553: Passive Income With Under-Market Homes, Wholetailing, Landlording & Crypto

September 13, 2021bmanasseroUncategorizedNo comments

SHOW NOTES FOR EPISODE 553: PASSIVE INCOME WITH UNDER-MARKET HOMES, WHOLETAILING, LANDLORDING & CRYPTO

Success in real estate investing is all about determination and persistence. In today’s podcast, real estate investor and CEO of GoForClose.com shares his story of how he, with no experience, implemented multiple investment strategies to build a massive 80 employee real estate empire and convert his investments into cryptocurrency for steady cash flow.

What You Will Learn

How to acquire investment properties with absolutely no money
Strategies for building a real estate business while working full-time
How to find a tenant who will do all your maintenance and repairs and pay rent
What “wholetailing” is and how it can beat wholesaling returns
The secret to finding a steady flow of below-market priced properties
How to generate cash flow with cryptocurrency
Why you need to hire employees right away if you are serious about creating a successful real estate business
How to negotiate with a distressed seller
Why Josh shifted from wholesaling to rental properties
A real estate disposition strategy that gets you your highest returns
How to find your best rental market

About Our Guest

Josh Miller

After 10 years as a data engineer for a fortune 3 company Josh Miller left to pursue full-time real estate investing. Utilizing his data skills, he acquired 120 rentals in 18 months and purchased/sold hundreds more. In 2019, he founded GoForClose to help fellow investors achieve the same success by providing them with a full service marketing agency to acquire off-market properties.

More About Josh

Born in England
Lived in Israel, Australia, U.S.
Went to college in U.S., graduated
Moved to Los Angeles area
Got corporate tech job
- Fell in love with data
Had the job for about a year and remembered his Realtor uncle who lived in Las Vegas
- Called Josh up in 2009-2010 and told him…
- There’s a whole street in Las Vegas where you can buy houses for $20-30K each..
- And he said that Josh should buy one
- Josh said “No, thank you!”
- He bought a car instead
- In 2013, he saw how much those houses had gone up and he felt like he had missed the boat
In 2013, Josh still had his corporate job and thought he could still try out the “real estate thing” and see how it goes

Becoming a Real Estate Investor

Josh decided to buy a single family rental property
But he didn’t exactly know what he was doing
He went on Auction.com
- Couldn’t find any properties he could afford in the L.A. (where he lived at the time)
- Bid on a home near Bakersfield, CA
- He was the only bidder and he won the property bid
- It was $130K and he didn’t have the money
- He ended up finding a loan
- No one else wanted the house, so Auction.com was ok with him taking the time needed to find financing
He bought the house but never saw the house in-person, until he went there for an Open House to take applications from prospective tenants
He put an ad on Craig’sList.com to find a renter
- The ad also said, “If you take care of all the repairs, I’ll take an extra $200 off the rent each month.”
  - In other words, “Never call me and you’ll get $200 off each month.”
- He ended up finding a contractor to rent the house
- It’s been 8 years since the guy rented the house, and Josh has only spoken to him 2 or 3 times
- The house is currently in better condition then when he bought it
  - The home was almost new when he bought it, too
Josh was very happy in his corporate job so he didn’t really do anything else in real estate for a while
- He also loved traveling all over the world

A Death That Changed His Trajectory

Josh’s boss was both a mentor and a friend
In 2016, his mentor unexpectedly died in his early 70s
This hit Josh very hard
Josh really broke down at the funeral
He couldn’t stop thinking about how this man had spent his entire life working, just waiting for the day when he could retire and spend time with his kids and grandkids
And how his dream never came true
This changed Josh’s perception of his job significantly
As much as he loved his job, he did not want to end up like his mentor and friend
Josh decided to set a goal and get serious about using real estate investing to create financial independence

