JF2401: Grow A High-Income Portfolio with Zach Haptonstall

JF2401: Grow A High-Income Portfolio with Zach Haptonstall

Zach is the CEO & Co-Founder of Rise48 Equity, an experienced Multifamily Apartment investor, #1 Best Selling Author of “Success Habits of Super Achievers,” and the Host & Founder of The Phoenix Multifamily Association. His passion for providing knowledge about financial freedom inspires him to provide passive income opportunities for investors and alike to use their time for more meaningful events such as spending time with families. Currently, he has now 420 units across five properties in Phoenix, Mesa, and Scottsdale worth over $48MM. In today’s episode, Zach will be going into details about his journey and challenges as a Multifamily Apartment investor and his advice on how he got to where he is today.

Zach Haptonstall Real Estate Background:

  • Founder & President of ZH Multifamily
  • He is lead sponsor, general partner, and equity owner of  over $35,000,000 worth of commercial real estate apartment buildings
  • Portfolio consists of 308 units
  • Based in Scottsdale, AZ
  • Say hi to him at: www.ZHMultifamily.com  

Click here for more info on groundbreaker.co

Best Ever Tweet:

“As a passive investor, build your presence and get to know your market while investing with people who are local as they are familiar like you.” – Zach Haptonstall


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Zach Haptonstall. Zach is joining us from Scottsdale, Arizona. Zach is the lead sponsor, general partner, and equity owner of over $35 million worth of commercial real estate. His portfolio consists of 308 units. Before we get started, Zach, can you tell us a little bit more about your background and what you’re focused on now?

Zach Haptonstall: Yeah, thanks so much, Ash. I appreciate the opportunity to be on the show. This is actually my second time being on the Joe Fairless show, so it’s always a pleasure circling back with you guys.

I was born and raised here in Phoenix, pretty much lived here my entire life. I had different stints in journalism and healthcare, where I did well and was fortunate, but it wasn’t really my passion. So a few years ago in 2018, I basically went all-in on real estate, and we’ve been very blessed just in the last 24 months. Here in the Phoenix market we’ve actually acquired about 90 million worth of apartment buildings and about 700 units. We have another 110 million under contract, another 600 units. So in the next three to four months, and we’re recording this now beginning of March 2021 – in the next three to four months we should double our portfolio and have over 200 million. So basically, the biggest thing, Ash, is I was just looking for passive income. I worked in health care, it was very hectic, always working crazy hours, and I was looking for passive income. So now that I’ve been able to break into this and develop passive income, my passion is really trying to provide passive income opportunities for other investors, and provide that financial freedom so that they can start to ease out of their job, or cut back, and have more disposable income for doing things for their family. So that’s really what we’re focused on now, is really just serving our investors.

Ash Patel: Alright hold on, my head’s spinning. 2018 wasn’t that long ago, and… 90 million dollars. Tell me the details of that journey.

Zach Haptonstall: I was working in hospice care, I was a co-owner of a hospice organization and a director of marketing. I got burnt-out, so in January of ’18, Ash, I resigned and I sold my equity in that company. I had no idea what I was going to do, I just knew I wanted to create passive income somehow, and get control back of my time. So I lived off of savings for about 14 or 15 months. I made no money through all of 2018, and I didn’t have any connections, no family, money, nobody in real estate. I just started reading books, listening to podcasts like this one, going to conferences, and I discovered multifamily and syndication and decided “This is what I want to do.” So 14 months went by since I quit my job and we closed our first deal. It was a long 14 months, burning through savings, going through the grind, the adversity.

So we bought that first deal 24 months ago, and since then we’ve been fortunate to gain a lot of momentum and been able to scale up and continue to syndicate more and more deals. It was really just a matter of just constantly grinding, networking, leveraging my past network, and then more so just going to conferences and being on podcast things like this, that really helped to grow the business.

Ash Patel: Zach, what was that first deal?

Zach Haptonstall: Good question. It was a 36-unit, it was about three and a half a million, so it was a smaller deal; our plan was to syndicate it. My partner Robert and I each had 25,000 non-refundable in earnest money. We tried to syndicate; we were going to investors and nobody wants to invest, because they don’t know us, we have no background. I go “Crap, we better figure this out.” So I’m just calling all these people I had met at conferences, and we had one lady, her name is Elisa Zang – she did a 1031 exchange and we ended up doing a tenant in common, which is not syndication, it’s a little bit different structure; similar to like a JV. But anyway, that first deal there was just a small handful of us, and we put our own money in the deal. We really wanted to learn the business plan and learn how to execute a value-add plan.

So we did well… We sold that deal in 21 months, almost doubled our money, it went very well. It gave us a lot of momentum, experience and confidence to now start to syndicate, take investor money, leverage their money, and grow their money for them, which we’ve been able to do. So it’s been a good development.

Ash Patel: Your first deal, did you not look at doing something that you could take down yourself? You purposely went out and found a potential syndication deal?

Zach Haptonstall: That’s a good question, Ash, because when I quit the job and I said “Okay, I want to go into real estate” I didn’t know anything about syndication. I didn’t know what the word meant, never heard of it, I didn’t know what it meant in this context anyway. I didn’t know about multifamily. I was looking at mobile home parks. I cold-called over 90 mobile home park owners, trying to buy one on a seller carry with my own money. So that was my mindset. But when I started to learn about scale, and syndication, and leverage, I realized I have this much money, I don’t want to put it all into one deal, because then I’m done; I can’t continue to scale.

So, yeah, to answer your question, I wanted to go bigger and I wanted to partner with other people so that I could put my money to work. That was my goal, to put myself in an uncomfortable situation and a scary situation, so that I’m forced to push my comfort zone.

Ash Patel: So three and a half-million dollars for 36 units. Give me more details on that, please. Was it a value-add property? Was it fully leased? Was it in the greater Phoenix area?

Zach Haptonstall: Good question. Yeah, it was in the Central West Phoenix area, right across the street from Grand Canyon University, for those of the listeners who are familiar. 36 units, it was 26 two-bedrooms, and 10 three-bedrooms, so a great unit mix. It was a value-add deal. This was like a late 60s build, but it didn’t have a chiller and it was individually metered for electricity, which was nice. So our plan was to go in there and do exterior and interior renovation. We actually put all new roofs on all the buildings, we did new exterior paint, we recoated the parking lot, we put new LED lighting on the exterior, we put new exterior cameras.

On the interiors, we renovated 26 of the 36 units. So depending on the flooring, we did new vinyl flooring, some of it had good tiles so we left it, we did new countertops, we painted the cabinets, did two-tone paint, new black appliances… This is really a workforce housing type of deal, that was our demographic. That’s most of our deals; we’re doing workforce affordable housing, but we go in there and improve the exterior and interior. It was a great value-add deal; we bought it for 95,000 a door, and we sold it 21 months later for 148,000 a door. It was a quick turn, and that’s just because, again, we were able to improve it, increase the rents which increased the value, and then sell it for that margin for us to make a good profit.

Ash Patel: That’s a great return for your investors. What are some of the challenges with that Phoenix, Scottsdale area?

Zach Haptonstall: In my opinion – I’m obviously biased, but if you look at national context Fundamental Statistics, Phoenix is the strongest –in my opinion– market in the country. When you look at population growth, number one now for the past few years. Job growth is number two behind Dallas. Rent growth has been number one, depending on which index you look at. So it’s extremely hot, it’s extremely competitive; prices continue to go up as they do nationally, cap rates continue to compress… So the big challenge is trying to find deals that make sense and that pencil. We’ve been able to really develop our advantage with the broker relationships.

The first four deals that we acquired in 2019, Ash, there was no secret – they were on the market, we had to compete, go through a best and final process, and we won them. And through that process, I was able to form very strong relationships with the brokers.

For those listeners who are newer, or maybe you’re passive investors, the brokers in any market pretty much control the market. Most of your deal flow is going to come through there. It’s how we get 100% of our deal flow, through the brokers. So through those four acquisitions, we established rapport, credibility, confidence with those brokers, so that now our last three acquisitions have been completely off-market, no competition; we were the only group. We have five deals under contract, like I said, which equals 110 million; we’re close to getting a sixth. These five deals are all completely off-market; no competition. We are probably getting the first look or probably within a group of three to five groups, getting that first look on almost every deal between 15 to 40 million in the Phoenix market, which is really our sweet spot for value-add.

So basically, to answer your question, the competition is tough; to find the deals that make sense is tough. It’s a needle in the haystack. So we’ve been fortunate that we’re active, we’re in front of the brokers constantly, we’re local, so we can act quickly, and we can strike quickly on these deals. That’s what gives us an advantage.

Ash Patel: I’ve seen amazingly low cap rates in Phoenix. What kind of cap rates are you buying these multifamily units for?

Zach Haptonstall: Right now, as of March 2021, this is a four to a four and a quarter cap market. A lot of people think “That’s crazy. Why would you do that? You’re overpaying.” I understand, a four cap is low and it sounds low. But you have to understand the dynamics of the market and these deals. Most people need to realize a cap rate is a fraction; the cap rate is the net operating income divided by the purchase price. When we’re buying a deal, that might be a four cap here in Phoenix, we’re looking at a lot of different factors. In order for our deals to pencil, we of course have to have the value-add upside, where we can go in and we know that we can renovate units, renovate the exterior, increase the rents. That’s a given, we have to have that element for it to work. But in addition to that, we also have to have what we call loss to lease, meaning that the rents are currently below market. So the current rents at the property are already below market, meaning that if that lease expires, then I can renew that lease right now, without doing anything to the unit, and immediately increase it anywhere from $50 to sometimes $200. We’re looking at the loss to lease plus value-add.

There are other components too, which I’ll get into. But when you have those things, you have to realize that these cap rates may be artificially deflated. If their net operating income is very low, because they’re 85% occupied, or half of their tenant base has rents that are below market, that’s going to make your cap rate very low. And because of the market, you’re going to pay the market price per door.

I personally secret shop all the comps. So I drive to all the comparable properties, I walk in there, I get the rents, I tour them, I get the square footage, the price per square foot amenities, what do their finishes look like… So what we do is we say, “Okay, we’re going to take this property to this finish.” Meaning new interior floors, new quartz countertops, new cabinet doors, LED lighting, etc, everything interior. When I’m shopping comps, we’re looking for deals that have that same interior finish, and we’re looking to see what rent they’re achieving.

When we’re projecting our pro forma rents, we’re saying, “Okay, we’ve already seen in the market, in this immediate area. We can achieve these renovations.” And that’s what we’re modeling to take it to. We might buy a deal at a four cap, Ash, but within a year or two, that deal could easily be a six or a seven cap, because we’ve immediately started to push up that NOI. That’s where the returns really start to become lucrative for the investors, which is our goal. So yeah, cap rates are always an important discussion, but you have to understand the market and what’s going in the cap rate.

Ash Patel: Zach, the secret shopping – do you do that posing as a tenant?

Zach Haptonstall: It’s a good question. So initially, when I first started, I was acting like a tenant. I would say, “Hey, my wife and I are looking for this. What do you have?” And I’d go on tour. But I started asking all these questions like, “Is this a chiller or individual HVAC? What are your RUBS or utility costs?” They kind of look at you funny, like why would a tenant be asking these things?

So about a year ago, I was talking to another experienced syndicator. He’s like, “Just tell them you’re buying a deal down the street.” That’s what I do now; for the most part, I’ll just go in there and say, “Hey, I’m Zach with Rise48 Equity, we’re buying an apartment down the street. Is it okay if I ask some questions? I’m trying to do a market survey.” Surprisingly, most property managers are totally fine with it. They’re used to getting calls for market surveys and things like that, and they’re fine to tour you.

Ash Patel: What kind of debt are you putting on these loans? Or what kind of debt are you putting on these properties, rather?

Zach Haptonstall: Good question. So we have a blend of agency and bridge financing. We’ve done seven agency loans, which were all Freddie Mac. In regards to agency, for this market the best loan product is a Freddie Mac floating rate, as opposed to a fixed rate. The reason for that is we have a couple of deals that are fixed-rate, meaning your interest rate does not change over the 10-year term. However, Freddie Mac really nails you on the back end with the prepayment penalty, known as yield maintenance or defeasance. So we actually have deals right now that we could sell in less than 24 months and achieve a 2x multiple for investors, but we cannot sell them right now because our yield maintenance is so high; that’s the fixed rate.

The floating rate means that your interest rate is floating over an index, depending on the loan, LIBOR or SOFR, just depending. What you do is you buy a cap. You buy a cap so that the interest rate cannot go above that. The appeal of the floating rate is that after 12 months, you can sell the property and you only have a 1% prepayment penalty for a Freddie floater. That’s our ideal agency product.

The other product that we’re doing is bridge loans. A bridge loan means that the lender is financing your rehab dollars, and you have a lower debt service coverage ratio requirement, which is important. We have a couple of deals under contract right now that we’re doing these bridge loans on, and the bridge loan terms right now are just amazing, Ash. These are three-year terms with two one-year extensions. So it’s a three plus one plus one, so three to five years. Three years of interest only, non-recourse; we’re getting 75% LTV, and we’re getting 100% of our cap-ex financed. And our interest rate, we’re getting quoted at a 3.4% to 3.5% interest rate for a bridge loan.

The idea with these is to go in, do your value-add in year one or year two, and then in year two or year three you can either sell it, or you can do a refinance, return a big chunk of capital back to investors, and then refinance into an agency loan, a 10-year term, hold it, and continue to cash flow.

Ash Patel: What kind of down payments are you having to put down on these?

Zach Haptonstall: Typically, we’re around anywhere from 25% to 35% would be the max. So 25% to 35%. We’re looking at 65% to 75% LTV, loan to value.

Ash Patel: What’s the difference between a 25 and a 35%? down? What determines that?

Zach Haptonstall: It really just depends on how the property is performing. So you have what’s called a DSCR, which stands for debt service coverage ratio. For easy math, I’ll say it this way – an agency like Freddie Mac, they require typically (in this market anyway; this is considered a standard market) they consider what’s called a 1.25 debt service coverage ratio. What that means is that if your monthly mortgage, for easy math, is $100, then the property needs to be producing at least $125 per month.

When you have a higher debt service coverage ratio, you can get a higher number of loan proceeds. Whereas if you’re not producing a lot of NOI, then you’re going to be limited. For an agency loan, you can be in the 60% LTV, meaning you could be 30% plus downpayment. That’s what makes it tough in a market like Phoenix, because it’s getting so expensive, that a lot of these loans are debt service restrained, because you’re paying X amount of price for a property that needs to have some type of renovation done in order to skyrocket the NOI. Whereas with the bridge loan, they have lower debt service coverage ratio requirements, and they’re designed for these renovations, going in there, renovating it, quickly increasing the value, and then selling or refi’ing it. It really just depends on the purchase price that you’re paying into the NOI, Ash, and that’ll determine what your down payment will be and how much loan proceeds you can get.

Ash Patel: Earlier, Zach, you mentioned that the prepayment penalty is significant. What are those prepayment penalties?

Zach Haptonstall: It’s a good question. Yield maintenance is a very tough calculation. I could not even tell you how to calculate it right now. It’s basically a number that’s tied to the LIBOR index. And as interest rates go down, which everybody expects them to continue to stay low for the next few years, your yield maintenance or defeasance prepay will go up. Yield maintenance basically means that Freddie Mac, whatever their yield was going to be or whatever they’re going to make over a 10-year term, they’re going to make that from you regardless of how long you own it.

Ash Patel: That’s a significant penalty.

Zach Haptonstall: It’s a significant penalty. To give you an idea, we have a deal, Villa Serene. We bought it for 17.5 million back in 2019, 18 months now. Right now, our prepaid penalty if you want to sell it is 3 million bucks. It’s insane. So we are basically waiting until the third quarter, so we can keep pushing the value up to get our purchase price high enough to absorb that prepay and still get our investors at least a 1.8 to 2x multiple in about two years… Which is still going to blow the projections out of the water, because typically we underwrite for five years. We’re going to do very well on those two deals, don’t get me wrong. We’re going to hit a 2x probably within 30 months or less on both of those. But if we didn’t have that yield maintenance, and if we were more experienced in the beginning, we could have achieved that probably in 18 months. So going forward, we’re not doing any more of that fixed-rate yield maintenance; we’re doing the floating rate, which is simply, you have what’s called a 12-month lockout, you cannot sell the property for 12 months after buying it, and then after that, it’s only a 1% prepayment penalty on the loan, which is very minimal. So that’s agency, Ash.

For these bridge loans, what we’re seeing is that the bridge loans will allow you to sell at any point. You could buy it and sell it six months later. Their prepay penalty is also very friendly to us. It’s simply 18 months of interest. Whatever they would have made over the first 18 months in interest, you have to just pay that to them. If you hold it for six months, and you sell it, then you have to pay them 12 months of interest as your prepayment penalty. So it’s not bad at all. In a growth market like Phoenix, you want to have flexible prepay, so that you have flexible exit plans, depending on what you want to do, whether that’s a refi or a sale.

Ash Patel: And how long do you lock your rates in for? Or are all of them floating?

Zach Haptonstall: If you do the fixed-rate, it’s locked in for 10 years with Freddie Mac. That’s the fixed-rate loan; but that has the nasty prepay with the yield maintenance. That’s where they get you, because people are like, “Oh, I want to guarantee my interest rate. I can model that out.” With a floating rate agency and a bridge loan – they’re both interest rates that float over an index. But you buy what’s called a cap. So you’re buying a cap, it’s typically depending on the deal – 20 to 40 grand, you underwrite it into the deal into the model, and that’s paid at closing. So basically, your interest rate will not exceed that amount. So that’s how that works.

Ash Patel: Okay. What’s been your biggest challenge with scaling your business?

Zach Haptonstall: I think the biggest challenge right now is keeping the cost of construction and materials down. In Phoenix, there’s just a lack of supply, for example, of stainless steel appliances, and we’re doing stainless steel appliances in most of our renovations. So in a couple of months here, we’re going to be doing at least 30 to 40 units a month, we’re going to be renovating, across our portfolio. We’ll own about 1,300 to 1,400 units and a few months… And that’s our biggest thing, is making sure that our supply chains are in good shape. We can get appliances and all the other materials – flooring, countertop, cabinets, etc. we can get them on time and on a budget for the supply chain. In addition to that, making sure that our construction crews are renovating on schedule, and are staying under budget. We’ve really been extremely conservative with our renovation budgets by building in a lot of contingency and a lot of cushion. We’re telling our construction crews, “This is your budget”, when internally, we might have two or three grand per unit on top of that, just in case they go over.

That’s really the biggest challenge when you’re scaling and you’re doing value-add – you have to be renovating units, you have to be adding value to the property by renovating it. And labor continues to go up, things like that. So we’re always wary of that, we’re very conservative when we stress test our deals with these models, so that we can make sure we’re staying on schedule and on budget.

Ash Patel: So, Zach, historically low cap rates, historically low interest rates – does that come into play? Does that worry you that if something changes in the market, you’re holding a tremendous amount of assets and you may not be able to dispose of them the way you had hoped?

