Real Estate Investing with Fix and Flipper Steve Kissane | EREI 23

On today’s show, Matt is once again interviewing a “real” real estate investor who is finding success in the current market. Meet Steve Kissane, one of Matt’s long-time friends and an investor with more than 20 years of experience in the industry.

 

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Podcast Transcript:
(Voice Over):  Epic Real Estate Investing Podcast Episode 23.  You’re about to meet a man that can show you how he took control of his life and financial future and how you can do the same.  He’s never been on TV.  He’s not a millionaire.  He doesn’t know Donald Trump.  He is a full time real estate investor, newly discovered author, and family man.  He does not report to a boss.

He creates his own schedule and takes his family on a few vacations every year.  He got started investing in real estate with almost no money and a really crummy credit score.  And he’s going to show you exactly how he did it and how he continues to do it.  You will have to work.  

You will have to be responsible.  However, laying the beach, sipping fruity drinks is a reasonable goal.  Without further delay, your guru.  Sorry.  Your guide to a better life, the real estate investor, Matt Theriault.

Matt TheriaultHello.  Greetings from The Epic Real Estate Investing Podcast.  The podcast that will show you how to build wealth through creative real estate investing.  That’s what we will discuss today and for a long time to come so you’ll have the option to realistically retire in the next 10 years or less.  And enjoy the good life while you’re still young enough to do so.

My name is Matt Theriault, author, full time real estate investor and family man.  If this is your first time listening to the show.  You want to do two things.  First of all, welcome.

Glad that you’re here but you’re going to want to go back and listen to Episode 1 for the ground rules of the show.  Two, I want you to download the Free Real Estate Investing Course – How to Do Deals, No Money Required.  You can get at FreeRealEstateInvestingcourse.com.

It’s a step-by-step course of where I reveal everything that I do, everything that I say, everything that I use including the documents and contracts.  Everything that you are going to need to invest in real estate using no money or credit.  And that’s yours for free at freerealestateinvestingcourse.com.

Okay.  So before we get in into today’s episode, I’ve got a few announcements.  First, I want to say thank you to Joe and Alex over at the Real Estate Investing Mastery Podcast for having me on this week as their guest.

If you haven’t subscribed to their podcast, I highly recommend it.  They got a great show.  They’re great guys.  They got a wealth of information and they’re very successful real estate investors.

So go check them out over at Real Estate Investing Mastery Podcast.  Second, I want to say thanks to all of you that have recently left reviews on this podcast.  I mean thanks to 212 and BooBiassss.

That’s how he spelled it.  There’s a bunch of S at the end.  Big Ad and Joe McCall.  Thank you for your reviews in iTunes.  Those reviews, they really help with the rankings so if you like what you hear on the show, feel free to log in to iTunes.  Search Epic Real Estate Investing and let me know what you think.  Okay?  Much appreciation on that.

Third, I know many of you have been waiting.  I’ve been giving a lot of emails and enquiries as to when Epic Pro Academy is going to launch.  So I’ve got good news for you.  January 12th is the day and in the meantime, I’ve posted a few new videos on the home page o epic Pro Academy that will probably be of interest to you.

The first one, the only realistic road to financial freedom that no one is telling you about.  That video is up.  The second video, you can steal one of my top three methods for finding motivated sellers.  I’ll walk you through that step-by-step on how to do that.

And as soon as I’m done recording this podcast, I’m going to go and work on a third video for you “How to Eliminate the Risks From Your Real Estate Investing.” Now imagine that, how much investing would you do if there were no risk?

I’m going to show on that video exactly how I coined each deal with absolute certainty and no fear. I know I’m going to win every single time. I’m going to show you how you could do the same thing also.  Okay?

Now I wont be leaving those videos up forever so be sure to go check them out and you can view them at EpicProAcademy.com.

Okay.  So we’re going to start off the New Year resuming our series of interviewing “real” real estate investors doing real estate in today’s market.

What make this series so special to what I believe and me makes it unique from other interview type format is the people I’ve chosen for this series.  They’ve got nothing to sell.

They have nothing to promote.  They’re not speakers.  They’re not teachers.  They’re not gurus.  You’ll probably notice that many of them aren’t really polished speakers either. I mean they just don’t teach.  They don’t publicly speak.  All they do is real estate.

To maintain integrity with this show’s theme, I want you to hear how it really is out there.  I want you to get an unfiltered sense of what’s really going on and what it takes to be successful in this business. I want you to know how this business really works.

I mean it’s a shame you’re probably only going to get real answers from real” real estate investors.  Real estate investors with no hidden agendas.  I mean it’s so often that people get their real estate investing education and information from people that used to do real estate or they do a little real estate here and there.

But selling their real estate information is now their primary business.  There are so many those do that because they found it’s much easier to sell the information on how to do real estate than it is to actually do the real estate itself.

