OPM Mastery

On this episode of the Invest Four More Podcast, I interview myself. I just took a trip to Florida to explore rental property locations and have a nice vacation with my family. I learned a lot about the market, codes, insurance, neighborhoods and towns, while in Florida. I saw quite a few houses, met with multiple agents and I get a really good idea of what it would be like to buy rentals in that area. I think I have decided that the Florida market is much better for rental properties, than the Colorado market and I am going to move forward with my plan to invest in rentals in a new market.

Before I get started on what I cover on this podcast, I wanted to give my readers and listeners a heads up on a couple of items. I mentioned this to my email list already, but I am giving away a Complete Blueprint to Successful Real Estate Investing program. The only thing you have to do to enter the contest is leave a review on one of my eBooks on Amazon and email me to let me know by Monday March 28th. [email protected]. Below is the link to my books on Amazon (all my eBooks are on sale this weekend for $2.99).

Mark Ferguson author page

As a reminder my book Fix and Flip your Way to Financial Freedom is available in Paperback. My new rental property book will be available in the next week or two as well. This book will be about 350 pages long and cover just about everything you need to know about investing in rentals. It will also be available in paperback.

Finally I am having a live webinar on investing in out-of-state rentals next week. I will have time for live questions at the end and you can sign up here. Live Webinar

I have been over my reasons for investing in a new market on other podcasts and in articles. The main reason I am looking to invest in other markets is our prices are going through the roof in Colorado. I have 15 rentals in Colorado and I love the fact their values have increased, but rents have not increased as much as values have. While I am making more on each property now, than when I bought them, I have a lot of equity in my properties that is not making a very good return. While I am making great returns based on the cash I have invested into my rentals, I am not making that much money based on the equity I have.

The other problem I am running into, is I can not find great cash flowing rentals in my area anymore. Prices have increased from $80,000 to $130,000 to $150,000 to $220,000 for the rentals I am used to buying. Those prices are considering I am getting a good deal and buying below market. Not only are rents not rising as fast as prices are, but it takes much more cash to buy more expensive properties, which reduces my cash on cash returns.

I have still have a goal to purchase 100 rental properties by 2023, so I have to do something different.

Picking a new market to invest in is not easy. There are many towns and areas of the country that have decent cash flow and decent prices, but they all different economies. Here are the basic things I looked at to choose a market.

After looking at all of factors, I decided Florida was a good place to explore.

I learned a lot about the market in Florida. I took my time choosing a location to explore, finding areas that had good prices, as well as price to rent ratios. There were many things I learned about the market in Florida.

For more detail on all of this, make sure you listen to the podcast.

After visiting Florida, seeing the market and having a nice vacation with my family, I have decided it is a good market to invest in. I have two properties in Colorado, that are vacant or will be vacant soon that I plan to sell and use a 1031 exchange to buy multiple rentals in Florida. I am also moving forward with refinancing 7 of my rentals with a national lender to 30 year fixed rate mortgages, which will give me about $250,000 cash out. I can use that money to buy more rentals in Florida. If you want to get more information on 30 year fixed rate mortgages from national lenders, check out the article below.

How to finance more than ten properties.

The podcast is really starting to take off! Thank you all who listen and reach out to me. If you know of anyone who might be an interesting guest send me an email:[email protected]. If you enjoy the show, be sure to leave a review on iTunes!

LEAVE A RATING AND REVIEW FOR US OVER ON ITUNES

Don't forget to get entered into the contest for a Blueprint by leaving a review! Mark Ferguson author page

Coming soon..

Many of my guests on the Invest Four More Podcast, are real estate investors. I have made a lot of money investing in real estate, but I have also made a lot of money selling houses as a real estate agent. On Today's episode, I interview Stacy Hall, who has been an extremely successful REO agent, selling over 450 houses a year. Not only has Stacy made a lot of money listing REO properties, she also has a property management business, works with hedge funds, has over 50 rental properties and a BPO business. Stacy tells us how she got started, how she has been able to open up her own brokerage in two parts of the country, and much more on this episode of The Invest Four More Podcast.

Stacy was buying a HUD foreclosure when she worked as a manager for AT & T. At the time she was doing very well, but saw how much money the HUD listing agent made, without seemingly doing much work. Stacy decided to become a real estate agent and did quite well in her first year. She sold about 20 houses her first year as an agent and was hooked on real estate.

How much money do you need to make your first year as a real estate agent?

Stacy was not a huge fan of using her sphere of influence, so she worked hard to find other sources of business. She focussed on listings first, by going after FSBOs (For Sale By Owner) and expired listings. Stacy was great at talking on the phone and she credits much of her success to constant communication with her clients.

Even though Stacy got involved in real estate because of a HUD home she bought. She did not actively go after HUD and REO listings when she first started. However, she was randomly approached to do a BPO (broker price opinion) in her first year in the business. She completed the BPO, made some money and then started to get more BPOs. A couple of months later she started to get REO listings from the BPOs she had completed. Here story is remarkably similar to mine, since I was also randomly called to do a BPO when I was not involved in the REO business at all.

Stacy not only made money from REO listings, but completes many BPOs for banks. Stacy knows quite a few agents who make well over $100,000 a year, just completing BPOs.

How to become a REO and HUD listing broker

Stacy became very successful selling REO properties. She worked with a national brokerage at the time, who charged her a hefty franchise fee. The broker of that company actually asked her to leave, because he thought the low prices of the foreclosed homes that Stacy sold, were hurting the image of the office. Stacy could not believe they wanted to lose all of her listings and commissions she generated for the office, but she says no it worked out great for her. She opened up her own brokerage and was then able to keep all her commissions, pay no franchise fee, hire her own buyers agents and make much more money.

Why you should start a real estate team

Stacy started out as a real estate agent in Illinois, but also opened up an office in Atlanta. She worked with a partner in Atlanta and was able to list REO properties in the area, as well as work with hedge funds. She was able to expand her business greatly, and increase the price point of the homes she was selling. Stacy opened up a property management business, because of the hedge fund she started working with in Atlanta. The hedge fund needed a company to manage the rental properties they were buying and Stacy created a company to help them out. Now Stacy manages 170 properties and helps the hedge fund buy more houses in the Atlanta area.

Stacy owns over 50 rental properties free and clear. She started with rental properties when she decided to rent her personal house, instead of sell it. She saw how much money she was making on the property in Southern Illinois and decided to buy more rentals. She bought cheap properties that were in need of work (under $40,000), fixed them up, rented them out and then refinanced them, so she could buy more. Stacy loved the returns she was getting, but saw a problem when investors she worked with, wanted to buy the same houses she wanted to buy. She decided to stop buying rentals and focus on selling houses to avoid any conflict of interest.

Stacy sells many homes every year that are distressed and can be great rentals or flips. She works with many investors in Illinois and Atlanta and says there are plenty of opportunities for investors to make money in both markets. She sees a strong rental market in Atlanta with homes that can be bought for $100,000 and rented for $1,300 or more a month. Houses can be bought in Illinois much cheaper, but still make money as rentals.

Stacy is looking to help many people make money with real estate. Not only can Stacy help investors find properties, but her brokerage is looking for new agents. Stacy said the best way to contact her is by email: [email protected] and you can also check out her website here: http://www.stacyhall.net/

The podcast is really starting to take off! Thank you all who listen and reach out to me. If you know of anyone who might be an interesting guest send me an email:[email protected]. If you enjoy the show, be sure to leave a review on iTunes!

LEAVE A RATING AND REVIEW FOR US OVER ON ITUNES

EPISODE 40

[INTRODUCTION]

[0:00:14.0] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.

So on this show, we’d like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, on how I buy properties, check out investfourmore.com.

[INTRODUCTION]

[0:00:59] MF: Hey everyone, Mark Ferguson for Invest Four More and welcome to another episode the Invest Four More Real Estate Podcast. Today, I have another awesome guest. A guest who’s a little different from who we normally talk to. Stacy Hall is a real estate agent but she focuses on REO sales, which are bank owned foreclosures.

That’s how I’ve really been successful in the business and not only just Stacy handle REO properties for banks and HUD especially as a BPO business, a broker price opinion business, she’s a real estate investor and she has her own property management business as well. So she really has a lot of different things going on.

[INTERVIEW]

[0:01:37] MF: Stacy, I’m really happy to have you on the show. How are you doing today?

[0:01:40] SH: Great Mark, thanks for having me. I’m really excited to be with you today.

[0:01:44] MF: Yeah, no, great to talk to you. So you started as a real estate agent in 2000 and I would like to start from the beginning, what made you want to get into real estate?

[0:01:58] SH: When I licensed back in 2000, it started out of, I dunno, I’d say I fell into it. I bought a foreclosed house and I bought other ones before that but this was a foreclosure that I bought and the agent didn’t do a lot and when I got to the closing tables and saw how much money he made, I’m like, “Wow,” and he really didn’t do a lot of work.

So that’s the outside perception from anybody that’s not a realtor. I have a really different opinion now but that’s what brought me and I saw what he did, saw what I thought was super easy money, I took my license and then the rest was history. I licensed in September of 2000.

[0:02:34] MF: Very cool and one thing I always ask, what were you doing before you got your license? What line of work were you in?

[0:02:41] SH: Part of that I worked for, it’s now AT&T Wireless. It was Singular and then Ameritech before that while I was working there but I ran a call center in a small town in Illinois. I had worked there for multiple years. Had a very heavy customer service background. That’s what I did prior.

[0:02:59] MF: So you’re used talking to the phone then?

[0:03:02] SH: Oh heck yes, that’s my money maker. It’s my ability to sell.

[0:03:07] MF: Right, right and being an agent, I know with the Internet today and all the online leads and all the different technology they have, I think people get away from talking on the phone but really if you want to be a successful agent, you have to be good on the phone.

[0:03:20] SH: Oh big time, you have to answer your phone or you’ll never make it in this industry is my opinion.

[0:03:26] MF: Yep and I still can’t believe how many agents do not answer their phone and don’t call people back and don’t check voicemail but that’s another…

[0:03:33] SH: Exactly, that’s a whole other show in itself, isn’t it?

[0:03:37] MF: Yeah. So how long do you think it took you before you really got the ball rolling and became successful and started closing houses as an agent?

[0:03:49] SH: I had a really good sphere of influence when I first came in and I was very aggressive. I wasn’t afraid to go out and talk so when I first started, I started with a major franchise and they had some good training but they wanted you to farm and do all that and that wasn’t what I was looking for. So I hit the streets doing expires and for sale by owner.

I could convert a for sale by owners to a listing so I really focused as a listing broker off the bat. At the time I was like, “Buyers are liars,” I had a ton in my card so I thought I was going to focus on that listing side. I’d show 50 houses to one buyer and saw easier money, I thought at the time, was in the listing side. So I hit the streets there.

I had my first closing about 45 days in. My first year in the business, I think I closed to a month 20 or so was my first year in. I was pretty successful. I’m down state Illinois, Champagne, Illinois area so it’s a smaller market not the Chicago where there’s hundreds of thousands of listings. We literary have 1,200 houses a year all there.

[0:04:54] MF: That’s awesome, you did very well in the beginning. One thing I see new agents do a lot when they get into the business is they take class after class after class. They try to make sure they know every single rule and every single — try and do everything before they go out there and talk to people. But it sounds like the first thing you did was just get out and talk to people and start meeting people.

[0:05:21] SH: Oh definitely and I mean that’s the best way. When you’re new, you can use your sphere of influence of people you know, but personally I’d rather work with other people than the ones I know sometimes, as well get out there and meet different people and I just found it really easy to get out and talk to the people wanting to sell their houses that didn’t sell, give them creative solutions, things I could do for them. So in this industry, it’s all about relationship is what I found and I found that pretty early on in my career is, get out, get your face out there so yeah, that’s where I found my success. But yeah, you’re absolutely right. Get out there and talk.

[0:05:57] MF: Right, very cool and when you’re looking for those FSBO’s, where you’re driving around, were you looking for advertising? How did you find those for sale by owners?

[0:06:05] SH: It was the pre-Craigslist, I don’t even thing Craigslist was out then so yeah, it was driving around and just looking at the signs, going into the different neighborhoods. My kids were heavily involved in sports at the time so we’d go into different towns and as I was going in, I’d write down a for sale by owner number and I’d call them that night. So yeah, that’s basically how I found then just driving around hitting the streets. Something a lot of people don’t do anymore, knocking on doors.

[0:06:30] MF: Right, very cool. So you did very well in the beginning obviously, selling 20 houses your first year. I mean most agents don’t sell that much even if they’ve been in the business 10 years.

[0:06:43] SH: Right.

[0:06:44] MF: How did you progressed into the REO business, the foreclosure side of the business?

[0:06:50] SH: It was actually funny I fell into it. I was probably eight months in the industry and out of the blue, somebody had called me. I don’t even know how they found my phone number but it was a bank that wanted me to give them an opinion of a value on a home that they’d just foreclosed on and at first, I was kind of like, “Yeah, that doesn’t sound anything I’d like to do.” And then they’re like, “It’s a quick $75, we just need a few photos and some comparables.” I’m like, “Yeah, sure, why not?”

So I went to it and did it sure enough, they sent me my check real quick and I thought I was done. I’m like, “Wow, this wasn’t bad. This is kind of quick money,” and when you’re new, you’re always looking for different things and two months later, that same bank had called me back and said, “Hey, you did a really good job. We think you’re right on track for the money, would you want to list this for us?”

I’m like, “Yeah, I’ve never done it. Sure, what do you need me to do?” They’re like, “Just put it on the market for the price your BPO is and get it sold,” so that’s what I did. We had it under contract in 15 - 20 days, which shocked me because our average days on market for the MLS was about 45 at the time. So I’m like, “Wow,” and it went to closing. It closed quick, closed easy and I’m like, “Ah, this isn’t bad.”

I guess they were impressed and it’s funny, it’s Ocwen, they were my first client ever so that’s how I got into the industry. It was with Ocwen who is Altisource now but it was quick and painless and they liked it and they started sending me more and more and more.

[0:08:16] MF: That’s awesome. That’s funny because I had been in the business probably five years, I got licensed in 2002 and a company randomly called me and asked me to do a broker price opinion for them and I had no idea what it was. I’m like, “What?” They’re like, “You just need to evaluate,” and I’m like, “Okay,” and actually faxed it back to them.

They had e-mail and everything but that company was still faxing stuff and I’m like, “Hey, this is kind of easy,” so I started looking into it and doing more and more BPO’s and I think Ocwen gave me my second listing.

[0:08:51] SH: Yours again.

[0:08:53] MF: Yeah and I think it’s USRES gave me my first one but no, that’s funny.

[0:08:58] SH: That is so funny.

[0:08:59] MF: Both companies are completely different now.

[0:09:01] SH: Oh heavens, yes. Totally night and day.

[0:09:05] MF: Yep.

[0:09:06] SH: How it’s changed in 14 years that’s amazing.

[0:09:10] MF: Yes, for those of you who don’t know which is most people listening but Ocwen now pretty much lists all their properties across the country with an agent in Florida and once in a while they list in with local agents but at least in my area, everything goes through an agent in Florida. And I’m in Colorado which don’t know how that makes any sense but that’s what they do.

[0:09:29] SH: Illinois and Georgia is that way as well, they basically use our BPO photos for their MLS photos, which drives me crazy. So I don’t even do their BPO’s anymore so yeah, that’s how it is for us.

[0:09:43] MF: Right. Yep, same here. All right well that’s cool how you get started and I imagine you grew your business. How did you go about finding more clients and doing more BPO’s?

[0:09:55] SH: I honestly started going to the five stars, the REOMAC conferences. I had a nice steady business. I was doing right about 50 to 80 bank owned properties a year after my probably third year in. I did 10 probably for Ocwen the first year and then I picked up city, I did about 10 or 15 for them plus the Ocwen stuff and so I just started picking it up and about 5th year in, I decided, “Hey, maybe I should go to some of these conferences and see what these are all about,” and they were super expensive.

I think my first Five Star was about four grand to register to go as an agent because it was so popular and there was about, what? 10,000 agents there and just networking. Again, it’s that customer service side, get out, talk to people and so I picked up a couple new clients and then Fannie Mae was my next big client I picked up and that was a whirlwind for me. That opened the whole doors to tons of listings.

[0:10:54] MF: Right, that’s awesome.

[0:10:55] SH: Yeah, ’08’s when I picked up Fannie Mae, I picked up several smaller ones prior to that but Fannie Mae was ’08.

[0:11:04] MF: Very cool. Yeah, I’ve been to Five Star a number of times and different conferences and that’s really what helped my career take off too. Not just meeting the asset managers and the banks but meeting other agents and seeing what they’re doing, making friends, that was a huge bonus to my career.

[0:11:21] SH: Oh definitely. Oh absolutely and you’re right, it wasn’t networking with the asset managers. They were kind of the aloof unicorn that nobody could find. You heard about them, you knew they were there, but where were they? It was meeting other agents that had relationships and helping me figure out who I needed to talk to so that’s absolutely what helped my career too. It’s pretty cool. It sounds like you’re pretty much on the same path as I was.

[0:11:44] MF: Right, I tied a little later, I didn’t get into REO probably until 2007 or 2008 but yeah, it’s the same way I got into it and it’s funny. I wasn’t at Five Star when it was crazy with the 10,000 or 5,000 people but I heard stories. Yeah, I’ve been there after that one was smaller but I heard stories about asset managers, trading name tags with agents so that they could go to the restroom without being mobbed by agents and just all kinds of crazy stuff.

[0:12:10] SH: Absolutely. I did that with IndyMac with an IndyMac asset manager at one and she was being hounded and if I gave her my name badge, I’m like, “Here,” and she’s like, “Are you kidding me?” I’m like, “No, it’s fine. I don’t care,” and so it was funny but yeah, absolutely. It is totally insane how they used to be. Definitely.

[0:12:29] MF: One tip for anybody who wants to be an REO agent, hounding asset managers is not the way to get business.. That is a way to lose business.

[0:12:39] SH: Absolutely. The quickest way to get out of the network and “do not use list” is driving the asset managers crazy.

[0:12:48] MF: And fanning a business card in their face and telling them how awesome you are is not how you get listings so.

[0:12:54] SH: Or slipping it under the stall door, like you said, yes, stuffing it under the stall door while they’re going to the bathroom.

[0:13:01] MF: Right, that’s crazy. Obviously, you’ve done very well. You’ve had major clients in the REO business and you actually opened a second office. How did you go to that process and decide to make that business decision?

[0:13:18] SH: At one of the conferences I met my business partner, who’s now my business partner, Ted and he lived in Atlanta and had told me how great the market was. I guess I should back up. It’s funny, when I met him at the conference, I like to say I was an REO agent before being an REO agent was cool, which in ’08, ’09 and ’10 that’s when it was cool to get into REO because retail had slowed down.

So I had met Ted there and we talked and become friends and it’s like, “you know it’s great market down here” and he’s doing well on his own. He was with another company, on a split, so we just get talking became friends and I watched what the Atlanta market was doing and we decided it was natural to open one up down here. I licensed in Georgia and he ran the Georgia stuff for us, but Georgia’s market was incredible.

It’s funny I look back, four years ago when I started coming here maybe five, houses were going for 20, $30,000 in Atlanta and I’m like, “Man maybe I should sell some of my rentals, free up some cash and invest here,” and I just didn’t know the market well enough and Ted said I should but I was like, “Yeah, you know,” kind of afraid as an investor to take millions out of a stable area where you’re making good money.

Now, the same houses four years later were selling for 20, 30, now they’re going for 150 now. So yeah, hindsight it’s like should have listened to the expert definitely and went with it but yeah, so that’s how I came to Atlanta. We’ve done well here too. We do a lot of BPO’s here so we see a lot of different values. I’m bigger in Illinois with the numbers I do.

