JF1441: Getting Started In 2007 Was A Goldmine with Jennifer Beadles

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Unlike 99.9% of real estate investors, Jennifer saw opportunity in 2007 and 2008. She was able to buy projects that builders were losing for pennies on the dollar, finish them, and sell them for huge profit. Inventory was everywhere, good labor was cheap, all she needed was the capital to get the ball rolling. Find out how she did it in this episode of The Best Real Estate Investing Advice Ever Show.. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Jennifer Beadles Real Estate Background:

  • Real estate investor since 2007, builder and founder of Agents Invest
  • Agents Invest is a referral service for real estate investors to connect with investment savvy real estate agents in markets across the country
  • Also has a GC license, focuses on new construction, and owns a 17 unit rental portfolio
  • Say hi to her at http://agentsinvest.com/
  • Based in Snohomish, WA
  • Best Ever Book: 4 Hour Work Week

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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, Jennifer Beadles. How are you doing, Jennifer?

Jennifer Beadles: I’m doing great, Joe.

Joe Fairless: Well, I’m glad to hear it, and welcome to the show. A little bit about Jennifer – she has been a real estate investor since 2007; also a builder and a founder of Agents Invest. In case you’re wondering, Agents Invest is a referral service for real estate investors to connect with investment-savvy real estate agents in markets across the country. She also has her GC license, focuses on new construction and owns a 17-unit rental portfolio. Based in Snohomish, WA. With that being said, Jennifer, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jennifer Beadles: Absolutely. My background – when I was 21 years old I bought my first house, and that really kind of catapulted me into real estate investing. I got hired on as an admin for a local builder/developer, and really just became totally immersed in the building development. I did everything from bigger developments, we did [unintelligible [00:02:01].08] we did single-family houses, small multifamily… And then also on consulting projects for other builders.

I did that for two years. That was kind of the best and worst time to get in – that was 2007 to late 2009. When I got started, everything was booming, life was good, everything was great. By 2009, everything was not so great; the banks were literally coming to us saying, “Hey, we’re taking this 40 acres back. We don’t know what it is, we don’t know what we have.”

So kind of coming in at a really early age, I got a really good viewpoint of a great market and a bad market. I took that opportunity and started what I call the build-to-sell strategy. I quit that company the day after I bought a house-hack duplex… And I took friends and family and said “Hey guys, it looks like there’s blood on the streets, but I see a ton of opportunity out there.”

I kind of worked with some local builders that were losing their projects – what I mean by losing their projects is literally they had permits and had foundations in the ground and the banks took their loan… So I came in and helped them negotiate some short sales, and kind of pulled some friends and family together, we purchased those projects, finished them out, and just made a killing on the profit side. It was a great time to build, because the costs were down, there were a lot of available workers who were willing to get things done.

So yeah, I really kind of focused on that. That was my starting strategy with real estate. I had also gotten my real estate license about six months prior… So I was kind of doing a couple different things with that. I was  taking the opportunity of some projects that we were able to hire for a really fantastic price, able to acquire some listings as a real estate agent and doing that, and then able to kind of help friends and family make some really great investment opportunities, and a great return on their investment while doing that.

I have had to pivot as the market changed, so I kind of took a lot of the profits that I was making on that side and turning that into passive income streams. So from build-to-sell we kind of went into house flipping, and then some buying rental properties… And we have had more units in the past; my husband and I have been kind of taking the properties that just aren’t cash-flowing as much and going into other properties that will just cashflow more.

Currently, my focus — kind of two things, really… Just getting into more new construction projects. We took about two years off from building, just because we were doing way too many things – we were doing building, and flipping, and I was helping other investors build and flip and buy rentals, and we were buying houses at the courthouse steps, and doing a lot of different things… We were doing house-hacking and live and flips as well, so I kind of said, “Okay, let’s put a pause on the build-to-sell” and now we’re getting more back and more focused personally on the build-to-rent, on that strategy, and then also doing some out of state investing.

Joe Fairless: How long have you been investing? 2007, so that’s about 11 years… There are a lot of professionals who want to do what you’re doing, and start as an admin or on the ground level of a company, but don’t make the transition from an admin for two years to then you’re working with local builders who are losing their projects, negotiating with banks on short sales and then finishing out the projects with your own crew and people that you hire, and then bringing in investors along the way… What things did you do that you think might be unique, if you were to look at it objectively, that other people might not do?

Jennifer Beadles: That’s a really great question. I think for me – I get confidence in numbers, so I saw the opportunity in these projects. I think the numbers worked so well… I worked them sideways and backwards and said “Gosh, okay, if we can’t sell these things, what could they rent for?” So I think my ability to see all angles of these projects and then confidently say “Look, investors, I’ve worked the numbers sideways, backwards and these different ways. Here’s how I think this thing can work.” I think that’s one thing.

Then I think the other thing is  I’m pretty good about putting teams together. I know my strengths and I’m very aware of my weaknesses… So when I was now doing these projects on my own, not through the company that I had worked for, I went  to the superintendent that they had laid off six months ago, and called him out and said “Hey, what are you doing?” He said, “Well, look, I’m about to go get a job at Home Depot”, because no one was hiring; they weren’t’ looking for superintendents back in 2009… And I just said “Look, I can’t pay you as an employee, that’s not really the business model I’m going after, but if you’re willing to take a chance with me, get your GC license, you know how to build (he’d built hundreds of houses a year), and I have investor capital – we can finish out some projects.” He took a chance on me.

So I think it was just these two things – having the confidence in yourself that you can do it, and then assembling the right team to make those things happen.

Joe Fairless: What do you think are some characteristics that people look for in order to take a chance on someone?

Jennifer Beadles: Well, I think confidence is really important. For me, I want to deal with confident people… But confident people that also will explain the downsides. I think sometimes there’s arrogance and there’s confidence. I think sometimes arrogance comes in where you think that you won’t lose, there’s no downside or there’s no potential to lose, and that I tend to steer clear from. But confidence is someone that can accurately explain the numbers, explain the business models, and then say how they’ve kind of covered any potential losses, or where losses could be found, and kind of their plan for mitigating that. I think that that’s super-important.

I thought, okay, if I’m an investor in what I’m offering, what would be important to me? What would I need to know in order to take the next step? I just kind of covered all bases, really. That’s how it worked.

Joe Fairless: You had two years working as an admin, and then right after that, during the downturn, you were negotiating with banks and helping the local builders who were losing their projects negotiate with the banks on short sales… How did you learn how to do that?

Jennifer Beadles: I kind of learned as I was going through it, but I also had a lot of people to lean on. There were a lot of other agents that I had made contacts with… Short sales were very new in 2009. It was kind of like “How do we deal with this?” And prior to that, I also had some banking relationships. The banks would come to us and they truly didn’t know what they were foreclosing on or potentially doing deeds in lieu on; they just didn’t know what stage of construction or stage of short platting these projects were in… So I just kind of understood what the bankers were  looking for.

And the banks were under a lot of scrutiny too, with the FDIC… So it wasn’t really that difficult of a conversation. Of course, I wanted to help the other builders out, trying to get them in a situation where they wouldn’t be left with a large note with the bank either… So I was kind of just really looking out for everyone, and to be honest, Joe, I didn’t really know what I was doing; I just asked the right questions and really kind of thought “Okay, how can I make this a win for everyone, not just me and my investors, or just the builder?” I think it was just really kind of trying to put everyone together that made sense for everyone.

Joe Fairless: You’ve got a 17-unit portfolio currently – what does that consist of?

Jennifer Beadles: Small multifamilies. Mostly two to four-unit properties, and then we’re building another one right now, so that will be 19 units with that one. But mostly I love bread and butter duplexes, triplexes, fourplexes.

Joe Fairless: And why are they bread and butter for you?

Jennifer Beadles: They’re easy. Most of our properties have decent yards, and they’re easy to rent. Our tenants stay a long time, because they’ve got a nice yard, they don’t have tenants above them or below them; a lot of times our duplexes — my probably favorite product is a duplex where the garages connect the units… So you’ve got [unintelligible [00:10:10].02] maybe 20 feet or more.

For us, that’s just easy. It’s easy to finance… I’m very familiar with the income ratios that we need, and things like that. For us it’s just easy. The tenants stay a long time. Half of our rentals are rented out through this program called Supported Living. I’m gonna keep saying easy — most tenants stay often times 10-15 years, their rents are guaranteed, they come every month… There’s a provider that provides care for these tenants, so we don’t get involved in anything on that end… So yeah, for us it’s just easy.

Everything we own, kind of oddly, is single-story, so we don’t have to deal with decks, and two-stories, things like that. We maybe get one call every 45 days. We self-manage everything but our out-of-state, and it’s just easy. Easy and profitable.

Joe Fairless: The Supported Living program – how did you hear about it and why would other landlords, if you’re looking at it objectively, not do that program?

Jennifer Beadles: The way that I heard about it was I was looking at a property that was a triplex, and it was listen actually as a group home, which is a totally different category of what this property is. So it was listed as a triplex, as a group home, got it under contract because the price was just great, and learned that it actually was in a group home, which requires licensing and certifications and things like that.

So I just learned about the program, I asked a lot of questions… The tenants were all intellectually disables, so they were with disabilities there… And we loved it so much that we started acquiring more units specifically for them.

The potential downsides though are that there’s a little bit more wear and tear to the properties. Sometimes the tenants, if they’ve got walkers or things like that, you’ve got some walls [unintelligible [00:11:48].25] and things like that… Or on occasion, if they’re having a bad day, something will happen to a wall or a door, so we’ve gotta kind of deal with them on that…

I like the long-term… We kind of go for hassle-free rentals, and knowing that we’re not gonna have tenants turn over every year or things like that… No matter if rooms are vacant or whatever, we always get the rent. So there’s a lot of positives, but like I said, the downside is there’s a little bit more wear and tear.

Joe Fairless: And why not have 100% of your rentals instead of half be on the Supported Living program?

Jennifer Beadles: We’re actually working towards that. This new duplex that we’re building right now, it’s gonna be for the Supported Living program. Some of our rentals are in areas where they don’t have a need for that, because the providers also have to consider the staffing. In some of our areas they just don’t have staff coverage, so that’s really the only reason why we haven’t converted those.

My hope would be that they would find staff in that area and we can kind of convert those throughout the years.

Joe Fairless: Of the 17 that you’ve got, not including the duplex that’s being constructed, how many are out of state and where are they?

Jennifer Beadles: We just have the one duplex right now in Greenwood, Indiana, which is just outside of Indianapolis. So there’s two units there.

Joe Fairless: And you’re in Washington state, so how the heck did you end up buying a duplex over in Greenwood?

