charlie@podpostmedia.com

PRIVATE LENDING FOR PROFIT: PART 1

April 12, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews, Real Estate Investing

Insurance adjuster by day, real estate private lender by night (well, and weekends too).

This describes Keith Baker’s professional life, in a nutshell. The Houston-based private lender also hosts The Private Lender Podcast. But he didn’t always have a career in real estate. As Keith explains to Josh in this podcast, his background is in construction, general contracting, and the oil industry… but eventually he made the leap to his current role in insurance adjusting.

Keith also made a name for himself in the Houston area as a reputable private lender, known for his low interest rates. He shares his top 3 tips for lending money to others, and talks about finding the “whales” in your market, who are often the best people to lend to. Plus, he gives some insight on how his day job actually complements his work as a private lender.

Take a listen to hear Keith’s strategy for finding the best (low-risk, high-profit) deals to lend for. You can also learn from his mistakes, as he discusses the deals he regrets (and one that he passed up, and later wished he hadn’t).

WATCH AND LEARN:

Welcome to Strategic Real Estate Coach Radio, hosted by Josh Cantwell and Kyle Garifo. Strategic Real Estate Coaches, where the nation’s leading real estate investors, brokers and agents turn to transform the way the real estate business is being done in neighborhoods across the nation. If you desire to make more money, do more deals, grow your passive income and build the lifestyle you’ve always wanted, you need Strategic Real Estate Coach.

This powerhouse team is led by Josh Cantwell, a seasoned investor with nearly a decade of experience, over 700 transactions and over $5.5 million in fundraising generated for himself and his partners. Now, sit back, listen, learn and accelerate your business with Strategic Real Estate Coach Radio.

Josh:   So hey guys, welcome back. Josh Cantwell here, at StrategicRealEstateCoach.com and Freeland Ventures. Welcome back to The Strategic Real Estate Coach Podcast, an interview series. I am in particular excited to be with you today to talk about private lending with a relatively new friend. His name is Keith Baker and Keith has an amazing podcast of his own called The Private Lender Podcast. Keith, welcome to the show.

Keith:  Thank you Josh. Glad to be here.

Josh:   You Bet. You Bet. So Keith, let’s jump in. Tell us a little about the private lender podcast. You have a passion for money. You’ve done a bunch of real estate deals, but you also have, you know, a full time job really with an amazing opportunity as an owner a shareholder in your existing company and that’s led you to become a real focus on passive investing as a self directed IRA investor and a private lender. So tell us about the podcast and your passion for private money.

Keith:  Sure. Yeah. Well the podcast was born out of I was on vacation with the family my whole family loves the beach I don’t, so when you’re sitting down in Florida one day in August and I live in Houston heat and humidity are around me all the time. I don’t see why I need to pay extra money to go and feel it on the beach, but it all came together that I wanted to tell people about private money and I’ll get to kind of how, why in a second. But it’s passive, every time I talk to a real estate investor, what are your needs? Oh, I’d love to get more private money, love to have more funding, more private money, easy, quick, inexpensive, forget the banks, you know, hard money, all that kind of stuff. So I said, okay, well I’ve always been told that I have the face for radio, so why not go ahead and start a podcast and I launched on January one and had been fumbling my way through it ever since and I absolutely love it. I do have a great day job where I bounced around, I did construction, I did the oil field, worked on the rigs and I’ve always enjoyed real estate and the construction aspect of it. For awhile there I was a contractor and I did a lot of flips for other rehabbers but I quickly found that I was doing all the work, you know, I’m the one that was getting the hangnails and bleeding fingers in everything. And I didn’t, so as I was trying to, transitioning with my, you know, I still had have a nine to five. We had, you know, had a family. I wasn’t the type of person just to quit. So when I got out of the oil field and went into insurance adjusting, which is what I do now, but I still do it for the oil field.

Keith:  It’s a high dollar, high ticket items, but I travel at the last minute often. I mean there’s a bag, literally I have a bag next in the closet next to the front door, something goes, boom, I’m on a plane to go. So it really prohibits me from meeting contractors or future tenants or you know, and I know this is at that time and it gives, you know, a decade ago, it’s not what it is now where you can just walk up with a smartphone and gain access to a house. So I focused on private lending and I had some old 401ks because like typically like someone born in the seventies, I bounced around from job to job to job until I finally landed on the one I’m at now, so I had a bunch of old 401ks, converted them fortunately for us in Houston here, there’s a wonderful company called Quest IRA, gives free education and started walking down that path and became known as just a lender really, but I would loan to only to whales in the Houston area, the big, big names, but, and I would often, I would do at ridiculously low interest rates, but the caveat was that that borrower had to walk me through the deal so I could see their business from start to finish on that property. And that is what really, that’s when I saw the power of private lending. It isn’t just the money or the debt that you’re getting, it’s the education, it’s the network and really just the knowledge of and seeing things and how people do things. And that’s really for me where the golden nuggets are not just the payments.

Josh:   Yeah, you bet. I recruit capital often from people that think they want to be active investors, right. And when I educate them about self directed IRAs are like, oh my God, I have this old 401k with 300 grand in there, 150 grand or whatever and they’re like, well, can I actively flip money using this self directed IRA cash? I’m like, well you can, but all the profit has to go back in your IRA. And they’re like, eh forget it. I don’t want to do it so much work. So then I’m like, well, you could lend to us, you could lend to these other borrowers and you could follow along the process and learn while you’re getting an interest on your money. So it’s very, very similar to what you’re talking about. Now Keith, you handle millions of dollars of other people’s money everyday and that’s why you become comfortable as a private lender with your own cash. Tell us a little bit about that. Like you’re managing money in these, you know, and taken off on planes and you’re used to looking at risk and you’re used to looking at trying to mitigate that risk. How is your day job sort of permeated into your private lending business and managing that risk?

Keith:  It’s funny. You make it sound a lot sexier than it really is. But I’m happy to walk you down. Yeah so basically what happens is my background was drilling, so usually the upstream stuff. So anytime there’s a well blowout, there’s a fire or like say a refinery, something goes boom that’s when I get to go to work is when I’m a loss adjuster. So when these things happen, I get on the plane, I go look at them quickly and you know, if it’s just an oil well fire, I’ll write a report. If it’s a refinery that gets a little more involved, you have to get engineers and accountants and you get into some very complicated financial calculations for things like say business interruption where something goes bad there’s an insurance policy that will pay your monthly kind of revenue or at least the profit side of it, but it’s based on, oh well I don’t get into, I get the accountants into it. So but the point being is the people I work for are mostly Lloyd’s of London Syndicate’s at Lloyd’s of London. It’s their money that’s being paid out to these oil companies and it’s up to me to pour through everything, all the invoices to make sure that everything is relevant to repair, you know, if widget a blows up, then I look at the whole repair process. I’ll liaise with engineers on what the cause was, so on and so forth. But at the end of the day, it’s all about what is that going to cost the insurance company to reimburse the oil company.

Keith:  And so I’ve, you know, I’ve actually hand delivered checks for $5,000 to small oil companies in Houston. Also negotiated settlements in excess of $100,000,000 for some famous hurricane claim. So it’s you know, it took me about five years to get over the fact that this isn’t my money and to kind of lose that ah of, you know, if I make a mistake is this really does cost somebody. Fortunately it doesn’t cost a life, you know, at the end of the day I just deal with dumb iron and property. I don’t deal with feelings or soft tissue fortunately but it’s still, you know, people get funny when it comes to money, you know, so especially if they feel like they’re losing it. So it was just kind of a natural fissile because of my adjusting career and you know jumping on planes at the last minute to go look at things that are burning into, okay, well I can do this passively and yeah, I remember being in a small town in Pennsylvania and getting a call from a property manager about how we’re going to have to evict and I’m like, why are you just send me the bill, get it done. I don’t, I don’t need to be in this process, you know, if the metrics aren’t met, get rid of them. So that’s how I’ve kind of like, I like the passive thing. It’s other people’s money, although it’s my money that I loaned, but it just kind of, it just kind of naturally progressed for me looking after someone else’s money and doing the same thing with the oil field, but doing the same thing with real estate.

Josh:   Got it. So Keith, is there any kind of criteria specifically that you look at now in your real estate private lending practice, you talk about on your podcast, is there a checklist or a, you know, a go for flights, you know, sort of check off plan before you lend money out?

