Epic Real Estate Investing - Creative Real Estate Investing - Joe Crump | 586

Episode Date: February 11, 2019

Our guest, Joe Crump has helped many people to buy and sell properties. Today, he will help you, by bringing more creative real estate investing strategies! Learn what he thinks of the changing market, why you should pursue the win-win strategies when dealing with the sellers, and how Joe flips lease options. Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, so on the phone, I'm with Mr. Michael Pendleton. He is a member of the Your First Deal course, and you know what? He got his first deal. So I saw him post about it on the follow-through Friday post inside of the Your First Deal private Facebook group, and I just brought him on here to talk about it. And so, Michael, how are you? I'm doing well. Appreciate you having me on.

You bet. And just, I appreciate you for just taking the instruction, following through, and getting paid. Yeah, it's pretty easy. When you lay everything out, you literally just have to do it. There's really no excuse. Well, I'm glad you said that. People are tired of hearing me say it. What market are you in, Michael?

Oklahoma City. Oklahoma City, all righty. And then, so you had like three deals coming around, but you posted your first check. I think it was for, I don't have a picture, it was like $15,000. Yeah, $14,000, exactly. 14, 5. Close enough. So how did you find this particular deal?

that was actually printing off my own postcards and stamping them myself and mailing them. And so it was just an absentee owner list. And so I ended up getting a call on it. It was actually kind of took your three option letter of intent and that slam and kind of combined it really into the postcard. Just had it front and back and where I kind of laid all my cards on the table. And the ones that called me back were generally pretty interested. Nice. Ingenuity, resourceful.

Sure. Very good. All right. So it doesn't sound like rocket science to me. What's your planned exit strategy was to flip it, I presume, since you already got paid. Exactly. Right? Perfect.

And how much money you made on that was 14,0005. Correct. So you got two others. Let's talk about those. How did you find those two? The same way? Same way. The other two were actually a package deal from a landlord.

and actually ended up making offers on three. He accepted two out of three and went seller financing with another investor. But, you know, they ended up being great deals. Cool. So you got these three deals in. What is your, what did you say is your biggest lesson learned in these transactions? You know, I've always heard it. And you've probably said it a hundred times, I think, that, you know, if you have a deal,

it's really easy to get rid of. And early on, in hindsight, I found myself, I guess, massages. the numbers just to get something under contract. And so I'd get it under contract. I had seven or eight under contract and I just couldn't figure out why I couldn't move them. And then, you know, kind of sat down and self-analyzed and realized I didn't have a deal. I was, I was convincing myself. I was trying to get somebody to buy a bad property. And, you know, these three, the first one was gone in about 30 minutes and the second one was gone in two hours. And so lesson learned, you know, a deal will be gone very quickly. And so if it's not gone very quickly,

you probably need to do a little self-analysis and figure out if it's actually a deal. Right. Yeah, it's either lack of exposure or it's not a deal, right? Exactly. How are you and Casey going to celebrate? We, now that we have a marketing budget, so we, that's all I'm doing. Actually, it took these last two weeks and, you know, with our isolations and just really been working on the systems.

This is our third business. And so we own quite a few other businesses. and so I have to automate. And so to get it to be successful to be able to scale it. And so taking the marketing budget, you had a podcast with Chris Chico. And so I'm doing a lot of Facebook advertising right now and really just trying to find ways to streamline and see how I can scale while simultaneously backing myself out.

Fantastic. You've been a pleasure to have around the community. Keep doing what you're doing. If you need anything, you let us know. And we'll do this again. Outstanding. Well, appreciate everything you do. you give a wealth of information, you know, people really just have to do it.

And that's all it is. That's awesome. Thanks, Michael. Have a going. I appreciate it. You too. Bye-bye. So if you'd like to walk in Michael's footsteps and get that first or next deal done,

put one of those $14,500 checks in your pocket, you can go to free real estate investing course. com. Everything you need, as you heard, is available inside that course to get your first or your next deal done using little to no money. Go to free real estate investing course.com. This is Terrio Media. Yo, yeah, we got the cash flow.

You didn't know home for us, we got the cash flow. Alrighty, so today I am joined by a seasoned real estate investor that started back in 1986. And just three years after he started, he'd been able to purchase $17 million worth of property. And since he has helped many hundreds of people buy and sell real estate. estate and he's sold a ton of it for himself. He's also taught many, many folks how to become real estate investors, quit their day jobs and change their lives. So please help me welcome to the show, Mr. Joe Crump. Joe, welcome to Epic Real Estate Investing. Thanks for having me on the call, Matt.

One thing you forgot to mention, I also lost to that $17 million. So that happened back in 1991. And so I've been through the ups and downs of this whole process. And it took me a few years to come back from that major loss. But I learned a whole new way of investing because of that loss. Yeah, they say, excuse me, I was just reading one of these memes on Instagram, and it was of Bill Gates, and he said, success is a terrible teacher. So you must be a phenomenal teacher now. No, I resemble some of those remarks, so I get it.