Zach Haptonstall: It’s definitely a good question and it’s a valid question. We’re always concerned about that and we always keep that in mind. That’s why we have such a conservative stress test for these deals. We’re extremely conservative. In our model, we’re saying that we’re going to hold each deal for five years, and exit in year five or year six. In our model, we’re assuming that right after we buy the deal, there’s going to be a recession or an economic downturn. We’re assuming that rent growth is going to drastically decrease, that vacancy is going to increase, and that expenses are going to increase. And if the deal still pencils and meets that stress test, then we’ll do the deal. Because in our model, we’re assuming that there’s going to be a recession right after we buy it. We can execute our business plan, hold through the recession, sell in year five or year six, and achieve those returns… When in reality, we’ve been blowing those numbers out of the water and selling 18 to 24 months, and matching or exceeding the return we were telling investors over five years.

So you just have to be conservative. You can’t get too aggressive with these deals and with the underwriting; you can’t get caught up in it. We have not won a marketed deal on the market, Ash, in 18 months. August 2018 was the last one we even won a deal. We keep getting second and third place because, in our model, we cannot go to the purchase price that these other groups are paying. They’re getting bid-up on the market, these best and final bidding processes. Just like I said, in a few months when we close these deals, it’ll be our last eight acquisitions were all completely off-market with no competition. That’s probably the main reason they actually work, because we’re not getting bid-up on the price.

Ash Patel: And what are some of the different ways you’re finding these off-market deals?

Zach Haptonstall: It’s all broker relationships, 100%. The brokers that we performed with were probably in the top one to three groups for the top four to five brokers. So we’re getting a first look at a lot of these deals. We perform with the brokers, they know that we can execute, and they bring us the deal. When they have a good deal, they bring it to us first. They say, “Hey, what do you think?” and we act quickly. I cannot stress the importance of acting quickly.

There’s been a few deals just in the last month or two, that it was us and like two other groups. But the other groups – one was in Canada, for example, the other one was in California. Well, you call me – I’ll get out there right now. I’ll be there in an hour to tour the asset. I’ll go shop the comps for the rest of the afternoon. We’ll get a CoStar report, we’ll get a debt quote from our lender the next day, we’ll fully underwrite it, and we’ll be able to make an offer within 24 hours, and we’ll pounce on it.

There was a deal we won four weeks ago, where the group offered around 500k more than us, but we just beat them to the punch. We toured it, we underwrote it, we made the offer sooner, and we already have accepted LOI by the time they were getting ready to schedule their tour. So it was too late for them.

Ash Patel: That first-mover advantage is a real thing. What else do you do to nurture the relationships with the brokers, other than moving fast?

Zach Haptonstall: Good question, Ash. So let’s say you’re newer… And this is what I had to do. In the beginning, I didn’t know any brokers; I’m a younger guy, I was terrified, and I was intimidated by the brokers. You get nervous, because you feel like you don’t belong or do you feel like you’re wasting their time… And you have to remove all that from your mind. So if you’re trying to get into this, then you need to understand that these brokers – they want to tour the deals, because they want to show their seller that they’re getting a lot of volume and a lot of activity. So what I do all the time, – I do this regularly; I just did it last week – if there’s a broker you haven’t talked to in a while, or maybe you’ve never met them, and you know that they’re one of the top brokers, you need to go to the websites of all these brokers… Like CBRE, NorthMarq, Berkadia, Marcus, and Millichap – all these top national broker companies, go to their website, they usually have something where you can sign up for their deals. You can put in your market, whatever… They’ll send you all the marketing deals that they have, and you’re going to start seeing a blast of these deals. Then you need to start calling or emailing these brokers and say, “Hey, I’m so and so; this is our background, this is our business plan. Can I tour?” What I do, Ash, is I constantly crank tours with brokers. I’ll tour deals that I have no interest in buying. I know it’s a crappy deal in a crappy area, but I’ll look through the offering memorandum of the broker, I’ll get some familiarity, and I’ll show up – and I always look professional, I always wear a tie; I’m not saying you have to do that, but that’s what I do. I always look professional, I have a notebook, and my partner and I will go through and tour this asset. We’ll be taking pictures – deals that we don’t even care about, we’ll act like we care. I’ll even ask hypothetical questions to demonstrate my knowledge of the asset, so that the broker knows that “Hey, these guys look legit. They came in, they understood, they look prepared.”

Then a day or two later, I’ll get back to the broker and I’ll just be like “Hey, Mr. Broker, thanks for the tour. I really appreciate it. It was great to see you again. We’re going to pass on this one; we can’t get to your price because of these reasons.” And you give them feedback, that’s all they want. You have to understand, these brokers, 99% of the time, hear “No”, constantly. They’re just trying to get a commission, they have no guarantee check. So you have to constantly crank the volume with them, stay in front of them, and just give them good feedback, so that they don’t feel like they’re wasting their time. If you tell a broker “no” within a day or two and you give them a good reason, then he’s going to be a lot happier than if you just never hear from you again. Because he’s going to be like, “Well, that guy’s not serious. I’m not going to waste my time sending him the deal.”

So I’m constantly staying in front of the brokers, and as I’m walking the property I’m just trying to feel them out. I’ll talk about our criteria like, “Hey, we’re looking for 15 to 40 million dollar deals, with value-add, in these areas, 80’s build.”

And if I’m interested in the deal, then I use that time to try to kind of get into their mind of how I can get an advantage. I’ll usually do the entire tour, learn about the property etc, and then as we’re done walking into the office or the parking lot, I’ll just start to say like, “Okay, so what do you think for terms, Mr. Broker? How much earnest money? Do you think they’re going to be open to a 10-day inspection or 14 days? What does it take to win it? What’s the process?” Things like that. So you just establish that rapport. And yes, I make a point of regularly touring deals with brokers, simply to stay in front of them and then stay on top of their minds.

Ash Patel: Very interesting. I love it. Zach, what’s your Best Ever real estate investing advice?

Zach Haptonstall: Oh, the Best Ever real estate investing advice… That’s a tough one, Ash. I think that you need to understand the market. If you’re a passive investor, I think you need to invest with people who are local. I know a lot of people are not local; I’m not saying you can’t succeed, but I think if you’re getting into it, maybe it’s a new sponsor for you, or you’re not familiar with it… I think being local and investing with somebody who has experience in that market is very critical, because for every investor that’s investing in Texas and they live in Florida, and they’re doing well, I can tell you about five investors who are in a different state, and they’re not doing well. Because they simply don’t have proximity and they don’t have the market knowledge. I think it’s very important to have some type of presence in the market and also invest with somebody who has experience in the market.

Ash Patel: Good advice. Zach, are you ready for the lightning round?

Zach Haptonstall: I’m ready, Ash. Let’s do it.

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

Break: [00:30:40][00:31:02]

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

Zach Haptonstall: I just finished it; it’s like the second time in the last few weeks, and I’m going to read it again. It’s called How to Own Your Own Mind by Napoleon Hill. He’s the guy who wrote How to Think and Grow Rich. This is more of an expansion on those principles, and it goes pretty deep. He’s interviewing Andrew Carnegie, the steel industry tycoon. I think the book was written in the 1920’s, or 30’s, or something, but it’s very interesting. I do audiobooks, Ash. I listen to books when I’m at the gym. But it’s very interesting how a lot of the things he’s saying – and it’s almost been 100 years now – are very relevant. You wouldn’t know that it’s old or outdated. I like that book.

Ash Patel: What was your biggest takeaway from that book?

Zach Haptonstall: There are a couple of things. I think this is a pretty common theme in books that are self-help books. It’s about visualizing what you want to do and then taking the action to achieve it. So How to Own Your Own Mind by Napoleon Hill is all about action and how over the generations and the centuries, there is a formula. If you can envision it, be positive, be determined, take action. That’s the best lesson.

Ash Patel: What’s the Best Ever way you like to give back?

Zach Haptonstall: The Best Ever I like to give back… We’ve done How to Feed your Starving Children, I helped with that and donating. We help out at our church. Grace and I want to go on a mission. We were going to do it last year and then COVID hit… And that’s a big thing. As far as the real estate context, I’m always happy to help new people who are trying to get into it, because I went through the grind and I know how hard it is. So I’m always happy to share any of my contacts. I have a truly abundance mindset, so I don’t view people as competition. I’m all about competition, healthy competition. So I like to just give back; people always call me just to kind of pick my brain and I try to help them on their journey.

Ash Patel: Yeah, that’s a great outlook. Zach, how can the Best Ever listeners reach out to you?

Zach Haptonstall: Yeah, you can just go to our website, it’s rise48equity.com. You can email me at zach@rise48equity.com. If you go to our website, you can set up a call with me. If you’re a passive investor looking to invest in deals, I’m happy to educate you on this market and establish a relationship. If you’re trying to get into it on the active GP side, I’m happy to give you any advice, tips, or resources that I have. So yeah, go to the website or email me and we’ll get back to you quickly.

Ash Patel: Zach, thank you for being on the show today. You’ve got a great story. In just a few short years you’ve used some great tactics to take down a huge portfolio. I loved the secret shopper program, the relationship-building with the brokers… You’ve accomplished a lot since 2018. So thank you again for sharing all of your advice and have a Best Ever day.

Zach Haptonstall: Thanks so much, Ash. I really appreciate the time.

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JF2376: Creating Legacy Ownership With Bruce Wuollet

Bruce started his real estate journey by buying and repositioning single-family units and worked his way into the multi-family market. His company, Bakerson, now focuses on legacy ownership, making sure that his clients have a solid investment to pass on to their future generations. 

Bruce’s dad owned a bakery and employed his family members. It’s no wonder that his own company now centers around family values too. Legacy ownership doesn’t have to be about status and social rank. Instead, one could build something of value to pass on to their children while also teaching them how to make a living.

Bruce Wuollet Real Estate Background:

  • Owner of Bakerson, & full-time multifamily syndicator
  • Over 18 years of real estate investing experience
  • Bakerson has bought thousands of individual units, repositioned them, and sold them 
  • The personal portfolio consists of 250 units
  • Track record of 16 multifamily – 850 units and transacted over 2,000 single-family homes
  • Based in Scottsdale, AZ
  • Say hi to him at: www.bakerson.com 
  • Best Ever book: Life is Magic by John Dorenbos 

 

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“As an individual, I’m not so concerned whether I’m remembered, but I do want to pass on the work ethic and what got us where we are” – Bruce Wuollet.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever. We don’t get into any of that fluffy stuff. With us today, Bruce Wuollet. How are you doing, Bruce?

Bruce Wuollet: I’m doing fantastic and improving. Thanks for having me on.

Joe Fairless: Well, I love that phrase, ‘I’m doing fantastic and improving.’ Fulfillment is in the progress that we make, and I like that a lot. Bruce is the owner of Bakerson and a full-time multifamily syndicator. Bakerson has bought thousands of individual units, repositioned and sold them. He’s been investing for 18 years. He has a personal portfolio of 250 units, and he’s got a track record of 16 multifamily projects consisting of 850 units, and transacted over 2000 single-family homes. He’s got some experience, needless to say. Based in Scottsdale, the Phoenix metro area, Arizona.

So with that being said, Bruce, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Bruce Wuollet: Absolutely. So currently we’re doing multifamily repositioning. We started out in single-family, worked into multifamily, buy fix and sell, and our current focus is legacy ownership. And I look at legacy as not an image, but something we can pass on to future generations. So our current focus is to acquire and reposition the class B multifamily workforce housing, with really a supreme focus on the residents, because that’s ultimately our customer. So we focused on taking care of the resident, who takes care of the property, which maintains the value and takes care of Bakerson and the investors. That’s our primary focus at the moment, and it seems to be getting a lot of [unintelligible [00:04:36].11] right now.

Joe Fairless: A couple of questions about that, and then we’ll get into some of the stuff you’ve been doing specifically. Legacy ownership – you said, it’s about passing it on to future generations. Why is that important to you?

Bruce Wuollet: I grew up in a family business in Minneapolis, a bakery business, and that’s where the name Bakerson comes from. I tell everybody that I’m an SOB, I’m a Son Of a Baker. I started working with my dad at 11 years old. I worked there for 15 years alongside of him and seeing what he did, and decided the idea is great, but I didn’t care for working in the food industry so much, I wanted to get into the business world; I tried a few different things.

But what I noticed there is my dad was very gifted at having a business with family involved. And then when we were at work, he was my boss, but when I was at home, he was my dad. And it was a cool dynamic. And when I first started my business, I didn’t want employees, but slowly but surely my kids grew up, and I’ve got a son and a son-in-law who work for me, a daughter who works part-time for me, and then a brother-in-law. So it’s been in the family. So I’m thinking, “Man, if I could help them create a better life, that would be fulfilling for me and then they can do with it and hopefully, create something for their children.”

And when I’ve been to these conferences, specifically, IMN conferences, I’ve ran into quite a few legacy owners, and some of them are second and third-generation multifamily owners. And I just think that’s really cool. They’ve taken it to a whole new level, they’ve taken what they’ve learned and applied it. And I like to tell people that none of us are complete geniuses that we seem we are; we do something great, we’re pretty proud of it, but realize all of our success is on the back of the thousands of generations of people that have gone before us, that have created what we, to this point, we add on to with our bit and hopefully do something special.

Joe Fairless: There’s a contrarian perspective, and I’d like to get your opinion and thoughts on it… And that is first generation makes the money, second-generation loses money, and third generation’s just on drugs doing something else. How do you protect against that?

Bruce Wuollet: Yeah, and I am familiar with that. The other thing that people know as far as generations go, you are loved for one generation, remembered in two and forgotten in three. So as an individual, I’m not so concerned about whether or not I’m remembered, but I do want to pass on the work ethic and to remember what got us to where we are. I watched my dad work his tail feathers off growing up, and a ton of respect for that. And he didn’t give us anything; everything we got, we had earned. So [unintelligible [00:06:58].26] in the people that work for me, and everything they get is earned, nothing is passed on. There’s not a free car sitting in the driveway ready for them to take it to high school. That kind of life does not exist in my home; they work for it and they prove it, and they earn that spot. And then with that work ethic, I’m hoping they can pass it on to the future. Because what happens with some is they try to live vicariously through their children and give them a life they didn’t have. I don’t want to give them a life, I want to give them an opportunity and then they can work that life to their benefit, as opposed to just give it to them… And I think that is the difference. And you’re right, most businesses do not make third generation; when I see those, that’s highly motivating when I run into those people.

Joe Fairless: So your thought process is, “I’m going to attempt to protect or mitigate that from happening by leading by example. And then because it worked for me,” I’m speaking as you, because when you saw your dad working his tail off, you have that same approach, and your thought process is by showing others that they’re going to pick up on it and by not giving them things, except for opportunity to accomplish things, and they’ll pass it along.

Bruce Wuollet: Yeah. And then if they don’t, by that time I’ll probably be long gone, so I won’t see it anyway. But that’s the attempt. And what they do with it, I guess they do with it. And I have to remember also, once I hand the business off to the next generation, it’s going to change. There’s people that they bring in their own skill set, their own ideas, their own vision, and it’s going to look different with a new person at the head of it, and I have to accept that. It’s going to change, and hopefully for the better. And if they ask me for an advice or an opinion, I’ll certainly share it, but I’m not going to meddle if that comes to that. Or maybe I’m here until the day [unintelligible [00:08:35].24] I don’t have a plan to exit at this point, so I may be in it indefinitely. We’ll see.

Joe Fairless: Let’s talk about something else you mentioned which is, you have a supreme focus on the residents. So we’ll talk more tactics now. How does that tactically come to life?

Bruce Wuollet: When I’ve walked the properties — the reason this is motivating for me is when we buy properties, we’ve purchased a few in Phoenix and Tucson from [unintelligible [00:08:57].27], and I see how they treat the residents, and a simple math tells me that a resident that pays you $700 a month, in five years is a $42,000 customer. And that’s a lot of money. That’s a good commitment of their income to you; you’ve got to treat them with dignity and respect.

I had an experience at Apple computers where I spent just a fraction of that on some computers, and all of a sudden I get these calls from these business development team, and they give you free courses and all of a sudden, you’re like a superstar because you bought three laptop computers at one time in your company name… And that’s awesome. That’s a great way to treat your customer.

So then how do I do that? When we go on-site, up here, I could walk around the property and people ask, “Are you the owner?” And I tell them,  “Yeah,” and then I ask them, “Do you like it here?” They say yes or no. And if they say no, I find out why not, and share that with management. And I think it’s important that we create a sense of community, and all we’re asking for them is to live in peace and pay their rent. Very, very simple. You live in peace and pay your rent, we’ll treat you with dignity and respect. If you don’t do either one of those, there’s certain things we have to do to take care of those matters.

And we’ve had co-operatives which were completely crime-ridden with prostitution, we had one that [unintelligible [00:10:11].03] it was a drive-through pharmacy, because there was so much drug distribution going on in there. And police officers told us, “You’re crazy to buy this property,” and we did. And 12, 13, 14 months later, I didn’t meet with the police, but they met with the property managers and said “Man, whatever you guys are doing, we love it. Keep it up.” To me, that’s impactful. Now we’ve made a difference in the community as a whole by getting rid of the problems.

And the saying that I like to use is “if you get rid of the trash, the rats will leave”. So that’s how it works. If you get rid of the problem, people leave with it; get rid of the trash.

And the other thing is we hire third-party property managers, but we have made sure they’re always on top of the resident calls. If there’s a work order that comes in, it gets handled as efficiently and as quickly as possible. These are never ignored. It’s a pet peeve — if I walk onto a property and somebody says they have a leaking shower, which shouldn’t happen to me, but as a property we’re touring to buy… And they had wrapped a plastic garbage bag around the faucet because it was running into the wall, and it was causing a problem… Then they say, “Oh, it’s been like this for a month. They just won’t come and service it.” If that happened at one of my properties, we’d have a discussion with the property management and say that you need to take care of them in a timely and immediate fashion.

Joe Fairless: What’s timely?

Bruce Wuollet: Well, respond within 24 hours to any call. If it’s an emergency, obviously sooner. It depends on the magnitude and the level of the problem is. If it’s something that’s health and safety, it has to be fixed immediately. And people need to be accommodated, if there’s issues inside the unit that they really couldn’t sleep there, you’ve got to put them somewhere for the night, worst-case scenario. Everything has to be responded within the 24 hour period, at least to respond that we’re on it and then get the work scheduled and get it done as soon as you get through your [inaudible [00:11:49].

Joe Fairless: The property where the police officer said, “Whatever you’re doing, you’re doing it right”, you turned it around – how many units was that property?

Bruce Wuollet: 75 units.

Joe Fairless: 75 units, okay. So you’re buying a 75 unit drive-through pharmacy, and you, at some point in time when you were about to buy it, the police officer says, “Don’t buy it, you’re crazy,” and then at some point in time, after you purchase it, they say, “Whatever you’re doing, keep doing it.” Tell us the step-by-step process as best you can during this conversation for how you were able to turn that around and get that type of compliment from someone who previously said you’re crazy for buying it.

Bruce Wuollet: Well, I can only speak to the feedback we got from our property managers; I didn’t personally walk the property and evict residents or deal with the residents, since we have a third-party—

Job Fairless: Strategically though, how do you go about implementing the plan?

Bruce Wuollet: The first thing is excessive 911 calls to a unit. If there’s excessive 911 calls to a particular unit or about a particular unit, those people will have to leave due to health and safety; you’ve got to make sure that you’re following the law, Landlord-Tenant Act of Arizona; but if there’s a lot of excessive 911 calls, they have to go.

Joe Fairless: So is that something you look at in the due diligence, you always go to the police station and ask for a police report, or how do you determine that?

