40 Doors in the First 2 Years with Henry Washington

Brandon: This is the BiggerPockets Podcast show 366.

Speaker 1: 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. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

Brandon: What’s going on everyone? This is Brandon, host of the BiggerPockets Podcast here with my cohost Mr. David Green. David, what’s up man? Welcome to the podcast.

David: Thank you very much. It is dumping rain over here which is very odd for California. [crosstalk 00:00:42] do a whole lot.

Brandon: Is that odd for San Francisco in the winter? I feel like that’s all it does.

David: Probably fog more so, but yeah California in general we don’t get a whole lot of rain. You forget it exists until it happens.

Brandon: I understand that. I understand that. Well, I escaped that because I didn’t want to live in Washington anymore. And now I live in Hawaii but speaking-

David: Oh, I know why I was going to tell you about the rain.

Brandon: Oh, why?

David: Because I have two flips going on right now and the rain is keeping the contractors-

Brandon: Oh, fancy.

David: … from getting out there. I was wondering why I brought that up in the first place but I just realized it’s… I didn’t factor in for rain because we never get it.

Brandon: In other words you were just starting a conversation so you could talk about yourself. It’s like, “Hey, do you do Crossfit?” Oh, I actually do. I do Crossfit every day. It’s that kind of thing wasn’t it? Admit it?

David: I have to fit my Crossfit in between not eating meat and having healthy, clean food lifestyle.

Brandon: I believe you do. Well, you ruined my segue so I’m going to do it anyway. Speaking of Washington, today’s guest is Henry Washington. Like that? Was that a pretty good… That was pretty good joke.

David: Because Washington rains a lot, yes. Nicely done B.

Brandon: Yes. Well, see? Thanks. Our guest today is Henry Washington, real estate investor out of the Arkansas… Am I saying that right? Arkansas?

David: No, it’s Arkansas. You just [inaudible 00:01:56].

Brandon: Arkansas. The Arkansas, Arkansas market, super legit investor. I met him at BP Con 2019. I was really impressed by him and his story. I said, “You have to come on the podcast and tell it.” The guy has done… He’s got 40 doors in the last… just been doing this for two years, 40 doors doing over half a dozen flips a year, and just has such a great way of thinking about real estate and growing his business. You guys are going to love it today.

Brandon: Hang tight for all of that. But before we get to today’s interview with Henry let’s get to today’s quick tip.

David: Quick tip.

Brandon: All right. Today’s quick tip is simple. Something that Henry talks about in the show today, he actually landed his first deal. He’s going to tell you this story. He landed his first deal simply by doing what this quick tip is. Tell other people what you’re doing.

Brandon: We’ve said it before on this show but I’m going to say it again because people still don’t do it. If you’re trying to invest in real estate tell people, “Hey, I’m getting into real estate investing,” or, “I’m trying to invest in real estate. Or, “I’m a real estate investor. Do you have any deals?” Those questions, or I should say those statements to people are going to land you deals if you do it consistently enough. Let everybody in your circle know that you invest in real estate. That is today’s quick tip.

David: Quick tip.

Brandon: And now it’s time for the interview with Henry Washington. Again, so many good things in this interview, this story about how he got to 40 doors in the last just couple of years of doing it while still working a full-time job. Make sure you listen to his idea of like the deal funnel, how he’s built that in multiple different ways of getting deals, and why that’s so important.

Brandon: In the deal deep dive he walks through an amazing property. I call it like the better than BRRRR. It’s like even better than a normal BRRRR deal. You love that. Then in the fire round we talk about something called the four… We actually name it on the thing. I stole it from David. The four C principles with contractors. This is the four C principle when dealing with contractors.

Brandon: If you follow this mentality, this process, you’re going to have a million times easier time with dealing with contractors. You won’t do what I did like last Friday night which was drive around at 10:00 at night looking for an ATM machine to pay a contractor. Don’t do that. Don’t do what I did. Instead follow the four C principle. Hang tight for that.

Brandon: And without further ado let’s get to today’s interview with henry Washington. Mr. Henry Washington welcome to the BiggerPockets Podcast man. Good to have you here.

Henry: Thanks for having me. Appreciate it.

Brandon: Yeah. Let’s get into your story. You and I met at the BiggerPockets Conference 2019 and I was like, I got to get this guy on the podcast because his story is incredible. That’s how this came to be. Why would I say that? Tell us your story. Start at the beginning. What’d you do before real estate? How’d you get into it? Let’s go from there.

Henry: Sure. Yeah. I’ve spent most of my career working in the IT industry so I’ve done software development and data analytics for big retail mostly. Let’s see. I moved to Arkansas where I’m at in 2010. It was just me. I was here by myself. I was working. Life was great. I’d make a paycheck and then I’d spend the paycheck. Then I got married. I met my wife, and 365 days after the day we met we got married.

Brandon: Oh, wow.

Henry: Yeah. That went fast. Then I’d say maybe about six months into being married we had a conversation and were talking about what we wanted our future to look like, and family, and kids, and all that. In the middle of the night that night I woke up literally in a panic because I had gone from this single guy, just good job, educated, and now all of the sudden I’ve got a wife and we’re talking about having a kid.

Henry: I had no savings, like none. I had $1,000 in a savings account. I knew that that wasn’t going to be enough to support a wife and child. Like if anything goes wrong I was going to be in a tough place. Literally 2:00 in the morning started googling how to make extra money, and started googling passive income, and side hustles.

Henry: I came across a TED Talk where a guy was talking about passive income streams. The way he said there’s tons of passive income streams, but he uses real estate and rentals. I thought, we like real estate. We’ll stop and look at open houses for now reason so why don’t I look into this real estate thing?

Henry: Finally was able to go back to sleep, and the next day reached out to a real estate agent friend of mine who worked at the same place I worked. She was super thrilled that I was into it, and literally brought me a box of books and was like, “Pick one and read it.” The one I picked was Rich Dad Poor Dad.

Brandon: Nice.

Henry: I read it and was hooked from there and decided okay, well I’m going to do real estate. I’m going to buy a rental. I figured I’m a people person. I didn’t have any fears about being a landlord or what that was like. I knew from there I wanted to figure out how to buy a rental property. That’s kind of what got the wheels turning.

Brandon: What do you think it is about Rich Dad Poor Dad? Because we talk about that on the show a lot right? A lot of people, myself included in there, it changed our life and pointed us toward real estate though it’s not a real estate book. Why is that? What about that book made that such a thing?

Henry: I think one thing I got from it that actually isn’t technically related to my real estate background but kind of, A I think it’s super motivating. It just motivates you as a regular guy to feel like I can do something powerful right? And I can do something that’s going to change my life and my family’s life.

Henry: But I think one of the most important takeaways I took was the concept of paying yourself first. That’s not something I had ever thought about or done before. I had always paid all my bills and then tried to save. That worked for like two weeks and then it didn’t work anymore. I told my wife.

Henry: I said, “Hey,” after reading this book I said, “Let’s just set aside 10% of our income first. We’ll pay our tithes, and then we’ll pay ourselves. Then we’ll figure out the rest.” I said, “We’ll just put it in a savings account.” I said, “If something crazy happens it’ll be there. It’s not like we’re spending the money. It’ll be there. Let’s just try that, and let’s continue down the real estate path but if in 12 months I’ve never done a deal…”

Henry: I did the math on 10% of our income. I said, “Look at how much we’ll have in our savings account. That’s way better than the 1,000 we have now.” I mean that was just a powerful thing, taking that little step and watching that money grow showed me that the words in the book we’re going to actually be helpful for me. I think it’s just a motivating book.

Brandon: You know that concept of paying yourself first, it’s a common thing and Rich Dad Poor Dad talks about it, and the Richest Man of Babylon talks about it. Dave Ramsay talks about it. It’s so simple yet so powerful right?

Henry: Right.

Brandon: Now a lot of people will say, “Well, I don’t have any money to set aside for savings,” but the fascinating thing, and Mike Michalowicz who was a guest on the BiggerPockets Business Podcast recently, he makes this point about the reason we do that even if it’s just a dollar or two dollars, or five dollars, is because it’s more of a mental game than it is a tangible one. You’re not getting rich necessarily off 10% of your paycheck going into a savings account, but it’s more of a mental thing. What did that do mentally to you?

