company which was not how I started I started off as a Buy and Hold investor and as a flipper and doing creative
Finance uh and then we moved into sale later to try to monetize some of our marketing I didn’t start there and I
found that when I was trying to scale a wholesaling company it really wasn’t the right Market it’s a pretty small Market where we are and our our margins are
pretty pretty small On Assignment fees and so some of the other strategies that we were we were doing so kind of similar
to Wyoming in a way right where you’ve got some lower price point more affordable housing a really good rental
market so we built up a really good rental portfolio but we were spinning our wheels and wasting a lot of money
trying to build um a big wholesaling operation so took a step back and looked at what were all the deals that were the
most fun and what were the ones that were most profitable and it all involved creative Finance so both buying subject
to owner financing and then creating ws and an originating notes and selling
notes and all of that that world to me is just really fun I love solving these
kind of complicated problems and every deal is a little bit of a one-off so it’s a challenge in a way when you’re
doing a lot of these complicated creative structures it’s not a always a repeatable process so you you can’t it’s
harder to scale it really takes some skilled people to look at these deals and to underwrite them and try to come
up with Creative Solutions that work for our sellers so we just decided that we’re not going to scale we’re not trying to create a big huge company
we’re trying to do five to seven deals a month that are creative mostly WPS so
that’s our Focus we’ll still do a little bit of other stuff when it makes sense but we’re trying to focus on on wraps
and originating notes and selling notes these days love it yeah yeah that’s it’s uh I can relate to you getting on a call
and like working through a deal and figuring out how we how can we make this work for both sides it’s a lot more fun
than calling and offering somebody 70% 70% of the value of their house right minus repairs getting yelled at and
called having the reputation of like a lot of the other wholesalers that are just trying to buy low and sell high
you’re bringing value right you’re bringing value these people that are in a situation getting in probably the most money they can out of their house right
absolutely yeah I mean there’s lots of times we we’ll pay full retail or even over retail if the terms are favorable
for us and we’re able to to cash flow that on on a wrap on the back cool well I’ll ask you this one Jay because I get
it a lot they’re like people just can’t wrap their head around like why would anybody ever like sell their house on
terms when they CU like a lot of people perceive that hey like nobody’s going to want to buy that nobody’s going to want to like get paid over five or 10 years
but like yeah I’m just curious what you kind of why it works so well for you guys yeah I don’t think it’s the perfect
fit for for all of our sellers but for for some of our sellers it’s absolutely the perfect fit because there’s there’s
multiple benefits the main one probably is tax benefits so a lot of times these
are are landlords that have been around for a long time maybe they’ve they’ve held this house for 203 years they’ve
completely paid off the underlying note and their cost basis is extremely low whatever they bought that house for so
when it comes time to sell the house the difference between their cost basis what they PID for it or what their basis in
is in it versus what they end up selling it for they’re going to have to pay cap gains on that and that can be significant sometimes you also have
appreciation recapture there’s all kinds of things that happened that a lot of sellers don’t realize especially maybe
you know they were mom and pop landlord they had three or four houses and they were collecting a rent check every month
they don’t realize maybe what the negative consequences are of them selling the property and if we can help educate them about that we’re not CPAs
but we can point them to go where to look for that information they can get the expert advice they need and it makes a lot of sense they’d much rather spread
out those taxes over you know 20 years uh and and a lot of times they’re surprised
to see that the same amount of money that they were netting as a landlord I can write them a check every month so
they have no work and they’re still getting the same amount of income as what they were getting before so it
makes sense for a lot of people yeah okay technical one Jake so I I’ll have these conversations too and we’re
talking through this about hey we’re we’re deferring your capital gains or or we’re spreading them out but but a lot
of times as a investor we want to keep the payment relatively low right and then they are and like we’ll put a
balloon for example a lot of times we’ll put a 5-year balloon or a 10-year balloon on it but have you found a way that in that five year like let’s say we
do a deal and we have a five-year balloon and we’re just doing interest only in the meantime to the to this person selling their house so they’re
not going to take capital gains this year but they would still pay all those capital gains in year five right if we
had a big balloon where they paid off the balance so all that depreciation would just I guess you kick the can down
the road is that the selling point or or have you found a way to where you could really wipe out those you know what I
mean cuz I’ve also heard if you could last thing I’ll say is I’ve also heard if you keep it under 40,000 per year
like what you pay them out they’re not actually going to be taxed capital gains but at the same time I’m never I’m not
going to be paying them 40,000 a a year on the payoff but right how would you answer that I I would say two things one
offer uh a longer balloon they should want to spread that out over a longer period of time you can also put
something in your promiser note your your D to trust that that allows for an extension
so sometimes this can be really beneficial to you as the buyer you can put in an automatic extension if they’ll
agree to it in other words if we’ve made all of our payments never missed a payment never had a late payment you
agree to have an automatic extension in x amount of years for the same amount of term so that can spread it out for for
longer or you can have an agreed upon process to come together when that balloon is coming due and see if you
want to extend it as well I’ve seen that as well got it okay so put in the balloon okay but eventually I got you so
you’re you’re kicking that can further down the road where they don’t and they make the income yeah just the only struggle I was getting was I was trying
to talk to these people through hey you sell today your basis is 50,000 and you’re I’m you’re buying selling this
for 250 that’s 200,000 going to hit you so let’s spread that out but I’m thinking about it well it’s just going
to hit him in 5 years on that balloon or whenever I refinance them or is there a way to get around that oh I see when if
you if you go to refinance yeah yeah say I buy them out or sell the property or whatever I do in five years or 10
whatever it is uh yeah so there’s a great tool that a lot of people don’t know about called substitution of
collateral so um important concept that most Real Estate Investors I hope
understand but a lot of people are still really confused about which is what is the difference between a promiser note and a eer trust it’s different in every
state right some states are mortgage States but you’ve got a debt instrument and then you’ve got an ownership instrument and they’re related but
they’re not the same thing so in the same way that you can buy a house subject to you can take the the the note
