KSS 48 | Creative Real Estate Investing

 

Real estate investing has and always been an avenue in creating wealth, and Millennials are getting creative with it. In this episode, host, Kevin Shortle, chats with Smart Real Estate Coach COO, Zachary Beach, about his learning curve and making it big with real estate investing. Zachary shares his journey from learning from his father-in-law to doing 100 properties in a short period. He also talks about the perks of having a coach, getting involved with a community to leverage credibility, and the beauty of finding motivated sellers with a high probability of doing something creative. Zachary also reveals the emerging trend of turning your house into an asset that produces income and offers his co-authored book, The New Rules of Real Estate Investing.

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Get Creative: The New Rules of Real Estate Investing With Zachary Beach

I have a guest here that I know you’re going to enjoy like us. He’s involved in the creative real estate side of things. That involves real estate notes and his name is Zachary Beach. Zachary, how are you?

I am fantastic, Kevin. Thanks for having me on. I’m excited to be here.

It’s a pleasure. I was looking over your information. I’ve been waiting to have you on. We had some similar background, a little bit, pretty close. Like you, after graduating from college, I said, “What am I going to do here?” I looked at real estate but didn’t know anything about that. I fell back to what I did all through school, which is bartending, which I saw that you did as well. You did personal training and I was a lifeguard also. I always had that desire for real estate. I don’t know what the attraction was. Was that something you always had as well at a young age?

I’d love to tell you, yes, but the real truth is no. I was getting burnt out between bartending and personal training. The hours were getting ridiculous and I reached a peak pinnacle. I was one of the head bartenders at a place. I was like, “If I stay here, this is exactly what I’d do for the rest of my life.” I went to my father-in-law, Chris, who had a real estate company. He has been involved in that for almost a few decades now. I went to him and said, “I don’t know if I’m going to like real estate, but I know it’s better than this. Do you mind if I partner with you on this and go from there? If I like it, I’ll stick around. If I don’t, that’s okay too.” Luckily, I ended up liking it.

Once you ended up liking it, you took off pretty quick. I should have probably premised this all with you much younger than myself. I definitely want to talk about that. I know there’s a renewed interest in creative real estate investing with the Millennials, which you would fall into that category. Continuing on with that, you hooked up with your father-in-law and ended up doing how many properties in a short period of time?

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It took me about six months to fully get down then, but once I did that, we were able to accomplish 100 properties in a pretty short period of time within three years. Thanks to my amazing team, the learning curve was exponential because I was in a house with somebody that knew what they were doing. It ended up being a little bit easier, but all of them are more simple because I was able to present everything to the table and to the team on a daily basis. The feedback loop was so much quicker than most out there. I was grateful for that.

You stepped right into a coaching mentorship type of scenario and from your experience, I know from mine, it’s invaluable. It would have been very difficult if not impossible for you to accomplish any of that without it. Do you agree?

I 100% agree. There’s a reason why even the position I have now, I’m constantly looking to grow. I have a coach or a mentor in at least 2 to 3 different aspects of my life, especially the ones that I’m super focused on growing like the personal side, personal development and scaling the business. I have another coach and mentor that belong to a great group. I’m always surrounding myself with people that are ahead.

Starting out, coming up with the money, the credit or the creativity, how would somebody who’s younger like yourself get started in this or even somebody who’s looking for that second career and they’re in that stage in their life? What was your experience in developing that, building that up and working with other people? Give me a background on how do you think you can leverage anybody to jump into this?

If you have the ability to get involved with either a community or groups that we built like what we call a wicked smart community, which is the associates that we lock arms with the trenches, they’re able to leverage our credibility of almost a few decades in hundreds upon hundreds of deals. If you can get involved and have a mentor that especially you can get on the phone with you or a coach, a partner that’s been doing it for a while, leveraging that is going to significantly shorten that learning curve, that credibility curve.

KSS 48 | Creative Real Estate Investing

Creative Real Estate Investing: It doesn’t matter if you’ve been doing real estate for a day or ten years. If you could solve your seller’s problem, you’re going to be a good fit to be the investor on a property.

 

I also think credibility is a facade inside your mind as well. A lot of people, when they first get started, they’re like, “Who am I? Why should I be able to buy a property or be an investor? People aren’t going to say yes to me,” or that they have all these things in the back of their minds. Most of the time, a seller is not going to even bring up those questions. It doesn’t matter if what you’ve been doing is a day or ten years, if you could solve their problem, you’re going to be a good fit to be the investor on that property.

