JF1412: Building A Dream Team When Embarking On An Entrepreneurial Adventure #SkillSetSunday with Bobby Montagne

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Mr. Montagne shared great advice with us once before on the show (find link below). Last time, we learned his real estate strategy, today we learn how he has been able to build his “dream team”. As real estate investors, we are entrepreneurs, and we need to have an excellent team that we can trust to have our backs. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Bobby Montagne Real Estate Background:

  • CEO of Walnut Street Finance
  • Real estate entrepreneur with three decades of experience in commercial and residential property development, finance and sales
  • Has successfully overseen $15 billion in career transactions
  • Among an elite class of private real estate lenders that has consistently delivered high-quality returns to partners and investors

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JF1390: Gain Credibility & Visibility As A Real Estate Investor Using Traditional and Social Media #SituationSaturday with Christina Daves

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Chrstina is here to tell us how we can leverage traditional media to get more visibility. Her tips also help for gaining credibility as a newer investor. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Christina Daves Background:

  • Founder of PR for Anyone
  • Shows people how to get visibility using social and traditional media
  • Author of the bestselling book, PR for Anyone™ – 100+ Affordable Ways to Easily Create Buzz for Your Business
  • Say hi to her at http://prforanyone.com/  or at www.getpresstoday.com
  • Based In Washington D.C.

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Read Full Transcript

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 Saturday, we're doing a special segment called Situation Saturday, where we will help you work through a challenging situation that you might be in, or perhaps you'll come across in the future.
Today, the challenging situation is you're a real estate investor but no one knows about you, or not as many people as you'd like know about you, so we have a guest today who will teach us how, as real estate investors, we can get more visibility using social and traditional media.
With us today to talk about that, Christina Daves. How are you doing, Christina?
Christina Daves: Hey! I'm great, Joe. Great to chat with you again.
Joe Fairless: Nice to have you on the show. A little bit about Christina - she is the founder of PR For Anyone. She shows people how to get visibility using social and traditional media. She is the author of the book "PR For Anyone: 100+ affordable ways to easily generate buzz for your business" and you can check out her website at PrForAnyone.com. With that being said, Christina, will you give the Best Ever listeners just a little bit of background for context, and then we'll get into the bulk of our conversation?
Christina Daves: Yeah, absolutely. Oh my gosh, it's probably eight years ago now I invented a product, and everybody loved the idea, and it was great, and everything was wonderful until I manufactured the product and I realized that I had created a whole new space in the marketplace. So you wanna talk about nobody knowing about you -- nobody knew that they needed my product. So what happened was I broke my foot, and I was put in one of those big, ugly medical boots and we were headed to New York City the next day... So I'm looking for anything to decorate it, right? We're going to the fashion capital of the world, so I'm googling "medical boot fashion", "medical boot accessories", and there was nothing on the market.
Having been an entrepreneur my whole life, of course, the light bulbs went off, and I did research, and I found out that there was a huge market for this... So I went forward, took a mortgage out on the house, did everything, and then it was like "Oh my gosh, how do I let people know about this?" I didn't have any money left for advertising; I couldn't hire a big DC PR firm... So basically, I became a do-it-yourself expert in publicity, and "How do you get free publicity?" I made a lot of mistakes along the way, and then I really started to figure things out.
On national television, I was on the Steve Harvey Show, I've been in Forbes several times, Entrepreneur... I figured things out because the more visibility I got on these big media outlets, the more people would find out about my product. That's how it started.
Joe Fairless: And as real estate investors, especially investors who have a full-time job, but then want to transition into active full-time investing, the challenge is a credibility challenge, because they have a sphere of influence that knows them from whatever background and profession they were in previously, and then when they start talking to people about real estate investing, it might be like "Wait, what? You're a real estate investor? I know you from computer programming, or whatever else." And not only for people who are transitioning from full-time something else to full-time investors, but then also anyone who's listening who wants to grow your business - you get more traction with more exposure, you're likely going to generate more business results... Totally relevant for us, and I'm excited to dive in. What's the best approach for this conversation?
Christina Daves: Well, we'll start with publicity, and then we can talk about some social media hacks and tools that everybody can use... But it's starting local. You're probably on a more national level in terms of investment, but I would think a lot of people listening are investors in their own backyard, and that's where your expertise comes in. Just because you were a computer programmer, there's a lot of spin that you can give yourself to position yourself as -- maybe you've lived in that area your whole life, and you know the real estate industry inside and out. Maybe you were doing another job AND doing it. So when you're pitching stories, you don't have to say "I'm new at real estate investing."
If you're with a company -- I work with a lot of real estate agents and I always say "Don't say you're new to real estate. Say you're newly affiliated with this firm." So there's lots of ways you can spin it a little bit.
Local is the easiest way to get publicity, and one of the things I recommend is if there is a national trend in real estate investing, if there is a study that came out, how can you pull it locally? What does that mean for your local market? That's a great thing that you can pitch your local market, again, assuming that most of the people on here - you could tell me your audience better; if it's national, I have a whole other idea. We can go nationally, too. But locally is the easiest way to get publicity.
Obviously, they want local people... If you ever tried to pitch the media in another state, it's hard. They want the people who are in their community to be the experts. But that's why it's -- like I said, you take national trends, national studies and bring them into your local community; that's a really easy way to stand out and to get coverage.
Joe Fairless: I love that. With the national trends or reports - is that as simple as seeing what's on a national news station, and then saying "Hey, I saw this report from XYZ" or do we have to get Google alerts for that, or how should we approach that?
Christina Daves: Yes... Yes to everything. If you can see that study before it makes the national news and then you can approach your local - that's great. Or let's say you see it on NBC Nightly News, you see a study... I would call my local NBC affiliate and say "Hey, they just ran this story last night; let me tell you what the local spin is. How about I come in for an interview and we can talk about what this means for our region?"
Joe Fairless: That's easy. Not easy, but it's a simple, intuitive process is what I should say, because my next question was "Who do you reach out to when you find the study that could be newsworthy and you're approaching them?"
Christina Daves: And people laugh... Especially locally, it's really easy. Google. Google is a question search engine. "Who writes about real estate stories for..." and the name of your local publication. Or "Who writes about real estate investing?"
If you're in New York City, I'm gonna tell you it's gonna be a little bit harder. That's the number one market in the country. And most of those are your NBC Nightly News, those kinds of things. You can still get on in New York, it's just that you're competing with a lot more people. But for the most part, everywhere else it's really not that hard. You can pick up the phone, you can Google your call letters (WRC in DC) and you can pick up the phone and call the newsroom and say "Hey, I just saw this story on NBC Nightly News. I've got a great idea how we can bring this locally. Who is the producer that I would send my e-mail to?" And they're gonna tell you, because they wanna know this kind of stuff.
Everybody is so afraid of the media, and they really are very accessible and very easy to reach, and very appreciative if you give them good stories.
Joe Fairless: That is a stand-out way, certainly, to get local coverage, and as you said, starting local is the easiest way to get publicity. Is there a channel or medium, rather, that we should prioritize over others?
Christina Daves: I would say TV probably is more competitive, because more people are trying to get on television. What's interesting is I think that the blogs and the onlines have a much bigger reach. TV used to be the big thing. Now it might not be so bad to have a link in your local paper where they're e-mailing all of their subscribers. People read news online, people read news on their phones. So I just think anywhere in your regional market...
Know all of your newspapers, your magazines, know what they cover. I always tell people, "Do your homework." Spend that extra bit of time so you know what they cover and how they cover it. How do they normally write real estate stories? Or do they even cover that?
You don't wanna pitch somebody that would never cover the real estate market. In DC -- it's all about activities in DC, and concerts, and book readings, and this kind of thing. They would not write a story about the real estate market in DC. But find the outlet that does, and then build your media list, so you have it right there. You've got the 10 people in your community that you can hit every time there's a story, and you're staying front of mind, so then they're also gonna remember you when there's a real estate type related story... They'll be like "Oh, Joe's been sending me great story ideas for months now. I bet he's got a great quote on this."
Joe Fairless: When you have an idea to pitch the local media, should you reach out to all of them at once, just to make sure you get coverage, or take a different approach?
Christina Daves: That's a very good question. You have to be kind of careful, especially with television. I will usually pitch what I think is the best media outlet first. So I'll pitch, I'll follow up with a phone call, and then I'll send a reminder e-mail, all within a few days.
Now, if it's breaking news, I will pick up the phone and say "Hey, this study came out. This is really impactful for our region", and talk about it. But then, after that amount of time I would go to the next one, and if the first one came back, I would be honest and say "Hey, so-and-so is also covering it." Sometimes they want exclusive, sometimes they don't care, but you don't wanna upset them. They might say "Okay, we'll pass on this one, but next time let us be first."
So you just have to be mindful of your contacts... Especially because you're not sending a press release. I'm a big proponent of you find the right person, you build a relationship, you send a personal e-mail to them, so they know this is not a blanket press release that's gone out to the world. This is really specific to them, to their media outlet, and you could be specific about it.
"I know that you cover once a month in this section in the paper, and I think this would be a great fit for that." You've done your homework, and they see that.
Now, newspapers - if you've got a regional and you've got a local, I would pitch both of them; that doesn't really matter. Again, in DC you could pitch The Washington Post real estate section and the regional paper and the local paper all the same story, and you wouldn't step on anybody's toes.
Joe Fairless: Got it. Okay. You mentioned starting local is the easiest way to get publicity, and you say national would be a different direction... So how do we go national?
Christina Daves: The easiest resource is something called "Help a reporter out." I'm a huge proponent of it; I'm actually one of their biggest success stories, because I use it every single day. It's helpareporter.com. I'm not a paid spokesperson or anything like that; it's an amazing resource. There are a ton of real estate leads in there. So what happens is three times a day they send out queries from journalists looking for quotes or more information, and it comes out at like 6 AM, 1 PM and 6 PM roughly, Eastern Time. It's important to answer quickly, because I think they have 500,000 people in their database that they're sending this out to... But I will tell you that the real estate people that I have worked with have been in the Wall Street Journal, they have been in national magazines, they have been in the Washington Post, New York Times... It goes on and on and on.
It is so important to make that part of your marketing plan, especially being in the real estate industry, because there are some days you could get 10-20 real estate queries alone; I don't know any other industry that they do that much with.
Then you get the -- I call it the Google juice. You get the SEO of these big, huge media outlets that are putting your name in there, they're putting your website if you have a website, and then when people start checking you out for doing stuff with you and you start coming up on page one of Google with a New York Times or a Wall Street Journal article, you look incredibly credible to those people... And that's why local is easiest, but national is where the big credibility is.
Joe Fairless: For example, when you got into Entrepreneur Magazine, how did you get into there?
Christina Daves: If you put my name into Google right now, last I checked there was like 14 pages of Google. I would say 90%-95% of that is answering Help a Reporter Out queries. It's tremendous. That's how I got in the Steve Harvey Show. I changed my business completely to be on a show like that, and that was all from Help a Reporter Out.
Joe Fairless: What were you on the show for?
Christina Daves: I was on an inventors' competition that I won.
Joe Fairless: Wow!
Christina Daves: Yeah, it was great! I won $20,000 and all of that credibility to be on that show, and then they brought me back a couple more times. It was amazing.
Joe Fairless: Now let's talk about social. What do we need to know about social to help get more visibility. Everybody thinks they need to be on every single platform, and you're not gonna do every platform well. You can't. It's impossible. Take the one that you're really comfortable with and do it really well.
Obviously, for real estate in general, that's a big referral business; people who know, like and trust you are gonna tell people about you and what you do... So Facebook is really good for that to stay front of mind with your family, with your friends. Don't post all your business stuff on your personal page. Make sure you have a business page. But sometimes you can send some stuff over to your personal page to remind them.
For real estate investors, LinkedIn is huge because of the searchability and because of the types of people that are on LinkedIn and the people you can connect with to build your network. It's very important to have a good profile, a good profile picture. Don't put a picture from happy hour at the beach; this is business. [laughter]
The next one that's really big in the real estate world right now is Instagram - because of the pictures, because of the Instagram Live, because of the slideshows that you can do... But I would take one and get really comfortable with it. Hashtags are really important on Instagram, Twitter... And this is new on LinkedIn - you can now use hashtags to get found. So when you're doing your posts, think about that. And social media, guys - video. You've got to be doing video.
I heard a statistic that in 2019, 80% of all content consumed online is gonna be video. So you've got to be putting your stuff out there, and just get used to it. It's muscle memory. The more you do it, the more comfortable you get. My first video was horrible, and I love to tell the story - my first Facebook Live I was so proud of myself... I got all set up, I did it, I hit Post, everything was great, and I realized that my phone lock was on, so I was at a 90% angle... [laughter] But I didn't lose any clients. Nobody said "Oh, Christina, I can't work with you because you did a Facebook Live sideways." Everybody laughed and thought it was really funny... But that's how people get to know you, and that's how people get to see the authentic you, and that's how people get to decide they wanna work with you.
So video is really important... And LinkedIn is doing video now. They do any lives; it has to be a recorded video. And then the Facebook Lives are just a tremendous way to get people to find out about you and allow you to educate people... So it's something you really have to incorporate into your marketing plan.
Joe Fairless: Anything that we haven't discussed that we should discuss in this shorter conversation? Because I know your book has 100+ affordable ways to create buzz for your business... But anything that comes to mind that you think we should discuss for our conversation?
Christina Daves: Yes, just do it! My business coach years ago told me that imperfect action is better than perfect inaction, and I have embraced that. Because like I said, people are gonna not wanna work with you because your video isn't perfect, or your content isn't perfect... It's just really important to get yourself out there, because if you don't do it, somebody else will. Somebody's gonna do it. If they need a real estate investor to quote in a newspaper or a magazine, somebody's gonna get it, so why not let it be you, and put yourself out there so you're the expert and you're the credible one and you get all the logos on your website, compared to the other person who's doing it?
Joe Fairless: How can the Best Ever listeners get in touch with you?
Christina Daves: PRForAnyone is everything. That's my handle on all the social media, that's the website... If you'd like to go a little deeper on what we talked about today, with some more ideas, I have a PDF checklist that I created. That's at GetPressToday, and it's specific for people in the real estate industry... To give you some ideas on how to make yourself newsworthy, how to pitch to media... So that might be helpful to actually have something written in front of you. And if you wanna talk about anything, ChatWithChristina.com will take you right to my phone calendar, and I would love to talk to you and see what I can do to help.
Joe Fairless: Excellent. Yeah, I'm at GetPressToday, and I see "Get my free step-by-step guide." Awesome. Christina, thank you so much for sharing this expertise, how to get free publicity, both locally, just paying attention, creating a database and doing the work, the just-do-it part, and being smart with how we approach the local contacts. As you said, TV is more competitive, but blogs tend to have a bigger reach, and they also help better with SEO, unless the TV segment is also published on that news organization's blog, and then you get the double whammy, which is good.
Then how to approach national press, HARO - Help A Reporter Out... My company has been using that sporadically, and we certainly have received some success there, so I second that... And you taught me something -- you taught me many things, but one of the things that I wrote down and I bolded and I'm gonna be reaching out to my team on is LinkedIn, how we can use hashtags now on LinkedIn, whereas before we couldn't... Or you could, but it just didn't do anything. So that's something that I'm gonna implement in my stuff, too.
Thanks so much for being on the show. I hope you have a best ever weekend, and we'll talk to you soon.
Christina Daves: Thank you.

Bobby Montagne and Joe Fairless

JF1222: Pivoting From Development To Private Money Lending with Bobby Montagne

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He has over three decades of residential property development, finance, and sales. After 2008 Bobby saw that banks were not able to lend on projects that previously had never been an issue. With capital drying up, he decided to pivot. He created Walnut Street Finance to provide capital to companies doing what he just pivoted from. Now his company is a full fledged private lender that understands the product (construction & development) better than most, which allows them to lend when a lot of others cannot. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Bobby Montagne Real Estate Background:

– Three decades of experience in commercial and residential property development, finance, and sales

– Successfully overseen $15 billion in career transactions

– Among an elite class of private real estate lenders and delivered high-quality returns to partners and investors

– Between 2010-’15 was principal owner of WSD Capital, a real estate development firm that renovated and resold 185 classic row houses that generated $150M in revenue

– Based in Fairfax, Virginia

– Say hi to him at: www.walnutstreetfinance.com

– Best Ever Book:Think and Grow Rich

 


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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, Bobby Montagne. How are you doing, Bobby?

Bobby Montagne: I’m well, thank you. How are you? Thanks for having me.

Joe Fairless: I am well too, and you’re welcome, my friend. I am very much looking forward to our conversation. Holy cow, I was looking over your bio before, and you’ve got some experience – three decades of experience, in fact, in commercial and residential property development, finance and sales. And in fact, between 2010 and 2015 he was the principal owner of WSD Capital, which is a real estate development firm that renovated and resold 185 classic row homes that generated – get this! – 150 million dollars in revenue.

