JF1973: Value-Add Mobile Home Parks and Commercial Ground-Floor Apartments with Gabriel Hamel

Gabriel Hamel has amassed a multi-million dollar real estate portfolio consisting of single-family homes, multi-family apartments, commercial real estate, and mobile home parks. His 43-unit mobile home park had some value-add opportunities and Gabriel took advantage. Listen to this episode to find out how Gabriel purchased his mobile home park and other multi-family properties.

 

Best Ever Tweet:

“Do the math, know your market, and trust your intuition. Intuition goes a long way in this game.” – Gabriel Hamel, Hamel Investments

Gabriel Hamel Real Estate Background:

  • Real Estate investor, experience with Seller Financing and other creative purchasing structures
  • Currently owns 140 units
  • Based in Eugene, OR
  • Say hi to him at https://hamelinvestments.com/ 
  • Best Ever Book: The Big Leap 

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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, Gabriel Hamel. How are you doing, Gabriel?

Gabriel Hamel: Hey, I’m doing great. Great to be here with you and your Best Ever listeners.

Joe Fairless: Yeah. Well, I’m looking forward to it and grateful that you’re on the show. A little bit about Gabriel – he’s a real estate investor, he has experience with seller financing and other creative purchasing structures; currently own 140 units and has another 60 under contract. Based in Duck Country, Eugene, Oregon. So with that being said, Gabriel, do you want to give the Best Ever listeners a little bit more about your background, and your current focus?

Gabriel Hamel: Yes. I started buying real estate in 2005. Shortly before that, I picked up Rich Dad, Poor Dad. Before that I didn’t have a lot of direction on what I wanted to do with my life. Read Rich Dad, Poor Dad, I got deployed to Iraq shortly after that, but constantly thought about the lessons I learned in Rich Dad Poor Dad. I came back, started buying property in 2005 when banks were giving loans to just about anybody. A couple of years into that, now it’s 2008, I own a couple of houses and banks are not giving loans out to people that don’t have jobs or money. So that’s when I really turned my focus into getting creative with seller financing deals.

Joe Fairless: You’ve got 140 units.

Gabriel Hamel: 140 units, yup.

Joe Fairless: Wow. What is the largest property that you have within the 140?

Gabriel Hamel: The largest property as far as the unit count, I have a 43-unit mobile home park.

Joe Fairless: Okay. So a 43-unit mobile home park. So of the remaining 97, what’s that?

Gabriel Hamel: It’s a big mix. I started off with single family and then smaller multifamily, a lot of duplexes, triplexes, 4-unit, 6-unit stuff. I have a couple of apartments that are 20-unit, 15-unit, but I still hold quite a bit of smaller multifamily as well.

Joe Fairless: Which one’s your favorite?

Gabriel Hamel: I am really liking the mobile home park.

Joe Fairless: Really?

Gabriel Hamel: I really am. Yeah, it had a lot of value-add opportunity. The 60-unit that you mentioned that I had in contract actually pulled out of that deal. And the one I purchased, the more I dug into it and the more I dug into the numbers, the better it got. The 60-unit I had in contract, the more I dug into it, the worse it looked. So I had to trust my instinct and trust the numbers and pull out of that one.

Joe Fairless: We’ll talk about the 60-unit in a bit. 43-unit mobile home park, you said that’s your favorite. You really like it. There’s a lot of value that you added. Will you elaborate?

Gabriel Hamel: Yeah, it was something I was looking for. I took it on similar to some of the multifamily stuff. I like to buy property that has that value-add opportunity, so I’m looking at properties that are poorly managed, under-rented, deferred maintenance. This park, it was running okay. The previous owners were great people and they ran the park okay, but there was some value-add opportunity with– the rents hadn’t been increased in four and a half years, the utilities weren’t being billed back to the tenants… So that was costing close to $15,000 a year, just there. Then some of the mobile homes themselves, a lot of the maintenance costs were on the park-owned properties. So right now, I’m in the process of selling the park-owned units back to the tenants on contract. In that way, they’ll be responsible for some of that ongoing maintenance and they’ll have that pride of ownership in the home.

Joe Fairless: Is that the name of the game with mobile home parks, to not own the mobile homes?

Gabriel Hamel: I’ve seen it done both ways. But I want to own the land and not the mobile homes.

Joe Fairless: You mentioned the reason why – maintenance costs, and then there’s more private ownership. What would someone who has the opposite philosophy say for why he or she wants to own the mobile homes?

