How to Close Profitable Real Estate Deals Remotely with Paul Lizell

Good morning and welcome, Wicked Smart listeners. Thanks for joining this week again. This is Chris Preeb, and my focus every week on the show, as you know, is to empower you in some shape, form, or fashion. If you are not taking action after these shows, it's nothing more than jibber jabber in your ears. I'd love to see you guys take action. I know I load it up every single week with 1, 2, 3, 4 things you could do, plus the things that come out of the interview with the guests. So let's make sure we are on that as a team, you and I. And if I can help you in any shape, form, or fashion, please go ahead and schedule a call with me personally. I've been putting this out just on the podcast. Go to smartrealestatecoach.com/chrisprecall. Okay. Okay. Buckle in here while we bring you the Wicked Smart Masters Class with Mr. Paul Lysel. Now, I've been on Paul's show and I believe he was on our show. If I look at my notes here, back in June-ish. Anyway, you can go ahead and search that. Paul's the founder of The Virtual Investor. I know that gets a lot of your guys' attention. The Flipping Out podcast is his podcast. That's a writer-downer. That's the show that I've been on. You want to go ahead and subscribe to that. He's also obviously a very active investor. He has REOauctionAcademy.com. Again, a writer-downer. REOauctionAcademy.com. He's been flipping property since '01, guys. And you know what I say when I have guests on this show, and this is why Paul's coming back on prior to '08. There is some serious history to get through '08 and to be thriving now like myself and so many others. And I try to almost every guest date it or look for people that predate rather the 2008 crash because it's important. It's important who you follow, who you associate with, who you listen to. There are just too many people out there floundering and having had some success. And I say that lightly, some success post-2008 crash. Okay. So I just want to again preface the quality of guests we have and preface you being super careful. Paul's actually bought and sold properties in 44 of the 50 states. Okay. So another little sort of tidbit or guide to help you. He contributes his success to utilizing systems and processes that simplify the online buying process. And I know that's a hot button for everyone. So again, ArielAuctionAcademy.com as we get ready for the next Wicked Smart Masters Class. All right, guys, I want to make sure I remind you about our QLS Live event. We've been hosting this thing since 2016 in a basement, and now we have a brand new facility in Boston, Massachusetts. This year, 2024, it's going to be September 23rd and 24th. That's a Monday and a Tuesday. Makes it easy for travel. It is literally right next to the airport. Go to smartrealestatecoach.com/QLSLIVE and use the coupon code PODCAST50. That's going to give you 50% off. I'll see you there. All right, Paul, with that as a little backdrop and background again about you, welcome back to the show.

Hey, thanks for having me, Chris. I appreciate it.

Yeah, I was looking through my notes. I think you were on, if I'm not mistaken, like in the, in the fall. But I'm like, okay, the virtual stuff's all anybody's inquired about in our community. We had an event last week virtually and everybody's like, can we do this virtual? Can we do a virtual? So I want to, I want to dive in here. Can you just, aside from them going back to the last episode, sort of give an up-to-date what you do, just 10,000-foot view, and then they can always go back to that episode too, and then we'll jump right in.

Absolutely. Be happy to. So we buy on online auctions and that would be on Hubzu or auction.com or Xome or Hudson and Marshall, RealtyBid.com, AuctionNetwork.com, and HUDHomeStore.com. Gov. We also include that as well. So we buy all over the country. We've bought in 44 out of 50 states. Now, obviously, the way things shifted and everything since post-COVID, there's been a lot of migration, right? A lot of people moved from the Northeast down to the, to the, to the South when they can with their jobs. So we've migrated more where we're buying to the Sunbelt and also certain other markets that have just been hot where there's just a lot of inventory for us to buy, like in Michigan. Oklahoma, Arkansas, some Louisiana, Texas. Always, we're always buying here in Florida, but Florida market has softened a bit here. There's more inventory than there has been over the past few years. So we're adjusting to that as well.

So I've just gone logically in my brain what they might be thinking, the wicked smart listener. So as you, as you go into new markets, I guess 2 things come to mind for me. One, how do you do it sort of blindly? Okay, I never went to this market. Is there any new system you have to set up or people are like, just Connect the dots there, and then I've got some follow-up to that maybe.