I’ll never lie to you about this.  I’ll never lie about that real estate is hard work.  It can be stressful.  It can be frustrating. It oftentimes can keep you up at night.  It keeps me up at night.  It’s going probably more work and more money than you’re going to be comfortable in investing.

But at the same time if you stick to it, if you stay committed and if you maintain some flexibility, what I mean by that is not everything happens how it’s supposed to.  In fact, frequently stuff can come right out of the your left field and smack you right up side of your head and going out painful after painful. I mean just hard blows of reality.

That’s what I mean by recommending that you stay flexible.  Then just keep your eye on the prize.  Okay?  Keep on your eye on the prize because it does get easier as you go.  The rewards at the end are like nothing else that today can really provide.

I mean giant chunks of cash and steady streams of cash flow make life a much better existence.  That’s why I do what I do.  That’s why I love real estate. I mean the pleasures and the rewards of successful real estate investing far outweighs the pains and the lessons.

But just know that there’s going to be some pain.  There’s going to be some lessons.  You’re never going to escape that if you happen to escape that. I mean you’re probably not investing in real estate.  If you keep your investing in this perspective at least this my perspective.  This is how I view it.

I’m either making money or I’m learning. I am either making money or I am learning. Now some of those learning experiences are much more expensive than others but look at those painful experiences in that way.

It’s just education.  I mean why would you ever do what so many people do. I never understood this.  Why would you pay so much for your education through those experiences and then quit?

I never understood that. I mean would a doctor after investing hundreds of thousands of dollars in their education, investing countless hours of blood, sweat, and tears and practicing their performances and perfecting their technique. Would they just quit after their first malpractice lawsuit citing that the medical industry doesn’t work?  It’s too risky.  It doesn’t work in my market.

I’m just kind of go find something else to do.  Would you ever hear that? No. Of course not.  You would not.  That doctor would simply take note of what got him or her into that malpractice predicament.  And just be sure not to make the same mistake again.

He wouldn’t make the same mistake twice.  Then they keep going.  Look at your investing.  Look at your real estate investing lessons in the exact same way.  Just keep going. It’s worth it in the end.

Besides, I mean what are the alternatives?  What else can you go do to experience all the different benefits real estate offer? I mean you can create tow types of income in real estate.  You can create active income and you can create passive income.  You get amazing tax breaks and shelters like nothing else out there offers.

I mean you can virtually eliminate your tax liability through real estate investing.  You can create equity.  You can benefit from appreciation.  You can control and manipulate the power of leverage inside of real estate like no other investment can provide.

So stick it out.  Don’t quit with your first or second hiccup.  Okay?  Got it?  Don’t quit after your first or second lesson. I mean you’ll likely pay good money for those lessons.  Now you know and your future is brighter because you now know.

Alright.  So today on the phone, I got a really good friend of mine and we actually met during a real estate transaction.  In fact, it was my very first real estate transaction.  My first experience as a real estate investor.

Although he and his buddy are partners.  They did most of the work.  I did find the deal and I was able to execute the extra strategy for them so that we all got paid.  So I do consider this my first deal and that’s how I met today’s guest.

He is an accomplished fix and flipper.  He also understands the power and importance of buying and holding.  He understands the power of cash flow.  He’s got nothing to sell, nothing to promote.  He is just a regular full-tine real estate investor with over 20 years of experience.  He is doing me a favour by coming on the show today to share his knowledge and experience with you.

So on the phone, I have my good friend and business associate, Mr. Steve Kissane.  Steve, welcome to the Epic Real Estate Investing podcast.

Steve:  Glad to be on.

Matt:  Good.  Glad you’re here so just before we get into some of these questions.  How did you get started investing in real estate and what was the initial attraction?

Steve:   I got started investing in real estate in 1990.  The initial, basically I purchased for about 6 months and then I saw the market was starting to turn so I joined and resell it pretty quickly.

I get up before the market started turning at that point in time.  At the point, I was looking where to put my money. I ended up starting to invest not in California that time but down in Texas.  So I basically just, real estate is something I’m always interested in.

At that point time like I said, I make good money on my initial purchase. At that point in time, you know went down in Texas and started buying you know small duplexes and fourplexes type of things in OTC and things and just kept going from there.

Matt:  Got it.  What’s your primary acquisition strategy or your own or where do you find most of your deals?

Steve:    Today I’m dong mostly basically single family in duplexes.  Mostly in the lower end market, I’m looking at the resell side of it.  I’m looking between $200,000 and $300,000.  Right now in today’s market, my resell number is I’m keeping it at $300,000. In purchasing things in the $100,000 to $250,00 mark.  Mainly in the entry-level market because I feel like right now that’s the safest and best market.  You know the entry level that hit really hard from the sub-primes and they hit hard and quick.

So you know when you look at the lower end market, they get hit hard and quick versus some of the other markets. Now if you look at $500,000 to $600,000, there’s still lot of foreclosures floating in the market but I see more downside in the higher end market than I do in the lower end so I’m focusing on doing and buying single family duplexes and fixing them up and reselling them.

