JF2408: Real Estate Networking in Single-Family and Multifamily Value-Adds with Savannah Arroyo

JF2408: Real Estate Networking in Single-Family and Multi-Family Value-Adds with Savannah Arroyo

Savannah started investing in real estate while she was on maternity leave with her second daughter. She and her husband were looking for different ways they could start investing their money, growing their wealth, working towards financial freedom, and they stumbled upon real estate. They started investing in single-family homes and then switched into multifamily. Right now they’re doing value-add multifamily syndication deals. Within 1 year, they acquired 15 units. Today, Savannah will be explaining which details helped her team reach their goals.

Savannah Arroyo Real Estate Background

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Best Ever Tweet:

“The more you share, the more you network, the more you help other people grow, it has the potential of coming back to you.” — Savannah Arroyo


Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here with today’s guest, Savannah Arroyo. Savannah is joining us from Sacramento, California. She’s a full-time registered nurse and has a portfolio of 15 units. Savannah, welcome.

Savannah Arroyo: Hi, thank you. I’m super stoked to be here.

Ash Patel: Alright. So tell us what you’re working on now. A little bit more about your background.

Savannah Arroyo: Yes. I’m a registered nurse. I grew up in Sacramento, California. I went to Sacramento State University, got my nursing degree, worked in a couple of different hospitals and a couple of different specialties up there, and then went back to school and got my master’s degree in nursing leadership and administration. I since have moved down to Los Angeles, California. So I live down here, I oversee multiple departments in a hospital here in LA. I got started investing in real estate last year while I was on maternity leave with my second daughter. My husband and I were just looking for different ways that we could start investing our money, growing our wealth, working towards financial freedom. We stumbled upon real estate, we got started investing in single-family homes, and then shortly after we switched into multifamily. Right now we’re doing value-add multifamily syndication deals.

Ash Patel: Alright. One year, 15 units.

Savannah Arroyo: Yes.

Ash Patel: How did that happen?

Savannah Arroyo: We’re very motivated. When we first decided we were going to get into real estate, we got very specific with our goals and what we wanted to achieve in the next five years specifically, and we’ve worked backward from there. We just wrote down where we wanted to be in five years, physically wrote it down together, and then backtracked what we needed to be doing at three years, one year, on a monthly basis to make that happen. We had originally done the two single-family deals we did them across the country in Georgia, just because of the lower price point to entry than LA. After that, we just scaled faster and then switched into multifamily. We did our first 12-unit syndication last year.

Ash Patel: Okay. So a lot of questions there. Can you share some of your five-year goals?

Savannah Arroyo: Yes. One of our five-year goals is just for my husband to be working on real estate full-time. That’s a huge change in our lives, just because we both work full-time careers. I’m in the healthcare industry, he does some benefits consulting, so we are very busy with that. One of our biggest motivations behind starting investing in real estate was we realized if we started investing now, doing it full-force, that we could be in a place five years from now where my husband can really run the asset management side of our business and have a lot more flexibility with being home with our daughters. So we plan to do two to three syndications every year over the next five years to put ourselves in that position.

Ash Patel: Very cool. So husband and wife team that currently both work full-time jobs. Do you have separate defined roles?

Savannah Arroyo: Yes, we do. That was something we learned after we did our first syndication deal. That first syndication deal, we did everything together, side by side. We were looking at the underwriting together, we were on the phone with the broker together, we were on the phone with the lawyers together, with the investors, doing all the paperwork side by side, and that was really so we could get a better idea of how a syndication works from start to finish. We were both through every step of the process. It was really eye-opening to us, and then it allowed us to pick and choose what sides of the business we naturally liked or gravitated towards more.

Me in my role at work, I oversee operations, so I was naturally drawn to the operational side of things. I love connecting with people, so I took over marketing and investor relations. And then my husband, he’s an Excel wizard, so he does our underwriting and asset management.

Ash Patel: Savannah, from day one, was your goal to get into syndication?

Savannah Arroyo: No, it was not. I had never even heard of the term syndication; like most people, I guess, when you get into real estate, I had never heard of the concept.

Ash Patel: Alright, let’s talk about your first deal. So you’ve done some homework, you’ve done a lot of research, and now it’s time to find your first deal. What was that process like?

Savannah Arroyo: The first thing we did when we switched over from single-family homes to multifamily was…

Ash Patel: Let’s start with the single families, let’s rewind. Your very first deal.

Savannah Arroyo: Very first, okay. For that first one, we were actually looking at the BRRRR strategy, because we had a fixed amount of capital and we wanted to make it grow. So with a BRRRR strategy, you’re buying a property usually below market value, it needs a full rehab pretty much, renovating it, putting a renter in it, refinancing it with a goal of pulling out all that initial capital, and then repeating the process over and over. So that was our plan; we were gung ho on that.

When it came down to looking at properties across the country in Georgia, and knowing we were going to put all our capital into this, we just really didn’t feel comfortable overseeing a complete renovation across the country. That was where we stopped with that approach. It was just a little bit out of our comfort zone. I’m not saying that people aren’t making it work. I know firsthand there are tons of people that are making that strategy work. But for us, working full-time jobs with our kids, we didn’t want it to be a very stressful journey. So we ended up buying new build townhomes over there, build to rent projects.

Ash Patel: In Georgia?

Savannah Arroyo: Yes.

Ash Patel: Okay. What was your next deal?

Savannah Arroyo: The next deal was the 12 unit multifamily syndication, which we’ve converted into 13 units. So that’s where I’m at, 15.

Ash Patel: Okay, so you went from a single-family right to syndication?

Savannah Arroyo: Yes.

Ash Patel: What were the numbers on the single-family? What’d you buy it for? The townhouse.

Savannah Arroyo: Yeah. $127,000 for a four-bedroom with a two and a half bath, so bigger than a house here in LA. And we bought two of them. But just the price point entry over there is a lot cheaper.

Ash Patel: What does it rent for?

Savannah Arroyo: Those rent for $1,545. So it’s cash flowing from day one. The property management team is the team in place who helps build it, it’s the same company. So they have an interest in building it correctly, because they’re going to be the ones managing it. Even some of the maintenance issues that we’ve had come up, which has been minimal because they’re new builds, they’ve taken very well care of the issues that arose. And then they work with financial companies and lenders that were able to get us in at 15% down. So we were really able to stretch our capital and get into two of those.

Ash Patel: Was this project purpose-built for landlords and renters?

Savannah Arroyo: Yes.

Ash Patel: Interesting. What is that project called?

Savannah Arroyo: Build-to-rent projects. Specifically for investors. They come in and buy multiple homes or a whole block of homes. A lot of people investing out of the country or out of state that is coming in, they’re wanting a cash-flowing turnkey property that’s very low maintenance.

Ash Patel: What is the project called in Savannah? This specific development.

Savannah Arroyo: It’s called Union City townhomes at Suncoast Management.

Ash Patel: Okay. And how’s the cash flow?

Savannah Arroyo: Good. They’re cash flowing a couple hundred a month. We took a hit on that, because we got in at 15% down, so we do have mortgage insurance… But for us, that’s something we’re going to be able to get rid of in a year or two. It’s in a very well-developed neighborhood in Georgia, and there’s just great appreciation over there in that little city.

Break: [00:08:08][00:09:14]

Ash Patel: The next one turns into a syndication. Did you set out to syndicate it, or did you go out just to take the multifamily down?

Savannah Arroyo: We did set out to syndicate it, and that was specifically because after doing those first two deals and telling people we were investing in real estate, we got a lot of interest from friends and family who were interested in getting involved in real estate. And when we stumbled upon multifamily specifically and what syndication allows people to do, which – it basically allows investors to pool together their capital to take down these bigger deals. And usually, in these projects there’s an operator of the deal who oversees the project and how the business plan is carrying out… And then a lot of people just jump on as passive investors, so they’re investing passively in these deals, getting a lot of the returns of real estate that even the operator is getting. And it allows people who don’t want to put in a lot of work into real estate to still get involved passively. That was an opportunity we were able to provide our friends and family, and it’s  something that now I’m working to provide medical professionals. So it’s become a team sport, and we love it.

Ash Patel: Good. What are the numbers on that deal?

Savannah Arroyo: It was a 12-unit that we’ve converted into a13-unit. So it’s a very strong value-add. It is a million dollars, it is in a coastal town in Oregon, 25% below market rents, so we’re increasing that over three years, and then we’ve converted that storage unit into a studio, so it really just skyrockets that NOI. We plan to exit after three years.

Ash Patel: How many investors did you take on for this?

Savannah Arroyo: We have four investors and [unintelligible [10:45] members.

Ash Patel: How much of your own cash did you have to put into this deal?

Savannah Arroyo: We put a little bit above $100,000, just because it had really good returns and we wanted a piece of that for ourselves, and we had the capital available to put in it. We always put up our capital in all our deals, so that’s something that we just put in.

Ash Patel: How did you find this 25% below market?

Savannah Arroyo: Well, I don’t hear about a lot of investors investing over there, and that was something that we originally just started looking into because I have family over there, and we were really just curious more than anything, we were just running numbers when we first got into it, just practicing running numbers and looking at deals, just comparing different markets, and we found this really good deal and just started kind of talking to brokers… There are a lot of strong value-add opportunities and very strong rental markets where the majority of the people in the towns do rent. This building has had zero delinquencies since the beginning of COVID, which is pretty crazy. But it just goes to show that it’s a very good market.

Ash Patel: So you guys took a real systematic approach to this, and it seems like that’s how you do everything. So that being said, your three and five-year plans, now that you’ve discovered syndication, how have those changed?

Savannah Arroyo: Well, we definitely think that we’ll be able to achieve our five-year goals faster now, especially after the traction that we’ve gotten after doing that first deal. Networking has been huge for us. Just networking within real estate and especially the multifamily network, there’s a lot of people that have strategic partnerships and developing different relationships with people to kind of fast-track your growth within real estate… So that’s provided a lot of opportunity. We still have the same goals, so we’re very focused on them, but we are aware that we’ll probably achieve them a little bit faster.

Ash Patel: Great. So I agree with the networking. Great advice. What are some of your tips for our Best Ever listeners on how to increase their networking?

Savannah Arroyo: Join masterminds and meetups, they are all over. I started investing during COVID, so I actually just attended my first live meetup in Texas a couple of weekends ago, and it was so awesome for me to be face to face with other investors. It was the first time I’ve had that in a year and a half since I’ve started investing… But since then, once I got into it, there’s all these virtual meetups. Zoom has been so amazing. I’ve gotten to connect with people all over the country who are investing in real estate and who have similar goals. They’re everywhere.

So if you hop on Facebook, different networking groups, Clubhouse is big right now… I’m not on it yet, but I hear that there are some good networking events in there. Just connecting with people, even in social media. Usually, people that are doing these events are putting it out there on social media and you can see that people are doing it. They’re usually always free. You can join and connect with other people. They’re amazing resources.

Ash Patel: That’s great advice, and I agree with you, the real estate community is just incredible. They’re always helpful and sharing advice. I have to ask you this question… I’ve spoken with a number of investors from California, and after talking to them, they asked me why am I giving away all my secrets. And my mentality is, the more you share, the more you network, the more you help other people grow, maybe it has the potential of coming back to you. How have you found other real estate investors? Are they more cooperative or more competitive?

Savannah Arroyo: I totally relate to that statement. For me, personally, I don’t operate from a scarcity mindset. I think people who are more reserved with sharing their secrets and kind of what they’re working on might be operating from a scarcity mindset, where they don’t think that there’s enough out there to share with everyone. The people that I am naturally drawn to, and the people I think that are drawn to me, operate more from a giving mindset.

I have personally seen it not just in real estate but in all areas of my life, people that constantly give always get back more. I love sharing what I’m learning with other people, and I’m about leveling up people… Especially in the medical industry where I’m at, where people don’t even know about real estate. I love connecting with other women, or just people wanting to get into it. I think I just attract those people because I’m like that, I guess.

