JF1303: He Wants To Put An End To Zillow with Greg Hague

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Greg started with only three agents and grew his real estate firm to over 4000 agents. Greg had an interesting strategy for investing when he started out that had a lot of success. He’s had a different path to his success than you might typically hear, a story we can all learn from. Greg also has a new website aimed at taking down Zillow. Hear about his new project and the motivation behind it. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Greg Hague Real Estate Background:

  • Founder of the most talked about topic in real estate today, the viral-hot Stop Zillow campaign.
  • Nationally acclaimed real estate speaker, broker, attorney and Huffington Post writer
  • His real estate strategies have been featured in Forbes, The Wall Street Journal, U.S. News and over 300 major publications worldwide
  • Starting with three agents, he built a 122 office, 4000 agent real estate firm.
  • Then founded what became the number one Christie’s Luxury Home Brokerage in the Southwest
  • Based in Scottsdale, Arizona
  • Say hi to him at http://realestatemavericks.com/  NEW WEBSITE http://buyerhunt.com Email: greg@realestatemavericks.com
  • Best Ever Book: How to Win Friends and Influence People

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TRANSCRIPTION

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

Greg Hague: I am doing fantastic, Joe. My pleasure to be on your show, thank you.

Joe Fairless: Well, I’m so grateful that you are on the show!  A little bit about Greg – he started with three agents and built a 122-office, 4,000-agent real estate firm (holy cow!), then founded what became the number one Christie’s Luxury Home Brokerage in the Southwest. He is an attorney, he also is an investor, and we’re gonna be talking all about his background and the tactics that he uses as an investor. He has a very particular way that he invests, the type of properties he invests in, and we’ll talk about that.

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

Greg Hague: Yes. I grew up in the business, my dad was a realtor… Actually, I have a fun little thing – my dad was a realtor, my mom was a realtor, my uncle was a realtor, kind of thing… My wife is a realtor, my kids are realtors… [laughs] So I grew up in the business, Cincinnati, Ohio, moved to Scottsdale, Arizona in 1981, I started that company that you referenced, and some good investment advice is that if you wanna be a savvy investor, you will not start a real estate firm that grows to 4,000 agents, because you have no time to focus in investing.

In any case, I sold that, then did start a luxury home brokerage, and the focus of my investing – I have one major rule that I follow in my investing, is I don’t invest with other people; when I say “with other people”, I do not let other people manage my money. I figured that I am the one who will care most about my money, but also realize that with respect to investing, there are only certain areas that I know and other areas that I don’t… So my thinking was to figure out one investment model that I could learn and know meticulously (I call it “with meticulosity”) and then execute on that model. That’s what I’ve done, and I’ll be glad to share that with you today.

Joe Fairless: Oh, I love that approach – just focusing on one thing and doing it at a very high proficiency, and then maximizing the results that way… So please, share your approach with us.

Greg Hague: I grew up, as I say, in the real estate business, and that’s the residential real estate business, so I am not a commercial real estate expert. I would say that I’m a residential real estate expert, having been in it – I hate to even say this – for 50 years. This is my 50th year; I was licensed in 1967.

After I was fortunate enough to be successful, obtain a reasonable net worth, I did start investing because I realized that passive income is a true way to escape and be free… And my focus was on residential real estate, so let’s start there – number one.

Number two – I loved the idea of renting homes; that’s pretty simple – buy and rent homes. But I actually liked better the idea of renting homes in a way that I could sell those homes at maximum price, and actually, let’s say, even at more than retail price, where I was accomplishing (in my view) two really commendable goals. Goal number one was to rent homes and get cashflow, and goal number two was to actually sell those homes at a price that was above market, so that at the end of the rental term I ended up with a closing and a big profit on the home. So I got both cashflow and profit.

The bottom line is that I developed what I developed a lease purchase program where I would buy lower to medium price homes, where there’s a lot of lease demand and they’re very affordable, I would fix them up – not fix them up as much for resale, as much as fix them up for rental… But I wouldn’t just rent them. Every single one was never available for rent, and actually it was never available for a cash sale; so I would not sell it to a cash buyer and I would not rent it to only a renter. I would only [unintelligible [00:06:20].11] to someone who wanted to both lease and then purchase and close on the home in two years. That’s the model I established and that’s all that I did.

The benefits of that are, number one, people who are lease-purchasing  homes are generally people who can’t purchase a home, that is get financing now; maybe people just don’t have a good credit at the point, got hurt in a bad economy, some such thing… So the real benefits there are number one, at least in Arizona and in most of the states there is a restriction on the amount of lease deposit you can take… But if you’re doing lease in conjunction with purchase, you can take a larger deposit because you can take a deposit with respect to the purchase. So I would get a larger deposit because these buyers can’t buy for cash or they can’t get financing at this particular time. They’re willing to pay a little bit more, let’s say 5%-10% more for a home closing in two years, so I did maximize my sale price. They would put up a generally reasonable deposit, let’s say 5%-10% as opposed to lease deposits.

And then here’s the thing – they make lease payments, and sometimes, let’s say if a lease payment is going to be $1,500/month but they can afford $2,000/month, we’d make the lease payment $2,000/month, but we would attribute $500 against principal, so they were building equity during the course of the lease.

The good news is at the end of the lease term, if people are able to close, that’s great. If they’re not able to close, I don’t kick them out, and I don’t even want them to forfeit their money. I will renew it again for another two years, we’ll take a look at the price and might adjust the price up a little bit, because homes in these price ranges are appreciating, and we’ll just keep them in the home and let them continue to accumulate equity on two-year rolling lease purchases until they are able to purchase the home, or in the unfortunate event that they can’t/don’t wanna leave etc., they would be the ones to decide to walk away, never me playing hardball and kicking them out.

So a very win/win relationship where I give people two-year options or lease-purchase arrangements that they could roll and continue to roll as long as we were fair in adjusting the price. That has worked out very well for me, Joe.

Joe Fairless: After the two years and they aren’t able to purchase, do they then need to provide another deposit?

Greg Hague: Absolutely not. We let the deposit they previously provided – we let that apply and continue forward. The only adjustment we would make – we might make an adjustment in rent if rentals have gone up; we might make an adjustment in purchase price, but only to the extent (percentage-wise) that homes in that price range have gone up. So very fair, because remember, I have sold the home to them in the beginning at a price that might be 5%-10% above market, and they know that and that’s just a premium one pays because I’m giving them these lease purchase terms and they’re not having to qualify for a loan. But it’s a really nice lease-purchase arrangement because it’s one where as long as the (we’ll call it) tenant buyer stays in the game, continues to make payments and be a good tenant, be a good buyer, they can just stay with me until they’re able to buy that home.

Joe Fairless: On the expiration of one two-year lease, has the rent or the purchase price ever decreased?

Greg Hague: I wasn’t really doing this actively back when the market crashed, in ’07, ’08, ’09, so the answer is no, but when the market declined back in ’08, ’09, I would expect that would have been a scenario where had I been doing this, at that point I would have had to reduce prices and reduce rent payments.

Joe Fairless: What type of attorney are you?

Greg Hague: Well, after I graduated from law school, I went into real estate, so I don’t really practice anymore, but I guess if you were going to say what kind of attorney am I, I’d be more of a contract/commercial attorney; I taught contract law at the law school here, and actually, I was proud to win professor of the year…

Joe Fairless: Wow, congrats.

Greg Hague: So I would say my expertise is in real estate and contracts, certainly not in anything like personal injury or criminal lawyer kind of thing.

Joe Fairless: What law school did you teach at?

Greg Hague: I taught down here at Summit. It was previously Phoenix School of Law in Arizona, and then they changed it to Summit Law School. My story there is I passed my original first bar exam back in Ohio in 1974, but never really practiced. I worked with my dad in his real estate firm, then started my own firms…

Then when the market crashed out here in Arizona in ’08-’09 I thought “Well, there’s nothing to sell in real estate”, so I decided to take the Arizona Bar at 60 years old, which was kind of crazy… I hadn’t been to law school in 35 years. I went ahead and not only passed the Arizona Bar, but got the top score in the state when I took the bar exam. That got a lot of publicity, because 60-year-old guys aren’t supposed to do that. I did practice commercial law for about a year and a half, and quite frankly, I got tired of driving downtown and working in an office all day, so I went back into real estate.

Joe Fairless: With your background as an attorney, was it less daunting for you to put together the lease purchase program, versus someone who doesn’t have the legal background?

