JF2045: How AirBnBs Will Weather The Storm During The Coronavirus With Kyle Stanley

 

Kyle is the owner of Fearless Flipping and has a focus on AirBnBs. He is joining us today to talk about how the coronavirus has impacted his business. One thing he mentions that is helping him during this time is that he doesn’t view his business as an AirBnB business, but more of a short term rental business which is helping him develop plans to weather this storm. Kyle shares some advice that has worked throughout time and is showing how important it is during this pandemic.

 

Kyle Stanley  Real Estate Background:

    • Owner of Fearless Flipping
    • 5 years of real estate investing experience
    • Currently has 11 AirBnBs
    • Located in Fresno California
    • Say hi to him at : https://www.fearlessflipping.com/

 

Best Ever Tweet:

“Utilizing the 33% rule when analyzing deals has helped me stay comfortable during this pandemic” – Kyle Stanley


TRANSCRIPTION

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

Kyle Stanley: I’m good, Theo. Thanks for having me on the show, very excited.

Theo Hicks: Oh, yep. Absolutely, and thanks for joining us, and thank you for agreeing to talk about how the coronavirus is impacting your real estate investing business. But before we get into that, a little bit about Kyle’s background – he’s the owner of Fearless Flipping; he has five years of Airbnb experience, currently has 11 Airbnb short-term rentals, is located in Fresno, California, and his website is fearlessflipping.com. Kyle, do you mind telling us a little more information about your background and what you’re focused on today?

Kyle Stanley:  Yeah, well that’s the keyword – today. So as we’re here on April 1st, it’s not an April Fool’s joke, unfortunately, what we’re going through. So we got to take everything serious right now. Leading up to, I would say the beginning of March, the main focus of my business was Airbnb, and then on the side, I was flipping, doing short-term real estate investments, from wholesaling to BRRRRs to flipping, and we had a really solid flow going. We were on pace this year for three different streams of income reaching six figures. The third stream was education in the short-term rentals and Airbnb business. And then all the madness happened and now, really the big thing has been weathering the storm and figuring out what’s next, but I’m excited about what we’ve been able to do to weather the storm, to be able to make this still a very profitable, short-term rental business and sharing that with your audience today.

Theo Hicks: Yeah, so we’re going to talk about how to weather the storm that is the coronavirus. So that’ll be the title of the episode. So what are some of the things that you’re doing? So you got short-term rentals. A lot of times that I’ve talked to said that the short-term rental business is greatly reduced, or in some locations outright banned. So I’m just wondering, are all your properties in Fresno, California? Are they scattered across the country?

Kyle Stanley: They’re all in Fresno and I think – first of all, I want to just lay a precedence here that there’s a lot of people out there that are talking about Airbnb being dead, short-term rentals being dead, and these people are jumping the gun. They are completely in the mindset of whatever’s happening now is going to happen for the rest of eternity, and that’s just not true when it comes to this. There’s also airlines that are being shut down. Does that mean that airlines will be shut down for the rest of eternity? No. As soon as this whole thing recovers, then everything’s recovered.

But I also know there’s a lot of people that are very mad at Airbnb right now, and the message I really want to bring today, Theo, is that I don’t have an Airbnb business, I have a short-term rentals management business. If you have that mindset, you have the mindset of problem-solving. My mindset right away in the beginning was before I even got any of my properties  – yes, I knew the potential of making $1,000 plus of cash flow was there. We have one property that makes us usually right around $2,500 per month in Fresno, California, of all places. But I also said, “Well, are these recession-proof?” and I think we all were talking about it leading up to this whole coronavirus stuff of, hey, there’s gonna be a market crash, there’s gonna be a market correction, there’s going to be some minor recession. We just didn’t see it coming in the form of a zombie apocalypse, for lack of a better term.

We didn’t really see it coming and hitting us literally overnight. And because of that though, I’ve been very, very happy about everything that we’ve been able to do to weather the storm, and to see results still coming in… And just focusing on the Airbnb side and on the short-term rental side, we added two properties this last month, so we went from eight to ten, and we just added an 11th just a couple days ago. But we went from eight to ten, and we still ended up, after expenses, in the month of March, netting more than any other month that we ever had, and grossing more than any other month that we ever had.

I truly believe that’s for a couple reasons. Number one, I did the deals right. I made sure that I was getting into a deal that would be successful, even during a rough time. Again, not knowing when a coronavirus thing would hit, but just a rough time in general… And then the bigger thing and beyond that is that I knew that if something were to be impacted by Airbnb, let’s say, Airbnb shuts down; it’s a third-party site. I’m an entrepreneur, I’m not a Airbnb employee. I need to find other methods to be able to list my properties on, and by doing that, we were able to still find ways to get people in our properties not through the means of Airbnb, and fill those vacancies and still be close to 90% to 93% booked all in the month of March. And moving forward, we can talk about a little bit more, but now just to weather the storm, nine of our 11 listings are month-to-month rentals, and we’re seeing what happens with the other two rentals just to see if Airbnb will continue to pick back up. So without going too much deeper into that — I don’t want to keep on talking, but that’s the overview of what we’ve been doing right now.

Theo Hicks: Okay. So some of the two things you said were to, one, buy right, and then two was to not rely entirely on Airbnb, have a backup plan. So let’s talk about the first one, which is buy the deals right. So what does that mean? What aspects of the deals were you looking at to make sure that you’re buying them right?

Kyle Stanley: Just like anything in real estate, you’ve got to analyze the deal. So with an Airbnb, I use the 33% rule, which is whatever you’re netting needs to be at least 33% of what you’re grossing. And if you can do that, that means that if something like this happened and you have to take a big hit and adjust your method of how you’re filling your properties, there was enough meat on that bone to not hurt you. So because we had expected– again, let’s just take that rule for example. If I’m expecting to gross $3,000 in a property for the month, then the 33% rule means that I need to net at least $1000 of those dollars. So essentially, what that means is my expenses are $2,000. As long as I can cover $2,000 in a property during a coronavirus, then I know I’m at least breaking even. We don’t want to lose money during this time. We just want to weather the storm, get to even, and then pick back up where we were before.

But the great news is that those properties that, let’s say, I was grossing $3,000 and needed $2,000 in order to cover my expenses, I’m actually at some of those getting as much as $2,700 for month-to-month rentals. So that’s been really, really positive to see that I’m not taking this $1,000 hit, I’m only taking a maybe, a $300, $400, $500 hit per property. So instead of netting at $8,500, maybe next month I’m going to net $4,000 which, during weathering a storm, that’s pretty good.

So your audience knows too, buying the deal — I own five of mine and then I manage three and then I do what’s called arbitraging for three of the other ones, where basically I take over the rent, take over the lease, and sublease it out to other people, and I’m still profiting on those despite what a lot of people are saying. A lot of people are saying right now that lease arbitraging is not a thing, it’s not profitable. I am still profitable on all my lease arbitrage properties, because – again, just doing the deal right.

