JF2303: Insurance Broker and Investor With Nathan Britten

Nathan is a full-time insurance broker and part-time real estate investor with five years of experience. He went to school to study entrepreneurship and eventually found a calling in insurance which led to insuring houses to now focusing on growing his own portfolio while working full-time. 

 Nathan Britten Real Estate Background:

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Best Ever Tweet:

“Find a project with the lowest barrier of entry and with the highest return” – Nathan Britten


TRANSCRIPTION

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

Nathan Britten: I’m doing great. Thanks for having me on, man. I appreciate it.

Theo Hicks: No problem. Thanks for joining us. A little bit about Nathan, he is a full-time insurance broker and a part-time real estate investor with five years of real estate experience. His portfolio consists of two flips and one rental. He is based in Oklahoma City, Oklahoma, and his website is www.pi-ins.com/nathan-britten. Just go to the show notes and click on his website. It will be easier that way.

Nathan Britten: [laughs] Yeah, I’m sure everybody’s writing that down, letter for letter.

Theo Hicks: Alright, Nathan, do you mind telling us some more about your background and what you’re focused on today?

Nathan Britten: Yeah. So I graduated from OU in 2014, with a degree in entrepreneurship, and that’s not a very common degree, but generally speaking, it’s kind of general business… Essentially, we started companies basically each semester and pitched to investors and banks and tried to prove viability, stuff like that. So that gave a lot of good background and training into sales and general business. After I graduated, I started a CNG conversion business with my dad, which was converting vehicles to run on natural gas. We sold that about two years once oil and gas was going down, and got out of that.

I knew of a guy who worked in insurance in Oklahoma City, and I was just kind of exploring all my different options, and interviewed with them. It was kind of the entrepreneurial spirit of being able to create your own book and go out and build your own thing, but kind of under the scope of a company, but have a lot of freedom and a lot of freedom to do whatever you do in a great business. So with that, I got into running a lot of property for insurance, a lot of single-family investors, large schedules, apartment schedules… And being in Oklahoma, that’s a little bit more challenging than other places to ensure things. So with that, I met a lot of good contacts, I got involved a lot in real estate investing groups, and kind of learned from them and picked up some things along the way, and decided to kind of do my own things.  It really came out of needing a place to live… And it’s like, “Well, I guess we’ll just buy a house.”

[unintelligible [00:05:40].21] I guess what brought me to there, but I got into a deal that was a short sale. It was terrible, kind of a drug house almost, not in good condition; I turned that into basically a flip property. That was my first endeavor in that, and that’s kind of where it got me to this point of what I do now… And obviously, full-time as an insurance broker for a lot of property risks… And then now I just basically do it in my free time, just looking for deals and flips and other rentals.

Theo Hicks: So for your insurance job – that’s providing insurance for real estate, right?

Nathan Britten: Primarily, yes.

Theo Hicks: Interesting. It’s the first time I’ve heard of someone getting into real estate through insurance.

Nathan Britten: It’s an unusual path, and really, because a property is not everyone’s favorite thing to do for insurance. It’s just something that I was kind of naturally drawn to. We’ve got a really great program now that we write nationwide; we probably have about 20,000 rental properties in there, and a great apartment program as well… So I’ve got to get my own plug in here – anybody looking for single-family rentals or apartment quotes, I’m your guy.

Theo Hicks: So when people are kind of first starting off, there are usually two philosophies. The one philosophy is after they’ve gotten interested in real estate, their main focus is to quit their job and then do real estate full time. And then there’s the other philosophy that’s “I’m going to keep working, and then do real estate part-time, because of the benefits of having a full-time job.” So from your perspective, is your plan to eventually do real estate full time? Or do you plan on doing it with this full-time job? And then whatever your answer is, why do you select that route?

Nathan Britten: I think there’s a line that you cross once you either have a certain amount of funds, or you have a model that you’re going after, and a situational job that would force you to go full time into real estate investing. Insurance is one of those, where – as I was mentioning earlier – there’s a lot of flexibility, a lot of freedom. And that’s what allowed me the two flips that I’ve done thus far. Granted, they were pretty close to my office, but I was spending primarily all my time during the day managing contractors and projects at the houses, and I can still get most of the insurance stuffs done through my phone. So it gives me that kind of freedom.

But eventually, I do enjoy investing in real estate and doing those types of projects more than insurance… But that’s the thing that provides me my money to do that. So there’s a line, I think it’s probably a money line; not to say you can’t go out and raise some money and partner with people, different ways to do that. But for now, what works best for me, and kind of how I see it for the foreseeable future is to keep the insurance boat rowing, and invest in real estate on the side, and kind of have the best of both worlds.

Theo Hicks: What would be your recommendation to someone who wants to get started in real estate, and they have a full-time job, but it’s not like yours, where it’s very flexible. Let’s say they have a full-time job and they’re in an office; they have a non real estate related full-time job. They’re in an office – I guess not now technically not in the office, but they need to be in front of their computer or in an office starting at eight o’clock, and they can’t get off until five o’clock. What would be your recommendation to them to get started?

Nathan Britten: Well, you’re going to have to delegate a little bit; if you buy a rental, you’re probably going to have to hire a property manager. I don’t have a property manager personally, just because I’ve just got one rental and I handle that pretty well, and they’re five minutes from my office if they ever needing anything. You’re going to have to put in some overtime. You can’t be looking for deals and meeting with people during your work hours. That’s a little bit of conflict of interest. The boss probably wouldn’t appreciate that.

But after hours – the internet is 24/7, so you can get a lot of stuff done on the internet, I’m sure you know, Theo. And as far as a lot of those real estate investing clubs – they meet after hours, and you can learn a lot there. Obviously a lot of books and articles and websites like BiggerPockets, where we connected… You can get a lot of information that way. As far as if you were to do a flip, that’s pretty tough, because I personally like to be very hands-on… And I don’t know everything off the top of my head, to tell you, “Hey, go do this and do it this way.” I need to be there. And if you ask me a question, I can answer it, say how I want it. But that’s going to be a lot more hands-on, so I probably wouldn’t go with the full flip… Otherwise, it’s going to either take way too long, or it’s going to be way too troublesome, I think, if you’re not actually there.

Theo Hicks: So obviously, it’s very difficult to do the flip. So if you did not have this insurance job, would you have not done the flip? Or would you have been willing to change to a more flexible job to do flips?

Nathan Britten: I would have found a way. I’m just kind of a problem solver by nature; this just happened to be the way I did it. I think if I was tied to a desk, eight to five, I don’t think I could do that for very long. I would probably be out in I would say less than a month, of that kind of situation. And I think I would have gone more towards drop that eight to five, go full-in on real estate, because obviously, I’m young, I can take a few more risks… I would figure out a way to raise some money and partner with people, and… I’m just a problem-solver by nature, so whatever situation I feel like gets thrown at me, I’d figured out a way to solve it and make it work.

Theo Hicks: Let’s talk about your rental. So you mentioned the first flip – did you go in with the intention of living there and it turned into a flip?

Nathan Britten: Yeah. I actually did live there for a bit.

Theo Hicks: Was it like a live and flip?

Nathan Britten: Yes. I got it on a short sale, which I had no idea what that meant, and I don’t think my realtor really did either. So I wasn’t very well-prepped for it. And I had a lease ending this month, and it ended up taking much longer to get the property actually closed. And once we did, I was like, “Man, we were right on the line here.” [unintelligible [00:11:48].18]  $30,000 and basically a full remodel of this place into one month. And we ended up doing it. And I was there pretty much all day, every day. It was definitely trial by fire… And I really enjoyed it, I thought it was awesome. And then it turned out exactly how I wanted it.

I kind of combined a few different of the entryways into real estate investing… I had a buddy who’s in med school, he was renting from me and basically paying my mortgage for it too at the same time, once we got it finished. So we did that for a couple of years and ended up selling it for basically double for what we had into it. So it was a good deal.

Theo Hicks: And then after that flip, was the rental next, or was the rental the third deal?

Nathan Britten: The rental was next. It was actually a place next door, and I just had been keeping tabs on it. It was a great area. I essentially did my exact same deal of how I bought this house, the first flip, and just bought the one next door. It was in even worse condition, and I had a little more time to evaluate the area… And obviously, now I have my contractors that I trust and know they can do good work, and more of an idea of what it would take to do this. So I got that fixed up and ready. Not as nice as the first one, because I knew I was going to be renting it, but I’ve had pretty much the same tenants in there for coming up on three, four years now.

Theo Hicks: You said it was next door… Was this something that you kind of just waited for it to go on the market? Or did you actively pursue this deal?

Nathan Britten: I did actively pursue it. I knew that they were renting it, and I didn’t like the neighbors. I didn’t like the renters. They were terrible. I think it was a drug house. And it was just a situation poorly kept, and I just reached out to the guy who owned it, found him online and was like “Hey, man. I live next door. I like this house, I’d like to buy it from you.” And it just turned out to be a situation where they were kind of a hassle for him. So we bought it, got some new renters in there and it worked out. But I definitely had to pursue him.

Theo Hicks: Did you use the same contractors on that deal that you used in your first deal?

Nathan Britten: Most of them. They’re not general contractors, but I just know a lot of people that do a lot of that type of work. As for bigger companies, I’d say ‘Hey, man. Do you know anybody that can do this?” And then they would refer me to someone that way. But for the most part, it’s kind of the same crew; a couple of different changes, but kind of the same crew.

Theo Hicks: So those contacts – that was from your insurance shop?

Nathan Britten: I’ve grown up in Oklahoma City my whole life, and my dad was in sales, so he just knows a lot of people around town… And that’s kind of how I came into contact with other people. And then they were nice enough to say “Hey, yeah. This guy’s great for this. Go ahead and use them.” It wasn’t really interfering with their business; he was one of their subcontractors,

Theo Hicks: Circling back to the rental really quick. So you call the guy, was he “Yeah, I’ll sell it to you right away”, or did it take some convincing?

Nathan Britten: Oh, it took some convincing. And I really kind of overpaid for what I thought was market, but it was a deal I saw long-term value in. I knew there was a commercial development going into the end of the street, and really that was my main driver. I was like, once this actually gets approved, then everything on the street – it’s really going to increase the value. So I was like “Well, I’ll overpay now for the market value, and I’m going to hold it for a long time, and I’ll be covering my holding costs anyway…” So yeah, it made sense to me.

Theo Hicks: That was my next question – so eventually he agreed to sell it. How did you determine the price? You said it was a little bit over the market. So a two-part question – how did you figure out the market, and then where did that over-the-market price come from? Was that just what he wanted?

Nathan Britten: I’m not extremely educated in real estate. So there’s a lot of terms, and outside factors, and equations, probably that I’m not familiar with… What I always boil it down to is, okay, what’s our average price per square foot around here of what sold recently, and then what’s on the market below that? And I’m not scared of an ugly-looking house, where nothing works. I think the two that I’ve done are some of the worst that you can do, as far as keeping the existing structure, and not just knocking the thing down and building it back up. So that’s never deterred me at all.

So I really just look for the worst house in the neighborhood, and if the price per square foot is right, then what I’ve done in my past is basically use a construction loan to do the costs. And then I know that my after renovation value is going to be enough to get my equity, and I’ll be set that way. So I boiled it down to price per square foot in the area and tried to find the crappy ones, and then go from there.

Theo Hicks: And what about the rehab cost? Do you typically know that before you buy? Or is that something that’s more narrowed down after you put the property under contract? Or is it not until after you buy it?

Nathan Britten: I can ballpark it before, depending on the projects that are needed. A lot of stuff you can research online and make a couple of calls to your contractors, and if you have the right people come out and inspect it beforehand, you’ll know exactly what you’re going to do before. And I try to jam in as many people as possible. Realtors hate me, because I try to jam in as many people as possible in that inspection period, and I try to extend the inspection period for as long as possible, so that way, I’m basically risk-free in my evaluation of this house, and I can just basically have all my guys come in and bid it during the inspection period. So that’s my plan about it.

Theo Hicks: Yeah. And then the construction loan, the down payment – is that just money you have saved up from work?

Nathan Britten: Yeah. I’ve got saved up from work and we sold our business, I had some funds there… And I just always lived pretty cheap as it is, so yeah. And I’ve got pretty good banking relationships as well around here, so been kind of flexible with me on down payment stuff as well. So it’s really just — if you find a good banker that can do that kind of stuff for you, that’s really, really valuable.

Theo Hicks: Okay, Nathan. What is your best real estate investing advice ever?

Nathan Britten: I could go basic and say buy low, sell high, but… I guess figure out the lowest barrier of entry, with the highest ceiling at the end of the project; that’s probably what I would say, especially just starting out. And anybody who invests in real estate kind of has the same mindset of “I want to make money in a way that’s passive. I want to make money in a way that is a little bit unconventional.” So the end goal, I think, for most people is making money. So if you’re just starting out especially, just find that lowest barrier of entry with the highest upside… So that’s the expanded buy low sell high.

Theo Hicks: Alright, Nathan, are you ready for the Best Ever lightning round?

Nathan Britten: Let’s do it.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:18:34][00:19:17]

Theo Hicks: Okay, Nathan, what is the Best Ever book you’ve recently read?

Nathan Britten:  Recently read… I kind of went back into the archives a little bit and re-read How to Win Friends and Influence People, Dale Carnegie. And that’s not necessarily real estate focused, but the practices in there of dealing with people – you have to deal with a lot of people in real estate and just in life in general, and learning how to understand people and how to treat them, that’s key.

Theo Hicks: If your business were to collapse today, what would you do next?

