Ken is a business owner who started out as a land broker and in 2008 he quickly learned how to adapt due to the economic downturn. Fast Forward to today and now he has developed a successful app called Legacy of Love, an app that helps connect kids with their parents. Ken also shares a story on how he went from purchasing a shopping center and searching for tenants to creating his own tenant.
Ken Wimberly Real Estate Background:
Founder and visionary behind Legacy of Love, LLC.
Entrepreneur and real estate investor, and has 16 streams of passive income and 4 streams of active income
Jerry never had any intentions of owning a marketing company. When he was stuck with the task of finding work from home, he worked with a friend answering phones and talking to people because she was great at everything but talking to people. Once he did his first wholesale, he was hooked. Jerry learned how to do marketing and went out on his own. Now he helps investors keep deals in the pipeline.
Best Ever Tweet:
[spp-tweet tweet=”“Some language choices work well, others don’t” – Jerry Puckett “]
Jerry Puckett Real Estate Background:
Founder and managing partner at New Refined Images
Helps clients source deals through direct mail and internet marketing
Sent more than 1 million pieces of mail to more than 90 markets in 2017
We profile 1 nonprofit or cause every month that is near and dear to our heart. To help get the word out, submit a cause, or donate, visitbestevercauses.com.
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, Jerry Puckett. How are you doing, Jerry?
Jerry Puckett: I’m doing well, Joe. Thank you for inviting me onto the Best Ever Show. I appreciate it.
Joe Fairless: My pleasure, nice to have you. A little bit about Jerry – he is the founder and managing partner at New Refined Images. He helps clients source deals through direct mail and internet marketing. He sent over one million pieces of mail to more than 90 markets in 2017, and you can learn more about his company at MarketLikeAWholesaler.com. Based on Fort-Worth, Texas, Cowtown, where I’m from. With that being said, Jerry, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Jerry Puckett: Sure, you bet. I did not start off to have a marketing service; that was not my goal, that was not my plan. I just wanted to be a wholesaler. In 2010 my wife was diagnosed with breast cancer, and I needed to find something that I could do from home, so that I could take care of her. It was either quit my job, stay home and take care of her, or it was to hire somebody else to stay home and take care of her, and I just couldn’t see me doing that… So I ended up falling in with a friend of ours who had a very small real estate company, and all she wanted me to do was answer the phone for her.
So it went from that to — just the long story short, she really had no people skills; she could analyze a number up, down, backwards and sideways, but she could not talk to people. So I was talking with them on the phone, and she’d go out there and ruin the deal every time. They’d say “Well, we’ve spent 20-30 minutes on the phone with Jerry. Where is he?” So she started bringing me along to her appointments with her, and I found out that I had a knack for negotiation.
At one point we had two fully executed contracts and she only had enough money to close on one, and we didn’t know anything about creative financing at the time. She was like “Oh my goodness, what are we gonna do with this other one?” and I said “Well, I’ve been reading Bigger Pockets. Why don’t you let me wholesale that thing?” She said “Wholesale? What’s that? I don’t know anything about wholesaling. I said “That’s okay, I do”, because I’d been reading Bigger Pockets.
I made a couple of calls, I sold the property, I made a $10,000 fee in just a few minutes, and I was hooked. Wholesaling is cool, it’s really easy, or so I thought at the time. What I didn’t really factor into my equation at the time was that she had done all the work ahead of time of setting up the marketing campaigns and everything else like that… So when I actually got out on my own, I had to learn how to do all of that stuff for myself.
I had a colleague from — my very first Bigger Pockets colleague; his name is John Claus. He was kind of watching over my shoulder as I got better at wholesaling here in DFW. He was like “You’re doing a really good job competing there against some of these big guys… Could you do a campaign like that for me down in Austin?” I’d drank the Bigger Pockets Kool-Aid a long time ago and I wanted to pay it forward, so I said “Sure, no problem. We’ll just set it up and I’ll run it like I do with my own systems, and all you’ll have to do is pick the calls and make the deals.”
He thought that sounded pretty good, so within five months he had three deals under contract and he had netted six figures off of each. So what does he do? He gets back on Bigger Pockets and starts shooting his mouth off about it – “Hey, six-figure income from a yellow letter.”
Next thing I know, my phone is ringing off the hook. “Hey, Jerry, can you help me with my marketing? Can you…? Can you…?” So that’s how the marketing service was first built.
I ended up going out to a Bigger Pockets conference out in Denver that year, and people all over the place were saying “Hey, can you mentor me? Can you mentor me?” There were folks out there that were charging 10k-15k a pop upfront, just to teach people regurgitated crap that you could get anywhere for free. So I just saw the two things kind of dovetailed. There’s nothing I can really teach you unless you’re actually out there talking to sellers, and you’re not gonna be talking to sellers unless you’re doing your own marketing, so hey, why don’t you use my marketing pieces, and the least I can do is teach you how to go from there. So that’s how the wholesaler thing got started… Dovetailed exactly at the same time when the MLS dried up for investors and they weren’t able to find products on the MLS anymore, so that a lot of them would say “Jerry, you always have product, how come I don’t have product?” I said, “Well, you’ve gotta market like a wholesaler.”
And one thing just kind of led to another and one market after another, one investor after another, one state after another, people were coming to me, I was doing their marketing for them, and it just kind of grew from there. If you check out my profile over at Bigger Pockets you’ll see we’ve got something like 7,000 positive reviews from people that are out there making money off of what we’re doing.
