Orange County Real Estate Investor Network 👉 Livestream | Out Of State Investing With JD Kamala

Okay, again, my name is Joe Homs and I've been investing for over 40 years. I started when I was 20. I currently do mostly fix and flips right now. My team and I have about 20 flips that we're doing. Riverside, Los Angeles, San Bernardino. We've got 2 properties up in Big Bear that we're going to Airbnb. The desert we've been looking at as well.

Mike!

I'm not, I'm not too excited about buy-and-hold stuff, but if that's something you're thinking about doing here in California, it's really hard to do unless you kind of do an Airbnb Up in the mountains or you go out into the desert. And you should see some of these properties that people are buying for $150,000, $200,000. They're, you know, making it look gorgeous like a resort basically, putting pools in, just amazing stuff. And then literally they turn around and sell them a year or two later and I saw one the other day, they sold it for $800,000. So there's opportunities here in California, it's that you, you know, you have to kind of look, you have to find them. Okay, so we're going to go out of state. This month's speaker, JD, is a real estate investor that lives here in Irvine but conducts all of his business out of state in San Antonio, Texas. How old are you?

24.

He's 24 years old, okay? After graduating from the University of Southern California, JD worked at JPMorgan as an investment banker for the technology mergers and acquisitions team in San Francisco. Most notably, he was the lead analyst for Disney's $71 billion acquisition of 21st Century Fox. I hope you got a real big piece of that. I hope so. He also led strategic finance at the technology startup Acorn Where he helped raise over $105 million in funding. In June 2020, JD— wow, it's like a short period of time, you know. It's like in June 2020, he left the corporate world to begin his journey into real estate investing. And you did that like, you know, full, full— you quit.

Completely quit.

Completely quit. That's why he's here. That's what I met him about, what, a month ago? And I was so impressed because he wants to bring his business here to California. I think he should keep it over there, but, you know, that's another story. I was so impressed that I asked him to speak this month. In his spare time— you have spare time?

Mm-hmm.

JD moonlights as a career development mentor for aspiring high school and college students under his company, ProFreshMe. He is also a co-founder of Jet Speed Ventures, Which advises early-stage companies through their fundraising journey. He loves surfing in San Clemente, snowboarding in Mammoth, learning how to golf, and watching the Los Angeles Lakers. 24. Okay. Let me change mics here because we're— Stuff it in there like that.

It's a fake pocket here. I'll go in here.

Okay, that'll work too. Okay.

All right.

Welcome.

The first thing I'll say is, Joe, thank you so much for having me here. For those of you who haven't had a chance to speak with Joe yet, He's got such a wealth of knowledge, experience, and resources, and he's awesome. So if you haven't chatted with him yet, I'd highly recommend it. The second thing I'll say is I want this to be like an open discussion. I mean, just hearing some of the intros around the room, it seems like I have a pretty seasoned bunch of people here for the most part. So I'm one of you guys. I'm here learning. I'm here growing as much as I can. So I love this to be an open discussion. If you have questions, feel free to raise your hand. We'll chat about it, whatever. I just want to talk about my story a bit, why I decided to quit my corporate job, how I was able to do so, why I decided to invest out of state, San Antonio specifically, give some advice on how you guys can actionably, you know, invest, build the team, you know, do the financing, everything associated with out-of-state investing, and hopefully inspire since You know, like I said, I'm one of you guys. I was sitting in these chairs a month ago, 2 months ago. I'm sitting in these meetups all the time. So, you know, always a bunch to learn. But Joe kinda gave the intro about me. So I started, you know, very corporate path, you know, doing investment banking, you know, very grind type of work. You know, not super fulfilling, working a ton of hours, you know, making a decent amount of money. But I always had this bug For real estate. You know, my parents, they did a little bit of flipping casually. So when I was a kid, I was somewhat involved in what was going on. But I just did not like working for the man, you know? Like you said, that $71 billion deal, I got a thumbs up, a nice thank you email, and that was all. And I had put my blood, sweat, and tears into those models and into those presentations. So I decided to make a pivot towards real estate. You know, for a bunch of the reasons that you guys probably decided to do so also, you know, the cash flow, the lifestyle, etc. But for me, the journey started with just trying to buy my own house, right? I'm a younger guy. I was like, okay, hey, I'll buy a house. I have a decent job. Let's see what I can do. Started looking around Orange County, started looking in the high desert. I think someone said they were doing that. Riverside County. Nothing would pencil out and it would make sense. It felt like I was just pouring money into something Living in there and then actually building a liability for myself by having to pay this mortgage every month. That just wasn't making sense. So as I started digging into, you know, buying a house for myself, I was like, okay, where does it actually make sense? Where can I cash flow? Where can I get all these great benefits that people talk about for real estate? You know, obviously you can get them here, right? Joe and a bunch of you guys are doing so. But for my style of investing where I wanted to You know, do the BRRRR method. I read a book, I was like, hey, the BRRRR method, this is where it's at. Where could I do that? You know, so I partnered up with a buddy from high school of mine who we've been chatting about this for a little while. We made a spreadsheet, we looked at like 50 different markets across the US, you know, scattered across job growth, population growth, you know, what kind of major employers are there, what are the drivers, why might somebody want to live in this particular market? And is it growing, yes or no? After talking to a bunch of people, doing lots of data, kind of settled on San Antonio as the place that had really strong job growth, population growth, affordable housing, still cash flow, a bunch of these different factors that made a ton of sense. And at this point, I'm still working full-time at Acorns. I have a 9-to-5 job. I'm having to slip away. Parts of the day or after work to just do all this research. Decided to just fly out there one weekend, took a look at some of the different leads that we had, looking all on market at this point. Saw one that we liked, talked to the agent, put it under contract that weekend. Flew back, tried to get things going. And then COVID hit. A lot of things shut down, lending started getting a little scared. We weren't sure what was going to happen. So we decided at that point to pull out of that initial deal. It was a duplex. We pulled out of that deal, we forfeit our EMD, and then we were kind of back to square one. We were like, oh man, we kind of missed our shot here. But after that we were like, okay, we got a little taste of it. I think we can do this. Let's try to get direct-to-seller leads. Because you just hear rumbles, hey, direct-to-seller leads, that's the way to go. You get the best deals from the seller. So we just tried to do campaigns. We started cold calling. All day long I was just cold calling whenever I wasn't in meetings. Text messaging, sending mailers, going and put bandit signs out in San Antonio. Whatever it took to try to get these leads. But the problem was, like, we just didn't know what to do with them once we got them. Right? Had we been in a mentorship program or something of the like, we might be able to have actionably taken down some of these deals. But what that did help us with was underwriting. And the first step that I would recommend anybody trying to really get into this business would be just really underwrite and understand the market that you're looking at, the deals you're looking at, just so when something actually comes across your desk that makes sense, you know how to jump on it right away, right? At that point, I was underwriting, you know, dozens of deals a week. You know, by the time we actually bought our first one, you know, I underwrote probably 200, 300 different properties to the point where you can really get a good sense of a particular area or property just In a matter of seconds, you know. So after doing a little bit of wholesaling, my partner at the time actually got laid off from his job. And we were forced with a decision point. Are we going to stick with this corporate job that we've been working on? Or has COVID given us an opportunity to dive into something headfirst, give it everything we have, and see what happens? We took the latter. We took a shot. We were like, hey, Let's try to do this, see what we can do. Once we get some traction, I'll also quit my job and we'll both just run with it full-time. So we were trying this wholesaling thing. It wasn't super successful. We weren't able to get anything done. But we got confidence. We got education. We started to build out our network in San Antonio. And after that, we said, hey, you know, maybe we just buy a deal from wholesalers. You know, let's just figure out if If a deal makes sense, let's take it down and start building our experience that way. So we contacted a couple wholesalers, New Western. I don't know if you guys are familiar, but the very first deals we bought were from New Western. We started getting their email blasts. We were like, hey, this makes sense. We bought 3 in 1 week. We were like, all right, the numbers are making sense. We can cash flow this way, we can exit this way. Let's do it. We just jumped in, we bought 3 straight away. So that dive into real estate really just happened so Quickly, so organically. Right after we put those 3 under contract, I quit my job, and then we just started going for it. And mind you, like, I'm, you know, I was a corporate guy. I know nothing about real estate pretty much to this point. I don't know how to do the contracting. I don't know where to get the financing. I don't know how to do anything. Literally, like, where maybe some of you feel like you are today. But all of it kind of just started by doing, right? Like, one step at a time, we were able to say, hey, you know, we're starting with—

$1,000.