Henry: Yeah. That’s kind of what I was going to say is the thing I think that is a key for an entrepreneur to be successful, it’s mindset. It’s I think differently now two years into this real estate journey than I ever thought before starting. It’s just a lot… It’s the power of knowing you can take nothing and turn it into something right?

Henry: When you know you can do that it kind of takes away from some of the fear that investing can bring. One thing I tell people I like to do now that I never did before is when I do have a fear about something, when I have a fear about an investment, or a fear about making a decision, I try to write those fears down, right? I’ll put them on a piece of paper because I want to see.

Henry: I want the chemical reaction of writing it down and then looking at it to say, “Okay, is this a legit fear?” I take those fears, and then I write down what some of the actual things I can do to alleviate those fears are. And if there’s little things I can do to alleviate those fears that can help me take that step then I know the fear wasn’t really a big deal. It was just something…

Henry: We just kind of have these predetermined fears in our mind that aren’t really real. By writing it down and thinking through what are the things I can do to alleviate those fears it kind of helps me get over them. It helps me to move forward and kind of keeps you out of the analysis paralysis, or just fear for no reason kind of things that entrepreneurs tend to get.

Brandon: Yeah. That’s really good.

David: I know a lot of people when they’re learning, I want to learn something, they come looking for a step-by-step process, just like a formula. I hear this all the time. “Tell me where do I get the deals?” There’s this idea that there’s like a website. If you tell me what the right website is I’ll go there. They have the deals and I can buy it. And it’s that simple.

David: When people realize it’s not that simple is when they lose heart. I’ve noticed that the people like you Henry, and we’re about to tell people like what you’ve actually done in the period of time you did which is where this credibility comes from that I guess we probably should’ve established before we started talking to you, it was very, very impressive. Trust me.

David: Is the mindset is what the common denominator is with the people that are successful. The thing about Rich Dad Poor Dad to me that really stood out was it was actually kind of an offensive concept to a lot of people but it was that rich people think differently, that wealth is a result of how you think, whereas we like to believe well, wealthy people think that way because they started with wealth.

David: That’s why they think that way. But it’s not. It’s they became wealthy because they look at money differently. That little thing like paying yourself first, I’m going to set aside 10%, 20% of my money and I got to make it work with everything else. If there’s not enough, well then I better get another job, or I better make coffee at my house instead of Starbucks, or whatever little change you have to make is what rich people do with money.

David: They don’t earn money through W-2 jobs. They don’t pay as much taxes on their money. They think about investments as something that will grow when they’re not working. Really if you learn to think like rich people think what Robert Kiyosaki figured out was that you will get the results rich people get.

David: I don’t know why when it comes to money it is so hard for human beings to get that through their head because it’s like that with everything else in life right? If you want to get a better body then you do what people who have good bodies do. You eat the food they eat, you work out that they eat, and boom you get the body right?

David: We would never go to someone who’s in really good shape and say, “I’m not going to listen to your advice because you already look really good right? Of course you think that way.” But with money that’s what we do is like, “Well, he’s just a rich a hole. Why am I going to listen? He doesn’t know what it’s like to be me.” Yeah, that’s exactly why you should listen to him because he doesn’t know what it’s like to be you. Your way doesn’t work.

David: Your way gets you the result you get. I love like Henry, you have a talent for explaining this in very easy to weigh, understanding that you got to think like this. Actually I’m looking through the notes and you have such a solid, simple process for how to know when to buy, when not to buy. I’m really excited to get into this. Brandon, would you agree? Have you seen similar patters with people that are successful?

Brandon: Yeah, definitely. I mean it definitely is… How many times do we hear people talk about that rich people are lucky, or I’m not wealthy so I can’t invest in real estate? It’s like it’s a simple mindset shift. Obviously Henry you made that shift by reading Rich Dad Poor Dad. Let’s walk through that. How did you go from that to now you got the education side, you’re excited, you’re motivated? What did you do then with that information?

Henry: the first thing I did was I decided to just tell people that I was a real estate investor and that I was buying rental properties. Hadn’t bought a thing but I wanted to put that energy out there because I knew that that’s where I wanted to go, and I knew I was going to do whatever I needed to do to be successful so why not go ahead and tell people that that’s what I do?

Henry: By doing that a good buddy of mine came to me and said, “Hey, man I heard that you’re buying rental properties.” He said, “I have a house that I need to sell. Are you interested?” I was like, “Yeah, man. Tell me about it.”

Henry: He had a house where he and his family lived. He moved out of that house to move over to the church campus where he was going to church, and he was living there to save money because he had plans of buying this larger property that someone he knew in the church was going to sell to him. He was saving the money and he had gotten to the point where this guy had to sell that property.

Henry: He had the money to buy it. He needed to buy it now, but for him to use the loan product he needed to use he needed to sell the primary residence he had before. He said, “I got to sell it. I’ve got a tenant in there. I was letting him live there so he could get his credit together and then he could buy it. That never came to fruition so I need to sell it. Here’s what I’ll sell it to you for.”

Henry: I ran the numbers and it was a good deal. I said, “Okay. Well, I’ll buy it.” We talked it over, and I put it under contract. Then I panicked because I had no money. I had no money, and I didn’t know how I was going to buy it but I was just going to figure out a way. He understood this. Like I said he was a buddy of mine. He knew it was my first deal, but he trusted me to figure it out.

Henry: I went and just looked into how I could buy this thing, where I could get money from, what I could sell, how much I needed. Once I figured out I needed about 20 grand I couldn’t sell enough things to get 20 grand. I called, well he’s the business partner now. He wasn’t at the time. He was just kind of like a mentor [inaudible 00:16:33] then. I said, “Hey. I’ve got this deal. It’s a good rental. I don’t think I’ll be able to come up with the money. Would you step in and buy it because we need to help this guy out?”

Henry: This is when I got that first taste of that entrepreneurial mindset. I got it from who then turned out to be my business [inaudible 00:16:53]. He said, “This is a good deal.” He said, “I can buy this deal. I will buy this deal, but you need to figure out how to buy it. Go figure it out.” We sat on the phone and we brainstormed. 401k came up. I said, “Well, my wife has a 401k.

Henry: He was like, “Well, I think you can take a loan out against 401ks.” I was like, “Okay.” I did some research. I called my wife. She called up her company. They told her what she needed to do. She called me back and said we can do it. She took out a 401k loan for the amount that we needed to close on the deal.

Henry: I closed on the house. I kept the tenant in it. I raised his rents. And the new rent amount covered all my expenses and the loan payment back to ourselves for the 401k. That house was paying us back with interest for that loan.

Brandon: Yeah. That’s cool. And what I love about that is it shows that concept of the Rich Dad Poor Dad thing. The poor people say, “I can’t afford it.” Rich people say, “How do I afford it.” You basically, that mentor of yours was like, “You need to start asking the question how do I afford it,” which is where you started asking questions and saying, “Hm.” This wouldn’t have worked though if it wasn’t a good deal right? I mean if this was-

Henry: Right.

Brandon: … a horrible deal it wouldn’t have worked.

Henry: Right. And what really got me hooked on it was A, now I’m getting paid for an investment that I technically didn’t have to use any money for. Yeah, we’re using 401k money but it was a little different. Then because we bought a good deal I was able to take out a line of credit on the equity and I’ve been leveraging that to buy other properties either to flip or to BRRRR. That one deal has opened the door for me to grow exponentially.

Brandon: That’s cool. Now, did you buy that one for 20 or that was the down payment you needed to be able to buy it?

Henry: That was the down payment. I paid one [inaudible 00:18:53] that one. It was worth about 150.

Brandon: Okay, that’s cool. What did it rent for?

Henry: 1,100.

Brandon: Okay, that’s awesome. All right, so what happened after that. You bought that first deal and then you said, “All right, I’m retired,” and you kicked your feet up and did nothing?

Henry: Yeah. Yep, exactly. No, after that I just had this energy and I was like all right, well I need to get more deals. While I was going through that process of buying that home I was also starting to build a marketing campaign so I could do my first direct mail marketing campaign because I wanted to start a lead funnel.

