JF2350: The Art Of The Follow-up With Sterling White #SkillsetSunday

Sterling is a multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just over a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Today, Sterling will be going into details about one of his most powerful sales tool, the follow-up.

Sterling White  Real Estate Background:  

  • Full-time real estate investor and author of “From Zero to 400 Units”
  • Over a decade of experience
  • Previous episode – JF1236
  • Portfolio consists of 400 Units
  • Based in Indianapolis, IN
  • Say hi to him at: https://www.sonderinvestmentgroup.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The art of the followup separates the newbies from the pros” – Sterling White


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever. We don’t get into any of that fluffy stuff. And – well, it’s Sunday. Because it’s Sunday, we’ve got a special segment for you called Skillset Sunday. And here’s the skill that you might not have, or if you have, then props to you, but I bet we can hone this skill. And this skill is the art of the follow-up. And who’s going to teach us his way of the art of the follow up, which has been successful for him and others he’s spoken to about it? Mr. Sterling White. Sterling, how are you doing my friend?

Sterling White: Alright. Welcome, everyone. Strap in your seat belts, bring your bags with you, because we’re going to be dropping tons of golden nuggets and bombs. So I definitely appreciate being on here again, Joe. It’s always great catching up with you.

Joe Fairless: And a little bit about Sterling, just as a refresher – he was on episode 1236, titled What To Do When A Deal Falls Through, Situation Saturday. You can go listen to that, episode 1236. Just a refresher real quick. He’s a full-time real estate investor and author of From Zero to 400 Units. He’s got over a decade worth of experience. His portfolio consists of –imagine this– 400 units. He’s based in Indianapolis, Indiana. So with that being said, we’re talking about the art of the follow-up. How should we begin the conversation to frame it the correct way?

Sterling White: Yeah. One thing I love – we’re in essence triple S, because it’s Skillset Sunday with Sterling. So I love trple S’es. [laughter] And I would say is this was by far the absolute game-changer for me with the follow-up, and for individuals to know that this is really what separates the newbies from the novice, the novice from the amateurs, amateurs from the pros, and absolute mastery is just this one segment in itself.

Joe Fairless: Well, I’m in. And before we started recording this, we were talking about a couple of different angles to take with this conversation… And you mentioned the art of the follow-up, and you mentioned that it’s a mindset approach, first and foremost, and then you get into the tactics. And I loved that. So can you talk about just how we should think about following up with people?

Sterling White: Yeah, I would say is… How I’ve shifted it — and this is more so on the acquisitions, or you can say in general we’re relating to acquisitions… It’s that even when you’re buying, you’re still selling. So it’s a sales process. And many of the times, let’s say you’re taking the direct to owner approach, or you’re touching base with a broker. Let’s say we’re taking the direct to owner approach, because that’s the path that I go. 95% to 99.9% of the time that owner is not interested when I first reach out. So first, it takes six to eight attempts just to get in contact with them, they’re not interested, and now it takes additional follow-ups to now catch them at the right timing… Because I really want to touch and follow-up, because I spoke with someone the other day, and they said, “I’m doing direct mail, it’s not working.” And I asked them, “How many times did you do it?” They said “Once, Joe.” One time.

Joe Fairless: And that’s not going to cut it when you’re introducing yourself to someone for the first time, right? You’ve got to have multiple ways of having them get to know you, and you get to know them.

Sterling White: Exactly. And also, on top of that, is I like to call it the value-based follow-up. So now I’m going to get into some tactics. So you can keep following up with an owner with the same approach, saying now you’re interested in selling, now you’re interested in selling your property. Or you can go the extra mile and – this is one I’ll use, I’ll send out random birthday cards. And on the birthday card, it says, “I may have caught you a little bit sooner, a little bit later, but just want to ensure I got you.” So there’s that.

And then also, I’ll reach out to them and say, “Hey, we’ve got local meetups here that are in Indianapolis and thought you would be a great speaker to share your story, considering you’ve had success in the industry.” So all these different ways – and this is one quote I like to use, it’s “Creativity follows commitment.” If you’re committed enough, you’ll be creative as a way to stay top of mind. Because if not, you follow with the same message, and they’ll say just put me on the Do Not Call List.

Joe Fairless: We might bounce a little back and forth on getting into the weeds and then talking more high-level, but I want to ask about one of the things you just mentioned… When you say to an owner, “Hey, I want to profile you. I want you to share your story at a meetup that I host”, how many owners have taken you up on that?

Sterling White: Zero. At this point in time, it’s been zero. And of course, I started implementing this right as COVID happened, so that also affected things… But why this comes into consideration? I’ve at least gotten some engagement from them. That’s the main thing. Of course, if they say “Yes, I’d be interested”, then I would set it up. But it’s more of those things that’s just to open up the relationship again. Because many times these individuals just go ghost, and I don’t hear from them again. And then that’s when I start to get creative as a way just to touch them. And then from there, they say, “Yeah, I’d be open to it.”

One of the owners I got in touch with, he said, “Well, I’m a little bit nervous, but I enjoy doing things that are out of my comfort zone.” And then we started a conversation from there. So it’s just really just staying top of mind. So one, building the relationship, and then also, it’s timing. This was one individual, it’s going on for about two and a half or three years now, of which I’ve been following up with that individual… And it’s just about timing; they’re still not ready to sell. And at that right moment in time when I follow-up – there we go. I’m the one that first comes to mind.

Joe Fairless: How many have you got engagement from with the random birthday cards?

Sterling White: It is very low. I would say the percentage in terms of sending out, I would say…

Joe Fairless: Just the total number of people, would you say.

Sterling White: Four to five.

Joe Fairless: Four to five?

Sterling White: Correct.

Joe Fairless: And these are multifamily owners?

Sterling White: Yeah, these are multifamily property owners. And I’ll send these out after I’ve had some conversation with them. It’s just not one of those just direct mail campaigns where they are not familiar with me at all.

Joe Fairless: Okay. I thought you were about to say “I’ll send them out these random birthday cards after I’ve had some drinks” or something like that. I was like “That makes sense. If you’re sending random ones, you might as well make a party of it as you write these out.” [laughter] The four to five that you’ve had an engagement with, what did they say?

Sterling White: It’s just more of “Hey, you got me a little bit too soon, but I do appreciate the card.”

Joe Fairless: [laughter] And what’s your follow up there?

Sterling White: The follow-up is, “I just want to ensure I got you covered, and yeah, anyway I could be of value to you…” So I’m re-engaging the conversation. And it’s also a pattern interrupt, too. You get a random birthday card, they’re like “What is this?!” And I know one guy that actually sends — and yes, this is going to be hilarious. He sends potatoes. Yes, potatoes. And he had one of his clients reach back out to him and said, “Did you send me a potato?” He’s like “Yeah, I sent you a potato. But now that I’ve got you on the phone now…”

Joe Fairless: Oh, gosh… Oh, man. Huh… When you get these leads, what system are you using to track the leads? And this person responded to the birthday card, this one responded to the share your story meetup…

Sterling White: So I have a CRM that I use. And for everyone who’s on here, ECRM is different. There are tons that are out there. I do a lot of outbound communication, so there’s one that’s Mojo Dialer that some people use. I use close.com, which is very simple for me to use because I like things to be super simple. And it’s more for individuals that are doing quite a bit of volume in terms of calls. So that’s what I use in terms of a CRM, and I keep everything tracked in there.

Joe Fairless: Got it. close.com, “Turn more leads into revenue.” I’m on their website. I haven’t heard of close.com. So close.com – is that your main CRM? You send out emails through that, you track your leads, you track engagement… Like a Salesforce type thing?

Sterling White: Yeah, it’s the same exact thing. I’m unsure if Salesforce you can actually make outbound calls. And one thing I’ve heard about Salesforce is it can get very clunky and very convoluted. So that’s why I ended up going with this. And yeah, you can track everything. I can have the KPI, so I can understand if we make this amount of calls, this is where the conversion rate to appointments is. And then we can reverse-engineer from that and say, “This is how many LOIs that we can get from this amount of appointments”. And then from those LOIs, this is the amount that converts to an actual contract.

Joe Fairless: But a lot of the stuff we’re talking about, or you’ve been talking about, aren’t phone calls, they’re mailing stuff out. So are you also doing cold calls?

Sterling White: Yeah, cold calls are my primary channel. The direct mail and those that I was mentioned to you are more of just a way to follow up.

Joe Fairless: Ah, yes.

Sterling White: And the thing with my list is — so I target apartments 75 to 200 units. So I’m in Indianapolis and other Midwestern markets, so it’s very niche. So a primary touchpoint is calls. And then also we even get creative on top of that, but in essence, we just use direct mails as a way just to keep following up, versus just using a text message, or a call, or an email.

Joe Fairless: Okay. So you use direct mail to keep following up. You said earlier that 99% of the time you call the owner the first time, they’re not interested. So it takes six to eight attempts to follow up with them.

Sterling White: Six to eight attempts just to get in contact with them.

Joe Fairless: To get in contact with them. For them to say “Hi, Sterling.” Or “Leave me alone, Sterling.” Or “I’m interested.”

Sterling White: “I’m not interested to sell my property.” Or “I would sell it for above market, or top dollar, or the right price”.

Joe Fairless: Right. Okay. Let’s talk about the other ways then you’re following up. One’s a random birthday card. Another is to share your story. You said it takes six to eight times. So what are the other things you’re doing?

Sterling White: Personal visit, by far my favorite one. It definitely takes some, for lack of a better word, big cojones when it comes to this, just dropping in on the owner completely cold. But if you’re committed enough, you’ll figure out a way, and this comes down to your why. I have big why’s and I’m willing to do things like that. So that’s one.

And then also, there’s another channel if I’ve had difficulties getting in touch with someone – one way I’ve done, this was 120 units here in Indianapolis, in which I had not very much success in terms of getting in touch with the owner… So what I did was I use a database such as beenverified.com. I’m not affiliated with them, I just use them. So I typed the owner’s first and last name in there, and then I ended up getting a relative, which was the daughter. So I reached out to the daughter on Facebook, strictly business, everyone that’s on here, and just asked “Hey, looking to get in touch with your father relating to this property”, and was able to get their number directly.

Joe Fairless: Wow. Did she asked how you got my info?

Sterling White: Sometimes you’ll get that, but not from that. She probably just saw I was very handsome and said [unintelligible [00:14:20].25]

Joe Fairless: Oh, man. [laughter] That’s an interesting approach because it connects you with the owner through a loved one. What a warm referral that is. The loved one might be saying, “This creepy guy randomly reached out to me, dad. I’m going to give you his info, but then you call the cops right after.” But either way, she’s still talking to her father about you. And assuming that he loves his daughter, there’s some to be said about that.

Sterling White: Yeah, and it’s all just… Gosh, where was I going to go with that? It’s just really the habit of going the extra mile –which is a principle from Napoleon Hill– is I feel in those cases such as this example, people hit these specific barriers when they’re looking to get in touch with an owner… Whether they’ve made these multiple follow-up attempts, they’re not properly getting through, they’re getting in touch with a gatekeeper, can’t get through to the gatekeeper to the direct decision-maker… By going the extra mile, I feel — because people stop at that, and then when you go above and beyond, that’s what really separates you from those. Because I closed on a deal where I’ve actually sent it over to the brokers and said, “Hey, could you help me out with this lead? Because I haven’t had much success?” And then many of them just said, “No, we haven’t had any contact with them.” I went the extra mile to do some more skip tracing, ended up finding one of the operators having a unique last name. They were in Florida, I said, “Well, let me just give this person a call. They’re in real estate.” It turns out they were one of the people who actually put the syndication together close to two decades ago, and then started the conversation. Fast-forward, we closed on it. The brokers reached out to me and said “How the heck? I had so much difficulty getting in touch with that person.”

Joe Fairless: That was 120 units?

Sterling White: That was 156 units.

Joe Fairless: That was 156.

Sterling White: That was another property.

Joe Fairless: The 120 units you got through the beenverified daughter and dad connection?

Sterling White: Yes, correct. I didn’t close on that. That was just one that ended up going the extra mile was  a way to being creative as a way to get in touch with the decision-maker. Because many people just say, “Ah, this property is not going to work. It’s too difficult. Let me move on to another one.”

Joe Fairless: Why didn’t that one work?

Sterling White: Their price. And I’ve shifted away from those. It’s built in the early 1970s, C-class property. It needs quite a bit of work. And I’ve shifted my model more towards 1980 to 2000 construction, with less deferred maintenance.

Joe Fairless: So the random birthday cards, meetups to share your story, personal visits…

Sterling White: Rubik’s cube, many people know me for this. This is by far one of my favorite ones outside of the personal visit, is a Rubik’s cube. I’ll send it to them, direct mail, with a small note that says “Hey, let’s figure this out.”

Joe Fairless: How many conversations has that resulted in?

Sterling White: I would say more so about 15 to 20. And there was one –because I follow up right after I send the Rubik’s cube– is the owner, I had him on the phone, and he said “My wife cannot figure out this damn Rubik’s cube. So she’s in the back, working on the Rubik’s cube, and he’s speaking to the guy who sent it to him. So all these different channels are just a way to just keep pinging the person to stay top of mind. So once they do the transition from not interested to being interested, you’re the one that comes top of mind.

Joe Fairless: And you’re able to track that in close.com, like, “Okay, sent them this Rubik’s Cube, I did a personal visit.” Do you track all that stuff? Or just the phone call results?

Sterling White: I track more so the phone call results. I do include in the notes the various touchpoints. But in terms of tracking, “Hey, this converted to this,” that is something to actually implement. But right now it’s more so just the calls.

Joe Fairless: Do you have a process that you follow, where you do it in a certain order, these things?

Sterling White: In terms of a certain order, is if I send a letter of intent out to someone before the actual contract and I don’t hear from them, that’s when I will send the Rubik’s cube. And then if I have gotten in touch with…

Joe Fairless: Oh, real quick. A letter of intent… I assume that means that you’ve got financials from them, or are you just writing it up based off of what you believe to be the financials?

Sterling White: I have gotten financials — that does vary. I have actually recently sent an LOI to an owner. What I did was I just normalized; so they were able to provide me the rent roll, I normalized the expenses, and then I submitted an LOI just as a way to follow up.

Joe Fairless: But at that point, if they’ve sent you the rent roll, you’ve already engaged them.

Sterling White: Yes, correct. This isn’t a blind Rubik’s cube. Is that what you’re–

Joe Fairless: Yeah. Okay. Noted. So the Rubik’s cube is in place after you’ve had some sort of engagement with them. But the other things, like skip tracing an owner – you clearly haven’t talked to them because you have to skip trace them. Beenverified, same thing. Personal visit, I imagine, that’s in the same category. Meetup, share your story, same thing. So with those in particular, do you have a certain order in which you follow up?

Sterling White: Yeah, the first channel will be the birthday card. That’s one. So the birthday card is the go-to in terms of the subset, but also in terms of like a process. Because some owners are at different stages. So we have this owner, I know that they’re in Indianapolis, I’ll do a personal visit. And then I’ll follow up with a personal handwritten letter from myself as a way, “Hey, it was good to meet you.” So in terms of like an actual process of the direct mail, primarily is the happy birthday card. But outside of that is — it’s not “Okay, we’re going to do this campaign, we’re going to do this campaign, and this campaign.” We do have occasions that we do a campaign on the go to all of the owners that have expressed interest, but in terms of a process.

Joe Fairless: What would that be? All the owners who have expressed interest,  what does that campaign look like?

Sterling White: The campaign will be something along the lines of a handwritten letter. So that’s one. And then also there’ll be – myself will send an email out to them that says, “Hey, going to be out in the neighborhood, would love to put my hand in your hand.” So that’s what we’ll do if after a month we haven’t had an engagement with a specific set of owners. We’ll say, “Hey, this is a campaign that we’re going to use on all 25 or 30 of these individuals.”

Joe Fairless: I love hearing about this. Anything that we haven’t talked about, that you think we should, as relates to the art of the follow-up?

Sterling White: I would just say for everyone, this is one thing I learned… Love him or hate him, hose of you are on here –  Grant Cardone… So I’ve gotten so much valuable information in terms of just the sales in itself… Because I’m a believer that sales is everything, and not just in business, but even in life. But through this, the follow-up is some people just don’t have realistic expectations. The majority of the time, people don’t even make the attempt, whether that’s direct mail, or cold call, or whatever channel they’re using. And then they quit after the second, third, or fourth time, not knowing that on average it takes between six to eight attempts just to get in contact with the person. That’s just the get in contact, give them your pitch, and them many a time they’re not even interested. And now it’s, even more, follow ups after that.

Joe Fairless: What are your thoughts about someone who sends the same (let’s just call it) postcard or brochure to that contact six to eight times? Good or bad?

Sterling White: You’ve got to be creative, because they are getting tons of other direct mail. So by someone doing that, it’s better than nothing. And the good thing is that they’re consistent. But if they’re able to switch it up of some sort… Because that yellow letter that they have that was handwritten that they’ve sent maybe two to three times, if they send a red one in a red envelope, that could be the one that hits and triggers that person, “Oh, I’m actually going to pick this one up and actually take a look and call this individual.”

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

Sterling White: You can visit me on Instagram, @sterlingwhiteofficial, and also visit sonderinvestmentgroup.com. [unintelligible [00:22:33].11] here to be a value to everyone who’s on here. Just remember, keep being awesome.

Joe Fairless: I loved our conversation as always. I love the creativity that’s put into action. A lot of people have… No, I wouldn’t say a lot of people have a lot of creative ideas to move the business forward, because that’s a unique skill set, I believe… But not only do you have creative ideas to move the business forward, but you also execute on them and follow through [unintelligible [00:23:03].12] the follow-up, like we talked about. Breaking through the clutter and then executing on that on a consistent basis.

And also, as you said a couple of times, setting expectations with yourself and with your team, that it is going to take six to eight times just to get in contact with them. And we’re talking about owners in this circumstance, but I imagine that’s applied to others as well. Thanks for being on the show, Sterling, I enjoyed it. I hope you have a Best Ever weekend and talk to you again soon.

Sterling White: Oh, yeah. Have a great one, everyone.

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JF2313: Tennis To Investor With Sunitha Rao

Sunitha works in corporate financial planning for a biopharmaceutical firm while investing on the side for the past 2 years and currently has a portfolio consisting of 6 properties with a total of 9 doors. She shares how she dropped out of school to pursue tennis and eventually realized tennis wasn’t for her so she pivoted and went back to school to get a degree and now she is working full-time and building her wealth on the side part-time. 

Sunitha Rao Real Estate Background:

  • Works in corporate financial planning for a biopharmaceutical firm while investing on the side
  • 2 years of real estate investing experience
  • Portfolio consists of 6 properties with 9 door rentals
  • Based in Indianapolis, IN
  • Say hi to her at www.Griffixpropertygroup.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You have to add value in everything you do” – Sunitha Rao


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

Sunitha Rao: Doing well, thanks. And yourself?

Joe Fairless: I am doing well, and thanks for asking. A little bit about Sunitha – she works in corporate financial planning for a biopharmaceutical firm, while investing on the side; she’s got two years in real estate investing experience. Her portfolio consists of six properties with nine doors, and she’s based in Indianapolis, Indiana. With that being said, do you wanna give the best ever listeners a little bit more about your background and your current focus?

Sunitha Rao: Sure. My background is a little different from many people, especially those in the investing world. I spent actually the first ten years of my “professional life” as a professional tennis player.

Joe Fairless: Nice!

Sunitha Rao: I turned pro when I was 14, that’s why the air quotations are there. I retired at 23; no money, no education. I dropped out of school after sixth grade. I was basically a train wreck, right?

Joe Fairless: So don’t have my daughter do that then, huh?

Sunitha Rao: No. Don’t. Keep her in school. [laughs]

Joe Fairless: Okay.

Sunitha Rao: So at that point I was all about “Let’s get a good job, let’s make that stable income, let’s get going with life. There’s no reason to be poor and broke for the rest of my years.” So I went back to school, I got my bachelor’s, I got a job at a Fortune 500 company, in their management training program; it was a rotational program meant to breed leadership… And I thought life was great. But as time went on, I realize — and by “time” I mean like two whole years. It didn’t take me too long to figure out what was going on, I think. I was giving so much of my time to this company, and I just wasn’t seeing the same returns back for the time invested… And I started thinking “There’s got to be a better way to invest my time so that I can have more financial freedom, and maybe even earn back some of that time in the future.” And that was when I started looking into different areas of personal finance; I found actually Bigger Pockets and real estate investing, and just kind of dove in head first, studying basically any free moment that I had… Because I was also getting my MBA and working full-time at that time. I like to have a full plate.  [laughs]

Joe Fairless: Clearly.

Sunitha Rao: And then it took me about two years to save up a little bit of money, and then I started investing in Indianapolis, after I’d saved up that money and gotten a little bit of that knowledge base. However, at this time I was still based in Boston, still working that full-time job, still trying to make ends meet, figure things out on a single W-2 income salary. So that in itself was a really interesting process.

After that first investment, spring of 2018, a little over two years now, I’ve gotten up to nine doors using a variety of strategies, from BRRR, long-term buy and hold, I have an Airbnb, I’ve house-hacked, I’m still house-hacking, I’ve done seller financing, investor financing, you name it. I’ve had to use a whole variety of strategies in order to make the most of my W-2 income, so that I can grow this business as safely and as quickly as possible.

Joe Fairless: Wow, you have just been resourceful and made it happen. When you left the tennis world at age 23, I think I heard you — you said you went back to school. Now, I imagine you already had your high school degree, right?

Sunitha Rao: Uhm…

Joe Fairless: No?! Okay, tell us about that. So you’re 23 years old and — what do you mean when you said you went back to school?

Sunitha Rao: So what I had was a GED, which was an equivalency diploma.

Joe Fairless: Yeah, that checks the box, right?

Sunitha Rao: Yeah, but this test is so easy; I feel like if you’re even halfway literate… I dropped out of school after sixth grade; I didn’t know any high school math. I didn’t even finish middle-school math, yet I don’t know how I was able to get a high school equivalency diploma when I didn’t do anything after that, essentially… So yes, I did have a high school degree, but when I went back to school, I enrolled in local community college and I had to take 6-8 months of remedial English and math classes to get myself back up to a college level. Then I started from there.

Joe Fairless: Okay. And then you got your undergrad?

Sunitha Rao: Yes. I eventually got kind of an academic merits scholarship, which is hilarious…

Joe Fairless: Wow.

Sunitha Rao: …and so weird, at a private school up in Boston called Babson College.

Joe Fairless: Oh, yeah.

Sunitha Rao: They focus on business and entrepreneurship. So I was really lucky to have landed that spot, and ended up getting my undergrad from there.

Joe Fairless: And how were you paying for school?

Sunitha Rao: Through scholarships and merits, and I was also working all the time; I was teaching tennis on the side, I was bartending on the side, waiting tables… I dog-sat, I baby-sat… I didn’t like kids then. [laughs] I did basically anything I could to fund my existence during that time.

Joe Fairless: So then you saved up some money and you bought your first place… What did you buy and how much money did you save up to buy it?

Sunitha Rao: I think at the time I had about $60,000 saved up. I bought — there were two homes on the same parcel. They weren’t attached, it wasn’t a duplex. It was a single-family home with a dethatched carriage house, and it was in one of the more affluent counties in Indianapolis, while not being in the most affluent city. So I was getting a lot of the run-off with people who couldn’t afford to be in the best area, but still wanted their kids in the best school district, and they wanted to be in a low-crime neighborhood, and that sort of thing. So it was a really good situation to have found; I found this while I was still half a country away, essentially.

So the numbers – the purchase price was 95k. I spent about 11k in initial rehab, and got that rented. Since then, I have transformed this property; it’s much more profitable now. At that time I rented the main house for $800 and rented the carriage house for $500. So it was still about 1.3% price-to-rent ratio. But since then I’ve had to invest probably another 13k, but I turned the dethatched carriage home into an Airbnb. It’s this 400 sqft. level home that is just so awkward and weird… But it’s been great as an Airbnb. I’ve been doing it about a year. I’m grossing between $1,400 to $2,000 amount, so that’s netting at least 1k a month after all of the  holding expenses, and stuff.

Joe Fairless: Wow.

Sunitha Rao: So it’s a little over 2% in a very good area.

Joe Fairless: And it’s been over a year since you’ve been doing the Airbnb. How has the impact been over the last 3-4 months?

Sunitha Rao: It’s actually not been too terrible. When Covid initially hit and the travel started to die down, and the quarantines were in place, I actually shifted to a medium-term rental, so like one month here, another person who wanted two months… So I was really lucky to have found it; it’s not like I went out searching for it, they just reached out to me via VRBO or Airbnb, and we’re like “What can you do…?”

I definitely had a little bit of a hit in terms of profit, but it’s still way more profitable than a long-term rental, so I consider that a win.

Joe Fairless: You bought it for $95,000… What type of financing did you get?

Sunitha Rao: Conventional. That was my first deal. There’s no way I was going into it with cash; not that I had it, or any other options… So yeah, I did the conventional route. But it’s actually helped me out getting into it with a little  bit more equity, because about a year and change after I purchased the property I refinanced that and a couple others into a commercial mortgage… And that property actually ended up appraising for about 140k. So I already had 20% equity, it appraised for 140k, and I was able to get a line of credit as a second position, that I’ve since been using to fund other rehabs and other acquisitions. So I actually didn’t mind in the long run having a little more equity in that property.

Joe Fairless: I’d like to talk more about that in just a brief moment… But first, you were in Boston at the time, and this is in Indianapolis… Are you from Indianapolis?

Sunitha Rao: No, I have never been to Indianapolis before doing that deal… [laughs]

Joe Fairless: Really?

Sunitha Rao: Yeah…

Joe Fairless: How did you come across the deal?

Sunitha Rao: MLS.

Joe Fairless: MLS, but how do you know — were you looking at MLS’es in a bunch of cities, or what?

Sunitha Rao: No, I was focused on Indianapolis. I’m a visual person, and what I did was I built out this map of where the Trader Joe’s were in the city, where the good school districts were, where certain crimes were happening, so I  could get a visual depiction of exactly which neighborhoods I wanted to be in. Then when I looked at the MLS, I would look at it in the map view; and when something popped up in my price range in the right area, I could pull that trigger really quickly and know what I was looking at.

Joe Fairless: And how did you have access to the MLS?

Sunitha Rao: Through a broker.

Joe Fairless: Through a broker, okay. So you were working with a real estate agent… And did they give you access  to the MLS? Or were they looking–

Sunitha Rao: They would just send me the drip feeds whenever something came within my criteria, and that’s when I would use the map view.

Joe Fairless: Okay, cool. Well, I wanna talk about what you just mentioned… You refinanced that and a couple others into a commercial mortgage, and then you got money out… Plus, you got a line of credit.

Sunitha Rao: Yes.

Joe Fairless: Please elaborate on that. Next level.

Sunitha Rao: This is one of my favorite things.

Joe Fairless: Yeah, next level is what it is.

Sunitha Rao: Thank you. [laughs] So a lot of people talk about having “dead equity” in the smaller residential area, and I don’t think that’s 100% true because of what I’ve been able  to do. It also, I think, highlights the importance of not only buying for cashflow, but also buying with plenty of equity and for appreciation in good areas. I’m a firm believer in balancing the two, and that it’s possible.

So I found a lender; it was a local portfolio lender. This was one of the benefits in terms of moving to Indiana, because then I was able to network and build the relations I needed to meet these people. But I’ve found this lender who would take a minimum of five doors — it didn’t even have to be five properties, just five doors… And they would appraise it. They would have to have first-lien position. So they would have to have the primary loan under their name, but then for whatever equity was left over after whatever they loaned on, they would give a line of credit. It’s essentially like a HELOC, but it was under my LLC, so it was kind of like a business equity line of credit; I don’t know if that’s actually a name, if that’s the actual name for it…

So I went with them, I refied, and even though it was on a 20-year amortization schedule, they were able to offer a lower blended interest rate that actually brought my payments down. At this point I think it’s like $200/month lower, despite being on a shorter amortization schedule.

Then they did the appraisal. There were three properties, five doors, and they said “Okay, you have this much equity. We will lend–” I think it was 80%. I forgot if it was 75% or 80% of that, in this line of credit… Which you can basically use as a credit card. I don’t use it a lot of time, but when I need to have the cash for a BRRR, or now that I’m paying that off, if I want to acquire, I can just pull on that cash and be a cash buyer, which is so impactful, and also really helpful, because on my single W-2 income it’s not like I’m gonna have hoards of cash sitting around. I’m just trying to figure this out and basically get by and grow this as time goes on. So having just this little pile for an acquisition fund is so beneficial.

Joe Fairless:  Oh, it’s empowering, because you know you’ve got that in your toolkit, and should you choose to exercise it, then you have the ability to close on deals that you wouldn’t have… But just the confidence in knowing that you’ve got that in your backpocket, it’s gotta be awesome.

Sunitha Rao: If you told me two years ago that I would have X thousand dollars just sitting in cash, doing nothing, until I want to do something with it, I would have told you you were crazy. But there’s a  way to achieve things if you just keep plugging along.

Joe Fairless: So on that refinance where you put it all under a commercial mortgage with a portfolio lender that’s local to Indianapolis – just so I’m clear, you didn’t get any money out, just that money that you would have gotten out was a part of equity that you have a line of credit against up to 75% or 80%… Is that correct?

Sunitha Rao: That is correct. I didn’t look into options for cash-out refi, because I didn’t want one.

Joe Fairless: Why not?

Sunitha Rao: So let’s say I could cash-out refi for 200k – then I could pull that cash out and it would also be sitting there, but then regardless of whether I am using it to earn a return or not, I’m paying for that. I much preferred with where I am at this point in my investment journey  to not have to incur extra costs while I’m not using the money.

Joe Fairless: And what do you mean by you’re paying for that in extra costs?

Sunitha Rao: Because it’s essentially a loan, right? So if it’s a cash-out refi, you’re taking out that 200k, you’re taking the money from the bank and you are keeping it. And if you get to keep the money, they’re like “Sure, you can keep it, but you’re gonna be paying that in a larger loan value.” Now I only took out, let’s say, 150k, so I’m only paying for 150k until I wanna use that 50k. When I use that 50k and I can earn a return with it, then I’m like “Okay, I’ll pay the bank for it, because I’m making money off of it anyway.” But the rest of the time, I don’t have to.

Joe Fairless: Do you remember what the interest rate is?

Sunitha Rao: Yes. Initially, it was 5.5% for the primary, and I think the HELOC (or the BELOC) was 6%, but then when interest rates dropped this year, I went back to them and I brought them like a bunch of business, and we’d all become buddies, and I was like “Guys, help me out here.” They were like “Okay, let me talk to underwriting.” Because it was a portfolio lender, because they did everything in-house, a week later they came back and they were like “Okay, we’ll lower your rates.” And I didn’t have to pay a dime or do anything else.

So now I’m at 4.75% on the commercial/primary, and 4.75% on the business line of credit.

Joe Fairless: Good for you. Wow, they lowered both.

Sunitha Rao: Yeah.

Joe Fairless: I could see them lowering the line of credit rate, but you’ve got some power of persuasion to have them lower the other one… It wasn’t fixed, was it?

Sunitha Rao: Five-year balloon.

Joe Fairless: It was a five-year balloon… Fixed interest rate?

Sunitha Rao: Until the five years, and then we’ll see after that.

Joe Fairless: Yeah. So they lowered a fixed interest rate?

Sunitha Rao: Mm-hm…

Joe Fairless: Wow. [laughs]

Sunitha Rao: It pays to make [unintelligible [00:17:42].02]

Joe Fairless: That’s me clapping right here. That’s me clapping. Wow… Okay. So let’s talk about what you did right there with the lender who you had a fixed interest rate with, but yet you go to them and you somehow convince them to lower your fixed interest rate. I’m not sure the right question to ask, other than I’ll start with how did you convince them to do that?

Sunitha Rao: It’s everything else. You have to add value. If I hadn’t worked on building those relationships… I make it as easy as possible for them to work with me. They’re working with me because they make money off of me. And if they need information when they’re trying to get something to work, I am on it right away. I answer emails, I don’t make them wait, and then as time goes by, when I find people who I think will be a good fit, I’m always looking to connect people. And if I can find people who will be a good fit, then I connect them right away. Sometimes it works, sometimes it doesn’t, but I try to make sure that it will work before I meet with them, so that I don’t waste anybody’s time.

Joe Fairless: What are some examples of how you added value to them in the past, other than you business?

Sunitha Rao: I brought them other investors who were looking for similar products in the area, and who I thought would also be easy to work with and enjoyable for them to work with. It’s not enough that they just bring money if the guy’s a complete jerk. So I’m very careful with the people I connect. I like to make sure that they’ll be able to execute, and they’ll also just be generally good people.

