From Fraternity Rentals to Real Island Ownership with Mike Cossette

[0:00] Welcome back to the REI Agent. I am here with Mike Sett. Mike, thanks so much for joining us. Yes. Thank you so much, Matias, for having me. And I’ve got to say, I really appreciate everything you do for the investment community. I love your show. Thanks for having me on. Thanks, Mike. Yeah. You’re coming out of the warm and sunny Austin, I would imagine, a little bit warmer than what we’re experiencing, I’m sure. Yeah, I actually had to turn my AC on last night. It was crazy. We had a big cold spell that went through the whole country. And we got two days of ice, they shut down the entire city. We had cars flying down on ice across the road. And then three days later, we were in 70 degrees. And yesterday, we were up in the mid 80s. Wow, that’s crazy. How do those Waymos handle the ice?

[0:47] Man, they are not well. Let’s just put it that way. I feel like the bane of your existence in Austin. I know that Tesla is also testing their autonomous taxi service, right? We have a lot. It’s like, this is one of the hubs of the test grounds. I’m ready to start seeing some flying cars. That’s the rumor about the Roadster. But anyway, we got to ride in one of those Waymos when the conference down in Austin last May. And it was an experience, it was fun. But I’ve heard that they just kind of stop if they don’t know what to do in the middle of like, the road. And it’s just probably just very annoying. If you’re a resident trying to get somewhere. Yeah, I think they quit running them during the freezes because they’re aware of their little issues there. I didn’t see any, I didn’t see any very many cars at all, much less any autonomous cars.

[1:42] Sure. Well, Mike, give us like a bird’s eye view of who you are and what you do in the real estate space. Sure, sure. So, you know, I’m an investor and real estate broker, owner of a Remax franchise for 20 years now, 2006. So yeah, 20 years this year and started back in college, renting out a fraternity house that I talked my parents into buying and then renting out to, which should have been, you know, four bedroom house with an attic and I was able to get six people to pay rent.

[2:22] And, you know, started figuring out how about the rental, you know, situation works being a landlord, trying to get all those things done. And at the same time, while I was shopping for property as a 23 year old, you know, I wasn’t giving a lot of attention or respect or anything. And it that really led me wrong. And I really thought at that time, you know, I could do this a lot better, a lot more ethically, or at least make people feel good. And so I, you know, had the back of my head that, you know, that’s a need that at least I felt I could, I could do better on. And fast forward a couple of years, ended up doing a remodel on this property, went to the bank, they basically told me they wanted to give me more money for it, even though I destroyed it over the last several years.

[3:16] So then, you know, the investor mindset started to, you know, spur and realize, hold on, I rented this out, paid for it. Other people were paying me more, I was making money off of it. And now you want to give me more money, even though it’s completely destroyed. This is a business I need to get into. So that was back in 2005, at the height of the market. And so, you know, we graduated. Also growing up, like, and that was part of the reason they were willing to give you more money, because like the things were selling so crazy. Yeah, like 2004, five, six things were just going up. And, and I just had a lot, a lot of equity had been built up in the property. And so, you know, so, so doing a remodel on it, I got to, you know, deal with contractors and vendors and kind of GC, my own flip or, you know, rehab property. And that was fun to learn a lot there. So all of those three, you know, those three main components kind of combined into, hey, you know, and the market was doing good. I should get into the real estate business. And my, my dad actually sold a company out in Colorado came down and was looking to start a company. So we partnered up and joined Remax,

[4:37] got our licenses, joined the Remax franchise, and then bought, bought it out right around the time of the crash. So, yeah, that’s how we got, I got started. And then yeah, the crash was the crash. And we put our heads down and made it through. And here we are. Yeah. Man. I like, it’s not a time that people typically get into the business, but like, if somebody gets into the business, like right after the crash happens or right after like the things have slowed down, I just think it’s gotta be probably just mentally easier. Like you’re like long-term, okay, I’m going to build this thing. I’m going to keep going. And like, you know, before, if you get started right when it’s like hot, it’s just feels like it’s, you know, you just walk outside and you throw a rock and you’re going to sell a house or whatever, you know, whatever house you hit. Right. Yeah. So like I was, I got started in 2014. Okay. So I had this like slow runway to kind of build up the business until, you know, things really took off. But whenever, whenever I saw people getting in right in the heat of things, I was like, oh man, I just,

[5:39] I hope they can, I hope they make it. And you’re, I guess you’re a testament to that being possible that you were able to get in kind of where things were crazy and good and then, you know, ride through the worst period. So yeah. Great. What, what were some of the things that you, the secrets to like kind of surviving that crash? Well, you know, I think, you know, and as a young, you know, mid 20 year old, I didn’t really know any different, like getting into the business in 2006 and, and even, even seven, you know, it was so, it was crazy easy. And I thought, wow, this is going to be, this is incredible. Lenders call me and say, I can approve anyone for anything, just send them my way. Right.

