For today’s Follow Along Friday, Joe is sharing his biggest lessons learned from doing his podcast interviews last week. From shelf corporations to learning about underground storage tanks and the problems they can cause. We’ll also receive the usual business updates that we as investors can learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? 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.
We’ve got Follow Along Friday today. The purpose of Follow Along Friday is to talk about what we have learned, or certain things that we’ve come across in our real estate endeavors, so that we can share those lessons with you, ultimately to help you on your journey; that’s the whole point of Follow Along Friday.
With us, Theo Hicks, as always. Theo, how should we get going?
Theo Hicks: Well, this week we’re gonna talk about some of the things that you learned from your podcast interviews last week. We’ve got five particular people – these are interviews where you learned something new, basically, and since these interviews are not gonna come up for a while, and since we’re on Follow Along Friday and the purpose of Follow Along Friday is to teach people about things that we’ve learned, we figured we could have a conversation around that today. So I guess we could just go straight through these five interviews, starting with Jerry Detweiler…? Did I pronounce that correctly?
Joe Fairless: Yeah, I think so. I think it’s Detweiler. But for additional context, and thanks for setting the stage – just for a little bit more context… So every Thursday I do interviews for this show; that is the day I do interviews. Most of you Best Ever listeners know this, but I don’t do interviews every single day for this daily podcast, otherwise I’d go bonkers and I wouldn’t be able to be effective with the primary way that I make money, and that is Ashcroft Capital, overseeing that company along with my business partner, Frank.
So the way I slice up my time is on Thursdays I do interview day. Today, for example, I am interviewing nine people, and I’m starting to interview at [11:30] AM, and they’re 30-minute blocks, so I’ve got three interviews from [11:30] all the way to 1 PM. Then I have a call with a potential new investor who reached out to us. That’s usually my break period after the three interviews, but my team booked a new investor call, so I’m speaking to a new investor. Then I’ve got three more interviews. Then there is a break at 3 PM, to [3:30]. Then from [3:30] to 5 PM I have three more interviews. So I’m doing nine interviews today. It’s a pretty quick day for me, because it’s so active… And then we do this Follow Along Friday on Thursday, so that it can air on Fridays, and the ads, and whatever else can be added in there the day before.
So Thursdays are interview day, and I am inundated with a whole lot of information… And I thought it would be interesting for me to be intentional about the information that I’m learning and coming across last week, so I can really determine what am I taking away from these interviews… And these five things that I’m about to talk about – some of them might seem a little silly, because, like, “Really? That’s the thing you chose to take away from the interview?” and what I was really focused on is something brand new that I hadn’t heard of before from the interviews, or it was just something that was good to reinforce in my mind.
So while I was talking to the individuals who I interviewed last week on the interview day, if there was something that stood out like that, I put it in all caps and I said “Thing I learned”, and then I said “This would be cool to share with the Best Ever listeners next week.” And I believe you can learn something from anyone; it’s your responsibility, should you choose to undertake this, to find out what that something is. Everyone has something that they can teach us; whether or not we discover what that is, that’s up to us. That takes us first wanting to learn from that individual, and then also being able to ask the right questions.
I can interview someone who has no real estate experience – I usually don’t – and I could learn something from them about what they have done so far, and if it’s nothing at all, well, there’s something to be learned there… We would dig into why they haven’t done anything, and we can learn some aspects of their psychology and perhaps apply that or reinforce some things in our own mind. So there is the setup for this.
One thing from Jerry Detweiler that I learned is she mentioned shelf corporations. I’d never heard of a shelf corporation before, had you?
Theo Hicks: No.
Joe Fairless: No?
Theo Hicks: I’ve heard of Shell Corporation, but shelf…
Joe Fairless: Right, this would be shelf corporation… I too have heard of Shell Corporation, but not shelf corporation. Jerry works at Nav.com, and their business model is essentially helping businesses get lines of credit, and they help businesses determine what their credit score is and how to build that credit score, so they can get more and more lines of credit for funding. And we talked about she and her team approach that, and she also talked about some scams that are out there to try and trick people into paying them money so that they can build their credit, but it doesn’t actually work.
One scam she said to look out for – it’s not always a scam, but one thing to look out for and be very eyes wide open about if you choose to pursue it is a shelf corporation. The concept behind the shelf corporation from a line of credit standpoint is the corporation has been established for a long period of time, but they’ve putting it (metaphorically) essentially on a shelf, so it doesn’t have activity, but it’s been building this credit, because it’s been around for so long, so people sell their shelf corporations to individuals who want a business that’s been around a while, so it can be approved for a larger line of credit. Makes sense?
Theo Hicks: It makes sense, yeah.