Theo Hicks: So you said that you have 11 properties in your portfolio… You said that eight were month-to-month rentals?

Kyle Stanley: Yeah. Currently, actually, nine are month-to-month rentals, and then we’re keeping two on Airbnb.

Theo Hicks: Perfect. So, for those nine – and I guess this goes into the second thing that you talked about, which is having other ways to list your properties… So obviously, you’re not listing those on Airbnb. So for my first question is, where are you listing those properties, and secondly, how has your wording changed now that they’re month-to-month, as opposed to Airbnb’s for the weekend or something?

Kyle Stanley: Yes. Our main means which we’re doing it is Craigslist – that’s where we’re getting most of our places;  Facebook marketplace would be next, and then just networking with realtors, property managers, loan officers who have people that need that transition. Maybe they’re selling their house or maybe they’re getting kicked out of one of their homes and they’ve got to transition to find the right place.

So we’re very upfront with everyone, we’re not telling them, “Hey, sign a 12-month lease” with the idea that we’re going to kick them out. We’re letting them know this is furnished, it is a month-to-month rental. We are used to a very profitable Airbnb business, but right now, we’re just looking to use this as a way to weather the storm and to help more local people who are going through some transitional issues that need some help. So we’ve got people in our homes right now that are going through divorce, some are buying a house and waiting to be able to get into that next house. We’ve got some nursing students that are coming in that have been from out of town and need to stay for a couple months…

We haven’t had any first responders yet, but we are opening ourselves up to that as well, and we’re really just making sure everyone knows, you might only be here for 30 days, you might be here if you want for three months, maybe even, God forbid, this thing goes on for a long time, you can be here for three years, but they understand that every month, we have a new evaluation that we’re doing to make sure that they are still a good fit for our property.

Theo Hicks: So of those nine, are they all occupied right now, with that month-to-month lease?

Kyle Stanley: Yes, they are occupied. Seven of the nine are either a family or a person taking up the whole house, and then we had to get creative with some of our bigger properties by renting out room by room, which I thought was going to be really difficult; it turns out that that is not as difficult as I thought it would be. In fact, it’s more profitable and more people are open to doing a room by room, not even knowing who else is going to be in the house, because desperate times call for desperate measures, and those people are definitely in those kinds of situations.

Theo Hicks: That’s interesting. Craigslist is a powerful tool right now.

Kyle Stanley: Yeah, and I guess that’s the big thing. “Oh, Craigslist… That sounds super sketchy.” Well, you know, right now we’ve got to do as much as we can to just help as many people as possible. I think I’m a pretty good judge of character, and at the end of the day if I’m doing room by room, then every roommate has to approve of the next incoming guest as well, to make sure personalities will match.

Theo Hicks: Is there anything else that we haven’t talked about that you’re focusing on right now during this coronavirus time?

Kyle Stanley: Yeah, the first thing is, as you can tell, this really is short-term rentals. It’s property management versus just “Hey, let’s throw an Airbnb listing on there.” So I think for those of you that are thinking about getting into Airbnb or maybe thinking about getting out of Airbnb, the biggest thing right now is, to me, this is getting rid of all of the fakers in this game. It’s getting rid of all the people who just wanted the easy route. “Hey, throw your room or home on Airbnb and get paid a ton of money.” Now that there’s actual work and a lot of these people probably even have a full-time job, they’re probably not doing the things that I’m doing. So that creates a unique opportunity for people that are serious about building their short-term rental portfolio or getting into a short-term rental portfolio, because you’re gonna have a lot less competition on the other side.

And when all this starts to dwindle down, I truly believe that travel, especially to places like my market, Fresno, California – people come here because they have to, not because they want to… And that’s really a good place to be, is when you’re hosting mostly families that are coming into town to see family, or business people, and then the occasional traveler. If there’s a major recession that continues to linger beyond all of this, I’m in a really good position to have a lot more people coming in that need to reschedule things that got canceled, and a lot less competition, so that I can actually raise my rates.  It’s simple, just supply and demand. If the supply is a lot lower and the demand is just as high or higher, then my rates are going to go up.

So I think if you’re in that position — I’m not necessarily talking about the destination getaways per se; I think there’s still a lot to be seen there – the Newport beaches, the Hawaii’s, the Florida’s, all those things where people go there because they want to get away… I’m not sure if that’s still gonna be as strong on the other end of this because of the recession. But for places like mine, where it’s Fresno, California, and other places too, like in Midland, Texas, a lot of business people coming in there, you might be in a really good position to lock something down right now, weather the storm, just cover your expenses, and then on the other side of this you’ve got a very profitable business that you can throw right back on the Airbnb, and have a lot less competition in your area.

Theo Hicks: So you think people should be buying right now?

Kyle Stanley: Again, buying is different in the short-term rentals scenario. So if you’re talking about buying a property, then you got to make sure your numbers are right, for sure. But if you’re talking about arbitraging or managing for someone else, then yes, I definitely think it would be just as good of a time to get in, especially with landlords being really, really open to the idea of getting a solid tenant in there like yourself, that’s going to manage the property and take really good care of it.

Theo Hicks: You mentioned that you bought a property a few weeks ago, right?

Kyle Stanley: Yeah, it’s actually the one that I’m doing the podcast in right now. It’s three units on one lot. It’s not multifamily, it’s just a single-family house with a [unintelligible [00:13:55].14], and then we converted the workshop into another unit, and it’s house-hacking at its finest. It’s fun.

Theo Hicks: So obviously, you bought it amid the coronavirus. How was the underwriting different? Did you underwrite different expenses or a different income? And if so, where did you come up with numbers from?

Kyle Stanley: What terms did I do the deal with, or…?

Theo Hicks: No. So usually you underwrite–  and I’m making up numbers here. Usually this house, in a regular time, would make $5,000 a month. How do you determine how much income would be coming in?

Kyle Stanley: That’s a great question. So I knew my expenses at this place were going to be right around $3,500 per month, from mortgages and then paying back my lender on the furniture. So what I did there is I evaluated it as an Airbnb first, and saw that after year one — because the way that we do our terms, we pay back our furnishing in year one, and then that person is now off the loan; it’s a short-term loan. So in year one, I’d be cash-flowing $600 a month with Airbnb, while living on the property. And then, after year one, we would be cash-flowing right around $1,500 to $1,600 per month, because we would have paid off the furnishing. That was as an Airbnb.

Now that we’re doing this as a short-term rental and month-to-month, I’m at least getting all of my mortgage covered, and then I’ve still got my loan back to my lender, and that means that right now if I wanted to– I don’t want to, I’m in a financial position where I could move out of the unit that I’m in and put someone else in and not owe anything, but I’m okay with spending $1,000 to $1,500 dollars a month to still live in a place, and that’s what I’m doing right now, just to stay where I’m at. But to answer your question, if I’m underwriting it though, I know I could rent out this space that I’m in short-term and cover all my expenses and probably cashflow a few hundred dollars. But if it can get back to Airbnb, and I rent out my unit, the third of the three, then I could be more along the lines of $2,500 to $3,000 a month for this entire property.