the debt that you have originated with this seller and then you can go substitute it for a different piece of
collateral with a substitution of collateral Clause so let’s say you had a rra buyer or or if you were just holding
it and you wanted to refinance it because you wanted to get your Equity out or something like that you could take that debt and you could go put it
on a different piece of collateral so that they didn’t realize that income in one year and it continues you continue
just making those payments and they just have a different different collateral there’s a different piece of real estate that is the collateral for that promise
right now got it okay so yeah in five years you’re ready to refinance or buy it they don’t want to take the big that
big tax hit we talked about so you substitute to another property they keep getting the income yeah it’s a win-win
to be honest because now that seller doesn’t realize all of that gain in one year and you continue to have what what
we’ll assume is pretty good terms of debt right and you can go take that debt and go put it on a different property
got it yeah because for a while there and I needed to pay these people back like if I was really truly saying hey in
that same scenario where they got 200,000 of potentially capital gains like I would need to spread that over 30
years which I guess that’s typically what you’re saying to do is right but I’m also trying to yeah I guess that’s
the probably way to do it right because if I am negotiating no interest I’m just going to spread this out over time they don’t pay capital gains on it yeah I
guess so I didn’t want the payment to be too high right because if I make the payment I want to keep their payment to me to keep the cash flow good on it
right but I just worried I was worried at the end of it that they’re going to still be in the same situation if you if you have another property that’s free
and clear then you can do that substitution of Catal but you got to do it from the beginning you got you have to put that Clause into the promisory
note oh so okay into the into their original okay that permits you to do a substitution of collateral got it okay
yeah makes sense because I’m trying to think of like it seems like the sellers we get they like creative Finance because a they don’t need all the money
now and we can kind of Kick the Can down the road and I feel like in our case that allows us to like get somebody in
there cash flow it lock it up at today’s prices so that’s maybe one seller um and
maybe it’s a seller too that can’t really move it right now on the market but we’ll say hey give us a 5-year
balloon let us make payments right I don’t know I I guess I’m seeing more people that are and do you get this
subjection a lot where like it’s an older person they’re like I don’t know if I’m going to be alive in 10 years so we do and I think that’s
legitimate for some of them one of the ways that we we get around it is most of those old people have family members and
we can say that this is part of your estate planning and you’re creating you know a legacy for your family they don’t
have to deal with the burden of being a landlord they just get a guaranteed payment every month and we’ve had some
sellers even approach us with that because that’s exactly the problem that they’re trying to solve they’ve built a
portfolio they don’t maybe they don’t have confidence in their children being able to run it or um or maybe they know
their children just don’t have a passion for it and they don’t have interest so it it that it solves a problem for some people I’m sure got it yeah so just
those people that don’t want to yeah anyway I just get that objection commonly they’re like well what’s I don’t want to go 10 years cuz what’s
going to but yeah it’s like hey you could plan this out and then I guess thinking this all the way through if they do pass everything resets on it
right they’re and then if they if the no got paid off is that right or do you have to you mean you’re talking about
adjusted cost basis B when someone passes away not really because it’s already sold right there’s not the value
is the value it’s whatever the face value of the note is that they’ve sold they don’t own the propert proper anymore so I don’t think it’s a good
question I’ve never I’ve never thought about it before but I don’t think there would be an adjusted cost basis for
owner sign owner finance Noe right as opposed to a piece of real estate got it so it’s still there and uh just just
thinking when that balloon payment happened if it happened after they passed if they would still get taxed on
capital gains yes I think they would I don’t know it’s a good question though I
I don’t know kept gains plus probate I’m not sure yeah that’s all right I I know what you mean cool hey another one
before we leave creative finances I like it just selfishly asking this insurance so how I got this asked this question
asked to me today so let’s say that yeah we do we go sub to we keep the insurance
in place are you typically just getting added as an additional insured and then I’m also just wondering say something
catastrophe does happen or roof gets total out or there’s a fire kind of how all that happens and what you recommend
in like insuring these properties and also not trying to pull the do on sale Clause by notifying the lender that the
insurance and all that changes yeah I’m dealing with these issues right now and we’ve we’ve been buying subt for three
years now and so this is the first time that we’ve run into this issue and we’re working through it and solving it right
now of a roof claim with as sub2 and it is not easy I would recommend that you
you make sure you have a good partner and your insurance broker so so for us we we do not leave the sellers policy in
place we they keep it in place for about a month and we make sure that deed is trans and then we come in and we
substitute our policy and the seller is named as additional insurer on that policy along with the lender so our
insurance broker basically creates two different policies two different Eis evidence of insurance one for kind of us
internally and one that we present to the lender that has all the the proper additional insured on it and everything
so um I will say you you I hope if anyone out there is purchasing subt they have all the proper papw they know what
they’re doing they’re using a really good title company or closing attorney and they’re getting the things they need
because you respect especially need a a power of attorney a limited power of attorney to act on the seller’s behalf in in case of any the mortgage and the
insurance so we’re going through that right now trying to get an insurance claim processed because the insurance
company will name the additional insured on the check so we have a check made out to me my company and the mortgage
company and you kind of look at this check go huh how am I going to cash this
when it the mortgage company uh does not know that I own the house so we’re working through that right now I don’t
have the answer because we’re halfway through it but we know we have all the all the paperwork we need we have the limited power of attorney and we’re
submitting all that got it so the limited power of attorney from the original seller allows you to act on
their behalf on the property correct now I’m not too scared about it because we
for me I’m not scared about do do on sale Clause at all because we have protection against the do on sale with
the structure that we create with our wraps so when we take a sub two or a sub2 seller finance hybrid and we wrap
it when we originate those notes to the end home buyer we create a first and a second position lean and the first
position lean is a little bit of a guess but it’s it’s generally equal to the
unpaid principal balance of the sub2 in two years so the reason we do that is
