Clean Tech Meets Real Estate with Owen Barrett

 

Clean Tech Meets Real Estate with Owen Barrett

 

Guest: Owen Barrett is a dynamic entrepreneur with a decade of experience in clean technology and real estate. As the founder of Raven, he is revolutionizing the real estate industry by combining clean technology and net-zero principles with profitable investments. Owen’s expertise lies in implementing energy-saving solutions in commercial properties, and his company offers a unique opportunity for investors to participate in net-zero real estate with minimal capital. With a focus on integrating rooftop solar installations, Owen and his team bring a wealth of knowledge in clean tech, enabling them to optimize energy efficiency, reduce operating costs, and increase property value. His innovative approach extends to the development of proprietary software that automates solar billing, streamlining the process for multifamily properties. Owen Barrett is a trailblazer, democratizing net-zero real estate and paving the way for a sustainable and profitable future in the industry.

 

Big Idea: In this eye-opening podcast episode, Owen Barrett, founder of Raven, shares his investment philosophy centered around identifying overlooked secondary markets with strong economic tailwinds and integrating clean technology into real estate acquisitions. He discusses the Inflation Reduction Act, which offers tax credits and rebates for decarbonization and electrification projects, presenting lucrative opportunities for investors in single-family homes.

 

 

    

 

Owen: I’ve spent about a decade of my life being in clean technology, so anything that saves energy and saves money. And what I’ve noticed over time is that commercial real estate as a whole across an industry is the furthest behind when it comes to implementing clean technology into their properties, which is saying a lot because a lot of industry is pretty far behind. Three, four years ago you didn’t really need to get that creative to make money in commercial real estate. The market was going up, everything was going up, but now that’s different. Now rents are more stagnant, rents are even falling in some markets. And so now energy conservation’s an easy way, an easier way for property owners to make properties more valuable. So it’s interesting timing for us because there’s a lot of macroeconomic tailwinds or headwinds, I guess, that are happening that make our value add model a little bit more popular.

So we’re in this interesting space of combining clean technology with real estate acquisitions, we couple the two. Raven is the newest business, the newest brand. And the idea behind Raven is to democratize the ability to invest in net zero real estate. So we pay investors 10% annual interest, the minimum investment is $250 and we were really deliberate behind that because we wanted it to be an opportunity for everyone. I come from a past of regulation or 506D offerings, which is a lot of accredited investors, $50,000 minimum investments. And with Raven we just wanted to make it more attainable for everyone. So we really decreased the minimum investment, tried to make it an opportunity for everybody.

Dan: Yeah, that’s pretty interesting. This is the first time out of 223 guests I think that we’ve ever had that low of a minimum investment. So every single other syndicator is probably $50,000 or $100,000 and it’s going to be an accredited investor type of offering only. The 10% annual interest, how is that paid, sorted out? Is that going to be like a flat interest rate paid at the end of the deal no matter how good or bad Raven does on the deal? Or is that calculated in some other methodology?

Owen: No, yeah, we’ve structured it as preferred debt. So it’s a promissory note to Raven. We pool the capital, we buy and decarbonize buildings. It’s paid quarterly right now. The goal is to move that to monthly. That’ll probably happen in 2024. In investing there’s no such thing as a guaranteed return, so we don’t guarantee 10%, but we do pay our regulation A investors before we pay ourselves. So they earn 10% before we make any money. So we tried to structure it in a way that it’s not risk free, but it’s as low risk as you can get within the real estate realm.

 

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 9.25%.  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://JoinRayven.com/

 

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

https://AccessOffMarketDeals.com/podcast/

 

Owen Barrett & I Discuss Clean Tech Meets Real Estate:

  • Secondary markets with economic tailwinds: Exploring investment opportunities in smaller, overlooked markets that have significant economic growth potential.

  • Cash flow markets: Emphasizing the importance of investing in markets that generate consistent cash flow rather than relying solely on property appreciation.

  • Tax credits and rebates for decarbonization and electrification: Highlighting the benefits of leveraging incentives provided by initiatives like the Inflation Reduction Act to reduce renovation costs and promote sustainability.

  • Newer vintage properties: Discussing the advantages of acquiring properties directly from developers to minimize repair and maintenance issues.

  • Clean technology integration: Exploring the integration of clean technology, such as solar panels and electric heating solutions, into real estate investments to enhance property value and reduce operating costs.

    

Relevant Episodes: (There are 223 Content Packed Interviews in Total)

 

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

Real Estate Insights and Opportunities From Chicago to Austin with Drew Breneman

 

Real Estate Insights and Opportunities From Chicago to Austin with Drew Breneman

 

Guest: Drew Breneman is a real estate investor based in Austin, Texas. He began his journey at a young age, starting an online business and saving his earnings. As he delved into investing, Drew explored various avenues, including stocks and mutual funds, but found his passion in real estate. Inspired by books on investing, he realized the potential of leveraging properties and their appreciation. Drew purchased his first duplex as a college freshman in Madison, Wisconsin, and continued to expand his real estate portfolio while completing his education. With a focus on multifamily properties, Drew combines his business mindset with investment strategies to create successful ventures in the real estate market.

 

Big Idea: Join hosts Drew and Dan in this inspiring real estate podcast episode as they discuss Drew’s journey from Chicago to Austin, his early entrepreneurial ventures, and his success in real estate investing. They delve into various topics, including the reasons for Drew’s relocation, real estate opportunities in Chicago, Drew’s entry into real estate investing, his early ventures, transitioning to multifamily and value-add deals, expanding into new markets, the importance of real estate education, holding properties for the long term, and the significance of preparedness. Gain valuable insights and strategies from two experienced real estate professionals.

 

 

    

 

Dan: Yes, I love Chicago personally for the rental apartments that I own. I think Chicago is understated in the national investment context when we talk about apartment buildings, although I don’t necessarily know if that would hold true when we get into the main topic here of the size of deal that you are focusing on now. I think it probably is a good market, and I’m not super familiar with, let’s say, 20 to 34 units and up in the city of Chicago. But one unique thing, we do deals in Atlanta, Chicago, Philly, around the country, Florida, a lot of other markets as well. And the one thing I found and love about the Chicago market specifically, Drew, is the abundance of two, three, and four-flat buildings. So like, I’ve found no other market, maybe Los Angeles or New York offers that kind of opportunity to call the entry-level investor to get the two or the three or the four-unit buildings and kind of do the house hacking.

So I’ve loved this city for that reason. And when I got here, moved here from Philadelphia in 2015 to Chicago, I was blown away by the high prices in areas where I came from. In Philly, we have very, very low prices comparatively. People making the same kind of money in Philadelphia can buy a much lower-cost house in the city. And then the prices were probably almost double in Chicago. So we have expensive real estate and high rents. And my investment philosophy, buying those apartment units over the past couple of years, has been to get into the expensive property and take out, I don’t want to overpay, but I want to take out a higher and higher mortgage with higher and higher rents on a per-unit basis because I’m paying down that at a higher velocity over time. And then the two and a half percent increases are larger dollars. So it allowed me to play a little bit bigger than I might have been able to play in the city of Philadelphia. And there’s just such an abundance of that type of inventory. Whereas in Philadelphia or a lot of other cities, Atlanta having a duplex or a triplex is like a unicorn. It’s a really rare event. But I digress on that. Why don’t we, for listeners, Drew, why don’t you kind of do our evolution of the business model and your origination story so we can get a picture of who you are and what your business looks like?

Drew: Sounds great! And I’ve noticed the same thing about Chicago. If you wanted to get started in a two to four-unit, there might be more there than anywhere. I often give that advice to someone starting out, and one of the people I was talking to was in Phoenix, and he was like, “There’s no three units here. What are you talking about?” So I was like, “Well, you got to figure out where they are. I’m sure there’s some.” But anyway, yes. So I got started really young. So started from the Milwaukee area, and both my parents were teachers. I was living in the suburbs my whole childhood, and I started a business online just buying and selling items and video games. I didn’t make any huge money on any one sale, but I made five or $10 per sale, and I saved all the money.

 

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 9.25%.  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.Breneman.com/

 

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

https://AccessOffMarketDeals.com/podcast/

 

Drew Breneman & I Discuss Real Estate Insights and Opportunities From Chicago to Austin:

  • Reasons for Relocating: Seeking Safety and Lower Property Taxes
  • Real Estate Investing in Chicago: Abundance of Entry-Level Opportunities
  • Drew’s Early Entrepreneurial Journey: From Online Sales to Real Estate
  • Transitioning to Multifamily and Value-Add Deals: Maximizing Returns in Chicago
  • Expanding to New Markets: Venturing into Sunbelt Markets

    

Relevant Episodes: (There are 222 Content Packed Interviews in Total)

 

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

Unveiling Your Real Estate Edge: Insights from Jeremiah Boucher

 

Unveiling Your Real Estate Edge: Insights from Jeremiah Boucher

 

Guest: Jeremiah Boucher, a seasoned real estate investor, shares his transformative journey in the industry, from a challenging experience during the 2008 financial crisis to finding his competitive edge. With a focus on manufactured housing, self-storage, and small bay industrial properties, Jeremiah emphasizes the importance of continuous learning, building relationships, and honing communication and negotiation skills.

 

Big Idea: Jeremiah Boucher discusses his  journey of self-discovery and growth in the real estate industry. From overcoming adversity during the 2008 financial crisis to finding his niche in specialized asset classes, Jeremiah shares his insights on finding your competitive advantage, building trust, and the importance of continuous improvement. Get ready to gain valuable knowledge on deal sourcing, negotiation strategies, and the power of effective communication and presentation skills in real estate.

 

 

    

 

Boucher: Yeah. Similar to a lot of the listeners, I quit college and got into real estate. I bought a lot of houses. I lost everything in 08 with just like the big short, you know, and had some real challenges with tax liens and foreclosure and credit card debt and all of that whole deal. I didn’t have an edge, so I was doing what everyone else was doing in Vegas. You know, everybody was a realtor, everybody was a house flipper, learned the lesson. I knew something in my gut was wrong in that whole process, and I knew that wasn’t going to survive. I took the hit and had to rebuild, and then the next 10 years really were about building up a manufactured housing portfolio

I did that by just being young and naive and aggressive and reaching out to some guys that started a big mobile home park fund and helped them build that fund by sourcing deals and kind of putting together creative deals and managing and operating some of these deals and then had a nice swap with them in 2016 where I was able to take on my own assets and manufactured housing. That gave me some autonomy to take that cash flow and put it into my own management company. I ran that out of Vegas, a lot of the assets were in Vegas and up near Reno, and I was able to at that point, you know, kind of build up my resources and learn the ins and outs of the operational part of the business, which is rough when you’re dealing with some types of, you know, lower-income housing and, what revolves around that.

I saw at least the writing on the wall for me that I thought asset values were extremely high, and I really wasn’t prepared to grow or scale that type of business at that time, so I had a good exit in 2019 and wrote the book and then, you know, connected with I think you a couple of years later, but it was really through, you know, a bunch of different networks where I started to actually scale and start with some funds rather than doing individual syndications, and at this stage, I only operate out of raising money through funds. I’m a typical, you know, private equity syndicator, like a lot of guys on your show, and then at that stage, you know, my niche, my focus, you know, first was manufactured housing. We still look at it, but it’s not as heavy in the portfolio. Second is storage, you know, traditionally storage and tertiary secondary markets. A lot of them are up in the northeast. We remotely manage a lot of them, and we look for the rough ones and improve them.

Then lastly, my most recent kind of fun asset class is Small Bay industrial up in the Northeast, and I’m building a lot of it. I do construction as well. We can get into all that, but that’s trying to condense it as best I could for you, Dan.

 

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 9.25%.  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.PatriotHoldings.com

www.StorageBootcamp.com

 

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

https://AccessOffMarketDeals.com/podcast/

 

Jeremiah Boucher & I Discuss the Unveiling Your Real Estate Edge:

  • Finding Your Competitive Edge: Identify and leverage your unique value proposition to gain a competitive advantage in real estate by specializing in a specific asset class and continuously improving your skills.

  • Building Relationships and Trust: Learn how to build strong relationships and foster trust with sellers, partners, and investors, crucial for achieving success in real estate. Effective communication, active listening, and demonstrating credibility as a buyer are key elements discussed.

  • Understanding Different Asset Classes: Gain a comprehensive understanding of various real estate asset classes, including manufactured housing, self-storage, and small bay industrial properties. Explore the potential benefits and challenges of each asset class to make informed investment decisions.

  • Strategies for Deal Sourcing and Negotiation: Discover practical strategies for finding and evaluating real estate deals, along with effective negotiation techniques. Jeremiah shares insights on deal sourcing, market analysis, and structuring creative solutions that align with both buyer and seller goals.

  • Importance of Communication and Negotiation Skills: Recognize the significance of developing strong communication and negotiation skills in the real estate industry. Effective presentation, problem-solving, and active listening are essential for navigating complex transactions and building long-term relationships.

