Seth: Hey folks, how's it going? This is Seth Williams. You're listening to the REtipster podcast, and this is episode 186. Show notes for today's episode can be found at retipster.com/186.

Today, I'm talking with Paul do Campo. Paul is a professional copywriter and real estate investor. He helps real estate investors with their follow-up marketing. Today, we're going to discuss using the right words in our communication, the importance of follow-up, how to implement follow-up, and how Paul has figured out how to use the right blend of communication to win repeatedly as a real estate investor.

I'll just say before we get started, the conversation you're about to hear was recorded on a day when my voice was pretty bad. So I apologize in advance for that.

Also, the audio quality was lacking just a little bit. I think you'll be able to hear everything we say, but just want to give you a warning ahead of time. Sorry about that. We'll try to do better next time.

With that all out of the way, Paul, welcome to the show. How are you doing?

Paul: Thank you, man. I appreciate being on. We haven't spoken in a while. It was way back when I had you on my show. Things have changed quite a bit. Went from land to copywriting, and that was mainly of necessity to quit my W-2 and get into something that can support myself month for month.

Now, what do I do for investing? I actually sold off all my land notes. I'm actually working on selling one more off. We're hypothecating it out. I'm just kind of shifting gears here, pivoting my money into other sources.

And what I do today is just OmniDrip. I mentioned it. So that's a company I set up. We help investors with their actual follow-up, meaning like drip sequences, their automation, the copy, the content that goes into long-term follow-up because most investors we deal with, they're not really sure what to say besides, are you still interested in selling? They follow up infrequently.

A lot of my clients, they're winning over deals after three, four months. That's three to six months. It's kind of a typical range for these long-term sellers that just aren't ready yet. They're winning them over with 50, 60, 70 touches of follow-up.

So we have to be a little more creative about what we say. It's not just repeating the same direct question, “Are you still interested in selling?” It's being a little more creative and bringing more value upfront, building up credibility, driving them back to the website, driving them to articles, sending them follow-up mail, and sending emails of course.

Seth: You've got experience with houses, with land, and with notes, right? Of those three, how would you segment, this percentage of my experience is with houses and this percent is with land. How much time have you spent in each one of those different realms?

Paul: Yeah, I'd say more so in land. I probably spent a lot more in land. And my journey back in 2016, like everybody else, I jumped into wholesaling. A lot of land flippers, they start that way. and difficulty of it and sending lots of mail, cold calling, door knocking, all that, shifting over to mobile homes like Lonnie deals.

Seth: Lonnie deals? What is that?

Paul: Like the trailers or the mobile homes that you flip? You don't own the land and you sell them on owner, just like land, you sell them into notes.

Seth: Okay. Just out of curiosity. Did you say Lonnie deals? Am I hearing that right? What does that mean? I've never heard of that.

Paul: That's what I think the terminology for it. There's a guy named Lonnie Scruggs. He wrote a book on it back in the 70s called Deals on Wheels. It's just basically land, but with mobile homes. You don't own the land. It's in a mobile home park.

A really good return on those, but I just didn't like the rehabbing part of it. I didn't like chasing sellers, chasing buyers too, because there's chasing on both ends.

And then transitioning into land, which I love, because there was no chasing at all, except for the selling part of it. There's a little more intensity to actually get that property sold.

And then, from there, I had to make a decision because I needed to quit my W-2. I was doing copywriting gigs as well. And I made a decision to just go full-time in a copy because I already had clients, and it was exceeding the income I was making in my W-2. So I decided to quit my W-2 and just focus on copy for two years.

Seth: So when you say copywriting gigs, so were you doing copywriting for your W-2 job as well? And you had copywriting gigs for various companies on the side? Tell me more about that.

Paul: No, my W-2 job, I was actually a pipeline welder. I was a pipeline welder and foreman for the natural gas utility back in Southern California. It was actually a good job in terms of benefits and pay. I just wanted the freedom.

Seth: So how did the copywriting thing come into your life? Like, when did you even become aware that that was a profession? And it's like, okay, I love it; I want to do that.

Paul: I discovered marketing copy out of necessity back in 2016, because I really sucked at this whole sales and marketing thing to get houses. I came from blue collar. And when you make that shift from blue collar, and that's all you've done your whole life, and you come from a blue collar family, you don't know anything about sales and marketing. Making that shift if you don't have that personality is really a struggle.

So I, by accident, became Investor Carrot's copywriter for about a year.

Seth: How did that happen by accident?

Paul: Well, I knew about copy. I kind of knew, like, I heard about it. I read a couple books on it. And Carrot had sent out an email to all their members. And I was a member at the time. I had my own Carrot site.

And they said, hey, we're looking for a copywriter. And I said, why not? So sent it out, did their application. They chose me. I don't even, I was so surprised. Like, you know, what the heck happened here? I'm not even trained. I don't even know what I'm doing here.

Seth: Did you submit examples of your work or something? Is that how they chose you?

Paul: I don't exactly remember the application process. I didn't have any work to submit. So maybe there are some examples that I just put together on the fly there.

But the funny story is they actually then got rid of me the first two months because I kept submitting work that had a bunch of errors and because I was just really bad at proofreading. It was kind of depressing at the time because I was like, man, I actually enjoyed doing that. It was a very high hourly pay for what you do just right.

And so a couple months went by and I reached out to the person, like Trevor's right hand gal at the time. She's not there anymore. But I said, hy, if proofreading was my only reason why you guys got rid of me, how about you guys give me another try? I'll go out and hire out of my own pocket somebody to proofread all my material, make sure everything goes through.

They're ecstatic about it because they really enjoyed what I did. They were excited that I'm trying to solve the problem. So I got back in with them as a contractor and hired my own proofreader to do all that. Got better at proofreading, got better and better at what I do. From there, gigs kind of just started happening.

I started… one of my clients was a land developer, a big land developer who entitles, he buys his large lots that can fit a hotel, can fit a large multifamily. And they were doing something unique. He hired one of the best list guys in the country who works with Dan Kennedy, Craig Simpson. So that was fun working alongside him. The idea was they entitled these large lots, they own these large lots, they get the planning in place, they get the architects to create the hotel, blueprints.

And one of them happened to be in Vegas, like not on the strip, but just one block away from the strip. And they sell these, they put these together into a direct mail package, and they send it off to the top investors in the U.S. or maybe the world. I don't know what their list was, but I put together the package, the copy on it. And that was really fun.

Craig and I both parted ways with them because they were just taking too long in between projects. They would finish it and they wouldn't even send it. It would take months and months to even send. And now that thing is outdated. The letter's outdated and the list is outdated. So we'd end up just naturally parting ways and being too busy to fulfill for them.

Seth: I'm curious about going back to your story of how you got into copywriting.

So it sounds like you were sort of self-taught. It's not like you went to school for this. You just read a few books and it resonated with you and you figured out how to write in a way that was compelling and got people to take action. Is that right?

And if so, what books were you reading that were so influential to get you into this?

Paul: Yeah, it's just self-taught. Most copywriters are self-taught. There's not like a course in university on copywriting. There might be now if you get into like the whole CMO world and marketing world.

Some of the books… I would say Gary Halbert was influential on me. He's long gone. Bring that name up and even investors sometimes know who that is.

Ben Settle, who's alive today, he's an email copywriter. He was very influential on me.

Joe Sugarman, who's long gone, and I own his book. And probably a really good book for investors. Joe Sugarman, he only has like two books published. So that's a really good book.

So I'd say that the idea of copy is taking the problems that exist in the market, the deep-rooted problems, and then bringing the solution in a way that fits the market today.

So let me tie this into land, okay, because I started practicing this with land, because I was buying lots, I was selling lots, and I decided to do something a little differently. I decided to take my pages that display any lots I have for sale. I started to write it in a way where I'm displaying what exactly this lot's going to do.

We talked about it before. You can sell land in one of two ways. And I'm not saying the other way is bad; it's still going to work.

But you can sell it as, here's my half acre lot in the desert. Here's the coordinates. Basically selling it as a commodity, right? And when you boil it down to those roots, you're selling it as a commodity.

Now, I'm not saying that doesn't work. And a lot of investors became very successful doing it that way.

To optimize it a little bit more, I decided to sell it like, what am I actually solving here? And what's the actual use case of this land?

Most of the time, I was selling mountain lots. So after about a handful of sales, I already kind of understood my market. My market where people, city folks, because there was only one mountain range in that area, and the city folks were buying it because they dreamed of having this cabin in the woods.

Okay, so rest and relaxation, getting away from the city folks, making the city the enemy. All that I was really bringing into the front fold of the copy. And I did this with emails too.

Actually, I really liked what was happening with emails because most of the time people are doing, hey, here's our deal of the week. Instead, I decided to shift gears. And go more into being a brand that people enjoy reading, not for the sake of, oh, let's check out their deal, let's check out what he has to say today. I would be on the lookout for stories that really sell the lot that we have for sale.

So for example, I remember hearing about the story in the news that happened in the area where nurses and doctors were caught in this specific hospital having certain relations with the clients who were in comas. And it was a true story in the news. And there's other stories, like finding maggots underneath their bandages because they weren't cleaning them.

So I think my subject line was maggot-infested cities or something like that. I talked about that story. And then I pivoted into the call to action, which was our mountain lot, which was to get away from all these city people, to get fresh air, to be away from the millions, population, and et cetera.

So I just brought the problem up, brought up the solution with the real reason why they want to actually buy the land. And what I started seeing is that people on my buyers list, people I've never spoken to at all, would email me out of the blue and say, hey, I've been on your list for three months now, ready to buy. And it'd be one of the easiest sales I can make.

So it wasn't hardly any chasing. That's what I started seeing because I realized, and this is nothing new, by the way. You see this done in coaching. You see this done selling software. And in my OmniDrip brand, you see this. You develop a relationship with your actual buyers list.

Seth: How much work is it to be on the lookout for these stories to create this newsletter and all this stuff to entertain people with the end goal of, “I hope you'll buy something from me at some point”? How do you make the connection between, “I'm here to entertain you,” and connect the dots all the way to, “Okay, now buy this from me.”

Paul: Yeah. It's more of an art than a science. The more you do, the more writing begets writing or ideas beget ideas.

So, when somebody who has never done this before, it's like, I can never do this. Yeah, you haven't really done it before. And then, and when you start doing it, when you start looking out for stuff, in time, I mean, this is what you're supposed to kind of do as a salesperson is connect problems with solutions, right? And you're either doing it face-to-face, digging for information, really asking the situational, the problem questions of the salesperson. Whereas a marketer, you're doing it where you already know the market well enough. And you're choosing the biggest pain points.

And that could be through analogies. That could be the stories you've heard. It just comes from doing it enough to where, oh, this is a really cool analogy to show my audience.

So being entertaining is far more, and I've sent over at the time of this recording, I've probably had like 2,000 email blasts, not like 2,000 individual emails, but like 2,000 blasts, lists of 5,000 people to 60,000 people. My bread and butter today, I'd say, is like if anybody asks, hey, can And can you work one-on-one with me? My one-on-one package is email marketing. So every month we're talking to the list. We're creating relationships with that list. We're selling something to that list.

I would say after all that, the least valuable method of communication is education. It's just education. Just like, here's the three ways to do this. Here are the five ways to do that. It works to some degree. What I've realized is people tune out of that after so much. And people tune more into when there's even a subtle or slight entertainment factor to what you do, whether it be podcasts, whether it be articles, whatever it is, there's something in how you communicate that's actually somewhat entertaining.

If you don't believe me, look at the highest paid people in the world, they're all entertainers. Look at Donald Trump. He's kind of entertaining. So people do keep coming back because there is a slight entertainment factor to what you do.

Seth: Yeah, that's interesting. So like, what makes education entertaining? I don't know if you know who Ramit Sethi is, but he is a phenomenally good verbal communicator. Every time I hear him talk at all, I'm just kind of captivated by whatever he's saying. And I think what's going on there is he knows how to use the right words, but also vocal tonality and inflection and stuff just to make him not sound monotone. It's just very entertaining to listen to.

So is that what it is? It's just surprising people at what you do? Or what makes anything entertaining versus boring?

Paul: Yeah, that's a really good question. Ramit Sethi is hard to understand if he actually went out of his way to learn all that or if he actually does that already naturally.

So one aspect to that is bringing personality into the fold. Everybody has a personality, everybody has something that they can share. For emails, specifically, it's personality-driven. You look at Russell Brunson, he almost does the opposite of what is taught, which is slow down, be professional. The guy is a fast talker.

The key, and he mentions this, to what makes him wildly successful (in webinars specifically, because his pivotal moment is when you learn how to do webinars and sell via webinars) is he is an extremely good storyteller. And he ties it in and he brings up another story and ties it into what he's teaching. That is one aspect of doing it.

Telling stories, tying it into what you're teaching or selling that grows a relationship with something. People become friends because they like the other person. They like their personality. And that's kind of what you're doing with an email list as well.

I mean, back to what I do with OmniDrip with, you know, flippers, and we have some land guys that are clients as well with their acquisition side with their follow-up. If you come in with your follow, you know, everyone has drip sequences, but those are the dry, boring, direct questions of, hey, are you still looking to sell? Hey, are you still looking to buy? Those direct questions are 100% self-serving. They don't do anything for the other person. You’re an annoying pest at that point.

So what we bring in is we add a little more creativity. So what does that mean? That means that we're talking about what the cash offer actually brings the table. I'm bringing humor messages too. We have humor messages, like if somebody hasn't responded for a long time, I'm putting in humor messages into it. We're driving them back to an article. So for example, if the seller says, hey, I'm going to be fixing the house ourselves, we're driving them to an article that talks about the five top rehab items, the best bang for your buck.

And that has its own purpose for authority building, making us the experts in that field.

Seth: Can you give me an example? What is one of these humor messages? What are you talking about when you say that?

Paul: We'll send a text message out. We have different variations of all kinds of that. I'll say, hey, we haven't spoken in a while. “Press one if you've been swallowed by a gator. Press two if you actually did reach out to sell your property. Press three if you actually want me to be eaten by a gator. And this was all a mistake. You never wanted to sell your house.” That produces a lot of LOLs, but it's at least a response back, right?

So driving a response back to start that communication. Because that's the bottom line of follow-up is we want to move them. We want to start a conversation again, move them along the pipeline. If they haven't booked a call with us, that's the next step. We want to move them in our pipeline.

Seth: You brought up OmniDrip. What is OmniDrip?

Paul: Yeah, it's a brand I created by leveraging everything, all this copywriting experience I just talked about, and helping investors with it.

So what can a copywriter do with investors? People think it's writing your letter, your direct mail, which is all fine. But for me, the highest use and the best value I can bring for an investor, the ones actually doing lots of volume, is boosting their follow-up marketing.

So that all the leads that they're getting now, because they're only going to convert, you know, maybe 10% or less of those leads that come in (10% would actually be really good organization, if you can do that, I'm talking about single-family). And making sure that we are increasing that by having better follow-up long-term, better SMS, better email, better tasks, voicemail scripts, better articles, all following the seller or the lead, I should say. To either find out if it was all a mistake, that's always a good goal, right? If the lead was actually not selling one or moving out of our system.

Or two, when they're finally all ready, because this happens a lot, they ghost you, they're ignoring you. They actually are a lead. They actually are a really net quality lead. They're actually going to sell at one point. It's just that life gets in the way. There's more priorities.

Seth: Yeah. So when you say help with follow-up, so does that mean just writing the copy for them? Or is this like a CRM system that manages the follow-up? Or is it like the initial outreach? Is it that too? Like what specifically does OmniDrip do?

Paul: Yeah. So that's a good question. I don't sell a CRM and I purposely do that. I'm not planning on ever selling a CRM. We utilize whatever CRM the investor uses, you know, so they don't have to switch a CRM. That's a pain. Switching a CRM is a pain.

So we utilize whatever you have. Most CRMs have automations already, meaning like you can activate a sequence for a lead and then, and it sends out a sequence of emails, SMS, et cetera.

And so we plug, I have content already. We have hundreds and hundreds of variations of it for different types of investors. And we make it so it's semi-custom. We plug them into the CRM for a single family investor.

Right now, it's like 24 sequences for land flippers. It's cut in half or less.

Seth: Is this email? Because usually when I think of copywriting, that's kind of the default that I go to. But it sounds like this is like direct mail. This is texting. What communication mediums are being used here?

Paul: Everything. Because if you narrow down to one communication medium, you're really minimizing the pool of what you can do because people are going to unsubscribe. You're going to hit reply to stop. And then if you're only utilizing one way of communication, you've just eliminated any communication from that lead.

Seth: If somebody comes to you off the street, what would be the top three you would recommend?

Paul: Top three sequences?

Seth: The top three communication mediums. Is it like direct mail, texting, and something else? Or what would you need?

Paul: Okay, I say manual tasks to call, right? We still need to make those calls. So that'd be one. Two would be SMS and three would be mail as well. So follow-up mail.

So follow-up mail is what we add in, which is very different from the typical mail.

If somebody comes into my world and they know who I am, they opted in, they want a cash offer, whatever it is. And they already know me somewhat that we've already kind of spoken, or they went through my portal or my website. So it makes no sense for me to send out a letter that says, Hey, I want to buy your house. Makes more sense for me to send out, for example, a greeting card that says, Hey, I appreciate you trusting us and taking the next step.

Or if they said no to my offer, it makes sense for me to send out a greeting card that says, Hey, we understand that our offer doesn't work for you, but we're here if anything changes.

So that type of mail that goes out, if we haven't heard from them and they fill out a form and it's been 30 days and no response, I send out like a pattern disruptive type of postcard, like a dog. And it says, Hey, what in the world just happened? Get them to read it and says, hey, you fill out a form from our website here. Just want to make sure that you actually have the intention to sell? Let's connect again. We have your cash offer waiting.

Seth: You're saying that you recommend people start with a cold call, right? Cold call first, have some kind of conversation.

Paul: The cadence, you're asking about like, what's the cadence of all this?

Seth: Like, what's the order?

Paul: It depends on the sequence. I mean, okay, this is for people who have already inquired, right? So this is the big opportunity. You know, everyone's focused on lead gen, which is hugely important. Everybody needs those leads. But a lot of people who've been doing this for a little while who already have that lead generation in place, they know how to do it.

The next opportunity to optimize their business is actually the leads that are already in their CRM. The leads who have already said yes to them at one point, but they sell with someone else.

Seth: When you say yes, does that just mean responding in some way?

Paul: You sent a mailer out, they called back, they said they'd like to get an offer, right? You sent out a mailer saying, you know, I'd like to buy your property. They called back about that. And then that lead disappears. It happens all the time. That lead falls through the cracks. Maybe you got them an offer and then that falls through the cracks.

So there's all kinds of breaking points in your pipeline after a lead comes in.

Seth: And correct me if I'm wrong, but... So it sounds like when people come to you, they already have a big list of people that have already responded in some way. You just help them squeeze more value out of those people, essentially?

Paul: Yeah, exactly. It's not so much about cold outreach. We focus on the leads that they already have, and we focus on their continuous stream of leads that are coming in. If they're going to continue doing business, they're going to continue having leads come in and optimizing those leads to make sure we're squeezing as much as we can from it.

Because most investors operate in a very low conversion rate. Their KPIs are really low because they're only focusing on the leads that you needed to sell yesterday. Their hair is on fire and they forget the ones that are still on the fence. They don't seem to have any intention right now, but they actually do have, they're going to sell. It's just a matter of time. It's a matter of fixing whatever things they have going on and they're just ignoring your text, which has nothing to do with you.

And then they end up selling with someone else just because they forgot who you are. They're going to forget who you are if you're not following up intentionally and building your credibility and your brand with them.

Seth: So what does a good follow-up sequence look like? How many times are we following up? What are we seeing? How are we communicating with them? What order? And at what point do you stop? At what point is like, okay, I've kicked this thing enough and it's not going to work.

Paul: Yeah, that's really a question. And so, we're always improving to see what works. And it's hard to say it in audio right now, instead of having a visual infographic. But whenever it's ours, I have this infographic of an actual pipeline. That's what I used to do as I weld. And so there's all these little gates. There's about three or four gates that you have to open that a lead flows through until you finally have a deal closed.

So when a lead comes into your system, you send out a mailer. They said, oh yeah, we're interested in selling our property. You gave them a cold call and they said, oh yeah, actually we're selling our property.

That lead is now in your pipeline. Now there's all these steps along the way.

So I would say that our first sequence that we have is when a lead is fresh, they enter into the top of funnel. They said yes right away means they have a hot inquiry to move along with you, but for some reason they're not responding. That happens a lot. Actually people who buy leads from other vendors or PPC leads, even SEO leads. Those are a little less often.

Seth: Just gonna stop you there. So you said they said yes, but they're not responding. So how did they say yes? Does it mean they did respond?

Paul: They did respond, but then the communication stops.

Seth: Okay. So they responded one time in some way. Maybe they didn't say, yes, I want to sell, but they said something, but then they are not continuing to respond after the second contact?

Paul: Yeah. It happens a lot with single-family businesses. So they see an ad about selling your house. They fill out the form. So that's the initial inquiry. That's the saying, yes, I'm interested.

And then communication stops. Like you're trying to call them back. They're not answering. You're sending them text, manual text, hey, let's get an appointment so we can talk about your property so we can get you an offer. Communication stops.

So going back to my pipeline, that is the first opportunity then. That's the first opportunity we can optimize those types of leads.

So with those, I'm highly aggressive, meaning I probably have like three or four auto text messages that go on the first day, a task to call, two emails that are sent on the first day alone and a mailer that's on the first day alone. Because the whole idea is to we need to get them back on the phone with us. We want to move them now into the next stage of our pipeline, which is the appointment.

Seth: Yeah. So in that situation, when somebody has said yes once, but then they're unresponsive, it sounds like the most effective way to break through that and actually start the conversation again is just to hammer them from every angle until something happens. And how often does that still not work?

Paul: So that particular sequence right there only lasts for about 30 days. So most of the time they get in contact probably midway or before that, actually,

Seth: Did you say three days or 30 days?

Paul: 30 days.

Let me clarify. It's not 30 days of every day we're sending them. Different steps. It tapers out. So it's hammer on first, then we start tapering like maybe three days, then five days, and 15 days. So it's about 30 days long with that sequence.

And then there's a task that gets sent out to whoever is, you know, the lead manager, whoever owns the lead to go ahead and put them in a different sequence. That's a lot less aggressive. And it's about a year long. Maybe it starts off a 15-day follow-up, and then tapers out to 30 days, maybe even 45 days towards the end of the year.

So that would be the cadence of it. Early on in the funnel, yeah, we're hammering hard. And you have to hammer with some intention of bringing value. It’s not just sending three messages in one day asking, “Are you still interested in selling?”

Again, I'm going back to that, because that's what I see often, that stuff gets ignored. If they're not in the moment right now, if they haven't prioritized selling their house, that stuff gets ignored. And then it also gets unsubscribed. And so you're creating a bigger chance of getting unsubscribed and stopping that communication from them.

So again, the intention is still hammering, but we still do it with value because we want to get them back on the phone. If we got an offer from them and they again ghost you, you put them in a different sequence that's maybe less aggressive like that because they moved down our pipeline.

Does that make sense?

Seth: I think so. But I guess a couple of things I'm wondering, And first thing is, do you have any kind of measurable, quantifiable way to tell when we do this stuff with OmniDrip, the result is this, we get this many deals. When we don't, when it's just that one and done, then we get this many deals.

Like how much of a difference does this make to go through all this stuff to keep trying to get ahold of these people?

Paul: Yeah. So I have anecdotal, not quantifiable, like stats. And if I told you, I'd probably be lying because nobody has enough stats to give you a true figure.

But when my clients do implement this, I mean, I have a review on my website. He's a single-family house flipper wholesaler. And he said it's added a hundred thousand to his bottom line. He's doing at least a deal, two deals per month.

I have other people that give actual measurements of, Hey, this is added X amount.

So I don't have like, if you do this, it's going to increase it by X percentage because the truth is that's really hard to measure with the CRM.

I've reached out to clients after we plugged everything in, ask them, Hey, how are things going? I want to make sure things are working. If it's not working, then I’ll try to fix it.

I've had clients say, you know, I haven't really noticed anything yet.

And I dive into their CRM and then say, we'll go into deals closed, see their inventory of deals closed. I'll dive into it and say, Hey, this was actually in a drip sequence. I see the activity here.

They responded after that. And it looks like you closed the deal two weeks later. And they're like, Oh yeah, that's right.

When you have a system like this, you tend to forget where the source came from. So that's another layer of complexity of measuring this stuff.

Seth: I will say, like you said, there's no way to really know what might've been because it's just, you just can't know that, but I'm pretty sure it makes a massive difference just by my own experience.

Something that I am pretty bad at is, uh, I don't like to annoy people. Like I don't like doing email campaigns to people saying basically the exact same thing seven times over again. I don't want to be a pain. I don't want people to unsubscribe, all this stuff.

But there have been a handful of experiences in my years of blogging where I've been pushed pretty hard by people to promote their thing. For example, you know, whenever I attend a conference, certain conferences, the person that runs that conference wants me to send out emails to my audience, tell them to show up there to meet me and hang out at the conference. And my default would be to send out one email and that's it. And if they don't come, they don't come.

But I'm being pushed to send out seven emails like once a month over the next five months or whatever it is. And I'll tell you, every single time, there is somebody who, not somebody, several people that respond, like the second email who didn't respond to the first one, and then the third one that didn't respond to the second one, and then fourth and fifth. Every single one gets results.

Whereas if I just did one, I would be losing a ton. So I'm sure this follow-up makes a big difference.

Paul: This is not theory. This goes across all industries where you're doing a lot of marketing on the front end and the back end.

And so going back to what I said, I've done about 2,000 email blasts. So that comes out to an email blast a day for five and a half years. For other companies, for myself, the more emails I send out for some kind of promotion, for example, the more money we make. That I know for a fact.And that's my peers who have sent out more emails than me, who are more involved with email copywriting than I am. They say the same exact thing. You still have to be a little more intentional about what you say. The stronger the relationship you have with that audience, the more money you're going to make and the more it's welcomed to send out more.

I haven't talked about this, but this is warm marketing. We have to think there's a lot of things that get mixed up when you're talking about cold lead generation versus warm conversion, warm communication with somebody you already know.

Very different rules, cold marketing and lead generation. Investors get this all mixed up and that's a whole different ballpark.

We're talking about converting people who already know you. There's this old ad guy named Leo Burnett, ad guy in the fifties. And he coined this term called “friendly familiarity.” And that's where that is the component element that really sells. It's not so much like, oh, this headline pulled you in, all of a sudden you wanted to buy. Most people are skeptical.

In direct response marketing, the guys that make a lot of money selling financial newsletters, they make a lot of money on the small percentage of the population who are called hyper buyers or hyper clickers, whatever you want. The people who are just like, oh my God, that sounds amazing when you buy it right now and they buy it and they don't ever use the product.

That only encompasses 5% of the population. The rest of the market, they're very much more skeptical and very much slower to make a decision. So the people who capitalize on that by creating a relationship in the long run come out a lot further.

Seth: So friendly familiarity. I mean, that sounds like a big deal to grasp what that means. Does that just mean like building rapport with them over time through your writing or something? Or what is that?

Paul: Yeah. Leo Burnett actually put this in analogy. You think about the insurance salesperson who sells insurance and this is in the fifties. So you see him on the bus every day. You know who he is. You know, he sells insurance. He's told you before. He's kind of pitched you before that, but every day you see him on the bus. Maybe he tells a story. Maybe you just shoot the hay with about different things going on in life.

Then when that person, something happens in that person's life that then says, you know, see somebody die in the family and the family doesn't have any way of ensuring that, decides I better call whatever his name is that I see every day.

That is an example of friendly familiarity, always showing up, and just showing up with value too. That is like the key to long-term email marketing with your warm list, not cold email lead generation, which I've done, different story. People show up to your show because they know who you are. You're the friendly familiarity. You're consistent in showing up.

People like consistency. So I've been on cash buyers lists that wholesalers reach out to. Hey, can I put you on my cash buyers? Sure. That's fine. Never hear from that person ever. Three months later, I get an email. I don't even know who the person is. Three months later, it's like, I have a deal here. I have no idea who this person is.

If I don't know the person who shows up in my email inbox, I tend to hit spam because I think it's a cold outreach. So I hit spam every single time. I'm not the only person that does that.

Anyone who's growing a buyer's list, don't only show up even days later. Show up immediately in their inbox because the meetup, the meeting is fresh in their mind. And so you want to continue that as time goes by. People buy things or end up selling things to people they trust and they like.

Like, trust is one of the biggest factors in actually moving a transaction down the line.

Seth: Do you know who James Clear is?

Paul: I've seen his content, but I don't know much about what he does.

Seth: Yeah, he wrote the book Atomic Habits, and it's been like a huge bestseller. I don't know how many millions of copies it's sold.

He's got this newsletter. It's kind of funny. Like, I get tons of different newsletters, some of which I've signed up for, some of which I haven't. There are certain ones that I just instinctively, I literally don't even see what they say. They just get deleted.

And James Clear is one that, I don't always read it, but I never delete them because when I see them, they're really clear and simple and to the point. It's not like a wall of text. There's actually not much text at all. It's just like a handful of valuable things and it's always really good stuff.

And it seems like that's kind of what we ought to be going for, right?

Paul: It depends on the market. I'm not going to say that the short form is better than long form.

The most successful email copywriter I know, he sells courses. He sells in the copywriting space and niche. There's different markets, different niches. Real estate investing is a whole other niche. And within it, you have land investing. And so you have all these hot people who are looking for more information.

Well, copywriting is one of them. It's a whole other world where you have people just diving into copywriting.

And so the most successful person I know in that niche who does very well, he uses very long form, very story-driven emails, and he sells really well doing it. Story-driven emails about him. “Hey, I was sitting at the bus stop one day…” I mean, they're, they're entertaining and it's not just a story for the sake of a story. Sometimes it is, but he's one of the most well-known. His name is Dan Kennedy. You could look him up is you'll see his email. There's long stories. Companies, copywriters eat it up because they want to learn how to do what he does.

So it depends on the market. And if I'm selling to CEOs who have very little time, I might be more brief, more to the point. Ben Settle is one of them. Ben Settle is one of these that sells to business owners. His stuff is very short to the point. They're not long drawn out and some of them are.

The point of it is, at the end of the day, what I'm looking for every email I send out is did I increase or decrease a relationship with my list? Most people are looking at what's my open rates and what's my clicks. That has seen absolutely no correlation with revenue, with more opens equals more clicks equals more revenue. I've never seen that. And my peers will say the same exact thing.

Seth: So if that stuff doesn't matter, then how do you know if you've deepened your relationship with your audience?

Paul: That's really a question. And that comes from revenue, right? Revenue is the number one metric, but also the engagement you're getting. You're still getting replies back. You're getting replies back from people. The metric that I watch, most people don't watch this, but I watch email revenue per contact.

So if I'm writing for a software company, for example, and they're trying, they have the same goals of mine, create a relationship with that list, be a personality-driven brand rather than just a box brand that nobody cares about. We're going to drive that principle in. And then we're going to look at what's our email list, how much revenue is attributed to that email list. We want to look at that every single month and see if it's sustaining, if it's growing, et cetera.

So that's probably the number one KPI I'll be looking at.

Seth: I guess in order to use that as a measurement stick, that means each email needs to have some kind of a revenue generating objective to it, right?

Paul: Yeah. That's a good question. I don't look at per email because, and here's why. The common idea is like, oh, let's take the best performing email and throw it into our drip sequence. Okay.

I've done that plenty of times, you know, recycle it back, we get the best one, I've done multiple metrics, open rates, clicks, and revenue, put it back into it and recycle it, send it months later.

I've seen it where it did okay, it did the same, and I've seen it a lot of times where it actually was the worst performing one.

So here's a really great way to see what your relationship is with your list is to start split-testing subject lines. Put a really bad subject line in, put a really good subject line that you think would do great, and then you experiment with all this.