Henry: Also at the time knew nothing about direct mail marketing. I just knew that I needed to find a way to get deals. I started my first direct mail marketing campaign and at the same time because I was putting that energy out there [inaudible 00:19:49] real estate investor I had another deal come to me. It was from a local realtor who was in the same real estate investors association as me.

Henry: He called me and he said, “Hey. Heard you’re buying houses. I have a deal.” That deal turned out to be my first flip project. Simultaneously I bought a flip and started the direct mail marketing. The flip was, I’ve kind of heard you talk about before we can get spoiled by our first flip. 100% that situation. I bought the house for 190,000. It was a large house so I knew I couldn’t rent it and turn a profit on it.

Henry: But it was a large house in a super desirable location. And the realtor had already figured out what the seller wanted to sell the house for. I ran the numbers at that price and it worked great from a [inaudible 00:20:50] perspective. I bought it for 190 and it needed $40,000 worth of work. I got to that 40 because I walked in with a couple of contractors. I had no clue walking in it the first time what it actually needed so I took a couple of people with me that knew what they were talking about.

Henry: It needed about $40,000 worth of work. I was able to have the bank finance. They financed the purchase and the down payment so I didn’t have to bring any money to the table. But they didn’t finance the rehab so I had to find rehab money. Again I had no money. This guy who was a mentor turned business partner, his name was Dustin, he had access to a line of credit.

Henry: He lent me $20,000, or he lent me the 40 I needed to do the rehab. I was able to basically finance 100% of the deal. We rehabbed the property and it sold for 325 I believe?

Brandon: Whoa.

Henry: 325 in two days for sale by owner. And the buyer also didn’t have a real estate agent.

Brandon: You just got to take all that as cash, I mean like save all that money.

Henry: Yeah. I was like, “Yeah. House flipping’s awesome. Let’s go buy 100 more like that.” I haven’t found one that awesome since, but that first one was great.

Brandon: That’s how that works. That’s good because it builds up that confidence you need to just start moving forward on it. That’s actually fantastic. All right. Again, you figure out a way to get this deal done in fact for no money because you borrowed money. The bank lent the money for the purchase and the rehab, or sorry the bank did the down payment. [inaudible 00:22:37] the down payment. The rehab though you borrowed you said from a friend?

Henry: Yep.

Brandon: You just did this flip. You made a bunch of money. I mean how much profit was that at the end of the day do you remember?

Henry: I think after [inaudible 00:22:49] done it was about 60,000.

Brandon: Yeah. That’s amazing. That’s amazing. Okay. All right. Then you’re also building this deal pipeline at the same time. Can you explain like why is that important for people listening to the show right now? Because a lot of people just think in terms of one off deals. They’re like, “I just got to get a deal.” You’re saying, “I want to build a deal pipeline.” What do you mean?

Henry: Right. Absolutely. I knew, and this is what I tell new investors all the time, but I knew that even though I was a new investor no matter what strategy I wanted to do, whether it be rentals, or flips, or assignments, however I wanted to go about that business the one thing I need is a good deal. Kind of what got me there was I kept going to the Real Estate Investors Association meeetings prior to me doing any steps myself.

Henry: All everybody was saying was, “There’s no good deals. There’s no good deals. I want to buy a house but there’s no good deals.” What that made me think was they’re not doing the work to find the good deals so if I do it I know I’ll always have exit strategies because there’s a bunch of people in this room who want deals who aren’t going to go find them, so I’ll go find them.

Henry: I knew that no matter what I do I need a good deal so I should focus on that. I should take whatever resources I have whether that be time, or money, and [inaudible 00:24:10] that into creating a pipeline of deals. Then from there I can… Whatever my situation is, whatever my capital situation is, I can let that dictate what I do with those deals because if there’s multiple exit strategies I know that I’ll make money on those deals.

Henry: That’s what I did. I wanted to start direct mail marketing, and since I knew nothing about direct mail marketing I just listened to different podcasts [inaudible 00:24:35]. I read different books. And I wanted to send postcards. I chose postcards because they were cheaper. I mean I just didn’t have a bunch of money at the time.

Henry: Matter of fact I had no money [inaudible 00:24:51]. I’ll get into that in a second. I wanted to send postcards and I didn’t know what I wanted them to say so I literally just googled real estate investor postcards, Google Image searched them. Looked them up and picked what I thought looked good and was a message that I wanted to put on there, and jotted that down.

Henry: Decided to mail… The criteria I chose to mail, again I had done a bunch of research and what I would do is I would jot down from these different podcaster things like who these people were mailing for motivated sellers. Then I would go through that list and if there was something in common with who everybody was mailing, that’s who I decided not to mail because I wanted to find people… I wanted people to get my letter who weren’t getting letters from a bunch of people in my area.

Henry: I wanted to find maybe a [inaudible 00:25:45] or somebody who wasn’t getting marketed to all the time because I was so new and I figured I don’t know how to compete with everybody. Find somebody who doesn’t have a ton of competition in that space then maybe I’ll have a better chance at getting a good deal. At that point everybody was mailing to absentee owners.

Henry: I said great. I’m not going to mail to absentee owners. I picked kind of the least common sources that I would research. One of those was aged for me which turned out to work out really well. I mailed to people with equity who were age 50 or older. What that brought to the table were people who were in situations where their house was catching up to them, or there was too much maintenance. They were looking for a way to sell.

Henry: Couldn’t [inaudible 00:26:37] there was so much maintenance with the house that needed to be done for them to sell traditionally, or maybe they were embarrassed by it. I got a really good return. I sent 1,000 postcards in my first direct mail campaign, and probably got 50 phone calls. I’d say I looked at 10 or so houses and I think I got two to three deals out of that first direct mail campaign. It was a good start.

David: Once the phone starts ringing and you get people on the phone I want to talk with you about what you do to get them under contract but before I’d really like your decision making criteria. Can you explain to people how simple it can be when you’re looking at a deal and you analyzed it, and how you decide what to do with it?

Henry: Yeah. Absolutely. For me I look at every deal that comes in from a lens of buy and hold first because that’s what I want. That’s my bread and butter. If I could buy every deal and keep it as a rental forever that’s what I’d do. That lens for me is if I could run the numbers, and that single family home is going to pay me over $100 a door after all the expenses I’m going to buy it.

Henry: It just [inaudible 00:27:53] for me, barring that the location makes sense. But from a numbers standpoint over $100 a door 9 times out of 10 I’m going to buy it. If it doesn’t hit that criteria, but it may hit the if I flip it I can make $15,000 to $20,000, then I’m going to buy it so that I can flip it because if it hits that criteria I can either flip it or I can give that to another investor because I know that’ll meet their criteria.

Henry: When I’m going to evaluate a deal, when I’m going to make an offer on the deal I know at this price point if I get the deal I can keep it. If I get it at this price point I can make money from a flip or at another way. It helps me when going in with negotiations because I can have multiple options for people.

David: Now, when you say $100 a door is that putting a certain amount of money down or is that no money down?

Henry: I do 15% down.

Brandon: Okay. That’s cool. All right. So what’s great about this is it just shows like if you have a good deal, if you’re out there hustling for good deals you’re going to get leads that are coming in. You just put yourself out there. You did direct mail. Not everyone who sends 1,000 postcards are going to get two or three deals. Who cares, right?

Brandon: You put yourself out there. You started getting leads coming in. You started getting deals, and then you get to put them through the funnel. Everything is a funnel right? I always say that. Everything is a funnel. You’re like all right, so this one… It’s almost like sifting. You know like as a kid you’re sifting for gold or whatever, and yeah the big rocks get stuck and they go to the next pan. Then the middle sized ones get stuck, and you go to the next one.

Brandon: That’s all you’re doing, sifting for good deals. That should be the name of this show, sifting for good deals with Henry Washington. Anyway, so you’re able to say, “Hey, if this can work as a rental great. If not then I’m going to try it as a flip. If not, okay I’ll try it as a wholesale.” If not we’ll let it go. And maybe even pass… Do you pass things on to real estate agents?

Henry: Sure.

Brandon: Yeah.

