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Hampshire Capital CEO Shane Carter On Real Estate Development

The REI Diamonds Show - Daniel Breslin | Shane Carter | Real Estate Development

Guest: Shane Carter is a seasoned real estate developer and entrepreneur with over 27 years of experience, specializing in multifamily and single-family development. He is the author of “Optimize Your Life,” which emphasizes balancing professional success with personal well-being. As the founder of Hampshire Capital, Shane leverages his expertise in construction and development to create value and foster community growth.

Big Idea: Shane shares his journey from home builder to successful real estate developer.

This episode is also sponsored by Lending Home. Lending Home offers reliable & low-cost fix & flip loans with interest rates as low as 9.25%. Buy & hold loans offered even lower. Get a FREE iPad when you close your first deal by registering here now.

Resources mentioned in this episode:

Hampshire Capital LLC

View the episode description & transcript here:

Hampshire Capital CEO Shane Carter on Real Estate Development – REI Diamonds

Shane Carter & I Discuss Real Estate Development:

Balancing Personal Growth and Professional Success (00:01:46)
Real Estate Development (00:07:45)
Strategic Insights on Market Conditions (00:30:00)
The Impact of Kindness and Networking (00:49:09)

Relevant Episodes: (200+ Content-Packed Interviews in Total)

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Hampshire Capital CEO Shane Carter On Real Estate Development

Mr. Shane Carter, welcome to The REI Diamond Show. How are you?

I’m doing great, Dan. Thanks so much for having me. It’s an honor to be here.

Balancing Personal Growth And Professional Success

I’m sure people who will have read the description and the bullet points from our conversation are looking forward to hearing about all of the large-scale single-family development deals and the multifamily assets. Before we dive into that, in September 2024, I believe, you released the book you wrote, Optimize Your Life. I know that a lot of our audience is about family, freedom, and living life to the fullest. Would you mind taking us through a little bit of the journey of putting that book together and maybe what the top-line message is?

Thanks, Dan. I appreciate that. This is a book that, just so we’re clear about it upfront, I didn’t write to be a lead magnet or to be a funnel into a course or to be anything other than a cathartic process of getting my thoughts out and wanting to share with others all that I’ve learned in the 27 years of my professional career and my personal growth journey. I’ve been a personal growth junkie from the very beginning. I’ve read and absorbed about every book you can. This is my recounting of the main lessons that I’ve learned on that journey. It starts with mindset and how we quite literally create the world around us via our mindset on a daily basis.

If you do that consistently and long enough, you craft your own life in a very meaningful way. The rest of the book also goes into what I believe to be a critical balance between mind, body, and spirit. I think that’s a piece that a lot of entrepreneurs miss. There’s a lot of influencers out there. I’m not going to name names, their sole focus is business growth. “Grow your business. Eat, sleep, live, and die, and breathe it. Grow for the sake of growth.”

I offer many counterpoints to that that I don’t think are very healthy for most of us to try to engage in. The main one is relationships. It doesn’t matter how much money you have if you don’t have good relationships with your significant other, with your friends and family, with your children, etc. I personally know several people who are extremely wealthy and have massive regrets because they don’t have the relationship with their children that they wanted or they wish that they had had because they were so focused on growing their company.

That’s something for everyone to hear before it’s too late before they go too deep down that road. Also, physical health and wellness. I’m a big health and wellness guy. I don’t think that anyone performs to their highest and best self without a real clean machine and a highly functioning physical body. The spirit part is, again, something that people don’t talk a lot about, but I believe that a connection to a higher spirit and understanding yourself through that lens as a conduit to the beauty of a higher power is very releasing and freeing so that we can let go of the rope a bit and enjoy the journey more.

We create the world around us via our mindset daily. If you do that consistently and long enough, you craft your own life in a very meaningful way.

I imagine you must have a couple of kids then.

I have three.

About how old now?

My oldest boy is fifteen. He’ll be sixteen next month. I’ve got a six-year-old and a four-year-old.

You’re in the thick of it then right there.

Yes. I’m loving it.

I’m going to take the opposite side. I think there’s probably a time, maybe we go back. Your 27-year career and your boy’s about to be sixteen now. What about the first ten years? Was there a little bit of an obsessive drive that probably is helpful to get the momentum going? If someone is tuning in now and they haven’t quite got the momentum going in their career yet, I would posit it could be potentially a little bit detrimental and you may not get to where you want without some period of time. Is it 3, 2, 5, or 7 years? Maybe it’s different for a lot of different people. For me, I know I had to push hard for 5, 6, 7, 8, or 9 years before the momentum started to show. Not that I neglected my physical, spiritual, or relationships completely, but there is some place for getting the cart moving.

I can’t disagree with you. I think you’re right. If I reflect back on my journey, there was absolutely that time period. For me, it was similar to yours, probably. It was in that 5 to 7-year time period where it takes a lot of energy to get that flywheel to spin so that it starts to spin on its own. You’re right. It does take a drive and a passion. As a younger man in my 30s, let’s say, that was critical to my ultimate success.

I think you’re right on that. I’m not going to discount that at all. I’m fortunate that I had kids a little bit later so that I was able to establish my flywheel and have the grace to be able to step back and get a little more balanced about it. You’re right. It does take that hyper-focus up front to get something up and running and going.

It takes an incredible amount of energy to get the flywheel to spin, but once it does, it starts to spin on its own. The challenge is knowing when to step back and regain balance.

Maybe you and I are probably at that place where balance is important. I’m 44 now. My daughter graduated college here, so she’s 23. Got married, and may have another round of young kids running around here. This is a topic that’s hot on my mind. It’s like, what’s that going to look like in the next 5 to 10 years? If I fast forward and I’m blessed enough to have a 4 to 6-year-old there, what will I construct life from there? Falls back to the mindset piece of your mindset creates the world around you.

Real Estate Development And Career Beginnings

I realized that. The options are somewhat endless. How do I want to create the next steps of my life? Good position to be in. Let’s shift gears here if we can. Real estate development background. When I saw the booking agents connect us, God, it must’ve been 5 or 6 months ago at least. I was looking forward to this one on the calendar. It’s like, “This guy has this real estate development background.” Would you mind starting here in your career and establishing that may have been some foundation for what you put together since then?

My background, Dan, is what I like to call the classic self-made man story. I’m a bit older than you, so I bought this late-night infomercial Carleton Sheets’ No Down Payment book way back in the day, in the late ’90s. That was my kickoff to understanding real estate and investing in creative thought processes around real estate. I started wholesaling contracts and flipping houses. Through that process, I developed a passion for construction and development, the process of transmuting old, horrible properties into beautiful homes for families and folks to live in. It was extremely rewarding work, and I loved it.

I loved the whole knowledge base of understanding how a building works and how you build something from the ground up. I started to get into new construction as well and started a general contracting firm, did tons of renovations, tore a bunch of homes down, and built beautiful homes in their place. I grew myself in that capacity over the years, went from building starter homes to middle-market homes, to multimillion-dollar luxury homes.

I got into community development, where we’re getting land entitled and then putting in the roads and then building the homes and building entire communities. I also got into building townhomes and mixed-use projects, etc. That’s how I grew as a developer over the years, but that’s all transactional income. I always took the transactional income that I made in those businesses and invested in income-producing assets, predominantly multifamily, and predominantly value-add multifamily because I was a construction guy.

I didn’t know how to use other people’s money until 2014 or 2015. I think I took in my first investment. The beginning part of my career was, “I’ve got an extra $10,000 or $20,000,” and I would use it as a down payment, go buy a little fixer-upper 3 or 4-unit building, have my construction company fix it up, we’d rent it out, we’d refinance it, and I’d get my money back.

I’d buy an 8-unit, a 20-unit, and then a 60-unit, and so on and so forth. I let my equity and transactional money fuel my income-producing asset acquisitions. I learned how to partner with people and bring in partners to leverage their money and my expertise in construction and development. We started to do bigger projects, which got us into investing in the South, and starting to look hard at that in 2018 and 2019. We’ve acquired a little over 2,000 units and $320 million or so in assets there in the last five years.

What’s the plan? Are you holding those, or is it the buy, add the value, and sell strategy to cash everybody back out?

Those are still mostly value-add projects and properties. The value-add’s been completed on all of them. We’re in the buy-and-hold stage because of the market shift. We’re fortunate that we are in fixed-rate debt and have good leverage positions on all of them. We’re looking to exit assets in 2026, 2027, and 2028. We’re always looking to buy more. It’s been very difficult with the lack of liquidity and the lack of deals trading to find opportunities that make sense for us.

Exciting Real Estate Deals In Recent Years

It’s hard to make them pencil out. What’s the debt now? I haven’t checked, but I imagine you could probably get some Fannie products, like 6, 6.25, maybe 6.50, or something like that. That’s 30 years, you’re stuck in the thing, yield maintenance in the whole deal. What, in the last 12 to 18 months, are the deals that are exciting to you and that you are participating in and getting up off the bench for 2023, 2024, and now we’re in 2025?

We saw the writing on the wall there in late 2022, beginning of 2023, in terms of the rising interest rate environment and what that was going to do to the industry. We were fortunate to pivot back into my background, skill set, network, and experience and got back into land development and got back into that side of the business and are doing it in the growth markets that we already know and understand.

We have folks in Dallas and folks in Tampa, where we have staff and employees in those areas. We’re hyper-focused now on doing what’s called horizontal land development. We do entitlement work, but we also take land that’s already been entitled and approved, and we buy it and put it in the roads and infrastructure. We get construction loans, put in the roads and infrastructure, and then sell finished pad sites or finished lots to the national homebuilders.

Some of our clients are D.R. Horton, Pulte, Meritage, those types of firms, top 50 nationally traded homebuilders. We’re excited about that side of the business and growing that side of our business because there’s a dearth of developers who know how to do that and have the capacity. We’re fortunate, we have a $50 million investment fund that we started last year, that we raised capital for.

That fund allows us to invest in land development. To a builder, we’re an interesting group because we have capital, we have the resources, we have the skill set, we’re vertically integrated, we do the construction management, and we’re able to come in and fill a void or a niche in the ecosystem where there are not enough guys developing lots for the homebuilders. We’re capitalizing on that opportunity now.

It’s interesting, and I’m in a partnership where we’re doing quite a bit of this. I think our fund has 14 or 18 projects, something like that. Each one is probably between around maybe 80 lots on the low end and 250 to 300 on the high end, except ours is all paperwork. It’s sold to the builder as soon as the construction drawings are approved, they’re going to settlement. Not a tree has been moved, and not a curb or a water line has been installed on the property.

You’re now stepping in, and maybe you’re an interim type of person who’s taking that dirt and putting the road work in there. It can be a risky scenario, at least, that’s the way our investment philosophy has worked, which is why we’re exiting on the front end. I think D.R. and Pulte and the rest of them have another third-party developer who comes in, does all the roads, and does it almost work for a fee. Is that you guys, or are you buying the land?

That’s us. After this episode, we have to talk because I’m your buyer for all those deals. That’s exactly what we do. It is because D.R. Horton, a lot of these nationally traded companies, publicly traded companies, I should say, have what’s called a land light strategy. What that means is they keep it off their books, and they keep it off of their balance sheet by leveraging third-party developers. For D.R. Horton, they’ve got an interest in a group called Fourstar Group, another publicly traded company.

All they do is put in roads and infrastructure, and sell the finished lots to D.R. There’s an entire network of other builders, and Fourstar Group doesn’t serve all of D.R.’s needs. There’s still a tremendous amount of opportunity and need for third-party guys like us to come in, and put it on our balance sheet. We take the construction loan, we take the risk, we put in the roads and infrastructure, and then we deliver the lots on a 2-to-3-year timeline.

They get to buy the dirt with finished lots and tranches, take them down, build houses, sell them, and they don’t even have to buy the next tranche until they’ve sold through most of those first ones. It hits their balance sheet, and then it turns into revenue quickly. That’s their strategy. We’re an important part of that ecosystem because we hold it on our balance sheet, and we take that risk, and we take that interest carry, and we hold it on our side.

We make the numbers work well. You brought up something important though, which is risks. The risk on our side of the business is usually, who’s going to buy this? We mitigate that risk by having the contract with the builder upfront before we close on the construction loan. Let’s take one of your examples. You’ve got 120 lots. You got it entitled and approved. You got construction drawings done, and you’re saying, “I’m selling it to the builder,” but the builder is not buying it.

The builder is taking that, and they’re assigning it to someone like me for us to close on and put in the roads and infrastructure. What they’re doing is they’re giving us a forward contract to buy the finished lots at a certain price. There’s even an annual escalator involved in it, etc. They’re locking in their position in their land pipeline and controlling it without having it on their balance sheet. That’s our role.

If a builder is paying $100,000 for a finished lot with all the infrastructure in there, what can your all-in cost basis be with the interest to carry the whole thing? Are you able to pack a 30% profit margin in there, or is it a little thinner than that?

It depends on the deal. That’s a great question. It’s usually in that 20% to 30% range. Our buy box is pretty similar to yours. What we focus on is the 100 to 400 lot community size. We want to be in that $15,000 to $20,000 a lot profit range. That’s what we target and focus from a risk-reward profile. It is because again, these construction loans, I’m personally guaranteeing them. We go out, we get a $20 million construction loan to build all the roads and infrastructure. It’s not on the builder’s books, it’s on our books.

Even if it’s non-recourse to the entity, there are these things called completion guarantees. Anyone who’s done development knows the completion guarantee for a development project is in place the entire time until it’s completed. You are on the hook then, therefore, personally, the entire time due to that completion guarantee clause.

When you guys build them out, if you have a 300-lot subdivision, somebody got that entitlement done. Are you doing the construction drawings and approvals, or is that done also and handed to you when you step in?

We do it both ways. We work with all kinds of different folks. Some folks get the land use zoning approvals completed and the entitlements. We step in and do the engineering drawings and the CDs, and get everything laid out, and then we close on it. We love working with folks who have all the CDs done, the engineering’s done. They’ve already got indications of interest from the builder groups, and we step in, and we close on it, and we go to town, and get those contracts with the builders set up.

Everybody wins there. We’re not taking away from anyone. We’re still giving someone like yourself, or somebody who’s doing the entitlement work, all the money that they want. We’re still selling the lots to the builders at a price that makes sense for them to build their product. We’re sandwiching ourselves in the middle and making a nice profit for taking on the risk we’re taking on.

Do you guys build that out in one tranche, or would you build out 80 lots in four separate tranches as they complete, and perhaps not have to pay interest on the other unfinished sections until it’s time?

That’s a good question, Dan. This gets into my business partner and the highly detailed financial models that we have relative to this, but we try to have our expense build be in concert with our revenue chunks that come in the lots. There is an efficiency though, however, from a site work. I own site work equipment, I’ve been doing site work development for a long time.

There is an efficiency of mobilization and getting there and doing the work that starts to become cost-prohibitive if you’re asking guys to stop and wait, and then remobilize. There’s this fine line of allowing the project to proceed and the expense to build, and then staggering the lot takedown schedule and the revenue build, so that your max exposure and your max interest carry is usually never more than about 40% to 50% of the total cost of the project.

First Subdivision And Land Development Experience

It sounds complicated, complex, and scary. Can you take me back to the first subdivision that you approved? Maybe it was like you turned one lot into two, or something like that. What was the first time you went and did a subdivision where you put infrastructure on the land?

The first time I did that, that was a small four-lot subdivision. It was here locally when I was still an active home builder. Again, someone else had done all the work to get it entitled and approved. It was shovel-ready. Drawings were done for the roads. The lots were laid out. It was a plug-and-play go. Bought it, put in the roads and infrastructure, built the homes, and sold them.

I make it sound easy, but that took us the better part of a year to do that because it was our first one and we didn’t know exactly what we were doing. We screwed up the water lines at first, and we worked with the city to get that corrected. We had to dig up some water lines and put in some curb stops in the right locations instead of the wrong locations. That was a bit nebulous on the plan. That’s why we made that mistake. The water management was fine.

The sewer was fine. The grades, we had to play with some of the grades a little bit. The engineers had laid out grading for the individual lots in a way that wasn’t as ideal when we got there physically on site and started building and developing these homes and having to deal with all the additional fill that they didn’t calculate for. We raised some elevations on some of the homes to account for some of that additional fill and did some tweaks like that. It was a great learning experience on only four lots. This is going back probably fifteen years ago now, but a great learning experience.

Surviving Economic Downturns In Real Estate

You were in the business through the last downturn. I guess it’s the second downturn if we’re counting the COVID downturn. It’s been a while now. In 2007, 2008, or 2009, around that time, what were you up to then, Shane?

I was in the thick of it. I was buying assets. I had, not a ton under my belt at that point, but I want to say I probably had 40 or 50 rentals under my belt at that moment in time. I was doing construction and development work. I was flipping houses, I was renovating homes, and I was doing new construction builds for others as a fee build for clients and building custom homes. I hadn’t quite got to being an entitlement developer yet. I was in the thick of it.

Being a custom home builder through that time is what allowed me to thrive and exist through it without getting through completely unscathed. A couple of things. First of all, everything that I owned, I didn’t over leverage because I bought it cheap. It was all challenged properties that needed to have a ton of work done. I did the construction work ourselves at cost and refinanced them at a low enough level so that they would produce great cashflow for me.

In other words, I didn’t pull out too, too much equity. I didn’t over-leverage those. That was a great lesson to learn through the crash was that in ‘05, ‘06, and ‘07, I was still buying properties and doing this burr method of owning assets. I never over-leveraged. That was something I didn’t think about other than I wanted to make sure that the rents that were coming in gave me a great margin. That’s all I thought about when I was doing it.

I didn’t think that something bad might happen. You might wish that you had lower leverage. I wanted the cash flow. I liked the whole concept of passive cashflow. I already had a transactional cashflow business that was giving me more cash. I didn’t necessarily need to have access to more cash. I wanted to set up a passive machine. That served me through that. That’s what I was doing.

What market was that in?

All here in New England. It was Northern Massachusetts, all of New Hampshire, and Southern Maine.

Very constrained real estate markets with not a lot. I’m guessing you probably have zero subdivisions going or done under your belt that are 120 lots or more anywhere in New England. Am I right?

Correct, you are 100% right.

You get into a market like that and that weathers a storm like the 2008, 2009, or 2010 type of era, a lot better than in the Atlanta, Georgia area where the construction was insane in that go around. Texas, same deal. You got very easy zoning and approvals in Texas compared to Georgia and compared to the Northeast. We have a few storage projects up in the New Hampshire area, all-purpose storage, you probably have driven by them. It’s taking forever to get approvals and the permits and everything. Luckily, I guess it did because maybe we would have overbuilt a bit, who knows? There are pros and cons for market downturns, which in my opinion, the market downturn, I think we’re in a flat era.

I don’t think we’re going to see 10% increases in value again for a few years, pretty much anywhere in the country. I don’t think we have the conditions for a blowout quite yet. If you look at the demographics and the large peaks of people that exist in the home buying year compared to the valleys in the home buyers demographic in 2008, 2009, and 2010, some of that was the underwriting was faulty and some of it maybe more was the window of home buyers.

It was like the lowest population in all of recent history at that age. I think the next time we may see some trouble on the horizon might be fifteen years from now when you start to see maybe some of these demographic shifts continue. The birth rate is low and there’ll be these lower valleys where we had peaks in Millennials and Gen Y and the rest of it.

