In the latest episode of Investories, we extend a warm welcome to financial freedom-fighter, Mike Newton, popularly known as Millennial Mike. This episode uncovers Mike's journey from humble beginnings, involving a struggling family and government welfare, to becoming a cause celebre in the world of real estate investing. Witness Mike's transformation as he optimizes strategies to conquer the steep path to an impressive portfolio of fifteen real estate units within only five years.
Millennial Mike encourages listeners to foster an active role in securing their financial future. In this enlightening conversation, he sheds light on his journey as a law enforcement officer while concurrently laying the groundwork for his real estate empire. His road to financial freedom offers a viable blueprint to those aspiring to shield their financial futures from economic uncertainty.
Tune in for actionable guidance on house hacking, a strategic approach that Jetpacked Mike to a profitable landlord status. Additionally, this episode also provides insight into managing long-distance properties, delivering experiential lessons, tips, and strategies that will aid even the most novice of investors in expanding their portfolios.
Listen as Mike and the Investories team plunge into the bleak perception of low reputation score markets in real estate. Learn how winds of financial fortune can blow even in such markets with the right understanding and strategy. Capitalizing on programs like Section 8, and leveraging private finance can turn such locations into your veritable gold mine.
The podcast concludes with a riveting discussion on successful real estate investment techniques, focusing on concepts like private money, hard money, BRRRR strategy, and value-adding investments. Millennial Mike's wealth of knowledge shared through his unique perspective is an essential resource for anyone aiming to stride confidently into the world of real estate investment.
Don't miss out on this treasure trove of financial wisdom from Millennial Mike. Stay connected for more insightful conversations that hit the sweet spot between inspiration and practical advice. Join us in this investment journey, because your financial liberation is just an episode away!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Welcome to Investories, unlocking the investing mindset and business strategies
of high-performing individuals to level up your financial game,
crush your goals, and build a life fulfilled.
This is the show that asks the questions you wish you knew to ask. This is Investories.
(00:22):
Booyah! Welcome to the Investories podcast with me, your host, John Hooper.
So we've got a really cool interview today
millennial mike aka mike newton is uh
really interesting interesting youtuber podcaster investor
he started about five years ago
with very little money uh no properties and he's
(00:43):
grown his uh his portfolio to eight rentals 10
units and um you know it's
a it's his style is very easygoing but
very straight down the line he's worked he's
figured things out he's been very open and transparent
on his journey youtube channel is absolutely worth
a follow uh to follow that journey and um that's what's really interesting it's
(01:07):
he's he's gone from that zero to 100 or zero to to 10 units very quickly very
methodically and um with a real eye for um understanding what's out there and
understanding understanding and learning and growing and all that good stuff.
And he's sharing his story with us and with the wider platform as part of that.
(01:28):
It's a wide ranging interview. It's really enjoyable. He's an infectious character.
And as I said, he lives in that space of authenticity and kind of likability and it's great.
So I'm really excited to bring you this one. Before we
dive right in if you could do us a favor and hop on youtube and subscribe and
(01:48):
like and feel free to write a comment we reply to all of our comments maybe
eventually sometimes it takes me a little longer than than i'd like and if you
have any guest suggestions why not drop us a line at,
investoriespodcast at gmail.com or in write something in the comments and if
you're listening on any podcast platform please just give us a five-star review
(02:10):
it really helps us it helps us make sure we're getting the right guests and
and and you know featuring higher in the in the rankings and boost my ego and
but anyway without further ado here's millennial mike.
Welcome to Investorees, Mike Newton, aka Millennial Mike.
Hi, Mike. I'm happy to be here. Thanks for having me. And yes,
(02:30):
yes, you can just call me Mike.
I like it. I like it. And Mike and I connected through a real estate group I'm
in, and Mike was really gracious with his time to come in and speak to us.
And through that, I've kind of got to know you is the wrong word.
I've watched YouTube videos, right?
We live in a weird age, right? That we feel like we know people and we can say, hey, how's it going?
(02:50):
But yeah, Mike's channel, which we'll put in the show notes is really good.
It's very, very open, honest, straight to the point. So, so thanks,
Mike. Mike, awesome to have you on.
Thank you. No, I really appreciate it. And it is, it is a very interesting phenomenon
that you just brought up,
which is the fact that you can watch someone's content sometimes for years and
(03:13):
never actually meet that person in real life or have a conversation with them,
but you will feel like they're your real life friend because you're spending
so much of your time with that person.
I think it's a very powerful tool for good. It can also be a powerful tool for
bad because then they can befriend you and sell you scams, or you could just
relate to them and learn something from them.
You're the former, right, Mike? Let's get that clear that this is a no scam zone.
(03:38):
It helps when I have nothing for sale, no boot camps, no classes,
no courses, no merchandise, nothing.
So if I'm a scam artist, I'm certainly doing a terrible job.
You're not optimized for sure.
Mike, can we start with your, your journey into real estate?
Because it's super interesting. You were a, you were a state trooper, right?
I still am. Yeah, still am. You're still a state trooper. Yeah.
(03:59):
So, and then I read in your bio on, on YouTube that you kind of made this pivot.
What was, what was that journey kind of being a state trooper and then thinking,
holy crap, what else should I be doing?
You know, I think it's extremely important for people to recognize that all
of the traditional forms of retirement planning are completely outdated.
(04:21):
They are a recipe for disaster. You know, I've had a couple conversations with
people who preach the 401k, the Roth IRA,
and with my job as a police officer, I actually am one of the few jobs that
still has a pension, which was, you know, for decades considered the gold standard
of retirement. You have a pension That's amazing.
So many places have gone away from that. But ultimately, at the end of the day,
(04:42):
I think that as we've seen in the last few years with inflation being at record
highs for 50 years, I think with unfunded pension liabilities,
which is where companies or governments that have said they would provide a
pension, but they declared bankruptcy and those people were left penniless.
And then I think that when you look at a Roth IRA or 401k, what happens if you
happen to be the guy who retired in 2006 and then 07, 08, 09 happens and your 401k became a 201k.
(05:08):
That was the joke back then. I think that it's an outdated method.
It's better than nothing. So I will use that. I think it's better than social
security, but I just think building businesses, investing in real estate is so much better.
And so transitioning away from just being the type of guy who's a SWAT officer
and responding to high risk calls to saying I could create for myself passive
(05:29):
income through real estate and rental properties and retire instead of 25 years with a pension,
retire in 10 years with tens of thousands of dollars of free flow and cash flow
that automatically adjusts for inflation and continues to increase the equity of the properties.
It was just a no brainer for me. It just really came down to how am I going
to do it? How long is it going to take?
I love that. And that's super interesting. I've had
(05:51):
that same journey where i've you know not not the pension
but the 401k and left left roles and had
401k sat there with some stock and i don't really
understand what this is so i actually put it to work in real estate i
took it out and turned it into a self-directed so i i totally agree with you
that there's this there's this thought process of like you know just leaving
it and and hoping that fidelity or whoever's managing your money does the right
(06:15):
thing to take ownership of that and and And your mindset of kind of sitting
there and working out is really,
really powerful because if you don't care, who's going to care, right?
Exactly. So that's super interesting. So what it taught me through that process,
like what did that look like from a, okay, I've identified the problem and next
I need to do X. What did that look like?
(06:38):
You know, so my journey towards becoming educated about real estate started before I was even a cop.
I worked in construction and for years I would work in a shop and I would listen to music.
And then one day I decided I was going to listen to educational content instead.
Instead of just listen to more Elton John on the radio, some oldies,
I was going to listen to something that was going to teach me something. thing.
And so I started listening to podcasts about business.
(07:02):
And this was back in 2009, 2010, before podcast technically,
I was listening to YouTube videos about it.
And I started to become educated about real estate investing.
And so I knew at about 21 years old, back in 2011, 2012, I need to learn how
to invest in real estate. This is going to be how I become successful.
I mean, I had to do some career changes and focus on building up my income so
(07:24):
that I could save more more money so that I could invest.
And eventually I did. And those of you who don't know, I actually own 15 different
units. I have 10 buildings.
I invest in Seattle, Chicago, Illinois, and in Gary, Indiana,
one of the most distraught markets in the entire country.
Think of Detroit, but maybe worse.
And, you know, I've built this portfolio over the last five years,
(07:46):
but it started with saying to myself, I don't want to be poor like I had been my entire life.
I grew up on Section 8 housing, government assistance, food stamps.
I came from a criminal family. The police were over there all the time.
And I did not want to live that life for myself.
And I think for a lot of people that have that desire, it's really just about
(08:09):
finding the method to get yourself out of it.
It's not even really about convincing them or saying, this is what you need
to do, or you should want to be better.
It's okay. I want to be better, but how, how do I avoid the scams and how How do I take action?
Wait, so I have a question from
young Mike and police activity around the family home to state trooper.
What's that? What's that journey? Is that just completely they say you rebel
(08:32):
against your parents? Is that it?
Well, you know, I talk at high schools.
I was talking to the high school just the other day in uniform and everything,
talking to the kids. And I always start with who hates the cops.
And I raise my hand as I'm standing there. But do I hate the cops?
I hated the police as a kid that I never had a good experience with them in
North Dakota. go to where I grew up, you can get your driver's license at 14,
(08:53):
which means I was driving in the eighth grade.
It's a comical, right? And so you're getting pulled over because you look like
a child. And I looked like a child because I was a child.
And so I never had a good experience with the police. There were always over,
I can't get into the specifics because I think your channel might get demonetized,
but bad stuff happened at my house as a kid.
And, you know, I had my first positive experience with law enforcement when
(09:15):
I was 18 years old, I got pulled over, I was speeding And the police officer was nice to me.
And, you know, about 18, you kind of start to grow up and you realize,
hey, I probably shouldn't judge an entire profession worth of people based off
the poor actions of a few individuals.
And so I had a positive experience. And I still never thought I would ever be a police officer.
I mean, I could not stand the cops. But what actually inspired me to want to
(09:37):
be a police officer was, tragically, a friend of mine, young lady that I'd worked
with for about a year, she was murdered.
And she was killed because of a domestic violence dispute with her husband.
And I sat there and I when I got the news, when I got the call,
I was so taken aback and shocked and everybody was.
(09:57):
But over the next six months to a year as I'm watching the trial unfold and
and we're learning all this information about how she was being abused and how
she was being controlled and manipulated. manipulated.
And I start putting together in my mind, I remember when she came to work with
a broken phone again for the third time, for the fourth time.
Why is your phone getting broken?
