BiggerPockets Real Estate Podcast - 283: 18 Houses in the First 18 Months with Paul Thompson

Episode Date: June 14, 2018

Start slow—or take off like a rocket? When it comes to real estate investing, the choice isn’t the same for all. This week, our guest Paul Thompson made a clear choice: Rocket! After realizing the fragile nature of his six-figure salary, he set out to replace his salary with passive income—as quickly as possible. This led him to average a new home purchase every month for the first year and a half, and soon he had true financial freedom and quit his 9–5. This show is packed full of actionable tips, including some never-before-heard-on-this-podcast strategies for finding deals with the use of virtual assistants, Craigslist, and cold calling! This is one episode for which you’ll need to take some notes, so grab a notebook and let’s get into it! In This Episode We Cover: Paul’s backstory prior to real estate investing His first deal doing the BRRRR method What is escape velocity? P.I.L.E. (Passive Income greater than your Living Expenses) How he manages his properties Finding private money lenders through BiggerPockets His system in making offers Things he looks for in each deal How to negotiate for seller financing Subject-to explained Why does he L.I.E. every day? His interesting thoughts about money How he balances his time The third-party catalyst And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Webinar David Greene’s Twitter Profile David Greene’s Instagram Brandon’s Twitter Profile Brandon’s Instagram BiggerPockets Twitter Profile BiggerPockets Instagram BiggerPockets New Member Introduction Forums Upwork Screen-O-Matic Zillow Craigslist CallRail Podio Zapier Google Duplex GoBundance How I Analyzed a Deal in 5 Minutes (& Bought it Before Anyone Else Could) Uber Turo BiggerPockets Podcast Guest Form Books Mentioned in this Show Long-Distance Real Estate Investing by David Greene The Book on Investing with No and Low Money Down by Brandon Turner Building Wealth One House at a Time by John Schaub The Richest Man in Babylon by George S. Clason The Pumpkin Plan by Mike Michalowicz Profit First by Mike Michalowicz The Big Leap by Gay Hendricks Fire Round Questions How detailed of a plan for financing do I need before I start actively hunting for deals? What niche/strategy will yield the most results, direct mail for subject to and owner financing or finding partners/private money? Tweetable Topics: “How many deals do you have is the wrong question to ask. It’s how much cashflow are you generating?” (Tweet This!) “Never assume that what is important to you is important to the other party.” (Tweet This!) “There is plenty of money for the things you really want.” (Tweet This!) “You don’t want cash, you want what cash can give you.” (Tweet This!) Connect with Paul Paul’s BiggerPockets Profile Paul’s Website Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 283. I was 37 years old. I had a job. I had savings. I knew I was bankable. I knew I could refy it out of it. I'd already check that out. And I, $30,000 and $10,000 of my own money into it was not going to make or break me.

That one deal. But I waited for 15 years to do that deal. And so it was the bet no matter how badly it went, it was the best deal you could have ever done because I did it. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

What's going on, everyone? This is Brandon Turner. Today's host of the Bigger Pockets podcast here with my co-host, Mr. David. what was it the man T.M. Green. How you doing? David. You can't ask me what my own nickname is. Anyone who picks their own nickname, I've already determined it's not a person you can trust. That's why they call me Brandon nickname Picker Turner. Anyway, what's up? What's new in your life? I knew you were working on some refinances. Did they go through yet? I got my refinance finished. I have money again. And after listening to today's guest, I am pumped to get in there and start buying properties. I mean, I'm feeling better than I have in a very long time. Yeah, today's guest is, today's show is probably, I would say, the most, if not one of the most

actionable shows we've ever done in terms of like, try this. Here's what this did. Here's what I, here's my process. Here's my system. This, this, this. And you guys are going to love it. So before we get to that, though, we've got to take care of some house cleaning, housekeeping. I don't know what the phrase is.

Housekeeping. Okay. Whatever. First of all, let's get to today's quick tip. All right, quick tip today is very, very simple. Follow David Green, Brandon Turner, and Bigger Pockets over on Instagram and Twitter. So David is at David Green 24. Bigger Pockets is at Bigger Pockets, all those places.

And then mine is at Beardy Brandon on Instagram and Brandon at BP over on Twitter. Just follow us. We put a lot of our real estate deal stuff going on there on the Bigger Pockets channel. We're constantly sharing good things and little stories of our users. So make sure you guys follow us there and tweet us or whatever. and kind of get involved in the community. Sound good? David, are you following me?

Oh, I'm following everything you do. Brandon actually posts really good stuff. In spite of the fact that his face looks so weird, his Instagram posts are really, really good. He'll post books that he's reading. He'll post other investors that you should be following. I recently reached out to one of them. I think it was investor girl, Britt.

Brittany, if you're listening to this, shout out for you. She's doing some awesome stuff. She's like flipping her own houses and she does live-in flips. And this is someone who's like, what, 24, 25, maybe 26 years old. And she's out there making it happen. and every time I meet a new person that someone like Brandon has vouched for, my business gets better because I'm learning from what they're doing, my confidence grows, that's how you do.

And our guest today is going to talk about very similar things, how he started going to meetups and meeting other investors and learning from what they did. And you guys are going to be amazed when you realize what he did in the first 18 months of real estate investing. That is true. So for decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

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I learned something this week. So I learned that, that, so iTunes doesn't tell everybody what they're, like how they determine what shows get ranked well and what shows don't. But I read an article that said that pretty much they're sure now that the way they're, base their rankings is off of people who subscribe to a show. So I'm asking for a favor. Everybody listen to the show. Make sure you are subscribed to this. Even if you listen to this on YouTube or on something else, go to iTunes and subscribe to our show. I want to see if that actually bumps up us in the rankings for podcasts so we can reach more people. So that's it. That's a second quick tip of the day. And with that, I want to jump into the show because it is an amazing show,

like we said. So today's guest is Paul Thompson. Now, Paul is the guy that David, you actually met at at a conference one time. You were blown away by him. I had some other people that knew them were blown away by him. I met him today here on this podcast and I am blown away by him. You guys are going to love it. He is a real estate investor who went from nothing like real estate wise to financial freedom in a very short amount of time. And while working a full-time job, it's fantastic. 18 deals in eight months plus he's done a whole lot more since then. So you guys are going to love it. So without further ado, let's get to the interview with Paul Thompson. All right, Mr. Paul Thompson. Welcome to the Bigger Pockets podcast. How you doing?

I'm doing awesome. Thanks for having me. Yeah, this should be a lot of fun today. We're going to be talking about your story. And I know that you used to have a job and you no longer have a job because of real estate. That sounds like the summary of your story, right? Yes. That's right. That's all we need then.

No longer have a day job. All right. Thanks guys for watching the Bigger Pockets podcast. You're listening today. Just kidding. All right. Let's go through it. Let's talk about how you got started your very first deal.

You know, what did you do before that? How'd you get into it? So first off, I was a computer engineer. I was kind of a by day I was an engineer and I would do. investing in the evening. But at first, it was always stock investing. It was the solo or the 401k in the IRA, that sort of thing. The dark side of investing.

Yeah. Yeah. The empire. Right. I can become a Jedi or something, right? Yeah. The Jedi's are the real estate investors. That's how I look at it.

Yeah. Anyway, that's right. So it took me 15 years. I was a sideline investor when it came to real estate. I read some books. And I was an agent for a short while to kind of, I thought that would be something. good to like learn how to become an agent, our real estate investor. And then 2008 happened and everything crashed. And I, I wasn't an investor at the time, a real estate investor. But I,

I knew that was the opportunity of a lifetime. And I did not know how to capitalize on it. So I spent several years up to that kind of figuring out how to become a better manager, had become a better, a better thinker. And I was finished an MBA program and I became a manager in in corporate America. And I really poured myself in a corporate America. And at the end of it, I just found that I was just unfulfilled by it. And there was one, about three years ago, there was one summer. I was driving back from Gulf Shores, which is kind of where we go to the beach here in southern part of the States. And I just felt empty because there was this, I just don't know. I couldn't figure out. I had a 10-hour drive. So I mean, my wife hashed it out.

And I finally came to the realization that I couldn't stay another week. And the reason I couldn't stay another week was because I had the money. My kids were out of school. My wife doesn't work. I had to go back to work. And I worked for a telecommunications company. I couldn't have asked to get off or to work remotely, even though they make the very technology that makes that possible. No, that was against policy. So I had at that point, I realized that I had to engineer a way out of corporate America. I was vulnerable. I could have been laid off at any moment. And what you'll find out later, about three years later, I was laid off. And thankfully, I had spent those three years working and replacing my income. That's awesome. All right. So let's talk about what was your very first deal.

What would that look like? My very first deal was I bought from a wholesaler. It was a $30,000. It was in a working class area of North Iraq, which is just across the river from the little of rock where I live. And it was, I needed about $10,000 worth of work of repair. And it was a three bedroom, one bath would rent for about $6.50. So kind of like that standard, moderate, low, income type house that you see in the southeast and the Midwest. And I've funded it with a private money investor that I found through bigger pockets. And yeah, and I did the BIR method. So, and I, and I'd done the study for it and I'd figured out what that, that was the, the, the BIR method. I rented it for $6.50 after doing some repairs. I did very little of the work myself, if any.