[6:23] And so I made, you know, so much money coming out of college, you know, being used to like a couple hundred dollars a month stipend to making, you know, close to six figures as a 24, 25 year old. And, and then, and then it all, then when it all came down and crashed, you know, I had only had been in the business for one and a half years, really. And I was still, you know, still in, in this business, that’s nothing like you, you don’t even get really get your wheels going and start moving until two, three, four years in the business. And so, you know, I didn’t, you know, it didn’t really understand all the macroeconomics behind it at that time. And the only option that I really had was to adapt and, and go with, go with the flow and, you know, learn short sales, become a distressed property expert and lean into that, which I think everyone who survived ended up having to do.

[7:23] And that was also a amazing time to purchase properties. So a lot of the, you know, my net worth now, it was, you know, dates, you could trace almost everything back to the 2009, 10, 11 timeframe when people, you know, just weren’t able to buy stuff and you can see the opportunity. And again, as you know, without a family and a wife, and you’re kind of like, you know, coming out of fraternity, like you’re flexible, like I could go live in a tent in the woods for a month if I needed to, right. So taking a risk to lose what nothing like it was easy to take risks. So I think, you know, that was a, that was one of the things that was an advantage of not knowing. And, and then really having the flexibility to, to take some big risks and then being adaptable.

[8:15] You know, I think in this market coming into 2022, 23, 24, where it’s been, you know, in, in some cases, I think even a tougher market for agents, especially getting started, you know, I think that that is an amazing time because they don’t know any different either, right. They have to start from the ground. And then if they can get the wheels rolling and, you know, get comfortable on the phone and get comfortable doing a hard, hard grind, uh, and learning fundamentals, then, then the next 10 years are just, are just going to explode, um, versus the other way around, you know, getting in and not knowing any different and then having it crash. Um, the rug pulled out from under you. Yeah. Yeah.

[9:03] I think really like, you know, building up those best practices, um, early on is like, that’s so key. Like, you know, getting the right habits, getting the right discipline with your database, your, you know, your, your sphere outreach, that kind of stuff, all that stuff really matters. Um, and it’s just hard when it’s, when, when you’re like, when I was going through the peaks of the market, like I, I had like, just like my years were like, just boom, boom, boom, boom, boom, because I would be like doing everything right, motivated and like, and like, you know, selling it like double the, you know, one of my best years. And then the next year I was like, just burn out. That’s like, I can’t, I’m not going to do all the things that I need to do to, to get it. Cause I just need a breather. But, um, but anyway, the point is, is that in, and when it’s that busy, it’s hard to like do the right things and, and, you know, uh, have your database filled out, you know, all that kind of stuff. So, um, I agree. I think in, in a lot of ways, it’s better to build up that business, um, when it’s a little bit slower and, um, it’s not as

[10:01] exciting, but you know, that will probably mean you’ll, you have a easier time for the long haul. Um, I got to jump back though. Uh, and like you convinced your parents to buy a house, um, in college that you could then, uh, rent out to other people. You were, I would imagine you were living there as well. Uh, but like, where did that come from? Like, where, like where, what sparked real estate for you? What, what like gave you that entrepreneurial, like mindset to, you know, or were you always thinking about that kind of thing? Cause that’s not normal.

[10:36] I mean, uh, yeah, I was always, uh, you know, I was never a good employee. Um, I never could really, you know, take orders as well, uh, for other people and never really motivated me. I was always internally motivated. So, you know, young kid selling baseball, hustling for baseball cards, selling fake watches, uh, selling, you know, uh, knockoff tennis shoes, like throughout school and stuff. And just kind of seeing, uh, you know, seeing little opportunities and trying to take advantage of them. And for the real estate standpoint, it was just a, uh, a mix of one. My folks had left Texas. My brother was, uh, at university of Texas and I was at, uh, what’s now is Texas state university and we had no home base. So my parents came to visit, you know, they had nowhere to stay. And my, you know, me and my brother wanted to see each other. Like it was either his apartment or my apartment or dorm. And, uh, and so that aspect, um, you know, was kind of out there. And then at the same time, our fraternity, uh, that had just joined really, um, you know, didn’t have a fraternity house. So we were kind of getting back on campus. So we’re looking for that as well. And my folks

[11:43] came down and, and, uh, you know, trying to try to figure out how we can do both. And it just seemed like a natural, uh, progression and, uh, my, you know, got to thank my parents and stuff for really seeing the vision of, Oh wait, like, you know, he wants to do this. He can, you know, I can do that. And, and it was a good financial move. Um, and, and all the things pieces just kind of played together, but you know, if, if, if either one of those P any one of those pieces wasn’t there, I don’t know that that, that would have come together the way it did. Yeah. Yeah. But I mean, there’s a lot of times where there, the pieces are there and people don’t see it and don’t take advantage of it. So, I mean, that’s, that’s kudos to you. Um, I am curious about, uh, you know, how we, at what you were investing in, you, you mentioned, you know, building your portfolio basically, um, after the downturn. So like what, what strategies were you looking at?