I would agree with that. I’d say at least ten years. I know that due to the chronic underbuilding that we’ve done since the crash and the GFC, it’s going to take us ten years from the beginning of 2025, it’ll take all of ten years to get back to a homeostasis or a balance in the construction and home-building marketplace. That includes multi and single-family. That’s where we are and we can’t build more because we’re zoning and entitlement constraint.

Has it been that way for ten years already?

It already has. Just about.

Buy and hold, right?

That’s right.

Strategic Insights On Market Conditions

While we’re on the topic of the predictions, we’re in January, everybody is forecasting the future. Other than what we talked about, maybe we could switch gears and touch on some of the predictions and maybe touch a little bit on the development cycle around multifamily residential. You have 300 million plus, 2,000-some-odd units. I’m guessing these are Sunbelt assets, Florida, Texas, Georgia, that kind of thing. Where are we at? We had a lot of multifamily new construction in the last five years, but I think a lot of that’s maybe winding down. Do you have any predictions on the development cycle and the larger multifamily assets and maybe your appetite to jump into that?

It’s something we live and breathe every day. Our asset managers eat, sleep, and breathe this, and they are extremely in touch with the market at a granular level in the markets that we’re at in the Carolinas, Texas, Florida, and the Southeast. You’re right, we overbuilt, and we have the highest surge of multifamily deliveries that we’ve ever had, or that we’ve had in 30 years, I believe, since the ‘70s. The interesting thing is that it’s being absorbed, though. We did see some negative rent growth.

We have some B assets and some C assets. We did see some negative rents occur due to the shifting that happens when you have that supply hit the market and folks moving up, if you’re in C, you move to B, or in B, you move to A. We did see that and feel that over the last 24 months. I believe that is stabilizing now. That new A class is absorbing well, and I think that the best story coming out of 2024, was the absorption of the high deliveries. It could have gone the other way, and we could have been dealing with a much bigger problem on our hands, but thankfully that didn’t occur.

That tells you that we are a renter nation, and we’re going to stay a renter nation. The affordability gap’s never been bigger. Frankly, I don’t see it coming down in the next three years. I think we’re going to have an interesting time period in 2025, there’s still a bunch of deliveries in 2025, by the way, it’s coming off the peak. I think when we hit 2026 and 2027, we see a cratering of deliveries in multifamily, and that’s going to allow rent growth to occur. I think rent growth starts to occur at the end of this year and into Q1 of 2026.

I think you’re going to see great rent growth through 2026 and 2027. When I say great, back to 2%, 3%, and 4% rent growth. To me, that’s great in terms of stability. When we were seeing 5%, 7%, 10% rent growth annually, that’s unsustainable, and anybody who’s been in the business long enough should know that’s not good. It’s not okay. You can ride the wave while it’s there but know that from a macro perspective, that’s not healthy.

For us, we’re thinking about jumping into using our skillset and capacity for multifamily development to deliver products and coming out of the ground in 2026, 2027, and 2028, because that’s when it’s going to feel great to have new products, and hit the market again. We’re going to be in a rent-growth environment. You’re going to see stability of pricing, and I think you’re going to see a lot of liquidity flow back in later this year and into 2026 and 2027. Liquidity is the primer to cap rate compression. It’s not interest rates, it’s liquidity. That’s where I see cap rate compression happening and where I see liquidity happening so that properties can exchange again and we get back into a trading environment.

Liquidity is actually the primer to cap rate compression. It’s not interest rates, it’s liquidity.

Is liquidity still a function of the interest rates, though? It is like I’m not willing to transact and buy, and I can’t pencil a deal out at a 7% cap if I’ve got to pay 6.5% interest. I’m like I’m going to sit the market out. If I’m a seller, I’m not selling at a 7% cap, so I’m going to have to wait until they get down to 6.5%. The liquidity still is tied to the interest rates at some level, or am I missing something?

You’re right, Dan. It is tied to it, but I think it’s not a direct correlation. I think a lot of people think about interest rates and cap rates as being intimately tied. There’s this intermediary thing called liquidity that ties them both together. I think liquidity is linked to the cap rate and linked to the interest rate. Through that process, interest rates are linked to cap rates, but it’s only through liquidity that it happens.

It’s funny, the interest rates shot up in a six-month period in 2022, unlike anything I’ve experienced in history, but the cap rates certainly did not follow anything near lockstep. I think the latest report I looked at was a week or so back, and they’re still inching up. It’s by 0.25% or 0.18%, but it’s been doing that all the way through. The cap rates are ever so slowly following that curve as time goes on. What would you expect?

I looked at a multifamily development deal within the last three months, and the exit was pro forma at 5% or 5.5%. I don’t know if it was a 6%, or if they did it at a 4.5% as a cap rate to sell. They’re going to merchant build, stabilize it, and sell it. The whole project will be done in 3 to 5 years because it’ll be 1, 1.5, and 2 years to get it built and all the entitlements finished. They thought 1 or 2.5 years to stabilize it, and then 1.5 to buy and let the buy and hold. Those 2.5% rent increases burn off a little bit. They had good financials to sell it.

I felt like a 5.5% cap to me feels low, but I’m more of the old product dealer kind of guy. Most of my industries, like 30-year-old storage facilities, 25-year-old shopping centers, and 100-year-old warehouses. All our cap rates are 7.5%, 8.5%, or 9%. They’re high. That was one of the first instances where I was a little bit shocked. I’m curious because you’re in the business and looking at these new builds potentially for 2027. For you, is it more of a yield on cost as you enter that deal? Do you pay attention and you’re mentally thinking, I hope this is a 5.5% cap product, because when I sell it in year four, it will be a four-year-old vintage product, and it should probably go for this cap rate.

First of all, it’s hypermarket dependent. Even hyper-location dependent within the market. What we do to bake in conservatism to our underwriting is if we were looking at a development deal for multifamily, let’s say in Atlanta, to pick a market that you’re familiar with, we would, first of all, take a close look at where exactly in Atlanta is it. Is it in the Northern section of Atlanta? Is it in the Southeast? As you know, there’s a big difference between those two.

We take a close look at the location, and then we poll the brokers, and we say, “Where are A-class assets trading?” They are assets that are moving, and they might be from REIT A to REIT B, or from Blackstone to REIT B, or what have you, but there are assets still exchanging hands in that A-class. A-class is where all the big money wants to be, and A-class is where most astute, smart money wants to be.

That will give a good indication of what they’re valuing, what they’re seeing in the market, and what they’re valuing A-class now. We would base our pro forma on what things are trading for now in this environment, knowing and expecting that, as we’ve discussed, looking at macro trends, looking at supply drop-offs, and liquidity increases, that cap rate could compress. Let’s pick a number, let’s say things are trading at a 5.75% cap now for A-class in Atlanta.

I think it’s probably less than that, but let’s say it’s 5.75%. We would underwrite that for a future development project that we’re going to deliver in three years from now. We would do a sensitivity analysis on what that looks like if it’s a 6, a 6.25%, or a 6.5%. We’d also offer some potential upside options of what it was to look like at 5.5% or 5.25%. We wouldn’t underwrite at a 5 or a 5.25%, saying, “It’s 5.75%. We expect a 50-basis point compression due to XYZ, and therefore we’re going to underwrite that.” We’re not going to do that, but I do believe that’s going to happen, but that’s not how we underwrite.

That’s what I call delusional optimism. I wrote a blog post on that. When I invest my money in LPs, I have to have some delusional optimism. For me, I need to say, if things go tremendously well in the other direction, what is that going to look like? If there’s nothing there that I can be delusionally optimistic about, I probably don’t want to invest. Most of the time, if they’re higher yield development projects and longer-term things where I don’t get cashflow for 2 or 3 years while the thing stabilizes, there has to be some delusional upside, in a sense. That doesn’t mean, in some instances, it could be a 100% return in month thirteen if things go our way. Is it going to happen? 90% chance, probably not.

Key Metrics or Evaluating Development Projects

I’m prepared to sit here and wait my 3, 4, or 5 years until we’re stable and we exit. It turns out to be more of a 24% IRR. I hope, still good. The 24 is not delusional optimism. That’s more of a realistic pro forma projection based on, like you said, a 5.75% cap rate. Whereas underwriting it at the 5% cap or 5.25% cap would probably be what I call delusional optimism. Do you pay any attention to any other metrics? Is there price per unit or rent growth? What are some other things on a development project that would have to check the box before you’re going to go ahead and entitle a site?

We do feasibility studies on anything that we do like that. We get John Burns’s study, and they’re the industry standard for that type of feasibility study. There’s a wealth of insight, knowledge, and data that comes from those. That’s key. I think our main metric is untrended yield on cost because that shows, whether are we fundamentally creating value and what is that value.

If we say, and again, going back to that example, that we have a conservative forward projection that the asset is going to trade at a 5% or 7% cap in 3 or 4 years in Atlanta. The untrended yield on cost, for us, we want to see that at 7% or higher, maybe even 7.25%, to know that we are 125 or 150 BIP Delta between what our untrended yield on cost is versus what our exit would be. That’s how we know we’re creating value.

That’s smart. That makes sense. Does that yield on cost? That doesn’t apply, or does that apply if you were doing the subdivisions that we mentioned earlier?

No, what we’re doing on the subdivision side is more transactional income. Where we’re buying it for X, we have construction costs, and we’re selling it at Y. It’s a pretty straight-line metric. We have interest carry, and then we have overhead and profit. It’s more of a transactional income business model there. We can apply that same metric, however, to the BTR space, which is something that we’re excited about given that we’re uniquely qualified to have a vertical integration to deliver BTR communities to the market. Where, again, we are focused on that 150-basis point Delta in yield on cost versus stabilized value.

For any of these assets that we mentioned, we lightly touched on built-to-rent. We touched on single-family community development, and we touched on potentially maybe buying value-added multifamily properties or building from the ground up multifamily. Would any of those have the potential to show up in the $50 million fund that you mentioned?

Yes. We can do any of those four items. For us, too, when we think about developing multifamily into 2027, 2028, etc., as we discussed, for us, it’s not to be merchant builders. For us, we’re going to pick the right locations, and we’re going to build that. We’re going to keep that untrended yield on cost Delta.

We are going to keep those assets for a long time. We are in the process of understanding how we want our portfolio to be structured over the next ten years. As we exit some of the B and C class assets, we’re going to be continuing to high-grade into the A minus and A class assets. If we’re going to be developing something, we’re likely going to be developing it with a programmatic LP that will want to stay in and keep the deal with us long-term.

What does that mean Programmatic LP? That’s not the fund. Is that maybe a family office that’s taking a single check investment?

Yes, correct, or a group that understands who we are, and what we do, and is willing to invest in a 90, 10 equity construct with us on a go-forward basis for that type of product. That’s something that we always have our eyes on the horizon for.

Makes sense. I guess that’s the smart money and the big money, and we’re going after the A-class assets at that point.

That’s right.

Investor Insights On Real Estate Fund Structure

Can you run me through an example of the fund? If I am an investor, and I bring $250,000, how long is it locked up? What are my expected returns? How soon is capital due? Any other details that might be pertinent in that example?

Our fund is structured on a five-year timeline and horizon. It’s a 10 PREF, and for that level of investment, it would have an expected five-year IRR of 22%. That’s a little over a 2 times equity multiple in that five years with a 10 PREF. As the dollar amounts go up, we have four different class sizes, A1 through four. Higher dollar amounts have a higher split. They start at 70-30 and then go up to 90-10 for a waterfall based on the check size.

Have you pulled the entire $50 million in, and now you’re forced to deploy it, or is it you get commitments on a certain amount and then do a capital call? Putting $50 million to work tomorrow is a tough task for anyone.

For sure. First of all, we have not raised all $50 million. We do only call capital on an as-needed basis. We take the commitments. Beginning of January, we have opportunities that are closing next month. We would call that capital usually 30 days before closing. It is a commit-and-call system that we have.

What is the usual time distance? If somebody committed, are you usually calling them 30 to 60 days, or is it sometimes 6, 7, or 8 months before the capital is called, or there’s no control of something like that?

I would say it’s probably going to be, certainly no sooner than 30 days, and would likely be within a 90-day to 120-day time period. We have a pipeline of deals. We have all sorts of additional methodologies for solving equity, but our fund is our primary source. If there isn’t available capital there, we have 2nd and 3rd fund options available, fund-to-fund options for us as well.

I have one question I’m going to ask as my wrap-up. Before we get to that wrap-up question, if somebody is interested in getting on an email list for the fund, perhaps there’s another better way that you would have our audience stay in touch.

Check out our website. It’s HampshireCap.com. There are a lot of good resources there. There are tons of buttons you can click to get on our contact list and have one of our team members reach out and have a conversation with you about what your goals are and whether or not we might be a good fit for your portfolio.

The Impact Of Kindness And Networking

My final question is, what is the kindest thing anyone has ever done for you?

Dan, I wasn’t prepared for this. That is awesome. This shot into my head because this is how powerful it is. When I was a teenager, I switched high schools midway through my freshman year, ninth grader. Halfway through the year, around this time, maybe February or so, I switched from one high school to the other. New kid, all these other kids had matriculated together. I didn’t know anybody. I remember sitting in this class, and there were these two girls that sat in front of me, and they turned around, and they were so kind to me, and they asked me who I was, and where was I from, and what my deal was.

They introduced me to people, and they completely made something as stressful as any teenager could ever think it could ever be, it was, and they completely made it effortless and graceful and beautiful and easy for me to integrate into that school. I am forever grateful to them. That’s how I love this. I tell it because that’s how impactful small acts can be. I’ll never forget that. To them, they’ve long forgotten about that because they were being themselves and being fun, outgoing, kind people. That’s who they are. For me, that was forever impactful.

Small acts of kindness can have a lifelong impact.

I guess we got to pass it along from there. Shane, I have pages of notes here. A ton of great detail. I appreciate you opening the books and being transparent with all the questions, and I appreciate your time coming on the show.

My pleasure, Dan. It’s been great. Thank you.

Important Links

Build A Portfolio Of Seller Financing Cash Flow With Nick Disney

The REI Diamonds Show - Daniel Breslin | Nick Disney | Seller Financing

Episode: Build a Portfolio of Seller Financing Cash Flow with Nick Disney

Guest: Nick Disney is the founder of Sell My San Antonio House. His company specializes in flipping houses to owner occupants using seller financing.

Big Idea: Instead of selling conventionally using bank financing and real estate agents, Nick sells directly to his owner-occupant buyers and provides seller financing. These 10%+ interest-bearing notes are then sold off to investors who enjoy 30 years of payments, receiving 3.4 times their original investment.

This episode is also sponsored by Lending Home. Lending Home offers reliable & low-cost fix & flip loans with interest rates as low as 9.25%. Buy & hold loans offered even lower. Get a FREE iPad when you close your first deal by registering here now.

Resources mentioned in this episode:

Sell My San Antonio House

View the episode description & transcript here:

Build a Portfolio of Seller Financing Cash Flow with Nick Disney – REI Diamonds

Nick & I Discuss Seller Financing:

• Creating a Legal Seller Financed Transaction

• Underwriting the Borrower

• How to “Refi” your note after purchase

• Long-term Cash Flow without Tenant & Repair Headaches

Relevant Episodes: (200+ Content-Packed Interviews in Total)

• Buying Mortgage Notes Generates 15% + Returns with Brian Lauchner

• Dave Van Horn on The Process of Investing in Notes

• 100+ Unit Apartment Syndication with Stephanie Walter

—

Watch the Episode here

Listen to the Podcast here

Build A Portfolio Of Seller Financing Cash Flow With Nick Disney

Nick Disney, welcome to The REI Diamonds Show. How are you doing?

I’m doing great. I appreciate you having me.

For sure. I’m in Chicago. I’ll be heading to Florida in January. I just got back from the Bahamas. The cold weather is here now in Chicago. Location stamping for the audience. Where are you right now?

San Antonio, Texas. We don’t do cold weather. We shut down the whole city. We’re not built for it. It’s nice here. It’s down 60. We’re pretty chilly.

From Real Estate Beginnings To A Proven Business Model

For those who may not know who you are, you have a pretty strong Instagram following. You put out a lot of content there. They may want to check that out. Would you mind giving us a short synopsis of the development of your career and then what the business model looks like?

I’m a single-family real estate investor in San Antonio, Texas. That’s 99% of our business. We started buying, wholesaling, and some flips. We started building the rental portfolio. Now it has transitioned into buying, rehabbing, and selling with owner finance. We want to sell the property and create a promissory note, which is our preferred method to produce long-term cashflow. We create notes. We keep some of them, and we sell some of those notes to other folks who want to buy the payment stream on the back end.

Business Models And Mortgage Lending Laws

I have a friend. He was a guest on the show five years ago, maybe before he even started doing this. Dan Sadowski. He’s out of Delaware. A lot of locals in Philly probably know the name. He put this business model together and never took his course, never went to his networking event or the little seminars he did. He’s moved on to developing resorts or something like that at this point.

The basis of his strategy seemed sound to me. I’m like, that would be great. Sell it off and hold the note. Here’s where I always got stumped. I’m hoping you can get this cleared off the table right from the beginning, the mortgage lending laws. Selling it on, and I held paper on two deals, had to foreclose on both of them and got a pretty big payout in terms of the size of the loan from bailouts. It was foreclosure bailout grants they got.

I’m like, that was enough. I’m not even going to bother chasing them for the other $5,000 or whatever. If they call one day, I’ll give them a payoff and release it. If not, it is what it is. The thing that had me worried that I would lose sleep at night is I don’t want to violate federal mortgage laws by creating too many notes. Maybe you have some insight on what those guidelines are and maybe how you could get around that.

They do change, like your national law, and there are some state laws. The biggest key that I would tell anybody to get started is we run everything through an RMLO, residential mortgage loan originator. We have one, and I’m sure there’s one local to wherever you’re at. They specialize in creating seller finance notes. They’re all licensed, and they know all of the rules, and they are very good at helping you follow all the rules. If you follow all the rules, document everything appropriately, and operate your business as you should operate it, it has not been an issue for us at all.

Seller finance is probably more popular in Texas than almost any other state. Some people do it all over. Creating too many hasn’t been a problem. Where people have run into problems is when they were doing different than directly selling it. If we sell a house, you buy it. We’re going to have a mortgage note, deed of trust, we’re going to give you the deed. You own it. We don’t do lease options.

We don’t do rent-to-own. We don’t do any of those types of creative strategies. Not to say that there’s anything wrong with it. We directly sell them, and then we’re collecting a principal and interest payment. I would not let that deter you or any of you from doing it. If that’s what they want to do, make sure that you have the right people watching out for you.

You Google RMLO mortgage loan. Are they servicing companies, Nick?

Those are not the servicing companies. A residential mortgage loan originator, any bank that you went and got a loan from is going to have an RMLO in there. You just didn’t know that’s what it is. This company, if we take ours, for example. We’re going to sell this house to Jimmy. He’s going to buy it. We’re going to put together his file and his paperwork.

There are certain things that you have to document. We have to have a sales contract. We have to have proof of income. We have to have tax returns, bank statements, all these things that will go in there. They will run them. They will show their ability to repay. They will also create our disclosures. Anybody that’s ever got a mortgage, you’ll get your initial disclosures that you have to sign. You’ll have final disclosures that you have to sign later.

They will produce all those for us and make sure that everything is done appropriately, that we have correct debt to income for our borrowers, and that we don’t go outside of any of the rules. There are also certain timelines you have to follow. You can’t send the final disclosures ten minutes before they close. Most of them would be honest mistakes, but they would help protect you and make sure you do things the right way. That is where I would tell people to start. If there’s anybody in your local area that’s doing a lot of owner finance, they probably have somebody that they could refer you to.

