00:00 - 05:00

David:

What's up military millionaires. I'm your host David Pere here with Alex Felice and Frank Scappaticci and John Plumstead, who are virtual wholesalers and partners, and they're both army vets.

One of them is actually still active duty. And they started this business earlier this year. I remember jumping on a phone call with Frank and just talking to him a little bit on one of my intro calls, and talking about what he was wanting to do. And then he actually came and spoke with our mastermind a month two months ago, time goes way too fast, but they've just exploded over the last year they're now in multiple markets, they've done a ton of deals. And so we wanted to bring him on the show and talk about what's possible with wholesaling or just with really anything you put your mind to, if you're serious about it. And that's the short intro for this first recording in the new year. That hashtag New Year, me, whatever.

Anyway, yeah, Alex is cringing if you're watching if you're not watching the video, because he loves everybody's cringing me. Some new year's resolutions you have already failed by the time this comes out anyway.

Intro:

Welcome to the military millionaire podcast where we teach service members, veterans and their families how to build wealth through personal finance, entrepreneurship and real estate investing. I'm your host, David Pere. And together with my co host Alex Felice. We're here to be your no BS guys along the most important mission you'll ever embark on your finances.

Roger Vick one Oscar Mike.

David:

Welcome, guys.

Frank:

Hey, what's up? Thanks for having us on.

John:

Yeah, thanks. We're excited for this. We appreciate it.

David:

I'm excited too. Why don't you guys give a little intro to yourselves in and then, too, I guess, yourselves together? I

Frank:

Yeah, I'll give it a shot. I'll just say how we came together.

So John and I were teammates. We played football together at West Point. We're both linebackers, actually, I think we were competing with each other to play. And then we ended up both being able to play thank God. So linebacker has three positions, or at least in our defense, we both got to play.

Both are active duty army, we're both Field Artillery officers or I was a field artillery officer. We moved different parts of the country. But we both have been involved in real estate in some capacity over the last five years, John was doing multifamily as I was doing some single families down in Texas. And I think in January plomb, I think it was, was it you they called me or texted me?, I don't even remember. Like..

John:

I can remember, we realized at some point that we're both interested in real estate, we're both doing real estate, but not necessarily together. So maybe we should try to join forces and put stuff together. And then at some point along the way, we decided, hey, instead of just looking at this, like a supplement to our retirement, what if we tried to do this with a little bit more focus, and try to have a little bit of short term success, as well. And then over the last, over the last year, during 2020, kind of put it in overdrive and enclosed a bunch of deals and ended up finishing the year really strong.

Frank:

Yeah. But we started just trying to acquire, like, five to 10 assets, you know, single family, small multifamily. And then we tried to work with agents and just struggled a little bit in terms of getting leads, and then we just did all the marketing in house. I think in February, March, we started doing direct marketing, text messaging, primarily back then, straight to sellers and single family.

And then I think we quickly ended up with like 10 leads or 10 contracts, and then we're like, well, we can't buy them all. We haven't raised any private money yet. So let's start wholesaling. And that's like, we accidentally kind of started our company to be totally honest, it wasn't really on purpose. We just didn't want to throw the deals away. You know.

Alex:

What Mark you guys out of?

John:

Killeen, Texas, outside of Fort Hood, big military market there and then we tried Fort Benning, Georgia, right or outside Columbus, Georgia. But now we're in like 12 to 15 different markets. We've got some test markets. And then we've got you know, maybe eight markets that we feel really confident in Clarksville, Tennessee. Savannah, Georgia, Charleston, Cape Coral, Florida Pensacola we're doing well in all those markets. So.

Frank:

Fayetteville too, Fayetteville is becoming my favorite North Carolina.

Alex:

I'm looking for deals.

Frank:

Yeah, get on the list, man. I got to get a buyers list.

Alex:

I can't wait to make somebody who doesn't live in my market money.

So what's the deal with them buying assets? So are you guys? Do you still have some of the deals?

05:00 - 10:00

John:

We do.

I think we're going more towards that as well. I think. We started identifying ourselves as wholesalers basically because we couldn't keep up with our deal flow at the backend. So we're like, hey, the only way to keep our front door open is to be able to wholesale on the back end. And we've since cleaned that up, and we're probably about 50-50. Now we'll keep ourselves and flipper hold on to it, and then we'll wholesale, the other 50%.

But we're, we're migrating towards trying to keep as much for ourselves as we can, let's just say some of them don't kind of fit our criteria.

Alex:

So the ones you keep, are you keeping them? In all in every market? Are you focused on one market? Are you doing? Do you have a strategy for it? Or is it just to go by deal?

Frank:

I think it's um, it's we're not holding on to many of them, we have a couple rentals. But for the most part, we're flipping the houses. And that's because when you operate in like 10 cities, it's owning single family rentals in 10 cities, it's just from a management perspective, just very difficult to keep up with it.

And honestly, having 10 contractors you can rely on is also a significant challenge. So what we've decided is when we're going to buy out of state, which is pretty much every house that we own, we're going to really try to not be the best flippers in a particular city, but buy things at a discount, you know, relying on our marketing to win on price so that the rehabs are kind of small, right?

So our flip might look like we buy it at 180 grand, but five to 10k worth of work, meaning like you probably could have sold it as it was and then maybe sell it for 220 to 230. And then make a profit that way. So we might make lighter margins, then the people that do a huge value add flip, but I think we take on a little bit more risk, because we try to win on price. Now. That's that's what we're good at. We're not good at rehabs really, I guess is what I should say.

Alex:

Yeah, so yeah. I'm the opposite. I'm really good at managing ground teams, systems, well, not systems, but managing people, managing resources, understanding how to deploy resources, terrible at marketing, I don't want to do it. I hate it. Which is a big disadvantage, actually right now in this part of the market cycle.