Joe Fairless: So conceptually it makes sense, but she said “Not necessarily the case most of the time, because there’s a lot of things that go into actually getting approved for a line of credit.” Actually, there’s a couple things, and you will have to listen to the interview with her to learn those things, because I didn’t write that down, and I’m not necessarily looking for a business line of credit, so… That’s something in my notes, but not on the notes in front of me. But that was one takeaway that I got from the day, is the shelf corporations. It was a new term, I hadn’t heard of it… And just something to look out for, not necessarily to jump on board if you are looking for a line of credit. I thought it would be interesting for the Best Ever listeners.
Theo Hicks: That is interesting. We can kind of apply this to real estate, too… Kind of, not exactly, but… I’m thinking of shelf properties – these are properties that have obviously been rented out for a long time, but the owner themselves have kind of put it on the shelf and haven’t really addressed any of the deferred maintenance or any of the issues, and you need to watch out for those kinds of properties too, because you’ll find a lot of hidden things that you didn’t expect.
I think my fourplexes could probably be considered shelf properties; they’ve been ignored for a while, so… That’s the first thing that came to my mind when you said that.
Joe Fairless: I like that, yeah. Way to bring that full circle. Nice work. The second is a conversation I had with Steve [unintelligible [00:08:55].16] First off, he’s from Detroit; I was born in Flint, Michigan, grew up in Texas, and there’s something about talking to people who are from Detroit and Flint area… I just enjoy blue collar, say-it-how-it-is type of people, and I just really like having the conversations with people like that.
Anyway, he talked about a 20-unit apartment complex, a 1920’s property, all-brick, and what I wrote down as something that I liked during our conversation – and it’s not anything about the deal, but it was how he was describing the deal, because he’s a great storyteller… But in my opinion he wasn’t intending to be a great storyteller, he’s just someone who you like to hear talk about what they’re working on, because it’s really interesting, because he makes it sound really interesting… But he unintentionally makes it sounds interesting, it’s just how he has a conversation. He said “Imagine this… “, and then he talked about the deal. And when he said “Imagine this”, I was like, “Well, I’m imagining exactly what he’s talking about.” And it was that command of “Imagine this…” I wrote it down, I was like, “I like that phrase”, because it immediately made me think of exactly what he was talking about, because he told me to imagine it… And I thought, “Well, that’s an interesting phrase that I can incorporate whenever I’m talking about stuff and I want people to imagine it, and be there with me in the journey as I tell the story”, so I wrote that down.
Clearly, that has nothing really to do with the real estate deals that he was working on, which are — it’s really interesting to hear his story, so I obviously recommend listening to his podcast when it comes out, in 30-45 days, but the “Imagine this” phrase is what caught my attention.
Theo Hicks: Yeah, seriously. My goal is gonna be to use that phrase at least once on this podcast. I’m gonna drop it out of nowhere, Joe, so… You’re never gonna know when it’s gonna come. [laughter]
Joe Fairless: I have so much anticipation for when that will happen. The next one is Chandler David Smith. He started in sales, knocking on doors… And I wish I wouldn’t have sent you the outline that I was gonna talk about, Theo, because I would have asked you what you think he was selling door-to-door, but… You see the outline in front of you – he was selling pest control products/services. Door-to-door, incredibly hard. Pest control services – I imagine that’s gotta be pretty hard, too… And he ended up being a top salesperson doing door-to-door sales, and clearly that translates into real estate, because you’ve got to be able to sell yourself, sell the deal, sell yourself to team members to attract the right team members, the most qualified team members… And so I asked him “How did you do that?” Because he made $90,000 in a summer, and he signed up 459 accounts during a summer. He signed up 459 accounts for pest control. He said it was like a $300 or $500 service that he was signing people up… And one out of every seven or so that he went to ended up buying the pest control, and I said “Well, how did you do it?” and he said, “Well, I worked harder than others.” I said, “Okay, elaborate on that, please, because we wanna get underneath the surface there.” He said, “Well, it wasn’t that I was working many hours more than other people. What I was doing – I was working at least one hour more; and in that extra hour more I was getting a disproportionate amount of results from working that extra hour.”
So he was doing one hour more a day, and he was getting a disproportionate amount of results because of that. And I told him during the conversation – it reminded me of when Tony Robbins talks about when you do a set of ten reps in a weight room, when you’re doing bench press, a set of ten, what rep leads you to the greatest growth, and it’s rep eleven. It’s the eleventh rep where — okay, you did ten; great, ten was tough… Okay, now do one more. You can do one more. And that eleventh one is the one that leads to the greatest growth. I do that when I’m working out. If I’m gonna do a certain set, I always do one or two extra ones… And those types of things have compounding effects on the business, because when you do that consistently, well, now you’ve got some greater results than if you were just doing exactly what everyone else is doing.