Ash Patel: That’s an incredible mindset. Speaking of secrets, what’s your best secret?

Savannah Arroyo: I would say networking and not being afraid to ask people for advice. My husband and I were coming into the real estate game just thinking that we would just do it ourselves, which is fine – we did that first deal ourselves – but once we started networking with people and creating those connections and relationships, the amount of resources that people have shared with us has been so amazing.

I have now, after I’ve been doing podcasts, people reaching out to me and I love connecting with people. But you get on these calls with people, and as you said, they’ll share their secrets or kind of what they’re working on and it just provides so much more opportunity when you start doing that.

Ash Patel: I agree 100%. So you’ve done one syndication Savannah. What were your lessons learned on that one that you’ll apply to the next one?

Savannah Arroyo: I would say definitely building a platform was our biggest learning curve on that one. So for that one, I hadn’t launched The Networth Nurse yet. We were sharing these investment strategies with our friends and family and we didn’t have a platform with resources that we could provide them. So we were constantly directing our investors towards other resources… Which is still great. People should always be getting resources from multiple sources. All your resources and education should not come from one source. But after we did that first deal, I launched The Networth Nurse, I’ve created blogs, YouTube videos, and doodle videos explaining exactly how our syndication works… And that way I can direct investors to my website, where it gives them all the information about me, about what we’re doing, what kind of deals we’re looking at.

So then by the time that I do get them on a call for a potential deal that we have in the works, the process is a lot smoother. Before, we would spend a lot of hours on the phone with our investors, which was fun and it was a big learning experience, but now we’ve kind of streamlined that process.

Ash Patel: Still in line with that theme of networking.

Savannah Arroyo: Yes.

Ash Patel: That’s great. Savannah, on your next deal, what are you looking for specifically?

Savannah Arroyo: Strong value-add opportunities. They are all over. We’re still looking at Atlanta, Georgia; it is pretty competitive over there. We’re looking in Reno… We just have different strategies in each market we’re looking at, depending on how they work. In Reno they have a very low inventory, so we’re looking at more new construction opportunities over there. We’re still looking for value-add opportunities in Oregon (a strong rental market), we have a great relationship with a broker out there. And then we started looking at New Mexico, too. So strong value-add and 50 to 100 units will be our next deal.

Ash Patel: Are you looking just through brokers?

Savannah Arroyo: Mainly through brokers, yeah. My husband has created great relationships with the brokers. We give them very quick and thorough feedback when they send us deals. We’re very specific on what we’re looking for, so in each market we have very strict parameters, you would say, for what deals we’re expecting. So it helps give the brokers more direction when they send us deals. My husband always gives them a 48-hour turnaround time of what he liked or didn’t like about the deal, and whether he wants to see more. So we’ve created great relationships with brokers and that’s where we’re getting all our deals right now.

Ash Patel: What are some of the ways you can add value in terms of the deals that you’re looking at? What kind of specific value-add elements are you looking for?

Savannah Arroyo: So pretty much below-market rents and out-of-control expenses. A deal we’re looking at right now, the expenses are up to 75%, which if you’re investing in multifamily, they’re usually around 50%. The water sewage charges for that building are crazy high. When we went to look at the property, there are faucets leaking and showerheads dripping throughout the whole building, so we’re working with a water conservation teams to implement water conservation fixtures throughout the whole building, which will drastically drop the water charges. So that’s a huge value-add. [00:18:40].28] below-market rents. So they’re really just properties that are owned by local mom and pop who aren’t necessarily taking care of it.

For our first deal, he owns multiple properties and was wanting to get out of multifamily altogether, and was 1031-ing it to land, so he was motivated to sell. For this last one that we’re looking at, the 24-unit, it’s one of his smallest deals. The seller has a lot more bigger deals, so he’s let this one kind of go on the backburner and wanting to get rid of it. So there’s a lot of value-add potential in those types of deals that were just not really properly managed.

Ash Patel: That’s a great strategy. What are your targeted returns for your investors?

Savannah Arroyo: We’re looking for two times equity return around five years; three to seven years, and five is kind of the middle point on that. We’re looking at 15% to 17% AAR, around 14% to 16% IRR, and 6% to 10% cash flow.

Ash Patel: Got it.

Savannah Arroyo: [unintelligible [19:42]

Ash Patel: What were the returns on your original syndication thus far?

Savannah Arroyo: Thus far – that’s the thing about strong value-add deals, they’ll have a lower cash flow, because the rents on that one were so below and we’re adding a lot of value to that unit. So we’re still about six months into it and it’s very minimal cash-flowing. We haven’t disbursed that check to our investors yet, but that was something they knew getting into it. It’s a shorter hold on that deal, it’s three years, and a really good equity return. So they’re understanding of the fact that it’s not heavy cash flow, but we’re really working to increase those rents, and our underwriting is going on track so far.

Ash Patel: Awesome. Savannah, the investors that you’re interacting with – are they in it for the long game, or do they want the monthly or quarterly checks?

Savannah Arroyo: I would say both. Definitely both. I’m talking to investors who want both types of returns. I would say more the cash flow. I think a lot of the people that we are talking to for investing, they’re trying to create that passive income to potentially replace their earned income down the road… So most people are looking for that cash flow. But if they have the ability to invest in multiple deals and we have multiple projects going on, we can show them some of our other deals that don’t necessarily have high cash flow, but have really great equity return in a short amount of time.

Ash Patel: Great strategy. Savannah, what’s your Best Ever real estate investing advice?

Savannah Arroyo: I would say network. Get out there and network. If there’s someone out there doing what you want to be doing or going where you want to go, reach out to them, ask them how they did it. Whether it’s platform building, getting down a niche, taking down a deal, doing anything that they’re doing in their business; if it appeals to you and you want to be there, reach out to them. I’m sure that they would be very cooperative and provide some feedback.

Ash Patel: Great advice. Savannah, are you ready for the lightning round?

Savannah Arroyo: Yes.

Ash Patel: Good. First, a quick word from our partners.

Break: [00:21:36][00:22:11]

Ash Patel: Savannah, what’s the Best Ever book you recently read?

Savannah Arroyo: I would say Crushing It by Gary Vaynerchuk. I think I’m new to the game. No one’s really recommended this book to me, but especially as I’m building a brand and marketing, I’ve listened to it on an audiobook for the last two weekends and I’m ready to listen to it again. I love it.

Ash Patel: That is a great book. What’s your biggest takeaway? I think you’ve already implemented it. Is it networking?

Savannah Arroyo: Networking and content creation. People want to trust you and know that you’re putting out good content. I don’t think I undervalued how important content creation is, but I’ve now started building it up and ramping up my game.

Ash Patel: It’s like a snowball. Once you start creating it, you get hooked. Savannah, what’s the Best Ever way you like to give back?

Savannah Arroyo: Connecting with other investors. Honestly, people who are looking to get started, or build a brand, or even especially with medical professionals who haven’t heard about real estate investing and I’m able to provide them the opportunity to invest in some of our deals – I love that. When they get their first check in the mail and start getting some of that cash flow, it’s just such a great feeling.

Ash Patel: That is great. Savannah, how can the Best Ever listeners reach out to you?

Savannah Arroyo: The Networth Nurse. You can find me under @TheNetworthNurse on all social media handles. That’s Facebook, LinkedIn, YouTube, and Instagram. That’s also my website. I love connecting with people. If you’re even remotely interested in anything I’ve been saying, please reach out to me. I’d love to connect.

Ash Patel: That’s great. Savannah, thank you so much for sharing your advice and being on this show. In just one year, you and your husband have been able to create something incredible. On your way to your second syndication and you didn’t even plan on going down this route… So great advice for everybody with the networking, and you used your profession and your medical context to your advantage… Great story. Thank you again for being on the show.

Savannah Arroyo: Thank you. My pleasure.

Ash Patel: Have a Best Ever day, Savannah.

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JF2003: The Power of Virtual Help With Daniel Ramsey

Daniel Ramsey bought his first house at 24 and it was an investment property for him. Daniel’s journey as an entrepreneur took him on a path to hire his own Virtual Assistants to help him in his business and later discovering a need in the marketplace and decided to start MyOutDesk. He shares how valuable VA’s can be for your business and how it can double your business rather than just replacing a task. You will learn some valuable unique questions he asks every entrepreneur before they hire his company to make sure they can grow their business. These questions can help you even if you do not hire a VA.

Daniel Ramsey Real Estate Background:

  • Founder & CEO of MyOutDesk, a virtual assistant company
  • Licensed real estate broker, mortgage broker, and general contractor has sold hundreds of homes and made millions in commissions
  • Based in Sacramento, CA
  • Say hi to him at https://www.myoutdesk.com/ 
  • Best Ever Book: The Richest Man in Babylon

Best Ever Tweet:

“You’ve cut $100,000 dollars of my payroll every 2 weeks, so by adding virtual assistants we were saving our clients money and grow revenue.” – Daniel Ramsey


Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, I’ll be hosting today’s episode, and today we’re speaking with Daniel Ramsey. Daniel, how are you doing today?

Daniel Ramsey: I’m great, Theo. Thanks for having me today.

Theo Hicks: Absolutely and thank you for joining us. I’m looking forward to a very high energy conversation. So a little bit about Daniel – he is the founder and CEO of MyOutDesk, which is a virtual assistant company; he’s also a licensed real estate broker, a mortgage broker and a general contractor who has sold hundreds of homes and made millions in commissions. Currently based in the Sacramento, and you can say hi to him at myoutdesk.com. So Daniel, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Daniel Ramsey: Yeah, absolutely. So I’m a real estate broker. I bought my first house when I was 24, and it was an investment property for me. It was a four-bedroom, cookie-cutter, 1970s-built home, and the agent on the other side actually mailed me the keys, literally. He didn’t come and drop it off, there was no high five at the closing, he didn’t show up for anything. He’s like, “Hey, what’s your home address?” and I was like, “Well, it’s this.” And he literally said, “Well, I’m gonna mail you the keys.”

So once I closed on the transaction, I looked at how much he made – 3% of a $200,000 investment, and then the lender actually made 2%. So between the two of them, they made 5%. I was thinking, “Well, I can do a better job than those guys,” and that’s how I got into real estate, just looking at the opportunities and saying, “I can do this,” and the rest is history.

Theo Hicks: So you started off as a broker and as a mortgage broker as well, sold a lot of homes. I want to focus on the MyOutDesk though, at least for the outset. So can you tell us a little bit about your virtual assistant company, how it got started, and maybe more importantly, why it got started?

Daniel Ramsey: Sure, my favorite story about that is – I’m on my honeymoon, it’s 2009, and I’m literally serving investors,  helping them buy properties and buying properties for myself, and I have this great photo of myself on the honeymoon, at 1:00 a.m. in the morning, working at the bar… And I was getting married, and I was thinking, “Man, if I want to stay married, I’ve got to get leverage. I need to get help in my business.” I was at that time like a helicopter delegator. I would delegate, but then pay attention to every single detail.

It was really at that time that we started expanding the use of virtual assistants in my own real estate game. So I was a mortgage broker, a real estate guy, a contractor; I flipped and bought properties and then we bought long term holds. Back then, the market was crazy with the Great Depression and all, or actually the Great Recession at that particular time. So like any entrepreneur, I needed help, and I needed it inexpensively. As an investor, our margins were really small and I thought, “Well, where could we find help?” At that time, there was a book called The World is Flat, and it was a great book. I picked it up and what I realized is that with the Internet and Skype and all the systems and tools out there, we could actually hire somebody really anywhere in the world, and they could do all of my paperwork, or they could do our marketing, or they could prospect for us.

So what happened is I started using virtual assistants, and a good friend of mine in San Diego, who did thousands of transactions a year, he said, “Hey, could you get me some?” So our first client literally was an investor, real estate guy in San Diego, and he said, “I need five,” and over a year period, he ended up having 17 virtual assistants running every aspect of his business. What I realized at that point– we were in a conversation, and I’m like, “Hey, so how much have we saved you?” and he’s like, “Literally, Daniel, every two weeks, you’ve cut $100,000 of my payroll, every two weeks,” because this guy had a huge operation. So by adding virtual assistants, we were basically saving our clients money and helping them grow revenue. So that’s the origin story of how MyOutDesk was born. It was just, I’m an entrepreneur and there’s a need.