Gabriel Hamel: I’ve seen the higher end parks where the homes are newer and in great shape. So they’re able to rent them out at a lot higher of amount and there’s not a lot of that maintenance cost. So the part that I purchased, they’re older units, so almost all the maintenance for the last several years have been when I was digging into the numbers were on the park owned homes. So I think the newer parks and the newer homes – there’s gonna be less maintenance and they’re going to be able to charge a premium for renting it, and they’re owning the unit as well.

Joe Fairless: How much did you buy the 43-unit mobile home park for?

Gabriel Hamel: I paid a little over 1.3.

Joe Fairless: Is that your money, you and partners, or what?

Gabriel Hamel: This one, I didn’t have a partner on. I used to some private money and put about 20% down, and an interest only loan that I will be able to refi out of that. I think next 18 months I’ll be able to add a lot value and refi out and recoup probably most of the money that I put into it.

Joe Fairless: So private money and with 20% down. So is that you borrowed the 1.3 from someone and you paid 20%?

Gabriel Hamel: No, I put down about $240,000 and I had private money to finance the rest of the deal.

Joe Fairless: Okay, private money meaning just investors?

Gabriel Hamel: Yeah, hard money.

Joe Fairless: Hard money. Okay, so hard money lender, got it. So you got a hard money loan on it, and then you put out of your pocket the 20% down, and the goal is to get the heck out of that loan as quickly as possible and to refinance out.

Gabriel Hamel: Exactly. And it cash-flows with that hard money. But I think with making some of these changes it should appraise out based on [unintelligible [00:06:48].26] cap rates. I think it’ll appraise out close to that 2 million mark, and so I’ll be able to get something long-term fixed financing on the park.

Joe Fairless: And your 200K-ish back?

Gabriel Hamel: Yep. Correct.

Joe Fairless: That would be nice. That’s called infinite returns.

Gabriel Hamel: That’s what I’m always looking for, is infinite returns.

Joe Fairless: Yeah. How’d you find the 43-unit?

Gabriel Hamel: This one was actually– a commercial broker had been sending me a lot of multifamily stuff up in Portland. A lot of it was really nice, A and B class stuff. I just said, “Hey, if you see any value-add multifamily or mobile home park, let me know.” They had someone in their office with this park, so I had the opportunity to look at it. I actually drove down there, and the owners of the park were there. So I was able to spend some time with them and really getting to know them and the park a lot better, which made a big difference.

There was actually an offer that came in higher than mine. But I think building that relationship with those sellers really made a big difference. And I’ve done a lot of seller financing deals where it’s been really relationship based and I’m working directly with the seller on unlisted properties. It’s rare to able to build that relationship directly with the seller and in this case, they happened to be there when I showed up at the park. It worked out really well.

Joe Fairless: It’s just a coincidence.

Gabriel Hamel: Yeah, absolutely.

Joe Fairless: Have you since tried to manufacture that coincidence moving forward, since it worked out so well?

Gabriel Hamel: Showing up to a park with a seller there?

Joe Fairless: Yeah.

Gabriel Hamel: Not exactly. I’ve looked at several other parks… The 60-unit park that I backed out of– the previous owner, she didn’t own it anymore, but was actually acting as the property manager. So I was able to look at that property and get a lot information from this property manager whose parents had owned it, and her grandparents had actually built the park. So that was interesting as well.

Joe Fairless: So you’ve got that 43-unit… It sounds like that’s a fairly recent purchase.

Gabriel Hamel: Yeah, I closed on that in June of this year.

Joe Fairless: Okay. Alright. So recent-ish purchase. You got the 43-unit mobile home park, and then you also said you have a 15-unit and a 20-unit apartment building. Do you self-manage all this stuff?

Gabriel Hamel: I don’t manage any of my rentals. So right when I hit the 17-unit mark, I was managing it myself. I had young kids at home. But at 17-units– one night, I was fixing a toilet or attempting to fix a toilet, and I had already considered and factored in property management. I’m kind of handy but not that handy, so I ended up spending my time… And then I had to call a plumber anyway; it’s late at night. So I’m spending my time and money, and then that was really the time I turned everything over to property management. And once I did that, I had a lot more of my time to put deals together. That was one of the best decisions I ever made.

I know a lot of people self-manage and some don’t, and I’m definitely one that sees the value in not managing my own properties. I don’t love it, I’m not great at it. I’m better at putting deals together. And I don’t like being that guy that has to take a security deposit or kick a tenant out for non-payment.

Joe Fairless: The 15-unit and the 20-unit… How are those people performing?