I know you’ve said I’ve been real successful and just to give everybody an idea, I do about 400 to 450 bank owned listings a year throughout Illinois and we don’t do Chicago that’s all down state and for not being in a major area, I think we do well. I’ve got a good team, we’ve got pretty good systems plus I enjoy it.

[0:15:20] MF: No, you do amazing. Those are amazing numbers so congratulations on setting that up.

[0:15:26] SH: Oh thanks, I appreciate that.

[0:15:28] MF: Yeah, where I’m at in Colorado, four or five years ago, we could buy 20 or $30,000 properties here. I’m north of Denver about 50 miles and at the time I’m like, “Oh I just don’t want those old crappy properties,” and the same properties are worth 150 now. So I did buy a lot of rentals here, but they weren’t the really cheap ones.

[0:15:53] SH: Yeah.

[0:15:54] MF: But at the time, it’s just like, “There is no way that can be that cheap forever.”

[0:15:59] SH: Exactly, yeah that’s was how it was here in Atlanta and where I’m from in down state Illinois, it’s been a stable market. We’re a small college town, University of Illinois is right there and we never really have the big dive and I know it sounds like doing 400 to 450 homes a year bank owned is a ton for a small market but it’s pretty spread out.

We cover from Kankakee all the way down to Metropolis, Illinois so it’s a decent size area. I think it’s 40 some counties but compared to Atlanta, there’s gosh, I can’t even venture on how many REO properties are in Atlanta or some of these major markets.

[0:16:36] MF: Right. So how many miles do you think you cover in Illinois from the farthest point one way to the farthest point in other direction?

[0:16:45] SH: Well I could tell you from our corporate office which is in Champagne, Illinois to our furthest away town which is Metropolis, which is right there on the Ohio River with the Kentucky boarder, it takes three hours and ten minutes and then we also go north up by the quad cities and that’s about a three hour and 30 minute ride. So we have offices in between but from where I live, that’s how far away I’d be. So it’s a pretty good haul on some of them.

[0:17:16] MF: Yeah and a lot of people think a lot of REO agents have it easy and they don’t do a lot of work, but when you realize the area they cover and the different things they do, I think people realize it’s not quite as easy as it may seem.

[0:17:28] SH: Oh definitely, yeah. There’s nothing sexy about REO some days. You go into the houses that animals have urinated all over everything and the carpet’s still there and there are bugs crawling and oh yeah, definitely, definitely.

[0:17:42] MF: Yep and because I’m in sort of a rural area but they have me covering HUD up to 90, 100 miles away sometimes too, just because there are simply no other agents out there who can do the work that an REO agent can do.

[0:17:58] SH: Yep, absolutely and HUD is my big account right now. I do a lot for HUD throughout Illinois and that’s kind of where I’m at. There are so many rural town will call me and they’re like, “Hey Stacy,” and I’m like, “What? That’s in Illinois?” And I look it up and it’s a town of 200 people and I’m like, “Oh my goodness,” so yeah.

[0:18:18] MF: Yep and they want their inspections in 24 hours so it’s not like you can take a couple of days to get out there. You’ve got to go right away.

[0:18:25] SH: Exactly, exactly. Yep and then you’ve got to go weekly for some of the asset management companies. Yeah, definitely a big challenge for us REO agents. Like I said, it’s not as sexy as everybody on the outside thinks it is. Everybody thinks we just stick it in the MLS and it sells quickly and you make lots of money. I don’t know about you in Colorado but my average sale price for Illinois is only $44,000.

[0:18:47] MF: Oh wow.

[0:18:48] SH: On those REO’s so.

[0:18:51] MF: Our market has gone crazy. So our average used to be about 90 to 95 I think for the houses we sold and now, it’s up close to 200.

[0:19:03] SH: Wow, you’ve done well.

[0:19:05] MF: There’s no REO’s or HUD homes left here because our market has done so well. The inventory is almost gone. I mean it’s probably at tenth or a less of what it was four years ago.

[0:19:17] SH: Well in our market, FHA financing is really predominant. So it’s always going to be  — because we’re so rural, that’s just in a one way people finance. I do a lot of work for VA also, VA loans are a little more challenging on the foreclosure side. They take a lot longer to come to market but VA and FHA are two main types of finance and that are used where I cover there.

Now, our Georgia office, they’re average sale price is much better there. I think we’re on the 140 price range on our bank owned properties in Georgia. It’s more lucrative in Georgia. You don’t have to do near as many.

[0:19:54] MF: Right, that’s nice. You have to sell a lot of $40,000 houses to make it worthwhile.

[0:20:01] SH: Yeah. I was talking with one of my friends that’s a realtor in California and we’re talking about how many I did and he’s like, “Yeah, I wish my volume would pick up like that” and I’m like, “Yeah, you just got to work at it.” He goes, “But I did just doubled size one of my $400,000 REO’s,” I’m like, “Let’s see, $800,000 in volume divided by my group $44,000 in sale price. That’s 20 of mine, what are you complaining about?”

[0:20:22] MF: Right, yep.

[0:20:24] SH: Definitely.

[0:20:26] MF: Very cool. I’m curious, what do you think your biggest challenge as an REO agent is? Is it managing your team or is it handling expenses? What’s the biggest problem you run into?

[0:20:38] SH: Handling expenses. The banks do ask a lot of us, putting utilities in our names, submitting for reimbursement, that’s a major moving piece and with Fannie Mae when I first started it, I was out 10, $15,000 any given month in utilities. Now the banks are asking us to pay for them to rehab the homes. There are several of them that are like, “Hey, we need $6,000 worth of work done. Pay the vendor and we’ll pay you back in 30, 40, 45, 50 days,” so it’s expensive.

That’s something a lot of people don’t realize as an agent, you have to have $5,000 per property just kind of sitting around waiting for things like that. And then you sit and wait and make sure you don’t miss out on any reimbursements. I’ve got a very good lady that does our accounting. She’s all over them, at 30 days she’s e-mailing saying, “Hey, where’s our money? Where’s our money?”

But from what I hear in the industry, it’s the number one area people lose money as a broker is in the reimbursements. They forget about it, they don’t submit it in time and then the flood of calls. We get tons and tons of inquiries on our properties. I mean they’re low priced properties. There’s tons of equity sitting in these because they do need so much work so we get a lot of calls.

[0:22:00] MF: Yeah. Nope, I would agree with you on the expense part of it. I don’t think people realize how much responsibility and how much work it takes to have homes repaired, pay the people, keep track of expenses and then you have to submit invoices the correct way to the banks. You can’t just send them any invoice. It’s got to be done their way, every single bank does it different. So you got to know all their systems and then yeah, some banks simply won’t pay you if you don’t have to, so you have to keep on them and make sure. I mean it’s not an easy process to go through.

[0:22:32] SH: Oh definitely not and like I said, with the Fannie Mae I had, and it’s funny this asset management company is no longer in business but is a TV show now, which I’m always made to watch but he puts always $15 to $20 grand into me every month. Yeah, he lives in a $5 million house in Atlanta so, but he could never pay me back on time. It’s like, “Hmm, okay,” but yeah, that’s where the frustration is.

[0:22:55] MF: Yep, I know who you’re talking about so. Very cool, so awesome job on the REO business on the real estate side, but not only REO’s but you’ve also started working with hedge funds in Atlanta so how did that start, how has that been?

[0:23:17] SH: Actually, we got in the hedge fund from our property management business. We were actually managing their properties that they had bought through other agents and we were their leasing agency. We were responsible for finding the tenant and we had a referral into them because they were like, “You guys are doing a great job, would you like to buy some for us?” And we’re like, “Okay, what kind of referral fee are you going to charge?” And they’re like, “We don’t charge anything. You get all your own commission.”

I’m like, “Wow, that’s a novice thing, you don’t hear that much in this industry. There’s always somebody taking a little bit in the REO segment.” So we went through their training course and started purchasing properties and since January 2015 when they started and they’re over 250 in Atlanta now. So they’re aggressive, they’ve got a 7.5% cap rate which some people are like, “Wow, that’s insane. How can you even do that?” Atlanta has got really strong rents.

So they’re a good company to be with, they’ve done well, they’re in 10 other markets I think right now throughout the US and expanding the two others right now. But yeah, we fell into it  like I said, just from another piece of our business that we were doing well for them.

[0:24:29] MF: Wow, that’s great and then one thing I wanted to talk to you about is your property management business too because I’ve thought about starting one then thought against it just because of the numbers and the volume, how did you get into property management and how has that business been?

[0:24:44] SH: We got into it, as I said, I own some myself so I’ve always managed my own and then here in Atlanta, we had a relationship with a national company that we knew and they brought us in on one of their portfolios through doing some REO work for them. They said, “Can you guys build this division and do this?” And we’re like, “Well if you have numbers, we’ll build it.” And they definitely have numbers.

The biggest thing that I’ve seen in the property management industry is the numbers are getting cut. They don’t want to pay. It used to be I can get a 10% of the monthly rent for my monthly fee. It’s down to six, some people want you to do it for 5 now and that’s kind of the big challenge. It’s a numbers game. If you’re doing one to 10 a month, it will eat you alive.

You have to be at right about a 100 a month that you’re managing monthly to make it worth your while otherwise, the numbers you get a lot of calls. Rentals probably have tripled the calls that an REO listing or even a retail listing has, so a lot of staff needed. But the way we look at it was, for every one property, you get first month’s rent. We’re very aggressive.

We rent probably 80-90% of our own listings, so we keep all the rent. So that first month’s rent goes to us 100% and then you get your management fee monthly. So you could look at it one rental in a year would equal the commission on one listing and that’s how anybody thinking of getting into it, that’s how we decided if it was going to be worth it.

[0:26:20] MF: Right. How many properties are you managing right now?

[0:26:24] SH: Probably 175.

[0:26:28] MF: Okay and yeah, my sister had a property management business. It’s a very small one compared to that but I helped her back in high school working with it and the calls we would get are just for people wanting to rent, for people with problems, it was completely different than trying to sell real estate. It takes a lot of time.

[0:26:50] SH: Well a lot of times, you got to have really good staff. I mean tenants love to call at midnight because their furnace isn’t working and I’m like, “Was it working earlier?” “Yeah,” and I’m like, “Oh great.” So it’s knowing the trouble shooting. “Hey, is there a switch somebody could have flipped,” you know things like that and people don’t realize that tenants call for everything. They’re expecting to not have to do anything and we do literary get calls for everything. It’s amazing.

[0:27:19] MF: Right I agree. And we’re in Colorado and my sister would rent to college students a lot, that was her primary tenant and so she’d get these college students who never lived on their own before and now they’re living in a house. I don’t know how many times for a Christmas break they would turn the heat off like just turn it off.

[0:27:37] SH: Oh man.

[0:27:38] MF: “For some reason our pipes froze,” and I’m like, “Yeah, you can’t turn the heat off.”

[0:27:43] SH: In Colorado right? Florida maybe, but Colorado, yeah, no, no.

[0:27:48] MF: Yeah, they wanted to save money on their heating bill so they just turned off the heat and so after a while, that became very clear when you rented the house to never ever, ever turn the heat off when you leave.

[0:27:59] SH: Yeah, probably my favorite call is, “Hey, I’m out of town and my friend wants to run over to my house, can you go let her in with your key?” I’m like, “What? No, that doesn’t work like that that’s not a lock out.”

[0:28:13] MF: Oh yeah, college students are always losing their keys, always needing you to make them new ones or you let them in. So I think she got to a point where she charged them $100 basically every time she had to let someone back into the house.

[0:28:26] SH: Exactly, we’ve got that in our lease here as well so yeah, property management can be challenging. A good staff is worth it’s weight in gold. If you’re going to do property management, buy quality staff members. Don’t try and go for minimum wage. You want somebody that knows what they’re doing and has done it before. There are so many legalities on leases. Tenants Union in Illinois are horrible so you’ve got to be all over your repairs and stuff like that.

I’ve got one guy in Illinois, this has been six years ago. He’s uneducated, no high school diploma, he was construction type of work, he bought a 100 houses in a year, rented them all section eight and he is making it hand over fist. Section eight loves him, he rehabs his properties beautifully. So it’s possible to make good money being a landlord that is for sure.

[0:29:20] MF: Oh yeah. Yep, for sure. That’s awesome. Another thing, you also have a BPO business as well besides the REO’s. I think a lot of people, when they look at this foreclosures, the REO agent, they think about the houses they list and the commissions they make. But the BPO business can be a completely another source of income as well. So how does your BPO side of the business work?

[0:29:44] SH: It actually works very well. I started doing BPO’s, like I said, when I first got in. I was doing just a couple and then BPO’s have really picked up. For those who don’t know, when a bank forecloses they need to know what the home is worth, it used to be they pay an appraiser. For an appraiser to do a drive by they get $200 bucks. Now, they can use a realtor to do the same thing and they pay anywhere from $35 to $55, the rural stuff, I can get a $100 for.

So I had consistently done about 158 year in Illinois, it makes me $60 - $70,000 extra dollars a year on top of my other stuff. Some of the banks will allow you to have other people do your photos for you. I have what I call runners or my agents will go and take the photos, put them into my system and then we do the report real simply. Other banks require you to do everything. I try to not work with those banks because I really don’t want to go do my own photos just because of the time involved in it.

Atlanta, Ted, oh gosh he started doing BPO’s right after we met in ’08 so he started doing just a couple. He has for the last six years now done at least 350 a month, that’s $160,000 a year business and he follows that same model too of having other take your photos and do the picture side of it for us. We use an autofill system that will fill it straight from the MLS and put it into the report. It takes us five minutes to do a BPO. Agents typing them by hand can take up to a couple of hours to type everything in but we’ve got software that just dumps it all in there for you.

[0:31:31] MF: Right, that’s awesome and yeah, I’ve done BPO’s myself too. I think at the peak, I did about 1,000 a year and yeah, some of those things that require you to drive out and take the picture of every single house is like, “Are you serious? Do you know how much time it takes to drive out there and you can’t have someone else take pictures?”

[0:31:52] SH: Yeah, you’re like, “Pass! I don’t need to visit a property to know the value. I can look at the photos and know,” and yeah, those banks are crazy. Ted just got a big drop from one client at the end of February, 350 orders in a week’s period so it was a national company and they were ordering them nationwide. I think they had 15,000 across the US to place.

They called Ted and they’re like, “How many do you want to do?” And he’s like, “How about 350?” And he goes, “Perfect tell me your counties.” So there is money to made out of that, that’s for sure. It’s another good, we like to call it pillars of income and that’s how we look at it. We got our REO business, we also have buyer’s agents that take the leads, we have our property management business and then we have our BPO business as well.

[0:32:39] MF: Wow, that’s great and then how many buyer’s agents do you have in each area?

[0:32:44] SH: Illinois we have 18 total throughout the six areas. Georgia we have eight.

[0:32:55] MF: Okay. That’s awesome.

[0:32:57] SH: Yeah and we’re pretty loyal. We’ve never looked to be a big brokerage and it was funny, at the start I told you guys, I started out with a major national company with franchises and I was probably three years into it, I’m like, “Man,” as I’d survey my clients I’m like, “Why are you using me?” And they’re like, “Because you’re you?” And I’m like, “Not because I’m with this major company?” They’re like, “No, we don’t care who you’re with.”

So I was starting to think about getting out when the brokerage came to me and they’re like, “You know Stacy, we like you. You’re great, but we’re all about our average sale price and your little foreclosures are really just hurting our numbers,” and I’m like, “What are you saying?” And he’s like, “I think you have to look for another company because you’re really killing our average sale price.”

It’s funny I see them all the time and we joke about it and he’s like, “Man, should I be kicking myself,” because they have floor time and everything. They missed out on so many leads and so I thank him every time. I’m like, “Dude, you made me a millionaire by kicking me to the curb and opening my eyes.”

[0:33:56] MF: That’s crazy that they — oh wow.

[0:33:58] SH: Yeah, they were all about their appearance. They had these $12,000 listings, “Oh my gosh, that’s just below us, beneath us,” and I’m like, “Yeah, whatever.” So yeah it was funny. So we don’t franchise fees and when we started the Twin City it’s like, “Why? Why pay those big franchise fees?”

[0:34:21] MF: Yeah, that’s awesome and I’ve seen that too. Our office is known as a foreclosure office. We have a lot of foreclosure listings and I’ll see other offices put us down or try and say, “Oh they just list foreclosures, they just these dumpy little houses.” And it’s like, “Well, we sell a lot more houses than you, we make a lot more money than you and we have a lot more leads than you so we’re okay with that. We’ll be just fine with that image.”

[0:34:46] SH: Well, it’s because the REO properties are priced aggressively and there’s always equity in them. Investors loved to call us. They know our listings. We have investors that subscribe to our website and follow it because they know we put our listings on. We use video marketing on our website so they see the videos, they can tour the houses, we’ve helped people in other countries buy properties and they’ve never set foot into them using our video marketing. So it’s all about being unique but yeah, we get the same branding in our area. “Oh, they’re just a foreclosure company. You wouldn’t put your house with them.” Nope, we’ve got leads galore coming in.

[0:35:25] MF: Yeah, if you’re just a regular house seller, would you rather have a company who never list foreclosures and high prices but they never have buyers or would you rather have a company with a ton of listings, a ton of buyers, a ton of leads that could help you sell your house? I think it’s pretty obvious.

[0:35:42] SH: Exactly, yep, definitely.

[0:35:45] MF: All right, cool. Another thing that we touched on briefly that I’d love to talk about is you said you have rental properties and you were an active investor before. How did you get started investing in real estate?

[0:35:58] SH: It happened by chance. I bought my first house, divorced my ex-husband and I kept that one, had remarried. We moved and we were going to sell it, I’m like, “No, maybe we should rent it.” Found a renter super quick and I’m like, “Wow, that was easy,” and Rantoul was a town that the Air Force base had closed. There is a lot of housing that was going super cheap.

I had some money from when I had gotten out of AT&T, took my retirement and bought five houses and rented them very quickly. Went back in, got a loan to refinance those and the rents were just incredible compared to what I paid for them. I was making probably about 15 cap. It was a very good cap rate that I had on them. They were cheap properties, 10, 12, $15,000. I put five in them and rent them out for $700 a month just because the people living there couldn’t afford to buy the houses they wanted to rent.

So I’ve got long term tenants and all mine now which helped. I think my least tenant was probably six years in, so when they come they stay. I keep a good product and so that’s kind of how I built it and we just kept buying five to 10 a year and adding onto it based on the equity we had in the other ones, the banks love to give me money when I had them rented that quick.

I owed barely anything on them at the time and my rents were so high so getting money was no problem at that time. But yeah, that’s how I got in and once I really got into the foreclosure and as you know working for HUD, you can’t buy any of your own listings. You can’t even buy a HUD owned property being a listing brokerage for the HUD.

The more I looked at it when I started working with the one client I told you about in Champagne that bought so many, he was looking at some and so was I and I’m like, “You know this feels like a conflict of interest if I really should tell him to buy it, but I want it,” so that’s when I decided, “You know what? It’s time for me to just focus on real estate. I don’t need that in my portfolio.” I had a good portfolio, I’m very happy with it so that’s kind of two fold why I fell out. HUD said that I couldn’t buy any of the good properties because I was their listing broker and it just felt like a conflict to me.

I wanted to be able to tell anybody working with me that, “Yes, buy it.” Not like some agents that are like, “Oh don’t buy it” and then you see they bought it six months later when you’re looking at it.

[0:38:26] MF: Right and I understand that too and I still buy a lot of properties here too, but I don’t work with investors myself anymore. I very rarely work with traditional buyers unless it’s friends or family and so I’ll just have someone in my team work with them. I’m like, “Don’t tell me what they’re doing. I won’t tell you what I’m doing,” so there is no conflict of interest.