I don’t try to reinvent the wheel, I just kind of stay sharp and in front of the different trends; you learn a lot by split testing with over a million pieces in 90 markets, so I almost feel like I’m cheating, but that’s the way we do it. Everything we do is custom and boutique.
Joe Fairless: Split testing that many tests, for a lack of a better word, you’re gonna learn a lot… What have you learned?
Jerry Puckett: Well, the funny thing is I can take all the data that we get from the mailings and I can kind of put it on a heat map of sorts; Google’s got some pretty amazing features. So I start to see trends, I start to see something that happens out in California or over in New York and I know that it’s gonna spread. I see from the results of the mailings that some language choices work well, while others don’t… So it’s just something that you pick up along the way. We monitor every response that comes, so everything that we write is done custom. We don’t use templates that are just stale. I don’t write letter two until I see the results from letter one etc.
So I see trends a lot of times before they happen, I know when an area is getting hot, I know when an area is drying up, I can see it shift from one place to the other, and hopefully when you examine all of that you can get in front of it. I think that’s one of the advantages that we have – we’re able to stay in front of the market as it were, and stay out in front of everybody else.
Joe Fairless: What are some language choices that work well?
Jerry Puckett: Well, you’ve gotta be somewhat particular to your market in that. For instance, the things that I say in Austin absolutely wouldn’t work in Denver, and the things that I might say in Southern California could probably get you locked up in New Hampshire. You wanna kind of focus in on the vernacular. It’d be kind of hard to do it nationally, but for example when I’m in Texas I say things like “Y’all”, “Circle the wagons”, mustangs on the mail piece itself… People love horses out in Texas…
Joe Fairless: [laughs] Oh, I thought you were talking about the car.
Jerry Puckett: Oh, no, no, no. Not at all. Mustangs. We’ve done some studies on that, the psychological profiling of American people; they’ve always wanted an American kind of royalty and people have an affinity for horses or mustangs. It’s a real subtle psychological thing, but if you put a picture of a mustang on the outside on your envelope, your open and read rate is gonna jump way up. It’s sometimes just that simple.
Joe Fairless: What do you put in New Hampshire? You mentioned New Hampshire, you got me curious about that state.
Jerry Puckett: New Hampshire – they’re Yankees, right? And they think that everybody is out to kind of scam them, and there are a lot of — well, I guess I’m just gonna say there are older folks that if… There’s certain things that you must do. You must put your full name on the return address; if you don’t, they’re just going to assume that you’re a scammer and they’re gonna call the cops on you, or they’re gonna report you to the district attorney, or something like that.
You must do that, you must be absolutely polite, you must Mr. And Mrs. when you address somebody, no “Hey, Dave” or “Hey, Bob.” It’s got to be very formal, it’s got to be very polite, and you’ve got to assure them somewhere along the course of the way that you are not trying to scam them, that you really do want to buy their property… And “Please give me a call” and then have the number be one that works well, and not at all try to be anonymous. That’s the thing when you’re over anywhere in New England – if you try to be anonymous in any kind of way you’re automatically gonna be targeted as a scammer, and they will call the police on you quickly.
Joe Fairless: What happens when they call the police?
Jerry Puckett: Well, usually the police will call you and say “Hey, we got a report from so-and-so that you’re running some kind of a scam.” You’re not doing anything wrong, you’re not doing anything illegal, so you’ve got to explain to them exactly what you’re doing, how you go the address and everything else, and they’ll usually just leave it with “Okay, but take so-and-so off your list” and I’m like “Of course.”
Joe Fairless: [laughs]
Jerry Puckett: I don’t wanna have anything else to do with them. But if you’re in this business for any length of time, something like that’s gonna happen. I’ve listened to quite a number of older posts that Michael [unintelligible 00:09:52.25] would put out; he’s got recordings of people who have called him and threatened to shoot him in the head and different things like that. I’ve got a few snippets of those myself. You get all kinds of interesting calls, with people who wanna do all kinds of crazy things to you. They get mad; I don’t know why they get mad, but they get mad.
Joe Fairless: Conversely, Southern California – what’s the approach there?
Jerry Puckett: Man, Southern California is a bear to get anybody to notice you at all. We’re lucky if we get a 1% response rate out there. That is the toughest market anywhere. So the approach there is you’ve gotta kind of be bold and over the top, and you have to exude a frame of mind that says that you have money, and that you’re able to move quickly.
I know that that sounds kind of like Captain Obvious sort of thinking, but it’s not, because in a lot of markets you want people to think that you’re just the guy next door.
Joe Fairless: That’s Texas.
Jerry Puckett: Yeah. Here in Texas I get in the door by being the guy next door.
Joe Fairless: Yup.
Jerry Puckett: I just do a couple of deals a year to help buy Christmas presents and groceries, but in California if you take that kind of — I guess you would call it a kiss me approach… If you take that kind of approach in California, you’re never gonna get a call. No one is ever gonna call you. So the best thing you can do there is show them pictures of other deals that you’ve done, maybe put some of your numbers out there, anything that’s gonna be visually appealing and speak to their heart immediately. They can’t be overdone; it’s still got to be a short and a sweet message, but we’ve gotten traction just by saying “Hey, here’s the last deal that we did” or point them to a website where you might have testimonials… “Here’s what so-and-so had to say after doing a deal with us”, and just have that be something easy that they can get to and listen to. That will capture their attention sometimes, and they’ll give you a call just to check you out and kick your tires, and if they’ve done that, then you’re in the door, so to speak. You’re in play.
