The Science of Flipping - Episode 56 – Auctions, how to buy your deals at auction| Real Estate Investing Podcast
Episode Date: December 17, 2014document.addEventListener("DOMContentLoaded", function () { podlovePlayer("#player-5eb5ab31c5588", "https://thescienceofflipping.com/wp-json/podlove-web-player/short...code/post/655", "https://thescienceofflipping.com/wp-json/podlove-web-player/shortcode/config/default/theme/default"); }); <p> document.addEventListener("DOMContentLoaded", function () { podlovePlayer("#player-5eb5ab31c55de", {"title":"Episode 56 u2013 Auctions, how to buy your deals at auction | Real Estate Investing Podcast","subtitle":null,"summary":null,"duration":"","poster":null,"chapters":"","transcripts":"","audio":[{"url":"http://thescienceofflipping.com/wp-content/uploads/2014/12/Episode-56.mp3","mimeType":"audio/mpeg","title":"AUDIO/MPEG","size":0}]}, "https://thescienceofflipping.com/wp-json/podlove-web-player/shortcode/config/default/theme/default"); }); <br /> Justin Colby interviews one of the largest bid service companies in the Phoenix area. Spencer Caldwell owns and operates Gentry Real Estate Services who has purchased over 10k properties in the last 7 years. They review how the bid service works and what happens down at the auction steps.
Transcript
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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby.
Hey guys, welcome to another awesome episode of the Science of Flipping Podcast. I am your
host, Justin Colby, and welcome again to the podcast.
If this is your first time to the podcast of Science of Flipping, please get over to
the website, thescienceofflipping.com, to make sure you pick up your free e-book.
The e-book has to do with the 15 costly mistakes you can make in today's real
estate market. It's absolutely free. So if this is your first time, get over to the website so
you can pick up your free copy of the 15 most costly mistakes a real estate investor can make.
Also, if this is your first time or even your second or third time to the podcast and you love
what you're hearing and you're interested in taking your game to the next level, shoot me an email about coaching and consulting.
If you're interested in me personally helping you get to that next level, shoot me an email at info at thescienceofflipping.com and I will personally personally reply to you, and we will set up a phone call
and see if it's a good fit for both parts.
Now, this podcast, I have a special guest on this episode, and before I bring him on,
my podcast specifically is all about providing you systems and organization in your business
so that you don't feel like you're doing absolutely
everything all the time, that you actually own a business, not just have a high-paying
job.
And so every week, every episode, I try to give you a new golden nugget on how to systemize
your business and how to grow your business.
And today is all about how to grow your business. Today is all about how to grow your business.
My special guest is Mr. Spencer Caldwell from Gentry AZ.
Mr. Spencer Caldwell is actually our bid service that we use here in Phoenix.
He has been working with us since I think 2010.
We got into the auction.
Everybody say hi to Spencer. Spencer, what's going on, bud?
Hey, man. Justin, thanks for having me. I'm so excited. My partner just looked at me and wondered why I just stood out of my chair to talk on my phone here at my desk here in
Mesa, Arizona. I'm excited to be here. In fact, tonight is our company party, and I
just don't really have time to be here today. but Justin said, man, I need you for this podcast.
I've got to roll this out.
It's too important info.
I couldn't pass up the opportunity.
So Justin, just wanted to give you thanks for having the opportunity for having me on this podcast,
and like I said, my name is Spencer Caldwell from Gentry Real Estate Group,
and here in Arizona, I am a native.
I grew up in the mountains on a pig farm with 80,000 pigs
and that's where I learned my work ethic in real estate
and Justin and I have been doing business for a long time
and it's just an absolute pleasure
anytime I get a chance to talk to you, Justin.
When I was 14, I moved from the mountains
and my family started doing real estate
so I've been in the real estate business for a long time
and just a pleasure, Justin. I appreciate you inviting me today. Yeah, man. I'm glad that you were able
to put aside your schedule and tell everybody at the office, I'm sorry I dragged you away from
your party. I'm sure you're about to get going here. But thank you again. It's a cloudy day here,
so I'm sure it's a great night for a little party and having a cocktail or two. So that'll be fun
for you guys. Hey, listen, why don't we just kind of simply start, as
I mentioned and you mentioned, you're our bid service, and I know you've absolutely
crushed it over the last seven years. You've done roughly, what, 10,000 deals in the last
seven years or so, is that correct?
Yeah, that's correct. We've had the wonderful opportunity to help clients as yourself who are listening to purchase over 10,000 properties at
the Trusty Sales Auction in just seven short years. A total volume game, very, very exciting.