[0:38:47] SH: That’s a good idea, I never even thought of that. I probably have passed on a lot of them went to that thought, when you come with that mindset. So no, definitely.

[0:38:56] MF: Yeah and then are those properties, you bought them for 12, $15,000, have they gone up in value or is it been a pretty stable market where you bought those properties?

[0:39:05] SH: Oh no, they’ve gone up significantly. Most of them are probably $70,000, $85,000 now on average. They’re all paid off, free and clear now.

[0:39:15] MF: Wow, that’s awesome and the rent?

[0:39:16] SH: Since I was in a kind of rent and dump it — the rents because they’re long term tenants, I am one of those landlords, I’d rather keep you and keep you happy. They keep a great house for me. I never had issues with them so I don’t raise my tenants rent, which I know is silly of me but my philosophy is rather than have to pay for a turn and rehab the property, I’d rather keep their rents lock in for them but I could definitely rent them for much higher than what I’m getting right now but yeah, that’s my strategy anyway.

I teach my investors different, they should have an increase in their lease. In most markets you don’t find the long term tenants. I think mine is unique because it’s a role market maybe. People that come into these small towns stay forever it seems like. Atlanta, we turn our properties once ever two years it seems like here. They’ll come to the next best thing or they’ve moved or with traffic in Atlanta, you don’t want to live too far away from where you work because you could sit for an hour.

[0:40:20] MF: Yeah.

[0:40:21] SH: Definitely.

[0:40:23] MF: Very cool. I feel the same way about, I mean rent has really increased here. So there’s a few properties that we turned over but there’s so much work that goes into re-renting it. Like you said, a tenant usually does some wear and tear to a property so you got to spruce it up and a lot of times, it’s just not worth it to get a new tenant for a couple hundred dollars more a month.

[0:40:45] SH: Exactly, yeah. Definitely.

[0:40:48] MF: Very cool. Obviously, you have a lot of different things going on which I love. I do the same thing. I’ve got rentals and flips and a blog and my real estate team. So I really get to multiple streams of income coming in. I’m curious, what are your goals for the future? You planning to just kind of continue with the same things? Do you have any new plans that are going to change things up a little bit?

[0:41:11] SH: We’re looking at other couple markets right now, maybe expanding a little more in Georgia. Illinois, we cover pretty much the state. We are looking to maybe get into a couple of other more major towns, the Savanah area in Georgia. So that’s what our looks are this year and then we’re going to bring a board probably five additional agents for Atlanta.

As you know, HUD is being a re-awarded so the company that got the Georgia area had Illinois, I’ve got a great relationship with them. They were not allowing any new brokers in under their old contract so I never could do HUD in Georgia so we’re looking forward to have a good relationship with them and then our biggest new thing that we’re launching in Georgia, we bought a bus. We’re going to do home buyer tours.

We’re really committed to the investors being able to go out and see multiple homes. So we’re going to be doing a home buyer tour twice a month with our agents where we’ll take everybody out to ten. We’ll do one for owner occupants and then we’ll do a separate investor seminar. So that’s our 2016 plan.

[0:42:17] MF: Very cool. I’m curious. Obviously, you’re not doing much investing yourself but it sounds like there’s still a lot of opportunities for investors in both markets that you’re working in?

[0:42:28] SH: Oh absolutely, yeah. The numbers are staggering here. The homes that we’re buying for the hedge funds that we work with in Atlanta, they’re buying owner retail homes. They’re not even having to buy the foreclosed homes. There’s still equity in these retail properties. If you look right at Atlanta’s market right now, I think there’s only 24,000 homes for sale which is crazy.

When I first started down here, there was 90,000 homes for sale. So there is a huge shortage which should equate to a seller’s market but a good cash offer with a low due diligence time, really goes through quickly. I mean we’re seeing owners take $10,000 off the list price and list it off at 110. They’ll take our $100,000 offer three days on the market.

So it’s all about relationships, as you know, knowing the listing brokers, being able to show their clients have a good solid track record of closing these. As REO brokers, Ted’s listed one, it was a $220,000 house in Greyson, it was worth $250 all day. We had nine offers. Of those nine, eight of them didn’t even go to the property first. So they had submitted blind offers.

It’s like, “Come on you guys,” and that’s where we’re different. We go and we inspect them prior to writing an offer so yeah, the investment of Atlanta and Illinois, there’s both great markets to be an investor in right now. The fund we’re buying for and there’s two of them, they got a buy and hold strategy. They are flipping a few of them as we come across those really good deals, they’ll go ahead and flip them right then but they’re going to hold them for five years and rent them for at least the next five years is what their strategy is which I think is a good strategy. If you’ve got some extra money, put it into that rental market.

[0:44:17] MF: Right, no that’s great and I talked about it a lot in my blog but I’ve got 16 rentals here in Colorado and our prices have gone up so high that the numbers don’t work here anymore for cash flow. So I’m going to Florida next week to look at the rental market down there but I’ve been exploring a number of different markets to try and find new places to buy in because I mean the equity is awesome.

[0:44:40] SH: Tampa’s got a good market. So yeah, Tampa has got a really good market. I will tell you, check Atlanta. The rental prices they’re getting here, we take a house that we buy for a $100, our investor will put $15 - 20 in it, new paint, new carpet, no appliances and it’s a nice product. We can put it on for $1400 and it’s gone. The rentals, the shortage is just unbelievable right now for rental properties. I bet we get 50 leads of property a day.

People sight unseen putting applications and we want it because they found out from their friends. Our client has a good product out there so yeah, if you guys are thinking Florida is a good market, Atlanta’s rental searches is a killer, killer right now and our clients are very picky. They’ve watched the crime maps, they won’t buy in heavy crime areas. So they’re buying in good neighborhoods that they see the future values in.

[0:45:36] MF: Right, no that’s great and it sounds like prices are still in obviously they’re not 20 or $30,000 anymore but you’re still in the price range is affordable around $100,000 where other places are just new through the roof right now.

[0:45:49] SH: Through the roof, yep. Definitely very affordable housing around here.

[0:45:55] MF: Very cool and then in Illinois, are you still seeing — is there an inventory decreasing or is it still steady because of the rural nature of where it’s at?

[0:46:03] SH: Our rural stuff has been very steady. The Chicago, there’s a lot of inventory in Chicago. Chicago’s biggest challenge, I would flip in Chicago. Renting is a little tougher. Some of the areas are just — the rent prices are high. We took the same client out to Chicago and show them the Chicago market and they could buy a house for $130 put 10 or 15 and it rents for $1,900 in that neighborhood.

The challenges if you’re getting into a new market understand the tenant unions and things like that. Illinois, as I said before, is very famous for their tenant unions. So you want to be good with those for sure but yeah, there’s a lot of flips going on up in the Chicago market. Homes are selling quick up there and then my down state stuff definitely.

It’s been nice and steady. The rents aren’t as strong but the prices are so much cheaper. I mean I’ve got, like I said, some listings that are $5,000. You could put 20 in them and rent them for $650 with your eyes closed. So it’s easier to put your money. You can get more of those is the way I look at it. I’d rather buy 10 of them and pull $650 than spend $200,000 and get $1,500 rent. That’s just how I always looked at it.

[0:47:21] MF: That’s great and one thing too about Chicago is the taxes are very high for property taxes.

[0:47:26] SH: They are crazy up there. Yeah, definitely.

[0:47:30] MF: Yeah, well you see these awesome numbers when you actually put in all the taxes and everything, it’s not quite as good as it looks on paper.

[0:47:37] SH: Yeah and that’s the reason they driving $1,900 rentals, rent prices for a $130,000 property because those people know they can’t afford to own there. Those taxes are five grand a year which is just crazy. Down state, take a $130,000 house, where I’m from and the taxes are $1,400 a year. Still the same priced house. It’s just crazy.

[0:48:01] MF: Right, that’s a huge difference and in Colorado it’s nice because on $150,000 house, the taxes are $800 a year or $700 so it’s really nice taxes.

[0:48:09] SH: And that’s pretty much how Atlanta is too. You’re looking $1,100, $1,200 on a $140,000 house, which is nice. Some of the areas are higher but for the most part, that’s about what they are here in Georgia.

[0:48:24] MF: Yeah, that’s not too bad. Very cool, well I’ve learned a ton on this interview conversation. I’m curious, I have a couple more questions for you. One, if someone walks you into the REO business, do you have any advice or any tips for them just starting out without any REO experience and is it realistic to get into the REO right now in this market, is it possible?

[0:48:52] SH: I actually know a lot of agents nationwide and people ask me that all the time because I go out in different forums and I will post information. For me, what I tell everybody is try to sell some first. First sell those HUD homes, you can sell any HUD home. They’re out there, you can advertise them, there’s a lot of different ways to do it.

Sell one first and then understand the process because it’s not as easy as everybody thinks and becoming a listing broker is tough. They really are a closed network. It’s tough to get in anymore and the number of asset companies that are out there have shrunk probably tenfold, you know? Fannie used to have 10 different asset management companies. Now, they do everything in house. It’s very tough to get in.

So it’s a good goal to have but there is a lot involved and you do have to have a strong bank account to back these properties because you are expected to pay the contractors and hold it for 30 or 45 days. So my word of advice is get out and sell some, run some investor classes. Get investors to want to buy, represent some investors and understand that side of it and then I’d jump in.

[0:50:03] MF: Yes and one thing I always tell people too is start doing BPO’s first for some of these companies too because that teaches you the business and gives you income and really can help you figure out what the business is all about before you jump in plus it’s much easier to start doing BPO’s and getting listings.

[0:50:20] SH: Oh absolutely, BPO’s and probably the biggest myth I hear is, “Oh if I do BPO’s I’ll get REO listings.” That’s kind of true and it was way true back when I started because the companies ordered their own BPO’s. Now they outsource but you’re right, getting in to be a BPO agent is way easier and it’s quicker money.

If you can do 200 a month, hey it’s no problem. Get out there, do them, get yourself some money being made. Companies like specialized assets, SAM, they still and that is one company that’s absolutely true if you do a BPO for them, they pay you for it and if you get the property they will sign it to you as a listing.

So I think that’s a nice thing to have and that’s one of the companies when people say, “Hey, where would I start?” I’d start with SAM. They’ll take you as a BPO agent, you work your way in and then you can get on their REO side. But that’s the top of my mind.

[0:51:11] MF: Yeah, you’re right. Yeah, five years ago there were 15 to 20 companies like them that did that but now, they didn’t do it. Most BPO companies don’t have listings. They’re just doing BPO’s. They still at least give you some experience until you find your resume too if you’re trying to get into the company.

[0:51:28] SH: Oh exactly, and it helps you know how to value your properties. That’s what being an REO agent is about. The banks want to minimize their loss, they are already losing money. The houses they’re in need of work, none of them and let’s face it are in moving condition or very rarely are they and they want you to get there — any agent can go and say, “Yeah for $10,000.”

Well, really it’s maybe $20,000 so do on the values definitely helps you get in tuned with your market and then you can become that expert and you can just know anymore. My REO listings I can pull up and I’m like, “$25 grand.” I’ll go home, pull my comps, “Hey what do you know? $26 grand I was right on the money and when you do hundreds a month, just know the neighborhoods which I really think helps you. And it help you on the retail sense too when you’re working with the buyer and investor because you’ve done these reports so much. You just know the neighborhood so that’s…

[0:52:17] MF: Yeah, that’s a great point and that something we started doing because we’ve gone through more retail because of our market is we’ll actually do BPO’s for traditional listings because it gives them so much more information that just a comparative market evaluation that it blows their minds like, “Oh wow, I actually see how you’re valuing it now. It’s not just telling you a number and then giving me three sold comps.” Like, “Oh wow, this is great,” so there’s a lot of different uses for BPO’s, yeah.

[0:52:47] SH: Oh yeah, definitely. Most definitely.

[0:52:50] MF: All right, so my one last question which I’m sure you’ll be happy with, if somebody wants to get in touch with you if they’re an investor, a home buyer in the Illinois area or in the Atlanta area, what’s the best way to get in touch with you or your company? How should they go about contacting you?

[0:53:06] SH: My company is Twin City Realty, we’re called that in Illinois and in Georgia and anybody, if you need advice, I get tons of people asking me how to get in the BPO business, how do I start investing, e-mail is going to be the best way. My staff watches my e-mails too, I’ve got great staff members but if I’m not available they’d be happy to answer anything as well.

E-mail me and this is my personal e-mail, its [email protected]. I respond to everybody. I’m here to help. If you’re an agent, you want to get in the business, heck, if you’re in Champagne, Illinois and you’re listening to this, call me. I’ll give you my same companies. I’m the type of agent, I’m not afraid. I know I do good work for my companies so they won’t stop using me but I’ll be happy to tell you how to get in. So I’ll share with anybody in my knowledge.

[0:53:58] MF: And you’re looking for new buyer’s agents too as well. So maybe somebody who wants to get on a great team to talk to you about that.

[0:54:04] SH: Oh absolutely. Yep, if you’re in Atlanta or anywhere in Illinois and you’re looking to make the switch, we’ve got hundreds of lists that come in that we give out to our agents. We don’t require full time so absolutely, we got that option as well as for my Atlanta office. Like I said, get into some other markets here in Atlanta.

[0:54:23] MF: Yeah and from experience, I can say if you’re a new agent or an experienced agent, working with an REO team has so many advantages because of the leads that come in. It’s awesome so it’s much easier than trying to do it all on your own.

[0:54:39] SH: Absolutely, you are absolutely right Mark, that’s for sure.

[0:54:42] MF: Great. All right well Stacy, I know we’ve taken up quite a bit of your time. I really appreciate you doing the interview, enlightening us on the REO world, on property management, on BPO’s. Thank you so much for being on the phone with me and really, I appreciate it a ton.

[0:54:59] SH: Thanks for having me and I love watching your blogs and stuff. I mean you’ve got great information out there on your podcast so I think you’re doing a great service to our industry for sure.

[0:55:08] MF: Well thank you, I appreciate that and yeah, thanks again and have a great weekend.

[0:55:15] SH: Hey, you as well. Thanks again Mark.

[END]

Jonathon Twombly started his career as a litigation attorney. He loved the exciting work and working on big cases in New York, when he first started out. As his career progressed it became much less exciting and appeared to have much less potential, than he first thought. Sure he was making great money, but it came at a huge sacrifice because of all the work he had to do. He also was not building anything substantial financially. Circumstances helped push Jonathon out of law and he decided real estate was what he really wanted to do. After some massive failures, Jonathon has bought over 400 rental units in about 3 years. We talk about all of it on this episode of the Invest Four More Real Estate Podcast.

After Jonathon received his law degree, he went to work immediately as a litigation attorney in New York City. Jonathon loved the excitement and working on big cases right out of law school. Over the years, the job became less exciting as the job became more about paperwork than practicing law. He also realized that his ultimate goal of making partner, was not as appealing as he thought it would be. To be a successful attorney you have to work long hours and sacrifice a lot. When he started to see what it was like to be a partner, he realized they worked even harder and sacrificed even more. Did he really want to spend his entire life working?

Jonathon decided he needed a career change. He decided real estate was what he wanted to be involved in, but could not get a job working with large real estate investment firms. He was told it was almost impossible for experienced real estate executives to get a job, let alone someone with a law background and no real estate experience. Instead of give up, he decided he would make his own job.

Jonathon found a real estate investor who was looking for a partner. Thanks to Jonathon's work on Wall Street, he had many connections who were willing to invest with Jonathon, if he could find great real estate deals. Jonathon and his partner went to work looking for large multifamily properties in Texas and Louisiana. They found a couple of properties that would work, and got both properties under contract. They had a mix of private financing and bank financing lined up. However, when it came down to finalizing the loans, the bank backed out. This left Jonathon and his partner out thousands of dollars in due diligence costs. They also had to back out of the other deal, because the same bank was financing that property as well.

Jonathon had been working in the real estate business for about a year with nothing to show for it, except lost money. He did not give up. He decided he would figure out investing in multifamily properties himself. He moved locations to the South East.

Jonathon had learned a lot working with his partner, even if he didn't make any money. When he started looking at properties in the South East part of the country he immediately felt better about the numbers and investment. It took him some time to break into the multifamily investing world. Many brokers and investors will take someone serious until they have bought multifamily properties. Jonathon was able to buy and finance a 102 unit building for his first investment property! In the last couple of years, he has bought more buildings that total 404 units!

Single family versus multifamily

Jonathon has a lot of advice for those looking to invest in multifamily properties.

Jonathon has started his own blog about investing in multifamily properties. Themortarblog.com, is where you can find Jonathon and get a free eBook on how to get brokers to take you seriously.

The podcast is really starting to take off! Thank you all who listen and reach out to me. If you know of anyone who might be an interesting guest send me an email:[email protected]. If you enjoy the show, be sure to leave a review on iTunes!

LEAVE A RATING AND REVIEW FOR US OVER ON ITUNES

I have lowered the prices on my video training series in the shop!

[0:00:58.0] MF: Hi everyone, Mark Ferguson with Invest Four More. Welcome to another episode of the Invest Four More real estate podcast. I have a really interesting guest on today’s show, really excited. Jonathan Twombly with two bridges asset management is joining us. He started out as an attorney on Wall Street, turned to real estate, became an investor and his company now has over 400 units. I’m really interested to talk to Jonathan, wee how he got to that point, where he’s investing and yeah, just pick his brain. So Jonathan, thank you so much for being on the show, how are you?

[0:01:38.6] JT: I’m Great Mark, thank you so much for having me, it’s a great pleasure.

[0:01:42.7] MF: Yup, I really appreciate it, I love talking to people who had different careers or started out in different place and made their way to real estate. You sound like you have a very interesting story. I’m curious, did you go into law straight out of college or how did you get started becoming an attorney on Wall Street?

[0:01:58.9] JT: Yeah, so actually I didn’t go straight to law school. After college I went to Japan, I was intending to be there for a year but I wound up being there for three years and came back and went to law school after that.

[0:02:12.4] MF: Very cool. What drew you to Japan? Was it just a break, a big exploration or were you trying to find something else there?

[0:02:18.3] JT: I’m sorry, I missed the question, what was it?

[0:02:20.5] MF: When you went to Japan, was it just to explore, take a break or were you looking for something specific there for work? What was your goal?

[0:02:29.3] JT: There were a couple of things. When I was in college, it was really at the height of the Japanese bubble and a lot of people thought that getting in on Japan somehow was the way to get rich. Including the woman I was dating at that time and I guess during our sophomore and junior year, something in college, she went to Japan for the summer and I really missed her.

This was back before email and stuff, we’re like writing letters to each other by hand and every once in a while she’d call me and it would cost like a $100, it was nuts. She was saying stuff like, “I don’t know what you’re going to do but I’m coming back to Japan after we graduate.” And I started thinking, “I really don’t want to go straight to any kind of school, I’ve kind of had enough of school for a while. So why don’t I go to Japan with her?”

And started studying Japanese and of course right after that we broke up but I just was interested enough that I kept on studying and then when I graduated it was 1991 and we were in the middle of the recession and I thought, “Well hey, why don’t I go to Japan and work on my Japanese, that will hopefully help me somehow in my career?” And that’s how I wound up there.

[0:03:41.9] MF: Very cool. Was it anything like you thought it would be there? Was it completely different?

[0:03:46.6] JT: I was very lucky because I had very little in a way of expectations as to what Japan would be like. I wasn’t one of those guys who was like super interested in Japan or was into manga or was into Samurai or anything. Really, it was weird because I knew some language but I didn’t really know anything about Japan at all. That actually turned out to be a good thing because I didn’t have any kind of preconceived ideas about what to expect and I just went there with a really open mind and had a really good time.

[0:04:17.5] MF: Very cool. So after Japan you came back to the US and that’s when you went back to law school?