Greg Hague: I’d say that’s a fair statement, because I’m very comfortable with contracts and comfortable with real estate, I would probably be more comfortable than most in doing this… Although the principles – you don’t have to be an attorney to really understand the principles of what I’m doing and understand the kind of contractual terms that you need.
I think a really good advice for someone who likes the kind of model I describe is in the beginning to work with an attorney, just to make sure you get your documents and your processes all dialed in, and at that point keep the attorney there if you have questions, but I think you could just move forward on your own at that point, as long as you get good advice upfront.

Joe Fairless: And is the question you ask the attorney when you’re screening which attorney to work with simply “Have you worked on contracts that are lease-purchases?”

Greg Hague: I think that’d be a great question to ask. There’s a website, avvo.com, that has attorneys go in — you can actually ask questions on Avvo; there are various attorneys who are looking for business in there. That’s what I’d recommend – look at attorneys that have commercial real estate background and ask them some questions about lease purchases… Have they done that? Have they represented people who have? And more than that, just actually ask them the kinds of questions that you might have if you’re thinking about getting into that line of investment and see how they answer those questions. That is a great way to determine whether somebody might be right for you.

Joe Fairless: Thanks for sharing that, I was not aware of that website, and that will be a resource, I imagine, that will be helpful for a lot of people.

Greg Hague: With the approach you’re taking, the lease purchase – you’re getting the rent, so you’re getting cashflow, and you’re also getting a premium for the house within two years, assuming they live up to their side of the bargain… And certainly there’s some benefits for you if they don’t, and it kind of still benefits them because of how you structured it – you’re letting them renew it, it’s up to them. The question I have about this, because I imagine some Best Ever listeners are thinking this – this is a glorified flip (two years you’re in and out) and you make money, assuming things go well, on both sides, but you’re only in it for two years and then you’ve gotta go find something else, and you’re just constantly recycling… Versus the long-term buy and hold, put a resident in there, pay down the mortgage, make a little bit of money along the way and build your portfolio over time so it’s more and more units – what would you say to that?

Greg Hague: I would say it is. However, the real benefit to it is that if you look at home appreciation, which has been significant over the last few years, because lease purchasers are willing to pay more for property, because they have to, because there aren’t that many available for lease purchase, so there’s a lot more demand than supply… Because they’re willing to pay more, you maximize your return; so while you might call it a glorified lease purchase, I would think of it as more this model that I believe in. I would think of it as more of just a way to maximize your return on the properties you’re investing in. If you hold them, you’ll get normal appreciation; if you lease purchase them, you’ll get normal appreciation plus a premium.

Joe Fairless: How active are you in your business with the lease purchase program? I’m trying to get a sense of how much time does it take you to spend on this and how many do you have going on at one time?

Greg Hague: Well, the truth is I’m not at all active in it right now, because I am so busy with another project… I don’t know if your listeners have read, but I am launching a website on February 19th that will be a competitor to Zillow, and I have thousands of realtors across the country who have supported me in this, we have almost 1,000 realtors who have contributed to our crowdfunding campaign at StopZillow.com…

Joe Fairless: How much have you raised for it?

Greg Hague: I think if you look on there today, it’s almost $300,000; over $290,000, I believe.

Joe Fairless: Wow, that’s impressive.

Greg Hague: So that has been my absolute, total focus over the past year. Also, I own a luxury home brokerage here in Scottsdale, Paradise Valley area and we’re extremely busy… So I’ve had zero time to do it myself. My money is sitting in the bank right now, I’m one of the worst investors in the world; it’s sitting in the bank right now, earning like, I don’t know, half a percent, if even that, so… [laughs] So don’t look at me right now as being one who is the savvy investor, who is doing what he preaches. I am not doing what I preach.

Joe Fairless: Yeah, but you did it for how many years?

Greg Hague: Oh, I did it. Going back many years, I did it for years and years. I found it to be fun. That was back when I had time to do it, and this requires a little bit more involvement than just like a passive investment. So I really enjoyed it, but I just haven’t had time to do it recently. I don’t do what I preach, unfortunately…

Joe Fairless: Well, but you did, and that’s what’s most important. But approximately, how many of those did you see through from start to finish? Just roughly. Two? Twenty? Three hundred? Just a rough estimate.

Greg Hague: I just couldn’t — like, back in Cincinnati, when I started in Cincinnati, I remember we started doing it with townhomes, then my dad developed subdivisions and we actually did it with his firm, Hague Realtors, in Cincinnati… He would develop subdivisions of 20, 30, 40 homes, and a portion of those we would do lease purchases on… So just a lot.

Joe Fairless: Let’s say 100, just for — or 200. I don’t know what a lot is.

Greg Hague: I don’t either, because remember, this goes back — I started doing this back in the 1970’s with my father, so…

Joe Fairless: Got it. Alright, then I have a question that ties into this, that’s why I was trying to get a rough number. Can we conservatively assume that you did at least 100?

Greg Hague: If you look at the ones that I have started doing back in Cincinnati with my father and his  [unintelligible [00:17:16].04] and all that, I would say that we could assume that it was 100.

Joe Fairless: Okay, cool.

Greg Hague: But again, this goes way back, just FYI.

Joe Fairless: That’s fine, that’s fine. So my question is, now that you aren’t actively doing it, money isn’t coming into your bank account from that strategy, so my question is if you could now choose between the approach you took with those 100+ properties, or have 10% of those properties, so approximately 10 homes in your portfolio, making you money, that have since had the principal paid down, which would you choose?

Greg Hague: I’m more of an active investor. I liked to be hands-on. How can I say this the right way…? I like action and I like involvement; I like to play poker. So having a home that would sit – I presume this is what you’re saying… We’d kept ten of those homes back from Cincinnati and they were all paid off by now, which they certainly would be, and I’d been receiving rent, would I prefer that? The answer is no, but that doesn’t mean it wouldn’t have been a smart move. It’s just not my personality. I like to be hands-on, I like to work my money. So it wouldn’t have been that it wouldn’t have been smart, it’s just not me. That’s the best way I know how to answer that.

Joe Fairless: Cool. Fair enough. Going back to the website you’re launching – what’s the URL? If you could share that, so that we know where to go to check that out.

Greg Hague: Yes, we’ll unveil the URL on February 17th at the website launch party at my home, and if you would like to see what that party’s about, go to websitelaunchparty.com. But if you’d like to see what the website is about, you could go to StopZillow.com, or same place you’ll go if you go to plantosaverealestate.com. That’s where you’ll see our crowdfunding campaign, you’ll see my videos up there, and you’ll see what this is really all about. And the whole idea – if I could just talk about it for a minute, would that be okay?

Joe Fairless: Sure, please.

Greg Hague: It’s that I believe it doesn’t make sense that we as a profession, the real estate profession – a profession that sells homes – doesn’t have its own website to market those homes. We’re dependent on third-party websites like Zillow and like Trulia, and like even Realtor.com. The NAR – I presume your listeners know, maybe they don’t – National Association of Realtors sold Realtor.com a few years ago to Rupert Murdoch for 950 million dollars. We do not even own our own branded website, and it’s just insane. No other industry that sells a product doesn’t have its own website to market that product, and yet we as a profession don’t. We are handcuffed into using a website like Zillow, and if you go into Zillow, you’ll see that they do things that at least from a realtor’s perspective we find objectionable – at least I do, and a lot of realtors I know do. For example, a home that you would buy for investment and then you go to sell and you list with a realtor, and let’s say you’re selling it for $450,000, Zillow may well post a Zestimate value right below your asking price that’s $50,000 below your asking price. Well, you’re up the creek; no buyer’s gonna pay your asking price when they see that Zestimate, and those Zestimates have been proven to be inaccurate.

I’m not gonna make this about that, other than to say that that is the project, to launch this website, and the goal is over the next few years to turn it into the first-ever realtor-owned, realtor-managed website, an official website for the real estate profession, and you can read about it and watch my videos; they’re at StopZillow.com. If you believe in the mission and you wanna contribute, you can contribute as little as $25 and you’ll get access to our smartphone app, website, how to use this, on February 19th (that’s a Monday). You’ll get access and become one of our supporters and also one of the first in the country to demo it.

Joe Fairless: You do like to be where the action is, don’t you?

Greg Hague: Yes, I do. That’s what I meant. The idea of buying a home and renting it and just letting the mortgage pay down over time – it’s a great concept, and it’s so right for so many people, it just ain’t me.

Joe Fairless: Fair enough, fair enough. What is your best real estate investing advice ever?

Greg Hague: I think this is not going to be a watershed, I’m sure your listeners have heard it many times, but the money is made when you buy, not when you sell.

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

Greg Hague: Sure.