[12:37] What were you implementing? Was it harder to get money? Uh, was, was that part of the, um, strategy you had to implement was just trying to how to learn how to finance things, um, in this new world? Yes. It’s always, uh, the capital stack and trying to figure out financing is, you know, is always, uh, there’s always something new and something to learn and a different dynamic in the marketplace. Um, at that point, um, they were rewriting the mortgage laws because of, you know, the subprime stuff. So they were rewriting them backwards. Uh, it was, uh, one of my, uh, uh, lenders came to me and said, Hey, they’re, they’re kind of, you know, giving a very vague, uh, description of what, you know, needs to be done on the front end. They’re defining these rules and regulations from closing, moving backwards. And, um, and I had a property that I had bought with my ex-wife and was trying to sell it, but wasn’t, you know, it wasn’t selling. So I was able to, at that point kind of borrow, uh, equity from, um, from a property that I already owned, um, kind of like it would be like a, uh, like a HELOC type situation, but I was just able to pull equity out through and, uh, and, and, and

[13:50] reinvest it. And it was, uh, it was a unique scenario and I was able to get a property downtown and keep that, uh, that original property. Um, and that was, uh, that was 2011, 2009, I bought that foreclosure, uh, and then I borrowed equity from that foreclosure to buy one in 2011 and then turn that into a duplex, um, downtown Austin, that, uh, it still runs as two Airbnbs. And so that’s one of my, uh, you know, one of my favorite properties. We just moved out of that like two years ago. Uh, we had, we had surprise twins. So four kids in four years had to get more space. Sure. Definitely. That’s awesome. Um, okay. So was, was it then were you doing like a burr type strategy in, in those like acquisitions? Like were you basically flipping a house and then, uh, refinancing the capital out of it? Um, Yeah. That one, that one, not really. Um, so that one was a, uh, that, you know, we discovered short-term rental back, um, when we were living in the house downtown and, uh, you know, I was just living there as a straight residence with one rental property. Um, and then I was, I had gotten divorced and I was living downtown. So I wanted to travel and see the world,

[15:09] that sort of thing. So when I would leave town, uh, my girlfriend at the time, who’s my wife now, um, she got turned on to Airbnb. I think this was 2013. And so when we’d leave town, we’d rent the house out. Um, yeah, she, she was the proponent of that. And I was a little like hesitant because it was like, what people in our house, you know, what’s going to happen here? So she, we gave it a shot and we had South by Southwest and ACL was just getting kind of moving. And, um, so we were able to take vacations and basically have them be paid for by the short-term rental market. So we were like, wow, this is amazing. Um, let’s keep doing this. Uh, and then, you know, eventually, uh, kid conversations want to happen and it was kind of older bungalow style house.

[15:55] So, um, we decided, I decided to go try and talk to some banks and see who would lend on air, homemade Airbnb projection spreadsheets that I like made on my, you know, like every time I had nine, I think it was nine, uh, lenders laughed me out of their office.

[16:15] Cause this is 2017. Uh, yeah. And so, but then, then one, one, uh, lender saw, saw the vision and he happened to be very familiar with the neighborhood. And, uh, and that was my first new construct, you know, ground up custom construction, uh, turning that house into a duplex. Um, and then running that as a, as an Airbnb. And then, um, while doing that, um, went to, uh, having life altering, uh, trips to Africa, uh, that really shook, shook me to my core and, you know, kind of made me think, Hey, if I’m going to get into real estate investing, whatever I want to do, like life is short, you know, I’m not going to, you know, overweigh the risks and analysis, analyze too much and just, you know, got to take, take my shot. And so then I really started focusing on, okay, you know, instead of why things wouldn’t work, like, how can I make things work kind of mindset? Um, and, and really go big and, and, you know, get into commercial apartments. We’ve got Bond Island in Florida and some rehab in Florida and, and just kind of seeing the opportunities that are, that are presented. So, you know, there’s not really one strategy that we have stuck to. Um, and there’s,