Well, because he was taking it, going through her stuff, throwing it against the wall.
(10:19):
She would have to go home early or get home right on time to make sure everything
was good or he was going to be upset.
And there was all these little cues and all these little tells that the 22,
23-year-old version of myself wasn't able to put together as to what was actually happening.
And to this day, I still feel partially responsible for the fact that she was murdered.
(10:40):
Because if I had known then what I now know now after years of training and
experience and seeing domestic violence, I would have been able to see what
was going on and maybe be in a position to have helped or encouraged her to
get help or get away from it.
And so I put aside my distrust and dislike for the police and said.
I want to become a SWAT officer so I can go find monsters like that and make
(11:05):
sure they get put in prison.
And I'm happy to report I've been doing it for years now, and it's immensely gratifying.
Wow. Amazing. No, I totally, I think that's an incredible reason.
I think, yeah, thinking back to yourself at 22, myself at 22 is like,
I wouldn't have had the situational awareness to say, oh, this is really problematic.
I'd have been like, oh, okay, you should probably get your phone fixed.
(11:27):
And that's what I was doing. Yeah. easy to
do easy to easy to kind of frame that out so
in terms of that first deal and stepping into real estate what
what did that look like were you kind of you
said you you squirreled away a load of money which is good right that's the
non-creative creative way but equally it's really scary when you lay out that
(11:48):
cash that you've kind of scrimped and saved what did that look like to this
day every time i do a wire transfer i'm just petrified It's really off by a
digit. Clicking that button. Yeah.
So for me, you know, I worked probably 70, 80, 90 hours a week for about a six-month period.
I worked an insane amount of overtime, and I saved all the money up I needed
(12:11):
for a down payment so I could buy a duplex.
And the reason I wanted to get a duplex was so I could house hack.
And I still, to this day, live in this side and rent out the other side.
And I just converted it to an Airbnb. It's doing great. Very cool. Very cool.
But I recognize that it's unbelievably
powerful if you can cut your most expensive bill out of your life.
(12:31):
And everybody's most expensive bill is their mortgage payment or their rent payment.
And I was paying $2,000 a month. Well, I move into this duplex.
I have a tenant next door.
My mortgage is $2,700, but the tenant pays $1,600. My roommate pays $500.
Now I'm left only paying a few hundred dollars a month to live.
And after I move into this place, now I'm able to save an extra $1,500 a month
(12:53):
to buy my next rental and I'm building equity and I bought it in 2018.
So I got years worth of crazy appreciation.
It's just been house hacking will go down as the single most important financial
decision I made in my entire life.
Yeah. I love that. I really wanted to do that. I live in San Diego and I really wanted to house hack.
And for me, it was the, it was the value or I wanted to, when we first bought,
(13:17):
but it was that value of like, what areas can I afford to buy in?
And do Do I want to buy there, be married there, have a family there?
And ultimately, I couldn't make that work.
I couldn't make that equation work just for my own comfort.
But for 99% of markets across the US, 100%, especially if you're younger.
(13:38):
My nephew, who's 19, was asking me about how to get into real estate and this and that.
And I was like, dude, buy a house with four beds and rent three out to your friends.
It's really that simple. simple so i think that's that's really admirable in
terms of getting kind of bitten by the bug taking that first step what was how
(13:58):
did you decide what was next because i think that's something that i struggle
with is like what do i want to do next.
After the first rental property? After the first one, yeah. Yeah,
that's a great question. So for me, I bought this first duplex.
And at the time I was sitting there thinking to myself, okay,
I was able to come up with a 5% down on this.
(14:18):
But 20% down on a property in the Seattle area. I mean, we're looking at six,
700,000. Yeah, that's a lot of cash.
Yeah, 20% down is 150, 180 grand. It's insane.
And so I'm sitting there saying to myself, I don't know how I'm going to buy
the next one. And so I started drawing circles out from where I lived.
All right, what if I go an hour, two hours, three hours, four hours?
(14:41):
And the funny thing is, is anywhere in the state of Washington is ridiculously
expensive. You're looking at four, $500,000 properties anywhere.
So I'd get to the point where I'm like, I've now gone so many hours outside
of where I live, I may as well start looking at other markets.
I'm from the Midwest originally, I'll look around there.
And I had a friend of mine recommend and say, Hey, why don't you try Gary,
(15:04):
Indiana, which for those of you who don't know, it's been dubbed America's most miserable city.
It's got three times the national crime rate, three times the poverty rate,
13,000 abandoned buildings in the city.
If you Google this city, I promise you, you're going to feel like you need to
clear your browsing history.
That's how dirty it is. It's going to make your computer just like virus filled.
(15:25):
And so I told my friend promptly, absolutely not. I'm not doing it.
No way. One quick Google search. I'm done.
But he kept bothering me. He kept telling me, just try. He said,
why don't you just call and talk to some people? And I said,
all right, I'll consider it because I'll admit.
When you look at the numbers and they've got houses for sale for 40,
50, $60,000, you're like, okay, that's a really cheap house.
(15:48):
My down payment's like 12,000 bucks.
Okay. I'm interested, but I'm not sure. And so really it came down to me of,
I was looking for a market that would produce cash flow because I don't buy
for appreciation. I buy for cash flow.
And once I got turned on to Gary, after I said no enough times,
I finally just started doing the research and learning about the market and
(16:11):
asking the questions that I was concerned about,
like, well, aren't there going to be like gangbangers trying to rent for me
and drive by shootings all the time and nobody's going to pay their money and
everything's going to go up in flames.
You talk to enough people, you put the right team on the ground,
you can be successful in any market.
That's awesome. Let's unpack that a little bit. So you said you buy for cashflow
(16:32):
rather than appreciation.
What was the decision on kind of looking at markets in that way rather other
than buying and holding and waiting.
You know, this is something that I have grown to disagree with BiggerPockets
more and more because they have recently been saying buying for cash flow is
dead, buy for appreciation.
And I think it's a symptom of people who've invested for so long have the luxury
(16:56):
of not needing to be as careful as they had to when they got started out.
And I think that kind of just happens to a lot of people. You know,
risk doesn't feel as risky when you've got 100 units to back you up.
But when you've got one or none, you need to be careful.
So why do I buy for cash flow? Well, appreciation isn't guaranteed.
We had the Great Recession, 07, 08. Houses went down 50% in some places.
(17:20):
If you buy hoping for appreciation, you might be very, very unhappy when you
find out something bad happens. Or appreciation could just be slow.
For those people who've been paying attention the last couple of years,
we got about a decade's worth of appreciation in a year, 2021 to 2022. 22.
I'm honestly thinking we probably won't have much appreciation over the next
nine years as we catch up to where we should have naturally gotten to over time.
(17:45):
So appreciation is just very lumpy and inconsistent, hard to plan for.
And then if you want to take advantage of it, you either have to sell or do
a cash out refinance, which has all these steps to it.
Cash flow, on the other hand, super easy. I've got mortgage payments for 350 bucks a month.
The unit rents for 1200 bucks a month.
You don't have to be a math whiz to figure out $1,200 minus $350 is a good deal.
(18:09):
Sure, you got some property manager fees and things in there like that,
but if you're cash flowing for $500 a door, it's pretty easy to figure that
out. How many of those do you need to buy to replace your income?
I love that. I love the simple, simple math. Right. And I think you've hit a
really interesting point, which is, yeah, for four years, like the consensus of cash flow.
(18:29):
And now there is a switch to appreciation.
But let's not forget, in 2007, you know, appreciation was wiped off the map.
So although cash flow can kind of ride up and down, so can appreciation.
So it's super interesting. interesting you mentioned
about picking your team and getting the right people in
in gary specifically what did that process look
(18:50):
like did you phone them up and say hey hey i'm mike i'm a
state trooper i'm in swat can you help me out or you know i i don't ever call
and tell people that i'm a police officer because there's people and then i
also don't want anybody to ever you know i don't want to use my position of
authority to get some sort of i'm teasing her favor but But typically what I
do is I always start with referrals.
(19:12):
I'm always looking for somebody in my network to make a referral.
So when I tell people and teach people how to get started investing at a distance,
the number one thing that I say is you need to build a network of other investors in that area.
I talk a lot about virtual networking.
Let's say you wanted to go to the market of Birmingham, Alabama.
I don't own anything there.
(19:33):
The first thing I'm gonna tell people to do is get on YouTube and get on Instagram
and type in real estate investors, Birmingham, Alabama, rental properties, Burlingham, Alabama.
Who is making videos in that area? What small time creator that actually has
the time to respond to you who is out there that you can watch their videos,
send them a message and start talking with them and building a relationship.
(19:54):
And then from there, sure, if you live locally, you could attend local meetups,
but you could do everything virtually.
Once you meet enough other investors that you can chat with.
Well, guess what? Oh, this guy owns 25 rentals. Who's your property manager? Who's your contractor?
Who's your plumber, your electrician, the guy who does your yard?
He's going to be able to provide you with a list of vetted contractors and a
(20:16):
team that you now don't have to build from scratch yourself.
So that's like the most important person on your out-of-state investing team
is the network of other investors. After that, it's your property manager.
And again, you join that Facebook group, that Birmingham, Alabama Facebook group
for real estate investors, which I guarantee you there is one or there's a middle
Alabama Facebook group or a Alabama Facebook group.
(20:39):
There's a group out there. You join it and you start reading through the last
five years of posts because the question's been asked, who's a good property
manager or has anyone had problems with a property manager?
Then you read hundreds of comments that say, these guys rock,
these guys suck. You build your list from there.
The other thing is you find in those groups is you find trends.
You find the same players coming up each time answering questions and you can
(21:03):
really start to kind of knit together that network.
My other ad would be LinkedIn.
There's a lot of untapped kind of opportunity in LinkedIn.
Even just finding operators and saying, and you're right, the right scale, right?
If you go to the largest kind of most famous real estate person you could think
of, they're probably not going to answer.
But if you find an operator on LinkedIn and reach out and say,
(21:25):
hey, I really admire what you're doing. Have you got time to talk?
It's an easy win to kind of get in there. So that's super interesting.
Have you had any problems dealing with any of your team? Has there been any
challenges? And how did you mitigate that?
You know, I think there's always going to be growing pains. And I think one
of the most interesting things when you start out, and could be if you start
(21:47):
out locally or at a distance.
When you start out with a property manager and you've got one little unit,
you represent a tiny little paycheck to that property manager.
You're more of a nuisance than anything else. Are you going to get the type
of service that you want?