Joe Fairless: And how many customers have you brought them?

Sunitha Rao: Quite a few. I don’t know the exact numbers, but these aren’t people who have one home or two homes. These are also portfolios of dozens of homes, or millions of dollars etc. So I bring them the gamut, and then I also work to help them on their residential space; there are other people I know who are trying to have HELOCs – I’ll connect them. So then I have an overall holistic, strong relationship with the bank.

So even if I’m like “Hey, I haven’t done anything for a minute for you, but I talked to the other lady on the residential side and I heard things are going well. She’s gotten a couple HELOCs” etc. So they want to keep working with me because I’m bringing value to them personally, but also to the bank.

Joe Fairless: It makes sense. So if you had to guess or estimate about  how many referrals you’ve sent their way… Give it your best shot, if you wouldn’t mind.

Sunitha Rao: Probably at least two dozen, at least.

Joe Fairless: And they’re highly qualified, based off of what you’re saying.

Sunitha Rao: Oh, yeah.

Joe Fairless: Say you’ve got a new referral today. Are you sending it to the same person you’ve been speaking to all along and have a relationship with, or are there a couple people that you make sure always copy it on the emails, and they see that you’re hooking them up.

Sunitha Rao: I try not to flood anyone’s inbox. So the people who will directly benefit are the ones who will have that connection.

Joe Fairless: Okay. So do you have one point of contact there?

Sunitha Rao: It depends on the need. Within that specific bank there are two points of contact, and I’ll loop in whoever is needed at that point.

Joe Fairless: Okay, so there’s two different people who you have a really strong relationship with.

Sunitha Rao: Yeah. And you also have to really know what they’re looking for and what they can offer. If someone comes to me with a cash-out refi, wanting a contact for a cash-out refi for X property, and I know someone at that bank – if one side of that bank is not gonna work, I won’t even go there, because that’s not gonna be in the investor’s best interest. It is  a warm lead for the bank, but the bank might not be able to execute on that, so why would I wanna waste their time?

So it’s about looking through and evaluating each individual with their unique needs, and figuring out how to help them, and that in turn somehow helps you… I don’t know. But it’s worked.

Joe Fairless: Oh, absolutely. I have a relationship with a local bank, and I have not once asked them  “What types of customers are you looking for, who maybe I can bring them to you?” I’ve never asked that. Never even thought to ask. And I pride myself on — I have a vision board, and on my vision board in the middle it says “The secret to living is giving.”

Sunitha Rao: I love that.

Joe Fairless: But I’ve never even thought of asking the questions that you were asking them, and then connecting those dots…

Sunitha Rao: It’s not just that either… So when I talk to the residential broker there, I’m like “Okay, so if I bring someone to you, what’s the most efficient way to get them through your process and to give you the information?” And she’ll be like “Okay, if this is the situation, just send me an email. If this is the situation, they can apply online. Here’s the link.” That also makes it more efficient for both the banker and the person trying to reach out for the loan product.

If they are larger investors, usually I connect them personally, so that both sides can build that relationship, because there’s more possibility for a long-term relationship in those situations.

Joe Fairless: Yeah, that is beautiful. That is absolutely beautiful. I will today email my point person at my local bank and ask her — in so many words; I’ll wordsmith it, but “Who can I introduce you to? What are you looking  for to help your business?” And then as a follow-up, what’s the best way to do that, so that I’m not (as  you were talking about) flooding someone’s inbox and not becoming a nuisance when I’m trying to help; I don’t want it to backfire on me.

Sunitha Rao: Exactly, exactly.

Joe Fairless: Well, taking a step back, what is your best real estate investing advice ever?

Sunitha Rao: It is to think outside the box. I’m paraphrasing a Steve Jobs quote that I saw somewhere, but it has to do with getting ahead. If you want to succeed or get ahead, look at what others are doing, but do it differently. And I think investing is no different. When we invest in real estate, it’s the same thing like buying a stock. You’re trying to identify a mispriced asset. And if you are looking at everything in the same way that everybody else is, if you’re looking in the same place that everybody else is, doing things the same way, you’re shooting yourself in the foot.

So that’s in terms of investing… But then also, looking at what others are doing who might have the same goal. My goal is financial independence, and I have a lot of friends in the FIRE arena; one of them was like “Yeah, you have to go to FinCon.” FinCon, for those who haven’t heard of it, the tagline is “Where money and media meet.” It’s the largest personal finance conference, geared towards those who put out financial content – financial advisors/websites etc. When he told me that, I was like “You’ve got to be out of your mind. I don’t have a website.” I didn’t have an Instagram at that point. I had three houses. I was like “What am I gonna do?” But I trusted that he knew what he was doing, because he was so much more successful. And I went, and it was one of the best decisions I could have made for my investing career. I met so many people, got so many ideas… It was amazing.

So don’t be afraid to do things differently than  maybe you initially saw yourself doing.

Joe Fairless: Story of your life, right? Tennis from 14 to 23, and then just making a very dramatic pivot at that point…

Sunitha Rao: Yeah, basically. Thanks for connecting those dots. I hadn’t seen that until this point.

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

Sunitha Rao: Yes, I am ready. Let’s do it.

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

Break: [00:24:46].11] to [00:25:27].00]

Joe Fairless: Okay, what deal have you lost the most amount of money on?

Sunitha Rao: I don’t think I’ve lost money on any deal just yet. However, I did just finish a BRRR. I literally refinanced three days ago, completed the refi… And that was not as successful as I had hoped, because — we all make rookie mistakes; I made rookie mistakes on this go around. I didn’t factor in holding costs, because it leased and rehabbed during the time of Covid, so we had trouble getting materials, it took longer… So I didn’t take that into account. I didn’t take in to account refinancing costs, etc. So I definitely ended up leaving more in the deal than I had wanted. I still would have done it, but that was a little bit sad for me.

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

Sunitha Rao: I am very passionate about social causes. At this point I’m a little bit formant in my activities, but in prior years I’ve been heavily involved in women’s causes, diversity and inclusion initiatives at my workplace, LGBTQ community stuff, presenting at workshops and just doing anything I can to help those who I think don’t have as strong a voice, or helping those who may not have allies. That’s really why also I’m in real estate… I really want to be involved in non-profit work as a long-term goal. I just can’t do that right now with my job in real estate.

Joe Fairless: Any non-profit in particular?

Sunitha Rao: Yes. One is the National Coalition of Domestic Violence Against Women. I am a survivor, so that is something that means very much to me. I’m also after my time in my LGBTQ [unintelligible [00:27:00].04] at my prior employer; I’m also really passionate about that. I have many friends who are in the LGBTQ community and have seen how they have suffered and been treated unfairly, and not been able to have the same experiences and opportunities as many of those who have the privilege of being straight, or in more of a majority position. So those are two areas I’m particularly passionate about.

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

Sunitha Rao: I have a website and I have an Instagram. Both go by the same moniker, GriffixPropertyGroup.com. And then my Instagram goes by that handle, @griffixpropertygroup.

Joe Fairless: Sunitha, it was a pleasure having a conversation with you and learning from you and your path, and your resourceful ways about getting deals done… Which we didn’t get into a whole lot, but I’m confident that we got into some stuff that was at least equally as valuable, which is adding value, and specific ways to add value to lenders, so that you can build that relationship and ultimately save money on what is likely your largest expense for the deal.

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

Sunitha Rao: Thanks for having me.

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JF2188: Fake Rent Checks With Jack Gibson #SituationSaturday

Jack is the President & Co-Founder of High Return Real Estate and also a returning guest from episode JF1252. Before he started into real estate, Jack started off by selling products for a multi-level marketing company, taking him 9 months to make his first commission check of $14…and after sticking it through and learning the business his business is now generating around 20 million in sales. In this episode, he goes into a sticky situation that he recently ran into by working with a company and finding out he was receiving “fake” rent checks.

Jack Gibson  Real Estate Background:

  • President & Co-Founder of High Return Real Estate
  • Returned guest from episode JF1252
  • Portfolio consists of 80 turnkey properties
  • Based in Indianapolis, IN
  • Say hi to him at: https://highreturnrealestate.com



Click here for more info on PropStream

Best Ever Tweet:

“The number one lesson I have learned is to trust, but verify” – Jack Gibson


Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, we are speaking with a repeat guest, Jack Gibson. Jack, how are you doing today?

Jack Gibson: Great, Theo. Thanks for having me back. Appreciate the opportunity.

Theo Hicks: Thanks for coming back. I’m looking forward to our conversation. So today is Saturday which means it is Situation Saturday, so we’re going to be talking about a sticky situation that Jack was in, what happened, lessons learned moving forward, so that you can apply that to your business and not get in the same situation in the future in your business. But before we get to that, let’s talk about Jack’s background. So he’s the President and Co-Founder of High Return Real Estate. Make sure you check out his first episode, which was Episode 1252, where he talks about his turnkey portfolios; right now, his portfolio consists of 60 turnkey properties. He is based in Indianapolis, Indiana, and you can say hi to him at his website, which is highreturnrealestate.com. So Jack, before we get into your sticky situation, could you tell us a little more about your background and what you’re focused on today?

Jack Gibson: Yeah, I got started in entrepreneurship when I was 19; I’m 42 now. I was going to college, living in the dorms. My parents said, “Get good grades, study hard.” They checked up on me, went to all my parent-teacher conferences in college, if that gives you any type of idea of what household I grew up in. It was great, but there was high expectations.

One day, I get this flyer while sitting in my dorm room about an opportunity to sell nutrition products in a multilevel marketing company. At first, I thought, “Man, this is probably a scam, this isn’t gonna work, how am I going to sell this?” So I just threw the flyer to the side, and then I don’t know, something hit me and I said, “Why not just take a look?” This is how opportunities are found, is that you really could just take a look and research and see. So I looked into it and I was excited. So I signed up, and that business today– it was a rough start. I think it took me nine months to get my first commission for 14 bucks. So I was selling some products and making a little bit of money along the way, but I didn’t get my first official commission check until nine months in. But from that point, I started figuring things out and that became a million-dollar business by the time I graduated college. So I’ve been doing that ever since, and now I think this year we’ll probably hit close to $20 million in sales in that operation. So it’s been amazing.

So that allowed me the opportunity with a cash flow business like that with very little expenses to be able to invest into real estate, and that’s when I started about five years ago with a turnkey property myself. So I bought from a turnkey buyer.

Theo Hicks: Perfect, thanks for sharing that. So let’s talk about your sticky situation. So I’m just gonna let you tell us what happened. Tell us your story, and then once you’re done, I will jump in with some follow up questions. The mic is yours.

Jack Gibson: Yeah, I just finished this book by Keith Cunningham, I thought it was fantastic, called The Road Less Stupid. I feel by sharing this, I’m sharing the road more stupid. But look, I’ve found that sharing transparently and sharing your successes and your failures and your mistakes and your stupid decisions and all of the bad things that happened to you along the way – that makes you more relatable. People really like that, because they probably all have their own similar story, maybe at various levels of stupidity, and have bad, sticky situations. But that original turnkey buyer that I bought from was called OceanPoint, and they sent me a mailer, and at that time, I had just done a trip into Indianapolis about three hours from my house here in Michigan, and I was looking into just buying a property that was already done and already performing. Their price to rent ratios were incredible, so I started buying up properties. I got up to 15 units with the owner-operator and I was getting really nice rent checks, over 20% returns. So naturally, we built up a really good trust, a lot of relationships with people over the last 20 years of doing business, and they know how I show up and I said, “Look, this is working for me. This is a good operation; I went in and checked it out. I’ve met him a few times, I’m getting rent checks every month,” and I started posting that on social media and just telling colleagues, friends, family, neighbors, and I sold $5 million. I referred $5 million in cash business in the first 12 months just from that.

So that was about– I don’t know how many investors maybe 20 to 30, somewhere in there, and we had about 130 units, including mine altogether. So it turns out, none of us got inspections. Maybe there was a couple of people that did and those did check out, but the vast majority of us that bought, including myself, we didn’t get any inspections. We just trusted the owner, and it turned out a lot of the rent checks were fake. So he was operating a Ponzi scheme almost, and we didn’t even realize it; none of us. So once everything crashed, and eventually that’s what happens in those types of situations; it’ll eventually crumble. They run out of money to keep paying investors, or whatever happens. Once we all realized the condition of our properties and how much they had been neglected, it was just a disaster. So everybody was looking to me to fix their situation, and I took responsibility for that. I look back now and I’m like, “Man, I ruined two years of my life taking on so much responsibility.” But that’s when you operate at a high level of integrity, you take full responsibility and just figure out what can we do? How do we get out of this?

So over the course of about the last two years, we just went back in and got contractors, fixed up all the properties, found new management, and then we found another management company after that, because the next one didn’t work… The contractors, a lot of them screwed us over again. So it’s just a really tough situation because we were left with essentially all these properties that were in bad shape, that were not performing, and we didn’t have the connections and trusted resources to be able to fix them back up and get them performing again. So it was that whole process, literally… And the bulk of it, I got done in about 24 months, and I still have my very last property today, three months later.

Theo Hicks: Wow. So Oceanpointe, how do they operate? You said that once you figured out what was going on, you got new management, you got contractors in there… So you bought the properties through Oceanpointe, and then were they also full service, they were managing it as well?

Jack Gibson: Yeah. Well, when you buy a property at a tax sale for $10,000, and then you sell it for $40,000 with a promise to do $20,000, $25,000 worth of rehab on it, then instead of doing $25,000 worth of rehab, which to get the bones of the property fixed up, which of course be the major cap-ex items – the roof, the foundation, the electrical, the plumbing, when you don’t do any of that and you just put lipstick on a pig and make it look good on pictures, and then you’re sending rent checks out, he was able to hide the lack of quality of the property. So we would look at the pictures, the pictures looked great, but what we found out later is that not one property had working plumbing or electric. Not one property was fully functional. Almost every property needed a new roof, too. So those are very expensive items, especially if you’ve already “paid for them” when you bought the property. So now you have to do that all over again. So now you have to put another 20, 30 grand into a property, and now you’re way over market value.

Theo Hicks: Yeah. Were the properties supposed to be renovated already when you bought them?

Jack Gibson: Yes.

Theo Hicks: Okay. So you were told that hey–

Jack Gibson: Well, some of them, but a lot of them were — you’re buying them pre-rehab; say you’re buying it for $20,000 and you give them $20,000 in rehab, or whatever the case. Maybe you bought it for $30,000 and you gave them $30,000 in rehab for a duplex type thing.

Theo Hicks: So probably what’s happening was this, he was saying, “Hey, I bought this for 10 grand, you buy it for $40,000, and I’ll do 30 grand renovations,” but instead of doing the renovations, he was just paying you rent checks from that 30 grand.

Jack Gibson: Exactly. You got it.

Theo Hicks: Okay. So once you figured out what was happening, you told me that it took you some time. Well first, before we get into that actually, before I ask you questions about how you found the contractors, how you found the property management company and maybe tell stories about how you had issues there too, tell me from the time you figured it out to after you talked to all the people – how did those conversations go? Did they call you? Did you call them? What did you say? How did they react?

Jack Gibson: One day I, all of a sudden, got five to ten texts or emails from people that were “Will you buy my property back, or can you help me sell this?”, and I’m like, “What happened?”, and every single one of them, their rent had dropped by about 70% to 80%. So what happened was he didn’t actually have a property management license. It had been revoked a year or two or more before. So he was operating under the management license of another broker. Well, that broker got really uncomfortable with what he was doing. In some cases, not even turning water on for tenants; that’s documented. We know that to be a fact. So now, he pulls the management away. So now you’re left with “Okay, who’s actually really paying?” So all of a sudden, it just dropped like a rock. Everybody’s messaging me and I’m like, “What just happened?” So then we realized that it hit the fan. Everything had just collapsed all of a sudden.

Theo Hicks: So you said you realized… So did you — at that point, once you started getting all these texts, did you call this guy? Did you go out to the property right away and see that they were in complete disarray? How did you actually 100% knew “Okay, this is bad”?

Jack Gibson: Well, we had some suspicions that things weren’t on the up and up, so at that time we were making plans with a new property management company to switch everybody over. So we knew that something wasn’t right, but we did not know by any stretch that it was to the level that it was at, because everybody was still getting rent checks. So if they’re still getting rent checks, we’re like, “Okay, I mean, we have no reason to believe that this isn’t real tenants paying. Why would anybody pay out fake rent?” Well, he was paying out fake rent to get people to buy more properties, to lure them in. So as long as the sales kept going, then he had enough money coming in to keep paying off the fake rents. Well, when the sales all of a sudden just dried up, his main guy stopped selling because he realized what was going on. Well now, he doesn’t have any income to pay out the rent.

So yeah, when that happened, I was calling him, texting him, but he wasn’t answering. He just went dark on everybody. We lawyered up and FBI has been to his home, and under indictment and probably got about 20 to 30 lawsuits coming at him right now. So that’s pretty extensive, the level of hot water he is in, but that didn’t do anything to make us whole. We had to figure it all out on our own.

So I went into town, got some contractors that I didn’t know, I started getting quotes from them. We had so many properties all at once that there just wasn’t a lot of time — we were under duress, so we didn’t have that much time to vet them as well as we would have liked. We’re just like “Here. You go here, you go here, you go here and let’s get these done and get these back performing again”, and that didn’t work, because they just took advantage of the situation and they didn’t really do a good quality of work. So then, finally I met up with a contractor. He’s my number one guy to this day. He is just an awesome guy. He’s a structural engineer and he went into every property that we still could salvage and he got them squared away.

Theo Hicks: How did you find this guy?

Jack Gibson: It’s funny. He bought a house on land contract from me… Because I was going to buy one of his houses that he had for sale. He had some back taxes on it and whatnot and he wanted to get that cleared. So he fixed up the house that I sold him on the land contract, did a great job, and I said, “If you ever do some jobs with me, I got plenty.” So it was about a few months and then finally came back, he’s like, “Yeah, I quit my job. They don’t appreciate me. I’d love to go to work for you.” So I just started giving them jobs left and right, and he slowly – I was very cautious this time around, but I gave them small jobs, and he did that well, and then started feeding him bigger and bigger jobs until the trust was established, and now I trust him as much as I do pretty much any human being on the planet. This guy, I can send him money and I know what I’m getting.

Theo Hicks: What about the property management? So you said that you had your suspicions before everything hit the fan, and you were already working with a management company to transition over to, but then you also mentioned that just like the contracting issues, you had issues with the next management company as well. So I’m assuming that that’s the management company you’re talking about. So maybe walk us through what happened there, how you found them, what the issues were, and how you ultimately found the management company that you’re using today.

Jack Gibson: They’ve done some acquisitions for us in terms of being able to find us houses that we could then sell, do a rehab and sell to investors. So we had a relationship with them, and they had property management experience, having their own portfolios in Indy. So they decided to start the management company to try to help keep investors happy that we needed to transition over promotion point. So they just couldn’t get the job done. I think they put a good effort in, but they were in way over their heads with the skill sets that they have organizationally. So I just had a lot of investors that just weren’t happy with the communication and the tenant placements weren’t being screened right.

So we went to a national company called Great Jones and they’ve been incredible because they have systems, they have technology, they are fully staffed, they have and so many resources, and they don’t mark up any construction. So that’s a very different approach and model compared to all the other property managers that we had interviewed in Indy. They all make– most of their money is by marking up tenant turns, marking up maintenance calls, marking up any construction costs… Which I don’t have any issue with that. That’s certainly– they’ve got to make money somehow. But with Great Jones, they have enough volume where they could just make the money off the 10% management fee and the tenant placement, and all the other stuff is just at the cost that they’re quoted. So that really puts all of our investors that we moved over there in a much better cash flow position.

Theo Hicks: If you could summarize for the listeners, what would be your top two to three to five lessons learned that you applied moving forward after going through this entire experience?

Jack Gibson: Well, I think that number one, the most important lesson is trust, but verify. So if we would have just done that and gotten these inspections, then we would have seen what kind of properties that we were dealing with. But I always tell– because I have younger guys that come to me because they know I have a pretty big real estate portfolio, and now it’s performing; it’s awesome. The rent checks that are hitting today are– it’s very exciting, but it took a while to get to that point. I tell them, “Look, you got to make sure that– there’s three major mistakes that you got to watch out for. If you don’t make these mistakes, then you should be in a really good position buying real estate.” Number one is don’t pay too much for the condition of the property. It’s okay to buy a property that needs a lot of work. You’re probably going to get your best equity position on those types of deals, but you got to make sure that you understand the market and understanding what’s out there and that you’re not overpaying… Because the stuff that we see, nine out of ten of them were passing on, because they’re just way too much, they’re not realistic for how much actual work the property really needs to get it to be a quality long-term property.

So then the second part is you got to be really careful with your contractors. There’s some great contractors out there and there’s some real shysters. So you can pay for a contracting, and then if you have to pay for all that same work a second time or even a third time – man, that’s crushing. So just having good quality contracting partners is critical, and then I think probably the third and most important thing for the long term performance of your property is the property management. They’re gonna make or break you on the cash flow with how they screen and place tenants, how they take care of their tenants, all the things that they do to get your property and keep your property performing.

So if you’re really paying attention to those three things– I mean, it’s not easy. If it were easy, everybody would do it. It’s much easier to just go buy stocks and just pray that they go up. That’s a lot easier proposition. However, I don’t like that plan because I’m not in control and I can’t control that much what’s happening, and the Board of Directors makes a decision and I just don’t have any say. So all I’m doing is just buying and praying that it goes up. Whereas with real estate, if I buy smart and get it rehabbed smart and have the right teams behind it, I’m gonna make some really nice cash flow every month and it’s going to be consistent.

Theo Hicks: Perfect. Okay Jack, is there anything else that you want to mention about this story, about your business that you haven’t talked about already before we wrap up?

Jack Gibson: Well, I think, it’d probably be good for me to at least show a little bit of positivity in terms of what we offer. Yes, we’ve made mistakes, but not only did we– I feel like, we stepped up to the plate in a big way and we took money out of our company and I took money out of my own account to help investors get funded… Some of them I gave back all of the commissions that I made when I sold the properties to the Oceanpointe, and partnered up with them. I gave all the commissions back and then some to the ones that really needed it in a bad way.

So I feel like, as far as doing business with us, we’re going to operate in the highest level of integrity. If something does go wrong, we try to stand behind it. Obviously with real estate, it’s never going to be perfect. You can do your best to put everything together the right way and it doesn’t mean you’re guaranteed, of course, any positive returns at any time, but you can put yourself in the driver’s seat where you have a really good strong chance of it…

But we learned a lot of lessons. We’ve got an awesome team and a lot of systems in place that helps us to make sure that the property is a very quality property. I mean, we put it through third-party inspections. It goes through the Great Jones test. They’re going in and they’re picking the property apart and finding all the things that need to be done prior to a tenant being placed. So there’s multiple steps of quality control to make sure that what happened with Oceanpointe never ever comes close to happening again. So those are the properties that we sell to investors. We are working very hard on scaling and creating our own portfolio, much more so now than before where we were focused more on the turnkey sales process. We still do offer turnkey properties, but we want to build up our own rent checks and our own holds. It’s shifted in terms of our focus. So if we do release a property, it’s something that we would be willing to hold for ourselves for the next ten years.

Theo Hicks: Perfect. Well Jack, I appreciate you coming on the show and being willing to share your story with all the listeners, as well as tell us your lesson. So just to quickly summarize the story… You bought turnkey properties from a person who ended up being a fraud, and once you found out that they’re a fraud after you and some of your colleagues had invested, you grinded to reverse the issues, to find contractors to resolve the issues, to find a new property management company, and then after all that is said and done, your top takeaways are one, the most important takeaway was to trust, but verify. A specific situation is applied to turnkey rentals is that make sure you’re actually doing the inspections and that not trusting the operator.

And then you also talked about the three mistakes to watch out for which was don’t pay too much for the condition of the property, which means, number one, you don’t necessarily have to buy a turnkey property because you can make a lot more money buying a property that needs a lot of work, but at the same time, just because the property needs a lot of work, it doesn’t mean that the price is still right. So make sure that you’re still buying right, understand how much money you need to invest into that deal so that you’re not overpaying. The second one was be careful with your contractors because just because you find someone who’s the cheapest option, if they don’t end up working out right, you have to pay someone else. So it’s better to pay maybe the middle of a higher option once then pay multiple people two, three, four times. And then lastly, you talked about how the property management company makes or breaks the cash flow at the deal. So again, Jack, really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we will talk to you tomorrow.

Jack Gibson: Thanks, Theo.

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JF2030 : Property Management and Wholesaling With Isaac Barrow

Isaac is the general manager of Parrot Property Group. He started in real estate in the back half of 2015 when his brother needed help managing a few rentals then slowly he started to go into wholesaling, getting his licenses in real estate, and managing bigger property groups.

Isaac Barrow Real Estate Background:


Best Ever Tweet:

“Maintain your relationship with people and eventually you’ll look up and see you have a great reputation.” – Isaac Barrow


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

Isaac Barrow: I’m doing great, how are you?

Joe Fairless: I am doing well, and glad to hear that. A little bit about Isaac – he’s the general manager of Parrot Property Group. Parrot Property Group is a family-owned business with 80 years of combined real estate and construction experience. They help investors find properties and manage properties in the Indianapolis area. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Isaac Barrow: Sure. I started in real estate in late 2015. It wasn’t at all my background, but I got started just — my brother needed somebody to manage a few rentals. He had at the time only a few rentals. I started managing those, and then it just sort of springboarded into a bunch of other different things, like wholesaling, and managing at a higher level, managing more properties, since I obviously got my real estate license… So yeah, I’ve been doing it for about four years, and now I’m doing it full-time, obviously. Full-time wholesaling, full-time management, brokering, and lots of partnerships… Yeah, that’s pretty much how it’s all come full-circle.

Joe Fairless: Okay. Let’s talk about Parrot Property Group. What do you all do exactly?

Isaac Barrow: We try to be sort of a one-stop-shop. Primarily, our focus is wholesaling. We started really jumping into that after I started… And we try to find houses for investors, we do a lot of marketing for that… So we primarily focus on wholesaling, but we’ve done management, we’ve actually done some private lending… We have our own brokerage, so we do some on-market brokering transactions as well…

So we try to do a little bit of everything, but anytime people ask what exactly we do, it’s always gonna be focused around the wholesale off market. That’s primarily what we focus on and try to hammer down on. We network with competitors, and stuff like that. So primarily wholesaling, but a lot management and brokering and stuff like that.

Joe Fairless: Tell us about your lead generation system for getting wholesale deals.

Isaac Barrow: Well, we try to canvas everything. We have done some stuff on the MLS. It’s a little harder to find a good wholesale price on the market, but we’ve done some of that. What we’ll also do – obviously, we do a lot of the direct mail marketing that a lot of people do, whether it be postcards, whether it be letters… We’ve also done email campaigns, we’ve done social media marketing… We try to do pretty much everything we can to get leads. I would say most people would probably tell you that most of the leads come from the postcards and the letters, because there’s just so much of it… There’s really an unlimited amount of direct mail marketing you can do at one time.

So direct mail marketing, social media, driving for dollars is definitely something we’ve done in the past, where we see a “For sale by owner” sign… Or sometimes we just meet people… There was a time – I think about two years ago – I met this guy in a little Deli and he told me he wanted to sell his house. We ended up buying it, and selling it, and doing pretty well on it. So I try to do a little bit of everything, but I think everybody else who does this will probably tell you that the most successful route is either skip-tracing or direct mail marketing.

Joe Fairless: Let’s talk about skip-tracing, and then we’ll go from there. For anyone who’s not familiar with skip-tracing, what is it, and then how do you implement it in your business?

Isaac Barrow: Well, skip-tracing is basically, for example — there’s all kinds of databases you can use, where if you’re looking for somebody who owns a house… Let’s say you look at a house across the street, in a  nice area, but the house is dilapidated, nobody lives there, and you wanna just find out who owns the house… The best way to go about it – you could just enter all the information you have. It’s not that hard to find out who owns the house, but you can just enter all the information you have, and some database will spit out a bunch of possible phone numbers, a bunch of possible emails… And then you could just start hitting the phones and  calling people.

Now, in a lot of cases it is kind of difficult to find a really reliable batch of data for one person who you don’t really know where they are, you don’t really know where they’re living, if they’re even alive… So it’s just a good method, and a lot of people don’t do it. I think it’s picked up in popularity, especially over the last couple of years… But it’s basically just a way to cold-calling. You can cold-call. There are all kinds of databases you can pick out, with people who own rentals, people who own stuff free and clear, and you can just call them. You can have a VA do it, you can have an assistant do it… It’s definitely something we’ve utilized, especially in the last year or two.

Joe Fairless: Where do you hire your VAs?

Isaac Barrow: Honestly, we haven’t actually done it yet. We’re looking into it; we actually haven’t had a VA at any point, so we haven’t done it. We have hired an assistant before, and she was doing a lot of that for us. That was her primary role; she would just come in and just make calls. The list was so long… You could spend a year just calling that list. A lot of people wouldn’t answer, but even if  your success rate is low, if you hit one, that’s a good deal. Obviously, just cold-calling people doesn’t cost anywhere near as much as sending out postcards, or even doing driving for dollars. You might think “Well, that doesn’t cost anything”, but it does cost a lot of time, and driving around, and spending money on gas, and all that.  So it’s just a very cost-effective way. Now, it is work, for sure, but it’s a very cost-effective way of finding new leads.

Joe Fairless: Now, you mentioned you had an assistant, so that leads me to believe that you no longer have one… Is that correct?

Isaac Barrow: Yes.

Joe Fairless: Why not, if it was working?

Isaac Barrow: Well, we’re just looking for different things. We’re probably looking for something a little more full-time. It was just one of those things where we just weren’t getting enough time, and we wanna get somebody more full-time.

Joe Fairless: Okay. So it’s not that the responsibilities are not being undertaken in the future, it’s just a different vision for what the person wanted versus what you wanted.

Isaac Barrow: Basically… The calling was going well. The whole week she would just be calling people, and it seems to be something more people are doing… Because honestly, I get calls all the time from wholesalers, saying “Hey, I saw you have this house on Main Street” or whatever. And they’ll ask “Do you wanna sell it? Are you interested in maybe seller financing?” And obviously, I’ll say no, because I’m not interested, but it definitely shows me that other people are doing it, too.

Joe Fairless: Is that all you say, is no, and that’s it, or is there something else you do?

Isaac Barrow: Sometimes I’ll ask how they got my number and they won’t really give a great answer… They’ll sort of say the same thing I’ll say, which is “I got it from a database. We’re just calling people who we saw own houses in Indianapolis.” So usually I’ll just say “No, I’m not interested”, or “No, I’m an investor too, so I’m not really interested in selling at a wholesale price.” Usually, I don’t really entertain it too much. And I also noticed that it’s kind of the same 3-4 people, so they kind of know that I’m not interested anyway… So I think I’ve been taken off some of those people’s lists already.

Joe Fairless: Okay. I was wondering if you had a way to flip that, so that you would then partner up with that wholesaler on other deals… Because you mentioned earlier that you network with other wholesalers.

Isaac Barrow: Yeah, I sure said that. I also will tell them “Hey, I’m a buyer, so put me on your list on any deals you have.” I haven’t really gotten anything from those particular ones… But yeah, I’ve definitely done a lot of networking over the last four years, with local wholesalers of varying levels of experience.

Joe Fairless: What’s a deal you’ve lost money on?

Isaac Barrow: One of the first deals I did. It was little one bed double, in a pretty marginal, suspect area. I just wanted the deal. I was so convinced that we can make money on it. We didn’t even pay much, and we didn’t lose much either, but… We paid 14k, and I should have just held strong at 11k, but we went up a little bit, and then we sold it for 12k. So it’s not like we lost a ton of money… We still had to pay broker’s fees, and all that, and we had to sit on it for a long,  long time. Longer than I thought. I thought it would move pretty quickly… But it was just a rookie mistake.

Joe Fairless: How long did it take to move?

Isaac Barrow: I wanna say it took like 3,5 months, something like that. I thought it would go in 2, 3, 4 weeks tops… Because it was an area that at that time was moving pretty good, but it was just not the best part. And again, it was a one-bed double…

Joe Fairless: What’s a double?

Isaac Barrow: Just a duplex.

Joe Fairless: Oh, a duplex. Okay. It was one side of a duplex?

Isaac Barrow: No, it was a full duplex, but there’s only one bed on–

Joe Fairless: A full duplex, $14,000?

Isaac Barrow: Yup.

Joe Fairless: For a duplex that has a one-bedroom on each of the sides?

