JF1916: How This Investor Grew His Portfolio to over 125,000 Units with Jeff Klotz

Jeff is not only an investor, but also a broker who helps others grow their own portfolio. He struggled in the beginning to grow his business, so he focused on that until he was having some success. Now Jeff shares his knowledge with his clients and with us on today’s episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“If you buy right and you have the right business plan and business strategy, you should be able to survive another 2008 crisis” – Jeff Klotz”


Jeff Klotz Real Estate Background:

  • Serial entrepreneur, real estate investor and developer
  • Klotz’s investments have included 125,000 apartment units, 42 developments, and numerous other real estate projects
  • Founder of over 100 companies
  • Based in Jacksonville, FL
  • Say hi to him at http://theklotzcompanies.com/
  • Best Ever Book: 10X Rule


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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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jeff Klotz. How are you doing, Jeff?

Jeff Klotz: I’m doing great.

Joe Fairless: Well, I’m glad to hear that, and looking forward to our talk and our conversation. A little bit about Jeff – he’s a serial entrepreneur real estate investor and developer. Klotz investments have included 125,000 apartment units, 42 developments and a bunch of other real estate projects. He’s the founder of over 100 companies; based in Jacksonville, Florida. With that being said, Jeff, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jeff Klotz: Okay. Well, my background is interesting – I started out in real estate, literally straight out of high school. I actually bought my first investment property while still in high school. I fell in love with the multifamily business, and I guess the rest is history. For 24 years we’ve been intimately focused on the multifamily industry, and have built a platform called the Klotz Group, which is basically a group of wholly-owned subsidiaries that provide pretty much everything from concept through completion, along the way of both a multifamily value-add strategy, renovation, rehab, modernization, to a ground-up development strategy.

Like you said, that body of work over the last 24 years has been a little over 125,000 units of multifamily throughout the South-East, and just over 40 projects completely full-circle… And then of course the platform itself provides a whole series of services, including brokerage, property management, mortgage banking, construction, development, investment banking, and a handful of other (what we call) ancillary service providers that have probably racked up transaction volume into the billions.

So it’s been an interesting track record and an interesting 24-year stretch in the industry, and I still love it today as much as I loved it when I joined.

Joe Fairless: So you own companies like a mortgage brokerage within your portfolio? Did I hear that right?

Jeff Klotz: That is correct, yes. We are in the mortgage banking business, which is predominantly a commercial mortgage brokerage; I’d say 90% of that body of work is strictly multifamily.

Joe Fairless: So what made you want to be vertically integrated, versus just being focused on development?

Jeff Klotz: Well, for me, early stage I really struggled to grow. As a teenage entrepreneur, my challenge for business and business growth was probably the same as almost everyone else starting out – access to capital, capital constraints. I think experts will tell you the number one reason why most small businesses fail is a lack of capital… So I certainly battled that. As a kid, it’s hard to access capital. I didn’t grow up rich, I didn’t know any rich folks. I was kind of knocking on doors the hard way.

Early on, I really wanted to perfect my portfolio, and I needed to grow my business, and the best way to grow the business was to produce what I’ll call “ancillary revenue” from all these different services. But I started to become more successful, and then later on I began to really understand capital markets, and started to really solve my access to capital problems, it was almost the exact opposite.

We perfected the platform and really broadened the reach and the scope of all the different platform services to really serve our own needs, because that was the best way we found to control the results and to deliver superior results and returns by really controlling your own destiny. We learned along the way that it was next to impossible to rely on third-parties and get the same type of results if you were relying on yourself.

So long story short, I probably don’t desire to be in all these different businesses, but to some extent it’s a necessary evil.

Joe Fairless: Yeah, I get that. So how many companies do you actively oversee right now?

Jeff Klotz: The Klotz Group has as many as 12 subsidiaries that are in the real estate business. I’ve got some other investments, and we’ve got a family office that focuses on some philanthropic efforts and things like that, but probably for the focus of this call there’s 12 wholly-owned subsidiaries under the Klotz Group umbrella that provide all different types of services, pretty much a soup to nuts or an A-to-Z, or a concept through completion strategy in what we’ll call multifamily real estate investment.

Joe Fairless: And the purpose of those businesses is twofold, it sounds like. One is to help you and your team do your deals, but then also you might as well have other customers and clients outside of your company if you’re gonna have a business anyway. Is that the thought process?

Jeff Klotz: That’s exactly correct. The strategy is really a 50/50 strategy. I think that a healthy business is one where you’ve got diversification. About half of our business comes from what we call captive work, which is our own investments, and then the other half comes from the third-party marketplace. So that does a lot for both the industry and the organization. It allows us to have a lot of different touchpoints to the entire industry, and it really helps us grow the business. We meet a lot of really great people, and can help a lot of really great people…

You kind of hinged on the mortgage banking business – a lot of our clients come to us looking for debt, and for whatever reason they’re staking 75% leverage and we might only be able to get them 70%, because that’s what the deal qualifies for, so they might be 5% short on a deal, and we end up stepping in and becoming their partner, owning a piece of the deal and helping them get it across the finish line… And then of course, by that time they’ve figured out they can leverage a lot of our other services and really add value to the deal.

Joe Fairless: What’s the most and what’s the least profitable of those 12?

Jeff Klotz: Oh, boy… I’d say property management is probably the least profitable… And included in those 12 is the investment subsidiary, which is by far — the gain on sale, or the gain on real estate investments is by far the most profitable.

Joe Fairless: Okay.

Jeff Klotz: Many of those businesses are loss-leaders. They really contribute to the overall investment result. I might make X in the construction business, but I’m creating 10x at the property level because of my efforts on the construction side.

Joe Fairless: Yeah, it makes sense. And I imagine over the years you’ve created a business as a result of [unintelligible [00:07:15].09] loss-leader, but even — it wasn’t something that you wanted to be in the  business anymore. So you created one, then shut it down because you thought you needed it, or thought you wanted to be in it, but you didn’t… What’s an example of that? If there is an example of that.

Jeff Klotz: Okay. Well, there’s a couple of times… In 2001 we sold the construction business. We were able to stay out of that for a couple of years. In 2006, if you remember, the market was on fire. You couldn’t help but trip and fall and make money in the real estate business… So we thought we didn’t really need to be in the property management business, so I sold the property management company, only to really be forced back into the business a couple years later by my partners and investors, who said “Look, Jeff, this isn’t working. We’re not seeing the same results or returns from the properties and from the projects like we were when you were running it, so… Get back in the business”, basically. He who has to go makes the rules, right?

Joe Fairless: And with where you see your group of companies headed, do you see a new business coming up that you are gonna be creating, or maybe putting more emphasis in a current area that you have?

Jeff Klotz: Well, our business – we really hit a reset button back in 2015 after building a portfolio of (we’ll call it) C-class housing. We were one of the most active operators and groups focused on (what we’ll call) middle market C-class housing throughout the South-East. We’d built a portfolio close to 40,000 units, and that was the goal; so we accomplished our goal, but we really couldn’t celebrate the accomplishment because it was just a really tough struggle. That’s a tough business to scale, and it’s a really tough portfolio to operate… So we really kind of hit the reset button, spent the next couple years exiting that business, and really focused on a cleaner, more quality body of work. So for us it was testing and proving the concept in a much newer, higher-quality asset class [unintelligible [00:09:00].06] create the same type of results and returns.

Over the last couple of years we spent proving that concept out, so today the real focus is just growing that strategy. So we find ourselves doing a lot more luxury ground-up development today. It’s a different type of development than we’ve done previously. Previously we were just looking to get something built, and it was more workforce housing, and what have you. Today we’re able to develop some of what I’ll call best in class in several different markets.

The strategy today is not necessarily get into new business, but it’s just continue to grow the business both vertically and horizontally, so that we can once again — we were once upon a time the largest residential landlord in about 13-15 cities throughout the South-East, and that’s our goal, to do that again, just with a little different quality of assets.

Joe Fairless: And I’m sure you get this question a lot, but I’m gonna ask it anyway… When a correction takes place, what’s your thought about being in ground-up development luxury?

Jeff Klotz: Well, you’ve probably heard this, and I’m sure every one of your listeners have heard that – you make your money on the buy. That can mean a lot of different things, but it’s kind of an old cliché in real estate. It took me a long time to even really figure out what that meant… But being well-protected by your bases on the way in, so that you have what I’ll call “a lot of screw-up room” or a lot of mistake room, is really one of the founding principles that we operate by. So if you buy right and you have the right business plan and the right business strategy, you should be able to withstand another catastrophic event like in 2008.

Joe Fairless: What’s a quantifiable example of buying right? How do you stress-test that?

Jeff Klotz: Well, I think today this concept of value-add – that’s probably one of the bigger buzzwords in the multifamily industry, and a lot of times it’s a lot more complex than just buying a piece of real estate and raising rents. You’ve really gotta understand the asset, the asset class, the market… And I think you’ve gotta buy right. You’ve gotta buy at — I’ll still call it a discount. I’ll tell you what is not lining up through an internationally-marketed brokerage effort and participating in first, second, third round, best and final, and winning an option – the concept of who pays the most wins, I have always had a hard time understanding that. So almost all of the deals that we do are privately negotiated, they’re off-market, they’re situational acquisitions and they’ve got a good story.

Even in today’s very frothy real estate market, you look at the last 12 acquisitions that we’ve made  – they’ve all been what I consider below market value. I think there’s good deals out there, you’ve just gotta really know where to find them and where to look. Our platform, which has many touchpoints to the industry, helps to contribute to putting us at the right place, at the right time, and being able to have access to those deals that otherwise might not be available to us.

Joe Fairless: And just maybe one or two more follow-up questions on this, and then I’d love to learn more about the 40,000 units and the scaling challenges with the C-class housing. A lot of people will say when a correction takes place, class A is gonna get hit first, because they’re the ones who are gonna lose their jobs, so those residents are gonna then go down to class B… So you don’t wanna be in class A. And then the people will also say that ground-up development is riskier because there’s no income that’s being generated until you get out of the construction loan and you’re completely leased up in your long-term financing. What are your thoughts on those two points?

Jeff Klotz: Well, I agree with those two points, to some extent. In fact, that was the thesis of some of our early real estate funds, and that was the pitch. And again, we were focused on C-class… And I think, for the most part, that’s  a real concern, right? But we always like to shoot for a much shorter strategy. A long-term strategy – you have a greater chance of getting stuck holding the ball, or whenever the music stops, without a seat… So I think the merits of a project are strong. Again, if you buy or build the project plan with a lot of screw-up room, or mistake room, or whatever you wanna call it, it should pass the stress test for a softening in the market, or what have you.

The bottom line is people will always need a place to eat and sleep and call home… But there’s always gonna be a cyclical nature to our business and almost every other business, so I think you have to be afraid of that. You have to plan for that. When we underwrite a deal, when we go to acquire a deal, when we go to build a deal, there’s always a sense of urgency, and we always plan for the worst, but work for the best. So it’s always a concern of ours, which is one of the reasons why we have a short-term strategy.

We were a large multifamily owner going into 2008 in the recession/downturn/crash, and our strategy then was to really just protect the asset; if we were the best operator, with the best service and the best performance in the market, then we were well-protected… So we were fortunate enough to survive the downturn without losing any assets. In fact, we were quickly able to start a growth process.

I think it’s just a quality operator, with a quality project, in a quality location, with a quality credit risk. So the stronger your residents are, the more protected they are from a recession, and things like that. So I think there’s a whole series of merits that you really have to pay close attention to.

Joe Fairless: Let’s talk about the 40,000 units. What were some specific challenges that you had in scaling and executing on that level of collection of units, with that type of classification of property and resident base?

Jeff Klotz: Well, first of all it wasn’t so much the class of asset, but  it was. And what I mean by that is to succeed at C-class multifamily operations – it’s a lot more staff, or manpower, or people-intense. You’ve really gotta check the boxes and  dot the i’s and cross the t’s. You need a lot more people to succeed in that effort. We built a team of over 1,000 employees, and we went from 100 to over 1,000 really quick. So just that type of scale was really difficult. We were consistently chasing the growth.

