David:  Alright guys, Welcome back to the Discount Property Investor Podcast.  This is your hosts David Dodge and Michael Slane.

Mike: Hey guys!

David:  Today we have an awesome episode for you guys.  We have two guests that are located here in St. Louis, in our market with me and Mike.  Bob Scott and Jimmy Vreeland today we're going to be talking about -- what are you guys doing, for the most part?

Bob:  We do it all.

David:  You guys do it all.  Okay, cool.  This is going to be an awesome episode.

Jimmy: We're talking about passive income, we're talking about real estate, and we’re talking about avoiding taxes, talking about it all.

David:  We're talking about it all.

Jimmy: And it’s Happy Entrepreneur drinks!

David:  Yeah!  Awesome--I like it.  These guys came in about 15 minutes ago and we've been kind of chatting in the meantime, prior to starting the recording process here, and they had some good ideas about wanting to have a little "happy hour" during the podcast.

Mike: That was our first good idea, as far as I'm concerned.  Doing a happy hour during our podcast.  It is Friday afternoon so --

Jimmy: This is what we do in our office on Friday afternoon.

David:  That's right.

Mike: Perfect.

David:  So I do want to encourage all the listeners and all the viewers to check out www.discountpropertyinvestor.com  if you're looking for deals in the St. Louis area.  Mike and I's company Discount Property Investors.com has tons of great deals--all off-market wholesale deals.  In the top right-hand corner of the page you can subscribe if you want to get emails, and as always if you’ve listened to our podcasts or videos in the past, we are constantly pushing people to go check out www.freewholesalecourse.com.  It is free guys.  It will teach you anything and everything you need to know about getting started in wholesaling with little to no money down.  There is no catch--it is FREE.  Check it out.  So, Jimmy, Bob, what are you guys doing every day with your real estate businesses?  Let's hear a little bit about --

Jimmy: Our base business is our (00:02:14.29 inaudible) we are carrying about 120 lease-to-own properties right now

David:  120.  Holy cow.  Is that a pretty standard inventory?

Bob:  It's constantly growing--we add about five to six houses every month.

David:  Every month--okay.

Bob:  We haven't turned a lot of those over as far as selling them.  We're right at the point now where we've been building this pipeline of lease-option properties for a little over 18 months now so we've got some of our first tenant-buyers that we placed starting to cash out.  They've gotten their credit in order and they are actually going to buy through.  We've also started offering turnkey investments to out-of-state investors, so we've got a few of those under contract.  A lot of the inventory is going to start turning now.

David:  Holy cow, that's a ton of properties.

Jimmy: Yeah.

Mike: Yeah.

Jimmy: We'll probably always carry about a hundred though.

Mike: So then are you guys managing it all yourselves or do you have somebody else --?

Jimmy: That’s kind of the advantage of lease-to-own is that there's minimal management.  So if there's a leaky faucet—“Tenant-buyer, this is your house--you need to take care of that.”

Bob:  Yeah.  We explain to folks that "Look, this is kind of 'training wheels' for being a homeowner, and as part of the program you're going to have to learn how to do some of these minor updates and repairs and maintenance to the house so --.”

David:  Cool.  This may be redundant to you guys but we have a lot of listeners and viewers that are very new to real estate, so I want to break this down really quickly and then we can jump back in.  So when you guys say "lease-option" and/or "lease-to-own"(it's the same thing) what does that mean?  If I'm new to real estate, I have no idea what that means.  What does --

Jimmy: Yeah.  We always talk about how we "stumbled upon it."

David:  Cool!

Bob:  Yeah, so Jimmy and I have both been investing in real estate since probably about 2006.  We both read "Rich Dad, Poor Dad", and we met about two and a half years ago and had a lot in common.  Jimmy's a West Point grad and I'm an Air Force Academy grad, and we both played football there, so we hit it off over all those topics.   Basically, I was rehabbing houses and selling turnkey to hedge funds a few years ago--stuff in North County.  You know--buying for $10,000-$15,000 putting $5,000-$10,000 into them, trying to sell them mid-30s and basically --

David:  How did you fall into that?  Just on another quick-flow topic tangent --

Jimmy: Yeah.

David:  Did you start rehabbing and then just --

Bob:  No, I actually started wholesaling when I got out of the Air Force.  I did a few flips while I was in and knew I wanted to do real estate full time.

David:  Okay.

Bob:   I got out of the Air Force in 2011, and the St. Louis market was so distressed.

David:  Right.  Great time to get into real estate.

Bob:  Oh, it was great.  You could buy a two or four family building in South City -- I was down in the State streets, buying multi-families for $20,000.  I thought those were the best investments just because of the price points and the buildings were flipping and everything else, but I transitioned out of that and one thing leads to another --

David:  Right.  How did you meet the hedge fund guy to sell these deals to?  It's like everyone's "golden ticket".

Bob:  There was just a local agent actually, that was just kind of -- she was aggregating for them and kind of being their “on-the-field” person --

David:  Cool.

Bob:  She was just like "Hey, you meet these numbers" and you put them up and buy a couple every month so --

David:  Awesome.

Bob:  Yeah, but it was a terrible game to be in.  One, it's very small margins.  I'm rehabbing a house, buying the property, taking the title -- it's very high risk.  In a lot of those neighborhoods there’s a lot of break-ins and vandalism, and I'm trying to eke out $10,000, maybe $12,000 net after all is said and done.

David:  And you may spend months on a project at that point too.

Bob:  Yeah.  So -- it was stupid.

David:  Were you doing multiple at once?

Bob:  Yeah--I always had three to five jobs at any given time.

David:  Right.  So for those people that are listening and watching at North County, St. Louis Missouri, it's a great area for investors --

Jimmy: It's the "Land of milk and honey"

David:  It's the "Land of milk and honey"--I love that!  So for those that aren't St. Louis locals, it is an area that is I would say--you guys correct me if I'm wrong--but it's an area that is probably fifty percent landlord-owned.  Not the whole county, but a lot of parts of North County.

Bob:  Yeah--some neighborhoods you can go higher--probably 75-80 percent.  I mean, I was driving through Glasgow Village the other day and we saw a few up there--we don't buy them anymore but I have to imagine that's 80 percent, 90 percent landlord-owned.

David:  Right.  And that's just a little neighborhood within North County, for our viewers here today.  So you started out doing some rehabs and you were selling them to hedge funds which is actually awesome--that's a great way to get started in this business.

Bob:  Yeah.

David:  And then you guys transitioned into --

Jimmy: That was Bob alone.

David:  OK, that was Bob alone.  How about you?  How did you get started?

Jimmy: I got out of the army and I read "Rich Dad, Poor Dad.”  He was like "Well; first you need to learn to sell to be an entrepreneur."  And I was like "Alright, I'll go get a job and I'll go sell."  So I was selling medical equipment, selling knee and hip replacements to doctors and being in a hospital all day.

David:  Cool.  So you had some sales experience, which helps, of course.

Jimmy: Yeah.  And so, but then I kind of got locked into a pair of golden handcuffs, because I was taking down a bunch of money.  I was giving 40% of it to the government, but you know I could still sit around the water cooler and be like "I make X".

David:  Right.

Jimmy: And so I had kind of an "accumulation of dollars" mindset as opposed to a "passive income" mindset and I had read "Rich Dad, Poor Dad" and I had it in the back of my mind but I was just like 'I'm getting drug into the corporate world too far --.’

David:  Right.

Jimmy: So even when I was overseas in '06 I was still buying properties.  I was picking up like one a year and then I was really getting to the point where I'm not keeping enough of my income, and I was commission only and January 1st comes around every year and I've got to start all over and then me and my wife we had four kids in five years -- I was just like "This corporate stuff is not going to work."

David:  Right.

Jimmy: And then about that time, Bob and I met.  We had similarities, and so instead of hedge funds, I bought a couple of his properties, and then I gave him some private money loans, and then we were competing on a couple different houses, and I was like "This is stupid--let's just partner up and see what happens."

David:  What an awesome way to join forces!  You were buying from Bob at one point, and then you guys started competing and you're like "Hell".  That's kind of how--very similar to how Mike and I joined forces.  Little different but very similar.

Mike: Very similar.  And let me say--congratulations on four kids in five years.  Sorry about your wife being pregnant for five years.

Jimmy: There's nothing to be sorry about.  What do you call it when they're very voluptuous --?

David:  Fertile!

Jimmy: Yeah, fertile.  It was a lovely time!

Mike: One of my favorite quotes is "Everybody loves a pregnant woman."

Jimmy: Yeah.  They're very curvy.

David:  It's true.

Jimmy: You got kids?

Mike: No, just dogs.

David:  Me neither--not yet.

Mike: So let's get back on topic though a little bit.  You guys got --

Jimmy: Hold on a second--I'm still thinking about pregnant boobs.  They're incredible.  Sorry--I'm good.  I'm ready to focus.

Mike: Make a note here--this is iTunes Explicit!

David:  No worries.  So you guys started working together after you bought some and you gave him some loans and --

Jimmy: We're like "We're going to do the 'Rich Dad, Poor Dad' model" and it's going to be AWESOME!  Like “The Excel sheets look fucking awesome and this is going to be great!” but no one explained to us the perpetual and infinite liability of maintenance.

David:  It's a pain.  I have 15 rentals so I know it--I know the game.  I love the cash flow--there's no better business for receiving cash flow--but it looks like you guys have figured out a better business for still receiving cash flow but have a lot less maintenance and headaches.  So let's stay on track here--so you guys met, you were buying deals off Bob, you started lending, then you started competing, then you partnered up and bought like 20.

Jimmy: And bought like 20-

David:  And bought 20, now was this just landlord deals for the most part?

Bob:  Yeah, yeah. They were mainly landlord deals, you know, we were all in like 25, 30 house on stuff kind of all over North county, 900 square feet,

Jimmy: You guys, you talked to a lot of beginning investors, right?

David:  We do.

Jimmy: The part of the reason it worked is he had access to inventory that the hedge funds weren't taking and it was tying up capital but I did a thing right --

Bob:  Well, the real story is actually I had five houses under contract to this hedge fund and normally --

David:  Sell it to them?

Bob:  Just sell it to them. Normally I just said, "Hey I'm gonna get the house past occupancy. It's under contracted to you- It's your deal", but they wanted me to actually place the tenant as well, so I had a property manager guy do all the tenant screening, place the tenants for me, and so I put tenants in all five of these properties, and then we were like, a week out from closing and they're like," Actually we are gonna back out of the contract, you changed our, we changed your algorithms-"

David:  You got stuck.

Bob:  I got stuck. I go from being a full-time rehabber to being a full-time landlord overnight and have all my working capital tied up and so it was like, one of these situations, where I was like, “I’m screwed"

David:  Pivot or die.

Bob:  Yeah, and I've been like doing my own thing so it's like, I can't get traditional bank financing but Jimmy's got a good W2, and he can get all the bank money he has so we were like, we teamed up. We refinanced property --

Jimmy: Like if you have a W2, all you do is slide it across the bank and they'll start --

David:  They'll start loaning. W2 is powerful.

Jimmy: Nobody knows that. I only knew that because I was playing basketball as all these bankers at the MAC and, so if you're new and you're an operator, find out, a dude who hates their job but has a W2-

David:  Partner with 'em.

Jimmy: Yeah, there could be partnerships like-

Mike: That's a great point. I quit my job way too early when I started investing. I should have kept my job and just kind of blown it off so I had that W2 because quite frankly --

David:  Because you can build up a line of credit or some sort of trust.

Mike: Yeah, it’s a huge --

Jimmy: HR and stuff, they can't fire you. You got to like do something blatant to get fired.

Mike: Exactly. Start investing full time, keep your day job.

David:  That's awesome.

Jimmy: But W2 jobs are exhausting and they take over a bunch of your time but that's why you team up with an operator.

David:  Right, now you don't have that W2 job anymore, right?

Jimmy: No

David:  Ok, but you did when you started though?

Jimmy: Yeah. My strike number was a certain amount of monthly income and then it was 60 properties, so to me like that would have like tested our model if we got 60. So we got to 60 and in 2015.

Bob:  Fall, December.

David:  Now let me interrupt you there for one minute when you got to 60, those were all just regular lease properties?

Jimmy: No. At property 20 we were like, “This sucks. We need something different or we need to quit."

David:  Ok. So that's where I wanna move the conversation to. Exactly, so again we still need to answer this question for our viewers and our listeners. What is lease option? People don't know what that is.

Bob:  OK, so, a lease with an option to buy is basically, if you're my potential tenant buyer, you are gonna rent the property from me. You're gonna give me a non-refundable option to pause it upfront, which for most folks is anywhere between three to five percent of the value of the home. So let's just take a 100,000 dollar house, you are gonna give me 3 to 5000 dollars upfront. It's not a security deposit. It's non-refundable and that, it's classified as an optional deposit because now you are locking in the purchase price upfront from me and you have the exclusive right to buy the home from me in a certain period of time.

David:  However I'm gonna be leasing it from you, right?

Bob:  You're also gonna be living in the property and paying the rent to me during that time period.

David:  Cool, so let's use this perfect example here, we have a $100,000 dollar and let's say that I have $3000 to give you today. I give it to you -- that gives me the ability to have the option to buy. So I'll sign a lease and now you guys typically do a 12-month place or a 24?

Bob:  24

David:  Ok, so I will do a 24-month lease, at whatever the month your rent is, I will give you $3000 down that's non-refundable but it allows me to buy this house at 100,000 or at 97,000? Does that 3000-

Jimmy: 97,000.

David:  Does count towards the -- okay, does that make sense what I'm asking you guys? So that 3000 would come off of the £100,000 price that I would to then have to buy. Now next question is, every month when I pay rent, do you guys offer, what's called a rent credit?

Bob:  We do not advertise it. We do not blanket give it out, we use it as a negotiation tool. So you come in, you sit down at the table with me, if for whatever reason you're real hard up about that rent credit, we give it away, pretty much like candy just because the end sales price on the option price we can typically push above comps because we are offering terms. We're not an outright sale in, you know, it's into the future potentially 2 years so we're typically really aggressive on that option price so for me giving you £200 per month rent credit up to 2 years 4800 bucks that's not a big deal. I'm glad to give that away if that's what you want but I use it basically as my ace in the hole to close the deal because we got a buyer with money in it.

Mike: That's an awesome tip. So a question I wanna know what are the benefits then of doing a lease option cause you guys had mentioned that you don't have to do as much of the maintenance on the properties --

Bob:  Correct.

Mike: To me what you've described though is still pretty standard for the lease of 2 year period, tenant and lease or renter agreement like it still sounds pretty typically, so how does that work?

Bob:  It is you're saying from the tenant buyer's perspective.

Mike: -- from the tenant's perspective, yeah. They're paying you the option to buy it but they're still paying you rent each month. Right?