Theo Hicks: How many investors are you working with now?

Daniel Ramsey: Tons. Over the last 12 years, we’ve served over 5,000 clients. Our focus, in the beginning was really the distressed market. I started outsourcing in 2007, and the exact number – I have no idea, but I know it’s in the hundreds of folks.

The big thing to think about if you’re listening right now and you’re an investor or in the real estate game, is how can you systemize or make a process out of what you’re doing every single day, and then have somebody added into that process that can help you drive revenue or save you money and/or time. That’s what we do, is we help strategically think about your business and how you’re growing, and then add talent in key areas that will really accelerate growth or save you a lot of money.

Theo Hicks: Can you walk me through the process, starting from someone who reaches out to you saying they want to use your service to they’re up and running with their VAs? What’s the process that you go through with them?

Daniel Ramsey: We have this wholesaler — he initially reached out to me back in 2011 or 2012, and I’ll just walk you through the process that we did with him. We do a consultation. So if you go to our website myoutdesk.com and you register for a consultation, what we do is we look at who’s on your team now, how are you generating revenue, and what systems and processes you have in place; and systems– I’m talking about tech platforms. I’m also talking about what third-party vendors are you using, how are you getting your managing projects, how are you selling property or buying property, how are you generating leads?

So we’ll look at how your business runs, who’s on your team, and then we strategically think “How could we double results?” That’s our one question. How can we double your business by adding virtual assistants? So what we’ve found is that when we slow entrepreneurs down, and they really start considering like, “Gosh, if my family’s life depended on it or if my life depended on it, and I had to double, let’s say, next year, what would I have to do differently? Or what would I have to create for my world to make that even a possibility?” Those are the questions that we ask when we do a consultation.

Every investor is different, every real estate person does things just a little bit different, but the tenets of generating revenue and growing a business, they’re all the same. So how you generate revenue is probably going to be very similar to how hundreds of our clients are. So we’ve gotten the depth of experience and past expertise that can really help set an investor up for success.

Theo Hicks: So I’m assuming that VAs can cover a lot of the different real estate duties. So rather than asking what they can do for you, what are some things that you’ve discovered that VAs are not a good fit for? What are some things that, I, as an investor should always do myself?

Daniel Ramsey: That’s a great question. Here’s the thing… I’m an entrepreneur, if you’re listening right now, you’re an entrepreneur – the thing that we do that’s just world-class is we can hold a lot of moving parts together, and we can be negotiating three transactions, in escrow on two others, talking to ten other investors, and then we have projects going across the city that we’re in, and we have a friend coming to town, and my daughter has soccer practice. That’s our unique skill. So you can’t outsource that. A lot of clients come to us and say, “Well, I really need help organizing my life and organizing my world and building my business,” and we aren’t in a position to give you a strategic thinker or somebody who can build your systems or help you grow your investment world.

What we can do though, and this is what we focus on, is if you’re generating leads in a process, then we can help you at 100% be a major player in that process, meaning we can prospect for you, we can help you drive leads, we can help you have more sales conversations every single day… Or we can help you market, meaning you have properties that you’re selling or properties that you’re in negotiation with – we can help you with all the marketing that is required on that. Or we can help you in the project management and/or transaction coordination piece where we’re doing the paperwork and helping you manage your projects correctly and positively. So those are the three areas that we focus on – sales, marketing and operations.

Theo Hicks: How are you finding the VAs?

Daniel Ramsey: It’s a great question. So if you’re listening right now, and if you’re considering hiring virtual assistants, what I’m going to go through is your must-have checklist. There’s a lot of virtual assistant companies out there that are just, what I would say, non-sophisticated, and that’s really scary for an investor, because your brand out in the marketplace and your word and what you’re doing in the world, it’s really important that we protect that. So number one, we’re an entity in the Philippines, which is where we operate. So we have a corporation over there and we’re a corporation here in the US. It’s really important that the country that the virtual assistants are in has legal representation, meaning we have an attorney over there, we have a CPA over there, we have a management team over there. So that’s one really important thing.

Number two, the technology is such a big deal because what we tell people is, your virtual assistant to show up to the job, they have to have a great computer, they have to have a great internet speed, and they have to have noise canceling headsets. So they show up online every day. So our virtual assistants start out with a start-of-day report and an end-of-day report.

So another thing that we do at a really high level is just make sure that we’ve got people who have all the systems that they need to be really successful for our clients, our real estate investor clients. So that’s another thing, and then the other thing is just screening them at a high level. We do an FBI grade background check way before you even interview somebody. We’re doing a physical — I mean, this is the craziness… Our people actually go to a doctor and get signed off from a doctor that they’re in healthy working conditions and they don’t have any issues or challenges. So we’re doing a ton of upfront work so that when you come to us and say, “Hey Daniel, I need help with my operations,” or “I need help in marketing,” or “Help me have more conversations and get more deals”, when you come to us, you know that the person that we are going to give you is fully vetted and going to be a rockstar to really help drive your business growth.

Theo Hicks: What’s the typical cost of getting a VA for your company?

Daniel Ramsey: For $1,747 a month, which is a great deal if you consider what’s hiring a physical employee, we’re about a third of the cost. And with that $1,747 a month – that’s $1,747 – with that cost we’re giving them health care, we’re making sure that they have vacation time, we’re managing their entire payroll for you. If you think about Upwork, that’s a competitor out there, Upwork is a dating site and MyOutDesk – we’re a real estate, virtual assistant marriage site, meaning we give people long-term opportunities with clients like your audience, because that’s what really helps businesses grow, that’s what really builds wealth in the real estate game, is systems and processes and longevity in your talent pool.

The people who are on your team, they’re with you a long time, they’re tied to the vision, and they really care about you building your wealth. And the other pieces – these folks aren’t going to get trained by you and then go off and compete against you. So they’re in the Philippines, they’re not going to come to, for instance, Sacramento and all of a sudden become an investor themselves once they learn all of your trade secrets and everything you know in the market. So those are some of the costs and  what really matters for hiring a virtual assistant.

Theo Hicks: Last question before the money question… What are some of the challenges you faced, just in general – if you have any specific examples, that’d be helpful as well – in grounding your own business?

Daniel Ramsey: You know what, I love that question, and I’ve gotten a lot of mistakes. That’s easy, Theo. First of all, I didn’t have a lot of focus, and as you can tell about your introduction of me, I was a mortgage guy, a real estate guy, a real estate investor, I had a contractor’s license, I was developing property… And now as I look back at it, it was good, because I got a really good depth of knowledge. I know the real estate game, I know what your audience is going through to find jobs, I’m friends or have been in a client relationship with some of the top investors in the country… So I’m thankful for that experience, but I think the one thing that I would have done differently if I could go back is I would have hyper-focused on my one or two businesses.

Back in 2013 I sold off my real estate brokerage and then in 2016 I sold my real estate investments. I literally exited the real estate investment world to solely focus on providing virtual assistants to help companies instantly scale when they’re growing. So I would just say the focus. As an entrepreneur, we all have ADD; I do anyways. If you’re listening and you don’t, you’re a really lucky guy. Sometimes it can feel like a superpower, because I can do a lot and I can get a lot done, but it also means that I don’t hold on to the long-term like I wish I would have… At least certainly when I first got started being an entrepreneur.

Theo Hicks: Alright, Daniel, what is your best real estate investing advice ever, that’s not what you just said?

Daniel Ramsey: Yeah, that’s a great question. My favorite thing is to classify… I got this from a guy named Andrew and he’s a good dude, and he’s been in the, I would say, risk analysis world. So my best advice is definitely get the book, The Richest Man in Babylon. That’s a brilliant book for real estate folks. It has a real estate flair to it because in real estate investing, the biggest thing is the allocation of capital. But I like to classify why I’m investing in a deal, and I’ve got an acronym and it’s DAR. So D stands for Dream. Is the person on the other side of the table from me just selling a dream or is there a real opportunity here? The other thing is Activity. So sometimes you hear people “Well, my podcast has a million downloads” and that’s good, but the business might not have revenue or the business might have some revenue, and a million sounds really great, but it’s not a clear indication that there’s a business there.

So we talked to a lot of investors and they’re like, “I’ve got 13 deals right now that I’m negotiating, and I’m working really hard to get these in contract, and then get them transferred over or wholesaled out.” So that’s activity. Some people sell an investment based on activity.

And the last is Revenue, so R. So it’s DAR – a Dream, Activity or Revenue. Just be clear when you’re investing in real estate or any investment really, why are you making this investment and what are the risks associated with that investment? Obviously, revenue is my favorite. It’s easy to quantify, it’s easy to measure… Warren Buffett’s thing is he doesn’t invest in technology because he doesn’t understand it, and right now, technology is getting tanked. It did back in 2001 and back in 2007.

So, every six or seven years, Warren Buffett seems like a rock star because he says, “I just don’t understand it so I don’t invest in it.” But that’s my favorite way to understand an investment, is that acronym – a dream, is it activity based or is it revenue based for the investment?

Theo Hicks: Alrighty. Are you ready for the Best Ever lightning round?

Daniel Ramsey: You rock and roll. Let’s do it.

Break: [00:16:24]:05] to [00:17:11]:08]

Theo Hicks: Okay. What is the best ever book you’ve recently read?

Daniel Ramsey: Oh my goodness, I’m not gonna even go best ever, I’m just gonna say – because we’re on the real estate investing podcast – I’m going to say the one that I mentioned earlier, The Richest Man in Babylon. I think that’s a brilliant book.

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

Daniel Ramsey: The same thing, meaning what’s cool about building and growing a business is there’s so much opportunity once you understand the game. So I would still be investing in real estate, I would still have a virtual assistant company, I would just do it differently. What’s cool about once you become an entrepreneur and you understand the real game that’s there, that it’s just about generating revenue and managing risk and hiring people, you no longer have that fear that you’re gonna lose everything. So I would do exactly what I’m doing right now.

Theo Hicks: What deal did you lose the most money on and how much money did you lose?

Daniel Ramsey: I love that question. I was just on a podcast the other day about that. I bought a flip in San Francisco, California, which… For those of you, that’s the Bay Area. We call it Bay Area because when you’re in California, you’re like, “I want to go to the Bay.” But it was a house on a hill, and it turned out that hill was unstable. So I had to spend crazy amount of money building a retaining wall, putting metal pipes 25 feet in the ground and having them stick up 10 feet above ground, and there was 250 linear feet of that. So on that deal, because I didn’t manage risk properly, I was in that dream state, I lost $200,000.

Theo Hicks: Then lastly, what is the best ever place to reach you?

Daniel Ramsey: Jump on our website myoutdesk.com, request a consultation. Like I said before, our only job is to help you grow and scale your business with virtual assistants. We get people who come on they’re all day long, and they get business steps that they need to implement over the next three to six months that are massively valuable. Sometimes we can work with somebody and really help them and other times we can’t. So my suggestion is, jump on our website. It’s myoutdesk.com and check it out.

And Theo, if you don’t mind, I’d be happy to give away a copy of our book. We actually have a book, it’s called Scaling Your Business With Virtual Assistants, and for your audience, I’m happy to give it away for free. All you’d have to do to get a copy is text the letters – S, as in Sam, Victor, Paul, to 31996 and you’ll get a copy of our book, absolutely free, and it’s to help people grow and scale real estate businesses with virtual assistants.

Theo Hicks: Thank you for offering that. We’ll make sure we put that in the show notes. Again, that’s text SVP to 31996.

Daniel Ramsey: That’s it.