I did it with a partner that I met on Bigger Pockets. That was local. I met through the local RIA in Bigger Pockets, a combination of the two. And we joint ventured effectively on it. He was a handy guy and I knew I wasn't. I didn't want to be. And so he did the work. And then we refied it. That's awesome. Let me just jump in real quick.

There's like five things you said there that newbies aren't supposed to do on your first deal. Your first deal, you shouldn't, you're not supposed to buy from a wholesaler. Nobody does that. Right. Your first deal, you're not supposed to find private money. Like your first deal, you can't do it. I mean, you can't burr a deal into your way experience.

Like that's what everyone kind of feels like there's, these are a little bit more advanced strategies, so to speak. And you did it on your first one. I don't know, how did you get the knowledge to do that, the guts to do that? I mean, like, what was that mentality like when you were putting that together? Sure. The reason, and actually I do oftentimes it would suggest to many newbies to not do some of those steps, depending on where they are in life.

I was 37 years old. I had a job. I had savings. I knew I was bankable. I knew I could refy out of it. I'd already check that out. And I, $30,000 and $10,000 of my own money into it was not going to make or break me. That one deal.

Yep. But I waited for 15 years to do that deal. And so it was the bet, no matter how badly it went, it was the best deal you could have ever done because I did it. Yeah, that's so true. Yeah. I mean, we talk about that a lot here, right? It's like the first deal, whether or not it's a home run. It doesn't really matter.

It's not going to make you rich. It's just, it gets that train moving. It gets that momentum going. Right. It's the momentum. Right. Which I talk about a lot is you want to create escape velocity. And whether or not you actually want to quit your job or not,

you want to build enough momentum so that you can kind of get out of the gravity orbit and you kind of get into the stratosphere so you can actually really build momentum. And that's exactly what I did. It's just every deal I did subsequently was just this attitude of reach escape velocity. Escape velocity. I've not heard that. David Green, are you listening to this guy? This guy's getting more analogies than you.

This is impressive. I don't know if I'm ready to crown him quite. Yeah, we might have to have an analogy face off or something. nothing before. We're going to have to measure those guns again. We're talking about. Yeah, I keep my analogies way up here. Remind me about Zoolander, the dance off.

Remember the dance off? All right. So, escape velocity, I love that. Can you define that a little bit more? Like, what do you mean by escape velocity? And what does that look like? So in rocket science, you have to expend, I don't remember the exact number, but it's like 80 or 95% of your fuel to get,

out of the Earth's orbit. And so anytime you start or bootstrap, any sort of business, whether it be real estate or not, is it requires a lot of effort on the front end. And I wanted to create enough of that momentum and enough streams of income to replace my one stream of income, which was my day job. And that's why I could consider this escape velocity to get out of this kind of lifestyle by default that so many of us are told to do in our society in America is to go to school and get a job. And then consumers, lifestyle inflation kicks in and it's hard to escape. So you've got to be the first person I've ever heard on Bigger Pockets that has said in rocket science and then followed. Followed that with something that's related real estate investing. That's very cool.

It reminds me of something Brandon talks about a lot, which is his lift philosophy where you talk about like a plane getting out the runway. Brandon, can you kind of go into that little bit and related to what Paul's talking about with escape velocity and using up 90% of your fuel to get out of the atmosphere? What are you talking about, David? Okay. No, so I started working on a book a while back and I'll pick it back up again. But basically the idea being, yeah, it's like a lot of people give up, they fail, they never get started, right? The question we ask on every podcast. And let's say it's kind of like a plane.

A lot of people like will build a plane and it never takes off. They try to take off and it crashes. You know, like they just, but those people who actually achieve lift, they do take off. And then it's easier at that point because you're in the air and you don't use as much. Like you said, you don't use as much fuel. the hard part is over. Yet I would say 90% of people, even those listening to this podcast right now,

will not achieve that initial lift or lift off if you want to use the rocket analogy. So yeah, I think that's true. And a lot of people really struggle with getting that first deal, which is the best deal, the most important deal is the first deal because that will lead to the second,

which will lead to the third. Even if it goes poorly, right? Even if it goes poorly. Because you're going to learn a ton of stuff. Did yours go poorly or did you go well? Not really. It went, I mean, not everything went plan but it I mean I had some problems that that popped up but you just learn from it every every

I look at it as every problem you come across is some sort of a trial and it's a trial and tribulation you're like okay and and when you're I look at I approach things very scientifically and when you're doing some sort of scientific experiment you try something oh that didn't work that was a that was a case study that was a trial now you iterate and you just keep repeating yeah yeah that's why Thomas Edison needed somebody tries to make the light bulb right because he just had to try a thousand ways that it wouldn't work. And then you figured out where it would. So we haven't really done you justice, Paul. We haven't told people where you actually are in your investing career. You know, we've talked about your first deal. We're going to dig back into that in a minute.

Can you just let's jump ahead really quick. Tell me how many deals did you do in your first 18 months? In the first 18 months, I bought 18 single family houses. And overall, I probably did about, I don't know, 25 or 30 deals, whether it be in my IRA or solo 401K or wholesale and a couple flips. Okay. So you like a rocket. You just came in blazing. Right. This is incredible. And that's what I want people to realize is that first deal, if you do it right, not if the deal goes right, but if you learn enough in it can lead to a rocket and leaving the atmosphere. Right. And that's what I want to dig in. Paul. I want you to kind of give us your blueprint for how you got started and what you built, what you learned, what tools you added to your tool belt that allowed you to get to the point where now you are full time real estate. You are kicking ASS when it comes to this job. I mean, like when I talk to you, you're one of the most humble people, one of the most smartest people that I've met of all investors. And I know, you're absolutely one of my favorite ones. Help people who are thinking, you know, I want to get starting real estate, but I just don't have the confidence or I don't know what I need to be doing. Lay out the blueprint of what you did so we can all follow it. The blueprint is I like single

family because I think that's what people tend to understand the best. And if you choose to go in real estate and be an investor in real estate, I want you to invest in something that you understand the best. And for most of us, single family is where that is. Most of us live in houses or have living houses. And we kind of understand the needs. The dynamics are not that complicated. So you reduce a lot of complexity by doing that versus some of the other choices. Even mobile homes. I still not sure I understand mobile homes that much. Right now I don't want to. I want to do single families. It's a whole different dynamic. And so the whole deal is do one deal at a time, build wealth with little deals by buying one house at a time. And it's, and I'm always a little bit reluctant to talk about how many deals I did in a certain amount of time because I think to somebody who's new or just getting started that that can be a little bit of intimidating sounding. And there's lots of people. been on the podcast, I've done so many more than that. But even it's overwhelming. And you don't have to do that many deals. And I actually think how many deals or how many units do you have is the wrong question to ask. It's how much cash flow you're generating? You need to start with how much

income do you need to replace your day job or to gain the goal that you want to get to. And for me, it's it's pile. It's passive income has to be greater than your living expenses. Pile. And that is the recipe that you want to follow. So if your number for me was $5,000, I had to have $5,000. a month. And where I live in central Arkansas, the cost of living is low. I had to have enough income from rentals that I could safely withdraw income from there to replace that $5,000. Once you hit that, that's what I call lean financial independent.

I can't live in exotic life, but I'm done. I can walk away when that happens. Yeah, I call that like level one. There's like level one financial freedom, which is like that baseline. I can pay my bills. Yep. I hit that when I was 27. And then it was like, well, I don't want to live this way.

You know, my number originally was three grand. If I had three grand, I could pay all my official bills. I didn't have any car payments or anything crazy. I was like, but then as you get older, you're like, well, I'd like to have a little bit nicer stuff. So now, of a sudden, it went to five grand. And then, you know, it'll creep up over time. But it does creep. That level one, though, is what's so important.

Because once you have that, then you can get out of the rat rat rat rat race. The rat race. All right. You can get out of the rat race and have time and mental. energy to work on getting to level two or to level three or however you want to define that, right? Sure. Yeah.

It's the margin. The margin in life when you don't have to go into this idea where you're exchanging time for money anymore and you're now, you're financially independent. It's very lean, but now you have the freedom of time to, and you're actually making money while you sleep. And that's the key to wealth is you've got to get there, even if it's $5,000 or $3,000 in your case. So were you during this time when you were used, you, you, you, you, you, you, you, you, you, you,

you know, rocketed out to begin. You started the first deal. You bought 18 houses in the first 18 months, which is amazing. Were you working a full-time job during this time? And if so, how were you managing that? How do you do that? I was working a full-time job. And actually, well, for, I didn't do, of all the houses I've purchased to date, I've only done work on one of the houses. And it was a house that needed literally nothing. It was, oh, it was so next to nothing. I mean, less than a thousand dollars or worth of work. One of the things was replacing the oven door. And after two orders of the wrong hinge and putting the wrong thing in twice and spending $500, which I could have just placed an entire oven for that, I was like, okay, never again. And I kind of knew that going into it,

but I wanted to kind of test this theory, right? I like to test theories. And let's just get into it and figure out how much time this really is. And hot and sweaty mess in the summer of, in Arkansas and the South, that is not the way you're going to be an investor. I needed to learn and confirm that for myself. And since then, you hired it all out. I talk to landlords all the time. They talk about saving 150 bucks here and there to go do a call out for a plumbing issue. And I would never spend.