Isaac Barrow: Yeah, on each side.

Joe Fairless: Huh. Okay.

Isaac Barrow: People are always amazed when I tell them stuff like that, what the prices are… But if you showed it to people around here, they’d be like “Oh yeah, that makes sense.” Because it’s just a one-bed double. Just not that attractive. The rent’s low, the houses are small, the resale value is pretty marginal… Best-case scenario you fix it up really nice and then you could sell it to a house-hacker for 60k… But that  house needed everything. That house probably needed to be gutted, to be honest with you. So we just didn’t negotiate that well on that deal, and we learned from that.

So that’s the one I can think of where we lost money. I think we’ve only had 2-3 where we lost 1k or 2k. Nothing crazy.

Joe Fairless: So the most you’ve lost on any deal is about 2k?

Isaac Barrow: Yeah, I think so. There’s like one or two that come to mind, but I think even on those we broke even. And those were all really cheap deals, where we bought a gutted house, pretty shortly before that deal, for $9,000 and we sold it for $9,800, and then I think after broker’s fees I think our net was $9,200, so I think we made $200. [laughs] But yeah, that double is the one that sort of sticks out as the one that we lost money on.

Joe Fairless: Any common theme among the handful that you have lost or broke even on?

Isaac Barrow: Just wanting the house a little too much, thinking “Oh, this is gonna work. I like this house. I think it’s worth it.” I  think the one thing I’ve learned from this is it’s just not about you, it’s not about what you would pay for the house if it was in good shape. You have to take a numbers perspective to it and just remove the opinion from it. You have to look at “Okay, well, what are houses actually going for? What’s a realistic way of looking at it?” I liked that house – that double that I mentioned – because I thought the rent would actually be a little bit higher, and I thought the area was coming up… But when you actually looked at the numbers, you would come to the conclusion  that even at 11k that’s probably pretty topped out for that spot.

So the common theme I would say is — I would sometimes see competitors getting in and looking at it, and I would say “Well, I wanna get it, because if competitors are offering  similar prices, then it’s probably worth more, because that’s what they’re gonna do. They’re gonna try to sell it.” So just not thinking enough about “Okay, what are the actual numbers?” And that was, like I said, very early on, and I’ve learned from that by now… But I think that was a mistake I’ve made, just looking at it too much like speculative, and sort of projecting, as opposed to looking at the actual hard data at the time, as opposed to what I feel the hard data could become. So just projecting too much.

Joe Fairless: When you look at that hard data, what are the key things that you’re looking for, and where are you finding for?

Isaac Barrow: Well, I’m an agent, so I have access to all kinds of ways to pull comps… So I’ll jsut look at comps, and if it’s a two-bed in good condition, I’ll look at two-beds in good condition. I try to look at houses that were sold in the last 360, sometimes 540 days… Because sometimes you have areas that just aren’t moving, and that could mean one of two things. That could mean either the area is just low turnover, and people buy there, and then they don’t move, so it’s a homeowner area, which is good… But it could also mean people don’t wanna buy there.

So I try to look over the last year and a half what’s happening, how have prices changed, what are houses that are really dumpy and need a lot of work done for, what are houses that are kind of rental-grade going for, and what are houses that are at least close to or at least at homeowner-grade, what are those going for… So I try to look at those things and then I’ll make an evaluation based on that.

Joe Fairless: What’s something that you’ve changed in your process as a business over the last 12 months?

Isaac Barrow: I’ve been doing this now four years… I think I need a lot less in terms of asking people “What’s your opinion of this? What’s your opinion of that?” I just have a lot more confidence now about just the knowledge perspective of things… But in terms of the actual business, I would say before I was running less of the sales side of the things, and now I’m running that pretty much by myself… So I’m running more things now from the day-to-day perspective, and my brother is still helping me out with the day-to-day big-picture strategy-type stuff. I’m doing more of the operational systems and stuff like that.

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

Isaac Barrow: My advice would probably be to just stay adaptable, don’t get set in your ways, and just look at the market and look at what that’s telling you. One example I would have of that is in the beginning, when I started doing this, the whole goal was “We’re just gonna buy rentals.” Our goal was to get 50 rentals, 100 rentals, and just go from there… And we’ll sell some of them obviously, but that was the goal. But as prices began to rise, we started doing wholesaling, and then wholesaling took off and has done really well for us; we sort of stepped away from rentals… We still have rentals, but we sold off some of them, and wholesaling has been our focus.

So just staying adaptable I think has been huge. And I guess I can’t give two snippets of advice, because that would defeat the purpose, but…

Joe Fairless: Why not? Let’s do another. One more.

Isaac Barrow: Another would be just leverage  your relationships with people. Instead of just working with people and doing these one-off type deals, try to have partnerships with people. We have a relationship with a group here where at first we were just selling houses to them here and there, and then as they began to trust us and vice-versa, we sort of launched a partnership with them. So just start partnerships and maintain your relationships with people, so you’ll look up and then eventually you’ll have a great reputation. So just making sure you’re working with people and having good rapport with everybody you work with.

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

Isaac Barrow: I am.

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

Break: [00:15:42].24] to [00:16:33].22]

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

Isaac Barrow: I recently read  a book called Traction, which is just a book about how to make your business really sustainable. I’m forgetting the author, but it’s a great book. It was a recommendation. I actually went to a meetup and talked to a  guy who has been doing business for 10-11 years, and every once in a while I just go to him for advice; he actually had the book at the meeting, so I didn’t really have to ask him anything… But I was just asking general business questions, because I’m more of  a hands-on person.

I actually asked him “When you started your business, how long did it take you before you really started delegating things?” and he just recommended the book. He gave me a few nuggets, just saying “If your goal is to stay in the business, then stay in the business. But if you wanna delegate, do that.” And he gave me the book and I’ve enjoyed reading it. I haven’t read all of it, but I’ve read most of it.

Joe Fairless: Best ever deal you’ve done?

Isaac Barrow: Best ever deal I’ve done… I would probably say — there’s a suburban house we bought not too long ago (three months ago). We bought it, and our goal was “We’re gonna buy it, we’re gonna paint it, we’re gonna put some carpet in it, clean it up a little bit and sell it.” And it sold to a fund within two days, all cash. It was the easiest deal we’ve ever done by far, because we painted it in carpet, and within two days we had to hold the house for a total of ten days, I think… And we made really good money on it. So that was definitely the best one.

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

Isaac Barrow: A mistake I’ve made on a transaction… I had an MLS deal a year ago; I had some lease addendum with a tenant, and I just totally forgot about it, until a few days before closing. I didn’t even tell the buyer, because I didn’t even remember… And the lease addendum really said nothing. It was basically just like “Oh, well if the tenant gets a job in another state, he can give notice.” And it didn’t kill the deal, but it could have been a huge mistake, because it could have killed the deal. If the buyer wasn’t cool with it, he would have been totally reasonable to just say “I don’t want any part of that.”

That’s the first one that comes to mind. I’m sure there’s some other mistakes I’ve made, but that’s the first one I can think of.

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

Isaac Barrow: You can visit our website, which is ParrotPG.com. Or if any of your listeners wanna just give me a call and talk, my phone number is 317-204-2900.

Joe Fairless: Isaac, I enjoyed our conversation, I enjoyed learning about how your position has evolved, how your role in the business has evolved, the challenges on the couple deals that you’ve lost a little bit of money or broke even, and wanting the house too much on those, and now really focusing on looking at the hard data… As well as learning about the success that you’ve had too, and the different lead generation touch points that you have, with skip-tracing, postcards, meeting people at Delis, and getting deals, and all sorts of other things.

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

Isaac Barrow: Thanks for having me on.

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JF1992: Software Developer David Lecko Creates an App to Assist in Contacting Distressed Properties

David Lecko is from Indianapolis and the CEO of Deal Machine. Deal Machine is a real estate investing app that puts you in touch with any property owner via direct mail, phone, and email. All you have to do is simply take a photo and you instantly see who owns it, then choose how you want to get in touch with the owner. David also shares how his app can help you hire drivers to help you find more properties. 

David Lecko Real Estate Background:

  • CEO Of Deal Machine –  a real estate investing app that puts you in touch with any property owner via direct mail, phone, and email. When you see a house, simply take a photo and instantly see who owns it, then choose how you want to get in touch with the owner.
  • Last year app been used to capture 4 Million Potential deals 
  • Based in Indianapolis
  • Say hi to him at https://dealmachine.com/

Best Ever Tweet:

“Obviously you don’t want to Lock up a Property that you know you can’t honor the purchase price, but if after your inspection you realize it’s going to cost more than what you thought to fix, then it’s perfectly fine to go renegotiate with the seller”- David Lecko

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

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

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


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

David Lecko: Good. How are you doing?

Joe Fairless: I am doing well, and looking forward to our conversation.

David Lecko: Me too.

Joe Fairless: A little bit about David – he is the CEO of Deal Machine, an app that enables real estate investors to find off-market deals and contact any property owner via direct mail, email and phone, with a single click. In the last year the app has been used to capture over 4 million potential deals by driving for dollar teams. Based in Indianapolis.

With that being said, do you wanna give everyone hanging out — and by the way, if you’re listening to us on the podcast, we are filming this live in Cincinnati. If you wanna hang out with us, go to BestEverMeetup.com. We meet the last Tuesday of every month. So with that being said, do you wanna give everyone here and the Best Ever listeners a little bit more about your background and your current focus?

David Lecko: Sure. So who’s read Rich Dad, Poor Dad? Awesome. That’s exactly what motivated me in 2016 to actually buy a rental property. I had always been really interested in retiring early, but I was on a career path, and then I was putting money away in a 401K type deal, but I didn’t have a lot of control over that, because the market would go up, and so would the money, and then it’d go down… So I loved how the rental properties would give you predictable cashflow.

That’s when I started figuring out “Okay, how do I buy one?” I was looking at what was available online, on the MLS or Zillow, and really nothing had numbers that worked. So if I bought it at the prices they were asking, it wasn’t gonna cashflow, because they were charging too much. Have you guys ever encountered that? Yeah, you know what I’m talking about.

So I had to take things into my own hand and find my own deal. I went to a meetup just like this in Indianapolis, where I live, and I heard them talk about driving for dollars; how many of you guys have heard of driving for dollars? Cool. If you guys have heard of that, you know it’s a fantastic list; that’s what I was told, and that’s why I started driving, looking for houses that looked rundown, so that I could contact them and ask if they wanted to sell their property.

The idea is if their property is rundown, and they need to sell it, then they either need to  dump a bunch of money into it and fix it themselves to sell it on the market, or sell it at a discount to me. So that’s what I was looking for. I was gonna provide and speed and convenience, and they were gonna provide the discount.

So I struggled with the follow-up… This is where I had the big issue. I wrote down about 40 addresses, over about 3-4 weeks, and then I actually drove by the same house twice on accident, and somebody was out there renovating it. I was like “Oh, that house looks familiar. I am pretty sure I wrote that down”, and sure enough, I had… But I hadn’t done anything with my list.

So I had this moment when I was like “Oh man, I’m totally missing out on this deal. Somebody recently bought it, and it wasn’t me”, because I hadn’t even reached out to the owner yet. So I had that follow-through issues, and that’s when I decided that I needed to make something on my phone that would allow me to look up the property and then send out a piece of mail right there on the spot, and then automatically repeat that. I had a software development background, so that weekend I developed a very basic app just for my own phone, that would do that.

Joe Fairless: And what does this app do now, that that app did not do originally?

David Lecko: The biggest difference now is I had started as a beginner, and it was all about me inputting the properties… And I realize that investors that are already doing 10 deals a year plus, they’re buying these lists, but they’re spending a lot of money sending mail to those lists… Because if you can buy a list online, every other investor can have that same list. Do you guys agree with that? You go to ListSource and your competitors are doing that, too.

So I realized that as I  was doing more deals, you’ve gotta spend a lot more money to do deals that way at scale. So now the app has a lot of tools for actually training people from Craigslist or on your team already, and onboarding them and actually getting them to add properties for  you.

So when I first started to have somebody drive for me, you get to a point where if you’ve done a few deals, you wanna scale; you’ve gotta hire somebody else to go do certain tasks. And to hire somebody else, you could hire somebody to drive for like $15/hour. So I realized when I got to a certain point I needed to leverage my time, and it was worth paying somebody to do a very basic task. Because if you’re doing one, two deals a month, your time is already worth a lot more than $15/hour. So the app gives you a lot of tools to systematize you building a team.

Joe Fairless: So user flow, or just the linear experience from “I download it, and then implementing it”, how does that experience look like?

David Lecko: For the team?

Joe Fairless: Yeah, from the team aspect.

David Lecko: I’m glad you asked. So when I first started, I looked at Craigslist, because I thought Uber drivers — Uber is recruiting on Craigslist; I’m looking for the same type of person, so I’m gonna post an ad on Craigslist to make $15/hour. So I had set up five interviews with people who were interested to drive for me for $15/hour, and then here’s what happened. Four of the interviewees never showed up, and then the fifth one did show up, and I was very energized about it… But then the next day she called me back and she said “Hey, I’m gonna move to Florida with my mom, so I’m not gonna be able to do this job.” I was like “What’s going on? I thought you guys wanted this job, and nobody’s showing  up”,  and they’re all flaking out. Then I realized that building  team of people that make $15/hour can be very challenging when you’re recruiting from Craigslist.

Basically, you can post this ad on Craigslist, you can write it yourself. We’ve got a template. But you wanna actually direct them to be able to jump through the same hoops they’re gonna have to do for their job, before you spend any time scheduling with them or talking to them.

As an example, what I started to realize was if I’m hiring them to add properties, before I  meet them or train them I want them to sign up for the app and add 20 properties that day, and I’ll pay them that day as well via Venmo. But if somebody does that, that really weeds out a lot of the riff-raff and people that don’t’ really want the job seriously, or they’re not stable enough to follow through on their commitment to meet you for an interview.

So the portal is all about — they can go to this page, learn about how you’re gonna pay them, what they’re gonna have to do, what the requirements are, like a driver’s license and insurance etc.

They can self-signup, and then they go through six training videos that you choose. We’ve produced some, but you can choose, like “I want a high level of distress, low level of distress, you could focus on these areas…” So it lets them go through this whole process that’s normally a very big pain, and then on your side, the properties kind of flow through to you, and you can approve them and have mail sent out, and you can also see where this driver is actually driving; it has route tracking, so you can see “Oh, they drove three miles today. It took them 25 minutes.” That way they’re not like “I drove an hour”, and then you can see they only drove 20 minutes.

So it gives you all that insight to what your team is doing, and if you’re got more than one driver, it’ll prevent them from overlapping, because they can see where everyone else has gone.

Joe Fairless: And why not compensate them based on results versus hourly rate?

David Lecko: So when you’re first starting out, I might suggest having your mom or a relative that is gonna be somebody you know is gonna stick and wants to help you out, and pay them something when you close the deal. However, if you recruit outside of a very small inner circle, in a lot of areas there’s realtor laws that prevent you from paying when a deal closes, because that’s too close to how a realtor would act when you’re transacting real estate, and you need  a license to do that. So that’s something you need to double-check, if you’re gonna pay based on the performance like that.

Joe Fairless: Well, I’m not talking about not performance of closing, which would be the ultimate alignment of interest; I’m talking about performance of X number of leads.

David Lecko: Oh. So I think that’s a really cool way, too. If you do that, you could pay like a dollar per lead, and then you could expect to add 15 properties an hour, for example. But what I’ve found is it makes a lot of sense to us, but for somebody who wants to drive Uber, they’d much, much, much appreciate having a very steady income that they can predict, rather than “Oh, I’m just getting a dollar every time I do this activity.

It doesn’t really feel like a job to them, and they won’t treat it as such. If you want them to stick around and do this regularly, they’re gonna have a lot better chance of sticking if you do the hourly. When you do that though, you still wanna set a goal, an expectation of “Hey, I need you to add at least 12-15 properties during each one of these hours.”

Joe Fairless: Is that the average amount that they would do?

David Lecko: Good question. It totally depends on what neighborhood you’re looking at. You could go in a neighborhood and add 70 properties in an hour if literally everything is terrible-looking. It just depends on if that’s where you personally wanna look. When I’m buying a rental, I would prefer to go to an area that is not totally in bad shape, but one where the neighborhood was built in the ’60s and maybe wasn’t updated yet, so you’re gonna have every third house that’s gonna be rough, but others are pretty well kept.

Joe Fairless: So now from the real estate investor’s perspective, what’s that experience from start to finish, in terms of all the different steps that they take?

David Lecko: Sure. If you’re just starting out, there’s a 14-day trial. You can add unlimited properties, you can add your own house, sending yourself a postcard from there… And if you wanna start adding team members, that’s a whole other module. But if you have those team members, you’re gonna see when they’re self-signing up, like I talked about, you’re gonna see where they’ve driven, and you’re gonna see those properties coming in, so that you can actually approve those. None of the drivers are spending are spending your money without you approving “Yeah, you’re adding the right kind of properties.”

Joe Fairless: And what are the different revenue streams for you as the developer?

David Lecko: So the app has a monthly fee; it’s $49/month. The mail pieces – we’ve got seven types, and they range from 49 cents to $1,50. The $1,50 is actually a piece that’s written by hand, with a pen, that we send on your behalf, so you can choose what mail piece you’d like to send.

Joe Fairless: Any profit sharing on the hourly rates for the drivers?

David Lecko: Good question. We provide the technology, but you would actually hire the drivers directly yourself, through the technology.

Joe Fairless: What’s a feature that you all tried in the app – and I’m assuming there is one; if there’s not, that’s fine –  and it’s no longer there because it didn’t test well, for whatever reason?

David Lecko: That’s a good question. I will say we started with the app being free, and then the mail pieces were $2. It’s pretty pricey for a mail piece, but if you’re just doing one-off, it’s like “Oh, that’ll probably save me money.” But we kind of switched the model and lowered the mail cost as much as possible, and people use it a lot better. So that’s a major thing that we definitely changed.

Joe Fairless: What’s been the biggest challenge?

David Lecko: The biggest challenge that I feel really passionate about is that people actually quit too early. When they’re first starting out, they might try adding 10 properties, and they’ll be like “Oh, this didn’t work for me.” But really, you need to add 200+ properties.

A story I always like to tell is when you’re starting a business – for me, I’ve started the first version of deal machine in 2016, and I actually worked a whole year and a half before it was earning any money for me to pay myself a salary. So when I see a lot of people getting started with something, I feel like they don’t have a proper expectation of how much work it’ll take… And the payoff is there, but they get discouraged and they move on to something else too quickly. So they’re kind of chasing their tail, because they’re moving on from one thing to the next before they fully understand that it’s a numbers game, and it takes 200+ properties to find that are rundown, and contact them several times over the 2-3 months, before you decide that “Oh, this is not for you.”

Joe Fairless: Is there a feature on that, is there a feature that you follow-up mail campaigns to the same list?

David Lecko: Yeah. You can repeat the same thing, or you can have it send a different message the second time. But I think when you’re just starting out, just keep it really simple and just keep repeating the same one. It actually features the picture of the house on it, so it’s already gonna stick out compared to any other mail they’re receiving from any other investors like that.

Joe Fairless: And you have different options, for postcards vs. put in an envelope, and then a different variety of those?

David Lecko: Yeah, there’s the postcards that feature the picture, and people look at that, and they’re like “Oh, they were actually in front of my house. You can tell.”

Joe Fairless: Is that pulled from the county website, or the picture that the driver takes?

David Lecko: The driver takes it, with the app. So it looks a lot more clear and personal than a Google Street View picture, for example. So what was the question?

Joe Fairless: You answered it.

David Lecko: Okay, good.

Joe Fairless: For an investor who wants to scale quicker, and does not want to work directly with the drivers, is there a concierge option, where someone on your team handles the drivers stuff? The investor simply comes to you and says “Hey, I have a budget of X amount. Please handle the drivers stuff. I want this area of distressed properties identified and then mailed to.”

David Lecko: Yeah, if you’re interested in that — it’s not on our pricing page, but if you’re interested in that, you should ask for it in the chat and we’ll do a one-on-one meeting with you and discover  your goals and manage the drivers for you.

Joe Fairless: What markets are you all in?

David Lecko: Well, it actually works across the United States. The four million properties that were added – that was across the whole United States. But I live in Indianapolis. It works everywhere.

Joe Fairless: I assumed it worked everywhere. I also imagine three years into it — and this is my guess, but maybe it’s a wrong assumption… That you all have a heavy concentration, it’s top-heavy on certain top 10% markets, or three markets weigh heavily in that four million. Is that accurate or not?

David Lecko: Yeah. I would say it just naturally follows where people are heavily investing, so markets like Phoenix, and Houston. Those are pretty heavy for us. But there’s a whole lot of people doing real estate investing, specifically wholesaling there. That’s the primary person that uses the app… So we kind of follow those trends as well.

Joe Fairless: Got it. You were a software developer before?

David Lecko: Yeah, I was.

Joe Fairless: Okay. And usually I ask what skills did you acquire there that apply to what you’re doing, but that’s a dumb question in this case… [laughter] Well, you can answer it…

David Lecko: I think a lot of people are interested in developing just an app in general; they’re not familiar with the process… So I was gonna share that developing an app is very similar to actually developing a house. For an application you’ve got the database, it stores all the members’ data, all the users’ data; you’ve got the user interface, which is what you see, and then you’ve got  a layer that connects the two. And that’s called an API.

So a house – you lay a foundation and there’s like an expert for that. You frame it, and there’s a carpenter for that. And then you put the roof on, and there’s an expert for that, too. Same is true if you’re developing an app – you would need three different developers that had expertise in each of those levels.

I just thought I’d throw that in there, because people typically ask me questions about software.

Joe Fairless: So on the investing front, your own investing, what have you purchased?

David Lecko: The best story is I bought this $4,000 house, and I didn’t have the money to do the full renovation, so I put $60,000 on these credit cards. I got these no-interest credit cards and I maxed them out. It was scary. And I actually got sucked into this position where I thought “As soon as I renovate this house, I’ll be able to refinance it out for 70k or 100k, and I’ll be good. I’m gonna pay off those credit cards.” But the problem was this house was pretty unique; it was half the square footage of anything else on the block, and it was the nicest house on the block now, since I came and fixed it up… So no banks that I could find would give me a loan, because there’s no comps. But it’s rented right now for $1,800/month, and I’m only 70k into it. So it’s way better than a  traditional rental would even be.

Joe Fairless: Not factoring the interest rates from the credit cards.

David Lecko: Well, those were zero. But eventually they kicked in, yeah… So what I ended up doing was a friend from Chicago had another friend that’s like a stock trader, or something; he does something like that. And apparently, those guys have a lot of money, so he lent me the money to pay off my credit cards. That is how I handled not paying the high interest on those… Because that would have been insane.

And then luckily, the business had kind of taken off, to where I did have enough cash to pay him back in time, so like “Phew!” I don’t know what I would have done, but it could have been bad.

Joe Fairless: What were the terms?

David Lecko: The terms was he would just get the house if I didn’t pay him back.

Joe Fairless: Zero percent interest?

David Lecko: I forget… I just remember it was four months…

Joe Fairless: Okay, a very short-term loan.

David Lecko: Yeah. It was supposed to be a bridge loan, because I was trying to get that bank financing… So that was another reason. Before they didn’t give me comps, they actually were like “Hey, your credit score is pretty bad.” And that was because I was utilizing all those credit cards. So the first step I was doing was “Alright, I’ve gotta pay off these credit cards so I can get a mortgage in the first place.” So that’s why I did the bridge loan. Then I found out, “Oh, they won’t have a comp for me.” Anyway… So I definitely learned a lot on that first deal… But it’s still performing well. Yeah, I can’t get  a loan on it…

Joe Fairless: How did you find the $4,000 house?

David Lecko: It had a tarp on the roof, and I took a picture of it and added it to the Deal Machine app, and I actually got a call from him on the 7th postcard. So it was like 5-7 months later. And he called me — it was the first deal I’d ever done this way, and it was so easy, because he was just like “Hey, I’ve got this postcard thing and I need to sell my house.” And I was like “Okay. Do you wanna meet up?” And he was like “Yes.”

I came over that night, and I was like “Hey, I’m gonna take a bunch of pictures and then I’ll give you an offer two days later”, mainly because I didn’t know what to offer. I was gonna offer him $10,000, and then I don’t know why – I did some numbers, and I was like “Every other  house around here is much larger, and since yours is so much smaller, dollar per square foot I need to offer $4,700.” So I showed him that math, and then he accepted it a day later. So it was actually a really easy transaction, especially since I didn’t know what I was doing. [laughter]

Joe Fairless: You said that was the seventh postcard he received in approximately 5-7 months…

David Lecko: Right.

Joe Fairless: So we’ll call it seven months… Is  that what you all have found, one follow-up per month is the most effective, or is it a different frequency than that?

David Lecko: We recommend doing every 21 days, actually. So it’s a little bit sooner than every month. We want to make sure everyone is following up at least three times. We just want people to get out of the mindset of “Oh, I sent one and they didn’t call me back.” As this example showed me, it was all about timing for him, because his house has been in bad shape for years. That was obvious.

So he didn’t need to sell it until a life event happened where he then needed to sell it. And for him – he had had surgery, and he couldn’t mow his grass anymore. In his words, “I couldn’t keep up with the maintenance of the property.” He didn’t have high standards for that, but he couldn’t do anything now, so… He was moving out to an assisted living place where they were gonna take close care of him, so that’s when he decided he needed to sell it. So it’s a lot about timing. It’s like a timing and numbers game, as well as identifying the right distressed house.

Joe Fairless: And 21 days, you said… Why not 20, why not 50, why not 12? How did that come about?

David Lecko: At the time it wasn’t super-scientific, because I was just reading articles about sales follow-ups in general, and… I had that experience of within 3-4 weeks not sending a postcard and then somebody buying it in that period. So I was like “I need to strike the right balance of being pretty timely, so that I’m always kind of there. But I wanna watch my budget too, so I’m not gonna send it every two weeks.”

Now we say if you do 22 days, it’ll arrive on a different day of the week every time. I don’t really know if that’s important. It’s just kind of like a nerdy thing.

Joe Fairless: Yeah. Let’s say it’s seven cycles of 21 days.

David Lecko: Yeah.

Joe Fairless: Within each cycle, does the postcard change at all, or is it the same postcard every time?

David Lecko: I recommend sending the same one. The default that we send – it just says “Is this your property?” There’s a photo of the property, and it says “If you’re interested in selling, I can close quickly and with cash. Please give me a call or text. Have a great day.” So it’s simple enough that it just works. There’s no magic postcard out there… And if you’ve got a pretty decent message, I think it’s okay to send the same one.

Those guys who are doing tend deals a year plus – they get a little bit more sophisticated sometimes when they’ve mapped out “This is the sequence that we wanna use.” So you do have that option as well to switch it up.

Joe Fairless: What’s a deal you’ve lost money on?

David Lecko: Let’s see… I will say I offered on a property that I was planning on buying and renovating myself, and it was the second one, after this $4,000 one. And I actually shopped it around to some of the other wholesalers that I knew actually take down properties, and they were all 10k below what I had it locked up as… So in order to be safe myself, I was just like “I need to lower this down, because the cigarette smoke damage in the walls is actually gonna require us to replace that drywall, to get rid of the smell… So that’s gonna cost an additional 10k.” And that seller did actually agree, “Let’s get this deal done. I still wanna do the deal, I just have to do it a little bit lower.”

Obviously, you don’t wanna purposefully lock up a property that you know you can’t honor that purchase price, but when it’s a real scenario like it was for me, that I did a little bit more inspection and realized “Hey, this is gonna cost more than I thought to fix”, then I think it’s perfectly fine to go renegotiate with that seller. So we didn’t lose money on it, because we had gotten that lower price.

Joe Fairless: Last question and then we’ll open it up to everyone… Best real estate investing advice ever?

David Lecko: I think that whatever you choose, you should be consistent. You don’t need to blindly do that thing forever, but I think you should talk to an expert who’s had a lot of success doing that thing. And if it’s driving for dollars, or if it is doing cold-calling from the absentee owner list, I would encourage you to find somebody who’s had the success that you want in that area, and then get an idea for “How many calls do I actually have to make?” And then be really consistent, even above and beyond that, a bit… Because you might be newer at it, so you’re gonna have a little bit more work to put in as you’re figuring things out.

I would just say the  best ever advice is whatever you choose, be consistent and have the right expectations.

Joe Fairless: Amen! Alright, questions.

Audience Member: For all the deals that the drivers are gathering that customers don’t act on – what do you do with those?

David Lecko: Well, I personally  don’t do anything. We don’t do anything.

Audience Member: Could you monetize those, or could those be bought by other customers?

David Lecko: Great question. We’ve just totally stayed away from doing anything quite like that, mainly because we just want everybody to be super-clear that their leads that they’re putting in the system are totally there, and nobody else is looking at those in any way.

But it’d be really interesting if somebody decided that they wanted to sell those leads to somebody else, I think.

Audience Member: [unintelligible [00:25:41].01]

David Lecko: It’s a huge number, and I’ll tell you what – most people aren’t doing the follow-ups they should be. That’s the differentiator between somebody who’s successful and not. So – great question; we just haven’t explored that yet.

Audience Member: [unintelligible [00:26:00].00]

David Lecko: It’s a really good question. We provide the technology for you to input the leads and have the team inputting leads, and then actually sending out marketing. We don’t have anything official to offer as far as like a call script or whatnot. There’s a lot more to it than what we currently provide, but it’s a good thing to point out.

Audience Member: Do you have financial calculators in there at all?

David Lecko: We don’t. There’s other apps that you can use for that. Deal Machine is really focused on the scaling a driving team for your business.

Joe Fairless: Literally and figuratively… Do you have one?

Audience Member: [unintelligible [00:26:50].18] I’m curious, with your app, do you know when the deal goes through? And if you do know that, what’s the follow-up like? Is it like 500 properties equals one deal, or…? Do you know that?

David Lecko: Great question. So from all the success stories that we hear about, there’s tons that we just don’t hear about. We always give the advice that it takes at least 200 rundown properties, and you mail three times each. And we always say “at least.” And a lot of people will have random deals that happen before that point, and there’s certainly stuff that happens after that… But that’s kind of what we offer, to really help you to at least have an expectation of “I need to do this much work at least, in order to try this out, to get a deal>”

Joe Fairless: What are those numbers based on?

David Lecko: They’re based on all the anecdotal testimonials and reviews that we’ve done over the last couple of years from all these investors that are using our platform. So it’s the ones we hear about, that we’ve kind of just boiled that down to like an easily rememberable number of what you should try to be hitting.

Audience Member: Great presentation, by the way. It was really informative.

David Lecko: Thank you.

Audience Member: As far as capturing the data – that’s always interesting to me, because I have a software background, too.

David Lecko: Cool!

Audience Member: It was really interesting. But is that an opportunity for you guys to capture some metrics? For example, if I close a deal, and let’s say I had 200 properties I”ve inputted in this particular app, and I’ve signified you guys that “Yes, this is the transaction that I closed”, I’m assuming that would probably be helpful for you guys as well, right?

David Lecko: Yeah. So actually, there is a place where you can mark the deal as like a deal that you actually closed… And then there’s a screen that’s like “What was your exit strategy?” And you can put in what your profit was. And that’s really helpful to you too, because we’ll show you on the analytics graph how many dollars did you spend on the Deal Machine or doing this marketing method, versus what’s your profit been. So it’s really powerful to see that graph for the investor side. That’s the closest thing to what you’re suggesting that we’ve got. It’s good to see those results. If that’s not there, [unintelligible [00:28:51].03]

Audience Member: This is very cool stuff. This obviously works for residential, but how about apartments? Has anyone used it for apartment properties, or commercial?

David Lecko: Yeah, it actually works with anything that has an address. So if a building is owned by an entity or a person, it’s gonna actually work the same way it would for a single-family home. So you could most definitely use that.

Audience Member: My question is about campaigns. I know you talk about just keeping it consistent throughout… Do you have a divide between certain subdivisions of properties? Like, “This one’s a much nicer subdivision. I wanna split this kind of campaign/mailer for this subdivision, and have a different one where it’s a really different setup of mailing and all that stuff”?

David Lecko: Yeah. Actually, what we have – they’re called tags; so you could tag all these properties as a certain campaign or a certain area, and then that’s how you could actually filter out the types of deals.

Audience Member: Do you also provide other information, like email addresses, or telephone numbers at all?

David Lecko: There’s an instant skip tracing in the app that I didn’t mention. It’s a separate button. Instead of sending a mailer, you could get their phone number, email, and a list of other addresses where they’ve registered the utilities.

Audience Member: Is that kind of an add-on cost, or…?