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

Break: [[00:21:44].08] to [[00:22:19].12]

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

Greg Hague: Best ever book I read was How To Win Friends And Influence People by Dale Carnegie, by far.

Joe Fairless: Best ever deal you’ve done?

Greg Hague: Best ever deal I did was I helped a friend of mine sell a casino in Las Vegas. That was totally fun and made a lot of money.

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

Greg Hague: A mistake I’ve made on a transaction… Gosh, there’s so many. I’ll just give you one of the minor ones – I bought many people refrigerators and washer and dryers because back in the old days (I’ve gotten better) I forgot to exclude or include, or whatever… [laughter] So I’ve written a lot of checks for refrigerators and washer and dryers, how’s that?

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

Greg Hague: The best ever way I like to give back is I believe that in this country it is just so wrong that everybody doesn’t have some form of a home, some form of shelter, so for many years I have been a supporter of the homeless with Phoenix Rescue Mission, and now with my wife we’re getting involved with an organization called Homeward Bound. I believe that, because I’ve grown in real estate, it’d be appropriate for me to try to help everybody have a roof over their head.

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

Greg Hague: They can reach me at Greg@realestatemavericks.com, or call my office at 480-998-9900.

Joe Fairless: Greg, I’m grateful you were on the show, talking to us about your newest venture and project that you have. It’s very impressive that you’ve got about 300k worth of crowdfunding already pledged towards it, as well as your singular focus when you were investing on the lease purchase program, talking to us about how to do it, benefits, pros, cons. Also, you and I talked about more of a long-term play and what type of personality and approach this would be best for.

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

Greg Hague: Thank you, Joe. My pleasure.

JF1160: The Science And Art Of Wholetailing #SkillSetSunday with Justin Colby

Listen to the Episode Below (24:59)
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Justin and his team have moved over 650 homes! Today, he’ll tell us how we can profit more per deal and how to get more deals. Justin says that in order to get more deals, we need to quit being “one-trick ponies”. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Justin Colby Real Estate Background:

  • Co-Founder and President of The Science of Flipping, Omni Investment Group and Phoenix Wealth Builders
  • Host of The Science of Flipping Podcast
  • Last year he flipped 96 homes and as a whole, he and his partner have flipped/ wholesaled over 300 properties to date
  • In the process of building 79 townhomes in Mesa, AZ.
  • Based in Scottsdale, Arizona
  • Say hi to him at http://thescienceofflipping.com/

 


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TRANSCRIPTION

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

With us today, Justin Colby. How are you doing, Justin?

Justin Colby: Good, man. How are you, bro’?

Joe Fairless: I’m doing well, nice to have you on the show again. Best Ever listeners, you have heard of Justin Colby, because 1) You listen to his podcast, probably; if you’re a flipper, you certainly should (The Science of Flipping), and if you don’t, then I know you listen to our podcast, and in episode JF 64 he gave his best advice ever. He’s also been on the podcast a couple other times on the special segments.

Because today is Sunday, we’ve got a special segment for you called Skillset Sunday, like we usually do. We’re gonna come away with a specific skill that perhaps you didn’t have, or we’re gonna help you hone that skill by the end of our conversation. That skill is the science and art of wholetaling. It’s a big focus of Justin’s right now.

A little bit about Justin, just as a refresher – he’s a co-founder and president of The Science of Flipping. Last year he flipped 96 homes – yes, 96 homes – and he has a partner who they have flipped over 300 properties to date.

He’s in the process of building 79 townhomes in Mesa, Arizona. Based in Scottsdale, Arizona… With that being said, Justin, just to give the Best Ever listeners a refresher – do you wanna give a little bit more about your background and your current focus?

Justin Colby: Yeah, absolutely. I think my assistant might have sent you an old bio; we’ve done over 650 homes…

Joe Fairless: Wow!

Justin Colby: We’re getting close to 700 at this point. We’ve actually sold off the development. That was good, because if you’ve ever tried to develop or are a developer, you know the headaches and hassles that come with that. So it was actually a good move for us to sell that off, but I definitely think she gave you the old one… That was definitely a couple years ago.

But things are rocking. One of the biggest things that I keep getting asked from our podcast listeners The Science of Flipping, from our students (whatever) is how to profit more per deal and how to get more deals. So obviously, you have me on the show and we’re talking about your specific trade or skill – Skillset Sunday I think you named it, and it’s a great name, by the way…

Joe Fairless: [laughs] I love alliteration.

Justin Colby: Yeah. So obviously, you and I have known each other for quite some time, so one of the things that I wanted to bring to your loyal listeners is this art of wholetaling, which is a close cousin of wholesaling, as well as actually rehabbing. The main difference here between all three – wholesaling, you tend to lock a property with the intent to either assign your contract and/or do a double-close of sorts. Rehabbing, like everyone is well aware – you negotiate a deal, you buy the property, then you add value to it by rehabbing it – maybe a new kitchen, a new roof, adding square footage, popping the top and going vertical… I’ve done it all.

Back in 2010 I started what — I don’t know if I can claim I termed it, but we started wholetaling, which is a cousin, being that I find the leads and negotiate the leads the same way, but instead of the intention of either assigning the contract, I actually will buy the property using private lenders, and then instead of rehabbing it, I don’t rehab it. I don’t put any more money into it, and I actually just relist it on the MLS.

The reason that strategy works – and it works in any city and any market… Well, I guess I shouldn’t say any market, because if it’s a downhill, a slide, like 6, you wanna be very careful. But the reason this strategy works no matter where you are is because especially right now, in a seller’s market, you can get top dollar. So one thing that everyone wants to know is how do you make more money in this industry, right? And one of my answers to that – there’s several answers, but one of my answers is stop being a one-trick pony and only wholesaling, or stop being a one-trick pony and only rehabbing. The headaches that come with rehabbing is a slow paycheck, for one. It may be bigger, but it comes slower. Dealing with contractors that don’t finish the work on time, and every other hurdle, as well as maybe the city.

The hurdle with wholesaling is you might not make as much money per deal as you actually want, though you make more money quicker and you don’t necessarily have to raise any money privately. So this is a go-between that in a seller’s market you can get top dollar. I mean, literally, we’re getting an extra 20% to 50%, even 100% more than we would on our wholesale deals.

It’s a strategy that I’ve been teaching for a small group of people, and I’ve finally kind of got the courage to bring it out to the mass public, and speak on your show, and others are interviewing me about this subject as well.

Joe Fairless: If you don’t rehab the property, then who are you selling it to? Because I imagine the single-family homebuyer, the primary residence person is gonna want something that’s ready to go.

Justin Colby: Yes, so it is not a one size fits all. We try to do — about 30% of our deals I would like to be wholetails, and that comes down to the knowledge of the market, meaning the key to this entire world is you need to know your market and what’s selling for what. Otherwise, don’t be buying properties, don’t raise money. You just need to know your market, that is the key.

But we are actually selling to other investors, and the reason why is because guess what agents have on their buyers’ list? Other investors. Let’s just make the argument – I’m gonna use Phoenix – there’s 30k (I think there’s close to 40k) investors here in Phoenix. Let’s just say there’s five buyers on each of those agents’ buyers list… Just five, no more than five. So 150k buyers – all of those buyers are having the same problem that we’re having, which is what?

Joe Fairless: Finding deals.

Justin Colby: Exactly. So I am direct to seller, no realtor knows about it, no one else knows about it, I get it under contract… Now, I have a list of 22k or so for wholesale deals (buyers, that is), well, why wouldn’t I wanna go catch 150k buyers by putting it on the MLS? I decide the terms, meaning if a realtor brings a buyer, it has to be cash or hard money; they are gonna go conventional or use a loan for it, because the home is in good condition. Then I’m gonna require them to put down a non-refundable deposit of anywhere from 10%-20% non-refundable. Their skin is in the game. They’re buying a $200,000 home, they’re coming up with $20,000-$40,000 that is absolutely non-refundable, even if they don’t get the loan. So I get to dictate terms. But at the end of the day, the people we are still selling to tend to be investors, but because they can’t find properties, realtors can’t find properties, I’m giving the market an opportunity to have a property that still has profit in it. So I’m really feeding a niche that a lot of people, especially in Phoenix, arguably one of the most difficult real estate investing markets there is… There are a lot of people — our friend Sean is here, and Cody, and so many other investors are here. Well, if they only traditionally wholesale, I have a leg up on them because I have money that I can buy the home, and then list it and get a premium and open it up to another however many buyers that I don’t even have on my list.

Joe Fairless: What would be the downside if you aren’t able to sell it wholetail basically at the retail price that you’re looking for?