I was reading up a little bit about you and you had started in the film business and there's a little bit of parallel that I started the music business and made a transition over to real estate. What inspired that transition from film to real estate for you? Well, I was working in Los Angeles. I went to film school and I was working in Los Angeles as a grip, which is lighting, the lighting department and the business. And I was sitting on the dolly, the camera dolly with the assistant cameraman one day back in, you know,

1985 or so. And he was telling me about the house that he owned. And he had made more money on the appreciation on his house than we both had made that year, you know, working in the business. And we were doing pretty well in the business. And I thought, wow, this is amazing. You do you make this money without doing anything. And so I thought, well, you know, it'd be a great idea. Let's go out and buy a house. And so I went out immediately and I bought a brand new construction. It hadn't been built yet and is a stupid way to buy property. I went out and got a loan on it.

And by the time they were finished building, it took about three months, four months to build it, it had gone up 20% in value. And I bought it at full price when I bought it, but it went up in value because the market was going crazy at the time in California. And so I thought, what am I going to do with this? It's too far away from where I live.

I don't want to live in it. I don't really want to put a tenant in it, you know, because it's too far away. I don't want to manage it. So I just sold it. I made a profit and I thought, this is pretty cool. I can make money. And maybe if I bought a property below market value, you know, big light bulb goes on,

maybe I could make even more money. So I did it again and I started flipping property. And then I started building property up in the Hollywood Hills and building, you know, some really large houses up there. You know, the million dollar properties at the time. And this is like back in the 80s. And that's and then in 90, 91 is when the big SNL crisis. happened and the crash came and that's when I got caught in that that whole mess. And it was because I was leveraged out.

I was using loans. I was using, you know, mortgages. I was using my own credit. I was using my own cash into these deals. And that's how I was able to build very quickly. But the level of risk on deals like that is so much higher than if you do it with seller financing or you do zero down techniques or if you use, you know, cash only. for properties, which is what I do these days. The subject, you know, I do both solar financing

and cash-only deals. Okay, so lost it in 1991. How did the next crash pan out for you? Were you able to learn from your lessons and make it through their 2006, 2007? Oh, yeah. I didn't have, you know, my name on the line at that point. I had gotten my credit back in place and I have perfect credit again and I'm able to borrow. And I borrowed some more. bought some more properties, but I was also able to buy them in a way that was sustainable, no matter what happened to the market. As long as I could put tenants in there, they were sustainable. At the time, in 2004, 2005, I mean, I saw the bubble coming. It was the same thing that was happening back in the 90s. And so I saw it coming again, and I knew that it was coming.

I was just surprised that it took until 07, 08 before it really hit. I thought it was going to happen before that. So I was warning everybody about it and people were going down to Florida and they were buying into these condos that were being built in Florida and they'd pay four or $500,000. They'd put $20,000 down. They'd get a new loan on it. And when that crash happened, they couldn't sell those properties. So now they're stuck with these properties and these big payments on these $400,000 loans. And the potential income for those properties is $1,200 a month. So they couldn't and sustain that business. At the same time, because of the no-income verification loans, we were selling subdivisions,

and I was selling properties to investors that were sustainable, so they could buy a property that was 120 or 150 in a new subdivision that we were able to structure a deal so they could get in with a really low-down payment because of these no-income verification loans. Everything worked out pretty smoothly, and as long as they had enough reserve, they weren't going to lose money because the income on those properties was more than the cost of the loan. So it made sense, but there was still risk for them. And one of the problems with 07 and 08 is we not only had declines and values, but we also had a lot more vacancies. I went from a, with my portfolio, I went from a 3% vacancy rate to a 20% vacancy rate. So any properties that I had mortgages

on, I had to make sure those were paid, which I had enough reserves to do that. And I was prepared for it, but there are people that weren't and that didn't keep any reserves and they lost their properties, especially the ones that had negative cash flow. And with a 20% vacancy rate, that can be pretty painful. If it lasts for six months or a year or two years, that's going to be very painful for people. So you don't want to put yourself into a position where you have that going on. And anybody that's doing seller financing knows that if you get into a situation like that. Let's say you take a property subject to or you can give that property back to the settler. As long as you give it back to them, at least as far as I'm concerned,

give it back to them in the condition that's as equal or better than what you've got it and that it's paid up and on time. I don't give back properties that I'm three months late on. And so I'm fortunate enough not to have had to do that because I had built my portfolio during those intervening years to be substantial enough, so I didn't have that cash flow problem. But I saw a lot of people go down because of that. And a lot of people that did loans and mortgages had that happen to them as well during 07. So having a little bit of foresight, having some experience and having that pain in the past

made me very much not want that to happen again. Right, right. It was a painful, humiliating experience. What does your business look like today? Well, I have a fairly sizable portfolio. I also have most of it taken care of by someone else. My philosophy in all this is systemization. You have to systemize, automate, and outsource the work in your business so that you can extract yourself.

Because what you want, you know, as we all know, we want to work on our business rather than in our business. We don't want to be the day-to-day stuff that we're doing. We want to be able to look at the people that are in our field, the people that are our employees, our partners. We want to be able to see that everybody's doing what they're supposed to be doing. We want to have systems set up so that they know what they're supposed to be doing. And then all we want to do is sit back and tweak things and make sure that things are moving along smoothly.