He is based in Fairfax, Virginia. His company now – Walnut Street Finance. There’s a link to that in the show notes page… With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Bobby Montagne: Sure thing, I’d love to, and again, thanks. The short story is I got out of school in the late ’80s, I worked for other developers and finance companies for ten years. I started my own company, Walnut Street Development in the late ’90s, and then built essentially infill residential properties in and around Washington DC in what we refer to as the Beltway And by infill I mean typically very good locations, where we were tearing something down or just buying a small infill site and building a building.

We built high-end condos, we built single-family detached, and we were essentially the builder and the developer. We would buy the land, zone the land, build the buildings, sell the buildings.

In 2015, after the recession and the Dodd-Frank Law I noticed that capital was no longer available for the typical infill developer, just because banks used to be able to do essentially A to Z. After the recession, the whole front of the alphabet got taken away from them, and capital was no longer available to the typical infill developer. So if I started my company in 2012 or beyond, I probably could have never found capital to build the projects.

So I decided to pivot, and go from the builder/developer to a lender, in the space where traditional banks weren’t lending. I love this space, I understand the space, I understand real estate and the thought process, and we’ve been at it now for a year and a half. We’ve originated about 15 million dollars in 40 different deals in and around Washington.

Joe Fairless: Is that where you’re focused to lend, Washington?

Bobby Montagne: Washington DC, Northern Virginia and pieces of Maryland that, again, touch the Beltway, Southern Maryland. The plan is to do it in that market, this region, for the next year or two, and then begin to think about other markets. But we wanna perfect our model, perfect our underwriting, and just really better understand this private lending space before we move into markets that we’re not familiar with.

Joe Fairless: There are opportunities that I see all the time, but my focus right now is multifamily investing. However, I might think “Man, storage units (which I do) make a lot of sense, and so do mobile home parks.” I believe both of those things. However, I’m not gonna pivot, because I’m focused on what I’m doing.

Now, you said you saw an opportunity, because the capital wasn’t available for infill developers in 2015, and now you wanna be the solution to that, but what were the other reasons why you switched? Because it’s one thing to see an opportunity, it’s another to then switch what you’re currently doing and making money on and do something else.

Bobby Montagne: That’s such a good question. As with every pivot in a business, especially if you’re having success, pivoting is a big deal. We started buying dilapidated row houses in Washington DC in 2010, and we could buy dilapidated row houses in DC in 2010 for a great number. We would do a complete gut renovation and sell the property, and have a cash-on-cash return somewhere in the high twenties. It was a good business.

That high twenty cash-on-cash return continued through 2014. I was flabbergasted at how long it lasted. Typically, when you have those sorts of returns, others discover the space, money comes flooding into it, competition increases. Others can discover the space and get after it in an organized fashion or compete with us in an organized fashion until late ’14, early ’15.

Before late ’14, early ’15, depending on the market, we had a very simple formula – essentially, we would buy a dilapidated row house for $10  (I’m just using that as a ratio point), we’d fix for $5, and we’d sell for $20. If we were in Georgetown, that ratio would be buy dilapidated for a million dollars, renovate for 500k, sell for two million. If we were in Petworth, we’d buy it for 300k, fix it for 150k, sell for 600k. So that buy for ten, fix for five, sell for twenty formula stuck in many neighborhoods, and we did it as efficiently as we could for four years, 180-something-odd units.

In late ’14, early ’15, as others discovered the space, the buy for ten moved to buy for twelve. The fix stayed at five, and the sale stayed at twenty, so the margins got squeezed because there were more players bidding up the price of dilapidated row houses. It got very competitive, and the simple story was in a neighborhood called Petworth we had done 30-something-odd row houses; on a particular street in Petworth (3rd Street), we had done five or six deals. I knew 3rd Street really well. I knew dogs’ names.

A house becomes available on 3rd Street, I’d hear about it at one o’clock; I’d bid 350k, we’ll close as soon as they want to, and I’d get a call later that afternoon the number is 375k. I said “Okay, 375k it is. Ready to close.” I’d get a call after dinner, the number is 400k. It’s the first time Petworth dilapidated traded for something with a 4 in front of it, and that’s when it hit me – I was like, “Holy cow, the others have discovered the space. We’ve gotta think about a pivot.” And that is what led to the original thought of the pivot.

In fact, the moons always line up. I called the guy who won on 3rd Street for 400k – a great guy, a young guy, just getting into the space, quit his 9-to-five, was gonna get into this business big time, educated… But he didn’t have any capital. So I called him, I introduced myself, he said “Yes, I know who you are, I know your company, and I like your product.” I said, “Well, listen, congratulations on the buy. When do you have to close?” He said, “Thirty days.” I said, “What are you gonna do for capital?” He said, “I don’t know, but I’ve got about 25 days to figure it out.

Long story short, I lent him 300k of the 400k to buy it, and I lent him all the construction improvements and he turned into a friend of mine. I did two or three deals with him off of a yellow pad. I hadn’t even considered really getting into this lending space… And after I did a couple deals with him, I began to think, “This really makes sense, because there’s so many folks that are very good builders, and they’re also good deal bird dogs, just like this guy on 3rd Street, but what they don’t have is access to capital”, and they don’t necessarily understand money as well as they should, and I can help in both of those categories. So that was the beginning of the thought process, and it went from there.

Joe Fairless: If you were talking to someone who lives across the country from you so there’s no competition from them, and they said “Can you just tell me what are the benefits from owning a company that does these loans (hard money lending)?”, what would your replies be, from a monetary standpoint? “Well, we mitigate our risk here and then we make our money here…” What would you say?

Bobby Montagne: I would not get into hard money lending or private lending or the space I’m in if I did not understand the product as well as I do. My company really understands construction. We know what a two by four costs; we know how to underwrite, we know how long the construction takes, we know about permits and plans and marketing. We’re so comfortable in that space that I feel like I can take on more risk than most of our competitors in this space who are typically – not across the board, but typically very smart money guys, but they don’t know what a two by four costs.

So to answer your question, with that background [unintelligible [00:11:29].19] real estate, the upside in this space is the security of the investment. We’re lending 75% to 80% loan-to-value in the first lien position on a hard asset – a row house, a single-family detached, a condo in and around Washington DC, the capital of the United States, where the real estate values are pretty strong. So if things go South, we have real collateral backing our investments.

In addition to that – and again, with the caveat that we understand the space and the asset, in addition to that, lending only up to 75% of the loan-to-value, we vet fully not just the real estate, but the borrower also… Not from the standpoint that there’s a big, fat balance sheet – because they never do – but from the standpoint of “Are they capable of doing what they say they’re gonna do?” And then in the completely subjective category, do they have integrity? Are they going to do what they say they’re going to do? You get to know the borrower, and then at some point you put your hand on your heart and you “I believe he’s [unintelligible [00:12:37].22]”

So if somebody on the other side of the country is getting into this space, I would recommend really knowing the product, and I would recommend underwriting not only the hard asset, but also the borrower.

Joe Fairless: As far as how you make money on it, you initially talked about the security of it with the 75% loan-to-value, so you’ve got some leeway there, and then you also have a hard asset… What type of upside is there for you?

Bobby Montagne: Well, what we do is we have a fair amount of my own money in this, but our cost of capital we pay our investors is somewhere in the neighborhood of 8% to 9%. We pay our investors a monthly coupon, so they get a check every month. Then we lend that money to our borrowers, that’s somewhere between 10% and 12% annually, and somewhere between two and four points. The total cost is somewhere between 12% and 15%. So we receive 12% to 15% for the money that we put out, we pay 8% for that money, and we keep the delta.

Let’s say the delta is 5%. If you can build a company where you’re doing 10 million dollars in loans per year, you can count on keeping 5% of that, or 500,000 bucks. The real game is to scale the company to somewhere in the 40 million dollars of origination per year, and we’re on our way to that. We should be there in early 2019. Then when you apply the 5% delta on 40 million, it’s a two million dollar upside. You use that two million dollars to first pay your people, and you don’t need a lot of people in this space; you need a handful of really smart people, and the rest goes to retained earnings. That’s a good business.

Joe Fairless: With the investors you’ve got monthly distributions you’re doing, 8% to 9%… When you are low on projects, are you still having to pay 8%-9% to investors on projects that you’re not lending their money out to earn that higher percent so you have a delta?

Bobby Montagne: That’s a great question, Joe. Typically, in the hard money or private lending space when the money is idle, not in play in a deal, investors aren’t getting paid, so the switch is shut off. When a new deal arrives, the switch gets put back on. I don’t do that. If you invest in my company at 8% or 9%, the switch goes on and it doesn’t go off until you redeem. I’m able to do that because we have a very strong pipeline, and the reason we have a very strong pipeline is because we’ve invested very heavily in in-bound marketing, and our phone rings with viable deals.

So I don’t have the off-switch for my capital, so the next question – or the obvious question – is “Well, what happens when you have a whole bunch of idle capital and you’ve got money just going out and not coming in?” Well, we protect ourselves from that in that we can return capital. If I have idle money and I don’t see a home for it for the next three or four months, we’re gonna return capital. But honestly, where we are in the business, in the growth mode, shame on us if we don’t have a home for capital.

Joe Fairless: You said you invest heavily in inbound marketing – what are you investing in?

Bobby Montagne: We invest heavily in inbound marketing and outbound marketing. On the inbound side we work with HubSpot; we put out content blogs, two and three and four a week, primarily aimed at potential borrowers. On the outbound marketing side we have outreach meetings to talk about hunting for a deal – “What are you looking for? What neighborhoods are promising? Why would you pick that neighborhood over another neighborhood? How does the math work?” “We’ll buy for ten, fix for five, sell for twenty.”

So we’re educating… We’re content marketing, as the term is, but we’re educating. We’re constantly trying to help, not dissimilar to what you do, trying to help those worthy borrowers who are very good builders, who get up early and get after it. We’re trying to help those folks build a business. And we can do that by providing capital, and we can do that by providing help. For example, we did a loan with a guy in a great location (again, in Washington DC), in a neighborhood called Eckington. Gut renovation of a row house; permit should have taken three to four weeks. After three to four weeks, no permit. We give them a call and say “Hey, when are you starting?” He says, “I can’t get my permit.” We said, “Well, what’s going on?” He explained it to us, we provided a resource that he then engaged, hired, and it [unintelligible [00:17:42].02] and off to the races he went.

So we try to help not only with providing capital, but we also do a bit of coaching. “This is a better way to go than the other way”, if folks want to ask. If they don’t wanna ask, that’s fine, too.

Joe Fairless: Based on your experience in the industry as a developer and now on the lending side, what is your best real estate investing advice ever?

Bobby Montagne: Not my best advice, I borrowed it from Warren Buffet – it’s preserve capital. That’s the first and probably only real rule. You can’t afford to lose capital. It happens, it’s happened to me, but you really have to protect your capital. So that’s my advice. As Warren Buffet says, “Rule number one – protect capital. Rule number two – see rule number one.”

Joe Fairless: On the part where you have lost money on a deal, can you tell us a story about that deal?

Bobby Montagne: I can, actually. It wasn’t on the lending side… Like I said earlier, we’ve been in the lending business for about 15 months now. We haven’t had any deals get sideways on us. We will eventually, and we know how to deal with it when it does happen, but in 2000 to 2005, 2006 I built high-end condos in and around Washington. Very big deals. I built a building next to the Vice-President’s mansion in Washington DC off of Wisconsin and [unintelligible [00:19:10].20] a 420-unit deal in Arlington; it had a pool on the tenth floor that looked down the mall… I mean, really high-end condo stuff.

And from 2000 to 2005 you couldn’t build them fast enough. They sold off with paper before we even had the frame up of the building. In 2006 we had three buildings, mostly completely sold out. Between the three there were 15 units all in the 1 million plus range that had not sold, so we were kind of scratching our head in late ’05, early ’06, like “Why haven’t these sold?” The building is done, people moved into it, it’s a great product, but they weren’t selling.

At the same time, I was getting ready to start a building on Mass Ave. in Washington, a ten-story apartment building where we had bought the land, zoned the land, gone through historic review, and getting ready to build the building.

So I went to New York and I got a big construction loan to build this ten-story building in early 2006, and it was so easy to convince the bank in New York that this was a viable project and they should lend literally tens of millions of dollars to get it built… And I left New York on a train on Thursday night and I started thinking to myself, “That was way too easy.” There should have been way more due diligence on the bank side, way more questions, like ‘How fast do they sell? How many days on the market? What are the price points? Why did you decide to do this many one-bedrooms and this many two-bedrooms?’ None of those questions.

So I’m sitting on the train, I’m coming back to Washington from New York, and it occurred to me, “That was really easy money for this ten-story building on Mass Ave. and we have 15 units that we can’t sell in these completed buildings.” So I started thinking, “We can’t sell the last units, easy money… We’re at the top of the market. We need to get out right now.”

I went and I talked to my equity investor at the time, an older gentleman who’d seen it, been there and done that, we kind of talked through what I’ve just said, but in a little more detail, and he agreed. “It’s the top of the market, time to get out.” So we sold everything – we sold those last 15 units, five of them a at a loss, we sold that site on Mass Ave., the ten-story multifamily condo building site on Mass Ave. at a slight loss, and we got on the sidelines in 2006 and stayed there until 2009. And although I lost money and the business obviously didn’t grow, because we weren’t building anything, it was the smartest thing I’ve ever done.

Joe Fairless: Wow. I’ve heard stories where people got out, but I haven’t heard as detailed of a story like you just told us. Thank you for sharing that. Are you seeing anything like that now?

Bobby Montagne: No, I am not, and I really like the way we’re growing now. At least I can speak towards the Greater Washington Metropolitan marketplace. We’re increasing in values, but at a steady, reasonable pace. There’s no crazy spikes. Construction costs are remaining relatively steady, eaking up a little bit, but no spikes.

I remember in 2004 and 2005 we were selling a 420-unit building in Arlington, we would have a conference call every morning with my equity partners and the lead bank to talk about pricing, because we would increase prices almost every day, and we’d still sell it, which is crazytown. And when building buildings we would budget x amount for steel, and then all of a sudden steel costs 2x, and you’re like “Why?” and it’s like, “Well, that’s what it costs. The demand for steel. Supply and demand. Prices went up because everyone wants steel.”

Concrete – same story, and then you always heard, “Well, they’re building everything in China, so concrete prices are up because China is sucking up all the concrete.”

I’m not seeing anything or hearing any stories like that now. It’s just steady, the line is increasing, but not at any spike or exponential rates. I love that kind of market.

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

Bobby Montagne: Sure.

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

Break: [[00:23:41].26] to [[00:24:39].08]

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

Bobby Montagne: Think and Grow Rich.

Joe Fairless: Best ever deal you’ve done?

Bobby Montagne: Clarington 1021, a condo building in Arlington.

Joe Fairless: And why is that the best ever deal?

Bobby Montagne: Not just for me, but the profit mostly for the equity partners… A profit of 15 million dollars in 18 months.

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

Bobby Montagne: Not doing full due diligence, and I continue to make that mistake. It’s a fight against frankly being lazy. Can’t do it.

Joe Fairless: What’s one area of the due diligence that you’ve honed in on that you need to put more focus on?

Bobby Montagne: Well, we have gotten better at that, but I would say the piece that we constantly need to ask about is document control. Are all the documents right? Do we have the originals? Is everything fine and within the right spot? Did the title report say what we wanted it to? Are we properly ensured? You know, document control.

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

Bobby Montagne: The best ever way I like to give back is actually being involved in the giving back and not just writing checks. For example, we get involved in helping to renovate and build houses for those that wouldn’t be able to do it for themselves, kind of a Christmas in April program. I really like that way of giving back.

Joe Fairless: And how can the Best Ever listeners get in touch with you or learn more about your company?

Bobby Montagne: Our website is WalnutStreetFinance.com. Our phone number that rings in our office on everyone’s desk and gets picked up is 703-273-3500. My cell phone – if you are interested in learning more about this space or our company, you can call me directly. That number is 202-409-4100.

Joe Fairless: Well, thank you for talking about your experience in real estate developing, and then also doing what you’re doing now – lending; why you got into lending, you saw the writing on the wall, the example of what you were looking for with the deals, I love how you simplified it. For me it was helpful, because I have a very simple mind – that “ten dollars you buy, five dollars you fix and you sell it for twenty”, and how you were seeing it bump up to twelve, five, twenty. And the writing on the wall that you saw in 2006, and what you did, and then some deals that you’ve done along the way.

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

Bobby Montagne: Joe, thanks so much. I really appreciate your time.

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JF1209: The Interview On Negotiating Real Estate #SkillSetSunday with J Scott

Listen to the Episode Below (26:05)
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J Scott earned over $1 million on his first 50 flips. He literally wrote The Book On Flipping Houses. His most recent book, The Book On Negotiating Real Estate gives us expert tips to negotiate like the professionals. If you want to learn how to get better deals on properties and get an edge on your competition, bring pencil and paper when you listen to this one! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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J Scott Real Estate Background:

  • Investor specializing in residential rehabbing/flipping
  • Completed 200 deals since 2008, has bought and sold over $25M in property
  • Earned more than $1,075,291 on his first 50 flips
  • He is the author of the best-selling book, “The Book on Flipping Houses
  • J also runs the website 123Flip.com, which provides insight into every aspect of his real estate business
  • Releasing new book on negotiating for real estate investors in May 2017
  • Based in Washington D.C.
  • Say hi to him at www.123Flip.com  
  • Listen to his Best Ever Advice Here:

https://joefairless.com/podcast/jf217-you-only-have-one-chance-to-make-a-good-flippin-impression/  

 


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TRANSCRIPTION

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 of that fluff. With us today we’ve got a returning Best Ever guest; you can hear his best ever advice, episode 217, titled “You Only Have One Chance To Make A Good Flippin’ Impression.” How are you doing, J. Scott?