that in the case of a sub2 getting called we have a note that we can go
liquidate within a matter of a week I mean we have note buyers that will execute on a note in 7 days and so we
can have all of that money back from selling that first position note and we can go Wipe Out the do on sale clause
and then we still have our second position note in place that is an equity position and also cash flow for us and
so we can wipe out the underlying sub two and and move on while still having
uh you know equity in the property got it very interesting I didn’t know about that and that makes sense you just pack and you guys are selling a lot of notes
and have those relationships so yeah and it’s a good not right yeah and it’s a going to be a low LTV loan I’m sure
exactly so it’s interesting that whole world we’ve gotten into that in the last nine months where we’re really building
buyers lists for note buyers and it’s similar to a wholesaling business in a way of building a buyers list and
creating relationships and understanding what these different note buyers buy boxes are and what they buy at and
trying to find always trying to find better better buyers who will pay a little bit more got it yeah we should
seg away there here in just a second but yeah so back insurance so that makes sense that you’re less worried cuz that was one thing concern I had is all right
once don’t mess with the insurance policy once you’ve close because it could just be one thing to call to do on
sale but you’re not as worried because if they do call it I don’t know have you ever actually even seen it called because he swapped insurances yeah I
mean I’ve seen do on sale Clauses happen to and the number one way it happens is
because somebody messes up Insurance some way I will tell you in the years we’ve been doing this we’ve probably
made every mistake that you could make under the sun when it comes to doing this and we’ve still never had a do on
sale so it’s not like it’s a nuclear bomb that if you touch it it’s going to explode it’s a little bit more forgiving
than that I don’t I don’t want people to be careless or Reckless you need to know what you’re doing and understand the process and and and deal with an
insurance broker who understands what you’re doing and that you’re putting Insurance on a sub two and will write it properly but people don’t have to be so
freaked out about it got it okay yeah I need to go back and change some of mind some of them I’ve just left the insurance in place that was in there
when they closed and then try to get myself added or my LLC added as an additional insured but the risk there is
I’m going to have to go through them if something does happen you’re going to have to go through the sell which is one of the things that we’re telling our
sellers when we close on a so to is hey we’re 100% responsible for all of this you don’t have to do anything else there
there might be a time when I need to call you for something but but that is extremely rare you’re not going to be responsible for insurance or taxes or
anything like that so got it and that’s where you get that limited power attorney that allows you to act on there
okay absolutely okay and yeah I was just also if we ever went to sell the property like getting a getting a payoff
statement so it allows you to interact with the mortgage company as well if there’s anything that you need to do with the mortgage company got it yeah
this is good these are good we could keep yeah I I’ll I could go really deep on these but yeah because there just all these scenarios but you answered I think
Jake you’re like hey if if something does come up or you guys have ran into a lot of hurdles that do get brought up
and sounds like yeah it’s just matter of working through them yeah and just asking questions and I think it’s really
important to have Specialists on your team I don’t mean internal team but
external team so title companies real estate attorneys insurance companies if you’re doing any kind of creative
Finance you really need to develop those relationships with those people who can guide you um along the way in your local
area well specifically State this is all state specific every State’s going to have different rules and regulations
around creative finance and so develop a relationship with somebody local who’s an expert cool well let’s yeah Jake you
touched on it kind of building like getting into selling notes right so I love what you guys have done with your company to where you’ve kind of solved
the problem was of okay so you go and you go seller or Finance some of these deals but sometimes sometimes they want
some money up front right or they need some cash it’s not just a simple like hey it’s sh just a simple straight up
sub to assume my loan and those are great but those don’t always happen so curious can tell me a story how you guys
evolved and how you built out really this note buyers list yeah I I give a lot of credit to my partner Andrew
really worked on that worked a lot on our underwriting um and worked a lot on our dispo and building note buyers lists
I think him just tinkering with the system and playing with our underwriting model he’s created pretty amazing tool
that’s you know multiple pages of this giant spreadsheet that we can do some interesting things and we can play with
different interesting scenarios and one of the things we uncovered was traditionally people don’t want to deal
with a with a seller that needs a huge down payment and but when we started actually running the numbers we realized
wow we can we can give a large down payment if we need to because we do have
this strategy of selling the note on the back end and we’ve got to tie up money for a few months but now we just need to
go solve the all the money problem which we’ve solved over the last few months just building new relationships with
with lenders both hard money lenders who understand our model and are willing to to lend on it and then also building new
relationships with private money lenders which is our Big Goal moving forward is to raise more Capital to fund these kind
of deals um you know creative deals has substantial entry fees and costs associated with getting into them but
the benefits there create so much value on the back end we just needed to dis solve the money problem which we which we’ve done lately interesting cool so
how so you kind of built out the model you guys could kind of get creative yeah how have you started to find no buyers
like and find all these people because that’s a whole another world that a lot of people don’t know anything about yeah it’s a combination of a couple different
things so there are some Facebook groups out there and there’s a little bit of Education in this space Eddie speed is
is the big one you know has been around forever and has a tremendous amount of knowledge and then there’s a few other smaller players we’ve studied a lot with
Mitch Stevens and Nick legamaro and Eric sage and and people like that so when you start networking within those groups
you start meeting a lot of noyers so just reaching out and and saying hey we’ve got these notes available and
building a list same way you would if you were trying to buy a build a buyer list for for wholesale and there are
some auction houses as well paper stack is one of them so we’ve put notes up there and then we’re building
relationship just with anybody who reaches out on those auction platforms and just putting them into a database
taking lots of copious notes understanding what these folks buy boxes are and it it’s the same really because
some of these buyers are super solid and will execute and do it what they say
every single time some of these buyers are are not and they’re pretty flaky so
a little there’s definitely a learning curve in understanding who the who the players are and um the different levels