My adrenaline is continually pumping. I'm getting gray hairs over the past few years. My wife says
it's from stress, but I say, no, it's just too much adrenaline going straight to my head because
the auction business is so much fun.
Yeah.
I'm surprised you still have hair.
If I was in your line of work, dude, I'd be bald.
I would just lose all my hair.
Well, so listen, I kind of want to hear, first I want to know a little bit how you got started. I can't imagine how pigs are relevant to you flipping homes or even starting an auction
company, but tell us a little bit about once you moved down here into what would be the big city, right?
How did you get your jump into becoming a bid service?
What was that transition for you?
Great, man. Thanks for asking the question.
So I bring up the pigs because at the end of the day, any farmer,
they find out that they're not in the business for their farm.
They're not in the business of selling their crops.
They're not in the business of selling their cotton.
What they realize is they're on a beautiful, priceless
piece of land that just, and they're in the real estate business at the end of the day.
And so that's how I got into real estate is just being around family and mentors and coaches. In
fact, Justin, you probably don't know this about me, but I studied biochemistry in college, and I wanted to be a doctor badly. And I was actually headed out to school and had a cousin get home with $400,000 debt.
And I just didn't want to go put myself into any more debt.
In fact, I had all four years of college paid off through loans, not through loans,
excuse me, through scholarships and Pell Grants.
And so I had zero debt and four years of college under my belt.
And I wasn't about to head out to graduate school and have $400,000 debt.
So I said, hey, look, I'm going to work for a year.
And I'm going to make as much money as I can.
And I know these young guys that do these summer sales just can go kill it in the summer.
That's all they focus on, 18 hours a day is just working.
So I said, look, I'm going to do that in real estate.
And this was just 10, 11 years ago.
And I had the wonderful opportunity to jump on with a firm that my uncle owned.
And there was investors from California that were just buying.
I mean, we had the wonderful opportunity of moving a couple thousand homes in a few years,
just 11 years ago here in Arizona.
So I fell into a pretty exciting business. And long story short, after that year of real estate,
I ended up buying, I think, 20 rentals for myself and my wife. And we were in real estate. We
weren't getting out and we were happy. And it's been that way since. Obviously, there's a little
bit of a hiccup in the economy a few years after that here in Arizona. And everything started to foreclose.
So I quite honestly was twiddling my thumbs one day and actually on a bike ride with a friend that was a developer
building these big, beautiful custom homes.
And his market, all the builders just stopped building homes seven years ago.
They didn't have the funding.
And so we're on the bike and we said, what's the next step?
And he said, you know what?
There's a lot of people starting to foreclose on their homes.
Spencer, if you don't go down to the courthouse and start buying properties for me,
I've got the money to do it, but we're not building homes.
People aren't buying new builds.
If you don't go down there, I'm going to go down there myself.
I'd say, hey, I'm there.
The next morning I woke up and was on the courthouse buying properties.
And long story short, never had to do any type of advertising, had enough business through
family and friends and word of mouth.
That's where I got started, Justin.
That's great.
That's a great story.
Being able to end that by saying everything happened word of mouth, that's really how
real estate is in a general sense.
It's all about networking and knowing the right people.
It's not always what you know and the degree you have, right? I mean, you said you're a biochemist
major. Not anything you do today has to deal with your biochemist major. And I'm an English major.
And besides speaking the language, pretty much nothing I do in my day to day has to do with my
major. And it's, you know, it's all about who I know and not what I know necessarily.
And so I love to be able to bring that as a relevant topic because I think a lot of
times a lot of my listeners and a lot of my students overthink that, right?
And they want to go get educated and this and that.
But, you know, a lot of times it comes down to just simply who you know can help you and
project your business life into that next stratosphere.
I'm glad you were able to bring that up.
Yeah, no problem.
Let's get into a little bit of the dynamic of the auction.
I know a lot of listeners are going to love this episode.
I want you to start from the fact that there's two auctions kind of going on simultaneously here in Phoenix.
And I know for those of you on the East Coast, it could be a little bit different.
You guys do almost like a doorstep type auction where the sheriff actually goes to the house himself.
So I know some of those listeners, this is going to be slightly different, but I want to pull out of Spencer exactly the process of his day-to-day because there's multiple
auctions being done down here and there's multiple areas that you can go to pick up
property. Spencer, why don't you just give us the foundation of that day-to-day and the
different trustees auctions that are happening here in Phoenix?
Awesome. Absolutely.