Keith:  Well, actually I am coming up with that. I speak about my criteria. Like, I’ll give you one of my, one of my pillars, pillar number one is there are two types of ROI. First I want to know am I going to get the return of my investment back, that’s number one. And then if I am going to get it back, once I’ve established that it’s going to come back or I’m relatively comfortable with it coming back then alright, how much am I going to make on that? That’s the, that’s the first pillar. The second pillar is never lend to family or friends. If you have the money to give, give it with the expectation that it won’t come back. If it does come back to you, they pay it back, great. But thanksgiving and Christmas gets really odd when people commingle money with friends and family ask me how I know. So those are the two big pillars. And the third pillar is I tell people unequivocally, if you’re starting out as a private lender, now, Josh, not someone like yourself with years of experience, but someone new to the private lending game, stay the heck away from subordinate liens. Don’t loan on seconds, thirds, etc. Just stay in the first position lien, it’s the best way to secure yourself until you can get comfortable with somebody’s business model, how they lend. I tell people, never take a second position. I have two seconds and an unsecured note outright right now that I do because I know that this, based on the people, you know, it’s based on their work history and their also their investment history, but that’s kind of my go to’s, like stay away from that early on, get your feet wet, learn how to do it safely, you know. So when you are in a second position lien, you’re not just sitting there with your hand out because you know, you’ve basically given up all control over your money at that point. To me, it’s like an unsecured note just handling, handing something, somebody some money. So that’s kind of my, my heart and fast, also never lend to newbies. That’s what hard money lenders are for. That’s why they charge 15 to 18 percent and all those points because they’re, they look at it the same way I do, but they’re in the business of making money. I’m in the business of investing with money. So it’s, you know, it’s more passive. It’s, it’s different. But I look at it the same way, like don’t only go to Wales, people who have a proven track record and the other thing is in local markets, lend to people who would take a reputation hit if they didn’t pay you back.

Josh:   Yeah I like that one.

Keith:  You put, you put more skin, if he puts more of their skin in the game. Like skin doesn’t have to mean money, you know necessarily. Obviously it does if somebody comes to me and goes, hey, this is at 72 percent of after repaired value all in, I say, okay, we’ll put it in another six or seven percent, get me down to about 65 and we’ll talk all day. That’s one way you can put skin in the game. The other is if somebody is a whale in the market and they’re, let’s say they’re starting off their coaching or they’re getting students in the area, I will loan to a student if it’s a newbie, if they have a coach that know and trust and have seen them work. And so if one of those whales in your local market messes up, I mean, and look like it’s not to say that people don’t make mistakes. People with experience make mistakes, but a whale in the market can’t just walk away and go, you know what, I messed up, I’m not going to pay it back, I’m just going to walk away from this because they’ve got reputation on the line. And that is a whole other level of protection and mitigation that a lot of people don’t think of.

Josh:   Yeah I like that. Those are some great ones that I haven’t thought about. Reputation damage I don’t really talk about that too much but so true.

Keith:  Yeah. Well, in your business right now, I mean, you know it’s better if you make a mistake, it’s better to fess up and say, look, this is going to cost X I need two months to give you the money back. You will be made whole, you know. And if people can go on, yep, this investment didn’t go through but you know what? I got made whole, Josh kept his word he did what he said. That’s huge. That goes a long way, especially in this day and age I think.

Josh:   Yeah, and we’ve got to make people whole not only get them there principal, but their interests at all costs, like, not that, that we’re going to do anything wrong or fraudulent or anything that at all cost, but literally like in my mindset, it’s like getting people to invest with us the first thing on our list of things to do in our business and values is make sure we protect our investors principle, that’s number one, they’re our number one priority before I take any money out of the business, before my partners get paid. My staff knows like everybody is on the line to make sure that the private lender gets their money back, their principal at least and then of course their interests too. But you know, rule number one is never lose principle. Rule number two is refer back to rule number one. Never lose principle. So Keith I know that you’ve went down a number of different deals. You’ve given us some amazing sort of pillars of what to look for. What is your, what is your traditional type of loan that you like to make? Is it always a first mortgage lien, like a private lender loan? Do you invest equity in deals? Are you looking at longer term equity plays where you can get your principal back and be an owner in perpetuity? Just give us a flavor for some of the different deal flow that you’ve looked at.

Keith:  All the above. Yeah, it started off, I was, the way I kind of became into, I, there’s a guy I interviewed, his name is Tom Barry, investor loan source and Tom was a similar background to you, financial advisor and got into real estate and just killed it and had all these private lenders say, hey Tom, I got money but it’s not working. So he put it to work and I was going to put my money, my old 401k I was just going to roll it over into his fund. And he had this great conversation. He was open and honest and he laid everything out and I decided after that phone call, I was like, I think I want to do this, you know, I want to learn how to do this and I want it to niche down, learn everything I could about that and be known as a private lender because I figured if everyone’s looking for private lenders, that’s the guy I should be. And so, excuse me. I decided to do that and I did that. I started looking at, alright, I’m going to do fix and flips. Give me two points I’ll give you 10 percent you give me two or three points up front. Every six months we’re turning the money around. I’m happy on my interest rates. I’m happy on my cash flow from the points, but it was in my self directed IRA so I don’t get to see that money. It just accumulates. And then as the ISO, so I started lending to just a handful of guys a couple of guys really and then business models changed. They went from buying and selling into more of a wholesaling niche because that was what the market was dictating so they didn’t need private money and so I was actually traveling for my day job. I was in Scotland and I got a phone call and they said, hey, would you mind loaning to this guy?

Keith:  And I was like, yeah, I know of them and the Houston area. Okay, sure. I’ll talk to him. Well, long story short, that guy’s Landon Rothstein he’s now my partner in Asset REI. And he’s a co-owner of 713 RIA and 713 Coaching or Mentoring. So yeah and through Landon he’s introduced me to people like Mitch Stevens and hey look, turn this into a seller finance note and collect on it for 20 years. So now I’m in, you know, I’m still a part of the Atari generation. I do like that instant gratification from the flips, but I’m looking now more, I don’t mind taking a smaller interest rate for three years, for example, if it’s going into a project that I believe in where somebody who’s not mortgageable can come in and step into a house, start making payments, have their piece of the American dream, and then as long as they’re increasing the value of my property, of the equity that my loan is tied to, I’m happy, you know, so it’s not all about the 15 percent anymore. I won’t turn it down, don’t get me wrong, but it’s. I’ve gone from the short attention span into the longer attention span because at the end of the day, as much as I love my day job and want to exceed and excel at it, I don’t want to do it forever. I want to be able to sit back and say, okay, I’ve got x amount of money coming in from either my private lending or my real estate holdings or both. And so that’s where I’m kind of shifting now. I mean, you come to me with a good LTV loan to value. If I’m all in at 50 percent there’s not a whole lot of projects that I won’t shy away from. I mean, there are some certain areas that I won’t, you know, I’m sure you’ve heard about this little storm called Hurricane Harvey. You know, and all the other hurricanes. So there are some things along the coast that I won’t get into, but as long as it’s a deal, I will at least sit down and listen with whoever’s presenting it, you know, so that’s a long way of saying I really don’t have a criteria, but I have all the criteria.

Josh:   Whatever did the deal dictates, right? The deal dictates. So if you’re looking at…

Keith:  The first guy loan to loan and single family residence and he comes to me and says, hey, I got this commercial opportunity and I’m like, whoa, that’s out of my wheelhouse. I don’t, you know, I got to stay in my lane, my single family lane. And he was convincing enough successful young young guy, but had been doing it already a decade. And he jumped in he said, look, I need $70,000 for this. I was like, I’ll tell you what, as long as it appraises for 150 and you get a commercial appraiser, you know, the thick booklet of, of what this thing is going to be worth I’ll take a look at the loan. And the appraiser came back with a value of $305,000. So I called the borrower and I said, look, I’m going to loan you this money and you don’t have to pay me back. I’ll take over, I’ll foreclose and I will loan to you again and again, bringing you keep bringing these kind of deals, you know, almost all my risk went away, you know, like, so many things could go wrong for $70,000 and still recoup 300, you know. And so that’s when I started okay I need to start looking at other things and you know, sharpening other tools. And so now I don’t make it a habit to loan on commercial, but I will in my free time. That is what I’m studying up on.