Justin Colby: Anytime you are borrowing money, and whether you’re a rehab flipper or a wholtailer, or even if you buy and hold – there’s always risk, and that’s why wholesaling is such a great way to get into the industry, because it really limits your risk. So wholetailing – the downside of that obviously is you don’t make as much money. You don’t wanna use this as a catch-all; this isn’t every deal ever I’m gonna be wholetailing… This is, again, a tool in your toolbelt for the right home.

We just bought one last week for 400k, we have it on the market as of this weekend for 495k… So after cost of money – I didn’t rehab it at all – there’s roughly 10% of my sales price goes to commissions for realtors, cost of money, holding costs… It’s roughly 10%. It’s a little under that, actually; it’s closer to 9%, but I just rounded up. So after said and done, 95k minus roughly 45k – I made $45,000. I probably could have made 25k on a wholesale fee. So I doubled my money, I 2x-ed my money because I had an opportunity to take this property down.

So again, the risk would be if you don’t get it sold at the price that you want it sold, that’s why you really need to know your market. I was gonna wholesale it for 25k, and whether I got the 25k or not, but that’s where we were at, so we underwrote it for a wholetail.

So again, if you can 2x your money knowing your market, it limits your risk. Now, there’s a risk anytime you’re borrowing money and buying a property…

Joe Fairless: Yeah, and I imagine the buyers who want the loan are definitely not desirable, because even if they put up 10%-20%, your returns wouldn’t be as good, since you’re borrowing the money and you’re paying on a monthly or whatever your terms are with your hard money lender.

Justin Colby: I dictate that. So you’re right, I would prefer a cash close quick, but if they come in, they’re willing to put down the 10%-20% non-refundable, an extra 30 days, and then we’ll stipulate… I’ll actually even go — if there’s a lender here that will pay them enough, I’ll actually line up hard money until they can refi it with a bank, just to save myself. But at the end of the day, 3k for an extra monthly payment — again, so I went from making 45k to making 42k grand… I’ll take it. I’m still making an extra 20k+ over wholesaling.

It’s a very similar amount of time. The reason why I say this is I’ve rehabbed well over 350 deals, I’ve wholesaled roughly 250-300, so it’s something where I know the difference between the two; there’s huge high risk in rehabbing, because now you’re actually putting in money and creating value, and if  [unintelligible [00:11:16].03] you can be f-ed, and ask me how I know that, right…? And I love wholesaling, for obvious reasons, same reasons everyone does, but this is a great little niche that you can put in an extra 150k-250k in your pocket up and above — stretch your bottom line is what I’m basically saying here.

Joe Fairless: For a Best Ever listener who is line “Yeah, I like this wholetailing! Oh, wait… My bank account – I don’t have that money.” How do you recommend someone starting out go find private lenders?

Justin Colby: I run a training on this, but one of the tools I use… A business partner, Kent Clothier, has a tool called Find Private Lenders; I’ve been using that now since he came out with it. It’s the same type of direct mail, basically… [unintelligible [00:11:59].23] all the data for people who lent privately, meaning not a corporation, and the direct mail simply says “Hey, I saw you lent on 123 Main Street. I have a property very similar to 123 Main Street. If you’re interested in lending again, please give me a call.”

I found one lender specifically out of California that averaged over 8 million dollars with this one lender.

Joe Fairless: Through direct mail?

Justin Colby: Through direct mail. That data, again, Find Private Lenders now packages it, but that’s all public data; you can absolutely go down to the County Recorder’s Office and pull all that data for yourself if you would like to do that. I’d rather spend $1,000 and find private lenders now. [unintelligible [00:12:38].27] it’s as easy as knowing who you’re talking to, and one of the things that everyone’s biggest hurdle is “How do I raise money? I don’t know…” – if you don’t actually go ask for it, you’ll never get it, and most people actually never go talk to people about opportunities in real estate, because they’re scared, quite frankly.

They might be marketing, they might be wholesaling and you’re making some money – well, if you can take that one wholesale deal and show that to someone who might have some money… Maybe they have a savings account, maybe they have a self-directed IRA, maybe their family is rich or whatever, to say “Here’s an opportunity – instead of throwing it in the stock market…” I have a whole presentation about this that I can give your listeners if you guys would like; I call it a Private Lender Packet, and you just present it. “Here’s 123 Main Street. Here’s my purchase price. Here’s the sales price. Here’s the mortgage I’d like to borrow money at 10%. Here’s the mortgage layout. After two months I would owe you this, three months this, four months this… Blah-blah-blah. Here’s how you’re protected with a note.” The main key here is they want protection.

It’s not even as much about how much money can they make, it’s how is my money gonna be protected so I don’t lose it, because in the stock market it’s not protected. So in real estate we have a way to protect them, and if everything goes to hell, then they at least have an asset which is real estate. So it’s about educating them if they’ve never lent on real estate, but once you do and someone has done it once, they have an itch for it. I promise you right now, because shows are so popular, everybody and their mother – and Joe will agree to this – wants to be in the real estate investing business.

Look at Grant Cardone – he’s everywhere right now, talking about real estate investing and lending on property and returns on your investment. It is everywhere. So you open up the door a little bit to someone, I promise you they’re gonna start drooling a little bit, trying to figure out how they can make this work, how they can protect their money and what type of returns they can get. It just takes you to go out and talk to them.

So besides a list and direct mail, quite honestly, it’s about the people around you. I have a friend who inherited a decent sum of money; he’s a fireman, he doesn’t know what to do with it, and he’s like “Hey, I know you flip homes; I’d like to do something with my money.”

I’m like “Listen, I don’t like mixing friends and business, but here’s what it’s gonna look like.” I gave him the same type of packet. If you’re good with this, awesome; you can lend me money. If not, no harm, no foul. But you would be shocked about your friends, your family and the people around you, the people at meetup groups… If you guys aren’t going to meetup groups, talking about raising money or doing deals together, you’re missing some easy money, and I don’t wanna use the word “easy”, because it’s not just easy, but it’s a lot more simple than people think it is.

Joe Fairless: Right. It’s true, it is… Especially once you get some momentum and you have some projects that are returning some capital, because then you get the same people and then they talk to people, and then you attract other people…

I wanna ask you a clarification question. You said the direct mail piece says “I saw you lent on 123 Main Street. If you’re interested in lending again, give me a call because I have a similar property.” Where in the public records does it show that someone lent on a property?

Justin Colby: Well, it will show that there was a loan on the property, and then the way you decipher it is if says Chase Bank or it says Justin Colby. If it’s Justin Colby, it may not be 100% guaranteed, but you are 99% sure that that’s a private loan.

Joe Fairless: Okay, cool. And then the other question is what are the types of terms — you gave a hypothetical example – I think you said 10% – but just for a Best Ever listener who’s getting started with private lenders, what’s a typical term? I know it depends on the investor, it depends on the deal probably, but just generally what are you seeing?

Justin Colby: Most common it’s somewhere between 10%-15%.

Joe Fairless: Annually?

Justin Colby: Yes, annualized. I’ve raised all the way down to 8%; I just got a line of credit from a lender at 9% for five million dollars. Once again, to Joe’s point – once you start doing something and you start to show results, money becomes cheaper and cheaper and cheaper, and what I wanted to say about that is even if you have to cut your teeth, meaning you have to do your first deal as a partnership, where you call someone and be like “Hey, Joe, I wanna do this deal, blah-blah-blah… Why don’t we JV it? You bring the money, I’ll bring the deal, we’ll split profits.” Even if you have to start there, which is very expensive money – that is as expensive as it gets – but now you start to have a track record; you can then bring that track record to so many people that your money is gonna get cheaper and cheaper and cheaper.

So even if to start out you need to JV with people, do joint ventures and split profits just to get the ball rolling, at least you have the opportunity now that you have this experience to bring elsewhere.

Nowadays most loans are 10%-15%, anywhere in there. I have a lender that gives me as low as 8%. 8% is the lowest I’ve received privately. I know, again, if you’ve got a Credit Union, some banks you can get lower, but I’m teaching guys how to do it privately, so you don’t have to have any money out of pocket. And you do a note. I tend to do a six-month, just because I know I’m not gonna hold it for very long; you annualize the interest… I back-end it, meaning I’m not even debt-servicing through the note, meaning if I’m supposed to be paying $1,000/month, it actually accrues on top of the principle, and so when I sell it, that’s when they take the $1,000/month including the principle. I don’t actually debt-service and cut checks every month.

Joe Fairless: You don’t do interest-only payments or anything?