It’s interesting. I didn’t know they existed, and I didn’t do all this stuff. There were some loans where you could do one loan, but if you did more than one loan, you got in trouble. Does that mean if I did that, and I did the paperwork on my own and didn’t get all the disclosures and everything, I did one, I’m okay? If I started doing 5 or 10 of them, I’m not. You’re not a lawyer, right?

We’re not, but I could give you the general idea. It also depends on who you do that loan to. I’m an investor. If you did a loan to me, you could probably write about anything you wanted in there. Most of ours are owner-occupants. There is a different set of rules there for the owner-occupant. They’re meant to protect families, protect against predatory lending, and things like that. I would check with your attorney, but it was 3 or more in a 12-month year. If you did 1 or 2, it was no problem. You still would want to follow the rules.

Once you did that third, you fell into a different set of rules, and it would impact things like, we don’t do balloon payments, but putting balloon payments in, and then terms. There’s another set of rules you’d want to make sure that you follow. My advice, it’s not that hard to do it right from the first one if you’re going to do it. Start the right way with the first one. That way, if you got to more than the limit, you’d still be okay.

Breaking Down A Recent Real Estate Deal

For the sake of a linear conversation, let’s go through an example. Maybe it’s a real one that you did in the last six months, like purchase price, rehab. Let’s go through all the numbers, and all the details, and then we’ll talk about the sale. Who’s the buyer avatar on that actual deal? Was there an application process, down payment, etc.? If we could start with the numbers of the deal, buy, rehab, renovate, and then go through the rest of the transaction to give the audience an example.

For sure. I think it’s a great idea. We’re in San Antonio, so that is a lower price point market in general if you’re looking at the US. One that we are closing, we bought it for $90,000. It needed some work, so we bought it for $90,000. We had to put in right about $25,000, but for the sake of round numbers, let’s call it $25,000. You’ve got $115,000 in this property. This is in an area where we have owner-financed a lot. That’s typically a blue-collar neighborhood. We have a good quality product. They’re safe neighborhoods. They may not be the fanciest neighborhoods, but we sold the property.

We have it under contract for $165,000. The borrower is bringing $25,000 total. That’s not just a $25,000 down payment. That $25,000 includes his down payment and closing costs, and we do have everybody prepay escrows, so taxes and insurance. That’s a total $25,000 financial commitment from the person who wants to buy the house. We’re going to finance it for 30 years. We had it rehabbed.

We have a sales guy. He was showing the property. Most of them we don’t sell on the MLS. We’re typically going to have signs in the yard, Facebook Marketplace, and some in our network. Reached out, and wants to own a home. Got a good job. The guy makes good money. He saved $25,000, which is not the easiest thing in the world to do, but he is a contractor. He doesn’t have traditional paycheck stubs.

He doesn’t have probably the greatest documentation of his financial history, but he’s worked for a long time as a contractor, and he makes good money, and he can show that he makes his money consistently over a long period of time. When you start to put all that together, we still have the same state sales contract. We still have the same owner finance addendum.

We’re still going to collect everything to document that he does make this much money and can repay it. Once we take that, we will send all that to the RMLO, and they’re going to say, we need this, we need his IDs, we need any bank statements, any tax returns, any financial documentation we can use. They will send us back a report, “Mr. So-and-so, we’ve got his report back.” We show his debt-to-income looks good. I remember because I looked at it, I think the previous day, it’s like 14%.

Here’s one of the key factors that we focus on owner finance. It doesn’t mean this person has bad credit. It doesn’t mean that at all, but it could very well mean that they have no credit. This gentleman paid cash for his truck. He has two of them. He paid cash for both of them. He has no credit cards. He’s never had a credit card. He doesn’t use our US financial system the way a lot of people do. There’s not a lot of credit history. His credit score is not good, but it’s not because of negatives, it’s because it doesn’t exist. He has no other fixed debt than our mortgage and no other fixed set payments. His DTI is low.

If you follow all the rules, document everything properly, and run your business the right way, seller financing is a solid strategy.

Someone like that has a lot of success in our model of consistently making their payment. They get to own a home, and we get the cash flow. We approved him, and the RMLO will send the initial disclosures. For folks that don’t know, the initial disclosures are breaking down, it’s like his closing disclosure, what his payment’s going to look like over time, and what his estimated closing costs are going to be. He signed those. We’ve got him set up with a closing date at the title company. We do have everybody close with the title even if they don’t want to. I do recommend it. It’s a better process.

It helps protect them and you. Three days before, he’ll get his final disclosures, which will have his final numbers of exactly what all his costs are. We’ll close him at the title company. One thing that we do is we do always use a third-party note servicer. That’s the person who will collect the payments, and he’ll make his payments directly to them. They will then send us the principal and interest portion of it. We do require everybody to escrow, so they will hold the escrow accounts for taxes and insurance, and make sure they’re paid out at the end of the year, similar to the mortgage that anyone else has had.

What kind of an interest rate does he have on this one?

We’re typically at 10.9%.

Is that a legal limit based on something, or you’re allowed to select the interest rate?

We are allowed to select it up to a certain point. The limit is somewhere around probably 18% or 19%. We don’t need to go that high. We wouldn’t go that high. Even if you could charge it, I’m telling you it would be a bad idea because you’re going to set that person up for failure. You’re going to create more headaches, and that’s not our business model. At 10.9%, we do make a good return, but it also allows them to make their payment. We’re trying to set up long-term payments where they pay every month, 15 or 30 years, and we’ll make plenty of money like that. We don’t need to charge them a ridiculous interest rate.

What is the payment roughly?

Principal and interest are going to be right around $1,420 a month.

Are you typically selling to this client? There’s a sign on the loan that says, buy this home for $1,420 a month. Is this a payment-driven transaction for him, or is it price, or maybe most of them?

We can’t put the actual payment on the sign. You can’t say, “For this much.” Typically, our person who buys a house, their financial concerns are how much is the down payment. We do charge more than typical in our business, but we have a lower default rate as well. They want to know that, and then they want to know what their monthly payment is. That’s typically where they’re driven.

After that, the actual sales price of the house is usually a third question. That’s their concern most of the time. If we can keep that principal and interest similar to what the rents are around there, it makes a lot of sense to them. They will have taxes and insurance on top of that, but they can see that they own the home. Down payment, monthly payment, and opportunity to own a home is probably the biggest driver.

Are you not allowed to put the down payment and the monthly payment in your Facebook ads? It’s not allowed to go on the sign.

You can’t put in the monthly payment. You can’t say what the monthly payment is, and that it would vary anyway. You can advertise the down payment that you’re asking for. That will typically be in our ads. $25,000 down is pretty much our standard. That varies. We can run our business, but it’s not uncommon that we get $30,000 or $35,000 that people bring to the table.

Out of the $25,000, are we talking about $5,000 or $10,000 for prepaid escrow and the closing costs?

It will vary depending on the time of year, but you’re probably $7,500. $7,500 is going to go to closing costs and their prepaid escrows because they’re going to fund taxes, which are probably taxes a little higher in some other places. They’re going to fund the interest and then their closing costs.

You got $17,500 coming out of your $165,000 purchase price. You don’t have to typically pay an agent because you’re selling them directly.

We have a guy that works for us, so we do pay him per house. We’re not selling 3% for our agent, 3% for theirs.

We’ll keep the commissions out of the math for the sake of the example. $147,500 is the note, and he’s paying $1,420 a month. You have this principal balance of $147,500 that’s written to produce 10% interest. That alone is pretty good, but now let’s talk about how you’re financing that stack. Is Nick Disney got $140,000? You’re in there for $115,000, so you got some upside in the profit there. Are you leaving that $90,000, $100,000, or $110,000 in your own cash in the deal, or are you now selling that off? What’s the exit to maybe clean up your books and get to the final profit on this deal?

It’s a combination. We do sell a lot of them. This one we will sell because I already have someone that wants to buy it. If they buy it, we sell ours at an unpaid principal balance. If it’s $147,500, that’s the purchase price, $147,500.

Will it have to be seasoned for six months before that person steps in, or your brand is strong enough with this buyer? We’re like, “Give me the 10.9%.”

That’s exactly what it is. It’s the relationship. It’s not the first note that he’s bought. It’s the relationship and the product that you put out. He’ll buy it right after.

If you help someone and ensure they don’t lose money, they will tell everyone you did right by them, and that will help your business in the long run.

We’re talking about a 10% down mortgage for this buyer. I don’t feel like it’s unreasonable to pay 10.9% based on the risk profile. The borrower has no credit history. They can’t go get a 6.5% or 7% mortgage that’s out there in the market now. They’re only putting 10% down. There’s no PMI. It’s a good deal. It’s a fair deal.

I believe it is.

How many of these notes have you originated and sold? Do you know, Nick?

I don’t. It’s in the hundreds. It’s somewhere in there.

Do you know if any of those have defaulted?

Absolutely. There is no perfect system. We’re good. We have an incredibly low default rate. We may have 1 or 2 a year. We’ve learned a lot over a long period of time. When I say we don’t do bad credit, because if you do, you’re going to have more defaults. Someone who brings had to save $25,000, worked hard to save that most of the time. It’s not easy for a person to do. They’re committed, but things happen. We’ll do that. We rarely have one default out of the gate. If we do that, then we’ll remedy that for the investor because that’s also part of the relationship.

What do you mean by remedy? Is it working it out with the buyer, some combination?

It’s usually a combination. We’ll always work it out. If Dan bought the note, “Nick, I didn’t get paid.” That’s not good. One, “We have to get your permission, but we’ll reach out on your behalf.” We’ve already met them. We’ll talk to them, and see if we can get it worked out. If we can’t, and it’s right out of the gate, typically we say, “That’s our fault. How about I give you another one? We trade it out.” I can give you one and buy back the problem. If I buy back the problem from you, then you won’t have any problems. You go tell everybody that I’m a great guy and I fixed them all. It does work out for both of us. It’s easy for us to fix it.

Is that a written guarantee for your investor at all?

There’s no way to write it. There’s no way for me to write it in there.

Not legally, right?

No. I asked about it. Other people have asked me about it, which is why I asked the attorney about it. It’s not, but you’ve been doing this a long time, if you help someone and you make sure that they don’t lose any money, they will go tell everybody else that you made sure. It’s going to help your business in the long run. It’s much easier for us to fix the issue with a note than most other people because that’s our whole business model. We’re doing it every day. We put it right back in the system.

That’s the other thing. It’s like if I’m sitting here in Chicago and I buy this note in San Antonio and then it goes bad, I’m like, “I’m now hunting around for the foreclosure attorney. I’m figuring out how to get it back through the sheriff’s sale or whatever it is that goes on there.” It’s fast in Texas. The laws are favorable for lenders in Texas.

It makes sense to have notes that are in Texas, is probably part of the reason why an at-par $147,500 note can transact, is because there’s a certain security that comes with being in Texas, with the way the laws work there. If it’s torn up at all and needs another paint job, it’s like I’m sitting here in Chicago having to figure out who can paint my house, who can put the lockbox on there, who can come in and fix the broken pipe or whatever else is going on.

Handling Defaulted Notes And Foreclosure Strategies

That sounds like a big nightmare, but at least some verbal willingness to jump in there and swap that out on your behalf would make me feel a little better about plunging in and earning my 10.9%. If a note goes bad, what’s your action item? Are you making an attempt for cash for keys? The backup plan is like taking it to the courthouse steps.

Rarely do we have to go to the courthouse steps. The first thing that we do, whether it’s my note or somebody else is we will contact them. We make everyone come to the office. They have to sit down with us if they want to buy a house from us. One, we get an interview in person, but two, they know us. If we call, they know who’s calling. They know there’s a problem even if we sell it. It does help. We will go talk to them. We’ll knock on the door.

Most of the time, if it’s one payment, the conversation is, “I’m sorry. We didn’t have as much work. I’ll make two payments next month.” It’s not a problem. You get the same amount of money. If they can’t and they can’t make it up and it has to go through, I don’t go down and do the foreclosure. I will give anybody our foreclosure attorney. I’m going to send them an email.

He’s going to start the process, and then if it goes all the way and they don’t catch up, which is very rare, he’s going to send a second email saying, “What’s the opening bid from the lender,” which, if you own the note, you would have your opening bid, what you feel like your costs are. The foreclosure is pretty simple and straightforward in Texas. Again, we do everything we can to try to avoid that. It’s fewer headaches, and it’s a lot smoother.

Do you know how many have made it to that extreme end of the process?

When I first started, more. They were my notes because I made a fair amount of mistakes. I don’t know the number. It’s less than that have gone all the way to foreclosure. It’s less than twenty. It’s not many.

Out of 100, 200, or 300?

A bank won’t just give you money for any note. You need an established relationship with them, and they need to understand real estate.

It’s more than 300. I don’t know. 400 or 500. Very low. You have to follow the process because if you don’t and you just Wild West it, you’re going to give yourself headaches.

I cringe at the thought of trying to duplicate this system. I’ve been in foreclosure in Chicago and the Philadelphia region. We have a judicial system, which means there’s a 1-to-3-year court process before you get a judgment. The judgment then goes to the sheriff’s sale to be scheduled. That could take anywhere from 1 to 6 months to get to the step. You’re talking, it’s three years. You’re like, I’m over here having to pay property taxes to protect my mortgage for two years.

We don’t have that.

I cringe at picking the wrong state and not having somebody who’s a third party handling that stuff. It’s good that you have the volume there. 20 out of 500, it’s probably a 2% or 3% default rate in the whole country. That’s probably about average with Fannie Mae, Freddie Mac, and conventional mortgages, we’re probably in the 2% to 4% range anytime. If the market’s in a state of crashing, we’re probably 3% to 6% or higher. When we came through 2008, 2009, and 2010, recently, if I had to guess, and I haven’t checked in like 6 to 9 months, I think we’re at a 2% to 3% default rate. That default rate wasn’t that they made it all the way through the process, that was foreclosure filings that I was tracking.

Those were the default rates on that. Your model is to cycle the cash back out. You’ve made $17,500. It’s flipping a house without the cost of the real estate agent. You’ve chiseled down that expense to whatever it is you’re paying your internal sales guy. You’re all in for $115,000. Your net profits are a clean $40,000 to $50,000 on a deal like this. Do you think if you took it to the open market, it would have been more like, “We’ll give you $155,000 with a $5,000 assist?” Are you able to get a market value without quite as hard of a negotiation, maybe, if you were to go to market?

We sell ours at market value. We’ll run comps. We sell them at value, and so we don’t get a lot of pushback on the price, so we’re getting that. We do have a couple extra steps, but we do control more of the steps, and it’s more predictable in our model, and we have fewer people as far as the buyer, buyer’s agent, other issues coming through, so it does allow us to be very smooth. We’re pretty dialed in our buy, rehab, sell, and then either sell the note or there are other options. Sometimes we’ll refinance. You can refinance a note like you can a house as well, so that’s something that more people should do.

How Refinancing Strategies Unlock Investment Potential

Let’s go on that thread then. We ran through the example of selling the note and getting your cash back out, so how does the refinance work?

It’s going to work very similar to the way you’d refinance a rental property. I relate to that because many people have done that, but you’re not refinancing the property because you don’t own it. What you own, or what you have is this note and deed of trust. You have this income stream or a note receivable. You can take that and pledge that as your collateral to the bank. You are not going to walk into any old bank and do this.

It’s not going to happen. One, you probably need to have an established relationship with them. They don’t tend to open this up to anyone, and they’re typically going to be one of your local banks that understands real estate, and you’ve built a relationship with them. Once you have done that, if you have this note, you can go in and refinance it very similar to the way you would refinance a rental property, and you’ll pull back a bunch of that capital.

Let’s say Dan had a good deal and went through our entire process. He’s $115,000 in, but he has a note, and he can refinance and get most of his $115,000 back out, then he doesn’t have nearly as much money left in this deal, but he still is collecting the payment. He has a payment to make to his bank for his cash-out refi on the note.

Is there a small spread there? What do you think about a note you know was refinanced in the last six months? What was the interest they were paying to the bank?

7.5%.

You’re making the 7.5% to the 10.9%, so a 3% spread on the interest. That’s the goal. Is that the standard?

It would be hard to say that’s the standard because it varies. I don’t even know if there is a standard. What worked for us, especially when money was a little cheaper and interest rates would go down, is if we had a 30-year at 10.9%, and so this payment is X, and we would go back and get a 10 or a 15 from the bank at a little bit lower interest rate. If you could wash those out, you would give up those first few payments, but you have all of your money back.

You get all your money back, and you still have, even if the payment, the cashflow is not very much, once you pay off because the one you get is going to be shorter, it’s not going to be a 30-year note, it’s going to be a shorter note, you have, if it’s 10 or 20 years of gravy, or 15 years of gravy left over. That allowed for growth because we were using the same capital more than once.

At that point in time, was it more advantageous for you to not ever sell off any notes? It almost feels like it would be. Why bother with the headache of having to guarantee verbally these notes and deal with investor calls when the payments stop? Why bother with all that headache? Why not refinance every one of them?

It is because they do two different things. When you refinance them out, you’re hanging on to them, and it is simpler and saves some steps, and you’ll get those back-end payments, which is great. When you sell them, you’re getting cash in your business, and any business that needs to recoup capital and put cash in, because you’re still going to have other expenses, and so, when you sell them, you’re putting cash back in, and when you’re hanging on to them, you’re creating long-term cashflow.

You’re leaving some of that cash every time you refi in the deal, in a sense.

Typically, you are.

How much? Is it $10,000 or $20,000 on each one? What is it, a $115,000 note, what are they going to give you on the refi?

We’ll use that one as an example. $103,000, $250,000, so there, you’re leaving $12,000 in it. Some are less. When you have a good deal, those are the great ones to refi because then you can get all your money out. Say we had bought that $10,000 or $12,000 less, then you get all of your money back out and you don’t have anything left in, those are great to refi. Your business needs capital, you have people to pay, and it’s a balance of the long-term and the short-term win, and the business needs both. That’s why we would use both.

Know what your goal is. Assess whether the product you buy truly accomplishes what you’re trying to do.

Is that $103,000, $250,000, that’s not based on the principal balance of the note? It must be based on either a desktop or drive-by or an actual appraisal of the property, and then an LTV from there. Is that the metric the bank is using?

Exactly. It typically won’t be a full appraisal, it’ll typically be a drive-by. It depends on the bank, but typically, we were at 70%. It’ll be 70% of the appraisal value or the unpaid principal balance, whichever is lower. They’re going to take the lower number and they’re going to give you 70% of that.

Seventy percent of the unpaid balance?

Right. They would do an appraisal on the property, it’s going to come in at $165,000. You could refi up to 70% of the $165,000, up to the unpaid principal balance. They’re not going to give you more than what the commissary note is.

The other one was 70% and it was the lower number. What was the lower number, you said?

The lower number that I said?

I don’t know, I may have missed it. My mind is blown because I’m like, it can’t be refi notes. How many of these could I get? I’m going to fly down to Texas and see this banker so I can set up a few million dollars worth of these.

I know some people who have them, and some banks will do millions. It’s in the cards for you.

You said 70% of the appraised value. If that $165,000 example, I’ll do the math, times 0.7, that’s $115,000 they’ll give you on that loan.

They would give you that, but they won’t give you more than what the unpaid principal balance is, so whichever one is less.

On that one, he owes us $147,000. If I bought the note for $147,000, I’d be getting $115,500 back. $147,500. I would have $32,000 in the deal in that instance.