Matt:  Got it.  So you’re doing more of the fix and flips as your main strategy right now?

Steve:    Right now is I’m doing fix and flips.  I’ll start to look at the buy and hold this year.  But so far my 2011 is doing mainly fix and flips.  Now I want to continue on the fix and flip and also starting to look on buying and holds going forward to close to bottom. (laughing)

Matt:  Right. Right.  It seems to be the consensus right now.  So for your fix and flips, where do you find your deals to fix and flips?

Steve:    The job of fix and flips in this year where I go through buying REOs.  You know, buying REOs is majority of where our deals come from.  We have been going down in the courthouse.

We start going to the court house after everything going out with MERS started happening and you know also you’re purchasing properties.  The next thing you know you’re being sued for different things along with the banks and everyone else.  You’re one of the many people on that list.

So basically over the last 18 months, we’ve pretty much been focusing on majority of our deals are coming from REOs.  You know working with brokers and you’re dealing with REOs and trying to get the deals from them.

So far, it’s you know very good.  It’s very competitive with a lot of people out there doing the same thing.  Now if you can build a relationship and you get your foot in the door.  We find good deals there. We find enough to keep ourselves busy.

Matt:  Right. Right.  For those that might not know, can you explain to the audience what MERS is?

Steve:  Yeah.  MERS is the, let’s get the exact initials, it’s like Mortgage something.  It’s basically it’s a servicing or people who basically start servicing all the mortgages from the different banks.

So if Countrywide, Bank of America, or Wells Fargo has a loan back in 2004 or 2005, they would transfer it over to MERS.  And MERS basically handles everything with that mortgage.

They would get the payments, selling you know processing the payments and processing any transfer of note that sold has many of those mortgages and the mortgage back security.  You know, they would package and resold.  And MERS was tracking all of that for the banks and for everybody.

And so they’re handling all that and then I have seen when the market collapsed and a lot of those loans went bad.  They even made it part of the mortgage back security.  It’s hard to determine which mortgage went bad and what’s the effect on that bond or security with the mortgage security ties?

Anyways, the bottom line is there were a lot of gray areas that people wasn’t sure if everything was followed as far as transferring that individual mortgage from the bank to the MERS and eventually it was being foreclosed. I mean was everything processed correctly?  It was hard to track all that so therefore that whole issue came up about 18 months or two years ago when people were saying, Oh.  I wasn’t correctly foreclosed on.  All of a sudden now when you’re buying a property down at the courthouse, you’re buying it.

You’re basically buying that note and you have to go and you’ve hit that homeowner.  Then that’s the time attorneys would start to get involve suing whoever bought that note or whoever you know the bank and everyone else involved.

You’re seeing the lawsuit and they would get the property. Then all of a sudden you couldn’t go and start dong the work on the house and deal with the lawsuit first.  So we started basically at that point in time we started staying away.

Since then we found enough deals in the REOs that we can unpack at this time.

Matt:  Got it.  Got it.  You said you developed relationships with brokers that have those REO relationships.  Have you been proactive at developing those relationships?  How do you go about meeting those types of brokers?

Steve:   Yeah.  Basically, I meet them through our dealings basically.  A lot of them I’ve been working with for before you know all this downturn and dealing in the Los Angeles market for the last 10 years.

So some of them I have relationship before then so we continue that.  But even right now, we talk enough.  You know we see somebody who’s doing a lot of that whose name pops up in a lot of these things.  Now we will try to make an introduction and you know get them called. We try to you know make an offer.  When we make an offer obviously just like every one else, a lot of times it doesn’t go through because they’ve got like 30 other offers.

So we try to get our foot on the door and try to get to know them, give them a call, try to work to work with them and build a relationship that way.  You know take them to lunch.

Matt:  That’s good old-fashioned snoozing.

Steve:    It’s kind like you can’t go in and say, hey.  I do a lot of investments.  Pick me.  You know kind of thing.  You usually end up getting rejected a couple of times when you start talking to that person. The next thing you know is you slowly get them to know that yeah.  You make offers then if they have deals then they know you’re going to come through it.

The main thing is once you do start working with them, you know, you have to give them your answer quickly.  Once you do say you’re going to do it, you got to do it.  You got to follow through.  Otherwise, you know, you can easily; you know they have to know that they rely on you.

If you’re going to say you’re going to buy that price and I’ll close on 10 to 15 days.  You have to perform.

Matt:  Got it.  So let’s see.  What does your typical day look like right now?  I know you’re a full time real estate investor.  You do fix and flips.  You’re starting to look at buying and holds this year. I want to ask you about that in a second but what does your typical day look like?

Steve:  A typical day is like in the morning you know we’re up looking at, we do, and we look up at all new listings.  You know, at the first part of the day we’re looking at the MLS.  We have somebody who’s looking at the MLS to see new listings and things.  We all follow up on that.

