Epic Real Estate Investing - A Text Book Wholesale Deal With Paul Hopkins | Episode 141

Episode Date: January 19, 2015

Matt is interviewing Inner Circle coaching client, Paul Hopkins, who recently flipped his first wholesale deal without meeting his seller face to face or ever stepping foot in the property.  Although he experienced some panic after first getting his deal under contract, he followed the process step by step and things went smoothly.  Listen in to learn more about Paul’s text book wholesale deal.  ------- The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E ducation P roperties I ncome C oaching   Learn more about your ad choices. Visit megaphone.fm/adchoices

Broadcasting from Terrio Studios in Glendale, California. It's time for Epic Real Estate Investing with Matt Terrio. Yeah. Hello, and welcome. Welcome to Epic Real Estate Investing, the podcast where I show people how to escape the rat race using real estate. And got a great show for you today. First thing, though, I just wanted to thank you for your support of the new podcast. podcast turnkey real estate investing.

As I mentioned on last episode, I started a second one, a second real estate podcast, geared a little bit more towards passive investing in real estate. And in this one right here, is going to stay a little bit more focused on the active investing part. So again, thanks for your support. Thank you for all the great reviews and the ratings. Thank you for subscribing. Thank you for downloading.

Love you. Speaking of last episode, I got a few really good questions in on my hedge fund. got two. And I discussed my hedge fund and how I set it up last. And I forgot a couple fundamental things. And the first question from Mario here in Carl's Bad California brought up the obvious. What's the name of your fund? So great question. And I guess I did fail to mention that. Epic Wealth fund. That's the name of the fund. And we've already got a small little website up at Epicwealthfund.com. Nothing fancy, but it's there. So thank you, Mario, for reminding me of that. And second question comes from Janet in San Antonio, Texas.

Did you choose to, did you file your fund under the rules of a 506B or a 506C and why? So another great question. It sounds like Janet has a little bit more intimate knowledge of a fund and how it works. Maybe she's contemplating setting one up herself. So it is a good question and it is an important one. You definitely want to know the difference. And to answer that question completely, that just might put you all. asleep. So I'm not going to answer it completely. I've got a great interview coming up for you and I

want you to be awake when it starts. So the quick answer to your question, Janet, is it's a 506B, but that's about to change and here's why. I'll give you the fundamental reasons or the fundamental difference, at least how it impacts me. This is going to be very important for any of you thinking of going down this path as well and creating your own hedge fund. We initially chose a 506B because because they would allow us to accept up to 35 non-accredited investors. And I just really liked the idea of being able to let some of my friends and family in on this opportunity. They've got some money to invest, but they're not accredited. So, you know, that's why I wanted to let them in.

That's why I did this. Before I go any further, what's an accredited investor? I'll just go over that really quickly. Currently, an accredited investor is someone who's individual net worth or joint net worth with that person's spouse, it exceeds $1 million, not counting their primary residence. So that's one way that they qualify or anyone who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. So that's the two

basic ways. There are a lot of, if you go read the SEC guidelines or the code, the rules, whatever they call that book that the SEC puts these rules in. There are a lot of other ways to qualify, but those are the two primary ways that most people would be concerned with. So you have to have a net worth of a million bucks, not counting your primary residence, or you got to make $200,000 a year or combined $300,000 a year with your spouse. Okay, so that's an accredited investor. So the 506b rule, it allowed me to let up 35 non-accredited investors that aren't worth a million bucks and don't make that much money a year. So investors who don't meet that criteria. And then I can let in an unlimited number of accredited investors.

But now I'm going to be closing down this initial round of funding and refiling my fund under Rule 506C, of which will allow accredited investors only. And the reason is, you see, with a 506B, you can't publicly promote, advertise, or solicit for potential investors. There has to be an established relationship prior to really even mentioning that you have a fund or asking them to invest in your fund. So 506B puts some limitations on you in that sense, in the sense of raising money. under 506C, although I don't get the benefit of allowing non-accredited investors in, I am allowed to promote and advertise my fund freely for all intents and purposes. I just can't accept non-accredited investors. That's the big difference.

So that switch is going to happen very shortly here at the end of the month. So if you're thinking of going down the path of creating your own hedge fund and, you know, say you have a rolodex of friends and family that aren't accredited investors, but still have enough money to invest into your fund and they likely will, you may want to go with the 506B. That might be a better path for you. That's why I chose a 506B, but I happen to move through my Rolodex rather quickly.