Theo Hicks: Thanks for sharing that. And then, one last question before we conclude. So you mentioned that you think that this situation is going to get rid of all the fakers who wanted an easy route. So what do you think exactly is gonna happen to them? Do you think they’re gonna get foreclosed on? Do you think they’re just gonna just sell and then that’ll open up an opportunity for people to buy a short-term rental single-family home that’s maybe furnished for cheap? For those people, what do you think’s gonna happen to them in the next six months?

Kyle Stanley: The ones that have bought the vacation rentals with just the idea of it  working as an Airbnb, I think they’re in trouble, at least for a few years. I think that’s really tough. If you have a, let’s just call it $5,000 per month expenses, and you need this thing to make at least $5,000 a month, I think that’s going to be really tough during any recession, because people just aren’t going to be traveling as much.

Then the other side of it is the people who are just using it as “Hey, this is my primary residence, but I leave on the weekends and I Airbnb it” or “Hey, this is my secondary residence. I only use it about three months out of the year.” I think those people will probably not get hit as hard. But I think the ones that are going to be just okay are going to be the ones that are in markets like mine or in deals like mine that you can put a long-term renter in, and you’ll be just fine. I hope that the majority of people did deals like that, where they can put long-term renters in and be okay. Then for the other people that are doing lease arbitrage like myself, it’s just about getting out of a lease and selling the furniture. So it was a risk of what they knew they were getting into, that if something were to ever happen, if Airbnb shut down, hey, they have a lease. But in a lot of people’s ideas and a lot of people’s minds, it’s a lot better to just have a lease than it is to own a piece of real estate that may not work as a long term rental, so they can get out pretty easily.

Theo Hicks: Yeah, definitely. Well, Kyle, I appreciate you coming out today and being willing to talk about the things you’re doing during this coronavirus pandemic. I think a lot of this advice will be very helpful to people who are doing short-term rentals, doing long term rentals… I think this will also be some very timeless advice as well.

So you talked about how you’re weathering the storm with your short-term rental business; you mentioned that you think people who are screaming at the top of their lungs that the short-term rental business is dead are jumping the gun, and then you got more specific and mentioned that the two things that you did is make sure you did the deals right on the front end. So you mentioned the 33% rule, which means that the money you net needs to be 33% of what you are grossing. So if you gross three grand, you need to net $1000, which means your expenses are two grand. That way, you’ll have meat on the bone to take a hit and not lose money. The other one was making sure you’re not relying on Airbnb and having backup options.

So you mentioned that you’re pivoting to month-to-month rentals for nine of the 11 properties and that you’re using Craigslist, Facebook Marketplace, and then networking with property managers and brokers to secure leases, month-to-month leases on those. Focusing on helping local people, people who are going through divorces, buying a house and waiting to get in, nursing students, and you’re opening them up to first-responders now.

You mentioned how you think that this is going to get rid of a lot of these fakers who wanted the easy route and didn’t want to work hard, because now it takes more work. You can’t just throw something up on Airbnb and get a tenant coming in there.

We talked about how to underwrite a deal during the coronavirus which, I think, is very powerful. So how to underwrite a deal during a “recession”. And that expenses are really set, and you evaluated it as a Airbnb first, and then you’re willing to spend money since you’re living there yourself – $1,500 bucks a month – but you know that if you move out, you would be able to at least break even, and weather the storm, and then once things get back to normal, make your profits again.

So Kyle, I really appreciate you coming on the show today again and sharing what you’re going through with us. Stay safe. Best Ever listeners, thanks for listening and stay safe. Have a best every day and we will talk to you tomorrow.

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Brandon Silveira

JF1977: How to invest in farmland without huge amounts of capital with Brandon Silveira

Fourth-generation farmer, Brandon Silveira, could never see himself venturing too far off from his roots. He focuses on acquiring a variety of farmland, especially through his crowd-funding website, FarmFundr. Listen to this episode to hear Brandon explain everything you need to know about passively investing in farmland. 

Brandon Silveira Real Estate Background:

  • Fourth-generation farmer and real estate investor who has bought and sold millions in real estate
  • Currently manages over $100 million in assets
  • Specialty is in farm management, land acquisition and a variety of farm and land financing and strategies
  • His passion is to bridge the gap between the farmland and investors
  • Based in Fresno, CA
  • Say hi to him at https://www.farmfundr.com/ 

 

Best Ever Tweet:

“You expect a certain amount of return on your capital – say 15% – you may not hit that number, you may only do 2%, you may only do 3%, but if you’re doing your job right you should never lose money on that deal.” – Brandon Silveira


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

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

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


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 fluffy stuff. With us today,  Brandon Silvera. How are you doing, Brandon?

Brandon Silvera: I’m doing good. How are you?

Joe Fairless: I’m doing well, and looking forward to our conversation. A little bit about Brandon – he’s a fourth-generation farmer and real estate investor who has bought and sold millions in real estate, currently manages over 100 million in assets. His specialty is in farm management, land acquisition, and a variety of farm and financing strategies. His passion is to bridge the gap between farmland and investors. Based in Fresno, California. So with that being said, Brandon, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Brandon Silvera: Sure. I was born and raised in farming. Just like any farm kid, I was out here on the ranch most of my life. I went and got an agricultural degree at Cal Poly, and came back and figured I’d better do what I like and know best. So I just kept farming.

Joe Fairless: Okay. So you’ve got 100 million in assets right now. What is that comprised of?

Brandon Silvera: Mostly agricultural property. So we farm almonds, walnuts, grapes, garlic, tomatoes, cotton, corn, wheat, oats. We’ve got a variety of permanent crops as well as real crops that we own and manage.

Joe Fairless: So you own the land, and the business, which is the product that you’re farming.

Brandon Silvera: Yeah. There’s the land that we own that we grow our crops on. Then we also manage some other property where we grow crops on other land for other owners; kind of a full service type situation. I’ve been doing that for quite a while. We put together some bigger investment deals. One thing that I saw was there was a need for lower capital entry for some investors. Some of the deals that were happening were, say a $5 million farm and it’s five guys putting in a million dollars apiece. Then there’s one guy who has $100,000 but couldn’t get in on the deal. I just saw a huge need for this lower entry level to buy smaller farms and for people to get in and invest in farmland without putting up huge amounts of capital.

Joe Fairless: Okay, and that is the company that you founded.