Nathan Britten: So if insurance collapsed… Yeah, I think I would probably partner up with my family and we would probably start a real estate empire. I’d just go full bore at it.

Theo Hicks: What is the Best Ever way you like to give back?

Nathan Britten: Probably my favorite was Big Brothers, Big Sisters. Great national organization, still really involved in Oklahoma. It’s just awesome giving back to kids that haven’t been really been given a fair shot, for whatever reason, and being able to mentor them, and just be there for them to talk to them. Really cool, really rewarding.

Theo Hicks: And then lastly, what’s the Best Ever place to reach you?

Nathan Britten: Probably my cell phone. 405-802-9930.

Theo Hicks: Alright, Nathan, thanks for joining us and walking us through your journey from entrepreneurship degree in college, to insurance, to real estate. We talked a little bit about how to navigate getting into real estate while you have a job. So if you have a flexible job, then you’ll be able to work on things like flips during the day. If you don’t have a flexible job as a nine to five, and you’re not like Nathan, you [unintelligible [00:20:52].23] at the desk, then you have to put in time after hours, put in overtime, have property management. But if you’re like Nathan, you don’t like nine to five, and you’re young, and you can take risks, then you could just not work at all and go straight into real estate.

We talked about a few of his deals; his first deal with a short sale, a kind of live and flip that he sold for two times what he had into it, and his next deal was a rental that was actually the property next door. So I don’t think I’ve talked about this in a long time, but a really good way to find off-market deals is to buy the property, whether it’s a single-family or massive apartments, buy a property on that same street, because you kind of already have that credibility from owning something there. So they can look at this property –  and I’m sure in Nathan’s case, seeing a dump turned into a really nice property, they’re more willing to sell to someone like that than some random person they’ve never met before.

So he kind of walked us through his business plan with the construction loan, bringing as many people as he can during the inspection period to make sure that the rehab costs are super accurate, having good banking relationships to get those good loan terms, and then to determine the offer price using the average price per square foot on recent sales. So the sales comparable approach, in a sense.

And then lastly, his Best Ever advice was for those looking to get started, find that lowest barrier of entry, so that $30,000, $50,000 house that’s in horrible condition, because it has not only the lowest barrier of entry, but also the highest best potential exit, and the most upside. And then he gave us his phone number; if you want to learn more about him and his business, talk to him, text him.

So Nathan, thank you for joining us. Appreciate it. Enjoyed our conversation. Best Ever listeners, as always, thank you for listening. Have a Best Ever day, and we’ll talk to you tomorrow.

Nathan Britten: Awesome. Thanks, Theo. I appreciate it.

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JF2044: Rent Collecting During The Coronavirus With Will Fraser

Will has been a real estate investor for the past 3 years and has a portfolio of 23 properties all focusing on long term rentals. Will shares how his long term rentals have been impacted by the coronavirus pandemic. He shares the different plans he has in place to collect rent from his tenants and to make sure he helps them out at the same time. 

 

Will Fraser Real Estate Background:

    • A full-time real estate broker
    • 3 years of real estate experience
    • His portfolio consists of 23 properties, 4 he personally owns
    • From Oklahoma City, OK
    • Say hi to him at: will@craftsmanre.com 

 

 

Best Ever Tweet:

“This gives me an opportunity to build a strong and unique relationship with some of my tenants that I wouldn’t have the ability to do otherwise.” – Will Fraser


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. My name is Theo Hicks, I’m the host today, and today we’ll be speaking with Will Fraser. Will, how are you doing today?

Will Fraser: Theo, I’m doing great, man. Enjoying life here, and glad to be on the show. Thanks for the opportunity.

Theo Hicks: Oh, absolutely, and thank you for joining us. Today, we are going to be talking about how the Coronavirus is impacting Will’s business. Before we get into that, let’s hear about Will’s background. He is a full-time real estate broker. He just hit three years of real estate experience.

His portfolio consists of 23 properties, four of which he personally owns. He is from Oklahoma City, Oklahoma, and you can say hi to him at Will@CraftsmanRE.com. Will, do you mind providing us with a little more information about your background and what you are focused on today?

Will Fraser: Yeah, absolutely, man. Well, I took a circuitous path to real estate, like all non-traditional real estate investors did. I studied biochemistry, and that launched into a job overseas, which after I got deported landed me in Oklahoma City. I worked with a startup that was selling things to real estate agents. I realized that most real estate agents, respectively speaking, would not know the difference between a small dark place and a hole in the ground. And what I saw was I’ve got some skills that might mesh well with real estate, so let’s give this a shot.

One of my early clients was a real estate investor. So I saw some of the deals that he was doing, and I was like “Man, that really doesn’t seem that hard.” And I started just kind of emulating what he was doing. Little by little, that grew into what I’m doing today. I’m a residential real estate agent that helps people buy and sell their personal homes. I help investors buy and sell investment homes, and then I also manage my own portfolio that I have… Some personally, like you said earlier, and  some with partners.

Theo Hicks: You said you own four yourself, and then 23 – are those JVs?

Will Fraser: Yeah, what we did is we started out with a JV agreement, and then we started buying in an LLC that we jointly own. But the first batch of 15 properties were purchased with my business in a JV agreement. And then as that relationship grew, we were all going forward more confidently, and then we saw that “Hey, this is something we’d really like to scale together.”

Theo Hicks: Okay, and then are those single-family homes duplexes, triplexes…?

Will Fraser: There are two fourplexes, a triplex, about ten duplexes, and then the balance, our single-family.

Theo Hicks: Okay, and they’re all rentals.

Will Fraser: Yeah, that’s right.

Theo Hicks: Okay, perfect. And those are long-term, not short-term.

Will Fraser: Right. They’re all long-term. One of them – we leased it out to someone who’s Airbnb-ing it. We love getting to partner with other investors and creating win-wins. Somebody came to us and wanted to do an Airbnb in Oklahoma City, and we said “Hey, we’ve got a property that would actually work well for that.” So that’s one of them. So it’s kind of a mixture… It’s a long-term rental for us, but a short-term rental for our tenant.

Theo Hicks: Okay, perfect. So I guess the first question that I’ll lead with, with today being the first of the month that we’re recording this, is are you seeing any issues with rent collections from the Coronavirus on those long-term rentals?

Will Fraser: Definitely. And I think that there’s some of what we could have known is gonna come… Just what I would call the ostrich approach, of tenants burying their heads in the ground and pretending that there’s not a problem, and then you don’t see that rent come in on the first, you don’t see it coming on the second or third… So we’re already seeing some of that. But a lot of what I’ve been seeing that is surprising is tenants reaching out within the last three days to let me know that they’ve been furloughed, their hours have been cut, or they’re struggling… I’ve got a couple tenants that are in the oil and gas field right now, and they’re letting me know in advance “Hey, I’m paying my rent this month, but I just wanted to let you know I don’t know how long I can continue this.” I’ve been more encouraged by those than the people that I know are doing an ostrich right now.

But yeah, I think that everything we’re seeing right now is what we expected to see, but with a little more of the avoidance on the tenant side.

Theo Hicks: Okay. So for people who, as you mentioned, reached out, said that they’ve had some sort of financial hardship, they’re gonna pay rent this month, but they don’t know how long they can keep that  up – do you have any plans on what you are going to do if it gets to the point where they can’t pay the full rent?

Will Fraser: Yeah, that’s a great question. What I’ve discussed is a few different things – one, if they want to pay by credit card, I will eat the credit card fees; so I’ll allow them to put it on a credit card. I don’t encourage that as a Band-Aid, but I do know that credit card companies are offering some forgiveness platforms… That, frankly speaking, they can do because of their size, and I can’t do, because of my size. So I will offer that.

Then another thing that I’m offering is the ability to pay incrementally, and then amortize the balance that’s not paid over the rest of their lease. So with a tenant of mine that’s in oil and gas, I know that if he can skip a month next month, it’s going to put him having more cash on hand to weather a storm… Because he’s looking at Covid-19 and the shutdown – that’s definitely impacting the total economy; and oil and gas is — I have literally just filled up for 99 cents a gallon. That is crazy.

Theo Hicks: Wow…

Will Fraser: Yeah, it was absurd. Like, can we store this stuff, and flip it? [laughs] No, we can’t. But for him, he and I both acknowledged that “Hey, if you can skip next month and I don’t hit you with a late fee, or even a potential eviction”, then he can hold that cash and be a little more resilient in the face of an impending however many months of down… But we can amortize what he didn’t pay over the remainder of his 15 months left on his lease. And he felt like that was a really gracious thing.

He has proven himself as a tenant that communicates honestly and stands by his word, so I wanna be understanding and do the same thing for him.

Theo Hicks: That was a good transition with another question I had… So you’ve got, let’s just say, ten tenants reach out to you and say that “I’ve been furloughed, my hours have been cut, I lost my job, and I’m not gonna be able to pay rent this month.” Do you just take that at face value, or do you ask for some sort of additional documentation to confirm that what they’re saying is true?

The reason why I ask is because I would imagine that with the [unintelligible [00:07:56].10] evictions, people might take advantage of that and just claim that they’ve lost their job when they really haven’t. I was wondering if you’re doing anything extra to confirm, like requiring a financial hardship letter, or anything like that.

Will Fraser: That’s a great question. At this point I’m not, other than just taking note of who their employer is, and then asking some other people… Because Oklahoma City, honestly, is not that big of  a place. So if someone works at Dell and I hear that they’ve been furloughed, that’s  pretty easy to confirm through the grapevine… So just taking note of that.

But at this point I’m not asking for any of those things, and the idea being with tenants that have already proven themselves to be valuable – I hesitate to say valuable or invaluable, but ones that showed the right kind of character and communication tendencies, I wanna come alongside them and extend a trust that should be reciprocated in the months and years to come.

So it’s an opportunity to grab a depth relationally that we’re not gonna get otherwise in a tenant/landlord relationship, that should be great for the years to come. So that’s my idea of extending that trust… But for sure, it’s gonna be manipulated, and I’ve already had tenants reaching out, saying “Hey, I heard you don’t have to pay your mortgage, so are you just trying to play it all close to the chest and get us to  pay, even though you don’t have to pay?”  Like, hey, that was the governor of New Jersey, and the last time I checked, he’s not the governor of Oklahoma.

But there’s a lot of misinformation out there. It gives us a good opportunity to kind of level up and just call a spade a spade. What I told that tenant is “The moment my mortgage is forgiven, I will pay that forward.” Because there’s a reason — if the government froze all principal, interest, taxes, insurance and repairs and maintenance, there’s a real reason. So it would be in keeping with that to say “Hey tenant,  you don’t need to pay this month, because I don’t need to pay.”

But as it is, principal and interest are still due, taxes are still due, insurance is still due, and tenants are calling me more than ever to do repairs and maintenance, because they’re home more than ever. So explaining that to people, “Hey, do you see why all these things are still in play? Which is why we need to collect.” And then a secondary conversation is if for some reason you legitimately can’t pay and we’re prioritizing what we have to pay to make sense, then that’s real, too.

The oil and gas guy – he legitimately is having zero income right now. So yeah, I know no one’s calling you to come do whatever he does in the oil and gas, so that has a real effect… So I wanna live with him in an understanding way, but also communicate very real, so that they can understand the landlord’s side… Because I think a lot of times tenants live in this world as if being a tenant is somehow different than owning a house… Let me flesh that out a little bit. I had a tenant call and go berserk because they didn’t have hot water one night. And at the exact same time I didn’t have hot water at my house, because my hot water heater was out. It took my four days to get my own hot water heater replaced, yet the tenant’s expectation was that it was completely unacceptable for them to not have hot water for two hours. That’s not true if you own the house, so why on earth would you expect it to be true if you are a tenant in a house?

Anyway, so educating tenants on what reality is – we have an opportunity to do that now, that we don’t have day to day.

Theo Hicks: Yeah, and I think a lot of the things you said — I think one of the key advantages people who self-manage will have during this situation, than people who have a third-party company… They can’t have those conversations, because they don’t’ have a relationship with their residents. So I think a lot of the stuff you’re saying right now definitely applies to people who self-manage.

From other conversations I’ve had with people who self-manage – they’re saying that they’re having it much smoother (as smooth as it could possibly be, I guess) than third-parties.

I have  a couple other questions… This is taking a different track, but you have partners on some of your deals – how did those conversations go? At what point did you guys realize that this was something that was gonna have an impact on your business? I’m just curious to see how those conversations went. I’m assuming — was everyone on the same page right away, did everyone come at the realization at the same time? Were there any budding heads? What’s it like being in partnerships during this situation?

Will Fraser: It was kind of an evolving situation, because they came to me as clients, typical real estate clients, looking to buy rental properties… And one of the things that I try to do with everyone is walk through a series of discovery questions, because there’s a lot of different investing philosophies. If you had two different people who say “I wanna invest in real estate”, but one of them means “I wanna make the big bucks in flipping” and the other means “I wanna  buy properties that cash-flow and I wanna hold it for 27.5 years, and then keep swapping until we give our kids a huge gift” – that’s naturally gonna butt heads.

But a lot of people, when they hear about real estate investing and they really just get a hankering to get started, they come full of zeal, but not full of a lot of developed vision… So I try to walk everyone through the process of formulating — if you had a magic wand and you can wave it in ten years, in fifteen, in thirty years, what would be true of your real estate investments, and what role would you play in it?

As I started to do that with these guys, it just became evident that we were all looking at long-term wealth built through wise buy and hold investing. So I thought that was cool, that it had never occurred to us to partner until we started looking at specific deals… And what we’re seeing is the faster you can move on these deals, because the market has just been roaring in Oklahoma City, the better of a shot you have at actually taking it down.