And I ask people, how much do you think your time's actually worth? And most of us discount our time. We have no, we have no idea. I've come to the point to where I think an hour of my time is probably worth about $3,500. And it will only get higher over time. That's incredible. Tell me, well, when you first started, you were working in a corporate job where you doing all this while you are working?

I was, I did it on the nights and weekends. And during lunch, I would run over and look at a house or something. But then I learned very quickly how to that after you look at enough houses, you've seen enough houses. Yeah. I don't have to see a whole bunch of houses anymore. I, in fact, I have done a deal now using your method from your book, David, that here in Arkansas, just, it's 12 miles from here.

I still haven't seen it. I use all the same principles because it scales, right? I mean, it doesn't matter. I don't need to see a house for it to know. Now, people I trust, part of my core four, as you call it, have gone to see it. And I have pictures and I have videos. And I've been through the neighborhood before, but I've never actually seen the house. That's amazing.

I love that. So that book was long distance, real estate investing for those who haven't heard of it. I think that it's a methods that'll work, whether it's long distance or short distance, like Paul just said. It's really just about streamlining your business and your system so that you two can be making $3,500 an hour, much like Paul. Now, you mentioned Paul, you bought your first deal with private money you found from so many on bigger pockets. That is awesome. Tell me how that came about. How did you make that connection? So we all kind of understand this principle that when you, for your first starting, you want to provide value to somebody else. You don't want to just be that annoying little,

you know, a person that's always asking need, need, need. I wanted to find a way to provide value. And so I went and studied everything I could. I read bigger pockets. I went to tons of courses. I spent some money on courses. I read tons of books. And so I would go into those forums on bigger pockets and I would just add whatever value. And I would say, you know, I'm not sure. This is what I've read. This is what this book has says. This person's recommendation, I wouldn't say I already know this until I've done it. But then I would just add value. And then I started talking to somebody on there. And she lives in Hot Springs, which is about an hour from here. And she had recently relocated here and she's retired and she was well to do. And she wanted to get into

lending. And so I went and met with her and we started chatting. And she was trying to figure out how to end, but I had done all the research already on how to do notes and mortgages. So I was very comfortable with the paperwork. So we just kind of hit it off. And she funded it and she came and looked at the house with me. And she said, what can I do? What kind of repairs you're going to do? And we kind of learned together on that process. But it was through the forum and the channel, so to speak, that bigger pockets offers. I don't know how it would have found her otherwise. Yeah, that's awesome. And you know, it's something we talk about a lot, you know, here on the show and just on the webinars that I do and the podcast that we do, like you need. You need.

to connect the people in your local area. And that's why like every like so much of what we do on bigger pockets. If you're somebody who listens to the show, not you, Paul, but like if listeners are, you listen to the show maybe or maybe you're watching this on YouTube or you're listening on your iPhone or whatever, that's great. Like that's great to get information. But nothing replaces that like interacting with real life people who are doing it. So I'll just encourage you guys. Like if you get into the forums, talk to people. I mean, even if you don't think you have any experience, do exactly what Paul said here. Or maybe even just go to the new member introduction forum and welcome people. Hey, thank you know, glad you're here. Welcome to the forum.

Like little things like that just build relationships and add tremendous amount of value. So I really like that a lot. And I like that, you know, you built a relationship. You figured something out together because people on bigger pockets want to do real estate. It's like they want to do this stuff. You're not trying to convince some like neighbor who's who's afraid and never even heard of what a rental house is. Like you're not convinced that guy. You're talking to people who already want to do real estate. And a lot of people have money. and they're nervous about the market and they would be very willing to partner. So, you know, again, it's not impossible to get private money or to partner with somebody or whatever on the

first deal. It's doable and you had the confidence to do it. So just a nice work there. That's cool. All right. Thank you. And subsequently, I've, I would say that I've, of the deals I have now, I've only used banks, I think on 10 properties altogether. I've very much a big believer in private financing and working deals out with other people and bringing in a third party catalyst. That's a human being that you can negotiate with. Yeah, on that note, here's a question I get all the time from people. They ask, well, why would somebody just lend me money, private money, when they could just go do the deal themselves?

What's your answer to that? Not everybody wants to be a landlord. And so don't ever assume that what is important to you is important to the other party. There are a lot of aspects of a real estate transaction. There's all these bundles of rights. And you can split them up in any. That's why I like real estate so much because it's so variable. And a value is subjective.

Don't ever assume that what you want is what somebody else wants. That's really good. There's a lot of good stuff you're giving us here, Paul. Tell me a little bit of the specifics on how you're finding deals. Like in order to buy 18 deals in 18 months, you're doing a lot of deal finding and you're doing a lot of fundraising. Let's focus on how you're finding deals, what your strategies are, why you think is working for you.

Okay. So first off, the first 10 deals, which I bought like within two or three months when I started, I bought all through whole. sellers. And I was networking. I was going to the local RIA. And at the time, I was lucky the local RIA was kind of being reinvigorated by a seasoned investor at the time. And so I was starting making a lot of connections. And I would do this thing called microphone marketing. And so every time I would get there, every Ria, I would go to, I would go in front of the room and I would grab the, you know,

if you have a deal and I would grab it and I would talk about a deal that I was working on or a deal that someone wanted to partner on. And then just, I was making it clear that I was in the room to do deals. I wasn't a looky loo. I was serious. And that kind of stuff just, it's a long term in play, but it's a very successful. You want to build this extensive network of people. And so I just didn't find it that difficult to raise private money. And so the way I found deals subsequently after that was I wanted, I didn't want to, to always be relying on wholesalers. I want to be able to control the deal myself. And that's really the key is you want to be able to control. If you want to do this as a ones you doze and get a few here and there, that's fine to buy from

wholesalers. But if you want to be in a business and replace your day job, you want to control the deals. That's the key. And so I've done all the traditional things, bandit signs, where it's legal to do so. I've done direct mail of very different categories. I've done door knocking, door a door, almost got arrested. So there's definitely got to be true story. You got to be aware of the local ordinances where you can actually legally doorknock. And then I did driving for dollars. And then I also do this thing called farming off of Zillow and Craigslist, which isn't really all that revolutionary, There is a deal of every 40 deals on Zillor Craig list, at least in my market. I suspect in other markets too.

There's a deal. You just have to go hustle and do it. And so I would automate some of that. I hired some VAs after I started scaling up and I had them just sending offers. And I got to the point to where I don't go and look at a property unless I can get the person on the phone that's a motivated seller or a seller. They have to show motivation and they have to come off 15% to 85% of what they're asking for or what I think it's worth before I go look at a property. Okay, that's good. Tell us a little bit about what you have your VA doing. Okay, I don't have that one anymore, but the idea that I was running was that I, the VA,

I hired through Upwork.com and I hired and I recorded everything I did on ScreenO-Matic. So all this is free except for actually going through Upwork and hiring them. And it was like $3.50 an hour, super cheap. And all they did would just replicate what I would do. And I had this three-letter option intent calculator. And I had this, I use Podio. and then I use Zapier, and I would just have them go through this calculator

and just plug in a value. And then every house, it needs at least $5,000 of repair, no matter what, no matter how perfect the pictures look. And then based on picture quality, or then you run some numbers that if it's a light rehab,

it's $10 a square foot, if it's medium, it's 15, if it's heavy, it's 20. And then you just take off that percentage of repairs and you make a cash offer. And then I do two owner financing offers. I don't care if they have a, a mortgage or not, I don't know, I don't care. I'm just going to make an offer that has cash,

which is low. It's like 50% low. And then there's owner financing of completely principal only or owner financing interest only and with no interest. And so they basically click a button on Podio and offer gets email to them or mail to them physically. Okay, let me make sure I got this right. So you've got your VA that's calling a list of properties that you've given them, you bought from a title company or wherever you buy your list from. They're giving this script that you've made. Hi, I'm calling to see if you want to sell your house. You're looking for motivated sellers.

When they get someone that says, yeah, I might be interested in it. They go to Podio and they send a letter to this person either in the mail or email or whatever they have. And that letter is actually a three option letter of intent where you're saying, look, I want to buy your house. I can give you this price in one of three ways. A, here's my cash offer. And I believe you're saying it's about 50% of what you think the property would be worth.

Right. Yeah, depending on cost. Yeah, typically, I like that. Around the 50% number, right? So that's a very low number. And Brandon talks about this all the time that he likes to give people options when he writes low offers so that they're not as offended. Option two will be, I will buy your house for this price, which is significantly higher,

but it's owner financing, a principal and interest rate or loan at an interest rate of, whatever, I can pay this much. Or I can give you this much, which is much closer to the highest amount possible if it's owner financing at a zero percent interest rate or something like that. So they, if they're motivated, have three different options that they can look at and decide which of these is best for them, rather than a yes, no option. Oh, you're giving me 50% of what my house's work worth, forget it. And the beauty of this is that you can do this at a huge scale because you've got a virtual assistant making the phone calls. And they're just sending a letter that

you've already designed to all these people. When I first heard you talking about how you're doing this, I just thought it was genius. It is so simple and it is so effective because you're not wasting your $3,500 an hour time making these phone calls. You've got a VA who does it for $350, which actually is a nice round number. What is that like half of a 1% or something? like that, a tenth of one percent that you're paying for this work. And you're going to get people that say, yeah, I want to buy my house or sell my house. And then even if they don't go for the three option letter of intent, you now started a dialogue with them.

