Experience
Experience
I started when I was 25 years old back in 1985. A friend of mine helped me get hard money for a property. Hard money was 65% of arv – repairs.
Example $200,000 house (ARV or After Repaired Value based on comparable values)
formula 65% of 200,000 = 130,000 max loan – repairs to renovate say $20,000
The maximum hard money loan is $110,000.
Usually 8-10 points
10-15% interest only
12 month call (which means they can call the loan due and take the house repossess)
The end result is I made approximately $30,000 during this deal. I was 25 years old..
The next story is how I met Glenn.
Back story:
I was in a bar, and I just lost my job. I am66 now, but at the time I was 25, fresh out of the US Marines. The year was 1985. Interest rates were high, over 10%.
See interest rates history here
At the bar was this smiling guy, and he said,
“Who just died?”
I looked at him. He must have smelled the self-pity on my face.
Here is what just happened to me.
I worked for a small firm in Constriction Engineering Products, Johnson Controls, that sold air and water control equipment to large apartment and commercial building contractors. My math and science background helped me.
But the J O B paid $400 a week and was an advance on future commissions. I had over $10K in commissions due to me, and asked my boss for my commissions now. He laughed, and said I would get paid when he got paid.
I got in an argument with him and he fired me.
So this guy at the bar said to me,
“Tough break. What are you gonna do now?”
“Look for work I guess,” I replied.
So he says, “You like real estate?” You like solving problems for people?”
I was taken aback by that comment. Was this guy trying to hire me or what?
I smiled, and asked him, “are you looking hire someone?”
He chuckled, and said, “Well, I’m always looking for great salespeople that hustle.”
Here’s what happened. The man’s name was Glenn, and he owned a real estate investment company.
He never called it a real estate investment company, he called ” a place where we solve problems for people.”
The thing that was amazing about Glenn as he knew a little bit about everything and I mean everything.
He knew about business, legal issues, tax issues, marketing, sales, promotion, networking, and most importantly he knew about people (psychology).
The first thing he did was tell me that I have two ears and one mouth, and I should listen more than I talk.
Second thing he did was have me read “How to Win Friends and Influence People” by Dale Carnegie.
Then he taught me how to set appointments was home sellers, go out to their home, and write up a letter of intent to purchase or lease.
He said to me, “your job is to bring me potential home sellers will consider a creative offer.”
I was very confused the first few months working there. I did know what a wraparound mortgage was, or subject to, or subordinating notes, or lease option assignments.
So I stumbled along.
What allowed me succeed was Glenn had an awesome direct mail marketing machine, and even had an appointment setter, so I just needed to get my car and go talk to 3 to 4 sellers everyday. I’d use the same presentation with everyone. And I’ve get them all letter of intent to buy for cash or on terms.
One of the things Glenn told me was “some will, some won’t, so what!”
What that means is that some sellers will do what you want to them to do, and some will not.
The law of large numbers cures all problems.
What surprised me even more is that some sellers would call the office, in 3 to 6 to even 12 months later, because they appreciated my first meeting with them.
Especially some sellers that were very angry with me in the beginning, called me names, said things like “you just try to rip me off!!”
In my first six months I must have seen 20 people a week, 80 a people month, almost 500 people in that six months. I think we did three to five houses a month grossing between $5-$10,000 per house, and I didn’t make that money, Glenn did.
The arrangement for pay for me was I would make $500 cash every week, that’s cash. No benefits and no 401(k). Was it legal, I don’t know. I didn’t own the business. I was hired hand.
After a few months, Glen said “you’re do a good job keep it up. I’m going to give you a few more duties. I want to be able to travel so you can run the office while I’m gone.”
I was scared at first, having never run a business. I was like the security of a paycheck.
But I loved being able to make decisions, being the captain of my own ship.
I think what made me more pissed off than anything though was making $500 a week, and making bank deposits of 10,000, 20,000, even 30,000 a week.
So after to have years of making $500 a week cash, and living frugally, I said the following to Glenn,
Glenn, I’ve “I learned so much here. You taught me about sellers, buyers, legal, tax, marketing, there is no way I could have learned this in school.
“I saved up some money and start my office. I wont compete with you. I’d like to give you four weeks notice.”
Glenn leaned back in his swivel chair, smiled and said,
“Brian, you’re irreplaceable here. You came to me knowing nothing and now you know everything you need to know. You never asked for a raise or a partnership stake in the business.
I can honestly say that without you over the last two and half years I would not have made the kind of money that I have. I have two things to say to you before you go onto greener pastures.”
My God I was really nervous. What was Glenn going on to say?
“The first I want to ask you is, what took you so long?”
Then he laughed.
“I expected you to hang in there for about six months and move on.
You’re really smart and you should have started your own business long ago.”
“The second thing I want to tell you is I’m going to give you a bonus, (he takes out his checkbook, and writes this check out) “and I don’t want you to look at it until you sit down to car and drive away, deal?”
I said, “deal!”
I got to my car, exhale, and take the check out of my pocket.
It was for $15,000.
Back in 1985 that was a lot of money.
In the memo I remember what was written,
“for my good friend Brian.”
With everything I learned over that 2 1/2 years, it didn’t take me long to be profitable.
I got a modest office space, with neighbors that were white-collar professionals, and attorney and CPA.
I had a secretary part-time for 3 months, then full time.
And Glenn even took me to lunch every week, said he missed me.
That first business was very special to me.
I have had several businesses since then, but that first one was my favorite.
So after 2 and 1/2 years with Glenn, I started all by myself.
I had a business plan that I was working on.
I had some money from marketing to get postcards out.
What I needed was back office help. So I devised a script that the person that answered the phone would say.
And they would set an appointment for me to go see the seller.
Once I saw the seller I would give the seller a couple of different options, but I would use the appeal to a higher authority technique.
” I’m not the final decision maker, but I need to do is to write down all the details of your house especially the financial details like the mortgage, and then collect any documents that you have that show ownership, such as the deed and the mortgage papers, of course I’ll give you a receipt for those documents and return them to you. What the office does is analyzes everything and comes back with a written offer within 24 hours. Usually have at least two choices in the offer. This cost you nothing. It takes us time and money to do this but we find it’s embarrassed way to help sellers make a good decision.”
Now the truth of the matter is there’s no one else to look at this deal with myself, and Glenn used to look over the paperwork but it’s my job to look over the paperwork now,
What type of offers do we offer sellers?
Well it was rare that we offered a cash offer that the seller accepted. It was usually a creative financing offer that the seller accepted, it was either a land contract, a lease with option or a seller financing seller carry. Many of our seller financing transactions were “subject to the existing financing” which means that we simply took over the payments.
Our exit strategy most of the time were lease with option. In the current climate of regulation, the consumer Watch Dogs do not like land contracts or contracts for deed. That doesn’t mean they are illegal, that just means that the regulators are clamping down on Bad actors. See Regulators Page.