JF1106: How to Find Owner Financing Deals with Daniel Ameduri

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Daniel Ameduri Real Estate Background:
-Co-Founder of the Future Money Trends Letter, FMT Advisory, and the Wealth Research Group
-Over 40 transactions  owns 15 rental units, 7 homes, 2 duplexes, 1 four plex
-Investor in private commercial REIT and involved in over 200 first trust deeds, he is partial owner/investor
-In ‘07 forecasting market and mortgage collapse, he started his own YouTube channel, VisionVictory, which has received 10 million video views During ‘08 mortgage crisis, helped people buy
-Put Options on Countrywide Mortgage (saw gain of 1,400%) Been featured in Wall Street Journal, ABCWorldNews, and RTTV, with platform is over 200,000 subscribers
-Based in Austin, Texas
-Say hi to him at www.futuremoneytrends.com
-Best Ever Book: Laws of Success by Napoleon Hill

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Daniel Ameduri. How are you doing, Daniel?

Daniel Ameduri: I’m doing great, thanks for having me on your show.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Daniel – he has over 40 transactions; he bought his first rental property at the age of 18 years old and he now owns 15 rental units, seven homes, two duplexes, and one fourplex. He is the co-founder of Future Money Trends Letter and he’s been featured on all sorts of media publications. With that being said, Daniel, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Daniel Ameduri: Sure. I was always interested in investing; when I was a child (five years old) I was selling things out of the garage, going door to door, and it turned into really my hobby. I was just always fascinated with money; never into the materialism part of it, just fascinated with money. It was like a video game – just keep going and going and going. I ended up becoming an avid reader in Barnes & Noble as a teenager, and at 18 years old, the first chance I got, three months out of high school, I started buying real estate.

Ultimately, I had a very successful real estate investment full-time career in my young 20’s. I had a big crash as well, and all of this, along with the other investments I made with public companies and private businesses, I started the FutureMoneyTrends.com letter, where it’s essentially personal finance ideas, investment ideas. A lot of it comes from the stories I have, so that people can hopefully, just like when they listen to your show, either not make mistakes, or improve on some of the things that I’ve done successfully.

Joe Fairless: Alright, well I wanna focus on the Future Money Trends Letter and the insights that we can get from that and lessons that you’ve learned, but before we focus on that, obviously I have to ask you about 18 years old, three months out of high school, you bought a property – where did you get the money?

Daniel Ameduri: Well, I’ve gotta tell you, it was just from savings. I only had to use $3,000 – this was in the year 2000…

Joe Fairless: That’s a lot of money for an 18-year-old.

Daniel Ameduri: It was, but I was a hardcore saver. That’s one of the things I can tell you – with personal finance, becoming a relentless saver is key. So I had used this $3,000 and got a loan; this was in the early days of basically the real estate boom, and I happened to be Southern California, so I was in one of the best spots to do this… And I did it three months out of high school because I really didn’t know that I wasn’t supposed to be able to do this, so I just went out and did it. I skipped going to college.

My second purchase was about nine months later at age 19, and that one was the first time I ever did creative financing. That one’s probably a little more interesting just because I used the broker’s commission — I had her exempt me of the commission, and then I used that as my down payment. It became a lien on the previous property, but of course, she got reimbursed as soon as she got paid.

Joe Fairless: How did you come up with that idea?

Daniel Ameduri: As corny as it sounds, worse than the word “corny” itself is Carleton Sheets. I watched that stuff and I ate it up. Of course, I probably didn’t apply 99% of it, but that was one thing that he said that I picked up on. I tried it, I asked a few different brokers, most of them locked me out of the room, and then I met an 81-year-old broker who said “You’re how old?” I’m like “18.” She’s like “You own a rental property already?” I said “Yes.” And she was like “Let’s do it.”

Joe Fairless: [laughs] That’s great. Alright, let’s talk about your Money Trends Letter that you send out… What are you investing in right now?

Daniel Ameduri: Well, FutureMoneyTrends.com – its main focus is income ideas. Right now some of the real estate investments that we focus on, we do advocate that people look into single-family homes in good areas, we offer ideas on how to flip or rent, and we really advocate for some of these owner-financing deals. I’ve done almost exclusively owner-financing since 2008. A lot of people think they’re not there, but they’re everywhere, to be perfectly honest with you, and they’re more accessible than ever because of the internet.

