GI124: Purchasing Over 2,000 Houses with Mitch Stephen

GI124: Purchasing Over 2,000 Houses with Mitch Stephen

Mitch Stephen has been a real estate investor for 25+ years and has purchased over 2,000 houses. Today he specializes in owner financing properties and has perfected a method of achieving cash-flow without having to be a landlord and without having to rehab properties.

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Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Mitch Stephen. Mitch has been a real estateinvestor for 25+ yearsand has purchased over 2,000 houses. Today he specializes in owner financing properties and has perfected a method of achieving cash-flow without having to be a landlord and without having to rehab properties. So thank you so much for being on the show.

Mitch:
Hey, thank you for having me. This is always a pleasure to be around you.

Charles:
Thank you. Thank you. So please tell us a little bit about your background, both personally and professionally and prior to getting involved in real estate investing.

Mitch:
I failed at everything else. Real estate investing was the last thing, and if I didn’t fail it that I was just going to jump off a cliff. I was always an entrepreneur. My word was always very important to me, so I always had good credit, but consequently, when I failed at businesses, it took me a long time to recover because I would go to work and I would pay everybody back then I was involved with, if I owed anybody money, I wouldn’t start the next business until so sometimes that could cost me a year or a year and a half, you know, trying to just pay people back for believing in me. And I always had good credit. I, my businesses didn’t do very well most of the time. So from 18 graduation of high school, till 34, I spent a lot of time trying to find myself.

Mitch:
And then one day I accidentally screwed up and bought a condo that was seller finance to me. Cause I had a bartending job at night just to make sure I could put gas in my gas tank and get to where I was going. And then every month I had the business of the month that I was trying to get off the ground with absolutely zero capital, which is very difficult. And I someone’s seller financed me a condo and then I bought a little bit bigger one across the street. And then one day someone said they want to buy on both from me and I made more money and condos are not really the vehicle of choice we’re investing for me. You know what I mean? We’re really kind of horrible because of the maintenance fees and the potential of all that. But I got lucky. I hit a window. I, and I looked up one day and I had more money in the bank than I made in a year and a half of working, you know, and I just thought to myself, maybe I need to look into this.

Mitch:
And I started with the books and the tapes, and that was when I was 21, 22, 23. I really didn’t. I read the books and tapes. I listened to Robert Allen and nothing down my understood the concepts, but I didn’t own those concepts in my heart. You can tell me all you wanted to, that you didn’t need money to really get into the real estate game. I, I heard it, but I didn’t. And I would, I would say I believed it and I knew it and I would recite it, but I didn’t own the concept of my heart. So one day I screwed up and bought a house with none of my own money on a credit card. And, and then the rest was history. I, once I own the concept in my heart and said, oh, that’s what the heck they’re talking about right there. I just did it. Then I owned it. I went out and I bought the whole town.

Charles:
There you go. Yeah. Robert Allen and the Carlton sheets were old. Both those guys for, from the eighties and nineties. I remember listening to those. My dad had,

Mitch:
Yeah, those were my first two moves. Nice.

Charles:
So when you started investing, you were in a condo and your other, where did you, when did you kind of figure out a little bit later on what you liked as your best kind of vehicle throughout real estate of investing? Like

Mitch:
You’ve looked through all these phases, right? You go through like, you don’t have money or you’re a young investor, so you’re buying crappy, the cheapest property because you equate that they don’t cost as much. So I’ll be able to get more of those or that I’ll make more money with those. It’s the only way I can get in is to start where the cheapest stuff, you know, it’s not true because it’s the same theories work with million dollar properties. I’ve never still to this day gone to million dollar properties, but I did figure out how to manipulate my middle income properties houses mostly. And I did get off the bottom out of the war zones and the Barrios in the, in the, in the stuff. But it took me a long time to get all the Barrios because I thought that’s where I belonged.

Mitch:
You know, here I wasn’t the only white guy down there, you know? And I S I was seller financing to these people because where I was buying houses, no one could get alone and probably the house couldn’t qualify. So I was seller, I was seller financing. You know, I started out flipping on credit cards. I bought my first house was on credit cards, but you got to remember in 1996 in downtown San Antonio, Texas in the lesser parts of town, you were buying houses for 10, 12, 8,000, $15,000, right? That’s credit card crap. You know, like here, give me 10 on this card and five on this card, I in the house, give me 10 I’m on this card, I’m going to remodel it. And you got, you know, 25,000 in this house, three bedroom, two bath, 1100, 1200 square foot place. And then you owner finance it for 64, for 58,000, you know, give me three or four or 5,000 down and then start making payments to me.

Mitch:
Well, you couldn’t own or finance it because your credit, when you’re buying on credit cards, the debt window’s too short, you know, cause I was only getting six months, 12 months, 18 months, 0% interest. So I was having to flip those houses, but with my, I was going out and buying houses and then seller financing. I was making 10%, not only on my money, but I was making 10% on the spread. So it was like making 20% on your money. You know what I mean? You know what I mean? It’s because when you bought it at 50 cents on the dollar and sold it for a hundred cents on the dollar, you, you know, the ROI jumps up a lot because of that created spread. And and I just fell in love with seller financing because I was able to pick up, you know, way back then, even three, four, 5,000, a house times four houses was $20,000 for the month upfront.

