Epic Real Estate Investing - Contrary to Popular Belief About the Shifting Market | Erik Hatch | 998

Episode Date: April 24, 2020

Today, Matt is joined with Erik Hatch, a founder of the Homeless & Hungry movement that has raised close to 1 million dollars since 2006, a creator of the top-producing real estate team in North Dakota, The Erik Hatch Team, and a host of Real Estate Radio. Erik shares his insights on shifting market, what big risks he sees in real estate in the next 12 months, and what investment opportunities you can pursue, contrary to popular belief, right now! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-A's dot com.

Here's Matt. Hey there, Epic Investor. It's Matt Terrio from Epic Real Estate. This is where we show people how to invest in real estate with an emphasis on retiring early. And to do that, there's just one thing you need to do, just one thing, one time. And that's just to shift your focus, shift your focus from making piles of cash to creating streams of cash. If you do that one thing, just one time, you are on your way faster, 10 times faster than how the rest of the society is going about it. This is the Epic Real Estate Investing show.

I wonder if it's your first time here. Really glad that you've found us. Make yourself at home. If you like what you hear, make sure you hit the subscribe button before you go. And if this is not your first time here, welcome back. And thank you for sharing this with your friends

and your family sharing with me, your emails and your reviews and just your nice words. You're the absolute best for doing that. So thanks again. Got a great guest for us today. He is a native of Fargo, North Dakota, and has a beautiful family. His passions are simple,

making a difference and having fun while doing so. He is the creator of the, the homeless and hungry movement that has raised close to a million dollars since 2006 for local homeless shelters. His dedication to the community and investment in the place he calls home is unparalleled. He has built the top producing real estate team in North Dakota. That's from the source of the Wall Street Journal since 2012. His real estate team has grown at a record pace amidst big failures and successes. He is garnering national attention for his efforts. With the culture at the core, his team has helped over 2,500 families since 2012.

with their real estate needs. He is an investor at the core, however, investing his time, talent, and treasures into those around him. He has spoken at local, regional, and national conventions. He's the host of real estate radio, a social media expert, and avid writer, and a pretty poor golfer. Well, at least we got one thing in common. So please help me, welcome to the show, Mr. Eric Hatch. Eric, welcome to Epic Real Estate Investing. Oh, so good to be here. Thanks for having me, Matt. It's a thrill. Yeah. All I know about North Dakota or Fargo specifically is that it just snows there all the time. Is that true? So as we record this, it's April 22nd. It snowed yesterday.

It did. It just kind of came out of the blue and it melted right away. And they opened golf courses yesterday and I still went and golfed. So take that, Mother Nature. There you go. I like it. You know, we got a mutual friend and Chris Arnold. Great dude. Been on here on the show. I was in, I love to hang out with him every time we can get together. And anytime he introduces me to somebody, I'm like,

I'm always looking forward to this conversation. And the weird thing is you are from Fargo, North Dakota. And I don't know how this happened, but I've also, well, one of my most successful students is from Fargo. I don't know if you know them, Jack and Josh. Oh, yeah, for sure. Yeah, those guys crush it. Yeah, totally. And then about two events later came two more guys, actually referred by Jack and Josh, Mark and Bryce.

And they're not sure I know Mark and Bruce. but I'm sure I will soon. Yeah, yeah. They got a closing, I think almost every single Friday on their on an Instagram post. Oh, wow. Both are doing well. And so now I know of all the places in the country, I know like three wonderful people from Fargo, North Dakota. That's like half the population too.

So, yeah, you can. Right. I know the whole city. You're well connected. Great, great. So you're a real estate agent. Your bio, it says investor at the core. Can you, can you share me with?

with me a little bit about what your real estate agency looks like and how that integrates or how that cooperates with your investing? Yeah, 100%. So I think of investing in two ways. There's investing in people and then investing in product. And investing in people is what I first did best. My background is in ministry. I worked for about a decade at a local church doing, I was a youth pastor and a worship leader.

And like, I got paid to throw dodge balls at kids. and it was a pretty good gig. I moved into real estate. So I loved investing in people. And as I built my real estate team, that still stayed at the core is investing in people. And it was in 2012 that I did my first investment deal. I found a HUD house and was so afraid to spend money on it. And so I found two other investors, buddies of mine from high school.

And we each threw like $8,000 at it. And we thought we were going to go broke. We bought one. Now I'm carrying, I think, 60 doors eight years later. and then we've taken our real estate brokerage. We operate solely as a team. So we're a real estate team that happens to own our own brokerage is really what it comes down to. We're a team of 38th and we're in four different markets now.