And then to top it all off, the business strategy that we had – we were buying and selling quite quickly… For about five years in a row we were buying over 8,000 units/year on average. So to have that type of portfolio churn, you’re always moving. It’s hard to build a team, it’s hard to build consistency… And then of course, the assets themselves – yes, they’re challenging. They were in rougher neighborhoods… So it’s harder to find good people, it requires more training, it’s harder to find good residents, it requires a lot better screening and tenant evaluation or qualification. Even the municipalities started to neglect those types of neighborhoods, where there’s lower income. So it’s a tougher, longer, harder grind or battle or fight, and you almost had to fight for every bit of success, every good resident, and what have you. So all in all, the entire effort is more difficult.

On a personal level, I really underestimated or probably was naive in how difficult it really is to build and scale a business. I’ve found building a real estate portfolio easy. In fact, growing is easy. But actually building a business around all that growth, and building the right type of team, and the right types of policies and procedures and structure – that was probably the most challenging part of it all.

Joe Fairless: Thank you for that. I appreciate that insight. That’s very, very helpful. And one thing that I’d love to learn more about is if you were to have a 300-unit class C apartment building, in a class C area, and a 300-unit new development – picture whatever you’re building now, that 300 units – how many people would it take to staff each of those?

Jeff Klotz: There’s an old rule of thumb in the industry – 2 per 100. So in theory you’d need 6 people. Three in the office, and three in the field, on the maintenance team. I think that in a C-class operating property… Was the A-class a new build, new construction?

Joe Fairless: Yeah, it’s one you’ve just completed. We’ll just say one you just completed.

Jeff Klotz: I think on the property itself there’s probably only a slight difference in the amount of manpower needed. But we’ll call it the corporate oversight, or the regional/district oversight – you definitely need a whole heck of a lot more oversight on the C-class asset than you do the A-class asset.

Joe Fairless: Got it. Taking a giant step back, based on your experience in the industry – you’ve bought your first place while you were in high school; that is pretty close to a record, I think, from the 1,800 guests I’ve interviewed… What is your best real estate investing advice ever?

Jeff Klotz: Oh, boy… That’s a hard one. I think the real estate business is not a get-rich-quick plan/strategy. All these late-night advertisements for “You too can be rich like me” – it doesn’t work that way. I’ve been doing this for 24 years, and it took a long time to create success. It is a get-rich-slow business, by the way. It’s a lot of hard work, it’s a long late-night grind…It’s difficult, and it’s tough to think that yo can create success as a hobby or a part-time business. It’s a lot like the gym – there’s no shortcuts. Nothing takes the place of hard work and effort if you wanna get in shape. You can try all the latest, fad this or fad that, but you’ve gotta do the work.

I see way too many people enter this business thinking that they can do it part-time, or in-between a day job, or after a day job… And I think if you’re gonna be a passive investor – sure, that works. There’s a whole other topic of how do you make good passive investments; probably the least successful deals I’ve ever done were called passive investments… But  I think just preparing somebody for the time it takes to learn the business and what have you – it sounds pretty basic, but that’s where I see most people making a mistake; it’s the inability to really truly commit to the time, effort, energy and hard work it takes to be successful in this business.

Joe Fairless: And over the period of time that you’ve done it.

Jeff Klotz: Right.

Joe Fairless: Yeah, it’s a shiny object for some people, and then they find something else… Whereas put in decades – then you can see some results if you do things consistently that are the right thing, right?

Jeff Klotz: Right. And I think whether we’re talking real estate or we’re talking anything else in business, I think that part of our culture today is that of things happening quickly, and there’s almost a sense of lack of patience, and I can go on and on… But I just really think that you’ve gotta really be realistic with the goals, and the time it takes, and of course the effort it takes. There’s an old saying, “If it were easy, everybody would be doing it”, right?

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

Jeff Klotz: I’ll give it my best.

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

Break: [00:19:15].10] to [00:20:13].09]

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

Jeff Klotz: Oh, boy… I’m not a big book reader. There’s an interesting story behind it… But I’ve just recently read some of Grant Cardone’s stuff, and I was amazingly shocked with just how relatable it was, and just how great the content was. That was kind of an interesting experience for me.

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

Jeff Klotz: That would have been a passive investment. Once upon a time, prior to really committing to grow the entire platform vertically and horizontally, I thought I could leverage some other operators and other sponsors. I wasn’t in a good pick of a couple different guys. I had no control, and so therefore the outcomes weren’t that good.

Joe Fairless: And knowing what you know now, if you were to passively invest and you were to interview them again about the opportunity, what are some questions you would ask now that you didn’t ask before?

Jeff Klotz: Well, I’d really wanna understand the track record, their true experience in actually controlling outcomes… There’s a lot of sponsors out there that have worked for other folks, or have been alongside other sponsors, or have been on teams with sponsors, but I  really wanna see someone who has a solid track record of doing it themselves, signing on the debt, having real skin in the game, and really a solid commitment to the business.

I think nowadays there’s a lot of folks that think it looks a lot easier than it really is, so I think that might be the tone of what I’m saying here… I’d spent a lot more time getting to know the individual and the organization and understanding what their theories and philosophies and their ideas are for how they operate real estate.

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

Jeff Klotz: Well, the next deal, right? In this business you’re always as good as your last deal, so we continue to get better and better. I think that really my next deal will be the best deal I’ve ever done.

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

Jeff Klotz: Years ago I’ve formed a family office called the Klotz Family Office. We have three main philanthropic efforts, including a faith-based not-for-profit named Save Your Communities, which is focused on creating and preserving, as well as providing sustainable [unintelligible [00:22:10].08] affordable multifamily housing. That’s a big part of our mission. I also have a Central-American-based foundation called [unintelligible [00:22:16].17] which basically serves the needs of those living in poverty, most likely as a result of natural disaster.

Then we have a third effort, which is basically an entrepreneurial scholarship. So once a year we pick a young individual who I think might possess some real serial entrepreneurial traits, and we try to partner with them and mentor with them, and help them get themselves in the door [unintelligible [00:22:35].20]

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

Jeff Klotz: Well, they can visit our website, TheKlotzCompanies.com. They can email me at jklotz@theklotzcompanies.com.

Joe Fairless: Cool. Well, Jeff, thank you so much for being on the show, talking about your experience, talking about your approach, what your focus is now, and the challenges that you came across on the passive investment, as well as when you achieved the goal of 40,000 units… Not really having time to celebrate, and then reconfiguring the structure of your focus. And what you’re doing now, building the luxury ground-up development.

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

Jeff Klotz: Thanks, Joe. I enjoyed it.


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JF1523: Protect Yourself And Renters From Rental Property Scams #SituationSaturday with Tammy Sorrento

Tammy was an insurance investigator for many years. She took that knowledge into a new industry, investigating rental property scams. She was actually in a situation with a scammer, luckily with her background she knew right away it was a scam. Not everyone can pick up on that, and that’s what her company, Fireball Approves, helps with. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Tammy Sorrento Real Estate Background:

  • Private Investigator specializing in the prevention of rental scams
  • Developed a solution for rental property after working for 20 years doing insurance investigations
  • Keeps renters from getting burned when they are renting property for long-term to vacation
  • Based in Jacksonville, FL
  • Say hi to her at https://fornoscams.us/

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Do you need debt, equity, or a loan guarantor for your deals?

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, Tammy Sorrento. How are you doing, Tammy?

Tammy Sorrento: I’m doing great. How are you, Joe?

Joe Fairless: I’m doing great as well, and I’m looking forward to our conversation. Today, Best Ever listeners – first off, I hope you’re having a Best Ever weekend. Because today is Saturday, we’ve got a special segment. It’s Situation Saturday, where if you find yourself owning a property, well then you need to listen up, because Tammy is  a private investigator who specializes in the prevention of rental scams. She has developed a solution for rental properties after working for 20 years doing insurance investigations.

She keeps renter from getting burned when they’re getting property for long-term to vacation. She’s based in Jacksonville, Florida, and she works with clients all across the country. So we’re gonna talk about how to protect yourself from rental property scams, and to set the foundation, Tammy, can you talk a little bit about your background, just so we get to know you a little bit more?

Tammy Sorrento: Absolutely. I have been in insurance for the last two decades plus. So I started off as an agent, and then I became a claim [unintelligible [00:04:14].11] an investigator, and I have handled every type of insurance claim that you can imagine, including litigation, all over the United States. This is my passion, and that’s Fireball Approves… And the whole reason that I started this is I was in this situation, as many renters are. I was actually looking for a vacation rental, and it was a last-minute thing, and I was gonna have my siblings come in from all over the U.S., and we wanted to go to Key West. Everything was booked. And once again, that’s because this was a last-minute reservation… And that’s when they get you. That’s when the scammers know that you’re vulnerable.

So knowing what I know, I felt very confident that I would be able to sniff out a scam, and I did, but what I realized is if someone doesn’t have the background that I have, I can certainly understand how people get scammed when you’re dealing with advertisers on Craigslist, on Facebook, all over the internet… How do you know that you’re actually dealing with the property owner of that rental? So then I decided to create a solution, so that people that don’t have my background then have a solution to keep them safe. Then the natural progression was to become a private investigator.

My services are nationwide, they’re extremely affordable, because my main goal is to help as many as I can. I’m not gonna eliminate an income group or age group. My charge to the renters is only $19. And what I do is you can send me the URL of the advertisement, and I’m gonna make sure that that advertiser is the correct owner or the correct agent. This includes – and you’ll not hear this from any other vendor; in fact, I don’t think that anyone is actually doing what I’m doing… This even includes the e-mail and the phone number, because that’s how you’re dealing with the advertisers.

It started off as a vacation product. I actually list property owners on my website; they’ve gone through my vetting process, because they also want to give potential customers peace of mind that they are legit. So it’s been very exciting, very eye-opening, and I have a compulsive need to help people, and this is just the best of both worlds.

Joe Fairless: Why wouldn’t the potential renter just go to VRBO or Airbnb and have that done for them?

Tammy Sorrento: Well, if you do a Google search of “Airbnb scams”, “VRBO scams”, they are out there. Once again, you may wanna have a second set of eyes just to make sure. In fact, we have a testimonial where someone did reserve an Airbnb in Colorado, and we just made sure that that was legitimate. So it was worth it to that customer.

Joe Fairless: Was it?

Tammy Sorrento: Yes, she paid the $19 so that they knew that there weren’t going to be any issues. Unfortunately, the scammers are extremely pervasive. I can see, I can understand, and when people do get scammed on a rental, they are embarrassed… So like I said, I priced my service low enough that it actually doesn’t make sense not to have us check it out for you.

Joe Fairless: So what’s the typical scam?

Tammy Sorrento: The typical scam – and this is for any type of rental; this can be a property rental, this can be vacation, but that you’re not dealing with a property… That someone has gone to Airbnb or VRBO, has nothing to do with that property and they list it as the owner. So you send in the money, you go to this rental, and you find out that you sent money that you’re never gonna get back. This is what I prevent.

Joe Fairless: What information is typically provided by the scammer, that gives the victim the comfort level to then send the scammer money?

Tammy Sorrento: Well, here’s what happened with me. With the one that I was in contact in Key West, I looked up public records, I knew who the property owner was, I knew that there was a home at that address via Google maps, but get this – everyone has access to public records, but not all states have public records. But also the scammers have access to public records. So would you believe that the scammer that I was actually in contact with had their e-mail address in the name of the property owner at Gmail.com?

So here’s how I found out that it was a scam. I kept on saying to the person, “You know what, I cannot connect that you are who you say you are, and I can’t bring my four children down and not have a place.” So I ended our discussion. Then two days later he contacts me again – it could have been a she for all I know – and said “You know what, I was dealing with you longer… I’ll send you some references.” I said okay.

He sent me some invoices that were just like mine, just no phone numbers. So I googled the phone number for one of the customers from Chicago. Now, this is where it gets really interesting and eye-opening. She and her husband had flown down from Chicago to Key West New Year’s Eve weekend… And her first response when I asked about this rental, she said “Why on earth did he give you my information? That was an absolute scam.” So I asked her, “You were protected by using your credit card and using PayPal, right?” and she said it took six months for her to get her money back, because the credit card issuer considered that person-to-person, and not person-to-business.

That was when I said, “Okay, something needs to be done, because there seems to be a crime that’s hard to prove.” Once you send money — we all know the red flags; you’re not gonna wire money, because that’s just like sending cash. There’s no way to get that back. But what about the situations — maybe someone doesn’t wanna pay the fee that Airbnb and VRBO charges. Maybe they are [unintelligible [00:11:46].07] which is why they’re going to alternative sources. What if they’re moving from another area? And this is another place that we help someone…

This was a radio station owner, when we first started. She called  me and she said, “Okay, my daughter is moving back to St. Augustine, and she was looking through Craigslist for rentals, and she said the one that she picked just doesn’t sound right. Can you check into it?” So we did, and within two hours we had contacted the homeowner of that property, and there was a difference of what the scammer listed it as, of like $600/month.

