BiggerPockets Podcast 123 with Justin Escajeda Transcript

Link to show: BP Podcast 123: Overcoming an Ugly Past to Become a Cash Flow King with Justin Escajeda

Josh: This is the BiggerPockets Podcast Show 123.

Real estate has really provided me the means for a steady flow of income month after month.

You’re listening to BiggerPockets Radio simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype you’re in the right place.

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Josh: What’s going on everybody? This is Josh Dorkin host of the BiggerPockets podcast here with my cohost Mr. Brandon Turner. What’s going on Brandon?

Brandon: Not much, how are you?

Josh: I’m good, I’m good, doing well, enjoying the spring, enjoying the nice warm weather although it snowed like 2 days ago.

Brandon: I heard that you guys had crazy weather.

Josh: Yes, it’s crazy in Colorado, April is unpredictable.

Brandon: And you moved, that’s a good thing.

Josh: It’s something like that, yes, relocation.

Brandon: Relocation is always good, not moved like physically. Hopefully you move more often.

Josh: I was relocated by the undercover…

Brandon: That’s exciting, got a new house, moving up in the world, look at you.

Josh: I’m just moving around trying to make room for the kids, dogs and everything else that comes with that.

Brandon: I helped a friend move yesterday, that’s always a miserable whole experience.

Josh: I tell my friends I’m not your friend when it comes to moving. I don’t move, I don’t help people move and I don’t ask people to help me move.

Brandon: I actually kind of like it because I need some exercise because I sit all day long. I wish when people ask me to move, help them move at least I’m doing something with my life.

Josh: Here’s a quick story. My friend Mr. Brian Volk-Weiss decided one day that we were going to do, do you ever see those obstacle courses for grown-ups? They have all these cool obstacle courses. They have TV shows about it where you go and…

Brandon: No idea.

Josh: You know what I’m talking about, they have these cool obstacle courses.

Brandon: This sounds awkward.

Josh: It’s fun, you go through mud and runs and that kind of stuff.

Brandon: Sure.

Josh: He said, we’re going to do this cool obstacle course it’s a secret. We’re going to check this out. Bring towels, bring bathing suit, all this stuff and I’m like, cool. So for weeks he’s hyping me up, he’s hyping me up and the day comes and he’s going to come pick me up. So he picks me up, it’s 6:00 AM and we’re driving, we’re driving and I’m super excited about this whole thing. This is kind of a weird place, we’re going into like a residential area, this is not really an obstacle course type of neighborhood.

I’m going and I’m going and I don’t see anything. And then we make a turn and I knew from his GPS that we were getting close. And we make a turn and I see a moving truck at the end of the block like a Ryder of Penske or something like that. And I was so pissed! It was an hour and 15, an hour and 20 minutes from my house. He kidnapped me to go move a friend of his so I didn’t even know this guy and I was kidnapped to go help this dude move. Suffice to say I was definitely pranked and I was definitely pissed off.

Brandon: You never moved anybody again.

Josh: That was pretty much it.

Brandon: I got peace out of the deal, you got hosed so cool.

Josh: Definitely got hosed.

Brandon: Today’s show, this is a cool show, very unique show. I think people are going to hopefully get a lot out of this one. I did, I thought it was fascinating.

Josh: Yes I think it was great. Before we do, let’s get to today’s Quick Tip. Alright guys, quick tip. We send out emails regularly, I think it’s every other week about people in your area. And we have this feature on BiggerPockets, it’s biggerpocket.com/meet. If you are a newer member of our site and have yet to connect with people go to the ‘meet’ page, look at investors in your area and connect with them. Say hey, what’s up? I’m so and so, I’m in your area, this is what I do, would love to link up. Simple, you just expanded your network, you just increased the likelihood that you’re going to be successful as a real estate investor, period. It’s that easy. The more people you connect with, the more people you network with the greater your chances of success as a real estate investor I promise it.

So go out there, jump on the meet page and when we send you those emails about people in your area just reach out to them and say hey. That’s today’s quick tip.

Brandon: There you go, good job.

Josh: Awesome, awesome.

Brandon: Today’s show.

Josh: Let’s do sponsor first.

Brandon: This episode is brought to you by realtyshares.com, Realty Shares is a crowdfunding platform that allows accredited investors to invest in pre-vetted real estate deals online. So investors can browse and invest in both residential and commercial properties that yield returns of 8%-16% annually. As a Realty Shares member you can also possibly invest in professionally managed real estate investments in a variety of asset types and geographies for as little as $5000 on from the convenience of your living room.

So to learn more and to get started with a free account visit realtyshares.com/BiggerPockets, that’s realtyshares.com/BiggerPockets.

Josh: Great, great, great, awesome. Alright guys so today’s show like we said is a little bit different but certainly interesting, our guest Justin Escajeda. Justin is a real estate investor out of the Pittsburg area. And Justin he’s had a life that hasn’t been so easy. He’s made some choices and decisions that probably weren’t the best for I believe he says 20 years. Was doing things like drugs and other bad things and went down to, he was homeless and I believe walking on the train tracks with a bag of all his belongings that was his life.