So with them being out of town, with them being otherwise employed, and looking to deploy some of the capital that they generate into real estate… But me being a full-time real estate person, I was able to move a lot faster than they were, so we kept losing deals, because hey, there’s this gap.

So I had the idea – and I remember walking through one deal together, and the idea was “I can buy this and you can basically do hard money lending, or private money lending.” And option two was “You could buy this, and I broker it”, and then option three is “We buy this together.” And then they just kind of looked at me and were like “Huh. What would that one look like?” “I don’t know, let’s flesh it out.” So we just dove into the option of “We buy it together”, and we kicked around a bunch of ideas, and we saw that there was a synergy  there that they were pleased with, and I was pleased with. So we tried it with one deal first, and then we grew that, and then it’s turned into — gosh, I think we said like 30 units off of that one.

Theo Hicks: Okay, thanks for sharing that. But now, more recently, you’ve had these partnerships, and you’re kind of going through a crisis… I’m just curious to see what those conversations are like. Are you guys having weekly calls to figure things out? Was there a couple people who didn’t think it was that big of a deal at first, while other people thought it was a big deal? Were there any issues at all? And if so, how did you get through them, or how are you getting through them?

Will Fraser: Yeah, we’re having about two calls a week – which partially is crisis and partially is we’re all sitting in a very different pace than we have, so we wanna take the opportunity to really lay the groundwork and communicate more… Because most of the time, the partners are all running at a million miles an hour in different directions.

But I think I was the one that was not taking it seriously at first, because I looked  at it as “Hey, this is a coastal thing. We have very few cases in Oklahoma…” I don’t know if you noticed, but it’s not really a tourist destination, or an immigration hot spot… So typically, we’re not hit by the same things that affect New York and L.A.

So that kind of naivety was exposed by the partners, and we’re like “Hey, what are we gonna do when the tenants can’t pay?” I’m like, “Well, I don’t know that that’s gonna happen.” And our partnership – and I think this is in the nature of healthy partnerships, that really drives me to embrace them… Is when I was weak and short-sighted, my partners brought a seriousness that’s challenged me to step up and say “Okay, what are we going to do?” So we started diving deep into the numbers and saying “Okay, do we need to start having conversations with our lenders now?”, to say “Okay, when this happens and we can’t pay, what are we gonna do?” And we got to all get on solid ground with our approach…

And actually, things like that have given us an opportunity to go deeper in unifying our vision, which is going to continue to pay dividends… Because what we decided was “This presents us with an opportunity to grab credibility.” Because one of the things that we run into with the lending side is “Hey, you guys are relatively young and new, so we don’t know if we wanna continue to make [unintelligible [00:16:38].24] loans to you… So let’s weather it a little bit.”

So when you have something like this, where countless people who have been less disciplines are looking at it and they’re saying “Holy crap, we have no money here”, and they’re calling their banks, that creates a panic on the bank, and a stress on the bank. So when the bank calls us and says “Hey, are you gonna be able to make your payments?” and we do every time, on time, then we’re establishing credibility in the fox hole, like the war time, that is going to pay dividends in the peace time… But the partners and I, through these calls and through running stress tests and analyses, we’ve decided “Hey, we’ve got a lot that we can give up before we don’t pay the bank. Hey, we’re gonna give up personal profit.”

So we started going through that priority list of “How do we honor the commitments we’ve made, and establish credibility in this time, that’s gonna pay dividends in the peace time?” So I think it’s been a cool opportunity for that, and I’m thankful for my partners bringing the seriousness that I lacked, because it’s made us a lot more mature as an investing group.

Theo Hicks: Okay. Well, is there anything else that we haven’t talked about already, as it relates to the Coronavirus and your business, that you wanna mention before we sign off?

Will Fraser: I think the importance of communicating ahead of time. And I’m gonna say this as a reminder to myself. When we can see things coming, it does everyone better to communicate up front, as opposed to — I mean, when we ostrich and we stick our heads in the ground, and we’re like “Maybe it will go away”, the problems usually don’t go away without being resolved.

So let’s take these opportunities to have our partnership discussions, to have discussions with our vendors and our tenants, and our landlords if we’re tenants, and call a spade a spade, and talk about reality, and let’s wrestle through those hard things now… Because it’s gonna establish better rapport and better credibility.

Theo Hicks: Alright, Will, we really appreciate you  taking the time to come on the show today, and extra-appreciative for you talking about how you are dealing with the Coronavirus right now… So just to kind of recap what we’ve talked about – we’ve talked about rent collections; you’ve got a mixture of 4, 3, 2-units, and then a single-family home that are long-term rentals. We’ve talked about how you’ve actually had tenants reaching out to you, letting you know that they’ve hit that financial hardship, that they’ll be able to pay rent this month, but weren’t totally sure how long they’d be able to pay rent… So a few plans you have in place is let them pay with their credit card, and eat that credit card fee, although that’s not something that you’re going to encourage. Then allow people to pay their rent incrementally, and then amortize that over the rest of their lease.

You also mentioned that if you live in a smaller areas, it’s much easier to confirm that someone’s telling you the truth. If someone mentions  they worked at Dell, and claim that they’ve been laid off and you know that Dell are laying people off, then you’re able to confirm if they’re telling you the truth.

We also talked about how you approached your partnerships, and how you do two calls a week right now, and that you were proactively planning ahead of time, you and your partners, about what to do if your tenants cannot pay rent. You also mentioned something I thought was really wise, which was that this is a great opportunity to build credibility with your lender if you’re able to make your payments in full and on time. Once things start to come back to normal and you want to buy properties from people who maybe weren’t paying their mortgage payments on time, then you can get financing from your bank, because of all the credibility you’ve built up…

And then lastly, you talked about the importance of communicating ahead of time, as opposed to the ostrich approach that you mentioned, of sticking your head in the ground. That applies to the residents, as well as the investors, too.

Again, I really appreciate you coming on the show, Will. Best Ever listeners, as always, thank you for listening. Everyone stay safe, have a best ever day, and we will talk to you tomorrow.

Will Fraser: Thanks, Theo. Have a good one, man.

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JF1874: Veteran Real Estate Investor Shares Story Of Scaling The Real Estate Ranks with Cory Boatright

Cory is with us today to share his story of scaling his business. He started in the same position as many new investors, from bird dogging to wholesaling and then on from there, Cory has faced a lot of the same problems other have faced or will face as they try to grow into the real estate investing industry. Hear how he has overcome obstacles, and how he stayed focused enough to eventually sell over $100 Million in real estate transactions.

 

Cory Boatright Real Estate Background:

  • Real estate investing coach and investor
  • Has completed over 1000 real estate transactions, owns/manages over 422 apartment units via syndication, and sold over 100 million in real estate transactions
  • Based in Oklahoma City, OK
  • Say hi to him at www.coryboatright.com or www.apartmentevaluator.com
  • Best Ever Book: Modern Day Jonah

 


Best Ever Tweet:

“Usually you want to go the cheapest route but with multifamily you may not” – Cory Boatright

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

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

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


TRANSCRIPTION

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

Cory Boatright: What’s going on, Joe?

Joe Fairless: Well, I’m looking forward to our conversation. A little bit about Cory – he’s been a real estate investing coach and investor. He’s completed over 1,000 real estate transactions, owns and manages over 420 apartment units (he’s on the GP side on those properties) and sold over 100 million dollars in real estate transactions. Wowsers! Also based in Oklahoma City, Oklahoma. With that being said, Cory, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Cory Boatright: Sure. Thanks again for having me on here. Real estate investors, I’ve been doing it for just close to 15 years now. I bought my first house when I was 21 years old, so that’s 21 years ago. I’m 42, getting ready to be 43 in June. I just kind of went up the ranks, I did everything from a bird dog, all the way up to I had a short sale business in 2006, and a loss mitigation company, and then just basically moved to wholesaling after a bunch of big things happened in my life, that were pretty hard things to deal with personally… But also, everything that you go through teaches you a lesson.

So I got involved with more wholesaling over the last 5-6 years, and about half that time I started having more interest with apartments. You and I just saw each other in Colorado at your event, which was awesome; an absolutely incredible  event… And I read your incredible book; it’s a huge, huge book. I’ll put it right here on my desk, so everyone is seeing it.

Joe Fairless: Oh yeah, there it is…

Cory Boatright: It’s such a big book, man… And it’s great!

Joe Fairless: There’s a lot of stuff to say about apartment syndication.

Cory Boatright: It’s a lot, it’s a lot… And I listen to all your podcasts, and everything. So you have been tremendously helpful in that regard. Another one of my partners, Corey Peterson, with the Big Kahuna, he’s been really helpful as well, and Michael Blank, Sean Terry is one of my partners now, working on the apartments side… So what I’m focused on is finding 75 to 150-unit apartment complexes, primarily in the greater OKC area. That’s been my big focus right now. We’re finding them off market, and the reason why, Joe, is because I believe there’s a big gap, where what’s called direct response marketing – you’re familiar, obviously, with Dan Kennedy, and John Carlton, a lot of the greats from marketing – there is a gap right now that’s needed, I believe, in multifamily. No one is really doing a great job of doing direct response marketing for multifamily, and for the owners.

So in 2019, one of my big Emphasis projects – I call them Emphasis projects – is really finding some piece of direct mail, marketing piece, some medium that really gets in touch with the owners of the 75-unit to 150-unit via direct response, with not having to – not that there’s anything wrong, but not having to work with or go through a broker, if note needed. So that’s been a big emphasis… And then of course, my wholesaling business. We did over 113 deals last year. I have a great operation, how that’s setup. That runs maybe about 15 hours of my time a week to keep that thing churning… So it gives me an extra time to do the other things, like marketing for multifamily.

Joe Fairless: Well, let’s dive in. I’d love to talk about the direct response marketing to multifamily operators and why you see an opportunity there… But first, the 15 hours  a week that you invest in your wholesaling business – what are you doing exactly?

Cory Boatright: I have this exercise – and I do this with consulting students as well – called “the $10,000/hour activity.” Basically, it is take a week of your life and write down from when you get up to when you go to bed at night, everything that you did in an hour, every hour, you put it up on your phone, that reminds you “What did you do this last hour?” At the end of this week you have to grade “Was that thing that you did (we’re talking about business activities, not family; you can’t put a price on that) worth $10/hour activity, $100/hour activity, $1,000/hour activity, or $10,000/hour activity?” Obviously, there’s very few things in a $10,000/hour activity, and it’s more of a concept, but what I’ve found – and it’s easy for all entrepreneurs to do this, myself included – is that we tend to do things just so we can get them done, so they’re not lingering around, not hanging out there, and causing us to get off focus… But those are $10 to $100/hour activities, Joe. And the goal is to figure out where we can spend more of our time on the $1,000 to $10,000/hour activities.

Those things, as you asked, are the big leverage points, the big rocks. We do a level 10 in our business — if you’re familiar with Traction; great book, you’ve probably heard a lot from it… A great way to basically run a company, and you can go through and you can find out these big rocks of what are the things that need to happen to move the needle forward? Those tend to be not the things that are the $10 to $100/hour activities; those are the $1,000 to $10,000/hour activities.

An example would be maybe you need to call someone, Joe, and have a conversation with them, because it needs to be a direct conversation with you and them to connect, and build that relationship with then. Maybe from there, you want to talk to them about some opportunity that you have that’s coming up, or in your business, that can really move the needle forward in your business. That would be a $10,000/hour activity. Some of these other smaller activities are things that typically just a virtual assistant can handle.

I’m still amazed – and you’ve mentioned this before we got on this interview today that you have a lot of Tim Ferriss books around. Well, he wrote the 4-Hour Workweek, which was pretty instrumental in changing the perspective for me – and I bet for you, too – on how  you view business and how you can leverage things. Well, that’s where the focus is right now, is “Where can I put those big rocks, and where can I look at those $1,000 to $10,000 activities that can move the needle forward?”

Joe Fairless: Today is Thursday, so we’re well into the week… What are some specific things that you’ve done in your wholesaling business this week?

Cory Boatright: Great question. This week I contacted a guy named Greg Helbeck and Jason McDougall, and I’ve found an opportunity for marketing – because I love it; I absolutely love marketing – but it’s in Dallas. I’m here in Oklahoma City, I’m not gonna do anything in Dallas. I know that they have a great operation in Dallas. I simply told them about this opportunity, spent maybe ten minutes with them, and said “Hey, first off, is this a good opportunity, a house that you can do something with?” They said “Absolutely.” I said “I’m not gonna spend a lot of time on it. Here’s all the information on it. If you think we can do something, let’s partner up. You let me know.”

So that was one thing I did. They came back to me… Not only are they gonna be able to partner on it; that deal in itself – we picked it up for around 143k, and we’re probably going to sell it between 165k to 170k. So just for that 5-10 minutes of spending that time, sharing that little bit of information with them, being very clear on the expectations – “I’m not gonna do anything. This is a great opportunity for you. This is your area, this is your market”, and that deal is going to clear 27k, so my part of that deal will be over 10k. And I spent maybe 10 minutes on that. So that’s an example.

Joe Fairless: That’s a $60,000/hour thing that you just did. Even better.

Cory Boatright: That’s right. I’m working on the 10X. [laughter] It’s difficult to get there, but you’ve gotta shoot for that. But that really is an example – whenever you’re creating those leverage points and you find those things that you’re not gonna necessarily spend your time on, but you know someone else that’s really gonna be good at it, then it’s good to build on those relationships.

Joe Fairless: So let’s talk about your comment when you said direct response marketing, and there’s a gap that is there for multifamily properties… Specifically, having something that compels owners of 75 to 150-unit properties to follow up with you. What do you know, that others aren’t doing?