So we saved the daughter from paying a deposit and coming down and not having a place to stay. That’s where I get my fulfillment.

Joe Fairless: Oh, yeah. It’s a wonderful service that you provide. You said you check up on the Craigslist posting, and within two hours you contacted the homeowner… In those two hours, what are you doing?

Tammy Sorrento: We use tools that’s not available to the public. These are tools that insurance companies, financial institutions — we are literally going in and investigating who that property owner is, and then we contact them… And many times we hear “That’s my property.” In California there is no public records, so you can’t check an address, but we have our tools that the common public does not.

So we’ll contact the actual property owner, and often times they’ll say “I’m not renting my house. I’m living in it.” [laughs] So we just saved the homeowner from having someone come to their home, knock on the door, and say “I just paid a first, last and deposit”, and now they can’t get that money back. So I’m basically helping the owners as well, because who wants to get that knock on the door? Wouldn’t you feel terrible, even though it’s not even your fault?

Joe Fairless: Yeah, it’d be an interesting conversation, that’s for sure. From a business standpoint, $19 for a verification – that’s a whole lot of verifications for you to make a big impact on a bank account, so what’s your vision for this to grow the company? Is it acquire more $19/pop people and just grow organically, or is there a different revenue stream and business plan?

Tammy Sorrento: Well, I’ll tell you what we’re doing now. The $19, that is a B2C model. I just wanna help people. So that’s my B2C model. Now we are actually implementing a B2B model, and we’re going to companies for their recruiting… Because when they recruit their employees, would they really want the employees to be on their own with finding an accommodation when they’re starting a new company? Do they really wanna put their recruits through the process of possibly getting scammed? So that’s where we’re growing. We are in talks with — and when I say “we”, I actually partnered with a like-minded entrepreneur in Seattle, Washington, and we pooled our resources together and we are going to tech companies. They’re not hiring local. If they’re gonna bring in someone from (let’s say) Kansas, we can be a part of their recruiting, where we will make sure that their new employee isn’t gonna start their job stressed out because they possibly got scammed. We’re gonna keep that from happening.

Joe Fairless: Anything else as it relates to this topic of being vigilant and knowing what to do and what to look for from a renter’s standpoint, for long-term rentals or vacation rentals, that we haven’t talked about, that you think we should?

Tammy Sorrento: Oh, absolutely… The stories. It’s almost like the scammers have a script that they use… And it’s going to be “I’ll send you the keys. I’m out of the country. I’m in the military. I’m a missionary.” I’ve heard this excuse. “I was in a car accident. My husband was transported to Texas”, and this beautiful $400,000 home, they’re listing for  a very nominal amount. But once again, if you’re looking from out of town, how are you gonna know what the going rental rate is for that area? And when I heard that excuse — we had driven by, because I was actually looking for a family member… Before I even drove by to look at the house, they said “Now, if you drive by, you’re gonna see a property management sign, but we fired them because they were too greedy, so we are just doing this on our own. We’re in Texas… So if you like what you see on the outside, we’re gonna need a deposit to send you the keys.” I mean, really? [laughs] But that is what they’re saying, and like I said, if you don’t have the experience that we have, that is believable and you think “Wow… You know what, I got the good deal”, but nine times out of ten it’s not.

Joe Fairless: And prior to sending the deposit, they usually offer to give some sort of contract?

Tammy Sorrento: Yes, absolutely. Of course, the ones that we prevent people – they never get to that point, thank God.

Joe Fairless: Sure. Speaking candidly, in my world, if I’m doing a vacation or a long-term rental — well, I don’t know about long-term rental, but vacation home, I just go Airbnb… And there’s power in the crowd through those reviews. If you go with someone who’s got 50 reviews plus, it’s highly likely you’re gonna have a similar experience as the 50+ people, because that’s what the platform’s built on. So are there a  lot of people looking at vacation rentals on Craigslist that is an audience for this?

Tammy Sorrento: [unintelligible [00:18:34].05] and I know where you’re coming from, Joe, and you’re absolutely right. You’re paying a premium for Airbnb and VRBO, and even the hot property owner, they’re paying a premium. It’s expensive to list on their site, and then you just think, “Well, surely people wouldn’t pay that much money if they’re a scammer”, but then I challenge that thinking. If they’re gonna make money, why would they not pay to sign on?

Airbnb has gotten better about that, because if you looked two or three years ago, there were a lot of scams.

Joe Fairless: Have you busted anyone who you qualified, who was initially on Airbnb and then you got paid by a client to look him up, and then they weren’t legit?

Tammy Sorrento: No, actually all the ones that we’ve looked at Airbnb, knock on wood, they were legit.

Joe Fairless: Mostly Craigslist?

Tammy Sorrento: Mostly Craigslist.

Joe Fairless: Got it.

Tammy Sorrento: And Facebook. A lot of people look on Facebook for that, as well. So that is our mission. Now, what we’re doing also is we are expanding that it’s not only just an investigation as to if you are dealing with the property owner, but now we’re also expanding to include services where we will get an objective party to actually walk through. So if it’s a long-term rental that you’re looking for, we are going to make sure and actually visit that rental, and make sure that the amenities are as described. That’s a huge help.

Joe Fairless: When I lived in New York City, Craigslist was the way to go for rentals, so I get that, and I’m sure it’s rampant in New York City and rentals on Craigslist, so you could probably retire a billionaire if you just focus on New York City scams in the rental industry. Well, how can the Best Ever listeners learn more about what you’ve got going on and get in touch with you?

Tammy Sorrento: Well, my company name is Fireball Approves, and most people don’t like that, because it doesn’t say what I do… But I did that because as scammers evolve, I want to evolve. My mission is to put the scammers out of business. I also report them to the FBI as well, hoping that that will help shut them down. But everyone is welcome to check out my website at ForNoScams.us. I made my website where that really tells what I do. We’re also on Facebook, Fireball Approves, ForNoScams, we have Instagram, Twitter, we’re on LinkedIn… So I invite everyone that if they have a child going to college, if they’re relocating, if they are looking to rent a vacation home – it’s better to know before you go, because you don’t wanna get burned.

Vacation time is a time for relaxation. You certainly don’t want to end up like the person I spoke to, where they had to find accommodation in Key West over New Year’s Eve weekend. Can you just imagine the hassle involved in that? And then not to get their money back for six months. This is what I avoid.

Joe Fairless: It’s certainly helpful for those you work with. At a minimum, a peace of mind; at most – we talked about that… Money, and time, and stress, and all that. When you report these cases to the FBI, are they like “Oh, Tammy, come on… Leave me alone. Another one of these things…?!”

Tammy Sorrento: [laughs]

Joe Fairless: What’s the response from them?

Tammy Sorrento: Well, I did go to the FBI building here locally, and — I’m a go-getter… And I explained to them what I was doing, and I said “Hey, I feel like I have a duty to let you know… Because this is a growing concern.” So they did give me the website to relay my findings. What I find most of all is the person that’s advertising that property isn’t even in the same state; so now you deal with that. So I hope that they’re using my information. Of course, they won’t follow up with me to let me know if they shut them down, but eventually, that has to be the case.

Joe Fairless: Great stuff. Thank you for being on the show, educating us on this topic. I think it’s certainly relevant for those of us who live in cities where we find our next apartment or rental or Craigslist… And then also for anyone who looks for vacation rentals on Craigslist – if you’re out there, then this certainly is a good service, too. Thank you again for spending time with us and doing what you do. I hope you have a best ever weekend, and we’ll talk to you soon.

Tammy Sorrento: Joe, thank you, and I hope to be back soon.

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A Best Ever Show flyer featuring guest James Hawk

JF1382: Leaving Great Income Behind To Start Your Own Wholesaling Business with James Hawk

James was making good money as a W2 worker with benefits and a comfortable life. He looked into real estate investing, started wholesaling, did two deals, and left his job. His family thought he was crazy and so did his friends. Now with his company being worth multiple millions of dollars, clearly he made the right choice. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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James Hawk Real Estate Background:

  • Owns and operates a multi million dollar real estate investing business in North and Central Florida
  • Full time real estate investor since 2010, has purchased over 1,000 properties
  • Bought and sold over $40 million worth of real estate
  • Say hi to him at: www.flipmorehouses.com
  • Based in Jacksonville, FL
  • Best Ever Book: Traction

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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, James Hawk. How are you doing, James?

James Hawk: Good, man. How are you? Thanks for having me on.

Joe Fairless: My pleasure. I am doing well, and nice to have you on the show. A little bit about James – he owns and operates a multi-million-dollar real estate investing business in North and Central Florida. He’s been a full-time real estate investor since 2010, and has purchased over 1,000 properties. He’s bought and sold off 40 million dollars worth of real estate, and he’s based in Jacksonville, Florida.

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

James Hawk: Sure, sure. Primarily, we wholesale. I would say that our business is broken down into about 90% wholesale, 5% rehabbing, a little bit of wholetail, and then we also do a little bit of new construction, as well… But not that much.

Basically, I got started in 2010. I was working full-time for a bridge company. We actually did the Woodrow Wilson in Washington DC. We’ve been featured in Mega Builders, and a lot of other cool stuff like that.

Joe Fairless: Wow, cool.

James Hawk: Yeah, that’s pretty cool… But I learned pretty quickly that it was “Where am I really going?” I was making decent money; I wanted more out of my life. At the time, I had a friend that was a full-time real estate investor. He really wouldn’t share too much with me; I had just seen that he was successful and he was making a lot of money… And I said I was gonna be an agent.

So instead of going the agent route, I think it was on — man, you know back then… I know you were in the game as well probably, you couldn’t just go to YouTube and five million videos showed up, or anything like that… So what I did is I stumbled across I wanna say a blog about wholesaling. I think it was actually an REI club, or something like that. I had never heard of it before, and I just took the concept and basically just went out — I just went until I figured it out, more or less.

It was about 5-6 months before I actually did my first deal for $4,000. My second one was for 20k, and then I quit my job and went full-time.

Joe Fairless: Wow, there you go. You did some research, made it happen, and now here you are.

James Hawk: Yeah. I’d say everyone thought I was crazy, obviously… It’s the same story…

Joe Fairless: Who’s everyone?

James Hawk: My family, my friends… I wasn’t making a ton of money, but I had a regular middle-class job, good benefits and everything else. It’s just something that — I don’t come from an entrepreneurial family like everyone… They go to school, they get a good job, and they live out their lives. For me to do that, it was just a lot different than what I grew up around.

Joe Fairless: How old are you now?

James Hawk: 31.

Joe Fairless: 31. So how old were you when you left the bridge company?

James Hawk: I think I was 22.

Joe Fairless: You were 22 then… Were you married at the time? I don’t wanna make assumptions. No. Okay, I thought it was kind of young to be married, but I just wanted to make sure. Okay, so you weren’t married… So your family and friends thought you were crazy, because you left the decent salary job, as you said, and started your own venture. Now 90% of your business is wholesaling, and then you’ve got miscellaneous stuff… Why did you choose wholesaling over rehabbing, wholetailing and new construction? …the other aspects of the business you do, but not nearly as much.

James Hawk: Right, and what’s interesting – it’s kind of been a rollercoaster over the last 8 years, bouncing back and forth between “Alright, we’re gonna be…”– you know, I have a business partner, by the way, now. I didn’t at first, but since 2013 I have. But we went back and forth, like “Alright, we’re gonna rehab everything. Now we’re wholesaling everything.” We’ve gone through just the common hurdles that most people that have been doing this for a fair amount of time probably have, as well… Then we finally settled in the last couple years on the model that we have now, just simply because it’s just so much easier.

Anyone that has rehabbed a substantial amount of houses knows dealing with the contractors and just the invoicing and all that stuff is really a pain. There’s a lot of money in it, and we’ve brought people in-house, had project managers… We’ve done it a lot of different ways, but at the end of the day for our time and the lifestyle that we were looking to have in this business, wholesaling has just made the most sense for us.

Joe Fairless: I hear you. If I didn’t do what I did and I was still doing real estate, wholesaling would be the next option I’d focus on. The only reason I didn’t get into wholesaling originally is I didn’t really know about it… Otherwise I might be in it, because the risk per deal is, like, nothing… Right? You’re not risking your own money, so if you don’t sell it, then you just don’t sell it, right?