David Lecko: It is, just like sending a piece of postcard is. Because it’s just a cost for us to be able to provide that, for a look-up for you.

Audience Member: Does the postcard have your return address on it?

David Lecko: It does. It has your return address, that’s right.

Audience Member: And what do you do if it gets returned? If the postcard comes back.

David Lecko: Yeah, skip tracing and calling. That’s the best thing to do. Here’s something I didn’t realize… I just joined this mastermind called Collective Genius, and a lot of people there are doing 50 deals per year plus… And that looks like probably 20k to 40k/month on marketing spent for those guys. So I sat down with this guy named Martin, and he was telling me if he gets a postcard returned, he’s doing so many deals he doesn’t take the extra time to dig deeper. So all these really big real estate investors in your city – they’re doing too much scale in order to properly research returned mail.

So if you’re not at that level, you can compete with the really big investors by taking those opportunities such as return mail, and actually using your time to investigate that a little bit further, because they’re not doing that. They’re so busy doing things at scale… You know what I mean? Does that answer your question?

Audience Member: Oh, absolutely.

David Lecko: The return mail is gold.

Audience Member: I have two questions… Can I cheat? Okay… First – quick question. I am a realtor, so whenever I solicit someone to buy their property, I have to disclose that I’m a realtor.

David Lecko: Okay.

Audience Member: Do your mailers take that into account?

David Lecko: We actually created a disclosure section that’s smaller print and at the bottom, that you can put in wherever you want. So you can put “I’m a realtor number XYZ” if that’s something that you’ve gotta do.

Audience Member: Okay. Awesome. Let’s say I’m amateur, I’m new to real estate, I wanna find a deal… I’m willing to spend about $100-$200/month on marketing, and I have some time that I can go looking, driving for dollars. How do you recommend that I spend my time and my $100 to $200/month? Give me some specifics.

David Lecko: Man, I think you need a budget of $700 total to get a deal, at a minimum. So if your budget is like $200/month, I would drive myself and I would try to add 200 properties as soon as possible, and repeat those mailers over the course of 2-3 months. That would cost you about $100 to $200/month. Does that make sense?

Audience Member: Yeah.

David Lecko: So you could do it.

Audience Member: In your app, let’s say you have 200 properties in there. You do some skip tracing, you get some emails… Does it have the ability to export all that information?

David Lecko: Yes, sir. Our philosophy is you went out there and got those leads, so any piece of data like that that’s in the system is yours… So you could definitely export that. We’ve got several different options for doing that, like different formats… So you can do whatever you want with it. If you’ve got an existing CRM, you can actually connect it to Deal Machine as well, so that when you or your team inputs a property, it automatically forwards to your CRM, and then you might have a follow-up sequence built in there already, for example.

Audience Member: What CRMs does it interface to?

David Lecko: We actually have a Zapier integration. If you don’t know what that is, it connects to like 1,000+ apps online. So if you guys use Podio – a real popular one – it definitely has a Zapier integration, too. There’s just too many CRMs to name, but that’s our approach right now – we provide the connection to Zapier, and that thing can send it all over the place.

Joe Fairless: We’ll do three more questions.

Audience Member: [unintelligible [00:33:48].18]

David Lecko: Yeah. I actually don’t say anything negative at all… But it’s got the picture, so… [laughter]

Audience Member: [unintelligible [00:34:10].17]

David Lecko: So the picture is just factual about what their house looks like, and all I’m saying is “Is this your property? If you wanna sell it, please call me. I can close quickly and with cash.” So it’s all positive focus, and then the picture is factual about what it looks like. So if they’re out of state, they might not know what their house looks like. They might not know it’s in such bad condition. So it could be an eye-opener for them to see that photo. And if they live there – again, you’re not saying “Your house is ugly”, you’re not saying “I’m calling you because your house looks really bad.” You’re just saying “I really like your house. Here it is… I wanna buy it.”

Audience Member: Or “I buy houses in this area.”

David Lecko: Right, yeah, or “I buy houses in this area.”

Joe Fairless: And they can customize their message, right?

David Lecko: You can customize it. We’ve got the default in there that works pretty well, but you can definitely customize it yourself if you wanna say something unique.

Joe Fairless: Two more.

Audience Member: How accurate is the data, the API? …because the auditor’s website – you know, it’s kind of like “junk in, junk out…”?

David Lecko: Yeah. We get the data from the county, so it’s gonna be as accurate as your auditor is. In Indianapolis when I’ve bought a house, it takes up to a month-and-a-half for that to update sometimes… So I would expect the same when you’re using the Deal Machine app. It might be a little bit delayed like that.

Audience Member: I’ve worked at customer success in a software company…

David Lecko: Oh, amazing.

Audience Member: Yeah. Do you think that there might be a pricing option where you could say “Verified by natural human” and then you can sell that dataset for  a higher price? Because it’s not that it’s super inaccurate, but it’s verified first. Someone went and they either drove to the house, or they sent a mailer first… It seems like a good feature to have.

David Lecko: That’s interesting, yeah. It’s definitely interesting. We don’t offer that currently, but…

Audience Member: I’ll send you an invoice. [laughter]

Joe Fairless: Last one.

Audience Member: Do you have an idea percentage-wise in your app, based on research on follow-up,  of how many are primary residence abandonment, versus secondarily-owned? Is there an alternative to find those?

David Lecko: Let me back up and say – when you say primary residence abandonment, do you mean like you lived in Florida, there’s a hurricane that destroyed your house, and then you fled, but it’s still registered as owner-occupied? Is that what you mean?

Audience Member: Not exactly… Like, you go buy something — like, I went to buy something the other day and the papers are on the windows… Okay, great. So not necessarily an out-of-state owner there, right?

David Lecko: Okay. When you say papers, you mean like notices?

Audience Member: I guess my example would be the mailer would go to that residence, because that’s what’s on the auditor’s site… Versus it’s kind of rundown, it may be going into foreclosure…

David Lecko: Okay. So I think the real important thing to understand is if it is an absentee owner, the mailpiece is gonna go to where the owner lives, not the house. And if it’s registered as owner-occupied, but it’s totally vacant – so where’s the owner? …then that’s when I would use the skip tracing in order to call them, email them, and then get a list of other addresses where they’ve registered their utilities… Because if they’ve moved into an apartment, they’ve got utilities there and that will show there. So you can send mail to that address too, in that case.

And then I’ll tag on a personal note… I know that a lot of people talk about the absentee owners are the best leads. But when you’re looking for distressed properties, the owner-occupied ones are just as good leads, that a lot of people ignore. And the reason is if their house – like in my case – is in bad shape, at some point they’re probably gonna need to sell that, and they’re not gonna wanna put the money in to fix it… So don’t ignore the owner-occupied ones either.

Joe Fairless: David, thank you so much.

David Lecko: Yeah, thank you. It was a pleasure to be here.

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JF1668: Buy & Hold Investor Got His Start By Wholesaling with Ryan Dossey

Ryan and his team were focused on wholesaling and then flipping, and then got into buy and hold investments. He’s built a good sized real estate business and is here today to tell us how he’s been able to have great success. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“One of our acquisition guys gets 10-12% of the commission on something we sell” – Ryan Dossey


Ryan Dossey Real Estate Background:


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


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

Ryan Dossey: Doing good, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Ryan – he is a buy and hold investor with assets in Indianapolis, Louisville and St. Louis. He’s also the founder of Call Porter and Ballpoint Marketing. He closed on 73 units last year using the BRRRR method, and he’s based in Indianapolis, Indiana. With that being said, Ryan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ryan Dossey: Yeah, absolutely. I’ve been doing real estate for about four years now. I started out like most folks with wholesaling, did  a yellow letter campaign, got lucky on our first one… From there, we kind of transitioned into some other remodeling stuff; I did a couple and realized I really didn’t like it, and then in 2017, towards the end of the year, we transitioned more over towards buy and hold.

Currently, we’re actually now focusing on two units and up, reason being eventually we wanna push our team the multifamily direction, so we’re basically not letting them do single-families after this quarter, then duplexes, triplexes, and eventually just five on up.

It’s been working really well for us, because most of the single-families we were keeping; they’re like your hedge-fund-esque, “everybody wants” kind of deals… So we’ve started to sell those off and just start to focus more of our marketing efforts towards the small multifamilies.

Joe Fairless: You started wholesaling, then remodeling, and then in 2017 focus was on buy and hold…

Ryan Dossey: Yup.

Joe Fairless: In my mind, wholesaling and remodeling – that is a way to earn income, whereas buy and hold, you earn passive income, but you need income to buy those properties; so in my mind, those are almost like two separate things. One, you’re making money, and then second is buy and hold as you’re making money, but you have to put money upfront.

So did you reach a tipping point with cash reserves, where it’s like “Okay, now we can just focus on buy and holds” or you earning income other ways to acquire more buy and holds?

Ryan Dossey: Good question. Wholesale was not really a  process I super-enjoyed; the typical wholesale anyway, of throw it under contract and hope to find a buyer. So we actually ended up partnering up with a group that’s called Stewardship Properties. They’ve got a pretty large pool of private money raised, so we’re using private funding paying cash, and then we’re using some wholesaling and some flipping to cover things like operating costs as we go. Last year alone we had like $97,000 in holding costs just on our BRRRR deals, during construction, prior to lease-up.

Joe Fairless: Okay. I think you explained that very clearly, but I think I’d still like clarification, just for my own purposes…

Ryan Dossey: Sure.

Joe Fairless: So you are partnering with a group that is bringing private money to your buy and holds, and then – is the business plan for you to improve those properties and refinance them out?

Ryan Dossey: Correct, yeah. All of these properties are like A and B-class. Our typical formula – we go 75% minus repairs, minus an additional 5k to help cover any surprises, holding costs, any of that kind of stuff. We’re targeting a minimum of a 1.2% rent-to-cost ration. So your typical BRRRR deals.

Joe Fairless: Okay. So your macro-level business plan is you find a property that has equity in it and that you can repair, so that you can cash out the private funding person or group, and hold on to that property in the long-run and make money off of the rent.

Ryan Dossey: Correct, yeah. Ultimately, we use the analogy that we’re flipping capital, not flipping properties. Most of our private money is about 8% interest-only. We do a two-year renewable term. Most of our banks have a 6 to 12-month seasoning. We’re working with one right now that actually has no seasoning requirements at all, so we’re basically getting the properties turned, leased, and then passing them over to our bank.

Joe Fairless: Okay. Is it  a local community bank/credit union?

Ryan Dossey: Not a credit union, but kind of a local — they’re in a couple markets, but they’re kind of a smaller community bank.

Joe Fairless: What bank is it ?

Ryan Dossey: The banks is called Busey.

Joe Fairless: Busey… Okay.

Ryan Dossey: Yeah. They’re in Indiana, Central Illinois and St. Louis.

Joe Fairless: And you’re based in Indianapolis, but you have properties in a couple other cities… How did you get into those other cities?

Ryan Dossey: I’m originally from St. Louis. I lived there for about ten years before I came out to Indi. I’ve only been out in Indi for a little over three years now.

Joe Fairless: What brought you to Indianapolis?

Ryan Dossey: My wife, actually. She is going to school, she is getting her doctorate in Psychology.

Joe Fairless: Okay.

Ryan Dossey: Yeah, so that’s actually where I originally started with real estate. My first year I think we bought two rentals that I ended up selling my interest in to a partner there where I moved out here… So we basically just have ground partners that are equity owners in our portfolios in both of those markets. So I support them from here with marketing, systems, our admin does some of their stuff for them, and then I’m out there probably about once a quarter.

Joe Fairless: What’s been a challenge of your as you’ve evolved your approach from wholesaling to remodeling to now flipping capital, as you call it?

Ryan Dossey: Good question. I think most of our challenges have people-related, just making sure we have the right people in the right places, and kind of dealing with some of those interpersonal, if you have an equity partner and holding them accountable to things, and really kind of making sure everybody’s working towards the same common goal.

Joe Fairless: It’s interesting, because you’re doing the BRRRR method at scale, and I traditionally think of it as a…

Ryan Dossey: Onesie-twosie?

Joe Fairless: Yeah. It’s interesting to hear that. So one challenge that you’ve overcome is the seasoning period for financing, and you’re using Busey Bank for that.

Ryan Dossey: We’re using them in one market. We’ve got other smaller banks, one in St. Louis and one in Kentucky, and actually our bank in Kentucky is like no seasoning, they’ll go up to 80%, and they’re even potentially interested in funding stuff in Indianapolis for us. So it’s kind of a little bit of a white whale there.

Joe Fairless: So one challenge was seasoning, you’ve resolved that; another, I imagine, is finding the opportunities to do this with… So how are you finding the opportunities?

Ryan Dossey: Really inventory sourcing is not an issue for us. We have the number one ranking “we buy houses” site here in Indianapolis, just organically through Google. We do 10k to 15k pieces of mail a month, just here in Indianapolis [unintelligible [00:09:01].11] calls, we have an acquisitions manager that’ll actually book appointments; he goes and runs the calls, makes the offers… So really the sourcing inventory hasn’t been that big of a struggle for us, honestly.

Joe Fairless: “We buy houses” – is that something you had to pay to participate in?

Ryan Dossey: No, no… When I say “We buy houses”, I’m just talking the keyword. If you google “we buy houses”, which is what most sellers are looking for, we come up before the franchises.

Joe Fairless: [laughs] Nice. How did you do that?

Ryan Dossey: …thanks to whoever won that lawsuit. [laughter] I think that was Brad Chandler. [laughs]

Joe Fairless: I didn’t know that someone sued and was like “Hey, you can’t own WeBuyHouses”, and they won.

Ryan Dossey: Yeah, they did. It was a pretty big, pretty expensive court case. It had to do with trademark infringement stuff, and Brad ended up winning.

Joe Fairless: Oh, okay. And how did you get to be number one?

Ryan Dossey: I wish I had a “do this, do that” for you. There was a guy that I used to work with back in my day job who reached out to me when I started in real estate investing. He was like, “Hey, I’m doing this SEO thing. I’d like to try it for an investor.” And he quoted me like 2k a month. At the time, I was like “That’s insane. There’s no way.” But then I started to think about. I mean, if I get one deal a year, it’s more than paid for itself… So we started paying him; we got to month three, still nothing. Month four, we started to see some movement, and then by month six we were actually first for most of our keywords. I think I’m first for like 18 or 19 different cities, kind of in my farm area, in the nine counties I’m in now.

Joe Fairless: That’s great. So you hire someone who is focused on that…

Ryan Dossey: Someone way smarter than me. [laughs]

Joe Fairless: Yeah, yeah. You know what the lifetime value of a customer is for you, and then as long as that math works for what you make on a deal, then you can invest in it and see how it goes.

Ryan Dossey: Yeah. And we actually brought him in as a partner in a different venture, so he only works on my stuff now. We had a couple friends try him out, and he got some friends of mine the first or second in Miami in like three months… So I was like, “Hey, this guy knows what he’s doing… Let’s lock him down.” [laughs]

Joe Fairless: I get that. You’ve talked about how you got inventory, we’ve talked about the loan aspect, with the seasoning and getting the right financing… What else would a Best Ever listener need to know in order to scale from, as you said, a onesie-twosie BRRRR approach, to buying 70+ BRRRRs a year?

Ryan Dossey: So it’s definitely cash-intensive, right? You can start to do the math. We’re dropping 10k-15k pieces of mail a month; we’ve got two full-time acquisitions guys, we’ve got a full-time leasing/admin person, and that’s just here in Indianapolis. So it’s one of those — you’re gonna need to have some source of capital. Whether that’s private funding, whether that’s money you’ve saved up, or if it’s buying and selling wholesale properties. That’s actually how I found my Kentucky partner; he hit me up through Instagram, and — I’m sure you get this stuff all the time… “Hey, teach me how to invest.” And I was like, “You know what, I’ve got some time today.” I ended up on the phone with him for about an hour, I gave him some really advanced tips, and then got off the call, thought “He’s probably not gonna do anything with that”, but I gave back a little…

And he reached out to me 45 days later; he was like, “Hey man, I really appreciate it.” He wholesaled two houses, made like 34k. I was like, “Okay, you have my attention.”

Joe Fairless: That’s awesome. So you’ve got the inventory, seasoning, and just the amount of money that’s needed to get going and keep that business going. Anything else that you think you should mention to scale a BRRRR approach?

Ryan Dossey: You really have to know your numbers of have somebody who knows them. The actual bookkeeping side of stuff really surprised me as we’ve started going, realizing “Hey, what are we all-into some of these properties for?” It’s not as simple as “purchase plus repairs.” What did your marketing cost you? What kind of commission did you have to pay your acquisitions manager? And making sure you’ve still got a deal that you can effectively BRRRR out of.

For us, we try to focus on the stuff that everybody wants. Most of our rentals actually are built newer than 2000. Three beds, 2,5 baths, or larger, attached two-car garage, vinyl or brick, in kind of those newer neighborhoods. They’re a lot less work than some of the lower-end stuff.

We bought a duplex that we probably never should have bought. It was an absolute steal, fell into our lap, and I think it took us four months to find a tenant that we approved of for our screening criteria.

So I think it’s of those just – be cognizant of where you’re operating in, don’t necessarily go for the B and C-class areas; I think it’s good to have a mix. But I’ve actually got a house that I literally sell tomorrow – bought as a BRRRR deal, and we ended up into it for about 165k; the house was worth 210k-220k. The problem is we finished right after schools went back. So most people that reached out weren’t interested in moving until basically the next year. We had people that were like, “Hey, can you hold it for me?”

Long story short – holding costs on it started to just rack up; we had a pipe freeze over winter… Nothing major, it was an exterior deal, but we ended up at the point where “Okay, we’re into this thing for 180k now, and it’s just been sitting.” So we decided this is a nice enough house, let’s sell it. We threw it on the MLS, and we’re actually gonna walk with somewhere around 20k-25k after it’s all said and done.

So I would also say just have multiple exit strategies. Don’t have it be something that it has to appraise — I saw a thread on Bigger Pockets today with a guy talking about doing a slow BRRRR, where he bought a deal for 90% of what it’s worth, and he’s hoping appreciation unburies him in three years… I was like, “That’s terrifying.”

The big thing with just about everything I own is I’m fairly confident that we could sell it on the MLS for more than we’re into it by quite a good margin tomorrow, if we needed to.

Joe Fairless: That’s what I was wondering about… Because when you are doing the BRRRR method, you’re basically getting your money that you put into it back out of it, and — there might be a spread there too, but on average, I don’t imagine there’s a huge spread after you get all your money back out, and really the goal here (it sounds like) is to build that rental income for the long-run.

So the thought I had was, well, I love that approach for the long-run, but if you have a team, then that rental income – it’s gonna take a long time to build up, so that you can pay the team… So you’ve got to also be doing some other deals on the side to get chunks of cash to pay the team. Am I thinking about that accurately?

Ryan Dossey: Yeah, it’s kind of cheesy, but we use the expression “Keep the best, wholesale the rest.” Part of the reason we decided to start offloading new single-family leads that come in – I’m not selling any of my current inventory, but new stuff that comes in – is there’s such a high demand for this quality of product that we’re sourcing. We had a deal that we set up, kind of a group showing, and a guy reached out and was like “I’ll give you your asking price, cash, as is, site unseen if you cancel the showing.” I was like, “Alright, done. I’ll do that all day long.”

So we’re doing some of that… The other way to potentially do it – my maintenance guy, we kind of hacked his salary. We realized we didn’t have really enough demand for a maintenance guy, yet we needed one. I think we picked him up when we were at 35 or 40 units. Well, we talked to our GC and we figured out “Look, we can actually have him use some of our tear-out, and that’s gonna lower our renovation costs by more than enough to cover his salary, and then the rest of the time he’s free to run calls.” We do all of our management in-house.

So we do that, and then with our acquisitions guys, we go 70%, minus repairs, minus an extra 5k. That’s their MAO, and they’ll shoot below that sometimes. So a lot of the times my big thing is our team has to be paying for themselves, myself included. If I’m gonna pull out of our cashflow to pay myself, I have to be pulling in more than that amount of cash; that’s the way I look at it.

Joe Fairless: Do you have a multiple that you look at?

Ryan Dossey: We don’t…

Joe Fairless: I’ve always thought about that with team members – you’ve gotta be paying for yourself, but if you just pay for yourself, then there is no business.

Ryan Dossey: Well, yeah… I mean, it’s–

Joe Fairless: It’s like two times multiple, or you’ve gotta bring in three times… And maybe it’s not telling them that, but just…

Ryan Dossey: Having that metric… Yeah, it’s a great idea. It’s probably something we should spend some time figuring out on our end. But when I say “paying for themselves”, I’m talking substantially so. Typically, one of our acquisitions guys is gonna get 10%-12% of the commission on something that we decide to wholesale or wholetail off… And realistically, if they do a deal a month, they should have more than paid for themselves and covered their base salary.

Joe Fairless: Sure. What’s your best real estate investing advice ever?

Ryan Dossey: My best ever – have people that you can bounce deals off of, that aren’t there, they haven’t looked at it, they haven’t met with the homeowner, they’re not wanting the deal – to give you serious, honest feedback.

That deal I mentioned that we’re selling off, one of the gals on our team was like “Hey, I don’t know about this one…” And I ended up “No, I think this is a good one. We’ve got multiple exit strategies. Let’s try it.” Ultimately, she ended up being right. Had we closed on that house and just resold it right away, we would have made an extra $20,000.

So surrounding yourself with people that aren’t afraid to give you their feedback, whether you want it or not. [laughter]

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

Ryan Dossey: Yup.

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

Break: [00:18:48].08] to [00:19:54].27]

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

Ryan Dossey: Best book that I recently read… It’s probably been mentioned on here a ton, but I’m gonna go with Extreme Ownership.

Joe Fairless: Who wrote that?

Ryan Dossey: Jocko Willink and Leif Babin.

Joe Fairless: Right, right, right… Navy seal?

Ryan Dossey: Yup. I listen to it on audio, and it was about one of the most interesting books that I think I’ve ever listened to.

Joe Fairless: Okay. Best ever deal you’ve done?

Ryan Dossey: Best deal I have ever done… Alright, so this is kind of cool; not a numbers thing at all. Totally just a personal thing. So I got into real estate because I’m a car guy. I got to the point where I could afford something nice, and then didn’t want it on my credit, didn’t wanna throw out that amount of cash… So I actually got a house under contract, and a buddy of mine owns a somewhat high-end car rental company, and they decided they wanted to get into real estate investing. So I wholesaled them the house, made 8k, and in return got an Alfa Romeo 4C for a year at no cost to me. So I got paid on it, and got a car out of it for the year.

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

Ryan Dossey: School districts… [laughs] I did a flip in a super high-end neighborhood; I bought a house for 110k. I was like, “This is gonna be a home run.” Our remodel ended up being 200k, which was the largest single-family remodel I’d done at that point… And comps had us at 450k all day long. So we listed at 450k, nothing happened. We ended up dropping by 10k, dropping by 10k… Ended up finally selling at 390k. The issue we ran into – the comps we’d pulled, even though they were a tenth of a mile away, were on the other side of the school district line.

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

Ryan Dossey: The best way I like to give back… To the world in general, or the investment community in particular?

Joe Fairless: However you wanna take that question.

Ryan Dossey: For me, I like to help people get from where they are to where they can be. I run a small, free Facebook group and we do a lot of stuff in there, showing people really complex stuff and breaking down things like how to get press releases and stuff done. We recently did a giveaway in there, and one of our guys – we gave out like 2,000 pieces of mail – ended up wholesaling two houses, made 50k, and launched his investment career… So it was pretty cool.

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

Ryan Dossey: They can reach out to me through Facebook, Instagram or YouTube. I think you guys have all of those links.

Joe Fairless: Well, thank you so much for being on the show, Ryan, and talking about how to scale a BRRRR method. There are multiple takeaways; it was really interesting to me how you’ve managed to buy over 70 properties last year using the BRRRR method, and the challenges that we’d have to overcome in order to do that – finding inventory, the loan and the seasoning period, having the money that’s required in order to do this, as well as knowing your numbers and scaling the team, while having multiple exit strategies… So thanks again for being on the show, talking about your background and what you all are doing.

I hope you have a best ever day, and we’ll talk to you soon.

Ryan Dossey: Thanks for having me, guys.


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Pete Barrow and Joe Fairless

JF1479: Finding Off Market Deals, Managing Rentals, & Wholesaling with Pete Barrow

Pete and his team do a little bit of everything. The leaders of his business are himself and his sons, and they have a great system in place. One son is the deal finder, the other is the property manager, and Pete over-sees as well as being the head of marketing, networking and growing the business. Tune in to hear how she pays $0 on capital gains! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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

With us today, Pete Barrow. How are you doing, Pete?

Pete Barrow: Hi, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Pete – he is the owner of Parrot Homebuyers. He buys homes anywhere in Indianapolis, takes pride in closing extremely fast, and you can say hi to him at his company website, ParrotPropertyManagement.com. With that being said, Pete, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Pete Barrow: Sure, Joe. I should start by saying I’m one of the owners; it’s myself and my two sons, Sam and Isaac. Our background is this – we all lived in the Maryland suburbs of DC. I lived there for 35 years, and I was a cabinet maker, carpenter, handyman, and I always day-dreamed about getting into real properties, back before it was cool even… But on the East Coast the costs are very high, I’m sure everybody knows.

My older son Sam always wanted to leave there anyway, so he saved up his pennies, he quit his job and he just started driving around the country for a place he might like. I don’t actually know anyone who ever did that, but… He just drove to cities, and spent some time there. And I thought it was kind of strange that he settled on Indi, but I came out here and saw it, and we loved it too. It’s affordable, the people are nice… My son is a tech guy, so he ran all the numbers and he said the economy is steady and reliable; it never booms, it never busts. So he bought a beautiful little house out there for about a fifth of what it would have cost in DC, and then we bought another, a foreclosure, and then we bought another… He’s a web design guy, and he was building his own little company at the time, so he would just sit on the couch all day with his parrot on his shoulder and worked at building up his company.

I started coming out here and spending 4-5 months a year working on the houses, and then Sam joined his brother Isaac, moved out here, too. He’d been managing a family pizza place, and that turned out to be useful. Now, here’s the good part. I was back in Maryland, finishing up a job for a long-time customer, and she just spontaneously asked me if we could use some money for our rental business. I called Sam, and he found a package of 13 of these beautiful old Midwestern foursquare duplexes in a nice upcoming area. My old customer bought them, and we managed them and repaired them and shared the profit. So that was the beginning of Parrot, which started out as a property management company just for those properties.

Now, we also found  a package of four other duplexes at the same time, which my son resold and made 20k, which we all found astonishing. That’s where we realized that wholesaling was a thing, so my son started working at building that up.

Over the next year, suddenly my old customer started to realize that real estate is not as passive as everyone says, he wanted to take his profits, so we bought a bunch of those duplexes back from him. They made a nice pile of money, we got 20 units in one bite, and we discovered wholesaling… So that was a pretty good year. What made it work was we just knowing these people forever, and them having some trust in me, and my son being very good at digging up off-market deals, and then my younger son being very good at management. So we just started– sorry, go ahead.

Joe Fairless: I didn’t mean to interrupt. Feel free to…

Pete Barrow: No, I’ll talk all day if you don’t interrupt.

Joe Fairless: [laughs] Well, that’s why–

Pete Barrow: You’d better stop this thing…

Joe Fairless: That’s why you’re a good interview guest. That’s great. It’s much easier to work with someone who can talk versus the opposite, whenever it’s an audio interview. How was your son finding these duplexes? For example, the package of four where the profit was 20k.

Pete Barrow: Oh, those duplexes actually came from another wholesaler. And like I said, most of them we wound up buying, and four of them he resold. Things were a whole lot cheaper just a couple years ago, so there was still room to buy from a wholesaler, and the wholesale on to someone else. It’s getting a little harder to get things like that.

Joe Fairless: And speaking of getting harder to get deals like that, how are you all currently doing it, since it is more challenging?

Pete Barrow: We do the usual, unimaginative stuff like send out postcards. I think we sent 100,000 postcards so far this year. Not all to the same person, to different people. We also go to meetups, and we network, and we just try to meet everybody… But we’re also doing a lot more sort of boots on the ground stuff. Some of our best deals, in fact — I was sitting in a restaurant six months ago and I overheard some guy talking on the phone, and it became obvious he was talking to a tenant who was trying to buy his house. And the tenant was not coming through, and he was getting frustrated, and I just went over and introduced myself and gave him a card. I didn’t think we’d get the house; I thought he would be a guy who’d sell retail, but I just sat there and talked about real estate for like an hour, and told him everything I could that I thought would help him. Well, he called up and sold us the house, and we made like 20k on it… So that paid for my sandwich. Since that happened, my son is expecting me to do that every day, but I’ve never done it since.

Joe Fairless: Yeah, every day at lunch, right? It was a $20,000 lunch.

Pete Barrow: Mostly at lunch I just wanna sit there and eat my sandwich and not be bothered… But it is part of my role now to just go around and talk to people, and I’m doing quite a lot of that. I have made it a habit now. When I’m sitting in a restaurant, if it’s at all possible to go over and introduce myself to the table of old guys that look like they might own houses and wanna leave town, I’ll go and do that.

Joe Fairless: And what do you do? Will you describe that scenario in detail for how you make that happen?

Pete Barrow: Well, let’s see… I was in a little grill the other day downtown, and there were these four old guys sitting and talking, and they were all hilarious. One of them was talking about how he knew some people who dug a well on their property and something went wrong with the well, and after a while I went over and I said “Hey, I don’t mean to be listening in, but we had a house that was fed by a spring when I was a kid, and at one point it started poisoning us all.” [laughs] Of course, when you get sick, you wanna drink more water, so that took a while to figure out… It took a while to figure out what was really wrong with that. That was the way to start the conversation, and… Don’t try this if you’re not the type of person, but I like talking to people anyway.

That’s one of the nice things about this town. If you try to do this in some places, I think you’re gonna get rudely rebuffed, but… In Indi, I’ve been astonished at how easy it is just to go up to people and say “Hey, how did you get those Azaleas to look so good?” and they’ll just stop and talk to you. That makes it a whole lot easier.

Joe Fairless: When you were in the restaurant, having your $20,000 sandwich, what did you do to introduce yourself to the gentleman who you thought was talking to his tenant, who was looking to buy the house but didn’t end up doing it?

Pete Barrow: I don’t remember… I think I just went over and apologized upfront. “I’m sorry to eavesdrop, but this is a tiny little room and it was hard not to just hear that conversation. We’re landlords too, and…” I don’t remember how I eased into it, but it must have been fairly slick, so… [laughs]

Joe Fairless: Of course, of course. Totally smooth operator. So it’s you and your two sons… Who does what again?

Pete Barrow: Well, my job has been – because I was a carpenter forever – to fix up our new acquisitions and help maintain our old acquisitions… And that’s not just me; we have a really good little crew of two who make it easy. But now I’m supposed to be transitioning into the public face of Parrot, which is going around bothering people in restaurants, and going to meetups, and stuff.

My older son, Sam, is sort of the idea guy who kind of just paces the floor all the time, and then wakes you up at two in the morning to tell you what he’s figured out. He’s the one who kind of comes up with stuff, and he’s also a technical wizard, and he’s written a lot of software that we use to mine the data. I think he said some of that he’s gonna make available to the public; if people are interested, go on our website and inquire. But that’s his role.

And then my younger son, Isaac, who had management experience – he does the books, he shows the units, does the leasing, he handles all the calls, and it’s incredibly nice to have that in-house, because nobody cares more about you getting a good tenant that you do. Once he took that over completely, problems with tenants just about completely ceased. So he’s very good at keeping our stuff full, and keeping good people in there, and managing the problems.

Joe Fairless: And anything in particular that he did that you’re aware of, that helped with quality residents?

Pete Barrow: Let me mention also he does all the wholesaling; he does every bit of that, from going and looking at the houses, dealing with the sellers, dealing with the buyers… What did he do to get quality residents? He finds them on social media a lot, which I have no understanding of even what that is… I just know the word “social media” and I’m supposed to say that. But he just screens them; it’s not that hard now to find out everything a person ever did. He can do these skip-trace reports — I don’t know if that’s what he does, but for $10 you can get 150-page printouts that tells you every car someone ever drove, every phone number they ever had…

So he looks at rental history, and income, and especially evictions and penalties and stuff.

Joe Fairless: With your role in the company, generating the leads, as well as you used to be the primary point person for fixing them up and overseeing the team, what was a challenging project that you worked on?