[0:04:22.8] JT: So yeah, at that point I actually applied to a law school from Japan and came back here in ’94 and went to law school here in New York and I didn’t take any breaks after that.

[0:04:37.8] MF: Cool, and then after law school, did you go straight into working as an attorney and what was your specialization as an attorney?

[0:04:45.9] JT: Yeah, so I went into law school assuming I was going to do something related to Japan some kind of like international transactional practice and what happened was once I got to law school, I actually really liked it my first year, which is apparently very unusual and I sort of realized from that if I liked law school that much, I really should go into litigation which is really what they teach you how to do in law school.

They don’t really teach you how to do transactional work. So I decided to go into litigation and after law school I went to work for big firm here in the city doing commercial litigations so I was, you know, basically spent a number of years representing fortune 100 companies, fighting with other big companies over big piles of money.

[0:05:38.2] MF: Very cool. Well I imagine that was pretty exciting and pretty stressful at the same time.

[0:05:42.3] JT: It was exciting at first, I was quite lucky, I missed out on a lot of the typical first year associate, standing at the copy machine kind of stuff that you hear about. I was working one on one with a couple of very senior partners and we were running in and out of court together, getting injunctions and that was really, really fun.

After the first year, some of that stuff I missed out on caught up with me and then it was the reviewing endless boxes of documents from back in the day when they were still boxes of paper documents that you had to review as opposed to everything be on a computer. It was really fun at first, it sort of slowly got to being more and more of a grind after that.

[0:06:26.1] MF: Not quite as glamorous as it might sound from the outside?

[0:06:30.2] JT: It was not glamorous at all, I’ll tell you that. There were a lot of very late nights and a lot of working on weekends and months where I didn’t have a single day off and that sort of stuff and that really gets to you after a while.

[0:06:44.1] MF: Oh yeah, I bet. And I imagine that is why you started to move over towards real estate or some other type of business and investment in your career?

[0:06:52.9] JT: Yeah, exactly, I mean I spent a long time doing litigation, tried a number of times to get out of it, even just walked off the job without any plan more than once and I couldn’t really figure out what to do and I was very fortunate in that I was good at what I did and I had a good reputation and was always easy for me to find another job when I went back to it. But I wasn’t particularly happy.

Particularly the longer I went in the field and once I really understood how small the window to make partner was and also that life on the other side as a partner really wasn’t any better than it was as an associate, they just paid you more but you also have a lot more responsibility to bring in business and it was just as stressful.

I really started feeling like I needed to look for a better way to live my life and I also really didn’t like the fact that I was a service provider, I was trading time for money, I wasn’t building any kind of residual stream of income, I wasn’t building any kind of asset with all this work I was doing, I was just like a hamster on a wheel, spinning, spinning, spinning, spinning, spinning, and making great money but it wasn’t leading to anything, it was just, I could have spun that way until the day I dropped dead and I really started thinking about what else could I be doing with myself than this?

[0:08:15.8] MF: Right, that makes sense. I think it sounds very familiar to many people in the corporate world too where it’s just, you work and work like crazy to try and get a few spots that really pay off. Like CEO or CFO and then once you get to that point, it’s not any better, you almost have to work harder. It’s not the light at the end of the tunnel, sometimes isn’t quite as bright as it might seem to be.

[0:08:39.5] JT: Yeah, there’s no security in it either as I found out the hard way. You can be really great at what you do and work very hard and at the end of the day it doesn’t really matter if the work isn’t there, if the company doesn’t do a good job of bringing in business, because I found for instance as an associate, you’re not there to get business. You’re there to grind out the work and build the hours and if the firm is not getting the business then you’re kind of screwed if the work runs out.

That actually happened to me in 2011. I had a couple of years after the great recession started where I really didn’t have very much to do and the firm that I was with at the time kept me on because they like my work, they valued me as employee but at the end of the day, they can’t pay you if you’re not making money for the firm. So they let me go on 2011.

[0:09:34.7] MF: Right, and that happens all the time. Not just because companies don’t have work but because newer younger people often are cheaper than the more experienced people as well.

[0:09:45.5] JT: That’s definitely true.

[0:09:47.8] MF: So how did you get interested in real estate and real estate investing?

[0:09:53.8] JT: So it’s — I kind of arrived by around about path. I guess once I started getting a little bit disenchanted with my legal career and looking around for other things, I really became attracted to some kind of investing, some kind of finance career. I had some very good friends who were very successful in the security and investment world, running funds and stuff who said to me, “Look, you’ve got the right temperament to be an investor, you should look into that.”

And so I started looking into it, the problem was for me timing, this was I guess just before 2008 hit and then immediately after that. I was kind of exploring jobs and finance and people were telling me, “Look Jonathan, you’re 35 years old, you’ve been a lawyer all this time, under the best of circumstances you’d be looking at jobs where some guy who is younger than you is going to be hiring you and nobody’s going to want to hire you if they’re going to have a hard time telling you that you got to stay late and work for them.

If you’ve got a family and you’re senior to them — they want people who are easy to boss around, they’re looking for that 25 year old and that’s in the best of times. Now, there are thousands of guys out in the street who just lost their jobs with really great resumes and you’re a career changer. You really ought to spend your time looking elsewhere.”

So I gave up on the institutional finance idea.I started thinking about real estate. And real estate had been something I’d always been interested in ever since I was a kid, but I never really thought I could do it as a career. I started looking into it after I gave up on the finance idea and started spending time, because I had a lot of down time at work, I was spending time online underwriting properties and trying to find property.

New York City is obviously prohibitively expensive and things didn’t really make sense to buy but I was looking at stuff online like upstate New York in Albany and other places like that. Even looked at a few deals in Hudson River Valley, just kind of trying to figure it all out. I decided sort of around 2010 that I really wanted to do this as a career somehow. Again, I started — because of my background at a big law firm, naturally my mind sort of gravitated towards going to work for some institution.

I had friends who worked for some of the big real estate companies and I started talking to them. I started hearing the same kind of story that I was hearing when I was interested in finance a couple of years before which was, “Look, at your age, with your background, in this city, it’s going to be really tough for you to break in.”

And it actually got to the point where one of my friends just sat me down over coffee and said, “Look, this isn’t going to happen. Jonathan, I hate to be the bearer of bad news but I got to level with you, it’s not going to happen for you with your background.” and he said to me, “The only way it’s going to happen,” — what’s that?

[0:12:57.6] MF: I was going to say, obviously that’s not a very fun thing to hear trying to change careers.

[0:13:02.2] JT: Yeah, exactly. I was really desperate to get out of law at this point, it was pretty miserable. This friend of mine Richard said, “I can really only think of one, circumstance in which you’re going to be able to break in to this field, which is that if you meet somebody who takes a liking to you and they’ve got a small shop, someone might say to you hey, why don’t you become my partner?”

And I thought, “That doesn’t sound all that likely since I don’t really have any background in this.” As luck would have it, I’ve been doing a lot of networking in the field and I had met someone a few weeks before who was starting her own multifamily investment business and she called me up and asked me if I would meet her for coffee and when I did, she said, “Hey look, how would you like to be my partner?” I said, “Well, this is interesting I just had this conversation a couple of weeks ago so let me think about it.”

I went to consult with a couple of friends about what they thought and they both said to me, “Well look, let me meet this person and if I like her I will give you guys money to invest.” Here I was with the offer to become partner and two people offering to invest with me. So I thought, “Okay, maybe I ought to say yes to this thing and see what happens.” This was just around the time like I said where I lost my job, I was still actually on severance when all this was going on so I kind of exited my law firm job into this real estate startup.

[0:14:36.1] MF: Wow, that’s really cool. Kind of funny how everything works out sometimes like that. I’m curious, had that person already started to invest in multifamily or was she starting from scratch a new company?

[0:14:49.7] JT: So the company she was starting was from scratch but she actually did have a background. She and her husband owned five or 600 units of multifamily down in Louisiana and Texas. She had actually been through a whole repositioning herself that her husband had said, “Here, you run this so you can learn how to do this.” After she got finished doing that, she had decided she wanted to do this as a business not just as a family investment thing.

Her husband was not interested in taking it to — they were fairly comfortable the way they were. He didn’t have any interest in taking this any further other than just investing their own money. So she was out looking for people to join up with her to do this. That was when we connected.

[0:15:38.1] MF: Wow, that’s great. So when you started working with her, obviously I’m sure she is very happy that you had people who would invest money with you, that’s always nice to have with a partner. How long did it take you guys before you bought your first properties and what was that process like?

[0:15:54.2] JT: We actually never closed on anything together. What happened was, so this is now 2011, it took us a good six to eight months before we actually found a deal that we wanted to do. I think we might have put in a couple of offers on some other stuff and I think we probably were never really in range to get them.

We came across this deal that we’ve actually seen once before when we saw it the first time, the price just made no sense but the deal came back to us at a much lowered price and we thought, “Okay, this makes sense now.” Put in an offer, got it accepted and within a couple of months we had an accepted offer again with the same seller. So we were actually doing two deals at one time sort of right out of the bat.

Because we had the two investors lined up, it was essentially one deal for each of the investors and on the first one which is in a place called Houma, Louisiana which is down in the Bayou in Louisiana and it’s an oil country down there. We sort of had everything lined up to go, we were — had the lender lined up, we had the equity lined up, we had a cosigner lined up, the management company.

Kind of had all the ducks in a row, ready to go and the bank was just about to sign off on the loan and they sent their junior underwriter there and they backed out at the last minute, which was just a terrible, terrible blow.

[0:17:24.4] MF: Did they say why they backed out? What the reason was?

[0:17:27.3] JT: Yeah, so they called us up and they said, “Okay, we’re backing out of the deal,” and we said, “Why?” And they said, “We’re going to send — well we’ll send you the report.” I was asking, “Was this the engineer, was this,” — “No, no, this has nothing to do, this isn’t the engineer, this is our under writer,” and so, we got the report and the report was full of stuff like “the breeze ways are dirty and we found a golf ball that had come through a window in a down unit”.

Crazy, insignificant stuff like that. The big one was, “Well we found that there were 10 down units,” we knew that. That’s why we’re buying a deal, That was the value add here. You knew that too, we’ve underwritten all of this. It turned out that the whole thing, I don’t know whether they were feeling anxious about their relationship.

This was going to be like a Fannie Mae loan, they were feeling anxious with about their relationship with Fannie Mae or what the story was 2012 wasn’t a great lending environment either but the bank just backed out and all of this was contextual. We just wound up with — here we were, ready to close the deal, everything lined up. We didn’t have enough time to get another lender at this point.

We also weren’t interested in spending like another $15,000 just to have another lender to look at it when someone had just backed out. So we wound up terminating the deal and had to eat all of the costs of the deal that we put in, legal fees and due diligence costs and all sorts of stuff, it was really just a horrible experience. Then, what happened was, I think — so we had this other deal that was still live and it was the same lender. When we went and did our due diligence, we found some stuff that we didn’t like.

Looking back at it now, it wouldn’t have been enough for me to terminate the deal now knowing what I know now but at the time, I think because we were so skittish coming out of this experience with the lender that we terminated that deal ourselves just so we can get our deposits back. And again we had to eat all of the legal fees and the other expenses that were associated with getting us to the point where we were.

So here we were, now this is sort of the end of 2012, we’ve spent 18 months looking for deals, months and months of due diligence on these two deals and now we’re back at square one plus out of pocket, thousands of dollars each.

[0:19:55.4] MF: That’s a fun experience.

[0:19:56.8] JT: Yeah.

[0:19:58.6] MF: Well obviously it’s worked out okay because we have over 400 units now. So how did you end up buying that first property? It sounds like it might not have been with his first partner?

[0:20:07.9] JT: Yeah, so what happened was at that point, we decided that we should just go our separate ways, we got along fine, it wasn’t acrimonious at all but we definitely — going through the experience, I think it exposed some philosophical differences, which could have become an issue if we had stayed together long term. It’s just sort of different ways of approaching things and we decided, “You know, this is kind of a good breaking point for us to go our separate ways.”

We wrapped things up, divided up the assets such as they were and I think I got a filing cabinet and a desk out of the deal. I went back to square one. Pretty soon thereafter, I was talking with one of those friends of mine who was going to invest with us, I said to him, “Hey look, I think I might have to go back to practicing law at this point.” He said, “No, no, don’t be so hasty. Why don’t you and I become partners, you run the business, I’ll just be silent in the background and you can start going and looking for deals.”

That’s what I did, I formed two bridges. I started looking for deals in the southeast instead of in Louisiana and Texas. I had been very attracted to the southeast for a number of reasons but the big ones were that just the demographics were great in terms of population growth and it’s much closer to New York City than Louisiana and Texas.

In terms of being able to manage property at distance, the south east was really attractive. I had been down in Charleston, South Carolina looking to try to establish some relationships down there. I went out, I started asking around — I had a number of friends in the area and just started asking my friends if they had friends who were in commercial real estate, specifically brokers. A number of friends came back to me with some names and people that they knew, not just someone they heard of but folks that were in their network and I started talking with those folks and seeing if anybody was interested in working with me.

And I wound up meeting really great guy named Tyler Flesh who had been — he wasn’t really a broker, he was actually a really multifamily acquisitions guy. Had been in the business for a couple of decades but he was now out in his own, doing some development work and doing some advisory work and consulting work and we connected through mutual friends down in Charleston. And once started two bridges, I signed up Tyler to be my rep down there. So he and I started looking for deals in the beginning of 2013 after I formed the business.

[0:22:45.5] MF: Very cool. Is that where your first property was? Was it down there in Charleston?

[0:22:50.3] JT: Yeah, I’m sorry that this has been such a long round about story about how I got my first deal. So what happened was, we were down there banging our heads, trying to find deals, driving all over South Carolina as a new groove. Even though Tyler had great connections with the brokerage community down there, as a new group and an unproven investor, we sell tough, trying to find deals.

And finally Tyler called in a favor from one of his partners, basically one of these like his partner had a longtime friend, whose daughter was a broker and so we got personal introduction to her, she was out in Greenville, South Carolina which is out in the western part of the state and with the benefit of that personal introduction, we drove out there to meet her and just got lucky, we sat down in her office, we kind of went through what we were looking for.

She said, “Well look, I just got this deal that came in the door yesterday. Nobody has seen it yet, why don’t you guys go take a look.” So we drove out, see the property, it was 102 units, 1970’s product and the minute we drove in we both knew that this was a good property. Tyler obviously had years of experience looking at this stuff and I know from my experience in Louisiana, this property just looked a whole lot better than the stuff that I had been seeing before.

So I came back to New York, we looked at the numbers, made an offer and fortunately the broker was able to convince the seller to take our offer and not put it on the market and we were in business.

[0:24:25.1] MF: Nice. How did you finance that? Was that a mix of bank and private financing like you tried to do on the first ones?

[0:24:31.9] JT: Yeah, we had, you know the two investors who were originally with me was still with me, we had the equity lined up for the deal. This time we did CMBS debt because we weren’t qualified to do agency debt yet so we just hadn’t been in business long enough. We did CMBS and we were able to take it down that way.

[0:24:52.1] MF: Very cool, and for those of us who don’t know what is CMBS debt?

[0:24:55.1] JT: So CMBS is commercial mortgage backed securities. If you remember back in the financial place is what got us in so much trouble was that regular MBS debt, the mortgage backed securities were packaging a bad mortgages together to try to make them into good securities and that’s how the world blew up.

This is commercial mortgage back securities which means that what they do is they take your mortgage, they package it up with a bunch of other mortgages and then they sell the package to investors who are looking for — it’s usually pretty low return but a very stable, steady, and secure security. It’s mostly banks that they don’t add stuff.

[0:25:35.3] MF: Right.

[0:25:35.9] JT: Best result you get, there’s a lot of hoops you have to jump through but you can get very good interest rates and you can lock in long term fixed rate interest that’s why they’re attractive.

[0:25:46.1] MF: Very cool, nice. So you have your first property under your belt, how long did it take you to buy the second one. ‘Cause obviously you’re up over 400 now, it happened pretty quickly I assume.

[0:25:57.1] JT: Yeah, once we got that first deal. Here we are talking like two years burned in the first partnership, almost another year burned looking for deals after I started two bridges, just trying to break in to this area. After that, things started happening much faster. Once you close a deal in this area, then you get established, everybody finds out who you are.

The brokers all find out who you are and obviously the brokers that you’ve closed the deal with, trust you and want to work with you more. So the same broker started bringing us more deals right away. The second deal we bought was also in the upstate in South Carolina. It was a deal that the brokers called me up one day and said, “Look, we’ve got this, it’s off market, it’s only going to get shown through a couple of people if you want to make an offer on it, you got to make an offer on it.” It was crazy, I had like a day or something.

I couldn’t possibly get down there, so I wound up actually getting on the phone with my management company, we all got together on Google street view and we looked at the Google street view and put together an offer based on the numbers that we had and what we saw in Google street view. We were fortunate enough to have the best offer on that deal and we were able to take that one down too.

[0:27:15.8] MF: Nice, that’s a little stressful.

[0:27:18.9] JT: Yeah, it was a little stressful and the funny thing was that when we looked at the deal, I think that the Google Street view photos were out of date. The property looked a lot rougher than it was. So we wound up building all of this cap X into the deal that might not have done otherwise. As it turns out with that cap X, we were really able to do a nice job, kind of just upgrading the property a little bit and that property’s been just a spectacular performer for us. So just really happy with it.

The funny thing is at the time, I was just ready to lose it because I thought we were over paying for the property and I just was really anxious about it, I didn’t know if we were going to be able to make the preferred return and the whole thing just, I was so nervous about it and it turned out to be just this spectacular property which has beat our underwriting…

[0:28:06.5] MF: That’s awesome.

[0:28:07.1] JT: …more than we can imagine.

[0:28:09.8] MF: That’s awesome. Google street view has helped you get a better deal because it’s in condition.

[0:28:15.2] JT: In a way, yeah.

[0:28:18.3] MF: Have you continued to buy in South Carolina, are you branching out a little bit into other areas of the country?

[0:28:24.8] JT: We’ve continued to buy in that same market. We really like the upstate market in South Carolina, it’s the manufacturing belt. It lies right between Charlotte and Atlanta so there’s a lot going on there these days, there’s an inland port that opened 2013. There’s a lot of manufacturing moving in there.

There’s an enormous BMW plan right there and that’s caused a lot of suppliers to move into the area. So it’s a market that will really bullish on for the long term. We will continue to buy there but we do definitely plan on expanding outward from there throughout the south east, that’s really where our expertise lies, that’s our bread and butter that area. So yeah, the answer is yes, we’ll continue to buy there.

[0:29:12.3] MF: Very cool. I have rental properties in Colorado and have always invested here but I’m looking to buy in Florida myself because our market has just gone bonkers price wise. It just seems like, if there’s such a different market place down there with, and like you said, population growth is huge and prices are low and so it’s very interesting to me.

[0:29:34.4] JT: Yeah, the south east is — obviously there’s been a certain amount of price inflation over the last few years as you had everywhere else. But it just hasn’t been the same as you see in the major markets and that’s what’s kept it attractive to us.

But even if you look at say Charleston, Charleston’s has had a lot of the price inflation that you see elsewhere. We try to avoid that by investing — we stay away from the really hot markets because we’re looking for more value.

[0:30:06.3] MF: Right, that makes complete sense to me. Are you looking to buy more and more right now or what’s your main focus right now with your company?

[0:30:15.9] JT: Right now my main focus is we’re going to push to really increase our investor base. So we take a little bit of a step back from actively pursuing deals and really spending more time on getting to know the investment community and telling them what we’re capable of doing with the view towards raising a fund, to continue to do more of this. We’ve proved out our concept of what these properties in the south east could do.