Bruce Wuollet: No, that’s usually after the fact. Once the property is purchased, our property managers are part of the Arizona multifamily, and you can get reports directly from the police department on call to your units as long as you’re going through the program for safety, from multi-housing. So when they’ve gone through that, they get a direct link to a community action officer, and the community action officer gives them direct reports regarding that particular property. So we require the property to go through the training; it’s free training put on by the state of Arizona, and  you go to the training and your property get certified as crime-free multi-housing.

Joe Fairness: What’s an excessive amount of calls?

Bruce Wuollet: I guess I don’t know that number. That’s what they’ve told us, that when there’s excessive amounts, they deal with it. So I don’t know if that’s one a week or one a day or one a month. I guess I don’t know that answer. That’s a good question.

Joe Fairness: Okay.

Bruce Wuollet: And then the other thing is the timely payment of rent. And we don’t take cash; they may have paid cash previously, but when we go through the audit of the books, we require them to make payments and make timely payments, so we can collect on back rent, past dues. And the property managers we use are very diligent on—everybody is treated the same; it is due on the 1st late and late on the 5th. And then the clock starts ticking and they get a 5 day notice, the 10 day, and so on.

So they follow that exact—every resident gets treated exactly the same, regardless of their level of how long they’ve been there, who they are, what’s the situation. Obviously that’s changed with COVID right now, the process has changed, but they’re always on top of the newest changes and mandate. But to follow that, to follow through is the biggest thing; and don’t let that get behind, because that can be a problem. If you start to ignore that or not take care of that, that person if they go 4 or 5 months without paying, they’re not going to catch up; they’re just going to walk out.

Joe Fairless: You said you don’t take cash. So do you have a certain system that you like to set up with each of the residents so that it’s more automated?

Bruce Wuollet: Yeah, there’s an online payment system that’s preferred, and then they can pay checks at the office or mail them in, but the preferred method is online payment systems.

Joe Fairless: Okay, so those are two components of turning a property around – looking at the 911 calls and seeing if there’s excessive amount for a unit. Also making sure people are getting caught up or you’re evicting them, given a non-pandemic world. What else, strategically, do you do to turn around a 75 unit?

Bruce Wuollet: The other thing is a lot of traffic, foot traffic through the property. This particular property [unintelligible [00:15:30].04] fairly well, so we didn’t have that issue. But other properties that we purchased haven’t had fencing, and so there’s a lot of foot traffic walking through the property. And lighting is a big issue. At night, there are certain corners and they walk through, they do their drugs sales, for example.

Another property in Tucson, 74 units, it had a lot of that kind of traffic. We put in some LEDs, a pile of LEDs and lit up the property. We did not fence it off, we left it open, but controlled the traffic. WE added more and more lights and trimmed back the trees in the bushes; it reduced the traffic considerably, that people began to walk around, because it was so lit up in the courtyard in the corners.

And then at times, we’ve had to patrol, foot patrol, walk around, because there’s people that are not to be on property that have been trespassed. Another thing is there’s people that don’t live there, you can trespass them and then they’re not allowed back unless they have a specific guest they’re visiting. And the property managers are fairly good at asking the right questions, like who are you, what are you doing here, who are you visiting, and which unit are they? And then once they get that, they know whether they belong or not.

And I’ve experienced that first-hand when I was walking around the properties, there was a small group of people sitting in this corner and I asked them what they were doing, they said, “Oh, we’re just hanging out.” So I went and told the manager, “Hey, there’s some people [unintelligible [00:16:41].22] “Oh, we’re from this area.” But she went over there and I walked over there with her, and she asked a bunch of questions, [unintelligible [00:16:46].09]  And those people got up and left. They kind of asked the same questions I did, but in a more — very specific question. What are you doing here? Who are you with? Oh, what unit are they? Did you stay here or are you just visiting? Are they home right now? Can we go talk to them? And after a while they realized that they’ve been caught and they get up and leave. We’ve been very, very persistent on that foot traffic, especially in a higher crime neighborhood, where you can have more issues like that.

Joe Fairless: Thank you. That’s very helpful. From landscaping to lighting, and to the types of questions to ask as well. You said that your properties are managed by third-party managers, I’m going to give you a scenario that might be a nightmare for you, but I’d like to hear how you’d work through it. Your current third-party property managers are gone, they decided not to be in the business anymore. So now you have to hire a new third-party property manager. What questions do you ask them that have allowed you to achieve the success that you’ve achieved within multifamily?

Bruce Wuollet: That happened to us, and it’s pretty interesting you mentioned that, because we had a person that left with no notice. So we were really, really smart and we decided “We’re going to set up our own property management company. “We hired a broker, hired some people, and well, that didn’t go so well. So we closed the doors on our vertical integrated property management company.

Joe Fairless: Why didn’t it work?

Bruce Wuollet: Just the amount of resources to put to it. We didn’t have the right people in place. I hired them based on emotion, they said the right things, without knowing who they were. It started really good. For 90 days, it was phenomenal. Well, then a person got in over their head and she didn’t admit it, and we just thought, “Oh, we’ll just keep helping her.” But pretty soon, we were doing all the work, but yet paying her to do it. And we just said, “This isn’t going to work. Let’s just focus on what we do best. Why don’t we find properties and we position property managers that have 10s of years of experience with this, and pay them to do the work, instead of trying to find that person in-house?” So our expertise is finding good deals; that’s really, really what we’re good at.

But in that scenario, what did we do? Because that actually happened. So then we ended up hiring another company we’re using right now… And the prior relationship with one of the individuals helped, but the question that you would ask is “What are the properties in the area are you managing? How many units in this market are you managing? What class are they?” Is it all Class A and this is their only class B property? Then it’s probably not a match, as an example.

The other thing is I’ve asked to visit with other owners that have used them and state their experience, and then I’ve asked to tour the property… And one of the strongest recommendations we got is through the local brokers. We spend most of our time in Tucson, and there’s really three major, major brokers there. If you just interviewed them and just say, “Hey, who are the best property managers in town and why?” and then when you get a name, you’d ask them, do you know these people? What do you know about them? What do you like? What do you not like? And nobody, no matter how good they are, nobody checks every box. There’s always some area of growth that they could have. And you just decide, is that an area you’re willing to leave that gap, or is that one that needs to be bridged before you hire them? As you know, it’s impossible to get somebody to check every single box; they check most of them and you decide, “Okay, that’s the one with a gap, but that’s one we’re willing to stomach or willing to cover ourselves or work with them on.” But those are probably the biggest three things; tour the properties, talk to the owners and visit with local brokers.

Joe Fairless: It’s really interesting that you identified finding the area of growth and being okay with it or not okay with it, that the individual of the property management company has… Because that makes me think, well, if I’m doing my research and I have not identified where are they a little short on or where could they improve, then I need to keep digging. Otherwise, I’m going in with blinders on and I’m going to be surprised by something that will hurt the business.

Bruce Wuollet: Oh, that happened. We didn’t; we went in with one of the property managers that we were recommended. We didn’t do any due diligence on them, and we hired them. And then after some months, they’re doing cash basis accounting, our CPA said “You’ve got to do accrual,” so we did accrual accounting and uncovered, between two properties, $90,000 of unpaid bills.

Joe Fairless: Oh.

Bruce Wuollet: And that gave us a stomachache. And the total units on that was just over 200 units between those two buildings. That gave us a stomachache, we lost some sleep. “Okay, what happened? Where did it go?” Then we accounted for it and we had to contact the people and put a plan together to pay them back, right?

Joe Fairless: Wow.

Bruce Wuollet: Because, as you know, when you’re repositioning your properties, the liquidity is very low, while you—actually, maybe you wouldn’t know, but in the properties we buy, sometimes we run them down to 20% occupied or 80% vacant while we’re repositioning them. And when you have a bill like that come over, it’s a headache. So I talked to our attorney and went through that and he said, “Bruce, did they do the work?” “Yes, they actually did the work.” “Did you receive benefits?” “Yes, we received benefits.” “Then you’ve got to pay the bill. You can go after them if you want.” So we thought about it and I said, “You know, I [unintelligible [00:21:44].14]  Let’s just pay it, do the best we can to move on, replace them and mark it up as a learning experience.” That’s what we did.

Joe Fairless: Wow.

Bruce Wuollet: Yeah, that was quite the scare. So yeah, we have had those type of horror stories and I can do a whole show just on those if you wanted someday.

Joe Fairless: That’s an interesting point, cash versus accrual-based accounting, how important that is.

Bruce Wuollet: Yes. If it’s logged as soon as it comes in, it won’t get missed. But if it’s just put in a file and once you get the money you start pulling the bills out of the file cabinet, well, if it’s 90 days, the vendors are upset. And that’s when we finally got wind of it, because they started reaching out to us directly, “Whoa, what’s going on?”

But the good news is now we have a process where that won’t happen again, that we have an agreement with our current property management company that when a job order comes in, it gets sent up to the regional manager. And any work that’s done without approval from the regional manager is not a liability of the property management company. And they agreed to that. And everything they do is very open, we get weekly reports instead of monthly. So with that, it’s how do we mitigate that in the future and we’ve set up new systems to keep that from happening.

Joe Fairless: Taking a step back, looking more big picture, what’s your best real estate investing advice ever?

Bruce Wuollet: Make sure you properly do due diligence on those that you work with. I think that’s the biggest thing. People say what they’re going to do and then do what they said they’re going to do. That’s really the best thing I can offer.

Joe Fairless: And we talked about different ways to do that as it relates to property managers. We’re going to do a lightning round. Are you ready for the best ever lightning round?

Bruce Wuollet: Yes, sir.

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

Break: [00:23:22] to [00:23:46]

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

Bruce Wuollet: Life Is Magic by Jon Dorenbos.

Joe Fairless: The best ever deal you’ve done.

Bruce Wuollet: The 34 units in Tucson was an amazing experience.

Joe Fairless: Why?

Bruce Wuollet: We bought it with the intent to do a 24-month return, we turned it in 11 months and we made profit, the investors were happy and the owner that bought it thanked us for selling him the property.

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

Bruce Wuollet: I’m very involved at our local church. We volunteer, and so I give back to our local church here in Arizona.

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

Bruce Wuollet: Three ways. https://bakerson.com/, you can email me at bruce@bakerson.com or they could call or text me at 520-808-9111.

Joe Fairless: Bruce, thanks for being on the show. Thanks for talking about your experiences, repositioning properties and getting tactical to give us some tips for how to do so, and also how to qualify third-party property managers and some lessons learned along the way. I hope you have a best ever day and we’ll talk to you again soon.

Bruce Wuollet: Alright, thanks. Hopefully, they gathered at least one golden nugget out of that. I appreciate your time.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2257: Sports Reporter to Sales to Multi-Family Investor With Zach Haptonstall

Zach is the Founder & President of ZH Multifamily and an equity owner of over $48M worth of commercial real estate apartment buildings. Zach climbed up in healthcare sales and at the top of his career after accomplishing many of his monetary goals he found that he wasn’t fulfilled. He eventually discovered real estate and decided to leave his job and live off of 12 months of income while he pursued his new dream and now the rest is history.

Zach Haptonstall Real Estate Background:

  • Founder & President of ZH Multifamily
  • He is lead sponsor, general partner, and equity owner of  over $48,000,000 worth of commercial real estate apartment buildings
  • Portfolio consist of 420 units
  • Based in Scottsdale, AZ
  • Say hi to him at: www.ZHMultifamily.com 
  • Best Ever Book: Bible

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“You need to attack, constantly be trying to move the needle forward and know it will be difficult because you will not have tangible evidence that it will work” – Zach Haptonstall


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today we’ll be speaking with Zach Haptonstall.

Zach, how are you doing today?

Zach Haptonstall: Hey, I’m doing great, Theo. Thanks for having me on, man. I really appreciate the opportunity to be with your viewers and your listeners here.

Theo Hicks: Absolutely. Thank you for taking the time to speak with us. So a little bit about Zach. He’s the founder and president of ZH Multifamily. He is a lead sponsor, general partner and equity owner of over $48 million worth of commercial real estate. His portfolio consists of 420 units. He is based in Scottsdale, Arizona, and his website is https://www.zhmultifamily.com/.

So Zach, do you mind telling us a little bit more about your background and what you’re focused on today?

Zach Haptonstall: Absolutely, Theo. So I was born and raised here in Phoenix, Arizona. Never really had much of a real estate background, no family in real estate. I wanted to be a football player, so I had a small Division II football scholarship to a school in Colorado. I went there for a bit, realized I wasn’t going to make the NFL, came back and the next best thing is I wanted to be a sports reporter and a journalist. So I went to journalism school, I got a broadcast journalism degree, and I was actually a live news anchor on Arizona PBS here for a short time. And it was a sports reporter, and I hosted a show on Fox Sports Network. So that was really cool at first, being on live TV and everything. And then I just quickly realized that it wasn’t what I wanted to do. I wasn’t passionate about it. I was a sports fan, but I didn’t want to do that as my job.

So I graduated school, I was 21, I decided I don’t want to do this… I have all this school debt and I was like, “Man, I need to make money.” So I was delivering medical equipment nights and weekends, Theo, while I was going to school to pay for school, and my boss was like, “Hey, you can make pretty good money doing healthcare marketing.” So after journalism, I actually had a job of all things as a hospice marketer. For those listeners who don’t understand what hospice care is, it’s basically mobile nursing and care giving for people with end-of-life illnesses. And so my job was to drive all around Phoenix and just cold call, walk into hospitals, doctors offices, assisted livings, build relationships with physicians, social workers etc, to sign people up in hospice.

So long story short, Theo, I was very blessed to do well in the hospice arena. So by the time I was 23, I was making 150k a year. I bought a house. By the time I was 24, I had gotten my MBA, paid off all my school. So I did that for about four years. I was blessed to be making over 200K a year by then. I had no debt, with a little over 100k in my bank account, and coming from a lower middle-class family, I was blessed in doing well and grateful, but I just didn’t feel fulfilled. I just was burnt out and I had already achieved all those goals in that arena… And I wanted to create more freedom of my time and more passive income. So I didn’t know much about real estate like I said, but January of 2018, I said, “Screw it. I don’t want to do this anymore.” So I resigned, and I sold my equity in the company. And I had no plan except I knew I wanted to somehow create passive income through real estate.

So I set aside savings for over 12 months. I said, “I’m going to live off savings for the next 12 months.” I ended up living off savings for more than 12 months, and I just kind of dove in. I started listening to podcasts like this one, reading books, cold calling people, etc, etc.

Initially, I was looking at flipping homes, then mobile home parks, then I went to multifamily and syndication and the power of leveraging other people to come together and acquire these assets.

So long story short, 10 months went by, I burned through a lot of savings, went through a lot of adversity just trying to figure this out. And finally, after 10 months, we got the first deal under contract. We closed it four months later. So it was 14 months from when I first quit my job and decided to do real estate full time that we got the first deal. It was a 36-unit. And then we were just fortunate to catch momentum after that.

Since then, since closing on that first deal, right now we’re near the end of July 2020, as we record this deal, Theo, and we acquired that first property in February of 19. And since then we’ve acquired 420 units, 48 million over five assets, all here in the Phoenix area. So it just kind of goes to show once you get that first deal, you catch momentum – we were able to scale up from there.

Theo Hicks: Thanks for sharing that. So you said your first deal was 36 units, you said?

Zach Haptonstall: Yeah, it was 36 units, 3.4 million. Correct.

Theo Hicks: Perfect. So maybe walk us through how that deal came to be. So you mentioned that you had partners on that deal, you mentioned the cost and the size, but from—you made your decision to do multifamily. You got educated on the process, then what did you do? Did you first reach out to partners and then who did you reach out to for the money? Maybe walk us through that process from, “Okay, now I’m ready to start taking action”, to “This first deal is closed.”

Zach Haptonstall: Great question, because it’s a daunting task, right? To take down these multi-million dollar assets… And I didn’t have tremendous net worth or liquidity to even sign on these loans, so you have to find a partner. That was probably the hardest part, Theo, was going through the adversity of trying to find people who are like-minded, who are motivated, who actually can help you with these deals. And so I initially was just trying to meet with people, cold call people. Then I started going to conferences, meetups, things like that. I met a guy Robert [Inaudible [00:08:03] who also lives here in Phoenix, Scottsdale area, and we kind of hit it off; he’s high net worth, high liquidity guy. He had been trying to find apartments, and so we decided to team up.

So this first deal, to answer your question, it was on market. So it wasn’t like some secret off-market deal. It was through a broker. It was on market. I had personally underwritten at least 30 or 40 deals by that time, and nothing penciled, nothing really made sense. Everything’s overpriced, which is the case in multifamily. This deal finally penciled. So Robert and I, we put in an offer on it, and then it gets accepted and we’re like, “Oh, crap, what do we do now?” That was a scary thing. Like, “Well, we’d better just push forward.”

So we get the deal under contract, and our plan, Theo, was to syndicate the deal. Okay? So I had a network of physicians and healthcare business owners from being in the healthcare arena, and Robert had some high net worth friends. So in our minds, we were thinking, “Yeah, we’ll just get this deal, all of our network will invest in the deal and it’ll be great.”

So we get the deal under contract, 30 days go by, we’re done with due diligence… We’re each non-refundable for 25,000. So I have 25k hard, and nobody’s really interested in this deal. So it’s a scary thing. We’re like, “Crap, we need to bring 1.4 million of equity to this deal.”, and our plan was to syndicate it and we’re not really getting a lot of interest. So I was just calling different people I had met and established relationships with at conferences, and had several phone calls with them… And I get a call one day from somebody I had met at a conference and had several calls with and she’s like, “Hey, I heard you have this deal in Phoenix.” I don’t know how she found out about it, but she’s like, “I just sold a 12 unit deal in Seattle, and I’m going to 1031 exchange. Why don’t I 1031 exchange into your 36-unit deal you have and we’ll do what’s called a tenant in common, a TIC deal, and I’ll bring 650k of equity.” And I said, “That sounds great. Let’s do it. And what’s a TIC deal? How does that work?” So I didn’t really understand that process. We originally planned, Theo, to do a syndication, but we ended up doing a tenant in common, which is essentially it’s similar to a JV, a joint venture structure. Everybody’s active, there are no passive investors.

So I at that time had about 160k to 164k left, and I was all in and I put 160k into this deal. Almost all my cash. Robert put almost 300K, we brought in her for 650k, and then I found a couple guys that come in at about 150k, and we made the deal work. So we ended up doing a TIC structure, not a syndication. We closed on that deal and that just gave us a lot of confidence going forward.

And then there’s different things throughout that process… Right after that, I sold my house, which I was never planning on selling… Because I needed more liquidity, and I invested that money in the next deals… But you just kind of have to figure it out and you have to find complementary partners who have skills that you don’t necessarily have, and that’s the key really.

Theo Hicks: What do you think would have happened if that person didn’t reach out to you for a 1031 exchange?

Zach Haptonstall: Good question. I would like to think we would have figured it out and found somebody, but it’s likely we wouldn’t have been able to close and we could have lost our earnest money. That’s the risk you take with multifamily. And you don’t ever want to be too aggressive. You want to make sure you have stress tests in place in your underwriting and you have conservative assumptions. But of the five deals we’ve done, and we have one under contract, none of them have been super-smooth. It’s like there’s always these scary things that come up, so you have to get to the point where you trust in your underwriting, you trust the deal, the fundamentals, and you have to be a problem solver and overcome different obstacles along the way.

