E10 - James Brown and Lease Option

[0:00] this is the wealthy investor show where we don’t just talk about your wealth we also talk about your holistic health i’m your host matthias and i’m erica and this is the wealthy investor welcome back to the wealthy investor guys we weren’t sure what to talk about today but we got something juicy for me erica is a licensed therapist right yeah that’s your profession yeah yeah and i am not i have read self-help books like mindset books that kind of stuff and so there comes times in our marriage wonderful beautiful marriage when we disagree a little bit about certain things or we have some spirited conversations and so i think we wanted to have a little bit of that now so specifically i think that sometimes i think that there we shouldn’t give ourselves excuses we shouldn’t give ourselves just love yourself unconditionally obviously you want to love yourself but my point would be that you’ve got to a great don’t my point would be that loving yourself comes from taking action towards what you were your goals your accomplishments you don’t want to get to it all started from a video that i apparently misinterpreted

[1:15] and where they were saying the thing that i got hung up on was they were saying that accomplishments are an external thing an external factor and you shouldn’t rely on accomplishments to have self-worth and wait a second first of all that’s not what the video that’s what i just said apparently i misunderstood okay good and so i went out i went on a bit of a rant and and basically said that i think it’s wrong i think that really if you don’t if you’re not feeling accomplished you can and basically if you just set goals towards where you want to get to and you actively work towards them and if you really break that stuff down onto a minute level and track it and achieve the things that you are setting out to do that would bring about accomplishment and that it would make you feel good because you’re feeling accomplished and that’s an internal thing um so apparently i misunderstood the video yeah yeah you did because the video was a woman first of all talking about how let me mansplain this real quick to you it was a woman talking about how as female as women we grow up in a society that everywhere it is blasted

[2:29] that we should look a certain way that we should act a certain way that certain behavior for women is unacceptable unacceptable and how it can be hard for women to be assertive especially in business settings what are male dominant and how the more you can believe in yourself and let go of some of what society tells us is necessary or what we have to be like or how we have to look if we can let go of that we can experience freedom inside ourselves we can really begin to love ourselves and then pursue whatever we’re interested in or whatever we want to be or who we want to be that was the video and matias had a a response video that he was asking me if it would be appropriate to post that just said it was supposed to be controversial just it was supposed to be controversial it’s just this was like a just make your goals and go for them and you’ll be happy well i said you’re gonna get buried it was a post i wasn’t actually planning on posting because i knew it would be controversial and i didn’t know if i wanted to really i intentionally said some message to women and i knew that in doing so i would get a lot

[3:42] of hate which is attention that could get views or whatnot but i don’t know if i want that image so i didn’t post it i i think what you’re saying is true and important but not alongside like it’s you’re totally different messages yeah and i guess the other part i think one of the themes of the video as well and correct me if i had misinterpreted this as well was was that an assertive woman that a woman that’s powerful that knows her worth is not attractive or something like that or is a burden or the pain or something to that extent and to me like i married you what did what i’m trying to say is i am attracted to people that can we’ve talked about this many times that i view as you as a partner i want your input i want your like back and forth i don’t want you to be a subservient woman i’m attracted to and so i don’t get that mindset that somebody that is assertive i think there’s men i think there’s women that when the way they handle themselves in an assertive way is a bit grating but i don’t see that as a gender thing i think that’s more of how you approach that maybe more of a social skills i don’t see as a gender but again i’m i’m not a woman

[5:02] i haven’t grown up as a woman do you see how it sounds different if i would say the exact same thing you just said to me if i would say that to you that that you being an assertive man is something that i find attractive i don’t want you to be a submissive man yeah it’s not language we use for men yeah i i would say that there is you society would expect that to be attractive right is that what you’re saying it would even society yes society would put you front and center in the leadership role generally speaking and it takes extra the post just saying it takes a lot of extra work and energy for women to be in that role where for men mostly it’s just you can step right in and it’s there for you i mean i think there’s definitely oh yeah sure and i think there’s work to be i think you have to work to be become a good leader no matter if you’re a woman or a man and i think there’s a positive there’s a good way to be assertive there’s a good way to get a hone skills regardless right i think what you’re maybe saying what i’m saying is like the yes you do have to hone leadership skills and it’s helpful if you can figure out what