J Scott: Hey, Joe. I’m thrilled to be here!
Joe Fairless: Nice to have you on the show, and thrilled that you’re back on the show. You add a lot of value — when we talk you add a lot of value to my life, and now it’s time for me to share the value with the Best Ever listeners as well. You did that on episode 217, and we’re gonna do it again.

Today is Sunday, and because is Sunday, this is Skillset Sunday, where we talk about a specific skill that will help the Best Ever listeners after they get done listening to our conversation. We’re gonna be talking about the skill of negotiation; you’ve just released a book on that. In addition, a little bit about J. Scott – he has completed over 200 deals. He’s bought and sold over 25 million dollars in property. He’s an investor specializing in residential rehabbing and flipping.

He earned more than a million bucks on his first 50 flips… Exactly, 1,075,291 dollars on his first 50 flips. And he runs the website 123Flip.com. Based in Washington, Dc.

Before we get into negotiations, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

J Scott: Sure. I started in real estate back in 2008, probably the worst market in history. My wife and I had been in the tech industry before then, and living in California… So we did the corporate thing for a long time, decided to start a family, moved back East, and we were looking for something to do back in the summer of 2008, just before we got married. Somehow we fell into real estate. The story I tell – so I guess it was true, because it was 10 years ago and I barely remember – is we were watching an HDTV flipping show, and my wife said “Hey, let’s try flipping a house.”

We had just purchased our first house, I could barely change a light bulb, she didn’t know anything about real estate, but we decided “Hey, we’re looking for something to do. Let’s give it a try.”
We bought our first house two days before we got married, and then we bought three more within the next two months, and it just kind of took off from there. I attribute a lot of our success to the fact that it really was the worst real estate market probably in 100 years, so it forced us to really learn the foundational concepts of real estate. We couldn’t just come in and rely on appreciation and a crazy market to kind of fix all of our mistakes. We really had to learn the basics, and we really had to do things right, because if we made any mistakes back in 2008, we weren’t getting things sold.

So that’s kind of how we got started, and we flipped houses for about six years, then we started doing some new construction, we started buying some rentals, so we’ve expanded a little bit, and we’re doing a whole bunch of different stuff these days, but fix and flip is still our core business and our bread and butter.

Joe Fairless: And now we’ve got the benefit of hearing how you’ve honed your negotiation skills, so how should we approach this conversation so that we get the best information to the Best Ever listeners about negotiation?

J Scott: Like I said, back in 2008 – the worst market in recent history; I like to say that in any given real estate market, one of two things is true – it’s either really tough to buy houses, or it’s really tough to sell houses. If not one of those things were true at any given time, everybody would be making tons of money. So back in 2008 it was really tough to sell houses. I could go out and throw a dart at MLS listings and find great deals, but getting them sold was tough back then, because there were so many easy deals out there that you could buy stuff at literally 20, 30 cents on the dollar where I was, in Atlanta. Negotiating wasn’t really that important of a skill.

Like I said, I could just go online and find MLS listings and REO’s and buy properties all day. But what I found is – and what a lot of real estate investors have found – over the last 3, 4, 5 years, the selling parts become really easy. Tons of buyers out there, crazy hot market, but where a lot of investors are running into trouble is buying properties. That’s where negotiation really comes in handy. Being able to work directly with sellers, being able to work with institutions like banks, and HUD and other government agencies, and even being able to work through real estate agents, knowing how to negotiate gives you that edge that really allows you to get better deals on properties.

So it takes a deal that either may not work or is really thin and turns it into a deal that’s good or great, and it also gives you that edge over other investors who are coming in, trying to buy the same deals. So especially in a market like the one we have today, where things are hot and there are plenty of buyers and not a lot of sellers, negotiation really makes a difference between getting the deals and not getting the deals.

Joe Fairless: So you’re taking us into the territory of “it’s not just about negotiation, but it’s about the rapport building”, it sounds like. Is that correct?

J Scott: Absolutely. I think a lot of people, when they think about negotiation they think about that part of the process where you’re haggling over price, you’re haggling over terms, one person’s saying “Hey, I’ll give you this”, and the other one is saying “Well, how about that?”, but what a lot of people don’t think about is there’s a whole lot more that goes into negotiation before you get to that stage, that determines who’s gonna come out successful. And that’s all the preparation, that’s building rapport, that’s really building trust.

When we talk about building rapport, what we’re really talking about is building trust. Basically, building a relationship with another party so that they will trust you and like you, and frankly, they want to see you succeed. People want to see other people that they like succeed. Even if they’re on the other side of the negotiating table from you, if somebody likes you, they’re gonna want to help you. So that’s what building rapport does – it builds that level of trust, and it builds that level of likability so that the person that you’re competing against is actually also on your side.

Joe Fairless: Okay, and I think everyone will agree with you on that – we want to be liked by the other party. So let’s talk through the process that you recommend a Best Ever listener go through, or certain things they should do to accomplish the goal of building rapport and trust.

J Scott: Certainly. There are a lot of things, and anybody that’s delved in psychology and persuasion techniques knows that there are a whole bunch of techniques. I’m not actually gonna go into each of them, but they all basically revolve around the fact that other people want to be liked, they want to be accepted, they want to feel important. I like to say – and this is true whether you’re negotiating or whether you’re going out on a date or whether you’re going into a job interview – the best way to build rapport with somebody is to let them talk about themselves. People love to talk about themselves.

I like to say, if you go to a dinner party and you want to be the center of attention, all you have to do is ask a question and then say “That’s really interesting. Tell me more!” If you keep saying that over and over, you’re gonna find people just circling around you. Everybody likes to talk about themselves, and if you give people the opportunity to talk about themselves, they’re gonna feel like you are doing them a favor, and they’re gonna naturally congregate towards you and they’re gonna like you.

So whether it’s negotiating, whether it’s going on a date, whether it’s going on a job interview, ask the other person questions, let them talk about themselves, because they’re gonna interpret that as something likable about you, if that makes sense.

Joe Fairless: Okay. Is this part of the preparation work that happens prior to going back and forth on the purchase price and the terms?

J Scott: Well, there’s a lot of preparation that goes into it. There’s the preparation even before you meet the other person. If you get a phone call from a potential seller who says “Hey, I wanna sell my property at 123 Main Street”, and you ask some basic questions and you get some information and it sounds like it could potentially be a good deal, you say “Great, I’ll meet you there tomorrow at noon and I’ll take a look and we can talk.” What should you be doing between that moment and the next day when you actually meet the seller – there’s a whole bunch of preparation that goes on there, and it starts at the highest level, which is “What’s the market like? Is it a buyer’s market, is it a seller’s market?” That will give you some indication of how much leverage you have in that negotiation. What’s the inventory like? That tells you how much competition you have. Is that seller likely calling 30 other investors, or are you the only phone call they’ve made?

Then investigating the neighborhood – everything from “Where is the house located?” Is it on a busy street? Is it near an airport? Are there train tracks running behind it? Then even down to the house level – drive by the house before you meet the seller. Does the neighbor have chickens living in the yard? Does the neighbor have loud barking dogs? Go in the middle of the night; is there a lot of activity in the middle of the night? Are people out and about? Is there drug activity on the street? Stuff like that. That will give you the information you need so that when you go and start talking to the seller about actually buying the property, you know what you’re buying, you know how much it’s worth, and you’ll soon know what type of leverage you have over the seller.

For example, we once bought a property where there was a train running through the backyard. We were looking at Google Maps and we saw the train tracks. We did some investigation and we found out that the train only runs basically in the middle of night. 3 AM, every night, it passes the back of that house. If we wouldn’t have done that investigation, we’d have no idea that there was a train that ran behind the house.

Then when we went to talk to the seller, we were able to say “Hey, we know there’s a train that runs behind the house every night at 3 AM. That’s gonna make it more difficult for us to sell the property after we fix it up, so how are you gonna compensate us for that negative aspect of your house?”

So doing that type of research gave us some leverage to go to the seller and say “Hey, we know there’s something negative about the house. You’re gonna have to compensate us for that. You’re gonna have to give us some concession for that negative.” That’s type of research that allows you to have a discussion with the seller, that puts all the information on the table and allows you to get concessions and allows you to get compensation for the negatives.

Joe Fairless: Getting a little granular on that particular example, how do you put a price point on a train at 3 AM behind the house?

J Scott: Well, the nice thing is if there’s a train running behind that house at 3 AM, it’s probably running behind all the houses in that neighborhood, and it’s probably running behind a lot of the houses in the adjoining neighborhoods. So you can look at comps and you can see, are these houses selling for 5% less than other houses in the area that are further from the train tracks? Or maybe there’s no price difference at all, but even if there’s no price difference at all, the seller doesn’t necessarily know that you can still use that as leverage, you can still use that to get concessions. But typically, looking at comparable sales in that neighborhood or other neighborhoods that have the same proximity to the train tracks (or whatever the negative is) will give you an idea of what that particular thing, what’s the discount you’re looking at based on that particular thing.

Joe Fairless: In my mind we’ve got two categories, and perhaps this shouldn’t be this way, but we’ve got two categories. You’ve just described how to prepare for a meeting so that you know what you’re buying and you do have leverage – or you identify if you don’t have any leverage based on your findings… So that’s one category. But then the other category is what you’ve mentioned earlier, and that is people want to be liked, accepted and feel important, so really it’s about the person, not necessarily the opportunity… And this is just how I have it broken out in my mind, and in my notes, as I’m listening to you.

So you just talked about the actual opportunity, but then what about the person? How do you prepare for being liked, accepted, or having them like you, them feeling accepted and important, so that you do build that rapport and they want you to succeed?

J Scott: There’s a whole bunch of ways. A lot of people look at negotiation as “It’s all about business.” What I like to say is that it’s not about business, it really is personal. Business in itself is personal. The biggest reason somebody is going to do something nice for somebody else is because they have a personal relationship with that person, and whether that relationship is “We’ve been friends since high school”, or “We’re worked together for the last 10 years”, or “They came into my house yesterday and we had a great conversation and they were really nice.” If you have that relationship, people are going to want to do something in reciprocation.

It doesn’t necessarily mean you have to be best friends for the last 20 years. Just sitting down at a kitchen table, having a cup of coffee, talking about kids, talking about where you went to school and where you worked, and finding things that you have in common can go a long way towards building a basis for a relationship that will make the entire negotiation process a lot easier.

In terms of specific tips, a few things that I like to say. One, there are a lot of investors who like to negotiate over the phone or over text message, because it’s easier; you don’t have to have a hard conversation with the seller or with the buyer, face to face, but in actuality it’s just as difficult for the other party. If you’re gonna throw out a low-ball offer, it’s really hard to do that face-to-face, but by the same token, if the seller gets a low-ball offer face-to-face, it’s hard for them to look you in the eye and say “Absolutely not.” It’s easy for them to say “That’s ridiculous” over text or over e-mail or even over the phone, but when you’re face-to-face it’s hard for you to throw out a low offer, but it’s also hard for the other person to reject that offer. So getting face-to-face is really an important part of the process. It gives you some leverage, but again, it allows you to build that rapport.

If you’re talking to somebody over the phone and you never see them, you’re less likely to feel attached to them in some personal way than if you’re sitting at the kitchen table or the coffee table, drinking a cup of coffee and talking about family. So I talked a little bit about asking questions, talking about them. People like to talk about themselves. Doing little things for people.

You mentioned the book that we’ve just released on negotiating, and I talk a lot about what I call concessions. Concessions are a whole pot filled with things that make up the deal, and you give some and you take some, and you divvy up the concessions. One thing you can do that really can help a negotiation is you make a concession upfront; you give something. People have this innate need to reciprocate something that’s been given to them.

Here’s a good example. Have you ever received in the mail a request for a donation from some company, and they include a little sheet of return address labels for even a nickel? I’ve started seeing [unintelligible [00:17:48].20] of literally a nickel. There’s a reason they do that – they do that because they know you’ve now received something, and you have this innate need to now reciprocate, and what they’ve found is they can literally hand you money and it’s gonna be beneficial for them, because they know that they’re gonna get something much bigger in return.

That little idea of “I gave you a gift, now I expect something in return” is huge. So if you wanna build what’s called “capital” with a buyer or a seller, one great thing you can do is you can give a little concession. Buy them a cup of coffee; meet them at a restaurant, pick up the check. Go to their house with a little gift. All of these things will basically not just ingratiate them to you, but also provide the sense of obligation back to you. That’s not something I invented, that’s actually a well-known psychological product of persuasion, but it’s very useful when working with buyers and sellers in the real estate world. These little things, these little tips can add up and really tip the scales of leverage in your favor in the negotiation.

Joe Fairless: I practice those tips as well, and thank you for mentioning the law of reciprocity. That’s a big one, when we give them something proactively, because… I think it’s The Power of Influence; I think that’s the book that I read it in, by Robert Cialdini. He talks about it in there. This is just scientifically proven; this isn’t us just waxing poetic. Study after study proves this, that when you do give something initially, they do feel compelled to give something back, but here’s the kicker – as you said, when you give back, after receiving something, you tend to give back more than what you received, and there’s a disproportionate return there. So in a deal, when you give them something upfront, then you can almost expect to receive something disproportionately bigger coming back your way.

I wanna ask you a question about — after you set up the meeting but before you meet them, you do the preparation on the market inventory, the neighborhood, the house… Do you do any preparation on the person?

J Scott: Absolutely. That’s one of the nice things with social media these days – it’s really not too tough to do prep and reconnaissance on people. Everything, starting with a simple Google search, you can find out things like – let’s say it’s a seller – where does the seller work, maybe even how much money does the seller make; you can find out how long they’ve owned the property, you can find out probably how much they owe on the property or at least how much their mortgage originally was, and you can do the amortization schedule yourself.

You’ll probably find family pictures. You can find out if they have kids, how old they are, you might find out their sports affiliation; you can find out, “Hey, he’s a Boston Red Socks fan.” You’re a Boston Red Socks fan? Great, now you have something to talk about. You can find out where they grew up and where they went to school. Hey, you know somebody who went to that school? Again, you have something to talk about.

LinkedIn is a great resource. Perhaps you know somebody that works in the industry they work in. How many mutual first connections do you have on LinkedIn? Realtor.com – go on Realtor.com and you can find out when they bought the house, what was the condition of the house when they bought it, you can see pictures of the house when they bought it… So you walk in and you realize, “Wow, the house has been trashed in the last three years since they’ve owned it. Probably something’s going on there.”

You can do things like Facebook, Instagram, Twitter; you can find blogs. I tell a story in our book about how we literally had a deal where a seller came to look at one of our properties, and they made an offer – it was a low offer – and we were thinking about accepting the offer, because the house had been on the market for a month or two and we were getting ready to drop the price… But before we did that, my wife, who is probably the best I’ve ever met at Google-stalking people, she starts looking around. She finds this person’s Facebook page – this was a couple years ago, before people started making everything private…

She literally found a Facebook post by this woman that had looked at the house, and it basically said something to the point of “Was on a house hunting trip…”, we found out that her fiancée lived in Wisconsin and was getting to move to Maryland, where the house was. And the Facebook post was something like “We’re getting ready to give up on finding a house on this trip, but we think we’ve found the perfect house. We’ve made an offer, we’re just waiting to hear back from the sellers. The house is really close to”, and they mentioned the name of some person.  “We could be neighbors!”

So we see that Facebook post, and the first thing my wife thinks is “This person really wants this house.” It was obvious that they were getting ready to give up on finding a house on this trip; they found this house, it’s near a friend of theirs, so instead of basically going back and giving them a big discount on the house and making a counteroffer that was close to their offer price, we actually went back and made a counteroffer close to list price, and we got it. They accepted the deal… Simply because they went and they posted on Facebook how much they liked this house and how excited they were, and we found that post, we could use that as leverage. And people do that all the time. If anything, we’ve found that we’ve been on the receiving end of that a few times.

We have a blog, 123Flip, and for the first several years we posted all the pictures of our properties and all the numbers, and we actually found that there were a couple buyers who came and looked at our properties and actually found our properties on our blog, knew exactly how much we bought the property for, knew exactly how much we rehabbed it for… So that time of personal reconnaissance using social media, using Google, can go a long way towards helping you build a profile of your buyer or your seller, and then figuring out where the pressure points are, figuring out the motivations, figuring out the points of leverage you have over those people when you’re negotiating with them.

Joe Fairless: J, this has been an educational conversation, that’s for sure. I’ve written down a lot of notes. Where can the Best Ever listeners get in touch with you?