James Hawk: Yeah, and that’s pretty much it. That was a great point. There is, it’s very minimal risk. I will say this – we focus very, very much on customer experience and branding and creating that “We’re the authority” in any market that we’re in; that’s what we try to portray and we try to live up to it. We never try to put anything under contract that we don’t wanna close on or we don’t have the ability to close on… We always make sure that we can.

The only issues that we might run into every once in a while is that maybe one of our salespeople that gets the contract, and for whatever reason it just doesn’t really work – it’s rare, but it does happen… Then we usually use an inspection period and then we’ll just either have to back out or renegotiate.

Joe Fairless: Customer experience and branding is the focus according to you. How do you apply that and bring that to life?

James Hawk: Well, in a lot of ways. From everything that we do – from the marketing standpoint, from the time that we talk to somebody… We answer the phone first and foremost, always. We’re basically gonna make sure that they’re treated like family when they call us. That’s how everyone in here is. We’re really close, and we just do a lot of stuff that not necessarily every other company that wholesales would do. We’ll send them packages in the mail after the appointment, thank you packages… Just a lot of different stuff like that, that I’ve never seen anyone else do.

We have a charity program, it’s called “Houses Help.” If we buy your house, we basically will donate up to $1,000 to the church, or a charity of the seller’s choice. We have another move-in program… Just different stuff like that that really helps us stand out amongst everyone else.

Joe Fairless: The being treated like family part whenever they call you – will you elaborate on how that’s executed?

James Hawk: Sure. Let me say it like this – whenever they call, it doesn’t matter what they say to us… This happens all the time – they call from (let’s just say) mail, or whatever, and they’re super, super upset. We’ll just kill them with kindness until it turns around… And this happens, I’m telling you, probably once a week, where someone will call and they’re super upset; we’ll just focus everything on really digging into why they’re upset, trying to turn that around, trying to help them understand our position, and then basically getting that appointment and going out there and meeting with them. Once we do that, typically, at least 40%-50% of the time they’ll buy that house.

Joe Fairless: Yeah, there’s a difference between what I call the customer service smile, where it’s just fake… You’re calling with an issue and they’re smiling, but you know it’s just a front, versus what you said, where you’re asking questions to get to the root of why they’re feeling that way… And why is it? Why are they calling you super upset, by the way?

James Hawk: Just to echo what you’ve just said – that’s exactly right, and I should have said that… It’s being really genuine, as well; that’s another great point to that, just being really genuine. And I would say the only time people would call and they’re really upset is off of mail. We have a lot of different marketing channels – we do radio, we do mail, we do Facebook, Google… But the mail is the only time that we’ll ever get a call from someone that’s upset, and that’s simply because they go out to their mailbox every day and there’s 10, 15, 20 postcards and letters.

So even though we write all of our own and try to really stand out, at the end of the day some people just get frustrated that they’re getting so much mail… And then we’re just talking to them and letting them know why we’re doing that, and being genuine with them, and they usually appreciate that. Half of the other people, like they tell us, don’t even answer the phone.

Joe Fairless: Do you answer phones 24/7?

James Hawk: Not 24/7, but any time between 8 AM and 2 AM.

Joe Fairless: Oh, that’s pretty close.

James Hawk: Yeah, we’re close… Not quite 24/7, but yeah, between 8 and 2.

Joe Fairless: If I call at 1 AM, where is the person located who I’m talking to?

James Hawk: The person at 1 AM would be in the Philippines; that would be a VA. But we will answer the phone.

Joe Fairless: [laughs] Your marketing – you touched on it. You said customer experience and branding tend to be the focus… So we’ve just talked about customer experience… What about branding and — I’ll group in marketing there. You said radio, direct mail, Google… What else do you do?

James Hawk: We also do Facebook ads, and we’ve really spent quite a bit of money and really dialed in Facebook. Something that I hear quite often — I’m in a couple high-level real estate masterminds, and the common theme is “Facebook for motivated sellers is just very difficult. The lead quality isn’t that great, it’s really expensive…” And this is just every day, on average, we spend for a lead, let’s just say direct mail, $100 or maybe a little over $100 for a direct mail lead. On Facebook, we can bring in leads for about $40, so less than half of a direct mail lead… And typically, they can even be higher quality, because they’re actually taking the time to submit the form, and in essence, we’re kind of more in the driver’s seat versus with direct mail… They’re just responding, so that’s reactive instead of proactive.

Joe Fairless: What about radio? What are you getting per lead?

James Hawk: Well, radio is interesting… We’ve just started testing radio the last three weeks. We are getting calls. We haven’t got a deal off of radio yet, but we’re gonna see. We have a local, very popular DJ that’s endorsing us, and I’m curious to see what happens. We’re also gonna test TV, but the majority of our money goes into Facebook, Google, direct mail and relationships and networking.

Joe Fairless: What’s your cost per lead on Google?

James Hawk: On Google we stay around $175 or so for AdWords… The lead quality is always extremely high. What we do tend to find though is if you get a lead on AdWords, 9 times out of 10 they also went to five other sites, which we really don’t mind, because we go out and we have a full-blown presentation that we give them; we have a leave behind folder with a credibility kit we send them when we book the appointment… They’ll get a link that will show a video of who’s coming out to their house, with an introduction…
So we do all these little cool things that we really don’t see anyone else doing, that for us just seems like it’s business fundamentals.

Joe Fairless: You bring up an interesting point – I never ever thought about where it’s not just about cost per acquisition, it’s also about where those individuals are coming from, and if that platform lends itself to them also easily reaching out to your competition… And you mention that it’s not a big deal, but ideally, it would be nice if it was a platform that they weren’t naturally coming across your competition, right?

James Hawk: Sure.

Joe Fairless: That’s interesting, I’ve never thought about that. So you said 175 – I assume it’s 175 dollars, not $1,75, right?

James Hawk: Right, right. Yeah.

Joe Fairless: That’s what I thought, I just wanted to make sure.

James Hawk: [unintelligible [00:13:34].14]

Joe Fairless: So there comes my next question – with Facebook being $40/lead and you said it’s pretty high quality, why not just go all-in on the Facebook ads and not do direct mail, radio, TV or Google?

James Hawk: Well, I’ll tell you why, and that’s a very good question. The reason why we wouldn’t do that is just simply because we like to at least have a few lines in the water… You just never know. I recommend to everyone, make sure at least you have three or four marketing channels, just simply because you just never know what might happen. If something with that channel dies, or Facebook changes their algorithm, or whatever it is, that could really affect your business.

An example would be even direct mail. Back in 2011-2012 I felt like we were the only postcard or letter that these people were getting; it was very rare that we even had much competition at all, because things really hadn’t picked back up. But now – geez, every single day we go to appointments and there’s 30-40 postcards just stacked up on their counter, and that’s what my salespeople tell me all the time… But yeah, that’s why. I highly suggest that you just don’t have one resource that your entire business is depending upon.

Joe Fairless: Let’s talk about your team… How do you structure the team?

James Hawk: We have eight people now. We have two outside sales, we have one lead coordinator that’s during the day, and then we also have a lead coordinator/data specialist that’s at night. We obviously have my business partner, we have a full-time marketing person on staff, and we also have a full-time dispositions manager as well. I think that’s everybody; don’t tell them I said that… [laughter]

Joe Fairless: I think you got it. Your business partner – how do you divide up roles and responsibilities?

James Hawk: That’s a great question as well. What we do is we’re like “Look, you’re gonna focus on this side of the business, and I’m gonna focus on this side”, and we base that around what our strengths are.

My strength is more on the sales and marketing side, so that’s what I focus on. His strength is more on the going out and raising money, managing any construction… That’s what he focuses on. It’s a divide and conquer model.

Joe Fairless: Yeah, you complement each other.

James Hawk: Right, absolutely.

Joe Fairless: How did you meet your business partner?

James Hawk: We both had our own wholesaling business, and this was like at the end of 2012 – we just kept running across each other on Craigslist, looking at each other’s properties that were for sale, and then we’d call on them, not realizing it. After that happened like 3-4 times, we were like “Hey, let’s just meet up.”

I just happened to have a lead in a phenomenal area in [unintelligible [00:16:33].13] and I was like “Hey, why don’t you meet up with me and let’s take a look at this house that I think I’m gonna get.” So he met me over there, we walked the house… We just hit it off really well, our values aligned, and it just made sense. We made an agreement that it’s “Okay, I’ll go out and I will lock up this contract on this house. You go out and raise the money, and then we’ll just rehab this house together and see what happens.”

It was on a whim, to an extent, I guess you could say. And we did that house, and we absolutely crushed it. It was probably the best worst thing that could happen. We actually made over 100k on that house…

Joe Fairless: Wow.

James Hawk: …and that was our first rehab. We just happened to do it together, and it was the first rehab for each of us. Then we decided “Hey, why don’t we just partner up and do this?” $100,000 will get you really excited, so you’re ready to partner with everybody.

Joe Fairless: It does. Now I have to ask this question – you focus on wholesaling, but you made $100,000 on rehab, and that was how you and your partner did your deal… So why did you get away from rehabbing?

James Hawk: We still do…

Joe Fairless: But 90% is pretty — you said 90% is wholesaling, and 5% is rehabs.

James Hawk: It is. Well, here’s the thing, and this will put it in perspective for everyone… We actually make a good amount of money, even on our wholesale deals. Our average profit per wholesale deal is around 23k-24k. Obviously, every rehab can’t be 100k. We actually had two wholesale deals last year that were over 100k.

Joe Fairless: Wow.

James Hawk: So we just look at it as like “Okay, if we can make 23k-24k or whatever that is right now, versus maybe 35k-40k if we buy it and rehab it…”, that’s kind of the way that we look at it. If it’s substantially more, if we can at least double our money rehabbing it, then we will.

Joe Fairless: We’ve got to talk about these two wholesale deals last year where you made over $100,000 each. Let’s talk about each individually. Pick whichever you want first.

James Hawk: This is one before we had salespeople, at the beginning of the year. I think it was like February 2017. It was the Atlantic Beach, which is a highly desirable area; the seller called, I went out to the appointment, and he had literally stuff stacked to the ceiling throughout the entire house. His mother was living with him and she had just passed away, and he had some financial hardship.

I worked with him, I released some money early, helped him move out, and really walked him through the process. That deal – we actually sent out and it was within an hour we actually got over what we were asking for it. I wanna say we sold it for 272k, and we had it for 169k under contract. It didn’t close though for a couple months, but yeah, that was a good one.

Joe Fairless: How did you find it?

James Hawk: That one came from direct mail.

Joe Fairless: Okay. What about that other one?

James Hawk: The other one was actually direct mail as well. It was in another highly desireable area called [unintelligible [00:19:45].19] There’s like an equity membership just to be in there; I wanna say it’s 20k or 30k that you need to put up front just to live in that community… And we got a great deal on the house. From the hurricane, it had flooded it a little bit, and they had already relocated to a different location, so the house was just sitting there. This one was one of our salespeople.

By the way, we always try to get video testimonials, just because we love getting the social proof, and we love being able to show that to everyone else, and for anyone that’s skeptical, they can see that it’s real. So we also got him to do a video testimonial, but we also sold it to someone that lived in that neighborhood.

One of our buyers lived in there, and he was looking for another house in that neighborhood. We got it for 370k, and then we sold it to him for (I think it was) 483k. So the final check was just over like 101k that we made on it. He ended up buying it, and he fixed it up to live in it, and then he sold his other house in that same neighborhood.

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

James Hawk: The best real estate investing advice ever – I would say that it goes in line with marketing. Someone once told me always to be consistent, and don’t always make it about you. It’s always about what’s in it for whoever your prospect is.

Joe Fairless: That is so true, and in the world of social media a lot of people get away from that. There’s a lot of chest-pounding out there, versus thinking about how that content will be valuable for the people receiving it.

James Hawk: 100%.

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

James Hawk: I’m ready.

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

Break: [00:21:42].24] to [00:22:20].00]

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

James Hawk: Traction, by Gino Wickman.

Joe Fairless: Best ever deal you’ve done that you haven’t discussed on this show yet?

James Hawk: Best ever deal I’ve done that I haven’t discussed on the show – obviously, I would go back to that $100,000 wholesale deal, but I’ll tell you what, we’ve just completed a project… It was just a lot – we tore down the house, and it was actually a double lot. We’re gonna be right at $100,000 on that. It was minimal effort, minimal time, and it’s 100k, so that was a great deal.