But that's why I asked I was like, dude, if you guys are buying, oh, I bought one single family in Killeen and one single family in favor of one single tenant renting them. Like that's a logistical nightmare for management's. But you're saying you do flips mostly around and that way, you're just doing these like rehabs and you buy them a discount? So even if the contractors, it's hard to lose.

Frank:

Yeah, it's funny enough, a lot of our contractors are vets. We just completed a flip at home at the market this morning, actually in Fayetteville, and the GC is a warrant officer. So I don't know how he's actually managing his army career. And he's doing like six flips. But he did an amazing job like he knew exactly the price that he told us was going to be at homes in great condition.

Our agent called me back and she's like, I don't know how this contractor does it. I don't know how he manages his schedule. But he did an amazing job. So we rely on vets to do the work, which is kind of funny.

Alex:

Who is it here in town?

Frank:

Eli Lopez or Eli is how he goes, someone in your mastermind references them when I spoke and I was like, wow, this guy's must be the best marketing GC out there. Because like random people know who he is. But he does a good job. And he's awesome.

Alex:

Yeah, he does good work.

David:

That’s pretty cool.

Alex:

Yeah, that's awesome.

David:

Okay, so you mentioned at the beginning that you were originally started finding deals with direct sellers via text. And you kind of said, at the time, so is that still your main marketing source? Or how are you sourcing? I mean, I can't imagine that. You're personally texting, you know, I know the text message platforms. But at this point, you can't both be sitting at a computer and say, Alright, we got 10 markets and go. So how did that? What are you guys doing for marketing now?

John:

Yeah, it's evolved, and it continues to evolve.

One is, our primary means is SMS or text message marketing. But we really kind of lump that together. It's just outbound marketing, because the process whether you're texting or cold calling, or sending ringless voicemails is very similar.

But we've got five virtual assistants right now all out of the Philippines. And we've got our process set up. So there's a couple different websites to manage the leads coming in and then pushing all the text messages out, pushing ringless voicemails out, using speed dialers to make as many phone calls as we can in an hour.

But we pull public records off prop stream for distressed sellers or retired landlords, put them in those different systems try to contact as many people as possible, or our virtual assistants do and then we look at a qualified leads as someone who owns a home, wants to sell their home and is willing to entertain a below market offer.

If they say yes to those three questions, hey, it's a qualified lead. Then we get our acquisitions manager on the phone with them to try to get close.

David:

Sounds simply that I'm sure it is. But that's yeah, it’s awesome.

Frank:

It's a lot more complicated than that. Because I mean, where you can make it very complicated. For sure.

I think there's a temptation especially at the beginning to ask sellers a ton of questions up front. So you can screen everything like and make it perfect. And then when the acquisitions manager gets the deal, they competently underwrite it and do cash flow analysis. And we just decided like, the front door is going to be simple.

Like if you want it to go fast, it has to be extremely limited in terms of complexity. So we ask them three questions, then their qualified lead our acquisitions manager when he underwrites a deal, he goes, What's the ARV 70% of that minus what the seller is telling me the rehab value is, so if it's $100,000, house $70,000 minus the expected rehab, that's it. That's the max offer.

Because if you want to do 20 deals, you know, or that person to have 20 phone calls with the seller, like and you asked him to do all the cash flow analysis that your normal investor does, like, you're never gonna scale that's just or maybe you could, but that's not how we do it.

10:00 - 15:00

David:

Yep, I mean, it sounds like that makes sense. If you're doing smaller rehabs, I don't know. You might get a little crazy if you're trying to get jobs. But you guys have found a niche in which you don't need to do that.

Are you finding that the majority of these deals at that price point are like, B class neighborhoods, single family homes? Are you finding a lot of things like retiring landlords? Are these homeowners? Like what's kind of your? Is there a main spread that's working for you?

John:

We really like you know, b to c type assets. We're always trying to cover our downside. So anything we look at, we're looking at, hey, if this goes sideways, can we hold it as a rent?

So generally, you know, if, if it's a 1% rule, it's probably going to fit our criteria. Depending on the market, you know, where you know, 120 to 180k ARV we go higher, and we go lower. But generally, you know, what you would think of for the 1% rules, the same type of stuff we're going after.

Frank:

I think we cap or we were capping our max ARV at 250 for a while, right now we're entering the North Austin area. So we have to increase that slightly, because if we cap it at 250, then we're gonna take a lot of houses out of the population. But traditionally, we've been $250,000 and below.

Alex:

Dude, this is, um, this is pretty good, this is a pretty standard system. I don't mean that like, I mean, this sounds like the way that most wholesalers do this.

So how can somebody who? How can a troop who wants to make some extra money? Do this one of our listeners, I want them to compete against you and get cheaper deals in Fayetteville.

John:

Yeah, I like it.

I think it's simple. But difficult, right? I think the process is really simple. You can go to propstream.com you can download a tired landlord list, you can go to a texting platform, like lead Sherpa or launch control, and you can send out hundreds of texts in a few minutes.

I think the tricky part. And you know, the best recommendation I would tell, you know, this, this potential soldier is make sure you get enough leads to start, a lot of people want to start with like 100 leads or even 500 leads, but the way we do it, I wouldn't advise starting with less than, like 10,000 leads even 10,000 is kind of a low number.

For a while we're sending 10,000 text messages every single day. So to make this system work like this, you need a large, large population to start with. And then I would say a lot of people send one text message, and they don't get a reply, or they don't get the answer they want. And then they don't they don't hit that data again. And we keep hitting the data over and over and over again. Because our biggest cost is in our text messages. It's spending to get those records to skip trace, which means getting their phone numbers right.

So once we get that phone number, we need to make sure we keep following up following up with them. So best recommendation, get a big list. And then keep texting or cold calling or ringless voice mailing, whatever you want to do but over and over and over again to find deals.