Jennifer Beadles: Prices got pretty expensive here in the Seattle Metro a couple years ago, they kind of skyrocketed, which is great when you own properties, not so good if you’re looking to acquire more… So I kind of went about this (I guess) journey of investing out of state. I had been very pro Seattle market for a lot of different reasons, and didn’t really have a reason or desire to invest out of state… And a year went by and we hadn’t bought anything yet. I said, “Okay, we really need to start looking…”

So yeah, we just started doing research. I was looking for areas that have population growth, low unemployment, low crime, good price-to-rent ratios… I had identified a couple cities, and then I went about building the team, because I realized you could find the best deal in the best market in the world, but if you don’t have the right team, then it could be a really terrible deal.

So I just happened to kind of line up a good team there in Indianapolis, and they found me the exact product that’s my favorite; they found me a rambler duplex, 3-bed 2-bath each side, 1,200 and some change square feet, units connected by the garage… So I went for it, and I got a really great deal, a really good property.

Joe Fairless: What was the all-in price and what’s it rent for?

Jennifer Beadles: The purchase price was $155,000. We did go ahead and renovate that, so we put about $19,000 into the renovation on that. It’s currently renting for $2,235, and it’s now valued I think at about $250,000.

Joe Fairless: You mentioned earlier that what attracts people to take a chance on someone is confidence, but also not only “100% confidence, let’s go full-steam ahead”, but also explaining the downside… So what’s a deal that you’ve done that didn’t work out?

Jennifer Beadles: I had one early on when I was doing a lot of flips… I was buying at the courthouse steps, and what had happened is I had had a lot of success really early on, and just to be honest, I started to get pretty confident in myself and my abilities. I had this discipline though, before every auction I would set a number, and I would say “If it sells for a dollar over this number, then that’s okay. I’m stopping at this number.”

So this particular Friday I actually had a couple of friends, agent friends, that were coming to the auction to see how it would go. And I’d set a number on a certain property, and because my friends were there, and I was kind of showing them how it goes, I found myself at a point where I had won a property (won the highest bid) and I ended up being about $30,000 higher than my stop number. Sure enough, that was the only property that I’ve ever lost money on. I ended up losing about $19,000 on that flip.

It was a fantastic lesson. One, I was kind of showing off in a way to my friends… I really just wanted to win at the auction and kind of show them “Okay, this is how it’s done, this is how you do it.” And there was a couple other things… With every property there was a couple characteristics that I’d look for; I’d always look at the PUD meter (the power meter) and if the little tag was red, that meant that there was a safety issue and it would shut off due to that. If the tag was yellow, it was shut off due to non-payment; green means it’s on. And I don’t like basement properties, but of course this property was a basement… And I didn’t check the power meter that day, and when I went back after buying it, I realized it was yellow, which meant power was off… And it has a basement, which means that [unintelligible [00:16:30].15] and when there’s no power and it’s the rainy season… Anyway, I got into the house, and the basement had standing water, and mold… So anyway, this property taught me a lot of lessons, and I paid dearly for it and I was in some ways kind of happy to pay that money, because that was just a really good lesson, and… Hey, stick to your numbers, don’t try to show off, and stick to the checklist on these properties.

Joe Fairless: What are some daily habits that you have?

Jennifer Beadles: Daily habits… I’m a big believer in you have to kind of take care of yourself – your mind, your body – in order to perform at the highest level. For me it’s eating really healthy in the morning, kind of doing some morning routines… I’ve got a three-year-old, making sure that she has some attention early in the morning before she goes where she goes… Those are kind of personal habits.

Then I also — not so much daily, but every single week I review our investments and I look for opportunities to improve, I look for lessons to be learned… So kind of some of those things – a lot of review and reflection.

Joe Fairless: The “eat really healthy” – what do you eat?

Jennifer Beadles: I do a lot of greens. My morning smoothie, I’ve got this Udo’s Oil, which is Omega threes and Omega sixes… I do some protein powder… We have a little garden at our house, we live on an acre and a half in Snohomish, so I do my kale every morning in my smoothie, powder greens, things like that – just really starting the morning off with just a lot of nutrition… Because I talk on the phone a lot; I look at deals all day long, so I’ve gotta be really on it.

Joe Fairless: How much of a focus is Agents Invest of yours? We haven’t even talked about that.

Jennifer Beadles: Yeah, so that is actually a newer focus. About two years ago we had gotten to this place where our portfolio was paying out six figures every year, and we were really happy with where things were, but I felt like I was missing something. What I was missing was contributions.

Prior to that, my husband and I didn’t really openly share about our portfolio and what real estate investing had done for us; it was just kind of mostly with our investors. So I made the decision to be more focused on contribution, and really what turned into with that out-of-state deal that I bought – I said “Gosh, it was actually kind of difficult for me to put a team together out of state. I wonder how many other investors have experienced the same thing.” They’re wanting to invest outside of their local area, but maybe running into issues of putting teams together, or just not finding good people.

So I started teaching and sharing – I do a monthly meetup, and really kind of my goal for Agents Invest is to share strategies and help people learn about real estate investing… And then number two is connect them with vetted teams in different markets, where they’re gonna achieve a high cashflow, they’re gonna get equity, and they’re gonna have the ability to connect with really great people to help them execute on their strategy.

So I spend a good amount of time doing that as well; that’s just my passion project. The weekend before last I actually had done something totally new. We flew in about 21 investors into Oklahoma City, and I showed them around the city, met with the teams that I have there, and we just had a lot of fun. We did a lot of networking, different activities, and then also looked at a lot of properties, some small apartment complexes, and then a lot of 2-4 unit properties as well.

That’s really my passion project company that I’m super-focused on. I probably don’t acquire as many units as I could because I’m just really into helping other people get into deals.

There’s times where my husband is like “We should have bought that one”, but there’s just something about helping other people learn and grow and build their own portfolios as well that I just love.

Joe Fairless: How did you – or maybe you didn’t – monetize Agents Invest?

Jennifer Beadles: That was something — being a licensed real estate agent (I’ve been licensed since 2009) it’s very common for what we call referrals, right? Someone let’s say in Seattle is moving to Texas; I would call up an agent friend in Texas and said “Hey, I would like to refer you a client.” That’s super-common, it happens all the time within kind of the regular business. But when we’re talking about this investment side of things it’s a little different… So I took that same model and kind of my value-add really for both sides — again, I’m always looking for ways where everyone can win; with these agent teams – I go to them and really personally vet them. I spend a couple of months making sure that these teams really know what they’re doing and really can provide value and add good connections for these investor clients that I’m referring.

So we have a referral agreement, and I just say “Guys, if you can do the right thing for me and my clients, then I will make some referral connections for you guys.” So yeah, we have referral agreement [unintelligible [00:21:07].02] and I’m compensated by the percentage of the commission.

Joe Fairless: What questions do you ask to vet them?

Jennifer Beadles: A lot of things related to just the basics. How do you calculate the cap rate? Tell me about how you calculate cash-on-cash return… A lot of times on the residential side we’re not talking IRR, so that’s something that I don’t typically get into with them… And then I just tell them to send me their deals, tell me the best deal that they’ve seen recently…

Again, this is all kind of focused on buy and holds. We’re not necessarily focused on flips in these different areas. But if they really know what they’re talking about, and a lot of them also own their own rental properties, then I just kind of go through the motions with them of looking at their deals, making sure that they’ve answered all the proper questions… And then also, if they can tell me what their areas of weakness are.

A lot of times I’ll kind of coach with these agents too, and they’ll say “Hey, I’m really good at finding deals, but I’ll be honest – the number crunching side is not my strength.” Then I’ll send them my spreadsheet and we’ll kind of go through the numbers with them until they can accurately provide proformas to these investors.

So it’s a lot of different things. It’s questions, but then also having them show me actual deals.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Jennifer Beadles: Best real estate investing advice ever… I think just getting started. A lot of people get analysis paralysis, and there’s people that I’ve talked to that they’re like “You know, I’ve been looking into real estate investing for two years and I just haven’t found the right deal yet.”

A lot of times to those people I just say “You’ve just gotta do a deal.” And that might sound like kind of silly advice, because of course, we all want to do the best deal ever, but I think you learn so much even from that first deal.

The first three deals that I did were not very good, but I had to get through those three to learn the investing strategy and criteria that I have now. So had I not just kind of failed forward in the beginning, I might not be where I am today… So really to do a deal.

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

Jennifer Beadles: Yup.

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

Break: [[00:23:17].16] to [[00:24:22].05]

Joe Fairless: Best ever most recent book you’ve read?

Jennifer Beadles: Best ever most recent…

Joe Fairless: Or something you’ve read recently.

Jennifer Beadles: Gosh, I’ve probably read the 4-Hour Workweek like seven times. I just re-read it and re-read it, because I’m just always at a different place when I read it, and I always kind of get something new every time I read it.

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

Jennifer Beadles: The live and flips… So probably the last one that we did – we purchased it in 2011 at the courthouse steps, sight unseen, and then sold it four years later and all we had to do is paint… We netted about $275,000. Then of course we got the capital gains exemption on that, so it was great.

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

Jennifer Beadles: I had a deal that I got under contract for $25,000. It was a commercial zone with a single-family residence with a billboard in the front yard. I’d gone out of town and the bank had needed one more signature for me to fully execute the contract, and I didn’t see the e-mail, so they gave it to someone else. Every time I drive by that, I get very disappointed that I wasn’t paying attention.

Joe Fairless: Oh, man… And you said there was a billboard in front?

Jennifer Beadles: Yeah, commercial zoned, and a billboard, and a single-family house, for $25,000.

Joe Fairless: [laughs] Okay, we won’t talk about that anymore. I can tell it still stings a little bit.

Jennifer Beadles: It hurts, it hurts.

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

Jennifer Beadles: Just sharing my story and just meeting different people. I love it. I love sharing what’s gone really well and I love sharing my mistakes.

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

Jennifer Beadles: They can find me at AgentsInvest.com. I also have a blog, reimillionaire.com. It’s kind of just some fun, funky stories about things that are going right and things that are going wrong; it’s got some fun stories about my current new construction project that is a great read… So yeah, either way.

Joe Fairless: Jennifer, thank you so much for being on the show. I learned a whole lot, and you truly are inspirational with how you entered into the industry and were able to hit the ground running so quickly at a very challenging time, in 2009, whenever you left. You got that house-hack duplex, then you quit your job the next day… That’s a tough period in the economy, and instead of trying to swim upstream, you went with the current and you started helping local builders who were losing their projects, and you negotiated short sales and then finished out those projects.

Then also with that type of mindset – that’s why I asked you how you can have others take a chance on you, and not for you, because you’re past that point, but for the Best Ever listeners who are looking for somebody to take a chance on them… And you said having the confidence, but also with that confidence, explain the downside, so have the full 360 picture in mind when you’re talking to people.

Thank you so much or sharing your story, your advice and the projects that you’re working on. I hope you have a best ever day, and we’ll talk to you soon.

Jennifer Beadles: Thanks, Joe.

