S6 E3: Working with Investors
This RoadMap episode stars our hosts CEO Ren Jones and Real Estate Carley Hathaway. Ren and Carley discuss different ways you can create consistent recurring revenue streams through investment properties.Agents have intellectual capital, knowledge of the market and value/good buy. Some of your contacts have capital but lack wisdom, partner with investors who have capital and purchase rental properties! Your tenants will basically be paying your monthly bills (PITI) with their rental income to you. Rental properties should be financed with 10 or 15 year mortgage.
Ren Jones (00:04):
It’s that time. Welcome to Roadmap, how to take three listings a week until you’re ready for more. Each week we interview a great agent who’s taking two, three, four listings, but this is the investment show, how to work with investors, everything you’d ever want to know about investing for yourself and investing and getting investors and having them on hand to sell them houses, several times a year. Repeat business, don’t you love it? Anyway, well, want to thank everybody for being here, and I want to introduce my co-host from San Diego, Carley Hathaway. That’s carleyhathaway.com. Hi Carley. How’s the real estate business?
Carley Hathaway (00:50):
Hey, Ren. Hey, everybody. Real estate is great and I’m really looking forward to this show because I cannot wait to start calling those for rent by owner people.
Ren Jones (00:59):
Good. And maybe you want to invest?
Carley Hathaway (01:02):
Definitely want to start investing in some rentals.
Ren Jones (01:05):
Good. So, let’s dive in and jump right now. So, here’s the thing. A lot of real estate people think they have to invest with cash.
Carley Hathaway (01:14):
Ren Jones (01:15):
Yes. And you don’t.
Carley Hathaway (01:17):
No, are we using Bitcoin?
Ren Jones (01:23):
That’s it. You took my line. Yes, turn them in for Bitcoin. Now actually, folks write this down. Intellectual capital, intellectual capital. Carley, when you sell real estate … and you’ve been doing that 10 years?
Carley Hathaway (01:38):
Yep. Just over nine years, yeah.
Ren Jones (01:40):
You have a pretty good eye about values and things like that, right?
Carley Hathaway (01:45):
Ren Jones (01:46):
And then you meet people that want to invest, but they don’t know where to buy.
Carley Hathaway (01:52):
Ren Jones (01:53):
They have the money, but not the wisdom. A lot of agents have the wisdom.
Carley Hathaway (02:00):
And none of the money.
Ren Jones (02:00):
Together and just say, “Tell you what, let’s do this. Let’s form a little LLC together, and I will help us buy properties. I will be a 30% partner. You’re the money person.”
Carley Hathaway (02:18):
I like it.
Ren Jones (02:18):
You’ve got a lot of people that will say, “I’m in.” You’re going to sit there and look and go, “Nope, nope, nope, nope.” Because you are the eyes and ears. You have intellectual capital. Your investment, your capital is what you know. And a lot of you out there that are watching this show, you have that intellectual capital. You’ve been doing this a long time or you’re focused in on one area and what’s hot and what’s not, what’s smart and what’s not very smart. So, you’re worth a being a 30% partner with somebody that wants to buy several doors. So take a look at that. And you don’t have to be in one partnership. Friend of mine, she sells 120 homes a year blindfolded. She does it blindfold it. She’s in the Eastern Shore of Virginia. She has six, seven, eight partnerships with people. She’s the intellectual capital. Because if we’re doing it right, if we’re buying investment property right, when do we get our profit? When is the profit realized?
Carley Hathaway (03:26):
Ren Jones (03:27):
Well, it’s one of two ways. It’s either realized immediately. There are a lot of people that want to find … When they close, they want to immediately pick up 20%, 30%. Okay?
Carley Hathaway (03:37):
Ren Jones (03:38):
And that takes a lot of looking. But if you’re in the business, can you do that? Would you see something, and you’d go … then you would write on a little board, “OMG. OMG.” And you would say, “Got to move fast.”
