Real Estate Nerds: Recent Episodes
Scott Smith
Tired of feeling out of your depth when looking over real estate deals? Learn from the pros in our Contract Forensics episodes. Real estate attorney Scott Smith will be interviewing professional real estate investors and CPAs as they break down deals. Learn the basics of contracts, tips and tricks for success, and some of the fine print and common mistakes that turn money-makers into money-pits. Listen in for great advice, big personalities, and great conversations about real estate investing. You don’t have to go it alone: let our dream team show you how to build your real estate empire.
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
What can a real estate investor do when inventory is low and priced too high to be profitable? Consider buying notes instead of property. Notes are the secured debt for an asset. Today's Royal Investing special guest, Paige Panzarello, breaks down her strategy to achieving great success by investing in non-performing, first-position real estate notes.
- A non-performing real estate note is secured by the equity in the property.
- You can purchase these notes for anywhere from .38 to .62 cents on the dollar.
- A 24% increase in foreclosures post-Covid indicates tremendous opportunity in this space.
- When you buy a note, you become the bank. As the bank, you have complete control over your exit strategy.
- Depending on how you choose to resolve the note you could experience an excellent return on investment or create ongoing passive income.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Insurance is your first line of defense against accidents and natural disasters. Things get complicated for real estate investors as more assets are acquired, more policies need to be purchased.
- You might find that your current carrier isn't licensed to sell coverage in different states or for certain assets.
- General and local insurance carriers do not have a solid understanding of the real estate investing business so they may not be able to best advise on the most cost-effective and efficient solutions for you.
- You will find yourself dealing with multiple agents working with different companies. The lack of a holistic solution drives the risk of having inappropriate levels of coverage. You could be paying for more than you need or have gaps.
Learn how Royal Legal Solutions can offer you a single point of contact and the best coverage for all of your liability, life / whole life, and annuities insurance so you can focus your energy on your business goals.
Want a refresher or to see what you missed? Watch the replay.
FREEBIES
Using Real Estate and Debt to Build Wealth (ppt)
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Founded in 2003 by Brad Cullipher, the Brad Cullipher Mortgage Group powered by Mutual of Omaha Mortgage has been helping clients around the US purchase, refinance and build their dream homes for over a decade. We know when you come to us for a home loan or to refinance your mortgage you’re looking for a partner that can get the job done. We’re honored to have the opportunity to work with you. Here are a few things you can expect from us: 30-day closing, impeccable follow-up, and transparent rates and fees. We're committed to delivering the best value for our clients and we'd love to have the opportunity to help you. In this session of Royal Investing, Brad presents a few of the options available to real estate investors to grow wealth.
Want a refresher or to see what you missed? Watch the replay.
FREEBIES
Using Real Estate and Debt to Build Wealth (ppt)
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
...
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
In this episode, Dan McCabe breaks down how using a 1031 exchange can compound your net worth over time. Dan is the Co-Founder, Vice President of Exchange Resource Group who has 40 years of legal expertise as an attorney in real estate and construction law and completed his first 1031 Exchange in 1977. He is a graduate of Southern Oregon University and Willamette University College of Law in Salem, Oregon.
Dan served as legal counsel to a number of real estate professionals and has acted as a principal and real estate agent in many real estate sales and development projects. Additionally, he served as a Municipal Judge for over nine years.
From Dan's perspective, if you aren't using this strategy, you aren't a serious investor. His motto is "maximum flexibility, minimum tax". Learn the techniques used by the most successful real estate investors.
Want a refresher or to see what you missed? Watch the replay.
FREEBIES
1031 Exchange (ppt)
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
LLCs are one of the most popular ways to hold title to a property, providing real estate investors with a number of benefits, including limitation of liability, credit score protection, and asset protection.
LLCs also give you flexibility in how you will be taxed. While an LLC is a pass-through entity by default, you may opt for different types of LLC taxation.
- Disregarded entity
- General partnership
- Tax treatment as C Corporation
- Tax treatment as s Corporation
In this episode, Scott Royal Smith provides a detailed explanation of how this structure is used for operations and the benefit of setting one up sooner rather than later.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
In this episode, special guest, and mentoring community member Julie Zhu shared about judgment enforcement. Specifically, she described strategies for collecting on, holding, buying, and selling unpaid judgments (debt). This information is especially valuable for anyone who is a landlord or deals with contractors.
Julie considers judgment enforcement as one way she has diversified her portfolio and compares this type of investing to non-performing notes.
Wondering how to collect on a judgment without having to evict your tenant? Several legal and ethical tactics are covered here.
Want a refresher or to see what you missed? Watch the replay.
For information on how to judgment-proof your assets, check out Julie's Top 10 Points to Judgment Proof Your Assets (pdf)
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Listen in as special guest Ron Galloway breaks down the potential in investing in carbon credits as an asset class. Ron joins us with an extensive background in finance and research. Here he outlines why investing in carbon credits is a can't-lose opportunity.
A carbon credit is a bit like a stock certificate in that it represents a certain amount of carbon emissions, for instance, one metric ton of carbon emissions. A company that emits a lot of carbon during its business process can offset its carbon output through the purchase of carbon emissions. If the company emits 30 metric tons of carbon, they buy 30 carbon credits to offset this. This has become so common now that carbon credits are routinely traded in major markets worldwide.
This is a must-watch episode for any serious investor looking to diversify during these times of historically high inflation and low-interest rates.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Today Royal Investing featured a special guest, Mark Swedberg, who joined us to drive a discussion about challenges faced in scaling your business. Real estate investing can quickly become overwhelming for beginners. Even successful veteran investors run into a snafu from time to time. In group mentoring, we aim to share our experiences, learn from each other, and grow together.
Lack of systems and processes: Without clearly defined processes, it's nearly impossible to delegate. As a business owner, you need to be the person to create, develop, and follow the systems necessary to run your operations. A set of checklists may be enough to get you started. Over time you can add detail as you refine your processes. Your system will empower you and bring you peace of mind knowing your business can function without you should the unforeseen arise.
Difficulty delegating duties: Let's face it. Many of us like to be in complete control of our business. But once you have your systems and processes in place, it will become easier to farm out some of the work. Offloading non-income-generating tasks to someone else will allow you to focus on income-generating activities that grow your business. A good rule of thumb is, "If you can pay someone else (hourly) to do it for less than what you earn (hourly), consider hiring."
Low inventory in the housing market: Attendees talked about the difficulty of finding reasonably priced properties. One participant shared a solution. Consider partnering with a local, top-performing realtor for leads. Provide that person an incentive to give you first-choice as deals arise and nurture your relationship with them. (Hat tip, Chris!)
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Today Royal Investing featured a special guest, Ron Galloway, who gave an excellent presentation of his market analysis as it relates to interest rates and inflation. Ron broke down what he believes the true numbers to be and how he has arrived at his conclusions. Finally, Ron shared his thoughts about how to navigate these unprecedented times.
Inflation defined. In Ron's view inflation is put simply, an increase in the money supply. Nations globally have increased their money supply up to fourfold in just the past 12 months. This has led to historically high inflation which reduces the value of your money over time and drives prices up.
How is inflation measured? Ron explained that the inflation numbers given publicly do not take into account essential goods such as food and fuel. Commodities such as these are not as easily able to negate price fluctuations as other goods like electronics. The impact of high inflation is most felt by those with less money.
Impact of low-interest rates. Ron defined real interest rates as the rate of interest minus inflation. Historically low, even negative interest rates as in the EU have reduced the incentive for banks to loan money. Instead, we see the top institutions using cash flow for derivatives.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
ENGAGE WITH US
Are you ready to take action on Asset Protection, Tax Strategy, or Estate Planning?
Take our Financial Freedom Quiz, where we will gather your general information to have a productive conversation. At the end of the quiz, you will have the opportunity to schedule your consultation. https://hubs.la/Q014rfVz0
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Housing Prices. In 2021 we saw housing prices skyrocket, which became a barrier to entry for new real estate investors and home-buyers alike. This trend is expected to level out with reports capping this year's increases at 3%.
Geographic Market Shifts. As prices begin to stabilize, we can expect to see an uptick in first-time homebuyer sales and starter homes. While a large portion of the workforce has transitioned into a working from home situation there has been increased interest in real estate located in suburban and rural areas.
Interest Rates. Large gains in interest rates are not expected. This kind of market is ideal for taking equity out of your properties to reinvest elsewhere for higher returns. Blockchain use in real estate is opening up new opportunities in syndication. Cryptocurrency could be a lucrative option for those hoping to hedge against inflation while providing the liquidity needed to fund future deals.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Today we talked about getting ready for tax filing. We discussed deductions you can take, ways to lower your taxable income, and highlighted the importance of documentation storage and availability. Make sure you have a plan for keeping your documentation in order and that your spouse, partner, or other stakeholders have access. Consider maintaining multiple copies, using a solid digital archive solution, and updating your records regularly.
What are some of the most common business deductions you can take?
- business assets purchased in the current fiscal year
- vehicle purchase and/or depreciation if used for business
- mileage for business travel
- home-office deduction
- office equipment
- ATM fees
How can you reduce your taxable income?
- LLC annual meeting
- Charitable giving
- Solo-401k contributions
- Other retirement plan contributions
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
REGISTER FOR ROYAL TAX for more education specific to tax strategies for real estate investors and attend LIVE on Zoom, Tuesdays at 1:00 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith
https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
DISCORD COMMUNITY: https://discord.gg/KKS7rZG5kM
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Although slightly different from our standard investing topics, the stories and insights shared were powerful and inspiring. Our special guests Russ Morgan and Joey Mure, Wealth Without Wall Street founders, invited us to consider that money isn't the only quality of life measure. Call attendees commented on the divine timing of the concepts covered as we self-reflect on 2021 achievements and prepare for 2022 aspirations.
Are you living your life to the fullest or just going through the motions? Many people fall into the trap of the day-to-day grind and never allow themselves to dare to dream. Ask yourself what your dream life would look like relative to friends, family, love, career, and extra-curricular activities.
How can you achieve your dream life? We discussed the GPS analogy as it relates to your dream life. GPS technology only works once you set your intended destination. Identify your top goals and chart a path forward to accomplish them. Discover what you were born to do and leverage your strengths, talents, and expertise to build the lifestyle you desire. Create a vision board to keep your dreams top of mind.
Do you know your investor DNA? Your investor DNA has to do with things like risk tolerance, time management, and flexibility. Have past failures been a result of operating outside of your DNA? Realign your plan to your personality for a higher likelihood of success. Surround yourself with others on a similar journey to learn and grow while creating your network.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
What are the key benefits of using the Series LLC structure? The Series LLC simplifies operations, promotes growth, and serves to protect assets. It is infinitely scalable, yet only requires one bank account, one set of records, and one entity to form and maintain.
How does the Series LLC provide Asset Protection? Asset protection is achieved through the separation of assets, which the Series LLC accomplishes combined with a Land Trust that brings anonymity.
What if my state doesn't have the Series LLC? You can form the Series LLC in one state and use it in another because of the Full Faith and Credit Clause in the US Constitution. This means that the Series LLC is recognized in all states.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
This week on our live Group Mentoring, join our host, in-house Attorney Megan Templeton as she and Scott break down Estate Planning.
Learn how the proper Estate Plan can help you create and preserve generational wealth while sparing loved ones the pain of probate.
What are the foundational documents I need for my estate plan? At a minimum, we suggest a pour over will, living trust, medical power of attorney, financial power of attorney, and HIPPA release.
What is the difference between a revocable trust and an irrevocable trust? A revocable trust is a trust in which the terms can be changed at any time. An irrevocable trust describes a trust that cannot be modified after it is created without the consent of the beneficiaries.
How often should I update my estate plan? Your estate plan should be updated whenever your circle of people or assets changes. For example, when you get married or if you purchase a new home. A good rule of thumb is to set aside time at least once a year to review and update your estate plan.
Aren't all estate plans boilerplate? No. Estate plans are both state-specific and situation-specific. You should take into account your home state's requirements for a valid estate plan and what your personal circumstances are. For example, you may need to discuss a trust which shields from Medicaid or a special needs trust.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
You've probably heard the buzz about Bitcoin, but what about Blockchain? Blockchain is a new technology that could have a big impact on how investment transactions are carried out in the future. Find out about the benefits of blockchain and how it can be used to simplify your business.
Here are some questions to help you think about the impacts of blockchain on your business:
What impact do blockchain and cryptocurrency have on your current and future portfolio?
Have you used these methods previously?
Are you interested in using them?
How can these methods and technology help you build generational wealth?
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOSTS
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
Megan Templeton, Esq. Megan Templeton is from Birmingham, Alabama. She attended Auburn University and graduated in three years with a Bachelor’s in Psychology. While attending Auburn University, Megan was actively involved in the Auburn Honors College and Omega Phi Alpha, a service sorority. Upon graduation from Auburn University, she pursued her Juris Doctorate from Samford University’s Cumberland School of Law and her Master’s of Public Administration from the University of Alabama at Birmingham. Megan obtained both her JD and MPA in December 2015. Megan’s previous law positions have included clerk at the U.S. Attorney’s Office of the Northern District of Alabama, manager of a closing and title company, and currently the owner and principal attorney of Iron City Law, a boutique law firm in Birmingham, AL serving small businesses and the real estate community.
KEY TAKEAWAYS
Join me in this session where I will be demystifying the DST (Delaware Statuary Trust). If you’re a California investor or even own property in California, you cannot afford to miss out on this information.
As usual, we will have group breakout sessions to share your experiences and a Q/A portion. I hope you will consider attending LIVE. Come to learn or share with other investors who run the gamut in their experiences and backgrounds.
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
LINKEDIN: Check out what folks are saying and make a professional connection with Scott Royal Smith https://www.linkedin.com/in/scott-royal-smith/
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
MEET THE HOST
Scott Royal Smith, Esq., CEO, Real Estate Investor. As the founder of Royal Legal Solutions, I am an asset protection attorney and long-time real estate investor in every asset class in 10+ states. My background in litigation and investing uniquely has provided me with insights into how to best use the law for maximum legal advantage while streamlining operations, taxes, and compliance.
KEY TAKEAWAYS
Special guest, Amanda Han will be attending to share her expertise. Amanda is the Managing Director at Keystone CPA, a fellow real estate investor, UNLV alumni, and a published author. She brings a wealth of knowledge that she's accumulated over the course of her successful 20+ year career. Come learn from the best!
Want a refresher or to see what you missed? Watch the replay.
REGISTER FOR ROYAL INVESTING and attend LIVE on Zoom, Wednesdays at 11:30 p.m. CST.
Ready to go beyond basics and take your education to the next level? Get FREE Access to the Asset Protection Vault. This resource contains our top 5 video Masterclasses and ebooks.
WEBSITE: http://royallegalsolutions.com
FACEBOOK: Join our exclusive group to discover the tax, legal, & asset protection secrets every real estate investor needs to know. https://www.facebook.com/groups/495820367909918/
This week’s guest Terry White is an expert in the Airbnb market. He works in multifamily investing. Terry dishes on his Airbnb business Cozy Bnb and how he scored a best deal after only working on five or six deals. Tune into this week’s episode and learn how listening to your gut and going on instincts will lead you to the home run deals.
This week’s guest Mark Kenney shares his bad beats story. It all started by working with a partner he had done deals with before, syndicating the deal and raising capital from other people. Tune into this week’s episode and learn from Mark’s mistakes in sniffing out a con artist. When these deals go south it is generally not a problem with the property but with the people involved.
This week’s guest Jake Koferl is an expert in the Airbnb market. He works in multifamily investing. Jake dishes on his Airbnb business Cozy Bnb and how he scored a best deal after only working on five or six deals. Tune into this week’s episode and learn how listening to your gut and going on instincts will lead you to the home run deals.
Working with clients that are eager to buy, sell, or close, and love the very first home they’re shown is rare. It’s far a more frequent occurrence that realtors encounter difficult clients. This week’s guest Art Kelly talks about his worst deal. Tune into this week’s episode that involves a for sale by owner seller that his clients located on their own. Art shares his story and lessons in managing difficult clients, learning the art of negotiating the “for sale by owner” sale and setting up expectations when bringing on new clients.
Austin, Texas has become a boomtown for investors. To say there is a lot of opportunity would be an understatement. This week’s guest Evan Kirkpatrick explains the type of nuts and bolts skills that you need to do syndication deals, run a real estate business, and gives some closing advice to the audience about finding where you can fit in when it comes to real estate.Tune into this week’s episode where Evan Kirkpatrick discusses his background as a CPA and how helps real estate investors with high net worth to small business owners just getting started with their tax strategies.
Mark Roderick fills us in on how the rich can take care of themselves and the non-rich need the government’s help, which is why he thinks crowdfunding is so important to the average person. Since the JOBS Act of 2012, Mark has spent much of his time in the crowdfunding space. If you have ever thought to yourself the internet is a ruthless landscape slowly squeezing the middleman and driving human beings up the value chain? Then you’ll want to tune into this week’s episode where Mark will explain everything from syndications to cryptocurrencies to crowdfunding, oh my!
For many business owners and individuals access to cash or having enough capital is a common problem for those who want to start up, grow, and generate more returns for their business. If you have limited resources it can be hard to expand without the capital you need. Tyler Crandall let’s us know there is a lot of capital out there if you just know where to find it. Listen now, and learn how you can too.
Sakar Kawle joins asset protection attorney Scott Smith to bus some of the myths behind Section 8 ventures and debunk the misinformation surrounding this type of investing Sakar dives deep into why he believes the Section 8 real estate business model is a great one to get into. Check out the latest episode of the Real Estate Nerds Podcast to hear Sakar break down the steps he took to turn his Section 8 real estate deals into a pattern of success. Listen now, and learn how you can too.
Should I keep a piece of property or sell it? It’s an age-old investing question. But today, billionaire REI Grant Cardone explains how he approaches his best deals, why you should never sell a piece of cashflowing property, and how to buy as many properties as you can without becoming overleveraged. Check out the latest episode of the Real Estate Nerds Podcast to hear Grant break down the steps he took to turn his real estate deals into a pattern of success. He’s since grown his portfolio to one billion dollars! Listen now, and learn how you can too.
Have you ever wondered if a deal was the perfect expansion, or perhaps just a little too much of a stretch to jump into? Matt Faircloth explains how he approached his best deal, which happened to be a stretch for him at the time. Listen in to the Real Estate Nerds Podcast as Matt explains the steps he took to ensure that this stretch of an investment was a success! Matt is now an experienced syndicator and also dives into what investors should look for when looking to work with syndications, and what separates a syndicator from the crowd in the market.
John Casmon began his investing career and eventually found himself growing faster than his funding! Today on the Real Estate Nerds Podcast Scott Smith talks with John about how he eventually graduated from investments with his wife into the syndications he operates today. The best deal John highlights was actually found through a broker who he worked with quite often and knew his goals. John discusses what “due-diligence” looks like for him when looking at an investment property. He also explains what factors are deal breakers for himself, and how he tries to navigate the whole process.
Chris Prefontaine is real estate investor who has a passion for mentorship. He not only invests personally with his family business but also with students that he partners with throughout the whole deal making process. He joins Scott on Real Estate Nerds to hash out what his ‘best deal’ looked like as well as some bonus information on how to avoid ‘bad beats’. Scott and Chris talk about how important mentorship is in the real estate game and give advice on how to be successful. Chris also shares information on how to get his free e-book, “Real Estate On Your Terms”.
Nick Aiola runs a 100% virtual CPA firm that caters to real estate investors. Today he joins Scott Royal Smith to discuss his best deal, which actually began as an acquisitional nightmare. Nick explains how he made an offer on a four-family until located just a few minutes from his own home, aiming for the most favorable deal he could land. It wasn’t that simple, and Nick had to go back-and-forth for a couple months between the seller and the bank in order to finally get the deal laid out correctly and favorably.
Scott Smith is joined by entrepreneur and real estate investor Andrew Cushman, who has invested in about 1,800 units so far and is always looking ahead for his next deal. This podcast covers how Andrew got into apartment investing with a deal in East Atlanta, having to work through 65 different lenders before finding someone who would work with him. Andrew shares his pattern to build those connections: networking, creative connections (he just shot a “intro” video in his backyard for someone!) and sheer persistence. In this podcast episode Andrew explains how he seeks out mentors, his process of rehabbing apartments, how to deal with delays and extra costs, due diligence, task delegation within partnerships, property management and course correction when things go wrong.
On today’s Bad Beats episode of The Real Estate Nerds Podcast, Some of you may already know Tyler Sheff from his podcast, The Cashflow Guys. Today, he has joined us on The Real Estate Nerds Podcast to share one of his legendary worst deals.
Tune in to Episode 51 of The Real Estate Nerds Podcast now to hear Tyler’s full story and the full breakdown of his Bad Beat.
Listen To Episode 51 of The Real Estate Nerds Podcast Now
Tyler Sheff on the Value of Processes and Sticking With Your Talents
Our host and attorney Scott Smith welcomes “Cashflow Guy” Tyler Sheff to the show. Tyler has chosen to share about one of his worst deals today.
[1:00] Scott invites Tyler to share a bit about his background before they dive into his worst deal. Tyler describes himself as a “recovering house flipper” who made a lot of money, and also got hit with a massive tax bill once the money started rolling in in the early-mid 2000s.
[2:30] Tyler quips: “Back then I used to think that my charm had an effect on the IRS. Turns out, they don’t really care.” After paying a six-figure tax bill, Tyler resolved to learn more about building wealth and shifted his attention to buy-and-hold investing in 2012.
[4:00] Scott asks about the beginnings of Tyler’s worst deal. Tyler opts to introduce it with another side story, pointing out that most of what he does now is teaching others about investing. He negotiated what he thought was a great deal on an off-market fourplex, and had attorneys draft closing paperwork according to a partner’s requests. They closed and began renovations, which essentially doubled the value of the property. Only when he went to sell the building did he realize the other party had never signed their agreement with him. “They literally stole a $400,000 building,” Tyler points out--adding that he did all of the work and saw nothing for it.
[7:00] Scott asks Tyler what got him so motivated that he overlooked aspects of due diligence like checking signatures. Tyler points out that, “If you’re smart, you learn your lesson and put systems in place” to avoid repeating mistakes. Tyler believes his biggest failure was ignoring his own systems. Scott agrees that ultimately, a business’s systems are what will allow it to grow.
[10:00] Tyler emphasizes the importance of sticking with what you’re good at in investing: “Investors should pick a piece that they’re good at and stick with it.” He and Scott point out that this is partially the role of real estate professionals--to keep investors on the track of looking for new deals or otherwise doing what they do best.
[12:00] Tyler points to some of his experience as a licensed real estate agent, and what he does in “realtor mode.” The two investors talk about what a debacle closing becomes when nobody has a good process “checklist.”
[Tweet "“Investors should pick a piece that they’re good at and stick with it.” - Tyler Sheff, Episode 51 of The Real Estate Nerds Podcast"]
A Victorian Dream Home Turned Worst Deal
Scott and Tyler get into the details of the Worst Deal Tyler came onto the show to share today. They go through every twist of what went wrong.
[14:00] Scott asks Tyler to set the stage for his worst deal. In 2001, Tyler found a listing that was on the market for $40,000: A 3,000 square foot Victorian home in a nice neighborhood. Tyler believes the property would have been worth roughly $350,000 in “fixed-up condition.” He had one friend front money, while Tyler went out and found opportunities and handled sales. They had a second partner who was a contractor. Together, they were cash-buyers.
[16:00] When the young partners arrived on the property the next day, there was a literal crowd. Tyler approached the agent, offered $50,000 and to close in a week, and the deal was as good as done right there. “Deal of the century right? Well, from there it proved otherwise.”
[17:30] Tyler had been a police officer in the same town where the property was. One day, he was at the property waiting for a material delivery. Home Depot claimed they had delivered the materials, but provided the wrong address, stating that Tyler’s partner had come in and changed it. Tyler discovered the contracting partner was embezzling from his company. Tyler and the banking partner realized they had been wiped from over $300,000 in the bank down to $10,000. They had the option to sue, but soon realized they couldn’t serve the partner, who had run back to his home country of England.
[19:30] The partner who had embezzled from Tyler and his partner attempted to slow actions against him by reporting the pair to to city for his own contracting negligence. However, Tyler and the other partner soon discovered his contracting was part of the con as well. They had never bothered to verify his license because he was a friend.
[20:30] The City Inspector comes to the house based on the ex-partner’s report, only for Tyler to realize he knew her from having arrested her son on drug charges. Tyler demanded the City send a new Inspector. However, the first one had already found Termite Damage and the City issued a demolition order.
[22:40] Scott recaps Tyler’s story so far which includes: 1. $290,000 literally stolen from him by a partner , 2. A crazed building inspector with a personal vendetta against our dear investor busting up the building in his absence. And all of this took place within about one week.
[23:40] Tyler explains how he essentially put every spare dollar into this building for the next few years. It took time, but they solved the property’s problems in small increments, one at a time.
[26:20] Scott asks about how Tyler got the City on his side when he wasn’t in a great position and how he developed that relationship. Tyler credit’s brutal honesty--that at no point did he try to lie his way out of his problems--with helping cultivate that relationship. He was also highly respectful in his dealings, albeit blunt that he had a “colossal nightmare” on his hand.
[29:30] When Scott expresses amazement at some of the relationships Tyler built under these circumstances, Tyler explains: “I was humble, and I truly believe the best in people.” He also believes most people are generally agreeable face-to-face, and will help you if you’re determined.
[31:50] Scott points out that vulnerability and honesty are often the keys to human connection. Tyler makes a parallel to the court system. Scott shares an anecdote that highlights Tyler’s point. What won the case Scott talks about was just reasoning with the judge in a basic, “two guys talking” way.
[35:30] Scott wonders if connection is its own kind of revenue. “Absolutely,” Tyler says. “Any time you’re working face-to-face, you’ll be more successful.”
[36:30] Tyler’s property ultimately never profited. Proceeds from the sale went towards paying back the partner who acted as the bank. They were proud of the quality of the job they did with the rehab, and he believes the buyers got a great house. “We left it better than we found it,” he says.
The Take-Aways
Scott and Tyler each share their favorite take-away from Tyler’s Bad Beat story.
[38:00] Scott’s take-away is the fact that he credits Tyler’s success with his ability to stick to his word.
[38:30] Tyler’s take-away is simple: “Never assume the answers to the questions that you haven’t yet asked.” Scott agrees, and takes it a step further, encouraging investors to hear “no” more times than they think is necessary before accepting it.
On today’s episode of The Real Estate Nerds Podcast, we get to hear about both a Bad Beat and a Best Deal--because in the real world, sometimes they happen right on top of each other. That has certainly been the case for multi-family investor Ola Dantis. Tune in to Episode 50 of The Real Estate Nerds Podcast now to hear Ola dish about one of his worst deals, a bonus Best Deal, and many of the lessons he has learned along his path to real estate success.
Listen To Episode 50 of The Real Estate Nerds Podcast Now
Ola Dantis on Multi-Family Investing, Freedom of Mind, and Freedom of Time
Ola Dantis sits down with our host and attorney Scott Smith. The pair of investors chat about Ola’s real estate beginnings and the ambition of all real estate investors: freedom.
[1:00] Ola is originally from the U.K. but has lived in the U.S. for the past five years. One day he received a call from a friend whose business was taking off. The friend wanted Ola to invest in his business and invited him to learn about the opportunity in Dubai. Ola explains: “I did what any wise man does: consulted my wife.” [2:30] The two argued about the value of the trip, but Ola ultimately decided to go in hopes of learning something valuable.
[3:00] Ola ended up making the trip to Dubai, and spent the majority of it in his hotel room dissecting his friend’s business. He observed that his friend’s real estate business was doing very well back home in London. Ola decided to do the same thing in the United States and was buying his first properties within three months.
[4:00] Scott asks how Ola’s plan evolved over time. Ola points out that his trip changed everything. When he got back, he began diving into researching many investing books, podcasts, and forums like BiggerPockets. One book that was influential for Ola--and many other investors, was Robert Kiyasaki’s Rich Dad, Poor Dad.
[6:00] Once he’d finished Rich Dad, Poor Dad, Ola moved on to reading “more tactical content” about real estate investing to construct an investing plan. He settled on multi-family as his asset class of choice, explaining “Our first property was a multi-family. That’s how I got into it.”
[7:00] Ola knew from the beginning he wanted a business that was in some form passive. He uses this language because he recognizes “Real estate is never totally passive. If you’re not a creator or syndicator like myself, you can’t just be somewhere on a beach and your business runs. You have to manage the property manager.” He does acknowledge that you can be a passive investor on some deals, but to a degree you will typically be taking some action. When asked about his motivations, he says: “It’s about freedom of time and mind.” For him, true freedom of choice was tied to making good money.
[9:30] Scott probes Ola on whether money is a prerequisite to certain kinds of freedom. Ola points out the variety of experiences that are only available to those who have achieved a degree of financial stability. Pursuing truly ambitious goals generally does require capital. Ola believes this is also true of “freedom of mind”--and points to some of the experiences that combat the modern problems of anxiety and depression. Money can be used towards fulfilling activities.
[11:30] Scott points out that there’s a trade-off in freedoms. You may be able to use real estate to quit your job, but you will still have to manage your investments. Ola points out that he sets goals in terms of which freedoms he hopes to pursue: “I don’t have to be a billionaire at the expense of spending time with my daughter..I don’t have to be a billionaire at the expense of my soul.” He believes balanced goals are as important as goals that are specific and measurable.
[14:00] Scott asks about fears or anxieties that Ola has overcome. Ola speaks to a fear that is fairly common among real estate investors: “If I get very successful, will I still be the same person?” He also has fears of failure, but believes both can be addressed through consciously not growing too quickly and simple awareness.
[16:00] In reference to anxiety, Ola points to social media. He worries at times about the social media culture of artificial happiness, and projections of unrealistic standards of looks and success. This gives him concerns for his young daughter: “Our kids grow up into a culture of constant polished images of nonreality. It’s just not true.” He also recognizes the utility of social media for real estate, and has raised a substantial amount of money on Instagram himself.
[18:00] Scott points out many of us use social media to compare ourselves to others in a negative way. He wonders whether there is a more positive way to use these tools. For Ola, it’s all about realism. He thinks if people posted truer reflections of their life, social media could have a more positive impact on the world. “Make sure you’re pushing out reality,” Ola advises.
[20:30] Scott and Ola reflect on why people go to such great lengths to create ornately artificial impressions of themselves on social media accounts. For those who use social media deceptively, Scott warns, “You’re only tricking the people that are at the bottom tier of awareness of society. Everyone else has already picked up that there’s just no way your life is that great. It’s just not realistic.”
[Tweet "“Our first property was a multi-family. That’s how I got into it.” - Ola Dantis Episode 50 of The Real Estate Nerds Podcast"]
Ola Dantis on One of His Worst Deals
Scott and Ola transition into a real estate war story of one of Ola’s worst deals. As an avid podcaster and podcast listener himself, Ola is particularly excited to share about one of his worst deals. While he loves a great success story as much as anything else, he shares our opinion that discussing our worst investments can be extremely valuable.
[23:30] Ola had gotten into a partnership and bought a large house in Baltimore, Maryland. He wasn’t accustomed to buying houses that large--2500 square feet. He also knew personally he did not want to do a flip, since he preferred more passive investments and flipping is extremely active.
[24:40] Ola, despite knowing that he didn’t want to do flips, got drawn into the project after being promised high profits near $50,000. He freely admits he got overexcited. They bought the house, and it simply sat for the next three months. They did some very small repairs but the entire project took nearly seven months to finish. For the beginners in the audience Ola points out, “If you’re doing a fix-and-flip, you want to be done in about 3-4 months from start to finish.” [25:52]
[26:00] For each additional month that clicked by, Ola was paying interest to his hard money lender. Contractors weren’t completing their work on time. He knew from his projections that his budget would be higher. He knew rebuilding such a large house would be a massive project, but he didn’t realize it would take so long.
[28:00] If you get into real estate, according to Ola: “You’re going to fail...It’s okay. Don’t give up.” He believes if you tell yourself you can succeed, you will. Things just happen in real estate, and that’s okay. It’s still a powerful vehicle, even if you get beat up a bit along the way.
[30:30] Scott agrees and adds: “You can only say ‘I’m a failure,’ when you stop. Otherwise, you’re just learning on your path to success.”
The Other Side of the Investing Coin: One of Ola’s Best Deals and Today’s Take-Aways
We were fortunate to also have time to hear Ola tell us about one of his best deals, which teaches some slightly different lessons. Then, each investor shares their favorite take-way for our listeners from Ola’s story.
[32:00] Ola shifts gears to tell us about the property involved in one of his best deals, which also happened to be his earliest. In fact, it was his first multi-family investment property in a “good area” of Baltimore.
[33:00] Ola’s team remodeled the home and installed new appliances. Now, “This thing cashflows like a monster.” He points out that sometimes good deals and bad deals happen right on each other’s heels, and real estate can just be an “up and down game.”
[34:00] For Scott, one of the major lessons he learned from Ola’s story was the importance of moving in the right direction. Fears and anxieties are normal; it’s all about which action you take.
[35:00] Ola has two lessons: “First and foremost, real estate is an abundance game. There’s enough to go around.” He adds that the other major lesson is that real estate isn’t a get-rich-quick scheme, but a long-term plan. There will be ups and downs, and how you handle them will determine your success.
[Tweet "“You’re going to fail...It’s okay. Don’t give up.” - Ola Dantis, Episode 50 of The Real Estate Nerds Podcast"]
Connect With Ola Dantis
Connect with Ola on his website, InvestWithOla.com. You can also find him on Instagram most often out of his different social media accounts.
Listener Resources
Thank you for joining us on today's episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
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On today’s Best Deals episode of The Real Estate Nerds Podcast, we hear from investor Jeremy Roll. After a decade in the corporate world, Jeremy began pulling his investing funds out of the stock market and pouring them into real estate assets. What started as a series of long nights reading books in the Investing section of Barnes and Noble has evolved into a consistently cashflowing, reliable investing strategy that serves Jeremy to this day.
Tune in to Episode 49 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 49 of The Real Estate Nerds Podcast Now
Jeremy Roll on Cashflow Investing and the Value of Long-Term Strategy
Our host and attorney Scott Smith welcomes Jeremy Roll onto the show. Together the two investors discuss Jeremy’s background, real estate beginnings, and how he developed the strategy that has led to consistently good deals in the long term.
[1:00] Jeremy is originally from Montreal, Canada but moved to the U.S. to obtain his M.B.A. from the Wharton School in Philadelphia. He spent a decade in the corporate world.
[2:00] In 2002, just after the dotcom crash, Jeremy began seeking investment alternatives that weren’t linked to the highly volatile stock market. He began pulling funds out of stocks and bonds and into managed real estate funds. He found cash flow was far more predictable when he began using this strategy, and that he also had more opportunities to diversify.
[4:00] By 2007, Jeremy had pulled all of his investing funds out of the stock and bond markets and was working at Toyota headquarters: “I loved having both the paycheck and the cashflow...But I had enough cashflow to take a risk and leave the corporate world.” Jeremy is now a full-time passive investor with a portfolio that spans a variety of asset classes. Since 2007 he has focused on increasing his passive investment “snowball” to keep the trend going and avoid returning to the corporate world.
[7:00] “In my opinion, the average long-term returns of the stock market will be much lower than real estate,” Jeremy explains. He points to the tax benefits of real estate, and highlights that the freedom he has gained from real estate investing has been a major appeal for him when deciding to make these types of investments.
[8:00] Scott asks how Jeremy went about researching his investing options, and specifically, what that process looked like. Jeremy points out that he spent many nights in Barnes and Noble reading a variety of investing books. Reading about many different ideas and methods helped Jeremy decide to pull the trigger on changing his investing strategy. He was also influenced by a family friend who was achieving success with syndication opportunities.
[10:00] Scott asks Jeremy about his process for determining which asset classes made sense for him, as factors like tax benefits can change. Jeremy explains that “Cashflow investing is the opposite of a get-rich-quick scheme. It takes a long-term view.” [10:41] He explains that if he were no longer happy with the cashflow coming in, he might change his strategy. But for now, his investments are working for him in both the short- and long-term. Jeremy’s ideal is ensuring that his investments offer consistent cashflow so that he does not have to concern himself with redeploying his capital into other methods.