Today he has rental properties, storage units, mobile homes, he’s looking to get in into mobile home parks. He’s doing really well, turned his life around, it’s fascinating definitely an interesting story. So stay tuned and hear how, if Justin can do this you too can. You have no excuse to say I can’t do it if there’s no way I could be successful. If Justin was able to do that, very inspiring and we’re really happy to have the opportunity to share this with you guys.

With that let’s bring him on. Justin welcome to the show it’s good to have you here.

Justin: Thank you. Thank you for having me this is awesome.

Brandon: This show is a very bit different. I know very little about you, usually I do quite a bit of research up front but this time I had very little. I had Hillary do a lot of the research just because I’ve been lazy.

Josh: Brandon was being lazy.

Brandon: I’ve been lazy and I wanted to try it out like what if I know nothing hardly about the guest? Let’s see where the conversation goes, kind of my thought process at least that’s how I justify my laziness. So you take us from the beginning. Who are you? Where did you come from? How did you get started with real estate?

Justin: My name is Justin from Pittsburgh, Pennsylvania. Actually I think I might be your first guest from Pittsburgh to tell you the truth.

Brandon: You might be.

Justin: I always listen to your shows and there was never anyone from Pittsburgh.

Josh: Nobody really likes Pittsburgh.

Justin: No, even from people from Pittsburgh no, that’s why we’re all so miserable. I got started in real estate, I have to see seven years ago. However my story kind of starts off prior to that, always been an entrepreneur always. I say since the fifth grade but real estate was always attractive to me because I fell into the stereotype of seeing the landlords and all they did was pick up rent. And I was like, oh man that’s awesome.

Brandon: That’s all we do, that’s it.

Justin: And we’re like Scrooge McDuck, we go…

Brandon: Nice, good reference.

Justin: And we swim in our gold vaults of gold coins. Needless to say I found out that was very false, very untrue. I always started a lot of little businesses also I’m like a lot of your guests, most of them were cash under the table.

Josh: Nobody is listening only 50,000 people and probably the IRS.

Justin: Like you said, Brandon wants to learn more about me and if something I could say can inspire someone or have someone get them out of the rut they are in I’m all for it. I tried to give back as much as I can but like I said I’ve always been into quick dollar, any means necessary, any means possible. And real estate seemed to be a more legitimate one at the time when I first got into being a landlord. I was like you know what? I’m going to get a bunch of properties, I’m going to get 600 properties. I’m going to walk around like Joe Pesci in The Super and I’m not going to do anything to any of my units. I love The Super I love that movie.

Josh: I’ve not seen that one.

Justin: You should.

Josh: You are The Super my friend.

Brandon: It is about the slumlord of slumlords. It’s a real cheesy…

Josh: I’ll look on Netflix for that one.

Brandon: Late 80s early 90s.

Justin: Yes but it’s good you’ll like it believe me. I am still an entrepreneur and have started a few businesses, legitimate businesses now. However real estate is really provided me the means for a steady flow of income month after month to help fund other projects, to make my businesses grow better.

Brandon: I’ve got to ask because people are wondering this tool. You didn’t rob banks or something right?

Justin: No.

Brandon: Okay, making sure.

Justin: No, anything from bootleg cigarettes, selling drugs.

Brandon: You came from a rough background.

Justin: But I came from the suburbs, don’t think…

Brandon: Okay.

Justin: Do you know what I mean? I was just naturally attracted to that lifestyle for some reason even at a young age. But yes I just grew up with the mentality and you know what is? The people I was naturally attracted to the bad kids and that gravitated into a lot of nasty stuff, a lot of nasty stuff that I had to get over. But I don’t know, I mean, talking like probably 15 to 20 years of just doing illegal things. And finally the last 7 years I’ve been legitimate and it’s been very difficult. Very difficult to do things the correct way, by the book.

Brandon: How did you come to the realization that you needed to stop living that lifestyle?

Justin: I became addicted to drugs and my life was going down the toilet, I was homeless, no money. All relationships totally shot, drug of choice was heroine. So on a side note there I will say that living in that lifestyle for so long it actually has given me a great grasp on interviewing tenants. Things along that line.

Josh: How to look out for what I used to be right?

Justin: Yeah, wait, wait. What did you say?

Brandon: How to look out for guys who do what you used to do.

Justin: Exactly. Actually the very woman I ever showed an apartment to was my first duplex. I showed her an apartment, she’s walking around, she’s like m oh yeah this looks really nice. Of course this is my first one so I decked it out and, crown molding, trims, one of the things I probably don’t do now. But I just went above and beyond. She’s walking around and she’s like, can I use your bathroom? I said, yes no problem.

