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 Zach Beach. Zach’S company buys and sells about 10-15 homes per month with little to no money down while also coaching students to follow his plan of owner financing and lease purchases. So thanks so much for being on the show, Zach,
Zach:
Hey Charles, I’m excited to be here about for you to dive in, get some nitty gritty going on and, and go from there.
Charles:
Awesome. So can you tell us a little bit about yourself before becoming a real estate investor?
Zach:
Okay. Yeah. So I don’t know if many of, many of your out there have, we’re in the hospitality industry, but coming out of college, I was a bartender for about four years and I also personal trained on the side as well. So as you can imagine, that schedule gets a bit draining. I would stay up all night bartending and then I’d have to wake up super early in the morning and personal train, sometimes the same people. So it was a bit of a conflict, but it made ends meet at the beginning. But about four or five years into doing that, I started getting super burnt out. I was burning the kid off on both ends and I had a family member, which maybe you interviewed my father-in-law Chris has been in real estate for, I know it’s gonna be almost 30 years now. I’m probably dating him now, but it’s about 30 years now. So I went to him about five years ago and I said, Hey, I don’t know if I’m going to like real estate, but right now I’m getting extremely tired getting burnt out. Would you be open to if I just started more or less making dials for you guys? It was at the time it was my brother-in-law and my father in law working together at a small investment company. So I went to him and honestly I had no idea if I was going to like real estate at all. I just figured, Hey, let’s give this thing a try, cause it’s gonna be better at what I’m doing right now. Fast forward, five years later, you know, I’ve done well over hundreds of deals now and help out people across the country do the exact same thing.
Charles:
So what would you say was your main choice of choosing real estate or investment vehicle other than the couple of, you know, getting into a normal work schedule? Was it, were you, were you hoping for it can, you know, a a regular income, right? A stability, stable income, or was it something where you were looking for something that was going to give you more freedom?
Zach:
Yeah. Great question. Honestly I didn’t even think past, Hey, I just wanted to get out of my current situation because I went to, I went to, cause I did the whole college thing and graduated like a marketing marketing degree and a minor in finance. And I didn’t know, I didn’t know what the heck I was going to do when I left college. And I’m definitely one of those people that are unemployable. I’m a definitely entrepreneur at heart. So I just knew I wasn’t going to join the corporate world. So that’s why I went into bartending. And then when real estate just happened to be something that was always around, because I actually started dating my wife and I was 12 years old. So I knew that her family was on as a real estate. I was having to be around it. I’d never partook in it, but I just figured, Hey, this is going to be better than what I’m doing right now. So no real, no real other aspect other than, Hey, it’s going to be better than what I’m doing right now.
Charles:
Yeah. Awesome. Awesome. So we usually talk about a lot of buy and hold and commercial real estate here. I wanted to kind of fig figure out if you could break up exactly what your company does in regards to focusing on this unique investing strategy that you have.
Zach:
Yeah. So we primarily focus on buying and selling on terms and you know, that that gets passed around a lot and maybe maybe you’re sitting in the audience and you’re not super familiar with it, but it just, it means that we’re not using our own cash, not using our own credit. We’re not going to investors ask for money and we’re not signing personally on bank loans. So the way we do our deals is basically go through a contract and the major areas that we focus on, the techniques that we use are by owner financing. So having the seller hold the note. Typically we’re doing that on properties that are free and clear. We’re gonna assume that there’s no mortgage on the house. We also buy on lease options or we call lease purchases. And that is, if there is a mortgage on the property, at least purchases, nothing more than a delayed cash sale, we’re going to take it over control of a property. We’re going to agree upon a price upfront, we’ll take over our responsibilities and then we’ll have an end date in the future in which that seller is going to be cashed out. And then last technique is buying property subject to the existing loan. This is going to assume that there’s a mortgage on a house. Typically we buy this way. If a seller has little to little equity in the property or is in arrears or, or if they sell, you know, they’re going to have to come out of pocket and keep that super simple. You close on the property title transfers to our company, but the mortgage remains in the seller’s name. We just contractually responsible to continue to make that mortgage payment. And then at date, the future of the mortgage will be paid off. So those are the three main techniques, but all of them come with, you know, really leveraging the property and doing our best to live in our liability.