[12:00] Jeremy points out that his preferred type of investing is highly liquid and draws listener attention to SEC regulations he describes as “anti-flipping laws.” He recommends his methods for any investor who values predictability with their investments. Scott asks if there are personality factors, such as risk-aversion, that drove him towards passive cashflow investing. Jeremy cautions listeners that his strategy is not ideal for anyone impatient or expecting massive returns within the year, even with sufficient capital.
[14:30] Despite having been an investor for 17 years already, Jeremy looks forward to the future: “A long term mindset can determine your success.”
[15:30] “You can invest in assets across the entire risk spectrum,” he adds while also stating he does have a personal preference for lower-risk investments.
[Tweet "“A long term mindset can determine your success.” - Jeremy Roll, Episode 49 of The Real Estate Nerds Podcast"]
Jeremy Roll on What a Best Deal Looks Like
Scott and Jeremy turn their attention to
[16:22] “I think everything is overpriced right now,” Jeremy explains, adding that in a way he looks forward to a downturn so he can take advantage of lower prices. Yet this belief did not stop him from investing in an Alabama-based mobile home park. His investment cashflowed heavily right from the beginning, and he enjoyed 95-97% occupancy rates in a relatively economically strong area.
[18:30] Jeremy believes a strong local economy can combine with other factors, such as better-than-average pricing and the proper operators, can create layers of security within an investment. “You’ve got to invest in the right people,” he explains, pointing out that he was essentially betting on mobile park operators with a great track record. He found the high return rates and low prices appealing, particularly since his preferred types of investments are harder to come by in the current market.
[20:30] Jeremy adds that his operator underpromised and overdelivered through conservative estimates.
[21:30] Scott invites Jeremy to share another best deal and highlight any trends that have contributed to his success. In 2015, Jeremy purchased four self-storage facilities from one of the Top 30 operators in the United States. He purchased three of the properties directly from the investors, and secured prices 10% lower than market value. His investor was a high-profile, high net worth individual with whom he has maintained a relationship.
[22:30] Jeremy was able to secure cap rates between 3.5 and 8% for these A-class Florida properties. He was able to sell the properties three years later, a feat he considers only achievable because he “bought them right.”
[24:30] “We were really picky about how we bought properties,” Jeremy explains. He believes his success is largely attributable to this simple fact--along with having the best operator for a given property. He believes making purchases the right way is particularly important in this current real estate climate.
Lessons Learned From Jeremy Roll’s Best Deals
Jeremy and Scott each chime in about what they feel are the most important takeaways from Jeremy’s story for our podcast listeners.
[19:00] Scott’s main takeaway: “Expect the downturn and price things appropriately”
[21:20] Jeremy’s advice to listeners is simple and direct: “Be very careful right now. Pricing is high. Real estate is cyclical. You have to be cognizant of where we are in the cycle. If you’re a new investor, step back and look at the cycle.” He points out that you can do everything perfectly, but if you fail to execute the right timing, your investment may fail in spite of your hard work.
On today’s Best Deals episode of The Real Estate Nerds Podcast, we hear from investors and Special Forces veteran Edwin Epperson Some of you may know Edwin already from his podcast, Can Investors Save The World? Spoiler alert: we totally can. Today, Edwin shares how his real estate journey has evolved, as well as some of the ways he has implemented the lessons he learned from his military experience in his real estate investing life.
Tune in to Episode 48 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 48 of The Real Estate Nerds Podcast Now
Edwin Epperson on The Beauty of Being The “Bank,” The Value of Clear Expectations, & Investing Lessons From the Military
Our host and attorney Scott Smith welcomes investor and decorated combat veteran Edwin Epperson onto the show. The two investors chat about Edwin’s background and his life and mindset going into his best deal.
[1:00] Edwin got into real estate with the plan to buy homes, fix and flip them. He was in the military in a Special Forces unit, training to become a Green Beret. He joined a club in Fayetteville, NC and found a money lender at one of these meetings. The lender told him he wouldn’t make him a loan, which shocked Ed.
[2:30] Ed admits that at the time, “I didn’t have the knowledge or experience to be successful at real estate investing.” His lender friend advised him to carve out time to gain the knowledge he would need. Ed followed this advice and stuck around at the meetings, where the same lender asked him if he’d considered becoming the “bank.” Ed found five mentors. He spent the next couple of years learning about investing from a lender’s perspective.
[4:10] “I fell in love with the idea of shifting the risk to someone else while also mitigating that risk,” Ed explains. Around this time, he was deployed but continued to study his plan to become the bank.
[5:30] By 2014, Ed was redeployed to Afghanistan and had gotten some of his fellow service members interested in becoming involved with these real estate projects. By late spring, he received an offer and began analyzing the relevant figures. He agreed to help an investor make a purchase while he was still overseas. He ended up making his first real estate loan admidst this deployment. He got the copies of all of his confirmation documents just as he was preparing to go out to mission: “I did my first real estate loan while in Afghanistan.”
[8:04] “I fell in love with the idea of not being geographically restricted,” Ed explains. For this reason, he thinks being the bank is a great way to become involved in real estate.
[9:20] Despite his love for Special Forces work, Ed decided not to re-enlist and instead went into real estate full time. He wanted to be home for his family, and realized he could use his tools to build a network and keep using this business model.
[11:00] Ed explains why he believes most Ponzi schemes start with the best of intentions, and how he avoided that. So rather than actually handling another person’s money, he used a servicing company: “I had professionals who were there as a buffer between me and anything that might cause a problem.” This helped his credibility, as did his track record. Ed elaborates: “Word of mouth is huge. My business has grown largely by word of mouth.”
[Tweet "“Every business is a learning experience.” - Edwin Epperson, Episode 48 of The Real Estate Nerds Podcast"]
[13:00] Ed started out by leveraging his own network of family and friends. Rather than providing formal plans such as a PPM, he would simply share his personal guidelines and checklist that he would use to evaluate loan opportunities. He also developed hard limits for his company as well, in terms of which loan-to-value ratios he was seeking. By presenting himself and his plan in this way, he was able to expand his network.
[15:50] Scott points out that some of his military friends operate the same way, with highly accurate approaches. He feels operating based on a plan is stronger than operating on hype alone.
[17:40] Ed shares a bit about how military processes, such as “After Action Reviews” following missions, can actually be adapted for investing strategy. He shares how these reviews allowed him to make tweaks to their plans and procedures. Ed believes that implementing this type of process could help any investor (or any business person at all) evaluate what works and what doesn’t, then adjust accordingly.
[21:00] Scott wonders whether Ed’s strategy of showing investors the plan is also a way to recruit them into investing with you. Scott wonders whether this encourages higher levels of personal responsibility. “Every business is a learning experience,” Ed explains: “I’ve got three core values: 1. Communication, 2. Extreme Ownership, and 3. Giving Back. Those are the three things I really focus on.” The second value comes from a book of the same name, authored by a Navy Seal, that both Scott and Ed recommend.
[23:00] For Ed, “Setting expectations is absolutely critical.” Keeping expectations clear keeps all parties accountable and leaves no room for assumptions. He shares about how expectations he has set on himself and investors have worked both in his favor and against him, when not done properly. Ed explains how his failure to set expectations has created miscommunications between him and his investors.
[26:50] Scott points out that “It doesn’t even matter what the expectations are, so long as you meet them.”
Lessons Learned From Edwin’s Story and Experience
Scott and Edwin each share their top take-aways for our listeners.
[28:00] Scott thinks there’s a major lesson in how Ed shared his processes to gain trust. He also was struck by how Ed’s military experience has informed his investing in specific ways. These items go hand-in-hand: “How can an investor be pissed at you if they bought into your process?
[30:00] Edwin’s take-away is even simpler: “Never compromise your guidelines. When you start looking to the almighty dollar, you will make mistakes.”
[17:00] Scott and Dave share about BiggerPockets, and the tools this online community offers investors. Scott regularly contributes asset protection content to BiggerPockets.
[18:43] On the topic of asset protection and long term real estate success, Dave comments: “Having great people on your team is so huge.”
On today’s Best Deals episode of The Real Estate Nerds Podcast, Scott chats with fellow attorney-investor Sean Yesner. Yesner was investing to get to know his clients’ situations and frustrations better. And he made a great deal that survived the Recession specifically because he avoided it. How? He got out of real estate investing just in time. If you’ve ever wanted to hear a couple of real estate attorneys talk shop in a way you can understand, this episode is for you.
Tune in to Episode 47 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 47 of The Real Estate Nerds Podcast Now
Sean Yesner on The Best Deal That Helped Him Survive the Recession
Sean Yesner joins our host and attorney Scott Smith. The two attorney-investors chat about one of Sean’s best deals.
[1:00] Sean, like Scott, practices law and also invests in real estate. He finds his experience with owning real estate has helped him related to his clients: “As a real estate attorney representing real estate investor clients, I need to have some kind of frame of reference for what they’re going through. To practice without having owned real estate would be a disservice to them.”
[3:45] Sean also hosts a podcast, the Crushing Debt Podcast, which is informed by his practice of consumer law. Both attorneys capitalize off of attacking the “business end” of lawsuits and briefly share their experiences.
[6:30] Sean rented out his first home, placed inside of a Land Trust with an LLC as its beneficiary. When he saw the crash coming, he sold his investment property in 2007. He points out that one of the harbingers of the crash was “people who weren’t in real estate giving me investment advice.” He recounts a story of meeting an IHOP waitress who owned a $300-400,000 house and knowing it was a bad sign.
[10:00] While he sees fewer ill-advised loans in today’s market, Sean explains why he believes that not everyone should own a house. He does feel banks are loosening standards a bit at the moment.
[12:00] Scott pins Sean down on what exactly persuaded Sean to pull out of the market before the crash. “You make money when you buy, not when you sell,” Sean explains [13:37]. If you make the purchase right, it should not matter when you sell.
[15:00] Sean points out that he and Scott have the benefit of their clients’ collective experience as well as their own.
[17:00] Sean was also getting married around the time he sold. His lifestyle was changing in a way that no longer lended itself to being a landlord. He also is just conservative by nature
[18:20] In addition to being Sean’s hero, Sean’s CPA father has also influenced his career. Sean started his law firm in part because of his father’s inspiration and because of his experience working on the other side of the equation in foreclosures. When his law firm shut down, he did the same thing his CPA father did and struck out on his own.
Sean Yesner and Scott Smith Chat Mentorship, The Value of Professionals, and How to Solve Poor Decision-Making in Investing
The two attorneys shift focus and give us some great legal points to keep in mind about asset protection for real estate investors. These guys learned real estate law so that you don’t have to. Tune in to hear the full inside scoop on how you can make the most out of your professionals, what good professionals do for you, and the importance of proactivity with asset protection strategies.
[21:00] Scott and Sean touch on the importance of mentorship in building good decision-making. Scott points out that who we listen to can be a huge factor in developing the right mentality for real estate and business success.
[24:00] Sean shares about a client who always has a “deal pending” that will fix everything, and how this is the same type of gambling logic that gets people in trouble with investing. He points out that we hire professionals to remove emotion from our decisions, and shares an example of when he had to do exactly that for himself with a creditor. Fortunately, he also had his legal structures in place to keep his assets protected.
[28:00] The two attorneys share on the importance of being proactive with asset protection.
[30:00] Circling back to the importance of impartiality, Scott speculates that sometimes the best question isn’t how you feel about an investment, but how someone smarter or more experienced than you feels.
[31:30] Sean points out the value in hiring a competent professional: “One reason to hire an attorney is to let us do what we’re trained to do while you go out and make money.”
Lessons Learned From Sean’s Story
Sean and Scott wrap up the show with their favorite takeaways from Sean’s story.
[32:50] Scott’s biggest takeaway from Sean’s story is to check your motivations.
[34:00] Sean sums up his biggest lesson learned with a quote from his father: “If opportunity knocks, you don’t have to let it in, but you’re a fool if you don’t answer the door.”
On today’s Best Deals episode of The Real Estate Nerds Podcast, we will hear about some of the ways investors can capitalize on tax strategy. Dave Foster’s best deal story is an example of exactly that, and he is all too keen to share his methods with our listeners.
Tune in to Episode 46 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 46 of The Real Estate Nerds Podcast Now
Dave Foster on 1031 and Tax Free Investing Tactics
Our host and attorney Scott Smith welcomes Dave Foster. The two investors chat about Dave’s background and the strategy that led him to a string of best deals.
[1:00] Dave has been a “deal junkie” for over a quarter century. He began investing in Denver following economic collapse in the 1980s. He describes this as a cowboy era rife with both booms and busts.
[3:45] Scott probes Dave’s strategy further. Dave bought his first fix-and-flip in 1996. It was a success until tax time came. The amount of tax liability lowered the overall quality of the deal.
[5:30] Dave points out some of the larger context of his story involving 1031 Exchanges and tax-free treatment. He describes how he was able to capitalize on saved tax dollars, putting them instead toward the growth of his portfolio.
[9:00] Scott and Dave dive deeper into his 1031 strategy. He includes a type of tax exemption that, when combined with a Tax Code update in 1987, allows for substantial savings. The exemption applied to primary residences.
[12:00] Dave explains how he was able to capitalize on these tax exemptions by moving into his investment properties every couple of years to convert tax deferred dollars into tax free dollars.
[13:30] Scott points out how Dave’s strategy is particularly smart in an appreciating economy. It has worked out for him. Dave currently lives on a sailboat--giving this investing story a somewhat idyllic ending.
Lessons Learned From Dave’s Strategy
Brian and Scott conduct a quick post-mortem to see what other investors can learn from Brian’s mistakes with this property.
[14:00] Scott points out that these are basic investment strategies anyone can take advantage of, even with a smaller portfolio.
[15:20] Dave points out that setting up entities and hiring an appropriate team of professionals can be essential for real estate success
[17:00] Scott and Dave share about BiggerPockets, and the tools this online community offers investors. Scott regularly contributes asset protection content to BiggerPockets.
[18:43] On the topic of asset protection and long term real estate success, Dave comments: “Having great people on your team is so huge.”
On today’s episode of The Real Estate Nerds Podcast, we hear a Bad Beat from an investor and entrepreneur who rightly points out that success can sometimes reveal our problems. This was certainly the case for Antonio Smith, Jr., whose hustle and drive from growing up and experience of homelessness and his youth have undoubtedly helped mold him into the mentor, teacher, and multi-million dollar success he is today. But his first taste of success ended up unfolding into one of his all-time worst deals. Fortunately, Antonio isn’t one to get knocked out of the game easily. He’s bounced back and now has his sights set on leveraging real estate on the higher goal of philanthropy. Tune in to hear a truly remarkable story that does what our favorite episodes of The Real Estate Nerds do best: tells us as much about the person as the investment while giving us all some brain and soul food.
Tune in to Episode 45 of The Real Estate Nerds Podcast now to hear the full Antonio’s full conversation with our host and attorney Scott Smith.
Listen To Episode 45 of The Real Estate Nerds Podcast Now
Antonio T. Smith, Jr.’s Incredible Personal Story and Incredibly Bad Set of Deals
Antonio went from rags to riches after rebounding from profound early life struggles--but his journey hasn’t been without bumps in the road. Little did he know, he’d lose big within his very first year in real estate--but that didn’t stop him from learning from his mistakes and winning in the long-run.
[1:00] Scott asks where Antonio’s head is at, as that informs all of our deals. Antonio tells us about his mindset: “My mindset is dominate. All day, every day...You want to become a monopoly as fast as possible.” He isn’t a monopoly in real estate, but he is in his type of coaching field. Antonio rose from homelessness as a youth aged out of foster care and is now a multi-millionaire.
[2:45] Antonio is from Galveston, TX. He had escaped poverty and immediately went into several deals when he got into real estate in 2008 after Hurricane Ike devastated the island. He purchased several homes in short order as his first rental properties.
[4:00] Hindsight is clear for Antonio: “Success will reveal your problems. My problem was overcompensation.” He had one renter walk out and that, and overcompensation, led to the loss of four of his houses. Scott asks how things went wrong so quickly. Antonio explains that he learned to invest before he learned to create systems that sustained a healthy business.
[5:45] Antonio trained under his mentor for two years, learning the real estate game before learning creative financing. He found a way to finance notes, picked his houses, then would get renters to fund the notes.
[7:50] Antonio bought his houses in 2009, when the housing market in Texas dramatically declined. His renters were forced to downsize. The first time, he resolved the problem by moving into the house. But when another two renters left, he couldn’t account for that.
[10:17] Another problem Antonio had from the beginning was a lack of preparation: “I thought six months’ reserves was enough...I’m telling everyone: that is never enough.” He now aims for about ten times that.
[Tweet "“My goal is my legacy...to create more millionaires.” - Antonio T. Smith, Episode 45 of The Real Estate Nerds Podcast"]
Learning From This Bad Beat: Bulletproofing Your Assets and Building Your Legacy
Antonio and Scott reflect on some of the mistakes Antonio made in his story, as well as what has changed for him in the years since.
[11:50] In Antonio’s view, learning and having someone else pay for your debts are critical to investing. He also believes entrepreneurs should have a high tolerance for pain. His main issue was the individuals paying his bills stopped.
[13:00] Scott asks if his problem wasn’t a lack of knowledge so much as a lack of knowledge of what to do when things go poorly. Antonio agrees, pointing out there are a lot of other things he didn’t know about--taxes, what to do when he passed up his mentor, let alone what was the smart thing for him to do at the time.
[15:00] Scott wonders whether another mentor would have helped. Antonio thinks if he had gotten one, he would have known he had 180 days to prevent foreclosure and be less dependent on having tenants actively in the properties. He also would have advised himself that his investments weren’t protected as assets, and that he needed to diversify into small businesses of some kind to generate income. That way, if his investment income stream dried up, he’d have another form of income.
[17:45] Scott points out that many people spend their active income, and have trouble keeping their lifestyles down. He describes that critical piece of “bulletproofing your assets.” Today, Antonio has 16 income streams.
[20:30] Antonio didn’t have a technical deficit, he simply didn’t know what types of questions to ask. He believes a mentor would have been immensely helpful in keeping him in check in multiple ways. That would have included asking what he was going to do if all of his renters walked out on him.
[23:00] Antonio also admits he was chasing a lifestyle. Scott points out that’s what a lot of people sell, but that smart investors worry about what they want long-term.
[26:00] Antonio’s long-term goals have changed: “My goal is my legacy...to create more millionaires.” He has already done so with his core team of eight and has a new goal of 100 by a set date. He wants to create a lasting change in the world.
[28:00] The two investors discuss how initially, investing may be about having things. Those who succeed beyond a certain point will have wiser ambitions, usually involving giving back.
[31:30] Antonio shares another one of the goals that drives him: “My passion in real estate now is to buy in low-income areas and fix them up, but not gentrification. I want to buy the hood then teach the people there to appreciate the hood.”
Take-Aways: Start Moving & Invest for Your Long-Term Goals
Scott and Antonio each share their favorite take-aways for listeners from Antonio’s story.
[32:45] Scott shares that his main takeaway is that slow growth isn’t necessarily “sexy,” but it’s sustainable and what gets investors to the higher levels of wisdom and contribution to the world. He also finds that Antonio’s story is a testament to the power mentors in maintaining this type of growth.
[31:30] Antonio knows what he wants to tell our listeners: “Move before you’re ready. I suffered from that, but I had a continuing education problem, not a moving problem.” He elaborates that “It is far easier to educate a doer than it is to activate a thinker.” [34:00]
On today’s episode of The Real Estate Nerds Podcast, we explore a Bad Beat that is truly a real estate horror story, complete with colorful characters and AWOL property management. Brian is well-versed in multi-family and note deals, but the one-bedroom condo he bought in North Carolina was one of his earliest and worst deals.
Tune in to Episode 44 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 44 of The Real Estate Nerds Podcast Now
Brian Hamrick
Brian Hamrick joins our intrepid host and attorney Scott Smith. The two investors go over Brian’s background
[1:00] Brian isn’t just here to share his Bad Beat--he’s actually researched the property after-the-fact to see how bad it really was. Brian is the owner of an investment group and podcast host himself. He describes himself as a “net seller” who has bought and sold over 450 units.
[2:00] Brian gives a brief overview: “This was one of the smallest deals I’ve ever done, but also one of the most boneheaded deals I’ve ever done.” The property in question was a condo in North Carolina. He began investing after reading Rich Dad, Poor Dad, took some seminars, and made offers in his home community (Los Angeles) but found almost none of the properties there cashflowed. Properties were simply too expensive, even with Brian’s nice job in the entertainment industry. He found a network for out-of-state investors, complete with property managers and brokers, that allowed him to buy 7 single-family homes in multiple states. He was given the offer of “armchair investing,” though this ended up being far from the case.
[4:40] Brian had invested in several properties already, and all were performing well. He paid $33,000 cash for a condo in a community called Heritage House. He reads out his full list of monthly expenses, which should have been $125. Given the total rent, he should have been cashflowing $350-360/monthly. He was also comfortable enough in his W-2 job that this deal seemed like a no-brainer.
[7:00] “I will never invest in condos again,” Brian explains, briefly listing his reasons. HOA fees tend to go up on these properties, and HOAs have been the source of other problems. He was also promised rent-ready properties complete with new fixtures and appliances and given indications that tenants were ready to move in. Brian was almost prepared to buy two or three of these properties.
[8:50] Brian describes his due diligence efforts. His biggest problem, in his view, is that “I never visited the property. I took their word for it.” [9:40]
[10:00] The property was in a less-than-desirable area. Brian now realizes the error of owning the nicest property in a terrible area.
[Tweet "“This was one of the smallest deals I’ve ever done, but also one of the most boneheaded deals I’ve ever done.” - Brian Hamrick, Episode 44 of The Real Estate Nerds Podcast"]
How The Property’s Problems Snowballed Into a Major Loss
The two investors explore how Brian’s issues with this property piled up quickly.
[12:00] The first major red flag for Brian was that his rental payment was paying $475, not the $550 he was promised. He accepted this in the interest of getting the cash-flow immediately, but it ate into his profits by about $50. Things went well enough for a year, but the next tenant paid only $400 and Brian was on the hook for new furniture.
[13:30] That tenant was evicted, and the property remained vacant. The property manager informed him a fire was set in the hallway, and that Brian needed to replace the carpet. Since his tenants were a woman and a small child, he was concerned for their safety. They left, too--leaving him with yet another vacancy. At this point, he went online and did some research on the complex. He found a horrible review complaining of prostitutes, thieves, broken appliances, and worse.
[15:25] Scott speculates that there may not have been no on-site property manager. There was, which makes Scott laugh and question whether they were drunk all the time. But the reality was worse: the on-site employee was apparently an ex-convict photographed smoking crack on the premises. He used the services of the local prostitutes, but for whatever reason, the property management would not fire him.
[17:00] Brian points out he owned this property in his own name rather than in an LLC structure--something we at Royal Legal Solutions advise investors never to do. He worried, quite rightfully, about the possibility of being held liable for the antics on this property. He knew he had to get it out of his name, and quickly. He found a real estate agent willing to sell properties in this “war-zone” area, but she could only get $2,000-$4,000 for it.
[18:00] Ultimately, Brian took the deal: “I bought this unit in 2008 for $34,000 and sold it in 2010 for $3,000.”
Lessons Learned From This $31,000 Loss
Brian and Scott conduct a quick post-mortem to see what other investors can learn from Brian’s mistakes with this property.
[19:00] Brian realized he should have done a lot more on the due diligence front. The fact that he never met the people he trusted to manage his properties, let alone took a flight out to view the property and area, contributed to this becoming a bad deal. He learned his lesson and changed his strategy: “Now, I only buy in my backyard...All of my residential properties are within 20 minutes of where I live.”
[21:20] The property management lesson learned is even simpler for Brian: “Having the right management team is important in real estate. You really have to know and trust your team.” He also has far less confidence in “armchair investing” in general. He got a call every time there was a problem anyway, and the team on the ground wasn’t handling them. He is careful to point out that armchair investing is different from syndication or ordinary passive investing, as there are asset managers who are incentivized to deal with any issues.
[24:00] The building Brian owned was later condemned, and just for fun, he reads of the laundry list of scary things inspectors found on the premises.
On today’s episode of The Real Estate Nerds Podcast, fellow attorney-investor Michael Quarles is giving us a twofer. Normally, we focus on one Best Deal or Worst Deal--but Michael has two Bad Beats to share with us today, and a host of free information about negotiation, investing psychology, and why success is a “requirement” in his life.
Tune in to Episode 43 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 43 of The Real Estate Nerds Podcast Now
Michael Quarles on the Finer Points of Negotiation
Scott Smith welcomes Rebecca Walser, who shares about her background, business philosophy and wealth building strategies.
[1:00] Michael decides to share two of his worst deals with our listeners. Scott asks Michael to set the stage for the period of time before the deal.
[2:00] Michael has been engaging in entrepreneurship since he was a teenager. He shares his general real estate investing strategy, but also describes himself as a “serial entrepreneur.”
[3:30] Michael took a student to a presentation, and actually posed as the student to bolster his mentee’s credibility. After a lengthy wait in the car, the student emerged from the meeting dejected. Michael had thought everything would go perfectly, and asked what went wrong. The student simply replied “I started talking.”
[4:45] Michael shares the lesson his student learned the hard way: “That’s the worst thing we can do: not realize when we’ve said enough. And when we’ve said enough, stop talking.” That resulted in the loss of the contract.
[6:00] Michael points out that any time a seller offers you something, even something as minor as a beer or a glass of water, you should take it. These small offers are actually closing signals. “Consumers give us little hints and triggers that we can see,” he explains.
[7:30] Scott wonders whether Michael’s point is really about how to listen. Michael clarifies that at this point, he means simply stop talking about real estate.
[9:05] Michael shifts towards his thoughts on negotiation: “We can’t convince someone to do something they don’t wan to do...But through the art of negotiation, we can convince them to set a price that causes us to say yes.” He describes an example.
[12:05] Michael gives some surprising advice on negotiation: “If you want to learn how to negotiate, how to communicate: go talk to a 3-year-old.” Michael points out children this age do not know how to lie yet, but have some reasoning abilities.
[13:20] Scott asks about situations where execution does not line up with training, such as when they take classes like Michael’s. Michael points out that one must be a gifted storyteller to be an effective negotiator, and that practice is vital to any learned information. He and Scott do a brief exercise to illustrate this point. They speak back and forth using only three words, a tactic Michael recommends.
[16:00] Michael describes how he always surveys his tenants after the fact. He found she did not get to communicate with him the way she wanted to, which he considers a personal failure.
[17:30] Scott and Michael discuss the power of mimicking, a tactic effective with both children and fellow investors.
Michael Quarles’ on The Beauty of Ugly Houses
The two investors shift focus to the second deal Michael wants to discuss.
[18:00] Michael bought a house that was “not quite a duplex” but had an additional small house in the back of the property. There was a double homicide in the house, which worked to Michael’s advantage with lenders. But that wasn’t the end of the criminal element: the offender who committed the homicides returned to commit an arson in an attempt to destroy the evidence relating to the homicides.
[19:00] Michael easily resold the house to another investor who renovated it, got a tenant in, and is still profiting. The lesson he learned from this deal is simple: “Those deals that don’t conform are the ones where we make the most money.” He goes on to state he would buy every “ugly” house in his city, given the opportunity.
[21:00] Michael’s current market is direct tenants and investor-buyers (typically flippers). There is a specific value in the types of houses he purchases--those under the median for the area. Michael encourages investors to look at the properties through the eyes of the consumer.
[23:00] Michael points out that ethical, moral, and legal boundaries are critical. He also points out that the order of those is significant, as something can be legal but not ethical.
[25:00] Scott points out that acceptance of certain harsh realities can serve the savvy investor.
[26:00] Michael describes visiting a house that was outside of his comfort zone. He found a highly motivated seller who was in need of back surgery that made his home uninhabitable during his recovery. He also wanted a relatively low amount of the house. He sold it within ten days.
[Tweet "“There’s a currency of success that has nothing to do with dollars.” - Frazer Rice, Episode 40 Real Estate Nerds Podcast"]
The Takeaway: Facing Fear and Requiring Success
Michael and Scott wrap up with their major lessons learned from Michael’s experience.
[28:42] Scott points out a major learning lesson from Michael’s story. He finds that we must practice habits of success regardless of outcome. Michael counters that even a failure is a type of success, and necessary.
[30:00] Michael asks about the cost of law school, and legal education generally. 3.5 years and $150,00 is the figure they settle on. He points out that many investors spend massive amounts of money to “hit the home run” upon execution. He shares a story of overcoming fear as he forged a professional relationship with a female investor.
[32:00] Scott points out that a life of comfort is one that can cause regret about not taking more risks. He puts it bluntly: “Risk always means fear, and overcoming fear.” [32:00]
[36:00] Michael shares his own take-away. He encourages the audience to treat life like a requirement.
On today’s episode of The Real Estate Nerds Podcast, fellow attorney-investor Rebecca Walser sits down with our host and attorney Scott Smith. If you’ve ever wondered what happens when a couple of lawyers sit down to talk real estate shop, Rebecca and Scott are here to help you find out. Tune in for some free insider knowledge as well as a good-old-fashioned Bat Beats episode.
Tune in to Episode 42 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 42 of The Real Estate Nerds Podcast Now
Rebecca Walser on Building Wealth
Scott Smith welcomes Rebecca Walser, who shares about her background, business philosophy and wealth building strategies.
[0:45] Scott is particularly enthusiastic about talking about a bad deal with a fellow attorney, and asks Rebecca to share some more about her background and practice. Rebecca is a Certified Financial Planner who worked in finance for over a decade before attending law school at the University of Florida, then proceeding with her LLM in Federal Taxation at NYU.
[4:00] Rebecca’s law practice centered around tax minimization for high net worth individuals. She describes a revelation she had during a meeting with a client where she decided to strike out on her own, “marrying” her love of both law and finance.
[6:00] In Rebecca’s practice, Walser Wealth Management, she regards market volatility as the first of two major threats to wealth building and maintenance. Tax issues present the other major issue to keeping wealth.
[8:00] Rebecca shares how her background informs the way she serves her clients: “Our practice is unique not only because we help build wealth financially, but because we also make sure the wealth is built in the right tax bucket.” She believes approaching tax and traditional wealth building holistically is essential. Using a self-directed IRA to hold real estate investments is a common and effective strategy among Rebecca’s clients.
[Tweet "“You could be a doctor with a high litigation risk. You could own a construction company. You could have a high inheritance risk with a drug-addicted sibling. Everyone’s situation is different.” - Frazer Rice, Real Estate Nerds Ep. 41"]
Self-Directed IRAs and Real Estate: Managing Expectations
Rebecca shares how self-directed IRA deals can sometimes go sideways, and the best management solutions for when they do.
[10:00] Rebecca describes pairing with a group to establish manage self-directed IRA accounts, including finding deals. She experienced some difficulties in terms of on-the-ground property management. Poor property management can get expensive fairly quickly. Many of Rebecca’s clients like real estate’s “hands off” investment approach when property management is active and professional.
[12:20] Scott discusses Rebecca’s vetting process for the nationally-recognized company that managed her clients’ properties. He wonders if contractual solutions could have improved her situation, or whether to simply take a different approach moving forward.
[14:26] Rebecca points to the nature of expectations in this type of asset (real estate in a self-directed IRA) and its unique problems as learning moments in her own story. Scott suggests real estate investors may have, or at least desire, a heightened sense of control over their asset than a typical investor would feel over a stock or a bond.
[18:00] The two investors agree one one critical point: “Real estate should be looked at like any other investment: whether it’s working or whether it’s not.”
[19:30] Scott brings up client management. He finds “high transparency and frequent touchpoints” useful for problem-solving with clients. Rebecca agrees both are important in professions where you’re managing other people’s money, as she and Scott are. Rebecca shares some communication strategies for clarifying her company’s role and boundaries regarding clients and their investments.
[Tweet "“There’s a currency of success that has nothing to do with dollars.” - Frazer Rice, Episode 40 Real Estate Nerds Podcast"]
The Takeaway:
Rebecca and Scott conclude the show with their “lessons learned” from Rebecca’s story.
[23:57] For Scott, clarifying expectations upfront is a huge lesson to be learned from Rebecca’s experience, particularly surrounding responsibilities to other people.
[25:05] For Rebecca, cautioning clients about the distinctions between real estate and stocks/bonds has proven essential. She points out failure to do this creates a situation the company has to manage later anyway. Rebecca succinctly sums up: “Real estate, as great as it is, we do ourselves a disservice to describe it as turn-key easy.”
On today’s episode of The Real Estate Nerds Podcast, our host and attorney Scott Smith is joined by Frazer Rice. The two attorney-investors dive right into a deep conversation about asset protection and management, learning financial responsibility, and the true meaning of wealth.
Note that this is an episode in our “Live From FinCon 2018” Series. Don’t forget to check out the Royal Legal YouTube channel for video extras and other great content. Back to the show...
Tune in to Episode 41 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 41 of The Real Estate Nerds Podcast Now
Frazer Rice on Wealth Actually and Steps You Can Take To Keep More of Your Investing Income in Your Hand
Frazer Rice sits down with our host and asset protection attorney, Scott Smith. Together, they chat about Frasier’s latest book,
[0:45] Frazer is a wealth expert who helps other investors keep as much of their earnings in their own pockets. This includes asset protection, but also tax minimization work. He points out the many ways that the U.S. Government, via taxation, pockets taxpayer dollars through sheer ignorance on the part of the taxpayer.
[2:00] Frazer recently authored Wealth Actually: Intelligent Decision-Making for the 1%. The book is full of wisdom for those changing asset classes or “moving up” in the real estate world.
[2:30] Scott expresses his admiration for the book, relating his own experiences as an asset protection attorney.
[3:15] Frazer points out the need for unique, customized plans: “You could be a doctor with a high litigation risk. You could own a construction company. You could have a high inheritance risk with a drug-addicted sibling. Everyone’s situation is different.” Each of these circumstances requires a specific type of risk management, and that’s where Frazer’s latest work is useful
[5:30] Scott asks what motivated Frazer’s latest book. Frazer immediately points to taxes, and how to mitigate capital gains and minimize tax liability. He also speaks to how to form an adequate estate plan--advice he routinely gives his clients. Failure to form an estate plan can lead to lengthy litigation, forced sales, and plenty of avoidable fees.
[Tweet "“You could be a doctor with a high litigation risk. You could own a construction company. You could have a high inheritance risk with a drug-addicted sibling. Everyone’s situation is different.” - Frazer Rice, Real Estate Nerds Ep. 41"]
Tools Even Children Can Use for Learning Fiscal Responsibility
Frazer shares some of his practical tips for working with young people to set them up for a life of financial responsibility. Since financial literacy is generally overlooked in schools, Frazer has taken the initiative to fill this education gap.
[7: 20] Frazer lists a couple of exercises for teaching children about investing, preparing them for a lifetime of responsibility. They learn early on about losing as well. Siblings present an ideal situation, as they can work together on exercises to determine their strengths and weaknesses
[10:00] Scott inquires whether these concepts are for children only. Frazer replies that financial literacy is something investors can work on at any age. Scott asks how Frazer explains headier concepts like taxes, real estate investing, and problem-solving. Frasier replies that his financial literacy tools are modified for age-appropriateness.
[14:00] Scott asks about whether it is worth the effort to train children in their real estate business for seamless transition. Frazer says yes, and that the lessons about wealth are fairly intuitive--and better off taught. He elaborates more on wealth management with some stories from his experiences with clients.
[18:30] On the subject of wealth, Frazer points out that a broad definition can improve your life: “There’s a currency of success that has nothing to do with dollars.” Scott agrees, and points out that people can use real estate for passive income to free up time to pursue the things they really enjoy.
[21:00] Scott asks a bit more about how children learn from early investing options. Frazer believes if the power of compound interest were taught universally, Americans in general would be doing better.
[Tweet "“There’s a currency of success that has nothing to do with dollars.” - Frazer Rice, Episode 41 Real Estate Nerds Podcast"]
The Takeaway: Your Approach Can Be What Makes The Deal Work
Scott and Frazer wrap up with the take-aways points from their discussion. Both investors agree that a strong backing system and network is vital.
