals with me, which that’s pretty much it. Everybody works hard together to get the deal done, and people just like doing deals with me. So people just started bringing me deals.

To this day — the one deal that we’re closing on now, it’s three houses, online contracts; that came to me from another investor that I did a wholesale deal with. They’re actually his houses, and we’re doing that deal together right now.

A tip for a lot of people too is if you’re trying to build your wholesaling business, whenever you see, “We Buy Houses” signs in the road,—I read somewhere some people take those signs and they take them out, they throw them in the trash. I call all those signs and then I just say, “Hey, are you a wholesaler? Because I’m a wholesaler and a buyer.” I call all those signs. And then a lot of the times you find some really good people.

Theo Hicks: Nice. Basically, you’re networking with other wholesalers, so that a wholesaler brings you a deal. And then you’ll put it on social media and then another wholesaler will reach out, and you’ll kind of JV together to sell that deal.

Emilio Basa: Yes.

Theo Hicks: Okay, I just wanted to make sure I had that right. Is it just a 50/50 split of the assignment fee?

Emilio Basa: It depends on what the deal is. That’s the thing. It’s like, when you’re doing a deal, you just wanna be transparent with everybody. Whoever has it in the first position, you say, “Hey, how much do you have it under contract for?” If they trust you and they want to do deals with you, they’ll tell you. At the end of the day, I’ll tell them, “I don’t care how much you make. You can make 20 grand, 30 grand. If I make two, then I make two. But if it’s a good deal, and I could find a buyer, then that’s what it is.” Because some people won’t tell me and then some people are like “I want 10k, and I’ll take nothing less.” I’m like, “Okay, that’s fine. Well, I’ll try and do this. And I’ll try and work the deal this way.” And then what I do is I have a JV agreement.

What I used to do was either splits, or I had two contracts; one was a 50/50 split, and the other one would be where I’d add my fees on top. And usually, that worked out pretty well, until sometimes with some deals, I’ve had up to six wholesalers on one deal. It was definitely—it was a daisy chain, that’s for sure, because one guy had it, and then another guy told me about it, so he wanted to cut… And then I told another guy about it, who told somebody else and that somebody else brought the buyer.

Theo Hicks: Oh, man.

Emilio Basa: I know, it was a big mess. The way I work out in my JV contract, I literally have six blank lines. And then I put down everyone’s LLC, and then next to the LLC, you write the amount down, and then at the bottom, it says ‘total’ and then everyone has to sign it. So then when you take that agreement, you send it to the title company. There’s two ways you could do it – everyone could get paid straight out of the settlement statement, or one person can take the lump sum check, and then pay everybody out. But that takes a lot of trust. A lot of people won’t do that. They rather would be on the settlement statement, on the HUD, and get paid out that way.

Particularly, I don’t like doing daisy chains, but sometimes some deals that’s what happens. It just unfolds that way. If you have a deal and no one else is buying, but this one guy found a buyer, but it’s not his buyer and it’s another one’s buyer, at the end of the day I’m like, “Dude, let’s work it out.”

Theo Hicks: Yeah, so it sounds like it’s pretty negotiable, right? It’s kind of like what people want.

Emilio Basa: It is. Yeah, yeah.

Theo Hicks: Okay.

Emilio Basa: The tricky thing is that when you’re dealing with two people like me and another wholesaler, our values pretty much match up. Everybody just wants to do a smooth deal. No one gets too greedy, things like that. And then the more people you add, the more personalities you add. So sometimes somebody actually might get really greedy. If you get one person that kind of messes up and messes up the deal, then that’s where it could kind of derail the deal. But for the most part, especially when they start finding out how many people are involved, there’s not a lot of meat on the bone, but everyone wants to get a deal done, so let’s get it done.

Theo Hicks: Sure. Let’s transition to talking about the mass texting you do. Walk us through that.

Emilio Basa: I just started doing it. I’ve probably been doing it for two months now. I’m not going to lie, I pay about $3.50 a bandit sign, and I used to put them up myself. But now I’ve got one guy that delivers them for me, so I pay him three bucks. So my cost per bandit sign is usually $6.50 or $7 a sign.

My response rate was, let’s say 10-15 percent, and sometimes I get some pretty good deals. But with text blasting, it’s 20 cents a text and you could send out 1,000 texts. If you just get one deal, the cost per lead is extremely, extremely low. You’re spending $200 to close out on a contract as opposed to doing like a bandit sign or direct mail. Let’s see, I’m closing one today and that was from a text blast from four weeks ago. I closed one, two weeks ago, that was also from a text.

Theo Hicks: Are these text to wholesalers or are these to the actual sellers?

Emilio Basa: The tricky thing is for text blasting wholesalers, a lot of them are already on my email blast. If ever I need a deal, I’ll either just send out an email blast and just say, “Hey, wholesalers, anybody got a deal that you’re looking to sell, reach out to me,” or when I call people on the bandit signs, I’ll say, “Hey, what’s your name,” and then his name’s Jason. I’ll put in Jason-wholesaler. So whenever I need a deal, I’ll literally go on my iPhone, type in wholesaler, and maybe like 50 wholesalers pop up, and I just text them all the same message. I just copy and paste it and I say, “Hey, I need a deal, what do you got?” And then I paste it to the 50 wholesalers, and you’ll get a deal by the end of the day for sure.

Theo Hicks: Nice.  So for the 20 cents per text, though—

Emilion Basa: That’s to the seller.

Theo Hicks: Because you’re going to find a deal to put under contract. How are you getting their numbers? Is there like a service that does it all for you, who you’re targeting? Walk us through that.

Emilio Basa: I just started using Prop Stream.

Theo Hicks: Sorry, what’s it called?

Emilio Basa: Prop Stream.

Theo Hicks: Prop Stream. Okay.

Emilio Basa: Yeah. Prop Stream is a software where you can look up different lists. As a wholesaler or as an investor, your best deals come from motivated sellers. What you want to do, instead of targeting a blanket area, let’s say you’ve figured out one county’s got 80,000 leads or 80,000 people that own homes. But then what you want to do is you want to find the motivated list out of there. There’s either pre-foreclosures, there’s bankruptcies, divorces, things like that.

With Prop Stream, what you could do is you could type in a county or a city and then you could start adding different attributes to filter down to your criteria of what you’re looking for. You could target specific lists, so you could target — absentee owners is a really popular one. You could do absentee owners. And then what you could do is you could filter down by—if you only buy three bedrooms and up, so you could filter that.

An important one that I do is I get rid of all the LLCs. I do individual owners only. So that filters out a lot of LLCs. And then what you’ll do is you’ll get a list at the end of it. What you could do is you could export that list. What I do is I take that list, and you can either skip trace it in Prop Stream, but whatever text blasting service you use, and there’s a ton of them. I think there’s one called Roar, there’s one called Sherpa, there’s Batch Leads… You could take that list, and then you could put it in your text blasting software, and then you just start sending it out and then see who’s interested.

Theo Hicks: So you’re having a lot of success with that. You’ve done two deals so far. What was the assignment fees in those?

Emilio Basa: One was 15 and this other one that was a double close, it’s a five.

Theo Hicks: How quickly are you able to get these deals under contracts after someone reaches out to you? Is it pretty quick? Is it that day? Or does it need a little bit more work?

Emilio Basa: No, it depends on their motivation and it depends on their situation. Ideally, I would love to get it under contract after the first call. But a lot of the times the sellers – some of them might be motivated, but they’re not really motivated to close that day. A lot of the times, you really have to work a lead by just following up with them, and then just building that rapport.

I’ve got a deal right now – it’s in Moore, Michigan. The lady, I probably called her four or five times. Really all it is, is just like you catching up with her to see how things are going. One thing that I’ve changed this year is I actually learned wholesaling from a few people, but the one that it’s honestly is like my mentor and my largest influencer is Sean Terry. A lot of people that know Sean Terry – that’s the Flip to Freedom students… With Sean Terry, he’s a really good salesman. I don’t want to say it’s the hard sell, but when he goes into an appointment, he’s leaving with a signed contract. That’s the goal. A lot of the times if somebody isn’t terribly motivated, or they’re in a situation where they’re kind of getting to that point, there’s no point in trying to do a hard sell.

What I’m doing lately is I’m actually not trying to do a hard sell. If listing it with an agent might be better for them. I actually don’t think I’m the right buyer for you. I actually think an agent is better for you. Have you tried being an agent? Have you tried doing this? Have you tried doing that? What happens is is that whenever you start suggesting them other options than you buying it—because they’re on pre-foreclosure list, they’re used to people bombarding them trying to really pitch him to sell that day. When they talk to somebody that honestly says, “I don’t think I’m the right buyer for you,” it kind of puts their guard down, and they could start talking to you as if you’re not trying to sell the house, you’re really just giving them your honest opinion.

They appreciate the transparency more than somebody that’s just looking for that person that’s truly motivated, because I think some wholesalers – if they’re not truly motivated, they’ll really probably just walk away from the deal. But a lot of the times, if you just build that rapport, and you’re there, and you call them up and just see how things are going, they appreciate that more than somebody that’s just trying to buy their house.

Theo Hicks: Okay, Emilio, what is your best real estate investing advice ever?

Emilio Basa: I would say be uncomfortable, which means I talked to a lot of newer investors, and a lot of them, they’re making that first call or they’re doing their first walkthrough, and sometimes — I know a ton of them that have a bunch of calls that they have to make and they just stare at the phone… Or bandit signs. They have to put up a bandit sign. I was just talking to somebody the other day. They ordered 50 bandit signs and they were ready to go and then they went out that night and literally they didn’t do it. A month later, the bandit signs are still in their garage, just sitting there. That’s the thing – be comfortable with being uncomfortable. Because when you start off with one thing like wholesaling, wholesaling is to me the—I don’t wanna say kindergarten. It’s like elementary. It’s like the basics of real estate investing.

What you’re going to do is you get out of your comfort zone and then when you start graduating up to other things, like when you start doing your first flip, or doing your first rental, you’re going to do things that are very uncomfortable, and you have to get used to that, because by you being uncomfortable, you’re stretching out and you’re growing as a person, as an investor.

Theo Hicks: Okay, are you ready for the best ever lightning round?

Emilio Basa: Sure, do it.

Theo Hicks: Okay.

Break: [00:16:48] to [00:17:39]

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

Emilio Basa: A book by Gino Wickman called Traction. That’s a really, really good book. I just started it, I haven’t finished it, but it’s a really good book about scaling out your business and trying to put a team together and creating a vision for your business. It’s just been a great book so far.

Theo Hicks: If your business were to collapse today, what would you do next?

Emilio Basa: I’ll be honest, I’d probably would start the same business. I’d just starting another same business. That, or — I was a musician before. If I could try and make money as a musician, then I might go back to that.

Theo Hicks: Tell me about your best wholesale deal, your biggest assignment fee. Kind of walk us through how you found it, who you sold it to, things like that.

Emilio Basa: Well, I got two that are tied. My biggest one was in Detroit. It was a double close. We made about 26k on that one. That came off of a bandit sign lead. That was an amazing deal because I didn’t even have to negotiate the price. He said his price and I was like, “Holy crap, that’s a really good price.” I was like, “I’ll meet you there tomorrow,” and he met me up there. I built the rapport… It took them a week to sign it, but that was a pretty good one.

But I think honestly one of my favorite deals, my best deal that I remember was – I do virtual wholesaling too, and I was doing deals out in Washington, out in Seattle. I wasn’t doing houses, I was doing vacant land. I remember I just bought the course on how to do virtual wholesaling land, and then three months later, this deal pops up and that one was a $20,000 assignment off of virtual wholesaling.

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

Emilio Basa: I give a lot of advice over the phone. I don’t really mentor, but I get a lot of wholesalers that are new to the industry, and I love to just talk to them about how to grow their business. Any advice I could give. Oh plus, I also have a YouTube channel where I cover Detroit real estate investing. It’s https://www.youtube.com/quickpropertysolutions. I also look out for out of state investors that are buying in Detroit, because a lot of them get burned or get their money stolen or something like that. I created a YouTube channel where I’m starting to give advice on that channel as well.

Theo Hicks: And then lastly, what’s the best ever place to reach you probably just reach you?

Emilio Basa: Probably just reach out to me — I think the YouTube. I’m very active on YouTube. If anybody was interested, they could go on there and leave a comment, or just go to my website, http://www.quickpropertysolutions.co/, or the YouTube, which is https://www.youtube.com/quickpropertysolutions. I’m on Instagram too and Facebook, so they could pretty much find me anywhere.

Theo Hicks: Well, thanks for joining us, Emilio. I really enjoyed our conversation; lots of interesting takeaways. I definitely like your mindset. It seems like you go against what most other wholesalers do, which is helping you be successful.

A few of the things I hold from this was I liked how you mentioned how some wholesalers see a bandit sign, they want to yank it out of the ground and throw in the trash, light it on fire.

Emilio Basa: Oh my God…

Theo Hicks: Whereas for you, you actually call them up because you found a lot of success doing joint ventures with wholesalers. It’s kind of like 70% to 80% of your deals have been JVs, you put your deals on social media, and you’ll have people reaching out to you that actually happen to be wholesalers, and those are people that will do deals with.

You also mentioned that you do text blasting, so you kind of walked us through that and why it is kind of a much lower cost per lead.

You said if you use a Prop Stream as a software, you talked about how to create the list, make sure you’re targeting a specific county, find motivated sellers list, like pre-foreclosures, delinquencies, divorces, absentee owners; you can filter by the number of bedrooms. You’ve personally filtered out all the LLCs, you only want to target individual users. Then you export that list into the text processing software that will send text messages to all those people.

I also liked how you said whenever a wholesaler calls you from a bandit signs or whatever, you’ll save their name in your phone as wholesaler. So whenever you need a deal or you have a deal, you just have your own kind of customized text blasts with your cell phone, you just blast all the wholesalers in your phone.

You also mentioned that when you’re talking to them, you don’t do the hard sale. Instead, you kind of just build a rapport and be honest, even if that means that you believe you don’t have the best option for them. By doing that, you found that they open up a lot more and are willing to work with you a lot more.

Lastly, your best ever advice, which was to be uncomfortable and you gave a lot of examples about that.

Emilio, again, thank you so much for joining us today. Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

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JF1950: Detroit Investor Talks Getting Started, And The Detroit Marketplace with Andrew Kuhn

Andrew began investing in Detroit in his twenties when he moved up there strictly because of the inventory of cheap houses. He started buying houses while in school and training, owning a rental before owning his first home. Andrew is principal in over 400 units and we’ll hear all about those deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“It is the preparation that ends up creating the separation” – Andrew Kuhn


Andrew Kuhn Real Estate Background:

  • Founder and CEO of Kuhn Investment Group, Kuhn property management, and Infill Development
  • Principal in over 400 units, invested in another 1000 units passively
  • Based in Detroit, MI
  • Say hi to him at https://kuhncp.com/
  • Best Ever Book: Who Not How


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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

With us today, Andrew Kuhn. How are you doing?

Andrew Kuhn: I’m doing great, Joe. Yourself?

Joe Fairless: I am doing great as well, and looking forward to our conversation. A little bit about Andrew – he’s the founder and CEO of Kuhn Investment Group, Kuhn Property Management and Infill Development, principal on over 400 units, and has invested in another 1,000 units passively. Based in Detroit, Michigan. With that being said, Andrew, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Andrew Kuhn: Sure. Thanks for having me on, Joe. As a fellow Ohioan, I was originally born in a small town called Bucyrus, Ohio. I did my undergraduate studies at the University of Findlay, and was actually a pre-med major. I thought I was gonna medical [unintelligible [00:02:10].05] I was gonna be an orthopedic surgeon… And long story short, about 19-20 years old a friend of mine from Rutgers mailed me a copy of Rich Dad, Poor Dad, said “Read this book and tell me what you think”, and that was the switch I needed to pivot directions in my life.

So much to the dismay of my parents, I didn’t apply for the MCATs, rather I decided to graduate and move up to the state of Michigan, because that was the only place at the time where you could buy cheap housing as  a kid in his early twenties, to buy and sell real estate. So it was really an interesting situation, and I blame everything that started with that book.

Joe Fairless: Alright, so you moved up to Michigan.

Andrew Kuhn: Yeah.

Joe Fairless: Did you move to Detroit?

Andrew Kuhn: I did. I live in the inner ring suburbs, Royal Oak. I’m about three miles outside of the city of Detroit proper.

Joe Fairless: It’s a nice area.

Andrew Kuhn: It’s a nice area. And actually, that was the biggest thing that shocked me about Michigan. I moved up here, and — again, don’t get me wrong, I love Ohio, but the amount of water year-around up North, with Traverse and Petoskey and all these beautiful destinations, wine country, the West side of the state, natural beaches – it really blew me away with just everything it offers on top of the city of Metro Detroit, which has this cool energy; it’s got this grit to it, in regards to everybody’s hustling, there’s still opportunity, and it’s really a city that at one time was one of the largest in the United States, during the manufacturing era, and then kind of fell through decades and decades of despair, and just poverty, really… So  now it’s kind of nice to see it coming back again.

Joe Fairless: What year was this, when you moved to Michigan?

Andrew Kuhn: 2006.

Joe Fairless: 2006. How much money did you have in the bank account?

Andrew Kuhn: [laughs] I think I owed about 30k in student loans, and I had another 50k in credit card debt, and maybe a couple thousand dollars in savings from growing up. It was one of those things where you’ve gotta get out there and just start taking your first steps out there.

I started in the single-family housing market. As I mentioned in my bio to you, one of the things I did was I started just flipping houses, and I realized that the strategy of buy/sell/make some money – it wasn’t a very good strategy to get ahead, because you would spend the money that you earned to live and survive and to keep going.

So I realized that I needed to do what Michael Masterson calls chicken entrepreneur, so I went back into the medical device space, and for a long time – about 13 years – I was a medical device professional, basically supervising surgeries during the day. So I’d be in the operating room in the hospitals, watching surgeries, make sure implants were put in correctly, and then at nights and weekends I started buying houses. And the funny thing is I owned my first rental before I owned my first house.

I was laughing the other day telling this story to a friend, because when I started out I literally was renting an apartment, yet I was buying rentals…

Joe Fairless: Me too.

Andrew Kuhn: Yup. [laughs]

Joe Fairless: I owned four rental houses before, so I’m with you on that. So you made your money as a medical device professional, and then you invested that money into single-family homes, and then you started scaling your portfolio.

Andrew Kuhn: Yeah, and I also – to add to that – I had a partner in the single-family space, and he owned his own property management company… Originally, I actually hired him, because I got about two dozen houses, and I was like “I can’t manage these anymore. They’re starting to take up too much time.” So I hired him, then we became partners, and since then we’ve done probably close to 150 deals. We still own 100 houses together, and basically we buy and rent, we build to rent, we’ve done some modular construction for rent, we’ve done some buy/sell transactions, but… As you know, you live off of cashflow, right? So my whole goal has always been to work once and get paid multiple times, off passive income streams, or relatively passive, all things considered.

Joe Fairless: What a great philosophy – work once and get paid multiple times from that.

Andrew Kuhn: Yup, exactly.

Joe Fairless: Modular construction to then rent… Educate us on why do that, compared to building to rent?

Andrew Kuhn: Great question. The actual modular industry is still a fairly new industry… And in modular construction, basically it’s the same construction methods of building either an apartment or a house, but instead of actually doing all the stick framing on-site, you actually are doing it in a controlled environment [unintelligible [00:06:26].19] industrial warehouses. And then they’re shipped, they’re put on a semi bed and shipped to a site. You still have to get your architectural plans approved by the state, you still have to follow every building code, you still have to get all your permits and everything signed off on, but the thing is that you get a prefixed price, you can control your pricing, and the delivery time.

To give you an idea, I live in an urban area, and the development company is infill because basically a lot of what we do is finding vacant lots or blighted properties, and I would buy them cheap, so that my land costs were low, and then I would constrict the construction time so that I could have modular to get a faster product from the time I order a house to the time we have it set, have everything tied in, and then get it rented out. I found that I shaved 6-8  months off the average timeframe of doing it the other way.

Joe Fairless: My goodness. And you have a price that’s much more reliable.

Andrew Kuhn: Exactly. Especially since costs are through the roof right now. I’m doing about a ten-million-dollar renovation on a 125(ish) units in the city of Detroit proper, in a historic neighborhood, and  – I’ll give you a perfect example; this is a story I give everybody. We had a $300,000 window budget, and after six months of historic commission meetings, our windows budget ended up at $925,000, so…

Joe Fairless: Wow…

Andrew Kuhn: [laughs] So those types of things, those types of lessons really make an impact on you and you learn from them to really try and mitigate risk, which I think is an under-utilized for investing in real estate as an asset class.

Joe Fairless: What were the changes that were made to go from 300k to 925k?

Andrew Kuhn: Basically, if any of the Best Ever listeners ever decide to do historic designated communities – basically, they can be designated historic by the state, or the United States nationally, and basically sometimes  it’ll be individual houses, sometimes in our case it was a full neighborhood of multifamily apartment complexes… And basically what happens is whenever the day is that it was designated, from that point forward any single thing you do to the exterior of the building, renovation-wise, everything, has to be in the original format as much as possible. What that means is we had just budgeted regular, standard vinyl windows, we’re gonna do it brown or black, because it’s a red brick building, to make it look good, and they didn’t like our sightline profiles of our [unintelligible [00:08:54].16] dividers. They said it doesn’t really represent the earlier model.

We’ve tried to do Juliet balconies and make exterior modifications to open up the apartments, because a lot of the B inventory that I own is sub-500 feet. Probably at least half of the apartments are very small spaces, urban walkable downtown [unintelligible [00:09:13].16] that affordable, cool aspect.

Joe Fairless: Going back to the modular construction, why would you do it any other way besides modular, if it’s cheaper and more reliable from a timing standpoint?

Andrew Kuhn: Great question. In regards to modular, there are pluses but there are also minuses to it. First off, real estate development as a whole is a very costly business, and so is the multifamily investment company. So you’re spending large amounts of money. Now, the reality is when you do a modular construction, you actually pay for the house upfront. So you put a deposit down when you order, and then the balance is due when they deliver it on-site.

In the single-family house world you’re writing a 100k to 150k check by the time it’s delivered, and then you still have another month of tie-ins, and approvals, and all the other fun stuff to actually basically have it on-site.

Joe Fairless: Okay, so it’s just cash-heavy upfront.

Andrew Kuhn: It is. And then really what you have to do is you have to be very liquid to be able to have cashflow management, and then on the back-end you can put long-term debt financing on it. But just know that you don’t get that going in.

Joe Fairless: Any feedback aesthetically from prospective buyers or renters about modular versus regular, custom-built?