Pete Barrow: Well, we’re in the middle of two of them right now, and they’re just dragging on forever, which doesn’t speak to well for me. We bought a hoarder house, which was — I can’t literally to the ceiling, because to me “literally” means literally… It was a couple of feet short of the ceiling… But we found stuff in there that I would even ask my crew to touch. It was just too nasty to have someone to do…

Joe Fairless: What was it?

Pete Barrow: Can I say it on the air? A big plastic bin full of fermented urine.

Joe Fairless: Okay…

Pete Barrow: Actually, one of my crew had to help me carry that out, and it sloshed all over our boots… But just food that had been in bags for three months, and stuff. But the house was great; it was beautiful, and solid, it was in a really promising neighborhood that’s already nice, and it’s coming up, that stylish people are moving into. Not super-stylish, but just a really good, solid house, and also it’s a two-bedroom with one floor and a full unfinished basement and a full unfinished attic, which is very easy to get into a house like that and totally redo the plumbing and wiring and just deal with all the problems, and then not hear any maintenance calls.

Most of the ones that we get to go in and go over like that, we just get really no maintenance calls. That’s what I like. We wanna grow a much bigger portfolio. We wanna get to 100 houses, 150 doors.

Joe Fairless: How many are you at now?

Pete Barrow: 42 doors, I think.

Joe Fairless: Okay. That hoarder house, how much did you buy it for?

Pete Barrow: 11k.

Joe Fairless: What are you putting into it?

Pete Barrow: Well, my son was yelling at me about this the other day… I think we’ll probably be into it for a total of 55k-60k when we’re done. Part of that is a new air conditioner, and we’re gonna tear the driveway up and redo it. That’s 10k right there.

Joe Fairless: And then what’s it gonna sell for? Or you’re holding on to it…?

Pete Barrow: We’re gonna keep it. The stuff we redo, we redo for ourselves. Everything we buy and sell [unintelligible [00:14:55].07] We could probably sell it for 75k-80k. So we didn’t get a huge bargain on it, but what we’ve got now for less than market value – we’ve got a house that will need zero maintenance for many years. You really can’t buy that.

Joe Fairless: And is the model you wholesale houses, get chunks of cash, then take that cash and reinvest it into buying fix and hold properties?

Pete Barrow: Something like that. It’s all a little sloppier than that right now, because we’re too busy to really be that precise about what we’re doing… But yes, we’re getting money from the rentals, we’re getting money from the wholesales, we’re pulling it out, distributing it to ourselves, and then putting it back into the process of acquiring and fixing up more stuff… And it seems to work. The stuff we wanna get  – I love getting these little places that are really in terrible shape, and then go in and just basically start at — we don’t gut them, but being able to redo all the mechanicals… Everything that moves in the house: every wire, every pipe, every light switch, every light fixture, every water faucet… Everything that can go bad is pretty much new, and decent quality. That’s our model.

Joe Fairless: You mentioned two projects… Maybe I missed it. You said the hoarder house, and–

Pete Barrow: No, you didn’t miss it. There’s another one that we got that is in a wonderful spot; it’s worth a lot more than we paid for it, but it’s in a floodway; just the last three feet of the yard is in the floodway… And I can’t really say it’s been a problem, because right now I’m at the stage of not really doing anything about it, but I’m just dreading doing anything about it, because I know I’m gonna be spending a lot of time walking from one office to the other, making phone calls to try to get it straight that we can abate that by filling it in somehow. Also, it has no driveway, and right out in front of the house is a bike path.

People have told me “You can’t do that”, other people have told me “Yeah, you can, but you need to get an engineer, and get a drainage plan…” So I’m thinking between those two things, I’m gonna spend 100 hours just walking from one office to the next… But maybe not. Bureaucracy is not as bad here as it is in a lot of places. You can get your driver’s license renewed in ten minutes. It’s a lot nicer [unintelligible [00:17:12].13]

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

Pete Barrow: Well, it would be a generality. First of all, what I said about this house I got at the restaurant – just start locally. If you’re trying to be wholesaler, which I assume a lot of listeners are, start with your own community, start with people you know. There’s probably some little old lady who wants to sell her house and move back to Alabama. That’s a specific, but just in general, just be calm and don’t get too excited. Don’t go to these meetups where people stand up and pump their fists and scream “Financial freedom!” It’s just a business like any other, and you work really hard to get good at it. So a lot of work and a lot of [unintelligible [00:17:54].27]

Joe Fairless: What’s a smart area to put work into and focus into if you’re in your business?

Pete Barrow: I’m not sure what you mean?

Joe Fairless: Where do you spend time that is effective in your business?

Pete Barrow: I guess that’s kind of what I’m learning right now. I’ve been avoiding the business side and just doing the fix-up work, and my sons have been pleading with me to go out and develop the business… And what they say is meeting people, going around and developing relationships with people. So yeah, I would say it’s a good way to spend time. And that could be anything from going to meetups, where you’ll meet mostly buyers, to just walking around the streets, and going into stores, and dropping cards, and [00:18:40].28] That’s kind of what I’m working on now.

Joe Fairless: The last deal that you got under contract, how did you find that property?

Pete Barrow: We do so much stuff I don’t know what the last deal we did was, but the last deal we bought, we just got it from a postcard. That’s not very exciting, I know, but we got it from a postcard. A woman just wanted to get rid of it and move into a condo. We got a very good deal on it.

Joe Fairless: Do you remember the numbers?

Pete Barrow: We paid 20k for it. We don’t go into the hot new area and [unintelligible [00:19:13].19] in the center of it. We don’t have the money to do that on a big scale. But both of my sons have an encyclopedic knowledge of the city and all the areas, so we’re finding stuff that’s right on the fringe of those places, right in between two of them, and right in the path of where the good stuff is… And this fits that description perfectly – it’s right on the fringe of a neighborhood called Irvington, which is very nice and very hip.

Joe Fairless: You’re buying it for 20k… How much are you putting into it?

Pete Barrow: We’re not gonna put too much into this one right away because we’ve got too many other things in fix-up mode right now. We’re probably gonna spend 8k-10k just getting it decently rentable.

Joe Fairless: And  what’s it rent for?

Pete Barrow: Probably eight or nine…

Joe Fairless: Wow.

Pete Barrow: So we’ll have 30k into it.

Joe Fairless: And $800 for a 30k house – that’s really good.

Pete Barrow: Yeah. Well, that’s the funny thing – a lot of investors pour money in here from California, and they’re just delighted that they can meet the 1% rule. We have a lot of places that are like that. The monthly rent is 3% of the total cost. It’s not easy to find stuff like that, but if you’re wholesaling and you’re looking at hundreds of houses, you’re maybe buying and selling 70-80 a year, then you keep one or two.

Joe Fairless: The hoarder house – you were all-in for 60k; what’s it gonna rent for?

Pete Barrow: That one we also think $800 or $900. I think $900 might be a little high, but probably $800.

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

Pete Barrow: I don’t know, Joe. I guess let’s just find out. [laughs]

Joe Fairless: We’ll just throw ourselves into it and see what takes place.

Pete Barrow: Just put me to the test.

Joe Fairless: [laughs] First, a quick word from our Best Ever partners.

Break: [00:20:57].25] to [00:21:37].12]

Joe Fairless: What’s the best book you’ve read recently?

Pete Barrow: I assume you want  a business book…

Joe Fairless: Well, whatever, any book.

Pete Barrow: The best book that’s even moderately relevant – I read a biography of Rockefeller. It’s called “Titan”, and it’s terrific. What that guy did, and start from less than nothing, is amazing. Not only what he did for himself, but what he did to build up the country. All his those 19th-century robber barons did wonderful things, for all of us, not just for themselves.

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

Pete Barrow: We got a little place out towards the suburbs, but not quite… You know, there’s nothing to distinguish this house; I don’t know why it worked out so well, but the guy was highly motivated, he was happy to get his 20k, and somebody was delighted to buy it for 50k, so everyone was happy… So there’s a 30k deal. I don’t have any million dollar deals to talk about.

Joe Fairless: What was his motivation?

Pete Barrow: I think he was old and I think he had some kind of drug problems; I’m not really sure.

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

Pete Barrow: A mistake… Probably the one I was telling you about, the one that’s in the floodway, and the driveway problem. We’re gonna have a lot more money in that house than we should, but it’s probably still worth twice what we’re gonna have in it, so that’s not a very bad mistake.

I think there’s one deal we actually lost money on, and we lost like $500, so that counts as our worst deal. We just bought this little one-bedroom double because it was cheap, and we didn’t stop to think about whether anyone else was gonna want it. It was just cheap, so that was the early days. So a $500 loss for your worst deal… It can be worse than that.

Joe Fairless: Take that all day long. Absolutely. What’s the best ever way you like to give back?

Pete Barrow: I think the business itself is a way of giving back. We hire people, we buy stuff from people who wanna sell it, and we sell it to people who wanna buy it, and we provide nice places for tenants, and we put them in good shape, and we maintain them, and everyone gets along… I don’t know, I guess I should have something better than that. Maybe that’s what I got from this Rockefeller book – he amassed billions of dollars, but when he started this business, kerosene cost 58 cents. By the time he got done, it cost 7 cents a gallon, and that was a huge blessing to the working person, in an era when a working person made a dollar a day.

That’s the thing about capitalism – if you’re doing it right, you’re  not just getting some money; you’re providing something people want.

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

Pete Barrow: The website is ParrotPropertyManagement.com. You can call us at 317 202 1211. That’ll get you directly to my son, Isaac.

Joe Fairless: Thank you so much for being on the show and talking about your experiences, how you and your two sons have formed this company, and roles, responsibilities, some challenging things that you’ve come across, having buckets of pee splashed on you at the hoarder house, to some better things, where you have $20,000 sandwiches… So you certainly went from one end of the spectrum to another.

Pete Barrow: Well, thank you for having me here. You’re a terrific interviewer, you make it easy. You might be the best ever interviewer.

Joe Fairless: I appreciate that. I am grateful that you were on the show, and talking about – in addition to those extreme examples – one lesson is that $500 loss. You bought it because it was cheap, and cheap doesn’t mean necessarily good… Plus the opportunity cost with your time, so there’s probably more to the loss than that. But when you apply that lesson to future projects, then it’s awesome, because now you’ve saved time because you’ve learned that lesson… And that’s why I love doing these interviews, because now if a Best Ever listener is considering a super cheap house just because it’s cheap doesn’t necessarily mean it’s a good opportunity, and perhaps this story can save them from something similar.

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

Pete Barrow: Thanks, Joe.

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Ivan Barrett and Joe Fairless

JF1376: When Deals Don’t Go As Planned, Try To Fall Forward #SituationSaturday with Ivan Barratt

On Ivan’s third apartment acquisition, everything went wrong and “almost ruined” Ivan. To start with, Ivan paid too much for this 30 unit re-development deal. The deal was very distressed, and in a less than ideal location, but Ivan had faith in the area rebounding. Hear how he handled this situation with terrible tenants that wouldn’t pay, the property falling apart, bad plumbing, bad electrical, just about everything you can imagine went wrong with this place. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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

I hope you’re having a best ever weekend. Because today is Saturday, we’re gonna be talking about Situation Saturday – it’s a special segment. We’re gonna talking about a challenging situation – in particular, our best ever guest’s third apartment deal was a 30-unit that just did not go at planned… So that when you come across a deal that doesn’t go as planned, you can listen to this episode or think back to this episode, and hear what has happened to someone else and how they approached it, and how to do or not do what they did.

So with us today to talk to us about the 30-unit – how are you doing, Ivan Barratt?

Ivan Barratt: Hey, Joe. I am doing well, man, and I hope you are, too. It’s great to be back on the show.

Joe Fairless: I am grateful that you’re back. I enjoyed our first conversation so much, I was like “Wait, there’s more to it. I’d love to learn more.” A little bit about Ivan, as a refresher – he’s a multifamily owner, manager and syndicator who specializes in agency and FHA financed projects. He has raised over 24 million in equity, and acquired over 1,800 units since 2004. His company manages well over 100 million in assets, comprising of 2,200 units. Based in Indianapolis, Indiana.

With that being said, Ivan, will you give a refresher just about your background? Then we’ll dive into the story.

Ivan Barratt: Sure. So I’m a pretty lucky guy… My dad was an attorney, and growing up, he had a bunch of rental properties, so I got a taste for the real estate bug early. I even went to school for it, I learned all about finance and investing in real estate, got out, got my foot in the door working for a real estate developer here in Indianapolis, Indiana by saying basically “I’ll work for free. Pay me if I sell something, but otherwise I’m working for free. I just wanna learn.”

Eight years later, at the bottom of the great recession, I decided to start my own company. I started a property management company in my spare bedroom, and I was a one-man show for a while, until I continued onwards, scaling, hiring, firing people… Today we’re actually close to 150 million in assets under management. We’ve acquired some more properties, and also still manage apartments for other folks along the way, and that’s where we’re at today.

Joe Fairless: Alright, well thank you for that refresher. There’s lots of stuff we dove into on the previous episode, so Best Ever listeners, just search Ivan’s name and my name in Google and you’ll come across that episode. So let’s talk about your challenging situation. Tell us about this 30-unit that you did.

Ivan Barratt: We could go on for a couple of days about all the mistakes I’ve made. I thought one that would be really relevant to your audience would be my third apartment acquisition. I bought several smaller deals, then I bought a six-unit, and then a 35-unit, and when I was feeling really high on myself and really confident I bought a 30-unit redevelopment deal here in Indianapolis, Indiana.

Basically, it almost crushed me, almost  killed me, almost ruined me. Everything that could have gone wrong went wrong, and I made a bunch of mistakes, so I’m happy to start wherever you like. Right out of the gate, Joe, I paid too much for it.

Joe Fairless: Okay. Tell us maybe how you found it, and when you say redevelopment, will you elaborate on what that means?

Ivan Barratt: Yes. This deal was actually on LoopNet. It had been on there for a couple years, and I had this suspicion that this area that it was in was going to turn around. It was in the path of redevelopment. So I went in and made a much lower offer than the seller had on LoopNet for it, and actually was able to strike a deal… 30 units for about – by the time I closed – $600,000.

Joe Fairless: What was it on LoopNet for?

Ivan Barratt: I think it had been listed on LoopNet for 1.1 million for a couple of years… And it was in an area that I could tell was going to redevelop, but at the time it was a very, very distressed project, and I thought that I was ready for a bigger renovation deal, and that I could handle it with the team I had in place, which ended up not being the case.

Joe Fairless: Initially, if it’s on LoopNet, 1.1 million, and then you’re able to get it for 600k, I imagine initially you’re celebrating.

Ivan Barratt: Oh yeah, I thought I had a deal on my hands, big time.

Joe Fairless: How much did you think you needed to put into it per unit in order to get it to where you wanted it?

Ivan Barratt: My biggest mistake was thinking that I could put some more lipstick on it, and I could — basically, I committed one of the mortal sins of real estate; I walked away from the closing table with about 100k in proceeds to help me do some renovations, and I thought I could do the rest out of cashflow.

Joe Fairless: Okay. How much did you plan on doing out of cashflow?

Ivan Barratt: I figured I only needed a couple hundred grand to make it better.

Joe Fairless: In addition to the hundred that you had allocated?

Ivan Barratt: Yeah, I figured over the first couple of years I would continue to recycle all the positive cashflow, all my profits back into the deal to continue to improve it and make it better.

Joe Fairless: Okay. Why is that a mistake?

Ivan Barratt: Well, in this particular instance, the property was in such bad shape, and the tenants were so awful that it was hard to collect rents, it was a constant amount of phone calls… The ones I took over as a new management company, the phone started ringing off the hook with folks that think that you’re there to fix everything right away… So because I’d been pretty loose on my due diligence and just thinking “Well, I’m getting this property for such a great deal…. I’ll figure it out”, sort of that cowboy mentality of buying real estate really hurt.

Every time you peeled back the onion, there was another layer of problems. The HVAC was all in bad shape, there were heaters that were just on their last leg, water heaters leaking like sieves, bad plumbing all around… But the worst part was the resident class there was so awful; even if I had fixed/renovated units, I wouldn’t have even been able to attract quality residents.

The average rents when I bought the place were in the $500, and just trying to get residents in there, I ended up  having to drop rents just to try to get cashflow going. It just kept getting worse and worse. My partner and I ended up putting in more capital, I took out some business lines of credit just to push more cash into the deal, and it kept getting worse and the debt just kept stacking up. We kept going down what I think you and I would maybe call “the maintenance and repair death spiral.”

Joe Fairless: Absolutely. If you were to close – God forbid – this property again, different name but all the same fundamentals, and you bought it for 600k… I’ll even throw this other variable in there – you didn’t learn your lesson from the first one in that you still only have 100k in cap-ex… Would you a) do what you did on the first one, where you dropped rents to get cashflow going, or b) would you just rip off the Band-Aid and evict who needs to be evicted, fix it up and then build up from there? Or would you do c, which is something I didn’t mention?

Ivan Barratt: I don’t know if this fully answers your question, but the problem that we had there with these low rents is that when we would throw people out, it was also very tough to get quality tenants at that rent rate. I mean, that’s pretty low rents, right? So you would throw people out and then one out of three would end up being bad residents again, which would cause even more problems; you’d be farther into that issue.

I think what I would tell you if I had a time machine, I would have done my homework a little bit deeper, I would have gone back to the seller and said “Listen, I’m gonna need X price for the property.”

Joe Fairless: What would that price be?

Ivan Barratt: It would have been probably closer to 400k… And say “Hey, I’m walking otherwise…” And I also would have done the financing completely different, which is what ended up saving me. Late in 2016 we were able to refinance the property, and I can tell you how in a moment… But I would have gone in with my private or hard money lender as some people might call them, I would have gone in with him out of the gate, with much more capital set aside for the improvements. I would have thrown everybody out on day one, literally vacated the property and started over the right way; that’s how I’d rip that Band-Aid off. That’s actually what we ended up doing in late 2016 to turn this thing around.

The only thing that really saved me, Joe, was the fact that I did end up buying in that good location. It took longer for the area to redevelop, which is almost like being wrong, being early… But the area did finally catch up, and my private lenders – we put together a new business plan for how we would essentially throw everyone out and start over, and do new kitchens, new windows, new parking lots, new HVAC, new surfaces… All of the things that we really should have done right out of the gate. We were able to convince our private lender to do that, so we were able to take out that old legacy debt and throw everyone out.

Fast-forward to now, I’ve got a much better team to execute the project, and we were able to turn it around and get it refinanced with Freddie a few months ago.

Joe Fairless: Oh, wow. A few months ago as of this interview?

Ivan Barratt: As of this interview, yeah. In early ’16 we got our approval from a private lender to do basically a redevelopment loan… So we retired the bank debt that was on it, and we had – gosh, almost 400k in reserve for renovations and for some interest expense on the debt while we threw everybody out.

So over the course of ’17 we got it renovated, got it released, and got 90 days of trailing financials, so basically by early ’18 I refinanced this property with Freddie on a valuation of 2.1 million.

Joe Fairless: Are you gonna make any money on this?

Ivan Barratt: Yeah, we’ve actually got a bunch of our capital out, and we’ve still got some hard equity in the deal, and as of recently, we’re in PSA negotiations with a buyer to buy us out at a similar valuation, and assume the Freddie debt in place.

Joe Fairless: That’s outstanding. Congratulations on that. You mentioned the team that you had initially didn’t work out… Can you elaborate?

Ivan Barratt: Yes, I absolutely can. I had a very inexperienced contractor that thought he knew what he was doing, because we had renovated some smaller assets together and he was renovating other single-family homes… And I trusted him too much to be able to execute. His pricing was correct; I didn’t have the management team I have now, I didn’t have the maintenance and construction oversight that I have now.

Then we’ve got a director of maintenance and construction, I’ve got a director of property management, an internal accounting team, and then my partner who runs a lot of the day to day operations on the management side now. In short, I worked really hard to be the dumbest guy in the room when it comes to my executive team, because of past challenging situations such as the one that we’re talking about.

Joe Fairless: How hard do you have to work to be the dumbest person in the room?

Ivan Barratt: Really hard.

Joe Fairless: Oh, really? [laughs] It’s easy for me. I just enter the room and automatically I’m the dumbest person in the room. [laughs]

Ivan Barratt: Yeah, I thought there might be a little bit of humility in there. You know, finding people who can execute in their lane and that don’t need a lot of hand-holding and a lot of oversight used to make real estate seem easy. Now we’re having a lot more fun; we’re really focused on our management culture. We’ve got great staff at the top, running their various disciplines within the organization, and they all report to my partner, who’s the COO who runs day-to-day decision-making.

Being the entrepreneur/visionary kind of guy I am, getting out of the way of the people who can mind the details far better than me has been a game-changer for the organization.

Joe Fairless: I hear you. Absolutely. Everyone benefits as a result of that. After hearing you talk about this deal and talking to you about the deal, it sounds like the lessons are 1) proper due diligence, and that goes with the residents, as well as the cap-ex mechanicals (that sort of stuff) on the property. 2) Being properly capitalized to execute the vision, and then 3) selecting the right team. First off, is that accurate? And secondly, if so, is there anything else that comes to mind?

Ivan Barratt: Yes, I would tie off that list with discipline as the deal sponsor. I was too impatient, I was too eager to get another big deal. Today we might be doing 200 and 300-unit acquisitions, but at the time it was a big deal and I was really eager to get my next project going. I had investors on the sideline wanting to invest, I had a little bit of a track record, and I let my own ego and my arrogance get in the way and cloud my judgment.

Joe Fairless: With the due diligence items and being properly capitalized, what’s different now about your company? And ideally, if you could get into some specifics on what you do now, that would be helpful.

Ivan Barratt: Absolutely. The collective brain power first and foremost is much larger now, with that director executive team I mentioned before. There’s decades of apartment industry experience. Now we look at probably 200 or so projects before we choose one, so there’s a lot more discipline there. We can walk away from just about any deal at any time, if we need to.

Cultivating that culture that “Hey, we’re in this for the long haul…” We wanna do, say, six deals a year right now. Last year we did three. This year we may only do another three, and that’s okay; we no longer need to do a deal or refinance a project or sell something to make payroll. The management company is self-sustaining now.

Joe Fairless: When you were pumping money into the bottomless pit, as it seemed, I imagine, at the time, were you in a tough spot financially, just as a business and personally?

Ivan Barratt: It didn’t feel great. Not necessarily a real tough spot yet. I had a good partner and we both put some more capital into the deal. I was perfectly fine taking out a business line of credit in my name attached to the property to show that I was not interested in losing this project or letting it go… But it resulted in a lot of sleepless nights, a lot of stress, absolutely.

Joe Fairless: How do you psychologically get through that?

Ivan Barratt: Well, that’s a great question. Working out definitely helps. Gosh, where do I start…? I think first and foremost facing yourself, and then God, or the Universe, or however you wanna language it. For me, facing God… That I’m being taught this for a reason. Sometimes I would say to myself over and over again, almost like a mantra, “I’m learning on 30, so that I don’t make this mistake on 300”, and I am so thankful that I paid tuition on 30 units, not on a really big deal, with a lot of capital at stake.

Joe Fairless: With that comment, what would your advice be to someone who wants to go from singles to 50 units, or 100 units?

Ivan Barratt: In today’s market I think it’s gonna be pretty difficult, but I think if you have the discipline and the perspiration, it’s not impossible at all. You’ve probably talked about this before – it’s the difference between simple and easy. A lot of the things in real estate are simple to learn and understand, but to actually execute them it’s anything but easy. If you’re willing to look at 200 projects before you buy one 50-unit deal, you’re gonna have a much better visceral understanding of what a good deal looks like, than if you were like me and you were just eager to go out and get your hands on something.

I think knowing a lot of property managers is a good idea… At least having one or two that you really trust, that you can get a couple of different angles of opinion on a project. That’s probably one of the first two things that come to mind. As you know, in this market it’s really, really difficult to find an actual good deal.

Joe Fairless: Yes, that is true, and the team is very important, that’s for sure. First off, congratulations on seeing through almost full cycle… But certainly having it in a good spot now, regardless of if the buyer closes on the transaction, you still got it in a really good spot. How can the Best Ever listeners get in touch with you and learn more about what you’re doing?

Ivan Barratt: I’m pretty easy to find, Ivan Barratt – it’s not a very common name. BarrattAssetManagement.com is a great place. I’m on LinkedIn, Instagram, @ivan.barratt… I’m trying to make myself easy to find.

Joe Fairless: Awesome. Well, Ivan, thank you for being on the show and talking about the 30-unit, the lessons learned from it… 1) Due diligence on both the property mechanicals, as well as the residences or the tenants. 2) Having it properly capitalized. 3) Having the right team. 4) The discipline that it takes in order to stay on the sidelines until you have the right opportunity, versus forcing your hand and being a motivated buyer, which is usually not a good thing.

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

Ivan Barratt: My pleasure. Thanks for having me, Joe.

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how to wholesale real estate

JF1289: How To Wholesale Over $250 MILLION Of Property In 10 Years with Jason Lucchesi

Jason bet on himself in 2008 after losing his job at a mortgage company (gee I wonder why) and no other places would hire him unless it was 100% commission. He started his real estate investing company and never looked back. Today we get expert tips on building a buyers list, finding deals, and technical, time-saving ideas. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Jason Lucchesi Real Estate Background:

Founded real estate investment company Global Fortune Solutions in 2008

Has been involved in $250,000,000 of closed transactions

-He’s a #1 bestselling author, speaker, mentor and coach to thousands of students across the country.

-Say hi to him at www.noflippingexcuses.org

-Based in Indianapolis, Indiana

-Best Ever Book: The E-Myth


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

With us today, Jason Lucchesi. How are you doing, Jason?

Jason Lucchesi: Good. How are you doing, Joe?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Jason – he founded a real estate investment company called Global Fortune Solutions in 2008. He’s also got a non-profit, and the website there is NoFlippingExcuses.org. He’s been involved in over 250 million dollars’ worth of closed transactions, and he’s based in Indianapolis, Indiana. With that being said, Jason, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jason Lucchesi: My background is I got started in 2008 as a full-time investor, and the main reason for that is I got started because I didn’t have a college degree and I was just coming out of a really bad spot from being in the mortgage business… That’s when the collapse just started. I didn’t have a college degree, I was doing really well at the place I was at, which was Countrywide Home Loans, and essentially, as soon as I got out of the mortgage business, I couldn’t find anywhere that wanted to hire me, unless it was 100% commission. So I decided to go all-in on myself, and not have a back-up plan. I went all-in with real estate and decided to make it happen.

What I’m really focusing on today is mainly wholesaling. I do about 10% of the business is rehabbing, 65% of it is wholesaling, and the remaining portion is buying properties that we could put into the portfolio, that produce income.

Joe Fairless: Sweet. Between 2008 and today, how has that percent breakdown changed?

Jason Lucchesi: It’s been somewhat around the same… I would say rehabs have gone from 20% to 10%. It’s just something that I don’t really enjoy doing, even though I’ve completely systematized it to where I don’t really have to be there anymore. I don’t like having our capital out for a long period of time, either it be our own personal acquisition capital or private funding… I just don’t like having that funding out for a certain period of time, especially with rehabs. You never know what’s gonna come up and what delays you’re gonna foresee, especially since we’re in several different markets, so we could hit a little bit of a snag and it becomes somewhat of a problem. We try and just keep our capital in projects that we know aren’t gonna take long periods of time.

Joe Fairless: Yeah, if I was in your business, I would be doing the same thing… I mean, why risk your capital on a rehab if you can get similar, or as great, or even greater profits in some cases on wholesales?

Jason Lucchesi: Oh yeah, absolutely.

Joe Fairless: Yeah, it’s a no-brainer. So let’s talk about your approach to wholesaling, since that’s 65% of your business… What can you tell us about the way you approach the business?

Jason Lucchesi: So I actually promote it from a backwards position. Whenever I get into any deal – we have a pretty large buyers list now, but for a lot of folks that we work with — we have a lot of training where we train folks, and we always tell individuals “Start off with getting your buyers first. Find out exactly what they want”, because if they don’t want 4-bedroom 2-bathroom homes, there’s no reason for you to be looking at 4-bedroom 2-bath homes.
So we approach it in a way to where we know exactly what our buyers want, so we only go after deals that we know that if we get them at the right price and we could sell them at the right price, we know that deals are gonna go quickly. So we like to find the buyers in advance, and we like to know what our buyers want. With that being said, we approach deals in a way where we’re going after properties that are absentee homeowners; we’re still going after short sales, but short sales that actually have equity in them… And we’re also going after probates and properties directly from hedge funds and banks.

Joe Fairless: Let’s talk about getting your buyers first… What are some tactical ways that we can build our buyers list?

Jason Lucchesi: The three easiest steps I would recommend – and you don’t have to leave the comfort of your own home, or if you have a day job. This is something that I did – I used Facebook, YouTube and LinkedIn to build my buyers list… And you really don’t need a big, gigantic buyers list. So I would find other real estate investors on LinkedIn, I would see how active they are, what type of groups they’re in… That would really help out with finding — there’s literally any type of real estate investor on LinkedIn, and there’s gonna be millions on there that are real estate investors.
Same thing goes for Facebook – I would find people in real estate-related groups on Facebook, I’d reach out to folks… Not be salesy. I’d actually wanna get to know the person before I started doing some sort of a pitch. I like getting to know people first, before letting them know “Hey, I’m coming across deeply discounted, off-market properties. Would you be at all interested?”

Same thing goes for YouTube – most people don’t even think about this one, but you type in “We buy houses” on there, or you wanna do it from a geographical standpoint, “We buy Indianapolis houses” and you look at all the channels that are on there, you’re gonna find people that are already looking for properties. Or they could be potential partners, like [unintelligible [00:07:59].04] Their e-mails, their phone numbers – they’re all gonna be available, so you don’t ever have to leave the comfort of your own home. Or some people like to work at coffee shops – you don’t have to leave the coffee shops.

So it’s very easy to get them, and then what we do from there, Joe, once we find some people that are good, we like to find out their title companies, because those could be good title companies that we wanna close at, but instead of asking for a proof of funds right off the bat, we talk to their title companies and find out when is the last time they’ve actually closed on a transaction. If it’s crickets on the other end of the call, we know it’s probably not a real individual that has access to capital to where they could close on deals if we do send them deals. So that’s a way that we vet people too, without having to ask for a proof of funds, which a lot of new investors face, and they don’t know how to overcome that.

Joe Fairless: Yeah, that’s a nice tip. With YouTube, LinkedIn – you talked about that… I might have missed your Facebook example for how to build our buyers list on Facebook.

Jason Lucchesi: Sure. So what I do is we go on Facebook, and in their little search engine area I just type “real estate”, and it will automatically pop information up for you… But what I do is I just click on the little magnifying glass there, and what I do is I click on groups, and it’ll bring up all of the real estate-related groups on Facebook, and there’s literally thousands if not millions of groups on Facebook. You can just start going after — I like just going after regular groups, and if you’re looking in a geographical area, you could put “real estate indiana” or “real estate chicago”, or whatever it may be, wherever you’re at. It’s very simple to find folks in a geographical area, just from looking at the Facebook groups. You go on there and you could just start looking at other members, and it’s very easy to join groups. There’s an unlimited number of groups that you could join on Facebook, compared to LinkedIn. LinkedIn is at 100. But still, you could go on Facebook and you could look at all the members that are in that group, and you could just start sending them messages… And I recommend that you don’t send off spammy messages, but just messages like “Hey, I wanted to reach out; I saw that we’re in the same group together, and I wanted to see if we could potentially do business together.” You know, just a simple message like that, Joe, really goes a long way and starts building up relationships with people.

Joe Fairless: If I got that message – and I know I’m gonna be picking apart words – I think “spam”, because I don’t know who you are, and “potentially do business…” I have no idea what that means. But does that type of message work with other people and is it just me, or is that not the exact message that we should be sending?

Jason Lucchesi: It works I would say about 6 out of every 10 times. But like I was saying, I would make sure that it’s gonna be personalized. So I wouldn’t just say “Hey.” I would put “Hey, Joe. My name is Jason Lucchesi. I saw that we’re a part of the Real Estate Indianapolis Group here on Facebook. I wanted to reach out to you, I’m doing some business here – I’m coming across some deeply discounted off-market deals and I wanted to see if you would be interested at all in looking at any of the deals that we’re coming across.”

Joe Fairless: Okay.

Jason Lucchesi: You could change up your messaging to whatever suits you as a professional, but we try and make it in a way where it’s gonna get them interested and wanna respond back. Normally, when I send off a message that’s just like I said, the response rate is actually between six, seven out of every ten people that we send the message off to.

Joe Fairless: On the second part, if I was interested in buying homes like that, I would be inclined to respond back, for sure. “Yeah, put this e-mail on your e-mail list and let me know.”

Jason Lucchesi: Yeah, absolutely.