And think about paying off mortgages – anyone who looks at paying off their mortgage early, whether or not that’s a good thing (that’s debatable), but just the sheer facts of if you do an extra mortgage payment once a year, or a little bit extra each month, then that’s gonna save you a lot of money in interest, and that’s gonna pay it off much faster over a period of time.
Theo Hicks: Yeah, I think there was another athlete – it might have been Mohammad Ali, but I’m not 100% sure, but he also had a similar philosophy, which is he didn’t even count the reps until it started to hurt. It was him, or [unintelligible [00:13:56].12] one of those super-athletes.
I totally agree, because if you think about it, if you work an extra hour every day of the month, each month you’re nearly getting an extra full workweek of time that others aren’t getting in… So that obviously, for sure compounds, because over a 12-month period you’re almost getting 12 extra workweeks worth of time in each year than someone else. If you compound that over time, that kind of puts you way ahead of everyone else.
Joe Fairless: Yeah, I like that. I hadn’t heard of “start counting the reps once you start feeling the burn.” The fourth thing is Steve Pesavento. He’s flipping properties in a couple different cities in the U.S. that he does not live in, and we talked about challenges, and things him and his team have had to overcome as a result of their remote flipping… And one of the things he mentioned is he’s flipping in Raleigh, North Carolina; I asked him about deals that didn’t go well, and he mentioned this one deal where in Raleigh there was an underground oil storage tank, and he hadn’t ever come across that; I personally have not come across that either… And he said it can be common in that area, and he said the cost to have them removed was 15k-20k, which was something that he hadn’t expected… And on a single-family home fix and flip, that can severely hurt your margins/take you to the other direction.
Theo Hicks: I think one of your earliest podcast episodes someone had mentioned that they bought land — they didn’t know it used to be a gas station, and they had the same issue with the underwater gas tanks, that cost a ton of money to remove.
Joe Fairless: And then lastly, Edwin Kelly – he heads up a self-directed IRA company, and they’ve recently evolved so that they… Apparently, self-directed IRA companies have to have some sort of trust charter connection — and again, I’m getting outside of my comfort zone, because I don’t know a whole lot about this… But I believe a trust charter company or a trust charter has to sponsor a self-directed IRA company. So Edwin’s company, as they’ve grown they went ahead and established a trust charter, so they don’t have to be sponsored by a trust company.
So I learned from this conversation, which is pretty esoteric knowledge, but still, it’s something I learned – the two states in the United States that are most favorable and flexible for trust charters from a regulatory standpoint are New Mexico and South Dakota. So I was writing down things I learned — I don’t think I’ll ever apply that information anywhere, but it’s an interesting trivia question, so I wrote it down.
Theo Hicks: We should have just used that for the trivia question of the week.
Joe Fairless: Well, I know, yeah… Yeah, we should have. So there you go, those are five things, and… Best Ever listeners, if you found this interesting, then let us know and I’ll attempt to do this more often than not, whenever I do the interview marathon days.
Theo Hicks: Awesome. Well, speaking of the trivia question, let’s move into that. Last week, the question was “In 2016 a record number of companies left California. What state did the large portion of those companies move to?” and unfortunately I kind of gave it away when I mentioned that your investors would know…
Joe Fairless: You definitely gave it away.
Theo Hicks: I did give it away. The answer was Texas.
Joe Fairless: That was a weak trivia question. Most people knew that even if you didn’t give it away though.
Theo Hicks: Well, I think this week’s question is a little bit stronger…
Joe Fairless: Okay…
Theo Hicks: So what city – it has to have a population greater than 200,000, so it can’t be a really small city with five people in it – has the largest percentage of the population renting? So what city has the largest percentage of the population renting? Now, the percentage is actually over 70%, keep that in mind… Which was shocking to me, because I think the U.S. average is in the 30% range, I think, around there.
Joe, what city do you think has the largest percent renter population?
Joe Fairless: I’m gonna go with New York City, because it’s expensive to live there, and it’s a place that a lot of young professionals go out of school, for jobs, and they don’t buy, they just rent; for those two reasons I’m gonna go with New York City.
Theo Hicks: Okay.
Joe Fairless: Although I feel like if it was New York City at 70%, I would have read that somewhere already. I am not confident in my answer, but logically, that’s what I’m saying. I believe I’m wrong, but that’s my best guess.
Theo Hicks: Okay. Just to make you feel a little bit better, New York is definitely in the top five.
Joe Fairless: Alright, cool.
Theo Hicks: So your logic was definitely sound.