As I said before, the demographic story is pretty compelling and unique, certainly compared to the more traditionally sort of — the markets where investors have typically gone up until now, which has been your big six gateway cities. But I think that we can make a compelling case that if you’re really looking for, certainly for cash flow and long term upside because of the population growth then markets like the south is the really the place to be.

So that’s our thesis for the fund that we’re trying to raise and we’re out now talking to investors about participating in that.

[0:31:21.1] MF: Very cool. So are you looking for big investors or any investors, was that process look like?

[0:31:28.0] JT: We’re really talking to larger institutional investors at the moment. So that’ kind of where the focus is.

[0:31:35.5] MF: Okay, that makes sense. So you’ve had quite a story. It did not just come easy to you to get over 400 units that’s for sure.

[0:31:45.7] JT: Yeah, go ahead I’m sorry.

[0:31:46.7] MF: I was just going to say, there’s a lot of people who want to get in to multifamily investing and buy big properties like this. I mean do you have any advice for them, what they can expect going through this process? Obviously it’s not a fast process to get started.

[0:32:01.8] JT: This is not a fast process at all and I would actually say, “Don’t try to do what I’ve done.” The reason I did it this way is because I actually didn’t know any better. Sometimes that can help you. Your ambitions might get set higher by default if that’s all you know and that’s kind of what happened to me because of my first partner. This is just the kind of property that she was going after because it was what she already owned with her husband and that’s kind of where her mind was.

I had really thought at the time when I started out that I was going to be looking for duplexes and quads and stuff and build up from there. So I leap frogged over that process just because I connected with my first partner and that’s what she was doing. But I think it’s, to be honest, very tough to pull this off, there are other people who do it and I’m not saying, if you’ve got the ambition, got the money lined up that you shouldn’t. But raising a couple of million dollars for a deal is not an easy thing to do, especially if you have no track record.

And if I had to do it all over again, I would really look to smaller deals. Maybe the deals that’s sort of the 10 to 20 size to get started, you definitely run into issues if you don’t have the requisite net worth to pull off the big deals because you’ll need to have, in combination with your partners, you need to have the net worth equal to the size of the loan that you’re trying to get. If you don’t have that, then you got to get people to cosign with you and you’ve got to give away part of the deal. Sometimes it’s a big part of the deal and you just kind of dilute your own upside by doing that.

So really if I had to do it all over again, I would try to stay within what my own net worth could support or maybe one other partner and then you’re talking about much smaller capital raises, they’re easier to do with friends and family and you can get that track record that you need to them then build bigger. I mean this is definitely a business where the patient application of effort over time will repay you.

But you got to really be patient and you have to be prepared for it to take a long time, not just to find deals but also for your track record to accumulate to the point where you can get investors. So I was fortunate in that I had people who I’d known for a very long time who had the means to invest with me and get me started. I know not everybody has that and I wouldn’t want anybody to take that as the only way to get into this business. There are lots of ways to get into this business, and starting smaller is a great way to do it.

[0:34:45.0] MF: Yeah, you said something earlier too that I’ve heard from Michael Blank and some other multifamily investors who I’ve interviewed and that some of these brokers won’t take you serious if you’ve never done a deal as well. So I imagine if you’ve done a smaller deal, maybe not a huge deal but a 10, 20 unit then they’re like, “Okay well at least I know you’ve bought something you’re not just a tire kicker trying to buy these properties with no money,” and I imagine that helps a lot too.

[0:35:10.6] JT: Absolutely. I mean this was what we were running up against in both of my partnerships when they first started which is that nobody knew who we were and we hadn’t closed a deal before and it is very difficult to get brokers to pay attention to if you haven’t done deals before.  So you’ve got to kind of figure out the place in the market where you can break through that. You may be able to do that with some smaller deals.

Certainly if they’re smaller, multifamily deals that are still considered residential where you could potentially live in them yourself, you can always pretend that you’re going to live there and brokers will deal with you as a homeowner buyer. But yeah, absolutely getting a deal done for the purposes of getting the brokers to take you seriously. It’s not just the brokers either, it’s the lenders, and nobody wants to be on your first deal.

[0:36:01.5] MF: Right.

[0:36:03.5] JT: You got to figure out a way to get those deals done and smaller maybe the way to do it.

[0:36:08.9] MF: That’s great. I know you’ve got to run here pretty soon. I think those are all the questions I had for you. I really learned a lot. If someone has any questions for you or they’re interested in your company, what’s the best way to reach out to you or to find out more about you?

[0:36:22.9] JT: I have been blogging, my own real estate blog where you can hear a lot of this stories or read a lot of this stories. Read my advice about how to break into the business and what you do once you break in. That is called Themortarblog.com and it just happens we were talking about getting brokers to take it seriously, right now I have a free give away on my website which is a guide to getting brokers to take you seriously.

So if anybody wants to go and download that, that’s free, it just contains some of my advice and experience over how to present yourself in the best light to get brokers to take you seriously even if you’ve never done a deal before. Feel free to go download that.

[0:37:10.4] MF: That’s funny and we did not talk about that beforehand, that was pure coincidence, so that’s funny.

[0:37:15.7] JT: Yeah, thank you for letting me do a shameless plug.

[0:37:17.5] MF: Right, no problem.

[0:37:18.8] JT: Yeah, that’s the way you can find me, it’s the Mortar Blog yeah.

[0:37:21.9] MF: Okay great. Well Jonathan, thank you so much for being on the show, you’ve had a very interesting journey that took a little while to get there but it sounds like things are going great for you now. And I imagine you’re much happier now than being a lawyer as well.

[0:37:34.9] JT: Yeah, absolutely. I mean I’ll be perfectly honest and say that I still haven’t replaced my salary from my law days, but I am a hundred times happier than I was in those days. So I get up, I look forward to — Sunday night, I’m ready to go to work on Monday morning, I’m rearing to go every day and it’s terrific. I get to talk to great people like you which is the best part about it.

[0:37:55.5] MF: It’s an awesome business to be in and I know what you mean about looking forward to work. It’s not a grind, it’s a lot of fun. Well Jonathan, thank you so much for being on, good luck to you and yeah, please keep in touch.

[0:38:07.3] JT: I will do, absolutely. Thank you so much for having me on, this has been a great — I’ve had a great time talking.

[0:38:11.4] MF: Great to hear. All right, well we’ll talk to you soon.

[0:38:15.0] JT: Thank you so much Mark.

On this episode of the Invest Four More Real Estate Podcast I interview Chad Carson. Chad is an incredibly nice guy, who I have met in person, and an incredible investor as well. Chad was a starting linebacker for Clemson University, which is a pretty big deal, but couldn't quite make it in the NFL. His father had been a real estate investor and he decided to give it a shot after college. Chad loved real estate and became successful very quickly, even though he started with about $1,000. Chad figured out ways to get started in the business without much money and built an incredible business that is allowing him to spend a year in Argentina with his family. Chad and I are similar age and he is at a point now where he has enough income from his rentals to retire.

Chad graduated from college with little money, but knew he wanted to be involved in real estate. Chad started by trying to locate deals for his father. Chad started out by driving for dollars. He would drive around neighborhoods looking for run down or vacant houses, try to find the owners, and then try to convince them to sell. It took Chad a couple of months to get the first deal for his father, but found one and earned his first check from real estate. From that point on, Chad was hooked and ramped up his real estate business.

Chad learned how to find deals and he started to make a decent living. He knew there was more to real estate than finding deals so he expanded to fix and flipping. Chad worked with a partner and at one time they were buying 5o houses a year to flip and hold as rentals.  Chad now has 55 units with his partner and has built a business that provides enough income to retire.

Chad Carson started investing in real estate in the early 2000's. He was flipping houses before and after the housing crisis, much like myself. Chad attributes surviving the crisis to being lucky and in a steady market. When Chad and his partner, bought over 50 houses in one year they decided they had to slow down and make sure all their properties were stabilized before buying many more. That happened to be right before the housing crisis happened. Chad also says that the towns in South Carolina where he was investing in were not hit too hard by the housing crisis. They invested for cash flow with long-term loans in place and that also helped them make it through the down-turn unscathed.

Chad finds deals a number of ways, but loves direct marketing. He learned how to find deals driving for dollars and still loves that tactic 15 years later. He has combined driving for dollars with direct mail to get the best results. This is something that Bob Couture from Podcast 37 does as well. Chad warns that direct marketing and direct mail is not easy or cheap. They have to send out thousands of letters to to get deals and sending out that much mail gets expensive.

Chad has used private money to finance most of his real estate deals. Over the years he has built many connections and got his first private money from one of his old college professors. Chad has structured the private money into long-term loans of ten years or more. Chad attributes his success in finding lenders to proving he can find great deals, proving he can make money with his deals and building great relationships with people.

Chad has his own blog with a lot of great information. You can find it at Coachcarson.com. Chad is called "coach", because of his very successful football background and his love to share what he has learned. Chad not only teaches how he has become successful in real estate, but also loves to teach about positive thinking and why he has becomes so successful.

The podcast is really starting to take off! Thank you all who listen and reach out to me. If you know of anyone who might be an interesting guest send me an email: [email protected]. If you enjoy the show, be sure to leave a review on iTunes!

LEAVE A RATING AND REVIEW FOR US OVER ON ITUNES

I am also having a sale on my quick start rental property video training. Use coupon code: quick50 to get 50 percent off! This makes it less than $10. https://shop.investfourmore.com/product/quick-start-rental-property-video-guide/

[0:00:58.0] MF: Hey everyone, Mark Ferguson here with Invest Four More. Welcome to another episode of the Invest Four More Real Estate Podcast. I have a really cool guest on today. Chad Carson who I’ve known for a little while, he’s been an investor owning rental properties, flipping for many years. He also used to be a football player which I find very interesting as a sports fan. And as a Bronco fan, I’m into football a lot right now. Really happy to have Chad on the show. Chad, how are you doing?

[0:01:28.3]CC: I’m doing awesome Mark, it’s great to be here, thanks for having me.

[0:01:31.0] MF: Yeah, thank you so much for being on the show. I really like talking to investors of course and different investors and how they’ve used strategies to build up their passive income and also flipping. You got some really cool goals but I’d love to start with how you got started in real estate. I know you went to Clemson on a football scholarship. How did you get started in real estate after going through that?

[0:01:54.9] CC: With me, it was kind of a story like, maybe a lot of people getting out of high school or getting out of college, just trying to figure out what you’re going to do in your life and you’re at all these little crossroads and I was actually a biology major in college. Biology and German of all things.

And so kind of the pre med type path but I started looking at it and that was one path, I applied to a bunch of med schools and I started just thinking about the structure and the rigidness of that kind of career you just had to go for eight years or 10 years and you finally start making money and you’re sort of locked into something for decades.

I didn’t necessarily write it off but I said, “You know, I’m just going to put that off for a little while and also had some opportunities like working for some bigger businesses and kind of Wall Street kind of stuff and both of those are really cool and they were kind of the traditional paths because you make a bunch of money and it’s pretty secure. but I was really enticed by the entrepreneurship path.

The idea that you could go start your own business and it was exciting and I knew nothing about it and it was just sort of like that sports feeling of this big challenge and excitement of going after a big goal. And so I plunged in to real estate investing sort of with that much knowledge in it. My father owned a few rental properties growing up, I was familiar with it.

I really just say, I own my car, car free and clear, I’ve got a thousand bucks in the bank. And I just started learning and reading and jumped into it with the business partner with a guy I knew in college and the two of us have been flipping and getting after it ever since then but that was the motivation at the very beginning.

[0:03:26.2] MF: No, that’s great. And I’m curious, did you look at other businesses? Wanting to be an entrepreneur, did you research other ways to make money? What drew you to real estate?

[0:03:35.3] CC: Yeah that’s a good question, I really didn’t and I think a lot of it had to do with observing my father growing up and I knew real estate was interesting, I’d always complained about it when I was in middle school because my dad used to overpay me like eight or 10 bucks an hour but it was totally not worth it as a painter. I would have to paint some of his properties and he would buy a foreclosure at the court house steps.

You didn’t know what was inside, so we’d get it and you have to — sometimes I was cleaning out refrigerators with maggots in it and rats were running after you in the house and I was like, “This is ridiculous, I would never want to invest in real estate.” Then you grow up and you get out of college and you’re like, “Well, dad was pretty smart after all.”

And so that was sort of the reason I looked at it and said, “This is a pretty intriguing business.” He actually had some books and seminars and things on his shelf, I was just thumbing around trying to reading and sitting in his office one day and I got the bug just by reading some of those books and just I got excited about it. I really didn’t look at it in the other ones, any other avenues except for that.

[0:04:37.3] MF: That’s great. Real estate really is one of the easier ways to start a business without much capital and without a ton of experience. That makes sense. How did you do your first deal with a thousand dollars in the bank?

[0:04:51.6] CC: I know a lot of people talk about wholesaling and I’ve done a lot of wholesaling in the past but I sort of took a different attack on that because I didn’t have any money, I just graduated from college, I didn’t even have a place to live because I was just trying to figure it out. And so I actually lived at home in Newnan, Georgia where I’m from, where my father invests.

And so my first year, the plan was, I just asked him about deals, you know, “What do the numbers look like? What kind of properties are you going after? I’d like to learn more about your business.” And as he explained some of that to me, it kind of came to mind that I had read somewhere about a bird dog, somebody who goes out, finds deals for other people and I ask that.

Gave a proposition to my dad, I said, “What if I just hustled, I don’t know a lot at the moment but I’ll go out and hustle, I’ll knock on doors, I’ll talk to every realtor in town, I’ll send out letters? I don’t care what I need to do, but if you’ll tell me what you’re looking for, I’ll go find it, I will sniff it out.”

That was a really good way for me to get started because when you’re nothing at that point, you’re going to have a learning curve and it sort of isolated just one part of the business that I could focus on and that was just lead generation bird dogging. That was it. I didn’t have to worry about the money, I didn’t have to worry about how to rent the properties, I didn’t have to worry about how to fix them up and flip them.

All I needed to know was I’m going to learn, I’m doing the very beginning of the funnel, I’m just going to go out and sniff out deals and it was really kind of learning in motion and I helped him by — it took about four, five months to get my first deal. Then I made a couple of thousand bucks per deal, I passed them on to him, sometimes I helped him along the way flipping on marketing or whatever.

But then at the end of that year I had learned a lot and I decided to then start doing it on my own because I knew how to find the deals. And so then I moved back up to Clemson where I went to college and that’s where my business partner and I got started and we just started buying properties on our own using private money lenders who would just stepped in. Instead of me wholesaling it to somebody else, I just would find the lender who would put up the money and then I would buy it myself.

[0:06:53.1] MF: That’s awesome. I know what you mean about wholesaling, there’s a lot of guru’s out there, a lot of people teaching wholesaling is an easy way to get started in real estate with money and credit. It’s not easy.

[0:07:05.0] CC: It’s not easy at all.

[0:07:07.4] MF: But one thing Wholesaling does doe is it teaches you how to find deals which is one of the most important things of real estate. The way you started was a great way because it probably taught you one of the most important things that you can do, and that was finding the deals.

[0:07:20.2] CC: Exactly. I’ve kind of felt like that ever since then that as long as I can find good deals and they’re truly good deals, they’re not just on paper and they’re the kind of deals that have equity, real meat on the bone, they have real cash flow. You truly can go find the money if you have the deal and that’s been proven over and over again to me that I kind of started in a little bit unorthodox way that I didn’t have the traditional job, I didn’t have credit to go to the bank and get loans.

But because I was able to use that one skill that you’re talking about, I always had something to bring to the table because there are lots of people with money and no time and no expertise but there weren’t that many people and there still aren’t today that, believe it or not, who are willing to go out and hustle and dig and kind of go in the nooks and crannies where nobody else is looking. I mean there’s always this nooks and crannies, and so if you’re willing to take that extra effort, I feel like that’s a really good thing to bring to the table.

[0:08:13.5] MF: Yeah, I totally agree. I’m curious, what do you think was your most successful way to find those deals?

[0:08:20.9] CC: Yeah, I used a variety but I’ve always stuck with direct mail over the years. A lot of my — I did buy a lot of REO’s at that point. I like REO’s, I think you do a lot of those too right Mark?

[0:08:33.1] MF: Yup.

[0:08:35.1] CC: I still like that because it was a really low cost way to get started, I didn’t have to put up all the money for direct mail and have some failed campaigns that never brought anything in. But I guess the combination of that and then direct mail to different list was really helpful for me because it sort of gave me that diversity of leads.

Some years, the direct mail to for example, an expired listing list or direct mail to out of town list, work like gang busters and then the next year it didn’t work at all. I would always have at least two or there different campaigns going and those have been pretty consistent for me.

[0:09:12.4] MF: That’s great. I use some direct mail too but it’s hard for me to focus on it with a ton of different things going on but it has given us some good results too. I think some people get the misconception about direct mail. You just send out one letter and then you get a couple of leads and buy a house from it. It doesn’t work that way. How many letters do you send out to people? How many contacts do you think you have to make before you can get one deal?

[0:09:38.5] CC: Yeah. My direct mail has evolved a lot. I’m much more pinned, today and my business is different than it was 10, 12 years ago. When I really get my volume up, you have to send out thousands of letters and my typical response rate is, I might send out for example 1,000 letters and get a 3% response rate maybe. And so you're going to get 30 calls and then out of those 30, maybe 10 of them will be worth going on appointments and maybe one or two of those are going to be good deals. That’s sort of a round number way to looking at it.

[0:10:15.8] MF: Right, those thousand letters aren’t free either, you got to pay for postage and to create them, it can get expensive to do direct mail campaign for sure.

[0:10:24.4] CC: Yeah, you can figure a dollar per letter. I outsource all my letters when I do that but between stamps and paying somebody to do it and the cost of envelopes, it’s a pretty big, or especially for a brand new person, that’s a pretty big investment, especially if those thousand letters don’t work. If you’ve sent it to the wrong list or your letter wasn’t really good or whatever.

I’d say it’s like a second or third level, kind of a little bit more advanced strategy. I think there’s some other ways that I really enjoy and things like today I still do. I’ve never stopped doing like just driving around neighborhoods and bird dogging myself or having other people do the same thing and I really enjoy picking out, in my target neighborhoods, I’ll pick out and make a list of properties that are vacant or that I just take a really cool property that’ll be a good investment.

Or properties where the zoning is kind of in favor of, like if it’s a single family house on a multiunit zoning or something. Just pick out those properties and make a list and send direct mail to those targeted lists of people. I think that sort of an awesome way to do it, you really narrow down your market and then you just continually send letters to that smaller list of people, that’s another good way to do it.

[0:11:31.3] MF: Right. I talked Bob Couture last week, he does the same exact thing in Massachusetts. He said, it’s so much more target, they get so much better results if you put that extra work in to actually drive around or hire someone to drive around and find those houses that look vacant or dilapidated. Not just because you have a better chance but because there’s so many other investors mailing to the absentee owners, the list is just a lot less competition if you put that extra work in.

[0:12:00.3] CC: Exactly. Another thing. Direct mail is an art that people study for years and if you really don’t get your letter right or if you really don’t get your envelope right, I mean there’s so many different tweaks you could do. I think that what you’re saying, they give you a competitive advantage.

Because those big firms that can send out 10,000 letters at a time and they have a marketing person on board. They’re going to really hone their message and they’re going to adapt it better than you are typically, as a small operator. What you’re saying will you drive around and find those properties, that’s the hustle that the other investors aren’t willing to do and there’s always those little things.

Even better, if you can get out in the neighborhood and knock on doors and talk to the neighbors and do some of that. You can never outsource relationships in people and conversations. And so I’ve always found that, that’s the thing that is kind of my moat or my barrier that is competitive advantage around what I do is just have relationships with people. That’s something that people can’t do with 10,000 letters.

[0:13:01.3] MF: Right, no that’s great. That’s something too that people can do that may not have a lot of money but they’ve got time. Like me as I started out. You can go out there and talk to people, drive around, it doesn’t cost you that much money.

