Josh Cantwell: So, hey there, guys. Welcome back to Accelerated Investor with Josh Cantwell. Today, I have a guest on the show, and his name is Jon Iannotti. Jon is a very successful real estate investor and entrepreneur and world traveler. He started investing in real estate in 1978 when interest rates were 21%. That’s one of the reasons why I’ve invited Jon onto the show. Jon and I have known each other for years, but because of Jon’s experience with these rising interest rate environments, inflation, and the Federal Reserve, I thought it’d be very good to hear this conversation on how Jon and I are positioning ourselves to take advantage as the market shifts and changes.

So, one of the things that you’re going to hear about today on the show, number one, is this concept of what Jon calls true PITI. We’re going to explain what that means when it comes to cash flowing your portfolio. Number two, we’re going to specifically talk about why seller financing, seller carrybacks, assumable mortgages, and subject 2 is going to be so attractive at the start of 2023.  And number three, you’re going to specifically hear Jon and I have a great conversation around marketing, and while you’re not really in the real estate business, you’re in the marketing business, personal marketing, personal brand marketing. Marketing for private money is all about this business, and why going forward, there are going to be so many more direct-to-seller deals available that you’re going to have to do an amazing job of marketing yourself in order to get ahead of your competition. So, looking forward to this interview with Jon Iannotti. Here we go.

[INTERVIEW]

Josh Cantwell: So, hey, Jon, listen, thank you so much for joining me on Accelerated Real Estate Investor. You and I have a lot of experience in this game. So, I’m excited to share that with our audience today. Thanks for joining me.

Jon Iannotti: Oh, it’s a pleasure to be with you and an honor.

Josh Cantwell: I appreciate that. Jon, I think, normally, because there’s so much going on in the market, I always love to talk with our guests about what they’re doing with today’s market, what they’re excited about in today’s market, and how they see the market kind of shaking out here. And I would say, not the short term or long term, but the near term, like six months to two years. So, what do you think is going on with the market? What are you excited about doing with today’s market? And kind of how do you think this whole thing’s going to flush out?

Jon Iannotti: That’s a good question. I pride myself on changing with the markets. So, we’re like a chameleon. We change our colors every time something comes down the pipe that’s a little different. As you know, real estate is cyclical. And we are in a cycle right now that’s ready to pop again. And I believe and I’ve been saying for probably the past eight, ten months that I think come January, February of ‘23, we’re going to see the market really take a nosedive, whether it’s pricing, foreclosures, whatever. We’re going to see a big influx of that.

And right now, I think what’s going on is people are still living their lives, even though inflation’s through the roof, and now, they’re going to be doing more taxing of us and all that kind of stuff. Well, they’ve been boxed up for two years with the pandemic. Well, now, they’re able to move around and they’re out there, they’re traveling, they’re spending money, but the problem is it’s costing them so much more.

And what’s going on right now is they’re going through their savings. They’re going through their credit cards. Christmas is coming. Everything is going to be on the credit cards. January, February, here comes the bills. Now, here we go. We got a problem. And it’s going to be a mess.

And we’ve positioned ourselves for this round of downturn. So, we’ve partnered with some people that have done over 5,000 short sales around the country for the banks. So, they work for the banks, now they’re working with us. So, we’re prepared that whenever residential, small, multis, commercial, whatever comes down the pipe, we’re prepared to go after those things because we’re going to have to help a lot of people.

And I think this one is going to be a lot worse than ’08 was. I think ’08 was really bad. I mean, that was terrible. I mean, if you didn’t lose money in ’08 in real estate, you weren’t doing real estate. We all, even myself, lost some money in real estate back then. But you know what? You pick yourself up, you dust yourself off, and you get back on the horse. And that’s what we did.

And since then, we’ve been doing tons and tons of deals. I do deals not only in Western Pennsylvania, which is where I’m originally from, but also, I moved about 12 years ago down to Florida. So, I’m in Southwest Florida. I do deals here. I do deals across the country because we mentor and teach our lifetime members around the country, and then part of that is they can bring deals to us. And we partner on those.