    

Relevant Episodes: (There are 221 Content Packed Interviews in Total)

 

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

Inside the Self-Storage Industry with Jacob Vanderslice of Van West Partners

 

Inside the Self-Storage Industry with Jacob Vanderslice of Van West Partners

 

Guest: Jacob Vanderslice is a real estate investor and entrepreneur with over 15 years of experience in the industry. He is the founder of Van West Partners, a real estate investment firm that specializes in self-storage facilities. Jacob has an extensive background in residential fix and flips, multifamily, adaptive reuse retail, and town-owned development, but his passion lies in the self-storage business. Jacob explains the reasoning behind his shift towards storage, the company’s investment philosophy, and how they create value in their facilities.

 

Big Idea:  Real estate investor and entrepreneur Jacob Vanderslice shares his expertise in self-storage investment. Jacob discusses his journey in real estate investing and how his company, Van West Partners, moved from single-family rentals to self-storage investments. He emphasizes the importance of creating value through income streams and optimizing unit mix for maximum revenue. Jacob also talks about his investment philosophy, which centers around value-add investments in growing markets.

 

 

    

 

Daniel: Okay, nice. Yeah, I’m in Chicago. As listeners probably know. Figure maybe we’ll start with the evolution or the reader’s digest version. Maybe a little bit about who Jacob is, but then also VanWest and kind of how your personal career and your business model evolved to the point where they’re at today in 2022.

Jacob: Certainly. Well, it’s all been accidental and I guess unintentional to a degree like most things are. We started investing real estate full-time in about 2006, and we cut our teeth doing lots and lots of residential fix and flips. We did a bunch of rentals. We did buy, fix and sell deals. We did almost probably 1200 of them over a fairly long period. We really started in 06 and kind of kept going in that business until about we had some overlap, but kind of started to quiet it down in about 19 as deal flow constricted and returns kind of went down. So that’s how we cut our teeth. Just buying residential homes at the auctions and fixing them up, making them better, and either running them out or selling them. We’ve also done a fair amount of multi-family adaptive reuse, retail, some for-sale townhome development, and we got in the storage business in 2015. And we looked at storage for a while, and we like the fact that it’s historically downside protected.

It’s got durable recurring revenue streams. It’s scalable, repeatable, defensible. So we researched it for a while and we kind of jumped in head first on our first deal. We did a ground-up development project here in Denver, and then we did a few other development projects locally, and then we opened up the Milwaukee market starting in about 2016 just north of you. We did a handful of deals out there. And over time, I mentioned accidental earlier. Over time, I just kind of evolved to becoming our main line of business. The residential business is great. Fixed and Flips is a great business. But one of the things we didn’t like about it is it was I guess overly transactional, meaning you’re buying, selling over and over and over again. And to make money, you constantly have to be buying a deal, making it better than selling it. And we wanted to shift to a business that was more cash flow focused versus a quick reversion focused. And that’s why we landed on storage. And through today, we’ve got 38 storage facilities, about 275 million in asset center management all over the country, Midwest, southeast, south, got some stuff in Denver, and we’re buying more and we’re building more.

 

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 9.25%.  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.VanWestPartners.com

 

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

https://AccessOffMarketDeals.com/podcast/

 

Jacob Vanderslice & I Discuss the Self-Storage Industry:

  • The evolution of Van West Partners’ investment strategy

  • The state of the US real estate market and the impact of COVID-19

  • The role of technology in the real estate industry

  • The potential impact of government policies on the market

  • The outlook for the real estate market in the near future

    

Relevant Episodes: (There are 219 Content Packed Interviews in Total)

 

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

Maximizing Asset Protection and Tax Savings with Scott Royal Smith

 

Maximizing Asset Protection and Tax Savings with Scott Royal Smith

 

Guest: Scott Royal Smith is a real estate investor, attorney, and founder of Royal Legal Solutions. He shares his background in real estate and law, and how he scaled his wealth through strategic planning and asset protection. He believes in educating people and forming relationships to help them leverage their assets to build wealth.

 

Big Idea: Scott Royal Smith shares his expertise on cost-effective legal structures for real estate investing and tax strategies for asset protection. He presents a practical system involving creating a series of LLCs and a Land Trust to hold assets, which provides effective asset protection and can help minimize maintenance costs. Scott’s insights offer valuable perspectives on how to reduce risk, minimize costs, and ultimately build wealth in real estate investing.

 

 

    

 

Dan: Nice. Scott, so for listeners, would you mind giving us maybe the reader’s digest version of the evolution of your business real estate and law career and then sort of what the business model is today?

Scott: Yeah and so my company is Royal legal Solutions but I got started in real estate when I was in law school. I bought a commercial property and auto repair and transmission repair shop for the back taxes. And I end up flipping the business in the building upon graduating to graduate from law school without any debt. And I thought that was going to be a hotshot litigation attorney. So I took a job suing insurance companies in a law firm. Turns out insurance company’s business model is collecting premiums and denying coverage, especially when things get expensive. And then that’s what attorneys does, they sue them whenever they do that. So, get first-hand experience about how does the whole game of insurance really work and how it’s important for us to have insurance, but also have additional protection in place.

But the whole time while I was working as an attorney there, I continued by real estate and I scaled my own real estate portfolio until I was making more money doing real estate and I was being an attorney. It took me about like a year and a half. I wasn’t sleeping a whole lot at those times in my life, and I didn’t need a lot of money, right? I wasn’t married, didn’t have kids and I was like, hey man, I’ve hit it. I’ve hit my financial freedom. I was like I’m golden, but then I ran into the problem and I think a lot of people run into which is like wait shouldn’t I be structuring this inside of like LLCs and should I be using any of trust to hold my assets and my company’s anonymously? And what should I be doing with all of my taxes and my estate planning, and my insurance? And why do I want to be doing all that? How’s that all suppose to work?

So, I did what everybody does and I was like, well, I’ll try to read the books and I’ll try to contact professionals. And so I did all of that, and I realized that nobody really have a complete system we’d put together. So I had to put one together for my own. So I built my own team of people because I was like, well, I want, I had the financial freedom but I wanted the time freedom. And the only way I can get there is if I built a team. If I studied for myself to understand how to do it for myself and then built a team of people that do it for me on basically managing my wealth for me.

It was great, I finally had everything that I wanted and I was traveling a ton and living a great life. And as I came back in living inside the states, a lot of my friends real estate Investors and asked me like hey man, how are you doing? What is he doing? How are you living this lifestyle? What is going on right now? And it’s like, well, here’s what I built. And this is how it all works. And they’re like, well, can I get in on that? Can you take on more people and help me build this thing? So I was just kind of helping people out, getting them into the things that I’d figured out for myself. And eventually when I was like, hey, you should go in this BiggerPockets podcast and go just share with people about asset protection. It’s one part of whether it’s some of the stuff you know. And I didn’t think anything was going to come of it. So I gave up my personal email and phone number into it.

And what happened was I was getting 30 to 40 phone calls a week from investors all over the country. They were like, hey man, I really need help on asset protection and how all these other pieces are supposed to put together. So then that’s where I realized that whatever you want to call, that higher power in life was really tapping me on the shoulder and says, hey, this isn’t all about just hanging out on the beaches and have a good time. You need to be of service to other people, help them be able to walk the path that you’ve walked and get them to that place of being secure and having the true freedom and protection in place for keeping what they’ve work so hard to be able to build. And that’s Royal legal Solutions is now turning and I, we serve all 50 states, we have over 2,000 clients that we’ve helped that are Real Estate Investors and we have about 30 people of attorneys, CPAs, paralegals and support staff.

 

This Episode is Also Sponsored by the 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 Now at  http://REILineOfCredit.com

 

Resources mentioned in this episode:

https://RoyalLegalSolutions.com/

 

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

https://AccessOffMarketDeals.com/podcast/

 

Scott & I Discuss:

  • Leveraging LLCs for asset protection

  • Land Trusts to hold assets

  • Private Foundations for tax savings

  • Strategic planning for building net worth

    

Relevant Episodes: (There are 220 Content Packed Interviews in Total)

 

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

Dave Foster On Avoiding Taxes Using 1031 Exchange Real Estate Investing

The REI Diamonds Show - Daniel Breslin | Dave Foster | 1031 Exchange

 

Guest: Dave Foster is a 25-year real estate veteran and coach who has used 1031 exchanges to increase his buying power while minimizing his tax obligations. He has a keen understanding of how to use this under-utilized tax provision to create wealth in real estate.

 

Big Idea: 1031 exchanges can be used to defer taxes and leverage capital when transitioning from one real estate investment to another. With the right strategy, investors can keep their own tax dollars working for them, creating more buying power and limiting their tax obligations. Dave Foster can show you how to unlock the benefits of 1031 exchange real estate investing.

 

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 6.49%.  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.The1031investor.com

 

Dave Foster & I Discuss 1031 Exchange Real Estate Investing:

  • What are 1031 Exchanges
  • How to Use 1031 Exchanges
  • Trends and Strategies of 1031 Exchanges

 

Relevant Episodes: (There are 210 Content Packed Interviews in Total)

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Watch the episode here

 

Listen to the podcast here

 

Dave Foster On Avoiding Taxes Using 1031 Exchange Real Estate Investing

Welcome to the show, Dave. How are you doing?

I’m doing awesome, Dan. It’s great to meet you and to be with you. You and I were talking before. I love that real estate sign behind you. That’s the thing every realtor should have.

I know.

That’s awesome.

Family History, Hurricane Impacts, And Real Estate Investment

I will for the readers, because I don’t think I’ve ever discussed it, but that’s from my grandfather and the signs probably from the 1950s. He was a broker for the Catholic Church in Philadelphia. He was like a property manager, and that was his shtick. We were joking about being me third generation. My dad, like, flipped or, like, had 2 or 3 rentals that he did a renovation on and, like, gave him to his partners. That was the extent of his second generation. Ed Kelly was my mom’s side. He was the grandfather who passed when I was like eight years old, maybe. It’s a stretch for me to say I’m third generation. It helped me have the confidence to get started back in 2006 and do those first couple of deals when I had zero dollars, zero experience, and zero connections.

That’s awesome. We all start somewhere, man. That’s for sure.

For us to get a start, Dave, whereabouts are you physically located in recording?

I’m in Sunny St. Petersburg, Florida, where winter came. It was 54 degrees. We’re at the height of our big winter. Don’t cry for me. We’re okay.

Did you guys fare okay with a hurricane that came through a few weeks ago?

Yeah. For everybody who watches those sorts of things, it looked like we were in the crosshairs. Everybody started bugging out. Most of my family, we take what we call her occasions where you just grab a copy of your insurance, pack the dogs up, and go visit friends. It took that turn and ended up going south of us and messed up Fort Myers, Lee, and Collier County pretty bad, but we just got not much at all. We’re fortunate, others not so much.

 

The REI Diamonds Show - Daniel Breslin | Dave Foster | 1031 Exchange

 

I was surprised as the hurricane was coming toward your area, how many friends and people who literally work as service providers within our organization, graphic designers, the mail house, the print shop. I’m like, I have, I don’t know, 5 or 10 pallets worth of printed material that are now in jeopardy. That’s like not any small, let alone all the friends, family lives and all that.

We feel like we as a company really dodged a bullet probably the same way that you do, but prayers for the families of everybody who did not dodge. I did notice last night I saw a video and I see that in Naples, there is this influx of listings now for vacant lots that just hit the market. People are refusing to rebuild. Time to get out. What interesting insight or observation have you might maybe seen a little closer to the ground there in Florida with what just occurred with the hurricane?

I think the model is out there. It’s just who we are. People love, especially in that area, they love to buy their dream retirement home. Many times, that’s a lot to be built on, or it’s a home, and you go through something like this, and it’s like waking up and starting to question your own mortality again. It’s like, “Wait a minute, do I want to live through this?” The reality is that they always rebuild.

I think perhaps what I was discussing with some of my colleagues is a microcosm, an identical scenario as what we had in 2014 with the fires in Pigeon Valley or Pigeon Forge, Tennessee, and Gatlinburg that destroyed 80% of the rental stock of properties. As you can imagine, at that same time, the exact same thing happened. Everybody that could not stomach the risk or could not rebuild sold the lots. Those started getting bought up and rebuilt.

Now, if you just say Pigeon Forge and Gatlinburg, those are hot topics on everybody’s radar for the massive amounts of vacation rental. South Florida, anywhere, or Northern California in the wildfires, any one of those places is going to experience the same resurgent. They always come back because there are always people who are optimistic and who see the ten years of benefit. The problem is if you’re one of the people that have to live through the one year that can sometimes cloud the other ten. It’ll take some time.

They’re going to come back stronger. Don’t believe everything you see on the media, some sensational pictures. If you notice most of those pictures or stick-built construction, trailer homes, and older types of buildings, you don’t have to go very far in England at all and see that most of the properties built in the last 15 to 20 years did just fine.

I wonder what the pricing is on those lots. I imagine that there must be some market force at work with supply and demand, and those same lots even three months ago before the hurricane must have sold for some percentage more than they’re going to get now.

