Epic Real Estate Investing - New Market Adaptations | Zack Childress | 1022

Episode Date: May 18, 2020

“We are not in the housing crisis, we are in economic pause.” Zack Childress Today, Matt interviews Zack Childress, a founder of Automated Real Estate Systems and AutoSoft Development, as well as a creator of many real estate software solutions such as MLS Gorilla and Social Branding Optimization. Tune in and find out how Zack adapts his business to the shifting market, what are his goals in the next 6 months, what big risks he sees for real estate in this challenging year, and 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.com.

Here's Matt. Hey, Epic Investor. It's Matt. Terrio from Epic Real Estate, where we show people how to invest in real estate with an emphasis on retiring early. Now, you don't have to retire early, but boy, if you got the option to it, sure feels good. And this is the Epic Real Estate Investing Show. If it's your first time here, really glad that you've found us. Make yourself at home. Kick up your feet. Stay for a while. And 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, wow. Welcome. back. And thank you for being here. Thank you for sharing with this with your friends and family. We wouldn't have been here for 10 plus years if it wasn't for you doing that. And it's for you that

I'm eternally grateful for. So you're the best. Thank you. Got a great show for you today. A returning guest. One of my favorite people to talk to here on the show. I think this is only the second. Maybe I'd be the third time. But we always have a lot of fun, always filled with insight. He's always up to big things. And as we were continuing our our whole quarantine episodes and getting the, taking the temperature of successful real estate investors all across the country to see how business has changed for them and what they're doing now and how it's going to change for them in the future and where the risks are, where the opportunities are and all that fun, good stuff.

So without further ado, please help me welcome back to the show, Mr. Zach Childress. Zach, welcome back to that's real estate investing. Sorry, that was me. Got it. Well, it certainly wasn't me. Very good. Good to see you, buddy. You too, man. You too. Glad to be on here. I'm excited about the chat today. Totally. So the big question now that everybody's doing, everyone's working on Zoom. Yeah, I know, right? Are you wearing pants?

You don't want me to stand up. Okay, good. Please don't. They just did it on the, it was on TMZ the other night. It says, raise your hand. If you're wearing something below the waist that you would not normally, only wear it to work. And like five of the hands went up. So I was interviewing an attorney the other day here locally about just like what they're seeing from like in a closing office point of view is like closing down up, what kind of closing. And he's got his suit on and everything. And we go through the whole thing and everything's good. Like we had a good call and then it comes to an end and he's like,

oh, let me show you something. And he stands up. And he's got a pair of flower shorts on. Board shorts or something. Nice. I was like, that is golden. That's great. It's great. So you're in Alabama still? I am. Born here, drifted off for many years. Florida, you know, California, Michigan, and then came back.

Nice. I like it there. Yes. Are you a old tide guy? Are you a war-y-go guy? You probably always ask me that. Well, that's the Alabama question. It is like, roll tired, right?

But here's the thing, man. Like, I just don't spend a lot of time watching sports. I'm not that person. I mean, I certainly don't know. That's for sure. Yeah, very much. And so, look, I mean, my whole family's Alabama fans, but I mean, I couldn't tell you who plays on it. I couldn't.

You just not a sports guy? No. You look like a sports guy, though. Like, you would be in the bar, drinking beer, watching sports. I really don't sit around drinking beer, neither. but I will go to a UFC fight in a heartbeat. Okay. UFC, that's the thing.

I'm right here by the, I'm just like a two-xes down from their main headquarters here in Vegas. Oh, that's awesome. Yeah, I've been watching it since the very first one, I'm a horse Gracie before they had rules and regulations. And so I've been a long, long-time fan, UFC.

I was really into it in the beginning. I thought it was really cool. And then just the Gracies just went in and just made it so boring. They'd take it to the ground and the thing was over and it was like, Well, this is no fun to watch. Yeah. It's dominated at all. Are they not allowed to do that anymore?

They still do it. There's just rules now. You can't kick in the groin. You can't kick in the head. Like all of that you could do back then. I mean, it really started getting exciting when you had like the Chutladell era, the Shamrock era, you know, the bad boy. You know, when those guys started coming in and Matt Hughes came in, like, that was a whole revolution of Greco-Roman wrestling and the Gracie wrestling mixed in with like Kimpo. and we started seeing a lot of that like mixed type of martial art,

not just one skill set versus another skill set. But I know this show is not about UFC. No, but it's like, who knows where it's going to go. It's good. We're going to, we'll create a metaphor out of the UFC in the real estate market here before we're done. So you've been doing this for a really long time. We went through your whole backstory last episode.