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

James Hawk: A mistake… [laughs]

Joe Fairless: You haven’t made any of those yet, have you?

James Hawk: Oh, man… I would say that a big mistake that you can make in wholesaling, that I’ve made so many times, is typically we use with a wholesale deal our buyer’s funds; now we always have our funds there, just to back it up… But before we didn’t do that, so if the buyer’s money don’t show up or they back out at the last minute, then you’re in a bad situation.

Joe Fairless: What happens if you don’t have money and they don’t have money, but you’re supposed to close? I don’t think I know that answer.

James Hawk: Typically, we always do have the money; it just might not be there at the time, or whenever we did it that way… If they fell out at the last minute, or the lender didn’t send their money or whatever the case may be, then now we’re scrambling, trying to go to the bank, talk to our lender or whatever we have to do to get that money over there.

So typically, we would just go to the seller and say “Hey, there’s an issue, but we’re gonna get the money over there as soon as possible. Work with us.” Luckily, it hasn’t gone severe, but that’s always an uncomfortable situation, and I would highly suggest — now, we always even have our buyer send in their money 24 hours in advance as well, just for a comfort level.

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

James Hawk: To our Houses Help program. That’s really cool, we love that.

Joe Fairless: What is it?

James Hawk: Like I said earlier, it’s the program that we offer to all the sellers.

Joe Fairless: Oh, sorry, yeah. If you buy the house, you donate up to $1,000 to charity… Or if you buy their house, you donate up to $1,000?

James Hawk: Yeah, of their choice. It could be a choice, a charity… Whatever they choose, then we would donate the money. And it’s at closing, so we show up on the HUD and they would see it happen.

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

James Hawk: You can find me almost everywhere @flipfuel – Instagram, Facebook, YouTube… @flipfuel, you can find me.

Joe Fairless: Excellent. And your website is linked in the show notes. James, thank you so much for being on the show, talking about your business focus, which is wholesaling, as well as getting into the details – I love it; you got into the cost per leads for Facebook ($40), direct mail ($100), Google ($175) and some pros and cons for each of those. You got into the team, and then got into two case studies for those 100k wholesale deals.

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

James Hawk: Thanks, man. I appreciate it.

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Creative Real Estate Financing Expert

JF1263: Creative Financing Specialist Tells All with Scott Ulmer

Scott bought his first home when he was only 14 years old! Now he’s done over 1,500 real estate transactions and he specializes in getting creative with his deals. Scott likes to get creative when he buys as well as when he sells. To hear expert tips on creative financing from both the buying and selling side, listen to this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Scott Ulmer Real Estate Background:

-Owner of Little Pink Houses of America

-Bought his first home when he was 14 years old, and started investing full-time right after high school

-Developed unique Lease-Purchase program coined “ABLE” (Assembling Buyer Lease Estates)

-Has done 1,500 real estate transactions, specializing in non-traditional, creative, no-money, no-credit style deals

-Say hi to him at www.pinkaffiliates.com   904-500-PINK (7465) ext. 2

-Based in Jacksonville, Florida

-Best Ever Book: Good to Great by Jim Collins


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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, Scott Ulmer. How are you doing, my friend?

Scott Ulmer: I’m doing great, sir. How about yourself?

Joe Fairless: I am doing great, and nice to have you on the show. A little bit about Scott – he is the owner of Little Pink Houses of America. He bought his first home when he was 14 years old (boy, that’s young) and started investing full-time right after high school. He developed a unique lease purchase program coined ABLE (Assembling Buyer Lease Estates) and has done 1,500 real estate transactions; specializing in non-traditional, creative, no-money-down, no-credit style deals. Based in Jacksonville, Florida.

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

Scott Ulmer: Sure, I’d love to, and thanks for having me, by the way. So I was born and raised in a real estate family. In fact – kind of a niche story – I joke that my father who grew up very poor, not only did he have to walk ten miles in the snow to get to school, but he didn’t even have shoes; he had holes in them. So he’s kind of a success story, rags to riches; he read a book when I was I think eight years old, from Mark Haroldsen, How To Wake Up The Financial Genius Inside Of You, and from there he started doing some low-end wholesale type deals, and kind of segued into a career into real estate.

So I effectively was kind of raised in that environment. I did buy my first house at 14. There was kind of a story behind that; I had help, of course, but I really jumped in full-time right out of high school, I did go to college… Actually, I graduated a little early so I could get out and start working. I always liked making money and wanted to do that. My folks wouldn’t let me drop out, so I was required to graduate, which in hindsight was a good thing.

I ended up buying houses for my father. That was my primary job. We were a volume-based company, and that was actually in Ohio. We were doing about 150 deals a year; we were buying for cash, we would renovate them and we would sell them on what’s called a land installment contract, which is very similar to a lease option – it has a few different moving parts, but in the end the model and the premise of the model is really to work on getting our buyers not just credit-qualified, but mortgage-ready in a fairly finite period of time. So the genesis for what we do today at Pink really started with my father’s company; he was kind of a pioneer. This would have been in the late ’80s, early ’90s, where he was very much doing volume-based business.

In my biggest month I bought 32 homes, I bought six in one day… We just were buying like crazy. My father would borrow private funds and would use those funds to purchase and renovate homes. There was a lot of sloppiness, there were a lot of things that were done improperly, frankly. No malice, but certainly not done the way that they should have been done, and it ultimately led to the downfall and demise of his company, of which I was an integral part of, and our lives just were devastated and involved prison, and just a lot of very, very hard times. From that, it was one of those moments – kind of the Y in the road, that you either let challenges and adversity define you and map out who your identity is going to be the rest of your life, or you learn from it and you grow and you decide that you’re not gonna let adversity take you down, and in fact you’re gonna use it as a springboard.

Through some of the toughest chapters of my life, it propelled me to where I am today personally, professionally, and certainly spiritually. Currently, I’ve taken the knowledge I had with my father… There’s another gentleman in the real estate world named Ron LeGrand; Ron brought me down, I ran his real estate operation and did most of his high-level coaching for a period of years there, and then branched out on my own to start Little Pink Houses about four years ago.

We are in Jacksonville, Florida, we have a staff of nine, and we really have to primary focuses – we have a very cookie-cutter system, we’re niche-based, we deal with executive-level homes and we do lease purchase  — we call them executive lease purchase down here based on the price point and the targets that we ultimately go after. We also have a training arm which is intended to work with folks who would be potential partners for us that could open up our affiliate in their own market.

Kind of a condensed back-story of myself – 22 years full-time experience and a lot of mistakes. Kind of cliché, but it’s true. That’s kind of how you get from point A to point B – learning from those mistakes, and we’ve certainly made our share of them… But we’re proud of what we have today, and I’m certainly excited to be talking about it with you here.

Joe Fairless: You ended up going to prison, right?

Scott Ulmer: I did.

Joe Fairless: Okay, so when you got out, what were your immediate next steps to build up your career again?

Scott Ulmer: Sure. It’s a great question; I don’t know that I’ve had anyone ask me that. First of all, I had a young daughter and a wife who stuck with me, and that really strengthened our marriage. I saw a lot of folks go the other direction where marriages didn’t quite work out in the same scenario, but… LeGrand actually reached out to me before I got out and had made a job proposal to me, or maybe a job request. It wasn’t an offer, it was kind of “If you’re interested, give me a call”, and literally, within 30 days of being home, he flew me down, interviewed, offered me the job on the spot, and 3-5 weeks later I was down full-time. So fortunately, things kind of fell into place for me, but that certainly could have gone a lot of different directions.

I was very open to anything… You know, a lot of people looked at real estate – who were in it before 2008 and after – that maybe it wasn’t the vehicle that it was cut out to be, or the vehicle that was gonna separate them and earn them wealth and all the good stuff that comes with that. The reality is that real estate is cyclical, but what everybody went through in 2008, including myself, it didn’t deter my interest in real estate.

I’m a life-long real estate guy, I knew that real estate was going to be the path that ultimately would lead me to my destiny and my dreams; I never had any doubts about that. LeGrand showed up, frankly out of nowhere, and couldn’t have been a bigger blessing. I was tremendously grateful to him for the opportunity. He candidly, Joe, helped me from the lowest spot of my life and I’ll forever be grateful for that.  I was very fortunate that I had that opportunity waiting for me.

Joe Fairless: How do you think about the challenges and adversity that you come across…? Because you mentioned earlier we can either let challenges and adversity define us, OR we can learn and grow from it. And you’ve chosen the latter, to learn and grow from it, whereas others wouldn’t… So how do you think about it? How do you process that in your mind?

Scott Ulmer: It’s a great question. I was sharing prior to the recording that everytime we have trainings here, I share really the entire back-story; it takes me about 30-40 minutes, and if I’m being totally honest, I get emotional every time I tell it, because I have a little bit of a slideshow in there, and there’s a picture of my daughter and I hugging on the beach when I first got to Florida, and I’d be lying if I told you that those emotions were not still very raw inside of me, because they are. But I guess — again, some of this may sound cliché, but it’s true… In life, there are a lot of things that happen to you, some of which you cause and others that just kind of happen, and it’s how you choose to respond to them.

When the proverbial bottom fell out of our life, at a time when everything really kind of went down — I was 26 at the time my father’s company went out of business, I was 31 when everything kind of came to a head… So at that point in my life I had a daughter and a wife that were certainly much more important than myself, and it was at that time I just said, you know, you’re gonna have those pity-parties every once in a while; my mom has a great saying – she says “Look, you’re gonna have your pity-party… Have it, 15 minutes, and get past it. It’s your choice how you wanna respond to it.”

I think processing the adversity for me – there were many times it felt overwhelming and I didn’t wanna go on and all those thoughts that are probably very common when you’re going through a tremendous adversity and a trying time… But I allowed myself a couple moments to kind of wallow in the pity, and then it was time to suck it up and get back at it. In the end, it was just a conscious decision to say “You know what, I don’t like what happened, and I’m gonna try to make the most of the situation. I’ve got a lot of life left to live, God willing, and I wanna try to make my mark in a positive way as best I can.” So it was a choice at how I wanted to respond more than anything, and again, it took a lot of reminders to myself and certainly a lot of digging deep. I would be lying if I said otherwise.

In the end, I believe that I had some great experience, I had some great knowledge that was very specific to a niche of real estate, and I just believed that there was a lot left for me, and I surely wanted to try to make the most of the life that I had and the adversity I had to go through. I felt that there would be opportunities for me to share that with other people that have gone through their own adversity and hope that maybe I could be a small inspiration to some people in the end.

Joe Fairless: So now let’s talk about your business that you have, Little Pink Houses of America. You said you have two different arms of business. One is the executive lease purchase, and the other is your training arm. So basically, an affiliate program for others to open up what you’re doing in their market. What is an executive lease purchase?

Scott Ulmer: Great. So our elevator pitch is fairly simple. We work with folks that can afford a mortgage and a down payment, but for a multitude of reasons may not be able to walk into the bank and qualify for a traditional loan today. Perfect example of our target demographic – husband and wife decides it’s time to buy a home; good jobs, income is sufficient, crediting [unintelligible [00:10:58].03] they go and they contact a local realtor, the realtor takes to an in-house finance company, they get this magic pre-approval letter that we always chuckle at, and with that, of course, they go look at a dozen homes, they identify one they love, they negotiate on it, it gets accepted – of course, contingent on their final financing being approved.

When they go back to the loan officer or loan originator, unfortunately, for one reason or another, they are denied at the finish line, so to speak. That’s our buyer – someone who is close, who has enough merit to get a pre-approval, has money saved up, has a down payment, can afford the mortgage payment that the income matches up, but can’t walk into the bank today.

Joe Fairless: Why would they get denied in that example? Because it sounds like everything is good.

Scott Ulmer: Well, they get denied for a lot of reasons. In fact, there are a ton of reasons right now. A lot of them are very, very quirky. I will tell you, one of the biggest demographics we work with is self-employed. Self-employed – they show a very good income, but they also show a lot of write-offs, and loans are based on net income on their tax returns, so after the write-offs are taken out, their net income shows not enough for the bank to loan on.

There are others where maybe an old credit blemish may have popped up that they didn’t see originally. We have folks that have been denied for – oh, my goodness – not enough time on the job, and… I mean, there are a lot of quirky reasons. At the end of the day the banking restrictions subsequent to 2008 have become very stringent, they still are. The reality is somewhere between 70%-80% of our population today in America can’t walk into the bank off of the street and qualify for a traditional mortgage.