Mitch:
And then my cashflow would go up 400 bucks or 350 or 400 bucks. And I’m talking 90, 19 96 numbers now would go up 300 and 350 bucks. Every time I did that per house and I was getting paid three or $4,000 to make it happen. So I realized that the potential of seller financing to my buyers was that I would get enough money to live on today and make my payments in my house, but I didn’t even have to touch my cashflow. And it just kept racking up. It just kept racking up. I looked up one day I have 300 mortgages. I’m averaging $500 per house, positive cashflow I’m cash flowing a hundred and frigging 50,000 a month. And I got paid a million dollars in down payments in today’s numbers to make it happen. I mean like, what else do you guys need? I, you know, screw appreciation.

Charles:
Yeah, for sure.

Mitch:
So, you know, because with the, with the millions that I, I mean, you know, the, the, the money that I generate, I don’t want to over sensationalize this, but with the money that I make, I would go by self storage units and wall. All of a sudden my depreciation problem has gone away. I just wasn’t buying my depreciation one house at a time and renting out. I was sacrificing depreciation for a half a year, eight months. And then I, you know, taking all the money I made from 40 houses or whatever, and buying a million and a half, $2 million storage facility and bam I’m in the depreciation game. Nice.

Charles:
Yeah. Everybody loves the depreciation that’s in real estate. So tell us a little bit of how the current investment strategy works. So you’re finding these properties. How do you find the properties? And can you give us a little overview of the strategy before you go into that?

Mitch:
Yeah. Well, first of all, as we all know life has become very competitive looking for distress properties, but you have to live with the chaos is, you know, we, we, we are also coupled by the time that we’re in right now, it’s a boom time. Every city in the country is getting multiple offers. The second something is listed and they’re selling for over the, you know, I don’t know of any place. I’m sure there is, but I don’t know of any place that’s gone. Yeah. We’re kind of flat. I don’t know any place like that right now. That’s even worth talking about, I mean, you know what I mean? And so we have to live where the chaos is. We have to live where there is no time to take advantage this market. That’s the only way you find properties is you’ve got F they don’t care, or they don’t have time, you know, or there’s no one who cares, you know?

Mitch:
So that’s where you have to live to find deals. You have to live where that kind of chaos is. And it’s usually death, divorce transfer, I don’t know, behind. And there’s a lot of different signs, right? And so you start delving into that bucket where everyone’s been filtered that have these problems, and then you start looking at them one at a time and seeing who’s most likely to, you know, be a prime prospect to sell their house to you. It’s not rocket science, it’s just pure work is what it is. People, you know, there was a day when I started, you know, when I started, you could get in the classifieds at eight in the morning by 12 o’clock in the afternoon, you’d have a perfectly good deal, perfectly good deal any day of the week you wanted to. And if you screwed up, you’d have to, and you, weren’t going to know, and you didn’t know how you’re going to pay for, you know it’s not that way anymore.

Mitch:
It’s a science practically. It’s about persistence. It’s about seven and eight and nine and 10 and 11 touches. It’s about stickiness. It’s about persistence. You don’t, you just can’t give up and today, and I’m still buying about a hundred houses a year. I’ve been buying a hundred houses a year for over two decades, even in COVID. I bought 83, which was a miracle. I thought I was only going to end up around 40, but at the end of the year, 2020 had kind of jumped up. So here’s the thing. I establish an owner finance value based on the rims. I can, I figured out my sales price based on the rents in the neighborhood. It’s kind of like an NOI, but it’s kind of not. Because I don’t take any expenses into account. You know, I just look at the rents, I got a formula and then we run it.

Mitch:
So this is what the formula is. You guys got your pencil on paper, you’ll pay attention. This is how you establish the OFV the owner finance value, because the trick is the owner finance value works best when you’re selling a house. And the P I T I S on this house is the same as the rent on the same house across the street. You know, if it’s a $1,500 a week across the street and someone can own this house for $1,500, what do you think’s going to happen? Right. The separator being, do you have a down payment? And do I like you because I gotta agree to trust you to make me payments for 30 years. Okay. So, but that’s my game. I’m trying. So I want to use a rent to establish a, a sale price so that when it’s all said and done this guys, P I T I S payment is the same as he was paying for rent, give or take a few bucks.

Mitch:
And people will always pay a hundred, 150 more to own in their mind psychologically. It doesn’t offend them. I don’t like to stress people over what they’re used to paying, because I want it to be a smooth life for them. I don’t want to take people’s houses. I’m not in the business of Jack and people’s houses out from Andro. You know what I mean? I have to take houses back and self-defense sometimes, but I don’t go in with that plan. I think it’s a crappy plan. You know, you’ll get enough of them back, even if you don’t want any, you know so here’s the formula. You take the rent and I’m just going to use some numbers. I know. So if the rent’s a thousand, you minus the property, the monthly property taxes is the monthly insurance. So let’s say the property taxes are a hundred a month in insurance is 50, just for easy math.