We say the same thing in the notes side of the business. That’s all we are, problem solvers. It’s finding that solution. The more solutions you have, the tools in the toolbox, the more deals that you can look at. One of the things I’m interested in asking you about is the creative side. Everybody understands cash buyers are coming to buy the house with cash, but as an investor, you need to get creative. What can you tell us about buying and selling properties on terms? Maybe start with the buying properties on terms. What’s your typical approach? How much time and effort are involved? Maybe even what percentage of deals that you think go through with that?

When we talk about terms, we’re talking about primarily three different avenues with buy and sell, lease options, owner financing or buying subject to the existing loan. Subject to the existing loan could also pair with owner financing if there’s equity involved with notes. We primarily stick to those three avenues. What we teach is to not use your own cash credit or ask investors for money if it’s not needed. We would either craft up the terms on which we don’t have to put down money and solve problems for sellers. It’s more or less how can you focus on the needs of what the seller needs and not necessarily their wants. You focus on their needs and be able to supply that solution with the same side being you need to create the terms in order to make it a profitable deal for you. More or less, buying and selling our contracts.

You specifically target those types of potential sellers. If I understand you correctly, correct me if I’m wrong, you’re not going out saying, “Here’s a cash offer or here’s a term offer.” You’re more on the creative side of finding motivated sellers that you think of a high probability of doing something creative.

We typically have been offering cash deals, cash offers. We’re not a wholesaling business either. We’re not trying to even wholesale deals. We’re in the business of creating wealth now monthly and in the future. I’m having those direct conversations with the seller from day one about, “What’s your problem? What type of solution do you need? Are you open to working on terms? If you’re not, they’re going to go in the follow-up funnel. One day, things will change. I’m not even doing those multiple approaches where I’m going to offer a cash offer. That’s not our business model.

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Are you buying perhaps lead list or something like that? Do you generate leads in-house? You probably are targeting landlords who are fed-up on the lease options side, maybe you’re looking for property owners that have a lot of equity but have moved or something like that. Is that a typical approach that you take, a lead list?

Where I see fishing in the same pond is probably 90% of other people out there. We’re generating a large number of our leads from expired listings. The people who have been in the market, at one point in time, the market said for some reason that it wasn’t a good time to sell or maybe it was a price they didn’t want to negotiate. For sale by owners, for rent by owners is another fantastic one. We do direct mails for some of those lead sources that you were talking about, but 50% of my business comes from expired leads. The other 50% will come from a combination of the other three that you were speaking about. I like to work with people that have been seasoned and have been through the open market as they’re way more likely to be looking for alternative solutions.

That’s what I was thinking when you were talking there, it’s like somebody tried to sell their house through a traditional means. They took one method approach. It didn’t work out and now they’re back with the same problem that they had. I’m not picking on real estate agents. I have a real estate license too, but a lot of them aren’t trained up enough to ask those questions to probe and find out what the problems are, which is what creates an opportunity for investors like yourself.

I definitely agree with you there. My father-in-law, Chris, was a broker for eighteen years. He didn’t do a single terms deal until later on in his real estate career. Most realtors are not taught this type of business. Especially realtors that are open, they are looking for new creative terms and get on the investing side in order to create wealth and step away from the treadmill. We worked with a good handful of people and once you get that dialed in, another great referral market, they become an endless referral list because you’re able to now give them another tool in their toolbox. Now every single person that comes through, every prospect, if they can’t list their house or let’s say there are some other aspects of the property where it doesn’t make sense for them, they have another place to send people eventually. Hopefully if they’re smart enough, they learn it themselves and now they can create some great deals to create some wealth.

We talked about buying on terms but also selling on terms has exploded and I love it. A lot of people are starting to get that selling on terms can be a very positive thing, less time consuming, less liability and responsibility on properties. Do you do a lot of that? Is that just one of the items you look at as an exit strategy or are you specializing in that?

KSS 48 | Creative Real Estate Investing

Creative Real Estate Investing: If you’re involved in another niche and you’re not getting your margins, then you’re throwing away a lot of leads that you could potentially get creative on.