Charles:
So, I mean, the first one’s pretty straightforward if they have no mortgage. The other two. Now I imagine with the subject too, you’re putting that into some sort of trust. Is that how it works? Some living trust or something like this. And then is it usually on those last two? Is it five years or something like this? That’s what I usually hear from people that buy on terms. Is that usually how you guys do it within five years, the mortgage paid off we’ll refinance it or sell it something like this?
Zach:
A good question. The one thing I do want to say about our owner financing deals is so we do a lot of deals that are owner financing about five years, or we even have plenty that are 10, 20, 30 years as well. But the five years to 10 years, we actually get 0% interest loans on these properties. So we’re paying principal only payments. So this is obviously huge when it comes to leveraging yourself and also creating wealth on the back end. So with that being said, I mean, with the principle I payments, our typical rule of thumb is if we’re buying a single family home and it happens to be over, I think it’s two 99 and a principal only payment of at least a thousand dollars. And in term of at least four years, then you have a six figure deal. So it just it’s protected, I’m sure we’ll dab this later on, you know, with the current state of the economy, but talking about protection and leveraging yourself against the economy. I mean, especially the longer terms, the better, but also the principal pay down the amount that’s going to be due on a loan in five years is significantly less than what you’re paying for it right now. So allows us to tap into markets and work with sellers that are they’re struggling to sell in the market right now, if you want to dive into at least purchase lease purchase. And we tend to work with a lot of sellers on the aspect of they’re looking to get the most money for their property, or what’s his say, they’re not able to sell it traditionally because of various things and they expire. And now they’re looking for alternative options, those, those types of sellers and those types of deals that can be super profitable to answer your question out, most of our deals, or are going to at least be around five years originally this cause we’re always constantly innovating, improving raising our deals. Averages are about 36 months, and now we’re continuously working on longer terms, especially with the unknowns of the market right now, the longer the term, the more protection you have and also the better.
Charles:
Yeah, no, that makes perfect sense. Very interesting. Interesting to have the principal only. That’s not something I hear often. Usually when we’re structuring owner financing on multifamily deals, we will sell to the seller, the interest only. And then obviously we’re pushing that out now for offers. We’re putting on smaller multifamily stuff that we work on the side, we will be used to be three years. And now it’s five seven trying to push that down the road as far as possible because no one really knows what’s going to happen. You’re trying to minimize your debt payment there, but that’s, that’s pretty that you can’t get much better than that with the principal only are not even paying for the debt which is awesome. That’s a great strategy.
Zach:
Well, the strategy behind it too is alright, mr. Seller, you want your price? Well, I’ll pay you principal only payments on that price. And we know that we can pay market value or even suddenly above on a premium, because we’re going to make up the difference in the next six months to a year. And now we’re back to below market value within 12 to 18 months. So it allows you to get the seller to his dollar figure, as long as your other terms, such as principal payments and longer terms, as far as when the balloon payments do, as long as those match up, then you can get a seller to their number, which most other people or most other investors out there in our playing field and single family homes, aren’t, aren’t able to offer that or choosing not to us.
Charles:
Yeah, it’s, it’s great. The most successful people. I interview have don’t just work in a box. So it’s they go? They have we’ll do the same thing is we’re going to say, Hey, this is if we’re going to a bank, this is if you sell our finance, it, this is, you know, option C and you can, they can pick on what they want. Do I want the money now? Do I not want the money now? Am I trying to get a higher price? The other person that called me some wholesaler, he wants to give me 65% of what my house is worth. You know what I mean? So it’s awesome that you guys are able to offer all these different, all these different options. Now, how do you guys find your deals and maintain your deal? Focus? You must have quite the deal flow. If you’re doing 10, 15 deals a month.