Then any deals we see, we’re talking to those brokers not everyday but obviously whenever we call. Then in the mornings, after that about 10 o’clock then we’re downtown looking at either A, looking at potential deals, or you know looking at different projects we have going on.

Then back in the office usually around 2 o’clock in the afternoon, looking again.  We try to spend majority of the day looking for new deals so that is the hottest thing to do right now is to find the deal that keeps you going.  Once we get the deal and we got it wrapped up, and you know we got the crews out there and they can always come up with a plan.  What we’re going to do as far as rehabbing it and where that’s going.  We monitor that.

But the majority of the time right now is in this market because it’s pretty touch to find deals.  We’re doing and looking at the REOs.  We are also you know we do deals directly with a couple of programs.  We do mail list out to people.

We get a couple of deals out of that but not like what it used to be.  A lot of times we do get a response and you are talking to somebody who wants to sell.  They’re usually on the water.  We cannot deal going through the whole short sales cycle like that.

Matt:  Right.

Steve:    So we tend not to follow up on those so we do mail list.  We haven’t had found some good notes.  It’s paid for itself because we have a couple of deals left last year.

Matt:  Got it.  So tell me about your mail list.  Is this a service that you use?  Or do you do a handwritten letter?  Or is it a typed letter?  You do it yourself?

Steve:   It’s a typed letter.  We have letters on the system.  You know we don’t use service when sending hundreds of thousands all the time but we are sending a few hundred every month.  It’s a, we get different reports from title on who to send it to.  You know we search certain criteria that we like.

You know that we get a response from and we just a few letters geared specifically to what we have been mailing on.  We have a few letters here and you know we have that in place right now.  We have looked into possibly some cheap service out there right now to have a lot of it done.  We haven’t looked that up but we haven’t actually pulled the trigger on that.

Matt:  Got it.  Got it.  So when you send out your mails and on the phone starts to ring.  Do you have that go to a voice answering service?  Or do you answer the phone calls live?

Steve:  No.  We have a voice answering service for that.

Matt:  You do?  Then you just collect those numbers and then you return the phone calls later on?

Steve:    Correct.  Yeah.  Because we want someone to answer the phone all the time.  We find out that if someone actually answers the phone that just most of the time that person is just going to hang up.

So it’s worth it to have an answering service to go pick those up and pick that information that they have a dialogue to follow and answer those questions.  We follow up on them.

Matt:  Oh good. So you have a live person service?

Steve:    Yes.

Matt:  That’s cool, very cool.  I think that’s a good approach.

Steve:    Yes.

Matt:  What are some of the things? Go ahead.

Steve:    Because yeah, we used to, if we don’t have a liver answering service then you haven’t called from the office and someone wasn’t there.  We typically can come back to the office and you just say and look how many calls you got and see all these hang ups.

You’re like okay.  But not 800 numbers but they’re local numbers so people call and hang up form my letters.  Sometimes you only get one shot to really get them so I forward them to have somebody or a live person to answer that call.

Matt:  Exactly.  I totally agree. If you don’t get that person when they’re calling on their time.  It’s hard to get them back on in the mood or mindset to get them to discuss their situation.

Steve:   Correct.

Matt:  Yep.  Awesome. So how is your, right now you’re investing mostly in California?  Right?

Steve:  Yeah.  We have property in that state but investing right now 100% in California.

Matt:  Got it.  So with the system that you kind of explain to me your marketing and what your typical day looks like, how many fix and flips are you doing right now a year?

Steve:    We did 16 last year.

Matt: 16.  That’s good.  You are holding property right now.  You do have some buy and holds.  Can you tell me a little bit about those?

Steve:  Yeah.  I have a number of rentals.  Some of them are more recent purchases.  Some of them I have for a long time.  I have a number of duplexes that we have right now.

But one of the two larger buildings 16-unit or 12-unit.  We have started looking at those.  You know the smaller buildings.  I say smaller I mean under 20-units so there are some good deals out there right now.  Especially in the C-type areas kind of downtown, central area.

You know the bigger investors haven’t really gone down there so those types of units. We do follow those.  If we see a good deal there, we do something on those but majority of the time we are focusing on fix and flips and buy and holds. We are looking into doing more buy and holds this year.  We are looking at the smaller leagues.

Matt:  Got it.  So with those fourplexes and duplexes, you’re starting to look for your buy and holds.  Is there a certain or how do you select those like first how do you select the area?  And as far as finding the right area, the property that you actually choose that you’re actually going to make an offer and that you want to buy and hold.  How do you analyse that and what’s the kind of deciding factor whether this is thumbs up or thumbs down?

Steve:   Well the first thing we look at is we look at rental or buyers.  We keep them at the beginning.  We say, okay.  Number one is if it’s rented or not.  That’s the first question.  Because the ones that we buy, we want two things before we start anything.  We want cash flow and equity on day one so we want to buy.  We don’t want something that in five years from now, the cash starts flowing.