My partner and I started with $70K of capital amongst the two of us. That's it. We bought our first deals using hard money. Building out models just to figure out, does this make sense? Does this not make sense? So we used hard money for the financing. And then I just interviewed a bunch of GCs, had them walk all of our jobs, just figure out how to do the fascia, how to do the painting, what kind of value add do we want. And I wasn't super good at it at the beginning. I'm still not super great at it. Right? But the lesson of that point is like, you just gotta get it going. You just gotta try, try, try, get it going, get it going. And then eventually you'll kinda get one piece after another and then it kind of all starts to come together. So after doing those first initial deals, you know, we did up to this point like $4 million of deal value and we hold 10 cash flowing rentals in San Antonio. And after the first experience doing wholesaling, Sorry, buying it directly from wholesalers, we decided to take the operation ourselves. We were like, hey, the wholesalers are able to get these deals and sell it to us, why don't we just go to get them directly ourselves? So what we decided to do, and this is a really key point with out-of-state marketing as well, is you gotta have really good systems and processes of generating leads, right? In this business, in real estate, you are marketing, right? You're marketing for dollars, you're marketing for deals, you're marketing for tenants. All the time, that's what you're doing. So for us, we were able to develop a really powerful system through text messaging. Launch Control is the system that we use. So basically what it does, it can just send mass text messaging to owners out there. We just say, hey, you know, my name is JD, I'm a local investor, I, you know, I own property up the street from you. If you're ever interested in selling, please, you know, let me know, reach out, we can have a conversation. So just by function of doing that, building a good system, We were able to get so many different leads that turned into wholesale opportunities, that turned into flips, that turned into buy-and-hold rentals for us, turned into a whole bunch of different things. Yeah.

All right.

I don't know, questions after or jump in? Please. I want this to be a conversation.

So with the Launchpad?

Launch Control. Launch Control.

Okay. So I have experience with like Twilio and like building out like SMS lead generation. Yeah.

For the data that you put into it, where are you getting that?

Like, are you doing title leads? Like, where's the base data set?

We use PropStream. So I don't know if you guys are familiar with PropStream, but basically it's like a real estate data aggregator that you can type in the property address of anything and it'll spit out a rough value, some comps, it'll spit out the owner, mortgage history, transaction history. Everything is kind of housed in there. So what we do is we pull a list of, hey, absentee owners that own 50% of equity, or people who have owned this for 10, 20+ years, whatever kind of thing we're figuring out for the week. Who had their water bill shut off? Just random things. We pull a really big list, drop it into Launch Control, blast out text messaging to, you know, we can do hundreds in a matter of minutes. And then just the leads that come in, we just chat with them.

Hey.

You know, what are you looking to sell it for? What's the condition? Just build rapport as much as possible to the point where they're comfortable with you as a person, as an investor, and they're willing to trust you with selling the property to them, or you're buying the property from them. So the system is something that if you're trying to invest out of state is something that is, in my opinion, the most important thing to do, right? Because when you're out of state, you don't have control, right? Unless you live there and you can be hands-on, you You really gotta trust that the people that you put in place, the systems that you put in place, are effective enough to operate without you being there.

Right.

For us, what that meant was having the right team, right? Having a contractor that we trusted and that we could put on these jobs, but not putting everything to the contractor. Having a set of other eyes that can go there for us and who's incentivized to make sure that the contractor is, you know, on time with everything, taking pictures, showing us day to day what's going on. Just building out that process is super, super key. I guess I'll pause there if other people have questions too before I talk about financing and all these other things.

Yeah? Talking about the same system, how accurate is the system for PropStream? I know there's a bunch of them out there. Why choose that? And also, do you have VAs that does the acquisition? Or are you guys doing it yourself?

Yeah. PropStream's pretty good. It's not perfect. You know, there are leads out there that people are like, hey, I don't own this property, whatever. But when you're sending things in such mass quantity, it doesn't matter that much. And depending on what market you choose to go into, depending on how saturated it is, like San Antonio at this point, like there's a ton of investors out there. There's a ton of wholesalers out there trying to reach out. So you get people who are, can be upset at you, maybe they are— You know, they've, they're like, we've, I've talked to 10 of you guys, no worries. So it's really about building the rapport. But also just by reaching out, it's the timing too. Most of the leads that we get that are turned into contracts for us are ones that you just called somebody at the right time. They said, hey, you know, I wasn't gonna sell. People have reached out to me and I'm never selling. But today I just had an epiphany that I'm gonna sell. And then if you're the first person to call them, We can sign it up like that. Alright, like last week we had a deal, matter of half an hour, it went from first contact to a contract. Like it can, it can move very quickly if you can get the timing right.

You know, another good thing about text messaging too, their text messages live in their phone, no one really deletes their texts, and you may hear from them again like 6 months later and you can't lock them. It's like one of the best effective ways to land outbound deals.

Yeah, absolutely. Those drip campaigns, right? Super key. You know, we had a couple of deals this past couple of weeks, just drips. People who told us flat no before, and then you just hit them up again, and then hey, they want to do it for some reason. You know, no problem with that.

Do you use a VA or do you call yourself?

In the beginning, we were calling ourselves. Texting ourselves, but that quickly became too much to handle. So we now work with 2 VAs to help on the acquisition side. So what the VA does, the way it integrates into our system, we supply the leads, they, the VA sends out all the leads, kind of responds to the inquiries. Because it's pretty much the same conversation every time. No, I'm not interested in selling. Yes, I'm interested in selling, but at an outrageous price. What's the condition? It's like A script that you can give them. And then once the VA has qualified a lead, the VA will call our photographer who will walk the property on our behalf, take pictures, you know, look at how's the foundation, how's the roof, what's the tenant like, is it a good neighborhood, is it a bad neighborhood. Give us all the insight, the local insight that we can't have because we're in California. And then once a deal makes sense at that point, It then passes to my partner who, you know, gets on the phone and kind of closes things. But yeah, so we work with a couple of VAs in that regard. And they're extremely powerful. Like our VAs, $700 a month. It's like really not that bad and they will bring us a lot, a lot of value over time. So if you guys are thinking about scaling your business out of state, in state, VAs are a very, very powerful tool to do that. Very, very powerful.

Do you use like local companies or overseas? They use people in Vietnam— not Vietnam, we use people in Philippines.

Philippines.

Or they just— I, when I hear the recordings, it doesn't work.

Yeah, yeah, yeah. We use ones from the Philippines as well.