Once anybody’s called, that’s one of the biggest things that folks will do wrong – they don’t follow up. I can have somebody call me and say “Take me off your list” and that’s fine, I’m gonna take you off a list, and I’m not gonna waste any more money mailing to you, because now I have your phone number. I can reach out and touch you any time that I want for free, and you’ve already opened the door by calling me.
So the way I work any given market – I continue to stay in touch with people until one of four things happens. They either will sell me their property, sell it to someone else, tell me to go to hell, or die. And if they die, then I’m gonna follow up with their executors and the heirs until they sell me their house, sell it to someone else, tell me to go to hell or die.
Joe Fairless: Wouldn’t the “Take me off your list” be basically telling you to go to hell? So wouldn’t that already take them off the list?
Jerry Puckett: No, no. “Go to hell” means literally “I’m gonna shoot you in the head, leave me alone.” They’ll get mad. If somebody’s rude, if they’re at the point where they’re rude on the phone, I won’t ever speak to them again, I’m done. But if somebody is just “You know, I’m not really interested, take me off the list” – that’s okay, because people’s circumstances change frequently. The people who are in distress this month, last month they didn’t have a clue what was going on, or that they were gonna fall into something where they needed some help.
The people who are gonna be in distress next month, right now they’re cruising along like everything’s fine. So when I reach out — I usually just use text. I will reach out and text somebody maybe 3-4 times a year if they’ll say “Take me off the list.” One of about four things can happen. And I’ll just say something like “Hey Bob, it’s been a while since we’ve talked… Has everything been okay?” I don’t ask about the property specifically; polite society being what it is, their only point of reference for speaking with me in the first place is their property, so when I reach out to them like that, they can either answer back and say “Jerry, I’m still not interested, but thanks for checking on me.” And that’s fine, then I’ve deepened my rapport with them, and I’ve reconnected my name with selling their house.
Or they could say “Jerry, I’m not interested right now, but I know somebody who is… And didn’t you offer me a referral fee?” So they can refer me to somebody. Or at that point they can tell me to go to hell, leave them alone, don’t ever contact them again.
So if any of those things happen, that’s fine, it pushed my agenda a little bit more forward. And they could always say “You know, Jerry, things have changed. I’m interested in hearing your offer now.” And that happens more often than you would think. People’s circumstances change, they change quickly; if you’re somebody that’s been in contact with them and that stayed in touch with them over time, then when it’s time to do something, you’re gonna be the one they call.
That’s why everybody who does this just preaches about being persistent and consistent, and that’s why. The more persistent and consistent you are, the luckier you get. You’re gonna be the one they call.
Joe Fairless: And when you were talking about the different states and the vernacular that you use, or the approach – that’s not just your off-the-cuff thoughts, that’s based on quantifiable split testing research, is that correct?
Jerry Puckett: That’s correct. We have a system that we use for everybody that we work with that allows them to track their responses. It really kills two birds with one stone; I call it a lead tracker, but it’s not quite sophisticated enough to be software… It’s a spreadsheet with a lot of bells and whistles built into it. While it allows the client some place to track their calls, set appointments, take notes and everything like that, it also keeps my master mailing list updated in real time, so that I don’t have to nag anybody to do it. But part of keeping track of the calls is that I ask them and try to teach them how to take good notes when they’re talking to people, and if they happen to record calls, then that’s something I can hear too, and I can actually listen to the way people talk.
But yes, in any given market, I will keep track via that lead tracker which version of the text that I used for which segment. That gives me back information on the back-end; I can see who responded to what. With this many different pieces to play with, I’ve done things as small as moving a comma to see if it helps or it doesn’t help. I know that sounds silly, but you really have to test something to death.
Joe Fairless: I’ve heard that when you put in a comma, it makes the amount look larger, but when you remove the comma, then it makes the amount look smaller.
Jerry Puckett: Yeah, anything that gives more wide space on the page is gonna be helpful. But then on the other hand, if you don’t use a comma, sometimes when people are reading it they don’t take a breath as they’re reading the message in their mind where they should, so if you meant to pause for emphasis, then it’s not there. So there’s a lot of different things to take into consideration.
I tell people all the time that just because you have a printer on your desk and you know how to use mail merge that doesn’t mean you’re a marketer any more than having a set of tools out in your garage makes you a mechanic. So there are a lot of things to take into consideration if you’re trying to crack a market open and you’re really trying to succeed.
Joe Fairless: I do have some tools in my garage and I am definitely not a mechanic, so I understand that… The direct mail that you do – do you work with any investors who purchase medium to large apartment buildings?
Jerry Puckett: I have worked with people who have bought up to — I think the largest any of my clients has bought is like a 50-unit, so I guess that would probably be small to you, considering the things that you do, but I think it was pretty big to them. Where would you put 50? Is that small or medium?
Joe Fairless: I don’t know, we’ll say medium; we’ll call it medium. So what is the approach for the 50-unit, compared to what you’re doing with the single-families?