We want, start looking for something where cash flow right away.  So we know that in two-month fix up rented and we would be cash flowing in that right away.  The other thing we want to do is we want to buy equity just like what we do on the flips.  We buy in place for $100,000 then we are going to resell it to $200,000.

We’re looking at that same thing on the buy and holds because you know we want to buy a duplex or fourplex that’s under valued and once we draw a pass and get it rented.  You know, we have built equity.

So two things we are looking for here: equity and cash flow from day one.  You know the first thing we look at you know right away is I say, okay.  We’re doing a lot of stuff downtown.  We all look at the West side for buy and holds also because we just see that now that the good side is the West side.

Long term, that’s going to do really well but we are looking for something GRM of same or less. We don’t pay more than 70 cents for gross multiplier right now so we’re looking in. So small percent then we look at it.

Matt:  Got it.  So you said you did most of the fix and flips in 2011.  You had 16 of those and you’d mentioned earlier that you think we’re getting close to the bottom.  What are you seeing in the market or what are your readings?  What types of indicators are you looking at that have you believing that we are close to the bottom?

Steve:  Well I believe that we are close to the bottom in the lower-end for sure.  You know, in those areas that you know with the resell value of under $300,000.  I believe you know we are close to the bottom or closer to the end of the bottom.

Well we got hit hard.  We see you know when we do a flip; we know there’s a lot of pent-up demand for those homes.  If you priced it right, you’re going to get a lot of offers right away.

The only issue really is it’s hard for people to get loans but the demand is there but you know there are obstacles for those people to buy.  You know buy but you know those buyers need help purchasing homes at the $300,000.  It’s usually cheapest to buying that house than paying the rent and mortgage.

So the rent versus buy decision is favourable for or during those types of deals but we don’t see that in you know upper not actually not in the upper but in the middle. You hit the property between $5 million or $3 million.  In LA, it’s $500,000 to a million dollars.

We don’t see the same, we’re not as positive in that area as we are in the lower end because it’s different for the fact it’s affecting those houses.  The rent versus buy decision doesn’t make sense if you buy a $700,000 home, the mortgage may not be cheaper and renting house similar to that.

The other thing is a lot of unknown issues impacting those houses].  You know a lot of negative things coming out of Washington that have a bigger impact on those type of $700,000 or $900,000 home.

If the mortgage interest deduction goes away, which you don’t think it’s going away but they’ve been talking it out for over 12 months.  The more they want to eliminate, the more deductions made from the $250,000.

If that goes away, which you don’t think it’s going away but you know they’ve been talking out for about 12 months.   It would have a major impact on $100,000 or $800,000 now it’s sudden.  If you’re making $1200 to $15,000 and you’re not going to get the mortgage interest deduction.

It doesn’t make a lot of sense to go buy the house right now so we still see a lot of negative things coming out of Washington that has a negative impact on those types of homes but we don’t see it.

It’s not the same impact on the lower end homes because again when you get the mortgage interest deduction or not for $300,00 home, it’s still cheaper for you to buy and pay mortgage than to even without the interest deduction plus you’re making $250,000 so it’s not an issue.

Again we see at the bottom.  I mean we still see the upper hand just like we see in the last couple of months.  You know there’s been the price or the actual price in California has gone down but the majority value mainly due to the number of home selling.

Again we saw a lot of that so therefore homes selling November was less than say in April or May or June so therefore we see the average price in medium-priced in California has been down in the last couple of months.  But majority of that is due to the fact that it’s less upper hand home selling.

We think a lot of that is due to you know negative things coming out of Washington and people say this and that like okay.  You know why don’t I wait until everything kind of until we figure everything out as far like mortgage interest deduction and other things coming out of Washington to go sidelines until all that clears up.

Matt:  Got it.  Very cool.  I know you’ve been doing this for a long time, Steve.  You’ve been doing this since 1990s as you’ve mentioned.  How much have you had invested in your actual real estate investing education and do you continue to invest in your real estate education?

Steve:    Yes.  I invest all the time.  Unfortunately I don’t have a budget.  Some people I know go into the year and say would spend this much on this time, my education.  I don’t do that exactly but I do take classes all the time.

You know if I see something good. It’s more selective saying I would spend $2,000 or $3,000 this year.  It’s more selective.  If it is a good cause and makes sense then I’ll do that. I want to know more about it.  I’ll go take that you know.

I subscribe to a couple of different newsletters to understand on top of what’s going on because as much as I want to stay on top of everything you can’t stay on top of everything so I want to try to read those newsletters.

I think it’s very good. He does a great job at really quantifying exactly what’s going on.  Not just saying here’s what I think.  He actually gets in and quantifies it with facts and charts and everything. I think that’s really helpful.

Then just to have really take the cost every month or so. I end up at least a one day cost. I get involve in real estate clubs like twice a month to get different reviews, talking to those people on those clubs, what they’re doing, and team with the different speakers they have coming in to talk about the aspects of the market, what they’re doing.