Whatever, didn't work with the accent. Sometimes the internet, it's a little lagging. Hello, hello, hello. After 30 seconds person hangs up and she says hello.

Oh wow.

You know, some difficulties in there.

Yeah, yeah, definitely. But you use people from here or from the Philippines? Both of them. Yeah, we've actually had decent success. I mean, we ramped them up maybe a month ago or so. So there's still growing pains, but we've been able to do a couple deals with them already too. So yeah, absolutely, absolutely. Uh, no, I think, uh, my partner manages them, but like 20 hours a week. Yeah, so it's not, it's not too bad. A virtual assistant.

Is it really virtual?

Is it a real person? It's a real person, uh, who will like help you do some tasks virtually.

And how come the, uh, the owner or seller, you know, that they like— how do you gain their trust? Why they decide to go with you but not with other agents?

That depends on you as an investor. If you're able to actively listen and try to solve whatever problems they have, then they're more willing to go with you. As an example, a deal we did last week, this woman called us and said, you know, hey, I got these solar panels that I owe $50,000 on, and I've got rental properties, you know, in different states all over the US. But I gotta pay off these solar panels next week, otherwise I, you know, whatever is gonna happen to them. She said, can you guys do something about that? And I said, yeah, we'll buy your property for $50,000, of course. And she said, oh wait, but also I wanna keep the tenants in there because it's a pretty good friend of mine who has, you know, some terminal illness. And the other investors I've been talking to, they wanna kick her out so they can, you know, rent up the place, so they can fix it up and rent it up, or whatever. But we told her, look, you know, it's not great cash flow but it's enough. And that we can make it work. We'll keep her in there, we'll give you your $50,000, and we can close on it next week. She went for it totally. Because we were actually adding a value to her life, right? She talked to all these other investors. People will give her that price, of course, but they don't wanna let the tenant in there. So just The ability to close deals directly with the seller, it's all about building the rapport. Just understanding what the need is.

How do they know that it's not a scam? It's actual, you know, it's not a fraud?

Yeah, no, that's a good question. A lot of times people, they think it's a scam. They think you're out to get them. They don't trust you. Why would they trust you? Well, the way we've been able to get around that as best as we can is by the experience and showing them, hey look, like I literally own a property down the street from you. With these specs, I know the area, I'm a local investor, I'm not just a, you know, a big corporate person. And you just gotta hope that they, you know, they kind of work with that. If not, move on. Nope, no problem at all.

With that property, was it a subject to or you just paid cash for it?

Just paid cash. Yeah, $50,000, it's probably worth $130,000 already as it is. So sometimes if you can get it right on the spot, like you can walk into a decent amount of equity. After those first few with wholesalers, the rest of them have been direct to seller for us, which has been amazing. With single-family, that's why it's so great sometimes. There's such inefficiency with pricing to where if you're in the right place in the right time, you can have deals with just crazy returns. Right? Like this one that we just bought, $50,000, we could cash-out refi right now, pull our cash out tax-free, have a cash-flowing rental. 30 years, it's paid off. It's crazy. Real estate, it's really crazy. I think you had a question.

Yeah, yeah. When you target these, the situation you mentioned, it's a non-owner occupied, right? Correct. Are you going mostly after owner, like which one are you focused on? Most of your deals are non-owner occupied? Like somebody who's got extra rentals or their only rental or something like that versus trying to convince the property owner themselves to move out?

Most of the time. But we run lots of different campaigns. So it, most of the time though. That's when people are less sensitive because it's less personal.

They don't have to move.

Exactly, they don't have to move.

Quick comment. VAs are there to help you warm up the lead. And especially if he's texting, they're probably just talking over the text and not so much in person, maybe a little bit in person. We hire VAs, the same thing. And then As far as trying to find out if you're legit or not, it's all about getting your systems in place. One of the systems that we have is we actually have a website that— because you know, from Russia, you know that everything on the internet is the truth, right? So you just give them that website and have them go on there and just read about you. I don't know if you have a website or not.

We do.

But just building credibility and I always tell people when you're first getting started, you know, go make some business cards for yourself. You know, just handing business cards out to people, everybody thinks that, yeah, well, this guy must know what he's doing. You know, he's giving me a business card, right? So same thing, just take that to the next level with the website and just act like you know what you're doing and you'll be fine.

Especially for a younger guy like me, like, it's Sometimes it's hard to build credibility with people, right? Even with you guys, maybe you see me, hey, this younger guy, what can he teach me, right? But it's really just about the presentation. You know, are you coming off as somebody who is knowledgeable, who is trustworthy, who can actually add value to your life? If so, then hey, maybe they're willing to work with you. As Joe mentioned, yeah, we have a website too. You know, we made some nice business cards. You know, sometimes I'll go out in a little polo and a little hat, you know, just to To make people feel comfortable that you know what you're doing. Which in some cases, the honest truth is I don't. If it's a new type of deal format that I've never done, I'm learning too. A new asset class, I'm learning too. But you just figure it out as you go.

One last comment, sorry, I just remembered because I'm old and I forget. On your solar deal, we buy solar deals and if they transfer it over to you in escrow, A lot of times the solar companies, like let's say on your $50,000 deal, they'll say if you want to buy it for $30,000, you can buy it for $30,000. So you might want to check that as you're transferring it over into your name. A lot of the solar companies will say, yeah, you can, you know, keep it and keep paying us, or if you want to just buy it out, we'll sell it to you for $30,000. We've done that.

Yeah, that's a great point. This one, the solar panel was for a separate rental that she had, so I don't know if it would, it would transfer in this case, but that, that's great insight. So 2 questions.

One, how often do you go out there? And 2 is, how did you, like, are you buying in the city or the suburb? And in your research, how did you determine which suburbs to go after?

Yeah, that's a great question. So when I first started getting familiar with San Antonio, I was out there for a couple months at a time. This was COVID, so people aren't traveling. I would just drive there, park out there for 2 months, you know, do whatever, and then come back. I did that maybe 2 or 3 times. And since I'm now very familiar with the market, the different suburbs and everything, I can go out there way less frequently. Maybe once a month, once every couple of months. I'm able to spend my time thinking about other projects, other asset classes and stuff, just because I put in that upfront knowledge. We buy in San Antonio, it's, you can think of it as a big circle, you know, with 4, maybe 4 different quadrants. We like to buy kind of in the northeast and northwest. west quadrants. And the way we were able to get comfortable with that as a market, we drove literally every single subdivision of that city. Literally every single one and took notes. The roads, they're cracked, we don't like them. The trees, they're overhanging, there's seeds everywhere. The fences are poor, there's graffiti on the wall, there's trash. You know, we really understood that local market just by function of being there. And with today's tech, like, you don't even Like, you don't even necessarily need to be there, right? You can do Google Maps, you can do all these different things and lean on people who are on the ground to give you insight. Hey, I noticed this about this part, that about that part. What do you like? What do you dislike? You can do it that way. But my recommendation, especially if you're trying to do something in a state that you didn't grow up there, you don't know anything about it, spend a week, spend 2 weeks, just drive around, talk, get out of the car and talk to people. You know, what's the good part of town, what's the bad part of town, they can tell you quickly, right? For everybody who's local here, I'm sure you know what's good and not good in like that, right? So just lean on people who have that experience, who have that market knowledge, and that, you know, that will really help you figure out, you know, where you want to be investing. But for us, it's like downtown-ish, northeast, northwest, everything along the I-35 corridor up to Austin. That's gravy right now. So we're just trying to follow where the growth is.