If you see not much difference between the two when it comes to opens, that means people are opening your email because of who you are, because of the sender name, rather than the line. If you're getting a huge fluctuation of people opening because of the really sexy direct response type of subject line, it means you have more people opening because of the subject line rather than the sender name.

And that's the objective. I want people to open because they see that name come in. You know, here's a really good example that ties into SMS marketing.

I'm a subscriber to J. Peterman catalog. They sell clothing, high-end clothing. And I get a message every single day from them. A lot of times I'm not into buying clothing. I'm not even into it, but I'm still on their list and I still open it up just to check out what they have. And what they sell, it's usually a new offer about some type of new jacket, some kind of bomber jacket, whatever.

I'm still on their list, even though I get hammered every single day by them. And they're wildly successful in this industry of selling clothing. And so they know what they're doing. They're sending it every single day. Without skipping a beat.

Seth: What is it they're saying that's keeping you from saying stop?

Paul: Because the idea in the back of my head is like, you know, one day I want to buy something from them. One day I will. So I'm going to keep them on because they're always sending value in the form of an offer and a new jacket, whatever it is.

It's not like I go and open up each one. I'm not like, I see it, sometimes I don't open it. Most of the time I don't open it. I still allow it because they've built that trust. Again, going back to trust. They built that trust with me that I still want to keep there in the loop to make sure I don't miss out on anything.

So tying it all back, it's all about the trust and relationship you have with your list.

Seth: It sounds like we're talking about newsletter-ish stuff, which I think is pretty relevant. Earlier in our conversation, you were talking about selling properties and getting people to be interested in the properties you're selling.

And again, correct me if I'm wrong, but that's kind of when this newsletter-type thing makes sense. And I guess you'd have to have a lot of properties in your inventory continually to justify all the work it takes to keep entertaining people and all this stuff.

But when we're talking about the acquisition side of things, where OmniDrip comes in, do you say, OK, Seth, we're going to take all your existing leads who have responded to you and we're going to start saying this specific message to this person on this day through this medium. The next day, we're going to say this thing through this medium.

Like, is that kind of what you do? Like, say exactly what to say and through what means we say it?

Paul: Yeah. After a client is done with us and on a drip.

So here's the before. Before, they might have maybe two or three drips. They kind of use it. The whole operation is, yeah, a lead comes in and I'll set a manual task to call. If they don't answer, I'll set another manual task. If they don't answer, I'll set another manual task.

So that is the “system” of follow-up. After we're done with them, they're going to have 20 different sequences.

So let's put this in a scenario. Now, after they're done with this, with us, a lead comes into their system. It's a landlord lead. They got done talking with them. He's interested in selling this property. He's got tenants in place. You give them an offer and then all of a sudden communication stops.

So what do you do with that? Before, they would just… most people would just call it dead after three or four or five manual tasks, or you can drop them into one of the sequences, which in this case would be the offer to low landlord sequence, drop them into that, let it work in the background for you. It's just going to send out the text messages automatically. If your CRM does that, it's going to send out the emails automatically. It's going to send out tasks for you to call back. It's not going to be every day.

This sequence right here I'm talking about is not an everyday sequence, far from it. It's going to send out emails that drive it to an article, SMS to drive you to an article. It might send a couple of direct mail pieces, not a whole lot, one or two. It's going to send you a task for a Loom video to send a personal Loom video to this person.

It's no different than a text message. You'll get a task notification that says, hey, follow up with this lead, send them a Loom video. Here's how to do it. Here's what you should say. It's a landlord lead. That lead now, whatever happened, we want to get them back on the phone to either text reply, Hey, I actually sold my house already.

That's a good thing. Get them off your list. You don't need them on your list anymore. If they sold it already.

Seth: When you talk about, “it's going to send all this stuff automatically,” and so that makes me think there's a CRM involved that's actually executing this stuff for you. But you said you don't work with a specific one, like you just work with whatever they have.

So are you like setting this up for them? Or are you saying, here, Seth, take this stuff, you set it up. This is what you're going to do.

Paul: No, we set it up in their CRM because a lot of investors don't quite understand how to set these things up. So I don't just give it to them.

And plus, they see more value in us doing it for them. If I just handed somebody, here's the templates. Well, for one, it's not made to their business because if a client comes in, I want to make sure if they do face-to-face appointments, we make sure that the messaging matches that. We don't want to send something that sounds like you're a 100% virtual investor. Hey, let's get on the phone to get details.

If you'd rather do face-to-face, we want to make sure everything matches to your business. So we put your URLs in place. We create articles for you, put it on your website.

Yeah, so if we hand out a template to people, they're never going to do it. And so I'm interested in getting people results at the end of the day. So we want to make sure that everything is in properly, that they're using it, they understand how to use it.

And because I've done the template thing and nobody ever really… Like you get back to them like, oh, you know, I don't know if it's working.

I don't know. Did you install it all? I installed about half of it.

I'll tell you the amount of content we input into their CRM, I've done it before. I have a team that does it. It's taken me like 8 to 10 hours to input into the CRM. So if I just hand them that template, they're going to be overwhelmed and they're just not going to do it.

Seth: Yeah. I think I heard you say somewhere that it's shown that it takes over 70 touches to convert those long-term leads.

When I hear this, it almost melts my brain because I don't want to follow up 70 times. That just sounds terrible. But the way that you do this is it happens automatically, right? And then does it stop after 80 times or something? Or when do you call it quits?

Paul: So to go back to that, to give some context to that, I know that from diving into clients, CRMs, and some CRMs, not a whole lot do this, but they'll tell you like, what's the average amount of touches it took before this person turned into a deal, right? They'll tell you that.

I keep seeing 70. I saw 180 there a day with a deal, 180 touches.

Now, that's total touches. That means they came into your CRM, they opted in, they filled out your form or they called in, and then you're just manual tasks, your call attempts, voicemails left. After they get in contact, transaction coordinators talking with them. So that takes into account too.

I'm seeing that number, these high numbers of 60, 70, 180 touches on average to see for these deals to convert. So what does that look like in the whole big picture? That's not like manual tasks. That's not you picking up the phone and making 180 calls. That is a combination. The manual, final calls are probably a small, probably a quarter of that or less. The rest of it are emails and SMS.

Okay, I'm going to tie this back. Going back, it's about friendly familiarity again, right? So I am trying to get touches in place. So I'm breaking these tactics down to the very minute detail, meaning if I send out a task for you, Seth, to call somebody to follow up with them, my task is going to tell you, call that lead. If the lead doesn't answer, leave this voicemail and I give you the whole framework on what to say.

And that task will then say, manually text them and paste this, then send this text their way after you leave the voicemail. And that text usually says, “Hey, I just called you about our offer. Do I have the wrong property?” So that's three touches.

So in reality, that's three touches, friendly familiarity. They're getting the missed call notification, the voicemail notification. If they have voicemail set up, they're getting the text, the manual text. And driving them also to an article on the website, that's a fourth touch. And if you want to get geeky about it, if you have a pixel set up now, you have ads being put in front of now, you're getting more touches.

So the point of this, again, is driving back home to this friendly familiarity, getting that and awareness up.

Seth: I don't know how much you track this, but when a lead is finally converted into a deal and closed, is there any common denominator you notice that's making that happen? Like, was it because the investor used a certain marketing medium, said a certain thing, offered a higher price or something else?

Like, what buttons should a person be pushing to increase their chances of closing?

Paul: That's a question I don't have an answer to because every investor I come across operates in a different way. They run a team of acquisition managers, or it's just the solo, like he's the owner and he might have a lead manager or an assistant, but he runs the appointments. And so he has a wildly better conversion rate than the other guys.

And they all use sequences differently. Not wildly differently, but I know an investor who loves how aggressive our form-filled sequences are. That's what I was describing to you, where it's like seven touches in the first day. He's using that even for leads that aren't even in that part of the stage yet. Maybe it's a lead that he gave an offer, but they dropped out of nowhere.He'll plug into that one. He loves doing it. He gets a response out of it.

And a lot of them have different lead sources. That plays a big role because your cold calling lead is far different from a guy who throws out a form. So that one calling the lead takes far longer to convert versus a PPC lead.

Seth: Yeah. So when it comes to something like texting or email, when somebody can say stop or unsubscribe and basically just kill that line of communication, what are some examples of things you say that actually get people to react and respond the right way without saying stop?

Or maybe another way to say that is, when people do say stop or unsubscribe, are there any common themes in terms of like, what was said in that email or text when they did that? What are the things that are making people opt out versus stay on the line with you?

Paul: In a 10,000-foot view of everything, because that's hard to measure. Again, because I don't really look at unsubscribes. I have a peer that looks more at this. And he actually says, he says this, the more opt-outs I get, the more money I make on a promo. So the more emails you send, yeah, the more opt-outs you're going to get.

Seth: Is that person in real estate or some other business?

Paul: Another business.

Seth: Okay. So that's one thing just to be aware of. I mean, it's could be a different type of recipient.

Paul: Yeah. Obviously different personality, different industry, different product.

But it's not like I, with real estate investors, we don't plug in daily emails in that way. Like a daily email might come in the first three days. And then after that, it tapers, there are emails like, you know, in a year span, that person's lead is probably getting 11 emails. So it's not a whole lot. So we're not sending a whole plethora of emails like that.

I don't have anything in real estate. I don't have anything to say as far as what is the good number. But I think a lot of people are scared of the unsubscribes. So that's why they tone down the frequency.

When I say everything I've seen outside of real estate, inside of real estate, everything I've seen is the more we send, the better outcome you have.

Seth: Yeah. So I guess your big discovery is like opt-outs and unsubscribes are not something we should be afraid of. Almost like lean into that. Say what you're going to say. If people want to leave, they'll leave. Don't worry about it. Is that your thought?

Paul: Yeah, absolutely. Because, again, we're plugging in multiple mediums, right? So if we do get unsubscribed, which is a natural part of all this marketing, it's not a bad thing to have unsubscribed. They come back later. We see they come back later anyway, right?

So they're not ready yet. They're still searching for a solution later down the road. And they fill out another form if you stop consistent marketing, right? And they come back later back into your SMS list.

But yeah, I'm not afraid of unsubscribes. Unless it's a huge, this is a caveat to that, understand what is an exorbitant amount, huge amount for unsubscribes rate. So in email, I'm looking at like half percent. So are we under half percent? Okay, we're at a healthy unsubscribe rate.

If you're getting 2%, 3% unsubscribe rate on email, don't remember what the SMS one is (SMS is higher than email; it's natural to get a higher unsubscribe rate in SMS than it is in email). But if I'm getting a huge amount, you're doing something wrong, either lead quality is completely off or (maybe this, I've seen this happen with people) merge fields are broken. So the dynamic fields, like you send out some emails, and it’s supposed to say, “Hey, John,” but instead it says, “Hey, first name.”

And so, all the merge fields are broken. And so people are like, yeah, this is garbage, and they unsubscribe.

So that's typically when you have a high unsubscribe rate, there's something technically wrong or wrong with your lead source.

Seth: Yep. Sometimes I like to ask questions like what I'm about to ask. It's kind of a ridiculous question. I know it's going to be hard for you to answer, but I just ask it anyway, just to get your thoughts on it.

So I know you said you recommend multiple different communication mediums like texting and email and calls and mail and all this stuff. So if a land investor could only use one marketing medium, they're not allowed anything else. What would you recommend?

Paul: I would say calls. Still continue to call because now you're eliminating automation. Now you're eliminating everything I do, which is fine.

I'm not going to say and hide behind, oh, email is the best way. I don't think so. Email works for real estate investors. Email works because it's an added layer with SMS. I recommend email last (this is for acquisitions, by the way), because you don't get a whole lot of replies back.

And that's a mistake I hear people say like, well, I don't get a whole lot of replies back from email, so I'm going to eliminate it. It's a terrible reason to eliminate a medium because marketing is not isolated from one another. It's not like they only see your SMS and your email is a completely different world.

No, everything connects with each other. They just read your email about some kind of scam going on in the market today. They relate that, again, friendly familiarity. They're relating that back to you and your brand. They see your text messages. They're going to respond to their most comfortable medium, which is usually text messages.

But it still adds to the story. It still leverages problems and pains. It still brings up your brand.

So going back, though, if you had no no other means of doing it, I'd say call.

Seth: And when you say that, are you thinking like hire a cold calling agency to reach out to people or just do this follow-up? Or are you thinking like, no, you Seth, you do the call.

Paul: So you're talking about cold lead generation. Again, so we want to mix the two.

Now cold lead generation is different. If I'm talking about warm follow-up, like actually following up with the person who came in already, who said yes to you already, calling would be the number one, I'd say. That's why I still keep calls in my automation.

Seth: With that in mind, again, is that me personally calling or is it like you can hire a cold calling or I'm sorry, just a calling agency to do it?

Paul: Yeah, either one. You, as a business owner, typically have a higher conversion rate than somebody who you hire. That's across the board; I've seen it in other organizations I've worked in.

It doesn't matter. It doesn't matter if it's you or somebody else, but calling is probably the better means. Because the SMS you have, again, going back to the unsubscribe, the SMS is going to have a chance of getting unsubscribed. Same with email. mail. Once that stops, it stops.

But calling is a little different. Until they call back, tell you to get me off your list. But then we want that call back. Then that creates a conversation point with them. We're getting face-to-face with them.

Seth: It's interesting how you're saying it doesn't matter. Because I know, I mean, maybe it depends on the quality of whatever agency you hire, whoever the person is doing it. Because I've heard some recorded calls that are just awful. I mean, it still works because there's not many other people doing it, but it's still not good as opposed to like, if I'm doing it and I care and I have better communication like that, that makes a huge difference.

Is it more about following the right script then in that case?

Paul: Yeah, I said that assuming that the other person doing it is doing a somewhat decent enough job, right? That's assuming that, right? And that rule goes into play for anything. If you have somebody who builds out drip sequences and emails, they don't know what they're doing. They're going to do a far less job if you're just going to do it yourself. So that goes to anything.

But assuming that calling, if you're going to use somebody else, obviously hire somebody. I mean, I hire somebody that knows what they're doing and you've vetted them, et cetera. So yeah, I think that goes without saying.

Seth: And if somebody could use two marketing mediums for follow-up specifically, would it be calling and what else?

Paul: Call and text message. If you're going to use auto text message just to use text message. Yeah.

That's the higher responsive medium that does get more responsive than any other medium. It doesn't mean you shouldn't use the others because it's cheap to send an email. It doesn't take any extra effort except building it up front to send that auto email.

But if you only had two, I'd say call and text message and do a cadence of either one. Calling, text message, calling, text message, a kind of repeated cadence like that.

Seth: So it sounds like texting gets more responses, but calling is more effective at actually closing deals?

Paul: Well, I mean, closing a deal means you're getting on the phone with them over the year. I mean, unless you're assuming closing it via 100% virtual, you're not even talking with them?

Seth: It happens less frequently, but it can happen. I've had that before.

Paul: Yeah, I've had that in land, especially. Funny enough, I had that happen more often with email than any other, like than text, for example.

But I mean, you get contracts in the mail too. So that's mail, I guess. That's the contactless medium. Mail can be one of them too, right? That was my mode of operation: just get the contracts in the mailbox. I've never talked to him at all. Then send him an email about the whole process, right? Send him a check.

And so it's kind of hard to say which one is best. Obviously, we just went through like each scenario is different, right? So some people might take that out of context where I just said, and then say, oh, that means for lead generation, cold calling is best. And then text messages.

Not necessarily. I mean, I didn't do that when I started in land, I was just sending mail out and I'd have a pretty high conversion rate on contracts.

Seth: Well, it's kind of interesting. Even when we started this conversation, I was kind of coming into this with certain assumptions, and I think you were too.

And it's important for people to recognize that because I think for land investors, this is definitely changing, but historically over the past 10-plus years, there used to be literally zero follow-up. People just didn't do it. You send one letter and that's it. You move on.

And we're in this world now where follow-up is way more important now and can be much more effective. And a lot of these things we're talking about are like my questions are framed in the context of almost like cold outreach. But that's not what you're talking about. You're talking about, no, these people have already responded in some way.

And that's just a different conversation when you already have some kind of connection with somebody versus not.

Paul: It's optimizing a different part of your business. All businesses, if you look at just the factory, you're putting them down a conveyor belt. I'm just talking about one part of that and optimizing that part. And there are other parts to optimize. One is lead generation. The other, selling the property. That's another part to optimize.

So yeah, it's just a different mode. I mean, depending on where you're at in your stage. Like you said, it's changed, right? From when I flipped land, I wasn't worried. And on the acquisition side of things, I wasn't worried about follow-up. Didn't really need to be. And if I was, I'd have too much property. I'd have a bottleneck in my conveyor belt, right? Which is a good problem to have, but it can be a really bad problem.

Seth: I did wonder about that whole conversation of following up more versus just doing more cold outreach to new people. I don't know if you have any cost comparisons on this, but like, what does it cost to implement this follow-up stuff versus, no, no, let's not do that.

Let's just keep reaching out to new people. Like what is more expensive, do you think?

Paul: That is a really good question. So, okay, I can relate this more to single-family because wholesalers and flippers have this problem more, right? It's land flipping.

Seth: The land is going that direction now. So it's a relevant thing to talk about.

Paul: So I'll say this. You're familiar with Dan Kennedy, right?

Seth: Oh, yeah, for sure.

Paul: Everybody knows Dan. He's not the only one that said this. He talks a lot about this in his newsletters, things like that.

And so in his books, people spend a huge amount of resources on the lead generation, and then they spend very little money on the follow-up, and that's the least expensive marketing avenue.

So this is a cost comparison. A lead, a call that comes in for a flipper, comes in, it's going to cost maybe $150, $180. Maybe on the high side, it's going to cost $300 per lead. So if you're buying leads from a vendor, those can cost $250, $300 a pop, okay? Very expensive lead.

So you can then, if you decide, I'm going to just do more lead generation, understand you are moving a lot of money into that front end to produce the same results or a slightly better result. While if you implement some sort of follow-up, especially if it's automated in a sense, let's take follow-up mail. The follow-up mail we implement, it'll probably cost you per lead an extra 10 bucks per month.

So maybe per lead, it costs you 10 bucks. So you're adding 10 bucks into that $310. It's fractional to follow up, especially if you have some automation in place right now. If you don't have automation in place, you have to hire somebody to do the follow-up for you. That adds on to your costs.

It's still not as much as buying that lead because we're all buying leads. We're doing, we're buying leads through your time, with your money. And that is a huge amount of resources to get that lead.

Seth: Yeah. And I'm wondering, if somebody responds, under what conditions would you say we should not follow up with this person? Like, is it only if they say, I hate you, don't ever talk to me again and then you don't do it? Or like, if it sounds like they're 90% on no, but there's just a tiny little piece that's like, well, maybe. How do you know when to disqualify them versus continuing to follow up?

Paul: I would say for me personally, I would do it until they unsubscribe, right? I'm going to say every lead that comes in is a viable lead until they say no. That's my modus operandi.

Seth: So like on the phone call side of things, if you're emailing them, texting them and calling them, if they unsubscribe from the email and the text, does that mean you shouldn't call them anymore? Or do they have to cuss you out on the phone and that's the unsubscribe?

Paul: Yeah. Most investors operate this way, which is fine. An SMS unsubscribe. That's one channel they didn't subscribe from. There's still the email. So different channels.

I'm not a lawyer. So like if an attorney tells you no, that no means from all channels. I don't know if that answers your question, but everyone's going to feel it differently. For me, it's a no from each channel.

Seth: Well, Paul, I appreciate your time. If people want to work with you or talk to you more about how this stuff works and pick your brain more, what's the best way to get ahold of you?

Paul: Yeah. They can go to my site, reiomniadrip.com and easily contact me there. There's no salespeople behind it. They can just reach out to me. They can call me at my phone number on my site as well.

Seth: Sweet. Yeah. I will include a link to that, along with a lot of other stuff we talked about here at retipster.com/186. That's the show notes for this episode.

Paul, thanks again. It's great to talk to you and hopefully we'll talk again soon.

Paul: Likewise, man. Appreciate it.

Seth: Hey folks, how's it going? This is Seth Williams, and you're listening to the REtipster podcast. This is episode 180, and today I'm talking with my friend, Neil Clements, about all things subdividing.

So Neil is a phenomenal example of a land investor who has been killing it in the subdividing niche. I got connected with him a few months back when I was looking for the subdividers in the REtipster community, and I got on a call with him, and in an hour and a half or so, he just blew my mind. He gave me an incredible education about how subdividing works in Texas. I asked him tons of questions and he just nailed everything and really made it make sense for me.

And I wanted to share the love with all of you here. And Neil was willing to do that. And we're going to be going through this process of I'm going to do what I do best, where I just try to pick around and ask as many questions as I can to really try to understand the full scope of what's going on, how this works, who this is and isn't for, and on and on. And I think we're going to have a good time here.

So, Neil, welcome to the show. How's it going?

Neil: Great, Seth. I'm happy to be here. Thanks for having me on again.

Seth: Yeah, absolutely. So for those who don't know you, why don't you tell us your real estate investing background? When did you get into land and what were you doing before that?

Neil: Yep. So I came out of college and immediately went into real estate. It's one of the only things that I've ever done. And so that looked like for me starting off as a real estate agent agent about eight years ago, and then went to be a mortgage broker, went back to be a real estate agent once I moved from one part of Dallas to another, and quickly found myself flipping houses with a partner, doing rent houses, flipping houses, and that was near COVID time, about three years ago.

And so we had a very successful house flipping business, scaled that up very quickly. First year did about 20 flips, second year did 30 flips, and wanted to keep scaling from there. until recently, early last year, early 2023, took a one-month sabbatical, went to the beach with the family, worked part-time, even though I had a team back here in DFW that was still working, and really looked over the whole business. Where were we successful? Where were we not successful? Especially with the market recently changing and some deals looking like really good deals that we had bought that were no longer good deals now, now that the market had shifted late 2022 going into 2023.

And I looked back and saw that most of our profits came from land deals. And it's not that we had done a ton of them. We had done maybe a handful of them. But I looked at the profit that came from the land deals. I looked at the time that it took to do the land deals. I looked at how much did we have to spend to renovate the properties and had this epiphany that, oh my gosh, we're focused on the wrong thing.

And so I came back, shifted our team of cold callers, our operations, everybody that we have on the team and just said, let's have one singular focus. Instead of trying to do a lot of different things in real estate investing, let's go all in on land, specifically on land subdividing.

So I had an excellent year last year and looking forward to a really good one this year.

Seth: So you took the Land Investing Masterclass, right? If I remember correctly.

Neil: I did. Yes, I did.

Seth: Sweet. So did you start off just doing straight-up land flips and you're like, okay, I'm done with this. Let's go on to subdividing. Or did you get into this knowing, okay, subdividing is where it's at. That's what I'm going to start with.

Neil: Yeah. So I probably started off different than most people on a few different aspects. So first off, it was the second thing you said, which is I started off subdividing. And the reason I did it that way is because the first time we bought our first handful of flips actually had four to five acres on them. And so we came across laying deals very early in our house flipping business.

We quickly found out that this, I guess, ingrained concept in the land, just like it is in houses, that the smaller land that you have, the more price per acre that you've got, because you have more demand, more people can buy it. The bigger land that you have, the lower price per acre you have. There's less marketability, there's less demand, therefore you can't sell it as much per acre.

And so it's the same with houses. Lower square footage equals higher price per square foot and vice versa. And so taking that similar concept from house flipping just to land, we started to find that there were opportunities out there where, for instance, maybe you could buy 20 acres for $10,000 an acre and then sell one acre lots for $50,000 to $75,000 an acre.

And to put that in perspective, that's a purchase price of $200,000 and a sales price of $500,000 to $700,000, with not a lot of renovation needed in between.

And now, obviously, that's a home run deal that doesn't happen every single transaction, but that's the power of subdividing. And so we got into subdividing specifically to look for subdivide deals and not necessarily to look for properties that were extremely undervalued. Because, I mean, we're in the fastest growing metro in the nation being DFW and trying to buy properties that most of the people out there say, buy it at 40%, 50%, even 60% for but the size of properties that we're purchasing, you know, people just laugh at us.

And we've spoken to, in our cold calling efforts, about 20,000 to 30,000 people last year. And I can't tell you once that we even got a deal at 70% or 80% of market value, even though we actively offered at those amounts. Anyways, we came into it looking to subdivide and add value to properties.

Seth: So what percentage of market value are you buying them at? Like 90%, 80%, or 100%?

Neil: Yeah, so there's two ways to look at it. I mean, let's tackle subdividing a little bit, then I'll explain how we look at it.

So there's one area of subdividing where you can do big lots, meaning that you essentially take 50 acres and a 10-acre lot. You don't have to have any kind of approvals, no county involvement, an exemption. So that's easy because you don't have any risk. You can literally just survey it. You don't have to wait for anybody to approve it.

So on something like that, yeah, we can typically offer up to 90% of market value, potentially 100% of market value, just depending on if the spread hits where we want it to hit. I'll tell you about that in a second.

The other aspect of it is a platted subdivision where you have to get county approvals. And the reason that that's different is because if we go out there and say pay 100% of market value or 90% of market value for a property, having to have a platted subdivision doesn't mean we get automatic approval. And so therefore, it's not like on the big ones where we can just say it's actually worth, say, 30% more. It's not worth that extra margin until it's actually approved.

And so therefore, we either have to wait until it gets approved to close, or are we going to take that risk? But to backtrack here, your original question was, how do we calculate offers?

So we don't like to pay over market value, don't like to pay over 90%, 100% of market value, but truly our main margin is we want to have a 30% gross profit margin on every deal we do. And what that looks like for us is we've got to buy at 60% of the after-repair value. And so that leaves 10% cost for expenses. So if we pay more attention to what we can make the property worth more than what the property is currently worth.

And I liken that to apartment investors or to people who buy businesses who are not necessarily paying as much attention to what the property is worth in current condition based upon occupancy, based upon revenues, whatever they're evaluating. They're going to look at what's the future potential, what it's going to take to get there, and how much money is it going to take, how much time, how much risk, and calculate it based upon the after repair value.

And so similarly, we've put that approach toward land investing. And so that's more of how we calculate what is it going to be worth after we do this subdivide and how much money is it going to take to get there.

Seth: So in this whole thing of figuring out what your offer price is versus the improved or after subdivision value of that property. So how do you know when it is or isn't worthwhile to subdivide at all?

Like, say, if you were to buy a 40-acre parcel, split it up into four, and the net proceeds of that or the sale of the child parcels ends up being not that much more than what you could have sold the original parcel for.

Is there some kind of ratio you're looking for? Like, what kind of increase do you need to see in the child parcel versus the parent parcel in order to justify your involvement in doing this?

Neil: Absolutely. I mean, there's no set in stone number. My number I'm looking for is a 30% gross profit margin. And so that's just specifically running your net numbers versus what you sell it for, or 60% of what it's worth after you subdivide it. And that's how I calculate the offers.

But to answer your question another way is there has to be a difference in price per acre between a smaller lot versus a bigger lot in a county. And so we actually started recently running our numbers differently.

Previously, when we were targeting counties, you know, we just went into a county because of proximity, you know, because we can drive there essentially, you know, it's within three hours of DFW Metro. And so we said, okay. Here are 20 counties we can target. Let's call all of them.

And very quickly, we learned by doing that is that there are some counties that you have that spread. Again, kind of like we said, maybe 10,000 an acre on bigger pieces. You know, 10 to 20 acres, 50 acres, and on smaller pieces, you're at, say, 20,000 to 50,000 an acre.

There's a clear, massive value spread between lower acreage and bigger acreage, because that's how we create our profit. And so that's one reason to do it.

So the second reason to do a subdivide would be to sell a property easier.

And so although not more profitable, in almost all circumstances, there is more demand for a 25-acre lot than there is a 50 lot in most places in the U.S., you know, 25-acre lot, 50-acre lot versus 100-acre lot, one acre lot versus 10-acre lot, you know, however you want to slice it up, there is more demand at the lower end. And so you either do it for profit or you do it for days on market to be able to sell it faster.

But if we're going to take on a subdivide, it's going to be for profit. And it's going to have to be a very sizable chunk because the properties that we're looking at buying, our average purchase price is about $350,000. Our average after repair value is just about one and a half times to double that. So, you know, anywhere from 550 to about 750 and so we're not necessarily looking for skinny deals.

Yet another question you asked earlier about how do you know when to subdivide things like that. Subdividing it's not right for everybody and the other thing that I will tell you about it is that it's rare to find a good property that can be subdivided. And we can dive into that. What do those properties look like? But it's not easy to find. Let's say that.

Seth: Yeah. I mean, maybe we should get into that. Like, and I know this, this probably differs from state to state and area to area. Cause I know in Texas, the availability of water is a huge deal. That is not a big deal in other parts of the country, but that's just one example.

But when you're looking for the perfect parcel to subdivide, or maybe when you're putting together your list of property owners to contact, whether it's direct mail or cold calling or however you do that. So what does your perfect property look like? And what kind of of stuff would you just be like, absolutely not, this is never going to work; don't even call them.

Neil: Sure. So you're looking for the needle in a haystack, I will tell you that. The difficult part that we have found in running these properties is that you have to hand-sort them. In most of the areas, if I'm using DataTree or some other list provider, they're not going to give you, for instance, road frontage as the main, ideal goal that you want to have.

Because when we talk about subdividing, if you're talking about wanting to put in roads, you want to install utilities, you want to do all that. Well, you better have some deep pockets or you better have some good relationships with people who do. Yet the subdividing that we like to do already has the roads in place, for the most part, already has the utilities in place, water and electric, and has the ability to, with minimal effort, say $10,000 or $20,000 or less, has the ability to be instantly marketable.

And so, that's what we're looking for. Floodplains, in a lot of instances, kill that. Obviously, steep contours kill that. So we're looking for properties that we can instantly market as smaller. That is the best way to say it. Otherwise, you're not necessarily doing a minor subdivision. You start to get into a major subdivision, which takes a lot of time, effort, and money, and a lot more risk, in my opinion.

Seth: So it sounds like this isn't the kind of thing where you just, you know, go to DataTree and say, yeah, give me everything vacant land, 40 acres and up, and go. Like, you have to download it and then open up Land ID or something and go parcel by parcel and look at it and be like, does that make sense? Yes or no. No, because you got to understand road access and utilities and a lot of stuff you just can't really know without looking at it, right?

Neil: That's correct. And that's what makes it so difficult. And that's what kind of isolates the opportunity to the select few who are willing to do it.

And so we still we know an only prospect for subdivides where I mean, we'll still prospect for properties that don't need subdivision. However, you know, out of the, I think we bought 15 properties or so last year, those amount of properties that we bought, there was only one that was not a subdivide opportunity.

To give you an idea, the competition in our marketplace, and maybe this is everywhere, I don't know, I only target North and East Texas, Dallas, Fort Worth, and Tyler. But the competition in our marketplace is just unlike anything I've seen.

Now, I will say it's not as intense as house flipping or wholesaling, yet I did not expect for land investing to be this intense and for every single phone call we do to have to even, for instance, if we give an offer at 100% of market value, to even have to convince somebody that that's market value and to take it.

So, I mean, that's the struggle, you know, you would think if you're not in this industry or if you've never given offers that good, you would think giving somebody 90% to 100% of market value that they would all just jump for joy and be like, oh yeah, where do I sign? And the reality is in hot market areas, like I work in a lot of times, that's still not enough.

Seth: Yeah. Now, what do you think that is? Cause I'm pretty sure it's not that case everywhere where you could make an offer for 60% of market value.

Neil: I don't think it's that case everywhere.

Seth: Yeah, so is this just because it's Texas and it's growing like crazy? And I do think there are a lot of land investors there because of the relative ease of subdividing and that kind of thing. But I don't know, is it just because it's one of those hot markets out there?

Neil: Yeah, I mean, if you look at, a lot of people still have, I guess, COVID mentality, and not the disease. Yet COVID mentality and the fact of they think their property is going to get 10 offers in three days and sell for 10% above market value with no effort.