J Scott: I am on Facebook and Twitter, @123Flip, my website, 123Flip.com, and my e-mail, J@123Flip.com. For anybody that might be interested in the book we’ve just released, it’s called The Book On Negotiating Real Estate – feel free to check out NegotiatingBook.com. You can download a free chapter there, and it’s also available on Amazon.

Joe Fairless: Outstanding. I will be getting that book. J, thanks for being on the show, talking about how preparation is so important. That’s really the focus of our conversation today – being prepared, not only to speak to the individual, and the search that you need to do prior, and you gave the story about the social media stalking that your wife is so good at doing, and how it resulted in more dollars in your pockets, as well as the preparation to do on the property itself, what’s the market (is it a seller or a buyer’s market?), what’s the inventory, the neighborhood, the train track example at 3 AM, and the house and the neighbors as well.

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

J Scott: Awesome. Thanks, Joe.

Best Real Estate Investing Advice Ever Show Podcast

JF1189: Starting Small Leads To Quick Success & Bigger Success with Dan Lesniak

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Dan is a real estate broker, developer, and author who got started by selling other condos in the building he was living in. According to him, that was a key part to his success, by starting small and building a reputation, he was able to leverage and scale to more places, doing more business quicker than had he started by going bigger. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Daniel Lesniak Real Estate Background:

  • Real Estate Broker, Developer and Author – ‎Optime Realty
  • Author of The HyperLocal HyperFast Real Estate Agent- provides detailed strategy
  • Made $500k gross in his first year as real estate agent
  • Helped hundreds of buyers and sellers complete over $250 million in sales
  • Based in Washington, D.C.
  • Say hi to him at www.hyperlocalhyperfastbook.com  
  • Best Ever Book: Awaken The Giant Within

 


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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 fluff. With us today, Dan Lesniak. How are you doing, Dan?

Dan Lesniak: Great! How are you doing, Joe?

Joe Fairless: I am doing great as well, thanks for asking me and thanks for being on the show. A little bit about Dan – he is a real estate broker, developer and author. His company is Orange Line Living. He is the author of The HyperLocal HyperFast Real Estate Agent. He made $500,000 gross in his first year as a real estate agent, and he is based in Arlington, Virginia. With that being said, Dan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dan Lesniak: Sure. Just real quickly, I started off in real estate about five years ago, and I had a great first year right off the gate. I did about 22 million in sales, 26 transactions, and shortly after that I started to form a team. Eventually, I met my wife through real estate. She also had a team, so we combined the two teams into one that we co-run with a couple different brands.

Right now we’ve got our own brokerage, we’ve got about 36 people, and we sell about 350 homes a year, so that’s a big focus of ours, of course.

The second thing we focus on is development deals. My wife has a background in new construction sales, that she did before she got in a general brokerage, and as a part of our general brokerage strategy, she’s helped a lot of custom builders do infill deals in our area. We’ve got a whole program here that’s generating lots for builders.

A couple years ago we started to realize we should become partners in some of these deals with the builders, put our own money and get our own loans and raise our own money from investors… So we’ve expanded, started to do that… We typically do 4-6 homes a year; they’re usually complete teardowns, and new construction.

That’s been going well, and of course, as you mentioned, the book came out a couple months ago and it’s been doing well; it talks about my first year in real estate, and some of the strategies I use to grow so quickly in the area… So that’s a little bit of a background of where I’ve been and what we’re doing now.

Joe Fairless: We’ve got a lot to talk about, and I’m looking forward to digging into the details… Let’s start with probably the area that you get asked most frequently, but it’s for good reason… Your first year, grossing $500,000, and 22 million dollars in sales, 36 transactions – what are the strategies that you used to grow so quickly and do that?

Dan Lesniak: The biggest overarching principle was to really focus on a process I call STP, which is Segmentation, Targeting and Positioning. Segmenting is how you divide the market up; basically, how are you gonna cut this pie that we call the market? Target is which of the segments are you gonna go after, and positioning is how are you gonna position yourself to that segment, as the person that can create value for them, and ideally the most value.

When you’re thinking about the focus you wanna have, the segment you wanna go after, it’s important to make it small enough that you can have an impact. The smaller it is, the smaller the market piece you’re going after, the easier it is to have an impact. Your energy, your time, your marketing dollars are gonna go further if they’re concentrated amongst fewer people. So it’s important to do that, and important to pick a segment that has a cohesive profile, so that you can send a marketing message that will really appeal to them.

That being said, it is possible to take a segment that’s too small. If you own 100% market share of a segment that produces four or five transactions a year, that’s not gonna be a very good business. It’s gotta be a big enough market share that if you were to become the [unintelligible [00:05:08].07] agent in that segment, that you’d be able to have a good business off it. But I feel like most agents, especially when they’re starting out, they try to go after too big of an area, or too widespread of an area. The typical strategy is they go after their sphere of influence (SOI) and that’s gonna be a very diverse, both economically, socially, geographic group. So you’re missing out on a lot of benefits there.

In my case, I decided to basically go after the buildings that I lived in at the time. It only had about 200 homes, so I started to get a few of the sales in there, and then kind of spread out into other adjacent buildings and houses.

Joe Fairless: Going after the sales and the buildings you were living in… So you were living in a condo building?

Dan Lesniak: Correct. Yeah, I was living in a condo building. It was about three or four years old at the time, so it was about the point where people are starting to outgrow their condo, so turnover was starting to happen. But yeah, initially I just really focused on 182 condos that I thought would be coming up for resale soon. I got a few clients there, and luckily, most of the people selling there were looking to move into adjacent condo or townhouse communities, so that kind of just helped me naturally spread from one building to all the buildings around the one metro stop, and then to the next metro stop, and so forth.

So it really all started with having a narrow geographic focus and specific target, and all of my marketing was positioned and directed to those people.

Joe Fairless: You have provided insights that I’ve seen Tim Ferriss talk about, John Lee Dumas on Entrepreneur On Fire – his recap of 1,000 interviews that he did with entrepreneurs, he mentioned the same thing you mentioned there, smart… It is smart, but I didn’t mean to say smart — the smaller the market piece, the easier it is to have an impact. That is initially counter-intuitive to a lot of people, myself included, because when you get started you wanna reach everyone; you wanna grow your business to reach as many people as possible, but the reality is if you start with a very specific group in mind, deliver on those expectations or exceed their expectations, then you can grow and evolve from there. Is that what you did?

Dan Lesniak: Yeah, I started out there, I probably  in that first year got close to 50% of the market share in that building. Then if you do open houses there, you’re getting directional signs, you start mailing about those success stories to adjacent areas, and now you’ve got sellers that are looking to move into bigger townhomes or bigger condos, so you can go to those areas and tell them “Hey, I’ve got the buyers…”

By starting small and really just trying to get one, two, three, four sales in that first building, I was able to have some quick success that I was able to leverage into more success.

Joe Fairless: Let’s talk about development deals. As a real estate agent and now broker, you have evolved your business, which I compare to a fix and flipper evolving their business from fix and flipping to then investing those profits into long-term rentals. So instead of you being transaction-focused – which you still do, where you sell homes, but you also have the long-term play where you’re an owner on these development deals… What was the biggest challenge that you and your wife had, evolving from transaction-based to then becoming partners on the development deals?

Dan Lesniak: Initially, it was just such a big capital commitment… The first deal we did was a one-acre home in Arlington; they contacted us, one of [unintelligible [00:09:17].26] one of the townhouses we were selling. I knew that that townhome was gonna sell quickly, so they couldn’t write a contingent offer… But I knew I’d be able to quickly sell their existing home. Then my wife said “Hey, that’s one acre. We could probably get like four or five houses out of that.” Most of the homes in Arlington are like an eighth of an acre or smaller… So we decided to buy it from them directly, so that they could move into the townhouse that they wanted, so they were happy about that… But it was a two-million dollar purchase for us, which at the time was a lot.

We didn’t have a history of development at the time, so banks options were requiring us to put 30%, 40% down, things of that nature. So it’s just kind of that first, big, initial loan was a little scary, and we just kind of jumped into the deep end…

Joe Fairless: How did you get the money? Was that your own money?

Dan Lesniak: Half of it was our money, and then we ended up partnering with one of the top two or three builders in the area that did custom homes; they put the other half of the money, and we basically became a 50/50 partner. Our role was to give input on designs and what the end product should look like, and then sell the four homes. Their role was to do the engineering and build the homes. So we each put in half the work and half the equity.

Joe Fairless: Did you pay cash for that, a million each, or did you have a loan?

Dan Lesniak: We got a loan. We ended up putting 300k each, and then a loan for 1.4.

Joe Fairless: Okay. What type of process did you have to go through to get approved for the loan? Anything noteworthy?

Dan Lesniak: We went with a small local bank. They tend to be the ones that do the investment and spec build type loans. The bigger banks and regional banks seem to stay away from that. So it was a local bank. We had to provide them with personal financial statements and a few years of our earnings and tax returns, but other than that I don’t think it was too out of the ordinary.

Joe Fairless: Okay.

Dan Lesniak: A little bit of legal work… We had to form a separate LLC with the builder, but that wasn’t too big of a hurdle either.

Joe Fairless: Have you sold those four homes?

Dan Lesniak: Yeah, those four were done about two years ago, [unintelligible [00:11:40].27] Overall, it was a really great project. We put in 300k to kind of get it going, and I think we walked away with about 480k in profit, and it took a little under three years total. Yeah, we were happy with it.

Joe Fairless: Do you take any of those profits – or maybe not those particular profits, just profits in general – and then invest in long-term real estate for you and your wife?

Dan Lesniak: We haven’t yet. We’ve bought and sold rental homes before, and typically we’ve done that through our guaranteed sale program. We have a program where we guarantee the sale of homes for move-out buyers and give them a price upfront; if they agree to it – great. If their home doesn’t sell, we buy it at that price. We’ve acquired two or three rentals through that program, so we’ve definitely used some of the profits to do that.

We haven’t really held on to any of them for more than a few years. We tend to kind of rent them, try to get them cash-flowing, but if we see a chance to sell for profit later, we do that.

So we’ve done that, we’ve reinvested some of that money into two new projects, and then the other thing we’ve added – we’ve got three different development deals going on now, but now what we’ve added, because of our success on the first one and because some of our past clients have heard about that, they’ve wanted to participate somehow… So we’ve basically gone out, we’ve raised the majority of the down payment now, and put those people in kind of like a second position behind the bank, and they a preferred return of 15%. So now we’re able to do projects of similar size, but not have to write such enormous checks to do it.

Joe Fairless: A 15% preferred return – did I hear that correctly?

Dan Lesniak: Yes.

Joe Fairless: And how long does the project usually take? Two, three years?

Dan Lesniak: If it’s one house, it’s about a year, because we have done some where you just buy one house, tear it down, build a new one. If it’s a subdivision where we’re gonna take one or two houses and try to get four out of them, that can take about two years.

Joe Fairless: And let’s go with just one house to keep things simple – one house, it takes about a year… That 15% return – that isn’t paid out once you close and start working on it, it’s deferred until you actually liquidate, and then they get the first 15%… Is that accurate?

Dan Lesniak: Correct. So if they put in 100k and it takes 12 months, we’re writing them a check at the end for 115k.

Joe Fairless: Okay, and do they have any upside on the deal, or is it just the 15%?

Dan Lesniak: No, so far the only structure we’ve used has been a straight 15%.

Joe Fairless: Okay. And when I say “just”, I mean, 15% is amazing… I don’t mean to trivialize that, I was just curious if there’s any equity participation. Okay, based on your experience, what is your best real estate investing advice ever?

Dan Lesniak: I think my best advice would be to just find something that you like and that excites you and just jump in and do it. There’s probably dozens of ways or even hundreds of ways to make money in real estate, and until you’ve done it, it’s gonna be new to you… There’s gonna be some few of the unknowns, and uncertainty… If you let that get in your way, you’ll always find the reasons why not to do something.

Real estate has the advantage of having a lot more flexibility than most investments. If the market turns on you, you don’t have to just throw up the flag and surrender; you’ve got options to refinance, restructure, change the purpose of whatever you’re doing… So there’s usually a way to make it work.

My biggest advice would be to just find something that really interests you, and learn about it, read about it, get a mentor if you can, and jump in and do it.

Joe Fairless: I am the same way, I have a similar mentality as the one you described. Pros and cons to that mentality… What’s a disadvantage that you’ve come across with having the ‘jump in’ mentality?

Dan Lesniak: Well, you might not do it the best way; you might read something wrong and make a mistake, or even lose money when you do it that way.

Joe Fairless: What about a specific example for you? Can you think of a specific example where it hasn’t worked out?

Dan Lesniak: Yeah, the biggest example for me was probably about 12 years ago, so it was a long time ago, but I started buying my first home when I was fairly young – I think 23 – and I was in the navy, so I had access to [unintelligible [00:16:40].25] financing, so it was pretty easy because you didn’t have to put any money into it… And especially back then, anybody could get a loan on 2004 or 2005.

So I bought my first home in Jacksonville, Florida. That one went up in value a lot, I think like a 25% increase the first year or two… So I bought a second one, and that was going well. Then they were building some new condos in downtown Jacksonville and I thought “Oh, I can get in pre-construction, put down a deposit to hold it, and then two years or a year and a half when they said it would be done, I could sell it and make a ton of money.” Well, it worked out well for my first two homes in Jacksonville; I made I think $65,000 on the first one, and that was having put nothing into it when I bought it… But the condo, they said it was gonna take a year and a half to build; it took closer to two and a half, I believe, and by then the market had turned, so I basically had to walk away on my deposit, which at the time was close to $40,000.

It was pretty tough to do… Their developer was pressuring me to close, and my parents actually were, too. They were like “What about that money you’re gonna lose?” In my mind, I had made money down in Jacksonville, so I was happy about that, but I was also buying a condo in Arlington at the time, so in my mind had I made money in the Jacksonville scenario, or had I not lost that $40,000, the $400,000 condo that I was buying in Jacksonville probably would have cost 500k… Because you’re really only gonna lose in a down market if you sell and don’t get back in.

So I sort of took comfort in the fact that although I was losing 40k down in Jacksonville, a) I made about that much on the first house I did down there, but b) I was buying a home to live in up in Arlington, DC area. Had the nation’s market been such that the Jacksonville home worked out, I would have paid just as much, if not more, for the home in Arlington. So that was a good lesson. I think I looked at it in a way that  was healthy, and it helped me in evaluating investments since.

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

Dan Lesniak: Sure.

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

Break: [[00:19:05].01] to [[00:20:09].07]

Joe Fairless: Best ever book you’ve read?

Dan Lesniak: Tony Robbins, Awaken The Giant Within.

Joe Fairless: Best ever deal you’ve done?

Dan Lesniak: The deal I’ve described earlier, where we bought the one-acre lot for two million and then turned it into four homes.

Joe Fairless: What’s a mistake you’ve made on a transaction that you have not mentioned already?

Dan Lesniak: I think there was a deal once where we waived the home inspection of a property we were acquiring for investment, and we ended up having to do a lot more fixes than we originally anticipated. It was the deal where we should have had the home inspection or looked a little bit closer before we made the offer.

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

Dan Lesniak: We love partnering with local charities. There’s a couple that we’ve partnered with for a few years now… Number one is Doorways for Women and Families. They help women specifically, but also families that are going through hard times get back on their feet, get into safe housing, and then educate them so that they can get out of tough situations and go on and live happy lives. So yeah, Doorways for Women and Families has been a great partner for charity.

Joe Fairless: How can the Best Ever listeners get in touch with you? What’s the best way?

Dan Lesniak: You can go to my website, LiveTheOrangeLine.com, or HyperLocalHyperFast.com – either one of those two.

Joe Fairless: Dan, thank you for talking to us about what you’re doing, in particular how you’re generating multiple revenue streams with your company, how you got started in selling homes – a very strategic approach… The segmentation, targeting and position approach, and how you mentioned “The smaller the market piece you go after, the easier it is to make an impact.” Make sure you have it large enough to actually make an impact, but be very specific and intentional, and pick a segment that has a cohesive profile, so that when you send the message to that segment, it will resonate with the majority of the segment.

Additionally, how you’re partnering with builders to develop properties, bring in money, now bringing your money and investor money, and sharing in those profits… In that one example you gave us, you put in 300k, it was the first deal that you did, it was a big ol’ one at the time, and I imagine 300k is still a large deal to you, but still relative to the amount that you had been doing in the past, 300k certainly was a big chunk, and you ended up making over $400,000 in the course of less than three years.

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

Dan Lesniak: Thanks a lot, Joe.

Best Real Estate Investing Advice Ever Show Podcast

JF1135: An Easier Way To Track Each Property’s P&L In Real Time with Raj Bhaskar

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After serving as CEO of a financial software company that was bought by Yardi, Raj co-founded and is CEO of a mobile tax app made for real estate investors and freelancers. Hurdlr can help investors keep track of how their properties are performing in real time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Raj Bhaskar Background:
-Co-founder and CEO of Hurdlr, a mobile tax app designed for freelancers
-Prior to Hurdlr, he was CEO of VisualHOMES, a leading provider of financial software for real estate owners
-VisualHOMES was acquired by Yardi Systems in 2010
-Raj graduated, with honors, from The George Washington University.
-Based in Washington, D.C. Say hi to him inside the Hurdlr app
-Best Ever Book: The One Thing


Made Possible Because of Our Best Ever Sponsors:

Fund That Flip provides short-term fix and flip loans to experienced investors. If you’re looking for a reliable funding partner, their online platform makes the entire process super easy, and they can get you funded in as few as 7 days.