Zach:
Yeah. We actually shop in the same spaces that most others do, which is just kind of funny. And most people ask us and think that like, there’s this mysterious door that we go behind or this like market that we tap in that nobody knows about. And the funny thing is we just have different options and we look at deals differently than the average investor or even the average realtor because we buy properties that are for sale by owner. We buy properties that are for rent by owner are huge. Our biggest pool is probably expired listings. That’s usually about 60 to 70% of our deals. And we found that tends to be the best pool because somebody’s been through the traditional market. For some reason it has not sold. And now they’re looking for alternative options. So it’s more of a mindset and the traditional market did not solve their problem, whether it’s good or bad. As I was talking about owner financing, they’re probably most people that are waiting to buy owner financing. Their problem is not a financial problem. It’s a real estate problem. I have this real estate asset. I want a specific price for it. It’s not like I’m drowning. It’s not like I need somebody to come and take over payments. Cause it’s free and clear. It’s not that I need the money or I want to refund it. I just, I need an alternative option so I can feel comfortable with the price and, and and sell the asset. So what we’re just doing is we’re just solving problems or providing solutions to people that couldn’t either find solutions traditionally or are looking for alternative solutions because they’re not happy with the ones that forwards and presented to them.
Charles:
Yeah, no, for sure. If that’s a it’s, especially if they’ve been on the market, that’s perfect. They can be better because it’s three to six months that has been sitting on the market for a property. They want to sell that they’ve been paying all the expenses, all the debt, all the interests, whatever it is on that property and just hoping it sells and then having to pay 6% commission plus all the other state fees, County, city fees. So that’s a, that’s an awesome, awesome strategy. Now, how do you minimize your downside when you’re investing in this, in this style.
Speaker 3:
Yeah. We’ve, we’ve covered a couple of things, but to bring it full circle, minimizing risk certainly our contracts, when we buy property, we’re not signing personally being signed with the LLC, whether it’s owner financing or whether it’s at least purchase or buying it subject to the existing loan. Typically if you don’t have invested money on it. So it’s not like we have additional debt that we have to pay say in our credit, something effective because it’s yellow C as well. And, and then the biggest thing I would say is, is the length of terms. The, the term, as far as if you can extend these deals, just like you’re doing five, 10 plus years down the road. I mean, it minimizes the default of the third party, which is how we get paid. And we can go into our three paydays in a minute, how we can create three pays on one deal, but the longer the term then they’ll even if a buyer defaults, I mean, you still have so much time in order to cast somebody out. So it significantly minimizes that risk. But also a majority of our deals have less than $500 as a down payment. We barely put money down on these types of deals. There’s, there’s been a handful of deals that we’ve done hundreds of that, where we actually put down a good deposit. And the only one that I can think of breath top of my head is we bought a property is worth $940,000. Or we actually have it on the market for over a million right now. And we put $10,000 down on the property and we paid the closing costs. And that one actually we structured principle only payments as well with the owner. So that would be the largest deposit. And what we actually do is we rolled in profits from another deal, cause we had another deal cash now, and then we rolled it into this deal. So as you grow your business, then you can certainly move around funds in order to create better deals.
Charles:
Yeah. Even, even with you putting down 10,000 on that, that’s, I mean, that’s almost like, you know, one around 1%, which is unheard of for buying property like that. So,
Zach:
So as you can see, I mean the, if the contract States that you’re eliminated to the, your liability of your deposit, most of these deals, we don’t have much skin in the game. Although, I mean, I do want to put this on the other side because I’m sitting with my investor hat on, but from a family business owner standpoint, me morally and ethically we’re we have the intention to cash out every single one of these properties. And we do our best. It’s very rarefied. These properties do not cash out because of the processes that we set up in place in order to make sure that our third party that we end up selling it to is going to be definitely qualified in order to get a loan in the future in that way, where maintaining the property or controlling the property and being very systematic throughout this process. So morally and ethically, we’re working always work towards casting out. But as far as from an investment standpoint, we don’t have a lot of liability in these deals.