Gabriel Hamel: The 15-unit was a value-add. It was an old building, I partnered on that one. It was a commercial ground floor with two commercial spaces and 13 apartments. That was quite a bit different than many other projects I had done. My partner on it had a crew of guys that did a lot of the work. I put the deal together. He’d been working on it prior, and handed it over to me to negotiate the purchase. That was a big value-add. So all the apartments had to get gutted and restructured because of some egress things that were going on.

Joe Fairless: What was going on with the egress?

Gabriel Hamel: So it was a single-room occupancy originally. So before we bought it, the city came and every code violation you can imagine was going on.

Joe Fairless: Before you bought it?

Gabriel Hamel: Before I bought it.

Joe Fairless: Thank goodness.

Gabriel Hamel: Yep, yep. So we were trying to purchase this prior to that, when people were still living in it. Then a small fire happened, also previous to us owning it. That’s when the fire marshal came in and saw all these violations, kicked all the tenants out. So we’re still trying to negotiate. So now here’s a building that the sellers are trying to sell and there’s nobody. All the commercial is vacant, the residential is vacant… And we went to the city and just said, “Hey, we want to do this. We want to make this work.” We had some ideas and some plans, and they were great to work with. We just sat down and said, “Hey, what can we do? What can’t we do?” So this particular building, instead of keeping it a single-room occupancy, we essentially put a hallway down on the side that we couldn’t put windows into, made that a long hallway, and made a bunch of just neat and oddly-shaped — one two-bedroom in there, but one-bedroom units. It was a great play.

Our focus was the residential. The residential would fully support our financing. So that’s where the majority of our time went. As soon as that was done, we focused on the commercial and got some great tenants on the ground floor there.

Joe Fairless: What type of businesses do you get?

Gabriel Hamel: We have a bicycle shop that had been in another location previously, that wanted to be in this part of town. Then we had a restaurant come in on the larger side of the ground floor, and they’ve done really well.

Joe Fairless: A local mom-and-pop restaurant or a chain?

Gabriel Hamel: Yep. Local restaurant and local bike shop.

Joe Fairless: Okay, cool. What kind of area is this in?

Gabriel Hamel: I live in Eugene, Oregon, and this was in downtown Springfield. So growing up, it was, “Hey, why would you go to Springfield?” There wasn’t a lot going on downtown, and this building was the eyesore. It was the bigger– you see the building on your way into town when you cross the river, and on your way out when you cross the river, because it takes up that whole block. It was an attractive building, but it needed a lot of work. But also, it was in the path of progress. A lot of restaurants and stores from Eugene and local folks were coming into Springfield and opening up restaurants and stores and different things. So part of it was timing. Now, downtown Springfield is a very neat place. People actually want to go down there and hang out and grab a meal. So it’s neat to see.

Joe Fairless: What did you buy it for? How much did you put into it? What’s it worth now?

Gabriel Hamel: Oh, gosh. This was a little while ago.

Joe Fairless: Wait, when was it? When did you buy it?

Gabriel Hamel: So we bought this about three years ago.

Joe Fairless: Oh that’s not too long ago.

Gabriel Hamel: Not too long ago, not too long ago. We had close to a year of renovation, like all said and done. So we bought this in–

Joe Fairless: To the best of your memory. To the best of your memory.

Gabriel Hamel: We were in the 400-range and we put another close to that into it. The renovations were close to what we paid for it.

Joe Fairless: Okay, and what’s it worth now?

Gabriel Hamel: It would appraise out probably close to two million, maybe more.

Joe Fairless: There you go. Do you plan on doing a refi on that?

Gabriel Hamel: Yeah, we actually did. So we refinanced it. My partner and I had some 1031 money so we exchanged a little bit into that. We used hard money for the purchase and most of the renovation. Then we actually did refinance out of it and did a 25 year amortization commercial style loan.

Joe Fairless: I’ve noticed on the two projects we’ve talked about in detail, you’ve used hard money. What are the terms that you’re getting?

Gabriel Hamel: I typically borrow in the low 8% interest only, and a couple of points.

Joe Fairless: Are you making payments on the interest only throughout, or at the very end or?

Gabriel Hamel: It really depends on the deal. On the mobile home park, yeah, right away. On this other project, we actually deferred some of the payments during that construction time. So we actually kept an account aside that would cover that, so that we had some money to focus just on the renovation. Hard money is not something I used starting off for quite a while. I didn’t use any hard money for the first 10+ years of investing.

Joe Fairless: Was that your own money and that was it?

Gabriel Hamel: I was doing a lot of seller financing deals. I started with almost no money. So my first three deals were two no money down and a 5% down deal. I didn’t have a lot of money, but banks were giving loans then. Then in 2008 and ’09, ’10, ’11, ’12, I did a lot of low and no money down seller financing deals. That’s where I really built up the majority of my portfolio. These other two deals were a little bit different than what my focus up until then had been.