Andrew Kuhn: Here’s the beautiful thing about modular… Just like anything in life, there are very cheap, inexpensive builders, then there are super high-end custom modular construction companies… So when you go with a mid-grade level product, it looks literally no different from an actual stick-built, frame-built house, that’s built on a lot, on-site, basically. So that’s the nice thing.

There are some limitations, because whatever they build has to be able to be shipped down the highway, so you have [unintelligible [00:10:58].12] of each block, and it’s kind of like building building blocks together and tying them together. And by the way, just so you know, down the street from me right now there’s a 382-unit development that’s all modular construction, super-high-end, class A, beautiful product, all kinds of amenities… And it’s kind of cool to watch it, because literally just bring in semi after semi after semi of what looks like pallets, and then the next day literally they have full stories added to the construction of these places… So it’s pretty incredible.

Joe Fairless: It sounds very logical to go that direction, assuming that you’ve got some cash and you’re physically responsible and you know how to manage it…

Andrew Kuhn: Yup.

Joe Fairless: I imagine though that the very first time you did modular construction, it was a little nerve-wracking, because it was just different.

Andrew Kuhn: 100%.

Joe Fairless: So how did you get over the thought process of “It’s different, and it’s kind of new, but you know what – I’m still gonna try it.”

Andrew Kuhn: One thing that those in my circle know about me and my life is that I’m a big believer in personal development. About that same time I got Rich Dad, Poor Dad introduced to me, I was introduced to a gentleman named Jim Rohn, who’s–

Joe Fairless: I love him.

Andrew Kuhn: So Jim was my gateway into the personal development space. He introduced you to Zig, and Brian Tracy, and Dale Carnegie, and Napoleon Hill, and all these amazing personal development speakers from what I consider the original generation really… And that was really what taught me that you need to win the inner game before you can win the outer game. And part of that – not only going through that whole personal development process – is really understanding that you win the inner game before you win the outer game, but also the fact that when you are growing in life, it’s painful… And the more you fail, the more successful you will be. The most successful people always have the most failures.

So what I’ve realized is that every time I get comfortable, I know I’m getting stagnant and I’m leaving a growth mode, and that’s a bad area to be in. Humans by nature are growth-oriented. So really, it’s a mental game first to understand that “Look, I don’t know what I’m doing, but I will tell you what – I know this for a fact – the school of hard knocks in life, of actually experiencing and doing new things will teach you better than any book, any other way that you can consume information, by actually doing it and learning and getting better because of it.”

Joe Fairless: How do you set yourself up financially — because with that mentality, someone might hear that and think “Okay, any time I’m getting comfortable, that means I’m getting stagnant, so I need to go out there and do something that might be painful.” They might interpret that to mean that they’re putting all the chips on the table, and continuing to bet on black. So how do you, from a personal finances standpoint, make sure that you’ve got some things separated from these risky, or new things ( I should say), that you’re doing, that have increased risk?

Andrew Kuhn: That is a great question. So what I would advise – and this is what I personally did, after a lot of introspection, was I realized that by nature I’m a very conservative individual. I mean, obviously, I have an element of risk-taking, but really what appears to be outside risk is learning how to manage the downside risk, and mitigate that as much as possible, so that it really only leaves you with the upside.

That being said – again, I spent nights and weekends for 13 years buying houses before I finally made a pivot and walked away from a day job that was a $350,000/year guaranteed job, that I could do in 30 hours a week. It was bonkers. But what I’m saying though is that in that timeframe I used it as a tool. So I built my dream house, I paid off my dream house, I got rid of all personal debt…

I have a philosophy that you always own assets and you lease liabilities. I think a lot of people don’t get their financial house in order so that they can be in a position of strength to then go out and bring your game to the next level. And really, it is the pre-work or the preparation that ends up determining the separation.

Joe Fairless: And just on the “you own assets and lease liabilities”, I imagine you consider your house a liability, right?

Andrew Kuhn: I do consider my house a liability. I did pay it off after we built it, and the reason I did that was because – again, this goes down to planning for the worst. So if at the end of the day the sky started falling and all my investments were upside down, and I had to give them back to the bank, or they called everything due, at the end of the day I still own my house, free and clear, so I actually technically own it, minus the taxes I have to pay every year… And basically, I still have a position of security. So it’s a cost, and it’s not just financial; you can’t always measure things strictly on a financial numbers basis, especially personal life and living decisions, too.

Joe Fairless: Very true, yeah. There’s investment decisions, there’s quality of life or lifestyle decisions, that just give us a peace of mind.

Andrew Kuhn: 100%.

Joe Fairless: What’s a deal you’ve lost money on? Let me rephrase, what deal have you lost the most money on?

Andrew Kuhn: That’s another interesting story… As any entrepreneur, I have plenty of battle wounds. I’ll tell you the greatest lessons that I’ve learned. Early on, I was helping to try and develop an indoor go-karting facility. When I first moved up to Michigan, I was like 22-23, and I ended up making an unsecured loan to who I thought was my partner at the time doing this, of $50,000.

Now, as a 22-year-old, I had a line of credit with that kind of money on it, but I didn’t have any savings… So I’m like “Okay, this makes sense…”

Joe Fairless: I was gonna say, you had 30k in student loans, 50k in credit card debt…

Andrew Kuhn: Exactly. So 8%-10% interest… I’m like “This sounds good.” Well, the reality is he ended up disappearing with the money, and then that put me in an even worse situation, having to pay that back over the next couple of years, and have the fortitude to stick with it, to pay it off, to learn from my lesson. And that taught me a really good thing about lending money and being very careful, because no one’s gonna care about your own personal money and financial well-being as much as you will… Because they don’t have as  much invested. So that was a  big one for me.

I also have houses — like, right now I’m in the middle of a pretty high-end single-family home flip. We paid — basically, it’s still to be determined, but it could turn out to not be that great… Whereas we bought a house in a very Tony suburb of Detroit, a 3,000 sqft. house, ended up spending about 650k on the acquisition, have another 400k in the budget for renovations, so there’s over a million bucks… And we’re pegging it to the market to 1.2-1.3. But the problem is because I abdicated responsibility, I lost control. So what happened was that property sat vacant for 14 months at an interest cost of just sitting there of $77,000.

Joe Fairless: Why did it sit vacant?

Andrew Kuhn: Basically, because I had a partner on this deal that I went in with, and long story short, he was kind of running the deal, and I was the finance guy behind it… And I didn’t hold him accountable to his construction timelines, and stuff like that.

Here’s another great lesson for your listeners – always, always be cautious and wary of short-term debt. I had a mentor, Jack Miller and John Schaub, in the housing world, that always said that you should never have short-term debt, because it’s basically a ticking time bomb… And 2 years, 3 years, 5 years, even 10 years goes by really fast. So I made a pact to myself that there was no more short-term lending under 5 years.

Joe Fairless: Okay. And the unsecured loan of 50k, in your early twenties – you wrote a check to that person… And then what happened exactly?

Andrew Kuhn: So I drew up a promissory note, and we had terms, he signed it, gave his personal guarantee, and we were trying to raise about two million bucks that we needed to get this — basically, to buy an Old Sam’s Club… And we were gonna outfit it with indoor go-karting, and a restaurant, and the whole deal.

Joe Fairless: [unintelligible [00:19:29].02] idea.

Andrew Kuhn: Yeah, it was a huge idea. And when you’re in your early twenties and you don’t know any better, it sounded awesome, right?

Joe Fairless: Yeah.

Andrew Kuhn: So I was all-in.

Joe Fairless: It still sounds awesome. Not profitable, but awesome though.

Andrew Kuhn: Yeah, exactly. Not profitable at all, but really awesome. So anyways, especially when you live in Detroit, the Motor City, and everybody loves cars and stuff up here… But that being  said, we were doing this in 2006-2007, and really we’d just hit the downturn, where we basically tapped out on being able to raise the additional capital that we needed to be able to get our renovation and everything up and running online. So then – this is what happens, is people get behind, and then they’re like “Oh, I have an electricity bill, and taxes are outstanding”, and all this stuff… And it was one of those situations where he had expected more money to come in to pay me out, and it never came. The other prospective investor pulled out and said “No go.”

So long story short, he spent that money and didn’t have it to pay back, and I never saw a dime of it.

Joe Fairless: And you asked “Hey, buddy, come on…” What was the response?

Andrew Kuhn: Great question… I mean, we’re really starting to get personal here, bu that’s okay. So if you really wanna know the story about that –  so I actually pursued him legally. I went after it, I had an attorney… It was actually a great original introduction to attorneys, because you deal with them so much in this industry… And had him kind of go after him. He wasn’t originally from the States, so he relocated back to his old state, and just kept dodging it, and dodging basically the attorneys for a long time.

Then unfortunately – it was about 7-8 years after that – he passed. He had a heart attack. So he was basically uncollectable. My attorney calls me one day and says “Well, I don’t think we’re gonna be able to pursue this anymore.” So then it was actually closure. And that’s another big thing – you don’t wanna leave things lingering out there, and open; you really want closure on stuff. So that was very comforting, to at least know that “Alright, this chapter in my life – it was the school of hard knocks. Lesson learned, and now I’m moving forward.”

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

Andrew Kuhn: Sure thing.

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

Break: [00:21:47].03] to [00:22:28].10]

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

Andrew Kuhn: Oh, best ever book I’ve recently read… So  I am big into Dan Sullivan right now, Strategic Coach. I go up to Toronto and do workshops with him. He just wrote a book called “Who, Not How”. Basically [unintelligible [00:22:39].05] when you have these ambitions to build a big business, it’s not the how you do it, it’s the who; that means you need to be spending your time finding the right who’s to be able to build your team, to get more done… Because as you know, investing in multifamily real estate is a team sport.

Joe Fairless: What’s the best ever deal you’ve done?

Andrew Kuhn: Best ever deal I’ve ever done… Actually, I’ll tell you two stories. One was a value-add class B asset in the Metro Detroit suburbs; ended up buying it for about 1.4, put about 250k in renovations, so I was in for 1.6-1.7.  I got a post-stabilized valuation of about 2.6…

Joe Fairless: Wooh!

Andrew Kuhn: Yeah, almost a million dollars’ worth of equity there. It was a relative small deal, 28 units, but it was a nice little hit there for basically a 2.5 to 3-year turn, running the whole process through and stabilizing it.

Another deal – again, as I mentioned earlier in the podcast, Detroit does have a lot of inexpensively-priced real estate. A couple of years ago I had an opportunity to buy a large multifamily complex with some partners. We paid about 8k/door, and really it was just an occupancy issue. It was the right problems – it had poor management, and we ended up  stabilizing it, and then I actually sold it for 22k a door, so I almost tripled my money on that one.

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

Andrew Kuhn: The best ever way that I love to give back – and this is truly why I do what I do – is I like to create success and continual growth, so that I can provide more for my community: for the charities I support, for the communities, so I can have a bigger influence, and really make a bigger impact in this world.

Same thing with owning apartments. It really is an amazing thing when you can provide someone a safe, secure community and place to live, that can sometimes change their life. So it really is rewarding in that aspect.

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

Andrew Kuhn: Easiest way to get a hold of me is KuhnRealEstate.com. That’s our main investor page, and there is a form they can submit. I believe they’re gonna post in the show notes as well the office contact info and everything.

Joe Fairless: Andrew, thank you for being on the show. Thanks for sharing your stories, thanks for sharing your path, some specific case studies, talking about some lessons learned on the historical windows – 300k to 925k – talking about modular construction, talking about loaning money to people and all sorts of other relevant, helpful pieces of information.

I really appreciate, and grateful you were on the show. I hope you have  a best ever day, and we’ll talk to you again soon.

Andrew Kuhn: Yes, you too. Thank you.

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JF1742: New Investors Run Out Of Money, Find Money Partner At Local Meetup with Grant Warrington

Grant and his wife set out to be real estate investors, started buying properties but quickly ran out of money. He went to a local meetup where he met a young successful investor (Josh Sterling) who gave him tips on how to move forward. They took his advice and ran with it, getting up to 11 units in two years, after thinking they were out of money to move forward. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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“If we’re going to stay on this path, how many houses would we need?” – Grant Warrington


Grant Warrington Real Estate Background:

  • Started investing in real estate in 2004 – bankruptcy followed, restarted in 2014
  • Currently owns 20+ units with is wife and business partner, Monika
  • Oversees the operations of 736 units for Epic Property Management
  • Based in Detroit, MI
  • Say hi to him at https://bluerockcapital.net/


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

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


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Steve Streit & Joe Fairless on Best Ever Show episode 1635 banner

JF1635: Leveraging Others’ Skills To Scale A Real Estate Investing Business with Steve Streit

Steve wanted to make more money, but felt bad for doing it. He first had to overcome that mindset, after he realized it was okay to work less and earn more, he was able to build a business over the past two years. He’s flipping houses, and just closed on a 20 unit. We’ll he’ll tactical advice from some of his deals, as well as how to build a great team and leverage other people’s’ skill sets. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Steve Streit Real Estate Background:

  • Real estate investor focused on developing key areas in Detroit
  • Flipped over 70 houses in the last 18 months, actively buying 1-2 houses a week, and has a portfolio of 50 units and actively looking for more multifamily units
  • Based in Detroit, MI
  • Say hi to him at https://www.stevemovesmichigan.com/  
  • Best Ever Book: Never Split The Difference


Sponsored by Stessa – Maximize tax deductions on your rental properties. Get your free tax guide from Stessa, the essential tool for rental property owners.


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, Steve Streit. How are you doing, Steve?

Steve Streit: Hey, Joe. Awesome. How are you doing today?

Joe Fairless: I’m doing awesome as well, nice to have you on the show. A little bit about Steve – he is a real estate investor focused on developing key areas in Detroit, Michigan. He’s flipped over 70 homes in the last 18 months; he’s actively buying 1-2 homes a week, and he’s got a portfolio of 50 units, and he’s actively looking to purchase more multifamily deals. With that being said, Steve, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Steve Streit: Awesome. I’ll keep the background short, because it’s pretty boring. Until I got into real estate I was a common house painter. I shifted from a common house painter to owning a painting company. I read a lot of the books that I was told to read, E-myth being one of them, and that was me; I was doing it all – I was the typical solopreneur, trying to run my own show, doing  the marketing, doing the billing, shuffling paperwork, then slapping paint on the walls and then coming home at all hours at night, trying to devote time to friends and family… And they usually got the short end of the stick, it came second to work.

I quickly realized that the harder I work, the less money I make. It was pretty disheartening. But me being a die-hard, never-give-up type of guy, I kept that business for about ten years, and I quickly realized that flipping one house would cover my profits that I would make for an entire year in painting. I had to do that a few times and I realized I was just in the wrong vehicle. It wasn’t necessarily my work ethic, or my aptitude, it was simply just being in the wrong vehicle, around the wrong people, with the wrong mindset. The rest is history.

I couldn’t be in a better position today. I’m not where I wanna be, but we’re flipping houses, wholesaling, getting into developing… I own multifamily; we just bought a 20-unit apartment complex; I’m head over heels about that. It was in a good enough neighborhood, but the apartment was in real bad shape, but I’m just really excited about the whole thing. It’s a newer adventure to me. We’re about two, two-and-a-half years in full-time.

Joe Fairless: We have a lot to talk about, I’m excited to talk to you about this, because there’s a couple things that I’d like to address with you and learn about. One is you said you went from a house painter to owning a painting company, and then you realized you could do one flip and that would make you as much money as a year’s worth of having that painting company… And you said you had the right attitude because you’re a hardworker, but you were in the wrong vehicle, so you were doing the wrong business… What in addition to the a-ha moment of “Okay, clearly I’m making more money flipping this house”, you also mentioned mindset, and being around the wrong people versus the right people, so what on that aspect of things changed for you? And any specific examples would be helpful.

Steve Streit: Joe, that’s a great question, because I think the mindset was really the thing that was holding me back the whole time. I thought that I was supposed to be doing a certain thing; I thought that I was supposed to be putting in a certain amount of hours in order to earn a certain amount of revenue. So if I earned more, a lot of times I would feel uncomfortable and I’d feel like I was cheating somebody, as odd as that sounds.

Let’s just say I charged $1,000 to paint a couple rooms, or let’s just say a small apartment was $1,000. If I had the opportunity to charge $1,500, sure I would, but it wouldn’t feel right. So my pay was directly proportionate to how much I thought that I could charge. In the painting world, in the contracting world you’re limited by industry standards, so you try to stay within that realm; one plus one equals two in that world, and in real estate one plus one might equal ten, because you can leverage other people’s time, you can leverage the market, you’ve got cap rates in apartments… I don’t know if I answered that clearly, but it’s really been a learning curve for me.

Joe Fairless: You did!

Steve Streit: One thing I love about real estate is just the opportunity to leverage other people’s money, other people’s time, other people’s talents, and then seeing that I have value, being the match-maker, being the person that brings deals together – I can put whatever price I want on that.

Joe Fairless: I’ll just speak personally, I totally get the thought that I’m supposed to work a certain amount of hours in exchange for a certain amount of money, and when I make more money for less or fewer hours, there can be a  guilty feeling… So how did you get over that? What tools did you use to shift your mindset?

Steve Streit: Time was one of the biggest ones. I would tell myself that I can do this, I should be allowed to make money, I deserve to be wealthy, I deserve to have this in my life… So it’s really a self-help type thing as much as it is a real estate thing, to kind of break down the ideas and the barriers, and the years of me telling myself what should happen – that I should fit into a certain box, under certain parameters.

So number one, Joe, was time. It took years to kind of break that down. And then a lot of the reading, Napoleon Hill, a lot of those type books, really, Think and Grow Rich and a number of other ones… Listening to podcasts, listening to other successful people, and then slowly but surely inserting myself physically around other people, going to the real estate meetings which I was a little against at first, because I wasn’t sure how that was gonna help… But I think the power of being around other successful people really rubs off. And it goes back to the old adage of “You become the company that you keep.” Who you surround yourself with is important, so be careful of your friends… And maybe when mom was telling you “Don’t hang out with those kids” she was right, but maybe she should have also said “Hey, hang out with these other ones. You might gain some stuff, too”, so it really works both ways.

Joe Fairless: Very helpful, thank you for that. So that was the mindset and the foundation of how you’ve gotten to where you’re at; now let’s talk some specifics on deals. I believe you said it was a 20-unit – is that correct? …that you recently closed on.

Steve Streit: A day before Thanksgiving.

Joe Fairless: Closed on a 20-unit the day before Thanksgiving. What was the purchase price, what are you putting into it, what’s the business plan? I would love to hear some specifics on it.

Steve Streit: Okay, imagine this – 1920s, all brick, limestones caps… We have a bald eagle at the top, beautiful architecturally. Solid, brick building, and it’s two-and-a-half stories, including a garden-level basement apartment. I bought it and I thought there was a few people living there. I got to go through most of the units; some of them were locked. It turns out there was more than a few, it was over half occupied, most of which by people who have not had any lease in place, with a mom and pop style landlord, living in the basement, who ended up in the hospital because of pneumonia and other illnesses, that may or may not have been caused by the living conditions in the building.

So it was really a sad situation for the tenants, and the building owner seemed like he was holding on to the very end to that building, but there was just so much maintenance and upkeep that wasn’t done that these  folks were heating their apartments with their stoves; there wasn’t adequate heating. The living conditions were subpar at best; it was really disheartening to walk through some of the units and see the situations… But we started the eviction process, some people voluntarily left, and we’re still hanging on to a few die-hards, if you will. But [unintelligible [00:10:00].17] roofs, bricks, we got a brand new boiler in the building within two weeks, we got heat on, we capped off the broken pipes and we’ve been through about eight 30 yard dumpsters…

Joe Fairless: Wow.

Steve Streit: So it’s been a constant process. I really need pictures to illustrate this, but it’s been a full-on rehab, and we’re gonna do a nice restoration on this building to bring it up to get market rate rents, and safe living conditions for people. It’s an exciting opportunity, but let me tell you, it’s heavylifting.

Joe Fairless: Oh, yeah… How much did you buy it for?

Steve Streit: Oh, money. $140,000.

Joe Fairless: Details. Those are details, I know, but…

Steve Streit: Yeah, minor details…

Joe Fairless: $140,000?

Steve Streit: Yeah.

Joe Fairless: And how much are you going to put into it total, assuming things go according to plan, which of course they will, right? Exactly according to plan.

Steve Streit: Always, every day, no matter what. [laughter] So on the low side we’re at a $200,000 rehab. It could go up to 220k-240k. We should be all-in under 400k, I’d say, if we hit a few [unintelligible [00:11:00].07]

Joe Fairless: So you bought it for $7,000 a door. You’re gonna be all-in for — we’ll call it 400k, worst-case scenario; I’m knocking on wood for you. Worst-case 400k all-in. What’s the stabilized valuation of it, assuming whatever cap rate that is market for it?

Steve Streit: We’re looking at about $750,000 stabilized. It could go as high as $850,000 or $900,000. That’s kind of living on a hope and a prayer, a little bit… But it also depends on what the other apartment buildings are doing around me, because the area is rolling and developing rapidly. But that’s everything restored; that’s all the units brand new…

Joe Fairless: What part of Detroit is it?

Steve Streit: It’s East side, and it’s lower East side, by Grosse Pointe, so it’s got kind of a nice little buffer… It’s a couple miles off the water and it’s off of Mack Avenue, for anybody that’s familiar with Detroit.

Joe Fairless: The 140k – is that all cash?

Steve Streit: Yeah, I’ve used my own money cash, and then I put some hard money on it afterwards, but I needed to close on it quick, so…

Joe Fairless: Okay. So you put 140k out of your bank account, and then for the renovations you’ve got a hard money loan on it.

Steve Streit: Yeah.

Joe Fairless: What are the terms for that loan?

Steve Streit: I have a couple different notes on there actually, so it’s 12%-13% on average.

Joe Fairless: Okay. And how long do you have those until?

Steve Streit: A year. I usually get them for a one-year term. That will give me enough time to get the building stabilized and get some new money. Now, after a year comes, I can always talk to them and see if they wanna stay in it longer, if we get to that point… But I don’t think we will. We’re moving pretty good on that.

Joe Fairless: Because the goal is to not renew that and instead put maybe a community banker or some sort of longer-term loan on it?

Steve Streit: Yeah, get some long-term agency debt, 15-year, 20-year, whatever I can get, at a better interest rate, that’s amortized, that pays principal, and of course some interest.

Joe Fairless: And clearly, you’re rolling up your sleeves and you’re on the ground, overseeing this project… At least from what I can tell.

Steve Streit: 100%.

Joe Fairless: Out of the different cap-ex projects you mentioned – roofs, fixing pipes, cleaning stuff out, what’s been something that surprised you about the process?