Henry: Absolutely. Yeah. Well, because I’m not an agent one of the things I did to build my team was in order to know if you’re getting a good deal you got to run comps right? I don’t have access to the MLS so I had to run comps. I networked with realtors from the Real Estate Association and I told them. I said, “Hey, if you’re willing to run comps for me any deals I don’t buy that they don’t need me, they need a realtor, I’ll give them to you.” And that’s been a great way for me to be able to get accurate comps because now I have a relationship with a realtor who will jump on my comps quickly when I need them run fast because he knows that if it’s not going to work for me it may work for him, and he’ll get a good deal out of it.

Henry: He’ll get a listing out of it. That’s been a great relationship for me. Then he lists all my… I don’t do for sale by owners anymore when I’m done rehabbing them but, so he lists all my properties after I flip them. It’s a good symbiotic relationship.

Brandon: That’s solid. Very cool. Hey, where are you at right now in terms of your whole portfolio? I mean rentals, how many flips are you doing? Wholesales? What’s your life look like?

Henry: Sure. I’m at about 40 doors from a rental perspective. Then we flip 6 to 10 houses a year.

Brandon: Wow. That’s awesome.

Henry: Most of, I would say half of those are whole tails where we’re just buying them because they’re good deals and putting them back on the market.

Brandon: Yeah. Wholetailing is fascinating because you’re buying a property and then you’re not going through a massive rehab.

Henry: Yeah. Absolutely.

Brandon: You’re just reselling it against your… Yeah. You’re flipping it with no work. That sounds like the ideal scenario. The reason you’re able to do that again is because you’re good at getting leads. You have a deal funnel. The deals come in the top. You sift through them. You get leads. You get things that are good.

Brandon: Let’s go back real quick because… Is direct mail still your main kind of avenue for finding deals today or have you shifted away from that?

Henry: Yeah. Direct mail, and I have a website, a lead generation website that I have a Google AdWords. The Google AdWords helps the sponsored ad rank towards the top.

Brandon: I want to talk about that. That’s cool.

Henry: Yeah. I get a lot of leads through there. I’d say my best deals come from my website.

Brandon: Really? Okay, let’s talk about that. I want to also go back to the direct mail but now that you brought that up now I’m intrigued. You got a website, a lead gen website. Is that through… Who’s that through? Or is that just your own…

Henry: Through Danny, through LeadPropeller.

Brandon: LeadPropeller. Okay. I have a LeadPropeller one as well. You got a LeadPropeller website. People then either search Google or they come up on AdWords. Explain that process because some people just have no idea even how Google Ads even work, so what does that look like?

Henry: Sure. Yeah. Once I got the website I needed to find a way to get that website ranked in the searchings right? You can do that a couple of ways. You can do it organically through search engine optimization, by ensuring that you have all the special right words in your website, or blog content, or something that’s going to help when people Google, to help your website to come to the top.

Henry: But that takes time, right? If you don’t have the time for that you can do a Google AdWords campaign. What that means is you basically pay Google to create, or pay someone to create a marketing campaign for your Google page. You’ll get a sponsored ad at the top when people search for whatever different types of words you put in.

Henry: I again used LeadPropeller’s Google AdWords team. They were able to create just different ads for me so when people search, “Sell my house fast,” or, “Sell a house fast in northwest Arkansas,” my ad will be at the top of the search results and it helps them to find me.

Brandon: That’s cool. And of course you’re paying for those ads so do you have any idea off the top of your head like what’s your average cost to acquire so to speak? Cost to acquire a customer? Cost to get a home? What are you paying?

Henry: Yeah. It depends. It depends on like what their search was. You pay per click, then depending on what their search was… Certain searches cost me more money. I would say as a whole I pay about $500 a month for my Google AdWords campaign. I’d say during the busiest parts of the year I might get 30 to 40 clicks a month.

Henry: During the slowest parts of year I won’t… Like right now I’ll get five, six, seven clicks just because not a lot of people are searching for selling their houses right now during the holiday season.

Brandon: Sure. Well, so let’s say you spent over the course of a year $6,000, 500 bucks a month. Over one year what do you expect? Like what kind of number of deals are you getting from that source?

Henry: Almost 6 to 10 deals a year from my website.

Brandon: Man, that’s amazing.

Henry: Yeah. I mean it more than pays for itself. Like I said it doesn’t sound like a huge volume but if you look at the profit margins on a deal versus what you’re paying per month it’s well worth it.

Brandon: This is where I wish more people understood just the power of paid marketing. I mean I’ve had so many conversations with people in the past where it’s like, “Well, I’m not paying Google for an ad,” or, “I’m not going to pay for this or that.” I’m like, “If you paid me $500 and I gave you back $30,000 would you do that?” Everyone’s like, “Yeah. Of course.” Okay, well that’s what we’re talking about. Now, it’s not a guarantee and that’s where people get weirded out. But man, I love, love, love paid marketing like that. That’s cool.

Henry: It’s absolutely worth it if you’re going to do the work after you get the lead. I think a lot of people… Part of the reason why I paid for the marketing is before I did it I would search these things and then click on who came up. I would call them, and most of them either didn’t answer the phone or if they did answer the phone it was a VA or somebody who wasn’t local. Or they were just unpleasant. I thought, “Great. That means if I get on here, and I get my ad at the top of the page, and I answer the phone and provide good customer service then I’m probably going to get the deal.”

Brandon: That’s smart. That’s smart. It’s a funnel. I mean you get a certain cost per click, and then a certain number of people are going to call you. A certain number of those are actually going to be interested. A certain number of those are going to accept your offer. The more you can improve each part of that funnel the greater chance you’re going to have of getting the deal, and the more money you make, and the less you spend. You really seem to have optimized that really well. I mean 40 doors is no small amount to do. And how many year… It’s like two years now right?

Henry: Just over two years, yeah.

Brandon: Jeez, like 40 doors… Now, are those multi… I mean that’s not like one 40 unit apartment building [inaudible 00:36:54]?

Henry: No. No. No. I think our largest is an eight unit.

Brandon: Wow.

Henry: Most are duplexes and single family homes. And the eight unit is technically four duplexes. It’s just on two parcels.

Brandon: Yeah. That’s amazing. How are you going about financing all these properties? That’s a lot of bank loans.

Henry: Yeah. Yes it is. It’s, most of them are small portfolio loans from banks. We’ll do the 15% down, and we’ll finance them that way. We’ve got about four banks that we work with, small regional banks that we work with. Then a few are owner financed so those have been great for me. I’d like to do more of those. But yeah, small portfolio loans and owner financing.

Brandon: That’s so funny. The other day somebody messaged me and said, “I tried to get a loan to go through,” or trying to get something. I don’t remember what it was but they said, “And I kept hearing about these portfolio lenders on the podcast so I finally just went out and found… I called a bunch of local regional banks and I found somebody. They funded my deal.” They were so shocked that it worked.

Brandon: I’m like, “I know.” This stuff actually works. Like if you go outside the big Chase, Wells-Fargo, US Bank world and talk to local people at a local bank they want to fund your deal. That’s how they make money is by funding your deal. A lot of other people are just going to the big dogs so that they can take those smaller deals that you got.

Brandon: Like you said 15% down on a rental property because a local bank was willing to do that, and you’re building relationships with them. Beautiful thing.

Henry: For that 8 unit we only had to put 10% down because we bought it at such a discounted rate. I mean the smaller regional banks, they just can be more flexible especially if your deal is a really good deal.

David: You know one thing I’ve heard that people do at these smaller regional banks and it sounds too good to be true but it’s not if you think about it is the bank will not lend to me on a loan to value of what you’re paying for the property. They’ll lend to you on whatever it appraises for. On that $150,000 house you got they would say, “We’ll give you 75% of that,” and you may end up getting more than 115 to put down on that house right? You may put nothing into that deal if you get a good enough deal.

David: It’s just like Brandon said, and like you said Henry, when you find the deal all the other stuff falls into place. Of course if you’re buying a house for 50 grand that’s worth 200 the bank’s not going to make you put down 15% of 50 grand. They’re getting like a 20% loan to value. They’re going to give you a lot more there. And if they don’t want it, well somebody else will. Even if they let you borrow 100 grand they still have 50% loan to value.