Justin Colby: No.

Joe Fairless: Okay, you just lump it all towards the end.

Justin Colby: Yeah, because of liquidity issues. So if you’re doing 5, 10, 15 of these at a time, or rehabbing, a lot of times the hurdle of rehabbing is liquidity. You have five deals wrapped up and you’re doing rehabs and you have all this money out and you’re like “Holy hell, I have no money in my bank account.”

Joe Fairless: So a five million dollar line of credit at 9%… Are you lumping it all towards the end on those deals too, or do you have some special terms?

Justin Colby: Yeah, that line of credit I can’t. Privately, I do. So I call Joe and I’m like “Joe, give me a loan. Great.” I would say “Hey Joe, let’s structure it at 12% interest.” I’ll do back-ended interest, meaning it will just continue to accrue, and then we’ll just map out what the loan looks like – 6 months, 12%, etc. But with the line of credit, I do have to debt-service that. You have to do that.

Joe Fairless: Okay. And the line of credit – is that with a community bank?

Justin Colby: No, it’s actually with Lending Home… If you’ve heard of Lending Home.

Joe Fairless: I have.

Justin Colby: [unintelligible [00:19:18].00] give anyone paperwork to see if they would fit that model; they do a very light credit check. You have to show you have money in the bank. They don’t wanna just lend to anybody. So it’s not necessarily for starters, I would say. People who are out there doing deals, making money, you can go get a line of credit, go through an application.

Joe Fairless: In the typical terms, you didn’t mention any points at closing.

Justin Colby: Privately versus the line of credit it’s gonna be different. With a straight note, let’s call 10%, six-month note, annualized, debt-servicing on the back-end, right? Line of credit can be different. It could have points, you could increase your points and have lower interest, you can have less points and have higher interest, but it’s all dependent upon what you want, what makes more financial sense.

Points, a lot of times for quick transactions are not good. So I personally, as a wholetailer, want no points, ever. I want higher interest, because I’m not tending to hold it on long. Wholetailing – you should be in and out within 30 days, period. From the day you buy it to the day you sell it and collect the check – no more than 30 days. That’s the intention.

Now, things happen, I get that, but your intention is to have a quick check, just like wholesaling. But you’re doubling, you’re tripling, you’re quadrupling what you normally would make on a wholesale property.

Joe Fairless: Anything that we haven’t talked about as it relates to wholetailing that you wanna discuss before we wrap up?

Justin Colby: I think the thing that I’ve gotta just keep hammering home –  you need to know your market. You need to know how many days the property is on the market for, you need to know what price point the hottest market is; for us, it’s about 150k-200k, that is the epitome of on fire. So if I were to do this deal — again, I’ve just bought a home for 400k, so I have to know, before I bought it, how many days on market are most properties of 400k? Are there any comparable as is properties? Because I’m not gonna rehab it.

So you’ve really gotta dive in and know all the way down to what percentage of list price are homes selling for. We saw that the homes at 400k were selling about 97% of list price. So if I listed it for 495k or whatever we did, the market is tending to give me 97% of that, that’s what the home is selling at.

So it’s crucial to know your market, to know your price points, the days on market, how quickly things are moving, all the way down to how many cash transactions are in that zip code… So getting data before you pull the trigger on this is gonna be the most paramount part of this. But once you know that data, security comes with knowledge, right? So it will be a lot less risky because you have the knowledge behind you. That would be the last thing I wanna make sure everyone’s very aware of – the most important part is the knowledge of your market, your zip codes, how quickly things are moving.

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

Justin Colby: TheScienceOfFlipping.com or The Science Of Flipping Podcast on iTunes is there. You can e-mail me at Justin@thescienceofflipping.com for any questions. I think I did this last time – I have a book that I sell on Amazon, named The Science Of Flipping. I sell it for $15, but anytime someone is gracious enough to interview me on their podcast, I tell them to go find it on my website for free. So just go to TheScienceOfFlipping.com and go ahead and download my book – it’s my real book; it’s not just an eBook, I actually sell this on Amazon. So it’s a $15 book that I’m giving you for free. Just go to TheScienceOfFlipping.com and you can grab that book.

Joe Fairless: Cool. Justin, you delivered on the value proposition here of wholetailing and discussing the pros and cons, the differences when compared to wholesaling and rehabbing, how to find private lenders — well, first off, what the heck is it, how to find private lenders to help fund those deals, the list of direct mail, people around you, the typical terms that we can expect to receive… I love how you mentioned you don’t want the points, you’d rather pay a higher interest rate; I wrote that down, I was like “That’s interesting.” That’s a good negotiation point to remember when you’re talking to private lenders, because when you do the math, yeah, that makes a lot of sense – 1% at closing versus paying 1% over 12 months; d’oh, it makes a lot of sense.

And also the data that is needed prior to doing this, and I’m really glad you went through that at the very end – days on market, what percent of the list price are homes selling for, and knowing what is the sweet spot. In your market it’s 150k-200k homes that are the hottest.

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

Justin Colby: Thanks, dude!

JF1021: How He Develops Commercial RE Nationwide While Living in One Place

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He’s able to stay in one place and partner with multiple companies in multiple markets around the United States. He has perfected the craft of networking, and referral-based business is all he will accept. Hear how you can make ties with other individuals in other parts of the world!

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Joshua Simon Real Estate Background:
– Founder and CEO of SimonCRE
– Seasoned real estate professional with over 12 years of experience in leasing, development, and finance
– In 6 years has developed over 1.6 million Square Feet; has over $90 million in construction planned in 2017
– Founded a hosted VoIP company, which specialized in business communications called One Stop Voice
– Based in Scottsdale, Arizona
– Say hi to him at http://simoncre.com/

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

Josh Simon: I’m doing great, how are you?

Joe Fairless: I’m doing well and I’m excited to talk to you. We’ve got a seasoned real estate professional with over 12 years of experience in leasing, development and finance. In six years he’s developed over 1.6 million square feet and has over 90 million dollars in construction planned in 2017. He’s the founder and CEO of Simon CRE and he is based in Scottsdale, Arizona.

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

Josh Simon: Yeah, sure. I’ve been, like you said, developing for 12 years, focusing on retail. This year we’ll do about 40 [unintelligible [00:03:16].05] projects in about nine states, mostly for O’Reilly Auto Parts, Dollar General, PetSmart, Starbucks, several national users. I think what gives us a unique experience is that we do stuff all over the country.

Joe Fairless: Yeah, that is unique. How are you able to have exceptional teams across the country, while being based in Arizona?

Josh Simon: Well, that’s a good question. It’s probably one of the hardest things we deal with. What we find is that you have to locate the good people in every market. We have 12 years experience; we find these guys over and over again and we start using them.

Joe Fairless: How do you find them?

Josh Simon: Referrals. Everything we do is networking – finding people, getting good referrals.

Joe Fairless: So  you get a referral… How do you qualify that team member? And just to bring it to life a little bit for some listeners who might not be as familiar with the process – who are the team members that you’re interviewing?

Josh Simon: Anywhere from architects to contractors; anyone that has to do with building a ground-up project. Attorneys, if you have an issue, civil engineers, surveyors…

Joe Fairless: Let’s just pick one of them… You can pick whichever one you want that you just mentioned; even though you got referred to them, I’m sure you still qualify them through your own process in some fashion. What is that qualification process look like or even sound like when you’re asking the questions?

Josh Simon: Well, it’s tough, because you don’t meet a lot of the people when you’re doing stuff all over the country; you don’t get to sit down face to face always, so a lot of it has to do with gut.

I’ll give you a good example – contractors. That’s probably the biggest struggle. Have you ever remodeled your house?

Joe Fairless: I haven’t, but I’ve heard contractors are the biggest challenge out of any project.

Josh Simon: I think the hardest thing [unintelligible [00:05:11].07] your listeners are gonna say, “Oh, I’ve remodeled a house; I got swindled a few bucks” or “I dealt with a bad sub that didn’t do the right job.” Contractors are probably the hardest thing that we deal with.

If I look at my list of problems I have to deal with today, like after this show, it’s probably around some kind of contractor issues. And when you do that many projects, it’s just a natural that you’re gonna run into issues… Not so much [unintelligible [00:05:35].04], but it could be sub-contractors that didn’t pay their supplier… So I think if I have any kind of advice in dealing with subs and contractors and vendors in general, call the referrals, do your homework, look at their financials and then look at the projects that they’ve done.

When you go do anything – let’s say you get three price in anything in life, just like when you have a handyman at your house or if you’re doing a remodel on a rental – don’t always go with the low guy, because you’re either missing something or he’s gonna change order you to death and you’ll end up paying way more.