Things are changing so quickly that you know three years ago no one was doing REOs.  Now everyone is doing REOs and things so you know REO.  There are a lot of different ways to buy houses.  As the market you know as things change, other ways of buying houses making it cents in 5 to 6 months so you want to make a switch.  You want to start doing different things because REOs are hot right now.  They will be for a long time given the number that are coming on but there are also other areas where you can find good deals up that way that will be making sense real soon.

Then you question, it’s really important to invest in your education.  We do that a lot.

Matt:  speaking of education, what is something you now know that you wish you would have known when you first started?

Steve:  Creative financing.  You know there are lot of ways to buy and hold property.  There are lots of ways.  If you can find a deal, there’s no reason why you can’t get that deal done.  Whether you have the money or whether you need to bring somebody in that deal or talking to somebody you know, to make the money when you buy the property.  You don’t make money when you sell.

If you’re out there and whether you are big time investor or small time investor, you can find a good deal.  You have the knowledge to go and either to put a deal together yourself or at least realize, hey.  I got a good deal.  I have a lock up but now I don’t know what deal is.

If you have contacts or you know you got the education to then talk to somebody and say, here’s what I got.  You can make that work so I think knowing about creative financing and knowing having a good network that you can turn to so that when you do you know do all that work of finding a good deal so that you won’t lose it.

So looking back in hindsight, yeah just getting out there, networking with people that you have a good core group of people that you can work with whether it’s a lender, an investor.  You can turn to and say, here’s the deal.

To really get out there and networking and creating a good group of people that you can work with and talk to when you do find a deal and just knowing more about the financing because once you know about the financing and having different ways to fund the deal.  It’s one of the key things in this market.  Once you find a deal, you find somebody who can fix it up.  You can get someone to sell for you but you know buying a deal and putting the deal together is different so knowing all the different options you have is and getting educated on that is important.

Matt:  Got it.  Do you have a maybe story of about the more creative ways that you’ve acquired a property?

Steve:    Yeah. Back in early 2000, I purchased I think a 16-unit property.  Those on the market.  I ended up actually buying about three places in this one individual.  He has a lot of different apartment buildings.  His friends are in trouble.  He is trying to unload a number of them.

He had to sell them really quick. So basically ended up talking to him again.  This time I just had a good deal with the money I can make the deal work.  Now it’s just a matter of getting this guy the money that he needed to sell it because he needed cash.  He just couldn’t do it.  You know we couldn’t do, he couldn’t carry anything or do anything like that.

So basically ended up getting a hard money loan and first position I got him to take a second position and then I ended up going out and kind of silent third.  Using the silent third to put up money like it was more of someone I knew because I bought the second out right after we close so it was kind of, I’m trying to remember the gut reasons why we do.  It was kind of funky.

You know that was one way.  We had to get a hard money loan up to pay 11% on the money.  Paying the second is we had to pay off within four months because that’s the seller had to have money within a certain time frame.

So we were able to convince him to take back you know to do the second and we get him paid off in four months.  Then we had to go out and get that money to pay him off so that was one way.  It wasn’t super creative or anything but.

Matt:  Right.  Just knowing what your options are.  I guess you know that pulling three different people or three different financing sources into a deal. You know a lot of people go out there looking and thinking that they have to have the money to go out and invest.  You know you do need the money to invest but it does not really have to be your money.  There are multiple sources to get that from.  That’s kind of what you did there.

Steve:  Yeah.  It turned out to be a no-money down deal.  People said you’re crazy. I mean 11%. I would buy with 20% if it were going to cash flow you know.  It’s a property I don’t own today.  In a month I would own it and I’m going to pay somebody 11% to keep everybody happy.  I’m going to collect my rent so I’m going to put money in my pocket. We are all going to be happy.

Matt:  Right.

Steve:  That’s one thing.  It doesn’t matter how much the interest rate you’re going to be paying.  If you have to pay a higher interest rate to get a good deal, you know it will pay you in the end of the month or every month, it’s worth it.

Matt:  Exactly.  I got a you know half a dozen of properties in Illinois of which I know I paid over market value before but I was able to get on seller financing on such a low money down.

I’m giving 30% ROI.  As long as I’m cash flowing 30%. I mean where else are you going to get that.  I’ve got a lot of people who kind of said the same things to me. I was nuts to pay so much on those properties. I was like, it’s 30% return on my investment then as long as it’s cash flowing and you’re making money and you’re an investor.  You put your money to work and have it bring more back to you.

Steve:  Yeah.  It’s paying you every month so it’s no big deal to hold that. So you can hold that for seven years.  Seven years from now, you’re probably be sitting on a lot of equity on those.

Matt:  Exactly.  Exactly.  So let me ask you this, Steve.  This last question or actually this second to the last question, if you lost everything today and you had to scratch, how would you restart?

Steve:  I would restart by thinking of doing single-family flips.  I would go out there. I would find deals then once I find that deal I would do things.  I would start talking to people you know to potential money people.