She’s in the bathroom for like 10 minutes. I’m like maybe she had to get a #2 whatever. Then I started hearing profuse vomiting and she threw up all over the toilet, all over the floor and all she did was close the door. So I didn’t know this until after the fact. I said, are you alright, she’s like yes, I was coming down with a bug. Then I happened to see her arm she had track marks all up her arms so I was like I’ll be in touch and I wasn’t in touch needless to say.

But I did have to clean up all her vomit all over the bathroom. Actually I could write a whole book on weird stuff like that.

Josh: You’re doing all this stuff 7 years ago, something happens.

Justin: Yes. I got clean.

Josh: You got clean, presumably it sounds like you were broke, you had nothing going on. How the hell did you go from a broke ex-drug user whatever the heck you were doing that I probably don’t want to know (criminal) to become a legitimate real estate investor and turn your entire existence around?

Justin: Like I said I got clean, I went to rehab a half-way house, did everything that was suggested and just came to the realization that I was living in a terrible way from everything that I had previously known was wrong, the way I thought. And I just built off of that, I somewhat got my credit back in order and I was living in this duplex and the lady who was living in the duplex she’s offered to sell me it. And the other side of the duplex was totally trashed and she’s trying to sell me and that got my wheels spinning about it. Long story short, 3 months later I bought another duplex.

Brandon: You didn’t buy the one that she offered you that had made you think about it?

Justin: No, no. She wanted way too much even with the zero real estate background as that time I knew that was like, I don’t think this is right.

Brandon: So tell us about that first deal, that first duplex. Where did you find it? How did you finance it?

Justin: The first deal I got was in a low-income neighborhood. I got an FHA loan for it and realized I didn’t want to live in it after I bought it just because the neighborhood was terrible. And I ended up calling FHA and hey I don’t want to live here. They’re like you can’t rent out both sides and I was like, okay I won’t. So I did it anyway and then I felt bad about it. Then I was getting nervous, I was like, oh man what’s going to happen? Then at the same time I was like they’re still getting their money so who cares?

I refinanced I got out of that and that duplex is actually, I bought that for $40,000 and that was just straight dumb luck. Because that area is actually filled with all these shalers and frackers and pipeliners. So there is actually in that low-income are of Pennsylvania because it’s right outside out Pittsburgh. But there’s zero rentals, you can rent a $400 apartment for now $900 a month. So actually do well on that one. I strictly rent to the guys who are working on the pipelines and stuff and they’re never there, they work like 20 hours a day.

They come there, sleep for 4 hours and their company pays. One unit’s $900 and the other unit’s $950.

Josh: What did you pay for the property?

Justin: $40,000.

Josh: Holy smokes!

Justin: Yes, yes, love shot right?

Josh: That’s serious right there.

Justin: Serious dumb luck.

Josh: On the FHA thing obviously to everybody listening you want to follow the rules and not just say, I’m going to rent out both sides and not live there. That’s not a good idea.

Brandon: Not that I’m giving legal advice here at all but what I’ve heard is that you have to have the intent of living there. If something drastically changes after you buy it, I’m not saying, hear me out here, I’m not saying you should deceive the FHA. They’re not going to put a gun to your head if 6 months after you move into a FHA thing, they’re not going to sue you if you have to move because you got married or because the neighborhood was bad or somebody broke into your house whatever. It’s not lie they’re going to sue you if you move out for legitimate reasons. But you have to have the intent of living there.

Justin: That sounds a lot like the rationalization and justification I was doing.

Josh: You got this first property, you’re making, I don’t want to do the math in my head, I can’t really think right now. You’re making lots of percent on this thing and you’re into it. How does that next deal come together? What does it look like? Where does your learning process go?

Justin: I didn’t do a whole lot of learning after that first deal. I was just kind of like this is awesome this is so easy. I looked in that neighborhood after that and I bought two houses side by side from each other, two single-families. They were dirt cheap, $2,500 I ended up getting them both for because the lady just couldn’t hold on it.

Josh: This wasn’t Detroit, this is Pittsburgh.

Justin: No, this is Pittsburgh.

Josh: Pittsburgh the new Detroit.

Justin: Just so everyone knows that wasn’t a compliment. But I bought those and I ended up sitting on them forever and not doing anything with them. And I ended up doing some other deals at the time with some partners, two partners of mine. We bought some apartments and then we started some self-storage business. That kind of took up a lot of my time. With those two houses I ended up just getting rid of them with a seller finance to another investor.

Brandon: Why don’t you explain what that exactly means for those people who have no idea what that means to get rid of them with seller finance?

Justin: Basically I was going to local RE meetings, I was going on the Facebook blogging, real estate sites in Pittsburgh. I was just saying, hey do you want to be a landlord? I’ll let you walk into this for 5 grand. You fix them up, pay me. Actually I structured it pretty sweet, I said you don’t have to pay me anything for 6 months. And then after 6 months you start paying me $300 a month. But I need the down payment. It worked out and that’s a nice, in my opinion if you want to be a landlord and you’re starting off you want to do the work that’s pretty, I thought that was pretty grave a deal.