because there’s there’s different levels to these note buyers as well there’s guys who are buying oneoff notes because
they’re they’re an individual investor and that’s how they’re Building Wealth for themselves then there’s also aggregators who are going and buying up
several individual notes from guys like me and then putting them together into a trunch and selling those off to family
offices hedge funds things like that so all these different levels in the in the note buying space so to learn about man
super fascinating yeah especially the the networking getting into it yeah I love it I’m curious so so buil so You’
built them out found started to find all these note buyers and then as you mentioned starting to get into private
money because there still sounds like yeah you said almost Bridge lending or there’s this little period right where
you go get a property under a contract and then you’re going to go sell the note so is that to if I’m understanding
it right you you want to be able to fund the deal right and then you’re going to go find your end buyer and there’s that little bit of Gap of time and you’re
using private money does that help yeah and there’s some math to do just in
terms of seasoning the note so um if you season the note longer then it increases the value of the note however then
you’re also assuming the risk that what happens if your borrower misses the payment or goes into default during that
time so it’s a balancing act of saying do I want to take a little bit less money up front and just get out of the
note right now or do I want to stay in it longer and perhaps get maximize my
profit but assume more risk so kind of have to weigh that there’s two different ways two different paths though when it
comes to doing a wrap one is what you’re what we’re talking about right now which is the shortterm financing to acquire it
sell it and then sell the note but we’re also trying to acquire long-term financing and that’s either the sub2 the
seller finance or even our private money lenders who maybe want to come in and just get regular monthly payments every
month for 5 to 10 years and then we can use that money to go wrap to an inhome
buyer and then we don’t have to sell the note we can we can keep the notes and actually make a little bit more money uh
over time time if we can line up that financing to purchase the property got it yeah yeah you’re creating I remember
talking to your partner about this you’re basically becoming the the note buyer and getting the advantages that they have right and setting the terms
and exactly well big personal one I got is and you you know our Market well like so same and I’m going to relate it to
this because like creating a buyers list in a place like Wyoming has been a challenge because there’s less buyers so
I’m curious when it comes to note buyers do you feel like they going to be less note buyers in a more rural place like
Wyoming or do you feel like it’s if the numbers are there it’s not really going to matter I it’s it’s somewhere right in the middle so I think you will have a
discount on your note so that’s a big what we talk about is what’s the discount on the note so if the face
value of the note is $100,000 somebody comes in and says I’ll give you 70,000
so it’s a you know 30% discount when you get into more rural areas often times there is a little bit more of a discount
um on the value of the note but there’s still going to be a buyer there for it what they look at is the whole package
now some of the big institutional buyers just like a hedge fund would will have a buy box and they’re not going to buy in
certain areas but um the individual investors really are looking at each individual note and looking at the
strength of that note so one of the things we focused on is really putting together a great presentation package
for those for those note buyers so they have all of the information they need we we’re giving them Market data we’re
giving them comps for the property we’re giving them a full rmo underwriting
package on the borrower we’re looking for Quality borrowers who put good pound down payments and have good credit
scores and all of that adds up each one of those little factors gives us um a
little bit more profit on the Note because that note buyer isn’t going to discount it yeah no that makes sense
yeah just a little bit of discount but good to know they’re out there that’s but that is encouraging right because there is there is kind of almost a limit
well I don’t know it’s the same finding buyers in Wyoming or rural places but the not sounds like it’s well either way
I can see it from I guess an Investor’s perspective them owning and flipping a pie of real estate versus a note that is
much more protected and less involved somebody can do that from long distance right a lot easier absolutely yeah
they’re they’re not going to care as much about the location as a long-term you know landlord investor would okay
another one Jake thinking about and you talked about like time and bandwidth and how busy your team is now I’m curious
how long it’s taken you guys to start to find your in buyers your rap buyers right cuz that’s one we haven’t really
touched on as far as in our business is okay say we got a seller finance let’s go find the buyer and then I’ve also
listened a lot of stuff at sub 2 about building those buyers and I know they’re out there but just how long is that kind
of Taken I’d be curious too your like zero to one advice on building a r buyers list yeah so uh that’s something
we really focus on a lot there’s short medium and long-term goals based around
that so you know short-term go stick a bandit sign in the yard that says D Ado that’s it’s really it’s not that hard
your phone will re will we ring off the hook now the challenge that we’ve faced recently is having a lot of buyers that
were have been pretty flaky you know we’ll schedule an open house and 15 people will show up in a tenth of those
actually 15 people say they’ll come in 10% actually do right so we’ve been trying to improve our internal processes
for how do we maximize our buyer list a little bit better we’re building you know longterm we’re building a buyer
list by we’ve got websites so we used AI to build a SP Spanish language owner
financing website it took like 10 minutes um and put that together we also
have an English language we have two Facebook groups that we’ve started based around owner financing in the Texas
pandal so that we can post things in our own Facebook groups and then the best list is putting it on the MLS so uh we
use flat fee Brokers for some of our lower-end properties but then you for higher end stuff you really need to have
it on on the ml I believe um and we have great realtor partners that we work with
for that got it okay and so do you think feels like this the maybe the cheat code or skip to that if you just want to do
it fast just go MLS huh play a fat flat fee get on the MLS um but you’re still going to face that battle of fighting or
filtering through all the leads right figuring yeah but I would do I would have Omni marketing I I would have a
bandit sign in the yard I would have it on Facebook Marketplace and I would have it uh on the MLS and I would be trying
to funnel as many as many leads as you can for buyers um because one you can put them on into your database for
future deals but you also want to you want to be turning people away instead of settling for whoever shows up I guess
yeah you’re getting as much demand as you can makes sense yeah I guess so I mean it’s similar in a way to the way we run our rental listings where we get a
crap ton of interest I’m sure it’s the same way and you filter through them and we’ve got a process to do that with my
VA all manage that so I just need to get them to manage these yeah we’ve created
a pre-qual qualification web form for our website that we can direct buyers to so they’ve got to fil fill in at least