And the reality is, is that since late 2022, that's not what's going on. And so a lot of times we're in an uphill battle on what people perceive their property to be worth. And even after we're able to talk to them about what that looks like, they just don't agree or they have a reason they want to hold onto the property.

The other thing that we don't encounter much, we're encountering almost no distress, which is extremely foreign to me because, you know, in house flipping, that's, that's the name of the game is, you know, somebody has a rundown property condition. Somebody's in a hardship, such as foreclosure. Somebody needs to sell a house quickly for some reason or another, you know. In land, especially in our area, property values have shot up so high, so quickly. I mean, most properties in our area have doubled over the past three years from what they were previously worth.

So I think that there is just a lag between market perception and what people expect to get for their properties.

Seth: Do you ever even start the conversation with like 50% of market value or does it just start at 80% and go up from there?

Neil: Oh, no, it doesn't even start at 50. I mean, it's hard to say, but we even have people laugh us off the phone at 90% of market value.

And I'm not saying that lightly. I mean, we have two American cold callers in our office who are my acquisitions agents that make the calls and they lock up the deals. And we found them to be the best possible callers on the phone for the type of properties we deal with.

And even with that, I'm continually surprised every single day for about the past year, how often, you know, we just sit and look at each other like these people are absolutely insane as far as what they expect to get for their property.

And the other difficulty that we have is, and maybe this is everywhere, but in North and East Texas markets, it seems like land sellers and land real estate agents price their properties at just ungodly prices. You know, if a property is worth $10,000 an acre, they'll list it at $25,000 an acre and they'll flood the market with all these bad listings.

And so anytime we're negotiating with somebody, you know, we have to try to show them sold comparables and they just don't want to hear it, especially in Texas, because they can't see that data. So all they have is to go on as us because we're real estate agents, we have access to it.

But it's difficult to convince somebody in these areas to even sell for market value, much less 10% or 20% off market value.

Seth: Wow. It's fascinating. Has it always been like this? Or is this something you're seeing like this year? In 2023 or I don't know.

Neil: I'm relatively new to the game of straight land investing and not house flipping. And so even though we've had immense success, even though we've done quite a few properties at this point, even just in the last year, I can say that this is all that I know. know.

And we didn't expect it to be this way, especially based upon the education and the content that we'd absorbed in preparation for making this change. We didn't anticipate it to be this hard.

Now, a lot of people listening to this are probably going to say, yeah, you shouldn't know. But everything's harder when you actually start trying it. Yet truly, I thought it'd be easier. And maybe it is in other areas.

And that's maybe a point that you're trying to make is maybe there are other areas of the U.S. that are good for these subdivides that don't have as much competition. And I'm definitely all ears for somebody who knows of some areas.

Seth: As I'm hearing you say all this stuff… It does make some sense. I mean, Texas is like fastest growing, has a lot of stuff going for it. It's relatively easy-ish to do these kind of minor subdivides anyway. Not that there are no obstacles, as you know, but there's a lot of reasons why the stars and planets align and send a lot of people that direction.

But we actually had a conversation with David Hansen, I believe it was episode 176. He works in several different states and he's always doing like the platted subdivisions where it's a major subdivide. It's very involved. And he's kind of a genius at figuring out like, what is the best possible way to carve up these parcels so that we can get as many in there and have green space and sell this whole thing for that, you know, as much as you possibly can.

I think it still has a lot to do with the market, but is your preference to go after after minor subdivides?

Neil: Oh, absolutely.

Seth: Yeah. And I wonder like if things would shift, say if it was the other way around, it's like, no, my specialty is platted subdivisions. I'm not afraid of spending over a year to get this thing done. Like I'm the best at this and I will figure out how to make the most of it.

Like if you all of a sudden had that competitive advantage, this would be a lot easier because you can create money out of thin air by just being willing to go through these difficult steps and having the expertise to do that.

That's what David's situation is. But it sounds like you're more like a normal person where you don't necessarily have that civil engineering expertise and you don't want to deal with all that stuff. I certainly wouldn't.

But I wonder if maybe it's just about changing that recipe a little bit in order to find that competitive edge that most other people don't seem to have.

Neil: Yeah. I'd be curious to know with David what that looks like, because I know that there are instances, for instance, where we can pay, say, 150% of market value, where we could pay 200% set of market value. The instances are varied.

For him, I'm sure it's all about after repair value. What is the value when I've done? It doesn't matter what has worked now. The constraints for me is that when I'm getting a bank loan, my property's still got to appraise.

And so a lot of these banks aren't necessarily, they're not seeing the same value as I'm seeing it as a subdivision because they may acknowledge that the subject property is 50 acres, but they're not going to value it as five, 10 to acre lots, even if I send them the surveys. They just don't want want to take the risk on that collateral.

And so as opposed to if you have a major subdivision, you have a plat in place, you have all those approvals. Well, hey, now a bank looks at it as a completed platted subdivision. Hey, it is different. And so that could be it. And could it be possible that he's coming in here, somebody like him is going after these exact same properties that I'm going after and just doing more work on them, such as a major subdivide? It's very possible.

Seth: Yeah and I don't want to speak too much for David, but I believe what he said was like, they don't even get into this until they know they have a national builder who's ready to buy up everything. So by the time they're closing on it, the deal is sort of done in terms of getting the thing sold.

So maybe that gives a bank a different kind of asssurance, when it's like, hey this thing is literally worth this, here's the purchase agreement, it's done.

Neil: Yeah, that's super smart. I mean, my model would differ in the fact that I'm looking to stay as nimble as possible and looking to move as quickly as possible. And so most of our minor subdivisions, from the time we go under contract, we close within 45 to 60 days and then we're only holding them for at a maximum of six months. We're not necessarily installing a ton of utilities. We're not installing roads. And so, beyond the purchase price of the property, we're not shelling out a ton of capital.

And so for me, as I'm growing this from nothing to something awesome, kind of this first, second year of getting into it, my priority is quick capital return so that I could actually go out there and maybe do some of those bigger deals. But right now I'm trying to build a capital stack so that I have the opportunity to wait for a year to do one of those major subdivides. Because right now, it just wouldn't be in the cards.

Seth: So you may have already said this, but maybe we should talk about just some typical numbers on this thing. So like what is a typical acquisition price and the typical disposition price, what you're selling it for in the end?

And I think you said it takes six-ish months if it's a minor subdivide. Is that right?

Neil: Right, exactly. And the 60s months is specifically just days on market. It's specifically just advertising time for either going to market with a realtor or actually trying to sell the properties.

And so there's very little time, a week at most, just to really coordinate your photographer, maybe get property mode, maybe clear some frontage, just some basic stuff that really doesn't take much time. And so, with that, average numbers, if we're just trying to look at what does this look like on an average basis, I'll give you an example of what I think like a good deal would be.

So this is just an example of a deal that we're working, east of Dallas, in a smaller county. We're purchasing for a hundred thousand and we're selling it for 260,000. We've got to add a water line. So we're doing about 35,000 in repairs and all in our net profit on that is going to be 107,000 after you take out about 10% or so for real estate agent fees, closing costs, and holding costs.

And so I would consider that an excellent investment. Profit is 40% of ARV in that circumstance. And that's what I would consider for what we're doing a very average deal. Not necessarily a home run, yet also not a single. Somewhere in between, double, triple, a good, solid, healthy deal.

That's kind of what we average. Some of our bigger deals, we're looking right now at a deal that we're buying for a million, and we're going to do a major subdivide on it and ultimately make it worth about two and a half million, but that's going to take two or three years.

And so there are stuff like that that we are doing, yet that's really the one-offs. Those are the home runs. Those are the once a year, once every other year properties that you actually get to see on it. But my average minor subdivide is only maybe three or four lots.

It's not that bad. If you know the challenge, the challenge is finding the properties, right? I mean, because if you can find the properties and you can get them under contract to get a value, the actual end subdivide is not really that hard. Especially if you have a good real estate agent you're partnering with, a good surveyor, a good title company or attorney, you've already got really everything you need to do the deal and to do it right.

Where most people get in trouble with subdivides is specifically just having a lack of knowledge on what can be subdivided and it cannot be subdivided. Where people get in trouble is they buy a property thinking it can be subdivided without actually having discussed with anybody. Then they go to actually try to subdivide it, figure out they can't, and then now they're either upside down or they're just selling the property for breakeven.

Seth: So right there, what would a person need to do to avoid that, to buy a property thinking they can subdivide it and then realizing they can’t? What questions need to be answered for them to be 100% sure they can do what they want to do?

Neil: Yeah. I mean, so you've got to figure out who's going to give you approval. And so, and you need approvals. So for instance, if we're talking about Texas, you're 10 acres plus, there's a full state exemption that says if all your resulting lots are 10 acres plus, then you don't have to get any formal county approvals or anything like that. If you're outside of city limits.

Now, if you're inside city limits, you're always dealing with the city. You know, that could change. depending on jurisdiction. And so you've got to figure out what governing body has authority over your land. And are you going to be subject to what their rules and regulations are? Or are you going to be exempt?

The second thing you need to do is verify all utilities. In Texas, that means water primarily. Water is the big issue here, like Seth alluded to. Electricity, not as big of an issue, but still, we've got to make sure it's there. And then you've got to make sure your other basic due diligence for buying a piece of land, easements, floodplain, et cetera.

But the biggest thing that I would say for somebody looking to subdivide is you've got to add a layer of due diligence into your process of buying that you don't previously probably have, which is county approvals, city approvals, and what is that all going to look like.

And then if you're not verifying buying utilities such as water and electric on these properties, for subdivides, you're going to want to, because especially if you're subdividing into smaller lots, you're probably selling to somebody who wants to put a house on it to some extent. And so bigger recreational tracts, that's not as important.

But if you're subdividing into smaller pieces, you have to make sure that they can actually do what they want to do. And a lot of times, that's building for us.

Seth: Yeah, that was an interesting thing that kind of had this aha moment because I know like in states like Michigan and Florida and Wisconsin and Washington, perc tests are a really big deal. It's the kind of thing that can kill a deal if it doesn't.

And things like water, it's a non-issue. There's tons of water. Like there's so much water we don't know what to do with it. Whereas in Texas, it's the opposite where perc tests are never an issue and water is always an issue.

So, and it's not like, say if there's no water and correct me if I'm wrong on this, Neil, but my understanding is that if you find out there's no water, that doesn't mean you can't subdivide, it just means you're going to have a really hard time selling that.

Like, it's almost like, why do all this when you know you're not going to be able to sell it because there's no water, right?

Neil: Well, to some extent. So it all goes down to, are you talking about exempt subdivisions, big parcels, or platted subdivisions? Because big exempt subdivisions, yeah, you're just going to have trouble selling it. No big deal.

Smaller platted subdivisions, the county or the city is going to… you actually have to submit proof that you can get water. And so if you're wanting to take, say, five acres and the five one-acre lots, just for example, the county is going to want to make sure you can get water and electric access, and they're going to need actual signed documents from your water provider and electricity provider saying they agree to provide water.

The answer is it depends, but it depends on what kind of subdivision you want to do. I mean, I was talking with a colleague yesterday who was just asking me, hey, can I subdivide this property? What would it look like? And she was looking at a five-acre property, tried to divide it into two or three different lots.

And I looked at it pretty quickly and just said, hey, you're not going to be able to do that. She said, well, why is that? Well, first off, it doesn't have the road frontage. You need to look at those regulations on how much road frontage is needed per lot.

You also can't just survey this out with a surf pair. Like you got to get a plat. It's inside city limits. You got to get city approval. You got to run it by them. You got to verify water. You got to verify electric. Sometimes counties will have you verify drainage runoff to make sure you're not going to flood somebody else's property by putting houses there.

And so when you do a platted subdivision, which is kind of teetering on major minor, you know, somewhere in there, if you're not doing roads, it's a lot more extensive. And you really got to know your stuff. Or you need a long due diligence period to make sure that you don't get stuck with a property you don't want to buy.

If you're doing an exempt subdivision where nobody has approvals over it, you're kind of more in the wild west and you just need a really good real estate agent surveyor.

Seth: Yeah, this was another huge thing I learned from Neil the first time we talked was when he was explaining this whole exempt subdivision thing about basically how to find like, what are these rules? When are you exempt from having to go through all these requirements and get county approval to do this subdivide?

And he showed me line by line in the document online. Here's where you go do it. And I actually made a video explaining how to do this with Claude, the chatbot. You can probably do it with a lot of different chatbots now.

And I actually discovered it's easier than I thought it was to do this in Michigan, just by following what Neil showed me how to do. I'll include a link to that in the show notes for this episode, retipster.com/180.

But this kind of goes back to if anybody out there heard the episode with David Hansen in 176, he was explaining what he has to do is basically read the county's zoning ordinance and rules and all this stuff and understand it better than the county does so that he is the authority and he knows exactly what he can and can't do. And if people challenge him, he can say, no, your own rules say this.

How much time do you have to spend going line by line through county and township and city regulations to understand this stuff? Like, do you not have to do that much anymore because you stick to the same few markets all the time?

Neil: So we still do it every time. And I'll give you an example of why.

And the time that we do it is we do it right before we call a county. So especially if we're exploring a new county, I'll read the subdivision guidelines and I'll send my acquisitions guys a summary of what we can do in the county.

Because the acquisitions guys are going to be running their after repair value and giving offers based upon the margins we want to hit, based upon what's allowed in that county is exempt, essentially.

And so there's a county in our area in Texas, and there's actually several counties in Texas that can not only do 10 acres, they can also do five-acre exempt subdivisions, which is really neat because especially in areas where there are high demand for that, that’s fantastic.

And so in this specific county, we put under contract a property that was 25 acres. And our intention was to make five five-acre parcels. Well, in our due diligence process, we originally saw five acres was allowed. Our project manager called the county and the county told him, the provision says greater than five acres.

And oh my gosh, my heart sunk because what they said is we interpret that as 5.01 acres per lot. And you have five acres, therefore you cannot do this. That killed our deal. Oh my gosh. I mean, it's just little things like that that you get the nuances of.

And so to answer your question, yeah, we absolutely read it every single time because we've also seen other counties that don't even have any subdivision regulations, especially getting out toward West Texas. There are actually quite a few counties that are small enough that they don't want the hassle of dealing with your subdivisions. They don't care. And you can do literally whatever you want.

And so knowing those subdivision guidelines and knowing which counties you can do what and cannot do what, you could actually make a business, and we have made a business off of taking advantage of those exceptions and counties that have unique offerings like that.

Seth: Yeah. Makes you wonder, though, like a big component of what makes this work is the fact that there's demand for these newer, smaller parcels that you create and they just kind of sell relatively quickly.

If the demand suddenly dried up, this would kind of not work anymore, right? In a place like West Texas, is there demand for that kind of thing? Like, does it make less sense to do it out there even though it's easier?

Neil: Yeah, I mean, that's absolutely what you got to watch. You've got to know that there's probably a reason that they don't have subdivision regulations. And it's probably because they don't have an issue with it because not many people do it.

So on this whole issue of demand and how important that is to this whole strategy of subdividing, whether it's major or minor or exempt. So like, what is the risk that demand would dry up? It seems like this is not a huge risk in Texas, at least in your area. As long as I've been aware of what's going on there, it seems like there's always high demand for it.

But say if you're working somewhere else, I look at the six-month timeframe or maybe the year-plus timeframe it takes to do this with like a platted subdivision. What is the risk that, okay, this made sense when we started it, but something changed in the meantime, and now it doesn't make sense, and they're subdivided.

And, you know, is there much of a risk of that, or could you catch it before it gets to that point?

Neil: No, of course, there's always a risk. The advantage of the model that we use with the minor and exempt subdivisions is that, you know, our contract period is maybe only 45 to 60 days.

And so from the time we go under contract, if we can't predict the market 45 or 60 days out, we're in trouble. And nobody can predict what's going to happen. We saw that with 2020. We saw that with 2001, 2008. All the times that the market shifted drastically very, very quickly. We can't predict the big “black swan” events per se.

Yet even in events like that, land demand has historically stayed there, especially if you're able to pivot to an owner finance strategy, or if you have good capital backing you to where you can make those pivots.

And so I'm not necessarily worried too much about that. The people who I think should worry about that are the people who are doing very long-term and large-scale major subdivisions, who, from the time they go under contract, have to spend a year to maybe 18 months to get approvals for that. You brought a massive risk.

I mean, imagine, Seth, if you went under contract on a property, summer 2021, the absolute peak of the market. And then you look and you had to spend a year, maybe 18 months to get that plotting approval. You know, the market really started dipping April or May 2022. Especially in Texas. And so the market that you bought into and now you did this major subdivision on, things have changed drastically.

You spent all this time, all this effort. And so if you didn't have a good contract or you don't have a way to get out of that contract or you don't have competent attorneys on what you're going to do on that, not to mention the time and money wasted, you could be in for a pretty big loophole or a pretty big trouble there.

So my worry, and that's the worry that I have with being a home builder, that's the worry that I have with doing those big subdivisions is demand can change at the snap of a finger. And if you don't have good, competent attorneys that can get you out of contracts like that, that could be big trouble for you.

But with how fast we do things, I'm not as worried about it.

Seth: Now, going back to something you had said a while back, you were talking about a property, like one of the home run deals where you bought it for a million and it's going to sell for two and a half million, I think you said, and it's going to take two and a half years. So why is that taking so long? Two and a half years is a long time. What's going on there?

Neil: Yeah, and that's probably an overestimation. Yet, it's outside of city limits, yet it's in a city's ETJ. Have you ever heard of that term? Extra-territorial jurisdiction?

And so basically what that means is that the city, and it's a pretty big city in East Texas, has decided that anywhere surrounding us within a certain number of miles influences our city. And so therefore, we're going to have to control what happens in it. And so even though no tax is paid to the city, they still control development in that area.

And so you go from previously being able to maybe do something exempt or dealing specifically with just the county, which is my preference in every circumstance—county is a lot easier to deal with than cities—and now you move it to having to get full approval from a relatively large city in East Texas that is known for not being easy to work with.

So once you get to that, our process is going to look like listed on market day one with with some preliminary marketing materials right after we buy it, spend six months to a year to attract… our main goal is RV parks or mobile home park because that mobile home park is next door. And so our main objective is to attract a similar investor who is going to, an in-builder or buyer who's going to want to do that.

And then we'll partner with them, us take on the expense of actually doing the subdivision of the development and go through all the hurdles with the city. And ultimately, probably, I would say, six months of back and forth, maybe nine months of back and forth, get that approved and get to the closing table.

And so that's overall a time period of say a year and a half, two years to do that. And I went ahead and got a 30-year loan on it. Just in case, man. You never know what's going to happen. But that's an example of just what I'm being told by a commercial real estate agent that we're going to partner with on the deal and what I've seen other comparables in the market take to actually get full market value.

And so a lot of those big subdivision contracts like that, the work is not necessarily done until the builder is selected. Very similar to what you said, David had told you, you know, you don't want to get the work done first because, well, what if the builder doesn't like it? Or what if the person, the end buyer says, well, I would have done this differently.

You could have a preliminary plan, but you also want to get their input too, because they're the ultimate end buyer. So they need input on how they like to do things.

Seth: As you were talking there, a thought just came to my mind. I know that in Texas, the availability of water is a big deal in order to make that property useful. So there are actually some improved property types that don't require water at all.

I'm thinking about my self-storage facility, like we don't have water there or there's other solar panel farms and that kind of thing. I wonder if you do come across these properties that are not worthless, but they're worth less because of the lack of water.

I wonder if you could just look at it from those other angles of, well, we couldn't build a house here, but we could do this. Maybe it's useful for that.

Neil: No, I love that idea. That's a really good idea. I mean, the challenge with most of the properties that we are doing deals on is that they're in relatively rural locations. And so they're far enough away from a major population center to not make sense for self-storage.

Yet solar is absolutely something we're looking into in every single project we go into contract on. And so we go ahead and list that on a service that markets solar listings. We also send it out to five or six guys who do solar that I know to get bids. And so yes we are actively pursuing those opportunities because they are incredibly lucrative whenever they hit. I haven't had one hit yet, but I had a friend who had one hit and it's life-changing money.

Seth: Yeah. Well, it's actually like, you're right about self-storage in terms of like the rural markets and that kind of thing in terms of that playing a part in it. But I'm kind of going on a tangent here, but I've been researching, you know, higher end RV and boat storage and that kind of thing where it's like an improved garage type thing you stored in.

And apparently, the population matters a lot less for that. What is important is that the facility is really close to a highway and really close to a gas station where RVs can pull in there and people can air up their tires and get gas and that kind of thing.

And it's kind of opening up my mind a lot because the lens that I've always looked at self-storage through where it's like, okay, there can only be so many square feet per person in that area. It's like, throw it all out. It doesn't matter. All that matters is that it's not all that matters, but the things that do matter is proximity to a highway and that kind of thing.

So, but it's just making me wonder, like, there's probably tons of different uses for certain properties that would otherwise be less useful if you didn't know about what makes a good version of this property use. I don't know if you're able to follow what I'm saying.

Neil: No, I completely follow you. And I think that's really intelligent. I mean, our ability as land investors to make money is going to be only limited by where we can see the demand.

And so you're absolutely right. I mean, you know, whereas I look at a property, I see a really cool subdivide. Somebody else looks at it, sees a major subdivision. Somebody else looks at it, sees an RV park. Somebody else looks at it and sees exactly what you just talked about. You know, everybody has their own playbook that they want to run. And the more plays that you have in your playbook for whatever situation comes up, the more money you're going to make.

Seth: Absolutely. I almost wish there was like some kind of an AI thing where you could like plug the property, like upload the DataTree profile report. And it could just like, you know, do its magic and think of all the possible uses based on where it is. And I don't think we're there yet, but hopefully someday somebody makes something like that.

So going back to something you said earlier about how, you know, you don't even start by offering these people at 50%. Like you get laughed out for being offered 90%. So that implies that the conversation starts with a pretty high offer and you go up from there or the deal just dies.

So what if you did start by offering 50% knowing that you won't get the deal then, but like, you're going to have to go up and up and up, but at least you're like anchoring them at that lower price instead of just anchoring them at a 90% price?

I mean, I'm kind of with you. I think I would be doing the same thing you do. Like once I get laughed at by enough people, I would just stop trying. But I don't know. What if you did? Would that make any difference, do you think?

Neil: Yeah. So we started off the first three months of last year when we were doing cold calls, we started off at offering 65%, went up to 75% of market value. The challenge was that we didn't get any deals within three months.

And as soon as we started evaluating these properties differently, we started calculating our offers based upon ARV in a gross profit margin versus current market value and just offering, you know, say 65%, 75% of it, that's when our acquisitions really took off and we started putting under contract a lot of properties.

And so, you know, out of the 15 deals that we closed last year, a majority of those were last six months and most of them were last 90 days of the year. And so our acquisitions ramped up. And now we also were doing more phone calls. And also cold calling takes a long time to ramp up as far as actually starting to get those under contract. Maybe mail's the same. I'm not as familiar with it, but it takes a while.

It's interesting to think about what-ifs. I can just tell you what we've done. And I can tell you starting off that low did not work for us. Now, we're always trying to get prices out of people before we tell them our price, of course. And we're actually pretty successful at it, probably 90% of the time.

The issue is that, say a property is worth $300,000, people are telling us they want $400,000, don't call us back unless you can get me $400,000. And we'll call them back and offer them 200. And they'll say, I told you not to call me back.

You know, I mean, it doesn't mean we don't call them back, but it's just, you know, here's how our offer is calculated. Here's how we see it. Here's the potential in the property. And it’s not resonating, not hitting. And so that's the difficulty.

Is there any merit to offering 50% in these areas? Hey, man, I'm sure that there are other people who are buying deals at 50% in these areas. For some reason, that's just not us, though.

Seth: Well it's almost like… When you said originally you started at 65 then you went to 75 you weren't getting deals, again, this is a what-if game, this is probably pointless even. But like what if you started at 50 knowing I can go up to 100 and it can still work but I'm still going to start at 50 I’m going to make them think that that's a valid starting point? And I know they'll say no, but we'll go to 65, we'll go to 75, we'll go to 85. I wonder if you might end up in a lower place as a result of starting so much lower?

Neil: It's a good perspective and it definitely be something I'm willing to try. I don't have any guess to what would happen. All I can say is when we tried something similar previously, it ultimately led to fewer conversions.

I mean, the difficult thing is, I mean, some of the more recent properties we're buying are actually up in the $600,000, $800,000, a million. For properties like that, obviously, you got a pretty good offer on there.

I mean, overall, I think there are two factors that contribute to why we have to offer so much. So one is that we're dealing with extremely sophisticated sellers. They own assets worth $300,000, $500,000, $700,000, $1 million. Absolutely more sophisticated than the person who owns a $50,000 piece of land. There's no doubt. And so with sophistication, I believe, comes a higher price.

And then two, with the demand and the growth in this area… The other problem that we hear a lot is that, hey, I just got a mailer, and my mailer offer was $350,000 when we can maybe only offer, I don't know, $350,000 as well. But they're like, yeah, I wouldn't take $350,000.

And so I can tell you for a fact that there are other people in Texas doing the same thing that we're doing who are blasting people before we get to them with cold calls, but they're blasting them with mailers. But the people that we get would say, oh, I'd never call a mailer. I'd never talk to somebody who sent me mail, but you're really a nice guy, so I'd rather sell it to you. I can hear you. I can see that you're trustworthy.

And so that's why we like cold calling. But it's an interesting thing.

Seth: Do you ever do seller financing? I know you get bank financing a lot. So like what percentage of your deals that you buy end up going the seller financing route?

Neil: Not many, unfortunately. That is something that we're looking to implement more of this year. We just put a property under contract yesterday on seller financing. So that was an excellent deal for us. And then we bought another, we bought one more last year.

And so I'm thinking in terms of probably one out of 20, one out of 30. So yeah, I mean, 5% or less for seller finance. We're actually selling more on dispositions on seller finance more than we're acquiring on seller finance. And I love holding those notes that will do that all day.

Seth: Do you prefer to do that on the disposition end? Like if you could have your choice, would you rather do seller financing or do you want to get cash first if you could?

Neil: No, I'd get cash first.

So as we kind of talked earlier, I'm in the building phase. And so I'm looking to scale as quickly as possible. And so the thing that is holding me back from scaling is absolutely access to capital. 1000%.

And I know that I could probably get unlimited capital at say 50% profit split or whatever profit split it would be. It would not be hard to find. But I'd rather take the full profit and fund it here and try to scale up a little bit slower, but albeit build up a much bigger capital stack a year or two from now. So that's what I'm trying to build up.

Who knows what's going to happen in this market and this economy with this year coming up. And so I'm just trying and build up capital stack to go to town when something happens.

Seth: Yeah. Totally. Now, I think you said you did about 15 of these deals this past year. Is that right?

Neil: Correct. Yep.

Seth: So how much are you making doing this?

Neil: Our average profit last year per deal was 150,000. And that's gross. That's not net. That's gross. But that's after all like cost of goods sold and everything before staff.

And our median profit’s about 110. And so some of those skewed a little bit higher, but we're making about $100,000 per property that we do. We're very fortunate to have a very high net profit last year, over seven figures. And looking forward to this next year, try to do the exact same thing and maybe double or triple that.

And so the craziest thing is that, I mean, we really focused on this May of last year. That's a full six months ago. Now, we had some success in land before that and subdividing before that. Yet, I have never seen an opportunity like this. Being a realtor is a fantastic income opportunity.

It's not necessarily where I want to be forever. Being a house flipper was a fantastic income opportunity yet it was very difficult compared to land flipping and doing these subdivides and doing these land flips, I mean drastically easier than being a realtor or being a house flipper. And I'm making three to four times the net like net profit on every single land flip that we did on every single house flip that we did.

And when we put it like that, I mean, it's just, there's no comparison. And a lot of people, you know, you and me included, are saying, hey, it's getting competitive. There's a lot of people out there. You know, we're having to decrease our margins. But I hope what people are taking away from today, and one of the reasons I wanted to get together with you, Seth, again and talk about this, is…

There's more than one way to do this game. And as things get more competitive, we have to find ways to add value to properties. The days of offering 30% or 50% on a $200,000 property, buying it for $70,000 to $100,000 in my market area are long gone.

And so if you want to work in extremely high demand areas, you've got to find ways to add value to properties that nobody else is looking at, whether that's building self-storage like you did, Seth, whether that's subdividing properties like I'm doing, or whether that's doing major platting. Whatever you're doing, you got to be adding plays to your playbook or else this competition is going to get you.

Seth: Yeah, man. I totally agree with that. Do you ever think about, or does it ever seem enticing to like, maybe I should go to a less demand, less competition area where it's easier to buy deals, but maybe take longer to sell?

Like, does that thought ever cross your mind? Or is it like, no, I prefer the high competition, difficulty of finding deals, low market value. And I prefer being able to sell them at a good amount of time.

Neil: I've heard from several people that a land investor's biggest struggle is selling properties and selling them quickly. A lot of times acquisitions…

Seth: Sounds like the opposite for you, right?

Neil: Yeah, it is. And so that's where I'm very fortunate. And so with me being a realtor and me having access to MLS and all these areas that I work in, and us having an operations team behind the scenes with a full-time person here, and then also a VA in the Philippines, with us having that kind of support, our disposition effort, I mean, maybe takes me a handful of hours a week to be able to sell these properties.

And that's not an exaggeration. It does not take long or much effort from me.

Seth: That's awesome.

Neil: I would rather have that dispositions effort and have the ability or have the hardship be on acquisitions, because once I sell some of these properties, get some capital back, I'll just reinvest it in the acquisitions.

And so I would prefer a market that is fiercely competitive to one where I can do these subdivides and I can just keep on funneling acquisitions, acquisitions, acquisitions, and then selling them pretty easy.

And so now I will say it also doesn't make sense… so we don't target, for instance, like a Dallas county, a Tarrant county, Dallas and Fort Worth, Collin County, like Mckinney… We don't target these suburban areas either. So there comes a point where too much demand is too much demand. So we have found some sweet spots in some counties that have less demand.

But for me, in the most rural areas we work at, which would be, say, two and a half hours away from Dallas, you can still have 10- to 20-acre properties selling in a month or two. That's considered slow in a lot of areas. Maybe three months, four months, worst case.

And so it's hard to find an area in North Dallas or North Texas or East Texas that doesn't have a ferocious demand for land. It's actually hard to find.

Seth: Do you know Logan Fulmer?

Neil: I've heard his name. Yeah.

Seth: Yeah. So we interviewed him, I think it was episode 177. And he goes after properties in Texas that have a lot of title issues, like intentionally going after them and fixing the title issues. Sometimes it takes years.

But one of the examples that he talked about recently was when he bought a landlocked parcel in Texas for 5,000 bucks and then sued for access, put a road into it. All of that cost him like 150 grand. And then he sold it for $500,000.

I wonder, is there a lot of landlocked property in Texas near your area? I wonder if that might be a way of somehow seeking out the landlocked ones, even though it's a huge pain and a lot of cost to build a road to it. Maybe it's still worth it if it makes you come out ahead.

Neil: My objective, and this is kind of a recurring thing that we've talked about a little bit, is it's a good idea. There's no doubt. Just like major platting is a good idea. Just like building a self-storage facility is a good idea.

Seth: Hey, everybody, how's it going? This is Seth Williams, and you're listening to the REtipster Podcast.

This is episode 178. And today I'm talking with my friend, Matt Theriault. So Matt is somebody I've followed for a long time since before I got into the blogging and YouTubing world myself.

And I remember back when YouTube was still a relatively new thing and I would look for real estate investing videos on YouTube and I would always see Matt's videos. And I appreciated them because they were really well thought through. They made me you think critically about real estate investing as a profession and how to deal with problems and think outside the box. And these things weren't surface level. They were pretty deep. And as a fairly deep guy myself, I appreciated his approach and his teaching style.