Joe Fairless: I forgot how I introduced you with the first thing. I mentioned that you have experience with seller financing and other creative purchase structures. So let’s talk about that in a moment… But on a related note, these last couple that we’ve talked about, they weren’t seller financing or creative structures, although I guess you could argue getting a hard money lender and doing what you did is cvasi-creative. Do you see yourself doing more of the structure that we’ve talked about in the future? Or do you see yourself reverting back to the seller financing?

Gabriel Hamel: I do both. So I try to take a real holistic approach to any deal, and I look at the deal individually and see what makes the most sense for that property. How am I going to get the biggest return on my money, how much money am I bringing into the deal… So it just really depends on the property, what financing would best fit.

Joe Fairless: Okay. So let’s talk about a deal that you’ve done with seller financing and why you chose that versus hard money and your own money with a down payment.

Gabriel Hamel: So my very first seller financing deal was the deal I found on Craigslist, and they were offering seller financing. I had been looking for seller financing. The reason I did that without bank loan or hard money is because I did not have the funds or a job to get conventional financing.

Joe Fairless: Were you in the military?

Gabriel Hamel: I was, yeah.

Joe Fairless: Okay. So I guess this is post-military.

Gabriel Hamel: It is. I was deployed to Iraq in 2003 and 2004. I came back, bought my first house in 2005, another one in 2006, and another one in 2007. That was all with bank financing. But a bank would approve anyone then. So I still bought smart, even though it was a hot market, and not great loans. I still have those houses today and they’ve done well. But I realized quickly a couple hundred dollars a month of cash flow per house would take a lot of single family houses to build up enough cash flow to live on. So my first seller financing deal was two duplexes side by side, four units. I put twelve and a half thousand down, and I got a lot of that back with deposits and prorated rents at closing, so it ended up being less than that… And the thing cash-flowed. So like all the things that I said before – poorly managed, under-rented, deferred maintenance, and it had all those things. The sellers were great people that were just tired of managing property, and so they were happy to sell or finance the deal. It was terms that were favorable to them and favorable to me. It was a true win-win scenario.

Joe Fairless: Out of all your deals, which deal have you lost the most amount of money on?

Gabriel Hamel: I have never lost money on a deal.

Joe Fairless: Props to you. Which one’s been the least profitable?

Gabriel Hamel: The least profitable – I partnered on another single room occupancy property about an hour South of me. I partnered with the same person I partnered on this other partner with, and I partnered with the lender. Long-term, it’s going to be fine. It’s a property that had a bad reputation and we ended up having to do a lot more work up front. It’s taken a while to really change the image of this building. Long-term, it’ll be fine if we keep it. If we sell it, I think we would make some money and do okay there. But it has not been as profitable as we anticipated. The expenses with the earlier renovation than we anticipated has costed not to perform as well.

Joe Fairless: What aspects of the expenses creeped up on you?

Gabriel Hamel: We had early vacancy. By the time we closed on it, some tenants had moved out. We had a commercial tenant that wasn’t paying. All the rents were low, being that it was single-room occupancy, but it also was really hard to get because it had a bad reputation previously for drugs and transient traffic coming through there to just really change the image of the property. So interior painting every time a tenant moved out, exterior painting we’ve done recently, and just some upgrades that we plan to do, but not as quickly as we did.

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

Gabriel Hamel: My best real estate investing advice ever, I’d say network, build relationships and let people know what you’re looking for. If people don’t know what you’re looking for, how are they going to find you? How are they going to bring you a deal? Lastly, I’d say do the math, know your market and trust your intuition. I think math and intuition goes a long way in this game.

Joe Fairless: We’re gonna do the lightning round. Are you ready for the best ever lightning round?

Gabriel Hamel: I’m ready.

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

Break: [00:19:32]:00] to [00:20:08]:03]

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

Gabriel Hamel: I have two of them. The Big Leap by Gay Hendricks and Can’t Hurt Me by David Goggins.

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

Gabriel Hamel: A mistake on a transaction we haven’t talked about… Not digging deeper into my due diligence.

Joe Fairless: Will you elaborate?

Gabriel Hamel: I think when you get a proforma from, say a broker, and those numbers don’t always add up. Now, I’ve been okay with– now I’ve had enough experience to really dig into those, but I think a lot of properties look great on paper, and once you really spend some time and dig into those numbers, they don’t always add up to what you’re really being sold by the broker.