I also try to set up systems so that each part of the system relies on another member of the team to make sure that job gets done. So if Mary has to do a job, Sam over here knows about it and he can't get his job done unless Mary does her job. And so if Mary doesn't do her job, I find out about it from Sam and vice versa.

So you set up systems so that they all interrelate with each other and that you find out about the problems very quickly because everybody else can't do their job, unless the other jobs are done. So it's really important to set up your systems properly so that you don't have one person who's doing all the work. And then if something happens to them and you don't hear from them for a week, suddenly you find out you've just lost a bunch of money

because they didn't do their job or they've disappeared or you're not going to have them any longer. And that's a really unpleasant thing to happen. After a while, when you're doing this and you have a good system set up, and you're working with people like me, everybody works from their own home. I don't have an office space. I don't want to go into an office space.

I don't want the overhead of an office space. And I prefer, and most everybody that works for me would prefer to work at home anyway. It gives them some freedom. And we've worked together long enough. Most of my people have worked with me for almost a decade or more.

So I've been able to keep continuity with my employees because they're happy being able to do the work that they do. You know, I try to take care of them. I try to make sure that they're, happy with their job and their pay and their growth and their potential for the future. But they try to make sure that I'm happy with the work that they're doing. And, you know, that's worked out pretty well for us over the years. Sounds like good relationships with your team.

Very important. Couldn't agree more. Are you still in acquisition mode or are you just strictly in management mode at this moment? Yes, I work with several, a lot of the times with my acquisition is through my partner. So I'll bring in people that I've actually have been through my mentor program. That's pretty much the only people that I partner with these days because having gone through six months of my training, they understand what I'm looking for. They understand what I need and what I'm trying to accomplish. So if they bring me a deal and say, hey, Joe, we've got one here.

I don't have the capital to do it. Do you want to bring in some capital and do something like this? I can step in and do that. Or if they have a deal that, hey, I've got a property, I can get it on a land contract, I can get a subject to. but it needs a little bit of work. We want to put a little bit of capital into it. Do you want to do that? And I'll come into deals like that.

And then we set up separate LLCs to work with separate people like that. So a lot of the investing that I'm doing now is using the money that I've put into my Roth IRA over the years and, you know, continuing to build that tax-free money. And I expect you've talked to other people about self-directed. or if IRA is correct. Okay. Yep. Great. So then that's kind of clear.

The answer to the question I was going to ask you, I was going to ask you, what's your best source or most common source for off-market deals today? And it sounds like it's partnering with your students or your clients. I can tell you where we're, because I'm still bringing in leads. We're generating leads. So I'm bringing in leads and then I'm working with people as well. So that's another part of it. And most of the leads that we're getting,

are coming from the software system that we developed. I have a system that I call the push button automarketer, and it's a lead generation development and conversion system, and it helps you automate your business. So I use it for my business, and then I also sell it to other investors who use it. And essentially the basics of the system as it goes out to Zillow,

and it pulls off all the for-sell by owners in a particular area, and it'll send them a text that says, would you consider selling your home rent to buy rather than selling it outright? And it sends them a series of texts over a three-month period or whatever period I tell it to, and it'll send different messages to them over that period. So it's a drip system for that group. And it sends them texts.

It can send them voice blasts. It can send them emails. It can, we're getting ready to add a new module to be able to send snail mail so we can send postcards and letters. And then it can do it in a sequence. It then takes those people that respond, puts them into a CRM, a contact relationship management module within the system and helps us keep track of those people as well. And then, you know, we've got people that are making calls to those people and trying to put together deals. And within that system as well, we've, we've also, uh, we've also, uh, We have a lead questionnaire so they can fill out that lead questionnaire online,

get all the information that's needed. And then the person with the skill, the rainmaker, whoever, you know, I've got assigned to that task, the person who's the most skilled, usually one of my students, is making that call and closing the deal. And then they can also call through the system, which is kind of nice, because one of the problems with dealing with any kind of telemarketer, and not so much my partner students, but my telemarketers that I pay hourly is it's hard to keep track of their time.

So we've set up the system so that it actually can record their calls and we can keep track of how long they're on the phone. So instead of paying them, you know, they send me an invoice, say I worked 10 hours and I made these 10 calls. What I can, what we do instead is I'll pay you 150% of the time that you're on the call and then we monitor them based upon the amount of time that they're on the call because we have recordings of their calls. So we can say, okay, they've worked for an hour. We pay them for an hour and a half of time.

And that's how they get paid that makes it possible for us to monitor. It also makes it possible for us to listen to their recordings and make sure they're not saying things to people that they shouldn't be saying and help them with the training process going through that thing. So it's really a helpful thing. and I can put as many team members into the system as I want, and we can assign leads to particular team members. So when a team member, let's say we've got a lead that's assigned to one of my people, and I want that person to call six days into the time that lead comes into our process.

