David Dodge: Hi guys welcome back to the discount property investor podcast this is your host David Dodge. My partner Mike Slane is out in the field today so I will be hosting this episode of the discount property investor podcast. If you are new to real estate investing and /or wholesaling check out our free wholesale course at freewholesalecourse.com. Learn the basics of how to buy properties at a discount, remember folks, you make your money when you buy, however you get paid when you sell but all the money is made in the beginning when you buy. Wholesaling is a great way to learn how to buy properties at a discount. So Today I am joined by Keith Rogers. Hello Keith! How are you, sir?

Keith Rogers: Man, I'm doing great thank you for having me.

David Dodge: All right, good deal. So, I was connected with Keith through one of the mastermind groups that I'm involved with and I'm excited to have Keith on the show today. Keith it is doing some pretty cool stuff with seller financing to build wealth but before we get into that, Keith, tell us a little bit about how you got it started investing in real estate. What was the driving factor that said it- that said alright y'know - or you said to yourself "alright this is you know what I want to start doing full time: real estate investing”?

Keith Rogers: You know, since I was a little kid, I enjoyed working with my hands and doing things like that, so there was a little bit of a passion involved in just wanting to remodel homes. And I was shoved into that reality in 2002 when I bought a franchise- a we buy ugly houses franchise in Lubbock, Texas.

David Dodge: So you did buy one of the franchises?

Keith Rogers: I did

David Dodge: Cool cool.

Keith Rogers: I started the one in Lubbock, Texas in 2002 and I was kinda forced into doing that because I didn't own my career in a high-tech business and of course we all know about the bubble that burst in 2001 so I just started trying to pursue my passion instead of a paycheck in 2002

David Dodge: Ok, so that was in 2002.

Keith Rogers: Yeah, and so from there, took a little bit different course, I owned that company for 3 years. I ran into some gentleman during that process that had something amazing going in over finance. They were just doing a great job here in Texas and we really had a synergy between the three of us and they hired me to come and run and expand their business. Within 4 years, we had expanded our business to 13 different states, we had trained 60 people how to find properties for us and we were creating about a 150 seller finance notes a month.

David Dodge: Wow! That's a lot of notes a month man. 150 of them!

Keith Rogers: That is a lot of notes. I was overseeing all of the buying and the training and the whole acquisition process, and even the sales process so I kept my teeth in webuyuglyhouses, but I learned everything that I know about seller financing from that company and in 2009, I started them doing that on my own for my own private investors and so I create portfolios of owner finance notes and use investor money to do that.

David Dodge: So, let's talk a little bit about seller financing and notes. So, when you say seller financing, what goes through my head is: I go out on an appointment and I get a property under contract with the seller. And part of our agreement is that I'm going to either pay them all or a portion of the money at a later time. But I'm not giving them neces- I'm not buying a house out right in cash or I'm not going to a banker, a private lender or a hard money lender to get the money. I'm just basically working with the seller and they are going to be the bank okay. So, are you do- Am I getting this right when you say seller financing because you keep saying notes? So, I'm getting confused.

Keith Rogers: That's correct so thank you for trying to get this straight. We have done a lot of that in the past, but that is not what I'm alluding to when I talk about my business model. So, my business model is that literally we buy the house. I've done it multiple ways in the past but we buy the house either with a bank financing or we buy it with cash from investors or we buy it with partial cash from investors and parcel bank financing.

David Dodge: So, you guys are buying the houses then?

Keith Rogers: Absolutely

David Dodge: So, then you're selling the homes?

Keith Rogers: That's right

David Dodge: Seller financing is actually you offering it, not you asking for it so this is interesting and I'm really glad we're having this conversation today Keith because I know very little about the selling. I've actually done a few deals where I bought the house and I've sold them always to a retail buyer though. When I've done seller financing, its to a retail buyer. And basically, I'll give them you know, six months to a year. Basically, it's like you know, it’s very short-term. I've bought homes on seller financing as well, and it's the opposite, in that rate I need 5 to 10 years and typically I'm going to need them to finance at least 50% if not a 100%. So, you're doing something completely different from my two strategies. Is that correct?