It could be or, strangely enough, in many cases, I bought a lot like this where my choice was between a lot with the house on it. I chose the lot because I was going to have to tear down my house. If the hurricane took care of that, now might be the time to put a premium on a lot that already has plumbing to it. Who knows?

Understanding And Utilizing The 1031 Exchange For Real Estate

True enough. I think we’re going to get into the 1031 exchange here in a few moments, Dave, but do you want to share your background in real estate as a framework, I guess, and then maybe how that progressed into doing the 1031 exchanges as a business model?

That’s a very fun story to tell because it feeds exactly right into it. The 1031 exchange we’re going to be dancing around is a process that lets real estate investors sell investments or real estate that they hold for productive use and then go and buy new investment real estate. If they use the 10th year loan process, they get to indefinitely defer paying tax on the profit and depreciation recapture, which just basically means the IRS lets you keep the tax and use it for your own benefit.

When you stop and think about that, if you’ve got $100,000 tax and you get to use that for yourself, let’s say you put it into a stock, if you were going to put it into a stock or if you put it into a real estate that makes 10% an investment, that’s $10,000 a year. I don’t know about you, but that’s real money to me. The 1031 exchange is huge. The way that I found it was by learning a lesson in the School of Art Knox. We wanted to find a way to create financial freedom that would give us time to enjoy our family because time’s the greatest commodity we have.

A whole lot of people over the last few years, we said, “Let’s do real estate. It’s got to be easy. Anybody can do it. Let’s go.” 23 or 24 years ago, I bought a duplex in Denver, Colorado, fixed it up, and sold it. Life was awesome. Until I went to my accountant, and he said, “Dave, didn’t you have a silent partner?” I said, “What do you mean?” Goes, “Uncle Sam and Uncle Sam’s about to make more on this property than you are.”

That just didn’t sit well. Not to mention the fact that it put my plans many years down the road and behind. It was right at that moment in 1997 that there was a huge court case settled between the IRS and a guy named Stoker, and the IRS lost. This whole new way of doing 1031 exchanges was going to be available for everyday investors. When we started to look at what the impact on that would have been, I said, “We would have totally jumpstarted our own career.”

I had friends saying, “We want to do this for others. Do you want in?” I said, “Absolutely.” From that moment, I’ve embarked on a 23-plus-year career of doing 1031 exchanges for others and using it in our portfolio and business practice. We managed to transition to three different geographic markets and ended up with a portfolio, strangely enough, in Cape Coral, Florida. Back in the day, where we were able to buy a 53-foot sailboat and live on it for twelve years while raising our family and paying for that with income from our rental properties. All without being a penny in capital gains tax. When that happens to you, you get pretty excited about it. I love doing that for others. That’s what got us into it.

Nice. Still got the boat?

We sold the boat when the kids started talking about college because that’s where all my money goes these days.

Fair enough. My daughter’s got two more years of the college payments there. Cool. Let’s dive into it. You describe what the 1031 is. I think people who get into real estate hear about it. For me, it felt like a very far off, distant thing when I first thought of doing, “How do I get the first property that’s going to appreciate it and give me a gain?” The one 1031 exchange I did do was a two flat unit here in Chicago. I bought it.

Renovated it, had it a year year and a half something like that. Sold it versus keeping it and made like $25,000 or something like that. I did a 1031 exchange just for the sake of doing it. I didn’t need the $25,000. I was like, do the exchange, and I had an eight-unit building lined up. I put some more cash with the 1031 money to get into the much larger deal. I still have that eight unit. Now it’s a ten-unit, and it’s one of the better deals in my portfolio that I’ll hang on to. Now that I’ve gotten that thing stable and brought it up to speed. Looking back, Dave, it felt like it was almost too small of a deal for the 1031 for me.

It was like, “Was all that even worth it?” I saved like $9,000, $10,000 in tax. It was worth it. I had the experience, and I have the new building, which I may not have even stepped up to and bought that eight unit. It may have never been a motivation for me if it wasn’t for wanting to do the 1031 exchange. I’m curious. With 23 years’ worth of investment deals and 1031 transactions for clients, what is the optimal deal size that you’ve seen take place or maybe the most common deal size where the 1031 is, like, worth it, really moves a needle? Maybe there’s an example of a deal there, too, that you would share.

1031 Exchange Strategies: Optimizing Deals And Compounding Gains

I think it’s really important to remember that just like you treated it, the 1031 is a tool. Now, it’s a tool that you can use strategically, but it’s a tool that, like any other tool, can have many different uses depending on what the person wielding it knows or what they’re trying to do. I can make a hammer work for all kinds of electrical problems. I just have to use it right. That being said, when I think of it over the years, it depends on where you’re trying to get to. One of my favorite clients of all time was like, in 2004, there was a lady that sold a lot, and she literally made $10,000 on the lot.

Now, as a resident of the state of Florida, she was looking at $1,500 in tax. By the time she paid for her exchange and everything, she was literally only going to save like $500 or $600. I asked her about this, “Are you sure you want to do this?” It’s just not that much and whatever and she goes, “That $500 is mine. You bet I want to.” See, there’s a lot of just personal philosophy about how you feel about paying taxes. What’s important is to see what she did.

That $500 became part of a down payment on a larger property. Just like when you got started, that first amount of gain wasn’t that much, but it gave you an extra boost on a down payment for a larger property. That starts to roll forward. It’s basically a form of compound interest. It’s just compounding. I wish that we had an ability for me to put some screens up here, but I’ve got some examples where we take the exact same investor, and one of them does 1031s, and one of them doesn’t.

That’s the only difference. They sell a piece of property first, and then they take whatever is left. Now, on the $100,000 game for the investor doing the 1031, they’ve got $20,000 more to put in as a down payment of the next property. The other investor doesn’t. We do that in four steps. Literally, at the end of four steps, twenty years, and four transactions. The investor that has deferred the tax has a down payment that allows them to control almost $12 million of real estate.

Whereas the investor who does not do 1031 exchanges has the down payment in the cash to control about three and a half million. That’s how huge that difference is in using the tax for yourself versus paying for it now. It’s the same principle as your 401(k) and IRAs. It’s just the tool that exists outside of those retirement accounts to let you do the same thing. Grow tax-deferred.

You touch on something that I think is an elusive topic, and I learned it best reading The Snowball, which is the story about Warren Buffett that came out maybe ten years ago. He would talk about those same compounding gains. You see the chart, $12 million for investor A who did the 1031s and 3.5 for investor B. We’re like, “That’s great. That makes sense.” I can tell you, I don’t know, realize the impact of compounding that tax portion of your investment.

It took me a few years to really have the maturity and the patience to put the money down there and set it to work because investor B was not going to have access really to that cash pile from the sales. I’m sorry, investor A, who got to 12 million in Yen, he’s not going to get access to any of his cash whatsoever. It’s like do other flexible stuff outside of real estate for that full twenty-year period. He’s not going to touch it. I think that for me, at least when I was a little younger, I liked the hit of flipping a house and there’s a 30K profit.

Balancing Fix/Flip With Long-Term Investment

You are an adrenaline junkie. I got a little bit of that in me as well. You’re absolutely right. There are those people that gravitate to that. Number one, they love the deal to get in, to get out. They’ve created value. They love having that cash in hand, but there are so many things. This is not a knock on the model because I do it some too, but you have to just recognize there are opportunity costs for that.

Opportunity cost is number one, you’re going to pay a truckload more in tax every year. You have no preferential treatment. Number two, you don’t get the tax write-off of depreciation when all you’re doing is buying and selling. You’ve got to recapture all of that. Number three, as part of the calculation of the internal rate of return, one of the things that is huge that people forget is the amortization of the loan.

If you borrow money to buy a property and then rent it to someone, the tenant is paying the mortgage payment. Part of that mortgage payment is a return of your capital that you borrowed. Plus, you get the tax write-off on the interest there. There’s a whole number of different tax-related opportunities you don’t get when you’re fixing and flipping, but talk on it does feel good. It does. There’s a reason for doing that. Can I give you the answer? This is what so many of my investors do. It is an awesome strategy to get the best of both worlds.

 

If you borrow money to buy a property and rent it out, the tenant is paying your mortgage for you.

 

Buying your properties, fix them, rent them out. Now, right there, you just opened up the door for a great internal rate of return. You’re going to get depreciation. You’re going to get rent flow. You’re going to get depreciation. You’re going to get amortization of the loan. You’re going to get the tax write-off on interest. While you own that property and that tenant is paying all the bills, do a cash-out refinance. Pull the cash out of refinance, and use that as a down payment to go buy your next project. Fix it up, put a renter in it.

As soon as that happens to another cash-out refinance. The next thing you know, you’re juggling 3 or 4, what feels like fix and flip properties, but they’re fixing flip properties on properties that you’re going to hold over a one-year mark. When you sell them, you’re going to 1031. Here’s where we throw gasoline on it. When you sell that property in 1031, you’re not going to buy one. You take the down payment, and you’re going to use that to buy two cheaper properties.

If you want to grow that way. All of a sudden, you got more fix-up work than your crews can handle. Yet all of it is going as capital gains, and all of it is 1031 eligible, and you’re using that deferred tax, but you’re also still getting those refis out either to invest in something else or to buy braces or college or whatever it is that you need. I’ve got a couple of clients that will do 20 to 30 exchanges a year. Every one of the properties they’ve owned for more than a year, because that’s just their model.

They’ve gotten one year removed from the fix and flip, but they still get their adrenaline fix, but then they just hold the others long enough to do the 1031 out of. That can be a great way to get the best of both worlds. You’re describing the level of patience, and that was not what I had. I was a liquidity junkie for lack of a better word. I just wanted to have access to it’s why people buy into, I think some at some level stocks, the stocks give you this a lure because they’re liquid.

Intent And Timing In 1031 Exchanges

Bitcoin gives you this allure because it’s liquid. I can get it back out. There’s some security there and being able to make an instant withdrawal, which is not there if my plan is to hold the property for a year or twenty years. I hear you mentioned the year deadline. Is that a minimum in order to be able to do the 1031, or is that arbitrary for the investors? It’s fairly arbitrary. There’s no statutory holding period. Anything more than one year is generally seen as totally safe.

The true standard is your intent. If you have a property that has been your intent to hold for productive use, then it qualifies for 1031 treatment. If you buy a property with the intent of primarily reselling it, it does not qualify. Now, the things that a year does, and my industry is even guilty of this. We used to use a mantra called a year and a day. It doesn’t do anything magical. What it does do is this. Any property you own for more than a year generally gets afforded long-term capital gains treatment. That feels longer term than ordinary income.

Secondly, any property you’ve owned for more than a year or a year and a day at least is reported on two consecutive tax returns because you owned it in two consecutive years. Thirdly, there are several different case rulings out there where the IRS trying to get a handle on this gave an idea of what three different appropriate holding periods would be. They use the phrases two tax years, and two calendar years.

It did not take the bright attorneys in America long to figure out that if you want to take that at face value, that’s anything in between 2 days and 730 days. To keep it simple, but also to give them plenty of gray, the iris makes the standard intent. Intent is whatever you can demonstrate. One of my favorite exchangers from two years ago is up in Tennessee, which we were talking about earlier.

He sold a cabin that he bought 30 days after he bought it. He wanted to do a 1031. I said, “No, dude, cannot just buy and sell. That’s not what 1031 is for.” He said, “Dave, I had to honor the long-term lease that was in the contract. It was part of the contract to buy. I had to honor this long-term lease because the tenant was a friend of the seller.” I said, “That’s a nice try, but how come you’re not honoring that lease?”

He said, “It’s because she broke it.” I said, “That’s a little bit different, but still what you’re dead.” He said, “I think the problem is the bear. A bear had literally taken up residence at the trash cans for that house. The tenant felt unsafe. She broke the lease.” This guy said, I don’t want to try to rent something with a bear.” He had ring photos to prove it. His accountant was perfectly fine. Guess what? That’s pretty easy to demonstrate his intent, wasn’t it?

I guess it is. Assuming he made money 30 days later.

Pigeon Forge 2017 or 2018. He did okay.

Nice. How about the deadline? I believe that eighth unit I was referring to early in the episode. I think I had that lined up and was going to buy it anyway. I was already under contract or something, and then I think I had the other one selling. It wasn’t like I set out and said, “I’m going to 1031 this $27,000 into another building and then go find something. I was simultaneously had them working.

The deadline wasn’t an issue, but a lot of the other times I was going to consider the 1031, it was more of an issue of having something of high enough quality for me to 1031 into the next one. I’m going to be honest. I love selling properties to 1031 buyers because they’re typically motivated, and they pay more than the average entrepreneurial investor buyer. How does your client or what is your suggestion to not get burned by being a motivated buyer once you’ve put the 1031 in place?

You’re speaking right to it. The first thing that you got to just burn into your mind is that nobody in history has ever gone broke by paying tax on profit. It may feel like it, but nobody has ever gone broke paying tax on profit. There is no transaction in the world that is worth it if you have to overpay to a point where it is more than it would have cost you not to do it.