I can have the system set up and the template created, sort of a follow-up template created that I can attach to the system. that lead. It says on day one, they get this text on day two. They get this voice blast on day three. They get another text, except it's got an URL to one of their websites, the clone sites that I've got. On day five, I want my team member to call them. We have an email or a text or a voice blast, whichever I choose. I can have that sent to the team member saying, you need to call this lead today. And they can go into the CRM. They can see who the lead is. They can see what they've said. to that lead so far and be able to call them and do that follow-up efficiently and then keep their

notes on it. So what's supposed to happen next and either leave them in that follow-up system or if need be put them into a different follow-up system that applies more to that person based on the conversation that they had or hopefully actually put a deal together with that person and close a deal. Nice. Sounds like you got a really good thorough system set up. You'd said you had telemarketers. Are these employees, are they contractors, virtual assistants, or is it a service? No, it's all people that I've trained. Usually we found them through either Upwork or Craigslist. So we'll either run ads in Craigslist. If I want people that are in a specific area, then I may use Craigslist. But Upwork is pretty good too. and I found that it doesn't really matter where the people are. They just have to have pretty good language skills.

So I'm looking for people to have decent language skills. But if you're hiring a telemarketer, it's the last thing that I tell people to outsource. As you're going through this, first you want to automate everything that you're doing. And there's going to be some things that you have to have humans do. And that's what you're going to outsource. But you're probably going to outsource the easier tasks first, the time. I'm consuming easy tasks, like just having an admin person to make sure that your leads are getting followed up on and keeping your system going. So if I have somebody who's making calls, I have an admin person there who's checking to make sure that they're making those calls and that they're following up and they're putting notes into the system to make sure those calls have been made.

And that person isn't going to be very expensive. I may pay $8 or $10 an hour. And over time, their rate's going to go up. But that's what I would start on that. then I'm going to find somebody who's going to be my boots on the ground because we're doing a lot of this stuff remotely. So if I'm in Indiana and I want to put a deal together in California, I can go into my auto marketer system. I can buy a 213 area code phone number so that we can call through the system and it'll look like I'm local to the people that I'm calling. It'll also whoever's whoever's calling, whether it's a telemarketer, they can call through the system and they can call from that number and it'll look like a local.

a local call. And that does make a difference when you're going through the process. If anybody asked, we always tell them that we're not local, but rarely do people ask. Got it. What's going on in the marketplace that you see right now that either excites you or has you concerned and how is it changing the way you're doing business? Well, I'm always, I hate to be Pollyanna, but I'm always excited about the market, whether it's going up or whether it's going down because it means different types of business and different types of leads. During the boom times, that's always good because our portfolio is appreciating. There's a lot of properties out there.

A lot of people are selling. A lot of people are excited about selling. We can still do the zero-down structures. There's not as many people that are in desperate need. So you don't see as many substantially under-market value properties unless you go in a deeper marketing search, maybe going after absentee or expires, going after that type of thing, or finding investors through the for-sell by owner process. Those are places that we can find a lot of undervalued properties. But as the market declines, those things start getting more

attractive and wholesaling becomes more interesting. There's a lot more people that are willing to do subject to and laying contracts and contract for deed and multi-mortgages and signable cash deals. and we're able to use more of our zero-down structures when we see the market decline. We've had a really nice run here over the last few years where the market has been increasing. Personally, I think that we're heading towards another market decline. We're seeing some softening in a lot of the markets across the country right now. And I'm kind of in a unique position of being a teacher. I expect you have that same experience because you get to learn from everybody who's in different areas

and what they're experiencing. And that's kind of what we're seeing right now. There's still some very nice places in the country. But I never buy based on appreciation. What I think is good. I love appreciation. I love it when it happens. But you can never build a strategy around appreciation.

That's what I did in the beginning. And that's why I had those losses. Because ultimately I thought, oh, this market is going up, you know, 20% per year, 30% a year. I'm going to make money no money. matter how stupid I am. And you can in that kind of market until it turns. And then when it turns, if you're still in that market, you're going to get caught in it and you're going to get hammered. And so the goal is to buy based on one of two things, either substantially under market value for either cash or terms or closer to market value on terms. Those are the only two ways that we

make money as real estate investors that's reliable, sustainable, and a long-term strategy in any type of market, whether it's appreciating, depreciating, you know, high-end market, low-end market. The stuff that I've been doing works in all those markets. We tweak it slightly based on where the market's at and what kind of responses we're getting. You know, I've built probably, I don't know, I guess all of it, really. Now I'm thinking about it was looking for an exception, but I don't think there's too many. built my whole portfolio on creative acquisition strategies. I think we have a lot of similarities there and how we prefer to purchase.

I always look to the seller for my first source of financing if I can. And I think I have a little bit of a different approach on how I approach a seller with regard to introducing, you know, terms. How do you do it? You mentioned a little bit of something with your push button automator system and sending out to Zillow and offering a rent-to-own type acquisition. do you lead with that creative structure or do you try and come around to it in another way? Yes. Before I go into that, please tell me your basic concept because I'd love to hear what you're doing. Sure.