Mitch:
So a thousand minus one 50 lives, eight 50. So out of that thousand dollars rent that this guy has, that’s all that’s available from he and I to talk about because there has to be insurance on the place and they have to pay the property taxes. So there’s only eight 50 left over for him to make a principal interest taxes, payment, right. And insurance. So there’s eight 50. Now you could take the eight 15, you could go to your mortgage calculator and you could plug the eight 50 in is the monthly payment. You could plug 30 years in it as the as the term. And you can plug 10% in as the interest rate and we can solve for the balance. And we can figure out that it’s $79,970 or $790, whatever it is, which to me is $98,000. I always round off. And I always round in my favor, we’re talking about sales price. So I rounded up nine $97,750. That’s $98,000 is what he can afford to finance at 30 years at 10% to have an eight 50 PNI payment. Right.

Mitch:
So that’s what he can afford to finance. So what does that make the price? Well, I don’t accept less than 10% down, but I don’t want to settle for my minimum all the time. So I add 12% on top and that’s the price. And if you add 12% on top of 98,000, it comes out to a number that’s really close to 110,000, and that’s my price. And I don’t give a crap what the Mia appraiser says, what the BPO says, what the CMA says. I don’t give a crap about what the comp Sage, because these people can not qualify for a loan. There are choices. Do I want to pay a thousand rent for the rest of my life, which won’t be a thousand rent, right. Because what will the rent be next year? And the year after that the rent is going to go up, right?

Mitch:
Or do I want to opt into a fixed thousand dollar payment pretty much given, or take a few little variation on taxes and insurance over the years? Do I want to pay a thousand a month to rent, or do I want to own this son of a gun and get all the benefits of home ownership of appreciation stability, no, all, all, you know, pride, all that comes with it and not a hundred percent of renters want to own a house, but can we just agree that a very large portion of that number of wood, whether it’s 83% or 92% or 76%, it’s more winters than you’ll ever find for personally. Did you know that a hundred percent of statistics were made up on the spot? I’ve heard that before, so, or, or you can plug that 8, 8 50 payment we’re talking about, you could plug it into a mortgage calculator, or you could just multiply eight 50 times 1, 1, 5, and you’ll be really close.

Mitch:
And that’s what I do because I’ve operated my whole life with a, with a $2 calculator that I got from the dollar store, which is the most confusing part of this whole conversation. You know, I hold it up to the sun, it gets on there. I take eight 50 and I put 1, 1 5, you know, and that’s what the finance amount is. And then I add 12% and that’s the price, easy, easy, easy, easy, easy. But, you know, the trick is you just gotta make sure that you’re not wrong on what the rents are. 4, 3, 2, and that neighborhood or whatever, you know what I mean? And that’s pretty easy to do. And so now that I’ve established the price, I’m selling this house for 110, I want no less than 10% down, I’m going to get 12,000 down. I’m going to carry 98,000 for 30 years.

Mitch:
At 10%, his pit, payment’s going to be right around a thousand bucks. And then if I think I can push it $35 a month, I’ll charge P I T I S servicing fee because I’m allowed to put the servicing fee on his side of the closing. So isn’t that nice. I get for him all these notes over to a servicing company, and my buyer’s paying the fee. Interesting. If that’s the only thing you pick up out of this, and you haven’t been, you haven’t been letting you haven’t been charging your buyer for a servicing fee. I mean, that could be where thousands and thousands and thousands of dollars over a career.

Mitch:
Hmm. So I find a house. I mean, I go to a house, I pull up in front of it and I, I, in order to buy a house, I have to establish what I’m going to sell it for, or else I’m just peeing in the wind. I mean, I have no, I’m just guessing. So I go up there and I figured out what the rents are real quick. I do this formula. I figured out what my owner finance value is. And by the way, I probably coined the OFV. There’s the, the ARV, the M O that in the mail, you know, the N the Mao, there’s never been an OFV out there until I showed up 15 years ago. And I’m saying, because remember the OFV is a value unto itself is a very powerful number, but it only means something to someone who cannot get alone.

Mitch:
Try to explain why you’re selling the houses during the recession in the lesser neighborhoods are going for 27,000. There’s 40 comps in the neighborhood that clearly say these houses are worth 27,000. And then I run the rents and the rents are a thousand bucks a month, and I’m selling it for 50, or, I mean, the rents are six or six 50 a month. I put my house up 59. I’m a hundred percent over the market. And I sell it in four days, blows the banker’s mind blows the realtor’s mind. They think you’re really screwing them. I said, no, I’m not screwing. I’m the landlord. Screw it. They don’t give them. Oh, excuse me. They don’t give them crap. You know what I mean? It’s crack better than. I’m not really sure. It’s all fine. Within our pilot podcast language here. You know, I get enthusiastic sometimes and I get kind of wound up.

Mitch:
So, so here I, the first thing I do is I, I run that formula. I find out what my, oh, if it is, then I go in and I shoot for, to buy my properties at 50 cents on the, on the OFV. So if it’s a hundred thousand ROV, I’m trying to, I’m trying to get it for 50, you know, why I picked 50%? Cause, cause I can divide by two, like a. I mean, I’m a divided by two mother. I can do it like that. And so I’m shooting for that. I really will go up to about 65%. But when we’re figuring what 65% of most numbers, I have to get out that $2 calculator I got from the dollar store. And, and, and I, and if I, and that’s the most I will borrow from my private lenders is 65% of the OFV.