Alex:

My old sales managers used to tell me once you get a lead, you call them every single day until they buy or die.

John:

I like it.

Alex:

What's um, what's an upfront cost for me to do something like this? I want to set up a prop stream, I want to buy some lead lists, what about 10,000 I want to buy 30,000 numbers. And I don't want to go in under capitalized because if anybody if you've heard any of my content before, I'll tell you the number one reason businesses fail is under capitalization don't go in under capitalized.

So what's my troop? I want somebody to do this. They want to set it up for say six months, they want to front load the cost and they're gonna put the work in, give me a roundabout number sound like that to set this up.

John:

I'd feel comfortable doing five grand I mean, that that's that's not super fat, right? You better have a little luck there. But you can definitely take some solid swings.

You know we're looking, depending on how you're doing it, you're gonna go 25 cents or so to get a record to skip trace it right. So if you want 25,000 people that's generally going to be 1000 bucks per column, another 500 bucks a month, kind of for the different platforms you're going to use. Um, you know, so I think 5000 I feel really comfortable.

15:00 - 20:00

Alex:

I love that.

$5,000 a troop, an E 4, an E 3, maybe, maybe somebody younger than that can probably round up that kind of money. And that's a good way to say, Okay, here's a starting point where you can, you can put this on your back, and go off and do this sweat equity essentially.

David:

To break that down for the troops, that's about 25% of one Mustang.

Frank:

I like the aggressiveness.

Alex:

We should start doing that, that's a rolling thing. Like, we should measure everything by cost of a percentage of a Mustang. I like that.

Frank:

Percentage of Dodge Challenger.

So like I was gonna, you can probably do it cheaper than that, right? I think there's like a general rule, the less hustle you want to do, the more expensive lead generation is like the cheapest version of lead gen is driving around your neighborhood driving for dollars, right? Like, that can be free. But like, if you, I think the most important thing, if you really want to get started is increasing your chances of success, right? Because if you close a deal, you're likely to recoup that $5,000. Because most wholesalers on a good deal, make a little bit more than that. And that they're, I think you're batting like 75% chance you succeed.

If you drive for dollars, it might take you two months to get a couple leads, you know, especially if you're brand new. So I'd almost bet like spending a little bit of money. Don't go crazy and drop 10 grand on pay per click and spend a little bit of cash to reduce your hustle, you can do your W two and just have some decent chance that you're gonna win. That's my tip.

John:

If you didn't have money, you know, let's say someone out here is super excited. They want to hustle but they have no money right now. What I would do is go to Zillow, go to for sale by owners and just call for sale by owners because we know that they're motivated. And they might not take a below market offer but we know they want to sell.

So I would, you know I would pick a day of the week. So let's say it's gonna be Tuesday night and I would call every for sale by the owner in the area. And then I do the same thing on Craigslist. And then I do it every Tuesday forever. And I'm 100% confident someone can eventually find a deal.

David:

Yeah, and another good one is the For Rent signs on Craigslist or some of those places, right? If you're hitting up landlords that have vacancies, my favorite off market quote unquote person like the person that I bought the most deals off of over the last like two or three months and I've only been doing direct to sellers a little bit are the retiring landlords like the you know, the lady, I just got a contract today and the lady's like husband died six years ago, I didn't sell the house because I was sentimental. And now it's sat vacant for six years, and I'm done with it. I'm like, Okay, thanks. So.

Frank:

Retired Landlords is probably where we got, I'd say like, more than half of our deals have probably come from retired landlords, that's also based off the markets we're in because military bases have a really high population of single family rentals. So that's probably not a big coincidence. But there is a theme in the wholesaling, especially in the virtual wholesaling space that landlord cities are some of the best places to go for that particular reason.

So a lot of people that do what we do they target places like Memphis, and Cleveland and places that are super high population rental locations. And we started actually analyzing cities with that as one of our criteria points, number of rentals divided by total population, right. And if that number looks really good, we might go to that city. So.

David:

Yeah.

All right. I got a question for you for the listeners, the part that nobody ever talks about once when you're when you're wholesaling, right? Everybody talks about how to find a deal, how to analyze a deal, sometimes even talks about how to find buyers, right?

But somebody says Yes, right. You've been calling and banging on doors and driving around for months, and somebody says yes, which is gonna scare the hell out of you at first. But now what right like if you're wholesaling, you're not, you're not working with a real estate agent, right? You're not you're not going and saying, hey, here you go, tell me what I need to do. Like when you buy a home, they hold your hand and sing Kumbaya and walk you through everything. So what would you do? What can you walk me through? Like, once the Oh shit, they said yes. Now what factor happens to like, what are you guys rolling out for your next few steps?

Frank:

So I mean, you want to get that contract sign as soon as possible.

So if you don't have a purchase agreement that I would recommend being somewhat simple if your state doesn't have some crazy mandatory contract, like get a one to two page purchase agreement from another credible wholesaler, which is what we did a guy Jordan, another West Point grad gave us our first contract, and we were still using it, or a form of it. Get that thing signed. Try to keep your earnest money low. That's pretty simple.

Yeah, make sure your contract is transparent. If you're not going to double close, meaning you're going to temporarily purchase the property and immediately resell it. If you're going to assign the contract, put that on the contract. Make sure it says it's assignable. And then that way, you're also not hiding the chicken on the seller, like they should know that you're going to market that property, potentially assign it to another investor.

20:00 - 25:00

Frank:

We tell people, hey, we're either gonna buy this ourselves, or we're gonna have a lender. Look at it, or we're going to source it to one of our pool of investors or buddies. Like Don't, don't be dishonest with the seller, like they're going to find out, like when you ask to do a walkthrough of their home, that people besides you are going to be in their house, right?