Sure. Ours is really simple, and I always try in everything I do in life, the KISS theory, right? Keep it simple, stupid. So when we're looking at properties in different markets, the first thing we utilize is Zillow. Zillow really does give good comps, very good up-to-date comps. So that's what we utilize to find out, do we think we have a deal? And if we think we have a deal, then our next step is to reach out to a local realtor. And when When I say local realtor, I don't mean a RE/MAX or Keller Williams or whether it's— we're looking for small mom-and-pop brokerages that have been there 30, 40 years, that really know the market, that are used to dealing with investors, that have a lot of contractors that they utilize. And they're our best resource. One, a lot of times this is surprising, but a lot of times we'll call on a property and they go, oh, we know somebody who used to own that, or we've sold that house before. So they're quite aware of the area. It's usually smaller towns that we're buying into, which helps. But these have been our best resources, and then they refer contractors to us. And so if we're rehabbing or doing some minor work to the property, they kind of manage it for us, right? For the commission, we try to get them involved on the buy side commission and the sell side commissions. They get a little bit extra in the deal because they're doing a little bit extra work, more than a normal realtor would. But in this market, I think Agents are much more willing to work just because there's not a lot of inventory, right? They're much more willing to work to get any deal just so they can continue to get some commission, especially within our settlement going on.

Yeah, I could see incentive for that, right? Clearly, you're reaching out to them, especially now in a time where realtors are dropping like flies. When I was a realtor, Paul, I used to say, oh great, I know this kind of market purges the market. I used to look forward to it. So yeah, that's awesome. And then talk about a little bit about do you shift markets, Paul? And I honestly, I'm asking because if we talked about this before in the past, I want to know how that's shifting now. In other words, our niche, we stay put, right?

Yep.

Do you guys shift on purpose as the market shifts and what kind of research do you do to get to that? I do.

And let me grab a paper real quick.

Yeah.

All right. So what I have in my hand here, you're not going to really be able to see it too well, but There's markets where there is increase in inventory and markets where there's decreased inventory. So the markets that surprisingly have the biggest increase in inventory are Kansas, Arkansas, Florida, Nebraska, Texas, Maine, Vermont, Mississippi, North Carolina, Alaska, and Hawaii. So we're still buying there, but not as much. So we're looking at where the inventory is down, which is Nevada. It's down almost 26%. It's Michigan, which is down 5%. Illinois surprisingly is down 5%. New York, which we won't touch anymore. We don't bother with New York. Washington, California's down a little bit, but we don't do a whole lot there. We've done some in West Virginia, which is down. New Jersey's down. Pennsylvania's down. So we're trying to focus on those markets. You guys are down up there in Boston. Boston market doesn't have much inventory, right? And that's a red-hot market right now. So we're trying to focus as many deals as we can get in those inventory-constricted markets. Because we know the inventory will fly off the shelf quick because there's just not that much. So we do shift that way for sure. If there's not a whole lot of inventory, we want to be in there. If we can get a deal that we know is a deal, we know we're going to move it really, really quickly. We had one in Minnesota, believe it or not, that we just listed. I had like 5 offers all over ask and we're in the midst of trying to figure out which one we're going to go with right now. But yeah.

Problem to have, right?

Great problem to have. And that's what we like, right? Because other markets are sitting in right now. I've got properties in Florida have been sitting 6, 7 months. And I keep doing price drops. So we're trying to avoid them as much as possible. So we're looking at the demographics, we look at Redfin for Altos Research, which is a great one to follow on YouTube. They give all updated numbers on these things too, and you got to be on top of them.

That's awesome. So before I forget, I always insert this. Tell the Wicked Spatulas how to reach you, Paul. Obviously, in addition to that website I gave at the beginning, but any and all connects you want them to know about. And then I want to talk a little bit about these exits again.

Sure, they can follow me on The Virtual Investor on YouTube. They can follow me, they can reach out to me on Facebook at just Paul Lysell and Instagram. I believe it's @PaulLysell. And I'm trying to remember some other resources. Those are probably the best ones to reach us.