 

We specialize in that. There’s been a trend, I can’t remember exactly where I saw it, but it looked like the trend was going to be that roughly 20% to 25% of all transactions in the next few years are going to be based on owner financing. People are starting to step away from having the bank as the middleman. If you look at the United States now, in North America, there’s a large number of people that have free and clear properties. That makes it easy for them to turn their house or one of their houses into an asset, which they can then produce income from. I expect to see that trend continue to go up. Our major exit strategy tends to be through our rent-to-own program, especially if we’re buying on a lease option. We tend to sell on a rent-to-own. If we’re buying owner financing, we do sell owner financing. It depends on what our initial buy strategy is with the seller is how we’re going to exit the deal. It’s rare that we turn it into a buy and hold or rent.

You’re talking about your exit strategy based upon how you buy-in. You’re talking about the least option to purchase.

If we’re buying on a lease purchase, we’ll typically sell on a rent-to-own. If we’re buying owner financing or buying it subject to the existing loan or taking title, we could either do it rent-to-own or we could sell it owner finance. It’s very rare if we do a regular rental.

I have a chapter on the lease option to purchase, lease purchase, in my book. I know you had a book come out that you did with your father and brother-in-law, The New Rules of Real Estate Investing. Mine came out shortly after yours did. That lease option where you give the person the right to buy that property or make it a purchase instead of an option, I think it’s fantastic. It’s great on taxes. It’s great on everything. It moves you into long-term capital gains. It enables the borrower to prove themselves that they’ll be able to afford it before you flip them over to seller financing. While they’re renting, they are a much better tenant because they don’t legally own it, but in their mind, they do own it. You’d get a much better tenant that way. That’s a fantastic strategy. Selling on terms is what builds the long-term wealth. That’s what sets people up that way.

It turns people from a tenant to a tenant-buyer because they’re coming in with a non-refundable deposit that puts their feet to the fire. They ended up acting a heck of a lot better especially because they’re taking over any and all responsibilities to the property. They have an interest in the property for when they buy it in the future, if the market appreciates, they get some of that. There are a lot of incentives for them to continue to make this work and to get to the finish line in order to become a traditional buyer, which is what we want to see. It definitely creates what we call our three-payday system, which is the non-refundable deposit upfront, which is your payday number one, the monthly cashflow, which would be your payday number two. Payday number three is the backend profit that you get from either the additional premium that you sold it at and the principal pay down that happened. That’s where you see a large amount of your wealth is on those backend profits.

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What price range are you dealing with? The reason I’m asking you that is a lot of my audience in the note space, we go to where the deals are. We’re investing all over the place, a lot of which is going to end up though in the Midwest and Southeast. We deal with properties that are typical $150,000 and less. I think being up in the Northeast, you’re probably dealing at different prices.

We buy property all around the country as we have associates that we lock arms with. We’re at some big hot markets. We have the million-dollar price range in DC, LA, Massachusetts and Rhode Island. The New England area tends to sit somewhere in that $299,000 to say $699,000 range. We can do it in any type of price range. If we’re down in Arkansas, which I hopped off the phone with one of our associates down there and the price ranges are like $129,000 to $79,000. It works in every single market. It comes back down to can you structure the correct terms? Are those terms going to give you the ability to sell it correctly in order to make profits? It doesn’t matter what the price range is.

That was my point because I know there are some people in the note space, they go, “I’d like to do some bigger deals. Can we do these same creative aspects in the note business?” You answered that question the same way that I would have there as well. What about social media? Do you find any business through social media? Has that been a part of growing your business at all?

We’ve been selling and definitely marketing our properties on the Facebook marketplace, which maybe is not so new anymore. Within the years, they allowed you to start putting up properties up there, which has been driving some additional traffic. Because of the business that we’re in, we tend to use social media in a way to educate people, which is the most important. When you’re expecting sellers to allow you to buy their property with little to no money down and you’re taking over these assets for long-term deals. They’ve got to be educated and they’re going to like you. They’re going to build some credibility. We tend to post Q and A’s on our website and also on social media in order to build a relationship with people. That’s important that they realize that we are a family business. We do care. We’re trying to educate you. We want to work you through the process.

