The Science of Flipping - Episode 58 – Justin Colby Interviews Kent Clothier | Real Estate Investing Podcast

Episode Date: January 27, 2015

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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 we have an incredibly special guest. One of my closest friends and mentors is on today, so I'm excited to get going with this episode. But before we do, if this is your first time to this podcast, I want you to get over to thescienceofflipping.com. I have my best-selling book on Amazon for free at thescienceofflipping.com. I have my best-selling book on Amazon for free at thescienceofflipping.com. This is the book that is currently selling on Amazon right now, and I'm giving it away for free to you. Just get over to thescienceofflipping.com. This podcast is all about

creating the systems and organization in your business to live your life by design. Live the life that you want to be living. And so my special guest today is one of the mentors that I've had for years and has become one of our best friends that has really ingrained this in us in our real estate business. And I really am enjoying the fact that he's on here. He's a busy man. So I want to bring on my friend, Kent Clother. How are you, buddy? Doing good, brother.

What's going on? Not a lot. Just working our business day to day. We got a couple deals in the works right now that our acquisition manager is running around. So I thought I'd take this time to get you on the phone and to let my listeners know how to start doing some reversible sales. So you thought you'd get me on the phone and just bug me. Yeah. You got a little free time on your hands. So come on, let's just, you know, let's go bug Kent.

I think that was the best move. I think it was the best. Yeah. I mean, you talk about a power move. I hear you. Go for it, brother. Yeah. So, hey, listen, you were the guy that put me in the mind frame of, you know, living your life by design. And we definitely, Eddie and I have definitely put that into our real estate business and specifically with wholesaling. It's even more specific with reverse wholesaling. I just want to jump right into the topic and really give my listeners as much time as I can get from you, which is hopefully more than five minutes. Let's start talking about reverse wholesaling and how you and your family have come up with this and, and what it's kind of meant to you to utilize this system. Yeah, absolutely. So, you know, I guess probably the best place to start as it relates

to reverse wholesaling is kind of where, where the concept came from, uh, and how it all relates to like what you said is, is living a life by design. It really boils down to a couple of things. The bottom line is that in order to live the life you want to live and have what you want to have, you've got to really value your time. You've got to decide what that time looks like and how you want to spend that time, whether that's like Eddie with his son or you running up and down the streets.

Oh, here we go. Or me with my family. I'm just playing. But my point is what do you really want to spend your time doing, right? And what really matters to you and family and getting out and living life and going on trips and creating moments, right? Moments that matter. And when you get really grounded in that, what you quickly realize is that what life isn't about is going off and wasting a bunch of time and doing a bunch of mundane tasks and doing a bunch of

stuff that, quite frankly, nobody that I know in the real estate industry likes doing, driving up and down the streets, knocking on doors, hanging door hangers or doing flyers or walking up to perfect strangers and trying to get them to sell you their house. Nobody likes any of that stuff. And if you do, check your head. I mean that's a really, really brutal way to make money in real estate. And so if you value your time and you want to spend your time doing as much as you can of the things that you love doing, then you have to remove the nonsense. And so reverse wholesaling is a concept that I came up with in another business many, many years ago. And it's the idea of just kind of starting with the end in mind. It's shopping versus selling. Here's what I mean is there's a

massive, massive opportunity out there, continues to be a massive opportunity in the market today, where literally there are hundreds of thousands of cash buyers that are actively buying in the market. They have been for the past seven years. They have been for the past 70 years, but definitely they have been very prevalent in the last seven years and only getting more. These guys and girls make up anywhere from 30% to 50% of the actual transactions happening in the market, which is kind of ironic when you think that most of us, when we think about buying real estate, we think about going to the bank and getting a mortgage and all that. And it's kind of alarming

when somebody puts a mirror up in front of your face and says, no, no, no, here's reality. What's really going on is that 50% of the deals in the market, 30% to 50%, are actually somebody just stroking a check. And so if somebody's stroking a check, they're buying a property as an investment. Very rarely does somebody stroke a check for their primary residence. So most people that buy or pay cash for a property, they're buying it as an investment, which means they want to buy more, which means they have something in mind they're trying to do. So the key here is go figure out what they have in mind and go shopping for it. These people have a predefined idea.

And if you don't want to waste a bunch of time driving up and down the streets and crossing your fingers and hoping you've got something under contract that somebody might want to buy, then just go work on building relationships with people who already have the money, already have the desire, already have the motivation. They're currently doing it. They're buying multiples. And all you want to do is become their best friend and help them buy more. And that is how you don't waste time. That's how you create a lot of revenue into your business. And that is how you start getting onto the good things and spending the time the way you want to spend it. Yeah. And I know you're, you're really big into marketing and that's one of your biggest expertise is finding

these people and marketing for these people. And in fact, uh, you know, you have an incredible software out there that actually can pull lists from County records and city records and records all over that are public access. But you actually have built a software that you can find these cash buyers who are actually stroking that check you're talking about, right? And I know specifically because I've been using it for years and it's very targeted, right? And that's the most important part about our business is let's not throw money away, right?