Theo Hicks: Alright, Daniel. I thoroughly enjoyed this conversation. I learned a lot about the virtual assistant business, but also just general entrepreneurial advice. Just to quickly go over what we talked about– so MyOutDesk came out of a pain point you had, which was spending a lot of time on your business… And this specific example you gave was working at a bar at 1:00 a.m., you’re on your honeymoon, and then you went over the story of how that started, you started using VAs… A good friend of yours asking you for VAs, you hooked him up with 17, and he said he was able to save about $100,000 every two weeks, and then it’s grown from there to serving over 5,000 clients over the past 12 years.

We talked about the process that a new client goes through and how it starts with a consultation, and you want to know everything they’re doing right now, so you can strategically help them double their business within a year; that’s the key question you ask.

We talked about things that you should not hire a VA for. A VA will help you scale your business, but at the end of the day you’re responsible for scaling your business. You can’t give them a VA who’s going to be a strategic thinker, build your systems, grow your investment world… But you focus specifically on sales, marketing… And then the third one was operations, correct?

Daniel Ramsey: Yeah, those are the three places we serve. Yeah, sales, marketing and ops.

Theo Hicks: You talked about how you find your VAs and some key factors you want to have when you’re doing that. That was interesting that you put them through an FBI background check, and the physical was also pretty interesting. Haven’t heard that one before. You talked about the costs, talked about the challenges for you, for growing your business. I’m sure a lot of people can relate, which is you’re gonna have a challenge if you’re trying to do a million things at once, as opposed to focusing on one or two specific things. You mentioned how you sold all of your other businesses to focus exclusively on this VA business.

Then your best ever advice was when you’re looking at an investment, you want to know if it’s a dream investment, an activity based investment or if you’re actually making money on this thing. Then lastly, again, you offered a free copy of your book, which was, How to Scale Using Virtual Assistants. Text S as in Sam, V as in Victor, P as in Paul to 31996 to get a copy of that free book. We need to use that texting service (I like that) for our books. But again, I really appreciate it, Daniel. Best Ever listeners, thanks for listening. Have a best ever day and we will talk to you tomorrow.

Daniel Ramsey: Thanks, Theo.

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JF1909: Adding Value & Finding Solutions For Real Estate Taxes with Brett Swarts

Brett is a real estate tax expert who is coming on the show today to help us with any tax problems we may have. Joe and Brett will get into the details of real estate taxes, and we’ll hear some stories of investors saving money on taxes with Brett’s help. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Find somebody who is a specialist in that area and diversify” – Brett Swarts


Brett Swarts Real Estate Background:

  • President of Capital Gains Tax Solutions, LLC
  • Provides trustee services which helps real estate and business owners gain tax deferral, freedom, liquidity and diversification with their funds so they can create and preserve more wealth
  • Based in Sacramento, CA
  • Say hi to him at https://capitalgainstaxsolutions.com/
  • Best Ever Book: Crucial Conversations


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

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

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


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

Brett Swarts: I’m doing well, Joe. Thanks for having me on the show.

Joe Fairless: Well, my pleasure, and looking forward to our conversation. A little bit about Brett – he’s the president of Capital Gains Tax Solutions. He provides trustee services which helps real estate and business owners gain tax deferral, freedom, liquidity and diversification with their funds, so they can create and preserve more wealth. Based in Sacramento, California.

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

Brett Swarts: Yes. Thanks, Joe. I started out in real estate as a young child, with my dad, helping him build custom homes in Fremont, San Jose, Northern California area. Rentals have always been in my life. I studied business in college, went on to Marcus & Millichap as an internship, and was with them for five years as a commercial real estate broker, helping clients buy and sell apartment buildings mainly.

From there I went and kind of started my own two companies, Commercial Realty Apartment Advisors and Capital Gains Tax Solutions. That’s kind of the business background. I’m married, five kids, I played basketball in college, [unintelligible [00:02:32].03] in particular, and I love playing that as much as I can…

Joe Fairless: Marcus & Millichap real estate broker, and now you’re working with owners of properties to set up their business, so they can defer the capital gains… How did you make the conscious choice to transition?

Brett Swarts: At Marcus & Millichap at the time when I was first starting in 2006, I was still in college, but graduated in ’07, the market shifted quite a bit in ’08, and things changed… And the manager at the time in my Marcus & Millichap office in Sacramento – he brought in a gentleman to speak on the deferred sales trust as an alternative or a back-up plan for a failed 1031 exchange… And we were looking for ways to help clients solve these issues.

The biggest stat that he left with us at the time was there’s about – according to the American Bankers Association – 17 trillion dollars that will pass from one generation to the next in the next 20 years… And this is known as the baby boomers. It’s the largest wealth transfer in the history of the world, and 50% of America’s net worth is tied to high-end primary homes, commercial real estate, and also private equity or businesses.

So they’re faced with the [unintelligible [00:03:41].12] liability and looking for alternative ways to get out of real estate. So he approached us with that strategy, and I started to study it and look at it, and I obtained my series 22 and 63… But really, my approach, Joe, has always been to add value and find a solution for what my clients were looking for. And as the years passed by and the marketplace has really grown in appreciation, everything has kind of shifted from these baby boomers who don’t wanna be in debt, who are tired of the 1031 exchange, who don’t necessarily wanna overpay for a property in a  highly appreciated marketplace…

So I launched a company in partnership with the Estate Planning Team to really focus on commercial real estate owners, syndicators, business brokers and high-end luxury real estate agents to help them grow their business. So it’s kind of a natural progression, if you will, from focusing just on the 1031 exchange, to now the deferred sales trust as another option.

Joe Fairless: Okay, so the deferred sales trust – I guess that’s the unique thing that you bring to the table from a consulting standpoint, and help set up… Is  that correct?

Brett Swarts: Exactly.

Joe Fairless: Okay. And what exactly is that?

Brett Swarts: A deferred sales trust is just a manufactured installment sale, Joe. It’s like a seller carryback, except we’re using a third-party trust to buy your property. Let’s say you have a deal you’re selling for ten million – they’re gonna give you a  zero down payment in exchange for a note… But immediately we’re gonna sell it to the cash buyer that’s already lined up for ten million, and therefore we can defer all the tax, because you haven’t received any actual or constructive receipt… So it’s just a manufactured installment sale; it’s tied to IRC 453, which is a 90+ year old tax law.

We’ve been doing it – we collectively, and there’s thousands of professionals now across the U.S, financial advisors, CPAs, tax attorneys, QI companies, syndicators who use our strategy. A 23-year track record, over thousands of trusts have been closed, 14 no-change IRS audits… So it’s just an installment sale, but it’s unique in how we do it.

Joe Fairless: Okay. So will you give maybe an example of a client of yours that you can share, that they did, and then just walk us through some numbers and the process?

Brett Swarts: Of course. A recent one, just a couple weeks ago, a gentleman named Peter – he’s out of Marin, California, long-term commercial real estate investor, mostly with multifamily, but he’s also a residential broker himself – so he sold an 18-unit apartment complex in Sacramento; so he’s driving up from the Bay Area, he’s knocking on doors, he’s collecting rents… It’s kind of a tough neighborhood he’s going into Sacramento… So he was stuck with a property that he didn’t wanna own, but he also didn’t wanna 1031 exchange. And the way he put it was “I’d rather have 18 problems. I don’t want 36 problems. I actually just kind of wanna retire. I’m older now, and I wanna get out of debt, and I wanna diversify… And I actually want a passive income stream, but I don’t wanna have to do it myself.”

The property itself is only about 18 units, so it’s hard to hire property management to get scale and make sense of the numbers there… So he learned about the deferred sales trust and he liked the fact that he could sell it and he could pay up all of his debt, so now he’s debt-free… He had about $500,000 of debt.

Joe Fairless: On the property, or separate from the property?

Brett Swarts: On the property, yeah.

Joe Fairless: Okay, alright.

Brett Swarts: So he was selling for about 1.8, and he had about 500k in debt… So he was gonna net about 1.3 into the trust.

Joe Fairless: Okay.

Brett Swarts: He had a basis that was pretty low too, because he had done exchanges into this property… So he had another 500k in liability for tax liability. That’s state, federal, Obamacare; it’s about 37% if you add that up in California, plus the depreciation recapture, which can be as high as 40% or so… Or even higher.

Joe Fairless: 40% on top of the 500k, or in total?

Brett Swarts: Yeah, so he was faced with two things – he had debt of 500k, and then he had a tax liability of 500k… So he felt completely trapped. He goes “I have to do a 1031 or something else, because by the time I pay off my debt and pay off the capital gains tax I’m just gonna get wiped out. It makes zero sense. But again, I don’t wanna have 36 problems. I already have 18 problems. I don’t know what to do.”

Joe Fairless: Right.

Brett Swarts: That’s where a lot of my clients have been over the years – they feel trapped between over-paying for property, taking on more debt, chasing deals that otherwise they wouldn’t pay for if it wasn’t for their 37% to 50% of their gain being wiped out by the capital gains tax… So enter the deferred sales trust – he was able to sell, put 1.3 million into the trust, become debt-free, defer that $500,000 in tax as well that he owed… And now he’s invested in stocks, bonds, mutual funds of his choosing… But his real passion is to put it into commercial real estate syndication deals with different operators across the U.S, where he can diversify within that portfolio about 80% of the funds.

So it solved his “Hey, I don’t like the stock market.” It solved his “I can still be in commercial real estate”, and the biggest one is he can buy whenever he wants to. He doesn’t have to buy tomorrow or day 180. He can wait on the sidelines until deals make sense.

Joe Fairless: Okay. And who’s paying the 1.8 for the property that’s participating in the deferred sales trust?

Brett Swarts: Just a buyer. Especially in California and Sacramento – it’s one of the hottest multifamily markets in the nation, and there’s tons of 1031 buyers and tons of buyers that wanna pay a price for the property.

I think the deal traded around about a 6,25% cap. It was a C deal, C- location… So yeah, just a cash buyer that’s lined up. It can have a lender… They take title the same way they would have, as if Peter was gonna do a 1031 or a deferred sales trust.

Joe Fairless: Got it. So from the buyer’s standpoint it’s not that different from buying it if they were doing a 1031.

Brett Swarts: Correct. It’s like a simultaneous close. It’s actually an assignment of sale. So what Peter did is he just put language into the document that states that he has the right to a deferred sales trust or a 1031, and no additional cost to the buyer. And he did consider that, by the way, going for a 1031 and looking for  a deal… Because the deferred sales trust is actually a back-up plan for a failed 1031. So it actually empowers people too to go out there and search for a deal, and if they can’t find it, they have a back-up plan. And it also doesn’t take up one of their positions either for the exchange rules.

Joe Fairless: Okay, so you have to have the money with an intermediary during the process when you’re looking for a 1031 exchange… So as long as you have that with the third-party, then you can still do the deferred sales trust if your 1031 falls through?

Brett Swarts: You got it. It’s a constructive or actual receipt. So the way a 1031 works, Joe, as you probably know and your listeners know, is instead of having the funds sent to (say) Joe from escrow, we wanna send it to a QI company who holds the money to maintain non-constructive receipt for you… And then at that point you can move the funds to another property and perfect the exchange. The same concept is true here – instead of the funds being sent directly to Peter or Joe, they’re gonna be sent to the trust, which is gonna maintain non-constructive receipt.

Joe Fairless: Got it, okay. What are some questions investors have about this, that are common, that you address?

Brett Swarts: The first one is “How do we know it’s legal? It sounds too good to be true.” Those  are the two biggest things. The first thing we would say – it’s a 90-year-old tax law; thousands of trusts have been closed. We have thousands of business professionals… And it’s just an installment sale; we’re just creative on how we use it.

The next one is “Where are the funds held?” Well, the funds are held at Bank of New York Mellon, Charles Schwab, TD Ameritrade… You can hire your own financial advisor or you can use one of our professionals that we work with across the U.S. to manage the money. They can put it into stocks, bonds, mutual funds of your choosing; very conservative allocations.

My favorite part is they say “Well, can I go back into real estate?” and the answer is “Absolutely.” You can go in tomorrow, or whenever you want to, and then you can diversify it. So those are the main ones… But we encourage everybody to bring in their trusted advisors, Joe. We recognize that this is a new concept for people, so we actually say “Hey, don’t just trust what we’re saying; bring in your brain surgeons.” And who are the brain surgeons? Those are the CPAs and tax attorneys that you trust. Have them speak with our CPAs and tax attorneys before moving forward.