Steve Streit: Good question. I think there were a lot of surprises. I have a construction background being a painting contractor; I also have a builder’s license, so we’ve done decent-scale remodel projects, but really digging in a little bit and realizing that a lot of the units were just total guts, so we just ripped everything out and started fresh.

Another thing that I wasn’t familiar with – I’ve never had an issue with this, but it was full of bed bugs and roaches, I ain’t gonna lie. It was nasty, and it sounds like the little stuff, but it’s harder to get folks to work in those conditions.

Joe Fairless: Oh, roaches are fine, but bed bugs – that would be a problem.

Steve Streit: Yeah. Bed bugs, roaches, rats – you name it, it was there. We had to evict the people that were living there, but we had to get some of the insects out, too.

Joe Fairless: Okay,  you come across bed bugs… I think roaches – come on, man up, right? You guys get in there and there’s roaches, whatever; but bed bugs, they’re hitchhikers; they’ll get on your clothes and then they’ll come home with you, so I get that. You discover the bed bugs and your crew is like “Hey, Steve, we’ve got bed bugs here. I’m out. You fix this.” Does that delay your project for a month? …because it takes at least three treatments to get those suckers out of there.

Steve Streit: Yeah, so I’ve been very lucky to have an amazing crew. They literally just put on their suits and got the infested couch, or whatever. I physically see them. I knew they were in there, but I didn’t hang out in the apartments long enough to look for them, Joe… But they complained about it quite often; they said this one’s bad, and I believed them.

So they just dumpstered pretty much everything. Anything that they were living on was dumpstered and they were put out. Thank god we had freezing cold weather. I don’t know if that killed them, made them dormant, whatever the hell it did, but most of the infestation was out. We still are gonna have to [unintelligible [00:15:07].21] before we do the final, final renovation; we haven’t started the drywall repair or the painting yet. But I think even before we do that, we’ll probably put that [unintelligible [00:15:18].16] but we got out the worst of it. These guys have been troopers, they’re awesome; I couldn’t have done it without a very loyal, dedicated, hardworking, good-attitude crew. So you need that relationship with the contractors.

Joe Fairless: And those relationships were formed from the 70 fix and flips you’ve done over the last 18 months, is that correct?

Steve Streit: Yeah, and spanning time, and I hate to say it, but it is a time-intensive thing. You’ve gotta spend time with these people; you have to talk to them, you have to show up on the jobs, meet with them. They’re not gonna go into bed bug infestation, nasty apartments for you if they don’t kind of like you a little bit, I’ll just say that.

Joe Fairless: Yeah, yeah.

Steve Streit: So “Yeah, I’ll pay you a thousand bucks” or “I’ll pay you X amount of dollars to do it. Just get it done” type thing – yeah, that works, money talks, but you want people that are gonna work hard for you and that wanna be a part of the team, that wanna grow, and they’re doing something to help the cause of the business, if you’re into the fix and flip thing, if you’re into the renovation thing. You might wanna stay away from that altogether and buy fully-occupied buildings, which is a lot safer bet probably… If you end up doing this.

Joe Fairless: But those are boring podcast interviews. This is so much better.

Steve Streit: Oh, okay. [laughter] Okay, cool. Yeah, yeah.

Joe Fairless: The $240,000 budget – I know that’s the high end, but we’ll just go with that… 240k for the improvements to the property – how much of that 240k is interior work versus exterior work?

Steve Streit: We’re probably only 25k-30k on the exterior.

Joe Fairless: Yeah, that’s what I figured.

Steve Streit: I’d probably say 25k. It’s all on the inside, really. You look at the budget, that’s 10%, that’s nothing. 50k off the rip for boilers, returns, fixing the radiators…

Joe Fairless: That’s about $10,750 a unit that you’re doing there, for interior work.

Steve Streit: Yeah, and that covers your hallways, and miscellaneous, and stuff like that.

Joe Fairless: Based on your experience, and taking a step back from this project, but just taking assessment of your experience to date in real estate, what’s your best real estate investing advice ever?

Steve Streit: Okay, so if you’re gonna rehab, know what you’re gonna get into. Get a team established. I think people lose the biggest, and rehabbing is the most risky thing you can do if you have zero relationships with contractors. I’ve seen more people get robbed by contractors, and having faulty budgets, and projects go sideways than anything. So get those relationships established. If you don’t have those relationships, partner with somebody who does.

I think it’s better to take half of the profit or a part of the profit with an experienced investor. That’s what I’m doing now a lot – helping new investors get in, and helping them rehab houses, and showing them… So if they have a deal and they don’t have contractors lined up, we’ll come in and facilitate and help them with that, with a profit share.

So I’d partner with people. Don’t try to knock this all out on your own, because you’re gonna learn, and it might hurt. That’s my best advice ever, Joe.

Joe Fairless: And on the 20-unit building that you purchased, you’re the only owner of it, but when you say “partner”, it’s these team members who you have a relationship with, who are helping doing the work – is that correct?

Steve Streit: Yeah, I’m the only owner of this building.

Joe Fairless: Are you doing property management, too?

Steve Streit: I’m probably gonna step away from that. I will probably help with getting the unit filled up, and then I’ll give that to somebody else. I’ll turn the management over to a separate company. We’re really not geared for management.

Joe Fairless: Who do you use?

Steve Streit: Local people. They manage only a couple hundred units, but they’re in the area, so they’re able to service the building if something goes wrong.

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

Steve Streit: Oh, yeah.

Joe Fairless: Alright, well then oh-yeah let’s do it. First though, a quick word from our Best Ever partners.

Break: [00:19:11].27] to [00:20:13].05]

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

Steve Streit: Books… I haven’t read a book cover-to-cover in probably a year…

Joe Fairless: You’ve got all you need from Napoleon Hill, “Think and grow rich”, huh?

Steve Streit: Yeah, right. So Never Split the Difference, Chris Voss; the book was on audio, so that’s one thing I’ve heard.

Joe Fairless: Best ever deal you’ve done that we have not talked about during this conversation?

Steve Streit: Okay, so – last summer, a wholetail deal. I bought it for 45k, sold it for 100k. I had the cost of a dumpster and a clean-out in it, so my rehab costs were $980, with a $50,000 spread.

Joe Fairless: You said “wholetail” instead of wholesale, and not a “hotel”, correct?

Steve Streit: Not a hotel, Joe. Wholetail, for those of you who don’t know – it’s like a wholesale deal, but you will close on it and then do a very light rehab and then list it on the market. At least that’s my definition of a wholetail. It involves no major upgrades. It’s quick, easy, and you use the MLS in your favor, you leverage it.

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

Steve Streit: Under-estimating rehab costs still. Know your numbers. I’m working off of spreadsheets and budgets. What’s in your head and what actually happens is two different things. I’ve done, like I said, 70 of these things in the last 18 months, and counting. The numbers are changing, costs go up; just watch your numbers.

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

Steve Streit: Working with new investors. If you are looking to flip a house and you wanna flip a house in 2019, and you’ve been thinking about it for months or even years, I wanna help you. I’m happy to work with people who are willing to invest in themselves.

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

Steve Streit: Okay, so I’m gonna do something that has helped me more than it’s hurt me, so I’m gonna just give my cell phone number. I would ask you to just text me, okay? My number is 248-977-8481, and shoot me a text with your name and information, just so I know the context of the text would be helpful.

Joe Fairless: So definitely call you directly and then put you on robocall systems too, is that correct?

Steve Streit: All hours of the night, no problem.

Joe Fairless: [laughs] Steve, I really enjoyed learning about your shift in mindset from painting, to owning a painting company, to doing fix and flips, to having a business in fixing and flipping, and now doing multifamily… And then also getting into the details on this 20-unit distressed property and what you’re doing to turn it around, and also improving the community, as well as enhancing the lives of the people who are there, and deserve to be there because they’re paying rent.

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

Steve Streit: Joe, thank you for everything you do with the industry, and I hope to talk to you soon. Thank you.

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JF1628: Identify An Up-And-Coming Market Before Everyone Else #SituationSaturday with Brent Maxwell

Brent is back to share more great knowledge with us (see his first episode below). He is an investor in Detroit, focusing on the revitalization of the city. Brent excels at finding the areas of Detroit that are just beginning to turn around, and start buying before other investors catch on. How does he do it? Find out by hitting play. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Brent Maxwell Real Estate Background:

  • Real estate investor whose personal and professional stories align with the recovery of Detroit
  • Has a passion for the “limping” sections of Detroit and helps people buy into a piece of the city’s recovery
  • Based in Detroit, MI


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

First off, I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a situation for you, and here’s the situation – you want to identify and up-and-coming market before everyone else. Well, how do you do that? Today’s Best Ever guest, Brent Maxwell will be discussing that with us. Brent, how are you doing?

Brent Maxwell: I’m doing great, Joe. Good to be back.

Joe Fairless: Yeah, nice to have you back. As a refresher, Best Ever listeners, Brent is a real estate investor whose personal and professional stories align with the recovery of Detroit. He’s based in Detroit, Michigan, he’s got a passion for the “limping” sections of Detroit, and helps people buy into a piece of the city’s recovery.

I interviewed him a little while ago, episode 1357. He has bought, sold and brokered 1,000 of Detroit real estate, with a volume of over 30 million dollars. With that being said, Brent, will you give the listeners just a refresher of your background? And then we’ll go right into how to identify an up-and-coming area.

Brent Maxwell: Sure. I’ve been investing in Detroit real estate since 2005; I bought my first duplex then, and have proceeded to buy and sell a number of others for myself and for partners and for clients, and I’ve been a part of the economic crash that was in Detroit, and hit Detroit harder than most cities… But I’ve also been a part of its recovery, and I’m enjoying the ride.

Joe Fairless: The focus of our conversation today is how to identify an up-and-coming market before everyone else… So how do we do that?

Brent Maxwell: That’s a great question. For the people that have a bit of risk tolerance, I think it’s the question to be asking. When you look at, for example, Detroit as a market, as a whole, there was a trough from 2009 when we bottomed out, all the way for the next few years, and then things started to peak up. In many areas of the city and most of the suburbs property values are at, near, or even above their pre-crash peak values, but there are still many places where the values are still flat. So if you’re buying as a value investor and you’re looking for an increase and appreciation, obviously you wanna buy in an area where that curve is at least at the emerging part of the growth market, and ideally you’re getting in low, obviously… So how do we do that? I think the answer in Detroit is to look for areas where you’re starting to see signs of the percolation of transition.

Joe Fairless: And what signifies transition?

Brent Maxwell: Transition is a change of the demographics of an area. You’re looking at areas that have been stable or declining for a long period of time, and are experiencing a different character of person moving into them, whether it be middle income, middle-class people, or young, hip people, whatever that is – those are areas of transition. Of course, there’s downer transitions as well, but we’re looking for the upper transitions. Basically, we’re looking for areas that, for a lack of a better word, are approaching what many people would consider gentrifying, although really at the beginning stages of any neighborhood in transition you don’t have any gentrification, and quite frankly in the neighborhoods of Detroit there isn’t any gentrification. I realize it’s a bad word for a lot of people, but I don’t have any problem saying it because it doesn’t really exist, even in the central business districts downtown, where you’re seeing $25/ft for rental space… It’s priced appropriately, compared to similar markets nationwide, so you can’t really look at that as being something that’s displacing people.

Joe Fairless: How do you find that data? Where do you look? …and if you’re on the ground, same question.

Brent Maxwell: Well, there’s two questions there, really – how do you find the data and what does it look like from the ground? The data is readily available to anyone with basic access to comps in an area. You can see days on market, prices of properties that have been sold, photos of those properties and such by looking at the MLS or any associated feed that comes from that. So that’s one step. The other step though is actually being in the neighborhoods and in the areas that we’re talking about, and kind of getting a feel for it by being present all the time.

When you see a young couple moving in, with young kids, and a couple dogs, and they look completely out of place compared to the other people in the neighborhood, and there’s a bar that was formally run down and now it’s got some hipsters coming to hang out there, you know that there’s something going on in that particular area. These are kind of harbingers of progress, and leading indicators of an area that is on the edge of hip, or will maybe someday be hip.

Joe Fairless: From the data question and response you said you wanna look at comps in the area, and some specific data points like days on market and prices of properties that have been sold. What specifically are you looking for with days on market?

Brent Maxwell: A decrease in days on market. I like to divide the market into quarters, and I look at the top quarter for my investing purposes. A decrease in days on market on the top quarter of properties means that the people who are buying the more expensive properties in an area are acting faster… And in conjunction with the decrease in the days on market you wanna see a drive-up in prices.

Joe Fairless: So when you say you divide the market into quarters, you’re dividing it into quarters based on purchase price?

Brent Maxwell: Sale price, yeah.

Joe Fairless: Sales price, yeah. Got it. Okay, so you look at all of the sale prices for a particular area, and then you divide it into quarters, and then if you see a decrease days on market for the most expensive quarter of properties that have been sold, then that’s a good indicator.

Brent Maxwell: Yeah. And another good indicator is looking at the bottom quartile, and looking at the floor of the market. Now, Detroit is unique, I would think – at least in my experience – among markets, as far as the floor being in many cases non-existent, and there being sometimes a large number of what I would consider negative value properties. If I could expand on what I mean by that…

Joe Fairless: Yeah, please.

Brent Maxwell: If you have a neighborhood where a 3-bedroom 1,000 sq. ft. bungalow in great condition sells for $40,000 – which exists in the city of Detroit – and in that same neighborhood you’ve got a blown out bungalow that’s selling for $5,000, if it takes you $35,000 to get that $5,000 bungalow up to the place where the $40,000 bungalow that’s just as nice is, then you’ve got a property that is awash on a dollar-for-dollar basis. You’re investing 40k in either property, but in one case you’re losing out on opportunity cost, because you’re tying up your money over a longer of period of time, while you’re in that renovation/stabilization phase. You’ve also got the risk associated with the time that you’ve got a rehab in play… So that’s not a good deal.

Now, some of those properties actually end up being where — if you look at them and you take them… A lot of times they’re sold on a quitclaim deed, which means they’re sold with a suspect title, or there’s no guarantee on the title… So you’ve gotta take the time to go to an attorney and have them quiet the title, there’s back-taxes, huge back water bills, sometimes there are assessments from the city or blight tickets attached to this type of property… You can have a property that actually costs you more to get it stabilized and functional than the nicest properties in that neighborhood are selling for. So I’d consider that a negative value property. If you can buy a cherry for $40,000 and it costs you $50,000 to get the house next door that’s trashed and turn it into a cherry, the house next door doesn’t have any real value.

Joe Fairless: Yeah, that is understood.

Brent Maxwell: So Detroit has got that, it’s got negative value properties, it’s got neighborhoods where there’s no floor, where the properties go down to $1, $500, $1,000… There’s properties available still in many neighborhoods of Detroit for that low price point. Now, they don’t have any real value, so you’re not hitting a home run by buying a $1,000 property. You’re probably better off just spending your money on lottery tickets. But at the same time, when you look at the bottom quarter of neighborhoods and those thousand-dollar properties go away, and all of a sudden the floor creeps up to $10,000 or $20,000, then you’ve got a neighborhood where you can seriously look at that and say “There’s something going on here. This was formerly a highly distressed neighborhood, a war zone, what have you. Now none of these properties are being given away on a deed, for a dollar.”

Joe Fairless: And what period of time are you looking for the historicals to see how it’s trending?

Brent Maxwell: I go back to ’05.

Joe Fairless: Okay.

Brent Maxwell: From a chart standpoint it’s really pretty if you go back that far, because you get to see the top, or the peak coming in ’05-’06, and then the softening, the crush in ’08, the drops in ’09, the trough in ’10, ’11 and ’12, and then the emergence of the markets in that same period. So you can kind of do a graph over time of sales price in an area, trying to get properties — looking, for example, at that 3-bedroom 1,000 sq. ft. bungalow we were talking about. And you can overlay one area versus another area and see that while they both experienced a peak and they both experienced a crash and they both experienced a trough, one of them has pulled out of the trough and now the values are shot way up, and the other one is flat. Then you can throw a third neighborhood in that same thing and overlay it in there and you can see that it’s flat, but now the values are starting to creep up, and you’ve got a 25% increase in your curve. You start to see the beginning of what they call a hockey stick, right?

Joe Fairless: Yup.

Brent Maxwell: But you don’t wanna see a hockey stick with a long blade, you wanna see the hockey stick with a short blade, because you know you’re at the beginning of that curve.

Joe Fairless: Yup. You said “area” – how are you defining “area”?

Brent Maxwell: I use neighborhoods. I draw my own custom maps. The multiple listing service (MLS) here in Detroit breaks things down into arbitrary – they’re not [unintelligible [00:11:47].18] but they are just picked randomly – areas; so they’re not very useful. You can define areas by zip code, which is in my opinion too large and also sometimes not as useful… City – obviously, we’re talking about the 139 square miles that is the city of Detroit, so it’s far too big…

Joe Fairless: Right, of course.

Brent Maxwell: I mean, you can throw Boston, San Francisco and Manhattan in there and still have room for Phoenix.

Joe Fairless: Dang! I didn’t know that.

Brent Maxwell: Yeah, it’s huge. You can throw a lot of big cities in there and you think “Wow, all these fit in the same area…” Actually, when it comes to Phoenix, the density of Phoenix is very similar to the density of Detroit.

Joe Fairless: Hm. Just warmer weather.

Brent Maxwell: There’s certainly warmer weather, yeah. I have relatives in the Phoenix area.

Joe Fairless: Do you use just an Excel spreadsheet? When you say overlay, is that what you do?

Brent Maxwell: No. You’d be surprised by the service that’s provided for brokers, the amount of information you can get. There’s a lot of data and information available, and if you really learn how to use the tool, there’s many charts available that you can create; you just have to learn how to play with it, plug the information in. So I don’t pull them out and export them into an Excel spreadsheet; I do export a lot of information into Google Sheets, the same thing… It’s what I use, because it’s call based, but I use those more for marketing data and for generating a list, and that sort of thing.

The sheets I’m talking about for the overlays – I don’t actually overlay them, I just print them out and look at them next to each other, and you can see transvisually. So it looks like a line chart. On the left-hand side of the page you’ve got the mountain that was the great peak, and then the Great Recession crash, and then the trough, and then towards the right you’ve got ’15, ’16, ’17, ’18 as far as the years go… And you can look at it and you can see the action over time. So I compare the areas that I’m looking at versus the surrounding areas in other key metric areas that I’m very familiar with in the city. And by areas, I do mean that thing, what I said about neighborhoods. [unintelligible [00:13:35].20] block by block and street by street, and there are definitely neighborhood boundaries… Which works to our advantage in some cases, especially when it comes to, for example, comps. If you’re dealing with a transitional market and you’re starting to get outside of straight investors sales, and you’re looking at selling to retail homebuyers, or using mortgages, comps become very important from a mortgage standpoint, for appraisal purposes, and appraisers look at like properties versus like properties, so they’re looking at that 3-bedroom, 1,000 sq. ft. bungalow, and you can have a neighborhood in Detroit like East English Village, which is a historic, very nice middle-class neighborhood that borders on one side Cornerstone Village, and on the other side Morningside, and these two neighborhoods share some of the similar housing stock.

So you can have a 3-bedroom bungalow that’s $225,000 in East English Village, which the appraisers will use to comp out properties on both the neighborhood next to it, Morningside, and on the other side, Cornerstone Village. You get to ride off their comps. Obviously, with the changes in the way the laws work, not only does the seller nor the buyer have any access over the appraiser, and the lender doesn’t either; there’s like  a third-party appraisal company that enables all that stuff now… But they still pick their comps from the data. So the advantage is you can work near a hot neighborhood, as long as you have similar properties – that’s technically not the same neighborhood, but appraisers don’t care about neighborhoods, they care about zip codes, cities and like properties.

Joe Fairless: Anything from a on-the-ground standpoint? You mentioned young couples with a dog, and hipsters going into a bar that’s been opened… Anything else, a type of business maybe that you’ve seen, that indicates that the property value is increasing?

Brent Maxwell: Yeah, absolutely. Big rooftop data companies like Trader Joe’s and Whole Foods. Obviously, when those come in the neighborhood, you know that the neighborhood is going to experience some continued resurgence… But they’re looking at rooftop data and they come later in the process.

On the front-end though, a lot of people think that they have people move to an area, and then the prices start to go up, but in my experience, before the hipper people come, you have the artists, the pioneers who come, who are looking at just cheap, cheap, cheap prices, and the ability to live and focus on their art or their lifestyle, and still  have a neighborhood that works for them. So that’s something that people think is the driving force, but in my opinion, what really makes the difference is, like you said about the businesses, when you’ve got a hip restaurant that lands in a neighborhood, or a hip coffee shop, that kind of thing, that brings in people to drive to as a destination to the neighborhood, that is the big number one sign.

In Corktown, which is just outside of downtown on the West side of Detroit, we had Slows BBQ 10-12 years ago, and it was very trendy, hip and popular, and it led the procession of businesses and people that moved into Corktown, and thoroughly drove values through the roof there… And it really turned that neighborhood into a great, great neighborhood.

What  we’re experiencing now on the East side of Detroit is something similar going on in the Jefferson-Chalmers neighborhood and in the East Village neighborhoods, where you’ve got [unintelligible [00:16:56].07] just opened recently, you’ve got Roses, which is a diner that’s very hip and trendy, to the point where — it begins in the busy times in the morning, there’s lines outside the door, in the middle of an area where we’d be like “Why on Earth is this diner packed with people lined up outside the door?”

Joe Fairless: There’s really not a good reason, but…

Brent Maxwell: There isn’t [unintelligible [00:17:18].19] I’ve been there three or four times, and only three or four times — I live right by there, it’s just not my thing… But the last time I went there was really the best time; I’ve enjoyed it the most then. But yeah, that’s what drives it, so the next thing you know is there’s people moving in who are bicycling all over, and the city is just thrown in from downtown all the way to the Grosse Point Border on the East side along Jefferson, which is the main road that runs by the water… They’ve done bike lanes running all the way from the city to Alter, which is huge here for Detroit.

We’ve got [unintelligible [00:17:52].04] where you can rent bicycles, all throughout downtown, Midtown, going into West Village, all surrounding the downtown central business district… But now we’ve got scooters, and I’ve seen the scooters — I don’t know if you guys are familiar with the scooter rentals…

Joe Fairless: Yeah, Birds…

Brent Maxwell: Birds, and Limes… They end up just straight up hood areas, where you’re like “Wow, how is there a scooter here?” But people of all socio-economic background use them. They’re convenient, and they’re not that expensive. They also provide an opportunity for locals for recharging them, I understand; that provides a source of income.

