Investor Cheat Code Podcast with Mike Simmons

Today I'm excited to interview a great investor here in my local Michigan market. Get ready to learn and take some notes!

I know Josh Sterling personally and I'm thrilled to talk to him about his business. He grew up in California and was an airline pilot for five years. He moved to Michigan in 2009 and that's when he started investing in real estate. He owns and manages 125 units, flips 12-15 properties per years, and runs a property management property. And on top of all this, he currently has a full-time job as an air-traffic controller!

For all of you out there thinking that you can't invest in real estate because you have a full-time job, listen closely to this episode and find out how Josh does it.

Josh was working as a pilot when he decided to get involved in real estate because he wanted to be able to provide for himself and not depend on an employer in a volatile industry. Before he left the airlines, he owned five properties. Josh invests in Michigan but stays out of Detroit. The first properties he bought in 2009 were in the $25,000-$30,000 range, which was incredibly low because of the financial situation at that time.

I asked Josh why he still keeps his day job. He says it allows him to aggressively invest in real estate; the more money he makes, the more he can invest. Josh strives to live on about 25% of his net income. Josh and his wife look at their day jobs as tools to appeal for bank financing. They won't be working full-time jobs forever, but those jobs have been very helpful so far.

Listen to the full episode to hear Josh talk about his systems and his criteria for buying a property, and how they've evolved over the years. Josh also talks about the differences between his rental business and his house-flipping business, and how he finances his deals.

Many new investors worry about being able to invest in real estate while still holding down a full-time job. Josh has wonderful advice on balancing the two and managing to scale his real estate business. The first step--learning to delegate.

There is valuable, detailed information in this episode and I highly recommend that you set aside some time to listen to it carefully! If you have any questions, post a comment here or email me.

Finally, I hinted a couple of weeks ago that my business has changed completely in the fast few months. I'm doing a lot more direct marketing, which I'll get into in future episodes. I'm also doing a lot more wholesaling. If you're in the Michigan market, I have a tremendous amount of leads coming in and would be happy to talk to you about them. If you want to find out more or even get on my buyers' list, email me at [email protected] with the subject line Wholesale.

I’m back!

I’ve had a crazy last few months. There have been significant changes in my business that I’m thrilled to share with you! The content I have for you based on my own experiences and my own business alone is so valuable.

My guest for today’s episode is someone who’s done incredible things for my business, and I think he can help you with yours too.

 

Dan Barrett is the owner of Adwords Nerds, the only agency of its kind that works exclusively with real estate investors. This is a company I’m currently working with and getting real world results from. They’re a fully certified Google partner, and they’ve really transformed my business lately, bringing me more online leads that I ever thought was possible.

Dan is the coolest guy I’ve ever worked with, and he’s super knowledgeable. His company is always transparent and incredibly client-focused.  They will work with you for an entire month for free, with no obligation to you. On top of that, they always work month-to-month so you can always end your service if you’re not happy with it.

Try it today, guys.  And as a thank you for listening to this podcast, they’re offering an exclusive free 60-minute consultation with Dan to talk about your business. I can tell you from experience that the first month I worked with Adwords Nerds paid for itself ten times over.

So, let’s dive into the interview.

Dan comes from a very interesting background. He was training to be a high school history teacher and has a Master’s degree in History and a Master’s degree in Education. But he’d also always been involved in music and been in bands. To be able to promote his band, he started learning how to build websites and promote them online. He eventually began freelancing in web design and working in SEO optimization. About five years ago, Dan made the decision to take his tech business full-time.

He made the jump into Two Friendly Nerds, which started as a web design and SEO agency. About two years, they started doing pay-per-click advertising, and then last year Dan started doing Adwords management specifically for real estate investors. He wanted to dig deeply into a single market and understand his clients and their process from start to finish.  Listen to the full interview to find out how Dan settled on real estate as the niche market he wanted to focus on—it’s a funny story!

In the past year (or less), Adwords Nerds has worked with 25 real estate companies of all sizes. Dan is very interested in comparing data across all these different markets and strategies to figure out what works across the board and what is helpful for each particular client.

As I’ve mentioned before, I used to think that you needed to find money to start investing in real estate. I’ve since realized that the single most important thing you can do as an investor (even if you woke up this morning and decided to invest in real estate) is lead generation. Once you have a deal, you will be able to make money off it—money flocks to good deals.