[6:23] your goals are and work towards them and mindset is everything and you can take charge of your life i think that’s what you’re saying and i believe that it’s just men and generally speaking like gender wise men tend to start from here and women start a little bit lower and so they have to work harder to to with the word shed some of these societal pressures to be a certain way before they can really start to be in tune with who they really are who we really are and then begin to set goals and work towards those things and not be bothered by all of these other pieces that makes sense so what at what point do you think is there the role of giving yourself excuses versus the role of give yourself grace like where’s the line in in that from whatever for talking to women talking to men whatever you think there is a role to give yourself grace i know we’ve talked about this with the book the keeping house and whatever what’s it called keeping health while drowning being house while drowning there’s there that book has a lot of grace and their whole point about you need to have your house being functioning and so sometimes if you’re not functioning you need to give yourself grace and

[7:34] make things easier until you can become functioning and do do things the way you hope to do it one of the examples would be like even if you’re if you can’t do dishes because you’re just so overwhelmed as a parent or however you are if you’re just depressed or whatever that you should just use plastic silverware and plate and whatever until you are able to get to the point where you can do dishes and the point is you need to be functional so there’s definitely a role in grace it’s my question making any yeah i think so i think first first you have to be able to acknowledge what’s happening it’s important to me that you can acknowledge that there is a difference between you as a male and me as a female and if we would approach the same position or there’s there’s different societal pressures for me than there are for you it doesn’t excuse anything necessarily it’s just helpful to be aware of that because yeah i’m not disagreeing with you on that no i know i know but once you can acknowledge where you are if there is a difference or if you are drowning you can’t do the dishes if you know where you

[8:39] are at your starting point then you can figure out how much challenge you can give yourself to start moving forward without becoming paralyzed then you just can’t function because it’s too overwhelming you have to know how much can i move forward at this point and then once you move a bit you might need to rest for a minute and give yourself a lot of grace before you can challenge yourself again and move forward you see that with everything in life wouldn’t you say that makes a lot of sense i think it’s so if you were to set out goals or whatever the key there is to making them doable and making them goals that you can achieve so if you set yourself up for failure by making the goals if you’re comparing yourself to some superhuman that runs 20 miles every morning and then you set a similar goal you’re going to set yourself up for failure you need to set a tangible for where you’re at the moment yeah if i would acknowledge the difference like for women the harder part for women in life and just succumb to it then i might say i can’t do anything or i can’t even make that goal because that might be too hard or

[9:45] they might not want me or they might not see me as somebody who can step into that position what’s the point of trying because i’m a woman that i’m not going to be able to do it or whatever they’re going to prefer whatever yeah so instead it is building confidence to say i can do this and i’m going to try and it’s okay if i fail and even if i fail it’s not always because i’m a woman it might just because it didn’t work that time and then i’m going to try something new or different but i’m going to keep working on it i’ve enjoyed this little conversation we’ve had i think we’re on to something here we should worry where i put my neck out and let’s you can address the hate mail keogox 321 raleigh north carolina somebody probably lived there perhaps but anyways today let’s get shift gears a little bit we talked to james brown james brown is an investor out of the colorado denver area he has a really interesting he does a lot of different things he’s a agent and he but one of his main one of the main things that we talked about was his option lease option strategy for investing in real estate where he makes it a real win i think oftentimes that has a bit

[11:01] of a dirty name where people think that the person renting the house renting to own is going to get screwed over they’re just set up to fail but he has a very awesome program that really sets the people up to succeed so that’s super interesting we got into the weeds on that a little bit he also has fund the funds where he helps vet syndication deals for people who have money that don’t necessarily have time to to vet those deals so that’s interesting as well he provides service there where he underwrites the the deals a little bit more and has a big checklist that he goes through to make sure that the deal is a good deal for the investors that are investing through them and you got into his backstory which was pretty interesting yeah he was born and raised in alaska working on his father’s commercial salmon fishing boat and had some fun stories to tell about just his experiences in alaska and then he moved to colorado i think when he was 18 went to college there and has been there ever since and so he loves the outdoors we didn’t get into that as much but he has a lot of outdoor hobbies and

[12:08] has a lot of fun it sounds like he was fun to talk to hope you enjoy him without further ado here’s james brown welcome back and we are here today with james brown james is out of just south of denver colorado and james has a really interesting investment strategy that maybe has a bit of a bad name to it it’s a lease to own and he has a very unique strategy as to how he does it so i’m really eager to get into that and get into the nitty gritty details and how you make it a true win for everybody involved but before that do you want to get started and tell us a little bit about where you’re from what kind of got you into real estate yeah so i’m from alaska originally so always gets good reactions it was a cool place to grow up my my parents were teachers and my dad had the summers off and he had a commercial salmon fishing boat so wow grounded out and learned what hard work was on the boat had a lot of adventures so what part of class anchorage the big city girl yeah a lot of outdoor activities hunting fishing skiing snowboarding snowmobiling all that that’s a lot of fun i’ve never been to alaska i’m sure you get a lot of people curious about that in colorado it’s very similar we