JF1310: Making $490k A Year With Flips – While Working Less Than 20 Hours Per Week with Elliot Smith

Listen to the Episode Below (24:11)
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Elliot and his wife flipped 28 homes last year that made them $497,000, and they only worked 20 hours a week or less! In 2018 their plan is to work more and complete more deals. Hear how they were able to make that much money while working so little. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Elliot Smith Real Estate Background:

  • He and his wife (both 28 years old) own a real estate investment company, C&E Real Estate
  • In 2017 we flipped 28 homes with a gross profit of $497k while working under 20 hours a week
  • We believe in putting people first and profits second
  • Buy and holds, fix and flips, and wholesaling
  • Based in Vancouver, Washington
  • Say hi to him at www.summitthousebuyers.com
  • Best Ever Book: Pitch Anything

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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, Elliot Smith. How are you doing, Elliot?

Elliot Smith:  Good, thanks.

Joe Fairless:  My pleasure. Nice to have you on the show. A little bit about Elliot — he and his wife own a real estate investment company called C&E Real Estate. In 2007, they flipped 28 homes with a gross profit of $497,000 while working under 20 hours a week. Based in Vancouver, Washington. With that being said, Elliot, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Elliot Smith:  Yeah. That was actually 2017, so last year, not 2007. But what we’re doing basically is we go direct seller for most of our properties and we’re buying and rehabbing them, in Vancouver market and also Eastern Washington and Tri-Cities. We have a full partner in Vancouver that helps manage the rehab process, and then we’re solo in Tri-Cities. So we will wholesale sometimes, but mainly we’re just going direct seller, buying properties at a discount, and then fixing them up and reselling them.

Joe Fairless:  What are some of the most effective ways that you’re getting the homes at a discount?

Elliot Smith:  We basically do a lot of direct mail. Sometimes we do some cold calling as well, but for the most part I think what sets us apart is just our abilities when we’re actually dealing with sellers.  I think we have a lot higher closing rate than most people do, just because we can feel out what their needs and wants are, and help solve their problems a little bit better than most of our competitors can.

Joe Fairless:  Can you tell us a specific example, maybe tell us a story about you doing that – maybe the problem and then how you approached it?

Elliot Smith:  Yeah.  One, for instance, we sent a letter, the brother had passed away, and so we were buying the house from the other brother who was handling the estate. And when we went there to the appointment, there was not just us, but there was a realtor there as well. The property needed work, and so after dealing with them, the other realtor that showed up, she knew us and our credibility, so she was like, “Hey, you probably should work with these guys… Even though you could probably list it and get a little bit more money.”

Tt that point, we were able to solve the problem with no inspections, as is, and kind of abide on his timeline and be patient with him. The guy did nickel us up a little bit, but we still got a really good deal. But we were able to be there at the right time and not pressure him, not have to have a deal. I think that’s the important thing – if we get the deal, great; if we don’t get the deal, then that’s okay too.  So we’re never pressuring anybody to sell us their property. We just basically — when we say it’s on their timeline, it’s totally on their timeline, and we’re not pushing and pushing and pushing this on. We’re making them feel comfortable that, “Hey, we are the right choice; we are professionals, and this is how we can provide value to you.”

Joe Fairless:  How do you balance the desire to close deals with not having a pressured timeline?

Elliot Smith:  I think that balance comes from the way my wife and I live our life. We live basically debt-free. The only debt we have is our small mortgage and then rentals, and we live well below our means, and so we don’t have to close a deal.  So if we get the deal, that’s great, but if we don’t, we don’t need that to live. So I think that really sets us up for success in that realm because we’re not saying, “Oh, I gotta have a deal because I’m going to pay my car payment or my high mortgage payment or these things next month, because if not, I can’t afford it.”  And so I think that really puts us in a solid situation to be patient, and if the deal comes, the deal comes; if it doesn’t, then that’s okay too.

Joe Fairless:  Can you tell us the numbers of the last deal that you did?

Elliot Smith:  We have six going right now, that we’re working on right now. I can talk about that one that I was just talking about, how we solved their problem. We bought it for $110,000. We’re probably gonna be all into it for $50,000 on the rehab and we pre-sold it for 235k.  So we’re all in at $160,000, pre-sold it for $235,000, we take out a couple of commissions, we’re probably going to make right around $60,000, somewhere in there [unintelligible [00:06:28].13].

Joe Fairless:  Over what period of time from start to finish?

Elliot Smith:  We bought it in November and the only reason we haven’t closed on it yet is because of the 90-day FHA, so we’ll close in 95-96 days.

Joe Fairless:  You’ll close in 95-96 days — okay, wow. Three months, $60,000 dollars profit.

Elliot Smith:  And that’s a split. I have a partner in Vancouver, so I split everything with my partner.

Joe Fairless:  And how do you structure your partnership? Who does what?

Elliot Smith:  I’m pretty good at finding the deals and dealing with the homeowners, and he’s good with the homeowners as well. But we run the marketing, we run the phone calls, we run and set up the appointments, and he’s really good at putting it back together and managing the rehab process. So he’ll put them put them back together and then he’ll sell them, and then we’ll kind of split them 50/50 from there.

Joe Fairless:  You find the deals and you secure them, and then it sounds like he does the rest?

Elliot Smith:  He puts them back together and then he’ll sell them.

Joe Fairless:  Cool. Is that where the less than 20 hours a week thing comes into play, where you flip 28 homes but work less than 20 hours a week?

Elliot Smith:  Yeah. That was totally 2017. We moved back to our hometown, so we’re trying to do it. We’re going back and forth between Tri-Cities and Vancouver, but this year we’re kind of ramping up to try to work more hours just to build up our reserves more and learn more. Because a lot of the time-consuming stuff is — we do a lot of time-consuming stuff answering phone calls, doing the marketing, things like that, and then this stuff is time-consuming putting them back together, so we kind of split that up. And I also have my wife who runs half of our business, so put us both together and we’re probably working 40 hours a week. But she runs half and half for us.

Joe Fairless:  Got it. So between you and your wife, you’re working 40? Did I hear that correctly?

Elliot Smith:  She’s probably working 20, I’m probably working 20, and we work different times. I’m a very up and down salesman more like, and she is more linear to [inaudible [00:08:30]], and so she’s way more structured, and then I’m more like, I’ll burn out, work all day, and then I won’t work for a couple of days, or I’ll just like do minimal stuff and then I’ll go golfing. And she’ll be like, “No, I’ll just work four or five hours a day, get my stuff done, the things I gotta do.”

Joe Fairless:  How come you three decide to fix and flip versus wholesale primarily? I know you do wholesaling, but why not wholesale exclusively?

Elliot Smith:  Because I feel like we have the opportunity, we have the financing and the money, that we can make extra money. Again, it goes back to we don’t need to make a check right now. So if we can hold it and flip it and we can make 5k, 10k, 20k, 30k more, then it makes more sense  to load a pipeline that way for us.

Joe Fairless:  What are some things that have evolved over your business as you’ve gotten the system down better and better?

Elliot Smith:  I think just dealing with the sellers has gotten better. The follow-up has gotten a lot better. We finally hired an assistant last year, and so she’s been a big part of our business. And then just really bringing the partner on, especially with moving back home and being two and a half hours away from Vancouver, my partner is invaluable. And so just the team, I think, that we’ve built over the last two years has really been the most important part. We’re way better as a team than we would be just my wife and I, and I think everybody adds so much value in their own core area that they focus on, and as long as we stay in those areas, then we’re very successful. And so just trying to learn that, and then also learning how to work with your wife, which is not the easiest thing in the world, that took a lot of time and learning the system and how to work together. I think it has really paid dividends as well.

Joe Fairless:  What’s some advice you have for someone who’s looking to start working with their husband or wife?

Elliot Smith:  I think that you really have to set your expectations who does what, and the biggest problem is I’m very visionary and she’s more like implementer, so if you look at it the wrong way in that you’re not equal and say, “Hey, you need to do this, you need to do this” and you forget everything they’re doing, then your wife tends to or your other partner tends to think, “Well, screw you. You’re not seeing what I’m doing on a daily basis. I’m doing all of the little things that have to get done, and you’re just trying to focus on just big things.”

So really trying to line out, okay, what are our roles, and who makes decisions in each area? So that’s really important. Somebody is the boss of something, but we’re both the boss together of the whole business. So on certain decisions we make decisions together, and then there are certain areas like marketing, the systems, managing our assistant, things like that, Christie is in charge of. And then I’m in charge of anything that has to do with the sellers, with the buying of properties, which properties we’re buying, what’s our plan, who we’re going to partner with, how we’re going to do it.

Then our partner in Vancouver, we don’t ever question him on what he does when he puts the houses back together. He is 100% in charge of that, because he’s way better at it than we are. Christie is good at it, but we tend to do too much, and he’s very good at like, “Here’s what it means, and here’s how we maximize our return.” So mainly just staying in your lane of what you’re doing, instead of trying to boss each other around.

And then also, the biggest thing that we have to get over is if we give feedback to each other, it’s not that we’re attacking each other, but sometimes it can come off like that, like “Oh, I’m attacking you” or “You’re attacking me because I’m not doing enough, or you’re saying I’m not doing enough, and I’m saying you’re not doing enough,” so it’s definitely hard, especially with our personalities where I’m kind of more that bipolar, super-high and super-low personality, and she’s a very linear personality. It was very difficult.

Joe Fairless:  Very helpful. Thank you for sharing that, that’s for sure. When you were talking about how your business has evolved, you said the follow-up with the sellers has gotten better. Can you elaborate a little bit more about that?

Elliot Smith:  Yeah.  When we first started, I was working 70 hours a week, so I only had time for the low-hanging fruit.  So if the seller – I knew there were some motivation factors, then I would push them and that would be the lead that I would chase.  But the leads that came through that were like warm leads, like “Hey, I might sell in a couple of months, or I might sell in six months,” I would forget about them, because most of the time I’d answer the phone while I was driving and I didn’t have a good system to follow up with them, and then they get lost, and then all of a sudden you’ve just wasted money on the leads.

I answer all my calls through CallRail. All our calls go through there. She’ll go back and listen to our calls and take notes for me, enter everything in Podio, and then actually goes physically on my calendar and sets appointments for me to follow up with people and what I need to talk to them about.  So she was basically forcing my hand to follow up with people, because I do forget.  So she goes through that, and then I also would not always put the correct information in the CRM, so she’ll go put the correct information in the CRM, let us know if it’s a lead or take it off the list, and then what we talked about, and then “Hey, you said you’d follow up in two weeks”, so then I’ll follow up in two weeks and try to go over that.

Joe Fairless:  What a smooth system. I haven’t heard of one as efficient as that.

Elliot Smith:  And then she’ll also sometimes — on leads that we haven’t heard from for a while, she’ll just go through and spend a day and just follow up with leads that we talked to like a year ago and just be like “Okay, just touching base with you” and just seeing if we can retrace and refine, find some motivation from people that we talked to a while ago as well. So she’s really good on the phone as well, so if I can’t do it, or if I’m out of the country, she actually answers the phones for us.