Josh:   Nice. There you go. So Keith, what’s maybe a crazy deal that you didn’t do or a deal that you passed on? You know, obviously you said you look at a lot of different stuff. You’ve probably seen some pretty wicked deals come across your desk that you passed on or things that maybe you funded that you wish you passed on. So tell us about that.

Keith:  Well, there’s a couple of second position liens that I wish I would have passed on. I’m happy to say that it did work out for me, just not in the timeline that was agreed. But yeah, that’s the second positions when you do that, you just take yourself out of control and that’s not a good place to be for me, for someone like myself, other people are okay with it, you know, like I’m going to give you my money and I don’t expect to see anything really for three years, that’s great. Some of the ones that I wish I had there was this, for lack of a better term, a mansion and old mansion that was going back to the bank and we needed about $120,000 to make the, to make everything right with the bank, get the payment going back and basically we’re looking to kind of take it over on a sub two type of deal and it was about two and a half hours away from Houston almost to Louisiana. So I got up one Saturday, drove out there and met the owners and it was just a, it’s too much, you know, it was, it was too opulent. It’s, you know, the market was so small that, you know, the buying list, the buyer list was so small for something like that that I didn’t want to tie up my money into it. And so I, you know, thanked the people for meeting me out there walking me through. I was like, you know, and this is a deal that my buddy Landon my partner had found and I said no, I called them on the way home I said, no, I, you know, I just, I’m not 100 percent comfortable on that, you know, if it was $20,000 and I wouldn’t be, I wouldn’t have a problem with it, you know, but it’s like half a million dollar home and they had converted to an office.

Keith:  Long Story Short, my $120,000 would have doubled in about 40 days had I pulled the trigger on the deal, but I didn’t because I wasn’t comfortable with it. So I say that’s a successful loss for me because I didn’t know if you don’t get anything ventured, nothing gained, but at the same time, you know, it’s real easy to sit back and Monday morning quarterback that deal. But it just, I like in my area, I like deals between 50 to $200,000 on the house that you’re going to find plenty of people to get into those, those, those homes. Once you know, and half a million dollars, I know in places like California is a hovel, but in Houston, in Texas, that’s a, that’s a half a million is going to get you a nice spread so. It was too nice of a property and I still, I had made, at the end of the day, I made the right decision I wasn’t comfortable I stuck with my gut I didn’t lose money. But I could have made so much.

Josh:   Yeah. It’s often not the deals though that you don’t do it’s the deals that you do that go backwards. And often affects somebody’s financial future forever you know a lot of people can’t afford to lose principle. Oh, I could’ve done this deal. I have bought Facebook stock. Oh, I could have bought Google. Great. So could the rest of us however, good investors long term make good consistent decisions they usually don’t have a one time windfall that makes them healthy. It’s usually about consistent decisions and avoiding a big loss that ultimately makes somebody a really good investor long-term that’s great. Keith, any others, any others come to mind that you either did or didn’t do?

Keith:  Yeah, there’s a paid $5,000 for a house I can’t get rid of. It was back taxes owed and out of state owner he got tired of getting the notes notices from the city to they’d have to go by. The city would go by and mow the yard and stuff. And I remember looking, going to the house going, this is the biggest piece of crap I’ve ever seen, but I’ve seen worse, you know, I’ve seen, you know, stick around real estate long enough, you’re going to see some, you know, you’re going to go from the, the manure pile to diamond and I thought that was going to make this into a diamond and as long as it just gives, you know, pays for itself and doesn’t cost me money at this point I’ll be happy for it. But it’s, you know, it was, I kind of broke my rules, I was like, it’s too close to the water I don’t like investing as, okay, I’ll just make them get a flood policy and well I didn’t, I didn’t follow up on that. And I forgot to put in my attorney instructions to the closing company, the title company. So normally, that is, I am having some checklists slowly built up but I’m a one man shop with the, with the podcast so it takes me a lot longer to get things out. But one of the things I look for is I want insurance binders in place for both obviously for title insurance property and if it’s and flood, if it’s in Texas or anywhere, anywhere near the Gulf coast I require flood insurance and if you can’t pay the 450 bucks a year for the insurance that’s outside of the flood plain, then you really don’t have a deal so look at it.

Josh:   So Keith, last question, looking back, after lending out a lot of money and meeting a lot of people through your podcast and obviously investing in flips of your own, is there any advice that you’d give your younger, former self that you look back and tell our audience or tell yourself, man, this stands out. A couple of things I would have done differently that I think you can share that would impact other people.

Keith:  Absolutely. And let’s go ahead and let’s replace the tape because I’ve got stuff…

Josh:   Lots of stuff to share.

Keith:  Oh yeah, no, I have few regrets in my life and I’m happy about that. But I would have. First off I would have started much earlier than I did and I had some people not in real estate, just friends of the family that tried to take a young 17, 19 year old Keith Baker and say, hey look man, you got a little windfall cash from someone in the family put that away. I’m like, Nah, I’m going to college I’m going to burn all this money, you know? And now I go back and talk to these people and I’m like, man, if I would have just even 10 percent of what you said, you know, 20, 25 years ago I’d be, I’d be so much better off so. I would have, one I would have started much, much earlier than I did but I was, you know, typical teenager, I’m going to go to college, I’m going to change the world, you know, my parents don’t know crap, they don’t know what they’re talking about. And then I started paying my own mortgage and I was like, oh, hey, mom and dad okay. Yeah. So I would have started earlier. I would’ve jumped in, I probably would have niched down a little, a little more. I went a little broad like, oh, I’ll try flipping, I’ll try land lording. I’ll try, pick something, find somebody who can, whether it be a coach, a mentor, or even just a friend or family member. Find somebody who’s doing what you want to do and follow them and do it and do it sooner than later. Don’t, you know, I was in my thirties before I, you know, had the aha moment of like would just let 15 years go by, you know, and so there’s that, you know, constantly being behind the eight ball and a reading, I would have read so much more earlier on than, because now I don’t have the time wife, kids, jobs, podcast investing, you know, I try to dedicate about 15 to 20 minutes at night in reading, about real estate, about business and educating myself. Those are the three big things I would’ve done absolutely different and started saving and the one, there’s one negative side to private lending and that’s, you’re going to run out of money. There’s only so much you can lend out a before you go into like broking or creating a fund and everything. So I wish I would have saved more so I could, I could have my hands in more and more projects.

Josh:   There you go. Nice. One quick tip what I started doing this year you know I listen to audio books, right. But now I’ve built up my tolerance for speed to the point where I could listen to them at 2.0 speed and at the same time, now I can listen to them. I buy the physical book with a highlighter, so I listen to it on 2.0 speed and highlight at the same time. And I might want to pause it, you know, when I have something that I really want to think about or something I really want to push, push down into my, into my core and make sure I use it. But for me listening at 2.0 speed I get through some of the minutiae a little quicker and by highlighting I’m actually retaining way more than I ever retained. I’ve been reading, I’m 42 years I’ve been reading all my life since college business books, hundreds and hundreds of books, real estate books, etc. Success books. And now I finally feel like I’m retaining more. I’ve always been a really slow reader so I didn’t really like to read because it would take me forever to get through a book. But now, so take that for what it’s worth. Maybe that’ll help.

Keith:  No, it’s great because I do podcasts at 1.5 speed in the car for that same reason. Obviously I’m not highlighting while I’m driving or I shouldn’t be, but I think I’m going incorporate that because it’s, you’re reading, you’re highlighting and you’re listening at the same time. And that’s really reinforcing. I like that idea. Yeah.

Josh:   Multiple senses man, it gets in there pretty good. Fantastic. Well Keith hanks so much for sharing. Tell us a little bit more about where we can find your podcast, where we can get in touch with you if our audience wants to reach out, listen to your stuff or approach you about a deal with you. How can they get in touch with you, where can they find you?

Keith:  Yeah, so PrivateLenderPodcast.com is where you can find me. Email is Keith, K E I T H @PrivateLenderPodcast.com and you can listen to the show, iTunes, Google Play, Stitcher, SoundCloud, anywhere, any platform that houses the podcasts, you should be able to find me there. And while we’re, while we’re at it, if anyone listening can go right now to The Private Lender Podcast and also go to Josh’s podcasts on ITunes, leave us, leave us some ratings and reviews we would greatly appreciate it because that helps get the word out and helps people, the listeners now to find this. So, but that’s how you get hold of me PrivateLenderPodcast.com.