[22:40] Scott points out that most investors take mis-steps because of their own blind spots.
[23:00] Frazer confirms, and further elaborates that skill sets are diverse, and that’s okay: “You don’t need to know how to solve every problem..If you’re okay at a couple of things, that’s a good business model.” Some team members may be better with lenders, while others can crunch the numbers on properties and comps easily. Still others may be more equipped for managing contractors and the properties themselves.
Welcome back to the Real Estate Nerds Podcast. On today’s Bad Beats episode, investor, author, and retirement planning expert Damion Lupo joins our host and attorney Scott Smith. Together they discuss the details of one of Damion’s worst deals, while also sharing some of their expertise about evaluating markets, investing strategy, and investing psychology tips anyone can use. Tune in to Episode 40 of The Real Estate Nerds Podcast to hear their full conversation.
Listen To Episode 40 of The Real Estate Nerds Podcast Now
Damion Lupo on Losing Big, Blind Spots, and Preparing for an Impending Recession
Damion and Scott discuss Damion's early real estate career and the lessons he has learned about his own blind spots. Damion also shares some of his observations about recessions, including a prediction on when we may be looking at our next one and what to do about it.
[1:00] Damion grew up in Alaska, where he later took physically demanding jobs in the oil industry. He left at 17 to escape the ennui and isolation of life in Alaska. He was able to use some of these funds to get started in the real estate industry.
[2:45] Damion describes his early real estate dealings. He believes he was naive, which in some cases worked to his advantage. He purchase 150 houses, but they became a massive problem: “Within 8 years, I took a $20 million portfolio of a cliff,”
[3:00] The two investors discuss the value of learning the lessons from failures. Those who do not take the learning opportunity do not tend to perform well over time. Damion admits that he failed to listen often.
[6:15] Damion also speaks to the danger of not acknowledging your own limits: “Your blind spot is everything you’re not seeing. Maybe you need to move three inches to the left and everything is wide open. It could just be that simple.”
[7:00] Scott points out that a solid economy and market bull run influences the way investors think about real estate. Damion speculates that after a long bull run, a recession within the next year and a half is extremely powerful. He suggest investors evaluate their portfolios and plan ahead for the recession.
[8:30] The two investors discuss how different assets perform in a downturn. According to Damion, “You have to know what’s going on in a recession and plan for it.” Scott agrees, pointing to investors he knows that are doing well know and thoroughly prepared for a recession.
[9:45] “It’s the prepper mentality,” Damion adds. However, some people spend more time and money on preparation than maintaining their businesses. He reflects on the fear of the unknown, which motivates many of these paradoxical opportunities. Scott points out that figuring in probability of any given risk is important for an accurate picture.
[12:00] Damion agrees that investors can evaluate risk ahead of time. He points to his own investment “rules” as an example. For instance, he will not have more than 5% of his own liquidity in a given deal. He heeds to these rules religiously. His approach is conservative compared to what he's seeing from other investors: “I don’t see a lot of practicality. I see a lot of people who are stoned out of their mind by the wealth the bubble has been creating.” [13:20]
[14:00] Scott shares a couple of anecdotes about investors in the current climate.
[15:12] Damion shares advice for new investors. “If you want to make money, there is one thing you should invest in: your education.” He lists a few terms all investors should be familiar with. Scott points out that “It is always more expensive to learn by experience...You don’t have to if you aren’t lazy.” He speaks from his own experience, pointing out he once lost several thousand dollars because of failure to do due diligence.
Scott circles back to the value of having personal rules, pointing out that some investors have criteria for behavior patterns outside of relationships. Damion agrees that having rules prevents delusion.
[Tweet "“If you want to make money, there is one thing you should invest in: your education.” - Damion Lupo, Real Estate Nerds Podcast Episode 40"]
How to Fully Engage with Your Life (And Why You Want To)
Damion shares about some of the deep internal work he has done to recover from failure, maintain success, and nurture himself to contribute to and connect with the broader community more. He discusses how he defined his purposes, as well as some of the influential books and practices that have informed his own development.
[18:30] Damion points that passive income can develop passive desires in other areas of life, and how problematic this phenomenon is. He and Scott discuss the distinction between passive investors and those who are actively engaged.
[20:00] Scott recalls his interview with Scott Sutherland about best and highest use of a property, pointing out the parallels with Damion’s story. Damian points out that the same principle of active engagement applies to retirement planning: “If you’re not engaged, you’re toast.” [21:58] Scott points out that applying one’s mind intensely almost guarantees returns.
[23:00] Scott asks about the difference in Damion’s life before and after 2008. He shares some stories about his drive for “more” as a younger man, as well as watching his father pass away living with regret.
[26:00] The two investors discuss the internal building blocks that are essential to genuine fulfillment. Scott, who shuddered initially at the mention of spirituality, has also performed a lot of internal work.
[28:00] Damion highlights the Blank Slate Principle. These strategies helped him refocus his priorities onto things that actually fulfilled him in life.
The Takeaway: Work on Yourself to Become a Better Investor
Damion and Scott conclude with some take-aways of Damion’s story for listeners. While each had their own take, they agreed on the most important principles.
[30:00] Scott feels that Damion’s story speaks to the value of strong investing psychology and profound self-insight. In his opinion, wealth and happiness do not necessarily correlate--if you want both, you have to work for it, but the work will be on yourself. This view is confirmed my numerous studies in human behavior, social sciences, and psychology.
[32:19] Damion offers a take-away for listeners “If you want to feel successful, fail faster and more frequently.” He points to the survival of extreme events, the value of gratitude, and the power of a healthy attitude toward failure.
[33:23[ Damion lends some advice to struggling or anxious investors: “What’s the lesson in your pain right now? If you don’t learn it, you’re stuck.”
Today’s Bad Beats episode of The Real Estate Nerds Podcast was cut live at FinCon 2018. So on top of the usual show notes, be sure to check out the Royal Legal Solutions YouTube Channel for some video extras from this and other bonus material from the conference.
Our host and attorney Scott Smith got the chance to sit down with Monick Halm, an apartment syndication investor who some of you may already know as The Real Estate Investor Goddess. Monick agreed to tell us about one of her worst deals and how she recovered from it. Tune in to Episode 39 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 39 of The Real Estate Nerds Podcast Now
Monick Halm’s Apartment Syndication Bad Beat
Monick joins Scott to tell us a bit about her investing career and an apartment syndication deal that didn’t go as planned.
[1:55] Monick joins Scott to share about one of her first two apartment syndication deals. She bought two 77-unit buildings within a week of another, with high hopes for both. She planned to manage them together. The market, Albuquerque, NM, was new to her and her partner. But the numbers jived, and things looked bright enough in the beginning.
[3:30] Monick quickly learned that many of her apartments had tenants who simply weren’t paying rent. “One thing we didn’t do well is look at the dates and see how long tenants had been there,” Monick explains. “We didn’t pay enough attention to delinquency.”
[4:45] The property was managed by one of the state’s largest property management companies. Occupancy plummeted and the property management company was not pulling their own weight.
[5:40] Monick speaks to an additional stress of underperforming in a syndication context: “It’s bad when your property’s not performing like you want and your own money’s on the line. But when it’s someone else’s, it’s so much worse.”
[6:30] Did you know that Albuquerque, NM is the car-jacking capital of the country? We didn’t. And neither did Monick. But she found out when two of her tenants had vehicles stolen from the complex’s lot. Even then, she had to bid with five separate companies before one agreed to build a fence nine long months later.
[8:30] Monick did eventually experience a share of good luck: “Cap rates went down and a seller approached us about buying the property at a good sale price.”
[Tweet ""It's bad when your property's not performing like you want and your own money's on the line. But when it's someone else's, it's so much worse." - Monick Halm, Real Estate Nerds Podcast #39"]
Lessons Learned: Your Team Can Help You Recover From a Bad Beat
Monick and Scott wrap up the episode with the major lessons listeners Monick learned herself, as well as some take-aways listeners can learn from Monick’s story.
[9:15] Scott points out that Monick must have learned many lessons from this property. She confirms: “We learned a lot about the importance of your team. Your team on the ground is everything.” She also now knows the importance of understanding your market, particularly if you’re an out-of-state investor.
[10:30] “We leaned a lot on our network for advice” to both manage and get out of the situation, Monick explains. She has a wide professional network of experienced investors who are also syndicators. During this time, they provided an excellent sounding board and offered some problem-solving ideas that helped her spring back.
[12:30] Scott points out that you can do almost everything right, have a team of trusted advisors with the experience to handle the problem helped Monick recover from this deal. He adds that one of the beautiful things about real estate is that time can correct many costs.
[14:00] Monick shares about her space specifically for female investors, Real Estate Investor Goddesses. She has an upcoming 7-Day Challenge for anyone who joins to community. The challenge is an assessment to help determine whether you are ready to invest. If you are a woman interested in real estate, visit www.realestateinvestorgoddesses.com for the latest on that.
[Tweet "“We learned a lot about the importance of your team. Your team on the ground is everything.” - Monick Halm, Real Estate Nerds Podcast Episode #39"]
Connect With Monick Halm
Connect with Monick via The Real Estate Investor Goddesses Facebook Page or on Twitter as @monickpaulhalm.
Listener Resources
Thank you for joining us on today's episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
Don't forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today's episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next time for another fascinating conversation. Thanks for listening and joining us on our journey to become better investors!
On today’s episode of The Real Estate Nerds Podcast, Lucas Hall joins our host and real estate asset protection attorney Scott Smith. Today’s episode was cut live at FinCon 2018, so be sure to check out the Royal Legal Solutions YouTube Channel for some video extras from this and other bonus material from the conference. Although there was plenty to do at FinCon, Lucas was kind enough to sit down and share the short version of one of his best deals. He also told us about Landlordogy and the tools that have helped him succeed as a single-family investor.
Tune in to Episode 38 of The Real Estate Nerds Podcast now to hear the full conversation.
Listen To Episode 38 of The Real Estate Nerds Podcast Now
Lucas Hall on Househacking and The Art of Landlording
Scott Smith welcomes Lucas Hall onto The Real Estate Nerds Podcast. Together, the pair of investors discuss Lucas’s unusual motivation for making his first investment, and how a deal that didn’t appear all that great ended up being a win in the long run.
[1:45] Lucas is mainly a buy-and-hold investor focusing on single-family homes. We’ve heard lots of reasons for investors getting into real estate, but Lucas’s stands out: he had a crush on a girl who had closed on a house at 23. So naturally, he did the only logical thing--bought a house in her neighborhood.
[3:00] While Lucas was able to add some roommates to the property and hack the house for profitability, it didn’t come close to meeting the 1% rule. Lucas explains the 1% rule for the uninitiated: “If you buy a house for $200,000, you should be able to command $2,000 in rent monthly to at least cover your costs and make a little bit of money.” His property was near Capitol Hill in D.C., and Lucas essentially lived in the house rent-free and later used the equity to buy a condo.
[4:30] While Lucas may not have gotten his 1% monthly, he did get the other thing he wanted: the girl. They have now been married for a decade.
[6:00] On its own this house isn’t incredibly profitable. So Lucas has taken an unusual approach to making this property work for him--hacking the property into a group house. Rather than renting to a single family, he rents to a group of six adults who each have their own rooms and common areas. Together, they pay approximately $5,000/month--almost double what Lucas would gain from a typical family.
[7:00] Lucas’s wife actually helped him devise this house-hacking method. He purchased the house in 2005, a time when there weren’t as many online materials freely available for new landlords. Lucas learned by reading and doing, and later began blogging about his experiences.
[8:58] Lucas continues to run Landlordology, a website full of resources on the art of being a landlord. He also works for Cozy, a company that creates software tools for Landlords. He describes his ideal audience as anyone with roughly 20 units or less. Lucas has essentially developed the materials he wished he had when starting out for the benefit of others.
[10:40] Lucas compares learning to be a landlord to learning to fish. He describes Landlordology as a collection of best practices and the tools to be successful.
[11:55] Scott asks Lucas about his current personal investing endeavors. Lucas recently purchased his first vacation/short-term rental property in Colorado. He shares some of the differences between managing this type of property compared to his typical investments. “In order to be really successful, you have to manage a joint schedule on multiple platforms,” Lucas explains.
The Takeaway: Your Approach Can Be What Makes The Deal Work
Lucas and Scott conclude this episode of The Real Estate Nerds Podcast by highlighting their major takeaways from Lucas’s story.
[13:00] Scott points out that to some, Lucas got into real estate for the ‘wrong’ reasons, but he still achieved his own goals. Even with a less-than-ideal deal, Lucas was able to engineer solutions to make it work and help many other investors in the process.
[14:40] Lucas concurs: “I’ve had that ‘bad’ property for thirteen years and been renting it to groups...Even if it was a bad deal upfront, if I sold it today, I’d make a decent return on it.” The two investors agree it is impossible to know when you enter a deal
[15:00] Lucas adds that factors beyond your control are often impossible to prepare for, but that real estate allows you to “wait out” bad scenarios.
We talk a lot on The Real Estate Nerds Podcast about best deals and worst deals, but the reality is often more complex. Today’s guest, Trevor Robinson, has seen many ups, downs, and everything in between. He left college to strike out as an entrepreneuer, and through calculated risks, clever strategy, and a willingness to learn from mentors and self-directed study, has established an impressive portfolio before even reaching age 35. Tune in now to hear Trevor tell our host and real estate attorney Scott Smith about his investing career, some of his most notable deals, and the finer points of the investing strategy that has given him true financial independence.
Listen To Episode 37 of The Real Estate Nerds Podcast Now
Trevor Robinson’s Unconventional Path To Entrepreneurship
Trevor sits down with Scott to discuss his background and some of the highs and lows of his investing career.
[1:00] Trevor Robinson is a 32-year-old Missouri-based investor who took an unusual road to real estate. He had a realization during business school that drove him to drop out and pursue investing. His first endeavor, a tattoo shop, failed, but Trevor persisted with an electronics repair shop. He took those profits and went all in on real estate: “I knew real estate wasn’t a get-rich-quick scheme but it was a get rich scheme.” [2:33]
[2:45] Scott explores the fact that Trevor rejected traditional ideas of working life. Trevor discusses how he assessed the risk of leaving school--and offers a critique of student loans.
[5:00] The two investors discuss the necessity of failure. Scott admires the entrepreneurial spirit: “When I see people who failed while shooting for the stars but landed on the moon, I think that’s pretty damn good.” [5:50]
[Tweet: All I could see was the upside. I was literally manipulating myself into buying it because I didn’t want to lose the deal.”]
On Failure and Required Real Estate Reading
Scott asks Trevor for some of the details about deals of his that haven’t gone as planned, as well as his analysis of what he could have done better. Both investors agree that we can all experience profound growth from unsuccessful deals, given a healthy attitude towards failure and willingness to assess our mistakes honestly. Trevor also shares some of the books that have informed his investing strategy.
[6:45] Scott asks about the bad deals Trevor has experienced. Trevor discusses some of the “steals” he found over the years before diving into one of his earliest failures. He believes his first bad deal was a remodel in a low income area that needed $50,000 worth of repairs.
[8:05] Trevor points out some of the challenges of investing in low income areas, highlighting tenant issues that he struggled with. He finds that low income items like trailer parks do not appreciate as well as other asset classes.
[9:17] Trevor reflects on how he got himself into the early lackluster deal. The seasoned investor attributes his failures to youth and eagerness: “All I could see was the upside. I was literally manipulating myself into buying it because I didn’t want to lose the deal.”
[10:00] Scott and Trevor discuss the personality type that is necessary for managing low-income property. Trevor learned that he is not personally inclined to manage these types of properties, and now leverages his time and effort in other areas.
[12:00] Ultimately, Trevor grosses $1900 per month on this particular deal. He decided to hold the property, but found “Everything that could go wrong with it went wrong with it.” He goes on to advise new investors to learn from his mistakes and stay from these types of properties. He also shares some of the positive insights he gained from this early stage of his career, specifically, how to get the lending faucet “turned on.”
[13:40] Trevor elaborates on his strategy for getting financing: “I went after duplexes in C+ working class areas, mixed in with some single-families, and I’d primarily target under-rented ones...fix them up and raise the rents to have a tremendously high cash flow.” He goes on to explain his method for using equity to make additional investments. Trevor’s approach has worked well for him. He has diversified his portfolio to include commercial and multi-family properties, and is generally successful with lenders. He shares the attitude that has helped him in this area: “Your bank is pretty much your partner on the deal.”
[16:00] Trevor explains that reading about other investor’s losses has saved him millions. He also reveals his personal strategy: “I learned from doing it and talking to other investors.” He also credits some of his success to paying attention to real estate failures. Scott agrees that this is the spirit of The Real Estate Nerds Podcast: learning from others’ mistakes.
[17:00] Scott presses Trevor for more details about his investing education. Trevor is a voracious reader and has some recommendations for new investors. In his own experience, he has found that: “You don’t want to read “Get Rich Quick” books. You want to read those humble books about someone who lost it all.” On the subject of his favorite investing books, Trevor believes Manny Khoshbin’s Contrarian Playbook is one of the best things a new investor can read. He points out that the book is written in very plain English, making the ideas extremely accessible.
[19:35] Confessions of a Real Estate Entrepreneur has also been a highly influential book for Trevor. He believes books are as important as online tools, such as Reddit. He and Scott agree that anyone can improve themselves by simply investing in their own education. Developing a habit of reading
[Tweet="“You don’t want to read “Get Rich Quick” books. You want to read those humble books about someone who lost it all.” "]
How Trevor Robinson Gets His Best Deals
Scott and Trevor focus on some of Trevor’s more clear-cut wins. Trevor also shares about some of his most essential team members, tools, and tactics for how he finds the deals he wants.
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[21:00] Trevor dives into the details of his best deal. He shares a story about a simple flip in his college town. He had observed the college growing, and bought property that “boxed them in.” This is part of Trevor’s greater strategy: “Where you can see growth coming, buy around it.”
[22:40] An apartment complex ended up being one of Trevor’s better investments, though it took two years.
[23:59] “A lot of my deals won’t be profitable for years,” Trevor explains. He also shares how investors can leverage loans. He believes his portfolio diversifies over time.
[26:00] Scott asks Trevor how he approaches new deals. His appraiser has become a useful ally. Trevor’s “dream team” is composed of his banker, appraiser, and insurance agent. These professionals offer useful information about his investments.
[28:59] Scott and Trevor break down the costs and other elements to learn about new markets. He also shares his thoughts on which deals are worth pursuing and ways to lower expenses.
The Takeaway: Take Risks If You Want Freedom
Scott and Trevor wrap up this episode with the major lessons investors can learn from Trevor’s investing experience and career. Both have takeaways and practical advice that any investor can use.
[32:00] For Scott, he believes Trevor’s hybrid approach to the way he thinks about investing and use of both traditional and modern resources have served him immensely. Both investors have high praise Reddit as an educational resource and means of connecting real estate investors.
[33:45] Trevor has simple advice for investors at any stage in their career: “Don’t be afraid to take risks.” If you have a side hustle, get on the grind.
[35:00] Both investors feel real estate is a pursuit of freedom. Trevor finds deep fulfilment in helping others, and advises that investors “Take care of the people under you, and listen to the ones above you.”
On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith sits down with self-storage investor Hunter Thompson. Hunter is here to tell us about a uniquely good deal in one of the unusual asset classes he specializes in--self-storage. In addition to telling us about the deal, Hunter shares some of his overall strategies for success in his niche and real estate investing more generally. Tune in to Episode 36 of The Real Estate Nerds Podcast now to hear the full story.
Listen To Episode 36 of The Real Estate Nerds Podcast Now
Hunter Thompson on Recession-Proofing and Risk Management
Hunter joins Scott Smith to chat a little bit about his background, recession-proofing, and the unusual real estate niches that have allowed him to experience success and financial freedom.
[1:00] Hunter Thompson is an investor and the principal at Cash Flow Connections. He specializes primarily in mobile home parks and self-storage, but assists with many asset classes. He began investing in financial assets just before the recession, seeing opportunity when other investors panicked. The failure of the stock market piqued Hunter’s interest in real estate. He came to the realization that stocks were not a good vehicle for the type of investing he wanted to do just as the Europeacked. n financial crisis began.
[3:35] “Investors have every reason to be concerned about recessions,” Hunter tells Scott when asked about how he recession-proofs his own portfolio. “There are real estate assets that perform well during market corrections. The data is very compelling for mobile homes,” Hunter explains. He reflects on the 2008 correction and believes another correction is approaching. Yet Hunter is optimistic about real estate’s ability to weather future market corrections. He believes mobile home and self-storage have particular strengths in these types of wider market issues: “Mobile home parks are a great example of the worse the economy does, the better for the product.” [4:50]
[5:50] Hunter elaborates on what makes mobile homes and self-storage excellent even in volatile markets and recession: “The most important part of any real estate investment is the debt. It’s the majority of the capital stack.” Hunter quickly explains the relationship between debt and capital, and how to avoid problems regarding debt attached to real estate. He points to metrics beyond simply loan-to-value ratios for investors to pay particular attention to, including loan terms.
[8:08] Scott points out that Hunter’s approach is balanced in terms of risk. Hunter points out the value of asset classes, such as self-storage, that have an increased demand from those who are downsizing in a bear economy. He uses Baby Boomers approaching retirement age as an example. Scott asks where listeners can hear more of Hunter’s insights, and he replies that The Cash Flow Podcast is the best way for investors to follow him and his ideas.
[11:35]Hunter points out the value of lists in managing time and productivity, challenging listeners to devote thirty days to creating and completing to-do lists to see how their priorities are affected. He touches on the many ways to add value to self-storage units, particularly in comparison to single-family homes.
[Tweet="“My worst real estate deal became my best one.”"]
Hunter’s Self-Storage Win and The Strategy Behind It
The two investors switch gears, laying the groundwork for Hunter’s best deal story.
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[12:40] Hunter sets the scene for his all-time best deal, beginning with the “10,000 feet view” Scott requests. Hunter was involved in hard money lending in Tennessee. During this time, he observed the risk-adjusting benefits of self-storage and mobile home assets and wondered where he could add value.
[14:50] Hunter noted that out-managing and out-competing single-family units was difficult, but that: “With self-storage, there are a tremendous number of ways to add value.”
[15:50] Scott observes that Hunter exploited “information gaps” in a case where knowledge converted directly to dollars. Hunter points to the property he is here to discuss today as an example of exactly this concept. The property was a massive 120,000 square foot self-storage unit in Fayetteville North Carolina. He points out that military personnel made excellent tenants, particularly since their deployments tended to be longer than the rental periods for Hunter’s units.
[17:30] Hunter points out how a relationship with a trucking company, such as UHaul, can add thousands of dollars of monthly equity to a storage facility.
[19:15] The lack of mandatory tenant insurance also became an opportunity for Hunter. By filling that “gap” himself, he directly fed his bottom line immensely.
[21:00] The two investors discuss that the major value of Hunter’s company is through his wide network and many solid relationships.
[23:30] Scott points out that Hunter’s depth of knowledge, ability to exploit knowledge gaps, and network are things that are very valuable but difficult to build. Scott believes these are critical things to look for in an operator.
[25:00] Hunter believes two things have created a “unique opportunity to mess-up:” the real estate market doing well over the last decade and the JOBS Act. He points out that this can create confusion between whether good results come from your own processes or the market correction. Scott highlights that this is an issue of “because of or in spite of.”
The Takeaway: Better Thinking Leads to Better Investing
Hunter and Scott wrap up the show with the most important take-away our listeners can learn from Hunter’s story. They both agree that Hunter’s success hinged on his ability to think deeply about the problems and information gaps inherent to his investment and implement the strategies to solve them.
[27:00] Scott points out that Hunter’s ability to think deeply through his problems. The two investors agree that thinking makes the difference between success and failure in the long run.
[29:00] Hunter concludes his story by sharing that he sold the property he bought for $6.4 million for $9.1 a mere three years laters. While this deal had many good things going for it, Hunter explains: “The true key to why this was a great deal is the lack of capital expenditure risk.” Simply implementing better strategies led to success in Hunter’s case.
Welcome back to The Real Estate Nerds Podcast! On today’s episode our host and attorney Scott Smith welcomes investor Jordan Goodman to discuss a topic we haven’t covered as much as we would like to--funding real estate investments. Scott and Jordan have a truly inspiring conversation that may have you thinking differently about financing and sourcing funds for real estate investments. Stay tuned through the end to hear some of Jordan’s favorite free mortgage tools.
Listen to Episode 34 of The Real Estate Nerds Podcast Now
Jordan Goodman on Crowdfunding and More
Scott Smith invites Jordan Goodman onto the show. The two investors chat about Jordan’s crowdfund and crowdfunding more generally, as well as risk mitigation in these contexts.
[1:00]Jordan comes from a financial journalism background and runs the popular website MoneyAnswers.com. He has become the author of 13 books, many about real estate
[2:37] Jordan discusses crowdfunding, which has only been possible by Act of Congress in 2012. The spirit of the law was to give investors access to funding they otherwise may not have, while also benefiting developers.
[3:47] Jordan mentions the fund he is involved with and its 8% yield. It is called the Secured Real Estate Income Strategies Fund (SREIS). Visit the fund’s website for more information, including an inside look of those managing this fund. Jordan is on the board aswell.
[5:00] Jordan touches on the two strategies that make this fund work: “The first is forced appreciation, meaning they’re doing something to the building to increase the value of it.” Next, they use collaborative lending to partner with the developer and keep a profit share. Both the investor and the fund receive profit returns from sales.
[7:00] Scott asks Jordan how the fund handles the risks inherent to the real estate market:N “Obviously real estate has risks. So we want to mitigate those risks.” Jordan explains the ways that risk can be mitigated--by having lenders have “skin in the game,” through diversification. Diversification can be geographical or across asset classes. He also mentions the thorough underwriting they engage in.
[10:10] Jordan’s fund offers options. Investors may choose to receive monthly payouts or reinvest profits to continue to draw on the high returns.
[11:00] Scott points out that the rise of crowdfunding has attracted some bad operators on to the scene. He asks Jordan what investors should look for in a fun. “Track record is key,” Jordan explains. Jordan also believes leverage and the fund’s strategy (degree of speculation) are essential metrics to look at. He gives some concrete examples, pointing out that his fund doesn’t rely on an area’s appreciation, but rather on adding value. He gives an example of one investor whose cashflow doubled on the same property.
[13:00] The two investors touch on the dangers of loaded funds, which lack incentives for any of the key players to perform well. The more invested operators are, the better crowdfunded models tend to perform. In the case of Jordan’s fund, the profit sharing is split 80% to shareholders and 20% to management. Each gets paid “on the back end” based on the performance of the fund.
[16:50] Jordan and Scott talk the essential metrics that make Jordan’s fund that make it a good choice for those seeking secure, regular income off of passive real estate. Scott wonders if the fund is more secure in some sense, such as against recession, than real estate itself.
Jordan Goodman’s Investing Toolkit
Scott and Jordan change focus to practical tools any investors can use, giving particular attention to their mortgage payments and strategy.
[18:50] Scott asks about ways investors can get involved with some of the activities and funds Jordan has discussed. Jordan turns away from crowdfunding to point to another of the most essential tools for the average investor: “The Mortgage Optimization Strategy is a way to pay mortgages off much faster than you ever thought possible. It can be used on homesteads or investment properties.” Jordan highlights the fact that most mortgages aren’t making money, and in fact the average mortage holder is making many interest payments and few principal payments.
[19:32] “The Mortgage Optimization Strategy allows you to pay off the principle much faster--without extra income,” Jordan explains. He goes on to explain that some are able to pay of a 20- or 30-year mortgage in as little as 5-7 years. He gives an example of how this works using a Home Equity Line of Credit (HELOC). For a more in-depth description of this process, visit www.truthinequity.com. The tools are absolutely free and help calculate a mortgage based on the strategy.
[24:00] Jordan elaborates, stating: “There are three things you need to make this mortgage strategy work.
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Equity on your house.
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Decent credit score to qualify for the HELOC
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Positive cashflow to push the principal down.”
He believes most of our listeners have these three things, particularly those with tenants paying down those mortgages faster for you. Jordan has written an entire book chapter on this strategy.
[25:34] When Scott asks Jordan for additional resources on mortgages, Jordan explains some benefits for professions he knows as American heroes, consisting largely of those in the military, helping professions, and medicine. There is a program known as Heroes Come First that such people can take advantage of at www.heroescomefirst.com or by calling 1-888-487-6114.
[27:58] To conclude, Jordan offers one final resource: VerifyMyMortgage.com. They will conduct a detailed analysis of how much you should be paying, and their system can find many errors. Often, investors have overpaid their mortgages and are eligible for lower payments and even refunds.
Many of us dream about the things we’d do if only we had more time. Often, that’s the motivation for entering the real estate game. Today’s guest knew he wanted to leverage real estate to do something big: quit his job and start his own business. Our host, asset protection attorney Scott Smith, also happens to know a thing or two about that.
Welcome back to The Real Estate Nerds Podcast! On today’s Bad Beats episode, Scott Smith welcomes CPA and investor Brandon Hall. Together, they go over the details of one of Brandon’s earliest and worst real estate deals. However, Brandon doesn’t view the property he attempted to manage himself as a total loss. Find out what exactly happened with both the deal and Brandon’s business ambitions by tuning into the full conversation.
Listen to Episode 35 of The Real Estate Nerds Podcast Now
Brandon Hall on Becoming The Real Estate CPA
Brandon Hall sits down with our host and fellow investor Scott Smith. The two chat about Brandon’s business, a CPA firm that caters to fellow real estate investors, and Brandon’s entry into the real estate world.
[1:00] Brandon runs a CPA firm called The Real Estate CPA, which only serves real estate investors. They offer a variety of services including tax strategy, preparation, and accounting support. His firm is fully virtual but serves clients nationwide, just like Scott’s law firm Royal Legal Solutions. The two reflect on the advantages of operating this way and how this unconventional approach benefits clients.
[4:00] Scott points out that a CPA like Brandon who can successfully operate remotely demonstrates the high quality of his service. Virtual firms create a liberating work environment that allows firms to pick the most talented personnel without the traditional limits of location.
[6:30] Brandon also invests in syndication deals. He was originally drawn to this by a client and attended the first meeting as a courtesy. Brandon realized the deal was brilliant, and the pair formed Naked Capital--a virtual capital firm.
[8:00] Scott invites Brandon to set the scene for the worst deal he is here to discuss today. Brandon already had a couple of successful deals under his belt and was working at a conventional CPA firm, but plotting his move towards the virtual firm. He knew he would be leveraging his traditional W2 job to get the best financing terms for the investment. “My goal was to buy a property in Baltimore, then live in one unit and rent out the others,” Brandon explains. [8:48] He selected Baltimore because that is where his wife was working, and he was hoping to use the returns from this investment to start The Real Estate CPA.
[10:00] Scott relates to Brandon’s story, sharing that when he approaches a major change, he always evaluates a worst-case scenario and the exit strategy to get back to his current position. Brandon agrees that his plan was to simply go back to work if his real estate plan went down in flames. Scott observes: “People don’t really hold it against you if you’re doing something big.” [11:42]
Brandon Hall’s Baltimore Triplex Bad Beat
Brandon and Scott switch gears and dive into the details of Brandon’s Baltimore deal.
[12:40] Brandon followed through with his plan. He selected a property, lived in one unit, and rented out the other two units. Right off the bat, he had a problematic tenant who consistently paid rent late: “Part of this being a bad deal is I had no idea what the tenants were like. Then, I never actually put my foot down and said ‘You need to pay me.’ I never assessed late fees or any of that.” [13:00] He reasoned he was still getting paid eventually, but in retrospect realizes his failure to establish boundaries was a major mistake.
[14:00] Brandon now realizes the importance of setting expectations in the business world. He touches on what this looks like with his current clients. He admits: “At the time, I didn’t know how to set expectations and that carried over into my business as well. As you can imagine, eventually things break down.”
[15:00] Brandon explains that he had previously, and successfully, used property management companies to handle tenant issues. On this investment, he was managing the property himself and realized he simply wasn’t cut out for it. When he and his wife moved to North Carolina to be closer to family, he hired a property management firm. Yet this presented other difficulties: “Baltimore, Maryland is just an insane city to comply with if you are a landlord...I didn’t even realize some of the stuff we had to do.” He spent several thousand dollars and five months to get his units tested, inspected, and registered with the city.
[16:32] Scott asks if this was an error in due diligence. Brandon explains that the seller did give him the information he needed, but much of it was inaccurate. He points out that his own clients come to him with too-good-to-be-true tax strategies Simple double-checking could have saved Brandon money and compliance headaches: “I just listened to the hearsay, trusted it, and paid for it later.” [17:40]
[18:00] Scott points out that situations like Brandon’s are why investors hire professionals in the first place. Scott shares a funny anecdote about a client who asked his legal opinion on not paying income taxes. Spoiler alert: “My legal opinion is that you’re going to end up in jail if you do that.”
[19:30] Scott asks how Brandon dug himself out of the hole. Brandon points out that the property fortunately cashflowed well, with 8-10% annual returns. Unfortunately, his profits were sunk into cutting through the city’s red tape, particularly on lead paint issues. To make matters more complicated, Brandon was also growing his CPA firm rapidly. Where other firms may grow at 10% yearly, his was growing by approximately 10% monthly. Balancing his business with the property’s issues became a managerial nightmare.
[21:55] Brandon explains that he is now offloading this property, and if he has his way, will come out of the deal just above breaking even. He explains his motives for offloading: “From a total equity standpoint, we haven’t made much on this at all. The reason I’m offloading is I don’t want to be stuck with this property in a downturn. I don’t want to be in an anti-landlord city or state.” Brandon is nonetheless grateful for the lessons he has learned the hard way from this investment.
How a Bad Deal Led Brandon to a Better Life
Although this particular deal wasn’t profitable for Brandon, it did serve a greater purpose. In Brandon’s view, this property allowed him to start the business that he runs successfully today. He and Scott discuss the difficulties of a rapidly scaling business, as well as how real estate can lead to greater fulfilment in life in general.
[23:30] Scott and Brandon discuss how rapidly developing businesses present problems of their own. Like Brandon, Scott’s business grew rapidly over the past year and was accompanied by growing pains. Brandon believes he could have been smarter about his investment, but acknowledges that it played a key role in helping him achieve a larger goal: “This property allowed me to be more comfortable pulling the trigger, quitting my job, and launching my business full-time.”[25:27]
[26:00] Scott comments that many investors get into real estate to free up time to fulfill a higher purpose, and that Brandon’s story is an example of that. The two talk about the importance of healthy relationships in building a business and preventing burn-out. Brandon, who was dating his current wife Bonnie before he established his business, jokes that listeners should “lock in a significant other before building a business.” Together, the pair have endured extreme highs and lows, a testament to the strength of their relationship.
[31:00] Scott and Brandon acknowledge that dramatic highs and lows are normal in entrepreneurship. Scott points out that many of the wisest investors he knows maintain their internal condition to run on an even keel, even amidst chaos or highly stressful times. Scott tells Brandon: “I love that real estate has helped you get to that next phase of your life. I think that’s going to resonate with a lot of people.”
Welcome back to The Real Estate Nerds Podcast! On today’s episode, investor Scott Price joins real estate attorney Scott Smith to talk about the details of the strategy that keeps him on top. The pair of investors also analyze one of Scott Price’s all-time best deals. Tune in to hear the full story.
Listen to Episode 33 of The Real Estate Nerds Podcast Now
Scott Price: The Opportunistic Investor and His Strategy
Scott Price sits down with Scott Smith to discuss his early life and real estate career. Scott Price also shares what he looks for in a deal, what due diligence looks like in the auction context, and how he keeps himself accountable to his own criteria for good deals.
[1:00] Scott Price has worked traditional W2 jobs for most of his life while investing part-time for the last 15 years. He made the transition into full-time investing last year. Scott and his wife have collected a portfolio of multi-family, single-family, and office rentals over the years. Scott explains, “We’re opportunistic. We don’t just jump in on one asset class. We jump in on anything that might be a good deal.” [2:20]
[3:24] Scott Smith asks Scott Price for a brief overview of the Best Deal he is here to discuss today. Scott Price chose to share a deal that highlights the use of leverage. He bought a 2-building apartment complex in an online auction and used creative financing (and re-financing) to turn this one property into multiple assets for his portfolio. This one property turned into three cashflowing properties.