And you can see how motivated they are. That is a very simple plan. Anybody can put in place that will get your results if you're willing to put in the time. That's right. I love that. And I love that, you know, we talk about a bigger pockets all the time that everything, I mean, I push it because I think this way all the time, but everything is a funnel, right? Like if you want to buy more real estate deals, you've got to make more offers, which is what you, you built a system to basically automate that process.

Offer making. You got to analyze more deals. You built a system to automate that. And then lead generation. And so you were buying, you were buying a list. Where did you get your list from? Or how did you get that? This was from, there's two different ways. One is by scraping Zillow and Craig's list. And you have, I have a different VA that was not as I would pay them less. And they would just follow this simple recorded video instructions on how to go in and scrape. this data and have this spreadsheet and then somebody else, a VA would come by behind them and make these, and actually they would use text. Intentionally, I would use a system called call rail where I could send a text to say, hey, I saw your pictures on Zillow. Is it property still available? They say yes, then, so you go through this if and else. And they say, oh, based on the pictures, I'm ready to make an offer. And you'll be surprised nine times out of 10 people are okay with that. Or don't you want to see the house first? You're like, oh, no, I'm a local investor. I'm just, I'm familiar with an area. I'll just

see if we're in the same ballpark. I'll shoot you have an email I can send it to. and 40 offers, sometimes a day, but usually I would offer about 40 offers a month. I'm sorry, 40 offers a week a week doing that. In my market, you run out of Zillow and Craigs's Leeds if you do that very much. But then, then what's cool is you come back around with a different personality, a different person, and you make 85% offers on some of those same properties to see if they're motivated. And so you then do a test side-by-side test to see if the cash offer or owner financing offers didn't stick for some reason. Two weeks later, they get an 85% all cash offer.

And if they, that's interesting, I, yeah, I would like for you to come, I'll accept that or I'm interested. Come look to see the house. There's motivation. Trial one didn't work. Trial two did. Interesting. So you're saying basically if you get rejected the first time, that's what you're saying, right?

Then you would go back and follow up with eight. So instead of like the 50% number you were saying you're getting more like close to them. From a different person. They don't know it's me. Yeah. That's the whole point. I wait two weeks to see if anything changed. and then I send the 85, they might be motivated.

I'm probably not going to pay 85, 85 loan to value for that or value of it, but they're at least motivated. They came off 15%. Some of the best deals I've found using creative means and financing subsequently have been using that method. Fascinating. So when you say Craigslist and Zillow leads, are you talking about people who are listing their homes for sale by owner on those sites or they rentals that are listening

for rent? Okay, yep. The spreadsheet says for rent or for sale and it actually says it that way. And you approach the questionnaire that they go through on the text is a little bit different per if it's for sale or for rent. And the four rents are harder to confirm or harder to convert, but you'll get the potential for a landlord that wants to sell all their properties. Yeah. In a big lump sum later on. Yep.

And I talk about this a lot on these web. You know, I host a live webinar every single week on BiggerPockets, which you all should come to, BiggerPockets.com slash webinar. Anyway, one of the topics we cover every couple months is how to find deals in a competitive market. And I tell people all the time, like most landlords I know would be willing to sell at a certain price. And on Craigslist, like, there's a list of landlords every day new landlords are saying, hey, I'm a landlord. Look at me. Here's my phone number.

Like, it doesn't get a whole lot easier in terms of lead generation than something like a little more. But nobody does it because, you know what? It requires either hustle and hard work or the intelligence to create a system that other people can work for you. And I love that you kind of use both that. You built the system yourself. And that's the key to all systems, right? You build it yourself. You know how it works.

You make the videos. Then you hand it off to somebody else. And then your job becomes managing the process, which is just fantastic. And then we can take it to the next level if you don't mind. Yeah, please. Because you'll run out of deals even doing that. The next level is you go to property management websites. And those are nice properties that are for rent.

And you do the same thing. You scrape off all the big property managers and you run the same process. And that's where you get big portfolio potentials for big portfolios. I don't like to buy big portfolios at once, but I like to find sellers who are willing to sell all their portfolio. And then I pick and choose the best deal, the best properties out of their portfolio. Yeah, that's fantastic. I really like that a lot. How are you getting the phone numbers of those landlords that are advertising their properties?

I'm not. I'm a property manager. Good question. I'm mailing to their, wherever the billing address is from the county records. Fascinating. You know, I, this reminds me, there's a video that was out on, I think, I was out on Facebook, but it's basically Google. Google Assistant is getting so advanced that now, do you guys say this video? It can call and make you a hair appointment and like get you reservation.

And it sounds like it's a real person saying with ums and Oz and they're like, yeah, can I do like six o'clock? My client looking for something for six o'clock. And the person's like, we don't have six. And I'm like, okay, well, how long's the wait usually if they were to go at five? Anyway, amazing technology that Google's coming out with. Imagine hooking that up with lead gen for real estate investing. Is it?

Yeah, yeah, Google duplex. Yeah. My buddy Kyle Ranky told me about that and I didn't believe him. No, it's unbelievable. He sent me the link and I'm like, oh my gosh. Like there's O's and ums and that time won't work for me. How about this time? It's amazing.

Yeah. So somebody's going to figure out a way. So who's listening to this podcast is going to figure out a way to hook up Google Duplex to Legion. You're going to figure it out, Paul, actually. Maybe you're that guy. And you're going to have an automated guy just calling sellers and negotiating on your behalf without a real person involved.

That's the future of Legion right there. Never split the difference. and have all this rubric into it built in. Exactly. Anything at 75% loan to value, I accept. Done. Yep. That's amazing.

If you're listening to this, you need to make sure you're taking action because Paul's going to buy every stinking house in this country. If you can start quick about getting your stuff together. Paul, one thing that you, I know that you do that I've always respected about you. And I love to pick your brain about is that like Brandon has this philosophy that the

more tools you have in your tool belt, the more things you can tackle. There's this saying that to a man with a hammer, everything's a nail. When you have a certain mindset, every problem you come across, you try to fix it one way. You know, like if all you know how to do is fight, every time there's a disagreement, you look to punch the other person, right? You are very, very smart.

And I know that you understand real estate investing because you've intended, what, like 30 conferences since you started this a couple of years ago. Tell me about some of the ways that you will use different techniques on one deal to make a deal out of something that another investor might not have been able to do. Yes, I don't like to be technique driven. I don't go into thinking sub two for this one. I have no preconceived ideas. I go into it trying to figure out what the seller's problem is.

And I ask and I have questions that are opened in. What would you like to have happen? Why would you sell such a nice house like this anyway? And I want them to start talking. And most sellers will just chew your ear off and they'll tell you, they'll divulge way too much. You would not think that that would people would do that. But every new investor that I've ever worked with has always been surprised. I've had people, I had somebody actually offer me a sub two the other day.

Like that's the first that the seller themselves actually knew the terms and was offering it to me. And this was not a sophisticated landlord type guy. It's like he just somehow knew. I don't know. But so I have a kind of like a hierarchy. I caught the martini method. And I start off as I always want to buy owner financing first. If I can't do that, then I go down to sub two.

If I can't do sub two, I'll do a wrap around mortgage. If I can't do that, I'll think about these options. If I can't do that, I'll think about this. And I go down to the last thing on that list is wholesaling. If I can only get it for wholesaling. I guess really the very last is wholesaling a lease option, which I don't really do that much anymore, because it can, it just, it's really complicated and I don't like get in the middle of it. But you can actually monetize scenarios where there's no cash flow or equity. So I'm looking for three things.

I'm looking for motivation, cash flow and or equity. And if I can get two of those things, motivation first and then another two, then I have a deal. I can do a transaction engineering service where I can find a way to monetize that so that they get what they need and I get what I want. I love that. This is why a lot of people say, you know, I've had a hundred phone calls from motivated sellers and I can't get a single deal out of it. And that's true. You might just be marketing to the wrong people, but I think chances are you just don't understand all the different ways a person could put together a deal. Like, again, people, if all they have is a hammer and they're presented with a screw, what do they do? They start hitting the screw and it just snaps. It doesn't work. But if you have a lot of tools in your toolbox, you can start taking things off. I think, yeah, I think that's super cool. So anyway, You mentioned a lot of really good techniques that a lot of people are hearing and they might not understand exactly what they mean. Can you give me a hypothetical example of a deal that comes your way that you're, okay, I look at it from this angle and that didn't work. So I say, well, this might work and kind of walk us through what that thought process looks like in your brain. Okay, so let's just use, which is very common in the Midwest and the southeast is a house that's a, it's kind of the example of a lot.

It's a hundred thousand dollar house. It's worth that much. It probably is in it will rent for about $1,000. So it's just kind of standard 1% deal that somebody from California or somebody sales would buy in a heartbeat, right? They do it. I mean, happily. But to us local guys, well, we're not from the land of milk and honey. We're just raining capital.

So we have to come up with a little more creative ways. And so we look at those kind of deals. And we have to get it at $70,000 somehow for it to make sense. Not everybody wants to walk away from $75,000. So, okay, so they, you can get them down to, say, $80,000, but it still doesn't work. Well, if I could buy it for $80,000, but. give them 50 down. You find out that they need $50,000 to pay off their debt and to buy an RV as a

random example because they want to go around the world. I've actually had this happen. And they wanted money for their RV. I said, okay, well, if you need money for your RV and you need to pay off your $30,000 debt, would $20,000 cover you for your RV? Yes. Okay. Well, how are you going to pay for your gas on your RV and your insurance?