What do your real estate efforts look like today? Yeah, 17 years, brother, man. I've been in this game. And today, we're still just plugging along. I mean, you know, I'm heavy into rehabs. I still wholesale, but, you know, we kind of move with market cycles determining when we go heavy wholesaling and when we don't. But so right now, we've been heavy rehab.

We've been, you know, buying apartments, warehouse, I buy commercial space. Obviously, I'm not buying any more commercial space right now. But I've been fortunate. I have good tenants. and we're not getting hit too hard. I mean, our real estate market here is still super, super hot. So, I mean, for us, it's just a normal day. I mean, we have, I have met with my team and said, look, we don't know where this is going. We don't have a crystal ball, but obviously something's happening. I mean, you don't have 35 million people follow unemployment and not have an economic

effect off of that. And so we have kind of tightened up our buying criteria. I mean, you know, we typically keep anywhere from eight to 10 rehabs going at any time. And because we're running such a machine, I mean, you're talking, you know, 100 deals a year, you know, for the last three or four years, I mean, we've been okay snatching deals up where we only make 12,000 on them. But that was the market, right? And that was the volume play. And so, so now we know, like, hey, look, if the market does turn, no, we're probably not going to have eight to 10 rehabs running at any time because we're going to risk, we're going to mitigate our risk. and we've changed our strategy.

Like we won't buy anything less than 20,000 in profits now. And so we've made some adjustments just to try to have a plan in place for if something does come and does change. But look, man, I live through the 07, 08, 2009, you know, 2010 slide. And we kept investing then too. We just had to, you know, lean more on speculation, which I'm not an investor of a fan of speculation. But when a market's sliding, you got a speculating.

you got to speculate. You got to say, okay, well, what has the prices dropped in the last 90 days? What can I expect it to drop in the next 90 days? That's where I think I can sell it at. You got to calculate longer whole times. I'm not telling everybody that's where we are right now, but that's what we're getting prepared for. So. I've never been a speculator myself. I've always been 100% cash flow focused. And then if it turned out something I didn't want, then I just flip the contract and move on to the next deal to hold. Yeah, and I'm big on cash flow myself, Matt. And that's the whole reason. It's like an engine for me. Like, I keep the rehabbing side going because all I do with those profits is I just dump them into more long-term assets. Yep, exactly. Yeah, that's kind of the good formula.

If you don't have like a real good paying day job, then, you know, flipping and whole setting can be your really good paying day job to build a passive income. 100%. I'm glad you agreed with that because we're going to have a problem if you didn't. And I still do co- wholesaling to this day like anybody. I mean, you know, we get a lot of out-of-towners that want to come into our market and market for leads. And so I'll find them. I'll team up with them.

They'll bring me the lead. And then I'll find a buyer. And we just co-hosell the deal, man. And that's a huge part of where I say we still co-sale, but I'm not actively doing traditional wholesaling. I'm co- wholesaling with people who have deals that bring it to me and say, hey, you want to buy this? And I'm like, no, I don't want to buy it, but I know a buyer that will buy it. Let's co-ho sell it.

Nice. Yeah, I've never been big on speculation either, but now I'm living here in Vegas. And just before the whole virus thing shut down, it was predicted that the population was going to grow by double in the next three to five years. And that there were already, before this happened, there were more jobs than people. people. I was like, well, that's right for appreciation there, right? Yeah. So I'm still doing that. I saw some pictures of your hometown in Vegas. It was like a ghost town. Yeah, it's pretty. We're still on lockdown here. Like, I don't know when you'll be listening to this, but the fact that

we're still in lockdown and Florida's opened up, Georgia's starting to open up, Texas, and we're lower per capita cases than all of those programs. I don't know. They're progressive. The ones that are leading the way and opening up their states. And I'm like, why are we so batted down here for? Yeah. Well, didn't I saw some video the other day. Like your farmer's market opened up over there, didn't it?