[5:20] Scott Smith asks our guest about his background in these types of properties and what made him feel comfortable purchasing property online. He also asks what due diligence looks like under these sight-unseen scenarios. Scott Price has made such purchases three times. Scott Price shares his strategies for evaluating these types of properties, as well as a couple of anecdotes about how he has made these purchases.
[7:40] Scott tends to bid on many properties with the understanding that he may have to lose the earnest money if the property can’t feasibly be fixed or used for rental purposes. Because the property he’s discussing today was a foreclosure, he hit some additional bumps in the road. Risk is simply part of this method of purchasing.
[8:30] “I paid $295,000 but later learned it was in the $800,000-900,000 range. Even if I had just sold it for $400,000, I could have made a profit,” Scott Price explains.
[9:25] Scott shares a bit about his strategy for finding deals and risk mitigation: “I specialize in tertiary markets--small towns. A lot of investors don’t even look there.” He goes on to explain how he examines these properties, from inspections to the quality of the tenants. He tends to do a lot of his own footwork.
[11:50] Scott Smith asks if Scott Price has ever actually tracked the amount of time he spends on due diligence. Scott tends to zero in on a particular town and carry a list of criteria to narrow down his options. He also deploys his network to his advantage when checking out properties.
[14:30] Scott Price describes how he and his wife have automated their criteria and developed checklist systems that account for everything from comps to taxes. They start with high-level concerns, then work out the smaller details later in the process.
[16:15] Scott Smith asks where investors can learn these bits of knowledge that Scott Price has gained through experience. Scott Price points out: “One of the best sources to learn about these processes would be places such as Meet-ups.” He also praises podcasts, books, and MasterMind groups for being excellent resources on these subjects. He also points to the value of seminars. Tune in to hear who Scott’s favorite real estate guru is and why.
Scott Price’s Best Deal: Good Luck at an Auction
The two investors refocus on Scott Price’s Best Deal.
[18:00] Scott Smith recaps the early indicators that this was a good deal and asks about the “rehab phase” that follows auction. Scott Price shares that “I basically did my inspection after purchase, which of course is the opposite way than you want to do it. But that’s the way it works at auctions.” [19:10] He explains that this is not always the case, but it was for the type of auction he used.
[20:10] Scott Price elaborates further: “I take really good care of my properties, because I’m generally a buy-and-hold investor.” For this reason, and for the sake of the tenants, he does his best to keep his properties in excellent shape. He credits creative financing with giving him the financial buffer to hire professionals and address unexpected issues.
[21:30] When asked how he vets contractors, Scott Price replies: “I’ll talk to the brokers, property managers, and investors in that specific market. And I’ll look for the same names coming up.”
[23:00] Scott highlights that Scott Price must do a high degree of planning to execute his purchases.
The Takeaway: Dream Bigger Than Real Estate For True Success
Scott Smith and Scott Price conclude the show with the key lessons listeners can take away from Jason’s experience.
[23:30] Scott Smith points out that listeners can learn from Scott Price’s meticulous, data-driven, criteria-based approach to selecting and evaluating rental properties. Scott Price adds that his checklist approach also allows him greater flexibility: “It opens up the opportunities for higher returns and better deals. We’re not constrained by where we can drive to in 20 minutes.”
[26:15] Scott Price shares his own lesson with our listeners: “The most important thing is a vision of what I wanted to do in life.” He goes on to describe his family’s use of vision boards, and how real estate is a vehicle to pursuing these greater passions rather than an end in itself. “Eventually, you’ll be successful in real estate because you had a bigger vision.” [27:35] Scott Smith concurs and shares some of his own personal moments of introspection about purpose.
On today’s episode of The Real Estate Nerds Podcast, Jason Hartman joins our intrepid host and attorney Scott Smith take an inside look at what a conversation between a seasoned real estate professional and asset protection attorney actually looks like. Jason has been involved in over 1,000 transactions, and because of that alone, has been involved in lawsuits. Tune in to hear a fascinating discussion between two high level professionals, effectively giving you a peek inside their world.
Listen To Episode 32 of The Real Estate Nerds Podcast Now
Jason Hartman and Scott Smith on Asset Protection for Real Estate Investors
Jason sits down with Scott to discuss his background for context on their legal discussion. The two investors share some realities about lawsuits and asset protection in a lively question-and-answer format.
[2:00] Jason began investing in his first year of college and has over 30 years of investing under his belt. He is now considered the most expert on his niche.
[03:12] The two investors dive right into a discussion of litigation, liability, and the world of real estate lawsuits. “Liability doesn’t come from where you think it does,” Jason explains, pointing out that he hasn’t handled disgruntled tenants but has instead had to initiate litigation against representatives stealing client lists and other less expected legal clashes.Jason shares about litigation from the plaintiff side, explaining most investors don’t understand the liability and risks of being a plaintiff. He is blunt about the obligations of attorneys: “When your lawyer doesn’t do their job, you can get in trouble. It’s amazing how much liability a bad lawyer can create for you.”
[6:00] Jason brings up compartmentalization in the context of the Series LLC. Scott points out additional benefits “You can create one company that can have as many “children” as it wants. The children all have full liability protections...You have an infinitely scalable design that makes a lot of sense for real estate investors above everybody else.” He also points out the fatal flaw of holding multiple assets inside of a Traditional LLC, as well as the fact that there are no additional costs for operating the far more effective Series LLC.
[8:31]Scott shares his top picks for the best states for forming a Series LLC: Texas, Delaware, and Nevada for their strong asset protection laws. Wyoming has strong asset protection laws, but no formal Series LLC legislation or options yet. Fortunately, investors from any state can take advantage of the Series LLC.
[9:30] Scott discusses how easy it is to create a new child series, or company, in minutes for free on your Another FAQ Jason presents: Do you need separate bank accounts for each series to remain protected from merging? Scott’s answer--and insider tip on avoiding comingling easily through simple banking and bookkeeping--may surprise you. He offers a method for using a Series LLC with a single bank account.
[13:50] “I spent the first half of his career, creating wealth. Now I spend most of my time managing it,” Jason tells Scott. Jason shares some of the challenges he has experienced. He brings up banking regulations and the real-life impact of legislation such as the Patriot Act. Managing entities can be equally complicated, but he is interested in the Series LLC because it makes it easy to manage your real estate business. He asks Scott about which states are the least hassle.
[15:27]Scott confirms that he uses Texas Series LLCs in part because there are no ongoing fees, and only a single filing declaring “no taxes due” annually. There are no tax obligations beneath the first million dollars worth of income, which can be “chopped into entities to spread out anyway.” Scott’s firm, Royal Legal Solutions, also provides compliance and check-ups to asset protection plan and follows current evolving law for a flat fee. In addition to creating Series LLCs, Royal Legal Solutions gives clients the option of outsourcing maintenance. Scott has built up the Royal Legal Solutions staff to be as authoritative on these structures as he is.
[18:00] Jason asks if the Series LLC is a common starting point for his clients’ asset protection plans. Scott states that for most investors, he uses a two company structure: a Traditional LLC operating company and a Series LLC as an asset-holding company that does absolutely no operations. The liability is insulated within the Traditional LLC, which owns nothing at all. Because an effective Series LLC is an asset-holding company alone, it does no business with the public to perfectly separate legal liability from the assets themselves. He advises doing all business with the public “If anyone sues you, the either get blocked by the shell corporation or the problems of suing you personally, because you have nothing to take.” Jason asks if this means the Series LLC is a special purpose vehicle. Scott quickly recaps: “A shell corporation is an entity that handles operations but doesn’t own anything.”
[22:03] Scott mentions how these companies are technically owned by the investor’s estate plan in the form of an estate plan, that keeps your estate plan up to date as well as offering yet another layer of asset protection. Further, the investor’s assets won’t get caught up in probate court in the event of their passing. Scott clarifies the difference between a living trust, which does not protect assets, and a land trust which does protect assets when used with the Series LLC. He also points out the value of using anonymous trust structures to create anonymity for the investor. The way Scott sets up these anonymous land trusts also happens to be protected by attorney-client privilege, further preserving the client’s anonymity. The two investors touch on some other issues about trusts, including the benefit of pass-through tax treatment.
[26:45] Scott redirects the focus onto how Jason addresses his legal strategy. Jason advises investors to “Really pay attention to insurance.” He highlights the importance of good insurance, vigilance about how insurance companies operate, and maintaining anonymity. He also gives an example of unexpected liability when he brought an action against a seller who defaulted on their contract. “I love the law,” Jason states sincerely, “but these arbitrations operate outside of the law. That’s what’s really scary about it. They’re a private kangaroo court with no public record.” Jason’s own arbitrator had a massive conflict of interest which he failed to disclose. Jason lost the arbitration but a judgment was issued--against him, complete with trumped-up legal bills.
[31:00] Jason ended up taking his conflict-of-interest case against his arbitrator, who essentially represented the opposing side. He also shares about an alarming discussion he had with their collection attorney who knew the exact balance of a bank account the attorney couldn’t touch.
[33:00] Scott shares a brutal reality of the business of lawsuits. “People think lawsuits are about truth and honesty. Throw that way out the window. They’re 100% about who has what information and leverage.”
[34:00] Jason mentions his effort to help investors resolve disputes while staying out of court and arbitration--totally free of charge. It’s called FreeCourt.com, and is free for anyone to use. The system uses anyone who wants to participate in a crowd-jury, rather than a conventional jury.
On today’s episode of The Real Estate Nerds Podcast, the powerhouse investor, podcaster, and brains behind Morris Investing and the eponymous ClaytonMorris.com web site drops by. Clayton Morris shares one of his all-time worst deals with our host and attorney Scott Smith. Together, they dissect the deal and focus on the critical errors Clayton made--and what he does now to avoid future busts. Listeners will also gain some insight into Clayton’s philosophical approach and major revelations around investing and financial freedom. This is a conversation you truly don’t want to miss. Tune in now to hear the full discussion.
Listen To Episode 31 of The Real Estate Nerds Podcast Now
Clayton Morris on Financial Freedom and The Psychology of Reprogramming Bad Ideas
Scott welcomes Clayton on the show. The two dive into his background as context for the deal they got together to discuss. Their conversation covers Clayton’s early life and ideas about finances, the critical revelation that drove him into the real estate world, and the real world techniques that he has used to transform his own destructive, self-limiting thinking. These are techniques that any of us can, and probably should, use.
[1:00] Clayton mentions some of the unhealthy ideas that he absorbed about money and finances during childhood. Axioms like “money doesn’t grow on trees,” and the notion that a traditional career was the only means of financial security stuck with him for years. He spent a decade in broadcasting, and saw major success in that career. But ultimately, he dove into investing when he was fed up with being dependent on a paycheck and living by other people’s rules.
[03:12] Clayton elaborates more on his experience and pursuit of freedom. He describes his life before real estate: “You are your own performing asset. You get your asset out of bed every morning, drive to work, and rely on that paycheck.” He believed a W2 job was crucial for security. Now, he has successfully attained the goal of having regular cashflow on a monthly basis from real estate.
[4:00] Scott circles back to the childhood beliefs Clayton’s family and society instilled in him about money, namely that you have no safety net unless you follow a certain career path. After losing his job at Good Day Philadelphia, he bought two properties for roughly $50,000 that cashflowed at $850/month. He maintains this strategy, but at that time, he had not yet achieved a psychological shift. He discusses the major change: “It wasn’t until I started journaling and writing affirmations and realizing that I was worthy of these things...If you don’t believe you’re worthy of abundance, it won’t come.” [5:30]
[6:00] Clayton re-emphasizes that journaling was a critical discipline to retraining his mindset. He admits his old beliefs still creep up from time to time and shares some tips for combatting these moments.
Clayton Morris’s New Jersey Bust: Veering Out of His Lane
Scott and Clayton shift gears to discuss Clayton’s Bad Beat. They touch on what lead up to the deal, and the most significant mistakes Clayont made along the way.
[8:40] Scott asks Clayton for some background about the circumstances leading up to his worst deal. Clayton talks about his pattern for acquiring properties: “I try to find off-market properties that I can add value to, place a tenant and get it cashflowing. It’s what I’ve always done. It’s been a key to my success, it’s what we help my clients do, and it’s been a key to my success. It’s how we build financial freedom.” While this is his pattern, a property in New Jersey didn’t go as planned.
[9:00] An investor friend presented two New Jersey properties. He was a longtime landlord who managed the property himself, and was offering packages of ten as he planned retirement. Clayton tends to stay away from New Jersey for tax reasons. He sticks with single-family homes as a general rule and was told that he was looking at a package of 10. However, these weren’t truly single-family homes. They were duplexes, but not the type you’d imagine. In New Jersey, Clayton explains, “duplex” ownership means something different. Unlike most of the country, the units are deeded separately, almost like townhomes. This difference and his unfamiliarity is now something he regards as a mistake.
[11:30] Clayton’s next mistake was listening too closely to the landlord. This particular landlord managed properties himself, while Clayton always uses property management. There were other bumps in the road, such as maintenance issues and tenants vacating with little notice, that Clayton could have avoided by not being so trusting of his landlord. “I should have paid much closer attention to the tenants...We had to handle two evictions right out of the gate.”
[13:20] “We had to deal with all of these problems because I went out and around what I was used to,” Clayton explains. He allowed his emotions to cloud his judgment and ultimately ended up with additional inspection, legal, and tenant-caused damage costs. The remaining properties that were cash-flowing were essentially paying for the costs of the others. “This should have been a home-run of a deal, but basically I ended up making nothing.” [14:15]
[15:00] Scott asks whether Clayton began doubting his gut instincts. Clayton concedes his trust in this seller caused him to look the other way on some things that should have been clear red flags.
[16:20] Clayton shares another mistake he made: “I was distracted with other business and didn’t put much time, attention, and effort into this closing, which is my own fault.”
[17:00] Clayton warns of the dangers of “inherited” tenants. Unless he sees a full ledger, he will not simply trust that a tenant pays on time regularly. In fact, he has encountered completely falsified ledgers as well--and heard plenty of horror stories on the subject.
[20:00] Scott points out that Clayton’s story invokes a classic investor’s dillemma: “It can’t be the case that we never go out of our lane. When we veer out of our lane is when we find new opportunities, grow, and make money.” He asks Clayton for his thoughts on changing lanes effectively. Clayton believes that, “If you’re changing lanes, you need to be all in on it--looking over your shoulder and checking your blind spots.” Change must be calculated and focused, in his opinion. He feels his “lane change” failed because he was distracted by other issues and not paying full attention.
[22:00] Clayton ultimately agrees with Scott about the importance of getting out of your comfort zone: “Growth comes from discomfort, and not being distracted. You kind of have to surrender to the discomfort.”
[23:31] Scott believes one of the key takeaways from this lesson is knowing your core skills and sticking to them. He speculates that if Clayton had adopted a “copilot,” or someone familiar with the Jersey market and aspects he was unfamiliar with, this deal would have gone very differently. Clayton agrees that experts are extremely valuable, and defers to them regularly. His personal approach with highly skilled experts is humble. He encourages them to explain things like he’s a five-year-old and approaches with an attitude of being ready to learn.
[25:00] Clayton speaks briefly about the importance of his mentor: “I had a mentor who showed me the formula, where to buy, how to do it, what to look for, what type of neighborhood, and how to find the sweet spots.” This is how he developed his successful single-family strategy that remains the bread and butter of his portfolio. Scott shares how he, too, uses experts in various contexts, from investing in joint ventures as well as running Royal Legal Solutions.
The Takeaway: Set Aside Pride and Ask Questions
Scott and Clayton conclude this episode of The Real Estate Nerds Podcast by sharing the takeaways they hope listeners can use as lessons from Clayton’s story.
[27:30] Clayton’s biggest takeaway from his own story is about humility: “Don’t be too proud to ask the right questions.” He shares some additional lessons from his own mentor, who pointed out half of something is better than none of it. This is why partnering can be critical--going it alone is
[29:00] “You can learn some amazing things if you’re not too proud,” Clayton points out. Scott points out that giving another person the opportunity to share their knowledge is actually a gift to them. The opportunity to be of service is rewarding to experienced investors and other investors. Scott also points out that Clayton must know this well, as he helps many investors not only make money, but change their lives.
On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith interviews Jon Iannotti. The two investors discuss strategy at length, offering listeners some of the insider secrets of consistently and successfully making money in real estate. Jon also shares a personal story of how he weathered the market crash and has since developed systems that secure good deals. Tune in now to hear the full conversation.
Listen To Episode 30 of The Real Estate Nerds Podcast Now
Lessons Learned From Jon Iannotti’s Market Crash Survival
Scott welcomes Jon to The Real Estate Nerds Podcast and invites him to set the scene for their conversation.
[1:00] Jon has over 3,000 deals under his belt, mostly with his wife. Of those deals, he has never used his own money or credit. He has experience with notes, wholesaling, fix-and-flip, and more methods. He made his first investment in 1978, and ultimately went into real estate full time in 2001.
[3:15] Jon currently lives in Southwest Florida and actively invests there as well. His area was one of the hardest-hit during the recession: “We had to adapt almost overnight...We went into our deals with 13 exit strategies, and within ten days every exit strategy was gone.”
[4:10] Jon now regards this difficult period as a life lesson: “We either win or we learn. We don’t lose.” He also comments about some of the difficult realities he learned about short sales.
[5:00] As the market recovered, Jon developed a system with his wife called Agreeable Contract Terms (ACT). He credits the ACT system with helping him secure 14 deals in a week as the market became more favorable to sellers. He offers advice based on his experience with the crash: “Don’t count on appreciation.” [5:25] He describes his short-sale recovery method, and the dream team he assembled to make his strategy work.
[7:00] The two investors discuss market trends and whether the next recession is around the bend. Scott shares some tips about guaranteeing cashflow and “recession-proofing” as an investor. Jon agrees a market correction is impending, but believes there may be opportunities for investors to take over low-interest mortgages.
[Tweet="We either win or we learn. We don’t lose."]
Making Money Out of Thin Air: The REACT System and Funding Real Estate Deals
The two investors shift focus to Jon’s recovery following the crash, the development of his REACT system. They also dive into some of the details of exactly how Jon gets his deals done, and of course, where his money comes from.
[8:45] Jon describes the birth of the Reverse Engineered Agreeable Contract Terms, or REACT system. He also shares some of his approaches to handling cash buyers vs. those with loans, as well as some of the finer points of handling sellers. In general, he positions himself as the principle in the deal and allows another buyer to fund the deal.
[11:00] “We like to make money out of thin air,” Jon tells Scott. He explains his method for doing so with a concrete example of the REACT system in action. Essentially, Jon does the legwork of brokering deals and negotiating between two parties and ultimately profiting from both.
[14:00] Scott points out that Jon’s ability to source information is a major value of his business. Jon is always on the lookout for deals to get involved in more directly, but if the numbers don’t meet his criteria, he simply collects his fees and moves forward.
[15:00] Jon turns his attention to a particular deal involving a $200,000 house. The seller wanted $400,000 for it and would not budge, despite the house not being that valuable. Jon discovered a way to make this motivation work, exploiting the fact that the seller was not concerned with interest. Jon located a buyer who wouldn’t pay the full $400,000, but agreed to pay market rent and put $7,000 down. Since the seller owned the home free and clear, he eventually agreed to take $1,900/month and the savings of the tenant paying utilities and insurance. Essentially, Jon got this particular seller as close to his original desire as the market allowed.
[19:00] Scott asks about the risks of Jon’s work, particularly regarding time. Jon describes some of the costs and areas where he can outsource to most effectively leverage time. He spends most of his time on the funding end currently, rather than hunting for motivated sellers simply because that’s what makes sense in today’s market. Naturally, his strategy does adapt over time.
[22:00] Scott asks how Jon manages his private funding network, REACT Deal Flow. This is Jon’s system for managing contacts and marketing. He has over 4,500 investors in this network and has automated many of the features that market to these funders. Jon boils down his strategy simply: “Always go for the funding first, then go for the property.”
The Takeaway: Approach Funding First and The Deal Will Follow
The two investors wrap up their conversation with a recap of Jon’s methods and major advice for investors. Jon also offers listeners some free resources for developing their own systems.
[25:00] Scott solicits Jon’s advice for those getting started in investing. Scott also asks what distinguishes Jon’s role from that of an agent. The critical difference is that Jon does not make commission off of deals, but serves as a principle and secures agreements rather than simply providing listings.
[27:00] Scott points out that this conversation has inspired him to re-think the common approach of deal-hunting before securing funding. Jon points out that this counterintuitive approach was inspired by Warren Buffett’s tendency not to follow the crowd.
[29:30] As the show concludes, Jon offers listeners of The Real Estate Nerds Podcast a free copy of one of his three Amazon #1 best-selling books.
On today’s Bad Beats episode of The Real Estate Nerds Podcast, Daniel Barli joins our host and real estate attorney Scott Smith. Just like Scott, Daniel is also a real estate attorney and investor. Though Daniel now boasts a diverse and lucrative portfolio of over 80 properties, he’s here to tell us about one of his early failures. His story is a lesson to investors who try to take on too much. In Daniel’s case, he is an extremely educated attorney and skilled investor, but learned the hard way that he isn’t the best property manager. Tune in to hear what happened and how you can avoid repeating his mistakes.
Listen To Episode 29 of The Real Estate Nerds Podcast Now
Daniel Barli’s Commercial Loss: A Cautionary Tale In Doing it All
Scott welcomes fellow real estate Daniel Barli onto the show. After briefly chatting about Daniel’s background, the pair dive right into the details of Daniel’s worst deal.
[1:00] Daniel is a practicing real estate attorney, just like our host Scott Smith. He entered the real estate game in 2013 with the goal of generating steady, passive income. He now boasts a portfolio of over 80 investments, but is here today to tell us about one of his worst.
[2:30] Daniel’s worst deals started with one of his earliest purchases--a commercial unit in New Jersey with four tenants. He decided to manage the property himself, which he now regards as a mistake.
[3:30] In hindsight, Daniel believes his property management failure was rooted in becoming too friendly with his tenants. He cites one particular tenant, a fellow attorney, who consistently fell behind on the rent. Daniel attempted to work with her, but she progressively fell further and further behind. He tolerated this behavior because he empathized with her personal situation.
[4:30] When the tenant fell four months behind, Daniel served her with a notice that she must pay half of her back-rent or face eviction. She failed to do so, putting Daniel in a bind: “New Jersey is very tenant friendly. It’s not easy to get a tenant out, even for nonpayment of rent.” [5:04] The tenant, being an attorney, knew and exploited this despite having accrued over $14,000 in unpaid rent.
[6:04] Daniel showed up to retrieve the check and was met with a disappointment: “Of the $14,000 she owed me, she gave me a check for $100.”
[6:44] This incident became a lesson for Daniel, who no longer manages his own properties: “I thought I could save money managing property myself, but it ended up costing me quite a bit of money.” He was forced to evict the tenant--a process that took an additional 2 months because of New Jersey law. By the time she left, the tenant owed Daniel $19,000.
[7:15] Removing this tenant presented two problems. First, there was no good way to collect the tenant’s debt. Daniel would have had to take her to court, which would have been time-consuming, stressful, and likely fruitless. He also had to contend with having a vacancy in his building. Commercial property is more difficult to fill, in Daniel’s experience, than say multi-family or even single-family. He owns all of the above but has found commercial vacancies the most challenging to address.
Deal Post-Mortem: Lessons Learned From Daniel’s Property Management Loss
The two attorney-investors shift their focus from what happened with Daniel’s deal to why it cost him. Together, they conduct a brief post-mortem of Daniel’s property management failure.
[8:30] Daniel owned the building in a company name, but had become very familiar and friendly with the tenant who ended up costing him. He learned first and foremost he allowed this tenant to get away with too much because of their personal relationship: “Now when I use property management companies, it creates a buffer. People don’t need to know who Dan is.” He has resolved that “I won’t make the mistake of doing it all myself ever again.” [10:00]
[10:30] The two investors observe that there was a personal, as well as a financial cost, to this mistake. Daniel faced property tax consequences, negative cash-flow, and a high degree of personal stress as well.
[11:30] Scott asks whether there were any indications that property management would be a challenge. Daniel replies that there were not. The previous owner had managed the property himself for almost two decades, during which he managed to secure multiple long-term tenants. These tenants did not stay through Daniel’s tenure as owner-manager.
[13:30] When asked what he does to prevent future situations like this bad beat, Daniel replies: “I try to do more homework and due diligence upfront, speaking with people who are more experienced than I and have gone through things that I haven’t.” In the years since 2013, Daniel has grown a substantial network of experts to call upon in times of uncertainty.
[14:33] Daniel offers some tips for growing a network: “Going to local meetings to meet investors in your area is one way. There are tools online for meeting real estate investors, and then you just build relationships...Most of these people are not only able to help, but they want to help. They don’t want you to make the same mistakes they did.”
[15:40] Scott and Daniel discuss some specific strategies for developing a high-value investing network. They address the age-old problem of weeding out the less helpful connections and finding those that will prove most helpful and useful.
[17:00] Scott points out that he often determines a connection’s true value when he has face-to-face time with them. Daniel agrees strongly: “When you have time to get deeper into conversation with someone, you find out they know much more than you thought. Conversations can open doors that you never even dreamed of.” [17:54] Daniel cites a recent lunch that turned into a very valuable opportunity.
[19:30] Scott probes Daniel’s intentions when meeting other investors, and Daniel replies that he starts from a place of connecting and sharing information. If a deal develops out of that, fantastic. But he does not necessarily go in in with that expectation.
[21:00] Scott agrees with Daniel that some of the best relationships are unexpected: “When I’m connecting with an individual about more than just business, it forms those long-term relationships that are really impactful.”
The Takeaway: You Don’t Know Everything, But Your Network Might
Daniel and Scott conclude the show by sharing the major lessons learned from Daniel’s story. Each investor gives his opinion on the major takeaway for listeners.
[21:30] Scott sees Daniel’s story as one of the value of a strong network for preventing bad deals. In his view, if Daniel had some stronger relationships with higher-qualitty individuals, he may have been able to avoid this loss.
[22:18] For Daniel, the lesson of his story is simple: “Make sure you keep your education going. Don’t think you know it all. Don’t think you’re better than the stories you hear.” He recommends looking to your network for help so you’re not “kissing the same toads.”
[22:50] Daniel also believes a mentor is valuable: “If I could give one piece of advice it’s this: Find someone who’s been there and done that and doing it who can guide you.”
Would you give away your money to charity if you were $2.5 million in debt? Investor Paul Moore did exactly that during the lowest point of what looked like the worst deal of his lifetime. And against all odds at the height of the 2008 recession, it worked. On today’s episode of The Real Estate Nerds Podcast, Paul Moore joins our host and real estate attorney Scott Smith to share all of the ups and downs of a deal involving a New Jersey waterfront lot. Paul’s story is one that shows how blind investors truly are in the moment, as well as how the darkest moments in investing can lead to profound growth. Tune in to Episode 28 of The Real Estate Nerds Podcast now to hear a truly incredible comeback story and learn about how an abundance mindset can allow you to prosper in even the darkest financial times.
Listen To Episode 28 of The Real Estate Nerds Podcast Now
Paul Moore’s House Flipping and Raw Land Rollercoaster Ride
Scott welcomes Paul onto the show. The two investors
[2:00] Paul Moore has a Petroleum Engineering Degree, but ultimately worked for Ford after receiving his MBA. After starting a company with a partner that experienced rapid success in the 1990s, he sold his company in 1997 for $1.7 million. He knew he would be using this money to give back to society. His first endeavor was a nonprofit to serve international students studying in the U.S. He experienced such sudden growth that he was able to go into semi-retirement in his early 30s.
[03:12]Paul’s first flip was successful, earning him $24,000. He assumed he could rinse and repeat, but actually lost on the next two. His fix-and-flip method wasn’t necessarily the best approach in retrospect: “It’s not really a good idea to build a house if you don’t know how to tighten a doorknob. But that didn’t stop us from building seven.” [4:09] He built a real estate website and began buying expensive waterfront lots in Virginia, but accrued a massive amount of debt from these assets. In just a decade, he went from having $2 million in the bank to nearly $2.5 million in debt.
[6:00] Scott asks how Paul handled the personal stress of this profound debt. Paul explains that his lack of experience and faith that things would work out may have blinded him to how bad his situation was. His area and raw land assets felt the pain of the economic downturn as early as 2005. Paul points out a single 5-acre lot that he had planned to divide into multiple lots and homes was the source of $900,000 worth of his debt.
[7:45] Paul’s partner was struggling to keep up with the interest payments and later had to back out of their arrangement. As he was meditating one morning, he wondered to himself what George Mueller would do in this situation. George Mueller was a German philanthropist who owned orphanages and believed mindset alone could raise the money to fund the labors of love that Paul ultimately wanted to pursue. This idea of raising capital through magnetism resonated with Paul, who saw Mueller as a role model. Paul reasoned that the famously generous Mueller would do something counterintuitive: give away his money, even in debt.
[10:25] Paul’s friends looked at him askance when he announced his plan: “I’m going to give my way out of debt...I’m going to start giving generously to causes I care about and see what happens.” Paul can’t recall how he even came up with money to give, but believes he may have done so with borrowed money. Beginning in 2008, he began following his plan to donate weekly through 2008.
[13:00] A developer gave Paul an idea that could help him recover. He approached the local Zoning Commission having identified a loophole in the law that would allow him to subdivide the piece of land. He hit additional obstacles with the bank, but stuck to the plan of giving generously while developing this real estate.
[14:40] Against all odds, the 5-acre lot that held the most of his debt became Paul’s way out of debt: “We were completely debt-free 10 months later. We did it principally by selling these 1-acre lots...We sold them for $1.5 million in the middle of the biggest downturn since the Great Depression.” Paul sold four of the five lots in just two months at the peak of the 2008 crisis: “My worst real estate deal became my best one.” [15:45]
[Tweet="“My worst real estate deal became my best one.”"]
Diving Into the Details: Analyzing Paul’s Deal and the Minor Miracles That Saved It
The two investors dive into both Paul’s mentality and the nitty gritty details of how he turned his 5-acre lot around.
[17:00] Scott applauds Paul’s continued networking with others and probes Paul about his thinking behind living with an abundance mentality despite crushing debt. Paul agrees that this was one of the main things that helped him, particularly since he didn’t read desperate. Scott presses Paul for details.
[19:50] Paul explains that local law allowed only two occupants per bedroom, but that bedrooms in this area aren’t defined by the actual number of bedrooms, but by the septic system. High end rentals for this area correlated with a higher number of bedrooms. Paul made it his goal to rent out 8-bedroom homes. Subdividing the lot immediately wasn’t possible, as local laws didn’t allow divisions on private roads. Yet this division was critical to his plan. Paul had been banking on the city’s intentions to turn the road by his lot into a public road.
[22:20] Paul explains a legal tactic he exploited during this time--the family exemption. The law was intended to help farmers who wished to cut off a piece of land for a family member. While he wasn’t a farmer, Paul noticed the law didn’t require him to be one. The law did require that any tracts split off had to be held for 3-5 years.
[24:00] Paul instead sold the entire 5 acres to a single buyer for $1.3 million. The buyer relied on Paul to continue executing the plan, as he divided 4 acres from 1, which he donated to his wife. The law allowed him to sell the “master” 4-acre track, while holding the 1-acre. Another buyer came in and bought the 4 acres, and repeated this process. Each buyer lined up and divided the land, one after the other.
[26:00] Paul describes the difficulties of convincing a bank to loan the first buyer over $1 million for land appraised at $800,000. He tells the story of approaching the bank that he owed initially, who naturally declined but agreed to a small loan for repayment of outstanding debt. Instead, Paul took those funds to a community bank and told them his whole story and plan. Not only did the bank help Paul, but they also made loans to the four buyers he had lined up.
[29:00] Paul describes how he pulled off his minor lending miracle. Scott points out he should have been dealing with loan sharks at this point, and asks for the details on how Paul sold the community bank on the arrangement. Paul actually had no pre-existing relationship with this bank or banker. He simply had a good plan and amazing luck. Scott even admits if he was the banker’s attorney, he’d have advised against making Paul the loan.
[31:30] Paul elaborates on the method to his giving madness: “Some of the greatest business owners in the world are really generous...I believe that there’s a universal law of sewing and reaping that is almost always true.” Scott admires this commitment to generosity and the degree to which it served Paul.
[33:30] Scott points out that Paul’s mindset almost certainly got him through without reeking of desperation: “The reality we want doesn’t exist yet. But if we can act as if it does, amazing things can happen.” Scott points out that Paul is one of the only people who has actually walked the walk on this idea.
[35:00] Paul concludes his story by pointing out how savvy these buyers were. These were intelligent business men assuming a great deal of risk: “Lots still aren’t selling well now. I feel very grateful and thankful to be able to tell this story.
The Takeaway: Do Something Great and People Will Follow You
Scott and Paul conclude this episode of The Real Estate Nerds Podcast with their takes on the greatest lessons of Paul’s story. For Scott, Paul’s experience speaks to the power of ambition. Paul has learned many lessons from his experience, but above all encourages listeners to pursue a unique, good idea and believe in it.
[37:00] Scott observes that Paul began with a massive goal. Scott believes “If you shoot really high for the stars, even if you slip up, you can land on the moon.”
[38:00] Paul offers his own takeaways, pointing out that in December he had half of the property and interest. His partner walked in early January, four weeks before Paul solved the entire problem and made all of the profit. Paul even offered his partner the chance to stay in. Now, Paul raises capital for real estate deals and learned the mindset that avoids desperation: “I think before 2008, I would have been this desperate, clamoring “Will you invest please, sir?” And because of this, I’m really not.”
[40:00] Paul offers a final metaphor about investing. Ultimately, he believes almost anyone: “Have a great product, service, or investment, and people will come to you asking to be part of what you’re doing.”
On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith chats with MC Laubscher about wealth creation, real estate strategy, and the ever important investing mindset. MC believes that the most successful investors understand that they are their own most crucial assets. He advises new and seasoned investors alike to invest in themselves and relationships. Tune in to hear all of the wisdom MC dropped on this episode of the Real Estate Nerds Podcast.
Listen To Episode 27 of The Real Estate Nerds Podcast Now
MC Laubscher on Fear And Being Your Own Most Important Asset
MC Laubscher joins Scott to share about his early life and career, real estate debut, and his major insights into investing psychology.
[1:00] MC is originally from South Africa, but has been calling the U.S. home since 2001. He is the host of the incredibly popular CashFlow Ninja Podcast, which explains a variety of methods for creating income with a variety of assets, including cryptocurrency. He’s also the Chief Investor and Wealth Strategist at Producer’s Wealth, a wealth creation firm.
[2:45] MC describes a typical scenario for new investors: wondering where to start. He and Scott discuss the many anxieties that plague new or transitioning investors.
[3:47] MC brings attention to the fact that good investing, and even good liv
ing, isn’t all about numbers: “Your emotional IQ is a very big lesson that takes time to develop, especially when it comes to money.” MC believes the “reptilian brain” drives human behavior in many areas, with investing being no exception.
[4:45] Both Scott and MC can agree that a person’s headspace is critical to success in real estate, and life in general: “Once you switch from the scarcity mindset to the abundance mindset you start to see different opportunities in your own life. And you start to see them everywhere.”
[5:30] The two investors discuss the role of fear in the human mindset. Fear as a reaction to real threats has suited mankind for most of evolutionary history. But the psychological tendency to react with panic at setbacks is misdirected. In Scott’s opinion, “The guys who are really killing it are the ones who get comfortable with fear.” [6:26]
[7:00] “Fear drives most of our behaviors,” according to MC. But he chooses to focus on preparation to anticipate all possible outcomes. MC cautions new investors against hesitating for lack of information: “You’re not going to know everything before you start, or you’ll never start. You’ll just study your entire life.” He encourages realistic preparation when evaluating deals and possible outcomes, so investors can manage risk rather than be frightened away from the game.
[9:30] MC points out that there’s never a linear path, but no matter where you are, you can always invest in yourself: “Develop yourself as an asset first. Everything else is just vehicles.” Acknowledging that you are your most essential asset.