Carley Hathaway (03:51):
Yeah, I mean-
Ren Jones (03:52):
Then you go and you say, “All cash, close in 10 days.” And they’ll say, “Okay.” All right?
Carley Hathaway (03:57):
Ren Jones (03:58):
The second way profit is realized is over time, because when you rent these out, the tenant pays the bill, the tenant pays the bill, you get them with put down 20%, 30% you put down, you go no more than 15 years, 10 years is better, 15 years max. And at the end of 15 years, the tenant says, “Ah, I bought you a house.” That’s what the tenant says.
Carley Hathaway (04:30):
Yep, exactly. So, they’re paying your mortgage while the property value’s increasing. It’s perfect.
Ren Jones (04:33):
Right, every 15 … so if you buy one a year, at the end of year 15, the tenants there go, “Here you go, Carley.” At the end of the next year, “Here you go, Carley,” five years go by and you have five paid off houses, paid for by the tenant. What about it?
Carley Hathaway (04:52):
I like it. I love that.
Ren Jones (04:54):
Right. And so what we look at is can the tenant pay the rent and all the expenses, no money out? That’s fair.
Carley Hathaway (05:02):
Ren Jones (05:03):
I think so.
Carley Hathaway (05:03):
I think so too.
Ren Jones (05:04):
If you’re doing it right, if you’re shopping, buy something low maintenance. Okay?
Carley Hathaway (05:09):
Ren Jones (05:09):
All right. Now, the other thing we have to look at with investors and investment is adding investors. People that want to buy investment property, because guess what? Is that pipeline business, sort of like corporate calling we talked about in the last show, it’s ongoing. Somebody wants to buy, I want to buy one home a year. I want to buy two homes a year. How many do you have now? I have 16, but I want to buy two more a year. I’ll pay all cash, close in 10 days. Are those people worth hanging around, getting to know?
Carley Hathaway (05:42):
Yeah, exactly. Because I mean, your average buyer and seller, what? They do it every eight to 10 years, this person’s buying a house every year. Yeah, your pipeline’s going to always be full with them. For sure.
Ren Jones (05:52):
So, here’s where we find them. Number one, Carley, you sold them a house, or you sold their house and then they bought a house. Whatever. You know them and you know about them. Maybe it’s their fifth purchase, they put down 80%. Maybe they paid down 100%. And you say, “Have you ever got … ” here’s a good question to ask people say, “Are you happy with your current retirement plan?”
Carley Hathaway (06:17):
Oh, that’s a good one.
Ren Jones (06:19):
Are you happy with your current retirement plan? Because when you run the math, if you buy investment properties and the tenant is banking the payments, it’s a sweet deal.
Carley Hathaway (06:31):
Ren Jones (06:32):
That’s what you want to tell them. Just say, “What I would like to do … would you be interested in buying one door a year? I will help you find a low maintenance home. Get the tenant for you, get it all set up. You pay cash or otherwise finance no more than 15 years and you buy these things. I will find them for you.” Homegrown, with people you know. And beyond homegrown are lots of people that already have 10, 15, 20 properties. How do we find those?
Carley Hathaway (07:05):
How do we? How do we?
Ren Jones (07:07):
Well, think about it. How could you get in the way of finding those people?
Carley Hathaway (07:11):
Well, I mean, obviously they’re going to be renting the places out. So, the homeowners.
Ren Jones (07:16):
So, there are three types of for rent by owners out there, that advertise. There is an individual who’s running an ad and saying, “I’ve got a house for rent.”
And then there’s category number two. They own the property. They use a property management company to advertise and show it. And then third one is they’re a real estate agent and they own it and they’re doing it in their real estate agent. Our company will be providing for every Vulcan7 customer, category one and two. Talking to agents by accident. You need to be talking to people that you can help. And then you approach them and there are a few things that we need to say. So folks, write this stuff down and then use the Copycat principle.