So one, like you should just be ethical all the time to like, they're going to find that anyway, right. So just keep that in mind as you're going through the contracting process. And then, depending on the size of your operation, like you might pass it off to a dispositions person, or if you're a one man show, it might be you. But I'd say the next morning, or if you can that day, like start marketing that property, you know, like, get like you want to market as fast as possible, because once it's signed, you might only have 10, to 20 days to to close, right, the timelines are quick.

So it's all about getting that signature and getting it into the marketing process as soon as possible.

John:

And then we've got a, we've got a cash buyers list, and we've got a whole process for how to do it. But if I was bootstrapping, we have the most luck probably from just posting deals in local Facebook groups. Local off market deal Facebook groups, we get as much deal or as much buyers from there, as all the data sources, all the emails, everything else you can imagine we get just as much if not more from those Facebook groups.

Frank:

Yeah, I'll add something though, to dispel though.

I think a lot of wholesalers lose money ours included, I think the first seven months we existed, because we would just like get something under contract, we'd send a text out to our cash buyers list, drop it in a couple Facebook groups. And that was all we did, right?

So we didn't get the right eyeballs on it. Like we would have decent deals like sometimes not sell and we'd be like, what are we doing, you know? So now we have like a step by step process like you send it to the list. Okay, you got three responses in the list, we want to get five, we want to find people that are walkers that then we pretty much close every time right?

Then it's called agents cold call agents in the area. The next stop step that you see in our CRM is send out an email, then the next step is scrub bigger pockets for who's the most active in the area, get the names of those people call them like so like our VA is like have like six steps that they exhaust to get five people at the walkthrough, right? And then once they get five qualified buyers, we'll stop because we don't want to create unnecessarily. Like, we don't want to have a bidding war just piss everybody off either.

You know what I mean? Like, we have customers, we don't want them to feel like we're jerking them around. So once we add five, we stop.

Alex:

Yeah, if you can get five people and walk through that’s, and if it's a deal. I mean, seems like it seems like a form for more than you need, honestly.

Frank:

Yeah, exactly. Like we we pretty much close every time as long as the home is enough flooding the day they show up or something crazy happens. Like, the other thing is, get the offer like we've missed the price to home because we didn't know something about the house that someone showed up and they saw like, we had a chimney one time we didn't see it. But there was a foundation issue with the chimney being like five to $10,000 problem, right? So the buyers are like, guys, like this is an issue. And we had to renegotiate that price with the seller. You know, we still sold it to the person that showed up to the walkthrough, right?

But when you have to get their price, don't let them leave without telling you what they'll pay for the home because then you're just renegotiating blind, right? You have to get their number.

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Alex:

That's me talking to somebody the other day. That's like for those people who have never done sales as a job like you guys are doing it now, like for many people who have never really done sales and so they think sales is just slick talking. And it's not like it's real. There's like real things to know.

And the first one always asks for the sale. Always ask for the sale. If you're not gonna look something I'm like, give me your money. I want it, give me money, right? You don't have a chance to buy this. I want you to buy this at this price. Give me, write a check.
If you don't have them you can't look them in the eye and ask him for money. You got no chance of them jumping up and handed it to you.

And the same goes for oh you don't want to buy it. How come? What would you pay, what would you pay right now? What would you write a check for right now? And so those are the same question but on what you're saying on both sides I first asked for the sale second when they said no ask for it again. Ask Why not? What would you pay? Yeah,

25:00 - 30:00

David:

And asked for a referral.

Alex:

Yeah, if you don't want to buy who so you know, somebody will?

John:

Yeah, exactly.

David:

No joke that the one that we should paperwork should be getting signed tomorrow. Gotta love super tech savvy people who can't figure out how to sign something and take a picture of it and send it back to you so they have to go in person to your agents office anyway.

Yeah, literally some guy told me No, I don't want to sell that house. And I said, Great. Do you have any other properties or no one else with any other properties? Actually, I just passed up this one for this price. And I was like, in my head, he's like, yeah, I have too much going on. And in my head. I'm like, why would you even think about passing up that price no matter what you have going on, but okay. The asking price was 12,000 in an area that like, you know, 80 ARV lowball. I'm like, okay, I can dig that.

So anyway, so we set up the appointment for two days later, and like going under contract tomorrow, and it was literally just like, had I not thought to be like, oh, any any other properties? Total missed opportunity?

Frank:

Yeah, no doubt, no doubt. That's awesome.

John:

We are trying to standardize those things if we think, like, if, if you're trying to sell one deal, some of those questions might not make a difference. But if you're going to have that conversation, 100 times, how, how much more, how many more sales are you going to do if you ask that question, well, what is your offer? What is your price every single time or the same thing with the referral? If like, you ask the price, and then you say, Okay, do you know anyone who would be interested? If we can, the way we look at our business, like if we can systematize that stuff? Over the course of a year, we're gonna close another 10 deals, 20 deals, you know?

Frank:

Yeah. And also, like, wholesaling needs to be like a no BS, numbers sales process, because like, there's no time to dilly dally, right? There's multiple offers going on all at once. So it's like, do best and final, what's your answer? You know, and what I like to do, right, like, so like the example I gave before where we have to renegotiate a property. I talked to the person that ended up buying it. I was like, if we get this price down, what price are you buying it at? He actually said 100k on the dot. I was like, okay, we renegotiated it, I could have gone back and said 100k, I got it. But I was like, Hey, 98k, man got it for you done.

So now I'm like, you're gonna say yes. Because now if you say no, you broke the social contract, right? Like I exerted effort on your behalf. And I even sweetened it. He knows I cut a discount. So it's like, let's close right on to the next deal. So like, I could mess with people on price, but I'm like, Nah, dude, like, let's go. Like, let's move on to the next one.