Like, somebody was walking through downtown in Vegas and where the farmer's market is. And, like, they had ropes and stuff, you know, set up. But, like, there was people out there. So I don't know. I don't even know where that is. It's an old town. Old town. Okay.

It was about a half hour away from there. Everyone thinks when I say I move to Vegas, they think I live on the strip. Well, I used to own a house in Henderson up in the Anthem Islands. And so when we lived in California, we were going to Vegas so much that we just bought a house over there too. So I had some fun times in Vegas. Yeah, I have never had a fun time here. I don't know what you're talking about. The hiking and all the nature is awesome there.

Yes. Red Rock and, you know. Red Rock. I appreciate that country. Damn. Like, that was great. Very good. All right. So we talked a little bit about what business looks like for you right now and some of the things that you've changed and altered, which I think are all very smart moves. What's your focus moving in the next six months knowing what you do know? Yeah. I mean, I'm looking at it from only based off of what I've lived through. And I think that if the market, because you got to remember, like we're going to keep running forward, but we're going to, I live by this motto called, you know, PPE, prepare, plan, and execute. That has a whole new meaning today. Yeah, prepare, plan, and execute. And so I'm always preparing and I'm building the plan for what might be coming so I can execute. And if it's going to be anything like it was before, during the slide, you know, I did a ton of wholesaling. Like, that was my main thing. I pulled back on a lot of the high-risk stuff. I didn't buy a lot of rental properties only because I just didn't know unless they were super great rentals, I would buy them. But I didn't know where the prices were going to slide. So I leaned into wholesaling, did a ton of

ho-ho- wholesaling during that time. And so we're just kind of preparing our model for that, if that's the way we go. Got it. Got it. Yeah, it's all you can do. I think it's, I think those that have been through it, as you and I have been, I think it's almost a weird blessing, if you can call it that. I agree.

You know, there's definitely some good things that have come out of being locked up in your house with your family for a few. 100%. Right. But even on the- things that are coming in the whole, if you look at everything, it's forced people to move more into technology, do more like this to be able to get. Here, I'm going to say this. I feel like I've been more connected to people during this time than I was before this time because everybody now

has ran to Zooms at meetings on Zooms, masterminds on Zooms, coaching calls on Zooms. For my students, I mean, and maybe I'm just speaking on my side, but I really feel like I've actually gotten more connected to my community through this than anything. Yeah, I think that just new levels of efficiency are being created. And part of that is just how you communicate with other people. I totally can see how that happens. Let's see. Working, finding deals. So I know you're a little bit separated from that, but what do your marketing efforts look like and what's working best right now?

Yeah, man. I have three cores. I mean, we have what's called a penwell, and we're always working on all these things. But, you know, I'm a little different. I've been in my market as a full-time investor and the leader of my real estate investment association here for 11 years. So through my network, I get a lot of deals. Through new members, through the banks, I mean, I'm just known here, Huntsville Housebuyer. They know that's me, right? So my network is really strong. I still do a lot of mail. We do a lot of stacking and that's working. And then we do Facebook. That's our three cores. Our network is a solid core, which network encompasses everything. It's my co-holselling, you know, all of that. And then we drop direct mail, but I'm not a, I'm not a direct mail dropper like some people. I don't go pull an 8,000 person list and mail it. I'd rather mail 50 small lists than one big list. When you do that, do you customize your message for each of those lists? at 100%. And that's why I do do it. You know, I was raised in the marketing world of direct response

marketing, right? Congrual message to a congruent list gets you the response you want. And so, so we will do that. Like, we'll go in and we'll stack, you know, what we're trying to identify and what that pain outcome will look like. And then we'll build a three or four sequence message to agitate and really hone in on that pain so that we can then provide them a solution. So I've always been a chicken to pull the trigger on this because I just couldn't come up with the right message for a probate list. Do you have a custom message you send a probate? I don't mel to probate. It's something I just don't do.

I do meld an inherited list, which is what happens after the probate process. We just found that mailing into the probate side, yeah, it was just harder for us. The results took longer because it's like you've got to get through that process. So we just came on the backside and started a really targeting inherited list. Out of state inherited. That's our stack. Because if it's in state, we really can't dial in on that pain. But if it's out of state, then we can create a message that says, look, you know, did you just get a box of rocks in the mail?