So kind of the way we looked at it is we try not to always go with the low guy, we try to go with the guy that’s the best fit for the job. And kind of going back to what you said with the vendors – yeah, we look at everything for referrals, but we’re also looking at everything to see if they’re the right fit. If you need foot surgery, you don’t call a heart doctor… I think the same thing with architect and contractors – have they built that product type before? We’re not gonna use a single-storey retail contractor to go build a two-storey office building; it just doesn’t make sense.

Joe Fairless: I get that. I just want to back up a little bit… When you said “Call the referral, look at their financials and look at the projects they have done” – as far as looking at the financials, can you elaborate on that?

Josh Simon: We’re coming out of the great recession, so now contractors’ financials have improved. Back in 2010-2013, looking at a three-year financial statement, the tax return and profit & loss and the balance sheet – they didn’t always look too good. What we really wanna see is how much revenue are they doing? Are they making money? Do they have cash? Meaning, if you’re gonna do any size project – let’s say they’ve got a million dollar job, for example. If they have 50k in cash, well what happens if one of those subcontractors needs money to show up at the job the next day?

We’re processing a draw for the contractor, which is how you pay the contractors – you pay them through a draw process. And if that sub needs money and he’s only got $50,000 in the bank, is your job gonna proceed as fast as you want? Is he gonna stay on schedule? So I think it’s a relationship — just like a bank looks at a borrower’s financials, you wanna look to the contractor’s financials, because when you’re building anything, especially what we do, our construction cost is probably 80% of the total project budget, so that’s one of your biggest decisions you need to make. If it’s not done right, you can end up with legal issues, with a delayed project, with loss of rent from the project being delayed.

Joe Fairless: So that is a typical request to ask a contractor, in your case with these developments, to provide their financials?

Josh Simon: Yeah. Most of them will; some of them will ask to provide them directly to the bank, and then your lender is gonna review them, and your lender is gonna tell you if they approve them or not. I’d say 9 times out of 10 they happily provide you financials, because it is a big decision… Just like if you’re hiring an employee, sometimes you do a background check. You wanna make sure that this contractor is who they say they are. One other thing I’ll add, when you’re doing your due diligence it’s one simple step – going to the registrar of contractors website for every state that they’re licensed in… Do they have any outstanding complaints? Do they have task complaints? What does their history show online?

Joe Fairless: What is that…? You said it’s specific to every state, but what is the website you go to?

Josh Simon: The registrar of contractors for every state has one… As a contractor, in every state you have to be licensed. And every state (I have not run into one that doesn’t) has an online database where you can look up that contractor. For example, in Arizona they have a great website. You can pull up the contractor’s name, find their license, when does it expire, do they have all their stuff current (their [unintelligible [00:09:24].23], their insurance)? And then also, are there any complaints that have been filed against the contractor? You can actually pull up that information.

Joe Fairless: Great stuff… What a useful tip. Let’s take it back a little bit from a macro level. I’m on your website, I’m on projects, and I see you all have done projects in California, Alice, Texas (I have no clue where Alice, Texas is), Loretto and then Clifton, Arizona, another California, Kansas… How are you getting the business in these remote towns?

Josh Simon: Our business all derives from the retailers themselves or the tenants themselves. So all [unintelligible [00:10:12].13] are publicly traded. So all of our deals come from relationships. Like in anything in life, relationships are everything. So our ability to build those relationships with different tenants at different companies is what has gotten us here, and I think that’s one of the most important things. Obviously, you have to execute, but I think just getting yourself out there and making sure you’re networking and telling the story of who you are is very important.

Joe Fairless: If you can trace it back to a specific project or maybe a year or groups of projects, when was a tipping point for your company where you started getting a lot more business than you had previously, you hit a different level?

Josh Simon: That’s a great question. I think as millennials we tend to want everything today or in the next five minutes. When I started the company seven years ago it was not as fast as I thought. I started, I didn’t have two nickels to rub together; I just wanted to do my own thing, I figured I’d have nothing to lose. Our first three years in business we might have done 12 developments. It took a year to get my first two done – almost a year, exactly. Then after three years you start establishing a name in the market.

Twelve deals is not a lot, but all of a sudden people see that you’re real, lenders start seeing that, you pay back loans, tenants see that you can complete a project and you’re able to show them that you’re not an overnight deal and you’re gonna be gone.

I think one of the other things though is outside of real estate, when I started my own company I also bought a tech company; we did hosted VoIP, which is a business phone system. After three years side-by-side of both companies, I decided to sell the tech company to a publicly-traded company and get out of it. The reason why? Focus, focus, focus. I think looking back, the biggest thing – and I don’t think it was a mistake, because I learned so much – is to have focus. Know what  you’re doing and just do that.

Once we were able to get rid of the tech company, sell that and [unintelligible [00:12:27].15] time suck that that created, we’ve now done 78 projects in three and a half more years… So that was the tipping point – spending my full energy, my full effort into just my real estate business, and then saying no to everything else that did not have that laser focus.

Joe Fairless: Is there a retail development project that you would say no to?

Josh Simon: Oh yeah, a lot of them. Stuff that isn’t directly in our purview… Buying a mall. I would say doing a power center, which is where you have like a Target, a Kohl’s and 20 other retailers – that would be kind of outside of our laser-like focus. But I also star that with you can’t just do your whole focus, because you’ll get blinded; you won’t’ see anything else coming.

We’ve started to experiment, but [unintelligible [00:13:28].11] we are doing our first medical project. We’re [unintelligible [00:13:31].03] for a small primary care facility that has multiple locations in Arizona. So we will try something new, but it will be very targeted, very specific, because just like grandma’s cookies, you always kind of tweak the recipe sometimes to add a little more flavor. So you just have to be careful, be focused, but you have to know that in ten years, especially the way technology and our economy is evolving, you have to be able to be ready to try some new things, because what you’re doing today is not what you can be doing in ten years.

Joe Fairless: The first three years you had 12 development projects, and then next four – 78. In the first three years, those 12 – was any one of those 12 the one company or the retailer that then helped you expand to the 78 in four years?

Josh Simon: Yeah, we had just started working with Dollar General. For those of you that don’t know Dollar General, it’s not a dollar store, like a Walgreen without a type of a pharmacy… We  were able to get in with those guys as they were starting a big expansion.

Joe Fairless: How did you get that relationship?

Josh Simon: That one was through networking. A contractor that we worked with knew one of their construction managers and gave us an introduction. I made a few phone calls… Obviously, it took some persistence on my part; I got introduced to the local/regional real estate manager. We hit it off, and he gave me an opportunity, and I went out and [unintelligible [00:15:06].10] got it under contract to buy, got the deal approved by the tenants and built it in record time because I put every ounce of energy into that project knowing that there could be a huge relationship down the road.

Joe Fairless: How many Dollar Generals have you built since then?

Josh Simon: We’ve probably done over 30 I would guess, at this point. I don’t have an exact figure.

Joe Fairless: Are they in terms of volume the highest?

Josh Simon: Yeah, I would say they are one of our biggest customers for sure.

Joe Fairless: What type of differences do you have to account for when you build for a Dollar General versus maybe an EZPAWN? Because conceptually I envision them being pretty similar… But is there anything that you wanna point out that “Well, there’s something that’s different there”?

Josh Simon: From site selection side, development or [unintelligible [00:16:02].11]?

Joe Fairless: Let’s do all three, why not?

Josh Simon: From site selection, every retailer or every tenant has their own perfect site mix. For like a pawn store, it has to be the right zoning, there has to be the right demographics; zoning is a huge deal to be able to put a pawn store and be able to get the proper licensing.

On the Dollar General side, it’s important for them to be convenient to their customer base. I think 70% of Dollar Generals are in towns of less than 20,000 people. Do they have good access? Are they well visible from the road? Where is their competition? How is their competition doing? Is that another strong store? Can we outposition their competition by going a half mile to the East where more traffic is?

On the development side, things are way different. Most of the pawn [unintelligible [00:16:52].12] that we did were existing building redevelopments, which is very complicated because you start pulling off the drywall, you have a [unintelligible [00:17:02].04] back there. Is there a column you might not have accounted for in the plan? So there’s a lot of things… Versus a new construction, which often takes longer, because you have to get entitlements and site plan approvals, whereas if when you’re using an existing building and maybe remodeling it or expanding it, it’s a lot easier to get through the permitting process. So we’re a huge proponent of redevelopment because typically they don’t have to go through as much of the public purview, whereas new constructions – there’s notices sent out, there’s a lot more involvement of the public.