Could I pay you $300 a month for the next 10 years to cover the? that? Yes. Well, then I just create a deal where it's kind of a combination of two deals. You could even get more complicated. You could buy that sub two, also do an owner financing and give them some cash to walk and a house that's in good shape for $80,000. If you net all that out, you're probably only buying it for $65 as you factor in the high value of money and the interest rate that you're paying may only be 3%. I can't go and get a loan for 3%. No one can get a loan for 3% unless it's from the owner. That's an example of stacking three or four different options, cash, sub two and owner financing that I might turn around in lease option because I want

them to get out. I don't want to hold that sub two-two forever. So I do a lease option with a two-year deal and I agree that I'll pay them off in five years. Do you find yourself having to explain this to your sellers because they don't understand some of these terms and so you kind of have to walk them through what this means and how you're able to give them more money? I love that question. I never use the terms owner financing. I never use the term sub two to sellers. It'll blow their minds. And even when I'm talking to new investors, I don't try and throw those terms at people all the time. What I'm trying to get people to understand is the concepts. And I'll say, well, wouldn't you like to have some payments? Wouldn't you like some walking money? The Milwaukee money is cash if you want to

have payments. And I think I try and attach those payments to something I know they told me that they need. Where you don't get all the money for the insurance and the gas and example of the RV. You just find their scenario and you walk them through it. And lease options are especially hard because nobody understands what a least option is. Even investors get confused what it is. I don't use the word option with investors too much. I use the right to buy instead. Nice. Nice. People tend to overwhelm. It's almost like people will go to a motivated seller and try to impress them with how much they know and their knowledge. But in reality, like you want to be like you want to make them feel comfortable. If they get scared, nervous, whatever, overwhelmed, they're going to say no. I mean, everything's

always know. Like, how would you explain? Because we don't talk about subject too hardly ever here on the Bigger Pockets podcast. It's been years since we really. did a show on that. Can you explain to the listeners, maybe the same way you would explain to a seller, what is subject to and how does that work? What are the pros, what are the cons, what are the benefits and risks? Okay. And there are lots of, it can be very complicated. I think it's thrown around by gurus way too much as an easy way for people to get in without a lot of cash. So first off, if you're doing subject to the turn, and you'll hear this refer to as sub two or subject to investing, but I kind of don't like that because that's vernacular for one particular

use of the concept of subject to, all the terms subject to and legal speak means is exception to title. I can buy a house subject to an easement that is there. So when it comes to investors, when we talk about ways of getting financing, using somebody else's financing, it's already in place, you do subject to the existing mortgage. I, in a way I tell people is, I'll agree to make your payments for you. I'll own the property, but it's my responsibility to make the payments from now on. And I've had mortgage brokers that I've worked with that have agreed that they are the seller and they were mortgage brokers. And they said, sure, it's fine. I was like, you never know until you ask. I was nervous. I mean,

I knew he's a mortgage broker. And he said, sure, let's do that. That's funny. So what about, so tell us about the, what does it do on sale clause and how does that affect? Like, how does that play in this? And he did not ask me but the do on sell clause. I had to say that now. You do, you are aware, you're a mortgage broker. Let me explain. So most modern or practically every, modern traditional bank note these days or mortgage these days has a due on sales or an acceleration clause. And it gives them the bank, the note holder, the right to accelerate the clause if title exchanges or title transfers. It doesn't mean they have the right.

It doesn't mean they will or it's illegal. You have the, they have the right to accelerate. So it is a potential risk. And so I don't like to take on subject twos unless I know there's a lot of equity in the deal or a ton of cash flow that makes it worth the risk because I am so careful with subject to investing that somebody is putting a lot of faith in me. And it is not a technique that to be used to be used lightly just because you can. And sometimes somebody will offer subject to the existing mortgage.

And you're like, oh, they did it. They're going to do a sub too. But you don't want that deal because there's no cash flow in it and has no equity. Don't do it just because they agree to it. So what I want to make sure we highlight for everybody is that when someone's giving a loan to someone else, a bank to a borrower or like me if I'm the lender, I would say, hey, I'm willing to let you borrow this money from me, Paul, because I know your credit. score, I know your debt to income, I trust you're going to pay me back. But if you're going to go

give title to someone else, so now he's got to make the payments and I don't know that guy, right? So I have the right if I don't like that you're transferring title to someone else to say, no, now you have to pay off the loan in full because I don't want to get payments from this person because I can't trust that they're going to pay it back. That's called the due on sale clause, that all the money that I've let you borrow is due on the transfer of the title from from, from you to someone else. And it's very important that you recognize. Most banks don't care. If that check's coming in, they don't care where it's coming from, right? But there are scenarios where that might change, right?

Like we wait to see a spike in interest rates. Right now you're getting loans at three, four, or five percent. Well, if interest rates go up and you're getting loans at 15 percent, the bank might say, I want my money back because I want to go lend it to someone at 15 percent, not the four or five. And if they have the opportunity to take it back with the due on sale clause, they will. So you're very wise to be careful using that. It doesn't mean you should avoid it.

It doesn't mean that like subject to is bad and you should, you should like it. It means you need to understand what you're getting into. to that's one of the things that I really respect about the way that you're investing is that you're not just saying, oh, well, this is what I do. I'm a subject to investor. I go by stuff subject to and you just blindly follow this path because it's always worked before. You're looking at every single different angle from this and finding the piece that works the best. And one thing that you mentioned that I don't want to get overlooked is that you're actually speaking to the sellers at length when you first talk to them and getting their story so that you know which

of these tools is going to work better, right? Is that you're like a contractor that's going and looking over the whole house and seeing exactly what you tools you're going to need to bring to this thing to the job site, rather than showing up with my hammer and my saw because that's all I have and I'm just going to hammer and saw whatever I can. By asking questions on listening to people's situations and then understanding real estate investing at a deep level, you can come up with the solution that will work best for them. And as a byproduct of that, it will work for you and you'll be building your wealth. That's how the best investors make things happen. Brandon and I always say when you're finding an investment property, you're looking for some form of distress. What you're describing right now, Paul, is a personal distress most likely. They need to sell this house and they don't want it.

That means you're solving a problem. You're not just finding a great deal. Like there's nobody out there who's just like Johnny Appleseed thrown out great deals because they're this nice, benevolent person that wants to give things away. You're inheriting someone else's problem that they can't solve. So the more tools you have, the more likely you're going to be to solve it. That's why you've been so successful. Brandon, what are your thoughts on this?

Hello, what you have to? You're like, you're thinking, man, I've been talking for a while. I better get Brett in a chance. Yeah, that's exactly what it is. I want to eclipse your greatness. No, my thought was this. Like, I don't do subject to because it makes me nervous. There's nothing wrong with it, but I just haven't done it.

In fact, I actually wrote a whole chapter. When I wrote the book on investing in real estate with no and loominee down, I wrote a whole chapter on it. Then I took it out of the book and when we published it, I didn't include it in there because I was like, well, I don't actually do it. I did every other strategy in the book. I didn't do that one. And there are a lot of things to be nervous about. So I guess my bottom line is it. Like, don't be afraid of it.

But if you're going to do it, learn how to do it. Like, it's complicated. maybe a little bit. So even if you're listening to this show right now, yeah, don't get it. It is complicated. It is. And there's a lot of stuff in the back in with the insurance and figuring out how if you're going on trying to obfuscate the fact that title was transferred using land trust.

And it can get complicated pretty quickly. It's way too deep to want to go into here. But if you decide that you want to use that sort of technique, then it is something that you want to go find a book on subject to or you want to go to a conference that is talking about the nuances of it. Or there's a lot of content. And it's very mixed on bigger pockets forums about the pros and cons of it. I actually use it oftentimes when there's not even institutional debt involved.

I'll do sub two amongst friends. And a lot of people don't realize that. I like to invest in little posseys. And we invest with each other in like this kind of gaggle and a group of people that are doing investments. Well, we're loaning money to each other. And I'm happy to have somebody do a subject to of my mortgage that I've lent to somebody else on so long as I know that the collateral is good. and that I know who the new payer is. That's all the lender is typically want to know is the person that's going to pay,

are they reliable? And so it's actually, if you talk to lawyers that blows their mind that sub two exists, unless they realize that it's actually, it's often done amongst interested parties that know each other already. That's not that uncommon. But when it's on like a random seller that you don't really have your relationship with, that's where it's uncommon amongst the legal people you talk to.