Kind of along with that idea, how did you narrow it down in the United States? Like, you'll hear about places like, oh, Ohio's hot right now, or Arizona, or whatever.

Then of course you narrow it down.

How did you end up in San Antonio? How did you literally go through that process?

We looked at like 50 markets, all of which we heard from people— Ohio, Florida, North Carolina, whatever.

Right.

We judged them all across the same metrics. So job growth, population growth, employers, education system, affordability, the safety, the crime. My partner and I, we split up half and half. We got on a call, we argued about all the different markets, what we liked and didn't like, and found that San Antonio had the best combo of everything. You got good cash flow, Good appreciation upside since it's a really growing city. Lots of infrastructure that they're building out there. It's the little baby brother to Austin which has been just a fantastic market for real estate. The thing for us is it's still super affordable. Right, like you can cash flow on a lot of deals. Which you're not seeing that in California, you're not seeing that in a lot of markets. Still close to home for us. 4 or 5 hour flight. Sunbelt, there's, you know, you don't get frozen pipes and stuff over the, in the wintertime. And then just by driving there, checking it out, having a good feel about it, talking to lots of agents, and then we were like, this is our place, let's just put everything we got here.

What about property taxes?

Property taxes are expensive in Texas, that's for sure.

Comparing to wherever you're making a Because I have my in-laws in New Jersey, New York.

Yeah.

And they do this, and I thought I'm gonna jump in with them. And then I figured whatever I'm gonna make from rent, I'm gonna give it property taxes. So somehow—

They're what, 3%?

About 3%.

Okay, but what are you paying for these properties?

Sub $150,000.

Yeah, so 3% of $150,000 is nothing.

Yeah.

You know, 3% of $1 million, that's serious. That's something.

Yeah, but 3% is affordable, but there is places, for example, Ohio, maybe like 6% or something. Illinois, it's around also. Like, there is places that it's high. Yeah, so that makes also a difference when it comes to—

Absolutely.

Thinking at renting, at least.

Absolutely. Um, and for us We will only look to hold a rental if we can be cash flow positive after baking in the taxes, the interest, assumptions for vacancy, assumptions for regular repairs, CapEx requirement. If we can be still cash flowing maybe $100, $200 after that, no issues from us. Yes, sir?

Are you not looking at KRB because you're gonna hold those properties so you don't really care to sell them? How much equity is involved in it?

We absolutely look at the ARV.

Absolutely.

Because we wanna cash out refinance.

No, I'm saying like how much equity would have to be in the deal for you in order to purchase the house?

We have no like hard set percentage. Some people are like, oh, I want 65%, 70%. We just, we wanna make sure that our criteria is this. We're cash flowing if it's a rental. We're cash flowing at least $100 and we're leaving less than $10K in that deal at the end of the day. And most of the time if you can buy a deal with that criteria, you're probably buying 60% ARV, 50% ARV. But we've been blessed that a majority of our deals up to this point have been like just full cash outs. Like, we've just been really blessed and have a good acquisition pipeline that we've been able to do that. Just one quick example is, And it did, like the solar deal I talked about. A couple months back we bought a townhome, $80,000 direct to seller. We literally did nothing to it. It was already rented, rented for $1,220. We literally did nothing to it. Got an appraisal, $133,000. Full cash-out refinance, cash flowing rental, just like that. So really in real estate the magic is just in setting up a powerful funnel that allows you to sift through so many deals. And pick out the gems from them. Maybe it sounds easy, but it's like not easy at all. I'm not— I don't want to understate that. It's a very arduous process, which is why we've looped in VAs and team members to help take that load off. But yeah, we have no hard set percentage, just that's kind of the rough criteria we go with. Yeah.

Do you hire contractors to repair there, or you have your own?

We hire.

Yeah.

Contractors, I will say, is like the toughest part of the business to manage, especially when you're out of state. And especially when you don't grow up with a contracting background. Like I don't know construction very well at that point. So it's, you have to hire, you have to vet a lot of contractors, you have to go through the pain of some not pulling through on their word, on some not doing great jobs, of some just But how do you control them? How do you check that the contract is done the way that you want it or not done? Yeah, that's great. Number one, you gotta give contracts with them. You gotta make sure that, hey, this is the timeline, this is the expected product right here, you gotta adhere to that. Number 2, we put some checks and balances. We got photographers who will go out there every time a phase is done to take pictures, to analyze things, to make sure that, hey, what the contractor said is done is actually done and operational. And then if we're selling the property, we'll loop in our agent too, who will come walk through the property with a very fine-tooth comb from the buyer, the end buyer's perspective to just make sure that, hey, you know, everything is actually up to par. So, since we're not there, we're lucky that we have good team members to control the process as much as possible. But, you know, we'll talk to them all the time. We'll fly out there. We'll check on the work ourselves. But if we're not there, we gotta have the team members to handle that. 'Cause if not, that's where things will go wrong. And has gone wrong. Has definitely.

Do you just have one property management team up here that handles your deals after the fact?

We have a couple. Mostly to try them out, to just see who we'd like to build a long-term, more long-term relationship with. So right now we're working with 2 of them. At most we've worked with 3 at one time. Because that's another element where people will say, hey, if you have bad property management that could make or break a deal for you. Some of them we self-manage, but I definitely recommend to offload that as quickly as you can if you're trying to be in this business. Because property management is probably the highest input, lowest output aspects of this business. Like I would spend a whole week trying to find the best tenant when I could just have somebody do that for me. But hey, you know, it's a great tenant, no issues. I wouldn't have time to do other things.

Yeah. Are you only going after single-family residences in San Antonio? Or are you also going after 2 to 4 or maybe commercial properties?

Going after it all. The lowest barrier to entry is the single families. So that's where we started. But quickly we went into duplexes, fourplexes, 8-plexes, you know, whatever deal we can get. One of the bigger ones we've done to this point Personally, just my partner and I, we did this 8-unit deal where direct to seller, we just, you know, someone that we've been working with for a little while, building rapport for like over a year to try to get like one 8-unit property from them. Finally got under contract and the market was just so incredibly hot that we were able to assign that contract and get our same returns that we projected over the 5-year hold period. So to answer your question, like, yeah, just, just whatever it takes, honestly. But right now we're kind of looking into development stuff, which I talked to Joe about, trying to do some development potentially, maybe in the high desert, maybe thinking about some self-storage, thinking about value-add multifamily in San Antonio and wherever. So it's honestly just trying to be a sponge and learning all the different asset classes out there, because there's a ton out there that you can really make money with.

How do you defer rent if you don't have a W-2 job?

You get a non-qualified mortgage, non-QM lending. It's an asset-based loan which basically, it's an asset-based loan which basically the lender's gonna say, hey, is your debt service coverage ratio, basically will the rents cover up to like about like 1.2, 1.25x of the payment? If so, it doesn't matter if you don't have a W-2. We'll rent it to you, or we'll lend to you. The rates are typically, at least in San Antonio, about 5.5%. So it's more pricey. But when the property size is, you know, $100,000, the loan is $100,000 and your rent is like $1,200, there's no issue with that.

So— Can you take an interest-only option on those?