Josh:   Fantastic. Yeah, my team will monitor all those different platforms that Keith mentioned. If there’s questions specifically for Keith will grab them off those platforms. We’ll feed them to him privately. We’ll get you some answers, introduce you to the right people that can get you there. So Keith, thanks so much for joining us today and I really enjoyed it.

Keith:  Josh. I really appreciate it, man. Take care.

Josh:   Alright, talk to you soon.

You were just listening to strategic real estate coach radio hosted by Josh Cantwell and Kyle Garifo. Leave a comment on our iTunes channel and let us know what you want to learn next, who you would like us to interview, or if you just want to share some of your success stories in real estate and maybe we’ll talk about it on our next show while you’re there. Give us a five-star rating and make sure you subscribe so you can be the first to hear new episodes every Wednesday.          

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STRUCTURING CREATIVE REAL ESTATE DEALS TO BOOST YOUR PROFITS

April 8, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews, Real Estate Investing

When it comes to structuring creative real estate deals, Sean Flanagan is a verified pro. With more than 20 years of real estate investing experience in several competitive markets across the nation, hes covered all the bases from wholesaling to fix and flips, and everything in between.

Sean is also an expert marketer who is passionate about teaching other real estate investors how to improve their lead generation and build their list of motivated sellers. His company, REI Trainers, has several training programs that have helped countless real estate investors improve their marketing strategies and increase their profits.

In fact, Sean has built a reputation as someone who monetizes every single lead that comes his way. When the real estate market became highly competitive in recent years, he knew that he couldnt let any lead fall to the wayside simply because he was unsure of how to structure a deal for that particular property.

In this podcast, Sean shares his top tips for structuring the best deals for your business. He explains lease options, land trusts, and a strategy he calls pre-wholesaling. Whether youre an experienced investor, a newbie, or anyone in between, Seans insight can help you view deal structuring in a new way.

Still, even with all of his experience, Sean admits that hes had challenges along the way. Listen in to hear about the craziest deal he ever did:

WATCH AND LEARN:

Transcript

Welcome to Strategic Real Estate Coach Radio, hosted by Josh Cantwell and Kyle Garifo. Strategic Real Estate Coaches, where the nations leading real estate investors, brokers and agents turn to transform the way the real estate business is being done in neighborhoods across the nation. If you desire to make more money, do more deals, grow your passive income and build the lifestyle youve always wanted, you need Strategic Real Estate Coach.

This powerhouse team is led by Josh Cantwell, a seasoned investor with nearly a decade of experience, over 700 transactions and over $5.5 million in fundraising generated for himself and his partners. Now, sit back, listen, learn and accelerate your business with Strategic Real Estate Coach Radio.

Josh:      Hey everybody, whats going on? Welcome back. Welcome back. This is Josh Cantwell, CEO at Freeland Ventures, real estate, private equity and strategicrealestatecoach.com. Thanks so much for joining me again on the Strategic Real Estate Coach interview in podcast series and Im excited to be with you today. You know, sometimes we do these events, these podcasts, and these interviews, some of my own sort of a solo cast. Sometimes I have a guest and today Im really excited to be with Sean Flanagan. Sean has been a real estate investor for over 20 years, uh, in some of the most competitive markets across the country, uh, is really an expert marketer and does a number of things with the different brands that hes built, to license those brands to other real estate investors to build up their list of motivated sellers and their inbound leads as Sean and I were talking about getting ready for this.

You know Seans passionate for staying persistent in this business. Uh, and also for finding ways to monetize all of the different leads, all the different ways that deals come in and making sure that youre not throwing away, you know, 70, 80, 90 percent of your deal flow because, you know, maybe youre only a wholesaler and maybe youre only a subject to guy, maybe youre only a rehabber and deals dont fit inside your box. And so, well talk to Sean a little bit more about how he monetizes every lead that comes into his business. Uh, Sean is a creative, unique real estate investor trying to find ways to monetize each and every deal and hes shared these systems with thousands of investors across the country. Hes worked with some of my good friends, Patrick Riddle and JP Moses to get some of the word out about some of his different training programs. And so, were looking forward to talking to Sean today. Sean, how you doing?

Sean:     Doing good, Josh, how you doing?

Josh:      Im doing fantastic. Doing fantastic. Um, so help me understand a little bit more, Sean, help our audience understand, tell us a little bit more about your business in todays market right now. Uh, what are you focused on? What are you most excited about in your real estate investing business?

Sean:     Man, my business has evolved a lot over the past couple of years. We went, Ive gone from being a fulltime wholesaler and really owning one of the biggest wholesaling businesses in central Florida to, uh, to kind of steering it over to a fix and flips and rehabs and stuff, as the market kind of shifted. And now were, now were, were kind of moving towards a different strategy, which Ill get into, um, you know, in just a minute. But man, right now, I tell you were crushing most with creative real estate deals, right, because the markets gotten so, so competitive. Um, so that where were at right now and weve got Im still wholesaling and basically the way things work on, on our end is, uh, is um, Im typically focused on buying fix and flips. Weve got to rehab crews that work for us full time. So, Ill always try and keep a couple of deals going with them and then a few in the pipeline and then we kind of cherry picking those and wholesale everything else. Um, and weve gotten really good at it, especially recently at turning leads that other people arent wanting and leads that used to be kind of dead leads into profitable deals for us now. So thats, thats where were at. Thats where my focus is, and things are rocking and rolling.

Josh:      So, Sean, tell me a little bit more about that. I know the world talks a lot about creative real estate investing on this particular interview and podcasts, but the market has gotten really competitive and the market has in some areas softened a little bit with interest rates going up and weve been on this tenure boom, but things were really competitive in most markets still. And so, a lot of investors, like I cant find any deal flow or theres nothing on the MLS and theres an answer to that. The answer is to find ways to attack every lead differently and make money from every lead. So just talk a little bit about what youve seen in the marketplace and how things have gotten more competitive and, uh, and why you thought in your own mind and in your own business, uh, why youve got to get more creative and find more ways to make money from each deal. Because if youre just a fix and flip guy, a lot of the deal flow is not going to fit that box. Or if youre just a, you know, a, a wholesaler, just the subject to guy, maybe things arent going to fit in that box. So, tell us about your passion for being creative.

Sean:     Yeah, absolutely. What we do, you know, my, my passion is for being creative and also for marketing lead generations. So, weve got, weve got all these leads coming in all the time and it just got to the point to where Im seeing lots of leads come in that were just thrown to the wayside and wasting a lot of money. Um, and, and as you said, Josh, you hit the nail on the head. I mean, the markets so competitive, um, you know, its tough. I mean were going out and looking at leads, looking at houses and stuff and weve got 10 other investors putting in offers on these houses and thinking to myself, man what about the ones where there was a decent amount of equity but maybe not enough for me to actually close on the deal. Um, you know, with my cash or with private hard money or whatever, and then rehab it and take it through the whole process and then retail it.

Sean:     Um, and theres also not enough spread for, you know, for a wholesaler or another fix fixing flip buyer. You know, how can we make money in between there? So thats what Im, Ive really had to start focusing on again over the past couple of years or so. Um, and its just, you know, its, its really helped, uh, because its just so hard to generate good leads. So were focusing on, and I actually call it, you know, I kind of coined it and call it pre wholesaling because you know, if you back up a minute and theres one of the challenges that were facing right now is not just that the markets been so hot, but also that people have realized, I mean, its no secret that you can, you can play the middle man come in with no cash or credit or whatever and very limited amount of understanding and know-how and go in and put a house under contract and then turn around and flip that contract to a, to another end buyer. Right?