Joe Fairless: With your business, can you tell us maybe the last wholesale deal? Let’s talk about a case study, the last wholesale deal that you did.

Jason Lucchesi: Yeah, it’s actually a pretty good one. It was a probate transaction, it was a referral from our attorney, and he made an introduction for us; the executor of the estate is out of the state, and she was interested in selling the home… She didn’t know the best way to go about it, she didn’t know if she should have it listed with an agent or if she should try and sell it by herself, like a for-sale-by-owner.

So what happened was the attorney said “Hey, I’ve got a real estate investor, he’s been working with me for the past couple of years… I’ve sent him some folks that have gone in a similar situation like yourself, they just wanted to sell the property” and next thing you know, we’re having a conversation, me and the executor of the estate. She was letting me know “Hey, I wanted to sell the property and everything that’s included with it.” She was including the personal property in there as well, so I went and took a look at it… I noticed there was a car in the garage; it wasn’t like an awesome car, but it was a nice car.

We ended up picking up the property right around 60% of after-repair value, which was a really good deal for us, because the car – we ended up taking it to CarMax, and CarMax gave us a $6,000 check right on the spot… Because we bought the property with personal property included, so the title of the car transferred over to our company as well. Then we had some random stuff in the house that ended up being like close to $1,000… Some old magazines and some memorabilia that people wanted and we just sold those on Craigslist.

We ended up wholesaling the property — we ended up buying it, but we did a wholesale still on it. So we still sold it same day, we just wanted to sell those other things before we got the A to B, B to C transaction. So we bought it for 60 and we sold it for 70, but keep in mind, we got a $6,000 check from CarMax and around $1,000 from some of the goods that we sold in the house.

So we ended up making after closing costs – it was a little over $16,000, and it was a deal that literally took maybe about 17 days from start to finish.

Joe Fairless: That’s a fun one. It’s got a couple of wrinkles that aren’t typical, with the CarMax thing and with the $1,000 in memorabilia that you sold.

Jason Lucchesi: Yeah, absolutely. And to be honest with you, Joe, we find a lot of folks don’t wanna go back to mom and dad’s house and go through all that stuff themselves, so they end up wanting to do a lot of the “Hey, I just want to sell you everything.” We go over there and take a look at it, and if it makes sense we’ll do it.

Joe Fairless: Who goes through the stuff in the house and cleans it up and identifies what to sell, what not to sell, then takes pictures of it, puts it on Craigslist? Because there is time involved in that.

Jason Lucchesi: Oh yeah. It’s typically my acquisitions manager that goes over there and does all of that. That’s how they get paid – they get a base salary with the company, and then I also pay them a percentage of the transaction. They get about 10% from transactions closed, and then they also get a base salary from me.

Joe Fairless: Does the attorney receive a referral fee?

Jason Lucchesi: No, we can’t do that. We can’t send them any type of a referral fee here in the state of Indiana. I haven’t done that in any other states, but typically what I do is I send all referrals to him as well. Then we also have him listed on all of our sites, so he gets plenty of business from us in return, so that we can do business that way. Then every once in a while too I’ll send him a really nice gift card to a nice steakhouse, or something like that. That’s completely legal.

Joe Fairless: Based on your experience as a real estate investor since 2008, what is your best real estate investing advice ever?

Jason Lucchesi: I would say keep it simple. So many people do the whole analysis paralysis thing. They read so many books, they take so many educational courses, they become doctors when they go on Google… I like to just say keep it extremely simple. If you wanna wholesale, get 8-12 cash buyers, start going out finding deals, and then go and get those deals closed. I know it’s easier said than done with what I just said, but the less complicated you make it, the easier it’s going to be. And especially for brand new people, once they get through 5-10 transactions, then you can really start implementing systems in your business to where you’re not working in the business, you’re working on the business. Because if you’re always gonna be working in your business, you really don’t have a business, you have a job.

My big thing is, yeah, it’s good to get educated, you need to get educated, but there’s a point to where you get yourself too educated and you really don’t take that leap of faith, knowing that this business is gonna work. That’s some of the best I would give – just keeping the business really simple, especially in the beginning.

Joe Fairless: Now let’s talk about as you went through your beginning stages and then scaled and worked on your business, not in your business – as you were doing that, who was the first person you hired? I don’t need a name, but what was their role? And then what were the subsequent hires?

Jason Lucchesi: Sure. The first person I hired was an acquisitions manager. He went around, he would do the door knocking, he would be responsible for doing the direct mail marketing, he would be responsible for taking inbound calls and also making outbound calls, he would be responsible for getting deals under contract. From there, I would still have my hand in the jar by – once we get deals under contract, I would get them sold to our buyer, so that’s when I brought on our liquidations manager and taught them how to properly sell deals that made financial sense for us… Especially if we get a deal under contract, how do we get that deal sold for the maximum amount of money, but also make it a really great deal for our cash buyer to make sure that they continue to buy deals from us, not just one-off transactions.

So the liquidations manager would have a role as well; not as big as the acquisitions manager, but they still had to maintain our current cash buyers list and also increase that cash buyer portfolio and database as well.

Then as we started to scale a little bit more, I started hiring an assistant to help out with day-to-day operations to make sure that the acquisitions and liquidations manager was getting deals and everything was going through the system properly from a day-to-day.

Then the liquidations manager eventually started adding on to where they’d start making sure the title was clean, and closings were being scheduled, and all parties were notified, and that they would show up at the scheduled time that we had for the closing. And to get a little off the plate, I did hire somebody just to do marketing from a part-time basis, to run some pay-per-click ads for us, to be responsible for doing our direct mail marketing, which we started outsourcing that to another company. We started using GoBigPrinting.com and also YellowLettersComplete.com to outsource that, so we wouldn’t have to do that manually anymore.

Then I also hired somebody just to keep our books clean and making sure that we are operating the right way. The bookkeeper would only come in like 1-2 times per week, and they were just paid when they would come in.

Joe Fairless: That’s outstanding. Thank you for talking through that and also giving the marketing vendors that you use, because I was gonna ask about that. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jason Lucchesi: [laughs] I’ll do my best at it for you.

Joe Fairless: I know you’re ready, I can sense you’re ready. Alright, let’s do it. First though, a quick word from our Best Ever partners.

Break: [00:20:28].06] to [00:20:58].11]

Joe Fairless: Best ever book you’ve read?

Jason Lucchesi: The E-Myth.

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

Jason Lucchesi: My short-sale.

Joe Fairless: Can you tell us about that deal?

Jason Lucchesi: Sure, it was a deal that we were able to find and we got it negotiated and we were able to have the auction that was going to be going on the next day stopped, and we were able to close on the transaction and the individual homeowner didn’t have to have a foreclosure on their credit.

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

Jason Lucchesi: Not having private money lined up. My very first deal could have brought in six figures easily, but I didn’t have a private money lender lined up, so I ended up making right around $3,500 because of a lot of mistakes that happened with closing costs. But having a private money lender, even if it was a hard money lender, I still would have made close to six figures with a hard money lender.

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

Jason Lucchesi: Best way to give back right now is giving back to folks that have a disability and they need help getting around from room to room. Right now we’re working with a gentleman that’s a quadriplegic, and we are remodeling the whole entire house for him to make it wheelchair-accessible. It was probably about 3-4 weeks ago for the first time ever in their house… We had heat turned on and we were able to get them hot water. Now we’re gonna be working on the foundation to where he can actually go and use the shower, and we’re gonna make the transitions from room to room easier for him, since he has a power chair. That’s just one of the individuals that we’ve worked with. We’re working with several others to do the same thing. That’s what our organization is all about.

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

Jason Lucchesi: The best way I would recommend is I’m on Facebook, I’m on Instagram, and also we have NoFlippingExcuses.org, you can check us out there. We’ve got a ton on content as well on YouTube, and hopefully I’ll be able to have Joe on our podcast as well, which is The No Flipping Excuses Show. Maybe we can line that up to have you on there, Joe.

Joe Fairless: Well, I believe in the approach of having no flipping excuses, so I would love to be on that show.

Jason Lucchesi: That’s awesome, man.

Joe Fairless: Well, thank you for being on this show and sharing your experience, and also your lessons learned. The approach that you take, from choosing to wholesale primarily (65% right now of your business is wholesaling), and some tips for beginning wholesalers on how to build your buyers list – Facebook, YouTube, LinkedIn… Just being resourceful, and then some messaging that you can send your potential buyers, and then how to qualify them without getting a proof of funds, so just talking to the title companies about when was the last transaction they closed…

Then for a more experienced investor that is listening, who is wholesaling, how to scale your wholesaling company, and the hires you brought on and the sequence in which you brought them on – acquisitions manager, liquidation manager, assistant, marketing (you started doing some automation on the marketing), and then the bookkeeper.

Thanks for walking us through a process that talked to us about beginning, and then also if we’re looking to scale from a wholesaling standpoint. I hope you have a best ever day. I enjoyed it, and we’ll talk to you soon.

Jason Lucchesi: Thanks, Joe.

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JF1252: Leveraging A Partnership For 80+ Cash Flowing Properties with Jeff Schechter & Jack Gibson

Jack and Jeff are able to run a more efficient business by leveraging each others’ strengths. With over 80 properties that all cash flow really well, safe to say this has been a lucrative partnership. They’ll tell us a lot of details about their business that can help all of us learn how a larger scale real estate business runs. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Jeff Schechter & Jack Gibson Backgrounds:

Co-founders of High Return Real Estate

-Have over 80+ turnkey properties that are producing outstanding monthly cash flow returns.

-Each the processes of high return investments that you can’t secure through traditional sources

-Jack ran a successful multi-million dollar company before he was old enough to rent a car.

-Say hi to them at https://highreturnrealestate.com

-Based in Indianapolis, Indiana

-Best Ever Book: Rich Dad, Poor Dad


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

With us today, Jeff Schechter and Jack Gibson. How are you two doing?

Jack Gibson: Doing great, thanks for having us, Joe.

Jeff Schechter: Excellent.

Joe Fairless: Yeah, my pleasure, nice to have you both on the show. Jeff and Jack are the co-founders of High Return Real Estate. They also have a podcast, which is called The High Return Real Estate Show. Their business is turnkey investing. They have a turnkey investing company. And personally, they combined own over 80 turnkey properties that are producing monthly income, and that’s what we’re gonna be talking about today. Based in Indianapolis, Indiana. With that being said, do you two wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jack Gibson: Sure, so I’ll start with that. I got started in business about 20 years ago, I started in a network marketing health and nutrition company while I was going to college. I always wanted to be an entrepreneur. Built that business up, and about two or three years in I started reading Rich Dad, Poor Dad, and a lot of other Kiyosaki books and got the vision for real estate, but unfortunately didn’t have any cash or any real desire to do it right then, so I put it on the backburner, and then about three years ago my stocks dropped like a rock and I said to myself “I’m not going to live the rest of my life on the whims and the ups and downs of the stock market.” In one fell swoop I could get 50% of my equity wiped out.

Joe Fairless: Crazy.

Jack Gibson: Yeah. So I started listening to podcasts just like this, Joe, every morning at the gym, an hour at a time, for 90 straight days, and I’d learned so much so fast that I just jumped in, started buying up. I made some buying mistakes, but thankfully I had the cashflow position from my other business to weather that storm. Then I stumbled upon a great turnkey company and started buying up in Indianapolis, got fantastic returns, and then learned enough to take on my own business. That’s when I brought Schecky in.

He’s a digital marketing master, he is very organized and has a completely different skillset than mine, so we’ve really for the last year and a half formed a great partnership, friendship, and we just play back and forth and really work well. We know what our lane is and we try and stay in our own lane, so that we have an effective operation. Schecky, I’ll turn it over to you.

Jeff Schechter: Thanks so much. Like Jack, I’ve been an entrepreneur my whole life, I have done a whole bunch of different things, and as Jack mentioned, I’m pretty well entrenched in the digital marketing space. Jack and I met because I was doing some consulting for him in another business [unintelligible [00:05:01].01] friendship. He had found out that I had done some flipping back in the old days, ’05, ’06, ’07, before that previous crash, and I was doing some things that obviously I would never do today, but pretty much got my ass handed to me back then, and swore that I would never do real estate investing again… But it’s in my blood, and after some great conversations with Jack and seeing some of the stuff that was going on in Indi, we just felt like a) we wanted to dive in, but that we could also build a better mousetrap, so here we are.

Joe Fairless: Jack, you mentioned you made some buying mistakes, but you had some cashflow from your business at the time that allowed you to recover… What are some of those mistakes that you wouldn’t make again?

Jack Gibson: We talk about it on our show all the time – probably the top two mistakes that most new investors make are paying too much for a property, because they’re anxious, they wanna get into the game too quick. That was me. I didn’t do enough scouting out properties, analyzing deals, looking at what’s really going on in the market… And then the other thing is I didn’t factor in enough deferred maintenance. I bought an 11-unit property and took the property manager’s word that they really didn’t need much. Well, not much turned into $60,000 in unexpected–

Joe Fairless: That’s a lot!

Jack Gibson: Yes, yes! We pretty much had to redo every single unit to the tune of several thousand each. So it just taught me a lot about just “Pay trust, but verify.” So we’ve definitely learned to really put cap-ex into the equation.

The great thing about that property too is that even though it was a buying mistake, it’s turned out to be really good actually, and I just had to weather the storm and fix everything up, get new property management in place, and now it’s a very, very nice cash-flowing property.

I think that investors, in my opinion, if they buy too thin, not enough cash reserves, they can definitely get in trouble. And thankfully, I had cash reserves, cashflow from the other business, so then I made a mistake, I could weather that storm and turn it around. I learned a lot, and also I’m happy I still have that property.

Joe Fairless: Is there a formula that we can use to factor in cash reserves when analyzing a home?

Jack Gibson: That’s a great idea. I’m not that analytical, so I don’t really have a formula… I don’t know, Schecky, do you have one?

Joe Fairless: Or an amount, or something… If you’re looking at a property, how do you think about how much cash reserves you should have for that particular property?

Jack Gibson: Well, I think if the property has been recently rehabbed and all the major cap-ex items are taken care of – fixed plumbing and updated electrical and new roof, or roof’s been put to the test where it can go for ten years or so, I think we’re fine with 5% of total rents as far as the maintenance. I think if you really wanna be conservative, go with 10%. So it just depends if the property has been rehabbed recently and what all has been done to it as far as how conservative you wanna be. That’s obviously investor preference, but I’m very comfortable with 5%.

Joe Fairless: That’s helpful, there you go. The other question I have on the follow-up is you mentioned the $60,000 deferred maintenance that you didn’t think existed but did exist… How do you determine how much deferred maintenance there is, now that you’ve learned that lesson – as we all have, to some extent – and you’re looking at a deal? What do you do?

Jack Gibson: Well, we’ve got a really good head of rehab, Antonio. He goes in and scopes every single property before we buy, or even before we consider putting an offer in. He’s a lot more talented than Schecky and I are in that department. So you wanna put the right people on your team, put them in the right position to be successful, and let them utilize their talents and their skills to make the whole team successful. Our operation is 100% team effort.

He goes in every single property, he’s looking at everything possible that could go wrong, and then even then, budgeting a few thousand extra in case he missed something that he just couldn’t see in the first initial go-around. We’ve got scopes where he’ll come in and say “Look, this is great. It’s rent-ready, it needs $1,000.” And then we’ll buy properties where they need $30,000-$35,000, complete gut job, meaning everything brand new, and then everything in-between.

So we really rely on his expertise to be able to give us that “What are we looking at here?” to bring this property to where it’s gonna be bulletproof for the next 5, 10 years plus.

Joe Fairless: Is your business model that you find property that you can add that value and maybe put in a tenant and then sell it to an investor who’s looking for a turnkey property?

Jack Gibson: Sure, so we have two models, Joe. The one which I much prefer – it’s a lot less stressful – is what you’ve just said… Buy the property at a steep discount because nobody else wants to take it on; it’s dilapidated and it needs a serious cash injection. So we’ll scoop it up at a discount and then we’ll send Antonio in, and then he runs the appropriate crews for that project. We’ve got crews that really are best for big rehab, gut job type project, and then we’ve got crews that are better suited for a small two, three thousand tenant turnover.

So he’ll send the crews  in, get the property to where it’s rent-ready, and then we turn it over to property management, they’ll put a tenant in place, and then we sell it. That’s what a lot of people on the forums consider turnkey, right? I like that a lot better, because there’s never an investor saying “Okay, why is this delayed? Why is it not done yet?” I just don’t enjoy those texts, Joe. It’s not something I wanna see. Or “Why wasn’t a tenant placed yesterday? There should be a tenant in by now; I’ve owned this for three weeks.” Well, we’re vetting tenants, we’re trying to get the right people in. We don’t wanna take on somebody that we’re gonna have to evict in three or four months, so we’re trying to vet your tenants.

That whole process of explaining how to be patient – I just don’t really enjoy it. But the thing is it doesn’t always work that way. In a perfect world it would work that way, and that’s all we would serve up. But the timing of when the investor is ready to buy and what projects we have available – it doesn’t always match up where there’s turnkey available.

If you talk to us right now at this moment, we don’t have anything turnkey, ready to go, and we’ve got investors that are ready to buy. So we would offer them a discount, depending on how long and how much they have to wait for their project to be done, and we’re still doing all the same things that we would do to bring a project to turnkey, rent-ready or [unintelligible [00:11:59].02] They’re just buying a lot earlier in the process, and then we’re still running the whole show, we’re still doing everything. All we ask for them is patience, so we really make sure with those types of projects that the investor is patient; that’s the biggest thing, we need their patience. We don’t need them on top of us every week, asking when it’s gonna be done. That’s just not worth doing the deal, and then I need to charge some kind of extra tax, annoyance tax on top of that price to be able to make up for that. [laughter]

Joe Fairless: Psychiatrist tax…

Jack Gibson: Yes! Actually, I’m going to counseling right now, for certain people… [laughter]

Joe Fairless: Well, you mentioned two ways, but really it’s one business model, just where in the process does the investor come in, and that is dependent on the inventory that you have available and the quickness that the investor wants to invest.

Jack Gibson: Exactly. And there’s a lot of clients — we have one in particular that he wants all the pre-rehab type projects, because he wants everything to be totally brand new. He wants those 20k-30k rehab projects where we’re replacing electrical, plumbing, roof, drywall, everything is being vetted, and they’re willing to wait, because they’ve got a lot of cash sitting in the bank anyways, not making any money. So for them, they’re more concerned with what’s the deferred maintenance and the cap-ex five or ten years from now, “We want everything brand new.”

Then I get another investor closing on three today, and everything I serve up to him – if there’s not a tenant in place, or the lease that he can see and everything just perfect, he doesn’t want it. So it’s just totally different perspectives and tastes from the investors, and we’ll try to accommodate them based on where they’re at.

Joe Fairless: From an income stream standpoint for your company – and I’ve come up with three ways, but let me know if these aren’t correct or if there are additional ones… One is the sale of the property to the investor, from what you’ve bought it for, plus the rehab costs, and then what they buy it for – whatever that difference is, that’s one profit. Two would be the management of the property, which I doubt is much at all. And three is  maybe construction fees for actually doing the rehab, if they invest earlier on in the process. Did I summarize those correctly, or is there anything you wanna add or remove?

Jack Gibson: Well, actually our model is just one source. We make money on the sale. We pretty much run the construction at whatever cost that it is for us. I guess you could look at it as we’re making money on the sale and then we’re making part of the money on the construction or whatever, but it’s not how I think of it. I get my quote from our crews, and then I’m taking that number and just passing it on to the investor, that cost, and then we’re just trying to make an appropriate margin so we can keep our operation going and funded, and Schecky can be happy and I’m happy and the whole team is happy.

Management – we don’t make any money on that either. We turn it over — we have two or three different management companies that we utilize. We did have an in-house model at one point, Joe, but we much prefer just to put the professionals in their lane and let them take over once everything’s ready, and that’s worked very well for our investors. Schecky, I don’t wanna do all the talking – do you wanna add anything to that?

Jeff Schechter: Yeah, I think that the biggest issue there and the big value-add for the investors obviously is because of the economies of scale. Because we’re running all that stuff at our own cost and because we’re doing so many projects at one time, even with our markup, it’s extremely attractive to the investor to be able to buy a property at a very fair price, but the model is such that all along the way – from the buy, to the rehab, to the management, everything is… We’re focused on a lot of different numbers, but the main number that we’re really focused on is “How is this thing gonna ROI for the investor?”

So no matter really what the final cost is there, it’s really just “Can that investor plug into this situation where they can make high returns?”, hence the name of our company.

Joe Fairless: Right. What’s the ROI that you look for at minimum, net to the investor?

Jack Gibson: Nothing under 10%. You can chime in as well, Schecky. At a minimum, we wanna live up to our name, High Return Real Estate. So there are deals where we really don’t make any money, because we don’t wanna sell the property where the end investor is not making at least a double-digit net return. That model has been very successful for us. We’ve done very, very well, so it’s really a volume model, Joe. We’re really just trying to make sure that the end investor is sever at all times, that they’re getting a great ROI. I have investors that are up to 20% net. It has happened, and we do have them right now. Can I duplicate that all the time? No way. Those are definitely home runs; they’ve maybe got a quad or something that has just really stayed with a really low vacancy… But we’re trying to get to that 10%-15%. The sweet spot I think is the 12%-14% cap rates.

Joe Fairless: When you had your management company initially under your own roof, and then you decided to move it out to other companies that are doing it full-time and completely focused on it, what was an issue? Because clearly there was an issue that came up where you decided, “This just isn’t our thing. We’d rather focus on what we have been focusing on, not on the management side.” So what issue/issues came up?

Jack Gibson: Great question. When I initially started buying in Indianapolis, the turnkey provider that I bought from was awesome. I was getting great returns and great service from him, and I started referring a lot of friends, family, colleagues, and I generated something like 5-6 million just off my network, sending people in as referrals. That’s when I decided “Wow, I’ve got a business here.” So I asked them, I said “Can we make money together? Can I partner with you?” So then we formed a partnership where I was marketing and he was doing all the acquisitions and the property management… So in a sense, it was an in-house system. I wasn’t doing it, but our company together was in-house.

Well, then he started scaling up so much from other people that were marketing for him that the quality of the service and the communication just started deteriorating to a point where Schecky and I just said, “Look, this isn’t serving our investors, this is too stressful for us. We’ve gotta take on our own operation, and unfortunately part ways.” I’m very loyal, so that was a very difficult situation for me and Schecky to coach me through it for a good couple months, and definitely counseling was involved, paid and otherwise. [laughs]

Then when we started our own company together, that’s when we vetted out several different property management companies in the area, and we feel very good and we monitor everything that they’re doing. In fact, in our Buildium account we can look at all of the properties that are under management that we’ve sold, and we can see everything – what the rents are, what their expenses are… So if somebody gets in where they’re not doing that well, then we can swoop in and figure out “What do we need to do to make this work for them?” Schecky, I know you needed to add something there.

Jeff Schechter: Yeah, it’s interesting, because there seems to be a general consensus among people that look at turnkey operations and it’s assumed that it would make good sense for the turnkey company to also own and run the property management company. But just to pun an asterisk on what Jack said, what we found is that it’s really too easy for mistakes – and I’m talking also about rehab mistakes, too – to be easily hidden when the property management company is the same company. So even though that’s kind of the mantra, like when you get into some of these real estate forums, we get that question so often – “Why aren’t you guys running your own property management company?” Because we found from experience that that formula actually did not serve us, nor did it serve our investors.

The relationships that we have with a couple PM companies that we currently use — obviously, we certainly insist on transparency and investors being able to log on to online portals, being able to see all the activity, but the other thing that we really use them for is to keep us honest. So when we get done rehabbing a property, we ask another party to come in and go hey look, we’re saying it’s rent-ready, okay? But can we get another set of eyeballs on this that is representing going out and marketing to renters to say “Yes indeed, this is rent-ready.” And to be truthful, we found obviously there were a couple of situations where we said “Hey, this needs a little cleanup [unintelligible [00:20:53].23]” I mean, there are typically no big deals, but it’s really great to have this other company keep us honest, keeps us on our toes, and there’s no question that the end investor is far better served by this kind of formula.

Joe Fairless: Yeah, that’s interesting. I hadn’t thought of it that way, I’m glad that you mentioned that. Which one of you primarily speaks to potential investors? Who has those conversations?

Jack Gibson: Well, Schecky’s on the ground in Indianapolis, so he’s doing all of our investor tours. Whenever somebody wants to come to town and look at the properties and go in them and feel great about actually seeing our operation and meeting our teams. So he’s really good at the tours. For a while there he had a pretty terrible streak, so we were joking around with Schecky… [laughter] He really needed to upgrade his skills, but that wasn’t it; he’s awesome, and he treats people so well when they come into town.

I do a lot of the acquisitions as far as figuring out what we’re buying, and pricing and all that. Typically, Nicole – she started off as an investor with me, and now she’s our investor liaison. So she has the first conversations with the investors to see “Are they curious or are they serious?” and then once she establishes that they are serious on moving forward, then the next step is usually to come to me, so I can match them up with the appropriate acquisition and so on. So we both [unintelligible [00:22:16].18] in different ways.

Joe Fairless: Whoever wants to answer this question, answer it… What’s the toughest question that a potential investor has prior to — well, obviously, there are potential, so they haven’t invested yet… What’s a really tough question that they can ask your team?

Jack Gibson: Want that one, Schecky?

Jeff Schechter: Well, I can tell you one that we get the most often is “Why do you not accept financing?”

Jack Gibson: Oh, yeah. There you go. Yup.

Jeff Schechter: We sell all of our properties for cash, and we do that because we’re in lower-priced properties. The point of entry is very low for our properties. We’re typically in B and C-class properties in a metropolitan area that’s really great for investing. You can get a lot for $50,000 or $60,000 in this town. And what we’ve found is because of the volume that we’re doing, when we wait around for appraisals that may or may not be consistent, it just really gums up the whole sales process.

When we first started out and we did accept financing, it’s just like we would write up a lot of deals, and there was a big percentage of them that never closed, not because they weren’t real deals, but just because we were waiting too long to get answers back from their lender, and dealing back and forth between what the true appraised value is, things like that.

When you go cash, as you know, Joe, we can just move forward, close quickly, everybody wins. When we look on our website, our properties are prices accordingly that it’s assumed that it’s gonna close quickly and pay cash. So we’ve already put that good discount upfront for those people, just to make that transition very smooth.

Jack Gibson: To add something to that, I was just on a forum where these people were kind of piping in and saying that it’s a huge red flag if they won’t accept financing. Look, I’ve done financing deals. I’ve put together a $600,000 finance deal last year, and it was miserable. Absolutely I was miserable, I was stressed out, my wife was probably — wanted to get a big D from me… And I just said “You know what, I’m doing this partly for a serious business, yes, partly for fun, I wanna enjoy what I’m doing… This is not enjoyable, to work with these lenders and these banks and all the hoops that they make me jump through, and the delays, and then the investor can back out pretty much at any time… I just don’t like it.”

So it’s pretty much preference. We wanna deal with cash, and I don’t see how that’s a red flag. We definitely try to set up investor for a cash-out refinance on the backend. We’ve had a lot of them that have done that very successfully and gotten great appraisals on the backend, and we encourage them to do that. That’s how I did mine and it worked great. I got all my cash back out, because I was able to get really great appraisals. So I just wanted to throw that in there as well…

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

Jack Gibson: Wow. Go ahead, Schecky. Let me think for a second.

Jeff Schechter: Well, I’m a little biased, but I would say — again, as a qualifier, if you’re a buy and hold investor, then find a good turnkey company to work with. We have people who come to town and they’ll say “I wanna get a team together. I’m gonna rehab, I’m gonna do this”, but a good turnkey company like us – and yeah, I’ll brag for a minute, but we’ve got all these processes in place. We work with all the wholesalers, we go to all the tax sales, we buy right, we know the town really well, we’ve got great crews, we have incredible economy of scales, and I’m not saying it to sound snotty, but we can pretty much do a better job than any individual investor can do on his own accord.

So that would be the best advice – if you’re gonna do buy and hold, then find a really good turnkey company that you can work with.

Joe Fairless: The flipside of that point though – and I’m sure you’ve heard this – is that as real estate investors, if we add value and not a turnkey company, then we’re getting that equity, versus paying the premium that a turnkey company typically charges, therefore it would be faster, assuming things go according to plan, to do a cash-out refinance and continue to have that snowball approach.

Jack Gibson: That’s absolutely true and there’s a valid argument for that, Joe. For those that really wanna be active investors and they wanna go out and go to the tax sales an share of sales, and analyze a ton of properties to figure out what’s going on, “Is this a good deal? Is it not?” Probably for them, they really wanna get their hands dirty and get into the mix and create that forced appreciation themselves – sure.

I think for the bulk of investors that are out there, they don’t have the time and the skillset and the ability, or pretty much probably the biggest thing – they just don’t have that desire to go out and do all that heavy-lifting to save potentially a few thousand dollars of course in equity; we know that. But they don’t have it in them to be able to go out and do that, and for me — I mean, I know that’s an expensive lesson when you first start off. Those are the mistakes I made, because I was that beginning investor that was trying to be active, but I really didn’t have that much time when I first started (very active with my other business) and I didn’t have the knowledge. I paid the price for the mistakes, 60k+ and then some other properties as well that didn’t go all that well.

Joe Fairless: Got it.

Jeff Schechter: And I think that argument is good depending on the market that you’re in. To give you a good example, in Indi, where prices are really reasonable, if somebody was gonna go in and do their own rehab, maybe they save 8k or 10k or 12k off of what they could buy the property from us for. I mean, I think that’s a fair number in this market. If they hypothetically bought a duplex from us that’s cash-flowing at over $1,000 a month, you’re talking about 8 or 10 months of rent. If they take 8 or 10 months to do that rehab, it’s kind of awash. So I think that argument is really valid if you’re in more expensive areas where there’s opportunity to create a lot more forced appreciation, but along with that comes the greater risk in those more expensive markets. I just think it depends on what your tolerance is for that kind of stuff.

Joe Fairless: Yeah, good point. I appreciate you following up with that. Alright, we’ve gotta do a lightning round, and in fact it’s not just any lightning round, it’s the Best Ever Lightning Round. Are you two ready?

Jack Gibson: I always want the best. Throw it at us, let’s go!

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

Break: [00:28:43].09] to [00:29:30].27]

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

Jack Gibson: It has to be Rich Dad, Poor Dad. That got me started.

Joe Fairless: Best ever deal you’ve done that’s not the first one or your last one. Something in between.

Jack Gibson: Oh, man… This is the Lightning Round, the pressure is on… I can’t think of anything, because there’s nothing where I’ve made a huge hit. I think everything’s pretty consistent, Joe; I don’t have one in mind. Schecky, do you have anything? No? Okay…

Joe Fairless: Just pick one deal and what are the numbers on one deal, how about that?

Jack Gibson: There was an 8-unit that I bought for — I think I was on for 45k, because I threw a lot of referrals at him, instead of taking a commission… Probably my cost was like 60k, and ended up selling it for 100k.

Joe Fairless: You sold it for 100k — why did you keep that 8-unit? You were all in for 45k, why not just keep that, rent it out and then do cash-out refinance and hold on to it and put some financing on it?

Jack Gibson: Because it just wasn’t leasing up. The property management company was off… I don’t know what they were doing, but they were sleeping; I got tired of dealing with them, so I just said “Here, sell it off.” So they sold it off and I got 100k, and it was great.

Joe Fairless: Yeah, the $55,000 is great. Best ever way you like to give back?

Jack Gibson: You know, the top two things for me are church – [unintelligible [00:30:51].23] and ever since I’ve started doing that, my income has tripled and everything in my life has just increased.

Then we also support Accasa, which is for disadvantaged children; I have a big heart for the kids, so we give a ton of money to that charity. Because of our involvement, they’ve been able to take on another 25 children into their program in the last year, that are in the really tough streets of Jackson, Michigan… So it feel awesome.

Joe Fairless: Yeah, that’s incredible. And it’s interesting, you said you tied 10% and since then your income has tripled… And it’s not because you were wanting your income to triple, as a result of giving back. That’s just how the universe works.

Jack Gibson: I fully agree. I think that was the biggest game-changer for me in my entire life; when I first started doing that four years ago, it was absolutely amazing what happened. The things that started happening were indescribable. And yeah, you’re right, I wasn’t doing it to get something back, I was just doing it because I just wanted to put myself in the best possible position to be blessed, have good karma, the universe is looking out for me, all those things. It’s crazy.

I try to mentor young men in their twenties, I really wanna try to teach them how to be leaders and how to live a really good life, maybe avoid some of the mistakes I’ve made, and one of the big lessons I teach is just start giving back now; while the income is small, it’s a lot easier. When you start making big money, it’s gonna be a lot harder to make that switch, so do it now.