Bob:  So they do have the ability to build up some rent credit. That money that they're putting towards a house does counts as a down payment when they buy. They have the ability to customize a home. They can move in. They can, kind of you know, paint, change flooring, light fixtures, everything else. Some of our properties we actually sell are needing a little bit of work so you can customize a little bit of the home, a little bit more of the home and we also offer discount off of that ARV for the property needing work so for a guy who's a contractor or a handyman, you know, for us as investors when we rehab a property, probably two thirds of most renovation cost is actually labor, right. So if a guy's a contractor and a handyman most of the guys they're saving materials from job sites, you know, they just did a job for a housewife in the do in the subs 4 year old but it's still great, you can pull it out and save that right, so these guys have materials saved up and what cost us $20,000 to rehab a house might only cost them 5 so it's a good deal for us and it's a good deal for them to build in a little bit of equity for themselves by doing the work -

Jimmy: And we're hooking up with a credit repair program-

David:  So that was my next question, so what's the advantage of somebody coming to you --?

Jimmy: With right now as hot as the market is, we've capped our games like this has been in a down market, it's not advantageous but as hot as the market is right now, the calls we sold 2 years ago, like it was good that week for them, that we capped our games.

Bob:  Yeah, so they're locking in the purchase price today. They didn't know what it's gonna be. We help them get their financial house in order. We have them sit down with a mortgage broker. We give them credit repair companies. We also do this thing called rental karma which where is where we report there on time rent payments to their [00:17:48.10 - inaudible] union. [00:17:47.19 - cross talking]

Mike: So you're not trying to take advantage of them, you guys are trying to help them out too. That's awesome. Yeah, we're all about win-win.

Bob:  It really does behoove our tenant buyers to follow through the program. We just had a lady cash out last week. She was paying us $750 per month, in rent for a $50,000 house in Ferguson. She ended up qualifying, buying the house, her mortgage payment now is gonna be like $350 per month. That is a huge difference --

David:  Huge incentive for somebody to actually exercise their option versus continuing. Now I actually consider myself to be a semi-pro in lease options. I've done quite a bit of research on them. I've done 2 or 3 myself, and I trained under Joe, so I know quite a bit. Okay. You guys obviously are the pros though, so a lot of the questions that I ask, I know the answer to but the viewers don't. Okay. So I do wanna take one step back, if I am an individual renting, in an apartment or a house, regardless, and I want to, you know, buy a house but I can't afford it, Is that why I would do a lease option? What are the advantages of somebody doing a lease option versus just renting a property?

Jimmy: Cause you're tired of being a tenant and you are close to getting conventional financing.

David:  Perfect, but you probably couldn't get it today, so the advantages of doing a lease option would be that you could rent a property, you lock yourself into a purchase price and have the ability to buy it at a later date and you'd hope, and in your guys' case you'd hope that you've set this up where your rent payments that you pay monthly from the time that you sign your lease to the time that you exercise your option actually get counted as positive increase on your credit. Am I getting that right?

Mike: Awesome.

[00:00:20.06 – crosstalk]

Bob:  And we were asking from just a general “why should you be a homeowner” perspective, as well –

David:  Absolutely.

Bob:  Well, I mean, first off the bat is that you’re going to lower your monthly payment, granted you’re going to have maintenance built into that, but most of our properties that people buy they’re relative to what market rent is and to what their mortgage payment is going to be, after tax and insurance are rolled in, they’re easily going to save $300 to $400 per month.

David:  Right.

Bob:  So, imagine saving $300 to $400 per month, for the next 30 years, because most people are locking in a fixed interest rate loan. Do that math, and how much that makes a difference to most people. And also, if you look at the standard rent increases -- over time I think rents on average have doubled in the United States every 20 years.

David:  Right.

Bob:  So, we’re locking in this payment for 30 years, they’re protecting themselves from rent increases, the property has the potential to appreciate, so they can make even more money that way, and then at the end of the 30 years, the property is hopefully paid off and they own it free and clear, and they can pass that on to the next generation.

David:  I love it, I love it. Everybody wants to be a homeowner, and not everybody can qualify for a loan.

David:  Yeah.

Bob:  So this gives them

Jimmy: And it’s not just “Oh, a few people, one-offs, can’t qualify for loans”. 80% of the market cannot qualify for loans.

David:  80%! I’ve heard 82%, 83%, so yeah you’re right. 80+ percent of the market, I’m going to repeat this: can’t qualify for a loan. But they want to be a homeowner.

Jimmy: But a lot of that is just education, so what we offer our tenant-buyers is education.

David:  Right.

Jimmy: To get -- I mean sometimes it’s just as simple as opening a credit card.

David:  Right.

Jimmy: So, we help them with that.

David:  They just don't have any credit so --

Bob:  Intimidation by the traditional financial system, going to a mortgage broker, going to a bank, kind of having that like -- level of embarrassment over financials and everything else. So we try to make it -- the lowest level of intimidation factor as possible. Make it very easy to work with us.

David:  Right.

Bob:  We don’t charge an application fee -- we just -- try and have an honest conversation and let them know how the program works.

David:  I love it. Two points I want to -- ask as well as reiterate here. So -- as investors as we all are at this table. We are in this business to make money -- but at the same time we a constantly -- Mike says this a lot, constantly looking for that win:win, or that win:win:win, even in this case it's a win:win:win

Jimmy: Right because our private investors are also winning too.

David:  Absolutely. Absolutely. So we’re going to get into that in just a second here. But, whenever you guys do a lease-option, you don’t just get paid in the beginning with this option deposit, you probably get paid in three different ways, right?

Mike: Well yeah let’s talk about the one you mentioned earlier. You mentioned the $50,000 property in Ferguson.

[00:00:22.23 – crosstalk]

David:  I want the listeners and viewers here to understand lease-option as well as understand how they can get paid doing these types of deals.

Bob:  Yeah. So this property is probably on our lower end of the spectrum as far as ARV and monthly rents and everything else, but this was a short-sale deal. We bought it probably 18-24 months ago; I think we paid $18,600 for this house. We maybe put $5000 into it [00:00:22.54– crosstalk] Getting an occupancy permit, doing a little bit of cosmetic stuff, a nice three-bedroom, one-bath house. It was a slab with -- It actually had a decent bathroom and a decent kitchen but, you guys know as wholesalers, the most important part of the game is getting a deal up front.

David:  Buying it cheap.

Bob:  Buying it at a discount. You have to buy at a discount. You cannot pay retail if you’re planning on making money and being in this game long-term. So we bought the house cheap relative to where comps were at, at the time.

David:  So you bought it for $18,000, I want to reiterate: put about $5,000 into it, so you’re into it at $23,000-24,000, give or take.

Bob:  Yep, roughly.

Jimmy: We carried it for a little bit. It was unoccupied for –

David:  So call it $25,000.

Jimmy and Bob:  Yeah.

Bob:  So a little bit of holding cost. We got, I believe, maybe $2500, non-refundable, from the deposit when she moved in. She paid $750 a month. She was, I think, in the Reserves. She actually got a VA loan on her first property. So we –

David:  How long was she a tenant before she exercised her option?

Jimmy: Less than a year. She was fast.

Bob:  A little less than a year.

David:  Okay, that’s great.

Jimmy: She came in, saw -- the credit guys were like, “This is what you need to do to own this house in the next year”. And she just knocked it out.

David:  Cool. So you guys got $2500 down.

Bob:  Correct.

David:  You had $25,000 into it, let’s say, with your purchase, your rehab and some holding costs. So let’s call $25,000, give or take.

Jimmy: Yeah.

David:  She put down $2500. So you guys got paid up front, that was non-refundable, regardless of what happened.

Bob:  That’s correct.

David:  And then she paid you monthly, for ten or twelve months. $750 a month?

Bob and Jimmy: Yep.

David:  Awesome. And then what was the option price for?

Bob:  $40,999.

David:  $50,000? $40,999. So at the very end, you guys sold the property to her.

Jimmy: We owned it longer than a year. Rather than if we had just flipped it.

David:  Right.

Bob:  So now we’re talking long term gains, instead of short term capital gains.

[00:00:25.04– crosstalk]

Mike: For most people that’s a 20% tax difference in the rate you’re paying.

David:  Absolutely.

Bob:  I mean; it adds up over time. For everybody who’s wholesaling and flipping.

David:  So you got paid three times, really multiple because of every rent payment, but if you look at the three different types of payments, there’s actually a bonus payment at the end which is your taxes, but you guys got $2500 up-front, non-refundable from the tenant-buyer. You helped the tenant-buyer into a property that they probably couldn’t have bought day one, because you guys reported to the credit agencies that she was paying her rent on time and in full, and you were probably cash-flowing every month. So did you have debt on this house?

Jimmy: Yeah. We did.

David:  Okay, so what was the payment of the debt, estimated if you don’t know exactly –

Bob:  This one was probably -- I mean I use a rule of thumb for most of our properties, about $200 per month for taxes and insurance on most of our properties, and then for this one, you know, $25,000, your payment to the bank is relatively cheap. Let’s say $400 per month. Total.

David:  Total? So you guys were bringing in $750, you owed $400, so you were bringing in $350 per month. Paid at the option, paid every month in $350 in cash flow and that was multiple months, and then at the end you cashed out and sold the property for $50,000. You were into it for $25,000, but she had already had the $2500, so you ended up cashing out at the end –

Bob:  Roughly $22,000.

David:  $22,000, love it. And then, like I said, there’s a bonus. So there’s three ways you got paid, and you owned it for over 12 months.

Jimmy: Once you make your money you don’t want anyone to steal it from you, like the government. We used to work for them, so we’re really conscious of this, of what we pay them.

David:  Absolutely. So then at the end, you guys had to pay a capital gain, which was capped at -- was it 15%?

Bob:  Yes.

David:  Versus your tax rate on your income because you owned it for over 12 months.

Bob and Jimmy: Yes.

David:  Love it, love it. So everybody that’s listening and watching: lease options are a great tool, it’s a win-win-win. Not only can you get paid in the beginning, every single month, as well as at the end, whenever your tenant-buyer exercises their option, but you can also help an individual that’s looking to buy a house today, get into one, that may not be able to qualify today but they will later. And you’re going to help them, reporting to the credit agencies that they’re paying their rent on time. So let’s talk about –

[00:00:27.36 – crosstalk]

Jimmy: And you’re going to have a mortgage guy actually speak to them, and 90 days –

David:  So let’s do this as a case study for example.

Jimmy: When was the first home you ever bought?

David:  I bought my first home in 2006.

Jimmy: And what’s the longest tenant you ever had?

David:  The longest tenant I ever had was only 2 years.

Mike: I had one for like 8 years.

Jimmy: So what if every 90 days you were telling this person, “This is your home, I own it, but why wouldn’t you want to own it? This is your home, where you could raise your kids and family. But here, I’ll actually educate you, and help you do this.” You’re providing a service, so you should get paid for that, but in the long-term, I’ve had a couple of long term tenants and we were helping them. They would like to own their home.

David:  Absolutely. Sure.

Jimmy: So if you have something like this, I think it’s beneficial for everybody.

Mike: Well, who wouldn’t want to decrease their rent, even in that situation up in Ferguson, from $750 a month to maybe $350 a month. I mean, that -- it just makes sense.

Bob:  I think that most people, even if you can match whatever they’re going to pay for rent, and they’re going to own that house for that same amount, most people are going to say, “Yes, I want to do that”. People understand that, they get it, and they know long-term they’re going to make more money being a homeowner.

Mike: Okay, so, what’s the advantage then, I know you said there was a little bit less maintenance for you guys because they’re a tenant-buyer, but why do you want to do this over just holding it as a rental? Because this is set up and it sounds like it’s a year to two-year period. So why do that over just buying it and holding it as a rental? Just from an outsiders’ perspective

[00:00:29.16 – crosstalk]

Jimmy: Look at it from a Wall St example. We’re selling a call-option on every house. So we can take the rental income, but now we can sell another product too. We can sell a call-option. And we can get quick appreciation, not as quick like you guys as wholesalers, but two years of appreciation, so we do have that liquidity event possible. So we’re, like you said, we’re trying to make money three ways. If you’re a landlord, all you can do is make money one-way. If this house sells, we take that capital and we plug it back in to our system.

David:  However, when the toilet breaks and the faucet is leaking, I’m getting the call. You guys though are on a different way, because they own the home. So everyone has a different model.

That’s the next question that I have is, where do you guys draw the line? Is it 500 hours? Day-to-day type of maintenance? Or when do you have to come in and fix the property?

Jimmy: It actually protect the asset

David:  Okay, so that’s it then?

Jimmy: Yeah

[00:30:13.203 – 00:30:14.561 –cross talking]

David:  Okay, so how does that look? ---

Bob:  –proves something, you know, major pipe burst, and we know like, our property could get rapidly jacked up

David:  Right.

Bob:  You know; we’ll take that on. But if we’re just getting calls, it’s like, “No, this is your house.”

David:  You own the house

Bob:  It’s your baby, yeah you handle it.

David:  Right, okay. So, where would, like, HVAC fall into the mix? If it’s in the middle of the winter and the heat stops working, is that the problem –the tenant’s problem or is that –is that your guys’ problem?

Bob:  We tell them it’s their problem and we –you know, hopefully, have them sorted out. But we want them to make the effort first.

David:  Right

Bob:  And if they can’t handle it, then we step in.

David:  Right

Jimmy: And if they’re like, nice to our staff too.

David:  Absolutely. That makes a lot of –

[00:30:58.984 – 00:31:01.699 cross talking]

David:  So, some of the guys that I’ve worked with in the past would feel the exact same way.

Jimmy: It’s somewhat subjective, but if they’re rude,

David:  Right

Jimmy: If they’re rude to our team

David:  Mhm.

Jimmy: Like, nobody’s rude to our team’, like that our team!

David:  Right.

Jimmy: So.

David:  Those are your people.

Jimmy: Yeah

David:  Absolutely, so cause some people that I’ve worked with in the past have the very same mindset, and the –they’ll say, “Hey, this is your house, this is your problem”. However, if the people can’t figure it out, and again it’s not a structural thing or it’s like you know it’s an issue that’s terrible for the most part, what they do is it if the tenant can’t figure out is that they’ll come in and they’ll lend to him.

They’ll say, “Listen, you’re gonna need two grand to fix this, this is not our problem, you signed a lease option agreeing on this house, this is not your asset ---“

[00:31:37.484 – 00:31:40.322 cross talking]

Jimmy: We also tack in on –

David: Do you do that type of stuff?

Bob:  Yeah

David:  “---We’ll fix it, but you gotta pay me this back”

Jimmy: Yeah.

Bob:  So yeah. We replaced this furnace, it was fifty hundred bucks, we’re gonna tack that money into the auction price.