KSS 48 | Creative Real Estate Investing

The New Rules of Real Estate Investing: 24 Leading Experts Reveal Their Real Estate Secrets

It almost has to be a part of everybody because that’s the first instinct for everybody when they’re looking for more information or about a person, a product, training. What do we do? We get online. We look it up there. It’s nice to be able to see that. Do you find social media to be helpful? Is it starting to grow? I was late to Facebook. I started with Facebook a few months ago. Honestly, I never wanted to be a part of that. I was on LinkedIn, the more traditional things. I’m starting to see that I should have been in that awhile. Has it been working for you?

Absolutely. A good friend of mine interviewed Gary Vaynerchuk a few years ago. Gary Vaynerchuk said that every single business is going to have to be their own media channel. That’s what we’re starting to see nowadays is every single business, whether you’re brick and mortar or you’re online, you’re your own media channel now. You have to constantly put out information like you’re doing right now, you have a podcast. Your podcast is your own media channel. People are getting to know you. You’re now being inserted into people’s lives on a daily basis. You’re in their head now with your headphones.

From here on out, everybody should be on social media constantly bringing more content because that’s how people get information now. It’s directly related to social media, YouTube. There are no more commercials. My son is two years old and every single time a commercial comes on, he says, “Uh-oh.” It’s eventually going to be eliminated where you have to be your own media channel. You have to supply your own content and that’s how you’re going to create your business.

Zach, I’ve got a question for you. You do real estate coaching now. I know you can’t get into all the details here, but give me your thoughts on what mindset, what schedule and what business model do you recommend to somebody who’s looking to say, “I’m not making the margins I was in buying foreclosures or courthouse steps kind of stuff. I want to get more into the creative aspect of this.” What are your thoughts on that? Give us a little step-by-step if you could.

If you’re involved in another niche and you’re not getting your margins, then I would think that you’re throwing away a lot of leads that you could potentially get creative on. My first step would always be to revisit all the leads that you’re already in your pipeline and identify if you weren’t able to create that transaction based on that other niche because maybe it was too slim on margins. That’s probably going to be a good subject to deal with. We can buy the property subject to the existing loan. There’s not a lot of equity in the property. Now you’re turning that into a long-term deal where you’re taking the title for little to no money down, but a seller is not coming out of pocket. We’ve had plenty of those properties that we bought subject to an existing loan.

They’re now paying their selves out and appreciating and there are huge margins on the backend. My first step always would be to instead of go buy new leads, look at the leads that you already have and take a look at how you can get creative with those, any and all, people that you’ve reached out to that have free and clear properties that are not open to receiving cash deals that are $0.60 on the dollar. You should revisit and take a look at either Kevin is buying or creating notes from or buying and owner financing as well and having them hold the paper. There are some creative deals between us and Kevin that can help you create some great deals off free and clear properties that are also going to allow you to buy the property at full market value. That puts you in a whole other category when it comes to being a transaction entity. That’s what we like to call it when you have any deal that can come across your desk. That’s where I would start. Look at the current leads you have and see if you can get creative based on those leads.

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A little bit more specifically, what schedule might somebody do? Do you teach that you need to make X number of calls? One of the things that I’ve seen, and I know you’ve seen this as well as a teacher trainer, is people setting aside this extra time in their life to do that seems they don’t have something set to look at. What’s your approach to that?

I look at what you want for goals and work yourself backward. We created what’s called the expired down process, in which all of the numbers are broken down. I always say look at a couple of things which is, how many deals do you want to do? I break it down backward, which is how many dials is it going to take you per minute to be on the phone? If you look at it, if you’re doing a manual dial on a couch, it’s going to take you roughly a minute to a minute, five seconds. How many dials is it going to take you in order to acquire a lead? Looking at our old numbers or our numbers from this report a few years ago, it takes about 24 dials in order to get a lead. A lead in my mind is somebody that would be open to having a conversation about terms. It doesn’t mean that they have to say yes, but they’re open to it.

I’d look at how many leads does it take in order for you to get an appointment? It was roughly seventeen leads at that time in order to get an appointment. It’s roughly four leads or four appointments in order to get a deal done. If you said, “I want to do two deals a month in this way,” then you need to go on eight appointments and work yourself backward. You’re 100% right. It’s all the numbers and it becomes a very predictable business. That’s what separates us from a lot of others is this is a business that if A, then B. If you can get your numbers dialed in, especially after if you’re brand new, then you’re going to create your own numbers. You’re going to figure this out. Once you have those dialed in, you’re going to be able to look at your next upcoming year and say, “If I want my profit in this business to be X and my average deal is our average is roughly $75,000 per three paydays, if I want to be that, I need to do X amount of deals, which means I need to spend twelve hours on the phone and I need to get 100 leads.” It becomes very predictable in this business, which allows you to generate the profit that you want.