I have to update my bio because we've sold over 4,000 houses now as a team in the last eight years. And as we look at this and as we do this, a year and a half ago, we opened up our plan and strategy to really start targeting those. that we're looking to sell the easy way, that smooth way of selling directly to an investor. And so that was a new piece that is now, I think, starting to shake things up a little bit. And I really like that, Matt, because what we're doing is we're selling, you know, we'll sell 700 plus homes this year, the traditional way. But we're going to add another 50 or so transactions to that of people who are looking to sell directly to the investor. I just, I happen to be the investor. And we're giving people now a

menu of options, which we don't think happens too much in the industry. You know, wholesalers and investors will give the offer of what they can do, but they can't say, or if you want to list your house traditionally, here's what that looks like. You're always referring or handing off. And we've created an ecosystem that allows us to nurture both sides of that. And we've found really great response from our clients. Nice. You know, I know there's several people that listen to the show that have licenses and are dipping their toe in the water and then investing side. And I have investors who have like wondered and should I go get my license because I might be able to double dip or something like that is the thought process. How are you approaching that and how are you

presenting that to your clients to actually make it work for you? Because I've found it to not be as easy as it sounds. No, it is an arts and it's not a science. That's, That's for certain. It takes a lot of repetition and we broke a lot of eggs to make this omelette here. We're advertising in two different ways. We have our traditional route and then we're advertising for people. We call ours a snap offer. So we say it's as easy as three to one sold. Three, contact us. Two, we'll do an on-site valuation of your property. And one is within just a couple of days, we're going to get you two numbers. your traditional list price or your investment offer, your iBuyer offer, the get out of jail free offer for them to sell quickly. And we just put those net sheets side by side with one another.

And we talk about the pain of each of them. We certainly listen intently to where they're looking to go. And in that and through that, we're finding that about 20% of the time people that are interested in an eye buyer offer from us are actually taking. it. 20%? Yeah. That's pretty high. Yeah.

Well, and we're telling all of our sellers about it. Just not all of them are saying that they're interested in there because most of the time we actually don't know what a seller wants. And what's interesting about this, and as I've talked with other people in the industry, is that almost all of traditional real estate, residential real estate markets around, we're going to sell your house to help you get the most amount of money and the least amount of time. But the biggest pains that people have is uncertainty and the fear of interruptions and followed by the money that they want to make.

And so we've really adjusted our marketing. And when people get on the phone with us before we ever meet with them, we're making sure that we're not misleading them from the very first second. So full transparency is I'm buying houses Matt for about 70 cents on the dollar. Right. We are asking the person in that very initial phone conversation of the investor offers traditionally around 70 cents on the dollars. Is that something you're still interested in learning about? Or do you want to pursue the traditional real estate route? And so we're filtering that so we're not misleading people.

That was a mistake that we made early on is people would oftentimes think, well, this investor offers going to be 88 cents on the dollar or I can sell at 100 cents on the dollar. It just doesn't work that way. Got it. So what are your marketing channels of how you're spreading your word and your message? So I spend in my traditional brokerage, I spend probably $60,000 a month on just my marketing. And we're targeting buyers on some side. So we're spending money on Zillow and that sort.

But our main mediums for seller leads, radio is very big for us. We are on a talk radio station. I have my own real estate radio show as well, as well as a podcast. So I have a few different avenues that people tend to discover what we're doing. We then fast forward and we got into direct mail about a year and a half ago. And I never thought it would work, Matt. And I'm sure you guys talk about direct mail all the time because it's crazy to see how many people raise their hands from getting consistent flyers in their mailbox. And so that has been my greatest return on investment.

outside of simple word of mouth. But one of the things that we love doing is we love being storytellers. I think that's actually what great marketing is, is being a storyteller. And so social media gives us that platform. The reason why HGTV exists and why people love house flipping shows is because they love the drama, they love the risk, and they love the story that comes from it, seeing something go from bad to beautiful. And we are trying to do that same thing with what we're doing with.

video and social media to make sure that we're telling that story consistently because a great seller's story leads to a new seller tomorrow. So those are really our big mediums that we're using. Of course, word of mouth is still a big player in this and will always continue to be. But we put most of our money in radio, in direct mail, and then we are doing some retargeting and whatnot on social media. Got it. So the direct mail, the postcard, letter combination?

Postcard, yeah. We work with Gary Boomerstein's company, REI Vault, and that has been just a big, big success and a big win for us. So if you want to see what we're doing specifically with REIValt, we go, if you go to REIValt.com slash snap offer, you can see how we've built a real estate brokerage model in with an I buyer model. Got it.