MC Laubscher’s Ideal Investing Strategy: Tools Any Investor Can Use
[10:30] The two investors shift to discussing uncertainty. They agree that regardless of what happens, you can always work on your internal building blocks. Without a solid sense of self, investors are subject to getting caught up in the whirlwind of markets.
[12:30] MC points out that financial wealth is secondary wealth in other aspects of life: “The wealthiest individuals and families value creativity, philosophy, principles, values, core beliefs, and investing in themselves and relationships above investing in things.”
[14:00] The two investors shift focus to the age-old question of how to get started in real estate. His advice also applies to refining an existing investing method for greater success. MC advises having a clear vision and examining strategy thoroughly. MC gives us his ideas for developing the perfect strategy, which involves positioning yourself as the first and most important asset. Then, you should understand what you do best. Everyone has their skill set and area of expertise, and MC advises investors stay in that sphere.
[15:21] MC hits his next critical point about sound investing strategy: “Your strategy has to be aligned with the vision and goals you want, and it has to be focused.” Next, he points out that efficiency is key--and indeed one of the major draws of real estate from a tax standpoint.
[17:10] MC’s next piece of strategy involves protection: “You have to make money, you have to protect it, and you have to multiply it.” He points out that many investors know how to make money, but not how to protect it. Risk management goes hand in hand with protection, as well. It’s critical for investors to understand risk in all of its forms--economic, political, market, and institutional. Maximizing every dollar is essential.
[18:30] To properly implement a strategy, MC believes investors need an “A-Team” of professionals. These can include attorneys, advisors, CPAs, asset protection specialists, and more.
[19:30] Scott circles back to how to maximize every dollar. MC points to tax minimization as one simple method. He gives an example of how to have a single dollar doing many different things in a syndication context. He also shares some tips on cash-flow banking, a way to take advantage of insurance contracts, in the family office context. Tune in to hear his method for cash-flow banking that offers asset protection, tax-free growth and withdrawals, and high levels of efficiency.
[23:00] MC gives a real-world example of cash-flow banking, complete with all its moving parts. His point is clear: “Have one dollar do many different things.” In a real estate context, this is possible through cash-flow, appreciation, tax strategy, and many more methods.
[26:00] Scott draws a parallel to MC’s techniques and his world, asset protection. He notes that the right strategy will depend on the investor and their circumstances. MC highlights a simple truth: “You don’t have to be a Rockefeller to implement some of the strategies that the Rockefellers used.” [26:49] He gives examples of how strategies can be tailored to any point in an investing career, but points out that you can start small--even as a child.
[28:30] Scott asks MC about scaling up. MC points out that he works in wealth creation, not management. For his clients, he helps with not only creating the cash-flow banking systems, but also developing the strategy and bringing in the proper experts. He describes his approach as holistic, rather than focused on income alone.
[30:30] MC points out the benefits of flexibility: “Stay efficient, stay on track, but make adjustments along the way.” Given how markets cycle, strategies will inevitably change, even if the approach stays the same.
[32:00] Scott asks MC for advice on getting started with MC’s holistic approach. MC responds with the top three books from his reading list. He loves Rich Dad, Poor Dad for worldview and wealth creation. He also likes The 10x Rule for motivation and Becoming Your Own Banker by Nelson Nash for banking information. He believes the principles in these books can help any investor.
Kathy Fettke’s early career was nothing but clear skies. So when a storm came, in the form of the recession, she didn’t have the experience to be prepared. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith interviews Kathy Fettke about her all-time worst deal. Learn how Kathy lost big twice, what she had to do to recover, and how she now uses her famous Real Wealth Network--and their combined experience--to avoid future bad deals. Thanks for joining us!
Listen To Episode 26 of The Real Estate Nerds Podcast Now
Kathy Fettke on Her First Bad Deal & Not Listening to Her Own Advice
Scott welcomes investor and coach Kathy Fettke to the show. The two investors chat about Kathy’s early real estate career and the prelude to her deal.
[1:00] Kathy now makes a habit of partnering with people who have survived down markets. She began investing in 1997 by buying her first house and turning it into a fourplex. “It quadrupled in value in a 10-year span...What did I know about real estate? I only knew that if you bought something, it makes money.” [2:27]
[2:48] Kathy stresses the importance of knowing the downsides of markets, reinforcing her thoughts on partners: “Would you get into an airplane with a pilot who had only flown blue skies? No. You want to know that they can survive the storm.”
[3:10] Scott asks how Kathy developed her substantial network. She began developing her network when her husband received troubling health news. The two burned through their savings amidst uncertainty. During this time, Kathy set about learning how to create real, lasting wealth. She started by simply interviewing investors, one after another. The Real Wealth Show was born.
[4:30] Today, Kathy has an audience of over 40,000 members looking to her for advice on cash-flow and investing strategies, as well as networking opportunities. Scott points out that her success and growth are underscored by her tenacity in the face of challenges.
[6:00] Scott and Kathy fast forward to 2007 to discuss the beginnings of Kathy’s deal. Kathy credits The Real Wealth Show with helping her identify over-leveraged markets where homes were under-valued. She had a connection that helped her learn about the opportunities available in a down market.
[7:20] Kathy speaks a bit about her decision making process: “First of all, you have to trust your gut.” Common sense told her that the lending crisis was inevitable. She followed the instructions of the trusted mentor who helped her learn about preparing for the fall-out: “I wanted to own real estate where people could pay loans, where housing was affordable. That was Texas.” [7:35] She bought 14 properties, all of which performed well
[8:13] Kathy points out that she was teaching other investors as she went along, and knows exactly what her first mistake was: “I stopped listening to my own advice.” She realizes in retrospect she thought she was smarter than the smartest people she had advising her. She explains her rationale to Scott about why she deviated from the path that she encouraged others to follow. She figured diversification was good, and that she didn’t want to overinvest in Dallas.
[9:00] Kathy elaborates on her flawed logic: “I thought I could use the same reasoning and go find areas that had job growth and population growth. But somehow I didn’t pay attention to those two metrics that I was teaching.”
[9:30] Kathy briefly discusses the media’s role in her decision making. She has a journalism background, and bought into some media hype about Boise, Idaho. She knew from experience, but disregarded one of the main lessons she had already learned, which was to “Follow the jobs.” Where people need jobs, they will also need housing. In the case of Boise, the job market wasn’t growing--and neither was the population.
[10:50] Kathy shares a second rule that she broke: “Always invest in a metro area that has at least a million people, because if half are renters, you have a larger pool.” She believes she ignored her own advice based on Zillow metrics, and getting excited and big-headed.
[11:30] The two investors talk about how easy it is to be taken in by buzz and popular thought. Scott briefly paraphrases Oscar Wilde’s notion that “Everything that is popular is wrong.” If enough people say something, even smart investors can begin to accept it as truth without truly investigating. Scott and Kathy chat more about the emotional context of this deal, and how ego can cloud judgment.
[13:12] Kathy thinks her problematic thinking was even more basic: “It was more lack of experience mixed with too much eagerness.” If anything, she believes she got a little greedy.
[14:00] In the case of Boise, Californians were moving to the city and driving some prices up. But Kathy was moving on pure speculation rather than observable metrics: “The properties didn’t make sense the day I bought them, and they didn’t cash-flow.” [14:36] She couldn’t manage her way out of the problem, either, and ultimately sold the property at a loss.
[Tweet="I’m damn glad that I kept pushing forward."]
Kathy’s Worst Deal
That first deal Kathy mentioned wasn’t even the worst deal she’s here to tell us about. Her all-time worst deal took place several states over in Tennessee. She and Scott conduct a little post-mortem of her Bad Beat together.
[15:00] Kathy shares about her next, even more painful deal. She continued hunting markets around the country and found an area in Tennessee, but it was low on inventory. She made a deal with a builder, who agreed to give her network 10% of what he built in exchange for her purchasing some of the properties.
[16:30] What got her into trouble with the first deal she talked about came back to bite her a second time: “Again, I didn’t follow my rules about following the jobs. This was vacation property.”
[17:00] During the building process, the market crashed. Kathy shares with Scott about how her failure to read the fine print on one loan led to a major problem. She was forced to refinance, and while investor loans were previously unlimited before the crash, banks were placing hard limits on the numbers of loans investors could have. Unfortunately, in Tennessee, you can actually go to jail for failing to pay debts--and the loan in question was in her husband’s name. What had started out as a labor of love ironically ended in a painful predicament.
[19:00] Just as timing had a role in getting Kathy into this problem, it also played a role in getting her out. Given how many people were having loan issues, new legislation passed that took jail for nonpayment off the table. She doesn’t know how she would have solved the problem without this legislative intervention. Simply selling isn’t an option in a market downturn.
[20:00] Scott asks if Kathy had a more experienced investor on board for these deals. They discuss the delicate balance of not deviating from models that work, while also leaving room to grow. She shares about learning from her experience, and believes she over-corrected in hindsight: “I missed an opportunity because of my fear of ever making mistakes again.” She was afraid to take properties that weren’t cash-flowing, but would have been lucrative if she had taken them.
[23:00] The two investors discuss the issues involved in market downturns. Scott points out one famous investor who dropped out of the market for four years when faced with a downturn. Kathy responds with the importance of taking the temperature of the market.
[26:00] Kathy shares an anecdote about a misguided investor who believed C-class properties will always be in demand: “In reality, the way it works, is everything kind of goes on sale...What happens in a downturn is the people in the nicest properties have to downsize into a B property, and people who have been living in C properties can now afford the B. The safest place to be is in the middle.”
[27:27] When asked if there are ways to learn without experience, Kathy tells Scott: “It’s a rare person who can make the right decisions without experience.” She does believe that you can account for inexperience, and circles back to her airplane analogy: “If you don’t have the experience to navigate a storm, you need a copilot.” [28:18] This is particularly true when you’re investing other people’s money as well as your own. She now has experienced team members on her network to help with areas where she isn’t as experienced.
[29:10] Scott asks what younger investors with less experience bring to the real estate networking table. Kathy, who is often the younger party in her own deals, believes younger people bring understanding of the culture to their deals. She herself had to explain what a webinar is to another investor. Experiences like this have shown her that “Younger people can bring the technology and marketing that older people are clueless about.” [30:25] Young investors also have high amounts of energy, drive, and willingness to learn and work hard.
[31:00] Kathy knows her own place in her network, as well: “I fill up a room, bring my experienced experts, and together, we make it happen.”
The Takeaways: Challenge What You Think You Know & Get Experienced Partners to Help You
As always, we like to wrap up the show with the greatest takeaways from Kathy’s story. Kathy and Scott each share their opinion on the strongest lessons listeners can learn from Kathy’s Bad Beat experience.
[32:00] For Kathy, the major lesson is to contain excitement. She dove directly into the deep end of investing and found herself lacking in experience. Her advice to new investors is simply “Jump in, but jump in with a partner who’s been there before or do an enormous amount of studying.” [33:50]
[34:00] Kathy underscores her point about doing your homework: “Real estate isn’t that hard or that complicated, but a lot of people mistakenly believe they don’t need the education.” Scott agrees that this is vital, as is analyzing the details of any particular deal.
[35:00] Scott points out that Kathy’s story is a cautionary tale about the influence of mass media messaging, and the importance of challenging beliefs we take for granted. Identifying the truth amidst buzz is a skill that requires practice, as is challenging one’s own belief systems.
On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith welcomes Jacob Ayers. Jacob is only 28, but has already made his first successful real estate investment. If you’re new to the game, or waiting until everything is perfect to get started, or just uncertain where to begin, Jacob has tips for you. He believes there’s a step that anyone can take in the direction of becoming a real estate investor. His own story is a great example of not letting anything, whether it be lack of experience or capital, get in the way of pursuing real estate dreams. Tune in to hear Scott and Jacob’s full conversation.
Listen To Episode 24 of The Real Estate Nerds Podcast Now
Jacob Ayers’ Life and Business Philosophy: Striking a Balance Between Security and Freedom
Jacob Ayers joins Scott to discuss his background, as well as how he balances his day job with his investing career to reap the rewards of both.
[1:00] Jacob is only 28, but began investing at age 25. He shares about the expectations placed upon him by society and his family, which he ultimately found unfulfilling. He graduated from college, joined Corporate America, and knew he wanted something more. He developed an interest in personal finance and investing around age 23, and gave himself an education.
[4:00] After educating himself with the many free resources available online and getting some money together from his day job, it was clear to Jacob what he had to do next: “I bought my first rental property, and here we are today.” Scott points out that it’s possible there are personality types that want the safety and security of a “normal” job, while others are driven to strike out as entrepreneurs and do something different. The two investors speculate whether this is a matter of personality, fundamental values, or something else.
[5:30] Jacob believes “you’ve got to be a little bit crazy to go down this path.” He considers real estate investing his side hustle and works full-time as an engineer. In this way, he’s struck a balance between security and freedom. Scott acknowledges the wisdom in this: “There’s a middle ground, and you have to consider your worst case scenario. For you, that’s ‘I still go to work on Monday, build up more capital, and try again.’” [6:38]
[7:20] Scott points out that Jacob has built up a community around his philosophy towards work and real estate balance, especially as a young person. Many people approach Jacob with their fears around real estate investing, and that drove him to start his podcast to share his knowledge and experience.
[8:15] Jacob digs deeper into what drives him and his investing: “I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that.” Even if investing itself isn’t your passion, it can give you the opportunity to pursue the things that you do what truly moves and inspires you. Scott agrees: “Money can’t get you anything. It can only motivate you to pursue another passion.” [8:54]
[bctt tweet="I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that." username="Royal_Legal_Law"]
Jacob Ayers’ Best Deal: A $25,000 House With a $140 Mortage
Jacob shares the details of his first real estate investment, an almost unbelievably cheap property in his hometown. Yet it has maintained steady cashflow, and perhaps more importantly, taught him many investing lessons.
[9:30] Jacob’s best deal began when he was around 23 or 24, having just spent a year researching opportunities, listening to podcasts, going to meetups, and otherwise getting his free real estate education. He bought a rent-ready property in his hometown in Oklahoma for $25,000.
[10:20] Jacob bought the house with traditional financing for $5,000 down and rented it out immediately. He knew the worst-case scenario was a loss he could afford, as his mortgage is only $140--comparable to Scott’s cell phone bill.
[11:15] Jacob went into his first deal with the commitment to treat it as a learning experience: “I treated the whole thing as kind of an experiment...When I got that first rent check, it was my proof of concept moment.” He resolved to rinse, repeat, and expand.
[12:00] Scott asks Jacob whether he’s ever had a bad deal. He tells a cautionary tale about his first tenants, whom he didn’t screen at all. They bailed from the house after six months and trashed the place. But Jacob says this taught him to screen tenants, rather than taking the first qualified people to offer. He has learned to treat these mistakes as lessons in becoming a better landlord.
[13:45] Jacob discusses how he’s a details guy who wants to know all of the numbers and have his spreadsheets perfectly laid out, but ultimately he has to take the plunge sometimes. He acknowledges a truth about investing: “You don’t know what you don’t know” [14:30] But all the reading in the world couldn’t prepare him for the lessons that just doing deals and managing property has taught him.
[15:55] Scott notes Jacob’s natural entrepreneurialism: “You probably learned more in a year of dealing with that property than you could have in a year of listening to podcasts and reading books.” Jacob agrees: “You can only learn so much by paper, and the rest is just by doing.” [16:00] He acknowledges that cheap properties like his aren’t everywhere, and encourages investors to investigate affordable properties
[17:00] Jacob talks about how he talks investors through examining markets. This is something he does often with friends who live in expensive, hot markets like Austin and Houston, TX.
[18:00] Scott drops his own bit of advice, explaining why he’s a big believer Jacob agrees: “Partnering as early on as possible is a really good idea. At least having a coach or a mentor to informally look over your shoulder and be a sounding board, voice of reason, and somebody who’s done what you’re doing.” The two investors share their methods for getting expertise. Scott likes to throw small amounts of money at consultants for their expertise. He puts his money where his mouth is, and encourages investors to use and abuse his own law firm, Royal Legal Solutions, in this way.
The Takeaway: Take Action Today to Succeed Tomorrow
The two investors wrap up their discussion by sharing their takeaways. Both Scott and Jacob agree that if you want to succeed in investing, you have to just get out there and try.
[20:00] Jacob’s advice to new investors is to just get in the game: “To get started, you have to take that first step. It can be big, or little. It can be picking up a book or going to a MeetUp. It can be anything, just take the first step.” He encourages investors to get out there, take action, make mistakes, and keep going.
[21:00] Scott agrees, and points out that Jacob’s spirit of not letting fear win the day has contributed to his success. Not allowing “no” to be an option and finding a way to get in the game is essential. Scott offers words of encouragement to those hesitating to get started: “If you keep trying, you never lose. Otherwise, it’s just learning. You only lose when you quit.” [22:00]
On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith welcomes Jacob Ayers. Jacob is only 28, but has already made his first successful real estate investment. If you’re new to the game, or waiting until everything is perfect to get started, or just uncertain where to begin, Jacob has tips for you. He believes there’s a step that anyone can take in the direction of becoming a real estate investor. His own story is a great example of not letting anything, whether it be lack of experience or capital, get in the way of pursuing real estate dreams. Tune in to hear Scott and Jacob’s full conversation.
Listen To Episode 24 of The Real Estate Nerds Podcast Now
Jacob Ayers’ Life and Business Philosophy: Striking a Balance Between Security and Freedom
Jacob Ayers joins Scott to discuss his background, as well as how he balances his day job with his investing career to reap the rewards of both.
[1:00] Jacob is only 28, but began investing at age 25. He shares about the expectations placed upon him by society and his family, which he ultimately found unfulfilling. He graduated from college, joined Corporate America, and knew he wanted something more. He developed an interest in personal finance and investing around age 23, and gave himself an education.
[4:00] After educating himself with the many free resources available online and getting some money together from his day job, it was clear to Jacob what he had to do next: “I bought my first rental property, and here we are today.” Scott points out that it’s possible there are personality types that want the safety and security of a “normal” job, while others are driven to strike out as entrepreneurs and do something different. The two investors speculate whether this is a matter of personality, fundamental values, or something else.
[5:30] Jacob believes “you’ve got to be a little bit crazy to go down this path.” He considers real estate investing his side hustle and works full-time as an engineer. In this way, he’s struck a balance between security and freedom. Scott acknowledges the wisdom in this: “There’s a middle ground, and you have to consider your worst case scenario. For you, that’s ‘I still go to work on Monday, build up more capital, and try again.’” [6:38]
[7:20] Scott points out that Jacob has built up a community around his philosophy towards work and real estate balance, especially as a young person. Many people approach Jacob with their fears around real estate investing, and that drove him to start his podcast to share his knowledge and experience.
[8:15] Jacob digs deeper into what drives him and his investing: “I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that.” Even if investing itself isn’t your passion, it can give you the opportunity to pursue the things that you do what truly moves and inspires you. Scott agrees: “Money can’t get you anything. It can only motivate you to pursue another passion.” [8:54]
[bctt tweet="I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that." username="Royal_Legal_Law"]
Jacob Ayers’ Best Deal: A $25,000 House With a $140 Mortage
Jacob shares the details of his first real estate investment, an almost unbelievably cheap property in his hometown. Yet it has maintained steady cashflow, and perhaps more importantly, taught him many investing lessons.
[9:30] Jacob’s best deal began when he was around 23 or 24, having just spent a year researching opportunities, listening to podcasts, going to meetups, and otherwise getting his free real estate education. He bought a rent-ready property in his hometown in Oklahoma for $25,000.
[10:20] Jacob bought the house with traditional financing for $5,000 down and rented it out immediately. He knew the worst-case scenario was a loss he could afford, as his mortgage is only $140--comparable to Scott’s cell phone bill.
[11:15] Jacob went into his first deal with the commitment to treat it as a learning experience: “I treated the whole thing as kind of an experiment...When I got that first rent check, it was my proof of concept moment.” He resolved to rinse, repeat, and expand.
[12:00] Scott asks Jacob whether he’s ever had a bad deal. He tells a cautionary tale about his first tenants, whom he didn’t screen at all. They bailed from the house after six months and trashed the place. But Jacob says this taught him to screen tenants, rather than taking the first qualified people to offer. He has learned to treat these mistakes as lessons in becoming a better landlord.
[13:45] Jacob discusses how he’s a details guy who wants to know all of the numbers and have his spreadsheets perfectly laid out, but ultimately he has to take the plunge sometimes. He acknowledges a truth about investing: “You don’t know what you don’t know” [14:30] But all the reading in the world couldn’t prepare him for the lessons that just doing deals and managing property has taught him.
[15:55] Scott notes Jacob’s natural entrepreneurialism: “You probably learned more in a year of dealing with that property than you could have in a year of listening to podcasts and reading books.” Jacob agrees: “You can only learn so much by paper, and the rest is just by doing.” [16:00] He acknowledges that cheap properties like his aren’t everywhere, and encourages investors to investigate affordable properties
[17:00] Jacob talks about how he talks investors through examining markets. This is something he does often with friends who live in expensive, hot markets like Austin and Houston, TX.
[18:00] Scott drops his own bit of advice, explaining why he’s a big believer Jacob agrees: “Partnering as early on as possible is a really good idea. At least having a coach or a mentor to informally look over your shoulder and be a sounding board, voice of reason, and somebody who’s done what you’re doing.” The two investors share their methods for getting expertise. Scott likes to throw small amounts of money at consultants for their expertise. He puts his money where his mouth is, and encourages investors to use and abuse his own law firm, Royal Legal Solutions, in this way.
The Takeaway: Take Action Today to Succeed Tomorrow
The two investors wrap up their discussion by sharing their takeaways. Both Scott and Jacob agree that if you want to succeed in investing, you have to just get out there and try.
[20:00] Jacob’s advice to new investors is to just get in the game: “To get started, you have to take that first step. It can be big, or little. It can be picking up a book or going to a MeetUp. It can be anything, just take the first step.” He encourages investors to get out there, take action, make mistakes, and keep going.
[21:00] Scott agrees, and points out that Jacob’s spirit of not letting fear win the day has contributed to his success. Not allowing “no” to be an option and finding a way to get in the game is essential. Scott offers words of encouragement to those hesitating to get started: “If you keep trying, you never lose. Otherwise, it’s just learning. You only lose when you quit.” [22:00]
What is a real estate investor supposed to do when their first apartment complex purchase turns out to be rife with drug dealers, prostitutes, and other problematic tenants? Today’s guest had to figure that out for himself, and did so quickly. On today’s episode of The Real Estate Nerds Podcast, Bill Manassero joins our host and real estate attorney Scott Smith to tell us about both a best and worst deal, one of our only hybrid Bad Beats/Best Deals episodes. Tune in to hear how Bill kept his first apartment complex purchase from becoming a total bad beat through creative problem solving, strong networking, and clever solutions like connections with the local community and even leveraging Airbnb. This is one you’ll have to just listen to to really believe.
Listen To Episode 23 of The Real Estate Nerds Podcast Now
Bill Manassero’s Apartment Complex Rollercoaster Deal: Bright Beginnings
Bill joins Scott and shares a bit about his background and the circumstances that led up to his Best Deal.
[1:00] Bill started his real estate career later in life. He began considering this option while he was ending the end of a 12-year stint as a missionary in Port-au-Prince, Haiti. He was at a turning point, but not quite ready to retire. He began eyeballing and studying emerging markets, then initially purchased a set of duplexes and single family homes in these markets.
[2:10] Bill quickly learned a lesson: “I paid about the same for the duplexes as I did for single family homes, but everything was sort of better.” Vacancies were never 100%, taxes were cheaper, and he was able to collect double the rent. This made it clear multi-units were best for him. So he began checking out apartment complexes in the three markets he was already in: Memphis, Atlanta, and Indianapolis. Because this ambition was huge, he continued educating himself about this new-to-him asset class.
[3:30] Bill experienced some initial “analysis paralysis” when working the figures for his potential new investments: “The numbers definitely are different for multi-units.” But he pressed on, eventually finding a 22-unit property in Indianapolis in an emerging part of the city, sandwiched between trending and developing parts of town. By the time he got the courage to make an offer, someone else had bought the property. Bill learned the value of moving quickly in a hot market.
[5:00] Bill decided to take one last shot, and let the broker know he was still interested if anything happened to cause the deal to fall through. 3 months later, Bill learned the deal did fall through. The deal falling through actually put Bill in a better position to ask for lower than asking price, and now the seller was more motivated to get the property off his hands. Bill completed his due diligence, and when the inspector came through Bill was able to save even more. He ended up buying the property at 25% below asking price, and way below the market value.
[7:00] While this was Bill’s first apartment complex deal, he shares with Scott how his experience with the financing end of real estate helped him negotiate the funding dilemma around the property.
[8:30] When Scott asks how Bill handled the jump from single- and multi-family to complexes psychologically. Bill was anxious but soon learned that “It wasn’t all that different on doing a transaction on a single family or a duplex.” Bill now believes dragging his feet actually hurt him.
[9:45] Bill points out the first big thing he did right with this deal: “A lot of us when we’re after a property and it goes under contract, we immediately go away. But going back to the broker and saying “I’m still interested, don’t forget me” got me that winning call.”
[10:00] Bill was thrilled with the beginnings of the deal, but not everything about this property was a win. He was unprepared for the surprises that came up with this property. He was looking for ways to boost the rent and cut expenses, and discovered that he was paying for heating and would have had to pay high costs to replace its boilers. He ended up having to replace all the gas-powered appliances with electric, and transfer the costs to the tenants (who paid their own electric bills). He describes the rehab measures and other improvements he took to increase rent values 16-20% increase per unit over time.
[bctt tweet="“I paid about the same for the duplexes as I did for single family homes, but everything was sort of better.”." username="Royal_Legal_Law"]
The Challenges of a C-Class Complex & Bill’s Creative Solutions
The two investors discuss Bill’s many challenges around the property in more depth. Whether it was the police activity, property management complication, or tenants selling drugs, something seemed to always pop up with this property. But Bill didn’t give up. He tells Scott about the broad range of clever strategies he used to address these many issues successfully.
[13:30] Another early challenge Bill faced was handling property management: “A 22-unit doesn’t really warrant an on-site property manager. I had a property manager in place, but they weren’t able to be there all the time.” So, there wasn’t always someone there to handle issues as they came up.
[14:00] Bill tells a hilarious anecdote about the police running a sting operation out of his apartment, which he now knows was an enormous red flags. But he did make some great contacts with the police department, and even offered to let them use the place again--if only to have their cars in his parking lot!
[15:00] Bill also describes the challenges with his occupants: “We had some real tough tenants. Some guys we thought were dealing, others we thought were pimps.” Scott asks why Bill bothered trying to bring up such a rough area. Bill decided to invest time and money into this because of the value and demographics of the surrounding areas, which were blue collar workers and millennial students/young professionals.
[16:20] The owner before Bill was indiscriminate with tenants: “He just kind of let anybody in. They were allowing folks in that weren’t screened very well.” Bill’s response was creative: “We had to move into a mode I call Stealth tenant marketing. We started targeting major employers in the area and going to their HR departments. We gave them flyers offering any of their employees who signed up for our apartments a month free and other incentives to get good working folks into the building.” [16:44] This move paid off for Bill, and helped turn the complex around and changing its dynamics. But he still had to check out questionable tenants, and immediately evict the sketchier tenants if they were late on the rent. That was easier to do than proving illegal activity.
[18:00] Bill shares how property management’s goals didn’t align with his own, and how he responded: “I had to really monitor property management closely. They were concerned with getting people in to have a high vacancy rate. I was concerned with getting in the right people.” While Bill had no advisors, he borrowed some of these creative moves from the mentors he’d had over the years.
[19:21] Bill describes some of his other clever solutions for improving his complex, including using closed circuit TVs. He also addressed the security concerns of this C building in a smart way: “I brought in a house mom, a tenant who pays lower rent in exchange for the job of monitoring what’s going on, keeping things in line, and reporting tenants who aren’t doing things right.” These measures increased the quality and security of the complex.
[20:29] Bill sums up the strategy he employed succinctly: “It’s all management. It’s all about having strong management, strong criteria for tenants, and not just getting bodies in there but getting the right bodies in there.”
[21:10] Bill offers some tips to any investors for handling property managers of any type: “You need to document and almost put a manual together for each property manager based on the needs of the property and the area. And if they can’t do it, you’ve got to move on.” He also emphasizes strong communication: “As an out-of-state investor, the property manager is your number one key to success or failure. If you don’t handle them right and get the right people in you’re doomed for failure.” [21:35]
[22:30] Bill believes management is so important because despite all of his research and legwork, he didn’t see the problems. Scott ribs him a little for his naivete: “Sweet innocent Bill...Didn’t even see the prostitutes!” Bill shares how he managed to add capital as well by converting three units into Airbnb units. In addition to being more profitable, Airbnb tenants would report to Bill when tenants attempted to proposition them or sell them drugs, because they weren’t afraid like the local tenants.
On this episode of Real Estate Nerds, Rod Khleif tells our host Scott Smith a painful story of building up a real estate empire, only to watch it crumble. But he is back, stronger, and wealthier than ever thanks to a multi-unit real estate investment strategy. Listen to Episode 16: Bad Beats to learn about Rod's rise, fall, and comeback, and the truths he has learned from his journey. Scott and Rod share insights into multi-family unit investing, as well as the strategic and psychological secrets to resilience that helped Rod build back up after losing everything. Success in anything is a habit that can be learned, and today's episode will show you exactly how to build the positive mindset that is essential to real estate success.
Listen to Episode 22 of The Real Estate Nerds Podcast Now
Rod Khleif's Story: The Rise and Fall of a Young Real Estate Investor
Scott welcomes Rod Khleif, a multi-family real estate investment success. But Rod wasn't always a success. Rod tells the story of his humble beginnings, rise in the industry, and his most devastating loss.
A Young Real Estate Broker on the Rise
Rod tells Scott about his experience growing up poor, wearing clothes from Goodwill and drinking powdered milk, and knowing he wanted more. He set out to make his mark and improve his life by getting started in the real estate industry.
[1:18] Rod's entry into the real estate industry at age 18 was inspired by his mother's successful investment.
[1:37] During his third year as an investor, Rod multiplied his income tenfold. How?
[1:55] Scott learns about Rod's earliest investing epiphone: mindset is everything.
"It's your mindset. Your ability to push through fear, take action, to get uncomfortable, and to get up when you get your nose bloodied that causes you to be a success. And to be a consistent success."
Real estate skills account for 10-20% of your success, according to Rod. The other 80% is all psychology.
[2;40] By 2006, Rod owned over 200,000 houses and several apartment complexes in three states. His net worth climbed by $17 million overnight, and he was earning an average of $80-100 per hour.
2008: The Fall, or, The Seminar
Rod tells about how he "imploded" in 2008, but he isn't crying about it. He came to view it as a massive learning experience. He now affectionately refers to this objective failure as a "Seminar."
[3:13] In 2008, the market crash combined with Rod's investing strategy caused him to lose $50 million.
[4:15] Rod explains why his investment strategy was ultimately unsustainable.
Rod's C- property choices combined with the costs of insurance and property taxes in Florida to create significant cash flow problems.
Maintenance costs made managing single-family properties expensive and inefficient.
[6:20] The critical lesson, for Rod, was that if you're going to buy and hold, buying multi-family properties is a much more sustainable long-term plan.
[6:48] This experience motivated Rod to start his Lifetime Cashflow Podcast, which educates other real estate investors based on his experience.
[7:52] Rod describes the parts of his business that were worth
Mindset: Investing is All in Your Head
Rod has since seen a comeback and is more successful than ever. He shared how this was only possible because he developed a healthy attitude towards failure and a mindset that fosters success. He told Scott some of his best psychological tricks for developing a winning mentality.
On Failure
[8:55]Rod tells Scott about having to reframe his position on failure. Despite owning multiple successful businesses, he has also had many go down in flames. His advice to our listeners is: "You shouldn't be afraid of failure. Most successful people fail their way to success.
[9:55] The billionaire owner of Spanx, who began with a mere $5,000, agrees. Her father used to challenge her with the question: "What have you failed at today?"
This attitude towards failure also resonates with Scott: "If you haven't failed at something on a daily basis, you're really not trying. Stuff doesn't work out most of the time if I'm trying new things. "
[10:00] Scott and Rod agree that comfort is your enemy as an investor. Both have signs in their offices to remind them that comfort kills, and life begins on the edge of your comfort zone, respectively. They agree that coping with discomfort is vital to quality of life.
Motivational and Psychological Tips for Real Estate Investors
[10:40] Rod is a Certified High Performance Coach who engineered his own comeback in part by learning directly from world-famous motivational speaker Tony Robbins.
[11:20] Mr. Robbins taught Rod the importance of psychology to success and some of the tools below, empowering Rod to bounce back from his $50 million "Seminar."
[12:30] Motivational Tool #1: Manifestation. Rod describes manifesting his desires into existence, initially with cars he hoped to own. When he owned a Corvette, he placed a picture of the Maserati he dreamed of having in the visor. He later came to own a Maserati.
-visualization of success
[13:50] Motivational Tool #2: Written Goal Setting Process. If you don't know what you want, you won't know how to get it. Rod shares his one-hour exercise for establishing, and meeting, your major goals in life. Here are the basic steps:
Write down everything you could ever possibly want in life. Don't place limits on yourself. Want a Lambo? Toilet made of solid gold? Go for it.
Also write down everything you want to learn.
Also write down who you want to help. Be specific. Everything you want to do, be, or have should be written down.
Ensure that your goals are measurable. Put a time limit on each goal. Keep in mind that people tend to overestimate what we can do one year but underestimate what is achievable in ten years
Pick one "top" goal, then pick top 3 one-year goals. Write a paragraph about why each goal is absolutely necessary with compelling, strong language. An example might be "I must acquire one more property this year to help support my amazing family."
Last step: Use images placed in a journal to reinforce your goal and bring in visualization element.
It's natural to be nervous when changing your focus as a real estate investor, but often the greatest risks can reap the greatest rewards. Our guest knows this from personal experience. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith sits down with a man he calls “one of the smartest investors I know,” Scott Meyers. In his case, transitioning out of single-family homes and apartment complexes in the wake of the tech bubble bursting was the smartest choice he ever made. The Best Deal he is here to discuss was his first commercial purchase, and he has stuck with industrial and self-storage properties to the point he would never dream of going back. Listen to the podcast now to hear the two Scotts discuss Scott Meyers' office building win, how the deal played out, what challenges Scott faced and the ways he overcame them, and how his mindset, focus, and integrity have contributed to a successful mentoring and investing career.
Scott Smith welcomes Scott Meyers and asks about his early days in real estate.
[1:00] Scott Meyers has been in real estate for 25 years, first starting out in 1993. He began buying houses, then apartments, and eventually graduated to industrial and self-storage. The best deal he is here to talk about his an industrial deal that he affectionately calls “The Boomerang Property,” because he has already bought it and sold it once, and is now preparing to sell it again.
[2:15] Scott Meyers explains that this deal came up for him in 2005. He was recovering from the 1999 recession following the burst of the tech bubble. He owned approximately 400 apartment complexes and 100 houses at the time, and found his tenants were leaving in dramatic numbers. So he decided to sell of these properties as quickly as possible. During this time, he was eyeballing commercial and self-storage investments to step up to the next level of his investing career.
[3:30] After selling the last complex (which was also his personal office space), Scott and his assistant began searching for a 15-20,000 square foot building with multi-tenant capacities. One goal of the investment was to use part of it as his office, so his tenants would essentially be paying for his office space. He eventually found a seller-financed property with the cost per square foot he was looking for. The only problem was that the property was 200,000 square feet--ten times what Scott actually needed.
[4:30] Because the property checked all of Scott’s other needs, he decided to check it out anyway. His reaction was pleasant surprise: “It was way bigger than anything I’d ever imagined. It was a cool old industrial building originally built in 1929.”
[4:55] Scott elaborates on his attraction to the property: “I was tired of tenants and toilets...I wanted to do something that was fun and challenging.” He also saw this as his second chance to prove himself in the real estate world. At this point in his life it was either try something new, or get a job--not an option for Scott Meyers.