By doing that over time, those numbers do mesh up. You may not hit something on your first call, second call, third call, whatever. It takes a process, but eventually, those numbers do pan out. It’s funny you’re saying that same thing. I had a conversation on one of my coaching calls with somebody who’s starting their campaign to find motivated note sellers and how many letters and how many follow-ups. It’s like, “This is what you need to do to get that first deal done.” I’ve had some younger people like yourself getting involved in the note space and thinking, “Can I do this to buy my own personal residence?” It’s pretty obvious. It doesn’t have to be investments. We’ve already said it doesn’t matter what age you are in this, it doesn’t matter where the properties are located, but the properties could also be for you personally, your own first home or investment properties to build long-term wealth. It all applies the same way.

I’m glad you brought that up. I bought my own house on a lease option. It’s in an exact way. I was looking for a property. It was a couple of towns over because me and my wife, we had our first kid and I’ve had my second one now, but we were looking to buy a property. It was in this very specific town. I want to preface this by saying you can buy these types of properties anywhere. I know that you were mentioning the Midwest and things like that, but I bought a nice house on the water over here in Rhode Island. I say that because I want people to know that they can buy their house. I ended up buying it for roughly fair market value. It’s now appreciated greatly and we bought it from a guy that had a fifteen-year note or a fifteen-year mortgage that was being paid down.

There are only six years left on it. The principal coming off that property is over $1,000 a month. By the time, my lease option or when I have to exercise the option, I would already have almost $40,000 as a down payment on the property because $1,000 is coming up every single month. It’s a great way to increase your deposit. I’m not going to have to come up with too much money at the closing table unless I want a very specific monthly payment at the closing table in order to get this deal done. I highly recommend you go through all of our stuff and all you do is buy your own property on a lease option.

I bet you had people say, “You can’t buy something like that in this town.” I was a real estate agent. Somebody came in and this is way back. We used to have assumable non-qualifying loans so you could take over somebody’s loan payments, you’d have to check with a bank. They signed it over and you started making the payments similar to buying a property subject to came as a result of those loans going away. When you had assumable non-qualifying, you didn’t have to take it subject to. You took over the payment. They came in the office looking at selling it and I was like, “I’ll buy it if I got to take over the payments.” Those techniques are out there. They work on everything. I agree it’s run the numbers, see what works best for you. How can people reach out to you and learn more about what you’re doing, Zach?

I’d love to give each and every person our free book. We’ll ship it to you. It’s a nice book, a physical copy. I’m a person that likes to read books physically not on an eBook. I’ll give it to you absolutely for free. You have to do no shipping. We’ll send it to you. All you have to do is go to NewRulesForFree.com. Go pick up the book. It’s The New Rules of Real Estate Investing. It has 24 leading experts. You will pull out some great nuggets in there, I promise you that.

Chris sent me a book and I’ve gone through that as well. Zack, thank you very much for being on. I appreciate it.

Thank you very much for having me.

If you liked the show, please go ahead and give us a good rating. That always does help and refer to a friend. I do appreciate that as well. Make sure you also check my calendar for upcoming events in your area. We’re starting to put our plans together for next year. Zach, thanks again for being on. I look forward to putting another episode together for you.

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About Zachary Beach

KSS 48 | Creative Real Estate InvestingZachary has been fully active in real estate for over 4 years now. Before he was in real estate, he was a bartender and personal trainer and continues to prove daily that you can come from any background and be successful in this industry. He has completed over 100 deals, has mentored & coached students on many more, and continues to help complete 12-15 new deals per month.

Zachary runs the day-to-day operations of Smart Real Estate Coach and has been a large part in the scaling of this company. He continues to be in the trenches coaching Associates and helping them complete deals and scale their own business.

Zachary is extremely passionate about personal growth, mindset, and helping others reach their full potential. He co-authored the Amazon best-seller The New Rules of Real Estate Investing. If he is not working, you will most likely catch him reading, working out, playing sports, or enjoying his family, which includes his wife Kayla and two children Remi and Bellamy.

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