Probably not. Is that fair? No, but life's not fair. Grow up.
The best way to ameliorate this situation is to have a big brother.
(22:08):
And what I mean by that is you're good friends with somebody who's an established
investor in that market.
That person refers you to the property manager.
That person sends an email where you and them are CC'd.
And now, anytime you're not getting the service you want, you go tell your big
brother investor, hey, they don't respond to my stuff.
(22:28):
I can't get an answer from them. I got some questions about that.
And if they aren't treating you right, all of a sudden your friend investor
is now going to reach out and say, hey, what's going on with this?
Well, they represent a substantially larger portfolio size, bigger paycheck.
And that's exactly what I did. I piggybacked off the success of another investor
that I'd befriended in Indiana to vouch for me. Now I'm that guy for all the people that I help out.
(22:53):
I'm the guy who, because of my YouTube channel and stuff like that,
I mean, I refer hundreds of people and I get no referral fee.
I don't want any kickbacks, but I refer hundreds of people to contractors and
plumbers and property managers out there.
And it's to the point now where I tell everybody, if they don't treat you right,
let me know because I will shut their business down with one video or,
(23:14):
hey, I'm not referring anybody anymore.
People are having a bad experience. and because of that everybody behaves
properly and no one is ever left out in
the dark or get screwed over awesome i love that one thing you did say was around
kind of doing the analysis and as you pivoted to gary indiana which is as you
said kind of our left field not a market that everyone's looking at what is
(23:36):
your analysis of a market and maybe down even into assets what does that look like.
You know, so it's very interesting. A lot of times you'll hear the typical bigger
pockets, the conventional wisdom out there.
Well, you know, you want a market that's, you know, increasing in population
with a bunch of good jobs.
That's, you know, trending A and B market, maybe with some C class properties.
And if you go down the conventional wisdom of what makes a good market to invest
(24:00):
in, Gary, Indiana fails by nearly every single metric.
And that's another one of the reasons why I wasn't interested in it because
the conventional wisdom says no.
But here's the thing. in every single market in the country,
whether it be the most expensive, least expensive,
most densely populated, least densely populated, blue state,
(24:20):
red state, doesn't matter where, in any market in the country,
there's people who are investing successfully and people who are not investing successfully.
So you need to find and befriend the people who are doing it right and then
copy and paste their strategies into your life.
You could fail in the best market and you can succeed in the worst.
I have found a way to succeed in one of the worst markets.
(24:42):
Now, when I did analyze Gary Indiana specifically, I pretty much had to say
right out the gate, okay, anything about crime statistics and neighborhood safety
ratings and all that type of stuff, out the window, it's going to fail.
We're looking at purely cashflow. And again, what I talked about earlier,
if it's got a 350 to $500 mortgage payment and it's renting for a thousand to
(25:03):
1300 bucks a month, the math on it is pretty easy.
Can you make that cash flow over a long period of time?
Yes or no? The answer is yes. Okay, cool. Do I have a property manager that
I trust to take care of it and find me good tenants? Yes or no?
Yes. Okay, well then why not? Why not jump in?
In terms of the numbers you did look at, did you have certain metrics that you
(25:28):
were other than cash flow?
So you said no crime Was there kind of employment levels or income or...?
I did not take any of that type of stuff into consideration because again,
it's going to fail every single metric.
It was an unbelievably depressed economy, 13,000 abandoned buildings in the city of Gary, Indiana.
(25:48):
The reason it's such a failing city is when de-industrialization happened in
the late seventies and we started shipping all of our steel jobs.
The city of Gary was founded by us steel in 1906.
Uh, we shipped our steel jobs across the, across the water to of China.
And this company that used to employ 95,000 people now employs only 5,000 people.
All the skilled labor workers took off and left, and they just left this unbelievably
(26:13):
destitute city. There's not much good to say about it.
But this leads me to a point that I bring up that I think people need to focus
on. This is what you should do moving forward in the future.
We are right now at a point where a word that's called income inequality gets
thrown around all And you may have a political triggered response to income
inequality, whether you're for or against it.
(26:33):
The fact is, is that there is a spread of income inequality happening.
There are more people stacking up on the bottom and more people stacking up on the top.
The rich classes is growing as well.
I'm in it. You're in it. i think my
projection is the government is going to continue to
provide housing assistance to the people that are
(26:54):
on the bottom end of the spectrum and it's
not going to be popular to limit housing to limit food
stamps they're going to expand those programs and so
you as the smart intelligent investor can say
to yourself i know how to work with the government to provide housing to people
that need housing and the government always pays i am transitioning everything
(27:16):
i have to section 8 because the government always pays and they don't pay a
below market rate anymore. They used to be famous for paying trash.
Now, the most important thing for any investor is, am I actually going to get
a check every month and will the house be kept in good condition?
Section 8 has a terrible reputation and it's undeserved.
(27:36):
They get paid every month. You're getting paid a fair rate for the unit.
And if they don't keep it in good condition, then the tenants can be punished
by the Section 8 program and evicted. If they get evicted, they're off it for five years.
And they don't want to lose that because that is quite literally their meal
ticket. So usually they're on pretty good behavior.
So my advice to people out there is partner with the government.
Figure out how to provide housing to the people who need it.
(27:58):
And, yeah, oh, well, what about employment rates or any of this?
Dude, the people that rent from me don't have a job. Or maybe they have a very
low earning job, but their portion of the rent is 50 bucks a month.
The other $1,100 is paid by the government.
That's really interesting. Yeah. And I totally, I'm from the UK,
so I probably see housing and equality a little differently from everyone else
(28:19):
or a lot of people in the US.
So I totally align with that. It's interesting.
And yeah, you're right. It's only going to be a bigger focus for governments
to kind of manage that piece or at least provide that piece.
I wanted to pivot slightly in terms of your, well,
actually, first of all, in terms of that move into Section 8,
(28:41):
what's been the most surprising kind of, I guess, issues is the wrong word,
but kind of changes that you've had to make to move into Section 8?
It's been nothing but positive. You know, people, when I first learned about
Section 8, because I actually grew up on it, and I didn't know much about what
was going on when I was a kid, other than, hey, we get free rent and we live in this house.
(29:03):
But there is a preconceived notion that Section 8 tenants are going to be trouble, like gangbangers.
Think of the projects in New York in the 1970s. Nothing but violence are going
to destroy the place. It's going to be horrible.
And maybe at one point it was like that. Or not all Section 8 programs are created
equal. Well, maybe in some areas it's not as well.
But when I looked at Gary and the Section 8 program out there,
(29:25):
as I mentioned earlier, these tenants, the average amount of time somebody stays
in a Section 8 rental is seven years.
The last thing you want as a landlord is turnover. You want people to stay and
stay for a very long time. That's how you get paid.
In Gary specifically, they have shut down the wait list to get on Section 8.
There's such a long line, they've closed the waiting list. list.
You can't even get on the waiting list.
Once you're on the list, it's on average two to three years before you even get a unit.
(29:49):
So when I bring a unit to the Section 8 program and say, I got a unit, do you want it?
It's quite literally like that family
is winning the lottery because they might've been waiting for years.
They're going to come in. They don't want to get kicked off.
They don't want any problems.
Are they going to take care of the property as well as you are?
Probably not. No tenant ever does. But I have not had properties destroyed.
(30:12):
I've not had payments not come in. I've not had an incessant amount of phone
calls for things being broken.
And when people say, oh, well, what about the fact that they might inspect your property?
Who cares? They're always going to come out and they're going to find some dumb
thing that needs fixed or painted.
Once a year, you're going to
have to pay a couple hundred bucks to fix whatever it is and appease them.
(30:32):
But if you can't pass a Section 8 property, you're probably a slumlord.
Or excuse me, if you can't pass a Section 8 inspection, you're probably a slumlord
because they're not that hard to pass.
You should want your properties to be beautiful pride of ownership rentals that
people enjoy living in because that's your reputation.
I love that. I agree with that. So we invest in short-term rentals in Big Bear. We have one up there.
(30:56):
And there's an arduous kind of checklist that you go through.
And it's like, this is all good fundamentals of someone living in a unit, right?
It's like, are they going to die of carbon monoxide? No. Oh, good. That's good.
Those kind of things. That's not scary. That's a good thing.
That's really interesting. I think, especially in the market at the moment,
(31:16):
like that's the guaranteed rent piece.
And certainly during COVID when there was huge layoffs and rent guarantees and
stuff, but rolling off the back of that, that's such an interesting space to be in.
I wanted to change focus a little bit in terms of maybe BERS,
but also financing in general.
How are you seeing kind of changes in the market to finance your investments?
(31:41):
Yeah, it was significantly easier in the glory days of real estate two, three years ago.
The glory days of, yeah, I was going to say nine months ago, yeah.
Right, exactly, yeah. But it's literally the first even four months of 2022.
Interest rates 3%, 4%, easy to make something cashflow.
People complained about prices then. Now we complain about prices and interest
(32:03):
rates and your monthly payment. It's horrible.
So what do you do? What do you do to continue investing even though interest
rates and prices and monthly payments are at an all-time high?
That's a very good question. It's a very important question.
If you aren't doing everything you can to learn about creative financing,
you're doing yourself a disservice.
Seller financing is the holy grail of real estate.
(32:24):
The terms are all made up. The rules are made up. How long, how much of an interest
rate, completely made up.
I just closed on a deal on Friday where I only had to put $3,000 down.
I have a 0% interest rate. It was a $20,000 purchase price.
I had to put three grand down and I'm paying 400 a month for the next three
years until it's paid off.
(32:45):
That deal right there can be copied over and over again in any market.
Maybe you adjust the price and things like that, but those deals are out there.
Now here's a little hidden trick.
You need to network with wholesalers and you need to educate them on seller financing.
Financing they're already spending the time sending out
mailers trying to contact people that want to sell their house
(33:06):
and for whatever reason it's distressed or it's damaged or they
they've got some problem with that and they're going to sell it quick wholesalers
are a great entry into the seller finance space that i never hear anyone talk
about because they're already they're already flooding the market with their
pamphlets and with their marketing and then you you can just teach them instead
of always offering cash,
(33:27):
why not also offer financing to the people you're trying to get those houses
from? Give them two options.
Yeah, we'll buy this house cash at 40 grand, but we got investors who will actually
pay 60 grand for it if you do financing.
It'll still give you a down payment. And then so long as your wholesaler still
gets his assignment fee in the middle, he doesn't care. That's how he's getting paid.
(33:49):
So talk to your wholesalers and and learn about seller financing.