Keith Rogers: That's correct

David Dodge: Man, that's awesome. Fill me in what you're doing. I'm so curious.

Keith Rogers: Yeah, so literally we own the house. My business model at first was to buy all the houses in cash and so I used investor money and created these things in partnerships and use that money to buy the house and then we create an owner-financed note, which is usually a 15-year note, we did some up to 20 years but generally we wanna stay in the 15 year or less note. The buyers that are buying our homes generally have damaged credit and often worse than that.

David Dodge: Are they retail buyers or are they investors?

Keith Rogers: Oh, they're all retail buyers.

David Dodge: So, they are owner occupants?

Keith Rogers: Absolutely

David Dodge: Okay

Keith Rogers: These are people that cannot qualify through the normal chains, whether it through a bank loan or a mortgage company and they're looking for secondary financing. So, these are credit-risk and so our interest rates are commiserate to that and they're regulated by law what we can charge and we have to do a true mortgage just in the same sense that any mortgage company would be. And we create an owner financed note, approximately 10% down, sometimes even more depending on the client and we hold that note.

David Dodge: So you guys are servicing the loan too

Keith Rogers: Yes, we are

David Dodge: Very cool. Interesting. So you guys have basically built yourself a mortgage investment bank.

Keith Rogers: That's exactly right. That's why I call-

David Dodge: Keith, you're cutting out on me- Oh there you go.

Keith Rogers: We feel it’s far more beneficial to own the note. I'd rather own the note than let the bank own the note. There's a reason that banks are very successful and we want a part of that. So, we create a yield- there is a number of ways to do this, we have models where we can teach to do that on stuff that's close to retail price when we buy it, some things that are it 80% LTV when we buy or stuff that I've been buying and creating in small town for many many years that were at 50% markup on some of that stuff.

David Dodge: What do you mean 50% markups? On the price of the property or-

Keith Rogers: Yes.

David Dodge: So not only are you selling the property at a higher price than you can sell to other people but then you guys are charging a higher rate too. So, this is a profit center in both ways.

Keith Rogers: Well, yeah let me clarify one of those things. We still sell the property at the exact same amount that we would to a retail buyer, but our interest rate is higher.

David Dodge: Ok got it so you're saying your yield is 50% higher from what somebody would have- so like my credit score I just looked at it yesterday, it's 815 so I can get a pretty cheap mortgage and I have about 48 of them already.

Keith Rogers: You would never be my customer. Ever *chuckle*

David Dodge: Right right. So, my interest rate is y'know, mid-4's, high 4's, low 5's. However, if my credit score, was 520, would that work for you guys?

Keith Rogers: Yes, typical credit scores for us range at the very low to about 525, but most of them are in the 5's - 550, 560, something along those lines. They have had an incident- often a divorce or something- medical bills- something that have really damaged, they cannot qualify other than us. They want to be home owners, and also by putting these things on 15-year mortgages, we stay in the cheaper side of the mortgages, most of the mortgages or all the mortgage that I write, the sale prices are $200,000 or less and most of them are under a hundred thousand dollars. But a typical scenario for us is that I buy a house, pretty much from a wholesale standpoint, I'll buy a house at 50 cents on a dollar. I'll do some rehab work to that and I'll have, once I create that note, I'll have about a 66 to 70% LTV in that note. So not only do we reap the benefit of the higher interest rate, we're also reaping the difference we've created from the fix and flip.

David Dodge: So, you're not realizing those profits right away though, you're realizing them later, right?