Joe Fairless:  From a legal standpoint, is it fine to record calls?

Elliot Smith:  You need to tell people that you’re recording the phone calls.

Joe Fairless:  Okay. Whenever they call, you’re like “Hey, I’m recording this, just FYI, for…” What do you say exactly?

Elliot Smith:  Just say, “This is being recorded.”  I have an automated thing on there that’s just saying “Hey, this is being recorded.”

Joe Fairless:  Do they ever ask you why?

Elliot Smith:  No. It’s just the same as like when you call into a top corporation and they’re like “Hey, this is being recorded for quality insurance,” I’ve never been asked why. Most people understand.

Joe Fairless:  Got it, cool. Good stuff. Based on your experience, what is your best real estate investing advice ever?

Elliot Smith:  I think really getting good at talking to sellers or talking to people, like do you have a heart for people, or are you just chasing a dollar? I think that’s really the key that sets us apart. Our whole team, we care about people first, and then after that, if we make a profit, that’s what runs our business, but we care about putting people first.  So we try to do the right thing. If we go into a property and the house is one we probably shouldn’t buy, they probably should list it, after we talk to them, we tell them that. So we never try to force people to sell to us, and so we actually care about people, and I think that’s an important thing to have.

Joe Fairless:  Can you tell us a specific example of when you walked into a house and you said, “This should be listed instead of selling to us” and just tell us why and some more details on that?

Elliot Smith: Yeah, and we do it pretty often. So we do the appointment and we walk the house, and basically we just have a conversation with the seller – what are your wants, what are your needs, what are your timelines, what are you thinking, what do you need to walk away with? …things like that. And if the house is in good shape and even if they’re borderline, like we could probably buy the property, or they could sell it on the market, if they can make more money and their timeline is working, they don’t need to sell it right away and the property doesn’t have that much work so it could finance, then we usually are very upfront with them. And we’ve actually bought houses where we were like, “Hey, you can probably get more money selling it as an open market,” and they say, “Well, we still want to sell it to you. What’s your price?” But most of the time, what you run into is people think they can’t sell it on the market, because they don’t have any money to do any repairs, and we’re like, “No, you can actually go this route and it would finance, or you could have some of these repairs fixed at closing.” So we do it pretty often, actually… That’s one example.

My partner also is a realtor, so he can list the property as well, so sometimes we’ll say that as well. But 75% of the time they’ll list it with somebody else.

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

Elliot Smith:  Yeah.

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

Break: [[00:16:40].18] to [[00:17:08].19]

Joe Fairless:  Best ever book you’ve read?

Elliot Smith:  I would say Pitch Anything by Oren Klaff.

Joe Fairless:  Great book. I highly recommend that as well. Best ever deal you’ve done that’s not your first and wasn’t your last?

Elliot Smith:  We bought one November of 2016. We bought it for $100,000, we put $40,000 into it, we sold it for $35,000, and we made $121,000.

Joe Fairless:  How did you find that one?

Elliot Smith:  Direct mail.

Joe Fairless:  What’s on your direct mail piece?

Elliot Smith:  It’s pretty generic. All our direct mail comes from Open Letter Marketing and that’s — if anyone wants to use what we’re using, that’s where they can get it.

Joe Fairless:  Do you have a process for doing a certain number of direct mail pieces to an address?

Elliot Smith:  Yeah, we just don’t stop mailing until they call us.

Joe Fairless:  Oh, really?

Elliot Smith:  Yeah, so we mail them every month until they call us. So that deal actually that I just talked about, we had mailed it for 18 months straight before they actually called us.

Joe Fairless:  Every month for 18 months straight?

Elliot Smith:  Every month.

Joe Fairless:  And what type of addresses do you put on your list?

Elliot Smith:  We have a pretty big list. We’re mailing 7,000-9,000 letters a month. So most of our leads are driving for dollar leads.  We’re just building our own lists. We’re driving around, building our own list of properties that we’re interested in buying.

Joe Fairless:  All 7,000-9,000, are those all that you’ve manually put in there?

Elliot Smith:  Yeah, I would say 85% of them were all that we manually went and got ourselves. We went and drove neighborhoods, and wrote down addresses.

Joe Fairless:  That’s a high-quality list.

Elliot Smith:  Yeah, it is high-quality.  That’s the thing — most people, they want to just order a list that everybody else has ordered, and send the same thing that everybody else is sending, and they expect to get different results. So then they’ll mail for 2-3 months and then they stop. We understand that it’s a long game, so we want to send quality letters, which we do, and then when wanna send it to leads that we know we want to buy.  Sometimes people are mailing the same place, but sometimes we lose them, and sometimes – the majority of the time, we’re the only ones there.

Joe Fairless:  So earlier you said you have a generic direct mail, but then you just said you have quality letters that you send out.  So can you elaborate on the quality letters that you send?

Elliot Smith:  It’s more just a nicer envelope. We do different letters sequences, with different things in the letter – so different fonts, different wording, and we just go through a process. And again, I don’t want to get in too much in detail just because I’m kind of part of a group that I can’t give too much detail in what it actually says, but for the most part, you’re basically looking to send a letter that says, “Hey, my name is Elliot. I notice you own a house at 123 Main Street. If you’re interested in selling, give me a call.”

A lot of times what you see on letters is people will send out family letters like, “Hey, my wife and I really want to buy your house. I really want to be in this neighborhood as an investor.” We try to make the letter more about them and more to the point than more about us, and that’s the thing I think that really works, because you see a lot of these letters that are all about the investor and the investor’s needs and what the investor is looking for, and it doesn’t really touch on anything where it’s like, “I can solve a problem, I care more about you.” Trying to get that across is not the easiest way, but if I’m getting a letter from somebody who’s like me, if it’s all talking about that person, then I’m like, “Why am I going to call you, knowing that you’re only looking out for yourself?”  Does that make sense?

Joe Fairless:  Yeah, it makes a lot of sense. I appreciate your sharing that. What’s a mistake you’ve made on a transaction?

Elliot Smith:  Oh man, I’ve made a lot of mistakes.  Sometimes I think the mistake is really when you get to the appointment and you’re talking price, and sometimes the person will say a price like, “Hey, I think it’s worth 150k” and you’re like, “Holy crap, I was going to pay 175k”, so you get too eager.  I’ve done that a couple of times, where I’m like, “Yeah, we can do that” instead of playing it like, “Hey, maybe we should actually try to negotiate.”  And so then they’ll be like, “Oh, maybe I sold it too cheap.”  So really it’s all psychological with people, right? If anybody goes there and they make an offer and they say a price, and the person immediately accepts it, then you’re going to be like, “Oh, crap, I sold it for too cheap.”  But if there’s a little bit of negotiation, you’re going to feel like everybody won.

Joe Fairless:  Has that come back to burn you in the past?

Elliot Smith:  Yeah, I’ve lost deals that way. What you do is you actually turn the sellers off. Then all of a sudden they’re like, “Now I’ve gotta go back and spend six months to a year rethinking this whole thing”  because they’re like, “Maybe I was selling it too cheap, maybe I don’t know–” and then they kind of put their head in the sand and say “Well, I don’t really know what I’m doing and I don’t know how to talk to you, and I don’t know…”  So trying to get them back to the table is not always the easiest.

Joe Fairless:  It makes a lot of sense.  Best ever way you like to give back?

Elliot Smith:  I love volunteering, so I volunteer coach on a third-grade basketball team. I like basketball and I like volunteering for junior golf. I’m a big golfer. And my wife and I like just giving back to the community. We gave ten $250 gift cards for Thanksgiving this year to just random people that were nominated on our company page. We adopted a family for Christmas… And just really trying to be a good friend and always being a person that somebody can count on and trying to do things for others.

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

Elliot Smith:  I would say Bigger Pockets or Facebook, you can find me on Facebook. You just write Elliot Smith. And our company page is Summit Development.

Joe Fairless:  And your company page – is that your company website, summitdevelopment.com?

Elliot Smith:  Summithousebuyers.com is our page, and then just Summit Development is our Facebook page. But I’m on Bigger Pockets and I’m on my normal Facebook page.  Most people have been able to find me. I did an interview with another group, and most people have been able to find me that way.

Joe Fairless:  Well, thank you for being on the show and talking to us about evolution of your company and some successful tips that we can implement in our business that have helped you. One is the follow-up, and the follow-up approach, having a process… You answer your calls through CallRail, take notes, and then your assistant listens to them afterwards, takes notes and enters them into Podio, puts them on your  calendar for follow-up, so it’s an automated process… As well as working with a significant other, setting expectations for who does what, because there will be a division of responsibilities, so it’s necessary to be clear for who does what. And then the direct mail piece for how to be effective. First, have a high-quality list, and holy cow, your list comprises of driving for dollar addresses that you’ve written down.  That is the highest quality list that I can think of.  And then make the letter more about the recipient and less about the sender.

So thank you for being on the show.  I hope you have a Best Ever day and we’ll talk to you soon.

Elliot Smith:  Thanks.

JF1292: Leaving A Comfy Corporate Job For Multifamily Syndication with Tamar Mar

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Tamar got her start in real estate with single family homes. Along the way, she realized that reaching her passive income goal was going to be challenging with single family homes. That’s when she bought a gym equipment business and started syndicating properties. Now with three syndications under her belt, Tamar shares her story with us and her best lessons learned along the way. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Tamar Mar Real Estate Background:

Business Investor, Multifamily Investor controlling over $6 million worth of real estate assets

-Invested in over 500 units of Multifamily

-Host of the Investing for Life Podcast

-Spent 20 years in the startup arena as COO for prominent companies in FinTech and real estate brokerage

-This year, Tamar has shifted her focus to the acquisition of underperforming commercial and multi-family.

-Say hi to her at www.marotagroup.com

-Based in Mercer Island, Washington

-Best Ever Book: Laws of Success by Napoleon Hill

 


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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, Tamar Mar. How are you doing, Tamar?

Tamar Mar: I’m so great, Joe! Thanks for having me here today.

Joe Fairless: Well, I love that, great to hear, and my pleasure. A little bit about Tamar – she’s a multifamily investor who controls over six million dollars worth of real estate. She has invested in over 500 units of multifamily property. She is also the host of Investing For Life Podcast. She’s spent 20 years in the startup arena as a COO for prominent companies in fintech, and also in real estate.

This year, Tamar has shifted her focus to the acquisition of underperforming commercial and multifamily property. With that being said, Tamar, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Tamar Mar: Yeah, I sure do. Funny fact about me is I actually purchased my first house when I was 19 years old, because I was hyper-responsible since the time I was about four… And most 19-year-olds don’t buy a house, but I saw  an opportunity and I took it up. I’ve had rentals for over 15 years now, and about four years ago I started scaling up my investing business. At that time I had been working in the corporate arena, and just something inside of me said “You know what, I need to have my own business someday”, and I wasn’t really sure what I wanted it to be, but after many conversations with my husband and some other folks, I realized that real estate was something that I was really interested in, and pursuing the opportunity to eventually have an empire that my family could live off of, so to speak… So I rapidly ramped up that.