Cory Boatright: I’d love to be able to give you a lot of data, because I love data myself… But I’m really in the process right now of building the data up. But I can tell you some things I have figured out so far.

Joe Fairless: Okay.

Cory Boatright: One is I’ve done mailers on finding deals on apartment complexes, and what I’ve found in the Greater OKC area, in a source called List Source (your listeners are probably familiar with that; listsource.com). You can pull data and you can look at apartments that are ten units and above. And what’s really interesting that I’ve found after doing a small mailer was some people that contacted didn’t even know what their NOI was, didn’t know what a P&L sheet was, Joe; couldn’t tell you how many exact units are, couldn’t tell you what the vacancy rate was, couldn’t tell you how much work is needed.

This really blew my mind, because there is this assumption and there’s this perception that because someone owns a five million, ten million-dollar asset, that they’re smarter than you, or whatever it is… That they know more about that unit, that they’re gonna be less motivated to work with you because they have options. And they do have options, but as understanding the pain points from motivated sellers in the wholesaling business, which is what we deal with on a day-to-day basis, it is a different animal on multifamily, because it takes longer time, but the pain points are really interesting. On multifamily it is “My partners and I have a legal dispute.”

Joe Fairless: Yup.

Cory Boatright: “I’m going through a  divorce right now.” “I’m embarrassed because I don’t know how to run this thing. I don’t want anybody out there telling me ‘Oh, your 150-unit now is being bought up because you don’t know how to do it.” There’s embarrassment, there’s shame involved. They’ve got properties inherited, and their kids are on drugs, so they’re doing stuff they shouldn’t be, and they’re running the asset into the ground. They don’t have any idea on their accounting.

Or  maybe, some of the things — they just need to do a 1031. There’s a lot of other reasons, but some of the ones that weren’t so obvious, that was very learning for me, was these people are still motivated, too. So no one is hitting someone right between the eyes, which is what great marketing does, and speaks to one person. I’m not talking about speaking to this economy of multifamily owners, all assuming just because they have 100 units or whatever, that they’re happy and everything’s great, and they’re bigger than everyone else. I’m talking about a message that speaks to your pain. Because once you speak to that person’s pain, then you’ll get a response.

That’s really what I’m talking about – finding that marketing piece that says “Hey, if you have a challenge right now and you need to sell the property quickly, but you don’t know what it’s worth, you really don’t know if you’ve been fixing the property up the way it should be… Hey, I’m local. I’m here in Oklahoma City, I’ve lived here for years and years; let’s go have coffee. This is a completely confidential conversation.” By the way, anything that has private, confidential, your email address, your personal phone numbers saying “This is real”, stuff like that – it stands out from all of the noise that they get all the time, that says “I want you to call me [unintelligible [00:13:31].25].”

Joe Fairless: It absolutely does. When you say speak to one person and find that pain point, how do you create something that speaks to one person, when as you mentioned earlier, there are varying pain points on the spectrum? If I’m going through a divorce, my pain point is gonna be different from if I have inherited a property and I don’t know what I’m doing.

Cory Boatright: Sure. One thing that I know that hasn’t worked is a postcard. If you’re approaching this marketing for multifamily and you’re using a postcard, stop doing it.

Joe Fairless: [laughs]

Cory Boatright: Because the postcard is really designed for single-family, and there’s a reason why, but I don’t wanna get into it necessarily right now… I’ll tell you that a letter is gonna be more effective. And not only a letter, but a FedEx package that you can get a signature — because how many FedEx packages do you send and you don’t open?

Joe Fairless: You open it. You always open it.

Cory Boatright: You’re gonna open it. Or if you have an envelope with a window that shows their name, and at the top of it “Open immediately” or “Urgent”, something that shows urgency. And we can get into particulars of split testing. But the answer to your question is you are going to have to split test it. And I’d love to show you right now all the data, but I’m still working on this myself, so maybe at the end of myself we could have–

Joe Fairless: Follow up.

Cory Boatright: That’d be awesome, to follow up. But you’re going to have to split-test. And the cool thing about multifamily when you do these lists, Joe, is that they’re not that big. I send out between 50k and 60k mail pieces for single-family motivated homeowners every single month. I’ve done it for years, right? I don’t have to do even 10% of that, because there’s not 10% of 75 to 150 apartment complexes in the Greater OKC area. It doesn’t exist. So because you have a smaller list, now you have to change your mindset. This is hard for marketers because we think “What’s the best ROI for our marketing piece?” And you have to change that. You have to think about “What is the best way that I can get in touch with an apartment owner?” If I did get a deal, and it’s a direct to the owner, I’m not having to worry about a broker, so what’s that saving on a 3-5 million dollar deal? It’s saving at least 100k or more, right?

Joe Fairless: Yup.

Cory Boatright: So if I didn’t have to do that, what could I spend on the marketing piece? Well for me, I’m spending between 31 and 34 cents on a little postcard with an API that goes to Google for a Google image that says “Is this your house?” That one’s really effective. But on this, for a letter, you’re gonna spend 50-70 cents just on the regular marketing to single-family. You have to stop thinking about that, because your list is only 5k or 6k people, Joe. Now you can spend $15, $20. If you wanted to, you could probably spend $30 or $40, depending on where you are and what your marketing is, to get in touch with this person. And that’s the way that you have to think about it. And it’s really hard, because usually you wanna go the cheapest route, but on multifamily… You’re gonna have to spend a little bit more money, but it’s gonna be worth it if you find even one really solid deal.

Joe Fairless: It is. And that’s the beauty of the larger deals. It’s worth it when you just get one… And it’s not only the transactional profits you get from that deal, but it’s what it sets you up for for future deals because you did that first deal. I love that thought process, and I was going to ask you per piece approximately how much it would be for a FedEx, but you’ve just answered the question… Which really is “That’s the wrong question to ask, Joe. It’s really about what’s the opportunity cost here if you don’t do it.” Because if you’re working with a broker, there’s nothing wrong with that. But if you are working with a broker, you’re gonna pay a commission, whereas if you don’t, then on a large property the seller saves the $100,000, but then you can build that into your offer, and then you can save some money because you’re saving them on the broker fees. That’s great.

So one challenge that a listener will come across when they implement this is single-family – heck of a lot easier to track down the owners and their address; multifamily – you get an entity that owns the property more of than not. Then you look up the entity address and it gets you to some whacky address… So how do you make sure that you have the best addresses to contact the owners?

Cory Boatright: Great question. The easy answer, but many may not have this access – but you could get it, depending on how much your persistence is – is commercial brokers have a service that we’ve all heard of, called CoStar (I know many of your audience has). CoStar has all of the addresses, all of the phone numbers of these owners, and that’s gonna be one of your easiest routes to go if you can work with a broker and they’re willing to basically pull that data out and give it to you. Now, of course, if you’re doing that, the broker is probably gonna say “Well, if you find a deal, I want you to work with me”, so there’s that side of it, too. But if you wanted to go the route and pay for your own CoStar – I believe it’s $25,000 to $30,000 a year, so that’s gonna be [unintelligible [00:19:00].23] evaluate there.

The other one is skip-tracing. Skip-tracing is easier with a single-family, because you don’t have to typically worry about companies. A lot of these owners have companies and LLCs and trusts and everything else that these properties are associated in and set up in… So you can have skip-tracing. Skip-tracing can help you tremendously. There are some back-and-forth on whether or not you can get a company skip-traced, versus an individual skip-traced, and the answer is you can, but it may cost a little bit more money because it’s a little bit more involved. They have to go usually to the Secretary of State, they have to go and see who is a registered agent, and those things. On  some of these you can’t see [unintelligible [00:19:50].20] if they’re filed in places where they’re hidden… So that would be something that you need to look into – skip-tracing, and certainly CoStar.

Joe Fairless: And what are some skip-tracing resources that you recommend listeners check out?

Cory Boatright: Sure. American Skip Tracers is a guy that everyone can go check out. I believe Tom Krol – I’ll give him credit for introducing me to him. He didn’t even know it, but he posted about him. Tom Krol is a great wholesale–

Joe Fairless: Yup, I had him on the podcast. Really good interview.

Cory Boatright: Yeah, great guy. Lots of great [unintelligible [00:20:25].04] in our mastermind group, Collective Genius. So American Skip Tracers… I think it’s called American Tracers, or American Skip Tracers. That’s one. There is another one that is called IDI. It’s gonna take you a little harder time to get that one set up, but that one is very, very good for pulling great information, and you actually get set up on your own FTP (File Transfer Protocol, for you techies).

And then Delvepoint is another one that’s gonna be a little harder for you to get set up, but Delvepoint has fantastic data as well, that you can look into.

Joe Fairless: Wonderful information. Taking a step back, what’s your best real estate investing advice ever?

Cory Boatright: Two – be persistent, and when everybody else quits, keep going. That’s on single-family. So I’m gonna divide it. On multifamily – slow down. The person that takes longer time and thinks through things, and isn’t in a hurry – they’re going to win in the multifamily game… Especially when it comes down to you actually closing. When you’re actually closing, the last week of your closing process means everything. With delays, or anything else – that last week is what it’s all gonna come down to. So taking time and being patient on the multifamily.

It isn’t like a hot potato, like me in the wholesaling business, where I get a property, and I essentially — I do wholesaling, Joe; so we call it real estate, but really it’s like the pawn shop of real estate. I get these properties for 25, 30, 50 cents on the dollar, 40 to 60 cents on the dollar using the Greater OKC area – that means a 100k property, I buy it between (the lowest) 25k or (the highest) 60k. I turn around and I sell it for a profit. But I’m really selling the contract. Someone is signing a piece of paper for 50k, I know Joe is gonna buy it for 70k. I give that over to Joe, and he pays me 20k. That’s really wholesaling.

Joe Fairless: Yup.

Cory Boatright: And multifamily – it is so completely different. It is all about due diligence. It is all about “Did you tell me everything that you should have with this whole process of going through–”

Joe Fairless: Which they didn’t. [laughs]

Cory Boatright: They didn’t. They never do, right? The person that’s more excited to close is typically gonna be the person to lose.

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

Cory Boatright: Let’s do it!

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

Break: [00:23:04].00] to [00:23:39].10]

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

Cory Boatright: The best book recently?

Joe Fairless: Yeah, recently.

Cory Boatright: Recently… I read a book a week, so — I usually listen to a book a week on Audible. Modern-Day Jonah, which is Nathan Taylor actually sent it to me. I’m in the process of reading it right now.

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

Cory Boatright: Assuming my expectation was the same as the owner’s expectation.

Joe Fairless: Best ever deal you’ve done?

Cory Boatright: It had to be a short sale deal. I stumbled into it way back in the early 2008-2009, and it changed the trajectory of my life when I realized that banks were willing to accept less than what’s owned on the underlying debt. It changed my life.

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

Cory Boatright: Gratitude. I remind people every day that you take so many little things for granted. I started a thing called The Grateful Project through my — I won’t get into it, but I went through a personal episode of thyroid cancer at the end of 2012; it radically changed my life. And to this day, I post a reason to be grateful every single day. I wear this bracelet, The Grateful Project, which means everything to me. I think if you thought of gratitude as a currency, then you should really think about wanting to become a billionaire, because gratitude means everything, and it is the number one thing that will get you through life on the highs and lows.

Joe Fairless: Colleen (my wife) and I say what we’re grateful for before every meal, and one of Tony Robbins’ quotes that rings in my mind whenever we talk about this is “Trade your expectations for appreciation.”

Cory Boatright: I love that, man. I say in the shower every day – “My worst day is someone else’s paradise. My worst day is someone else’s paradise.”

Joe Fairless: It’s true.

Cory Boatright: I say it over and over again, and… Man, you get hit with different things in the day, and you’re like “Ugh..!”, but then you’re going “Well, it isn’t that bad.” It’s a good way to think about it.

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

Cory Boatright: I love that. So just google my name, Cory Boatright… What’s really funny – if you google my name, it actually says “People that google you also google Joe Fairless.” It’s really hilarious.

Joe Fairless: Oh, yeah…! I’m glad to be associated with you.

Cory Boatright: Good company. And then I was telling you, Joe, we set up — because I’m on Facebook a lot, I like social media, and I’ve done that for a long time… So I set up a website called ApartmentEvaluator.com. And the only reason I did this is because people were just sending me direct messages on Instagram, Facebook, and emails, like “Hey, I got this apartment deal”, and they might give me four pieces of information. And this Apartment Evaluator is just a very simple — it asks a couple of questions, but it really streamlines things, and helps with organization.

Joe Fairless: Amazing. Yeah, I see it in here. It looks straightforward, and it looks like a good resource. Well, thank you so much, Cory, for being on the show and talking about your journey… Talking about specifically marketing and where you see your blue ocean strategy, and focusing on direct response marketing towards apartment owners, and how you’re going to specifically go about that process… And you’re already a general partner on 420 units, which we didn’t even talk about, but I’m glad that we talked about what we did, because this is very action-oriented for the Best Ever listeners, and it’s good because you’re coming from a wholesaling background on residential, where you know the marketing piece, you’ve got that down pat… And now someone like you, with your background and experience can turn on and transition into the multifamily space. So I’m looking forward to a follow-up conversation; a year from now let’s talk and see the results of what you’re going to be doing after you get all the research in, and do split tests and stuff.

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

Cory Boatright: Thanks, Joe. I really appreciate you.