[13:29] just have more sunshine yeah and more people yeah right there was a tv show recently you can help me on the name of it maybe where it was it showed it was like a i don’t know it’s like a police investigation the tv show where they true detective yeah fourth season yeah it was based in alaska and we had the six months of darkness and that was really interesting to see and i was curious if that was actually how is that how it is is it actually six months not not in anchorage if you go up to prudhoe bay like all the way north there was actually a movie oh crap it was like a vampire alien movie i cannot think of it but it was a good one playing on for that yeah anchorage so in the winter it’ll get light around 10 a.m and then dark again around three it’s not much light very short days you get a little bit so a little bit better than yeah is seasonal depression higher there do they talk about that oh yeah suicide oh man crime in anchorage is super high really gun deaths higher than chicago which is always in the news wow i didn’t know that that yeah like growing up i don’t know if it was as bad growing up if it’s gotten worse or i just wasn’t aware because of the kid

[14:52] is that correlated to the season of depression as people do people speculate that is part of the reason or i would think that would be a huge factor yeah plus a lot of people have guns up there and what’s the bear sorry yeah can you paint me a picture of just what life was like for you growing up there what a day was like what would would you do how did you spend your time what did you do when the sun went down a lot of time indoors but i don’t know we would try to get out during the light go hiking and cross-country skiing i played hockey growing up of course yeah in the summers then was it longer days was it like light a lot for a long time oh yeah yeah yeah have a campfire and it’s still light at midnight so yeah summers are awesome i go back every year hang out with my folks and just temperatures are nice and long days so yeah fill it up yeah i like it only downside is mosquitoes really you think like mosquitoes would be around humidity but they they hang out around up there huh oh there’s a lot of humidity apparently i need to go to alaska yeah what is it minnesota is the land of a thousand lakes or ten thousand lakes oh there’s a

[16:13] million lakes there’s just so many that sounds i grew up in anchorage which is by the ocean so it’s humid right and it would regulate the temperature then as well from the ocean yeah totally so how old were you when you first started helping your dad on a salmon boat about 11 what kind of jobs did you have at that point before that no no with your dad what did he have you do on the boat oh initially just a gopher i actually never saw his first boat afloat so he’d fly me out and i’d help get the boat ready it was an old leaky wood boat so i’d be in dry dock and so i’d just be running around grabbing tools and stuff then on the boat itself there’s basically the captain and somebody that stacks the lead side of the seine and when that stacks the corks and then you have a skiff man and i don’t know i just run around helping wherever i could as a kid and then first job was stacking corks and then i moved on to running the skiff i did that the rest all the way through college wow what what does that i have not really been on a boat what does that mean running the skiff so um basically so salmon seining uh also called purse seining you have the big boat it’s got the seine on the back deck

[17:44] and then you have a skiff that’s you drag around behind it when you set out the seine the skiff is attached to the end of the seine and and the big boat takes off and the seine piles off the back and so it’s a big boat the seine is like the net yeah yep okay that’s what catches the fish so you basically say the fisher are coming down the the shoreline yeah going one direction or the other so you set it out set like a j-shaped hook so the fish come in hit the seine go out hit the end of that hook and circle around then after maybe a half hour you close the ends and then the bottom of it got like a purse kind of thing that you cinch up so it traps all the fish in the seine and then you start bringing one end in and pile it back on the deck so the skiff is just holding the seine open and then while you’re closing the skiff kind of keeps the big boat from getting into the seine and getting the prop tangled up that’s my level of how that all works that’s awesome wow how do you look back on those times on the boat finally i like a lot of adventures have sharks once in a while because we’d get weird stuff that come up