Mike: Oh that’s a great way to do it. Cause I was --that’s another thing that I think is somewhat worth distinguishing too is that you really aren’t buying it, and that’s in my mind is somewhat newer to this lease option discussion. It’s somewhat --It’s very different than a – I think it’s called a land contract?

Bob:  Mhm

Mike: Where you actually are selling it, and they actually –the buyer would actually be on the title to it. Because you guys are still on the title of the property you technically are the ones who own the property.

David:  Yeah so they don’t close and then have a mortgage, it’s the opposite. So –They lease it, and they just have a –typically one or two-page option agreement, right?

Mike: Right.

David:  Very simple

Jimmy: We also still pay the taxes, and we pay the insurance, and we pay the sewer.

Mike: But—

David: --You have zero maintenance.

Mike: --You are treating them as if they own it, instilling that mindset in them, that you’re buying the property, which is awesome—

David:  The whole time—

Mike: --Yeah its important

David:  --You were encouraging them to –to buy it, as well as help them, so that’s the thing I want to talk about real quick is, I used to use a company called Avalon Escrow, I dunno if you guys are familiar or not, but they collect the rents and then pay you. And I think they charge 35 bucks a month, but they report to the credit agencies for you.

Jimmy: Okay.

David:  So you guys have a company that you just pitch in–

Bob:  Yeah –Rental Karma, but they only report to the Trans Union force, so I’ll check them out, but they report to all three groups?

David:  All three?

Mike: Wow.

David:  Well they charge 35 bucks a month, but the cool thing is they collect rent, and then they pay you. So you have to help them set up the process of ACH or -- however the tenant can pay.

 [00:33:18.423 – 00:33:20.397 –inaudible, cross talking]

David:  But then they pay –I’m sorry—they pay you as well as report to the credit agency.

Mike:  I wonder if they could outsource it, use like, what’s that Cozy.co?

David:   Well I’m sure there’s multiple companies that do it, but I don’t think Cozy—

Mike: No I mean Cozy into their account.

David:  Oh yeah, I’m sure.

Mike: So there you go.

David:  I’m sure. Yeah, but that’s you know -- I just hired a credit person to look at my credit. I have a 700+ score. So it wasn’t like I needed to do it, but I just – I’m always interested--I was interested in financial education. So I went in—

[00:33:49.765 – 00:33.51.863 cross talking]

David:  ---And one of the things that she really mentioned --

Jimmy: You probably have to get inquiries off.

David:  I’m sorry?

Jimmy: You probably have to get inquires off.

David:  I do.

Jimmy: That’s what I got.

David:  Right, but one of the things she really harped on was, ‘if you’re gonna get a credit card, get one that’s gonna report to all three versus one or two, and Amex’ –she said— ‘doesn’t report to all three.’ And you would think they’re one of the biggest credit cards in the world, but they don’t do that. So I was just curious. So for those people who are listening, and watching at this point in time, there’s companies out there that you can help—

Jimmy: But for those watching, like, the credit game, it’s all bullshit. Like, all you have to do – there’s someone out there who knows how to play the game better than you, and you give them their feeder fee and they –

David:  They can help you.

Jimmy: --Play their game

David:  --Right.

Jimmy: But I mean it is—part of representation of why it is such bullshit is that 80% of Americans can’t get a loan.

David:  Isn’t that crazy?

Jimmy: So all you need is somebody on the inside to play the game for you.

David:  Right

Jimmy: And that’s kind of another service we provide

David:  Mhm, now do you do that through the same company, what it called, Rent --?

Bob:  Rental Kharma

[00:34:47.145 – 00:34:50.970 cross talking]

Bob:  And they don’t provide---

Mike: It’ll be in the show notes, everything we mentioned will be in the show notes for you guys.

David:  So RentalKahrma is the company that you guys just use to report, so you’re collecting the rent and then you just use that company to report to your credit agency. So what else do you do to help these people execute that option?

Bob:  There is the traditional Credarepair, like you guys mentioned, removing any bad things that are reported on there, and then if you can get a -- secured credit card, those also help out a lot of –a lot of credit card unions have those you know. You can put 300 bucks down, and they put in a CV, and they give you a credit card based upon that, and you just use that every month, you know the standard stuff, but don’t pay over – don’t owe over 30 % over your balance in a credit card, it all pretty simple.

Jimmy: We’ve worked out deals like, if you’re that close to being a homeowner and you have a little bit of credit card debt, they can skip rent that month if they put towards the credit card.

David:  Right, that’s a cool thing that you guys offer

Bob:  Yeah we’ve had people like –

Jimmy: We’re not gonna do that if you’re, like, at the beginning of the process, but if you’re like on the goal line.

David:  If you’re on third plate you’re in ready to come home. So for the listeners, why would you do that? And I’m assuming it’s because you have a pretty hefty amount of profit coming. On that third payment meaning that third profit point for you guy meaning that option execution.

Bob:  Yeah well give up $900 per rent today if in 45 days they cash us out and well get $25,000, $30,000, $35,000 back in payment, c’mon it’s a --

David:  Love it

Jimmy: Their monthly cash flow is gonna increase by 500 bucks too cause their rent payment just went in half.

David:  Love it, love it,

Mike: And obviously you’re not telling this the tenants ahead of time, but that’s great to keep in mind, for sure.

David:  That’s awesome. So one thing that we have not really touched on in this podcast yet, Mike is terms. And we have to do a whole episode on it, and I don’t want to waste a lot of time but I do want to give 20 or 30 second explanation on what terms is. So terms just means that you are becoming very flexible with a seller or buyer in order to help them proceed to execute the deal. Okay. So often times, me and Mike will go out to a property, “Hey the ARV on this property is 30 grand, it needs 5 so were gonna discount it as 70 %, we’re gonna reduce our five thousand. Were also gonna reduce our fee.” We did a whole episode on Max [00:37:20.24 - inaudible] offers and ARVs, and then that will become our price. So I don’t know what that number is, from the hip I’d say it’s 12 grand. Okay. However, if that individual would allow me to buy that property on terms.  Meaning that I wouldn’t have to give all of that $12,000 of that money today, and I could pay them over maybe three years, or five years, or even twenty years, then I’ll be willing to give them much more than twelve grand because I wouldn’t have to worry about paying it out of pocket.

So well have future episodes on terms. But Jimmy and Bob here are experts on terms because what they’re doing is that they are buying properties cheap from wholesalers and probably from their own methods and they’ll turn around and they’re selling those properties on the very, very creative term system called a lease option. Love it.

Jimmy: We’re talking about the time value of money, if you want money now, you’re gonna get paid less. If you’re willing to include time in your cost, you’re paid more.

Mike: Oh that’s a great way to explain it. Because that’s what I was just thinking about is – lets go back to the property in Ferguson, we talked about you bought it for 18, you put 5 in it, if you were gonna sell it to that hedge fund, I mean how much would you have sold it for?

Bob:  Oh probably, yeah, mid-30s, 35, 36.

Mike: Exactly, so you would’ve made 5, 7 thousand maybe, something like that on it. Whereas you hold it a for a little bit longer, you’re getting paid the 25 hundred upfront, at the monthly cash flow –

Bob:  350.

Mike: And then 20 something thousand at the end of the day.

David:  On the backhand.

Mike: Awesome.

Bob:  One thing I wanna throw at you—

David:  Please.

Bob:  You mentioned, “Hey you’re making money three ways”, on most of our deals, we’re actually making money four ways.

Mike:  Oh, there you go.

Bob:  So let’s say for example, this property were talking about. If I had borrowed $28,000 from a private lender to take down this deal, I had the acquisition price, I had my rehab price. I’m all in on this property for 25, borrowed 28, I actually put $3000 in my pocket the day I close on the house and walk away with money.

David: What?!

Bob:  So I’m-- that’s what happened, Yeah. So now I’m –

David:  So explain this to us.

Mike: Yeah go, go back again

Jimmy: This is a liquidity argument.

David: Okay.

Jimmy: So, if we were gonna buy a stock like the stock is worth what that market maker says it is that day, and it’s very – if you getting the real-estate—

David:  It’s very volatile, it’s gonna move a lot.

Jimmy: It’s not even, it’s gonna move but there’s a clear price.

David:  Sure.

Jimmy: Well you buy something undervalue so you buy something in for 30 but it’s really worth 50 right?

David:  It’s your guys’ game, you know that game, you do it all day

Jimmy: Why wouldn’t you refinance it for 40?

David:  Oh absolutely, all day.

Jimmy: And then you put the ten grand of liquidity in your pocket. So that’s what we’re doing right?

Bob:  If we’re borrowing extra today and sacrificing our back-end payday but we’re basically pulling that cash forward by borrowing for private lender, I mean, any business it’s all about cash flow, right?

David:  Absolutely.

Bob:  So we try-- liquidity for cash flow. The number one reason businesses fails is the lack of cash flow. So if we can pull some of that cash flow forward to today and basically borrow against the future but do it smartly make sure we’re at the right LTV, Loan-To-Value, and we’re still protecting our private lenders that makes our business much more sustainable. We’ve evened out the cash flow curve because we borrowed money and we’re making money, day one when we buy the house. We make money 30-60 days later for the [00:40:46.13 - inaudible] deposit. We make money each month from the cash flow and then we make the big back-end payday when the tenant/buyer buys a property.

David:  Got it. So the golden question is how--

Jimmy: Well then maybe-- [00:40:57.02 - cross talking]

David:  How are you doing that because-- [00:40:59.13 - cross talking]

Jimmy: -- it has to be agreed in, we’re not like, going to do the boat with it and gambling it.

David:  Of course.

Jimmy: It goes back into the business--

David:  Back into the business. More marketing-- [00:41:05.21 - cross talking]

Jimmy: --which makes that underlying asset more valuable.

David:  Absolutely.

Jimmy: So should we just borrow the money and had no money to market? And we never got a tenant/buyer in there?

David:  Right.

Jimmy: To our private lender? That asset is invaluable because it doesn’t have a tenant in there.

David:  Right. So I’m following you guys up to this point. You keep throwing out the word private lender and you just threw a new curveball at me with being able to pull out. So --

Bob:  So you’re a private lender--

David:  Okay, let’s explain that.

Bob:  You got $28,000 sitting on the sidelines because you hate Wall Street, you hate the [00:41:36.26 - inaudible] of it. You think it’s a complete sham and a casino--

David:  So I have a job and W2, I’m W2-employed, I have 28 grand in my checking account and you come to me--

Bob:   Might be a, might be IRA, any type of savings account, current account, anything else.

David:  Okay, sure.

Bob:  I say, “David I can give you 8% return of your money and it’s--

Jimmy: And you can throw it a life insurance policy first and then technically you get 13 but that’s like another hour of podcast. Anyway, go.

David:  Let’s go back to this scenario.

Bob:  I’m going to give you 8% of your money, your investment is going to be secured by a piece of real state, you’re loaning me $28,000, this asset has a value--

Jimmy: Wait, what is that called? You’re the -- you’re the first and only on the note. Collateralizing?

Bob:  You’re a first position --

Jimmy: But when you buy a stock, you are a non-secured investor.

Bob:  Yeah, it’s a piece of paper.

Jimmy: But you also get paid-- in bankruptcy, you get paid last. There is a different qualification, whatever we’ll look it up.

David:  Yeah, regardless though, let’s stick to this --

Jimmy: -- bottom line is, you get paid last in Wall Street. Jimmy and Bob, you get paid first.

David:  Yeah, because you’re the only one that’s pretty much putting up the money for the note. So it’s completely secured by the hard asset.

Jimmy: By an actual brick and mortar property with water running through it --

David:  Right. I want to get back to how you guys, as investors take my money and are able to buy the deal get paid three ways and then really that fourth way, that’s what I’m trying to get to.

Jimmy: It’s like a mindset. Are you going to borrow just what you need to take the property down, are you going to borrow a reasonable amount for what the underlying asset?

Bob:  So let’s just have this conversation on this house. I say, David you’re going to lend me $28,000, you’re investment is going to be secured by this property that’s worth $50,000. I’m showing you comps, I’m showing you ARV, the value is there, that’s roughly play a 55% loan to value, very safe deal, for whatever reason I go belly up, you take the property back. You can sell it on the open market and recoup most of your investment, probably all of it, pretty easily. So you’re a very safe position, you’re earning a very solid return on your money--

David:  And what do you pay?

Bob:  8%.

David:  8%. Okay.

Bob:  So you’re going to get 8% of your money which is a very healthy rate of return for being, in my personal opinion, the safest places to park money, right? Because even if the mark--

David:  The city pays 1½ %.

Jimmy: Yeah.

Bob:  And the markets here are $50,000. Even if the market, real estate market drop 20% you’re still, the value of the house is $40,000 and you’ve invested $28,000.

David:  You bought cheap.

Bob:  Still protected.

David:  Got it.

Bob:  Right?

David:  Okay.

Bob:  So you loan me this money, all your money is sent to the title company, it’s a third party, it’s handling the entire transaction. You’re getting title insurance, so you know the property is clear from that standpoint, we’re going to name you as the additionally insured on the property. So worst case scenario, the property burns down you’re covered there, right?

Bob:  Right.

Bob:  So now the title company, you’re going to wire that money to the title company, the whole $28,000. On the settlement statement, I’ve got my acquisition price of $18,000-whatever it was, I’ve got my renovation and I’m all in for $25,000. So I actually walk away with roughly $10,000 less closing calls--

David:  It’s all coming together.

Bob:  --at the purchase.

David:  So it wasn’t like you--

Bob:  A title company writes me a cheque for 10,000 less the [00:44:50.05 - inaudible]

David:  So it wasn’t like you, like you bought the deal and then you went to a bank and you try do some sort of a re-fire or some sort of a creative thing--

Jimmy: It had to go to a committee.

David:  --you’ve actually had the investor give you that much more money than you needed. So you got paid four ways because you have made three grand before you even found yourself a tenant/buyer--

Jimmy: Right.

David:  --on the acquisition of the property, okay? And then you, you found yourself a tenant/buyer gave you the deposit, paid you $350 a month more than what you owe that investor, which would be me --

Bob:  Yeah, I mean what’s 8% interest only on $28,000? I mean, you know, $30,000 it’ll $2,400 a year, so $200 a month, so my payment’s $400 a month.

David:  So you have your $200 taxes in interest, you have $200 in your interest only payment, you’re a bastard, I love it.

Mike: Dave what are the --

David:  And then you close out that deal with the execution of your option agreement and you get paid in the back-end.

Jimmy: And one other point, all the other private lending sites like Fundrise and whatever else is out there, that, they take-- if you lend us $50,000, $50,000’s earning interest, if you go to Fundrise or something like that, probably $45,000 is earning interest--

Bob:  There’s fees, admin, yada, yada, yada.