Brandon: I’m a huge fan of seller financing from both angles selling as a seller finance buying seller financed. If you’re just starting out you don’t have a lot of experience, don’t have a lot of money, something like that. Like an investor wants to sell your property, seller financing that’s how I bought my 24 units was with seller financing. They didn’t need a large down payment they just needed a little one, they carried the financing so I gave them every month instead of a bank and it worked out great. They aren’t everywhere, they’re not like a simple deal you just close and get out the MLS. But if you can find them it’s a great win-win for both parties if you structure it right.

Josh: Really quick on that $2,500 you said nobody had to pay anything for six months. You paid $2,500 for the two properties, was there a down payment on that or no?

Justin: 3 grand.

Josh: So $3,000 you don’t pay me a dollar for six months and 6 months later you owe me 300 bucks a month. Got it.

Brandon: So they could go in, do the work, fix it up, rent it out.

Josh: 5 years or 10 years on the note?

Justin: Oh no, what did I do? It was like 4 ended up being 4 ½ years what it came down to.

Brandon: You said you got into self-storage.

Justin: Yes, yes.

Brandon: I want to talk about that because we’ve never done a show on self-storage and I know you did a little bit of that one. First of all, basic question, again for those people who don’t even know what we’re talking about what do you mean self-storage.

Justin: Self-storage aka ministorage, I think the most recognizable thing if you’ve ever seen the Storage Wars on TV. The rollup doors, bunch of units.

Brandon: You bought a complex of them I’m assuming like a bunch of them?

Justin: No actually what I did was, me and my two partners of mine, we bought an old building for $20,000 right on a main drag. Pretty populated area in Pittsburgh and we totally gutted it, everything from the joists to the concrete in the basement, everything. And then we just installed units.

Brandon: How many units did you get in there?

Justin: 35.

Brandon: $20,000, how much did it cost to rehab the property?

Justin: That’s 60 grand.

Brandon: So you’re at 80 grand, you got 35 units, what is the average rent per unit?

Justin: $125 and we’re at about 80% right now.

Brandon: What standard is it about 75-80 and 90% full?

Justin: If you talk to the storage they say you should never be 100% full but only because you’re supposed to be increasing your prices every month or every year sorry. However, I’d rather just be 100% full.

Brandon: You said they’re averaging $120 a month?

Justin: $125 a month.

Brandon: 125 let’s say 35, $4375 then take 80% of that. You got $3500 bucks a month on an $80,000 investment that is a 4% deal.

Justin: I’ll tell you what, what’s great about that is I meet the tenants once and get the zero phone calls ever. Because the way we made it was, we don’t have like a person at the front gate or anything. We just have electronic key code access, we have 24 hour surveillance, everything is motion sensitive, they come and go as they please and we never have to bother with them.

Brandon: That’s awesome.

Josh: What do you do if somebody wants to rent a unit if you don’t have somebody working?

Justin: We have the phone numbers everywhere on there and they call for appointment only. And it’s the one time we meet them, we get our checks every month and that’s it.

Josh: Got it. I go, I rent, I’ve got a unit, I pay you guys and hopefully I’m following your terms of use and not doing bad things in there. Presumably there are people doing bad things in there because kind of what people like to do in those types of places sometimes or so I hear. Brandon? He’s all red I don’t know why he’s all red.

Brandon: I’m not embarrassed about it I don’t even know what they are.

Josh: I’ve rented that I rented them a few times like for moves and things like that. Tell us about like what is the eviction rate like for that type of property? What is the process like? Give us some more information.

Justin: It’s actually pretty much in your favor as the owner. And I will say this, I’m a big fan of Storage Wars the television show. I always said oh it’s going to be so cool when we have our first storage auction. And we did have our first storage option actually last summer. Two 10 by 10s packed full of all kinds of cool stuff. I said man are we going to make some money here you know? And truth be told the people on that show weren’t at our storage auction.

So we ended up getting $10 a piece per unit.

Josh: Really? What do you thing the units were worth? I’m just curious.

Justin: I don’t know, maybe a 100 bucks. Maybe I was just filled with years of watching that show. Watching this one go for 2 grand.

Josh: So is that the process? If you evict you have to auction off the belongings?

Justin: Actually what you have to do, at least in our economy you have to send 3 certified letters within, if it’s 15 days late, you have to send your first certified letter. And if they’re another 5 days late it’s 2 more within 10 days, it’s kind of confusing. But you have to have them all certified and then what you do is you send them on your 3rd certified letter say, we’re going to be putting this up for public auction. And they have 20 days from then to come and pay or claim it.

Now 10 days before the actual auction, you actually have to put, I always thought this was weird. You have to actually put their name and the size of their units and where obviously the auction is going to be in the paper. I should mention this, another awesome thing too. After that 2nd certified letter we put a lock on their unit.

Brandon: So they can’t come back without them paying you.

Justin: Right.

Brandon: Interesting. Self-storage seems really ideal, it really seems much, you don’t have to deal with tenants really, you don’t have to deal with toilets, you don’t have to deal with any of that stuff. What is the downside? Why isn’t everybody in this industry?