[17:34] you know, a little bit, uh, a little bit of a lot of strategies. Yeah. Well, I like to think of like, you know, learning all these different strategies, I think, well, to, to, first of all, to get started, if somebody hasn’t even bought anything yet, um, like it’s, it’s, can be a little bit bad to have all these strategies rattling around your head. You almost have to pick something and go for it, uh, and actually buy something and move. Uh, but once you kind of get, you know, used to that, actually buying something and seeing something through, um, you know, having all those strategies, it’s almost like a tool belt, right? Like, you know, like an opportunity, a problem comes up. Usually that problems are where the opportunities are. Right. Um, and you, you use this tool for that, um, that situation. Um, one of the, your story reminded me of, um, I saw this guy once talk about how they do approach Airbnb for their house they live in. Um, and I think this is something that a lot of people could be doing, um, is they basically, I mean, they, they have some parameters, but they basically throw up

[18:31] their house at all times, uh, has to be approved. Um, and it’s a basically make me leave price. It’s not a reasonable price. And then every once in a while, like they get booked for a week and, and they’re like, sure, we’ll do a vacation then. And it just, it, like you said, it pays for their vacation. Um, but you know, I think that’s a, that’s an interesting way of doing it. It’s like, if you’re able to kind of like be a little bit more loosey goosey about it and you’ll probably start figuring out like, you know, there’s probably times in the year in your area that, you know, people are traveling a little bit more and other Airbnbs are being booked and that kind of thing. So, um, but yeah, anyway, I think, I thought that was a fun way of kind of, you know, planning your vacations or not planning your vacations. Cause you’re just waiting for somebody to pay for it and they’ll tell you when the time is. Absolutely. Where’s the downside.

[19:22] Right. Um, well I do, uh, you bought an island. What? Yeah. During COVID we bought, I bought an island out the coast of Florida, about an hour and a half north of Tampa. Um, and actually, uh, an old wall street journal, uh, journalist did an article, uh, on it recently, but you know, that was, uh, it was kind of like one of those boring timeframes where everyone’s stuck at home and, uh, and a buddy come from Florida stay at our Airbnb and he was selling stuff, uh, around the country. Um, you know, I kind of, that’s when, you know, I don’t know if you heard of hip camp, but hip camp was a kind of a new thing because, and that is, uh, where you can rent out a piece of land that you own. Yeah. Yeah. And so it was called hip camp and, um, and then all these, you know, Airbnb and short term rental peer to peer financing, people were exploring that. And so you could literally buy a piece of land, uh, and rent it out to campers. Then you have a, a, a proven model and income that you can take now to a bank and borrow against that, that income and build a small structure and then rinse, wash and repeat and continue to add structures. And all you need to do is buy the piece of land to

[20:36] begin with, you know, you don’t want it in the middle of forest, you know, something that, that people would want to go to, right. But then you can now, you know, continue to add to it. Now you’ve got a massive property with several little, uh, cabanas or bungalows or whatever you want to build out there and, uh, and continue to finance the, the, you know, the equity and the income and banks were willing to do that. So I was kind of explaining that to a buddy of mine and his mind was kind of blown. That’s pretty cool. Yeah. And so the next day he came over and said, Hey man, you could tell he was up all night. He had a cup of coffee. Yeah. What’s going on. He’s like, I, I, I found an island. I wonder how I want to buy.

[21:12] Like what in Florida? He said, well, what’s worse could happen? I’m like, I don’t, I don’t know. Like hurricane blows the island away. Like I don’t know anything about buying islands, but I’ll help you do it for sure. And so we dove in and looked at, uh, the dynamics and, you know, research the property. He went out there on a boat and, uh, you know, film, film some stuff with some machetes and those kids. And it was very scary, but fun, uh, scenario and ended up helping him buy that, uh, went under contract and then realized, man, no bank is wanting to finance an island, an undeveloped island. Um, and I know he didn’t have, you know, all the funds to pay cash for it. So I told my wife, Hey babe, I’m expecting a call, um, from the ex that he’s probably going to want us to go in on this island with him. And sure enough, within 24 hours, the call came and I was like, you know what, this is 2020. The market had already proven itself that it was going to be nice. And you know, the rates had come down. So I was like, Hey, you know, let’s go in on this. And, uh, I brought in another partner who lived in Florida. Um, that way,

[22:20] nothing to fair because I was in Texas, nothing to fair is going on. I could send somebody over there. So we all became friends invested in this island and we have it now to this day. Um, and, uh, yeah, it’s, uh, it’s a work in progress. Let’s say that, um, we are developing camp, multiple campsites and, and stuff like that out there. It’s fun to visit, but that then, and then we bought a, uh, property down there that, you know, just got hit by four hurricanes to, to kind of make the logistics easier. So there’s a little house on the coast that’s basically been destroyed four times over now. Yeah. It’s been a bloodbath over there. Um, I mean, you’re kind of, I mean, you’re talking about too, I get the privilege of talking to people across the country, you know, and it’s fun, but it’s also interesting. Like everybody I talked to has like kind of a different perspective of the market. Um, and I found that people in Florida, people, I mean, Austin, um, and then, cause I don’t think it’s Texas. I think it’s just kind of Austin was kind of hyperinflated. Right.