Mitch:
If I want to buy a house for 70% of the OFV, I will take that 5% out of my pocket. I never let my private lenders in over 65%. And I average, only borrowing 58% from them in the first lien position. So on a a hundred thousand dollar house, I average borrowing 58,000 and giving my private lender a first name on 58,000 in that property, one lender, one property, one borrower, I either pay. And I look my lender right in the eye, every time my private people, this note is rackable agreed. It’s collateral only it’s non-recourse and it’s you know, six or seven or 8% payable, annual interest payable, monthly principal interest. I always do 15 year amps. And then depending on what rate I’m going to give, it’s a 15 year fully amortized for four, for 9%, a 15 year with a 10 ten-year balloon, you know, 8%, 15 year with a seven year balloon, 7%, 15 year with a five-year balloon, 6%.

Mitch:
Okay. So fully amortizing note, maybe with balloons, if you know, the longer you give me the money for it, the more I’m willing to pay you for it, because I’d really rather just get 15 year loans and set it and forget it. Okay. So, and it’s not recourse. And, and I look my private lender in the eye every time and say, I want you to understand me. First of all, I want you to understand how I arrived at this value, the OFV and I show them the formula. Do you agree that renters would rather pay the same amount and then get them to agree? Because if they don’t agree to that, then the whole deal is. You’re not going to sell them on it, but most people, 99.9 go. Yeah. Most renters would. I mean, I would, if I was a renter, you know, and then I look them, right?

Mitch:
And I says, you agree on that? You agree on what the value is. I never say that this is the value of the house. I say, this is the owner finance value. And I’m very clear about it because we can get into argument about values. What that son of a gun said, the value was this. And I went down there and it was only half of that, you know? Well, no, that’s a different value. That’s my palms. And so I’m very clear on that. And then I look them in the eye and I say, look, then you got to understand one last thing. If we’re going to work together, I have the right to pay as agreed or walk my position over in this property any day of the week. I want anytime I want to. So if you don’t like that collateral for the amount of money you’re loaning me, don’t do this deal.

Mitch:
You have to, you have to be happy. If you get that collateral, here’s a house I want 58,000. It’s worth 100 grand. If I walk my ownership, papers over to you and hand you that a hundred thousand dollar house, are you okay? And if the answer is, yes, we can do business. And if you’re not okay, we’re not now, let me be clear. I have never been foreclosed on. I have never filed bankruptcy. I’ve never filed chapter 13 or seven or anything else. I’ve never given a property back to any investor ever in my career, but I have that right. And I’m paying above market, right? Rates, you know, banks are paying 1%. I’m paying five and six and seven and eight times what you’re offered at your bank. And, and for that, you share in the downside risk, which is if something catastrophic happens that little old Mitch, Steven has nothing to do with and could not stop. If he wanted to, then I don’t get penalized. I just have to walk over my position to you and go, who would have guessed? This is how I sleep at night. Oh one $26 million to private lenders.

Mitch:
If I have a note on that house, then I’ll walk my note down to you. If I have the deed to that house, then I’ll walk the deed. Here’s my promise. If I ever can’t pay, I will walk my position over to you. You will not have to Sue me or take me to court or foreclosure. You’re usually going to get paid or I’ll walk it to you so far in 27 years and over 2000 houses with private loans, I’ve never given a property back to any private lender or anybody for that matter. Because the day I do that is the day they’re going to quit. Loaning me money. Cause doctors and lawyers and 83 year old widows don’t know what don’t want to deal with the house. They’re either ill-equipped or they just don’t want to. They will figure it out. If you, if you placed it in their lap, they will figure it out.

Mitch:
Their friend will come over. Their kid will come over and go, oh wow, this was no problem, mom, it’s worth a hundred grand. Just call the realtor, put it up. You’ll pay her, you know, $6,000 and you’ll get back your 60 and you’ll have 25,000 leftover in your pocket. Know, someone will figure it out for them, but you know, so I’m borrowing 50. So I say like, so on that 98, 110,000 on house, I pick up 12,000 down at 98,000. I got eight 50 coming in, in three 50 going out. Cause you know, and so I’m keeping a $500 a month positive cashflow of which I am not a landlord when the air conditioner breaks, it’s not my air conditioner. So when that mortgage payment comes to me and that’s what it is, I’m the bank. When that mortgage company comes to me, there is little to no reason for it to ever go out again.

Mitch:
When a landlord gets a check, God only knows what the next reason could be. That you have to send the money out. You know, I’ve collected rent for months and months, and months. And apparently it wasn’t even my money. It was the frigging AC guys because when the AC broken, it was 3,500 bucks to replace it. All I had to give all my money that I thought was mine to him. Well, that doesn’t happen when you’re seller financing. So it’s a very dependable, very durable because the mindset of owner inside your house is different tenants. And I know that you’re in the tenant business, but we’ll put it in my vernacular and I’m not slamming it because a lot of millions of dollars have been made from rent houses and rent properties of apartments. I get it, but there’s another side of a coin and this is my argument. No tenants move in, tear down and move out, owners, move in, fix up and stay, you know? And when the money comes short of foreclosure, there’s no reason I ever have to give it back. Toilet, hot water heater, roof. It’s not mine. You know, so I do lose depreciation. I do lose appreciation, but can dude, I’m buying a house for 58,000. And so in that for 110 and one in four of nine days, you know what I mean? Like how much appreciation do you apartment guys want? So you want,

Charles:
Yeah, no, that’s fantastic. So what I had a question with is how are you structuring the deal? So how does that, I mean, I imagine it’s not too difficult for finding these buyers that I would think is kind of an easy part of it, but is it how, like, how is it structured? So you have your, you have a mortgage in your company name and where is that? 65% that you were loaning from a private lender. How is that?