I’d say, okay.  Who are those potential money people that I can go to?  Then I would start right away looking for single-family flips.  And go find a good deal.  Once I find that good deal, I make sure I have a couple of different sources where I could go and say, here’s the deal.  Here’s how much we are looking at you know if you know come on this deal.  You know whatever you can work out with that investor.

I would find the investor then to you know, do you have the money to do it?  Will you just pay with them with this much percentage or get them into the deal?  Either way, it’s a win-win for you because you give away a part of the deal but you still get something versus of not being there if you can pay them straight interest.  That’s great.

Then yeah.  That’s what I would start doing first.  The reason why you’re doing that is because you can make money quicker.  You know.  First is the buy and hold where you know you’re not going to be able to you know if you lost everything then the first thing you want to do you know is you got to go liquid again.

So doing a fix and flip is the fastest way to get liquid.  You know getting money back into your pocket so to be built.  So yeah.  That’s what I would do. I would start doing fix and flips right away if I lost everything.

Matt:  Awesome.  Yep.  You need the cash to create the cash flow.  Now you got to flip properties to create that cash.  I agree.

Steve:   Yeah.  Yeah.  Exactly.

Matt:  I know you’ve done a ton of fix and flips and rehabs.  This is one of the most burning questions that came in from one of my listeners is what, I’ve been asking everyone who does fix and flips this one question.  What are your three most important rehab tips you could share with someone who is just getting into fixing and flipping?

Steve:  Know the market.  When I say know the market, you need to know why you have to sell it for.  There’s no way you could tell if it’s a good deal when you don’t know the market.  That’s very current if you want to sell.

Know your competition.  What else is out there for sale?  What can I realistically sell this for?  Do your research when you buy it.  You don’t want to find surprises like you know as after you close on that deal so I think you should do your research. Like you know.  Find out some violations.  Find out city issues that you have to deal with.  You can sit there and you can think you’re buying a great deal for $100,000 then you know after you close you didn’t do your research.  You find out that you have violations on it.  You know illegal square feet of you know.  You don’t want to find those out after the fact.

If that’s the problem such then you know chances are you may have just lost money on that deal.  Mainly you don’t want to lose money on the deal.  It’s okay if you didn’t make as much as you bought but do your homework.  Do your research.

And always have multiple exit strategies.  You know market changes.  Things happen.  You know.  So right now in this kind of market in this fix and flips, I know okay.  I can sell this property but let’s you know say your house blows up tomorrow, which is something that cannot easily happen.

Matt:  Right.

Steve:  Yeah.  You know all the banks in the US are losing billions of dollars.  We’re back to 2008, which is on you know only three years ago.  Well back in 2008 you know you couldn’t sell anything.  You could have tons of buyers but no one gets financing so it could happen.

You need to have multiple exit strategies.  If you can’t sell that property then you know will it cash flow to you?

Matt:  Right.  Now I agree with that. You should always have at least two because quite often that your first one or your plan A doesn’t work out.  That happens all the time.  So you need to have a plan B.

Steve:    Yeah.  I mean there are a lot of people who were once in this business anymore after 2007 and 2008.

Matt:  Right. Exactly. Those were the gamblers.

Steve:   Yeah.

Matt:  Yeah.  Definitely.  So let’s just end up: what’s in your investing future right now, Steve that you’re really excited about?

Steve:  Well for this year like what I said we are looking at during when we’re doing the fix and flips, we are also getting into more buy and holds also as the year progresses.

Matt: Awesome.  Awesome.  So you have the cash flow as the focus. I know you have a family.  You got a bunch of kids.  You made waffles for them this morning.  You know cash flows make all that happen.

Steve:  They keep those waffles flowing then.

Matt:  Exactly. (laughing)

Steve:  (laughing)

Matt:  Right.  Right.  Yeah.  So thanks Steve.  This really has been awesome.  You’re a wealth of information and you know we would love to have you back if you would be open to that?

Steve:    Yeah.  I would be open to it.  Thanks for the opportunity.  Just I think everyone realizes how good real estate is.  If you look at the last couple of years or just last year, real estate, stock market was faltering down.  It can’t be real estate.  It’s real.  You can see it and hold it so it’s great.

Matt:  Exactly.  That’s my favourite part of it actually.

Steve:  Yeah.  You know you have something.

Matt:  Awesome.  Thanks for taking your time and have ahead of your weekends to join us.  You have a good weekend.  We will talk soon.

Steve:    You too.  Take care.  Bye.

Matt:  Take care. Bye.  So that’s my buddy, Steve.  If you were listening and if you’ve been listening to our last few interviews all of our “real” real estate investors doing real estate in today’s market.

You’re probably starting to notice something about this business that you would rarely find in a course if you find in a course.  Or you’re not going to find it in a seminar.  You’re not going to find it in a weekend real estate investing boot camp either.

What I am speaking of is the real currency of this business is relationships.  This is a people business.  It’s those people and your relationships with those people that will cause your business to flourish.