So, we’re seeing a big influx right now of properties coming to us that a lot of landlords are dumping. I’m seeing a lot of single-family homes coming to us that are– how I characterize it as family problems and they need to get out of the property quickly. And I’ve been saying it since probably 2010 or 2011. I can’t wait for this downturn for one reason. And that is we’re going to be able to take a whole lot of properties subject 2 and these are going to be such nice low-interest loans. It’s going to be phenomenal. And that applies to the commercial side as well.

So, we’re excited about what’s coming. I mean, it’s bad for people. However, we’re positioning ourselves so that we can help as many people as we can get out of the situations they’re in and then get other people in if that’s what they want to do, or we’re going to buy and hold. I mean, I have no issues with buying and holding real estate. It’s the best way to go.

Josh Cantwell: Nice. I love it. So, specifically, I think, from my perspective, you and I probably have a lot of the same views but are interested to hear your take. I think the distress in the commercial market is going to come from bridge loans. People that bought a bridge, a property with a bridge loan based on a floating rate, it’s almost like an adjustable rate mortgage from resi. It’s a floating interest loan. And now as interest rates have gone up with the Federal Reserve, so far tends to be parallel with the Federal Reserve, Fed rates are going to continue to rise.

So, there’s going to be some distrust there. And those people that bought those and hope that the market would just keep going up, up, up, they’re going to get caught. On the resi side, I believe that the people that bought with FHA loans that put very little money down, that’s almost like the new subprime, if you will. It’s not really subprime but kind of because there’s so little money down. And those are first-time homebuyers. There’s going to be more distrust there. We’re already seeing it. I had my buddy Daren from Auction.com, who’s their chief economist on the show, and he said the distress he’s seeing is really an FHA.

And then also, what I think is, look, there are real operators. I’m a real operator. Jon, you’re a real operator that operates real estate. You got your thumb on the pulse with your team and your business every day. There are other people that just bought, bought, bought, bought, and thought they got the euphoria, the dopamine rush of buying. And then they’re like, oh, crap, I have to manage this? So, they’re going to have management problems because they just don’t have their thumb on the pulse. That’s where I think three places specifically that are going to happen, both in resi and commercial. What are your thoughts on that? Agree? Disagree? Do you see some other things?

Jon Iannotti: I totally agree with it. Back in ‘08, I think, if I remember correctly, there was a whole bunch of self-storage units that came available that everybody was in trouble and getting out of. This time, I think we’re going to see a bunch of apartment buildings, even though people have to have somewhere to live no matter what, the economy does. They got to have somewhere to go. Like you said, the bridge loans, all that is going to come into play and they’re going to want to get out, where they’ve taken all the tax benefits out of the property and they need to unload one.

I had a 10-unit done in Naples, Florida, that they completely redid it. It was a beautiful place. And they just wanted, I think it was $600,000 for it. And I’m like, whoa. So, we got home right away, found out the story, or he had a million and a half into the property, but he had already taken all the tax benefits out of it. If he sold it for any more than $600,000, he had to pay more taxes. And it came with condo docs. I mean, that’s huge.

Josh Cantwell: Wow.

Jon Iannotti: So, we moved on that one real quick. Find deals like that.

Josh Cantwell: So, let’s give our audience some advice here, Jon. So, as you kind of said, you think this is coming, I agree with you that this is going to take a minute for the market to realize that that is more expensive. If that’s more expensive, generally, prices are going to flatten out. People have less options to refinance and other are forced to sell. And if there’s a higher cost of debt, there are typically less buyers or buyers are willing to pay a little bit less. So, for those reasons, we can kind of forecast this coming over the next maybe six to nine months.

So, when we talk about preparing to jump on those opportunities, what specifically do you mean? Like are you talking about raising more private money now and warming that up so that when the opportunities are there, you can strike on it? Maybe it’s marketing for motivated sellers. Maybe it’s creating more joint venture partners. And then how do you prepare for it but be patient to wait until it actually happens and not overpay now when prices might flatten out or actually go down in some markets six to nine months from now? Because people are going to be like, oh my God, there’s an opportunity, I want to buy, but it’s like, oh, no, no, no, no. The opportunity might be 6 to 12 months from now. So, what are your thoughts on that for our audience?