Then on the construction side – I think I talked a little bit about it… When you’re doing ground-up, your biggest challenge for ground-up — once you pour the slab for the building, you pretty much are gonna be smooth sailing for the rest of the building. The biggest challenge you run into for the ground-up is before the slab: off-site utilities, dirt conditions… You start digging…

We were building a project in downtown St. Louis and we came across three underground storage tanks. Those were not expected, right? And that runs up the costs. So those are things that you take as risks when you’re developing that you have to think about. But once we pour the slab, most of those things have been accounted for.

Then on the redevelopment side, like I spoke about – you start pulling drywall off, and you’re like “Oh, there’s a column there.” Or the trusses aren’t properly supporting the roof, but you couldn’t see it because there was this hard lid ceiling that you couldn’t tear down because the tenant is still operating in that building when you’re doing the redevelopment.

Joe Fairless: Will you elaborate on the underground storage tanks, why that’s a problem, what did you do to remedy it and how much does it cost, typically?

Josh Simon: Underground you have utilities, connecting to the sewer, connecting to water, connecting electric… I’ll give you a perfect example – we’re finishing a project right now where we are potholing. So you look for the sewer connection by potholing into the ground to kind of find — the contractor looks for the sewer line. Well, the city didn’t know exactly where the sewer line is located against the property. Well, the contractor can’t find it, so now we have to go get an easement from our neighbor, so now there’s cost and timing issues involved with that, which can probably cost us an extra $15,000-$20,000 because of that.
Another thing with power – power companies a lot of times won’t have the design done when you start construction of how you’re gonna hook up to their system, and then now all of sudden they’ll give you their fees down the road of what that costs will entail. And a lot of times they come back asking for extra work. Undergrounding power lines is a big new thing. If you look at a lot of new developments, there’s no more overhead power, it’s all underground. So those are costs that you can’t really account for.

Then dirt conditions – I think we’ve talked about finding tanks underground, but also just the quality of the soil under the building. So when you build a building on top of soil, I think — I don’t know if you’ve read the news, but San Francisco, they’ve got that Millenium Tower that’s sinking, and all the residents are sueing… Well, that’s because the soil condition underneath – they didn’t properly build the foundation. That’s an extreme example, but this stuff does happen.

We built a building in the Midwest last year, and we had to build about a 40-foot  retaining wall to support a part of the parking lot. Well, there was a ton of rain and there was a bunch of settlement of the soil. We had backfilled this 40-foot retaining wall with a lot of soil, and then all of a sudden the parking lot – not just a small section of it – started to crack. The contractor had to go out, tear out a part of the parking lot, recompact the soil and repave. Luckily, because we were not liable for that, but that was still a time and we still had to put effort into fixing that.

Joe Fairless: And why weren’t you liable for that?

Josh Simon: [unintelligible [00:21:13].13] lots of technicalities. The geotechnical report didn’t properly account for the settlements, and then the contractor also didn’t get a compaction test. Every time you do any kind of compactions, you have a third-party group that comes out; usually the cities require it,or the governmental approving agency of the city/county. But a lot of times we always require it. So every time they put down more dirt and compact it, a third-party company comes out and tests that compaction to make sure it’s per spec.

Well, they missed a couple tests on their (what we call) lift. So every 10 feet, going up to 40 feet.

Joe Fairless: I don’t think you do based on the group of clients that you have, but I wanna ask you the question anyway… Do you retain any sort of equity ownership in any of these developments?

Josh Simon: On the real estate itself?

Joe Fairless: Yeah.

Josh Simon: Yes, we do; a lot of them we do. We buy the dirt, we build the building, and the tenant leases it back from us on a long-term lease.

Joe Fairless: Oh, okay. Cool. That’s great.

Josh Simon: Yeah. And then a lot of times what we do — they’re almost like commodities now… We sell a lot of them as a triple-net investment where people looking to have cash flow, especially in their retirement years, and a lot of these are under single tenants, like the Dollar Generals, for example… There’s really no maintenance for the landlord, so what we call that is “mailbox money.” A lot of these baby boomers, they own triplexes or duplexes in Southern California, they [unintelligible [00:22:50].22] light bulbs, so they’ll sell their duplex and do a 1031 exchange and go buy something that has way less maintenance.

Joe Fairless: What percentage do you sell and what percentage do you keep in your company’s portfolio?

Josh Simon: It really depends… This year we’re definitely a net seller, versus a net holder, just because of the market and just because of how fast we’ve grown. We’ve gotta kind of feed the machine, so we sell a lot of stuff. Right now it’s still a very good time to be a seller. 10-year Treasury is still very low, there’s still overall a good feeling about the economy, and the retailers we developer for are still very much in high demand.

Joe Fairless: That’s a fascinating business model. Josh, what’s your best real estate investing advice ever?

Josh Simon: Don’t be greedy, and no one ever went broke making a profit.

Joe Fairless: [laughs] How do you apply that in your current business.

Josh Simon: If you get an offer to buy something, or you get an offer to lease, or maybe there’s one sticking point in the deal that you’re like “I’m not gonna do that”, I always like to say “Don’t be greedy, with anything.” Is it really worth leaving the deal over? And then no one ever went broke making a profit – if you get an offer to sell something and there are $10,000 under your strike price, let’s say… Well, are you gonna make money? is it something you’d like to move forward with? Just sell it then, if that’s really what you want.

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

Josh Simon: Yes.

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

Break: [[00:24:29].06] to [[00:25:24].08]

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

Josh Simon: I would say I just read “Talent is Overrated”, but my other favorite is Team of Teams, by General McChrystal.

Joe Fairless: Best ever deal you’ve done?

Josh Simon: I bought a shopping center in Michigan – there was a Target, a theater, a Ruby Tuesday and shops – from a lender. We reworked all the leases and we were able to split off all the parcels for the best return I’ve ever done.

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

Josh Simon: I educate our future generations. We have a huge internship program. Right now we’ve got five students that are in college to teach them about real estate, and they work 20-30 hours every week.

Joe Fairless: What’s a mistake you’ve made on a deal that you can think of?

Josh Simon: I think it goes back to when we talked about using not the right contractor or vendor for a project. I’ve spent millions of dollars that I shouldn’t have.

Joe Fairless: And where can the Best Ever listeners get in touch with you, Josh?

Josh Simon: E-mail, or through our website you can contact us… Joshua@SimonCRE.com.

Joe Fairless: I encourage the Best Ever listeners to go check out your website, SimonCRE.com. It’s got all the project that your team’s worked on. It’s a fun website, too… It’s really well organized. It’s a nice and polished website. It just looks really good.

Josh, I knew this was gonna be an educational interview and a lot of fun. I loved talking about things that aren’t typically discussed on the show, and retail development certainly is one of them… How you talked about the differences between a pawn shop development and a Dollar General development, from site selection, from development and from the construction site, and how you compared and contrasted that… As well as the tipping point for your business, the first three years with 12 developments, the next four years with 78 developments, and getting that track record and also the relationship that you got through a contractor who worked with you and knew the construction manager and so on and so forth, and you ended up getting the relationship with Dollar General, one of your largest clients. Also, the mantra of “Don’t be greedy”, and “Nobody ever went broke making a profit.”
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Josh Simon: Thanks, Joe.

 

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JF922: How to Buy CHEAP Raw Land Part 2 #SkillsetSunday

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We’re BACK! Raw land investing and insights part 2! Take notes and start shopping for your cheap parcels surrounding your area today!

Best Ever Tweet:

Mark Podolsky Real Estate Background:

– Owner of Lank Geek Enterprises
– Investing in raw land for over 14 years and completed over 5,000 transactions
– His company is Frontier Equity Properties (http://www.frontierpropertiesusa.com/welcome)
– Popular podcast called The Land Geek (http://www.thelandgeek.com/)
– Based in Scottsdale, Arizona
Listen to his Best Ever Advice Here
Listen to part one of this 2 part series here

Click here for a summary of Mark’s Best Ever advice Part 2: http://bit.ly/2ngs4Dw

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JF915: How to Buy Raw Land at $.20 to $.30 on the Dollar! #SkillsetSunday

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Seems cheap, well it is! And buying raw land in the path of growth can be one of your greatest investments of all time! Hear how Mark the Land Geek ? does it and how you can apply the same principles to start your raw land investments.