The other thing that you really should be focusing on is private money.
And there's a difference between private money and hard money. Hard money sucks.
It's expensive. It's got a quick turnover time.
Private money is like seller financing. The terms are made up.
You do whatever you want.
I recommend people go to their local real estate investing network.
(34:11):
You're like your local meetup group. Even if you invest at a distance like I
do in Indiana, my private investors come from right here in Washington.
Two different types of people go to local real estate meetups.
People with no rentals and no money that want to get started and people that
are old with a bunch of money that want to invest in real estate,
but they're tired and they don't want to work really hard.
They want to piggyback off of your success. I showed up at my local real estate
(34:35):
investing network trying to help other people and teach other people how to get started.
But as the people with money didn't put in the amount of effort that they needed
to do to be successful, they kind of got to the point where they were just like,
well, can I just lend you money? Can we do a deal together?
And that's why I started trying to come up with, all right, well,
how do I structure this so that it's not as crappy as hard money,
(34:55):
but so that they can get paid?
And I came up with a pretty unique private money
deal that I've been running and it's maybe it's too complex to
tell in this video but you check it out on my channel if you want but
yeah I mean partner with private money investors because that's significantly
better than the interest rates the banks are paying right now if you structure
it right and how do you so investors now I guess are approaching you but how
(35:17):
did you pitch that first private money deal I think if you go to people trying to ask for something.
It's going to be very hard to come off as genuine. Like you care about them.
I never went to anybody and asked for their money.
What I, and like I said earlier, what I did is I attended these meetups and
I sat there as the guy, as the, as the big investor with eight units is the
(35:39):
big investor in my local meetup group.
The guy with three years of experience, I'm listening to everybody's story and
I'm giving them thoughtful information on how that they could take action to buy a rental.
If they email me, they text me, they have questions for me.
I take their calls always. ways. And what ends up happening is some people you
actually help get started investing. Fantastic. That's a win.
(35:59):
But some people along the way will become disheartened or not motivated enough,
or they don't have energy or they're too afraid to do it on their own.
There's going to be another group of people that would rather just piggyback
off your success. They will come to you.
They will ask you, hey, can I lend you money? Can we do a deal together?
(36:19):
What do you think I should do since I can't find anything.
Well, have you ever thought about lending money to anybody? Well, maybe.
Yeah, I mean, you could get 10% on your, it's just sitting in a bank right now
making 3%. Why don't you lend some money out, you know?
Then they can explore hard money and private money. And that's when you could
come in and say, okay, well, for me, I now get to say, you know,
(36:40):
I pay my investors 10%. You want to invest with me? I will guarantee you 10% return on your money.
I will cut you a check every single month to guarantee it against the asset.
You get a private mortgage in your name am filed with the county if i don't
pay you or i get killed at work you now own the asset you sell it you get your
money back you're good and and people are like i can get 10 that's twice as
much as a treasury bond and it's eight times as much as my bank is paying me like yeah pretty easy.
(37:05):
Yeah and i think so i've been doing a lot of research and and
hanging out hanging out with a few capital raisers and
it's really interesting the mindset or the mind shift of
like how you frame that which is you're not asking them
for money and you rightly you shouldn't be walking
up to people and say can you can you give me 100k or whatever what
you're doing is you're presenting an opportunity and you're discussing an opportunity
(37:28):
so it's very open very natural and the the the sell is the opportunity it's
not the oh can i borrow money kind of thing and i think that that shifted my
mind a little bit to uh to something a bit more a bit happier about it and a.
One other pro tip on that. It's always helpful to say, yeah, I've got this deal.
(37:51):
I'm going to buy it with or without you. It's such a good deal.
But if you want to partner with me on this deal, you can.
Here's how we can do it. But I don't need, like, don't feel bad or obligated
by any stretch. I'm going to buy this deal on my own. If you want to partner with me, that's great.
But this is an amazing deal. That right there helps kind of alleviate some of
the existential, like, pressure they may be feeling or something like,
(38:12):
no, man, this is a great deal.
Whether you join up with me or not, I'll buy this thing.
So talk to me about engaging wholesalers and kind of educating them.
What does that look like?
Yeah, that's a good question. Everything comes down to networking.
You just got to talk to a lot of people.
Real estate agents, wholesalers, everybody. When you drive around your city
and you see the we buy houses, you know, we buy ugly houses,
(38:35):
we buy houses fast for cash. Dude, those are wholesalers with those signs out there.
You might not be wanting to sell your house, but you can call and say,
I want to be added to your list of buyers.
Hey, do you guys ever do a mortgage wrap? Do you ever do any type of seller
financing? If you found the right deal and I didn't want to pay cash,
could we ever talk about offering seller financing? They might not have any idea what that is.
It's an extra tool in their tool belt to convince somebody to do a deal with them.
(38:56):
And they should want to learn it because, again, you're going to still pay them
their assignment fee. But instead of being told no at their 50% off cash price,
they might get told yes at their 30% off financed price.
Somebody might say, all right, I don't want to sell my $100,000 house for 50
grand cash, but I might sell it for 70 grand with a down payment and on terms.
(39:18):
That might make them feel a little bit better. Now the wholesaler has more options
to still get their assignment fee and you could get some good financing that
doesn't have crappy terms to it. So talk to as many wholesalers as you can.
Just like everything in life, there's gonna be ones that have higher aptitude
and ones that have a lower aptitude. There's gonna be the ones who don't really
care. There's gonna be the ones who wanna learn.
(39:40):
And you just need to talk to as many as you can.
How do you, how do you cover the assignment fee? Is that just like the example
you gave us? Was that the part of the three grand?
Yeah. So on the example that I gave you, there was a $10,000 assignment fee.
And with the wholesaler, I said, Hey, tell you what, I'll pay you your $10,000
assignment fee on this one, but I'll pay you $5,000 at close and another $5,000,
(40:01):
six months down the line, because I'm trying to get this thing remodeled.
And I always, always throw it out there, even though I could pay him the full
10 grand up front, there's no reason for me to do it.
I should always ask for financing.
And if they say no, okay, no problem. But if you don't ask, just like when it
comes to dating pretty girls, if you don't walk up and ask them,
(40:23):
they ain't going to say yes.
So you have to just say, hey, man, is there any way that I could pay you half
the assignment fee a day and another half in six months or something?
Or could I pay you your assignment fee a thousand bucks a month over the next year?
Or any number of different things, you know, because these guys,
they, like you, just want to get the deal closed and move on to the next deal.
And even though they've got a list of cash buyers, it's not as long as they think.
(40:44):
They might be working with one or two people on a property in some market.
So you give them a way to get their money, they're probably going to say yes
to you, especially if you're their only option, they will say yes.
That's so cool. That's really interesting. Yeah, I think wholesalers,
they're often seen as adversarial, but they're repping the seller right in a way.
(41:04):
So that's super interesting. interesting uh in terms of and and this is really
the last piece which is the the pivot to kind of burr what what's that look
like over the last i guess generally but over the last six months.
The BRRRR strategy is extremely important right now. And again,
I would honestly recommend people check out a video I did on my channel about
(41:25):
my triplex because I'm doing what I'm calling a slow BRRRR.
The BRRRR is a fantastic buy, remodel, rent it out, refinance.
The problem is with the refinance right now.
Rates are so bad and most people are trying to recoup all their money quickly.
And because you're compressed on a timeframe, frame, you have to refinance into a less than ideal loan.
(41:50):
And so how do you figure out and solve for that problem?
Well, what if I was able to elongate my time frame? And that's how I incorporate private money.
What if instead of using a bunch of money at hard money rates,
which are more expensive,
what if I used private money and I pay them over time and I give myself enough
(42:10):
time to do the BRRRR, instead of six months after buying it,
I could do it at any point between now and the next five years.
And I'm hoping that at some point in there, there will be a time where interest
rates and the price and the monthly payment makes sense.
And then I even gave myself in my contract, a line that says,
if it doesn't appraise for a certain dollar amount, I get to extend for another three years.
(42:32):
So I have up to eight years to actually cash out my BRRRR while I pay interest only to the lender.
And that interest only payment is 10%. They get their 10%. But because I'm not
paying principal and interest, I cash flow the entire time that I'm actually
making the payments to them.
I'm cash flowing better than if I was paying principal and interest to a bank,
(42:53):
even at a 5% interest rate.
Because when you add principal and interest, that monthly payment is more than just interest only.
And because I used the BRRRR strategy, when it comes time to cash out on the
backend, end, I get to cash out on a value that's high enough to cover the original
investor and still pay me.
I understand there's kind of like a lot of numbers and concepts there that maybe
are hard to understand on a podcast, but the burst strategy and value add is very important.
(43:16):
I think it's something that everybody should be looking at.
You just need to figure out how to solve for time.
Yeah, I think that's really interesting. And I think the question that immediately
comes up, and maybe this isn't the strategy for Gary, but what happens in Gary,
Indiana in a cashflow market rather than an appreciating market?
So that's why the burst strategy is important because I'm not banking on buying
(43:40):
a new house and hoping that it appreciates over time.
I'm banking on purchasing a asset that needs to have value added.
This $20,000 house that I just bought, I'm going to add a doorway at the bottom
of both stairs and boom, I've got a duplex.
First of all, I bought it at 20 grand. It's already worth 50.
I'm going to put a doorway on each side. Now I've got a duplex that's worth 90.
(44:03):
Now, of course, from there, I'm actually going to remodel it.
I'm going to spend 20 grand maybe into like fixing the floors,
the paint and everything like that.
When it's all said and done, it's going to go from the purchase price at 20
to an after repair value of 150.
When I go to the bank and say I want a loan, they'll say 75% of of 150?
Cool. Don't check me on the math. Here's a hundred grand, whatever it might
end up being. Here's a hundred grand. Well, I have my a hundred grand.
(44:26):
I now have more than enough money to pay off the original owner if I wanted
to, or pay off whatever money I used to remodel it.
So if you do value add, you need to make sure that there is a large enough wedge
in between your purchase price and the after repair value.
So you have to buy the asset, right? A lot of people get hemmed up because they
think they've bought it cheap enough. I'm getting it 30, 40% under market.
(44:48):
No, 50% is the minimum. It needs to be 50% under market to make sure you're
hedging against potential drops in values or costing more to get it fixed.
50% or better. Like in my case, 20,000 versus 150, dude, I mean,
it's really hard to screw that one up. Really hard. I love that.
No, and I think the eight-year loan as well, the additional tax makes a lot of sense.