Mitch:
So let’s say it was a hundred thousand on a house and I borrowed 50,000 from you. And so you got a first lien on this house, but you you’ve agreed that the money you loaned me is rackable. So when I sell, I sell on a wraparound mortgage, which means the guy that gives me 10,000 down is making the eight 50 payment to me. I’m taking the eight 50 that he’s given me. And I’m sending three 50 to you. His mortgage wraps around my mortgage to you. That’s why they call it a wraparound mortgage. It’s kind of his mortgage is wrapped around mine. And you have to, you have to, you have to get an attorney to devise or draw up a wraparound mortgage because a wraparound mortgage has to disclose to my buyer that he has a huge risk. I owe you money. And if I don’t pay you, we’re all screwed.

Mitch:
He’s screwed, everybody’s screwed. And they sign it every day because they don’t have a choice and no in that’s why there’s a lot of laws been passed, like Dodd-Frank and stuff, because a lot of people did this wrong or they took the money and they didn’t make the payment to you. And then the poor guy who put up $20,000 down and put in a new pool for $80,000, got screwed out of a house. You know, that’s why there’s these Dodd-Frank laws and stuff now because of some bad apples, you know, but I’ve never, I’ve never, I don’t let my people fail because of something I did. I also advise you if I forever, for whatever reason, don’t pay you, just go knock on the door and tell those people to send that $90,000 payment directly to you. And now you’re not collecting on 50 from me anymore. At 8%, you’re collecting a 90 from the guy in the house at 10%, for many, many, many, many years, you were in a better position, but why in the hell would that ever happen?

Charles:
Yeah. So it’s the rep because I know you’re going through all those, the list of non-recourse and all those kind of things. It’s the wrap that makes this whole S makes everything possible. Yes.

Mitch:
That’s why I need 26 million and counting because when I get out, you know, if I, when I, when I buy a house for 50, 60, 70, 80, a hundred, $20,000, it’s out that private lenders money is out for 15 years or seven years. I mean, it’s not like flipping a house where you put out 150 and in 60, 70, 80, 90 days, you get it all back and you start over again, mine, the money I get stays out for a long time, but the cash resulting from that transaction comes for a long time to imagine that you’re a wholesaler. What’s the average wholesale profit on a little house. I’ve been asking around the country. Some people say 10,000. Some people say 8,000, but just say, let’s just say it’s 8,000. Let’s say it’s 10,000 bucks. I am making the equivalent of a wholesale profit on every one in my house. It’s called a down payment.

Mitch:
I don’t call it a wholesale fee or assignment fee. It’s a down payment and they’re equal, but I still have a $500 a month positive cashflow for 30 freaking years. That’s a hundred, that’s 180,000. I’m still owed actually, it’s more than that because my payment could only last for 15 years. So I got $500 a month coming in for 180 months. And then I got the whole eight 50 coming in for the remaining 50, 180 months for the 30 years. So it’s like $220,000. I’m owed every time I do a transaction and I’m making the equivalent of what a wholesale fee. So if you’re a wholesaler out there and you haven’t mastered the art of raising private money, you’re killing yourself at $220,000 a transaction. That’s why you’re not rich. When I say I’m a multi-mode time, old time, old time multimillionaire on and on and on.

Mitch:
I am because I do a hundred deals a year, about 70 of them, I sell or finance about 70%. And every time I sell or finance a house, I’m owed 200 plus thousand dollars in the future. And it just keeps racking up into my financial financial statement. And in, you know, if you get $10,000 from eight houses a month, which is what it takes to do a hundred houses a year, and it just say the average down payment is 10,000, that’s 80,000 a month. How much you guys need to live on to support your family car? I mean, geez. Tell me, I mean, it’s, I mean, I can’t even spend all the down payment money, you know, of course now we’ve got to pay taxes and in the tax bracket, I’m in, you can take 40% off of that pretty soon or 39, you know, but it’s still a lot of money. Right. And, but, but I’m not even touching my cashflow for anything except to buy more assets because I can’t spend in the down payment. Right.

Charles:
Yeah. But the thing is with the gain depreciation, like you were saying before, that’s the third or the last part of it is where you’re buying additional assets that you can now offset your income because of the depreciation.