Jerry Puckett: Oddly enough, a lot of the messaging is the same. Messaging when you’re trying to buy something is usually just different iterations of your contact information plus the benefits of working with you plus a strong call to action. If you apply that formula, it’s the same thing. But with the apartment owners, and also with mobile park home owners, you want to convey to them that you really know what you’re talking about.
So if you start talking about the rent rolls, or separately metered — different things like that… You want to let people know that you know what you’re talking about, and that you are a fellow landlord. And if nothing else, so “If you’re not interested in selling, I certainly would like to network with you, I’d like to know more people like you.” Often times it’s a matter of just getting them into your network.
A community of people who own properties like that is much smaller, so if you’re networking with everybody, these folks also see each other a bit different — oh gosh, what’s the word for it? They network with each other in different ways, so if you get into somebody’s network, there’s a good chance that you’re gonna be able to reach out to somebody else, because they’re involved in the same association, they go to the same sorts of meetings, they deal with the same sorts of issues… So conquering that smaller market is actually a lot easier than when you’re doing a single-family house – to hit all the prospects that you need to, that’s usually a pretty huge prospects, and most people’s budgets don’t carry that kind of wallet to it. But when you’re looking at the apartment buildings, the community is much smaller, so you try to capture all of them and get all of them into your network.
Joe Fairless: Based on your experience as a real estate entrepreneur, what is your best advice ever for investors?
Jerry Puckett: Don’t cheap out. If you want to make money in this business, don’t go cheap. There’s just too many people out there that try so hard to pinch a penny that they’ll the make the things scream. I was brought up with the notion that the harder you squeeze a watermelon seed, the more likely it is to slip right out of your fingers. I’ve seen people try to outsmart people that have been doing this for years, I’ve seen them try to come up with uber-laser-targeted lists that nobody else has thought of… They’ll bend over backwards trying to save money, instead of counting the cost of what it’s gonna take to actually get to where they wanna be.
So my best advice that I can give to your best ever listeners would be really consider what it is that you wanna do and count the cost. Don’t cheap out on it. Sink some money into it if you’re gonna make some money back on it.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Jerry Puckett: Oh, the Best Ever Lightning Round… Okay, yes!
Joe Fairless: Alright, cool. First, a quick word from our Best Ever partners.
Break: [00:20:28.22] to [00:21:32.06]
Joe Fairless: What’s the best ever book you’ve read?
Jerry Puckett: Best ever book I’ve ever read… I guess if it’s a business book, I’m gonna say The Speed of Trust, by Stephen Covey.
Joe Fairless: What’s the best ever business transaction or real estate deal you’ve done?
Jerry Puckett: The best one was the first one that I told you about earlier. It happened so easily and fell together so nicely that it was purely addictive. Man, a couple of phone calls and I made $10,000, wholesaling a property that I didn’t have enough money to buy.
Joe Fairless: What’s a mistake you’ve made in business on a transaction?
Jerry Puckett: The biggest mistake that I ever made was not conveying my vulnerability. In other words, the biggest mistake that I ever made was at one point in time I was not 10)% honest with somebody that I was working with, and that came back to bite me more times than I could count.
Joe Fairless: Best ever way you like to give back?
Jerry Puckett: I love helping people on Bigger Pockets. I love to spend time answering people’s questions, and I make myself available to people who have questions trying to get started. I’m there all the time, hit me up.
Joe Fairless: And how can the Best Ever listeners get in touch with you? What’s the best way?
Jerry Puckett: The Best Ever listeners can get in touch with me by going either to BiggerPockets.com and looking at my profile, Jerry Puckett, or they can go to my website at www.marketlikeawholesaler.com. Fill out that Contact form and I’ll be in touch with you.
Joe Fairless: Jerry, thank you so much for being on the show, talking about best practices for direct mail, the differences, not only in regions, but also in states and the locations within the states… You talked about Southern California, you talked about the difference between that and (it sounds like, according to you) the polar opposite, New Hampshire. With Texas, having it all in there – mustangs (the horse, not the car) on the envelope, that sort of stuff. Really interesting, because it’s based on research and data, not opinion, and that’s what’s most interesting to me… It’s simply what’s working, and that’s the kind of stuff that I really love learning about, and it will be helpful for any Best Ever listener who is doing direct mail to pay attention to the word choices that we’re using.
Then also you talked about that 50-unit and how to approach that larger property… So thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Jerry Puckett: Thanks, Joe. It’s been great. I appreciate you.
Save paradise, put up a parking lot… and rake in the cash! That’s right, everything you want to know about investing in parking lots and garages are locked in this episode! Unconventional ways to invest? Absolutely! Take some notes!
Best Ever Tweet:
[spp-tweet tweet=”Expect to think differently from your competitors to last and ultimately win.”]
John Roy Real Estate Background:
– Founder of JNL Parking, a parking investments company
– Featured on CNBC as an expert in parking from his guide The Ultimate Parking Business Buyer’s Guide
– Serves on the Board of the National Parking Association and is a Certified Parking Professional
– One of the leading brokers in the Parking Industry
– Based in Fort Worth, Texas
– Say hi to him at www.jnlparking.com/
– Best Ever Book: The Fish that Swallowed the Whale
Made Possible Because of Our Best Ever Sponsors:
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Joe Fairless: Best ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
Today we’re gonna be talking about a topic we have never interviewed someone about before. As creepy as it sounds, I’ve actually dreamt about interviewing someone about this topic, because I hadn’t met anyone who invests in… Parking lots and parking garages! How are you doing, John Roy?