[23:20] Yeah. And then it’s all correction. Um, and then, uh, like, like Arizona kind of area. Like, I feel like those, those, some of those markets, they’ve been more pessimistic and they’ve seen more, uh, downward pressure. Um, so, so yeah, I mean, that’s, that’s kind of unfortunate with the, with the Florida thing as well, but, um, how, yeah, how has that been? I mean, have you had a hard time getting insurance? Um, I know that’s, it’s just ridiculously expensive. It is ridiculously expensive and, uh, the market for insurance is, you know, it’s inflated, but for, for good reason. Um, a lot of people in Florida take advantage of things. I found that out trying to contract, uh, work down there from Texas. Um, and you know, parts of, I guess that’s parts of any state, but, um, you know, they take it, do take advantage, especially, you know, on, on hurricanes and any natural disasters, you know, um, uh, there’s, there’s big money out there paying out, making payouts. People take advantage and then insurance companies just kind of run the numbers and say, Hey, you know what, we’re backing out and then prices go up. And I think a selective flood insurance is pretty much the,

[24:27] the only flood insurance company that I’ve gotten, uh, to insure us. And it’s, it’s pretty, it’s pretty pricey, um, for flood insurance. So, you know, uh, but at the end of the day, you know, when you get hit by a hurricane, you much higher high, high price insurance, uh, and get, you know, get your property back, then, uh, you know, say skim on the costs up front and be left holding the bag. And everyone’s learned that over the last four years, for sure. All right. So you’ve got this island that you’re doing, like you’re, you’re developing campsites for this camping portion of air camping, Airbnb, I’ll call it, what was it called again? Hip camp was the company. So that would be like the Airbnb equivalent. Okay. Uh, not four. And so what we’re doing is because, because I, and I learned a lot about the EPA, the Florida environmental agencies, all the different, uh, environmental and, uh, you know, city and county regulatory committees that all want a piece of the pie, if you’re doing anything on the coast. Uh, and so at the end of the day, we really can’t build anything traditional out there just

[25:38] because it’s so close to sea level and, um, and the economics of it just wouldn’t work, uh, to, to build anything substantial. So what we’re somewhat limited to is, you know, stuff that, you know, a handful of people could go out there and put together themselves, right. Um, or, you know, containers, um, nothing that’s really site built. Um, and then you, we’re looking at, uh, solar for, and for, for power, electricity out there. We’re looking at water collection, filtration for, for water. And, um, the septic scenario is one that we’re still, you know, kind of trying to figure out how that’s going to work. Um, but you know, right now it’s just for us and our families to go out there and hang out, go camping, go fishing, amazing fishing, scalloping, all that good stuff.

[26:30] And, uh, and, and then as we know, and it’s low overhead, it’s just like the taxes every year split between three people, uh, on an acre out of land out in the water. So yeah, I wouldn’t care. This is a hundred percent waterfront. That’s amazing. Yeah. So it’s a, it’s a work in progress, but you know, and we all have small families with small kids. So it’s one of those things that I imagine we’ll all jump in and spend a little more time and energy and money once, uh, we have that. And the beautiful thing is we can wait 50 years, uh, and, and, uh, and do something that, right. Sure. That’s awesome. Um, so, so, and then the other one in Florida is also STR. Uh, that’s an STR as well. Well, two years ago it was an STR and then, uh, now it’s just been a, uh, perpetual rehab, yeah. Construction site, which should be finishing up, uh, here and we’re doing, we’re doing countertops and cabinets this week, uh, or next week. So we’re getting to the final, and I think we’re probably gonna, probably gonna sell that, uh, that property, you know, um, once the market kind of comes back a little bit because the STR numbers, um, they’re okay. Uh, you know,

[27:45] it breaks even, um, but the size of the house, you know, it’s no longer functional for it’s a two bedroom, one bath, you know, 900 square feet. It’s great for a couple of guys going down on a fishing trip, but a family of six flying over, you know, in central Florida, you know, uh, and without going vertical, they won’t let us expand because of the hurricane issue. So, um, yeah, so lots of, lots of, but, and that’s the fun of the, that’s the, I think that’s the fun of all right. Running into the challenges and solving the challenges, um, even though it can be financially frustrating and time stuff, it definitely helps you get out of bed. And, uh, Yeah. If you were afraid of, of, of those things and never started, I mean, you wouldn’t, you know, I guess it’s not for everyone. Right. Um, what, what, um, so then you, you had mentioned you were looked at, was there other commercial stuff, apartments, like what else have you, uh, invested in? Yeah. So we’ve got a, uh, a 12 unit, uh, apartment complex, uh, that we did a seller financing, uh, mortgage wrap on in 2022.