And so I would like to think we would have scrambled… Because one part of that story, Theo, was that literally four or five days before closing, our lender calls me and says, “Hey, man, I’m so sorry. We were too aggressive on this underwriting on line item. We’re cutting your proceeds by $227,000.” “Right before closing, what do you mean? That’s crazy.”

So we just scrambled, and I had a friend who invested 150K, and Robert found somebody who put in 77K and we made it happen. So scary things come up and you just have to adjust and adapt.

Theo Hicks: Another question I have about this first deal… So you mentioned that your business partner, the net worth liquidity guy, he put in 300 grand in your first deal?

Zach Haptonstall: Yeah, it was like 275k. Yep, nearly 300k.

Theo Hicks: And then I’m assuming he’s the one who was the loan guarantor as well, so he signed the loan.

Zach Haptonstall: Yeah, we both did. Yep. But I needed his liquidity and net worth. Correct.

Theo Hicks: And then before this, you had never done a deal before, right?

Zach Haptonstall: Never. I had only bought a single-family home, which was my primary residence. That’s it, no other real estate investment.

Theo Hicks: Okay. So why did he partner up with you and then put all that money into a deal with you, and sign a loan with you if you hadn’t done a deal before? What did you do to sell him on this?

Zach Haptonstall: We initially met in — I think it was July or August. So we had been meeting frequently, and having several conversations for three or four months prior to that. And I thl6ink he could tell how serious I was. And I was transparent. I was like, “Look, I have this much money. I’m going to go all-in for the deal if I believe in the deal.” And he saw that I was putting in 160K. So he knew I had skin in the game and then I had a lot to lose, and we were on the same page. But I will say, he’s a lot more risk-averse than I was. So I was probably the more aggressive one to push to get that first deal.

So it’s really just about building that relationship and that trust, but it’s never a perfect thing, right? It sounds nice in hindsight, but there was a lot of stress throughout that process… But we’ve been partners in all of our deals, and it’s gone well. So you really have to just build that relationship, and you really do need to like the people you partner with, because you’re going to have to communicate with them frequently, and you’re going to have to have tough conversations, and you’re going to need to be able to hold each other accountable and call each other out if one person isn’t holding their weight. So that’s kind of the relationship that we have, along with our other partner now, [unintelligible [00:13:22].07]. So that’s important.

Theo Hicks: So during these three to four months, was it just you guys kind of just hanging out building a personal relationship? Were you just like talking on the phone, texting each other, getting coffee?

Zach Haptonstall: Yeah.

Theo Hicks:  I think is very important for the listeners, because you had no experience and you were able to do your first deal. So I’m kind of focusing on this a lot.

Zach Haptonstall: Yeah.

Theo Hicks: So you met this guy in July/August, you had three or four months kind of conversation, and then eventually he ended up investing with you. What were these interactions like? How often did you meet this guy? Kind of get into some specific stuff.

Zach Haptonstall: Yeah, good question, Theo. We were meeting frequently either at coffee shops or at his house… So I’m engaged, getting married in a couple months. I have no kids. Robert is married and has three kids. So obviously, there’s different dynamics, but he’s full-time real estate and I was full-time real estate as well at that time. And so we were able to meet during the week frequently, and we were underwriting deals together. I was demonstrating to him that in the previous six months before I met him, I was already focused on multifamily. And I was showing him and demonstrating all the relationships I had built with brokers, property managers, lenders, insurance brokers and just people in the industry etc, etc. So that was really a key, was to show him, “Look, I’m fully committed and I’m serious.” And he didn’t have any experience with multifamily either, so he was hungry to get into it, too. So he was trying to find a partner just as I was, but he had been looking for over two years.

So I think when we kind of clicked and we realized that we’re good complementary partners, it made sense for both of us. And we had complimentary assets, you know… Where he didn’t really have the relationships and things like that and I did, so I could bring value to him and vice versa. It just comes down to mutual respect and both demonstrating that you’re willing to work hard.

Theo Hicks: Thanks for sharing that. It was really solid advice. Alright, Zach, what is your best real estate investing advice ever?

Zach Haptonstall: There’s so many components to it… I guess if we’re really focused on people doing their first deal, this kind of sounds like an oxymoron, but my best advice ever is you need to really attack. You need to constantly be trying to move the needle forward, and it’s going to be very difficult because you’re not going to have any tangible or visible evidence that you’re making progress. But by listening to podcasts, reading books, and most importantly, getting out there and meeting real estate professionals, like brokers, lenders, and starting to underwrite deals, is the most important.

So my best advice to you would be you need to relentlessly attack; don’t ever give up. You need to stay consistent. You don’t need to do a crazy amount of things every day, but you need to do something little or try to keep pushing forward. And at the same time, you do have to be patient, which is where the oxymoron comes in… Because I got to the point where it was eight, nine months, I was putting so much pressure on myself that I was discouraging myself, and I had to almost relax and just kind of let it come to me. So just keep attacking, be determined, stay faithful, but be patient, too.

Theo Hicks: Perfect. Alright, Zach, are you ready for the best ever lightning round?

Zach Haptonstall: Let’s do it. I’m ready.

Theo Hicks: Okay.

Break: [00:16:12] to [00:16:55]

Theo Hicks: Okay, Zach, what is the best ever book you’ve recently read it?

Zach Haptonstall: Good question. So just to be clear, I don’t ever actually read books. I do audiobooks because I just can’t read books. But right now, I’m reading the Bible, front to back, on audiobooks. I’m Christian, I believe Jesus Christ is my Lord and Savior… And I’m doing audiobook, New American Standard Bible front to back, which is actually pretty interesting when you’re [unintelligible [00:17:12].12] things like that. There’s a bunch of other good books, The Power of Ambition by Jim Rohn is a good one I listen to frequently, just talking about fundamentals and discipline. So those are two good ones.

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

Zach Haptonstall: I would restart it and rebuild it. I would identify what are the issues, why did it collapse, take a little bit of time and reflect and I would come right back and go into attack mode. I would just do it again.

Theo Hicks: What is the best deal you’ve done so far?

Zach Haptonstall: The best deal we’ve done so far—well, we’ve acquired five deals and we have not sold any of them yet and gone full cycle, so it’s hard to say. However, our first deal is under contract and it’s going to be closing in September. So it’s got to be our first deal, our 36-unit deal. We bought it for 95k a door and we’re about to sell it for 148k a door in 18 months. So it was a good value-add business plan that we executed.

Theo Hicks: What’s the best other way you like to give back?

Zach Haptonstall: We like to volunteer. We’ve been to Feed My Starving Children and done food boxes, things like that. We had signed up to go on a mission in Mexico through our church,  but COVID kind of ruined that. In the real estate industry, I really like to just help people and get on phone calls, who are trying to get into it…  Because I went through so much adversity and people told me I couldn’t do it… So I like to get on phone calls with people and just share advice and try to inspire them or support them any way I can and just lend any valuable advice.

Theo Hicks: Have you lost money on a deal yet?

Zach Haptonstall: No, I haven’t. Not on a multifamily deal. The only thing I’ve ever lost money on is the Super Bowl was here in Phoenix, Arizona, Theo, in 2014/2015. And I had a friend who at a previous Super Bowl had leased out a hotel and then subleased it. Because there’s so many people that come here for it. So there’s this really nice four or five-star hotel, Talking Stick Resort. It’s got a casino, and all the hotels were booked in Phoenix. And I had this genius plan to sublease this. So I rented out this suite at Talking Stick Resort the weekend of the Super Bowl for four consecutive nights, Thursday night through Sunday night, 1000 bucks a night. I rented it out, and I reserved it. There was no more suites left. And my plan was to sublease it. So I put it on Craigslist, all these third party websites, and nobody bought it. So I lost four grand, and I literally stayed there for four nights in a row just so I didn’t feel like I completely wasted it. And I didn’t even have any fun or anything. So I probably won’t sublease any hotels.

Theo Hicks: That’s a good story. Lastly, what’s the best ever place to reach you?

Zach Haptonstall: You can just go to our website. It’s https://www.zhmultifamily.com/. You can email me at zach@zhmultifamily.com. I’d love to get on a call. There’s a ‘Contact us’ sheet on the website. You can fill that out and we’ll set up a call and help you however I can.

Theo Hicks: Perfect, Zach. Well, thanks for taking the time to join us today and walk us through your journey. I think that the biggest takeaway that most people are going to get is the specifics you went into on how you were able to find that first partner.

So again, you’d bought a house before, but it was just your single-family house. So it was your first investment deal, first multifamily investment deal. You said you met your partner at a meetup or conference, you met in July or August, and 3-4 months later he was investing almost $300,000 into a deal with you. And you mentioned that the reason why he did this is number one, you were super-transparent with him, and you mentioned that you are going all in, you were putting all your eggs into this basket, which gave him confidence that you had to succeed or you were done for.

Zach Haptonstall: Yeah.

Theo Hicks: You mentioned you went to the coffee shop and met, you went to his house and met. You said you were underwriting deals together, and then the biggest thing that I think you said was that you showed him all the relationships that you would built. So you didn’t come up to him and say, “Hey, let’s do this deal together”, and then he asked, “Okay, what’s the next step?”, and then you have a million things needed to do. You already had the education, you said you had your team built, so again, that portrayed that you knew what you were doing, that you were credible and that you were going to be able to get the job done… Which you did, because now you’re in the process of actually selling that deal.

And then you walked us through the process of that first deal and how it was supposed to be syndication, you didn’t have the money raised beforehand, you had a hard time raising the money, but it ended up working out. You mentioned that really in every deal you’ve done so far, it was always something that comes up and happens.

Zach Haptonstall: Right.

Theo Hicks: So it’s never going to be perfect. So it’s making sure you have those problem-solving skills. I think this also comes in your best ever advice about being patient and relaxing and not losing your mind when things do happen.

And the other aspect of your best ever advice was making sure that you are constantly in attack mode, constantly moving forward, constantly taking action and realizing that just because you’re not seeing that tangible evidence, you’re not seeing that deal being done right away doesn’t mean that you’re not actually progressing. That’s where the patience and the relaxation comes in. So keep focusing on getting educated, keep focusing on building your team members, keep focusing on building deals, because all those actions added up daily will lead to you ultimately doing a deal, whether it’s a month from now or a year from now.

Zach, again, I appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Zach Haptonstall: Thanks, Theo.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2250: The Power Of Using LinkedIn For Raising Investor Capital With Yakov Smart

Yakov Smart is the President at Linked Lead Enterprises. Yakov has been focusing on helping real estate investors with tools to help them raise capital through Linkedin. In today’s episode, Yakov, shares the mindset you need to have, and some of the steps you need to take.

Yakov Smart Real Estate Background: 

 

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“In a matter of minutes you can have a hyper-targeted list of thousands of your ideal investor” – Yakov Smart


TRANSCRIPTION

Theo Hicks: Hello, best ever listeners and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today, we’re speaking with Yakov Smart.

Yakov, how are you doing today?

Yakov Smart: I’m well, Theo. Thank you for having me.

Theo Hicks: Yep. And thanks for joining us. Looking forward to our conversation. We’re going to talk about raising money on LinkedIn. So Yakov is the President at Linked Lead Enterprises and is an internationally recognized LinkedIn experts as well as the author of Disrupting LinkedIn; what he does is specializes in helping real estate organizations raise private money using LinkedIn.

He is based in Scottsdale, Arizona, and you can say hi to him at his website which is http://linkedleads.us/.

Yakov, do you mind telling us a little bit more about your background and what you’re focused on today?

Yakov Smart: Absolutely. So I’ll give you the really brief version of the background, so we can get into some of the concepts today as well. So my expertise for a number of years has been in the online marketing space. I’ve been marketing online, pretty much growing up with social media. I’ve been on social media since the eighth grade, way back in the days of something called MySpace, which I know a lot of people listening probably can remember as well. I first got into online business and online marketing as a college student. I actually wrote an ebook on success in college, which I think is actually still on Amazon funnily enough… But that’s when I first got into this online marketing world. I’ve pretty much been hooked ever since.

And fast forward a bit… I’ve had my business focus specifically around lead generation and attracting clients and investors using LinkedIn. Forward to the time that we’re having this conversation about for four and a half years, and as of recently, we’ve shifted our entire focus because of the opportunity that’s here at the moment of working specifically with real estate entrepreneurs and organizations and showing them a new way of raising capital and attracting the investors they’re looking for using LinkedIn… And through a series of strategies, tactics, and really innovative new ways of tapping into the LinkedIn platform and a few other online marketing platforms, we give people proven tools and a new way of raising more capital so that they can massively grow and scale some of their projects.

Theo Hicks: Perfect, thanks for sharing. And then you’ve also got your book on Disrupting LinkedIn. So I’m going to kind of toss it over to you and let you start wherever you want, and walk us through your tips, tactics, tools for using LinkedIn to raise more money.

Yakov Smart: So let’s start with some really important frameworks, because I know there’s people listening who are already very active on LinkedIn and have already given it a shot in terms of attracting investors and marketing and are seeing some sort of results. And I know there’s people who probably have a LinkedIn profile and haven’t really tapped into it for attracting investors and maybe haven’t even thought about tapping into LinkedIn for raising more capital, or maybe there’s people are transitioning from their day jobs and want to get into doing things like syndications and other real estate projects.

So the very first thing to think about is to understand the power of that platform, right? Because what LinkedIn allows you to do, it allows you to reach high-level decision-makers directly. So whoever is an ideal investor for you, whether they need to be accredited or not, whatever that number is for you that you’re wanting people to invest in your projects, there’s a great chance you can reach that person directly on LinkedIn… Because the average household income of a LinkedIn users $115,000, okay? That’s an average household income. And when people work with us, they’re just blown away by how quickly when you know how to build a list on LinkedIn, literally, within a matter of minutes, you can have a hyper-targeted list of thousands of your ideal investors, whether those are local dentists, dentists nationally, international investors, people at family offices, other real estate entrepreneurs, attorneys, tech founders, people who are working as project managers in corporations, who have 401 K’s to invest, for example. Pretty much any type of investor you can imagine. You can build a hyper-targeted list of these individuals and a hyper-targeted list of accredited investors if you’re working with or wanting to work with accredited investors only.

And the great thing is this data is the best data in the world, it updates in real-time, and you have access to those lists of potential investors at your fingertips. And what’s also really neat about that is as opposed to going out and buying a list or paying a list broker thousands of dollars, this information is available in real-time. And a lot of it, you can even get on the free LinkedIn search.

So the very first thing that people have to recognize and that they have to know how to do is how to find and pinpoint their ideal investors on LinkedIn, and build those lists. And that’s a really, really big thing, and there’s a number of ways to do that. But the other piece, the sort of the one-two punch where things really start coming together for you, is in the messaging. Okay? And if there’s a secret sauce to this, the messaging is that. Because you have to understand the difference between meeting that potential investor, let’s say at a conference or a networking event, versus LinkedIn, where if you’re having a conversation at a conference or a networking event and they’re not that interested at first, most people will give you the time of day, and they don’t want to just run the other way and give you the cold shoulder… Versus online, you’ve got a split second to get them to care. There’s a lot of noise out there, so you need to be able to build trust, you need to be able to stand out using your messaging and you need to understand the psychology of that ideal investor as well when coming up with your messaging on LinkedIn.

The upside here and the vision and the potential for you as a real estate entrepreneur who wants to raise more money and raise private capital using LinkedIn is you have the ability to consistently generate investor leads by having a system in place where quite literally with one press of a button, you have something that runs on autopilot, it’s 90% automated, where you’re generating high-quality investor leads day in and day out, staying within SEC compliance and constantly filling your calendar and building new relationships with potential investors. So it’s a tremendously powerful platform. I’ll also say it’s still one of the most under-utilized platforms out there for generating high-quality investor leads.

Theo Hicks: Perfect. So I’ve got basically three categories. Number one, the list. Number two, the messaging. And then number three, which is kind of like a combination of those two, is making it automated. So let’s kind of walk through each of those three. So the list – you already mentioned, free LinkedIn profile versus the more advanced LinkedIn profiles. Maybe tell us, is it worth getting that premium LinkedIn profile when it comes to making these lists? What’s the difference between the two?

Yakov Smart: So there’s five ways to build lists on LinkedIn, okay? And this will be a really good, thorough answer. So a question that I think a lot of people are asking themselves that are listening… So five different ways to build a list on LinkedIn… The first way is using the free search. It’s available to everyone. There’s a limit on searches you can do per month, but there’s some really good basics that you can segment for when you’re building your free list.

The second way is to search by LinkedIn groups. That’s also a free feature. That’s a way to see people based on behavior based on interests. For example, if you want attorneys who are interested in real estate to begin with, which tends to be a much easier group than just attorneys in general, having that type of overlap is another good way to build lists, and finding people by groups is the second way to do searches.

Third way, if you have a list that you could import  previous contacts, or if you bought a list from somewhere, you could integrate that with LinkedIn.

Fourth ways to use the LinkedIn advertising platform. At the time we’re having this conversation, it’s not worth it for most real estate entrepreneurs. LinkedIn ads tend to be more expensive, and they’re not nearly what Facebook ads are at the moment. Now, that may change.

The fifth way, and this is where the premium accounts come into play, is something called LinkedIn Sales Navigator. Inside of our programs, I highly recommend for people who want to really ramp this up and do this at scale and get consistent results to use Sales Navigator. It’s not just the old school LinkedIn premium account. There’s a few different types of premium accounts. There’s recruiter, there’s old school premium and there’s Sales Navigator. And specifically, the upside of Sales Navigator is you can build hyper segmented lists. There’s about 15 to 20 different filters you can filter by. You can save these lists and use them like a CRM inside of LinkedIn.

And what you also have the ability to do is get hyper-specific. We’re talking about criteria like zip code, we’re talking about things like how long someone has been at their company, right? So oftentimes, a good investor or someone who has a retirement account that’s had that longevity. You can go by seniority in the organization. You can go by different interests, different affiliations, as well. So all that is available, and also by company sizes, where people live. For example, there’s an affluent zip code, you can build list of those people as well.

And where it gets really, really powerful, is having the ability to do that and get hyper-specific; the more specific you are in Sales Navigator, the better. And the reason why this is such a big hack, Theo, is this tool was originally intended for B2B sales prospecting, and part of this new way of using LinkedIn that I think a lot of real estate entrepreneurs are drawn to, certainly when they work with us and why they’re drawn to a lot of our programs, is we’ve taken a tool that’s very, very powerful but it’s never been used quite like this. And there’s so much upside potential to it.

Theo Hicks: Thanks for sharing those five ways. So let’s say, as I’m following and listening to this, I’ve got my free account, I already have my target audience defined; let’s say it’s attorneys and the zip code or whatever. So I do a search, I got my list. The next step, I’m assuming, is the messaging. So once I have my list, what do I do with the messaging aspect of it? What are some of your tips for making sure I’m able to get their attention right away, build that trust right away, stand out right away? And then I guess more tactically speaking, am I just direct messaging all of them individually? Is there like a bulk way to send a message to all of them? So I guess that’s kind of a two-part question, the what and the how.

Yakov Smart: So the messaging is a really big thing. There’s three important places to have your messaging, Theo. And we could talk for hours about messaging, but I’ll give you sort of the essential start with.