[0:13:13.6] CC: No.

[0:13:13.7] MF: If you're just willing to do it and talk to people, it’s a huge advantage.

[0:13:17.9] CC: Yup, that’s right.

[0:13:19.4] MF: Cool, so you start working with a partner, what made you want to work with a partner and get involved with somebody else in your business?

[0:13:27.6] CC: It’s something that other people have asked me that and it’s not like something I recommend wholesale to people to get a partner but it’s worked out really well with us and the original motivation was we combine financial resources a little bit, I had a thousand dollars in the bank and he had a little bit more money for some marketing upfront but we also saw it as a way to scale our business a little bit with a little bit less risk.

I was the acquisitions person, I was the person who was always working on getting money for deals when we started flipping houses. He was the one who would manage the rehab, sort of our project manager, rehab manager, got all the subs out, got all the bids, and then he would also manage in selling it or renting it depending on which one we did.

It was really efficient early on and able to scale to the point where about 2007. So we started at the end of 2003 together. Within three or four years, we bought 50 deals in one year which was just crazy for us but we did that a lot because we were able to be more specialized and once we bought a house, I didn’t even see it for another two or three months until we sold it or maybe not ever see it again.

And so we just sort of had a pipeline going and then I would have some people work with me and some acquisition assistance and he would have the contractors. So I think for that reason it was good and as we’ve evolved, we transitioned where he’s not working as much day to day and the business as I am. So I’ll take a salary in the business.

He’s still an owner but then he’s had capital from some other businesses that he’s been able to invest with us. And so we’ve aligned in a lot of ways but I’m not sure that that’s as easy to replicate for everybody. We’ve got some pretty good consistent values, we have consistent goals with each other and it’s just been a good thing for us.

[0:15:15.0] MF: That’s great it’s worked out so well. I’m curious one thing you mentioned was, how to decide whether to sell or rent and I know a lot of people ask me that question. What parameters or criteria do you use to decide if you're going to rent or flip the property?

[0:15:29.0] CC: Yeah, so early on I was different than it is now but like early on, it was flip every time for us, every single property, if we could sell it, we would. Primarily because we were doing it as a full time business, that’s how we put food on the table and so for the first three or four years it was all flips just because we didn’t have any capital to save for a rental properties. We didn’t have enough reserves and so we just felt like we just needed cash cash, cash.

Once we were able to get a little bit more of a cash base, the rental properties for us were more — we would prefer to after two or three flips a year, we would actually prefer to rent properties mainly because we feel like the tax advantages and wealth building advantages were better. If we just, or example, if we flipped the house and we’d already flip three or four houses before that. The extra flip that we made $20 grand on that flip, our tax bracket was typically higher, we pay more in taxes, they had to pay Fico taxes often on that.

And so if we held it for a couple of years, rented it out and decided to sell it sometimes in the future then even if we did want to cash in on that property we were paying a 15% or 20% or a much lower tax rate, and so we were able to keep more of the money. That was one of the first considerations we started thinking about was just, we did less work and squeeze more money out of each deal and that made sense with rental properties.

But it also made sense kind of long term because our main goal was to have recurring passive income and we didn’t want to keep working and working. I wanted to take trips, we wanted to have flexibility to do other projects. And so at some point we knew we wanted that recurring income that came from rental properties. We sort of saw it like we were farmers and the flip properties were like cash crops, the crop you planted in the spring, you harvested in the fall and you keep doing those to see if you could eat.

Then, the long term, like the fruit trees that we were planting were like these apple trees, these long term cash flip properties that they took a little while to grow, they didn’t produce any fruit in the first few years but after four, five, six years, they start really producing some good cash flow and you get them paid off and then those fruit trees produce money and fruit for you to eat for the rest of your life.

[0:17:44.4] MF: That’s a great analogy and plus, you don’t have to spend as much time with the fruit trees. After it’s been established, the cash drops itsself.

[0:17:52.9] CC: Exactly, yeah.

[0:17:53.5] MF: Great. How many rental property are you guys up to now?

[0:17:58.4] CC: We have about 55 units and a small number of those are like notes that we’ve owner financed properties to people in the past. But most of those, most of what we have are rental property. I’m in a college town so a big number of those now are college student rentals. Close to campus, on the bus lines and that’s kind of a different niche of real estate but it’s been pretty good for us because the university’s been growing and we’ve had basically zero vacancy for the last five, six years on some of those properties. So it’s been pretty good and rents have been going up. That’s been interesting niche.

[0:18:36.7] MF: Yeah, that’s great. I live in a college town as well, most of my rentals are still single family homes not rent to college students but my sister actually has rentals as well and she’s always been into college rental niche. So what tips or advice can you give about dealing with college students and renting to college students?

[0:18:55.9] CC: Yeah so you’re going to need to babysit a little bit more, that’s part of the issue but I think one of the things is just being, having some good systems. I have some single family rentals like you do too Mark and I find those are much more — they can self-manage a little bit better if you get a family in there and they stay for seven years, that’s really an awesome management arrangement because they can cut their own grass, they can do a lot of things themselves.

So student rentals, you’re going to need to have some pretty good turnover system because they turnover every couple of years. We just, having checklist, having operation manual, having some good advertising channels that you can make sure students are able to find out about your rentals, have a good website.

It’s just a little bit more of a business operation than a maybe a little bit more passive rental operation might be. But it’s been a good exchange for us because we have a part time employee who works with us and she can handle a lot of this stuff and operations and it’s made more cash flow for us over the long run.

[0:19:53.3] MF: That’s great. Something I was going to ask is are you managing these yourself or someone on your team helping manage them, how do you handle the management of those properties?

[0:20:01.7] CC: We started off doing — so my business partner did a lot of it himself and then I moved into the role for a while and did it myself. Then we, I think it’s been seven or eight years ago now, we hired a bookkeeper, a part time bookkeeper to just check our mail and do some things like that and just kind of file paperwork and just do some basic bookkeeping.

She did a really good and she’s grown into a bigger role where eventually we started letting her do all of our collections like if somebody was not paying on time, we’d let her call them and text them and track them down to get the money. Then she grew even more into more roles where she’s sort of been our assistant like going out and putting out rental signs and putting ads for our rental properties and then that sort of thing.

She’s helped us do a lot of that and kind of evolved for more of a book keeper into an administrator/administrative assistant kind of role. That’s been a really big help and we sort of lean on her for some of the core administrative task management and I still do the underwriting of our tenants when they come through but sign the final lease and that sort of thing. But then she does I’d say 90% of it and then that allows us a little bit more flexibility and kind of do everything else we need to do.

[0:21:15.0] MF: That’s great. When I started letting someone on my team to handle the management, it made my life so much easier. The more people I’ve hired and handed off the stuff I don’t like doing, the more I get done and the happier I am that’s for sure.

[0:21:30.2] CC: Yeah. You have a lot of system, and I’m reading your stuff too Mark, having those checklist and systems that allow you to hand off whatever you’re doing, that’s a powerful way to kind of generate income while still having some control in your time a little bit right? That’s an amazing way to do it.

[0:21:45.4] MF: Yeah, for sure. I’m not a super organized person all the time, people may think I’m this amazing detailed organized person and I’m more of a big picture thinker and what I’ve done is try to hie people who are more organized than me to do that stuff. So it works out well that way. Yeah, the more systems you can get in place, even for your own personal life and time management and everything you do, the more you’ll get done and the more efficient you’ll be and usually the happier you’ll be to.

[0:22:14.2] CC: Absolutely.

[0:22:15.8] MF: Very cool. Now, something that I find interesting is, you started back in the early 2000’s and you’re still going strong. Did your area get affected by the housing crisis and how did you get through that?

[0:22:28.6] CC: Yeah, so it did get affected. I think it was — I’m in upstate of South Carolina and we’re not a major metro area like Atlanta, Charlotte, but we’re halfway in between those major metro areas. And so to some extent, we never experienced the massive growth that a lot of the big metro areas like Denver and Atlanta and Charlotte, and all the big cities.

So we never got the peak that everybody else did but we also didn’t experience the massive drop like everybody else did. It was a little bit delayed and we definitely had some issues and we had the same banking issues, everybody where you couldn’t go get money to refinance or whatever. I think we did some things that were, some of it was a little bit lucky and some of it was being smart and thinking about things.

But I mentioned in 2007, we really had a big growth year where we had 50 acquisition closings in one year. Some of those were flips, some of them are wholesales, some of them were buying whole rental properties and we decided after that year to sort of slow down and say we just need to absorb what we have. That was a good move and I credit mainly my business partner to that and that was another benefit of having a business partner. He was doing more of the management and he said, we really need that, kind of get our heads around the growth we’ve already experienced, let’s just slow down for a little bit.

That was a good move because that was right about the time things were getting ugly but the other thing I think we did which is a little bit luck but is also some intuition about the market was we didn’t have a lot of bank loans. Almost all of — I’d say, I think I calculated at one point there it was like 90% or 92% of the payments we had going out the door on any of the properties we had leverage on were private financing.

They were either seller financing, lease options or self-directed IRA loans from individuals. The benefit of that, sometimes we pay a little bit higher interest, sometimes we didn’t. But the benefit of that was we had a little bit more flexible terms, most of those lenders were willing to give a seven, 10, 15 year terms that kind of let us ride out the storm and kind of get through everything.

But it also gave us peace of mind that in the worst case scenario, even if we did have a balloon or some loan we had to pay off, I would much rather sit face to face over coffee with one of my private lenders and talk about the situation and say, “Hey look, we’re working our tails off to get this right but right now we can’t sell this property, can you give me a little bit more time or can I give you more of a cash flow on the back end? Can I give you a piece of equity in the property?”

Like an individual is going to have that flexibility whereas the stories I’ve heard, kind of the disasters stories from people I knew in town, people I heard on the radio like Dave Ramsey and some of the bigger personalities who don’t like going and invest at all. They all borrowed bank money and when things got bad, their banks weren’t willing to negotiate.

And so I feel like that was another thing that we sort of had to do that because we didn’t have a job and we didn’t have a lot of income to go get a lot of bank loans, we had a few but it was sort of something we ran with once we started doing it.

[0:25:38.2] MF: Right, that makes a lot of sense and I think a lot of people got in trouble with the banks because not just getting bank loans but they were getting short term bank loans with balloon payments where, yeah, if things go wrong, the bank can say, “Hey, pay us all our money or we’re going to take the property,” or whatever. But if you invest with long term bank loans without balloon notes, you’re usually a lot safer. Yeah, there’s a big difference between the type of bank loans we’re getting.

[0:26:04.4] CC: Yes, good point. Yeah a 30 year mortgage at 4% is much different than a 6% or 5% commercial loan with a three year balloon. If you had 20 of those commercial loans, they all burst at the same time, that’s a problem.

[0:26:16.8] MF: Right. Exactly and there’s no guarantee prices will go up or you’ll be able to refinance those and that’s what I think a lot of people banked on was the prices would just keep going up or they could just continually refinance all the properties and when things changed, a lot of that money just disappeared for a couple of years.

[0:26:34.9] CC: Exactly, yeah, it dried up. Even if you were a good borrower, even if you had good credit. I tell people, “Look at what happened to all the big corporations that were like fortune 500 corporations — Goldman Sax and GE and Bank of America had to go to Warrant Buffett because they couldn’t get enough money.”

If those biggest companies in the country are having a hard time getting money during a downturn, you think you and I as kind of a mom and pop investor are going to be able to go to the bank and get money? It doesn’t work that way and the other thing that I found that was sort of fortuitous about using some non-bank financing was the best time to buy deals was 2008, nine, ten, right?

And that was when it was really difficult to get back money but that was actually the time when a lot of the investors who invested with me were also sort of panicking about the stock market and they were getting like zero percent interest in a CD and it was sort of a perfect storm because I had already built relationships with those people, they didn’t have a place that they felt good about to put their money.

Here I was finding really good deals, produced amazing income and I would go to them and say, “Hey look, there’s a good piece of real estate, you’ll be in it for 60% loan to value or 70% loan to value and it produces a ton of income, if I got run over by a bus, you could take the property back and be in really good shape.” And so it’s just a really easy proposition once you’d built that relationship with people to say, “Let’s go buy some properties now,” and you had cash and go do it. Everybody else didn’t.

[0:28:06.6] MF: Right, that’s great. I’m really curious too, you’ve had quite a few units, quite a few flips going on. Obviously you’ve had a ton of private money that you could borrow, how did you find those private money lenders in the beginning?

[0:28:19.7] CC: It all just started, it’s kind of like I was talking about going out and finding deals and sort of talking to people, sort of like that and the first one I guess is always the hardest one and my first private lender was a professor I met at Clemson when I was trying to figure out what I wanted to do right when I graduated. I went and took a business course and I was a biology major and I wanted to learn a little bit more about business.

I met the professor in class was talking about real estate, kind of perk my ears up and I stopped after class and talked to him and next thing I knew I was riding around in the car with him and looking at real estate deals after class. Eventually he put me on some projects and said, “Why don’t you go research this and this?” I didn’t even have to go to class anymore, he gave me like special projects on the side looking at real estate.

It took about a year but after I worked with my dad and was a bird dog for my dad, that year I moved back to Clemson’s, I went to him and said, “I’m finding this real estate deals but I need the money, I don’t have any money, is there any way we can work together?” And so we worked out a way where he would put up the money and we pay him an interest rate typically, sometimes we’d give him a piece of the equity on the back end as a lender so he would have a participating loan and so he was basically like an angel investor in the venture capital world where he would kind of take a chance on a new, young, upstart investor but he would make a bigger profit by doing that.

Then over time, once I had that one relationship with him, I would meet other people at meetings and around town and I will tell them about what I was doing with him and they got interested in that too. And so I was able to develop a little circle of people who would loan me money that way. I learned a lot about self-direction IRA’s and that helped a lot because I became sort of an expert on how that process worked at least and how to get the loans setup and closed and that sort of thing.

So I could explain that to somebody who had a big 401(k) and wanted to invest in real estate. I would say, “Well you could call this company over here, they could put $100,000 in a self-directed IRA and you could loan it to me and make 6% or make 10%,” or whatever I was borrowing at the time. I would help them figure that out.

[0:30:28.8] MF: That’s awesome. One thing I think that’s unique was what you’ve been saying is you’ve been able to get some long term private money financing. I mean most people I talk to, even for myself, a lot of private money, they might lend you money for a year or two but it sounds like you’ve been able to establish them longer term private money loans, right?

[0:30:47.2] CC: Yeah. It started off short term though, that was the interesting thing. I was doing all those flips early on and this, my professor friend, he just did short term with this for a long time but eventually, especially when the downturn came about, we started saying, “Look, the opportunity is in holding the property and what you’d be interested in just earning a guaranteed, just an income stream instead of having this in and out? How about you have some of your money just sit there for 10 years and make a set interest rate and you don’t have to worry about it anymore, you could just use that income to do whatever?”

So it’s sort of evolved into that and we started showing them some other deals where they would just make income and I think the key for them was that we had already established that trust and so it might be that with private lenders, you might want to do a couple of deals where we pay them off quickly in six months, 12 months. But then, on the next, maybe on the third deal you offer them, “Here’s another deal that’s a rental property, it produces $2,000 a month in income. I’m going to be paying you a thousand dollars and you’re going to be at a 70% loan to value. Would you be interested in that kind of deal if you loaned me the money over 10 years or maybe seven years?”

You just sort of lay it out there and compare it to the alternatives because I know you know this too Mark. When you compared it to what they can do on the stock market, many people on the stock market are expecting 7% over the long run. And so if you can show them they can make 6% with an interest payment and it’s passive, it’s more stable, they already like real estate. To me it’s not a theological proposition for them to go for a 6% return over 10 years instead of 7% in the stock market especially if they’re a real estate person who knows and likes real estate.

[0:32:31.9] MF: Yeah. That makes perfect sense to me because there’s no guarantee the stock market’s going to do that, 7%, might be more, might be less but it could be negative returns too. You got nothing backing the stock market investment either. If you lose your money, there’s no house that you could take back if you lose your money. In real estate it’s backed by a real asset and like you said, you’ve got a steady return coming in. With the stock market, there’s no guarantees at all.

[0:33:00.1] CC: No, exactly, yeah.

[0:33:03.0] MF: That’s awesome. Now, what has intrigued me, we talked a little bit before we started is you’ve got your rental properties, you’re still flipping some homes now but your goals is to retire basically next year, right?

[0:33:17.5] CC: Yeah. And so retire is kind of a loaded word but exactly, I am. My wife and I are planning on a mini retirement trip and really, the goal as a couple of main goals. One is we’re going to go abroad for a year, we have two little girls, we have a three year old and five year old daughters and so we wanted to just settle down in one location in a Spanish speaking country.

My wife speaks Spanish, and is a Spanish teacher. We just want to sort of immerse ourselves and get an apartment down in Argentina, a big city there and just sort of be — live local life, learn more Spanish, have a good time, sort of just take ourselves out of our normal life for a little while. The cool thing about that is I’m a goal person and to do that kind of thing financially and with your business, it forces you to get all your income in place.

So you have to have enough passive income coming in to fund that trip I think the more difficult part is detaching yourself from all the systems and the process you’ve made. My business partner and I are working a lot this year on making sure of our payment systems, so how are we going to pay contractors if I’m abroad in Argentina and how are we going to do paperwork? How are we going to communicate with people?

It’s just forced us to build a better business knowing that it’s time to go, we’re going to be leaving the country. It’s been a really fun process for many reasons first of all because it’s going to be a really cool trip and a family trip and sort of a lifetime kind of experience but it’s also going to be sort of getting us to the next plateau of our business in terms of passive income, in terms of passive systems and delegating and outsourcing things.

[0:35:01.5] MF: That’s awesome. I love how you have set it up so that you’re kind of forcing yourself to make a business self-sufficient without you being there. It should be the goal of every business owners, is that you create something where you don’t have to work it all year long to make money but actually makes money without you. So that’s awesome.

[0:35:20.6] CC: Yeah, I’m excited. In real estate, it seems like such a local business and a lot of people give you an objection, you might hear this too Mark that you got to be local, you got to be there and look at the property. I’ve done this in the past, I took a little mini retirement in 2009 and with my wife and I before kids went to South America and I remember it vividly being on the Magellan strait in Southern Chile in Patagonia and I was in this little Internet café and I had my little small laptop.

I was checking my email briefly because we were about to go on a tour to look like a penguin colony in the very tip of South America. I’m on Skype talking to a plumber because I had gotten an email about a hot water heater blowing up and it was leaking in the crawl space and so I got on Skype for like 10 cents a minute and called this plumber. I was on the phone for three or four minutes, he said, “Okay, I know what to do, I’ll handle it, I’ll pay for work, we’ll bill you later.” He went and handled the hot water heater. I was off the phone in three or four minutes and I went on to my tour to the penguin colony and had a good time.

So in a worst case scenario, real estate can be very mobile if you can, even in those kind of situation, even if you were handling maintenance yourself, it requires a phone call in a way digital, the technology and internet works these days, this is a really cool business owning rental property to be able to be mobile, to be able to be self-sufficient. It just never been a better time if you want to kind of detach yourself from your normal life and kind of move around a little bit, this is a really good way to do it.

[0:36:53.6] MF: That’s awesome. Yeah, I’ve talked to a number of people who are investing from across the country or even out of the country and yeah because of today’s technology, they can see pictures, they can see videos, they can see properties, it obviously helps to be local, to see what you’re investing in once in a while but you don’t have to be there 100% of the time.

[0:37:15.7] CC: Yeah, exactly. You can come in and out of town and you want to be back at some point, I don’t think you ever want to be detached but the point is if you can venture off in a new greener pastures for a little while and to me that’s part of the fun of life. Trying new things, having new adventures. Real estate kind of gives you that bedrock, that foundation that allows you to venture off and if you compare that to other life style that people have, grinding away at a job for 50 years or 30 years.