the basic information so we know they’ve got it down payment we know like general what their income is going to be so we
know that they can qualify we don’t want to waste our our rm’s time it’s also money too there’s fees involved with
running people through an rmlo we don’t want to waste their money so we do that pre-qualification process yeah that’s
one I’ve just been debating to your point of like bandwidth I’m like oh man I have spent the time to start to figure
out what dispo looks like on but do you yeah would your advice be yeah just get one and then yeah do those kind of three
things you said and just kind of triage it maybe try to find a team member who can kind of manage it all or how many
people do you have managing my partner Andrew who’s who’s really run most of the dispo for the for the last year and
then Katherine who’s on our team who’s a transaction coordinator and also does a lot more than just that but she really
runs all the transaction coordination Property Management even our ABS as well
um she’s running those so between the three of us we get it all done and then we have three vas supporting us as well
okay but you got to have some sort of high level person initially kind of seeing the process I think so we’ve
started to delegate some of those tasks off to to vas but we’ve really been Hands-On doing all the things for for
the last year and only recently the last few months started okay what what part of this this process can we start
creating some Sops for and and and delegating to to the EAS but we really wanted to be Hands-On with it as much as
possible got it if you don’t mind kind of going through your funnels so I’m seeing so you got your Facebook your MLS
your yard signs all feeding into your funnel and then first step is a showing or is the first step the pre-qual and
then eventually filtering down to the rmlo pre-qual would be the first step they need to do that before they can see
the property so we know that they’re they’re serious we know they’ll at least do the bare minimum of answering like
seven question questions on a web form before they can go see the property we’ve done it both ways but that’s
that’s how we’re doing it moving forward got it and then I assume you’re to keep cost down you’re putting the cost of the
RM rmo to the in buyer or you guys paying for that we’ve gone back and
forth on this I think it’s a challenge when we put so many closing costs onto
the end buyer at the end because they come to the table with a certain amount of money for a down payment and that
number is fix they it’s not going to get bigger you know in the next 30 45 days and so usually the closing costs come
out of our of the down payment that they’re they’re able to give us and so what we’ve been playing with moving
forward is wrapping those closing costs into our sales price and just C so they essentially become financed in a way
yeah makes sense okay but as far as your risk like is there I’m trying to see if there’s a risk to you’re working down
your funnel they did the pre-qual they went and saw the house they say they wanted take it is that the point where
they go to the R RM and then just some of those people that don’t make it through there who pays that yeah the
rmlo will well there’s different armal that we use and they all have a different fee structure um some of them
don’t have any upfront fees and so they just eat it if somebody backs out backs out halfway through the process another
reason we we don’t want to waste their time in in send them bad applicants try to be a good partner to them but then I
have there’s other armal we’ve used that have a $300 application fee so if they
back out at any point during the process the armo keeps that application fee as
at least some compensation for their time and are you under contract they’ve actually signed a in purchase contract
before they go to the rmo and that 100% okay yeah yeah they’ve gone through a prequel there’s a contract we’ve vetted
them multiple times and then they’re going to our then they go okay makes sense okay yeah cool the process that
you kind of run and start to iterate but yeah that’s been the only overwhelming thing on our side is to think about putting that together and finding the
buyers it’s it’s a lot of work in the beginning especially it’s time consuming
you can imagine it’s the same as having acquisition calls sometimes you know if you’re dealing with these in buyers
there can be a lot of handholding and explaining this is the first time they’ve ever purchased a home and so a
lot of times and they don’t know what they don’t know they don’t understand the process and we really have to hold
their hand all the way through it and make them feel assured cuz I can almost predict it when they’re going to start
you know kind of freaking out because it gets stressful you know it’s a huge deal for them and it starts getting real and
stressful so that’s a big part of what we do with the inhome buyers is just walking them through the process got it
yeah and any other best practice curious as you mentioned that out loud best practices to getting them so the people
qualifi pre-qualified saw the house said they want it sign a contract or even maybe you’re right before you’re about
to sign a contract just vetting those people to make again if they’re coming through Facebook or coming through some of these other channels to making sure
that is this guy going to be able to close any kind of tips you’ve kind of figured out to I know it’s not perfect
but I mean I think it the process is the tip right they’ve got to jump through multiple Hoops in order to get to the
finish line and if they falter it anywhere along the line we can ask them it’s hard CU you’re you’re you feel a
little bit pot committed and you think oh let’s try to get this across the finish line but when the red flags start
coming up you should really pay attention to them because you’re signing on to be in a relationship with this
person for a very long time they’re going to be your borrower hopefully for years and years if they’re already
giving you a hard time just in the first few weeks do you really want to have a relationship with these people for a mon
yeah that makes sense yeah you’re right just having the do if you’ve got the steps and the Hoops for them to jump through it sounds like it weeds it out
we get to know these people extremely well we know their history we and it’s not because we’re investigating that
hard it’s just we we develop a relationship with them there’s multiple conversations and we really want to
understand them and their situation and make sure that they’re a good fit for our program yeah man good sounds like
you that’s pretty impressive if you’ve getting it if you’ve got that much of a system in place yeah and I don’t know
about that it’s a work in progress it doesn’t feel like that on a daily basis still though I can see the value you’re
presenting on the back end when you go to sell these notes of that hey this is our I’m sure that betting process is
yeah we we hand over a link to a Google Drive that’s got 15 different folders in it and you know a few dozen different
documents that has every question that could that a note buyer would ever ask there is an answer to it in in that so
we try to be very thorough and all the documentation process that we do on Wow cool well cool any other anything things
you want to share on the we haven’t talked a ton about private money yeah you could feel free to ask questions or
tell us stuff you’re working on or yeah I think I’ve had success with raising private money that it just hasn’t been
very intentional and up to this point and and now with the way our business is
structured it really private money makes everything run better the more private money we can raise not only the more
deals we can do but the easier we can do deals the easier life will will be it just becomes especially with some of the
