Episode Summary
Listen on iTunes
Listen on Spotify
Watch on YouTube
Often times, when you use a relationship-oriented approach to buy a property from an off-market Seller with Seller Financing, there’s a good chance that Seller may own more properties they might consider selling you in the future. In this episode, Jeff sits down with Nate and Kylie, clients of The DEALS Workshop, who recently did just that: they bought a second batch of three properties with Seller Financing from their previous Seller! Check out the client case study interview in this episode!
Episode Transcript
“But it’s been nice to have that relationship established. It takes a lot of the stress out of the negotiations and really allows you to, you know, maybe just kind of be yourself a little bit more and not have to worry about you know, saying the right thing all the time or, you know, making sure you prepare more than one offer.”
Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.
Thanks for joining me for another episode of Racking Up Rentals. Show notes for this episode can be found at thoughtfulre.com/e186. Please do us a big favor by hitting the follow or subscribe button in your podcast app. It really helps fellow thoughtful real estate entrepreneurs to find the show, and of course, make sure that you don’t miss anything coming up. Onward with today’s episode.
You’ve heard me say it before, but one of the greatest pleasures, privileges and honors is when I get to sit down with one of my coaching clients, and have them tell the story of a deal that they did. There’s just nothing more rewarding, nothing that makes me feel more proud and happy for them than that. Now, a few episodes ago back in episode 172, I shared with you a first interview with my coaching client Nate, who bought an off market rental property from a seller, great deal, with seller financing. And at the time, we recognized that Nate had really teed up an opportunity for a lot more purchases from the same seller in the future. In this episode, I’m so excited to sit down with Nate again and share with you this second conversation, in which he went back to the well and bought another package of three more properties. He and his wife, Kylie, are excellent real estate entrepreneurs and I can’t wait to share this interview with you. So without further ado, here’s my client case study interview with Nate and Kylie.
Jeff Stephens
Well, Nate and Kylie, welcome back, I guess I should say, because we have had a similar conversation before. But congratulations on your recently closed deals.
Nate and Kylie
Yeah. Thank you. Thank you. Yeah, it’s exciting.
Jeff Stephens
For anybody who’s just hearing this for the first time, this is sort of like part two of a previous case study that resulted in you buying one property from a great off market seller, that we knew that it looked likely that it could create more opportunities down the road, but you’ve really taken advantage of that and bought several more properties from her. So if you wouldn’t mind, just kind of start at the top; you bought this last property and then what happened after that? How long did you wait, what was the transition like to talk about this new batch?
Nate and Kylie
Yeah, so the seller that we bought the properties from, she had, I think, she had about 15 properties. When we started talking to her, she was looking at liquidating everything, just looking to kind of move on with life. However, she knew that she still wanted to one, defer her capital gains – she’s very, very familiar with capital gains. And two, she still wanted her money working for her. And so you know, one of her big things was an interest rate on her mortgages. And we did give her the interest rate that she wanted with all those. But anyway, so we closed on one back in January. And then she immediately said that the rest of her remaining properties, she was going to do two things: she was going to first offer all of those properties to her current tenants. She really wanted to help individuals become homeowners if possible. So she offered all her properties to the current tenants at those properties. And then whatever was leftover, she offered to myself and her longtime handyman, who also had a couple of properties as well, but just based on the relationship that we’d already built with her.
I told her that we wanted to work with her again in the future and she really liked working with us. It was a great transaction. Everyone was happy and so I think she ended up with seven properties left, something like that. Seven properties left and she sent out like a little kind of pro forma or whatever, you know, property details, rents, updates, stuff like that, to myself and her handyman. And we went through and we kind of did some preliminary inspections. And we went ahead and submitted offers, and they were pretty similar to the first terms that we did with her. But one of the interesting things was she told us kind of right off the bat, what her handyman, the other investor, had offered her on all of the properties. He pretty much gave her a flat straight across the board; he offered her minus 10% of her asking price for all the properties just across the board. He didn’t do inspections or anything, because he had been, you know, familiar with all the properties and whatnot. So we knew what he had offered on all the properties. So it would have been pretty simple for us to just beat his offer, essentially.
But we went through, we did a lot of analyzing, and we came up with numbers that we thought were appropriate for the properties and the condition that they were in, and the capital expenses, essentially, that we’re going to have to put into the properties, you know, within the next six to 12 months, roofs, furnaces, water heaters, you know, some of the big ticket items. And at the end of the day, we only ended up the high bid on three of her properties, which, at the end of the day, we’re alright with; there’s plenty of deals to go around, so the fact that we didn’t get all seven of them, it’s no skin off our backs.