Mitch:
The story is a little bigger than that, because what you got is wholesaling one time cash flipping one time cash, you know, get one check from the house it’s done. Maybe the check’s big, but it’s over okay. Temporary cash. That’s what I do. I get some money up front. I get a lot of money coming in. But the average note in America only lasts seven and a half years, maybe at the economic echelon that I deal in. Maybe the notes last 10, because my guys are not going to get refinanced. They’re inherently Florida. They wouldn’t be paying 10% to me in the first place. Okay. But they do sell their houses. They put them on the market with a realtor and then the realtor finds a buyer and I’m getting a call for a payoff. So, so my strategy is a seller. Finance ready is, is some cash now in temporary cash coming in.

Mitch:
Okay. Temporary, because that note is going to expire one way or the other. So you have to take the money from your one-time cash events and the money from your temporary cash events. And you have to buy into a forever strategy. So you can work yourself, work your out of a job. You got to buy apartment complexes, something that’s forever. I chose boat, many stories around the lake where I live on boat. You know, I like being the tenant for that because it’s so less stressful, because, because this is not someone’s home. You know, when you try to move someone out of their home, this could be big, big ball of stress and get a lot of fight, get a lot of resistance. It could be really mentally stressful because when you, you buy that the 80 year old lady, you don’t, she’s not able to pay her rent.

Mitch:
You have put an 80 year old lady out on the street. Really. I mean, there’s some conflicts now for some people, it’s not an issue for other people like me. I struggle with that. You know, like I gotta, I gotta help. I gotta do something. I can’t, I gotta get her out, but I can’t put her on the street. What do I do now? I’m helping her find government programs. You know, I never had that problem in, in storage. You know, it’s a guy’s boat. That’s in there, screw the boat. He doesn’t, if he can’t make the payment on his story, he doesn’t deserve a book, you know? And plus I could do it at tiny increments. I could add 10 units. I can add 10, 10 by tens with a little bit of money in the next month or next quarter. When I have a little more, I can add another.

Mitch:
I, I built myself up from 13 units in 1991 to 1300 units that now only a hundred dollars a month. That’s 130,000 a month. Okay. Now I don’t get to keep it all. I got property taxes, I got personal taxes. I got utility bills and insurance and got to fix things and mow the grass and that. But I get to keep a crap load of it. I mean, a crap load. And there’s another income stream right there. Then if that’s all I had, I would not need to work. You know, people go, why do you work? This was an interesting question. I just led myself to it. You don’t mind if I just do this whole interview while myself you’re doing great. Well, you know, what do you work? I was retired for awhile, but let’s just say this highly energetic men, heaven forbid, heaven forbid they’d be good looking with a ton of money and nothing but idle time find very aggressive demons.

Mitch:
So maybe you should stay busy, you know? And because the luster wears off of the money. And I know some people would not believe that, but after a point, you understand it. I’m sure it can’t be about the money anymore. There has to be a higher reason. So why did I do this is what turns me on. And I don’t know why, but I kind of know why is when people I can help and be part of someone’s life or program or part of the story where they went from having a job to fire in their boss. I, that just tickles me to death. I don’t know why it is Dave Ramsey rings the bell. When people get debt-free Dave Ramsey would hate me. I bought my first a hundred houses on credit cards. I could blow his mind out of the water. I get excited.

Mitch:
We ring the bell at my office when someone says, Hey, I just told my boss to shove it yesterday. You know, I, I don’t know, but the reason why I think it excites me. Well, one of the reasons it’s excites me is because the day that you don’t have to have a job because you have 3,500 a month coming in from someplace else or 4,500 or whatever that nut is, and I’m not talking about get rich tough, just get financially independent at the most modest level so that your basic needs are met every day. So that you inherit is have 2,600 hours a year that you use to give to the job. You have it for yourself now in your family. So you can figure out who the hell supposed to be. And if being wealthy is in the cards for you, it will probably happen after you get that little 3,540 $500 a month coming in. So you can tell your boss to take a hike, you know, by that 26, put in the effort to get that 2,600 hours a year into your court, where you say what happens with it, because that’s when you’re going to become who you’re supposed to be. And that’s when you can spend the time to be an expert among experts on whatever it is you want to be an expert at and whatever your passion is. And that’s probably if, if being wealthy is in the cards for you, that’s when it’ll happen.

Charles:
Interesting. Okay. For sure. No, I definitely, I definitely agree with that. Getting out of your nine to five is is definitely most people’s number one goal. So it’s that’s fantastic.

Mitch:
And you know, what’s cool about that is you people you go in this real estate and for me, I need to make 50,000 on this deal. I’m trying to make 20. No, listen, let’s just make it real simple. You need $5,000 a month to live. Cause that’s what your job pays you. That’s all we’re trying to do is get 5,000 a month coming in. Everything just shrinks. It’s all seemed stupid. Now you live in the United States of America. The goal is to get $5,000 of your own money coming in from your own resources, from your own brain. It’s almost ridiculous. You live in the most blessed place you could ever live in $5,000, eight Jack. So quit thinking about millions. Let’s just get the first step done. You need 5,000 come in. It’s a tiny, tiny goal, which I can say that now, but when I needed 3,500 a month to come in, I wasn’t sure I could do it and scared the living hell out of me, but it happened in six months when I quit worrying about big crap and all the corporation. I just, you know, when I started just focusing on, okay, there’s another 300 a month coming in. Here’s 400 a month coming in. I’m going to buy this and there’s 300. Okay. I got my 3,500. See you later boss. And then I bought 45 houses in one year.