So thats become really, really popular, um, is as the years have gone on and you know, Ive just, Ive lately been focusing on how can, how can I get out of that rat race, how can I get our company out of that rat race? And so, what weve, what weve done is weve gone back to a, to a technique that I used years and years ago when I started two plus decades ago now, um, but taking over, taking over payments, uh, and then getting the deed on a property. Which is probably the easiest way to say it, subject two type stuff. And its the reason why I kind of joke around and call it pre-wholesaling now is just because, you know, as I was explaining a minute ago, wholesaling has gotten so competitive in every

Now youve got wholesalers who are crushing it and then youve got beginners who are trying to learn how to do it. And then youve got everything in between. But its weird. Beginners tend to, to migrate to for whatever reason right now, and its made the market really crowded. So, I kind of joke around and call pre-wholesaling what Im doing because I think its just a better place to start. Right? I think in real estate these are, this is the low hanging fruit that Im focused on right now. So, while everybody else is looking for the wholesale deals and then the deals with significant equity that they can come in and buy, close on and then flip for a big profit, you know, after the Rehab is done, which is a great way to do business. I do it too, but weve been focusing more lately on kind of the low hanging fruit that people arent paying attention to.

So, were, were doing these deals where we come in and take over the mortgage payments, um, you know, catch them up, resell the house on terms, that sort of thing. And, and I mean, man, were crushing it, you know, were making profits on the front end, in the middle as we hold the properties and on the back end when people refinance. So yeah, so in a nutshell, thats where were are at focus wise right now and were killing it with very little competition.

Josh:      Nice. So, Sean, for those people that have experience, they probably understand everything that you just talked about for the most part, for a new person, maybe that mightve just gone right over their head. So maybe to kind of bring it all together, give us an example with maybe some real numbers of a recent deal. Somebody that was behind on payments or you know, x amount of payments behind and kind of caught up. Give us just an example of a deal that youre working on or just closed on. Give us some numbers so people can sort of wrap their head around it.

Sean:     Ok. Our most recent deal, um, we took over payments on a house that was, um, and they owed like around $176,000 to $177,000 on that particular property. Now that property was in, it just came in from some friend of ours (inaudible). But anyways, so the seller was behind on the monthly (inaudible). PITI which is the principal interest taxes and insurance if you, if youre not familiar with that. So, we negotiated a deal with the seller to where we came in, took over the mortgage payments and actually caught up his back payment. It was a, a month or two. I cant, off the top my head, I dont remember exactly how many months behind it was.

Josh:      1,000, $2,000 to 2,500 bucks?

Sean:     Yeah, yeah because it hadnt hit the attorneys office yet hadnt hit his desk yet, so it was, it was minimal. Um, so we caught that back up. The guy had actually already moved out of the property anyways, so we caught up the back payments and the market value on that house was about 210 to 215. There were a few houses in the neighborhood that were listed a little bit higher than that, but true market value was about 215. So, what we did is we transferred the property immediately into a land trust. Now I almost hate to go too much into detail on how a land trust works because it does get a little bit complicated and probably talk about it for, you know, to get people to understand.

Josh:      Im very familiar with land trusts, but essentially guys, you have to understand in a trust and just make this real simple. Theres a trustee that manages the trust, the houses in trusts, so the trustee manages that, but theres a separate beneficiary and the beneficiary of the trust is the person that really gets the benefit of any assets that are in the trust. Right? So, the trustee manages it, maybe sells it and theres $5,000 profit or $40,000 of profit, but that profit doesnt go to the trustee, it goes to the beneficiary. So thats the long and short of it. Well keep it high level. Yeah. But its a fantastic tool. Weve used it hundreds and hundreds of times in the past and its a great way to take over payments, work with a borrower who cant afford the payments anymore. Uh, and still keep it in a way that it can be corrected through, you know, bringing the back payments current and then selling it on terms. So fantastic strategy. I love it.

Sean:     Yep. Absolutely. So, so that particular deal, what we did is we ended up offering for sale as an owner finance type deal. Um, we got $15,000 down on that particular property. Uh, we held a note for, I think its a four year, basically a wraparound mortgage and uh, weve got some positive cash flow on it coming in. It looks like the borrower will be able to refinance within a year and a half to years. Um, they had just a couple little credit blemishes, but they were cash rich and kind of credit challenged. So, on these deals, thats kind of the type of person that we are, were looking for is, you know, they could have several different issues that prevent them from buying a house right now. Um, but minor issues and then have a lot of cash to put down. Right? So, we got a good, good down payment on that one. Probably could have gotten more, but um, you know, so thats what we ended up with 15 down some, uh, some cash flow each month for the next two to four years and then well refinance. On the back end, we sold it for actually a little more than I said it was worth around 210 and I think we got 218 or 220 on that one. Alright.

Josh:      The markets going to go up in value. You know Ive done those kind of those lease option deals in the past, which was similar to this rap youre talking about, like Ill build in a premium kicker every year, assuming the markets going to go up. Of course, the house has to appraise four years from now or two years from now, but its reasonable to add some sort of a, you know, appreciation kicker because somebody is gonna say, well you have the house listed for sale for 215, I want to buy it for 215. Like, well, yeah, but you cant buy it for 215 today and every year its going to go up three to seven percent in value or whatever that number is and four years from now the house will be worth a lot more. So, we just build that into the number. The attorney puts it right in the contract, so its pretty agreed upon price, just building equity as you go and paying down the mortgage as you go, which is, which is fantastic.

Sean:     Yep. Yep. Absolutely. So, money on the front end, middle end, the back end. And then if anything were to happen in the buyer were to, you know, some something happened down the road or whatever, we can end up getting the, getting the house back and repeating the process. Thats not the game plan, but you know, when it happens, its not a bad thing. So yeah.

Josh:      Yeah for sure and another thing I love about too is, you know, uh, its still, according to a lot of different mortgage companies, mortgage banks, the Federal Reserve, about 40 percent of all the people who apply for a mortgage still get declined, right? 30 or 40 percent get declined. So those people are obviously candidates for things like wraps, things like owner financing, things like lease options. They want to live in a house, and they have that ownership mentality. Right. So, Sean just talk for a second about that kind of ownership mentality, a buyer versus a renter and the fact Because people are going to think, well if I did that, what if the owner has a midnight move out or what if the guy whos going to buy it trashes the house and maybe just talk about the mentality of that buyer, those people dont trash the house, they dont move out because they put big money down because they want to live there forever.

Sean:     Yeah, exactly. And you hit the nail on the head. Thats exactly what I was about to say is that these are, these are buyers, theyre not renters. They have a totally different mindset as you said. They want to live in that house, and they want to live in it forever, at least for a long time. They have the pride of ownership now. So, theyre the ones that are stepping up and dealing with the maintenance on the property and theyre the ones that are fixing it up. I mean, could, could, you know, in a worst-case scenario, could somebody move out in the middle of the night? Yeah, absolutely. But guess what, you just got a house back. You still got that borrowers down payment. You still got the cash flow, youve got the house back, now you get to repeat the process or sell it or do whatever you want. So, its, the risk is very minimal. Um, these, these buyers are people that weve found over the years that are grateful for the opportunity to be able to buy. Again, some of them are people that may have lost everything during the recession, you know, seven years ago and just cant, you know, some of it as a matter of fact that a lot of the people that were working with selling these houses to were people that lost their house years ago and ended up staying in the property for long periods of time. Now were in Florida.

So, you know, here when the market crash, you could stay in a property for a long period of time and the bank just wouldnt foreclose. So, the way that things work now is if, if you dont have two years outside of that foreclosure, like even if somebody had filed bankruptcy and the deed hasnt gone back to the bank, all right, people need at least two years from that point in time to be able to qualify for a mortgage again. Now these are people that have already built their credit back up, saved money for down payment and everything else, perfectly qualified borrowers, except for the fact that, you know, years ago they went into foreclosure and maybe the debt was taken care of in a bankruptcy or something seven or eight years ago. But the deed didnt actually transfer back to the bank, you know, until like a year or so ago. So, they just need a little more time.

And, and, uh, you know, these are people that are again, grateful for an opportunity to own a house, right? Because they, they know what its like before they want and they cant, you know, the institutional lenders arent going to lend to them right now. Um, so its, you know, its a good, good niche and thats not, thats not the situation for all of our bars, but a lot of what were seeing right now, it is a totally different animal when it comes to these people and renters.

Josh:      Yeah. Ive got it. So, Sean, youve been investing for 20 years. Uh, you have a team, you have these crews, youve done tons of fix and flips, wholesale deals, subject tos, curing properties. Youve probably seen it all and done it all in 20 years and obviously invested through multiple different market cycles up, down, good, bad. Central Florida seen it all, right? Massive depreciation, massive appreciation.