In that instance, you would.

In those instances, I get it. That makes sense why you would sell because how many of these $32,000 long-term 30-year investments do you want to have sitting there as a business owner? I get it in that instance. Are there times when someone instead, I imagine San Antonio houses had a little appreciation over the last couple of years, you bought two years ago, there’s a little bit of mortgage paydown, but the house traded at $135,000 two years ago, and now it’s at $155,000 or $160,000. It made sense to season your note for a year or two before you do the refi. Is that maybe a strategy too?

It’s a pretty good strategy. I’ve never thought about it. We never used it like that. It makes a lot of sense. You can do that. It’s always easier if you don’t have the reputation or relationships, to season your note for a few years because if you want to sell it or refi it, you’re going to get a higher appraisal. If you go to sell it and somebody, you can show a good pay history, “This guy’s never missed a payment in two years.” That shows a lot of confidence. You’ll probably get a higher value for selling a longer-seasoned note. There are always reasons to hang on to them.

If you’re a business owner and you’re continually turning, then to your point, sometimes you’re not going to want to leave that money in there. The majority of people who buy notes are not full-time real estate investors who are actively investing. They understand real estate. They like it. They want the cash flow, and they don’t want the headache of, say, rentals or running a business. For them, they’re like, “I want to put this here, and I want to get paid every month.” They’re not running the business that you’re running. They have different goals.

It makes sense. There are two ways that anyone reading could go about it. People are doing this as a business model. I know someone in Minneapolis doing this exact business model. I’m looking from the outside. I know he has a few bucks in the bank. He might be keeping the money in there. He’s probably got this refi thing set up. There’s no way I’m going to hold paper on a flip house and then hold paper and then wait for the money. I thought that’s what he was doing. No way. If you can refinance back out and set them up for the long term, it starts to make a lot more sense how something like that would scale.

The audience could do this type of deal in the strategy on their own and flip the house, set up the note, and work a business model that way. Maybe someone has 5 or 10 rental properties, or maybe even more. It’s feeling the way that I am and probably the other clients, where it’s like the tenants and the toilets and the eviction going on. It’s like, I’ve lost quite a lot of sleep from rental properties over the past seven years since I started buying them and owning them. I’m whittling them down as we speak for that reason.

A note that’s paying is set up properly with the RMLO in place and the servicer in place. I didn’t have either of those on any of the notes that I’ve done. I can see the attraction for a more passive real estate investment. At 10.9%, if it’s 6.5%, it doesn’t seem worth the effort. At 10.9%, you’re starting to get into the, “Maybe it’s worth the effort to figure this out.”

At 10.9%, if it’s passive and it’s written down, and it’s people that transition from rentals to buying notes are typically doing because it’s passive, they don’t have to do anything. They like real estate in general, and they get to keep it as collateral. It’s very predictable. We don’t have the swings, let’s say the up and down that you see in a stock market. It’s 10.9%. That’s what it is. It’s very predictable. For people who want that, it’s a great fit. If you’re looking for something else, then there’s probably something else that’s a better fit.

Investor Journeys: Transitioning From Rentals To Notes

Are there any avatars that you have, where they were in the rental business, and you guys connected a few years ago, and now they’re transitioned and they’re doing mortgage notes? Maybe you could, without naming names, tell the story a little bit.

I have several, but one that comes to mind, he’d owned several rental properties. I think he still has one. He was also a short-term private lender for us for a long time. He’s a great guy. He saw what we were doing, but he was committed for the longest time, me and him. He sold a rental, and he’s like, “I want one of these notes.” I’m like, “We built you one.” He kept them, and then he’d sell one every other year. We’ve probably worked with him for 10 or 12 years now. I think he’s got one left, and he’s like, “I don’t ever want anything else. Give me these notes. Let me get paid, and I’m going to travel.” That’s his vision.

Build the best relationships you can now, and take care of them. Then, the money will take care of itself.

That’s what he wants to do. It’s a win-win. A lot of people will also do a combination, using the rentals for the equity, and they’re easy to leverage in comparison. Owning the notes, if you have liquid, especially if you’re further on for the pure cashflow because they’re going to give you more cash flow, and it’s more predictable. Sometimes having that balance, we see that a lot. A lot of people have a lot of success. That’s our business model. We have a balance of having both and using each one for what they do well, and not trying to make a rental be your primary cash flow driver when something else might be better.

What do you think about someone’s got twenty rental properties? If you had twenty rental properties, and you weren’t sitting in your seat, but you were in my seat, let’s say having the conversation with you, what would be the balance? Is it done in a dollar amount? Not a number of properties. 50-50, 60-40. You love them. Maybe yours is like, “I’d be like 100% and get rid of all 20.” I don’t know.

I think as I’m transitioning, I’m probably getting more. I don’t know that I’d get rid of them all at once, but the conversation that I often have with people is, what’s your goal or what’s your number? Let’s say our average note pays $1,500 a month. If your cashflow number is $6,000 a month, and then that pays all your bills, we’ll use easy math here, then getting to the first four notes is huge because you can see then the advantage of having $1,500 a month times four. You’ve got your $6,000 on 30-year notes, depending on where you’re at.

If that was covered for the next 30 years, that was all your bills. You get a lot of freedom. For each person, that number is going to be different. That is a way that I would encourage someone to look at it, because they might be like, “I want to hang onto these rentals, but I also want to have the protection of this cash flow. Maybe I sell 3, 6, 8 and keep the others. What could I turn that for long-term cash flow?” That is how I would look at it. For me, you’re correct. I’ll sell them off as I go along, turn them into notes, and then do whatever I feel like doing.

The only thing that probably is unsettling to the person with the twenty rentals is the twenty rentals are hopefully staying at least at their current value and producing the rent, the return. They come with the chiseling away of the turnover expenses and the repairs. That has to be accounted for. The growing taxes on the properties are going to chisel away at the cashflow. You have a lot of things eating at your principal balance in a rental portfolio as time goes on.

Ideally, your equity spread grows. You have a larger pile with rental properties, but you do have the monthly payment chiseling away at your principal balance. That might be the only other negative side of the coin, which would be seeing the principal balances go down. Hopefully, you have another method of running your business or running your life, where you’re able to continue to replenish the note supply as it were.

You’re right, but they’re amortized like any other loan. It’s also not like you get that first $1,500 payment, and the balance went down by $1,500. You get a $1,500 payment, and the balance goes down by $7 or something because all that interest is paid upfront. I would, to your point, encourage people to maybe save some of that so they can buy another one, and then you can have it replenish itself and make it last an incredibly long time.

Aligning Investments With Your Financial Goals

I love it. What are the things that I maybe forget to ask, that are probably pertinent for the audience?

I think for the audience, step back and know what your goal is, and whatever product you’re going to buy. If it’s rentals, flips, owner finance, self-storage, or commercial, does it truly accomplish what you’re trying to do? It is because I have made those mistakes. You buy certain things, and they’re not going to give you, reach your goals. I think if they know that, then they should, at a minimum, learn about notes.

It’s much easier to own them than typically people think. If you have capital, you can buy one tomorrow. Know what that is. How would that balance your portfolio? If it would add to it, I would encourage you to look at it. From my experience, the notes are typically more cashflow that’s more predictable. Balance that with what your goals are. Everybody’s got to set the best thing for them.

Must-Read Books For Real Estate Success

I love it. Are there 1 or 2 book recommendations you would have that have been impactful in your fifteen-year real estate career?

Eat That Frog has helped me a lot. I’d like to use it. Rich Dad Poor Dad was where I got my start, like any of us. Eat That Frog, the idea is to do the hardest thing first and get it out of the way. Makes everything else easier to do. It’s very short. It’s very easy to read. I still say it to myself. I like that one for anybody else. That’s the one that stands out.

Crown Jewel Of Wisdom For Investors

Crown Jewel of Wisdom. You’ve been at it for fifteen years, which is a setup because you’ve already talked about transitioning. If you were going to go back and tell yourself what the Crown Jewel of Wisdom is, knowing everything you know now, back fifteen years ago when you were first starting into business, what would that be?

Build the best relationships you can now and take care of them. The money will take care of itself. Now that I’ve done this long enough, I’ve had relationships for years and years and years. They may not have made a lot of money upfront, or maybe you didn’t maximize every single dollar out of the gate, but building the relationships with the right people, both of you will make so much more over the long term. That’s what I would go back on day one and focus on. I think it’d be great for anybody getting started.

Before I ask my final questions, is there somewhere they can go to get more Nick Disney?

You can find me on Instagram, @RealEstate_Nick1, we put a lot of content on there. Feel free to reach out to me, or send me an email. I love to connect with people. If we can work together, if I can help you, if you can help me, whatever it is, [email protected]. I like to talk to people. I love real estate. If we can connect and do something, I’m happy to do it.

Reflecting On Acts Of Kindness

My final question is, what is the kindest thing anyone has ever done for you?

Real estate-related or in general?

You answer how you want.

I’m going to keep it real estate-related, so you don’t pull up my heartstrings here. When I started, there was this guy, I had no money, and no one would lend me any money. He lent me money on these deals, which he probably shouldn’t have, I probably wouldn’t have. It allowed me to get started on several of these initial deals. As you know, getting through those first few is such a game-changer. Knowing that you can do it, it doesn’t matter how much money you make. Without him taking a chance on me, because he believed that I could do it for whatever reason, I’m super thankful. He was super kind, and it was something they didn’t have to do. It made a huge impact on me.

I could answer with a very similar situation early on myself. I get that. I remember he gave me a $10,000 construction draw, my first lender. My credit was terrible. The scenario, I wouldn’t have lent myself. He gave me the $10,000. I’m like, “$10,000, this is amazing.” He’s still a business partner to this day. I guess he made the right choice, and I paid him back his money with interest.

There you go.

Nick, I had a blast. I got pages of notes. My mind is blown. I can’t believe that you can refi these notes. This opens up a whole sky-blue ocean out here of a new asset class in my mind. I appreciate you reaching out and getting us connected here so that we could have the show.

Thanks for having me. I enjoyed it. Let’s stay in touch.

Important Links

Investing in notes Long-term cash flow Real estate investing strategies Real estate portfolio growth Seller financing cash flow Seller financing real estate

Fast & Easy Multifamily Lending with StackSource Founder Tim Milazzo

Guest: Tim Milazzo is the co-founder of StackSource, a technology driven engine for funding commercial real estate deals of all types.

Big Idea: Having access to fast & easy multifamily lending, or any other commercial funding, is the first step to scaling a multi-million dollar real estate portfolio. The commercial loan landscape is extremely fragmented, with many lenders focused on only certain asset types, loan sizes, or other niche spaces at any given time. StackSource is a national high volume aggregator of lenders, loan types & contacts, providing borrowers the faster method for finding the correct lender for your particular asset type.

Tim & I discuss how this volume of lenders will put you in a position of strength when you’re funding a deal. Obtaining multiple, competing loan term sheets can be difficult when you’re buying a commercial deal because of the short timeline to closing.

The StackSource platform allows you to provide details of your project-whether multi family, industrial, commercial, etc- and then matches your loan type with those lending institutions currently lending in your local market and funding your specific deal type. The end result is multiple term sheets allowing you to select the best option for your deal.

This is a contrast to how I’ve bought my last half dozen multi family projects: calling around asking people I know who is funding this type of deal-then submitting my deal details to that single lender and obtaining one term sheet. My way is a position of weakness-I am stuck riding with that single lender on that deal. It’s worked out for me because I’m lucky to have found the right lender for my type of loan. Shall we begin?

The REI Diamonds Show-Real Estate Investment Podcast

Episode: Fast & Easy Multifamily Lending with StackSource Founder Tim Milazzo

Guest: Tim Milazzo is the co-founder of StackSource, a technology driven engine for funding commercial real estate deals of all types.

Big Idea: Having access tofast & easy multifamily lending, or any other commercial funding, is the first step to scaling a multi-million dollar real estate portfolio. The commercial loan landscape is extremely fragmented, with many lenders focused on only certain asset types, loan sizes, or other niche spaces at any given time. StackSource is a national high volume aggregator of lenders, loan types & contacts, providing borrowers the faster method for finding the correct lender for your particular asset type.

Tim & I discuss how this volume of lenders will put you in a position of strength when you’re funding a deal. Obtaining multiple, competing loan term sheets can be difficult when you’re buying a commercial deal because of the short timeline to closing.

The StackSource platform allows you to provide details of your project-whether multi family, industrial, commercial, etc- and then matches your loan type with those lending institutions currently lending in your local market and funding your specific deal type. The end result is multiple term sheets allowing you to select the best option for your deal.

This is a contrast to how I’ve bought my last half dozen multi family projects: calling around asking people I know who is funding this type of deal-then submitting my deal details to that single lender and obtaining one term sheet. My way is a position of weakness-I am stuck riding with that single lender on that deal. It’s worked out for me because I’m lucky to have found the right lender for my type of loan. Shall we begin?

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 6.99%. Buy & Hold Loans Offered Even Lower. Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

Resources mentioned in this episode:
https://www.StackSource.com/

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessRealEstateDeals.com/

View the Episode Description & Transcript Here:
https://reidiamonds.com/fast-easy-multifamily-lending-with-stacksource-founder-tim-milazzo/

Dan Breslin: Welcome to the REI Diamond Show. I’m your host, Dan Breslin, and this is episode 206 on fast and easy multifamily lending with StackSource founder, Tim Milazzo. If you’re into building wealth through real estate investing, you are in the right place. My goal is to identify high-caliber real estate investors and other industry service providers, invite them on the show, and then draw out the jewels of wisdom. Those tactics, mindsets, methods used to create millions of dollars more in the business of real estate. Having access to fast and easy multifamily lending or any other commercial funding is the first step to scaling a multimillion-dollar commercial real estate portfolio. The commercial loan landscape is extremely fragmented with many lenders focused only on certain asset types, or certain loan sizes, or other niche spaces at any given time. StackSource is a national, high-volume, aggregator of those lenders, loan types, contacts, etcetara, providing you, the borrower, with the faster method for finding the correct lender for your particular asset type.

On today’s episode, Tim and I discuss how this volume of lenders that StackSource has aggregated will put you in a position of strength when you are funding a deal. Obtaining multiple competing loan term sheets can be difficult when you’re buying a commercial deal because of the short timeline to closing. It’s multiple calls to the lenders that you’re googling and they don’t do this kind of asset type, etcetara. Whereas the StackSource platform allows you to provide the details of your project, whether multifamily, industrial. commercial, etcetera, and then matches your loan type with those lending institutions currently lending in that local market and funding your specific deal type. So, the end result is a multiple term sheets allowing you to select the best option for your deal, and then proceed with a complete loan package. And this is in contrast to how I bought my last half dozen multifamily projects which was going around, asking people I know who is funding this type of deal, and then submitting my deal details to that single lender, and obtaining a single term sheet. So, I kind of had no other options if that lender did not work out, and I didn’t really have the ability to shop the deal due to lack of time and lack of contacts. Whereas I didn’t have access to this platform.

So, my way was a position of weakness and I’m stuck riding with that single lender on that deal. Now, luckily, it worked out for me because I found just the right lender for just the right loan type who lends in my market but that’s not always the case, and the challenge can be even greater if you’re investing all over the US.

Tim & I Discuss StackSource & Multifamily Lending:

· Hottest Sectors in Commercial Real Estate

· How to Finance Multifamily Investments

· Obtaining Fastest Rate & Term Quotes

· Finding Commercial Funding Anywhere in the U.S.

Relevant Episodes: (There are 206 Content Packed Interviews in Total)

Episode 206: Fast & Easy Multifamily Lending with StackSource Founder Tim Milazzo

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Dan Breslin: Welcome to the REI Diamond Show. I’m your host, Dan Breslin, and this is episode 206 on fast and easy multifamily lending with StackSource founder, Tim Milazzo. If you’re into building wealth through real estate investing, you are in the right place. My goal is to identify high-caliber real estate investors and other industry service providers, invite them on the show, and then draw out the jewels of wisdom. Those tactics, mindsets, methods used to create millions of dollars more in the business of real estate. Having access to fast and easy multifamily lending or any other commercial funding is the first step to scaling a multimillion-dollar commercial real estate portfolio. The commercial loan landscape is extremely fragmented with many lenders focused only on certain asset types, or certain loan sizes, or other niche spaces at any given time. StackSource is a national, high-volume, aggregator of those lenders, loan types, contacts, etcetara, providing you, the borrower, with the faster method for finding the correct lender for your particular asset type.

On today’s episode, Tim and I discuss how this volume of lenders that StackSource has aggregated will put you in a position of strength when you are funding a deal. Obtaining multiple competing loan term sheets can be difficult when you’re buying a commercial deal because of the short timeline to closing. It’s multiple calls to the lenders that you’re googling and they don’t do this kind of asset type, etcetara. Whereas the StackSource platform allows you to provide the details of your project, whether multifamily, industrial. commercial, etcetera, and then matches your loan type with those lending institutions currently lending in that local market and funding your specific deal type. So, the end result is a multiple term sheets allowing you to select the best option for your deal, and then proceed with a complete loan package. And this is in contrast to how I bought my last half dozen multifamily projects which was going around, asking people I know who is funding this type of deal, and then submitting my deal details to that single lender, and obtaining a single term sheet. So, I kind of had no other options if that lender did not work out, and I didn’t really have the ability to shop the deal due to lack of time and lack of contacts. Whereas I didn’t have access to this platform.

So, my way was a position of weakness and I’m stuck riding with that single lender on that deal. Now, luckily, it worked out for me because I found just the right lender for just the right loan type who lends in my market but that’s not always the case, and the challenge can be even greater if you’re investing all over the US.

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 6.99%. Buy & Hold Loans Offered Even Lower. Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

Resources mentioned in this episode:

www.StackSource.com

For Access to Real Estate Deals You Can Buy & Sell for Profit:

https://AccessOffMarketDeals.com/podcast/

Tim & I Discuss StackSource & Multifamily Lending:

Hottest Sectors in Commercial Real Estate
How to Finance Multifamily Investments
Obtaining Fastest Rate & Term Quotes
Finding Commercial Funding Anywhere in the U.S.

Relevant Episodes: (There are 206 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

commercial diamond equity investments estate investor lending multifamily real rei diamonds rei diamonds show stacksource

How to Release Home Equity WITHOUT a Refi, Monthly Payments, or Mortgage with Matthew Sullivan

Episode: How to Release Home Equity WITHOUT a Refi or Payments-a conversation with Matthew Sullivan

Guest: Matthew Sullivan is the Founder & CEO of QuantumRE as well as the host of his own podcast, “Hooked on Startups”. He is originally from London and has a background working with Richard Branson’s corporate finance team and was a director of the Virgin-sponsored London Air Ambulance. Matthew has created a new method allowing homeowners to release home equity without a refi.

Big Idea: How to Cash Out Home Equity while making NO monthly payments. Add in blockchain technology to provide a secondary market for real estate investors to participate in hot real estate markets around the world in a truly passive manner.

The REI Diamonds Show-Real Estate Investment Podcast

Episode: How to Release Home Equity WITHOUT a Refi or Payments-a conversation with Matthew Sullivan

Guest: Matthew Sullivan is the Founder & CEO of QuantumRE as well as the host of his own podcast, “Hooked on Startups”. He is originally from London and has a background working with Richard Branson’s corporate finance team and was a director of the Virgin-sponsored London Air Ambulance.

Big Idea: How to Cash Out Home Equity while making NO monthly payments. Add in blockchain technology to provide a secondary market for real estate investors to participate in hot real estate markets around the world in a truly passive manner.