And so then here I am with my hands somewhat tied with regard to raising further capital to finding other investors. I mean, the only way I'd be able to find other investors now, if I didn't refile, is by just good old-fashioned networking, friends of friends asking for referrals personal face-to-face stuff and and that type of work it just doesn't really excite me um it can be i don't know i did that type of stuff for a long time i did that and i was in network marketing for a while before i got into real estate and it just it just felt kind of creepy like you're trying to come in the sneak in the back door in a relationship and then boom

you're going to pop with this opportunity on them and i didn't like that it didn't feel good so i didn't want to do that. I mean, it's the, it's the real estate that really excites me and I want to focus more on the real estate. So that's why I'm going to be opening up a second round of funding under Rule 506C so I can actually promote the fund and reach many people at once as opposed to one at a time. So there's the significant difference from me. I mean, there are other very big differences, but that's the fundamental difference that caused me to switch it up here at the end of January. All righty. So thanks for your questions. Janet and Mario, I appreciate it. All righty. So let's get on with today's interview. I had to postpone this from last week and I've got it for you this week.

I have an Epic Pro Academy member and Inner Circle coaching client who just closed his first wholesale deal. It was rather a textbook wholesale deal. So I wanted him to come on the show and tell you all about it and give you all the details. And we're going to do that in 30 seconds right after this. Listen, when it comes to your financial future, I've got some good news. I've got some bad news. The good news is you can make a million bucks in real estate. The bad news is there are a million ways to do it. Which strategy do you choose? Picking the right one can be a problem.

The new book, Epic Freedom, is your solution. Get a free copy at free epicbook.com. Epic Freedom, the two easiest and fastest strategies to a paycheck in real estate. Go to free epicbook.com. Freeepicbook.com. On the phone, we are joined by Epic Pro Academy member and Inner Circle coaching client, Mr. Paul Hopkins. Paul, welcome to Epic Real Estate Investing. Hey, thanks, Matt.

Good to be here. Yeah, likewise. Likewise. So you've had an exciting last couple weeks or so, right? Yes, I have. Yeah, it's been pretty exciting. Perfect. I want to hear all about it, and I want to hear it step by step, play by play.

But can you just kind of share with us a little bit on how you actually got involved in real estate investing? Sure thing. I'm a civil engineer, and so I've been working for a large construction company, and I've been working in Canada for the last 10 years. But, you know, just before my daughter was born, I picked up the book, Rich Dad, Poor Dad. And, you know, that kind of sparked a little bit of motivation in me. And I read the book in college, but, you know, I didn't really believe it at the time. Kind of set it aside for a while.

but then, you know, after working so many hours for this construction company, I figured there must be something else out there for me. So, you know, I had done some fix and flips on my own personal residence before, and, you know, I had some good success with that. But, you know, I wanted to really dive deeper into it. And that's kind of how I got started. And, you know, I started searching the website, started searching the Internet, came across your podcast and started listening to that and became a member and started doing

what you told me to do and, along behold, I closed on my first wholesale deal on December 31st. Oh, nice. Nice. Did you need the extra income for that year? It was nice, but no, I didn't. Okay. Super. So, well, congratulations. And so you remember of the academy and you just joined the coaching program here, what, late November, early December, I think? I did. I did, yeah. Super.

Okay. Well, cool. Glad to have you aboard. It's been nice getting to know you and it's nice to see that you got, we didn't quite get your deal closed by December 25th, but we did get it by the end of the year. So fantastic. That's right. Kind of step me through the process of, you know, how did you find your deal in the first place?

Well, I found it through a yellow letter. and I was targeting, this one specifically came from pre-foreclosure list. Okay. And so, you know, I sent out about 140 letters. That's it. And from those 140 letters, I only received two phone calls. One phone call was from a guy that really had no idea why I sent him a yellow letter. And the second phone call was from Distressed Cellar.

that wanted to get out of his property. Fantastic. Well, on your yellow letters, do you write anything special or just the basic like it shows in the academy? Exactly how you explained to do it in the academy. All righty, super. Just throwing you some softballs there. No, actually, I didn't know what you wrote on it. Okay, so you found the deal, or you found the deal through a yellow letter, and you found a

distressed seller, so one of the two phone calls you had were they were distressed. So tell me a little bit about their situation and how you guys came to an agreement. Sure. So this guy was speaking on behalf of his mother, and his mother, about early 90s, and she had been moved out of her property. The property is in Denver, and her son moved her out to Arkansas, and so the property was left vacant, and, you know, it needs to. did some work done.