Jimmy: --because they take out admin fees.

David:  Yes, you’ve Prosper and you have Lending Club and then you have--

Jimmy: They all charge fees. Like we don’t charge fees and we’re kind of getting paid. We put that money back into the property to make it a more valuable asset which benefits the investor --

David:  Right.

Jimmy: But these like one-of deals, like it’s very, it’s very good for the investor and for us.

David:  Absolutely. You got a question, Mike?

Mike: Oh no, I was just going to say, Dave if we’re ever selling Bob or Jimmy a deal again, we need to make sure we don’t do it, because apparently there’s way too much skin in the game.

David:  That’s right. But as wholesalers we like to quick cash.

Mike: No, we do.

David:  -- we’re happy that we can give these guys deals.

Jimmy: Back to my original argument. You guys have a low time threshold, right?

David:  We do.

Jimmy: So you’ll take less money for that low time.

David:  Right.

Jimmy: We have a--

David:  And oftentimes we invest $10-$100, very little money down.

Bob:  Yeah.

Mike: Yeah.

Jimmy: So you guys are all about speed, and your segment-- that’s why we’re on different segments of the market, we have a longer time threshold.

David:  Love it. So this brings me to the next point here, you guys obviously are killing it with lease options. You have a hundred and how many? Twenty?

Jimmy: 120.

Bob:  It’s always been an opportunity--

David:  120, give or take owned. So to the average investor viewer, listener at this point that wants to start doing these types of deals, where do they go out and find their hard, where do they find the guys like me that had the $28,000 in their account? So how do you guys go about getting, because you don’t have W2 anymore?

Jimmy: No.

David:  And I’m sure you guys both have a good chunk of change but that can run out quick. So how do you guys go about getting people to lend to you?

Jimmy: To raise private money?

David:  Yeah. How do you that?

Jimmy: There is this odd-- [00:47:44.03 - inaudible]

Bob:   I mean like, let’s talk--

Jimmy: You’re going to have to start with your friends and family. You’re going to have to say, “Hey, we’ll give you--" And when we were started we were paying 18%.

David:  Whoa. Wow. We’ll we have --

David:  I’ll lend you money tomorrow for 18%.

Jimmy: Well we’re not it, we’re not high risk anymore. We have 120 properties.

David:  That’s true.

David:  Right. Right.

Bob:  We weren’t paying private lenders, it was hard money rates from, from some local guys and there’s a lot of hard, I mean--

Jimmy: And I don’t think there’s a big of a distinction between hard and private, I don’t--

David:  No, no, I get it.

Jimmy: -- I disagree with that.

Jimmy: I get it. Sure.

Bob:  Yeah but I mean hard money just means a guy’s in the business of lending money versus a private individual who just has capital saved up.

David:  Right.

Bob:  That’s my personal opinion.

David:  So what I’m trying to do is transition into the conversation of the life insurance. I know you guys do that but the listeners don’t. So let’s transition into that conversation at this point. So you guys, in order to do more and more deals you need more people to lend to you?

Jimmy: Yes.

David:  So let’s talk about how you go about getting people to lend to you as well as let’s talk a little bit about the benefits of using the life insurance, because I know nothing about it.

Bob:  Sure.

Jimmy: Yeah.

Bob:  I mean, I’d say number one thing that we’ve doing recently to go past our personal networks is doing stuff like you guys are a bit with podcast, our YouTube channel, if you search ‘JointOps Properties’ on YouTube, I think we’ve got close to 80 videos on there now. We come out with 20--

David:  What’s it called?

Bob:  JoinOpts Properties.

David:  Is that the channel?

Bob:  Yeah. That’s the name of our company--

David:  Check that out guys. JointOps Properties.

Jimmy: We put out 20 a month, so yeah, anything we’re thinking, we’re going to pop off and put on YouTube--

Mike: Great. You have, do you have a website, too?

Bob:  Yeah.

Mike: Is it JointOps Properties, too?

Bob:  Yeah, JointOpsProperties.com.

Mike: Perfect.

David:  Awesome.

Bob:  So that is one thing that has helped us build our credibility. We talked about the lease option, explain how the numbers work, how private lenders are protected, our opinions on macroeconomics, [00:49:27.12 - inaudible] economics, this life insurance stuff, which Jimmy’s really gotten into and he’s kind of an expert at, but besides doing that it’s really been attacking people who have money sitting on the sidelines and you’ll lot of people after 2008--

Jimmy: Even the market’s are at all time high, it’s like--

David:  Oh yeah, people always --

Bob:  People still do not trust the market.

David:  Absolutely.

Bob:  There’s a lot of scared money out there.

David:  Yeah. So you guys got people that have CD’s, you got people that have 401K--

Jimmy: And even if the market all time high, you’re mutual funds kicking off like 5% and that’s tax.

David:  Right.

Jimmy: Like what the shit?

David:  I’m with you.

Jimmy: You can’t even beat inflation like--

David:  I got, I got my Roth IRA rate with the interest group. And I’m buying rental properties with it. So I know the game but you have a lot people that have --

Jimmy: You should be buying notes with that money.

David:  I probably should be.

Jimmy: Yeah.

David:  I probably should be.

Jimmy: Because there’s no maintenance and you, any cash flow you get, you can’t, you have to, it has to go back into the government controlled box.

David:  Right.

Jimmy: So --

David:  Well with the Roth, you don’t pay taxes on it but I’m still dealing with the maintenance--

Jimmy: But you can’t go down--

David:  I’m still, dude, I’m still paying property taxes.

Jimmy: --you can’t take that cash flow and go down the street with it.

David:  No.

Jimmy: You know?

David:  Right. Right.

Jimmy: So--

David:  So anyway, you guys got, you guys start with friends and family that have extra cash laying around. What happens whenever you’ve tapped out all your aunts, uncles, and best friends?

Jimmy: You got to go, you got to go --

David:  How do you go out and get money?

Jimmy: Where is there excess cash sitting around? And it’s an untold secret in this economy; it’s in life insurance.

David:  So let’s talk about that.

Jimmy: Life in-- so you read Rich Dad, Poor Dad and then you read Cash flow Quadrant, right?

David:  Read them both.

Jimmy: And what does Cash flow Quadrant teach you?

David:  Cash flow Quadrant talks about, you have your B-I-S and there’s another letter in there --

Jimmy: E-B --

David:  E. Yes, you’re employee--

Bob:  Small business owner. Big business owner. Investor.

David:  —you’re a small business owner, you’re investor, and then yeah, exactly, and then you’re business owner. So I understand the whole cash flow quadrant.

Jimmy: And who gets hammered the most by taxes?

David:  Employees. Every time.

Jimmy: And then who’s second?

David:  Small business owners.

Jimmy: So you got the B and I’s, they’re kind of in their own little world saying, you know, “You don’t get to steal from me that much.”

David:  Right.

Jimmy: And so, where do all B and I’s keep their capital? Their drive power?

David:  Probably in real estate or--

Jimmy: That’s not drive power if it’s in real estate.

David:  That’s true. Liquid cash.

Jimmy: Where do they keep their liquid drive power?

David:  Probably just in cash.

Mike: In banks.

Jimmy: Why would you do that? You get 1% interest.

Jimmy: So tell me where do they keep it.

Jimmy: No one, nobody puts there, any baller, nobody puts their liquid capital in a bank. And there’s another episode we could do called a bail in but that’s--

David:  Right.

Jimmy: --where they can just come in and take your money. So where do they keep it?

Bob:   Why don’t you just tell folks wherever it is --

David:  Yeah, I don’t know.

Jimmy: They’re keeping it in life insurance.

David:  Life insurance.

Jimmy: Because it’s liquid. It’s basically a new bank. My contention is that banks aren’t banks anymore. They’re these cellular things that collect fees, there’s no, they’re not a safe place to keep your capital.

Bob:  And then one of the other big secrets is where do the banks keep their capital? They keep it in life insurance. Most banks have what’s called BOLI, Bank-Owned Life Insurance. They own life insurance policies on all their key employees, everybody that’s ever worked for them. And the reason they do it is because they understand money and they understand this is the safest place to park money and keep liquid cash earning a great rate of return and have awesome tax benefits.

Mike: That right there is an awesome point, it’s not just banks, it’s almost all major corporations--

Jimmy: It’s every --

Mike: -- they own key employee insurance--

David: So I’ve read the book, Bank on Yourself, and I will probably read it again.

Bob:  Yeah, no, is that the Pamela Yellen or the other one, Bank on Yourself--

David: Bank on Yourself, not sure if--

Jimmy: Yeah, yeah, yeah. I don’t, I don’t like their organization. Read Nelson Nash’s ‘Becoming Your Own Banker.’

David:  Becoming Your Own Banker. Okay

Jimmy: He’s a good read.

David:  Check it now, we’re going to put that in the show notes, Mike. Awesome.

Jimmy: And it’s just as easy as using a bank, you can get your money back in 48 hours when you start--

David:  How many--

Jimmy: 48.

David:  48 hours.

Jimmy: I funded my first policy with like $50,000. 25% of that is illiquid for two years, so it’s a CD. It’s still earning 5%, which is destroying any CD, destroying any mutual fund, destroying anything you earn in a bank. And then I put the money in on Friday, I called them Monday and so what’s 75% of the 50? 35?

Bob:  Yeah, $37,500.

Bob:  So I call them and was like, “I need $37,500,” and then we bought a property with it. So I loaned it right back to my company. So the money’s working --

David:  Now hold on, I’m confused. I just want you to explain and elaborate on this really quickly. So you said, a second ago you said that there’s a two year period that you can’t touch it.

Bob:  So basically--

Jimmy: 25% of the money.

David:  --only for a quarter of it?

Jimmy: And so you know, you’re financial planner Andrew, your life insurance salesman doesn’t know how to sell this. Like my mom has sold life insurance for 30 years and she sold term and--

David:  Which you don’t get anything but it’s cheap? So your guys are using whole life—

[00:14:19.2 - cross talking]

Jimmy: --that’s renting life insurance with term. You’re renting life--

Bob:   You’re renting it.

David: Right. Right.

Jimmy: If you buy whole, it’s just like a property--

David:  So what’s that in between --

Jimmy: --and real estate investors--

David:  --personal and whole?

Jimmy: Universal’s deals with the market.

David:  So you don’t want that either? You’re talking whole life insurance here.

Jimmy: Right.

Bob:  Cash buy your whole life insurance. Cash all your dividend paying whole life insurance.

David:  Got it.

Jimmy: Universal depends on the ebbs and flows of the market, so there’s no point in messing with it. Just take your 5% keep it liquid and --

David:  Got it. So 25% of it is tied up for two years?

Jimmy: Liquid for two and a half years.

David:  That’s okay. That’s a pretty small amount.

Bob:  It’s because there’s fees, there’s cost mature to ensure you--

David:  It’s just like buying a house, you’ve to put up 25%-30% into commercial bank. Same scenario.

Jimmy: I guess time is perfect real estate investors because it’s all the same language.

David:  Right. Okay. So let’s just say, let’s just do an example here. I’ve a $100,000 sitting around, so I go buy, as Bob just said, a whole life insurance what was it, what was the--

Bob:  Cash value whole life insurance.

David:  --cash value whole life insurance. Okay. So I put a $100,000--

Jimmy: And don’t put it in Northwest Mutual because they’re not going to put in a liquid thing. It’s got to be as ma-- you got to maximize the liquidity.

David:  Maximize the liquidity.

Jimmy: That’s the game.

David:  Okay. So I have a $100,000, I go buy a whole cash value life insurance--

Mike: I’m going to interrupt for a sec.

David:  Please, please.

Mike: What companies are good at that?

Jimmy:  Pen, Guardian, Mass Mutual’s okay, they’re not that flexible.

Bob:  American Universal Life, AUL.

Jimmy: AUL.

David:  So there’s a lot of companies that can do this.

Bob:  There’s a bunch of them.

Jimmy: We own a couple policy, we don’t even know how to pronounce the name correctly.

Mike: No that was great, I just wanted to give a couple out if people are looking for that. So go ahead Dave with your --

David:  So I’m just trying to figure this out--

Jimmy: Atlas Wealth, they’re our guys. Go to them. They --

Bob:  We’ve got a whole website built around this if you want to be a real estate investor --

David:  Awesome.

Bob:  —and you want be using life insurance.

David:  Give it to me.

Bob:  You go to cashflowtactics.com, it’s crazy strategies you can use about this and ways you can leverage these policies and we go way in-depth on it, but this is just real broad strokes like why you should do this.

David:  What’s the site?

Bob:  Cashflowtactics.com

David:  Got that, Mike?

Mike: In the show notes, we got it.

David:  Cash-flow-tactics-dot-com.

Mike: Yeah. Excellent. Excellent.

David:  I love it.

Mike: So Dave, I know you--

David:  No, no you’re fine. This is a great conversation. So you got $100,000, $25,000 of it, I’m tied for two years, which is fine. And then I have--

Jimmy: And it’s still earning 5% tax free.

David:  Oh that’s awesome.

Jimmy: Did you hear what I said?  I said tax free.

David:  Wow.

Jimmy: So you know what, you keep all of it.

David:  5%?

Jimmy: Yeah.

David:  Tax free?

Bob:  Most awesome is 5% tax free.

David:  Okay. So then I have the ability to take 75% of that out?

Jimmy:  And put it into life insurance, I mean put it in real estate.

David:  So I guess the question is, is --

Bob:  You’re taking a power --

David:  We’re skipping ahead, let’s slow down really quick. So I have a $100K, I go talk to my guy and I put it in this account and I know that 25% of it is going to be tied up, I’m okay with that. I’m going to earn 5% on -- I’m assuming all of that money or just the 25%?

Jimmy: All of it.

David:  All of it.

Jimmy: While the 75% is working in your real estate.

David:  Okay. So let’s talk about 75%. So now I’m like, okay I come in, I meet Jimmy and I meet Bob, they say, “Dave, I’ve got this killer deal for you. I’m going to pay you 8%.” I’m like, “Great.” I want to pull out the $75,000 to give to these guys, is that a hard thing to do?

Jimmy: Very easy. Phone call.

David:  Just call your guy?

Bob:  Phone call.

David:  Simple?

Bob:  He’ll have the money wired to you in 24-48 hours.

David:  So you get your money right back. Now, do I have to pay a fee or a penalty or anything like that?

Bob:  You’re going to be paying an interest rate but it’s basically you’re paying it to yourself.

David:  What?

Bob:  So you’re basically taking--

Jimmy: You’re borrowing-- let me see if we can explain this real quick.

Bob:  Yeah, explain this.

Jimmy: And this is a real estate mindset, we need to take a line of credit that you, you’re borrowing against--

David:  So you’re borrowing from a bank --

Jimmy: --the underlying asset, right?