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

Resources Mentioned in this Episode:
www.QuantumRE.com

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessOffMarketDeals.com/podcast/

View the Episode Description & Transcript Here:
https://reidiamonds.com/how-to-release-home-equity-without-a-refi-monthly-payments-or-mortgage-with-matthew-sullivan/

Dan Breslin: Matthew joins us today sharing his unique business model of providing cash to homeowners without a refi mortgage or monthly payments. The conversation includes tokenization of real estate through blockchain technology, the underwriting process to obtain this cash, and a brief history of Matthew’s background as a helicopter pilot and how that applies to running a business. Let us begin.

Matthew Sullivan: Very well, Dan. Thanks for having me on.

Dan: Nice. So you have a bit of a history, which, I mean, maybe people already recognize the accent. But do you want to kind of talk about where you came from in your career and kind of how it evolved to what you are doing today?

Matthew: Yes, of course. So I am originally from England and I moved to Southern California about seven years ago. And before that, I had spent about the last previous twenty-something years and really running my own businesses in finance, telecommunications, and technology. I think back in the late 90’s I had the amazing privilege of working closely with Sir Richard Branson as well for a few years and it was involved with a number of companies like Virgin Cosmetics, Virgin Clothing.

I was a trustee of the London Air Ambulance that was sponsored by Virgin, so that was a fantastic time. I moved here with a big changed in circumstances back in England, so fresh start over here. And the first thing I did was just launch myself into real estate, which is something that I always wanted to do when I was in the UK, but I got distracted by the internet and other sorts of platforms. So, it was really a great opportunity to explore this fantastic universe of real estate.

Dan: Nice. Okay, so a couple of things before we dive into some of our big topics here. But I am curious, I do not know a lot about UK real estate. I have heard that it operates a little bit differently, it is more constrained, there is not the type of supply of real estate that we have in almost all the markets in the US. Would you mind shedding some light on that assumption for me?

Matthew: Yes. Well again, I did not have any great exposure to the real estate markets in the UK, so all of my real operating experience comes from the US. But I can tell you from my experiences as an investor, as a business person in the UK, property there, obviously it is a much smaller country, so you have got far fewer people and the number of opportunities is nowhere near as numerous as they are in the US.

Real estate in the US is a multi-layered industry, which comprises everything from huge public company investments down to individuals that are fixing and flipping. There is a large private money universe. One of the things that you do not have so much in the UK, so you do not have that same depth to the private capital. And also there is just nowhere near the scale of real estate opportunities that you see over here. If you look at just California for example, the size of the Californian economy is not far off the size of the UK economy and so that just puts it into perspective. It is much bigger over here, much faster-moving, and is much more the bedrock of the economy as a whole.

Matthew & I Discuss How to Unlock Home Equity
• What is a “Home Equity Contract”?
• Own a Piece of Appreciation in Hot Markets
• Tokenizing Residential Real Estate
• Using Option Contracts instead of Mortgages
• Cash Out Home Equity WITHOUT a Refi

Relevant Episodes: (189 Content Packed Interviews in Total)
• Deferring Taxes on ANY Highly Appreciated Asset Sale with Brett Swarts
https://bit.ly/2QA8diX
• Investing in Real Estate Using an IRA with Jason DeBono
https://bit.ly/3eGnfLP
• How to Take HUGE Depreciation using Cost Segregation with Yonah Weiss
https://bit.ly/3t5aOOQ

Episode 189: How to Release Home Equity WITHOUT a Refi, Monthly Payments, or Mortgage with Matthew Sullivan

Dan Breslin: Matthew joins us today sharing his unique business model of providing cash to homeowners without a refi mortgage or monthly payments. The conversation includes tokenization of real estate through blockchain technology, the underwriting process to obtain this cash, and a brief history of Matthew’s background as a helicopter pilot and how that applies to running a business. Let us begin.

All right, Matthew Sullivan, welcome to the REI Diamond Show. How are you doing today?

Matthew Sullivan: Very well, Dan. Thanks for having me on.

Dan: Nice. So you have a bit of a history, which, I mean, maybe people already recognize the accent. But do you want to kind of talk about where you came from in your career and kind of how it evolved to what you are doing today?

Matthew: Yes, of course. So I am originally from England and I moved to Southern California about seven years ago. And before that, I had spent about the last previous twenty-something years and really running my own businesses in finance, telecommunications, and technology. I think back in the late 90’s I had the amazing privilege of working closely with Sir Richard Branson as well for a few years and it was involved with a number of companies like Virgin Cosmetics, Virgin Clothing.

I was a trustee of the London Air Ambulance that was sponsored by Virgin, so that was a fantastic time. I moved here with a big changed in circumstances back in England, so fresh start over here. And the first thing I did was just launch myself into real estate, which is something that I always wanted to do when I was in the UK, but I got distracted by the internet and other sorts of platforms. So, it was really a great opportunity to explore this fantastic universe of real estate.

Dan: Nice. Okay, so a couple of things before we dive into some of our big topics here. But I am curious, I do not know a lot about UK real estate. I have heard that it operates a little bit differently, it is more constrained, there is not the type of supply of real estate that we have in almost all the markets in the US. Would you mind shedding some light on that assumption for me?

Matthew: Yes. Well again, I did not have any great exposure to the real estate markets in the UK, so all of my real operating experience comes from the US. But I can tell you from my experiences as an investor, as a business person in the UK, property there, obviously it is a much smaller country, so you have got far fewer people and the number of opportunities is nowhere near as numerous as they are in the US.

Real estate in the US is a multi-layered industry, which comprises everything from huge public company investments down to individuals that are fixing and flipping. There is a large private money universe. One of the things that you do not have so much in the UK, so you do not have that same depth to the private capital. And also there is just nowhere near the scale of real estate opportunities that you see over here. If you look at just California for example, the size of the Californian economy is not far off the size of the UK economy and so that just puts it into perspective. It is much bigger over here, much faster-moving, and is much more the bedrock of the economy as a whole.

Episode Sponsored by the Deal Machine:

Driving for Dollars Software to Build a Team of Drivers, Manage Routes, & Even Automate Marketing. Free Access at http://REIDealMachine.com/

Resources mentioned in this episode:

www.QuantumRE.com

Matthew & I Discuss How to Release Home Equity

What is a “Home Equity Contract”?
Own a Piece of Appreciation in Hot Markets
Tokenizing Residential Real Estate
Using Option Contracts instead of Mortgages
Cash Out Home Equity WITHOUT a Refi

Relevant Episodes: (There are 189 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

matthew sullivan Release Home Equity

How to Buy a House with No Money Down with Tim Padavic

Episode: How to Buy a House with No Money Down with Tim Padavic

Guest: Tim Padavic is the Vice President of The Federal Savings Bank. He’s licensed to lend in all 50 states.

Big Idea: Offering Your Retail Buyer “No Money Down” Wins More Deals (for Agents) & Keeps More Money in YOUR Pocket (for Flippers). Buying a house with no money down allows more buyers to participate in the red-hot real estate market. Recent surveys show the reason many buyers remain on the sideline is a limited savings for the down payment.
Agents & buyers obviously benefit by knowing how to buy house with no money down. Fix & Flip investors also benefit because they can offer buyers of their projects the option of no-or certainly very low money down.
If you’re flipping houses and use a real estate agent to sell your flips-you can share this episode & Tim’s contact info as a resource they might use in selling your house at a higher price. Think about it-if a buyer doesn’t need any money down-or any seller credits for down payment assistance, that money stays in YOUR pocket. Worth noting-this no money down strategy is only applicable on Owner Occupied residential property.

The REI Diamonds Show-Real Estate Investment Podcast

Episode: How to Buy a House with No Money Down with Tim Padavic

Guest: Tim Padavic is the Vice President of The Federal Savings Bank. He’s licensed to lend in all 50 states.

Big Idea: Offering Your Retail Buyer “No Money Down” Wins More Deals (for Agents) & Keeps More Money in YOUR Pocket (for Flippers). Buying a house with no money down allows more buyers to participate in the red-hot real estate market. Recent surveys show the reason many buyers remain on the sideline is a limited savings for the down payment.

Agents & buyers obviously benefit by knowing how to buy house with no money down. Fix & Flip investors also benefit because they can offer buyers of their projects the option of no-or certainly very low money down.

If you’re flipping houses and use a real estate agent to sell your flips-you can share this episode & Tim’s contact info as a resource they might use in selling your house at a higher price. Think about it-if a buyer doesn’t need any money down-or any seller credits for down payment assistance, that money stays in YOUR pocket. Worth noting-this no money down strategy is only applicable on Owner Occupied residential property.

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

Resources Mentioned in this Episode:
https://www.TheFederalSavingsBank.com

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessOffMarketDeals.com/podcast/

View the Episode Description & Transcript Here:
https://reidiamonds.com/how-to-buy-a-house-with-no-money-down-with-tim-padavic/

Dan Breslin: This episode was created for you. Agents and buyers obviously benefit by knowing how to buy a house with no money down and fix-and-flip investors also benefit because they can offer the buyers of their projects—the houses they’ve fixed to flip—the option of no money down or certainly very low money down financing. That’s the topic today.

And if you’re flipping houses and you use a real estate agent to sell those flips, I suggest that you share this episode and Tim Padavic’s contact info at the end as a resource that they might use in selling your house at a higher price. Think about it. If a buyer doesn’t need any money down or any seller credits to cover closing costs or down payment assistance, the money stays in your pocket. I’m not getting paid for this. Tim’s not kicking me anything back. I just know Tim from my network. He’s a valuable resource for me on my flips and he is licensed in all 50 states so I invited him to come on the show as a value-add to you, the valued member of my network.

Worth noting here before we get into the interview, this no money down strategy is only applicable on owner-occupied residential property. So, this is for owner-occupied properties. Tim, this episode, we do not discuss investor financing on this episode. Tim does not even get into investor financing. He specializes in homeowners looking to buy houses in which to live and that’s where the no money down financing mechanism that we’re going to discuss here today works. Ready to get started? Tim Padavic, welcome to the REI Diamond Show.

Tim: In regards to how I get started, in ’98, I got started brokering loans. We actually did most of our business in the refinance and remodel business. We helped rehabbers remodel homes for the homebuyer or the homeowner and we would lower their payment and get them their home improvement, all the way until about 2008 when the collapse happened and then I’ve been doing purchases ever since.

And most of my purchases, if not all of them, my specialty is people getting into their home either for the first time or maybe a move. They don’t really work with investors or second homes or anything like that. It’s not that I wouldn’t it, it’s just not my specialty. My specialty’s getting people into homes. People who are looking for a possibly a rehabbed home or upgrading to a rehabbed home. Something that is real nice for them to move into and the south side of Chicago has been a key focus of those rehabbed homes and the price points are right and some of the programs that we have available tie in really nicely.

Tim & I Discuss Buying a House with Low Down Payment:
• How to Access Grant Money for Down Payment
• Income & Debt Levels to Qualify
• How to Get Offers Accepted in this HOT Real Estate Market
• Importance of Beginning the Mortgage Process Now

Relevant Episodes: (There are 188 Content Packed Interviews in Total)
• Russell Walker on $45K/Month Positive Cash Flow with Airbnb
https://bit.ly/3xbAZ9Q
• How to Make $300K/Year Investing in Mobile Homes with No Money Down
https://bit.ly/3gx3t89
• Buying Mortgage Notes Generates 15% + Returns with Brian Lauchner
https://bit.ly/2QKYiqm
• Dan Breslin on Raising Private Money for Single Family Flips
https://bit.ly/3dJfeqo

Episode 188: How to Buy a House with No Money Down with Tim Padavic

Dan Breslin: This episode was created for you. Agents and buyers obviously benefit by knowing how to buy a house with no money down and fix-and-flip investors also benefit because they can offer the buyers of their projects—the houses they’ve fixed to flip—the option of no money down or certainly very low money down financing. That’s the topic today.

And if you’re flipping houses and you use a real estate agent to sell those flips, I suggest that you share this episode and Tim Padavic’s contact info at the end as a resource that they might use in selling your house at a higher price. Think about it. If a buyer doesn’t need any money down or any seller credits to cover closing costs or down payment assistance, the money stays in your pocket. I’m not getting paid for this. Tim’s not kicking me anything back. I just know Tim from my network. He’s a valuable resource for me on my flips and he is licensed in all 50 states so I invited him to come on the show as a value-add to you, the valued member of my network.

Worth noting here before we get into the interview, this no money down strategy is only applicable on owner-occupied residential property. So, this is for owner-occupied properties. Tim, this episode, we do not discuss investor financing on this episode. Tim does not even get into investor financing. He specializes in homeowners looking to buy houses in which to live and that’s where the no money down financing mechanism that we’re going to discuss here today works. Ready to get started? Tim Padavic, welcome to the REI Diamond Show.

Tim: In regards to how I get started, in ’98, I got started brokering loans. We actually did most of our business in the refinance and remodel business. We helped rehabbers remodel homes for the homebuyer or the homeowner and we would lower their payment and get them their home improvement, all the way until about 2008 when the collapse happened and then I’ve been doing purchases ever since.

And most of my purchases, if not all of them, my specialty is people getting into their home either for the first time or maybe a move. They don’t really work with investors or second homes or anything like that. It’s not that I wouldn’t it, it’s just not my specialty. My specialty’s getting people into homes. People who are looking for a possibly a rehabbed home or upgrading to a rehabbed home. Something that is real nice for them to move into and the south side of Chicago has been a key focus of those rehabbed homes and the price points are right and some of the programs that we have available tie in really nicely.

Episode Sponsored by the Deal Machine:

Driving for Dollars Software to Build a Team of Drivers, Manage Routes, & Even Automate Marketing. Free Access at http://REIDealMachine.com/

Resources mentioned in this episode:

www.TheFederalSavingsBank.com

Tim & I Discuss Buying a House with Low Down Payment:

How to Access Grant Money for Down Payment
Income & Debt Levels to Qualify
How to Get Offers Accepted in this HOT Real Estate Market
Importance of Beginning the Mortgage Process Now

Relevant Episodes: (There are 188 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

Investing in Multifamily properties

Buying Mortgage Notes Generates 15% + Returns with Brian Lauchner

Are you earning 15% on your passive investments? Would you consider buying mortgage notes if you could generate those returns?

Many investors in the real estate business routinely earn these type of returns through buying mortgage notes. Even 20%-30% or more. During this investing podcast, Brian Lauchner and I discuss two main topics. First, how to close more deals as a real estate investor using creative financing methods powered by the use of purchase notes. Second, we discuss how to sell those performing notes and generate quick cash.

Guest: Brian Lauchner-In Just a Few Short Years, Brian Graduated from Wholesaling & Flipping Houses to Designing a Lifestyle of Freedom through Buying & Selling Mortgage Notes.

Episode: Buying Mortgage Notes Generates 15% Returns & More with Brian Lauchner

Big Idea: “Any Cash I Put in a Deal, I Quickly Extract” The Note business is essentially originating, buying, selling, or holding mortgage notes. Brian describes his strategy for pulling his cash out of every Note deal as soon as possible-ideally within the first week or two. An even better scenario often occurs where a note deal is constructed and a large chunk of cash is pulled out day 1.

The REI Diamonds Show-Real Estate Investment Podcast

Are you earning 15% on your passive investments? Would you consider buying mortgage notes if you could generate those returns? Many investors in the real estate business routinely earn these type of returns. Even more.

During this investing podcast, Brian Lauchner and I discuss two main topics. First, how to close more deals as a real estate investor using creative financing methods powered by the use of purchase notes. Second, we discuss how to sell those performing notes and generate quick cash.

INTERESTED IN ATTENDING THE LIVE, VIRTUAL FULL DAY “GOLD IN NOTES” TRAINING?
“Gold in Notes” Live Training Coming Up Soon. Normally $97, You Can Attend FREE when you Sign up at http://www.REINoteSchool.com/

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessOffMarketDeals.com/podcast/

View the Episode Description & Transcript Here:
https://reidiamonds.com/buying-mortgage-notes-generates-15-returns-with-brian-lauchner/

Check Out the Full Archive of The R.E.I. Diamonds Show:
https://REIDiamonds.com/podcast/

How to Buy Mortgage Notes

The first logical step in generating large returns on investment capital is to figure out how to buy mortgage notes. It begins with understanding the risk & return of buying the note. Think about it this way, if you were to buy a stock, you’d first like to do some due diligence on the company. Maybe find out if they’re profitable, whether they have a good business model, or even if you trust the team running the company. In the same way, you can evaluate the risk of a real estate note by determining probability that the borrow will actually repay the note. You’d then figure out your potential return by calculating the unpaid balance (UPB) and considering the interest rate. There are quite a few types of mortgage notes. One way to categorize them would be sorting them into performing notes & non-performing notes. Performing notes would be situations where the borrower is current on their payments. Non performing notes are situations where the borrower has stopped making payments or violated the terms of the note in some other way. The other way could be an expired balloon payment.

Both performing & non-performing notes trade at a discount to UPB. The discount you can expect as a note buyer on a performing notes is smaller than you might expect on a non-performing note. The reason being that the non-performing notes require more work to realize a return. You must either work out a new payment plan with the borrower or foreclosure to recover your investment. The bigger the discount, the larger the return. Assuming you an actually get paid.

Brian and I discuss the process of buying mortgage notes in detail during the episode. Perhaps a better question: “How are these mortgage notes created? What is the source?”

Creative Financing Real Estate Methods-the Key to No Money Down Deals

Find the source, cut out the middleman, and you put yourself in the most powerful position for profit, right? So the source of mortgage notes is to be the money lender yourself. You could lend hard money to rehabbers short term and easily earn 10%-15% returns on your money. However, unless you have a contact with a rehabber who is doing volume, the returns might be inconsistent. Instead you might consider creative financing real estate deals.

Here’s how it works. You purchase the property at a lower price, then resell the property at a higher price. You collect a large down payment and arrange terms of payment for he remainder-creating a note & mortgage in the process. Of course this is a very oversimplified version of events-I suggest attending the upcoming REI Note School masterclass mentioned below for a full training.

Many note investors begin investing in real estate through the conventional route. Maybe buy a rental property or flip a few houses. Then the drag of owning rental property wears down returns. Note investing removes the investor from the day to day responsibility of owning property, such as maintenance, evictions, vacancy, you name it. Note investing allows you to set the terms, set up the payment processing and just check monthly to see that the payments are being made.

Interested in Attending a Live, Full Day Masterclass in Creative Financing & Trading Mortgage Notes?

Note School trainer, high volume note trader, & REI Diamonds Show guest, Brian Lauchner, offers a full day “Gold in Notes” training coming up. Normally $97, You Can Attend FREE when you Sign up at http://www.REINoteSchool.com/

Brian & I Discuss Creative Financing & Buying Mortgage Notes
• Originating Mortgage Notes Creates More Deals
• Paying Higher Prices Still Generates Profitable Deals
• Transition 100% to Buying, Selling, & Holding Notes
• How to Do No Money Down Note Deals

Relevant Episodes: (There are 180 Content Packed Interviews in Total)
• Deferring Taxes on ANY Highly Appreciated Asset Sale with Brett Swarts https://tinyurl.com/y59s9vxz
• Investing in Real Estate Using an IRA with Jason DeBono https://tinyurl.com/yxtlx8xa
• How to Take HUGE Depreciation using Cost Segregation with Yonah Weiss https://tinyurl.com/yxdzgb64

Episode 180: Buying Mortgage Notes Generates 15% + Returns with Brian Lauchner

Episode Sponsored by the Deal Machine:

Driving for Dollars Software to Build a Team of Drivers, Manage Routes, & Even Automate Marketing. Free Access at http://REIDealMachine.com/

How to Buy Mortgage Notes

The first logical step in generating large returns on investment capital is to figure out how to buy mortgage notes. It begins with understanding the risk & return of buying the note. Think about it this way, if you were to buy a stock, you’d first like to do some due diligence on the company. Maybe find out if they’re profitable, whether they have a good business model, or even if you trust the team running the company. In the same way, you can evaluate the risk of a real estate note by determining probability that the borrow will actually repay the note. You’d then figure out your potential return by calculating the unpaid balance (UPB) and considering the interest rate.