(45:14):
But that's really interesting. Yeah, that was my thought was like,
hang on, what if it doesn't appreciate?
But absolutely, you're adding value and you've got your a few get out clauses.
And by the time you've saved the cash flow to pay it outright,
worst case scenario, that's super interesting.
I want to be mindful of your time, Mike. I really appreciate your time today.
(45:35):
How How can people get in touch with you?
Yeah, so if anybody wants to follow me or reach out to me, just go on Instagram
or YouTube and type in Millennial Mike and I'll pop up, send me a DM.
I always respond to everybody on Instagram and YouTube. I try to respond to all my comments if I can.
Yeah, and we'll put links to all that in the show notes. And check out,
(45:55):
we don't like to promote other people's channels, but Mike's channel is really good.
It's kind of how you've talked today, Mike, just straight up and quite humorous
and all that good, even for a state trooper.
Music.
Welcome to Investories, unlocking the investing mindset and business strategies
of high-performing individuals to level up your financial game,
crush your goals, and build a life fulfilled.
This is the show that asks the questions you wish you knew to ask. This is Investories.
(00:22):
Booyah! Welcome to the Investories podcast with me, your host, John Hooper.
So we've got a really cool interview today
millennial mike aka mike newton is uh
really interesting interesting youtuber podcaster investor
he started about five years ago
with very little money uh no properties and he's
(00:43):
grown his uh his portfolio to eight rentals 10
units and um you know it's
a it's his style is very easygoing but
very straight down the line he's worked he's
figured things out he's been very open and transparent
on his journey youtube channel is absolutely worth
a follow uh to follow that journey and um that's what's really interesting it's
(01:07):
he's he's gone from that zero to 100 or zero to to 10 units very quickly very
methodically and um with a real eye for um understanding what's out there and
understanding understanding and learning and growing and all that good stuff.
And he's sharing his story with us and with the wider platform as part of that.
(01:28):
It's a wide ranging interview. It's really enjoyable. He's an infectious character.
And as I said, he lives in that space of authenticity and kind of likability and it's great.
So I'm really excited to bring you this one. Before we
dive right in if you could do us a favor and hop on youtube and subscribe and
(01:48):
like and feel free to write a comment we reply to all of our comments maybe
eventually sometimes it takes me a little longer than than i'd like and if you
have any guest suggestions why not drop us a line at,
investoriespodcast at gmail.com or in write something in the comments and if
you're listening on any podcast platform please just give us a five-star review
(02:10):
it really helps us it helps us make sure we're getting the right guests and
and and you know featuring higher in the in the rankings and boost my ego and
but anyway without further ado here's millennial mike.
Welcome to Investorees, Mike Newton, aka Millennial Mike.
Hi, Mike. I'm happy to be here. Thanks for having me. And yes,
(02:30):
yes, you can just call me Mike.
I like it. I like it. And Mike and I connected through a real estate group I'm
in, and Mike was really gracious with his time to come in and speak to us.
And through that, I've kind of got to know you is the wrong word.
I've watched YouTube videos, right?
We live in a weird age, right? That we feel like we know people and we can say, hey, how's it going?
(02:50):
But yeah, Mike's channel, which we'll put in the show notes is really good.
It's very, very open, honest, straight to the point. So, so thanks,
Mike. Mike, awesome to have you on.
Thank you. No, I really appreciate it. And it is, it is a very interesting phenomenon
that you just brought up,
which is the fact that you can watch someone's content sometimes for years and
(03:13):
never actually meet that person in real life or have a conversation with them,
but you will feel like they're your real life friend because you're spending
so much of your time with that person.
I think it's a very powerful tool for good. It can also be a powerful tool for
bad because then they can befriend you and sell you scams, or you could just
relate to them and learn something from them.
You're the former, right, Mike? Let's get that clear that this is a no scam zone.
(03:38):
It helps when I have nothing for sale, no boot camps, no classes,
no courses, no merchandise, nothing.
So if I'm a scam artist, I'm certainly doing a terrible job.
You're not optimized for sure.
Mike, can we start with your, your journey into real estate?
Because it's super interesting. You were a, you were a state trooper, right?
I still am. Yeah, still am. You're still a state trooper. Yeah.
(03:59):
So, and then I read in your bio on, on YouTube that you kind of made this pivot.
What was, what was that journey kind of being a state trooper and then thinking,
holy crap, what else should I be doing?
You know, I think it's extremely important for people to recognize that all
of the traditional forms of retirement planning are completely outdated.
(04:21):
They are a recipe for disaster. You know, I've had a couple conversations with
people who preach the 401k, the Roth IRA,
and with my job as a police officer, I actually am one of the few jobs that
still has a pension, which was, you know, for decades considered the gold standard
of retirement. You have a pension That's amazing.
So many places have gone away from that. But ultimately, at the end of the day,
(04:42):
I think that as we've seen in the last few years with inflation being at record
highs for 50 years, I think with unfunded pension liabilities,
which is where companies or governments that have said they would provide a
pension, but they declared bankruptcy and those people were left penniless.
And then I think that when you look at a Roth IRA or 401k, what happens if you
happen to be the guy who retired in 2006 and then 07, 08, 09 happens and your 401k became a 201k.
(05:08):
That was the joke back then. I think that it's an outdated method.
It's better than nothing. So I will use that. I think it's better than social
security, but I just think building businesses, investing in real estate is so much better.
And so transitioning away from just being the type of guy who's a SWAT officer
and responding to high risk calls to saying I could create for myself passive
(05:29):
income through real estate and rental properties and retire instead of 25 years with a pension,
retire in 10 years with tens of thousands of dollars of free flow and cash flow
that automatically adjusts for inflation and continues to increase the equity of the properties.
It was just a no brainer for me. It just really came down to how am I going
to do it? How long is it going to take?
I love that. And that's super interesting. I've had
(05:51):
that same journey where i've you know not not the pension
but the 401k and left left roles and had
401k sat there with some stock and i don't really
understand what this is so i actually put it to work in real estate i
took it out and turned it into a self-directed so i i totally agree with you
that there's this there's this thought process of like you know just leaving
it and and hoping that fidelity or whoever's managing your money does the right
(06:15):
thing to take ownership of that and and And your mindset of kind of sitting
there and working out is really,
really powerful because if you don't care, who's going to care, right?
Exactly. So that's super interesting. So what it taught me through that process,
like what did that look like from a, okay, I've identified the problem and next
I need to do X. What did that look like?
(06:38):
You know, so my journey towards becoming educated about real estate started before I was even a cop.
I worked in construction and for years I would work in a shop and I would listen to music.
And then one day I decided I was going to listen to educational content instead.
Instead of just listen to more Elton John on the radio, some oldies,
I was going to listen to something that was going to teach me something. thing.
And so I started listening to podcasts about business.
(07:02):
And this was back in 2009, 2010, before podcast technically,
I was listening to YouTube videos about it.
And I started to become educated about real estate investing.
And so I knew at about 21 years old, back in 2011, 2012, I need to learn how
to invest in real estate. This is going to be how I become successful.
I mean, I had to do some career changes and focus on building up my income so
(07:24):
that I could save more more money so that I could invest.
And eventually I did. And those of you who don't know, I actually own 15 different
units. I have 10 buildings.
I invest in Seattle, Chicago, Illinois, and in Gary, Indiana,
one of the most distraught markets in the entire country.
Think of Detroit, but maybe worse.
And, you know, I've built this portfolio over the last five years,
(07:46):
but it started with saying to myself, I don't want to be poor like I had been my entire life.
I grew up on Section 8 housing, government assistance, food stamps.
I came from a criminal family. The police were over there all the time.
And I did not want to live that life for myself.
And I think for a lot of people that have that desire, it's really just about
(08:09):
finding the method to get yourself out of it.
It's not even really about convincing them or saying, this is what you need
to do, or you should want to be better.
It's okay. I want to be better, but how, how do I avoid the scams and how How do I take action?
Wait, so I have a question from
young Mike and police activity around the family home to state trooper.
What's that? What's that journey? Is that just completely they say you rebel
(08:32):
against your parents? Is that it?
Well, you know, I talk at high schools.
I was talking to the high school just the other day in uniform and everything,
talking to the kids. And I always start with who hates the cops.
And I raise my hand as I'm standing there. But do I hate the cops?
I hated the police as a kid that I never had a good experience with them in
North Dakota. go to where I grew up, you can get your driver's license at 14,
(08:53):
which means I was driving in the eighth grade.
It's a comical, right? And so you're getting pulled over because you look like
a child. And I looked like a child because I was a child.
And so I never had a good experience with the police. There were always over,
I can't get into the specifics because I think your channel might get demonetized,
but bad stuff happened at my house as a kid.
And, you know, I had my first positive experience with law enforcement when
(09:15):
I was 18 years old, I got pulled over, I was speeding And the police officer was nice to me.
And, you know, about 18, you kind of start to grow up and you realize,
hey, I probably shouldn't judge an entire profession worth of people based off
the poor actions of a few individuals.
And so I had a positive experience. And I still never thought I would ever be a police officer.
I mean, I could not stand the cops. But what actually inspired me to want to
(09:37):
be a police officer was, tragically, a friend of mine, young lady that I'd worked
with for about a year, she was murdered.
And she was killed because of a domestic violence dispute with her husband.
And I sat there and I when I got the news, when I got the call,
I was so taken aback and shocked and everybody was.
(09:57):
But over the next six months to a year as I'm watching the trial unfold and
and we're learning all this information about how she was being abused and how
she was being controlled and manipulated. manipulated.
And I start putting together in my mind, I remember when she came to work with
a broken phone again for the third time, for the fourth time.
Why is your phone getting broken?
Well, because he was taking it, going through her stuff, throwing it against the wall.
(10:19):
She would have to go home early or get home right on time to make sure everything
was good or he was going to be upset.
And there was all these little cues and all these little tells that the 22,
23-year-old version of myself wasn't able to put together as to what was actually happening.
And to this day, I still feel partially responsible for the fact that she was murdered.
(10:40):
Because if I had known then what I now know now after years of training and
experience and seeing domestic violence, I would have been able to see what
was going on and maybe be in a position to have helped or encouraged her to
get help or get away from it.
And so I put aside my distrust and dislike for the police and said.
I want to become a SWAT officer so I can go find monsters like that and make
(11:05):
sure they get put in prison.
And I'm happy to report I've been doing it for years now, and it's immensely gratifying.
Wow. Amazing. No, I totally, I think that's an incredible reason.