Look, start with 1%, 5%, and then just start working that muscle; just like going to the gym – as you build that muscle up, it becomes easier and easier to do it and to do the increase and reach the full 10%.

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

Jack Gibson: Well, Schecky, you are a digital marketer… I think he’s got an internet delay, so I’ll take that one then.

Jeff Schechter: Well, that’s an easy one… Just go to highreturnrealestate.com.

Joe Fairless: Great, that’s highreturnrealestate.com, and that’s also in the show notes page.

Jeff Schechter: HighReturnRealEstate.com, just like it’s spelled.

Joe Fairless: Got it, and that’s in the show notes page, so people can just click through and go check out your website, and you’ve got a nice little video on the homepage; I was watching it before we started our conversation.

So thank you you two for spending some time with myself and the Best Ever listeners, and talking about your business model, as well as challenges along the way, both from an operations standpoint as owning a turnkey company, but then also on your own deals when you were getting started. As you mentioned, Jack, the top mistakes – one, paying too much for property, and two, not factoring enough for deferred maintenance, and you gave that neat little 5% of total rents for total maintenance, assuming it truly is a turnkey, or maybe 10% to something that might have a couple issues with it, just to be conservative… As well as the giving back component, and I’ve seen it myself personally, and then also with people like you and others – you give and you give, and the rising tide lifts all boats. That’s certainly how it works.

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

Jack Gibson: Best interview ever, Joe. Thanks for having us.

Jeff Schechter: Thank you, Joe. I appreciate it.

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JF1236: What To Do When A Deal Falls Through #SituationSaturday with Sterling White

Sterling has a team working with him to find deals, when one of the team members found an off market deal in Cincinnati, they took action and put it under contract. Not everything went as planned throughout the process, eventually they had to walk away. To hear what happened to cause them to leave the deal, and what Sterling and his team learned make sure to listen in! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Sterling White Background:

Co-Founder of Holdfolio a real estate crowdfunding platform

– Has been directly involved with both buying and selling over 100 single family homes

– Specialties include Sales, Marketing, Crowdfunding, Buy & Hold Investing, and Investment Properties

– Based in Indianapolis, Indiana

– Say hi to him at www.holdfolio.com


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

First off, I hope you’re having a best ever weekend.

Because today is Saturday, we’ve got a special segment with a returning guest, called (this is the segment, not the guest’s name) Situation Saturday. The guest name is Sterling White. How are you doing, Sterling?

Sterling White: Hey, I’m loving life! How are you doing, big Joe?

Joe Fairless: Sweet! Well, I’m loving life as well, and I’m looking forward to you sharing this story — you gave me a taste of it earlier before we started recording, and it is certainly a cautionary tale for Best Ever listeners and myself, and everyone who comes across this episode.

The sticky situation – the situation that Sterling was in – is he had a deal under contract, and then some things happened… So he will talk through that.
A little bit about Sterling though, in case you don’t recognize his name… He was a guest on the show, episode 655; you can listen to his best ever advice on that episode. Sterling is the co-founder of Holdfolio, which is a real estate crowdfunding platform. He’s also the host of Holdfolio Download, a podcast that you should go check out. He has been directly involved with buying and selling over 100 single family homes, and he especially includes sales, marketing, crowdfunding, buy and hold investing, and of course, investment properties. Based in Indianapolis, Indiana… With that being said, Sterling, how about you give the Best Ever listeners a little bit of a refresher of your background and your focus? Then we’ll roll into your situation.

Sterling White: Since early childhood I’ve always been into the whole entrepreneurship real of things. I remember as little as eight, nine years old I was getting my hands on Kool-Aid and selling it to kids throughout the school, and that kind of really just transitioned to getting into real estate with wanting to provide as much value for individuals out there. I started on the construction side, getting my hands dirty on large commercial projects, which were fire stations, churches etc. Then about two years after working into that, that’s when I then found my mentor, and that’s when I really wanted to better understand the investing side. I partnered with him, and really took about 20-25 years of his knowledge and compacted it into 2-3 years, and I absolutely worked for him for free, in order to gain all of that knowledge, which is something I recommend to newbies.

Transitioning to now –  bought and sold hundreds of single-family homes, and now with the current company we do single-family homes as well in portfolios of ten, and now we’re shifting over to the multifamily side to expand our footprint.

Joe Fairless: ANd what a perfect segue for your story. Will you tell us the story and tell us the situation that you were in?

Sterling White: Alright. Well, it’s still a little bit gut-wrenching, to tell you the truth… It was a property that was in Ohio, 118 units. We were very interested in purchasing this asset, and went back and forth with negotiations with the seller for the course of I’d say about a month, a month and a half, and we finally agreed on the purchase price, but with that under the condition that numbers still worked, but throughout the due diligence period no huge surprises… We didn’t want to expect [unintelligible [00:05:45].20]

Joe Fairless: And a couple quick questions… A month and a half of negotiations – was it an on or off-market deal?

Sterling White: This was an off-market deal.

Joe Fairless: Off-market deal. How did you come across it?

Sterling White: We came across it by pulling the public records, noticed it was owned by an LLC, used Google to trace down the actual owner of the LLC and gave him a call.

Joe Fairless: The purchase price was agreed upon for a 118-unit deal – in what city?

Sterling White: This was Cincinnati, Ohio.

Joe Fairless: In Cincinnati… And what was the agreed upon purchase price?

Sterling White: This was 4.7.

Joe Fairless: 4.7 million dollars… I was gonna make a joke — I couldn’t figure out a joke; I’m not fast enough to make a joke there! Okay, 4.7 million dollars, about $40,000 a unit. What was your business plan for this?

Sterling White: Our business plan (and one thing I reach out to you) was we were gonna go in there, and the units were a little bit outdated, and they were under-rented by about $100 to $125, so we were gonna go in there, make the necessary changes to renovations such as flooring, paint, countertops, and then that’s when we were going to ask for those rent bumps.

Joe Fairless: Okay. And the market comps were supporting your business plan, I assume?

Sterling White: Yes, there was a property right across the street that was 100% occupied at those increased rents.

Joe Fairless: Okay, alright. That helps us set the stage. Please proceed into the situation.

Sterling White: The deal was off-market, and the seller originally started at 5 million dollars for the purchase price, and we were about 4.3 or 4.4, and then finally — that’s what I mentioned, we were able to get to the 4.7. That was a little bit on the top end for us. At that point, that’s when we went under contract and we sent over everything to our lender to get the ball rolling on the finance side.

It was a week or two, we were still doing our due diligence on the market, the immediate area,  pulling additional comps, and that’s when we scheduled an inspection with the lender’s inspector and their engineer, and we walked through all of the units.

Joe Fairless: Okay.

Sterling White: At that point in time, a lesson now that I reflect is the seller mentioned that there has been some leaks throughout the building… So there’s ten total buildings, 118 units, and he mentioned there was leaks, but since he’s owned it, which was about 18 years, which was something else (hindsight 20/20) is he mentioned he’s been making repairs throughout, so we’re thinking in our heads “Okay, well maybe it will be fine once we get the roofers up there and we’ll further assess.”

So when we were walking through all 118 units, the top floor you notice a common thread that there was a leak — I wouldn’t say in each and every one of the units, but you can consistently see that there’s leaks.

Joe Fairless: Okay.

Sterling White: And it turns out once we got our roofers right after we finished the inspection, we got about three or four different bids, and they all stated that there’s no way we would feel comfortable making these repairs; you guys are gonna have to replace, and the cost, by the way, is gonna be close to 400k.

Joe Fairless: Yowsers!

Sterling White: Yes…

Joe Fairless: There’s the difference there between your 4.3 and 4.7 purchase price…

Sterling White: Exactly. And that was one of the biggest learning lessons for us — well, me in particular… I was very eager to get the ball rolling on the deal, and once we heard about those leaks, we should have instantly got those bids and got someone to get eyes on that, versus later in the process, where we’ve already spent money and had the inspectors come out.

Joe Fairless: And why is that? Were there costs associated to it?

Sterling White: For on the lender side, yes there was. I don’t know the exact figure, but it was between 5k to 8k that we paid out for that.

Joe Fairless: Just for the lender’s inspectors to go out there, because you had gotten through to the process where the lender had given you the term sheet, I imagine, and everything looked good, and now the lender was doing their due diligence on the ground.

Sterling White: That is correct.

Joe Fairless: Okay.

Sterling White: And we had a sit-down with the seller after everything was said and done, we’ve walked all the units, we’ve got all our bids from the roofers, and we said, “Well, this is something that we did not expect. Is there a way that you could accommodate us on this? If not, then we’re simply gonna have to walk away.” And he said no, so we walked away.

Joe Fairless: Was he a local person, or was he from out of state? It sounds like it was a local person.

Sterling White: Definitely local.

Joe Fairless: Okay. And what was the reason why he was wanting to sell?

Sterling White: That is a great question. I believe the main thing was he was just simply tired of managing it himself.

Joe Fairless: Was there a proposal for creative financing, maybe a master lease, that you could take over management, regain control of the property, and them pay him off over a longer period of time?

Sterling White: This is by far the most stubborn seller I have dealt with in my career. There was no budging.

Joe Fairless: That’s a definite no then.

Sterling White: Yes, definitely no. No budging from that individual’s end.

Joe Fairless: When you met with him, was it over the phone, or in person when you had the conversation about the roofs?

Sterling White: Both. I’d say it was more so in person. And even the owner is the operator, so he’s pretty hands on, and when we did send the roofers out there, he actually was engaged with them as well, trying to frame it “Oh, well that doesn’t necessarily need to be replaced… I think we could just repair that.” So there was a little bit of that in there, too.

Joe Fairless: Oh, he is very hands-on… Talk us through the conversation. You plan to meet with him in person… Where do you meet, first off?

Sterling White: We met at the property.

Joe Fairless: You met at the property… Are you in the office or are you standing somewhere on the property?

Sterling White: We actually met in the clubhouse that’s on site, and one thing that I always do when I’m meeting with a seller is I bring a thank-you card that just states “Thank you for your time today and allowing me to view this property.” I’ll always bring that with me and I’ll give it to him; it’s just a courtesy.

Joe Fairless: Okay, and why do you bring that up?

Sterling White: That is something that I believe goes a long way. Every time I have given that to a seller, I can see their eyes light up as if they’re shocked that someone took the time to go out, get them a card and give it to them.

Joe Fairless: Okay. So you have a card, you meet at the clubhouse on site… Do you two sit down and have a discussion, or are you two standing up?

Sterling White: Yeah, and this is me, my partner, and also a fellow colleague of ours that does solely focus on multifamily acquisitions… So it’s all three of us that’s in negotiations.

Joe Fairless: Alright. And then it’s just him?

Sterling White: Yeah, it’s just him.

Joe Fairless: And roughly how old is he?

Sterling White: Mid-fifties.

Joe Fairless: Okay. Now, how does that conversation go?

Sterling White: The conversation is — is this upfront, or is this after we’ve had all the inspections?

Joe Fairless: This is after you’ve had all the inspections.

Sterling White: Okay. We have the sit-down with them and mention we recently received the bids back from our roofers, that were able to go up and assess the condition of the roofs. “It turns out that we’re walking into something that we did not foresee when we originally spoke with you. At the time, we were at 4.2 or 4.3 (I forget which one we were originally at), but we came up halfway in order to accommodate you, since you were at the 5 million dollar purchase price, and at that point that was a little over what we were committing to. Now, with the recent development over these roofs, there’s no way we’re gonna be able to justify paying the 4.7 without getting ourselves in financial trouble. With that, is there a way that you’d be able to compromise and provide a credit in order for us to have this deal go through?” So that’s kind of the dialogue word for word.

Joe Fairless: Okay. And what was word for word his response? Ish…

Sterling White: It was more so that “I necessarily do not believe you guys have to replace all those roofs.” That was the main… And “I told you guys up front that I was gonna be firm at that 4.7 purchase price.”

Joe Fairless: And then that was it?

Sterling White: That was it.

Joe Fairless: Everyone got up and shook hands…? Did you take back your thank-you card and you walked out the door? [laughs]

Sterling White: No, I did not do that… [laughs] We did send over a mutual release to [unintelligible [00:15:16].08] but no, I did not pick up the thank you card and rip it up and step on it… [laughs]

Joe Fairless: I just see you looking at him, snatching it from his hands… “I’ll take that, please…” [laughs]

Sterling White: But you can feel the intensity, or… What’s the other word I’m looking for? The vibe that’s in the room when negotiations get really tight like that.

Joe Fairless: Yup.

Sterling White: I love that feeling, for some reason.

Joe Fairless: Now let’s talk about what you will do differently on the next deal. Well, first before we talk about what you would do differently, how much money did you lose in this transaction and where did that money go?

Sterling White: I’d say that number that I’ve mentioned, the…

Joe Fairless: 5k-8k for the inspector…

Sterling White: Yeah, that’s just about it. But the biggest thing was the time that was invested, which is something we can never get back. It was a significant amount of time. But outside of the cost to the lender, there was nothing… Maybe the cost for gas…

Joe Fairless: Right, because you live in Indianapolis and you just drove to Cincinnati… So the cost for gas, travel etc. but the big chunk would be the inspector. What about all the other due diligence you did on the property? Did you not have to pay any of those vendors?

Sterling White: No, I didn’t have to pay any of them?

Joe Fairless: What did you get done with vendors, just so we know who was doing what type of work he did, and that you didn’t have to pay him?

Sterling White: Well, from my experience, there is quite a bit of roofers that just wanna go up and provide a quote, and in the event that you do proceed with them, they provide a free estimate.

Joe Fairless: Yeah, I get it on the roofers, but as far as just your management company going through, doing units walks, or getting any type of other inspection reports… Did you get any of those done? HVAC, or anything like that?

Sterling White: No, I don’t believe we were able to get today.

Joe Fairless: Okay, cool. So the roofs were the only thing, and it was just the lender’s inspector… Alright, so it was 5k-8k out of pocket cost, a good down payment on one of those single-family homes that you love… But it’s a good lesson learned. What will you do differently moving forward?

Sterling White: Initially – and that’s what we’ve done on our other deals as well – as soon as something is questionable, we’ll go to a property that we’re close to negotiations with on the seller, we’ll check the condition of the roofs, and we’ll also look if it’s a brick building (which is predominantly what we go for), we’ll check the masonry as well. Those are items that we look at as big tickets – the masonry, the foundation, and if anything is settling… And if something is a concern, that’s when we’ll start calling out different individuals in those traits and get them out there before we send out money to our lender to go out and do the financing component.

Joe Fairless: Okay. Anything else that you wanna mention as it relates to this story, that we haven’t talked about?

Sterling White: Well, one thing that I’ve mentioned on the recent video I provided on the update on this is to bring a snack, which is a funny thing to mention, but… When we walk all the units, everyone that we were with were pretty hungry, so that’s one thing that I’d mention. When you’re taking a whole day and walking off these units, just make sure you have your energy.

Joe Fairless: Got it. Alright, well bring a snack, have some energy, have a thank-you card, be prepared to snatch it back from the seller if they don’t agree to your negotiation approach, and then most importantly, if something is questionable, make sure that you dive into it quickly and get quotes, so that you can renegotiate. Unfortunately, 5k-8k on a large purchase like that – it’s just gonna happen sometimes.

Sterling White: It’s tuition, that’s how I look at it as… Paying tuition. And one thing I wanted to mention too is I would recommend not to try and construe your numbers to try and make it work, if that makes sense.

Joe Fairless: Oh yeah, great point. This very well could have been an interview 24 months from now about how you went bankrupt after buying a 118-unit in Cincinnati, Ohio, because you tried to inflate your purchase price and thought you’d recover, but in reality it would have been better to lose 5k-8k by not closing on the deal… So good point, and definitely something important to keep in mind.

Thank you, Sterling, for being on the show. How can the Best Ever listeners get in touch with you?

Sterling White: Just e-mail me at Sterling@Holdfolio.com. I’m more than happy to create as much value for all you Best Ever listeners out there, because you are awesome!

Joe Fairless: Well, you are awesome, too! Thank you for being on the show. I hope you have a Best Ever day, I appreciate you telling us the story, and we’ll talk to you soon.

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JF1145: You’re Near Bankruptcy – What Do You Do? #SituationSaturday with Scott Meyers

Scott was in the checkout line at Walmart when his debit card stopped working. He had hit rock bottom. Lucky for him, he had the support of his wife, family, and other mentors to help him through this tough time in his life. Losing all his money was due to the lending practices that were going on in the early 2000’s, Scott had 80 houses he was renting out – but the tenants were now able to go buy their own house with just a signature. Hear how Scott was able to get through this time and build his Self storage business. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Scott Meyers Background:
-Owner at SelfStorageInvesting.com Founder of Self Storage Profits, Inc. that syndicate, acquire, develop, and manage
-Self-Storage Facilities Nationwide With over 5,200 units and over $30M
-We will also continue to grow our Information and Education Company
-Based in Indianapolis, Indiana
-Say hi to him at www.SelfStorageInvesting.com

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They’ve also partnered with best-selling author, J Scott to provide Bestever listeners a free chapter from his new book on negotiating real estate. If you’d like to improve your bestever negotiating skills, visit http://www.fundthatflip.com/bestever to download your free negotiating guide today.


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

I hope you’re having a wonderful best ever weekend; because today is Saturday, we’ve got a special segment like we usually do on Saturdays called Situation Saturday.

Here’s the situation, Best Ever listeners… You’re near bankruptcy – what do you do? We have a returning Best Ever guest, Scott Myers, who has been through that and now he’s got over 5,200 units valued at over 30 million dollars of self-storage facilities.

How are you doing, Scott?

Scott Myers: Fantastic, Joe. How about yourself?

Joe Fairless: I’m doing well, my friend; nice to have you back on the show. Can you give the Best Ever listeners a little bit more about your background and then tell us your story?

Scott Myers: Sure. The story begins – at least on the investing side – once I got into… Well, I was working for a Fortune 500 company, I moved to Indianapolis and started looking into ways to invest for retirement, as dad told me. So what I was looking into, not only maxing out my 401k with my company and doing the things that you should be doing, but I was looking for a hedge against that, so I started looking into real estate. On the whole, what I found was that the richest people in the world (let alone in Indianapolis) had not created their vast amounts of wealth in the stock market, they had created in real estate, so I began to get more interested and then also shifting, instead of focusing so much on maxing out my investments in the stock market… I started looking into real estate, so I bought a number of rental houses, followed the Carlton Sheets method that had gotten me started in this, and before we knew it, a few years later we had teenie houses, and then we got into apartments and bought a 400-apartment unit, but didn’t have the freedom and the extra cashflow that all the gurus had talked about at the time, we just had a lot of tenants, toilets and trash; a whole lot of folks that were leaving us high and dry, and the courts wouldn’t do much about it, because… They don’t. The eviction laws are to protect the tenants, so something had to give. I didn’t wanna get out of real estate, but it certainly wasn’t what we had hoped for, so while we were looking at other forms of real estate we found self-storage, because that doesn’t have tenants and toilets and trash, which was the main cause of my lack of free time and lack of extra cashflow.

So I bought a self-storage facility and the light bulb came on, the eyes were opened, and when somebody doesn’t pay you, you simply lock them out and then you sell your stuff and you get paid back, and there’s really not much to destroy because it’s a metal box on a concrete slab and you don’t have anybody living in it. So for those two reasons and the fact that we had the protection of lien laws versus evictions laws, which totally benefits the investor, not the tenant. So we sold off all our houses and all our apartments and we ramped things up on the self-storage side. We continued to buy and develop all across the country.

Along the way, we started this information/seminar business as well, and we began teaching people, starting with a local real estate investor association I used to run. Then it kind of blossomed from there and I got asked to speak on a number of different stages and different venues, and with the trade associations. We turned professional, if you will, and then ramped up that side of the business, and now I have a number of folks working underneath me and operating a full-blown information business where we create partners for ourselves in the future, so that these folks will go out and buy and develop self-storage facilities and then down the road we have an opportunity to partner with them on deals and use our equity partners.

To come full circle, it’s been a fantastic ride, and now we do have the extra time and the extra cashflow to live the life that we wanted when we got into this real estate game to begin with.

Joe Fairless: Well, you skipped over the near bankruptcy part.

Scott Myers: Oh, yeah…

Joe Fairless: Come on now… You just gave us the elevator version, but I asked about the near-bankruptcy part.

Scott Myers: Yeah, we can do a whole podcast on that.

Joe Fairless: Well, that’s what I wanna do. Tell us.

Scott Myers: This was back in 1999… That’s about the time when most of this started, which was the recession that we all forgot about because of the massive one that began in 2008. In 1999 there was a tech crash, and at that point, that is when I decided actually to go into real estate. I saw my 401k blow up; I wasn’t making as much on an hourly basis as I was in real estate at the time, so I decided to leave my job and become a full-time real estate investor.

Well, shortly after that is when — that recession, we didn’t come out of that within about a year to a year-and-a-half, and at that time, that’s when the government came up with this wonderful program where they would [unintelligible [00:05:31].03] a loan from anybody that could walk into a bank and fog a mirror; you could roll in all your debt into those loans, and people were getting houses with a signature… So all of our tenants were leaving – we had 80 houses, 400 apartment – and who could blame them? This was the best time in history for anybody to be able to buy a house, regardless of how crappy your credit was, and if you had no cash, the government would just take care of it… Good old Santa Claus.

So they did, and all my folks left, and so that left us with a pretty large gap in our income and then a pretty large ship to be able to turn. So every spare dollars that we had, we were putting back into our houses to rehab them to sell to these first-time homebuyers. And as you know, Joe, a $3,500 rehab to rent something is far different than a $10,000-$15,000 rehab to get something ready to appraise and sell.

Joe Fairless: Right.

Scott Myers: So we were doing our best to sell all those off, and we were in a huge cashflow pinch, and we really battled that for about two-and-a-half to three years. By all means and by all accounts we probably should have filed bankruptcy, but we spent all our savings, we pulled everything out of retirement to right the ship, and lo and behold, at the end of three years we were able to sell off all those apartments and all those houses to others investors. We got through that stage and lived to fight another day, while simultaneously  ramping up our self-storage holdings… But it’s an ugly day when you’re in the checkout line at Wal-Mart and your debit card doesn’t go through, because then it’s game over.

It’s one thing when the credit cards don’t go through, but when the debit card doesn’t go through you know you’re in trouble, and that’s the place that we were. [unintelligible [00:07:01].11] my wife and I were in a pretty dark place in the business, because this wasn’t what we signed up for, and it certainly wasn’t what she signed up for, and about the worst place that I’ve ever been — not about, it is; that’s the worst place I’ve ever been, because when you can’t provide for your family, then it’s the worst feeling pretty much, at least for most of us guys [unintelligible [00:07:20].06] I know there’s things that are worse, but that was pretty much the bottom.

Joe Fairless: How did you mentally get through it?

Scott Myers: Good question. Fortunately, I had a supportive wife. There’s many folks that I’ve seen in the past that go through financial troubles; 50% of all marriages in this country end up in divorce, and 80% of those are due to financial problems. I am very fortunate that my wife and I are both very strong in our faith, and we prayed together and we were rowing together, praying for land and rowing for shore together, and that’s what got us through. If I had not had the support of her, as well as several other smart people in real estate and in business (masterminds and groups that I was involved in, then it would have been even darker than it was). At the end of the day, the only thing that we can do is move forward. It really wasn’t an option. At this point I have not only a family to support, but really what else are you gonna do? You can’t curl up in a ball and wait for the worst or the bottom to fall out of it.

We would see the fruits of our labor, and we had faith that our creator was gonna get us through this and that he will provide, and He did. We learned a lot from that.

Here’s the thing, Joe – I wouldn’t want anybody to ever go through that, and I certainly wouldn’t wanna go through it again. There’s an awful lot of folks that I secretly – and I mean this in a positive way – wish would go through that, because the lessons that you learn about how to fight and how to scrap to see what you’re made of, and also to rely on someone else – and no matter what you believe spiritually, but also your partner in the business and perhaps partner in life – to go through something like that. Those are lessons learned that I would never trade.

Again, it was difficult, but man, there’s blessings on the other side of that and I’m sure any of these listeners out there that have been through this will probably agree. It just makes you a better person all the way around, versus somebody who goes through life and never has any adversity.

Joe Fairless: What skillset do you think you honed most within that time, that you now apply to your self-storage business, or just as an entrepreneur?

Scott Myers: By nature, I’m a trusting soul, and I give everybody the benefit of the doubt, and perhaps to a fault. And the people around you, including your bankers and partners – it’s funny what happens when money gets in the way or when money begins to dry up, or expectations aren’t met. You need to vet your partners, and if you’re going into partnerships… I look at not only the paperwork and the contracts much differently, but now I don’t know that I would ever go into a partnership in which — I’ll be a 50/50 partner with somebody so long as one of us is silent and the other one is the driving force. But when you get into a partnership where both folks or three folks or four are equally splitting and making the decisions in the business, I think it’s a recipe for disaster.

Most of the partnerships that we have right now are syndication and forum, as we talked about briefly before we started this call. I’m the promoter and the syndicator, and everybody else is silent, period. And I have control.

So at the end of the day, I don’t know that I’ll ever get into a partnership where we have equal decision-making – that’s the first. Second of all, I learned enough about banks that I don’t like…

Joe Fairless: Yeah, agreed.

Scott Myers: And don’t get me wrong, they are partners in your business as well; they’re truly partners. And  if you use a bank, and the LTV is 65%-75%-80%, don’t kid yourself that you own the property; you’re a minority partner in that property, and they have the control. So not only do you have your real estate and attorney look at your promissory note when you close on this, but just — I try to avoid banks at all costs now. That’s why we were forced to look at private equity and doing our deals when the money dried up, and that is a useful lesson in itself. That has taught us a lot and allows us to, quite honestly, get into bigger deals and better deals that we weren’t able to before, because if it wasn’t bankable we didn’t do it.

So that has helped as well, but going back to the lessons learned, we don’t like to knock on the door of a bank if we absolutely don’t have to. And if we are going to do it, we’ll have a clear short-term exit strategy in mind. We’re not gonna go down the path – never say never, but I don’t see us going down the path of looking at 15-20-30-year mortgages and having a bank as a partner during that timeframe, because during that timeframe you’ll go through at least three recessions and the banks have the ability to change on a dime and really not give you an option if they decide to do something different with their business, that they own and you’re a minority partner in, if that makes sense.

Joe Fairless: With your syndications you said you’re the lead partner, and then you’ve got passive limited partners in the deals… Are they able – and this is a very granular question with how you draw it up, but are they able to vote you out at all?

Scott Myers: Yeah, we have that stipulation in there. I am the majority; we also appoint one person, and I allow — once the syndicate is closed, essentially we have all the partners that are gonna be in that, that become partners going forward. We get on a webinar — we do multiple webinars in the beginning, and then usually once a month for a while, and then once a quarter, to keep everybody up to speed.

But after those first few calls, we will have somebody who will either volunteer or I will volunteer someone to be the lead voice for the investor group. And I ask them, I say “Hey listen, follow behind me; you have access to everything in a Dropbox, and all the numbers and everything. Shop the properties, shop the property management company and keep an eye on anything that’s going on on my end, but also you can have meetings at any time to discuss my performance as the person who’s driving the engine of this thing and who’s moving the needle.” If you don’t like it, then by two-thirds majority they can vote me out as the managing member.

Now, they don’t dilute any of my ownership; I preserve all of that or any of that should that ever happen, but by unanimous vote, the quorum I believe — I think some of the LLCs are a little bit different, but it’s either two-thirds or a quorum… I think sometimes that’s one and the same. If they don’t like what I’m doing, they think I’m doing a crummy job, then yes, they can vote me out and they can put in another managing member in my place.

To date, we’ve been doing this for quite a while and nobody has ever done that, nobody has ever threatened or I haven’t heard wind of it… But they have the ability to do that if they don’t like what I’m doing.

Joe Fairless: Got it. And in that Armageddon scenario, you’d still maintain your ownership… So since you’re not being diluted, they’d basically be saying “You’re doing such a poor job”, they will choose to dilute themselves in order to probably compensate whoever they’re putting in.

Scott Myers: If they would — in most cases, they would be hiring a different management company, or perhaps a consultant or somebody coming in, and either it would be paid a fee out of the property if they wanted, or it could be a dilution of somebody’s shares or their shares.

Joe Fairless: Anything else as it relates to being near bankruptcy to now having a company with over 5,200 storage units that you wanted to mention?

Scott Myers: Yeah, there are things that happen in the economy, in our industry or any industry  that sometimes are beyond your control. And as I looked at it, the noble thing to do was to burn all my 401k money and savings and absolutely every last dime to preserve my credit with the banks, and also… We didn’t have equity partners at that time [unintelligible [00:14:07].24] ultimately saved my credit, because that’s our lifeblood. As I look back, I will never do that again. If the economy tanks and we haven’t foreseen and prepared for that – which we are now; we’ve been through two of these recessions, we know what we’re doing, and we’re gonna take advantage of it instead of being a victim or lose anything or any value at this point… But should we have another financial Armageddon or something in our economy, something that’s beyond our control and is just a function of what’s happening in our country and economy, we’re not gonna burn through all of that.

I will be getting the keys back to the banks (if there are any) from our equity investor; we’re all in this together, so we’ll do what it takes at that point… But when it comes to any money that’s out there [unintelligible [00:14:48].04] but should I ever decide to take that out again, I will give them every last dime and leave myself with nothing at this point… Because no matter how you look at it and though many people may disagree with me out there, we have a reset button in this country that’s called Chapter 11. If that should happen again, we’ll do a Chapter 11 and we’ll work with our lenders like we did the last time and find a way to come out of it without bankruptcy or damaging our credit.

Now, again, we didn’t have to do that, but I burned through a lot of cash that I probably shouldn’t have done so [unintelligible [00:15:16].20] that we probably should have taken a different look at what was the smarter, wiser thing to do, because we were set back several years as a result of that.

Every situation different and every person is different, but I’ve talked to through that time, and I’m sure you probably have as well, Joe… There’s a whole lot of folks that used to be real estate investors in 2008 that aren’t.

Joe Fairless: Absolutely, yeah.

Scott Myers: I don’t think there’s one of those of us that are on the noble side that decided to do that, versus there’s three groups: those who do everything to avoid that, there’s those that just didn’t have any money left and they were forced to file bankruptcy, and there’s those that were smart enough to file a Chapter 11, and were in a position to work with the lenders and work with whoever they needed to to come out of that without their credit totally damaged and doing the right thing.

That’s what we’ve learned – there’s ways of bowing out and winding down a business where you don’t damage your credit as much, your credibility, and you live to fight another day. Does that make sense?

Joe Fairless: Yes, that does make sense, and of you talking through this and sharing the lessons learned, and I’m gonna summarize them in a second, but before I do, how can the Best Ever listeners get in touch with you?

Scott Myers: If you google “self-storage” and my name, you’ll find me. Our main site is selfstorageinvesting.com, but beyond that I think we’ve got more sites and hits (over 40,000) out there anyway, so if you’re looking for anything self-storage around investing, you’ll run into me. But the main site, with all our tools and free resources and to learn about our events and our partnerships and deals that we’re doing, selfstorageinvesting.com.

Joe Fairless: Outstanding. Scott, thank you for being on the show, thanks for talking about what it takes to go from near bankruptcy to over 5,000 self-storage units. The four lessons that I learned during our conversation is:

1) You’ve gotta have supportive team members; in your case, you’ve got a supportive wife, with an aligned vision.

2) Professional support, in terms of team members and mastermind group; you’ve got to not only have emotional support at home, but also the professional support where others who are doing similar things or have been in similar situations can help give direction that you need.

3) Well, the bank thing. Banks are your best friend in the good times, and when things go South, they could be your worst enemy. We are in a very favorable market right now in terms of acquiring debt, so dinners and drinks and everyone’s giving each other high fives, but talk to someone who has been in the situation that you’ve been in and have seen the other side of the banker, when things aren’t going as well, and ask them how did the bankers they were working with handle the situation at that time, and you might get a different perspective. It’s just important to know, with all of our business ventures, there’s one or two things that if they go wrong, then everything could be different, and we’ve just got to protect ourselves along the way.

4) Your overall approach of hey, you’re not gonna put your personal finances as much on the line as you did before; you’ll take a different approach. You’ll look at it on a case-by-case basis, and you said you have set your business up so it likely won’t happen again. But should you come across that situation, then that’s how you’ll approach it.
Thanks for being on the show, Scott. Best Ever listeners, if you want to check out Scott’s first conversation he had with us on this show, then go back all the way to episode 109 – yes, that’s like over 1,000 episodes ago; it aired 20th December 2014. That’s how long ago when I first met Scott.