Not on those. Not on those. The fixed 30-year fix? No. But when we purchase properties, We'll either bring our cash or we'll use hard money, which if you guys don't know what hard money is, it's basically short-term bridge financing. It serves as cash so you can close on deals in a week, 2 weeks, very short amount of time. But when you're first starting out, it's very expensive to get this loan and very risky. We're paying 3 acquisition points, so 3% of the loan balance as a fee, and then also 12% interest, that one is interest only. 12% interest. But you can refinance out in 3 months, in 6 months. So taking a step back, the structure that we use to purchase some of these deals, we'll find the property off market, we'll buy them with hard money or cash, we'll either fix up the property or if it's already stabilized, we'll just look to cash out refinance. We have a lender that can do it with only 3 months of seasoning. So we can be in and out of these deals, pull all our cash out like that. Right? Because like I said, my partner and I started with only $70,000 of our own money in the business. And we've been able to cycle cash, cycle cash, cycle cash through so many different deals to the point where we've been able to do like over $4 million of value now and hold 10 rentals. Just from the initial $70K. So it really is like, can you figure out the financing? Can you buy great deals? Can you put in the right team members to make it work? And if so, you can make a good amount of money in this business.

So it's 4 years, you started like a year back?

I started in April of 2020 and I quit my job in June of 2020.

I see. And then—

No, it's all good. That's all good. Other questions about that process?

Are you licensed in Texas or not?

As a real estate agent? No, I'm not licensed. I found like to be positives and negatives about that. Obviously the positive is we can list it ourselves, save on the commission. The negative is we have to disclose a little more. Positive is we get MLS access, which is great. But since we're buying off-market, we haven't had a need to do that quite yet.

Yeah.

I think you had a question about that.

Yeah, you mentioned like the team on the ground is really important. How did you find that, I guess? Like, yeah, because it's not just the GC, you've got like, I guess, even a photographer. I'm sure you have somebody else you can rely on. What do you— how'd you find that network, I guess?

That's a great question. Yeah. Like, I'll just put them out there: lender, contractor, insurance, you know, different brokers, photographers, you know, different tradesmen, electricians, plumbers, whatever. You find it all, number one, by referrals. Number two, like Facebook and Yelp and stuff. Like, you just start somewhere, wherever you can start. You're gonna deal with the black sheep sometimes, but just by function of Talking to somebody, having a conversation, having them bid, you will slowly start to figure out who's good and who's not. So it's honestly just by getting out there and doing it. Like, I would just literally Google electrician San Antonio Yelp sometimes when I first started, and I would just pick up the phone and call whoever's there, have them come out and bid it. Do I like them? Great. I'll start looping them in more. By the time you build relationships, you have 2 or 3 of those types of tradesmen you can call. Have them bid against each other and then just start building it that way.

And nowadays, do you go and see every deal in person or do you trust the photographer that like what you see, you feel good about it? Like you've got enough margin there that if something unforeseen happens, it's still gonna work out? Like how do you trust it now, I guess?

Absolutely.

It's almost sight unseen.

Some properties that I've never even stepped foot in some of them. Like I bought it, had contractors go in there, have new tenants in there. I've never stepped foot in there. The reason I'm able to trust out of state is because I put in the legwork underwriting. Like I know, hey, if I'm buying this price, I'm buying a property in this area at this price, it will be a good deal unless something catastrophic happens, right? So you start to trust yourself and your judgment just by a function of doing it so many times. I mentioned this earlier, but it gets to the point where you can see a zip code, you can see a couple of pictures of the property and the price, and you know, okay, this should work or this shouldn't work. You'll be able to figure that out just by doing it dozens and dozens and dozens of times. So for those people in here who said they were wholesaling or you're starting with wholesaling, it's honestly such a great way To underwrite deals quickly, it's like such a great way to learn how to put the deal to find the deal to put it together to do everything pretty much except finance it and purchase it. But everything else, like those reps are just so so incredibly valuable. Like you really will understand a pocket of a certain town you're in by talking to sellers because they have good insight. Hey, you know, like my neighbor is this whatever that the school is loud. You know, hey, we have in San Antonio. We have Air Force bases, they do graduations every Friday. So Airbnbs are great over here. You know, like you get those little nuggets just by function of doing, doing, doing. So like none of this in this business is hard, to be completely frank. It's not difficult. It's just you gotta put yourself out there and be willing to do stuff that you don't know how to do. Like for me, every day, like I just, I don't know how to do a lot of the stuff that I'm trying to work on now, but it's just a matter of Putting yourself out there and you figure it out. You figure it out. That's great.

You never worked with an agent when you started? So you started with wholesale and then you went with the other kind of text messaging and stuff like that, right?

That's right. Well, in the very beginning I worked with an agent just to look at deals. I put a duplex under contract with an agent in the very beginning. We didn't follow through. And then we tried to do it ourselves, direct to seller. And then at that point we never needed to work with an agent to buy a property.

So it's not too hard, right, to do what the agent is doing?

It's actually pretty hard, to be honest. Yeah, I'll give it to agents, man. Like there are some really complex situations that they gotta handle. You know, I'm blessed that I have some good agents in, you know, my quiver of team members that they can help Step in when you need that insight.

They're good.

They're good.

If you're going on market, you can work with, you can try to negotiate directly with the seller. But on the sell side for me, I definitely lean on my agents because they are just rock solid at pitching the property, staging it super well, answering complex questions from people. So definitely I will lean on them. But on the acquisition side? If you can figure out how to buy it yourself, yeah, just, if you're comfortable, do it.

So your agent doesn't receive 3%, I guess, right?

On the sell side, yeah. On the sell side they do.

Yeah.

But on the buy side, no, there's no agent. Me and the seller directly. Yeah. Let's see. Team members, financing, got started. What other questions can I answer about out of state or anything like that?

Do you do any seller finance? Offers subject to?

We haven't.

Like low cost, low value?

Yeah, we've pitched them to people. We haven't had great success with that. Maybe my pitch isn't great, but people like to see the cold hard cash. Like if it's $50K that you're buying, if I try to owner finance that, I don't wanna, it's like, what's the point in that case? There are lots of deals that we could probably be getting if we employed those tactics. But for us, we've had success just doing the hard money or doing the cash with the certain types of buyers that were the sellers that we're looking for.

Do you do what's the percentage of people filling out a form on your website versus just getting a phone call? Is there people like you have a Google AdWords or like SEO? Is there people That goes to your website with a lot of more interest in selling?

We don't have like an SEO wholesale website. Our website is more for raising money and doing multifamily investing. It's like more that type of website. So all the leads that we get off market are texting, cold texting essentially. That's pretty much all of them.

So you don't do cold calling?

We used to, we don't anymore. I think the gentleman in the back, like, was it Curly? Curly, yeah. The text messaging is super powerful, right? Because, I mean, how many spam calls do you guys get a day, right? Like, I get at least 5. So if someone's calling me, I'm not picking it up. But if someone's texting me, oh, I'll take a look, you know.

Google Ads and Facebook marketing. I use PropStream as well. When you print out that PropStream sheet, it has all the emails in there that you can dump into a contact list in Facebook. And if they have an email, if they have an email or a cell phone, it'll plug them in and you can market to them. That's a hack for it.

Yeah, that's a great point. For some of the deals that we don't want to keep for ourselves, like we'll wholesale them out. And we built out like a nice buyers list of people. We just use MailChimp, scrape leads from Facebook, from other wholesalers, add them all to this list. We have a deal we want to sell, we'll just blast it out to everybody, post it on Facebook, and most of the time we're able to get somebody who kind of wants to take it under contract.

So after you get an interest on the text message, From the seller, the VA calls the seller? Who communicates with the seller over the phone?