So basically, Arizona, to me, I'm very biased.
I live here, obviously, do business here.
I've done real estate business all over the U.S.
And there's a lot of listeners out of Arizona.
But for me, Arizona has been the most exciting because we live in a nonjudicial state.
So the auctions are quite cowboy to me as far as nonjudicial.
There's 12 major trustees that hold trustees in Arizona.
So as a trustee, it could be an attorney. It could be someone that sets up their business's
license as a trustee. And so the trustee is in between the buyer and the bank selling the
property. So we actually show up to the trustee to buy the property. And I mentioned that there's
12 trustees. And so that's a lot of them. That's a lot of data we've got to collect.
And the reason why Justin uses us as a bid service is because we're really good at that data.
You've got to collect it. In fact, it takes as many as six hours to collect
the data the day before the next day's auction to make sure that you've
got as much information as you need for the next day's auction.
It's a quick game. We're collecting data today, right now, for tomorrow's auction.
Since it's quick, it's not for everyone.
That's why it's the benefit.
That's why you're buying lower than what you can buy traditional real estate at.
So we're collecting data for tomorrow's auction.
We produce that data out to our investors.
They take a look at the inventory the night before the next day's auction, okay?
And when they take a look at the inventory, they're just running numbers.
They're not getting the list from me of what's going to auction until eight o'clock at night, the next day's auction.
So they're making numbers since the night before. The next morning, they're waking up and they're
going to drive by or send my driver. I've got a team of drivers to take picture. In fact,
I just met with someone in Sun City West that's an hour drive from Mesa and they want to buy
something out there, but they also want to buy something in Mesa. They're not going to have
enough time to drive over here tomorrow morning
to see what there is going to auction out here.
So I'll send my driver over there and take some pictures for them.
So Justin will let me know what he's interested in in the morning.
He'll give me an address.
My drivers will go snap some pictures.
And then Justin will create his bid off of his pro forma off the basis of the drive and the numbers, okay?
So it's very exciting.
It's very fast-moving.
And then I like to really compare myself to someone in a flight tower.
When I'm flying into Falcon Field here in Mesa, there's a dozen planes in the sky,
and there's just one flight tower, one control tower that's controlling these flights.
And so I'm controlling my staff to be at the right place at the right time. There's sometimes that we're at four different places
at one time. There's auctions that start at 9.30, 10, 11, 12, 12.30, and 2. So we're at a lot of
different places. So I'm controlling my drivers here from my desk, my staff, making sure they're
at the right place at the right time to bid on the property.
And our clients, they literally let us know by text, by email or phone call what property
they're interested in and their max bid.
We then show up to the auction at the right place at the right time and we bid on that
property and hopefully we win it.
So that's, in a nutshell, making a very complicated system, Justin, sound as super
simple as possible.
Right. And the point I bring that up is because this is complicated and the reason
why we've used you and I know a lot of other investors and I always recommend any student
use a bid service because there's a lot to it. It's not as simple as just showing up
to the auction and throwing your hand up every time you want to raise your offer price because you know you're talking about title insurance you want to make sure that you have a clean title
you guys do all of that i'm not going to wake up at 5 a.m 4 a.m to go drive the property take
pictures of the property uh you know figure out about whether it has clear title do the bidding
i'm just not going to do that. And so I'd rather take on
someone like yourself and pay you guys a fee to do all that kind of stuff. So I don't have to
overanalyze and work so hard. You know, this, this podcast Spencer is all about teaching people
systems and auto, uh, automation and organization in their business so that they could be in Costa
Rica while they're bidding on properties with you, right?
I mean, that's what we're all about here at The Science of Flipping is really teaching people how to systemize their business,
organize their business so they can be in Japan and still be winning bids at the auction.
Well, that's absolutely possible.
With the system that we have in place, that's just possible.
I love the name of the science of flipping.
And as far as the science of a bid service, we've got that down for you.
So you can be in Japan bidding with me.
And quite frankly, we do have a lot of international people that buy properties,
which is very, very exciting.
And we've got those systems in place.
You mentioned something that's really important.
You mentioned title.
You know, if you were just a person that just showed up to the auction not knowing what you're doing,
you could very well show up and buy a second mortgage.
Well, guess what?
We've never, ever done that because we have several title companies check title in the morning
before it's going to auction to make sure we're buying it first.
You could be financially devastated if you showed up and you bought a bad title.
It just would have saved.
See if there's a property going for $100,000 and the first was $100,000
but I showed up and I bought the $50,000 second, well, it just, if I bought, I still
have to go to be in full position of that property, I have to pay the $100,000.