Alex:

Yeah, something I'm gonna mess this story up, because I haven't read it in a long time. But it's something like in the 70s, or the 80s. Some guy that owns a McDonald's franchise goes to the head of McDonald's and says, Hey, you guys are missing like I can. I can bump up sales by like 20%. And he tells them their plan. He's like, I bet you this will work. But if it works, I want like three more franchises.

And so he goes at the end, at the end, when people are ordering every time they're ordering. They have to make an order. They go Hey, would you like Okay, thank you. Would you like to supersize that? What's that mean? Well, for like $1 more, you get, you know, whatever, much more you get a bigger size, whatever, that and so yeah, every single time, every single time every single time every single time. And then sure enough, like I don't know, that's how it happened. Because they're like, Oh, this really just just ask and they'll and they'll double their size or freakin add another 20 cents, or you know, it adds up on volume.

So you're saying it's like, dude, ask for the sale, ask for the referral. Ask for what they, you know, give you and then ask them again. Bye, bye till they buy or die.

Frank:

Exactly, no doubt.

David:

And they named a whole fucking movie supersize me after that, just for that guy.

Alex:

Well, they actually, they actually ended the supersize after that movie.

David:

But they still ask if you'd like anything else, or if you'd like fries, or if you'd like a drink or whatever, the concept remains right? In every fast food joint. And they've gotten me at least once.

Alex:

Really? Really, just once?

David:

I said, at least

Alex:

Today.

David:

Oh man.

All right. So, uh, how'd you guys do last year? Let's hear some of the let's hear some of the success. I know. I know some of it. But But you know, we've been talking about finding some deals and this and the other but like, numbers.

Frank:

So we did just drop 50 deals last year in 2020, which I think is pretty good, man. I feel really good about the volume we achieved. I feel really good that we've been able to scale to have five team members overseas and we have two onshore employees that are awesome.

One person Carlo ran and disposed. Adam, our acquisition manager. So like, I feel like we built a culture. We got a team. We've done a lot of volume. Now that's all the good stuff, right? And we're profitable, like we made money, like we're good. So that's all good stuff for a first year company on the negative side, I think we spent a ton of money, right. So we spent a lot of money on education, training, applications, we probably didn't get a ton of use of more lists of names that we probably needed. Rather, we spent a ton of money on data last year.

30:00 - 35:00

Frank:

And I think I chalked that up to us being super hungry. And a little liberal with like, oh, we'll just while we have our w two jobs, we'll drop a bunch of cash and not worry about it, and then 2021 will be productive.

So I think 2020 was a year of spending a lot of money to make money and learning a lot. And I think 2021 is like, our attitude is okay, now we got to be really profitable and make and like, the margins got to be really good, like a, like a real company, you know. So I feel really good about what we did was an awesome year, but I think we definitely have room to improve like everybody else.

David:

Well, I'm gonna break that down real quick. And just point out that it was 50 deals, but you started in February. So that's 50 deals in less than 10 months, so five a month, except that you obviously didn't score five your first month. So, you know, as you ramp up, right, that's some pretty solid numbers for one year of doing wholesaling, right. But there are people out here on the podcast, who would be happy to do five deals in a year. There are people who are happy with one deal in a year. You know, I mean, even if you only made 5000, a wholesale deal, right, five deals in a year. hefty, little bonus. So, that's, that's, that's some good stuff for a first year. So I love it.

Frank:

Yeah.

Alex:

You should reinvest anybody's that should reinvest 100% of its funds first year, you shouldn't be taking any, I shouldn't say you shouldn't. But I mean, like, dude, if you guys are serious, you should be throwing you should do exactly what you did.

Every time I have money, I reinvested in the business, and you're new, so you're gonna waste most of it. Because every new business is run by idiots. That's just the way it works.

In a couple years, you'll know what you're doing. But the opposite. The opposite is what most people run into, they go straight to stingy, they go straight to like, our God forbid, they got to live off the money. And so it's like, every time you get a deal, now it's like, dude, you can't, you can't throw enough money at that.

So you've thrown a bunch of money that you like you say, probably wasted. But also now you know not to throw money at that again. And so every time you do it, you get a little bit, you're like, Okay, I waste money all the time. I throw money at things all the time, like, what about this one, or this one, or this one, or this? And then soon enough, you know, as you get better, you're like, Don't waste money over there. But over here is pretty well spent. So I don't even consider it to be a negative. In fact, my guess is if I were, if I were just giving you blanket advice on how to start a business in the first three years, I'd say take no profit or take as little as you possibly can and reinvest 100% of the money. Even if that means wasting a bunch of it.

Frank:

Yeah, I think we definitely live by that to a certain extent. And you're one I think my wife would argue you though in year two, I think I've got a wife and two kids. I got a I'm planning on taking home something this year, but I agree with the sentiment for sure.

Alex:

Yeah, well, like undercapitalization is the reason most businesses fail and most businesses fail in the first three years.

So like year one, year two. I did small business underwriting for a long time, I've watched businesses go from an idea to successful and then to failure, the whole cycle. And I'll tell you what I said I had a buddy who was in this business and he came out in the third year, he's like, celebrating, he's like 96% of businesses fail the first three years and we made it and he was solid. He was insolvent 18 months later.

So don't celebrate your damn wins. Don't get cocky. I mean, I don't know you know your business way better. Obviously, I only knew about it for 20 minutes. But reinvesting is a good strategy. taking money out is riskier. Even if you got a wife and kids.

Frank:

Yeah, yeah. Well, you need liquidity.

I 100% agree with that. You got to have money in the bank. So you like plum would always say, Hey, I'm cool with paying ourselves. But if I can't market something, because we paid ourselves like I'm gonna be pissed. Yeah, but at least three or four times.

Alex:

And you're in the hottest real estate market of probably our lifetime with the biggest tailwind like, now is the time to get ahead of the future difficult times. Not like you can win now and enjoy it. But it's like when things slow down, which would probably be far away based on the way macroeconomics are looking. But still, when things slow down, you don't want to be like, Oh, look. Well, that was we had a good year too. So the time to reinvest and build that thing into stability, in my opinion is now.