I think, yeah, thinking back to yourself at 22, myself at 22 is like,
I wouldn't have had the situational awareness to say, oh, this is really problematic.
I'd have been like, oh, okay, you should probably get your phone fixed.
(11:27):
And that's what I was doing. Yeah. easy to
do easy to easy to kind of frame that out so
in terms of that first deal and stepping into real estate what
what did that look like were you kind of you
said you you squirreled away a load of money which is good right that's the
non-creative creative way but equally it's really scary when you lay out that
(11:48):
cash that you've kind of scrimped and saved what did that look like to this
day every time i do a wire transfer i'm just petrified It's really off by a
digit. Clicking that button. Yeah.
So for me, you know, I worked probably 70, 80, 90 hours a week for about a six-month period.
I worked an insane amount of overtime, and I saved all the money up I needed
(12:11):
for a down payment so I could buy a duplex.
And the reason I wanted to get a duplex was so I could house hack.
And I still, to this day, live in this side and rent out the other side.
And I just converted it to an Airbnb. It's doing great. Very cool. Very cool.
But I recognize that it's unbelievably
powerful if you can cut your most expensive bill out of your life.
(12:31):
And everybody's most expensive bill is their mortgage payment or their rent payment.
And I was paying $2,000 a month. Well, I move into this duplex.
I have a tenant next door.
My mortgage is $2,700, but the tenant pays $1,600. My roommate pays $500.
Now I'm left only paying a few hundred dollars a month to live.
And after I move into this place, now I'm able to save an extra $1,500 a month
(12:53):
to buy my next rental and I'm building equity and I bought it in 2018.
So I got years worth of crazy appreciation.
It's just been house hacking will go down as the single most important financial
decision I made in my entire life.
Yeah. I love that. I really wanted to do that. I live in San Diego and I really wanted to house hack.
And for me, it was the, it was the value or I wanted to, when we first bought,
(13:17):
but it was that value of like, what areas can I afford to buy in?
And do Do I want to buy there, be married there, have a family there?
And ultimately, I couldn't make that work.
I couldn't make that equation work just for my own comfort.
But for 99% of markets across the US, 100%, especially if you're younger.
(13:38):
My nephew, who's 19, was asking me about how to get into real estate and this and that.
And I was like, dude, buy a house with four beds and rent three out to your friends.
It's really that simple. simple so i think that's that's really admirable in
terms of getting kind of bitten by the bug taking that first step what was how
(13:58):
did you decide what was next because i think that's something that i struggle
with is like what do i want to do next.
After the first rental property? After the first one, yeah. Yeah,
that's a great question. So for me, I bought this first duplex.
And at the time I was sitting there thinking to myself, okay,
I was able to come up with a 5% down on this.
(14:18):
But 20% down on a property in the Seattle area. I mean, we're looking at six,
700,000. Yeah, that's a lot of cash.
Yeah, 20% down is 150, 180 grand. It's insane.
And so I'm sitting there saying to myself, I don't know how I'm going to buy
the next one. And so I started drawing circles out from where I lived.
All right, what if I go an hour, two hours, three hours, four hours?
(14:41):
And the funny thing is, is anywhere in the state of Washington is ridiculously
expensive. You're looking at four, $500,000 properties anywhere.
So I'd get to the point where I'm like, I've now gone so many hours outside
of where I live, I may as well start looking at other markets.
I'm from the Midwest originally, I'll look around there.
And I had a friend of mine recommend and say, Hey, why don't you try Gary,
(15:04):
Indiana, which for those of you who don't know, it's been dubbed America's most miserable city.
It's got three times the national crime rate, three times the poverty rate,
13,000 abandoned buildings in the city.
If you Google this city, I promise you, you're going to feel like you need to
clear your browsing history.
That's how dirty it is. It's going to make your computer just like virus filled.
(15:25):
And so I told my friend promptly, absolutely not. I'm not doing it.
No way. One quick Google search. I'm done.
But he kept bothering me. He kept telling me, just try. He said,
why don't you just call and talk to some people? And I said,
all right, I'll consider it because I'll admit.
When you look at the numbers and they've got houses for sale for 40,
50, $60,000, you're like, okay, that's a really cheap house.
(15:48):
My down payment's like 12,000 bucks.
Okay. I'm interested, but I'm not sure. And so really it came down to me of,
I was looking for a market that would produce cash flow because I don't buy
for appreciation. I buy for cash flow.
And once I got turned on to Gary, after I said no enough times,
I finally just started doing the research and learning about the market and
(16:11):
asking the questions that I was concerned about,
like, well, aren't there going to be like gangbangers trying to rent for me
and drive by shootings all the time and nobody's going to pay their money and
everything's going to go up in flames.
You talk to enough people, you put the right team on the ground,
you can be successful in any market.
That's awesome. Let's unpack that a little bit. So you said you buy for cashflow
(16:32):
rather than appreciation.
What was the decision on kind of looking at markets in that way rather other
than buying and holding and waiting.
You know, this is something that I have grown to disagree with BiggerPockets
more and more because they have recently been saying buying for cash flow is
dead, buy for appreciation.
And I think it's a symptom of people who've invested for so long have the luxury
(16:56):
of not needing to be as careful as they had to when they got started out.
And I think that kind of just happens to a lot of people. You know,
risk doesn't feel as risky when you've got 100 units to back you up.
But when you've got one or none, you need to be careful.
So why do I buy for cash flow? Well, appreciation isn't guaranteed.
We had the Great Recession, 07, 08. Houses went down 50% in some places.
(17:20):
If you buy hoping for appreciation, you might be very, very unhappy when you
find out something bad happens. Or appreciation could just be slow.
For those people who've been paying attention the last couple of years,
we got about a decade's worth of appreciation in a year, 2021 to 2022. 22.
I'm honestly thinking we probably won't have much appreciation over the next
nine years as we catch up to where we should have naturally gotten to over time.
(17:45):
So appreciation is just very lumpy and inconsistent, hard to plan for.
And then if you want to take advantage of it, you either have to sell or do
a cash out refinance, which has all these steps to it.
Cash flow, on the other hand, super easy. I've got mortgage payments for 350 bucks a month.
The unit rents for 1200 bucks a month.
You don't have to be a math whiz to figure out $1,200 minus $350 is a good deal.
(18:09):
Sure, you got some property manager fees and things in there like that,
but if you're cash flowing for $500 a door, it's pretty easy to figure that
out. How many of those do you need to buy to replace your income?
I love that. I love the simple, simple math. Right. And I think you've hit a
really interesting point, which is, yeah, for four years, like the consensus of cash flow.
(18:29):
And now there is a switch to appreciation.
But let's not forget, in 2007, you know, appreciation was wiped off the map.
So although cash flow can kind of ride up and down, so can appreciation.
So it's super interesting. interesting you mentioned
about picking your team and getting the right people in
in gary specifically what did that process look
(18:50):
like did you phone them up and say hey hey i'm mike i'm a
state trooper i'm in swat can you help me out or you know i i don't ever call
and tell people that i'm a police officer because there's people and then i
also don't want anybody to ever you know i don't want to use my position of
authority to get some sort of i'm teasing her favor but But typically what I
do is I always start with referrals.
(19:12):
I'm always looking for somebody in my network to make a referral.
So when I tell people and teach people how to get started investing at a distance,
the number one thing that I say is you need to build a network of other investors in that area.
I talk a lot about virtual networking.
Let's say you wanted to go to the market of Birmingham, Alabama.
I don't own anything there.
(19:33):
The first thing I'm gonna tell people to do is get on YouTube and get on Instagram
and type in real estate investors, Birmingham, Alabama, rental properties, Burlingham, Alabama.
Who is making videos in that area? What small time creator that actually has
the time to respond to you who is out there that you can watch their videos,
send them a message and start talking with them and building a relationship.
(19:54):
And then from there, sure, if you live locally, you could attend local meetups,
but you could do everything virtually.
Once you meet enough other investors that you can chat with.
Well, guess what? Oh, this guy owns 25 rentals. Who's your property manager? Who's your contractor?
Who's your plumber, your electrician, the guy who does your yard?
He's going to be able to provide you with a list of vetted contractors and a
(20:16):
team that you now don't have to build from scratch yourself.
So that's like the most important person on your out-of-state investing team
is the network of other investors. After that, it's your property manager.
And again, you join that Facebook group, that Birmingham, Alabama Facebook group
for real estate investors, which I guarantee you there is one or there's a middle
Alabama Facebook group or a Alabama Facebook group.
(20:39):
There's a group out there. You join it and you start reading through the last
five years of posts because the question's been asked, who's a good property
manager or has anyone had problems with a property manager?
Then you read hundreds of comments that say, these guys rock,
these guys suck. You build your list from there.
The other thing is you find in those groups is you find trends.
You find the same players coming up each time answering questions and you can
(21:03):
really start to kind of knit together that network.
My other ad would be LinkedIn.
There's a lot of untapped kind of opportunity in LinkedIn.
Even just finding operators and saying, and you're right, the right scale, right?
If you go to the largest kind of most famous real estate person you could think
of, they're probably not going to answer.
But if you find an operator on LinkedIn and reach out and say,
(21:25):
hey, I really admire what you're doing. Have you got time to talk?
It's an easy win to kind of get in there. So that's super interesting.
Have you had any problems dealing with any of your team? Has there been any
challenges? And how did you mitigate that?
You know, I think there's always going to be growing pains. And I think one
of the most interesting things when you start out, and could be if you start
(21:47):
out locally or at a distance.
When you start out with a property manager and you've got one little unit,
you represent a tiny little paycheck to that property manager.
You're more of a nuisance than anything else. Are you going to get the type
of service that you want?
Probably not. Is that fair? No, but life's not fair. Grow up.
The best way to ameliorate this situation is to have a big brother.
(22:08):
And what I mean by that is you're good friends with somebody who's an established
investor in that market.
That person refers you to the property manager.
That person sends an email where you and them are CC'd.
And now, anytime you're not getting the service you want, you go tell your big
brother investor, hey, they don't respond to my stuff.
(22:28):
I can't get an answer from them. I got some questions about that.
And if they aren't treating you right, all of a sudden your friend investor
is now going to reach out and say, hey, what's going on with this?
Well, they represent a substantially larger portfolio size, bigger paycheck.
And that's exactly what I did. I piggybacked off the success of another investor
that I'd befriended in Indiana to vouch for me. Now I'm that guy for all the people that I help out.
(22:53):
I'm the guy who, because of my YouTube channel and stuff like that,
I mean, I refer hundreds of people and I get no referral fee.