And so the guy received my yellow letter and he gave me a call. We started talking about, you know, his situation and, you know, tried to build up a good rapport with the guy. And just explained to him that I was an investor and that I could help him out in his situation. So, you know, tell me a little bit more about the property and then took it from there. And, you know, in fact, I never even met the guy, and I never did go see the property. Really? So everything was all done pretty much virtual.

So, virtually. Super. So, okay, how did you come up and if you weren't there and you didn't see the property and you didn't meet him, how did you determine the value of the property or what you were going to offer? Well, just in discussion with him, you know, he told me that he still owed the bank about $56,000. And, you know, there was some work that needed to be done to the property. He explained, you know, there's some issues with the roof, and, you know, it's been outdated. And, you know, he grew up there as a kid, and he doesn't think that anything had changed or been upgraded since he lived there. And so, you know, just kind of rounding out some of the numbers and figures, you know, I just threw a ballpark number at, you know, $20,000 of estimate.

as major repairs. And so, you know, I came up with a number that I could offer him based on the after-repair value. You know, I offered him just $100,000 cash that I could give him for his property, and then he'd walk away with about $40,000 in his pocket. Got it. Okay, so let's go through that. How did you determine what the after-repair value was? What source did you use?

I went on a Zillow. Just Zillow? Yep. Did you use the Zestimate or did you look at the actually recently solds? I did some comps on recent solds. Okay. Perfect. And then you came up with that value and then how did you, how are you able to determine,

oh, so that value probably was right around what, $200,000 or so? Well, it was a little bit less than that. Actually, it was, I did it a little bit different. So I got the after repair value of about 165. And, you know, subtracting realtor fees and $20,000 of repairs. And then, you know, I was just assuming that a contractor would come in and probably want 20 grand profit. So that left about $110,000 on the table for basically to, you know, for me to pocket. So the difference between 110 and 100.

So I would walk away with about $10,000. Got it. And then you had to pay the bank out of there. Okay, so that's where he got 40. And then 10 was left over for you. Yeah, exactly. Exactly. So, you know, there was some back payments that the seller still owed to the bank,

the liquid payments, and, you know, some taxes, lawyer fees, and whatever else. So I would take that as part of my cut in negotiations with a buyer. And that's, in fact, what I did in the end. Got it. Got it. Sweet, dude. Yeah, so as soon as I got it under contract, you know, I did exactly what you had listed out in your property marketing checklist, you know, that 15-point checklist going through every single one of those. And pretty much as soon as I started posting it on Craigslist, I got, you know, swarmed with phone calls, you know, interested in the property. And, you know, I figured that I must have had a pretty good deal and I just started rolling with the punches and, you know, ended up selling it to a buyer.

Fantastic. Fantastic. The one thing about that 15-point checklist is that you rarely get to around, no, I don't know, point six or seven before you're actually starting to get offers. Right. And so it sounds like that was your experience. So you had sent me a few emails to the, to the, to the, to the, coaching email that I gave you. And I don't know, you were kind of stressed at a couple points. I could sense a little tension in your emails and a little worry and concern.

What were some of the challenges that you faced in this deal? Well, you know, when I first received a phone call from the seller and that after that first initial phone call and he said, yeah, like, let's go ahead and, you know, I'll agree to sell the property to you. I panicked. And, you know, I, you know, I, I played it cool on the phone with him. But then as soon as I hung out with the phone, I was like, oh, my God, what am I going to do now? I don't know what to do. So that's when I contacted you.

You know, like I had, you know, a thousand questions that I threw at you. And I was like, what do we do about this? What do you do about that? And then, you know, you put me back in check and, you know, just said, you know, just take it one step at a time and start marketing it. And, you know, go from there. So, and that's pretty much what happened. So basically got it under contract with the seller on November 15th and eventually closed on it, you know, basically December 31st.

So, you know, I had about a month to really go through all that checklist and, you know, find a seller, find the right price. Or sorry, find a buyer, find a right price, and take it from there. Right. To make sure that I got all my due diligence taken care of. and just taking it one step at a time. Cool. So looking back, was there any cause for that panic?