Frank:

Yeah, we saw I mean, to be honest, so going over like how the year went, we started out and it was like month one we did less than a handful of deals. And the next month it was like we did a full handful. And then we really got like September October, we had like at one point in our CRM, we had like 20 something active contracts like close to 30 contact homes under contract that hadn't been sold yet. And that was probably at our peak.

Then later in the year. Our text messaging platform had a delivery rate issue, right, like our marketing, we weren't reaching as many eyeballs. So we had a dip and now we've kind of just come out of that dip.

So like in one year, we've had like a lot of the ups and downs that a small business will go through. So I think like the lesson we learned is you can succeed but especially if you're in the market face, the conditions are going to change every quarter like you have to stay on top of it or else like next in March, IOS is going to restrict Facebook ads and basically everyone how they collect data, like someone's going to struggle because of that. And then people that figure it out by April are probably going to create a competitive advantage. You know, like this stuff is always fluid. It never changes, or it never stays the same.

35:00 - 40:00

Alex:

This is why I love my rentals. Like I don't worry about none of this. I'm making money. Now, it's not as much as you guys I don't make as much as you guys. But man, I do. Let me tell you how lazy I am. You wouldn't believe it.

David:

Anybody who follows Alex's Facebook feed will be like no, no, he's super slammed always talking shit to people online.

Alex:

Talking Shut on Facebook is my full time job. Real Estate's like my third job.

Davidl”

Oh, man.

Alright, so..

Alex:

Hey look. I just want to clarify like, dude, I'm just trying to, I'm just trying to share the wisdom and the experience that I've had dealing with small businesses. Obviously, you guys know how to run your business, the best, you know, and you and you. You sound like, you know, based on what you told about the year one sounds like you doing the right thing. So I'm just trying to get my unsolicited advice. That's all.

John:

No, we completely agree.

I think, you know, at our core is trying our best to invest like Warren Buffett and be a value investor, right? And he does different asset classes, right, like he's in the stock market. But the bottom line is like he's a very conservative investor looking for the long term.

And although wholesaling is a short, short turnaround, we're trying to build a business with very sound fundamentals that, you know, have, we got a very conservative balance sheet. So we completely agree, like definitely always cover your downside, if you cover your downside then the upside will come in our opinion.

Alex:

Yeah, and I like what you said, like, Hey, you can spend, you can pay me all you want. But as soon as I can't afford to market a deal, I'm furious. And I have a very similar like, like, hey, look, you know, when there's time or payouts, it's like, pay me out whatever you want, I don't care. But if I can't throw the money back into the, if I can't reinvest into an opportunity, then I don't, I don't care about what the money can buy. I only care if I can buy more, more chances to make money. But I understand, you know, we got responsibilities and families and you know, gotta buy a Mustang.

David:

So, this is actually one of the reasons that I love the idea of servicemembers getting into real estate is so it's several things culturally, right like, obviously, I'm not trying to sell everybody in the military go be a house flipper or wholesaler. But for one people in the military they are used to and this is gonna sound crappy, but you know it, take it or leave it right. And like maybe not if you're in the Air Force, but people in the military are used to working ridiculous hours for the same pay, whether you work five hours, or you do a 24 hour duty shift, you're getting paid the same, right?

And so psychologically, like, I know, plenty of service members who have no problem working at night or working on the weekend, if it's something that they enjoy, right, like working on a Saturday, no big deal, because you're used to work and whatever, you're, you're still getting paid.

I think that's a huge advantage. Because if you were getting paid, you were living off your, your military salary, and then all of a sudden, you have a little bit of success with this, right? Like, you don't need the money at all. So you can 100% reinvest every single freaking Penny, and you've got weekends or, you know, if you're not deployed or or nights or whatever, where you're, you're okay with understanding the fact that, like, I got to put in some work, and I don't, and not to say that other people aren't, but like, I think servicemembers are uniquely qualified to do monotonous long hours without asking for a paycheck. And, and then you don't need it because you're all your basic needs, your human needs have to survive are met.

So then if you roll it back into this, by the time you get out, like, you'll be successful, right?

Frank:

I think the other reason I think veterans thrive in off market real estate, in particular is decisiveness. Like it's definitely in my opinion, like not at our space is not a place for someone that spent six hours in front of an Excel sheet analyzing each deal that goes across their table. Like, I used to be that person and other wholesalers, I'm sure that were selling to me were like, this guy is annoying as hell, like he's never gonna buy, right because he's, that's who he is. And I think one day someone was like, dude, decisiveness if something's good, like you need to let people know, you're serious, right? And I think like, you know, we, that's how we underwrite conservative, but once the underwriting is done, be aggressive. And I think like a veterans mentality fits that philosophy really, really well.

So I think that anyone out there that's listening, you know, that's active duty should be encouraged that you probably got a little bit more chutzpah than the average person based on your background. So.

Alex:

I actually agree with that. And I don't find that many of the soft skills that the military just translates into capitalist systems very well at all. But decisiveness is one of them. It's one of them that I'm really good at. And I did get it from the military. And that's, you know, you say chutzpah, like I don't consider myself to be that ambitious. I just got done saying how lazy I was.

40:00 - 45:00

Alex:

But when the deal comes along, I look at it in 10 seconds, like Yep, I'll buy that. I'll write a check. In fact, I'll commit like here, I'll, I'll give you the here's $5,000 earnest money, no due diligence, like, I'm ready to go. So that's something that people go Oh, Alex, how do you? I mean, I work with other veterans. They're not all, not everybody has decisiveness.