The first touchpoint will be texting, that's one VA. We're looping in another VA to handle that initial touchpoint just to schedule a meeting. Like to get a general sense, hey, is this person actually interested in selling? If so, okay, we'll send the photographer out there. And then if the photographer goes out there, pictures are good, Both VAs have had their touchpoints, then my partner comes in and he closes the deal.

Yeah.

So the first touchpoint is from a VA, but after that it's, you know, the first and second, and then after that it's us making sure things go smoothly.

Yeah. So you mentioned you and your partner are both doing this full-time.

Yes, sir.

So are you kind of funding your living by flipping or from the cash flow or both?

That's a great question also. My philosophy in business in general, but real estate specifically, you gotta have 2 sides of it. You gotta have your active income and you gotta have your passive income, right? For us, the wholesaling, the flipping, that's our active income. That gives us more short-term capital, short-term capital, which we then use to park in our long-term holds, right? These are our rentals, these are our multifamily, these are, you know, whatever, self-storage, whole development, whatever. But you gotta have the active and the passive. So right now, since we're both doing this full-time, Pretty much the wholesaling and flipping is what's keeping us afloat. And I guess we have lots of, a decent amount of cash flow coming from our rentals. But I think more of that is offsetting our operating expenses than actually paying us. Because you gotta invest in the systems, right? I've mentioned PropStream, I've mentioned Launch Control, Zapier, Zendesk. Like there's a bunch of different tools that you're gonna use.

EAs.

VAs, yeah, exactly. And you know, that rental income is what's paying for that and then all the flips and stuff, that's net to us.

What's the average price for the properties you go for?

Probably about $100,000 to $200,000. Yeah, they're way cheaper out in San Antonio. It's crazy.

You can't get a garage here for $100,000.

Not even. Yeah, not even. Yeah, but out there, that's why one of the huge things about out of state, you know, it's like you can find great places that have good growth, good upside, but it's still affordable, right? Like San Antonio, if you had $500,000 to buy a house, you're gonna live like a king. You know, like you don't— $150,000, I'm in like a solid 3-bed, 2-bath, 1,400 square feet in a good part of town, good school district. So it's—

Wow.

Yeah, it's crazy.

Is it, in San Antonio market, is it like 2 bedrooms, 3 bedrooms, 4 bedrooms, 5 bedrooms, or mansions? Like what's the good size from your experience?

Typically 3-bed, 1-bath, 3-bed, 2-bath. About 1,000 to 1,200 square feet. That's a good price point where you can be cash flowing and still have some good deals at that price point.

How do you sign the property? Like, do you create like a separate LLC for each individual property or you like—

Yeah, I have, I don't do it for an individual property, especially because I'm California-based. I gotta pay $800 franchise tax per entity that I create. We have 2 entities, one for the active side of the business, flipping, wholesaling, one for the passive side which is just holding rentals. So just 2 of them.

But can you open the LLC over in Texas or you have to open it over in California?

We've incorporated in Texas but my place of business is California since I domicile here, I live here. So I have to pay that franchise tax. Yeah, they get you. Yes sir.

What type of returns and terms do you offer your investors?

It depends on the type of investing. If it's private money debt, You know, we've had some investors at like 6% annualized, some at 10%. For syndication stuff, we haven't actually executed on like a multifamily syndication quite yet. But the way I've been angling that is like 80/20 GP-LP split, 3% acquisition fee, nothing else. So keep the alignment of interest, or keep the interest as aligned as much as possible. But still an evolving process. You know, like I'm hopefully gonna be able to syndicate for maybe a self-storage deal or multifamily deal, but it depends. Yeah. But in terms of financing, that's a really key thing to scale in this business as well, right? You hear it a million times, OPM, other people's money. But it's really true, right? If you can leverage other people's money in order to do a deal, like The deal that you've created for yourself is essentially free to you, right? So by using private money debt, like 6% money for example, if you can get $200,000, like you can recycle that capital a crazy amount of times until you can grow your little thing, your little nest egg to much more. And investors, that's a whole nother thing. But, you know, dealing with investors, it's really just about Keeping the communication good, making sure that they're aware of everything that's going on, being fully transparent, always being proactive with, if anything, good or bad, being proactive about it. You never want them calling you saying, hey, I've got no update, what's going on with the property? You always want to be proactive. Hey, this is what's happening. Always do what you say you're going to do. And investors, if you can deliver on your project, investors will keep coming, word will spread, and things can kind of Go on after that. So the hope is, you know, once we're actually able to take on a larger-scale project, which we're actively looking to do, I can just make a few phone calls and then hopefully the deal's funded. That's the hope, yeah. How much is the rent for a house of $100,000 there? Depends on the pocket of town, but typically it'll be about $1,000 to $1,200 a month.

Wow.

Yeah, so it can actually be quite lucrative. And San Antonio has good like public sector stuff. So there's like the Section 8 over there is called SAHA, San Antonio Housing Authority, where they subsidize a portion of the rent. So if you're in some of the less good pockets of town, you can kind of hedge your, like your risk of the tenant not paying by going through one of these programs. I don't know if that makes sense or not. But basically, $1,000 to $1,200 a month and you can subsidize some of the tenant's portion using government programs.

Have you ever had to do an eviction?

We actually haven't. No, we've been fortunate with the tenants that we've put in place and the systems we've put in place to avoid that. But if we did have to do an eviction, luckily Texas is one of the most landlord-friendly states. So as long as they're not backed up, we should be able to execute that in about a month or so. But just finding good tenants, screening them properly, talking to them as people, understanding, you know, why are they coming here, what's the situation, rather than just not paying, like, they'll be much more willing to work with you. We've had instances where, you know, we'll do different payment schedules for people, especially through COVID. But if you treat your— we don't even like to call them tenants, we like to call them residents. If you treat your residents with respect and dignity, then they will, you know, they will return the favor. They'll make sure that, you know, they're taking care of you because they like living in your property.

Does the management company screen them or you have a certain— that you go through, how you screen them?

Yeah, now our property management screens them. But when we were doing it, we would look for 3 times gross income to rent. We would look for at least a 600 credit score. We would look for, there's one other thing slipping my mind. But yeah, we would have our criteria that we wanna make sure that every person meets. Oh, no evictions or felonies. Yeah, none of that stuff. And if you're able to screen effectively, then your tenants, you take care of them, they'll take care of you.

You do video?

Through video or? In some cases, yes. I've only done that a couple of times. Mostly just call or just an in-person meeting. That's once they're like through the process already. As in like they've already been meeting the basic qualifications and everything. Like we're not having a conversation with every single person. Just if they've met the basic criteria, they've already applied, and it's just a matter of us accepting, then we'll take that step and make sure, you know, What's the story, what's going on, etc.

How do you show the property? You're not there, like you hire somebody to show the property?

Yeah. If the property management company will take care of it now, but if not, yeah, we will hire somebody to facilitate showings and stuff.

Which property management?

Which property management? We use what's called Rental Property Professionals.

Do you do—

are you trying to do some business in San Antonio?

Yeah.

Oh yeah, yeah, I'm happy to refer you. To whoever you need. Yeah, but Rental Property Pros, Janice Lozano, she'll take care of you. She's really solid.

What CRM system do you use?

Sorry?

What CRM system?

We use Zendesk. Yeah, we thought about Salesforce. It's expensive. And I frankly, it seemed way too complicated for what we needed. Zendesk is just exactly what we need. And like, we can make calls and texts and everything through there. So every time I talk to a resident or a tenant, Or sorry, a resident or like a contractor or somebody, I do it through Zendesk and then Zendesk records the call too. So I always have log of whatever I need. So it's really helpful.