My husband and I and our three kids started buying houses on auction, site unseen. We did that for about three years, where we would purchase them, renovate them, turn them into rentals, but at some point I realized about a year and a half ago that I wasn’t going to reach my passive income goals quite fast enough with the single-family houses, so at the end of last year I decided to leave my corporate environment job and pursue investing full-time in both the business and real estate space.

I bought a company last year – a high-end specialty fitness equipment retail company almost one year ago, and then I moved into the syndication space. Since then, I have closed on three — well, I’m closing on my third apartment deal within seven months as of January.

Joe Fairless: Wow, a lot to dive into here. Let’s go with the leaving the corporate job and buying a high-end specialty fitness retail company. Did I write that down correctly?

Tamar Mar: You sure did, Joe.

Joe Fairless: What is that, exactly? What does that mean?

Tamar Mar: It’s a company that had been around in the Pacific North-West (I’m in the Seattle area) for about 40 years, and the current owner – he was just tired and wanted to get out; he was in his seventies, and my cousin worked there for a number of years. So the business — we provide high-end fitness equipment for people’s home gyms. So think of really, really nice commercial-like equipment. Then we also provide equipment in the commercial arena such as hospitality, apartments, police officer’s gyms, corporate gyms, boot camps, that sort of stuff as well.

Joe Fairless: Okay. And that’s a brick and mortal — mortal… Brick and mortar business?

Tamar Mar: [laughs] It’s probably mortal as well at some point… [laughter]

Joe Fairless: Let’s hope it’s not. Let’s hope it’s immortal, right?

Tamar Mar: [laughs] It’s a brick and mortar business. We have one retail location, and then we also go out and use [unintelligible [00:05:57].26] arena as well.

Joe Fairless: Okay. So you purchased a brick and mortar business, and you also are doing syndication simultaneously. What type of syndication are you doing?

Tamar Mar: I am looking at under-performing multifamily assets. My goal originally in March of last year was to do three apartment buildings that were somewhere between the 12-24 unit size within 18 months or so, so by the end of 2018. I wanted to start off a little bit smaller, just to make sure that I had the experience that I needed, and I wasn’t planning on bringing any key principals in or partners to help me out at the time, so that was what my comfort level was.

Now I’ve ramped up — the deal I’m working on right now is a 37-unit and I plan to move up to larger properties after that.

Joe Fairless: Cool. Have you syndicated a deal yet?

Tamar Mar: Yes, I have. I’m on my third one right now.

Joe Fairless: On your third one. What were the first two?

Tamar Mar: The first two were properties that were about five hours away from my house, 4,5-5 hours away. One of them of a 15-unit, and that one was fantastic; it was about $300/door under market on the rents. Not a ton of deferred maintenance, but we really needed to go in and clean up the units, make them a little bit more presentable. We thought that there would only be about five of the 15 that would vacate after we raised the rents, and we indeed were correct in the first month… And then proceeded to have about 10 people total that vacated.

We have just finished up renovating all of those, and we’re getting ready to do a refi after owning it for just about nine months. We bought that one for 825k and now it’s worth probably about 1.25 after renovations.

Joe Fairless: Wow, 825k, it’s worth 1.25 million… And how much did you put into it?

Tamar Mar: Not a ton. I think we’ve put in about 35k into it so far.

Joe Fairless: How much did you put down, do you remember?

Tamar Mar: We put down about 300k. No, 275k-300k… I can’t remember the exact number.

Joe Fairless: Yeah, so 300k divided by 825k… That’s all-in probably about 36%. What type of loan did you get?

Tamar Mar: We got a full recourse loan on that one, and it ws with a community bank, a credit union. When we refinance, we should be able to get a non-recourse debt on that one.

Joe Fairless: It sounds like you’re going to get to close to be able to refinance all the money – or most of the money – you put into it.

Tamar Mar: Yes, which is so exciting, because my original plan was to be able to refi after probably three years… So I’m really pleased that we’ll be able to do that for our investors on such an accelerated timeline.

Joe Fairless: Yeah, that’s great. You’ve got  the 15-unit, and you have investors… How many investors do you have on the 15-unit?

Tamar Mar: I think we have about seven.

Joe Fairless: Seven. And for someone starting out wanting to do a syndication, they’re always curious – or at least I was curious – about how other people met their investors… So how did you meet your investors? I’m not looking for names, but just how did you meet them?

Tamar Mar: Some of them were closer friends and family. We had a relative, we had a co-worker of my husband’s, we had a couple of good friends… And then I am very active in the local real estate clubs in my community, so I go to between 4 and 7 of them a month… So I also met some of my investors in those arenas.

Joe Fairless: You go to 4 to 7 meetups a month?

Tamar Mar: Something like that.

Joe Fairless: Wow. You’re based in Mercer Island, right?

Tamar Mar: Yeah.

Joe Fairless: How far is that from downtown Seattle?

Tamar Mar: I am about eight minutes from downtown Seattle.

Joe Fairless: Oh, okay. [unintelligible [00:09:43].25]

Tamar Mar: Yeah, yeah.

Joe Fairless: So I imagine is it all Seattle-centric meetups that you go to?

Tamar Mar: They’re all over the Puget Sound region. Some of them are about 20-30 minutes South of where I live. I try to only — actually, I only go to ones that are within 30  minutes of my house. There’s ones that are all over the Puget Sound, but I have a family and three kids and I don’t wanna spend four hours driving to a meetup, if you know what I’m saying.

Joe Fairless: Yeah, that’s incredible, 4 to 7 meetups a month… That’s on average at least one a week that you go to. So you just block that out in your calendar the month prior, or you just go on a whim and say “I’m available, let me go do this.”

Tamar Mar: Usually it’s blocking it out on my calendar. The seven – that’s a really high number; this month I’m doing a capital raise, so I’m going to as many as possible to make new connections, so definitely on the high end. But I have kids sporting events all the time to go to and I don’t like missing those, so I try to plan around what I have going on with our family and the house.

Joe Fairless: With the 15-unit why did you do a syndication versus a joint venture?

Tamar Mar: I guess in all the time that my husband and I were doing the purchases of houses on auction, we were using our own capital for that; we were using our HELOC. We have a pretty extensive HELOC between two houses that we own. So we hadn’t ever really needed to look for outside capital. When I moved into the multifamily investing space I hadn’t built up a network of friends/family investors that I could go to because we hadn’t really had those conversations with people before. So I didn’t have somebody else that I could go to to say “Hey, do you wanna bring 200k to the table?” Most of the people that I was talking to were more comfortable with the $50,000 range.

Joe Fairless: How much does it cost to put the legal documents together for this syndication on the 15-unit?

Tamar Mar: I think I paid between 700k and 800k for it. Sorry, no–

Joe Fairless: No, that’s not right… [laughter]

Tamar Mar: Oh, that’s not right… Between and seven and eight thousand. My goodness…

Joe Fairless: I just threw up in my mouth a little bit. [laughs] You should have seen my mouth– I almost ate my microphone my mouth was so wide–

Tamar Mar: That’s a really good attorney that I have right there.

Joe Fairless: Yeah, bulletproof, baby. Bulletproof. Okay, $7,000-$8,000. Is that a local attorney?

Tamar Mar: No, he’s actually on the East Coast and he specializes in SEC…

Joe Fairless: Who do you use?

Tamar Mar: Steven [unintelligible [00:12:08].11]

Joe Fairless: Okay. And how did you come across the attorney?

Tamar Mar: I came across him through a podcast; I think I hear him on Michael Blank’s podcast about a year ago.

Joe Fairless: So you got the 15-unit, and how did you structure it with the investors?

Tamar Mar: We did a 75/25 split. It’s just straight profit sharing, no preferred returns on that one.

Joe Fairless: Okay. And now what about the second deal?

Tamar Mar: Yes. The second deal I actually got something  under contract right after that first one closed and I ended up getting rid of it. I walked away from the deal because of some information that came out in the due diligence period. Then I quickly got an off-market deal–

Joe Fairless: What came out? What happened?

Tamar Mar: Well, I was reviewing the finances and it was through a wholesaler and it had taken a really long time for them to get us all the due diligence documents. They hadn’t disclosed all of the electric expenses that they had, which were built into the rents. So we found out there was about $25,000-$30,000 worth of electrical expenses that there was no way that we could make it up, and it dropped our returns to probably like 5%-6%. So it just didn’t make sense.

Joe Fairless: And how much if any money did you lose as a result of getting that far?

Tamar Mar: Nothing, because I did all of my financial due diligence before I even move forward with a walkthrough or an inspection… So I was thrilled that I hadn’t lost any money on that deal.

Joe Fairless: Wow, alright. Great. So that didn’t work out, but then…

Tamar Mar: But then I moved into an off-market deal also in Spokane, which is about five hours away from my home here, and… Oh, this one is a treat. It’s a 16-unit, it is a little bit of a shady property, it doesn’t have the best reputation in town, although it’s in a very nice area that’s just right on the edge of a new community, that has built out a couple of giant casinos that are providing about 5,000 new jobs… So I’m not concerned about it just because it’s one of those junky properties in a nice neighborhood sort of a thing. So we are going to move forward in a couple weeks here to essentially vacate a whole entire property systematically, building by building, and do entire renovation inside and outside, and we’ll be able to really accelerate the returns on that property as well.

Joe Fairless: 16-unit… What were the numbers on that one?

Tamar Mar: We put in an offer for 875k, which was quite a bit above asking, and then we got it down to 762k because of all the renovations that needs to be done. The housing authority had been called on the property, it was in that bad of shape.

Joe Fairless: You said 875k was quite a bit above what they were asking?

Tamar Mar: Yeah, they were asking I think 800k originally, but since I had just closed on another property that was similar to that, I knew what the market was like and what it would take to get the deal, so we went in over asking to win the bid.

Joe Fairless: Oh, okay… So really there’s no downside other than potential reputation if you negotiate or retrade and they don’t agree, and they’re like “Hey, you went in with bad intentions; you just went in to get the deal.” So no financial loss or potential loss there…

Tamar Mar: No, and we actually got seller financing on that one through [unintelligible [00:15:25].27] so that’s also fantastic.

Joe Fairless: Was that originally part of the deal, or did that come through the due diligence?

Tamar Mar: That came out just because we didn’t think we were going to be able to get conventional financing with all of the work that needed to be done on the property. For instance, we had original electrical panels – it was a military barracks that were turned into an apartment community…

Joe Fairless: Wow.

Tamar Mar: … so the whole electric needs to be renovated, torn out, and I can’t even list everything that needs to be done. So we just figured we won’t be able to get conventional financing with ease, so we went to the sellers, asked if they’d do it, and they were actually quite open to that idea.