Joe Fairless: So you’ve provided some information on how you identify the up-and-coming markets, and we got into specifics, from the rent comps, days on market, how you look at the prices of the properties that have been sold, how you divide that into quarters, and look at the bottom, see how the bottom creep up to a certain price point, and then also the top, and then the underground neighborhoods too, and certain things to look for; you have to drive to that neighborhood, which brings in more people and more exposure.

I really appreciate this… How can the Best Ever listeners learn more about what you’re doing and get in touch with you?

Brent Maxwell: Just visit our website anytime, ipsrealty.com (Investment Property Systems Realty). Or they can call me or e-mail me. 313-422-13-33 is  my direct line. You can’t text it, but you can call it; it rings my cell phone in my office. Or brent@ipsrealty.com. I’m pretty much always on, I don’t have an off-switch.

Joe Fairless: Well, Brent, thank you so much for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Brent Maxwell: Wonderful.

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JF1602: Accidental Landlord Falls In Love With The Real Estate World & Builds A Business with Mike Jordan

Mike became an accidental landlord around the 2008 crash. He actually enjoyed the business and decided to take it up full time. Now he has multiple strategies in real estate investing, with each separate company having a different leader. Hear how he was able to scale to having multiple successful businesses after accidentally stepping into this career. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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

With us today, Mike Jordan. How are you doing, Mike?

Mike Jordan: I am doing well, thank you… And thank you for having me. I appreciate it being back on the show.

Joe Fairless: Yeah, my pleasure. Nice to have you back. Best Ever listeners, you recognize Mike’s name because he was on episode 1558, fairly recently, and it is titled “Championship-level rehabs for better returns.” I love how we went — well, I’m not gonna give myself credit; I shouldn’t… How YOU went through the rehab process and you talked to us about the keys to a successful rehab. Today we’re gonna do a regular episode and we’re gonna learn more about yourself and your background.

A little bit about Mike before we get going – he has been an entrepreneur since 1999, and he has over 100 million dollars in total transactions under his belt. He has done a bunch of different real estate strategies, from renovations, building homes, buying buy and hold properties, he’s a turnkey provider, has a property management company, wholesaling a whole bunch of stuff, and again, you can hear his other episode on “Keys to a successful rehab.” I highly recommend that episode, episode 1558. Based in Detroit, Michigan. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Mike Jordan: Absolutely. You’ve given out a lot about the background, but I’ll tell you, I started out as a contractor back in 1999, and always had a passion for growing financially, and opportunity-wise, and got into building homes back in the early 2000’s when it was a very hot thing to do… And that’s the only thing I knew how to do real estate-wise to make money, because I didn’t have the education that I’ve gained throughout the years through different sources such as yourself and many other sources that have taught me how to make money without just building homes. There’s a lot of routes to make money in real estate.

So I got into building homes, the market went down around 2006, I was left with approximately (I think it was) five homes, had no debt on them, kept them as rentals, and I became an accidental landlord that loved the business. So what I started doing is I said, you know what, as the years went on and the market got worse and worse, I started buying more and more properties. What happened was I learned how to take my construction skillset of renovating the homes, not going too far with them, but having  a beautiful home, if you had hardwood floors in there refinishing them, putting in a good kitchen in there, and most importantly, put in a good tenant that you manage properly.

Then after doing that, I started selling a lot of these homes to turnkey investors, and I created a property management company and became an accidental property manager. Prior to that I was an accidental landlord, I became an accidental property manager… It was by force, because I didn’t feel any of the property management companies delivered the right kind of client services, the direct, straightforward, honest service that owners deserve… And my companies kind of blossomed from there.

Then I got into buying notes, because I learned the business, buying debt, and it was good to buy when I come across good deals that make sense… So I kind of put that into my inventory bucket of opportunities to buy along the way.

Along doing that, a lot of the wholesalers and realtors that I would deal with, and events I would go to, people would sometimes say “Hey Mike, I got this deal under contract and I need money for around three months to buy it, fix it up and flip it”, or “I need money to buy it and wholesale it”, so I also became an accidental lender.

Actually, the accidental lender thing is kind of funny, because my first lending opportunity really came from one of my contractors that was working for me who was flipping a home, and then the second one was through a dentist that was working on my teeth. I said, “Wow, okay. This could be really good.” So I put that into the mix, and it sounds like it’s really complicated what I’m doing, but it’s not. It’s all synergetic, it’s all really related businesses in real estate, and there was a natural progression.

I looked at it like everything I’m doing, I wanna maximize, hit the ceiling on, and then basically add another function that makes sense to the business. That’s where I went on to create a brokers firm, which just made natural sense that if we’re going out there and doing off-market marketing, why not take the homes that we don’t wanna buy and create turnkey properties [unintelligible [00:06:35].06] for our clients, why not take them and list them? Or if the price doesn’t meet what we’re looking to buy it for, why not take it and list it? So we started out own brokers firm, and that’s been going really good, and it also complements our other business, such as the hard money business and our turnkey business and our property management business.

Along the way with being a turnkey provider, one of the things is to get the home done as economically as possible, without not providing a quality home. So quality has to be in the forefront of producing any product that we provide, and we started buying materials in bulk so we can bring those costs down without jeopardizing the quality. Then we started our own materials outlet company, which only carries certain products that we feel other investors – not homeowners – would buy from us.

I think one of the keys to my business is diversification, and [unintelligible [00:07:30].21] businesses that don’t affect what we’re doing in a negative way. So I’m not in the real business but then I also — I don’t have a pizza place. I’m in the same realm of businesses, and that’s where we’re achieving our success of flipping around 300 homes a year.

Joe Fairless: When you were building homes in the early 2000’s, and then in 2006 — you mentioned the recession started in 2006 where you were at, in Detroit… How did you have five homes with no debt on them? Because my assumption is that you had used financing in order to get loans  to build those homes, but it sounds like that’s an incorrect assumption, right?

Mike Jordan: Yeah, that was me saving every penny that I made for the last six years, and having a thriving construction business that was making a lot of money. So what I was doing is — I didn’t know how to dip into the “good debt world”, as I call it; because I think there’s good and bad debt. I didn’t know how to dip into that the right way, so what I  was doing is I was using my own cash. That was from me being in business prior to that for 4, 5, 6 years, and saving up money, and businesses doing really well… So I could go out there and build these homes in cash.

I wasn’t doing volume. I’ve built a total of 20 homes in my career. So when I was left with those four, actually two of them were new construction, and the other three were properties that I bought that I would have demo-ed and created lots out of.

Joe Fairless: But did you build all five of them? I mean — so the two new construction, did you build those two?

Mike Jordan: Yes, I built those two.

Joe Fairless: And the three that were demos – did you demo them and start building, or did you just keep those three?

Mike Jordan: No, I kept those three. They had tenants in them. I bought them anywhere between 70k and 120k, because they were on multiple lots… So I was valuing the home based on the value of the land. I was able to get by with not having debt, and that was a really positive thing for me to do. It was based on the earlier success that I had in my construction company and gaining a lot of business from that company.

Joe Fairless: For the two that you built, and you had to sit on them and rent them out and you became an accidental landlord, how much did it cost to build each one, approximately?

Mike Jordan: Well, back in the early or mid-2000’s, I was building actually (I would call it) a builder-grade home, which was standard finishes… I was building for around $80-$85/square foot. It wouldn’t be more than that.

Joe Fairless: And how big were they?

Mike Jordan: My typical size home was about 2,000 square foot. Well, from 1,900 to 2,000 square foot.

Joe Fairless: About $170,000 all-in, for each.

Mike Jordan: Absolutely. And we would list them for 249.9k, 259.9k. After commissions and hold costs and everything we’d probably end up netting roughly 40k-50k max. It was a decent business for me to make some money in, and I did what I knew at the time. But nowadays there’s a lot more access to information, where if you put out that kind of money, you could possibly make more money with it, and not as much movement and not as much heavy-lifting.

Joe Fairless: So you had about $700,000 tied into these homes whenever you became a landlord…

Mike Jordan: Yes.

Joe Fairless: What have you done since then with each of these five homes?

Mike Jordan: There’s two of them that I still own, they’re still rented till today.

Joe Fairless: The new construction?

Mike Jordan: No, the ones that I bought that were on double lots, that were just small homes that I bought for — I think one of them I bought for 90k… There was three of them that I bought; one was for 70k, one was 90k, one was 100k-and-something, if I remember right… But two of them I still own, they’re right next to each other. They’re actually four lots right next to each other, and I still own that.

Joe Fairless: And how did you net out with the other ones?

Mike Jordan: With the other ones – I actually sold them in the 2012-2013 timeframe, when the market got back up. I was actually profitable on them, because what happened was I rented them out through the downturn, didn’t make a ton of money on the rent, but I covered taxes and I was still [unintelligible [00:11:54].07] My cap rates were low (probably 5%, 6%), because they were not built for renting; they were more built to sell to a homeowner. So I was still profitable, but not very profitable. I would say I still made some money off of that, if you include the money I made after the rent… And I was just happy to get it off my books and take that money and go buy other inventory that was way below market value and it could cash-flow much better, and be better for flips for me at the time. I look at it like you could flip up and down the cycle, as long as you buy at the right prices.

Joe Fairless: Now that you had that experience, there was a major recession, and you were not leveraged, you were all cash, so you could just hold on to the properties, rent them out – it wasn’t what you wanted to do, but what you really didn’t want to do is lose them, and you didn’t, because you weren’t overly-leveraged… How have you applied those lessons learned to your portfolio today?

Mike Jordan: Well, I would say that I know that to use data and indicators is a better tool for me to predict what’s gonna happen in the future, in market turns, a lot better. That’s number one. Number two, I learned that I don’t like to be in the space of anything above 150k, because the homes that I sold were 260k, 270k… One of them was actually a little bit more, because I think the one was about 2,500 square feet, and the other one was around 3,500. So those weren’t my typical 200-square-footers, at the time; those two homes were two bigger homes, and maybe that’s why they didn’t sell when the market went down.

So I also learned to stick to my sweet spot, and that’s right around the 150k and below range. I have homes right now that we produce all the time that are 70k, and they produce $1,000 rent. That’s my sweet spot, where I could sell them turnkey for 60k, with a $900 to $1,000 rental income/month, and maybe I’m into them for 40k, 45k, 50k, whatever I’m into them for… So that’s a safe haven for me that if the market ever did turn…

Another point that I bring up is when it does, I’m gonna buy more aggressive. I’m not gonna try to make something happen that’s not there. If someone doesn’t wanna accept my offer, they don’t have to accept my offer. I’ll go on to the next one. Buy right is very important.

I guess those are some lessons that not only — like I said, number one, the data situation to understand what’s going on in the market, and number two, to understand the lane that you’re really good at, and number three, to buy at the right prices that work for you, and don’t make something happen that’s not there.

Joe Fairless: As far as understanding the lane that you’re really good at, maybe from an outside perspective – you’re doing property management, you’ve got a brokerage, you’ve got a turnkey company, you’re also doing private lending… It appears that there’s different lanes there; how would you respond to that?

Mike Jordan: Well, I guess when I say “in the lane that you’re in as far as buying properties”, what I meant was I guess the price point you’re in; that’s what I should have maybe clarified, by saying the price point model that you’re good at in real estate… But going to what you’re talking about with diversification or being in different lanes, what I do is we run a company that is diversified and has a leader of each division of our company which is a separate company… And I do feel that there’s certain rules in lending that are different than in buying, and there’s different rules in property management than there is in owning the property.

What we do is we formulate core values and key point indicators and processes and procedures for each company to be able to be successful. And each company follows those rules that we create, with having the leader implement those on a daily basis to make sure that everything is followed… And I as the owner of those companies take a look at everything and try to pivot, turn and make sure the ship is always going in the right direction. We have created this system by working with the right people, who have helped us create our processes and procedures, and we really put ourselves in a situation where we can diversify and have many things going on that work well for us.

Joe Fairless: Tell us a story of a deal that has gone terribly wrong.

Mike Jordan: Oh, absolutely. A deal that I bought in 2014 seemed like an incredible deal – comps in the area, about $100,000-$110,000 at the time; now they’re around 170k, 180k. I bought it for 25k, on a slab; it looks likes we can go in there and fix it for 20k, be in it for 45k, sell it really quick for 90k… But you go in there, and one of our newer inspectors – that all get trained – missed something that was key, which was a crack in the foundation. The crack in the foundation led to a lot of other problems, such as the structural situation that the city also found to be in jeopardy, where we have to not only fix the foundation, but there were some issues with the stability of the structure.

We get started without having the foundation taken care of, because we really don’t know there’s a foundation problem. Then we start realizing there’s a foundation problem, so then we’ve gotta tear up everything we’re doing, get a foundation company out there, and that is a deal that went from something that we thought we were gonna make 100% or 80% on our money in a matter of 4-5 months or even less, to a situation that cost us a lot of money.

So one thing I can point out to listeners out there, that they should always be cognizant of, is foundation issues can be major, major costs that you can miss… And you have to know the indicators of a foundation problem. I think that if someone would have given me this advice back in 2014, which I would have passed on to my team, trained them on it, I think we could have saved ourselves a whole lot of loss of money on that flip.

Joe Fairless: How much did you end up losing?

Mike Jordan: Oh, geez, I would say we probably lost around 20k or 30k on that particular house.

Joe Fairless: Based on your experience as a real estate investor in many different capacities, what is your best real estate investing advice ever?

Mike Jordan: My best real estate investing advice ever is for investors to find a core business that they love, that they’re good at, that they can get educated on, learn and grow and maximize that business. If they wanna be ambitious and have other ancillary incomes or build other companies, don’t do it before you perfect your core business… And perfecting your core business takes time. Someone might start a  business flipping homes today, and they might think they know it all, but there’s so many things to learn and so many little things that you can learn throughout time, and you’re gonna keep hitting the ceiling. And what I suggest is to create goals and create different short and long-term goals that you hit, hit the ceiling on, and then create other goals by learning from other experts around the country and other people that are in the business.

That really is the best advice – find that one area that’s your core business, that will always make you money, whether it be wholesaling, flipping, buying and holding properties, and have that be your income-generator. And then you can go out there, and if you wanna do other things, like I do, in some people’s perspective, which I am — and I didn’t diversify right away; it took me a while… But don’t do that until you perfect your core business.

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

Mike Jordan: Absolutely.

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

Break: [00:20:44].14] to [00:21:52].24]

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

Mike Jordan: Traction, I always mention that. I know it’s not a recent book I read, but I always recommend people to read Traction, because I believe it’s a great book on how to work together as a team. If you work by yourself, it even helps you there, too.

Joe Fairless: Best ever deal you’ve done?

Mike Jordan: Best ever deal I’ve done was an apartment complex I purchased, that was being mismanaged. Partners that didn’t have the time to run it, and a city that was fed up with them, and I got it for an incredible deal, in an A area. That was the best deal I’ve ever done, and if I could do a lot like that, I would keep doing them.

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

Mike Jordan: We give back by — our whole office was great this season; we pick families that are in need and we try to fulfill their needs for the holidays… But we also give back by hiring people that can work and grow in our organization, through different organizations like Michigan Works and different employment agencies. We feel that helping them create a career or gain a skillset, whether it be something even simple, we feel that that’s great, because we’re helping out our community and people to learn how to fish, instead of just giving them fish.

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

Mike Jordan: They can visit us on our website. The best website for us is strategyproperties.com. Or they can call us at our office at 734-224-5454. We’re more than happy to speak to them about anything that we can help them out with, with any aspect of real estate that we feel that we have a very strong grip on. Because if someone was to ask me about self-storage, I would tell you that’s not my area of expertise.

Joe Fairless: Well, thank you so much, Mike, for being on the show again, talking about your starting as a contractor, building the homes in the early 2000s, how you avoided a major, major error, and that would be giving your homes back, and instead you were pumping your money back into your deals… Which is probably a good lesson for developers and fix and flippers now, because there might be a slowdown coming up, and if you’ve got highly leveraged properties on a fix and flip or a development, you could get in some trouble financially.

If you’re using all your cash, then recession comes, and it stinks, because you’ve gotta hold on to your properties, but you’re holding on to the properties, and that’s the key. Thanks for talking about that, as well as the different areas of real estate that you’re in, with the foundation of it being your knack for being a value-add investor in the contracting business, because a lot of things tie into that, I can tell.

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

Mike Jordan: My pleasure, and thank you for having me on the show, and hopefully I’ve added some aspects of the real estate market where the listeners could gain some value from, because that’s very important to me… And I really appreciate you having me on the show.

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JF1558: Championship Level Rehabs For Better Returns #SituationSaturday with Michael Jordan

Today Joe is talking with Michael about his keys to successful renovations on single family homes. With over $100,000,000 in successful transactions, it is safe to say he has plenty of experience and knowledge to share. If you’re renovating anything, especially single family homes, you’ll want to hear these tips. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Michael Jordan Real Estate Background:

  • Entrepreneur since 1999, over $100,000,000 in total business transactions
  • Has successfully done multiple different real estate strategies including: renovations, building homes, buy and hold rentals, turkey provider, buying NPN’s, property management, wholesaling, and more
  • Based in Detroit, MI
  • Say hi to him at http://strategyproperties.com/

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

First off, I hope you’re having a best ever weekend. Because today is Saturday we’ve got a special segment for you called Situation Saturday, and here’s the situation – you’ve got a single-family house or you’re looking at a single-family house, and you need to renovate that puppy. Today our Best Ever guest, Michael Jordan, is gonna talk about the keys to successful renovations. First off, how are you doing, Michael?

Michael Jordan: I’m very well, thank you, Joe… And thank you for having me on your wonderful podcast.

Joe Fairless: Well, it’s my pleasure, and looking forward to our conversation. Michael has been an entrepreneur since 1999, he’s got over 100 million dollars in total business transactions, he has successfully done multiple real estate strategies, including renovations, building homes, buying and holding rentals, he’s a turnkey provider, non-performing notes, property management, wholesaling and a bunch more… Based in Detroit, Michigan.

I’ve met Michael a couple years ago at our conference (BestEverConference.com) in Denver, stayed in touch, and he is certainly an active player in the real estate world. Today we’re gonna be talking about the keys to successful renovations. First though, Michael, do you wanna give the Best Ever listeners just a little bit of context about your background and your experience within the renovation world?

Michael Jordan: Yeah, absolutely. I started out in 1999 and I was a contractor; I basically was running a contracting company, doing sales to property management companies, and handling their renovations. From there, it evolved into me being a real estate investor. I became an accidental landlord, and from there it was something that I loved, the real estate world and the investing world, and I put in my construction knowledge into the real estate investing world, and it paired very well for me.

That’s a little bit of background on my construction… I have roughly 19 years in that industry, and it’s something that there has been a lot of ups and downs, that maybe at some point today or at some other time I can share with you guys, as far as dealing with contractors and projects… But that is my experience in the construction world.

Joe Fairless: We’ll talk about keys to a successful renovation on a single-family house. What is the type of single-family house that you typically renovate? Can you describe it?

Michael Jordan: The typical single-family home that I would renovate is one that I buy as a REO from a bank, or a vacant home, that really needs to be renovated from A to Z – roof, windows, kitchen, bathroom, update electrical, update the plumbing, HVAC… So you’re doing the whole nine years. And when you’re in a project like that, it’s very important as a real estate investor to assess the project properly, from the standpoint of knowing what you do and don’t have to do in that home, and understanding the pricing, the timeframe… Everything is a key component in being successful in that renovation, and it all starts out by doing what we call “a pre-scope of work.” We call it “pre-purchase scope of work” because we go in there and we assess what needs to be done, and we can’t spend too much time on that, because we don’t know if we’re gonna get the home as a real estate investor or not. So we’re gonna be in there for 15 minutes and we’re gonna have a rough budget. Our rough budget should eventually be very close – within 10% – of our actual scope of work, which is a detailed scope of work. Hopefully that answers your question, but that is something that is a very important part of any project – knowing what needs to be done and have an accurate cost.

Joe Fairless: Before you enter the property to do the 15-minute walkthrough, what work (if any) is completed prior to that walkthrough?

Michael Jordan: I would say prior to that walkthrough we just know about the location-location-location. That’s what we’re going off of. We know that our average interior renovation is gonna cost approximately $25-$30 a square foot. That’s our approximate price to renovate a home from A to Z, and that’s what we’re working off of. Now, if we go in there and we find that there is a lot less work than we expected – there’s hardwood floors that look great, and there is a new kitchen that was put in there, which is very doubtful, obviously that number comes down. But when we’re looking at a home, we’re always gonna write an estimate, and we’re looking at it from, “Okay, let’s start off with that $25-$30/square foot number, and let’s either come down or possibly go up from there.”

We’ve been into homes where the walls have been gutted and there was no drywall up or installation, and it’s like almost a complete new home when we’re done.

Joe Fairless: That $25-$30/square foot – does that include your labor costs?

Michael Jordan: Yeah, that does. What we do is we are constantly — one of the biggest challenges that I think most real estate investors have is finding the right crews to do their work. What we do is we’re constantly recruiting, and we have to recruit crews that not only do good quality work, but that can meet our pricing. That is a challenge. So we really have to always be on the hunt for new contractors, and contractors that can work with us. And just the nature of our business – we’re gonna lose 10% of our contractors every month or so, just because that’s the nature of the business. They’ve got another bigger job, or they dropped off because they don’t have enough workers now… That’s what happens.

But we find that a way to combat that is to constantly recruit, and also to have in-house direct labor, labor that works for us on an hourly basis, or a salary basis. That’s a way that we combat getting hurt by crews that leave us or that don’t perform.

Joe Fairless: So you’ll know the location very well prior to doing the 15-minute walkthrough… How does that influence what your actual scope of work cost is, knowing the location?

Michael Jordan: We’re gonna look at comparables in the area – what’s the market going for? How much is the rental rate? What are the taxes? What are the trends in the area? Is it an inclining area? Is it an area that is stabilized out, where there’s not growth nor decline? Is it an area where there’s a lot of development going on, where we expect there to be appreciation on the value of the home and on the rent? That’s the homework that we do prior to getting to the home, and understanding the rough costs of a renovation.

Dependent on the area… Some areas call for — for example Royal Oak, Michigan, which is a very popular area… That area calls for more of — there’s finishes that are more desirable in that area, that we feel that more homeowners and renters like, so that’ll affect material prices, and then that also might affect our scope writing and our cost of the project.

Joe Fairless: You’ve done your research on the location, and now you have just pulled up to the subject property, and you’re about to do your 15-minute walkthrough… Walk us through what you’re looking for in a house, and your thought process, and where you’re writing it down, in just as much detail as possible, please.

Michael Jordan: Well, I would say what we’re looking for in a house is 1) we’re going in there and we’re taking a look at the cosmetics. We’re looking at the floors, the walls; can we move any walls to make it more of an open concept, or give a better layout there? Two of the main items that we look at are the kitchen and the bathrooms. We’re seeing “Okay, what can we do to make this look nicer, increase the size, make a better layout?” And then we’re going into the mechanicals – electrical, the plumbing, the HVAC.