Do you use API for the text messaging?

Yes, we use LaunchControl. We have Zapier, which is like the bridge, the joint. LaunchControl leads push through Zapier into Zendesk. Use Zendesk to push people down the funnel, right? Contracted, closed. You know, under construction, sold, rented, whatever. Yeah, that's all.

What if a seller texts you back after a few hours? Let's say like 2 or 3 hours. You know, it's important to actually respond right away. And your VAs don't work full-time, so is there a gap in time?

Sometimes. Yeah, sometimes. And I mean, I'm sure we've lost deals by not being immediately responsive. But the trade-off there is sanity. You know, we used to be doing it ourselves and, you know, I don't want to be responding to people at like 10 PM or something. Which I would be in the beginning, but it's like, you know, if you can have a team member help you out or do it the next morning, then, you know, it's usually okay.

What's the learning tool that you use?

Learning tool?

Books or, you know, videos or?

Books, podcasts, coming to meetups like this, just talking to other investors. Because everyone here seems like is doing something in the business, right? It's like everyone can share knowledge in some regard. But books, podcasts, lots of mentors, talking to people, and then just doing it, man. Honestly, just getting out there and not being afraid to just take some action. Because that's really the best learning. I can read however many books I want. But no matter what, I don't know how to manage a contractor unless I do it. Like, I don't know what to do if my pipe bursts the day before sale unless I do it. Like, you just, you'll figure it out as you go.

Is there any like book you can recommend? Like one, all of the books?

Oof, depends on what stage of investing you're looking for. But a beginning phase, the BiggerPockets BRRRR book is actually Pretty good as a, as like a primer. So I'd recommend that one. But as an overall like business book, it's not even related to real estate, but like The One Thing. I don't know if you guys have read that book, but it's, it's a really quality book that basically says if you want to accomplish whatever in life, in real estate in my case, you focus on the one thing that is the most important thing to that business. You focus on that first. And if you take that approach to anything in real estate or in life, I really feel like You can get there. And just podcasts. You know, when you're driving, you're walking the dogs, whatever, just soaking in knowledge as much as you can. Yeah, just being a sponge.

Was your one thing the underwriting?

Yeah, it was in the beginning. It kind of changes over time. But in the beginning it was the underwriting, and then it was building the confidence to actually put something under contract. And then it was managing the construction. Then there was a point it was raising money. Right now for me, my one thing is educating myself on self-storage. Just because I feel like that's an asset class that I would like to understand more and see if I can actually do something about that. But yeah, just focusing on that, that one thing that you think is gonna take your business the furthest. Do that. Whatever that is.

Is there a reason why— so you mentioned you're doing like the BRRRR method where you're buying, refinancing, cashing out to buy another property. After you cash out, you mentioned that you steer away from interest-only loans, which would like generate more cash flow. Is there a reason why you want to pay the principal down, or what's your philosophy on that?

The philosophy is I want to get just 30-year fixed loans that I'm still cash flowing on it even, like, if I'm cash flowing $50 or $150, that doesn't really matter too much for me. As long as I'm positive and I'm paying down this mortgage over the 30 years and I've left less than $10,000 or I'm pulling it all out, like, I don't really care about those small returns. I think the 30-year fixed, especially in the interest rate environment we've been in, which is slowly changing, it's— there's no issue with that. I don't know if that answers your question or not, but yeah, like, I don't really care if I'm getting incremental cash flow. I'd rather just put myself in a position to start continue building up that equity over time. So like a 10-year IO that was 30-year fixed would be like We have looked at that in some cases, but for us, we just don't have a need to since we can still cash flow a couple hundred a month and pay off, pay down the principal and not have to worry about a term coming up or anything like that. So, not a huge deal. But for commercial and other assets like that, absolutely, we would have to factor that in for the cash flow, 100%.

Yeah. The new constructions, in, let's say, San Antonio and Austin and the 35, let's say, the Road 35 in Phoenix, is that it's booming. It's like, it's a huge right now. And what do you think about, like, it's like, very soon there will be lots of new buildings and the price will go down. I mean, do you think that the price will go down?

I can't speak about other markets, but in San Antonio, I don't think so. The housing supply has been sub-2 months, and like a million people are supposed to move there over the next decade, which is a lot of people. So I see no issue with it. I don't think it'll compress prices. Because I mean, if you can buy a nice 3/2 single-family in a good neighborhood for $150K, and you have great world-class— you have an international airport, you've got a sports team, you've got all these great amenities. That'll just keep. keep improving. It will. So I have no issue about that in San Antonio just because people are moving there. When you, if you drive through San Antonio you see U-Hauls everywhere, you see new construction being sold. Like it's just new infrastructure being built out. It's crazy.

New construction is your enemy as a flipper. That's your enemy. Because if there is new construction for sure I'm gonna go for new construction. I'm not gonna go for flip, I'm gonna get like a home, brand new home, not a home that is dated from 1956 and it's just updated. I don't know about the updates, and especially if the prices are gonna be a little bit like $5,000 or $10,000, that's gonna be the difference for sure. People that are gonna— they may go for something new. And the truth is, this happened to one investor who wanted— he did it but in Houston. I don't know about, uh, about San Antonio, but in Houston, because it's a very big area, there is a lot of land. What makes a scarcity in the buildings, not the construction supply, or there is no construction, but there is no land. If there is no land to do any construction, construction is going to be like— buildings are going to be very expensive. But if you're somewhere where there is a lot of land, which is the case of Texas, like for example Houston. This guy, he just like lost so many deals just because of that, because there is new lands. What he did after the hurricane was—

Sure.

I don't know the name of the hurricane. So he bought those properties, he flipped them and made them ready. New developers, they just Start new cities. People, they want to the new developments, not to what he flipped.

Yeah.

And he lost a lot of money. So it's always this exact point to take into consideration.

Sure.

That's true that here it's very competitive and it's very hard, but what makes it competitive, there is a lot of people for a small portion of land. Same thing like New York City. A lot of people for a small portion of land. So it's gonna be always competitive and it's gonna be always growing. It's not— the entry barrier, it's gonna be high. It's not easy to, to get into that, but it gives you a comfort that you're providing something and that there is people, uh, they want it. Yeah, they have nowhere to go.

Yeah, no. Great points. Absolutely, absolutely. Totally agree with that, yeah.

Is there infrastructure problems like soil issues? I've heard in Texas there's a lot of that. Do you factor that in when you buy?

Absolutely, absolutely. San Antonio, notorious for foundation issues. Like 75% of the properties that we look at have foundation issues. 'Cause the soil, I don't know what kind of soil it is, but when it rains, the soil expands and contracts. And it always cracks the foundations. So absolutely something that we factor into our underwriting.

Do you factor in the monthly cash-on-cash? Like, do you factor in all those expenses ahead of time?

Yeah. We set aside like 6% for CapEx, part of the monthly cash flow. So we do factor that into account. And that's after an initial rehab of fixing these things, fixing the foundation, we still assume, hey, over time we want to shore up 6% every month to fix whenever the roof goes out, whenever the appliances goes out, whatever. So we also factor that in.

Yeah.

So would you consider San Antonio to be a good hedge? Because obviously a lot of people aren't going to be able to afford houses, so there's going to be a lot of renters still, right? So that's the reason why you would stick with just holding Absolutely. Yeah, so I think that, so no matter where they're doing building, those people who are building new builds, the people who can't afford it won't be able to get them anyway, but there always will be people that need to rent.