Joe Fairless: Best ever way you’d like to give back to the community.

Gabriel Hamel: I like going to lunch and meeting up with people who are excited about building financial freedom through real estate or already started on their journey. I really enjoy just that natural coaching and mentorship.

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

Gabriel Hamel: The best way to get a hold of me would be either through Instagram or on my website at hamelinvestments.com.

Joe Fairless: Thank you so much for being on the show. Well, we talked about in detail the 43-unit mobile home park, the value that you added and the business plan. We didn’t even talk about the 60-unit. Shoot! Real quick, I want to learn more about the 60-unit. What were some specific things that made you want to pull out of the deal?

Gabriel Hamel: On the 60-unit, the biggest reason I pulled out of the deal– and it’s going back to that proforma… They’ve built a beautiful proforma based on their highest month rent and their lowest expenses. The more I dug into the numbers, and the more documentation I got from the seller and the property manager, things just really didn’t add up. There was just too many questions, and the numbers – their rent amounts didn’t add up, the expenses didn’t add up. There were just so many red flags. I tried hard to make it work, and it’s not something that was going to force. It wasn’t a good purchase.

Joe Fairless: They weren’t flexible on the purchase price or terms?

Gabriel Hamel: By this point, no, they weren’t.

Joe Fairless: Well, thank you for sharing the reason why you pulled out of the deal, as well as the deals that have gone well. We touched on a little bit of seller financing, but really the focus was on the larger deals. Thank you for going to Iraq, serving our country and keeping us all safe. Really appreciate you sharing some time with us. I hope you have a best ever day and we’ll talk to you again soon.

Gabriel Hamel: You too. Thank you very much. I appreciate it.

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best ever real estate pro advice

JF937: Why Picking the RIGHT Partnership is Key in Wholesaling

Our guest is doing many types of deals, but he does them with a partner makes up for his weaknesses. If you have any weaknesses, which I’m sure you do, you need someone there to compensate for your loss and leverage what you can’t or shouldn’t do, get a partner!

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Travis Daggett Real Estate Background:

– Owner at CornerstonePropsCo, a Premiere Real Estate Redevelopment & Renovation Company
– Full-time real estate investor for five years
– Made 5 figures on his first wholesale deal..correction: 4 figures…you’ll hear about it in the interview 😉
– Married 19 years and has three amazing kids
– Based in Eugene, Oregon
– Best Ever Book: Visioneering

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picking real estate wholesale partner

 

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

With us today, Travis Daggett. How are you doing, Travis?

Travis Daggett: Doing great, thanks Joe!

Joe Fairless: Nice to have you on the show, my friend. Travis is the owner at CornerstonePropsCo, a premier real estate redevelopment and renovation company. He’s been a full-time real estate investor for five years. He made five figures on his first wholesale deal. He’s married 19 years and has three amazing kids, and he’s based in Eugene, Oregon. With that being said, Travis, do you wanna give the best ever listeners a little bit more about your background and your focus?

Travis Daggett: Yes, sure. Well, the five figures doesn’t really sound that impressive… However, I did start with literally no money, so that was a deal where I think I had an earnest money deposit in the deal, and I netted $7,000+. So it was a little better… That could be a $1,000, that’s no big deal, but for my first deal, it was alright.

Joe Fairless: Well, five figures would be $10,000+, because that would be five numbers.

Travis Daggett: Yeah, see…? This is the truth, that you don’t have to be a genius to be a real estate investor. [laughter] There’s a lot smarter people doing all kinds of things, but they’re not necessarily making more money, and sometimes they’re too smart for their own good.

Joe Fairless: [laughs] Alright, so you made 7,000 on your first… Let’s start there, how about that? Let’s start with your first wholesale deal. You made $7,000 on it. Can you tell us the story about that a little bit more?

Travis Daggett: Before this I was a sales trainer for an insurance company, and I was traveling all over… They’ve laid off about a quarter of the staff, so that was the blessing in disguise. I just started learning everything I could. I had a couple of rentals before, and that was about the extent of my real estate investing experience. I started learning about wholesaling, specifically HUD properties. This was 2011 when there were a lot of HUDs, and there was just a little loophole where you could make bids every single day on HUD properties, and you really could do it yourself. You could just find an agent that was sympathetic, I guess, and get their login information, essentially, work with them as their assistant if you needed to be an unlicensed assistant, and make bids every single day… So that’s what I did.

I got a property under contract, and then I found the buyer and did a back-to-back closing, because the HUD won’t allow assignments. So I bought it for seven and sold it for seventeen. All I had was the earnest money deposit out of pocket, which I think was $500; I had some closing costs, and type of a thing, so I think I netted over seven.