They'll find you, right?

PaulLysell.com. Yeah. Yeah.

Awesome. Yeah. REOauctionAcademy.com. I put in the notes, I'll do it again at the end and I'll put it in the show notes rather. Paul, talk about your exit. You buy these things on from these different sites you mentioned at the beginning, virtually. You buy them all cash. How do you, you know, how do you advise and what's your exit?

So multiple different ways. We use a lot of private lenders, we use our own cash, and we use asset-based lenders such as Keyavi, LendingOne, Lima One Capital, and Dominion Financial. So those are asset-based lenders. We try to do as much as we can with private lenders just because our private lenders, the ones we utilize, will allow us to buy it and not make a payment to them until we close. And then we give them all, which is just way easier for cash flow, for managing, and not have to worry about all the different things. And they'll also lend us money on a rehab if we're rehabbing. We're trying not to rehab that much in this market. We're trying to just do the basics, make it nice, clean, and mortgageable. If it's easy to get it FHA financeable, we will. But we generally try not to do FHA because that 90-day seasoning period, which we don't want really deal with.

Yeah. So it sounds like at least now, and you can tell me if it's been forever and that you're planning going forward, you're buying these like that at the beginning and then you are just sprucing them up and flipping them, correct?

We're sprucing them up, flipping them, list them on the MLS where we get the most eyes on them and the most, the highest offers.

So what's the plan going forward? Like, do you see— are you feeling now any tightening of that? Or because you fish in the pond of low inventory, you don't— you see nice margins still? What's the plan over the next like 3 years?

So we're seeing really good margins too in those markets that we're playing in. And inventory on the auctions is slowly, steadily climbing from that foreclosure hiatus that the federal government had done during COVID So they're slowly, steadily going up, which is what we want. We don't want any huge uptick, right? I mean, that would devastate the market, bring more inventory, drop pricing. We don't want that. We want that slow, steady. We're good. I mean, we're fishing the whole entire United States, so we don't need to just look at one particular market. So we always find plenty. Our students are able to find plenty and we're rarely bidding against each other.

And what does your team look like? Because as you're talking about that, I'm thinking you never see a property then, essentially, right?

Never.

Which is great. I wanted these guys to hear that. So what does your team look like? You know, you and who and how does that operate to do all these around the country?

So myself and Michael on the educational side, and we also have an acquisition manager. Our acquisition manager is the one responsible that once we get, and also 2 VAs. So the VAs will scrub and look at these to make sure they are potential deals. Then they go to our acquisition manager where he does his due diligence, and then we get together, Michael and him get together, and then Michael and I get together to find out what our MAO, maximum allowable offer, is on these. And then it goes to auction and we start bidding. So we do have a pretty good tight process on it. It seems to be the best way to do it. There's always unknowns you run into when you're talking about anything with real estate and bank-owned.

Yeah.

So that's why we're trying to do less rehabbing, because sometimes you open up a wall and you got a whole new can of worms, right?

Yeah, that's why I talk about margins. Yeah, right on. 100%. Interesting, because it sounds like you've carved out a teeny bit of a niche. Do you see— back to my latter part of that question— do you see you guys changing any direction in the next couple of years? What do you see about the market and how does that affect you guys going forward?

We see the market being either flat or slightly up this year, especially if interest rates drop a bit. Then there'll be a little bit of spike in the price. I mean, you see a slow, steady increase in the price. We're, we're at the point where affordability is a big problem for most people. Right. So I don't know how much more we can go up, but hey, inflation is pushing everything up. So we see the market being kind of similar to what it is now, maybe a little bit more inventory growth over the next few years, which would be good, a little bit healthier of a market. We do buy from wholesalers as well. So what we're doing right now is working on increasing our wholesalers throughout different markets that we're pretty active in just so we have more additional inventory. But I'll tell you, most wholesalers out there have very unrealistic prices. They're trying to slap things up there at MLS pricing. We're telling them, can't do that. You don't have the ability to do that, right? We're not paying MLS price. We're buying it so we could put it on MLS. So it doesn't work for us. But some, some of these Newer investors will put out there and put good pricing out there and we buy them.