Absolutely. Yeah, there's just in general right now a lack of affordable housing across the US. And so a place like San Antonio where most of the inventory is that, It's definitely advantageous for us, for sure. Yeah.

At the beginning of the presentation you mentioned that the underwriting is very important.

Yes.

Would you mind to elaborate what it includes? What is that?

So, for single-family underwriting, I just use a Google Sheet and I built out like a real simple template where you plug in, hey, this is my purchase price, this is my rehab, these are my financing terms, So what I can expect to rent it. You plug in all those assumptions and then you basically, how can I explain this simply? The model that I've built, I've made it so I can understand how much cash I'm leaving in the deal once the project is said and done by taking in all the different factors. So basically I plug in, like I said, purchase price, rehab, financing costs, ARV, all that stuff. And then I use it to understand how much cash I have out of pocket at closing. How much cash I'll get back in my pocket after refinancing or flipping, and then netting the two for either my profit or my cash flow. So I know that's it's hard to explain a the technical model, but there are lots of examples out there.

Yeah.

Pretty pretty much. Yeah, pretty much. Mm-hmm. Pretty much. I built out my own just my function of Employment before doing this. I was building models all the time, so it was a real simple transition.

So you just did for like 100 different houses, just plug them in and—

Exactly.

And then just go.

Exactly. Yeah, like I make one template sheet. Every time I have a new property, I copy and paste the sheet, put in the property specs. I have my returns, I have my cash in, cash out, cash flow. If it works, great. If it doesn't work, I never look at it again. But the underwriting is super key just to understand the market and to understand your project. The reason we built it out ourselves too is because a lot of times we'll try to think through like creative stuff, or we'll try to think about doing an Airbnb, or maybe doing a lease-to-own, or like some other different strategy. And just by having the model, you can like flexibly Do you do Airbnb too? We haven't yet. We haven't yet.

Yeah.

Since you do already wholesale, you flip and you wholesale and you rent. When it comes to flipping and wholesaling, I know flipping is going to take a little bit longer because you're gonna— there is other parties involved, which is Flipping brings some hassle.

Yeah.

Okay. When it comes to money over time, what does it work better for you? Just wholesaling or do both? Or flipping sort of?

Wholesaling, in my opinion. Especially if you're out of state. Like if you can avoid having to deal with a project where so many things could go wrong and still make a majority of your money, Like I would wholesale all day long. Unless it's like a really big project where you can be making like $60K, $70K on a flip. But for me, since I'm out of state, I like to control as much as I can. And we've been fortunate with the market timing, right? This year has been just radical to where you can get pretty much the same or an equivalent return of flip by just wholesaling. And you don't take any balance sheet risk. So. If I had to choose between the two, I would probably lean to wholesale just because I'm not there and I can't control it as much. But it's more fun to flip it honestly. But I'll wholesale if I had to choose between the two. And in San Antonio there are buyers. There are people out there lining up to buy your property. And one thing I've noticed in today's market is more institutional players, hedge fund guys are entering the wholesale space. To the point where if I have a property direct to seller, I don't need to go find an end buyer. You know, I can just call up a hedge fund guy who will buy it not at 70%, 75% ARV, they'll buy it at 80% or 85% ARV. Like they'll just, I'm serious, they'll just push it to the limit. I know those ones.

Exactly, yeah.

That's why I was laughing.

Yeah.

Exactly. So exactly, exactly.

Zillow is a little bird within like big tigers. I think there is a Blackstone there. They're one of the biggest. Like they're buying millions of units. Yeah, there is.

Blackstone's buying to hold. Zillow is flipping. Yeah, that's their mistake.

Yeah, they're believing in their system.

Yes.

When people, they're selling them, that's, that's not correct, they're not considering. Now they got a taste of their own medicine.

Yeah.

Actually, talking about the estimation, what do you— what tool do you use to estimate the property?

You gotta look at comps. You got, you got to look at comps, just market comparables, like what the property nearby yours are selling. Um, like, I never trust Zestimates or Redfin values. I mean, they can put whatever number they want. You really gotta look at the comps. And if you can, try to talk to some appraisers. I've learned that like people, appraisers specifically, will have different methodologies with things. But in general, really gotta look at tight, like about a mile at most around your property, very similar in year built and square footage and bedroom, bathroom. If you can find a good set of comparables, then that's your value right there, yeah. That's why sometimes working with agents is really helpful, because they can pull that comp sheet for you in one click. Yeah, for me, I have to go dig around a little bit. I gotta plug in all these properties. Is it actually a comp? So that would definitely be the benefit of working with an agent in some cases.

So through MLS, or a different type of—

I'll look at PropStream, I'll look at Redfin, I'll look at Zillow, I'll look at all those places that aggregate data from the MLS to pull comps. But if I can, I'll have one of my agents pull it for me from the MLS.

Yeah.

More on the personal side, what's your ultimate goal with real estate? I know I'm in the W-2 business.

Yeah.

And I'm thinking maybe in a couple of years to do what you're doing, but I'm kind of building an asset.

Yeah.

Ahead of time. What's your ultimate goal?

Is—

are you chasing the W-2 wage that you used to make, or at some point when you make it from the real estate, you kind of call it off? Like, if you have a— you have any goals in mind that you feel like, okay, well Now I need it?

It's a great question. My answer would be, I don't have a specific number in my head, but I'd like a scenario where the passive cash flow that comes in is more than enough to take care of me and my future family to the point where, you know, we don't have to worry about living expenses. In my mind, I don't know what that number is, but that would be when I've made it. But to be honest, like, I love real estate and I love what I'm doing. So like, I will probably continue to do this over my career just because it's fun. But yeah, it's kind of hard to say. Luckily, I've been able to replace my W-2 income already in the short time.

That's good.

Thank you. But I love just the passive cash flow side of it, you know. I'd love to just not have to do anything and then have $30,000 a month coming in net to my account, you know. But that's, that's a long, long journey, and the journey is the fun part. So we'll see. Thank you. You as well.

Can I answer that from the other side of the age coin? Okay. Um, I technically retired when I was 48. But I never plan on retiring fully. It's something that real estate, and I think you said it earlier, it's a bug that I caught, and it's something that I'll be doing for the rest of my life, whether as an agent, a flipper, a wholesaler, whatever it is that I'm doing at the time. I probably will never stop. I'm not the type of person, I don't think maybe you are, from You know, the short conversations we had. I mean, what do you do? Go out on the beach and you spend 15 minutes in the sand, you know, and then what do you do? Exactly. I get bored really quick, you know. I don't like passive. I've got lots of passive. I like the money coming in, but I like being in the game, and that's why I flip, is because I'm doing something every day. It's different. than just sitting there waiting to get my money in the post office box every month. That doesn't excite me as much as actually going out there and doing it. So on the other side of the coin, you know, build up however much you can to retire early. Know that you can retire, but never quit.

Yeah, a dream that my partner and I have is to take a big piece of land and develop it into like multi-use housing and like just have like a little community just that we created for our, you know, for ourselves. That's a little dream that my partner and I have. And to have vacation rentals all across places that I like to travel to, that's another goal. Mammoth, Hawaii, whatever. Hey, there you go. There you go. Doing a burr for some metaverse stuff. Yeah, but that, that, I mean, that's pretty much all I got. I want to make sure you guys have time to, you know, to network because that's why everyone's here. But I appreciate your time listening. And like I said, like, I'm one of you guys. So if you have insights or, you know, any things that you can share with me, I'd love to hear it. But—

Thank you so much for sharing.