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Banner for Best Ever Show with guest Ken Lewis

JF1650: Learn More About Another Passive Investment #SkillSetSunday with Ken Lewis

Precious metal investing, that’s what we’re covering today. Ken runs a company that sells precious metals. He’s sharing the benefits of precious metal investing with us today, even if you never pay him for services or products, he shares great information for you to think about. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Ken Lewis Professional Background:

  • Results-oriented professional with more than 25 years of leadership experience across a broad range of retail and technology organizations, many of which are in the Fortune 500
  • Chief Executive Officer at APMEX, the largest precious metals retailer in North America
  • Based in Oklahoma City, OK
  • Say hi to him at https://www.apmex.com/

 


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TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment for you called Skillset Sunday. The purpose of today’s episode is to introduce you to a new passive investment – well, it’s new to me; it might not be new to you – that you can learn more about, and if you already know about it, then perhaps you can hone your skill by listening to today’s expert. First off, how are you doing, Ken Lewis?

Ken Lewis: I’m doing great. Thanks for the time, Joe.

Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. A little bit about Ken, and then we’ll get into the type of investment. He’s a results-oriented professional with more than 25 years of leadership experience. He’s got that across a broad range of retail and tech organizations, many of which are in the Fortune 500 group. He is the CEO of APMEX, which is the largest precious metals retailer in North America, and we’re gonna be talking about passively investing in precious metals. Based in Oklahoma City, Oklahoma.

With  that being said, Ken, do you wanna give the Best Ever listeners a little bit more about your background? And then let’s talk about precious metals.

Ken Lewis: Yeah, great. I think the key is I’m an operations-oriented executive; I’ve been at companies like Microsoft and Home Depot, and had an opportunity to join APMEX about almost eight years ago. APMEX has been for many years one of the largest internet retails in the U.S. Actually, I think we were just recently ranked the 45th largest internet retailer… And it really got me into precious metals, and trying to understand that as a business concept.

I came into the company as an operations head. Over time I’ve broadened my responsibilities, and about three years ago I became CEO. So our whole thing is just trying to reinvent ourselves and remind our customers (and the world, really) about the advantages of potentially investing in precious metals. We’re known for top-notch customer service. Anyone who’s heard of our company will know that. We’re known for integrity, we do what we say we’re gonna do. We’ve got over a million customers, believe it or not; we’ve done over ten billion dollars in sales in our 18 years of existence… So a proven player that is all about trying to educate your consumers and others about the advantages of owning precious metals.

Joe Fairless: You said you’re trying to reinvent yourself… What were you, and in what way are you trying to reinvent yourself?

Ken Lewis: A lot of that is — I’ll give you the best example… About 4-5 years ago we didn’t have a phone team, and what we realized is we needed to have the ability to explain complicated concepts on the phone with customers. We couldn’t be up here, 100% internet play. So it was just about being able to walk them through the process, and educate them, and be there to support them with their questions.

Another example of that is we’ve literally just launched – about 4-5 weeks ago – a concept called One Gold, which is really digital precious metals. Some consumers would rather not have precious metals shipped to their home; they’d rather have it more in a digital form, where they take a position in metal, but they don’t have to worry about the security of protecting it.

So it’s just different things like that we’re constantly doing to try to find ways to make precious metals ownership be available to a broader mass.

Joe Fairless: From a passive investment standpoint — I mean, clearly this is incredibly passive, because I imagine you do one purchase and then you can just sit on it; you’ve got that allocation of either digital precious metals, or the tangible product, right?

Ken Lewis: Yeah, we kind of look at investors as a little bit of everything. There’s some who wanna collect, because they like the beauty of the product. There’s some that are doing what I call income allocation, where they’re taking incremental income and they’re maintaining a position in a metal. And there’s others out there that do asset reallocation, where maybe they sold some property, or they had a lifetime event, and they wanna have a percentage of their net worth tied to an asset that they think diversifies their portfolio.

That last one I just mentioned, they tend to be — I wouldn’t say one-and-done, but to your point, it typically tends to be large transactions, and then they kind of hold on to that and they wait to liquidate that years and years down the road, where others are a little bit more actively involved.

Joe Fairless: What are some common misconceptions about investing in precious metals?

Ken Lewis: That everyone who does it buries the stuff in their backyards, and they’re a conspiracy theorist. I think that there are a lot of customers out there, and we see it in our data… Look, our average customer is a 55 to 60-year-old individual with a 2x average net worth than the average consumer, who looks at us as an investment opportunity, not a way to protect only against the insecurities of the government.

So I think a lot of people, myself included, when I came into this business, frankly thought that the investors in metals were more the conspiracy theorists in general, and that’s just not the case. You can see that in so many different data points out there in the market… Many, many more people are now getting into metals as just a diversification strategy. It’s like holding bonds, or real estate, or other products. It’s just giving you some diversification in your portfolio in case something doesn’t go the way you expected it.

Joe Fairless: When you look at the changes that your company has had over the eight years since you’ve been with APMEX, what are some of the things that are noteworthy, other than some of the things that you already mentioned, like needing a phone team?

Ken Lewis: I think one of the most important things is we try to be the best in everything we do. The best example of that might be in today’s world, when you’re buying online, you expect your order to ship very quickly, and precious metals – the service levels tend to be a little bit slower than that. We actually now ship over 80% of our orders that are funded the same day, up until 3 o’clock in the afternoon. That’s just one example of taking the service to an absolute other level.

The other thing we’ve done that’s pretty significant is for those people who like a variety of product, we have over 18,000 different products on our website. It gives you the variety you’re looking for. Really, there’s nothing we probably don’t have that most consumers want, where many years ago your assortment was a fraction of that volume. Some consider that makes it confusing; what I would say to the average consumer is that you educate yourself and you become more knowledgeable, you find that you’re now wanting more variety of product, and we’re there to meet all of  your needs, and not requiring you to go to other players to be able to meet those needs. Those are just a couple of examples, Joe.

Joe Fairless: What are your top-selling products?

Ken Lewis: That’s a great question, and I’m gonna use this as an opportunity to also dive into the new product we’ve just launched… So American Eagles – the U.S. government actually makes an American Eagle coin, in one-ounce form, gold and silver. They tend to dominate our sales. I think we have about a 15% market share of all the Eagles sold in the world today. We do millions of ounces a year in silver, and a significant amount of gold as well.

What most don’t realize is when you go back and you look at the U.S. government – yeah, they print money, yeah, they have a big impact on our equity system, but precious metals is something the government has supported for many years, and their product tends to dominate our assortment.

Other products that people like to hold are one ounce gold bars, silver rounds they like to have as well… Products are typically in a smaller form factor, which is easy to handle in your home. Most people don’t realize, Joe, that we do about a billion dollars a year, and we’re shipping this to people’s homes. This is like getting an Amazon order with electronics; we’re literally shipping this to your home that you signed for, at your home, and you take delivery of it. So it’s very reachable, it’s really available to any number of players who wanna do that. We actually ship over 600,000 orders a year, so it’s become more commonplace, and we’re really the largest, not only in the U.S, but in the world, who are doing that.

One more thing, Joe… One of the things we did is we understand that still buying gold and silver online, and having it shipped to your home was still a hard concept for some people to get their heads around. You can actually own gold today in ETFs like GLD, or [unintelligible [00:09:51].12] or some of these other products, but we launched a product called One Gold, where it’s like crypto – you can go online, you can actually take a position on it immediately, you can instantly liquidate it anytime you need to… If you ever wanna take physical, you can do that transaction right online. It looks a lot like some of the crypto websites that are out there, but the coolest part about it is everything is backed 100% by metal, so you don’t have to worry about having an ownership in something that doesn’t have an intrinsic value to it.

Joe Fairless: Yeah, I’m on your site now, and… I think you mentioned – or maybe one of your team members mentioned when they were setting up this interview – that you would be giving away five 1853 Liberty Seated Quarters to the listeners… Is that accurate?

Ken Lewis: I’m looking at the individual who arranged the call… [laughs] I don’t think that was necessarily [unintelligible [00:10:45].27] but having said that, would I be open-minded to doing something? Absolutely. And I’ll tell you what we can do on your podcast – one of the things we can do is we’ll come up with something for your listeners, how about that?

Joe Fairless: There we go…

Ken Lewis: …something that might encourage them to take a look at our website and leave some comments. More specifically, I’d love them to take a look at OneGold.com. It’s just the brand new one we just launched. And if they created an account on there, maybe we can find a way to reward them for doing so.

Joe Fairless: If you’re not doing the 1853 Liberty Seated Quarter, maybe [unintelligible [00:11:15].29] Best Ever listeners, for some context, I just went to rare coins, and I scrolled all the way to the most expensive ones… One of them is $149,000, and the other is $144,000. So you almost got some good stuff, but unfortunately Ken wasn’t cooperating with us…

Ken Lewis: [laughs]

Joe Fairless: Well, I really enjoyed our conversation. This is interesting, it opens up a whole new world to me personally, and I know probably a lot of people are like “Dude, really? You didn’t know about this?” I’ve just got my head down on real estate stuff and I haven’t really focused on other types of investing… So it opened up a different world to me, and I really appreciate the time on this show.

How can the Best Ever listeners learn more about your company and what you all are doing?

Ken Lewis: Yeah, I’ll tell you what – and I’ll hit two things here real quick, for your listeners, which I think might be relevant… If I’m sitting in their shoes, obviously, you’re looking for investment; I can’t give financial advice, I can just quote some data… Just look at the five days, Joe – the Dow has dropped 6.2% or something like that; the precious metals or gold was actually up 1.6%. You go back to 2008 when we all know what the equities markets faced back then – equities markets were down 37%, gold was up 4%. And the last stat I’ll quote, and real estate is something I know your consumers focus on – if you had invested $100 in gold back in 2000, that’d be worth $429 today. The large caps would be worth $260 today. The only product that beats gold is real estate, at $738. So when you look at it from a long-term play and you look at these dynamics to the market, there are some very interesting stats that I would encourage your educated listeners to research. You can do that at APMEX.com, or they can take a look at our other property, OneGold.com, because sometimes the younger generation might find the One Gold concept frankly a little bit easier to execute and understand.

So that’s where I’d point your listeners, and we really appreciate their time and considering precious metals; even if you don’t buy it from us, I think it’s a valid play, and many investors out there — advisors will say 5% to 10% of your portfolio in precious metals is not a bad ratio to maintain, and the reality is most people don’t have any precious metals in their portfolios today.

Joe Fairless: Where on your website is that, where it shows real estate is number one, gold is number two, since 2000 or 2001?

Ken Lewis: You know, actually my team do that research for me. They actually pulled up the data and they’re using the Nareit Index and tracked that from 2000 to today. If you’d like, I can get you a copy of this analysis that you can make available to your listeners. It actually lists out large caps, small caps, it’s looking at international markets, real estate, bonds, cash, gold and silver, and I’ve got it since 2000 to 2018. So on my site we show you what gold and silver has done over a date range, where you can look at that and you can analyze just that. We don’t give you the other indices to compare against, but I’d have no problem sending this over to your team and maybe you can make this available to your listeners as well.

Joe Fairless: Yeah, I would appreciate that. You’re preaching to the choir, certainly, with real estate number one, and number two, if that’s what you’ve got, then we’re in good company, that’s for sure.

Ken Lewis: Yeah, and I appreciate that. Yeah, great.

Joe Fairless: So Best Ever listeners, there will be a link to download this document in the show notes, so you can just check that out. Well, thanks so much for being on the show, Ken. I really enjoyed our conversation. I hope you have a best ever weekend, and we’ll talk to you soon.

Ken Lewis: Alright, man. Take care!

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Guest Drew Eldridge on a Best Ever Show flyer with Joe Fairless

JF1297: Learning From A Bad First Investment with Drew Eldridge

Drew bought his first deal at almost retail, put too much money in the rehab, and wasn’t getting great returns. He learned from the experience and now owns 20 units and one commercial property. Hear what he learned and applied to his business after having a not-so-good first deal. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Drew Eldridge Real Estate Background:

  • Real estate investor and has been investing since 2006
  • He has 20 doors and one commercial property
  • Builds his rental portfolio not for cashflow but for retirement
  • Recently helped his son purchase his first rental property at 12 years old
  • Based in Oklahoma City, Oklahoma
  • Say hi to him at 405.213.4041 or www.sellyourmemphishomefast.com
  • Best Ever Book: Never Split the Difference by Chris Voss

 


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TRANSCRIPTION

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

Drew Eldridge: Great, Joe. Thanks for having me on today.

Joe Fairless: Well, my pleasure, nice to have you on the show. A little bit about Drew – he has 20 doors and one commercial property. He has been investing since 2006. He built his rental portfolio not for cashflow, but for retirement, and we’re gonna talk about that, to learn a little bit more about what that means. Based in Oklahoma City, Oklahoma. With that being said, Drew, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Drew Eldridge: Absolutely. I am an emergency medicine doctor, Joe, and I graduated from residency in 2005. Around 2006 I was trying to figure out what I wanted to as I started to actually have a little bit of real income. I started doing a little research and looked to see what all the wealthy people seem to do to make and retain that wealth, and it seemed like the commonality was real estate. So I started buying and reading every book I could find, and kind of looked at the variations, and decided that buy and hold was kind of what I thought I needed to get into.

That was 2006 – I bought one property after a few months of doing some research. I knew from reading that I didn’t wanna have the analysis paralysis, so I jumped in there and bought one, which of course was my worst deal to date… But it got the ball rolling.

I bought a few over the next seven years or so. After that I decided I need to look at this more as a business, “How can I increase my efficiency on this?” and kind of went from what I refer to, Joe, as like a hobby real estate investor to actually trying to be serious about it.