John Roy: Great, Joe. How are you doing?
Joe Fairless: I am doing well, and I’m pumped to talk about this stuff. I guarantee you no one’s ever been more excited to talk about parking lots and parking garages than I am right now, because again, I’ve interviewed close to 1,000 people and not one person has invested, or at least have talked about investing in parking lots and parking garages.
A little bit about John – he is the founder of GNL Parking, a parking investments company. He’s been featured on CNBC as an expert in parking, from his guide “The Ultimate Parking Business Buyer’s Guide.” He’s on the board of the National Parking Association and is a certified parking professional. He is based in Fort Worth, Texas, my hometown. With that being said, John, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
John Roy: Thank you, Joe. I don’t wanna put the listeners to sleep with all the accolades in parking. Sometimes it’s not a very exciting topic to talk about. People that know about the subject, once they start learning about it, they can’t stop talking about it. They always say “I’ve never really looked at it as an investment.” I know that I always have to pay, so it’s something that’s relatable to everybody, because we’ve all had to pay for this, but we never really think about it as an asset class.
Once people come around and learn about it, they’re usually very motivated to learn more about the investment and how they can get involved.
Joe Fairless: Well, let’s talk about how you make money with parking lots — well, first off let’s do this, before you answer that question. How about you tell us the business model behind parking lots and the business model behind parking garages? And if we can group them together in the same conversation or if we have to have two separate conversations.
John Roy: Great. Here’s the basic business – it’s the business of taking blacktop or pavement, an 18 by 10 section, and renting it over and over and over, with very little upkeep, no TI’s and very little headaches when you do it properly. That is the basic business model. Now, as with anything, it’s a lot more complicated, but what you really are looking for when you’re looking at parking investments is “What is my demand generator?” That is the number one thing that you always have to ask yourself.
We look for certain demand generators and certain demographics… We love universities, we love courthouses, we love hospitals and we love sporting events. We focus on those areas that have just proven time and time again to be great demand generators for people in need of parking.
Joe Fairless: Universities, courthouses, sporting events and what else? What was the fourth one?
John Roy: Hospitals.
Joe Fairless: Yes, I have driven to all four of those and parked somewhere. That makes sense. How do you run the numbers?
John Roy: It is calculated on a cap rate basis. A lot of times people get hung up in the price/space, what you’re paying. It’s similar to the hotel industry and a lot of other industries, where they’ll look at the price per key, but really in parking it comes down to your cap rate. You look at it and you analyze it just like any other business. You’ll take your revenue minus expenses, and you end up with your net operating income, and you look at it based on a cap rate.
Now, there’s opportunities within that, and you can’t always be scared of the cap rate because some of our best deals are purchased at low cap rates, so we immediately turn around, fix the operations and we can increase the cap rate sometimes by 300-400 basis points.
Joe Fairless: Will you give us an example?
John Roy: We were looking at a deal up in Milwaukee – it’s a great little parking market, not a lot of big institutional investors are really clamoring to look at some of these great Midwestern towns, but we found a listing where an owner was selling a Thai restaurant and a parking lot. A lot of people are gonna be chasing Thai restaurants in downtown Milwaukee. So we went up there, took a look at it, and we found a great opportunity with a surface lot. We didn’t really want the Thai restaurant, that’s not our forte, so we convinced the owner to keep the restaurant and we would purchase the parking lot for a million dollars.
Now, on the cap rate it was a 5% rate of return. It didn’t look great, but we saw opportunity, we saw the traditional signs that you look for, which is an attendant taking cash, not good signing, no automation… The operations were wrong. He was catering to monthly parkers, which in the parking industry you don’t typically want a lot of monthly parkers. You want daily, what we call “transient” parkers that are gonna turn the spaces over and over again.
So we purchased it on a 5% cap, then we turned around and signed a lease with Standard Parking, which is the largest parking operator in the country for $155,000/year. After our taxes, we were at an unlevered rate of return of 14%. We signed a ten-year lease, so we don’t even operate the lot; that’s not our model, we’re not operators. And we have a tenant in there that’s a publicly-traded company, and we have a great asset that we can probably turn around and make some good money off.
Joe Fairless: So you’re not operators, that’s what you’ve just said… Standard Parking – is that the name of the company? You usually just lease out your stuff to them?
John Roy: And there are hundreds, if not thousands of parking operators in the country. When somebody wants to get into parking, the easiest thing to do is to get into the operation side of it. Very few people have the capital, the wherewithal, the patience to actually invest into real estate, and that’s really what’s made us successful – we invest in the actual, physical real estate asset of parking, and then we turn around and lease it. It’s a cutthroat industry among operators. They operate on very low profit margins, so you’re actually able to get really good lease terms from parking operators throughout the country.
Joe Fairless: Okay, so you’re buying the actual real estate, the parking lot, but then you’re leasing it out so you don’t have to operate it, because as you said, it’s a cutthroat business and it’s tough to make some money on that unless you’re a well-funded, well-oiled machine…?
John Roy: I’m gonna jump to the end of your show here, where I’m gonna offer your listeners the best advice ever.