I don't want any kickbacks, but I refer hundreds of people to contractors and
plumbers and property managers out there.
And it's to the point now where I tell everybody, if they don't treat you right,
let me know because I will shut their business down with one video or,
(23:14):
hey, I'm not referring anybody anymore.
People are having a bad experience. and because of that everybody behaves
properly and no one is ever left out in
the dark or get screwed over awesome i love that one thing you did say was around
kind of doing the analysis and as you pivoted to gary indiana which is as you
said kind of our left field not a market that everyone's looking at what is
(23:36):
your analysis of a market and maybe down even into assets what does that look like.
You know, so it's very interesting. A lot of times you'll hear the typical bigger
pockets, the conventional wisdom out there.
Well, you know, you want a market that's, you know, increasing in population
with a bunch of good jobs.
That's, you know, trending A and B market, maybe with some C class properties.
And if you go down the conventional wisdom of what makes a good market to invest
(24:00):
in, Gary, Indiana fails by nearly every single metric.
And that's another one of the reasons why I wasn't interested in it because
the conventional wisdom says no.
But here's the thing. in every single market in the country,
whether it be the most expensive, least expensive,
most densely populated, least densely populated, blue state,
(24:20):
red state, doesn't matter where, in any market in the country,
there's people who are investing successfully and people who are not investing successfully.
So you need to find and befriend the people who are doing it right and then
copy and paste their strategies into your life.
You could fail in the best market and you can succeed in the worst.
I have found a way to succeed in one of the worst markets.
(24:42):
Now, when I did analyze Gary Indiana specifically, I pretty much had to say
right out the gate, okay, anything about crime statistics and neighborhood safety
ratings and all that type of stuff, out the window, it's going to fail.
We're looking at purely cashflow. And again, what I talked about earlier,
if it's got a 350 to $500 mortgage payment and it's renting for a thousand to
(25:03):
1300 bucks a month, the math on it is pretty easy.
Can you make that cash flow over a long period of time?
Yes or no? The answer is yes. Okay, cool. Do I have a property manager that
I trust to take care of it and find me good tenants? Yes or no?
Yes. Okay, well then why not? Why not jump in?
In terms of the numbers you did look at, did you have certain metrics that you
(25:28):
were other than cash flow?
So you said no crime Was there kind of employment levels or income or...?
I did not take any of that type of stuff into consideration because again,
it's going to fail every single metric.
It was an unbelievably depressed economy, 13,000 abandoned buildings in the city of Gary, Indiana.
(25:48):
The reason it's such a failing city is when de-industrialization happened in
the late seventies and we started shipping all of our steel jobs.
The city of Gary was founded by us steel in 1906.
Uh, we shipped our steel jobs across the, across the water to of China.
And this company that used to employ 95,000 people now employs only 5,000 people.
All the skilled labor workers took off and left, and they just left this unbelievably
(26:13):
destitute city. There's not much good to say about it.
But this leads me to a point that I bring up that I think people need to focus
on. This is what you should do moving forward in the future.
We are right now at a point where a word that's called income inequality gets
thrown around all And you may have a political triggered response to income
inequality, whether you're for or against it.
(26:33):
The fact is, is that there is a spread of income inequality happening.
There are more people stacking up on the bottom and more people stacking up on the top.
The rich classes is growing as well.
I'm in it. You're in it. i think my
projection is the government is going to continue to
provide housing assistance to the people that are
(26:54):
on the bottom end of the spectrum and it's
not going to be popular to limit housing to limit food
stamps they're going to expand those programs and so
you as the smart intelligent investor can say
to yourself i know how to work with the government to provide housing to people
that need housing and the government always pays i am transitioning everything
(27:16):
i have to section 8 because the government always pays and they don't pay a
below market rate anymore. They used to be famous for paying trash.
Now, the most important thing for any investor is, am I actually going to get
a check every month and will the house be kept in good condition?
Section 8 has a terrible reputation and it's undeserved.
(27:36):
They get paid every month. You're getting paid a fair rate for the unit.
And if they don't keep it in good condition, then the tenants can be punished
by the Section 8 program and evicted. If they get evicted, they're off it for five years.
And they don't want to lose that because that is quite literally their meal
ticket. So usually they're on pretty good behavior.
So my advice to people out there is partner with the government.
Figure out how to provide housing to the people who need it.
(27:58):
And, yeah, oh, well, what about employment rates or any of this?
Dude, the people that rent from me don't have a job. Or maybe they have a very
low earning job, but their portion of the rent is 50 bucks a month.
The other $1,100 is paid by the government.
That's really interesting. Yeah. And I totally, I'm from the UK,
so I probably see housing and equality a little differently from everyone else
(28:19):
or a lot of people in the US.
So I totally align with that. It's interesting.
And yeah, you're right. It's only going to be a bigger focus for governments
to kind of manage that piece or at least provide that piece.
I wanted to pivot slightly in terms of your, well,
actually, first of all, in terms of that move into Section 8,
(28:41):
what's been the most surprising kind of, I guess, issues is the wrong word,
but kind of changes that you've had to make to move into Section 8?
It's been nothing but positive. You know, people, when I first learned about
Section 8, because I actually grew up on it, and I didn't know much about what
was going on when I was a kid, other than, hey, we get free rent and we live in this house.
(29:03):
But there is a preconceived notion that Section 8 tenants are going to be trouble, like gangbangers.
Think of the projects in New York in the 1970s. Nothing but violence are going
to destroy the place. It's going to be horrible.
And maybe at one point it was like that. Or not all Section 8 programs are created
equal. Well, maybe in some areas it's not as well.
But when I looked at Gary and the Section 8 program out there,
(29:25):
as I mentioned earlier, these tenants, the average amount of time somebody stays
in a Section 8 rental is seven years.
The last thing you want as a landlord is turnover. You want people to stay and
stay for a very long time. That's how you get paid.
In Gary specifically, they have shut down the wait list to get on Section 8.
There's such a long line, they've closed the waiting list. list.
You can't even get on the waiting list.
Once you're on the list, it's on average two to three years before you even get a unit.
(29:49):
So when I bring a unit to the Section 8 program and say, I got a unit, do you want it?
It's quite literally like that family
is winning the lottery because they might've been waiting for years.
They're going to come in. They don't want to get kicked off.
They don't want any problems.
Are they going to take care of the property as well as you are?
Probably not. No tenant ever does. But I have not had properties destroyed.
(30:12):
I've not had payments not come in. I've not had an incessant amount of phone
calls for things being broken.
And when people say, oh, well, what about the fact that they might inspect your property?
Who cares? They're always going to come out and they're going to find some dumb
thing that needs fixed or painted.
Once a year, you're going to
have to pay a couple hundred bucks to fix whatever it is and appease them.
(30:32):
But if you can't pass a Section 8 property, you're probably a slumlord.
Or excuse me, if you can't pass a Section 8 inspection, you're probably a slumlord
because they're not that hard to pass.
You should want your properties to be beautiful pride of ownership rentals that
people enjoy living in because that's your reputation.
I love that. I agree with that. So we invest in short-term rentals in Big Bear. We have one up there.
(30:56):
And there's an arduous kind of checklist that you go through.
And it's like, this is all good fundamentals of someone living in a unit, right?
It's like, are they going to die of carbon monoxide? No. Oh, good. That's good.
Those kind of things. That's not scary. That's a good thing.
That's really interesting. I think, especially in the market at the moment,
(31:16):
like that's the guaranteed rent piece.
And certainly during COVID when there was huge layoffs and rent guarantees and
stuff, but rolling off the back of that, that's such an interesting space to be in.
I wanted to change focus a little bit in terms of maybe BERS,
but also financing in general.
How are you seeing kind of changes in the market to finance your investments?
(31:41):
Yeah, it was significantly easier in the glory days of real estate two, three years ago.
The glory days of, yeah, I was going to say nine months ago, yeah.
Right, exactly, yeah. But it's literally the first even four months of 2022.
Interest rates 3%, 4%, easy to make something cashflow.
People complained about prices then. Now we complain about prices and interest
(32:03):
rates and your monthly payment. It's horrible.
So what do you do? What do you do to continue investing even though interest
rates and prices and monthly payments are at an all-time high?
That's a very good question. It's a very important question.
If you aren't doing everything you can to learn about creative financing,
you're doing yourself a disservice.
Seller financing is the holy grail of real estate.
(32:24):
The terms are all made up. The rules are made up. How long, how much of an interest
rate, completely made up.
I just closed on a deal on Friday where I only had to put $3,000 down.
I have a 0% interest rate. It was a $20,000 purchase price.
I had to put three grand down and I'm paying 400 a month for the next three
years until it's paid off.
(32:45):
That deal right there can be copied over and over again in any market.
Maybe you adjust the price and things like that, but those deals are out there.
Now here's a little hidden trick.
You need to network with wholesalers and you need to educate them on seller financing.
Financing they're already spending the time sending out
mailers trying to contact people that want to sell their house
(33:06):
and for whatever reason it's distressed or it's damaged or they
they've got some problem with that and they're going to sell it quick wholesalers
are a great entry into the seller finance space that i never hear anyone talk
about because they're already they're already flooding the market with their
pamphlets and with their marketing and then you you can just teach them instead
of always offering cash,
(33:27):
why not also offer financing to the people you're trying to get those houses
from? Give them two options.
Yeah, we'll buy this house cash at 40 grand, but we got investors who will actually
pay 60 grand for it if you do financing.
It'll still give you a down payment. And then so long as your wholesaler still
gets his assignment fee in the middle, he doesn't care. That's how he's getting paid.
(33:49):
So talk to your wholesalers and and learn about seller financing.
The other thing that you really should be focusing on is private money.
And there's a difference between private money and hard money. Hard money sucks.
It's expensive. It's got a quick turnover time.
Private money is like seller financing. The terms are made up.
You do whatever you want.
I recommend people go to their local real estate investing network.
(34:11):
You're like your local meetup group. Even if you invest at a distance like I
do in Indiana, my private investors come from right here in Washington.
Two different types of people go to local real estate meetups.
People with no rentals and no money that want to get started and people that
are old with a bunch of money that want to invest in real estate,
but they're tired and they don't want to work really hard.
They want to piggyback off of your success. I showed up at my local real estate
(34:35):
investing network trying to help other people and teach other people how to get started.
But as the people with money didn't put in the amount of effort that they needed
to do to be successful, they kind of got to the point where they were just like,
well, can I just lend you money? Can we do a deal together?