Brandon Silvera: Yeah. I founded FarmFundr, which is a crowdfunding website, where with as little as $10,000 you can invest in a property that we have on our site, and own the land. We also manage the farm instead of leasing it back. The way that works is, we either hire a separate farm manager, or if it’s in our geographical area, we’ll hire our company to manage the farm. That way the investor sees a larger return.

Joe Fairless: Got it. Okay. So as an investor, if someone were to invest, say, as you said, as little as $10,000… Let’s say they invest $10,000 in a deal, then they’re buying a portion of– what exactly are they buying?

Brandon Silvera: For example, we have an almond orchard up right now as an offering. We have a $900,000 capital raise. For as little as $30,000, in this particular investment, you buy a portion of that orchard. That orchard is put into an LLC, and you own a portion of that LLC, and the LLC owns the almond orchard outright. That way, you can see the appreciation of that farm, and when you harvest those almonds, that profit from that crop goes back to you.

Joe Fairless: I know next to nothing on different types of crops and what they yield. I imagine — well, I do know that certain things are seasonal. So what are some products that you would farm that are more seasonal, versus others that are always generating income?

Brandon Silvera: There’s not many monthly cash flow type of commodities out there that we’re growing. There’s some alfalfa, different things that you harvest every month, but those investments really aren’t great on the scale that we’re trying to do things. Almost everything is once a year, after you harvest the crops; after the crops are sold, the payments are distributed back. It’s pretty crazy compared to the commercial world or apartments or anything like that. The returns can be great, but you just aren’t going to see that 12 months of income in every 30 days.

Joe Fairless: With alfalfa, for example, you said it doesn’t really get you to the scale that you’d like to get. Why wouldn’t it be able to?

Brandon Silvera: Here in California, land prices are pretty high. So if you’re going to buy a piece of property with a high land value – and alfalfa is a water-intensive crop, and the water is pretty expensive here as well – to go out and buy this property, and the return you’re gonna get on your investment probably wouldn’t be something that would be interesting to an investor. Now there is a lot of that crop around, but most of these are older dairy farms and whatnot that farm those types of crops.

Joe Fairless: Okay. So what are the disadvantages of going to an area with much cheaper land? Is it that you just can’t command the same price that you get in California for the product once it’s ready?

Brandon Silvera: So the Midwest, for example, with $5,000 to $8,000 an acre, you can get some good ground out there. But you’re also limited to planting soybeans, corn, very few crops. Here in California, the range of crops that we could plant is astronomical. If you have class one really good soil, we can grow stone fruit, cherries, walnuts, you name it. There’s just so many different things that we can plant, which makes it very appealing to outside investors, because you have options. Unless you’re planning a permanent orchard or vineyard, if you’re in the row crop business, if you have one commodity that isn’t doing well that year, you can switch it out and plant something different. So it’s very appealing.

Joe Fairless: As a passive investor who’s looking at your opportunities, who has not invested in this type of asset class before, what are the questions they should ask themselves when looking at a specific opportunity to qualify if it is the right opportunity for them or not?

Brandon Silvera: If you’re going to invest in California, the number one thing you’re going to want to know is  does it have water? Does it have two sources of water? Most everything, especially here in the San Joaquin Valley where we’re at, you’re going to want a groundwater source and you’re going to want a surface water source. If you don’t have both of those, I wouldn’t buy it. That’s going to be the absolute number one.

Joe Fairless: What exactly is a surface water source?

Brandon Silvera: Surface water source – we have a pretty intricate system of canals and dams here in California where you own stock or the ditch water owns a stock that owns a percentage of the water that’s held in the dam, and you have a right to use that on your crops.

Joe Fairless: Okay. So number one, make sure it has at least two sources of water.

Brandon Silvera: Yep. Then number two, you’re gonna make sure it’s good soil. Soil is very important.

Joe Fairless: How can someone analyzing this via the internet know if it’s good soil or not?

Brandon Silvera: Well, first of all, you’re going to want to see the past yield report. So if you’re buying a new piece of property, or investing in something like what we’re doing, you’re going to want to make sure that it has a history of producing what it should produce to have a good return on your investment. You can dive into it a little deeper. The USDA has soil reports that classify everything between a class one, two, or three soil. So if it’s a class one soil and you can see it on this USDA report, you know it’s pretty good there.

Joe Fairless: Okay. Is class three a deal-breaker?

Brandon Silvera: No. It’s like, if you’re going to invest in an apartment complex in an A, B, or C location. C location isn’t a deal breaker if the price is right. It’s the same concept. If you’ve got some pretty cheap dirt, and you can put a crop on there that’s going to give you a good return on investment, it may be a good investment. But you also have to look at  what’s the lifespan of that crop, and am I going to have to take that crop out? How many years can I keep it in there? Then what am I going to put in there next? It’s class three bad soil, you’re very limited. So I definitely wouldn’t say it’s a deal breaker, but you’d want to be a lot more careful.

Joe Fairless: One, does it have two sources of water? Two, is it good soil? What else should we consider? And thank you for the analogy of ABC multifamily. That helped me personally, so I appreciate that.

Brandon Silvera: Yeah. You’re going to want to make sure that whoever’s managing it or whichever farm manager is going to farm that crop is familiar and knows what they’re doing. That’s something we take pride in here at FarmFundr, that if we’re not farming it ourselves, which we’re extremely familiar with these crops, we’re going to hire the best of the best.

Joe Fairless: When you’re initially looking at a new opportunity, I imagine you ask yourselves questions number one and two. Number three, you know that you have confidence in yourself. So that’s good. Number one and number two. What are some other questions that you ask yourself when assessing an opportunity to offer up to investors?

Brandon Silvera: Basically, what’s the upside? Can we add value? Is this commodity going to return a good yearly cash flow and is it going to appreciate? One thing here in California, we’re seeing a lot of consolidation as far as farms because of water districts and their location, and I look at what’s going to happen to this property in 7 years, 10 years, 20 years, and how long is the investor going to have to hold on? How long are we going to hold on to it, and what’s the upside gonna be? For example, in almonds – almonds have a lifespan of around 20 to 25 years, and there’s a lot of workers out there that are producing great right now that have high price tags on them, but they’re at 15, 18 years old. If you’re an investor and we invest in this particular orchard for, say, $30,000 an acre, in seven years we have to pull that orchard out. What’s that ground going to be worth? Is it going to be worth 20,000 acres? Do we have to replant? There’s so many different variables that we look at to make sure that–

Joe Fairless: How do you project that? How do you determine your assumptions there?

Brandon Silvera: Due diligence. I’m finding out the varieties, I’m finding out how old these trees are, or grapes or– what the price has been, what the demand is. There’s just probably 1,000 different things you’ve got to look at to make sure that you’re investing in the right piece of property. The hold period – seven years is a lot different than 12 years in this world.

Joe Fairless: Talking about some major successes and some not so much, let’s first talk about your most profitable venture. What’s the most profitable venture you’ve done?

Brandon Silvera: Single deal or in general?

