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SHOW NOTES FOR EPISODE 029 WITH MITCH STEPHEN – HOW TO BE THE BANKER
In this episode, Mitch Steven, real estate investor and the author of My Life and 1,000 Houses: Failing Forward to Financial Freedom, shares how he went from building a portfolio of 1,000 houses to developing a unique lease-to-own program that helps individuals left behind by traditional lending institutions to become home owners and, at the same time, give new life to properties that often scar neighborhoods. In the interview, Mitch discusses how he has developed a method of achieving cash-flow without having to be a landlord and without having to rehab properties.
About Our Guest
Mitch Stephen
Mitch Stephen, the author of My Life and 1,000 Houses: Failing Forward to Financial Freedom (the first book of a three-book series), is a self-taught real estate entrepreneur. Self-employed since 1996, Mitch Stephen has purchased well over 1,000 houses in and about his hometown of San Antonio, TX. A high school graduate, he has never stopped learning – consuming books, CDs, seminars and webinars at every opportunity.
Today, he specializes in in a unique type of owner financing of properties to individuals left behind by traditional lending institutions and giving new life to properties that scar the neighborhoods. He has developed a method of achieving cash-flow without having to be a landlord and without having to rehab properties.
In addition, he has extensive experience in the art of raising private money and the classic “Nothing Down” deal as well as pioneering a method where you don’t have to give discounts to sell your notes.
A passionate speaker who delivers a message of integrity first and profits second; Mitch likes to keep it simple and explain, in plain English, the theories that made him financially independent.
More About Mitch
- No college education
- Tried many different businesses and couldn’t get paid
- Stumbled into real estate – liked it because you get paid or you get the property back
- Had 25 houses – tried to get $300 per house but instead was losing money
- Paid a consultant $10,000 to save him from the mess he was in
- Taught him how to stay in the business and make real money
- He wanted to quit being a landlord
- Consultant said to offer rental houses to tenants to own
- Consultant said to collect down payments on each houses – $3000 deposit x 25 houses = $75,000
- Plus received $7,500 per month on their mortgage payment
His Business Began to Grow
- Note buyers called wanting to buy his notes – he sold notes for $17,000 per house
- Had $500,000 in the bank but still had to pay taxes
- Today, he doesn’t sell notes
- Has done this process with over 1,500 houses
- People asked him to teach them but he said no at first. Now, says yes but will only take 12 students at a time
How He Began
- Went to his tenants and asked them if they wanted to buy the houses they were renting for 10 to 20% down. The higher down the less likely they are to drop out of the program.
- Some paid $3,000, others more
- Started looking for more houses to buy
- Drove up and down local streets looking for vacant or abandoned houses
- Looked in the classified
- Doesn’t use the term “Rent-to Own”
How it Works
- Owner financing works best with inexpensive houses or mobile homes with land
- He buys $30,000 house – Finances it (through investors) at 8% (interest only) for five years – he has to pay $200 per month – Loan is for $32,000 – he gets $2,000 (tax deferred) off the top
- His payment is $215
- His Winning Strategy:
- Buy it
- Do not fix it
- Double whatever you have in it
- Owner finance it at that double figure
- Plus the down payment
- Watch tenant go over budget fixing it up “your house”
- He knows, based on the rents, that the owner financed value is $65,000
- He offers the house at $65,000 at $5,000 down
- Sets up a note for $60,000 at 10½ % for 20 years, with a monthly payment of $600/month
- Does not need appraisal because not doing bank financing
- He gets $385 spread on the monthly payments, plus the $7,000 cash up front
- Has no responsibilities as a landlord and will yield over $92,000 in cash flow for 20 years
- He has also helped someone who could not ordinarily afford to buy a home to buy a home
- Made a renter a home owner and that creates neighborhood pride and improves the overall community
- Have fixed up a junker home and neighborhood values go up
- Increased taxes support local government services and improve community
New Book (His Third Book) on the Art of Owner Financing
- Revolves around the core belief that a person paying $1,000 to rent would rather pay $1,000 to own
- Some cases it’s actually cheaper to buy a house then to rent
- He can go into a neighborhoods, pull in front of a house, go on the internet:
- Check local rents
- Find what local tax bill is
- Knows how much they have
- Don’t need an appraisal to do owner financing
His Revelation on Financial Freedom
- His definition of financial freedom: Financial freedom happens when your wants and your needs are exceeded by your passive income
- Have to get financially free first before you can get wealthy
About his current business
- Said he has many businesses:
- Hard Money Lender
- Buying/selling homes
- Boat storage
- Self/mini-storage
- Educational Business
- It’s less about making money and more about helping others
- Wants to teach others his systems
Rap-it-Up
- Favorite Real Estate Book: Nothing Down by Robert G. Allen
- Favorite Business Book: Self-Made in America by John McCormick
- Favorite Website: Audible.com
- Favorite App: LoanShark and ServiceBell
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to try to rebuild your business? : Would put out 100 $10 earnest money contracts on houses. That’s how be bought his first 500 deals.
How Can People Get a Hold of Mitch
- 1000houses.com/olddawgs
- Mitch Stephen’s website: 1000houses.com
- To purchase Mitch’s book: My Life & 1000 Houses: Failing Forward to Financial Freedom by Mitch Stephen
Until our next podcast, keep moving forward and God bless!
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