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I lie every day. I want to know. I want to know what you mean by that. I lie L.I.e every day. What does that mean? Okay. It's an, it's an acronym. And it's, for me, this is kind of my own personal philosophy and just kind of a funny way to remember it when I talk to people is I learn every day. And so what I do is I always want to make myself better. And so the way I became an investor and did the amount of deals I did in the relatively short on time considering my experience level was that I poured myself into investing my inner game or improving my inner game such that I could transform myself to become something else so that I could get where I want to be. And I want to always learn. I spend probably two to four hours a day investing on or learning

somehow improving myself. And so the next. is invest, learn, invest. And so I invest can be apply or invest. I always believe even if you have a day job, you don't want to quit it, you should always be investing, investing monetarily or investing what you've learned and applying what you've learned for the future to do these little test cases, these trials. How am I going to get a little bit better every day? And that's what I call investing. And then last and probably the most important one is enrich somebody else constantly. I always want to find somehow to basically take what I've learned, take what I've, invested in, take what I've applied, and how can I share that with somebody else? How can I enrich

and make somebody else better? Because I believe in the givers gain principle of the more I help somebody else, the more I empower other people and make them better, it will come back to me somehow. I don't know when or how, but it always comes back somehow. That's cool. That's true. I was a, I think I mentioned this a few weeks ago, but I'll say it again now. I was doing research for a potential book that I'm working on. And in there, I found the stat and it was something I'm going to get it wrong because it's not perfectly. Basically, it was like for every dollar a person gives, like they earn back like $1.83 or something like that. And it was like this like principal, they did this study of what people who gave versus didn't give. And it found out that people

who are more generous with their money or whatever. I mean, specifically I was talking about money, but in general, generosity, you receive back even more than that. And I'm like, I'm not guaranteeing. It's kind of like the, I don't know, TV preachers who are like, just send in your seat of faith and you'll be rich. It's not like that. But like there's this. thing when people give, when we release our grasp that money is this finite thing that we have to hold on to and it's scarce. When we release that into the world and say, hey, I'm going to be generous with my money and with my time.

There's just something happens. Have you found that in your own life as well? Absolutely. I think you guys are both a member of or part of Go abundance. And I'm not, but that's, I live up to the same kind of concept or this life and air concept that there is plenty of money for all the things you truly want. if you want them badly enough. And I believe in an abundance mindset that I was raised and probably most everybody listening

and maybe you guys were raised in a scarcity mindset. And there's more money out there and there's more, there's plenty of time for anything you want to do if you want to do it badly enough. And so I absolutely believe that. Yeah, that's so true. So, all right. So speaking of money, I want to talk a little bit more about your kind of concepts of the money. Again, I had some notes here that I want to make sure we cover.

one of the things that you had written when you would send us some emails that said, we all think we want money, but that's not really true. What do you mean by that? That's right. So I'm going to give you a scenario for both of you. Would you rather have a $100,000 house that pays you $1,000 a month in rent, or would you rather have a note that you've invested in that pays you 6% return, it's $100,000? Or would you rather have a promissory note that's worth $100,000 that did not increase in value,

had no return and actually decreased in value. Which of those three would you rather have? I think I'd want the, if I understand the question, I think I'd want the rental house that gives me the $100,000. So it was a promissory note or a rental house or what was the other option? And the third option was another promissory note that had no return and it was depreciating a value every day. I'd probably go with the rental house.

Okay. The third option is $100,000 cash. Oh. So do you actually, do you want cash? Really? You want what cash can do for you. Right. Yep. Yeah. Right. So you're going to take that cash and you're going to take the cash and go invest it into a $100,000 house, right? Because that's what you do. Or if you prefer to do notes, then you go and invest in a note that gives you 6% return. But you don't have all the headaches, right? So you don't actually want cash. You just want

what cash can give you. It's flexible and you can spend it on whatever you want. That's why it's nice. But it's a terrible investment. You would not want to hang on to cash. You don't want money. You want what money can do for you. And I definitely want more money and I love money. And I'm proud to say that I love money. But I love what money can do for me. Yeah, that's so sure. And I think, I think keeping that in mind as people get into real estate is so important

because all the times you think of a number, like I want to be a millionaire or I want to have $10 million in the bank. But I like to kind of challenge people with, like, well, what do you really want? What is the purpose of that? Well, I want to be able to quit my job and travel the world. Okay, well, that's different. Keep that in mind. You want to build a life.

that enables you to do that, right? How many investors do we know that are like, get into real estate because they want this mythical financial freedom and then they work 100 hours a week even when they're financially free, right? So their whole goal was to get out of work and not have to work so much, spend more time traveling and hanging with family and working hobbies. And then they don't actually do that. It's like they just traded one rat race for another one.

You have to be very careful. You go buy yourself another job. Yep. Yeah, it's very true. So how do you balance that in terms of, you know, you want investments that. pay you passive income, but you also need like, you know, potentially flipping houses or wholesale. Do you do any of that stuff? Like, how do you balance that in your life? I do all three. So the way my business is set up is that I have, my end game is to have seven streams of income

and each one of them can stand on their own because wealthy people have seven streams of income. It could be five, it could be eight, doesn't matter. The idea is I don't depend on just one. So rentals is kind of the foundation that I have now. So I have about 25 and I'll probably add about six or so this year, give or take. There's no magic number to it. If I can find the right deal. And once I hit about 40, then I don't want anymore. And that's one pillar, so to speak. And I also do note investing. And so I do that out of my IRA and my solo 401k, I lend money or I buy other notes that are not performing or performing or depending on your preference. And then I also have a stock portfolio from my previous days when I was investing. And I just kind of keep that. And

that's why it's the third pillar. So I'm working on pillar number four. And pillar number four is kind of doing more wholesaling and more flips because I'm doing this marketing. I've gotten good at marketing. So that is a way to make money. And I do layups when it comes to the stuff. I don't do any of the work. I already have the contractors line up. I use my network effectively to get all this stuff done. I will do a flip for which I have no money in it and I have nothing. All I did was brought, I brought the deal or I brought the buyer from a buyer's list. And I stay in, I like to do effectively what they call whole tailing where you take a property to title and you take title of the property and then you just slow down trying to sell the property and you want to get as

much out of it in its current condition or with very light rehab. I'm not getting it retail ready. I don't really like selling to retail buyers because of all the complexities and the lawsuit potentials. I like to hotel to other investors instead. But instead of having to get a five or $10,000 or $10,000 assignment, I can get a sometimes $10,000, $30,000 deal off of doing a hotel. It's the same house with little to no work. The additional effort is getting utility. he's on and taking title. That's, I mean, I don't even know what to say. I'm kind of speechless.

This is like, you've got this down to a science where you're getting all the benefits of real estate investing without most of the headaches. You're just doing the layups, right? But you didn't start off that way. You had to start off getting your teeth kicked in like everybody else, seeing what works, seeing what didn't work, doing more of what worked, doing less of what didn't work, building up your confidence to get other people involved. You mentioned something earlier, the third party catalyst that you look for to kind of make

a deal happen. And what you're just describing, I can see. like I brought the flip. I didn't do anything else. None of the money, none of the work. Can you tell me about some of the ways you recognize a third party catalyst that you think would help you and what you look for them to accomplish in your deals?

Sure. It always starts with a deal. And so you have a deal that someone brings to you. And they ask about it. Hey, I have a deal. And it's a good flip. And they tell you all these details about it.

I don't care. I don't care. It's a house. Whatever. Everything's fixable. I want to know what's the random repairs. And they try to, well,

it's 17. But no, no, is it 15 or 20. Just tell me. Okay, it's 20. I round up. $20,000. Okay, so you need 50 acquisitions and you need 20 to purchase it and you think that are $100.

I'll work with that. What do you need to make that happen? You need $70,000. Well, do you know anybody who has $7,000? Go find somebody that's a third part that comes in and brings. Maybe I have it. Maybe I don't. Sometimes what I do is I'll say, okay, well, how about this?

I'll do that deal with you. I'll bring $70,000 to the table and do your flip. And then I turn around. I go find somebody that I know has money that's sitting around. looking for an investment and then I will buy it and wrap the mortgage around it or I'll lend on and wrap the mortgage and I'll have two into it and somebody else will bring 68. So my 2000 is all I have right now in my solo 401k. Everything else is tapped out, but I have that interest that's come in. I want to put it back to work. I want the interest to compound on itself.

So then I just have that $2,000 wrapped around and I'm in the middle of the deal. So I'm not brokering money. I'm still a principal involved. And I am kind of the senior guy involved. Somebody is a new flipper. I've seen the house. I'm comfortable with it. And that person who lends money to me at 68 at, say, 8%, but I'm getting 15 on my two, it's fine with that. And they know what's happening. What makes that possible is that people come to you as the expert. They trust you because you're an honest person. And they trust you because you know what you're doing and you've made it happen. And you've got this like aura about you that, hey, Paul is a calming influence that can make this happen. And that's why you're able to be involved in a deal with $2,000 that somebody else wouldn't

be able to be. And that was a result of you studying real estate and getting involved and taking action for long enough and developing into this person. Because I can already hear a lot of the objections coming. Nobody would ever let me be in on a deal for $2,000. Well, that's because you're not Paul. But what's stopping you from becoming him? What's stopping you from learning enough about real estate that you're the guy that has all the answers that someone says, hey, I found a good deal. I don't know what to do with it. Well, you know enough about real real estate that you process it down every single option in your brain. And you're like, we'll use this, we'll use this. You're like the general contractor that puts it all together. The general contract,

don't swing the hammers. They don't pull the cabinets off. They don't get the splinters. They don't work hard, right? They have the vision. They put the thing together and they benefit from their knowledge and the relationships they have with their subcontractors. It's the same thing you're doing. You're playing the role of GC general contractor with these deals. You're bringing in all the pieces that are needed. And that's how you're able to make $3,500 an hour with your time. It's why you're able to make deals work that other people can't. It's why you're sitting in the captain's seat because you learned. You paid the price. You didn't try to take the easy way out. You didn't try to get involved in real estate investing without ever feeling anxiety. I mean, you just said everything right,

and now you're benefiting. And that's what I want everyone to hear is that there is a, like there's a summit to this mountain that we're all climbing. And when you get there and you're sitting in the captain's seat, it's pretty nice. Can you give us any, any examples, Paul, or any maybe advice for what you did to get here so that someone else taking that same journey can get there faster or better? Well, it's back to that, that lie every day. That's exactly. And I think that to myself, okay, today I need to learn something. How can I be a little bit better? And to be successful is a choice, not a destination. And I was like, I choose to be successful, but I have to transform into something else to become that.