So you dropped a nugget there that I hope the listeners caught about affordability. I think the last, I don't know, I'll say 12-month window, but it's like the 3rd time in the last 50 years that there's been affordability problems. So you're nailing that. So for that reason, would you guys ever buy and hold? That's not even remotely in your strategy? No, we do.

So I do buy and hold. I've— and I've sold on Against my better wishes. So I have a 12-unit property in Casper, Wyoming that was going to be so expensive to refinance, meaning that the prepayment penalty was going to be so absorbent. And also the LTV, because it was Casper, Wyoming, they reduced from 80% to 65% because it's a smaller market. All these asset-based lenders really pulled back a bit. The interest rate was too high. So I'm like, you know what, I'm better off just selling this thing. There's a lot of buyers out there want to buy it. So I sold that against my will. I have a 5-unit running into the same issues again. I'm probably just going to flip that. And then what we're doing right now is working on a method called PadSplit, which we're doing here in Florida, where we're turning, say, a 4-bedroom, 3-bathroom, 2,000-square-foot home into an 8-bedroom, 3-bathroom, 2,000-square-foot home where we rent the rooms by the week. PadSplit, it's a newer company. I think they've been around for a few years, but it's really, really growing and they're in different markets. So we're starting to utilize that. And that's single-family housing with more multifamily-like income coming in.

Awesome. That's— yeah, I think last time we talked, you got my head around the pad split and I did some research. That's very interesting for the Wicked Smart listeners. If you haven't dug into that from the last, from the last episode, Paul, what am I not touching upon that you guys do that may put a nugget or two out to the, out to the Wicked Smart listener community here? What am I not hitting upon?

So we're looking for different types of properties now. We're kind of going into a specialty thing. And with— there's a company that sells container homes, which I've always been very interested in. They're very affordable and all done quickly in like 4 to 6 weeks. And there's also 3D-printed homes. So there's 2 different options that have both great for Florida, right? Because both meet the hurricane grade. I could build them up to make them flood grade. So I'm looking at properties that have a good bit of land. that I could potentially have the one house and then have another piece of land and build another property behind it there. So we're kind of going into morphing into highest and best use with a lot of these different properties and trying to find properties where we could really do a little bit more than just fix and flip a property on it.

I love it. And so that sounds like you guys are always cutting edge, it sounds like, but it also sounds like you're totally open to introducing new things to your team. You're not stuck in a in a runway or a rut, so to speak.

You always got to be forward-thinking and looking where it's going. And with affordability being a problem, these types of homes really solve that. You could do a studio home for $50,000, $40,000 with a container or the 3D-printed home. You could do a 3-bedroom for $150,000. So if I could buy a piece of land for $15,000, $20,000, put one of these on here, I'm all into it for, say, $200,000 with holding costs, with, you know, having to put a pad in and finish everything off. And if I could sell for $250,000, $300,000, yeah, there's, there's a, there's some pretty good margins there and it's pretty quick with how these things are able to be built.

So if these, if these guys want to go, because you educate on this too, obviously, right? I want to get that side a little bit.

Okay.

So as you're educating people, because I think it's important for these guys here, always you and I are both big on the mentoring and the coaching. What are some mistakes you've seen your students run into or repeat habits that you and I could look from a third party and go, man, if they would just do this. What are some stumbling blocks there that you wish that you could just solve, like, or that people would listen to you, right? Because you know the answer. Anything you think about?

Great question. Absolutely. And this is, I think, for anybody in real estate, let alone what we do with buying online auctions sight unseen. So they're relying too much on looking at pictures of this property, and these pictures could be 6 months, 12 months, 18 months, 2 years old. So you really need to get somebody out there. And what we've seen some of our students when they mess up is not get somebody out there to go take a look at the property, see what the condition is now, see if there's issues with it, see if it's occupied or vacant. That's the biggest issue they run into. And then they find out there's more repairs than they thought and the margins are much tighter. So that's why it's so important to do your due diligence as much as you can upfront so you don't run into these issues.