Creating a Real Estate Business

Instead of just investing, he wanted to create something bigger that would endure for the long term
He decided to stay at his his job, work on real estate on the side and build up the cash flow big enough to replace his current salary
He knew, if he was going to succeed in real estate, he had to find good deals
And the only way to find good deals would be to find off-market properties
He decided to use his tech acumen to create a website to attract distressed home sellers
He then bought “pay-per-click” (PPC) Google ads to drive traffic to the website
He initially thought of doing this locally in the Los Angeles area but, with real estate costs so high, it didn’t look like he could find any good deals
So, he decided to do the campaign for the whole U.S. market
He got a lot of leads but very few were worth pursuing
- However, he got one lead that looked pretty good
  - It came from this small town in Wisconsin
  - The home owner knew he had to sell his property
  - The home was worth $100K
  - He wanted to sell it for $100K
  - Josh said that didn’t make any sense – he needed something that was under market price
  - He came down to $90K
  - Josh contacted a local Realtor and the Realtor said the home was worth $100K
  - Josh said it was still too much
  - The owner came down to $80K
  - They continued back and forth until the seller came down to $50K
  - Josh still didn’t want to buy it
  - The owner said, “We owe back taxes and they are going to take the house back at the end of the month.”
  - So Josh said he would give a few thousand dollars more than what they owe
  - They ended up settling on $25K
  - Josh didn’t have $25K so, out of desperation, he went on BiggerPockets.com and found a private money lender
  - The person asked for 10% and no points (Josh didn’t know what points meant)
  - Josh thought, OK, $2,500. That works
  - They created some documents on the spot and signed them
  - He used the money to close on the property
  - Josh called the Realtor and said, “I bought the house. Now I have to sell it!”
  - The Realtor offered Josh $80K and he took it
  - So, he was in the house for around $30K, so he made $50K
That whole experience created enough confidence in Josh for him to decide to build a business out of it!

Hiring Employees

Josh was still working full-time
He knew it would take more time than he had so he hired his first employee – The guy was a sales guy
Plus, Josh hated the sales part of the business and he needed people who could do sales better
Josh focused his time on the data and marketing side of the business
The new sales guy’s job was to follow-up on the leads they received through their website
He ended up hiring more sales people as the business grew
He also hired people for transactions, dispositions and acquisitions
Every time he made money, he would hire more people

The Business Explodes

His model was so successful, they closed properties in 33 states in the first year
They would buy the properties, get them inspected, appraised or a BPO (broker’s price opinion) to determine the value
Then, they would list the properties and sell them
He was doing what he calls “wholetailing” – which is basically a hybrid between wholesaling and retailing a property, something that a lot of veteran real estate investors use to make more money on deals.
He was working crazy hours to oversee this process
He was getting nervous because he was still working his normal job but was exhausted doing both
He was stressed because he was using lots of private money
He knew he needed a new strategy

Re-Engineering the Business

He started looking at transforming his operations into 100% rental property income
He hired a mentor but not to coach him
- He just wanted someone he could run things by that he wasn’t sure about
- Just someone who could validate whether he was making a right or wrong decision
He knew, however, that he wasn’t comfortable doing this all across the nation
He spent 6 months finding a city where the numbers made sense
By 2017, he found Omaha, Nebraska
- He had never been there
- But the numbers worked well
- He started building a rental property portfolio
Google PPC ads were getting expensive so he looked at other data channels to find good off-market distressed properties, such as
- Direct mail
- Cold calling
- Text messaging
- Ringless voice mails
- Email
He focused his marketing efforts now more on QUALITY over QUANTITY
Josh focused more on the right zip codes and the right neighborhoods
This reduced his marketing budget significantly
He could then zero in on where 95% of their best leads were coming from within one zip code, for example
Most were C class properties, although they did get some A and B class properties as well
- C class properties looked good on paper but A class is where he would have wanted to be if he had know what C class properties truly cost you
He left his full-time job in January 2018 to go full-time real estate
In 6 months, he was making more from his rentals than he was making in his full-time job
His goal was to generate $40K per month in net income
- He reached that goal in just a year and a half
But, what he realized was that rental properties were not that passive
It’s easy making the money with rental properties but the property management is the toughest part of the equation
- He could never find a good property management company
- He did it himself for a while
- He hired out
- He tried other things
- He now recommends to any out-of-state investors that you find a good property manager BEFORE you start investing in an area
By 2020, Josh decided to sell almost his entire rental portfolio, except for 15 A class properties (that are completely paid off) that he keeps for the cash flow, depreciation and tax write-off benefits.

His Real Estate Disposition Strategy

When Josh was doing a lot of real estate deals, he would turn on the marketing to try to generate as many motivated home owners who wanted to sell their properties as possible
Then, his acquisition manager would go out to get the properties under contract
- He’d always try to get the homes at the best price possible
Then, they’d hand the property to their Disposition Manager
- They had a really cool flow chart regarding the status of the property…
  - Their ultimate goal was to turn it into a rental property
    - But, the criteria was,,,
      - It had to be in a good neighborhood
      - Rent ratio had to be good
      - They had to have rehab crews available
      - They had to have funds available
    - And, if it didn’t pass those requirements…
      - Then, they would try to wholesale the property
        
        If they couldn’t wholesale it…
        
        Then they would “wholetail” the property
        
        If they couldn’t wholetail the property…
        
        Then they would flip it
        
        If they couldn’t flip it…
        
        Then they would do lease options
To RECAP: Rental Property >Wholesale>Wholetail>Flip>Lease Option
As a result, he did end up with quite a few lease options that he still has today
- It works out well as a cash flow source
  - He gets the monthly income like with a rental
  - The downside is that he doesn’t own the property unless they default
  - If they don’t default, 10-15 years down the road, the income source goes away
  - The good part is that he doesn’t have to worry about repairs and maintenance
Having so many multiple disposition strategies allowed him to acquire and/or benefit from many properties