David: It’s a super good deal for the lender. Definitely do what these guys are saying and find the local bank that’s maybe not doing a ton of business, especially for you Henry being in a area that I would consider a sleepy town like Arkansas. You may not get that in The Bay Area where everybody needs money, but out there like Brandon said those banks are not doing a whole lot. That guy’s hungry.

David: He wants to put food on his table. He’s going to go to the board of directors and say, “We need to give Henry this loan,” AKA I need to get some money right now. I need to get paid. And that’s exactly right.

Henry: The power is in the deal. That’s why I tell new investors, especially if they’re having the either fear of getting started or the analysis paralysis, if you focus that time and attention on finding a good deal that is going to motivate you to take whatever the next steps are for you in your situation right?

Henry: If you get a deal that’s a sweet rental it’ll motivate you to go figure out how you’re going to finance it, to go figure out who’s going to do the rehab, to go figure out all those things that people are churning their wheels over all the time that it’s hard to figure out unless you have a deal that you’re working on. This is going to give you that motivation and push you in the direction because it’s the key to success anyway. If you find that good deal you’ll get there.

Brandon: Yeah. Yeah, you find a good deal you’re going to find the financing for it. You’re going to find a partner maybe, or you’re going to be able to wholesale it, whatever. You find a good deal you’re going to get the money. You’re going to get… All that stuff’s going to come together if you just go and get the good deal. Yeah. On the BiggerPockets Webinars, I teach a webinar every week on BiggerPockets, David Green here teaches webinars, and that’s what we talk about all the time is like once you know how to identify good deals…

Brandon: Like get a lead funnel, and it’s not that complicated. You can do direct mail like you did, or you could do… I mean there’s lots of ways. You could do Driving For Dollars. You could connect with wholesalers, tell everybody you know about real estate, which we didn’t harp on that but I meant to and then we moved on is like if you’re listening to the show tell everybody you know what you’re doing, that you want to be in real estate.

Brandon: Because people will naturally come to you just like they did for Henry here. Anyway, filter them through your funnel. Then you figure out what to do with it at that point because you have options. Great deals give you options.

Henry: Absolutely.

Brandon: Yeah. Your story is a perfect example of that. Hey, what do you wish you would have known Henry when you got started that you know now, like other than find a great deal what advice could you give a new investor right now and say, “Hey, do this?”

Henry: I would say the most difficult part about real estate investing is finding contractors and managing contractors, which is not something that I would have thought was difficult going into it. I would say that there’s been plenty of situations where not having a contractor lined up and ready to go has cost me money on the front side because your holding times are much longer.

Henry: It takes time to vet a good contractor. I would have spent more time trying to understand that part of the business and trying to understand how to find a good contractor, and understanding how to set your contractors up for success. You know the first deal I did I didn’t have a spec sheet or anything. I just walked the contractors through and said, “I want to do this, this, this, this, and this.” All that’s great on the walkthrough, but then when they actually start doing the work and they forget what you said… Right?

Brandon: Oh, my gosh. So true.

Henry: Yeah. Little things like that have cost me time, and money. If I would have known those things on the front side and at least gotten educated enough to know the right approach to finding a good contractor I think it would have helped me a lot more.

Brandon: You know the contractor thing is so much like… You know that quote, if I had six hours to chop down a tree I’d spend the first four sharpening my ax?

Henry: Right.

Brandon: The contractor world is exactly why that is such an important quote. If you just do the work up front to do the right things, like project management in any field… It doesn’t matter. It could be computers, or it could be real estate, or it could be anything. Project management in general the more work you do up front to keep things organized and to vet the right people on your team that are going to be working with you the easier the whole rest of it is.

Brandon: Even though the rest of it takes up 90% of the time it’s that first 10% of about the time if you just do that right. I mean real life story, I’ve been doing this now for what, 14 years now I think in real estate? Trying to get better at this, though still on Friday night last week it was 10:00 at night and I was driving around looking for an ATM machine to get cash to give to some random contractor guy who wanted to get paid because somebody on my team said he would get paid, and he didn’t get paid.

Brandon: I was like, “What am I doing? I have been doing this now for 14 years. How did I get here?” I was like, oh, because I didn’t do the up front work required that would have enabled me not to do that. And so I was punished, and rightfully so, because I didn’t do the upfront work needed to sharpen my ax.

Henry: Yeah. [crosstalk 00:44:35].

David: Isn’t that the way it goes?

Brandon: David were you going to say something?

David: Isn’t that the way it goes? Yeah. I just think you have such a good attitude Brandon that you acknowledge, “This is my fault.”

Brandon: [crosstalk 00:44:44].

David: Because most people would have found someone else to blame right? It’s the contractor’s fault for needing money. It’s my team member’s fault for telling him he’d get paid. It’s the real estate’s fault for being this way. But really it’s exactly that is I look at it like stuff’s going to happen in a project. Water is going to come down the chute.

David: And if I don’t have a place cut out for that water to go to it’s going to spill over me, and eventually it’s going to cover me and I’m going to drown in it if I don’t prepare for it coming. Problems will happen in business. People will need to get paid. People won’t show up. Things will go wrong.

David: When you take the time up front to put contingencies in place, and a plan in place, and train people for what are we going to do when this happens that water has somewhere to go and you don’t feel like you’re drowning. When you’re lazy, or you don’t respect that there’s a lot of work that’s going to go into this you just say, “Oh, I’ll deal with it when it comes.” Then you get caught up in this flood and you’re like, “That was horrific. I don’t want to ever do this again.”

David: If you think about Henry, his whole system is carving out a place for that water to go. He fills out a bunch of deals from his direct mail, and his SEO, and his phone rings. These deals come in. He jumps in right away, and he filters them, and he finds the 3 out of the 50 he can work with. Then he puts them along one of those paths that he’s already carved out. Here’s my criteria for buy and hold.

David: Here’s my criteria for flip. Here’s my criteria to give it to another investor. Henry never feels overwhelmed, and freaked out, and like, “Ah, I just can’t take it,” but somebody else would if they didn’t prepare the same way that he did. What I call is like what I’m describing right now as making a place for the water to go, that’s your funnel. That’s your system. That’s your business, whatever you want to call it.

David: You’ve got criteria in place, and people that are trained, and all the little pieces you need. Then the deals would be his phone ringing with someone like, “Oh, that’s all you need.” You find a way to find deals. You find a thing to do with the deals when they come. And you end up with a whole bunch of wealth and a really cool life. It’s just those two things you got to work on. If people could get…

David: I see Henry smiling because you’re like, “Yes. That’s exactly right.” If people could get that in their understanding, that to be good at real estate investing, to be good at selling houses, to be good at whatever you’re doing you find a bunch of leads. You figure out what to do with them. You proactively prepare for what’s going to happen when they come. You will have a really good business.

Henry: Absolutely. 100%. Real estate is just so super powerful and not extremely difficult. It takes work. It takes effort. It takes hustle. It takes a never quit mentality, but anyone can do it. If you are willing to put in the work and you have the mentality you can change your life, and not just your life. You can change the life of people around you and stimulate your economy. There’s just so many positives. I want to share that message with as many people as possible.

Brandon: That is so good. So true. So true. All right. Henry, let’s go over to the next segment of the show because I want to go a little bit deeper. It’s time for the triple D, the deal deep dive.

David: Deal deep dive.

Brandon: I don’t know if I can say triple D because you know what’s his name on the Food Network might have that thing trademarked but I’m going to do it anyway. Time for the-

Henry: You could-

Brandon: Go ahead?

Henry: I was going to say you could dye your beard blonde-

Brandon: I could.

Henry: … and [crosstalk 00:48:00].

Brandon: I could. I could be…

Henry: Yeah, that would be…

Brandon: I’m doing it. All right. Time for the deal deep dive. Henry, we’re going to dive deep into one particular property you’ve bought or a deal you’ve done of some kind and get to know it a little bit more intimately if you will. Let’s fire a bunch of questions. You got something in mind that we can dive into?

Henry: Yeah. Absolutely.

Brandon: All right. Question number one for me then, what kind of property is it and where is it located?

Henry: Yeah. This is… We’ll talk about that eight unit that’s four duplexes. It is multi-family, four duplexes and two empty lots.