Joe Fairless: You’re killing my format! I’ve gotta ask you the question, we’ve got lead-up music and everything, so I’m gonna ask you the question and then we’re gonna keep our conversation going… What is your best real estate investing advice ever, since you forced my hand?
John Roy: Don’t get into operations. [laughter] If you’re going to get into parking, get into the physical real estate side of it. Don’t get into operations, it’s a nasty business. If you go into it, you’re gonna get killed. They’re very competitive. Focus on real estate. That’s really my talk here – we’re driven by real estate; there’s no money to be made in operations… Very little. Let’s look at the actual ownership of assets. However, we have a lot of experience in operations, because we’ve done that in the past, so we could literally walk into a parking lot or a parking garage and within the first five minutes be able to say, “Okay, this is how we’re going to improve this operation, this is how we’re gonna drive our return; here’s what they’re doing right, here’s what they’re doing wrong.” Once you know that, then you can drive the actual value.
For people who wanna get into this type of business, what I always tell them is if you find a great site, contact two or three operators, let them do the due diligence by having them give you offers to lease this parking space from you, and you’ll have three competitive bids and you’ll be able to know pretty quickly what the real value of that asset is, without getting in trouble.
Joe Fairless: Okay. Obviously, you need to have it under contract at that point, when you get the bids, right?
John Roy: Not necessarily, no. Because if it hasn’t been sold and you’re doing your due diligence work before, it doesn’t take the operator very long to give you an operating bid. It usually takes about a week to get a bid back, as long as it’s not a very complicated process.
Joe Fairless: But the concern would be that they’d buy it and take it out from under you.
John Roy: That’s correct, yes. If you’re in a marketplace that’s competitive, depending on the market, sometimes these assets are gone very quickly, so you do have to tie it up and then start your due diligence, and that’s usually the process that we follow.
Joe Fairless: You said you can walk into a parking garage and know pretty quickly what they’re doing right, what they’re doing wrong. You already mentioned two things that are wrong – an attendant taking cash and not good signage… What else is wrong that you’ve commonly seen?
John Roy: I’m gonna give you an example for a garage, and this is very common. We had an example of a garage in Baltimore where they couldn’t make money – they were operating in the negative. We walk in there, and there’s another garage just a few doors down that is just absolutely killing it. It doesn’t take very long for us to walk in there and say “It’s the lighting. You have a lot of female clients who will not park in a garage that’s not well lit, that [unintelligible 00:11:52.24] that’s dirty.” A lot of times you’ll neglect that demographic of your business, which is a huge mistake.
First thing we tell people is make the appearance presentable and welcoming, and don’t ignore that demographic of your clientele. They wanna be able to feel safe the whole time – safety is a huge issue in garages. So just simple things like fixing up the lighting, cleaning up the place, new paint will do wonders in turning around that garage.
Joe Fairless: And then things people do right with their garages – proper lighting, having it automated, good signage and clean with new paint?
John Roy: That’s correct. You want a garage that’s presentable, good lighting, you want the latest technology… You want to be able to have a garage where people can come in, pay and get out quickly. They don’t wanna wait in lines, they don’t wanna deal with cash, they don’t wanna deal with tellers a lot of the time. The business is moving away from the human factor into almost complete automation.
You really do find opportunities out there when you find what we call the dinosaurs – people still taking cash… Or some people will be familiar with the [unintelligible 00:13:02.24] boxes with a bunch of slots in them that you fold your dollar up sometimes to slip it in there… Whenever you see that, it’s a great opportunity. You know, on average, that according to studies through the National Parking Association, there’s about 30% theft rates whenever you’re dealing with cash.
Joe Fairless: You say “death rate”?
John Roy: No, theft.
Joe Fairless: Theft. [laughter]
John Roy: I guess it could — well, let’s not talk about that. Yeah, theft rate. People are stealing money, in other words. It’s a cash business, it’s been going on for years and it’s changing, but there still are some opportunities out there.
Joe Fairless: Okay, so if we find a parking garage or a parking lot that had any of the things you’ve just mentioned that are wrong, then it could be a tell-tale sign that we have a motivated seller, or someone who would be interested in selling. How do we get in touch with that person?
John Roy: You rarely see signs for parking lots and parking garages for sale. I don’t know if you’ve ever have seen one yourself, but it’s very, very rare.
Joe Fairless: No, I haven’t.
John Roy: That’s the thing. Most of the times they’re done quietly, that’s why we’re in such demand in the industry and that’s why we specialize in what we do, and it’s really relationship-driven and you have to do your work. We call it pounding the pavement – getting out there, going to cities… We focus on downtown areas. We’ll walk around and we’ll look for garages and lots that have some of the tell-tale signs that we’ve just discussed, and we’ll call the office back and we’ll do a title search, tech search, and then we just start dialing and trying to get a hold of people. Sometimes it takes years before they come around, but eventually we see that if they get the right price, they’ll be interested in selling.
Joe Fairless: What does that conversation sound like, when you reach out to them initially?
John Roy: “Never. I will never sell this asset. It generates great cash, I’m not in a hurry to sell.” That’s typically how the conversation starts. Over time you just kind of break them down, sometimes you’ll bring an offer and you’ll pique their curiosity. A lot of the times sellers don’t have an idea that their asset could be worth as much, so once you present a number that they weren’t really thinking about, they tend to start opening up.
Sometimes there’s deaths in the families, they’re generational assets that are passed down, and the next generation doesn’t have any interest in operating the parking assets.