Unfortunately – or maybe fortunately for us, because it’s what our business is really patterned after – we don’t see any real end in sight. People can be denied; they can be pre-approved and denied at the final for many, many reasons. Some make sense, some don’t make sense, but ultimately it’s just the nature of the world we live in today. So a lot of reasons, but that really is our target buyer and that’s who we really go after.

Joe Fairless: Okay. So this couple finds you, and then what?

Scott Ulmer: We have a very thorough vetting process. Obviously, we do our marketing and they will find us through a variety of maybe 3-4 primary marketing mediums that we use. They find us, obviously we show them the home, they love it… We have a very thorough vetting process. It’s one of the things, by the way, Joe, that I think really distinguishes us from any other folks out there or organizations out there that do something similar. Our platform is designed to provide a successful bridge or stepping stone for these folks to become mortgage-ready and ultimately successful in their financing… So we take them through underwriting.

We have a company that we work with that is a national lender, and they understand the nature of the clients that we work with. So when we take them through underwriting, we’re not looking for a surprise or “Hey, they are really qualified” in the end. We know the folks we’re working with are not qualified, and in many cases we have a good idea as to why. Every once in a while, folks just don’t quite know and we kind of discovered why through this underwriting process… But we know why, so by taking what they’re underwriting, they’re providing 2-3 years of tax returns, 90 days worth of pay stubs, 90 days worth of bank statements, any other pertinent financial information that would govern whether or not an underwriter would say yes or no to issuing a loan to a prospective borrower.

So through that process, we are told 1) why they can’t get a mortgage. So we are told the specific things and specific reasons. And then 2) through that process, we are devising a blueprint that is custom-made for every borrower we work with that has requirements for them to undertake during the process of our agreements, which are typically 6-12 months, with our buyer, before they’re required to get financing.

So for our contracts, we’re actually required to take some of these items on and ultimately help them get to the point where they can become mortgage-ready in that window of time.

After we have this vetting process, we get this report published for us… We even sit down with every one of our buyers and we have an interview – it typically takes about an hour – and I always say it’s analogous to a loan committee, if you will. We understand that there’s some really good folks out there that have good jobs, good income, and for a lot of reasons, as I’ve said, can’t get their financing today… So we wanna get to know them on a personal level, we wanna go through their report, their credit, find out what had caused them to be in the spot that they’re in, and most importantly, really identify with them and make sure that this is a good fit for them, good fit for us, and that they understand what will be expected of them through the course of their term with us, and ultimately what will be required for them to successfully complete our mortgage-readiness program, which the end point is ultimately to get their loan approved and ultimately a title in their name… And as we say, with a smile, but we’re sincere, we hope they live happily ever after.

Joe Fairless: So basically people are finding you or you’re finding them, who haven’t been able to qualify for various reasons, but for the most part they should be able to qualify; there’s just a nuance or two involved, and then you hook them up with a lender, and that lender identifies exactly why they are or are not approved, and then you help them put together a plan so that they are mortgage-ready. Then once they are mortgage-ready, what is the final step that wraps the bow on this?

Scott Ulmer: That’s a great reassessment. So once we all come to term and they are the right buyer for us and we feel good and they understand the expectations and frankly what the path looks like to success and we all agree and feel good – and we’re very big on relationships – we have what we call soft-closing, which means we close on the lease purchase, or the executive lease purchase. We do use a law firm for that.

Then after the closing we have a few systems that really govern it. They are required to work with a mortgage-readiness company that we work with as well. This company provides us monthly reports, they really do all of the work; it’s outsource, we just get the reports. We also put the buyer in touch with a local mortgage lender that we’re working with, who also works in conjunction with the mortgage-readiness company, which is similar to a credit repair company, but it’s not always credit with the clients we work with.

We specialize in homes anywhere from 200k to 500k in Jacksonville, which is a big swathe of the population, and folks that are fairly well-heeled, that can afford a 5%-10% down payment and ultimately the monthly payment in that range… So it’s not always credit, but we call it mortgage-readiness. So the mortgage lender and the credit repair company work with the buyer through the course of the term… And by the way, the mortgage lender is gonna be the one that writes the loan in the end, and so he/she is involved from really the first six weeks of them moving into the home, at which point they can finance with a loan at any time.

After they have moved in, we have a kind of post-closing process which I’ve just explained, and it’s all outsource, so the mortgage-readiness/credit repair company works in conjunction with the lender who’s going to write the loan, and ultimately our client. And it’s our intent to get them a loan as soon as possible. Again, most fall within 6-12 months; there are certainly exceptions to that, but most are not less than six. The majority of our deals are somewhere between six and twelve months, and a lot of it is because of the systems we have once the buyer is in there, that really mandate and force their hand to get their loan. That’s what we wanna see, that’s what’s best for them, assuming our agreements are predicated upon.

I learned in my experience that sometimes you have to force those – in a good way, of course. You’re really requiring them to fulfill the obligation on the other side of the contract.

Joe Fairless: And how do you make money on this?

Scott Ulmer: It’s a great question. In our real estate business we really have two arms. We work with for-sale-by-owner sellers, we work with expired listings, we have a few different target demographics that we’re going after, and we have a very simple presentation, our script is very good… It kind of lays out who we are and what we do. It is not for every seller. About four out ten for-sale-by-owner sellers that we work with or that we contact have the potential to work with us. The other six have their reasons that they can’t work with any sort of a terms-type sale.

So as we contact these folks, we’re kind of laying out the platform… Most of the for-sale-by-owner sellers we work with, Joe, earn an average of 11% to 14% more if they can wait to get a full cash-out anywhere from 6 to 12 months, versus selling traditionally today. So the reason sellers do this with us is really singular – it’s the economic benefits. If  you’re dealing with a $300,000 home, you’re talking about a $30,000 to $40,000 swing over the course of a year. It some cases it can be even greater than that, depending on whether or not they have an underlying mortgage or they’re just generating cashflow through the 6-12 months.

When we find these sellers, we will negotiate what we call a strike price. We have the terms and conditions that we kind of negotiate with them. Most of them are preliminary, but we have negotiated a price that they can live with, and then we will mark our profit on top of that. We’re very transparent, we share with every seller that we have a minimum $10,000 profit that we’re going to be looking to generate on every deal that we do.

So if you take the average home – let’s say someone’s at 279,9k as an asking price; ten out of ten sellers list it high with the intent to take a little bit of a lower offer. Typically, we’ll be able to get them from the 279k to maybe 269k, 265k, 260k, depending on the negotiations we have. [unintelligible [00:20:02].08] we do a market analysis, of course, on every home. We then will take it back out at the price that we believe is marketable, and we’ve kind of carved our spread out from that scenario.

Joe Fairless: In order to do this then you need to have a for-sale-by-owner home, and a person or couple who can’t qualify for a loan to match them up with it?

Scott Ulmer: Pretty much. By the virtue of our agreements – we’ve got very strong agreements; when I say that, they are — we retained two law firms when we first started. We wanna make sure that we’re fully compliant with any sort of real estate licensing laws and any sort of real estate laws, period. So we actually have proprietary custom-made contracts that are very simple to understand. I learned a long time ago that we need to Keep It Simple, Silly; make sure that everybody can understand it.

In fact, our initial agreement we used with our for-sale-by-owner sellers is one page, and it’s just a work of art; our attorneys get the credit for that. The contracts we use obviously govern the entire model and the entire system, but you’re exactly right. We effectively are taking a for-sale-by-owner seller who has the ability to wait a short period of time before getting fully cashed out, and we’re pairing him up with a buyer who doesn’t need a terribly long time before getting their mortgage together. We provide them an absolute blueprint or a roadmap to their successful financing, we have post-closing systems that mandate that they follow through on what’s required, we have a third-party escrow servicing company we use that will debit the buyer account, and if there is an underlying mortgage on the home, that we get paid first, so there’s no equity skimming, and if there’s any additional cashflow above the mortgage, depending if we get that or the for-sale-by-owner seller gets it (it depends on what we negotiated)… But again, that eliminates having to collect payments; we put furnished home warranties on almost every deal we do, so repairs become the buyer responsibility. We have a home warranty in place just as a back-stop. But in the end, the simple way to look at it is just that – we’re pairing those two up, we’re carving a spread out in the middle, and then facilitating them through outsourced third-parties to make sure that they get their financing in the window of time that we’ve agreed.

Joe Fairless: Just looking at it from how — and I’m not in this space, so excuse me for the ignorance if I’m oversimplifying what I’m about to say… But it seems like a lot of work when if I take a couple different approaches, I could make more money and do less work. For example, if I find a for-sale-by-owner home and I wholesale it – boom, done, off my books, and I just made $10,000 on the wholesale. I don’t have to go find a motivated buyer, let alone have to set them up with these third-party people and track the process.

And on the flipside, if I find a person who doesn’t qualify for a loan, then maybe instead of matching them up with a home and take the spread, maybe I buy that home or figure out a way so that they can buy it from me, and then I work with them personally; that way, I can make profits on the down payment on the monthly payment, and then ultimately when they buy it. So help me understand the benefits of this, from a business standpoint. I get the altruistic standpoint.

Scott Ulmer: Yeah, and altruistic is not a bad word for it, and then this may be an altruistic statement, but our moniker internally and in many of our marketing is that we create homeowners. That’s our niche, we are proud of that. We wanna try to make a positive difference in people’s lives, and Joe, it’s a niche that we’ve identified in good markets and bad; there’s always a segment of our population that cannot qualify today with a bank loan, but can afford it, and certainly since 2008 that number of population has certainly increased exponentially.

As far as directly answering the question, wholesaling is something I’ve done just by virtue of doing a lot of deals over the years, so I’ve done my share of wholesale. I say this often – I know folks that make their living wholesaling; it’s never been my cup of tea. Very competitive, very saturated, and in my experience – which is extensive – you’re usually not generating 10k a pop. Oh, can you? Sure. I’ve generated 25k on a wholesale deal, but in most cases, wholesalers are walking with 2k, 3k; you’re right, you’re done, wash your hands and move forward. 10k on a wholesale flip would be pretty good, but I don’t think that that’s gonna be the consistent number that you’re gonna achieve, number one.

Number two, most of our profits are gonna fall between 15k and 20k. 10k is a number that is realistic based on the formula that we use. We have always believed that if you can generate $10,000 without having to use your own cash or credit, in a fairly short period of time – most of our sales are 45 to 60 days – and there’s just this massive pool of buyers out there… I’m not suggesting it’s easy, because we work hard, and we don’t make [unintelligible [00:24:38].14] about it; it’s not a get rich quick scheme over here, but it is absolutely a niche that is ripe for the picking.

We think we can do better than wholesalers with our formula, and because everything is outsourced – I don’t wanna pretend that there’s not an element of handholding and involvement, because there is, but it’s very minimal, once the buyer is in the home. And as far as buying them (the house itself) and then working with the buyers – we do do that as well. It depends on the motivation of the seller, it depends on the deal as a whole, and we do have opportunities with some additional lead sources that we’re generating where we find that low-hanging fruit.

What’s neat about our system is that we enter into an agreement with a seller with really four preliminary terms – the purchase price of the home, what they would consider on a monthly basis for the payment, if in fact they’re requiring any money upfront (about 50% of the sellers we work with are not requiring money or they’re not getting money upfront, which really just comes down to negotiating), and the fourth is the window of time that they would consider; in a term, as an example, 6-12 months. So we’ve preliminarily identified those with the seller.

Once we take those to our market and the buyers we’re working with, we then go back to our sellers and we typically will carve out a bigger spread and a bigger margin. In some cases, we then can buy the home and then be ultimately the seller in that case to the buyer, and generate a bigger spread. So there are some variations to what we do that encompass exactly what you’re saying, but we’ve always believed that if you have a formula, you’ve identified a niche, you do one thing and you do it really well… And we believe we do this very well. We’re not perfect, but most of our deals succeed and most of our clients are very happy.

Now, again, we are not perfect and we certainly have made mistakes, but this is the niche we’ve identified, we believe in the platform, we wanna create homeowners, and in doing so we believe we can generate a good living, and frankly our affiliates can do the same.

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

Scott Ulmer: Wow, that’s a great question. I don’t know that I’ve had someone ask me that…

Joe Fairless: It’s the name of my podcast, so I have to ask it, otherwise I wouldn’t check that box.