Charles:
Yeah, of course you want to follow through with what you what your intention was from the beginning. So let’s talk about your, the three pay days. And I wanted to kind of see what the business plan is. So you found the property you have it, you have a motivated seller. How do you get paid and what are you doing with that property?
Zach:
Yeah. Great question. So let’s let’s take one of the techniques. I feel like you guys are most familiar with like owner financing. So let’s say we buy a property in owner financing. So we’re agreeing upon a price with the seller or we’re closing on it. We’re agreeing upon making a monthly payment to the seller. And then we contractually are responsible taxes, insurance and everything. And then we have a balloon date in the future, which we need to pay them off. So we’ve, we’ve created that contract with the seller. We now own the property. We’re now going to go sell the property to what we call a tenant buyer. So somebody who’s just outside of financeability and I don’t just mean like anybody. I mean like somebody that’s just outside of finance that has the buyer mentality, but just cannot qualify for a loan today. So you’re talking about people that are self employed. You talking about somebody who had a legitimate hang up in their credit somebody that’s relocated and now has a new job. There’s so many different people there, especially in today’s market. People that can qualify for a loan three months ago can no longer qualify for a loan and especially on jumbo loans and all those loans that are outside of the norm. So what we do is we then work with those buyers, those buyers, and come in with a nonrefundable deposit, which counts towards the purchase price. So we raise the purchase price as a premium because our buyers are willing to pay a premium because they’re getting an option on the property. They then come up with a nonrefundable deposit. It’s going to range typically between five and 10% down. And then what we’ll do is over the course of the period of time, we’ll continue to have their deposit built up that way in the future. When they go get their own loan, they can show how much money they put down, which we want to make sure that they’re set up to succeed. Then we’re going to be collecting a monthly rent payment from them, which is going to be above what we have for expenses. So you get paid. Number one is you don’t refundable deposit. You’re paying number two is the cash flow that you accumulate monthly. And then paying number three is on the backend. When the buyer goes and casts out the property, you have been accumulated all the principal pay down. So what you have for debt on the house towards the end is going to be much less than what you started with. So you’ve got a big back end profit plus you’ve raised the price on the house. So if there’s any additional premium, that would be your pain, Number three, if you look at our deals across the board, they range anywhere from this pretty decent range because we’re in 80 plus markets right now, they range from say $50,000 on the low end. As far as our deals on all three paydays up to $250,000 on the high end average tends to sit somewhere between like 78 and $80,000. Now on all three paydays, wow, this is a landlord either. That’s, that’s the beauty of the whole thing too, is you have a buyer going in there. That’s treated as if they’re a buyer. They don’t call you in the middle of the night for anything that goes wrong with the property. Cause they’re a hundred percent contractually responsible for the property. They continue to make payments. So when we’re talking about controlling their house through that process, we’re literally collecting payments and just making sure all of the debt on the house is paid on time in order to support our, our seller staff.
Charles:
Yeah, because you’re not having a typical renter go in there. So it’s actually someone that wants to buy the property. Someone that they’re already making it their home by the time they move in as, as a renter. So that’s, that’s awesome. And these strategies, I think work even better in markets like this that might be uncertain or might be, you know, slight pullbacks. So what happens with, in, in this creative financing that you’re working with, how has COVID affected your real estate strategy for you and your students?