Jon Iannotti: I agree. And I’d say all of the above. But as far as private money, we’re constantly looking and gathering private money as we speak. Of course, cash is king. And the other thing that we do that some other people I don’t think really teach this, but as far as purchase price, I’m not so much concerned about the purchase price as I am the true PITI. And I call it a true PITI, that’s your principal, interest, taxes, insurance if there’s anything else that attaches to the property as a monthly fee. So, it’s the true PITI.

And if I can keep that low enough that it doesn’t matter what I paid for the property, of course, I’m going to try and get the best deal I can on the price, but it’s the true PITI that really matters. It’s kind of like I always tell people, when you see that Mercedes on TV and they say, you can drive this beautiful Mercedes for $299 a month, they don’t tell you the small print that it’s a $150,000 car. It’s the same with us when I’m doing deals, if I paid a little more, it’s okay as long as that true PITI is low enough that I can really cash flow the property. And then what we try to do, a lot of the deals that we do that are seller-financed, it’s principal only. And how do I get principal only? Well, I’ll give them…

Josh Cantwell: I’ll ask you that. Tell us.

Jon Iannotti: It’s just simple numbers, $100,000. $100,000 is what the properties work. I’ll give them $115,000, $120,000 as long as that true PITI is down low. If I can keep it low and it’s principal-only payments, I don’t mind paying the extra money because basically, you’re building the interest into the price.

Josh Cantwell: Right.

Jon Iannotti: But who’s going to get the deal? Or you go in and you’re going to say, I’ll give you $100,000, and then I say, I’ll give you $120,000. Who’s going to get the deal? So, that’s how you can do tons and tons of deals. That’s the way we do it.

Josh Cantwell: Yeah. I mean, I’m all about creating forever passive income. Matter of fact, my mastermind group is called Forever Passive Income. And again, it’s less about the equity or the price, it’s more about the daily, the monthly, the quarterly, the annual cash flow. That’s ultimately how you create financial independence. You have these guys, like I’m worth $20 million on paper, but I have no cash flow. Nobody gives a sh*t, right? I’d rather have somebody say, I make $100,000 a month of net free cash flow than say I’m worth $20 million on my balance sheet.

The cash flow creates true actionable independence. Like, I can take my kids to the zoo today if I want instead of working. I can go visit my mother and go for a walk with my mom on the beach instead of working. That comes from cash flow. So, essentially, Jon, what you’re saying is this true PITI, the true carrying cost is more important than price because it allows you to craft a strategy to either do a seller carry, do seller financing, do a wrap, assume the loan, do a subject to any of those types of strategies for resi or commercial that allows you to take over a property with a very low monthly obligation. That to you is the most important thing. Is that right?

Jon Iannotti: Definitely. I just had a single-family come in. It’s not worth a lot of money, but it’s a nice house. It was all totally redone and it was a divorce situation. And they’re like, you can just take over the payments. It’s mortgaged to the hilt, it’s to the ARV, but it’s a 2.25% interest rate. So, this thing’s going to cash flow at least $500 a month. So, it’s like, you know what, I’ll take it. And that’s in Pennsylvania where the rents are low. If it would have been down here in Florida, that thing would cash flow probably $1,500 a month. It’s just location.

Josh Cantwell: And I think the benefit of the Federal Reserve keeping rates so low for so long is everybody who could buy a refi, got into something very low.

Jon Iannotti: Yes.

Josh Cantwell: So, the go-forward opportunity for both resi and commercial is going to be some short sales because these are going to be purely just worth less than the mortgage. And so, we’re going to negotiate with the bank to short the mortgage. It’s called a short sale if my audience is not familiar, or because the rate is so low, again, you’re seeing loans of two and a half years and commercial loans at three and a quarter, three and a half. A lot of that commercial stuff is assumable, and the opportunity to say, hey, I can take it over based on the debt. I have a deal, actually, that we’re about to list, it’s worth about $14 million. We refinanced last year at 3.65% long-term Freddie Mac debt.

And even though now rates have crept up, so long-term permanent financing on commercials crept up 5%, 5.25%, today, it’s actually settled back down to about 4.8%, is what you can get a Fannie and Freddie, but this is locked in at 3.65%. And if the buyer wants an asset that wants just to purely cash flow, they’re going to put down X amount of dollars, they can now assume that deal, buy that property from us, assume the loan, and it’s the building stabilized. We’ve already turned in almost all the units. So, that’s a cash flow buyer that’s just looking to dump a bunch of money down and get a return on that investment.