David:  Sure.

Jimmy: These life insurance policies are assets, just like a house, just like anything else. And they can value it on the death benefit and the cash value of what you put into it.

David:  Okay.

Jimmy: So you’re borrowing against that $100K and here’s why they can do that, because they know if you did a $100K policy you probably have around $2.5 million in life insurance, right?

David:  Okay.

Jimmy: So they know, they owe you. If you die, they know they owe you, right? So let’s say you have $75,000 loan against that asset and you die, right?

David:  Mmmhmm.

Jimmy: The death benefit is just the death benefit minus $75K.

David:  So it’d be $2.5 million minus $75K. That was so good.

[00:58:22.17 - cross talking]

Bob:  A beneficiary.

Jimmy: Yeah, that’s why they’re willing to lend you money because they owe you money.

David:  Got it. So I guess the next question that I have--

Mike: That is crazy because honestly like if you’ve got a $100,000 in it, in my brain you it’s like you pulled out 75% of the money you put in, they would be like, “Oh we don’t want to owe you 75% of that $2.5 million.” That’s awesome.

[00:58:47.05 - cross talking]

David:  So is there a month, here’s where it break the--

Jimmy: No, they’re not, so the life insurance company is your lender right?

David:  Okay.

Jimmy: So they’re not a pain in the dick, like a banker.

David:  Which they are.

Jimmy: They’re not like, if you don’t pay them that month and like, “Where the fuck is my money?” Because the interest you’re accumulating goes against the liability they have against your death. So they want you to rack up interest because --

David:  There’s lots more they have to pay you.

Jimmy:  --when you die, right?

David:  Holy cow.

Mike: Dude that’s crazy.

David:  Mind blown.

Mike: Yeah, exactly.

Bob:  The loan you take against your policy, there’s no pre-set pay-back period. You could pay back quarterly, you could pay it back three years from now.

David:  So you don’t have a payment?

Bob:  There’s no payment.

Jimmy: No.

Bob:  You pay it back when you decide to pay them back.

David:  Wow. So is there any type of an interest that’s incurred?

Jimmy: Yeah, 5% interest.

Bob:  So you’re basically going to arbitrage that money, right? So you’re, you’re borrowing from yourself at 5% and you’re lending to me at 8%, you’re making the spread there.

David:  Right.

Bob:  Right. So you’re making money but then you’re still making money inside of the policy, the 5% compounding tax free. So now you have a tax advantages, so if you actually average it out, your line of money is now in the 12-13% range. Even though --

David: That's awesome.

Jimmy: We stumbled on this because we were having to pay higher interest rates to our private lenders, because they were like, "Jimmy, you are paying us ten but I have to give five to the government." So we looked into -- okay -- if they lend it out of their IRA is this a good idea? Could this -- because they don’t have to give us much in taxes, we don't have to pay them higher interest rates. And IRAs and 401ks weren't a good deal. But this life insurance, we basically -- if our private lenders don't have a life insurance we basically make them get it. Because our argument is, we'll pay you 8%, and the government's going to take 4% of that, but the life insurance will pile on 5%.

David: I see.

Jimmy: Most of our private lenders, a lot of them are army buddies, and then their wives love it because now they have two millions dollars of life insurance.

David: Of life insurance on the back. I have two questions that are based on that.

Jimmy: They're like 'Jimmy and Bob are really concerned about our family.'

David: Right. So two questions. First and foremost, yeah it's a great point.

Mike: I don't think I'd tell my wife about it.

David: If I had that 100K, because I want the viewers and listeners to understand this very clearly. So let's say I had this 100K or it could even be 30K, it doesn't matter. But I have this chunk of change --

Jimmy: And it's not doing anything in the bank. The little interest you get is taxed.

David: It is. Absolutely.

Jimmy: Which is little twist of the knife.

David: Regardless though, I put this into this policy -- 25% of that is tied up for two years, which is nothing.

Jimmy: And a great CD, a 5% tax free... CDs are taxed too.

David: Which is awesome. So after two years I have the ability to lend myself 100% of that money, then?

Jimmy: Two years later you've got to put the premium back in, right? It's an annual premium, right?

David: So that's my second question. Do I have any type of a cost associated after the fact?

Jimmy: After the --

David: So let's say I have to 100K but that's it, that's all the money I had --

Jimmy: Your cost is upfront.

Bob:  It depends on how you build the policy. You could do one-off...

Jimmy: Yeah, you would put 25 in every year.

Bob:  Yeah, you could do one-off chunks of change or you could do a yearly commitment if you know, hey I'm going to make X and that's going to be a savings goal for my wholesaling business, you know $20,000 a year is going to be my goal.

Mike: Well, I think you want you talk to your insurance provider.

Jimmy: Nah, don't talk to them. You need to educate yourself and think about it.

Mike: Aren't there one-time paid up whole life insurance policies?

Bob:  You can put in chunks of changes, as well, up front.

Mike: Couldn't you do, like -- if you had 300,000, 400,000 you could just throw it in there --

Bob:  You need to talk to an expert and there's various ways to structure it.

David: Right, so there's various ways is I guess, the answer to my question.

Mike: I used to work in insurance, that's why I asked. I was just curious.

Bob:  Most of ours, we structure to have a set yearly premium that we're putting that money in and we're parking it in. But there's a lot of cool things to do. Let's say you committed to $30,000 a year. For whatever reason if next year I can't pay that $30,000, the life insurance company isn't coming after me. They're just not going to build out -- my policy is not going to gain in value the corresponding amount. But I have up to five years later -- let's say next year I don't make any money and the year after that I don't make any money, but years three, four, five I'm making bank -- I can back-fill my policy with that $30,000 I missed up to five years later. So they're extremely flexible.

Mike: Well, if you work with Jimmy and Bob you are making money on the money you pulled out, so you shouldn't have a problem making your premium payment, right?

David: Right. Right. That's awesome. Holy cow. So there's tons of ways to use these policies?

Jimmy: It's called the infinite banking system, because once you do start thinking about it, you'll come up with an infinite amount of ideas.

Bob:  So for real estate investors, I think we probably came up with this, it's a tax escrow strategy. Why don't you explain that to folks?

Jimmy: We were having entrepreneur drinks one Friday and we're like, shit! We got to pay one-hundred grand in taxes every year.

Bob:  This is real estate taxes we owe on our portfolio.

Jimmy: And it grows every year. And Jeff Perky, actually he was a life insurance salesman who helped us come up with this idea.

David: Is he at E3? We're going to have him on the show next week.

Mike: Yeah, he's going to be a guest next week.

Jimmy: Perky?

Bob:  I see the standard going way down now.

Jimmy: For Perky you guys need to have me on the show to liven it up.

David: Come on up! We'll have you on again.

Jimmy: We'll just have entrepreneur drinks. Now this is actually Perky's idea. I'll take credit for utilizing it, he just -- in his very dry, monotone voice -- told us about it. So, any dollar you know you're going to spend. Wouldn't you like to have a 5% dividend on it?

David: Absolutely.

Jimmy: So if you could do that, you would take that deal any day of the week?

David: Absolutely.

Jimmy: So we built our buy-sell agreement around our property taxes. So we were escrowing our taxes in a bank, because if you're a landlord you know you need to keep your taxes around.

David: Yeah, I escrow all 15 of mine just because it's convenient. My business partner, he's got 30 or 40 properties, and he doesn't escrow because he likes to take that and put it in the bank and make a little bit of interest. But at the end of the year he's got a...

Jimmy: But what if he could make 5%?

David: ...huge, giant payment. So to me it was more of just a convenience thing. Like, yes, I know I could do (you're fine) yes I know what I could do with that cash, but I don't want to get sixty grand worth of bills on the same day of the year. That stresses me out.

Jimmy: We're going to tell you what we do with our taxes.

David: So to me it's worth not doing it. However, if I had a system in place that I wouldn't have to worry about, I would do it all day.

Jimmy: Right. So you actually escrow it?

David: I escrow all 15 of my mortgages. Yes.

Bob:  With the bank?

David: Actually, I shouldn't say all because a couple of my properties are free and clear. I have four, maybe five free and clear.

Jimmy: Oh shit. You've got to get rid of those free and clear ones.

David: But the rest of them, maybe nine or ten or eleven, regardless, I escrow, absolutely.

Jimmy: Ok. What if... we'll do another strategy. Because there's always the argument with real estate: do I pay everything off or do I leverage everything, right? You implement the life insurance, you split the difference.

David: What do you mean by 'split the difference?' What does that mean?

Jimmy: You take a loan from your life insurance company and you always carry a mortgage from the life insurance company on that property --

David: On that property.

Jimmy:  -- because, if you owned two houses free and clear --

David: I owe four, maybe five, I can't remember.

Jimmy: What are they worth?

David: Let's do the math here. I have Ferguson property that's worth probably thirty-five to forty. Delwood property that's probably worth about thirty-five. I have South City one that's worth about forty-five or fifty. So probably about a hundred-forty or hundred and fifty grand of properties that I own right out without mortgages.

Jimmy: So you’re earning “appreciation” you think –

 David: Their cash flow is really good, let's put it that way. All the appreciation in my eyes is just icing on the cake.

Bob:  That's how we do it, too.

David: That's like -- I don't have a bank loan on that.

Jimmy: What if you could guarantee yourself 4% appreciation on those?

David: If I could guarantee that, it would be amazing.

Jimmy: What if you took a line of credit and funded a life insurance policy with it that you're earning 4% on? And then you liquidate a life insurance policy and gave the line of credit money right back?

Bob:  You could back fill your policy, because you didn't have the opportunity to buy the life insurance before you bought the properties, but if you borrow against the free and clear properties, fund your life insurance policy --

David: Whoa, whoa, whoa, slow down. I have to take some notes here.

Mike: Well let's go back... it's cashflowtactics.com, that's where we need to go, right?

David: Right. I'm going to be all over this site this weekend.

Jimmy: We're going to put this video up on cashflowtactics.com

Mike: Awesome, yeah, absolutely, we'll be happy to share it with you guys.

David: So hold on, this is a great example. I want to touch on this again. So I wasn't smart enough, and/or I was ignorant –

Bob:  You just didn't know about it.

David: --I was ignorant at the time.

Mike: In the true sense of the word. Just ignorant.

David: Better word, better word -- I was ignorant about it. So you're saying that I can still utilize these tactics even though I didn't do it originally?

Bob:  Yeah.

David: So you're saying I would want to borrow against these properties and then get a policy that I would back-fill?

Bob:  You're basically just getting a bridge loan. So let's say you've got this house in Ferguson and it's, whatever, worth $50,000, just for round numbers. Let's say you borrow from a private lender. You're going to put $30,000 no need to trust against that property. Now you have $30,000 cash. You have a life insurance company, you give them $30,000, and then you're going to borrow against it and now you can pay your private lender off. Now granted you have that 25% hit the first year, right? But now you've essentially back-filled it and almost created, now you've created the two assets. You have the life insurance policy and now you still have the house free and clear. So now you've also created a death benefit for your family in case the worst happens to you. I'm sure your wife doesn't know how to handle real estate as good as you do, right?

David: Right.

Bob:  So now you've also, we call it this 'get out of jail free card' or permission slip. Now you can go be an entrepreneur, you can be a business owner, you can take risks and your family is still taken care of.

David: OK. So here's the disconnect that I'm having, and I think a lot of our listeners are going to be on the same page here. So I went and I borrowed money on these free and clear properties –

Jimmy: You borrowed against.

David: Right. I borrowed against, right.

Jimmy: We’ve been talking about liquidity and all that.

David: Right. So I borrowed against these. I went and I took out a policy that I then back-filled and then I borrowed from the policy to pay back the lender? Okay, so I get all of that. That's actually pretty easy.

Jimmy: And now you get your tax advantage because you have an interest payment on these houses now.

David: So that's my next question. So after I do all of that, I just shuffled a bunch of money around.

Bob:  Yeah, you're just shuffling money.

Mike: Dude, that's awesome.

David: But, how is all that shuffling benefit me? What actually happens next?

Jimmy: You get a 5% appreciation on those assets now.

David: Where does that come from?

Jimmy: You realize that --

Mike: Dude, that's fucking nuts.

Jimmy: The life insurance company dividend. So you're earning, you know, everybody gets into real estate, they appreciate at 3% every year and like, maybe they do.

David: Maybe, maybe not. Right.

Jimmy: But, you know, if I had books to sell, sure. Yeah, definitely.

David: Yeah, well that's why we like wholesaling because you do get paid instantly.

Bob:  When you build out your life insurance policy, you're going to have a contractually-guaranteed yearly dividend; it's actually a return of premium from the life insurance company. So the life insurance company has actuaries that determine, you know, based upon your age... how old are you?

David: Thirty one or two? I don't know.

Bob:  Thirty-one or thirty-two. You're a healthy guy; you take care of yourself besides having a cocktail on Fridays.

David: A little overweight, but yeah.

Bob:  But they're going to say basically, based upon your health, they're going to say, “We think you're probably going to die around here.”  And so they figure out how much money they need to set aside, how much they're going to charge you for the life insurance policy, but they always have to be highly conservative, right, because they're thinking long term. They're thinking 50 years ahead, 100 years ahead...

Jimmy: And they're not on Wall Street so they don't have a quarterly report to answer to, so they can actually make good decisions.

Bob:  The other thing is that you want a mutual life insurance company.

Jimmy: They're private companies.

Bob:  They're not pubic ally owned.

David: So, it's starting to click here. So the policy itself is going to be paying me a 5% dividend, but that's not going to come in the form of a cash flow.

Jimmy: No, like January 1st you get your money.

David: Oh, you get a check?

Jimmy: And you could either put it -- you could, I wouldn't recommend doing that.

David: So you could put it back into the policy.

Bob:  You could take the cash or you --

Jimmy: You could contribute to the next year's premium.

David: So what would you recommend doing?

Jimmy: Next year's premium and then if you need the money, borrow against it.

David: You you're constantly borrowing against ---

Jimmy: Just like if you are buying a house and we're constantly borrowing against the house.

Bob:  Yeah.

David: Oh wow. Holy cow.

Jimmy: To get liquidity.

Mike: God, I can't remember where I heard that term 'equity stripping' though. Like it's kind of like you always want to pull your money out of it and use it to buy the next asset.

Bob:  Yeah, if you have a property free and clear and you want to access that cash, if you sold the property now you're going to have to pay taxes, but if you just got a bank loan or private lender against it, it's a re-fi and you're not paying taxes on that money. So it's the same concept but just doing it with a life insurance policy.

Jimmy: What's the bar called below your office?

Mike: Awesome.

David: But with re-fi's you pay a ton of money into them. You pay two or three grand, minimum.

Bob:  Not with a private lender.