Justin: The one downside, where I will tell you to downsides and one from personal experience. When you start a new facility and I suppose this is with any business that’s in a brick and mortar area, you’re not established. We really didn’t start getting a whole lot of tenants right off the bat. I think we had two tenants for the first 6 months while being open. What are you going to do? Then through advertising and just people driving by, huge sign we started filling up.

I suppose the other downside would be you can’t charge a whole lot so you’re not, obviously a lot of them at $100 for instance you’re making a lot. And they’re popping up everywhere too, everywhere you go there are storage units, out in the country, in the city. I see them everywhere and you know what? The size of the units are getting cheaper and cheaper and cheaper. Competition’s actually getting a lot more serious here.

Brandon: I’ve heard that from other people with self-storages. They say it’s very much, it runs in kind of like a boom, bust cycle a lot like real estate does but it can get very severe. Because they’ll be like 10 years of overbuilding in one area. It’s like there’s not enough storage so then a bunch of people start building and it takes a few years to build them and get them all rented out. And then all of a sudden there’s way too much. And so supply and demand kicks in, the prices drop and there’s 80% vacancy everywhere. Then that lasts for 10 years and then back to the other way.

There’s just this big curve that I have heard that can happen in the areas. Absolute ways to overcome that, advertising and being better than the rest and being smarter than the next guy can help with that. But that’s just what I heard but again I never got to do it.

Justin: And one tip I will say this, if you are a storage unit operator I would highly, highly suggest getting the banking information for automatic withdrawal for your tenants. Because it seems like your self-storage bill is kind of put on the wayside a little bit. Much more so than rent or your electric, even when you send them a bill it’s just slow paying.

Brandon: Do you have a lot of issues with people paying late and stuff? Is that a constant struggle with chase rent?

Justin: No more than my apartment and house tenants.

Josh: It’s the same people.

Brandon: It’s the same kind of people.

Josh: Do you just have that one self-storage or have you gone and picked up other ones or built other ones?

Justin: We picked up another one this past fall, it’s another kind of conformed commercial building. The units are actually already in them so we inherited a bunch of tenants when we bought that. However, it also has office connected to it to. so it’s actually a nice buy.

Brandon: You’re a residential landlord you’re also a commercial landlord now and have self-storage guy. That’s cool it’s kind of a diversified.

Josh: Diverse. How many units are in that next building?

Justin: 17.

Josh: 17 storage and then what about office space?

Justin: I forget the square footage, we’re rehabbing it right now so it’s not currently being rented, the office space. But I always thought it’s be nice for like a dentistry practice or something or tattoo shop I don’t know.

Josh: Did anything come between after the self-storage then this next self-storage/office? Were there other properties that you had picked up?

Justin: Actually the last 1 ½ I’ve been focusing a lot on mobile homes, picking mobile homes up.

Brandon: Why mobile homes?

Justin: Because you can just get them for next to nothing.

Brandon: Tell us about that.

Justin: In my opinion I’ve come across people, they’ll change their mobile home and they can’t move them because as you may or may not know I know you have that mobile home park guy, 4 or 5 episodes I think. It costs him anywhere from 2 -3 grand to move one so people don’t want to move on specially if they are paying for a new house. And basically they just want to get out of it. A lot of the times you just negotiate getting the title for nothing.

Brandon: How do you find them? First of all how many have you got now, what’s your total number of mobile homes?

Justin: 19.

Josh: Are you buying the homes in a single park? Are you buying the homes on their own land? What are exactly are you doing?

Justin: Mostly in parks and I try to negotiate with the park owners. Because what’s in their benefit is going to be in my benefit too.

Josh: So you’ll go and you’ll pick up, you may own one home in this park, 5 in this park, 3 in another park.

Justin: Yes.

Josh: Got it, got it, got it.

Brandon: How are you finding them?

Justin: Craigslist, word-of-mouth in the park itself, tenants talk that’s all they do is talk. They’ll just call you up. I’ve put a couple of times “I Will Buy Your Mobile Home” signs I had two of those. Mostly word-of-mouth I will say that.

Josh: You got these parks for close to nothing it sounds like. What do you rent a mobile home out for?

Justin: I actually only rent to them and I do this $300 a month.

Brandon: What do you do with the rest of them?

Justin: The other ones I sell on terms.

Brandon: It’s kind of like that same strategy you did with the first $2500 house.

Justin: Yes.

Brandon: When you said the first those two houses I thought of the mobile home thing. We talked about that with John Fedro that same strategy of you buy them probably for cash if you can. And then just turn around and sell them on contract and make that good return on your investment.

Josh: And for those people who don’t know what the hell that means what does that mean? You are the bank again right?

Justin: Essentially yes. However as you know and you guys have talked about before the Safe Act and the Dodd-Frank Act. At least they’re a little scared of me so I went out and got a mortgage loan originator to make up all my notes. So everything is legitimate and I’m not just conjuring them up on my PC and saying you owe me this.