[28:54] So the, we had it under contract at the beginning of 22 and a, like a four, four percent interest rate. Um, and then three months of negotiating, uh, all of a sudden, and you know, all the different inspections and everything you had to go through rates had continued to rise. Uh, so we were looking at six, seven percent all of a sudden, and the numbers just really didn’t work. So we ended up, um, wrapping that mortgage. So taking over people who don’t know what a wrap is, it’s, it’s kind of like a seller financing only with an existing mortgage. So we took over the existing mortgage without telling the lender, uh, that we were doing that. And so we had to carry two insurance policies, kind of a ghost insurance policy, uh, and then, you know, a regular insurance policy, um, and, uh, and kit and had a 4% rate on that mortgage. And then the remainder of it, we did a, uh, seller took back a second note and, uh, with a couple two, two year balloon on it. And that was, uh, that was a 6%. Uh, and so, you know, so that carried us through, we thought in 2024 and 2025 rates, we were going to be really coming down, like everyone projected, wasn’t really the case. Uh, so then

[30:06] we’ve had to kind of refinance piece by piece out of that, um, uh, first with the bank, then with the sellers and, uh, and using more or less private money for that, uh, to do that. So at this point, I think, I think one of the, one of the sellers still has a piece of a second, but, um, there’s no bank involvement and, uh, uh, just, just private money and our money. And, uh, so we’re able to do, you know, do a lot more things and, and, uh, we’re carrying, it was supposed to be a five year exit strategy, uh, rents were going up and, you know, uh, but now it’s, uh, now it’s something that looks like we’re probably gonna hold onto for, for a little, a little while longer. Um, just because we don’t, uh, necessarily feel the need to flip it. And we’re still waiting on kind of some of these units to turn over and get remodeled. So we’re operating or remodeling and doing the value add component unit by unit as they vacate. So, you know, wasn’t one of those capital expense where everyone gets out and you do the whole thing and then, uh, release it, which that would, you know, that would have been the smart way to go. Um, initially had we had that capital, uh, to flip

[31:21] it. And, uh, uh, but now it’s kind of like, it’s kind of like a pet product that we really enjoy too. Yeah. That’s awesome. I mean, that’s a, it’s a very creative way of getting into it as well. And I mean, that’s one of the fun things about real estate is, is how creative you can get, um, what you’re talking about. Uh, I think a lot of times people refer to as, um, a subject to kind of deal. Yep. Exactly. So the, the, the wraparound bit, if I’m not mistaken, and I could be, uh, confusing a few different things I’ve heard over the years is, uh, you, you have to put in a, um, like kind of a second note, like on a promissory note to actually like, uh, repay, uh, or pay the mortgage, that kind of thing. So that the, it gives more protection to the seller. Um, if my, if I’m remembering that properly, and I think it’s, it’s the right way to, to go about that. Um, I had a really good episode, um, with, uh, uh, her name was Trin, I believe, uh, an attorney that, uh, specialized in, uh, subject to type deals. Um, and she also recommended putting it into a trust.

[32:26] Um, but yeah, that, that, um, definitely was a strategy that got really popular. A lot of people, uh, were excited about it. Pace Morby was, uh, promoting that thing heavy and strong. Um, and I think, I think it’s, it is like, you know, again, something good to have in the tool belt, but you know, you have to always, you know, keep in mind, like, you know, it’s usually there’s a, like, that’s like almost the only option for the seller to get rid of the property, to be willing to do something like that, unless they’re just, you know, Hey, you know, you’re a good person and I want to, you know, just help you out and get you a better rate. But I think there has to be a, a much stronger level of trust, uh, when you do a, anything like that, because there’s, there’s a higher level of risk on both sides, the buyer and the seller. And so they both, the relationship between the buyer and seller has to be very strong.

[33:16] Like you, like I would never advise, uh, a client, uh, even if it was a really good deal to, to try and do a subject to on, on a property where, um, in a traditional, where it’s kind of like a blind buyer and blind seller would never meet each other, never know each other kind of for it, because that level of trust has to be there. You have multiple layers of insurance. Like if a red flag gets brought up, especially in the commercial world where they can call notes whenever they want, you know, they see something they don’t like, and they’ve got a three, 4% mortgage on the, on their desk that they, that they’re trying to figure out how they can call that and resell it at 7%. You, they’re looking hard at some of the details. And if those red flags pop, then the buyer and the seller, they’re both tied together. They have to be able to, um, work together on finding the, those various solutions and the legal points. And so the, the level of trust, I think is something that a lot of people don’t really, um, emphasize when they talk about subject tos and mortgage wraps, because it very much can go sideways in so many more ways than, uh, you know, the media may, or,