Zach:
Yeah. Our, our business has actually had a upward trajectory right now. It’s, it’s been pretty, pretty insane. We’ve been busier than ever. And we built this model not only to be successful during good times. But this model we inherited and created a process around it because of back in Oh eight, my father along, I hit huge on the crash pad and everything personally signed. So we said, all right, well, if we’re going to create a model and build a nice business out of this and how do we protect that aspect and the unknown or the great thing that popped up out of it was that once COVID hit it actually dramatically increased our business because we were set up to succeed because thanks tightened up. So now buyers weren’t able to go buy properties, which then had the sellers are no longer able to sell. So those who those who would typically go through the normal traditional process of putting the property on the house. So the realtor going three to six months are now looking at our options ahead of time because they know right now with the uncertainty of the market, they’re looking for solutions. So our businesses has skyrocketed and our community did 30 plus transactions over the last couple months, me each month, 25 to 30 transactions or 25 to 30 deals over the last 90 days. So as soon as COBIT happened, this actually skyrocketed and tripled the business. So I can just say there’s no better time than now in order to get involved in creative financing, because we both know that this is going to now drag on for the next 18 to 24 months, because the they’re going to start opening this up. And this is my opinion. They gonna start opening this up. You do have some bank loans or government back loans that are allowing arrears, which are basically say a buyers in that are the homeowners in the house. They can’t make these payments over the last 90 days. Government backed loans are allowing them to be moved to the back of their loan, but we have not heard that non-government back loans are going to be allowing them to move that. So now you have a large amount of buyer or homeowners that are going to be hit with a large lump sum from banks, which we both know, like people aren’t going to get jobs back like that things aren’t going to change as quickly as I think the government wants us to. So now you have this huge pool of sellers that are going to need a lot of help. And if banks continued to tight and then you’re going to have a bunch of buyers that can no longer qualify. So now, now they’re looking for alternative options. So in order for this real estate economy to keep going, creative financing needs to be in place. We need to be able to pull banks out of out of the mix and be able to work hand in hand or the real estate market’s going to stall at least in the, in the single family, home family home realm. That’s my opinion. I mean, what we’ll see in the next 90 days really, but
Charles:
No, I think, I think you’re right on there with, with what you’re saying, the, for sure that we’re seeing, I mean, it’s even in the multifamily. So if you’re going in for these loans that are under a million dollars, so they’re going to be your regular local commercial banks, credit unions. They want 10% more down. They want more reserves on larger deals that we’re doing with agency, Fannie Freddie Mac. They want more reserves. So if you’re preapproved for a mortgage in February, right? I mean, March, April, your, your world was turned upside down on you. You know what I mean? So a regular buyer still wants to buy a house. They have to, they might work through more creative strategy, pay a little bit of a premium to actually, you know, move that along than waiting, which it will probably be. I mean, you know, like you said, 12, 18, 24 months from when this all started is that we’re actually going to see this thing come back, I think, to normal. And I think things will tighten up and maybe they’ll loosen a little bit here or there, but it’s not going to be like, it was in January for years. You know what I mean?
Zach:
Oh yeah, absolutely. I mean, time will tell, but we know government banks, they move a lot slower than we’d like them to plus I think we’re just kinda all looking through like the, the Rose colored glasses right now because we just, we have no idea what’s going to happen. I hope it goes back to normal. I mean, we were still doing plenty of deals when it was normal and I could act like a normal human, but right now, I mean, we’re just, we’re doing as best we can in this economy to help out as many people as possible. Sometimes I just don’t have enough time of the day to help out as many people as we’d like.
Charles:
Yeah, for sure. So with how you guys have gone, I like to go into kind of different systems. Can you kind of explain what kind of systems you guys have in place? What software your team utilizes to do all these deals through the whole process to manage fine, et cetera.
Zach:
Yeah. So it’s taken us about five or six years to develop our system to, to the T right now. And people have the ability to buy it. We call it our QLX home study course, but it’s really not in home study course. It’s our quantum leap system and it’s constantly updated. And as we continue to evolve our business, they have all the systems in place, including our contracts. So people, everybody out there, they have the ability to go get it. So we’ve taken the time to develop all the systems, all the process, all the checklist in order for you to buy through our four techniques, we talked about three of them today. And then as far as software goes we’re a big fan of freedom soft. We’ve been using that now which is really all inclusive, interactive system where you can do like you can have DocuSign or something similar to it, and they can do electronic signatures. You can do contracts through it. You can have workflows and campaigns and automated funnels. I can have different people working in different aspects of it, so it can work as a full machine. So we, we very much enjoy that. It’s allowed us to really be able to automate and delegate the business and make it more streamlined. So and that’s also in our resource section. You can also, if you go on our website, you can find it as we actually created a custom Acosta really software our coaches platform for those who are inside and utilize our techniques as all of our agreements and everything are already implemented in there are workflows already in there. So instead of having to go create the whole thing, guys, he did it for you very specifically to our business.