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 http://www.fundthatflip.com/bestever to download your free negotiating guide today.


 

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 of that fluff. With us today, Raj Bhaskar. How are you doing, Raj?

Raj Bhaskar: Doing great, Joe. Thanks for having me on board today.

Joe Fairless: My pleasure, nice to have you on the show. A little bit more about Raj – he is the co-founder and CEO of Hurdlr, which is a mobile tax app designed for people like us, who have a business, and we need some tax help and need some financing tracking help. Prior to Hurdlr, he was the CEO of VisualHOMES, which is a leading provider of financial software for real estate owners. That company was actually acquired by Yardi in 2010. He is based in Washington, D.C. – with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Raj Bhaskar: Sure, happy to, Joe. Thanks again for having me on board. Yes, I started with VisualHOMES back in the year 2000, so I did that for 10 years and two months. Basically, it was a real estate management platform focused on affordable housing and public housing, so subsidized housing like section 8 units, for example. So we did the property management [unintelligible [00:02:16].23] of all the financials, mostly for affordable housing agencies and public housing authorities all around the country; we were in about 35 different states. We built that up to about half a million units under management, a couple million residents; we were processing around 200 million monthly rental payments.

Joe Fairless: Wow.

Raj Bhaskar: And then, yeah, it was acquired by Yardi. 1st August, 2010, Yardi has half of all U.S. apartment buildings, a great fit… All of my clients and the employees are still there, and this is about seven years ago now.

Joe Fairless: That’s impressive. That’s really impressive. Was it your idea?

Raj Bhaskar: No, it definitely was not.

Joe Fairless: [laughs] With VisualHOMES you were the CEO though, right?

Raj Bhaskar: Correct.

Joe Fairless: Okay, so when did you join and when was it founded? I think you said 2000, when you joined, right?

Raj Bhaskar: Yeah, we had acquired a very small company that had a DOS product for housing agencies. They were focused on small agencies, and my strategy was basically to focus on medium to large agencies – I called it the Housing 500 – so we built a brand new platform from scratch and built in all the housing regulations and compliance… Which kind of ties into my new venture, because taxes are not that different; it’s basically regulations and calculations and compliance, just in a different market.

That’s where I have a solid team who likes to do that kind of very tedious work. And automating that is one part, and then the second part is “How do you stay up to date?” I’ve always tried to help folks with those things, so they don’t have to go through that painful stuff.

Joe Fairless: So how do real estate investors work with Hurdlr now?

Raj Bhaskar: They use our Hurdlr app to track all the finances around their real estate investments, or if they’re landlords, to track the rents and expenses. We have a real-time income tax calculation engine built in; we built an engine that supports all 50 states and D.C., so they can see their real — I call it “true profits”, and that’s revenue or income minus expenses, minus taxes. That’s what you keep at the end of the day.

So we allow folks to do that, and you can track your P&L at the property level. So you can have multiple properties, each with their own P&L, in a mobile app, on the go, in real time.

Joe Fairless: That is necessary, especially if we don’t have our own bookkeeper/accountant who’s helping us, but even then it’s usually not real-time, at least from my experience. What are some challenges that you’ve come across?

Raj Bhaskar: It’s interesting that you point out real-time, because that was one of my pet peeves in my prior venture. I got it growing nicely, and then there’s a time in the second five years, after we built up everything, where we were doubling our financials every year, and I wanted to see indicators along the way, and I got it to where my internal controller got me the financials a week after the month closed, and that was considered pretty good. I didn’t like that; I went around for indicators during the month, so I could make sure we hit our goals. That was one of the challenges that we’ve been building our app, is “How do you get all of those things in real time?”

I think for real estate investors — we also have a few thousand Airbnb hosts who also use our app to track for their rental units that they’re hosting, and the challenge is really staying on top of that… So we try to do that in the app, to help entrepreneurs stay on top of that. It was born out of the landlord related features and real estate investors because when I was building this current venture I was married and we were living in our condo, and then we eventually wanted to settle down a bit and get a house, and then I started renting out my condo.

The first time it came for tax filing, that’s when I had to provide all this info; I hadn’t done that before, and it was pretty tedious to get everything together, find all the info, especially all the expenses you have to track along the way.

Joe Fairless: With the app, you’ve seen it from beginning to now… What are some of the main differences that you’ve implemented based on feedback from either your team or the consumer?

Raj Bhaskar: From our users, and specifically in real estate, the number one thing was doing the P&L at the property level. So if you have multiple investments, how do you show the P&L per investment, in addition to a roll-up P&L. And that’s something we had planned early on in our system, because we built a project-based accounting system at the core so you’d be able to do that, but we didn’t release it with that; we released it with just tracking your P&L, regardless of whether you had multiple properties. It was nice to see folks requesting that, so we added that in. That was the biggest thing.

The second thing I think that we’re headed into is really can we get into folks with mortgages and loans, and tracking the financials around that at a more granular level. We haven’t done that yet, but we’re getting requests for that.

Joe Fairless: What’s your exit plan for this? Is it to get bought by a large company again?

Raj Bhaskar: My approach to building ventures in general — I’m only on my second one. I don’t consider myself a serial entrepreneur, because I’ve only had one other venture. It’s only to just build value at every step of the way, an ongoing business. If you look at my last venture, the team is there, it’s still operating, all the clients are there; that’s a solid ROI for Yardi after seven years. So I like to build things that last. I couldn’t say that there’s an actual exit strategy; it’s not to say that we won’t, at some point in the future, but generally you wanna do it where it grows the value even further.

Joe Fairless: Based on your experience as an entrepreneur and someone who’s been in the real estate space for over ten years, and then most recently worked with real estate investors, what is your best advice ever for real estate investors?

Raj Bhaskar: My best advice ever for your Best Ever listeners who are real estate investors is to know your financials in real time, to know your numbers, and kind of drilling down on that. As I’ve given my background, tracking your expenses is key. It can be tedious, but there are all kinds of tools out there to make it simple. It’s something you need to do, and there are three reasons why. One is that if you don’t, you’re leaving thousands on the table, and that’s for really any size property; the bigger, the more valuable it is, you’re gonna be leaving a lot more on the table.
The second is to save time. If you value your time, and I imagine that the Best Ever listeners value their time, then you’ll be saving time, but not having to set aside a day or two when it comes to tax time to get all that stuff together.

Third reason – and these aren’t necessarily in ranking order… You’ll be able to make much better decisions when you know your numbers. That’s something that I think a lot of times when I see in real investing, a lot of it is just focused on cashflow, because you have the payment on the loan and the mortgage going out, and then your rent coming in, in certain forms. Expenses are another big bucket to not overlook.

Joe Fairless: Can you give specific examples for each of those three, just to bring it to life a little bit?

Raj Bhaskar: Sure. So I have a condo that I’m renting out, and one of the biggest expenses I have are the monthly condo fees. That’s a simple one, that you would think that everyone’s tracking and noting, but often if you’re filing your own taxes, you’re not using a professional, sometimes folks kind of skip that. It’s not the time to get lazy with that stuff, because it directly impacts your profits. When you know these things, it’s reducing your taxable income.

So condo fees are one, and then the other big one which is harder to track are ongoing repairs/maintenance. For example, my condo is about ten years old now, and the HVAC system that it came with wasn’t that great, so it didn’t last that long. I had to replace that recently. That’s something that I’m absolutely tracking and reporting on my taxes. That’s   a pretty big expense. The harder ones I think to track are the one-off that come here and there. The ongoing ones you can automate with any number of tools out there; you can link it to your bank account or credit card.

I’ve seen folks that are doing this stuff really well. I know people who have opened a separate credit card for each of their properties; they may end up having a lot of cards, but they only charge expenses to that card. That’s another system you could put in place, so you know all the expenses for that particular property. But all those expenses add up quite a bit.

In terms of time, for any new Best Ever listeners that are investors or are thinking about getting into it, I can’t tell you enough to start now, put that system in place. You’ll see at the end of the year, when it comes time for prepping for taxes that it’ll make it so much more painless. For us humans, it’s hard to establish new habits, but that’s one that’s particularly important, because you save a lot of money.

But if you have a system that you set aside a week to do your tax prep, if that’s how you like to do it, that’s fine. I just prefer to do seconds a day, basically, as it comes in, because the information is really fresh, you don’t have to remember. I have a great memory, but now I have almost an 18-month old, our first child… And man, the first two weeks… While it was great, actually, I think it affected my memory.

Joe Fairless: Permanently?

Raj Bhaskar: [laughs] I’m definitely noting things a lot more now, because at any particular moment maybe you’re lacking quite a bit of sleep, and you’re perhaps not as sharp… It’s just easier to remember these things as they occur.

Joe Fairless: Yup. That was number two, right? Save time.

Raj Bhaskar: That was number two. And number three, on better decisions, there are real estate investors who I believe think they’re making money, but they’re not actually making money. The basis is that you don’t know your numbers, and if you don’t know your numbers — let’s say you think you’re making money, then chances are you’re spending more money than you should be… It’s a natural thinking process, because you think that you’re making more money, so you’re more open to spending a little more, and that’s a problem.

You need to know where you stand; you should have your objective on what profit margin you’re trying to hit, or at least be conscious of it, and have all the numbers while you’re making these decisions. If you think about it, if you’re not tracking things along the way, now you find out the stuff at the end of the year, when you or your accountant does the filing… This isn’t something where you just make an annual decision; you wanna at least do quarterly, if not monthly, where you’re checking things. You have your ongoing personal balance sheet or your investments, where you’re just making sure everything’s okay, looking for red flags.

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

Raj Bhaskar: Absolutely.

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

Break: [[00:13:32].22] to [[00:14:30].03]

Joe Fairless: Best ever book you’ve read?

Raj Bhaskar: The One Thing by Gary Keller and Jay Papasan.

Joe Fairless: Best ever transaction you’ve done – business, real estate, or whatever.

Raj Bhaskar: I bought my house on a seven-year ARM; that was fixed for the first seven years at 2.24% jumbo loan, and the monthly is equivalent to the rent I get on my condo that’s one-third the value of the house.

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

Raj Bhaskar: I like to do two things – help entrepreneurs with their businesses, and second, I do charitable giving, but my history with that is through my friends, who are either leading events or organizations.

Joe Fairless: What’s a mistake you’ve made in business?

Raj Bhaskar: I’ve made plenty of mistakes in business. In real estate in particular, with my investment in my condo, for example, one of the best ever mistakes I’ve made was not projecting out my lifestyle changes over several years… Because initially, my investment was to live in that condo, and I bought it when I was 26. I ended up living there for 8 or 9 years, which is a record, I think, for condo living… But that neighborhood is the neighborhood that I loved at the time, I loved to party in at the time, but I didn’t project out over so many years. That location – it was a great location, but that’s not the location to be when you start settling down and not partying like that anymore.

I think that can apply to other aspects of investing, when you’re looking at your long-term goals, is it purely financial or are there other aspects to it?

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

Raj Bhaskar: I can be reached inside my Hurdlr app – we have live in-app chat; we help our users through an app chat with any of their financial issues, or tracking or tax questions, and I jump on that as well. That’s real-time, during normal working hours, otherwise as quickly as possible in off hours.

Joe Fairless: Raj, thank you for sharing your entrepreneurial journey with us. Thanks for talking about some tax tips, or really our tax approach, and expenses approach that will be best practices. The third thing that you mentioned really resonated with me in terms of making better decisions, because sometimes we think we’re making money, but we’re actually not making money, and I’ve realized that with my single-family homes. I have three houses, and about this time last year I got an accountant to track all that stuff for me.

I get property management reports, but then I wouldn’t necessarily reconcile that with the mortgage I was being paid, so now I get every month a nice, clean spreadsheet of what I’m making or not making, and it is eye-opening. I didn’t necessarily know that — one of my homes, I have a mortgage payment that’s $900; I didn’t think it would be that high. I still make — last month I made $226 on it net of all expenses, but it’s just some things that we need to pay attention to, and it is something that if we’re not doing it, then we need to, as real estate investors.

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

Raj Bhaskar: Thanks a lot, Joe. I really appreciate it.

Best Ever Show Real Estate Advice

JF1131: How To Be The #1 Brokerage Team In Your Market with Samer Kuraishi

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Samer started out as an agent doing his own thing. He never really had a fantastic mentor or coach, but still made a really successful brokerage. If you are an agent or broker you’ll want to hear how he has sold over $800 million! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Samer Kuraishi Background:
-CEO & Broker of A-K Real Estate, boutique brokerage in DC, MD & VA
-Manage a team of 40+ agents / staff Specialize in residential, development, distressed properties, commercial & property management
-As of 2012 started using online marketing, has sold over 800M+ in sales.
-#1 Team in DC 4 yrs in a row
-Based in Washington, D.C.
Say hi to him at www.zillow.com/profile/SamerKuraishiGroup/


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

Joined with me today, Theo Hicks. How are you doing, sir?

Theo Hicks: Doing great, Joe. How are you doing?

Joe Fairless: I am doing great, nice to be partnered up with you again on Follow Along Friday. How do we wanna approach today?

Theo Hicks: We have a couple listener questions, but I wanted to first hit on the main topic for today, which is about finding advisors and mentors. I know something that you talk about a lot is the fact that in order to become – we’re talking about multifamily syndication specifically – an apartment syndicator, you’re gonna either need past success in business, or past success in real estate. If you’ve got past success in real estate, obviously, you can use that and leverage that for syndicating, but if you have business success, you can also use that, but you’re also going to need some sort of tying of real estate, so that your investors know that you know what you’re doing, or have someone on the team that knows what knows what they’re doing.

Joe Fairless: And YOU know you know what you’re doing.

Theo Hicks: Exactly, yeah. So obviously, you’ve got the education aspect of it for the syndicator themselves, but it’s also good to have an advisor and mentor to leverage their experience, and also other benefits as well. I know that you have had advisors/mentors in the past, so I wanted to have a conversation around that, about where you find them, what benefits you get, how many have you had, and things like that… So however you wanna approach the subject of how to find an advisor or a mentor for real estate.

Joe Fairless: I have had three total paid advisors over my real estate investing career, and one of those three I still am paying and still work with. He is more of a mindset strategy, less of a tactical Q&A for real estate deals. I have a network around me with people who have more experience than I have on real estate deals. My business partner, Frank, has been in the industry longer than I have been in the industry. He has quite frankly more relevant experience in asset management and underwriting, so he is also someone who is on my team and we’re partners.

As far as how to find the best real estate mentor or consultant, there’s really only one way. That one way is through  a word of mouth referral. That’s it. How I found my three were not through word of mouth referrals. I’d say the first two, pros and cons, and the third one, pro… But I found him through the Tony Robbins program. I watched Tony Robbins’ Ted talk video, then I had heard from other people who I knew that the Tony Robbins program was a good program, so I guess secondarily it was through word of mouth, but no one directly said “Go talk to this person”, but it was through a program that I already heard good things about.

As far as why I say word of mouth referral is the only way – well, that’s the best way to qualify someone. If you go through someone who you already know and they’re like “Yeah, it’s worked well for me. You should check this out, too!” You can read books and reach out to the authors, you could go on Bigger Pockets and see who’s posted a lot or has insightful things to say, but ultimately, it’s important not only for someone to be qualified, but they’ve gotta have some other things as a mentor/consultant.

I want to mention a couple things on what to expect from a consultant or mentor, and what not to expect. Because a lot of times when we think of hiring a mentor or a consultant, we think of them being our knight in shining armor, and they’re not. So let’s talk about what we shouldn’t expect from them. We shouldn’t expect them to be the solution to our problems. We shouldn’t expect them to have a done-for-you program where “Oh, you sign up with me and I’ve got it all taken care of. You sit back, you hang out and just follow this thing and be semi-engaged, and you’ll be a millionaire”, because that’s just not true. If it is true, best case scenario – let’s say it’s 100% true – then when you become a millionaire through that type of program… Well, I’ll just ask you, what happens to most of lottery winners ten years later?

Theo Hicks: They lost it all.

Joe Fairless: They lost it all, or worse. Or they’re dead.

Theo Hicks: Most likely much worse.

Joe Fairless: Yeah, most likely much worse. Unless you improve yourself along the way, regardless of what chunk of money you receive, you’re gonna be back to where you started, or worse. So even if it is a “done-for-you” program, then you’re still gonna be where you were, but you’re gonna have less years of your life to figure it out. So don’t look for the done-for-you programs; if someone promises it, even if they’re telling the truth (which they’re likely not), you’re gonna be worse off.

Instead, here’s what you should expect from a program – you should expect someone to have expertise in the subject matter that you’re looking to get better at. You should expect someone who is actively doing that subject matter. If it’s a partnered investing, when is the last time they closed? If it’s wholesaling, how many wholesale deals do they personally do? Not their student… That they personally do. If it’s fix and flips, same thing. Note buying – same thing.