My role  as a third-party trustee – I can’t ever move the funds; the funds only ever move with the client’s signature. The client has 24/7 access to view the funds. But my role is to educate and be the offensive coordinator in this scenario, where I’m working with a commercial real estate broker, the financial advisor, the CPA, the tax attorney, and the client. So we all work together as a team to make this transaction work.

Joe Fairless: And what are some things that you pay attention to within your role of the transaction?

Brett Swarts: My role is just to give them all the options. By the way, my company is Capital Gains Tax Solutions, plural, so I like to present the 1031 exchange, the pros and the cons, and then the deferred sales trust, the Delaware statutory trust, the charitable… And really just empower the client with the information and with the tool.

I liken it to this, Joe – imagine it was 25 years ago and you’re just learning about the 1031 exchange for the first time. Before you knew about it, you were just buying and selling properties and paying the tax. Then all of a sudden somebody empowered you with the strategy, and then once you understood it, you were able to create and preserve more wealth… So I really see my role as that – just empowering and educating, kind of being the guide for the client, so that they can create and preserve more wealth with the strategy. Hopefully that answers the question.

Joe Fairless: Got it, okay. And with the different options that someone has – let’s go with the deferred sales trust, to be specific… How are you compensated?

Brett Swarts: By the way, it works for a business, a high-end primary  home,  commercial real estate, collectibles… Anything you can think of, the deferred sales trust works for, whereas the 1031 only works for investment property mainly. So when they sell and the proceeds go into the trust, we get a recurring fee. So a first fee is about 50 basis points on the initial amount, and then once a year we get paid again, as long as the funds are in the trust. Most of our trusts go for ten years, but at the end of ten years you can renew for another ten, and then renew for another ten, and just keep going for as long as you want. Then you can pass it on to your kids.

Most of our notes earn 8%, and after fees they net about 6.5%, which is where the other fee comes in – that’s to your financial advisor. They charge somewhere between 50 basis points and 100 basis points, which is  0.5% to 1%… So just depending on where and how the funds are invested.

The last fee is to the tax attorneys. It’s 1.5% on the first million and 1.25% on anything above that. That includes audit defense for the life of the trust… But what we’re really focused on is what is your actual tax liability? So if you’re selling a ten million dollar deal, Joe, and you have a four million dollar tax liability (let’s imagine you had a zero basis), we’re gonna focus on that four million, and that’s a big number. We would say that that’s substantial; you’re gonna wanna do a 1031, or a Delaware, or a deferred sales trust, or maybe  a mixture of all three, depending on your scenario… So we’re really gonna dissect what’s going on. Do you have a mortgage over basis? Do you have some liquidity needs? Do you wanna get rid of the [unintelligible [00:14:48].08] liability? Do you want to stay in real estate with local operators that you trust and know?

So we’re really gonna ask a series of questions to decipher where the risk tolerance is, and also what their outlook is, and how comfortable they are with different asset classes… And then from there recommend one, two or three strategies, or maybe just one strategy.

Joe Fairless: What’s a potential client that’s come to you and  you just couldn’t help them for X, Y, Z reason? Can you just talk about that?

Brett Swarts: Yeah, so if you come to me, Joe, and you’re selling your business, and the buyer has removed all contingencies, it’s too late for us. We need to be able to be there before he does that. Now, commercial real estate is unique. Even if they remove all contingencies, we would just tell you to send it to a 1031 company, and that 1031 company at that point on day 46, we can help you, up until day 181. But if you take constructive receipt or actual receipt, it’s too late. So the next thing is working with a 1031 company, which will  give you both options.

There’s certain 1031 companies who haven’t heard about this. The big banks sometimes don’t move outside of their lane… So we’re still educating a lot of different QI companies. So  I would just recommend you make sure you have the language in your exchange agreement, because if you don’t, they may not cooperate and they may just send you the check from the QI company and then you’re gonna owe the tax. Those are the two main ones.

The other one has to do with just lower tax liability. It’s just a small amount. If you’re selling a 10 million dollar deal, Joe, and you only owe 50k or 100k in tax, we’re gonna tell you “Just pay the tax.” Take the 9.9 and go look for a deal for when it makes sense. So we’re gonna try to make a holistic approach to financial — within the actual strategy there’s some rules we have to follow.

Joe Fairless: I think you mentioned this tax code for deferred sales trust has been around for 90 years… Did I hear you correctly?

Brett Swarts: Correct. IRC 453, which is just a seller carryback… That’s the foundation of the tax code.

Joe Fairless: So what happened recently that brought this to light, that now it’s being discussed and you’re working with clients on it?

Brett Swarts: Yeah… Even a better question would be “How have you survived the IRS audits?”, which I think will answer the question you’re asking… So there’s been 14 no-change IRS audits; the biggest one was for over a 100 million dollar deal, and absolutely no issues whatsoever. These are random audits for just clients who are high net worth and they happen to find the deferred sales trust and look at it.

The last audit was a formal audit of the structure itself, of the law firm who created it, and the co-founder of the deferred sales trust with the estate planning team… And the first hour of the audit they said “Look, this is just an installment sale. You guys are being creative on how you’re applying the law, by using this third-party trust, who’s in it for a business purpose, who’s an unrelated party, and who can make a profit”, which those things are all true. As long as you’re following those rules, it works. So that’s the best answer I have. We’ve been able to do it thousands of times, and it’s been reviewed by national law firms. It’s not until you meet somebody who’s gonna educate you on the strategy that you’re gonna hear about it.

We also don’t necessarily mass-market it to everybody. I’m only one of 13 exclusive trustees across the U.S, Joe, so we’re very protective of the strategy… Although we’ll share it with a non-disclosure agreement, no problem… But we don’t want it getting into the wrong hands, where somebody might abuse the structure and we lose it for everybody… So we’re very particular about who and where they see the secret sauce, if you will.

Joe Fairless: Okay… And I guess because I didn’t sign an NDA or anything to have a conversation, you’re publicly talking about this —

Brett Swarts: Oh, this is fine. All the stuff we’re talking about here is fine, yeah.

Joe Fairless: So what aspect is more in the NDA component of the conversation?

Brett Swarts: It’s the actual execution of this. I mentioned a couple of things: business purpose, third-party unrelated trustee… And then it’s also the  ability to keep the funds safe, liquid, with an investment advisor. Those are the main areas, if I’m somebody approaching this for the first time, that I’d wanna understand. And then the brain surgeon is the law firm who created this; they can talk about these things. A lot of the times they don’t even really come up; people just say “Oh, it’s an installment sale, it works…” So hopefully that answers the question without giving too much away.

Joe Fairless: Based on your experience in the real estate industry, what’s your best advice ever for real estate investors?

Brett Swarts: Buy at optimal timing. Buy when deals make sense. We make our money on the buy side; we make money when we can find value-add, forced appreciation deals that make sense. And you may wanna consider diversifying outside of your single product type, and your single location, and find somebody who’s an operator, who’s a syndicator, who’s a specialist in that area, and diversify outside. The deferred sales trust allows you to do that.

Don’t overpay just because you only know the 1031 exchange. Get out of debt now and take on smart debt when the market is low, when you can buy properties at a discount. Risky debt stays in and keeps ride up, but don’t go into dumb debt when you overpay for properties just because you’re deferring the tax through a 1031 exchange. Make sure the fundamentals of the real estate make sense; if they don’t, figure out a way, or in a different location, with a different operator, and a different product type that does.

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

Brett Swarts: Yeah, let’s go.

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

Break: [00:20:05].20] to [00:20:41].29]

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

Brett Swarts: Best ever book I recently read… Crucial Conversations.

Joe Fairless: I love that book. What’s a mistake you’ve made on a transaction?

Brett Swarts: A mistake I’ve made on a transaction… Not saying yes to the client who wanted to bring in a partner on a deal, in the 12th hour; I should have just said “Yes. Whatever you wanna do, let’s work together.” I had too much pride and wanted to do it myself.

Joe Fairless: Best ever deal you’ve done?

Brett Swarts: Best ever deal I’ve done… Let’s see. We’ll talk about brokerage – it was an 8.2 million dollar value-add multifamily here in Sacramento, representing both sides, and it was a win/win because there was still some meat on the bone for the buyer, who was my client, and the seller had an up-leg lined up… So he bought it for 8.2, and now it’s worth 13 million and it’s only been a year and a half.

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

Brett Swarts: Go to CapitalGainsTaxSolutions.com, or search me on YouTube, Bigger Pockets, LinkedIn… Connect with us. We have a deferred sales trust calculator;  you can put it in there and it’s totally free; it will give you a side-by-side comparison. And/or schedule a one-on-one call with me and I’ll walk you through our strategy more.

Joe Fairless: Brett, thanks so much for being on the show, talking about deferred sales trusts, as well as the approach and a couple use cases. I hope you have a best ever day, and we’ll talk to you again soon.

Brett Swarts: Thanks, Joe.

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Guest Ryan Nickel on Best Ever Show flyer with Joe Fairless

JF1465: Lost His Job, Was On Food Stamps, Stayed Persistent, Closed Almost 100 Deals with Ryan Nickel

Ryan was sleeping in a closet when he made his first deal in 2015. Now, 3.5 years later, he has completed almost 100 deals and is thriving! We’ll hear about the strategy he specializes in, which he calls “skinny deals”. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Ryan Nickel Real Estate Background:

  • Been investing full time for 3.5 years and just under the 100 deal mark
  • Specializes in creative real estate deal structures
  • Has a niche he calls “Skinny Deals”
  • Based in Sacramento, California
  • Say hi to him at bootstraprei@gmail.com
  • Best Ever Book: The Liberty Of Our Language Revealed

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com

Best Ever Listeners:

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

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

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help.

See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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Joe Fairless & Matthew Recore on Best Ever Show flyer

JF1428: How To Purchase Real Estate At 0% Interest with Matthew Recore

Low on funds or just want to save as much money as possible? Matt is here to help you! He’s a creative financing expert, who often will close deals with 0% financing. Getting creative with sellers is his specialty, hear what he does to get sellers to agree to carry back 0% financing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Matthew Recore Real Estate Background:

  • Purchases between 3-8 properties per month in Northern California
  • Even in his rising, expensive, hyper-competitive market, he has been able to negotiate many transactions where the seller carried back financing at 0% Interest
  • Has written a book describing how he does it entitled “How to Purchase Real Estate at 0% Interest”
  • Say hi to him at matthewrecoreATgmail.com
  • Based in Sacramento, CA
  • Best Ever Book: Loving What Is

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We profile 1 nonprofit or cause every month that is near and dear to our heart. To help get the word out, submit a cause, or donate, visit bestevercauses.com.


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

With us today, Matt Recore. How are you doing, Matt?

Matt Recore: I’m doing great. How are you, Joe?

Joe Fairless: I’m doing great, and nice to have you on the show. A little bit about Matt – he purchases between 3-8 properties per month in Northern California. Even in his rising, expensive, hyper-competitive market of Northern California, he’s been able to negotiate many transactions where the seller carried back financing at 0% interest. I definitely wanna hear more about this, which is why we’re having our conversation… He’s also written a book describing how he does it, entitled “How to Purchase Real Estate at 0% Interest”. Based in Sacramento, California. With that being said, Matt, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Matt Recore: Sure. My background was in the tech world. I worked at CISCO Systems starting back in 2000; I was the youngest engineer there, at the age of 21… And it just didn’t feel like it was for me for the long term, especially after the dot-com crash hit.

I wanted something else, something where I was more in control of my future, and all roads pointed to real estate… So I got into real estate investing part-time around that job, in 2002, and started buying properties. Then right around ’04 and ’05 (towards the end of ’04) I got really scared of the market in Northern California and just wanted out… So I sold all my rentals, I sold my personal residence, and I actually bought a lot in Texas, and I also decided to leave the tech world for a little while… So that’s how I got into the business.