My business relationship with Dan started with an online conversation about how we might be able to work together, followed by a consultation. I initially told Dan that I don’t really want to learn Adwords myself, I just wanted to outsource it. Dan started learning my market, playing with keywords, and fine-tuning some data. About a week and a half later, I got my first lead and signed the deal—I realized I had spent only $10 to get this lead, and I ended up making $12,000 flipping that house. Now, I don’t know that that happens every time, but that was my result just a couple of weeks in.

Dan and I are going to create a case study of my experience with Adwords Nerds. We’re going to be very transparent about how many leads I’m getting through my website, how they’re converting, and what I’m making. We will be checking in and strategizing right on the podcast.

We are at the end of the first quarter of the year! Where are you with your goals? Have you gotten about a quarter of the way through what you wanted to accomplish for the year? If you've fallen behind, and I hope you haven't, I am always here to help you get back on track.

Today I am going to play an interview I did about a year ago with hard money expert Sasha Favelukis.

Alexander (Sasha) Favelukis has been involved in themortgage industry since 2002. He started as a wholesaler, selling loans packaged to the secondary market. With his experience and wealth of knowledge of the inner workings of the banking industry, he decided to move into the retail aspect of  lending, and began working as a loan officer in 2003.

In 2005, Sasha Favelukis and Alex Pellegrino started a mortgage and real estate company in La Mesa, CA. They immediately grew to 19 employees, partnered up with a large lender in Los Angeles, and became one of the first companies to offer non-resident alien loans to people with ITIN numbers. In January of 2007, they decided to exit the conventional lending industry because they saw the end of an era coming. Due to the fact that they were funding loans for some of the most aggressive lenders, they were able to see the contraction of the lending market before most did.

In July of 2007, Sasha moved to San Francisco to pursue an opportunity to work in theprivate money space. From 2007 until 2010 Sasha was able to fund $70 million in loans and put $50 million of investor capital to work. After studying the industry ofprivate money, or hard money as it is called, Sasha decided to move back to San Diego because he felt that the market had bottomed out and it was a good time to start lending there.

His private LLC was established in 2010, has funded over 120 hard money loans in San Diego County, and bought a multitude of investment properties that give a constant return of 10%.

In 2012, Sasha joined as a partner with Sequoian Investments Inc, which engages in private money finance. In 2013, Sequoian funded over $20 mm in short-term loans for property rehabbers in the San Diego area. They are now starting to expand to other markets in other states. They plan to be up and running across the US by mid-May.

Sasha essentially jumped right out of school and into the real estate investing world. He believed that he was able to position himself very well during the real estate crash of 2008/2009. He was in an area of California that was much less affected (San Francisco Bay), and he changed his model so that he was able to weather the storm.  That area of California remained very stable and prices did not dip dramatically. Because he isolated himself in an area that remained stable and largely unaffected, he was able to continue his real estate business while everyone else faced enormous challenges in the industry.

Sasha was lending money and finding deals for real estate investors. He and some partners were trying to buy rentals and kept getting outbid by house flippers. Eventually, Sasha just asked if he could fund some of their deals. From that point on, he started working with investors and funding flips.

Sasha’s advice for finding a good moneylender your area is simply to use word-of-mouth and personal recommendations. Because it’s very hard to know the good, hard moneylenders from the bad, hard moneylenders, your best chance is to talk to people you know and trust and get their recommendation.

Links

Sequoian Investments

You can reach him at 855-390-5626

Today I want to talk about something that was impressed upon me very early on in my career and that I still think is incredibly important. I'm talking about being a connector.

Real estate is a very social industry and there are always people who need help with something and people who have someone in their network who can be of assistance. A connector is someone in the middle between an individual who has a need and an individual or company that can solve that need. The best connections are ones that are mutually beneficial to both the person in need and the person with a solution.

My mentor is an incredible networker and he  mentored many people in my local real estate community. He knew that everyone had their strengths and weaknesses and he was able to connect people. On more than one occasion, he connected me with people who could help me with something in my business or with people who I had the ability to help.

I always make an effort to connect people who would benefit from knowing each other. Today, I had a listener contact me through email asking for help starting his business. I'm always excited to help my listeners take their first steps in the business. This particular listener was interested in investing in big multi-family buildings or commercial properties. That's not my area of expertise, but luckily I interview many very successful investors on this podcast, so I was able to put him in touch with one of my past guests, who would be able to give him great information and guidance.

Coincidentally, today someone I know in the industry connected someone to me who they felt I could help. And not only can I benefit this person, but they will also be helpful to me and my business. It was a great win-win connection, and I look forward to sharing more information about it on the show.