I’m grateful for our conversation, Scott. I hope you have a best ever weekend, and we’ll talk to you soon.

Scott Myers: Thanks, Joe. Take care.

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Tamika Catchings and Joe Fairless

JF1072: Overcoming Bullying, Major Injuries, and how to Conquer ANYTHING That Gets in Your Way – With Former WNBA Superstar Tamika Catchings

She’s a leader among leaders – as president of the WNBA Players Association she honed her leadership skills and now uses those skills in her life outside of basketball. From being a role model for the kids, to owning a tea shop, Tamika was kind enough to share her amazing story with us on the Best Ever Show, and all listeners can learn from what she has to say. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Tamika Catchings Background:
-One of the top players in WNBA history, professional career 16 seasons with Indiana Fever
-Ten-time WNBA All-Star, five-time WNBA Defensive Player of the Year, seven-time All-WNBA
-First Team selection and has four Olympic gold medals with Team USA
-In 2004, created the Catch the Stars Foundation, a non-profit organization that provides fitness, literacy and mentoring programs for youth.
-First recipient of ESPN’s Humanitarian Award in 2015
-2016 released her autobiography, “Catch A Star,” which is a New York Times best seller.
-2017 announces she is a game analyst for Women’s Basketball Games on SEC Network.
-Purchased tea shop, Tea’s Me Cafe from the previous owners of Indianapolis that she had been frequenting while playing for the Indiana Fever.
-April 2017 named the Director of Player Programs and Franchise Development for Pacers Sports & Entertainment.
-Say hi to her at tamikacatchings.com
-Based in Indianapolis, Indiana

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad, Emmitt Smith, hall of fame football player, and I am so pleased and grateful to say we’re gonna be talking to Tamika Catchings, WNBA star and now — well, I mean, always has been an entrepreneur, and now working on some entrepreneurial endeavors. How are you doing, Tamika?

Tamika Catchings: I’m doing great, Joe. How about you?

Joe Fairless: I am doing great as well. Best Ever listeners, holy cow if you don’t know Tamika… Just look at her Wikipedia page; I was blown away by your accomplishments, so here’s some highlights, and then we’ll get into our conversation.

First ever quintuple-double – I had to quintuply double-check that, but that was actually a real thing, and in case you’re wondering what the heck is a quintuple-double, it’s 25 points, 18 rebounds, 11 assists, 10 steals and 10 blocks… So double digits in five categories.

She is a former NBA star, she just recently hung up the sneakers and her number has been retired with Indiana Fever. She was the president of the WNBA Players Association from 2012 to 2016, and four of the things that stood out to me – she is one of only nine women to win a championship in college, WNBA and also an Olympic gold medal. She’s a New York Times best-selling author, the book called Catch a Star, which I will be purchasing immediately after our conversation.

She is the first recipient of ESPN’s humanitarian award, and I’m out of breath at this point, because I’m not as in shape as you are. So with that being said, if you wanna give the Best Ever listeners just a little bit more about your background and your current focus, and then we’ll go from there.

Tamika Catchings: My father actually played in the NBA for 11 years, so I was kind of born into the NBA family. He played for the Milwaukee Bucks, New Jersey Nets, Philadelphia 76ers, and the Los Angeles Clippers, so needless to say we’ve moved around a lot, but basketball has always kind of been in the framework of our lives. I was born with a hearing problem and a speech problem, so for me growing up, because of my impairment, I got bullied a lot, so really that was before it became so important in my life and just really everything.

Seventh grade I made my first goal I was gonna be in the NBA, follow my dad’s footsteps. WNBA came my freshman year in college, so I changed from wanting to be in the NBA to the WNBA, and I got drafted; Indiana Fever had an opportunity to play here for the last 15 years, and now currently my role is with Pacers Sports & Entertainment, I’m the director of player programs and franchise development. So a lot going on that basketball side, and then like you said, I wrote a book last year that came out; the paperback is actually about to come out at the beginning of August, and then I bought a tea shop called Tea’s Me Cafe Indy, here in Indianapolis, that hopefully we’ll look to franchise in the next couple of years… So a lot going on, but a lot of great things.

Last but not least, my foundation, the Catch The Stars foundation. We focus on boys and girls, ages 7-18, and providing programming around fitness literacy and mentoring.

Joe Fairless: I want to talk about the different ventures that you have, like the tea shop and the foundation, but before we get into that, when I was doing research prior to our conversation, I saw that your senior year at Tennessee you have ACL injury. Then you got drafted, and you had to sit out your first year in the WNBA. You finally made it to your goal, you’re in the WNBA, and now you’ve gotta sit for a year, and I’m gonna ask this question because this is so analogous to what all entrepreneurs come across, right? We know what our goal is, we think we’ve reached it, and then all of a sudden there’s a huge challenge in front of us. What was your mindset during that year? Because you ended up being the rookie of the year your next year when you actually played… So what was your mindset that year when you were injured?

Tamika Catchings: At first it was my senior year in college, so having the injury and knowing that I wasn’t gonna be able to finish up my senior year, I was just super disappointed. But one thing that I’ve always been is faith-oriented. My faith is what got me through early on, and even as I got drafted and eventually got here to Indiana — but I think really having a great supporting cast, having a great team around me helped to keep me positive, keep me motivated. I knew I wanted to get back to the court, I knew I wanted to be successful, so from that aspect, knowing that I was gonna have to work hard, ten times harder than I had to before… But I was willing to go the extra mile and I love a challenge. So that was kind of my mindset.

[unintelligible [00:07:42].27] Martin Luther King Jr. died, the draft was in April, and then I got cleared late June, early July to run. Actually, I was running straight away, something in my knee popped again, and I flew back home because at that point I had trouble with the team in Houston, back when we had the Houston team. I came back, had surgery the next day after that; first part I did my ACL, the second one I did my meniscus, so I had to go back, do another surgery until at least I was like “Okay, now I know I’m not coming back this year for sure, but I least I have a brand new knee.”

After that setback – the second setback – I was like “Alright, let’s just focus on being ready for next year, being ready for the next season. I have 12 months literally to prepare myself”, so I kind of shifted my focus away from “I really wanna try to get back this year and play, even if it’s just for a little bit”, shifting it to being prepared for the next year and however many more years I would have to play.

Joe Fairless: The first thing you mentioned was being faith oriented, and then the second thing was having a supporting cast… Digging in a little bit deeper with the faith oriented and a supporting cast, what’s the voice in your head saying from the faith oriented part? Is it that everything happens for a reason, or what are you saying to yourself?

Tamika Catchings: I can do all things [unintelligible [00:09:03].22] Literally, that’s probably my saying in everything – it’s just being focused on not my strength, but His strength through me. I can overcome anything, whether it’s a physical ailment or something even mentally I’m struggling with, or even in this new role and the challenges that it presents… Just knowing that He has me here for a reason, and not necessarily that it’s for me, but it’s really to ultimately give glory to Him in everything I do.

Joe Fairless: And as far as the supporting cast goes, who was up there helping you and what was their specific role? Maybe it wasn’t as official as a role, but what were they providing you?

Tamika Catchings: Well, my family is a huge piece. My mom and dad actually got divorced when I was in the 7th grade, so now I always lived with my mom, but my dad was always present in my life, too. So my family has been a big piece, but I would say if I had to pick one person – my sister. She was playing overseas; she’s 21 months older than me. I’m the baby for my mom and dad… And literally, when I tore my ACL, she was playing overseas. We’re not twins, even though people think we’re twins, but while she was playing overseas I got hurt. She got all these e-mails. It was in text messages back then; there wasn’t Facetime and all that, so she got all these e-mails just asking if I was okay, and then she found out I tore my ACL. She literally stopped her playing career, moved back to Knoxville, Tennessee, stayed with me until I finished my senior year, helped me out to do all my stuff, just get me [unintelligible [00:10:32].19] finishing school and all that good stuff. Then when I got drafted to Indiana, she moved to Indiana with me, and we’ve literally been together since then.

She’s married now with two boys, but we’re only ten minutes apart, so… We came in together, and we’re still together. And then my brother lives right up the street in St. Louis. He comes over a lot too, but the three of us are really close.

Joe Fairless: President of the WNBA Players Association for four years – how I interpret that is you’re a leader among leaders. How do you become a leader among leaders?

Tamika Catchings: Well, actually I got the role in 2004.

Joe Fairless: Oh, shoot! The Wikipedia is way off. [laughter] 2004 to when?

Tamika Catchings: Until last year, 2016.

Joe Fairless: Oh, my gosh… Wow.

Tamika Catchings: A long time.

Joe Fairless: You can’t trust the internet. [laughter]

Tamika Catchings: Yeah, it’s funny because from a leadership standpoint, when I got voted to be president, I was like freaked out, because I knew about the Players Association, but I hadn’t really been involved and engaged in it.

The players vote for their president, so they all voted me, and I was like “This is like some kind of joke, or something. I can’t lead this group.” But it took a little bit of time for me to get comfortable and get to the point where I felt “Okay, I can really do something and I can really start to take charge.” But from a respect standpoint, I think the coolest thing is knowing that the players vote you in, and that they look at you as their leader and they put you kind of not on a pedestal, but they put you in that role where they’re willing to follow you.

I always say 2004 was the first year I really saw a leader on the court in Dawn Staley, that showed me what leadership was about, and how to carry yourself and how to put people in the right position and how to allow your team around you to be successful. She taught me a lot just by watching her that one year, and then of course even over the next few years following that I had to kind of get my own leadership pattern (I guess you can say), and I learned that I have a voice, and not necessarily like “Just follow me. Everybody just follow me. Whatever I do, just do what I do.” What I learned really fast is not everybody can do that. Some people, you actually have to communicate and use words and tell them what you want, you can’t just show them. Then some people need a little bit of both, and some people you can just show them… So just being able to learn the different types of being able to communicate, but also the different types of being able to lead.

Joe Fairless: This is gonna be a tough question, but if you had to guess what the women would say who are voting for you to be the president of the Players Association, what would you guess they’d describe you as?

Tamika Catchings: Oh… Passionate, determined, a go-getter, and somebody that when you think of all the dirty work that needs to be done, and the behind the scenes stuff, somebody that’s willing to put in the time and the sacrifice for that. I think even as a basketball player, there’s so many things behind the scenes that you have to do… So really preparing yourself as a player to get ready for the game, to get ready for practice, and it’s almost the same thing, but it’s a thankless job… Being the president of the union is a thankless job, but it’s a job that somebody has to do. But if you’ve got somebody in that role, you want them to be committed to the lead, you want them to be passionate, dedicated, willing to sacrifice and willing to do the dirty work to make things happen.

Joe Fairless: Yeah, I imagine it is, as you said, a thankless job, and it’s a commitment above and beyond what you’re already doing… Holy cow, you had a lot of stuff going on. Looking back on it, what would be a specific benefit that you received as a result of being in that position?

Tamika Catchings: Being able to lead, being able to make a decision, and being able to — as a president, you can’t just focus on one group of players; you’re not just focusing on the superstars. You’re focusing on the stars of the team, but you’re also focusing on the rookies that are coming and you’re focusing on the players that are transitioning from a rookie contract to a veteran contract, and all the stuff in between.

“What do the players want? What do the players need? What’s more important?”, being able to prioritize… There’s a lot of things that you learn from a leadership standpoint, but even ultimately being able to communicate. I think that that has always been my struggle, because I got made fun of when I was younger.

I didn’t really like to talk to people, I never really liked to direct. As a leader, you have to learn how to talk to people, you have to learn how to do it and ask people to do certain things that maybe they might not want to, being able to communicate it effectively, but even being able to find the benefits, not only for what we need done, but for the particular player that we might need something done, and know how to get them engaged. There was a lot of trial and error, but it was fun.

Joe Fairless: How are you applying the skills you learned there to your current role now?

Tamika Catchings: Well, in everything that I do… It applies in every single role. When I look at the leadership qualities that I learned from being the Players Association president, being around Dawn and learning her leadership style and trying to figure out what my leadership style is and what kind of leader I wanted to be known for… But now I think that being able to put that in the roles that I’m in with Pace Sports & Entertainment, and the respect level that a lot of the players have – they see all this stuff that I do, and a lot of people have always been like, “Oh, that’s just [unintelligible [00:16:12].13]” But now from this role I’m like, “Look, it could be you, too.” You’ve gotta figure out what you’re passionate about while you’re playing. I just happen to be passionate about kids, I happen to be passionate about leadership.

Having to be passionate about impacting people and trying to help them figure out and find the best of them – all of that stuff plays into every single aspect of my life now.

Joe Fairless: So as an entrepreneur, you have a couple things that I know of going on. One of them is the tea shop you’ve mentioned a couple times… Talk to us about that. You’re looking to franchise it. Can you give us the back-story and what you’re doing with it?

Tamika Catchings: Well, when I moved to Indianapolis, somebody randomly took me to this Tea’s Me cafe. This was about ten years ago, and they were like “Oh, I know you like tea. I’ve got this nice little spot. We can go and we’re gonna have lunch, have some tea” and I’m like “Oh, great!” So we went, and it really became one of my favorite places to go.

Last year right before the holidays I had a meeting there, and I was just like “Oh, my gosh, I love this place!” and the guy I was meeting was just kind of like “Well, you’d better come as many times as you can, because the owner is moving” and I was like “Well, just because he moves doesn’t mean — the shop’s not going anywhere, right?” Well, I come to find out they didn’t know what they were gonna do with it.

Long story short, I was just like “We’re gonna be finding somebody for you”, and I ended up asking my husband after a couple of weeks, like “Hey, do you think I can do it?” and he was like “Why not? Anything that you’re passionate about and you go so hard with everything you… You’d be great.” So here we are. I took over in February 2017; it’s been a little bit over six months.

The thing is going great. I love the atmosphere, but really when I started looking at why I would want a tea shop… I love to drink tea, but I can go anywhere and get tea, right? But what it became was the benefit that it would allow for the kids that come to our foundation… So really being able to use Touch The Stars as kind of a model that we’ll go in and we’ll hire some of our kids to come and work, and teach them about leadership, teach them about serving, looking people in the eye, what to wear to work, how to carry yourself… Just kind of teach them the basic fields that have kind of been lost a little bit. So being able to use that, and then we right now currently have our First Friday, and our First Friday is always Youth Friday. So we have kids that come out and they can do spoken word, they can draw, they can sing, they can dance, they can do comedy, whatever it is, but just really having a space for our young people to come and excel.

Joe Fairless: Wow. I love how you merged the worlds, you were able to combine two… With the conversation you mentioned between you and your husband when you asked him  “Do you think I should go for it?” and he was like “Hey, anything you’re passionate about, you go all in” – that made me think of what is something that you’re passionate about that you went all in on, and that flopped? It didn’t go well. No gold medal, no trophies, you didn’t make money, whatever it was. What’s something?

Tamika Catchings: I’ll probably go back to the sports analogy. When you come in and every single year you come into a season, and we have media day, and what happens at media day? All media shows up and everybody has all these microphones, and I get cornered in a corner and all these mics are in front of me, and just like “Is this the year you’re gonna win a championship?” So I think about from 2001 – really 2002, when I started playing – all the way to 2009, when we made it to the finals and we lost in game 5 to Phoenix, but we didn’t win a championship until 2012… But from 2002 to 2012, every single year, literally, it was the same conversation. After the 2009 season I just expected 2010 to be like this great year, and “We made it all the way, we made it this far… All we needed was maybe five more minutes to win the game, so next year is gonna be the best year ever”, and it wasn’t. Not at all. We ended up losing in the first round, and I just remember the off-season after 2009, going into 2010, I was in the gym non-stop, getting ready. “2010 is gonna be the year, we’re gonna win the championship. It’s gonna be great”, and just going all in, workouts just kind of over the top a little bit… That’s how I am, over the top.

But we get to New York – New York was our first round – and it’s game three, so we needed to win, but we lost, and I just remember I was devastated. That was probably one of the moments that I really thought like “Maybe I don’t wanna play anymore. Maybe this is it. I’m tired of working so hard and committing myself to the Lord and working hard and trying to do everything just perfect, and then this is the outcome.” I’m mad, I’m lonely, I’m by myself, and everybody’s so concerned about going out and going to parties, but we’ve just lost, they should be upset; they’re not mad, they should be like me. There’s all this anger, so I just remember, literally, “I don’t wanna play basketball.”

We had a USA basketball training, and I just told [unintelligible [00:21:21].23] at that point in time, I was like “Look, Kelly, I don’t wanna play basketball. I really am struggling with getting back in the gym.” I wanted to go and play for the USA team, do the world championship, but my body hurt, I’m frustrated, I don’t know if I can go on, and she was just like “You know what? Take a week, a week and a half, get yourself together, do whatever you need to do, and then we’ll talk when you come back.”

So I did, and I came back, and I was fine; I ended up going with the USA team, but it was in that moment, probably one of the only moments that I’ve had where I really was just like “I’m done. I don’t wanna play anymore.” You overcome.

Joe Fairless: Yeah. What was the thought in that week, week and a half? Where did the thought change?

Tamika Catchings: I didn’t wanna be a quitter. I made a commitment that I was going with the USA team, so I didn’t wanna be one of those people that are like “I lose, and I’m a sore loser. I don’t wanna come and play because we lost.” That was kind of something that I did think about, but then also I truly loved to play basketball and loved the game. When I thought about the opportunity of going to the next level and going to play with the world championship team, not a lot of players get that opportunity. I didn’t wanna miss out on that just because I’m in the moment right now super upset, super frustrated about not winning.

Joe Fairless: You said you’re over the top on stuff… Will you describe or elaborate on that from a daily basis, how that comes to life?

Tamika Catchings: Well, I like things done a certain way. I’m a big planner, so I [unintelligible [00:22:59].23] that I am somebody that on Sundays prepares for the whole week. Sundays I pretty much know what outfit I’m gonna wear every single day. If I’ve got different events, my outfits are kind of lined up, so I know every day what I’m wearing, and what I have to do today, what I have to focus on. That’s why I can only do one week at a time.

So I’m over the top as far as from a planning aspect… But even like just getting stuff done. I like to be on top of what I have to do and what needs to get done, and just being able to focus on every single detail. I think that’s the best way to be.

Joe Fairless: What’s it like to be around you when your Monday plans change and the outfit you had planned for is no longer relevant?

Tamika Catchings: Well, that just happened to me. They told me I was going to a black tie event, so I went out of town with my gown, and my shoes, and I had like three different shoes that I had to choose from whichever dress that I wore. Then when I got there, I just happened to come up on a pitch and I’m like, “Okay, this doesn’t look like a black tie event.” So I went back and they were like “Oh, you know, it’s just cocktail attire.” So I’m like “Okay, well I don’t have a cocktail attire dress”, so I’m running around New York City trying to find the perfect dress to wear at the cocktail because, oh yeah, by the way, I’m a presenter and I don’t know what award I’m presenting, and I don’t even know who I’m presenting to… [laughter]

So yeah, it happens, but I kind of like took it with a grain of salt. At least I get a brand new dress, and something cute. I got a dress, I got to the awards show, and plenty of time, and I figured out “You know what? It doesn’t have to be perfect.” It’s fine.

Joe Fairless: Have you always been that way, where it doesn’t have to be perfect, it’s fine? Or has that come with age and experience? [laughs]

Tamika Catchings: Age and maturity. You get mature.

Joe Fairless: Yeah. If you had that mentality of “It doesn’t always have to be perfect” when you were starting out, do you think you would have been just as successful?

Tamika Catchings: No, because I think that being able to operate on that level with it, you demand a level of excellence… For my college coach, Pat Summitt, that was something that every day she demanded us to be excellent. Not compared to the person next to us, but our own sense of excellence and success. I think that being driven by her, and then by the time I got to the pro too, I think even for me, my drive actually started from when I was that little girl getting bullied, and wanting to be successful and wanting to fit in. I was driven to do whatever it took to be normal.

Then you think of the people that have come in your life, and then of course Pat, and then getting here with the Fever… But I don’t think that if I had that that I would be in the position that I’m in right now, and definitely all the opportunities that have come. Because even over time, one thing that I’ve also changed — during basketball, I just focused on my game and nothing else. I would do our foundation and I would do other stuff, but everything was predicated on my schedule with basketball, and then it kind of started transitioning when I started saying “Okay, I’m about to retire.”

Things started transitioning where basketball wasn’t necessarily the number one things. Other things were starting to kind of creep in, but I think that if I didn’t have that direction early on in my career, I wouldn’t have played as long as I did, and I wouldn’t have had the success that I’ve had, but then also now just opportunities, why I’m being willing to try new things… Whereas before I was like, “No, I don’t wanna do that. No, I don’t wanna do that. No, I’ve just gotta do this. This is all I have to focus on right now”, where now I’m like “Okay, well maybe I’ll try that. Okay, that sounds cool. I’ll try that” and really being open to more opportunity.

Joe Fairless: With the notoriety you have, and especially in Indianapolis, I’m sure you get a lot of opportunities presented to you. How do you qualify or disqualify those opportunities?

Tamika Catchings: It’s tough now, especially because you retire and then everybody’s like “Oh, you’ve got all this free time. You should be able to do this and this and this” and it’s like “No, I can’t.” Some of it I’m going doing stuff [unintelligible [00:27:07].22] and for the NBA and the WNBA, and then I’m doing stuff for Pacers Sports & Entertainment, and then I’m doing stuff for my tea shop, and then I’m doing stuff for our foundation. And oh, by the way, a big part of your job is relationship, and building relationship with the players. You’re going and bouncing around and doing all this stuff, but losing the big piece of what you’re supposed to be focused on, so… There’s a lot of moving parts, and I’m still trying to figure out how everything fits together. But from the appearance aspect and from trying to figure out and from trying to figure out what it is that I’m willing to support and that I’m willing to be at, a lot of it is just kind of timing available, then also not trying to wear yourself thin.

Joe Fairless: The question I ask all the guests is the following, and I want to kind of position it based on your skillset and what you’ve done, so I’m gonna tweak it slightly… What is the best advice ever you have for listeners who want to achieve at a high level?

Tamika Catchings: Well, the best advice my dad gave me when I was younger is you pick your friends, don’t let your friends pick you. How does that correlate to where we are now? Well, for so many of us, we wanna fit in. When you look at fitting in, you look at people flocking around you because of the success you have, or because you have this or you have that, and as professional athletes, you’ve got money, so I’m trying to be around you, I’m trying to go where you go, I’m trying to attach myself to you. But I learned early – I was in junior high when my dad said that, and I remember looking at my dad like “Yeah, [unintelligible [00:28:38].06] know what you’re talking about.”

Then as I got older, I realized when I had a good game, I’d have a whole entourage of people with me; then I’d have a bad game and I’d have my two or three people with me. Then I’d have another good game and I’d have an entourage, and I figured out, I’m like “God, I thought they were my friends, but they only come around when I’m doing really, really well, and all the cameras are around and all these people are around and everybody wants my attention, that’s when they’re there. But when I’m by myself and I have a bad game and I need somebody to maybe give me a couple words of encouragement, they’re nowhere to be found, even at this level.”

As you climb the ladders of success, there’s people that see what you’re doing and it’s like “How do I attach myself to you?” You start looking at what types of qualities do you want in a friend, or do you need a friend? Do you need a friend or do you need an associate? And really trying to pick and choose.

For me now, I have my core group of friends, and I don’t really need more friends, but I also look at myself in the role that I’m at right now… I can open doors for so many young ladies that are wanting to [unintelligible [00:29:46].18] wanting to be in this role, wanting to be around basketball, wanting to try to figure out a life for them, I can still open the door for them, but I’m very careful with who I let around me and in my circle, because one person, one bad egg can ruin all the rest of the eggs. I’m just being very conscious of — my circle is tight, but my circle is also tight with people that are successful, and that know what it takes to be successful.

Joe Fairless: So many life lessons and insights… I’ve been taking notes along the way, and at the very end I’ll mention some of the things that stood out to me. We usually do a lightning round, so are you ready for the Best Ever Lightning Round?

Tamika Catchings: Uh-oh… I don’t know…

Joe Fairless: [laughs] Oh, baloney, you’re ready for anything I could throw at you times 50. [laughter] Alright, first though, a quick word from our Best Ever partners.

Break: [00:30:38].24] to [00:31:39].01]

Joe Fairless: Okay, here’s a question… This is from a co-host who is on the show with me on Fridays; I was talking to him about our interview, and he went to Ohio state… A really big, strong guy, good at crossfit, and he’s like “You know, I was thinking one day if I would just work out a lot – this was when he was in college – I bet I could try out for the football team, but then I thought those student athletes, I don’t know how they balance the sport plus getting passing grades, let alone good grades, plus actually being a teenager in college.” And he said “I would love for you to ask her about how the heck she was able to balance that.” So how did you do that?

Tamika Catchings: Well, my mom set the stage and the standard when I was young. If we didn’t make A’s and B’s, we couldn’t play sport. So I was really learning early that I wanted to play sports, so I had to make good grades. Then when you get to college, as an athlete, yeah, you wanna experience all the different things that are going on, you wanna be a teenager, but for most of us, we have study hall, we have a lot of times that are specific to doing work. We have two of those that are available, so there’s a lot of services that are around for you to kind of tap into. Pat has a 100% graduation rate… So all of her players have graduated, and you don’t wanna be that one that one that doesn’t graduate. I think the discipline even comes from your other players, though. The discipline that they had as seniors…

First, when you come in and you’re watching the juniors and the seniors, and they’re taking it serious, so you automatically kind of get into that flow and that routine of what they’re doing, and kind of [unintelligible [00:33:26].28] to yourself a little bit because not all the time do we have classes at the same time. I think just being disciplined, being able to prioritize… You know you’ve got practice at this time, you know you have classes at this time, where do you fit in your homework hours and where do you make sure that you’re getting the work done?

Pat doesn’t play that either. She wasn’t gonna let us play if we didn’t make good grades, so being very strategic in how you’re gonna get everything done. I had a boyfriend in college, so I had to spend time with him too, and try to fit in that. I mean, not necessarily going to parties and stuff, but having somewhat of a social life. You just learn how to prioritize and what’s the most important and how you can fit it in.

Joe Fairless: And on the opposite end of the spectrum from where our conversation has been, what’s the worst advice you’ve either been given or heard?

Tamika Catchings: Oh, my… Honestly, I don’t know, because I’m sure if it wasn’t good, I probably was just like “Okay…”, and you’re giving the crazy face and you walk away, right?

Joe Fairless: [laughs] How about this – what’s a common mistake you see other people make, whether it’s other WNBA people, or whether it’s young people, whatever?

Tamika Catchings: Going back to the basketball world, people go to the gym, right? “Oh, I wanna be in the WNBA” or “I wanna be successful” or “If I’m in the WNBA, I wanna be successful”, but they just go to the gym, and going to the gym and going to work on your game are two different things. Anybody can go to the gym, and when you’re in the gym you shouldn’t have court shots, and shooting shots that you know you don’t shoot in the game. But then if you’re working on your game, you’re thinking about the shots that you take in the game, and you’re putting those shots in as you’re in the gym.

I think a lot of times it’s like “Oh, you know, if you work hard, if you go to the gym, you’re gonna be great.” I don’t agree with that. If you work hard on the thing that you know that you need to work on, and you’re very conscious of the mistake that you’ve been making in the game during practice, and you’re working on those, then yes, you can be great. But you don’t go to the gym and come out great.

Joe Fairless: Wow. Life lesson, that’s for sure. How can the Best Ever listeners learn more about what you’ve got going on, and to help do whatever you want them to do? [laughter] Because I’m in! You tell me what you want me to do, I’ll do it! This has been an incredible conversation.

Tamika Catchings: Yeah, our foundation is CatchTheStars.org. We have three different websites. CatchTheStars.org is the foundation. For the tea shop it’s teasmeindy.com. I do own a franchise, so the indie part of it is in Indy, and then wherever we go, we’ll change out the Indy. So teasmeindy.com, CatchTheStars.org, and then my personal one is TamikaCatchings.com.

Joe Fairless: This is a personal question for me… So Theo, the guy who I mentioned, he is like 6’3″, I’m 5’11”. He has very good basketball skills, I do not. We play one-on-one; I have not beat him. I’ve googled how to beat someone who’s taller than you in basketball, but I still haven’t beat him. Any tips?

Tamika Catchings: Oh, man… Practice.

Joe Fairless: I do, I practice more than him.

Tamika Catchings: You’ve gotta pull him out. You might be quicker than him, right? So you’ve gotta use your quickness; you’ve gotta pull him out. But you’ve gotta have a jump shot, too. If you don’t shoot and you pull him out, he’s probably gonna stay down by the basket because he knows you can’t shoot.

Joe Fairless: Yeah.

Tamika Catchings: If you get your jump shot, then he has to guard you, and then when you pull him out and give him a little shot fake, go around him… You’ve gotta be creative, because if he is taller than you… And you’ve gotta be fast. So work on your lateral quickness, work on your speed, work on your jump shots… There’s just a lot of stuff that you have to work on, but it’s okay… [laughter] I believe in you, I believe in you!

Joe Fairless: I’m a piece of clay that we can mold, yes… There’s a lot I need to work on. Okay, well I’m gonna work on my jump shot, because when I first started playing him I wasn’t jumping and shooting; he was [unintelligible [00:37:30].18] so now I actually jump and shoot.

Okay, well thank you so much for being on the show. What an incredible conversation… Life lessons along the way, from “pick your friend, don’t let your friend pick you”, and I love how you mentioned you open the door for people, but you’re careful for who you let around you. So it’s not that you’re closed off from helping others, but it’s just the people you spend the majority of your time with, that’s who you’re really selective with. Then what you mentioned earlier – it’s not about the reps, it’s about the quality reps, and working on the specific things that lead to success, and then how should we handle the challenges that come up, and how you have done it… 1) Being faith oriented, having the self-talk that you mentioned earlier. 2) The supporting cast, and then 3) Your mentality; you said you just love a challenge. So many other things – how to be a leader among leaders…

I highly recommend the Best Ever listeners to go relisten to this one. Tamika, thank you for being on the show, thanks for sharing your advice and your story, and we’ll talk to you soon.

Tamika Catchings: Thank you, Joe. Thanks for having me.

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JF919: Why You MUST Start Investing NOW and Not Wait

Our guest has multiple properties that total in value of over 3 million! He started late in the game, but he finally figured it out. He rehabs multiple properties a year and will share one of his condo deals he bought below half price!

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Shawn Holsapple Real Estate Background:

– Active full time real estate investor and licensed Indiana Real Estate Broker
– Wholesale over 150 properties annually while doing a few buy/fix/resell projects as time and inventory allows
– 15-20 rehabs per year, own 45 single family rentals and rent to own
– Started with nothing in 2011, now have over $3m in property, most with no money down bank loans
– Specialties: Out of State/Country Real Estate Investors and knows the challenges of hand-off investing
– Does JV & wholesale deals with local & international investors
– Based in Indianapolis, Indiana
– Say hi to him at shawn@hoosier-solutions.com
– Best Ever Book: Rich Dad, Poor Dad

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JF862: Landlord Paying for Utilities? Plus Large Multifamily Acquisitions

Are you a landlord, and would you pay for the tenant’s utilities? Our guest talks about an acquisition that he slowly convert it into a largely accommodated stay while he covers some of the electric bill due to high utility prices. It works out in his business as he has developed a reimbursement program, hear how he is doing it!

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Ivan Barratt Real Estate Background:

– Founder and CEO of Barratt Asset Management
– His companies manage 100 million in assets comprising over 1,300 units
– Since 2010, he has raised over $10 million in equity
– Focuses on the acquisition, redevelopment and management of multi-family income producing properties
– Based in Indianapolis, Indiana
– Say hi to him at BarrattAssetManagement.com
– Best Ever Book: Antifragile by Nassim Nicholas Taleb

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JF655: How This Company Allows Anybody to Invest in Their Portfolio

Interested in plugging in the cash to get a return without dealing with the common stresses of being a real estate entrepreneur? Today’s guest has a solution for you and invite you to invest in his portfolio to earn a better income on your investment than any CD or money market out there.

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Sterling White Real Estate Background:

– Co-founder of Holdfolio, a buy and hold platform
– Buy and hold investor
– Based in Indianapolis, Indiana
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JF469: World Series Poker Player a Virtual Wholesale Master

Yes he was in the World Series Poker tournament. He now tries his luck in wholesaling utilizing the expertise of others. He has made a presence online using SEO and outsourcing the due diligence to qualified VA’s. Our Best Ever guest is looking for more buyers…and he even called previous guests on the show to improve his game. Hear his success!

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