Brandon: All right. That’s in Arkansas right?

Henry: Yes, Fayetteville, Arkansas.

David: How did you find it?

Henry: I found it through hustle. A partner and I were out driving for dollars one day and we came across an apartment building that looked like the roof was having some trouble. We added that to our Driving For Dollars list but because we were mainly only looking for singles and duplexes, because this building looked pretty dilapidated, I looked into it as soon as we got back home.

Henry: I pulled up the county records and I found the owner. I happened to pull up the deed as well because I didn’t want to mail the PO box. I wanted to see if I could find an actual address to mail so I pulled up the deed to see if I could find an actual address. What I found on that deed was it had the stamp from the title agent at the closing company that they closed with.

Henry: She was the same title agent that we used to close all of our deals. I said, “Well, maybe I’ll call her and see if she knows the guy.” She’s been in the business for years. I called her. I said, “Hey, Brandy. I’m looking at this deal you closed umpteen years ago with so-and-so. Do you know this person?” She was like, “Oh, yeah. I know him. He’s a good friend.”

Henry: She was like, “You want to talk to him?” I was like, “Yeah. That’d be great.” She called him, told him we were interested in buying this apartment building and set up a meeting for us. We went and sat down. My business partner and I went and sat down with this gentleman and talked through that building. It worked out that we were not able to purchase that building.

Henry: Right at the end of that lunch meeting my partner and was like, “Well, do you have anything else you’d be willing to sell?” He was like, “Well, I got some duplexes but they’re bad. You don’t want those.” I’m like, “No. We probably do. We probably do.” We got up from that meeting and we drove over to these really run down duplexes on this cul de sac street. He said he was willing to sell them if we would buy them at what he owes the bank on them. He just wanted to get out.

Henry: I mean, and they were bad. I mean they were falling apart. But four duplexes and two empty lots. I say they’re empty lots. There were six duplexes, but two of them burned down because drugs are bad. We were able to… That’s how we found them was through him. We went through the purchase process from there.

Brandon: All right. How much did you pay for it?

Henry: We paid $200,000.

Brandon: Okay.

David: And how did you negotiate that price?

Henry: Yep. That was a struggle. He said he just wanted to pay off the bank, but didn’t want to tell us what it was. We made an initial offer of like 110, which is crazy low. They shot it down. We went back and forth maybe 3 or 4 times and landed on 200,000 which is what he needed to pay off the bank. We bought it for 200,000 and it needed about, I think we budgeted 140,000 for renovations.

Brandon: Wow. Okay. How did you fund that entire thing then?

Henry: Yeah. Small regional bank. We went to them with the deal. Because we were buying it for such a good deal, and we were putting about 140 into it they wanted to see it. They actually came out and they toured the property. We showed them, and told them what we were going to do to renovate it, and what we thought rents would be when we got done. We were able to buy that for 200 with 140 renovation budget. And we put 10% down.

Brandon: They actually wrapped the renovation in there and you just paid 10% of the whole entire thing down?

Henry: We paid 10% of the purchase price.

Brandon: Love it. Dude, that’s amazing.

David: And they funded 100% of the rehab?

Henry: Yes, sir.

Brandon: Boom. So good.

Henry: Yes, sir.

Brandon: So good.

David: This is a good time to be borrowing money. I’ll tell you what. Okay. What did you end up doing with this? Because I’m sure… This sounds a little different than just a standard deal.

Henry: Yeah. We still have it, and the plan was always to make it a longterm rental right? And so we renovated… Let’s see. We’ve renovated six of the eight units. The other two are starting construction right now. We’re renting… Average rents at this place are 725 to 750 a door. We’ve got 6 units rented at about that rate. In a couple of months we’ll have 8 units rented at that rate. Then the plan from there is to… The benefit to the empty lots is they’re zoned for multi-family up to 24 units.

Henry: We’re going to try to stick as many units as we can on those other two lots. We were able to buy a good deal, buy a great deal for very little capital down that’s already cash flowing at six units. That’s going to even get better with eight units. Then we’ll build as well so I’ll kind of get to get my feet wet in some new construction.

David: That’s because you bought somebody else’s problem.

Henry: That’s right.

David: That’s exactly what you did.

Henry: That’s right. And we asked. He wasn’t even going to show it to us. Whenever you’re meeting with somebody who’s in this business ask them. Ask them what they got. They might have something that’s great for you.

David: Isn’t that funny that you’ll hear people say there’s no deals and then Brandon will say, “Well, how many people have you talked to about real estate?” They’re like, “Well, why would I talk to people when there’s no deals?”

Brandon: right.

Henry: Right. I mean we went. We basically had a meeting where we decided we weren’t going to buy the thing we went to have the meeting about, but because we spoke up and said, “Well, what else you got,” we landed probably our best deal.

Brandon: You know-

David: That just scares me as to how many chances I might have missed [crosstalk 00:54:45].

Brandon: I know. Me too. Yep. I know. Actually one of the strategies I teach on webinars sometimes, it’s a really easy thing for new investors to find deals is go on Craigslist on like… Set a reminder on your phone every Monday morning. Go on Craigslist and go to the for rent section. Go look for every one of the mom and pop landlords listing their properties for rent. You always know it’s a mom and pop because it’s like two lines and like a crappy picture right?

Brandon: You call them and just say, “Hey. I’m not looking to rent your property but I’m a new investor and I’m looking to buy something. Any chance you want to sell that?” Now, chances are they’re not going to want to but what do we know? We know that A, they’re a real estate investor, and B they’re probably not very good at listings which means they might not be a good landlord.

Henry: Right.

Brandon: Then the third question, if they say no… I mean it’s a win-win either way because if they say no, fine. You built a relationship. You have a phone number of a landlord now in your area that owns property. If they say no on that one the question you just asked is perfect there. Okay, well do you have anything else? Chance are they’re going to go, “Hm. Well there is that one piece of junk property I hate but you’re not going to want that one.”

Henry: Yeah. Yeah.

Brandon: That one phone call could lead you to a dozen or two dozen leads because that person owns two dozen properties. Now you get to find out what their problem is, and you get to take it. Simple strategies like that, and the combined with what you just said about asking if they have anything else, so, so powerful.

Brandon: What’s cool also about this, it’s interesting, is we talk a lot about the BRRRR strategy at BiggerPockets, the buy a property, you rehab it, you rent it out, and then you refinance it, get a whole new loan. And then you repeat the process. Now the reason we talk about this, number one question I get about BRRRR is, and I don’t know Dave if you’re the same way, but why wouldn’t you just get one bank loan on the whole thing?

Brandon: Because what you did is that. You didn’t have to even refinance it. You got a loan that had the rehab into it, and they just made it one thing. That’s better than BRRRR. It’s like the BRRRR plus method. But it’s really hard to find those banks, but the banks, they’re the local community banks that are going to be the ones that can do the better than BRRRR strategy there. That’s cool.

Henry: Absolutely.

Brandon: Love that. All right. Finally at the end of the day what was the outcome in terms of what do you think the property is worth today? What kind of cash flow are you expecting from it now?

Henry: Sure. I think it’s worth somewhere between 500,000 and 600,000.

Brandon: Wow.

Henry: If you count the buildings, and you count the lots who knows what it’ll be worth once we actually develop those other two lots. I mean it’s just been a good deal.

Brandon: Awesome. Awesome.

Henry: like I said average rents are 725 to 750. One of the duplexes is a one bed, one bath so the rent’s a little lower on that one. But the other ones are two ones and two twos.

Brandon: And the fact that now you own this property that’s already been rehabbed your capex, like your capital expenditures and your repairs should be lower longterm. You might have a few kinks to work out. There always is at the beginning of a rental of a new unit that’s been rehabbed. But you should have fairly low expenses for years going forward now.

Henry: Right. Right.

Brandon: So cool.

Henry: Also this property we own most of the street. I think there’s only three houses on the street that we don’t own so we were really able to kind of change the whole dynamic of the neighborhood by rehabbing these properties which helps us keep the rents up.

Brandon: Yeah. So good. So good. All right last question David from the deal deep dive.

David: Well, what did you learn about this deal?