There should be a system, but it’s a proven system that others have replicated through implementing the system. Not done-for-you, but a proven step by step system for how to do it. You should expect to have an ally for your business, for your transactions, and most importantly, you should expect to have an ally who you can selfishly talk about what you need help with and not feel guilty for only talking about what you need… And that’s key, because some people have the mindset “I don’t wanna pay for consulting”, and that’s cool, I get it… Whatever, there’s no one path. The challenge with that thought process if you wanna achieve at a really high level is that you’re gonna need to bounce ideas off of people, you’re going to need to have questions about how to structure certain things, deals, contracts, whatever, and while you certainly should be consulting attorneys and CPAs along the way (where they’re relevant), there’s gonna be some grey area for stuff that you just need help with on that particular stuff.

When you continue to go to one person who you’re not paying, then there’s not gonna be that value exchange, unless they’re just incredibly nice; maybe they’re older, they’re just looking to give back, or maybe they’re a family member… That’s different, right? Family members are probably gonna be more willing to do this, but eventually you’re gonna hit a point where you’ve exhausted all of your karma points or the outreach that you can do and they’re gonna be wanting something in return, or you’re gonna turn them off and you’re gonna hurt that relationship.

So when you do have a consultant or a mentor, you pay them, or you give them a part of a deal or however it’s structured, and that allows you to selfishly ask them “Hey, what do I need to do right here?” and just keep asking them, because you’re compensating them.

Then the fourth thing would be connections. You should expect to receive connections from the consultant or mentor. Real estate is a relationship business; it’s about people, it’s not about transactions. Everyone who’s in it for the long run and who has success in the long run gets that. I just finished a book by Sam Zell… I’ve mentioned it before, but I just finished it now; it’s called “Am I being too subtle?” and he talks about how he always sets up his business transactions so that people want to do business with him in the future; therefore, if he can get something at a price that he knows he’ll make a lot of money, but the other person won’t make any, he’ll actually decrease the amount of profit he gets so that they win a little bit, he wins, and they wanna continue to do business with him in the long run. And that’s the way to approach business, and life in general. You will just be a happier person.

So to recap, the four things to expect from a consultant or mentor. One, expertise on the subject that you’re doing, and make sure that they’re actually doing it. Two, they have a system for doing it, and others have replicated those results; that’s something Tim Ferriss talks about a lot – it’s one thing to be an expert and to have an accomplished background in whatever your profession is, and it’s a whole other thing to actually be able to replicate those results for other people; so a system for doing so. Three, having an ally who you can selfishly ask a bunch of questions to and not feel self-conscious about not giving something back, because you are giving back. And four, relationship or connections. So those are the four things to expect.

What not to expect – a knight in shining armor. They’re not someone who is going to just magically wave a wand — now, I’ve turned the knight into a wizard, I realize that… But magically wave a wand and then it’s done. Just don’t do the done-for-you programs. If they just say “Oh, you just pay this much and it’s pretty much you sit back and be done” – don’t do that. Because even if it does work, you’re gonna be worse off in five years than you were when you began.

So going back to how you find it, the one way – a word of mouth referral, and if you don’t know someone who can provide you a word of mouth referral, then guess what, you’re not ready for a consultant, because you haven’t done your legwork on having enough of a network to be integrated or evolved in that industry. If you don’t know enough people in that industry where people can say “Oh, you should work with so-and-so”, then you’re not ready for that mentor step anyway; you need to work more on the foundation of the business, learn more about the fundamentals and attend more meetups and attend more seminars and conferences about whatever you’re focused on.

Theo Hicks: So after they do that, they kind of get their education and they’re working on their network, would that be the time they get a mentor or an advisor, or should they have done a couple of deals first, like smaller deals, or shadowed on deals? When do you think would be the ideal time to find an advisor? And you can say based off of when you found your first advisor…

Joe Fairless: Yeah, once you know the fundamentals of the business… If you’re asking questions to the advisor that can be easily found through a Google search, then you’re not ready. But if you’re at the point now where it’s like, “Okay, I get it, and I’ve got the following things working for me; I’ve got two-three things”, maybe you’ve got some money, but need help finding the right market, or you have the right market, you just need help getting access to more money, but you know how to run the numbers, you know the fundamentals, then I’d say it’s time.

Basically, one of my favorite books is “The road less traveled” by Scott Peck, and he’s a psychologist… There’s a whole series – The Road Less Traveled And Beyond, Further Along The Road… He got a little carried away on the title… But he talks about when you need to see a psychiatrist, and this is relevant to what you’ve just asked. When you need a psychiatrist is when you feel stuck; when you’ve done what you can do, but you’re just stuck. That’s when it’s time to bring on a professional or an expert in the area to help you out. So that’s what I would say.

Theo Hicks: [unintelligible [00:13:35].00] Something I really liked about your mentor now is that he’s very outcome-oriented. If you have a specific outcome in mind – you know exactly why you wanna have a coach, because you wanna have this outcome, that’s quantifiable and specific, then maybe that’s also another sign that you’re ready to have a mentor… Versus, “I wanna be a real estate investor, and I’ll get a mentor just because I’m supposed to.” My point is don’t just do it just because you think you’re supposed to; have an actual goal in mind as to why you’re getting this person, so you’re not wasting that person’s time, wasting your time and your money, when they could be spent on actually getting education elsewhere, doing your first deal, or whatever it is.

Joe Fairless: That’s a great point. For every one of my calls where someone applies to my consulting program, at the beginning of the call I always say “I wanna make sure we accomplish whatever you’re looking to accomplish on this call, so what is outcome for our call?” And I do that not only for people that apply, but then outside of that for other types of business calls. I make sure that we accomplish the outcome that they want to accomplish, and then if something works for us, it does; if it doesn’t, whatever. I help someone accomplish their outcome, we got to know each other, and then we’ll just go on our separate ways and everyone’s happy. Two thumbs up.

Theo Hicks: Cool. Alright, so now we’ll move on to a couple of listener questions. We’ve got Nick, who asked this question actually last week on Follow Along Friday. He wanted to know what is a better investing strategy between being leveraged versus having the entire property paid off? So I guess that’d be buying it all-cash up front.

Joe Fairless: Well, it’s clear that having leverage you will have a better cash on cash return. That’s obvious. However, I don’t think it’s a matter of a black and white debate on it, because the numbers are numbers… That’s why there are loans, to help you have better cash-on-cash return; I think that’s why there are loans, but that’s one purpose loans serve. The real question is what type of risk-tolerance do you have and what’s your investment philosophy? Because that ties into if you should buy all cash or if you should have a loan and have some leverage. Or a third option, have some leverage and then just aggressively pay off the loan. It’s a matter of your risk tolerance.

I can tell you that after speaking to people who lost it all in 2008 on my podcast, a lot of those people are now buying houses in cash and not having loans, and they went the complete opposite of the extreme they were at before, and perhaps there’s a middle ground they should be doing… But there’s something to be said about being able to rest at night knowing that regardless of what happens, banks don’t have anything on me, because I own all my properties free and clear. And again, it’s not about returns, because that’s not a debate. You get better returns with leverage, and the tax benefits, because you write off the interest, and some other things.

Theo Hicks: And the mortgage pays down from the actual residents… That’s one of my favorite aspects of having a loan – they’re paying down the loan.

Joe Fairless: They’re paying the loan for you. So there’s not a debate on that, it’s a higher level question of “What’s your risk tolerance?” because there is more risk when you have a lender; there is. And with that risk tolerance, what do you choose to do? Right now I can tell you all of our apartment communities obviously have a loan on them, because that gets the returns that we need just to return to our investors and to have successful transactions. If we paid all cash for the deals, then we would be making whatever the cap rate is, right? So 5%, 6%, 7%, or whatever that particular deal is… And that just doesn’t work. So we do leverage for apartment communities.

For my single-family homes – I do have loans on them, but I’m wrestling with this question myself on my single-family homes. I only have three houses, and I could pay them off; I haven’t yet, and I don’t know if I will or won’t. Financially, it’s not a smart decision to pay them off, but from a peace of mind standpoint, it’s kind of nice. So that’s really the question, and those are the things to think about.

Theo Hicks: Something else I’m thinking right now, and let me know what you think about this – if you do also have them paid off completely, and let’s say the market is to take some sort of dip, then not only are your properties themselves safe, because you’ve done a loan on them, but then you have access to all that equity, all the properties around that area, that people are potentially getting foreclosed on or can no longer buy those properties… So you can take a loan against your property to buy those properties, and then get a loan at that point. I guess the fact that you have access to that equity still, that you can if you need to and you want to take a loan against that, or [unintelligible [00:18:54].07] whatever you wanna do, you have that option too, whereas… Technically, you have it if the loan is depending on how much you’ve paid it down, but you definitely have access to equity if you pay it off completely.

Joe Fairless: One asterisk on that would be if the market tanks and you own them free and clear, it’d be more challenging to get a loan on your investment properties. So one thing you could do in that scenario or planning for that scenario if you do pay them off but you’re thinking about doing that, is talk to a credit union and see if you can get a line of credit and use those free and clear homes as collateral, and do that when things are nice and rosy. That way you’ve got this access to a line of credit. Now, the line of credit could disappear at any point in time from the credit union if things go South in the market, but at least you’re planning a little bit ahead to leverage that equity without actually tapping into it prior to something bad happening.

Theo Hicks: Yeah. The next question is from City Park Properties. He asks–

Joe Fairless: He or she.

Theo Hicks: He or she asks “Can you explain the difference between a broker who can offer off-market deals and a real estate agent”, who I’m assuming will only offer the on-market MLS deals?

Joe Fairless: He or she.

Theo Hicks: He or she. [laughter]

Joe Fairless: Do you wanna take that one?

Theo Hicks: From my understanding, as you create relationships with brokers, they’ll have their on-market deals, but obviously those deals were off-market when they got them… So if you have a relationship with brokers, you’re gonna have deals sent to you before they actually go live. From my understanding, the difference would be not necessarily the person themselves – because they would be doing both at the same time – it’s just how much of a relationship do you have with this person, or how much of a reputation do you have as an investor, that they would be comfortable giving you this deal before they actually put it on the market.

Now, I’m not sure if there’s brokers that just do off-market deals and that’s it, I don’t know, but from my experience so far, that’s what I’ve found – they’ll have on-market deals obviously, but if you know them well enough, you can get access to that beforehand. I also know for smaller deals, if you’ve got the pocket listings – that’s a well-known thing, where if you know an agent, they will have a deal that they don’t put on the market because they know that you’re interested in… I guess from personal experience, two of the three properties I bought were off-market, and one was on-market.

Obviously, that same real estate agent had five deals – two on-market, and three off-market that he wasn’t ready to put on market yet, probably for tax purposes for the seller, or something… But just the fact that I knew that guy was really the only reason I got these properties. If I didn’t know who he was, I wouldn’t have seen him posting on Facebook and I wouldn’t have had his phone number to reach out to him, call him and say “Hey, I wanna see this property and I wanna learn about the other properties off-market.”

Basically, the difference is “Do you know them or not?” and “Do you have a good relationship with them?” And if you do, you will have access to more deals that you would if you’re just some random guy that they don’t know.

Joe Fairless: Nailed it. Completely agree.

Theo Hicks: Alright, so that wraps up the main topics, the listener questions… Next, we’re gonna move into just some updates and observations from the past week. Do you have anything for your business, updates or observations?

Joe Fairless: Yeah, just closing approximately 5th December on the 304-unit. We are closing out our due diligence; we’ve been doing due diligence, and everything looks good. Really, we’re sending out the private placement memorandum to investors most likely today or tomorrow; that got finalized. Then we’ll just begin funding, and everything’s good; we’re all good there. As far as other property updates, we’re exceeding our rents from our projections across the board on every one of our properties, so things are going well… Nothing really stands out.

I mentioned I finished the book “Am I Being Too Subtle?” and now I’m reading a book from the 1970s called Coma, and it’s like a psychological thriller, so it’s not in the same genre as self-improvement, but I do recommend Sam Zell’s “Am I Being Too Subtle?” He does a really good job of putting you in the deal while it’s happening, even though it’s already happened, and he gives you his mindset for why he structured a deal a certain way, and this isn’t just real estate deals, it’s larger deals. He talks about losing 100 million dollars of his own money, plus  millions and millions – he doesn’t mention how much – of investor money on a cruise line venture that went South after 9/11.

He talks about having to file bankruptcy for the company that owned the Chicago Cubs and Chicago Tribune and some other entities… So he talks about failures, and he also talks about a lot of success, and how he structures an organization based on meritocracy, versus just tenure, or whatever. It’s what have you produced, and how he expects his employees to be entrepreneurial. He’s a billionaire, and it’s important to at least – when a billionaire talks – to hear what they have to say and then decide if it’s relevant to your or not. As a real estate investor, I recommend other real estate investors read this book, because it is a lot of relevant stuff.

Theo Hicks: Nice, cool stuff. My business – I’ve got one lesson learned about boilers… It’s a lesson first, so whenever I buy a property or look at a property, before I even put it under contract, I’m gonna have this new guy that I met come in and at least look at the boiler and then look at individual radiators in the units.

Joe Fairless: Can I guess the price?

Theo Hicks: Yeah, guess.

Joe Fairless: $4,500 to replace the boiler.

Theo Hicks: No, it’s more than that.

Joe Fairless: $9,500.

Theo Hicks: I know someone who sent me a quote that they got back in 2013, and it was $8,100 to replace his boiler, but the guy that I had come in – but I think that was just for the actual material, not including labor – said “Expect between $10,000 to $15,000 to replace the boiler.” Another lesson is you have to do maintenance on it once a year; at least inspect it, clean it up a little bit.

He was telling me a story — I’ll get to my point in a second, but he was telling me a story about how he’s working with a church right now that bought a brand new boiler for like $25,000 five years ago, and they didn’t inspect it or anything, and I guess whether it’s condensation or leaking, it basically just disintegrated because it so corroded, and so they had to replace a brand new boiler that they bought five years ago for $25,000. Obviously, they were doing [unintelligible [00:25:44].25] to raise the money, and things like that.

So I’ve got three boilers in the three of our properties, and the story goes one of them was leaking – I saw a leak on the ground during inspection, so in the inspection report or the inspection addendum we had them fix that. And they went in there, and I thought it was fixed, but it wasn’t… So another lesson is make sure that they actually fix what they’re supposed to fix. And it took them months to actually address the issue. Lastly, they finally went in there to fix it —

Joe Fairless: Who’s “they”?

Theo Hicks: The sellers who I bought the property from.

Joe Fairless: Oh, but you’ve already purchased it and the seller is going back in there to fix it?

Theo Hicks: Yeah, they’re going back in there to fix it.

Joe Fairless: So you closed without them fixing it, but they said “Hey, we’ve got your back. We’ll come fix it after closing, don’t worry, Theo”?

Theo Hicks: Exactly. Which at the time I thought, “Oh, how nice of them”, but now I’m thinking that they did this for a specific reason, which I’ll get into in a second. So they’re bringing their contractor… It was basically — they just cut these pipes and then they replaced them. And they go in there, and I guess they had to refill the boiler with water, and then go to each of the individual radiators and bleed them, because apparently it’s under pressure, so there’s air in there; they’re bleeding all the air out, so that water can circulate through.

And they go to the first radiator they open up, they take it off, and there’s like this long pipe that’ll go up and down with [unintelligible [00:26:58].10]. He sent me a picture of it, and it looks like something that you’d find on the sunken Titanic, it was so corroded and rusty… So he said “We can’t even touch this. This is such a hazard, since the boiler under pressure could explode at any time.” So we can’t touch this, you have to get it replaced.

I was in there yesterday and they went through all the individual units, and there’s probably three or four radiators per unit, and luckily only two of them were Titanic status, so they’ll have to fix those. But the boiler itself is so old that they told me “You need to start saving up money to replace them.”

So the lessons learned are having an inspector come in there and look at the boiler and all the individual radiators before buying a property. The boiler contractor that I was working with, he also owns properties, and he said that you can actually get the sellers to do that inspection separately from the regular inspection; they had them paid for it. I’m not sure if I’ll do that or not, but I’ll definitely have them looked at. He offered to actually do it and come in and look for me; he was a really nice guy.

Then also, obviously, if you have something on the inspection addendum, make sure that you have it addressed before closing, because they might not be doing it because they know that you’re opening up a massive can of worms. If they would have addressed that issue prior to closing, we would have found out that replace a couple of radiators, and the boiler potentially needs to be replaced, as well.

The silver lining here, from my perspective, is two things. Number one, I’m glad we’ve found this problem now and not in the middle of winter, because I don’t even know what people do if their heat goes out in the middle of winter, because you’re obligated by law to obviously provide heat.

Joe Fairless: You’d be riding up there with portable heaters, you’d buy a CVS.

Theo Hicks: Or putting them in a hotel.

Joe Fairless: Or putting them in a hotel, yeah.