So you know, not everybody gets it like that. But I do think that's something that's definitely I relate to. So I'm sure other people do too. decisiveness is in and of itself a very, very valuable trait. Because even if you make bad decisions, you and you're literally if you if your heads are not completely up your ass, if you make a bad decision, you're like, Oh, I won't do that twice. Next time, but I can still make the decision fast. There's mad value and being able to make a decision faster committing to it.

Frank:

Yeah, no doubt.

David:

Absolutely.

All right, we got a couple questions we ask every guest or in this case, guests. Right.

So the first one is if an E one, E two, right, a young service member walked up to you asking you for advice, real estate, life, whatever, what's the one thing you would tell them?

Frank:

That's a tough question.

I say read more. If I had to go back 10 years ago, I would say every morning, read a book. It sounds really lame and very cliche, but I didn't do it. So I've recently picked up the habits that I think lead to success. And I think Columbus is probably ahead of me on that stuff. But I wish I was a little more disciplined with my daily routine when I was like 25, as opposed to waiting till I was 30. So I mean, like, if you're a 22 years old man, wake up before PT and spend some time by yourself. That's it, that simple.

John:

I think my gut reaction was to try to tell them how important your health is. But I think, my average E one or E two, I know they wouldn't listen to taking care of their body and sleeping well, and, you know, not putting nicotine in their body.

So instead of giving that piece of advice, I would say, pick a number something around 20% or greater, and save that of every paycheck. If you can save 20% plus of every paycheck. Even if you're not sure what to do with it today, you're probably gonna end up being good.

Alex:

They'll do both really, actually good pieces of advice, saying 20% your income most troops won't do it. They're listening to me. They're listening to you. They're like, these fucking guys are idiots. I'm not doing that. And it'll be to their own detriment. That's really good advice.

The reading one dude. Reading is the most valuable thing I've ever done for myself. by a longshot. Yeah. So it's very hard to get people to read especially difficult books. So that's good advice. And both of those things are difficult to do. And that's how I know that there. That's how you can tell if the advice is good.

David:

Which is funny because they're like the two simplest things to do at the same time. Like literally just set up an appointment for 20%. And listen to audible on your drive to work. But simple, yep. difficult. All your things work like that. It's like running, running is an easy thing.

Frank:

Like every good idea I feel like I ever have that's related to our business is like, either during or right after I read a book. Like it's when I don't read it. Like I don't come up with ideas. I feel like an idiot. Like just do it.

David:

Yeah.

Alex:

There's a Pete teah, I think about this a lot like people's content out is limited by their content in, like, how can you have good ideas if you're not learning anything new like that machine needs. That machine appears to need fuel just like your body does. You're like, dude, I can't go run. Unless I eat my oatmeal, right? I can't read. I can't run unless I put fuel in my body. Well, how am I going to export something smart? Unless I put something freakin smart in my brain?

David:

Yeah. You want up to anyone, challenge yourself, challenge your beliefs, read things you don't already know or believe in. Or just go to Alex and ask him what his reading list is. Because it's a whole bunch of things you've never heard of, but it'll make you smarter.

Alex:

I'll put the hurt on you with the intellectual pain so you can read my list.

David:

Alright, so question number two, right? What's one resource book, course, website, whatever that you would recommend to anybody looking to get into real estate investing and, since it was mainly the topic maybe specifically wholesaling.

Doesn't have to be I suppose.

John:

My answer is a super, super softball. Like the fact that someone can listen to podcasts like this, or watch your guys's YouTube videos or other content producers on YouTube. Like the fact that you can get all that stuff for free. And then on YouTube, and on podcasts, you can listen to double time, and you know that this is maybe an extenuation or extension from our last question, but like you can, it's so easy to absorb really, really good content in today's day and age. I don't think you have much of an excuse not to do it, whether it's YouTube, or audible or books or whatever, just get after real estate content, if that's what you want to do get obsessed with it.

45:00 - 50:00

Frank:

Yeah, I agree.

I think from a content perspective, if someone wanted me to give them an exact blueprint, I'd say hey, for three months, listen to bigger pockets. Once you figure out what you want to do, if you do decide to wholesaling, go to real estate disruptors? I think Steve Trang has the best wholesaling podcast that's out there. And a lot of people do think that but like, I think it is the best, like, here's the best guests. He has some legit questions about how they run their business. It's really good. And he actually operates, he actually operates he actually runs a wholesaling company. He's not like an educator that doesn't do any actual real estate. So.

John:

One word of caution I would give people though, is that like Facebook for a lot of things, but a lot of the real estate, Facebook groups, I think are, I don't wanna say they're really bad, but there's a lot of bad advice. And there's a lot of scammers, and there's a lot of people trying to take your money for no reason.

So if you're trying to get advice in a Facebook group, especially a non paid Facebook group or a group that's not regulated very well. Be very careful. In those Facebook groups out there.

David:

Yes, a lot of advice given by people who have got set advice from hearing about it not doing it.

Frank:

Don't even get me started. There's planning all week. There's so many people trying to teach people how to do creative financing and pay over ARV for homes, because they'll have cash flow. And I think it's the stupidest trend in real estate investing. Like..

Alex:

Yeah, there's a guy who wrote a book for bigger pockets that says that bullshit, that's a stupid fucking advice.

Frank:

God forbid someone stops paying rent and the market starts receding a little bit. It's like, well, then what? You know, you can't scale a business like that. Like if you own 100 houses underwater. I don't care what your cash flow is like.

Alex:

That doesn't make you an investor, that just makes you, just makes you frivolous with your money.

John:

People get pissed with us sometimes because we talked about how simple it is, but also how hard it is, right? We're like, you have to get a bunch of leads and you gotta work those leads. And you know how you shortcut the process, you just work harder, right? Like this. This idea all these people posted on Facebook like Hey, who has leads they can't work because we can work these leads that have no equity. Like that's a strategy and if you want to go with that strategy, go for it but I don't recommend paying over ARV ever.