[19:09] eels and octopus and dogfish and just random stuff we’d go hunting and beachcombing and stuff like that that’s cool bears on the beach i’ve never seen one while i was on land luckily yeah that would be scary for me yeah yeah and code this is in kodiak alaska kodiak brown bears which are like immensely bigger than colorado brown oh yeah we just have black bears here and some of them can get big but not like a brown bear but we have their black bear yeah i’m anxious thinking about it was that just you i don’t do you have siblings you have brothers or sister brother you yeah my brother worked on the boat too so okay cool cool yeah he’s in real estate as well now is he still in alaska or did he also move around somewhere he and his wife are realtors in cleveland where her family’s home okay awesome if they say fishing is a gateway drug to real estate yeah okay so how did you get into real estate 10 i’d love to hear what the process was actually i was a graphic designer for 25 plus years and that it wasn’t really getting me where i wanted to be a real estate and i was getting burnt out so i was got serious approaching turning 50 i’m like i

[20:34] gotta do something different so i started learning about real estate through bigger pockets which is based here in never which is cool right took a few years to figure out which direction i wanted to go and then eventually i was like it just real estate took over my brain like all the potential so now i’m full-time now when you moved to denver how old were you at that point 18 right out of high school i came i came here for college and a lot of people came for college because mountains and yeah right cool yeah and then i just stayed yeah it was amazing every time we go to colorado we think seriously about moving there usually the the whole flight home we’re researching how so just neighbor and then things would be a great place to live and then that’s where then i think denver’s a great state the mountains really call to us oh it’s just so fun yeah yeah i was curious coming from alaska to denver how long do you feel like it took you to build a sense of community or just to feel like it was home for you pretty quickly because like i went to school in gunnison colorado which is a small town maybe 10 000 a lot of it’s the school great school

[21:51] and so that felt like community like right away because it’s so small even just walking around town like oh people i knew when i moved to denver that was that was a culture shock because i’d it’s a lot bigger than anchorage yeah just remember going out for walks and people wouldn’t make eye contact with me i’m like that’s weird because i was used to that small town you’re gonna run into people again you’re always that’s more friendly i didn’t like that but i don’t know i’ve been here a long time seems every time i go out somewhere i run into somebody i know that’s cool what do you do now when you’re on walks do you still greet people or have you adjusted oh yeah yeah i’m always like saying hi and making eye contact yeah yeah it’s funny we hear that too about going north that happens where it seems like people are very focused on where they’re going they have a direction and a path and they they’re not going to divert from that but around here we’re more south in virginia and and people are very friendly and wanting to talk about anything and everything all the time yeah yeah go around calling so there’s sugar so when you got into real estate did you have

[23:06] somebody that you were doing that with or were you exploring that one on your own yeah i started out on my own going to ria events and studying and all that but then eventually i went to it’s a there’s multiple locations called badass real estate investors so cool so i’m that’s where i met my business partner toby hansen he was going to be on here but had some internet issues but yeah he’s he was in the same position where he was running ads and stuff facebook ads google that kind of things for restaurants and real estate agent and he’s like in a similar position where he’s about to turn 50 i gotta get this together and and so we met clicked and that’s a pretty good combo the graphic design and the ads for prospecting whatever you’re wanting to find that’s pretty good background for you guys to have yeah totally yeah that’s cool and you’ve said this a couple of times i was about to turn 50 and i gotta get things together what do you mean by that what is happening what do you mean like you had mentioned we were about to turn 50 we wanted to pull something together or get something going was

[24:28] there something for you that number turning 50 was uh like a push for you yeah see my friends like with these careers and whatever about to retire and i’m like i have no retirement in my future i wasn’t saving up enough i got some money in mutual funds and stuff but that’s not growing and you have no control over that besides adding more and i saw all the potential of real estate we could dive into that of course but anybody on here probably realizes the power of real estate i was like okay i need to get gone yeah i go back to i think when i was in college my dad’s you should buy a duplex live in one side like basically house hacking before it had the name right like people were doing house hacking for a while before brayden or whoever coined it house whoever coined it yeah i didn’t do that but i was smart enough to buy a house with my brother here in denver and was able to leverage that and that’s i ended up buying my own home in 06 before things went sideways and i was like sitting there going ah for years i have no equity to play with right and i struggled too because i was once things came around i started getting into this

[25:58] it’s probably 2017 where i got serious started studying i’m like i have equity in here what do i do with it do i try to do a cash out refi or something and then go buy another primary and do i call it nomad investing where there’s leapfrog and keep them at rentals with those original primary home loans in place low down low interest rate i struggled because the house itself was not in a great area i fixed it up babied it it was an old house it was gonna need it needed peering like foundation okay um there was a a root in the sewer line i knew about that i had scoped when i bought it just ignored that figured it came up i’d deal with it old electrical as a rental i was like yeah this probably wouldn’t be super solid be looking at a lot of capex it was in a sketchy neighborhood that was getting worse even though people were coming in and buying and fixing places up the crime was going up like i went to the neighborhood association meeting the last year and they’re like it’s going up i’m like oh that’s not the trend i want and i don’t want to have i don’t want to live there anymore i had crappy neighbors too i was like i don’t want