Best Ever Tweet:

Mark Podolsky Real Estate Background:

– Owner of Lank Geek Enterprises
– Investing in raw land for over 14 years and completed over 5,000 transactions
– His company is Frontier Equity Properties (http://www.frontierpropertiesusa.com/welcome)
– Popular podcast called The Land Geek (http://www.thelandgeek.com/)
– Based in Scottsdale, Arizona
– Listen to his Best Ever Advice Here: https://joefairless.com/podcast/jf77-buying-raw-land-2-0/

Click here for a summary of Mark’s Best Ever advice: http://bit.ly/2mxn24t

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JF819: Don’t Struggle to Fund Your Deals, Here’s How You Can Find the BEST Lender

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A platform that has a select group of hundreds of the best lenders in the business will find your next lender ASAP. Hear how our guests have completed millions in loan originations through this unique platform and what they’re doing today to grow. More importantly, see what’s in it for you!

Best Ever Tweet:

David Luke and Selene Nelson Real Estate Background:

– David is VP for Business Development at CommLoan
– A technology platform that matches borrowers and lenders
– Selene is Senior Vice President of National Business Development
– Loan Purposes: Purchase, Refinance, Construction, Rehab.
– Selene-20 years experience in the financial industry; David – 12 years
– Matching process is based on 30 unique variables
– Based in Scottsdale, Arizona
– Say hi to them at http://www.commloan.com
– Best Ever Book: Zero to One by Peter Thiel

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JF775: How to MASTER Virtual Wholesaling #SkillsetSunday

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Risk can destroy your business, and that’s why many real estate entrepreneurs preferred to Wholesale properties rather than fix and flip only. Today you will hear from Jared, someone who has wholesaled many properties virtually outside of his state and how he does it. This is one of the episodes you need to listen to multiple times with the pad and pen, enjoy!

Best Ever Tweet:

Jared Vidales Real Estate Background:

– Co-owns a streamlined virtual wholesale operation, HQ
– He virtually fix/flips properties nationwide; and does 15 virtual deals a month
– Based in Scottsdale, Arizona
– Say hi to him at www.highestcashoffer.com
– Here’s his Best Ever book he’s read Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor

Listen to his Best Advice Here:
https://joefairless.com/blog/podcast/jf490-266000-profit-for-an-az-newbie-flipper

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JF742: The Ultimate Online Real Estate Marketing Breakdown!

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Do you want to understand the importance and psychology of online marketing? Look no further, this episode will take you deep into the “why” you need to get it done. Our guest shares the integrity and significance of online marketing and how it will gather you leads that you are looking for.

Best Ever Tweet:

Kasim Aslam Real Estate Background:

– Owner of Solutions 8 Digital Marketing
– Marketing in real estate lead generation strategist
– Over ten years of experience as a Digital Marketer
– Based in Scottsdale, AZ
– Say hi at fairpropertybuyers.com and sol8.com
– Best Ever Book: 7 Habits of Highly Effective People

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Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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JF711: How to HANG ON When the Owner Dies Before Closing #situationsaturday

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Sick seller of an assisted living facility dies before the closing docs are signed. Her son comes from Romania to stop the deal and…pandemonium! Lawyers, heated phone calls, and high stress abound…but our Best Ever guest and his partner do the right thing. Hear it here!

Best Ever Tweet:

Greg Bilbro Real Estate Background:

– Fair Property Buyers
– Experienced in rehab projects, flips, and other investments
– Based in Scottsdale, AZ
– Say hi at fliptracking.com
– Best Ever Book: Think and Grow Rich by Napoleon Hill

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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JF695: The Science of Flipping and Understanding the Data

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Our guest has a history of being in the financial industry, he later moved to real estate where he found his passion. Based in Scottsdale Arizona, Greg shares with us how he has built and lost investments and is now rebuilding. Hear his new approach to revealing important data regarding fix and flip metrics with a software that he has put together.

Best Ever Tweet:

Greg Bilbro Real Estate Background:

    – Fair Property Buyers
– Experienced in rehab projects, flips, and other investments
– Based in Scottsdale, AZ
– Say hi at fliptracking.com or 111-856-2689

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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JF693: Here’s the Right Way to Buy Condos

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Today’s guest has built custom homes, flipped many properties, and now lends in Arizona to conventional buyers and investors. Today he crunches the numbers on his new niche, condo buying. Hear his advice and why he believes that condos are great investments if done properly.

Best Ever Tweet:

Jeremy Lovett Real Estate Background:

 – Lender at Homeowners Financial Group USA, LLC
– Has flipped homes and built custom homes
– Currently buys condos
– Based in Scottsdale, AZ
– Say hi to him at http://jjlovett.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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JF668: How a Mobile Home Park was Flipped to a Church

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Our guest is from the hot hot valley of Arizona, and he is cranking deals! He is a one stop shop real estate investments boutique with the tool for every transaction. He shares many stories including one of purchasing a mobile home park and finding a buyer across the street!

Best Ever Tweet:


Stuart Gethner Real Estate Background:

    – Founder of Phelps Capital Consulting
– Invested over $10,000,000 in AZ
– Based in Scottsdale, Arizona
– Say hi to him at http://www.phelpscc.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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JF517: How She Received a 10% Response Rate Via Handwritten Mail

Today’s guest is new in wholesaling real estate, but she thinks big. She shares the mistakes she has made, and how she solved some EXPENSIVE problems. Hear her success from her direct mail plan and what her response rate was!

Best ever tweet:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

 

Joy Oberholtzer Real Estate Background:

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Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

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JF326: Understand These Costs Before You Flip a House

Today’s Best Ever guest is an experienced loan originator, but knows a lot about flips as well! Listen up as he shares with us flipping from his perspective, and the costs that you need to understand before you flip a house.

Best Ever Tweet:

Geoff Ball’s real estate background:

–          Mortgage Loan Originator at Applewood Funding Incorporated based in Scottsdale, Arizona

–          Specialize and only do hard money loans

–          Real estate investing company where he has flipped homes since 2004

–          Done over 200 flips

–          Started in private money in 2003

–          Say hi to him at http://www.3009investments.net and http://www.applewoodfunding.net

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Patch of Land – Want to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions athttp://www.PatchOfLand.com/bestever

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JF248: Dean Graziosi Shares His Best Real Estate Investing Advice Ever

Phew! If we aren’t excited after all of the great value Dean shared with us today, we are doing something wrong! Today, Dean shares with us how to find cheap deals in your area, how to pick the Best Ever place to invest, and how he made ONE MILLION dollars off a deal everyone told him he would go broke on. Get out a pen and paper because we are in for a treat today!

Best Ever Tweet:

Dean Graziosi’s real estate background:

–          Been investing over 25 years and real estate investing expert who has authored multiple NY Times best-selling books based in Scottsdale, Arizona

–          He practices and educates other investors on wholesaling, buy-and-hold, and fixing and flipping properties

–          One of his first investments was buying and fixing up a rundown apartment building with no money down in his hometown

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

–          Loves being a father more than anything in the history of the world

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Norada Real Estate Investments – Having a hard time finding great investment properties?  Unfortunately, the best deals are rarely found locally. Norada Real Estate’s simple proven system provides you with the best deals across the U.S. to create wealth and cash-flow.  Get your FREE copy of The Ultimate Guide to Out-of-State Real Estate Investing

Patch of LandWant to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions athttp://www.PatchOfLand.com/bestever

Youth Nation – How much do you really know about your clients? With milenials taking over the real estate market place, YOU need to learn about them. Read Youth Nation by Matt Britton to learn all you need to know.

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JF183: How to Sell 365 Homes in 365 Days

Today’s Best Ever guest talks about how he sold 365 homes in 365 days AND what you can do to make that happen as well.

Best Ever Tweet:

Tom Hopkins’s real estate background:

–        Former real estate agent who, after five years in the biz, had done over $14,000,000 in sales

–        Founded Tom Hopkins International in 1976 and has dedicated his life and company to teaching and inspiring others in the skills of selling  and is based in Scottsdale, Arizona

–        Author of eighteen books including, How to Master the Art of Selling

–        Say hi to him at http://www.tomhopkins.com/about.shtml

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JF38: Don’t You Dare Lose Control

Mark Cuban says he isn’t a glass hall full or half empty guy. Instead, he wants to be the guy pouring the glass. Today’s Best Ever guest shares the same philosophy. Jason Hartman talks about the importance of maintaining control and when it makes sense to relinquish the control.

Tune in to listen to his Best Real Estate Investing Advice Ever!

Jason Hartman’s real estate background:

–        Involved in thousands of real estate transactions

–        Owned income properties in 11 states and 17 cities

–        Host of the popular Creating Wealth Show

–        Developing 71 homes in Kansas City

–        Visit him at http://www.jasonhartman.com/podcast

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