So we do focus on people having trouble or not having a large enough down payment, and we teach different ideas on how to get these owner-financed deals. Outside of that in real estate, we do like buying first trustees; again, that’s easier than ever because of things like PeerStreet, where you can buy liens.
We also do some sort of private [unintelligible [00:05:40].08] where you can buy and invest in commercial real estate. And then with a small portion of our portfolio, 90% is income, 10% is speculation; that’s where we invest in micro-cap stocks and private businesses and pre-IPO-type companies.

Joe Fairless: Well, you certainly piqued my curiosity, and I’m sure some other Best Ever listeners when you said owner-financing, you’ve been doing it since 2008 and they are everywhere and accessible. Please elaborate.

Daniel Ameduri: Okay, so again, this comes from these seminars you go to or books you’ll read about owner financing. You kind of look around, or first off you’d ask a realtor – they’re always gonna say they’re not around. The realtors are the worst people to ask because they’re kind of in their mindset. They know 1+1 can only happen one way. They don’t realize 0,5+0,5, or 0,75… There’s all kinds of different ways to get there, but the realtors — I’m not doubting them, but typically they’re not even gonna try because there’s a lot of laziness involved… You have to go out and do it yourself. They’re everywhere.

First off, you should find the bird dogs in your city; they’re everywhere, and they’re called wholesalers. You usually can find them on Craigslist, and usually the wholesalers can help you find creative financing, can help you find owner-financing.

Another way I was able to find a lot of owner-financing deals was simply looking for the distressed deals. Originally, I knocked on doors and [unintelligible [00:06:59].23] and we try to do assumable mortgages, or with different reps and stuff. Eventually, for me, I was able to kind of — as you look for these deals, you ultimately will find those one out of 5,000 realtors in that city who will actually be like an expert in owner-financing. They’re in Vegas, they’re in Phoenix, they’re in Dallas, they’re in Austin, Houston… I come across them all the time.

Once you find them, then it’s a matter of simply telling them what your criteria is, and “Hey, keep me notified.” One thing I always did was I was always quick to jump on any deal that was in my criteria. Of course, I went just from being somebody on their e-mail list to somebody who was a priority, because I was buying. My criteria a few years ago, probably 2009 to 2011, was I was just looking for rental property. In the last three or four years I’ve only been looking for flips.

So those realtors that can find me those owner-financing deals have been the source of probably half of those deals. The other half have come from wholesalers themselves, which are in almost every city, I believe. You can just get on their list and let them know what you’re interested in, and you can find these owner-financing deals.

Now, most of the owner-financing deals I have done, you do need some cash. You’re gonna need anywhere from $5,000 to about $30,000, but they are there, they are available to you.

Joe Fairless: The myth – and I had this thought too, so please tell me that there’s another way… My thought was that wholesalers only want people who can buy for cash, and then be done with it.

Daniel Ameduri: That’s what they want, but the fact is the cash buyers have very select criteria for these people. Look, they’re inevitably going to have to get creative. If a bird dog/wholesaler is successful, he’s gonna have too many deals on his hand, and those are exactly the kind of deals you want.

I’ll give you a great example – I’ve been in situations where a wholesaler has locked up a deal and it’s now three days from foreclosure, so they call me and they say “Look, it’s Wednesday. On Friday, this house goes to foreclosure. Can you get me $25,000? I’ll fly it up to Wells Fargo in Dallas and we can save this property and it will be yours.” Those are the types of deals I’ve been able to do. So maybe they didn’t want to do business with me because I’m not the all-cash buyer, but at some point in time if they’re willing to get creative, and especially in states where I’ve been investing like Texas and Tennessee, you can simply do an assumable very easy – you’re paying the person’s mortgage… And a lot of times I’ll do a contract where I’m only paying it for a year and then [unintelligible [00:09:39].12] refinance or sell the property, in which case I’m almost always selling… And those are the type of deals I’ve done with different wholesalers.

And by the way, I’m not doing this full-time. If you’re doing this full-time, you’re gonna have to find more ways, you’re gonna have to be way more active than me. I’m a lazy [unintelligible [00:09:53].11] investor; I’m waiting for people to call me. I’m just putting my name out there and my phone number and my criteria, and I’m only doing let’s say maybe 2-3 deals a year on the flipside, and maybe I buy 1-3 rentals a year.