Joe Fairless: Either one. Whatever you want to talk about.

Brandon Silvera: Almonds right now are very profitable. We like almonds; I think the demand is strong.

Joe Fairless: Don’t they take a bunch of water? Am I imagining that? I thought they did.

Brandon Silvera: Well, it all depends on how you look at it. They don’t take as much water as a lot of other crops. For example, walnuts take a little bit more water, alfalfa takes tons of water, corn takes more water than almonds. Almonds take a little bit more than you would put on, say, a tomato crop or some of these other row crops, a little more than you put on a vineyard… But they got some bad press because people said, “Oh, it takes a gallon of water per nut.” Well, it’s a terrible way of looking at things, because when you put water on these crops, they’re building an entire plant. They’re building the root system, and any excess water is going down, and is being pushed back down into the aquifer. So if you use a certain amount of water, there’s a good amount of water that’s going back into the soil and going back into the aquifer as well. It’s not really a good way of–

Joe Fairless: Interesting soundbite, but not completely painting the whole picture.

Brandon Silvera: Exactly.

Joe Fairless: Thank you for that, because the press got me on that one. So thank you.

Brandon Silvera: Yeah. There’s so many other good things that these orchards are doing. Almonds, depending on how they’re farmed, they call it a zero carbon crop, where they take as much out as it’s costing us to farm these crops. That’s a whole different story, but they’re a good investment.

Joe Fairless: Let’s talk about a individual investment that didn’t go well. Which one have you lost the most amount of money on?

Brandon Silvera: Me personally, the only thing I’ve ever really regretted was I bought a condo and it was a bad investment. It wasn’t farmland. I’ve done real well in the farmland in the past. Maybe that’s because I’m more familiar. But I bought a condo one time that we had an HOA that was pretty reasonable. I think it was 300 and some; and the HOA started going up and astronomically to where I thought, “Man, there’s something wrong here. I don’t understand.” It was in a high rise building. I had bought it for an investment. I kept saying, “Man, I think this guy is going to go bankrupt. There’s too many fees on this condo owners, because the units underneath aren’t doing very well.”

Joe Fairless: You’re probably right.

Brandon Silvera: The board of HOA’s are like, “No, you don’t know what you’re talking about.” I’m like, “Okay, okay.” Well, sure enough, 18 months later, the guy claimed bankruptcy. The whole building went bankrupt. I didn’t do too well on that particular investment, to say the least.

Joe Fairless: How much did you lose? Do you remember?

Brandon Silvera: Well, I ended up hanging on to the unit and renting it out until the building was actually sold. We kept our units and whatnot. The price rebounded back to about the same price. It was exactly the same price I bought it at. But considering interest and what I was losing money for the mortgage and rent…

Joe Fairless: Plus stress.

Brandon Silvera: Yeah, I don’t even want to do the math.

Joe Fairless: We won’t make it. That’s fine. That’s fine.

Brandon Silvera: Yeah, I’d probably be very sad about it.

Joe Fairless: This is a happy show. Well, based on your experience, what is your best real estate investing advice ever?

Brandon Silvera: Honestly, “Never lose money.” That’s it. If you expect a certain amount of return on your capital, say 15%, you may not hit that number. You may only do 2%, you may only do 3%, but if you’re doing your job right, you shouldn’t lose money on that deal.

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

Brandon Silvera: Sure.

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

Break: [00:15:29]:02] to [00:16:09]:08]

Joe Fairless: Alright, you said that, “Never lose money.” So I heard that. But earlier we talked about the cycle of what you do, and you said you get money basically once a year after harvesting. So one might hear, “Don’t lose money”, but then think “Well, shoot, you’re getting one pop and hopefully the market doesn’t change over 12 months. Hopefully, some wacky stuff environmentally doesn’t change…” So it seems like it’s a riskier investment, because you’re only getting paid after harvest and you’ve got to hold your breath and cross your fingers that hope everything works out over 12 months. What would you say to that thought process?

Brandon Silvera: I’d say that it is riskier, but you have to hedge your bet. We have crop insurance and we have different things that we can do. Also, you can’t gauge a long-term investment like farmland after 12 months. It really is a long-term investment. So you may lose money in a year, but if you lose money over the life of that particular investment, it was a bad investment from the start.

Joe Fairless: How many years should one expect to invest in farmland in order to give it a fair shake?

Brandon Silvera: I wouldn’t invest any less than seven years. I think appreciation and the commodity prices need a fairly good life cycle. Anything over 12 or longer is probably a great investment.

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

Brandon Silvera: We’ve held a couple of different events strictly for our local children’s hospital. It’s probably my sweet spot right there.

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

Brandon Silvera: Go to farmfundr.com. You can also reach me anytime on email, info@farmfundr.com. Check us out on Instagram, Facebook, Twitter, LinkedIn, google us, find us. We’re out there.

Joe Fairless: Brandon, thanks for being on the show talking to us about farmland, funding, your company and your venture. I enjoyed learning about this, because I did not know much, if anything, about it prior to our conversation. So I hope you have a best ever day and we’ll talk to you soon.

Brandon Silvera: Sounds good. Thank you.

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best ever real estate pro advice

JF939: He Netted OVER $1 MM WHOLESALING Last Year

It’s safe to say that this is one of our most motivating and instructional episodes of wholesaling we have had. Our guest was able to net over $1 million in wholesaling last year, and he talks about how it all started. Hear his step-by-step case studies and what he did to grab over $20,000 on his first deal.

Best Ever Tweet:

Matt Garabedian Real Estate Background:

– Owner of Royal Realty, a full service Real Estate Brokerage, Buyer Representation and a Full Service Property Management Division
– Wholesaler and Flipper and creator of Matt Buys Houses Cash
– Recently started a new brand Phenomenal Investor, that is just rolling out
– In 2016 did just over $1mm in profit
– Based in Fresno, California
– Say hi to him at http://www.rrfresno.com

Click here for a summary of Matt’s Best Ever advice: http://bit.ly/2nkixYe

Made Possible Because of Our Best Ever Sponsors:

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real estate wholesaling podcast

 

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

With us today – Matt Garabedian. How are you doing, Matt?

Matt Garabedian: Hi, Joe. How are you doing?

Joe Fairless: I’m doing well, and boy, am I excited to talk to you, because… Well, Matt did over one million dollars in profit last year. He is the owner of Royal Realty, a full-service real estate brokerage and full-service property management division. He’s a wholesaler and flipper, and creator of Matt Buys Houses Cash. He’s based on Fresno, California. With that being said, Matt, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Matt Garabedian: Sure, thank you. Yes, I’ve been in real estate since 2009, and kind of a funny story… I remember getting into the business – this is right after the markets essentially crashed and the values were depressed, and there were foreclosures everywhere. I remember I was excited to get into the business, but a couple people, just in discussing it with them, were asking me, there were saying, “Matt, why the hell would you be getting into real estate right now? Everyone’s making a mass exodus out of the industry and out of the business, and who’s gonna buy real estate?” So it kind of hit me by surprise, and I was thinking “Am I making a bad decision here?”