David:

I love it.

Alex:

Look, we're all investors. No, hang on. I have to say this.

We're all investors here. Like you said, Warren Buffett Valley out investor, like the whole point of this is to get a freaking deal. I don't understand investors, so-called investors who pay retail for houses. That's the craziest thing. It's not even investing. It's like, dude, just park it. Do you have so much capital cash that you need to just park it somewhere? I get that, like there's Chinese buyers and California buyers that buy out of markets and they're like, Look, I have 400-500 grand, I have $6 million, I have to stick into a stable currency, I have to stick it into an appreciating market. And I need it in cash. And I just need to spend the cash. I don't know what else to do with it. Go buy houses, pay cash, even pay retail you're in good shape.

But if you're an investor who's trying to get himself started and you want to buy deals, you have to buy deals, buying retail makes you a piss poor investor on your best day buying properties that you pay over ARV just makes you a flat out sucker.

Frank:

Well, it's the difference like there's an argument you could be an investor and if you bought a house in Austin like subject two and that was five years ago and it was an enormous okay interest rate.

Yeah, you sold it. Now your IRR would be probably pretty good, right? So like.. No, you're you're you're speculating.

Alex:

Yeah, that works in hindsight, that doesn't work in the future going forward.

Frank:

You just have to admit to yourself, I'm speculating right now. I could lose money and you can't scale a company like that you can be an individual investor and do that maybe, but can you hire employees underneath that operation and actually run a company? No that's, I don't see it. So.

Alex:

It's cheaper and easier like real estate is a debt. Generally equity and tax heavy industry like it is highly liquid like it is not an efficient use of. It's not an easy use of capital.

Like if you want to make easy money and you want to do it speculatively go to the stock market, you'll make a lot of money for a lot less headache. If you want to use if you want to find deals and use debt to leverage the little resources. You have real estate's a really good Avenue but you have to get deals.

Buying over a RV is your sucker straight up. There's no excuse for that.

Well, there's somebody listening that I'm talking about, I want them to know.

David:

They probably stopped listening five minutes ago.

All right, so where can people get a hold of you guys?

Here's the shout out plug that you're allowed to.

John:

I appreciate it.

We've got a Facebook group called Virtual Real Estate Investing where we go live quite often and then our company is Grainline Investing. So if you want to hit us up on Facebook or Grail investing com hit us up.

Alex, we'd love to get you on a cash buyers list or anyone else out there looking for deals in a specific market. You know, or virtually we'd love to get you on your list and get you plugged in.

50:00 - 53:55

Alex:

I’m lookin.

Frank:

It’s GrainlineInvestments.com

John:

What did I say?

Frank:

You said Investing. That's not our company name.

David:

Right after the Hey, hey, John, you do this. I'm bad at this.

John:

We were both bad.

David:

It doesn't matter if they find your website as long as they get your email, right?

John:

Yeah.

David:

That's funny. I love it.

Alex:

Wait, is Carlo, your dispositions manager.

John:

Yeah.

Alex:

I have an investment email for me guys from Grainline Investments.

John:

All right. Keep that offer baby and get it in.
David:

And he didn’t buy.

I thought you were decisive.

Alex:

It's not even a deal. It's just like an advertisement. That's why I went to spam.

Frank:

Hey, you got a market man. Sorry.

David:

I love it. All right.

Alex:

I’m in your list.

David:

So real quick, one last question for you guys.

So I have linked for prop stream around and thrown down in the show notes. But in case people are wondering what platform do you use for SMS? And do you have a CRM that you recommend? Very simply, but everybody seems to have their own.

John:

Yeah, so I think we, we've realized it's kind of a moving target in this industry. It's like, a lot of these companies are, are good one day and not necessarily great the other day. So we're moving.

I saw your article the other day, and you talked about monday.com. We use monday.com. As a CRM, and project management board, we really like it. Like definitely click on that prop stream. Like we could not run our business without a prop stream. We love that.

On texting, we've had a lot of success with Lead Sherpa. We're also texting on launch control right now. Both of those are doing really well. And then what's it? Rei Reply. We don't use our Rei Reply, but I've heard a lot of people having success with it. So.

David:

Yeah, that's a new newcomer on the block. I've heard good things. I use launch control.

John:

Yeah, yeah, we were just checking out launch control. And they seem great so far. And then we use a Mojo Dialer. We've used a phone burner Mojo dialer for the three way calling. And we use drop cowboy for sending ringless voicemails.

What I realized with all those companies, we don't own any of those companies, and we use them. But we come and go because sometimes those companies are awesome. And sometimes they're not awesome. So.

David:

Yeah, the whole, the whole text blasting world of real estate is still fairly new. And there's all kinds of, you know, changing restrictions, even Launch Control, like the same template I used three weeks ago now they're like, Oh, we've also admitted this word to somebody, some of the wording on these texts to get them to actually go through is pretty...

Frank:

When someone starts to dominate the space, like, it's almost like their odds of getting a delivery rate decreasing starts to go up, you know, so it's like, inevitably, like, there's gonna be this, like leapfrogging in the SMS space until something stabilizes, you know, so I don't think most people will stick around for five years, I'm gonna change vendors, like two to three times minimum. So.

David:

Yeah. Right on.

Well, guys, we really appreciate it. This has been a good, good episode, lots of fun, lots of good information and actionable stuff that people can use, which is exactly what we love. So thank you very, very, very much for joining us today.

Frank:

Awesome.

John:

Thanks for letting us come on and talking with us. Wereally enjoyed it, appreciate it.

End:

Thank you for listening to another episode about my journey From military to millionaire. If you liked it, be sure to visit Frommilitarytomillionaire.com/podcast to subscribe to future podcasts. While you're there, we'd love for you to rate the show. Give us a review on iTunes. Now get out there and take action.