[27:17] to live there anymore and i don’t think i want renters in there even if i did get renters in pretty soon they’d be like wait what was that did i hear gunshot or like right okay we’re out of here we’re not going past our one-year lease like nah so i sold it i think that’s probably one it can be a hard uh hurdle to get over for investors people wanting to build up their portfolios etc is to let something go i think that has not really been so we were in an equity growth area as well not like denver we’re not appreciating quite as quickly but i think that’s probably something we’re going to face at some point as well like do we want to uh get money out of this or just sell it get the most out of it that we can and move it into something that’s maybe a little bit more cash flow intensive or a bigger asset get that the single family houses into the hotel model like monopoly so that could be a hard decision sounds like a great one yeah yeah and always in the back of my head remember people saying oh i wish i would have kept every property i had i’m like am i making a mistake there are situations where it makes more sense to sell it especially like you’re saying as you’re building

[28:32] equity in a place and it’s locked up yeah that’s it’s better to reuse that equity maybe that’s selling it outright cash out refi or something and what we’re getting at is a return on equity people don’t always think about the return on equity i think people often have the dream of paying off the house and just getting the straight cash flow which there’s nice things about it but if you analyze it from a return on equity model it doesn’t do very well if you were to take that equity and put it into some more properties or another property and leverage either with a cash out refinance that you said or going ahead and selling it and just putting it into something else you can get a much better return on equity yeah oh you nailed it yeah a lot of people don’t get that especially older investors it was just drilled into our heads pay off your at least your primary house right yeah yeah there’s benefits to that but when it’s a rental and you’re not attached to it and you’re thinking building wealth that’s a whole other story right yeah we we actually started off as a dave ramsey that’s our financial

[29:36] journey we were dave ramsey paying off all our debt kind of people and so we had that very much ingrained in our first house that we kept and turned into a rental about a 15 year note so very cash for cash flow poor and we’re going to have to figure out what to do with that at some point because the return on equity is not great but yeah it’s funny there’s definitely a balance i think i don’t know if i want to go out and max out all my equity lines to buy more property necessarily and just be complete leverage but there’s i think there’s a good balance in between if you’re in a good area you got good cash flow or like you said you were in an area that weren’t wanting to to stick around with so makes a lot of sound so good for you yeah yeah i got plenty of stories about living there the i was going to just say this kind of segues into your the lease to own option thing people often think like the lease to own like if you’re in a in an area that’s hard to maybe get a normal tenant in that may be like where you were if it was a more rough neighborhood like you envision somebody who can’t qualify for a traditional mortgage may not even be able to get a traditional lease option

[30:49] and so they get into this lease to own scenario where they maybe put a down payment down and then the owner is basically sitting back and waiting for them to fail so that when they fail they can recapture the property keep the down payment they paid keep their rent they paid well can you tell me a little bit about how your model works and why that’s not you’re not really taking advantage of the people you’re working with the win yeah the bad areas yeah we try to stay out of those try to stay in like just good working class cookie cutter home neighborhoods where the crime’s not high but they’re not like luxury right just sure any home most people would want right three bedroom two bath metro area near good schools low crime what’s the what’s the price point for that where you’re at what’s like the median our median depends on where you are but between 580 and 630 oh wow basically it’s high yeah that’s about almost double we’re three 320 to 350 right here yeah yeah it’s definitely harder to make it work to make it cash flow but like you were saying we have our appreciation it’s a hybrid of both you got to answer your question about like our model

[32:11] setting people up for success so that they can get a loan in the future that’s the key and not everybody does that there’s big companies and individuals that either unintentionally set people up for failure because they don’t know how to vet them and then set them up or they intentionally do it right i mean with the idea they’re going to take back the house and keep their option i like to sleep and i like to help people got a group of of other companies like ours growing around the nation so like a network and we all have the same mindset set them up for success and part of that’s getting with a lender in the beginning most that fail or because they don’t didn’t have a plan you know i know quite a bit about lending but i don’t know all the programs and all the intricacies so i always like to have a lender taking a look and going okay here’s why they can’t qualify or maybe it’s multiple things and this is what they need to do and here’s the likelihood and here’s how long we think it’s going to take them so just knowing that and having everybody on the same page up front that’s the key so you need to find somebody that can’t qualify for a mortgage right now but it