Well, you kind of touched on it. You didn't say it in exact words, but I think we think in somewhat a similar way is that, you know, as a real estate investor, I want to purchase a property in one of two ways. It's going to be my price in the seller's terms or the seller's price in my terms. And as long as I can control one of them, I know I can always make a deal. for myself. And so I prefer to go for the equity first. So I will go in with, you know, trying to get the low ball offer accepted and position myself in a way where it looks beneficial to them. And then if they want more, then I'll kind of back out, okay, well, if we're going to go a little bit

more for your price, then we're going to have to adjust the terms a little bit. And so I go through that way. I don't try to, uh, I did in the beginning and it got very frustrating. And maybe because I was just a little bit inexperienced in the beginning with it. But, you know, going through it and offering a subject to deal right off the bat. I got a lot of resistance there in the beginning, so I kind of figured a different way to do it and to get less resistance and actually earn more trust with the seller along the way also by just going on with a traditional offer and then starting getting creative once I found a little bit more about their needs and their motivation.

I think that's a pretty valid way to do it. I have no problem with that. One of the things, though, I like to have is a lot of leads. I'm one as many people that are interested in listening to me as possible. And I also like to have people who are thinking a little bit creatively and are starting to understand as they're trying to sell their property that they're probably not going to do it as a for sale by owner. We know that 85 to 95% of for sale by owners don't succeed.

They either take their property off the market or they list it with a realtor. And, you know, so we want to look at some, give them some other options. And maybe the way that I'm thinking about it is, I think that what you're doing is absolutely valid, but I think that one of the things I try to teach, and I think that I do it because I want people, I want my students to come across as credible to the people that they're working with. And I think that the best way to do that is by having full transparency and by treating the people that you're working with, the same way that you treat your family. If you're talking to your mom, you know, what would you suggest to her in order to get her property sold?

and so if I'm going to talk to someone and say, okay, you want to sell your property, at first I want to get their ear, and that's why we use the lease option, because of all the types of approaches we've done with our marketing, and that's been the one that's gotten us the most leads that are convertible. But once we get them, then we're starting to look at the situation, and we have to ask them a series of questions about their situation, what they're trying to accomplish, what position they're in, how much mortgage they've got,

how much their payments are, you know, can, what's going to make the most sense for them? And if you're talking to your mom and she says, you know, hey, Matt, I want to sell my property. I want to sell my house. And I don't want to use a realtor because they're going to cost me, you know, seven, eight, 15 percent based on, you know, closing cost and negotiation and repairs and all the other expenses. It's going to probably cost 12 to 15 percent after all said and done. Plus, it's going to take you, you know, three months to get it sold on average and another 40, days on that to get it closed.

Does it make sense for me to do that? Or does it make sense for me to sell it in some other manner? And if you sell it, you know, then you start to look at, okay, what's their situation? Or do they have a need situation or do they have a greed situation? Or do they, you know, is that what's the issue? Or is it they don't have too many options? So you help them understand what their options are by going through that. list of options with them. Have you talked to a realtor yet? Does that make sense to you? Do you know what it

costs to work with a realtor? In this conversation, it's learning to use a Socratic method of sales, which is basically asking questions to help people come to their own conclusion that aligns with yours. And that's how Socrates did it. And there's actually some good books on Socratic selling, And if you just Google or just go to Amazon and find them. There's some good books on that because leading people down the path, it's more of a consultative type of sales. You're not twisting some old lady's arm to try to squeeze out every bit of equity out of her property that she was planning on given to her kids when she died. So instead, you're saying, what makes the most sense for you? Because I know there's a lot of ways that I can make money and I can make good money.

And there are some people that they just want to get rid of the property and they're happy to give it to me with the price that I need in order to be profitable for me. So if I can get a lot of undervalue properties that way, and I can find people that just want to make the most money and do a lease option because that's how they're going to make the most money. If they hold on to that property, they've got some really nice places where they can make money. They can make money from depreciation on their taxes. You know, you're going to get that 27 and a half year depreciation, 3.64 percent of the tax, basis of that property every year. They're going to get the buy down on their mortgage if they've got a mortgage every month. How much is that? It's $150, $200, $300, how much are they getting on that? They're going to get the cash flow, the difference between their income on the property and

their costs on the property, their monthly PITI. They're going to get the appreciation on the property if it goes up in value because lease options usually don't exercise their option. less than 30% of lease options exercise their option. So it probably means that you're going to keep that property, which is the best financial situation you could be in. Or if they exercise the option and they take it, you're going to get top dollar without paying any realtor fees. And so you're going to be walking away with all the money,

all of your equity, instead of a dramatically reduced amount which you get after you pay the realtor fees. So there's some really nice ways to express that to people that are trying to get their property sold and are struggling with for sale by owner and don't like the idea of working with a realtor. Agreed.

Yeah, I'd give you the cliff notes of what, you know, kind of the behind the scenes, not behind the scenes, but at least the strategy of my acquisition. But yeah, we go right down that. We take very much a consultative approach. And, you know, it's all what's in the best interest for them, as long as the market will allow us to both get, what we want, then we got a win-win deal.