So today, I get to talk with Matt about his story and where his real estate investing and content creation journey has taken him and where he's trying to steer his ship in this ever-changing business environment we're all finding ourselves in.

So Matt, welcome to the show. How are you doing?

Matt: Thanks, Seth. I appreciate it. I had no idea that the history went back that far, but it's good to know.

Seth: Yeah, man. I'm sure you've had an impact on a lot of people through Epic Real Estate and just, I mean, I don't know how many millions of views you probably have on your videos, but you've been doing this for longer than most, right?

Matt: Yeah. As far as I know, I think I'm the longest-running real estate investing podcast that's still going. So we started in 2009. I think the only person that was there before me, and he had like 10 different podcasts, was Jason Hartman, but a little bit more like higher level type.

But as far as the how-to and the nitty-gritty and strategy and technique and tactics and stuff like that, I think, yeah, the longest one.

Seth: Yeah. So I don't think I've ever even heard the actual origin story of how you got into real estate and what your journey looked like. like and even like the how and the why behind why you started Epic Real Estate Investing. Can you just like give me the backstory on how that all started?

Mat: Yeah. And thanks for asking. It's been a long time since I've been asked. When I got out of the Marine Corps, I spent the next 14 or 15 years of my life in the music business.

Seth: Oh, really?

Matt: And I did really well for myself.

Seth: What did you do in the music business?

Matt: I had a small hip-hop label, but we had major label distribution. It just happened. I was really blessed and fortunate that people liked what I did and they're willing to pay money for it. It’s very different than how real estate started because there were no goals. There was no discipline. There was just waking up and doing what I loved and I was just really fortunate.

And then, when the digital download came along, it just kind of killed the music. When you make all your money selling CDs and records, you know, it made it kind of tough. And I would say in about six quick months, I had no idea what was happening. I mean, in hindsight, it's crystal clear. But at the time, had no idea and went out of business in like six very fast months, like on the emergence of Napster.

You know, the whole underground music scene, whether it was underground hip-hop or underground rock or underground dance, they embraced that digital download, the technology, far before the mainstream population even knew what it was. So if you fell into one of those genres, then you got wiped out before anyone else even knew what a download was.

Seth: Are there any well-known artists that you signed that I could search for and find?

Matt: Right. Signed? Not really. I mean, Michael Myers was my only artist, but kind of what we did that was a claim to fame was two things.

We made records specifically for disc jockeys, like the battle hip-hop DJs. So we made those instrumental records with all the little scratchy sounds and stuff like that on them.

So we did that and then… As far as I know I'm the first one that did this, but at the time, dance music compilations were really big but then they would like center on a DJ who was like the actual artist or the star of the thing, and then they would mix their music and so they're mixed like legal mixtapes. If you remember what a mixtape was, I don't know how old you are, Seth. But I used to sell those in high school.

Seth: Okay, nice.

Matt: Did you ever have a cassette player? Are you that old?

Seth: Oh, yeah. Yeah, for sure.

Matt: Okay. I kind of lost track of where that technology started and stopped.

Seth: All my childhood, it was tapes.

Matt: Very good. And so I just took that same idea from the dance music industry and went over to hip-hop. And so I had the Beat Junkies, their compilation on my label. And they're still going as far as I know today. And they all went off to do other things. And then they all came back together. And they all kind of operate individually and as a group.

And then on our compilations you know I was able to work with you know Jurassic 5 and Eminem and Mos Def, and so all the kind of, not necessarily your mainstrea, I guess. Eminem is mainstream now but he wasn't at the time, no one knew who he was. But I got to work with a lot of artists but never really had anybody signed to me except the one, Michael Myers and another guy named Akbar. But anyway.

Seth: Wow, nice.

Matt: Once we decided that, I don't know how I'm gonna make my way in entertainment because I didn't necessarily have the talent myself. I was a little bit more of the executive type and you know, I produced a lot. But it turned into a, all of a sudden, only the people with the deepest of pockets were going to stick around.

And so I just had to find and do something else. And I went and bagged groceries. I was 34 years old and I was bagging groceries because I didn't know how to do anything else. I didn't have any certifications or degrees or anything. I didn't know what to do, but I had to eat.

Seth: Was that like a low point for you? Like, did you get depressed or anything? I mean, that's a huge fall, right?

Matt: For sure. I mean, when you're in your hometown and you're bagging groceries at the local grocery store and your high school girlfriend comes through the line, you're like a paper plastic man. You know what I mean?

Seth: Ouch.

Matt: That one hurt that day for sure. But yeah, you know, 34 years old and taking my lunch breaks with 16 year olds was kind of very humbling, for sure. And so did a lot of complaining, you know, blaming everybody and everything for my situation. Life was unfair and poor me for about six months and I finally realized, wow, if I don't do something, this might be my future and I don't want that.

And I became kind of close with the grocery store manager who was also 34 years old. Coincidentally, you know, he was managing the place and I was pushing the shopping carts. He was only two years away. This was the big eye opener. And this is like kind of really like the launching ground and the foundation of everything I'm about today.

And he'd been there for 18 years. He started there bagging groceries just like me, but he started when he was 16. He was two years away from being there 20 years. And he was going to be able to withdraw, I think, 70% of his pension. For indefinitely. I mean, he stayed there for 30, he could get a hundred percent, but he was going to go ahead and take that then.

But he pulled me aside and he showed me, and he used to have a photo album. Do you know what photo albums are?

Seth: Oh yeah.

Matt: Okay. All right. It's funny. I have assistants and interns. They have no idea what I'm talking about sometimes. And that makes me feel really old. I must be kind of out of touch with the young ones too.

I told one that I was the other day, I was like, yeah, I used to sell compact discs. And she was like, what's that? I said, you know, CDs. She goes, oh, I didn't know that's what that stood for.

Seth: You know, I actually had a moment like this last year. I was talking to somebody, I think he was like 23 or something. And I don't know how this came up, but we mentioned Ricky Martin. Like, I remember back in high school when Ricky Martin was a big deal?

This kid's like, who's Ricky Martin? What are you talking about? I was like, are you serious? No way. But I guess it kind of made sense. I mean, he hasn't been a big deal for a long time.

Matt: For a very long time. That's right. So he had showed me a photo album and he had like, I don't know, it was three or four multiple angles of it, but lots of pictures. But of three or four different apartment buildings he had been able to amass along the way while he worked at the grocery store.

And he shared with me how the passive income from his apartment buildings will surpass the pension that he's going to receive. And so he was retired at the age of 38.

And he told me these words. And these words, I've said them a million times. If you've listened to the show, you've heard them at least 10 times. But he shared these words with me. And it's just been the foundation of my whole existence ever since when he said, “You know, Matt. If you really want your money back, if you really miss your money,” and I really did because, you know, I made my million before I was 30 years old. And he said, “real estate is the final frontier where the average person has a legitimate shot at creating real wealth.”

And I was like, the final frontier? This is the last one? He says, “Yeah, unless you can know you've got an amazing three pointer and can jump three feet or, you know, swing a baseball bat better than anybody or whatever.”

But he basically just kind of broke it down. You've got to be super talented. Or you have to have an amazing business idea. You have to be an inventor. You got to be a writer. You got to be a composer. You got to have a gift for sports. But for the average person, real estate is where their best shot is at getting wealthy.

And I was like, wow, at this point in my life, I feel far below average. So who am I to aspire above average? So I took it on and I did what I thought the logical thing to do was I went out and got my my real estate license.

And I did okay. You know, I got rookie of the year in my office the first year and then it just kind of settled down. And I lived in an area where I was very blessed. It was the million-dollar homes. So I only had to sell one of those things every other month to make a really, really good living.

And, but there was one Saturday where I was meeting with a client and I had two good clients, really good clients. They just did repeat business. They gave me business over and over and over again. I didn't have to work for it. Once that relationship was established. They just gave it to me.

And there was a Saturday. I was all dressed up in a suit and tie. I remember it specifically as in Palos Verdes, California, at the top of the hill of Palos Verdes. And I was in a suit and tie at 10:30 in the morning. They were supposed to be there. They didn't show up until about 11. And they came in, they signed all the paperwork. I had all their papers out and everything, coffee and snacks and everything for them to sign the paper. They were closing a bunch of deals.

And they came in 20 minutes late in jeans and a T-shirt, signed all the documents and took off for the day. And then I was left there to finish up the paperwork. And then I had to go hold their properties open. And I was like, you know what? Real estate's been good to me. But if this is where the money's at, I'm sitting on the wrong side of the desk.

And so that was like my breaking point where I was like, okay, no longer am I going to represent other people in their sales and their transactions. I'm going to act on my own behalf. I'm going to buy and sell myself. But I had no idea how to do it.

So I went and made a huge investment, like so many people do in their investing education. I think I paid $22,000. And back then, my family thought I was absolutely insane. That was unheard of. I remember my grandma, she's like, well, you're going to get like a degree or something, right? A certificate? And I was like, no.

She goes, well, do they have a good job placement program? I remember her asking me all these questions. And I was like, no, I'm going to go be my own boss. I'm going to do this all by myself.

So that's how that transition started. That's how I got into real estate. It really was for the money, but then it really became that whole moment of this guy, the grocery store manager. He was able to recreate in parallel to his day job's pension an income that far exceeded it and did it inside of 18 years.

And most people strive for 40 years and can't do that through the traditional means. I was like, you know what? No one ever taught this to me. This is a brand new thing, idea to me. And gosh, if I didn't just luckily end up bagging groceries, I still might not ever know. So I was like, okay, this is what I'm going to do. And that kind of became my, I mean, sure, I got into real estate for the money, but then it became a little bit of a passion of mine to actually share what I had learned.

Seth: Yeah, it's interesting. You talk about what if you had never started bagging groceries and had that revelation and heard all that? It makes me wonder, I have a feeling a lot of people are in that situation and hear about it, but they just kind of blow it off or dismiss it. Or it's like, no, it's not real.

And man, I even think about myself, like how many business ideas have I heard about that maybe were real, but I just blew it off and dismissed it. And it's a good reminder. Like it comes down to action, but I guess also being able to tell, okay, this is a real legitimate thing versus now this is not worth my time.

Matt: Yeah. But this guy, I had evidence staring me right in the face.

Seth: Yeah. I'm sure that helped.

Matt: And he was my age and he was done and I was just starting over. And that was, it really hit me emotionally.

Seth: For sure. So did you start trying to get apartment buildings like he did? Or did you go after houses? You're like, what was your first step after you paid 22 grand?

Matt: As much money as I made in real estate, I spent it as fast as I made it. So I didn't have any capital and having, you know, left the music business, I had to file bankruptcy there. And, you know, my wife left me with all of her debt and, you know, she didn't like it that I didn't have a job anymore, basically. And I was no longer a celebrity, a music celebrity.

So I was really drawn. I got really lucky. The program I chose... It's not around anymore, but it was kind of like a buffet. You got to learn whatever you wanted to learn. It was a two-year program. You go out to Glendale, Arizona and, you just kind of walked up and down the halls and okay, they got wholesaling over here and they got short sales over there. And then there's legal strategies here. And I just kind of walked up and down.

And so I was really drawn to the creative acquisitions class. And because I had to go there because that's what my resources allowed me to do. And I just really embraced that and got really good at it. And went into single-family houses and buying stuff subject to and seller financing and built a portfolio, got it to over 350 units at one time.

I was completely unlendable from a bank standards the whole time. And that's what I was able to build just with that. And then when I started getting money, I was like, well, why would I go to a bank? I don't need their money. I know how to do this myself. So it was really a blessing to be able to start with really no money at all.

Seth: Wow. So you bought a lot of these properties or maybe all of them with owner financing where the person sold them to you on installments?

Matt: It was either owner financing, subject to, private money, a combination of the three. So those are my three main tools.

Seth: Okay. Gotcha. Like a hard money lender or you had a rich uncle who would partner with you or something?

Matt: Friends and family. Friends and family. Yep.

Seth: Cool.

And just people that I I would meet. I met a lot of people at my RIA clubs. What's funny about RIA clubs is that, when you're going in there as a newbie, you're like kind of in awe. I haven't been to one in a while, but there were like 100 people every time I went.

And I just look at all these people like, oh, my God, these people are all real estate experts. Look at all this stuff that they're doing and blah, blah, blah. And then once you do one deal and you tell somebody about it, all of a sudden the crowd starts to gather. And all of a sudden, you find yourself holding court explaining how you did this one deal. And then you realize nobody in there knows what they're doing.

Becoming an expert attracts money, buyers, sellers, partners, investors.And so once you do a few deals, you become the de facto expert because no one else has done just a couple of deals. And what that does is it attracts a lot of money. It attracts buyers, attracts sellers, it attracts partners, it attracts investors.

And, you know, a lot of those people have money and they want to put it to work, but they don't know how. So they cling onto the people that are actually doing it. So that's, that was a big launching ground too, as far as the private money goes.

Seth: Wow. So just out of curiosity, the owner owner financing piece, what percentage of your deals would you say you got that way versus subject to or private money?

Matt: They almost all started with seller financing. So I would say probably 70%, 75% of them were all seller financing.

Seth: Okay. What was a typical structure? How would you explain it to them or get people to go along with that versus just wanting cash? Like what was their motivation for saying, yeah, I'll do that?

Matt: Good question. Beause when I first started doing it and I see a lot of people do still do this today is when I first heard about how, in seller financing, the seller could step in and be the bank, I was like, that got me all revved up and raring to go. So I would just go to my sales appointments and present that right away. And lots of rejection when you do it that way.

And then over time, I started to learn that, okay, so there's this other guy down there a couple couple of years later, he said, you know, Matt, we buy, we're real estate investors. We buy properties in one of two ways. It's either our price in the seller's terms or the seller's price in our terms. You only need to get control of one of them. And, what you need to understand is, it's easier to go for the terms because the seller doesn't really understand anything but price.

So that was the big pivotal moment for me when he said, when you go in, you have to talk price because that's all they understand. They didn't go to some educational program and learn how to sell creatively.

So when you walk in and they're in some sort of distress and you start presenting all these creative things, you sound like a scammer. You sound like someone's trying to steal their property. You sound like they're trying to pull the wool over someone's eyes and doing something that's illegal.

So you just always have to go through the price. And then, if you reach an impasse when discussing price, then you go, well, I might be able to give you a little bit more. If I could give you some money now and the rest later, how much do you actually need right now?

And that was always the transition. And I still use that exact line today. And once they give you an answer, now you've dialed in, you've closed for the down payment, so to speak. Now you just have to decide how you're going to pay the balance. And that's typically in payments.

Seth: Yeah. So is there some kind of, you know, once you get to that point where you wrote the subject of payments, that kind of thing. Is there a standard set of terms that you default to? Like five years, this percent interest, this down payment, or is it like there is no standard? You just figure out what they want and tailor it to that?

Matt: So my default, my go-to, like I always want them to tell me what they want, right? But if you ask them what they want, they don't have an answer. So you have to kind of feed it to them and let them and help them figure it out.

But it'll always be, once they give me the down payment, I'll say, okay, well, you know, most people that everyone else I work with, but they allow me to pay the balance in 300 equal monthly payments. Are you okay with that? And they almost never are. Oh, no, that's too long. It's 27 years. I'll be dead by then. I've heard that a million times.

And I was like, okay, well, how many payments would be acceptable? And now I can go from there. But I planted the anchor with 300, which I wouldn't get, I think it's 27-something years. And I also didn't, if I say 300 equal monthly payments, I'm also starting at zero interest too.

Seth: Do you say that or is that just kind of the underlying assumption?

Matt: No, just 300 equal monthly payments until the balance is paid off. So I didn't introduce interest at all.

Seth: As far as the down payment, is that just whatever they say they need now or do you have a standard down payment that you try to shoot for?

Matt: As little as possible always, right? You always want as long a time as possible and as little down money as possible. And if they say they need a half, then it's like, okay, well, what are the payments going to be? And what is that ROI going to calculate to? And now that gives me a number of what, how much I can go pay a private money person for. You know what I mean?

So that's how I do it. If they wanted a big, giant chunk of money down, then my payments are going to be really small and drawn out.

Seth: Sure.

Matt: And it's like, well, if that's too small, well, I'd be happy to raise them up for you, but what can you do for me on the down payment? And so it would just be like this little seesaw balancing act until we met someplace where it was a good deal for both of us.

Seth: Of all of these people that you've talked to with seller financing, I mean, obviously it sounds like it's worked out plenty of times, but what percentage of the time is it just like, no, we're not doing seller financing versus, yeah, we'll consider that.

Matt: I wish I was tracking that. I've gotten to the point where I just don't pay attention to the no's. I'm just looking for the yes-es. Most people don't like the payments idea. I just don't have a number. I mean, it's obviously just buying properties at a discount, period. Or it’s going to be a low number, right? I mean, one out of 10, you are knocking it out of the park.

Seth: The reason I asked that percentage of people to say yes to that is because I've heard people say that when they're trying to go down this self-financing path, it's usually like 20% to 25% of people will say yes, and the rest are just no. But that probably has a lot to do with other factors too. Like how well they're explaining it and how flexible they're willing to be on the terms and all this stuff. So I was just curious if you had any wild guess.

Matt: I would imagine my conversion rate is better than most just because I break it down. Like I don't say, well, how about you carry back the financing for me? Or I want you to do a seller carryback, or why don't I take over your payment subject too?

But I'll just say, hey, how much money do you need right now? Great, then I'll give you the rest later. Is that okay? So I remove all the jargon from it. So it is easy to understand.

So I think my conversion rate is probably better than most.

Seth: Yeah, that's actually huge. Being able to speak it in ways that are easy for an eighth grader to understand. There's a lot of people that can't do that. I feel like the smarter you get, the harder it is for people to be relatable like that.

I was just talking to somebody yesterday who was going on and on about all this stuff. I just didn't understand what he was talking about and it really hurt our communication. I feel very disconnected from what he was trying to explain to me. So yeah, it's a good, good point.

Matt: It's so true. I mean, and I've gone through where I didn't know anything and I was successful. And then I started to know a little bit of something and started to feel like I might have been a little too big for my britches and would get in my own way. And then I had to just dumb myself down again.

And, you know, when I have clients come through now with our program, they're all nervous and scared. And I said, good, don't let that go. Hold on to that for as long as you possibly can, because it's when you're the least threatening when you're the most dangerous. And so I've learned to actually play that role now.

Seth: Interesting. So of those three, seller financing, subject to, and private money, is your preference to go with seller financing?

Matt: Seller financing is always the preferred option for deals.

Seth: Like if you could always have your pick, is that what you would go with?

Matt: Always, always. As long as it cash flows and it produces an ROI, I'd rather do that every single time. I mean, I wish I would have gotten a few more loans when the rates were down at 2.5%, 3%. I wouldn't mind some more of those. But yeah, the seller financing is always the way to go for me

Seth: Yeah. So did you always stick to residential units or did you ever do anything else or how'd that go?

Matt: I dabbled in three different apartment buildings in Memphis and I screwed all three of those up.

Seth: What went wrong?

Matt: I got them really, really cheap. They needed a lot of rehab and managing a big rehab from Los Angeles and going halfway across the country to Memphis. I just couldn't keep my eye on the prize, you know what I mean? So I delegated too much. Didn't even delegate. I abdicated.

I said, here's the money, go fix it. And then I just trusted that it would get done. And it didn't. And so I would never do that again. But I did it three times, like all within the same year. And I said, okay, let's stop doing that.

Seth: Of those houses that you bought with seller financing, you're subject to private money. Were these ever requiring like full rehabs where you had to get a general contractor and fix the whole thing up because it was a piece of junk? Or were they just kind of ready to go where they didn't take a lot of work?

Matt: Both, but mostly needed rehab.

Seth: Okay.

Matt: Most of the time, if it needed too much rehab, it turned into a wholesale flip for me. So my intent was always to hold the property until I decided that I didn't want to. And usually one of the deciding factors is if it needed too much rehab.

Seth: And one more question about that seller financing. So under what conditions, if you got down that track of the seller seriously considering this, under what conditions would you say, no, like this isn't going to work? Is it just if it didn't cashflow, or was there like a minimum amount of cashflow you needed? Or like, if they wanted a balloon in three years, was that a deal killer? What did the box have to look like for it to work?

Matt: First and foremost, it had to cash flow. That was a must. If I'm not making a giant equity position or if I'm not making a stream of income, it's not a deal for me. So that's the first thing.

Second thing, if I'm going to hold on to it, then I have to have property management in the area that can get the property to perform. That's going to be more vital to your success than anything else, in my opinion, is having good property management that can screen tenants and can collect money and keep the maintenance down low and all that.

So that was always those two things—you know, those were the deal breakers.

Now, when it goes from there, it's a give and take on what the equity position is and what the cash flow position is.

Here's a good example. I mean, I'm always looking for the cash flow, right? But when I moved here to Vegas, I got a couple properties here that don't really cash flow at all. But they are the nicest properties in my portfolio.

And from what I've learned over the years in managing property managers that are managing my properties is that sometimes the nicer houses with the lower ROI are a better experience than when you go into a lower income area that has an amazing ROI. At the end of the day, what actually performs in real life is typically the nicer properties.

So I made that shift about four or five years ago and started really just focusing on much nicer properties and okay, like I don't need the cashflow to live. So cashflow hasn't been that much of a focus, although it's important. I don't want to carry a bunch of negative stuff, but that's just kind of an example of that.

There's so many variables and there's kind of a wide spectrum and it kind of depends on what does the deal present. And then second thing is what do you actually need at that time? Do I need cash to replenish my marketing budget or make payroll or am I cool there? And I can just keep adding to my portfolio and adding cash flow.

Seth: Another question I had was on the cash flow piece. Was there any kind of ratio either back then or now with the nicer properties you have where it's like, if I've got this much equity tied up in it, it needs to make this much per month in cash flow?

Like if you've got a million dollar property making you 25 bucks a month, I'm assuming that's probably the juice isn't worth the squeeze. So like, is there a minimum threshold?

Matt: I didn't have a strict box, no. But kind of what I would go for if I could get somewhere between a 10% and 15% cash-on-cash return, then I knew I could borrow the down payment and pay somewhere between six and eight and create an infinite return. So that was kind of like my minimum income.

Even though it wasn't written down anywhere that in my mindset, I was like, gosh, if I can get between 10% and 15% cash-on-cash, then I know I can pay somewhere between 6% and 8% for the private money and my private money pool would be more than happy with that. Because I only need 10 grand here and 50 grand there for those down payments.

Seth: Yeah. It sounds like you're clearly not afraid of hard work. Trying to think of, why do you think you were able to do so well and continue to do so well and all the different things?

I mean, you've succeeded in multiple domains, you know, the music business, real estate, education. Like, why is that? Why doesn't everybody succeed like this, like you do? Is it because you're not afraid to get on the phone and just talk to people and wheel and deal and negotiate, whereas other people might be scared or timid or shy? What do you think your unfair advantage is?

Matt: I think I'm very clear. I don't want to struggle, right? I don't want to just get by. I don't want to be mediocre. So that's inside of me. So I want more than average, first.

And I think second is if I don't go get it, who else will? I think those are probably the two things. Like no one's going to do it for me. And apparently today that does make me a little bit of an anomaly.

It seems like you pay attention to social media and you start reading the comments underneath. It's just like, wow. You know, one of the big comments that I heard, things I see all the time and hear all the time is when I talk about rental property and people say, yeah, but then you got to deal with tenants.

I was like, okay, so here's the trade off. I can spend four hours a month managing my property managers and deal with a bad tenant every once in a while. Or I can report to a boss for the next 40 years. You're telling me that sounds better? Because I feel that mindset a lot out there. Like that's the trade-off. Like you're going to say, no, real estate sucks. You're a loser and you're a con man and blah, blah, blah. And you're an idiot and you're irresponsible. And how dare you teach this to people? Because everyone's going to lose.

I'm just like, wow, is that really, that's really what people's mindset is when it comes to income property. They think they're going to mess up with every single tenant's going to be terrible for them.

And then they think, oh, there's the other one. If the water heater goes out, there goes your whole years of cash flow. Like I hear that all the time. And that's a reason not to do it. I was like, yeah, but I got the appreciation. I got the depreciation. And the tenant is still buying the property for me. And then whatever improvements go on, I just adjust my cost basis.

And it's beautiful. There's no other investment class that allows you to do all this stuff. And people hear just one thing and they're like, oh, no. And they walk away with the wrong lesson. And that's a shame.

Seth: Yeah, that is a shame. Well, I'm actually curious. So when you rewind the clock from when you're 34 and you're bagging groceries, to then you make this decision, you get your education, you start going down the real estate track as an investor, not just an agent. So how long did it take you from the day you started doing that to the point where you had more than enough properties to give you the cash flow to give you a much better life? I get that's kind of an open-ended question.

Matt: No, it's fine. Just under four years, about three and a half years.

Seth: Okay. So I guess you were working as an agent as you were buying these properties and building up that cash flow?

Matt: No, those two things did not run parallel for more than six months. So I was exclusively an agent, did not own anything. And then I made the transition. I started owning and I stopped being an agent altogether.

Seth: Okay. So during that runway up to that four-year period, were you still bagging groceries to live off of that? Or how were you supporting yourself?

Matt: Kind of what I said. I did the marketing. I did almost all networking, though. I mean, it was almost all face-to-face. And I mean, I didn't know people would respond to postcards back then. I thought that was ridiculous. Who would send that trash?

God, if I only knew then what I know now, I would have sent twice. I would have gone overboard on postcards back then. I had no idea they were working so well. But my intent was always to hold the property. But I ended up flipping a lot.

Seth: Oh, I see.

Matt: Did you know Matt Owens over at Owens Capital Group?

Seth: I don't think I do.

Matt: He's in Redondo Beach. And he had a big turnkey operation before I even knew what turnkey was. And I would go out to all the REIA groups. I would go to the Chamber of Commerce and all the little networking parties and I would sell his properties for him.

I got by doing that and he paid me 3,500 bucks for every turnkey property. And so I just went out and looked for busy professionals and brought them to his doorstep and I got commissions for that. So that paid a lot of bills for a long time.

Seth: So you got up to 300 units at some point, and then did you you decide to like start selling those off? And at what point did you decide, Hey, I should get into the education part of this business and do that. What made you realize early on that you'd be good at that?

Matt: All right. So that's a good question. I had no intention of ever becoming an educator in the beginning. I went to a rah-rah seminar. I was in one of those little pyramid multi-level marketing things for men.

And they were just like, well, loaded you up with all the personal development stuff. And they'd always have speakers. And there was one guy there. And this is right when I was just getting started in real estate.

And he said, you know, the wealthiest people in the world, they have one thing in common. How they make all their money is they get really good at something and then create multiple streams of income from that one thing that they're really good at.

And he says, most of the time, it ends up as being a consultant, a teacher, a tutor, or something like that. And so I heard that. Oh, okay. Well, maybe I'll teach one day. Let me get some more transactions under my belt. Maybe that's a possibility.

And I've always been the perennial opportunity seeker. And I got invited to this one thing. And this was when I was brand new. The internet was brand new. And someone went to this little workshop on membership websites. I was so blown away because I was receiving passive income from real estate. And now I want to diversify and get passive income from another source.

And so now I kind of put those two things together and went, well, maybe I could put some little videos together, put them inside this membership website, have another stream of passive income. So that's how it really started; it was the desire for another stream of passive income.

So we did that. And, you know, I sold it for, I think a hundred bucks a month or something like that. And we had probably a hundred people in there. And so that was kind of like, okay, well, hey, that's money. I don't really have to work on it. It's all automated, they can watch the videos.

And one day I walked into the house and Mercedes said, hey, I got you a coaching client. I was like, what's a coaching client? What do I have to do? And I said, I don't want to do that. I just want this passive income thing. I don't want to talk to people. I just want this to be this passive thing.

She said, well, he's already wired the money, so you've got to do it.

And so that was kind of where it started and he turned out to be wildly successful, that very first client. And I think I got kind of hooked on living vicariously through him and recognizing something I knew had value to other people besides myself.

And then we put out and sent out a little email, hey, who else wants to do this? And gosh, that was when you could send out an email and he had 30 new clients by noon. And that's kind of how it started.

Seth: I'm actually curious, how do you split your time between this education side and then the actual transacting of real estate deals yourself? I know this is something everybody who's a real estate investor and teaches about that has to figure out how to balance.

Is there some kind of organized structure where it's like, okay, I'm going to spend this day doing this and these other days doing this, or does it just kind of change from week to week? How do you make that happen?

Matt: Yeah, that was a big, big problem in the beginning because I would sell this thing that was like for 12 weeks, an hour of a phone call a week for 12 weeks. And then guess what happens when you get to 40 clients. Like that's all you do all day long and there is no time for anything else. I was like, okay, this is insanity.

I remember the year, it was 2014 or 2015. I would give all that money back to have that year back because all I did was stay on the phone for these little consultations. But what I did is I moved everything to a group structure. And so on Thursdays, there's a group call.

So it originally started off, I just work an hour a week now and service the same people and get the same results. And then I gave them access to me via the free app on your phone, Voxer. If they had deals to look at and they needed explaining of complex things, then they would come to the group call and I would do it then.

But if they had a quick question or two that I could just answer really quickly and get them going again, then that's what they would use Voxer for.

And that changed everything. All of a sudden, it became almost a lifestyle business. And now I had six and a half days a week now open to continue my real estate investing.

Seth: That's a great idea. Yeah, it makes sense to batch things like that. Is that still how it works today, that kind of group format?

Matt: Yeah. I mean, Thursdays are dedicated to my coaching. So there's like a few calls now that I do on Thursdays, depending on what experience level that the student is in. And then, yeah, the other six days are freed open for me to take the real estate calls.

Seth: Do people ever give you crap about being an educator at all? Like if you can really do this…

Matt: I’m just gonna say yes, I don't know what people give me crap all the time.

Seth: I mean, is that like a thing that you ever encounter?

Matt: The new word I keep hearing is grifter. Go ahead.

Seth: I mean, is that a thing you ever encounter where people like almost looked at you with a skeptical eye? Like, OK, how are you trying to scam me or something? You're not real because you're teaching stuff instead of doing it. Or is that a you ever deal with that or not really?

Matt: Yeah, it comes up particularly in the comments. Right. I do remember the day where someone said just another stinking guru. And I was like, guru? Is that what I am? Like, all of a sudden, it was like the first time anyone ever called me a guru.

And I was like, oh, wow, that's weird. I didn't know I was a guru. I thought I was just kind of, you know, helping people and being a facilitator of this online education. I didn't realize I was a guru.

But you get that. But weirdly, I've had people come through here. And after we've had some time together, I said, you know, Matt, I'm glad I came here and I'm glad I chose you. But, you know, I was actually more skeptical that I couldn't find anything negative about you on the iternet. I would rather have found something, maybe one or two people that kind of had an issue.

And so I've had it both ways, you know, to where people, they have negative things to say and there's nothing negative about me that has been said. Who knows?

Seth: Yeah.

Matt: If that's who they are, then they're just not the right fit to work together.

Seth: Sure. Yeah, I was listening to this interview between Jordan Peterson and Oliver Anthony. You know who he is, Oliver Anthony?

Matt: Oh, he's the singer guy, the country guy, right?

Seth: Yeah, he kind of just came out of nowhere. Yeah, so he put a video on YouTube and it blew up. Now he's got all these opportunities coming his way.

And as Jordan Peterson was interviewing Oliver Anthony, Oliver was saying like, yeah, I don't really want to sell out or I don't want to just sign this huge record deal. Almost like it was a questionably immoral judgment to do that, to just take a bunch of money and do that.

But Jordan Peterson had some kind of interesting thoughts on that. He was saying, you know, a lot of people who criticize others for selling out are people who have never really had the opportunity to sell out because they don't really have the opportunity. So they kind of look down on other people who do.

And also like, if you do take those opportunities to get more exposure, spread your message, and seen by more people, inevitably, you're going to get a lot more feedback, which is going to give you more information on how you can be doing things different and better as opposed to just working in a silo and just putting your head down and doing your own thing.