Joe Fairless: And what type of financing did you get with them?

Tamar Mar: I think we put about 22% down, and 6% was our interest rate, and it was for a period of 18 months. So it will take us probably 5-6 months to do the whole renovation process, and then stabilize the property, so we should be able to get conventional financing on that within nine months.

Joe Fairless: Are there residents living at the property?

Tamar Mar: Yes, there are. [laughter]

Joe Fairless: I’m picking up what you’re putting down with that comment… If they’re on a 12-month lease, then how can it only take 5-6 months to do the renovation?

Tamar Mar: That particular property had been prepped for sale about a year and a half prior to the sale. There was a fire that burnt down an entire building, and I think the owners were ready to get out, so they were prepping it by putting everybody on month-to-month leases.

We do have two tenants that are on some housing authority contracts which may be a little bit more difficult, and I think two tenants that are on a 12-month lease. We’re just gonna try to do some cash for keys, see what we can do there, or as we rotate through the different buildings and renovations, we will offer to put them in one of the newly renovated buildings if their lease hasn’t come up yet.

Joe Fairless: How many buildings are there with the 16-unit?

Tamar Mar: There’s just three.

Joe Fairless: Got it. And now the third deal — well, before we move on to the third one that you’re working on right now, what’s the structure on this one (the 16-unit) with the investors?

Tamar Mar: Actually, I guess this one isn’t a true syndication, this is more of a partnership. So I’m the managing partner of this deal; I have two limited partners who are friends of ours, co-workers of my husband’s that are good friends. We did a 75/25 split between limited and general partnership, but my husband and I were able to get in at about 70% of this deal in total.

Joe Fairless: Sweet, okay. And then it’s just profit sharing, no preferred or anything like that?

Tamar Mar: Yeah.

Joe Fairless: Cool. As far as your lessons learned with the 15-unit and the 16-unit, what are some of the things you’ve taken away from those experiences?

Tamar Mar: I think that my risk tolerance has really gone up, and I am willing to see things in a different light. I think my days of doing houses on auctions really prepped me for that, but I’m able to see beyond the mold and the walls, and the shabby conditions, and I’m really looking at how I can create a new community and a clean, safe place where people can create memories together in a nice home. So that’s one thing – look past the ugly.

Another thing is that I am just really getting a crush on this multifamily investing because I’m realizing how quickly you can print money, so to speak, by just improving the operational efficiencies of one of these assets.

Joe Fairless: And that’s the key that you’re doing, and it’s something I wanna talk a little bit more, about the operational efficiencies and how you’re — especially on the 16-unit; the 15-unit you said there wasn’t a lot of deferred maintenance, but the 16-unit clearly it’s gonna be a lot of heavy lifting literally and figuratively. How do you structure your team so that you’re getting that done? I mean, are you the one swinging the hammer?

Tamar Mar: Hah, no. [laughs] Although I’m not afraid of it, but I can’t do that when I have a property that’s five hours away. On this particular one I think it’s all about trusting your team. I have  a fabulous real estate broker who has connections all over the state and he has introduced me to some really key people to help me move my business forward… So I’m thrilled to have a property manager out there to [unintelligible [00:19:47].23] to the second deal, and I really trust him.

Then I’m using a contractor that they’re gonna go in and essentially move into one of the buildings while they are renovating it. So I’ll probably go out there once a month to check in on how everything’s going, and I’m gonna be hands-on with the design and all of that, but I will not be swinging any hammers, my friend.

Joe Fairless: And just so I’m understanding if you literally meant this or not – is the contractor literally living in the building while he or she is working on it?2

Tamar Mar: I’m not sure entirely how that’s going to work; I know they’ve done that on other deals,  but we haven’t smoothed out all of the details on it.

Joe Fairless: Okay. I was just curious, because if a contractor said “Hey, Joe, don’t worry, I’m gonna crash there…” My question to that contract would be like “Are you currently homeless, and if so, tell me your story, because it speaks to perhaps some life choices.” Maybe not, maybe it’s just bad luck, but most likely some life choices. Okay, that’s the 15-unit and the 16-unit.

Now you’re working on the 37-unit that you’re currently in the process of closing on, yes?

Tamar Mar: Yeah, correct. That opportunity came up right after I got back from vacation and I heard about the deal. The neat thing was we were able to walk the property before putting in an offer, and I cleared my whole schedule so I could do it, because as you know, that doesn’t happen very often. So I walked into it, and the great thing about that particular asset was that unlike most of the apartments that I’ve walked through over the last couple of years that have been in complete disarray, this was not. It was well taken care of, it didn’t have a lot of deferred maintenance, they just had a brand new roof… The units were well taken care of and renovated to some degree as they were vacated, and I felt really good about the way that it was — the repair of it.

Anyway, it’s a stabilized asset, and there isn’t a ton of upside in the rents, if much at all – it’s pretty close to market rates – but where we’re able to make some benefits here for our investors is, again, improving the operational efficiencies by decreasing the expenses, because the expense ratio is very high on this particular property. I think it was about 65%-67%.

Joe Fairless: What should it be?

Tamar Mar: I always calculate about 50% in my forecasts. I should be able to get it less than that.

Joe Fairless: Is that what you’re seeing your 15-unit at around, 50%?

Tamar Mar: No, I’m seeing that about 35%-37%, but this is an older property. It was a hospital that was built in 1926, in a historic downtown area, and it was converted to apartments in the mid-90’s. So it’s so charming… [laughter] It has hallways and elevators that’ll fit a [unintelligible [00:22:36].08] [laughter] So we do have a little bit higher expenses because we have an elevator, and it is a bit of an older property as well.

Joe Fairless: And just for the Best Ever listeners who are doing some math at home and they heard me say “invested in over 500 apartments” and then they calculated these three – so you’ve also invested passively in some deals first, and now you’re syndicating, yes?

Tamar Mar: Yeah, that’s true. So we’ve invested previously in the past in some retirement communities that we’ve gotten out of, and then we’ve also invested in passive opportunities, including one of your deals.

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

Tamar Mar: My best real estate investing advice ever is to be decisive about what you want to accomplish, and really have confidence in yourself and your plan. I think if you have believability — it lends credibility and believability to people if you have absolute confidence in what you’re doing.

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

Tamar Mar: Heck yeah!

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

Break: [[00:23:42].06] to [[00:24:13].07]

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

Tamar Mar: The best ever book I’ve read is Laws of Success by Napoleon Hill.

Joe Fairless: Best ever deal you’ve done?

Tamar Mar: I really like that first multifamily deal in Spokane, the 15-unit.

Joe Fairless: How come?

Tamar Mar: Because it showed me the power of investing in the multifamily space, and just having diligence and moving forward and crushing your goals.

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

Tamar Mar: I don’t know… I feel like sometimes all these things blur together and I can’t think of a great answer for that.

Joe Fairless: If you could do something different on — let’s go with the 16-unit… So far, that you didn’t do – what’s one little tactical thing that if you could do different, you would do different?

Tamar Mar: I think I probably would have gone out to the property to see it first. I hadn’t seen it before I put in an offer on it. I thought there might be a potential to build some extra facilities on it, for instance some self-storage, because it’s quite a large lot – three parcels – but then when I go there I realized “Oh, there’ s giant self-storage facility right across the street”, so it kind of crashed that dream, but I hadn’t driven by it yet.

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

Tamar Mar: I love listening. I like listening to other’s needs to see where I can add value.

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

Tamar Mar: You bet. They can visit InvestingForLifePodcast.com to be connected to my podcast, or my website, which is MarotaGroup.com.

Joe Fairless: Okay, and MarotaGroup is in the show notes, so Best Ever listeners, you can just click that and check it out. Well, Tamar, thank you for being on the show and talking about these case studies. You walked us through the details of these case studies – the 15-unit property, the numbers behind the property, the business plan, and congratulations on this upcoming refinance; you’re getting out most likely all or most of the money that you all put into it, and you’re putting more long-term conservative debt on it.

Then the 16-unit – I recommend journaling on this one… It sounds like you’re gonna have some more good stories with the 16-unit. That’s gonna be a lot of fun, to listen to stories about that as that continues to evolve, as well as good luck with your 37-unit.

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

Tamar Mar: My absolute pleasure. Thanks, Joe.

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JF966: How to Find a REALTOR to Sell Your Next Rehabbed Property ABOVE Asking Price

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If you regularly listen to the show you may eventually have a rehab project if you haven’t already. When you do, there are many expenses you need to look out for, such as capital expenditures for remodel, the cost of money to purchase, and most definitely the cost to hire someone to sell it. How about finding someone that will sell your product above asking price? Our guest today is your man! Learn how to vet each candidate.

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Aaron Hendon Real Estate Background:

– 5 Star Realtor with Keller Williams Greater Seattle
– Provides Boomers with Aging Parents a Stress Free Way to Handle Senior Transitions & Estate Resolutions
– Host of The Seattle Real Estate Podcast with Christine & Company
– Designated Leader of the Introduction Leaders Program at Landmark
– Based in Seattle, Washington
– Say hi to him at http://christine-and-company.com/
– Best Ever Book: The Undoing Project by Michael Lewis

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finding a realtor for fix and flip deals

 

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, Aaron Hendon. How are you doing, Aaron?

Aaron Hendon: Joe, I’m doing great, thanks! How are you doing?

Joe Fairless: I am doing well, and nice to have you on the show. A little bit about Aaron – he is a five-star realtor with Keller Williams Greater Seattle. He provides boomers with aging parents a stress-free way to handle senior transitions and estate resolutions. He’s the host of the Seattle Real Estate Podcast, and he is, of course, based in Seattle, Washington. With that being said, Aaron, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Aaron Hendon: Well, I’d say I’m a residential realtor now. I’ve been a real estate investor for about 15 years; I got into the residential, agent side of it about five years ago. Also, an author and an educator. I really do consider my job to be consulting with people when they’re making the biggest, most expensive transaction of their life. I work with investors and individuals looking to buy their homes, or anyone looking to buy residential real estate.

Joe Fairless: Okay, let’s just clear that up in my mind a little bit. So anyone who’s buying residential real estate you work with, but I believe — do you have a focus with baby boomers, or is that not the case?

Aaron Hendon: I do. One of the niches that I focus on are helping boomers with aging parents. The avatar there would be “Leave. I’m a boomer, my parents are in their nineties and I don’t know anything about anything about what I was gonna have to deal with when it came time for them to move out of their homes.” They got themselves a reverse mortgage on their own, I didn’t know anything about that, I had to go look into that… Estate resolution… It’s just such a stressful time for people; it’s such a hard space emotionally… Your house itself is emotional, much less your parents. So you’re dealing with all of that.