And now you got to pay taxes on it. And it needs work. And, you know, so we hone in on that and the expenses. And that's been working well for us. Got it. Got it. Interesting. And you said a customized message.

And I'm just like blanket to everybody the same thing. But I can see if you had just the right message to just the right person and had that congruency you're talking about, that could really increase the response rate. It takes a little bit more time to build it out. But I mean, you got to think like, you know, some of our, like if we look at our spreadsheet of the 50 different lists we got mailing right now, you know, each one of them has at least two to three stacked pains. and it takes longer, but you get a better message.

Because in versus like, look, I own a ton of properties. I get mail all the time in my mailbox, you know, like, hey, trust owner of this and trust owner of that, right? Yeah, yeah. It's like, do you want to sell? Like, it never talks to my pain, right? Right, right. They don't know my pain, right?

And so, or if I had pain, they didn't find it. And it's just a blanketed message. And yeah, it works in volume. And that's what I try to tell people. Like, if you're just mailing 10,000 people, then, yeah, that's a hard list to get down to everyone's paying. But if you take that 10,000 and then you start pulling out segments, yeah, the list size drops to some are 50 to 2 or 300, but you can get real clear on what they could be experiencing

or what they could be going through or what they're about to experience. That's great. Nice. So being the director, the leader of your RIA group and, you know, talking to sellers, talking to realtors, talking to wholesalers, I'm sure you've got your finger on the pulse of that. What's the, how have conversations changed with the community? Oh, it's drastic, man. I mean, it's like there is no middle ground right now.

I mean, it's either they're running because they're scared because they're listening to the media or they're trying to figure out how to take advantage of the operating. opportunities that are coming. So it is like a night and day switch. And I've spent a ton of time trying to educate my following, right? That like, look, you know, you can't take the data that the media is given you and think that that's the golden answer because that's a national data. Every market is micro data driven. And your micro market could be majorly different than the national data like us. Our micro data here is so vastly different than the national data. national data. And for somebody who's novice or doesn't quite understand and they're listening to national data, they're thinking that that's the end of the world for their market. And it's not. Right. If you're hearing data on the news that probably 99.9% of the time it applies to the retail market exclusively. Yeah, or they're taking in major depressed markets into that data too. You know what I mean? Like you talk about markets like Michigan and Ohio and, you know,

those, yeah, 50% unemployment rate in some of those towns. Well, those definitely affect the overall, but there again, that's micro data, right? It's for market. It's not your market. And so I just did a big training with my group the other day to try to cool down some of their heads, which we talked about the six market cycles. And I was taking them through my last 17 years and what we, what investing strategies would we do in each cycle and how to take the national data and break it down into local data so that they can be more predictable on where we're going. Nice. What do you think are the big risk with that being said? What do you think are the big risks in real estate this year? And how are you mitigating those? So that's a great point. I think the risk is just sticking your head in a hole,

honestly. I think that's the biggest risk there is. I think the second biggest risk is not leaning into your education right now to figure out how to take advantage of where we're going. And look, that might be clicheish, but I'm here telling you, like, that's fact. Like those two, things are fact. And the only reason I survived through the last downturn is I had a very strong mentor that was like, look, I've lived through these in the 80s, and here's what you need to be doing, and here's where you need to be going. And I was fortunate, you know, that I had someone like that in my corner. And, you know, guys, and the people that follow you, they've got you in their corner, and you've lived through this, and they need to be leaning in on you for this stuff. You know what I

mean? And that's the big two factors. Now, outside of that, we are taking a reassessment. We know that with, you know, the unemployment rate as it is, it's not going to, I mean, look, we're not in a housing crisis. Let me just be clear on that. We're in an economic pause. And I keep trying to express that message. Like, this isn't 08. We're not in a housing crisis. You know, we're in a pause. But unemployment will affect. But I also like to share the point that, look, I made most of my wealth when unemployment was 10%. You know what I mean? And we were in. a market where everybody was freaking out and running scared. Like I became extremely smart and invested strategically and built a massive wealth for my life. And so, but here's what I do know. I own a ton

of rental properties. And if it's anything like the last one, we will see rents go down. And we have to be prepared for that. And what I mean by that is, is not like rents are going to go from 600 to 300, but they do adjust. I mean, when people are unemployed and the next thing you know, they can't pay rents, they have to move out, which means we have higher vacancy rates. One of the reasons I'm so thankful that a lot of my, I'd say almost 70% of my portfolio on my apartment side are all Section 8. And that's been a blessing to me. Yes, some of, well, not some, a good portion of them, they pay more than what the voucher is that they get. But I'm like, look, you don't have to pay me that. I'm, because here in my book, I'm happy with collecting 550.