So the first place, as some people could probably guess, is going to be that LinkedIn profile. You don’t want it to sound like a resume, you’re not looking to put your executive bio out there. Your messaging on your LinkedIn profile needs to be all about what’s in it for them, because you’ve got to grab their attention first and gear it towards your ideal investor. The more specific you can be in your messaging on your LinkedIn profile, the easier it’s going to be to start building that trust. And you want that ideal investor, when they look at your profile, to look at it and think to themselves, “Wow, this is for me.” Okay? That’s a really big thing that you want to have happen. But there’s some other important areas of the profile where you can do that. There’s some tactical things, headlines, your About section, having a great cover photo, making sure your profile is set to public. Those types of different things that are a really good place to showcase a lot of your messaging.

And the other reason why the LinkedIn profile is so important is because other than your website online, this will surprise a lot of people, but it’s really important – your LinkedIn profile is your most important online marketing asset. Because when people Google your name, even if you haven’t logged into LinkedIn in years, that LinkedIn profile is usually going to be at least on the first page, if not in the first three results. So it’s really important to have that updated. It’s really important to have that powerful messaging on your profile.

The second place is in some of the content that you’re able to post on LinkedIn. Just like Facebook, there’s a newsfeed on LinkedIn, and it’s using content when it comes to messaging. It’s not about volume. It’s not about posting five times a day, right? There’s a lot of gurus who talk about posting five times a day or whatever. That’s an overwhelming amount. No need to do that. It’s more about posting quality things, that educate people and get people to have an ‘Aha!’ moment of like, “Wait a minute, this is something I might want to learn more about.” And there’s a number of best practices there, but as a rule of thumb, just think about content that moves people closer to action, that makes them more aware and makes them more educated about the type of investment opportunities that you have to offer.

Now, a real strong word of caution – when you post on LinkedIn, do not post individual deals. There’s a bunch of SEC compliance and regulations that you just don’t want to go there, right? So it’s never about individual deals, offering up individual investments just out in the open on LinkedIn. That’s not what I recommend at all; I want to make sure people do not do that.

The third important place for messaging is, as you mentioned, Theo, direct messages, right? And the big mistake to avoid with direct messaging, you don’t want to go for the one-shot kill. And something as nuanced as investing, with you – you know, there’s some cases where people are going to write you checks for hundreds of thousands if not millions of dollars over time, and to just start that relationship off, you do not want to start off by connecting and pitching them immediately, right? It’s one of the worst things you can do, and you can ruin someone who might have been interested by taking that sort of approach.

So instead of doing that, you want to think about it as a series. I call it a LinkedIn messenger funnel. It is a series of messages you can strategically send to someone on LinkedIn over time that’s going to get them to want to find out more about what you’re up to, about investing with you, and it’s going to get them to want to schedule a call with you, and then eventually join your investor club and your investor list. So it’s a really powerful way to look at messaging.

And some other best practices, you want to keep things concise. You want to make sure that you’re always leading with value, you want to make sure sometimes you’re asking the right questions that are going to get their wheel-spinning, they’re going to get them interested, and you want to make sure you’re automated. This was your other point as well, sort of on the systems and automation. I’m big on delegating. I’m big on you as a real estate entrepreneur being the visionary behind your business and having a system you can actually delegate.

First of all, you want to automate as much as possible, but you also want to have a system for generating investor leads on LinkedIn that you can actually delegate to an admin, an intern and an assistant. And the big thing is to have it be systematic in a way where they can plug into, right? Where that becomes mechanical, that becomes a button-pushing. So first the  strategy in the messaging and the processes and the individual tactics that are going to work for you. Then the mechanical on the day to day upkeep.

Now, the great thing about the day to day upkeep, using different types of automation software, you can actually automate about 90% of the work, right? So once you have the messaging in place, your profile looks good, you’ve got a really good list, you can automate pretty much all the follow up. And the only manual part, and this usually takes people between 15 to 20 minutes a day if they don’t have an assistant do it on their behalf, is responding to people who are actually interested. You’re going to start to see inquiries, you’re going to start to see people who are interested in finding out more about investing with you, people engaging, asking questions and messages. And you’re going to either give yourself 15-20 minutes a day, which is usually time very well spent, for responding to actual leads to people raising their hands wanting to know more, or eventually delegating that to an assistant or an admin person. So you definitely want to tap into automation. Automate 90% of the outreach and the follow-up. That’s a really big thing.

Theo Hicks: Okay, Yakov, besides all the amazing advice you’ve given so far, what is your best ever advice for raising capital on LinkedIn?

Yakov Smart: To think of it as a system and reverse engineer. You really want something that’s going to work for generating investor leads and getting people on your investor list over the long term. So the best ever advice is to reverse engineer the process, have great messaging, and think about this in the long term, something you can duplicate again and again.

Theo Hicks: Perfect. Are you ready for the best ever lightning round?

Yakov Smart: Let’s do it.

Theo Hicks: Okay.

Break: [00:18:57] to [00:19:50]

Theo Hicks: Okay, Yakov, what is the best ever book you’ve recently read?

Yakov Smart: The best ever book I’ve recently read, it’s a book actually by 50 Cent, that 50 Cent, Curtis “50 Cent” Jackson. It’s a great personal development book. I think people, if they listen to the audio especially will be very pleasantly surprised. It’s called Hustle Harder, Hustle Smarter.

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

Yakov Smart: I would figure something else out to market. I would generate some leads and sell some stuff.

Theo Hicks: What is the best ever way you like to give back?

Yakov Smart: Through education. I think educating people, upgrading their levels of awareness; it’s a great way because collectively, one person has a new range of skills or one person is doing better in their business with raising capital, and it positively impacts the people around them as well. So education first.

Theo Hicks: I’m not sure if you have a specific consulting program or your book is your main education source, but maybe tell us the most amount of money, either one of your clients or someone who’s read your book and reached out to you, the most amount of money someone has raised by using your LinkedIn strategies.

Yakov Smart: So I wouldn’t say that the book is a great source for attracting investors. It’s a general LinkedIn book. There are some better resources for accomplishing raising capital. I think, at the time, I think it’s 3.2 million actually raised. And I need to check that, but that’s the highest number that I know of.

Theo Hicks: Nice. And then lastly, what is the best ever place to reach you?

Yakov Smart: So there’s a very specific place for people who are listening to this and want to go deeper and know more. There’s a free online training, it’s http://linkedleads.us/raisingcapitalwebinar/. It’s a free online training that covers the methodology, and they can get access to that by going to http://linkedleads.us/raisingcapitalwebinar/.

Theo Hicks: Perfect, thanks for sharing that and I’ll make sure that that is included in the show notes. Yakov, thanks for coming on the show and giving us your best ever advice and tactics for raising capital on LinkedIn. We were very specific, and you gave all your advice in list form, which makes it very easy for me to summarize, aas well as for people listening to remember. So your framework was how powerful LinkedIn actually is, and that not all people are necessarily using it to generate leads, and some people are, some people aren’t.

But you mentioned that something that seems to shock people, is when you mentioned that the average household income for a LinkedIn user is $115,000. So it allows you to reach people that have that salary or even higher directly.

You mentioned that there are three different aspects of the strategy. First, is the list. Second, is the messaging. And the third, is making sure that it’s on autopilot.

For the list, there’s five ways to build lists; there’s the free search function, there’s searching by LinkedIn groups, there’s importing a list, maybe a list you bought somewhere else, there’s advertising, which you’ve said, probably not the best, at least right now for real estate investors. They can get more out of some other advertising, like on Facebook. And then fifth would be the LinkedIn Sales Navigator, which is one of those paid accounts that allows you to hyper-segment your lists, and there’s a bunch of filters you can use.

And then for the messaging, which you said was the secret sauce… I liked how you said that you have to recognize a difference between networking with someone face to face, where they’re not interested, they’re not going to just instantaneously walk away from you. They’re going to be polite, maybe listen to you a little bit, and then walk away. Whereas online, it’s a split-second, you’ve got a very short amount of time to get their attention, or they will just click away.

So you mentioned that to set yourself up for success, the three places you need to focus on are your profile, the content that you post, as well as the direct messaging. And you kind of gave us all examples of what to do for each of those. And then you talked about the third category, which is putting the system on autopilot and that you’re able to automate 90% of it. And then the only manual part would be responding to people, which you could automate even further by delegating to an admin.

And then to wrap it all up, you said your best ever advice, which was to think of it as a whole system, reverse engineer the process and then realize this is a long term strategy. Don’t get discouraged if you make your first list and don’t raise $3.4 million in a week.

So Yakov, again, thanks for joining us. Best of listeners, make sure you take advantage of that free course at http://linkedleads.us/raisingcapitalwebinar/. Thank you as always for listening. Have a best every day and we’ll talk to you tomorrow.

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JF2146: Lessons From A Buyout With Garrett Lynch

Garrett started wholesaling deals in the Chicago area and after realizing it wasn’t a sustainable model that he could grow into a business. He eventually had a business partner and acquired 3,400 units and due to some fallout between the two, he was bought out and took the lessons he learned to go on a break and came back strong with a new partner now owning 500 units.

Garrett Lynch Real Estate Background:

  • Full-time real estate syndicator
  • 9 years of real estate experience
  • Sold his portfolio in 2016 consisting of 3,400 units 26 properties
  • Currently owns 500 units 
  • Based in Scottsdale, Arizona
  • Say hi to him at https://nighthawkequity.com/

 

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Buy-sell insurance in place, I think everyone should probably have” – Garrett Lynch


TRANSCRIPTION

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

Garrett Lynch: I’m doing great. Thanks for having me, Joe.

Joe Fairless: Well, it’s my pleasure and glad you’re doing great. A little bit about Garrett – he’s a full-time real estate syndicator, he’s got nine years of real estate experience, he sold his portfolio in 2016, which consisted of 3,400 units in 26 properties, and he currently owns 500 units, based in Scottsdale, Arizona. So with that being said, Garrett, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Garrett Lynch: Yeah, I started this business about ten years ago and I started out wholesaling deals in the south side of Chicago, just some of the rougher areas of Chicago, roughest in the country, probably. After that, I realized that that wasn’t really a sustainable model and decided to go work for a guy with 1,000 apartments, and in doing so, I learned the bigger business, and realized that we had resources to go and start syndicating deals.

So myself and my best friend at the time started a company in 2013. We started buying out portfolios of D Class properties, mostly Section 8 stuff, and then ended up converting into some larger multifamily deals. We started with a 50-unit and we did a 70, a 120 and then jumped to a 380-unit deal, and then after that, we’re like, “Oh, we can buy these bigger deals. Let’s just continue doing that because it seems to work a lot better,” and so we scaled that operation about three and a half years to about 3,400 apartments, self-managed the entire portfolio. We got screwed over by a couple of management companies early on in the beginning and decided to just start our own without really knowing anything about it.

So lots of lessons in doing that, but at the end of 2016, I got bought out of my part of the portfolio, and then since transitioned out. I went on a little bit of a hiatus for a couple of years, traveled around the world for a bit, then I came back and found Michael Blanc and [unintelligible [00:04:58].03]. They had a portfolio of about 800 units, and so I came on board with them as a partner to help them scale the business and add value to their operation. So that’s where I’m at now, and we had our last closing actually in December of 2019. We closed on a 276-unit deal in Huntsville, about a $18.1 million purchase price. So we’re still looking for deals even in this crazy COVID era, and our typical deal ranges anywhere from $8 million to about $35 million, and we target the south-east region.

Joe Fairless: Okay. Well, we got a lot to unpack here and thanks for sharing that. So let’s talk about — in no order of importance, but let’s talk about in 2016, you got bought out of your portfolio. So does that mean you all did not sell the properties, but you personally were bought out of your ownership in those properties?

Garrett Lynch: Yes. Just to be candid, it was a partnership fallout. So the partnership didn’t work, we got to [unintelligible [00:06:04].20] So there was a lot of things involved in that, but it just didn’t work out. When we got to that point, things changed and some things happened, and so we had to negotiate a buyout. So it was mostly done through lawyers and all that stuff, but we essentially defined the value of every property that we owned, and then I had a partner, my partner cashed me out.

On the other side – it was probably very lucrative. Obviously, I made a decent amount of money on that buyout. So it’s all the equity that I was owned was paid in cash for me to arrive at the values of each property and I got paid out on that. The downside is that I had to pay a lot of taxes on that, because I wasn’t able to attend 1031 any of those, and I had to pay out on depreciation recapture. So it was an interesting experience. I had to do that in order to get to the level that I’m at now, for sure, and it was a very challenging time, but I’m glad I went through it and I’m back here now.

Joe Fairless: On the buyout, when you’re finding the value of all the properties, and then here’s the percent I own and this is the value, is there a discount placed on what your value is, since you’re getting cash, and it’s not the value is the value of someone pays you for it?

Garrett Lynch: I did take about a 15% haircut, but it was more like a negotiating process. So it actually took eight months to agree on the pricing of every deal. So we went through every deal, and went “What is this worth? What is this worth?” on each one and then what do we pay for it, and then what is my percentage ownership in that? I owned a quarter of the GP on everything. So we had to go in, figure out what that looked like in cash, and then I took a natural discount because we were just trying to arrive at the pricing and how it all worked together. We had 25 assets that we had to basically agree on, so I couldn’t just sell all of them, it would have taken forever. So we just had to do our best at it, and it moved through surprisingly fast, considering all we had to go through, and so once we arrived at that number, that was just what happened.

Joe Fairless: And how do you determine the value of the property?

Garrett Lynch: We just went in and underwrote it as if we were going to sell it in the market. We got brokers opinions on each one, we came up with a big spreadsheet of every single asset, the mortgage, how much equity was in there, and then we just had to come up with a number and I had them throw out the first number. I always do that because it’s a sales strategy, just to see where they thought things were falling, and then if I had back up on any deals from broker opinion or anything like that as to where things would trade, I would include that as well.

We underwrote in an exit broker fee which– we didn’t need to do that. I think as part of the negotiation we did, it where it was 2% on any deal that was over $5 million and then 3% on a deal that was under that, or something. I can’t remember the exact details, but it was like a tiered brokers percentage that went into it. We were simulating a sale, essentially, on each deal.

Joe Fairless: That’s interesting. I’m grateful that you’re sharing this. It’s something that isn’t talked about a lot, and it’s something that when someone does come across this situation, what you’re saying now is incredibly valuable to those parties who are trying to navigate the buyout structure. So thank you for sharing this.

Garrett Lynch: Of course. Another way to just avoid that is to get buy-sell insurance in place, which I think everyone should probably have at a certain point. There’s a lot of things that can happen in a partnership. Let’s say your partner somehow, God forbid, passes away, and then their spouse is now your partner and you hate their spouse. So having that insurance in place, I think, can be helpful.

Joe Fairless: So knowing what you know now, with a type of partnership that doesn’t work, and I know you’re currently in a partnership, what are some lessons that you learned for the partnership that did not work? Maybe I shouldn’t say it didn’t work because clearly, you all had success…

Garrett Lynch: I think it was actually, Trevor McGregor that told me this that most partnerships lasts three to seven years, and I think the biggest thing that we didn’t anticipate– we went into it, we were friends, I was the deal-finding guy, and then my partner was more like the equity and accounting and finance guy, and I was the operation guy, too. So we did offset each other; that was good, I think, in a partnership. And I think what we don’t want to do going into a partnership is just go into it with your friends, unless they have a role that either complements you. You don’t want to do the same thing, you want to have different roles, obviously, in a partnership. But I’ve seen a lot of people that just structure deals and it’s all messed up. It’s a very tricky thing, it’s hard to navigate, and I think that we were very close friends, plus we did offset each other, but you have to be realistic about how things are going to change and evolve, and you have to be able to pivot as they do, and I think that we were lacking in that department.

Joe Fairless: For example?

Garrett Lynch: For example, we were taking on employees as we got larger, but some of the roles that myself or my partner should have maybe taken on, we didn’t really outline how we were going to do those in lieu of the new employees that we were able take on, and so what happened was maybe some of the roles that I used to before– I was wearing many, many hats, I didn’t wear as many hats, and so maybe I was perceived as being less valuable and really, maybe we should have pivoted into something else. That could have been part of it, and vice versa, with my partner, in some respects.

So having clarity around at what level and what roles and responsibilities you’re going to take on even with having employees, I think… People get into partnerships because they can’t afford to pay employees, that’s one reason. So they partner with someone and then they split it up, and then as you grow, you can afford to pay employees to do those roles, and that’s where you want to be. But keeping an open mind to structural changes as things progressed, I think, is what we didn’t do, and that’s something that you definitely need to look at as things pivot. Maybe there’s a partner that just doesn’t serve the partnership anymore as things progress, so having an exit plan in place is important in that respect. So it’s like, “Okay, well, if things go sideways, we hate each other, or whatever, what is that going to look like?” I think the easiest way to protect yourself is just keep things on a deal by deal basis. Personally, I think if we had done it more like that, it would have allowed for us to pivot in the proper way and things, maybe it would have worked out better.

Joe Fairless: So now let’s switch gears and talk about, you said earlier, you got screwed over by management companies. So let’s talk about that.

Garrett Lynch: Yeah.

Joe Fairless: Please tell us.

Garrett Lynch: So first off, it’s impossible to have D Class properties run by a third-party company; there’s too many moving parts. I think that was part of it for us. D Class– nobody really that we know are probably doing them right now;  maybe a few, but that’s where we started. So the property management companies, there’s really two types. There’s bigger assets, they’re running your property for 3% or whatever it is, plus you pay the payroll, but we had a portfolio. The other side is they’re going to charge you 10% and that includes payroll to some degree, and they’re managing multiple sites, and so you’re fighting for their attention in a lot of ways. So we had probably got screwed over by four different companies. The first time, they said they were going to [unintelligible [00:13:24].15] on our expenses. So if there was a lock that need to be changed by a third party company or something silly like that, you’re just supposed to absorb that exact cost. Well, they were taking the invoices and marking up 20% and changing – actually committing fraud – and then passing them through to us, and they’re keeping a 20% difference.

Joe Fairless: Wow.

Garrett Lynch: Yeah. So we caught that and we had a huge issue.

Joe Fairless: How?

Garrett Lynch: They made a mistake on one of them. They left both numbers on the invoice. They didn’t doctor it properly and we caught it. We went in and did– yeah, so stupid. So they didn’t doctor it correctly, we went in and then we started auditing and everything and we actually called the companies directly… A bunch of them that we found, that their actual invoices were less than the ones that we’re getting from the management company.

So that was a huge exit and departure from that company; that was the first one. And we had just one company that was actually finding all the vendors in the market, and creating their own LLC, and then doing something similar with billing us through their construction company or whatever, using the vendors that they found in the market; and similarly, they said it was going to be a pass-through situation, but all they did was find the vendors and then use them almost as subs under their LLC company, and then they marked everything up. So we found that out, too.

Joe Fairless: Wow.

Garrett Lynch: So it was just really silly stuff that was going on and we just had it right away — we had a bad taste in our mouth with third party management; we wanted more control.

Joe Fairless: Those are two different groups.

Garrett Lynch: Two different groups, similar issues; they just did it in different ways. Both groups, we thought were pretty repeatable, which was interesting.

Joe Fairless: Yeah. What made you think that initially?