I mean, you can market anywhere, anytime and throw mud against the wall and just pray and cross your fingers it sticks, but let's get very targeted with our marketing, right? Wouldn't you agree? Well, yeah. I mean, again, think about it in these terms, right? It will always be easier to go find a property for a buyer than it is going to be to find a property or find a buyer for your property. So the way most people are taught, any book you go grab, right? Almost any traditional real estate book that's out there or any of these weekend seminars or whatever, they're going to teach you old, outdated ways to wholesale.

And wholesaling is simply the process of getting a property under contract at a discount and quickly flipping your interest in that property to someone else, right? And without really doing anything to the property. And so rather than go and try to get something under contract and hope and pray and cross your fingers and, you know, those sleepless nights, those gut-wrenching nights of trying to go out and find a buyer, how about you just eliminate that altogether? How about you just go and to the very people that are buying every single day, that are paying cash, that you can absolutely see proven statistically. This is the price they paid. This is the address they bought. This is the neighborhood it's in. I mean, verifiable data. Nobody just kind of blowing sunshine. I mean, this is the real data. I can see it all. I can engage those people, build relationships with those people. And then in turn, they point you in a direction and say, I want to buy five

more houses this year in the southeast part of, use your market as an example, Maricopa County. I want to pay $150,000 for each one of them. I want them to need less than $5,000 in rehab, and I want to be able to rent them for $1,800 a month. Well, you really have a very specific criteria at that point. And as an investor, life becomes infinitely easier if you know exactly what you're looking for. You become very targeted in everything you're doing. You're now moving with intention instead of kind of just wandering the streets trying to figure it out. Because now, if you know they want to pay $150,000, you know it's in the southeast part of the county, you know all these parameters, it's really straightforward.

You've got to be able to buy it cheaper than $150,000. I mean, it's that simple. People want to know, oh, Kent, what should I offer? What's the comps? I don't care. My buyer wants to pay $150,000. So if I want to make $10,000, the most I can pay is 140. And that solves that one problem that usually trips up most investors where they're, oh, you've seen the same way I've seen it. Paralysis through analysis.

They freak themselves out trying to get into all the minutia of what should I offer and crossing T's. When the reality of it is, it's a very simple business transaction. When you know exactly what your buyers want to pay, and if you want to make a $10,000 fee on it, then you now know what you have to pay. And if it doesn't fit in that box first, then it's not going to fit in the rest of the boxes. So it's got to get in that box first.

And then you can start going down the path of all the other stuff. You know, what repairs does it need, et cetera, et cetera, et cetera. But the bottom line is if you can't buy it with your profit in it then it's not even worth taking step two with and so these are all techniques to um and mindset if you will our our mind frames if you will to get you in a position where you're just not willing to waste time and as you alluded to, what we did over the years is, and everybody can still do this today, but you can go through the absolute brain damage

of walking down to your county clerk's office, county recorder's office, and you can go and find every real estate deal transaction that was recorded last week or last month, every real estate transaction in your county. And then you can turn around and try to match up against those real estate transactions every lien, mortgage that was recorded against any of those properties. And when you're done with that extremely arduous process, and like I said, brain damage and hours and hours and hours and hours, what you'll get on the other end of it is a list of properties where there was no mortgage recorded.

And if a mortgage wasn't recorded, then they paid cash. And from that list, you can kind of drop it into a spreadsheet and start building a marketing campaign, direct mail pieces and what have you and mail it to those people and start that process. We did that for years. It was our competitive advantage in our market. And then we decided to systematize that entire process and build software that would do that for us in any market in the United States. And then ultimately, we allowed other investors and other realtors to start buying that product, that data from us, as well with a lot of other data that we've now been able to compile. But that's how the

whole thing got started, right? We just needed it in our business to save us more time. Right, right. And I apologize, but I want all our listeners to know, and I would say all of our listeners do know who you are, but if you can put two minutes together about kind of your history and what you and your family have built there in Memphis, and now you're in Dallas and Houston and the numbers that you do, I want people to really understand why I brought Kent onto this podcast is really, you know, the Clothier family are no chumps, man. They are doing numbers that I would argue they are the biggest wholesaler in the nation. I think Kent even mentions that is Their numbers are huge. This is the exact system you and your family are using in not only Memphis, but Dallas and Houston. If you can take a moment or

two and describe what your family has built there in Memphis and Dallas and Houston, that would be awesome. I got involved in this business a little over 10 years ago. I guess it's almost 12 years ago. And I had been successful in a previous business where I was buying and selling groceries. I built a company with the help of many other people, built a company from nothing up to almost $2 billion a year down in Florida. Like I said, learned a lot in that process from the age of 17 to the time I was 30. And then had a run in and ultimately walked away from that company. And that started me down the path of real estate. I'm not going to tell you I didn't bang around for two or three years and have a lot of desperate times and some