David: To refinance with a big bank?

Jimmy: You could refinance with a private lender.

David: With a private lender it's cheaper so I guess with the insurance, whenever you go to bar were there fees every time?

Jimmy: No.

Bob:   No.

David: Like from your life insurance policies? You guys must feel like I'm stupid.

Mike: No.

David: No?

Jimmy: Nope.

David: Holy shit.

Jimmy: What's the bar underneath your building?

David: I'm sorry?

Jimmy: What's the bar underneath your building?

David: Oh... Double D's.

Jimmy: Alright, let's say you and me go to Double D's and have a few more shots after entrepreneur drinks and let's say --

David: I love the entrepreneur drinks –

Mike: We're going there --

David: We have token this episode: Entrepreneur Drinks!

Bob:  Cash Flow Cocktails!

Jimmy: I'm buy tequila and so will --

Mike: There you go. And what was that, you guys were planning on launching a podcast? We'll plug that, too. Was it Entrepreneur Drinks?

Jimmy: We're doing Entrepreneur Drinks and we're going to do it in your office every Friday at 4:30 with your equipment.

David: I'm down! That sounds awesome.

Mike: We've got better mics for it too, don't even worry.

Jimmy: But so let's say we go to Double D's and have a few shots, right?

David: Okay.

Jimmy: And I'm just a piece of shit with a friend who's an enterprising piece of shit lawyer. And then I do fight club, and I drag you into a fight I know I'll lose, right? And I let you kick my ass, right? And then I call my enterprising lawyer like, "David Dodge just kicked my ass!" Right? He goes online and sees that you have two properties free and clear, he's like, “this guy is asset-rich, let's go after him”.

David: Right.

Jimmy: And so that's another liability you opened yourself up to. But, if David Dodge life insurance policy has a first note on that property, I can't get to it.

David: No shit.

Jimmy: You love it! You love it!

Mike: These fucking guys, I swear to God, I saw you guys walk in and I was like, they're, you know, a couple of guys we're going to -- fucking geniuses’ right here!

David: So you take a couple of policies and you borrow against it to borrow more assets, but at the same times you're actually using that as asset protection --

Jimmy: Because now you have a note against it.

David: -- because now you have a note against it. So there's like, there's tons of ways that --

Jimmy: You never ever want to have a property free and clear, ever. It's a target on your back. You give up your tax advantages and then enterprising piece of shit lawyers can come after you.

Mike: Well, I'm going to plug another podcast because I was a huge fan of Jason Hartman. I don't know you guys have ever listened to him. Creating Wealth. Great podcast and he's a big fan. I think that's where I got the equity stripping thing. You always want to pull your money out of your assets, for that exact reason.

Jimmy: Money's such a poor word. Liquidity.

Bob:  Capital.

Jimmy Capital. No. It's liquidity because the house is still capital.

Bob:  Liquid capital.

Mike: Tomato, tomato.

Jimmy: It's an important distinction.

Mike: Is it?

Jimmy: Yeah, because the American dollar, the Federal Reserve notes are just bullshit. They're not real -- they are just pieces of paper we trade.

Bob:  It’s actually a note; it's a debt instrument.

Jimmy: It's digits at this point. Yeah, you're right. It is a debt instrument.

Bob:  Anyways, that's getting into --

Jimmy: Too much Austrian economics that you really don't want to get into --

Mike: Well, that's what he said you're pretty into. The Austrian economics, is that right?

Jimmy: Yeah.

Mike: That's awesome.

David: I've never heard that phrase before.

Mike: And neither have I, dude. I've heard of a lot of different economic stuff and I actually minored in economics. It's one of my favourite topics.

Jimmy: So most people are familiar with Keynesianism, which has been very popular for a while now. There's the Chicago school, which is Milton Friedman, a little bit more on the freedom side of things...

Mike: Someone's getting an Uber on the way home tonight.

Bob:  There's the Austrian school of economics. It's just more of a -- what's the best way to describe this?

Jimmy: It's entrepreneur-centered.

Bob:  Entrepreneur-centered and like freedom-centered, in my personal opinion. Not very big on government intervention, allowing basic laissez-faire economics as much as possible.

David: Right. Okay.

Mike: That's awesome.

David: So for the listeners and the viewers out there that are starting out in real estate, and they're new, Mike and I have done a really great job, I think, so far, teaching people how to get started --

Jimmy: And if you're still listening to this shit, holy shit --

David: That's right. No, but --

Bob:  You are bored! Hopefully you're having a drink, too.

David: No, but what I'm getting at though is we've done a really great job of showing people how they can get started in real estate investing with little to no money down, that's our goal --

Jimmy: But what you also need to tell them the advantages, like, if you go to work every day you only take home 50-60% of what you’re working your ass off for everyday.

David: No, no, absolutely. I'm with you 100%. I'm a financial planner, that's my original career and that's what I went to college for, but I didn't want anything to do with that after I did it for a little while, so --

Jimmy: I was listening to your guys’ podcast today, an episode 11 with Bill Maret?

David: Bill Maret.

Mike: Yeah, yeah.

Jimmy: And he talked about his freedom thing. The one thing he didn't bring up was your take-home income, what you actually put in your pocket; you don't have to match what your W2 says.

David: Sure.

Jimmy: You only have to match 60% of what your W2 says to live the same way. And that's a huge distinction.

David:  Absolutely.

Jimmy: Because, if you're a W2 employee, you work until April.

David: You do, just to pay the government.

Jimmy: Yeah, to get want you want. So anybody learning real estate needs to understand that, like, if I had to, like, day one, keep everything I made at my W2 job, that's a scary -- I was doing good.

David: Oh yeah.

Jimmy: But if I only had to get 60% of it? It wasn't that hard. I -- when I come home at five o'clock on Fridays I'm kind of drunk, but -- I was drunk, too, at a W2 job.

David: Come home on Fridays.

Jimmy: At five o'clock on like a Monday or Tuesday, where I was stressed out and a big dick, like, I'm not a dick anymore.

David: Right.

Jimmy: So, I'm not stressed out.

David: No I get it. So what I'm trying to get to though is, for the listener that's starting out, because I would imagine a lot of our listeners are new to real estate --

Mike: Yeah, I think that's out target, yeah.

David: We probably have some guys that are doing the same stuff that we're doing and that's great, those guys are continuing to educate, which we all do in this room --

Jimmy: I will say –

David: But the average person --

Jimmy: I will say, the only problem with starting with wholesaling, is you can't leverage your current W2.

David: It's irrelevant, but it's a good point.

Jimmy: That's a quote. If you are starting out and you have a W2, because I'm sure many of your students don't have W2s.

David: Well it doesn't matter if they do or not because we're teaching people how to start getting into real estate with little or no money down, how to control properties, how to build buyers lists, and how to sell them. So, again, not trying to be rude but it's irrelevant.

Mike: Well it's like to said, you've got to learn how to sell to be an entrepreneur.

Jimmy: You have to learn the market; you have to learn to sell.

David: We have to stay on topic here guys. So, what I'm trying to get to though --

Jimmy: And I didn't mean to try to shit on your stuff.

David:  No, you're not at all. You're not going to offend me at all.

Mike: Who knows where this fucking topic is.

David: No, that's fine. No, no, here's the topic though I'm trying...

Jimmy: If anyone's still listening like three hours later --

David: Right. No, we're only about an hour and 18 minutes in.

Jimmy: -- get your ass out there and start selling!

David: Right. But here's what I'm trying to get to, though. Would you guys recommend the individual to open up their own life insurance policy, first and foremost? Or go to friends and family and push them into one? Do you understand my question?

Jimmy: Yeah. That's a tough question.

Bob:  I mean if an individual has cash --

Jimmy: Yeah, you either need a lump sum of cash sitting around or you need to have a stream of cash, like we do with our property taxes. We know we have this money to spend and we know we're going to spend it, but we know that stream's coming in every month.

Bob:  Yeah, if you have your own capital, put it in a life insurance policy.

Jimmy: I would get it out of a bank, get it out of a savings account, and put it into a life insurance because now you own the bank.

David: Love that. Love it. Okay, good deal.

Jimmy: And if I could go back in time, I didn't -- when I first started investing I didn't even know there was wholesaling. I was buying everything off the MLS.

David: Me to.

Jimmy: I would never ever start that way, buying off the MLS. I would befriend a wholesaler, and start working with him.

David: Right.

Jimmy: I think the team aspect is best. You want an operator and then someone who can leverage that W2.

David: Awesome. Let's talk about your guys' course. You have a course, right? What was the website again?

Bob:  Well for life insurance it's cashflowtactics.com. We also go deep-dive on the whole lease-option game and how we built our business, how we scaled it so quickly --

David: So you have several courses?

Bob:  Yeah, yeah.

Mike: That's awesome. Where's that at?

Bob:  So you want to check out the lease options, it's autopilotassets.com and there's a free webinar there that's 45 minutes to an hour long. It really shows the power of lease options. The biggest thing that I think that people don't understand about lease options is that you’re opening yourself up to a much bigger buyer’s pool. Like Jimmy mentioned --

David: 80%.

Bob:  -- 80% of people, right? You guys, wholesaling is great. You get quick cash. But what percentage of the buyer’s market has cash and can close within two to three weeks?

Mike: Like 3%?

Bob:  It's a very small section of the market, right?

Mike: Very small.

Jimmy: Of the stuff you guys sell, is there an 80/20?

David: There is. There's always an 80/20.

Jimmy: There's always a 20% who take down 80% of your stuff.

David: Absolutely. And there's 20% that just waste our time. I mean 80%, right.

Jimmy: Well it's probably like me two years ago, like, kicking the tires and --

David: But okay though because eventually those guys become buyers -- not today, you've got to baby them a little bit -- but you're right, the 80/20 principle is always in play.

Mike: Well Bob, how long did it take you to sell Jimmy a deal, you know?

Bob:  Jimmy is a quick starter; let me tell you, he's all over the place.

Jimmy: 'You mean I can get $200 and I don't have to work for it? Oh yeah, I'm definitely buying two. I'm definitely selling two, for sure.'

David: Alright.

Bob:  But when you open yourself up to that much bigger buyer’s pool, it's very easy to sell lease-option properties. We have a huge buyers list. Like last week, we texted 15,000 people.

Mike: Holy Jesus!

Jimmy: That's because of livecom.com, which you guys might want to look at for your business.

David: Livecom?

Jimmy: Yeah, yeah, I want to tell you guys about this. Livecom is the shit.

Bob:  So you guys do textPlus, I get your texts; I'm on your wholesale list.

David: So we have about 900 on the text list, give or take.

Bob:  Okay. What does it cost you to send those texts?

David: Is it over a thousand, though? Awesome.

Bob:  What does it cost you to send those texts?

Mike: Ten cents.

Bob:  Ten cents? Okay, ten cents.

David: Is that per text?

Mike: Well, no, no, no -- it's like five cents, maybe.

David: Because we buy in bulk.

Mike: In depends on what we buy. We use [mozio.com?] if anyone is interested in checking it out.

David: I think we spend like $400 or $200, one of the two. Then we get a bulk amount of texts and then, yeah, it's about five cents per text.

Mike: So tell us how much better you're doing then us. Go.

Bob:  No, no --because we just got this service because we were using the same thing --

Mike: Fuck these guys. Am I right, Dave?

Jimmy: This isn't out stuff, this is Mitch Stevens.

David: I want to hear it.

Bob:  We're using a [01:23:05.24 - inaudible] which has a similar service. It's five cents per text, but we switched over to Livecom because basically every phone number has an email address attached to it. So if your phone is 314-555-5555, the email address for 314 [email protected] --

David: Right, I have it set up in my web forms to text me whenever I get an email, sometimes. I get that. It uses email.

Bob:  Right. It'll still show up as a text in your feed, right? So, basically, all these blocks of phone numbers are mostly still with the same carriers. So if you take that list of phone numbers and then send it to that email address, it'll show up as a text but it's over the email network so it's free, right? So this guy Mitch Stevens, he's got this program Livecom, where we texted – I mean granted he has a monthly subscription charge. For our buyers list it's like $300 to have up to 20,000 contacts. But now we need text-blast 15,000 people for free over the email network.

Mike: Now I'm sorry, just because I'm curious though. So it takes the phone number you have and it says 'this number @sprint' and then it just steals all of them @sprint, @att, at whatever and then it just sends it to all of them?

David: Have you ever done the email-text thing at all?

Mike: Yeah, I've seen it, yes. Because I use Google Voice as well.

Bob:  It's not perfect because some of these cell phone carriers, they trade blocks of phone numbers around, so what was originally a Sprint number is now an AT&T number but most people are still with their original carrier.

Mike: But CallFire though is sending it to all of them?

Bob:  No, this is Livecom.

Mike: I'm sorry, Livecom.

David: They used to have CallFire now they use Livecom.

Mike: So Livecom is using all of them. It just takes that number @... a bunch of them and it just blasts it to all of them, just hoping to that it's going to hit that -- that's freaking genius.

Bob:   Right. It does but them in buckets so it'll say, hey yeah we know this is the original carrier but it's only two cents to actually text them. So it's still way cheaper on the text-blasts. But now for $300 we can text-blast, weekly, 15,000 people. So from a cost perspective it's way cheaper.

David: Now what are you text-blasting? Just curious.

Jimmy: New rental-to-own home, owner finance their own home.

David: So you guys are capturing a massive list of people that are wanting to be tenant buyers?

Mike: Oh my God. Why would you even want to text 15,000 people that?

Bob:  Just for fun.

Mike: You only need, like, three!

Jimmy: You only need to do one.

Bob:  I just did it because I wanted to see what would happen. And the day I did it we got 1200 hits to our website.

Mike: Jesus.

David: So whatever you're texting out, you're not texting out 'Hey, call me back.' You're texting out 'I got this hot deal in Kirkwood that's 3 bedroom / 1 bath for this amount of money. It's a lease option. If you're looking to buy, this is the deal for you.’?

Jimmy: Yeah.

David: Got it.

Mike: Let's go back for a second because we talked about the Ferguson deal, and we kind of really hit on that pretty hard. But what is your kind of average AVR here in St. Louis. Ferguson I think is kind of the market you probably transitioned out of, if I'm right?

Jimmy: No! I love me some Ferguson.

Mike: You're still up there in Ferguson? Okay.

David: So the viewers and the listeners who are not in St. Louis, everyone has obviously heard of Ferguson because of the unrest and the riots in Ferguson. However, if you are --

Jimmy: All I hope is they don't see the video.

David: Yeah, hopefully they're not watching.

Jimmy: If they're still fucking listening at this point.

David: However --

Mike: They're not.

David: -- the small city of Ferguson in St. Louis, Missouri is actually a really, really great area.

Mike: Dude, it's a great area.

Jimmy: It's the best.