 

Nobody has ever gone broke paying tax on profit.

 

There’s a real cost analysis that has to go in place, but it is very true that many times a 1031 investor will look at this and say, “This deal, I’m going to have to overpace something for it, but the tax I would have to pay if I don’t do the 1031 is this. It would take me 4 or 5 years to recoup all of that tax if I have to pay it right now as opposed to putting it in this, which brings me maybe a little bit less or cost me a little bit more.”

You’ve got to really dive into those so that you can know and be sure. There’s no penalty for starting and not completing an exchange. The idea is if you’ve got a tax bill you want to defer, start the exchange and look around. You’ve got 45 days to shop around. If you don’t find something, let your exchange die. Exchanges are cheap. For a carton variety exchange, $1,000, $900, or something like that. That’s a tax write-off, anyway.

It really is going to cost you maybe $500 or $600 to kick the can down the road and see if you can find something that you like. What you did was a great strategy because you already had your acquisition target, and it was probably a seller’s market. You then looked at your portfolio and said, “I want to buy this. Do I have any properties that are ripe to sell that I could move into this that would then position me better? I’m going to sell those into a 1031.”

You remember this, there was a period of time in particular in California where people would put things on the market and they would get 20% over list day one cash offer, five day close. It was insane. What we told people was to take care of the hard job first. In that type of market, the hard job was finding your replacement. Go find your perfect replacement, get it under contract, then go sell your other property because it’s going to take a week.

That gives you plenty of time. You don’t have to worry about them finding a property. You don’t have to worry about somebody like Dan holding you hostage because he knows you’re a 1031 buyer. All those good things start to happen. I think also along with that though is don’t forget that the second half of your 1031 is going to happen the same way your first half happens. People who complain about having to overpay for a purchase need to remember that the reason is that it’s a seller’s market, and they probably got overpaid when they sold.

You got to take the market where it comes. Those are the primary strategies that we would tell people. Now we’re in a transitioning market where things are hanging on the list a little bit longer. Now might be a good time to wait, be patient, and get a sale, but get an extended contractor for your sale and then go shopping because every week you shop, people are getting a little more anxious to sell. I think this is great market to be a 1031 seller because you sold and you’re going to buy into a depressing market, not depressing.

Opportunities exist.

There you go. That’s exactly depressing. Sounds too much like 2008.

Patience And Long-Term Thinking In Real Estate Investment

We’ll be careful how we’re talking about that here for the time being. I think that’s an interesting observation is that the California market was super hot. At the same time, we here in Chicago, I’m one of the markets where we do business. There is the California buyer buying the 4 flat, 5 flat, 8 flat, 22 flat. They don’t exactly know the nuance of the neighborhoods. A lot of times, California buyers are going to buy in areas with more challenging tenant base but higher cap rates. I guess they keep getting the appreciation too, and enough people pay the rent, but all the locals will not touch a lot of those buildings for the headaches that come with them.

In Philadelphia, we have the New York buyers who operate and behave a lot like the California buyers. Atlanta, the entire country seems to be just buying into those single families. There’s not a hell of a lot of apartment buildings there. Interesting observation there. To get the 1031 is probably what they’re doing. It’s probably why they overpay a little for these places in these marginal areas. When we’re looking at it, explains the psychology going through the mind of that buyer there.

I think, too, I come back to the patience and the liquidity and what you described a minute ago, Dave, and I wrote it down was you’re selling a property and I’m picturing myself. Maybe even a reader who’s got a flip something to flip. They’re selling it, and they can taste the liquidity. It’s like, “Man, to have this $50,000, $60,000, $80,000 hit my account is going to feel good.” Instead, taking a detour, committing a $500, $600 or $700 fee if the exchange fails. Going into the 1031 and putting some forced patience against that liquidity and having a deadline for 45 days to intentionally go out and select something that might be another level up as a property.

Two more of the property you just got rid of are in slightly better locations than the one you got out of as far as future appreciation. Otherwise, I don’t really find myself digging through the real estate market and hunting for the eight unit that I bought unless I have the 1031 lined up. I feel like it forces you to be a little more patient and put the liquidity off. You still might end up having to take the liquidity and pay a tax anyway, but at least you’re forecasting a 30 to 45-day search period, and you got the money in the bank, and now your mind’s thinking on levering up the investment.

Now I’m more like investor A, who ends up with the twelve million because he’s being patient. I don’t want to understate the amount of patience required. That’s what I took from Warren Buffett’s book. It’s not run out and buy jets as soon as he could afford jets. There was this lifelong patience of compounding that took place. I almost feel like from my own experience, that patience and being that long-term investor, it took me, I don’t know, 8, 10, 12 years to see the value in. Now, I was building a business that turned out to be, very much thriving through that period of time.

I allocated my energy a certain way, but cannot overstate the patience factor in participating in the compounding effect of real estate, whether that’s just holding and managing right for the longterm, whether that’s 1031 exchanges like we’re talking about, or maybe it’s called segregation kicking a can down the line in another format or some other form of patience and hanging on to your investments long term. For me, patience is like coming now that I’m 41 or 42 years old. I’m learning it. In my 30s, I was not patient at all.

Real Estate As A Retirement Strategy: Converting Properties And Tax Benefits

I have never phrased it this way, but I was listening to you talk, and here’s exactly what it is. Anybody can go into real estate and create a job. You become a realtor, you buy and sell, you become a fix and flipper. Anybody can do that as a job. During up times, you’ll do really well, and you’ll buy a lifestyle as a job. The 1031 portion of it is like taking the job and adding to that contributions to your retirement.

 

Anybody can go into real estate and create a job. The 1031 exchange is what helps you build wealth.

 

The patience that you have reaps rewards for you later. As you said, you’ve got to be patient, but it’s like giving you the opportunity to indulge in that adrenaline side, but at the same time, start to prepare for the future and build that nest egg. That’s the mentality. We talk a lot about the life cycle of a real estate investor because, like your life, it changes. Your needs, desires, your targets, your energies will change as you grow older.

Early, like you said, when you’re young and impatient, you’re bye. Using the 1031, you can sell one and buy two. You can start to branch out geographically because the 1031 exchange will let you go anywhere in the country you want. We’ve hinted at this because it was with your 1031, but you can go from different classes. You could sell a single-family home and go buy an industrial building anywhere else in the country. Commercial buy raw land.

At some point in time, you may get a builder the edge. You use the 1031 to go buy a chunk of raw land. Create a land bank off of that and do some things with that. As you start to get older, your energy wanes, but your wisdom is increased. Now we start to 1031 into more passive opportunities because we have the ability to examine those and due to diligence to buy triple net commercial properties or 1031 compatible syndications, vacation rentals that we eventually convert into our primary residence. There are a ton of ways. They just have to be appropriate for you where you’re at.

Can you touch on that vacation rental thing that you just alluded to?

It’s my favorite thing of all. Here’s the principle. The 1031 exchange is a sale of investment property followed by a purchase of investment property. You do not have to use it for investment forever. The key is that you could say you live in Cincinnati and you’re getting ready to retire in a couple of years. You sell your Cincinnati rental, and you could buy something on the beach in Sarasota. Use it for investment for a couple of years, generating income.

Two tax returns?

There’s a safe harbor for the IRS. Those two years. There are still a lot of people who say a year is okay. One of the quirks of that law is that you being in it does not count as long as you are working on it. I know I had some people in Fort Myers that would have to go down and watch the automatic sprinkler system for 5 or 6 months a year because it was so prone to failure. Two years is a safe harbor.

They’re going to go from Cincinnati and retire where? In their former investment property. That doesn’t trigger a tax event. I feel like the Romco guy now, but wait, it’s even better when they sell their primary residence in Ohio. If they’ve lived in it for two out of five years, they get to take the first $500,000 in profit tax-free. They sell in Ohio, and $500,000 is tax-free. They move into a house with all the other money, tax deferred.

What a jumpstart on retirement that is. It gets even better. I have a guy on St. Pete Beach that did three 1031s into three, I mean, literally on the same floor, identical condo units on St. Pete Beach. He moved into the first one and converted it. That started his retirement. Now he’s going to live there as his wife says, “Until it’s time to redecoratel.” They’re going to stay there because as soon as he has owned that property for five years, as soon as he has lived in it for at least two, then he can sell it and take a proration of all of that deferred 1031 gain tax-free.

Tax Implications: Primary Residence Sales, Inheritance, And 1031 Exchange Concerns

That would count like on the 500 yen?

Up to 500. Correct. You only get a prorated. If he rented it for two years as he did and then he lives in it for eight, he will get 8/10th of the game. Where’s he going to move? Next door. He’ll do it all over again. Now, most of us who foolishly misspent our youth are going to have to be looking to deliver pizzas for Domino’s or bag groceries at the Kroger’s or something to supplement our social security. His supplement job is he lives in a beachfront condo, and he’ll sell one every once in a while and pay some tax just like I’m going to have to pay tax on my pizza delivery earnings.

Who would you rather be? What an awesome strategy. We did much the same thing in that we kept converting properties in each of our markets. Every time we sold one, we took the tax-free money and put that into our buy the boat kitty. That was how the boat was purchased for cash with tax-free dollars. The rest of our holdings, we simply generated income off through productive use.

Was it rental income going for the cash kitty?

No. For the boat kitty, it was the tax-free sales of our primary residences and the properties we converted. To live on, we use revenue from our rental investments. That’s my favorite way that the 1031 investor can get the money out. Again, like you keep saying all this whole thing, patience is the key, but patience will reward you. You want to know my second favorite way is to enjoy it all?

That’s right.

You got to die.

I don’t know if that’s enjoyable.

Like I said, it’s my second favorite. We’re all heading there anyway. Here’s what happens. For the 10th or for anybody, but for the 10th, everyone investor especially when you die holding real estate, that real estate is given what’s called a step up in basis. That your heirs inherited as if they paid market value the day you died. All of that profit over all of those years goes to your heirs tax-free.

It starts the depreciation clock for them all over again.

All over again. I’ve got one family we’re in our third generation from Connecticut, and they’re awesome. We did exchanges for granddad, who passed away many years ago. The portfolio went to his son, who again was 1031, and until he passed away a few years ago, and his children are now doing the same thing. Each time they inherited, all of the tax disappeared.

How much jeopardy is this in from a political sense? They keep tossing the 1031 on the table for the tax code. They’re going to pay for this and pay for that. Take away the step-up basis. What is your opinion or feel on the likelihood of the 1031 and the step-up basis that we were just talking about existing for the next 10 to 20 years?

I’m a firm believer. It was either Will Rogers or Gideon Tucker who said that no one’s personal liberties or property are safe as long as Congress is in session. You got to start from that point and never say never because lots of power is concentrated in a few silly answers. Here’s what’s happened over recent years. First of all, in the 23 years I’ve been doing this, every president I’ve been under has talked about getting rid of 1031 because it’s low-hanging fruit.

“If we just eliminate that, think of all the extra tax revenue we’ll get, and we’ll be able to make money.” The only president that did anything with it was Donald Trump. All he did was eliminate the personal property exception where you could 1031 things like his jet, heavy equipment for other heavy equipment, or airplanes, that thing. What he replaced that with, though, was this bonus depreciation.

I think he was seeing a way that he could get some extra bonus depreciation off of his plane rather than having to sell it because that’s what the impact was. Not judging. Just saying. Every president has talked about it, none of them have done it, anything. Why? It’s because, think about it, for every dollar that you get from long-term capital gains, which is at 15%, you’re going to slow down the real estate market because people will hold properties longer just to give them.

When people hold properties longer, what’s not going to happen? You’ll have much fewer. You’ll have two fewer real estate agent commissions, two fewer title company transactions, two fewer inspections, two fewer attorneys, and two fewer painters. All of these people that do ordinary income work, which is taxed at much higher rates. When you see the real numbers that have been produced, the cost to our economy is astronomical in the terms of billions of dollars that would be lost if they tried to simply collect the long-term capital gains from 1031 transactions.

To the point where when President Biden, I mean, he was loud and proud about it. He was going to get rid of it. That was right at the same time when you got my application for employment. Do you remember that? I sent that over to you because I thought I was going to be out of job. Right at that time, now the Senate was 50/50 red and blue. The Senate took a unanimous voice vote specifically to say no change will be allowed to Section 1031 tax-deferred exchanges.

Which was a resounding, it will not change. Now, the same thing has basically happened with the step-up in basis. Guess what? There’s a whole ton of representatives, senators, and people of influence that have property they’d love to be able to give to their kids and not pay tax on. I’m really not concerned about that because, ultimately, we’re all going to look out after our own self-interest, but 1031 looks very safe. It’s been around since 1920. No, it’s not. It’s one of the original parts of the code.

When you look at it, too, from the code is there to your point of keeping the transactions flowing. I own a shopping center. I own a couple of self like in a self-storage funds. They own apartment buildings. I wouldn’t have bought any of that stuff if it wasn’t for the 1031 exchange. I wouldn’t have invested money in those things if it wasn’t for the depreciation that I was going to get I would have had to pay a big tax bill, and I probably just would have needed to feel like I needed to hang on to whatever was left because I would have been wiped out.