Joe Fairless: And what transpired after having that mindset shift?

Drew Eldridge: Well, I basically bought 13 more doors in about 18 months time period. What I did was I just started networking. I said I’ve gotta learn more, and for me to think that I can kind of get this figured out on my own is just silly, so what I started doing was I started reaching out to people that I knew were kind of where I wanted to be, and just trying to figure out what would be the best play.

Through that, I just found more and more deals, and it seems like — I think the phrase is the harder you work, the better your luck is, or something like that… Basically, the more that I was involved in this, it seemed like the more deals came across my desk, and I was just able to start growing. But I also kind of had a mindset shift –  in the beginning I bought these houses more for the equity, like you mentioned in the beginning, more as kind of a retirement play. I’m buddies with Tim Shiner, who’s on your episode 1175.

Tim buys essentially for appreciation, and I kind of had some of that mindset; more than anything, I was buying more for the equity and the long play for retirement, because I didn’t really need the cashflow this minute. But also, some of that paradigm shift that happened about 18 months ago is I moved everything, from 10-year notes to 30-year notes, and actually did start going for kind of a cashflow play… Not because I needed the cashflow, but it just made more sense, because if I wanna pay those notes down quicker, I can absolutely do it. But then it frees up some of my money and I can just use that to build. I’m not tapping into my other income to build my portfolio. So I did have a bit of a mindset shift around that time period.

Joe Fairless: So before it was more for equity, now it’s more for cashflow, and as a result it’s longer-term leverage.

Drew Eldridge: That’s correct.

Joe Fairless: Okay. The first one, you said that was the worst deal to date. What are the numbers on it?

Drew Eldridge: Basically, I had no idea what I was doing. I kind of thought maybe I knew a little bit. I essentially bought at retail. It was probably retail about a 75k house, and I think I got it for 71k. Not much of a discount. Also, in the beginning I thought “You know what, I’m gonna do the repairs myself.” I grew up kind of learning how to do that stuff, and I’m in there fixing holes in the floor, and some other things…

I started with a property manager from that very first house, and I’ll tell you about that mindset in just a second, but she came in and said “Drew, what are you doing? You’re putting up crown molding, you’re fixing this house like it’s a flip or like you’re gonna move into it”, and I’d already spent quite a bit of money on the repairs…

Joe Fairless: How much?

Drew Eldridge: I think I ended up spending about 15k. And the house rented in the beginning for $650. The numbers are horrible, they don’t work out… But it was in an area that I knew was going to continue to grow, and I thought “Okay, I’ll bank off a little bit of the appreciation.” But anyway, looking back on that, it was a horrible deal, but I learned a whole lot from it, and I tried not to make those mistakes going forward.

Joe Fairless: What did it rent for afterwards?

Drew Eldridge: I think now it’s up to $800, but it’s worth probably 115k-120k now. I probably could better use that money elsewhere, but for now I’ve just hung on to it. Also in the beginning I had the mindset that I wanted to be an investor, not a landlord… So I think, unlike a lot of people that I talked to, I started off with that very first property thinking that I wanted a property manager, and that’s worked out pretty well. I now self-manage a couple of the properties, just because this far into it I kind of wanted to learn a little bit more about it… But I think that’s an interesting thing – I talked to a lot of people, and everybody wants to do it all in the beginning, and I think that’s great. My situation, coming out of residency, and not having as much time, having a manager was definitely the right play at that time.

Joe Fairless: You’ve got a commercial property… Is that where your office is located?

Drew Eldridge: No, I’m a partner in a Brazilian jiu-jitsu gym. We started a few years ago, and as we grew our membership and increased our numbers, we went from borrowing a mat to a three-year lease on a building that we had a place, and then about a year ago we were able to buy a commercial property, me and my partner on the gym. That’s kind of my first foray into commercial. Now, the benefit is that I know the tenant, and it’s a single tenant (that’s us). It’s actually been a great property so far, and it cashflows, and we’ve built equity in it, and it’s been a good deal.

Joe Fairless: You are a business partner in the Brazilian jiu-jitsu gym, and then you as a company also purchased a commercial property?

Drew Eldridge: That’s correct.

Joe Fairless: Okay.

Drew Eldridge: And then we rented it to ourselves.

Joe Fairless: Is it at market rent?

Drew Eldridge: It is. We’re able to justify that in cashflow, so it works well.

Joe Fairless: Oh yeah, absolutely. Did you consider buying a property that had two spots – one for you all and then one for someone else, so they could help with that?

Drew Eldridge: You know, we had considered that, but really the reason we did not do that, and I think that’s probably the smarter way to do it if you’re able, but with the business model that myself and the other guy that I’m involved with this – we kind of said “This is the amount that we wanna have as an outlay for this”, and to do that, we needed to stick with just a single tenant-sized building. So that’s how it worked out. It was a 5,000 square foot building, and we needed pretty much all of that for our  own gym. And for us to purchase a building that would have the size needed for any other tenant was just not what we wanted to do at the time.

Joe Fairless: You’ve got 20 doors and one commercial property. We talked about the commercial property… With those 20 doors what’s the largest property size in terms of doors?

Drew Eldridge: Just a three-unit. Most of them are single-families, and then I’ve got one three-unit.

Joe Fairless: Okay. How are you financing them now?

Drew Eldridge: What I had done initially was for those first seven properties that we talked about, because I’d put them on short terms, I built up quite a bit of equity by the time I decided to ramp up the second phase… Essentially, what I did is I went to the banker and we discussed it and I cross-collateralized most of those properties going forward, and I think I purchased probably about 500k retail value for about 5k of my own cash money, and then cross-collateralized the remainder off of those original seven properties.

So rather than having to come up with a large percentage down, that’s how I was able to do it and then grow those with reducing my own personal cash outlay, and increasing that return.

Joe Fairless: I’m starting to sweat a little bit, because I got really nervous when you said you cross-collateralized your properties. So if one property goes down, then it’s a domino effect. How do you think about that from a risk mitigation standpoint?

Drew Eldridge: That’s a very good point. So a couple things here. Number one, going forward, on all these properties – I bought them at a low enough cost that I feel that that’s less of a concern. Because when you look across my portfolio, I’m leveraged at about 50%, even with that. So I think with those numbers that doesn’t concern me as much as it should. Now, if I were considerably more leveraged, then yes, I absolutely don’t think that that’s a smart play. But I think as it stands with where my numbers are, that’s not much of a concern for me at this point.

Also, the other thing is I’m in a little bit different situation than some. I have a decent W-2 income that if I ever got in a real bind, I’m fortunate enough that I can cover some eventualities, at least for the short term. But you’re exactly right, there’s certainly risk involved with that strategy.

Joe Fairless: Do you plan on continuing to buy properties around one to three units, or are you changing your approach?

Drew Eldridge: I would absolutely love to move into multi’s, and that’s kind of on the horizon. For 2018 that’s my plan – I would like to educate myself a little bit better about that and try to figure it out. This three-unit, even though it’s kind of a multi — I mean, it technically is, but it’s not the same as buying a 16 or 20-unit property. That’s kind of my next goal, that’s what I would like to look into and learn and move into.

Joe Fairless: What was the tipping point for you that triggered the epiphany of “I wanna move from a hobby to a business?

Drew Eldridge: I think some of it had to do with just kind of my disappointment with medicine. The thought that ultimately in my job I get paid when I show up, and if I want something else to grow a business, there’s no one that’s gonna come to me and say “Hey Drew, this is what you need to do to grow a passive income.” And I knew from my previous properties that had the potential to do it, and short of me going back to school or starting some other business, that was my best opportunity to build that passive income.

And then the other thing, Joe, is that I’m a physician, so if my kids want to inherit something, a business from me, there’s not one. They could go to school, but I don’t truly have a practice they might inherit. At least with real estate there’s a business that I may continue to grow, that they could be a part of.

In fact, my 12-year-old bought a house last year. I’m trying to teach them and give them something that they can grow into as well.

Joe Fairless: I saw that bullet point in your bio and I was gonna ask you about that. Please elaborate on how your 12-year-old bought a house.

Drew Eldridge: I’ve got three boys: 10, 12 and 15. It’s been about a year and a half ago now, we were taking a trip and I had told my boys, I said “I will pay you $50 to read a book, but I get to choose it”, and my 12-year-old is a big reader. He’s the one that’s a little more on the intellectual side, always loving to read… So he read Rich Dad, Poor Dad for teens. And part of the $50 was we have to have a good conversation about it where you can explain the points, so I had to read the book of course, too.

He started telling me about depreciating assets, and liabilities, and just truly kind of the understanding of what the point he was trying to get across… And the boys had also been going around with us to all these rental properties for the past several years, and they have some money set up in what’s called a drip account; for your Best Ever listeners that may not be familiar, that’s dividend reinvestment plans… Essentially, where you purchase stocks – and you can usually purchase them direct – and they reinvest the quarterly dividends at a discount, so it’s compounding interest and dollar-cost averaging.

[unintelligible [00:15:16].12] that when they were younger, and told family and friends, “Hey, whenever you give gifts of money and things like that, we’re gonna end up putting that in stocks.” So we had done that over the years, and then also I think a $50 contribution monthly just was sucked out of our accounts to make to make it automatic… So Cooper had about $20,000+ that he knew he couldn’t touch until he was 18. But he said, “Hey dad, reading that book and talking about real estate, what if I use that money to buy a house? Could I use it before?” I said, “Well, maybe so. But you’re gonna have to try to figure out all the numbers.” Essentially, “I’m not gonna do it for you” is what I told him.

So we started going out, we’d grab lunch, we’d go make a list of properties, we’d go walk through, we’d drive for dollars, and I would have him make the calls. He would call the realtors, we’d meet them, I’d make the realtors talk to him… They’d try to talk to me and I’m like, “No, it’s Cooper’s money, you talk to him.”

By the end of it, he’s actually talking about foundation… “There’s a crack here. Do you think that’s a foundation problem?” He was trying to estimate repairs, as much as a 12-year-old can… But it was really good. The naysayers – and there’s only been a few, fortunately, whenever I’ve kind of told people about this… But we did have to title it in our names;  after talking with lawyers and the title companies, they said it’s a huge issue to try to put the minors on the LLC or on the contract, so they just said “Title it to him at 18.” And that’s what we did, but we used his money, none of it was from us. He had to pay for the repairs. We checked him out of school to go to the closing.

Even though he wasn’t signing, they had to explain it to him. We use our property manager, but he goes through the statements and looks and sees what the expenses are. Now, he’s always like “Can I have some of that cashflow to buy a dirt bike?” We give him a little bit to make it worth his while, but most of it goes back to basically resupply that dividend reinvestment plan that we started for him, with the hopes that he can do it again in a year or so.

Joe, I think the thing is even if nothing ever comes about it, he’s got a house that he can take some cashflow through college, or sell at some point for a down payment on his own house… But even better, what if he takes to this and wants to start doing some real estate himself?

Joe Fairless: Oh, something already has come about it. That’s incredible. He’s already learning the core principle of Rich Dad, Poor Dad, where if you want a liability, then you buy an asset and have that asset pay for the liability. So you want a dirt bike? Okay, well  your house can pay for your dirt bike, or in Rich Dad Poor Dad terms, your asset can pay for your liability. He’s already starting to see that first-hand. That’s amazing.

Drew Eldridge: 100%. And it’s funny that you said it, because that’s exactly how he justifies things. The amount of cashflow – he’s like “Okay, how many months of cashflow until I can blah-blah-blah?”
My 15-year-old is more social, he doesn’t really care. He’s like “I can’t sit down and read those books and do that.” At some point he may, but as he watches his brother get a little cash, he’s starting to say “Well, maybe I do need to do that. What book was that that I need to read, dad?” So we’re trying to get him involved, and then of course, the ten-year-old is still not quite there on comprehension of all this, but we’ll get there, we’ll see. It’s been fun.

Joe Fairless: What are the numbers on your 12-year-old’s house?

Drew Eldridge: The house that we found for him was a HUD property. When we first looked at or called about it, it was still in owner occupant status. It was funny, because we had kind of just run the numbers on it — because basically he and I would go through the numbers on most anything we looked at, and we had come up with a number and then the realtor called me right after he had gone to bed and said “Hey, this goes to investor status tomorrow. Do you want me to put an offer in?” So I gave it to her and it got accepted.

Basically, we paid 55k for the house, so we had to figure out his down payment… Then we initially had factored in about 3k in repairs, and I think there was an additional 3k because the HVAC needed to be replaced. So the retail value – of course, for what that’s worth – is about 85k for that house, and he’s renting it for $800/month. I think he’s all-in out of his own cash 17k-18k or so, and he’s renting it for $800/month. But the total acquisition cost I think was 62k or so.

Joe Fairless: When you take a look at the generational wealth component and you see what you’re building and what your family is building, how do you protect that from an asset protection standpoint? What do you have in place, or what will you have in place?

Drew Eldridge: Honestly, Joe, that’s one of the things that I think is very important, and probably something that I’m a little lackadaisical about… This is in an LLC, but I really don’t have a whole lot beyond that. Now, I’ve got some umbrella insurance policies as well, but there’s really not much beyond that. As I’ve started to network and meet people like Tim Shiner and meet local real estate investors here in Oklahoma City, I’m taking little tidbits from each of them, and that’s one of the things that on my list of “I probably need to improve.”

Just like I always tell people that I talk to about real estate, I’m like “Network, network, network”, I went and had lunch with a guy as I kind of started to try to ramp this up, and he looked at me and said “Well, show me your numbers.” I did, and he said “Why is your insurance number so high?” Essentially, he told me I need to switch to a commercial policy and save me about 7k/year.