So I'm $150,000 into this, well, guess what? The property was only worth $100,000. That's why I only paid $50,000 or thought I was paying $50,000 to have full
possession of the property. So you're just not going to have those type of headaches.
You don't have to show up. It's just, I mean, it's funny. You hear people talking about the
auction, the sharks. And I mean, it's just, it is, it's just not a good feeling. It's just,
it's just pure chaos. But we know what the chaos is, and we have a controlled chaos, and we know how to do that.
And so that's why you use the service for the drive reports, for the title, to be at the right place at the right time.
And one thing people don't know at the auction is you're not buying addresses, and they read off the address.
Well, we've had several random third-party people show up there thinking they're buying a certain address.
You're not buying an address. You're buying a trustee sales number there thinking they're buying a certain address. You're not buying an address.
You're buying a trustee sales number, and you're buying an APN.
And so they buy one address, and guess what?
They bought the wrong property.
So I see people on a weekly basis buy a second, buy the wrong property,
that are just financially devastated.
You know, we're down there trying to help,
and if we see someone show up and not know what they're doing, trying to help out.
But it's just, once again, it's chaos chaos and there's a lot of properties going at once.
So we try to help out where we can if someone doesn't look like what they're doing.
But we see people just getting in a lot of trouble down there, just not at the auctions,
not knowing what they're doing.
So that's why you use a bid service.
It's like I almost compare it to somewhat of an insurance policy, using a bid service
such as ourselves.
We're going to take away a lot of the headache and the hassle from you.
So, yeah, thanks for bringing that question up, Justin.
Yeah, absolutely, and it's important.
And I know I use Fidelity National Title for almost all my business,
and I know you guys use them, right?
They're one of your preferred title agents.
Absolutely.
And they just do such good work, and it's important
because you don't want to come into the second.
Now, you talk about all the guys you have.
You have runners, and you have people analyzing deals for the next day,
and it takes six hours, and you have people driving the properties.
So you have a fee.
Do you mind if I ask you how much that fee?
I know, but do you mind if we disclose that on the podcast?
No, not a problem. We have a flat
bid fee because the trustees and banks aren't going to pay us as a real estate agent or a broker
or a specialty. They're not going to pay us a fee. We just have a flat $2,500 fee per property that
we charge our clients. If you buy it for $100,000 a day, well, tomorrow we'll settle up at $102,500.
So we just add it to the top of what your winning bid is.
So you'll throw that into your pro forma, into your basis.
And it's just a flat fee.
Whether we buy a $2,000 property or a $2 million property, we're doing the same amount of work.
So it's just a flat fee.
Nice.
And then you talked about settling up.
So let's review that process.
I know it pretty well, but I'll ask you some strategic questions.
Here in Arizona, specifically Phoenix, you have to be ready.
If you win a bid, you have to be ready with at least a $10,000 earnest money check right on site, correct?
That is correct.
What's also good about using us, Justin, is we don't require that from our investors.
We create the relationship, and we'll actually front that for them.
We don't want to hold on to your $10,000 until you need to be spending it because, as you know, money works for you,
especially if you're a smart investor and you're listening to all these podcasts.
You know that you can make money in other areas.
So I'll actually front that $10,000 for you, Justin.
And that's awfully great of you, and we've definitely had you do that quite a few times. Now, what happens if you front that $10,000 and you call me, or just as the example, I would never do this,
but someone wants to back out.
Oh, Spencer, you know what? I couldn't do it. I can't financially do it. I don't have the money.
What happens to your $10,000 when you front it?
Well, if I were to buy a $100,000 property today and I fronted $10,000,
so in all essence, the client really owes $ 90,000 the next day to the trustee.
Well, they need to replace my 10 and give me the bid fee.
If they gave me a bid with a text or an email call and said,
hey, I really like this 1320 East Brown Road.
I will pay 100,000 for it.
And I go and make that happen.
And then the next day they get cold feet and say, hey, we don't want to do it anymore.
Then it's going to be their $10,000 loss, quite frankly.
So this is a business to be serious, and if you really want to flip a property, you've
got to be ready.
There's fees, and there's some costs to it, and you've got to be serious.
We only work with serious clients, and luckily no one's ever backed out.
Justin, we have that type of relationship with everyone, and we're real upfront and
real transparent.
It's an open book.
Yeah, and then I guess, so let's talk about the next step.
You front the $10,000 and or I come in and give you the check or whatever.
The $10,000 is in there.
What's the next step?