[33:32] has a clear path to be able to get qualified what’s that typically involved for one of your clients it’s a credit fixing what’s the typical great question so it’s usually self-employed that are a good fit because banks don’t like us self-employed people i’m self-employed so they typically need two years income tax returns so those are ideal because that’s they just need time and the self-employed people usually have some kind of savings that they can put towards their option fee so it’s not anything wonky like get into credit we look at that and we don’t have a minimum credit score or anything we just look at the whole picture like what is their source of income what are they making what’s what is their credit score things like that are there common industries that you find the self-employed people from or is it all over the place as to what they’re doing yeah it’s all over a lot more self-employed people these days contractors are a good example right here we have a lot of hispanic contractors so we’ve got somebody on our team on another girl that called earlier when we were before the show started she’s fluent in both languages so we’re looking at trying to help

[34:50] somebody right now they make good money they get some other things like citizenship stuff that we got to figure out too but cash heavy companies but and they don’t like banks right greater banks it’s a culture of thing like they’re used to being wary of them so yeah yeah no i can totally see that that makes sense and we talked a little bit about the property that we’ve invested in i have my partners from el salvador our partner from el salvador on that deal and so yeah we definitely he definitely works with that a lot and he has to he understands the lending side as he’s an agent as well he understands the lending side probably better than a lot of lenders maybe because he has to has had to translate a ton for his client the lender themselves or the title company or whoever does not speak spanish it’s interesting how those cultural things can really impact negotiations there’s all sorts of hurdles with cultures that we have to get through and just part of it with the citizenship piece you mentioned is part of it too helping them connect to resources immigration law or lawyers that can

[36:05] help them with that process or is that outside of what you all are involved in yeah we do we help however we can that part of it’s like outside my area of expertise but like anna who’s on our team she knows and they those clients usually know the path forward yeah yeah yeah like same with credit i’m not a credit expert so right if they need some help i send them to credit expert to help them figure that out and most lenders that we work with they can give some good advice if it’s real wonky or they need to like get some things removed they need a credit specialist then we pass them on and how much once you uh have finished the first part they’re in the house how much follow-up do you do to make sure they’re on track still to becoming owners or do you just revisit it once the the option is present oh good question yeah yeah we do follow up so minimum every six months and these are usually we do between usually one year minimum up to 10 years so most of the ones that we’ve done are one to three years most people can qualify figure out whatever they need in that amount of time i think we’re gonna start

[37:23] bumping that out five ten years just give them plenty of time so yeah okay that’s interesting i had another question i can’t remember i had a question i was curious how many how long have you been doing this i’m curious how long though like the longest deal that you’ve had or you’ve been working with folks yeah like i said most of them are one to three years so we’ve had a handful complete about half of them so we’ve been in business since 2019 ourselves here in this market and then our network like my mentor who i work with a lot of our deals have been joint venture deals with him in the midwest and he’s been doing this over a decade he was a lender first and then really liked the creative financing and just getting into the weeds and helping people that he couldn’t as a lender because they’ve got their checklist and if somebody doesn’t meet all of it his hands are tied as a lender it really is seeing it an opportunity and i remember what i was going to say then so you often will actually let the person pick their house that they want to buy on the mls correct good question we do it two ways so we either find the buyer first let them pick out a home on the mls

[38:39] and then we buy it for them or we go find those kind of cookie cutter ideal rent to own type homes buy it and then we go find a buyer you market that for that we’ll hit up our we’ve got a pretty good database of people and we don’t require as much up front when we have it property first so it opens it up to a lot more people that weren’t a fit for them picking out a house so they’re limited to that home that we’ve purchased so we do it both ways interesting if they are folks that pick out the house are they involved in negotiations as you’re coming to terms on a price yeah because like we get a snapshot of what it’s going to cost everybody and but then you get into negotiations we got to make sure everybody’s on the same page a little more complexity than one investor or primary home buyer doing those negotiations so yeah so then as far as the down payment goes is that the option fees that would how you refer to in this situation yeah because it’s non-refundable lease option consideration technical term that money can be applied towards down payment and closing costs equity in the house