Once we get through cosmetics – the floor, the walls, the kitchen, the bathroom, the electrical, mechanical and plumbing, then we’re taking a look at the windows, the roof, the driveway, and then safety and structure. Because we wanna make sure that every home that we complete compliance with the city code and ordinance, so we can get a city certificate of occupancy.

Joe Fairless: How do you do that in 15 minutes, and what part of what you’ve just talked about takes up the most amount of time?

Michael Jordan: I would say how we do that in 15 minutes is training, training and training. To me, I love it when people actually do a walkthrough with me. When I say 15 minutes, it might be 20 minutes. I’m just giving you a roundabout timeline. Just being so used to have in your eye, look at the main items that you’re looking for.

We also have assessment sheets, which help us go through it line by line what needs to be checked off or inputted into that sheet, to make sure we cover everything from A to Z.

I would say the scariest factor that anyone around the country can come across in a house is a foundation issue. Everything could be fixed; a kitchen could be changed out, cabinets can be changed out… All that good stuff that’s not going to be tremendously costly versus what [unintelligible [00:11:53].28] but if you miss a foundation issue – you miss a bowing wall, you miss a crack in the foundation that is really having the foundation sink… Those are major, major items.

I don’t wanna be going away from your question too much, but to answer your question, it’s really having that experience. I’ve probably been through maybe 5,000-6,000 houses, if not more, myself; my team has been through thousands of houses. We’ve been through so many of these things, and we knew where we’ve gotten bit in the past. My biggest losses have been from foundation issues that we’ve had to cure.

Going back to your question about how could it be so quick – well, first of all, we have to make it quick, because if we’re gonna buy homes, then we’re gonna take a look at 15-20 homes a day that we’re offering on, and scoping on, and doing all that stuff. We have to be time efficient, and it just comes with experience.

It’s not that someone that hasn’t done that that many times can’t learn – they can; that’s where I always tell real estate investors that wanna get into flipping… Some wholesalers wanna get into flipping, they wanna maximize their money there, and I tell them “You really first have to start off by you being an expert on pricing.” And don’t just count on the contractor, because you can take  a contractor out there, that you can rely on, but that contractor can disappear after a week, a month, a year or whatever it may be.

You have to be the pricing expert. You have to have more than one contractor to be able to come out there and finish the job. That’s why I look at educating oneself on how to write a scope of work and the proper pricing as one of the most crucial elements in becoming a good flipper and a good single-family home real estate investor.

Joe Fairless: The categories of cosmetics is one, kitchen bathrooms, two; mechanicals, three; miscellaneous stuff like windows, roof, driveway, four, and safety and structure, five. With those five categories, which one of those you look at it and you’re like “Pf, whatever. Let’s move on. I got this. I can handle really anything that comes my way.”

You mentioned foundation is the big one, that you don’t wanna mess up on, but which one of those five is like “Pf, whatever… Let’s do this. Easy.”

Michael Jordan: Painting and flooring. So easy.

Joe Fairless: Cosmetics?

Michael Jordan: Yeah, cosmetics. I think that I can bid the cosmetics off of a picture. Someone might say, “Well, you might have missed a hole in the wall.” It’s drywall, it’s not a big deal. It can be patched. It’s an item that’s gonna take you an hour to fix. So that’s the easiest one right there.

Joe Fairless: Well, within cosmetics, you mentioned “Can we move walls to make it a more open concept?”, how do you determine that?

Michael Jordan: Well, first of all, you wanna make sure that the wall is not load-bearing. And to do that, you wanna have some experience to know where the beams are placed, and to make sure that you can move those walls. That’s number one.

Number two, you’ve gotta have a vision from the standpoint of understanding what the benefits are to opening up those walls, because to do demo on a wall does take much time. But if you demo a wall and it shouldn’t have been demo-ed, you could also mess up the layout. So it really has to be someone that has that good vision, that quick vision.

I walked into a home with a wholesaler, probably around six or eight months ago, and I walked in and I told him — the home was around $250,000 potential ARV, and he was looking to wholesale it for $70,000 or $80,000… But there was a lot more work than our typical home. And the first thing when I walked in there, I’m like “Yeah, I would knock this wall out”, and he said “Man, how did you know that so quick?” I said, “Because there’s no purpose of this wall here. It actually gives you the vision of a smaller home. It gives you a more compressed look. It doesn’t benefit the layout in any factor, whereas if you took this wall out, you’ve got a more open floor plan, you’ve got a visual that is just much more appealing to anyone. And why it was placed here in the first place? I don’t know.” Maybe in the ’50s, ’60s, ’70s there was more [unintelligible [00:16:04].16] I don’t know, but for me, I just look at it from the standpoint of “What are the majority of people going to like? What are the majority of owners that are gonna buy this home going to like? What are the majority of tenants going to like?” That’s where I learned what they liked, and I kind of go off with that.

Joe Fairless: Going back to “know where the beams are placed, to determine if it’s a load-bearing wall or not”, how do you know that?

Michael Jordan: There’s tools; you could bring tools along to see if it’s a load-bearing beam, and if you can remove that wall. If you’re that good, you could pretty much knock on that wall and see if it’s hallow or if there’s a beam in there. That’s just also experience too, but there’s ways that we teach people to take a look if it’s a load-bearing beam or not and determine that.

Joe Fairless: Anything else as it relates to keys to successful renovation that we haven’t talked about, that you think we should?

Michael Jordan: Sure, absolutely. I would say that the keys to successful renovations also comes with a couple other parts. Number one is knowing the materials you’re gonna use and the costs of the materials you’re gonna use. A lot of people get started with the renovation and they actually finish the renovation, but they end up realizing that they weren’t as profitable as they should have been, because they maybe went overboard on materials, maybe they didn’t buy the materials at the right stores, where they could have got better discounts, they didn’t scope out the proper materials, that would give the same results as the more expensive materials, and they didn’t know how to color-coordinate things properly, and the home sold for less because they used the wrong color coordinations.

So materials is a huge factor in flipping homes, and I tell any investors that are out there – I know that everyone has watched the HGTV shows and whatnot, with them going through materials and whatnot… There is big reality to that. I would say that color-matching, proper materials are very important, but know your area, know your comps, know what your home is gonna sell for, and know what you can afford from the get-go with your materials. That’s one of the two other items I was gonna speak about.

The second item, which I spoke about earlier, is having the right contractor on your site. The right contractor doing a renovation means someone that you’ve seen their work, you have referrals from them, you know that they’re someone that can abide by a contract that is very reasonable for them to complete a home, and someone that their pricing is very competitive. I don’t recommend using contractors that don’t do work with their own hands, because that will defeat the purpose of what we as real estate investors are trying to do, and that is to be as profitable as possible.

I feel that that contractor that is a company, and has an office, and [unintelligible [00:19:11].19] eats into the profit by 30%-40% higher prices on the construction. So I recommend having smaller crews – you have your electrician, your plumber, your HVAC guy, your painter, your flooring guy… And just cut up the job.

Sometimes people feel that they just have to hire a contractor that does everything. Sure, that’s possible, you can do that, but cutting up the job also works really well if you plan it the right way.

Joe Fairless: You’ve done renovations for a long time… What is one mistake that you’ve made recently that you can share with us, on a renovation?

Michael Jordan: One mistake that I’ve made recently on a renovation I would say would be not saving hardwood floors because we thought the stains were just that bad on them… Because sometimes over the years people have pets, and there’s urine stains and whatnot that the pets create on the floor, and us going through there and figuring out another flooring option… Whereas now we realize throughout time – and I don’t think this was even recent; this was maybe something like last year. We realize over time that imperfections on floors are sometimes beautiful, so you can use different color stains to hide some of those imperfections and make it look like it’s part of the age of the floor, or going with a solid color, not stained, but pain that sits on top of it and looks wonderful. So I think one of the bigger mistakes that I’ve seen in the last year or so was us sometimes reverting to alternate flooring when we already have great flooring there.

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

Michael Jordan: Well, my name is Michael Jordan, I’m with Strategy Properties. You can visit us on my website, at StrategyProperties.com. You could also reach us at 734-224-5454. We’d be more than happy to give advice. We’ve been doing some training on renovations and how to handle renovations from A to Z, and teaming up with some people to do simulation renovations for them to go through a project with us, for them to learn the ins and outs of it before they go out on their own and do it in whatever state they’re in… So I hope that we’ve provided some good information to people, they could use it in their renovation projects to be successful, and that’s our goal on this podcast today.

Joe Fairless: Yeah, that would be a fun and worthwhile experience to go through for anyone who’s in the value-add business, so… That sounds really good.

Thank you so much for being on the show, talking about your approach, your pre-purchase scope of work, what you do, then the 15-minute walkthrough, the different categories of items that you look for… The one that could bite you real hard – the foundation – and other stuff that is just easy to address, like cosmetics… As well as talking about how you wanna make sure — what materials you’re using, what the cost is of those materials, and then getting deeper there. We didn’t have time to get into too many details there, but you went through that, as well as having the right contractor on your site, and having a backup option… And ultimately being an expert on pricing, so that when – not if, but when – a contractor does leave in the middle of the night, with the project halfway done, you know how to take it from there.

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

Michael Jordan: Thank you, Joe. I appreciate you having me on the show, and have a great weekend. Thank you.

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investing in downtown markets

JF1357: Identify An Emerging Part Of A Down Market, Invest, & Make Money with Brent Maxwell

Brent is an investor in Detroit, MI. That’s right, Brent invests in, makes money, and helps other investors make money in Detroit. The trick is finding emerging neighborhoods before they become “hip”. We may focus the conversation on Detroit today, but a lot of these tactics are applicable across the country. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Brent Maxwell Real Estate Background:

  • Real estate investor whose personal and professional stories align with the recovery of Detroit
  • Has a passion for the “limping” sections of Detroit and helps people buy into a piece of the city’s recovery
  • Based in Detroit, MI
  • Say hi to him at http://www.ipsrealty.com/
  • Best Ever Book: The One Thing by Gary Keller

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

Brent Maxwell: Hey, Joe. I’m doing great.

Joe Fairless: I’m glad to hear that. A little bit about Brent… He’s got an interesting approach – he has a passion for the “limping” sections of Detroit, and helps people buy into a piece of the city’s recovery. He’s based in Detroit, Michigan, his company’s website is IPSRealty.com (that’s in the show notes). Brent, with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Brent Maxwell: I’d love to. I’ve been in real estate investing in Detroit for going on 15 years now. I’ve started in 2005 with my first duplex, and just been running it at full steam ever since. I lived through the great run-up to the great crash of our generation.

Joe Fairless: What type of investor are you?

Brent Maxwell: I like to be a value investor; I do added value purchases, we invest for cashflow, but with long-term upside potential as a secondary criteria.

Joe Fairless: What does your portfolio look like today?

Brent Maxwell: Single-family residentials, small multifamily, small apartment buildings. The only time we’re dealing with anything really commercial is if it’s mixed use. For example, we bought a 32-unit building which four of the units were storefronts… But other than that, it’s all at this point in time residential income property.

Joe Fairless: When I mentioned your bio at the beginning, I said you’ve got a passion for the limping sections of Detroit and helping people buy into a piece of the city’s recovery – can you elaborate on that?

Brent Maxwell: Sure. So for limping – we like buildings that are limping, and by that I mean for the apartment buildings we like them with some occupancy, ideally with bad management or neglect, but with some people in the building, so that the building has functional systems, even if they need to be updated, or at the end of the use or life, or even functionally obsolete; at least they’re operating… Either there’s some people in the building, typically not paying rents, or paying below market, that sort of thing.

As far as the areas that we like to invest in, I like what I call “the edge of hip.” The areas that are on the cusp or the edge of where the hottest areas are, or areas that are just starting to hit that gentrification curve.

Joe Fairless: Let’s pretend that you weren’t from Detroit and you didn’t live in Detroit, and you lived in Indianapolis. If you were to invest in Detroit, how would you identify the edge of hip?

Brent Maxwell: There’s two ways to do that. One is to utilize a local expert like myself that knows the city and lives and breathes the city. The other way to identify those areas would be to look at all the data and go from that. I think that our approach — both of those support each other. So it’s not a gut feeling, it’s backed by science and math and the markets.

Joe Fairless: What data do you look at?

Brent Maxwell: Sales data. Also, we look at — from a planning standpoint, I buy for cashflow. So everything we buy is based on what’s it gonna cash-flow like, what’s the ROI gonna be when it’s rented now? But we have that secondary criteria of “What’s it gonna look like when this area has recovered?” and that isn’t just current sales data. The current sales data tells us what markets are hot, and you can see that from the streets as well, but from looking at just numbers you can tell prices are increasing in this area, versus other areas that are still flat.

But what we look for is — the city has 50-year land use maps; they have long-term planning. So the city doesn’t determine the market. People buy what they wanna buy, and the city is putting on a map and is saying “This is what we wanna have happen.” It doesn’t necessarily make that happen, but if you have the government behind what you’re doing, whether it be through tax breaks, or added attention to neighborhoods, bringing in NSP dollars or stabilization dollars from the Feds…

The city of Detroit just created a plan to do 12k affordable housing units with 250 million dollars in a fund – that money is gonna be targeted at areas that are in our target areas, and it was part of the reason we picked them, because of things like that. So even if we’re not participating at that fund, for example, if they develop the area that we have holdings in, it’s gonna help pull ours up… You know, a rising tide raises all the boats. And even if we’re not participating in government money, which has its own downsides and caveats to making it that useful, we still can take advantage of the fact that the government is putting a lot of money into certain areas of town.

And other areas of Detroit – large areas of Detroit – are vetted and planned to be farmland (they call it Innovative Ecological and Innovative Productive). So farmland, or factories, or small assemblies… They’re not gonna be building [unintelligible [00:05:47].07] and doing large manufacturing in the city anymore. It’s not something that really makes sense for anywhere in the States based on the cost of labor, but we still have plenty of opportunity for manufacturing and other types of industry… So that’s what the city is looking at.

If you look at the city of Detroit, it’s 139 square miles. 2.1 million people lived here at one point in time. Now you’ve got a third of that, so you’ve got a  huge quantity of land. I’ve seen drawings where they’ve taken San Francisco and Boston and put them in the city of Detroit, and there’s still a huge amount of city left for another city to be put in there. It’s got a lot of land. So we don’t have enough people living in the city, or enough demand to fill that, so I think that there’s a plan to do the agricultural and production in the city; that’s where it’s headed. And hopefully in our lifetime we’ll see all of Detroit experience the recovery that a small portion of the town has already seen.

Joe Fairless: I have a follow-up question on the population being a third, but I’ll get to that in just one second. First, the 50-year land use map…

Brent Maxwell: Sure.

Joe Fairless: How or who does the Best Ever listener talk to to obtain that?

Brent Maxwell: I’ll actually be putting a page coming up soon on the website with all my slide deck of maps on it, so it’ll be there… But you can get it if you just type in a Google search and look at the 50-year Detroit land use; the maps or the programs should come up where you can see what they have going on.

Joe Fairless: And then they can apply that same approach for Indianapolis? Apparently, Indianapolis is on my mind. I don’t know why… Or other cities like that?

Brent Maxwell: Well, the Indy 500 is in a month, right?

Joe Fairless: There it is, maybe that’s what it is.

Brent Maxwell: But as far as applying that map to other cities – no.

Joe Fairless: No, no, I’m saying applying that approach, the Google search of Indianapolis 50-year land use map… Searching for that and then coming up with the Indianapolis–

Brent Maxwell: I think this is a Detroit-specific thing. I don’t know if Indianapolis has that.

Joe Fairless: Okay, fair enough.

Brent Maxwell: But obviously, you can get all kinds of information about any of the competitive Rust Belt, Snow Belt cities like Indianapolis, or Milwaukee, or Cleveland, what have you. I think the advantage with Detroit over those markets is while they all have and can generate pretty strong ROI numbers and cashflow numbers, the housing stock, if you really compare… A city that comes up a lot is Buffalo, New York – if you look at the housing stock in Buffalo… No offence to Buffalo, but if you look at the housing stock that’s available for low-end, low-income rentals, it’s mostly frame in smaller houses, and if you look at the housing stock that’s available in Detroit, there’s plenty of quarter million dollar replacement value brick houses that you can have fully renovated for 20k-50k price points. So that’s something that all these other cities don’t have available. They just don’t have that high-end housing stock that’s so affordable.

Joe Fairless: Let’s talk about the housing stock, and in particular the one-third of the population that used to live there and now lives there. As a real estate investor, you need residents to pay the rent, so that you can at least break even, and then hopefully make money… So when you look at a city that has a whole bunch of land, but not as many people, wouldn’t that be the opposite of what you typically want?

Brent Maxwell: Well, I think the key there is to not look at the city, because I don’t invest in Detroit, I invest in certain areas of Detroit. So as I’ve said before, you could fit Boston and Seattle and San Francisco in Detroit and still have land left over… So for the investor, the idea is to find the specific areas that you want to invest in. There are plenty of areas in the city of Detroit that are experiencing strong transitional housing trends, as well as some areas that are experiencing somewhat substantial population growth.

If you break it down in our target areas, the population is either stable or growing, and the demand is increasing, and the demographics of the potential buyers and renters is also changing. Those are the areas in flux that we target.

Joe Fairless: Will you give us maybe a case study of the last deal, or a latest deal that you did, just so we get an idea of what you’re buying?

Brent Maxwell: Okay, so there’s a neighborhood called Jefferson-Chalmers, which is on the East Side of Detroit on the river, by the border of Grosse Point, which is an affluent suburb of Detroit; it borders right on it. Jefferson-Chalmers is right on the water, and it’s about a 10-minute drive from downtown. It’s certainly Uber-able and it’s bicycle-able. [unintelligible [00:10:16].26] it’s a nice neighborhood, lots of great houses, and we recently purchased a 4-unit at the end of the block on one of the side streets off of Jefferson, which is the main road that runs down along the East Side riverfront.

We purchased this property, a 4-unit building, right around the corner from the coffee shop next to the new used record store, right by the bike lanes that the city is putting in. Those things are really strong markers for an area that is attractive and attracting millennials, and experiencing some recovery and gentrification for sure.

Coffee shops, and certainly used record stores don’t open in neighborhoods that aren’t hip.

Joe Fairless: The record store recently opened?

Brent Maxwell: Yes.

Joe Fairless: Oh, my… Okay.

Brent Maxwell: Yeah, 12-inch vinyl records, you know? Old record store or new record store, whatever…

Joe Fairless: [unintelligible [00:11:04].15]

Brent Maxwell: Yeah, it’s been a couple years now, but it’s been there. So we purchased this 4-unit, and it had some capital improvements, some cap ex needed, and some deferred maintenance; we’re putting a roof on it. We’ve purchased it actually end of last summer, we’ve started to turn the units, and when the people move out, we’re turning $450-$500 per unit for these two-bedrooms into $750 rents. We’re absolutely capitalizing on the change in the demographic of the renters in the area.

Joe Fairless: When looking at your portfolio to date, and taking into account the value that’s been added through both forced appreciation and just natural appreciation, so regardless of what you do it just went up, what percent would be allocated towards forced, and what percent would be allocated towards just natural, because you’re picking the right edge of hip areas, as you call it?

Brent Maxwell: What percent of — can you clarify the question a little bit?

Joe Fairless: Sure. Your properties increase in value.

Brent Maxwell: Right.

Joe Fairless: What percent would you allocate towards you having a hand and forcing that appreciation through renovations or whatever else, versus you just — it’s not luck, but you’re finding the right area and it’s just naturally increasing, regardless of what you do to it?

Brent Maxwell: Right, so let me take a shot at answering that. Basically, all of the properties we buy have some built-in equity potential, some ability for forced appreciation, with rare exceptions. We do buy some that are fully stabilized, but being local and able to add that value, it just makes sense to buy properties that are at least a light project, a turn of some kind, or some form of distress that we can take advantage of, and add some leverage to our purchasing in that fashion.

And then all of them for sure are purchased with appreciation potential being a key component… And I’m not talking about a few points a year type of appreciation here. The areas that we’re buying in – I can give you an example of my primary; I’ve purchased ten years ago for $23,000 in Indian Village a 4,000 square foot [unintelligible [00:13:08].28] mansion. It was rough and I’ve put a lot of money into it, perhaps close to 100k total invested, but it’s worth 400k-500k now.

That type of appreciation, that type of hockey stick curve exists and it existed in downtown, in Midtown, Corktown, Indian Village, which I mentioned… That’s transferred over to other areas of Detroit (a university district), and now it’s hitting other neighborhoods, like the Jefferson-Chalmers we’re talking about, MorningSide is also near on the East Side, South-West Detroit outside of the super hip Hubbard Farms and Mexican Town area. There’s a lot of opportunity in South-West Detroit; we just bought a duplex down there.

And then on the West Side – I don’t deal much in the left side for geographic reasons, simply because I like my holdings within my regular travels, or ideally within a bicycle ride from my office or from my house… But North-West Detroit has a lot of churn and a lot of opportunity for transition there. So we’re talking about properties that pre-crash peak – for example your three-bedroom typical bungalow… In Detroit, the 1,000-square foot three-bedroom bungalow is kind of a common type of home – these houses sold for 80k to 120k pre-crash, 2005-2006, and now you can still purchase them in many neighborhoods, fully renovated, tenant-ready, in the 30k-40k range, or even 50k on the higher end. Sometimes even in the 20k range, but maybe not quite as nice.

Basically, you’re buying at a quarter to a third, sometimes half of the pre-crash peak values, and these areas when they hit that sweet spot, around 50k-60k/unit, lenders really start to take attraction to it, and the whole area experiences a dynamic shift from being a primary renters’ area to being new homeowners buying – and not just on FHA, but on conventional mortgages – new homes in the area. So you’ve got a big pop, where these properties go 20k, 30k, 40k over a couple years, and then all of a sudden they jump into 75k, 85k, 95k… Because when I look at a house that’s $80,000 versus a house that’s $60,000, the difference in strike point for me is $20,000, but for a homeowner who’s buying a house that’s $60,000 versus an $80,000 house, they’re looking at $125/month in debt service… So it’s easy for them to say “Well, we’ll just pay $5,000 more”, whereas for me that’s hard cash out of pocket, so it doesn’t always make sense.

Investors can’t compete against homeowners, and those neighborhoods that are ripe for transition – those are the areas we like to target.

Joe Fairless: Based on how you’re talking, it sounds like you also have your own property management company.

Brent Maxwell: We do. And we were a public property management company and we provided services to the world, but we’ve actually kind of closed our doors on that and now are only working with clients that are purchasing through us, with us, or partnering with us. So we’re a private in-house property management company doing all of our own management.