creative deals we’re doing you can’t go to a bank and explain it to them what you’re doing say do you want to give me
$75,000 for this deal they they it’s not going to check a box uh for them and
it’s way easier uh to pitch that to to private money lenders so we’ve been doing a few different things trying to
trying to gear up uh for a big Capital raise we’re treating it like an internal
project and putting a lot of focus on it we’re building out um a website that we
can take our pitch deck and put onto the website in some new formats so we can
direct people there to answer any of their questions it’s a little bit what we’re trying to raise money for there’s
some education that needs to go along with it as well because not everybody is going to understand what it is that
we’re doing on the the creative side with the waps and things like that it’s not loan me money for a flip right that
that’s a really simple simple deal to loan on whereas we really need to educate people so we’ve been focusing a
lot on that of building building that out over the last few months so that we can have better conversations with
people often times I feel like I have conversations about this stuff and people get really excited and then
afterwards I realize you know they probably got about 50% of what we were talking about because it’s all new
Concepts right it’s all new stuff for them and so it’s not it’s not like I’m smarter than anybody it it’s just we’ve
worked through all these problems and it’s not the typical stuff so that that’s a challenge of of explaining
something that that’s a little bit complicated and difficult and getting them to understand it and I think building out some some resources for
people is going to help us yeah love it man great strategy and like just looking at it bigger picture holistically and
and I’m with you the complications of are rate once you raise private money and just making it easier and just the
band with that you don’t have to the Hoops you don’t have to jump through and your team jump through to get deals funded yeah absolutely I think one of
the the selling points that we have for for raising money is that our lenders are in first position on a real piece of
real estate and it it usually extremely low ltvs a lot of these are some of them
are even 30 40% LTV we’re it’s a $200,000 house and we’re we’re asking
for 50 Grand or something like that uh to get the deal done and I I think I
really enjoy having these kind of conversations with people and so a lot of times the the lenders that are
attracted to us are people who are really interested in real estate investment and want to learn want to
learn more maybe learn about creative Finance of what we’re doing and at a benefit is that they get to lend on one
of our deals and call me whenever they want and ask a million questions so which is fun for me too so we worked
with a few lenders like that and it’s it’s a fun process but okay but thinking about that okay because you’re putting them just to structure that how you
would put a private money lender into one of these deals so assum yeah walk me through that cuz I was picturing that
like if they’re seller financing part of it they’re going to be on the loan or if there’s a sub two in place they’d be in
first position but yeah if there’s a sub two in place then they’re they’re definitely in first position um however
if it’s a seller finance deal you can negotiate whatever you want so I’ve seen it multiple times where we haven’t had
to do it for one of our deals but I’ve seen other people do it they’ll bring in a private money lender put them in first
position and the seller moves into second position until that private money lender is paid off and then the seller
moves back into first position I’ve seen that happen multiple times back at a first okay that way you’re always that
way they’re always in first okay and yeah I mean most private money lenders would like to be in first position if
they’re in second position it would only be natural that they maybe ask for a little bit more money yeah so if it was a sub two one yeah you would put them in
second and just compensate yeah but you’re probably assuming a two or 3% rate or something crazy low and blends
it all the numbers work really well those kind of deals I like to see them work out where the private money loan
can be paid off with the cash flow in a couple years so maybe you get into a deal and you you don’t really cash flow
at all in the beginning but you’re you’re paying down principal and and in a you know two or three years your
private money lender is paid off and then you then you start cash flowing and you have no money in the deal got it I
like it I remember seeing that stuff okay and on that and I was just talking keep going no go ahead yeah I was just
talking to yeah I was talking to shirat about this with Rec simply was we had a private money right before this podcast
actually and we were talking about like first positions and the payoffs hold on I kind of lost it there a Sho we’ll come
back to it but anyway had it had to do with paying that down and being oh that’s what it was it was like aggregating like everybody together or
keeping them separate right so on these ones is your guys strategy more to put everybody in a single oneoff property to
wear their first position on a single property and raise money that way basically investor matches up own
property or you guys thinking more of a fund kind of bigger yeah we’ve always done one property one note to keep it
simple I could see us starting a fund at some point in the future and it would
essentially be a note fund right let’s go let’s go raise a couple million dollars and then originate a bunch of
notes and put them into a portfolio and guaranteed a preferred return to us but for right now it’s it’s not necessary
for us and I think you could speak to this more than me but I think running fun is a whole another thing and another
full-time job really that requires a whole new skill set and talking about bandwidth I do not have the man to start
that right now at all yeah I hear you makes total sense cool awesome Jake well
what else what questions you got man I want to I haven’t we haven’t talked much marketing or stuff like that well I’m curious what you’re seeing in in the
market in in in in in Wyoming and Casper Sheridan these towns cuz what I’m seeing
in the markets that we’re in it’s it’s pretty we weird it’s kind of schizophrenic right now some things are
really hot and some things are ice cold so how are things going in Wyoming yeah that’s actually a good way to put it and I had I hadn’t verbalized it in my head
like that but thinking about what I’m seeing it is similar to where yeah yeah some stuff is still going really quick I
guess I’m trying to make sure you know what I guess what I’ve done is I’ve adapted to where just doing a lot of novs and trying to do less flips and or
created Finance stuff to where uh yeah I don’t know we’re going to be listed some stuff I mean stuff is still moving I my
big question is what’s it going to look like in September October because the last couple years it’s just been dead
Big Time dead then so I’m trying to Pivot my strategy and and my other thing is like that’s why I’ve been picking
your brain a lot today and and in terms of bandwidth I’m just slammed with appointments we’re well we’re definitely getting a ton of leads and putting a lot
of stuff in contract but I’m thinking but it’s always busy right now in July and June so I’m thinking fall when
things slow down it’ be a great time to really start to build out really go in deep on some of these seller finance
ones and try to put together more deals like that yeah and notes and mortgages and yeah yeah we’re also incorporating
inovations into our process as well it it’s a little different in that