Charles:
Awesome. Yeah, that’s great. Anything with these creative strategies and using DocuSign integrated with all your other stuff? I mean, DocuSign just makes the process so much faster and you can go out. If you take a look at the place, they can sign on your phone, you can send them an email for it. So it’s, it’s definitely revolutionized all these different creative financing techniques and stuff like this. So you’re an author and a coach. Are you able to explain on what your coaching program offers? And I know I have your book here, but
Zach:
Yeah. So, and we’ll offer the book for free at the end as well. And we’re actually going to rerelease with some additional new chapters for myself in our original Amazon bestselling book as well. But what separates us or smart real estate coach from, from others in my opinion, is we, we teach you the systems. Yes. we have very, we’re extremely innovative when it comes to that because we’re in the trenches. We’re not only coach on this. We still have our real estate investment company that we buy and sell properties on a day to day basis as well. So we’re not teaching you models are things from five years ago. We’re literally teaching you what we’re doing right now in the trenches. That’s why we have two companies that we stick to that because it’s extremely helpful. The second thing is we do to the system, but then our, we have certain coaching levels that allow us to get in the trenches with you, meaning lock arms with you, help you with jumping on the phone and, and doing negotiations with sellers working you through how to work with the buyers, hopping on buyers, meetings, hopping out by our signings, anything from again, getting a hold of the leads and all the way to getting the property cashed out and helping you control and make sure that you get your three paydays. So it separates us is we get, we have the ability to get in the trenches with you from that standpoint. And then the fact that most people don’t take into play, but we’ve realized in the realize that our students, if that’s such high success in our community is because of that community. We actually created what we call the wicked smart community, the community of the people. We do deals within the trenches and you have access to those. If you’re part of one of our coaching programs or part of our coaching program. So you can connect with one of the associates at Duke, that’s doing deals in Washington or California or Florida on what we have is a Slack platform. So it’s a constant communication where if you have a question you literally can just hit our members area and you’ll get like 10 different answers from people in a relatively quick period of time. So yes, you have your own point person as a coach, but you also have the amazing community that supports you throughout the entire process. And especially with what’s going on with Kobe, there’s nothing more important than being a part of a community that’s moving in the right direction. Then there’s too many people out there that took this as a vacation. And I don’t mean to sound insensitive because some people are extremely affected by, and I can understand that, but others are taking this up as if it’s a vacation. I can tell you that our community is running because they know. And we truly believe that over the next, say six to 10 months, you can create profits for the next six to 10 years by doing these types of deals. So that was a huge, huge benefit.
Charles:
Awesome. And how can people learn more about you I’ll put those links, any of these links into the YouTube and podcast notes?
Zach:
Yeah. So you held up the book, let’s give him the free book right now with COVID-19. We’re not sending out the hard books just because we don’t have everyone in the office like we used to, so you can get the free downloadable or you can go on Amazon and go ahead and buy it. I’m a huge fan of the actual book as well. So just go to new rules for free.com, go ahead and download that book. It’s new rules for free dot. And I’d also love to give you guys the ability to have a strategy call. Maybe we can hop on the phone for about 15 to 20 minutes myself. You can either talk to me or Chris and we can work you through and talk you through either what the next steps are for you, or go through any challenges that you may have. And you can go to smart real estate coach.com/action. It’s just slash action. And then it’s just six easy steps into a couple of questions and you can hop on our calendar. I’d love to chat with him, see how we can pass out.
Charles:
Awesome. Thank you so much for being on today’s Zack. And I look forward to talking to you.
Zach:
Thanks, Charles. I appreciate your time.
Charles:
Talk to you later. 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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