Garrett Lynch: Just who they were affiliated within the marketplace. One of the groups is affiliated with auction.com. We’re like, “What? How did this happen with these guys?” So maybe we didn’t do enough digging or enough homework in the beginning, and I’m certainly not having that experience with our management companies now. So I’m not as afraid of them, but at the time, we were just like, “Look, we can’t even deal with these third party companies.” Silly stuff. So management companies don’t really make that much money, unless they figure out ways to make money. For example, there was one company that wanted to charge us 5% instead of the 10%. They’re like, “We’ll be nice. We’ll just charge you 5%,” and we’re like, “Okay,” and they were nickel-and-diming us on every single thing that happens. They’d go on a Section 8 inspection, they’d fail it, they’d charge us 200 bucks, then they’d have to do three more; charged us 200 bucks every time. Any maintenance, they’re charging us 250 bucks. So now they’re making money on piecemeal stuff in addition to the 5%. So it ended up adding up to 25% when you added it all up and it was just like [unintelligible [00:16:20].04] off where they’re just like, “Oh, well. Oh, landscape.” Their contracts are super simple sometimes, which is problematic, and they don’t tell you “Oh, this 10% includes this, or that, or whatever.” It was just– well, they made it up when you got in the situation.

So those were just learning lessons in the beginning, and it’s obviously much tougher with a property management company when you’re not doing large multifamily deals. But a lot of people are still doing 50 units, 20 units and they can run into the same issues.

Joe Fairless: If there are questions you could ask a property management company to attempt to mitigate that from taking place if you [unintelligible [00:16:58].22] properties?

Garrett Lynch: Yeah, I would dissect their entire operation, and I’d be like, “Listen, there’s two ways that property managers make money on an individual’s fees for visiting the site. Tell me about how that works, and then tell me what’s included in your actual percentage fee? What do I get with that? Does that include landscaping? Does that including unlimited access to your maintenance guy? How do those differ? And what can I expect as far as charges go?” and then I would try to get the redacted version of statements that they send out to other groups that they work with, and then of course, get references.

What I do now actually if I’m trying to get a third-party management company, instead of getting their references directly from them, I’ll go on their website and find the properties that they manage, and I’ll just point out five that are similar to mine and I’ll ask for those references… Because you know you’re going to get the best references if you just ask them for references… Which can be helpful, because you can dig into those references, but you want to just get unbiased random references. So if they can’t provide it, then that’s a red flag.

Joe Fairless: Yeah, good stuff. That’s a great tip. Just going on their website and then finding the properties that are similar, whether it’s the area or class, and then asking the management company to get you in touch with those owners so you can talk to them about their experience.

Garrett Lynch: Yeah, and I just did it with our company in Nashville, and they literally passed with flying colors. I checked, I think, six references and a random just point at on their website, and I checked [unintelligible [00:18:36].00] reviews and were having a great experience with them right now.

Joe Fairless: Imagine that. That’s a really good tip. Thank you for sharing that.

Garrett Lynch: Of course.

Joe Fairless: So you don’t buy D Class anymore?

Garrett Lynch: No.

Joe Fairless: Why not?

Garrett Lynch: D Class is like low hanging fruit. On paper, the returns look really attractive, but when you get into them, there’s a lot of unforeseen deferred maintenance issues typically that come with the tenant base that you’re working with. So we had a portfolio of 300 apartments; 150 of them in the beginning were this market rate, and half were– so 150 were Section 8 or around that. We had to convert the entire portfolio to Section 8, because people were losing their jobs so often on the other 150 market rate. Even good tenants, having a decent track record, they’d just lose their jobs. It’s typically more transient of an area and so you get that turnover. People don’t care about credit. You can’t screen people properly because credit’s just non-existent. So you’re dealing with a whole slew of issues.

Joe Fairless: What area, market and sub-market?

Garrett Lynch: Southside of Chicago. I was in Southside Chicago.

Joe Fairless: Okay, thank you.

Garrett Lynch: So over there, unemployment is really high, and people just switch jobs like it’s nothing, and so we had that experience. So the only way we were going to get paid is if we switch it to Section 8, and then when we got into Section 8, it’s very tough to figure out who’s a good and a bad tenant even if you get Section 8. So there’s those challenges in that, too.

Imagine if you rehabbed an entire house or an entire two or three flat, and then you put in the tenants and within a couple of weeks or a couple of months, they destroy the entire property. We saw that all the time. So you spend all this money to rehab it and now you’ve gotta rehab it again when they move out; or you fail an inspection because they didn’t get rehabbed property or because they destroyed something, and if you fail your inspections, you can go into abatement and you’re not getting paid. So there’s a lot of issues like that.

And then also the employees that you’re dealing with in those areas and those types of asset classes mirror the tenants. So you’re not getting the highest quality labor either. So this is the most distinct thing I remember. I had a staff– ten guys that were going around running these properties of the 300 units, and I was like, “You know what? I think some of these people are not working right now, they’re not doing their job properly,” and so I fired eight of the ten people, I kept two, and the properties ran exactly the same as if we had ten.

Joe Fairless: How’d you find out that eight out of the ten were not doing anything?

Garrett Lynch: I had a hunch because tasks were not getting completed on time that should have. I would just pop in randomly and go visit them. I’d figure out where they were and I’d just do random site visits and see what they had going on, and sometimes they weren’t doing anything or they’re just sitting around. So eventually, I just– it was more of a gut thing than anything and I was like, “You know what, I can hire these guys back if I’m really messing up now, but my payroll is insane from breaking even or losing money… I don’t really have a choice, so let’s just see what happens.” And so I just did it, and then sure enough, it ran exactly the same. Two guys could run this thing. It was just nuts. It was like a snowball thing. So we thought– we were like, “Oh, we’re not running properly. Things aren’t working, and we need to hire someone else. Oh ,we need someone else.” So we just kept doing it.

Joe Fairless: Okay, yeah. Because those guys were training each other. “So here’s what we do from 8 pm to 6 pm. We go in this little corner over here and have a little siesta.” [laughs]

Garrett Lynch: Yes, so it was just foolishness on our end… But any high crime area or anything like that, you’re dealing with a whole different set of rules, and it’s very tough to navigate it, because there’s so many tasks that you have to complete that you may not deal with on a B Class property, and it’s just based around the tenant base in the area that you’re in. A lot of variables that are unseen; and then there’s also very little equity. Of course a lot of your listeners know, but it’s like you have the lowest amount of equity in D Class deals, and then A can be the highest, actually. So it’s an inverse on that, but the D Class has the highest cash flow potential… Which is somewhat true, but you’ve still got to sell out of it at some point, and so when it came the time to sell all of these things–

Joe Fairless: Someone’s gonna buy it.

Garrett Lynch: –who wants to buy this garbage that Section 8 tenant left and destroyed the place? You’re not selling that thing for more than what you paid for it at that point. So the basis rose up way too high, and then when it came time to– actually, I think we lost money on a lot of them.

Joe Fairless: Taking a step back, and it might be something that we just talked about, but what is your best real estate investing advice ever?

Garrett Lynch: My best real estate investing advice ever, I would say, is to understand that this is a partnership business, and you need to figure out if you want to enter into this business, where you can add value to someone else’s operation and then just do it for little to nothing in the beginning; just add the value and do as much as you can. So you have to figure out what they need and bring it to them, and don’t expect compensation for it in the beginning. If you can just do something to learn the skill — the knowledge is way more important than actually making money in the beginning, and sometimes that’s tough for people to understand. But if your skill and knowledge level aren’t there, you’re not going to be getting paid anyways.

So for me, I started out making very little in the beginning. I didn’t know anything. I was just wasn’t that valuable to the marketplace, and it took time and surrounding myself with other like-minded people and trying to add value to their operation consistently to get to the level of actually making a decent amount of money. So I would say, don’t be afraid to go in that direction and add value with little to no compensation to get yourself ahead, so you can make a lot more later.

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

Garrett Lynch: Yep.

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

Break [00:24:26]:07] to [00:25:43]:05]

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

Garrett Lynch: Best ever deal I’ve done was a 360-unit deal I found completely off-market in Columbus, Ohio. I think we bought it for $8 million, and in about a year, it was worth close to $15 million.

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

Garrett Lynch: A mistake I made was we went for a loan — we were going to close a deal with Fannie, and we didn’t put a stipulation in the contract that they had to show 90% occupancy. So the seller decided to drop their pants on the deal and just let it go. So the occupancy fell from 95% to 88% in a couple of weeks, and that didn’t meet the lender’s criteria, and so I didn’t have anything in the contract to protect us from that, and our money had gone hard at that point. So learning from that, obviously, you want to put some language in there to protect you if you’re going after debt that requires a certain occupancy.

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

Garrett Lynch: You can actually shoot me a text or a call, 630-709-8636, or email me at garrett@nighthawkequity.com.

Joe Fairless: Sneaky things property management companies can do. So thank you for identifying some things that have happened to you so we can look out for them, as well as how to approach partnerships, and when a partnership does go not as planned, how to navigate the buyout and getting into the specifics. Great stuff there, as well as talking about D Class properties. So thanks for being on the show. I hope you have a best ever day. Talk to you again soon.

Garrett Lynch: Thank you so much, Joe.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

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JF1573: Getting Great Online Reviews For Your Real Estate Investing Biz #SkillSetSunday with Brian Greenberg

Brian is a true entrepreneur, has started and ran numerous businesses, all on the backs of good reviews. He’s had over 10,000 great reviews over his career that has helped his businesses grow. Today he’s here to share how we an get a lot of great reviews for our businesses as well. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Brian Greenberg Real Estate Background:

  • Has founded businesses in e-commerce, marketing, and financial services.
  • Author of The Salesmen who Doesn’t Sell
  • He has generated over $50 million in revenue from his businesses and collected over 10,000 reviews and testimonials from customers.
  • Based in Scottsdale, AZ
  • Say hi to him at https://www.brianjgreenberg.com/bestever

Sponsored by Stessa – The simple way to track rental property performance. Get dashboard reporting, smarter income and expense tracking and tax-ready financials. Get your free account at stessa.com/bestever


TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday. You’re gonna learn a specific skill that you didn’t have, or you’ll be able to hone a skill that perhaps you had, but now you’ll be able to do it even better. Today we’re gonna be talking about, well, online reviews, and holy cow are these important, especially if you’re in the apartment investing business and your property has a website with an online reputation, because potential prospective residents, they go look at that online…

And if you also have online reviews for any other aspect of your business, then listen up, my friends – which should be pretty much all of us, by the way… Listen up, because we’ve got Brian Greenberg with us, who wrote the book “The salesman who doesn’t sell.” He has generated over 50 million dollars in revenue from his businesses and collected over 10,000 reviews and testimonials from his customers. Based in Scottsdale, Arizona. With that being said, Brian, do you wanna give the Best Ever listeners a little bit more about your background and then we’ll roll right into it?

Brian Greenberg: Sure. I’ve been able to make my living since 2003 on internet-based businesses. My current business right now is actually life insurance, at truebluelifeinsurance.com. A very tough industry, and I’ve been able to grow my business over my competitors, over the years, by collecting reviews.

Reviews are so important when people are choosing who to do business with, especially if you’re in an industry where you have people that aren’t so ethical, and it sells them without selling, Joe.

Joe Fairless: How have you gotten 10,000 reviews, and where are those reviews, by the way?

Brian Greenberg: Good question. Well, the first thing is you’ve gotta ask. I think so many people don’t ask for reviews, it’s terrible. I think also when you get reviews, people don’t like to display it and they think it’s some sort of bragging, or they’re embarrassed to do so.

Now, there is an easier way to do it. You don’t have to verbally ask. I collect all my reviews by e-mail. Knowing when to ask for the review by e-mail is another trick. Obviously, if you did something nice for them, if you fixed something for them, you just had a good conversation, that’s a tie-in, “Can I send you an e-mail?” Or it could be a cold e-mail.

Joe, I think one of the important things I wanna say is when you’re using e-mail to collect reviews, have them give you a review that you control first. This is a huge thing. You don’t wanna send them right to Apartments.com, or Yelp, or Google. That could be problematic, because they might not be happy. So send it to your own site first, and if they give you a five-star review, then you send a follow-up e-mail asking them to review you in other places, include the exact comment that they gave you originally, and give them the exact link where to enter the review. Don’t just send them to yelp.com, or don’t even send them just to your Google business page. There’s particular URLs that will give you a pop-up; it’ll show the stars, it’ll show where to enter the review, and make it so simple for customers.

Joe Fairless: So you’re asking them to basically do things, eventually; not the first time, but eventually you ask them to leave a review after you do something nice for them, and then you’ll screen it, essentially, to make sure it’s a good review, and then assuming it is, then you ask them to leave it one more time.

Brian Greenberg: Exactly. And it doesn’t have to be only when you did something good. You can send these e-mails to all your tenants, to everybody. Look, you’re gonna get feedback; if they’re unhappy, you’re gonna learn something. The important thing is, like you said, you wanna filter it first.

Now, I use Active Campaign. It’s an e-mail marketing software program. There’s a lot of other ones. I send three e-mails. Send it three times. In my business, I send it on day three, day seven and day ten. It’s good to send multiple.

Joe Fairless: What do you mean by day three, seven and ten?

Brian Greenberg: So I send them an e-mail on Tuesday, and then I’ll send them another e-mail on Friday…

Joe Fairless: But just randomly, or day three of your relationship with them, or day three of a certain milestone that was reached? What’s day three of?

Brian Greenberg: Well, first of all, I think if you did something nice, you fixed something for then, that’s a given. You can initiate those somehow. But yeah, as soon as they move in, if they’re happy. As soon as they renew a lease. Catch them when they’re happy.

In my business, I sell them life insurance policies, and the best time I can get them is right after they’ve been approved, right? They’re clients. I’ve done such a nice thing for them, and it invokes — it’s called the theory of reciprocity, and they wanna do something nice back for me.

Joe Fairless: That’s a law, by the way… That’s not just a theory. That’s legit, reciprocity.

Brian Greenberg: Joe, I also wanna say there’s a format. It pains me to see people get feedback and there’s no stars, there’s no date, there’s no details. Make sure when you get a review, get their name, the city, the stars, and then a comment. The more, the better, because people… They don’t wanna see a review — if it’s not done right, they don’t think that it’s real or legitimate. People are very good at spotting these now.

Joe Fairless: When you get their name, do you use their first and last name?

Brian Greenberg: No, I use their first name. I try to keep it as conversational as possible. I’ll send three e-mails, and they’re all gonna be a little bit different. Some will say the salesperson who is representing them is in a contest, or they get bonused if they get a review, which is — well, Joe, it’s true in my case…

Joe Fairless: Right, right.

Brian Greenberg: But again, that law of reciprocity – they’re gonna wanna not only help the company, but they’re gonna want to help the salesperson, the customer service person.

Joe Fairless: Is there a way that you also incorporate something that is helpful for them? Like, you give them a reason to give a review that is selfishly beneficial for them?

Brian Greenberg: Some people like to offer something back in return for a review, we’ll see this all the time – a gift card, a discount… These are all things that do work. So you could absolutely offer some sort of incentive for filling out a review. Sometimes you could offer an additional incentive if you then ask them to leave a review on a third-party website, like apartments.com or Zillow, wherever you’re trying to build up your reviews.

I also suggest that you pick one or two platforms that you wanna focus on. It can be problematic to go after too many. You don’t wanna spread yourself too thin. When people look you up, they’ll look up your company name, or your property name, followed by reviews or complaints. People do that nowadays – they look you up online, and a lot of these places will show up first; you’ll get multiple spots on the first page of Google, and you wanna have as many reviews as possible.

Joe Fairless: When you are looking at the best times to ask for reviews, I find it really interesting that you’ve mentioned we should identify the happy moments and then ask at that point in time… It makes a lot of sense, but perhaps not something that we’re doing — I’ll just speak for myself… Not something I have done. I haven’t actually sat down and thought, “Okay, in the lifecycle of a resident, when are the happiest moments? We should be strategic about asking for a review and be specific about where we’d like that review, in those moments.” I mean, just that simple insight can lead to some really good things.

Brian Greenberg: Yes. Joe, I don’t want people to overthink it too much. If you can’t find a time to trigger it, it’s fine; whenever you can, send out the blast. E-mail is a nice thing; you guys have their e-mail address – send it out, ask for feedback. Some people will give you feedback and it won’t be great, and the people that give you five stars – those are the people you ask to give you additional reviews on the third-party websites you’re targeting. The important thing is to ask. Don’t wait to ask. You don’t ask, you don’t get.

Joe Fairless: And when you come across negative reviews, what’s your approach there?

Brian Greenberg: There’s a lot of things. Number one, don’t react.

Joe Fairless: Don’t comment on them?

Brian Greenberg: Don’t react in a negative way. Don’t say “This is baloney! I did it this way, I offered this!” Don’t get in an argument match with these people. The thing is, you might think “Oh, I can get this review taken down. It’s such baloney…” You can’t. These third-party websites do not allow businesses to take down those reviews. If you try to get a lawyer, they’re gonna tell you no, and if you pursue it, you’re gonna waste a lot of time and a lot of money. It’s better to not react or respond.

The first thing I’d like to do is try to get the review taken down, or at least get them to change it to a five-star review, and I’m often able to do so. People that give a negative review, they usually want a response, they want something, so contact them.

I have a policy at my company, ABN. A lot of sales companies, they have ABC – Always Be Closing. I have ABN – Always Be Nice.

The first thing when I get a negative review – I know who it is, so I’ll call them… If I can’t get them on the phone, I’ll e-mail them. The first step is sympathize, say “I understand you’re upset.” The next step if fix it, or offer them something. Be willing to take a loss. These negative reviews can be tens of thousands of dollars in lost business. I’ve seen business having to change their whole company name and start all over again to get new profiles because of these negative reviews. So fix it, be willing to take a loss, and then after you’ve given them something, ask them to take it down. Overwhelmingly, they take it down. Knock on wood — please note, people do wanna take it down; usually, when they leave a negative review, it is to get something done for them.

Joe Fairless: With your business, what sites do you prioritize over others? And then we’ll relate it back to real estate.

Brian Greenberg: Sure. For me, I’ve done surveys and studies, and the number one for me is the Better Business Bureau. People weigh that so heavily. And then I also focus on Google, because people are already on Google. If they’re looking up my name, I know it’s gonna show. So those are the two platforms I focus on.

Every once in a while I’ll get Facebook reviews. I don’t believe those are Facebook. If you get negative reviews, you have the option to take that review tab down. So I like the Better Business Bureau and Google.

Joe Fairless: Got it. Well, I can tell you with our business Google is number one for reviews that we wanna focus on, and then Apartments.com tends to be number two. ApartmentRatings.com is also an important website to have good reviews, but most residents, whenever they look to live in an apartment building, they’ll google it, and lo and behold, Google Reviews comes up, so that’s the one we really wanna focus on.

Is there anything that would encourage someone to leave a review that we haven’t talked about, that you think we should?

Brian Greenberg: We kind of brushed over it, but there’s  a trick on Google, and you can even google how to do it, but you wanna send them to the actual page that gives them that pop-up and the stars. They make it tough, Google. You have to actually do a search and find out your company ID, and I think you’ve gotta go to Maps to do it. Then you’ve gotta drop the URL, and then you could even populate those stars with five stars to begin with, to kind of just push them into that five-star rating. That’s a big trick.

Joe Fairless: Anything else that we haven’t talked about that you think we should?

Brian Greenberg: Look, if you can’t get a negative review down, the best thing to do at that point is respond. Now, when you respond, again, you wanna come off as almost the victim, make the person get the karma. But also, when people are reviewing your company reviews, they view the negative reviews. They’ll go to the one-star ones, and the two-star ones, and they’ll find out how you handled them.