I want to ask you about success. I want to ask you about running not just a real estate business, but being an entrepreneur, being, you know, a guy that just is willing to kind of eat what he kills, runs his own business, take care of your family based off of you betting on yourself. So, if you were to look back over the last 20 years when things were really good and when things were really bad, theres probably a couple of things that stick out, things that you did well or things that you would have changed. So, what are those one or two things that you think have been the most important things to your success and maybe when things didnt go well, what are some lessons that you learned? Things you wouldve done different.

Sean:     Oh Man. Ill tell you one of the most important things, and you mentioned being entrepreneurs, it is persistence, right? In this business, real estate investing in general, it can be a game of ups and downs. You mentioned that you know the markets. I mean my Lord, weve seen the fluctuations here more than a lot of places in the country when it comes to the real estate market and learning to roll with the punches and persevere is one of the key aspects when it comes to success of a, of an entrepreneur. And thats probably whether its real estate investing or anything else for that matter. But, you know, persistence is definitely a key. Um, and then the other thing that Ive really learned it, I mean, keep marketing, keep these leads coming in, whatever business youre in, whether its real estate investing or anything else, and everything else kind of falls into place, right?

Because Ive, Ive found real estate investing over and man, its, you know, I think were on 20-year number 23 right now between my wife and I and this real estate investing game. As long as weve got enough leads coming in, you know, we found that we can screw a few things up. A lot of people, yeah, a lot of people focus, especially newer investors focused on, oh man, I dont want to screw this deal up or whatever. So, you know, the cure to that for me has always been, you know, have a lot of leads coming in and then figure out how to make money on all of them. Whether the market is hot, cold or somewhere in between. Um, and, and you can afford to screw up a few of them, especially if youre doing the business the right way. Um, you know, and youre not, youre not, you dont have a ton of your own money maybe in these deals, you dont have a ton of liability. Um, so, you know, I think thats probably the first thing that comes to mind at least.

Josh:      Nice. Fantastic. So, when you were to look back, you know, 20 plus years ago when you got into real estate, I always like to hear from my friends and guests, like what was going on in their mind when they jumped in, were they just pursuing the lifestyle, more income or assets? Were they running away from a job that they hated were they broke, busted and disgusted and just wanting to do something different? So, Sean, for you, where were you at when you caught the bug? What was motivating you to jump into this? Um, and tell me about your first, you know, really 30 days to six months. So, were you scared as hell? Like a lot of us freaking out like, oh my God, what did I just do? Um, so tell us what your motivation was and what your first couple months were like.

Sean:     Yeah, Im in my first couple of months actually it was a lot longer than that before I did my first deal. I kind of fell ass backwards into this whole real estate investing game. I was in direct sales. My wife and I got married 24 years or so ago and we had our first child on the way, and I knew that we needed to buy a house instead of renting. Um, and as I mentioned, I was in direct sales and sales and sales management. Um, I was not a W-2 employee, so everything was commissioned based and I had some bad credit from a brief stint in college. I never, I didnt graduate from college. I attended for a little while, took partying a lot more seriously than I took college. And along the way ended up with bad credit. Right. So, I started to have a somewhat decent income, at least what I figured out or what I thought at the time was a decent income. Looking back on, it wasnt much but just direct sales. So, I couldnt prove income, I had sketchy credit at a time. My wife was pregnant with our first child, Logan. And uh, I realized I need to buy us a house, right? Because were starting a family. I dont want to continue renting. So, I went to a mortgage broker. Um, pulled my credit and pretty much just told me that I cant finance a stick of gum, go pound sand, right? So, Im like, man. So, I walked out of there

Josh:      Cant finance a stick of gum. I like it. Im going to steal that if its alright with you.

Sean:     Yeah, absolutely. So, I figured Im going to, Im going to prove this guy wrong and I know theres going to be a way to do it I just dont know how. So, I had seen all these late-night infomercials, you know lying in bed after a night of partying or whatever. They said you can buy houses with no money down and no credit, blah, blah blah. So, what I did, and at the time I really hardly had a pot to piss in to be honest with you, but. But what I did not having a bunch of extra money is I would go after, after work, I would go up to Barnes and Noble and they closed at 11:00 every night. So, from, you know, eight, 9:00 until 11:00 for a month or two. I just sat in Barnes and Noble and I would read books about creative real estate that I really, at that point couldnt even afford to buy. Right.

So, so, you know, so I was determined to figure it out. But, um, so I studied, studied, studied, and then I got to where my wife was kind of the point to where, you know, youre, look, youre working all day, youre out selling, youre training these other reps that you got working for you and you in your sales business and then from, you know, until 11 to 12 oclock almost at night by the time you walked through the door, um, you know, Im not seeing you at all. So, we gotta figure something out. So, Im like, alright, I gotta figure out how to buy these books and were on limited budget. So, what we did is on Saturday and Sundays I would start, I would go to garage sales, and this is kind of

I dont know how I came up with this, um, but I would go to garage sales and uh, I would buy books, you know, for ten cents or fifteen, twenty-five cents or whatever that had never been read, right? Brand new books, people just want to get them off the shelf and out of there, out of their house, right? So, I buy a few of them and Id taken back to Barnes and Nobles and a couple of the other bookstores and I would exchange them for real estate investing books. Right. Just be like, you know it was a gift. I dont have the receipt. So, you know, whatever. I mean, maybe it wasnt the most honest thing in the world, but its what I, what I did to make the marriage work and to learn how to do this business. Right?

So, thats what I, thats what I did. And my wife finally told me after, I dont know, four or five months of studying, crap or get off the pot type thing, we got to figure this out. So, Im like, all right, lets find a house. So, I went out and I had heard about bandit signs and I took a, I took $200, which was probably about what we had to our name at that point. And I went and got some 18 by 24 plastic bandit signs that just basically said we buy houses and a phone number on it. Right? So, I put those out. I remember it like it was yesterday. I put them out on the New Years Eve, right? So, a couple of days go by and I get a call and its from a motivated seller. So, Im like, man, this is awesome. We got here. We go. Well, it turns out that property ended up being in an area is part of town called Pine Hills and its not a very, its not, lets put it to you this way. Its not where we wanted to live, its not a war zone, but its just not where were I wanted to raise a family. So anyways, I talked to the seller.

And long story short, I ended up putting, structuring a deal creatively with her because I knew I could probably sell this house to somebody else. Um, I put that house under contract, did a lease option, um, and then ended up reselling it to an end buyer. Thats a funny story in and of itself. And I dont want to, I dont want to go too far off topic here. Um, but remind me to get back to that later if we have an extra minute or two about crazy deals that Ive done. But long story short, we put six grand in our pocket up front on that, caught up the back payment on that one because that seller was actually falling behind. And again, I think that payment was less than a thousand dollars. So, say we ended up putting about five net into our pocket. Um, I structured that deal to where we had I think $200 a month positive cash flow with the end buyer on

Josh:      Now you can buy lots of books, $200 bucks a month of cash flow.

Sean:     Yeah. Yeah. So, you know, I realized at that point Im like, look, I mean I may not be the sharpest tool in the shed and it may have taken me six months to get this first deal under my belt and I may have done it without even actually trying to get a deal under my belt because I was looking for a primary residence, but were onto something here and I think I continue to make money with it. So, from there I just, I reinvest those profits, part of them back into marketing and lead generation and then I just continued spinning off deals from there. And its, its been, its been an interesting roller coaster ride with more ups than downs since luckily.

Josh:      Yeah, absolutely. Every entrepreneur has ups and downs. Yeah. Its about the end game, right? Its about Friend of mine, I was just with, um, was talking about what it takes to be an entrepreneur and scale a company. And I thought it was really cool. He just mentioned three things. He said, first of all, you gotta know what you want. Second of all, you got to know how to get there. The how is the strategy, the business, but the scale of real business, Its all about the WHO. Its all about who you bring on your team because even if youre a really smart entrepreneur. You dont want to be the smartest person in the room, especially if youre building a big company. And a lot of times you can flatten out the ups and downs with the WHO because if youre in, if youre in an up, you can continue the up with the right people, the right team, and if youre in a down if the markets going bad, but youve got good people around you.