Joe Fairless: What’s a typical partnership structure?

Brent Maxwell: We used to do flips, so it was basically an equity split where an investor put up cash, we would take care of the acquisition of the deal, managing it, doing the whole process, and we would split the upside. Sometimes we would have cash in the investment, other times it’d just be straight 100% investor capital.

What we switched the model to though is now we offer a small percentage on an annual basis, because we’re buying to hold for basically 2-5 years is the typical target length, and then of course it depends on factors that are outside of everyone’s control, such as if we hit another swoon, or if there’s a recession for a while, what that does with the market. I look forward to the opportunity to have easier buying, for sure, because the market is very tight and it’s hard to find good deals… But that is unlikely – based on everything I’ve read and everything I’ve seen, and historical evidence – that it’s going to last for a long time if there is any kind of a buyer’s market there, because of the fact of the massive shortage that exists in the inventory of the market here.

So we offer a fixed return plus an upside.

Joe Fairless: So it’s kind of like a preferred return, plus they’re equity owners in the deal?

Brent Maxwell: Exactly.

Joe Fairless: Okay.

Brent Maxwell: And we form new LLC’s, and partnerships, and a full operating agreement – it’s done in a  very clean, professional fashion. [unintelligible [00:17:11].03] the whole nine yards.

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

Brent Maxwell: Best real estate investing advice ever? I don’t want to live with regret, and I don’t think anybody else does either. Looking back, the deals that really bothered me the most are the ones that I passed on, for one reason or another, that I should have pulled the trigger on.

So if you look at the opportunities that happened in say, Corktown in Detroit, just outside of downtown – those values are through the roof. I’m not gonna miss them again, and I don’t think anybody else should.

The big crash of 2008 (09.15.2008) – that day came once in our lifetime. It’s not gonna come again. We’re not gonna see that level of opportunity, that level of correction. It’s a multigenerational event. So we still have the opportunity here in Detroit to take advantage of the opportunity that is here. It’s not gonna be here forever, so my best advice is if you see something and you wanna do something, take a shot.

Joe Fairless: At the time, why didn’t you pull the trigger on the properties in Corktown?

Brent Maxwell: I thought they were overpriced at the time, and I didn’t see the massive appreciation that was going to take place.

Joe Fairless: When you say that you thought they were massively overpriced at the time, what sales data were you looking at to determine that?

Brent Maxwell: To determine whether they were overpriced or not?

Joe Fairless: Yes.

Brent Maxwell: Just by comparing to other neighborhoods of Detroit, price per square foot, type of property and how much it was selling for. It comes down to demand and what people will be willing to pay. In some cases I’m still just completely baffled. There are brand new townhouses built in Detroit, not far from these neighborhoods that I’m talking about on the East Side, that are selling for $400/foot. Now, I don’t know about other markets in the country as far as that goes, but $400/foot for Detroit housing is through the roof, and it’s awesome! But if you would have told me 8 years ago that these houses were gonna be developed and you were gonna have 2,000 square foot townhouses selling for $799,000, I would have said “No way! That’s insane!”

But yet, if you look at that from a global standpoint and from other markets’ standpoint, it’s actually not that expensive to have a nicely developed townhouse, 2.5 miles outside of the city center, in a stable neighborhood, that you can get for under a million… That’s challenging in Chicago, for sure. You’re not gonna get that in Lincoln Park, are you?

Joe Fairless: Well, I don’t think so. I don’t know. [laughs] Probably not. I don’t know Chicago real estate that well, but I’ll trust you on that. So at the time – just traveling back in time to when you thought they were overpriced, based on other neighborhoods in Detroit and the price of property, without just pretending you’re at the roulette wheel and just hoping that it goes up, if the numbers and the data was saying “Don’t do it”, then how do you now make a decision in a similar circumstance to then do it, besides just hoping that it does it?

Brent Maxwell: Okay, [unintelligible [00:20:06].29] that area completely turned, and that’s one of the reasons why those prices have gone up so high; it was a different flavor of neighborhood, and it changed due to the influx of double-income no-kid people, and hipsters, and millennial workers, and so forth. You know, a very popular, hip neighborhood. Same thing with the West Village area, the Islandview area I was talking about with the property on 2,000 square foot townhouses trading for 799k. That example of the 2,000 square foot townhouse has been supported by the transition of the Corktown neighborhood.

Corktown was an anomaly at the time, but now we’ve got a historical precedent that suggests that this is something that’s going to happen in other areas, and I could see it happening in other areas as we speak.

Islandview, which is where those townhouses are – it’s really challenging to find any deals there for sure, but they’re available. We bought a house on Field Street a little while ago, which is in that neighborhood, that’s doing very well for us… And that Jefferson-Chalmers I mentioned on the East Side is another one where the edge of that has a lot of opportunity for us. So we are basing our buys on historical precedent, along with, in many cases, in more of the bread and butter neighborhoods; we’re not looking at that gentrification factor, but just looking at the ability for the neighborhood to catch back up to where it was. We’re dealing with a straight recovery there, it’s not a gentrification.

So if you’ve got a neighborhood where properties are trading for 30k-40k for nice houses, but they were trading for 80k-100k, that is just a recovery play waiting to happen, and the city and the market are both behind a nice neighborhood, with lots of good brick housing stock, including some mixed in frames. Those areas are going to recover; the city wants them to recover, the market is gonna want to recover, the prices are going up, and you see where prices were flat for 12, 13, 14, where they’re now starting to curve up and you see values increasing. It’s happening, we’re in the middle of it, watching it occur, so that’s how we know that these opportunities are real, and they’re happening, and we’re gonna take advantage of that. But like I said before, the caveat to it all is at this moment in time we still buy based on cashflow and income. So as long as we can make a real-world realized double-digit return on these investment properties, they’re buys when they have all those other upside potential elements attached to them, and we’re buying them with the immediate forced appreciation value-add play attached to them.

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

Brent Maxwell: Sure, let’s go.

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

Break: [00:22:28].29] to [00:23:08].13]

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

Brent Maxwell: Best ever book I’ve read… How about The One Thing, Gary Keller.

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

Brent Maxwell: I like to help people who are struggling to get back on track, whether it be via taking my time and working with recovering alcoholics and addicts, or helping struggling families to get back on track.

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

Brent Maxwell: 313-422-1333, or Brent@IpsRealty.com.

Joe Fairless: Brent, thank you so much for being on the show. A couple takeaways — I got a lot of takeaways, but a couple of them certainly rose to the surface… One is alignment of interest with the city, and also looking historically what’s happened in certain neighborhoods, and seeing if the fundamentals are still there, that will continue to drive that growth or bring that growth back… And that’s some of the things that you’ve mentioned with the 50-year land use map; by the way, I googled a couple cities and I didn’t get it, the 50-year land use map, so perhaps — obviously, it’s with Detroit, but then I’m sure there are others similar things… Perhaps looking at the zoning for the city. There are zoning maps for all the cities, and seeing how that’s laid out, and seeing what the plans are for the future use of that land; maybe talk to some individuals within the economic development organization with your city or your county.

Then you said this – you don’t invest in Detroit, you invest in certain areas of Detroit, and being very specific about those areas; you like the edge of hip, and we talked about how to look at that, both 1) talk to local experts, and 2) look at the data, and then that’s where the land use and just where the city is wanting to take it… Because it’s tough to swim upstream against the government, but if you flow with the government and where the city is allocating funding, then as you said, rising tides lift all boats.

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

Brent Maxwell: Thank you, Joe. You know, I always say, “You can’t flip the tide, but you can ride the waves.”

Joe Fairless: I love that.

Brent Maxwell: Thanks, Joe. Have a great day.

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Wendy Patton and Joe Fairless

JF1241: Buy Real Estate With Little Or No Money Down with Wendy Patton

Wendy has been investing in real estate for 32 years, specializing in little to no money down options. If you’re looking for a crash course in lease options, land contracts, subject to, and others, this is the episode for you! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Wendy Patton Real Estate Background:

-Recognized world-wide as one of the most inspiring speakers on “Little or No Money Down” real estate investing.

-Orchestrating the most complete and easy to follow Lease Option & Subject To programs in the US and UK.

– she has done over 750 deals and been investing since 1985

-Focus is on creative seller financing lease options, subject tos, and land contracts (contract for deed)

-Founder of the Michigan Real Estate Investors and has been investing since she was 21 years old

-Say hi to her at https://wendypatton.com/

-Based in Detroit, Michigan

-Best Ever Book: The One Thing by Gary Keller


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

Wendy Patton: Excellent, Joe. Thank you for having me.

Joe Fairless: My pleasure, nice to have you on the show. Wendy has done over 750 deals, and has been investing since 1985. Her focus is on creative seller financing, lease options, subject to’s and land contracts (contract for deeds). She is based in Detroit, Michigan. Wendy, with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Wendy Patton: You bet, Joe. When I started in 1985 I was young and broke, and did not have anything saved, did not have any credit established. I wanted to get started in this investing business. I started it because my mother gave me a real estate course that she had purchased at an event, and my father said “No, we’re not gonna do that.” He was a little bit fearful of this investing world.

She gave me the course after I had graduated from college, and on my way from Colorado to Michigan I listened to the course and decided “Oh my gosh, this is what I wanna do! This is so much more exciting than my degree is in!” So I started to pursue that on top of the job that I already had, and was able to start buying properties using creative financing strategies, because like I said, I only made $10/hour and had to pay for living expenses, so I didn’t have a lot of money. Then I ended up getting married, had twins, unfortunately got divorced, so I was a single a mother for many years as well.

So I started doing these creative strategies like a land contract, where you just pay a small amount down to the seller, they finance it instead of the bank. Then I started getting into — the biggest specialty and what I’m more known for is lease options. So I was leasing properties with the option to buy them, and then subletting them with the lease option to buy them to another end buyer – what we call a sandwich lease option – and started making a boatload of money. Of course, I ended up quitting my job soon after that. That’s what I’ve done… I’ve done so many of those, Joe, over the years, and I’ve done other kinds of investing, but some of my favorite things are just those creative strategies that it takes a little bit more creativity to put together.

Now I have the money, so I also buy fix and flip, and I buy and hold… However, those creative deals are the ones that I really enjoy, because they make you think about how to structure something.

Joe Fairless: Yeah, it keeps things fresh, too.

Wendy Patton: Yeah, they’re all different.

Joe Fairless: Let’s talk about one. Will you tell us a story of one creative financing example that you’ve done?

Wendy Patton: Sure. I have this one deal, and it was a deal that — I had an ad on Craigslist, and it basically said “Company, looking for 3-4 homes for a long-term lease.” So this woman called me, she had this home, it had been listed for 189.9k on the market, and it hadn’t sold, it had just expired. So she saw my ad and decided that since it hadn’t sold, maybe she should lease it. Of course, after we talked – I have a little script that I use – she really wanted to sell it, which is what I really wanted to do, buy it.

We worked out a deal, and it kind of sounds a little bit strange, but I ended up paying 185k for it. Now mind you, with commissions she wouldn’t have received 185k; however, because of the terms she gave me – it was a real low monthly; I think I paid $1,100 a month and I had the option to buy it for three years at the 185k.

Well, I knew I could lease it for $1,495 a month, so $1,500/month, and I was able to option it to a tenant buyer who paid me 225k for that deal. So I was able to create this $40,000 spread on the purchase and the selling of something that just didn’t sell on the retail market, and had almost $400/month cashflow on that deal.

It was really kind of an interesting deal. People will say “Why would this person pay you 225k?” and I said “Well, guess what it appraised for?” It appraised for 225k or 240k, I can’t remember for sure, but it was more than what she paid for it. And it was kind of out in the country… This woman had seven dogs.
Okay, first of all, landlords are not gonna take someone with seven dogs, right?

Joe Fairless: [laughs] Right…

Wendy Patton: And she had some credit issues, so that’s why she needed something like a lease option. She just had needed a little bit of time to improve her credit, and it took her only about 18 months to do that, and then she was able to cash me out on that deal. So I’ve done lots and lots of those types of deals, with lease options.

Joe Fairless: Let’s do a summarized replay of that… I’m gonna attempt to recap what you’ve just said, just so I have it in my head clearly. Your purchase price was 185k, and you agreed to pay $1,100/month in monthly payments, and I assume you had a balloon payment too with her?

Wendy Patton: Yeah, and actually I didn’t put anything down on that one and I didn’t get any credit of the $1,100. Had I thought a little more creatively [unintelligible [00:07:24].08] to be credited, but I didn’t.

Joe Fairless: Okay, so it was $1,100 in rent then.

Wendy Patton: Yeah, I paid $1,100, it was rent; totally expense, nothing credited.

Joe Fairless: Okay, $1,100 in rent. That doesn’t go towards your purchase price, and then you have a balloon payment… And when was the balloon payment due?

Wendy Patton: Within three years.

Joe Fairless: Within three years. So basically, I’m thinking doomsday scenario, you don’t find a buyer, but you do find a tenant, and they are renting for the same amount that you’re renting it for from her, and since you have no money in, you’re breaking even… But if you can find someone who pays above that in rent, and then also agrees to a higher purchase price, then you’re making money in both of those areas.

Wendy Patton: Yeah. I didn’t really get into the full details. One of the things that the buyer did is she also gave me $10,000 down, non-refundable. So I’m not putting anything down with that seller, I’m getting this $10,000 down, so I have $10,000 in my pocket when I started this deal, on top of that cashflow. That’s the part that — even if they don’t buy, that’s what’s beautiful about a lease option; if they don’t buy, or I don’t wanna buy, or I can’t buy, I’m in control with the privilege and the right to purchase that property, but not the obligation.

And even though I have this balloon, it’s not really a balloon because that would imply maybe that I have to pay it off by that time. I have the right to buy it by that time, but I don’t have to do it. So if things tank, doomsday, we have another 2007 type of market – no problem, I can go back to the seller, renegotiate, or go back to the seller and say “You know, I’ve decided I’m not gonna exercise my lease with option to buy.”

Joe Fairless: And the $225,000 purchase price, when she was looking for 185k – is that seller financing where you’re doing the financing for it?

Wendy Patton: I actually only do a lease with an option to buy on it. So it’s not true seller financing, because I don’t even own it, and she’s not gonna own it, so I’m not technically financing it, however I kind of put it in that same bucket of creativity, where it’s almost like owner financing. I am kind of financing it for them in the short-term, until they can get their mortgage. And usually, when I get a deal from a seller, I usually will get a 3-5 years type of timeframe; that’s kind of my typical. Sometimes longer, not usually much less. But when I get my buyer time, usually I will give them between 12 and 18, maybe 24 months, depending on the situation. If they had a bankruptcy and they need that two years, or whatever their situation is, it’s kind of dependent on them, why they need that time to get a mortgage.

Sometimes they may only need six more months, and in that case I may give them nine. I’m gonna give them a few extra months of cushion on the back-end to get that done.

Joe Fairless: The appraisal is an important aspect of this, since they’re getting financing in a traditional sense… In that case, did it appraise for 225k? And if so, what happens if it didn’t?

Wendy Patton: That one actually appraised for more than 225k. And I think the reason that it can, especially when you get to these unusual properties – that one was kind of out in the country, it had 10 acres; it was a little bit unique in that regard – the appraisals are a little bit more flexible than like maybe a city consistent type of “every cookie cutter home is the same.” If it didn’t appraise, I do not have to sell; I only have to sell for 225k. The buyer may not buy if it doesn’t appraise, but I only have to sell at 225k.

Now, I could choose to go down, Joe. There have been times over the years — of course, I’ve done a lot of deals, so there have been a few times over the years where it didn’t appraise, and I’m a realtor, so I go back, I look at the comps at that time, and I might say “I agree with the appraiser”, and maybe then I will go down. I have a choice to, I don’t have to.

For me, I have kind of a philosophy that I’ve taken over these years, because I’ve been in business a long time and I feel like one of the things that became important to me was this whole rule of “Pigs get fat, hogs go to slaughter”, or “You never get hurt taking a profit”, that kind of philosophy. So if I’m still gonna make money and it’s the right thing to do to drop that price because that’s truly what it might be worth, I would reduce my price if I could still make a profit. But that doesn’t mean someone listening has to do that; they just have to sell it for what they agreed to.

Joe Fairless: Right. Will you tell us a story of another deal that you’ve done?

Wendy Patton: Sure. So that’s called a sandwich lease option. Another strategy would be what’s called a cooperative lease option. That’s kind of like wholesaling a deal. So I came across a deal recently where the seller came to me and was willing to do a lease option, however they wanted about 149k, so we’ll just call it 150k, right? And it was really only worth maybe 155k, or something like that. It was so close, and I didn’t feel like I could mark it up that much more than about 155k, because [unintelligible [00:12:36].01]

So what I did is I went in and locked it up on a lease option for the 150k, and I flipped it to a tenant buyer for 5k. But then I’m out of it. So it’s not a sandwich; I actually assigned my contract to the tenant buyer for the 150k, but they paid me 5k for it. Just like we do in wholesaling for investors, except that this is not wholesaling to an investor, it’s wholesaling to like a tenant buyer, who’s willing to pay top dollar to get terms on a property that they’re going to live in and occupy.

I’ve done lots that are like that, those little flip things. We find these deals that just don’t have enough meat on the bones, and I’m not gonna do anything like that; there’s no money in it. I can’t sandwich that, I can’t really do much with it, but I can flip it for 5k. I can do those all day long.

Joe Fairless: So when you come across a deal that the seller is looking for top dollar – or whoever is representing the seller is looking for top dollar – then this is a place where you can go, where you flip it to a tenant buyer who would then buy it directly from the seller, and they’re just assigning the rights to purchase.

Wendy Patton: You got it, exactly. It’s just there’s not enough in there. And this is a great strategy for anyone listening who is an investor, who is out scrounging for deals, they’re sourcing them and they find some deals but it’s just nothing there. We probably have turned away many deals like that, and as long as the seller is willing to do a creative thing like a lease with an option to buy for a few years out, then it’s a perfect opportunity to flip that [unintelligible [00:14:12].17]

Typically, an option fee is gonna be about 3%-5% of that purchase price. In that example, 5k, that’s just a hair over 3%, and that’s gonna be a typical deal that I can do all day long like that.

Joe Fairless: What’s the most complicated deal you’ve done?

Wendy Patton: What was complicated…?

Joe Fairless: Or just a lot of people involved, or a lot of entities, or it was just really challenging – whichever direction you wanna go with this.

Wendy Patton: I’m gonna think of one that’s just really recent… One of my most complicated ones was — I do some small development where there was a lot split, and there was a property that I was buying… I bought the property on an option, so the owner came to me and said “Hey, I’ve got this other property that’s down the road, it’s on this canal”, and our waterfront properties are fairly valuable here in Michigan.

So it was on the canal, not the main part of the lake, but number one, it wasn’t ready; I felt like it could be split, but I wanted to make, of course, the purchase subject to this split being done, and I had to go through an entire process that took about nine months where I had to do an application to the city, I had to hire a surveyor… I had to put a lot of money out on this deal without it closing.

Joe Fairless: And time.

Wendy Patton: Soil borings on it… And to make sure that — the city wanted soil borings to know what could be built and what the quality of the ground was. So it was a lot of things that I don’t normally deal in, and I learned a lot about just land development, just from this one little teeny parcel.

It ended up working out. We ended up getting the approval, we got the right to split it, and then at the last minute after it was ready to split and it got all approved – I went to all the meetings and I went in front of the township… Then the seller goes “You know, I kind of changed my mind. Maybe my son wants to buy it.” So then immediately — I have this thing called a claim of interest that gets recorded against their title… And I didn’t even tell him I was doing this; I went right to the county, recorded my claim of interest to say “Hey world, I have an interest in this property. I’ve got a purchase agreement dated such and such”, and then once I had it recorded, I came back and I called him and I said, “Hey, I just wanna let you know that we need to move forward. I think you should contact an attorney if you feel like we have a valid contract… But I have a claim of interest recorded against this, because I’ve done everything and I’ve paid all those money out and I’ve spent nine months to split this property and make it valuable.”

I think he got some legal advice, and the guy was like [unintelligible [00:16:32].02] you’re not gonna win… You might as well just sell it to Wendy.” And he did, and it worked out fine, but there was that moment of “We changed our mind.” I had a little bit of complexities in that project, and…

Joe Fairless: And some drama.

Wendy Patton: Yeah.

Joe Fairless: When he told you that, was it over the phone or e-mail, by the way?

Wendy Patton: Over the phone.

Joe Fairless: Over the phone. Let’s pretend I’m him. Wendy, I actually think a relative of mine is going to buy it, but I appreciate working with you and talking to you over the last nine months.

Wendy Patton: Okay, Joe, why did you change your mind? What happened? I thought your son didn’t wanna buy that property.

Joe Fairless: Okay, so now we’ll step out of role-playing… So I give you a reason, and then how do you end that conversation?

Wendy Patton: I’m trying to remember exactly how that call went, but I probably would have said something like “Okay, Joe, you know what? I hear what you’re saying and I need some time to digest that. Let me think through that. Can I give you a call back maybe tomorrow or the next day?”

Joe Fairless: Yup.

Wendy Patton: And then what that does is it keeps that relationship still intact, where I didn’t get angry, I didn’t get upset with him, however, I needed to go protect myself immediately with the title. Because as soon as someone starts to flake out on me and I’ve done work, I immediately go and record that, because I’ve got to protect my interest at that point. I don’t ever normally do that unless there is an issue.

Then I came back and said, “Okay, Joe, here’s the deal. I’ve really thought about it, and I just don’t feel that it’s fair. I’ve spent the last nine months doing this, and if you want to get out of the contract, then I feel like it’s only right that you pay me now what I’m going to sell those properties for.” And he goes “Well, what do you think that would be?” and I go, “Well, it’s gonna be a lot more than you sold it to me for, because now I’ve put thousands of dollars, and not including any of my time, into confirming to see if these properties are even splittable. And now what they’re worth is two lots, not one, because of the work I did. So if you’d like to buy me out, then you could. Would you wanna do that?”

And of course, he had no idea what they were gonna be worth, and when I told him what they were gonna be worth, he said “Wow, that’s a lot”, and I said, “Well yeah, that’s why I wanted to do that. I went through this whole process.” And we ended up closing on it, but it was a little bit risky there for a minute. I was a little bit worried for a little bit; I was like, “Oh man, I just did all that work…”

Joe Fairless: Oh, I bet. Yeah, nine months, that’s a long time and that’s a lot of money. How did you know what to do with the county to push that through for the split?