Henry: Oh, man. Drugs are bad. That’s for sure. That’s one thing we definitely learned. I think this deal has gone on longer than we’ve wanted it to from the rehab perspective so I think I’d say we got this deal early enough in our real estate investing journey that we didn’t have the ducks in a row on the contractor and rehab side.

Henry: We spent a lot of time vetting a lot of contractors and have still… We’re on our third one now working on this same project. We’ve kind of taken learnings from each of those scenarios and we’re trying to be better at being able to do rehabs on projects, especially when you have them at a large scale.

Henry: Like I said we’re doing spec sheets. I’m sending those spec sheets out before I even meet the contractors there. Like I want you to get a sense for what you’re getting yourself into before you get there so that we’re not wasting each others’ time and so that you understand what the size of the prize is for you before you even get there. Those are things I just didn’t think to do on the front side. Most of the lessons learned are from that contractor perspective there.

Brandon: Very cool. Very, very cool. Well, thank you for sharing that. That was one of my favorite deal deep dives we’ve done yet. That’s super legit deal. It reminds me a lot of the fourplex that I bought from [inaudible 00:59:43]. We bought that one for dirt cheap, had to rehab it. Now we’re getting 750 rents out of each unit, and yeah, very similar.

Brandon: Cool. All right man. Well, before we get onto the last final couple segments of the show I’m curious. What’s the future look like for you? I mean are you still working a full-time job somewhere? Is this your full-time gig? Then what’s it look like going forward?

Henry: Yeah. I’m still a full-time employee man so the real estate is still a side hustle. I am trying to move into small, multifamily… I say small multifamily, five units and up to as many as possible really. I’m halfway into Matt Faircloth’s book on raising private capital. The next steps for me, I’ve already started marketing for larger multifamily buildings. Now I’m at the stage where I’m trying to figure out how to source the money for these larger deals because I want to start scaling a little higher.

Brandon: Super cool. Super cool man. All right, well with that let’s head over to the next segment of the show, the world famous fire round.

David: Fire round.

Brandon: This is the part of the show where we fire some questions directly at you from the BiggerPockets Forums to see what you got to say. Let’s do that now. Number one comes from Brent Davidson. When you’re hiring a contractor, this is actually perfect for today’s thing, how do you handle payments? I know you’re not supposed to pay for the whole job up front, but do you pay for something up front?

Henry: Yeah. Yeah. I’ve got a couple different scenarios. I’ve been lucky enough to find a contractor who puts his skin in the game and I don’t have to pay him until he’s completely done. In that scenario I don’t pay anything. But most contractors want some form of down payment from me. What I try to do is I’m fine paying a down payment, but what I ask them to do is to show me which line items that down payment is going to cover so that when they’re asking for their next draw it’s easy for me to say, “Okay, I paid you X down and that covered these things, and these things are now done so I’m okay paying you the draw.” Then I make them tell me what that’s going to be for.

Brandon: All right. Beautiful.

David: I’ll just add onto that that 99% of the complaints I’m getting from people I love right now saying, “I did everything you said in your system except I paid the contractor up front. What do I do now?” I don’t even know if there’s an answer for what do you do now. You just can’t… It’s like trying to put the toothpaste back in the tube. Once you paid them you’re committed. You just got to trust right?

David: Stop doing that. If you really, really like that contractor okay, but let them do it. Give them a little bit of money. Let them do some work, and give them some more money promptly. Don’t make them wait two weeks. That’s not cool, but yeah. Don’t squeeze out the toothpaste and then call me and say, “How do I get it back in the tube,” or anyone else because science has not solved that.

Henry: Most of your deposit when you first start goes towards materials to get them started. I just make them tell me what materials they’re going to get.

David: Then you buy it?

Henry: Then I make sure… Either I’ll buy it or I’ll make sure that that’s what they got.

Brandon: I always get annoyed like when contractors who I’m paying material… Because a lot of times I’ll buy all the material ahead of time like at a Lowe’s. I’ll just go get a big bulk order. Then they still ask for half down. I’m like, but I’m buying all the material. You literally have no expenses other than your employees which if you get the work done you get paid at the end of the week or whatever, every couple of weeks.

Brandon: Still it just irritates me. I know why they’re doing it. It’s because they have to pay for last week’s work that they don’t have money for, and so they’re using your down payment as salaries or whatever for their team, or for their beer for the weekend, I don’t know, whatever. It drives me insane. Yeah. The one… If there’s like one trick I’ve learned with contractors that just worked so well it’s like they got to always be hungry.

Brandon: Then if you do your job and pay them responsibly and quickly like you said David, like for example, if it’s like hey, you get $2,000 when the carpet is done, it is amazing how fast that carpet will get done when you hold to that rule of you get paid the $2,000 when your carpet’s done. They will work until midnight. They will bring in a friend to get that carpet done by midnight because they want that check from you.

Brandon: Then if you pay them quickly then you’re training them. I just get this done I get money. I get this done I get money. They work faster because they know that.

David: I don’t know why that’s so hard for us though, because Brandon you have dogs. Do you notice your dogs are more obedient when you have a treat in your hand?

Brandon: Yeah.

David: Not to compare contractors [crosstalk 01:04:24]. I make this mistake a lot okay, but it’s like just with little kids. You want a little kid to do something and you say, “You can do this if.” And you say, “You’ll get to do something else you want,” all of the sudden it’s so much easier to obey.

Brandon: Like-

David: It’s exactly like that.

Brandon: … last night. Last night I have carrots. Rosie refuses to eat carrots or any vegetable at all, so I have a piece of carrot, a chocolate chip, a piece of carrot a chocolate chip. Piece of carrot. Chocolate chip. I teach her. You eat one carrot bite you get to eat the chocolate chip. You know what she did? She went and picked up every single piece of the carrot, shoved them all in her mouth at one time, swallowed it, and then grabbed a handful of chocolate chips and ate them. I had been trying for an hour to get her to eat her vegetables. All it took was a little bit of a reward, and they just got it done.

David: And how much effort would it have taken for you to get her to eat those carrots without the chocolate chip? Like 100 times more.

Brandon: Yeah. [inaudible 01:05:12] awful.

David: Yeah. There you go. You heard it here first. Carrots, contractors, and chocolate chips.

Henry: Carrots, then chocolate chips. Got it.

Brandon: That sounds like a new book from BiggerPockets. Yeah. Carrots, contractors, and chocolate chips.

David: Contractors and chocolate chips.

Brandon: I would buy that book. How to handle contractors… Yeah. This is a great idea.

David: Folks, listen to this podcast because Brandon’s going to take credit for that quote. As soon as we wait, like a year from now he’s like, no one’s going to remember David’s [inaudible 01:05:38].

Brandon: No one’s going to remember it.

David: He’s going to jump on it.

Brandon: There you go. It’s all mine now.

David: All right, next question.

Brandon: It’s called the CC principle actually, the CCC principle. [crosstalk 01:05:45].

David: The four C’s, yeah.

Brandon: [inaudible 01:05:47]… You’re right. The four. I call it the four-

David: Chocolate chip.

Brandon: … C’s principle. I just made that up.

David: He’s already named it. That’s funny. He’s like texting Ryan Murdoch, “Hey, trademark this really fast-”

Brandon: Hey trademark-

David: “… before Damon’s team-”

Brandon: … yeah, the four C’s principle.

David: “… can get on it.”

Brandon: Anyway. All right.

David: All right.

Brandon: That was a long fire round.

David: Next question from Roman in Philly. How do you go about finding new tenants? What websites are you getting most of your leads from? Thank you.

Henry: Yep. All I do for new tenants is… I use Cozy as my property management system, Cozy.co. Cozy syndicates… I create the listing on Cozy. It syndicates to Trulia, and Realtor, and HotPads I believe. Then I put an ad on Zillow. That’s it. I don’t put a sign in the yard. I don’t use Craigslist. I don’t use Facebook. I just use those sources and I get enough leads to filter through.

Henry: Then I do open house style showings. I pick a time when I will be there and everybody has to come at that time. Kind of what I’ve learned doing that is I try to get there a little early, and I don’t stay much long past the time I said I would be there. If I said I’d be there at 1:00, and the showing’s done at 1:10, I might stay until 1:15 and then I’m gone.