really depressing times and kind of sleeping on people's couches and eating ramen noodles and all that kind of good stuff. But it was the worst of times when I was going through it. Now I look back and it was probably the best thing that ever happened to me going through those very, very difficult times. It was very humbling for me. And in those moments is when I got involved in real estate. I saw the same late night infomercials that they got involved in real estate. I saw the same late night infomercials that they run today. Well, they were running the same thing 12 years ago, baby. Uh, you know, make a million dollars, just come down, check it out. Three day seminar, you know, the whole thing. I went, I went through it. I got excited and it's very difficult for me

to, um, you know, without sounding like a hypocrite, it's very difficult for me to say that those training events are not worthwhile because I'm a product of it. I went through there. I went to the embassy suites in West Palm Beach, Florida, watched the guy talk about wholesaling. I'd never even heard of wholesaling. I had no idea you could buy a property or control a property without actually closing on it. So I went and down to the event, got excited, had a guy convince me that I needed to spend $1,000 on a wholesaling course, which after having millions of dollars in the bank, I was basically down to less than $5,000. And that was a pretty daunting task to spend $1,000 that I really didn't have. But I did it. And it changed my life, right? It was a fork in the road. I didn't know it then,

but it's certainly looking back now, it was absolutely a defining moment. I got involved. I understood. I've immersed myself in how to wholesale. I started buying and selling properties. And within my first 18 months, I bought and sold 91 houses and basically done about a million dollars in revenue and was on my way. I was hooked. I knew exactly how to do it. The challenge was the whole business, it wasn't really a business. It was me, right? I mean, I was the business. If I decided to take a vacation or whatever, then the whole business basically shut down. So to me, I made a decision that I

was going to start making it into a business and make it where it wasn't a job anymore. And so I really started bringing on systems and processes and people and leverage and ultimately now our business, as you alluded to, Memphis Invest, my family, we are in Memphis, Tennessee, Houston, Texas, and Dallas, Texas. We buy and sell roughly between 550 and 650 houses every year. We wholesale them to our clients. We handle rehabs. We are basically the largest turnkey provider in the country. We own one of the largest property management companies in the state of Tennessee.

We were recently, over the last two years, have been a Fortune or Inc. 500 company. So, I mean, for anybody that is a nonbeliever, I mean, I can tell you 12 years ago, I was about as desperate a situation as you can get. Fast forward 12 years, as you alluded to at the very day, and get to enjoy working with you guys and thousands of other clients and peers and people all over the country, right? And you get to change people's lives and show them how cool this business can really be. So don't ever discount the fact of whether something as trivial as getting started in wholesaling can't really have a profound impact on your life because I am a living testament that it can't.

Absolutely, man. I appreciate you putting together kind of the synopsis of where you came from. And I think we've all gone through those times and you know my story as good as anybody and sleeping on couches and not making any money and just jumping in both feet and starting with just doing it the wrong way, right? You know, doing it wrong enough. It sucks being broke, man. So what? I said it sucks being broke, right? Dude, it is the worst. Being broke is a great motivator. Yeah. Let me tell you about it. We, uh, we were ready, you know, we did it wrong enough, long enough, uh, to realize, you know realize we needed someone like yourself to straighten us out and jump right into the system. Guys, for everyone out there, and I just want to tell you, Ken, I really appreciate your time.

I know you're busy and you're jumping on another call. For all you listeners out there, everything we just talked about, about reverse wholesaling, finding your buyer first, becoming like a personal shopper, right? Talk to your buyer, find out exactly what they're looking for, the areas, the price, the square footage, what they will pay, how quickly they can act, do they want it rented or vacant, getting through that. We have all that for you guys. I can absolutely get you any type of scripts or anything that you would need because it's what we use in our business. Kent has built an incredible business around this. Memphis Invest is huge, possibly the largest wholesaler in the entire nation. We run our entire business here in Scottsdale, Arizona off of it. We currently are working on three deals right now. Flipping

to, I mean, it's the system that works, right? This whole podcast is about that system. So, brother, I appreciate it again, jumping on here. I appreciate your time. And I know I'll be talking to you here in the coming days. So, guys, that's about all we have. Hopefully you guys enjoyed this. Kent, thanks so much, man.

I appreciate it. Yeah, man, anytime. If you ever need me to come back, don't hesitate to ask. As you know, we love talking about how cool this business can be if people will just give themselves a chance to succeed. So always happy to do it, dude. Yeah, right on. Again, if you need that book, it's selling on Amazon.

I give it away for free. Go to thescienceofflipping.com, pick it up, and I will talk to you guys on the next podcast. Peace.