Wendy Patton: Well, normally when you’re gonna do anything that’s gonna be a split or land development, you kind of start with the city first – and that one really was through just the city – where I would go to them… I actually usually go in or call the assessor first, or whoever in that particular — in Michigan it’s the assessor’s office, they’re the ones that go out and value land and properties. I would call them and just say “Hey, I’ve got this property. Here’s the property ID number, the address (or whatever it is). I think it might be splittable, and I just kind of wanna know if you think it might be; if you could tell me the process over the phone or if you can tell by looking at your aerial overlays… Is that a possibility that it could be divided?” I’ve done quite a few of those, too.

So I just ask, and then they might say, “Well, this is what you need to do first.” “Okay, what is that? The application? Okay.” And then of course [unintelligible [00:19:45].20] soil borings, which was kind of unusual. Some cities, they’ll want perc test on it, if it’s gonna be a septic area… It depends on where you live. I kind of live on the North part of Metro Detroit, so 5-10 minutes North of me is gonna be all septic fields and bigger parcels, and then just South of me is going to be your normal lots in the city, with your city water and sewer, normal subdivisions. So they kind of look at both.

Joe Fairless: All-in, how much did you pay, and then how much did you sell it for?

Wendy Patton: I can remember my profit, because I 1031-exchanged it…

Joe Fairless: Okay, what was your profit?

Wendy Patton: It was 70k on them. For a little deal. I think we paid maybe 70k, or something… It must have been like 64k, because I probably had 5k of closing stuff, and the fees and stuff in there.

Joe Fairless: What did you 1031 into?

Wendy Patton: I 1031-ed into another property up in Northern Michigan.

Joe Fairless: What’s that deal?

Wendy Patton: It’s a lot on a golf course where we thought we would build our summer home. We put it into the company first, because it was an LLC, and then we thought that later, if we end up converting it, then we’ll do it, but we probably aren’t going to now. So we’re probably going to sell that property, or 1031 exchange it back down somewhere closer to something else; I just don’t know what it’ll be, but I’ll probably put it into more of an income-generating asset.

We just thought “Well, if we built something up there, we can rent it, we can use it a little bit…” We were just exploring that whole idea, and that’s what we thought we would do.

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

Wendy Patton: There’s a couple things, not just one thing. Number one, of course, get started immediately. Get as educated as you can. One of my biggest things I always tell investors that are wanting to get started, I say “Look, it’s not easy, it does take a lot of hard work, but it will pay off in the long-run if you just do it, and you do it persistently and consistently.”

Turn off the TV at night; stop watching that crap. You’re filling your mind with negative stuff. Spend your evenings listening to podcasts like this, to positive motivational things, reading, educating yourself, calling sellers, whatever it is… Especially if you have a full-time job. I think it’s that whole changing your mindset, and have some really strong goals that you’re gonna go after.

So it’s not necessarily all the real estate stuff. Actually, to me I would say the mindset is the most important thing. It’s changing your thinking first, because real estate is — yeah, you learn about real estate, you wanna learn about the techniques; all that stuff is great, but to me, the biggest thing that ever held me back was I didn’t think that I should make more than 100k or 200k/year. I actually had an issue with that, and from the very beginning I thought, “Well, money is the root of all evil” and all that stuff. I think everyone has these types of things that hold them back.

Yesterday afternoon I was mentoring one of the agents in my office. He was saying that he has been living at the poverty level for 15 years, but he’s brilliant. And I said, “Well, why are you living at the poverty level?” and he said “Because I think it’s this message I got when I was a kid, that I would never amount to much.” And I’m like, “Well, when are you gonna change that? I’ll help you. Let’s work on this right now. Because if you don’t change that mindset, you never will amount to much as far as income goes.” Anyways, I could go on for hours on that whole topic.

Joe Fairless: I hear you. It’s the foundation of what we must have.

Wendy Patton: Yeah. I was in a seminar last week and one of the speakers said a teenager or a kid has thousands of thoughts that go through their minds, and 80% of them are negative. But when you’re older, it’s even higher. “Am I good enough? Am I gonna amount to enough?” So it’s kind of like changing that whole mindset… And I’m not so much a ‘rah-rah-rah-rah’, it’s just that I do believe there is so much truth in that, that I have to always combat that negativity coming into our lives, or those naysayers that are saying…

My father, in the beginning he was like “Oh my god, I cannot believe you’re leaving your corporate job. Are you crazy? You have retirement, you have 401k, you have health benefits. Why would you do that? You went to college for this.” Then now, he’s 87 years old and he’s my biggest cheerleader in the entire Universe. He’s like, “Oh my god, my daughter Wendy!” He’s really cool.

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

Wendy Patton: Sure.

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

Break: [00:23:58].00] to [00:24:47].19]

Joe Fairless: Wendy, what’s the best ever book you’ve read?

Wendy Patton: I like The One Thing by Gary Keller. It keeps you focused and on track.

Joe Fairless: Best ever deal you’ve done?

Wendy Patton: Best ever deal I’ve done… I just did one this year in my IRA; I bought this property for $200,000 out of my IRA down, I borrowed from another IRA to fund it because I already had properties in my IRA and I didn’t have the cash in there, and it’s a deal that will net me about 90k tax-free in my Roth. So there you go.

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

Wendy Patton: I made a lot of mistakes over the years. I think one of my biggest mistakes, Joe, was back in the downturn I was speculating in Florida and other places, speculating on future appreciation instead of investing on current numbers and watching the data in the market.

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

Wendy Patton: I run the Michigan real estate investors group and I absolutely love that, because that gives me the opportunity to help hundreds of people locally learn to do the techniques that I made so much money at over the years. I love that.

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

Wendy Patton: I would say go to my website, WendyPatton.com. It’s got my office phone number, I’ve got some free giveaways on there… I would go there to check out a little bit more about what it is that I do and what I offer.

Joe Fairless: Wendy, thank you for being on the show and educating me and perhaps some Best Ever listeners on creative strategies. You truly did deliver on what you said you were focused on, and that’s creative financing. We’ve talked about three different structures, or creative deal-making, perhaps… And that’s the sandwich lease option, the co-op lease option and the lot split.

The lessons learned along the way with each of those three, with the lot split in particular, having the moment of drama where you then had to go get a claim of interest recorded on the property, and just knowing to do that. I wouldn’t know to do that. I would be talking to people like you, certainly, if I came across that situation, and say “Hey, what do I need to do here? Can you please help me out?” So that’s why we have this podcast – for Best Ever listeners who perhaps come across situations like that, then we know “Okay, if I have a contract but someone’s trying to back out”, then claim of interest – get it recorded.

So those types  of things, and then just your overall approach… I’m really grateful that you were on the show and shared that with us. Thanks for being on the show, Wendy. I hope you have a best ever day, and we’ll talk to you soon.

Wendy Patton: Thanks, Joe.

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Al Beahn and Joe Fairless

JF1201: Turn Key Real Estate Investing In Detroit with Al Beahn

Al runs a business that finds cash flowing properties for other investors in Detroit. He’ll tell us that most of the negativity associated with Detroit is exaggerated media driven information. About 90% of the clients that come to Detroit to see some properties are surprised ina  good way and end up investing with Al. Find out how to set yourself apart from other turn-key providers. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Al Beahn Real Estate Background:

– Founder and CEO of Pioneer Homes, the leading source for cash flow rental properties

– Past seven years, he has closed more than 1,000 deals, valued in excess of $50 million

– Has clients across six continents

– Based in Detroit, Michigan

– Say hi to him at: https://www.pioneerhomesus.com

– Best Ever Book: Profit First


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

With us today, Al Beahn. How are you doing, Al?

Al Beahn: I’m doing great, Joe. How are you?

Joe Fairless: I’m doing great as well, nice to have you on the show. Al is the founder and CEO of Pioneer Homes, which is a leading source for cash flow rental properties. Over the past seven years he’s closed more than 1,000 deals valued in excess of 50 million buckaroos. He has clients all across six continents, which almost is all of the continents; is Antarctica a continent? I think it is.

Al Beahn: I haven’t done anything there.

Joe Fairless: I figured that would be the one continent that you don’t have — this is where my board game risk background comes into play; I know my continents. And Al is based in Detroit, Michigan. His website is PioneerHomesUS.com, which is also in the show notes page.

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

Al Beahn: Yeah, absolutely. Thanks a lot for having me, Joe; I’ve been looking forward to it. I actually got into real estate in 2009. I graduated college, CMU [unintelligible [00:03:31].16], and I was living in my parents’ basement. My dad was not the kind of guy that liked having that going on, so I think I was home for about three or four months and he just sat down and said “Look, man, you’ve gotta figure something out.”

I had always wanted to get into real estate, I just never really understood how or what to do, so I just kind of took a plunge and went out and I raised some funds, and I bought my first fix and flip. I did that back in 2009. Bought my first property for $27,000, I did all the work myself – I guess you could say I learned the hard way doing that. I flipped it, I think we sold it about four months after we purchased it. It was a 90-day renovation, and about 30 days to sell.

At the time I think I was 22 years old and we cleared about $16,000, and I said “Man, this is kind of cool.” I was kind of like my own boss, I was doing whatever I wanted to do, and that’s kind of where I got into the business. That kind of transitioned us into the turnkey model, which kind of developed in about 2010 for us.

We were just kind of in the market; I always say we got lucky. It was just good timing, and being local Detroit guys, that model just kind of fell into our lap, and the rest is history, really.

Joe Fairless: Are your turnkeys in Detroit?

Al Beahn: Yes, about 90% of what we do is in Detroit. We were doing a lot more in the suburbs a few  years back, but the markets kind of shifted and we don’t see as much value there anymore, but yeah, we about 90%-95% now is in Detroit.

Joe Fairless: Pros and cons of investing in Detroit.

Al Beahn: Pros and cons… Pros is definitely going to be the price points. The ROI’s are significantly higher than the rest of the country. I think there’s a ton of value still to be had. Last week we were walking through properties that we could be all in at 40k-50k that will appraise in today’s market for 80k-100k, so… I think there’s a lot of opportunity for instant equity in certain parts of the city. I think there’s obviously the high ROI as well.

Cons – I think if you’re not careful with where you are, you’re definitely gonna be liable for some vandalism and theft like that, because that’s a real thing in Detroit if you’re not careful where you are. I’d say probably that’s the biggest con.

Joe Fairless: Where do you need to be? What areas?

Al Beahn: We try to stay in the North-West side of Detroit. We hone in on about six or seven different zip codes. East side there’s a couple small pockets; we like East English Village… That’s one of those areas I was talking about last week. It’s one of the few areas on the East side that we invest in. So between that and the West side, we try to stick to the West side for the most part.

Joe Fairless: When you talk to potential clients who have only heard about Detroit through probably negative means, what does that conversation sound like? And when they do invest, why do they ultimately invest?

Al Beahn: It’s really just media-driven negativity. This isn’t something that they’ve experienced themselves, so it’s just like a false image that they have, and I’d say 90% of the people that come here end up investing. I don’t think people expect to see what they see when they get here, and I think that’s one thing that kind of makes them get over that hurdle. But I don’t know, I guess we [unintelligible [00:06:46].01] They really take the time to educate the people that don’t wanna come visit. The sales cycle is extremely long – 60 to 90 days is pretty common, so I think they’re just comfortable that we spend that much time with them over the phone and educate them about the city as much as possible.

We like to share info about the market as well, so there’s just a lot of things I think that go into that, but ultimately the easiest sale is when they come here. They come and  we show them certain parts of the city, and they just… A lot of people that have never been here are shocked to see what they see in certain parts. We’ll show them the good and the bad. I’m not gonna sit here and say there’s not bad parts in Detroit because there are, but we just try to avoid those areas.

Joe Fairless: Let’s talk about your business – how do you stand out from other turnkey providers?

Al Beahn: Great question. There’s definitely some competition here. I think it’s just the time that we spend with our clients. I’m not gonna bash any of the clients or competitors because I think they’re all great in their own ways, but I think that some people just wanna be educated a lot before they decide to make this decision. I’d argue that our sales guys are pretty thorough with our clients, and then obviously our product is definitely top tier to our competitors. We know where to be in Detroit.

So I think just a communication thing, and obviously, after the sale too, we really try to stay in contact with our clients. If they have any issues, or sometimes there might be some paperwork [unintelligible [00:08:16].03] with the property management, so we try to help them get through those hurdles as well. I think those are a handful of those issues why we kind of stand apart.

Joe Fairless: And how do you make money on the business?

Al Beahn: Our profit is built into the purchase price of a property. We buy it for X, we put X into it, and then we sell it with our profit built in.

Joe Fairless: Do you manage it, too?

Al Beahn: No, we have a third party. I actually did property management for the first five years we were in business, and then I realized it’s not profitable. It was really more of a quality control for our clients, but it just kind of became a drag and it was really just kind of a money pit for the company, so I got out of that about four years ago, and now we just refer it all to a third party.

Joe Fairless: Do you have one third party you work with?

Al Beahn: There’s a couple we work with. If we have a really big month, I try not to shift too many properties at one company at any given time, just to ensure that everything is handled properly. Nobody will tell you that they can’t handle it, but we’ve kind of learned that there is a breaking point for sure on what they can take in at any given point.

Joe Fairless: On that note, on the breaking point for what a property management company can take in, what were some things that you noticed slipping through the cracks that normally wouldn’t if you didn’t inundate them with a bunch of properties that they’re bringing on for the month?

Al Beahn: I’d say the number one thing is just getting in contact with the tenants on a timely basis. A lot of the companies that we’ve screened, they would get really hung up on the paperwork and they wouldn’t wanna contact anybody until the paperwork assignment. Sometimes when we sell a house, we have clients that work 70 hours a week, they travel to different countries or out of the country or out of state, and sometimes they can’t get to that, so we were seeing a property management agreement (PMA) not be signed for 30 days, and the next thing you know we have a tenant who hasn’t been contacted in 30-45 days. So I think the biggest thing for me – and I’m not sure about you guys in your market, but here my most important part of this whole process is the transfer… So when we give a file to the manager, my number one thing is to get in contact with the tenants right away, and I think for us at least — because we also buy properties that are already turnkey… So we might buy property from a landlord that’s retiring, or something like that, so for me I think it’s really the contact with the tenant, to make sure that [unintelligible [00:10:33].07] with everything.

Joe Fairless: Yeah, I’d say that would be from a business owner standpoint. That’s the huge variable for you and growing your business, because if your client has a poor experience with the third-party management company, the house could be great, but then the management company just totally blows it on who they put into the property, or how they retain that person, or how they screen the future person, or they don’t address certain maintenance issues… That just seems like that could be a big headache for you and that could cost you some business.

Al Beahn: Right, absolutely. This is our screening conversation when we’re looking for new managers – “The number one thing that we need is that when we give you a file, you need to contact these tenants within 24/48 hours”, because a week goes by, two weeks go by, they have some maintenance issues, rent’s due and then they try to call somebody and they can’t get a hold of anybody, then red flags start going up. We’ve had tenants leave on us just for that simple little thing… So yeah, when you’re doing volume, there’s gonna be that little tiny percentage of issues, and that’s usually the number one issue – the lack in the management process. We’ve really tried to hone it and tried to perfect it. We’re not perfect, but I’d say we do as good as we possibly can with that part.

Joe Fairless: How many deals are you selling a year?

Al Beahn: We’re pacing probably to do about 250 this year. I try to hit between 15 and 20 a month, that’s our goal. Obviously, we have months where we succeed that and then other months that we don’t, but we’re pacing to do about 250 this year.

Joe Fairless: That’s a whole lot of deals, and you’re talking about you’re buying, renovating and selling them as turnkeys, about 20 a month or so?

Al Beahn: Yeah, we do about — I’d say 60% is already turnkey; we buy a lot of property as is, and then the rest would be the turnkey renovations, correct.

Joe Fairless: What type of process do you have – if any – with your clients who purchase the property and then after the purchase hand then off to the third-party management company. Do you have some sort of process to follow up with them later?

Al Beahn: Well, our sales guy is known to keep in touch with them, and a lot of our clients are long-time clients, so I wouldn’t call it a specific process; it’s more of just a relationship thing, because we’ve learned that if you maintain these relationships with these people, and you don’t just sell them a house and say “Hey, it’s great to meet you. Good luck”, there’s always that repeat business.
We had a guy who bought a house from us early in the year last year, and my sales guy just kept a relationship with him. Not trying to sell him anything, just “Hey, checking in… How are you doing? How’s your family?” I think they had a similar interest in sports, so they kind of chatted about that, and the next thing you know the guy had saved up some cash and bought another property. So it’s really not a specific process per se, I think it’s more about building relationships with your clients, and for me that’s always been the best way to do business… So I’d say that’s what we do with that.

Joe Fairless: The biggest challenge that you have right now is what?

Al Beahn: The biggest challenge… I’d like to say inventory, but it’s usually not inventory; Detroit is a really big place. I think really it’s just some of the people in Detroit, some of our competitors – I don’t wanna call them competitors, but… They’re in every market. The guys that think they’re wholesalers and they market properties at just crazy prices. When we’re selling houses at 45k-50k, these guys are sending lists out with properties for 25k-30k, and it’s just a real struggle because people see that and they just think that’s the market, so they want properties for that price, and we just really don’t do that. Yeah, we come across deals from time to time, but I think that’s probably our biggest. If I talk to our team, that’s probably the number one thing, if I had to pick.

Joe Fairless: What do you do to help mitigate the damage that that could have on your listings at the price points you have?

Al Beahn: Well, we cannot pool comparisons. Go look at the Google Maps Street View, go pull up Trulia and look at the surrounding values. I’m never one to use Trulia, but if you pull up a property and there’s houses in the area at 10k-15k, the majority of that, and then you go pull up one of our properties and there’s houses in the 50’s and 70’s, you can just see it’s a totally different property, it’s a totally different asset; it’s not apples to apples.

And the number one thing is to say “Look, I think you should come and look at them both. We’ll take you to that property and we’ll take you to ours and you can just see it for yourself.” And it’s funny, because a lot of people don’t wanna do that. They just wanna buy it site unseen. We turn away a lot of business, Joe. There’s a lot of people and we say “Look, we can’t compete with that. I don’t wanna put our name on that product.” So a lot of times we’ll just let the business walk away, because sometimes it’s a really hard pitch to get them to understand that.

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

Al Beahn: Best advice ever, that’s a good one. So the Best Ever listeners will like this, I guess… It’s really basic – I think no matter where you are, you have to do your due diligence. I’ve seen so many investors lose their shirt because they do not do their due diligence. Maybe that’s just a very simple, basic answer, but it’s such a major thing in the process. Obviously, price is one of them, but I think the due diligence part – inspections, title work and all that stuff… That to me, especially if you’re kind of getting into real estate — I know when I first got into it I didn’t even know what due diligence was; I’d walk through a property and think I just need to go to a title company and close. But I think the due diligence, inspections, title work is huge for me. If you’re just getting into it, I think that’s a big deal, for sure.

Joe Fairless: Tell us a story about when due diligence played a major role in the acquisition of a property.

Al Beahn: Yeah, absolutely. Back in the day, before we were good at this, it happened all the time. Buying properties on quitclaim deed… There was a time we bought (I think it was a) five-pack – this had to be in the very beginning, the first year, maybe a year and a half in the business. I found a house on a quitclaim deed. I think at the time the prices were so cheap back then… I wanna say we bought a five-pack for 55k or 60k, and “Hey, there’s back taxes. Hey, there’s water bills. Hey, there’s tax titles”, so you have to either [unintelligible [00:17:00].28] or you did not get title insurance. That happened to us before. I’d say that was probably early on one of the bigger mistakes that we made, just buying a property without understanding the title side of things.

Joe Fairless: Would you say that back taxes and water bills are more prevalent in Detroit that it will come up in due diligence compared to other markets?

Al Beahn: Well, it’s hard to say… I haven’t done much business in other markets, so I’m not sure. I’d say because of what happened in Detroit – there were 140,000 foreclosures when this whole thing hit the fan back in ’07 through ’09, so… To put it into perspective, there were on average 20k to 25k tax-foreclosed properties in the Wayne County auction every year. The most recent tax auction – there were only 6,500 properties. So it’s all getting cycled through.

So I think five years ago – absolutely; probably the number one in the country. But today, it might be more than average; I couldn’t say it’s more than any market, but it’s probably higher than the average.

Joe Fairless: Yeah. It was a poorly worded question. I should have asked you just relative to the properties you’re buying, are there a lot of back taxes and water bills? Because you’re in Detroit, you’ve been investing in Detroit, so you’re not aware of other markets. But you answered it. You made my stupid question into a smart answer, so thank you for that.

Al Beahn: No, it’s all good. I’d say maybe 20% to 30% of our properties that we buy have more than two years delinquent.

Joe Fairless: Okay, got it.

Al Beahn: I’m not sure, it might be different in every market. Here it’s after three years you’re subject to foreclosure, so we rarely see more than that.

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

Al Beahn: I’m ready, man.

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

Break: [00:18:51].24] to [00:19:44].01]

Joe Fairless: Best ever book you’ve read?

Al Beahn: Profit First, by Mike Michalowicz.

Joe Fairless: Best ever deal you’ve done?

Al Beahn: This is a tough one; there’s two of them. I’m gonna talk about the first one because  it was the first one I really did a creative deal. It was a package of 11 duplex units. In Detroit, a duplex — they’re side by side, and they’re actually two separate parcel ID’s, so you can buy and sell each half individually. There was a package of 11. I believe four of the units were actually side by side, so we actually bought the package, sold off the two buildings that were attached, profited enough to actually pay for the other seven units free and clear, and we had seven free and clear units with cash-flowing tenants basically for free.

I say that’s my best because it was one of the first deals we did that was very creative like that, and to this day I always love that deal.

Joe Fairless: Oh, absolutely. Do you still have those seven?

Al Beahn: No, we sold those probably about two years ago.

Joe Fairless: Okay. And when you sell them for your own personal investing, what’s the reason to sell and what do you do with that cash?

Al Beahn: At the time I think I was trying to get into some better assets at that time, so two years ago. I’d probably just put it back into the turnkey business and use it to basically flip some more properties.

Joe Fairless: And do you currently take some of the profits from the turnkey business and then buy rental properties for your own rental portfolio?

Al Beahn: Yes, I kind of do that model. I like to buy property from some of our profit. So if we flip ten houses, sometimes I might just maybe keep one of them. It’s almost kind of like a “no cash out of pocket”, really. There’s obvious opportunity cost there, but we do that as well for sure.

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

Al Beahn: In real estate as a whole, still to this day one of the bigger mistakes was selling some of the assets that we owned. Even though it’s duplex units, I’d argue if I would have held on for a few more years, it’d be much more valuable. But mistakes — it’s always probably a due diligence thing. We’re doing so much volume, sometimes something slips through and you’ve kind of gotta eat it. But it’s always usually a due diligence thing. I don’t think there’s a deal that stands out that I’d say was like the worst deal we’ve ever done.