You said the eye buyer thing a couple of times. Are you representing an eye buyer or that's just something you're competing with or a new moniker you've adopted? Well, eye buyers are really known as investment buyers or instant offers. You know, nobody really has fully honed in on it. But we, of course, have the competitors of Zillow and Open Door and Offerpad and that sort. And as of today, in the midst of the COVID crisis, they've suspended their buying for the most part. I'm an i buyer just the same as they're an i buyer. They just have a lot more marketing dollars and a bigger platform.

And so they're oftentimes giving their offers sites unseen and then going in and renegotiating after the inspection. And we're simply giving offers after, or excuse me, we're giving offers based on a walkthrough of the house in the first place. So that we're not blindsiding sellers and upsetting them. Because remember, we are a local company with local marketing with a very big person. of mine attached to it, and we would be doing ourselves a big disservice if we didn't, if we treated them the same way that as Zillow treats them. Right. And that is give them a price that feels like false hope and then go in and tell them the

reality price after the inspection. Yes. No, I like that right up front. And I think that's why you're succeeding with it because I think most wait to see that the purchase offer doesn't work and then they pop the listing idea onto them. Well, and Matt, This is the time right now where if you're a real estate agent or if you're a wholesaler or if you're a flipper, whatever it may be, this is the time that we should be licking our chops because the pain of sellers of fearing uncertainty and fearing interruptions is more heightened now than it ever has been.

And in large markets, our competition have suspended their activities. So my advice has been to people that I coach and people that I network with is like, If you're not doing this now, this is the time to get in, especially in this low right now, because the floodgates are about to open, and we're going to see more opportunity in a bat's than we ever have before. And once these bigger players come back in, we're now competing against that. And so I'd rather give everybody the fair shot to do it now rather than wait until the dust settles once again. That's been my message. You know, if you've been waiting to get in, now is your time.

you've been struggling and you're thinking about out, don't do that now. Because this is the time. You know, you said, I buyer. It's for investor buyer. I thought it was an internet buyer. No, no, no. And I've Googled the term. I'm even going to do it now as we talk.

So I make sure I'm not talking out of the wrong hole. But I've heard of I buyer. An eye buyer is and nobody's given a direct answer. It's a real estate investor that uses automated valuations. So yeah, that's probably internet is where you're getting that. The eye is known as an instant offer. I've seen it as instant. I've seen it as immediate.

I've seen it as internet. But I think it's kind of one of those terms that, and I'm just going off of the Googles right now. Sure. No. Google's no all. So, okay, that's good. I learned something. It has no anything for anybody here, but I was just curious.

I've been saying I buyer for a while and did it up on it and interviewed a ton of people. And that was the first what I actually stood for. Satisfied my own care. Hey, hey. I feel a little bit smarter right now. Thanks for that. Yes. Why?

This is like a win-win. So, all right, so you're buying properties at 70 cents on the dollar. You get about 20% of those for those people to take it. What are you doing with? Yeah. Yeah, the big three is there's the buy and hold. In fact, it's a big four now. So some of them were buying and holding.

So I'll keep them and put them in my portfolio. I think I've held about four in the last year and a half. Really, I like the flip though. I like the wholesale. I like the whole tail. Those are the other three. And I like those because I can turn my money a lot faster. If I use very simple math,

I should be hitting a profit number of 12 to 15% per transaction after the flip is done or after the whole tail is done. And if that's the case, my average days that I have the property in my ownership where cash is exchanged hands is 120. So four months. And I can give myself three deals in a year with that same money, you know, just buy, buy sell, buy sell, buy sell. And I can do that three times, giving myself a 36% return on my investment at minimum.

And I did the math. And if I start with a $10,000 investment today, it's going to take me 15 years to turn $10,000 into a million bucks net in my pocket. And so that's why I'm not so hot on the buy and hold right now for my portfolio. Why I'm more hot on the fix and flip. I'm more hot on the whole tail. And heck, I am drawn to the wholesale model of me not having to actually have any of my money exchange hands. and I just introduce it to another buyer. Super.

So moving into a shifting market on the flip, how are you preparing yourself? How is that having you adjust how you purchase? Yeah, great question. On the purchase side of it, my 70 cents is more like 65 cents right now if it's in the right price range. And Fargoer average sales price is about $230,000.

bucks. So if I know that my resale value price is under that 230, I still feel pretty confident that's a solid market for us. I just gave an offer today on a place that'll resale for about 300,000 if I bought it. Now, my offer was something more like 60 cents on the dollar. And so it's an aggressive offer, no doubt. I, in fact, don't expect them to take it. But what happens is when somebody says no to my offer, we then stay at the table with them. And this is one of the things that I I know a lot of people in this business aren't doing the full gamut of service and they're not giving enough menu options. When somebody says no to my offer, because I'm the first offer that they get, we then say, you know, for 30 days, can we go shop your offer to other investors? So you still don't have to put it on the market and deal with fixes and you can still pick the closing date.