Anything I could do to facilitate that transition I thought would be a very useful, valuable niche. I come from the mind of the — I don’t know if you ever read the book The Go-Giver – it’s sort of “How can I help? What can I do to provide value?” I thought there was a real niche that really could use help, so that’s a focus of ours here for sure in the last couple years.

Joe Fairless: It makes sense, and I do enjoy the Go-Giver, and the author of that, Bob Burg has been on the podcast a couple times, so Best Ever listeners, you can listen to his interview on this show, as well if you just google “Bob Burg Joe Fairless”.

Let’s talk about your investing approach. I believe you said you were a residential real estate investor for 15 years – did I hear that correctly?

Aaron Hendon: Yes.

Joe Fairless: What were you investing in?

Aaron Hendon: Single-family homes, the remodel and we’d rent out, and look at value and flip at some point, but buy and hold mostly.

Joe Fairless: Okay, and was that a past tense or present tense as far as you being an investor?

Aaron Hendon: Past tense.

Joe Fairless: How come?

Aaron Hendon: Well, because when the downturn came we lost our money. We lost our capital in the downturn, and have been slowly building back up. That’s sort of how I got into the realtor side of things. I thought, “Oh, well there’s a way for me to stay involved in something I enjoy, and carry none of the risk” – it’s a very low-risk model from the point of view of the realtor, and yet I could facilitate that with people that were looking to buy and hold, or flip, or do anything like that.

At this point, financially, for my family, we’re probably in the next 12 months looking at getting back in because now as a realtor, of course, I get the advantage of the commission.

Joe Fairless: Oh, yeah!

Aaron Hendon: It’s ridiculous for me not to be back. It took some time… I’m sure you have listeners for whom the downturn hit them, and it did for me, for sure.

Joe Fairless: Oh, absolutely… And I’m curious now that you’re going to get back into it, what is your approach going to be now versus then?

Aaron Hendon: Well, for sure don’t get carried away. It was very easy — looking back on it now, it’s just been sort of insane… Ninja loans, and all the questions I had about it at the time were like, “Wow, are they really gonna lend me this much money?” – that kind of stuff. So to not get carried away and not do things that don’t actually make sense. You don’t have to take the money just because they’re giving it. If it doesn’t actually make sense, there’s probably something on the other side of that. So we wanna do it more slowly, do it more cautiously, not get carried away, make sure that a downturn doesn’t take out everything.

Joe Fairless: What will be the type of financing or property you purchase on this next go round?

Aaron Hendon: I would stick with single-family residences, because that’s really sort of what I know and it’s my sweet spot. As much as I enjoy learning new things, I’d like to start back up with what I already know. I would prefer to start with — if I could find the flips, it would be the flips, but in the Seattle market right now there’s just so low inventory, and everybody who’s already in the business, all the investors, they’ve already got that covered. So I would most likely be looking for buy and holds. The Southern [unintelligible [00:07:24].03] Tacoma area… There’s a couple of great colleges there, so vacancy rates would be naturally lower because of the turnover, because of demand, and there’s the joint air force base Lewis-McChord, which are great tenants, and home values are certainly low enough that you could buy and have the rent pay the mortgage and then some, and that’s really where we’re gonna be looking.

Joe Fairless: And with the fix and flip, do you have your own team that you used in the past that you would just activate again, or are you starting from scratch with the team?

Aaron Hendon: I would be starting from scratch with that team.

Joe Fairless: What’s your role in the fix and flip process? How hands-on are you?

Aaron Hendon: I wasn’t, at all. Like I said, it’s been years since I’ve done it, so there’s no team now. When I did it, I was not hands-on at all.

Joe Fairless: Okay.

Aaron Hendon: I’m not handy with a hammer.

Joe Fairless: That makes two of us. So let’s talk about you being the host of the Seattle Real Estate Podcast – how long has that been running and what business result have you seen from being the host?

Aaron Hendon: It’s been about a year, and mostly it’s just a top-of-mind kind of phenomenon for people. I frankly don’t get a lot of subscribers, it’s not something I particularly promote as a podcast… I do educational videos at least two or three times a month, about topics that people ask me about. Sometimes I’ll do interviews, I’ll do interviews of people like a contractor or a lender or something like that, that are applicable for people buying residential real estate… And answer those kinds of questions, things about “What are the most profitable remodels I should do before I sell? Or the least profitable remodels. What’s it like to live in this part of town?” Market updates, “What’s the market doing?”, things like that, so that people, when they think of residential real estate, they might think of me as a resource.

All that goes up on YouTube, all those go out to my e-mail list of about 2,000, twice a month, so that people… Again, total go-giver – value, value, value. When they look in my direction, they think “Oh, well there’s a resource… There’s somebody who could give me some advice.”

In terms of ROI or business results, things like that, mostly it comes in the form of people call me — I just got a call from someone that I haven’t spoken to face-to-face, voice-to-voice, in 12 months, 15 months, something like that. And they just called and they said, “Listen, I’ve been getting your stuff, and I have a question. We’re right now ready to sell…”, and it’s that kind of constant drip of value on them that leads, with no ask, no sale (I’m not asking for anything) that leads them when it’s time to find someone to help, they come to me.

Joe Fairless: I love that. One thing I’ve noticed with my podcast initially is that I didn’t get any comments or feedback or outreach from strangers initially… But what it did is whenever I shared it, it influenced my current circle of friends and family, and it positioned me as a thought leader within my current circle of friends. The people who had been either needing questions answered in the real estate investing space, or thinking about it, who I already knew, this then positioned me as a thought leader, and it sounds like it’s been similar results for you.

Aaron Hendon: Yeah, Joe, a hundred percent. I don’t know how you feel saying the word “Thought leader” about yourself… It always makes me sort of uncomfortable – I always consider myself to be “Okay, I’m just some guy”, but at the same time I am putting myself out there and I do think that I have value to add, and I think that’s exactly right, I think it positions me as someone who people could turn to. For any of the listeners, everyone’s got something to add, everyone’s got value, everyone’s got a unique perspective, and I think it’s just a question of bracketing and putting aside our own internal thoughts of “Oh, I’m not really that smart” or “I really can’t do that.” Just put yourself out there.

Joe Fairless: Have you noticed any tangible business results since you’ve been doing it for a year? Any deals that have closed or any transactions, or is it still brewing and brewing, and long-term  you’ll see stuff?

Aaron Hendon: Something I do with the videos that turn into the podcast – those videos go twice a month to my list, and then I always call through my list of anyone who’s opened the videos… You know, you get a click report, you can find out who opened the video and who clicked on it, and as soon as I call through that list – prospecting – part of my phoning is calling through that list, and I call them and I’ve had people on the other side say “Oh great, I’ve gotten your video. Thank you so much for calling. Listen, my brother-in-law is ready to sell – do you wanna give him a call?” That kind of thing.
So I’ve probably done two, maybe three deals last year, something like that, from the e-mails. It’s the prospecting, though… You can’t really tell that they’re calling in from the videos, but you can tell if you call them… So I don’t know how many deals I got just from it, other than the ones that I called out to. But it’s two or three for sure, in the last year, which is not bad; it’s the first year I’ve done it

Joe Fairless: Yeah, that’s great, especially when you can start looking at the platform paying for itself and then some. You mentioned something earlier that piqued my curiosity… You said the most profitable remodel and the least profitable remodel before you sell – one, can you tell us what those are? And then two, if they’re market-specific to Seattle.

Aaron Hendon: I don’t think they’re market-specific, although I certainly don’t want anyone to come back to me later and go “Oh no, that was just Seattle!”, so I don’t know…

In terms of most profitable – and again, I’m speaking to individuals out to sell their home, not necessarily investors with money to put in… So I haven’t done it from that perspective, but from the residential homeowner, out to sell their home, the first thing I think they need to understand is that no remodel is gonna return more money than they put in. That remodel, at best, you’re looking at 80-90 cents on the dollar from an individual fixing their house. It’s different if you’ve bought a foreclosed home and you’re gonna go put money into it; that’s a different scenario and I haven’t done that work. But for the private homeowner, looking to improve their house, if they’re already clear that part of the value needs to be the amount that they enjoy it, that they don’t do it just before they sell, because they’re not gonna get that money back, the most profitable seemed to be putting on a nice deck, or fixing the deck that they have, making outdoor space. It’s relatively inexpensive, it looks great, and it adds in usable square-footage in some way that doesn’t necessarily get reported, but it’s fantastic, and it creates a great eye appeal, and that’s such a big deal when you’re selling your home. So that’s one thing.

Same thing with kitchens. Kitchens – you can spend $40,000 remodeling your kitchen and you’re not gonna get that back, but if you did it intelligently, did it economically, did it in a nice, well-done way, you can get 90 cents on the dollar back when you sell that house, and if the kitchen becomes more functional for you for the year or two that you live in it before you sell it – fantastic. That’s a great use of money.

The third one is usually going green – tankless water heaters, possibly solar, maybe radiant floors if you’re doing an add-on… It’ll give you, again, the best shot at getting 90 cents on the dollar, and only more and more popular… Green solutions are just becoming more and more valuable as we move forward with our economy. So I think those are the three places that residents can look.

Joe Fairless: And what about the least profitable?

Aaron Hendon: I think the least profitable ones are — first of all, primarily, anything you do, think in principle about this… No one is out to buy your home; people are out to buy THEIR home. They don’t wanna buy YOUR home, they wanna buy a house that they can turn into their home. So things that you do to the house that YOU love, like paint – if you’re gonna paint, you’d better be painting white, you’d better be painting neutral… Do not paint that room pink because you love pink, it’s detrimental. Not only do you lose the money and time it took you to paint it, but people are gonna pay you less. Same thing with carpeting… Unless the floors are just horrible, you’re way better off getting a carpet credit than you are carpeting, because no one’s gonna like your taste; nothing personal, but really… Don’t. Just don’t put in new carpeting. Flooring… Any kind of vinyl flooring – you just cannot rely on the fact that the buyer wants that, and you’d be better off offering that much money in the credit than you would be doing it yourself, because you’re liable to turn someone off.

So things that are cosmetic that are particular to you are the worst possible investments you have to flip the house.

Joe Fairless: Yeah, that’s a great lesson for investors… Definitely investors as far as no one’s buying your home, they’re buying their home, so make sure we do the renovations that align with the mantra.

Aaron Hendon: Yeah, very good. Great way to say that.

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

Aaron Hendon: This is very self-serving, so you’ll have to forgive me, Joe, but get a good realtor partner. Don’t go cheap when it comes time to find the professional that’s gonna sell that home. A good realtor, and if you interview a realtor well, he should be able to get you more money at sale than doing it yourself or doing it with a discount broker, and you can absolutely find realtors who’s list-price-to-sell-price ratio is high enough to cover their commission, and finding someone like that is like finding a great contractor. It’s like finding a great drywall.

Joe Fairless: What’s the list-price-to-sell-price ratio?

Aaron Hendon: It’s how much over or close to list price do you get when you sell a home.