It will cause your business to thrive.  It will cost your business to go on and on and on and around and around and around.  It keeps it going.

You see every piece of real estate you buy or sell is going to be from another person.  There are no silver bullets.  You got to get out there.  You got to share yourself among other people, among other investors, among other real estate professionals, among real estate clubs, among real estate networks.

Your network is going to be the backbone of your business. You develop that network with your people skills.  In my opinion, it’s the most powerful, most important skill you’re going to have as a real estate investor.

It’s your people skills because it doesn’t matter how you find your deal.  You’re going to eventually have to talk to a person.  If you haven’t read it, go out and get Dale Carnegie’s book “How To Win Friends and Influence People.”

I mean in real estate investing business is going to benefit more than that book than any real estate investing book that I know of.  What I mean by that is you can be an absolute beginner in this business.

You can totally mess up transactions.  You can mess at every single corner but if everyone you deal with knows you, likes you, and trusts you.  It’s always going to get the deal over the next guy.

You’re always going to have a hand up.  You’re always going to have someone that looks into your favour and gives you breaks, gives you deals, and gives you.  It’s just if they know you, like you, and trusts you.  You’re so far ahead than any other skill that can put you.

That book “How To Win Friends and Influence People” is going to give you that skill.  It’s going to give you that people skills.  I mean do you remember what Steve said today when I asked him how he would start over if he lost everything.  I mean yes.  He said he’d start fixing and flipping properties to get liquid.  Right?

You got to create the cash so you have to get liquid again.  That’s how he said he would do it.  But how did he say he do it?  He said he would go out and start talking to people.  That’s what he said.  He didn’t say he would launch a website.  He didn’t say he would send out direct mail.  He didn’t say he would go up and put up some more signs.

I’m sure all of those things work.  They all have their place.  They can compliment your business in powerful ways. I use all of that stuff but that’s not how he said he would start.

He said he would start by talking to other people.  A lot of people don’t really want to hear that but with every single one of my interviews. That’s been a common denominator.

They’ve been on the show. They got nothing to sell, nothing to promote.  They really don’t care If you believe them or not.  What your opinion is of them, what your belief about how they do their business is not going to affect to their reality one way or the other.

They’re just sharing with you how it is.  This is how we create our business.  This is how we continue building our business.  This is what is working today. It is through people.  Also you’ll notice that my recent guests they placed a big emphasis on finding deals.

That’s where most of their time is spent is on finding deals.  You’re probably starting to notice that they all look for the deal before they look for money in the deal.  That’s a huge mistake by new investors.  They try to find the money first.  Don’t do that.  Find the deal and the money will find you.

I mean I spent an entire episode or maybe I spent two episodes on this.  If you missed it, you’re going to want to go back and check that out. I’m not sure what episode that was.  I mean we only got 23 episodes so it’s not that many.

I only got iTunes up right now but know find the deal first and the money finds you.  They’ve all said that. They have no idea what questions I’m going to ask them.  They’ve all answered in almost precisely the same way.

Hopefully you’re starting to notice that.  Another common denominator among this interview, they all continue to invest in their education. I mean you have to in this business.

The dynamics are always changing.  The market is always changing.  The strategy is always changing.  The laws are changing.  The policies are changing.  I mean does doctors and lawyers stop with their education after college?

No.  It’s ongoing.  You’ve got to stay up to date.  You’re never are going to know it all.  Always be a student.  I mean even our guest today; Steve Kissane has been investing since 1990.  He still invests in his education.

Hopefully the patterns amongst these interviews are starting to appear for you.  This is how it’s done in the real world.  This is how it’s being done today in today’s market.  Now our next episode, I’ve got another really great interview lined up for you with a woman who is so successful in her fix and flips.

I mean she caught the attention of national TV.  She actually ended up on “Flip that House” so that’s next.  You don’t want to miss that episode.  To start the New Year off right, go get your free real estate investing course how to do deals, no money required.

I mean money certainly helps but it’s not required. You can that for free at FreeREalEstateInvestingCourse.com.  Lastly, go check out the new videos I posted for you at EpicProAcademy.com.  January 12 is our launch date but I put some videos up there right now just to hold you guys over.

All right?  I’m here for you.  This show is for you.  It’s for your success so let’s make 2012 a successful year.  Agreed?  Awesome.

So until next time.  As a very wise person once said, “A New Year’s resolution backed by commitment is not just another resolution.  It’s reality waiting to happen.”  So commit to your education.  Commit to your business.  Commit to this year being your best year ever.

To your success, I am Matt Theriault.  Living the dream.

(Voice Over):  Thank you for spending this time with Matt Theriault and the Epic Real Estate Investing podcast.  When you have time, stop by iTunes to leave your comments and let us know what you think of this show.  And if you haven’t done so already, get started investing today by visiting FreeRealEstateInvestingCourse.com to access Matt’s free course on how to deals, no money required.  Until next time.  To your success, to your success, to your success.