So there's actually a lot of upside to getting bigger, so to speak. And I know it's not necessarily this evil move or selfish move to do that, even though there might be obviously self-interest in that. There's a lot of good things that can come from leveraging the internet and getting your message out there.

So i thought that was interesting.

Matt: That's a pretty common viewpoint, I'm not surprised Oliver Anthony had that position. That's a pretty common viewpoint inside the music industry, because it's such an artsy thing that people feel once you do it for money you lose your your edge, you lose the artistic aspect of it. So I had that, I experienced that all the time in the music business. It was tough to work with people that weren't motivated by money. It's like you're a brilliant artist, I want you to be on my label. What do I got to do to to lure you over here so I can work with you?

And I think there's a lot of me that way as well early on. But I think the older you get, you realize how society works, you know, and the way that money serves our society. There's nothing that replaces it the way that it serves us. It puts food in our stomach. It puts the roof over our head, the clothes on our back. It pays the hospital bills. And it allows us to do all of those things for the people that we love. And if you don't have money, you can't do that.

So I think the older I get, the more I think you have an obligation to make as much money as you possibly can. If you want to really live a fulfilling life in a society that we live on this planet, because that's just how society works and you don't need money to be happy for sure. Like I've never wanted to debate people on that because that's kind of silly debate in my opinion, but boy, life is a whole lot better when you got it. I'd rather be sad with money than sad without it.

Seth: Yeah. No, I hear you. I'm with you. So you were talking earlier about, you wish you knew that like postcards worked as well as they did and that kind of thing. Maybe, I wonder, when you think of all the stuff you've learned in all the businesses you've taken part in, is there a most important lesson you've learned that you wish you knew when you started that you know now?

Matt: Gosh, there's a few of them, but the one thing that comes to mind right away, and I was just at a Christmas party. And they asked like if you could go back and tell your younger self—one of the questions, the table topics, that they surrounded on the table was—if you go back and give one piece of advice to your younger self what would it be?

And immediately it came to me was don't be afraid of the zeros. Meaning, it takes no more work to flip a hundred-thousand dollar house than it does a million-dollar house.

And in the beginning, being from Los Angeles and, you know, I think the median price in Los Angeles at that time was $350,000, $400,000, something like that. But when I made my first trip to Memphis and saw that houses were 50 grand, I got so excited and my confidence just went through the roof. And that's when I really started to succeed.

But looking back, I could have done the exact same thing in Los Angeles with the exact same work, the exact same processes, the exact same steps, the exact same conversations, everything, and made 10 times the money.

So I would go back in and that would be one thing. One lesson was like, just don't be afraid of the zeros. That's because as a big thing, a big number attached to it doesn't make it more difficult or scarier.

Seth: Why do you think we are more afraid of the zeros? Like, I think I am to some extent. And you're right. I mean, I don't know why. It doesn't make a logical sense. I don't know if I'm thinking somehow there's a bigger consequence if I screw this up versus a small deal when, either way, I'd be kind of screwed. So I don't know. But what do you think is going on with people's heads?

Matt: There's one paradigm shift that I had that really kind of changed everything for me. And it just removed that fear altogether. In fact, it almost reversed it. It’s when you don't have any money, you think that's the hard part, right? You think, like, I got to want to put an offer on a million-dollar house, where would I possibly get that money?

Even if they said, here's a 5% down payment and I still need 50 grand to make that happen, right? So that will hold a lot of people back from even writing an offer, let alone getting into the deal.

But the operative word being “deal,” if that 50 grand down is going to produce 100 grand profit, then you must put it under contract or else that 100 grand profit won't be yours.

And it's not difficult. Like an example I always use when I'm speaking to a group live is that “I have a dollar in my hand. Give me 50 cents and I'll give you the dollar.” That would be no problem for everyone to do. People do that trade all day long. Right? And so that kind of connects. So that's how you kind of look at a deal is that I have 50 cents that's worth a dollar to somebody.

And if you have that, then you want to get as much control as many of those as possible. And the same thing will go is like I have a hundred dollar bill, do you have 50 bucks, so that you'll trade me for it. Now we just added some more zeros to that and the answer is still a resounding hell yeah. And if it was a million bucks and do you have 500,000 for it, it'll be like, no, but I’m gonna go find it because that's a quick half a million dollars I could make right now. So that was a huge paradigm shift that has me no longer afraid of the zeros.

Then also, when you start playing that way, you start to recognize, wow, it's actually a lot easier to raise a couple million bucks than it is 50,000. If the exchange is there, right, if the dynamic of the deal is still there, it's much easier to find that money because for $50,000, someone's going to get 10% on that in return. And they're like, eh, that's like no money. It's probably even worth writing up the paperwork and signing the docs.

But hey, if I could put a million bucks out there and I can get 10% on it, then now you capture actually not necessarily more people's attention, but you get more serious attention and consideration from the people you do share it with.

Seth: Oh, that's a great illustration. I love that.

It sounds like things have gone resoundingly well for you as a real estate investor. Have things ever not gone well? Like have you had any horror stories or deals that fell apart or things gone really, really bad or anything like that?

Matt: Well, all of my multifamily ventures have really gone bad and I tried to do them from afar and they were major. I just bit off more than I could chew. They were big projects.

Seth: Does that mean like you lost money on them or something, or it was just a waste of time or how'd they go bad?

Matt: The one I got out by the skin of my teeth and broke even and was able to get all of my investors their money back. And I actually had to sell that with seller financing just to, so I could at least get my price. So that was okay.

Another one, yeah, I probably lost about 50 grand of my own money. But then there's another at the same time, and these three all happened relatively in the same time in relatively the same area.

Then there was another thing. I just bought this building. It's 50 doors and it's just a brick building and they were all gutted. Like every single unit had to be redone. And I got that for $1,000 a door. And I was like, well, hell yeah, just take it. We'll figure out what to do with it later. And I held onto that for a year and just paid the property tax.

And I'm finally just like, you know what? I'm never going to get to this. And now I've got these open wounds from these last two multifamilies. And I sold that one for $2,000 a door.

So that was actually a great day. But I haven't ventured back into multifamily since. But those were my disasters. And I'll do it again. But now that I'm local here in Vegas, I just told Mercedes last night, I was like, I want to get a multiunit here. We've got to start looking for multiunits here.

Seth: Cool.I mean, you got into buying houses. It was pre-2008, right?

Matt: It was right at 2008, 2007. I got the bug in 2006 when prices and the market were really flourishing. And then that's kind of when I was getting trained and educated.

Matt: Okay. And fortunately, I didn't lose a whole bunch of money like everybody else did around me. And so when the prices came down, now I was armed and ready to go.

Seth: I mean, if you were trying to do that exact same thing, buying those first 300 units or however many you got in those four years, do you think that'd be a lot harder to do right now in this environment in terms of getting people to do seller financing or getting lower prices and that kind of thing? How much of that success do you think was tied to just the time of which you were doing it?

Matt: Well, there was a lot more desperation. So if there's a lot more distress in the market, that makes it a little easier. And the other big difference from then between now is there are just a lot more houses than there were people. So that made it easier.

But, you know, life comes along and kicks everybody in the teeth every once in a while. And it doesn't matter where they're from or what demographic or how much they make a year. So us as real estate investors that exchange equity for peace of mind, there's people every single day that need peace of mind. And they're going to turn to their property for that financial relief and they need it fast and a real estate agent can't handle it. And so I don't think it's remarkably different or more difficult.

Seth: We talked a little bit about some of the harder deals you've done where you didn't come out ahead necessarily. Are there any astoundingly amazing deals that were just grand slams? What do those look like?

Matt: I think my grand slams came at the beginning of COVID, when everyone was kind of like, I mean, the very, very beginning when everyone was kind of panicking, they thought the economy was going to collapse and everyone was predicting the real estate market was going to crash.

And I was able to scoop up quite a bit of properties from people who had just bought turnkeys. I've got all of those with just seller financing. People just want to be out of it. And then we know what happened over the next two or three years as they all doubled and tripled in price in some places.

So that was a whole slew of grand slams just at the time where I was, I just want more cash flow. And if I'm going to get it with seller financing, I don't have to put a bunch of money down and I don't have to get a bank finance. I was like, I'll take them all. Yeah, let's go. This ain't going to last forever.

And so those were my, those were my really, really big wins. Otherwise everything has just been, you know, nice little single-family purchases.

Seth: Yeah. It's interesting. I kind of see with high interest rates, certain sectors of the real estate market slowing down a lot. And I just get excited when I see that stuff.

Are you kind of like that too? Like if people are freaked out, like it was three months after the pandemic hit, when it was like a huge depression for a really short period of time. I mean, that was a cause to get excited. There were tons of of opportunity there.

But it just makes me wonder, is there ever a time when it's appropriate to be scared? Like, oh, things are getting a little too crazy. Watch out.

Matt: Well, I think to justify it, to be really scared, we need a crystal ball because we don't really know what's going to happen next. If you look at right now and I get a lot of disagreement with this, but here's my theory about right now.

There's several dynamics at play that were different from 2008. And everyone says, oh, it's going to be 2008. It's a cycle. It's going to happen all over again.

I was like, well, if it does happen, it's not going to be for the same reason. And it's not going to be for a reason that we've ever experienced before, because the supply and demand has gone to such an imbalance that there's more people at home buying age. Like the millennials are now intersecting with the first time home buyer age. We have more demand for housing than any time in the history of this country. And we're also coming off of a 10-year deficit in building, so right there prices can only go one direction.

The second thing would be the interest rates obviously affect affordability and how available money is, but the prices keep going up. So although a lot of people are hurting, there's a lot of people that are still doing just fine and buying what's left because the inventory is so low.

I think now after the Fed's last little signal and they did not raise rates and then they suggested that they're going to lower them two times in 2024. And just based off of that news, we've seen the biggest decline in mortgage rates in a four-week period than we've seen since 2000, whatever. It's like the fastest drop in 20 years.

And so rates have already come down almost a full point than they were just five weeks ago. And if that's just before they even brought the rates back, so the Fed brings those rates down again, we hit 6.5%, 6%, I think a new bottom has been established and you'll see a bunch more people just because there are that many people to to dive right back in.

And I think that's going to happen in the spring. It's an election year. And the current administration doesn't want to sit there and debate and have to defend their position on the economy if the economy is going good. So I think they're going to do whatever they can to boost the economy.

And I think at that time, because of the supply and demand imbalance, right now, houses are probably as cheap as they're going to be for a very, very long time.

Seth: Well, given that and the whole crystal ball thing, are there any particular pockets of opportunity you think exists right now, just given where things are at?

Matt: I think the pocket of opportunity exists with single-family homes. If you look at Blackrock, it’s on track to own 60% of all single-family homes by 2030. Blackstone just raised, I think it's $40 billion, might be $30 billion, whichever. It doesn't really matter. I guess every billion is just another billion. But they just raised that to compete with Blackrock.

Weirdly that there are ones named Blackrock and ones named Blackstone, but they just did that. And then just two weeks ago, there's a giant press release from Jeff Bezos. Just came out of retirement and started a single-family fund.

Seth: Oh, really? I didn't hear about that.

Matt: So the race is on for single families right now. And I think, you know, as the expression goes, a rising tide lifts all boats.

The opportunity is to own or control as many single families as you possibly can right now. Because over the next few years, if all of those are institutionally owned, those that are privately owned are going to be at a premium.

That's kind of where I think the opportunity is right now.

Seth: Interesting. No, I hadn't even heard about that. I don't really follow the single-family home space that much, which is weird for a real estate investing person, but that's just not my area of focus.

So it's a good lesson in how to stay ahead of things, depending on whatever your strategy or your niche is. Information is powerful. Just being aware of that stuff and what's going on, that can educate your moves in a lot of ways.

Matt: Yep. I mean, do you remember the name Lee? Lee Iacocca?

Seth: Oh, yeah. Was he with Chrysler or something?

Matt: Yeah, he's the one who went in and saved Chrysler. And all he did was look at this type of information and look at demographics and look at where the population is aging. And he just based it off the Baby Boomers.

And when he did that, the Baby Boomers were starting their families. And he's like, okay, so what does this massive portion of our population, what do they need? Well, they need something to transport their families. And he essentially invented the minivan. And so he made that whole decision and it turned out to be a genius move and it brought Chrysler back to life just based off of looking at demographics.

And if you go back and the baby boomers had the same impact on when they were teenagers on Levi Strauss and on the Mustang, and then they had the same impact on Gerber baby food when they were born.

And so we've already seen that happen. And now we have this other bigger bubble, bigger population in a shorter timeframe that were born, being the millennials. They're going to go through and have all the same impact on all the same industries that the Baby Boomers did.

And one of those industries is housing. And right now they've just reached home buying age.

And there was just an article, I think it was in Business Insider last week, because the conception was millennials don't really want to be owners. They just want to rent. They want to be mobile. They want to be loose. And so they've kind of hit the home buying age a little later later because they have totally flipped.

Bank of America just did a whole new poll, new survey on it. And I was like, 70% of all millennials think that's their only chance to ever be wealthy is by buying real estate, but they're scared to death that they're not going to be able to. So I think when these rates come down, there's going to be a frenzy for them to try and get theirs.

Seth: Now that whole thing about Lee Iacocca and just like understanding the general populace and what they may or may not need. Like, how do you do that with confidence? Like what if you made the minivan and it just didn't work? What if that was just a miss, a misunderstanding?

I mean, I feel like we all look at him like a genius because it worked out, but I don't know. What if you made some other kind of weird car that people didn't buy? It's obvious in hindsight, you know?

Matt: Yep. But I mean, it's kind of like when you look at a human's basic needs, if you invest in a human's basic needs, a human's desire for water and food is not going to go away. So that could be a good investment. And the same thing with shelter, unless, you know, just kind of sleeping under the stars actually comes into fashion. And that's never been a thing. We've always had a roof over our heads.

If you're going to make a prediction, I think that's probably the safest prediction you could make. And if you look at Baby Boomers now, they're having a big impact on health care and retirement homes and vacations. And because now they're at an age where that's what they need. And they're having that big an impact on that whole industry. And this is going to happen all over again.

Seth: Have you seen the stuff about how birth rates are plummeting in most first world countries?

Matt: Yep.

Seth: So do you think that plays any role in this? Like, I've even thought about this with self-storage. Like, so it's going great today. But what if the population drops and a bunch of people just don't need storage anymore or whatever it is? I think the U S is in a better position because a lot of people want to emigrate here, which can make up for that loss.

But do you think that has anything, or worth looking at that in any way for the future?

Matt: I mean, I'm going to say absolutely yes. But there is a caveat that I have for it is there is enough people that have already been born to support the housing industry for at least the next 10 years, right? For at least that, probably well into the 20 years. And that's if we didn't add any more people.

But the Census Bureau came out with their report showing that we're having a million new immigrants a year, as you just mentioned. So there's a million new people. And that brings our birth rate slightly above the replenishment value. Forget what the number, I think it's like 1.8 babies average per family to maintain. But with the immigration, integration, it puts us at 1.9 and a half or something, just slightly over.

So as long as that policy remains in place, then I think real estate in any capacity is probably job security for quite a while.

Seth: how do you know all this stuff? Is it like a website you're going to, where it's like, hey tell me stuff I didn't know as a real estate investor? Is it like a ChatGPT thing or how do you stay on top of all these stats?

Matt: It's probably mostly because of the YouTube channel. I got to keep making stuff that's relevant. So I got a bunch of Google news alerts on and I'm always reading and like, what's the interesting thing to talk about today? And so I learned a lot, just kind of de facto being a content creator.

Seth: Well, when you and I were talking earlier this week, we were talking a little bit about AI. What role do you think AI is going to play in the lives of real estate investors in the years to come? Like, do you think it's going to cause a cataclysmic shift in anything or is it just kind of a fun little thing that's going to be around?

Matt: Well, fortunately… Each little AI bot out there doesn't need a house to own, right? So it's this intelligence that doesn't need shelter.

Gosh, you know what? I don't even know if I can make a prediction because it looks like all the experts that were creating AI predicted incorrectly. Have you heard that?

Seth: What were they predicting that wasn't right?

Matt: Well, they were predicting that AI was going to gobble up all the low-paying, menial jobs first. And they thought when it gets to more creative stuff and the stuff where you really need critical thinking and like that, that's probably going to be last in the food chain for AI to go ahead and take over.

But it actually started the exact opposite. It started taking over art. It started taking over music. It started taking over all the critical thing in writing and stuff like that. And, you know, the assembly job, assembly line jobs that we thought was going to take over, those seem to be all be pretty safe right now.

I use AI, like I use the ChatGPT thing almost every single day, probably for 40% of my day. I'm on it because it's so helpful and I'm so much more productive. But where their ideas of that advancement is going, I don't know.

I just saw this reel on the hologram. So they've had these holograms that they could actually literally, you would mistake them for people and they could cast them out anywhere. They've had that for years. The CIA has had this for years. And I don't know if this is true because it was on a reel, but they're pretty good at faking that stuff. But I was just blown away on that technology. And like TVs are just going to go away. Everything's just going to be a hologram show that sits on your desk. And if you don't like it there, you can pick it up and put it over here. And so wait until we have this little hologram sitting on our desk and there's AI attached to it.

Like, I guess, that could be the future, but I don't know what their capabilities are.

Seth: Have you used the ChatGPT Plus app, like the voice thing where you can have a verbal conversation with it?

Matt: I have not. No.

Seth: Dude, you have got to try it. It's nuts.

Matt: Is that on the App Store?

Seth: Yeah. So if you got ChatGPT Plus, do you have that?

Matt: I do, yeah.

Seth: So if you get the app from the App Store and just download the thing and sign in. So right down where you would normally type out your prompt, there's a little set of headphones. And you tap that and you can just start talking to it.

And, um, the voice that comes back to you is stunningly real. It's crazy. It's like, it has like breaths and it says like, um, and like, and he says things that a person would say. And it's like the most realistic thing I've ever heard. And I've heard from people who are using this to practice their calls with motivated sellers. Like they tell ChatGPT to pretend to be a motivated seller and ask challenging questions back.

And I tried this the other day and it was weird. I almost was like getting nervous talking to this chat bot. It's like, you know, starting to sweat a little bit. I was like, wait a minute. This is just a machine. It's okay. Relax, Seth.

But if you're somebody who is a verbal auditory processor and you like to just talk your thoughts instead of writing them out, it's gold. It's an amazing resource.

Matt: I have the app down on my phone. I don't even play though with the voice commands on my phone either though.

Seth: So I don't usually do it either. Like I actually prefer to type stuff out cause I can say what I actually mean. I just think better that way. But yeah, there's a lot of times, especially if you're like driving or something and you just, you just want to be able to talk it out with somebody and it's really good at that.

Matt: No. Interesting. I'm going to check that out.

Seth: Yeah. Well, it's made me think, I mean, if it can talk that real to me and make me feel like I'm talking to a real person, imagine what that means for phone calls and call centers. And I mean, any kind of customer service where people need human contact. I mean, it's not that big of a stretch for this to replace that now, or even like texting and chat bots and all this stuff. Like, I know that stuff exists already, but I feel like that's going to take huge leaps forward.

Matt: Well, I mean, just at the Google conference four years ago, there's a YouTube video. I remember AI calling up and making an appointment for a hairdresser, right? And it had the little breaths. It had a little chuckle. Ha ha, that was a good one or something like that. And so that was four years ago.

So yeah, I mean, I'm sure it's already here. We just don't know which app it exists in at the moment.

Seth: So is there anything you still want to do in your real estate investing career that you haven't done yet? Like do you have any big audacious goals where it's like, yeah, I got to do that, but you haven't been there yet?

Matt: I want more houses. The pandemic wasn't great for my education business. And when you're a live event business and they shut down live events, it kind of kills the business model. And so I sold a lot of my real estate, a lot of units to keep that whole education platform running.

I guess the biggest thing is for me to replenish everything that I sold. And it's focus number one at the moment over the next three or four months, because I think as soon as the rates go down, the prices are going to go up and it's going to be even more difficult to find.

Seth: When you're out finding new houses to buy these days, I don't know how much you're actually buying houses right now, but are you using direct mail? What's your way to find those deals?

Matt: I just released a video on exactly how I'm doing this.

Seth: Oh, cool.

Matt: So it’s on YouTube on the channel.

Seth: I'll find that and I'll link to it and I'll put it in the show notes.

Matt: Okay, cool. First, you have to know, yeah it is direct mail, but it's a very different type of direct mail. And a lot of people don't think direct mail is working and the reason it's not working is because you have thousands, hundreds of thousands of people sending the same direct mail pieces to the same people. And I've been in the appointments and I've seen stacks of postcards on people's desks, like all the letters and correspondence they've received from investors that are trying to get a deal.

And so what's required is first, you got to know who you're looking at or looking to. The second thing is how you got to personalize that communication. You have to get noticed and recognized in that person's mailbox above and beyond what everyone else is selling.

So rather than sending the same thing everybody's sending, you have to send something that nobody is sending.

And so I've gone to a few different direct mail houses that aren't real estate mail houses. And, you know, they send things in bulk that look like birthday cards and special packages and stuff like this and other direct mail stuff, but not necessarily real estate-related. Sure, it costs more, but I don't have to send out as much because it gets recognized, it gets noticed.

And then the message within, this is where I've been using ChatGPT to death because I've got this long, lengthy prompt of what's the ideal thing to say. And this is, in a nutshell, the ideal thing to say to an out-of-state owner of a vacant house that has a tax lien on it, to create a letter or a sequence of correspondence through different mediums. Creating a campaign, so to speak, that's speaking directly to that person's issue. Like that was the only letter I sent out this month was to this person. And that's the experience that they get.

And so that's working really, really well. And I put the step-by-step process on how how to do that.

Doing that and then also the other part where the stats are, and you've probably seen these stats before, the sales stats. But most sales or deals don't happen until after your fifth contact, right? And then most people will quit after their fourth, which is really remarkable because they're three feet from gold and most people quit.

And so I think with the direct mail, how I generate the interest, that works. But how I actually close the deals is with my follow-up sequence that you have to follow up and you have to leverage as many different types of communication and correspondence as you can for that follow-up. And that's what that whole video entails.

But between those two things is, uh, it's working really well. That's still working for me.

Seth: This is the best real estate lead generation strategy for 2024? Is that the one?

Matt: Yeah, that one. Yes.

Seth: Anybody listening to this, go to retipster.com/178. It's in the show notes and I'll have a link to that video here. Or you can just go to Matt's channel, Epic Real Estate on YouTube, and you'll find it there too. But that sounds awesome.

So it makes me wonder if you're able to send out a lot less mail, let's say I've got a list of, I don't know, 5,000 people and I've established, okay, I only have to send out a thousand now because this is going to work a lot better.

Do you have some logic you go through to figure out, okay, these are the 20% that are the lowest hanging fruit, and these are going to be the easiest ones to get. So I should go to these ones, not those other 4,000. Or is it just pick a random thousand from that 5,000 list and go with that?

Matt: Good question. So there's kind of two ways I go about it.

The first way is I try to stack as many of these distressed factors on top of each other as possible. So as I was just saying, if I'm going to send a letter to an absentee owner of a vacant house that has a tax lien on it, that's like three factors of distress.

They're an absentee owner, which means they might be a frustrated landlord. They have a vacant house that's not producing income. And they have a tax lien on it, which is a symptom of potential financial distress.

So I can do that. And so that would produce a certain size list. And then if I added one more thing, I was like, and also it was showing foreclosure activity. If I add that one more factor, then the list gets dramatically smaller, right? And so by adding those factors, that kind of reduces the size of your mailing list just by doing that.

But once you add too many, I mean, you're starting to get these small little micro lists of 20 houses here and 15 houses there and 30 houses with that one. So that's one way. If you can find the right combination that gives you what your number is according to whatever your monthly budget is going to be.

The second one is I use DealEngineer. It's kind of like PropStream, I guess. It has all the data and everything, but it has the predictive analytics. So it has all the same property data that every other software basically has. They pull in their data feeds and there are these aggregators, right?

So it has all the property data, but with the AI, they've been able to add people's data to it as well. And it does these predictive analytics by researching, you know, 40 years of properties sold off the market. What did the people have in common? Not just what did the properties have in common?

So it'll go deep. It's very intrusive. What magazine were they reading? What were their neighbors doing? And who was their neighbor? What was the school system experiencing at the time? What was the crime rate at the time? So it takes all of these different things. And I think it has their credit reports and everything.

And so it takes all of these information points and it creates a predictive score or a sellability score. And then I use that to sort as well. So I kind of go back and forth and create these different lists.

Seth: You go back and forth between PropStream and DealEngineer. Are those the two websites you're using to do this?

Matt: I use primarily DealEngineer and I use this other thing called Seller Sniper. DealEngineer gives me all the data that PropStream has. So I can reduce my list in one of two ways: by either just the factors and see how many that gives me or I can just use the AI and reduce it that way.

Seth: Does DealEngineer actually generate the lists for you as well or does it just tell you this is what these people look like, these things in common?

Matt: Yeah it'll it can generate the list for you because it has a score between between zero and 1000. So anything above 500 is, is at least two times more likely to sell than the stuff below 500. So there, that'll fix and clear up a whole bunch and clear out all the people that aren't going to sell to you at discount right away, just by doing that single one.

Seth: And how long have you been using DealEngineer? Have you used it long enough to know like, yeah, this works, this gets consistent results?

Matt: I'm going on almost two years now.

Seth: Oh, that sounds pretty sweet. I got to check that out.

Matt: I think they have a land thing thing too. I didn't pay for the land plugin, but they have a land upgrade.

Seth: I'm sure I and many others will check that out.

Matt: I think what really makes the marketing work is not necessarily the list and not necessarily what you're sending, but it's like a combination of all of them. So if you can find somebody that has a problem that would be open to sell in their house to solve that problem. That's first of all.

Second of all is standing out in a sea of marketing messages out there. So you got to stand out. If you make it personal and then if you're consistent and then you follow up, I think they all work if you have those elements in your marketing.

Seth: Yeah, I think I have some trust issues with some of these data services because I know kind of, not entirely, but kind of what goes on under the hood. Like there are some counties out there that are just super rural and remote where like the data just doesn't get updated for years on end or at least every quarter. Like, it's just not current.

Whereas in California, it's about as good as it ever gets. I mean it's like almost perfect data they just do such a good job there. I think that's where it all started. ut you know if you go to some place in Timbuktu or North Minnesota, it's like the the data either isn't there or it's going to be really old and these data services aren't going to tell you that.

So, I don't know, it just bugs me because I see them advertised like, yeah we'll show you delinquent tax data and this and that. But I know they don't actually have that data in a lot of counties. And they're not going to tell me when they don't.

But you work in like Las Vegas and more populated markets, right? So you probably don't run into that too much.

Matt: Yeah. So yeah, you're 100% right. I mean, totally.

And then even the data, even if it is updated, and I learned this as a real estate agent, is that that data is entered by someone that's working at minimum wage and who’s just sitting there watching the clock and can't wait to go home. So mistakes get made and they get made frequently, right? So there's that aspect as well.

But, you know, is it is it better than no data at all? That's kind of the question you can ask yourself.

Seth: Well, especially if you've used it and seen it work repeatedly in a certain market. I think that's all I need to know. I mean, you're golden right there.

Matt: Yeah, it's I mean, it's a better starting point than just, you know, sending a letter to every single house in your city.

Seth: Yeah, absolutely.

Matt: And if you did that, you'd need a pretty large budget. If you had the budget, it probably wouldn't be a bad strategy anyway. But if you don't have an unlimited budget, you've got to reduce it and get your list smaller in some way.

And so we just use the tools that give that to us. I subscribe to probably five different of those services. So they have their little strengths and weaknesses on each one of them.

Seth: Yeah, it's nice to have access to a few of them, especially when you know where certain ones shine because you can kind of pick and choose.

Awesome. Well, Matt, I totally appreciate you taking the time to talk to me today. It's been great having you on to close this out.

I've got a few final questions that don't have so much to do with real estate. It's more just to understand you as a person.

So first question, curious to hear your answer to this, because I don't get the sense that you have a lot of fears, but what is your biggest fear?

Matt: It's so interesting that you just asked me that question because I was asked that question when I was teaching a class, I was representing somebody else at the time.

I wasn't selling anything of my own in 2009 and they had asked me what do I fear, just what you asked me. And it was that it came out so spontaneously, that I won't be able to buy enough.

Seth: Like buy enough houses?

Matt: Yeah I wouldn't be able to buy enough. And I fear that right now.

Seth: What's enough? I mean, it's interesting to hear you say that. I mean, you strike me as somebody who you're not going to go starving anytime soon. I mean, are you afraid you're going to lose the roof over your head? Why is that fear even there?

Matt: Well, I know that the more that I control, the more that'll be there. I mean, the more that I'll gain from it. And I'm concerned a little bit about the value of the dollar and inflation. And if something were to happen to that, you want income-producing assets that represent a human being's essential need, like housing.

So if the dollar collapses, my house is not worth nothing. It might be worth zero dollars, but it'll be worth chickens and eggs and pelts. You know what I mean? Like whatever we're going to use it for currency next.

And if it goes to a digital currency, or if it goes just to a different currency altogether, or if the yuan comes in and all of a sudden that's our currency, whatever it could happen, the real estate is going to maintain value. You are just going to be paid in a different currency.

And so I guess that's maybe a little bit of a doomsday prepping type thing as well.

Seth: Yeah, that's what a lot of fears are, is doomsday stuff. It's not really rational, but we have those fears anyway. I got plenty of myself.

But that makes me wonder, what if you weren't allowed to buy real estate anymore? Like you can invest in anything else, but you can't do real estate. What do you think you would default to?

Matt: I've become pretty good at marketing. So rather than build something new or invest in something new, I think I would become, I don't know, I guess the simplest term is an affiliate marketer.

So that way, I could be very flexible and mobile and could point my marketing machine at whatever the trend was.

Seth: Yeah, you'd be great at that. Totally.

Matt: Yeah, I think I would do that.

Seth: So what are you most proud of?

Matt: I'm most proud of that I've built this platform that my 12-year-old won't have to take the long route to learn everything that I've learned. And I like that. And I've been able to help a lot of people who have been able to piggyback with their kids off of what I've built as well. And, uh, that's pretty awesome.

Seth: Cool, man. Last question here. So suppose you just had a hundred million dollars wired to your bank account. You don't have to worry about money anymore. You're also not allowed to continue on your current career path. So no more real estate, no more education, none of that.

What would you do for the rest of your life?

Matt: You know, I just have to say the first thing that came to mind, because that's what I've always wanted to be since I was a kid, is I always wanted to be a dolphin trainer at SeaWorld. So I think, I know that's a little bit like, a lot more information has come out about the humanity of, or the inhumanity, according to the animals we hold captive at our amusement parks.

But I think it would be some sort of like a marine biologist or researcher or something like that. One of my favorite shows is with Jeremy Wade on the Animal Channel. And just for him to be able to travel the world to these amazing places and go fishing. Something equivalent to that. I don't like to fish too much, but something equivalent to that is probably what I would do.

Seth: It's great, man. So if people want to find out more about you, what's the best place to go? What website or YouTube channel or what should they do?

Matt: Yeah. Epicrealestate.com will lead to everything that we do. So if you can find your way there, then pick your pleasure from there.

Seth: Cool. And I'll include links to that and Matt's YouTube channel and podcast in the show notes. Again, retipster.com/178.

Thanks everybody for listening. And if you're still here, go ahead and text the word FREE, F-R-E-E, to the number 33777. You can stay up to date on all the stuff going on in the REtipster world.

Thanks again for listening. Thanks, Matt. I'll talk to you next time.

Matt: Thanks, Seth.

Seth: Hey, everybody. How's it going? This is Seth Williams and Ajay Sharma, and you're listening to the REtipster podcast. This is episode 177. Today we're talking with Logan Fullmer.