Theo Hicks: So that was number one lesson, and I guess silver lining. And number two was I hadn’t looked at the other boilers in the other properties, and they were in much greater shape than this boiler… So I’m still gonna have to go and inspect each individual radiator, because obviously if the owner neglected the radiators in one unit, I’m expecting it to happen in the other units, and we’ve already had complaints about the boiler not working in one of the buildings… But yeah, fortunately the only boiler that he believes I’ll need to replace any time in the near future is in the one unit, whereas the other two are newer. So boilers are interesting…

Joe Fairless: To find the right inspector, what should a Best Ever listener search for, who should they ask to inspect the boilers? Because you said you already had it inspected, but it wasn’t sufficient.

Theo Hicks: So I asked the HVAC guy that was with me yesterday, I asked him “How did my general inspection not catch this?” and based off of what was involved to do the inspection – it wasn’t much, but it involves moving furniture, and pulling off the radiator. He said that most inspectors just don’t do that. Some of them might, some of them might not, so I guess one thing to do is that when you’re doing an inspection, if there is a boiler in the actual property, ask that inspector “Hey, can you look at the boilers? Do you have previous experience looking at boilers?” Or you can just get a boiler inspection from an HVAC company. So google “HVAC service city-name”, and then call up and say “Hey, do you have experience with boilers? Do you do maintenance on boilers? Do you inspect boilers?” and then go from there.

According to this boiler guy – he could just have been selling me, but he said to me “Not a lot of people look at these things anymore.” I’m so glad we found each other… Because I just found him just because of the issue with my property, and he was just the guy that the seller found. So I kind of just got lucky by finding this guy.

If you need to find someone, either ask the inspector who’s going to do your general inspection if they can look at the boiler and if they know how to look at boilers, and if not, just find an HVAC company to do a separate inspection.

Joe Fairless: Okay. Good lesson. It sucks for you, but good lesson. [laughter] In the long run it will be a good lesson for you, and everyone, for sure.

Theo Hicks: It’s one of those things where you kind of have to go through it to understand, unless you’ve read a book somewhere where they talk about boilers… Because I wouldn’t even think about looking into the boilers or having the boilers inspected. I was like, “Oh, I guess they just work, because people are living here.” It’s little things like that that you don’t think about that could be costly.

And the other lesson is make sure you get them ongoing maintenance once a year, because they can last 40-50 years if you do that.

Before I wrap up, one last thing that we wanted to start doing is that we’ve got the Best Ever Facebook Community, and each week a [unintelligible [00:31:15].18] or social media guy will post different business-related questions, that will have interactions with people, and it’s also nice because you see how other people answer these questions based off of their experience, and kind of just get to know each other.

So we are going to answer these questions ourselves on Follow Along Friday… This week the question – we’ll call it the Best Ever Facebook Community question of the week – was “What is your favorite morning routine for daily success and productivity?”

Joe Fairless: What’s yours?

Theo Hicks: [unintelligible [00:31:44].14] I was having trouble with having a morning routine, because it was more of like individual routines that had a kind of — I would do one, and that would be done and I’d have to will myself to the next one, and the next one, and the next one… So I wanted to find a way where I could just have one trigger that would automatically make me do all of my routines so I don’t have to think about it.

Something I’ve been doing for the past month – and this is at night, but then I review it in the morning… But I literally write out what I’m gonna be doing the entire day. “I’m gonna wake up at this time, and this is what I’m gonna do. At 8 o’clock I’m gonna do this, at 10 o’clock I’m gonna do this. Then at noon I’m gonna have a lunch…”

Joe Fairless: And that’s working for you?

Theo Hicks: It works really well, and it’s evolving, because now I’ve got alarms, so whenever I’m done with a certain task, the alarm goes off and I move to the next job. I’m kind of like automating myself so that I’m not only doing every single thing that I need to do for the day… At the end of the day I go back and I essentially just journal exactly what I did right and wrong; it’s like “Okay, I said I was gonna get up at 7, but I got up at [7:30] today, but I still did everything I was supposed to do. Then I was supposed to read at 9, but I had this thing come up that I had to do instead, so I couldn’t read today at all.” Or “I didn’t go to gym today because I’m lazy”, or things like that.

So it forces me to look at my failures, instead of just skipping something I said I would do and then just not even thinking about it again. That’s been very helpful. So at night I write out my schedule, in the morning I review it, I set up my alarms in the morning and then I do it throughout the day, and I don’t have to think at all throughout the day. At the end of the day, I think again by journaling about it and trying to make any tweaks, like “Oh, set an alarm”, or whatever… So that’s my routine.

Joe Fairless: After hearing that, you realize what I’m gonna do tomorrow…

Theo Hicks: What are you gonna do?

Joe Fairless: I’m gonna call you randomly 17 times throughout the day… [laughter]

Theo Hicks: To see if I’m on my schedule?

Joe Fairless: Yeah. “What are you doing now, Theo? What are you doing now? Are you supposed to be talking to me? Aren’t you supposed to be doing something else?”

Theo Hicks: I’ll send you a screenshot of it every morning. [laughter]

Joe Fairless: Things I do every day in the morning for productivity is as soon as I wake up I have a Five Star notepad and I write 15 times “I’m a strong, confident, successful and handsome real estate billionaire entrepreneur.” I’ve been saying that as my incantation and affirmation many years. Recently, over I’d say the last 90 days, I’ve been doing that every single day, writing it down 15 times, and I’ve mentioned that on the show before.

Theo Hicks: Even on weekends?

Joe Fairless: Even on weekends. Every single day. And if I miss a day – because there have been a handful of times where I’ve missed a day – I then make up it later. So I am caught up to today for the last 90-120 days.

Theo Hicks: That’s awesome.

Joe Fairless: Every day, 15 times. “I’m a strong, confident, successful and handsome real estate billionaire entrepreneur.” I also drink a liter of water with a scoop of wheat grass mixed into it every morning when I wake up; I have a daily journal that I write in usually towards the middle or end of the day… I just write whatever’s going on that day. It’s amazing to go back a year – and at this point I can go back two years, with that daily journal; I’ve been doing it that long – and just see what I was doing, what I was thinking that day and see the progress that I’ve made over that period of time.

Then I always do some sort of exercise. Over the last 90 days or so I’ve been doing at least 50 push-ups…

Theo Hicks: In a row?

Joe Fairless: In a row, yeah.

Theo Hicks: That’s impressive.

Joe Fairless: And in my softball team, Ben, who is Samantha, our team member’s boyfriend, he’s on my team and he asked me if I was on steroids… And not because I look swole, but because I’ve hit a home run in softball the last four games in the row, except for the last game [unintelligible [00:35:28].06] But I’ve been nailing home runs, and I attribute that to my 50 — actually, I do 51 push-ups, because I wanna do 50, and I always do a little bit above, so I always do at least 51 push-ups. Then usually I do some sort of cardio, too.

So those are the things I do for productivity and to get me set for success… Every day. Every single day.

Oh, and I read at least one section in a book, whether it’s a paragraph or whether it’s just a couple pages, depending on how boring the book is. But I will always read something, and that helps build momentum for continuing to read.

Theo Hicks: Yeah. Do you wanna mention the Best Ever Conference, or any updates on interviews we have?

Joe Fairless: We might have updated guests, I don’t know. Just go to BestEverConference.com and you can see all the guests we have so far. And early bird special – you save $100 if you book between now and Halloween.

Theo Hicks: I believe we have Bigger Pockets Josh Dorkin Part I released this Tuesday, and then we have part II coming up next week.

Joe Fairless: Which is not related to the conference, so…

Theo Hicks: Oh, sorry… I was talking about the upcoming exclusive interviews; I got ahead of myself.

Joe Fairless: Okay, got it. Yes, Josh Part II is being aired this coming Tuesday.

Theo Hicks: Awesome. And to wrap up, make sure you subscribe to the podcast on iTunes and leave a review for the opportunity to be the review of the week. This week we’ve got Westin Brooks, and he said:

“Awesome podcast. As a religious listener and a first-time investor, I felt more than confident diving into the real estate world. I’ve already utilized several tips and techniques he’s discussed, and I’m looking forward to expanding. Thanks!”

Joe Fairless: Thanks with an exclamation mark.

Theo Hicks: A lot of exclamation marks in there.

Joe Fairless: I appreciate you listening, Best Ever listeners… Enjoyed it. We’ll talk to you tomorrow, and have a best ever week!

Best Real Estate Investing Advice Ever Show Podcast

JF1057: Wholesaling $4,000,000 a Year, Learn how to Wholesale Development Deals! With Raphael Vargas

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After being robbed when he first started at the age of 21, he put his head down and kept working. His hard work paid off with a $30,000 first time wholesale fee! Raphael is not slowing or stopping, his company is doing four to five million dollars in revenue this year, oh and he’s only 25 right now!! Plus Joe and Raphael do some cold call role playing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Raphael Vargas Real Estate Background:
-CEO of Ace Equity Pros, a Collaborative Real Estate Investment and Brokerage Company
-Has produced Millions in revenue and operates in 3 Major Markets.
-DC / Baltimore, MD / Tampa, FL.
-Began real estate investing at age 21 and by age 24 created a $7 figure real estate business
-They have bought and sold over $35 Million Worth of Real Estate in the past 3 years
-Based in Washington, D.C.
-Say hi to him at aceequitypros.com
-Best Ever Book: Traction

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

Raphael Vargas: Phenomenal, my friend. How are you?

Joe Fairless: I am doing well, nice to have you on the show. A little bit more about Raphael – he is the CEO of Ace Equity Pros. He has produced millions in revenue and operates in three major markets: DC, Baltimore and Tampa, Florida. He began investing at the age of 21 and by the age of 24 created a seven-figure real estate business. His company has bought and sold over 35 million dollars worth of real estate in the past three years. He’s based in Washington DC. You can say hi to him at his company’s website, which is in the show notes. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Raphael Vargas: I am an entrepreneur by trade. Like you said, I started when I was 21, really from just kind of a starting point of literally ground zero, with a heavy background in sales and communications. I’ve been in sales for pretty much my entire life. But as far as real estate, I had no experience whatsoever.

I got introduced to real estate by an individual that just literally told me “Hey, you can flip properties with no money.” I didn’t believe him, so he actually showed me some documentation, some paperwork, and then I believed him. I paid him my entire net worth, which at the time was about $3,000, and he took it and robbed me. But the blessing is — which, by the way, for all the listeners out there, make sure you’re hiring the right individuals and listening to the right individuals that know what they’re talking about.

But the lesson that I learned was just 1) to obviously choose the right individuals to learn from in coaching, and 2) he just implanted that in my mind, and that’s really all I needed to just jump into it. I had no other coaching besides that to get to where I’m at today, other than just the YouTube videos, free podcasts, free information… There’s so much ridiculous free information online out there… It’s crazy to see people in America not striving for success and actually obtaining it… Because this is America, this is the land of the free. We literally have every opportunity to be successful here – financially, spiritually, mentally and physically. It’s really a blessing to live just here in America, first of all.

That’s pretty much my background, that’s how I started – I learned about real estate, and then three and a half, four years later now, I’m 25 years old and we run a pretty successful real estate brokerage [unintelligible [00:04:56].04] in multiple markets, and we are also doing a lot of wholesaling, flipping of contracts, flipping of properties in multiple markets as well, and we have a pretty substantial team that’s dedicated to our success as a company and as a company vision.

Joe Fairless: And I completely agree with you – so many free resources out there… We have access to pretty much everything that we need in order to be successful; you just have to actually put in the work and do some stuff. I was gonna ask you how old you are, because the 21 to 24 year old thing – I was like “I don’t know if he’ll remember back then”, but I think you’re gonna remember… [laughs]

So 21 to 24 years old, you created a seven figure real estate business. Is that a million, five million? What is that figure, and tell us the specifics on what you were doing to generate that.

Raphael Vargas: Sure. This year we’ll probably do close to around 4, 5 million; close to around the end of this year we’re projected to do that. But as far as what I did to actually get to that – it’s just a ridiculous amount of failure. I mean, a ridiculous, ridiculous amount of failure. From when I started and I was 21, I was doing everything from running around knocking on a bunch of doors from homeowners… I didn’t know what I was doing, I didn’t know how to portray myself; I looked like I was 16 when I was 21 still, but regardless, I was just doing everything, and I was just a massive guerilla marketing kind of guy – knocking on doors, cold calling… I got my first deal from cold-calling and it was actually a 1.1 million dollar acquisition, a condo development in DC.

Then I sold it for 1.13, and I made 30k on my first deal. That’s when the light bulb went off, it was interesting. That was my first closed deal. It’s when the light bulb went off and I was like “Wait, I can wholesale houses – why can’t I wholesale development properties? Why can’t I wholesale land acquisitions? Why can’t we wholesale condo conversion projects?” That’s what we started doing here in Washington DC, where we’ve done really large [unintelligible [00:07:04].06] where we just get a contract with a homeowner that doesn’t understand the full potential of their property to its full maximum use.

After studying development in Washington DC, I was able to really target those properties and then acquire those properties from the homeowners for a contract and then resell that to a developer for a high profit margin.

Joe Fairless: Was it just land, in some cases? Or was it someone’s property and then selling it to a developer so they can probably tear it down and then build something much bigger and newer?

Raphael Vargas: Yeah, land and/or properties. In DC specifically there’s almost no land, it’s all property, because it’s a very small and very congested city. But it’d be a row house sitting on a longer lot, where you can bump it back significantly and bump it up, where you can do four condos, three condos, luxury kind of area, that kind of thing.

Joe Fairless: That’s really interesting, because that is taking the typical wholesaling approach and adding an artistic spin to it, because you’re not just doing the wholesaling of a single-family house, but you’re looking at what type of development opportunities are there. You’re looking at it from the developer’s perspective, and you’re seeking out the opportunities that they would be interested in, and then you’re flipping the properties to them.

Raphael Vargas: That’s exactly right.

Joe Fairless: So you mentioned that first deal, the wholesale where you made 30k on it… How did you come up with the idea to look at it from a developer’s standpoint and flip properties to developers?

Raphael Vargas: It was from that very first deal – I analyzed it and then I was really pushing the deal, because I knew financially it made sense. I didn’t have many buyers, but I did have one great buyer relationship from a gentleman, and he was a developer in Dubai; a very wealthy individual, he’s actually the vice-president of Climate Control for the United States, and he’s really close with Richard Branson, things like that. He just really inspired me, and he kind of taught me how to put on my developer lens and hat.

After understanding it from him and selling the first deal to him and successfully closing on that, that’s what made me kind of understand their perspective. Then I just wanted to learn more, and after I closed that deal and a few more single-family deals, I paid one of my developer buddies to spend a day with me and teach me the zoning restrictions, zoning codes, setbacks, frontage on specific condo zoning, FARs – understanding all of that so that I can start teaching our acquisitions team on exactly how to analyze the property once they come across it to its maximum ability. That’s what we did.

Joe Fairless: That’s fascinating. I’m really glad we went this direction on the conversation. What’s FAR stand for?

Raphael Vargas: FAR is floor area ratio, and there’s always an FAR, depending on where you are. For example, if your FAR is three in a specific zoning code, and let’s say your lot size is 1,000 square feet, that means that you can build buildable square footage of 3,000 square feet. So you would multiply your FAR by your lot area, and that’s what you would get for your buildable square footage.

So we would understand that, but before, we’d look at a property and just say “Hey, this property is a single-family asset”, and we’d look at it as a single-family asset and offer a homeowner way lower than what it’s actually worth. Then we’d analyze it and say “Hold on, this is in C2a zoning, where the FAR is 3.5 potentially, where if it’s not a single-family, we can actually develop this where the height restriction is 90 feet, and we can build 10,000 square feet on this, so it’s way more valuable.” That’s how we learned that.

Joe Fairless: How did you get in contact with the Dubai gentleman?

Raphael Vargas: It was actually off of Craigslist. I was doing everything by the book when I first got into real estate. I didn’t close a deal for eight months, but I was the hardest working man I think ever in America. Days I would go not sleeping and not even eating, and I would just be like cold-calling homeowners, reading books, obsessing over this, [unintelligible [00:11:24].08] my brother, who was mentally disabled. I had a special place in my heart for my brother, because he was just really struggling… Just seeing him consistently walking around in circles… I wanted financially to take care of my family to a whole other level, which I’m still striving to do, and what inspires me every day, and my relationship with God, which also inspires me every day as well.

In the beginning, I was just doing everything by the book, and again, it said “Post on Craigslist and look for buyers”, and that’s what I did. He reached out to me, and little did I know, he’s like building hotels in Dubai, and he’s a ridiculously wealthy individual. He was just looking for some houses in DC to place his money, and that’s how I found him. We built a really good relationship to this day.

Joe Fairless: Walk us through the initial interaction and then the subsequent conversations or interactions… He responded to your Craigslist ad, then what happened?

Raphael Vargas: He responded to my Craigslist ad; very nice, humble individual. He just said, “Hey, I’m looking for investment properties. If you have anything, let me know.” It was a very simple e-mail, simple conversation. Then I told him about all of these deals, and he would say “Yeah, that doesn’t work for me. This doesn’t work for me. I’m looking for something bigger, or smaller”, whatever it is. Then we finally came across this deal, and we met and we consistently worked together on this deal, because there were a lot of issues with closing it – tenant issues, condo conversion issues… I was there helping him with those issues as well, trying to get them closed to make sure he felt comfortable. He saw my effort, and we ended up closing the deal. So it was pretty simple, and that’s pretty much how it went.