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

Al Beahn: That’s a good question. For me, I don’t really have any formal way of giving back. I like to donate to our church around Christmas time more than average, but… For me, we get a ton of people that reach out to us through our social channels and other ways like that, people that obviously have never done anything in real estate, and I kind of make it a point to at least help a handful of people. I get a lot of kids; I’m a younger guy, so a lot of kids (15, 16, 17) reach out to me through maybe Instagram, and I’ll just be really bold with them if I think they have a crappy sales pitch, or their approach is bad, but I try to make it a point, at least a couple kids a month, just to kind of give them a little bit of advice.

I know back when I was 16, 17, even if I had one little tidbit of advice, it would help me out a long way, so I try to do that as much as I can each month.

Joe Fairless: How can the best ever listeners get in touch with you?

Al Beahn: You can call the office. I’d say the easiest would be through e-mail. The e-mail would be info@pioneerhomesus.com. Check out our website, PioneerHomeUS.com, and all of our social handles – most of them are @pioneerhomesus, so I’d say those are the best ways.

Joe Fairless: Congrats on building such a high volume business, with 250 deals a year that you’re rehabbing and then selling to clients across six continents. I did confirm via Google, while we were talking, that Antarctica is the seventh continent. You’ve gotta work on your Antarcticans. I don’t know about the stats, but maybe I’ve got an Antarctica listener, and they’ll be a new client. If so, then let me know; that way I can claim to cover all seven continents.

Also, the overall approach that you take with the due diligence, lessons learned along the way, the back taxes, the water bills etc., and then knowing where to invest and where not to invest, or at least an area where you need to go in eyes wide open. So perhaps maybe you do invest, but it’s just an area where you go eyes wide open. Where you choose to invest would be the West side and the North-West side in general. It sounds like there are exceptions.

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

Al Beahn: Joe, I appreciate it, man. Have a good day as well. Thank you!

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Best Real Estate Investing Advice Ever Show Podcast

JF1096: Working Full Time While Investing on the Side with Brad Tacia

Brad works 40-50 hours a week at his job, but owns a 110 units of multifamily, 2 single family houses, and has a 50 unit syndication under contact. A lot of investors start with full time jobs, while trying to invest on the side. Brad has been pretty successful with this model, so listen to what he has to say! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Brad Tacia Background:
-Real Estate Investor Began investing in 2011, going full time investing in 2015
-Replaced his full time income in 2 years after switching to multifamily investing
-First multifamily property was 12-unit in 2015, with his largest being 63-unit in September 2016
-5 years ago was working 70 hour weeks as an engineer
-Based in Detroit, Michigan
-Say hi to him at bradtacia@gmail.com
-Best Ever Book: Millionaire Real Estate Investor

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Joe Fairless: Best ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Brad Tacia. How are you doing, Brad?

Brad Tacia: Great, thanks for having me, Joe.

Joe Fairless: My pleasure, nice to have you on the show. This is gonna be a fun interview, because you have a full-time job, but yet you’ve got quite the experience from a multifamily standpoint. A little bit about Brad – he began investing in 2011, and he got his first property (a 12-unit) in 2015. His largest was a 63-unit deal in September 2016. He is based in Detroit, Michigan. With that being said, Brad, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Brad Tacia: Sure. I grew up in the Detroit, Michigan area. My background is that I went to college for automotive engineering, and I’ve been doing that since 2000. My day job career has been in the engineering world; I definitely enjoy cars and engineering, but the day-to-day grind is really what had me looking into the real estate world. I dove in both feet, and I’m looking to do that full-time here shortly. I love real estate and everything about it, and what it can do for us.

Joe Fairless: How many hours a week are you working at your full-time job?

Brad Tacia: Right now I would say probably in the 45-50 range.

Joe Fairless: You’re working 45-50 hours… And what’s your real estate portfolio look like?

Brad Tacia: We have 112 units at the moment. 110 multifamily and two houses. We’re going to be selling those two houses this year. Then we’ve also got a 50-unit syndication on contract, so that will get us up to 160.

Joe Fairless: Where are they based?

Brad Tacia: All in Michigan. We have some in Monroe, Michigan, which is about 45 minutes South of Detroit, and then we have the majority of the rest in Lansing, Michigan (the capital of Michigan), and then a few in a subdivision in the city of Fowlerville, Michigan.

Joe Fairless: How many are in Monroe, Lansing and Fowlerville?

Brad Tacia: We’ve got 24 in Monroe, 23 in Fowlerville, and the balance would be in Lansing. I guess that’ll be 113 shortly.

Joe Fairless: Okay, cool. Lansing has been a market that you’ve clearly had some success in… How far away is it driving distance from you?

Brad Tacia: About one hour…

Joe Fairless: Okay. How did you build the team and find properties in Lansing?

Brad Tacia: First we got a property on contract that we found from a broker, and we jumped on it, got it under contract, then we interviewed about 10-12 different property management companies and narrowed it down to one that was really the leader in the city. So that’s where we found our property manager, which is one of the key players in our team.

Then our mortgage guy – we found him from a colleague from some meetups in the area. He’s actually down in Monroe, but he has funded most of our purchases.

Joe Fairless: By funding you mean the debt financing?

Brad Tacia: Yeah, the bank financing. It’s a credit union.

Joe Fairless: Okay. Which one?

Brad Tacia: Monroe County Community Credit Union is the one we use. They’ve been fantastic to work with.

Joe Fairless: What type of terms do you get with them?

Brad Tacia: Generally, most of them have been under a million, and one was over a million, so these are recourse loans; we’re not quite in the nonrecourse area yet. So these terms are 20% down, 4,25%, 4,5%, 20-year amortization, [unintelligible [00:06:08].02] five-year term with a rate adjustment at five years and then five years fixed again. So it’s a ten-year loan, but with two different rates.

Joe Fairless: 20% down… Are these properties ones that you put money into to improve, or is there a different business model that you do?

Brad Tacia: Each of the complexes is a little bit different. My first ones in Monroe were pretty much turnkey. They were built in 2006, 2007 and 2008. They were very nice units. They even got new roofs recently because of a hailstorm. For those I didn’t really need any capital at all; I was comfortable with that as my first apartments.

Then the second one we’ve got construction going on, because one was just a shell; a 6-unit that was full, a 6-unit shell, so we’ve got a lot of construction going on with that one. Then the 63 and the 23-units  after that were some light capital work, but really not a lot.

Joe Fairless: How are you financing the light capital work?

Brad Tacia: The one that we’ve got a fair amount of capital in we have a construction loan. The ones that are light capital are just coming out of cashflow. It’s light enough where we delayed taking distributions from them for a few months and we just use the first few months of cashflow for that.

Joe Fairless: And does Monroe County Community — what was it…?

Brad Tacia: Monroe County Community Credit Union…

Joe Fairless: Community Credit — I knew I was missing a word… [laughter] Monroe County Community Credit Union – have they done both of those loans in Lansing, even though they’re in Monroe?

Brad Tacia: Yes. Once we were performing on the first couple, they will go fund anything anywhere for us, with the right financials.

Joe Fairless: Excellent. What lessons have you learned in the lending approval or the overall process while working with the credit union to get these properties financed? In particular the 63-unit.

Brad Tacia: Well, definitely getting that coverage service ratio is one of their number one things to get right. That one in particular they liked a lot, because it’s a senior apartment complex, so they enjoyed that one. They actually gave us 25-year amortization on that one, which will bump the cashflow up a little bit, because it’s a senior — it’s not assisted living, but it’s an independent senior living facility where we take 55 and older people. I guess banks seem to really like that, that was one lesson we learned with that.

As long as you hit the service coverage ratio, you have a proven team — even if you don’t have the experience, if you get a property manager that’s very good with the area and the type of property you’re using, they put the property ahead of the person. That’s what I love about apartment investing – you’re not doing everything on your own credit. It’s the building itself, the property, and your team really that makes it work.

Joe Fairless: Let’s talk about the 63-unit that I believe you said you got from a broker… Is that correct?

Brad Tacia: Yeah, that’s correct.

Joe Fairless: Was it publicly marketed?

Brad Tacia: Yes, it was. This one was through [unintelligible [00:09:27].19] They’re pretty big in our area. It came on LoopNet, the place where most deals go to die, but we got it the first day on market, we went full price on it, got it under contract, and the reason we were happy with how they priced it was because they have 70% expenses to collected rent…

Joe Fairless: Wow…

Brad Tacia: …so there was so much opportunity to improve the management and just gain equity immediately. So the building was in really good shape, it was just run poorly.

Joe Fairless: Yeah, please elaborate. Keep talking about that… How did you knock it down from 70% to whatever percentage you ended up with?

Brad Tacia: The main thing we did was they had an on-site property manager – full-time property manager that was there from 8 to 5 every day, and they had a full-time maintenance guy and then another part-time maintenance guy, all on payroll. Their payroll expense was 90k+, which is insane for this size of a building. It just didn’t make sense at all. A 63-unit is much too small for that much on-site support. The property manager that we found is based in Lansing also. They have a bunch of maintenance guys on-site, and they have a property manager that runs our building and then a couple other smaller ones as well… So we’re not paying their entire salary. It’s a real easy drop in a better management style, more of a industry standards system, and boom, you just gained a bunch of equity and cashflow.

Joe Fairless: You said it was 90-what?

Brad Tacia: Call it 95k maybe, and now it’s roughly 25k.

Joe Fairless: [laughs]

Brad Tacia: That was an easy turnaround one for us.

Joe Fairless: Wow… 95k to 25k – that’s a difference of $70.000.

Brad Tacia: Exactly. And they still had a lot of maintenance cost — maybe a 10% maintenance cost as well. I don’t even know how — you would think they would save money by having enough on-site staff on the actual maintenance cost, but they didn’t. It was just wasted money.

Joe Fairless: And what’s the cap rate in the area?

Brad Tacia: Generally I would say that area is about an eight cap maybe.

Joe Fairless: So it’s $875,000 worth of value that was created…?

Brad Tacia: Yeah, that sounds about right. It was a home run, yeah.

Joe Fairless: See, this is why I love doing this show, because a lot of multifamily investors are complaining about how they can’t find deals, where are you finding deals… You found it on LoopNet. Now, you made an offer the very first day, so you pounced on it, but you immediately were well-versed enough to know that the expenses were out of whack, and you offered full-price and you got into it. Usually, the people who are complaining about “There’s no deals out there”, they’re also the same ones who aren’t going to make a full price offer on a deal the very first day. They’re gonna take more time to analyze it… I’m not saying that’s a bad thing, you do have to make sure that you’re comfortable with your offer, but you were prepared enough so that when you did see something, you jumped on it.

So you made an offer the first day… When did you officially have it under contract?

Brad Tacia: Within a day or two of that… A letter of intent anyway.

Joe Fairless: Okay, so you had an agreed upon letter of intent within a couple days.

Brad Tacia: Yes.

Joe Fairless: But you submitted your letter of intent (LOI) the first day and it was a full price offer?

Brad Tacia: Correct.

Joe Fairless: And prior to submitting the LOI on the first day, did you receive the Trailing Twelve financials and the current rent roll?

Brad Tacia: We got the financials, but we did not have the rent roll yet. We received that in due diligence.

Joe Fairless: Okay, so you were able to make the full price offer. Was this the first property that you were buying in Lansing?

Brad Tacia: Yes, it was.

Joe Fairless: How did you have the comfort level to buy a property — and it’s only an hour away from where you live, but still, it’s in a market that you don’t have property in… How were you able to feel comfortable doing that?

Brad Tacia: Well, a part of our due diligence was definitely researching the area. We spoke with all the property managers and some local police stations, and then some people we knew that lived in the area… That was a big part of our due diligence. Both me and my partner Mark were from this general area, so we have a lot of contacts in the area.

We also know the city a little bit, but we knew who to talk to about how the area is doing. We did our online research, talking with people and putting the data together.

Joe Fairless: Cool. Let’s talk about your 50 units that you said that you have right now under contract that you’re syndicating…?

Brad Tacia: Exactly, yeah.

Joe Fairless: Okay. Prior to these 50 units, did you use your own funds and that’s it? It sounds like you had a business partner, too?

Brad Tacia: Yeah, we have a 50/50 partner on the 63-units, 23-units and then one of the 12-units. It was all of our personal funds. We didn’t have any passive investors on any of those deals. This 50-unit is our first real syndication.

Joe Fairless: Tell us about how you’re structuring it.

Brad Tacia: Me and my partner Mark are syndicating this one, and it looks like we’re probably just gonna have one investor. We had planned on having about six or so investors, but one of the first ones we spoke with said that they wanted the whole deal… So it looks like there’s a good chance that we might just go with one investor. That is really gonna turn out to be more of a partnership than a full PPM kind of syndication.

Joe Fairless: What type of structure do you think you’ll do with them?

Brad Tacia: Basically, this is a similar deal to that 63-unit, where this one is actually 75% expenses… So it’s just as crazy, not run very well, so there’s plenty of profit here. We’re basically splitting the profit 50/50 on this one, and the investors are putting in all the money.

Joe Fairless: Okay, so you won’t put in any of your own money…?

Brad Tacia: Correct. We found the deal, we’re signing on the loan, we’re getting the financing, we’re getting the property management in place and running it, so that’s what we’re bringing to the table.

Joe Fairless: How did you find this 50-unit?

Brad Tacia: This was an off-market one that we found. My partner found this one on just a local Facebook real estate group. Someone said “Anyone interested in a 50-unit in Lansing, off-market?” We said yes, got it under contract, and here we are.

Joe Fairless: A Facebook real estate group… Please elaborate.

Brad Tacia: There’s plenty of real estate groups all over the country, but this is a local one that we had, and someone piped in asked if anyone was interested. It wasn’t an apartment-specific one or anything, and we jumped on it.

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

Brad Tacia: Just get started one way or another. I got started in single-family houses… It’s a lot less intimidating. I can definitely see starting there with a rental house or two, just so that you get the idea of how renting real estate works. Then from there, apartments let you scale so much faster… So if you’re looking to replace your job income, houses take a long time to do that. However, you can get comfortable, whether it’s small apartments or a single-family house. You really just need to get the ball rolling, and then once you get more comfortable, it’s crazy how fast you can grow your portfolio.

Joe Fairless: How were you notified of the broker deal that got placed on LoopNet, the 63-unit?

Brad Tacia: I just had a search on there for the area that I was interested in and the price range that I was interested in, and it popped up in my e-mail. I called the broker right away, I got right out there and checked it out, and really jumped on it fast.

Joe Fairless: You were subscribed to their newsletter and you received the e-mail from the broker and that’s how you were notified?

Brad Tacia: I got the notification through LoopNet, so it wasn’t off-market, or anything like that. I had not worked with that broker before. It was just a LoopNet subscription, I guess. You put an automated search in there, and you get e-mails when something new pops in there.

Joe Fairless: So you just signed up via LoopNet, said what you were looking for, and you got notified when something was posted?

Brad Tacia: Exactly.

Joe Fairless: Cool. What about the 50 units you saw — were you the person who saw the post on Facebook?

Brad Tacia: No, my partner Mark found that one.

Joe Fairless: Okay, your partner Mark found it. What were the immediate next steps?

Brad Tacia: The immediate next steps for that one was that he was actually gonna be out of town the next week, so I went out and checked it out.

Joe Fairless: How soon after?

Brad Tacia: This one we kind of drug our feet [unintelligible [00:19:01].07] Probably about a week after. I think they were feeling the off-market before listing it; if they didn’t sell it off-market, they were going to list it with a broker. But we were actually kind of dragging our feet on this one, and that actually worked to our advantage. I didn’t think the area would be all that great from my previous knowledge of the city, and then I went out there and was pleasantly surprised. I talked to the property manager, and he told me the same thing – it’s actually a pretty good rental area.

So in this particular case for negotiating, dragging our feet actually helped us out.

Joe Fairless: What do you have it under contract for?

Brad Tacia: We have it under contract for 1.125 million. That’s 225k/door, and the average rent is about $660/unit. It’s the same kind of high expense deal as our 63-unit. We’re gonna put the same property manager in there as our 63. This is only about three miles down the road from our other one, so it drops right into our system.

Joe Fairless: And how did you gain the credibility necessary with the broker on the 63-unit, since that was the largest deal you had done, and you weren’t local, you didn’t have any property in the area?

Brad Tacia: That’s a good question. Basically, I think it was just talking the lingo; we knew some of the same people, proof of funds, we had our property manager picked out… Beyond that, it was just talking with the broker and telling them that we know the next steps, we know what we’re doing, and what we said we were going to do we did, each step of the way. So we just showed competence, generally, I would say.

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

Brad Tacia: Sure.

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

Break: [00:20:55].05] to [00:21:54].14]

Joe Fairless: Best ever book you’ve read?

Brad Tacia: I would say The Millionaire Real Estate Investor. That really got me going in the real estate hard.

Joe Fairless: Best ever deal you’ve done?

Brad Tacia: The 63-unit in Lansing, with the 70% expenses.

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

Brad Tacia: I would say I spent too much in lawyer fees on my first deals. They were coming to closing with me; I spent a lot on legal on that one that I really didn’t need to.

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

Brad Tacia: Coaching, I would say… Friends, and I’m actually starting a coaching program here, where I will be coaching apartment investors just like what I’m doing here.

Joe Fairless: What’s the best ever way that you would tell someone who has done single-families, they’re ready to do multi, but they can’t find deals – what’s the best ever advice you’d give that person?

Brad Tacia: To be out there, to keep looking. Network with brokers… They can direct-mail right to owners, LoopNet… People say they’re not out there, but they do pop up. Just look everywhere and keep on it.

Joe Fairless: And Facebook groups.

Brad Tacia: Yes, exactly. That’s true.

Joe Fairless: Was the person presenting the 50-unit a wholesaler, or was that the owner?

Brad Tacia: He’s a part owner. It’s a syndication and he owned a piece of it.

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

Brad Tacia: They can e-mail me. That’s bradtacia@gmail.com. I also have started a Facebook group called Apartment Investors Of Michigan. Go ahead and join that, and we have a fair amount of information  sharing on that site as well.

Joe Fairless: Brad, thank you for being on the show, talking about these multifamily deals that you are getting in a time when I hear a lot of complaining from multifamily investors about how there’s not any good deals… And especially with your background, because you have a full-time job, and you were able to get a 63-unit from a broker without having gotten one that large before. So you showed the credibility, you had the things lined up, and then you acted on it almost instantaneously. You submitted the LOI that day… It’s a case study for how to act and approach getting deals on some markets that are hot or the deals are few and far between.

Thanks for sharing your story, and also talking about your business plan with each of the deal, and reducing the expenses. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Brad Tacia: Sounds great. Thanks, Joe.


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JF587: How You are Leaving Thousands of $$$ Behind by Not Doing This!

“Wholetail,” acquiring a property at a wholesale level and selling at a retail price without doing a lot to it, or very little. Today’s guest is pretty savvy using this strategy and has found success in this niche. Tune in and see how you can save even more cash at the closing table!

Best Ever Tweet:

Mike Cowper real estate background:

  • Been a wholesaler for 15 months and done over 50 transactions, 4 of them being his own rentals
  • Say hi to him at: webuyroi.com
  • He is based in Detroit, Michigan
  • His Best Ever book: Four Hour Work Week by Tim Ferriss and The One Thing by Gary Keller

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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.

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JF438: When Should You Evict?!?

Every landlord loathes the eviction process…you lose money, time, and it just looks bad. Not fun. Our Best Ever guest is a property manager pro, and he has processed many evictions, but is now well seasoned and evicts carefully. He is able to collaboratively work with tenants who will pay if they genuinely slip, but make no mistake, he is still stern and begins the process regardless. Hear his side of property management!

Best Ever Tweet:

Drew Sygit’s real estate background:

  • Founder and operating partner of Royal Rose Property Management
  • They have 403 units under management
  • Has 17 years in the mortgage biz as a mortgage broker and banker
  • Say hi to him at http://www.royalroseproperties.com
  • Based in Detroit, Michigan

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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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JF422: How to Flip 12 Homes a Year with a Full Time Job

Our Best Ever guest is not a full time investor, but he still manages to fix and flip 12 homes a year! He has established a power team that works cohesively in the Detroit, Michigan area. He was inspired by a previous guest on the show, Josh Sterling, who challenged him to jump in! Hear his story!

Best Ever Tweet:

Tom Wooderson’s real estate background:

  • Been investing for three years and is an active real estate agent, wholesaler, hard money lender and rehabber
  • He’s on track to rehab 12 properties in 2015 while having a full-time job
  • Based in Detroit, Michigan and graduated from Michigan State University
  • http://•http://www.twholdingsllc.com and thomaswooderson.com

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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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JF365: $1,000 Credit Card Charge to Virtual Wholesale Genius!

Ready for a new market? Our Best Ever guest hints how he successfully wholesales properties…virtually! No need to be everywhere at once; he instructs how to close a deal in another city while in the comfort of your home! How to find your “boots on the ground” including additional real estate professionals in places other than your hometown, you have to hear this!



Best Ever Tweet:



Chris Bruce’s real estate background:



  •  Full time real estate investor who started investing in Detroit, Michigan then went to Tampa, Florida
  • Say hi to him at http://escapethenewbiezone.com/aboutme
  • Popular podcast called Escape the REI Newbie Zone
  • Virtual wholesaling in different markets
  • Based in Tampa, Florida


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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 359: How To Buy FIVE Houses While Making $30,000 Per Year

Today’s Best Ever guest has probably flown you across the country and he kept you safe then, so listen up because he shares with us exactly how he left his job as a pilot and continues to have investing success.

Best Ever Tweet:

Josh Sterling’s real estate background:

–           Based in Detroit, Michigan

–           Currently own and manage 125 units

–           Flip about 12 – 15 properties a year and also runs a property management company

–           Was an airline pilot for 5 years and now I have a Piper Saratoga that he flies for fun

–           Say hi to him at http://www.epicpropertymanagement.com

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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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JF 107: Presenting…The World’s Fastest Refinance!

All we do is…set refinance records…and win! 🙂

Today’s Best Ever guest shares how he set an unofficial world record on the fastest refinance on a property, why it happened and how to avoid in the future. Plus, we talk about his experience growing up in the real estate business and his company’s focus on multifamily investing.

Let’s go!

Tweetable quote:

Nick Keesee’s real estate background:

–        Founder of Nile Capital, focused on multifamily family investing

–        Real estate investor who has property in the Detroit area

–        Based in Novi, Michigan about 30 min from Detroit

–        4th generation real estate investor

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Sponsored by: Twenty Four Sound – visit http://www.twentyfoursound.com and mention “bestever” for an exclusive 20% discount on your purchase.

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