I think people know that everybody is human, but if you make a mistake and you say “Look, we tried to fix it for you. We feel terrible about it. We’ve taken steps to correct it, we’ve offered you a refund” – whatever it is, if you handle it in that nature, it could actually turn that negative review into a positive. People will find out that you are accountable, you’re not gonna brush somebody off.

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

Brian Greenberg: Best Ever listeners can go to my website, BrianJGreenberg.com/bestever. I’d like to offer all your listeners my free audiobook. It’s The Salesman Who Doesn’t Sell. I give step-by-step instructions on who to do all these things. It was my goal to help people as much as possible.

Joe Fairless: Awesome. Well, thank you so much for being on the show. Very applicable advice for us as real estate investors. I believe that online reviews are something that is not discussed enough among investors, and it has much greater impact on our bottom line than what we perceive it to have.

There’s a lot of people googling our properties, and if we don’t have a solid review system set up with a strategy that is being implemented consistently, then we’re leaving money on the table. Regardless if we have an apartment building or if we just have a brokerage — not just, but if we have a brokerage, or if we’re in the service business within the real estate industry, all these comments that we talked about today are relevant.

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

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JF1544: Sometimes We Just Need A Mindset Shift Or Reset #SituationSaturday with Mark Podolsky

Mark is a well known investor and he’s back to add more value to us again on the podcast. We’ll touch on a lot of different mindset tricks and tips and hear how and why some people have more of a “drive” towards investing or working more to create future success, even if it causes short term pain. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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JF1468: How To Create Passive Income Through Raw Land Investing #SkillSetSunday with Mark Podolsky

Mark has been on the show before and he always delivers great value to his audience. Known as The Land Geek, he specializes in raw land investing. For this interview, Joe and Mark are focusing on uncovering how Mark uses raw land investing to not only buy land at a discount and sell for a profit, but also use raw land to create passive income. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Mark Podolsky Real Estate Background:


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


TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday, where — well, by the end of it, you will acquire or hone a particular skill, and the skill we’re gonna be talking about today is how to create passive income through raw land  investing. With us to talk about that, Mark Podolsky. How are you doing, Mark?

Mark Podolsky: Joe Fairless, always a pleasure to talk to you. I’m doing great, my pulse is normal, my respiration is fine… I’m just thrilled to be here. Thank you.

Joe Fairless: Well, I’m glad, because if it wasn’t normal and your respiration wasn’t fine, quite frankly I wouldn’t know what to do… [laughs] I would try and call someone in Phoenix, Arizona, or Scottsdale, where you’re at, and see if I can get you help that way. But you’re good, so we don’t have to worry about that.

A little bit about Mark – he is the owner of Frontier Properties, a land investing company, and he is the author of a new book that came out… You’ve gotta check it out, it’s called Dirt Rich, which discusses a step-by-step way for how he creates passive income in raw land investing, and how you can, too. He’s been buying and selling land full-time since 2001. His website is TheLandGeek.com, and he’s based in Scottsdale.

You recognize Mark’s name because you’re a loyal Best Ever listener; I have interviewed him multiple times, most recently in episode 915, “How to buy raw land at 20-30 cents on the dollar.” 915 – that was about 500 days ago or so, so it’s time we catch up again.

First, how about you tell the Best Ever listeners a little bit about your background, just as a refresher, and then we’ll get into your book?

Mark Podolsky: Sure, so I started as a very unhappy, miserable, overworked, overstressed, 45-minute commute to work and back, cubicle sitting in hell investment banker. I worked with private equity groups, doing mergers and acquisitions, and Joe, it got so bad for me that I wouldn’t get the Sunday blues, anticipating Monday coming around, I’d get the Friday blues, anticipating the weekend going by really fast and having to be back on Monday.

So my firm hires this guy, and he’s telling me that on the side he’s buying raw land, pennies on the dollar, at tax deed auctions, he’s marketing them online, and he’s making a 300% return on his investment. So I’m looking at companies all day long, and a great company has 15% [unintelligible [00:05:42].17] margins, or free cashflow, a great company. Your average company is at 10%, and I’m looking at companies all day long less than 10%, so of course, I don’t believe him.

I go to New Mexico with him, I’ve got $3,000 saved up for car repairs, I do exactly what he says to do, I buy 10 half-acre parcels, an average price of $300 each, I put them up online, and they all sell for an average price of over $1,200 each. 300%, it worked. So I took all that money and went to another tax deed auction where I live, in Arizona; again, it’s $2,000 [unintelligible [00:06:16].12] I’m buying up lots, I’m buying [unintelligible [00:06:19].08] and on that one auction I made over $92,000. So I said to my wife, I’m like “Honey, I’m gonna quit my job and I’m gonna be a full-time land investor.” She was pregnant at the time, and she said “Absolutely not.” So I said, “Okay, fine.”

I worked land investing as a side hustle for about 18 months, and it took that long for the land investing income to exceed the investment banking income, and then I quit, and I’ve been doing it full-time ever since.

Joe Fairless: When I think of raw land investing, I think of the type of activity that a wholesaler would have to do… That type of work where they’re constantly having to jump from one transaction to another; I don’t think of passive income. When I think of wholesaling, I don’t think of passive income, I think of active income. So help me understand… Your book is called Dirt Rich, and the value proposition is the step by step way for how you create passive income in raw land investing, so how does that take place?

Mark Podolsky: Joe, where do you live?

Joe Fairless: Cincinnati.

Mark Podolsky: You’re in Cincinnati, okay. So I go on the tax delinquent lists on this county in Texas, and I see “Oh, there’s Joe Fairless. He owes $200 in back taxes on his 10-acre parcel in Texas.” But you’re advertising two things to me; number one, you have no emotional attachment to that raw land. You live in Cincinnati, the property is in Texas. And number two, you’re distressed in some way, because when we don’t pay for something, we don’t value it. Maybe you’ve just lost your job, maybe you’re going through a divorce; maybe you inherited the property and you don’t know what to do with it. Maybe you just are sick of paying taxes, who knows… I don’t know. But essentially, you don’t value it.

So what I’m gonna do then is I’m gonna look at the comparable sales for the last 12-18 months on similar 10-acre parcels, I’m gonna take the lowest comps, and all I’m gonna do is divide by 4, and that’s gonna get me what Warren Buffet would call a 300% margin of safety. So in our example, let’s say that the comps are 10k; the most I’m gonna pay for your property, Joe, is $2,500. You get the offer and you accept it. Now, in reality, 3%-5% of people accept this “top dollar” offer.

So now I’m gonna go through due diligence, I’m gonna make sure you actually own the property, I’m gonna confirm that back taxes are only $200, I’m gonna make sure there’s ingress and egress, there’s legal access, I’m gonna get the GPS coordinates… I’m gonna go through this whole property checklist, and the way that we do it is all of this is automated with software. The offers are automated… Basically, the business is 90% automated with software. Our due diligence is outsourced to the Philippines, it costs us about $11 to do due diligence.

If it’s in a new area, we’ll crowdsource and have somebody actually physically go out with our property checklist, look at the property, take pictures, shoot video. So we physically don’t have to be there… But this is where the passive income piece of it comes – it’s a one-time sale, and then we get recurring income every single month, but we don’t have to deal, Joe, with any renters, rehabs, renovations or rodents.

Essentially, I buy that property from you for $2,500, and then I have a built-in best buyer to buy that property. Do you know who it is?

Joe Fairless: The neighbor.

Mark Podolsky: The neighbor.

Joe Fairless: I’ve talked to you before; I wouldn’t know that if I hadn’t interviewed you before though.

Mark Podolsky: Right, so I’m gonna send out neighbor letters and I’m gonna stoke a little fear, I’m gonna say “Hey look, before I go to the open market, here’s your opportunity. Protect your view, protect your privacy, expand your holdings.” And then the way I’ll sell it – and this is where the magic happens – is I’m gonna try to get my money out on the down payment. So I’m gonna ask for a $2,500 down payment; I might go six months out… And then, Joe, I’m just gonna make it a simple car payment. Let’s say $449/month, and 9% interest over the next eight years. So essentially, I’ve created a $449 passive income stream for the next eight years, without any of the traditional headaches of real estate, and I’ve got my capital out on the down payment.

My average return on investment on a seller-financed piece of property is 800% to 1,000%. So the game that we can play then is can we create enough of these land notes where our passive income exceeds our fixed expenses? …and then we’re working because we want to, and not because we have to.

And as far as passive income is concerned, I’ll make the argument nothing is passive. If you inherit a billion dollars tomorrow, you still have to actually expand some effort to efficiently invest that money to get a return on it. You just have to. So nothing is completely passive.

Joe Fairless: Yes, I agree. It would be irresponsible for someone to do nothing with the money, and not spend any time overseeing how it’s being invested, so I agree. There’s varying degrees of being passive.

So in the ideal scenario you go to the neighbor, they say “Yeah, I wanna buy it”, and your down payment equals what you paid for, and then the payments thereafter on a monthly basis is all cashflow and profit after that.

Mark Podolsky: And we automate that using a program called GeekPay.io. Essentially, that money flows out of their checking account every single month, and if the checking account bounces, then it’ll charge their credit card on file as a backup. And it automates the notifications, they can log in and they can see their current balance, and they can make a pre-payment anytime… So I don’t even have to spend any energy managing the note. That’s a one-time set it and forget it as well.

Joe Fairless: Yeah, that’s smart of you to build that out, and helpful for you, as well as the people who use that program. This approach – you’re having a conversation with a different neighbor, depending on where you’re buying it… So you’re talking to a whole lot of people for each deal, and I imagine there’s a decent amount of negotiating involved, and them validating that you actually are who you say you are, as well as you actually making sure that they can deliver on the payment… Is that also what’s done in the Philippines?

Mark Podolsky: We have an acquisition manager that handles that piece. We also have an intake manager that we automate using RingCentral for the buyers and sellers to qualify them. So we do have a process in place, so that I don’t have to personally handle that piece. But when you first start, there’s not a lot of negotiating that actually takes place. You’ll have to talk to your seller for about five minutes and explain to them your offer, and it’s a take it or leave it offer, because we don’t wanna be in the appraisal business. We don’t say “Hey, I’m interested in buying your land”, they’re like “Oh, I’m interested in selling my land”, and now we’re in a negotiation. We actually send them a real offer.

And then as far as the neighbors are concerned, they typically know they’re getting a great deal because of the pricing involved. So there’s not a lot of negotiation with that too; it’s more like “Hey, how do I get you the money?” So those are actually more anomaly type of events, or edge cases, where we actually have to do any type of real serious negotiating.

Joe Fairless: What percent of the transactions are purchased by a neighbor?

Mark Podolsky: I would say that at least 50% are neighbor transactions, and if the neighbor passes, then we’ll go to our buyers lists. These are people that have already indicated to us in some type of marketing format that they’re interested in buying raw land. If the buyers list passes, we’ll actually go to Craigslist, and we use software to automate our Craigslist postings. So I can put out like 100 ads by just pressing a button. That’s just PostingDomination.com/thelandgeek. It teaches people how to do that for themselves.

Then we also automate that as well to Facebook Buy/Sell groups. So Joe, in 30 days I’m gonna sell that property, one way or the other. Now, if it doesn’t sell in 30 days, then either I’m going to have to raise the price; maybe people think “Well, there’s something wrong with it if it’s too low”, or I might have to lower the down payment, I may have to extend some terms, lower the monthly payment, raise the monthly payment… I have to play with the pricing in some way, but essentially, we need to make it irresistible to the market.

Joe Fairless: Each of those three approaches – first is neighbors, second is buyers lists, third is Craigslist – are they equal in profit margin, or do they increase or decrease?

Mark Podolsky: The pricing stays the same. It’s equal.

Joe Fairless: Okay.

Mark Podolsky: Yeah.

Joe Fairless: I don’t know, I guess you could make an argument for each of the three that they would pay more or less for the land.

Mark Podolsky: Yeah, the reason we don’t play with the pricing to different platforms is simply because often times those people will be like “Hey, why is it more expensive here?” or “Why is it less expensive there?” and now we’re sort of losing credibility in the marketplace, with all the different pricing advertising. Because I could go to a site like Landmodo.com or LandsofAmerica.com, and probably get more on those platforms, but I don’t. What’s the old saying – pigs get fat, hogs get slaughtered… We just try to be piggish about it.

Joe Fairless: [laughs] Fair enough. First off, congrats on your book, Dirt Rich.

Mark Podolsky: Thank you.

Joe Fairless: It’s a step by step process for how to create passive income. Did you basically just walk us through that step by step process, and if not, then what additional stuff can you tell us about that?

Mark Podolsky: So the book gives you a lot more detail as to that step-by-step process. It also makes it come to life with stories. Then I also tell my own story about what happened to me through the real estate cycle, so that you don’t have to make the same mistakes I did, and live vicariously through me.

The people that have actually read the book and have reviewed it, they know land investing and they’re still getting value out of the book.

Joe Fairless: When you take a look at a deal that you thought was gonna be this passive deal, but became very active – can you tell us a story about one of those circumstances?

Mark Podolsky: Yeah, I did a deal in an area of Western Pennsylvania called Treasure Lake, and I fell in love with it. I flew out there – that was the first mistake, by the way. So I flew out there and I started negotiating with the Property Owners Association, and the county… The reason I fell in love with it is this gated community, and there’s two PGA-rated golf courses, there’s three lakes, there’s million dollar homes in there… But it was over-developed, so there’s like a thousand lots just sitting there, not earning the county any tax revenue, the Property Association is not getting revenue, so they can’t make any improvements to their own community…

So I said, “Look, fellas, you have dead money here. I could sell these lots for a dollar, and as long as someone pays their taxes this year and their POA fee, you’re going to be ahead of where you are now”, and that actually took years, Joe, of negotiating. I ended up buying up a thousand lots for nothing, but essentially, when I’ve factored in my time, I made only $100,000 on the deal, because the deal went south in 2008, and I bought it in 2007… But when I factored in my time, I actually broke even on that deal, going back and forth with negotiations… So today I won’t do any of that.

Joe Fairless: What’s the last deal you bought?

Mark Podolsky: The last raw land deal – I don’t even know, because just managing… Actually, tomorrow is my team meeting, when I would look at it. Do you have a second for me to open up my spreadsheet?

Joe Fairless: Yeah, sure.

Mark Podolsky: And I can tell you here… Let me just go into my software, and open it up… I should have known you were gonna ask me this. Okay, here we go. I see what we just bought – we just bought 1.76 acres in Arizona, 10 acres in Texas, 11 acres…

Joe Fairless: Where in Texas?

Mark Podolsky: In West Texas.

Joe Fairless: West Texas… What area?

Mark Podolsky: Culberson County. Do you know where that is?

Joe Fairless: I’ve heard of it, I don’t… I went to school in West Texas, in Lubbock, so I was wondering…

Mark Podolsky: Oh, okay. It’s a couple hours from Lubbock. It’s near where Jeff Bezos owns a bunch of property.

Joe Fairless: Huh, okay… I didn’t know he owned property there. Okay, got it. What were the terms on that land in Texas?

Mark Podolsky: On that deal, it looks like we paid $1,200. Let me look at the taxes… Oh wow, taxes were $175, and we sold that for $11,200. That was the last deal; that was one we just did.

Joe Fairless: That’s great.

Mark Podolsky: We’ve got a $150 monthly payment, we’ve got a note fee, we’ve got a late fee on there for $15, and we got a $300 down payment.

Joe Fairless: That’s cool. I’m glad that you gave us some examples. That brings it full circle. How can the Best Ever listeners get in touch with you and learn more about what you’ve got going on?

Mark Podolsky: I think the best place to go is TheLandGeek.com. If they go to TheLandGeek.com/DirtRich, they can actually get the book on Amazon, along with over $500 worth of bonuses. There’s a great blurb in the book, Joe.

Joe Fairless: I heard that you were bragging about that… I didn’t know [unintelligible [00:20:28].27] I’m grateful that you asked me to check it out and review it. I assume you’re talking about mine… Are you talking about mine?

Mark Podolsky: Only yours, of course…

Joe Fairless: [laughs]

Mark Podolsky: Of course.

Joe Fairless: Absolutely.

Mark Podolsky: This week, Joe, I’m actually sending out the paperback copies to the people that did review it, so be looking for yours as well.

Joe Fairless: Sweet. Yeah, digital gets me a little bit of a headache, so I’ll be glad to check out the paper one, as well. Mark, thanks for catching up with us again, talking about investing in raw land, talking about some case studies, how you do it, the approach that you take… And I agree there is no true passive income, but there are varying degrees of passive income, and it’s just irresponsible to completely just put money somewhere and then never look at it. I’ve gotta check up on it every now and then.

Thanks again for talking to us about your approach of what you do, and congrats on the new book. I hope you have a best ever weekend, and we’ll talk to you soon.

Mark Podolsky: Thanks, Joe. I really appreciate it.

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Best Show Ever flyer with Alex Goldstein

JF1380: Providing The Service He Wishes He Had As An Investor with Alex Goldstein

Alex was a real estate investor who “took his lumps in 2008”. He realized that he was not getting the level of service he wished he had been getting from his realtor partners. Now, as an agent, Alex is able to provide a high level of service for his clients, which are mostly high net-worth individuals or families. Hear the strategies he uses to be a top producing agent. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Alex Goldstein Real Estate Background:

  • Top-producing real estate agent
  • Has acted as investor, developer, and principal in over $50 million of land, commercial, and residential real estate transactions
  • Author of three real estate books
  • Based in Scottsdale, AZ
  • Say hi to him at http://www.luxeaz.com/
  • Best Ever Book: Man’s Search for Meaning

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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, Alex Goldstein. How are you doing, Alex?

 Alex Goldstein: I am doing fantastic. Thank you so much for having me on the show, Joe.

Joe Fairless: My pleasure. Nice to have you on the show. A little bit about Alex – he is a top producing real estate agent. He’s based in Scottsdale, Arizona. He has also been an investor, a developer and a principal in over 50 million dollars worth of land, commercial and residential real estate transactions. He’s written three books. With that being said, Alex, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

 Alex Goldstein: Sure, Joe; it would be my pleasure. My background – I started in investment and development, and built a pretty significant business in a lot of different property types. As a lot of people did, I took my lumps in the downturn, and one of the things that I recognized was that the level of service I was receiving from the agents who represented me was not really up to snuff… So I got into the agency business and started representing other people on their deals, so that they could receive the kind of service that I wish that I had.

Today, my primary focus is on helping high net worth families with their real estate needs, and I’m unusual because of my background, having experience in so many deal types… I work on both residential and commercial, so I have people with their primary residence, their business office location and income property.

My typical client is more concerned with protecting their wealth and sleeping well at night than on getting really aggressive with their investments.

Joe Fairless: As a real estate investor versus an agent, I imagine – but maybe this is an incorrect assumption – that you can make more money investing versus being an agent. If that’s the case, then why choose to be an agent versus an active investor? And perhaps that’s not correct, I don’t know.

 Alex Goldstein: Yeah, I suppose in the grand scheme of things you can’t become a billionaire by becoming an agent… With a few exceptions – somebody like Gary Keller – but that’s really more about building a business than being [unintelligible [00:03:13].26] per se.

Generally speaking, there is a cap, but you can certainly make an excellent living as a real estate agent, and it really comes down to what aspect of the business do you most enjoy. I really do like working with people, and I like helping people with their transactions, and helping them to get the best results and to not make big mistakes… So I really enjoy the position that I’m in.

Joe Fairless: Cool. So you mentioned that your focus is on helping high net worth families with real estate needs. How do you meet high net worth families?