Win-win is everything in business because it makes it possible for you to have a lifestyle that you'd actually want. You know, the people that are doing win-lose deals, they're in pain all the time because they're putting a lot of people in pain. And your life is going to be painful when you put people in pain. So, but if you're solving problems for people, you know, it's like Zig Zigler always said, the more people you help, the more money you make. Right.

If you solve problems for a living, you're going to have a lot more people happy with you. And, you know, when you go to a closing and somebody, you know, and the seller gives you a hug saying, boy, thank you for doing this. And the buyers in tears because they could not have bought a property without doing it using terms the way you're teaching them. Right. You help them do it. There's very few things that are as rewarding as, you know, changing people's lives like that. And so it can be a really powerful, a powerful thing.

And in the meantime, you make a ton of money. Right. What's one commonly held truth that you disagree with? That you should use loans and leverage your money, you know, conventional loans. When you go out to a bank, first of all, it makes the deal a lot more complex. So that's a, I would walk away from loans and start doing it with seller financing. And then once you've made enough money with seller financing, use that cash to buy properties and maybe work in low-end. markets, you know, we have rural areas, urban areas that, you know, can be good rental markets.

You know, that's, we've been doing a lot of that. And, and there's an awful lot of seller finance deals in those types of situations. You know, you're going to do an area that's got $40,000 properties. It's hard for people to go out and get a loan because most conventional lenders won't loan under $40,000. So if you go out and get a land contract on a deal like that and say, look, I'm going to pay you on this land contract. And if you want to, I'll give you a quick breakdown of how we, actually, that's a really interesting structure that your people might enjoy hearing about because we're doing zero interest land contracts or contract for deeds if you're in a trustee state.

And essentially we go to somebody, let's say they've got a $40,000 property and let's say they make $750 a month of income on that property, which isn't uncommon on these low-end properties because you have a really high income to cost ratio on. on those, which makes your return on investment very high for those types of properties. But let's say you only got $700 a month income on that. You know, it's going to cost you $70 a month to have the property management. You know, you want $200 a month of positive cash flow and the taxes of insurance. Let's say that costs you, you know, $150 a month.

So now that puts you at a $420 in cost on a $700. that means you've got $280 a month of money that you can spend on debt service. So if you take that $40,000, you divide that $280 into it. That gives you 142 months. You divide that by 12 months. That means you've got 11.9 years and you can pay that thing off at $280 a month, which is, and we're finding a lot of properties that we're paying off in five to seven years. because of this, because we're doing zero interest.

And the way we approach it with the people says, we'll make these amount of payments over this amount of time to pay you this much money, is that acceptable? And if they accept that, that makes a really wonderful investment because we're not only getting that $200 a month positive cash flow, we're also getting that $280 a month that's going directly to principal, which if you're using a hundred thousand dollar loan from a bank, you know, your first 10 years, you're putting $100 a month towards that $100,000.

You know, the $900 a month goes towards the other expenses. And so it makes a lot of sense when you buy properties like this because your capital and your equity goes up dramatically. You know, and the other types of top properties you can buy when you have, even if you have $20 or $30,000 or $40,000, you can go in and buy properties like this and you can keep them for the long term and put those in your portfolio, you know, let the money come in and don't touch those properties. You know, don't touch, don't sell them, just hold on to them, build your portfolio.

In the meantime, the way you make your income is by either flipping properties or finding other ways to bring income in from using terms deals. And, you know, whether it's doing lease option flips, you know, on high-end properties or, you know, because if you're working in a million-dollar property market, you know, let's say you're working in Brooklyn. or you're working in Queens or you're working in Sacramento, you know, you're dealing with high-end properties, you know, and you can start bringing in, you know, between $10,000 and $50,000 lease option fees on high-income properties like that. And that starts getting attractive as well. In addition to that, you can also get promissory notes if they don't have enough for a down payment. You can take an additional chunk of money or additional down payment from a promissory note,

even if you're flipping the property so you don't have to hold onto those properties with using sandwich leases, which I think is a mistake. Right. Okay, so I'm glad you talked your way through it because now I had an immediate question when you said that commonly held truth that you disagree with is taking conventional bank loans. But it's not necessarily the source of the loan. It was the difference between a 30-year amortized or a zero percent interest loan. It's also the risk. It's also the risk. I mean, if you look at the reason that I crashed was the market going under, but I could have, you know, if the banks had stayed with me, I could have completed the, because I was doing

construction up in the Hollywood Hills when things crash. If the banks had stayed with me, we could have completed those deals and we could have gotten out of them and we would have been okay. But the banks got nervous. They had to call the loans due. We had to walk away because of that situation. They came to us when the equity dropped and said, you've got to come up with more cash, which we didn't have at the time. So if you have too many properties that have too much, too many notes on them. And let's say you've got, you know, $200 a month positive cash flow on a property. A lot of times people will take even subject to properties, let alone regular, you know,

if you just take a single family home and rented it. But most tax assessor areas charge more to investors than they do to homeowners. In Indiana, it's a 1% for a homeowner minus, you know, some deductions like mortgage exemptions and homestead exemptions, which you can get it down to about a half a percent. But if you take over that property as an investor, your tax rate goes up to 2 percent on the taxable assessed value. And suddenly you've doubled or done more than double your cost on that. So suddenly your $150 or $200 a month cash flow disappears because your taxes went up that

second year. And now you have to, now you don't have any cash flow. And as soon as you have a vacancy, you've got to come out of pocket to make that happen. Now, you can, what I tell everybody when they're keeping properties like this, if you're do it, if you lease option the properties rather than rent it, you can get a lease option fee. So let's say you got a $100,000 property. You get a $5,000 lease option fee, maybe another $5,000 as a promissory note that they're paying in you.