No, not really. Not really, right? Now that I've actually gone through it, it was very simple to go through each step. Looking back on now that you've completed this deal and you look back to your whole experience, what would you have done differently or what might you do differently next time? That's a good question. Maybe I'd stay a little bit more active on, even though I got a lot of phone calls,

I'd still stay active on posting the ad on Craigslist. You know, that would definitely, even, that I would still build up my buyer's list. But another thing I would do is try to keep myself a little bit more organized because I was getting so many phone calls that, you know, I was jotting down numbers on little sticky notes and pieces of paper and, you know, I couldn't remember if I actually called somebody back and it was just, things are getting lost in the shuffle. So, you know, I'd almost set myself up a little bit more to be more organized than the next time this happens.

Got it. Got it. Very good. So the next time it happens, tell me what your current activities look like right now so we can kind of predict when that next time will be. Yeah, sure. So I'm currently sending out yellow letters. I'm targeting absentee owners and pre-foreclosures in the Denver area.

And so I just sent out about 150 letters to pre-foreclosures and a thousand letters to absentee owners and a thousand postcards to absentee owners in the Denver area. So my phone should start ringing off the hook here this week, actually. Good. When did those actually go out? I think they were going out this week. Okay. Very good. Cool. So, yeah, I guess that's it. I'm excited for you, dude. That was pretty painless. And it came up with a nice payday, and you've reloaded, and we're going after it again. So when that happens, why don't you come back and tell us all about the next one?

Sure, sure. Awesome. I guess another thing that I should also mention is, you know, I first negotiated with the seller to put it under contract for $100,000. And, you know, after going through the diligence and, you know, having all the buyers go buy the property and take a look at the, take a look at the property and come up with their own estimate of repairs, I was able to take that information and go back to the seller and renegotiate a price. and I was able to just drop it by 20 grand, so we renegotiated it at 80,000. And it was simple. All I asked him was, you know, are you willing to sharing the liability with me? And I needed you to come $20,000 down. And there was no hesitation on the other line.

He just said, okay. Right. And so then I was able to, you know, pay it forward to the end buyer and give them. a little bit more profit in their pocket. That's fantastic. So you just follow the instructions, right? Yeah, exactly. Yeah, perfect.

Perfect. Well, congratulations, Paul. Happy New Year to you. Good way to start off the new year. Yeah, yeah, thank you. Yeah, you bet. And, you know, I know you like to network. I've already connected you with another one of my coaching clients in the Denver area.

If someone wanted to get in contact with you and ask about questions or maybe, you know, pick your brain, have coffee, something like that. Would you be open to that? Absolutely. So how should they reach out to you? Two ways. They could give me a call on my cell phone, which is 720, 292-16-16. Or they could email me at Paul, P-A-U-L at paw-mop Properties.com. So that's P-A-M-A-Properties.com.

Fantastic. Cool, bud. Well, thanks for taking time out of your busy schedule and being so gracious with your sharing. It's awesome. This was like a textbook wholesale. It's perfect. Yeah. Awesome.

Yeah. Well, thanks to you, Matt. You've done a great job at teaching us the basics, and as long as you apply it, then it'll be rewarded. Awesome. Well, indeed you were. And thank you for sharing that with me. you for allowing me to help you along on your journey. We'll talk soon. Okay, sounds great, Matt.

All right. Take care of Paul. How you do? So there you go. Paul Hopkins. If you want to reach out to him, you may do so via his cell phone. He gave you permission. His number is 720-292-1616. 7-10-292-16 or send him an email to Paul at pamaproperties.com. Paul at pamaoproperties.com. That's it for today. I'm Matt Terrio, living the dream. Alert! Alert! Real estate investors, listen carefully. A closely guarded secret reveals that closely guarded secrets aren't really that closely guarded. Seriously, go to find motivated sellers ASAP.com to get the inside scoop on how the nation's most successful real estate investors really find their deeply discounted properties.

Go to find motivated sellers ASAP.com. Deeper discounts, less secrets. Find motivated sellers ASAP.com. You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed this show, please take a minute to visit iTunes and share your thoughts. Thanks for listening.

We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a part of the C-Suite Radio Network. business podcasts, visit c-sweetradio.com.