Josh: Can you explain that? What was that process like? What do they do? What do you do?

Justin: The tenants?

Josh: No, I’m talking between you and the originator.

Justin: He does everything, his contract was, I’d originally got one from my old lawyer and it was basically a rent-to-own contract which I don’t know how updated it was. And then when I saw his it was a lot more in detail and I guess it’s Dodd-Frank friendly pretty much. That’s what I’m paying for I’m legit.

Brandon: For those people that don’t know, Dodd-Frank was, when a legislation came out a few years ago from Dodd and Frank who led it up.

Josh: Barney Frank and Chris Dodd.

Brandon: Basically limits the amount that real estate investor can do seller financing to a degree. It says you can only do so many and before you do that you have to this and you have to follow these 50 rules. And the way around it of course is what you said is use a loan originator or mortgage originator.

Josh: You’re the lender of record but you don’t do any of the paperwork. At the end of the day they’re the originator and you are the lender.

Justin: Yes.

Josh: Okay.

Justin: I think some of the rules were you could only do 3 in your name or any kind of entity per 12 month period. I’ve never read it, I don’t know anybody who has read it or actually…

Josh: Guess what?? Dodd and Frank probably didn’t read it either.

Justin: Actually there’s some people I’ve noticed I’ve read on the BiggerPockets site there’s some pretty in-depth heated debates about it actually. I’ve totally stayed out of them I just read. There are some experts on your site there for sure.

Brandon: I’ve got lost in reading those because eventually these get so, I read them and I’m just like I have no idea any more this is so over my head I need a lawyer.

Justin: Yes.

Brandon: Kind of what you did, I’m just going to pay someone else to do this the right way for me and that’s smart.

Josh: Justin you’ve got these mobile homes and I understand you are looking to get into parks now.

Justin: Yes absolutely. However, I’ve been looking for a park for the last like 7 or 8 months. Truth be told they’re not very easy to buy. There’s so many factors especially with the infrastructure, the zoning and what terrifies me the most about it is and usually I’m not the type to overanalyze things, I’m not afraid to pull the trigger on them. But the last one I almost bought it had a septic system and that just terrified me.

Josh: You don’t want a puddle of poop on your property?

Justin: Well it wasn’t so much that it’s when I called the County Percolation Department they told me right off the bat they said we don’t have to come out there but we know it’s not working correctly. Then they also said it’s probably going to cost you this much to fix it so I couldn’t afford it. You’re looking at $60-$70,000 right out of the pocket because they’re going to come down there right after you buy it, I was like forget it.

Josh: Makes sense.

Justin: Regardless I mean especially dealing with some of these old mom and pops owners or these kids that have inherited the parks or these parks have been in their families so long. I’ll ask for a rent rule, he’s paying $150, he’s paying $200, I don’t know what he’s paying, that’s very common that’s what it is or they’re just making it up straight up lying.

Brandon: Going back to your discussion earlier on how you created a self-storage at a commercial property I wonder if it wouldn’t be easier to try to, it was empty for a while. But I wonder if it wouldn’t be easier to try to do the same thing with mobile home like buy a land, rezone it for mobile home or whatever.

Justin: I’ve heard that’s very difficult the rezone for mobile home parks.

Josh: Oh really?

Justin: At least in my area. I don’t know about anywhere else.

Brandon: Where do you see yourself going in the future? What’s your plan? Just more mobile home parks or just continue to do what you’re already doing?

Justin: Right now I’m currently in negotiations for this 3-store front here in Pittsburgh with 2 apartments above it. I really like the multi-families particularly, I like the commercials with some apartments above it. I really like that. I do not see myself buying any more single-families, I’m not saying, I don’t have anything against them but I just don’t…

Brandon: You hate them they suck.

Justin: Basically I don’t want to say it but yes. Bad experiences with them and I also have a masonry restoration company. So that’s my kind of main thing that I deal with on a day-to-day basis. And I hope to grow that the best that I can.

Brandon: Cool, awesome. Why don’t we move on to the section of the show we call the Fire Round.

It’s time for the Fire Round.

Brandon: These questions come straight to you from the BiggerPockets Forums which I know you occasionally hang out in. Justin you maybe have seen these before. Number one, somebody said this, “I want to eventually invest in commercial real estate like 30+ unit apartments or mixed-use maybe office buildings but I do not know where to start. Would it be a good idea for me to start by contacting an agent? Should that be my first step?

Justin: I don’t know, I’ve bought one through an agent, I bought another one just through the owner. I think you are going to get a whole lot more flexibility through the owner may be something more creative. Our seller finance which is always appealing to me. However I feel like at least the agents that I have dealt with when I’ve asked about things like that they automatically shut it down, I don’t know. The two commercial properties that I purchased were sitting vacant for so long and I had been looking at them so I know you there wasn’t a whole lot of interest in them.