Scott Ulmer: [laughs] I probably should have put two and two together there, right? Actually, I did some research on you – a very impressive career up to this point, I want you to know that. I’ve gotta tell you, one of the things that is probably gonna sound maybe even on the cusp of cliché, but there are so many people out here that we call white noise, and don’t get me wrong, there are some really genuinely talented and bright folks that are out there in the world of real estate education, but it scares me frankly, because I’ve seen a lot of things… When I was with LeGrand, I had the chance to really go all over the country, and I spoke with different groups and I had the chance to just meet some great people… And the amount of educators and trainers out there scares me.

Too many people get into real estate investing without really taking the time to research the folks that they’re getting advice from, kind of the template or blueprint that they’re going to follow… I think that the biggest thing would be — and by the way, that’s how people get stung; real estate is not rocket science; HDTV and DIY, they have all these “Flip This House” type shows that make it look like it’s a piece of cake, and you know, you get out there and you do this, that and the other and you walk away with an $80,000 profit. Well, sure, that can happen, but they make it look a little too easy, and I think so many people get into it with the rose-colored glasses that said “This is a piece of cake. I’m gonna go in and do my first deal and make $80,000” without really researching and making sure that what they’re doing is based in not just fact, but fact from somebody that knows what they’re talking about.

So the best advice I would give someone is before jumping in with both feet, make sure you’ve done your homework and make sure whoever you’re choosing to follow or be trained by really knows what they’re talking about, and didn’t do a couple of deals last year and now they’re out there training people. Unfortunately, I’ve seen that in more cases than one. So do your homework and educate yourself. There’s so much good stuff out there, so many great free pieces of content online, and of course, a lot of great trainers across the country. Align yourself with the right person and make sure you do your homework before you jump in. That’s how people get stung, by getting in over their heads because they didn’t do their homework and preparation ahead of time.

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

Scott Ulmer: I’m ready.

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

Break: [00:28:38].18] to [00:29:29].03]

Joe Fairless: Best ever book you’ve read?

Scott Ulmer: Good To Great, Jim Collins.

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

Scott Ulmer: I did a deal in Naples, Florida while I was on vacation. We bought it for 2.6 million and sold it for 3.3 million.

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

Scott Ulmer: Where do I start…? I think the one mistake that keeps coming back to me right now, Joe, is I lose every time I lose my cool. That should speak for itself. Always maintain composure. Sometimes with homes and houses people can become emotional, and if you’re not careful, you can as well. So you always wanna maintain a good composure, a level head… I lose every time I lose my cool, so when I can just keep composed and connect on an emotional level in a good way, I can eliminate those types of unnecessary mistakes that have to do with the relationships as a whole.

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

Scott Ulmer: Wow, that’s one of the biggest things we like to do around here. Time – we like to give back in time; anybody can write a check, and we’re believers in financial, but we have a charity that we support, Little Pink Houses of Hope. It’s a breast cancer charity, and yes, that does come with a check, but we believe in hands-on, and I won’t get up on my soapbox, but we’ve had three or four things recently (just in the past two months) where we’ve been able to actually go out in the community and give time, not just a check. The meaning for that is just we’re very honored to be able to do that, and we try to do as much of that as we can.

Joe Fairless: What’s the best ever way the Best Ever listeners can get in touch with you or learn more about your company?

Scott Ulmer: Our primary real estate website is LittlePinkHousesOfAmerica.com. Joe, I didn’t ask you if you left when you heard our name; I’m assuming you did, most people do… But we love it. It certainly wouldn’t be my first choice for a color scheme, but it sticks out like a sore thumb and people remember us, and that’s part of our branding. So LittlePinkHousesOfAmerica.com and then PinkAffiliates.com discusses our affiliates and the opportunity that you can work with us and train with us here in our office in Jacksonville, Florida.

Joe Fairless: Well, thank you for being on the show and sharing your story and the challenges and adversity and how you have taken an empowering meaning from it and applied that to what you’re doing now, creating homeowners, and the business model behind what you’re doing, how you make money, how it benefits others, and the business that you’re in now. So thanks for being on the show, I’m really grateful you were on the show. I hope you have a best ever day, and we’ll talk to you soon.

Scott Ulmer: Joe, thanks for having me. It’s been a pleasure.

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JF1208: How To Find The BEST EVER Commercial Loans with Austin Peek

Today we will get a breakdown of commercial loans and lenders. Austin has originated over $60 million in commercial mortgage loans since founding RiverStone RECAP four years ago. He’ll tell us the difference between a bank loan vs. CMBS (commercial mortgage backed security) and CMBS vs. life insurance companies. We also get great advice on vetting your mortgage broker. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Austin Peek Background:

– Founder & Principal of RiverStone RECAP, a CRE mortgage firm

Started RSR 4 years ago and he’s originated over $60MM in commercial mortgage loans across the country

– Recently launched a podcast: Millionaire Interviews

– Based in Jacksonville, Florida

– Say hi to him at: https://millionaire-interviews.com/best-ever to get the FREE quote matrix and CRE Lender List

– Best Ever Book: The Real Estate Game


Made Possible Because of Our Best Ever Sponsors:

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

With us today, Austin Peek. How are you doing, Austin?

Austin Peek: Good, how about yourself, Joe?

Joe Fairless: I’m doing well, and nice to have you on the show. I’m looking forward to diving in. Austin is the founder and principal of RiverStone RECAP, which is a commercial real estate mortgage firm. He’s originated over 60 million dollars in commercial mortgage loans across the country of the last four years, and congratulations, he recently launched a podcast called Millionaire Interviews… So you’ve got a lot of exciting things happening, congrats on that!

Austin Peek: Yeah, thank you very much. Just something different to do other than just real estate, so I figured I’m gonna go ahead and give it a try.

Joe Fairless: Absolutely, and I’m sure that it ties into your business in some form or fashion, at least I hope it does.

Austin Peek: Yeah, it definitely does. I have some real estate guys on, but for me, I talk to people in all different types of industries, so… I just wanna become a popular podcaster like yourself.

Joe Fairless: Cool, good stuff. You’re based in Jacksonville, Florida… Besides that, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Austin Peek: Yeah, I am in the commercial real estate mortgage side, [unintelligible [00:03:19].11] I only work on commercial. I generally deal on loans with one to ten million in origination size, that’s kind of my sweet point, and can do deals all across the country. So even though I’m in Jacksonville, Florida – this is one of the nice things about what I do… If one of your listeners says “Hey, I wanna get into real estate but I don’t wanna just stay in one market”, what I do is I work on deals in South Carolina, California, New York, wherever. I never even have to go see the property, so that’s one of the beautiful things about what I do on the financing industry – it’s really just about the numbers, and not so much about going door-to-door and selling people on buying a home.

Joe Fairless: How do you decide what range of loan space that you wanna be in? You said you’re in the 1 to 10…

Austin Peek: Really, after you do above one million dollars, basically every transaction is almost the same. So I can do up to 200 million dollars, and there’s plenty of guys that say “Yeah, I do the one million dollar range to 200 million”, whatever, but really, once you get above ten million in the loan amount… Again, I can go up to 20, 30, 40 – basically, it’s gonna be the same type of lenders that do a 10 million dollar deal, are normally gonna be closer to a 100 million dollar deal. But a lot of those originations that get above 10 million dollars – there’s usually private companies that are buying office buildings for example, so they don’t normally need a mortgage broker… They don’t even normally come to me, an independent mortgage broker; they already know what guys to go to, and normally they own billions of dollars worth of commercial real estate. So they usually don’t go to any brokerage companies, and they just do it all in-house.

Joe Fairless: Okay, so you have the ability to do above ten, but you don’t have as many potential clients.

Austin Peek: Exactly, yeah. So my niche just happenstance has been one to ten million, because I found out that’s a niche where I can help the most owners, because if you’re going underneath the one million dollar range, usually those are just a local bank; like, if you’re buying a very small single-tenant office building that might be worth 500k, or whatever. So those are usually just small bank loans. I deal on the intermediate where maybe a grandma or a grandpa owns a Walgreens, and they need financing on it. And that Walgreens happens to be in Tennessee, but they live in Florida. Well, what stinks for them is that usually they can’t get financing in Tennessee because they don’t live in Tennessee, so usually that loan range is gonna be in the one to five million range, so they don’t know where to go, so I’m the perfect guy to help them when you’re looking in that loan range… Because they’re obviously smart enough to be able to buy commercial real estate and be able to get a loan amount that high, but they’re not doing commercial real estate day to day; they’re probably only refinancing every five or ten years, so that’s where I help out the most owners.

Joe Fairless: Where are you getting the loans from?

Austin Peek: Most of my lenders are called CMBS lenders (commercial mortgage-backed security) or life insurance companies. So life insurance companies actually lend out just like a bank, but their terms are a little bit different. So those are usually the two types that I go to on a regular basis.

I can go to Fannie and Freddie as well, but some owners like to go to them directly. It just depends on where the property is and what the owner is looking for. Like I said, most people I work with, they usually own probably three to ten commercial properties… And again, this is just general; some of them own one, some of them own 20, 30 or even more. But generally speaking, they own a few, so they’re refinancing all those loans every couple of years, or every five or ten years, and they’re just rolling at different times. So usually they call me, because hey, they don’t need to look at the loan market but every one year or two years or every three years.

Joe Fairless: Let’s talk about the pros and cons for CMBS insurance companies and an agency loan, so Freddie or Fannie.

Austin Peek: What I like to do, if it’s alright with you – we’ll first talk about the difference between let’s say a bank loan and a CMBS or a life insurance company loan. So what I was talking about earlier – I live in Jacksonville. If I own an office building in Jacksonville Florida that’s worth two million bucks, and I want just a one million dollar loan, 50% loan-to-value, some of these people might go to a bank, and what bank usually does is they’ll have a loan term that maxes out at three years, or five years, or sometimes just one year, and they just have different options. So every one, or three, or five years I’m usually refinancing that, or doing the loan again with them. And usually, that amortization schedule is like 20 years, so it’s not very long.

Then also, the other thing is that most of those banks require a recourse – it was just one episode right before this of your podcast, where… I think a lot of owners find out what the difference is between recourse and non-recourse when you’re signing a loan… So almost every bank requires a recourse. There’s some special exceptions, but I’d say 95% of them require that.

Joe Fairless: And recourse, real quick, is if something goes wrong, the bank can come after you financially, versus non-recourse it can’t, unless you trigger some sort of obscure clauses.

Austin Peek: Exactly. So that’s the number one difference between, say, a local bank – if I wanted to go do a loan with that local bank at one million dollars, or if I went with the life insurance company at one million dollars. Usually, if it’s a lower LTV, the life insurance company is interested in it and they usually do non-recourse loans. So even if something went bad with the property, if it’s a single tenant and they left, they can only go after the loan amount, and not your personal property and everything else.

So that’s one difference between a bank and CMBS/life insurance companies. The other one is usually you’ll get a longer amortization schedule, and also it depends on — there’s gradual differences between all of them, but you can lock in a term, generally speaking, for a life insurance company up to 25 years. So it could be like a 25/25, so at the end of the 25 years you pay zero.

One of the negatives is that there are pre-payment penalties if you’re doing a life insurance company loan or CMBS loan. So you can’t pay it back early; usually, you can only pay it back three months before the maturity date. So if it’s a ten-year loan, usually you can pay it back nine years and nine months right after that you can start paying it back without penalty. So those are the subtle differences between a bank and a life insurance company/CMBS.

Joe Fairless: Just so I’m summarizing it correctly, and these are just generally speaking – local bank, the loan term maxes out between one to three years, whereas with a life insurance company, that would be the opposite end of the spectrum. You could do maybe 25 years on a 25-year amortization.

Austin Peek: Exactly.

Joe Fairless: Most banks require recourse, whereas CMBS and life insurance it can be non-recourse. The disadvantage – one of them that you mentioned with CMBS and life insurance would be the pre-payment penalties tend to be pretty steep, compared to a local bank that might have more flexibility, which really if it’s a 1-3 year term, that doesn’t even factor into it, because it’s such a short period of time.

Austin Peek: Exactly, so that’s part of the reason that they don’t even worry about it, because usually your term is so short anyhow. It’s not worth negotiating.

Joe Fairless: Okay. What about the fees involved for bank versus CMBS? You basically steered us  in the direction of grouping CMBS and life insurance into the same category, versus banks.