And so then that moves into our wholesale strategy. Again, I'm just the first wholesale offer. And we're finding that a lot of people may not like my offer of 130. thousand dollars but they're going to take 140 and if they're going to take 140 then we strap on a 15k wholesale fee and sell it for 155 and the investor gets what they want they get a house still undervalued and the seller gets what they want and i get what i want and uh we're all the better for it but i'm definitely getting more aggressive on my offers i'm just fortunate that i live in fargo north dakota where we don't have big swings quite like the coasts in the south do so as we're

sitting here in quarantine as we're recording this. Are you guys even in there? Because I think I heard from Mark and Bryce. You don't even have stay-at-home orders in your state? We have stay-at-home suggestions. Suggestions. Yeah. Yeah. It's kind of like the Wild Wild West up here. Yeah. I saw them post on Instagram, one of their closing last week. And we're still running around town. We're good to go. They're busy as ever. With that said, and maybe there's not a lot. happening there, but there is a lot of uncertainty of what's going to happen. Obviously, you have an idea. You think there's going to be a lot of fear and a lot of opportunity. And I agree with you. What are you seeing immediately? Anything? Or are you just kind of waiting? I study numbers as though

I'm an analyst. And we're seeing right now that new listings are down, what is it, 46% for the month right now. And that's just such a big swing. Because pendids are. are only down 20%. And so we're not... I'm sorry, you said new listings are down 40%. They're down 46% for the month. Okay. And that's this 2020 year versus 2019 last year.

So just for this month. And new pendids are only down 19 or 20%. And so that tells me that we're going to have a big amount of pain for buyers because there's less and less inventory and buyers aren't dropping off quite like sellers you're dropping off. And so what I'm expecting is that the phones are going to be ringing off the hook of sellers looking to get in the market when all this, when all this passes. And that is going to mean huge opportunity for investors. That's going to mean huge opportunity for traditional real estate agents. And those that can offer both are going to be at so much more of an advantage

because the pressure is building right now. And people are feeling so, easy about the state of their state and the state of living with random strangers coming through their house, the germs that are there. And then you think of the buyers. How many people are living in apartment buildings right now where that feels like a giant cesspool of filth, you know? And people that are living in their parents' bashing their heads in because they have no freedom.

So you think we're more even a stronger seller's market then? I do. I do. I think when this is done, we're going to see. but sellers are going to have a different energy to them. They're going to be more timid about doing a traditional real estate deal because of germs and because of people walking through their place. And the likelihood of them taking an investor offer, I think, is going to be higher

come the end of this than we've seen before. So the buyer could potentially, the way you see it, have the best of both worlds. Yeah, they sure can. I got it. I got it. I like that. There's logic there. It's the first time I've heard it from that perspective.

And I can be totally wrong though, too, Matt. No, we all. We all probably are because no one saw a virus just 60 days ago. No, sir. But, yeah, no, totally. I think there's logic on both sides. And that's the whole thing that I think has people kind of just eating a little bit because they're just like uncertain of what's actually going to happen.

So with all that said, what do you think are the big risks in real estate over the next 12 months or so? Anything of the luxury market? I think that I think and every community values their luxury market different. I'll say I'll say in my area anything priced over four or five hundred thousand. That's just such a tough gamut to go down because you can either build it for close to that cost if there's land available or you're going to rehab something that's that's old and you get it at a cheaper buck. But if I have somebody coming to me and they want me to buy a $700,000 house, like I'll give

an offer for like 350. You know, I'll give them a 50 cents on the dollar offer because I don't want that house because I think that house is going to sit on the market for 18 months and it's going to have to drop $100,000 in price. And that's just a headache I don't want to deal with. So that market for luxury, I think that's the most unstable as well as markets that are secondary or vacation home markets. I have a coaching client in Steamboat, Colorado, and he and I were just on the phone before

this. And we were chatting specifically about what's going to happen in Steamboat. And he said two sides of the coin that I really echo. One is the secondary home market becomes so much less attractive because people can barely afford their first home because of job losses and changes in the stock market. And so that's a really grim situation for people is getting a second home is difficult. The other side of that coin, though, is we're all learning to function in a virtual world now and we're learning to do life on Zoom calls. And so your job that you thought made you stay in Fargo, North Dakota for forever, you can say, well, you know what? I can actually do my job from Steamboat. And wouldn't you, and don't you? And don't give me, I love Fargo. This is such a cool