Right.

Because things change over time. When these things are vacant, they get beat up. These houses do over time. And for what? Maybe a roof wasn't leaking, but maybe it is now because of a storm ripped off a few shingles. The next thing you know, you got mold throughout the house.

Yeah, that's fun. Yeah, I've had that. I've had that. So, Paul, it sounds like no different from our community. If someone comes in your sort of education realm and they think they got it or they go, I don't want to bother Paul, like they could run astray. We have that happen all the time. And I go, why don't you just stay with us? That's why we're here. It sounds like you, you run into the same challenges.

Exactly. Exact same thing that you run into. I'm sure, you know, we have the same inventory, what we do, real estate, right? We're dealing with the same things. So we're going to have those same issues with it. Differences, a lot of you guys will do— I'm guessing a lot of them are wholesalers and fix and flippers, right? So they feel they got it and they're good and they move on and, and then they run into something they haven't seen. All they had to do was stay connected to you, right? And you could help. Hey, I could walk you through this. We can, we can help you with this. So that's where it's super important to always have mentors, right? People that you trust, people that have seen stuff you haven't seen before and can help you with it, right? That's super important. It's the most important thing. It's what's grown your group so much.

Yeah. So let's do an example here. Actually, when you said that, something came to mind. So I'll give you a sort of a horror story for a student. If they just had connected with us, then maybe you could think of one that you sort of either— we already got one. Okay, cool. So, so we had one in Maryland. For us, it was a student. And I'm going to make this long story short because we just cashed out of this. But they thought, yeah, I got it, or yeah, I don't want to bug Chris or the coaches. And then they got themselves so deep they couldn't afford the house. They put the wrong buyer in it. Everything went sideways because they didn't come in with us. We stepped up because one of our values, Paul, is all transactions of the highest integrity. And we knew if he backed out of the deal, the seller was going to get screwed, the bank was going to get screwed, and an investor that was in it. And I said, we can't do that. So we stepped in and said, we'll take it over. He consented because his hands are tied at this point. He waited too long and we cashed out of this thing on February 23rd at like, I think our payday 3 was like $317,000. All they had to do is stick with it and understand and put the right buyer in and listen to us. And they didn't. So that's a $300,000 lesson. And you said already that you have one in mind. So what was yours?

That's an expensive one right there. So ours was an example of what I was telling you before, not contacting an agent and getting boots on the ground to go look at a property. They went off a property, had pictures that were a couple of years old. When they finally bought the property, went in there, multiple things. One, the electric was off for too long, so they had to go get an inspection. When they did the inspection, they found out they need all new electric panel and electric, a lot of it on the inside as well. Roof was leaking, so there were issues there. It was a crack house, so there were needles all over the place. And I'm out. The kitchen was shot, even though it looked okay in the pictures. The bathroom was shot, the walls were shot, and it gets even worse. So then when you go to turn the water on, there's— it turns out that water was leaking between the house and the street. So then you had to dig everything up there, get the new lines put in, waste line, because I think it was all terracotta, which had collapsed too, and new water lines put in. So probably about $30,000 later, it's going to end up being about a $20-some-thousand loss for them.

So yeah.

Which should have been a nice gain. Should have been. But that's where you got to do some due diligence. The water thing, you couldn't— like, that's a surprise, right? You don't know.

Yeah.

You couldn't tell from the inside. It just was one of those things. It was just one thing on top of another, on top of another. But if they would have done due diligence, sent somebody in there, could have known, all right, I can't bid this high. My maximum allowable offer needs to be $25,000, $30,000 less than what it was. And that was where the issue arose.

You're going through those. Yeah, you're going through those kinks. I'm going, okay, each one of those I've been nailed with over the years. I'm going to make it a point. You and I tend to be similar in this respect, philosophy-wise, to kind of Share problems, share lessons so that people don't have to hit them.

Right.