 Alex Goldstein: Well, I do get referrals from past clients. I’m fortunate to have a good base of clients who have been very happy with the work that we’ve done together, and then I also do online advertising to continually find new clients.

Joe Fairless: How do you advertise? What do you do?

 Alex Goldstein: I use Google AdWords and Facebook ads.

Joe Fairless: And what has been some lessons learned on Google AdWords and Facebook ads?

 Alex Goldstein: Well, I think the main thing is that they’re always changing the rules, but the fundamentals seem to apply. I think that the hardest thing for people to do when they’re advertising online is to distinguish themselves from the herd, and it seems to me a lot of folks who are advertising online are sort of just doing the same things that other people do, and it’s a bit of a race to the bottom.

I think you have to be constantly reinventing your advertising, and really paying attention to getting their attention and delivering results.

Joe Fairless: So how do you not do what other people do and focus on getting their attention?

 Alex Goldstein: Well, I try to put myself in the shoes of that individual and think “What would I want if I were in their situation?” That’s how I got into this industry, thinking okay, when I was making investments, what were the things that were the most frustrating to me when I purchased and sold residences, what were the things that I wanted but I wasn’t getting… And that’s the position that I take – basically, treating the client the way that I would wanna be treated. That’s obviously gonna be very different, depending on that client and their needs, so different methods of advertising are gonna speak to those different needs.

Joe Fairless: What would an ad be? Can you give an example, just to illustrate that a little bit?

 Alex Goldstein: Well, you’re limited in terms of how much you can really do with an AdWords ad, so it’s very micro-level; it’s not like there’s some magic sauce… We’re always testing to see what resonates the best. I think that the key is also not just that first ad experience, but what happens after they click the ad. Are they getting onto a site that gives them the information they want, that loads quickly, and are you giving them something that’s gonna help distinguish your service from everyone else?

I think part of what’s been helpful for me is the fact that I have written several books on real estate and people tend to gravitate towards that, or at least the types of clients that I like to work with are people who find that valuable.

Joe Fairless: So does the ad mention that you’re an author, or does it say “Need help protecting your wealth?” What’s an example, just to kind of illustrate this a little bit.

 Alex Goldstein: Well, again, there’s a lot of different types of campaigns. Some are gonna be local, some are targeted to people coming from other places… But the idea is really to maintain a consistency. If I’m advertising to somebody in Texas for property in Arizona, then I’m going to reiterate that when they get to my website. Okay, I know something about people in Texas, or I have something to do with Texas, so it’s not just like I’m grabbing your attention and sending you something irrelevant.

I think that for a lot of advertising, the effectiveness goes down because people aren’t really pretending to be a customer and go through their own experience. I think that’s really it – just be empathetic, imagine what it’s like to be on the other side, and take it step by step. Then you just do whatever you can to improve that process on each step.

Joe Fairless: You mentioned that we’re always testing to see what works best – who’s “we”?

 Alex Goldstein: Well, I guess that’s the royal we. [laughs] I have hired companies in the past to do advertising for me, but I’ve found that actually I’ve been performing better doing it myself.

Joe Fairless: Wow.

 Alex Goldstein: So I really am the chief marketing officer of the business now, because I didn’t get the kinds of results I wanted with those agencies. Not to say that I wouldn’t hire again, but that’s where I am right now.

Joe Fairless: How did you measure the agency’s success versus what you can do? What quantifiably did you look at?

 Alex Goldstein: Well, you’ve got a lot of basic metrics in terms of cost per click and things like that, so there’s some of that… But ultimately, what I care about is how much money am I putting in before I get a client, basically, or a reasonable prospect to work with. So I just found that doing it myself, I tend to get better results than I was getting. And obviously, you’re paying them a significant amount of money to manage, so they’re kind of behind the 8-ball in that they have to do considerably better just to get their own feedback.

Obviously, they’re providing a service in terms of saving time, and I get that, but for whatever reason I’ve just found that my own ads that I run myself have given me really satisfactory performance. And the other thing about working with agencies is I feel like the communication and the transparency was a problem with a lot of different agencies. When I launch a campaign now, I can monitor it through the whole process and know exactly how it’s going, and I don’t have delays because I’m there, I can see it all.

That was a frustration I had with a few different agencies, where it was sort of like just a black box, and you’d find out a month later if it was working… And I didn’t like that.

Joe Fairless: I wouldn’t, either. I hear you on that. What is the investment range that you would have with an agency on a monthly basis?

 Alex Goldstein: You mean like how much were they charging?

Joe Fairless: How much they cost. I think of it as an investment, because there’s an ROI associated, but I’ll speak more plainly – how much did it cost?

 Alex Goldstein: Most of the agencies were between $500 and $1,000/month. I think maybe I hired four different agencies in the last few years. Some of them I got okay results, but it was either the communication or just the ROI wasn’t quite what I was looking for.

Joe Fairless: And that’s probably just the retainer, not including the actual ads, right?

 Alex Goldstein: Yeah, that’s just their fee, and then there’s my spend on top of that.

Joe Fairless: Got it. And how do you think of your spend? What type of ratio do you look for when you say “Okay, I’m gonna invest X amount, and I know that my lifetime value of an acquired customer is X amount” – what does that look like?

 Alex Goldstein: Well, it’s not very scientific in my industry… At least in terms of the niche that I serve, because a lot of my best prospects will take a really long time to actually result in a transaction. For me, I think the way it works is I really just have to use some assumptions about what percentage of leads will ultimately result in transactions.

For any given campaign, they could still be resulting in deal flow years later, and it’s really hard to track… So I guess it’s a little bit of [unintelligible [00:10:49].07] and a little bit of just making sure that the numbers are so far skewed in my favor that it would be hard to lose.

Joe Fairless: Now let’s move on to service, because you mentioned you got into this aspect of real estate because the level of service you got from other agents wasn’t good enough… So what specifically do you do that is above and beyond the typical level of service?

 Alex Goldstein: Well, I think I’m a lot more patient than most agents are. I think a lot of agents take a sort of scarcity-minded perspective about working with a client, like that they have to do a deal soon, or they’re gonna lose the opportunity. And suppose that there is always that risk, but I’d rather build my reputation on advising people thoroughly. So if someone needs to move quickly, we’ll move quickly, but I also don’t want people to be rushed into making transactions, particularly when there may be millions of dollars on the line. Being methodical and patient I think differentiates my service a lot.

Also, we talked a little bit more about advertising that I would have anticipated, but the truth is that that’s also a great value-add for my clients, because if I’m gonna be selling their property, I have an ability to draw a tremendous amount of attention for that property online, and I think because I have hands-on to the advertising and I know about the property, I can really connect the dots and get a lot of attention pretty quickly… I think that’s a value-add for the people that I’m selling for.

Joe Fairless: Absolutely. You’re the CMO. [laughs] I didn’t think we’d be talking so much about advertising either, but I just rolled with it, because it sounds like that is one of the two ways that you get high net worth families… And high net worth families, whether a Best Ever listener is a fix and flipper, or a syndicator, or a real estate agent, high net worth families tend to be a pretty good target audience for them, so I figured we’d get into how you acquire them.

You mentioned the other way is through referrals… Anything in particular that you do to facilitate referrals?

 Alex Goldstein: Probably not as much as I should do. I try to keep in touch with people and just find out what’s going on in their lives… But I don’t have anything really formal in terms of that. I think the best thing that I can do is just do a good job for people, and make sure that they remember me, that I’m somewhat top of mind. So I try to keep in touch with my past clients, but that’s about it.

Joe Fairless: You’ve written three books. If you had to write a fourth, what would the fourth one be about?

 Alex Goldstein: Well, I do love to write, so I think that my next book is probably not gonna be on real estate. I feel like I’ve said a lot about real estate, so I’m actually working on a book about wine… So that might not be the answer you want, but…

Joe Fairless: [laughs] Hey, that’s the truth though…

 Alex Goldstein: Yeah.

Joe Fairless: You’ve gotta go with it. Have you worked with families who are not high net worth when you were first getting started as an agent?

 Alex Goldstein: Yeah, when I first started working as an agent – at the time the market was really depressed, and there were tons of REO deals, so there were a lot of people that were out searching for a hundred thousand dollar properties. It’s not to say that today I won’t work with people who aren’t high net worth, it’s just that’s not the focus of the business and the advertising.

We do have a broad spectrum of clients, but that’s really the focus. I’ve done everything from 100k deals to seven million dollar deals in Arizona, and everything in between.

Joe Fairless: What’s the difference in questions that you’re asked with high net worth families, where you know you have to be prepared to answer?

 Alex Goldstein: I think that the high net worth families that I work with for the most part – it takes a while to sort of melt the ice, so to speak. There can be people who are not just gonna hand over their business or hand over their trust. I think it takes some time, and that process is really driven by individual personalities, experience and needs. I don’t think that there’s a blanket statement that I can make… But again, the families that are gonna work best with me are people who are willing to go through the process and be methodical, and who treat it seriously.

One of the things that I’ve been sort of cheerleading for for years is for people to recognize that their home is a very significant part of their financial plan, even though it’s not treated as such. I don’t think you should treat your house like an investment; I think that you should enjoy it, make enjoying it and the best lifestyle the number one priority. However, I also think it’s important to not make a huge mistake with it, because you don’t want to lose a million dollars or more when you go to sell your property. That’s some of the stuff that I put out there and try to get on people’s radar.

Joe Fairless: You just did an ad campaign. Congratulations, you just got a lead come through. First off, what information do they provide you whenever they fill out a form online?

 Alex Goldstein: Typically, it’s just an e-mail address. Sometimes people will provide their phone number as well. If we have a phone number, we’ll do our best to connect with them and then start sending them what I think are some pretty valuable information via e-mail, so they can start getting a handle on what’s going on in the marketplace.

Joe Fairless: And that was my question… So once they submit their information, what’s the follow-up process, so that you can melt the ice with them?

 Alex Goldstein: Well, we’ll basically let them know the services that are available to them, and then I also write a weekly newsletter that covers luxury properties in the Phoenix Metro Area. We’re now over 400 additions into it, so it’s got a pretty deep base of readers, and I think that people find that incredibly valuable to getting a handle on our market.

Joe Fairless: And do you have a planned process for jumping on a call with them whenever they submit their information, or is it just the e-mails and newsletters, and then they’ll reach out to you when they’re ready?

 Alex Goldstein: I think that calling people cold, so to speak, is harder and harder to do. People are just less likely to pick up the phone, so I think sometimes it may even at start be a text. My attitude is that I want people to know that I’m here for them, but I also don’t wanna be a pest. I make myself available, and… Again, with a lot of these types of decisions, they are large decisions, so I think my ideal client is more likely to be in this sort of gathering information phase, figuring out who they wanna work with phase, and that’s where I try to demonstrate my value, rather than just hammering them with phone calls, or stuff like that.

Joe Fairless: Fair enough. With the weekly newsletter that you do – anything in particular that’s in there that has been especially attractive or resonated really well with your audience?

 Alex Goldstein: I don’t think there’s a magic bullet, other than the consistency of it. Most of the newsletters that I see coming from people in the industry, they’re either “Here’s my listings” and they’re just kind of hammering people with “Buy my stuff”, or they tend to go in the opposite direction and get really cutesy, and it’s like “Here’s my chocolate chip muffin recipe”, “Here’s a picture of my cat”, and stuff like that.

What I do is I just provide my take on what’s going on in our real estate market and then the economy more broadly, because it can obviously have an impact… And I think that the consistency of that allows people to get to know me and to understand what it would be like to work with me.

There’s no “Do this and suddenly money is gonna fall out of the sky”, it’s just showing up each week and providing value, and then at some point you get the call.

Joe Fairless: That’s pretty incredible, 7+ years you’ve been doing that.

 Alex Goldstein: Yeah, it’s been a long time, and it’s evolved tremendously from when I first started.

Joe Fairless: What was the content like when you first started, compared to now?

 Alex Goldstein: Well, when I first started I think it was really just the listings, and kind of like “Here’s what’s going on.” Very factual, but not a lot of personality. Then over time I started giving myself more permission to interject my thoughts into things, and to really actually writing content that was (at least to me) useful and interesting.

Joe Fairless: What’s an example that was in one of the recent newsletters, where you wrote editorial or content about something that was useful or interesting?

 Alex Goldstein: I’m trying to think here… It’s a good question. I’ve got an archive of all this stuff. For instance, in the last edition I let people know about the fact that Maricopa County is the fastest-growing county in the country, which I think is an important thing to know.

Joe Fairless: Wow. In the country?

 Alex Goldstein: Yeah.

Joe Fairless: Dang!

 Alex Goldstein: So we had 202 people/day move here in 2017, which is more than any other county in the United States. So that’s an important fact for people to know… Then I sort of segue from that into some commentary about the luxury home price surge that’s being seen around the country, and just talk about what’s happening in some other markets and what might happen locally. So just my thoughts, and I have my crystal ball – it’s not better than anyone else’s, but hopefully people see what I see or can relate to it and will want to find out more.

Joe Fairless: Based on your experience as a real estate investor, and now primarily focused as being an agent, what is your best real estate investing advice ever?

 Alex Goldstein: My best advice ever is to pay attention to time, just as much or more than money. I think a lot of people are focused on the surface level numbers, and when they’re selling a property they may have ego, or they wanna get a certain number, or when they’re buying they’re maybe stuck on a certain price… I think it’s important to look at time throughout the whole process – how much time do you have to make your decision, how much time are you gonna be in this property? And when it comes to negotiation, which side (the buyer or seller), who has the greater need to act? Who has more time and flexibility and who’s under more pressure?

That’s the best advice that I can give people, because I feel like it’s overlooked and it’s really important.

Joe Fairless: That is an important leverage point, that’s for sure – who’s in greater need of the time in that transaction, if someone’s needing to sell or if someone is needing to buy.

 Alex Goldstein: Absolutely.

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

 Alex Goldstein: Sure.

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

Break: [00:21:28].03] to [00:22:16].13]

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

 Alex Goldstein: The best ever book is Man’s Search For Meaning, by Viktor Frankl.

Joe Fairless: I have not read the book, but I’ve heard Tony Robbins talk about his story many times… Actually, I was listening to it today, one of Tony’s audios…

 Alex Goldstein: It’s an easy read… Not very long, but it’s potent.

Joe Fairless: Best ever deal you’ve done?

 Alex Goldstein: I think that sometimes the best deals are the deals that you don’t do. A mistake can be so costly that it wipes out the gains that you may have made over a long time. Not too long ago I had a client who was very hot to purchase a property; he was gonna put millions of dollars into it, and I talked him out of it. It would have been an easy six-figure commission, but I was very proud of the fact that they didn’t do it, because I think that they were making  a surface-level analysis, and they would have probably lost a seven-figure sum on that deal.

Joe Fairless: Wow… Do they recognize the salad that you gave them?

 Alex Goldstein: Oh yeah, they were very grateful. After the dust was settled, they were like “Whoa… We almost made a BIG mistake.” [laughter]

Joe Fairless: What was it about the transaction that you saw something?

 Alex Goldstein: Well, the views were beautiful from this lot, but when I walked the lot, I felt like there were some irregularities in the way that it was shaped and how they’d be able to use it, and that ultimately the magnitude of the type of property that they wanted to create wouldn’t have been supported. Despite the fact that the lot was in a place with tremendous views, and surrounded by really high-end properties, I think it ultimately would have been the kind of odd duck, so to speak, of the block. I think if they had built the property there that they had intended to build, it really could have been something where ultimately took a two million dollar loss, or something in the end.

Joe Fairless: Wow, that’s some vision. That comes from experience right there. You can’t read about that in the book, that’s for sure.

 Alex Goldstein: Yeah.

Joe Fairless: When you took some lumps in the downturn, in 2008, what was the reason why your portfolio took the lumps? If you were to look at it very emotionlessly, what would you say the reason why was?

 Alex Goldstein: I think you just found the subject of my fourth book, Joe. [laughter]

Joe Fairless: Well, you can combine that with the wine one, and that will be better for you.

 Alex Goldstein: I think that the short version of it is that I underestimated how much time it would take to unwind some of these deals. The biggest issue that we had was that things were taking longer than anyone expected because it was such a boom. So if you were building, your deal was gonna take a lot longer to complete, and if you were doing entitlements, it was gonna take longer to go through… So it was kind of like — I saw that the crash was coming, but it was almost like you were just being stuck, where you just could not unwind things fast enough or get things completed.

Even though I think I was aware probably 18-24 months before the market, it wasn’t enough to remedy the situation. That was really the lesson for me, recognizing that, again, time is a big factor – we can under-estimate time – and that was one way where I under-estimated it, and I wouldn’t make that mistake again.

Joe Fairless: And those properties weren’t cash-flowing, so you had to sell them, and they weren’t able to sell quickly?

 Alex Goldstein: Yeah… There was a lot of different types of deals that were in the works at that point, but the long and the short of it is that the winners were just not enough to carry the losers in a way that was able to unwind in an orderly fashion… And by the time the properties were completed or zoning was done, the values were just down so much. We got a lot of deals that were just kind of flat, and some of them were way down.

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

 Alex Goldstein: Well, I give back in three ways. I think there’s money, time and knowledge. For me, the money is the easy one, and just writing checks. With time, I’ve been volunteering for the International Wine and Food Society, serving on the board here for about ten years, and I love that; it’s a great passion of mine. And with knowledge, it’s just writing books and hoping that people can learn from my experiences.

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

 Alex Goldstein: You can check out the website for my latest book, it’s NoNonsenseBook.com. The book is called No Nonsense Real Estate. There’s a Contact form if anybody wants to reach out to me.

Joe Fairless: And what’s your real estate agent website?

 Alex Goldstein: It’s LuxeAZ.com.

Joe Fairless: Alex, thank you so much for being on the show, talking to us about a wide range of topics, from 2008 lessons learned, to what you’re doing now to partner up and work with high net worth families on real estate transactions as an agent, how you attract them through referrals, the differentiating features or value propositions you have, the patience advertising, and then also your real estate expertise. I love that story that you mentioned… As well as getting into the marketing and the online advertising.

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

 Alex Goldstein: Thank you so much.

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Gray #BestEverShow banner with Greg Hague

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

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
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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.

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Best Real Estate Investing Advice Ever Show Podcast

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

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!

 

Best Ever Tweet:

 

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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They’ve also partnered with best-selling author, J Scott to provide Bestever listeners a free chapter from his new book on negotiating real estate. If you’d like to improve your bestever negotiating skills, visit www.fundthatflip.com/bestever to download your free negotiating guide today.


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!

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Best Real Estate Investing Advice Ever Show Podcast

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

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!

Best Ever Tweet:

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/

Click here for a summary of Josh’s Best Ever advice: How to Screen and Hire the Best General Contractor

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developing commercial real estate nationwide

 

 

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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Joe Fairless's real estate podcast

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

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

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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

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

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

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!

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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

Sponsored by:

Door Devil – visit http://www.doordevil.com and enter “bestever” to get an exclusive 20% discount on your purchase.

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Best Ever Show Real Estate Advice from experts

JF775: How to MASTER Virtual Wholesaling #SkillsetSunday

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

Want an inbox full of online leads?

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

 

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JF742: The Ultimate Online Real Estate Marketing Breakdown!

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

Want an inbox full of online leads?

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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no fluff real estate advice

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

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF695: The Science of Flipping and Understanding the Data

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF693: Here’s the Right Way to Buy Condos

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.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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