Or having to get up every morning and commute and do the same thing with somebody else’s schedule, that gets old. This always requires work but it’s a kind of work that’s flexible, and that has plateaus that you can take time off, has flexibility to do other things, to grow, it’s a really — I’m obviously sold on the vehicle of real estate investing but I’m kind of evangelical about it almost telling people about it because it’s just such an amazing way to build your life around it.

[0:38:15.6] MF: Right, that’s one thing I was going to ask you about too is you’ve been in real estate about 13, 14 years or around there?

[0:38:24.0] CC: 13 years now.

[0:38:24.9] MF: Yeah, so how long have you had taken the biotech route, you think that would have taken you to be able to take the trip for a year to another country like this?

[0:38:35.3] CC: I can’t even imagine Mark, I don’t’ know that it would have happened. I think the way it works is you get momentum in your life and you go down a certain path and you start acquiring debt to go to medical school and just one thing leads to another. I don’t know that I’d be doing it. I would like to think that maybe I’d make a lot of money as a doctor and save that money and kind of jump out of that ship eventually.

But I feel like if you put off getting in entrepreneurship, the longer you do that, you don’t get to taste that flexibility and sort of taste the Kool-Aid so to speak, you might keep putting it off for another decade and I don’t think I’d be doing what I’m doing if I would have gone that path.

[0:39:14.3] MF: Right, that’s one reason why I love real estate as well. That’s great. Do you have any plans after Argentina or are you just kind of taking it as it goes and see what happens?

[0:39:25.1] CC: Yeah I’m just taking it as it goes. I mean I sort of see it like I knew shift for me, even right now we’re looking at bigger deals than we’ve done in the past in Clemson where I am. I’m sort of like a big fish in a small pond, it’s a small town but it’s really growing fast and so we’re looking at some venture capital deals where we put some money in deals with other people where we buy maybe a little bit bigger apartment units.

We’re looking at some maybe doing some development deals if the numbers are right. So I think we’re kind of shifting and looking if we have a good base of rental properties, we can then pick and choose some really interesting opportunities that are kind of a bigger deals. And I think that’s kind of on the horizon for us.

Also, I like doing some of the same things you do as well, I like to write, I like to think, I like to share ideas with other people. The Internet real estate world has been interesting for me to be able to exchange ideas with other people, to share ideas, I write a weekly newsletter, which is as much therapy for me because I think my wife got tired of me just explaining all these ideas and there’s cool things I read in the book. She like, “Why don’t you just write it down and share it with other people?” And so that’s what I’ve been doing that for a while as well. I think I’ll venture off into that in a bigger way.

[0:40:38.5] MF: Right, and you have a great site. Yeah, tell people what your blog is and you’re welcome to tell us a little bit more about what you write about and what your plans are.

[0:40:46.6] CC: My blog is called CoachCarson.com and that’s sort of originated. I used to do a little bit more consulting with people where locally but I played sports, always liked the idea of your old school coach was about fundamentals and who is about kind of teaching you the core parts of the business and keeping you motivated and what I write about on Coachcarson.com is very much about real estate, real estate investing and building wealth.

But also I get in to a lot of the personal finance and early retirement and how do you balance your business and your life? And use real estate goals to accomplish some of the life goals that you have. So I get into some of that and some of the — I’m really interested in positive psychology and mindset and how you think about things and ideas you put in your head. So I touch on a little bit more, I definitely have a lot of real estate but there’s also some more of that kind of thing as well.

[0:41:40.9] MF: That’s great. I’m saying, I’m a huge believer in positive thinking and using our own self-conscious to help us succeed more. I think people don’t realize how much control we have over our life if we really put our mind to it.

[0:41:53.9] CC: Exactly, yeah. It’s amazing, it’s kind of like that garbage in, garbage out analogy that if you put garbage in, if you were eating food, if you start eating Cheetos every day for breakfast, lunch and dinner, eventually you’re going to turn into a Cheetos. That’s just not good for your body. Well, the same thing goes with your mind. I mean there’s a quote, I think it’s a quote by Marcus Aurelius who talks about your mind back in the roman days and he was a roman emperor, the guy from gladiator.

He was a philosopher as well and he said that your mind is kind of like a cloth that gets died by certain color and the more you soak your mind in a certain kind of thought, you’re going to actually, your mind’s going to turn into that. If you’re always thinking about negative things or you’re always thinking of being pessimistic, if you’re always thinking about whatever it is, that’s the way your mind’s going to naturally be that way.

And so a big part of the entrepreneurship and real estate I think is controlling that information that goes into your mind and deliberately thinking about the kinds of things you want to build. Listening to podcast like this where you have people who are optimistic and building their own lives. That’s part of it, you have to kind of hang out with people whether it’s virtually or in real life who shares some of the values and some of the aspirations that you do. That’s bound to rub off on you if you do that enough.

[0:43:09.7] MF: Right, that’s awesome man. We’ve been going a while here but that just reminds me of people who think about starting investing in real estate or thinking about becoming a real estate agent. They listen to people who never have been in the business or have never done it and they get discouraged because they tell them it’s a bad business to be in. But if you’re going to get involved in something, make sure you listen to the people who are actually doing it and not somebody who has never done it before and is negative about everything.

[0:43:35.5] CC: That’s right. That’s right. Or somebody who has crashed and burned and is pessimistic for the rest of their life about how that doesn’t work. There’s plenty of those people but there’s also people who crashed and burned, who have come back. You can find examples of whatever you want to find. Find somebody who had done what — there’s always somebody who has done what you’re trying to do or has overcome what you’re trying to overcome. That’s the beauty of the internet and there’s millions of stories out there. Find your story. If you resonate with Mark, that’s why you listen to him, you keep going with somebody like that who inspires you and who can show you a different way of thinking about life.

[0:44:15.5] MF: I appreciate that, thank you. Great, well, I think those are all the questions I had for you except for one last one and I think you got started. Many people want to get started in real estate without a whole lot of money, maybe not great credit, which I think the more money you can save, the better off you’ll be. But if someone has a thousand dollars in their pocket, they wanted to get involved in real estate, what do you think the best way for them to get started is?

[0:44:41.2] CC: Good question. There’s a lot of personal situations but I love the idea of house hacking and what I mean by that is using your personal residence somehow as a way to learn about real estate and there’s a couple of ways you can go with that. And my first, well it wasn’t my first but one of my first residences was I moved into a multi-unit property, a quadruplex and I had to live somewhere.

And so I got the loan to buy the property and lived there and I learned more about rental properties by living there at the unit and I could sort of live through my mistakes that I made because you’re always going to make mistakes. I was also — I learned a ton and I also was able to live positive cash flow by renting out the spaces next to me and I was actually living positive two or $300 bucks a month instead of having a thousand dollar mortgage payment, I was getting paid to live in a rental property. If you’re young and you’re willing or young at heart and you’re willing to do that kind of thing.

I think that’s a really cool way to do it and there’s so many ways to kind of hack your rental property, you can do air BNB and rent a couple of extra bedrooms. You can build an apartment unit over a garage, you can do — there’s all sorts of ways to get started with that. In rental properties in particular, I think that’s one I recommend a lot to people because you already have to have a place to live and its’ a really low risk way to get in to the business.

[0:46:04.3] MF: I totally agree, I think that’s an awesome way to get started and a lot of people think there’s some magic, secret formula but really, like you said before, if you learne the fundamentals well, that’s where the success comes from and one of those fundamentals is using low down payment, owner occupant loans if you can.

[0:46:21.1] CC: Yes, exactly. That’s the way to do it.

[0:46:24.3] MF: Awesome. Very cool, Well Chad, thank you so much for being on the show, if people want to get a hold of you, it is Coachcarson.com the best place or is there another way to get in touch with you?

[0:46:33.5] CC: Yeah, that’s it, go to Coachcarson.com and if you go on the front page there, I have my newsletter, you can subscribe there and I have some free information that you can get when you sign up and I also have a contact form there if you want to ask me a question or get in touch, you can hit contact and it will go directly to me.

[0:46:49.1] MF: All right, awesome. Well again, thank you so much for being on the show, love talking about your journey and I hope you have continued success and a lot of fun in Argentina, that will be exciting and yeah, thank you again.

[0:47:00.9] CC: Yeah, thanks Mark, it was a pleasure being on.

[0:47:03.5] MF: All right, you have a great day.

[0:47:04.6] CC: You too.

I am currently looking at buying rental properties from a long distance. Prices in Colorado have increased year after year and it is very tough to cash flow in the current market. I thought it would be awesome to interview an investor who is not only buying rentals from a long distance, but also flipping. Bob Couture is the guest on this weeks episode of the Invest Four More Real Estate Podcast and he is buying rentals and flips from 3,000 miles away. Bob lives in the Los Angeles area and invests in Massachusetts.

Bob Couture grew up in a family involved in real estate, specifically contracting. Like me, he did not want anything to do with it when he was growing up. He ended up joining the military and having a number of other jobs. Along the way he migrated to California and still lives there now. Bob saw an incredible opportunity in real estate with flipping homes. Living in California he knew it would be very tough to make money flipping, because of the high dollar amount to buy property. Bob grew up in Massachusetts and still had some connections in the area. he decided to check out the area and see if he could make any money flipping from a long distance.

Bob grew up in the area where he flips houses and he says that was a huge advantage to him. he had family and friends who knew the area and could help him reduce his learning curve. Bob did not blindly start investing in Massachusetts, he spend weeks of time there learning the market and figuring out of he could set up a flipping business there. After a few months of research and multiple trips to the area, Bob decided it was a great market and he could flip homes there. Bob suggests investors who are interested in investing in a new market check out the area thoroughly and it helps a lot if you have connections in the area as well.

Bob has used the MLS, networking and direct mail to find his deals. Bob recently got his real estate license so that he could save money buying and selling flips and because it would be easier to value homes and get great deals. Bob also uses direct mailings to potential sellers and has people do a lot of driving for dollars for him. Being 3,000 miles away Bob cannot see every home he buys or be there for the closings. He has found a partner in the area who can help Bob complete the repairs and look at homes for him. Bob still focuses on finding awesome deals to flip or hold as rentals.

Here is a great article on direct marketing.

Bob has had to find many ways to finance his flips since he plans to buy over ten in the next year. Bob has found local portfolio lenders who will fund his flips and has had success using crowd funding as well. Bob also uses some private financing and of course his own cash to finance his flips.

Bob does have any training programs, but he loves to talk to investors and you can find him on his website http://sc-homebuyers.com/.

LEAVE A RATING AND REVIEW FOR US OVER ON ITUNES

My new rental property book first draft is done! It is over 350 pages and should be ready in the next month or so.

[0:00:57] MF: Hey everyone, Mark Ferguson with Invest Four More. Welcome to another episode of the Invest Four More real estate podcast. Today, I’ve got a great guest, someone who I’m really interested in talking to myself because of how he has invested.

Bob Couture lives in California and not only buy his rental properties across the country but also has a flipping operation. He helps with some across the country. I’d love to hear how he’s doing it, how he got started in real estate and hopefully he has some tips for me and other people as well.

So Bob, thank you so much for being on the podcast, how are you doing?

[0:01:34.4] BC: I’m doing great Mark, thank you, It’s an honor to be here.

[0:01:37.2] MF: Great, really appreciate you being on the show. So you’re in California right now correct?

[0:01:43.3] BC: Right, I live in Los Angeles California. Specifically, Hermosa beach in LA.

[0:01:49.3] MF: Very cool. And obviously, for most people who are in California right now or wanting to invest in real estate, it is really hard to do anything in California I imagine as far as flipping or buying rentals.

[0:02:01.7] BC: Oh absolutely. It’s not a huge cash flow area on the rental side and then also the price entry is pretty high and wildly competitive over here. It becomes pretty tough, it was tough for me when I started to look around here and it just wasn’t going to work for the money that I had and the skill that I had and so I had to start looking other places.

[0:02:29.9] MF: Right, and I think a lot of people in the same boat as you, I like the affordability in California, it’s just crazy how few people can afford to even buy a house based on what they make let alone invest in what. Before we get really into that, you’re from Massachusetts originally, how did you end up in California?

[0:02:51.8] BC: I moved to California after college, I figured it was time to kind of try something different and if that didn’t work out I could always go back and fell in love with California, I like the idea of driving to snow and then driving away from it when I was done. The California kept me with that. So I have the great weather over here and enjoyed it but all my family is back east or back in Massachusetts in the Greater Springfield area. Stay here but then go back and visit and we thought about moving back to Massachusetts but that lasted about a minute and we were staying for sure.

I had a number of different jobs while I was out here in the corporate side, worked in finance and also worked in aerospace and defence and while I was out here I was part of the California army national guard and I had a number of different deployments. After I got back from my last deployment is what got me — I came back from Afghanistan, I went back to my corporate job at aerospace and defence and I just kind of realized, “This is not what I want to do for the rest of my life,” and that’s what got me thinking about real estate.

I joke, I think I was the last one to know that I was supposed to be in real estate. I grew up in a construction family, my father was a painter and then remodeller. He took a lot of summers from me as a kid going to work for him and then I think I kind of wanted to leave out of that business and I would go out and do other things but it brought me back kind of full circle. And then on my wife’s side, they’re in commercial real estate. Once I said I need to work for myself and this seemed to be the path.

And it was over a conversation about with my dad about doing a winter project. Normally slow for him, we went hunting for a house and did one together and then things kind of took off from there and it was great for me because I had kind of a built in mentor with my dad and he was great about keeping me out of trouble and not getting into kind of a projects that were over my head and he’s retired now and it was time for me to kind of look on some different things.

Although I was in California, I still wanted to invest there, I knew that area, I knew my dollars could go much further over there and as I was learning the business and it just felt like a comfortable place to be and that’s how I met my business partner Justin Simmons and we kind of realized really quick that we were the pieces at each other were missing. I had more of the finance sense in marketing sense and he had that construction sense and from there we S&C Homebuyers was born.

With me being in California, I can burn up the phones and I do a lot of the fielding the calls for the direct mail and then contacting agents and attorneys and all that. I can do that from California and then he’ll go view the houses, get the rehab numbers. Either he’ll negotiate it there on site or it comes back to me for further negotiation and then we close the things and then he’ll manage the rehab, I’ll go in.

And after that I’ll get it listed on the MLS, get it sold and things been working out great. I fly back about once a month to make sure I’m meeting with our investors, the banks, continuing to network and worked out wonderful for me, I get to visit with my family. That’s kind of been the journey up to date.

[0:06:36.6] MF: That’s great and first of all, thank you for your service and I’m sure it’s not fun going to Afghanistan but it’s funny because my father was in real estate when I was growing up too and the last thing I want to do is become an agent in real estate to what he did. After college I got a finance degree and I’m like, “Well, I can’t really find the perfect job I want to. I’ll just try real estate for a little bit part time.”

Then I realized, “Wow, this is pretty awesome. I’m probably going to stick with this.” But yeah, I know what you mean growing up, you don’t want to always follow exactly what your parents or family are doing but very cool. I’m curious when you first got started investing, were you looking for a rental? Were you looking for a flip? What was your strategy when you first were learning about real estate investing?

[0:07:21.0] BC: I wanted nothing to do with rental properties or being a landlord. I wanted to flip, I thought it looked so cool on TV and it look like such a sexy industry and all I want to do is flip houses and I ended up becoming a landlord after the first two. That’s kind of how the strategy did not go as planned.

I eventually got better at it and understanding the market better and there were some items of bad luck along the way but I take full responsibility for all the decisions, the good or bad on them and yeah, ended up being a landlord for the first two and the funny thing is, those first two are my best performing rentals. I guess everything happens for a reason.

[0:08:09.3] MF: Right, that’s funny. You kind of used the term “accidental landlord”, I’ve heard that before. Was it just because you didn’t quite make enough money to flip and you decide to rent them or what was the decision into turning those into rental properties?

[0:08:23.1] BC: The first one I had been holding for a very long time. I kind of had a good sense of what the ARV would be, the after repair value, the sale price should be for that house. But I was using an agent at the time and she thought from her CMA that it was going to go for another $30,000 more than that. And I thought, “Gosh, I don’t want to leave $30,000 on the table.”

We went with that and then it just hung out there, we continue to lower it and I think we got like through about six months and then that thing wasn’t going to move anymore. We’re getting closed to getting into the winter and I knew if I didn’t sell it in the fall I’d be holding that thing through the winter and I said, “Well I’m going to just try to rent this.” and It went that way.

[0:09:13.8] MF: Okay, brings up a good point. I know real estate agents are vital to, in the investor’s team as far as selling them but I think you make a good point, the investors should always have double checked and know their own numbers as well, you should never rely solely on the real estate agent to tell you if something’s worth or especially when you’re buying a flip, real estate agents mostly have no clue what the numbers need to be or how much room you have to have to make money on them. Have you found that out to be true as well?

[0:09:44.1] BC: Oh absolutely. When we have an agent, when we’re on the acquisition mode and we walk in with the agent, that’s always the question, “What do you think this will sell for, all done up?” Whatever number that they saw we know that it’s got to back off on $20,000 for that. That’s probably where the truth lies. Yeah. We’re much more cautious with that and for sure, now that I have my license and even before my license, I could run comps pretty easily with all their tools but now that I have the active for the MLS and running our own comps and really scrutinizing any comps that come in from anyone else. That’s the thing that will sink us the worse is going in, that expression, “you make your money when you buy,” if you’re buying too high based on a false ARV, you’re sunk before you started.

[0:10:40.5] MF: right, I completely agree. Speaking of that, one of the challenges because I’m looking at buying in different areas of the country for rental properties because our market’s gone so hot, I’m still flipping here in Colorado, I’m doing okay with that but the cash flow is just disappearing. I know you grew up where you're investing but how long did it take you to learn that market and figure out what values were and what good deals were before you felt comfortable investing there?

[0:11:09.2] BC: I would say about three months. It was about — and it was looking at a lot of different properties, either physically going out there and just going through a week or two of just property after property or going through the MLS. It took me I think before I felt really comfortable, I think it was a three month part.

You need to get those property, this look like, “Wow these great numbers,” and then you get out to that area and you’re like, that’s why this numbers are great, this is an awful area. I’m running into that still from time to time you’ll get some pockets and something like, “The number here seem too good to be true,” and sure enough, there is a reason for it. That’s why I feel very fortunate to have a partner that has boots on the ground or prior to that, my father can go over and look at those properties.

To me, I think it’s really important to be able to walk on the ground or know that there’s someone there that can go walk into that area. I know there are some people, some investors I feel very comfortable with, just using Google Earth or other online resources to get a sense of the value but I need to know that someone’s kind of walked it. Someone that I trust has walked it and were able to get those eyeballs on it.

[0:12:34.4] MF: Right, that’s great. Yeah, Google Earth can be six months or a year outdated. You never know what you’re going to find with those pictures and sure you have agents that help and help you, but at the same time, you can’t always trust them 100% as far as what they’re going to tell you about neighborhoods and different things.

Or investors trying to sell you a house that they own obviously, they’re going to bias towards the neighborhoods and what’s going on. Great advice. How long do you — how much time did you physically spend there when you first began and first were starting out your investing in that area?

[0:13:08.9] BC: I would go out for two to three weeks at a time when I first started out. Then now I’m down to maybe a week, week and a half but go off for some pretty long spells and then, or bring my family out for the summer but yeah, I was spending a lot of time up front just to reaffirming what I knew about certain areas, getting better acquainted with others and putting in a lot of time initially.