You take that $5,000. And if you only have one property to your name, you probably want to take that whole $5,000 and put it into an escrow account and not touch it because that property is going to go vacant at some point. You're going to have to make the payments on it. and you're going to have to do some minor repairs and put another tenant in there. Of course, when you put another tenant in there, it's going to be another lease option fee. So you get another $5,000.

And that may not happen for a year, may not happen for three years, may not ever happen. I mean, they may just stay in there. Because if I have somebody who goes in on a three-year lease option and their three years is up and they don't exercise their option, they want to stay in the property, I'll probably let them stay in the property. And, you know, it makes sense. So they could be in there for a decade. So you, maybe you're doing both. Are you acquiring lease option or are you selling lease option or both? I'm selling on lease option.

Right. I have what I call the zero down structure hierarchy. I believe there's a hierarchy of control. And whether you're the buyer or the seller, that hierarchy is reversed. So if you start, if you're the buyer of that property, the strongest position that you can be in is subject to because you get the deed. So if you have the deed to that property, you know, Next is multi-mortgage and then land contractor contract for deed. The next one after that is assignable cash deals and then lease options.

And if I'm selling a property, the strongest position I can be in as the seller is to sell it on a lease option because it makes the buyer in the weakest position. And when I talk about strength and weakness, you have to assume that you're the most ethical person in the room. And so knowing that, you know that you're going to be. do the right thing with people. You're not going to cheat people because having this control gives you power. So you have to know that you're the most ethical person in the room. You're going to do the right thing. So in order for you to do the right thing, you have to be in control. So make sure that you're in control of your deals and understand what kind of control you have based on the structure that you're using in the transaction. Right. No, I totally understand.

I was following along through this whole conversation a little bit lost in regard to when we were talking about your offer to Zillow FISBOS and the rent-to-own acquisition thing. Maybe I misunderstood that. And I was like, wow, you're acquiring lease option. So we're flipping lease options. You're flipping this option. So essentially what we're doing is we're saying, would you consider doing a lease option? And if they say yes, then what we'll do is we'll take their problem. I say, well, we'll say, how much do you want for the property? Oh, I want $200,000 for the property. Okay. And how much, you know, what's the market rent for that property. Let's say it's $1,800 a month. So you've got a $200,000 property is that's what you're going to get them for that property. And you don't really have to worry

too much about negotiating price on a deal like this. If it's worth close to $200,000, you're probably okay. I'm then going to raise the price to maybe $2.20. And I'm going to try to get maybe 10 in cash and maybe 10 as a promissory note from a new buyer, or at least five and five on something like that. So I'm going to go out there and I'm going to assign my right to buy. And the way I'm going to get control of this property is with a one page option agreement. I call it the lease option memo. And it's basically an option agreement saying that they, I have the right to buy this property or assign it to someone else. And Marta Memo actually defines what we're doing. It tells them, you know, we're going to go and sell this to somebody else and we're going to make a profit on it.

That makes us a principle in the transaction. And when we become a principle, in the transaction, it makes it legal for you to sell that property. If you're not a principal and you don't have a license, a real estate license, then if you try to sell it, then you're doing something that's illegal. So make sure you have the document that makes it legal so that you can do it and become a principal and be able to flip that property. So essentially, we'll get the, let's say the $5,000 or $10,000 from the lease option buyer. We're going to raise that price to $2.10. They're going to come up with $10,000. We're going to keep the $10,000. They're going to come up with the first month rent. We pass that on to the seller, the $1,800.

And we also pass on the buyer. We're out of the deal at that point. And then that buyer is going to move into the property and make payments to that seller for that three-year period, which is typically what we do on the lease option. Got it. Until they... No, totally following you now. Okay. Super. So you're going to do an option with the seller, and then you're exiting by assigning that option and putting a lease in place for the seller. Correct. Now, When you're taught, the reason that we market with lease options is because that's the response. That's the thing that we're going to get the most responses from. If you send out a text blast saying, I want to buy your property, I'm an investor, and I want to get a good deal on it, you're going to get fewer responses than if you say, I want to do a lease option.

And the way our text blast works over that three-month period, the drip system that we use, it does send out different messages. It sends out one that says, you know, I'm interested in making an offer on your property. and it sends them to another website, you can see it, We Will Buy.com, basically just I Buy houses website. And then another website it sends them to is, this is what we do with lease options, how we flip lease options. And that's called buyers for your house.com. And I've set up the system so that it's got all these different websites in it

with different types of offers that we drip on the sellers over time. So they can see, one, that we're credible, two, that we've got different ways to solve the problem. And three, that maybe we hit them at the right time with the right message. You know, that's kind of the goal here is to get enough people that you're hitting with messages at different times through their selling process, you know, whether it's the first day that they've got it on the market or the three months into it or even after that. And try to convert those people. Got it. Sweet. When you take it over the option, are you actually giving them an option, fee or are you waiting until you find the buyer?