inovations one of the main benefits of Innovations which of course you know is that you can sell to FHA buyers we don’t
need that benefit because we’re wrapping and we’re selling to an home buyer directly so what we’re trying to figure
out right now is pivoting our seller finance deals to be essentially a Novation which you don’t but we don’t
really have to do Innovation we just need a an agreement to Market uh permission to market the property and
then we’ll line up those end wrap buyers before we ever close on the property and
then it’s all one transaction yeah I mean rap at the same time huh I get there was a lot of fear for us
internally about about trying to do this and having those conversations with Sellers and one of the things that we
found that has been very encouraging is that the more transparent we get with
our pitch our sales pitch the better conversation we have so we come straight at the seller and say this is exactly
what we do this is our this is our strategy this is what we’re going to do with your property are you interested in
being a part of this and we get pretty good response from it so again not a fit for everybody but nobody has ever come
back is that’s their major objection is that we’re gonna do Novation essentially yeah I haven’t even layered in that part
of it where we’re just going to wrap and do it like that yeah so yeah we’re trying to take creative financing
acquisition do a inovation market for end rap buyers find the end rap buyer
and then close on the whole thing all at once love it man that makes total sense
I’m with you I mean that’s kind of my thing is I’m usually going into three offers like hey here’s your cash offer at 60 to 70% on the dollar hey here’s my
Novation offer which gets you pretty close to market value and then here’s seller finance where I’ll get you market
value and then I was like which bucket do you fit in and then I kind of go into the pitch based on that and and just doing Lois you know what’s helped me
which I should have done years ago it’s just putting together an Loi and that just gets them something gets them thinking and you know what people are
responding to that versus like throwing them out the the wholesale offer you know what I mean and then us going back
and forth on what should we even put on there and drafting a contract just send out an Loi and let them respond off that
no I think that’s a great idea and we’ve we’ve certainly done that a lot with stuff that’s on the MLS of sending Lois
to Realtors but I’ve never thought about like formalizing that with with our Sellers and I think it’d be great
because a lot of them they they just need to see something in writing they don’t really understand it until they see it in writing exactly yeah I just
grabbed somebody I finally had another wholesalers it was somebody out of state sending it to somebody Wyoming and I
just got their template I just modified it and put our language in there and I’m like cool yeah and then it highlights
what in general like what is seller finance and and it’s one page and and you’re right it get elicits a response
they can go share it with whoever they need to talk to about it without having to go deep into our contract which yeah
which is a whole another hurdle absolutely but uh how about the marketing side anything I can help you out with there it sounds like you’re
kind of tbling it a little bit but yeah we it’s interesting because I I felt like one of our strengths as a company
for a long time was was marketing was data and marketing and that we did we did a pretty good job of it especially
you know data management and and now we’re not really utilizing that skill very much uh we’re creating very very
small targeted Direct Mail campaigns that we’re getting good response rate from and that’s really it so we let’s do
it cuz um I I don’t think I have anything till three we like you also manage a portfolio virtually and
remotely and there’s a few things that have been been pretty challenging and I
think I think just having the right systems and processes in place will prevent it but the big one is getting
properties rented back out I don’t think we we have no idea what we’re doing and that was something that I was always
delegated to property management companies that we just took back in housee this year and maintenance stuff
we we know rehab we know construction managing the tenants we we’re pretty good at that Leasing and advertising and
doing open houses and showings and all that stuff I feel like pretty lost I’m sure you’ve got way better processes
than us for it comes to sh okay yeah so yeah I mean I basically and do you use a sauna or how do you do like build out
your sop yeah we have we have a sauna and notion so we put all of our Sops into notion and then we have checklists
and templates in ass yeah I build it all out in auna I think as I told you and like for example when we get yeah
they’ll just build out the listing in Zillow and Facebook for all our rentals um we use furnish finder as well if it’s
more of a long term we’ll also use what’s the other one turbo uh might be turbo tenant there’s a third one we’ve
been trying out that we’ll use but then basically yeah I mean it’s that’s just the top of my funnel right and then
they’ll send out all the direct messages and book and then we just try to I mean I’m a little bit loose when it comes to
it but you know what another thing I’ve tried to do is put digital locks on all my properties that way I could just get give them a code other people use like
those little um you could also do the ones where you give an ID and a credit card and you pay it’s like a paid
service you could do those as well that’s even more secure but we’ll I try to make the barrier to showings really
easy to where I can get as many people out there so and you’re back to your point of like screening we’ve gone back
and forth do we make them fill out an application or just let them go see the property and we’ve kind of landed on
like don’t create any barrier like get them out to the property so they’ll see it and if they like it if it’s vacant
and it’s not difficult then that’s what we’ll do um but if we got to like go AR range at showing then we’ll try to get them to
apply especially if I got to send somebody but the other thing is like a lot of our I put it into my lease that you’ll help us show this basically and
and a lot of times my tenants will want to help me cuz I’ll I might end their lease net I might we’re in the college
towns like I’ll end their lease a month early if they help me find somebody that moves in if somebody basically sublease
it but I’ll end up starting a new lease right so that incentivizes them to help me with showings and then because I
don’t really pay anybody to do showings for us we basically either have a lock box that my contractor installed or the
tenants help us with it that way we’re not having to pay an agent wow sounds a little scary to me I’m just afraid somebody would come in and like trash it
or steal something or something but yeah you haven’t had any bad luck yet I haven’t luckily and it’s yeah maybe it’s
a function of our Market um and I mean they’re they’re empty um I thought I mean for a wild yeah actually for my
ones in Fort Worth I was putting like a ring doorbell that way I could see who kind of came in there and out but I haven’t even done that in the Wyoming
places and it’s worked pretty well but yeah I don’t know if I’d yeah I don’t know if I’d recommend it for
everybody well in amarella we have we have boots on the ground in LEC we have boots on the ground and that’s where the
majority of our stuff is so I don’t want to wear them out with a million showings though so we either need to have a
couple open houses a week or do what you’re doing um and allow more free
access so and maybe that’s it use the I mean the really cheap and secure one I mean it’s a little bit more money in the