And if I don't have to get the 50 from them, okay, no big deal. At least I'm not out $600 every month, right? And so that was something that I put in place after the last cycle drop I went through. And I started getting all the phone calls. I'm out of work. I'm out of work. I'm out of work. I'm out of work.

I'm out of work. Right. And so that was years ago. I started switching any of our C class properties, C, C plus class properties. I moved all into Section 8. You know, I wish I could do that with the business is in my commercial space, but obviously that's not going to happen. Right, right.

I just saw an interesting take on the cover of, I don't know, one of the news platforms, I scour them all just to compare who's saying what. And one guy had said that there's going to be a greater need for commercial space because they got to space everybody so far apart. I thought that's a good point. I mean, it's true. But here's my flip to that. I think, you know, and I'm like you, I'm digging into the data and looking at bright and white.

And I ran across one the other day and I think it was on housing wire or something like that. And it was talking about how they predict that almost 30, if not 40 percent of the businesses won't go back. But I think there's another number inside of there that they don't look at. That 30 to 40 percent that won't go back, probably 70 percent of that, were already on the brinks of bankruptcy anyways, right? Like they were businesses that were living paycheck to paycheck. They're barely paying their employees. I mean, that's standard for businesses.

That's why most of them don't make it in five years. But I think that other 30% in there that won't go back, I think it's because they've realized like, look, I can operate a business from home. I can do my systems. I can have my meetings. Like, I don't need those expenses. So that's kind of where, you know, I'm looking at that as well.

But I like what you just brought up. I hadn't heard that yet. I mean, yeah, with the spacing. It might, you're right, they might have to have two suites instead of one suite, you know, to be able to get everybody in. So what's going on in your world right now that has you the most excited about the future? Man, I'm a real estate investor at the core, right? And so I see opportunity in everything that's going on right now. And I believe in the next six months, there's going to be a tidal wave of opportunity that hits us from all these forbearances that came out from the foreclosure. closures that are already starting to be on her eyes. I mean, that is, that's where I thrive is like

seeing those opportunities to help people because when that happens, we're able to start buying a lot more properties and we roll over into more like we start really rolling back out our lease option programs because we have all these displaced homeowners and they don't want to go rent an apartment. So we move them into a house and give them two, three years to get their credit back up. And so it's just a shift in our business model. And I'm pretty excited about that. And just the amount of co- wholesaling that we're starting to see come our way right now. I mean, it really, it works my strategy best because, you know, I can focus on other things. These other wholesalers are bringing leads in. I've got a ton of buyers. And so that's been another thing that I can see that's starting to

pick up as well. And I'm excited about that. So, sweet. Well, as always, Zach, it's a, it's a pleasure to talk to you. I always have a lot of fun talking to you. If someone wanted to get in touch with you, what's the best way for them to do that? Well, man, they can always go to Zach Childers.com and check me out there. I mean, got all kinds of cool stuff, free stuff. I mean, you know, our YouTube channels, they can plug into us from there. All kinds of stuff we got, man. We got massive amounts of YouTube videos. We got thousands of hours on our Facebook page of trainings and free content. But they can start at Zachchilders.com. Jack, Zach, not Jack.

Yeah, not Jack. Zach. I was saying Zach and Childress at the same time and it came out as Jack. Zach, Chilldress. Because we both have a mutual friend named JJ Childers, and then that always gets me confused. But you are the best, dude. Thanks for being here. Let's stay in touch, and we'll do it again.

Awesome, man. I'll see you on the flip side. Amen. So if you found this episode valuable, there's a pretty good chance. You know someone else who would too. and if you think about that person, when that person's name comes to mind, 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. Until then, that's it for today. God loves you. So do I, health, peace, blessings, and success to you.

I'm Matt Terrio. Live in the street. 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 for us, we got the cash flow. This podcast is a part of the C-suite Radio Network.

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