No, they don't get an option fee. They get the first month's rent. Oh, they're the first month's rent. Okay. Right. So if, and the reason this, the reason I developed it this way was because when I, originally when I was a real estate agent, because I, after everything crashed for me back in 91, I became an agent.

And, and I turned into actually a top producing agent within that first year. And it taught me some things about real estate that I didn't know as a investor and as a builder. Because I would go out and I would do a listing presentation as an agent to somebody who didn't have much equity. And they would have to come to closing with $10,000 to be able to sell their property because that would be about what the real estate agency would cost. And they didn't have it. So I was walking away from these deals, not because they didn't want to work with me, but because they couldn't. So I said, but why don't I just lease an option the property for you? You don't have too many options here. You can't pay for a realtor to get rid of it.

You don't have any equity in the property. This will end up, you know, actually make any money if I do it this way. But the way agents fill properties on lease option is they typically charge a month's rent to do that because that's what that's what property managers do. You know, that's what's kind of expected. So I just modified. I didn't want to work for one month's rent. And most agents don't want to work for one month's rent. You know, I didn't want the $1,200. I wanted the $5,000 or I wanted the $10,000. So instead, and I wanted to be able to get my seller the amount of money they needed in order to be able to sell the property and not have to come to closing the money. So I gave them full value. I raised the price a little bit overmarket value, asked for a down payment,

and then got people that couldn't have bought a property or owned their own property into a property, you know, in a way that's probably cheaper for them than buying it with a regular standard mortgage. Got it. I totally understand. Where I'm trying to go with this, is your option actually executed before you find the buyer? Have you given them their first month right? No, no, no. We don't execute until we have a buyer. So it's contingent upon us find a buyer. Got it. And we give ourselves 90 days to do that. Honestly, it takes usually less than three or four weeks to find somebody. And everything is contingent upon what, or determine it by the monthly payment. It's not about the purchase price. It's about the monthly payment. So if you're at,

market rent or below, you'll probably sell it within three or four weeks using Craigslist, Zillow, Facebook, and a sign in the yard. Those things are simple enough to be able to get that property sold if that monthly payment is in line with market rent. Because you have to remember, people look at, according to the Association of Realtors, 18 to 23 houses before they buy one. They're going to buy the best thing that they can buy for the money out there. So if you're not competing with the other properties properly in the space that they're competing, which on rental or lease options is going to be monthly payment. If you're not competing on that level, then all you're going to do is help somebody else sell their property. Right, right. No, I'm with you 100%.

I guess where you threw me was when you started talking about being the principal in the transaction. And I thought there was a distinction you were creating between whether you have a property under a purchase agreement, as a principal or as an option agreement as a principle, but they're the same. They're the same. Yes. Okay. I thought there was something that you were defining there and that I wasn't following along with.

But I got you. I'm with you. Cool. I like it. Thank you. Joe, if someone wanted to get in touch with you, what would be the best way for them to do that? Probably to start out with, go to my blog and joecrump blog.com.

There's over 500 free training videos there. there's a lot of material there. If they're interested in the auto marketer, push button automarketer.com is where that's located. And if they want to work with me personally, I also have a mentor program. I have a six-month mentor program where I work personally with people. I'm the coach, the person that they're talking to. And they can go to zero downinvesting.com and spell out zero, zero, downinvesting.com. downinvesting.com.

And there's details about how that program works. It's an expensive program. It's like going to college for a semester. It's about the same cost as going to college for a semester. And I have certain expectations for people when they get into it. So I always ask that if they're interested in that, they can scroll down to the bottom of the page and my phone number is there and they can call me.

And I'll answer their questions, but I'll also have questions for them about what they're doing and what they're trying to accomplish because I'm a little careful about who I bring into the program. I think the most important thing, and I'm sure you've come across this yourself, but the most important thing to learning how to be an investor is not that you have capital,

is not that you have good credit, is not that you're really smart or they're really good on the phone or any of those things. What matters is that you have a good attitude and they have the willingness to work and willingness to follow through and do the stuff that I teach. and if they do that, then I guarantee that they'll make money.

If they don't do that, I guarantee they won't make a dime. Right? I get it. No, yeah, we all have our areas of, I don't know, I use the word expertise very loosely because there's so much that we can all still learn. But, yeah, you got to do your part, and we can't help everybody. So I see the screening process. I understand that wholeheartedly. So great.

I really enjoyed this, Joe. Thank you for taking the time out. to come and share your wisdom here on the show. And I say we stay in touch and we do it again. Is that all right with you? Absolutely. Anytime. I really appreciate it. Thanks for having me on. Yeah, I appreciated you as well. And you're very welcome. All righty. So that's it for today. God blessed to your success. I'm Matt Terrio. Living the Dream. Take care. is a part of the C-suite radio network. For more top business podcasts,

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