Joe Fairless: I’m a wholesaler, you reach out to me or you come across me in some event… I ask you “What are you looking for?” What’s your response?

Daniel Ameduri: Right now I would tell you my response is always “I want what nobody else wants.” I want what everybody else hates. That is my standard reply to anybody. Any realtor or any wholesaler I speak to, I tell them I wanna be the guy that buys the thing that nobody else wants to buy. I want to get the things that are hated. I don’t care if it’s fire damage or foundation – what are people scared of, what do they hate, what does nobody want, what can no one get a loan for? I’m that guy.

Joe Fairless: Okay. And then what would be a specific example of a transaction you closed on that fits that criteria?

Daniel Ameduri: Here in Texas it’s foundation problems. I really like those. Without a doubt, my niche little market that I found here that I can’t believe there’s zero competition virtually – maybe not after this show though… But look, here’s the deal with the foundation problems – no one can get a loan. Bam! Right there, you just got rid of all your paint/carpet/blind fix and flippers. They’re gone. Most people are ignorant of what it takes to fix a foundation. Okay, there you go; you got rid of a ton of cash buyers and a ton of other investors. So now it’s you and a handful of people.

In my case, I don’t even know if there are a handful of people in central Texas doing this, but I’m on several realtors’ lists and several wholesalers. Many times if it’s a foundation problem they know that I can’t wait to get my hands on it, because what I accidentally discovered when I purchased my home was that a foundation problem is not a $50,000 problem, it’s a $3,000-$5,000 problem. That amazes me, because for $3,000-$5,000, that’s a problem for every single problem who has to get a loan.

Now, I’m speaking as if I’m buying cash, if you’re listening, but I’m not. Instead, what I’m doing is I’m approaching that homeowner who cannot sell his house; he is stuck. The only option for him is a cash buyer, that’s what [unintelligible [00:12:09].20] but what I tell him is “What do you ultimately need from this deal?” That’s where I start the negotiation. Maybe they need $5,000, maybe they need $30,000. If I can be agreeable to that, the rest is easy, because all I have to do is an assumable transaction; I take over the loan and I tell them “Look, I need 18 months to fix and flip this house or refinance it. I can get the foundation people almost immediately, I can have the foundation repaired within six weeks, and then I just need to finish the rest of the property.”

I still have an assumable loan, so I’ve never even applied for a mortgage at this point. I’m simply making the payment of the previous owner, but I am legally on the deed; I am the owner, I just don’t have the mortgage in my name. I continue making those payments, and that distressed seller – he’s long gone. And I then sell the property, and hopefully – and usually it works, in this case; and I say actually always it works so far – I’m able to sell the property in under six months… Paying off that loan, so that guy is happy, and I get to make the cash. I never have to go through the nightmare of an application of getting a mortgage, I never had to come in with [unintelligible  [00:13:14].13] to write a $200,000 check to buy the property cash… I usually got into the property for less than $25,000, and probably put another $25,000 to fix it up.

Joe Fairless: This is a strategy that every Best Ever listener can pick up, and that is identify the main issue in your market that scares people away, research the solution, and then you’re the guy or gal who is the go-to person for when people come across that type of property.

Daniel Ameduri: It’s so true. And the great thing about, let’s say, the central Texas foundation issues, is in Texas these are lifetime warranties, so once repaired – let’s say I’m in a community and there’s foundation problems known in this community… You happen to be now listing the only home that has a lifetime warranty on this foundation. And of course [unintelligible [00:14:05].05] unintended benefit, but there are some communities in central Texas where I fixed and flipped one foundation problem, and then I ended up getting called by two of the other home owners in that area within the year, because I was that guy who was willing to fix that problem… Because again, unless a cash buyer is aware of how small of a problem this is, it scares the hell out of everybody else and no bank wants the loan on it.

Joe Fairless: How did you find the solution to the foundation issue?