[6:00] Scott shares how he was able to get a 200,000 square foot building valued at $1.5 Million for no money down. He also shares some of the early challenges he faced with the unit. The property was made up of coworking space, inexpensive office space, and industrial mix. It had previously been a business incubator, and the 80-year old owner wanted to maintain that aspect of the business. Scott did so successfully: “We became the largest business incubator in the state, and I was the Executive Director.” [7:38]
[8:00] Although Scott was buying other self-storage properties, this one was his main priority. He was able to maximize cash flow easily by adding additional office space, leasing out all units, and managed to substantially force appreciation. While he didn’t predict the recession, he sold the property just in time in 2008 at $3.9 milllion: “That was the largest payday I had ever seen.” [9:10]
[9:54] The man who bought the property at $3.9 million went bankrupt as a result of the recession. This ended up costing Scott, who warns listeners: “If you’re going to sell something with seller-financing, be prepared to lose it. You better be happy with what you get at the closing table, because there’s no assurance that you’re getting anything on top of that.” Yet Scott was able to turn the buyer’s misfortune into opportunity.
[11:10] Scott ended up buying the property back for $500,000, or $3.98 per square foot. He felt he couldn’t pass on that opportunity. This time, he made the purchase with the help of 14 investors. But it wasn’t all sunshine--Scott also had to pay the debts incurred by the buyer, who had already stiffed him for $390,000. To add insult to injury, he also had to pay the legal fees to the very attorney who put him through bankruptcy to skate on his debt to Scott.
The Mental Pieces of Scott Meyers’ Success: Integrity and Rationality
Scott Smith and Scott Meyers continue analyzing this Best Deal, but also touch on the lessons learned from the aspects that didn’t go so well. Listeners can find out how Scott’s worldview, ability to separate business from emotion, and commitment to integrity above all else served him then and now.
[13:00] Scott Smith recognizes that this must have been harsh to deal with emotionally for Scott Meyers. The two investors discuss the importance of not letting emotion overwhelm good judgment or get in the way of an otherwise good deal. Scott Meyers’ unique knowledge of the building made it a great chance to take, even during a recession. The two Scotts agree that anger wouldn’t have been useful to harp on.
[16:00] Scott has also applied his worldview of not taking business decisions too personally to his network. He tells about how the 80-year-old original seller of the property became a mentor to Scott over the years. Scott recalls how he missed a detail in closing that allowed the seller to get over on him. The seller knew exactly what he was doing, as well. But because Scott was able to realize that it was all business rather than personal, he was able to let this incident and the emotion involved go and benefit profoundly from this relationship. In fact, Scott views this gentleman as having taught him a lesson.
[18:00] Nowadays, Scott does business mostly as a General Partner or Limited Partner, but prefers the former because it allows him to call the shots in his deals. His ability to view business deals rationally has been a lesson learned, and Scott Smith agrees about its importance: “Life is too short to cry over spilled milk, and it helps if you can compartmentalize and understand that this is a game. There are rules that you play by. And it helps to understand those rules.”
20:00 The two Scotts discuss the importance of operating with integrity. Scott owns two businesses, a private equity business an education business, on top of real estate investing. He holds himself to a high level of integrity for a variety of reasons, including the fact that reputation is everything in the digital age. “Protecting integrity above everything else, including profits, is how we play the game.”
[21:15] Scott Smith agrees and operates Royal Legal Solutions in the same manner: “In the modern age, your reputation is everything. It’s widespread, transparent, and easy to find out about...You can’t afford to have crazy people blast you on social media”
[22:45] Scott Smith asks how Scott Meyers managed to maintain focus with multiple endeavors. In fact, he actually withdrew from other projects to give this deal and property his complete attention. Scott Meyers shared his own personal strengths that allow him to maintain focus: “I’m not the smartest guy, buy I outwork other folks. Operating from a place of integrity tends to draw other folks to us.” [23:12] He also shares how his ability to work well with others, including the City and wider community, helped the building remain successful.
[25:00] Scott shares more about the community aspect around his office building, and how it has contributed to his continued success. It worked: in fact, he spoke to Scott from that very building for this interview. He also shares his tips for succeeding, which rely largely on just trying to do something great: “Just like fishing or marketing, you throw things out there and see what works...When you realize you’ve done something unique, it’s really gratifying.” [26:00]
[27:00] Scott circles back to the fact that this deal went so well because it was both a real estate and business play. Scott Meyer’s highlights that the second purchase was more of a real estate effort. He used the same strategy that worked the first time, but has also built a self-storage business along the way. After exiting the property the first time in 2008, Scott launched a self-storage education business. It grew during that time into a full-blown coaching and education business for serious, top-level investors. Coaching and helping is meaningful to him, but Scott feels his highest and best use of his time is still deal-making.
[29:00] Scott shares how he leverages his time effectively with his education and real estate projects: “I get away from the things that don’t make sense, and go towards doing what I love to do, which is teaching people and investing in real estate deals with the most upside and gain.” His students often become long-term partners, as well. Scott spends little time deal-hunting, Instead, his current and former students regularly bring him in on their own good deals.
,
[bctt tweet="“I’m not the smartest guy, buy I outwork other folks. Operating from a place of integrity tends to draw other folks to us." username="Royal_Legal_Law"]
The Takeaways: Focus Your Time Appropriately & Understand That This Good Market Won’t Last Forever
The two Scotts conclude this episode by sharing their personal takeaways from Scott Meyers’ story.
[31:00] Scott Smith kicks off with his greatest lesson, which is about focus. He cautions listeners against constant multi-tasking. Scott Smith learned that Scott Meyers’ willingness to make this deal his sole focus was a massive factor in its success. He feels that is something that any of us can work on for absolutely free.
[32:00] Scott Meyers’ first lesson is about speed and staying on top of priorities and moving parts. But he also feels that time and timing is vital, perhaps even more important than his first point. Understanding the scope of projects and what can happen in the worst case scenario is vital to succeeding in a major project.
[34:02] Scott also cautions against overconfidence in the current real estate market: “All you investors that are enjoying the boom going on, and those of you that came in after 2008: You’re not as good as you think you are. You’ve got a large wind in your sail right now of a booming economy. Don’t think you’re as good as you think you are if you’re not preparing for changes.” He gives additional tips for preparing for future recessions, and points out that those who don’t prepare will be the first to fall if a recession strikes. He urges listeners to plan for the worst and begin thinking about their own strategies for an inevitable market change.
[36:00] Scott Smith sees a parallel between Scott Meyers’ advice and estate planning. People don’t like to think about hard times, whether that’s death or market reversals, but these things are inevitable. Preparation for either event is vital for real estate investors. Scott Smith sums these simple truths up nicely: “Law favors the proactive. Finances favor the proactive. Being proactive is the only way to live if you want to be successful long term.”
Welcome back to the Real Estate Nerds Podcast. On today’s Best Deals episode, our host, real estate attorney Scott Smith welcomes residential and commercial real estate investor Darrin Gross. The pair of investors discuss Darrin’s first deal, which also happened to be one of his best. Darrin has since established a healthy portfolio of properties in no small part because of his ability to negotiate and identify the needs and problems of sellers. After all, a seller's problem is an investor's opportunity. Tune in to hear the full conversation and get some tips on improving your own real estate deals.
Darrin Gross and His Best Deal
Scott and Darrin talk a bit about Darrin’s background, entry into the world of real estate investing, and the duplex that started it all.
[1:00] Darrin is an insurance broker by day, and his work first exposed him to real estate investing.
[3:00] Darrin’s first property was an atypical duplex that was fairly rundown. Within seven months, Darrin had a second property and was earning close to half of his ordinary income.
[5:00] Scott asks Darrin about how he formed his team. In his early career, his team was disorganized.At first, he had only a property manager in place. His lender was also his seller, and he had another person helping with maintenance.
[7:00] Darrin’s earliest motivation for entering real estate was straight forward and modest: he wanted a new car. He also observed friends having success in passive investments, and that drove him to get involved.
[8:30] “The important thing about this property is that it’s the one that got me going.” The closing, like the property itself, was unconventional. The fact that his seller was carrying the note meant he bypassed certain typical pieces of the real estate buying process, like securing financing and inspections.
[10:00] Darrin describes how he got creative with this property. His essentially flipped the property several months later and was able to help a friend who needed $10,000 for another investment. Darrin was able to solve this problem with a line of credit he had, and crunched the numbers himself. He had an early realization: “You can make the deal work for you. It’s not always about what somebody is asking.” [10:30]
Darrin Gross’s Dealmaking: Negotiations and Motivation
Scott and Darrin dive into some of the details about what Darrin’s experiences have taught him about making good deals. The two investors talk about negotiation strategies and ways to gauge and exploit the motivations of a seller.
[12:00] Darrin also made some early observations about negotiations: “If you start high you can’t work your way low. If you start low, you can work your way up.” He tends to run the numbers first to find what works best for him, then make an offer that may interest the other party. He doesn’t tend to worry about offending the other party or catering to exactly what they ask for, but rather what number he can justify.
[13:30] Scott and Darrin briefly discuss the roles and motivations of brokers. Darrin believes brokers are beholden to sellers to get as much as they can for a property. Scott makes the point that quick sales and commissions for themselves are a big part of their job. Darrin agrees, but points out that.
[15:00] Darrin points out approaching with not just an offer, but a lender and pre-approval letter, can go a long way with closing with a seller.
[16:00] Darrin’s best deal involved a highly motivated seller. He knows from experience this played a role in his success: “You have to have a motivated seller if you want to get a good deal.” [16:45] In this case, the motivation was easy to detect--the seller needed $10,000 cash.
[17:34] Scott asks what information can be used to detect how motivated a seller is. On top of asking and looking at what degree a seller is willing to negotiate, Darrin advises looking at circumstances that might be a problem for the seller, but an opportunity for the investor.
[19:00] Darrin advises that investors run their own numbers as part of due diligence.
[20:00] Knowing a seller’s reasons for selling gives investors an opportunity to identify circumstances that can later be used in negotiation. With Darrin’s experience buying distressed properties, finding more information can lead to unique opportunities for a better deal.
The Takeaway: Get in the Game to Win It
Scott and Darrin close the show by discussing the major lesson listeners can learn from this deal. For Darrin, the important lesson he learned was that he had to just dive in to real estate to enjoy success in it.
[22:50] Scott asks Darrin what key takeaway listeners can take from his story. For Darrin, the answer is simple: “You’ve got to get in the game. If you’re not playing, you can’t win the game.” If he hadn’t gotten in on his first deal, he wouldn’t have his current success.
[24:00] The value in this deal, which Darrin refers to as his “accidental flip” for how he was able to leverage quickly to another buyer, is largely that it became a springboard: “That first property is what propelled and set me up to buy additional properties.” Scott agrees that the benefits that come your way aren’t the ones you expect.
[26:00] Darrin now makes regular monthly income from passive investment, and has also seized on real estate as an opportunity to pass on wealth to his children.
On this week’s episode of The Real Estate Nerds Podcast, Scott sits down with fellow real estate investor Joe Fairless. You may know Joe from his incredibly popular “Best Investing Advice Ever” Podcast, or two “Best Ever” investing books. He is a wildly successful apartment complex investor. Joe has come on the show today to tell our host and real estate attorney Scott Smith about his all-time best, and earliest, apartment syndication deal.
Joel Fairless’s Best Deal: An Apartment Syndication Success Story
Scott welcomes Joe onto the show and asks a bit about his background. The two investors bond over their Texas roots, then immediately dig into the details of Joe’s best deal.
[1:00] Joe is a full-time investor focusing on apartment communities, specifically via partnership syndications. Originally from Texas, he now lives in Cincinatti with his wife, who is expecting their first child together at the time of this recording. Joe is here to tell us about his best deal, which also happened to be the first deal he did with his current company. The property is in Houston, TX and called Woodglen Village.
[2:46] Scott observes that syndication partnerships are often the “next level” for investors: “With 1-4 single or multi-family units it’s hard to go wrong...But with apartment buildings you have to be a little more careful.” He asks Joe for more background on the deal.
[3:00] Joe shares that his business partner found the deal, before the two were officially partners but just mutual friends. The partner, Frank, had found the deal but had no money to close it. Frank had failed to secure funding from private equity groups, but once he partnered with Joe, Joe was able to use his network of investors to help fund the project and eventually got on board himself.
[5:00] “I didn’t want any part in the deal initially, because I hadn’t looked at it, and I just didn’t have the time,” Joe tells Scott. His mind was changed, however once Frank exhausted the options in Joe’s network and Joe finally actually laid eyes on the deal and realized its potential.
[6:00] Scott asks how Joe saw the makings of this Best Deal that others had missed. Spoiler alert: Joe doesn’t have a magic wand. In retrospect, he thinks Frank was shot down so many times because of his lack of experience, although Frank certainly had Joe speculates the other investors
[bctt tweet="Nothing in my life has meaning until I decide to give it meaning. That’s how I approach life.." username="RoyalLegalLaw"]
Investing Psychology: Joe’s Winning Approach to Challenges Closed His Best Deal
[7:30] Joe shares his initial greatest challenge with this deal: “This was summer of 2015 in Houston, TX...There were headlines in all the papers about oil plummeting and Houston being in big trouble. Since this deal was in Houston, that scared off a lot of people, including our lender about a week before close.” The lender attempted to re-trade, or change the terms of the deal in their favor (in the form of more equity that Joe and Frank did not agree two). The partners, fortunately, switched lenders.
[8:35] Joe’s network at this time was still developing, and he and Frank got a lot of rejection. Today, Joe’s network is massive and he rarely needs to even find his own deals But during this time, Joe had to reach out to his fellow Houston investors on LinkedIn and persuade them to get in on it: “It was incredibly challenging for the market, the location being in Houston, and the things that were happening with oil dominating all the headlines, and the lack of track record for debt and equity lenders and investors.” [9:57]
[10:30] Joe’s initial risk in this deal was $140,000. Scott asks about how he coped with the stress.
[11:00] Scott mentions that many investors use a morning routine on the logic that, “If I can own the morning, I can own the day.”
[11:12] While Joe agrees, his own stress management is more philosophical in nature: “Nothing in my life has meaning until I decide to give it meaning. That’s how I approach life.”
[12:10] Joe elaborates on his business philosophy, “What I believe is that when challenges arise, it’s happening for me and not to me...It’s there so I can become a better and stronger entrepreneur and real estate investor.”
[13:00] The two investors discuss their approaches to rising to challenges and working through fear, rather than falling beneath its weight and influence. Scott observes that Joe’s philosophy is a mental discipline. Joe shares how he developed this positive business mindset. He credits his current success largely to this discipline and having gratitude for what he has today.
[14:45] When Joe is struggling in his personal life, he volunteers for perspective: “There’s always someone that’s worse off. Having a good mindset is necessary to being a successful entrepreneur.” [15:15]
[16:00] Scott asks Joe whether long-term success has more to do with strong mindset or technical knowledge of real estate investing. Joe replies: “The really successful investors are the ones who evolve over time.” He isn’t referring so much to changing classes, but to “Work harder on yourself than you do your job.” [16:50] He believes this habit brings investors to the next level. Scott agrees that failure to do internal work can hinder an investor, while a willingness to do so
[18:47] Scott asks how this deal wound up becoming Joe’s best deal despite the challenges he described. Joe explains that the biggest challenge was getting to close. He and Frank bought the $14.1M property with $1M, and a mere 16 months later in December of 2016, they were refinanced for a $26M re-revaluation.
[20:00] Joe and Frank still own this Houston complex today, and Joe is grateful to have this amazing property in his portfolio still.
The Takeaway: Work on Yourself, and Good Deals Will Follow
Joe and Scott conclude with the greatest lesson from Joe’s Best Deal, which has much more to do on working on your internal condition than real estate skills. Here’s what Joe wants investors to learn from his success.
[20:30] Scott observes that Joe’s success is dependent on his mentality: “That strong internal drive can be our biggest resource.”
[21:18] Joe believes the biggest lesson investors can learn from his story is the value of working harder on yourself than the real estate. Scott agrees that putting yourself and your health/well-being first is a sure path to success. If you aren’t in top shape, your investments can’t follow.
WelcomeWelcome back to The Real Estate Nerds Podcast! On today’s Best Deals episode, our host, real estate attorney Scott Smith welcomes Josh Bauerle. Josh isn’t just an investor--he’s also a CPA. As we soon found out, his background in number-crunching truly served him when he made his first and best deal. Listen to the full show to hear the play-by-play of how a collection of Midwestern properties (and a series of carefully planned meetings and negotiations) launched Josh into the real estate world on the right foot.
Josh Bauerle’s Best Deal:
Josh joins Scott to tell him a bit about his life before and in the beginning of his real estate career. Then, the two get right into the circumstances that led up to his best deal.
[1:30] Josh is both an investor and a CPA. His CPA background informs his real estate investing, particularly regarding how he structures deals. Today he has 15 properties, though he started with only two.
[2:00] Scott asks for the “10,000 feet” view of Josh’s best deal. He began looking at a triplex in the rural Midwest, where properties are cheap. He eyeballed a $40,000 triplex, but was presented with 20 properties, but settled on 13 owner-financed properties. He ended up being able to take them all. Between receiving 90% of the financing from the seller and a loan for the remaining 10%, he acquired these properties with none of his own money down.
[3:00] Scott asks how Josh managed to find the seller that made this deal possible. Josh knew the seller personally from his small hometown. The seller even knew his parents. Josh was able to leverage this relationship and negotiate until he was pleased with the deal structure.
[4:30] Josh’s familiarity with the area helped him make this deal: “This was in my hometown. I could look at the street and know if it was a good area or bad area.”
[5:00] While his prior relationship with the seller served Josh, it also made him more hesitant to “lowball” him. The seller wanted $460,000. Since he made a counter-offer of $330,000.
[5:49] Josh’s experience as a CPA helped him manage this negotiation: “I came in with this giant binder. I had every single property I wanted laid out. I went onto BiggerPockets, ran the numbers, and looked at the numbers on comparable properties in the area.” Being so well prepared allowed Josh to justify his counter-offer without offending the seller.
[6:40] Between Josh’s thorough due diligence and smart negotiations, he ended up paying only $341,000 for all thirteen properties.
[7:20] Convincing the owner to finance the properties was Josh’s next step. He also showed up fully prepared with his credit report, income, and all the information to respond to the seller’s potential objections. He was even able to point out how the financing would save the seller money on capital gains taxes. This strategy was successful: “I think the key was I just went in and every objection he had, I had an answer for it. So there was really nothing left for him to say.” [8:40]
Sealing the Deal
Josh surely found a great opportunity with these properties. So Scott wanted to know how he finalized the deal and ensured his success with the seller.
[9:00] Scott asks whether Josh had anyone coaching him through these sophisticated negotiations. He did not. Josh relied on his experience as a CPA and his experience as partial owner of family properties to make the deal.
[10:09] Josh points out that new investors are often too quick to accept unfavorable terms, and cautions against this: “You have to be willing to walk away if it’s a bad deal.” Scott asks what dealbreakers Josh knew going in, and he shares what he wasn’t willing to budge on and what his “walk-away number” was.
[11:00] Josh was very mindful of his due diligence throughout the buying process. He was well aware that his properties, which averaged $39,000 each in value, weren’t going to be perfect, but conducted thorough inspections to avoid missing major defects. The seller also had anxieties about what to do in the event he needed to foreclose on Josh. These were relieved by involving an attorney who drew up a contract that satisfied both parties.
[12:51 Josh highlights a truth that this negotiation experience taught him: “I think with any deal you have to be flexible on either the terms or the price.”
[13:45] Scott has found that in his experience, wealthier people are less fixated on price and more interested in good terms. He gives a couple of examples from his own investing life.
[15:30] Scott asks Josh about the transition from closing to managing the properties. Josh explains that in this part of the country, owning property means managing it yourself. He had the good fortune of lucking into good tenants, and most of the properties were already occupied. His terms included that the seller get properties “rent-ready,” though the two were far apart on what that phrase actually means. For instance, he had to pay to fix a water line immediately on one property. Nevertheless, Josh’s transition into management was smooth.
The Takeaways: Build Trust and Do Your Homework
Josh and Scott wrap up the show with the major takeaways listeners can learn from Josh’s success story. The human pieces that made this investment work were Josh’s ability to listen, research his properties exhaustively, and build the necessary trust to get the deal he wanted.
[17:10] The two investors discuss the importance of trust in these transactions. Josh offers advice on going with your gut: “Something in you is going to to tell you that either you can trust someone or you can’t...You’ve got to trust your instincts.”
[18:41] Scott highlights how more points of contact and meetings with a person gives you a sense of who they really are. This doesn’t apply just to his business, but is a general principle he also uses when hiring for his own firm, Royal Legal Solutions: “We don’t hire anyone without having at least three contacts with them...People will tell you what’s wrong with them. And everyone has something wrong with them, so once we know what it is, it’s like ‘Cool. Welcome to the family!’”
[20:00] While Scott’s major lesson learned is getting to know a person well and develop trust, for Josh, the major lesson is the value of doing your homework. If he hadn’t been thoroughly prepared and investigated every aspect of the deal--down to the cost of property taxes--he would not have been nearly as successful. He believes this also gained him credibility: “Successful people want to know that you did your homework.” [21:41]
[23:00] Scott makes one final observation about Josh’s Best Deal: “This is a story about really listening to people and giving them what they what they want, down to an emotional level.”
Welcome back to the Real Estate Nerds Podcast. On today’s Best Deals episode, our host, real estate attorney Scott Smith welcomes residential and commercial real estate investor Darrin Gross. The pair of investors discuss Darrin’s first deal, which also happened to be one of his best. Darrin has since established a healthy portfolio of properties in no small part because of his ability to negotiate and identify the needs and problems of sellers. After all, a seller's problem is an investor's opportunity. Tune in to hear the full conversation and get some tips on improving your own real estate deals.
Scott and Darrin talk a bit about Darrin’s background, entry into the world of real estate investing, and the duplex that started it all.
[1:00] Darrin is an insurance broker by day, and his work first exposed him to real estate investing.
[3:00] Darrin’s first property was an atypical duplex that was fairly rundown. Within seven months, Darrin had a second property and was earning close to half of his ordinary income.
[5:00] Scott asks Darrin about how he formed his team. In his early career, his team was disorganized.At first, he had only a property manager in place. His lender was also his seller, and he had another person helping with maintenance.
[7:00] Darrin’s earliest motivation for entering real estate was straight forward and modest: he wanted a new car. He also observed friends having success in passive investments, and that drove him to get involved.
[8:30] “The important thing about this property is that it’s the one that got me going.” The closing, like the property itself, was unconventional. The fact that his seller was carrying the note meant he bypassed certain typical pieces of the real estate buying process, like securing financing and inspections.
[10:00] Darrin describes how he got creative with this property. His essentially flipped the property several months later and was able to help a friend who needed $10,000 for another investment. Darrin was able to solve this problem with a line of credit he had, and crunched the numbers himself. He had an early realization: “You can make the deal work for you. It’s not always about what somebody is asking.” [10:30]
Darrin Gross’s Dealmaking: Negotiations and Motivation
Scott and Darrin dive into some of the details about what Darrin’s experiences have taught him about making good deals. The two investors talk about negotiation strategies and ways to gauge and exploit the motivations of a seller.
[12:00] Darrin also made some early observations about negotiations: “If you start high you can’t work your way low. If you start low, you can work your way up.” He tends to run the numbers first to find what works best for him, then make an offer that may interest the other party. He doesn’t tend to worry about offending the other party or catering to exactly what they ask for, but rather what number he can justify.
[13:30] Scott and Darrin briefly discuss the roles and motivations of brokers. Darrin believes brokers are beholden to sellers to get as much as they can for a property. Scott makes the point that quick sales and commissions for themselves are a big part of their job. Darrin agrees, but points out that.
[15:00] Darrin points out approaching with not just an offer, but a lender and pre-approval letter, can go a long way with closing with a seller.
[16:00] Darrin’s best deal involved a highly motivated seller. He knows from experience this played a role in his success: “You have to have a motivated seller if you want to get a good deal.” [16:45] In this case, the motivation was easy to detect--the seller needed $10,000 cash.
[17:34] Scott asks what information can be used to detect how motivated a seller is. On top of asking and looking at what degree a seller is willing to negotiate, Darrin advises looking at circumstances that might be a problem for the seller, but an opportunity for the investor.
[19:00] Darrin advises that investors run their own numbers as part of due diligence.
[20:00] Knowing a seller’s reasons for selling gives investors an opportunity to identify circumstances that can later be used in negotiation. With Darrin’s experience buying distressed properties, finding more information can lead to unique opportunities for a better deal.
The Takeaway: Get in the Game to Win It
Scott and Darrin close the show by discussing the major lesson listeners can learn from this deal. For Darrin, the important lesson he learned was that he had to just dive in to real estate to enjoy success in it.
[22:50] Scott asks Darrin what key takeaway listeners can take from his story. For Darrin, the answer is simple: “You’ve got to get in the game. If you’re not playing, you can’t win the game.” If he hadn’t gotten in on his first deal, he wouldn’t have his current success.
[24:00] The value in this deal, which Darrin refers to as his “accidental flip” for how he was able to leverage quickly to another buyer, is largely that it became a springboard: “That first property is what propelled and set me up to buy additional properties.” Scott agrees that the benefits that come your way aren’t the ones you expect.
[26:00] Darrin now makes regular monthly income from passive investment, and has also seized on real estate as an opportunity to pass on wealth to his children.
Welcome back to the Real Estate Nerds Podcast! On today’s Bad Beats episode, real estate investor and entrepreneur Mitch Stephen joins our host, attorney Scott Smith, to tell us about the details of one of his deals--and he has made plenty of them. But today, instead of concentrating on his successes, the two investors will conduct a postmortem on one of Mitch’s all-time worst deals.
Mitch Stephen’s Bad Beat: Lots and Lending
Scott welcomes Joel onto the show. The two investors discuss
[1:00] Mitch owns about 1500 houses in the San Antonio, TX area. He began his real estate career in 1996 and averages 100 new real estate purchases per year. He excels at raising private money, with $12-13 million currently under his control. He also began loaning money to competitors for additional income.
[2:40] In fact, Mitch’s bad beat began with an ill-advised lending transaction. He wasn’t familiar with the person requesting the loan or type of loan, and it was outside of his typical wheelhouse. This would later become a fatal flaw, but he’s learned his lesson: “It seems like every time I get out of my lane, I get hit by a truck.”
Scott agrees that this is important: “Stay in your lane. Do what you know how to do.”
[3:00] Mitch new how to survive the recession in real estate, but he wasn’t as comfortable with his lending business. He received a request to make a loan for 15 properties in a gated community that averaged $120,000 apiece on 1-acre lots. He knew how to make loans on little houses, but not how to execute a $15 Million loan.
[4:30] The two investors discuss the temptation to deviate beyond your area of expertise. In his ordinary career, he always had ways to make his money back in the event of a defaulted loan: “If you can’t sell your house, what can you do with it? You can rent it.” [4:55] Mitch expressed his concerns about their inexperience to his partner, but the two were drawn in by the high value and projected return rates on the loan.
[6:00] The nature of lots as an asset class meant that Mitch’s usual “exit strategies” weren’t available to him.
[7:30] Mitch made the loan, and not 30 days later, Countrywide went under, officially starting the 2009 recession: “Within 15 days, every bank in the world was dried up and confessing that they were insolvent too.” [7:59] So within that month, he had every lot back and nobody set foot on one for roughly two years. Banks were reluctant to loan to even those with excellent credit in the wake of the crash.
[8:45] This bad timing made the deal go South immediately. $750,000 was the average home price in Mitch’s area. He points out that “That market is the first market to die in a recession.” This left Mitch in the position of owing $8,000 a month for the next 2.5 years.
[9:15] Mitch didn’t sell his first lot for 2 years and 6 months, and didn’t sell all of them for four years. The properties were essentially burning a hole in his pocket.
[10:21] Mitch was able to endure this loss for a couple of reasons. The first is simply about his own financial responsibility: “For as wealthy as I am, I’m ridiculously frugal.” He also credits his partner, who took on half of the costs. That partner had another partner who stuck with them both. In these ways, Mitch was able to keep his head above water, even in the face of rising property taxes.
[11:30] This combination of factors meant this Bad Beat didn’t compromise Mitch’s quality of life: “Even though I took a hit that was unpleasant, it didn’t affect me that much because I’ve been a good steward of my money my whole life.” Scott observes that Mitch was smart because he had built habits that made this gamble worth taking. Even if he lost big, he wouldn’t struggle to fill his gas tank or enjoy a high standard of living.
[13:00] Scott points out that there are great deals that come from outside of our comfortable investment classes. He asks how Mitch balances these opportunities, and the two agree that it’s important to get advice from an expert in the asset class that is new to you. Mitch feels the right advisor with the right experience could have made an excellent partner, who may have been able to predict the recession and its impact on the class.
[13:50] Scott agrees and offers this tip to new investors, or investors in new asset classes: “When you’re first getting involved in real estate transactions, always partner with somebody else who’s experienced in that area to some degree.”
[15:00] Mitch points out that federal regulations forced banks to divest their exposure in real estate. On top of negative cashflow, the bank wanted to demand $1 million back within 8 months.
[16:00] Mitch tells Scott how he coped with this immense level of stress and many problems: “You wake up early, you go to bed late, you attack your problem head on, stay busy so busy confronting your problems the problems that you don’t have time to worry about it.” He was fortunately able to get private loans to make up for the bank’s demand.
[17:30] Mitch shares his strategy for recession-proofing his current portfolio in the event of another recession.
[18:30] The two investors share their strategies for avoiding burnout. For Mitch, he engages in a daily prayer practice to draw strength, get centered, and open his mind to creative solutions to his problems. Scott recognizes that highly effective and successful people seem to have systems for
[19:31] Mitch has another tip for making it through hard times: “When times get tough, I stop drinking and doing all that fun stuff to stay focused.” Scott agrees this brings clarity and raises energy to take care of one’s health.
[20:43] Scott shares his own unusual piece of his morning routine. Before work, he boxes for an hour every day. His logic is that it shows him his strength and what he can make it through: “I already did three rounds this morning, there’s nothing that’s gonna hit me harder than my coach’s right cross!”
New and seasoned investors alike spend a lot of time worrying about capital. But according to today’s guest, once you learn how to raise capital, you can raise capital for anything. Venture capitalist Joel Block was raising capital initially for real estate. But once he learned how to tell stories and put the package together, he fell into venture capital transaction, which he raised about $10 million for--a path that led him to selling financial service packages on Wall Street. After selling that business to a Fortune 500 in 1995, he started investing in other companies and has been involved in about 40 different transactions since. When the market crashed in 2010, Joel saw opportunity where other investors saw disaster. He went back into real estate and started buying, which was ultimately a profitable decision. Joel says he now takes everything in stride. He joins our host and real estate attorney Scott Smith on this week’s episode of The Real Estate Nerds Podcast to talk about venture capital, real estate syndication, and investment crowdfunding. He shares some of the best deals he has experienced in his career so that listeners can copy the habits that have led to his success.
Joel Block’s Best Deal: A Lesson in the “Show Business” of Negotiations
Scott welcomes Joel onto the show. The two investors discuss how Joel’s best deal came to be.
[1:00] Joel started out as a CPA but wasn’t totally fulfilled. While he wasn’t a fan of the tax work, he enjoyed reading partnership agreements and was drawn to the real estate agreements. He met a partner and decided to go into real estate for himself. He fell into venture capital and quickly learned an important lesson: “Once you learn how to raise capital, you can raise capital for anything.” [1:54] His experience in real estate gave him the skill set to develop and sell a financial services company.
[2:45] Scott asks about how Joel originally got into his best deal. The deal he’s talking about was early in his career, which he believes in common: “I think some of the best stories happen early in your career, because everything is extraordinary then.” [3:11] Though he’s been a part of many great deals, including the sale of the firm that enabled him to go into real estate, he’s here to discuss his best real estate deal.
[3:30] After quitting his CPA job at Price Waterhouse, Joel started a property management firm. A shopping center in suburban Los Angeles needed to be improved, and had very low rents. The owner contacted Joel and he agreed to buy the property at only 26 years old. This deal happened in 1987.
[4:19] He bought the property for $2.2 million. They had to get mortgage from the bank and investors on board: “We had nothing. All we had was a little teeny line of credit from the bank, only about $25,000 between two of us guys.” They signed the contract, and Joel had only done one deal with his partner prior, and this was a far bigger deal.
[5:00] Investors laughed at him. Joel realizes in retrospect why: “Here’s the thing about young people: You’re too stupid to know any better, and that’s actually an advantage because you’re not afraid.“ But they were afraid, and started to look into reasons to back out, considering they’d just spent all the money they had on the deal. His seller, the older woman who had received his $25,000 by contract, was certainly not going to give him his money back either.
[6:00] Scott and Joel had a funny exchange about this situation.
Scott: Damn, grandma took you to school!
Joel: Yes, we absolutely got schooled by an old lady.
[6:30] Joel and his partner went back to their office, discouraged. They decided to call an inspector to check the property for asbestos, a hot topic in the late 80s. The inspector found trace amounts, but since there were no standards at the time, the investors were able to schedule an emergency meeting with the seller, her attorney, and all other parties with a stake in the deal to discuss this finding.
[bctt tweet="Put on the best show that you can." username="RoyalLegalLaw"]
[7:30] The investors played up the drama: “We had to put on the best show we could put on. All you have to do is go to a Ringling Brothers circus as a kid to know everything you need to know about show business...We were determined we were going to bring a 3-ring circus to this deal, because it was a really big problem.” [7:53]
[8:30] The 25 and 26 year old partners told the attorney point blank that they couldn’t buy the building because of the severity of the problem. He made it clear that he couldn’t be held liable for everyone in the building getting sick from asbestos--and absolutely floored the attorney. Fortunately for the young investors, this particular attorney had just gotten his ass kicked in an asbestos case days prior.
[9:30] Joel can only assume that the attorney. When they returned to the room, they informed the attorney the asbestos decontamination would cost at least $400,000. The attorney agreed to give it to them, reducing the property’s total price to $1.7 million.
[10:00] Because of this courageous negotiation, the property ended up being incredibly profitable for the two investors.
[11:00] Scott is impressed by Joel’s brave tactic and asks if this is common for him. Josh replies: “I’m a professional negotiator. It’s what I do...I look at the situation and deal with it in the way that it needs to be dealt with.”
[12:00] Scott points out that the attorney slipped up by not being familiar with what “trace” asbestos meant. This was in part a product of the time, but proved to be a critical error. The asbestos was under 1% and was unlikely to create the dramatic results Joel implied.
[13:15] While the two investors wanted out of the contract, the asbestos negotiation motivated the seller to do whatever it took to sell the property to them. While Joel and his partner originally just wanted their $25,000 back, they ended up getting a great deal.
[14:15] Scott and Joel discuss the value of “go big or go home” negotiations. This situation informed Joel’s book for entrepreneurs, which you can find out more about below.
The Takeaways: Be Courageous, Creative, and Resourceful
Joel and Scott wrap up the show by sharing their personal greatest lessons learned from Joel’s story.
[15:05] Scott shares the lesson that resonated most with him from Joel’s story: “The excitement of getting into a deal, in this case maybe the wrong deal, can really be turned around with some unconventional tactics.
[15:30] Joel shares that if you want to use other people’s money, you should protect it like it is your own--among some other tips for generating capital and creatively funding investments.
[16:30] Joel shares some of the resources he has available for investors learning to generate capital, create a serious real estate investment business. He also extends an invitation to his Symposium this year, with our host Scott Smith has intended. Scott noticed the wealth of insights into business models and the value networking with the individuals there. This is not a sales experience, but a networking opportunity to expose investors to some of the best in the field and take advantage of their knowledge.
Welcome back to The Real Estate Nerds Podcast! Lane Kawaoka knows the bandwagon of getting multiple houses to achieve the goal of passive income all too well. He bought eleven of them and realized there was an eviction or two--and at least three big catastrophes--happening every year, whether that was someone stealing an HVAC, major plumbing issues, or even the rain. Lane is a working engineer and remains in that industry by day. He made his real estate debut ten years ago, initially investing in single-family homes. Over eight years in that asset class, he got up to almost a dozen properties, then switched to syndication partnerships. Today, Lane is here to share the dirty laundry of his investing life and the worst deal that he has been through with our host, real estate attorney and fellow investor Scott Smith.