Joe Fairless: Alright, that was your first wholesale deal. Catch us up to speed, from then until what you’re doing now.

Travis Daggett: Well, 2012 was great, because there were a lot of HUDs, and I started thinking (mistakenly) that I was in the real estate investing business. At that point I really wasn’t in the real estate investing business, I was more in a tech business and real light on the real estate investing. That lead me to think I knew more than I knew, and started buying at the auction… Which, of course, was okay and I did alright, but then I thought I could get into rehabbing without really understanding it.

2013 is when I bought a property or two wrong – when I say “bought wrong”, I made the first and maybe the most deadly mistake in real estate investing, which is just buying for too much. It’s really hard or impossible to overcome that mistake.

So I made some mistakes along the way, and then HUD dried up, as a lot of people probably know. Auction properties dried up – by that I mean the supply went down, competition went up, so I needed to learn to source my own deals directly from sellers. I started doing that in 2014, and it’s been a rollercoaster, both results-wise, and when you’re self-employed, it’s an emotional rollercoaster too, but I’ve been really fortunate to partner with somebody that knows more than me and learned from him for the past couple of years.

We haven’t bought off the MLS since 2013, I think, and we sourced our own deals for the last two or three years.

Joe Fairless: And what type of volume are you doing on a monthly or annual basis?

Travis Daggett: Nothing crazy… I used to think that was the goal, to do more deals, but now I’d rather do less deals that are more profitable. Probably the average is a deal a month, but we did have one deal that was over six figures, and we had a wholesale deal that was almost $50,000, so we’ve been able to get some more profitable deals, and focus on that instead of volume.

Joe Fairless: And since you are selective with the properties that you end up working on, what is your criteria that you look at for a property to pass the test?

Travis Daggett: Well, we have two main targets or lists that we’re going after, because most of our deals come from direct mail… So the first one is properties where we’ve actually driven through neighborhoods, seen the property, wrote down the address, looked up the owner information, sent him a letter… That’s really the most valuable and valuable list that you can have – at least we believe – because we don’t have to guess at whether the property is a property that we wanna buy. When we’ve marketed to the absentee owner list in the past, we got people calling, they have a move-in ready house, and really that’s not good for them, not good for us. There’s really no way for us to create value or margin in a transaction like that, because we’re not real estate agents looking for listings.

So the first target is residential properties, mostly single-family, and we just call it our “driving for dollars” or our neighborhood list. The second is foreclosures, when the bank has filed either a notice of default for non-judicial foreclosure, or a lis pendens for a judicial foreclosure, because in Oregon we have both.

We’ve gotten a number of deals that way, targeting that list. That’s a lot more labor-intensive for each transaction.

Joe Fairless: Will you walk us through the process for how that works, and your role, and what data resources you need to have access to?

Travis Daggett: When I started in 2011 on HUD properties, again, it was real admin-heavy, it was really more of a tech business, and thankfully that’s an area where I’m stronger… So I started using virtual assistants, and I couldn’t have done what I did then without them, and I couldn’t do it now. We use virtual assistants to do a lot of the scrubbing on our lists. We’ll go out and drive through a neighborhood… Let’s say we take a day and we come up with a few hundred addresses, and then the VAs – they’re usually overseas, they’re in India or the Philippines – during the night (over here), they’ll use Property Radar (or whatever other site we need for that county) to find the owner’s names and their mailing address, because they may be different, and that completes our list.

With the foreclosure properties, we just get those from the title company, that’s free. There’s scrubbing involved there though as far as prioritizing the properties that we’re gonna go after more heavily in the beginning. Equity, for sure, a property with a good interest rate in case we wanna assume the mortgage or purchase it subject to the existing mortgage, that type of thing.

Joe Fairless: Will you tell us about the last deal you did? Give us the numbers and tell us which one of these paths allowed you to find it.

Travis Daggett: Yeah, sure. The final numbers aren’t in on that, but that’s fine, we can go through the process pretty well. The property that was on the foreclosure list, it was non-judicial foreclosure. We always have to have a cooperative seller, of course, or a cooperative homeowner. We wanna help them, they have to want the help, and it’s really a win for the bank too, if you understand negotiating for the bank. They’re not in the business of property restoration, or property management, or really anything to do with properties, so it’s a win for them.