Joe Fairless: Okay, fair enough.
Theo Hicks: So if you guys either reply to the YouTube video that we post, or send us an e-mail at info@joefairless.com, the first person to get the correct answer will receive a signed copy of our first book, Best Real Estate Investing Advice Ever Vol.1… Which we’re actually in the process of revising right now for a second edition. That should be coming out in the next couple months as well.
Joe Fairless: Yeah, we’re just cleaning up grammar and spelling and punctuation stuff. We’re not putting any bells and whistles in it, we’re just doing a better job of what we should have done in the first place, basically.
Theo Hicks: Also, this episode comes out Friday the 25th, which is exactly four weeks before the Best Ever Conference 2019 in Denver, Colorado, so make sure you guys go to BestEverConference.com, and check out the line-up that we have. We’ve got most of the presentations/panels filled out on that schedule; some of them are still to be determined… But also, buy your ticket to make sure you get the best price, because ticket prices go up each week.
And then of course, on the podcast we’re going to mention something that will be discussed at the conference that will definitely add value to your business – there’s going to be a two-person panel that will talk about the intricacies of SEC law. This will be for people who are interested in putting together syndications.
I think this is gonna be a powerful panel because I would probably say one out of ten posts that I see in the multifamily real estate forum on Bigger Pockets is related to SEC law, and asking questions about securities, and how to make sure they’re doing things by the book, and structuring partnerships correctly, and the differences between the different types of syndications… So during that panel, if you attend the Best Ever Conference, you’re gonna get most of the answers to the questions that you need, and if you have any extra questions, what’s great about the Best Ever Conference is that it’s got a networking time, so you can actually talk to them afterwards, or beforehand, or at one of the nightly events, to kind of ask more specific questions based on your current situation.
Joe Fairless: Yeah, and one of the attorneys that’s gonna be there – his name is Roland, and his information is on the BestEverConference.com website… He’s our securities attorney, so I personally can vouch for him as being someone who is gonna add a lot of value to the conversation. And if you have any deals at all that are going to qualify for a security, then why not go to the conference, learn, but then also have a conversation with him? His rate is north of $300/hour, so you talk to him at the conference, at the bar, or something, where we’re all hanging out, and you’re saving — hopefully he doesn’t hear me say this, but you’re saving the money when you’re talking to him at the bar, hanging out, and you’re getting some of the questions answered.
I’m sure there’s a line in the sand that if you’re not a client of his, then he can’t answer until you officially engage him, but still, it could be a really good opportunity and it actually could save you money as a result of attending.
Theo Hicks: Absolutely. So that’s BestEverConference.com. And then lastly, make sure (if you haven’t already) to pick up a copy of the Best Ever Apartment Syndication Book. If you leave a review on Amazon and send us a screenshot, we will send you a package of free apartment syndication resources, as well as you’ll have the opportunity to have your review read aloud on the Follow Along Friday Podcast.
This week’s review of the week comes from Alec Liskov. Alec left a regular Amazon review, but he went above and beyond and actually left a video review which was pretty cool, and I didn’t realize he could even do that on Amazon… I’ll summarize the review that he provided in the video:
“Joe’s book is one of the best resources on apartment syndications I’ve seen out there. There are three reasons why I love this book. Number one, his approach and guidance are designed for anyone to follow, from inexperienced to experienced investors. Two, he doesn’t just provide information, but rather a step-by-step guide of how to actually get started (and he mentions how he went back to the book to go over the different processes and step-by-step systems that we provided in the book). And number three, finally, he sets expectations and tells it like it is. He shares both his success stories, as well as his failures, which is really helpful in setting the right expectation for long-term success.”
Joe Fairless: Well, thank you for leaving that video review. I think it’s only a video review, right? That’s pretty cool. I didn’t realize you could do video reviews either, so thanks for doing that. I really appreciate it and I’m glad you got value from the book.
Theo, I called you yesterday, and your voice mailbox is full, so I didn’t leave you a message because I couldn’t. But I called you because I had a conversation with someone who I met yesterday and he said he bought our syndication book and he read it in one day.
Theo Hicks: Oh, man…
Joe Fairless: He called it a fun read. I was like, “Well, fun? Okay… I’ll go with that.” He’s a software engineer, and he said he loved that we got into the details, but he literally read it in one day. I thought I held the record, because I read it in one day when we were doing the final walkthrough of the book, so I read it from start to finish one last time, in one day… But he tied the world record for quickest read for the book. I thought you’d find that interesting, too.
Theo Hicks: That’s interesting.
Joe Fairless: Well, everyone, thanks for hanging out with us. I hope you got value from the conversation. Have a best ever day and we’ll talk to you tomorrow.