Keith Rogers: That is exactly right

David Dodge: That's a good tactic you’ve got going there too. That's pretty cool. That's very interesting. So, Keith, alright, I do 2 things mainly in my business. We do a lot of fix and flips, we do a lot of wholesaling and over the last year we've started acquiring rentals, and I have about, from yesterday, 45 online meaning their rented and cash flowing. I got about eight or nine more, I think 9 as of yesterday that we're rehabbing to put into the portfolio. And we always have a couple rehabs going at the same time. So, with that being said, my strategy with the rentals is the BRRRR strategy- you know why- I have private lenders that lend me money, I go and buy the house like you said it at 50/60 maybe 70 cents on the dollar depending on the neighborhood. I increase the value by rehabbing the home and then I get it rented, I refinance everything out in our goal is zero sometimes we'll have to leave one or two thousand in, sometimes we can walk with one or two thousand but we typically don't like to walk with anymore than that even if the bank says "hey you can get ten grand". There's no reason to borrow that money when its just less equity and a less payment and a higher cashflow so and so forth, so what I'm getting to with all this mumbo-jumbo here is that I'm borrowing the money to buy it and then I refinancing it, so basically, I'm borrowing the money again to pay off that first loan. It's all borrowed the entire time. So how are you guys getting the money to buy the home, rehab the home and then create a note and lend it out. I mean all in that process, money's owed just like in my process.

Keith Rogers: It is. Alright so it depends as I talked about before, there are three different ways that we do this depending on the situation. Where I cut my teeth and I learned from the company was an investor model where we created a partnership, brought investors in on that and they actually own the notes that I create. I do a partnership agreement with these investors on these notes where I receive a percentage of the interest over the life of that mortgage. I have created these partnerships for their benefit and for mine, but just to talk about my benefit is as of today we owned hundreds and hundreds of notes that I participate in those notes and I have zero money that uh - no debt service.

David Dodge: Wow, that's really interesting

Keith Rogers: And so, they own those and I have the right to the interest without having any debt service and for somebody like myself, that helps me to sleep at night I don't worry about debt, we have millions and millions of dollars of working capital with no debt service. So that's just one way that we teach that but I want to go back really quickly to one thing

David Dodge: Sure

Keith Rogers: I know very well that you probably have a list a lot of those people, I don't know the percentage but a lot of those people work off of a wholesale model and I think that's fantastic but I'm proud of you for doing is understanding that it all can't be wholesale.

So, I look at seller financing as, for me it’s the primary tool in my toolbox but for other people it may be a secondary tool in their tool box but it needs to be in that toolbox

David Dodge: It does. I agree

Keith Rogers: You need to understand that in the same way that you are taking you homes

and making rentals so you will have a long-term income because there is no guarantee that wholesaling continues, we may have a change and you have to have something, some diversification in order to be really good at what we do in our business. So that's the same way that I think about seller financing is: I own a real portfolio as well, I diversify that way as well. But for me, I don't like answering the phone as much, I don't like fixing things as much. I don't like paying taxes, I don't like paying insurance, I don't like remodeling a house after somebody's torn it up. So, all those things and one last thing, with seller finance, I know exactly how much we're going to make for these years to come. It is not dependent upon vacancy or market; this mortgage is locked in and that helps tremendously to raise money and to look at your future in a more confident way.

David Dodge: I love it man. I'm interested to learn more about this Keith, this is pretty awesome. So, Keith, you're doing a lot. You got a bunch of states that you guys are covering, how does it work whenever you. So, like with me, I market and spend a lot of money on my marketing, and I have students that I teach how to also market to find off market deals at a discount so they can buy those houses and then we primarily teach them how to wholesale because it's simple however that's not the only exit and often times the highest and best use of that isn't that exit. Putting it into a portfolio or rehabbing and flipping that property or buying it, rehabbing it, selling it on a lease option. I have a guy in my building that has 150 houses that he owns and he lease options everyone of them out. So many different strategies, how are you doing it- but my point is that I'm doing this in my backyard, right, all my marketing is basically within a 30-mile radius. How are you able to do it across the country? That to me is very intriguing.

Keith Rogers: Well ok, so to be more specific, remember I went out on my own. I do not work at that company anymore that is a nationwide company

David Dodge: Ok. I got you. So, at the time, you were training people to handle other areas. Right? Roger. but you weren't actually buying the house ok I'm sorry. I was confused, I thought that you were doing something differently. Ok no problem at all. Interesting.