Joe Fairless: You said your company is doing between 4-5 million this year… What is that? Is that revenue, is that profit, is that something else?

Raphael Vargas: That’s revenue. Revenue as far as wholesale assignment revenue. We don’t do any fix and flips; it’s just too tedious and our goal is to expand and scale this company to closer to around a 100 million dollar company, and it’s very scalable with the model that we have. And not only is it scalable, it’s also very profitable, and at the same time it really serves all kinds of homeowners.

The way that we do so is we have an investment fund – I learned this at the beginning of this year… I started realizing how many leads we’re throwing away consistently; I was just throwing away leads, homeowners that say “Hey, I want 250k” and their property is worth 300k. Us as investors, we can’t do anything with that, but I started realizing — me and my partner Joe, who has helped me throughout this entire process and has been my journey buddy essentially through this… We started realizing and saying “How can we stop throwing these away?” What we did was we started building out a brokerage, an agent model, where we say “Okay, let’s [unintelligible [00:14:20].00] We get these leads and these kinds of people that want this price and need to sell fast; we’re gonna wholesale it, or buy it and resell it on the market, and we’re gonna close and move quickly. That will be the investment model.” And you know what? If that homeowner wants 300k and the ARV is 325k, but it’s in great condition, we’re gonna give that to the agents.

So we custom-built a CRM based upon that, and we wanted to find out ways on how we can actually expand into multiple markets and still be effective, still not lose that touch and still build culture with our people in every single market that we’re in. Because of that, we’ve built a merged business where it was the agent and the investment model. And like I said, the investment model is strictly the one that’s doing between 4-5 million (that we said), but the agent model… Right now under listings we have close to around 32 million since the beginning of this year – 30 million in listings. That’s a whole other side of business that I was throwing away, and we as investors consistently throw away.

My partner and I just became really diligent on building that agent brokerage business out, and leveraging our real estate agents as our outside sales people… And then having a call center team in our offices here in Washington DC that qualifies those leads, sets those appointments, speaks to the homeowners and says “Look, we have options for you. We’re not just some regular company that’s here to lowball you. We’re here to give you options, and depending on what you want, that’s how we serve you”, and that’s exactly what we’ve done.

Now the game is “No lead left behind. No homeowner left behind.” We have an opportunity for every homeowner.

Joe Fairless: I like that. Do you do any lease options?

Raphael Vargas: We don’t, unfortunately.

Joe Fairless: How come? Why do you say “unfortunately”?

Raphael Vargas: Actually, not unfortunately… I did lease options when I first got into real estate, because I was trying to do everything and I hated it; it’s just not for me at the moment. Maybe I haven’t really learned enough about it to see its profitability, and it could definitely be something that’s amazing and profitable, but it just hasn’t been for me just yet.

Joe Fairless: What’s been the biggest challenge creating the brokerage and having the “no lead left behind” business now?

Raphael Vargas: People. You’re only as good as your people are. And leadership. Leadership and people. Everything surrounds around leadership, and I truly believe that to a T. Every day I’m consistently trying to focus on how I can develop myself as a better leader… And my partner Joe – we’re consistently focusing on how we can be better leaders, and not just leaders in business, but spiritual leaders, physical leaders, mental leaders for our people. The more we can develop our people, the more they can be really in tune to the company culture, in to the company vision, the longer terms they’re gonna stay with us and the harder work they’re gonna put forth every single day, day in, day out. That’s been the biggest issue – people.

Now, after taking a lot of different courses… Joe and I have been to courses like Scaling Up, which is a great course for business people, and there’s things like traction coaches, and we have a scaling up coach right now… But the people are everything, and I think that was originally the first biggest issue. We had the wrong people, but that’s changed since then.

Joe Fairless: You said it’s changed since then, so how are you now qualifying people in a way that you weren’t before?

Raphael Vargas: Joe, who handles a lot of the HR stuff, he created a job scorecard, and what we do is just for every position that we’re looking to hire, we really hone in on specifically — there’s two things for somebody to be qualified for a position: are they culturally the right fit? That means “Do they fit those core values in the company?” and then performance-wise, “Are they a high performer? Are they competent skill-wise for the position?” You need to know what are those competencies and skills for each one of those positions, and then again “What is your company culture? What are your core values?” and really understand those, so that you can interpret and understand whether or not the people that you’re interviewing/sitting in front of match core value, match that culture, and also have the competency and skills needed for the position. I hope that makes sense.

Joe Fairless: It does make sense, that’s a great tip. And with “culturally the right fit for the company”, what that forces us to do is self-reflect on “What is our company culture?”, because we have to know that before we can see if someone’s a fit, and it makes us be aware of what we currently have as a culture, and “Is that what we want? and what we wanna bring people into?”

Raphael Vargas: Yes.

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

Raphael Vargas: Wow…

Joe Fairless: You knew it was coming… You knew it was coming at the end of the show, baby! [laughs]

Raphael Vargas: Yeah, yeah… [laughs] Oh, man… I don’t wanna say, because it really is the best advice ever that I’ve ever received; I don’t wanna say it because it’s so effective, but do more cold-calling. That’s my best advice ever. Do more cold-calling, step out in front of homeowners and be different… And do more cold-calling. Contact more homeowners via cold-calling. It’s a way that a lot of investors are not doing, and we significantly scale that in our company to be ridiculously effective.
We still do a lot of different marketing techniques – direct mail, online, things like that, but the best advice I got, which is from Todd Toback (California) was “Do more cold-calling.” That’s what we’re starting to do a lot more of.

Joe Fairless: And where does your team get the phone numbers?

Raphael Vargas: I can’t say exactly who it’s from, but we do skiptrace them. We skiptrace a lot of the data.

Joe Fairless: Okay… And remind me again – what’s Skiptrace?

Raphael Vargas: Skiptrace is like an investigative service where you can input information of who somebody is and their address, and then that company retrieves that information on their best contact information, their best addresses, where that person is located currently if they can’t be found.

Joe Fairless: So do you just do it like by the zip code? Because certainly I don’t think you would do by individual people and then get their information, because that would take forever.

Raphael Vargas: Of course, yeah. By zip code, that’s exactly right. We target the hottest zip codes in all of our markets, whether that’s Baltimore, Tampa and DC, and that’s how we target these people.

Joe Fairless: I just answered the phone, it’s from someone at your call center. What do they say to me?

Raphael Vargas: Hey, good afternoon. Is this Mr. Joe?

Joe Fairless: It is.

Raphael Vargas: Hey, Mr. Joe. This is Raphael with Ace Home Offer; just giving you a quick call about your property on 123 Main Street.

Joe Fairless: Oh, cool. Okay.

Raphael Vargas: Yeah, so we just bought a house right there in that neighborhood, and I just wanted to personally reach out to you to see if you might be interested in an offer on your home. We’d love to make you a fair offer on your home.

Joe Fairless: You know what, Raphael, I usually don’t do this, but I like the way you sound, so absolutely, whatever you want, I’m in. [laughter]

Raphael Vargas: That’s, that’s… I wish we had more of those.

Joe Fairless: [laughs] I got the sense of it though, yeah… What if they say “I’m not interested.”

Raphael Vargas: “No worries, we’ll remove you from the call list.” We scrape their data and not call them again.

Joe Fairless: Got it. Okay, cool. That’s great stuff. Thank you for doing that. Are you ready for the Best Ever Lightning Round?

Raphael Vargas: Sure.

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

Break: [[00:22:07].02] to [[00:23:02].12]

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

Raphael Vargas: Best ever book I’ve read… I’m gonna be cliché and I’m gonna give you two books. One is definitely for me, it’s the Bible. I use that as my guidance tool [unintelligible [00:23:13].27] the decisions that I have to make consistently. I feel like that’s the best book I’ve ever read. But on a business level, it’s gotta be in the beginning Traction changed my life when it came to business. Traction just ridiculously changed my life, changed our business. So it’s Traction on a business level.

Joe Fairless: Best ever deal you’ve done?

Raphael Vargas: A condo conversion project where we netted $300,000 on an assignment fee and we got it done in 30 days.

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

Raphael Vargas: Not following up enough, or not being bold enough with homeowners or buyers. Not being bold enough.

Joe Fairless: By “bold” what do you mean?

Raphael Vargas: Bold as far as controlling the conversations. I’ve studied a lot on sales, and everyone in our company studies a lot on sales; controlling a conversation and controlling the transaction is an absolutely necessary part if you wanna actually get a deal closed. So not being bold enough to control the conversation, control the conversation, control the transaction and put your foot down in certain circumstances.

Joe Fairless: That condo conversion project where you made 300k in less than two months – did you wholesale that to a developer?

Raphael Vargas: Yes.

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

Raphael Vargas: Best way I like to give back… For myself it’s giving back what I have – the wisdom that God has given me and the knowledge on how to build yourself as a leader. I feel like that’s my gift to the world at the moment, giving that back.

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

Raphael Vargas: They can get in touch with me on AceHomeOffer.com. They can reach out to me there, or they can also e-mail me directly at Raphael@AceEquityPros.com. Ace Equity Pros is our wholesale site where you can pick up the best deals in the DC, Baltimore and Tampa market. Ace Home Offer is the company that does the acquisitions with the homeowners.

Joe Fairless: Excellent. Well, thank you for being on the show (holy cow!), talking about your 21 to 25 year old experience in real estate, and how you’ve gotten to where you’re at now… The consistent focus on 1) hard work, 2) self-improvement and 3) being savvy. You’re really savvy, especially in terms of adding the artistic approach to wholesaling, where you’re wholesaling to developers. You used that example towards the end of our conversation with making $300,000 on the condo conversion project in less than two months, and how after you got a couple deals under your belt you sat down, paid a developer buddy of yours to teach you zoning codes, setbacks, frontage, FAR (which I now know stands for floor area ratio), and many other things… And then also how you’ve built your business, the “no lead left behind” approach, and the call center has been a major lead generator for you.

Thanks for being on the show, thanks for telling us about your business, it’s an inspiration. I hope you have a best ever day, and we’ll talk to you soon.

Raphael Vargas: Thank you!

 

 

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JF594: What an Air Force Officer Does to Invest Out of State and Virtually

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Our Best Ever guest leaves out all the excuses and takes massive action picking up mostly turn key properties using joint ventures. He brings private money to the table and focuses on the exit. Hear how he funds and sells the light rehab properties in his market!

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Jacob Elbe real estate background:

  • Officer in the Air Force and Co-Founder of True North Property Solutions with his brother, Dan
  • Say hi to him at truenorthpropertysolutions.com
  • Focus is on out-of-state and virtual real estate investing while using creative financing and partnership
  • Based in Washington DC and currently doing an out-of-state flip

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Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

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JF534:College Graduate Buys 16 Rentals in Six Cities Using CRAIGSLIST

She decided that her route to wealth would be through passive income, so she bought some rentals, and yes she did use craigslist. She also purchased these rentals in six different cities, but was confident that the numbers outside the local market would be better. Hear how she did it.

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Nicole Bryan real estate background:

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

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

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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JF484: What Your Tax Strategy Lacks in the Multifamily Space

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Ready to switch out the HVAC system on your triplex? Did you consider recording the expense? It’s time to take advantage of the tax benefits before the new year…you still have time! Hear our Best Ever guest spill tax secrets!

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Brandon Hall’s Real Estate Background:

  • CPA and owner at Hall CPA
  • Brandon leverages a combo of his Big 4 and personal real estate investing experience to save his clients thousands of dollars in taxes
  • He specializes in real estate and small biz tax and entity structuring
  • Based in Washington DC and his Best Ever book rec is How to Win Friends and Influence People
  • Say hi to him at hallcpallc.com
  • Bought his first property, a triplex, in North Carolina in 2015

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JF348: Ya Gotta Do THIS To Correctly Screen Tenants #skillset Sunday

Today’s Best Ever guest doesn’t have his title for no reason. He shares with all you landlords and non-landlords out there how EVERYTHING you need to know about being a landlord and specifically your complete process to screen tenants.

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Lucas Hall’s real estate background:

o   Chief landlordlogist at Cozy and founder of http://www.landlordology.com which gives the best tools for Independent landlords and managers

o   10 years of landlording

o   Based in Washington D.C.

o   Get the doc referenced on this call here: https://www.landlordology.com/guides/landlords-guide-tenant-screening/

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JF253: Don’t Forget These Key Things to Keep Your Tenants Happy

 Today’s Best Ever guest shares with us just how important it is to make your tenants happy. From weekly BBQ’s, to buying a dog for the building she is an incredibly creative mind who might just inspire you to do more for your tenants.

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Holli Beckman’s real estate background:

–          CEO of Apartminty, a guide for apartment hunting and she is based in Washington, DC

–          Spent last 15 years learning property management from the ground up

–          She’s held every position from leasing agent to VP Marketing of a property management company called WC Smith

–          Say hi to Emmy the French Bulldog on Instagram @2mpup

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

The Art of Commercial Real Estate Leasing– You’ve heard him here before, and now he’s back with a book you must read. Buy Craig Coppola’s book, The Art of Commercial Real Estate Leasing and learn the 19 things to look for in a lease.

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JF226: Why ONE Block Can Determine How Successful YOUR Next Investment Is

Listen up, because today’s Best Ever guest shares with us what the housing market looks like from Capitol Hill, some alternative mortgages you may not know about and what you can do NOW to maximize cash flow in the future.

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 Lorraine Woellert’s real estate background:

–          Senior Correspondent at Redfin based in Washington D.C.

–          She writes about the housing market and industry policy

–          Prior to joining Redfin, she was a reporter at Bloomberg News most recently covering      the U.S. economy

–          She is a real estate investor

–          She has appeared on Bloomberg Television, CNBC and C-Span

–          Say hi to her at https://www.redfin.com/blog/author/lorrainewoellert and on Twitter    @woellert

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Made Possible Because of Our Best Ever Sponsors:

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

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

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JF217: You Only Have ONE Chance to Make a Good Flippin’ Impression

Just how important is it to meet and know the neighbors? Today’s Best Ever guest teaches us how important the neighbors are in your next flip, how he made over ONE MILLION dollars on his first 50 flips, and his Best Ever way to grow your flipping business.

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J Scott’s real estate background:

–          J Scott is an investor specializing in residential rehabbing/flipping based in Washington D.C.

–          Completed 150+ deals since 2008, has bought and sold over $25M in property

–          Earned more than $1,075,291 on his first 50 flips

–          He is the author of the best-selling book, “The Book on Flipping Houses

–          J also runs the website 123Flip.com, which provides insight into every aspect of his real estate business

–          Used to be a professional poker player – took 2nd in largest poker tournaments in history

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 Made Possible Because of Our Best Ever Sponsors:

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

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

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JF210: DON’T Call Them Tenants! Instead, Call Them…

Today’s Best Ever guest shares with you a unique approach when to referring to tenants. An approach that will likely change your philosophy on how to think about your rental property and management of it.

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Dan Lane’s real estate background:

–        Host of the popular podcast, Rental Income Podcast based outside of Washington, D.C.

–        Wanted to own rental property so turned old house into rental and bought a new house

–        Sold house and made $100,000 on his first investment property

–        When he was 11 years old he had a TV show

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Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

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JF192: The Art of Protecting the Downside in Real Estate Investing

From protecting the downside to buying an acre in the middle of Washington DC, today’s Best Ever guest shares with you his experience and how you can apply what he’s learned to your biz.

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Ben Miller’s real estate background:

–        Co-Founder of Fundrise which is a crowdfunding platform that has 40,000 investors funding deals and over 600 companies putting deals on the platform

–        15 years of experience in real estate and finance and has acquired, developed and financed more than $500 million of property

–        He is based in Washington D.C.

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Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

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JF 73: DO THIS and Never Receive a Late Payment from a Tenant…Ever

Today’s Best Ever guest shares with us something he has implemented that resulted in never receiving a late payment from a tenant. And, you’ll learn other ways to automate the process of being a landlord so you can spend time doing more of what you want to do.

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Lucas Hall’s real estate background:

–        Chief Landlordologist at Cozy which provides free rental management software to landlords

–        Landlord for 10 years and owner of 4 properties

–        Founded Landlordology.com which has the landlord tenant landlord laws on 40+ states

–        Got started in real estate to impress a girl…now they are married

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JF 42: Top Economist Reveals Her Best Real Estate Investing Advice Ever

Interest rates, refinancing and property selection, oh my. You are in for a treat with today’s Best Ever guest Nela Richardson who is the Chief Economist for Redfin. She talks about the state of today’s economy and, more importantly, her advice on how to capitalize on it.

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Nela Richardson’s real estate background:

–        Chief Economist for Redfin (http://www.redfin.com)

–        Former John Hopkins University professor of Finance

–        Former researcher at Harvard

–        Interview guest on CNN, Bloomberg TV, CSPAN, CBS Radio and more

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