So that was a little bit of leverage. Actually I got one, one of them was we offered for $40,000 for like three years ago they said no. I think they were asking $65,000 and then this past fall it was still for sale and we offered $40,000 and they were like all right. It’s something I drove past all the time.

Josh: I like that you said you drove past it, that’s a great way to find properties, where you go, where you live, where you work, where you drive around, keep your eye out. It’s a great way to find opportunities.

Justin: Another good thing about commercial properties, something I do a lot, I always advertise to other businesses for ad space. Particularly like on this side of our buildings we will put up vinyl signs with their businesses on. For like 7500 bucks a month and it’s just another way to create a couple of extra bucks every month.

Josh: Do you need permits for that?

Justin: If it’s a billboard if it’s protruding from the wall but not if it’s a vinyl type content right into the wall you don’t have to.

Josh: Obviously you want to check your local boss on that.

Brandon: One of my local mentor, good friend out here he’s got a property out on like the main drag on just like this beach town area. But a lot of traffic goes on this road, he sold just a sign like 4 by 4 vinyl sign. Got permission from the city and they didn’t care and sold it for $250 a month or something like that. Just on the front lawn of a rental property. It’s a huge lawn so it’s not like in the tenants’ way but it pays for all his lawn-mowing, as for him k=going out there it pays for a lot of his maintenance stuff. Just sticking a sign up for some local fishing company.

Justin: So sweet, yes.

Brandon: There’s cool ways you can make a lot of extra money in real estate if you get creative and think about it.

Josh: Next question, where do you find the listings of self-storage locations you can purchase? Or is there a place to find self-storage units? Is there like a website where you can find?

Justin: I did a lot of calling places, older, obviously I’m not going to call Guardian Storage or any of the super big names. You see those old ones all over the years and it looks like they have zero upkeep. And I just straight up call and ask if they’re looking to sell. And if they’re not write my number or I’ll go in and leave my card.

Brandon: It’s the same way with any real estate, that’s what’s cool about self-storage. It’s just like real estate it’s part of the real estate business so the same strategies that work for rental properties work for that. Very cool. I know you’ve done a little bit of wholesaling right? We didn’t talk about that today but you’ve done a little wholesaling right?

Justin: Yes I did like 3 deals total and then I was one of those people that they talk about, I’m like the people who don’t stick with it. It really is a time-consuming thing, people think it’s a quick buck. The wholesalers work hard and it’s a lot of work. You know what? I had other things going on that I put on a higher priority list than that.

Josh: So I can’t just say like, hey I’m going to be a wholesaler and like blink and have deals and money out of it? That’s what they tell you.

Justin: Yes, well if it did I would still be a wholesaler, I wouldn’t do anything else.

Josh: I know very, very few people who are full-time wholesalers, I know very, very few.

Justin: I think I know two.

Brandon: The ones who are tend to move on rehabbing anyway eventually and then landlording. Because if you’re really good at wholesaling then you could just get the deals for yourself a lot of the times. Anyway, the question was in the forums was for the Fire Round here, can you wholesale in mobile home the same way as a regular property? Did you know that?

Justin: Yes, I’m sure you can. And wholesalers have approached me but they say, basically it’s a finder’s fee what they’re asking for. And it’s just not worth it to me to go on with the deal. I got to put a certain amount, I’ve done enough of them now to know how much it’s going to cost me and what I like out of it. And if they’re going to ask for $500 or $1,000 for the finder’s fee keep it I’m not going to pay it.

Josh: For mobile homes is the maintenance more or less or the same as would be say a typical property, typical home?

Justin: No, no way. You can rehab a mobile home for definitely under $5,000 top to bottom, I know I do. It’s what you put into it too. I’ve seen people put granite counter tops in mobile homes. You can do whatever you want.

Brandon: The expectation’s probably not quite as high with the mobile homes. They don’t expect granite usually in a mobile.

Justin: No they don’t.

Brandon: Let’s wrap this thing up with the world famous…

Famous Four

Brandon: The Famous Four, these questions we ask everyone every show and we have for 118 shows or wherever it is we’re at now. We’re probably much further than that because this is being recorded early. But anyway, number one, what is your favorite real estate related book?

Justin: Rich Dad Poor Dad.

Brandon: I knew you were going to say that.

Justin: You know what? It’s by default because it’s really the only real estate book I ever read.

Josh: Business book, is there any kind of business book that you kind of, or anything that you’re reading or read for business?

Justin: Millionaire Next Door, blew my mind, I love that book. I think it’s so informative and it actually changed, it definitely changed the way I lived I may not really started to try to live below my means to the point where I try to buy 3 year-old cars now. It’s an awesome book, great read.

Josh: Nice, nice, awesome.

Brandon: Cool.

Josh: What about hobbies, what do you do for fun?

Justin: I like to hang out with my kids, I’m a cross-country dad so I help them, a lot of running. Also vaping too, I don’t know if you guys ever vaping this …

Brandon: I don’t even know what that is.

Justin: E-cigarette.