Now, we need in Phoenix, we have 24 hours to fund the entire thing, right?
Or is it 48?
24.
24.
If we buy today, today's a Friday, so we have until Monday at 5 o'clock to pay for it.
So like I said, a lot of our clients are out of state or in state.
So what happens is if they buy it today, they will wire funds over so we can pull the funds and go pay the trustee,
or else they can bring a cashier's check into our business and pay for it too.
And a lot of people think, oh, man, auctions, all cash, it's a little
bit scary. But Justin, I know that you got some tricks up your sleeve to where you don't have to
pay all the cash and that you've got connections to some hard money. So if you don't have all cash,
don't be afraid of that. I mean, auctions are for everyone. And you can go get hard money if you
don't have the cash. Obviously, if you get hard money, that's for another podcast of how the
details work there. But there is still some money involved.
Once again, if you don't have money, look, that is fine.
You can create a JV, which is a joint venture with someone that does have money
because you have the knowledge and you've been educated by Justin.
And that's for another podcast for the joint ventures that we can go over.
But buying auctions through auctions and flipping properties through auctions is for everyone.
And we can teach that and go over that for sure.
Absolutely, man.
That's why I'm so happy that you were able to make some time today to give back to my listeners.
As you know, we have a whole educational platform.
Who knows?
Maybe I'm going to have you start speaking at some of the events where you can really speak and hit home and educate a lot further on this process.
One of the last questions I wanted to make sure I got in today, and I know you got
a busy day, so I'm going to wrap it up.
But one of the last things I want to do is, in Phoenix, this is such a hot market, right?
I always say we're kind of the pulse of the investing world.
If our market goes up six months later, so is California, Nevada, Florida, right?
We almost run.
We are the pulse. And one of the things that is here is we
have a lot of flippers and we have a lot of wholesalers. And there's certain wholesalers
that are even able to wholesale deals. They win at auction. I know because I've worked with them.
Talk a little bit about how that process would actually happen. How would someone be able to utilize the auction if they were more driven by the wholesale model
so that they never really needed to come out of pocket to fund any of the deals?
Talk a little bit about how that would work.
Man, great question.
I'll be today, there's a property that went up for around $127,000. And immediately, that client that purchased that property, he called me back and said,
I'm not the actual buyer.
I've got it sold for $130,000.
Well, sweet.
And so I automatically, my will's returned.
So this client has been coached by someone as yourself, Justin, to be able to make
money without having the money. He won the bid and he knew it. He was on the case for $10,000
if you couldn't square up on Monday, but he knew that there was enough money in this property
that if he were to buy it, he knew that he, within minutes, could sell it and make a couple
thousand.
And so, you know, with wholesaling, there's all types of wholesaling.
Sometimes we hit a home run and we can make $30,000, $10,000.
But with auctions, sometimes volume speaks. And so, you know, and sometimes we just, you know, this guy in this case,
he made within minutes $4,000, within just minutes.
Obviously, he was thrilled.
There's definitely some wholesale tactics.
To go into depth, more depth, as far as another podcast, I'm wholesaling off the auction steps.
But definitely, your net worth is, to me,
is equal to your database and your connections.
So your net worth is your net work.
And just bringing it back home to what we started off with.
Real estate is a lot of who you know and who you're connected to.
And that's why these podcasts, to be listening to these every time,
is so important because your net worth is your network.
That's what it's about.
In wholesaling, same thing, Justin.
Would you not agree?
I would absolutely agree, man.
Listen, once again, I know you're a slam.
Thank you so much for taking this 25, 30 minutes out of your day to really give back to our
listeners.
I'm passionate about giving back and helping others, and I know you are too, man.
I really appreciate you talking about a subject that I just think a lot of people just don't know, and it scares them.
So I'm glad you were able to jump on, man.
And thank you so much for everything you do for me personally in our business here in Phoenix,
and as well as coming on here and giving back to my listeners, man.
I appreciate you.
Hey, pleasure.
Complete, complete honor, and I sure appreciate it.
Thank you for inviting me.
All right. All right, guys. Well, that is all we got today for this episode.
If you need to know more, you want to know more, go ahead and email info at the science of flipping dot com and we'll get all your questions answered. And if you are looking to, you know, be around the
right network and hang out with the right people and looking for that coaching and that mentorship,
again, email me at info at the science of flipping and I'll contact you personally to see
if you're a good fit. So, all right, that is all we got. Thank you for being great listeners. Go
out there and absolutely crush it. Be blessed and we will see you or talk to you on the next episode.
Thanks.