So Logan reached out to me recently about coming on the podcast, and when I heard more about his experience and his story, he seemed like a really great fit. Logan is an investor in land and commercial real estate, and he deals with some of the toughest title issues out there and uses them to kind of find some incredible opportunities. And these are three areas that I have a lot of interest in, and I know a lot of other people in the REtipster audience do as well. We're going to talk all about that and learn everything we can from him.

Logan, welcome to the show.

Logan: How are you doing, Seth?

Seth: Doing great. I appreciate it. Thank you. So why don't we start from the very beginning? Why don't you tell us about your real estate investing story? How did you get into it? What did you start with? How long ago was this? And then when, how, and why did you make your foray into the land business? How did that come about?

Logan: Well, about ten years ago, more or less, I'd kind of gotten my first real job. I inherited a little bit of money early on, and I was a poor steward of that, so I spent it as fast as I got it, just about. And it was a substantial amount of money.

After that, I thought, oh, my gosh, I got to figure out how to be an adult. I thought the $1 million was going to last the rest of my life, and it lasted, like, three years. So I went up and worked in the oil field, and after a couple of years, I started saving a little money and thought, okay, let me try this again. And I knew that I had to invest, otherwise, the salary that I made wasn't enough to get me much further in life. I bought some low cost vacant land just outside of downtown San Antonio, just outside of the MSA.

And those lots I was buying for between $5,000 apiece back then about ten years ago, and I'd already lost. I already had an experience with risk and loss and poor choices, and I went in with a bigger concern about my downside risk than more people usually do. Usually, folks are looking at how much money they're going to make on the upside, and they completely forget about all the risks. And this happens. A large part of the people, even after their experience, it continues to happen.

When I looked at this, I thought, what have I seen in the past? How did people make money? And I saw folks buy land and buy houses in older parts of town. And as those parts of town would turn around over a ten-year period, they would get some value, not just rental income, but just truly appreciation. And I remember seeing a couple of different big cities in Texas.

So I kind of had this thought in my mind. San Antonio was very close to where all the oil field areas I was working in. And San Antonio is the 7th largest city in the United States, but it's very undervalued. So I could buy these lots, literally. There was a highway that divided the central business district from some of the lowest values in San Antonio, so you'd have big time value and then nothing.

And I thought, boy, if the value spilled over that one highway, we're in good shape. So I bought a couple of dozen lots with a couple of years of my savings. So $5,000 to $10,000 dollars apiece. At that time, I was thinking, how much lower can the value go? They can't get that much less valuable than $5,000 apiece.

But if they do anything like the other downtowns in the big cities in Texas, they could go to hundreds of thousands apiece. So I've got a good shot at a lot of upside, but the downside risk is very low. So that made me feel comfortable spending every nickel that I had at the time. And the neat thing is, that segment of the story is very short, because within about two years, the market moved. I got really lucky and put all my chips, pushed them across the line there, and bet on black.

Thank God black was the color and the values just started skyrocketing. And the way I found out is I got a call from a realtor that said his client wanted to buy one of my lots for 200,000. And I was all in the whole portfolio for about 300,000. So you can imagine what changed in that moment.

Seth: You didn't learn about the land business from some land flipping course or something like that. You just kind of figured this out on your own, is that right?

Logan: Right. So this was ten years ago. So what we had on YouTube, that's just at the time, the guys, like all the guys that we look at as the old timer guys now, they were just starting to play with YouTube or hadn't even had a channel yet.

Seth: Yeah, that's kind of unusual. I do come across people like that from time to time who figure out land on their own, like, without somebody prompting them and kind of showing them the light. But it's not that often.

I mean, usually people hear land and they just are kind of turned off by it and they walk away. But it sounds like you kind of figured it out on your own and put the pieces together. It's pretty cool.

Logan: My dad was a CPA, so I'd gotten to see his stories about a lot of wealthy people because he got to see their taxes. Now, my dad wasn't wealthy, but I got to hear these stories about folks. And I realized folks usually made their money investing. It was a lot fewer people made it in just some kind of special career. And I realized that I couldn't afford a lot of the investments that were out there at the time. So I kind of defaulted to land because I just happened to be in a situation where someone said, oh, wow, land is cheap in San Antonio.

And I thought, I don't have a lot of money. Land is cheap and it's stable, whereas stocks, I don't understand that. And that'd just be a bigger risk than I took. So that was something that was affordable, it was close and I felt like I understood it because the lot that I bought was right there and no one could move it and it couldn't go up or down in value overnight like a stock. And I thought, this is the easiest thing I can get close to in my proximity and timing.

Ajay: Super interesting, Logan, because I feel like you interpret risk very differently than most. I think a lot of investors and folks listening get super excited at the prospect of doing massive deals, which I do too. I like doing deals where you can add some zeros at the end.

But I want to highlight your philosophy as you were getting started You essentially said, well, it can't go any lower. So if I'm investing five grand, I can't lose more than five grand a pop. But these things can go to the moon, essentially, right? And so they're not really going to go down to zero because their land in San Antonio, this is a great area, but I have a lot of upside here and I think investors talk a lot about asymmetric bets. But you basically figured asymmetric bet out on your own. Just reasoning through, let me throw some money at this thing.

I'm curious, is there a reason as to how you thought about risk back then and why you perceived it that way or anything kind of ingrained in how you grew up?

Logan: I didn't grow up with really much, just middle class, whatever, nothing really special, but neither up here big into investing or any of that stuff. But when I inherited some of that money, I didn't realize it was nearly a million bucks, and it was just the largest amount of money I’ve ever seen. I never had more than $10,000 or $5,000 in my checking account at one time. So when that kind of money came in, I thought I was rich for life. I was young, I wasn't paying attention. And when I lost all that or just blew through it, basically, I remember thinking, oh, my gosh, money can go so quickly. I need to respect it more. I had a good shot at it and it's all gone.

And I remember the next time when I worked to earn a couple of hundred thousand dollars. I remember it took me several years, three years to earn and save this after my income, after my expenses, after my taxes. And I remember thinking, gosh, it can go so fast. So I was really worried about losing it.

Seth: Yeah, for sure. I know a lot of people who went through the last big recession in 2009 and all that, myself included. It kind of scarred me to this day. I kind of have a hard time going out on a limb because I always see the world through that lens. I mean, that's how I entered the real estate investing market. Just saw it, it's very risky.Things can go wrong, things can go terrible, which they can. But that was kind of an unusually bad time back then, and that was not an appropriate way to think over the past ten years, as things have been going up and up and up.

So, it's kind of a blessing and a curse, I guess, when you have that sort of scar in your upbringing, right?

Logan: So there's an interesting balance. I met a guy, he's a local CPA. We started doing business together a couple of years into this. And it's interesting because I still had this care for the downside and risk mitigation. But he is ultra conservative. So there were times where I was willing to push the envelope more, although not near as risky as some people. I kind of helped things grow and expand, but he was always there to remind me, if you screw up, this is how bad it can be.

And I always remember thinking, man, I can swing for the fences like some of these guys that take on huge amounts of debts and take on projects that are real risky, that might have massive multiples, but if we screw up, we have to start all over again. And I remember thinking I would rather grow aggressively, but in a manner that I could control and felt comfortable with than looking for that one in a million shot. But I have good odds that I'm going to lose it all or bankrupt. I would rather be stable and consistent and grow in the long term than keep swinging for the fences.

Because I met guys like that the old time. A lot of developers have been bankrupt multiple times. They've been divorced a couple of times. They've had to move back into that small apartment multiple times from some lavish life. And man, that's stressful, dude. I didn't want that.

So anyway, that mattered to me a lot. But that was an interesting part. But to me, what was more valuable than that particular chain of events was when I went back to the market after I'd found that my lots had gone up in value and I sold several of them. At that point I said, great, I'm going to go buy some more of these $5,000 lots. And I realized there were no more $5,000 lots.

Ajay: Yeah, where'd they go?

Logan: Yeah, there's a really unique situation though. One of the lots that I bought, I got sloppy and I didn't buy title insurance. I was going through this slow process of going to title company, getting a commitment, closing, blah, blah, blah. And this one guy would sell me his for $5,000 or $4,000, but he said, “I'm not going through all the title company stuff. Just come pay me for it.”

So I gave him a check and he gave me a deed that recorded it. But later on I found out that I bought one of five deeds. That's why I didn't want to go to title because he would have to share the proceeds with four other siblings. And I went through this process that summer of calling lawyers, asking them how to fix it, making calls to property, the other owners trying to get this thing in front of a probate judge (it turned out I only need an affidavit of heirship), just all these steps.

And I figured out how to fix that. I picked up the other shares and then I also found there were some judgments and liens along the way. And I had to call these creditors and negotiate them. Some of them were so old that they were no longer valid. I learned a whole lot of information about that property. And I remember when I went back to the market to try to find those $5,000 lots that were no more, they were $100,000, $500,000. I remember thinking, “Wait a sec, there were a lot of people that couldn't sell because they had problems with title.” And I thought, I bet they haven't sold still.

So I called some of those people back and none of them had sold. So I remember thinking, well, there are problems but if I can figure out how to solve them, maybe I can get a deal. And that's when I started offering people just pennies. Like, literally, I'd still offer them the $5,000, but the difference is, I said, hey, you can come to the lawyer's office to pick up the check, and I'll get a deed from you.

I know we got multiple owners. I know we have title problems, but I'll basically inherit your issues. And that's when I started buying the land with problems in tow and figuring out every possible way to solve the problem. And that more or less became the basis of my business model for today. That was eight years ago.

Seth: Maybe that's a good segue. Tell us about your curative title work. Is this like a separate company you have where you help people solve title issues? Let's get into that a little bit.

Logan: So it basically has become the basis of a lot of my companies. It's kind of the feeder to my portfolio. It became the feeder to my cash flow machine. But at the end of the day, everybody's out buying property from wholesalers, sourcing their own deals, figuring out any way to acquire real estate. And I realize I'm looking at the downside risk.

If I can buy something for substantially less than it's worth, I can make a mistake valuing it. I need to liquidate it real quick and get some cash and still make money. All the things can go wrong, and I can still do okay because I got such an extreme discount on it. And that really mattered to me.

So I started acquiring properties with these problems, and it started translating. Into big ranches, I bought apartment complexes with problems like this. I'm talking industrial sites. You'd be absolutely amazed how often this problem exists in the rest of the commercial world.

Seth: If I understand right, are you intentionally going out and trying to buy properties with title issues? Is that what's going on? Or you're helping other people solve their problems with title issues, or what is it you're doing in that?

Logan: My goal is to buy them with the problems, I guess, inadvertently solving other people's problems along the way. But I'm the one that most of the time gets the bigger financial benefit out of that. I'll pay them some amount of money for their share, and then I'm taking on their problems. Then I've got to solve those problems that now become mine because I've got the land.

So at the end of the day, I'm looking for something that's got trouble. It may have judgments or liens, like an IRS lien or a creditor lien that's more valuable than the property actually is. As a result, these folks cannot sell with title insurance. It doesn't work. I'll buy it for a very small amount of money and then at that point I'll go in and negotiate with the creditor, sue the creditor, I'll deal with all the title issues. Maybe I have to open a probate. Maybe I've got to go find some owners that are lost or disconnected, things like that.

And once I get through solving those problems, now I have an asset for $0.30 on the dollar and I can decide, is this development land? Is there something I'm going to go sell to the market and capture my equity? What am I going to do with it?

Seth: So it sounds like the big advantage of buying properties with these title issues is basically you can get them at a huge discount. I think you just said $0.30 on the dollar, that kind of thing. It makes me wonder, though, what kinds of issues are we talking about and how costly and time consuming are they to fix those problems?

Logan: Yeah, I'll say one of the most common ones is multiple owners in unresolved estates. I call them kind of “orphaned estates.” That's one of the big issues.

Another issue is a break in the title chain, meaning someone didn't file a deed 40 years ago and then the next person that bought it sold it to the next person. They didn't get title insurance, but there's this chain of transactions, occupants, users. There's just this gap in the title chain for an unrecorded deed 30 or 40 years ago. Maybe you'll have an unreleased mortgage that's 70 years old and there's no release. And the owners can't find a mortgage company because they're out of business.

Sometimes you'll have a bad deed. Sometimes someone will sell this property and they'll write the legal description wrong. But that deed is from 60 years ago, maybe. That's a problem that has to be solved or the property can't sell the judgments or the liens. Maybe somebody didn't pay their child support liens. They have 250 grand in child support. The properties are 200. That doesn't make sense. All of these problems that prevent a property from selling.

I'll give you an example. Somebody wants to sell an apartment complex. He contracted to sell it. And the guy who was the seller changed his mind and did not close. He backed out. But the person who wanted to buy it still wants it. But he's in this spot. Well, I'll buy a specific performance claim from him and go sue that seller for performance, as long as there's enough equity in the deal. And I'll become the buyer of that after I win a lawsuit, basically.

So, in that case, you got to have millions of dollars at stake. I mean, that deal is $150,000 worth of legal fees. Took two years. I had a couple of million dollars in equity on the line there. So that is an expensive, long, high value-solve.

But some of these aren't so bad. I'll give you an example of a very common event. A property is worth 200,000. I'll buy it for ten or 20 grand from two or three owners. But there are half a dozen lost owners, and none of their probate, none of their heirship has been not. I'll just buy shares at a time and go find people one at a time, and we'll do a big affidavit of heirship or a declaration for heirship in the local probate court. That might cost… I might spend another 20 grand buying shares and doing a declaration of heirship. So that would be on the low end of the expensive side, and then the apartment specific performance would be on the high end of the expensive side.

Seth: In terms of these different issues that you're mentioning, some of them I understand pretty well because I've seen them many times. Some of them, I haven't seen them. But when I think of breaks in the chain of title or multiple owners and that kind of thing, can you just file a quiet title action to fix that stuff? Or is it way more convoluted than that?

And what happens if you take on one of these projects and you can't solve the title issues, and now you have a property you don't really own? Does it ever happen? And what's the risk of that?

Logan: Okay, that's a two-part question.

The quiet title lawsuit is not for multiple owners. That would be a declaration of heirship. That would be a different situation. So you need to be very sure that the share you're buying is legitimate. I've bought shares of properties before that were not shares of properties. So I got a deed for somebody from somebody, and paid them money, and that deed was worth nothing. So I've made that mistake. But I also bought six deeds to the same property, and I got those deeds for a good deal. And that last 7th one that I bought that was worth nothing. Didn't matter because I paid so little for them. I was still in the money.

So that happens a lot. But a quiet title action, a lot of times a quiet title or trespass to try title, those are two curative lawsuits that basically can catch a lot of different problems. A title break in the chain, that's a really common word that I'll use for that type of suit. And what you're doing is you're basically saying, this is my property. I'm saying it's mine. And unless anybody else comes to challenge that, the judge is going to rule in my favor and give me a full order for title. That works on some of these problems.

But when you're talking about the heirship stuff, the simple answer is you have to find everybody, and you have to have a bunch of people sign off on a genealogy report. And in Texas, we have a statute, an affidavit of heirship. And a lot of family members have to sign off on this after this big genealogy project has been done that says, this is my family. These are the heirs. Then an attorney compares the intestate succession chart in the estates code that says, these are the heirs. According to the law, if there was no will, it's a big document that gets filed in the land record, and that becomes your title chain instrument that connects all of those breaks in the title chain from all the owners.

To me, some of the ones I've done have been the worst. You're talking 60 and 70 heirs. So you have to find people all over the world sometimes. Sounds like an absolute nightmare. It can be. I made a million dollars on a 60-heir property. I spent $250,000 paying liquid taxes and buying shares. So I was all in for about 250. It took about six or a little less than six months, about half a year, when I got down the way and resold the property. Sold the property for a million.

So it is a hassle. But for a million bucks, I'll take that hassle

Ajay: Me, too!

Seth: It almost kind of reminds me of when you're trying to subdivide or get entitlements for a property where there's some. Risk there that maybe this won't work out. Like, I'm sinking a bunch of money in that maybe it won't come to fruition. It sounds like kind of a similar thing where you're doing a lot of this paperwork to put the pieces together. Has that ever happened where you went all in on this thing, and you couldn't get all those heirs to sign off, and you're like, well, I'm screwed. I mean, does that ever come about?

Logan: It's happened, but I'm not screwed. So let me talk about the entitlements for a minute there. You're saying you're going to spend all this money and you might not get the entitlements. There are tons where you're not going to do well in that case.

And I've got several, very large, I've got a 250 and a 450 lot subdivision happening right now, one in Austin and one in Dallas. But I bought each of those 30% below market. So I can screw up and spend a quarter million dollars on engineering fees and legal fees and all this.

And let's say I don't get the entitlements. I can still take the property to market, sell it for fair market, and I'm not going to lose any money. I'm going to make a couple of bucks, but I'm going to get reimbursed for my legal fees and my labor and time and the investment. I'm going to get all that back because I bought it below market.

Seth: And that's assuming we have a firm understanding of what market means, right?

Logan: I'm not going to spend three, four, five, 6 million unless I know what market is.

So there are times where I'll pass on them. When I'm looking at the 100 acres it was $7 million. I've got another one that's 200 acres, that's 450 lots, that's $6 million. So if I'm going to spend that kind of money, I'm going to figure out what it's worth and feel good about it, or I'm not going to buy it. So I'm not going to take that risk.

Some guys, they'll cut that check and say, go big or go home. I'm like, well, you might be in the courthouse one day and I might buy that land from the next guy at a price where I got the protection. You see? Different.

But that's how that'll play out of the land development deals. I don't want to take that risk there. But when it comes to the 60 heirs, I've had that situation where I get 40 people in and the other people say, “I'm not selling to you, forget it. I'm done.” In that case, in Texas, we've got section 23, which is a partition of real property. 23, the property code. It's an absolute right in Texas to access your equity and land.

So you file that judicial plea in your county or district court, and you ask the judge to sell the land and you get your share of the money, the partition lawsuit. So you're not ever going to be in a spot where you're just screwed and you can't get your money unless you bought a share that's not actually a share, then you might be. But if you bought a bunch of shares, that judge will sell it and give you your money so you can get out. I had to do that, too.

Ajay: Logan, this is super interesting, and I think most people are afraid to go through the quiet title process, and I think a big portion of that is truly, they just don't understand it. And so could you speak about, number one, who are you hiring to get that done? I'm assuming an attorney, right? But for those that don't know, just what type of attorney are you reaching out to?

Number two, how long does that time take, that whole process take? Number three, sorry, this might be like a four-question stack, man. Number three is, what court is that going through? What judge is ordering that summary of judgment? So I guess who do you hire? How long does it take? What's it cost? What court? Let me know if you need me to repeat that.

Logan: A real estate attorney that's experienced in this specific area. If you go to the doctor, you're not going to go to a quick doctor for a brain problem.

There are a lot of real estate attorneys. You need to find one that specializes in this stuff. I've got an attorney that works for me and he has a lot of this experience, but over the years, working specifically with me, he's kind of narrowed that down. Now I've got half a dozen other attorneys that don't work full time for me. I use them as necessary.

So an attorney that is experienced in this type of lit is what you've got to get.

Ajay: And what would I Google, “title attorney?” Or what exactly would I be looking for?

Logan: You're going to have to Google real estate attorney and start calling them and asking who takes on these cases, what their experience is. A lot of attorneys will say, oh, we do quiet title. And I say, great. How many of them have you done? How many have been successful?

And that second layer of questions, people like you and I are usually afraid to ask an attorney that, because the attorneys are condescending, you think they're smarter than you, you think they're richer than you, you think they know everything. When you take my annual income and divide it by the hours I work, I make probably four to six times what most of the best attorneys make.

So I had to realign my thinking and say, no, I'm the expert here and I need to find the best trade. It's a carpenter. It could be, I don't know, a plumber. In this case, it's an attorney. But there's still a trade to supplement my business. So when you think about it that way, all the questions you would ask a carpenter, you better be asking these to an attorney before you start dropping tens of thousands of dollars to hiring him, before you know what kind of work he can do. So you got to ask the right questions. But when you find that right attorney, then you get going.

Now, when you talk about, you could make a mistake and things may not go your way. You mentioned that earlier and you said, because you don't know what you don't know, is more or less what you're saying. In this case, we look at the statutes, we find out exactly what that is, we compare my fact pattern to that, and I look and decide how closely those line up.

If the fact pattern is darn near dead-on, and I really feel good about that, then I’m gonna file the case. But there are a lot of cases that I've looked at that I decided not to file and not to take because the fat iron wasn't convincing enough or wasn't close enough of a match. So I walked away and didn't take them because I didn't think I could win. I'm not going to take on that case and file that lawsuit unless I think I got a 90% chance or more. Otherwise, I had a really good track record in winning these things.

So it's kind of like that. You don't pick a fight that you don't think you can win. All the boxers do that. Now let me speak to the time. If you're going to get a default judgment, let's say you notice all these other parties that you have a plea and their name might be on an instrument of title chain. And I'm basically saying, hey, everyone, this is my property in this plea. And either you contest my ownership or you let this thing go. But if you don't contest it, I'm going to be the title holder according to the judge's final order.

That's what the summary is. If you get a default judgment and you notice everybody in the title chain and no one responds, you're going to get a default judgment in 90 days. But if folks raise their hands and say, “Whoa, that's my property, and here's why.” You have to litigate it a little.

Quiet title cases, unless you're dealing with a high value in a very complicated fact pattern, if you spend more than 10,000, $20,000, and it takes more than a year, be really surprised. These are usually relatively simple. So less than a year, less than 20 grand.

Seth: I got a question. When you were talking earlier about buying shares in a property, so are you talking about, like, a tenants-in-common situation where that's how the property is deeded to the existing owner, and you buy out one of the owner's shares in the property? Is that what you mean?

Logan: Right. Yeah. So you have co-tenants here in Texas. So what happens is most of these people that have multiple ownership situations, they didn't buy the property. It's not like all three of us went and bought the property, and all three of us are entitled together. That's very rare. That does happen. It's very rare.

It's typically Seth's daddy died, and Seth had four siblings, and Seth died and had seven kids. And now you have this congregation of 18 people. That's the most common tenants-in-common situation or co-tenant.

Seth: Okay. And that's what you're referring to when you talk about buying shares, right? Because otherwise there are joint tenants and that kind of thing. That's where everybody owns all the property together. And do you not deal with those types of properties as much?

Logan: Texas laws are different. We don't have rights of survivorship in our Texas laws. So when Seth passes away, if you don't have a will, Seth, the state's got a will for you. It's just a succession chart. It's in the state’s code.

And when you die, Seth, without a will, that section of the law, the codified laws, basically say who your heirs are. And there's this whole chart that you go through to pull out who says the heirs are.

Seth: It sounds like a lot of what you're able to do here hinges on the fact that you understand Texas law really well. If you were to try to do this in some other state, how much of this would you have to relearn? I don't think you'd be lost. But is there a lot of stuff where it’s like, oh that doesn't apply anymore. And neither does that. That's the Texas thing.

Logan: Yeah. I think once you understand the process and you understand how to read it, how to understand it and how it works, that's your biggest hurdle. Laws apply a little bit differently in each state, obviously, but it'll take you some time to figure that out. But as long as you understand the basis and civil practice and procedure, you'll be able to look at stuff and figure out the difference just by reading the common law or the statute and figure out what to do differently.

But what's neat here is Texas is huge, and I got no reason to go outside of Texas at this point. And I can talk through these projects with people on the phone like that without having to research.

Seth: Now, when you're working through these title issues, do you wait until the title issues are clear and then take title to the property, or do you just buy it and assume you're going to be able to figure it out and then deal with the stuff after that?

Logan: Typically, what I'll do is contract with at least one or multiple owners. I'll get a contract, and then I'll do some real research. And at that point, I'll make the decision to buy pieces of the property without title insurance or continue to work on solving them while I have a contract.

But I would say a large part of the time, I'll buy without the title insurance, and then I'll fix the problems. And the reason is, early on, I would trust people, and I would go fix all their problems. And then at the end, they would say, I changed my mind. And that's how I learned to do so well with specific performance lawsuits.

Seth: That's not cool.

Ajay: That's tough.

Seth: Are you putting down an earnest deposit or something to secure this? And how much time do you have to work through this stuff while it's under contract?

Logan: I do pretty low earnest money on stuff like this. A lot of times, I'll give somebody $500 for earnest, if I'm doing earnest. But because a lot of these are not going through a title insurance company, I'm going to send them a contract that doesn't include earnest money. And I'm basically going to tell them I'm going to close them.

The typical contract in our office closes between three and five days. So I only need enough time to run my own title abstract, get a third party title report to fact-check my work. My attorney and I look at it, and then it closes, usually within a week. So I don't have time to receive earnest money, get it receded, send out copies, everybody. I need to get them to sign that contract, and I'm going to pay them for their deed.

Seth: So it sounds like you are taking title to as much of the property as you can for as little as you can, and then solving the title issues after the fact, just based on what you said there.

Logan: That's right. A lot of folks watching this stuff saying, oh my gosh, that sounds so complicated. But one of the messages I like to explain to folks is it's a lot less complicated than you think because you don't have the right guidance and you haven't been around the right folks to figure it out.

But I'm going to tell you, I look at this and say, I can't understand why everybody is not doing it if they would just get a very small amount of education or read a little bit about it and invest very small amounts of money at a time. The returns are freaking astounding. I bet there's probably half a dozen people in the United States that are doing it at my level and they're all really open and really willing to share.

So if someone's got some, if, let's say they have a little bit more time than they do money and they're willing to invest some time but make exceptional returns, I'd tell people to seek these folks out, go watch all the stuff on the internet, call an attorney and pay them a couple of $100 an hour to explain stuff to you and go buy yourself a deed for $500. How much are you going to lose?

Seth: It sounds like there maybe is a systematized way to intentionally go out and find properties with these kinds of title issues on them. And it got me wondering, say if I want to go out and find a bunch of commercial properties with title issues so I can buy them at 20% or 30% of market value, how do you do that? Because a lot of times you can't really find title issues until you do the title search. And that's when you realize, oh, there's a problem.

Is there a way to, in DataTree or whatever your data service is, only show me these properties that are likely to have a problem? Or do you go to Foreclosure.com and look for those properties? It sounds like there's some special list somewhere that has all this stuff. Is that true?

Logan: Usually the property that have these kind of problems, the problems have been there long enough for the owners to be frustrated, are delinquent on taxes. So there are a lot of different ways that you can go find this stuff. In my opinion, that is the best distressed real estate list ever in the world and probably there will never be better.

Seth: When I hear that, I think, the distressed issue is delinquent taxes. There's a tax lien on the property or something like that. But it sounds like there's probably lots of other different issues on those same properties. Is that accurate?

Logan: Yeah. Usually once you start peeling those layers back on that onion, the first one is the delinquent taxes. But there are usually other layers in there. So let's examine that for a moment.

A property can only be delinquent on the taxes if there's no mortgage. Because if there's a mortgage, the loan servicer or the lender will pay the taxes and then shoot that bill over to the borrower and put them in default many times. So if there is no mortgage on a property, then the taxes can be delinquent. If there is no mortgage on a property, then it's very old ownership, or it's a very wealthy person that didn't use debt and they just bought it. The odds are it's old ownership.

So many times when there's old ownership, title problems exist. Because generally, if a mortgage is for 30 years long, most people don't pay mortgages off in their life. Some do, but a lot of people don't. So let's just say most people buy property and pay it off and live there. When they die, their children inherit it, may not do the right paperwork, and it comes without mortgage liability.

So many times you have second generation owners with title problems and they become delinquent on property. These folks didn't buy property and set out to be a property owner. They inherited it. They were given the property from their parent. So the folks that handled the title problems paid up the taxes and kept the property in good standing. They're not the person you're dealing with. You're dealing with that person that inherited it and really wasn't ready for it.

Seth: Well, this makes me wonder. Of all the different title issues out there, what one or two title issues would you say are the easiest ones to solve? Like when you're aware, okay, that's the problem. No sweat. We're going to take care of that. Just push-button easy.

And which title issues are like, the worst? Like, so bad they would scare you away. What would cause you to say, no, this isn't worth it, I'm running. Is there such a thing?

Logan: Yeah, there is. Or two things.

One of them is low property value. Almost any problem with the property. If the property is only worth 30 grand, I ain't getting out of bed for it. Not worth it.

The other thing is one of the owners is a minor. That's a nightmare. You're unable to buy a minor share for a discount to market, and you're generally unable to buy it for market value. You have to appoint an attorney for them, for the minor. You have to go get a guardianship of the real estate of a minor. You have the estate of a minor. Then the judge appoints an outline of attorney for the minor.

By the time you're said and done to this thing. You had two or three freaking attorneys for this dead gum minor. And if the minor has a very small share, like a few percent. You can afford to pay the premium on it. But if the minor has a large share, 20%, 30%, 50%, you can't pay the premium. So it's not worth doing it.

So if I hear there's a minor involved, I'm out. Unless they own a very single-digit share.

Seth: When you say minor, are you talking about somebody under 18 years old? Are you talking about like a coal miner? Because I keep hearing miner, like, what's the problem with miners? These coal miners, why are they such an issue? That's what you mean now, right?

Logan: Yeah. Somebody who's under 18, it's slow and it's a hassle. Some of these bigger problems, they're okay to deal with. When you're dealing with property, it's worth a couple of million dollars. You're willing to deal with it and pay the fees and take the test of time.

I did one earlier this year. That was about between $5 and $7 million community property estate. And I purchased the community property from the wife. It's worth somewhere around $3, maybe $4 million per share for. I'm not going to say how much, because this will probably end up in court one day. And we're not that far. But I'm going to tell you that you could buy a forerunner for more than I spent for this share of property.

And I believe the husband, who is going to say this is separate property. And we believe that it's community property. I think it'll be a substantial fight. Hundreds of thousands of dollars of legal fees. Many years worth of fighting. But on my side, I got $2 to $4 million on the law. So I'm willing to take that fight.

Seth: What are, like your bread and butter easiest title issues to solve. Like when you see it, it's basically not even an issue. Like you know exactly how to fix it.

Logan: A judgment or a lien that's almost ten years old, that's cake. That creditor is willing to negotiate. The debt is so old, it's almost worth nothing anyway. You give them 10 cents on the dollar, you're settled, done. I don't care how big it is. Good deal. So a low value judgment or a very old judgment.

And then when you have less than half a dozen owners, that's usually a gimme because each share of that property is worth at least 15% to 20%. So if you can buy that first share or two for a small enough discount, or big enough discount, small enough price, you're in the money. You're going to get those other shares from those folks.

And once I buy two, three, four, or five shares, even if the last person says, I'm not going to sell it to you because you want to give me small money for it, I just say, look, let's go sell it at market. I'm going to sell my 80%, you're going to sell your 20%. You'll get fair market value, your 20%, while I'll get my 80%. To me, that's cake. I'll get the three people of the five that agree in contract and close them. Let's go sell it at market together. It's easy.

A lot of folks walk away from a deal who only have four owners and two of them don't want to sell. They walk away from that because they don't know what to do. I just say, buy those two who do want to sell for ten grand or something low, record your deeds, call the others and say, let's go sell at market. You just replace those other two people, but pick up their equity for the discount you negotiate, and then it's a clean deal from there.

Seth: When you talk about low value judgments, that being an easy thing to solve or a judgment that's ten plus years old, is there a systematic way to find properties with just that issue? Or is it, again, back to the delinquent tax list, and just hopefully you'll come across something like that in your contact with those people?

Logan: I think the best way to do this is to start becoming very familiar with the basis of these half a dozen most common issues. Become familiar with them, how to spot them, what you think you might be able to do, and then go start fishing in the delinquent tax list. And once you start to find these and hear the problems, you call a guy like me, you call a local attorney and start to walk through those problems. You would be surprised how much easier you can really solve these.

But a lot of folks just don't want to put in the time. I look at it and say, I ain't about to go flip that house for a $19,000 profit margin and do all that construction and borrow hard money and all that for four months. I'd rather call lawyers and call property owners and make negotiations for four months and make an 80% margin instead of a 20% margin.