And that's why I started trying to come up with, all right, well,
how do I structure this so that it's not as crappy as hard money,
(34:55):
but so that they can get paid?
And I came up with a pretty unique private money
deal that I've been running and it's maybe it's too complex to
tell in this video but you check it out on my channel if you want but
yeah I mean partner with private money investors because that's significantly
better than the interest rates the banks are paying right now if you structure
it right and how do you so investors now I guess are approaching you but how
(35:17):
did you pitch that first private money deal I think if you go to people trying to ask for something.
It's going to be very hard to come off as genuine. Like you care about them.
I never went to anybody and asked for their money.
What I, and like I said earlier, what I did is I attended these meetups and
I sat there as the guy, as the, as the big investor with eight units is the
(35:39):
big investor in my local meetup group.
The guy with three years of experience, I'm listening to everybody's story and
I'm giving them thoughtful information on how that they could take action to buy a rental.
If they email me, they text me, they have questions for me.
I take their calls always. ways. And what ends up happening is some people you
actually help get started investing. Fantastic. That's a win.
(35:59):
But some people along the way will become disheartened or not motivated enough,
or they don't have energy or they're too afraid to do it on their own.
There's going to be another group of people that would rather just piggyback
off your success. They will come to you.
They will ask you, hey, can I lend you money? Can we do a deal together?
(36:19):
What do you think I should do since I can't find anything.
Well, have you ever thought about lending money to anybody? Well, maybe.
Yeah, I mean, you could get 10% on your, it's just sitting in a bank right now
making 3%. Why don't you lend some money out, you know?
Then they can explore hard money and private money. And that's when you could
come in and say, okay, well, for me, I now get to say, you know,
(36:40):
I pay my investors 10%. You want to invest with me? I will guarantee you 10% return on your money.
I will cut you a check every single month to guarantee it against the asset.
You get a private mortgage in your name am filed with the county if i don't
pay you or i get killed at work you now own the asset you sell it you get your
money back you're good and and people are like i can get 10 that's twice as
much as a treasury bond and it's eight times as much as my bank is paying me like yeah pretty easy.
(37:05):
Yeah and i think so i've been doing a lot of research and and
hanging out hanging out with a few capital raisers and
it's really interesting the mindset or the mind shift of
like how you frame that which is you're not asking them
for money and you rightly you shouldn't be walking
up to people and say can you can you give me 100k or whatever what
you're doing is you're presenting an opportunity and you're discussing an opportunity
(37:28):
so it's very open very natural and the the the sell is the opportunity it's
not the oh can i borrow money kind of thing and i think that that shifted my
mind a little bit to uh to something a bit more a bit happier about it and a.
One other pro tip on that. It's always helpful to say, yeah, I've got this deal.
(37:51):
I'm going to buy it with or without you. It's such a good deal.
But if you want to partner with me on this deal, you can.
Here's how we can do it. But I don't need, like, don't feel bad or obligated
by any stretch. I'm going to buy this deal on my own. If you want to partner with me, that's great.
But this is an amazing deal. That right there helps kind of alleviate some of
the existential, like, pressure they may be feeling or something like,
(38:12):
no, man, this is a great deal.
Whether you join up with me or not, I'll buy this thing.
So talk to me about engaging wholesalers and kind of educating them.
What does that look like?
Yeah, that's a good question. Everything comes down to networking.
You just got to talk to a lot of people.
Real estate agents, wholesalers, everybody. When you drive around your city
and you see the we buy houses, you know, we buy ugly houses,
(38:35):
we buy houses fast for cash. Dude, those are wholesalers with those signs out there.
You might not be wanting to sell your house, but you can call and say,
I want to be added to your list of buyers.
Hey, do you guys ever do a mortgage wrap? Do you ever do any type of seller
financing? If you found the right deal and I didn't want to pay cash,
could we ever talk about offering seller financing? They might not have any idea what that is.
It's an extra tool in their tool belt to convince somebody to do a deal with them.
(38:56):
And they should want to learn it because, again, you're going to still pay them
their assignment fee. But instead of being told no at their 50% off cash price,
they might get told yes at their 30% off financed price.
Somebody might say, all right, I don't want to sell my $100,000 house for 50
grand cash, but I might sell it for 70 grand with a down payment and on terms.
(39:18):
That might make them feel a little bit better. Now the wholesaler has more options
to still get their assignment fee and you could get some good financing that
doesn't have crappy terms to it. So talk to as many wholesalers as you can.
Just like everything in life, there's gonna be ones that have higher aptitude
and ones that have a lower aptitude. There's gonna be the ones who don't really
care. There's gonna be the ones who wanna learn.
(39:40):
And you just need to talk to as many as you can.
How do you, how do you cover the assignment fee? Is that just like the example
you gave us? Was that the part of the three grand?
Yeah. So on the example that I gave you, there was a $10,000 assignment fee.
And with the wholesaler, I said, Hey, tell you what, I'll pay you your $10,000
assignment fee on this one, but I'll pay you $5,000 at close and another $5,000,
(40:01):
six months down the line, because I'm trying to get this thing remodeled.
And I always, always throw it out there, even though I could pay him the full
10 grand up front, there's no reason for me to do it.
I should always ask for financing.
And if they say no, okay, no problem. But if you don't ask, just like when it
comes to dating pretty girls, if you don't walk up and ask them,
(40:23):
they ain't going to say yes.
So you have to just say, hey, man, is there any way that I could pay you half
the assignment fee a day and another half in six months or something?
Or could I pay you your assignment fee a thousand bucks a month over the next year?
Or any number of different things, you know, because these guys,
they, like you, just want to get the deal closed and move on to the next deal.
And even though they've got a list of cash buyers, it's not as long as they think.
(40:44):
They might be working with one or two people on a property in some market.
So you give them a way to get their money, they're probably going to say yes
to you, especially if you're their only option, they will say yes.
That's so cool. That's really interesting. Yeah, I think wholesalers,
they're often seen as adversarial, but they're repping the seller right in a way.
(41:04):
So that's super interesting. interesting uh in terms of and and this is really
the last piece which is the the pivot to kind of burr what what's that look
like over the last i guess generally but over the last six months.
The BRRRR strategy is extremely important right now. And again,
I would honestly recommend people check out a video I did on my channel about
(41:25):
my triplex because I'm doing what I'm calling a slow BRRRR.
The BRRRR is a fantastic buy, remodel, rent it out, refinance.
The problem is with the refinance right now.
Rates are so bad and most people are trying to recoup all their money quickly.
And because you're compressed on a timeframe, frame, you have to refinance into a less than ideal loan.
(41:50):
And so how do you figure out and solve for that problem?
Well, what if I was able to elongate my time frame? And that's how I incorporate private money.
What if instead of using a bunch of money at hard money rates,
which are more expensive,
what if I used private money and I pay them over time and I give myself enough
(42:10):
time to do the BRRRR, instead of six months after buying it,
I could do it at any point between now and the next five years.
And I'm hoping that at some point in there, there will be a time where interest
rates and the price and the monthly payment makes sense.
And then I even gave myself in my contract, a line that says,
if it doesn't appraise for a certain dollar amount, I get to extend for another three years.
(42:32):
So I have up to eight years to actually cash out my BRRRR while I pay interest only to the lender.
And that interest only payment is 10%. They get their 10%. But because I'm not
paying principal and interest, I cash flow the entire time that I'm actually
making the payments to them.
I'm cash flowing better than if I was paying principal and interest to a bank,
(42:53):
even at a 5% interest rate.
Because when you add principal and interest, that monthly payment is more than just interest only.
And because I used the BRRRR strategy, when it comes time to cash out on the
backend, end, I get to cash out on a value that's high enough to cover the original
investor and still pay me.
I understand there's kind of like a lot of numbers and concepts there that maybe
are hard to understand on a podcast, but the burst strategy and value add is very important.
(43:16):
I think it's something that everybody should be looking at.
You just need to figure out how to solve for time.
Yeah, I think that's really interesting. And I think the question that immediately
comes up, and maybe this isn't the strategy for Gary, but what happens in Gary,
Indiana in a cashflow market rather than an appreciating market?
So that's why the burst strategy is important because I'm not banking on buying
(43:40):
a new house and hoping that it appreciates over time.
I'm banking on purchasing a asset that needs to have value added.
This $20,000 house that I just bought, I'm going to add a doorway at the bottom
of both stairs and boom, I've got a duplex.
First of all, I bought it at 20 grand. It's already worth 50.
I'm going to put a doorway on each side. Now I've got a duplex that's worth 90.
(44:03):
Now, of course, from there, I'm actually going to remodel it.
I'm going to spend 20 grand maybe into like fixing the floors,
the paint and everything like that.
When it's all said and done, it's going to go from the purchase price at 20
to an after repair value of 150.
When I go to the bank and say I want a loan, they'll say 75% of of 150?
Cool. Don't check me on the math. Here's a hundred grand, whatever it might
end up being. Here's a hundred grand. Well, I have my a hundred grand.
(44:26):
I now have more than enough money to pay off the original owner if I wanted
to, or pay off whatever money I used to remodel it.
So if you do value add, you need to make sure that there is a large enough wedge
in between your purchase price and the after repair value.
So you have to buy the asset, right? A lot of people get hemmed up because they
think they've bought it cheap enough. I'm getting it 30, 40% under market.
(44:48):
No, 50% is the minimum. It needs to be 50% under market to make sure you're
hedging against potential drops in values or costing more to get it fixed.
50% or better. Like in my case, 20,000 versus 150, dude, I mean,
it's really hard to screw that one up. Really hard. I love that.
No, and I think the eight-year loan as well, the additional tax makes a lot of sense.
(45:14):
But that's really interesting. Yeah, that was my thought was like,
hang on, what if it doesn't appreciate?
But absolutely, you're adding value and you've got your a few get out clauses.
And by the time you've saved the cash flow to pay it outright,
worst case scenario, that's super interesting.
I want to be mindful of your time, Mike. I really appreciate your time today.
(45:35):
How How can people get in touch with you?
Yeah, so if anybody wants to follow me or reach out to me, just go on Instagram
or YouTube and type in Millennial Mike and I'll pop up, send me a DM.
I always respond to everybody on Instagram and YouTube. I try to respond to all my comments if I can.
Yeah, and we'll put links to all that in the show notes. And check out,
(45:55):
we don't like to promote other people's channels, but Mike's channel is really good.
It's kind of how you've talked today, Mike, just straight up and quite humorous
and all that good, even for a state trooper.
Music.
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