Brandon: Oh.

Justin: I know, it’s kind of corny but it’s like my one vice and it’s like my friends build them and they got me into it but it’s like see who can blow the biggest cloud.

Brandon: I didn’t even know that was a [inaudible][47:25].

Justin: I probably spend way too much fun on it but it’s just like something I do.

Brandon: That’s funny.

Justin: It’s right here, I haven’t been blowing on it this whole time.

Brandon: You can make a cloud. Do they have like competitions for that?

Justin: They do, I wouldn’t do that but they do actually have.

Brandon: What do you believe sets apart successful investors from those who fail, never get started or give up?

Justin: I think people who think they don’t deserve it. I truly believe that I deserve success, I deserve basically be wealthy and I’m going to work for it. I’m going to work every day if I have to weekends, holidays, whatever at nights. I feel guilty watching TV at nights sometimes. The stuff you can be doing.

Josh: Justin I’ve got a last question not part of the Famous Four here, you’ve got a very distinct story than a lot of the other people that we’ve had on the show. You know your story but you started, you did a lot a bad stuff it sounds like before and have had this full turnaround and that’s amazing and to be applauded for sure. So for those people who might just be down on their luck or might be making bad decisions who might be listening saying, hey you know what? This sounds cool but I don’t know how the hell to get anywhere.

What would you tell those people who are just in a bad place, they don’t have a lot of money, they’re working a crap job or whatever it is like crap, no offense, I won’t mention any franchises by names. Working $8 an hour job, they’re looking and dreaming and saying man I want to do this. What would you tell them and what advice would you give that person to get the ball moving?

Justin: Keep the goal in mind the end-goal in mind. Never be satisfied, feeling pass they’re just feelings they pass. If you’re walking down the railroad tracks with a garbage bag full of clothes like me. And you’re not at that point then you have a huge leg up on than I did.

Josh: And that’s amazing so what first steps, actual, attainable actions would you give to them beyond mindset. Like how do I? I want to buy my first house, I want to buy this, I want to do this. I want to flip, I want wholesale, I want to buy self-storage, I want to do anything, I want get into real estate. What would you tell me to do?

Justin: Actually you guys were just talking about this, physically write it down. I don’t know what happens when you actually physically take the pen to paper but physically write down your goals. I’m on that, just do it, just start doing one thing at a time, inches every day, a little bit more, a little bit more.

Josh: Cool man. Where can people find out more about you?

Justin: BiggerPockets and jmasonryrestoration.com, Facebook, contact me for whatever. Message me if you just want to talk, not just about real estate I don’t care.

Josh: Justin, we definitely appreciate it, it’s a pretty cool story and congrats on your personal turnaround. And congrats on the ongoing success and we hope obviously that it continues going forward and rock on man.

Justin: Yes thanks man, thanks for having me it was awesome, appreciated it.

Josh: For sure, my pleasure.

Brandon: Thank you.

Josh: Justin thank so much.

Justin: Thanks guys I’ll see you.

Josh: Alright guy, good show. Thanks again to Justin again really fascinating, really happy to hear. It’s hard, you hear about a guy who’s just made some really bad decisions and you want out and you want to judge him. That’s kind of a natural thing that people do.

Brandon: During the show I actually looked over, I was curious about the number of people in America who are addicted to drugs or alcohol and it’s like I think it was 11% of Americans are addicted. And then out of those 11% only 11% of them ever get treatment for it. I just thought that was fascinating thinking 50,000 people listen to our show, if those numbers were the same it’s a good chance that 5,000 people listening right now to this show who are struggling with that kind of stuff.

Josh: And if you are reach out and get some help.

Brandon: There’s definitely light at the end of the tunnel and Justin’s story kind of shows that. There’s ways out of that lifestyle you don’t have to be stuck in that and wallowing in that forever. I just think that yes his story is really inspiring kind of just showing that that’s possible.

Josh: Says the preacher. Alcohol Anonymous, there’s Narconon there’s all sorts of organizations definitely encourage if you’re fighting or facing any of that that you look into these organizations. Or if you know somebody who is help them out. Anyway it’s cool to see a guy like Justin who was able to work through it who really reached the bottom and now is starting to do really well. And we’re proud to hear this story and we’re proud to share it with you guys. And so hopefully if it inspires one person to step up and make moves, even if you’re not addicted or having other issues we definitely encourage you to get inspired. We encourage inspiration!

Brandon: Take action and last I’ll say is leave a comment for Justin in the show notes if you haven’t done that already. Get those at BiggerPockets.com/show123 and so just go ahead and leave message there. Ask questions, leave comments, whatever you can do. I guess I really appreciate that.

Josh: Awesome.

Brandon: Let’s get out of here.

Josh: Thanks guys for listening, this is BiggerPockets podcast. If you’re not yet a member of our site jump on BiggerPockets.com. Get involved, get active, make moves and take little baby steps every day if you’re getting started. That’s the way to make moves. I’m Josh Dorkin signing off.

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