At the time I couldn’t really afford to make any bad decisions, because I was pretty much broke. But I really focused on getting into the business, and I trusted my instincts and I really felt that this is where I belonged. I got into the business on the traditional side, as a regular broker, and quickly figured out that driving around and showing people houses and talking about neighborhoods really wasn’t my cup of tea, if you will.

So I started looking into selling properties to investors, where you’re looking at apartment complexes, and I enjoyed putting together a net operating income and talking about cash-on-cash return and cap rates. I enjoyed those conversations more because the guys were focused on bottom line, as opposed to a neighborhood or the layout of the kitchen or something esthetic. I really enjoyed that, and did that a few times in terms of selling some good deals on our apartment complexes… But I started asking myself, “How do I get on the other side of the closing table?”, if you will.

The guys that I was selling properties to were finding these deals, cash, and I asked myself, “Can I ever get to their side of the table where I was buying property?” At the time I was selling properties that were a good-sized deal with maybe $600,000, and I wasn’t selling those consistently; the average one was $200,000-$250,000. And although those were pretty decent commission checks, when you start reverse engineering it, I would have to do like a hundred Escrows a year to save some money to be able to be in that position to buy a property.

So I started researching other options, and we’ve all come across videos and guys like Preston Ely, or these other guru guys, if you will, and I started researching wholesaling. At that time, that lead me to a fortune builder, and it’s kind of ironic that those guys were all originally from Fresno, as well. I think they had just moved back from Connecticut to the San Diego market and just started launching their fortune builders mastery programs.

I got on the phone with one of the sales reps over there and they’re telling me about how they could teach me all of these practices and principles of how to become a wholesaler, but the [unintelligible [00:05:56].07] was gonna be $12,000, and I didn’t really have $12,000 to spend on any more education. I went home to my wife after really getting excited about it, and I said “I think this is gonna be a great opportunity for me to learn about another strategy where I could make some good money and possibly be able to get into the investing side of the business.”

She said, “Well, why do you need to spend money? You’re already a broker, you kind of know how to do deal.” I said, “Yeah, but this is different.” I had never heard about this strategy before, and I see guys posting these enormous checks; I’ve got all this real estate knowledge, but I’m just getting commissions. So I kind of got her blessing in a sense, and I scraped and scratched some money together and I bought into the mastery program.

To be honest with you, it was really great content, but I never really immersed myself in it, because I kind of went back to the “Let me get comfortable just making my commissions.” I didn’t pursue that and dive wholeheartedly into the wholesaling side until about 2012. I remember this like it was yesterday – I was just up late at night, just kind of pounding my head against the wall again, and really wanting to get into something that was gonna create a future for me… Just looking online again and seeing guys that are posting these big checks and having success. I said, “You know what? I’m just gonna do it.”

I went out, did my first direct mail campaign – I think I sent out like 300 letters, got a call from a guy… And again, I probably wouldn’t recommend this advice now, but I remember someone telling me “If you’re comfortable with the offer you’re making, it’s too much.”

I remember sitting in front of this house – I really had no idea what I was gonna offer the seller, but I kind of forced myself to make such a ridiculously low offer that I was uncomfortable telling him what I was gonna pay. I had to work up this courage to give the offer, and I think I ended up offering this guy $18,000 for his house. I kind of felt that the property was worth (fixed up) maybe $60,000. So I worked up the courage to give him the offer, and he told me “Well, that’s not gonna work, but how about we do $24,000?”

I was so excited just to get a counter… I said, “Okay!” and I wrote up the deal, got it under contract, and then I asked myself, “Boy, now what do I do with this?” because I didn’t really have the cash buyer for that particular property type, or I didn’t know who would be interested in buying it. So what I did, because I was a broker, I had access to the MLS and I kind of researched the neighborhood and I found a couple comparable properties that sold recently, and looked on the data and it showed that it was a cash transaction. I couldn’t find the actual buyer of the property – they just had the tax record just show the address – but I had the phone number to the agent that sold the deal.

So I called the agent and I said, “Hey, I noticed that you sold the property in the area recently. I have a house right down the street – do you think that this particular buyer would be interested in another one?” He said, “What have you got?” Knowing that I had the property under a contract for much lower than what the comps were, I kind of just shot for the moon and I said, “Well, I could sell this property for $52,000.”

I remember he told me, he said, “Don’t tell anybody about this property. We’ll have the money in Escrow in a week.” I said, “Oh my god, one call, one kill…? Like, one shot, one kill deal? This is too good to be true. This is not gonna really happen.”

Joe Fairless: It happens every time, doesn’t it? [laughter]

Matt Garabedian: Exactly, right! So I remember stressing and sweating… I was like, “Is this guy gonna show up with the money in Escrow? Is the seller gonna actually show up to the title company and sign the deed?” So I’m calling my title rep, they’re supposed to be here at two o’clock, and I tell them to let me know if they show up.” I remember at about [2:30] she e-mailed me, seller came in, signed the deed… I said, “Did he ask about any of the profs that I was making?” She’s like, “No, nothing came up.”

I learned that in my area the titles companies send out two different closing statements: one for the seller and one of the buyer. So the buyer is the one that really sees the assignment fee on there, and the buyer was due to bring in the money the next day. Sure enough, he came in and funded it, and I ended up making like $24,000 on that first deal, and I never looked back. I said, “Wow, this is amazing.” I never thought that could get this type of deal done. That was late 2012, and I’ve been grinding at the business ever since.

We just finished our 2016 year as just so blessed and profitable and excited… I’m giddy, I love the business.

Joe Fairless: On that first deal, also, were you asking if the buyer had mentioned anything about the assignment fee that you were making, and how concerned were you about that?

Matt Garabedian: Oh my goodness, I was stressed. I had heard people that would walk away from a closing if they saw what you were gonna make, and I had heard advice from people online that if you were making more than ten or fifteen thousand just to close Escrow and resell it. I didn’t have the money to close anyway, so I just figured “Hey, I’m gonna give it a shot.”

But I quickly figured out after that transaction and several more that if you are delivering value to the buyer, then it really didn’t matter what I was making. If I was making $200 or $20,000, if it was a good deal for them and they had an opportunity to acquire it, then it’s a good deal for them and they’re happy.

Joe Fairless: Do you still use the tactic of reaching out to cash buyers in the area where the house is that you have under contract to find your buyer?