Lane’s Worst Deal: A Roth IRA Ponzi Scheme
Lane sits down with Scott to tell us about his background, transition into real estate, and the worst deal he made as he changed the direction of his real estate career.
[1:00] Lane’s first properties were out-of-state turnkeys. On his eleventh major property, he realized the major issues involved with each property were eating into his time, energy, and profit lines. He concluded the model that had worked for him for his first eight years was no longer scaleable.
[2:30] Veteran investors advised Lane to join them in the world of syndication and partnerships, even saying they personally wished they’d stopped single-family investing years before they did.
[3:30] 2011-2012 was the year Lane began investing as a Limited Partner. He had some money in a Roth IRA, a vehicle that was not yet familiar to him. He didn’t know what to invest in and got some advice from a custodian, who referred him to an unethical outfit that was essentially running a Ponzi scheme: “They were buying up single-family homes, C and D class properties. The deal was I was going to put up all the money for the title to the property.” [4:30]
[5:30] Because Roth IRAs restricted Lane to investments without debt, he put $43,000 down. The company promised him a 9% fixed rate and to split the profits of the sale 50-50. Lane found out that the company was not reputable as he began doing internet research. Problems later surfaced with his ability to connect those checks. “I was naive and I didn’t know anything. I didn’t know what I didn’t know.” [6:18]
[6:30] Getting a referral from an IRA Custodian was a bad idea, Lane now realizes. Those custodians are not investors: “I broke the cardinal rule of you don’t work with people you don’t know, like, or trust.” He now uses his network to verify leads ahead of entering into contracts.
[8:30] For the first couple of years, things went fine. Lane got his checks regularly, and felt fairly secure as he held the property’s title. Then he realized nobody was paying taxes on the property. A friend in a similar situation. He speculates that the Ponzi scheme imploded in terms of liquidity around the third year. He had the option to take legal action, but chose not to because he valued his time above that. Lane simply walked away.
[10:00] Scott wonders if an extreme level of due diligence, such as checking the tax rolls, would have helped Lane avoid this situation. He prefers more transparent deals now and avoids IRAs and QRPs altogether: “I like single-asset LLC deals instead of blind pools.”
[11:20] He believes people buy into the blind pools because of marketing angles: “Normally the unsophisticated investor goes into the blind pool because they buy into that. The more sophisticated investors want to know what the asset is.” Some underwrite it themselves, even.
[12:20] Scott probes Lane’s lack of confidence in Self-Directed IRAs/401(k)s. Lane asserts that the major draw--tax savings--isn’t that great; “You’re still going to pay taxes at some point. You’re just kicking the can down the road.” He prefers paying taxes today, because he believes his taxable income is lower now than it will be in the future. He also compares the numbers to his preferred style of investment (LP Syndication), and feels you have less leverage with self-directed funds because of government restrictions.
[13:30] Lane also feels IRA custodians push these accounts because they’re the ones profiting from them. He advises new investors to remove money from these accounts slowly and strategically.
The Takeaway: Avoid Scams by Building a High Quality Network
This one bad deal didn’t scare Lane off from Limited Partnerships or syndication investing. He’s going “all in” on this strategy now that he’s remedied the main problem that contributed to his falling for the Ponzi scheme: a lack of a solid network.
[14:30] Scott asks what Lane could have done to sniff out and avoid the Ponzi scheme. “You have to surround yourself with the right people. I didn’t have the right people at that point...It’s all your network.”
[15:00] Scott shares that he was once initially skeptical of networking and felt he was wasting time. “Did you have that same experience of having to kiss a lot of toads before finding someone who could really help you?” Lane responds that he did. He’s a type of investor that isn’t common at local meet-ups--he had to find a more “target-rich” environment for network.
[16:25] The two investors find that “pay to play” groups end up being higher value. Meet-ups are great for those who are new or into fix-and-flips, but passive investors may find more results (and fewer “toads”) at groups that require paid membership.
[18:00] Lane offers ways to connect, pointing out: “I’m always looking to connect with other investors. I’m always hunting for that next deal.”
"We all know what people do with long leashes. They’re going to hang themselves eventually."
Welcome back to The Real Estate Nerds Podcast! Lane Kawaoka knows the bandwagon of getting multiple houses to achieve the goal of passive income all too well. He bought eleven of them and realized there was an eviction or two--and at least three big catastrophes--happening every year, whether that was someone stealing an HVAC, major plumbing issues, or even the rain. Lane is a working engineer and remains in that industry by day. He made his real estate debut ten years ago, initially investing in single-family homes. Over eight years in that asset class, he got up to almost a dozen properties, then switched to syndication partnerships. Today, Lane is here to share the dirty laundry of his investing life and the worst deal that he has been through with our host, real estate attorney and fellow investor Scott Smith.
Lane’s Worst Deal: A Roth IRA Ponzi Scheme
Lane sits down with Scott to tell us about his background, transition into real estate, and the worst deal he made as he changed the direction of his real estate career.
[1:00] Lane’s first properties were out-of-state turnkeys. On his eleventh major property, he realized the major issues involved with each property were eating into his time, energy, and profit lines. He concluded the model that had worked for him for his first eight years was no longer scaleable.
[2:30] Veteran investors advised Lane to join them in the world of syndication and partnerships, even saying they personally wished they’d stopped single-family investing years before they did.
[3:30] 2011-2012 was the year Lane began investing as a Limited Partner. He had some money in a Roth IRA, a vehicle that was not yet familiar to him. He didn’t know what to invest in and got some advice from a custodian, who referred him to an unethical outfit that was essentially running a Ponzi scheme: “They were buying up single-family homes, C and D class properties. The deal was I was going to put up all the money for the title to the property.” [4:30]
[5:30] Because Roth IRAs restricted Lane to investments without debt, he put $43,000 down. The company promised him a 9% fixed rate and to split the profits of the sale 50-50. Lane found out that the company was not reputable as he began doing internet research. Problems later surfaced with his ability to connect those checks. “I was naive and I didn’t know anything. I didn’t know what I didn’t know.” [6:18]
[6:30] Getting a referral from an IRA Custodian was a bad idea, Lane now realizes. Those custodians are not investors: “I broke the cardinal rule of you don’t work with people you don’t know, like, or trust.” He now uses his network to verify leads ahead of entering into contracts.
[8:30] For the first couple of years, things went fine. Lane got his checks regularly, and felt fairly secure as he held the property’s title. Then he realized nobody was paying taxes on the property. A friend in a similar situation. He speculates that the Ponzi scheme imploded in terms of liquidity around the third year. He had the option to take legal action, but chose not to because he valued his time above that. Lane simply walked away.
[10:00] Scott wonders if an extreme level of due diligence, such as checking the tax rolls, would have helped Lane avoid this situation. He prefers more transparent deals now and avoids IRAs and QRPs altogether: “I like single-asset LLC deals instead of blind pools.”
[11:20] He believes people buy into the blind pools because of marketing angles: “Normally the unsophisticated investor goes into the blind pool because they buy into that. The more sophisticated investors want to know what the asset is.” Some underwrite it themselves, even.
[12:20] Scott probes Lane’s lack of confidence in Self-Directed IRAs/401(k)s. Lane asserts that the major draw--tax savings--isn’t that great; “You’re still going to pay taxes at some point. You’re just kicking the can down the road.” He prefers paying taxes today, because he believes his taxable income is lower now than it will be in the future. He also compares the numbers to his preferred style of investment (LP Syndication), and feels you have less leverage with self-directed funds because of government restrictions.
[13:30] Lane also feels IRA custodians push these accounts because they’re the ones profiting from them. He advises new investors to remove money from these accounts slowly and strategically.
The Takeaway: Avoid Scams by Building a High Quality Network
This one bad deal didn’t scare Lane off from Limited Partnerships or syndication investing. He’s going “all in” on this strategy now that he’s remedied the main problem that contributed to his falling for the Ponzi scheme: a lack of a solid network.
[14:30] Scott asks what Lane could have done to sniff out and avoid the Ponzi scheme. “You have to surround yourself with the right people. I didn’t have the right people at that point...It’s all your network.”
[15:00] Scott shares that he was once initially skeptical of networking and felt he was wasting time. “Did you have that same experience of having to kiss a lot of toads before finding someone who could really help you?” Lane responds that he did. He’s a type of investor that isn’t common at local meet-ups--he had to find a more “target-rich” environment for network.
[16:25] The two investors find that “pay to play” groups end up being higher value. Meet-ups are great for those who are new or into fix-and-flips, but passive investors may find more results (and fewer “toads”) at groups that require paid membership.
[18:00] Lane offers ways to connect, pointing out: “I’m always looking to connect with other investors. I’m always hunting for that next deal.”
Welcome back to another Bad Beats episode of The Real Estate Nerds Podcast. Today, multi-family guru and investing coach Michael Blank joins us to do a post-mortem on one of his all-time worst deals. In a departure for our usual form, Michael's worst deal wasn't an unprofitable rental property, but a restaurant that started out well enough. Until, of course, it began costing him $10,000 a month and began taking a stressful toll on his life. He bought the franchise to quit his job and pursue true financial independence and freedom. And even though he lost big, Michael didn't lose in the long run. Tune in to hear what went wrong and how Michael has come to view this Bad Beat as a great lesson that helped transform him into the successful multi-family investor and teacher that he is today. You'll also get some tips on how to pursue your own bliss, recover from failure, and develop a mindset for a fulfilling life and career. Listen to Michael's full conversation with our host, real estate attorney and fellow investor Scott Smith, now.
Welcome back to another Bad Beats episode of The Real Estate Nerds Podcast. Today, multi-family guru and investing coach Michael Blank joins us to do a post-mortem on one of his all-time worst deals. In a departure for our usual form, Michael's worst deal wasn't an unprofitable rental property, but a restaurant that started out well enough. Until, of course, it began costing him $10,000 a month and began taking a stressful toll on his life. He bought the franchise to quit his job and pursue true financial independence and freedom. And even though he lost big, Michael didn't lose in the long run. Tune in to hear what went wrong and how Michael has come to view this Bad Beat as a great lesson that helped transform him into the successful multi-family investor and teacher that he is today. You'll also get some tips on how to pursue your own bliss, recover from failure, and develop a mindset for a fulfilling life and career. Listen to Michael's full conversation with our host, real estate attorney and fellow investor Scott Smith, now.
Welcome back to the Real Estate Nerds Podcast. On today’s Best Deals episode, our host, real estate attorney Scott Smith welcomes fellow investor Frank Rolfe. Most of us don’t think of mobile homes as goldmines, but Frank tells a strange and true story of how a low-budget trailer park became his best deal. In fact, the deal went so well that it laid the groundwork for Frank’s current successful real estate empire of mobile home parks across the America.
The Dollar General of Housing: The Beginnings of Frank’s Mobile Home Best Deal
Scott and Charles discuss Charles’ background, real estate debut, and current career as an investing coach. We also get the see some of Charles’ teaching side as he shares some tips and strategies that he advises his students to use.
[1:00] Frank and his partner Dave Reynolds are the 5th largest mobile home park owners in the U.S., with hundreds of properties across the country. The Best Deal he came to discuss today is actually the first deal he ever did.
[2:00] Frank entered the real estate industry in 1996 after selling his billboard business. He chose to invest in mobile home parks because the asset class wasn’t particularly popular. At the time, he saw these homes as “the Dollar General of housing,” and the idea of providing affordable housing appealed to him.
[3:00] This deal was for a mobile home park called Glenhaven in Dallas, TX. Frank put $10,000 down without even viewing the property, with the remaining $300,000+ financed over a 30-year-mortgage. He knew little about the area and nothing about properties. He only knew the contact who sold him the properties because he had created billboards for him.
[5:00] Frank knew the property was on a highway and that mobile home zoning is fairly rare in the area. He was attracted to the park because he knew he wanted “basic” housing: “I like industries that are built on cheapness. I liked the fact that the park was the cheapest, most bargain basement housing.” [5:28] He took the deal primarily because the financing terms were excellent, and was prepared for there to be some kind of catch. Yet he personally knew the seller was losing $2,000 a month on the property. Frank, on the other hand, was able to assume this risk easily and had an exit strategy in case the investment wasn’t profitable.
[6:15] Frank quickly determined that the property manager was the first thing that had to go, and in fact, the reason the property was losing $2,000 per month. Knowing this was the problem made taking a chance worthwhile: “I was willing to give it a whirl. I was willing to lose $10,000 to see if I could fix it.”
If I screwed up, I got scared, I could always push the eject button and be safe.
CLICK TO TWEET
How Frank’s “Wacky Subdivision” Became a Business Model
Frank describes how his trailer park full of odd and colorful characters became a surprising investing success.
[7:30] After closing on the property a mere three weeks later, Frank had the opportunity to view profit and loss statements. He noticed something odd: a cable TV bill for $3,000/month. For an 83-lot unit, this contract seemed large, and Frank later learned it had already ended. He simply canceled the contract, as this amenity was unnecessary given the property was 50% vacant and residents had alternatives. This small change allowed Frank to break even immediately.
[9:30] Scott asks how Frank approached the lack of perfect records regarding the park. He was able to discern how many homes were actually occupied, and therefore get a sense of his revenue. The city was able to provide records of the cost of utilities. Although he was new to the industry, he was able to verify the financial statements.
[12:00] Frank was able to get legal work done for free through the title company. Given that he bought the property with a non-recourse loan (meaning he could give it back to the seller), he went into the investment with relative peace of mind.
[13:00] To better understand his property and residents, Frank decided to sit in the trailer-office daily for a year. He didn’t know what to expect: “I felt like I’d bought OK Corral. The first thing I did was get a Texas handgun license so I could have a pistol in my pocket in when I showed up.” [13:57] He recognizes in retrospect he may have been biased, and while his residents were poor, they certainly weren’t dangerous. Fortunately, he never needed his pistol.
[14:37] Frank was surprised by “This was basically like a high-density subdivision, or in the case of this property, a subdivision full of wacky people. But that changed dramatically in the months ahead.” He had a cast of characters in his park “worthy of their own sitcoms.”
[16:00] While property management wasn’t the best expense of Frank’s time, he did learn a lot. During this time, he got a tip about another park that was being shut down. He was able to get both trailers and residents from the closing property,
[17:24] This chance encounter became a lucky break for Frank “I was able to take Glenhaven from half-occupied to fully-occupied at no cost.”
[18:00] Frank’s new residents were very different from his trailer park’s original occupants. Most were hard-working people, rather than the eccentric types he had grown accustomed to. His “menagerie of nutcases” became a stable business model.
If it’s got little risk and high reward, you should always do it. If it’s got high risk and little…
CLICK TO TWEET
The Takeaways: The Power of Financing and Risk vs. Reward
Scott and Frank close the episode by highlighting the biggest lessons Frank learned from his first mobile home park, as well as what ultimately became of Glenhaven.
[19:00] In Frank’s opinion, the major lesson he learned was about the power of seller financing.
[19:37] The other major lesson Frank learned from this excellent mobile home deal was about risk and reward: “If there’s little risk and high reward, you should always do it. If there’s high risk and no reward, you should never do it.”
[20:00] Scott observes Frank’s story is also about the power of networking. He found his deal through his billboard business, and his quirky residents ended up helping him develop a successful business investing in
[21:14] “One thing I learned early on about mobile home parks is that there’s a huge amount of demand,” Frank shares. He also lucked into very low lot rentals, which were appealing to his customer base. This also allowed him to raise rents while keeping full occupancy. He later sold the property for $1.5 million after buying it for only $400,000,
[22:43] Frank’s greatest takeaway from his first deal is the groundwork it laid for his future success: “The success of Glenhaven is what gave me the confidence to buy Park #2, Park #3, Park #4, and now of course we’re at 300...It’s the little things that make the big things possible.”
Sometimes, no matter how talented, smart, or experienced we are, Lady Luck just isn’t on our side. Welcome back to the Real Estate Nerds Podcast. On today’s Bad Beats episode, our host, real estate attorney Scott Smith chats with fellow attorney and multi-family investor Charles Dobens about one of Charles’ worst deals. Though the show focuses on a purchase of a C-class property that went wrong, Charles is an extremely successful owner of multiple apartment complexes who regularly advises new investors about multi-family investing. His coaching career has been informed by both his wins and losses. That said, we had Charles dig up the dirt on his all-time worst deal so that you, dear listeners, can learn from what went wrong.
Charles Dobens and The Wild World of Multi-Family Investing
Scott and Charles discuss Charles’ background, real estate debut, and current career as an investing coach. We also get the see some of Charles’ teaching side as he shares some tips and strategies that he advises his students to use.
[2:00] Scott asks Charles about his entrance into the multi-family investing game. Charles was one of those strange children who aspired to enter the insurance business, but also attended law school. At 40, his level of dissatisfaction with his work life drove him to look into multi-family investing. He sold his insurance to fulfil a lifelong dream of becoming an apartment owner
[3:15] After the market crashed, Charles began representing fellow investors who had suffered from bad deals. This led him to his current coaching career, which involves teaching fellow investors to invest in multi-family units successfully.
[5:18] While he has enjoyed many successes, Charles credits his failure with teaching him to how to evaluate the likelihood of an investment succeeding upfront. He shares a tip with our listeners that he usually reserves for his students: “Owning a multi-family property changes your life. And you have to know if it’s going to change your life for the better, or for the worse.”
[6:00] Charles believes being an owner-operator gave him the motivation to understand numbers. “The thing that really taught me the most about properties was owning them, understanding the numbers, and knowing what it really costs to own a property.” Failure to understand the numbers can tank an otherwise smart investment.
[7:30] Scott gets Charles’ take on partnering with more experienced investor for their first deals. Charles agrees that this strategy is sound and useful for both parties, pointing to many successful ventures he has seen his own students experience.
Charles Dobens’ C-Class Crash
Scott and Charles examine the details of Charles’s worst deal, the purchase of an apartment complex in a less-than-glamorous part of Fort Worth, Texas
[8:30] Brokers assured Charles that the area his 160-unit complex was located in was gentrifying, and therefore property values would rise. In retrospect, Charles knows this isn’t true and the area may not change for an additional 30 years. He was unfamiliar with the location within Fort Worth and its particular market conditions. But he felt secure in the purchase because the seller had multiple similar properties, some even in the same location. But they key issue with Charles’ property is that it had be purchased as an assumption.
[9:20] Buying as an assumption meant Charles agreed to take on the existing mortgage from the seller. He thens negotiated a price of $1.1 million for the complex, and agreed to put 10% down.
[11:00] Scott and Charles appreciate the irony that this looked like an excellent deal. Charles was pleased with his own negotiation skills, and thrilled to pay $100,00 for a coj=mplex valued in the millions. At the time of his purchase, the occupancy rate was 97%. The deal looked beautiful on paper.
[13:40] Charles explains the critical difference between a normal deal and an assumption: “When you’re doing a typical real estate deal there are two parties involved: the buyer and seller But when you’re buying an assumption, there’s a third party--and it’s the bank. They don’t care about the agreement you had with the seller.”
[14:27] Despite having negotiated a great deal and agreeing to a set mortgage amount, the bank demanded more money. The bank required Charles to deposit $200,000 into the bank, or else he would be declined for the mortgage.
[15:30] The inspection terms of Charles’ deal were also unusual and disturbing. He was allowed to inspect the property once, then forbidden to do so again for five months. This detail still irks Charles: “Do you know what can happen to a multi-family property in five months? You can lose the whole thing.”
[17:00] Charles’ property management company later tipped him off to a fraudulent aspect of the deal. When numbers weren’t adding up, He discovered that the occupancy rate was only 50%--half of what he was promised.
[18:14]In retrospect, Charles realizes he should have crafted a better contract that allowed him to return to return to the property and walk the units at any time. He also recommends a clause that states if units are not rent-ready, some money should be returned upon closing,
[19:00] Charles began collecting the evidence of fraud. He made a startling discovery: “What they did was white out the name of somebody else on the lease, and then hand write in somebody else’s name on the lease from another property that the guy owns.” The seller forgot to white out eight of the leases.
Charles explains that the trick he fell for is a type of fraud called phantom leases.
[20:37] Charles was never able to get occupancy above 70%. His deal had hidden economic terms, and he now realizes the entire affair was a disaster: “We did everything wrong on this. It was an incredible and expensive learning lesson.”
The Takeaways: Watch the Numbers, Document Everything, and Get Help Evaluating Your Deals
Our host and guest wrap up the show by going over some of the major lessons Charles learned from his experience with fraud and losing big. Charles continues to share some of these bits of wisdom with his students.
[21:00}Because of this bad deal, Charles now is much more vigilant about due diligence: “I don’t believe anything anyone tells me. Everything needs to be documented.”
[22:0] Charles also advises that investors look at the bank statements to see where money is coming from. He explains that “anything ending in three zeros” is a major red flag. If that much money is coming in, it’s probably an owner contribution. Rent deposits aren’t that high, and it’s a sign that the property is performing so poorly that the owner is making up the difference.
[23:00] Scott asks what Charles learned from this deal, and what advice he’d give his younger self to avoid losing on this investment. He gives a series of questions he would ask, and examines his beliefs and assumptions about both the property and its market.
[25:29] Scott agrees, adding: “Challenging assumptions is the number one way we get to high level learning.”
[26:00] Charles had a student looking at an assumption, and how he examined the number.The clause about the assumption was vague, and they made an offer that did not involve assumption and did some digging to determine the real cost of the property. The bank’s reserve replacements would go to the seller, but be collected from the buyer. When making an assumption deal, look out for this detail to avoid owing a hidden additional cost.
[30:00] As both an experienced investor and attorney, Charles advocates for his clients and looks out for new investors. He regularly takes on new investors and guides them through the world of multi-family investing.
Welcome back to the Real Estate Nerds Podcast. On today’s episode, our host and attorney Scott Smith welcomes Dmitriy Fomichenko, the founder of the financial firm Sense Financial Services LLC. The two investors share an affection for self-directed investing of retirement plan assets, and listeners will get to hear exactly why. In addition, Dmitriy also shares about a pair of lending investments he personally made, and what made one a success and the other a failure.
Self-Directed Investing 101
Dmitriy sits down with Scott to chat about his business and self-directed investing generally. The two investors explore the role of retirement planning professionals and compare the self-directed options available to investors.
[2:00] Dmitriy is an engineer by education. After a lay-off, he transitioned into real estate. During this time, he handled conventional financial accounts. In 2010, he founded Sense Financial, a group that deals exclusively with investors. His clients include many real estate investors, but also lenders and investors in newer nontraditional assets like cryptocurrency.
[4:00] Dmitriy and Scott discuss the benefits of self-directed investing. Dmitriy points out that Checkbook Control accounts give investors the power to invest in nontraditional assets. He also shares the various ways to fund self-directed IRAs and 401(k)s.
[5:30] Dmitriy briefly compares the self-directed IRA to the Solo 401(k). He feels the self-directed IRA option is somewhat limited by its fairly low contribution limits Although the Solo 401(k) is designed for self-employed individuals and small businesses, many types of professionals can qualify. He believes it is a powerful investment vehicle that allows for a high level of tax savings.
[6:50] Dmitriy’s company sets up trusts to hold plan assets for clients who own Solo 401(k)s. The client becomes the trustee receives Checkbook Control. He mentions that “You need to be educated on what you can and cannot do, because with freedom comes great responsibility.” [07:25]
[8:45] The clients Dmitriy works with enjoy the ability to control their assets: “You want to be in control? Use the guidance of professionals with more experience than you, but you should be making the financial decisions. That’s what the self-directed 401(k) enables you to do.”
[9:30] Scott asks Dmitriy about how investors can evaluate providers of self-directed accounts. Dmitriy explains that there are three self-directed options:
A truly self-directed IRA. This is an IRA that does not limit your investment choices. Most custodians will limit your options to financial products they offer, and require you to go through them to make or liquidate an investment.
The checkbook-controlled IRA, or IRA-owned LLC. This is Dmitriy’s specialty, an IRA account with funds moved to an LLC that the client controls.
The self-directed Solo 401(k). Dmitriy believes this vehicle is the “best of all” because of its many benefits, flexibility, and tax benefits.
[12:49] Scott asks Dmitriy about Solo 401(k) compliance, and which pieces his company handles and which are the responsibility of the clients. His company deals with plan creation, documentation, and maintaining and updating plan documents per IRS regulations. The client, on the other hand, must control the plan assets and keep accurate records of the investments. Clients can also get assistance with administering the plan from their professionals.
[15:00] Dimitriy clarifies the role of companies like his: “We aren’t attorneys. Our specialty is the 401(k), so that’s what we do. We don’t give you investment, tax, or legal advice.” While as an investor himself, Dmitriy certainly may have the experience to offer this type of guidance, he will generally know when to refer clients to a financial advisor or attorney.
A Tale of Two Notes: Dmitriy’s Best and Worst Solo 401(k) Investments
Scott asks Dmitriy about some of the best and worst deals he has seen made with the self-directed Solo 401(k). In his line of work, Dmitriy has seen plenty of both.
[16:50] Dmitriy decides to begin with an example of a bad deal. This particular example is of a private lending deal. He was advised to use a company offering investments in notes. He chose to invest in a small note for $20,000 tied to a property in Pennsylvania.
[17:31] In hindsight, Dmitriy can tell you exactly where he went wrong: “The mistake I made from the very beginning is not doing my due diligence.” He overlooked his part because he trusted the individual who introduced him to the company.
[18:04] Dmitriy later invested an additional $43,000 on a separate property. Things went well for a couple of years, until there were major property management and late payment issues. Dmitriy reached out to the owner. It turned out his $20,000 property was in terrible shape, had never been rehabbed as it was supposed to be, and had been vacant.
[19:10] Scott asks if what happened with Dmitriy’s money was theft--but because Dmitriy was lending the money, it technically wasn’t. Again, he emphasizes the importance of doing due diligence on properties: “When you invest in a note, there’s always a likelihood that it will be defaulted.” [19:50] He feels he should have discussed his deal with a more experienced investor as part of better due diligence.
[21:09] Dmitriy shifts gears into one of his best deals, another note, which helped offset the loss from the first deal he talked about. He made a loan of $43,000 in exchange for the deed to a property worth close to $70,000. He became the landlord and had a tenant paying to live there, and the interest on the note was around the same amount as the rent, effectively doubling his income.
[22:03] “If you look at these two notes, I ended up winning. But what I want your listeners to learn from this is you’ve got to do your due diligence,” Dmitriy tells Scott.
The Takeaways: Good Communication and Due Diligence Create Wins
Our host and guest conclude by comparing the note deals and sussing out what made one so much better than the other.
[23:00] When comparing the two notes, Dmitriy highlights that the win covered the loss. He chose to keep the second property because it was a better value. He could have foreclosed on it, but the borrowers chose to deed it to him instead after defaulting.
[24:40] Dmitriy won in part because the people he loaned money to defaulted, and failed to manage their own portfolios well.
[26:00}Scott observes that Dmitry’s good communication with his borrowers played a major role in his investment’s success. In his own line of work with real estate investors, Scott sees a lack of clear, consistent communication contribute to unnecessary losses.
On today’s episode of the Real Estate Nerds Podcast, our host Scott Smith sits down with Fernando Aires. On top of being a long time real estate investor, Fernando is also a tech guru on the forefront of leveraging data and analysis to make the best deals possible. The two investors had a fascinating conversation about Fernando’s unique approach to data, his best deal, and how investors can leverage both numbers and people in negotiations.
The Data Doesn't Lie: Real Estate, Biohacking, and Fernando Aires' Unique Perspective
Scott asks Fernando about his background and the inspiration for the investment tools he has developed.
[1:44] Fernando talks about his current career and background. He currently self-describes as "an entrepreneur in income property investing in software applications." He came up in the tech industry, specifically in computer chip design for Apple and other major companies. When he sought income opportunities outside of the tech sector, he developed an interest in real estate for its passive income potential. Fernando developed a portfolio of rentals across the country that eventually earned enough income to retire from Corporate America.
[2:40] After his transition, Fernando bought a software company and developed a tool that allows real estate investors to evaluate properties and analyze their investments from a data standpoint.
[3:12] Fernando shares his deep interest in biohacking and longevity. He is a Bulletproof coach with BulletProofExec.com. He also hosts a podcast with Jason Jason Hartman called the Longevity and Biohacking Podcast Show.
[03:48] Scott observes the connection between Fernando’s two interests. Both health and real estate see many trends, but “The data doesn't lie on what really matters, right?”
[04:09] Fernando's engineering background gave him a love of data that spills into all aspects of his life. He personally analyzes blood tests and biomarkers twice a year to track his health trends and analyze how his lifestyle is affecting his health. Fernando's experience with biohacking informed his analysis of real estate. As both a user and service provider, Fernando sees both sides of his tools: “The more involved an investor is, the more educated decisions can be made and therefore fine tuning the portfolio as it goes along becomes a lot easier.”
[05:10] Scott observes that Fernando's software allows investors to see where their time is most effectively spent. He finds having tools to analyze this data makes the process of managing his dozens of properties more efficient.
[Tweet "As long as you're straight with the people you're doing business with, you respect them, you're trustworthy, then doors will open."]
Fernando’s Best Deal
Scott and Fernando dive into the details and context of his best deal.
[8:30] Fernando’s best deal was one of his early ones. In 2012-2013, he formed a relationship with a bank that was seeking out investors to buy properties the bank had foreclosed on.
[09:45]Fernando looked at a package of 14 properties, and selected 10 with a high rent-to-value ratio. These were B+-A properties with higher-income tenants. He was able to find properties with 90% loan-to-value ratios, with excellent loan terms, fixed rates for a decade, and caps on the interest rates to prevent them from rising above 5%.
[11:40] Fernando purchased properties valued at over $1.5 million for less than $200,000 down. Today, these properties are worth over $2.2 million, with a return on his investment of around 384%. Fernando explains that this figure is calculated based on his actual money down.
[15:00] Scott asks more about how Fernando developed the relationship with the bank that allowed this deal to happen. Fernando’s advice is practical: “There’s nothing magic about relationships. The easiest way to build a relationship is to get started. That’s the first step.” [16:00] He also shares how he established a relationship in a new market by simply doing some research and building a good reputation.
[18:00] Scott agrees and points out that anyone can go into a bank and share their plans for feedback from the banking staff. Fernando agrees that you don’t need to know much to get started. He also finds that smaller community banks and credit unions have a better understanding of the investor mentality than large household name banks.
[Tweet "As long as you're straight with the people you're doing business with, you respect them, you're trustworthy, then doors will open."]
Lessons from Fernando’s Best Deal: The Value of Data and Good Relationships
Fernando and Scott analyze some of the lessons Fernando learned from this particular deal. The two also see Fernando’s success story as a lesson on the importance of relationships in investing.
[22:00] Scott alludes to the common dilemma new and experienced investors find themselves in--wondering where deals come from. He and Fernando agree it comes down to relationships. “If you’re straight with the people you do business with, and they see that you’ respect them and are trustworthy, doors will open.” [22:28]
[23:00] Scott asks whether Fernando saw any red flags with this deal. Fernando had concerns that the properties weren’t generating enough rent. Fortunately, rents did increase quickly enough to raise the initially low rent-to-value ratios.
[25:35] A major lesson Fernando learned from this deal is that that tenants in this class of properties tend to stay in their homes longer, which yields better returns. The deal didn’t look as good on paper as it ended up being in the long run.
[26:45] Fernando shares another lesson: “You have to buy the property that makes sense the day you buy it. If you buy a property hoping it will appreciate and having no other exit strategy, that’s gambling, not investing. If you’re not getting a real return, you’re not investing.” He did gamble a bit, but had an exit strategy in case the properties didn’t work out that would have returned him to his baseline. He knew he could sell the properties off easily if they weren’t profitable.
[28:00] Scott asks for details on Fernando’s negotiations with the bank. Fernando admits he didn’t have to do much haggling, but that his inspections revealed some issues with the property he had to ask the bank to fix. The bank was reluctant to make repairs, but ultimately did.
[31:00] Scott and Fernando discuss the value of langauge in negotiations. Fernando doesn’t let fear of losing the deal prevent him from asking for what he wants or needs, provided he’s being reasonable. He reasons that: “A good deal has to be good for both sides.” [32:59]
[34:00] Negotiations present another area where data is valuable for Fernando: “If you’re trying to gain leverage somehow, having data makes lots of sense.” Data also allows people to justify their decisions to higher-ups.
[37:00] Scott notices that some of the best negotiators he has seen are like Fernando--kind to people and nice in relationships, but hard on data.
The Takeaway: Data Drives Better Decisions
Scott and Fernando wrap up the show with some practical tips on incorporating data into an investing strategy. That said, his data is only so effective because he is also focusing on relationship-building.
[40:00] When comparing the two notes, Dmitriy highlights that the win covered the loss. He chose to keep the second property because it was a better value. He could have foreclosed on it, but the borrowers chose to deed it to him instead after defaulting.
[44:20] Scott agrees that “You can’t find out everything from behind a desktop. You need to go out and meet the people.”
Welcome back to The Real Estate Nerds Podcast! On today’s Bad Beats episode, we learn the power of knowing what you know, and knowing what you don’t. Our host and real estate attorney Scott Smith welcomes Gino Barbaro, a life coach, fellow investor, and host of the popular Jake and Gino Podcast. Gino Barbaro, co-founder of Jake & Gino LLC, a real estate education company focused on multifamily investing, takes us through what’s it like when the deal you’re most excited about ends up being your worst. Then he and Scott answer the critical question: where do you start again after an investing failure?
Gino’s Worst Deal
Scott introduces Gino and gets right into the details of his worst deal, as well as other lesser real estate blunders he’s made along his path to multi-family success.
[2:00] Gino began investing in real estate after college, while also following his father into the restaurant business. His first deal was in 2002, and he selected a multi-family property for his first purchase. He was motivated to enter real estate to break away from exhausting 60-hour work weeks and working for another person. Excited by the initial success of his first property, he eagerly purchased a mixed-use property just before the crash.
[3:00] Gino’s motivations to become a self-made success contributed to his self-described fatal flaw: a lack of education. He lacked fundamental negotiation skills, market and asset class understanding, and other knowledge that is crucial to real estate success. In retrospect, he believes he should have gotten advice from a more experienced investor. He confirms he wouldn’t buy this same property today for one simple reason: its location in New York, a city rif with complicated economic challenges that affect investors and renters alike.
[4:00] The complications around his multi-class New York property led Gino to get back to his roots: multi-family. But that didn’t stop him from making some other mistakes along the way.
[5:00] Gino has lost money on more than one occasion because of getting caught up in excitement, lacking familiarity with his asset class, and buying before getting enough information. He tells Scott about a different investment that ended up losing him $170,000 because he failed to do his due diligence. This particular deal was for a mobile home park.
[5:20] Scott asks Gino about the details of the asset that ended up being his worst deal. Gino explains that it was a mixed-use building, equal parts retail, industrial, and office space in New York City. Leasing the office space in particular became a challenge.
[6:30] Start the same. Gino was excited to get into the deal because it was something different. Scott points out that excitement clouds judgment, and Gino agrees that this was the case for him. He made multiple mistakes that are common for new investors, such as sinking far too much money into repairs.
[7:45] Gino can now see his two biggest issues: his blind spots and his ego.
On Risk: Knowing When to Be Brave
[8:00]Gino’s critical error by his own admission was failing to understand the numbers. Falling in love with property quote[8:09] Learning the business is more important for those starting out than focusing on lofty ambitions.
[9:00] One of Gino’s strengths is his ability to confront fears to take risks. He advises that investors weigh the pros and cons, and if pros win, that is motivation enough to take a risk that could be profitable.
[10:00] Scott relates to Gino’s risk assessment strategy of determining the worst case scenario, and facing it head-on if financially possible. This was something Scott personally experienced in his former life as a litigation attorney.
[10:10] “When I was doing litigation, I spent two years in there and realized everybody hated their lives, hated what they were doing.When I wanted to make the shift to go do Royal Legal Solutions and help real estate investors ... I asked myself, ‘How quickly can I go get another job if this doesn't work out?’” When Scott realized he could financially recover inside of a month, he took the leap and created the firm that he still leads today.