Instead, the tax code incentivized me to put my capital back in place for society’s benefit. The code is doing what it is. We talk about the tax benefit side for us as individuals, but for the impact that the recycling of capital has on society, I think it’s a good thing. I hope even those in Congress and the Senate, regardless of what their background is, would, I hope, continue to see that benefit for society.

Market Influences: Tax Code, Interest Rates, And Transaction Volume

It’s a really counterintuitive way of looking at the tax code. If you don’t view it as how the government gets your money and start thinking of it as how the government incentivizes your behavior. In 1920, they wanted the small farmer to be able to sell their farms and buy bigger farms. They couldn’t do that if they had to pay tax on the sale of their own farms. That’s what started it. The incentivization is that they really want a bustling, robust, and strong real estate sales market. The way to do that is to incentivize behavior where you do that, and they incentivize it by giving you the 1031 exchange.

 

The government doesn’t just tax you—they use the tax code to incentivize your behavior.

 

Dave, I know we’re getting close to the end here, but I do want to ask you your observation. Let’s say January 2022 through we’re at October 21st, 2022. Most of us reading who aren’t reading years in the future. We’ve had interest rates go from 3% to 7% in that same time period, and we feel a slowdown collectively in the real estate market. Can you describe maybe your observation through the lens of transaction volume in 1031 exchanges that you’ve been a part of during that time?

It’s a little too soon for us to tell simply because there is a normal pause in real estate in the fall. It’s just that people start school, we’re carrying towards the holidays, and builders all have their buildings under roof and weathered, so now they’re working inside. There is typically a reduction in volume, and we’re seeing that. We’re down about 20%.

It’s a little bit.  Is some of that a factor of interest rates, of a cooling market, of longer days on the market? Possibly. It’s really hard to speak to it. I don’t think we’re going to know until next March or April for sure what’s happening. I do know this, though. I am so old that I remember when 13% was not a bad interest rate on a commercial asset.

Those who want to whine about 6 or 7, think again and take a history lesson. Yes, it’s high, and we’ve got to make sure in our analysis for people that they are able to make cashflow work with what they’re having to pay for the cost of money. By the same token, someone said it was great the other day. “You marry property, you find the property you want to keep and you marry it, but you date the interest rate.”

 

You marry property, but you date the interest rate.

 

If it’s a good property, you can make it work even at a higher interest rate. If interest rates come down for you in two years, that’s just an extra bonus on top of what is already a good return for you. it’s softening how much. It doesn’t feel urgent at all. Again, keep my resume on top of your pile, and next April or May, we’ll see what’s happening.

Real Estate Market Analysis: Historical Context And The Prevalence Of Renters

If we look in the context, I felt this way this time last year, and we didn’t know if the rates were going to start climbing earlier than they did. I could even see it in the comps. If I go in and pull single-family comps, I pay a lot of attention to the month and the date that they won our contract when he settled. We could see the cooling off in the transaction volume in the markets we’re in this time last year the same way.

I recall it being that way in history, too. These are recent memory. For context, coming through 2006, 2007, 2008, 2009, 2010, 2011, 2012, those time periods were rough. I believe 2009 was the lowest transaction volume at somewhere around 4 1/2 million. If I’m not mistaken, I think we had like 6 1/2 million last year.

We’re talking 20% or 30% more transaction volume in a country with 20% more population through that same year period. We had this increase in transaction volume from the population. Even if it were as bad as the 2009 crash, which we’re not seeing Goldman and big bank failures or anything catastrophic occurring right yet. I mean, who knows what the future brings. Even if we saw that same reduction in volume, I forget what it was, the volume in 2005 or 2006. It may have been 5 1/5 million.

I don’t remember if it peaked at six but 10%, 20% less transactions, we went down like 4, 4 1/2 million transactions now, that is still a lot of real estate transaction volume that’s occurring even at the bottom of the market in the worst cycle for our, at least my memorable history. I was too young during the ‘80, ‘89, ‘90, and ‘92, and I wasn’t around for the late ‘70s thing that took place. Even if the market is down, houses still have value, and they will still be transaction. It’s just a matter of buying the assets right and being able to make the improvements and do the value add.

People still have to have someplace to live. We are seeing a nation where the percentage of renters is increasing dramatically. Again, I can speak directly to the 1031, and in 2005, there were about 570,000 1031 exchanges done. 2008, that number plummeted to 68,000. In that crash, we saw an almost 90% decrease. That’s why I sit here and go, “20% no big deal. That’s normal market.” 2005 or 2008, that was not normal. I don’t have to cuddle up in a fetal position and worry about that.

That’s good to know because I sell a lot of houses to people who are going to live there. My numbers of 4 1/2 million were a whole lot of people who were taking advantage of the first-time home buyer credit that came out during those years. If it got that bad, there would be something of that nature for sure with the way that they come up. If we had a 20% drop-off and we were doing mostly owner-occupant transactions, which a lot of our flipper podcast audience is probably doing. Again, it all comes down to buying right and making sure that you did a quality product and you can still get out of it. I probably wouldn’t build the deal on the highest watermark that exists in the marketplace.

I had a ton of investors that lost 90% of their wealth in 2008. I mean, 90% of their wealth, but it was all on paper. Those that did not have to sell just kept renting those properties. Now, they’re worth many multiples more than that.

Key Advice For Success: Patience And Long-Term Ownership

Dave, in closing, the crown jewel of wisdom, if you were passing this on to, I don’t know, one of your kids or maybe someone just getting started in real estate, what would you consider to be the crown jewel of wisdom? What’s your piece of sage advice that you would pass on to someone?

You’ve been stealing it from me this entire time. There are two people in history, two groups that have always ruled the world, banks and real estate owners. Become one of those. If you’re going to go the route of owning real estate, be patient. It’s long-term, but it will produce for him.

 

Real estate owners and banks have always ruled the world. Become one of those.

 

Well said. Dave, I appreciate you coming on the show. Thank you for giving me the time. I got a couple of pages of notes here, and I had a blast. Really appreciate it.

It was so good to be here and chat through things. I feel better already, don’t you?

Yeah.

A good spot.

 

Important Links

 

Relevant Episodes: (There are 210 Content Packed Interviews in Total)

 

 

Converting Dead Leads to Cash with Chris Craddock

 

Episode: Converting Dead Leads to Cash with Chris Craddock

 

Guest: Chris Craddock is the Founder and CEO of The Redux Group, a real estate team that sold over $150 million in real estate in 2020 throughout the Washington DC & Richmond Virginia region.  He is the host of the Uncommon Real Estate Podcast.

 

Big Idea: Homebuying companies can generate $10,000 or more every month by converting their dead leads into cash.   Direct to seller marketing for real estate investors is a great way to generate deal flow.  The waste product of this lead generation is that you end up with many retail-price seeking sellers.   Chris and I discuss the process of converting those leads to cash in this podcast-plus much more.

 

 

    

 

Dan Breslin: Today’s guest, Chris Craddock, is the founder and CEO of The Redux Group, a real estate brokerage team that sold over $150 million in real estate in 2020 alone, throughout the Washington DC and Richmond, Virginia region. He is the host of the Uncommon Real Estate podcast, as well. The big idea for today’s episode is that home buying companies like us, your direct seller marketing companies, can generate $10,000 or more every month by converting their dead leads into cash.

Direct to seller marketing for real estate. investors is a phenomenal way to generate deal flow, however, the waste product of this type of lead generation is that you end up with many retail price-seeking sellers that simply don’t fit for most of our buy box, as real estate investors.

I know I’m looking for houses that need a renovation, can fix them up, can flip them retail, that’s what I’m looking for. There’s not much I can do with the retail price-seeking sellers.

Chris and I are going to do a deep dive on this, the converting of these leads into cash on this podcast, plus much more. Shall we get started?

All right. Welcome to the REI Diamond Show.,Chris, how are you doing today?

Chris Craddock: I’m great, brother. Glad to be here with you.

Dan: Nice. For listeners who might not know who you are, do you want to do a little bit of a background story, Reader’s Digest, of what you have done and what your business looks like today?

Chris: Sure, yeah. I’ll try to give a one-minute version. 2000, I graduated college, then I stopped[?] with an organization called Young Life. Loved it, changed my life. It’s amazing. 2003, my wife got pregnant. I knew I wasn’t going to be able to live on 20,000 a year in the DC area, so I went to the library and checked out every book I could on real estate investing and read every book they had, almost like an idiot. I always say, “massive imperfect action”, right? Imperfect action trumps perfect inaction any day of the week. I just started knocking on distressed properties’ doors, and somehow in 4 months, I made 12 times what I made in a year. I was like, “This is awesome,” and so I just put that money away. We bought the house we live in now. I continued to administer stuff. I have 6 kids. As I got more kids, the money started disappearing fast, so I started flipping houses again.

At that point, it was after the crash, and so it was short sales. At the time, short sales are pretty easy to flip, but if you were licensed, they would pay a commission. Since then they changed their margin, so it’s a little bit harder to flip short sales these days. It’s still doable, but harder. I ended up getting licensed. During that time, in ministry, I’ve always led large groups of people, and so I got a Doctorate in Leadership because I just love leading people; I think it’s great. I think that’s the best way, success with others.

Somebody gave me Gary Keller’s book, The Millionaire Real Estate Agent. I read it; it just blew my mind. We started a real estate team in December, 2014. Halfway through that, I realized I came from the investor world and investors and agents seem to live on 2 separate planets. If you could combine those 2 planets, then both people could make a fortune, so we started doing that. Last year we did 167 million in volume, netted, well over 7 figures, built a company that helped other investors make a fortune. I’ve got 9 businesses, a number of them, 7-figure net profit business.

It’s just been a heck of a ride over the last few years, and they’re a lot of fun.

 

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.WholesalingInc.com/Revive

 

 

Chris & I Discuss How to Convert Leads to Cash:

  • Best Day of the Week to List ANY Property for Sale

  • Generating $60,000 Per Month in Referral Fees!

  • Tips for Selecting Quality Business Partners

  • Process of Converting Dead Leads to Cash

    

Relevant Episodes: (There are 192 Content Packed Interviews in Total)

 

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

Virtual Wholesale Real Estate Investing With Brandon Barnes

The REI Diamonds Show - Daniel Breslin | Brandon Barnes | Virtual Wholesale

 

Guest: Brandon Barnes focuses on virtual wholesale real estate investing in the Atlanta, Georgia market. He does over $1 million per year in revenue.

Big Idea: “That’s a Real Estate Investor’s Superpower: Being Able to Comp Properties & Have a Feel for Purchase Price” Brandon mentions this “superpower” about half way into the interview. He’s spot on. The Real Estate Investor’s Superpower can be summed up in two main points. First you have to know how much to offer so that you get your offer accepted. Second, you have to know how much you can sell the house for once you’re done renovation. Or renting & refinancing if you’re planning to buy & hold.

Brandon believes in Offers Over Appointments. In other words, he and his team would rather simply make offers over the phone than schedule face to face appointments. This is obvious if you’re a virtual wholesaler, but most of us in real estate prefer seeing the property prior to making an offer. You have to at least see photos before making an offer, right? The answer may surprise you. 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/

 

Resources Mentioned in this Episode:

https://www.SendMoreOffers.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/virtual-wholesale-real-estate-investing-with-brandon-barnes/

Dan Breslin: Welcome to the REI Diamonds Show. I am your host, Dan Breslin, and this is episode 183 on Virtual Wholesale Real Estate Investing with Brandon Barnes. If you are 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. I invite them 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.

Dan: Now, most real estate investors, including myself, prefer making offers after physically seeing the house. You go see the condition, underwrite the deal, figure out the values. They have to repair value and then make an offer. Today’s guest, Brandon Barnes, he used to do the same, but now, he prefers making all of his offers immediately over the phone without ever seeing the property or even seeing photos of the property. I mean, how does this work? Do we not need to know the condition of the house to make an offer or at a minimum, see the photos? These answers may surprise you.

Dan: All right. Welcome Brandon Barnes to the REI Diamonds Show. How are you doing today?

Brandon Barnes: Hey, I am well. Thank you for having me there.

Dan: Yeah, for sure. It has been much anticipated. Your name has been floating around the Atlanta Market where I do a lot of business for the past couple years here. I was highly excited to look forward to having you get on the show here once we started getting together with bookings. For those that may not know who Brandon Barnes already is, do you want to kind of give a little bit of a background for us, Brandon? Maybe how you began real estate investing and maybe even the details about your first deal if you could go back to that origination.

Brandon: Yeah, for sure. Look, I am here in the Atlanta area just like you mentioned. I started off my journey whole selling, specifically. I mean, that is just the art of finding off-market properties at a discount and kind of jumping to this game by chance, honestly. I gotten fired from a Corporate America job and I always thought I would climb the ladder and become an entrepreneur at some perfect opportunity, but I got fired. I reached out to a buddy that I knew from Pittsburgh when I was working for the HJ Heinz Company up there and I asked him what this real estate thing was all about.