Finding a Target Audience

He focused only on people in Omaha, NB
There were a lot of distressed home owners
That’s where he really started to learn about data and what makes a distressed owner
There are the obvious distressed owners are:
- Pre-foreclosures
- Tax delinquent
- Code violations
- Water shut-offs
The problem, however, is that there are hundreds of thousands of real estate investors (BiggerPockets has 1,000 new members a day!)
- And for those looking for distressed properties, everyone is looking for the same criteria
- The obvious distressed lists are easy to get today
- There are a lot of investors
- Technology makes it easy to reach the obvious groups
- Also, home prices are high so there is less distressed inventory
Josh has a team of 80-90 employees all looking for good distressed off-market properties
- They generate thousands of leads for their clients every month
There are great data resources out there to help investors find good lists
- PropStream
- ListSource
- PropertyRadar
- But the only problem is that millions of others have access to the same information
So Josh and his team have to dig deeper, through other channels
- They go into county websites
- He has a ton of developers
- They build out web scrapers
- They try to get harder to get lists
Josh’s team also tries to predict behavior based on
- Property characteristics
- What, historically, a distressed owner looks like
  - Then, they take that info and try to match it with other data points they have on distressed owners to see if it is likely that this guy/gal will be selling in the near future
- They take all that data and come up with who they think will be selling
But, the average person, who may not have access to all the talent and tools available to Josh, can still compile their own lists
- It starts with finding the best zip code to target
  - Instead of trying to find a needle in a haystack, they can find a smaller haystack
- Josh referenced Old Dawg articles and podcasts where it shows people how to find properties for less than $1,000
  - Josh said he has found those properties many times and sold them for tens of thousands of dollars
    - Those homes do exist

GoForClose

Although Josh no longer seeks properties for himself, he makes his team and resources available for those who want to find those great off-market deals through his company GoForClose.com
GoForClose.com will do all the prospecting and marketing for investors and deliver qualified sellers
There are lots of different real estate niches out there
But if you look at a typical real estate business business, you have
- Marketing
- Sales
- Dispositions
- Transaction Coordination
- Property management
- Construction
GoForClose takes care of the marketing component of a real estate investing business – the most cost and labor intensive step
- This is the area that a lot of investors spend all their time doing, especially in the single family home space
  - They spend lots of time and money trying to find motivated distressed sellers through:
    - Cold calling
    - Direct mail
    - Trying to find the best lists
  - This is also not an area where most investors thrive
  - Where most investors do best is in working with sellers, coming up with creative strategies to help address their needs and problems and raising money
GoForClose handles all the marketing functions and helps their investors to obtain qualified appointments with motivated sellers
- The real estate investor then just work directly with the sellers to help them to solve their problem

Identifying Markets

GoForClose also helps investors to find good markets
Josh combines all the data they collect, along with all the MLS and demographic data, and he provides a free tool people can use to identify a good market for the investor to market to
But Josh makes it clear, before you try to find a market, step back and find out what you want overall, before you dive into a market
- Some people get started wholesaling and flipping when what they really wanted was rental properties
- If you want to build a rental portfolio, you really need to target a different market than what a wholesaler might seek
- Finding a zip code is easy, but knowing what you want, what your talents are – first – is more important
  - Then you build your business around those things BEFORE you start your business

Under-Market-Value Economy to Rapidly Build-up a Rental Portfolio

Even though Josh has done many different strategies (wholesaling, wholetailing, flipping, etc.) what he loved most was buying rental properties
With the tools he developed, he could find inexpensive, under-market value properties and make a profit when he closed on the property
- He would work with local banks who would lend him 80% of the fair market value
  - If he bought the property at 60% of fair market value, he would often get a check at closing for the difference
    - That money would help him to buy more properties and quickly scale up his business, without having to use any of his own money
      - After he got a few dozen properties, then he would get a line of credit from the bank to scale up even faster
        
        He then used the line of credit to do the rehab, which boosted his margin even further when he refinanced

Passive Income From Cryptocurrency

He took his profits from the sales of his rental properties and put the money into Bitcoin and cryptocurrency
He found out how you could generate passive income by lending out cryptocurrency and charging interest
- It’s called staking
- People who need leverage, need someone else’s crypto to do that
- There are companies set up where they can facilitate you to essentially loan your crypto out, without them actually touching it, and they’ll pay you interest on that
- It depends on how aggressive you want to be
  - Josh is very conservative and only lends out at 6-8%
    - He likes to be headache and hassle free at a lower return
  - If you go aggressive, you can get upwards of 20%
- The good part of staking with Bitcoin is that it can continue to increase in value even though you are “lending it out”
- He’s not in the crypto space for the appreciation, he likes it more for the passive income
That is how he is generating cash flow today (along with the 12 rental properties, other lease option income, etc.)