Daniel Ameduri: It was an accident. I’ll be honest with you – in Southern California I came across a foundation problem and I ran. In central Texas I wanted to buy a home for my family to live in, and they said “It has a foundation problem.” Because I didn’t have my investor mindset on, I didn’t run. I became an entrepreneur problem-solver, which that’s what I should have been as an investor. Because I wanted to live in that home, I said “Well, I’m gonna find out how much it costs”, and to my surprise, the bids were coming in at $3,000, $3,500, and I was like “Wow!” Here I was, thinking this was a $50,000 problem… Because it’s about the logistics – they’re literally digging holes around the property, jacking it up… Typically, if it’s a two-storey, it will burst some pipes or break some things [unintelligible [00:15:19].00], so a lot of times you have to fix the piping as well, which is another $3,000 on let’s say a 2,000-3,000 square foot home.

So I actually originally discovered this whole problem that was solvable with the purchase of my own residence. Then once I knew that, I smelled the blood; I was hungry. I told that very realtor and everyone I could get in contact with – “If there’s a foundation problem, from basically all of central Texas to San Antonio, I wanna know about it.”

Joe Fairless: I might be splitting hairs here, so if I am, tell me so… When I asked you what you would tell me as a wholesaler what you’re looking for, you said “I want what nobody else wants. I want what everyone hates, what people are scared of”, but you didn’t specifically mention foundation… So why didn’t you just say “I want any property that has foundation issues?”

Daniel Ameduri: Because even though I have not had the chance to do one where a gas has burst in the property or the kitchen has fire damage or the roof has fire damage, I am interested in that… Because I have a feeling and I suspect – and maybe you’ve had other experts who have done this – that I will have the same profitable experience investing in something that has fire damage, in something that has a foundation problem… Because again, it eliminates 99% of the competition and I can probably structure the same sort of deal. I’ve rehabbed plenty of properties, and I know what it costs to rehab a kitchen or redo a roof, so that to me is not a problem at all.

It’s not so much the type of repair I’m looking for, it’s that I’m looking for scenarios where I eliminate 99% of the competition.

Joe Fairless: Please tell us the numbers of the last deal that you purchased.

Daniel Ameduri: Last deal I purchased was for $120,000, and it was in central Texas, it was a foundation issue. It happened to have some icing on the cake in the sense that it was also a distressed seller situation. The property was behind on payment, the person I bought it from owned it – he was the original owner, but his ex in-laws were living in it… And it had a foundation problem. So this house was just oozing with problems.

I went out there, looked at the property, had a foundation person look at it… The bid was $3,500 to fix it. It probably needed an additional $15,000-$20,000 in repairs at the time when I looked at it. The garage was literally buckling away from the house, and then the back of the house was literally buckling the other way. So the house was literally like being split; you’d see cracks in the concrete.

I approached the owner and I said “What do you need?” The owner was very straightforward – they needed out. They wanted someone to get the ex in-laws, and they really only needed about $5,000 to make them happy, and what blew me away about this deal was that there was a second mortgage HELOC on it with a $50,000 available credit line, and I’ve gotta tell you, when I was signing, I just couldn’t believe it. I was like “This doesn’t even make sense. This is so solvable for this guy, and he must have not even tried.”

He could have done it, he had a $50,000 HELOC that he had access to, he could have totally written that check, but he took $5,000 from me. I brought the property current, which was only about $6,000, so now the property is current with $11,000. I took ownership of the property, but in the terms I wouldn’t take ownership until the property was vacated, so it kind of put a little pressure on him; he had to also help me get the in-laws out.

So we got the in-laws out, closed the next day once the property was vacant. I literally had the foundation people in there, they fixed the foundation for $3,500. Because it was a 3,000 square foot home that was two storey we did have some issues with the pipes, but that was only about $1,200 to repair the pipes. Once the pipes were fixed, we had everything else come in, and I did the normal paint/carpet/blinds because of course they literally dug a five-foot hole in the middle of the house – it was probably 3×4 feet – when they were fixing this house.

It was a newer house, too. It was built in about 2003. So this property was then sold for $255,000. After real estate commissions etc. I wanna say there was about $70,000 in profit.

Joe Fairless: That’s outstanding. How long from when you first visited the property to when you were depositing the profits into your bank account?

Daniel Ameduri: The property was purchased in late November, and it was sold in the middle of March… So four months total, because I also went down there and looked at it, of course, before we closed it. [unintelligible [00:20:13].18] as far as closing these things – I’m closing these things anywhere from five days to two weeks. And look, I’ve just told you, some of them I’ve discovered it on Wednesday and closed it on Friday. When you’re not introducing a new bank, a new lender, an underwriter, appraisals and all that BS that I just hate — it’s funny, one of the things I hate is paperwork, so I forced myself to figure it out without doing it… And you just go straight to the guy who’s got the mortgage, and if you’ve got a distressed seller or somebody who can’t sell to conventional financing people, these deals can happen very quick. It’s a matter of calling an escrow company, getting a purchase agreement together, and making the mortgage payments.