Brandon: He said he had actually moved to Atlanta and was following a mentor program for wholesaling and I should come by and listen to it and this is a great opportunity to start a business. I was sold. Just a few months in the second month, I sent a thousand postcards and got my first contract. By month three, I had actually done my first deal for 15K and never looked back. I split that deal with them and kept on mailing. It was a great intro into the business.

 

Brandon & I Discuss Virtual Wholesale Real Estate:

  • Virtual Wholesale Real Estate Investing
  • Making Offers Over the Phone
  • The Real Estate Investor Superpower
  • Disclosing the Profit Motive-Yes, I’m Going to Make Money

 

Relevant Episodes: (183 Content Packed Interviews in Total)

  • How to Find Motivated Sellers with David Lecko

https://reidiamonds.com/how-to-find-motivated-sellers-with-david-lecko/

  • Dan Schwartz on Managing Off Market Investor Deal Flow

https://reidiamonds.com/dan-schwartz-on-managing-off-market-investor-deal-flow/

  • Josh Hertz on Wholesaling & Fix & Flips Philadelphia

https://reidiamonds.com/josh-hertz-on-wholesaling-fix-flips-philadelphia/

—

Watch the episode here

 

Listen to the podcast here

 

Virtual Wholesale Real Estate Investing With Brandon Barnes

This is episode 183 on virtual wholesale real estate investing with Brandon Barnes. 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. I invite them onto the show and then draw out the jewels of wisdom, those tactics, mindsets, and methods used to create millions of dollars and more into business of real estate.

Now, most real estate investors, including myself, prefer making offers after physically seeing the house. You go see the condition, underwrite the deal, figure out the values they have to repair value and then make an offer. My guest, Brandon Barnes, used to do the same, but now he prefers making all of his offers immediately over the phone without ever seeing the property or even seeing photos of the property. How does this work? Don’t we need to know the condition of the house to make an offer or at a minimum, see the photos? These answers may surprise you. All right, welcome Brandon Barnes to the show. How are you doing?

I’m well. Thank you for having me there.

Yeah, for sure. It’s been much anticipated. Your name’s been floating around the Atlanta market where I do a lot of business for the past couple of years here. I was highly excited and looking forward to having you on the show here once we started getting together with bookings. For those that may not know who Brandon Barnes already is, do you want to give a little bit of a background for us, Brandon? Maybe how you began real estate investing and maybe even the details about your first deal, if you could go back to that origination.

Brandon’s Early Real Estate Deals: Learning The Ropes

Yeah, for sure. I’m here in the Atlanta area, just like you mentioned. I started off my journey wholesaling specifically. That’s just the art of finding off-market properties at a discount and jumping to this game by chance. Honestly, I had gotten fired from my Corporate America job, and I always thought I’d climb the ladder and become an entrepreneur at some perfect opportunity.

 

Wholesaling is the art of finding off-market properties at a discount.

 

I got fired and I reached out to a buddy that I knew from Pittsburgh when I was working for the HJ Heinz Company up there. I asked him what this real estate thing was all about. He said he had actually moved to Atlanta and was following a mentor program for wholesaling. I should come by and listen to it. This is a great opportunity to start a business. I was sold. Just a few months in, the second month, I sent 1,000 postcards and got my first contract. By month three, I had actually done my first deal for $15,000 and never looked back. I split that deal with them and kept on mailing. It was a great intro into the business.

For that first deal, did you go back to the actual house and the appointment? I know we’re going to get in a little bit of a transition to what you’re doing now, but I’m going out on a limb, assuming you started slightly different than what the business model is now. Can you take me back to like literally you set the appointment and maybe what happened when you got to the living room, if that’s how you did it?

Yeah, for sure. I used to go to every appointment in person, tried to build incredible rapport, talked to homeowners craft the perfect offer and hoped to goodness they signed. That was exactly what happened with that one. I think I got a call from the lady and I don’t think I met her specifically, but that was an outlier because I would go to appointments in person all the time.

I started off my business and started off my career sending a lot of mail, doing a lot of direct mail, and it was just on that first thousand postcards, I had a lady with a tax lien issue and wanted to just sell the property. I probably shot myself in the foot because I got it under contract for about $20,000 and sold it for $35,000. I probably should have at least been able to sell that for $50,000. It was a great little 3, 2 townhome. I was going to every appointment in person driving all around the city. It would be weeks that maybe I got out 3 or 4 contracts and I was never going to get anywhere operating like that, trying to be everything for everybody. These days, we send a lot more offers. That’s to say the least.

This reminds me some of the circumstances when you mention like 1,000 postcards and you get a deal from that amount. I think back to my first deal, the numbers are a little different now, but I was down to my last $100 and I put in a $79 newspaper advertisement in for one week. I ended up getting 3 or 4 calls in that one week. This is 2006. The newspaper, for those who don’t remember, was a much more effective medium of advertising than it is now. I remember when I got there and I’m making the offer and I didn’t really know how to analyze markets and do comps. I had no access to the MLS and it was in like a very high crime, high drug activity neighborhood.

I remember seeing that a friend of mine bought one on Remington Street, a guy I knew from the REI meetings for $6,000. I figured, “I’ll offer $5,500 to this other one around the corner, and then I’ll go sell it to him and make $500.” I get into the living room, I think I might have looked at the house and then came back because I check that on making the offer the first time.

I show up the second time and the family’s there. I got my six-year-old daughter with me in not the greatest neighborhood. My dad had to drive me to the deal and I made the offer $5,500 and they like, talked about it for a minute and they pretty much flat out accepted. My negotiation skills were all but non-existent at the time.

I remember I’m sitting down, Brandon. I had to fill out the agreement of sale. We stopped at OfficeMax and bought a generic agreement of sale. I’m like, “I didn’t do this before. Crap, what information goes where?” I didn’t have the sense to actually practice the agreement of sale way back when. I called a guy on Remington Street and I’m like, “Do you want to buy this one for me for $6,000?” He’s like, “I’ll sell you mine for $5,500.” They call it Remington Street because of all the shell casings all over the ground. Every time I go to pick up the rent, I’m like, “What have I done?”

I lucked out. I sold it for $11,500 and $6,000 later, same as you, I was off to the races. Early on, where I was referencing the 1,000 postcards in my $79 advertising, that’s not the case for a lot of investors who go out and attempt the off-market deal business. What I’m getting at is there’s almost this certain element of luck where you and I got lucky on that. I wish I did a deal for every 1,000 pieces of mail that I sent out since then. Without that luck, maybe we wouldn’t have been so ambitious to keep going.

Yes, there’s skill. Yes, there’s luck. How important is luck or how much is luck and how much is skill, would you say, for people maybe just starting out so that when they get in there, if they don’t see that instantaneous luck, maybe they stick to it and go through the storm and get to the other side where you begin to get that momentum?

The Role Of Luck And Skill In Early Real Estate Success

I was definitely lucky because then, then the next thousands of postcards I was sending out after that, crickets and or just not any good deals. The success often happens in the outliers, and there was no reason that I should have gotten a $15,000 deal from those 1,000 postcards, but there was some luck there.

I hope that a lot of people get lucky in those early days because you just need that proof of concept early on. There are so many people that start and don’t get lucky or they’re beating their head against the wall for months without any traction or any deal flow. Definitely, I think we both got lucky early on because I promise you, I started to send 5,000 postcards, 3,000 postcards every week, and I ended up burning through my cash in those first few months of that very first year, 2016, wholesaling.

It was actually just listening to podcasts just was like this one where I ran across the Joe McCall podcast and he had interviewed Rick Ginn, the probate king of Florida. I thought that that was a great opportunity for me to differentiate myself. I started going after probate leads and sending letters at way less volume. That turned into some major deal flow for me. It was really probate deals that saved my business that second half of the year. I probably did $86,000 on like $3,000 worth of mail sending probate letters.

One more moment on our little beginner stories there. Do you remember the phone call when you made the offer and maybe that seller accepted on that original deal? Is there any recollection of that that you could share?

That very first deal, I remember where I was in my house. I remember that I was in the basement and I was scared to death to ask her if she would accept an offer of $19,000 for this townhouse. I remember she thought about it, she said that she had to consider some things, but it felt like she was moving in the right direction and she was actually going to consider this $19,000 offer.

I didn’t know what I didn’t know. And looking back on it, I could have paid a lot more and I could have sold it for a lot more. I just remember that trepidation of, “Should I ask her if this is enough?” It’s something that my mentor always says. If you have that uneasy feeling in your stomach, you’re probably making a good offer. I definitely had that bubbly feeling in my stomach, like, “Is this good enough?” Sure enough, we actually proceeded and moved forward.

 

If you have that uneasy feeling in your stomach, you’re probably making a good offer.

 

I asked for the details there and appreciate you diving just like you did into them, because I think for a lot of people, even people who’ve been in the business a really long time, Brandon, I noticed that the hesitation moment in the real estate business as an investor comes at the moment of making the offer. That’s where for new people who have low experience or maybe no access to the MLS, you got this challenge of getting your hands on the right data to be able to even figure out what the number is.

Let’s say you figure out what the number is, then there comes this other piece of actually presenting that offer to the seller. Maybe that can be more difficult over the phone and even more difficult in person with the seller than perhaps how you’re doing it now. Let’s just talk about the Brandon Barnes now of offers over appointments as a strategy.

Transitioning To Offers Over Appointments: A Strategic Shift

What I started to realize is that if I wasn’t making enough offers and if they weren’t getting out the door, we were generating leads a little quicker. If I wasn’t making enough offers, I was not giving us an opportunity to do deals. Just to double back a little bit, towards the end of 2016, the mentor group that I was in, there was a colleague, a friend now named Brent Daniels that was talking about cold calling.

Compared to direct mail, he was spending way less money sending making cold calls and he was doing some really large deals. I just thought that, “Here’s another great opportunity.” I just had my eyes open for those opportunities. He was an open book. He shared. He said, “If anybody wants to know a little bit more about it, give me a call.”

I did just that. He gave me the entire model and the process. I said, “I think that this is it.” I was on the cutting edge of cold calling late 2016, early ‘17. I actually went on and hired some cold callers middle of that next year, so May, June of 2017. We started to generate enough leads, but I was still trying to scramble and go to every property. I had a buddy that did a video within that mastermind group. He said, “Death to Podio.” He was tired of being in task hell in Podio.

He said, “We’re going to keep our leads in the dialer and you can really do deals just over the phone without seller appointments.” I wasn’t really a believer in the beginning, but as we started to try it out and lo and behold, we were able to do deals that way just by having really good conversations and making offers.

When I found out that I could do that, I really sped up that process. I hired an acquisition manager, which I had to train. He actually was one of my cold callers based in Mexico. He is still my acquisition manager to this day. I had to show him how to come up with that offer price over the phone. This gets into a strategy of mine that a lot of people really like when they hear it. If I could break it down, if you think that’d be all right, I think that would really give the readers some value.

Yeah, it’d be my next question, actually.

The “Maximum Allowable Offer” Strategy

What we do is instead of this ARV times 0.7 minus repair cost minus what you want to make, I start to see this trend and realize that that formula does not include houses that could be just great rentals that don’t need that 0.7 full rehab. I just started to, for every property that pops up in our dialer, any lead that I look at, you text me an address right now, I’m going to go onto Zillow.

I’m going to draw a little circle on the map and look at everything nearby, not crossing over any major roads or highways. I have a square footage filter that’s within 500 square feet and just look at all the comps. As I look at all the homes that sold, if they were sold fully renovated, I’m going to click into them, look in the price history and see what price they sold at before the work was done.

That gives me the price that an investor would pick it up for and what they would purchase it for before they do the rehab. I just started to subtract my margin, what I want to make, which I suggest $20,000 so you have some wiggle room. That then becomes my maximum allowable offer. That allows us to quickly, in conversations with sellers, find out the offer price in a ballpark right there on the phone and power dial all of our leads so that we’re just able to get to these properties faster, speak to homeowners over the phone, make offers and keep it moving.

It pushes us to the front of the line when we’re actually speaking to them about an agreement. That works for fully renovated properties and also works for homes that were fixed up a little bit and listed as a rental. I’ll just look into the price history of all the homes that sold, whether they were fully renovated or just mildly fixed up, the $10,000 investment and turned into a rental. I’ll subtract my margin and that is our maximum allowable offer.

Are you finding that by talking turnkey on the phone with that seller? We do little call calling and a lot of people, it’s a yes no, it’s a binary answer. “Are you interested in selling?” “Yes.” Okay, then we try to get out there and face to face. “Are you interested in selling?” “No, we’re not.” What does the lead-in for your reps sound like to keep them on the phone? Am I right in assuming that because you’re talking turnkey, you’re talking money and offers right there over the phone, that they’re more engaged and open to keep the conversation going with you? What does that conversation look like from the ACT manager’s vocabulary?