David: There's some houses up there for 400K. Unfortunately there's a little pocket that is, ah, it's a poor pocket. Let's be honest. And there's a lot of section 8 rentals in that pocket and a lot of apartment buildings. But other than that little pocket, which probably makes up about 20% or less, maybe even 10% of the entire city of Ferguson, it's a great area. I own a property in Ferguson. It was actually the first rental that I bought in St. Louis.

Mike: Dude, I loved wholesaling in Ferguson.

David: It's a great area.

Mike: Even while the whole Michael Brown stuff was going on, it still -- it was a safe area. It's not the area you saw on TV.

David: And everyone who lives in that city has pride.

Mike: There's a lot of Ferguson pride.

Jimmy: If you didn't live in this town, so you know Kirkwood is like the big --

Mike: Kind of ritzy and nice.

Bob:  Upper-middle class.

Jimmy: Both a hundred years ago were railroad towns. And if I were to pick you up at the airport, blindfold you, throw you through Kirkwood, and then say, “Hey, here we're at.” And I was to blindfold you again and take you through the main strip in Ferguson; you would not know a big difference.

Mike: I kind of thinking about that. I'm trying to think of the streets and you're absolutely right.

David: You really wouldn't, you wouldn't.

Jimmy: I feel like the same builders who, sixty years ago, built in Ferguson were the same people who built in Kirkwood. And both my parents grew up in North County, they know all these streets, but it was the same kind of demographic, same neighbourhood. And there are houses with fantastic bones in Ferguson.

Mike: Dude, there's so many good houses up there. That's what I was saying; it's one of my favourite areas to wholesale. Because it was --

Jimmy: What are your don't buys, Bob? Go ahead.

Bob:  Number one that comes to mind is Castle Point. I won't buy in there.

Jimmy: And we won't buy in the entire metropolitan, official, St. Louis city.

Bob:  Yeah, North City I don't buy but I do --

David: North City?

Jimmy: Yeah, anything north of 40, not a chance.

David: North of 40? Not Page?

Mike: No! We've got tons north of 40.

Jimmy: In the city, proper? No. In the city proper. We pay very few taxes in St. Louis city.

Bob:  We have a few in South City. I don't like Riverview Gardens. I mean I know Jennings is alright, I just personally don’t buy there because there's too many good deals elsewhere. For the lease option, one of the big distinctions between us and what we're doing versus maybe a traditional landlord is, my minimum square footage is a 1000 square feet. I don't want anything that's 850 square feet, 864 square feet --

David: That's a great point. You have to have some space. You don't want to be selling somebody a lease option on a 700 square foot house.

Bob:  Exactly. These people have a home-owners mindset and nobody's going to want to buy that house. You can't even fit a king or a queen-sized bed in those bedrooms. So our floor is a 1000 square feet. If we can get houses with 1500 square feet, 2000 square feet, I love those. Because a lot of the landlords they just want that $20-25,000 house, and I feel like there's a lot of competition there. But if I go a little bit north of that, I'm going to get a much bigger option on deposits; I'm going to get higher monthly rents. The other thing about lease options is we make it all a negotiation. So I told you 3-5% is kind of our average, but sometimes we've gotten $10,000 on properties that we were buying for $30-40,000 as down payments.

David: Now why would somebody -- I'm going to interrupt you here for a second -- why would someone give $10,000 on a $40,000 property. Like, why? What would be the benefit of that?

Bob:  Because they're 25% of the way home. No, because that's our purchase price. That's not our ARV. That's not our option price. That $40,000 house that is costing us, there's an $80,000 price tag on that. Because they know, hey, if I put this money down, it is counting towards the home, and also when we’re offering all these options, we sometimes have bidding wars. So we’re talking about life insurance real quick, and did you know that the guys at Enron, they had a lot of money on life insurance.

Jimmy:  No, no not Enron. Bernie Madoff.

Bob:  Both of them, Enron and Bernie Madoff, Bernie Madoff has a huge life insurance policy.

Jimmy: He’s dead. But he died a millionaire.

Bob:  Yeah. This money is also protected from creditors, as well. Which is one of the cool things about –

David: The life insurance policy is protected from creditors?

Bob and Jimmy: Yes.

David: No shit.

Jimmy: It’s like this, it’s cash flow quadrant.

Bob:  It’s this protected class.

Jimmy: [01:31:13.26 - inaudible]. You get your assets; put your assets in [01:31:18.07 - inaudible].

David: I want to talk about your guys’ courses and how our listeners and viewers can benefit from working with you guys and learning from you guys. So –

Jimmy: We design our whole thing of you just read rich dad poor dad and you’re about to stroke your check for your $7,000 to go to your rich dad, poor dad course.

David: Okay. Which I’ve done, have you done that?

Jimmy: Yeah! Okay.

David: I wasted seven grand. It wasn’t a complete waste!

Jimmy: It wasn’t a waste!

David: It wasn’t a complete waste!

Jimmy: Phenomenal information! Phenomenal information!

David:  It was. But if I were to do it over again, I could take that seven grand and I could do it a lot better. By all means I’m not upset. It was a good $7,000 spent.

Jimmy: But they pack your head with this knowledge, just like, now what do you do with it? You got to meet the wholesalers, you got to meet the banker, you got to meet --

David: Well, they give you, in my opinion, and this is just my opinion but they give you too broad. It’s like, “Here’s how you can be a real estate investor.” But they don’t give you enough information because the whole time they’re trying to up-sell you, on the thirty thousand dollar package.

Jimmy: Yeah. You’re trying to get to your first 200 bucks in cash, flow right?

David: Right. Whereas me and Mike offer a free course, free on how to get started investing in real estate to make 5-10 grand on your first deal in a month. So go on, I don’t mean to interrupt.

Jimmy: So yeah, we’re just, you’ve read the ‘Rich dad poor dad’, you’re about to stroke the check to do the course, we will say, “Hey, whatever you pay us, we will put it towards your down payment of your turn key property from us.” Because I think it’s easier to learn this game as you’re getting 200 bucks a month, cash flow winning.

Bob:  Yeah. It’s an easy win. So, the cash flow tactics basically, will say, you got a W2, you can leverage that, you got a little cash, but you don’t have time, you don’t necessarily have the expertise. We’re gonna say, “Here’s the guys who are experts in life insurance, they’re gonna build you out a financial plan around that, they’re gonna take whatever you’re goals are, whether you got a lump sum of cash, whether you got a stream of cash, they’re gonna build you a life insurance policy, and then we’re gonna take that money from the life insurance and we’re gonna put it into cash flowing real estate here in St. Louis, Missouri. Which in my opinion is one of the best cash flow markets in the country.

David: In the country! I agree.

Bob:  It’s fantastic. So we’ve got turnkey runnels that you can buy from us directly.

Jimmy: If you want to.

Bob:  You don’t have to buy from us, yeah.

David: Right. You guys offered that. It’s a product.

Bob:  Yeah, exactly.

Jimmy: Why not learn while you’re getting 200 bucks a month, keep talking.

Bob:  This is turnkey, we wanna make you a real estate investor getting passive income within like 60 to 90 days and that’s our goal.

Jimmy: Or if you’re in another city and you just wanna learn to do lease to own and scale it, and raise private money, that’s what autopilot assets will do for you.

Bob:  Yeah, so the first program is cashflowtactics.com. If you wanna know life insurance, you’ll wanna get into the turnkey real investment game, that’s where you go. You’ll wanna buy turnkey investments directly, you’re already a little bit knowledgeable, but you wanna be hands off and still take advantage of the lease options. All of our turn key deals are on lease options as well, which is, in my understanding, we know a lot of turnkey providers, turnkey operators around the country, we’re the only ones doing the lease key option, around the country.

David: Right.

Bob:  So, to check us out, you can go to joinopsproperties.com, we also have some private lending opportunities there. If you wanna learn lease options, the whole lease options game, you want to, wherever you are in the country, and you wanna build a lease option business, that’s autopilotassets.com.

David: So joinopsproperties.com , so that where somebody can come to you guys to learn --

Bob:  You wanna buy properties.

Jimmy: You know what? If you opt into our website, I’ll call you. Like I call –

David: Well that’s fine, but the Join ops properties, is that’s where somebody would go to invest?

Jimmy: [01:35:03 - cross talking and turnkey buyers.

David: Turnkey buyers and private liners, and then the other one –

Bob:  Auto pilot assets.  We’ve got a free webinar, and it’s like about 45 minutes or maybe an hour long, we’ll talk really in depth about those four profit centers that we talked about, using private lenders, making money when you buy, making money 30 to 60 days later [01:35:23 - inaudible] each month and then big end back end paydays. You know it’s all about cash flow in my opinion and the [01:35:31 - inaudible] assets strategy. No offense to wholesalers but you guys leave a lot of meat on the bone.

David: We are! We know we are –

Jimmy:  You guys have a high time preference, very high time preference.

Mike: And again, to our new investors brand new guys. Don’t have a freaking penny to their name there’s a reason you’re leaving the –

Bob:  I did it for two and a half years because I got out of the air force and I had like  4 thousand bucks I said I’m just gonna wholesale shit, and you learn the game you build your buyers list, you understand what a property is worth, how to estimate repairs. You just understand what other people are willing to pay for -- you understand market dynamics [01:36:15- cross talking]

Mike: What Jimmy said to; it’s learning how to sell too. So you are learning how to buy, you are learning how to sell. Learning how to market, absolutely.

Jimmy: I will say that… hanging out with you like marketing to me is -- it’s horrible. It’s hard it’s really -- selling you could read people’s body language, you can just make eye contact… but when you’re trying to sell someone  in a general area it sucks, I don’t do any of our marketing I do all of our marketing.

David: Well it’s one of the things that we could really push in our courses. We’re not in the real estate business as wholesalers, now if we are buying something to rehab or we are buying something to own as an investment property where we become a landlord, then yes we are. But as a wholesaler we are in the marketing business, and real estate just so happens to be the product that we buy and sell, real estate is our inventory --

Jimmy: But there is a huge demand, you are marketing something with a huge demand.  Because the one weakness that real estate has is, it has a huge need for liquidity and you guys are teaching people how to liquidate assets quickly.

David: We do.

Jimmy: If we were on Wall Street, you guys are market makers, you’re teaching people how to be market makers

David: Right.

Jimmy: No, it’s very -- so yeah, you’re -- if you can’t leverage a W2, and if you can’t leverage a bank and you need quick cash like, and you need to start, wholesaling is awesome.

David: It’s the easiest way to start in my opinion.

Bob:  Yeah, and is the lowest risk way against started.

David: But as you progress and as you -- well let’s say that you get to the point where you’re doing five, ten, fifteen deals a month, you don’t even need to be doing that many, you could be doing --

Jimmy: Monthly, monthly revenue being brought in, you guys are bringing it in move evident.

David: Of course. Yeah, yeah,

Jimmy: It is all about the time span, wherever you want to be on.

David: All about the time spectrum.  Absolutely, absolutely.  But the transition from the wholesaler could be to the wholetailer, or just the guys who pick the properties down and then just starts doing the rehabs -- as you guys know as you know, you now, also we’re getting to the point with our business where we’re doing 15, 20 maybe 20 plus deals a month on good months -- where certain deals would look really good to us to where we won’t wholesale, and we go to the banks and we’ll buy those properties --

Jimmy: Eww! Eww!

David: -- I know right? We just got to stop going to the banks.

Jimmy: Just go to people with cash value and life insurance.

David: Right. Trust me, I am learning from this episode here.

Jimmy: No more committees, no more --

David: Then we will do paint and carpet, or maybe not even anything depending on the property. And then we’ll list it on the MLS, and then sell it, and we’ll turn our $5 or $8,000 profit off the wholetailing into a $15-18,000 dollar profit exactly. The down side of that is that it takes more time, and that’s one of the things that you guys keep pressing on. We’ll not be able to make our money in two or three weeks, it may take us 4 months but we’ve tripled our profits center on there.

Jimmy: Yeah.

Bob:  But now -- if you create the ability to –

Jimmy: And by the way time preference is Austrian economics idea.

David: Love that.

Bob:  Now if you’ve added the skill set of raising private money… now you can get your time preference of dollars today when you buy the house, walk away from closing with money, then you can access that larger buyers pool by maybe doing a lease option [01:39:36.27 - inaudible] paydays, and you’re gonna make probably 20-25% more than you would on a hotel… as far as overall dollars in your pocket. You make way more money on a lease option than if you rehab the property, because you eliminating the holding cost.

David: Love that! Let’s talk about teams. So Mike and I have a pretty good team put together. There’s 4 of us in our business, we have two virtual assistant that are awesome guys, they work great, they work hard and we have an office manager here in town, so we have a pretty decent sized team we’re also doing 15-20 deals a month… neither one of us could do that made deals without our team.

Mike: Not even close.

David: we could probably do two or three, maybe five at most before we overwork ourselves okay.

Mike: Well, you’re over worked and then you just get burnt out.

David: Yeah, you’re burnt out exactly, and we work a ton. So let’s start with your guys’ team because I’m curious as an investor in this market with you guys to understand how an individual or team could get to the point of having a 120 to a 150 lease options, like that is mind boggling.

Mike: Yeah, especially since you guys said that you… I mean, don’t really manage them, but you kinda of let them manage themselves, right?

David: Well, there’s still a manager I would think [01:40:54.02 - inaudible] it’s just a lot less management right?

Bob:  So the great thing about the lease option is that the tenant buyers responsible for the repairs and maintenance day to day. But the other thing that is a benefit is that -- you are not taking that maintenance call. So for the tenant to call you, answer the phone, "What's the problem?"

David: It costs money to answer a phone.

Bob:  Now I call the handyman. "Hey handyman, go over there." Handy man goes there.

Jimmy: Let me interject real quick. So I would be selling knee and hip replacements. My W2 job, I was --they have my phone number, right? So I'd be like -- I have a doctor calling me to like… to make some really good money or I have a tenant calling me like. “I have a leaky faucet!” It was irrational, but we did it to give what we had to go.

David: It's the same thing.

Bob:  It's opportunity costing you time -- [01:41:48.02 - cross talking]

Jimmy: You have more valuables phone calls coming in and saying -- Anything is more of a valuable than, “I have a leaky faucet.”

Bob:  So you are saving the money on a cost, but then you are also saving the time to manage that whole process to oversee the handyman, the contractors and everything else. So it's a time-saving as well. When you eliminate that from a management perspective, all you are doing is making sure that the money comes in every month.

David: Right.

Bob:  and if it doesn't; then you hire someone on your team to, you know, process innovation. But our team right now consists --

David: That's one of the things we didn't talk about! One second -- You guys collected option deposit and you hope and encourage and coach these tenant buyers to buy. But if they don't, you still own the asset; you've still collected a couple of months at minimum –

Jimmy: if they can't follow through on what they committed to us --

David: Right. Plus you have taken the option deposit, or I should say that you have collected it, and it's non- refundable. So you don't ever want somebody to back out, but if they do, it's actually not a bad thing, it's a good thing.