Carley Hathaway (08:04):
Ren Jones (08:05):
That’s it. So, what I’d like you to write down is questions that you ask if you want to talk to an investor, because if you’re calling on the house they’ve got for rent, it’s just a reason to talk to them. They may not want to sell that home. Or they may, but they may want to sell the other one on Memory Lane. I can’t remember the exact address, Memory Lane. So, they may want to sell one of their other ones. And you need to ask questions. Just say, “I was calling about the house you have on Willow Glen, is that … You’re renting that out, I see.” “Yes.” This is Carley Hathaway from the bestrealtyintown.com, and I wanted to find out if you might want to sell that instead of rent it?” “No, I’m quite happy with that as a rental.” “Great. Do you have more than one rental?” “Well, yeah. I’ve got nine homes.” “Nine? Good for you. How long you been doing this?” “I just started three years ago.” Those are important questions. Nine homes, three years. Not bad, great.
“Do you have anything now that you might want to sell or exchange for something more lucrative?” You know the word exchange, are you familiar with the exchanges?
Carley Hathaway (09:26):
Yeah, exchanges, yeah.
Ren Jones (09:26):
Carley Hathaway (09:27):
Ren Jones (09:28):
The 1031 tax exchange allows them to move the equity, sell a home and buy one without having a tax implication.
Carley Hathaway (09:38):
Ren Jones (09:38):
Move that equity. That’s a 1031 exchange. So you say, “Do you have something now that you’d like to … ” and then they go, “Nah, I think I like all nine.” “Okay, great. So are you open to buying number 10?” They go, “Well, yeah, if it’s the right one.” “Okay, well here, take this magic wand and wave it and tell me what number 10 looks like. What does the ideal home look like? How much do you’re paying for it? How big is it? How many bedrooms, bath, what neighborhoods or neighborhoods? What parts of town? And let me see if I can find that. Would you like to do that? Would you be open to that if I find a perfect home?” “Great.” Okay, now you’ve built a relationship with this investor. You need to talk to them every 60 days or sooner. You find a hot one, put your little searches in, look at it yourself and only call them when it’s a gem. Just say, “This hit the market four hours ago. I need you to know about this because … ” and let them eyeball it, okay?
Carley Hathaway (10:40):
Yeah, yeah. And not only that, if they have a renter they’ve had for five years and they’re moving out, they may want to test the market with that one and sell it and see if it would move. Just because they’re not ready to sell that day. They might be ready to sell in six months.
Ren Jones (10:54):
Right, right, exactly. So you just never know. And then the other thing is finding out what their strategies are. Whether you ask them or not, they’re going to tell you, they’re going to say things, “Well, I like to pay all cash and I want the rent payments to pay the cost of the house back in six years, eight years, 10 years,” whatever. They will tell you that, or they will say, “I want the rent to be one 100th of the cost of the house,” or one 60th of the cost of the house, whatever that is. , they’ll give you things like that as a guideline when you’re looking. So you got to find out the rents. You got to find out does that rent include the heat, or the water, or what’s included in that rent payment? You can’t just go, “Oh, I have no idea.” You have to know before you call them back, just say, “The rent’s $2,000 a month. All the utilities are metered,” so they pay their own water, sewer, electric, and heat.
Carley Hathaway (11:52):
Ren Jones (11:53):
You don’t have heat in San Diego, so it’s not a problem.
Carley Hathaway (11:56):
We don’t. We don’t have heaters. No, I think coming in with that knowledge is really key because this is our job. They have jobs they do, 9:00 to 5:00, or 8:00 to whatever. They don’t have time to do all this research. That’s what we’re there for. And we can be their source of knowledge with this.
Ren Jones (12:11):
All right. Going back real quickly to the retirement plan, just say if you buy one home a year and you can finance it no more than 15 years, and I want you to buy … Say you buy five houses, 200,000 each. At the end of the 15th year, you now have 200,000 in equity and $2,000 a month rent coming in. I’m assuming there’s no appreciation, but there will be. At the end of the year 16, you’ll have another 200,000. Now you’ve got 400,000 and you’ve got $4,000 in cash coming in, plus 400,000 equity. On the end of year 17, you now have $600,000 and $6,000 in rent coming in. At the end of year 18, if I did that right? Yes.