Benefits Of Talking Turkey With Sellers And Following Up Effectively

It starts just like you mentioned, from our initial prospectors, our first phone call is just the introduction is everything going really high. “John, look, I’m sorry this is out of the blue, but I was just actually just calling about a property I believe you own at 123 Main Street. Yeah, look, we’re looking to purchase a home in the area. Just wanted to see if you consider selling it.”

If they say yes, we’ll continue on getting condition. “It sounds like a great home. Why would you consider selling it? What’s the best price you would consider if we paid all the closing costs?” There was no real estate commissions to pay. We’ll ask them for their email address and send that over to my acquisition manager very quickly so that he can dig in a little deeper.

As he’s talking to people, he’s trying to get a ballpark and get them to close, get them to agree to a price in that first phone call by using exactly that strategy that I just mentioned. Even when we’re not close on price, we’re still going to let them know, “We’re going to send over our best offer and follow up with you and see if you got it,” and we’ll take it from there.

Using that method, we’re really able to get 50, 60, 70 offers out each and every week. From our metrics, every 25 offers, I’m expecting to sign contract back. We’ve just sped up that process instead of like, here’s a lead, let me send it over to a CRM like Podio and then hand dial them. We’re instead keeping that lead in our dialer, having our acquisition manager power dial those homeowners. As soon as they pop up, he’s clicking on Zillow, looking at the comps, looking in the price history, finding the sale before the sale, subtracting that $20,000 and making that offer. It just helps us speed up that process so we’re able to get 50-plus offers out the door. To your point, it’s the offers over appointment strategy.

Yeah, it’s slick. What would be the split between the ACT manager gets a commitment and someone says, “We’ll take the $110,000 versus you send in the offer for $110,000 and do a little follow up after they initially said, “No, the price isn’t going to work.” Is that like a 50/50, the deal’s coming on the front end, the instant close versus the follow-up or some other different balance?

It’s different. Only about maybe 25% of the time we’re able to get them to agree to our price that very first conversation. On average, about nine touches until we’re getting assigned contracts. Most are in that second group of folks that we sent over our best offer, and then we followed up with them making sure that they got the agreement and trying to continue to build rapport over time and get them to sign.

It’s more in that second group of just constant follow up, but he’s just able to do his follow up so much more efficiently by keeping our leads in the dialer. When he says, “I need to get in there and do some follow up,” he’s power dialing these leads and getting through them and connecting with homeowners live follow up faster than if he was hand dialing.

I prefer that. I prefer a live follow-up touch over some automated system that sends text messages and RBMs with some interval. I’d rather him do live follow-up and talk details of the deal, details of the document versus the person that’s still calling and just trying to convince them to agree to some pie in the sky number. I feel like it allows us to cut in front of the line because we said, “We sent over an agreement. We’re ready to move forward.” They’re taking us a little bit more serious than the next person that’s just calling still trying to get them to agree to terms.

The Importance Of Negotiating Offers And Overcoming Hesitation

That makes sense. It underscores the most valuable time that a real estate investor is going to is going to invest in their business, is going to be in the process of negotiating offers on the purchase side. I’ll go out and say that that’s more important than negotiating the deal on the sales side. If you didn’t buy the deal right in the first place, your sales side is already going to be severely impacted no matter how great your sales side of the negotiation goes.

 

The most valuable time that a real estate investor is going to invest in their business is in the process of negotiating offers on the purchase side.

 

Dealing with contractors or going out and picking out cabinets and light fixtures and all the stuff you see on HGTV, forget it all. Not necessarily forget it or disregard it, but the highest value time you can invest in your business is on the offers. If you think back to the beginning of our conversation here, Brandon, that is the same thing that a lot of times is going to stop a newer and experienced or an investor that’s not getting a level of consistent results. It’s probably because they’re not putting 50, 60, 70 offers per week into the market.

Whether you are following up and dealing with agents and you’re investing the time that way, or you’re literally talking and communicating with the seller who you’ve already made an offer, either way, that time investment is the most valuable portion of the transactionally driven real estate investor’s business. Fix and flipping if you’re on the acquisition side with your buying whole rental portfolio.

If you’re on the side where you’re just managing your portfolio, obviously, this is a different thing and they probably checked out of this episode by now. The other thing I’m wondering, and probably the audience is, too, at this point, but how do you know the condition of the property? Are you doing this blind? Are they texting you photos? What’s the deal with underwriting for condition?

Evaluating Property Condition Without Seeing It: Expert Insights

That’s a million-dollar question. Honestly, I did not see a major drop off in cancel contracts or renegotiated agreements from when I was going to the property trying to estimate repairs versus once we just started to send offers based off of what’s sold in the market. Honestly, it was just the same type of contract fallout rate where there is going to be some deals that work and some that don’t.

If we’re basing our offer for subject property off of other homes that have sold in the area, we already have a feel for what an investment deal will sell for in this particular area. If we’re able to offer our property contract at a similar rate, at a similar price point, it’s a deal because at the end of the day, the first thing that a buyer’s going to do is they’re going to look at comps in the area and say, “I see that this property sold for X.” If we’re able to offer a contract for our property at a similar price point, then it already makes sense.

To dive a little deeper into that question, when I’m looking at my subject property, of course, there are going to be homes that are in better or worse condition. When I’m looking at the comps that have sold and I see what they sold at before a renovation, there’s still going to be a range. If I’m looking into an area and I see a bunch of fully fixed up, fully renovated properties also for $250,000 in the area, and then I look in the price history and most of them sold a little below $100,000, there are some that sold closer to $100,000 and some that closed sold closer to $60,000. I would assume that the ones that sold closer to $60,000 were more in the need of repairs. They were in worse shape before the renovation started.

My subject property, if the owner tells me, “It was vandalized. It’s completely messed up. It’s going to need a full gut job,” I’m going to be a little bearish on my offer and get closer to the homes that sold in the $60,000. Versus if a homeowner says, “The fundamentals are there. We actually replaced the roof a few years ago. Yes, it needs a complete update and renovation, but the water here is good. The AC unit is good,” I’m going to be a little bullish, and my offer is going to be on the higher end of what those other homes sold for before they were renovated. It’s still an estimate. We’re still estimating the value of our property based on its condition.

What the homeowner tells us is the closer that we can get to the price point that these other properties sold for before they were renovated. Once something goes under contract, we immediately go out, we immediately tell the homeowner, we need two times to get in there. Once for photos and then a second time for our purchasing partners, contractors, any potential agents.

Furthermore, if any wholesalers are reading, the quicker you can get to the point where you’re letting homeowners know that oftentimes, the majority of the times, you’re going to immediately resell their property for profit to your network of buyers, the better off you’ll be. All of us started off saying, “We’re going to buy your home and we’re going to fix and flip it or hold it as a rental.”

The quicker you can get to the point where you’re telling them the truth, being a truth teller and a truth seeker, the smoother your transactions will go and you’ll be able to say, “I’m providing you value by quickly and conveniently allowing you to sell your property at the price point that we agreed upon. That’s the value that I’m providing. The way that I do that is my prerogative, and sometimes I’m going to immediately resell it for profit to someone in my network.”

Letting them know, being honesty is the best policy is going to be super helpful. If you do get something under contract that’s a little too high, renegotiate the moral way and letting them know throughout the process the entire time. We do not go under contract with properties with the idea of renegotiating. Most of the time, we’re able to hit the right price point just basing our offer off of what other homes that sold in the area.

Are no photos being sent during that negotiation at any point?

Not most of the times. There are some times that homeowners are adamant about us seeing the property prior. Sometimes they are. We’ll send our guy out to take photos or we’ll ask them to send photos. Majority of the times, I would say 6 to 7, or really 8 out of 10 times we’re able to go into contract without any photos and without the seller almost forcing us to come through their property, but it does happen.

You have a point. As I hear you talking, I’m thinking through my own experience. I’m in Philadelphia, I’m in Chicago, and I’m in Atlanta, and we do a volume of deals in all three of those markets. New Jersey, Delaware, Maryland. We’re in quite a few markets. As you’re talking, I’m thinking, “You’re right, Brandon.” As I think through, I have like my South side Chicago properties and the cash comps go through a certain range, and the ranges are for certain conditions.

It’s like an anomaly when I have a burned-out shell in the South side of Chicago. That’s going to be significantly more money than one that at least had a family maybe living there in within recent history. I go to Atlanta, and there’s certain neighborhoods in Atlanta where the year of construction is around the same time.

If we’re talking 30310, 30315, beltline, Southwest Atlanta area, we have older home inventory that’s going to need significant improvement to be retail ready. It’s probably only going to be this investor fixing and flipping type of mentality there in most cases versus finding one that was renovated 3 or 4 years ago. Yeah, they come through sometimes in their rental condition, but age of the inventory that sells to cash buyers in Southwest Atlanta is going to be different than some other areas where the construction is all newer construction built in, like, let’s say ‘70s, ‘80s, and ‘90s, like up in Beaufort and Hall County.

A lot newer construction in the suburbs for the most part. Summing it all up, you can actually underwrite the condition almost by looking at the comps and like comparing the year of the build of the subject property to the year of the build of the properties around it and getting a feel for the pictures. That’s not a skill that’s going to come easy on the front end. I’m curious how long it took you to get the acquisition manager that you have running things up to speed on this range thinking that you described about, the conditions.

I really think it was about 3 to 6 months before he started to feel comfortable. What he always does is we use Slack to communicate within our business. If he has something that he had a question on, he would just send me over the address, the condition of the property, what the homeowner want, and I gave him real time feedback. Just a few addresses a day each day over time would just allow him to get it and see it better and better over time. Also, I was able to just show them on the map, just to your point, different areas around the city where most of the price points will be for a wholesale transaction.

Southwest Atlanta, like inside the perimeter and South of I-20, which cuts across the city, it’s going to usually be around this price point. You probably need to be under $100,000 or if it’s in a really high area towards the city, you can probably get up to $150,000 on your offer price because those homes fully fixed up are well above $350,000. If you’re outside the perimeter and North of the city, you’re able to offer X. I was able to just show him on the map assumed averages just based on history and experience. Also, just always give him feedback on a daily basis.

He tells me like, “Look at these addresses,” and I was able to give them that feed by looking at the map. For me, it’s something that I built over time. I’m somewhat of an analytical thinker, but I’m not too analytical where I absolutely have to look at all the numbers. I have a touch and a feel for what buyers will pay. As soon as you start thinking about these properties as a buyer would, like, “Would this be a good deal for me? Will I have enough room to do this work and still make this money?”

The better you are going to be at making your offers. Thinking as a buyer will help you really key in on your ability. That’s a real estate investor’s superpower. Being able to comp properties and have a feel for a purchase price is our superpower. Always be working on that if you want to be successful in this business.

 

A real estate investor superpower is being able to comp properties and have a feel for purchase price.

 

Disclosing Profit Motives And Handling Seller Objections

The other thing I want to circle back to again here for a moment, but you’re disclosing the profit motive to a seller at some point early in this thing, or maybe when you got the contract out and you’re saying, “I’m going to sell this property to someone in my network. I’m make a profit.” It’s implied like, “Why else would I be buying a property if I wasn’t going to turn around and sell it at some point to make a profit?” It can be offensive if you’re not disclosing that in some fashion upfront.

How often does that torpedo a deal, if at all? If it does torpedo a deal, how do you mitigate that? Is it a good enough deal that you’re willing to close on it? Is there any other way to handle the objection that a seller might have if all of a sudden, they find themselves offended that you’re planning on making a profit on the deal for doing business?

It definitely can turn people off where they say, “I absolutely do not want you assigning this contract to purchase my home,” or wholesaling this property if they’re really savvy. We’ll pivot very quickly and say, “We do have other exit strategies. We do have lending partners where we can purchase this home and then do whatever we want with it after we’ve purchased it from you.” That’s exactly what I’ll do. I’ll reach out to a private lender in my network and actually purchase homes and at that point, I’m going to list it on the open market, but it has to be a good enough deal. Yes, to your point, it can turn some people off, but not everybody. You sometimes have those really nice homeowners.

There’s one that we, that we have under contract currently. We mentioned because it was in such great shape that we listed on the MLS even while we’re just still under contract. We say, “I absolutely don’t care what you do with it. I want to receive X amount of money and I want to be able to close within 30 days.”

On that particular home, it’s such a good deal, as far as just being retail ready, that I am still going to purchase it and then list it on the MLS so that I can accept the conventional home buyer’s offer. It’s just letting them know upfront and if they have an issue with it, we’ll remove whatever language out of the agreement. Honestly, you sometimes can just double close on the property and steal, have a simultaneous transaction where we’re purchasing a property using an end buyer’s funds and then immediately reselling it. We have options to go around what they see as us assigning their contract.

It’s funny, though. If we had hesitation, we talked about around making the offer. I experienced people never wanting to bring up the profit motive the way you just described. It’s like, “Don’t bring that up. It’s taboo. I’m not saying anything like that to jeopardize my contract,” and they back themselves into a corner because they don’t mention that ever. Now it creates, like you said, all these speed bumps further down the line in the deal. If they’re trying to get contractors, partners, buyers, etc., through the deal, and now all of a sudden, the seller’s wondering what’s going on.