Charles:
Nice. So just a couple of things. I have two final questions here in regards to the strategy. What, what percentage do you think of people actually refinance these, these loans you out of them other than selling? Obviously they sell it. You’re out of it, but not many,

Mitch:
Not many, not many. It’s usually they sell the house. They want a bigger house move to another part of town. They’re got transferred that you know, they need to move closer to a new job. They got, I don’t know all the reasons I need to move closer to well, Wella, you know, the grandmother because they having a baby now, you know, they put the house up on the market, the realtor listed, and a new buyer comes along with a new loan and all of a sudden I’m getting a call for a payoff that’s 95% of. Okay.

Charles:
All right. And how is with this strategy, how has this changed during COVID obviously you said you did an 83 homes in 2020. How has this changed with with COVID like with

Mitch:
90 days, I used to be nine days on the market and now in four days on the morning, and I don’t even put signs out anymore. I don’t even put a sign in the front yard. I sell my houses in four days. I have no signs whatsoever.

Charles:
And how is that done?

Mitch:
Facebook marketplace. I got 8,000 people that are interested in the seller finance homes that I use bandit signs to capture their cell phone numbers, you know, pre recorded, how to, how to get an owner, finance home or home Dwayne, no other way. No. If you’re using your Spanish and trying to capture that market, and I’m capturing all their cell phone numbers and I send them text messages to say, you want to see my houses go over to my Facebook page. You know, it’s free, free for me free for you. And I got 8,000 people following me on my Facebook page. And whenever I have a new house for sale, I just send out a text, two sets per person, right between the eyes. They already raised their hand and said, they’re interested in my product. I send them a text, which has a 96% open rate. And it has a little link that says, oh, it says go over to my Facebook page and look at the new house I got. Is this the one you want? Four days? I got multiple contracts.

Charles:
Fantastic. That’s a great system you have to with capturing the phone numbers. And then also at the leasing. I mean, it pretty much minimizes if not eliminates any of your marketing expenses.

Mitch:
Yeah. I just, I have someone that answers that phone. I got a 22 year old kid that used to sell mobile homes. I said, how would you like to get off this mobile home lot and be able to roam around and be free and do what you want. But as long as you’re still in my houses, he says, well, what’s it look like I said, come over a mile. Just let me show you. I took him out one day. He makes $150,000 a year now.And I don’t worry about my house and he’s, he’s happy, happy, happy, happy, happy camper.

Charles:
So what are some common mistakes? Like you said before, about people wanting all this money up front, like the 50,000 dealer here, or 20,000 here where they should be focusing just on their monthly income. What are the mistakes you see are common states. You see other real estate investors make

Mitch:
The biggest one ever. When it comes, they need funding. They need places to fund. They’re giving up half their deals to partners who have the money, which is a big chunk. It’s way more than borrowing money. I mean, you can borrow money at 15% is cheaper than 50% of your profit. You know what I mean? In most cases the biggest, biggest mistake they make is they think they can’t go find private lenders because it’s about them. No one gives a crap about you. Charles Manson should be able to get the loans I get from prison after murdering people, because I go out and say, Hey, warden, I need 50,000 warden says, screw you, Mitch. You’re a mass murderer. And you’re in jail. I said, look, warden, give me 50,000. If I don’t pay you back, you can have my $120,000 house. And the warden thinks for a minute and says, you got a deal.

Mitch:
I hope you don’t pay me. And I don’t think you’re gonna, so here’s the fifth. When can I get my house? You know, it’s not about you. No one gives a crap about you. It’s about the deal and you get that through your head. And it doesn’t matter. You’re, you know, too short, too tall, too short, too fat. Doesn’t no one gives a crap. What they want to know is what am I investing in? And if you don’t pay me what happens? And if that, what happens is better than if they get paid, then they got a deal. Yeah. So get on with it. If the only thing you do this year is master the art of raising private money. I have a course. I don’t, you know, buyer don’t buy it. It doesn’t matter, but it’s, it’s a thousand bucks called private money, changes everything.

Mitch:
And when you learn to raise private money, it’s, it’s not a very thick course. It’s very light, it’s it. It’s not heavy. It’s not bulky. It’s you might even get it and go, wow, what did I pay for the problem? The thing is, it’s very rich. It’s very rich. Everything in it is right on target. And it’s all you need to know. And if you do it in a certain order and you get in a certain mindset and you present a certain way, people are going to say yes to you. I’m just going to show you how to get a yes. You know, you’re not going to get a yes. Every time, you know, figure you’re going to have to go through 20 to get one. Okay. Just figure that. Now the question is, are you going to go through 20? The answer for most people is no.

Mitch:
And that’s why it won’t work. Now. I think if you commit to go talk to 20 people under my, those teachings, I think you’re going to have a higher success rate for that. But I always like to set the, you know, the idea I like to be conservative so people don’t get disappointed or, or think it’s not working. I think you’ll get three or four out of 20. If you pitch it the way I want. And it may be the only course in the planet. And I don’t know for sure, but I’m, I’m probably pretty sure it’s the only course that teaches you how to raise private money with seller financing as the backdrop. Okay. Yeah. You know what I mean? Most people will raise a money. I’m going to buy an apartment complex. This is how it works, or I’m going to have a house don’t work. This is, this is how you talk to people about giving, getting them to give you their money. When your strategy is seller financing house, it may be the only one out there. I’ll probably try. I wouldn’t doubt if it was, it’s a big world out there. And it’s hard to say that, but I probably am.