Biggest Mistakes

In the beginning, he was very committed to success and was buying homes all over the country
- He was mostly wholesaling, wholetailing, flipping – all of which required a lot of time and effort
- He was so busy, he hardly ever saw his family and kids
- This was not what he wanted
- What he wanted was passive income but not at the expense of his personal life
- That’s when he shifted more toward rental properties, which were more passive
Another mistake was when he was choosing his market
- He was more focused on the data than on finding a good property management company
- If he could do it all over again, he would first find a market with a great property management company, then look at the data

Biggest Success

He did not try to do everything
Early on, he knew he had to hire talent in areas he clearly lacked skills
He focused on what he was good at – the data and the marketing
He has only talked to 2 homeowners from all the properties he has purchased, negotiated, etc. because he knows that is not his skillset
- He’s not good at sales
- He is not good at talking with home owners
That’s why he hired people who had the skills to do the other parts of the business better than him
He was fortunate enough to have a good salary at his W2 job to help pay for new employees for his business
However, he says, even if you don’t have that, you can partner or flip homes for the funds needed to hire the right employees

Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years

Josh talks with a lot of investors
- He talked with a dentist who has a very successful business who wants to get into wholesaling
  - Josh asked him, “Why?” He’s making tons of money
  - Josh recommended that he keep his business and passively invest in a syndicate for a large apartment complex where someone else is doing all the work and you just have to sit back and enjoy the income
- Then, he talked to someone who is a great salesperson
  - For that person, he said definitely go for it and use your skills on the phone dealing with sellers
Do what you’re good at
Stay in your lane and outsource the other elements
Real estate investing is a business
- It’s not a hobby
- You need to treat it as a business
You need to be honest with yourself
- Where would you do best in that business?
- He recommends reading the book Traction by Gino Wickman
  - Find out if you are:
    - The Visionary
    - The Integrator
  - Don’t start a business if you are not in one of those positions

Working Remotely

He was recently in Italy, traveling with his family on vacation
While there, Josh and his wife were talking about their home in Southern California, on the beach, and he wondered what it could sell for
While they were on vacation, they made the decision to list their home
- They called up their Realtor and she listed the house
- They sold the house the following weekend
- Now, they are going to live in Europe and run the business from there
Regarding running his business:
- It’s incredible when you do what you love
- When you wake up and you’re excited about what you’re creating
- That’s where he’s at
- He’s very excited about the opportunity of helping investors fulfill their dreams
  - And seeing investors go on to help other people
- Even as much as he enjoyed his vacation in Europe, he couldn’t wait to get back to the business
  - He could work 4 hours a week but, because he loves it so much, it’s more like 80 hours a week – it doesn’t feel like work
He has been running his business remotely for awhile
Being in Europe and running the business will not be a big deal
He has a friend that has $500 million in Bitcoin and all he wants to do is help other people
That’s where Josh wants to be – focused on directing his success to help others

His Company Goals

When he worked at his corporate job, he saw lots of silos of everyone re-creating the wheel
He sees the same thing today in the real estate investor space
His goal is to create a wheel that will work well for the marketing space
He wants to see GoForClose to be that place where people can come to for free or paid resources
- To say, “OK, here’s the wheel. Now I just have to put it on my wagon!” To take their business where they want to go
- He is not going to stop until he achieves that
He also wants to see his company, one day, helping investors from other niches like multifamily, mobile home parks, storage, etc.

Rap-It-Up

Favorite real estate book: Big Shifts Ahead: Demographic Clarity for Business by John Burns and Chris Porter
Favorite business book: Who Not How by Dan Sullivan
Most valuable web site for success (other than your own): County websites
Favorite app: Chess and Krisp (noise cancelling – block out barking dogs)
Favorite quote: “If you don’t look back on yourself and think wow, how stupid I was a year ago, then you must not have learned much in the past year”
If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to re-launch your real estate investing business? I would find the person I want to emulate, who’s incredibly successful in real estate investing today. And I would use the $1,000 to buy a plane ticket, hotel room. I would then pester the person, buy them lunch, do whatever I could to be around that person, try to work for the person, hopefully in a multifamily real estate type business.

How to Reach Josh

Website: GoForClose.com
- Get free app for finding the right zip code
- He loves talking to investors – book a free appointment with him

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