So there were two loans on the property, we went through a number of rounds at the bank of negotiating, and we were able to postpone the sale a couple times, which helps us. In this case, we actually worked successful in negotiating a discount with the first lender, but we knew even if we purchased it for the amount of the first mortgage and the second it’d still be a deal, so we went ahead and paid off the first – they were the ones foreclosing – and then we continued to negotiate with the second, even though they really had no reason to negotiate with us… But we thought we’d just give it a shot, and ended up getting it for the amounts in the first and the second. But it was still a deal, especially when you consider the market here, where it’s less than two months of inventory, so it’s very competitive.

Prices are going up — we’re not buying for speculation, but were all in on our purchase I think at 140, and as it sat, it’s probably worth in the upper hundred, and then with a renovation of probably 30,000 (nothing major), it’d be worth in the low two-hundreds, and we’ll probably rent it out for 1,500/month, I would guess.

Our aim high is definitely a 1% rent-to-cost ratio. In that Eugene area we also have appreciation, so we’ll go anywhere from 0.75 to 0.8%, up to 1% rent-to-cost ratio.

Joe Fairless: Is your goal to buy and hold these properties?

Travis Daggett: Right, so my partner has a property management company, and that’s our partnership: I find the properties, so I’m in charge of the marketing and finding the deals, and then at that point he really takes over as far as the property management side. That’s what we’ve done on all but one; we’ve wholesaled one, but everything in the last couple of years, we’ve held on to through this property management company.

Joe Fairless: And do you just split the costs 50/50?

Travis Daggett: Well, cost of the marketing — again, I was really fortunate to find a guy that really knows this stuff and he’s honest. We met at a real estate investing REIA group (Real Estate Investors Association). So yeah, we basically split the costs upfront for the marketing, and then since we’re not cashing out the property so to speak, we just did an appraisal on the property, because usually we’re gonna finance out of it with a bank loan… So now we have an appraisal, we know what we’re all into it, so we have our equity in the property.

At that point, I can either say, “Well, okay, I’ll take the equity as a payout right now” or I can say “Well, I’ll stay in the property and we’ll just split the cash flow.”

Joe Fairless: Oh, okay. Alright. Either one of you have the flexibility to cash out your equity at closing and be done with that property, and the other person holds on to it, or you both have ownership and enjoy the cash flow and appreciation…

Travis Daggett: Yeah. I mean, it’s really more of his choice than mine. I’m fine with that, of course, because he’s got the property management company. But it’s just one of those — I’m sure people have been in bad partnerships (and good ones) and it’s probably pretty rare (I’m thankful for that) that there hasn’t been that tension when we feel like we’re on opposite sides of the table. For the most part, we feel like we’re on the same side of the table; we’re not negotiating against each other, so it’s been a good situation.

Joe Fairless: Yeah, it’s refreshing when you have a business partner like that. Just for point of clarification, you said it’s really up to him on that… I don’t understand that point. Can you elaborate?

Travis Daggett: We have different ways of looking at who controls a deal, and whose it is, so to speak, who owns it. So since I’m finding most of the deals, I could say “Okay, these are my deals.” However, early on, just because of the nature of our partnership and relationship, we both just agreed all the deals we just throw into the pot.

We were in a situation where I was saying, “Okay, here’s the deal. How much do you want for it?” It’s a traditional wholesaler type of attitude. I said, “Here’s the deal, let’s see what we can do with it?” A part of it is he has access to a lot more capital than I do (at better rates, at least), so he’s funding the deals, so I’m happy to give him a lot of the decision-making that way, too.

Joe Fairless: That makes sense.

Travis Daggett: Yeah, we’re both in agreement. It’s not like I’m saying, “Hey, we should flip this thing because we’re gonna make six figures just after doing floor and paint” and he’s saying “No, I wanna hold to this.” Most of them it’s pretty clear when we buy it it’s gonna be a rental.

For example, we purchased one for a few hundred thousand in Eugene, so that one we know it’s gonna be a flip when we’re done with the rehab.

Joe Fairless: Okay. The point I had missed was that he was financing them and you were finding them. Once you said that, it made a lot of sense.

If you partner were to move away – for whatever reason – and you had to find a new partner, how would you qualify that new partner so that you would attempt to have the same caliber or partner that you have now?

Travis Daggett: Tough question. In partnerships in business, and I’m sure just generally in life, it’s usually (from my experience) more of the intangibles or the character issues that damage partnerships or damage businesses, as opposed to people’s aptitudes. I think we all know really smart, skilled people that can self-destruct and destroy partnerships.

In the case of my partner, I was able to thankfully observe him for a couple of years just through the REIA and just through some acquaintances, and watching him and his business, and seeing that he was someone that did what they said they were gonna do. He had a track record of success in partnering with other people… Without that knowledge, it’d be really tough to find a partner or to choose a partner.