[0:13:42.2] MF: Very cool. I have one question for you I know it might not be easy to answer, but obviously it helps that you had your father and you grew up in the area and you knew it somewhat, maybe even when you were there, you probably weren’t looking at some real estate investing wise. A lot of people looking for new areas to invest in, I always suggest, start out first with someone you know or if you have someone you trust in an area, you don’t have to hire them or have them work for you but at least they can give you an idea of areas and what’s going on.

I mean how much more important to have someone you know and trust there as supposed to investing somewhere that might have great numbers or just great deals where you know nobody if that makes sense?

[0:14:24.2] BC: Yeah, I’ll give you a little side story that’s outside of Massachusetts. I have a rental property, it’s a lactation rental in Palm Springs. So that’s about two hours, two and a half hours from Los Angeles. Across the street from my rental property over there, there is a house and all it is, is a façade of a house. That house was sold on online auction and the first buyer that bought it saw the side of the house, bought it, I think it was like maybe $250,000, which is a decent price for houses over there. Three to $500 in that neighborhood all done up.

He bought this house, it looked like a great street, great neighborhood and went in there to go walk it and opened that front door, there was no roof to it, there was no back side to this house, it was just the front wall window and door. He was able to get out of that transaction and then the next buyer bought it for I think it was $125 or something near there, which is a much better price for that house to be able to level it. It was a great price for that house to be able to level it and put a new one in there.

That kind of situation speaks to me of the “having someone over there” because at $250, that wouldn’t have been a bad house, you would have gone that 50 cents on the dollar at a $500,000 ARV which was perfectly in the realm of reason over there. That sounds like a pretty good deal. But that was awful and luckily he was able to get out of it.

It’s just crazy to think, I mean that these things exist and he was able to get out of it because that wasn’t disclosed but that doesn’t happen all the time but those are the real stories that are out there about not being able to… someone that you trust being able to walk over and at least open the door to make sure that the roof is there and the whole backside of the house.

[0:16:29.6] MF: Right, that doesn’t happen too often but man that’s crazy. Something else you said that ring a bell. Even in Massachusetts where you’re investing. You know, you said you’ll find houses, it looked like they have awesome numbers, great potential but then you go to the area and it’s like, “Oh there’s a reason,” and even when you know an area or have people, you’ve just got to have someone you trust be able to walk in or go to the property and tell you everything that’s going around it.

[0:16:57.0] BC: Yeah. Very similar on that for Springfield, there’s some historic areas and historic homes and if you end up buying something like that, your normal numbers go out the window because you’ve got to restore these things to historical guidelines and we had one that was a potential wholesale opportunity, we couldn’t give the house away because no one could make the numbers work with all that historical stuff that they would have to do or historical guidelines that they would have to meet to rehab the house.

So those things, if you don’t know that you’re getting into a historical house or that area — so maybe back to your original question is, do you need to be there? Maybe not need to be there, but do you need to have someone there that you trust? I think absolutely. There’s nuances of areas. Like I had mentioned about Springfield, the nuances of the historical sections.

In Palm Springs, there’s a nuances of the — there’s Indian land versus what do they call, like fee simple versus lease land. There’s houses that seem like a great deal and they’re going for cheap and they look like they’re in great condition but there is a lease that expires on that and that you have to — you don’t know what the Indian lease will be on that when that expires.

So there’s no rules — I say no rules, but you don’t know what that renegotiation’s going to be. A lot of scary things that happen with areas that you don’t know about and it changes from state to state, from counties to county. Those are the nuances that you got to be able to talk to someone that’s on the ground over there and that knows it. Ideally maybe it’s an agent, maybe it’s a friend or a family member that’s in that area.

Someone that you meet through some networking or I think there’s a lot of different companies that are out there too that are doing like the turnkey sale if you do some good research and learn about those and get references that might help but there’s just too much of the scary stuff out there.

I’m definitely not the type to say, “Don’t do it because of this hurdles,” you got to ask yourself how you’re going to do it and how do you protect yourself. What could go wrong and how do you mitigate that risk?

[0:19:20.4] MF: Right, that makes perfect sense. That’s a little scary. Not knowing what they’re going to do. Very cool. So changing directions, how have you ended up buying most of the properties in Massachusetts from California? You said you were on the phone a lot, you’re doing a lot of the negotiations, how does that work from a long distance?

[0:19:43.7] BC: With FedEx. We’ll get the closing documents and they get emailed to me, I’ll get my side of it notarized and it goes back to the, so in Massachusetts we use attorneys. They’ll go back to the attorney and then we’ll meet them at the closing table to sign his side and to close that way. We run into no slow down with that and the ability to purchase properties, I had no issues there. And then often I’m there once a month anyway, so if the timing works then I’ll be there in person.

On that part, not a big deal and then in terms of offers, over email or make the verbal or I’ll email or fax, however the recipient wants to receive it, and then go that direction. Yeah, we’ve been able to not need me over there for closings and purchases or the sales, it’s worked out just great. I’ve got a FedEx envelope sitting right next to me that I’ve got to go out and get some documents notarized and dropped in there for a closing this week.

[0:21:00.9] MF: Very cool. I know you do some direct marketing for finding properties, do you think most of your properties you’d use the direct marketing or do you use the MLS as well to find deals? How do you find those deals?

[0:21:13.5] BC: Great question. I would put it into three buckets for us, it’s direct marketing is the third, the MLS is a third and then our network is the other third. I would put maybe the, we get very few — the website leaves just don’t really pan out for us. I’d say we get a few of those in there too but the overall, that’s kind of our three major buckets, the direct mail, the MLS. On the MLS it’s more so on the REO and short sales and then our network with attorneys, other agents and referrals from friends and family.

[0:22:02.0] MF: Okay, great. And Massachusetts still has a ton of foreclosures if I remember right? If I remember, it takes like three years or more to foreclose in Massachusetts. So I think they still have a ton of inventory, don’t they have distressed properties?

[0:22:16.8] BC: They do. I think we’re starting to see even more of an optic. I almost feel like there is quite a bit that were held back and that’s still running in squares. I think we had someone come out to our Real Estate Investment Association and I think their analysis was a good two to three years still.

[0:22:40.3] MF: Wow, are you seeing prices kind of stable there or they decreasing or increasing? What’s the market look like?

[0:22:48.1] BC: The area where — over the last couple of months we’re seeing more and more of the bank owned coming in to the market. In those particular towns or cities, in their areas, we’re seeing some downward pressure on home prices. Nothing drastic and also, this is a tough bend in the year for us with winter for home sales, so a culmination of those two things. The rest of the area, I’m relatively stable, pretty good, it’s staying strong, some respectable increases for home prices. So a little bit of mixed bag, it really goes neighborhood to neighborhood.

[0:23:31.9] MF: Yeah, it’s interesting to hear because as you know, most parts of the country are seeing increases in prices and very low inventory but there still are a few areas out there that have quite a few. Florida is another one that I think, I just looked this up, the average time to foreclose the property in Florida was 935 days. I think it was higher in Massachusetts but I can’t remember the exact number.

[0:23:55.1] BC: Wow.

[0:23:56.9] MF: Yeah, in the states, they made this huge crazy foreclosure laws hoping to help people and keep them in their houses, but in the end it kind of destroyed the market comeback because it took so long to get through these properties. That’s interesting to hear.

[0:24:19.7] BC: I’m sorry Mark, quick question for you, what’s attracting you to Florid? Is it the high level of foreclosures or what’s got you looking down that way if you don’t mind me asking?

[0:24:30.9] MF: Yeah, the high level foreclosures always peaks my interest because I know there’s inventory there and then the population is really increasing. Like they just pasted up New York for the third or fourth most popular state in the country. They’ve got an increasing population, the economy seems to be doing pretty well and home prices are increasing there but not crazy increasing.

So it seems kind of like this interesting situation where they’ve got a really good economy of people moving in but there’s so many foreclosures that prices aren’t going up as high as maybe some other areas of the country. That’s what really — and they have low taxes which is nice too. That keeps my interest but yeah and it’s close to the ocean. If I go down there and visit…

[0:25:19.3] BC: Visit?

[0:25:20.7] MF: …that’s a nice break.

[0:25:22.5] BC: There you go.

[0:25:26.1] MF: My family and I are going there March 12th to 22nd to explore some properties and have a vacation too, so we’ll see what it’s like.

[0:25:34.2] BC: Right on.

[0:25:38.3] MF: I’m curious, I don’t do a lot of direct mail myself for marketing, I do some but it’s definitely on the third of my business, most of mine is still MLS and it helps me on agent. But what do you focus on when you’re doing your direct marketing to get those deals?

[0:25:53.8] BC: A lot of driving for dollars for us. It’s having the eyeballs on the property and seeing some level of distress and that helps to at least give us a reason to send out the mail, our direct mail doesn’t say your house looks like crap and that’s why you’re getting the sweater. At least we know that there’s some kind of level of distress to start off.

We also are engaged with the absentee owners as well with the kind of the same thinking as most of them. Maybe there’s some tired landlords in that bunch and might be willing to sell or haven’t kept up with the maintenance or whatnot but our driving for dollars are probably kind of the main one, looking out at the foreclosures and seeing if we can use our expertise to help stop a foreclosure or look at alternative strategies or short sales and things of the like. So that’s pretty much been it for us on the direct mail piece.

[0:26:59.3] MF: That’s great. It seems like if you’re doing the driving for dollars, you’re getting much more targeted people than you are just sending out to every out of state owner or absentee owners. Does that have a higher success rate for you as far as the absentee owners?

[0:27:16.7] BC: It does, it does. We’ll get more calls form the absentee owners but I think it’s more of a, they’re probably used to it and they’re either calling to make you stop or trying to, fishing for the higher price if they’ve got a fish on the line or not. When we’re getting on for the driving for dollars piece, it’s normally a situation of one or two things; a very angry phone call or are one where, “Gosh, my prayers have been answered I can’t keep up with this place, I’m really happy that you called,” and some really great phone calls have come out of that.

[0:27:58.4] MF: That’s great. Yeah, if you’re going to do any type of direct marketing, you have to be prepared for angry phone calls, that’s part of the business. It happens.

[0:28:08.6] BC: That was the toughest part for me in the beginning. Like, “Wow, why are people so angry at me?” It is just part of the business and understanding where they’re coming from and just laughing it off, they can’t hurt you over the phone and I don’t think that they’d need to. They’re frustrated, they’ve got different things going on and just gotta laugh that stuff off.

[0:28:28.9] MF: Yup. Some people need to be mad at somebody for something.

[0:28:33.6] BC: Well said, well said.

[0:28:35.9] MF: You know, so you’ve got your real estate license, what prompted you to do that and how — was it a pretty simple process for you to get your license?

[0:28:44.3] BC: Yup. Part of that was just to make sure that we’re keeping as many of those dollars in house as possible. Also, to leverage the MLS and for that, for further research and what not. I got my California real estate license because I thought this is where I was going to start business and then was pretty easy to do. I didn’t have to take the educational part back in Massachusetts, I just needed to get the books in and sign up for the test and they had like a reciprocity for California.

That worked out pretty good. It was pretty easy and I think it was very worthwhile, it allows us to see properties when we want to see them and have to go around someone else’s schedule. My partner is registered as an assistant, so it gives him — affords him those opportunities as an agent just about the same as an agent other than negotiating prices. It works out great for us. I think it was, for us it was a good, good move. It’s not for everybody but I think it worked out great for what we wanted.

[0:30:02.3] MF: Great. Yeah I think when you’re doing that level of dilator, makes a lot of sense for finding deals but valuing properties and then saving the money on commissions as well just kind of icing on the cake.

[0:30:14.4] BC: Yeah, for sure.

[0:30:16.0] MF: How did you go about choosing a brokerage in Massachusetts. I’m curious, did you pick kind of a low fee one where they left you alone or did you go with a big name firm?

[0:30:25.0] BC: I checked out some of the big named firms and then I got my head spinning on like how the commission structure worked. I ended up going with a friend of mine and he’s a real estate investor, and we became friends because he helped me try to sell my second or third flip and we got to talking, he was into real estate investing, he was on the multifamily side. So he started with single family and then gone into multifamily.

As he was focusing more into multi, it seemed like a good fit for us to be the single family guys within his brokerage and the synergy in that relationship has been outstanding. Get to lean on quite a bit for help and then I think we get to help out the brokerage as well. We almost, I like to say that we, “No lead’s left behind,” and when I can’t buy it for the home buying company then we have the brokerage as an easy way to get someone if they’re looking for retail value to list the property.

So I won’t be listing it but I can refer that into the brokerage. It gives us some more opportunities for both sides, a good referral stream for the brokerage and makes us look really good that we’re not just a one trick pony with, “Hey we can either buy your house or say goodbye,” we got another option for them and go and list it.

Or they can always keep us a plan B if things didn’t work out as they thought with the listing, they always have us there too. It allows us to keep the relationships alive and feel good that anyone that we come in contact with, we have multiple ways to help them. I’m sure that’s what you realize in your business having, being an agent and also an investor.

[0:32:23.3] MF: Yup, exactly, I was actually going to ask you that question but you got to it before I could if you listed the one you can use. It’s a big source of income and if you’re not a licensed agent, you can’t take referral fees legally form an agent. So it really, it gives you a huge advantage being an agent if you have those leads.

There’s a lot of them that they want retail, they don’t want to sell it for the prices that we can buy them for. It does give them a really nice option too. You're like, “Hey, if that doesn’t work, here’s what we can list it to, list it for but you’ll have to do such and such and such, pay these fees.” Nope, we do the exact same thing.

[0:33:01.9] BC: Very cool.

[0:33:04.8] MF: All right. So, I know you’ve got to get out of here in a little bit but I’ve got a few more questions. One thing I really want to talk about is how are you financing your properties or how has that worked out from out of state?

[0:33:17.9] BC: That’s a great question there. Multiple ways, so we have developed some good relationships with some local banks, they are portfolio lenders in that Greater Springfield area and we use them for, like a good case and point we had a house, a fairly large house that we bought in November. So there was going to be that by the month or two of rehab and we knew we were going to have to carry that house out until March because of the winter.

So we went with bank financing because we knew we were going to have to carry that house for a bit. We’ve used our own cash for some purchases in the past. We also used Fund That Flip, we’ve got a great relationship with Fund That Flip, that’s a crowd funding source and over the last 30 days I think we put two houses through them on their platform and it’s been great.

What I really like about the Fund That Flip. When you hear crowd funding, you hear it’s normally — you think you put the opportunity out there and you got to wait for all these increments to come in and to fully fund it.

The way that they do it is the company, Fund That Flip will fund the projects so you can go and close and then they put the opportunity out onto their website to get back filled funding from the outside investors from credit investors, multiple and credit investors coming in and funding whatever they want to.

Works out great. We get the money when we need it to be able to close and then keep the momentum going and then they go and get their — present the opportunity out to other investors and back fill it.

[0:35:01.8] MF: Okay, great, I have wondered how that worked, I did not know. Yeah, you got to wait two weeks for them to fill up the investment, that doesn’t work for most investors who are looking to get quick deals and get things closed. That makes sense. And I’ve talked to Fund That Flip a couple of times and it is an interesting new concept for funding. So I haven’t talked to anybody who has used it but that’s great to know that it does work. Very cool.

[0:35:26.0] BC: It’s been great. And there’s another benefit to it on our side. It’s great to have private lenders but at the end of the year you’ve got to make sure you’re accounting for that and doing the proper tax documentation for those lenders, using that Fund That Flip platform, all that administration, all that back end stuff is handled for you.

It’s great and when I come across friends and family that do want to invest but they can’t put up the hundred or $150,000 that might be needed for some of our projects but here they can go in as little as $5,000 or they can, as long as they’re credit investor, they can go in and lend on a smaller scale and get a great return.

So I like that as well, that the administration is handled for you and an easy platform and it works out great. Another way that we fund projects that are through some private lenders, got about three right now and various projects. So kind of used, I think you got to use all kinds of different ones and depending on what the project is and what it might call for.

[0:36:40.6] MF: Great, that’s awesome. And I do, yes, I do very similar. I have a mix of portfolio lending with local banks and then private money in my own cash and lines of credit and yeah, all types of — when you have a lot of flips going on, there’s a lot of money you need that’s for sure. And yeah, I’ve been kind of been reaching out to lenders in Florida right now to try and find some portfolio lenders down there and see if I can get some financing for rentals, but very cool.

What do you think your goals are for the next year or couple of years? Are you trying to build up your flipping business or you’re trying to buy more rentals too, what do you think your plans are?

[0:37:17.8] BC: Yeah, we set our plans for 2016 will be 16 acquisitions. We’re looking to do at least eight flips out of that, four rentals and four whole sales is the plan.

[0:37:31.4] MF: All right, when you do the rentals, are you partnering on those too or just yours? How do those work?

[0:37:40.0] BC: We are looking to put those into the company, in the partnership. All the rentals that currently exist are in our individual, our previous companies, our own respective companies. Now we’re going to put some in to the company as well.

[0:37:56.7] MF: Okay, very cool. Well I think those are all the questions I had for you, a lot of great information. Do you have any tips or advise for somebody who is looking to invest out of state and kind of like what the first steps are for starting that process as far as finding a place to invest?

[0:38:18.4] BC: If there’s a place that you know and you’re comfortable with, I think that is one. I would take a page out of your book where you’re going to the destination that you’re thinking about. So you're going to have an opportunity to walk that ground, get a good sense of the neighborhood and I’m sure you’re already trying to talk to banks, the portfolio lenders over there, I’m sure you’re going to have a number of coffees and network with people in that area to kind of pick their brain.

My advice is if you’re looking for an area, who do you know over there that you can trust? And I really recommend that you’ll walk back around, you really need to, in my view, get a sense of where you're going to invest and talk to as many people as possible and get the referrals as possible. I didn’t do that on — I had a project with, I did a Cape Cod and I got a contractor that really hosed us. And it was — I should have spent more time vetting that contractor and getting a better referral.

Like I had mentioned earlier in your podcast, there’s all kinds of things that can happen. Don’t put your mind to what you can’t do, figure out how you’re going to do it, but think of all the bad things that can happen and how you’re going to mitigate that risk. Get great referrals, try to walk that ground if you can. There’s almost no reason not to. If you’re planning it ahead of time, you can write that stuff off and get familiar with the area that you want to go invest in.

[0:40:03.5] MF: Right, that’s great. Yeah, I was going to say, “Hope for the best but plan for the worst.” It will happen but yeah, you can’t be so negative that you never do anything either. Very cool.

[0:40:15.3] BC: Well said, well said.

[0:40:18.1] MF: Well, great. I really appreciate it. Now if people want to get a hold of you, what’s the best way to contact you to go into your website? Or I know you’re active on Bigger Pockets as well. What’s the best way for people to shoot an email or talk to you if you want to?

[0:40:32.3] BC: You can find me on bigger podcasts like you said, our website is www.sc-homebuyers.com or you can email me at [email protected].

[0:40:51.1] MF: Very cool, if anybody wants to sell a house in Springfield I’m sure you’d help them out…

[0:40:56.1] BC: Yeah.

[0:40:57.4] MF: …to get rid of something. Very cool. Al right, Bob I know you got to run, you got some kids that will need your attention here soon. So I’ll let you go here, thank you so much for being on the podcast, it was really great. I learned a lot myself and I think you’ve really set up a very great business model in a pretty short period of time from 3,000 miles away. So congratulations on that.

[0:41:22.5] BC: Thank you Mark, I really enjoy being here and thanks for having me on. I wish you tons of success in your new market. Please keep us posted on how things go.

[0:41:34.6] MF: I will, for sure. We’ll see what happens in the next year, it should be exciting. Hopefully a good exciting, we’ll see.

[0:41:42.6] BC: Yup, for sure.

[0:41:43.8] MF: All right. Great, well thank you so much Bob, have a great rest of the week.

[0:41:47.8] BC: You too, thank you Mark, take care.

[END]