There are quite a few types of mortgage notes. One way to categorize them would be sorting them into performing notes & non-performing notes. Performing notes would be situations where the borrower is current on their payments. Non performing notes are situations where the borrower has stopped making payments or violated the terms of the note in some other way. The other way could be an expired balloon payment.

Both performing & non-performing notes trade at a discount to UPB. The discount you can expect as a note buyer on a performing notes is smaller than you might expect on a non-performing note. The reason being that the non-performing notes require more work to realize a return. You must either work out a new payment plan with the borrower or foreclosure to recover your investment. The bigger the discount, the larger the return. Assuming you an actually get paid.

Brian and I discuss the process of buying mortgage notes in detail during the episode. Perhaps a better question: “How are these mortgage notes created? What is the source?”

Creative Financing Real Estate Methods-the Key to No Money Down Deals

Find the source, cut out the middleman, and you put yourself in the most powerful position for profit, right? So the source of mortgage notes is to be the money lender yourself. You could lend hard money to rehabbers short term and easily earn 10%-15% returns on your money. However, unless you have a contact with a rehabber who is doing volume, the returns might be inconsistent. Instead you might consider creative financing real estate deals.

Here’s how it works. You purchase the property at a lower price, then resell the property at a higher price. You collect a large down payment and arrange terms of payment for he remainder-creating a note & mortgage in the process. Of course this is a very oversimplified version of events-I suggest attending the upcoming REI Note School masterclass mentioned below for a full training.

Many note investors begin investing in real estate through the conventional route. Maybe buy a rental property or flip a few houses. Then the drag of owning rental property wears down returns. Note investing removes the investor from the day to day responsibility of owning property, such as maintenance, evictions, vacancy, you name it. Note investing allows you to set the terms, set up the payment processing and just check monthly to see that the payments are being made.

Interested in Attending a Live, Full Day Masterclass in Creative Financing & Trading Mortgage Notes FOR FREE?

Note School trainer, high volume note trader, & REI Diamonds Show guest, Brian Lauchner, offers a full day “Gold in Notes” training coming up. You can attend FREE, and attend virtually if you sign up through www.REINoteSchool.com

Normally $97, You Can Attend FREE by Signing up at www.REINoteSchool.com

Brian & I Discuss Creative Financing & Buying Mortgage Notes

Originating Mortgage Notes Creates More Deals
Paying Higher Prices Still Generates Profitable Deals
Transition 100% to Buying, Selling, & Holding Notes
How to Do No Money Down Note Deals

Relevant Episodes: (There are 180 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

brian lauchner eddie speed investing notes real estate creative financing investing mortgage note mortgage note example note school what is a mortgage note

How to Make $300K/Year Investing in Mobile Homes with No Money Down

Investing in mobile homes with no money down is possible if you execute the correct strategy. Jay Samera joins me on the show to discuss this strategy in detail. Investing in mobile homes can generate quick chunks of cash. Brand new investors often do their first deal and net anywhere from a few thousand dollars to $10,000 or more. Many real estate investors avoid this strategy because of they don’t know the strategy. They would rather do a wholesale deal or a flip because it’s more mainstream.

The REI Diamonds Show-Real Estate Investment Podcast

Investing in mobile homes with no money down is possible if you execute the correct strategy. Jay Samera joins me on the show to discuss this strategy in detail. Investing in mobile homes can generate quick chunks of cash. Brand new investors often do their first deal and net anywhere from a few thousand dollars to $10,000 or more. Many real estate investors avoid this strategy because of they don’t know the strategy. They would rather do a wholesale deal or a flip because it’s more mainstream.

Free Access to the Deal Machine software for Generating Off Market Deals by Driving for Dollars: http://REIDealMachine.com/

Resources Mentioned in this Episode:
https://TrailerCashAcademy.com

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessOffMarketDeals.com/podcast/

View the Episode Description & Transcript Here:
https://reidiamonds.com/how-to-make-300k-year-investing-in-mobile-homes-with-no-money-down/

Check Out the Full Archive of The R.E.I. Diamonds Show:
https://REIDiamonds.com/podcast/

The Mobile Home Market is Prime for Making Quick Cash

There is nearly no competition in the mobile home investing market. This is because the real estate investing community largely ignores the mobile home market. This lack of competition refers to the buy side-dealing with a motivated seller.

On the other side of the deal is the buyer who will occupy the property. Normally these buyers would be in the market to rent a home, but leap at the opportunity to buy rental property instead. This “buyer” is actually only buying the manufactured home, not the land beneath. Considering that fact, the purchase price paid for the house and the monthly rent payments still provide that buyer with a home they own. These buyers now have pride of ownership. They can maintain, paint, or change their home without asking any landlord. It feels good to own a home.

This is NOT about Buying Mobile Home Parks-You do NOT own the land here…

You don’t actually “buy the property”. Park owners actually own the lot and the mobile home owner pays rent. I normally pass on these deals myself because of this fact. It’s also a reason many gravitate toward wholesaling houses instead-as you’re doing deals on fee simple (fully owned) property which most real estate investors understand. Essentially you are buying & selling the mobile home itself. It might make more sense to think of this strategy like buying & selling cars for profit. There is a title, but no deed. The Park Owner (sometimes a real estate investment trust) holds the deed to the land. Here’s why that’s important:

5 Risks that Lead to BIG Losses & How to Avoid Them

Jay and I discuss 5 big risks which could cost you big during the show. One of the biggest risks to understand is that you’re at the mercy of the land owner. That park I mentioned above? They have the ability to write the rules for their park. Every mobile home park has it’s own set of rules. Some of these rules included approving any resident. Those approval processes could take months-while you’re responsible for paying the lot rent. Check out the episode to discover the other 4 risks.

Structure of a No Money Down Mobile Home Deal

No money down real estate investing is always accomplished through creative financing. You’re simply putting together sellers and buyers. Find a motivated seller and lock in a purchase price-often by arranging to make payments. Then find a buyer, set a purchase price, collect a down payment, and hold a note (or loan) for the balance.

Be sure to collect a larger down payment than is required to pay the seller, so there is some profit left right up front in the deal. Congrats-you’re just bought & sold real estate with no money. Well, I guess in this case, it’s actually a mobile home. Along these same lines, creative financing applies to various types of real estate-land, apartment buildings, houses, and of course, mobile homes (not actually real estate).

You also set the terms and the interest rate for the payments you’re collecting. Even though you don’t own the land, you’re still collecting cash flow just like an investment property. Many would agree this is even better since you’re not responsible for any maintenance or upkeep on the deal.

Jay & I Discuss Investing in Mobile Homes
• Structure of a No Money Down Mobile Home Deal
• 5 Risks that Lead to BIG Losses & How to Avoid Them
• Most Valuable Asset-Even if You Have No Money
• Best States for Mobile Home Investing

Relevant Episodes: (There are 180 Content Packed Interviews in Total)
• Deferring Taxes on ANY Highly Appreciated Asset Sale with Brett Swarts https://reidiamonds.com/deferring-taxes-on-any-highly-appreciated-asset-sale-with-brett-swarts/
• Investing in Real Estate Using an IRA with Jason DeBono https://reidiamonds.com/investing-in-real-estate-using-an-ira-with-jason-debono/
• How to Take HUGE Depreciation using Cost Segregation with Yonah Weiss https://reidiamonds.com/how-to-take-huge-depreciation-using-cost-segregation-with-yonah-weiss/

Episode 179: How to Make $300K/Year Investing in Mobile Homes with No Money Down

Episode Sponsored by the Deal Machine:

Driving for Dollars Software to Build a Team of Drivers, Manage Routes, & Even Automate Marketing. Free Access at http://REIDealMachine.com/

The Mobile Home Market is Prime for Making Quick Cash

There is nearly no competition in the mobile home investing market. This is because the real estate investing community largely ignores the mobile home market. This lack of competition refers to the buy side-dealing with a motivated seller.

On the other side of the deal is the buyer who will occupy the property. Normally these buyers would be in the market to rent a home, but leap at the opportunity to buy rental property instead. This “buyer” is actually only buying the manufactured home, not the land beneath. Considering that fact, the purchase price paid for the house and the monthly rent payments still provide that buyer with a home they own. These buyers now have pride of ownership. They can maintain, paint, or change their home without asking any landlord. It feels good to own a home.

This is NOT about Buying Mobile Home Parks-You do NOT own the land here…

You don’t actually “buy the property”. Park owners actually own the lot and the mobile home owner pays rent. I normally pass on these deals myself because of this fact. It’s also a reason many gravitate toward wholesaling houses instead-as you’re doing deals on fee simple (fully owned) property which most real estate investors understand. Essentially you are buying & selling the mobile home itself. It might make more sense to think of this strategy like buying & selling cars for profit. There is a title, but no deed. The Park Owner (sometimes a real estate investment trust) holds the deed to the land. Here’s why that’s important:

5 Risks that Lead to BIG Losses & How to Avoid Them

Jay and I discuss 5 big risks which could cost you big during the show. One of the biggest risks to understand is that you’re at the mercy of the land owner. That park I mentioned above? They have the ability to write the rules for their park. Every mobile home park has it’s own set of rules. Some of these rules included approving any resident. Those approval processes could take months-while you’re responsible for paying the lot rent. Check out the episode to discover the other 4 risks.

Structure of a No Money Down Mobile Home Deal

No money down real estate investing is always accomplished through creative financing. You’re simply putting together sellers and buyers. Find a motivated seller and lock in a purchase price-often by arranging to make payments. Then find a buyer, set a purchase price, collect a down payment, and hold a note (or loan) for the balance.

Be sure to collect a larger down payment than is required to pay the seller, so there is some profit left right up front in the deal. Congrats-you’re just bought & sold real estate with no money. Well, I guess in this case, it’s actually a mobile home. Along these same lines, creative financing applies to various types of real estate-land, apartment buildings, houses, and of course, mobile homes (not actually real estate).

You also set the terms and the interest rate for the payments you’re collecting. Even though you don’t own the land, you’re still collecting cash flow just like an investment property. Many would agree this is even better since you’re not responsible for any maintenance or upkeep on the deal.

Resources Mentioned in this Episode:

www.TrailerCashAcademy.com

Jay & I Discuss Investing in Mobile Homes

Structure of a No Money Down Mobile Home Deal
5 Risks that Lead to BIG Losses & How to Avoid Them
Most Valuable Asset-Even if You Have No Money
Best States for Mobile Home Investing

Relevant Episodes: (There are 180 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

Investing in Real Estate with No Money Down with Chris Prefontaine

real estate investing Chris Prefontaine

$75,000 Profit Per Deal-No Money Down RE Investing

You might have heard people say that investing in real estate with no money down is impossible. The first thing to understand is that investing with “no money down” does NOT mean “no money at all”. My guest, Chris Prefontaine, has developed an entire system to consistently buy property with no money down. We are NOT talking about house hacking or buying a primary residence. These no money down deals generate cash flow over the long term.

There are a few financing options to invest in real estate with no money down. The first way is by using seller financing. You find a seller willing to accept payments on the purchase price. In other words, the seller is the money lender in the deal, not a bank. For example, you agree to pay $400,000 for a house by making monthly installments of $2,000 per month.

The REI Diamonds Show-Real Estate Investment Podcast

Investing in Real Estate with No Money Down

You might have heard people say that investing in real estate with no money down is impossible. The first thing to understand is that investing with “no money down” does NOT mean “no money at all”. My guest, Chris Prefontaine, has developed an entire system to consistently buy property with no money down. We are NOT talking about house hacking or buying a primary residence. These no money down deals generate cash flow over the long term.

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

Get Access to Chris Prefontaine Quantum Leap System:
http://www.REITerms.com

For Access to Real Estate Deals You Can Buy & Sell for Profit:
https://AccessOffMarketDeals.com/podcast/

View the Episode Description & Transcript Here:
https://reidiamonds.com/investing-in-real-estate-with-no-money-down-with-chris-prefontaine

There are a few financing options to invest in real estate with no money down. The first way is by using seller financing. You find a seller willing to accept payments on the purchase price. In other words, the seller is the money lender in the deal, not a bank. For example, you agree to pay $400,000 for a house by making monthly installments of $2,000 per month. The second way is to use a lease option where you pay the owner a certain monthly payment. Additionally, you lock in a purchase price for a certain period of time. Let’s continue using the $400,000 example. First, you lock in a monthly payment of $2,000 with the seller. Second, you lock in the purchase price of $4,000. Third, you agree to pay that $400,000 price within 36 months.

You make your profit by finding a buyer willing to pay $2,400 per month and $440,000 within that same 36 month period. Of course, this is an oversimplified set of examples. Every no money down real estate deal is unique. You can negotiate monthly payments, credits, the purchase price, & the term of the deal. Your options are endless!

Has Covid Improved the No Money Down Real Estate Market?
Covid has affected many real estate markets throughout the U.S. I’m a real estate investor and I personally buy rental property in Atlanta, Chicago, & Philadelphia. These markets have become superheated through 2020 which caused inventory levels to drop. The lack of houses for sale has caused purchase prices to rise. I imagine your market is similar. This low inventory can make finding a deal more challenging. However, your opportunity to make money is better because the prices are rising. Any deal you make has a higher chance of selling at a profit since the market is moving up. In other words, deals are more valuable now than they have ever been. So how do you find no money down real estate deals?

Which Sellers Will Accept a No Money Down Offer?
The real estate investing business is based on making offers. Newbie investors often avoid making offers for a variety of made up reasons. They blame their credit score or interest rates. There are two reasons newbies don’t buy real estate. First, they don’t ever make offers to buy investment property. The second reason is usually the cause of the first reason. They don’t know how to make the offer. The price, the terms, the closing date. These are confusing.

To make things worse, newbies often make their offers to the wrong seller. Banks selling REO property will NOT accept a no money down offer. They expect cash. A seller who needs the cash to move to their next house cannot accept a no money down offer. They need cash.

On the other hand, a seller who is seeking to avoid paying taxes on the sale of a house is the perfect seller to offer a no money down deal. Those sellers are the perfect candidate for a no money down deal. The next challenge is finding those sellers. The best method for attracting deal flow is through marketing. All volume investors know this secret. Get good at advertising and you’ll never be without a deal. How much advertising budget is needed to succeed? Much less than you think. You’ll have to check out the episode for full details.

Check Out the Full Archive of The R.E.I. Diamonds Show:
https://REIDiamonds.com/podcast/

Episode 177: Investing in Real Estate with No Money Down with Chris Prefontaine

The second way is to use a lease option where you pay the owner a certain monthly payment. Additionally, you lock in a purchase price for a certain period of time. Let’s continue using the $400,000 example. First, you lock in a monthly payment of $2,000 with the seller. Second, you lock in the purchase price of $4,000. Third, you agree to pay that $400,000 price within 36 months.

You make your profit by finding a buyer willing to pay $2,400 per month and $440,000 within that same 36 month period. Of course, this is an oversimplified set of examples. Every no money down real estate deal is unique. You can negotiate monthly payments, credits, the purchase price, & the term of the deal. Your options are endless!

Has Covid Improved the No Money Down Real Estate Market?

Covid has affected many real estate markets throughout the U.S. I’m a real estate investor and I personally buy rental property in Atlanta, Chicago, & Philadelphia. These markets have become superheated through 2020 which caused inventory levels to drop. The lack of houses for sale has caused purchase prices to rise. I imagine your market is similar.

This low inventory can make finding a deal more challenging. However, your opportunity to make money is better because the prices are rising. Any deal you make has a higher chance of selling at a profit since the market is moving up. In other words, deals are more valuable now than they have ever been. So how do you find no money down real estate deals?

Which Sellers Will Accept a No Money Down Offer?

The real estate investing business is based on making offers. Newbie investors often avoid making offers for a variety of made up reasons. They blame their credit score or interest rates. There are two reasons newbies don’t buy real estate. First, they don’t ever make offers to buy investment property. The second reason is usually the cause of the first reason. They don’t know how to make the offer. The price, the terms, the closing date. These are confusing.

To make things worse, newbies often make their offers to the wrong seller. Banks selling REO property will NOT accept a no money down offer. They expect cash. A seller who needs the cash to move to their next house cannot accept a no money down offer. They need cash.

On the other hand, a seller who is seeking to avoid paying taxes on the sale of a house is the perfect seller to offer a no money down deal. Those sellers are the perfect candidate for a no money down deal. The next challenge is finding those sellers. The best method for attracting deal flow is through marketing. All volume investors know this secret. Get good at advertising and you’ll never be without a deal. How much advertising budget is needed to succeed? Much less than you think. You’ll have to check out the episode for full details.

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

For a Masterclass on Doing No Money Down Terms Deals, go to: www.REITerms.com

Chris & I Discuss:

Has Covid Improved the No Money Down Market?
Which Sellers Will Accept a No Money Down Offer?
Can this Business Run on $2,000/Month Marketing?
3 Steps to Dominating Any Niche

Relevant Episodes: (There are 177 Content Packed Interviews in Total)

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

chris Prefontaine investing in real estate with no money down real estate investing coaching smart real estate coach

How To Buy Land With No Money Down With Mark Podolsky

The REI Diamonds Show - Daniel Breslin | Mark Podolsky | No Money Down

Mark & I Discuss How to Flip Land Deals with No Money Down:

How to Profit from the Current Bubble in Land
Where the Best Land Deals are Located
Finding the Best Buyer for Any Land Deal
Knowing Which Land Deals Have Little Competition

How to Invest in Land with No Money Down—Podcast Episode Highlights

Mark Podolsky, aka The Land Geek, has been buying and selling land for more than 20 years. In this episode, Mark & I discuss how to invest in land–specifically how to buy land with no money down. His specialty is buying vacant land very cheap—in the $5,000-$20,000 range, closing using quit claim deeds, and then reselling to buyers on terms at nice profit spreads and strong interest rates.

In other words, buy a parcel of land for $5,000, close, then resell immediately for $20,000. The trick is the terms-to that same buyer, Mark would collect $5,000 down and accept payments of around $200 until paid in full. Oh, he also charges interest on the $15,000 balance, so there is some additional profit in the deal long term as the payments roll in.

Mark uses direct mail & software to fire off automatic offers in bulk, allowing the seller to simply sign the agreement should they accept the offer. Using his system, which he shares with his students, he’s been able to build a substantial passive income while systematizing the business to run on near automation. Mark’s goal is to do a deal per day—or somewhere around 200-300 deals per year.

Buying Raw Land is Only a Good Real Estate Investment Strategy When

The way I see it, there are really only two ways that land investors make money. The first would be to buy land at a low price and then sell it at a higher price at some point in the future. This is Mark’s strategy, as we discuss in depth during the episode. The second way to profit from raw land is to buy the plot of land and then develop the land to increase value—build a house, rezone, or maybe construct a commercial property. This podcast does NOT focus on development; however, we have had many commercial real estate developers on the show.