Seth: Well, on that thing, because I've seen this tons of times on the delinquent tax list, where there's properties that have a break in the chain of title or like a tax sale in the not too distant past. But I won't know that until I get it under contract and send it to a title company and they do their title search.

And now, at that point, I've already made an offer to them not knowing about this issue. How do you know this stuff before you make an offer? Or do you make the offer and then adjust it way down?

Logan: Well, it can happen like that. You make the offer and you adjust down, but that's really hard to do because the moment you tell someone, you're giving them $200,000, and then you come back to them and say, just kidding, you have all these problems, 20 grand, they don't trust you, and they walk away.

But typically, if you're buying from the delinquent tax list, these folks have already tried to sell. They know they have problems. I know there's usually a problem. So when I'm going through this process, we're scanning the delinquent tax list, especially on the tax sale list, we're plugging these people's names and legal addresses and land records and doing a five-minute title search real quick to see what we can find as we're talking to them.

So, in my office, people are in clusters. You have a closer and you have a researcher. So everybody works in teams of two with this kind of work. So I got somebody, a phone jockey. And he’s like a deal maker who loves to talk to people. They're gregarious or charismatic. They love making phone calls. They're doing that. And I got a super nerd sitting there on the computer running the data.

Seth: How are you doing that five-minute title search? Are you using certain software for that?

Logan: Most land records, there's a couple of iFile pages or websites that will allow you to search all of the land records together. But we're in Texas, we're pretty familiar with the different real property records. So you just get a login to the deed records in your county and log right in, and you can pop the name in and literally see all of the deeds that attach to that legal description.

Or you just go, grantor, grantee, and just keep swapping their names into the search and you'll pull out deed after deed after deed. So it is a skill. I won't say it's not.

Seth: Yeah, I've actually got a video I put together a couple of years ago showing how to do this with DataTree. You can do title searches right in there. It doesn't work everywhere. The county's data has to be available in their system, but assuming it is, you can do it pretty easily there, and there's a cost to that.

Logan: What's DataTree?

Seth: You know First American Data?

Logan: I have no idea.

Seth: So First American, it's one of the big three data aggregators around the country. First American, Corelogic, and Black Knight. They all basically collect this county data from the counties. And First American has a platform called DataTree, and that's where people like us can actually subscribe and get this data directly from them. And it's pretty convenient.

DataTree data is also hooked up to a lot of other resellers out there that kind of pretend to be their own data service, but they're just rehashing DataTree's data. DataTree has a way to do these title searches throughout the country, in most markets.

Ajay: DataTree is where us regular land flippers go to find deals at 50 cents on the dollar, where people want like 120 cents on the dollar pretty regularly. It's a great tool.

Seth: I was actually talking to the folks at DataTree not long ago, and they were telling me that apparently most users of DataTree are not real estate investors. Really, the reason any real estate investors use them is because, well, I don't want to take all the credit, but I started making videos about it and a few other people started doing it too. Most real estate investors use other stuff, like PropStream and that kind of thing. It's really tailored to them. But DataTree is like a catch-all. Like anybody who wants property owner data, you can use DataTree. So I thought that was kind of interesting.

Ajay: That's super interesting.

Logan: Is there a couple of providers that can provide a title report within one day? And they may be using some of this as a background source of information. But I've got providers that for $200 will do a title report and it's 80% of perfect, and it literally gets delivered in a couple of hours for $200, we do a quick report real fast, in a few minutes in the land records, and then we get to the point where we say we're going to do this deal, let's get on the phone, let's start finding people. We'll immediately order that third-party title report and it'll show up later on that day. And we have something to compare our work to just to make sure we're not messing out. It's kind of a fact check for $200.

Seeth: I've made several videos showing how to do this with several different platforms. I'll include links to those in the show notes for this episode at retipster.com/177.

I was wondering, Logan, so I was looking at your Instagram profile, and you got some really fascinating stuff there about some of the deals you've done, like this landlocked parcel that you bought and then put an easement and a road in there. And I think if I remember the numbers right, you said you bought it for $5,000, put about $150,000 of work into the easement and building the road, and then it was worth $500,000. And I saw another one about like an RV, a parking lot that you bought and then a metal building that you bought and turned it into storage.

Are these deals all coming from the delinquent taxes? Like, is that what you're doing right now when you find these deals? Or are they coming from other places, like referrals from other investors, or do you have some other secondary or tertiary source of deals you're getting?

Logan: I would say right now about a third of these transactions are coming from referrals. I really don't like to be the first one that calls to identify a problem because then there's no trust with me. And that's not an indicator of my pitch, that's more a human situation.

So I'm the first guy that shows up and says, I found you have a big problem, by the way, I'm going to buy it from you for nothing. I have a hard time there. But usually when I'm the second, third or 10th person that just gets brought to me at that point, it's real easy. They already know the problems. They've been down this road.

And it's funny, the shoe is down the other foot where these folks are referred to me by a realtor, or we have called them after they have had many years of problems. And I say, look, I think we've identified some problems. This may be the type of project that we take on often. I have a series of questions, and if it looks the way I think it might, I would consider taking on that problem and maybe doing a project like this.

So I'm kind of telling them I might do it, I might not. And at this point, they tell me, “We've been trying to sell this property for ten years. We hired our own lawyer. We've done it all, and no one can buy it.”

And that's when I say, great, would you like to come to my office tomorrow and I'll give you $10,000 in cash? It's a whole different thing, because no one's ever offered that and no one solved it. They already told me. So now I've got an answer for them.

But I would say a third of the deals do come from referrals. We are looking through the delinquent tax list. You can run a search for tax foreclosures in the docket search in your county, because tax foreclosures are judicial foreclosures. They're not like a mortgage, where it's a foreclosure on a deed of trust.

So lawsuit happens for about six to twelve months before the order of sale happens. So we can get into the docket and find hundreds of those.

Seth: Have you had to work really hard on just making it known? Like, “Hey, I'm a guy who deals with title issues. If you have those problems, come and talk to me.” Has that been a useful thing for you to do, given that you have the skill set of knowing how to deal with those problems?

Logan: Yeah, I mean, I've spent a lot of time on my social media talking about, know, my followership is nothing like a lot of folks, relatively small, but it's enough to drive a substantial amount of business over the years.

Ajay: Logan, in terms of foreclosures, so obviously you're dealing with delinquent, you know, a decent chunk of these are tax foreclosures. But are you ever negotiating with mortgage companies as lienholders or banks or people who might be holding first position liens of a mortgage that's going into foreclosure? And how is that different from a tax foreclosure?

Logan: It does happen. A lot of the time, I'll find that there are mistakes. If there's a title problem with the property, they'll have a situation where they made a mortgage with the husband and never got the wife, and it's a community property asset. She never signed that mortgage.

So, unfortunately, they only have half of the collateral that they foreclose. They will only foreclose on a 50% undivided interest, more or less effectively, not the entire share. So I go to the bank and say, “Guys, you only have 50% collateral, but in order to get to that, you got to foreclose and then you have to deal with the other person. Then you have to file a partition lawsuit. Now you're going to look like a monster because you did this. You're going to be in the news. Do you want to go through all that or will I? Sell it to me for a discount and we'll all settle today.”

Man, this is an interesting thing. You take everything for granted. You think the guy that wrote your insurance policy on your car did it perfect and didn't make mistakes. You think the deed of your house doesn't have any errors in it. You think the lawsuit that was filed against all these people, you think all the mortgages are out there don't have problems? Think about this for a minute.

If you fill out a 100-item questionnaire, you're probably going to make a few mistakes. It just happens. We're humans. If you look at every single document and every single process, you find a lot more mistakes than you realize. And those are opportunities.

Ajay: Seth, I feel like your skin's crawling at the thought of every property…

Seth: A little bit. I was actually talking to a different guy, David Hansen, from the last episode. He does fairly complex subdivisions and plat maps and all this stuff. And he was explaining to me all the costs that go into doing that and how much time it takes and the risk involved. And it kind of reminds me of this a little bit. Just in the time and money investment to solving these issues and making it a marketable title and all this stuff and then having a much higher value on the other side.

But when you're figuring out how much to offer somebody, is there a certain formula you're going into this with? It's like, okay, well, the market value is this and it's going to cost me this much and take me this much time to solve the problem. So my offer is this. Or is it just like no, 30% and whatever delta is there between that and the market value, I just could take that.

How hard do you think through that? Or is it just sort of the standard formula is 30% of market value?

Logan: It is case-by-case dependent. But I will tell you a number that sounds really good is $5,000. And another number that sounds really good is $10,000. The reason I like those numbers is they're big enough to be real money, but they're small enough to where if you're talking about real property that has any amount of value, those are small dollars.

So if I'm offering a person 5,000 or 10,000, it can be a very small fraction of the value of the property. But I don't care how much money you got or how much money you got, $10,000 is real money. And if I'm going to put it in your hand tomorrow, the next day, I'm worth a lot of money and I'll pay attention to ten grand, so it matters.

10,000 is a really good number. I use that number a lot, and that number can be used on a $200,000 property, or it can be used on a $500,000 property. If I think the problems are big enough that people are just done with it.

Now, I do, back in a lot of times, I don't want to be in anything for more than 30 or 40 cents on the dollar. So I've got to back into it a lot of times and say, these are the taxes, these are the amount of shares. Total 30,000, but I'm only buying 25% from them. Okay, I can only afford to give them this much, but I also kind of feel through it because you'll hear indicators during the phone call. We're sick of it. I'm done with it. I'll just let the county take it for the taxes. And when they hear that, I'm like, you'll give it to people.

Seth: Logan, I saw you post about a landlocked property that I mentioned earlier, where you bought it for five grand and put 150 grand into it, and then it was worth 500,000.

That struck a chord with me because I come across plenty of landlocked properties and I buy them a lot. I just don't do anything to fix it. I just buy them for super cheap and then sell them for super cheap. But when I thought about this idea of, man, that is a huge jump in value from putting in the easement and the road. I mean, that's just amazing.

And you mentioned in that video that in Texas there are four common law remedies to get access to your property. And I don't know that those laws exist in every state. In fact, I've come across issues where there definitely was not a way to solve the issue, or at least everybody I talked to didn't know how to do it.

And so I'm wondering, if somebody was trying to do exactly what you did and intentionally seek out landlocked properties with the goal of suing for access and building a road. That is the sole business model, only landlocked properties where we can do this. How would they figure out which states make the most sense to do that in? Like, what do they need to research and figure out and then what's the best way to filter a list or find only landlocked properties like that and only go after those? Any ideas on that?

Logan: Yeah, so I know for sure Texas has really good laws for that. We've got a lot of common law that gives you those four remedies. So I might spend a little time doing that research for those other states. But if you get an attorney who knows what they're doing, it's not as complicated as people think.

I mean, you can get into Westlaw or some of these, the programs that they have and type in landlocked, and you're going to find a bunch of case laws. So a lot of attorneys just say if they don't know how to do it, you can't do it. I heard that for several years, and finally I heard a different answer. I realized there's a big business case out here. So spending the time to keep asking people and doing your own research, you'd be surprised what you'd yield.

Now, when you talked about CoreLogic, you can go into the company like that, or even, there's one here called TaxNet that we use, and there are a bunch of different categories of filters. But a lot of these properties, if they're landlocked, it does say it in the appraisal district like metric somewhere.

So you might spend a little time filtering through some data in particular counties that you're familiar with. But a lot of times you can find it where it says that it's landlocked, and they even under-assess the value sometimes because of that. So if you do that, and you could pull that stuff out really quickly in large volume.

I haven't done it that way. I'm really looking at this particular property that was on the tax sale list, and I called the owners, $5,000 in the taxes owed, and $5,000 is what I paid to the owner. So I was in it for ten grand, which is what I actually paid. But you really have to look at the fact pattern and what caused it to be landlocked.

So if you're a single operator and you want to go make a lot of money, you might want to do some bigger projects or other projects. But if you have some people or some help or your time isn't quite that valuable, you can poke through these and you'll see a lot that's landlocked and doing a little bit of research, you'll be able to see that the front property is what used to be adjoined with that property in a single property. And when the front person sold off the back piece and caused the back piece to be landlocked, that's your event that's going to allow you to get access. That particular problem caused land to be locked. That event is illegal in Texas. So you can sue that front tract owner for an implied easement and you'll get it.

Seth: It makes sense. I don't know why that wouldn't apply everywhere.

Logan: All of these situations exist. All of these situations have clues. All of these situations have data pathways somewhere out there. You can get into it fairly easily by just finding a few owners and doing one of those deals, maybe negotiating some judgments or liens. What I'm talking about is ten years in, so they're very complicated and I'm talking about very simply.

But if you really want to get started, pick a couple of problems and just sort your way through it at a low cost every time. And that's when you develop a skill that may not be your everyday full-time skill, but when you run across these deals once a month, that might be where you pick up massive deals because you feel willing to try it.

Seth: That thing you were saying earlier about how you come across an attorney who doesn't know how to do it so they can't say it can't be done. I feel like I've encountered that a lot in my life where people just, what they're really saying is they can't do it, not that it can't be done.

How do you know when to believe that versus saying, no, I don't believe it. I'm going to keep powering through. When do you quit or when do you settle and just accept what you're told? Do you have any guideposts that you use for us? Like, okay, well, this person is this level of smartness, so I'm going to take what he says. Any thoughts on that?

Logan: You know, you'd be surprised. There's a lot on Google today. A lot of these law firms put out good articles, and if you get on Google and start Googling about your problem, you'll find a lot of really good information. And you have to feel comfortable questioning the knowledge.

The first guy that I sat down with was referred to me, the attorney from the title company, and he would say, this won't work. And I would say, why? And he would say, well, because of this. And I would say, why? And he would say, well, because of this. And I would say, why? Like a three-year-old. You really have to be willing to pester the heck out of a professional who thinks he's smarter than you, and you have to get him to the point where he'll either give you a different answer or give you an answer that you really believe.

Seth: Awesome. Well, Logan, if people want to find out more about you or learn more from you about how to dig into these title issues and make sense of them and really get to the bottom of what can and can't be done, where do you suggest they go? Do you have a website for this kind of thing or how does that work?

Logan: I tell people to go to Instagram, type in “Logan Fulmer” on Instagram. You can see it right down there. My name, if you go there, man, I'm easy to connect to. I give a lot of information out here. And the truth is I need those folks and they need me. I can help solve their problem, but I do deals with folks from these referral sources all the time. One in three deals are referrals.

So I encourage folks to reach out to us with these problems. You're going to learn something from us. We're going to help do the deal with you and make you a little bit of money on it. And you might decide it's your new profession, I don't know. But let's start that on Instagram.

Seth: Awesome. And just to clarify, that is logan_fullmer, and I'm going to have a link to that Instagram profile in the show notes, again at retipster.com/177.

Logan, appreciate you spending some time with us today and schooling us on how this stuff works. Appreciate it. And let's stay in touch.

Logan: Absolutely. I enjoyed it. Thanks for your time.

Seth: Hey, how's it going? This is Seth Williams. You're listening to the REtipster podcast. This is episode 176.

And today I'm talking with a new friend of mine named David Hansen. So I met David through a mutual friend, Chris Duff. Chris runs Land Daily Diligence in Sirius Land Capital. And the first time I met Chris, it was at the Land Unconference Inner Circle, and I just overheard him talking about how he was working with this guy named David Hansen.

And he kept mentioning David Hansen this and David Hansen that, and I was like, who is this David Hansen guy? Am I supposed to know who he is? It sounds like he's like Mark Cuban or some huge name or something.

And so eventually, Chris put me in touch with David, and I got on a call with him, and just learned a lot more about who he was, and I started to see why this guy was kind of a big deal.

So, David Hansen is a civil engineer, planner, and land developer, and probably a lot of other things I don't even know about yet. And he has a wide breadth of experience in the world of land development, and today I'm gonna talk with him about how he's been able to take a lot of different properties and figure out how to set them up so that they're worth the most on the back end when the development is done.

And he's got a very interesting mix of experience and abilities that I think can be pretty valuable to learn from. So we're gonna learn right now.

So David, welcome to the show. How are you doing?

David: I'm doing great, Seth. Thanks for the overwhelmingly positive vibe you've set. I hope I can live up to what you just said.

Seth: Oh, yeah. I'm sure you will. No problem.

Other than what I just said about you in that intro, why don't you tell us your story? Who is David Hansen, and what have you done in the past, and what is it you do now?

David: So, let's see, I was born and raised in Pensacola, Florida, went off to college in Tennessee, went back to Pensacola. In 1985, I moved to the D.C. area. I sold paper and office products for three years, and I woke up one morning and said, “I can't do this any longer. I need to find something else.”

And I promise you, I pulled out one ad and I opened them to the civil engineering ads and I read a couple. I went, sounds interesting. I actually went on five interviews. I knew nothing about civil engineering; my degree’s in mathematics. But I went on five interviews.

And at the fifth interview, at the point in an interview when you think you're probably about halfway through, I looked at the guy across the table, stood up, and I said, “Everything sounds great, when do I start?” And I reached out to shake his hand and he stuttered. He shook my hand and said, “How about Monday?”

I said “Great!” So I was at that firm for 11 years.

And on my five-year anniversary, the VP of the company came in. When you were there for five years, they gave you a week's pay, and ten years, two weeks paid, just as a bonus. And I could feel—his name was Lou—I could feel him standing behind me.

I stopped and I said, “Yeah, Lou, what is it?” He goes, “Well, you've been here for five years,” we shook hands, and I went back to work, whatever I was working on at the time. And I could feel that he was still there.

So I turned around and I went, “What's up?” And he goes, “Don't take this the wrong way, but why did we hire you?”

And I said, “I don't know if there's a good way to take that, Lou.” I went through my story that I just told you, and he paused for a minute, and the guy that hired me—his name was Dick—and he goes, “You know, you might be the only good thing Dick ever did for this company.”

And as I said, I was there for almost 11 years.

Seth: One quick question, was I hearing you right in your interview? You basically hired them? It almost sounded like you made the decision that you were gonna work there, and they just kinda accepted that. Did I catch that right?

David: Yeah, you got it right.

Seth: Yeah. Is that a good tactic that new employees should take when they want a job? Just interview your employer and then say it.

David: I don't know. It hit me at that point that, A, I really knew nothing about the industry, I mean, other than you deal with it every day. You drive on roads every day, you pull into the shopping area, and you notice how traffic flows and things. And all of that just kind of hit me all at once, at a point where I was like, “Okay, it's gonna go one way or another. Either he's gonna say, no, we need to take this decision or whatever.”

But it just felt like the right moment. So yeah, you kind of hit it. I just said, “This all sounds great. When do I start?”

Seth: So you didn't need a degree in engineering or something to get there? You can just, like they just taught you, based on your math knowledge?

David: Actually, in high school, I've always wanted to be an architect. And we can do this again and I can tell you all the things I've restored: eight historic homes in Virginia with my own hands, done all the engineering, all the architecture. But when I found out it was a five-year program and I knew I was a four-year student, that wasn't gonna work.

Yeah, you don't need an engineering degree to learn how to practice. I can't seal and sign plans—I'm not an engineer—but I still get phone calls from firms that I've worked with and worked for. The engineers that I engage for my current projects, we sit down and confer on how I like things laid out, how I want to handle stormwater management, where I think the best location for, whether it's ponds, low-impact design, things of that nature.

Once I started, I immersed myself in it. One of the things that I did then, and I still do, and I recommend people do—I think you and I talked about last time—is to read the zoning ordinance and read the subdivision ordinance in a jurisdiction that you want to be working in.

Those are the Bible. It is what the bureaucrats in the jurisdiction use to counter anything you're trying to achieve. They always roll back to, what's the standard zoning ordinance? What's allowed in our subdivision ordinance? Those are the tools that they use. So my recommendation to everybody is that you should be well versed in in those tools. That is what is going to be, the end of the day, how all the decisions are taken.

Seth: Cool, and then after the civil engineering thing, so you said you had some other career after that? Or what was next?

David: I worked for one of the national builders for a couple of years, not in their engineering. I thought I was going into work in their engineering department, acquisitions and entitlements, where I ended up was in the field, developing land.

To be honest, I couldn't be more thankful. I learned a lot in two years. I'd seen a lot. I'd watched a number of my projects, whether it was big road design or things like that, I'd watched things get constructed. I've been in the field watching heavy equipment move, watching rock being blasted, and all that of excavations.

Two years of learning how to move dirt from one spot to another on the phone with the excavation contractor on one phone and my dirt hauling guy in the other, negotiating prices to have them come in with 400 trucks and how I had to pull permits from the city of Alexandria to ensure that.

But you learn a lot. I learned a ton about not only how to engineer it, how to plan it, but then how to develop it. And I continue utilizing those skills to this day.

And then after that, I went back to engineering. I was at another big national civil engineering firm for another six years, where I was the assistant director of planning. So I got out of the day-to-day civil engineering end of it and worked strictly on town and urban planning.

Seth: And when was that? What year?

David: 2004. In 2004, I stepped away from engineering and I went full-time doing owners’ representation. I had my own projects. I had three huge projects in West Virginia and got everything teed up just in time for the 2008 crash. That was a party.

Seth: Oh, I'm sure.

Now, that decision to leave your job and go out on your own, so what led up to that? Like, how did you know, okay, it's time to move on and do my own thing? Like, did you get people asking you to do some kind of consulting on the side?

David: That is a great question. In my time with the National Builder, I'd stayed in contact, of course, with engineering. As the development wing, I was in meetings with sellers and property owners as we were negotiating the acquisition of property, rezoning, and everything.

But I stayed in touch with people. I had my old clients, my development clients, I stayed in touch with them. And like anything else, I'd gotten immersed in land and land development, so I was still finding deals and sending deals to whether if my group didn't want it or to other people.

And when I went back into engineering, I was still kind of juggling those things. And finally, what hit me at some point was that I was really running the risk of a conflict. I had to sit down with the owner of this company, who's still a very good friend of mine. We had a conversation. I said, I can't run the risk of you guys risking somebody brings a deal into the office that I'm working on on the side.

I know about it, this guy. They come in and say, oh, well, your guy saw the deal, stole the deal, took it to somebody else. And so I felt it was time for me to put it aside, you couldn't do both. You can't serve clients and serve yourself at the same time.

Even though ethically, I don't think it was a problem. It was, ethically, it was a problem for me to run that risk. I couldn't, I didn't want to risk a relationship that I'd built up and so many other things, it wasn't worth it. So I decided to just do it on my own.

Seth: So these three big developments in West Virginia that you're doing, was this the kind of thing where you're putting your own money into it or people come to you with money and you just tell them what to do to make the development? What's your involvement in that?

David: Yep, a little bit of both. I was lucky to have been introduced to landowners who had the desire to develop their property. They had some of their own money to put toward the entitlement cost. They, for the most part, had very low basis in the land and I also had investors, guys that I knew would step in.

I had the relationships that I built up with all the national builders over almost 15-plus years in the engineering world. So it was fairly easy for me to take deals that I planned to builders that knew my reputation and set up the deals, the projects in West Virginia.

One of them was, it's built out today, it's called Archer's Rock. It finished out at 3,800 units. Another one called Morning Dove, it was almost 600 units. And they're both finished today. The third one never got built, but it's one that I wish it had. So this is one that's 3,800 units.

Seth: So like, tell me, what was that property originally? How many acres was it? How do you take a property like that and figure out, okay, this size property should be this number of units. Like, how do you know what to do with it?

David: It was a total of 1,400 acres, three owners. It was an old apple orchard. It was in Berkeley County, West Virginia. It was planned in, I think we had six or eight phases. The original land plan that I did was, you do it in big bubbles. They're big bubble diagrams. You lay out the main infrastructure, the main roads, the big divided roads, how you're getting the traffic in and out and distributing it throughout the site, and then created the pods of varying lot sizes.

Again, working with the builders, and I still do this today, I don't do a deal today, if I can't lock down a builder during my study period, I'll kick out of the project. If it's not interesting enough to the builders, there's really no need to proceed.

The other thing I do, and I'm going to steal a phrase from somebody else, I hate to bake a cake with the wrong ingredients. So, not having a builder and not knowing what product they're going to put on the project and what product lines, how many different product lines they want to use.

You know, you can go from a 45-foot lot to a 55 to a 65 to an 80, depending on product width and depth. And I like to work with the builders to make sure that what I'm specing, now you can run into a lot of problems if, say, you spec a 50-foot lot, but all the builder's product is with two 5-foot side yards, so you've got a 40-foot envelope, but everybody's product is 42 feet. Nobody's product fits on your lots. Or they have to step down to a smaller product, which is less expensive. They'll pay you less for your lots.

Had you designed all your lots at 55s or 53s, everybody's product fits, or the builder's product fits, and they can build what they want to build and you can sell at the number that you need to sell at.

So the big projects start out as big planning efforts. And once you create the framework and the grid, you work your way down into the individual blocks and lot sizes within those, then it gets passed on to the engineers and that's how they engineer it.

Seth: Man, tons of questions are coming up as you're talking. Just kind of like an off-the-cuff question. By the way, when you say units, you're talking the parcels, right? Like making lots? Is that what you mean when you say that?

David: Yeah, when I say unit, it's a building unit. So if the builder wants to do, say, three product lines, so you're dealing with NBR and they want to do three product lines. What they're gonna want is a 30- to 35-foot piece, a product.

And then a 40- to 48-foot product, and then they're going to want a big product that'll fit on an 80-foot lot. It's going to be 65, possibly 70 feet wide.

Seth: And when you say product, are you talking about like a type of residence or something? What does product mean?

David: So the builders program and they have product. Their program is how they're combining their product lines and sizes. But the product is the individual building that they're going to build.

Seth: How do you determine what that size is supposed to be? Is that after a long discussion with the builder to figure out what they want? Or do you just kind of know, no, this makes sense. I'm going to make it this way. I'll lay it all out and then I'll start talking to builders to see if they want it. Like, what comes first?

David: Two things. Yes, you kind of hit a couple of things that happen.

One is, once again, the zoning ordinance and the subdivision ordinance come into it.

A good example is my city of Augusta, Georgia. I have a project there. It's got three different zoning categories. It's got R3B, R1B, and R1A.

R3B is a multifamily townhouse. Minimum lot boundary is 2,500 square feet. The R1B is a minimum lot size of 7,500 square feet, and the R1A is a minimum lot size of 10,000 square feet.

That said, I dug deeper into their zoning code. They have an option called “open space conservation design.” If you give them 40% open space, they'll allow you to reduce your lot sizes by 40%. In the R1B, 7,500 square feet goes down to 4,500 square feet, and the 10,000 square feet goes down to 6,000.

I take all of those into consideration, then I start talking to the builders. First question to a builder is, do you have product that will fit on a 45-foot wide lot?

They all do. The question is, are you building it in this market? If you're not, what's your preference?

There, they've come back to me and everybody's got a product that will fit on the 45 and the 60.

And we've also got some 10,000 square feet that's either 80 to 100 feet wide depending on what we do for depth. So they can do three product lines on that particular job, possibly four, but they do have one that fits in those lot sizes.

Now they could have come back to me and said, “Look, in this particular market we don't have the bigger product. So we only do two. If you got to have 10,000 square different lots, we've got to put the only other product that we build, so we're not going to pay you more for those lots because we can't get any more out of the house just because it's on a bigger lot.”

Seth: Now, the first time we talked, you mentioned something about—maybe this is a good example of what you're talking about—a 149-acre development in South Carolina where the owner was going to do 70 single family lots, but you figured out how to do over 260 lots, which made the deal a lot more profitable. And I think at the same time, you also added more green space to that development.

And the first I was like, how does that work when you add more green space and get more lots like that? And that's probably what you're talking about right here, right?

David: Yeah, that's the same thing we're doing in Augusta. If you did it per the ordinance with the lot sizes that they had, you end up with significantly fewer lots, and you basically lot out the entire property by going in.

And the same thing in South Carolina, that was in Richland County. If you utilize their open space option and give them 40% open space, you can reduce your lot sizes down to… they didn't even have a minimum. I could have made them anything.

So on that one, we were actually working with the builders to lay out the lot size based on product that they wanted to build, because there was no absolute minimum in the lot sizing, as long as you came up with 40% open space.

And there were some bonus densities in there. If you gave them more contiguous open space, you got a 5% bonus. If you created parks and amenities, you got a 5% bonus. So, all of those add up to constantly increasing the yield.

The other interesting thing about that in South Carolina was that I didn't have public water or sewer. That's never scared me. I've done communal-based water systems and wastewater treatment with disposal. And that's what we were going to do on that particular project.

And again, as I said, unfortunately, the contract wasn't exactly right to make it work the best. So, the guys that I was helping out decided to kick out of the contract. It's funny, I actually reached out to the seller over Thanksgiving and he said he's under contract right now, but if they kick out, he'll call me back.

Seth: It sounds like, you know, say you find the piece of land, and maybe your first step is to read that zoning ordinance, understand maybe a few different scenarios of what's even possible. Then you have this discussion with a builder or two or three to figure out what they want.

And once you understand that, then you can go and actually start plotting it out and just saying, okay, well, given that this is what they want, we could put these things here and those things there. Is that the right order to think through this?

David: Kind of, yeah. One of the things that I do in between, I'll do a sketch almost. Before I speak to the builders, based on the ordinance, I'll do a sketch. A little bit more clean than rough. I can say, “I'll email you one of my hand sketches. They're to scale, they're detailed, show the open space, whatever preservation, I show wetlands.” I try to get all of that out of the way first, but I use that to entice the builders.

The one deal that I've got right now in South Carolina is funny. All the builders looked at it, we got it under contract. And when I sent my sketches out to three of the builders, three of the nationals, one of them called me back and he was laughing. He goes, “We looked at this and the engineer we took it to could only get 125 lots on it. How did you get 200?” And I explained to him how I'd configured everything and what I'd based everything on. That particular builder actually has that project under contract with us right now.

Seth: That right there, your ability to do a hand sketch… are you literally like putting pencil to paper or you have software or something? I have no idea how to do this kind of thing.

David: There it is right there. I do everything absolutely by hand.

Seth: In order to do that, though, don't you need topo surveys and wetland delineations to actually know for certain where all that stuff is?

David: Yeah, it's amazing how accurate it is; there's a ton of ways to find all of that. I utilize every available tool.

Local GIS is fantastic now. Jurisdictional GIS is unbelievable. Most jurisdictions that I'm working on, if they're developing right now, they're fairly sophisticated. All of their topography is LIDAR-based, and if you interpolate, even if it's at five-foot contours, most of them go down to two-foot contours. But even if it's four and five-foot contours, you can interpolate in between the two.

The National Wetland Database is great to work with. Once again, most jurisdictions that I'm working in are sophisticated enough to have at least a rudimentary wetland determined area. I normally stay a minimum of 50 feet off anything I plot.

One of the first things we do when we move in and are looking at a project, I find a local engineer and surveyor, I have boundary done. I send out a wetlands survey, or bare minimum, I'll have the wetland scientists do a desktop survey for me.

It's amazing. The wetland scientists, and I don't know if a lot of people know this, have a lot of really powerful tools now. Whether it's the LIDAR-based infrared. They know with probably 90% accuracy where the wetlands are on a piece before they leave their desks to go flag it. And most of them will give you a desktop version for maybe a thousand bucks.

Seth: Do you use Land ID for any of this stuff?

David: You know what? I looked at it briefly. I don't want to say whether I trust it or not. It's enough, combined with a couple of other things. Again, I've been doing it for a long time. I can look at aerial photographs and tell you from the color of the flora and fauna where the likely spots for the wetlands are.

But I trust the local wetland guy. Again, with a phone call and 10 or 15 minutes on the phone, if he knows you know what you're talking about, he'll generate a desktop version of what the potential wetlands are for you based on soils and his infrared LIDAR. He'll be about 90% correct.

Seth: I guess what I'm getting at with a lot of these questions is when I look at a huge deal like this, where you sink tons of money into it and put a lot of work into it, what questions need to be answered before you actually close on the thing and buy it? And what do you do to lock up the property in the meantime to get those questions answered?