Its kind of easier to make it through when the market throws you for a curve ball. So, um, interesting take on that. I thought it was real simple but powerful message, know what you want, know how to get there or the strategy. And then its all about the WHO. Um, so I wanted to ask you about that Sean, you know, and your team building your business, youve got these rehab crews, youre doing this licensing of your marketing. Maybe talk for a second about your team, maybe talk a little bit about some of the people that youve come across over the last 20 years. People that had a big impact in your life and what its meant to your business when youve been around the right people and then if theres been any kind of negative or thing that went bad and that was related to having the wrong person on your team. Maybe talk to that for a sec.

Sean:     Alright. Well, I guess I could go on for a long time about, about this topic and more so with the wrong probably than the right. Its difficult to, uh, its, it can be difficult to find the right people, um, you know, to put on your team. And I mean weve, weve gone through unfortunately probably more, I dont say bad for lack of better words than good. Um, weve got, uh, weve got a great team in place now and we have for quite a while, but, uh, you know, its taken us awhile and Ill tell you on one hand, I might not be the best person to give advice on this because I tend to stay kind of to myself with my wife and I and my family as opposed to getting out and networking. But the more Ive made myself get out and network, the more my team has grown. I mean, weve got a great realtor that we do business now. We got a great attorney that we do business with now. Um, I mean weve got key players. Weve got two crews for our rehabs and after going through, I mean, I can tell you every, well, Im sure you could to. And we can probably both go home with stories about dealing with bad contractors and, and similar issues for, you know, for the whole day and night. Um, you know, we got a good mortgage brokers on our team and everything now, but you got to kiss a lot of frogs sometimes before you find the right ones. Um, but finding the right ones is definitely key. Getting out and networking and stepping out of your comfort zone to build your team is very, very, very important. Ive learned it the hard way in this business.

Josh:      So have I, and with one guy or one gal can make things so much easier when they own it, theyre responsible for it, theyre accountable to it and they do it and they do it well versus somebody whos not, whos the exact opposite of all of the things I just said, uh, can cause so much trouble, so much pain and so much delay. Um, and loss of income, loss of opportunity. Um, its a really, really, really big deal. I would rather In the beginning of my real estate business, you know, Ive hired all the family and friends, anybody that can come work for me and I was all about keeping the expenses down. So, we hired a lot of people that were just cheap, inexpensive. And over the last 14 years as a real estate entrepreneur, Ive realized Id rather have less people who are probably cost me three times as much money, but who are just absolute A players and that really own their role, own their niche and they, they, they do it whether Im there or not. Right. Big Difference.

Sean:     Yeah. And thats a trap that a lot of entrepreneurs fall into. I mean, and not even just new ones. And again, entrepreneurs, whether its real estate investing or, or whatever else it is, that youre in. Cheap typically actually equals expensive. And you mentioned that, that, you know, you just made a good point. You know, Id rather have somebody thats expensive thats costing me three times more than the cheap person. The reality is actually the reverse. The cheap person is costing you three times more than the expensive person is. You just dont. You just dont realize it. You know. And it shouldnt be an easy lesson to learn, right? Because Ive learned it, you know, a thousand times over. But I mean, at the end of the day, lifes going to teach you those same lessons over and over and over until you, until you finally learn them.

Josh:      Yeah. So, Sean, um, because as we kind of round third base here and head for home. Uh, Im just curious, you know, after being in the business 20 years, Ive been in business a long time. I bought my first investment property in 2001, so Im going on 17 years, you know, I felt like the first five or 10 years of investing was all the learning lessons and then just this last couple of years that we really, really made hay, like all the mistakes I made in the past I learned from and finally did it right. Um, so help me understand for you, after 20 years in this business and seeing the ups and downs and doing really well and having some challenging times, what does the future look like for you? What are you focused on? Im curious on what youre trying to build. Is it cashflow, is it assets, you know, where are you going in the next, you know, three to five to 10 years? What do you see happening for yourself and for your company?

Sean:     You know, my, my, for myself and my company and my business has, has changed a lot over the years. Were to the point now to where Im starting to look towards wanting to taper down. My wife and I have raised three kids, ones out of the house and is in the Air Force living in South Korea now. Our middle son is going to be going into his junior year in high school pretty soon here. And then we have a daughter thats a couple years behind him. So, Im starting to really think about, uh, about retirement. Im looking at, Im looking at building cashflow several different ways. We buy multifamily properties. Ive got a lot of, a lot of cash flow coming in on these pre-wholesale type deals that I got into a little bit earlier. Um, I mean were, were structuring creative deals where we have a lot of cash flow for a long period of time on those deals.

And then the other thing that were focusing on and have been focusing on for, for quite a while now is, we found a pretty cool little niche here. And you can, and you can do this anywhere, you know, probably just about any market across the country. I assume theres probably some and uh, you know, in, in Denver, Colorado area and in certain parts of California where the prices are just so high that doesnt work. But what my wife and I have been doing here is, is buying these little two-bedroom, one bath block homes, uh, that actually dont even have central heat and air in them. And um, and you know, we pick them up for 25, 30 grand, just dirt cheap and we turn around and we rent them out and well fix them up just a little bit. Um, anything that could go wrong on those little two ones with no central heat and air and an 800 square foot houses is relatively cheap to fix and they spin off $800, $900 a month in income, positive cash here.

So even if you have debt on that property, youve paid it off in a year and a half, couple of. Um, so weve been focusing on that. Uh, and, and I almost wish I would wish I wouldnt have shared that. I almost like to keep it to myself because for whatever reason, its a niche that people havent figured out. And Man, were, I mean were, were killing it with that. So thats where we are really focused on right now is continuing to do those things and veering over towards retirement. Hopefully be able to hang out with the grandkids and sail off into the sunset some point in the not too distant future.

Josh:      Nice. Very good. Thats awesome. Um, so you mentioned this crazy deal earlier, crazy deal that you worked on some crazy buyers that you worked with on one of your pre-wholesale deals. Tell us about that, whats maybe the craziest, craziest experience, a deal youve worked on or closed or maybe a deal that you didnt do and youre like, thank God I didnt do that.

Sean:     Oh Man, I can. Again, this is one of those that I could throw out all kinds of stories and wed be here for a long time. Ill stick with To build on what I was sharing earlier though about that, uh, you know, about our, our first deal actually and how we came about that. So, I mentioned that, uh, you know, weve got $5,000 on that deal. Like I, I signed it up basically as a lease option and then what I did is that Now keep in mind at this point in time, and this was 21, 22, 23 years ago, I was brand new. I probably knew just enough about this business to be dangerous, right? To really screw things up.

Josh:      Someone other than yourself.

Sean:     Right. Exactly. So, uh, so I got that property, did a lease option on it, turned around, offered it is um, like a for sale by owner thing with no credit, no qualified by the house. And uh, I, I turned around and I sold it like I was owner financing even though even though I didnt actually have the deed to that property right now, at that point I didnt realize that you could just get the deed and take the payments subject to, I would have no problems with that point, but I didnt do that on this particular deal because I just didnt know better at the time. So got the lease option. Turnaround arranged to hold some financing for an end buyer for a couple of years. Um, they gave me the $6,000 down structure to cut a couple of hundred dollars positive cash flow. This buyer moves into the property, right?

I take that, I take about a thousand dollars out of their down payment, catch up the one month that was behind on that particular property. So this new buyer moves into the property. Everythings going good for, for like a month, right? She makes her first payment on time. Everythings good, shes happy. She loves us. Everybody loves us. Caught up the original sellers back payments again, mentioned that before, but just want to reiterate it that I fixed up the house a little bit, painted on the outside. The new buyer had totally fixed it up. The new buyer is now having a house warming party with all of her friends and family. All right, so here we are on a Saturday afternoon or whatever for the house warming party. Everybodys over there. Shes showing her new house off. Knock. Knock. Knock. Its the owner of the house that actually owned the house still. The owners knocking on the door. What You dont own this house. What are you doing in our house? Right? You dont own this house. Oh man.

Josh:      Its like a Super Bowl Party where an owner shows up. What are you doing here?

Sean:     Exactly. Exactly. You know, so that was a minefield that just blew up on me and it was from not knowing how to structure deals properly at the beginning of my business and not communicating properly with everybody in the party. I mean, now, you know, fast forward so many years later, everything is about making sure that everybody knows exactly whats going on in the deal. I dont ever want to leave anything, you know, unknown. Um, but back then thats just how I structured my first deal and it blew up in my face. Um, ended up being, you know, ended up working out. But man, that my stomach was in knots for a few days over that one.