Charles:
So Mitch, how can our listeners learn more about you and your business?

Mitch:
Go to 1000 houses.com 1 0 0, 0 houses.com. Beyond that, you could go to 1000 houses.com for slash YouTube. I’m putting up a 10 minute segment every working day for the next year, and it’s free. And I pick a subject adverse possession of foreclosure how to talk to private lenders. I pick, I pick a topic. I talked for 10 minutes on it, more or less. And I’m just spilling my guts about every single topic I can think about. And believe me, it’s 240 topics I got to come up with. So there’s like nothing left that I’m haven’t talked about or not going to talk about. By the time I get done, it’s actually pretty painful. It’s hard work. I wish I didn’t do it, but I already committed and I don’t quit. So, you know, I said, I’m going to do this and I’m going to finish a year and it. I’m going to finish whether I’m dead. So go to 1000 houses.com YouTube, or I don’t know if you’d go to 1000 houses or comments all over there, there will be so sick of me and all my stuff. You won’t even, you know, you won’t need another app.

Charles:
Yeah. I was checking out. So all the links to all of Mitch’s social and then all of the courses, I think he has two courses and then his mentoring and stuff like that is all on that website. So make sure to check them out. And thank you so much for coming on today. Med

Mitch:
Yeah, there’s a ton of free stuff over there. People chastise me say, you’d give away too much. I said, you know, the people that get into it, they’re going to figure out you either going to pay him mistakes or you’re going to pay a coach pick which way you want to do it. Making mistakes could be a lot more expensive and a lot more anxiety. And you might quit a business that you didn’t need to quit because you just didn’t, it didn’t happen fast enough. I suggest you get a coach, but either way you’re going to pay. So it’d be easier with a coach. So, you know, I mean, you know what I’m saying? Right? The school of hard knocks is an expensive graduation party, man, really, really hard.

Charles:
So thank you so much for coming on today, Mitch, I will put all those links to the show notes and I’m looking forward to connecting with you in the near future.

Mitch:
And I really appreciate you Charles, and you do a good service out here. And it really changes a lot of lives. I hope people are watching. I hope they got something out of this. Everything you want to get a little bit of, I’ve been doing it for 27 years. I get things out of conversations all the time. It’s why I do a podcast and have interviewed 500 people. Because every time I interview somebody, they’re pretty smart. Like when I interview you or whatever, I mean, I’m going to learn something about the apartment, you know, or syndication or something I didn’t know about. And you just keep getting better and better and better and smarter all the time. You know, that’s what it’s all about. You should never stop learning

Charles:
Ever. It’s great learning new strategies within real estate. I always, I always love bringing on and talking to new people that have a different way of kind of making their own niche within real estate investing.

Mitch:
Yeah. Well, that’s the deal. Don’t get caught up in the shiny object thing. You know, when you’re starting out, look at all the different, you know, go to all the free stuff, get on the internet, take everything free on, you know, subject to seller financing strategy and syndication and apartments and multifamily and whatever. And then when you find yourself, gravitating towards one, then put everything else aside, stay on the internet and just keep drilling down now on this strategy. And then when you’re sure it’s for you and that you’re in the right market for that strategy, and that’s what you want to do. That’s when you hire a coach and then you find a coach who has been doing that only for a long, long time and is still doing it now, probably, you know what I mean? And that’s your God just make sure that the coach that you pick is the kind of person that you want to be on and off the field because you can’t separate the two either. One’s going to show up somewhere in the other side. So if the person’s really good at investing, but you don’t like the way they’re living now that your coach.

Charles:
Interesting. Okay. Yeah. I’ve never heard of that before, but that makes perfect sense because obviously if they’re training you in what you’re working on, so, well, interesting. Thank you very much, Mitch. And I’ll talk to you soon and have a good rest of your week.

Mitch:
Thank you, man. I appreciate you. Bye now.

Charles:
Bye.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Mitch Stephen

Mitch has been a self-employed RE investor for 25+ years. His real estate investing career started at the age of 23 when he read “Nothing Down” by Robert Allen.
Mitch Stephen has purchased well over 2,000 houses in and around his hometown of San Antonio, TX. A high school graduate, who never stopped learning. Books, CDs, seminars and webinars were his classroom.
Today he specializes in owner financing properties to individuals left behind by traditional lending institutions and giving new life to properties that scar the neighborhoods.
He has perfected a method of achieving cash-flow without having to be a landlord and without having to rehab properties. He’s mastered the art of raising private money and the classic “Nothing Down” deal.
He has pioneered the idea that you don’t have to give discounts to sell your notes.
A passionate speaker who delivers the message of integrity first and profits second; an expert at keeping it simple and explaining, in plain English, the theories that made him financially independent. He is always an inspiration to those around him.
Mitch has been interviewing for his podcast for over 3 years and has more than 400 great guests.

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