David: Okay, well, now we're down to contract and then there's not a deal that I've done unless it was; we closed on part of a deal in Augusta, because it was too good not to close on, price-wise, it was ridiculous.

Generally speaking, you're looking at appropriately contracting things. Most of our contracts, 90- to 120-day study. We go hard after the 120 days. I try to contract as well as possible with an approval. Generally, final site plan, if at all possible.

If they're looking for more of a date certain, and most attorneys or counsel will ask you, you know, we need some kind of date certain. I'll start out at 18 months after the execution date of the contract, and the least that I'll do is 12 months.

Seth: And this is, you have that much time to get the property purchased, all of the entitlements, everything completely finished?

David: Yeah, and I usually base it on that, and I try to have fairly in-depth conversations with the jurisdiction. I talk with the engineers. For any deal or any new jurisdiction we're working in, I'll interview four or five engineering firms. And from that, part of that interview with me is asking, you know, what's the generalized processing time on a buy right, construction, and plats here?

And you'll hear a ton of different things. Generally, what they're going to give you as the processing time is six to nine months. And then you have to add in the ramp up time for the engineer to get the plans done and submitted, the engineer's time to respond to comments and scheduling.

And it runs, again, depending on the jurisdiction, it's nine to 12 months. I do a lot of work still in Northern Virginia. It could be 18 to 24 months.

Seth: Yeah. So talking about money, I guess a few different steps in this process, you got this initial earnest deposit that you're putting down for 90 to 120 days. Is this like a 5% or how much money do you put in it just to lock it up?

David: Nah, normally, and here's the way I negotiate that. Normally, depending on, I mean, it tracks back and forth with the value of the contract, because most of what we're doing exceeds a million, to two million, let's just say.

Seth: Just to buy it or to do all the development?

David: To buy. Just to give you an example, the piece we have in South Carolina, 105 acres, it's 1.85 million. $10,000 at contract for the first 120 days. If we decide to proceed after the 120 days, we put up another $40,000. So the at-risk deposit at that point is $50,000.

The reason that number is what it is, and I do a couple of other things too, and I'll allude to those and I'll actually disclose them, because we've run into issues where it's difficult to negotiate contracts because people have been misled by other folks in our industry. And I don't think it's malicious, I just don't think they understood what they were doing.

And what it does is it kind of sours the pool. So if somebody else came in and had a 120-day study and didn't do anything, then the seller is soured. And if I come in and ask for, yeah, the last guy didn't do anything.

So one of the things that we do is, during the study period, I stay in touch with the seller's counsel or the seller, at least monthly, I disclose all of our due diligence. And if we decide not to proceed, I do two things.

One, I release all of my due diligence and I do it with a written report as to why we're not going to proceed. I tell them why. “I can't make the numbers work. Here's what the builders are telling me. Here's what it's going to cost to extend sewer or water or whatever, whatever the issues are, that make it a deal that that's just not going to work for me.”

If we decide to proceed, one of the things in the contract is that I have my engineer either bi-weekly or monthly write a status report and he signs it and seals it. One thing to remember is an engineer's seal is a license, just like a lawyer's bar certificate. It's a license. If his veracity comes into question, he could lose his seal. He's not going to risk his seal over giving bad advice.

So I make sure that all my engineers will do that. They'll sign it and seal it. And we provide that to the seller and to his counsel monthly, because when I'm negotiating a contract, one of the things I tell them is about the project in South Carolina.

So we got 50,000 hard. We're going to spend probably close to 230 grand to entitle the property. And if at the end something goes wrong, we can't settle, guess who gets all that? The seller does. It's his. We release it. His only cause against us is the deposit and everything we've created while we had it under contract.

Seth: How often does that happen, where you do all this stuff, the due diligence, like you go the whole nine yards and then something falls apart, you spend 230 grand and then you lose it all? Has that ever happened? Or what would cause that to happen?

David: Yeah, not quite that much in engineering, but yeah, I had deals in, well, I lost a lot in West Virginia in 2008, and somebody got it all.

Yeah, I keep, to this day, copies. I had $9 million worth of worthless paper or selling finished lots to three national builders. It all fell apart, and it felt like overnight, but I think it was probably like a week, but it was pretty tough.

Seth: You kind of skipped over and got into the good stuff, but back in 2008 when you made these, or tried to make these three, and they kind of fell apart, was that your money into that, or was that somebody else's money? And how do you recover from something like that if it just goes so horribly wrong? How do you bounce back from that?

David: It was both because I'd rolled not only my own money, I'd left some in and I subordinated to a bank a couple of times to get settlements across the table. A lot of people lost a lot of money and it really happened overnight. How do you recover? It was a bloodbath.

Seth: Yeah, it was awful.

David: I mean, they went from selling, I mean, man, they were rolling through those two of the subdivisions. I can tell you very briefly. I attended a meeting at a bank with the guys from NBR, and we were sitting at the table, and the banker, a lovely woman, but she told the guys at NBR, and I was there with one of their VPs, and she said, well, we have your deposit, because we were trying to renegotiate the deal. They were going to keep working their way through the project.

At the time, we were selling finished lots for $72,500. They came in and said, we can't do $72,000 anymore, but we'll keep working through it. We'll buy lots from you at $55,000. And they were getting 70 at every closing—the bank was—to pay down their debt.

And the banker goes, “Well, who's going to pay the other 15?” And we're all looking, I'm there with the owner and the developer, myself, the guys from NBR. And we all went, “Nobody, you'll get 55,000. Nobody else is getting anything. You'll get the 55,000.”

And she's like, “No, we get 70.” It's like, “But there's not going to be 70, there's going to be 55.”

And she looked at the guys at NBR and she said, “Well, if you're going to walk away, you're going to walk away from the deposit.” it was like, 700-something thousand on that section. And she goes, “You're going to walk away from 700,000?”

And the guy from NBR, it was great. He goes, “Do you read the papers?”

She goes, “What do you mean?” He goes, “We just walked away from a $35 million deposit. Do you think we care about 700? We're trying to work this deal out and the place you are, you can't even see the forest for the trees.”

But that's how it was. She was so filled in the week before, where everything was great. Not even paying attention to what was going on in the world that day, and basically told NBR, no, we'll just take the land and sit on it, thinking that it was all just like a bad dream. And I think, well, and I think the bank would belly up, I don't even know.

But yeah, NBR would have stayed in the deal. They would have kept buying lots at their takedown at 55, and the deal would have worked, but the bank couldn't buy what was taking place.

So, yeah, it was tough, it was a weird time. I had to go and tell my wife we were losing the house, and it's hard, it was hard. You know?

Seth: Yeah, did you kind of just get out of the business for a few years, or like, what did you do at that point, when it's so catastrophic?

David: So, when I graduated from college in 1982, I learned how to build houses, and I worked for a couple of big builders in Northwest Florida, and then I worked for a couple of custom builders. I've always stayed in it. I would build decks and do additions for friends and stuff like that.

When the market crashed, there were still people that were still doing stuff. Not everybody got pummeled. It certainly wasn't as bad as when the S&Ls all failed in ‘89 and ‘90 because I was there for that too and survived all the layoffs as a civil engineer.

But I just started building things. I started restoring, like I said, I restored eight historic homes. I've got real older friends who are doing the fix-and-flip things. I would go in and roll through a house and roll it back out for them, anything to keep rolling.

I still kept dabbling in what I knew. I had a friend who owned his own small engineering firm. I would do all of his comment responses and land plans. If he had a client come in and ask for a land plan on a piece, I would do all the layouts and everything. And I kept that up and then rolled it down from there.

Seth: Does that make you gun-shy, I mean, going through that? I know I got into land in 2009, so like from the very beginning, I was also in banking at the same time, and like you said, it was just a bloodbath. It was terrible everywhere, and that was kind of the mentality that I got into the business with.

I never had really seen it any other way, and that kind of made it hard for me to go out on a limb with this stuff, because it's like, well, what if there's another 2008 after I do this, now what? But it sounds like you were able to overcome that. So was that hard? What did it take for you to be like, yeah, let's take another risk?

David: You got to remember, I watched 89 and 90, you know, when they all the S&Ls failed. And I watched just the community where I lived in Northern Virginia, countryside, like overnight, people were selling houses, new homes were going in, and they were like in the 390s.

And overnight, that fell apart so badly with the S&Ls, nobody knew where to send, there were people who didn't even know where to send their mortgage checks because the bank was gone. And, you know, people tried to get out of houses that one day were 390 and the next day were 150.

And I was at the engineering firm that I started with and I lasted through all the layoffs there and watched it all roll back up again. And then I saw what happened in 08. Now we are where we are right now.

But the one thing that I learned in both of those, in 89 and 90 and 08, you know, the national builders, you know what they did? They kept building because it's what they do.

So I even look at today and say we're in the 08 thing, which was catastrophic to the point that it put us in the housing deficit that we're in today because, you got to remember, everything slowed down and everybody was afraid from like 08 to 15 or 16. And that's a long time. I mean, the builders kept building, but historically, year after year, if you look at the number of building permits that are being pulled in any jurisdiction that's seeing growth and whatnot, and there's a number.

And then you look at what happened during that time frame, and you noticed you were in banking, so say you're at 5,000 permits, which is the norm. But then for five years, you're only pulling 3,000, so it's 2,000 behind. Then, even when you swing up and you think you're catching up, you're still behind.

I live in Northeast Florida now. When I first moved here, I hooked up, I met all the builders. I'm doing some stuff down here. One of the builders, super smart guy, nice, he's a great regional builder, he and I were out having drinks one night. He goes, “In 2018, in this area, we were 30,000 permits behind.” Even what happened from 18 to 21 or 22 with all this huge growth, he goes, “we are still 18 behind.”

Even with this, with what's going on in the markets today, yeah, there's going to be ebb and flow. I mean, I was lucky to live in Northern Virginia. You got the federal government there. It flows. But there's always something there. I feel for some of the areas that really get hard hit and shrivel up and die.

It's funny. I'm working on a deal, oddly enough, in Lackawanna, Pennsylvania, where there are no national builders. We're trying to figure out how to make this little deal work, which is really tough because… So it's right next to Scranton and, you know, essentially, when steel and that industry died, Scranton was just kind of bumping along. There's no big draw there. There's nothing happening. It's very funny to try and work in those.

And then, when you see the economic impacts of today, they kind of tighten back up a little bit, too. You know, there's not a builder that wants to go out on a limb. And that, looking down at what's going on in the Southeast, with industry moving out of the North and Northwest and Middle America, moving down to South Carolina and North Carolina, those areas are kind of thriving and moving. It's interesting to see those subtle shifts and changes.

But again, what I did notice was that the national builders are machines and they get to feed their machine, even when it slows down. Those guys are more innovative. I mean, right now, they're buying down points on 7% more. Whether it works or not I don't know. You said you were in the banking industry. I don't know whether those things work, but it's what they do.

The national builders don't have a fallback plan. What are they going to do? They don't wake up and go, “Hey, let's start making cars.”

Seth: Yeah. On that whole thing of talking about the Southeast U.S., what does a market need to look like for you to pursue these projects? Like, are you looking for something like certain demographics or growth trends? Like, what makes you spin the globe and be like, okay, we're going to go here and not there? Or when you see a big development opportunity, what would make you say, no, we're not gonna go there because there's not enough demand. Like, what are you looking at?

David: Yeah, that's another great question. For me, so I've spent my life essentially up and down the eastern seaboard, the southeast. I was in Chattanooga for a couple of years. I was just outside Nashville for a couple of years during college. And I grew up in northwest Florida, so I know the Gulf Coast, Alabama, doing some stuff.

I've got two or three projects in Alabama. I know the Mid-Atlantic from having been there. I know how the Mid-Atlantic functions. And I learned interesting trends on things, just me personally, where I think people are heading and why. I look at the right-to-work state and the opportunities there.

And then COVID. I mean, myself, we were in Northern Virginia. They shut Northern Virginia down. And I have teenagers, my daughter's a senior in high school, our son is at the Fire Academy of the South in college here in Jacksonville.

But when they shut everything down, my children didn't take to the electronic learning. They needed that peer push. And we sat down and had a long conversation, the entire family, and it was like, we have to go somewhere where A, school's in session, and B, preferably, if they lock down the globe again, I wanted to be somewhere where it was warm. So, Northeast Florida, so we're here.

And so what I noticed from that, just also being a student of people, I watched people streaming out of the Northeast, out of Middle America, South. And a couple of other things happened with that was we can work from anywhere. I mean, I do what I do here. I have projects anywhere from Texas to Virginia, Florida, Tennessee, Kentucky. I don't have to be there. I can go there and visit and look at things. I can have somebody put eyes on the ground and take photographs

It's the idea of being able to virtually accommodate what we do that has become unbelievably prevalent and a lot of ease in function with electronics and better access to information. Things that started out in engineering, when I started out, everything was done by hand. You were in a jurisdiction. I mean, there were computers, but it wasn't like it is today. Everything was paper copies of ordinances that you went through.

So I noticed those things. And to me, people are going places for a reason, whether it's to escape the cold, escape an over-aggressive regulatory arm, whether it be government or quasi-governmental, that was kind of where I look. And I gravitate toward areas that appeal to me, you know?

I mean, I'd love to do a deal in Colorado, because I think it's—to me, Colorado is where the people that flooded out of the east and came to a mountain range and basically said, I'm not crossing that, we're stopping here.

Seth: Yeah.

David: You know what I mean, they were like, “Man!” Yeah, think about it. If you left the Blue Ridge and you rode in a covered wagon and you saw the Rockies, I'd pitch my tent under where we are, I’m good.

Seth: I saw this video a while back explaining why California sort of operates like a different country. Like in its prices and its culture in a lot of different ways and a lot of it has to do with the Rocky Mountains, because it's so hard to, or for a long time, it was so hard to transport oil there and just travel there at all. You had to come around the other side of the country just to get there. So, it's interesting.

David: Yeah, well, until the Panama Canal. But I think that's a lot of people, Seth. I think a lot of people focus on… not necessarily what they know.

And actually I do, I see it in the industry that we're in. I see the guys who… I don't understand it. I appreciate it but I don't understand it. The guys that flip lots, one lot, 10 lots, but individual lots everywhere. I don't understand it because to me, 20 transactions criss-crossed everywhere, versus I find one piece and I can turn it into 20 lots and I can do it. The timeframe takes longer, but it's what I know.

For me, I see the added value of that operation. And that's not to discount the fact that there's been a lot of money made. I'm sure there's a lot more to be made in finding those one-off lots and finding the right buyer.

Seth: Can you tell me about a time that a development opportunity crossed your desk, and you just said, no, this is a terrible idea. The market's bad, the property's bad. Why did you say no? What went wrong with that?

David: Nine times out of 10, it's not right off the bat. I look at a ton of things. I’ll give you a great example.

I had somebody bring me something in Oklahoma. And for all the world it actually might have been a really cool opportunity. Eventually, it was east of Tulsa, almost at the Missouri border, can't think of the name of the city. Although I want to say Roger Maris's house was in the little town, Converse right above it. And it was really neat. And the gal that brought it, and I explained to her after I went through everything, like the little town is kind of coming back, Route 56 goes through there, and all these things.

And her big thing was that the American Heartland is about to do this park, you know, like Disney World in the middle of nowhere in Oklahoma. And her thing was, this would be great for housing and things.

And I paused for a minute, and one of the things that hit me was, and I sent this to this gal, was Orlando and Disney World. Go 30 miles, draw a circle, 30 miles around Orlando, and what are you going to find? It is still rural as hell. And this little town was like 45 or 50 miles from that core. And I went, it's not what you think it is. It won't work. I mean, it theoretically has a potential, but it's not going to work.

But I didn't walk away from it immediately. Anything that I look at, I embrace. I'll look at what it could be and what all the options are. I guess what I like to see myself as, I'm not a problem finder, I'd rather be a problem solver. If there are too many things to overcome, then I have to just say, you know, it's probably a deal for somebody, just it's not a deal for me. Does that make sense?

Seth: It does. And the next question is, when you find a deal that does make sense, how are you figuring out how much to offer for these things? Are you just paying full market value, whatever that is, or do you need to get it at a certain discount or something?

David: There are a couple of ways to look at it. I look at as many, people say, off-market. That always makes me laugh. It's off-market. Is it for sale? Yeah. Well, apparently it's on the market. If it's for sale, it's on the market. You stumbled upon it. I know guys have lucked out. A blind squirrel finds a nut kind of thing.

But yes, there's a negotiation. Once again, I open book them. I'll sit down with a seller and tell them exactly, “Okay, here's what you have. In my opinion, you've got this much wetlands. I think I can get this many lots out of this, the builders will pay me X for the lot, I need to be here.” They can either get down to that number or we go back and forth with a few things.

What I learned a long time ago is that I don't have to buy every deal. Many times, sellers are too stuck on a number that doesn't work. Have I put things under contract at a seller's number because I thought, yeah, we kicked out of two deals this year, maybe three, one north of Atlanta and one in Savannah.

What I do with those is the deal in Savannah. I told the builders what I wanted for it and I had a builder come back. And he gave me my number and I still couldn't get it over the line. I went back to the seller who was an elderly gentleman and I made him a great offer of a structure and he didn't want to do it.

But what I ended up doing in the end was I hooked my builder up with the seller because the builder, he'll entitle himself to develop. So basically, I didn't get there in time, I couldn't assign my contract and get a fee or anything, but it was a builder that I haven't worked with before. And by putting him in the deal, I built a relationship so I can go back to him.

We had this conversation and I said, “So okay on the next deal, you're gonna pay me a little bit more.” And he goes, “Yeah, if it works, we'll do that, definitely.” And actually, we're looking at a South Carolina deal that we'll probably do with him.

So I was able to post it with a builder, saved the deal, kept the seller happy because I know the seller's got some other stuff, and it created a relationship with a builder that I didn't have before.

Seth: So when you're coming up with an offer price, it sounds like you're kind of reverse engineering this, right? It's not like you're comparing other comps, if comps even exist, it's more of, okay, what's the end game and what's that gonna make and how do we back into our offer price number? Is that right?

David: Yeah, a comp to me is, it's useless. Because, I mean, I'm sure it's useful to someone. To me it is, it's useless.

Seth: No, I totally get that.

David: I don't care what somebody else paid or what they got. And I've heard that from sellers who, well, so-and-so across the street sold for this. And I'm like, yeah, they sold on a rezoned piece with construction plans done. You don't have that. You've got a raw piece of land, and I don't know how we're going to make that work.

Yeah, I do. I basically reverse engineer. And then figure from there what could go right and could go wrong.

Seth: I don't know if you've ever heard this, but I know when I first started learning about house flipping many, many years ago, which I did not end up doing, because I was not good at it, but I heard this idea that anything is a deal at the right price.

And when I think about what you do, and the fact that, you know, going back to this Oklahoma example, say if you got that land for free, and you put half a million dollars into developing, you know, a development that nobody's going to buy. Would you disagree with that statement, that anything is a deal at the right price?

David: I would disagree with that every day. But you made a great point. In that genre of a house flip or a lot flip, then that's 100% correct. If you can pick up a lot for a thousand bucks that has any intrinsic value and roll out of it for $2,500 or $3,000, that's a deal.

What I like to think that I'm doing is, and others do—I mean, this is no innovative thing that I just somehow managed to figure out—not every deal is a deal. There's a lot of things that… again, I've looked at a lot of things where I wanted to make the deal work and if you can't, you can't.

What I like to think of it as is leaving a deal where I don't sour the other side.

Seth: Yeah. So how are you finding these deals? Are you finding them yourself or do other land investors bring them to you? Where do these come from?

David: Yes and yes. I'm in a couple of deals where other people have come to me who couldn't figure it out and have asked for help. I'm in deals that I've found. I found the one in—the big one that we have in Augusta. A couple of South Carolina deals, realtors.

Seth: So you're kind of just always scanning the horizon and people know they can come to you with these kinds of opportunities?

David: I'd like to hope so, yeah.

Seth: And how many of these projects do you do per year?

David: It depends on the level of involvement.

And again, like we talked about earlier, I'm trying to get better and I can't keep doing everything for everyone for nothing. But I love it, so I kind of do it in my sleep.

But I think once you get to a certain point in the engineering process, once you get past the study period, the 120 days, because I think somewhere between eight and ten of these per year, there's a lot of work in it, but you got to be backfilling. You need them staggered and you got to backfill with things coming in. As long as you can't just have eight of them and stop and then scramble for eight more than that.

I think as they roll forward, juggling eight to ten, because again, not every deal is a deal. You're going to kick out of a few. Some will make sense, some don't. And some things get through the process faster.

Seth: I'm trying to figure out, how do you make money and how much money can you make from these deals? And which hats are you wearing in this process? Is it you doing literally everything? What are you not doing in this process?

David: Okay, well, it depends on how the structure is. I'll just focus on the deals that I'm working on with one partner.

So we're 50-50. He's the money guy, I run the show. Just a quick example, right now, the deal in South Carolina, 1.8 million. Our contract is for 3.9.

Seth: So that profit you guys split 50-50?

David: Yeah, and once everything is paid back, entitlement costs and things like that are netted out, yeah, 50-50 of the net.

Seth: And then being the money guy, so whoever this other person is, they're kicking in all the cash? Are you getting like a bank loan to float it while it's being developed and sold off? How does that financing work?

David: Right now, he's covering the entitlement costs, and then as we close deals, money will stay in to fund other deals.

Seth: And was I understanding the timing right? Like you get a property under contract for, say 120 days, in that time you're doing your due diligence like your topo survey, your wetland delineation, anything you need to know to get the thing figured out, and then the entitlements happen after you close or before you close?

David: You're not gonna close until it's fully entitled. So now after the 120 days, your deposit goes hard, then you start your entitlement work.

Seth: Okay, so after the 120 days, what is the time frame after that you have to get your entitlements done?

David: Depends on the contract. The least would be eight months, both probably 18, or depending on the jurisdiction, if they entitle quickly, it'll be less.

Seth: Okay, so like on that $1.8 million deal, say if it takes, I don't know, 12 months or something to do that, once the entitlements are done, then you buy it for $1.8 million, and then it's up to you to, are you putting in roads and utilities and all this stuff?

David: No, although I can, I don't like that. I'm not a fan, but we could. If you get that far in, it's debt and equity to finance.

Seth: So you're just doing the paper entitlements and then you're selling off everything to a builder and they come in and put in the roads and do all that stuff?

David: Yeah, or a third party developer. My preferred method is to contract directly with a builder developer or a third-party developer.

In Augusta, we're going right with a JV between a third-party developer and the builder. I've got a project in Alberta, Alabama. We are contracting with the third-party developer who has an agreement with the builder. I put the builder in, he brought the developer to the table. Now we're working with the developer who's got an agreement with the builder.

Seth: So, that builder is super important. How do you know that they're committed? And at what point did they come in and say, yes, we'll do it, and do they put money down or something? How do you know they're serious about it and they're not gonna flake out?

David: Yeah, my builders, my preference is to have a builder either under contract or right at that point before we go past our study period.

Seth: So, before you go past the 120-day due diligence period?

David: Yeah, to give you an example, on the South Carolina project, we had six LOIs from the national builders.

Seth: So six different builders were like, “Yeah, we'll take it.”

David: Yeah. And the builders post 10% of the contract value in a deposit.

Seth: And that happens before the 120-day, or whatever the research period is?

David: No, that'll happen after their study period, depending on what the terms of their contract are. Normally, 60 to 90 days.

Seth: And if something were to happen like what you were talking about in 2008 in West Virginia, maybe they would walk but you would get there 10% that you could keep?

David: Yeah.

Seth: Okay.

David: But hopefully they don't. What you do is you restructure.

Seth: So just like, ask for less money?

David: Well you know hopefully everybody sees the writing on the wall and you go back in maybe restructure a little bit with the seller, restructure with the builder you know, and just try and keep the deal like anything else to try and keep pace together.

I mean, we did everything everything we could to try and keep things pasted together, and it was just, as you and I spoke about earlier, everyone was in shock. You said you were in banking, right? The bankers were in shock.

Seth: Yeah, for sure.

David: They didn't believe it. It was like, “No, no, no, this will all change tomorrow.” Like, it ain't changing.

Seth: Yeah, that was a crazy time. I don't know if we'll ever live through something quite that bizarre again, but yeah, it was nuts.

David: Yeah, it was definitely different. And it's hard to explain to folks who missed it.

Seth: I know demand for new building and that kind of thing is super important for this kind of thing, because if you're creating all these new products for builders and that kind of thing, there needs to be sufficient demand.

So given this environment that we're in with rising interest rates and buildings kind of slowing down in a lot of places around the country, does that pose a serious risk to you? Say, if you started these projects back when interest rates were a lot lower, and now they're going higher, I don't know, does that ever happen where a builder's like, you know what, things have changed, we don't need this anymore, see ya.

Is that only the most catastrophic situation where that kind of thing would come up?

David: You know, it could, it did in no way. I'd like to hope we're a little more savvy about it now and that people are more realistic.

No, I mean, you certainly could, I mean, it's a risk. Anything we're doing's a risk. The question is, how do you minimize your risk? How much are you out, you know, can you afford the deposits? Can you afford how much entitlement you've spent?

It's the biggest reason to avoid closing on a property until you have something. I mean, imagine you spent a million eight on a piece and now you gotta sit on it for five years. It might be better to walk away from 70 or 80 grand than try to figure out how to juggle a million nine for a certain time frame.

Seth: If somebody's out there, they're listening to this, they're hearing you talk, and they're like, man, this David guy, he's awesome, what he's doing. Like, I want to do what he's doing.

And admittedly, it sounds like a big unfair advantage you have with your ability to look at a property and just intuitively know and sketch out, “This is what I think is the best thing. Here are a few scenarios.” I don't know how to do that. I have no clue where to even start with that.

So, is that because of your civil engineering background? Or if somebody wanted to become like you, what would you suggest they do in terms of their career path?

David: Again, well, career path, I mean, trustable engineering if you have an aptitude.

Without that in place, no, I'll tell you the same thing. I've said it a few times in this, read the things that matter. In this industry, to me, if you're looking to do this, you need to understand those things that matter, the zoning ordinance, the subdivision ordinance. It sucks to read them. They're technical manuals. But in those, there's little ClipArt pictures sometimes and some ordinances that show you what they're looking for.

And all that does is give you a basic understanding. The rest of this is, I guess, you could find the right engineer in. I don't know, but you're killing me. It's a tough question.

Once again, I use the tools that I've forged over 35 years to kind of do my end of it. There's a dozen ways to skin this cat, find an engineer, but then you're trusting someone else. My issue with these things, and I tell this to folks I help. It's not that I don't trust everybody, but here's one thing, it's why you need a lot of people looking at things.

If I had one piece of property and I gave it to ten engineers and I got ten of the same answers, I don't need nine of you. You want ten different answers, but you also want somebody who's looking.

I'm the most unconventional engineer I've ever met. I don't think in terms, in boxed terms. Given an opportunity to lay something out where somebody tells me that the minimum lot size is 15,000 square feet and the minimum frontage is a hundred square feet, I know that five out of ten engineers are going to give you a layout with lots that are a hundred by a hundred and fifty.

And I'll use an example. I had an engineer do that on my project in Alberta, Alabama and he gave me 75 lots and inside of an hour I've set in my layout with 95 lots. I've magically found 20 lots? No, all I cared about was, if my minimum lot size is 15,000, what's 111 by 130? It's 15,000.

Now, I just picked up 20 feet on three-size lots, that's 60 feet. I picked up another row of lots. I double-loaded a street he had single-loaded, but he thought inside of a box.

My first vision of things is not inside of a box. I have guys in our industry calling, going, what's your buy box? I'm like, I don't have a box, I'll look at anything you send me and we can take a decision from that. Because once you're in a box, it's hard to get out.

Seth: Maybe the box is the zoning ordinance, right? So whatever that says you can't do, that's essentially the box, right?

David: Yeah, yeah. But there's one thing, there's nuance in every zoning ordinance. And there is because they want to build in some flexibility while trying to contain you. But if you think in rigid terms, then you're stuck there.

But if you step back a second and go, “I can make 15,000 square feet look different a bunch of different ways,” that's when you start nailing the success.

Seth: And I hope people are catching what David's saying here in that taking a plan of 70 lots and turn it into 90, or however many he's able to do, effectively he's creating money out of thin air. And sometimes a lot of money, because you can sell it for a lot more. And when you have that kind of a brain that can think in those dimensions, it is surprisingly uncommon.

And in terms of finding a good engineer, I mean this is probably a huge discussion, do you have any pointers on how do you know when you've got a good engineer who knows how to think outside the box or just see things in different ways.

David:Here's one of the things, this is a good one, maybe we should do this again, Seth.

One of the things that I've learned is, in 35 years, see I can speak with you on your level, with your experiences, right? When I'm on the phone with a lawyer, I speak to a lawyer in ways that he can recognize that I'm educated, I know what I'm speaking about. When I'm on the phone with a bureaucrat, jurisdictional bureaucrat.

I've been dealing with them for 35 years. I speak to them the way they see things and I don't try and argue with them over their reading of the ordinance. I merely point out the way I read the ordinance and I don't ask them what can I do on this piece of property. I tell them what I've read in their ordinance so immediately they know that, “Wait a minute, this guy read the ordinance!”

And then when I'm having a conversation with an engineer, I speak to him using engineering terms and speak about it the way an engineer would.

And I think that can all be acquired and it doesn't have to be in those terms exactly. I mean, if you read enough, if you know enough about what you're seeking to find and you're asking the questions the right way, the answers you get are significantly different than the answers you get if you just ask someone, “What do you think I can do with this?”

Because then they're going to revert to a box. “Oh, well, you can do these five things.” And they're going to leave out the fact that we've got this other part of our ordinance that if you give us 40% open space, you can shrink everything down and do something completely different.

You'll never find that out if you don't say, “Oh, I noticed that you have this other section, and if I read it correctly, if I give you 40% open space, I can make my lot 6,000 square feet.” And a lot of times, whether they read it or not, then they're going, you hear the pages flipping. “Oh, yeah, I see that. That's interesting.”

So I think, if anyone wants to learn anything, it would be to focus on not necessarily asking an open-ended question, because you're not really gonna get the answer that you're seeking. Even if it's subtly educating yourself before you ask the questions, you're gonna get better answers.

Seth: That's a huge lesson right there that I can totally vouch for. Being able to dispense with any assumptions that a lot of us make when we ask and answer questions and really get clear on what you want to know.

Those open-ended questions, I can't stand them. I see them all the time in our forum and my answer is it depends on 500 different things. Get really clear about what you want to know and show me that you've actually thought through it yourself before you start asking questions and wasting everybody's time.

David: It's great because we talked about earlier, I met my one partner because he asked the question online and I read it and what I knew was that the question he really wanted to ask he didn't know how to ask. And so I responded to what I thought the question was they was and I wrote it out pretty detailed like, you're not asking it correct here. Is this what I think you're looking for and within three minutes I got a DM from going can we get on a call?

Seth: Yeah. Well, David, this has been awesome talking to you. So appreciate your time and sharing your wisdom with us.

If people wanna get ahold of you, do you have a website or something that someone else can learn more about what you do or anything like that?

David: Yeah, our website is openlandcommunities.com. If you got a deal or something that you're not sure of, reach out, man. I'm happy to give it a look, give you an honest opinion. I tell people I got enough of my own. I'm certainly not gonna steal anything from somebody. I've never done anything like that in my life.

I’ll also sign NDAs or non-competes, I have no ill will. I'd rather give somebody free advice and help them structure a deal right than run into a deal that somebody has just soured or clouded the water and then you got to unwind it. Besides, I like this community and I think we should all help each other.

Seth: Yeah, I'm with you, man.

Well, thanks again. Thanks to the listeners out there. If you want to stay up to date on everything going on with REtipster, you can text the word free, F-R-E-E, to the number 33777, stamp it in, all the stuff that's going on.

Thanks again for listening, and we'll talk to you next time.