Josh:      Yeah. Show up at the party and give everybody a beer or two and then lets talk it.

Sean:     Or three or four. Right?

Josh:      So, Sean you have a ton of experience, youve done boatloads of deals. Is there any kind of advice that you would go back and give your younger self or some of our audience that might be in then kind of new to intermediate category, what would you go back and do differently? Or what advice would you give yourself?

Sean:     Well, you know, Ill tell you the first thing that pops into my head with that question. It is continue to educate yourself and have persistence in your business and understand that theres going to be, no matter how good you are, how great you think theres going to be ups and downs, especially early on. Um, education is, is, is the key though, right? At the end of the day, persistence and education, both, uh, you know, I shared, I shared my story with you about how I, how I educated myself to learn how to begin to buy and sell houses without using any of my own cash, credit, money and just having crap credit. Right? So, I Education and courses, real estate investing courses, you know, people think sometimes theyre expensive, but man, Ill tell you that theres probably not a course out there that I havent studied and I still to this day continue to buy peoples courses, trainers and residential real estate stuff.

I mean, it might cost $500,000 to get a course. Let me tell you the piece if you. Heres the way I see it. If you pick up one piece of good information that you can apply to your business from that course, its worth it weight in gold because its going to continue to pay you back for the rest of your life. Right? In this business and possibly any others, um, that you move into later on down the road. So, educations key. It was a driving factor for me still to this day. Um, you know, I dont think I know that Ive educated myself far more than I ever could have, uh, or more so than most people ever go and get a four year college degree will because I continue to educate myself on the topics that Im passionate about in life and business day in and day out. I have no problem staying up until 3:00 in the morning every night reading and I read a book a week. Um, education is key.

I mean, with, with real estate and real estate investing, especially continue to study what other people are putting out there that have been there and done it before you and learn from them. Consider yourself to be a sponge and just soak in all the information and then go apply it to your business. Its probably the best piece of advice that I can give you when it comes to especially real estate investing.

Josh:      Awesome. Awesome. Sean. Its been great. Its been great fun sharing stories with you. I appreciate it. If our audience wanted to reach out to you, uh, touch base with you, whether it was for coaching and mentoring or some of your courses or know licensing your marketing programs, whats a good way for people to reach out and touch base with you?

Sean:     Well, and Ive got my website is reitrainers.com as reitrainers.com. You can find information on, on any of our training and also in the licensing product for marketing lead generation on that website. And Josh, Ill probably shoot you over a link and maybe you can maybe put it on your site to go to Josh instead of I mean if you dont want to write it down or whatever, go to Joshs site, click there and itll, itll lead you to it.

Josh:      Well put, well put that in the show notes, your, your contact information and your site and all that stuff so Ill could reach out to and, uh, and, and connect with you that way. So, listen to my audience. Thats here again. Welcome back. I appreciate you being back with us again. If you enjoyed this, leave us a rating and a review. Tell us how were doing. If it was great, let us know, if it sucked and you thought it was waste of time, let us know either way, leave us a five-star review. Sean, it has been fantastic getting to know you a little bit more, spending time with you and, uh, look forward to, you know, just building on our relationship and for our audience. Thanks so much for being here. We value all of you. Thanks so much for spending time with us today listening to this and look forward to connecting with you again in the future. So, Sean, thanks a lot. Take care my friend.

Sean:     Appreciate it.

Josh:      All right, well talk to you soon.

You were just listening to strategic real estate coach radio hosted by Josh Cantwell and Kyle Garifo. Leave a comment on our iTunes channel and let us know what you want to learn next, who you would like us to interview, or if you just want to share some of your success stories in real estate and maybe well talk about it on our next show while youre there. Give us a five-star rating and make sure you subscribe so you can be the first to hear new episodes every Wednesday.

Follow Josh Cantwell and Strategic Real Estate Coach on Facebook and Twitter. Check out all our awesome free training videos at YouTube.com/srecvideo. If you want to find out 55 simple and powerful ways to find killer real estate investments, go to 55 simple ways.com/podcast right now to download our free report and get a ton of free resources on finding properties and funding properties and stay up to date on whats happening right now in the real estate industry. Thats 55simpleways.com/podcast. Thanks for listening.


WHAT ARE YOU THINKING?

Every businessno matter how small or how largecan benefit from professionally-created videos and digital marketing tools. Have you had success with videos? Or are you looking to learn more about the process? Let us know below.

FINDING A LENDER FOR YOUR COMMERCIAL REAL ESTATE INVESTMENTS JUST GOT EASIER

March 25, 2019 charlie@podpostmedia.com Alternative Investing, Entrepreneurs, Interviews, Real Estate Investing

Finding the best financing option for your commercial real estate investments doesn’t have to be a headache. Tim Milazzo, founder of StackSource, explains how his company quickly and seamlessly matches commercial investors with the best potential lenders (and how they help these investors negotiate the lowest rates and secure the best financing option for their properties).

WHAT ARE YOU THINKING?

Every business—no matter how small or how large—can benefit from professionally-created videos and digital marketing tools. Have you had success with videos? Or are you looking to learn more about the process? Let us know below.

TOP TIPS FOR BECOMING HIGH-PERFORMING ENTREPRENEUR

March 23, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews

The most successful real estate investors have a strong entrepreneurial spirit. After all, we often start our businesses from virtually nothing – and it takes a lot of determination, hard work, and perseverance to reach our goals. To help inspire the entrepreneur in all of us, successful business founder Vinnie Fisher shares his tips for reaching the top in any industry.

BUILDING YOUR TEAM & MAKING THE SWITCH FROM OPERATOR TO OWNER

March 11, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews, Real Estate Investing

Known as “The Flip King,” real estate investor Joe Evangelisti has done over 1,000 property deals and flips $10 million+ in real estate every year. It’s safe to say he’s pretty much an expert in the areas of flipping properties and wholesaling.

But – get this – Joe only spends about 5-10 hours a week working for his company now. After building up a successful business and putting a rockstar team in place, Joe was able to step away from his owner-operator responsibilities and shift entirely to  an owner role instead.

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Every business—no matter how small or how large—can benefit from professionally-created videos and digital marketing tools. Have you had success with videos? Or are you looking to learn more about the process? Let us know below.

MASTERING MULTI-FAMILY PROPERTY INVESTING

February 23, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews, Real Estate Investing

nvesting in multi-family, value-add apartments is not for the faint of heart but it can be an extremely profitable niche of this industry. Case in point: Real estate investor Jason Yarusi of New Jersey, who owns 400+ units, has had amazing success in the multi-family investing business.

In this podcast, Jason shares how he first got started in real estate investing, and how he grew from investing in single-family flips to multi-family apartments. He also explains his fascinating method of investing in flood area-impacted properties, which he lifts (builds a new FEMA-compliant foundation that raises the house up) and then sells for profit.

Jason also touches on his financing strategy for multi-unit properties, and talks about the best ways to perfect your processes (hint: start small!)

Whether you invest in single-family or multi-unit properties, Jasons insightful advice rings true for every investor. Tune in to hear how many units he hopes to own 5 years from now.

WHAT ARE YOU THINKING?

Every businessno matter how small or how largecan benefit from professionally-created videos and digital marketing tools. Have you had success with videos? Or are you looking to learn more about the process? Let us know below.

THE INS AND OUTS OF SELLER FINANCING & LEASE OPTION INVESTING

February 20, 2019 charlie@podpostmedia.com Entrepreneurs, Interviews, Real Estate Investing

John Jackson knows a thing or two about seller financing and lease option (rent to own) closings. After all, hes done more than 600 of these types of deals. Hes even fondly known as the Texas lease option guy by real estate experts and homebuyers in his local market.

So, why would a real estate investor want to pursue seller financing or lease option opportunities?

Well, for one, these are very low-risk deals. Plus, its a very viable option for nicer houses that dont have much equity. And what might be the most appealing part theres very little competition for investors in this niche.

In this podcast, John explains the details of seller financing and lease option investing, and shares a few success stories of how these have worked well for him. Take a listen to hear about his future goals, and his best advice for any investor regardless of their strategy of choice

WHAT ARE YOU THINKING?

Every businessno matter how small or how largecan benefit from professionally-created videos and digital marketing tools. Have you had success with videos? Or are you looking to learn more about the process? Let us know below.