I’d have to start with somebody that plays to my weaknesses… Kind of like a marriage – if you have the same strengths and weaknesses, that can be a little bit of a challenge. So it should be somebody that is strong where I’m weak, and maybe where they’re weak, I’m strong. In our partnership now, I’m certainly not strong in negotiating and funding. I’ve gotten pretty strong in admin and stronger in marketing… So I’d say somebody that’s strong in the funding side and the construction side, that’s who I’d look for.

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

Travis Daggett: I kind of alluded to it earlier… I’d say don’t be confused about what business you’re in and what your strengths actually are, because I think pride and arrogance and blindness in that area can really destroy you.

Joe Fairless: Now, are you ready for the Best Ever Lightning Round?

Travis Daggett: I’m ready!

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

Break: [00:18:26].14] to [00:19:07].24]

Joe Fairless: Best ever book you’ve read?

Travis Daggett: Visioneering, by Andy Stanley.

Joe Fairless: Best ever deal you’ve done.

Travis Daggett: A deal in Eugene… It was a short sale, over six figures in profit.

Joe Fairless: Now, is that six figures, is that seven, or is that five or four or three? I have to ask you now a second time.

Travis Daggett: I got it straight now, this is tax season. [laughter] I gotta nail it.

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

Travis Daggett: I think it’s just the lifestyle, it’s really plan. All of us can give emotionally when we see the kid on TV with the belly sticking out, but I think giving is really a lifestyle, so it’s planned. We plan that we’re gonna give a certain amount, we’re not just surprised at the end of the year when we do our taxes.

Joe Fairless: What’s the biggest mistake you’ve made on a deal?

Travis Daggett: Well, I think I talked about this one earlier, but I’ll relive that painful memory again… Bought at auction, so of course, it’s done, paid cash; trusted a partner who unintentionally — he just was outside of his area of expertise as well… Then we made it worse by over-rehabbing it by about double, then we made it worse still by selling with seller financing — not that that’s a bad strategy in general, but just delaying our misery… And then ended up taking the loss I think two years after we bought it. We should have just swallowed the poison a couple of years earlier and taken a loss.

Joe Fairless: Tell us about the six-figure profit that you made. Tell us the numbers on that one.

Travis Daggett: Really desirable area near [unintelligible [00:20:41].28]. It took over a year to finish it, to close on it. When we first shot – short sale, direct mail marketing, they called us… As soon as we looked at it, even online, looked at comps and stuff, we knew that it was a great area property, we really wanted to have it. Even before we looked at it, we said “If we can get this anywhere near 300,000, it’s a deal.” So we met with the sellers, they were very cooperative – he was actually a patents attorney, so he knew a little bit about the legal process. It took a long time, a lot of handholding – I don’t mean that in a condescending way – just walking him through the process and negotiating with the banks, meeting the VPO agent there, dealing with all kinds of liens that popped up with credit cards, and just going through that whole process.

We ended up buying it for 244,000 I think, so just right out of the gate we had probably 50,000 in equity, and then it was a light rehab… Of course, over the years, from when we started to when we finished, that area went through the roof even in property values; it probably went up double digits, so we ended up with over a hundred thousand dollars in equity when we ended up closing on it, finished rehabbing and then appraised.

Joe Fairless: That’s great. How much did you put into the rehab?

Travis Daggett: About 30. Maybe less. Maybe 25.

Joe Fairless: And what did you sell it for?

Travis Daggett: No, we held on to this one, because it’s a hot campus rental area. I really don’t know off the top of my head what we rent it for, but I would have to guess it’s in the twos. I couldn’t see it renting for less than 2,000/month.

Joe Fairless: Yeah, sounds like a great buy and hold, that’s for sure. Where can the Best Ever listeners get in touch with you?

Travis Daggett: The e-mail address is selltocornerstone@gmail.com. That’s my business, Cornerstone Properties Eugene is the name of the business.

Joe Fairless: Travis, thank you for being on the show, and talking about the deals that you’ve done, how you’re getting those deals, the hundred-thousand dollar in equity that you have as a buy and hold, how you found it and the short sale process… Along with the partnership stuff, because that’s really important. Real estate really is a partnership and team environment, and we have to be careful who we partner with.

I love the approach that you take. It is really about having someone who plays to your weaknesses, and I found out the same thing with my partners that worked out – they are strong where I’m not, and I’m strong where they’re not, and it makes for the best partnership.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon!

Travis Daggett: You’re welcome. Thanks, Joe!

 

 

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Joe Fairless