By the same token, when networking this is one of the things that commonly comes up – “How are you protecting your assets?” I hate to admit it, but that’s something that I probably need to be a little bit more on the [unintelligible [00:21:11].02]

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

Drew Eldridge: My best real estate investing advice ever is essentially to network and to do something. I always say, do something and do it now. That doesn’t mean necessarily to buy a house right now, but do something to move you towards that goal. I’m not sure if that’s going out and buying a book, buying a journal to start taking notes in, but do something and do it now. Because I see too many people that say “Hey, I wanna invest in real estate”, but they don’t network, they don’t bother to take it beyond just talk.

Joe Fairless: Absolutely. It reminds me of the phrase that Tony Robbins says, “When would now be a good time?” It scrambles your brain a little bit, it’s like “Wait, what? When would NOW be a good time?” Okay, I get it. Thank you. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Drew Eldridge: Let’s do it.

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

Break: [00:22:11].03] to [00:22:39].23]

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

Drew Eldridge: Never Split the Difference, by Chris Voss. It’s a book about negotiation, it’s something that I have to constantly go back and look at. Just this past week it saved me $16,000 on an RV purchase. I highly recommend that book.

Joe Fairless: I interviewed Chris about 10-15 episodes ago, I think… That’s when it released, but if you just google “Chris Voss Joe Fairless”, that interview will come up. Best ever deal you’ve done that wasn’t your first and wasn’t your last?

Drew Eldridge: It was, again, by virtue of starting to take this serious and tell people that I’m a real estate investor… At the hospital, there was a nurse that came to me and said “I want to rent my house that I have left over from my divorce.” I said “Here’s how you do it”, and she came back to me about six months later and said “Will you just buy this house?” I said, “Okay, tell me the numbers.” It values at about 70k, and she said “I owe 38k on it. Will you go ahead and just pay off the mortgage and you can have it?” I know those numbers aren’t super sweet for probably a lot of your best ever listeners…

Joe Fairless: Yeah, they are. That’s incredible.

Drew Eldridge: Well, for me it was a great deal… And here’s the other thing too, and this just goes to show you the power of that networking. So that was a year and a half ago… About two weeks ago her mom (of all people) contacted me and said “Hey, are you still buying houses?” “Sure.” She said “I have a friend whose mom died; she’s got this house, she just can’t bear to deal with it.” I said to her, “Okay, tell me the numbers.” She wants 85k for it, can I go and talk to her?

I got it for 82k, and I probably should have paid 85k (I hope she doesn’t listen to this), but because of Chris Voss’ book, you’ve gotta make them feel like you didn’t just accept their offer, because of the psychology of them thinking they could have done something different. But the house is probably worth 150k, and I will probably have to put 5k or less into it. And I did tell her “Your house is worth more”, but she was crying and thanking me at the end of it for helping her get this quickly done. Then that deal led to a second deal, and those two have been some of the best deals so far.

Joe Fairless: How did Chris’ book help you save $16,000 on that RV purchase?

Drew Eldridge: I really didn’t intend to buy an RV, and I was having the one that I currently have worked on… And by the way, I love to travel in the RV with a family; it’s a motorhome, it’s a great way — it’s 100% a depreciating asset, but it has emotional importance and I think it’s one of the few depreciating assets I’m cool with. But anyway, I went in and on Monday I sat down with them and said “Here’s the one I’m interested in on your lot”, and the price that they gave me – we kind of negotiated a little bit back and forth, and I kind of just was like “Nope, thanks” and walked out. Because they told me “This is our bottom dollar, we’re not gonna budge” (we came down a couple thousand).

So the guy calls me back two days later – of course you knew that was gonna happen… And I said “Okay, well let’s talk”, but what I did is I pulled out Chris’ book (it had been a few months since I read it) and I took some notes, and I said “You know what, I’m gonna just try.” So we went back and forth, and I used a lot — I used his “Now, how am I possibly gonna be able to do that?”

Joe Fairless: Yup.

Drew Eldridge: And a lot of his other little techniques, and it was great. Ultimately, I walked out 16k or 17k cheaper than what they told me was their absolute best number on Monday, take it or leave it. I owe Chris some money, apparently.

Joe Fairless: I have his e-mail, so I will e-mail him and copy you and I will tell him that you’re paying him $8,000 at least. Don’t worry, I’m on that.

Drew Eldridge: Absolutely. Or at least buy him a beer or a lunch.

Joe Fairless: I think he’ll probably take the $8,000 over the beer or lunch.

Drew Eldridge: I bet.

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

Drew Eldridge: I kind of alluded to it before… I think number one was paying retail or too close to retail on that first deal. And some of that was also just because I was anxious to get something done, and get the first one under contract. I think that’s probably the biggest mistake. Then also included in that deal was the fact of trying to overdo it and not make it a rental, whenever that’s really what the market I was going for.

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

Drew Eldridge: I’m a reserve deputy with the County Sheriff’s office here, and been doing that for ten years; I’m assigned to the SWAT team, and I do it for free. In a way, it’s my version of community service… So I guess that’s one way that I give back.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on or get in touch with you and say hi?

Drew Eldridge: I’ll give you my phone number, they’re more than welcome to text me. It’s 405-213-4041. I love to talk real estate, and I always seem to learn something from everybody I interact with. Also, we’re gonna try — I’ve got a cousin… I grew up kind of just outside of Memphis, Tennessee, and we’re gonna start doing some wholesaling in Memphis, so SellYourMemphisHomeFast.com is our little basic investor website, if anybody wants to reach out to me there as well, or is interested in the Memphis market, hit me up for that. We’re gonna give that a go in 2018.

Joe Fairless: I am surprised that URL was still available, SellYourMemphisHomeFast.com.

Drew Eldridge: No one was more surprised than I was.

Joe Fairless: I’ll put that in the show notes link. Thank you so much, Drew, for being on the show, for talking about how you are — boy, you’re involved in a lot of stuff. Volunteer reserve deputy, Brazilian jiu-jitsu gym partner, commercial owner (although you’ve got a really good tenant, since it’s you and your business partner) and then a doctor, too. I probably ended with the most time-consuming thing… Emergency medicine doctor.
Thank you for being on the show and talking about how your 12-year-old bought the house and the approach that you too with him… Certainly a lot of lessons for all the parents or people who want to be parents, an option for how to approach with your kids. So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Drew Eldridge: Thanks for having me on, I appreciate it.

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Kathleen Shannon and Joe Fairless

JF1268: Being Boss Through Residential Real Estate Investing with Kathleen Shannon

Kathleen is an entrepreneur, podcaster, and real estate investor. We get to hear entrepreneurial tips from her as well as hear an investor story of buying residential real estate. She prefers to buy houses that are move in ready, and rent them out to decent tenants in decent areas. Her strategy is that she only buys homes that she would want to live in. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Kathleen Shannon Real Estate Background:

-Co-owner of the branding agency Braid Creative

-Co-host and author of Being Boss a podcast (and now book!) giving advice for creative entrepreneurs

-Invests in residential properties with her husband as a way to slowly build their wealth and retirement

-10+ years Agency & Entrepreneurial experience

-Say hi to her at www.braidcreative.com

-Based in Oklahoma City, Oklahoma

-Best Ever Book: Daring Greatly

 


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TRANSCRIPTION

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

Kathleen Shannon: Good. How are you, Joe?

Joe Fairless: I am doing good as well, nice to have you on the show. A little bit about Kathleen – she is the co-owner of the branding agency Braid Creative. She is also a real estate investor, she invests in residential properties and she is the co-host of the podcast Being Boss, which is a podcast for creative entrepreneurs, as well as the author of the book Being Boss, which is a book, I imagine, for creative entrepreneurs. She is based in Oklahoma City, Oklahoma, but soon to be a resident of Detroit, Michigan. With that being said, Kathleen, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Kathleen Shannon: Yeah, sure. So I own my own branding agency, Braid Creative, and I went to school as an artist, thinking I would be a painter, and never imagined that I would be investing in real estate. Before I came on the show I was thinking about the fact that I think so much identity is wrapped up in our homes and the homes that we buy, and it keeps a lot of people from buying homes, and I feel like I was able to kind of like make that leap, and make it happen.
So other than Braid Creative, my branding agency, I also co-host the Being Boss podcast where I’m talking about advice for creative entrepreneurs, and there is a huge overlap between entrepreneurship and investing in real estate and how you manage it and your different approach; everyone has a different approach, right? So it’s all very personal, but it also comes down to numbers. That’s kind of where I’m at…

Joe Fairless: I’d love for you to elaborate on the first part that you mentioned where you said “So much of your identity is wrapped up in the homes, and maybe the result of that might be people don’t buy as many–” will you help me understand that a little bit more?

Kathleen Shannon: Yeah, sure. Buying your first house is a huge milestone. I think that it is wrapped up in the same vein as getting married or having a baby, and it’s not a decision that most people go into lightly; it’s incredibly personal and emotional, and whenever you’re buying your first home, you want it to be just right. If you’ve ever watched any HGTV, people just get so wrapped up in the emotions of it, and I think that you have to really take that out of the equation whenever you start investing in real estate… Because it really is a numbers game and it really is about building your wealth and building your retirement, and I just think that a lot of especially creative entrepreneurs, which is my audience – I think a lot of them don’t think of themselves as someone who could be investing in real estate. I think that a lot of them may have the impression that you have to be a millionaire to invest in properties, and that’s certainly not the case, especially if you know your area and have a unique situation, kind of like Oklahoma City has.

Joe Fairless: If I were a guest on your podcast, and we were talking about investing in real estate, knowing your audience, how would you position that conversation so that it resonates with them and they’re empowered to then go buy real estate?

Kathleen Shannon: You know, I would probably start with the first smallest step. So what is the first thing that you can do to start stepping into a future of owning real estate and investing in real estate? The first thing you would wanna do is get qualified for a loan, right? And I know it sounds really simple, but that’s the kind of thing that people — I would say lean into it by researching the market, getting a loan, figuring out what you can afford, really crunching some numbers… And I would say start with your own first home. So whenever you are buying your first home, don’t think about buying your forever home. I think that a lot of people really overextend themselves with their mortgage by buying the kind of house that they think is gonna be one and done, and that’s it.

Instead, I would buy something that is a good starter home that would make a really great investment property in a few years. So that’s what I would tell people – start with your first home, the one that you actually live in for a couple of years, because then you’re gonna get better finance rates, you’re going to get the feel for what it’s like to even manage a property… So just the little things, like all the repairs that come up; you start to understand the expenses associated with owning a home, and then from there I think that a lot of people think about renting out their home to someone who wants to destroy it.

I feel like the biggest fear whenever it comes to residential property is, “Well, what if someone just trashes my home?” And that is a relevant fear and it does happen, but just like entrepreneurship, you have to trust that you can handle things that are thrown your way. You can get a clean-up crew and for $500 your house is looking good again. Or someone skipping out on rent, or not paying rent and having to evict someone… I think that people go to all these worst-case scenarios, and it overwhelms them and they don’t wanna do it, when in reality, yes, you’re going to have hiccups, but it’s just one at a time, and trusting that you’re going to be able to handle it along the way goes a really long way.

Joe Fairless: Is that how you got started with your investing, that thought process?

Kathleen Shannon: Definitely. I got started with investing though actually by living in a house that my parents owned. Whenever I was going to college, they had bought me and my siblings a place to live in, and whenever I moved out of that place, I managed the property for them. I figured out how to get people in the place, which is just asking your friends, “Hey, do you want a cool place to live in?” Or your friend’s saying, “Hey, I like your place. If you’re ever renting it out, let me know.” So it really is this organic and easy.

So just like creative entrepreneurship, it’s about getting that first client.  Whenever it comes to investing in real estate, it’s about getting that first house, and it’s about getting that first tenant. If you can get a really good one, it will get you started on a really good foot.

So that’s how I started – I was just managing my own friends who were living in my parents’ property, and from there seeing “Okay, there isn’t some nebulous, faceless enemy wanting to destroy the place…”, and from there, I’m trying to remember… Because I married my husband and he was impressed that I was able to manage my parents’ property, and he owned a house, so whenever we moved in together, we were like “Well, hey, how about — let’s just rent out your house.” So that’s the way that we started there together with investing in real estate.

Joe Fairless: Okay, you rented out his house that he owned.

Kathleen Shannon: Correct.

Joe Fairless: Were you also managing your parents’ property?

Kathleen Shannon: By that point I was no longer managing my parents’ property. I think that they were managing that themselves.

Joe Fairless: They wanted to get in on the fun.

Kathleen Shannon: Right… [laughter]

Joe Fairless: Okay, so you have turned over the reins to your first management job — and by the way, this isn’t your full-time job, it’s something you’re just doing on the side… And now you and your husband have decided to rent out the house that he had… And then what?

Kathleen Shannon: Then that was a crash course in having that disaster tenant. So we had a couple of tenants, and I swear I think the house was cursed. I actually recently sold it. I don’t usually sell properties; I’m like a long game kind of person whenever it comes to my properties, because my own goals for having investment properties is for retirement. Being a creative entrepreneur, I don’t have a fat pension or a 401k — I do have a 401k, but I think that investment properties is a really great way to have a long-term retirement vision… So I recently sold the place because every single tenant was just a little bit of a nightmare as far as kind of trashing the place, or not paying rent and having to evict someone, and learning how to do that for the first time, learning how to garnish a checking account, which is never fun… There’s nothing about that that I like doing.