Joe Fairless: You can ask that of the agent whenever you’re interviewing him or her?

Aaron Hendon: You sure can.

Joe Fairless: I guess you should…?

Aaron Hendon: Well look, isn’t the point to get the most money in the least amount of time with the least hassle? If that’s the point, then that’s the kind of questions you wanna ask your realtor that really nobody asks, Joe. This is literally how I got started in my educational program of creating videos and creating books. I’m in the middle of my second book now, called Real Estate Blindspots, because it’s so shocking to me that people actually do want the most money in the least time with the least hassle, but what they do when they interview realtors is pretend “Oh, they’re all the same.” It’s whacky!

Joe Fairless: Okay, you can ask that question, “What is your list-price-to-sale-price ratio?”, but how do you get verification that what they’re saying is correct?

Aaron Hendon: If you’re questioning their honesty, we’ve got a problem right away, with using that person. But you could easily ask them “Show me the listings you sold in the last 12 months.” When I go for a listing appointment, I print out the last 12 months worth of listings and I show them the list-price-to-sale-price ratio. Now, no one does that; I know no one else is doing that, because everyone else is organized around the way the market thinks, and the way the market thinks is “All realtors do the same, so therefore the first one that comes through my door is the best one.” That is really how the market thinks, and I’m out to break that up and let people know, “Look, there’s other people that you might have interviewed that they show you this?” You could just ask them to print it up off the MLS.

Joe Fairless: Instead of asking what’s your list-price-to-sale-price ratio you can just ask “Can I see the listings you sold in the last 12 months, a print-out of that?” and then you’re not questioning their truthfulness, you’re just asking them to look at that… And then on those print-outs will it show the original list price and the sale price?

Aaron Hendon: It will show the list price, the sale price and the days on market. It should all be right there for you. And it will blow their mind. I promise, if you’re an investor, if your listeners do that, there will be people that get chased away. There’ll be people that get insulted, there’ll be people that find you arrogant… And what a great way to vet who you work with, because how dare anyone be insulted? They’re about to take 2%, 3% of your commission, and they’re gonna get insulted?

Joe Fairless: I love that. That’s phenomenal. I’m really glad that you mentioned that. What is a good ratio?

Aaron Hendon: That’s a really great question, Joe, and that is something that you either would wanna research yourself and find out what the market is like in Seattle… It’s a super hot market, it’s insane… Multiple multiples over asking price; two days on market, six, seven, eight, ten offers – it’s crazy. It’s not like that everywhere. Our team does 105% of asking price on average, where the local market altogether is 100% of asking price… Because if you’re taking all of it, it’s 100%, and we consistently get 105%.

Good, it’s not like that in Tallahassee, but you should find out what it is like in Tallahassee, find out what the overall market in Tallahassee is like, so that when you compare realtors, you’re comparing them against your market average; not some national average, but YOU, where YOU’re selling. And you can ask them, you can find a realtor that finds that out…

I’m trying to think how investors would find that out… I’m a little bit off about how to do that…

Joe Fairless: We could simply ask three, four or five people, real estate agents, that question, and then we’ll at least be able to compare those five against each other.

Aaron Hendon: Completely! And then you can see, because if you get someone who’s obviously heads and shoulders above the rest, you can then start asking, “Okay, how do you do that?” And then, Joe… I think it’s really great, it’s just a really good point, because at that point, after you’ve gotten their actual performance, then you could ask the questions – “Okay, do I like hanging out with this person? Does this person fill me with confidence? Do they make sense? Do they have integrity? Is this someone I wanna do business with?”

I think those are also still critical questions, I just don’t think those are the only questions, and those are pretty much the only questions that anybody ever uses, not the performance one.

Joe Fairless: I love that, it’s very helpful for anyone listening who will use a real estate agent, which is most of us. Are you ready for the Best Ever Lightning Round?

Aaron Hendon: Sure!
Joe Fairless: Alright, let’s go. First, a pause for our Best Ever partners.

Aaron Hendon: Okay.

Break: [[00:21:48].28] to [[00:22:31].09]

Joe Fairless: Now let’s roll right into it. What’s the best ever book you’ve read?

Aaron Hendon: I’m gonna tell you the last book, because the recency bias is always right there for me… The last book I read is called The Undoing Project by Michael Lewis. That’s the guy that wrote Moneyball and The Big Short. I find him fascinating, he’s a great writer. The Undoing Project is about Daniel Kahneman and Amos Tversky, who are Nobel prize-winning psychologists who created really the field of behavioral economics. Just a fascinating look on how human beings are so predictably irrational in their buying.

Joe Fairless: Oh, sign me up!

Aaron Hendon: It’s the basis of my Real Estate Blindspots book, about the way we’re idiots about real estate.

Joe Fairless: I’m reading that for sure, that’s next on my list. Best ever deal you’ve done?

Aaron Hendon: Okay, the best ever deal… I have very good friends that I got to write an offer for… I’ve actually done this twice now with friends, but one where we went and saw the house – it was the second house they saw – we walked in, they loved it, there was already an inspection done. I called the realtor and I said “Hey, my clients really love this place. Do you have an offer?” They said, “Yeah, well we’ve just sent our counter-offer back to them but it’s not signed yet.” I said, “Okay, well if I wrote you an offer at this price, could it bump the one you have?” They said, “Yes, it could…”

So we sat down at a coffee house, we wrote up that offer, got it to them, they rescinded their counter-offer and accepted our offer. So while that’s clearly some other realtor’s least-favorite deal, that was my favorite. I loved being able to do that.

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

Aaron Hendon: Honestly, I do work with a company called Landmark Worldwide. It’s a company that’s committed to transformational leadership and transformational educational in the world, and I’ve been participating and leading programs with them for about 20 years. It’s a volunteer process for me, but man, to watch people step beyond who they know themselves to be and into a world where they become leaders in their own life… There’s just nothing like that.

Joe Fairless: What’s the biggest mistake you’ve made on a particular deal?

Aaron Hendon: That was what was there for me when you said “What’s your favorite deal?” – what’s my least favorite deals… [laughter] There was one last year where I had this great client, I totally loved them – and they did love me, up until this – and the deal was sort of closed way too quickly. It was out of protocol; the whole thing was out of protocol. They were using Bank of America, which if I could make sure that none of your investors ever use the big banks, it would make me thrilled and happy…

So they were using a big bank, and I knew it, it was a problem all the way through the deal. The deal finally got approved and was ready to close on a Friday, and my client e-mailed me and said, “Can I please, please, please, please get in there this weekend? Can we close today?” and I said “Yes”, and I should have said, “Well, we really do need to do a walkthrough, which could postpone the close until Monday… But we should do a walkthrough. How do you wanna do it?” – and I didn’t say that, I just said yes.

We went ahead and closed, and then we did the walkthrough and the seller had left just a ton of stuff all over the house, and while I paid for the cleaner, I got it all cleaned up, my client was just heartbroken. They had gotten a house that was just so poorly maintained, and it all could have been avoided had I done the walkthrough, had I done what I know to do. They won’t use me again, it was a tough deal to put together, but I didn’t do what I know to do at the end, and it was just a shame. It was really disappointing.

Joe Fairless: Lessons learned along the way, that’s for sure.

Aaron Hendon: Absolutely.

Joe Fairless: Where can the Best Ever listeners get in touch with you, Aaron?

Aaron Hendon: Probably the best thing to do — so I wrote a book about interviewing realtors, called “Don’t get fooled again.” It’s seven questions you must ask to avoid hiring the wrong real estate agent again. If they go to dontgetfooledagainbook.com, they will not only be able to download that book for free, they’ll also get on my mailing list, which will then get them all my information, and they’ll also be on the list to get a free copy of The Real Estate Blindspots when it comes out later this year, which is a much more thorough investigation of the ways in which we are irrational, foolish with buying and selling real estate. And I’d love their feedback on that too; that would give me a really big favor, if when they got a copy of that book, they were available to give me feedback. That’s a promo for your investors.

Joe Fairless: Aaron, the number one question you gave us, if that’s any indication of what’s in that book… Everyone definitely should get the book. I love the question, and we should all ask potential real estate agents who work with us “What is your list-price-to-sale-price ratio?” or maybe instead of that, just ask to see the listings over the last 12 months, and then you’ll see the list-price-to-sale-price, and days on market, then compare them to others or compare them to a standard that we know the market to be at.

Thanks so much for being on the show… Lots of other great lessons, but that’s the one clearly head and shoulders above for me, that I took away from this interview. I hope you have a best ever day, my friend, and we’ll talk to you soon.

Aaron Hendon: Joe, thank you very much. Thanks to everyone listening too, I appreciate it.

 

 

 

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Joe Fairless's real estate podcast

JF918: Section 8 and 87 Units AREN’T SO BAD…Ask This Guy!

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He manages/owns 87 units ranging from single units to multi family to single-family homes. That’s a lot… We know, yet we are still perplexed by how he does it all himself. Hear how he manages his section 8 rentals and his screening process, it’s worth taking notes.

Best Ever Tweet:

Curt Bidwell Real Estate Background:

– Managing Partner at Philia Holding Company, LLC
– Started in RE in 1990 with 3 partners and a 4-plex, while serving as a full time Youth Pastor
– Over the 26 years he has bought out each partner
– Has accumulated several SFR, duplexes, a 10 & 24 unit apartment, & a 42-unit mixed-use building
– Current project is a major farmhouse rehab that includes a short plat.
– Based in Seattle, Washington
– Say hi to him at http://www.philiahc.com
– Best Ever Book: Millionaire Real Estate Investor by Gary Keller

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JF916: High End House Hacking in Seattle!

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House hacking seems to be the way to go and especially get started in real estate. Our guest did so with Microsoft employees, high tenants who rented rooms while our guest lived in the master. More to come in this episode, tune in!

Best Ever Tweet:

Jeremy Jones Real Estate Background:

– Real estate investor and musician
– In 2002 was working full-time at Microsoft and acquired a rent-by-the-room rental home
– In 2012, partnered with his brother to build a portfolio of multifamily rentals in Seattle
– Received a GRAMMY Nomination in 2014 for playing drums in Macklemore & Ryan Lewis album The Heist
– Based in Seattle, Washington
– Say hi to him at http://www.jeremyjonesmusic.com
– Best Ever Book: Autobiography of a Yogi

Click here for a summary of Jeremy’s Best Ever advice: http://bit.ly/2lBp2ZZ

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Best Ever Show Real Estate Advice

JF 82: House Hacking Tips Revealed

Today’s Best Ever guest discusses a strategy for growing your real estate portfolio that I think is the best EVER strategy for beginning investors.

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Brandon Turner’s background:

–        Active investor focusing primarily on rental properties and flips in Western Washington State

–        Started investing when he was 21 years old

–        Co-host of the world famous BiggerPockets Podcast alongside Joshua Dorkin

–        And, actively involved writing in-depth articles on http://www.BiggerPockets.com 

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