[11:00] Our guest and host conclude that approaching your ambitions logically can save you a lot of grief and money. Gino asserts: “Look at things logically. Emotions lower intelligence. That’s what happens. I was emotional about this thing. But at the same time, you need the emotions to take the action.” That said, he realizes if he had a stronger team consisting of a smart attorneys, underwriters, and CPAs, he may not have experienced the failure he did going it alone.
[12:00] For Gino, developing a successful life is as simple as knowing what you want and why, then worrying about how to get it. “Focus on your why, and you’ll figure out your how.” [12:12] For him, that was multi-family real estate.
[13:00] Scott asks when Gino points to a failure to do legal due diligence on both his part, and his attorney’s. There were additional issues with the Board of Health and water issues in the building. He failed fire inspections and had to spend thousands upgrading his fire detection and sprinkler systems.
Lessons Learned from Gino’s Worst Deal: Due Diligence, Focus, and Recovering From Failure
[14:15] The lesson for Gino was clear: “Due diligence is the two most important words in any investing endeavor.” Scott observes that a better attorney or even a more experienced investor could have prevented many of these problems. Gino agrees that this was a deal that a smart attorney should have killed.
[15:50] Scott points out that getting an intelligent partner into the deal can be the cheapest way to have some experts on your team. Getting partners with high levels of knowledge invested in your deal can get any investor tons of free expertise, vigilance, and a safety net against bad deals.
[17:00] Keeping your eye on the ball is critical for any investment to succeed. Ultimately, Gino believes if you focus on the numbers and path toward profit, this attitude can keep you on the track to success.
[18:00] Some failures are inevitable, but having a system to do some “forensics” to evaluate what went wrong can prevent repeating your mistakes. Scott Smith advises investors: “Don’t be afraid to make mistakes, but make better mistakes along the way.” [18:40].
[19:00] Gino concurs that if you aren’t making errors, you aren’t doing much living. “The most successful people in life are those who can look at a problem through the lens of opportunity.”
[caption id="attachment_5820" align="aligncenter" width="600"] Real Estate Education: If your goals aren't juice, if you don't have passion for your goals, they're just something I wrote on a piece of paper.[/caption]
The Takeaway: Know Thyself and Have a Healthy Attitude Toward Mistakes
Scott and Gino wrap up the show by recapping the major points that other investors can learn from Gino’s story.
[20:00] The two investors agree that approaching mistakes constructively can make or break a real estate career. Similarly, they concur that excitement is a double-edged sword. It can cloud your judgment, or motivate you. This is where having a team can be useful to ensure enthusiasm is harnessed and used to motivate without distracting from good decision-making.
[21:00] Self-awareness and situational awareness can help investors approach deals intelligently, evaluate them rationally, and use previous bad deals as springboards on to better things.
Welcome back to The Real Estate Nerds Podcast! On today’s episode, we’re talking credit in plain English. Credit expert Wayne Sanford joins our host, real estate attorney Scott Smith, to share some credit tips that real estate investors--or really anyone--can actually use. Whether you’re new to credit, bouncing back from bad credit, or simply looking to improve your good credit, Wayne has tips for you. In under half an hour, you could be on your way to a better credit score. Let’s get right into it.
Techniques You Can Use To Improve Your Credit
Scott introduces Wayne, and the two experts dive right into common credit dilemmas and solutions.
[1:00] Scott asks what types of investors use Wayne’s services, and is surprised that the answer is nearly everyone: “Everyone knows credit is important, but you don’t realize how important until you need something today.” [1:44] His demographics are a combination of those with poor credit in need of credit repair and investors with good credit seeking to make it even better. Many of his clients approach him for the first time when they enter the real estate market.
[3:00] Scott asks about the most common situations that have easy fixes. The easiest situation for Wayne to address is “getting a fast 15 points.” Investors can take advantage of revolving credit (i.e. credit cards) being the single biggest factor in a credit score. Minimizing use of the credit card and keeping its balance between 10-20% of the max is superior to a balance of 0. The conventional wisdom that paying off a maxed out card monthly is actually just a popular misconception.
[4:45] New credit, or “baby credit,” applies to credit histories under 5 years old. People with new credit want to demonstrate that they’re a good risk for the lender. An average investor can call their credit card company to find out when their company reports to credit bureaus and exploit this information by timing when lenders pull information. Credit isn’t done in real-time; sometimes it’s better to wait for your credit to update before having a lender look you up.
[7:00]Wayne points out that the “Fast 15” technique is best for newer credit. Individuals with decades of good credit history may benefit more from keeping a zero balance.
[8:30] Young people or those with no credit should approach establishing credit wisely. Our guest points out that there are great credit options for college students with low limits around $500. People in this situation should maintain a low balance, while also making regular and timely payments. Once you make a late payment, it can’t be un-done.
[9:00] Scott asks about the best strategies for those in the 650-600 range who are trying to improve their credit for better financing on real estate. Wayne has a few pointers for these investors.
[9:40] Wayne offers a useful analogy for understanding credit: “Think of your credit report like a stack of cards. The messier it is, the lower the credit score.” Higher scores are “less messy,” which means it’s easier to repair poor credit but a longer process to elevate someone from 650 into the 700s.
[10:44] Most real estate lenders are concerned about the most recent two years. It still takes seven years for damaging credit information to fall off, but good recent trends are the most important for investors.
Credit Information Everyone Should Know
[11:50] Each state has its own statute of limitations on how long a creditor can sue you for. Some states like Wyoming can hold lenders accountable for 10 years, but this is on the longer side of the spectrum. The effect of judgments from creditors is massive: lenders won’t want to touch lenders in this situation at all.
[13:00] Fortunately, Wayne explains that recent changes in the law have helped those plagued with medical debt. Many of Wayne’s clients approach him because of debilitating medical debt: “God knows the medical industry is a business, and their billing department is the worst I’ve seen ever.” [13:10] Even otherwise responsible individuals who pay bills on time can be damaged by simply not receiving their bills. Professionals like Wayne can help if the creditor or collection company made an error in delivering the bill.
[15:00] Scott asks what weapons are available for those who get in a credit-related fight. Wayne shares that there are more tools available in disputes than most customers are aware of. Scott acknowledges that areas like credit and the law have professionals for a reason. Yes, you can learn the same information as experts, but it’s generally not the best expense of the average investor’s time: :“It makes sense to hire professionals to help us when there’s a steep learning curve.” [16:52]
Scam-Busting with Wayne: How To Tell if a Credit Provider is Legitimate
Not all credit repair services are created equally. Wayne offers some tips on how investors can find the best professional for them, and stay away from the scammers in the industry.
[17:10] Scott asks Wayne how customers can find a good credit professional and weed out the scammers in the field. Wayne advises that we look for professionals who ask questions. Legitimate credit professionals will want to know about your situation to ensure you’re getting what you need. He agrees with Scott’s assessment of when to hire a professional. If you’re inclined to do the work yourself, you can make a bigger mess that you will have to hire a professional to help clean up.
[19:20] Wayne also advises that credit customers go with their gut feelings. If something feels off, or you get the sense someone is reading a script just to sell you something, follow your instincts. Looking at customer reviews can also be helpful.
[21:00] The expense of a service isn’t necessarily an indicator of good or bad companies, according to Wayne. His own company offers a sliding-scale fee based on the complexity of the customer’s needs.
[22:50] When a customer’s need change, there’s another advantage to using a professional like Wayne: “When I’m looking at your credit, I don’t just look at it from the credit score perspective. I also look at it from the underwriting perspective.”
[23:00] Wayne explains his process for evaluating his clients. He always looks at credit scores for free, partially out of a belief in karma. But he also knows that being honest about whether someone needs his services can lead to future referrals.
The Takeaways: Know Your Credit Score, Use a Professional, and Watch Out for Scams
Scott and Wayne end the show with some key points investors can use to get the most out of their credit professionals, and a quick PSA on credit fact vs. fiction.
[24;50 ]Scott reminds listeners of the value of a good professional, and shares his personal approach to getting the most out of experts: “I’m a big believer in paying experts small sums of money to get great information. I find almost all experts are willing to do that...I always advocate that people use and abuse attorneys and CPAs like that.”
[26:00] Wayne leaves us with a Public Service announcement: “If it’s over seven years old, it can’t be posted on your credit. Depending on your state, usually 4-5 years after, you can’t be sued. If they’re threatening you, it’s most likely a scam.” Threats are used in these situations, but are generally empty.
Chasing the shiny thing could get you into a lot of trouble, including screwing up your IRA account. Scott Maurer, Director of Business Development for Advanta IRA, says that a lot of times, it’s somebody just getting into it and they're too trusting of individuals and not asking the right questions. For whatever reason, the common thread for people that have bungled their IRA accounts is that they are not fully understanding of what they're getting involved in and not really doing their due diligence or seeking outside assistance to really evaluate things. Scott Smith and Scott Maurer talk about all of the ways people could screw up their IRA accounts, some mistakes people could easily avoid, and the proper steps to take to avoid losing your money.
IRA Custodians: How They Can (And Can't) Help You
[1:00] Our host asks Scott Maurer to describe a deal where someone really bungled their IRA, but thought they were making an awesome investment. Scott Smith also wants to know what typically happens that makes these deals end badly.
[1:28]The mistake Scott Maurer sees over and over is that people botch IRA investments by failing to fully understand tehm and seek the appropriate kind of professional help.
[1:50] Scott Smith asks if those making major IRA mistakes simply don't use IRA accounts often, or are attempting one-time deals.
Scott Maurer remarks that that's often true, or these are investors who are too trusting of their professionals and simply not asking the right questions.
Other investors simply don't understand the risks or these investments genrally, and are lured in with promises of returns that are higher than stock market averages.
[2:38]Many of these investors are perfectly intelligent and even successful in their own fields, but simply aren't familiar with IRA accounts.
[bctt tweet="We don't do due diligence. It's up to the clients. It's written in our documents." username="RoyalLegalLaw"]
[2:58] As an Custodian at Advanta IRA,, Scott Maurer is legally barred from advising on whether a deal is good or bad for the client.
[3:08]Scott Maurer elaborates that due diligence issponsibility of the clients: "It's written in our documents and the forms they sign." IRA custodians are limited in their ability to advise, and typically refer clients to tax advisors or attorneys. However, their role is to esnure compliant documentation, not advise on investments.
[3:56] Scott Smith offers an insider secret on exploiting lawyers' lust for money: Attorneys are so hungry for business that they'll offer extremely cheap, or even free consults.
Scott has used this trick himself to get a cheap half-hour consult. This means the lawyer can review your deal and offer dirt-cheap egal advice on your situation. Attorneys do this in the hopes of getting more of your business.
Our host explains the risk of going cheap on legal advice. Getting improper, or no professional help can place the whole investment on the line. He recommends that new investors get a more seasoned investor or attorney in the field for help.
[5:03] Scott Smith expands on his tip for exploiting lawyers' need for consultations. Many attorneysare willing to go to great lengths just to get a consult.
Scott Maurer agrees and encourages his clients to get attorneys involved. While some go through with the deal regardless, others make more informed decisions or even opt of out IRA investing on their lawyer's advice.
[5:44] Even if a professional advises against an investment, it's a good idea to listen: "Sometimes, the deal that you don't do is important than the one that you did."
How An IRA Deal Went Sideways
The two Scotts discuss a real-world example of a new IRA investor making a bad deal and what exactly went wrong.
[5:59]Scott Smitth asks for a real example of how an investor botched his IRA deal, even with professionals involved.
[6:18] Scott Maurer describes a client who was promised 10-12% returns, and blindly trusted his mortgage broker's claim. The investor reasoned that with 20% down and a loan for the remaining 80% from the bank, he was sure to strike it rich. The client was new to real estate, and didn't understand equity or the terms of the loan.
[7:08] Scott Maurer explains how the investor's naivete on real estate and lack of familiarity with how real estate financing works ended up costing him.
[7:33]The client made a mistake by trusting a mortgage broker who was more interested in getting his fee than the client's success.
[caption id="attachment_5332" align="aligncenter" width="600"] IRA Account: There are people who are always willing to help and give you their opinion on a deal and they don't have a vested interest in the property. They're going to be honest with you.[/caption]
Insider Tips on Getting the Most Out of Your Attorney and Custodian
The Scotts share their professional perspectives to help investors understand, and exploit, the roles and motivations of Custodians and lawyers.
[7:59] Scott Smith gets real about the motivations for everyone else involved in the deal: cold hard cash. Custodians, lawyers, and mortgage brokers are all motivated by their paydays, but limited in what advice they can offer. The person receiving the loan is solely motivated by money, while the professionals have specific roles they are allowed to operate within. T
[8:28] Scott Maurer explains that the Custodian's hands are tied. If an investor asks whether they can lend $100,000 from their IRA, the Custodian will simply tell them they can. But legally, they are barred from saying whether that is a good idea for this particular investor.
[9:03] Scott Smith offers some insight on selecting the right attorney and the importance of finding a lawyer who is appropriate for the deal. The best choice, in his opinion, is to find a lawyer who is also investing similarly themselves: "You need somebody who's an investor in that field to tell you whether the deal itself is good."
The attorney's qualifications matter. The wrong type of attorney will simply tell you what you can do, rather than what you should do: "You really need a should. You need somebody else in there especially for your first couple of deals."
[9:25] Scott Maurer's client ultimately did get advice from a real estate attorney, he just did it too late. The client finally retained a real estate attorney because he had to foreclose on the borrower after over-lending from his IRA. When borrower walked, the IRA covered the loss, but the note was worth far less than the property.
[9:56] Ultimately the client spent substantially more on the attorney. If he'd gone upfront, he could have paid a few thousand dollars. But because the client waited, he paid thousands more to go through foreclosure and his IRA took back the property.
[10:16] Scott Smith points out the additional fees for foreclosure and the attorney's services hit the misguided client even harder in the pocketbook.
Networking to Avoid Disaster: Use Your Real Estate Investing Community Wisely
The two Scotts conclude that there's a better way to avoid this level of loss and drama: do your research upfront, hire the right attorney, and seek help from the investing community. Scott Mauer points out that you can get a lot of good advice from seasoned investors completely free.
[11:00] Scott Smith concurs, and adds that getting this advice is easy. "It's just as easy as popping into any real estate Meetup group and then just announcing in a meeting, 'I’ve got a deal. It looks like this. Is anybody here ever done a deal like this who is willing to talk to me?'"
[11:30] Networking is critical, and you have no excuse, because it's also free. Your network can save your ass well before things go bad, and can be a huge piece of your investing plan. Scott Smith puts this bluntly: "You’ve got to have a network, otherwise you're going to get taken by somebody that knows more than you. That’s just the world we live in."
[bctt tweet="If you're just getting started, there are no dumb questions and everybody in that room has been where you have before." username="RoyalLegalLaw"]
[12:00] Veteran investors also have something to gain from sharing their experiences with newer investors. Scott Smith points out that like most humans, even seasoned investors get lonely too: "They want a real estate friend. Just go and be their friend."
[12:05] Scott Maurer agrees, adding that more experienced investors attend these groups to find more deals and build their network.
[12:23] Scott Maurer offers advice for new investors: "Don't be afraid to ask questions...If you're just getting started, there are no dumb questions and everybody in that room has been where you have before."
[12:45] Scott Smith highlights another way to use the feedback of other investors. You may have a good deal if other people want in on it too.
[13:14] If you take away one piece of advice from this episode, make it this: If your professional isn't telling you if you should do the deal or not, they're not giving you advice on the deal itself. They're just doing their part. Lawyers, custodians, and CPAs are generally going to tell you what you can do, not what you should do. Get advice from someone who can answer the "should" questions.
The Takeaway: Due Diligence is All on You
The bottom line for today is to always do your own homework, and of course, get professional help. Just be sure it's the right kind of help. Thanks for tuning in to this week's Episode of the Real Estate Nerds Podcast. This was a Bad Beats episode, our series on investors who've crashed and burned in real estate and the investing game.
Welcome back to The Real Estate Nerds Podcast! On today’s Bad Beats episode, . Real estate attorney and intrepid host Scott Smith interviews fellow real estate investor Marco Santarelli. Marco is the founder of Norada Real Estate Investments, a nationwide provider of turnkey cash-flow investment properties. Since 2004, they’ve helped over 1,000 investors create wealth and passive income through real estate. Marco also shares his expertise with investors all over the country for free as the host of the popular Passive Real Estate Investing Podcast. Today, he tells Scott about one of his worst deals, and shares what investors can learn from his mistakes. After all, as us true Real Estate Nerds know, a Bad Beat is only a failure if you don’t learn from it. So that’s exactly what we’re going to do. Let’s dive right in.
Bad Deals and Good Deals All Start the Same Way
Scott introduces Marco and gets his perspective on the many ways deals can go bad. In the beginning, it can be hard to tell what you’re in for amidst all the excitement.
[1:00] Marco jumped right into real estate at 18 years old, the moment he became eligible for financing. 15 years later, he’s still in the business and helping other investors find high cash-flow properties. He’s seen great success, in part, because he’s willing to look at and learn from his mistakes as an investor.
[3:00] Both experts agree that good deals and bad deals look the same at first glance. Marco recommends a top-down approach that takes the whole picture into account, rather than remaining hyper-focused on the property itself:[4:00]“You can’t look at the property and the property only. You have to look at the macro picture...You start with the market, then work your way down to the suburb, the neighborhoods, then the property.” He suggests further analysis on the tenant, management aspects, and other details of the deal structure.
[5:30] Small errors in judgment can escalate quickly. Marco tells a wild story of trusting the wrong property manager. They had a good relationship and had worked together before, that ended abruptly when she ran off with $6,000 of his money. There were red flags he ignored because of their prior success.
[6:10] Scott points out how it can be hard to let go of a formerly trusted colleague, even if they’ve done you wrong: “It’s like a breakup, where I’m still in love with you, even though you’ve been terrible to me.”
[7:20] In retrospect, Marco realizes that he should have brought in outside property management. He’d known his runaway manager as an agent, but had never used her as a property manager. Our guest and host agree that just because a person is outstanding at one job doesn’t mean they’re qualified for another one.
Marco Santarelli on How Deals Go Wrong
Strangely enough, the $6,000 Marco lost isn’t the bad beat he came on our show to talk about. Scott and Marco dive into the dirty details of Marco’s worst deal.
[9:45] Scott asks Marco about what his worst deal was, and what circumstances led up to it. To understand what went wrong, Marco explains the context of the deal. Hhis business, Norada, helps investors with turnkey investments. His company plays an active role in “We want our investor-clients to take their “chunks” of cash and convert it into cash-flow, where you have a stream of cash Flipping business. Things started well enough, and he developed an active business that saw initial success.
[12:20] Marco’s very first deal under his new business lost him $17,700. Fortunately, his next deals covered the losses and he was making decent average profits. But the complexities of his business set-up, market issues, and operational issues with appraisers contributed to feelings of frustration and dissatisfaction.
[13:30] When Marco realized how much his business was taking him away from his true passions in life, he knew it was time for a change: “What was once a baby grew into a monster. It was sucking up more and more of my time...I’d built myself a business that was really a job.” He began scaling down and selling off his properties.
[14:34] Marco points out that the realities of flipping are stressful, time-consuming, and not nearly as easy as the media would lead new investors to believe. He cautions against getting investing advice from reality shows: “If you watch HGTV, or you watch all these flipping shows on TV, let’s face it, it’s reality TV. They’re going to show you what they want to show you that makes good TV, but it’s not as sexy or as glamorous as you see on TV.”
[15:00] While TV shows show the “wins” in flipping and make it look like easy money, Scott Smith points out that there’s actually a high level of knowledge required to be a successful flipper. Effective flippers understand markets, unexpected price increases, contractor relations, repair times, and much more. Marco agrees, and offers advice to those considering entering real estate as flippers: “If you’re going to flip property, even if it’s just one, you need to understand that nothing goes exactly as planned.” [15:30]
[17:00] While Marco started out in flipping, his Bad Beat started out as a joint venture he was persuaded to get in on. The sponsor who approached him allowed him control over the deal. The first few went well, and they quickly were earning capital in the millions. But over time as operations scaled up, this side project become more problematic and emotionally stressful. Market conditions and Marco’s lack of fulfilment drove him to shift his focus towards buy-and-holds and helping other investors.
[19:00] Appreciation has influenced Marco’s transition: “We’re in a seller’s market in virtually every part of the country, and because of that, prices are appreciating or going up faster than rents.” This created a major problem for Marco’s turn-key properties, as flipping is difficult in this climate. He was forced to diversify, as investors had lower interest in these deals and sales naturally slowed. Conservative appraisals created yet another problem.
[21:00] Tight inventory made good deals increasingly hard to find. “When you’re averaging single digit returns, that’s not enough meat on the bone to continue trying to build the business [22:40]. Under these circumstances, Marco was faced with the choice of being more selective and screening deals more carefully, or downgrading the class of properties he was buying to maintain a profit. The only alternative of moving to a different market didn’t appeal to Marco at all.
The Takeaway: Vet Your Team and Know When To Walk Away
Scott and Marco end the show by discussing their strategies for evaluating potential team members.
[23:30] Our guest highlights a truth of the investing world: “Real estate is a team sport. You never do anything by yourself.” Scott agrees, and regularly encourages his clients to have a dream team of an attorney, a CPA, and a dealmaker. Marco has prepared a team on the ground in Chicago, but hasn’t yet advanced in making purchases as he is still unloading his existing properties.
[27:00] The two investors discuss their habits for vetting a team. Scott takes new team members to hang out where he lives in the Austin area, sometimes taking members on a hike or other normal activity. This helps him get to know the other person, as their defenses drop and it allows both people to feel each other out. Marco sees the wisdom in this strategy, but acknowledges that you never really know what someone is like in a business sense until you’re already “in bed” with them. He believes the best you can do is get to know someone, do your homework on them, and look at their work and references.
[28:30] Contractors are trickier to vet, but tools like Angie’s List can help. Evaluating their past work and taking these relationships slowly can also help, in Marco’s experience.
[29:30] Scott Smith sometimes gets a work product from a team member, then has another professional come in to evaluate that product. Putting the professionals head-to-head gives Scott insight into both of their characters and their work. He notes that this strategy is particularly useful for his own kind: lawyers. This “test” can be done inexpensively, and Scott isn’t afraid to have a little fun with watching fellow lawyers face off for under $100: “It’s also just kind of entertaining to watch a cock-fight every now and then.”
[30:30] The major lesson Scott observes from Marco’s story is the value of walking away before a Bad Beat gets worse. Marco’s business wasn’t a total failure, but it simply wasn’t sustainable when scaled up under current market conditions. Marco has retained his success by sharing his knowledge and experience with new investors and being willing to diversify.
Connect With Marco Santarelli
Follow Marco Santarelli’s business activities by checking out his main website, NoradaRealEstate.com. Listeners can also check out his podcast, which has achieved a spot on the Top 20 podcasts on iTunes. Check out past and current episodes or join the community around Marco’s podcast at PassiveRealEstateInvesting.com, where Marco also hosts a wealth of free investing information and resources.
Listener Resources
Thank you for joining us on today's episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
Don't forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today's episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next week to learn how to be in the know for the best deals. Thanks for listening and joining us on our journey to become better investors!
Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions
Schedule your personal consultation now.
On the debut episode of The Real Estate Nerds Podcast, where we give the information you need to be the best investor. We take a look at the human side of investing and ask some of the most successful individuals in their fields about their best deals, bad beats, and the lessons they've learned through their experiences. Today, our host Scott Smith, an asset protection and real estate attorney, asks real estate investor Scott Sutherland about the best deal of his life.
Approaching The Real Estate Market for Hidden Opportunities
[1:00] Scott Sutherland has been investing in real estate full-time for eight years. Originally a product of the tech industry and traditional stock investing, he made his real estate debut after following investing strategists such as the Motley Fool. He credits his early success to bravery during a fearful time in the industry.
[3:35] Scott Smith points out that most in the market are brave right now. The two conclude that this is a good reason to be conservative, and skeptical of promises of absurdly high returns. The opinions of professionals matter more than the opinions of everyday investors.
[5:53] When asked what he does differently than average investors, Scott Sutherland highlights his early experience investing in Austin, TX duplexes during a market decline. He concluded that cash-flow doesn't lie, regardless of what other investors say in times of fear. He pointed out was that his worst-case scenario was still a success.
[8:17] Scott Smith comments on Scott Sutherland's tendency against following the herd: "If you say you're different, you're arrogant. But you might be different in the right way."
[10:00] While Scott Sutherland acknowledges the power of diversification, he also appreciates going with what you know: "The more you know about a given business, the more effective you can be at it." In his case, a major piece of his business is short-term rental (AirBnb). Tune in to hear the details of how his short-term rentals contribute to his larger strategy, as well as some of the nuances of this type of investing.
[15:08] Scott Sutherland always looks at the numbers when considering or analyzing investments: "Cash flow is your bird in the hand. Appreciation is the two in the bush."
[15:30] Scott Smith points out that you can only gain one piece of expertise at a time, and asks Scott Sutherland's thoughts on expanding into different asset classes.
[16:00] Scott Sutherland uses a sports analogy to describe this process in real estate: "It's still the same sport, you're just learning different shots." Having an area of expertise doesn't mean you're done learning. While Scott Smith prefers joint ventures with more experienced investors for learning new things, Scott Sutherland's personal approach is more cautious when it comes to partners and their risk. Both agree that harnessing the expertise of others is a vital element of growth as an investor.
[19:55] The two Scotts briefly debate the value of striking out on your own with new types of investments. Scott Sutherland shares his balanced approach: "There's a lot of satisfaction in knowing you could go it alone, but choose to work with others." [20:31]
[caption id="attachment_5303" align="aligncenter" width="600"] Real Estate Deals: If you don't jump out there and learn new things and go after new opportunities, then you'll never have those skills when the day comes and that opportunity arrives.[/caption]
Analyzing Scott Sutherland's Best Deal: How An Ugly Green House Got 5,000% Returns
Scott Smith probes Scott Sutherland for his unique perspective on his 2010 deal and what made it such a success.
[23:53] Our host and guest dive into the details of Scott Sutherland's big win, focusing on what Scott saw that other investors didn't. When asked what circumstances led up to his best deal, Scott Sutherland points to sheer necessity. One of his best deals happened to be one off his first, and was born out of the desire for him and his new wife to live in Austin's sought-after Zilker area. They eventually settled on a duplex that had recently been foreclosed on, planning to live in one side and rent out the other.
[25:15] One of the major lessons Scott Sutherland learned from this purchase is a piece of advice he continues to share with new investors and anyone buying a property: "If you're not the best buyer for it, particularly in a competitive market, you're not gonna get it. Or if you do, you're probably going to overpay for it." He believes this deal worked in no small part because he and his wife were a particularly good fit for the property. In general, he believes assets can be optimized for particular types of people: renters, families, developers, etc.
[28:20] The day Scott bought his property, it was dramatically underpriced. He actually chose to overpay for it by $40,000. Scott Smith acknowledges that most investors and brokers, possibly including himself, would have thought Scott Sutherland was insane for this choice. But it was the smart move to secure the asset, and has since become part of his greater strategy. He has since made multiple successful investments by offering higher than asking price, but lower than market value.
[29:30] But Scott Sutherland stands by it, based on the philosophy that "pigs get fat; hogs get slaughtered." Overpaying a little bit guaranteed he would get the asset.
[30:05] Scott Smith sees the wisdom in Sutherland's strategy: "If you want safe investments, everyone is going to agree with you. And that's great. But if you want to do something different, everyone is going to think you're wrong."
[33:00] While Scott Sutherland's primary motivation was to find an inexpensive place to live, He paid 0.55, or $1,500, down on a duplex worth $350,000. But over time, he found other ways to make the property more profitable. His low financing arrangement allowed him to close on the property and still have funds left over for re-investment. He was eventually able to rent the second unit for $1,500/month.
[36:00] Scott Sutherland's entry into vacation rentals in 2012 was inspired by a vacation he took with his wife. She observed that they could do exactly what the owners of their rental property were.
[39:00] The very next year, Scott Sutherland's next door neighbors moved out. This created an opportunity: Scott bought the property and continues to use it primarily as a vacation rental, a highly profitable choice for a location that hosts festivals such as SXSW. As for his original investment, it is currently valued at over $800,000: nearly a 5,000% return rate on his original down-payment.
What Investors Can Learn From Scott Sutherland's Duplex Win
The two Scotts end the show by analyzing the best aspects of Scott Sutherland's 2010 deal. Together, they share the major lessons they have learned from the deal itself and their broader real estate investing experiences.
[42:00] Scott Smith observes that the "magic" of this deal happened on the front-end, with Scott Sutherland seizing an opportunity others didn't even notice. The house itself was hideous when he bought it, but Scott Sutherland saw its potential and knew its location was extremely valuable. He has always liked properties that need some fixing up.
Forced Appreciation: The Beauty of Being the Scummy Neighbor
[44:00] Scott Ssutherand's penchant for visually unappealing or even beat up properties is actually part of his strategy: "Whenever you go into a neighborhood, you want to be the scourge of the neighborhood." He sees neighborhoods as an average of the homes. Given his affinity for duplexes, he is keenly aware that his neighbors' property values are likely to lift him up. Forcing the appreciation of his assets is a tactic that has been extremely lucrative.
[46:00] Scott Smith asks if Scott Sutherland has a tip for those interested in vacation rentals or short-term rentals. Check your local regulations and assume nothing. Austin, TX, for instance has regulations on short-term rentals. A real estate agent familiar with local laws can assist you. His own properties have fared well as "mid-term" rentals as a result of local regulations.
[51:00] Scott Sutherland recommends that new investors seriously consider using the same strategy he did by investing in duplexes. There are many benefits, particularly for investors who live in one unit and rent out the other. If there's a management issue, you can simply go next door. Risk is fairly low in good locations that are likely to trend well, as the income tends to off-set an investor's expenses.
[bctt tweet="If you're new to the game and you're looking to build wealth, buy a duplex and move into it yourself." username="RoyalLegalLaw"]
The Takeaway: Be Willing to Be Different and Be Smart About Risk
Scott Smith's takeaway from his guests story is this: "Know what your realistic downside risks are, and if you can afford them, take them." [56:00] If your worst-case scenario isn't that bad, it may be worth taking. If you've run the numbers and are willing to get uncomfortable, even to the point that other investors call you crazy, you too can see the opportunities that other investors don't.
Connect With Scott Sutherland
Scott Sutherland is easiest to reach via his website. He is generous with his time and enjoys offering his insights to fellow real estate investors. While his expertise lies in the Austin area, his knowledge can be applied to many markets and situations.
Listener Resources
Thank you for joining us on today's episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
Don't forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today's episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next week for the rest of a fascinating conversation with Scott Sutherland. Next time, Team Scott S. Squared will be breaking down the "post-mortem" of deals to look for even more lessons on becoming better investors. Thanks for listening!
Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions
Schedule your personal consultation now.
If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at podcast@royallegalsolutions.com
About Scott Sutherland
Scott earned his Engineering degree from Texas A&M in 1995 and his MBA in Finance from Southern Methodist University in 2002. He is an active property investor specializing in distressed properties, rehabs, and buy and hold rental properties. He operates the web site www.RealtyStake.com to share his investing knowledge.
On the debut episode of The Real Estate Nerds Podcast, where we give the information you need to be the best investor. We take a look at the human side of investing and ask some of the most successful individuals in their fields about their best deals, bad beats, and the lessons they've learned through their experiences. Today, our host Scott Smith, an asset protection and real estate attorney, asks real estate investor Scott Sutherland about the best deal of his life.
Scalpel, Please: The Post-Mortem of a Duplex Sale Gone Wrong
[1:00] Scott Sutherland has been investing in real estate full-time for eight years. Originally a product of the tech industry and traditional stock investing, he made his real estate debut after following investing strategists such as the Motley Fool. He credits his early success to bravery during a fearful time in the industry.
[3:30] Scott Sutherland talks about an investment that didn't go as planned. He was limited by two things: being a passive investor and using a Self-Directed IRA for the investment. These circumstances meant he had little control over the investment beyond a certain point. Self-Directed IRA investments have additional limitations that prohibit investors from being directly involved in their investment. Doing so is known as "self-dealing" and would trigger a costly prohibited transaction.
[6:00] Scott Smith asks what made the investment in question appealing, Scott Sutherland points out that he felt comfortable with the asset class: duplexes in the Austin, TX market. Having dealt with hundreds of them over his career and feeling confident in the data, Scott Sutherland had no reason to question the asset itself.
[8:00] The two Scotts agree that Operating Agreements and deal structure matters when it comes to new assets. Even if an asset is great, the documents that dictate what happens when things go wrong can prove critical if things go South. Scott Smith drafts these for a living as a real estate attorney.
[10:20] Scott Sutherland points out that the asset he bought was four duplexes, but treated as a single property. Financing and sales issues changed dramatically because of this. Eight units would have had a lower "exit risk" than all eight taken as a whole.
[12:22] Scott Smith observes the importance of keeping deal-making processes consistent: "You can't really control what happens with an investment. That's an illusion. The only thing we can really control is the process that led us to a conclusion around what decisions we're making."
[13:00] Timing was an element in "lowering the bar" for Scott Sutherland's process. "The hardest time to invest is when things are great...Confidence peaks the day before the crash." Fear of lost opportunities, or FOMO (Fear of Missing Out), can also play a role in investors making poorer decisions in a hot market.
[18:15] Scott Sutherland notes that unstable markets yield higher returns, but the opposite was true in his case. The market was flooded. He believes he should have ignored return-chasing in favor of evaluating the relationship between risk and return for his particular deal. In retrospect, there were "ticking time-bombs" like seller-financed debt, that created higher risks from the outset.
[19:25] "If you borrow 80% of your investment and lose 20%, you've lost everything. Because you've lost all your equity."
[20:00] Scott Sutherland points out his own sense of entitlement may have played a role in his loss. He was biased by having bought properties in certain neighborhoods for higher returns in the past, and neglected to look at the present situation for the asset and market. He has since realized his judgment was impaired: "I underestimated the risk because I was very focused on the return. I was very focused on how good things would go if they went well, and not on how quickly you could lose everything if things went poorly." [21:00]
[caption id="attachment_5316" align="aligncenter" width="600"] Postmortem Of Deals: If you've got a deal where you think this sponsor is going to really be hurt financially if this deal goes down, that's a good deal to look at because they're right there with you.[/caption]
The Red Flags Were There All Along
Scott Smith speculates that a combination of external market pressures and internal biases contributed to Scott Sutherland overlooking some red flags. Since hindsight is 20/20, the pair are able to clearly see how the bad deal could have been prevented.
[23:00] Scott Sutherland actually addressed two issues with his operator planning to live in one side and rent out the other. First, he was concerned about debt refinancing if things went poorly. The operator claimed the creditor had pre-approved refinancing, and later disappeared. Scott Sutherland believes he was too trusting. He recognizes he could have taken additional steps, like calling the lender.
[25:00] The second issue Scott Sutherland identified was that a partner was acting as a contractor, but they lacked a contract clearly stating what that person would make. He attempted to persuade his fellow investors to hammer this detail out on paper: "We all need to only make money if the deal makes money." [25:13] A simple provision limiting the amount the contractor could charge would have prevented this from becoming an issue.
[26:00] Scott also adds that having sponsors in the same position as you helps: "You want [sponsors] to worry more about the performance of the asset than you. If you've got a structure where the sponsor makes money no matter what happens, that's a non-starter." A sponsor who has this concern is more motivated to make the deal successful.
[28:00] While Scott Sutherland knew and trusted his sponsor, he could never have anticipated what ultimately happened. The sponsor, who had previously been reliable, walked away from all of his investors when this deal went south.
[30:50] Poor communication with the sponsor was also a red flag: "When they want your money and they aren't getting back to you quickly, it makes you wonder how they're going to be when they have your money."
[32:50] Scott Smith points out how networking failed Scott Sutherland: "The true value of your network is in information that isn't disclosed."
Postmortem Results: What Investors Can Learn From This Bad Beat
The two Scotts evaluate what could have been differently, and ultimately see this bad deal as a lesson in risk. Scott Sutherland sums this up succinctly as: "Knowing bats 1,000." [35:10] The two investors acknowledge that money can be hard to recover, but that losses can be lessons in resilience and better judgment.