Matt Garabedian: I still will do that from time to time, but over the years I’ve been able to develop some great relationships with cash buyers. I hear a lot of people saying “Go out and build your cash buyers list and get 500 names.” I did that, but I think the honest truth is most of us do our deals with two or three guys; that works for me. I’ve got a huge cash buyers list, but I’m consistently showing my deals to two three investors that I have, and they’re friends. We go to lunch and I tell them, “Here’s what I’ve got… What do you think? Here are the numbers”, and we usually do deals over lunch. Sometimes I’ll just send a text message and say, “Hey, I’ve got this deal. What do you think?” and I send them pictures. “Yeah, we’ll take it.”

So it’s gotten to the point where I’ve got relationships now so I can make these deals happen pretty easily.

Joe Fairless: How much negotiating goes back and forth between you and them when you send them an opportunity?

Matt Garabedian: Well, sometimes we negotiate, but for the most part, if I have a guy that is a friend and I’ve sold six deals this month already, and they all went to one guy, we’ll go and look at each deal, and if I can help him out because he’s buying volume from me, I’ll take three, four, five thousand dollars off of a deal just so that he feels like he’s getting value from me. I like to do that, because it’s much easier for me to sell them to a guy that I know a) he’s gonna close, b) he’s gonna show up and get the paperwork signed, I’m not gonna stress about him bailing on the deal or having his money fall through, or have a change of heart or trade price with me at the last minute… So I rarely have to renegotiate once we strike a deal.

I do a very good job up front doing my due diligence, I understand my comps, I understand my ARVs… I’ve flipped properties, I’m a property manager, I’m a landlord, so I’ve been on all sides of the table, if you will, so I can kind of put together a realistic rehab budget that’s pretty on point. So when I present a deal, it’s pretty accurate as to how it’s gonna go down. I don’t really have to trade price too much.

Joe Fairless: How did you meet the person who has bought the six deals this month from you?

Matt Garabedian: Well, this particular company – it’s two guys that run the company, and one of them I’ve known since I was 16 years old. We actually played baseball on traveling teams together, so I had a relationship with him from back when we were young guys. He got into the real estate business a little bit before me, and in my area in Fresno we’re a big agricultural farming community, so he does a really great job at selling agland, and he developed relationships on that side of the business. So I’ve always known him, and for the fact that he was in real estate, and a few years ago I found out that they were buying properties to buy as rentals or to flip, so it was kind of an easy partnership, if you will, because we had some history and known each other.

Other guys that I didn’t have a relationship with before, it’s a matter of just picking up the phone and introducing yourself and telling guys, “Hey, I’ve got deals. I’m interested to know if you’d like to hear about them.” It’s really as simple as that. I think money follows the deal. If you can concentrate on acquiring good deals, I think the money part usually will just be attracted to that.

Joe Fairless: And just to hone in on that a little bit… You said you have 2-3 people that buy the majority of your deals; we just heard how you met that one individual, since you were 16 years old… Let’s just think of the next person who’s bought the most amount of deals from you – what was the original meeting place for how you got introduced to that person.

Matt Garabedian: Well, I do some of my research, and I’ll find guys that are what I call “professional investors.” These are guys that are buying property on almost a daily or a weekly basis. When you start to see repetition and the same LLC or the same entity buying properties, you know that they’re in the business and they’re professional in how they build out their business. I’ve done a couple things – one thing I’ve done is I’ve actually showed up to the auction, and I would go up and introduce myself to that particular person and say, “Hey, I’m a wholesaler in the area, and I come across great deals. I know you’re at the auction consistently. Here’s my business card, can we have a cup of coffee?”

Another one would be just sending a letter and introducing myself and saying, “Can we meet up and talk?” I like meeting face-to-face and getting to know people, and explaining what it is that I do, what kind of value I can bring to them. It’s just a natural relationship at that point because you know that they’re looking for deals and I’m looking to sell deals, so it’s not a hard relationship to establish if you’re truly bringing value to the table.

Joe Fairless: If you had no buyers at this point, and you have a deal – what would be the number one way that you would go find your buyer?

Matt Garabedian: I would go straight to the auctions. You know that a) these guys are cash buyers, b) they’re actively looking for property because they’re standing at the courthouse steps every day, fighting over a few deals that end up going to a third-party, and they’re amongst competition. So if I have a deal under contract, I think that’s just the natural way, to go directly to a buyer. You can pull courthouse auctions; for my area I use Property Radar, and Property Radar will give you the actual location and time of the auction date. If you get there 20-30 minutes prior to the auction starting and you just go up and introduce yourself and pass out cards… Or I’ll do like a one-page brochure of the potential benefit to the buyer.

Say “I’ve got a property on a one, two, three main street; here’s the ARV. I’m selling it for this. The rehab is this. Give me a call” – I think that’s an excellent way to get in front of a cash buyer right away.

Joe Fairless: You started out by doing direct mail – is that the number one way you’re getting these deals, or is there something else?

Matt Garabedian: Yeah, direct mail is my bread and butter, absolutely. I do deals from my online marketing, but I would definitely say direct mail is the go-to source for me.

Joe Fairless: For someone who’s looking to go from good to great in deal flow via direct mail, what would you tell him/her?

Matt Garabedian: Know your KPIs. That took me a while to understand that. It’s never advisable just to throw money out the window without being able to track your response rate. You need to be able to track inbound calls, appointments, contracts and closings. Those are the main KPIs that I track. It all starts with having a proper CRM. I’ve spent thousands and thousands of dollars to develop my CRM. We use a custom Podio, and I’ve integrated CallRail, and other sources to be able to properly track. I can split-test my direct mail now and see based on what type of mail piece I’m using… For instance, if I’m using one mail piece to an absentee owner, I’ll split-test it with even the color of the letter or the postcard to see what’s getting the best response rate.

If you could dial in a) your CRM and b) your KPIs, which are both equally important, I think that’s gonna be a huge advantage to anybody out there that is competing against other investors or wholesalers or other investors in the area, because you’re able to look at your KPIs and say, “Well, I’ve sent out x amount of letters to this mail type and I’ve sent x amount of letters to split-test sample B, and sample B for whatever reason is returning much more. So I’m gonna focus on that and maybe look at what I could tweak on sample A to get a better response rate.”

Joe Fairless: And for anyone not familiar with KPI – key performance indicator, and Matt just went through what he looks for with those, what indicators he looks for.

Last question, and then I’m gonna ask you the money question. The last question is what type of direct mail piece have you found is most effective? You said you do split tests for colors of the card or the letter and all sorts of things… What’s you bread-and-butter direct mail piece look like?

Matt Garabedian: Well, that is a little proprietary, but I use three or four different direct mail pieces. The biggest thing that I’ve learned about a direct mail piece is it’s meant to extract the potential caller, if you will. I never wanna buy a piece of property over the phone, and I never try to buy a piece of property on my message on my direct mail. I want that person to be intrigued in us, to call me.