Joe Fairless: If we find a parking lot and we’re like “You know what? I might be able to get this person to sell me it”, who are the top three leasing companies I should reach out to?
John Roy: The biggest one is Standard Parking. They go by ticker symbol SP. They’re publicly traded, so you can actually invest in them. You have a lot of regional operators. If you’re on the East Coast, you have a company called [unintelligible 00:16:02.24] they’re a pretty big one. You have a Canadian company named Impark – it’s growing rapidly here in this country. Then I would say ABM is another one that’s a pretty big company in the Midwest… There’s no shortage of operators throughout the country.
Joe Fairless: What type of risk should we be aware of as someone who has real estate experience, but not this type of experience in this industry?
John Roy: This is why parking, in my opinion, is the greatest asset, because it’s really a hybrid of investment vehicles. You have basically a bond that pays you regular payments once you sign a lease with an operator, and it’s also a stock, because the land underneath it appreciates in value, and it’s always for future development – whether it’s a garage or a surface lot in a downtown. You have a stock, you have a bond, it’s all backed by real estate, and you also have basically a tip that protects you against surges in inflation because you have annual CPI increases built into your lease.
A typical investment is you purchase a surface lot in a downtown, you sign a lease for $100,000/year, plus 2,5% annual CPI increases. You have this guaranteed income for the next ten years.
Here are the risks that you have if you don’t get a guaranteed lease from an operator – the biggest risk is the governments, through taxation. But I guess that’s an inherent risk throughout real estate. What some cities will do is that it’s really a tech parking in the form of the parking tax, because that’s usually the low-hanging fruit for cities. So they could implement overnight a 10% parking tax. Now, typically it’s a pass-through cost to the consumer, but that’s really the biggest risk that you have.
If you’ve done your due diligence properly and don’t have any environmental risk on the land below you, there’s really not a lot of risk because if the operator stops paying you, you just move on to the next operator.
Joe Fairless: You mentioned environmental risks… Who does the due diligence on this? What type of professionals do we need to hire in order to do all the due diligence that we possibly need to do on a parking lot?
John Roy: Number one – you start with an operator. Get them to give you a guaranteed lease – I can’t emphasize that enough. Number two – YOU are going to do the due diligence on the surface lot, and here’s how it’s gonna go. You’re gonna tie it up for 45 days, you’re gonna order a property condition report if it’s a garage. You want to know that the garage is structurally sound. Do not ever buy a parking garage without a property condition report, because there’s a lot of swindlers out there that will try to sell you a garage that’s falling apart or could be condemned, and those are usually huge expenses. So get a clean bill of health through a property condition report.
You’re also gonna get environmental reports, and this is more prevalent for surface lots than garages. You wanna make sure that the land that you’re purchasing has not been contaminated in the past, because you could potentially be liable, even if it’s before you purchased this asset. Once you get a clean phase one, as we call it, then you’re fine. If they come up with what’s called RECs (recognized environmental concerns), you need to order a phase two where they will actually drill into the surface and try to get samples of any contamination. If it comes back that there are contaminations, walk away. Don’t do anything but walk away. If you get a clean phase two, then you can proceed with the deal. It’s as simple as that.
You’re gonna get a survey, which is standard for most real estate, and you’re gonna get a clean title. As long as you get that done, then it’ll be a very good investment for you.
Joe Fairless: Anything else we haven’t talked about as it relates to investing in parking lots and parking garages that you wanna mention?
John Roy: It’s tough to do. It’s tough to find these assets, but if you do, most of the time you need debt, so you wanna leverage these assets. Typically, in today’s market you can actually get debt on these parking assets where in the past you really couldn’t… Especially surface lots, banks would look at them as land plays, and you know how difficult and expensive it is to get financing for raw land. But now, with about 35% down, you can actually buy these assets, as long as you prepare a good proforma showing the cashflows, and especially if you have a guaranteed lease from an operator, you can get financing pretty easily.
I would say people that wanna get into this realm – don’t get discouraged. It’s gonna take you some time, but if you ever do find a great asset, you [unintelligible 00:20:53.01] make it work, have a worst-case-scenario and you can pass it on to us and we’ll give you a referral fee. There’s opportunities to be had, you just have to be patient with it.
Joe Fairless: The chicken before the egg thing that I’m getting tripped up on is this guaranteed lease from the operator, but hen also getting financing… Because the bank’s gonna wanna make sure that you have the guaranteed lease, but you can’t get the guaranteed lease until you actually own it. So how does that work?
John Roy: That’s a great point, thank you for pointing that out. Sometimes you get so caught up in your industry, you do it so much that you think everybody understands it. A guaranteed lease is just as simple as getting a commitment letter from the operator. The commitment letter will specify all the details; you will actually work through a lease, and then the day that you close on the property, the lease will be in place. The contract is really contingent upon closing.
So you get the commitment letter from the operator, you will sign a lease and it will state that on this date, the lease commence is as long as the deal close.
Joe Fairless: It makes sense. Are you ready for the Best Ever Lightning Round?
John Roy: Let’s go.
Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.
Break: [00:22:11.07] to [00:22:52.25]
Joe Fairless: Best ever book you’ve read?
John Roy: The Fish That Swallowed The Whale. It deals with Sam Zemurray and the Banana King. If people have not read that, that would be the number one book that you need to read right now. Get it on our list, you won’t be able to put it down. Amazing book.