long run it’s just that those I forget what they’re called the company that does it but they put on a lock box and you you have to put your ID and a credit
card into there before you go see it so I think that helps with security that’s a cool idea yeah I’ve never heard of that one so I’ve heard of that that the
code where you can reset the code for every person so then you would sort of know who had access but yeah the ID
thing that’s that’s a really good idea cuz then you get as many people as you can through there and then yeah and then
I just have trained my VA they I don’t look at any applications anymore they and you know what this another thing I
did is I like I train them what to look for and just like you’ve got a really good process for vetting people I could tell from your rap buyers but I like I
make them submit like a loom video at the end like hey I want you to just in case something and really it’s for
accountability but when you approve somebody like and I’ve taught them like who I would approve but and who you shouldn’t approve but when they go
through they record loom video like hey Casey here’s who I approved this is why this is the their references this is
what I did this is this is basically my decision and this is what I’m going to do and that way we’ve got it and then we
could even hold them accountable for we also learn from it like hey let’s go back to that person you approve that I’m
not having to evict like where did we miss no that’s I love that idea that’s great I could use that in other areas to
of having them record a loom video that documents their decisionmaking process it’s a really hard thing to manage
remotely is a decision making process so that’s a great that’s good point yeah because they wanted like they were
always asking me I like just make a decision and tell me why you did it and or and initially I was approving I’m like hey send me why you want to approve
these people or if you need to do make an exception cuz I we’re pretty fluid like and flexible I try to like I
understand that there are and really we mitigate everything with a co-signer or additional deposit but all I mean I rent
to obviously college kids all the time that have no rental history but like they’ve got to start somewhere and it’s a great risk mitigator with a co-signer
we haven’t gotten our butts kicked too bad with it yeah what software are you using for your property management build
buildium okay yeah yeah we tried to use buildium and we had a lot of problems with their payment system and so um
moved over to a veil for our single family rentals and then our multif
family stuff is still managed by thirdparty management company and they use AppFolio for it so AppFolio but I
love building them I wish we could have resolved the payment issue yeah we haven’t really had any and we paid for they could do a or the credit card
option or go to like a money order place it’s got like for me it was getting it set up they wouldn’t allow me to set up
payment because they have all these fraud things in place and I’ve I’ve specifically put things in place so that
my llc’s have levels of anonymity and there’s no way for me to prove who I was
and they wouldn’t let me say set up their payment system uh there was no way around it they needed a utility bill in
the name of my LLC that went to my mailing address there’s no there’s no
such thing it doesn’t it doesn’t exist so um we went around and around with it for for a month and ended up having to
use a different property management software yeah because that’s the other thing is those guys have just learned it and I mean the lucky thing I had was I
got like it was my second VA hire the first one we ended up firing second one’s been great and she’s now like we
pay her 15 bucks an hour now she’s like really good in Mexico but she’s been hiring all the other ones and training
them and she knows buildium and and she trains them and yeah we just literally separated I had her and she’s trained
and she’s gone through quite a few we’ve got had quite a bit of turnover but we’ve got one one that’s kind of stuck
when we just bought this other 63 unit we closed on last week we we kind of scaled up for that knowing that we had
one VA and her we had Monica she’s the best one and then another one Hugo and then we we hired a next one we figured
we’ll bring him on to where he can manage the 63 unit cuz it’s its own animal and uh and we’ve kind of Switched
kind of our like priorities to where two two of those vas are each one’s got my portfolio and of like 75 units roughly
but mostly single family houses and then the other ones the 63 unit and they’re managing those two but they’re reporting
to the the kind of my property manager I call her the head person got it she can man congrats on the the new acquisition
by the way yeah thank you I should be doing way more there’s a lot I’ll just start to get in the helping get that
thing up and running but but I’m also just crazy I’m doing all I’m our only Acquisitions man or guy which has been
great I’ve been enjoying all the calls getting really efficient at it but it’s
hard I need to step in and have more calls with with Sellers and don’t seem to have the time my my calendar
constantly gets filled in so I need to be better need to be better yeah thanks
what other challenges Property Management wise do you have anybody that pays with money order through yeah they
do through buildium and they just pay it through buildium okay that’s probably one big stickler thing we’re on we’re like we’re not accepting rent I mean
we’ll accept a deposit to hold because sometimes we just want to get their money in place so they won’t back out and I might take venmo or zel but we’ve
still got a couple random people that like literally don’t have a computer or a smartphone and pay with a with a money
order and it’s a real pain yeah I think it’s just one of those where it just sucks to turn people away but it’s like just got to do it in today’s day and age
and honestly yeah they’re going to be a pain in the butt more than likely right yeah
no they’re like Legacy renders that were in place from properties that I’ve purchased and have Liv there forever so
yeah I think it’s a good policy when we turn people to say it up front like you have to pay through this platform
there’s no other option yeah exactly and yeah and I I would think yeah I guess if they literally don’t own a checking
account yeah I guess that’s the nice thing about buildium is they’ve got another they’ve got a way that they can just go down yeah and make a money order
and it’ll still go through buildium and track it yeah yeah that’s awesome cool well I I better run we’ve been on here
for an hour and a half I gotta for my for my next one but this was great thank you so much G likewise no I got I’m glad
I helped you hopefully at the end but the I’m going to go back and rewatch the first one CU there’s I’m not ready to
implement it now but this fall I think I’m going to a lot of that stuff I’m happy to help any way I can awesome cool
all right Jake appreciate it let me know if I can help on the content stuff ever too as you may have learned by tuning in
this episode of Gregor sense the easiest way to make real estate investing hard is by going at it alone so as you
continue learning and seeking knowledge of the industry I want to encourage you to build relationships with other professionals who are passionate about
real estate whether that’s an agent a business owner or a managing investor like myself there are Pros that want
want to see you succeed and are willing to help you by sharing their experience you can always reach me by visiting Casey greers.com and scheduling a call I
look forward to connecting with you and continuing to share my experience with you here on Gregor sense mobile until next time I’m Casey Gregerson thanks for
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