I think that is where I’ve been able to separate myself, because if you look at a typical yellow letter, if you will, it’s “Hey, my name is Matt. I’m looking to buy properties cash. I buy it as is. I’ll close within ten days. Call me.” Those are a dime a dozen, because anyone can send those out. If you can kind of tweak your message and have that person pick up the phone because they’re intrigued, then I think you’re putting a leg up against the competition. I’m sure I’ve got competitors in my area that are sending the typical yellow letter or a postcard. The yellow letter is not as effective as it was five years ago. I think it’s kind of played out now, and so if you can tweak your message on your direct mail piece, then it’s gonna stand out from your competition.

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

Matt Garabedian: My best real estate investing advice would be to be aggressive, but always have an exit strategy, and be okay with the worst-case scenario. So if you analyze the deal and you assume that all hell was gonna break loose and the numbers were gonna go the opposite way of what you hope and anticipated, you’re still okay with the deal and you have an exit strategy once you figure out how you’re gonna go about your disposition.

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

Matt Garabedian: Let’s do it.

Joe Fairless: Alright. First, a quick word from our best ever partners.

Break: [00:23:05].12] to [00:23:47].02]

Joe Fairless: Best ever book you’ve read?

Matt Garabedian: Two of them: Secrets Of The Millionaire Mind by T. Harv Eker, and The One Thing by Gary Keller.

Joe Fairless: Best ever personal growth experience and what did you learn from it?

Matt Garabedian: Getting a mentor. I like to call it leveling up. I have a mentor and we’re a part of a mastermind group from very successful real estate investors all across the country. What I learned from that is you never want to be the smartest or the most successful guy in the room. When I became a part of this particular group I was amazed by the amount of golden nuggets and knowledge that I was able to take from very successful people. I recommend anybody out there that’s looking to level up – get around guys that are doing better than you, because they’re gonna help and force you to stretch, to push yourself, to dream bigger, to have bigger goals, to expand your business, and it’s awesome to have that type of accountability for guys that are in the same industry.

Joe Fairless: Can you mention which group you’re in?

Matt Garabedian: Yeah, I’m in a group with a guy by the name of Mark Evans DM. They call him the Godfather of virtual wholesaling, but he’s in the turnkey industry. It’s a private group, there’s about 15 guys in the group now. I definitely would recommend anyone to explore that if they’re looking for a mentor; Mark is one of the best in the game.

Joe Fairless: Best ever deal you’ve done?

Matt Garabedian: The best ever deal I did was a 17-unit apartment complex. I did the deal subject to… The scenario was the owner was an absentee landlord. They were in NOD, and they were basically on their way to losing the property. I was able to structure the deal subject to the existing loan, and it was one of those deals where everything lined up perfectly. The mortgage balance was 50% below market, the interest rate was excellent, and they were motivated. They were over 120 days delinquent, and I was able to provide a win/win scenario by paying their mortgage currents, paying their taxes currents, and then giving them some cash to do the deal. It worked out that we acquired the property for just under $560,000; total cash out of pocket was $25,000 and total rehab was about $100,000. After about 14 months we sold the property for just over a million dollars.

Joe Fairless: Wow, that’s a good one.

Matt Garabedian: Yeah, yeah.

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

Matt Garabedian: I love to give back to my family. I grew up in a middle-class family; my parents did the most that they could do for us, but we certainly were never in a position to get ahead or to invest in real estate or to put money away. It was kind of a paycheck-to-paycheck deal. My mom is the hardest-working person I’ve ever met. She’s worked every day of her life and never complained about it once, so last summer I called her up — it was actually on the 4th July, and my mom always drove kind of like a beater, if you will.

She had this Ford Taurus and it was always breaking down on her. I never liked the fact that it was just like an unreliable car for her, and I’ve got two little boys, so I wanted her to have something that she could take the grandchildren around and take them out or whatever they wanted to do… So I just called her up and I said, “Hey, I’m gonna come pick you up” and I drove her over to the Honda dealership in town and I said, “Mom, I just wanna let you know that I appreciate everything you did for me and I wanna buy you a car. Whatever you want, please pick it out.”

For me, it was a blessing to be able to do that for my mom, because at that point her whole face lit up… She couldn’t fathom the idea of being able to go and pick out any car and not have to worry about the price or the payment. That for me was just a total enjoyable experience. So my big why in this business is to take care of my family and set up a generational opportunity for my kids. That for me is why we can get up every day and do this business.

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

Matt Garabedian: Biggest mistake I’ve ever made on a deal…? To be honest with you, I’ve never lost money on a deal, thank goodness. I thought about this question, and I think the biggest mistake I’ve made earlier in my career was not understanding my value that I was bringing. I would tend to give away a lot in the deal just to please the other person or approve my worth to others.

I think now as I have gotten more entrenched in my business and learned more of the value that I bring, I’m a little bit more apt to negotiate and make it a two-way street, if you will. I try to provide value at all times to my clients, but I never want to give away too much.

Joe Fairless: How many people do you have employed with your company?

Matt Garabedian: Right now I’ve got three. I’ve got acquisitions, dispositions and marketing. Now I’m looking to hire a CFO.

Joe Fairless: What is the best place that the Best Ever listeners can get in touch with you?

Matt Garabedian: The best place – I’m on Instagram at @phenominvestor. I constantly update stuff that I’ve got going on on my Instagram account. They can e-mail me at matt@phenominvestor.com.

Joe Fairless: And your website, just in case they wanna check that out?

Matt Garabedian: I’ve got several, but you can find me on FastCashCloser.com.

Joe Fairless: Perfect. Matt, thank you for being on the show. I really enjoyed your story that you talked about. You told us how you were starting out and your a-ha moment, and then how you were able to get the cash buyer by looking at who bought a property, who was buying a property in that area, and got the deal done… And how with your direct mail you want the person to be intrigued enough to call you. That’s an interesting differentiation.
Then also having the approach of, if you for whatever reason lost all of your buyers, then the next thing you would do would be go straight to the auction and find the buyer for your wholesale deal, assuming you had a deal.

So thanks so much for being on the show… Lots of really good insight. I hope you have a best ever day, and we’ll talk to you soon!

Matt Garabedian: Thanks for inviting me, Joe. I really appreciate being on the show as well. I really enjoy listening to your show, it’s really well put together.

 

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JF573: How 100 Homes a Year Started with Rapport Building Door Knocks

Today’s guest began in the grassroots knocking on doors in finding deals. He was hungry for closing neighborhoods, and eventually built a wholesale company. He buys in the California market and works with many other investors, hear his story and how he began with very little!

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Don Costa real estate background:

  • Been in the real estate business for over 10 years
  • Started as a wholesaler then moved to flipping soon after.
  • After the crash he took time off then in 2012 he founded Strategic REI, Inc. and his goal is to flip 100 homes this year
  • Based in Fresno, California
  • Say hi to him at strategicrei.net and http://www.fiveminuteflip.com
  • Best Ever book: Think and Grow Richby Napoleon Hill

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