So yeah, that’s kind of start to finish. And she’s been great; she’s pulled all her locks and stuff from all the properties and given those to us. She’s got a whole bunch of other little maintenance items, she’s like, I don’t want any of it, I’m just done with that, I’m done being a landlord, you deal with it.
So she’s been awesome work with, and I don’t think, well probably, she had one more property come up. But I know in the future, you know, she had a couple of tenants that are going to be longer term, like maybe a year or so before they end up actually purchasing the property. And I’m sure that if those fall through, she’ll be she’ll be coming back to us for more.
Jeff Stephens
So she offered them all to the tenants, and it sounds like a couple of tenants maybe did buy them right away, and then a couple said yes, but I need a little more time.
Nate and Kylie
Yeah, yep. Exactly. Yeah. So some of them just need some time to save up for a down payment, that kind of thing. So yeah, she was really flexible; she didn’t care about a down payment, really. Like I said, she kind of really understands that capital gains, and so I’m sure that she offered her tenants great, great terms for being able to get into a property without having to deal with a bank or lender of any type.
Jeff Stephens
I think it’s an interesting insight about the seller. It’s a very, I should say, a very telling insight, I think, when you hear landlords say, and I’ve heard this many times, too, they say like, I want to offer it first to my tenants, or maybe I already did offer it first to my tenants. But it does seem like it’s a small percentage of those that kind of come to fruition. I’m surprised even the ones that did come to fruition in this case, you know, that they’re even that many. But it’s just interesting because it shows a lot of, maybe her sense of principles, and sort of what’s right and process and things like that, which tells you a lot about who you’re working with.
Nate and Kylie
It does and that’s part of the reason why I’ve really enjoyed working with her, as I think some of our values are really aligned as just as individuals. I’ve told myself many times, I think she’d make an awesome TREE herself. She’s just very thoughtful, down to earth, and fair. She’s just a good person.
Jeff Stephens
That is very cool. So did the handyman end up buying any of the properties at all?
Nate and Kylie
He bought the rest of them, to my knowledge. I think that yeah, I think that he, I guess she didn’t tell me but he put offers in on everything that we did as well. I don’t know what exactly his terms were. I just know the price point. I don’t know what he offered her for a down payment or anything like that.
Jeff Stephens
Interesting to see somebody else’s approach, I guess, you know, to just say like, here’s this number. Here’s five seconds of quick math, boom, blanket approach to everything. And I gotta have to imagine like from her perspective of how maybe weird or jarring that is to work with you guys, who are coming up with something that’s much more like tailored and custom and thoughtful, I guess, but like not just a one size fits all approach versus, versus that. Did you get any comments from her on that?
Nate and Kylie
Well, yeah, she was almost a little bit annoyed with him for a little while because he wouldn’t give her an individual, by property price. He just, you know, said this is the total that you’re asking and I’m going to offer you 10% less than what you’re asking. And so that actually kind of delayed her decision making a little bit. But she also told us, she said, if I had to pick who all my tenants’ new landlord was going to be, it’d be you guys as opposed to her handyman because she knows that he’s just going to put everything under management. And who knows if your tenants are going to be able to stay; that was one of the things that she really cared about, she really wanted her current tenants to be able to stay, which was something that we did offer her in our proposal. But yeah, I have to imagine that there is a couple of her tenants that are going to be having to look for new housing, after you know, everything gets turned over to management and they, you know, jack up rents and do whatever with the property. So, it is what it is, I guess.
Jeff Stephens
Yeah, absolutely. So it’s almost like, well because she was principled, she feels a sense of loyalty to the handyman because he’s been around for a long time right, and to the tenants. But if it weren’t for that, you guys would have had virtually no competition at all, because she felt like – you were, I mean, strangers really just, what, six months ago? But you came in and became her first, you know, her first choice, basically, if it weren’t for all these loyalties?
Nate and Kylie
Yeah, absolutely. I think if the handyman wasn’t there, she wouldn’t have offered them to anyone else, she would have let us take a stab at everything and submit proposals to her for everything she had on her plate.
Jeff Stephens
So when you think of your experience working with her the first time, and the first one you bought, and then the second round, and the three that you bought then, were there any noticeable differences? I’m kind of speaking to the people who are watching or listening to this, who in the future might see like, you know, as a multiple property seller, and maybe a series of transitions over time. Was there anything different experientially, I mean, obviously, context wise, like you already had a relationship when you went into the second one, so you weren’t starting from zero, you weren’t starting cold, but what were those two different experiences like?