Henry: Because if people show up late, that could potentially be a problem for me later. Maybe they’ll be late on rent. I like it when people are punctual. I like to utilize my time well. I make everybody come at one time. And if it doesn’t work for them I’ll give them another time the next week. I’ll be there in the next couple of days but I don’t just meet every individual tenant at the place.

David: That takes a little bit of faith to be that way, because you always wonder like what if I missed the perfect one you know? But all my experience with having like good employees, or good tenants, or good anything’s is they don’t let something really small deter them. Like if they really want that place they’re going to show up when you tell them to be there. They’re going to be there on time. They’re going to come with a good attitude and make a good impression.

Brandon: Good stuff. All right next one. I like this one. How do you… The standpoint they’re asking about, like motivated sellers, we’re talking about sellers, but how do you make yourself more likable? How do you get a seller to sell to you and not to somebody else? Any tricks on that?

Henry: I think I’m just naturally a people person. I think that helps. I always try to keep in the forefront of my mind that this is a people business. It’s not a real estate business. Real estate is the way that money is made, but people are the vehicle for getting us there right? I make sure that I try to take the time to understand what the situation is because we’re buying situations right? We’re not buying houses right?

Henry: If we were just buying houses they’d call a real estate agent. But there’s definitely a situation going on and I want to try to sympathize and empathize with these people as I’m dealing with that. I sit down with them and I just talk, and I just listen. Sometimes I know, you know, I know the second I get there that I’m not going to be able to buy the house but that doesn’t stop me from trying to understand what their problem is.

Henry: There have been multiple scenarios where we’ve done things to help people that had nothing to do with buying their house, and we didn’t buy their house, but it was just the right thing to do right?

Brandon: Like what?

Henry: One of the things, there was a lady who was suffering it looked like from… She had cancer at some point. She had this immaculate yard. I mean it looked like a professional landscaper had maintained this yard for years. It was just, everything was well groomed. We went to look at her house and she just wanted more than made sense for the home.

Henry: But while we were talking to her part of the reason she was wanting to sell was because there was a lawnmower repair shop behind her, and they were running big machines. The carbon monoxide it puts off really made her more sick. She just couldn’t run her lawnmower to then take care of her yard because she just wouldn’t feel well. One of the things we did there was even though I couldn’t buy her house we went out and we bought her an electric lawnmower so that she could take care of her yard, and we dropped that off to her.

Brandon: That’s cool.

Henry: It meant a lot to her. If you think about it from a people perspective it’s just a good thing to do, but also I’ve since gone back and checked on her just to see if she was all right, and she told me about a deal around the corner. And I went around the corner and knocked on the door for a house that ended up being a really, really good deal.

Henry: We didn’t get to buy it. Another investor, actually a friend of mine ended up buying it but had I shown up at her house sooner I might have been able to buy that deal right? Had we not done what we’d done you might not have some of those opportunities. Like I said it’s a people business. People talk. You never know who, somebody you’re dealing with whether you’re not buying their house might tell and have to call you.

Henry: I get word of mouth referrals all the time and I’ve bought several properties from word of mouth referrals. I just try to find a way to help everyone. If you think about each of your appointments as an opportunity for you to help someone, and figure out a way to do that whether that means buying their house or not, the success will come.

Brandon: Yeah. Really good. Really, really good dude. All right, well let’s get on to the next segment of the show, the last segment of the show. And this is our famous four.

David: Famous four.

Brandon: All right. The famous four is a part of the show where we ask the same four questions we’ve asked every guest every week and now we’re going to ask you. Mr. Henry Washington… by the way I mentioned earlier a guy named Mike Michalowicz on the BiggerPockets Business Podcast, just a big shout out to that episode, was so good.

Brandon: It transformed a lot of how I operate my business so I just want to recommend everybody go listen to… I mean listen to the show in general, and subscribe to it and all that, but go look up the episode with Mike Michalowicz. It was so, just inspiring yet reminded me of some stuff that I just wasn’t doing right in my business. Check that out. That’s why again the BiggerPockets Business show is so good to listen to because we are running businesses.

Brandon: Yes we’re investing in real estate, but we run real estate businesses kind of like a guy who owns a bakery. Yes, they’re baking cakes but they own a bakery. And we own a real estate business. Check it out. Anyway, side note there. But now, Henry Washington number one favorite real estate related book.

Henry: I would have to say honestly right now has been the book on raising capital.

Brandon: Ah, cool.

David: Wow, and that’s only having read-

Brandon: [inaudible 01:12:48].

David: … half of it.

Henry: Having read half of it. I mean, i think it does a good job of explaining some really, what can be difficult subjects on raising money in a way that makes sense for everybody. Yeah, absolutely. I’m definitely enjoying it.

Brandon: Good job Matty F.

David: Very cool.

Brandon: All right. What about your favorite business book?

Henry: Favorite business book. It’s a little different. I don’t even know if you’d classify it as a business book but I really enjoyed The Alchemist, not necessarily a business book but just a great book for motivation and understanding that if you’re doing the things that you are meant to do then the opportunities will come and you’ll be able to realize the things that you want to realize in your life and in your business.

Brandon: I really want to write a book someday just like The Alchemist because it was such a powerful book.

Henry: I loved it. Loved it.

Brandon: Yeah, I’m like I got to write the next… The Alchemist Two, Revenge of the Alchemist. It’s going to be great.

David: That’s hilarious, revenge of the alchemist.

Brandon: Number three, David?

David: It sounds like The Office, like the Michael Scarn [inaudible 01:13:58].

Brandon: Yeah. Yeah. Yep.

David: [crosstalk 01:13:59].

Brandon: That’s what it is.

David: All right Henry, what are some of your hobbies?

Henry: Oh, man. Hobbies. I’ve got a 15 month old daughter and she is so much fun.

Brandon: So no hobbies. All right.

Henry: She is so much fun so I’m really enjoying spending time with her. I play basketball. I haven’t played in a couple of months now but I used to play quite a bit so I enjoy doing that and you know, hanging out with my wife. We have a good time.

Brandon: Very cool. All right, number four. Henry, what do you think separates successful real estate investors from all those who give up, fail, or just plain don’t get started?

Henry: Yeah, man. I mean we talked about it earlier. It’s mindset right? Being open and willing to understand if you’re first getting started that you probably don’t have the right mindset, and being open to understanding and changing that mindset. And realizing that there probably isn’t a problem that you can’t figure out a way to solve on some level. Having the right mindset and the right attitude is what really sets apart those successful investors.

Brandon: So good.

David: Beautiful. This has been very good Henry. By the way, did we ask you how many units you have right now?

Henry: Yep.

Brandon: Yeah, 40 doors.

Henry: 40. 40 doors.

David: 40 doors.

Henry: Yep. 6 to 10 flips a year.

David: How long ago did you get started?

Henry: Just over two years ago.

David: There you go. 40 doors-

Brandon: That’s awesome.

David: … in a little over two years. Awesome.

Brandon: So cool.

David: For people who want to find out more about you where can they find you?

Henry: The best place to reach me is probably Instagram. You can find me at Independence Realty Group on Instagram, or you can shoot me an email at jjwash45@gmail, or my business email which is [email protected].

Brandon: Very cool. All right. Well, I’m going to go follow you on Instagram.

David: Good. I think that’s what Brandon and I were actually both doing.

Brandon: Yeah. That’s exactly what I was doing.

David: [crosstalk 01:16:02].

Brandon: Very cool. All right man. Well, thank you so much for being on the podcast today. Really, really good stuff and I look forward to seeing where you’re headed in the future. Without I guess further ado David Green, do you want to take us out?

David: Yep. If you want to follow us on Instagram he is Beardie Brandon. I am David Green 24. Brandon is trying to get to 100,000 follows so please unfollow him and go follow [crosstalk 01:16:26]. This is a socialistic competition that we’re having right now and I need some help. Just kidding. Then Henry you were Independence Realty Group on Instagram?

Henry: Independence Realty Group, yes sir.

David: All right. Cool man. This is David Green for Brandon revenge of the alchemist Turner signing out. That was so funny.

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