[34:22] you know, pays or whoever has the five minute pitch on it, you know, can portray it. It sensationalizes it. Yeah. And I think, um, yeah. And I, and, and, and I think where that might be part of where the trust can come in, in, in handy and, and, you know, just having like the bylaws, uh, be very clear, maybe within the trust and, you know, I want to, a great attorney to, to walk me through that, but, you know, having it, if, if both parties at the buyer and the seller are entering into a trust, the whole purpose of the St. Germain’s act, um, is to allow for people to transfer their, uh, ownership into a trust. Cause people do that. They get a trust and they want to keep, they don’t want to have to refinance just cause they, you know, formed a new legal identity, uh, uh, blue, uh, legal, uh, what am I even looking for? Entity identity. I kept coming up with identity. Um, but anyway, they don’t want to have to do all that. Um, so, so if, if a buyer and a seller then enter into a trust together, um, and it’s defined then, I mean, extra secure with a wraparound mortgage, potentially again, not an attorney here. Um, then it does kind of, it’s,

[35:27] it’s within the law for sure. And it, um, could have that extra protection for, for, um, all parties, but, um, yeah, that’s fun. And, uh, what, what of the strategies, um, I mean, like you, you, you’ve gone all over the place, but what are the strategies would you be actively interested in still, um, in your investing? You know, I, I, I still think right now, um, you know, the, uh, in, in central Texas, a couple of things, uh, one strategy is, and I, this is another completely different one is, um, um, warehouse construction, new construction. Um, and you know, there’s a huge opportunity there. There’s a lot of demand there in Texas. We have a lot of land, um, and, uh, the, and there’s, so there’s a lot of, you know, uh, for, for people with pretty big, big money, I guess, um, you know, talking a couple of million dollars, uh, to start that there’s some massive, massive upsides.

[36:28] Uh, so if you had a pool of investors, you know, that’s something that we’re seeing, I’ve got a couple of clients that are really, you know, doing really well and it’s kind of mind blowing, um, on that front. And then for the kind of the normal investor, I, I think the, um, think going into a right now, this, this bubble of market before things start taking off, we know the rates are coming down and there’s still some amazing deals out there. A lot of realtors in lenders, uh, people in the real estate space are, you know, they’re hurting. And a lot of those people are investors and they own some of these small multifamily properties and they’re, they’re understand and have the wherewithal to get creative and be okay with that on, on some deals. So I think finding a, if you’re a new investor, finding a, uh, a duplex, um, is one of my favorite, um, you know, asset classes because you have so much flexibility, uh, with short-term rental, long-term, you get to learn the tenant management. Um, you couldn’t live there, get the lower rates, you get, uh, uh, a scale of efficiencies. Um, and then you can also like, you know, take advantage of, uh, creative

[37:40] financing with an agent or a lender who’s familiar, who is trying to liquidate some of their properties. And, and the reason I see this is because we got a lot of properties and, and, you know, I would be willing to get creative AF if I get it to get, to get some of these sold, uh, and then either reposition the money or do whatever needed to be done. But there’s a big opportunity there, I think, and the learning opportunity for a new investor, that would be the ideal, uh, you know, starting point for, for that. So like networking, probably at local meetups, that kind of stuff is probably a, a great, uh, way to, to kind of find some of those that make sense. Um, yeah, yeah. Cool. Um, Mike, do you have a golden nugget for our listeners? Um, something that, um, yeah. So my golden nugget and might seem a little contrary to what we’ve, we’ve just been going through, but, um, and one of the things that I specialize now in helping people is, is a clarity framework of a lot of investors want to be real estate investors, but they want, uh, you know, cashflow and they want equity and they don’t have money and they want creative financing and they see all these things they want all these

[38:47] pieces. Um, and it never can really come together like that. I think getting clarity, uh, and defining first, what is the job, the main one purpose that me buying this property, what is the job of that property? Right. I think that is the number one thing that I see and find when I talk to investors, um, is, is getting clarity around the, the specific type of property and what it’s going to do. And then from there, then they can define the success metrics, like the cashflow targets and the equity growth and appreciation tax benefits. Um, those are the kind of the success metrics that they can measure the property. And then once they have those, then they can go and look at the actual numbers and start shopping for properties themselves. Um, I think a lot of people start backwards and they see these properties and they run the numbers. This could be profitable.