And that transformation is what makes it possible. And like you say, it takes three to five years. That does not happen overnight. But you got to put in the paces. Personally, I liked it. I like to learn. It's step number one, learn. So it's not that hard for me to then apply it, test it.

Oh, and then share it. And people come to me quite a bit asking for help. And I'm an open book and I help however I can. For the people who have read my article on how I bought and analyzed a deal in five minutes without ever seeing it, this was the guy that I was talking to, right? Like I met Paul. I talked to Paul. I could immediately tell Paul knows what he's doing.

Everyone that was there at the conference I met you at spoke very well about you. I did a little bit of research that I knew he's an honest guy. I feel safe with them, right? So I was fine buying a deal that you provided me the information on five minutes into hearing about it and putting it under contract. Right now there's still due diligence that goes involved. It's not like I just jumped off a cliff and said, well, I'll try. trust that this parachute Paul gave me is going to open, right?

But there's no reason not to buy it. That's what I want people to understand. When you become that guy who everybody looks to, opportunities come up that aren't there for other people, you know? And like you're just, you're doing everything right, Paul. And I love that. Brandon,

you've been quiet for a while. I have been a little quiet. No, you've been covering this. That's good. Tell me, Paul, one last question before we move on. I'm wondering,

it took you 15 years to get into this game. You know, it took you 15 years of sitting on the sideline, right? But why does it take people so long? And what advice do you have to others who are listening to this going, you know what? I don't want to be sitting here 15 years from now thinking I still want to get into real estate. So what advice do you have for those people? I had to find the pain.

I kind of floundered for a while. I poured myself into work. And then you kind of come out of it. And I realize, oh my gosh, I'm in what I call the real world matrix. I am exchanging my time for money. I'm jacked into the cubicle just like Neil was. and I'm there. And when you realize that in your eyes are opened and you finally take the right pill,

I, and that's what I actually would harness that pain. Like, I will not accept this. This is, and once you got to find that pain, that deep-seated emotional outcome or a deep-seated emotional pain to drive you towards the summit,

like you used a while ago, David, to actually get where you want to go. And until you find that for you, and that's not going to be the same for everybody. I mean, some people really like their jobs. But what happens when your dad has cancer and,

you can't go spend time with them because you have to spend time at work. That might change. And if you don't have the freedom to say, I have the income stream to walk away or go in sabbatical or demand, it's amazing. When you have what's called screw you money and you have streams of income and you're not working for money anymore, then the power struggle, their power shift is entirely on your side of the ledger. And you can basically dictate to your employer or dictate to life, what you're going to do.

You make, I want to control. And if you want control, if you need control and you realize you don't actually have that you're not happy, that's what you need to find. That's super, super insightful. Yeah, like, again, like you might not hate your job right now. You might have a great job. But like you said, like, what if all of a sudden something changes, a family member gets sick or you need more time off or you have another kid or whatever, right?

So by setting ourselves up now, knowing that the future is uncertain, like, let's like, let's give ourselves the best opportunity of having an amazing life for the next 80 years rather than living reactively to, oh, crap, something bad happened. And now I better, oh, I don't have any rentals. So, yeah, you know, feel the pain point and also know that the future is going to be uncertain. That's super, super good. So, all right, so we can probably talk for 100 hours here. But, you know, we've been doing this for an hour.

So I want to be respectful of your time today, Paul as well. So let's shift gears here and head over to the world famous Fire Round. Fire Round. It's time for the Fire Round. All right. Let's get to the Fire Round. These questions come direct out of the Bigger Pockets forums. which I know, Paul, you're active in.

So you might have seen these before. If not, they're going to be fresh and new for you. Number one, overnight. The ceiling and the main floor bathroom of our fourplex collapsed due to a water leak. We tried to enter the unit above to shut the water off and there's an angry pit bull inside. The lease says no pets. I can't get a hold of the tenant. Now what do I do?

That's a really unique question. That's not a very specific problem. First off you turn off the water. Number one. I always, the only tool that I ever carry around at all ever is a T, a T bar from home people for $7. I cannot tell you how many people, including contractors, including plumbers, I don't have one. Yep. And my house is flooding.

So next, they have a pit bull. Okay, call animals to shelters. It's almost certainly not supposed to be there. It's not legal. They're gone. I have taken too much grief from tenants. If they break the leases, they don't do things. and they're causing problems.

I prefer to do things like cash for keys. And in this case, you'd probably file an insurance report and they'd have to move anyway. So the problem probably solve itself. But I don't like to leave people in that are not cooperative and not following the rules. But I would do it with cash for keys. I would do it with cash for keys to begin with the Ford eviction.

What's cash for keys, Paul? Yeah. Cash for keys is when you offer to a tenant to move for, if they won't move first off by themselves, which they're being uncooperative, you say, well, how about I give you $300 on Friday? And when your stuff's out and you have the keys and I'll give you 300 bucks and you move in the next place versus the potential $1,000 or more that it might cost to wherever you happen

to live for an eviction. There you go. There you go. All right, Paul, next question. Right now, my wife and I are looking for a property to buy. A lot of the ones I am seeing. You didn't tell me, David? Come on.

Okay. But this is why Brandon is a podcast. So it's not a comedian. All right. A lot of the ones I'm seeing are already renovated and have tenants. Is it worth it to invest in one of those? Or should I buy a nasty one and fix it? And they're looking for an investment, I presume? Yes. Or they're trying to a house hack or what?

They just say they're looking for a property to buy. They're basically saying, should I buy a turnkey house that's in really good shape or should I go for a fixer up? It would end up depending what they want. They just want to live in themselves and they're not looking for an investment, just by the most convenient one like a typical retail buyer would be. I assume since they're on the forums or they're looking for an investment, I always like to be able to buy equity and put split equity into it, if you're doing a house hack especially,

if you have the potential to do house hacking and you're willing to do with the additional headache that it takes, how can you not do house hacking? It is probably the single greatest lever available to somebody trying to reach financial independence. Yeah, totally agree. All right. Number three here.

It's kind of a long question, but I think it's a really good one that a lot of people are struggling with. I'm actually going to summarize it because it's a really long question. But basically, this guy, before he got into financial freedom, real estate, this idea of early retirement, he was living like everybody else. And so he says when he was, he bought a brand new 2013 Chrysler 300 because he thought he deserved it to have this amazing thing because he worked hard. But now he's got this massive car payment that's like more than a mortgage payment. And he still owes 15 grand left on it. So he's wondering, should I just sell the car?

maybe even though I can't sell it for the same amount, should I just pay it off as quick as possible? What's your advice to somebody like that who's stuck with that huge massive payment? If you can find a way to, have you ever heard of the car service that it's like Uber, but you can actually rent your car out on weekends? Turrow.

Find a way to make that. Yeah, Turrow, that's it. I consider doing it, but I'm too lazy. If you are in a pinch, you have to make your whatever you have available to you, whether it be a house for house hacking or car for a car hacking. make that thing useful. Start doing Uber.

If it's a nice car, turn that asset or turn that liability into an asset, even if it doesn't actually break even, I assume he needs a car. So if he sells it, he's going to lose money. So why not think a little bit differently and try and figure out a way to make that make money? I love that. Go to a clown, you know, a store. You know, there's no way that you're not going to find a way to make that make money if you want it to. It's just you don't have the desire to.

You just want a way out. You made the mistake to get into it that much. Find a way out. Think outside the box. There is no box. Figure out a way. I like it. That's awesome.

Very good, Paul. All right. Last question. I read the book, long distance real estate investing. Which side note, Paul actually helped edit. Cool thing.

All right. I will be completing my, yeah, Paul was the guy that Sony spelling errors, we can blame Paul. And we'll be, so I read the book and we'll be completing my first slip in two months. With the profits,

I would want to reinvest in a rental in a more affordable market and all my research has led me to the Midwest and to the Southeast. The research has included the buy to rent ratios on Zillow and has given me some city slick into. What more would you do to determine which market you would want to focus on to build your core for? I love that question and it has almost nothing to do with the market itself. It's where you have connections. Invest where you know or invest where you know people. Then figure out if it fits the numbers that you're working for. the numbers for an investment for a rental investment for cash flow are going to work you can pick

anywhere from Tulsa, Oklahoma over to Savannah, Georgia and up to Cleveland. And between that area someplace, there are a major metropolitan area, pick cash flows somewhere somehow. And they all have their pros and cons and you can stack your income. It doesn't matter. Find somewhere where you know a property manager, you know a good agent. That's where you start. Then you find the house. I could not agree more. And that's pretty much exactly what I said in the book. So Nice. Thank you for. Maybe I read it.