How To Profit from the Current Land Bubble

Covid has superheated the land market. People have been racing to buy land as outdoor recreation, safely away from any virus danger, has become very popular in 2020. What better place to camp, ride dirt bikes, or have an RV than on your own land. There is something seductive about owning land, it always has been.

Mark’s buying and selling of land, the strategy of leaving no money in the deal long term—is the perfect way to profit from the current land market. It’s all about velocity: buy & sell as quickly as you can. In my own experience flipping houses, the good deals are those that profit. The best deals are those that profit and close quickly! The less time you actually own the land between the purchase and sale, the lower your risk of losing money or other liability.

You Gotta Avoid the Land Losers…

Some land is simply worthless. Areas such as Pennsylvania & New Jersey are often laden with environmental clean-up sites. Old industrial properties with EPA superfund sites could place the unsuspecting buyer into a huge financial responsibility. You can do quick due diligence on a potential land deal at EPA.gov

Another issue which could make land worthless is no road access. Think about it-you’ve gotta be able to get to the land you bought without encroaching on someone else’s land. I’ve personally passed on a large number of very cheap land deals because there was no access road.

If you were focused on the land that you were going to build, you’d also need to be aware of flood zones, but the deals Mark and I discuss aren’t really affected by flood zones. Most of the buyers are using the land for recreation, not development.

Cash Flow from Land Deals

The big takeaway here for Real Estate Investors is that you can take a small amount of seed capital and build your cashflow up to $100,000 or more per year in a short time. Mark has students who have done this in as little as 18 months. And Mark sees no end to this trend—with 2.43 billion acres in the U.S., there will be no shortage of land deals anytime soon.

—

Watch the episode here

Listen to the podcast here

How To Buy Land With No Money Down With Mark Podolsky

This is episode 176 on how to invest in land in 2021 with no money down. If you’re into building wealth through real estate investing, you are in the right place. My goal is to invite high-caliber real estate investors and other industry service providers onto the show and then draw out the jewels of wisdom, those tactics, mindsets, and methods used to create millions of dollars and more in the business of real estate.

Our guest has been here before. You will remember Mark Podolsky, a.k.a. The Land Geek. Mark focuses on high-volume, low-cost land flipping, with a focus on using those deals to generate long-term passive cashflow, putting himself in a better situation with taxes. As you’re probably already aware, the US land market has been heating up over the past few years, with COVID only serving to supercharge the market as people flock to places where they can have more distance from other people. Mark and I discuss this trend, as well as a few recent deals, including a development expected to generate more than a million-dollar profit.

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Mark, how have you been?

Pulse is normal. Respiration is fine. I’m so glad to talk with you again. Thanks for having me back.

I love having high-quality guests come back on the show a second time because it gives us this different timestamp perspective for the curious audience. I will include the 2018 recording that Mark and I did in the show notes, but you can go back to then and then come to now. It’s so revealing to pay attention to trends in real estate. The more that you are comfortable with the trends, the better your long-term investing strategy is, and probably the way you run your business and maybe even life in general, when you’re paying attention and on top of the trends.

The Land Geek’s Business Journey And Growth

These revisiting episodes, Mark, that we’re getting ready to dive into, provide that perspective of how things evolve and change over time. I know in the last one we probably did something similar, but I would like to begin again with the Land Geek creation story. What your business looks like, and how did you get here, Mark?

The way I got here, rewind the tape, it’s been twenty years now, Dan. I was a miserable, micromanaged, 45-minute commute-to-work-and-back investment banker, specializing in mergers and acquisitions with private equity groups. I hated it so much that I wouldn’t get Sunday blues anticipating Monday coming around. I’d get the Friday blues, anticipating the weekend going by fast and having to get back to work on Monday. My firm hires this guy.

He’s telling you that it’s a side hustle. He’s buying up raw land, pennies on the dollar, and he’s flipping them online, and he’s making a 300% return on his investment. I’m looking at companies all day long, and a great company has 15% EBITDA margins or free cashflow. Your average company is at 10%, and I’m looking at companies all day long for less than 10%. I don’t believe him. I’ve got $3,000 saved up for car repairs.

I go to New Mexico with him. I do exactly what he says to do. I buy 10.5-acre parcels, an average price of $300 each. I flip them online, and they all sell for an average price of $1,200 each. It works. I went to another auction where I live in Arizona. Again, there’s $2,000, there’s no one in the room, and I’m buying up lots and acres for nothing. I sold all that property over the next six months, and I made over $90,000 cash.

I go to my wife, and she’s pregnant at the time. I said, “Honey, I’m going to quit my job to become a full-time land investor.” She’s like, “Absolutely not.” I said, “Okay, it’s fine.” It took me about a total of eighteen months for the land investing income to exceed the investment banking income, and then I quit. I’ve been doing it full-time ever since. I’ve done over 6,000 transactions to date, and I love it.

For business now and over the last couple of years, you started getting a little heavier into some software programs. Is that right, Mark?

Yeah. The philosophy is we can always make more money. Solving money problems isn’t that hard, but solving money and time problems is the holy grail. That’s why we’re doing all this, to create this passive income. To do 6,000 transactions or do that volume, it’s a business. Anything that we can do to automate, I want to do it. I want to use three leverage points in my business, which are other people’s time, other people’s money, and software. The software that we’ve developed now has evolved so much since the last time we spoke. It’s unbelievable, literally saving thousands of hours.

We can always make more money, so stopping money problems isn’t that hard. However, solving both money and time problems–that’s the holy grail.

Finding Undeveloped And Off-Market Land Deals

Why don’t we start a little bit of the land conversation here? It’s 2020 now. It’s been 2 or 3 years or so. How do you find undeveloped lots and undeveloped land for sale? Maybe a better question is how do you find off-market land, which you can buy for a good price?

What we’re going to do is we’re going to go to these counties where we know there’s inexpensive land. There are 3,007 US counties. Where do you go first? Let’s face it, nobody wakes up and makes themselves some raw land in Iowa unless you live in Iowa. We’re going to focus on California, Nevada, Arizona, New Mexico, Colorado, Oregon, Washington, Florida, these fast-growing states, the sunshine states.

We’re going to go about an hour to three hours outside of a major city. We’re going to get a list from that county. What we’re going to do is we’re going to price that list. I don’t want to be in the appraisal business. I don’t want to send out a blind offer, “Sam, I’m interested in buying your land,” because the next thing you know, now I’m in a negotiation like, “I’m interested in selling my land.”

We’re going back and forth. It’s not an efficient use of time. Essentially, what we want to do is price the list. All I’m going to do is take the comparable sales for the last 12 to 18 months of that raw land. I’m going to take the lowest comparable sale and divide it by four. That’s going to get me a 300% margin of safety.

From there, I’m going to take that list. I’m going to load it into my software. It’s going to automatically send out offers at $0.65 a letter, with address verification automatically, first-class mail. It’s amazing. That’s how we want to get that deal flow rolling, by sending out actual offers. We’re looking for a 3% to 5% response rate. If it’s under 3%, I know I priced probably a little too low for the current market. If it’s over 5%, I probably need to renegotiate and retrade, because I probably got in too high. Does that make sense?

It makes sense. The savings in time. Are these DocuSign, or they will sign off on a physical 2 or 3-page agreement of sale that you’re sending off? How does that work? They now reply to that and engage by accepting the offer, I imagine.

They can mail back the offer, but it’s not through DocuSign. They can do it like a QR code and go to a little landing page and accept the offer. We make it as easy for them as possible, depending on how technically literate they are. They can even call or fax to accept the offer.

Let’s play it out a little bit further down. They accept the offer. What’s the next step? How long are we under contract with them? When are they expecting me to show up with a bundle of cash for their land, or however I promise to pay for that? What are your next steps as far as maybe selling or doing some due diligence about whether the land’s worth anything or not?

Our intake manager will take it from there, and they will contact the seller and say, “We got your back, you accepted the offer. This is the next step. We’re going to close in as fast as possible, about seven days.” The actual offer letter we give ourselves is about 30 days before we close it. We want to under-promise and over-deliver. We’re going to do our due diligence. I’m going to get back to you, seven days are left, and we’re going to close this transaction.

During that time, the intake manager will pass that off to our due diligence team, which if it’s $5,000 or less, we’re going to outsource it to our team in the Philippines. They’re connected to an American title company, and they’re going to fill out everything we need to know. We want to make sure there are no breaks in the chain of title, no liens or encumbrances, they still own the property, and that the back taxes aren’t too high, that it’s not going to destroy the margin on our deal. We want to know what’s compelling about the property. We want to get plat maps, GIS maps, aerial maps.

We want photos around there, video if we can get it, and give them a whole property checklist. Once everything checks out in due diligence, the intake manager again will contact that seller and say, “We’re going to go ahead and send you a deed. You’re going to print it, sign it, notarize it, and send it back to us.” That’s if it’s $5,000 or less, which is closed directly. If it’s $5,000 or more, we’re going to close through a title company. Once we own that property, this is where the magic happens, because we’re going to sell that property in 30 days or less and make it cashflow. I don’t want to go too far in, Dan, without hearing your voice.

I appreciate the break there. That’s interesting, it’s $5,000 or less, it’s like we’re still checking the title to make sure things are clean, but we’re not having to pay the $400 or $500 or so extra to get the title insurance added on there. I’m curious, have you ever got in trouble, like you sold it for let’s say $15,000, $20,000, whatever you ended up getting for it, and then a title issue did come back to bite you on one of these $5,000 deeds?

I’ve never had an issue. It’s not like housing, where we’re talking real money, $100,000 or more, or even $50,000 or more, super small house or whatever it is. These are small deals. They don’t change hands a lot. It’s rural land. The biggest thing you have to worry about on the due diligence piece is that can’t be cured, even an IRS lien can be cured in 90 days, the biggest thing is going to be, is there an environmental issue?

We’re not going to places like Pennsylvania or New Jersey, where there’s a lot of manufacturing, or maybe even Ohio and a chemical company could have spilled out there. You’ve got a Superfund site. What you would do essentially, to make sure you’re not in a Superfund site, and our team does this on all the properties, is go to EPA.gov and make sure that you’re not buying in a Superfund site. It is because then you’re talking about millions of dollars of cleanup that you could be liable for.

You might buy it for $5,000, and you sign a deed, and you could be on the hook, and they could come after you personally, for an unfathomable amount of money. Not good.

That’s why you have to make sure you’re not buying in those areas. I’ve been doing this for twenty years, and I’ve never had that issue, but we still check it.

Evaluating Land Size And Potential Uses

Makes sense. Let’s frame the piece of land itself. This is a three-hour drive from whatever it is, the bigger city there. I imagine there’s not a whole lot out there. What’s the size of the lot? What is the purpose that this potential buyer, we’re getting ready to touch on, what are they going to do with the land, Mark? Why is this valuable?

There’s a lust for land in this country that most of us don’t realize. I’d say that the majority of our buyers are what I call legacy investors. They want to own property. The fact that they can afford it, because if they’re looking around their own city, it might be unaffordable for them, but we make it like a car payment. We make it irresistible for them. They might go out there, they might camp or hunt or fish, but it’s the only asset that lasts. It’s this generational investment. They should have heard growing up, “Own land.” I’ve never been stuck with a piece of raw land. It’s crazy. They all sell. There’s a pig for every barn.

There’s a lust for land in this country that most people don’t realize.

It sounds strange to me. We have done 247 houses so far this year. I am stuck with 1 or 2 of them, only because I’m not willing to come down on my price much more. There’s this pain of reducing the price. I know I’m not losing profit, we’re losing real money we already have in on these houses by lowering the price. I am stuck with them, but I’m not because we’ll eventually sell them. One of my operating philosophies is to do a huge high volume of deals. It is because if there are some losers, and a lot of times there will be a loser here or there, at least in my experience, I make some mistakes by doing a high volume of deals.

In a high volume of deals, like a stock portfolio, there are more winners than there are losers. It all averages out at the end of the day. It sounds very strange to me when you say, “There’s a buyer for this place.” I’m in Illinois. I’m in Chicago. I live right here on the lake in the middle of Chicago in the city. Three hours south into the bottom of Illinois, where it’s like farmland or something like that. Who’s going to do anything with it? I don’t even know anyone who would want to. Campground stuff and hunting and fishing, I guess that does make sense when you say that. How do you find these buyers?

We’re going to market first to the neighbors. We send out a neighbor letter, and we’re going to say to them, “Here’s your opportunity. Protect your views, protect your privacy, know your neighbor.” Oftentimes, the neighbors will end up buying. This is like this built-in best buyer and this advantage that we have. If the neighbors pass, we’ll go to our buyers’ list. These are people who have already indicated an interest by either saying they’re interested in raw land or buying raw land from us in the past. Oftentimes, they’ll buy.

If the buyers’ list passes, then we’ll start marketing on Craigslist, it’s the tenth most trafficked website in the United States. We’ll go to Facebook buy/sell groups and Marketplace, and then we’ll go to the lands, Landmodo.com, LandAndFarm.com, LANDFLIP.com, LandHub.com, and LandsOfAmerica.com. These land platforms are where people buy and sell raw land every single day.

Is there a process for building a land buyers list? Do you have one for South Dakota and one for Colorado and one for this state? Is it going to be the same flock of buyers that somehow has this land list no matter what remote location it exists?

I think they’re location-agnostic for the most part. They want to own raw land. Even if they’re located in New York City, Nevada, or Arizona, they don’t care. The desert’s the desert to them. They want to go to a cool place that is outside the city. We’re marketing to them. We’re not doing a whole lot of segmentation. Once in a while, when we email our buyers list, I’ll get an email back saying, “Do you have anything in Texas?” In that case, we’re like, we do. We’ll send them the listing. We’re not letting our buyers dictate where we’re buying. We want to buy the property for $0.25 or $0.30 on the dollar. We’re making our money on the buy. We know we’ll sell it.

Understanding Land Deal Structures

It boggles my mind that there are land hoarders in this country like this, enough to build an entire business. It’s pretty cool. Can you talk about the deal structure a little bit? You mentioned selling to them on car payments but paying $5,000. How does that math work on a $5,000 deal?

Let’s take a deal that I did in West Texas. We sold it for $20,000. I believe it was $249 down, $249 a month, and 0% interest, and we paid $4,000 for it. Our annual yield on that deal was over 60%.

Are they land contracts? Are you doing a deed of trust? Does it unwind quickly?

No cost of foreclosure. We only do land contracts. We use a software program called GeekPay.io, and it’s a set-and-forget-it system. We’ll get the down payment via credit card, and then we’ll get their checking account information, routing number, and account number, one time, and then the system will draw from their checking account each month.

Let’s say that they don’t have any money in their checking account for that month and it bounces. We can use the credit card as a backup as well. It lowers our default rate on those types of deals. If their credit card bounces and their checking account bounces, then they’ve got 30 days to cure the default, and if they don’t, we keep the down payment, we keep all the monthly payments, and we resell the property. It increases our ROI in that situation.

Is there any risk when you’re owning this land in the land contract that you would have to keep property insurance on the land? I don’t know, if someone crashes a dirt bike on there and you’ve got a land contract, who would be liable for something like that?

That’s a great question. In reality, it hasn’t happened to me yet, knock on wood. The way that we protect ourselves, and the way I recommend people to do that is if they’re homeowners, they need an umbrella policy on top of their homeowner’s insurance. Typically, that’s the reason that we have an LLC, to limit liability. They can sue the company. You have this umbrella policy. When we’re doing the volume that we’re doing, to insure every single piece of land would take too long and be too costly for a commercial policy.

As long as a black swan event doesn’t occur, it’s okay.

So far it hasn’t. I remember years ago, they were out in Nevada, and they’re out 30 minutes from town. It’s rural Nevada. They’re looking at their land, and they’re telling this harrowing story, that they went off-road, and the car got a flat tire. They barely had any water. They thought they were going to die out there. The whole time I’m waiting for them to say, “I want a refund.” They’re like, “We loved it. We want the adjoining land.” That was a great adventure, this great story. They almost died, but they loved the land.

Put a spare tire and make sure you have the jack in the car next time. What type of inventory is involved in the business? I know you do this where you teach people the business, and you have the students running their business, I believe, separately. What type of inventory do you have now for sale, to give an idea of the numbers and volume it takes to be successful at doing what you’re doing?

I’m probably a little bit of an outlier because I’ve been doing it so long, and we’ve got this machine built. At any one time, I’m going to have 100 to 200 properties in inventory. We try to do a deal a day, that’s going to be our type of volume. I would say that for our students, for them to get to let’s say $10,000 a month in passive income in twelve months, they’re going to need to do about eight deals a month to get to that number. It’s not a tremendous amount of volume, but that should do it. To get to about $5,000 a month in passive, you need to do about 22 deals that average about $200 a month.

What kind of monetary and time commitment do you think would attach to each one of those two numbers?

We tell our clients that they need to budget an hour to a day of focused time in the business. The whole idea is to make it a business. A business is going to outlive you and me. They should be able to travel around the world, and this passive income machine should continue churning it out. To start building that infrastructure, hiring the virtual assistants, getting the teams in place, and the software, takes some time. Maybe about a year-long learning curve. That second year, it goes up from there.

A business should outlive us. The goal is to build a passive income machine.

That doesn’t sound too crazy. I spend a lot of time in my business, but I imagine that 1 to 2 hours. We say 1 to 2 hours, and it probably sounds like not a lot. In reality, for a lot of people to have 1 to 2 solid hours of doing something they have not been doing forever, it’s hard work. You have to push and use the force of will because it’s not something you’re used to doing. You’re setting up these VA relationships and stuff. It can be a challenge if you haven’t done that stuff already. It is no small thing, but it is a small-time commitment.

It’s a simple model, but it isn’t easy. If it were easy, everybody would be doing it.

What about cash marketing-wise? You had to use 3,000 deals, and you bought ten lots, and then you sold them off. What kind of a cash reserve would you have, and what kind of a monthly budget would you also have to have to get to the $5,000 to $10,000 per month coming in?

It depends on how you structure it. If you’re doing cash deals and you’re flipping at 300%, you can start with $1,000 or less, and it’ll move the needle because you build up your cash reserves real quick through cash sales. When you start doing terms, you’ll run out of money at some point because your capital recovery might be 6 to 12 months before you get your capital out.

At that point, we tell people, you’re making 300% to 1,000% ROI. If your yield is 70%, it is irrelevant to what you borrow. Get as much money as you can get at 2%, 3%, 5%. There are so many friends and family that are making 0% of their money. Do them a favor. Do a debt deal with them. Pay them back quarterly at 10%. They’ll be super happy. You’ll be happy. That’s how you scale your business to the next level.

As you talk about it, I’m single-family real estate, small multifamily stuff, 2, 3, 4-flats. That’s our specialty. The barrier to entry is high. You’re talking $50,000, $60,000, $80,000 by the time you buy a house and renovate it on the very low end, whether we’re talking Atlanta, Philadelphia, or Chicago, where I operate my business. It’s hard to find a $30,000 to $40,000 house and then put $50,000 to $60,000 in it, especially with some of the risks that come with some of those neighborhoods that are $30,000 to $40,000.

The real barrier to entry for a lot of investors in these three markets for us in single-family and residential, and I imagine throughout the United States as well, is probably more like $150,000 to $200,000. I funded a deal through one of my private lenders, and we paid 10% and 2 points to our money network. People go to FundRehabDeals.com. They sign up.