Joe Fairless: What scared you about the market in 2004-2005?

Matt Recore: The crazy mindset that I saw just popping up everywhere around here, in the Sacramento area. A lot of cash-out refi’s, a lot of loans that were interest-only; they were mainstream. There was a lot of no-income, no qualifying loans being given out, and it just scared me. Also, I got a chance to go to a seminar by a guy named Bruce Norris, that laid out how California was gonna have some hard times ahead… So with his advice and my own gut feeling, I ran for the hills, per se. I ran for Dallas, Texas, but being a remote landlord actually wasn’t for me either, so I ended up selling most of those and went back into the tech world, and then got back in full-time into real estate investing as a full-time investor in 2013.

Joe Fairless: On a related note, in episode 982 I actually interviewed Bruce Norris, and it’s titled, “When to be an aggressive investor.” So in 2005 you sold your stuff in Sacramento, and you bought in Texas?

Matt Recore: Yes.

Joe Fairless: What did you buy specifically?

Matt Recore: I bought a lot of single-family homes.

Joe Fairless: How many?

Matt Recore: I bought 13, and most of those actually were new construction. I went to builders and I bought a lot of their standing inventory. They had a lot of standing inventory at the time and they were willing to discount it, so I would go to like a DR Horton, or even a smaller builder – back then it was Gehan homes… But mostly DR Horton, and negotiated corporate-wide to buy a bunch of houses… So most all of those 13 – I think probably 11 of those – were from one builder, DR Horton.

We bought their standing inventory homes that were sitting on the market for a year or so, all brand new, and got a nice discount on them, and then put tenants in them.

Joe Fairless: Where are they located?

Matt Recore: They were all over. Frisco, McKinney, Rowlett… I don’t know if you know some towns there – Anna… There was a community called Savannah up in North Dallas…

Joe Fairless: DFW Area.

Matt Recore: Yeah, all DFW, all North Dallas.

Joe Fairless: That’s a good area right now.

Matt Recore: Yeah, it was really good, but being a remote landlord isn’t all it’s cracked up to be; I learned first-hand how property managers can really take advantage of a remote landlord, so you’ve gotta be careful with them, even if you have three or four managing your stuff… And turnovers can really hit you hard if you have like four or five tenants move out at the same time, if you don’t have another income source.

Joe Fairless: What happened? What are a couple other things with you being a remote landlord you got the short end of the stick?

Matt Recore: Well, you have a hard time really looking at the price of things when a turnover happens, for example. When a tenant moves out and the manager on the ground says that it needs this amount of work, and they also make a 10% commission off of all the repairs… That was pretty much the standard back then with my managers. So you get a $7,000 bill and they get a $700 commission, so they’re looking to get that bill as high as possible. That really impacts cashflow, and you don’t have feet on the street or you don’t have the ability to walk a house and see “You know what, that doesn’t need to be done. This is a rental, we don’t need to fix that.” You don’t have that ability there to really hone in… So I ended up going down from I think four managers to two managers, and then just decided to cut back a little bit.

Joe Fairless: You had four different property managers for 13 homes?

Matt Recore: Yeah.

Joe Fairless: Wow!

Matt Recore: So I gave each one three. My plan was to say “I’ll give each one of you three or four, and see which one I like best.” I quickly found that two of them weren’t that responsive, I felt like they were over-charging me on things, and I quickly let those go, gave my other units to those other two managers who I liked better… I let them compete against each other, because property management – it’s a really low margin business is what I’ve come to find, and it’s tough; it’s a tough business to be in. There are some people who work it really well and some people who just try to get the most from every owner.

You really want those that are high integrity, who are on your side, and that’s why I employed the four managers and the cut them back down to two.

Joe Fairless: Do you still have those 13 homes?

Matt Recore: No, I sold them at different times, just because I didn’t like being a remote landlord. Now I just have a few of those; I’m thinking about paying them off actually, and just keeping them for the long haul.

Joe Fairless: How many do you have?

Matt Recore: I have three.

Joe Fairless: So you sold ten of them.

Matt Recore: Yeah. I’ve just focused in on my local market, and focused in on building my rental portfolio locally where I’m at, and getting great seller financing terms at 0% interest, 2% interest, 3%, 4%, fully amortizing, and there’s no bank limit on those. There’s no limits as to how many you can have when a seller and you come to terms, on the terms of the deal… There’s no limit. You can have 1,000 single-family homes, all carried back with seller financing.

Joe Fairless: And we are going to spend the bulk of our time talking about that, because I’m fascinated by it. I just have another follow-up question on the 13 homes… So you sold 10; what about those three made you wanna keep them up to this point in time?

Matt Recore: It was location, and it was how much repairs the properties are gonna have over time. I really wanted like a 3/2 that was around 1,500 square feet, so that’s what I kept… And I kept them in great locations, where there’s a lot of growth coming… So Frisco, there was one in Rowlett, and actually one in Forney. There was a lot of growth coming, and I got it at a really good price.

Joe Fairless: Seller financing terms – you’re getting 0% interest from sellers… How do you structure that?

Matt Recore: It’s really structured with a blank sheet of paper honestly, and it’s structured with the offer being given to the seller. A lot of sellers get cash offers from buyers, and they get other types of offers from buyers, but I like to give them multiple offers. I like to give every seller a cash offer, and then maybe a seller financing offer with interest-only, a seller financing offer with a little bit of interest, maybe 3%-4% interest, fully-amortized, and then a seller financing offer that’s close to retail, at 0%.

I first heard about the idea back in 2004-2005 from another investor, and I didn’t implement it until 2014; I think that was the first time I started to send out or introduce the idea of principal-only payments to sellers… And I was very surprised when I got my first yes. Then I got my second yes, and then a third yes, and I think I’ve had now six people say yes to 0%.

Joe Fairless: So it was three or four? Cash, one. Seller financing with interest-only, two. Seller financing that’s close to retail price, but 0% interest…

Matt Recore: It depends on the deal. If the seller has a paid off property, then they’ll get four offers. If the seller has a loan in place – let’s say it’s a small balance loan – then they’ll get an offer where we pay off that loan, and then the balance is carried back. There’s different terms on that. So they’ll get a cash offer and they’ll get an offer where we pay off the loan and we carry back a balance at different rates, so they get maybe two or three different offers on that carry-back balance.

Then we may even introduce a fourth option, which is us taking over their loan and also them carrying back a small portion of the balance, too. In that case, some people might get five offers.

So I like that idea so much better than just providing a cash offer, because when they get four or five offers from me, they’re less apt to shop and they’re more apt to say “Okay, well let’s talk about offer number two” or “Let’s talk about offer number three. This is interesting to me. How does this work, and how do I know you’re gonna pay me? What’s my security?” So the conversation starts to go deeper, and greater rapport is built because I offer to share my financials, I offer to share my track record to give them references to other sellers, and trust is built in a much greater way as time goes on there.

Joe Fairless: Will you walk us through one of the properties that you got 0% interest and just tell us the numbers on it, and maybe the back-story, too?

Matt Recore: Sure. I’ll share my second deal. My second deal was in a really expensive neighborhood here in the Sacramento area. The seller called and he wanted retail; he was a former loan officer, retired, and at the time had I think around six rentals that were all paid off. He wanted to start to sell them piece by piece, but he wanted retail for it… And retail on that house was a little over 500k, maybe 520k-525k at the time. My cash offer was somewhere in the high threes, honestly… He said no, he said “I want retail”, and I said “Okay, I can do (at the time I think I said I can do) 480k” and then he said “No. Well, could you do 490k?” So I then sent him an offer that was 490k, 10k down, and 480k was gonna be carried back over 240 months, which is over 20 years, at 2k/month. So 2k/month over 240 months equals 480k.

He said, “Yes, sure.” And he said yes because of a few reasons. He was currently getting 2k/month in rent, and for him, he didn’t wanna be a landlord anymore, he wanted to slowly get out of the business, but he wanted to keep his cashflow… So his net after taxes was around $1,600/month on that property.

My offer was gonna get him $400 more in his pocket, and my plan was to raise the rent to $2,400. I saw that the market could support up to $2,300-$2,400 on that, and then with my taxes and insurance at $400 I was gonna be at a breakeven with him… But $2,000/month was gonna go towards principal every month, so I saw it as a great way to get a property close to retail, but with a lot of principal paydown coming, in an A neighborhood. This house was in a really, really nice neighborhood.

He said yes, and we closed, and I raised the rent up to $2,400, the tenant stayed in place, and that house is still one that I own. I’ve owned it now for two years, and my principal is now down to about $420 or so, somewhere in there, and the house has gone up to maybe 560k-570k. So now it’s essentially a wholesale deal. If I were to see that house right now, I’d probably offer all cash 420k or so, and the house is worth 570k or so… So now it’s become a wholesale deal, but it’s in the long-term keeper pile of my rentals, because there’s no way I could sell that with those terms.

Joe Fairless: Yeah, it’s pretty cool. So you’re basically breaking even and you put $10,000 down, but the break-even – you’re building equity in the property, because you’re paying down the  principal over time… And should rent increase, then maybe you’ll make $100 or so a month, who knows… But it’s really about the long-term play.

Matt Recore: Yes, absolutely. And it’s like a for savings account. That $2,000/month is a for savings account that I don’t see, it doesn’t show up in my bank, but it shows up in your net worth statement. As well, it’s not taxed. So it’s savings that you get to benefit on, but you don’t have to pay taxes on it. So it’s not like earning regular, ordinary income. It’s net worth that grows, but you’re also not being taxed on it.

Actually, I could have something else that cash-flows $300-$400/month, that maybe that house might be a negative some months, and that cash-flowing property could offset that, so they could balance each other out.

Joe Fairless: You’ve done six of these… I’m gonna choose a random number, one through six, but not two, and will you tell us about that one?

Matt Recore: Yeah…

Joe Fairless: Four. I’m gonna go with four. The random number is four.

Matt Recore: Number four… Let me go into the book. Oh, number four was an interesting one. This turned out to be a 0% interest deal in a vacation home market here in South Lake Tahoe, which is about an hour and a half from where I live. This one was one where I took over the seller’s mortgage, because the house was going to foreclosure. I actually found out about this as we were in Escrow, that the seller had a loan mod done back about five years ago, and they had — I took over the balance of like 260k… And they did a loan mod to where they moved around 100k to the back of the mortgage, and 160k of the mortgage was being paid over time. The other 100k was essentially a 0% interest, off to the side, off to the shelf, and wasn’t being touched… So it was essentially a 20-year loan on that 100k that I didn’t have to do anything with; it was off to the side, and I was just paying down the 160k.

What’s great about that is in a vacation home market like that, my payment was only $800/month, and the market rent on that was around $1,400-$1,500. So that’s a different type of 0% deal that I came across, because I inherited a loan mod…

Joe Fairless: Will you summarize that real quick one more time, just to make sure I’m following?

Matt Recore: Yeah, so the bank negotiated to split the balance up, and they took 160k and they said to the previous owner, “Okay, 160k of that we’re gonna fully amortize at 2% interest, and then we’re gonna take 100k of the balance and we’re gonna put that on the shelf and you’re gonna have no payments and no interest on that. It’ll be due when the property sells in 20 years, or when this loan is paid off, but we’re not gonna have you pay anything on it.” So really, the balance, all that was being paid down was the 160k at 2% interest. That became a great monthly deal, especially in that market, South Lake Tahoe – it’s tough to find inventory there, it’s tough to build there, it’s tough to get deals and it’s tough to cash-flow.

I actually partnered on that with someone in my office who works for me, and he goes to Tahoe all the time, and we kind of used that as part of the compensation package, and we partnered on that deal, because he was gonna be using it a ton… So  yeah, we kept that in the office, and he got a huge win out of it.

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

Matt Recore: Best advice ever would be to get started. Just do it, and learn — every day you go to school in this business; every day I learn something new, every day I’m growing and expanding, and applying what I learned six months ago, today, or what I learned today to a situation that’s coming up… So the best advice is to get in the game and just continue to learn and grow.