You've been around for a while in the business. So for the Wicked Smart listeners to know when it's appropriate, every guest I'm going to be asking a similar question because I want you guys to hear it. Whereas most educators don't want to tell you because they don't think they're going to scare you. Paul and I want you to go, hey, this can and will happen. Why don't you be prepared for it? Right, Paul?

Yes. Always expect the worst and hope for the best. It's kind of one of the things— I mean, usually you're not— these are few and far between. Most properties go smoothly and are pretty good. But every once in a while you run into one of these and they're very, very frustrating. And they're frustrating enough that for a new investor, it could scare them off from continuing to invest.

Yeah. I'll give you another quick story. So my son-in-law, Zach, you know, he's a partner in the company and he came in new with me like in '15. His very first sub-2 deal that he tied up had a $30,000 to $32,000 headache with respect to lend. If that was his first deal and he was on his own, he would've been out of business, right? So it's super important you tie in with us and with Paul and the different communities, whatever your niche may be. So Paul, super cool to share war stories. If nothing else, maybe the next time I have you on, we just talk about war stories. That'd be good.

Absolutely. That was a key point where you said that first deal, usually when a first deal on a newbie, they're done. They usually, right? Most 9 out of 10 times. So the fact that he stuck with it and was working with you and you work your way around it and you figure it out, that's, that's what the community's for. That's where it helps and that's where people succeed.

Yeah, because if it was like, I forget who quoted it, but I'll say it in my word. Where it's any moron literally can build a business when the wind's on their back and everything's going great, right? It's these things that weed everybody else out and the 3% rise to the top. And that's where you kind of need to live.

Yeah. Yeah. So true. When tailwinds are going, everything's going good. But when the headwinds come, it changes everything.

Yeah. It's also what one of my students left me a message last week and called. He said, oh, this happened. And this, he said, but I had a character building day. So I love that, how he positioned it.

It's great. You got to love that. It is character building day, right? You know, teaching, you learn. You learn from your mistakes. You don't really learn from success. Success happens. You kind of just skirt right by and go through and go to the next one. You learn on those failures and that those failures are great lessons. Teach you, all right, I did this. This is what I did wrong. This is what I did wrong. Now, next time I got to make sure I don't repeat those same mistakes.

Love it. So, Paul, once again, mention how they can reach you because I want— if this is of interest, I know it is for a lot of people, the virtual, then I want them to get you. And then any other parting thoughts?

reoandauctionacademy.com, and they can follow us on thevirtualinvestor.com as well. Those are the 2 best ways. Parting thoughts, stick with it. Don't give up. Real estate is the most tax-advantaged, best asset business to be in, right? I'm into cryptos too. I love cryptos, but they aren't tax-advantaged at all, right? So real estate is the best, and there's so many different things you could do. Fix and flip, wholesale, buy and hold, owner financing. Just so many things out there that you can do. So get in there, find a great mentor, follow the program and do your due diligence and you'll be successful.

Great. And mention your podcast again, even though I did in the intro so they can subscribe to that.

Yep. That is Flip the Flipping Out Podcast with Paul Lysell.

Love it. Paul, thanks again for being on, buddy. I really appreciate it. And we can hang out again and talk about war stories next time you're on. Appreciate it.

Looking forward to it. Thank you.

Thank you, everybody. Yeah, you too. Okay, Wicked Smile listeners, that does wrap up our time together with Mr. Paul Luzzell. Reach out if you could be of any help whatsoever. And then I made myself a note here to make sure that I hammer home, even though it's probably in some of the prerecordings, that you get a chance to come to our QLS Live Event 2024. This is no small event, guys. It is action-packed. It is our team, it is our certified coaches. And it's the first time since 2016 that we're hosting it in Boston, Massachusetts, so as to enable you to get there a little bit easier. It's literally right away from the airport. Go to— I want to give you guys a 50% ticket. So go to smartrealestatecoach.com/QLSLIVE and then it'll populate with a full price ticket. Punch in the coupon code PODCAST50 for 50% off. There's your gift. Make it an outstanding week. Again, if you're listening to this on the podcast audio only, Jump over to YouTube and you'll get a little bit more insight, a little bit more entertainment, for lack of a better word. Make it a great week.

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