Joe Fairless: The Fish That Swallowed The Whale?
John Roy: About bananas. Who would have ever thought a book about bananas would be the best book that one could ever read?
Joe Fairless: Wait, I wanna make sure I got the title down right: The Fish That Swallowed The Whale And Bananas…? Is that the title?
John Roy: The Fish That Swallowed The Whale, that’s the title. And it deals with making of the Banana King.
Joe Fairless: Okay, got it. There’s a lot of nouns thrown into that title. Okay, cool. Best ever deal you’ve done?
John Roy: Downtown Cincinnati. We took an old mall, we converted into a parking garage. Purchased it for 14,5 approximately, and when I said “we purchased it”, we helped that real estate group buy it. Now potentially worth 25-28 million, two years later.
Joe Fairless: How much did you put in to make that conversion?
John Roy: It was already done. It was turnkey at 14,5.
Joe Fairless: Oh, wow. Best ever way you like to give back?
John Roy: I like to volunteer my expertise in parking. Like I said, it’s a difficult field to get into, but I will always take calls and give people advice. They’re free to call me on my cell phone and I’ll walk them through a process, I have no problem doing that.
Joe Fairless: Just on that best ever deal, you said it was a mall and now it’s a parking garage, right?
John Roy: Correct, it was a mall. It’s downtown on Ray’s Street and 3rd, if you know Cincinnati. It was repurposed into a parking garage, about 775 spaces, and it’s been an absolute home run.
Joe Fairless: It was repurposed after you purchased it or before?
John Roy: It was concurrent. We had a deal in place with the city and a contractor to buy in and have them convert it into a parking garage. It took about 8-12 months for completion, but once it was done, it opened and we almost filled that garage up within two months.
Joe Fairless: So you didn’t have to pay for the conversion?
John Roy: We did, yeah.
Joe Fairless: You did, okay.
John Roy: Basically the conversion, land, everything, all-in 14,5.
Joe Fairless: Okay, I’m with you now. Got it. What’s a mistake you’ve made on a deal, on a very tactical level?
John Roy: Partnering up with a developer where you contribute the land and they don’t contribute enough equity themselves. We will never do that again.
Joe Fairless: And where can the Best Ever listeners get in touch with you?
John Roy: Go on my website and you can find both me and my partner’s contact information. Feel free to give us a call if you’re ever in Dallas or Fort Worth. Look me up, I’d love to have a drink or dinner with you.
Joe Fairless: Well, the theme has been clear, that’s for sure, on parking, and that is if you get into parking and you get into operations, then you did not listen to this episode very closely, because John does not want you in parking operations. Instead, buying the parking lot or garages and then finding an operator that has the experience to then enter into a lease with them.
We talked about a bunch of stuff, from the due diligence that you need to do to how you make money, which is through that lease, which is something I didn’t know. Then also you said at the very beginning of our conversation how you don’t want monthly parkers, you prefer to have more transient parking, and you look for universities, courthouses, sporting events and hospitals.
Then also the ways to do a parking garage right and wrong, and when we look at the wrong areas, perhaps we find a motivated seller. Or in your case, you said not a lot of times are they motivated, so really just someone who should be selling and perhaps eventually will sell to you if you stay in their ear long enough. Thanks so much for being on the show, John. I hope you have a best ever day, and we’ll talk to you soon.
A breakdown of all you need to know about assignments and wholesaling is the missing piece to your real estate puzzle. Our guest will take you step-by-step on how he gets it done and how you should do it to make it smooth and fair for all parties. This is when you cannot miss!
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Jimmy Reed Real Estate Background:
– Founder of 1REClub.com
– A DFW Real Estate Club in Fort Worth, Texas
– He started out wholesaling to local Investors in Fort Worth, TX
– 29 years experience in buying and selling real estate
– Based in Fort Worth, Texas
– Say hi to him at: http://www.jimmyreed.net
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Inspecting the home is often overlooked, especially by a real estate entrepreneur who has not been properly trained in knowing what to look for. Today you are about to get an inside look at why having a professional home inspector take the lead before you buy.
Best Ever Tweet:
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Adam Sedinger Real Estate Background:
– Professional Home Inspector at HouseEXAM DFW
– 10 year of experience in construction and has inspected over 7,000 homes
– Home inspections from new construction to vintage homes, one-year warranty inspections to investment properties
– HouseEXAM is a family business dedicated to serving home ownership needs, from buying to selling
– Based in Fort Worth, Texas
– Say hi to him at http://houseexamdfw.com
– Best Ever Book: Bible
Ever thought about being a property manager? Try being a landlord of multiple styles of homes, acquiring properties creatively, Property Management, and selling inventory! Today’s guest has dug himself deep in the roots of Fort Worth Texas where he can make multiple income streams, you are next!
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Have you ever wondered how I get my hair so thick and luscious? Well today you get to find out. That’s not all though! Today’s Best Ever guest shares with us how he found his niche in lease options, and how he gets 94% of his tenants to buy.
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John Jackson’s real estate background:
– Founder of Leasing to Buy based in Fort Worth, Texas
– Started as a self-taught day trader then got into real estate lease options in 2003
– Since 2003 he has done over 500 lease option transactions and structures them so buyer is highly likely to purchase the house
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