Your knowledge is cumulative, so you’re gonna make better decisions as times goes on, and it’s always best to mitigate your risk and plan for the worst-case scenario; also know the best-case scenario, and be very careful about leverage and about liquidity crises that can happen. Don’t put yourself  or allow yourself to be in a position to where you’re gonna experience a liquidity crisis.

Joe, there’s probably about six different pieces of advice there…

Joe Fairless: There were, and that’s helpful, and even as much or perhaps more for some listeners your approach to how you’re doing these deals… Because you’re living and breathing exactly what you mentioned; it’s a cumulative process (the learning), and you started one way, and now you’ve evolved it based on your education to another way, and it’s working even in a market that is incredibly competitive.

In your second deal example you were working with a former loan officer. They know their stuff, or they should know their stuff, and the creative aspect of this wasn’t how you got the deal, it was the actual loan… So if the loan officer is approving it because it makes sense for him, then it’s something that could work for other people, too.

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

Matt Recore: Sure, let’s go.

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

Break: [00:19:01].11] to [00:20:01].20]

Joe Fairless: Okay, best — you know, I’m changing this question up… How about what’s the best book that you’ve read most recently?

Matt Recore: Oh man, best book recently… A book that I’ve gotten a ton out of recently has been “Loving What Is”, by Byron Katie. That’s impacted me the most, and the principles behind [unintelligible [00:20:19].24] have impacted me the most.

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

Matt Recore: I would say the [unintelligible [00:20:30].00] two come to mind right away… First would be the [unintelligible [00:20:32].21] deals from that one seller who came to me and said “This worked out for me so great. I wanna sell you a couple more properties, but the other ones are gonna be at 3% interest. Is that okay?” I said “Absolutely, that’s fine.” So there’s a couple more deals that came from that seller… As well as another 0% interest deal in an area that is very supply-constrained. They wanted 50k down though, and I went ahead and did that deal; rents have almost gone up about 70% since I did that deal, and I’m quickly paying down that mortgage.

And there’s another 0% interest deal I’m just thinking about as I talk to you that we’ve paid down a ton since we’ve got the deal, and rents have more than doubled since we got it, as well.

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

Matt Recore: Oh man, I’ve made a mistake — a recent one would be one where I got sued. I got sued about a year and a half ago because I bought a house with the occupant in place, and I bought it from a trust, and it just so happens that one of the beneficiaries of the trust was also living in there… I didn’t really think much about it, I had a lease. Well, one of the beneficiaries of the trust was also married to a woman who didn’t like the fact that she was going through a divorce with the trustee of the trust, and she decided that she wasn’t gonna leave no matter what, and she then hired an attorney, and…

Joe Fairless: It sounds like a Jerry Springer episode.

Matt Recore: Oh my gosh, it got horrible… And there was actually a win that came from all of that – the attorney was amazing, and he kicked my butt and I had to pay a big settlement to get her out…

Joe Fairless: How much?

Matt Recore: It was 20k. So she left, but he pretty much kept all that money, because her attorney’s fees were so high… And I’ve adopted that attorney. I’ve hired that attorney now to be my attorney. He’s been my attorney on probably seven or eight different unlawful detainer actions, and he’s amazing. So there was a win that came from that… He actually put me on the stand for an hour and a half during a regular unlawful detainer hearing, and I was sweating, and it was horrible, and I was in the right in so many ways, but he found a couple little loopholes that my attorney messed up on, and he was able to win, and then secure the settlement for me to settle.

Anyways, I adopted him as my attorney, I hired him, and he’s become a friend of mine, and that was another huge lesson – you’ve gotta know about the occupancy situation when you’re purchasing a property; get the story, and get the lease, and really understand what the dynamics are, and where you’re exposed and where you’re not when you’re buying with occupants in place.

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

Matt Recore: Honestly, at home, as much as I can – time, presence, with my twins… We’ve just had twins a year ago with my wife…

Joe Fairless: Congrats!

Matt Recore: Thank you. I would say at home, and then with my team, but primarily at home and with my parents and family.

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

Matt Recore: They can get in touch initially through the book. They can go to Amazon and learn more about the strategies of buying at 0% interest by typing in “How to purchase real estate at 0% interest”, or my name, Matthew Recore. The books is I think around $17 right now.

Then there’s ways to contact me in the book, if they’d like some extra coaching, or help, or support in a deal, or a question that they may have as to how they can implement the 0% interest strategy into their market… I’d be more than willing to help and coach them.

Joe Fairless: Well, Matt, thank you so much for being on the show and talking about your transactions with 0% interest, how you offer 3-5 offers on a property, and then some case studies… And then you were talking about the attorney that you adopted and the lesson you learned; the lesson I took away from that is you saw the bigger picture, because most people (I’m gonna say most people) would be offended and pissed off at that guy for putting you on the stand for as long, and would hold a personal grudge forever against him… But you were seeing the bigger picture and you saw that you could make a foe an ally in the long run, and help you out in the long run. That takes a lot of vision and swallowing of pride a bit in order to do that. That I think is a microcosm of how you’ve approached your business as you’ve evolved it.

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

Matt Recore: Thank you, Joe. I appreciate it. Great to talk with you. Thanks for the compliment.

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JF1321: Squeeze More Cash Flow Out Of Your SFR’s with Al Williamson

Al has 5 awesome ways to get more cash out of single family homes to share with us today. From broadcasting Wifi in exchange for paying for a newsletter, to putting a billboard on top of your building. These are some next level, brainstorming techniques that you probably have not thought of yourself. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Al Williamson Real Estate Background:

  • Founder of Leading Landlord website that helps rental owners find new cash flow streams
  • Civil engineer and the Author of the Building Wealth with Inner City Rentals
  • Ancillary income specialist and short-term and furnished rental scientist
  • On his blog he discusses his income-generating, cost-cutting, and neighborhood revitalizing experiments
  • Based in Sacramento, California
  • Say hi to him at  https://leadinglandlord.com/