Nate and Kylie
Well, I think I was a lot more relaxed, which was nice. It’s always kind of nerve wracking, I guess, in a sense, when you start negotiations with a new prospective seller, and just kind of navigating those initial waters to kind of establish that relationship. But once we got past that point, it was a lot more easygoing; it’s very conversational between us now, it’s not necessarily, you know, all talking about properties or whatever. We spent a lot of time with her at the closing table, just kind of shooting the crap and you know, just having a good time. I texted her the other day, she left for vacation, I said, Hey, have fun over in Italy, you know, enjoy your time over there. So it’s been nice to, you know, have that relationship established, it takes a lot of the stress out of the negotiations, and really allows you to, you know, maybe just kind of be yourself a little bit more and not have to worry about, you know, saying the right thing all the time, or, you know, making sure you don’t care if someone offered or something like that. So that’s probably the biggest difference is it’s just a lot more. It was a lot more enjoyable experience. Had some of the expectations already in mind and it was just really smooth going.
Jeff Stephens
That’s awesome. Just yesterday, I met with a seller who I bought a four-plex from about two years ago, met them at a house that they have, and it was my first time having the second conversation with them about this property. It was just interesting, like what you just said, there wasn’t a lot of pretense, there was already a lot of familiarity. There’s almost you know, the first deal almost provides a bit of a template. So in that sense, the first deal is like important to get it right because it’s going to be the de facto reference point for everybody after that, but yeah, that’s really, really cool. So you saw opportunity with her for a lot more purchases than just the first one right? Was there anything you did then after the first one to continue to set the table or to water the seed, to mix metaphors as I do, but to make sure that you were first in line again or like trying to make it happen sooner or what did you do to keep it fresh and warm between you guys?
Nate and Kylie
Yeah, really there wasn’t a lot to do, as far as that goes. I do think the first time I ever sat down with her, I think I knew ahead of time, from a phone call that we had, that she had a bunch of properties she was looking to offload. I think I told her the first time that I sat down with her, I said, you know the bottom line here is I want the opportunity to work with you again in the future, you know, with the other properties that you’re selling, because she made that very clear from the get go that she was, she was done. She was getting rid of everything. So it was really on her timeline. I think she, maybe she took another trip in between sales. Yeah, just after we closed on that first property. Yeah. So it was really just kind of on her timeline, she let us know, hey, I’ve got some stuff going on. But, you know, once I’m ready, I’m going to be putting together all of these stat sheets for you. And I’ll send them over when I have them done, kind of thing. And we’ll just go from there. She gave us a bit of a timeline for submitting proposals, I think just because there was another individual involved, but it’s been very, very low key. Didn’t have to really press or keep on her; I think at closing on the first one, we were already talking about what’s next, when are we going to, you know, talk about the rest of your properties, kind of thing.
Jeff Stephens
Yeah, that’s awesome. And you may now choose to, since you know, I assume you know which of the of the remaining ones are kind of slated to be closed on by the tenants, but to your point a few minutes ago, you never know if that’s really truly going to come together. So there could be an opportunity to just stay in touch with her that way to be that Oh, when’s that one closing? Oh, well, I hope it works out for them. Hope it works out for you. If not, you know, you know where to find us.
Nate and Kylie
I think within just a couple of weeks of closing, she did have one tenant who was supposed to be buying a property, who backed out already. So yeah, I think probably there’s some opportunity there. One of the other things I’m kind of excited about is all of these properties that she’s selling, and she’s carrying the note for, they have balloons that are five to eight years. So we’re going to be in touch for at least that long. And then at the five to eight year point, she’s going to have a big influx of cash. And I’ve already planted a seed with her about doing some private lending. So I’m kind of excited to see if that that might come to fruition in the future, to be able to use her as a private lender for us and she did seem interested in the idea. So we have that to look forward to you too. It’s definitely going to be a marathon.