When they factor in the principal pay down, like Jon, like you talked about, factor in that low fixed interest rate for the next 29 years, that’s the play, right? If somebody is looking to do a value-add strategy, that’s not the right buyer for that deal. If I was a buyer for my own property that I’m selling, this 164-unit, the attractiveness is coming from the debt. And I think, Jon, what you’re saying is, is that’s going to be the number one thing that you look at six to nine months from now is let’s not just pay attention to price, let’s just not pay attention to discounts, let’s pay more attention to cash flow.

And if there’s a seller finance, a seller carry, assumable loan, a subject to deal, and frankly, Jon, I haven’t talked to anybody on this podcast that’s been having that conversation, so this is the first time. So, we’ve talked about it but not relative to today’s market and what’s going to happen 6 to 12 months from now. So, I think that’s the big takeaway for my audience that they really need to know about.

And I think, Jon, I was going to ask you about, like you’ve been at this for so long that you’ve seen kind of some of the traits that it takes to be successful when the market’s changing and moving, like we’re doing now. Other than what you said, when we started the podcast, you said being flexible, being able to change your business with the times. What are some other things that you think it takes to be successful long term because the market is cyclical and you might enter the market at “the right time or the wrong time,” but we’re in this for the long term? What do you think you’ve done right that’s made you successful long term? What are your members, what are your students doing right to be successful long-term because that’s really where it’s at?

Jon Iannotti: When I bought my first property back in 1978, interest rates were 21%. 21, and I thought I got a good deal at that time because things were going crazy. And now, people are talking, oh, it’s going to hit 5%, 6%, 7%. Oh, my gosh. I’m like, who cares? That’s low. As long as that true PITI is reachable, I don’t care what the rates are.

What can we do differently? You got to realize that we’re not in the real estate business, we’re in the marketing business. We’re constantly marketing for properties and for private money. So, you have to constantly put your message out there in front of people. You got to let people know what you’re doing. Like my shirt here has my logo on it, my jackets on the back have the logo on it. My vehicles are all lettered up. So, anywhere I go, people know what I do.

If I just walked in with normal clothes and stuff and a normal vehicle, go to shopping, whatever, they don’t know what I do. Nobody knows. By marketing myself, and that’s another thing I like to do is I like to figure out how to get the bigger companies marketing for me instead of me marketing for them.

And what I mean by that is, you see guys walking around with maybe a Ford on their shirt or a college university, or for me, it’s my Steelers, they’re marketing for these companies that don’t need you to market for them. So, what I’ve done is I’ve taken like a Steeler jersey. And on the back, I’ve had imprinted Butler’s We Buy Houses, number one. So, it’s like I’m marketing, okay, I got the Steeler thing in there, but they’re marketing for me instead of me totally marketing for them.

So, marketing is huge. You got to let people know what you’re doing. And if you don’t do that, number one, you’re not going to get leads for properties. Number two, you’re not going to have a conversation with anybody about private money. And private money is big. You’re huge in the private money. One of the other huge guys out there who teaches it, I mentored and got him started in the private money field. So, he’s doing exceptionally well, as well.

But you’re constantly marketing your business, yourself, you’re talking, always have your elevator speeches to what you do. I always like to tell people, well, I show people how to be invested in real estate without owning it. Then I shut up. What are they going to do? Well, how do you do that?

Josh Cantwell: Tell me more. How does that work? What do you mean I can do that?

Jon Iannotti: Then I got lent private money on it. Yeah, you don’t have to own it, but you can get it in. So, stuff like that, little tips like that. But again, we change what we’re doing according to what the market is doing. Before the crash, we were going gangbusters. I had about half a dozen crews out doing rehabs and all of that. And we were just going nuts with it.

Well, then when the crash happened, within like 10 days, all our exit strategies disappeared. They dried up, and it was like, whoa, now what do we do? So, we figured out, okay, now, we got to go towards short sales and distressed properties and that kind of stuff. We weren’t prepared for it, but we got prepared quickly. We had to. This time, I’m prepared. I have set the team up to where we’re ready to take on anything that comes down the pipe now. And it doesn’t matter if it’s a retail property, a wholesale property, a distressed property. It doesn’t matter if it’s residential, commercial, it doesn’t matter. We’re set up. Our systems are set up to where we can handle whatever comes across our desks.