[39:59] but it’s not officially a down payment because there’s no loan at that point it’s just an option for them to buy but we give them 100 credit for whatever they pay so walk me through that so you’re buying the house let’s say that’s the mls they the the buyer pays something on the mls model you’re you would be buying you and your joint venture partners whatever would be buying the house putting a 20 down payment on that house click because it’d be your name on the mortgage it wouldn’t be theirs so they couldn’t be any kind of it wouldn’t be a primary residency yeah it’s an investment so yeah minimum 20 sometimes even if the minimum is 20 we might do 25 just so that the cash flow is better there’s that teeter-totter to figure out what’s a good fit so it’s really whatever loan option you can find as a investor that you would put it under does that then match what their option fee would be or what’s the option fee then look like or the buyer or the the leasee at that point yeah so it varies like we aim for 10 or more of the purchase price hit up front that’s hot i like that because that usually

[41:11] covers their down payment and closing costs they’re getting like a five percent down conventional or if they get an fha great on the back end back end yeah okay skin in the game keeps them on the straight and narrow when they’ve got that much skin in the game and it’s insurance for us because it’s not refundable right so does that money then need to be held in escrow of some sort no that could be essentially offsetting your down payment and closing costs for the the purchase yeah yeah so it goes through escrow when we close like the right they pay that um but it’s not held in escrow okay it’s just but it is documented and owed back to them right and then you would just basically be making a like their monthly payment would be a little bit higher than your mortgage payment kind of thing like a typical okay but you mentioned as well that there would be some factored in appreciation for the option at the end you walk us through that a little bit yeah we just we look at what the market’s doing where we see it going and just trying to make it so it’s weighted a little more in favor of the buyer so if the market goes up good example we had one

[42:29] the buyer was actually a this is a cool story so the buyer was a real estate agent he didn’t have a full two years get alone picked out a duplex lived in one side and this is during covid in the run-up so i think i don’t remember what percentage appreciation we built in but it was low minnesota is less than here let’s say it was five percent something like that but the market went up right 15 20 so he walked into 60 grand equity so we set him up for that we still did fine we had our cash flow and our back end and maybe if we had it as a regular rental or and then sold it sure we might have been a lot more but we helped him out he became a homeowner we made money everybody’s happy and then we can repeat so so the only really the risk in this kind of scenario for the buyer would be if the market goes down for some reason if there’s a depreciation market they would still be obligated at the whatever agreed upon appreciation at the end in the contract correct yeah yeah yeah and that’s a good reason to make those option periods longer sure full 10 years we’ll build in like we’ve got one right now gal was going through a divorce after we got her in the house with her

[43:56] husband she’s going through divorce and not doing what she needed to do to to get her credit dialed in and so we gave her an extra year you may hopefully she makes it if not we can just keep extending it or we can always the last thing is we want to go through like a renegotiation rather stick with a contract that’s the first thing just extend it let the market come back yeah i love that it’s very apparent that this is a system that is designed to help people and benefit from owning real estate over time like it’s great i could imagine that i don’t know what that contract would look like but somebody could maybe structure in a way where they would assess what the value is when the option comes due to really capitalize on everything that is possible to take advantage of all the appreciation but i it’s such a win the really cool strategy yeah yeah yeah in the contract it’s got a debt a date and a purchase price agreed upon ahead of time so everybody’s on the same page but yeah market could change i i don’t know of anybody that has done that or you reassess yeah yeah and i’m just thinking out loud here like that somebody was really trying to maximize

[45:17] everything all the appreciation from owning the their property that that could be a route they try to explore but not as favorable to the buyer in most scenarios because most of the time the we’re certainly not looking at any depreciation with the inventory issues anytime soon it seems yeah i imagine that every interaction or contract that you set up is different you know you have all kinds of different people coming in with with a lot of their own story and just situations i’m curious what the learning process was like for you as you got this started it seems like it flows so smoothly now and was that always the case or did you guys work out some kinks along the way what was that like yeah yeah still learning definitely trying to wrap my head around it and all the scenarios too so like to that point like i’ve got somebody i mentioned earlier hispanic family wanting to do this we can keep their payment low at the max of what they told me they could pay problem is if we start low kind of look at the future right when they go get a loan without 25 down say they do three and a half or something their payment is going to be way higher like another four or five hundred bucks higher