Now, as much as you should always try to help people who reach out to you, the worse thing you can do is pretend to have knowledge that you don't have. A new investor seeking your help is at your mercy in many ways, and they don't know if the advice you're giving them is valid and valuable. If you fake expertise, you're not only hurting that person that you're supposed to be helping, but it will almost certainly reflect poorly on you. This industry is a small place and you always want to be making friends.

When you are a connector and you connect two people for the mutual benefit of both, it elevates your status with each of them. I always appreciate when people recommend me to others or offer me a recommendation for a specific need. Everyone wants to be associated with a connector.

Today I want to talk about the various modes of real estate investing. Over the last few years, I've realized something I really didn't understand in the beginning. I would read or hear real estate success stories online and on podcasts, and each time I would think that that investor had the answer, or understood the definitive way to work in real estate. We call this the shiny object syndrome. Eventually, I realized that there are countless ways of doing this business well.

There's no right way to do real estate. Being successful in real estate is usually a means to an end--maybe you don't want to have a 9 to 5 job, or you want financial stability. Every technique you hear about is valid in terms of helping you reach that goal. That's exciting! There are a million ways to do this and you don't have to do it somebody else's way. There's value in finding someone who's successful and modeling your path after them, but don't think that the success story you happened to hear about today is the only way to do it.

It's all about persistence. You don't have to discover the one right way to do it; any way will work, as long as you stick with it!

Today's episode is a replay of an interview with the phenomenal Nick Ruiz.  Nick has a rags to riches to rags to riches story, and the interview really shows you that, when things go wrong in the business, you need to know how to pick yourself up and build yourself up all over again.

Nick is a passionate, twice self-made real estate entrepreneur. He started when he was 19, built a multi-million dollar net worth, and borrowed millions of dollars from banks by his mid-20s. When the crash of 2008 came, he was too over-leveraged on his investment properties, and this eventually forced him into bankruptcy. But, he got extremely creative, hustled hard, and climbed back up flipping and wholesaling. He is now back into total financial independenceas a real estate entrepreneur. That I why I say he is a twice self-made real estate entrepreneur!

This was a very interesting interview and Nick is very interesting and an incredible real estate investor.

When I asked Nick what he thought was the biggest mistake that new real estate investors make, he responded that they overcomplicate the business; they take a simple flip and turn it into a complicated transaction that goes through several phases. It’s really as simple as this: buy a undervalued property, fix it up, and sell it for profit. New investors sometimes try to get overly creative and fancy with financing and introduce too many variables into the equation. Ultimately they have a tangled mess.

If Nick had to start his business over again from scratch tomorrow, he said that he would start by googling the probate attorneys in his area and starting to create relationships with them and their staff. He would then go to Walmart and buy poster board and start putting up “we buy houses” signs all over his target market. He would then determine where the local real estate investing clubs me, go there and start networking and creating relationships. I thought this was a very cool way to start over.

To hear the rest of the interview click on the player above, or go to Just Start Real Estate on iTunes. Like I said, this was a really fun interview and Nick is an awesome guy. It’s well worth your time to check it out.

Links

alphahomeflipping.com – Nick’s website. Go there and getting contact with him and find out more about him.

facebook.com/alphahomeflipping – Nick on Facebook.

Today we're going to talk about why we're in this business. A lot of people get into this business simply because they want to make money, and even run their business differently than they would if they weren't driven by money. And of course, real estate is a for profit business. However, that doesn't mean that every decision you make should be motivated by making money. There are times when I don't think about the money in order to do the responsible or ethical thing.

Real estate at its best is when you solve a problem for someone else, to both your benefits. I'm not saying money isn't important, but I'm glad to always be making money ethically and with a clear conscience. I want to go to sleep at night knowing that I did the right thing not only for myself, but for everyone around me.

In the past few months, I'm dealing more with sellers directly in my business. Almost 90% of the time, I'm talking to elderly sellers. But I never try to talk them out of their property or talk them down to a crazy low price. I want to create a win-win situation for both of us. I tell everyone on my team that they should treat these sellers like they would treat their own parents or grandparents.

Your business should be about more than just making money. The people I know who are ethical, honest, and try to do the right thing always do better than the sharks who are out there to grab every dollar they can find.

If you focus on trying to help people and find solutions to problems, your business will thrive. Money is important, but it should not be the only thing your business is built on.

Today I want to address a question that I saw on an online real estate group: is it unethical for a new real estate investor to sign a purchase agreement for a deal when they're not sure they have the money to close?

When you're starting out, you're going to make mistakes. You might not be able to perform on that commitment. You're signing that purchase agreement, you're taking massive action, but you might not know the next step.