We send out our private mortgage investment opportunities. For someone to participate there and fund one of our deals, they have to be an accredited investor, and they have to have the $200,000 that we needed, and it’s got to be in a position where it does not have to be liquefied and returned to them until we’re done with the deal, which could be 3 or 6 months. We might hit some snags, and it’s all of a sudden 9, 10, 11, 12 months.

They’re earning interest the entire time, but the illiquid and larger amounts of cash keep a lot of people from being able to play the game. As you’re talking about your thing, if this was my brother that came to me, or my dad was going to do this business, or vice versa, I know that my dad would have been in a much better position years ago if I was starting this business to hand me $10,000, which could be leveraged into 1 or 2 deals, it sounds like.

Maybe I get lucky and I get three deals if I’m getting into the land business, versus my dad was in no position to hand me $200,000 fifteen years ago when I started in the business. The barrier to entry-wise, I’m out on a limb because I don’t know your business, feels like you can do this with a much smaller pool of seed capital in the beginning. We get momentum and velocity and build it up. Is that correct?

You’re 100% correct. We’ve got people that have started with $800. I started with $3,000. It’s a very low capital cost to get started.

Land Market Trends And Pricing Over Time

Since 2018, when we first did our episode there, how has the land market in the United States changed since that time? Has pricing started to get a little higher? Has the market got more competitive? Have things stayed relatively flat and it’s been the same operating business? If it’s not 2018, maybe we go back to 2010 and you give a price comparison of what the trend or the trajectory might look like going forward.

It’s been a very weird two years, where 2019 was good equilibrium. It was easy to buy, and it was easy to sell. 2020, with COVID, we could not keep anything in inventory. It was like we went back to 2006. When the government does a stimulus and there’s all these dollars going into the economy, where do people go then for inflation hedges? They go to gold, silver, and land. It was insane this year as far as selling land. As fast as we bought it, we would sell it. As a result, prices have gone up this year. The ratio has gone up as well. I’d say it’s been a little harder to buy, but easy to sell. As we go into 2021, I don’t know how it’s going to be. We’re due for a recession. I’d like to think that there’d be some dip, but I don’t know. The market is hot.

It’s what I expected. Are prices increasing? Are you seeing more people paying cash, or are you selling them the same way on terms, and the balance of cash deals versus terms deals is equal through 2018, 2019, and 2020? Have you started to see maybe a weighting toward cash buyers suddenly in the market? They’re outcompeting, the terms buyers are getting squeezed a little bit.

Terms are always easy because you make a car payment. I’d say that we probably do 90% terms deals and 10% cash deals. The only reason we ever do a cash deal is because they insist on it, or they pay off their note early. We don’t want the cash. We want the cashflow.

Is some of that wanting the cashflow having to do with your overall tax strategy, or is it the higher price and the person paying cash wants a better deal? What’s that all about?

The person paying cash, they don’t want the debt. They want to own the property. They want the deed. Sometimes it might be cultural. If you have somebody from China, they want to pay cash for everything. They don’t believe in debt at all for the most part.

Why Teach Land Investing And Its Potential

What questions have I neglected to ask that you feel like the audience would love to know the answer to?

I don’t know. I think I would want to know why it’s so great. Why is Mark teaching this and telling everybody about it? That I’d want to know if I were the audience. What do you think, Dan? I think the answer to that is that the market is massive. I remember my wife and I were having this conversation. She’s like, “This is years ago. You’re going to teach people how to do what you’re doing. You’re going to create your own competition.” I put on my investment banker hat. I said, “You might be right. Let’s see how big the market is.”

When you analyze the billions of acres in this country and how few people are doing this business, because if you go to a meeting and there are 100 people in that room, you and I would be the only land guys. Ninety-nine of them are going to be house flippers, wholesalers, or landlords. It is because if you go on HGTV or the DIY network, you’ll never see a show called Flip This Land.

The before picture is raw land. The after picture is raw land. It’s the most boring niche there is. All we’re doing is shuffling paper and making money. Ever since I’ve been doing this, my investment company has only grown. Our clients’ businesses have grown. There is no competition when you look at the size of the market. There’s no big money in it. There are no private equity groups and no hedge funds.

Are most of the deals in this price point that we played out for all of our examples, or are there examples that you have that are not necessarily outliers, but where the deals are made in $60,000, $80,000, $100,000 pieces of land, or is that maybe what’s reserved for the private equity and the big money, the larger-priced parcels of land?

That’s going to be too small for them too. Let’s pick on some of the bigger landowners. They’re billionaires. Jeff Bezos and Warren Buffett. They’re buying productive farmland or timberland, and they’re making 8% of their money. They’re very happy with that 8%. It’s a very steady bond if you will. They’ll get some appreciation for it. If you’re a billionaire, you’re Ted Turner, you’re buying cattle, ranches, and that type of property. You’re not even playing in our little niche. It is because at some point, then it’s too much volume. If you’re a private equity group, you can’t even manage it. It’s too much money in one place.

It makes sense. Are you guys playing mostly it’s $20,000 deals all the way across, or are there any pricier deals than that that come through this niche?

For me, if I can deploy a couple of hundred grand on a deal and subdivide it, that’s a nice big deal. We’re not talking real money here. We’re doing a development deal. We’re buying 15 acres of 1,000 acres. After we subdivide it, we’re going to flip it for $5,000 an acre on easy terms. We’ll have all our money out in three years. We’re going to make $1 million on that one deal.

Nice. Where is that type of property located? Are those going to be one-acre lots that are buildable or are these going to be one-acre campsites like some of the other ones we talked about earlier?

Those will be buildable lots. We’re going to put roads and infrastructure in as well. Those will be a little bit more like a development-type deal. There are no restrictions. If someone wants to camp out there, they can. The end buyer is most likely going to want to eventually do something with it.

That makes sense. Do those lots have water, or are they going to be by well? Are you guys putting in pipes?

No, that would be by well.

That’s interesting. Nice. Congratulations. Sounds like a good deal.

That’s all we do, Dan. Good deals. Just like you. We don’t do bad deals.

I’ve done a couple of bad ones. I’ve done a couple of record-breaking bad ones. It’s the nature of the beast for me, I think. We do enough deals, but hopefully more good ones than bad ones. We do a whole lot of good deals. Some of them, we talk about our winners usually, I’m sure, in public. I’ve had some losers too. We’ll leave it at that.

I did a deal. It was a bad deal. We screwed up on the due diligence and had POA fees. We were buying these things for $50 a lot. We missed the due diligence. They owed $3,000 a lot in POA fees. We’re like, “This is terrible. We’re going to lose money on it.” I’m like, “Screw it. Don’t pay the property taxes. What we’ll do is we’ll let it go to auction and we’ll apply for the overage.” We did that. We didn’t pay the taxes because once it goes to a tax sale, it wipes out that POA lien. We made $8,000 on the deal, on the overage. It was pretty great. Even when we make a mistake, there’s a way to salvage it.

Even when we make a mistake, there’s a way to salvage it.

It sounds like you’re lucky there on that one. The POA, what does that stand for?

That’s a Property Owner’s Association.

Could they have, in theory, gone and applied for the overage and then got it in front of you as the owner, but they neglected to do that in that case?

I guess in theory. They don’t want to own the land. They want their fees.

It makes sense.

They know about it. The overage situation is not that well known. It is because it’s not like the county wants to keep the money. They don’t want to tell anybody.

Top Book Recommendations From Mark Podolsky

You’re right about that. What books have you recommended lately? Are there two books, real estate or otherwise, that you find yourself recommending most often?

The two most recommended books are the combination of The ONE Thing by Gary Keller and The 12 Week Year by Brian Moran. Those two books combined are magical. I always recommend those two books. A shameless plug, my own book is Dirt Rich. I think it’s pretty good, Dan. I’m working on a sequel to that. I don’t know if I’m going to call it Dirtier and Richer: How to Scale Your Land Business. That one I’m working on. If you’ve ever written a book, it’s miserable. I don’t recommend it.

I have only one.

I must hate myself, but I’m trying again.

Mark’s Ultimate Wisdom For Success

That’s cool. It can be fun to think through all the thoughts and put it all together. Mark, I ask all my readers this, and I know that we probably asked you that in 2018. We’ll probably go back and figure out if the answer was the same. This is the REI Diamond Show. It’s all about the jewels of wisdom. That said, let’s talk about the crown jewel of wisdom. Is there one thing you’d share with your younger self or maybe one thing you wish you knew then that you know now?

I wonder if I said this two years ago. I wish I knew how to meditate when I was younger and experience everything arising and not getting identified with good and bad thoughts. That would be like a superpower if I had done that when I was younger, for sure.

Meditation is experiencing everything arising without identification. Good and bad thoughts become just that – thoughts. That’s a superpower.

I assume you’re doing this on a regular, maybe daily basis?

I do it on a daily basis. Years now. It’s 5 or 6 years, and I love it. The best part of my day is this hour I spent with myself, literally doing nothing except watching my mind play out some dramas and then getting back to the moment. You realize, holy cow, there’s nothing out there that’s going to make you happy. It’s all internal. It’s a weird experience when you experience it. It takes a while to get enough mindfulness to get there.

It makes sense. I am an avid fan of Bulletproof Radio, which is Dave Asprey. This guy’s going to live to 180 years, and he puts a show out and has a brand. The supplements used to be on the anti-aging something in Silicon Valley. Anyway, on his show, he had a guest and he has a lot of guests who are doctors and this and that. It’s all about anti-aging.

The doctor would take patients who are experiencing things like anger issues, things like depression long term, people who have issues sleeping, anxiety attacks, and panic attacks, and they would use this alternative treatment plan where they would put them in the MRI machine, I believe, and they would check out there. It may be a different type of brain scan they use, but they look at the brain and they would find these dead spots. What their conclusion eventually came to be is a lot of times people have these brain traumas from childhood.

You fell off a bike, you fell out of a tree, you played hockey, you played football, you got hit with a baseball, you got in a car accident, you tripped and fell. They found that the brain needed these different protocols to redevelop connections to be able to use these neural networks fully and completely. A couple of the small little things this doctor said that you would have almost all patients do were fish oil pills twice a day and adjustments to the diet, maybe adding more fish in there, avoiding gluten in the bread, and the sugars.

The one thing and this is why I bring up this long-winded tangent, the one thing that they also included was a twenty-minute meditation in the morning and a twenty-minute meditation at nighttime. I started doing that at least a year, maybe a year and a half ago. I do it with the Muse meditation device, which gives you feedback on your app to see if you’re “doing it right” because you have your actual, not scientific feedback, but it is some way to get feedback to see what is going on in your mind.

It has been one wonderful year and a half. The same thing you’re talking about, this level of happiness, well-being, the calmness, my sleep is better. That was a long-winded plug-and-bow to the meditation thing. It’s been as equally life-changing for me as it sounds like it’s been for you. That’s pretty cool.

Do you do Bulletproof coffee?

I was doing Bulletproof coffee every day, and I think I screwed up by doing it every day. It’s now maybe once a week or less. It was giving me this indigestion by doing it every day. How about you?

I love coffee and I’ve been drinking coffee for fifteen years, daily. I became like a coffee snob. I would spend an hour in the morning drinking coffee and doing this whole ritual. I was like, “What would life be like without coffee?” I think it’s been like a month now. I have to tell you, I’m sleeping like a teenager now compared to when I was drinking coffee. I was substituting that time now to meditate. It is because I used to meditate for twenty minutes, so now I meditate for an hour. It’s great. I’m not missing it. At least not yet, but I did the whole drink coffee thing too.

You probably won’t at this point.

I don’t think I will. It’s social, you’re that person now. “You don’t drink coffee?”

Fair enough. Mark, how can our audience get some more information about you or The Land Geek or maybe even the software that we were talking about earlier?

The best place to start is TheLandGeek.com. I don’t think we had this two years ago, but I created a whole-tailing course on how to double your money in 30 days or less. It’s normally $97, but I’d love to offer your readers it for free. They go to TheLandGeek.com/QuickDeals. They can get that course and see if this is a niche that resonates with them.

I appreciate you taking the time out. I got a couple of pages of notes. Great conversation. Great follow-up here. It’s interesting to see the US land market in these tertiary areas developing and heating up here per your feedback there. I appreciate it, Mark. Thank you for coming to the show.

Dan, thank you so much for having me again. I appreciate it.

—

My favorite way to fund a fix-and-flip deal is by using private money. I did an episode on raising private money for single-family flips a little while back, detailing my entire process with Joe Fairless, as a matter of fact, which you can find at REIDiamonds.com by typing raising private money into the search bar. What if you don’t have access to private lenders and need money to get started? Everyone usually talks about hard money. That’s great as long as you have some reserves or a nice chunk of cash in the bank to show the hard money lender to get the loan. They like to loan money to people who already have a little bit of money, at least to be able to cover the payments and any other ancillary construction items that may come up.

One little-known and little-talked-about option is gap funding. Gap funding is a line of credit used to access the funds needed for reserves and business startup costs. There’s no restriction on how you use the funds. It’s called gap funding because it’s used to fill in the gap. The team over at REI Pathway Funding can set you up with a gap funding line of credit, which has an initial interest rate of 0%. In certain cases, if you qualify, it does not show up on your credit report as it’s structured as a business loan. To find out how much you might be pre-approved for, go to www.REIPathwayFunding.com.

Thanks again for tuning in. Remember to review and subscribe to your podcasting app. Search REI Diamonds and click subscribe. You can also access the 175- and 176-episode archive at www.REIDiamonds.com. My main business, Dan Breslin, is diamond equity investments, buying, renovating, and selling houses.

We bought and sold 223 houses in 2019. We’ve been blessed to grow about 40% to 50% year over year. We’ve done 273 houses so far in 2020. As I’m recording this, there are a few more days in the year to add a few more closings. We currently have another 108 houses in our inventory, either under construction, for sale, or sold and awaiting closing. Here’s how I can do business, you and I can do business together.

First, if you are interested in having access to the best real estate deals in your market, go to www.AccessRealEstateDeals.com. Number two, are you an accredited investor who enjoys double-digit returns? If you’d like to potentially invest passively in a real estate deal or several of mine, go to www.FundRehabDeals.com and sign up to receive my private mortgage investment opportunity emails.

Number three, I am always buying houses that I can flip. I buy occupied apartment buildings with below-market rents. If you have a deal that fits that description in either Atlanta, Chicago, or the Philadelphia region, please send me an email with the details. We are at the conclusion, my friend. Next up, fellow Forbes Real Estate Council member and Smart Real Estate Coach founder Chris Prefontaine joins us to discuss no-money-down real estate deals with average profits per deal of $75,000 and up. More on those fat deals next time. Danny B, signing off.

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John Matheson on How to Access Commercial Credit

John & I Discuss

System for Approaching the RIGHT Bank for Your Loan
Where to Get Financing-Even When Banks Aren’t Lending (2009)
John’s Favorite Deal Turns $300K into $3 Million
How to Develop Land WITHOUT Building a Single Structure

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Commercial Developer & Financing Oracle

John is the managing member of J. Healy Development, LLC. The company specializes in developing new projects into sustainable properties. John has been in the property development business for 26 years, and has been involved in transactions for developing, permitting, and/or financing of completed projects totalling over $50 million. Through J. Healy, John focuses on making multifamily, mixed-use, storage, and other commercial development properties more green and sustainable, lessening a property’s footprint while increasing its value.

John Matheson is also the CEO of Commercial Loan Success, a software and education platform designed to help small business owners and property investors make more informed financing decisions. Using the Commercial Loan Success loan analysis software platform, commercial borrowers and commercial lenders are able to communicate more e‑effectively, and borrowers are able to approach commercial lenders more confidently, already knowing that their transactions are lendable. Through Commercial Loan Success, John hopes to provide the resources and educational materials that small business owners, entrepreneurs, and real estate investors can use to confidently obtain financing and grow their businesses profitably, all without being at the mercy of the predatory lenders.

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Hampshire Capital CEO Shane Carter On Real Estate Development

Balancing Personal Growth And Professional Success

Real Estate Development And Career Beginnings

Exciting Real Estate Deals In Recent Years

First Subdivision And Land Development Experience

Surviving Economic Downturns In Real Estate

Strategic Insights On Market Conditions

Key Metrics or Evaluating Development Projects

Investor Insights On Real Estate Fund Structure

The Impact Of Kindness And Networking

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Build A Portfolio Of Seller Financing Cash Flow With Nick Disney

From Real Estate Beginnings To A Proven Business Model

Business Models And Mortgage Lending Laws

Breaking Down A Recent Real Estate Deal

Handling Defaulted Notes And Foreclosure Strategies

How Refinancing Strategies Unlock Investment Potential

Investor Journeys: Transitioning From Rentals To Notes

Aligning Investments With Your Financial Goals

Must-Read Books For Real Estate Success

Crown Jewel Of Wisdom For Investors

Reflecting On Acts Of Kindness

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Fast & Easy Multifamily Lending with StackSource Founder Tim Milazzo

Resources mentioned in this episode:

Tim & I Discuss StackSource & Multifamily Lending:

Hottest Sectors in Commercial Real Estate

How to Finance Multifamily Investments

Obtaining Fastest Rate & Term Quotes

Finding Commercial Funding Anywhere in the U.S.

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The transcript of this episode can be found here. Transcripts of all episodes can be found here.

Episode: How to Release Home Equity WITHOUT a Refi or Payments-a conversation with Matthew Sullivan

Episode Sponsored by the Deal Machine:

Resources mentioned in this episode:

Matthew & I Discuss How to Release Home Equity

What is a “Home Equity Contract”?

Own a Piece of Appreciation in Hot Markets

Tokenizing Residential Real Estate

Using Option Contracts instead of Mortgages

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Episode: How to Buy a House with No Money Down with Tim Padavic

Episode Sponsored by the Deal Machine:

Resources mentioned in this episode:

Tim & I Discuss Buying a House with Low Down Payment:

How to Access Grant Money for Down Payment

Income & Debt Levels to Qualify

How to Get Offers Accepted in this HOT Real Estate Market

Importance of Beginning the Mortgage Process Now

Relevant Episodes: (There are 188 Content Packed Interviews in Total)

The transcript of this episode can be found here. Transcripts of all episodes can be found here.

Are you earning 15% on your passive investments? Would you consider buying mortgage notes if you could generate those returns?

Episode Sponsored by the Deal Machine:

How to Buy Mortgage Notes

Creative Financing Real Estate Methods-the Key to No Money Down Deals

Interested in Attending a Live, Full Day Masterclass in Creative Financing & Trading Mortgage Notes FOR FREE?

Normally $97, You Can Attend FREE by Signing up at www.REINoteSchool.com

Brian & I Discuss Creative Financing & Buying Mortgage Notes

Originating Mortgage Notes Creates More Deals

Paying Higher Prices Still Generates Profitable Deals

Transition 100% to Buying, Selling, & Holding Notes

How to Do No Money Down Note Deals

Relevant Episodes: (There are 180 Content Packed Interviews in Total)

The transcript of this episode can be found here. Transcripts of all episodes can be found here.

Episode Sponsored by the Deal Machine:

The Mobile Home Market is Prime for Making Quick Cash

This is NOT about Buying Mobile Home Parks-You do NOT own the land here…

5 Risks that Lead to BIG Losses & How to Avoid Them

Structure of a No Money Down Mobile Home Deal

Resources Mentioned in this Episode:

Jay & I Discuss Investing in Mobile Homes

Structure of a No Money Down Mobile Home Deal

5 Risks that Lead to BIG Losses & How to Avoid Them

Most Valuable Asset-Even if You Have No Money

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.