So I managed that property, and then I bought my second property. This was a super cute house — this is also my policy, I always buy houses that I would be willing to live in myself. I’m not willing to slumlord it… And obviously, as I get older, my taste is a little bit more elevated… I probably wouldn’t live in the places that I have now; I would, it just wouldn’t be my first choice I guess is what I’m trying to say.

But I bought a really cute house, and was super stoked to do that, and managed that property. So now with two properties, with one of them kind of attracting bad eggs, I decided to hand over the management. I think it was after that first eviction I was like “This is just too hard to do on top of having my own business that I’m trying to grow.” So my husband’s mother ended up retiring and it was a really great job for her to do part-time, so now she’s managing the properties.

Joe Fairless: Okay. The numbers on the second house – do you remember what you bought it for and what it rents for?

Kathleen Shannon: Let’s see… I bought it for 65k, and I’m always putting down 20% on all of my places, and I think now I have enough that I have to put down 25%, which is also great for — you don’t wanna pay PMI on an investment property… And I think legally we have to have 20% down on an investment.

Anyway, so that house I bought for — I have the numbers right here… I bought that one for $63,800, and the mortgage is $432, and my rent is $830. So typically I like to make about $400 profit; that’s not pure profit, because there’s some expenses involved, of course…

Joe Fairless: Paying mom-in-law, things like that.

Kathleen Shannon: Exactly. So I like to make about $400 on the property to cover expenses, and that’s actually worked out pretty well. We haven’t ever been at a loss, we’ve always been able to really fill all the properties. We’ve had just enough money in the bank account to mess with my taxes at the end of the year…

Joe Fairless: Yeah, that’s good, and that means you’re lowering your taxable income because of depreciation, is that right?

Kathleen Shannon: That no, but I’m being taxed — I have enough income on the property… Yeah, there’s enough profit that I’m paying taxes.

Joe Fairless: Oh, the opposite.

Kathleen Shannon: Yeah, opposite.

Joe Fairless: Oh, okay. Got it.

Kathleen Shannon: Yeah, and I feel like — this is a whole other ball of wax, but I feel like it comes out of my paycheck, because my income is the most variable, being an entrepreneur…

Joe Fairless: Yeah. All this hard work…

Kathleen Shannon: I know, I promised myself I would never complain about taxes again, at the beginning of 2017. I was like, “You know what, I’m fine.”

Joe Fairless: Okay, so 65k… Did you have to put any money into it in order to get it move-in ready?

Kathleen Shannon: I didn’t. So most of the properties that I get are practically move-in ready. Sometimes I’ll throw up a coat of paint on it, or… You know, just even in the inspection process if there’s a few things that need to be repaired, but maybe a couple thousand dollars at most to get them ready.

Joe Fairless: Okay… And you bought the second house — is that in the same area as the first one, or a similar area?

Kathleen Shannon: No… You know what’s funny – that first one was in Norman, Oklahoma, which is where the University of Oklahoma is, and that was a 3-bedroom place, the one that was never doing well for us… So my strategy with all my other properties moving forward is that they’re in Oklahoma City, they’re on the edges of historical neighborhoods, so they’re not actually in the historical neighborhood, but right next door… And they’re usually somewhat near either a highway or a university, so like good locations.

Joe Fairless: Okay. How many homes do you have.

Kathleen Shannon: I have six rentals, after selling that seventh, that was the bad karma house…

Joe Fairless: Yeah, after selling the ugly, [unintelligible [00:14:36].00] bad karma…

Kathleen Shannon: Yeah. [laughs] So I have six rentals and one primary.

Joe Fairless: Six rentals, one primary. For each of the rentals, did you put down 20% and used the same type of loan program, or did you change it up?

Kathleen Shannon: Yes, I think. My husband and I also have a strategy where we each buy the houses in our own names, so we kind of alternate every other one so that up until five each, we only have to put down 20%. Then after five, we have to start putting down 25%, and the loan structure was the same on all of them.

Joe Fairless: Okay, 20% down, 30 years…

Kathleen Shannon: Yes, 30 years, fixed rate, and I have actually refinanced a couple of them whenever the rates have gone down low enough to make it worth it.

Joe Fairless: Okay. And are you using a local lender, or someone national?

Kathleen Shannon: I’m using a national bank, but I’ve got a local guy.

Joe Fairless: Got it, cool. Alright, which of your homes is the least profitable and which one is your most profitable, not including the bad karma house?

Kathleen Shannon: Right… The most profitable house is the house that I lived in. So I bought a house in Oklahoma City and I blogged about it. It’s a house that I was married in, that was featured on Glamour Magazine’s blog, and it’s the house that my son was born in… So this house is kind of internet-famous, and that’s the one that makes the most profit. That one makes around $550 in profit.

Joe Fairless: And that is before expenses and paying mom-in-law?

Kathleen Shannon: Yes, correct.

Joe Fairless: Okay, that’s basically — income minus mortgage is that $500.

Kathleen Shannon: Exactly.

Joe Fairless: Okay. And then what about the least?

Kathleen Shannon: The least profitable house — I make about $375.

Joe Fairless: Any lesson for us as listeners that we can take away from the most profitable versus the least profitable that you’ve identified?

Kathleen Shannon: Hm, interesting… I would say even my least profitable house feels profitable enough. I like the amount of profit that I’m making on it and I don’t think that it’s because of the house necessarily. The house that’s internet-famous – yeah, if you went to build up a blog around your house and live life into it… I think that breathing life into your homes – and that’s why I like to buy homes that I would personally live in –  I think that that’s really helpful. So having a personal brand is also really helpful for filling your homes with good people that you like. But other than that, I really don’t see a huge difference between then other than my house that’s the most profitable – it is a 3-bedroom, even though my strategy for the rest of my homes, which all of them make between $350 and $450 a month in profit before all the expenses of property management and repairs… So I think that all of those homes – the strategy that I’ve taken is that these are long-term investments; I wanna hang on to them for as long as possible, especially while Oklahoma City has seen so much growth, and really just maintaining them, keeping them nice. So I don’t know that there is any lessons between the two.

Joe Fairless: You mentioned having a personal brand that’s helpful for filling your houses, and that’s just right up your alley – you’ve got a branding agency… How does that help you fill up your homes?

Kathleen Shannon: I don’t really know how to say it other than if  you have 10,000 Instagram followers and a lot of them live in the city that you live in, and then you have a house available for rent, you can throw the house up on Instagram and say “Hey, I’ve got a space.” And then people start knowing you for having these really cute, cool houses.

I have people year-round asking me “Hey, do you have anything available?”, and usually not; usually my places are filled, but then whenever I do, I just throw it up on Instagram, like in an Instagram story (I’m not even posting it) and people are really excited, and usually I get a good lead that way.

Joe Fairless: Wow. So you have a social media following and you post about it, and then people who live in that city are interested and then they end up renting from you.

Kathleen Shannon: Correct.

Joe Fairless: Wow, cool.

Kathleen Shannon: I see people do this with Airbnb’s in kind of more destination places, and this isn’t something I would do if it were my full-time job. If it were my full-time job to manage properties, and even now as I’m looking for a place to rent in Detroit, I’m seeing how far really good photos and just a little bit of aesthetic — like, don’t go for the five-gallon bucket of the cheapest Band-Aid color paint that you can find… Whitewash your house; make it beautiful and clean and airy and bright, take your photos during the day, hire a photographer… It is worth thinking of your house as a brand, and treating it as such in order to get good tenants, and maybe a couple hundred extra bucks a month in rent.

Joe Fairless: Oh, yeah, that’s great advice, and I sincerely appreciate you giving that. We’re gonna dig even more into this, because I’ve got the question that I ask all my guests, and that is “What is your best real estate investing advice ever?”

Kathleen Shannon: I would say buy properties that you’d be willing to live in. I think that there’s so much integrity in that, especially for my audience. I know a bunch of real estate dudes that are making good money on these huge properties that are kind of gross, and I don’t know… To me – no offense if this is you or any of your listeners, but I started to think “Okay, maybe I need to do what the millionaires are doing”, right? But to me it just doesn’t feel quite aligned, at least right now, with my goals and really what I’m wanting out of this. So for me, whenever it comes to the brand that I have and the brand I’m trying to carry out through everything I do is just a reputation of a cool place to live in, or a cool branding agency to work with, and that’s really what I’m trying to carry through.

So be willing to live in the place that you would purchase, and manage it with integrity. If the A/C breaks, fix it the next day… Which is also why I like to manage my own properties, or have my mother-in-law do it, because I like to treat my people good. So that would be my biggest piece of advice, truly – be a good person, buy good properties.

Joe Fairless: I don’t think anyone would argue with that or want to publicly argue with being a good person is not the right approach, so I wholeheartedly embrace that. Are you ready for the Best Ever Lightning Round?

Kathleen Shannon: Yes, let’s do it.

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

Break: [00:21:26].10] to [00:22:18].05]

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

Kathleen Shannon: Daring Greatly, by Brené Brown.

Joe Fairless: Oh yeah, she’s got a good TED talk. She’s got a couple TED talks, doesn’t she?

Kathleen Shannon: Yeah, one of the most watched.

Joe Fairless: Yeah, I think she’s a professor somewhere in Houston; I think she’s Houston-based.

Kathleen Shannon: Yeah, she’s an author and researcher in Houston, and funny enough, I blogged about that book and she ended up hiring me to do her personal branding before she went on Oprah.

Joe Fairless: Holy cow! That’s pretty cool.

Kathleen Shannon: Yeah, yeah. But it is an incredible book just as far as showing up and being seen… It’s a must-read for everybody.

Joe Fairless: Best ever deal you’ve done that you and I have not talked about yet.

Kathleen Shannon: Like business deal?

Joe Fairless: Anything. It could be one of your homes, or it could be a business deal, however you wanna interpret that.

Kathleen Shannon: Well, I just wrote a book, and it is being traditionally published, and going through that deal feels huge. That was such an honor, to be able to write a book and to be picked up by Running Press.

Joe Fairless: Wow.

Kathleen Shannon: That’s a pretty cool deal.

Joe Fairless: Outstanding. Congrats on that. What are some takeaways, or what would be the reason why we read it?

Kathleen Shannon: A lot of people ask me “How do you get it all done? How are you doing it all?”, like running Being Boss, which has become a chart-topping podcast, how am I running a branding agency, I have a toddler, I have investment properties… So I get asked all the time, “How do you do it all?”, and all of my tips and tricks and mindsets and habits and routines are all in that book.

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

Kathleen Shannon: Renting to people whenever my gut said no. I don’t even know if that’s legal to say.

Joe Fairless: No, there’s always legal ways you can turn people down if —

Kathleen Shannon: I had a gut-check — I think I was so desperate to fill my first space that I rented to the first person who came along, and now I know better. And there were some red flags that I can mention, like essentially saying “Can you not call my current landlord?” and “Here’s the deal, I need to give you $40 today, and then I can give you the other $80 on Friday.” Just stuff like that.

Now I know better, so trust those red flags and trust that you’re gonna find someone else to rent your place.

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

Kathleen Shannon: I love generously sharing my gifts of knowledge on things like this podcast and my own podcast. I love mentoring college students who are freaked out about being artists for a living… So I love giving back in that way, but of course, picking some of my favorite charities and organizations that I believe in, and giving my time and money to those places as well.

Joe Fairless: How can the Best Ever listeners purchase your book and listen to your podcast, or just connect with you?

Kathleen Shannon: Oh yeah, so the podcast is called Being Boss. You can listen to that wherever you listen to podcasts, and you can learn more about the book at beingboss.club/book. You can also buy it wherever books are sold.

Joe Fairless: Kathleen, thank you for being on the show and talking to us about how you have built your real estate investing business, and also from a creative entrepreneurial standpoint, for any or all Best Ever listeners who are creative entrepreneurs, because we are all entrepreneurs… As real estate investors we’re entrepreneurs, but from a creative entrepreneur standpoint – not all of us will identify with that, but some will, and for those of you who do identify with being a creative entrepreneur, sometimes perhaps the worst-case scenarios come to mind for what could happen, and as you mentioned, know there are solutions to the worst-case scenarios and they might not even come up, even if they do.

Kathleen Shannon: Totally, and even more than that, just trust that you’ll be able to deal with it. That usually even the worst-case scenario isn’t that bad.

Joe Fairless: And then the first step is — just focus on the smallest first step, as you said, and that’s just get qualified for the loan, and then continue to go from there… As you just said, trust in yourself and in the process. Other people have done it before you, you’ll be able to do it too, with the right mentality and tactics.

And then also, as you mentioned, having a personal brand is incredibly helpful for your bottom line from a real estate standpoint – filling the vacancies at your properties, as well as your overall approach of, well, being a good person (first and foremost), and then from a more tactical standpoint, having beautiful, clean, airy, bright homes (to use your words) so that you’re proud of the product that you have and you’re able to be consistent throughout all your businesses that you’re involved in with your overall approach.

I’m really grateful… Congrats on the book; we’ll have a link to your website in the show notes page where everyone can get the book. I hope you have a best ever day, and we’ll talk to you soon.

Kathleen Shannon: Thanks so much.

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JF574: LIVE-IN FLIP and His Plan to Contract the Work!

Today’s guest is about to jump into his first fix and flip while he invests on the side. He won’t actually live in it during the flip (he will have his contractor rehab the home while he is absent), but it will be an owner occupied home. He is slowly but surely buying rentals and building his wealth!

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Tyler Flagg real estate background:

  • Owns three properties in Oklahoma City, Oklahoma
  • In process of closing on a HUD foreclosure for his primary residence then will flip it for practice
  • Been a pilot in the United States Air Force since 2011
  • His Best Ever book: Four Hour Work Week by Tim Ferriss

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