You've heard a lot of successful investors on the show say that you shouldn't worry about not knowing what you're doing; you should get out there, get a deal, and the rest will fall into place. I used to think that you should have everything ready to go before you get started on step one. I've changed my opinion on that. If you're new and you really want to be successful in real estate as soon as you can be, you need to take massive action. And as a new real estate investor, that means you're going to be taking steps that you don't exactly know how to handle.

For example, in the question I saw online, a new investor might be signing a purchase agreement despite not knowing whether they can close. That might sound a little unethical or like a bad idea, but the fact is that doing something is the only way to get experience. You can't wait to make an offer on a property until you're an experienced investor, because you'll never be an experienced investor until you start making offers. So in determining whether it's ethical or right, you have to think of the alternative. How do you get that experience to make it "ethical" if you can't make an offer?

In my opinion, it's not unethical. That said, you should always have 100% intention of fulfilling the commitment on a purchase agreement. But even as an experienced investor, you don't always have the money or buyer lined up when you sign a purchase agreement.

So if you're new, go out there and take massive action!

Today, I'm replaying an interview with someone who deals with a very unique aspect of real estate--private investing. Private investors rarely talk on podcasts because they don't want to be inundated with calls or emails from new investors who want money. That's why I'm only using this investor's first name in the interview, and I'm so glad I got him to share his unique perspective with the listeners of Just Start Real Estate.

In this episode, I talk to a friend of mine, and someone who I admire quite a bit. He is a private investor here in my local real estate investing community. Larry has been involved in real estate since 2007. He and I have worked together on deals in the past and he currently is a private investor for several real estate investors locally. He has a lot of insight and experience that he shares with us in this episode. It was definitely packed with good information. This is one you should definitely check out!

Larry has been an IT professional for over 35 years, and currently works full-time at a large computer software development corporation. Larry has always loved anything to do with home construction and is a serious do-it-yourselfer. He did his first residential property flip in 2007, and has since either partnered or funded about 20 more flips.

Larry’s dad was a builder and built over 250 homes over the course of his career. He was able to retire in his early forties when Larry was only 10 years old. Larry has always loved real estate, but since his father retired at a young age, Larry was not able to take over the family business. That did not stop him from getting involved in real estate! He was also able to work with his father on one spec build.

Larry officially became a real estate investor in 2007 when he purchased his first residential property flip. In Larry’s words, “that first flip nearly killed me“. One of the reasons why it was such a difficult experience was that Larry was working full-time. Full-time for Larry often is 8 AM to 8 PM. He would then go out to his flip and work until midnight. Because he is good at building, he would do a lot of the construction himself. This was a bad idea, which he certainly learned. It was that experience that led him to realize that doing flips on his own was not going to be a good fit. He then partnered up with a another real estate investor and did a few deals. After doing about five deals with his business partner, Larry decided to become a private lenderexclusively. He has not done any more deals himself, but he lends his funds to other real estate investors. In his current deals, he is essentially a silent partner whocontributes all of the funds but does not do any of the work himself.

Larry currently invests with a handful of investors that live locally and do deals in Southeast Michigan. He only invests with people who he knows personally and has developed a relationship with prior to lending money. Any additional investors that he would take in the future would have to have a portfolio of their past deals and show agood track record of performance.

I asked Larry what his criteria was for deciding whether or not he would fund a deal. He told me that he does not require a specific profit amount, or a specific rate of return. Larry looks at each deal individually, and if it is a deal that he would do himselfif he had the time to flip the house, he will consider funding it. There has to be a good spread and plenty of money in the deal for any miscalculations in the rehab. To give you some idea, Larry typically lends around $125,000 to purchase the house and then that house will typically sell for around $175,000. That is a fairly standard deal for him and his real estate investor partners.

Larry typically uses two documents on each deal – a private mortgage document, and a promissory note. The private mortgage gets recorded the day of closing, and the promissory note spells out the terms of...

Today I want to talk to new investors about choosing a market to invest in. The right answer is different for everybody, but in general you want to look for an area that is within reasonable driving distance from where you live and work. Within that radius, you don't want to invest to the absolute most or least expensive neighborhoods.

"Reasonable driving distance" might vary for you, but let's say you should look within a 30 minute radius from your home.

Now within that, the most expensive neighborhoods will be tough to get into. On the other hand, the cheapest neighborhoods won't really have houses that are easy to flip. You tend to find the most buyers or even renters somewhere in the middle. In Michigan, that means houses with a sale price of about $125,000 to $175,000. That's the sweet spot with the most buyers and renters.  Focus on a price point that feeds into the greatest population of potential buyers. Fish where the fish are. You want to build your business on the rule, not the exception.