Josh Cantwell: Got it. I love it. So, Jon, if our audience, which I’m sure is going to want to better position themselves to take advantage of this market, obviously, your strategy of this true PITI, seller finance, seller carry wraps, assumable, subject 2, not really something that I do, but our audience needs to be prepared for this. So I would love it if they would engage with you, jump on to your website, get your free book, some of those kind of things. So, if our audience wants to engage with you and learn more about you and kind of prepare themselves for what we’re forecasting that’s going to be coming, how can they do that? Where can they learn more about you?

Jon Iannotti: The best thing to do is just toss us an email at info@buy, B-U-Y, cats, C-A-T-S now.com, info@buycatsnow.com. And what we’ll do is we’ll get on a call with you and we’ll discuss what we do and how we do it and see if it’s a fit for you. Now, I will tell you, I don’t sell to everybody the information that we have. You got to be a good fit for us. If you’re just going to take it and put it on the shelf and not do anything with it, well, I don’t want to sell to you. So, I’m a little different that way than the gurus out there.

The gurus, they sell, sell, sell, sell, sell. We decided when we finally decided to teach as a business back in, I think it was ‘14, we said, we’re going to do it differently. We’re going to give them everything we’ve got. We’re going to make it lifetime so that if the market changes again and we’re doing something different, you’re going to get it. You don’t have to pay again. We’re going to keep it a low price so that everybody can afford it.

And I do a monthly phone call, Zoom call with everybody, all the members. Also, if they have questions, they can submit an email to our system, and I answer all the emails, nobody else. So, I don’t know any other guru out there that does it the way we do it. And I’m not looking to upsell into this, into that, that kind of stuff. We’ve got one system, one price, and it’s unbelievably cheap for what you get.

Josh Cantwell: And you’re partnering with these people on deals all over the country, working with your members. We talked about that offline before we even started recording. Jon’s one of the advisors, lots of deals with his members. That’s where the money’s really at. Like I have a mastermind group. We charge for it, but only because it’s an ecosystem. Jon, just like you talked about, an ecosystem where you have that’s kind of contained with your members to do more deals, to do more partnerships, raise more money, find more properties.

And I would submit to all of our audience that, look, navigating the next 6 to 12 months is going to be a little different for everybody. It’s going to be a little bit of a challenge. And you want to be part of an ecosystem where people are sharing best practices and what’s working for them. So, if you’re not in one of those groups, I would encourage you to look at that. And if you’re interested in engaging with Jon and learning more about true PITI program, definitely reach out to them. Again, the email is info@buycatsnow.com. Awesome stuff. Jon, listen, I want to thank you for carving out some time today and joining me on Accelerated Investor.

Jon Iannotti: Thanks for having me.

[CLOSING]

Josh Cantwell: Well, hey, listen, I hope you enjoyed that interview with Jon and I. Again, love the conversation about seller financing, short sales, marketing your business, and true PITI. Listen, if you enjoyed the show, smash down right now on the Subscribe button. Open your phone, go to iTunes, go to Spotify, go to YouTube. Subscribe right now so you’d never miss another episode.

Also, leave us a 5-star rating and review. And also, don’t forget to join our private Facebook group. Go to Facebook. Go there now. Look for Accelerated Real Estate Investor. Join our private Facebook group. And finally, if you’re looking for strategies to navigate the markets going forward, listen, I think you’re missing out if you’re not part of my mastermind program. We’ve got over 80 members. They’re all very successful, intermediate to advanced investors, guys that have started $25 million private equity funds, guys that own 500 units of apartments, 1,000 units of apartments, guys buying $20 million assets, $6 million assets, $10 million assets.

If you are looking to be FIRE, be financially independent and retire early, go visit me online at JoshCantwellCoaching.com. There you could submit your application for our mastermind group, and our next mastermind is coming up the first week of December, December of 2022 in New Orleans, first week of December. You’re going to want to be there, I promise you, JoshCantwellCoaching.com. We’ll see you next time. Take care.