All right. Well, let's shift gears one last time and head over to the world famous. Famous for. Now, these are the same four questions we ask every guest every week. But before I throw them at you, Paul, let's hear from Mindy on what is going on this week over on the Bigger Pockets Money podcast. Thanks for asking, Brandon. This week on the Bigger Pock's Money podcast, we talked to Chris and Debbie Emick, a couple with two daughters who are working towards. its financial independence. A combination of local and long distance real estate investing,

coupled with frugality and conscious spending, have them very close to financial freedom. All right. Now it's time for the famous four. All righty. So let's get to the famous four. Question number one. Paul, what is your favorite or current favorite real estate related book? Okay. So I really liked the building wealth one house at a time. It was written by a guy named John Chob, I've actually been to his conferences, and that's where I learned how to doork and I actually have been to his house. Super nice guy. He's just a sage of real estate. And his principle is build wealth buying one house at a time. So if you're just getting started, that is just the greatest way to start. It doesn't, the numbers are nice and round and

it's a little too convenient. But the concept is of how to approach it is perfect. If you want to learn how to actually run the numbers to figure out your N-O-I or whatnot, The ABCs of real estate is still the best one I found for that for average mortals actually understand. And it talks about apartments or multifamily, but actually it works the same principle. It works for single family. And I still use that today on my single family investments is I do the same numbers. I use the same due diligence process that he uses for multifamily.

Well, you are anything but an average mortal. That's why I thought that was funny. You're a bit of a god among. No, we got you. All right. Tell me what is your favorite business book? Okay. So I like, if you're not really good at finances yet, I really like the richest man in Babylon

just to get your head on straight about finances. It's just super simple. It's a quick read. If you're to take the next step, if you're talking about a business and how to make it perform better, whether it's real estate or not, the pumpkin plan by Mike McCausky or whatever his name is, Mike McAllowitz. That was a good book. It's just how, it's a brilliant book. It's a lot of things with the one thing and the pumpkin plan are very similar, but the pumpkin plan kind gives you specifics on how to do it with a business. And you want to basically, the summary is the niches are in the riches and fire your worst clients or in our case tenants. And so the next book that I would recommend is by the same author, Mike McEllowitz, is the profit first. And it is how to

remove the psychology of bake balance budgeting that so many small business owners do. You look at that checking account and you think, oh, I have 10,000, 20,000, whatever's in there. I have a lot of money and you make decisions based on your expenses when in fact you should have had in your books or however you run things that you should actually have 5,000 allocated for business or for taxes or for five thousand you always pay yourself first or profit first and it reduces that operating account that you're actually making buying decisions out of to a very small number that you make a rational and the one I'm crazy about now is the big leap have you guys read the big leap by gay Hendricks no no I think you guys read it you would love it I'm I know brandon you're big reader it basically allows you to

teaches you how to break through the upper limit problem that he says so many of us have when you gain success, we sabotage ourselves because we've kind of gone beyond our comfort level. And it triggers us to kind of sabotage ourselves. And our thermostat has gone too high and we were uncomfortable. And it walks you through how to kind of work your way around that and kind of find your zone of genius. And ironically, real estate is probably not my zone of genius. What is your zone of genius?

My zone of genius is actually helping other people have mindset shifts on how to a attack life and actually find their own personal zone of genius and empower them. So I never knew it. But actually, David was saying, I actually, people trust me naturally. I don't try to do that. People trust me. And I'm trustworthy. And so people open up to me about things. I didn't know. So maybe I should be a therapist or some sort of a coach or something. That's funny. Do you ever, are you ever told that you look like a young Steve Jobs? Because you look just like a young Steve Jobs. It's kind of weirding me out a little bit. Yeah, I'm going to find a picture and put it side by side with you right now.

Now over it. Anyway, okay, let's move on. Mindy Jensen is always saying that Brandon looks like the lead singer of the spin doctors. I don't even know what the spin doctors is. It was a band when we were like really little that probably either you or I was allowed to listen to. Yeah, probably know. Were you like to sing one of their songs, David? What are the songs?

I don't know when I wasn't allowed to listen to him. Paul? You got anything? I'm going to be able to either. No. Anyway, all right. Well, we want to know, does Brandon look more like the lead singer of the spin doctors or does Paul? look more like a young Steve Jobs.

I don't think I look like anybody. I don't get left out of these conversations. Yeah, I'm an original. Just ugly. Nobody famous is as ugly as me. All right, Paul, what are some of your hobbies? So hobbies right now are, I've started to podcasting. I'm trying to get better at public speaking.

I find that's something I'm going into more is like, I have these ideas. I want to be able to more effectively share those. And then I do, I'm getting into a lot into fitness and diet. And I'm like going all like plant based and everything, getting all granola. Very, very. I'm going to live be 123. I'm going to make it to 2100. You're going to make it a 2100.

Brandon, he lives in Washington. And that's how everybody in there is very, granola. That's a very good way to put it. Yeah. I would fit right in. You would fit right in, especially with the beard. It's, it's very worthy of the Pacific Northwest. Yeah, the beer's in for sure.

All right, last question from me. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started? That's kind of restating what I said before, but it is absolutely finding that deep-seated inner fire on, and what's crazy is it doesn't have to be about real estate. Real estate is a vehicle, it's a tool to get you where you want to go. And if you want to escape the rat race, if you're tired of being on the hamster wheel, and like the word I use, like you're in the real world matrix, and you want to,

and you just see that that realization and you want out. And that helped picture that and actually, there's a, there's a formula that's called tier, T-E-A-R, thoughts plus emotions plus actions equals results. And you have to, you have to have the thoughts in order to think about it. But the emotions are what's clear. And once you harness those emotions, your actions kind of come subsequently as a result and then you get your results.

Fantastic. Well, will real estate also get you out of the rate rass or just the rat rate? Yeah. Rest is what we called it, right? You know, in a serious note, The Matrix is an incredibly good movie to watch if you're looking to change your life in any way. Whatever your struggle is that you're trying to get out of,

I love, love, love that movie just for the mindset that it comes. Yeah, the idea that you can shoot your way out of anything. It just changed. Or you can just like learn just by like, like there's slip in your eyes. Yeah, yeah, yeah, exactly. Isn't that the theme of the Matrix? Like you just shoot enough people and you can get out of anything? Hey, just plug that thing in the back of your head and I know how to fly helicopter.

I mean, it's worked with you so far, so I can only support it. Anyway, all right. Hey, Paul. I so appreciate you sharing so much wisdom with us that you have and so many of these, like, really good concepts. I could probably talk to you all day long. And I hope everyone who listens to this goes back and listens again because I guarantee that you will find more if you listen to this the second time.

Tell me for the people who want to learn more about you, where can they find out more about you. Okay. Yeah. I'm on bigger pockets. active there and I have a website that's called level up mastermind. I nFO that's dot info not dot com and that will take you over to my to my website and I am actually will have a free offer to anybody who is in bigger pockets that's interested if you're hitting that upper limit and you have a struggle on that

page there's a questionnaire fill it out I will answer you personally on what is the struggle that you have that is keeping you from branching out or taking yourself to the next level to level up your life, send it in there and I will get out to you personally. Awesome. All right. Good deal. Well, thank you, Paul.

This was fun. I learned a ton of good ideas that I'd never, never even heard of. So I love that. I love learning new stuff. So thank you so much for sharing. And I'm sure we'll see you around the bigger pockets community. Thanks for having me.

Thank you, bro. And that was our show with Paul Thompson. Fantastic. I loved, I loved all the actionable stuff that was in that episode. I love just hearing, you know, how he's getting deals and how that system works with the virtual assistance and

the phone calls and all that. I think yeah, I'm totally inspired. Yeah, that three letter option of intent system that he's put together. That alone is worth its weight in gold. I'm going to start doing that immediately. Yeah, very, very cool. So yeah, if you guys, you know, if you find your mind wandering during that show or anything like that,

which would be tough because he was so good at, like, giving good raw information. But if go back and listen to it again, like grab a dope book, listen on your drive home from work or whatever and apply those things to your life. Don't just listen and go, oh, that was cool. But figure out what are you going to apply today in your life that he talked about today? What one thing can you do today like right now in your business? And if you don't know what that is, go listen

again and you'll find lots of gold. So very cool, very cool. Nice, nice pick there, David Green on choosing Paul for the show. I am happy to contribute. The more listeners that we have subscribing, the better guests that we can get on here, the more value we can bring and the more money we can make everyone. So you better get some bigger pockets. There you go. So if you are interested in becoming a guest on the Bigger Pockets podcast. We do have a system, a process in place for dealing with that. Lots of people want to come on the show. And we would love to have you. If you are awesome, have done at least, we like to say at least a dozen or 10 deals you've put together and you have a great personality. Go to biggerpockets.com slash guest, G-U-E-S-T. And that kind of starts the process.

We can't guarantee anything. We get lots and lots of submissions. But we want to hear from you. And I'll give you a hint. If you want to increase your chance of getting on the show, submit a video with your application. There is a spot. you can link to a video, just record some on your phone. It shows our producer kind of a little bit of who you are. So with that, we got to get out of here. David Green, you want to add anything or take us out? This is David Green for Brandon Rate Rass Turner.

Signing off. I knew you were going to do that. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online.

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