Joe Fairless: What is your best real estate investing advice ever?

Daniel Ameduri: Best real estate investing advice is probably what I’ve already told you, and that’s “Buy what everybody else doesn’t want to buy.” Because you’ve gotta find some edge. There’s too many people out there investing in real estate. If you really want to see significant profits — because some of these foundation issues, I’ve kept these as rentals. You’re getting them on the cheap, they cash-flow, huge equity capture… And again, not that much, but my best advice is buy what everybody else doesn’t want to buy.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Daniel Ameduri: I am.

Joe Fairless: Alright, let’s do it. First, a quick work from our Best Ever partners.

Break: [00:21:31].18] to [00:22:30].14]

Joe Fairless: Best ever book you’ve read?

Daniel Ameduri: The Law Of Success, by Napoleon Hill.

Joe Fairless: Best ever deal you’ve done that you haven’t talked about?

Daniel Ameduri: The best deal I’ve ever done that I’ve never really talked about is the fourplex. It had a small foundation problem; I did not want to get a loan for this fourplex, but I wanted to keep it as a long-term portfolio hold because I knew I could get a huge equity capture and it was a cash cow. All in, principal interest, all that stuff was $1,500. It was bringing about $3,000. I knew I could even raise the rents to make more, which I am now.

Now, the reason it was the coolest deal I’ve ever done is not because of how much money I’ve made monthly on it or the equity capture, but because when I went to do the assumable – my typical thing that I do – the bank freaked out. They didn’t want us doing this, so here’s what we did – I got lucky. It was owned by an LLC, so we went right around the bank, and all I did was buy the LLC. I never actually bought the property, I just bought the LLC that owned the property.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Daniel Ameduri: The biggest mistake I’ve ever made on a transaction is hoping for appreciation… Those go into my early days, in 2000-2006, but who could blame me? At 18 years old I had only experienced success and appreciation in Southern California, and I had confused a bubble in a bull market in real estate for brains. So buying because I believed the property was going to appreciate – huge mistake.

Joe Fairless: I don’t think too many people can fault an 18-year-old for approaching it that way or having that mindset as an 18-year old and then not seeing the difference until something crazy happens.

What’s the best ever way you like to give back?

Daniel Ameduri: I do have several charities and several people I like to support, but I will tell you this – with my FutureMoneyTrends.com letter I reached out and I do phone calls with people, I answer every single question that comes in. One guy – he’s an Israeli – in 2010 reached out to me through the FutureMoneyTrends.com letter; fast-forward today, we’ve been on a few vacations. Now he’s a business partner of mine [unintelligible [00:24:33].05].

I love pouring out my heart and soul, and I’m very focused on over-delivering with the FutureMoneyTrends.com letter. So that is I guess not the most charitable way to give back, because it is a profitable business, but I absolutely love what I do, and if I got paid almost nothing, I probably would still love to do it, because I’m having too much fun.

Joe Fairless: How can the Best Ever listeners get in touch with you?

Daniel Ameduri: You can just go to FutureMoneyTrends.com, you can subscribe for free to our weekly digest where  you’ll get our personal finance ideas each week. You can always go to the Contact Us page, as a question; it will get to me, and I will respond.

Joe Fairless: Well, there’s a clear theme here, and that is, as you mentioned with your best ever advice, buy what everyone else does not want to buy. So for every Best Ever listener, a good exercise, a very simple exercise is to identify the main issue in your market. If you don’t know, then ask someone… And ask many people who are actively doing deals, what are the main issues that they’re seeing; perhaps it is not a characteristic of a property, but perhaps it’s something in the process that they’re seeing as an issue. Maybe it’s a software platform or something that you come up with… But identifying what the main issue is, research the solution, and then after you have the solution to those problems (or that problem), then you just enjoy the flow of opportunity that comes your way.

Thank you for talking to us about the deals that you’re doing, walking us through specific transactions. Daniel, I hope you have a Best Ever day, and we’ll talk to you soon.

Daniel Ameduri: Thanks very much.

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