[46:45] if they can’t afford that that’s setting them up for failure so we have to calculate today’s rate for them with our loan versus theirs so that’s interesting a big gap yeah those are the learnings along the way like how do we figure this out so i’m always trying to find that balance for the buyer and us so everybody’s happy keeping the end in mind and really setting them up for success we always ask people what their favorite books are do you have any favorite books that come to mind that would be either real estate related or that would be just personal development or just a favorite book in general do you have any that comes in mind oh let’s see one as a an agent that i like right now is uh the full fee agent it’s based off chris voss’s book never split the difference thank you yeah based off that is such an interesting book all the concepts the never split the difference it’s really helped me create conversations are powerful especially when you’re going through negotiation there’s a lot of factors you crack the code on that that sounds really interesting i’ve not heard that one before so i’ll check that out yeah for sure and i wanted to ask you too you also have authored

[48:17] a couple of books and are those available on amazon yeah the i don’t know if you can see in the background yeah colorado real estate investors investing strategies books so it’s just every year it comes out so i’ve contributed the last three years fourth one coming out here at some point that’s cool it’s curated so it’s multiple strategies from different investors i can’t repeat every time but things have shifted for me and i add things and delete things and shift though i’m always able to create some fresh stuff i mentioned before we started shooting here we’re raising capital for multi-family self-storage type syndications like big projects raising capital both to help our investors diversify single family multi-family not everybody can do a single family like here in colorado gotta put down 25 on a 600 000 house that’s a big chunk plus you gotta go get a loan right the numbers are great but not everybody can do that if they can get into a syndication 50 000 minimum that’s more attainable a lot of people have that in their ira so they could use that um do you do you tar you you mentioned a little bit about vetting the

[49:45] deals you get into and everything what are some of the metrics you use to that the the apartment deal or whatever is or funding oh yeah okay so um the operators themselves minimum five deals ideally they’ve gone full circle or they’ve bought and then either refinanced and sold never had to do a capital call that’s happening even with some big syndicators that we see in the headlines so that’s ideally they’ve been through oh wait that’s a long time ago but right been through some hardships so that and then we have a 220 point due diligence checklist we go through once we see that it’s seems like a good opportunity then we go through that we use third-party underwriting 50 man hours boots on the ground looking at the property that all of that or later of due diligence oh wow so you underwrite on top of i’m assuming these people are doing underwriting as well on their deals but you underwrite it at the same time yeah the operator does it but workers come in a passive investor a doctor or somebody like yeah they don’t know how to underwrite maybe don’t have the time and this is we’ve got a team of people knowing the right questions to ask and so that gives us confidence

[51:10] and sharing that with our investors and gives the investors confidence that there’s that extra layer yeah because if it was on the market there’s going to be what the agent has disclosed as the numbers and then there’s going to be the person that’s buying having done the underwriting and now you’re saying you’re doing another layer of underwriting to triple check more or less that’s pretty cool do you have typical targets for cash on cash or irr yeah like pretty similar to our rent to own 20 i’m not really the numbers guy can’t really quote all the things but i mean everyone’s gonna be different too there could be different plays with yeah the irr is a little bit i don’t know i don’t know if i love irr that’s yeah there’s all those different metrics right but cool is there any place that people could reach out to to work with you or if they’re interested in these strategies or these fun deals is there a best way to reach out to you yeah hybrid realestateinvesting.com is like the one just for the rent to own and i’ve got an faq video on there collected all these questions and i just did a video

[52:22] answering the questions so that’s a good place somebody’s interested in that that was really helpful oh yeah actually coming in knowing essentially nothing about the process that was helpful for me to see yeah cool yeah and then the syndication stuff legacywealthcollective.com that’s a landing page for our private investor club so i syndications they can either be 506c which is only accredited if there’s 506b non-accredited investors we have to have a relationship so that’s how that one reason we have the private investor club so they can see stuff that we can’t advertise so yeah and accelerated capital is our brand for the capital raising for those okay and we can definitely link that in the show notes as well cool yeah thank you so much for being on here it was super interesting for me and i’m sure for a lot of people that have not really explored at least what the full potential of least to own rent to own options would be so yeah thanks so much james you’re welcome yeah great questions guys yeah thank you for coming on it was great to talk to you yeah appreciate it yeah good good to get to know you guys a little bit i’d like to have you on my show great

[53:42] thanks for listening to the wealthy investor podcast where we talk about wealth and holistic health if you enjoy our content subscribe wherever you get your podcasts to hear new episodes every thursday if you really like our content you can follow us on social media at the wealthy investor wealthy spell w-e-l-l-t-h-y you