[39:45] And at the end of the day, yeah, that could be a great property, but is it going to solve the need that you want it to write? And you have to, you have to, you have to have a structure when you think about these things. Um, and, and it can be simple, but you have to be clear because once you’re clear, then that’s when things can run smoothly. You can pinpoint and really fine tune what you’re looking for. Yeah. I love that. That’s so great. And one of the things, one of the purposes, um, I like, you know, in the book I’m writing, I preach is, uh, for agents is to kind of, you know, it could be a retirement account. It can, that you can use now was it once it builds up and is, you know, a little bit more income producing, um, you know, the, the investments you make can help stabilize you through ups and downs, you know, cause we all have those times where like, you know, we, we look at our pipeline and it’s dried up and we might not have a sale for a month or two. And, um, so, you know, that stuff can happen. Um, I actually, I don’t know if, if your market’s as seasonal as it is here, but we definitely, um, you know, things slow down over the winter,

[40:50] then you have tax time. And, you know, depending on your brokerage model, you might have commission splits, uh, that reset. Um, so it can just be a hard time, um, through some of the different seasons and then off the market cycles as well. So like, I think, um, you know, defining your why as, you know, being like a long-term stability, um, could be, could be that having your being a hundred percent of your expenses be covered by passive cashflow as a goal. Like even if you don’t necessarily need it, um, that’s just a feeling of freedom that is, you know, pretty awesome if you can achieve it. So I love that. That’s a really good, that’s like, start with the end in mind. And then that’s a really good golden nugget. Um, what about a favorite book? Do you have one that you think is fundamental that everybody should read, or maybe just one that you have come across more recently and really enjoy? Yeah. So I’ve got, I’ve got several. Um, and I think, uh, you know, the top two that come to mind, um, is, is what an infamous, uh, Dan Martell’s buying back your time.

[41:50] That book is so phenomenal, uh, when it comes to leveraging your time, finding out what your buyback rate is, finding out, you know, identifying your, who to hire, how to hire them and, uh, leveraging your time, energy, effort, money to systematically become, uh, more focused on the highest return of your time and money. And I think that’s one that, uh, after having four kids in four years, um, and, uh, a lot of responsibilities, properties, brokerage, business, all of those things has really, uh, changed the game for me. And then the second one, um, is, um, uh, uh, Oh, the slight edge, uh, the, the, the slight edge by, um, Oh, what’s his name? Uh, anyway, so that is basically the incremental daily activities that you do that build up over time, um, can, can be life-changing and it just simple disciplines. And it really breaks that down. I think if you’re starting out coming in as a young person, learning that you have so much runway, it’s kind of like compounding in compounding interest, right? It really, you know, starts paying millions of dollars 20 years from now, but, uh, but you got to start. So, um, starting early with incremental important

[43:07] disciplines, um, that will build up over time. The, the slight edge is probably, yeah, those are the top Jeff Olson. Yeah. Yep. Yep. Jeff’s it. Jeff Olson. Yeah. Awesome. Yeah, no, um, those are great. Um, and yeah, I think, I think that it, as an agent, um, people, when they get started, they kind of feel like they’ve broken out of the rat race, if you will. Um, sort of like, I mean, like I’m my own boss, I can do whatever I want, that kind of stuff. And that’s, it’s, it’s great. I’m not poo-pooing on that at all. It’s, it’s a great thing. And, um, but if you look at like Robert Kiyosaki’s cashflow quadrant, you know, you’ve gone from, you know, the employed to the self-employed, uh, but really you’re just an employee of your, you’re just your own employee. Um, and, and you’re, you know, as soon as you step away, nothing happens.

[43:56] And so you have to do everything. Um, and it’s exhausting. It can be really tiring. Um, and, um, there are things that you’re just going to be a better at. And like you said, like, you’re going to have things that you’re going to be more profitable activities. And so, yeah, I think with this podcast, um, you know, getting into the investor category, uh, is, is one of the areas as well that we’re, we’re focusing in obviously. And then also getting into me more of a business owner is another one. And so that buy back your time is definitely a great resource for that. Um, Mike, this has been a lot of fun, a great conversation. Where can people, uh, follow you, find you if they want to have any more information, if they want to see Island videos, where do they go?

[44:40] Yeah, absolutely. I’ve got, I’ve got some on my, uh, Instagram and, uh, my space spaces and all those things. Uh, and I’ve got the same name. It’s, uh, ask ASK Mike costs at, uh, at ask Mike costs anywhere, uh, all the socials and, uh, you’ll find me. I make, I do do a decent amount of content and, uh, definitely have some Island videos and I respond to all my DMS and messages and all that stuff. Awesome. Awesome. We’ll have that in the show notes, Mike. Thanks so much for being on the show. It’s been a pleasure. Absolutely. Thank you, Matthias. And for everything that you do, really appreciate it. Thanks for listening to the REI agent. If you enjoyed this episode, hit subscribe to catch new shows every week, visit REI agent.com for more content until next time, keep building the life you want. All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.