place. But if you said, Eric, do you want to live in Fargo or Steamboat, I would certainly consider the other option. I'm not saying I pick up and move, but like a lot of people would choose mountains over, uh, over Fargo. Right. Right. Right. Super. So, all right, so stay away from the, the luxury market. And for those that, I mean, for example, if I was your student and I was just getting started, what would you tell me to do right now? Yeah, you got to get in the game. I advise that there's four major elements to be a great eye buyer or somebody using a snap offer or a house flipper. It's all the same language here. But there's four things. The first is you have to establish what your marketing is. and we had alluded to that earlier on the conversation here. The second piece is you need to have your financing figured out. It's either your money or somebody else's money,

but you've got to have a plan with how you're going to do it, and you have to know your numbers exceedingly well. The third is you need to have your team in place. I can't tell you how many wrong general contractor hires I've made that have cost me more than I care to admit. Getting a great relationship with your title companies, with your inspectors, with your flooring contractors and everything in between is exceedingly valuable.

So having the right team in place. And then finally, the fourth is you need to have the right network of people. You have to have the right coaching, which is what's great about what you're doing right here with this podcast. We built an I buyer mastermind group on Facebook that exists too. That's a membership subscription model for people because I just think that I've, from the mistakes I've made, I'm going to save the next person 50,000. simply by having them avoid the dumb things that I did in building this.

And I would say that you also have, you know, million-dollar ideas that are being shared all the time on your podcast and other places that people should be ripping off and duplicating. And so having that right network of coaching is that fourth and sweetest piece. Mm-hmm. Mm-hmm. Nice. But just being a coach yourself in helping people with their real estate, what's one piece of advice you hear being given, out there that just absolutely makes you cringe.

That is such a good question. I don't know if anybody's asked me that before, but I'm happy to answer that because I know the answer. It is, here's the best script to use. I think scripts are dangerous, irresponsible, and unnecessary. Now, don't misunderstand me when I say this. We have best practices of things that we've learned to say to best articulate our points.

But most people who are looking to invest or sell or whatever it may be pick up a script book that says, here's what I'm supposed to say in this situation. And the only script I subscribe to is the script of tell me more. And that's the idea and the precipice of asking questions rather than making statements. And our job as a great salesperson or a great flipper needs to be. be in the question and curiosity realm more than it is in the statements and directing realm. So if you slow down, you ask the right questions rather than trying to hit somebody with a script, I think you're going to be in the driver's seat. You're going to have a better relationship

and the relationship is the foundational piece of any business transaction whatsoever. Amen to that, Eric. Couldn't agree with you more. Thank you, brother. I think, you know, it can contradict yourself a little bit, or I'm saying I can because I don't believe in scripts because, you know, you could know you're just backwards and forwards, but the seller doesn't always know theirs. I like that. It could really make it you lost. But I think the consultative approach that you're doing, I think, is right on point. I think the curiosity and the investigating and the tell me more thing is perfect.

I think that's the, and then the transparency right up front, right off the bat. I think that's the best way to conduct business today. So I think you're right on point. If people wanted to get in touch with you, I'm sure there's somebody. What would be the best way for them to do that? You should learn about what we're doing at hatchcoaching.com. That is for all of our coaching needs. We have some great lead conversion coaching as well as team development and leadership coaching.

And then, of course, we're hitting hard with our snap offer platform, which is a great toolbox and a way for people to be their own investment buyer, their own internet buyer, whatever the eye buyer is that we're going to put that eye on there. That's the route that we're going, and we're so happy and passionate to impact the real estate industry in the best possible way. Nice.

That instant, immediate investor and internet buyer. I think it's all of them. Yeah, I can't find a definitive answer on the Googles, and I should. There's just not. Yep, I like it. Well, very good. Eric's been an absolute pleasure.

Let's stay in touch. Let's do this again. Sure, appreciate it. Thanks for the time. Yeah, you bet. Say hello to Jack and Josh for me. Yes, sir. Go look for Mark and Bryce, really cool dudes.

And I think all four of those guys are really close friends anyway. So good luck. Stay warm up there this spring. And we'll talk soon. All right. Thank you, brother. You bet. All right.

So if you found this episode valuable is valuable. as I did, there's a good chance that you probably know someone else who would as well. And when that person's name comes to your mind, please feel free to share it with them and ask them to click the subscribe button when they get here. I'll take great care of them. All righty. So that's it for today. God loves you. So do I. Peace, health, blessings and success to you. I'm Matt Terrio. Live in the dream. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home boy, we got the gas flow.

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