Jeff Stephens
Yeah, absolutely. I think that’s such an important point too. I mean, you’ve got one good relationship that now can possibly branch out into, I mean it already has, but possibly branch out into lots of other related things too, because she’s really seeing what it’s like to work with you guys and how on top of things you are. It’s a little bit of a segue to just one other point I wanted to make, which is one of the differences, even though it’s not like a ton, it wasn’t like years had passed between your first purchase from her and then the second batch, but still I think one of the other things that changed between batch one and batch two, is you guys, just to a certain extent: your own confidence, your own experience. Because you’ve been it through before, you’d been through the Bob situation, which was like kind of its own roller coaster, but a lot of lessons and resilience and battle scars and all sorts of stuff like that that came out of that. And like you said before, it was almost like you didn’t have to try as hard because you had this relationship. But I think another thing that’s a little bit interesting in a situation like this is, you probably also didn’t feel quite as much pressure to perform. Now, I don’t want to put words in your mouth, but the first time you were doing it, you were really applying what you’ve been learning and practicing here and you’re like I want to get this one done for proof of concept; I want to get this one done because we want to be able to call this a win and stuff. But with the second batch, there might have been a little bit less pressure because, you’re like, no we’ve already proven to ourselves we can do this, we’ve already proven to her we can do it. So now, you can just approach the opportunities just on their own merits but without all the sort of other elements of feeling the pressure, like I really want to perform, if that makes sense.
Nate and Kylie
Yeah, there’s a lot of truth to that. Absolutely. It is a confidence builder; if you go back to part one of the interview, the Bob saga, even going through all that, even though as far as acquiring properties, we chalk that up as a loss, but really it was a win. Just the experience alone and having a little more confidence in talking to sellers and you know, how to steer the conversation and things to say, things not to say. So, yeah, there’s a lot to be said about doing it once and kind of getting on the board, if you will. And I would agree with the statement that you don’t have to work as hard I think, just, I don’t know, if it’s just a lack of mental stress from, you know, self-imposed stressors, kind of thing. It, at the very least, it’s seemed like less work the second time around.
Jeff Stephens
Yeah, totally. Just part of the snowballing I think, you know, momentum and confidence and how those things, you have more credibility, have more reference points from her, more experiences just kind of snowballs in the right direction. So I think that that is absolutely fantastic. I’m really excited for you. And one thing, I think I gave you kudos for this in the first interview, but I want to do it again, because I continue to be reminded of this, every time I hear your updates and stuff is: you guys are both busy people, working and being new parents and fur parents and you know, having a full life. And a lot of people, they would buy something and then they would take their foot off the gas and coast for a long time, maybe forever. And then other people would say like, I’m gonna take my foot off the gas, and then you know, in a year, I’m gonna put my foot back on the gas, but you guys have just continued to have your foot on the gas. And like, you know, within a couple of days after closing of these deals, you’re already talking about these other seller meetings you have and stuff and I just want to give you great kudos for that. So I think it’s really, really, really important. I’m not saying it’s important to be aggressive. I just mean it’s important to keep going because if we all started looking at our lives, we can we can all find excuses. Why not? We’re a little too busy here. We’re not quite ready in this way or whatever. But you guys just keep going. And I love seeing that.
Nate and Kylie
Yeah, we look at the big picture, the long term because there’s definitely days where it sucks. We sacrifice a lot. Our friends and family are not doing the things that we’re doing. And yeah, it’s gonna pay off. And you know, we enjoy it. Like I said, you know, we have bad days here and there. But all in all, we like it. And we’re gonna keep doing it.
Jeff Stephens
Love it. Well, I’m so excited for you guys. And so proud of you too. And I just love seeing you just continue to apply everything you’re doing and learning. And the other thing I noticed too, just like from the coach’s perspective, the amount of contributing you do to other people, like in our group, and answering their questions and giving advice and stuff, is awesome. It’s just great to see people taking more leadership because you’ve got more experience and confidence to do that. And it’s such a great thing overall. So congratulations and keep on this amazing trajectory.
Nate and Kylie
Yeah, thanks. Well, we appreciate all the support and advice and help ongoing.
Jeff Stephens
It’s my honor. Thank you.
Well, there you have it my conversation with Nate and Kylie; I’m so proud of them, so happy for them. They’re challenging me and making me feel like I need to keep up with them which is such a reward and I absolutely love it.
That is it for today’s episode of Racking Up Rentals. So again show notes can be found at thoughtfulre.com/e186. Please do yourself a big favor by hitting that subscribe or follow button in your podcast app and rating and reviewing the show. Rating and reviewing helps so much and I’m so grateful for that.
Did you know that we have a Facebook group for Thoughtful Real Estate Entrepreneurs too? We do and it’s called Rental Portfolio Wealth Builders. We’d love to have you join us over there. You can just go to group.thoughtfulre.com and the magic of the internet will take you right there. I will see you in the next episode. Until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off.
Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers. Remember: solve the person to unlock the deal and solve the financing to unlock the profits.
Leave a Reply