Yeah, I can differentiate between those. I know we only have so much time, so… The difference between CMBS [unintelligible [00:10:31].15] life insurance companies, they’re both non-recourse, again, but usually CMBS is gonna cost you a lot more as far as closing costs, because attorney fees can range up to $25,000 for closing a deal, and that’s even when we’re talking a single tenant. We can get it lower to maybe 20, I’ve even seen 15, but the big thing is because they’re using New York lenders, and New York lenders use New York attorneys. So that’s why the fees for closing a CMBS loan are usually higher, but the amortization schedule for them, they can usually go out to 30 years, versus a life insurance company – usually we’re talking about… Depending on the loan size, again, we’re talking about a 1% to 1,5% closing costs; that’s without a broker fee.

A broker fee is generally 1% as well, so I say all-in you’re looking at about 2% on a life insurance company loan. To close that, there is way less closing costs and there’s usually way less headache, because the CMBS, again, it’s just all these lenders that are securitizing a group of loans, so your one loan is usually a package of maybe 50 loans. They basically package all those together and then sell them on Wall Street.

Joe Fairless: I wanna make sure I heard you correctly… Will you repeat the life insurance estimated closing cost and the CMBS? You said 2%, but I wasn’t sure which one you’re talking about, because I think it got mixed up in my head.

Austin Peek: I would say generally speaking that — and again, CMBS, what they can do is they can work it into the rate. So it’s gonna look maybe about the same on the closing costs, but all in I would just say for both of them it’s slightly higher with a CMBS loan, because instead of the $5,000 attorney that you’re using for a life insurance company loan, you’re using usually a $25,000 attorney for a CMBS loan. So you might be adding $15,000 to $20,000 to the closing costs, but in general if you add them all up I’d say it’s 2% for closing these loans.

Again, the smaller the loan — it really doesn’t matter if I’m closing a one million dollar loan versus a ten million dollar loan. It’s not gonna be 2% on the ten million dollar loan. We’re gonna talk less than 1%. So it doesn’t really change much, it’s just the smaller the loan amount the higher the percentage. Because all these are fixed costs – the appraisal, all the third-party reports etc.

What I try to do for my clients, and I don’t think enough brokers do – I put it in what I call a quote matrix where I’ll put three or four of our best lender quotes, put it in Excel, say “Hey, put the terms, the amortization, the differences between each one”, so you can compare apples to apples. Because I know especially talking over a podcast that maybe it gets confusing talking about all these different things, and trust me, I’ve been doing it for almost ten years, so it gets even confusing to me just saying it verbally. But when I put it in a quote matrix so you can actually compare apples to apples, see which guys and what your overall rate is after you pay the closing costs – that’s what I try to do, so they can make the most wise decision for them.

Joe Fairless: What are the components of a quote matrix, what categories?

Austin Peek: You have the term amortization, and then I’ll put in closing costs, because that matters obviously a lot. I’m bringing up one right now, so I make sure I can just read off exactly one. Then I put in the interest rates, so we can see what the actual spread is. Also, for a CMBS loan – here’s the difference between this and a life insurance company… It’s that they’ll usually acquire reserves for tenant improvements and leasing commissions, and also for capital expenditures. So I’ll put that in the quotes matrix saying “Hey, this lender requires 80 cents per square foot of reserves, versus this one only requires $1,15, or this one requires actually zero, because it’s a life insurance company and they don’t care about that part.”

Basically, I’m taking a lot of different calculations where I put it all in one where they can look, “Hey, this is my interest rate if I add in all the closing costs.” So although the interest rate might look higher on, say, a life insurance company, but overall it might be lower because if you factor in the closing costs of the other one, even though the CMBS lender might look a little bit lower, once you add in all those closing costs, you’re like “Oh, my overall rate is actually not as good.”

When you get 15-page documents from these lenders, it gets complicated. I’m there just to try to make it uncomplicated, and try to put it all in a simplified form for them.

Joe Fairless: And do you have pre-payment penalty in there, too?

Austin Peek: Yeah, [unintelligible [00:14:48].10] Some of them are like — what it is for CMBS is there’s defeasance, it’s called the pre-payment penalty, and then the pre-payment penalty for life insurance companies is yield maintenance. They used to have their own calculators; CMBS is pretty complicated as far as defeasance penalty.

So yeah, I’ll put that all in there for them. Again, I’m just trying to simplify it, even though it might not sound like it from me talking right now… But I promise you, I’m a visual person, so that’s why I try to visualize it and put it all in something that they can actually compare it to.

Joe Fairless: And then you’ll probably have the loan-to-value, right?

Austin Peek: Right, and then there’s usually a minimum debt coverage ratio, or there’s also a minimum debt yield. All these lenders use different percentage or terms to make sure that “Hey, I make sure that they get their loans amounts”, so I look at what the actual NOI (net operating income) is of the property, and make sure we’re meeting their loan-to-value. Because it could quote a higher loan amount, that they’re willing to do a higher loan amount, but if it exceeds their loan-to-value the way they calculate it – because each lender is gonna calculate it a little different… And hey, we’re not gonna get the loan amount that they’re quoting. They might be quoting a two million dollar loan, but hey, using my matrix, and if I’m using 75% LTV, and based on their underwriting in the past, I think the maximum amount we’re gonna get is 1.8 million.

So those little calculations, those really make the difference to make sure the owner picks the right lender. And then also  I tell them which ones are the easiest to close with. Because some of them are very difficult. It might take three times longer with one lender versus another, so I’ll just tell them my past experiences on who’s been the easiest to close with.

If you send me your quote matrix and just black out or erase whatever private information you have, can we share it with the Best Ever listeners?

Austin Peek: Definitely. Actually, I’ve put something else together, too… I’ve put a list together of  150 commercial real estate lenders. I put a link on my website, and I can put another one where it directs to both of them.

Joe Fairless: Oh, let’s just do that. So how can they get that, where do they go?

Austin Peek: It’s Millionaire-Interviews.com, and then if you do /bestever, I already have it set up so you can see what it looks like. All you’ve gotta do is put in your e-mail address and you’ll be sent a list of lenders that has 150 of them that… Basically, I put “Hey, this guy likes to do this type of deal” – retail, office, or multifamily, and what their general loan ranges are. I try to be as transparent as I can, because I thought that would be the most useful. But I can also put a [unintelligible [00:17:12].17]

Joe Fairless: It’s be good. I’ve obviously gotten a bunch of quote matrix for our deals, and it’s fascinating to look at, and look at all the different ways you can analyze it, and since you’ve mentioned you’ve got one that you’ve put together, I think the Best Ever listeners would enjoy that. Your URL, what is it again?

Austin Peek: It’s millionaire-interviews.com, and then if you just do /bestever, then it redirects you right there.

Joe Fairless: So how about you just e-mail my assistant afterwards, and then we’ll make sure we have that link in there, because it might get misconstrued… That’s kind of a long, ugly URL, so we’ll get it so they can easily get there.

Alright, cool. So that’s that. Based on your experience as a lender, what is your best real estate investing advice ever?

Austin Peek: Make sure you read the loan docs and understand what you’re really getting yourself into. With Google out there, you can kind of google all the ups and downs, and I would just make sure you do your research.

Joe Fairless: What are some things that a client of yours who hasn’t worked with you a lot, but is working with you on the first couple deals, they tend to overlook?

Austin Peek: The ease of the transaction. So again, just because one lender is quoting maybe 100k or 200k in the loan amount, if their metrics are not being met, then they’re gonna cut the loan proceeds right before we close, and then my owner is gonna be ticked off. So the main thing – that’s what I try to get over and tell them, I’m like “Hey, these guys give us the best interest rate and they’re giving us the best loan amount, but I want you to know that these guys can be difficult to deal with.” Over a two-month, three-month closing, sometimes they’ll say “Hey, we need to cut the loan term”, or whatever. So that’s the main thing, trying to get over that hurdle with the owner.

Joe Fairless: Yeah, and that has happened before… I’ve interviewed guests on the show for who that unfortunately took place, and they weren’t able to close on their loan, because the lender said on the closing day that they weren’t getting approved. Episode 599 is titled “Big Money Raised, Investor Partners Set, And On The Closing Day The Lender Says…” Mark Mascia, he’s a billion-dollar real estate developer and a friend of mine; he is the interview guest and he talks about that disaster situation where just that happened.

Austin Peek: I know which ones do that, because I’ve had one or two do that to me before where they do it a day or two beforehand, where they’ll try to cut the loan amount or raise the interest rate 0.5%, and being a real estate owner, these guys — it’s not even about the extra percent, it’s that they to screw them at the end and they’re gonna remember that, and then they’re like “Hey, I’m not gonna do the loan with you.” Those are the lenders that you’ve gotta watch out for; they might have the best terms, but if a broker hasn’t closed with them before, it gets a little iffy.

Joe Fairless: Absolutely. It is not just about black and white, it’s the grey space in between, and knowing who’s an ally of yours and what type of relationship you have with them.

Austin Peek: Exactly.

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

Austin Peek: Let’s go!

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

Break: [00:20:28].16] to [00:21:21].17]

Joe Fairless: Best ever book you’ve read?

Austin Peek: I’ve got two of them right here. One is called The Real Estate Game, by William Poorvu, and he’s Harvard Business School, and if you wanna get into commercial real estate, he has all these different stories about different property types and how to look at it. I love that, I’ve read it six or seven times and highlighted and underlined things.

The second one is if you’re trying to get into brokering, even though I’m on the commercial side, Your 1st Year In Real Estate; I think it’s like a $15 book, but it gave me a lot of ideas on how to grow my own mortgage brokerage business. Little tips that you don’t think of, maybe one you want to start a business, they’re in there. So I recommend those two books.

Joe Fairless: Do you invest in deals?

Austin Peek: No, not investing. I’ve done some residential flips, but I’m not getting in the commercial end yet. But best ever deal that I’ve done personally – it’s probably my first one, because that gave me the confidence to go ahead and do other deals. It was called the Austin Laurel Building, which is funny because that is my first name, and there was a girl in high school who used to hate me, and her name was Laurel. So the Austin Laurel building in Tampa, Florida. That was my first deal.

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

Austin Peek: Probably not supporting the owners the whole way as far as checking in or hand-holding. To me, what I’m really good at is doing all the upfront stuff, throwing in quote matrices, making sure I can compare them and give them apples to apples comparisons… But I’m not the best at “Hey, I wanted to let you know where you’re at”, every week checking in, letting him know. Even though I’m doing that on the backend to make sure the deal is getting done… Just communication I think is always key, so that’s probably always one thing that I need to work with as far as just letting the owners know where we’re at all the time.

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

Austin Peek: Really, it’s been now through my podcast. I wanted to do something new and I felt like it was a way to get back to the people who wanna start their own businesses. I was making a lot of old rich guys more rich, is what I like to say with the commercial real estate and mortgage brokering, and I wanna do something a little different. So I’ve been doing that and that’s been my best of giving back I think so far… Just trying to interview entrepreneurs and inspire people who wanna start their own businesses.

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

Austin Peek: The best way is Austin@Millionaire-Interviews.com.

Joe Fairless: Cool, and I have since discovered the link, and I guess what was throwing me off was that dash… Millionare-Interviews.com/bestever. You don’t have to remember it, it’s in the show notes link, and I am officially subscribed to your newsletter, I’m going to get that guide for the lenders and their contact info and looking forward to seeing that matrix too, once you have that up and running.

Thank you for being on the show. This was jam-packed, full of practical and specific insight into the lending world and how to think about it, pros and cons of bank loans, and CMBS and insurance companies, what to think about, what to compare against, and the overall approach that we should take in terms of it’s not just about the numbers, it’s also about your relationship with the lender to make sure that even though the numbers look good, the relationship is ever better, so that everyone delivers on what they say they’re gonna deliver on.

Austin Peek: Yeah, absolutely. One last word of wisdom is with financing there are a lot of sketchy guys. I’ve got my CCIM, which is the top 1% of commercial real estate, and I’ve got my masters in real estate, so… Make sure that there’s people that you’re dealing with on the financing that have some credentials, because I will tell you, time and again I feel bad for the owners that get screwed by it, because there’s a lot of sketchy finance guys with hard money out there that are trying to screw the owners out there.

Joe Fairless: I agree, there are a lot of people who are not of integrity, especially in that space; I’ve come across it. So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Austin Peek: Thanks again, Joe.

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Joe Fairless