Carley Hathaway (12:56):
Ren Jones (12:56):
You have $800,000 in equity and you’ve got $8,000 in rent coming in. At the end of the fifth year, 20, the final mortgage is paid off, and you have $1 million in cool cash, or in investment property and you have 10 grand a month coming in. Those homes are paid for. You will have that forever, except the rents keep going up. And that million dollars worth of house is now worth probably $2 million. And the rents is not 10,000, it’s 20,000. So, it is a goldmine retirement plan if you –
Carley Hathaway (13:36):
Absolutely. I love those numbers. That sounds so good to me.
Ren Jones (13:38):
Yes. So, we’re assuming no appreciation, no money out. We’re assuming that the tenant pays everything, all the cost of their payment. So tell them, “Hey, do you want to have a retirement plan that is a lot better than your 401(k)?”
Carley Hathaway (13:55):
Yeah, exactly. And you know what? I feel like now is a really good time to really start calling these owners because all the Airbnb laws are changing really drastically right now. For example, in San Diego, it has to be your primary residence or you can’t Airbnb anymore. And I know that’s the same for Colorado.
Ren Jones (14:14):
The People’s Republic of California is an interesting place.
Carley Hathaway (14:18):
It is. Yeah, so these people that are Airbnb are going to be looking to unload. So, it’s just a great time to attack.
Ren Jones (14:26):
That’s right. So yeah, just get in the way. Get in the way. So last thing, I want to remind people that we at Vulcan7, you will starting September 12th, and maybe we’ll do it a little sooner. September 12th, you will have FBROs, for rent by owners in category one and category two. And these are not like … Some of our competitors have these, but they have crap. You get an agent, you get the property manager, you will get the owner if you call these. The quality is that high. And actually it’s this high, or actually it’s this high.
Anyway, I want to thank everybody for being here, and I want to thank Aaron Wittstein, who simulcast the show on his Facebook group with 52,000 members. If you want to get involved with that, that’s at facebook.com/groups/gotobjections. And we appreciate that simulcast.
And finally, a lot of you have been asking and writing in and they’re like, “What is Carley’s secret? What is Carley’s secret? What is Carley’s secret?” So folks, after she’s done her lead generation and set appointments, she goes to the refrigerator and gets delicious Graeter’s Mint Chocolate Chip. They sell it all across North America. If you go to graeters.com and look for the store near you. If you live at Cardiff-by-the-Sea, the seaside market has a huge display of it. It’s all over the United States. This is the one for listings. If you get one of the other flavors, it’s just ice cream. They have several flavors. Now, the Rocky Road is if you’re working with buyers, so be careful.
Carley Hathaway (16:02):
Exactly. You sit at open houses on the weekends, you eat Rocky Road.
Ren Jones (16:07):
That’s it. That’s it. That’s Rocky Road for darn sure. So anyway, if the listing is slow to sell, dig a hole in the front yard, bury it upside down. And a lot of people don’t know that story. They’re thinking it’s about the ice cream. But in the 1990s, if you went into realtor.com magazine, it hit the peak around 1999, real estate agents were buying little St. Joseph saints, the catholic Saints, little plastic St. Joseph by the dozen. Companies would sell them, because the belief was if you buried St. Joseph upside down in the front yard, that listing would sell. And in the ’90s, things were slow, and so these things would sell by the … Real estate agents would have four dozen little St. Josephs stacked on their desks. True story.
Carley Hathaway (16:54):
Ren Jones (16:55):
True story. Look that one up, folks.
Carley Hathaway (16:55):
Ren Jones (16:58):
Google that, burying St. Joseph upside down.
Carley Hathaway (16:59):
Ren Jones (17:00):
It’s a wild story and it’s just part of our folklore of being an American. Anyway, see everybody next week.
Carley Hathaway (17:07):
Bye. Thanks everybody. I’m so excited for September 12th, to start calling.
Ren Jones (17:11):