“Why are all these people at my property? I thought you were purchasing this property.” You just don’t want to face those issues during your inspection or especially at the closing table.

Brandon Barnes’s Atlanta Real Estate Market Insights

Yeah. To me, it’s like, “I’m going to make a profit. If you have a problem with that and there’s someone else that you have lined up to buy the house, that’s great if you want to go explore that option. I’m here now. I’m ready to sign, and I’m the one that’s going to put a check in your hand. Of course, I’m doing this because I’m in the business of making money.” I win some, I lose some, but at the end of the day, I’ve got to make a profit here for the business to continue on. It is what it is. Let’s switch gears again here. Let’s talk the Atlanta market. Tell me where you came from. I think you said you moved to Atlanta. Was the reason that you moved to Atlanta because the real estate market was hot?

No. I was born up near Chicago but moved here when I was one year old. I’m raised here. I’m from Atlanta. I went and graduated from Purdue University in Indiana. My first job out of college was with the HJ Heinz Company in Pittsburgh. They were going to move me to 3 different cities and 3 different years. They got purchased. They moved me out to Illinois, Iowa and then they got acquired and canceled my job. I had a young child and I was driving back and forth but I found a job with the Kraft Oscar Meyer company. They got bought out by the same company that bought the Heinz Company. We lived there for a little bit, and I started to look for opportunities back here in Atlanta.

I found a position with Unilever and we were able to move back home. Before the year was up, I was fired. Literally two weeks after getting married to my wife, I got fired. I think that just goes to show that I was not the best employee. I needed to be charting my own path. I knew nothing about real estate whatsoever. I got fired right in October. I reached out to my buddy in December and as soon as he told me about wholesaling and I could follow this mentor program, by January 2016, I was fully in, burned the boats, doing my own thing. I hired my first team member in June of 2016, my administrative assistant, she’s been with me ever since.

She’s my right hand, keeps my business together. I’ve been operating it as a business since day one. That really helped out. All the corporate experience that I had allowed me to lead the team of cold callers and acquisition managers and have a systematic approach to the business. Though I’m not using my degree directly, the Operations Management degree and corporate experience that I got right out of college definitely played a role in my success. There is something to say about going to school and getting your education. You can’t leverage that in the business world in the right sense.

The Value Of Education And Learning From Experience

I think that’s good to say. Congratulations on getting fired, by the way.

It’s the best thing that ever happened to me.

You’re not the only one. We’ve heard that a few other times on the show, and I know a lot of people personally who that was the case in the catalyst for getting started in real estate, but I like to underscore the part about you saying that the degree did actually translate into what you’re doing now. I think it is something. I’m of the, “I dropped out of college and got right to doing stuff,” but that’s not really the case. I dropped out because I wasn’t disciplined enough to finish it, and I got bored quickly with that and wanted to get off and get to work. That was the end of engineering school for me. I think that you are absolutely right. A lot of the stuff that I had to learn from books and self-teach and through hard one experience.

I know for a fact that stuff is quickly available and you can assimilate that into the way of your thinking through business school management and a lot of other courses that you could take in college. And I know that a lot of people in the real estate thing and even in the world right now, there’s this like anti-higher education backlash amongst entrepreneurs. Everyone wants to quit and be Bill Gates or quit and be Mark Zuckerberg but that’s not always the entire situation. That’s a great point there to highlight your experience.

I have 4 young children and by the time of this release, we’ll probably have announced that 1 more is on the way.

Congratulations.

I appreciate it, but I’m still going to allow them to go to school and have that experience, by all means do so. I will also offer them the option is if you are starting a business, if you’re doing the entrepreneurial thing in high school and things are looking good, I will allow them to choose whether or not they want to continue on going to college. If they don’t have anything in the works, definitely, I think that there is value in a degree.

That experience, the fun that you get, the comradery that you have from your college experience. I still have all my engineering buddies. We meet on a Zoom call or Google Hangout every few months. Those are lifelong friends, White guys out of Indiana that I’m still kicking it with from virtually. We do a little reunion every once in a while, too, so I want them to have that experience. There is something about that that you can’t replicate just jumping into the business world with bills and issues. There’s some value to an education, for sure.

My daughter’s at Temple right now, and obviously with the pandemic going on, it could have been done virtually. She knew enough that she wanted the experience, so we got the apartment. They’re canceling the dorms, now they’re back on. They’re allowed to stay there. Now they have a couple in-person classes, so it’s been a whip solve a year, but she’s getting the experience. I’m in Chicago, she’s in Pennsylvania, and she’s away at school.

That to be crazy for these kids that are going through COVID. I can’t imagine. Hopefully, she’s still enjoying herself and that’s good that she’s still allowed her. Does she want to be an entrepreneur as well?

She’s scared of that, and she feels like, “I can always come work for dad at some point if I can’t figure out something else.” She is into occupational therapy. I think it was one of them. She switched her major. She liked personal training and wanted to do her own personal training business, but there’s a certain amount of experience that comes in selecting the right business opportunity also, which I think she’ll probably develop that at some point, but she’s doing her.

That’s awesome. The kids are a blessing.

That’s why I moved out to Chicago. I’m from Philadelphia and 2005 or ’06 is when my daughter moved here with her mom and then I moved to Chicago so I could be here for her middle school and high school years right before she left to go back to Philadelphia for college where I’m originally from. You’ve got to love it. Let’s talk books. We get our wisdom and we get our knowledge. Is there a book or two maybe that you recommend to people or that you found pivotal, business, real estate or otherwise, that you think would be valuable for the listeners to check out?

Recommended Books For Real Estate Success

Yeah, there’s a few great books. I definitely always suggest Profit First as you’re getting making sure that you have a game plan for your money. The one thing is something to try to live by sometimes tougher sit than done. The E-Myth if you’re really wanting to be an entrepreneur and then Traction as you get going. You’re building a team and you’re wanting to have some structure to your business and your meeting schedule and meeting rhythm. For anybody out there that’s cold calling, I highly suggest Fanatical Prospecting by Jeff Blount. That’s something that I think everybody that’s going to be on the phone should definitely listen to or read. I gave a slew of book there.

I wrote them all down. That’s a new one. Fanatical Prospecting by Jeb Blount.

Yeah, that’s a great one.

All right, so this is the REI Diamond Show, Brandon. At the end, we talk about our crown jewel of wisdom. I’m going to set the stage here. Let’s say it’s like 2015, 2016. Your bank account is at near zero. No deals waiting on the board to close. Yes, you did it with the postcards originally, but if you had to restart your career, knowing what you know now, how would you get started?

Brandon Barnes’s Advice For Starting Over In Real Estate

I would go directly to the courthouse and I would pull the probate records and the eviction records of recently filed evictions and probate. I would do that every week and find a way to contact those, either the petitioner that petitioned for probate or the plaintiff that filed the eviction. I would be contacting them by any means necessary, preferably by the phone.

If you’re really hungry and really gritty, go knock on the door if you absolutely have to. Those will be the immediate steps that I would do in any city. You could drop me anywhere in the country, I’m going straight to the courthouse, find the records from the source and trying to contact them as quickly as possible from the moment that they filed these cases.

You talk about how quickly as possible, and you also mentioned doing this every week. These lists are sometimes available, usually on a monthly pool. How important is it to do it every week? Is that because there’s other people doing the same thing and you’ve got to get there first? Is that why this is part of the crown jewel of wisdom for you?

A hundred percent. I think you get the first mover advantage if you cut the curve and go weekly because every week in a major county, you can get 30 actual leads. In our major counties, there’s probably about 50 records filed a week and 30 of them own real estate. There are so many list providers and vendors that only allow these lists to make these lists available to their clients monthly. Go weekly. Beat them to the punch and be the first person to reach out.

That little extra with the probate process, though, is if you can go under contract with a homeowner and write in the agreement, this transaction will close after the probate process is complete. There’s going to be people that say, “I can’t sell it to you right now.” We can still go under contract so that as soon as they get their letters of testamentary, you could be closing literally the next day. The one little gem I’ll add in there is if I needed to find my buyers, I would go out and put bandit signs around the area, the major intersections around where the property I have under contract is located. Desperate, 3 beds, 2 bath, cash investors only, and my phone number.

Do you still do the bandit signs now?

I don’t. I did it ‘16, ‘17. That’s really how I built up a lot of my best buyers, from that original way of getting buyers. I really grew my list by swapping with other investors in the city, one-on-one swap of our list. I had gotten up to like 15,000, 16,000 and then deleted out all the people that weren’t opening the emails. I have about 8,000, 9,000 strong buyers on my email list.

I appreciate you coming on the show here. What should readers do if they want to get more Brandon Barnes?

Head over to SendMoreOffers.com. All my links to my social are there. Anywhere that I’m putting content out, you can follow me. If you’re interested in learning more about how we send more offers and want to talk about your goals, see if you’re a good fit for the program and want some additional resources, book a call with me. You can do that right on the website. Thanks, Dan.

One tip too is put in the www. I’m not sure if it’s just my browser or not, but the first time I tried to punch it in without the www, it gave me like a, some Google error, but once I put the www in there, it actually went straight to the site.

Yeah, that’s why I said like that. I don’t know why. I’ve got to get that fixed, but yeah, definitely put that in. I look forward to hearing from you, guys.

Yeah, for sure. Thanks again, Brandon. I really appreciate you being on the show, and we will we’ll catch up soon.

Thanks, Dan.

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Creative Financing And The Mortgage Note Business

Are you interested in doing deals with no money down? Creative financing. It sounds like a good idea, right? You might consider diving deeper into the mortgage note business. The mortgage note business is the creative financing strategy in real estate. First, negotiate no money down deals with sellers, then find a buyer willing and able to put some money down and continue making payments until the deal is paid off with a profit for you and in between.

One of the things with creative financing is that you can sell properties from much higher prices using creative financing. Here’s an example. I bought a package deal a few years ago, and as part of the package, I think there were five houses that I really wanted because they were in the right area, and there was a sixth house for $20,000, not in the right area.

That house that I had to buy for $20,000 as part of the package, it was worth about $20,000. I tried selling the house on the market for $20,000 plus or minus leaving the room for the commission but to no avail. The house did not sell. I removed the listing and I wrote a Craigslist ad offering that same house for $45,000. This time, I added creative financing.

The deal sold for a price of $45,000 with $8,500 down and $443 per month for 10 years. The deal was off my plate collecting payments. If the deal runs all the way through the 10 years, I’ll end up with a total of $61,660 on a deal I couldn’t sell that I had to buy for $20,000, which amounts to a profit of $41,660. Not a bad deal on a deal that I couldn’t even sell to break even.

What’s the best way to learn about creative financing, no money down deals and the mortgage note business? You’re in luck. My friend Brian Lochner is hosting a full day virtual workshop on exactly that topic. Normally, this costs $97 to attend. As a reader, you can attend free when you register at REINoteSchool.com. This class is a full day of content, tons of examples of real deals, and of course, many of these deals are the crowd favorites. No money down, and extracting a nice chunk of cash upfront followed by years of additional payments. Go check the schedule and sign up.

Thanks again for tuning in. Remember to review and subscribe. Just search REI Diamonds and click subscribe. To receive the episode highlights via email, sign up at REIDiamonds.com. At that site, you can also access the full episode archive of Wealth Building Real Estate Investment Jewels of Wisdom. My main business, Diamond Equity Investments, is that of buying, renovating and selling houses, 283 in 2020 and 30, bought and sold so far in 2021. We have another 114 houses in our inventory, either under construction for sale or awaiting closing.

Here’s how we can do business. Number one, are you interested in having access to the best real estate deals in your market? In other words, access to deals you can buy at low enough prices to actually profit after renovating and reselling. If so, go now to AccessRealEstateDeals.com. Number two, are you an accredited investor who enjoys double-digit returns? If you’d like to potentially invest passively in my real estate deals, go to FundRehabDeals.com and sign up to receive my private mortgage investment opportunity emails.

Number three, finally, I am always buying houses that I can flip and 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, we have Avery Carl joining us to discuss a few of the hottest vacation rental real estate markets in the Southeastern US and exactly how you can get your peace. Catch you next time.

 

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Carl Fischer on Self-Directed IRA Investing

Self-Directed IRA Investing

Carl Fischer, of Cama Plan, & Dan Breslin discuss Self-Directed IRA’s, Tax-Free Real Estate Investing, & Private Lending. Cama Plan is an IRA Custodian that Permits Self-Directed Investments of IRA Funds into Alternative Investments including Gold, Mortgage, Private Companies, & Even Real Estate.

Click Here to Read Dan’s Article “How to Fund Real Estate with Self-Directed IRA Accounts”

Carl Fischer & Dan Breslin Discuss:

  • Buying Real Estate in Your IRA/401K
  • Turning Your IRA into a “Mini-Bank”
  • How to Create Tax-Free Income for Life
  • Using Tax Free Income to Pay for Health Care & Education Expenses

Listen Now:

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www.CamaPlan.com

1-866-559-4430

 

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