Keith Rogers: So, I train those 60 people to look, find and procure our kinds of homes in 13 different states, but in 2009, I left that and I only operate in Texas. Texas is a wonderful property state to operate this kind of deal. Plus, it's a non-judicial foreclosure state. So, there are some states depending on where you are or where you're listening that I probably would advise you not to do this. 

David Dodge: Roger. So, tell me a little bit more about the non-judicial foreclosure.

Keith Rogers: Sure, so Texas being a non-judicial foreclosure state which means we don't go through the court process. We go to the county clerks in order to take back a house if somebody stops paying me. There are other states that you have to actually go in front of the judge, that is a much longer scenario and during that time you are not getting your house back. The people can just sit in your house and not give you it. That's one of the advantages to rentals is it's a much shorter curve if someone stops paying you. In Texas, we can do this in about 4- 4 and a half month, depending on how diligent you are. If somebody called me to coach them, one of the first thing that we would look at would be the redemption rights and the foreclosure laws in their state, and I would be direct with them and tell them: "I wouldn't do this" or "Yes, you're in a great place to do it this". I think that's where we would start, I am very familiar about most states, there are some that I would have to look up and just decide, but there's always different ways to do it. So, it's not complicated but we teach part of that process as well. And to go back, one last thing, this model really works good for people that wholesale. Really is a great combination with wholesalers, in the sense that if you're always wholesaling your susceptible to a downturn, so what I advise my clients to do is if you're wholesaling 10 houses a month, let's keep two of those. Let's keep three of those houses, let's keep a percentage maybe you wanna keep one of them for a rental, maybe you want to keep one for seller financing, maybe you wanna pay all your bills, all your employees, stick a little bit of money in your pocket. That's a great scenario it's a little bit for today, it's a little bit for tomorrow

David Dodge: I like that.

Keith Rogers: A great diversification, so that's where most of my clients are coming to. Their seeing that type of application really work for them.

David Dodge: I like it. Speaking of your clients and your coaching, tell us a little bit more about your coaching program. How can somebody reach out or learn more about what you're doing?

Keith Rogers: Sure. You know I have wholesales, I have rented, I have a portfolio of rentals, seller financing. I've ran large companies, small companies so really, I believe that my coaching is about - I'm there to handle a lot of the real estate questions, not just seller financing - that is my expertise. I also believe in really helping people just in their daily lives as well, so we spend a lot of time talking about their daily lives outside of work as well and I enjoy that side of that business very much so. Anybody can find me on ownthenote.com

David Dodge: ownthenote.com. Alright.

Keith Rogers: Or they can email me directly at [email protected]

David Dodge: So ownthenote.com or [email protected] and this is coming straight from Keith Rogers everybody. So, Keith, you are the king of seller financing. Man, I think that's super cool. I'm going to check out your website later on today, you have a lot of information to share and I'm sure you probably have quite a few students that you're working with right now.

Keith Rogers: Yeah so, I'm adding students all the time, working with them. Trying to shorten their learning curve as fast as possible. I don't intent- when I coach, my intention is to make sure that they get the information they need. I don't want to spread them out over years, I want to get them the information they can go on down the road. 

David Dodge: Man, I think that's awesome. Everybody, check out Keith Rodgers- ownthenote.com or you can email him directly [email protected]. Keith, thank you so much for coming on the show today. Any departing words for us?

Keith Rogers: I believe in a model you just keep adding. Just keep adding and one day you wake up and you got something really special.

David Dodge: Man, I love that. One of my favorite quotes is "Consistent, Persistent Action". Three words man and it means so much. Alright guys, thanks for listening. Keith, thanks for joining us today. Thanks for sharing some information and teaching us a little bit about seller financing. We look forward to connecting with you. Guys don't forget the best way to get a deal is off-market direct to the seller regardless if you're wholesaling you need to learn how to market and get these deals direct. We have a free wholesale course don't forget, check it out: freewholesalecourse.com. Until next time guys, we are signing off. Thanks for listening!