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate investing podcast. We only talk about the best advice ever, we don't get into any of that fluffy stuff. With us today, Al Williamson. How are you doing, Al?
Al Williamson: Wonderful! Thank you, Joe. It's so good to talk to you again.
Joe Fairless: Nice to talk to you too, my friend. A little bit about Al - he was a previous guest on the show, and I'm gonna ask the Best Ever listeners to think back a long, long time ago... It's episode 53. It was October 26th, 2014.
Al Williamson: Wow!
Joe Fairless: Holy moly! October 26th, 2014, episode 53, titled "Cashing in on revitalized areas." If you just search "Al Williamson Joe Fairless", you can find that episode. Today, Best Ever listeners, it's a skillset Sunday day. We're gonna be talking about the skill of ways to get more cashflow out of a single-family property.
Al is the founder of Leading Landlord, which helps rental owners find new cashflow streams. He is a civil engineer and the author of Building Wealth With Inner City Rentals. Based in Sacramento... With that being said, Al, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Al Williamson: Okay, Joe. First of all, let me say I'm so proud of you, for you sticking to your dreams and really mastering your craft now. You are just excellent! You've come so far from our first episode. So polished.
Joe Fairless: I appreciate that. And if you listen to episode 53, you will hear a noticeable difference, I expect. I can't listen to it, because I'll just cringe hearing myself. You did great, but I'm sure I'm terrible.
Al Williamson: So for me, in 2008 I had this apartment complex that didn't have tenants that paid rent... So I started this quest of figuring out how I was gonna pay the mortgage without relying on my tenants, because I just did not want to give the place back to the bank. I was so involved with the neighborhood revitalization (that was my first book), and getting these drug dealers off the streets, and trying to bring jobs to the neighborhood... That was so rewarding, Joe, just like flipping a house is rewarding... Making a difference to a neighborhood is to the X power, right? It's just so rewarding.
I didn't wanna give it back up, so I started this quest of collecting ideas and even inventing some ideas on how to make more income without relying on your tenants. So tenant-independent income streams, as well as getting more spread out of what you already own... Because my credit cards could only take so much, so I had to figure out --
Joe Fairless: Well, you have my curiosity piqued, so please continue.
Al Williamson: Okay, so I figured it out and I wrote this book called "40 ways to increase the net income of your rental property", and I kind of wanted to share with you five ways out of the 12 different batches of ideas that I came up with... Hopefully your users can just start brainstorming with this and come up with an extra $100 or $200 per month.
Joe Fairless: Yes, please.
Al Williamson: Okay. So the buckets that we wanna talk about that you can envision - let's just talk about single-family homes, because that's probably the hardest type of investment to come up with ancillary income... So if we can do it for a single-family home, we can definitely do it for multifamily, or one of those huge apartment complexes like you have.
So you can envision your single-family investment as a transportation pad or as a broadcast station, but you can also think of it as a hospitality center, or an ad agency even, an ad platform, or a storage facility. By thinking of it as the uses that it has, when we put on those different lenses and look at your investment, we see these different opportunities. So which one do you wanna dig into first?
Joe Fairless: Well, let's just go in order - broadcast station.
Al Williamson: Okay. So broadcast station - I set up a big Wi-Fi antenna on top of my building. My building was one of the tallest in the area, and I realized that they had commercial antennas that can broadcast Wi-Fi a half mile radius. So the goal was if I could resell Wi-Fi using a coffee shop type model where you go to Starbucks or your local coffee shop and they give you free Wi-Fi in exchange for you buy coffee, right?
Joe Fairless: Yeah.
Al Williamson: It's complementary, so you can provide Wi-Fi complementary; that's a common business practice. I was gonna sell a newsletter delivered by e-mail about what's going on into the neighborhood, people would pay for that and I would give them Wi-Fi complementary... Do you follow what I'm saying?
Joe Fairless: I am, and that's not the direction I thought you were gonna go. Very, very interesting... So you were gonna create a newsletter with community information that's hyper local, and then as an add-on bonus, you say "Oh, by the way, pay for my newsletter and you'll get complementary Wi-Fi."
Al Williamson: That's right. That would have brought in $2,000/month if I would have captured everyone in my area. That was my first major failure, because the trees - Sacramento, California is known as the city of trees, and I had landscape interference... So I am waiting for a different type of technology to come out before I relaunch that. But it can work for different areas... If you are up on a mountain, Wi-Fi falls in the shape of an umbrella - it goes out and then it drops.
So if your single-family home is up on a hill, you definitely have some opportunities to do that, especially in a desert area.
Joe Fairless: Why not just charge for Wi-Fi and have the newsletter as a bonus? Why did you lead with the--
Al Williamson: Well, that's illegal to resell Wi-Fi.
Joe Fairless: Oh...
Al Williamson: Just a loophole.
Joe Fairless: Okay, I'm with you.
Al Williamson: Because everyone can understand a coffee shop, and even if you walk in a Home Depot or anything like that, they allow you to use their Wi-Fi signal.
Joe Fairless: Alright. We are going off-roading with the brainstorm stuff; I like this a lot, interesting.
Al Williamson: That's it. These are things you can do with your single-family home. You consider it as a tripod for different things. Even a tripod with ad agency; if you drop down there, you have billboard opportunities on your property, as well as on your rooftop if it's visible by a highway, whatever your traffic count is. You've seen even nice benches with advertisements on it, right Joe?
Joe Fairless: Yeah.
Al Williamson: All those things can be done when you start looking at the traffic count exposure that your place gets, as well as how it can be seen or branded. Even our president is showing you that naming rights is valuable as well.
So I wouldn't cancel that out... You definitely need to think about those advertisement opportunities that you have. Outdoor advertising is a huge industry.
Joe Fairless: Wouldn't there be a lot of code restrictions for slapping a logo on your roof, or painting your house a certain brand, like a tagline for a brand, things like that?
Al Williamson: You know, there are, and there's always loopholes, Joe. That's what's great. Because they give you so many days, if it's a political year... What you can do - you can rack up a political -- local donations or contributions... Either taking a contribution or creating a large deduction for yourself for so many days before a campaign.
Joe Fairless: Okay.
Al Williamson: Also, the stores - if there's a local mom and pop store and you have a bench, if they're sponsoring a bench that's in front of your place... Or even I've seen fences - I've got lots of pictures on my website as well - advertising the nearby store. So people monetize their fences as well. So there's plenty of outdoor advertising opportunities.
And some cities have more stricter codes than others. If you're in a rural location, it's just like the Wild West. So billboards - absolutely; it's a good way to get $50 to $100/month, depending on your traffic count.
Joe Fairless: What about hospitality?
Al Williamson: Hospitality -- it's really easy... With your existing single-family home, you can compete against other landlords if you choose, or you can compete against hotels and extended stay hotels, and go after their guests, and make 3-5 times more just by doing that. So we think of Airbnb and BRBO, but you can also go really hyper-local and serve the businesses that are around you.
I have a whole community that just does that - we go after and compete against the evil, dastardly extended stay America... My biggest enemy.
Joe Fairless: [laughs]
Al Williamson: Did you know, Joe, that 36% of all the travel in the United States are people staying 1-6 months?
Joe Fairless: Okay... I did not know that.
Al Williamson: So there's that huge opportunity there. This is a big, big opportunity. You've heard of digital nomads... I think you're probably a digital nomad, aren't you?
Joe Fairless: I don't know, it depends on how it's defined...
Al Williamson: You're settled down now, now that you're married...
Joe Fairless: Yeah.
Al Williamson: But lots of people like to travel with their laptops and do different things, so more Tim Ferriss juniors are out there...
Joe Fairless: As far as the hospitality goes and competing with the extended stay guests, everyone's heard of Airbnb, but you said you go hyper-local and serve the local businesses around you... What do you mean by that?
Al Williamson: Let me tell you about Reuben, for example. He's in Florida, and he said "Al, there's nothing around me. I can't do travel nurses like you do, Al." I often take care of local hospitals, travel nurses... And I said "Reuben, just go talk to the businesses that are around you." He says, "All that we have is a flight safety school." I said "Take them a gift basket, go in there..." So he did, and the owner of the flight safety school followed him back to his place, signed a six-month lease and told him he needed 60 more units to take care of his people coming in for training.
So I tell people all the time -- it's like, catching your own typos is nearly impossible to do, but there's people... If there's a hotel in your town, and especially in extended stay America or an extended stay hotel, there are all kinds of business travelers coming in for training, for HR training, for relocation, insurance issues where they're temporarily relocating... Your local theater has a whole cast coming in... It's in this.
I like to say that opportunities are as large as the sun. There's just no way to define it all, there's so much going on, right in your own community.
Joe Fairless: You mentioned storage facility.
Al Williamson: Storage facility is interesting... I'd like to break it into two categories. There's will you allow your tenant to have additional storage outside of their property, like in your yard, or in a garage? And my favorite is creating a storage facility that someone who doesn't rent your dwelling can use... And they can access without cutting across your tenant's property or inconveniencing your tenant. Like, off of an alleyway or a part of your fence line you have some storage.
The reason being is people nation-wide -- it's about $1/square foot per month for storage, and you can easily set up a 200 square foot or two 10x10 storage units with roll-up doors for about $5,000, and that 200 square feet will bring you in $200/month without much at all
So people have the opportunity to go drive five miles to a big institutional, commercial storage, or they can just drive down the street and put their stuff in your place. Much more convenient. Huge value opportunity.
Joe Fairless: Have you done that one?
Al Williamson: I started it, but I sold the place that I was gonna use... But some people in my community are doing it quite a bit.
Joe Fairless: Can you give an example? I know you just conceptually did it, but can you think of an example of someone in your community who's doing it and just tell us a little bit more about it? Like numbers, and things like that.
Al Williamson: A company called Roost -- I can't remember who bought them, but they were the Airbnb of storage. They allowed people to set up spaces in their garage that they could rent out. There's a number of companies now, they have competitors; I haven't tracked it... But there's an Airbnb of storage, if you follow what I'm saying. If you have extra space in your garage, you can just look them up and see what's going on. And also Craigslist has a storage section, where people rent out places to park your RV, or store your things... So it's whatever you can negotiate on Craigslist as well.
Joe Fairless: I did not know that.
Al Williamson: But if it's covered and weather-protected, you can pretty much ask for I think $1/square foot.
Joe Fairless: And that's in most markets?
Al Williamson: Yeah, that's nation-wide average.
Joe Fairless: Okay, got it. And I think you mentioned there were five categories or five ways. So far I've written down broadcast station, hospitality, ad center, storage facility. What's the fifth?
Al Williamson: Transportation hub. One person in our community, he rents one parking space in his duplex to Zipcar, which is a car sharing company... And he brings in $250/month for renting his parking space. Other people around his area - they have access to that shared car.
Also, there's just creating a parking space on your lawn, just kind of extending your driveway with some drive strips, and allowing people to park there instead of beating the meter on the street, or... Depending if you're close to a downtown area. That can bring you $30-$50/month or more.
Where are you now? Are you in Denver, or are you--
Joe Fairless: I'm in Cincinnati.
Al Williamson: Cincinnati, okay. So if you're by a stadium or things like that, where parking is a premium, or even a downtown business center - anywhere there's paid parking or meters around, or even where you need a permit, there's opportunities to monetize your lawn, so to speak, providing parking.
Joe Fairless: I know that the tactics are very thought-provoking, and I think a lot of people's wheels are turning with "Okay, how can I maximize the earning potential of my property?" And I believe the thought process that you're talking about or that you're using is more important than the tactics. I'm mentioning that first, before I ask the following question, because I understand that it's more about how can you maximize the income through these creative methods, but here's my very tactical question...
Al Williamson: Okay.
Joe Fairless: And that is I'm thinking through -- so I've got three houses in Dallas-Fort Worth; so I have apartments, but I also own three homes. I'm thinking through these things, and I can't think of one that wouldn't really upset the neighbors and/or the tenants... Like transportation hub, for example. Renting out a parking space to Zipcar. It sounds great in theory. We fall over ourselves trying to get an increase in rent every year - or I do - of 3%-5%, but you're telling us a way that someone's getting $250/month; it's incredible. But then I'm thinking, man, if I looked outside my window and I just saw people all hours of the day and night coming in my driveway, going in the car, music's blaring or maybe it's not, I don't know, but there's strangers in my driveway, as a tenant, I would have an issue with that.
Al Williamson: Joe, you've really hit a great point, which is crucial to when I was putting all this together... And that's how we partner with our tenants. We're traditionally adversarial and not so much joint venture-minded when it comes to landlord/tenant. So if your tenant is the type where you could joint venture into them, where they share in some of the revenue stream, however you decide to split it... But if it's in their best interest, then all those issues fall away.
Joe Fairless: Yes, they do. The only thing that surfaces in that scenario would be legal issues, and I imagine that's where you wanna have a good attorney to draft something up... But more importantly, you wanna make sure that they understand what they're getting, you understand what you're getting, and it's transparent.
Al Williamson: Let me give you a practical example.
Joe Fairless: Yeah, please.
Al Williamson: Okay, there's a lot of cities that are coming out with ordinances against Airbnb if it's not your primary residence. Especially in San Francisco area, we have some people in our community that are doing an innkeeper type of arrangement with a tenant that they place in there. They'll have a tenant take care of all the bellhop and maintenance and housekeeping duties, and the owner takes care of the front desk duties, let's say with the Airbnb. And that whole venture works because it's through that partnership or through that tenant who lives there full-time; that's their primary residence. It allows them to get through that loophole. And the tenant wins because they potentially have opportunities to greatly defray the cost of their rent, and almost live rent-free, almost house-hack. So the more is rented, the less rent they pay.
Joe Fairless: What's a typical percent split that you would do with a tenant?
Al Williamson: I didn't actually pull it off with my place; I got close. It was where I wanted to -- if it was filled 20% of the time, let's say 20 days, we would reduce 50% of the rent, so to speak... Just enough so that they have some interest in it, and make them part of it.
If you could get it so that they could completely cover their rent, that'd be even better if the numbers work. It depends on the size of the place.
Joe Fairless: I'm gonna venture a guess that the most profitable of these that you've done or seen done is the hospitality category, where you're renting it extended stay, versus these one-off things. First off, is that correct?
Al Williamson: I can't say, because there's different startup costs. One of the most profitable things is to rent someone else's place and run an extended stay operation from it, an arbitrage that way... Because you're protected against your maintenance costs, and you can quickly break even and just really have nothing but cashflow.
Joe Fairless: Yup, and the only thing you risk is whatever lease that you sign with the landlord.
Al Williamson: Yes, and that's limited, because if your extended stay operation doesn't work, then you just fall back into long-term furnished rental, or even if that didn't work, you fall back just to breakeven just renting his place for what it costs. So you have two safety nets underneath you.
Joe Fairless: And you wanna be transparent and forthcoming with the owner, the landlord, prior to signing the lease.
Al Williamson: Yes, everything has to be done with high integrity, absolutely. For that particular one, showing the landlord the benefits of you taking even better care of a place than he could possibly, because your self-interest is making sure his place looks and works and functions awesome, so that you don't get phone calls. Also, maybe that landlord can reduce or eliminate their management company. That's 8% savings there.
Joe Fairless: Al, you're working a different side of my brain than I usually work on the interviews, and I really am enjoying it, so thank you for sharing these ideas - a lot of the ideas I've never heard of before - and categorizing them and then giving us some examples.
How can the Best Ever listeners learn more about what you've got going on?
Al Williamson: The best place - I keep all my writings and what I'm learning and the current research I'm doing... I'm a landlord scientist full-time now; I kind of hung up my civil engineering hat now... It's at leadinglandlord.com. You can see what I'm doing, what I'm working on... Last year, for example, we were trying to figure out how to make one rental property generate enough money so that it could replace a mid-level job. We started off not knowing, and then we've figured out... We turned that one into a short-term rental and safer profits, and then [unintelligible 00:21:58.03] And I'm actually living off that experiment just to show people the journey, and I think we'll hit $10,000 in 15 months; we're well on our way.
Joe Fairless: Outstanding. Well, I highly recommend going and checking out leadinglandlord.com, learning more about these tips and these practical ways to win -- or to... I was gonna say win, but you really are winning... To earn and increase the income for your property. We were talking single-family, but it's clear there's an easy extension to commercial, and it's actually easier for commercial than single-family.
So from the ad center with the billboard naming rights, maybe branding a fence, to the storage facility, transportation hub with Zipcar, and then the broadcast station... I'm really interested to hear how that goes when that gets executed. But again, it's not necessarily the tactics that I suggest being focused on, it's really the mental approach for thinking about different ways to earn income, and just thinking a little bit differently, or a lot differently than what's typical... Because there are ways to do it; it's just a matter of executing, and then also testing, too. I'm sure there's gonna be some testing involved, and seeing what works best for your particular property in your area.
Thanks for being on the show. I hope you have a best ever day, and we'll talk to you soon.
Al Williamson: Thanks, Joe.

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JF660: How He Netted $100k from a BANDIT SIGN!

Our guest has been through some hard times, all while he was young. Press play and hear his story as he shares his struggles in high school and college and see what he has made of himself today! He has multiple streams of income and is growing rapidly!

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Matt Aitchison Real Estate Background:

    – CEO of Vault Investment Properties
– Podcast host of Millionaire Mindset Podcast
– Based in Sacramento, California
– Say hi on Facebook or Instagram
– Reach him www.millionairemindcast.com

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JF53: Cashing in on Revitalized Areas

Buy in an improving area, manage well and watch your value increase. Seems obvious right? Right. But today’s Best Ever guest shares with you a major wrinkle to this plan that can help you increase your property value even more…and faster.

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Al Williamson’s real estate background:

–        Been a landlord since 1996

–        Owner of two homes, one apartment building and one commercial building

–        Author of Building Wealth with Inner City Rentals

–        Visit him at http://www.leadinglandlord.com

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