Jimmy It has regular landlords-

David: There are a lot of scumbags in the market place that just say, “Oh, all I do is lease option because they never buy”.

Jimmy: But wait, there a lot of scumbags as renters!

David: That's right! But those guys gibe you guys a bad name indirectly, because --

Jimmy I'm not sure if there is really --I don't think that there's really people like that out there.

David: There are, there are, I know a couple of them. And they just say all I do is lease option. But whenever they and do their tenants screening, they don't care, that person could have a 200 credit score and they'll do it, they'll give them lease option knowing that it is impossible for that individual. And you guys have more integrity than that.

Jimmy: I do think that you need to counter this argument; there is a bunch of scumbag renters.

David: There are. Oh yeah.

Jimmy: Who will [01:43:35.21 - inaudible] and if you are new in real estate, and you just want somebody to rent your property out and these scumbag renters? They know.

[01:43:44.29 - cross talking]

Mike: Honestly guys if you are starting out as a landlord, there are tenants who know the game --

Jimmy: And they know you are new.

Mike: Exactly. So be aware of that and --

[01:44:00.08 - inaudible]

Jimmy: -- that these people they are just trying to hose people and that's not true, but no one also accounts that there are also a bunch of scumbag renters.

David: There is, totally. No, no, I wasn't arguing, I was just bringing up a valid point that, that you know, you guys are looking for that win-win,

Jimmy: For me the lease to own, creates a great win-win, but also protects me against scumbag tenants.

David: right.

Jimmy: Which there --

David: Well, it’s great though! Because you guys got the option deposit and if it's only 1 or 2% you have collected yourself the vacancy protection.

Jimmy: Exactly.

[01:44:32.08 - cross talking]

Bob:  Most landlords are collecting first month's rent upfront and one month equivalent security deposit, so or for the average house in North County, rent for 900 bucks per month, you are giving the keys to your $60-80,000 asset over to somebody for $1800 per month. And if they know how to play the game, they can stretch that out by playing the game --

David: Six months?

Bob:  Six months, longer! Seven to eight months, file bankruptcy, do all this other crazy stuff.

David: And they live for free?

Bob:  And you still got to pay that mortgage payment, you got to do the taxes --

Jimmy: You still got to do the maintenance while they are not paying you.

David:  Yeah! Because if the roof starts leaking – regardless, they are moving out in six months or whenever you can get them out, but the roof is still leaking!

Jimmy: When we were regular landlords, we had tenants that were 90 days late, calling us for maintenance.

Jimmy: Oh my god, are you out of your mind?

Bob:  So we just eliminated those people.

Speaker: But in the court with the judge you still have to cover that maintenance, isn't that crazy?

Bob:  So doing a lease option [01:45:32.23 - inaudible] because now they have to have 3000, the 5000 minimum plus the first month's rent. So you are dealing with a little by more savvy of a person who has to scrape together a little bit more money to get into the door and the keys to your asset.

David: That's a great point. You guys are eliminating like -- a lot of these professional tenants. Because professional tenants typically will have first month’s rent and a deposit.

Bob:  Yep.

David: But if they have 3% of the property, it shows you take the least a bit more serious.

Bob:  They have [01:46:00.24 - inaudible].

David: -- 5% or even more, they have skin in the game, absolutely.

Mike: Particularly we mentioned this earlier too, if it is somebody who is willing to work on the property too. So you have a blue collar guy that knows how to do some repairs, that's awesome.

Bob:  Yep.

Mike: They are putting equity into it. They have got sweat equity in that property.

Jimmy: They get a lower purchase price because we don't have to put more money into the asset.

Bob:  We have increased our [01:46:25.00 - inaudible] because now we are not spending money on the renovation. We are also not spending money managing the contractor and that whole rehab process. So lowering the holding costs as well.

David: Right.

Jimmy: Life insurance, private lending, we cut out the middle man of the banks.

David: Right.

Jimmy: Lease to own we cut out the middle man of the general contractor.

David: Right.

Jimmy: Who you know is charging you for his hours as his sits at the desk at home depo, bullshitting with whoever --

David: Right back to this topic, teams. Tell me about your team a little bit? If you don't mind.

Bob:  Right now we have got five team members in addition of us. We have a fantastic team.

David: On top of you two?

Bob:  Five on top of us two.

David: Nice.

Bob:  We have got an amazing team that work their ass off and -- I love the shit out of them, but we have basically got two sales guys -- that handle all of our inbound calls, screening tenant buyers. To get -- we get 500 - 600 phone calls per week from potential tenant buyers.

David: So you have a huge data base?

Bob:  A huge data base. And it takes a lot of time to figure -- you get a lot of tire kickers, you get people who say they have $500 down and I can pay $400 a month.

Jimmy: Professional tenants.

Bob:  So you got to screen out those leads. They find the crème of the crop. We have got basically -- one person who is doing all our Craigslist marketing, our V-flyer which is a notifications site. A lot of front end marketing like our utility turn-on’s, our property cleans, [01:47:59.23 - inaudible] when we buy a property. Then we got two folks who basically handle our management side of the business, and then getting our tenant buyers -- coordinating with a mortgage brokers and getting to an actual cash out.

David: So you guys have a great team, so --

Jimmy: Wait, what about Teresa too?

Bob:  I did. I mentioned her.

Jimmy:  But Teresa is like a bulldog. She loves to hammer people who are not giving us service. So if anybody isn't doing their job; Teresa goes on the phone and just destroys these people. I love sitting in the office -- if we were hokey team, she would be our enforced. If you are going to have a team, you have to have an enforcer.

David: Right.

Jimmy: Bob is a really nice guy, I am not -- but I have to like --

Mike: You're just blunt. We need a Teresa too though.

Jimmy: If I was being blunt on everyone it would be horrible. But I do it all the time. Teresa does that for me, that is my favorite thing about her.

David: I want to touch on more topic really quick guys. You have two full time team members that are handling inbound calls, correct me if I’m wrong -- for tenant buyers -- which you just states is 80% of the market.

Bob:  Yes.

David: Right. How do you keep the phone ringing? So this is a marketing question. How do you keep the phone ringing for two full time people --

Mike: That's a lot.

David: -- to answer the calls -- for the 80% of the market -- to contact your company -- to say, "Hey, I rent currently, and I want to rent from you guys, and I want to have the option to buy, and eventually be a home owner. So how do you market to get that phone ringing?

Bob:  So we do Craigslist postings every day, multiple times per day.

David: Multiple markets or just this market?

Bob:  Just St Louis.

David: Okay.

Bob:  We do -- V-flyer which is a syndication site. So basically you put an ad on V-flyer, another one is called [01:49:56.04 - inaudible]. And then they –

David: [01:49:59.25 - inaudible]

Bob:  Maybe not. I don't use it, I just keep it in the back of my head. So -- you can basically –

Mike: Someone else is doing it at this point, right?

Bob:  Yeah.

Mike: Tell Teresa.

Bob:  Exactly. And -- so you post the add there once and shoots it out to 30 different websites, Zillo, Yahoo Rest Estate, Trillia –

David: Are you -- do you use ghost property listings or?

Bob:  Yeah.

David: At this point, do you even need to?

Bob:  We need to because it's like, "Hey I still own this house at 123 main street, even though a tenant buyer has been in there for 12 months, 18 months –

Jimmy: How you doing?

Bob:  So we keep all of our properties for every property we have every touched and still owned live on [01:50:37.09 - inaudible].

David: Okay.

Bob:  Because hey we still got other properties –

David: We do that with our deals occasionally too.

Mike: Well, we just keep our deals live.

David: We keep it live. So if we have sold the deal, instead of pulling it down we will keep it live. So you guys are doing the same thing.

Bob:  The same thing.

David: It's not really a –

Jimmy: It's a food in the door.

David: It's not a bad thing because, you know what? You are going to be able to help that individual at a later time. Yes so we do that with Craigslist postings. If we have a post that we post, and the deal sells in four hours, yet the post will stay live for 30 days. We just don't remove it. Because somebody will still call and say, "Hey that's a great deal in Ferguson."

Jimmy: You might have the second best deal too.

David: Right, I may have the second best deal or --

Mike: There is a second reason we don't remove it too; it's a lot of work to go back through all your old ads and have someone remove it.

David: It's great marketing to have that out there, your name, your number and your e-mail on it. So you guys are doing that, that's my question. So awesome, what else? Craigslist, V-flyer, [01:51:34.24 - inaudible], there has got to be more? Two full time guys, two full time people. That's a lot.

Bob: We also do a Facebook. Facebook has been huge for us for last 7 or 8 months. You can get really dialed in and targeted as far as -- I have a house in [01:51:53.22 - inaudible] I can target everybody on Facebook in [01:51:56.28 - inaudible]. For like basically 5 - 10 bucks per day for a Facebook ad, I can typically get like 10 - 15, maybe 20 inbound leads from a website.

David: So you can get almost $1 or less -- per lead?

Bob: Yes.

David: So you will target a particular zip code, then you will just use a ghost listing?

Bob: No, I say, "Hey we got a rent only property --"

David: Oh you already have one? Ready to go.

Bob: I got one ready to go, or we have multiple ones. We always have 2 or 3 Facebook ads running, 5 to 10 bucks per day budget on -- if not more. We get half our traffic from Facebook.

David: Holy cow! Isn't that awesome?

Bob: The other thing about Facebook is that anybody who hits our website -- I can put a tracking pixel on there right? So I can do retargeting. So -- hey if you have hit my website, you are obviously very interested in renting rent to own properties, and if I spend some more ad dollars to hit you up. Most of the sales are made in the follow up, so [01:52:56.03 - inaudible] and anybody who has hit our website in the last 30 days we can hit up. We have been luckily using some type of call or phone tracking system from the beginning of our lease option business. We started doing lease options in the fall of 2014.

David: Wow Mike that is inspiring, fall of 2014 --

Mike: You guys are crushing it.

David: They have 150 properties under lease option at this point. Love it, didn't mean to interrupt you.

Bob: No worries.

Jimmy: We didn't have to use conventional ideas --

David: Which limits everything.

Bob: Lease option and the whole motto of getting paid in four different ways. It allows you to scale so much quicker, and you eliminate a lot of headaches of traditional landlords and what have you. We basically have always directed all of our calls to some call catching system. So the [01:53:46.09 - inaudible] system I was telling you about -- when I built out that text blast. We have over 44,000 phone calls that was not unique numbers. That was inbound phone calls, website opt ins. 44,000 times people hit us up. I eliminated the uniques and then -- filtered down to just mobile numbers, and was left with 15,000 phone numbers.

David: Right.

Bob: We have been building our e-mail data base; we got close to 10,000 e-mails. So it is one of those things where the business can start snowballing. We have people who -- they know they want to eventually rent to own and they are saving up money for a down payment. We recently closed a deal -- with someone who has been on our list for over a year, finally pulled the trigger and least property option for loan.

David: It's the best thing, having the list. Like I was saying earlier, you may have a guy that is 80:20 principle. That is going to be the target of today, but 8 or 12 months later they are going to be a buyer and it's a deal. That could make you guys 15 or 20k.  Just off that individual buyer, awesome. So you guys are doing tons of marketing. You are doing Craigslist posting, you are using V-flyer and [01:54:51.09 - inaudible] to -- to syndicate to 30 plus different websites. Doing Facebook posting as well -- so the Facebook posting you are probably doing on your page and then you are promoting the post?

Bob: Correct.

David: 10, 15 bucks. I mean you are not spending a lot of money. But then you are building a massive buyers list. So your buyers list probably trumps ours.

Mike: Well they said they were texting -- what? 10,000 people.

David: That's what I mean. We have 12-15,000 people on our buyers list in the St Louis area --

Jimmy: But it's a different market.

[01:55:26.03 - cross talk]

Mike: Oh we have 30 something thousand. But we got about 1000 on our text list.

David: [01:55:33.02 - inaudible] whereas you guys have at least that many, and these people -- they are not looking to buy a rehab or be a landlord; they are looking for a home. Which is powerful, holy cow. That's awesome.

Bob: Then we do the traditional thing; we put a street sign --

Jimmy: If we have one buyer they are going to buy one property. Your guy's buyers buy multiples.

David: So you are constantly having to build the list, but we do the same thing. Right.

Bob: We do the traditional thing like put a sign in the yard, gives us some phone calls. We used to do bandit signs, trying to find owner, finance buyers. But we figured, we can get more leads from Facebook. Better ROI. So we can kind of eliminate that.

David: Holy cow, 150 deals live. That's impressive.

Mike: That's cool man.

David: So what's the goal for the next 3-5 years guys?

[01:56:25.04 cross talking]

Bob: When it gets to about 300 units overall in St Louis, and have those churning --

David: All lease option deals or --

Bob: All lease options deals; I would never be a landlord again.

Mike: What about other markets too? You said all in St Louis, is there a reason you are not trying to reach out?

Bob: You know, we looked at Kansas City, we have looked at some other markets; I think St Louis has the best like -- metrics system as far as [01:56:47.16 - inaudible] multiplier. You can buy a house and rent it out for -- for a reason --

[01:56:55.06 - cross talking]

David: Now when you say you would never want to be a landlord again, I only want to do lease option. I want to ask this question to you guys because -- to me -- that just seems like I am constantly -- if I was in your shoes, I am constantly marketing for that next deal, okay.

Jimmy: So you are always a landlord.

David: Well, I get that.

Mike: That's my opinion too. I feel like -- it is more of an active income --

David: You make more, but it's active, you're right. My question is why always do lease option versus -- own 3-500 units and just retire?

Jimmy: Because we built a big enough system, and if we do have to cash out, it just goes through the system --

David: So you're building a team, the B or the I -- in the quadrant?

Jimmy: It is like a hybrid of all strategies. Like the person who just cashed out, it's like -- alright we are just going to buy another property and do the same thing over and over again.

Mike: So it is a bit more active though? I mean do kind of want to stress that point --

Bob: No it's not. Because a landlord -- the time that landlord is managing his property, yes he might have a management company but he is going to pay 10% to them and he is still going to have a lot of money. That is still just as active, as-- for me to be on your guys text list and to buy a new property every time one cashes out -- that doesn't take a lot of time. So I have replaced the time on --

David: You've replaced a manager -- a maintenance person within an acquisition person.

Jimmy: An acquisition person is always more fun.

David: It is always fun, they are dealing with a leaky basement --

Jimmy: There is this myth that you are this passive investor, but there is a lot of emotional stress when you get your statement from your property manager and you just -- $3000 on a new H-vac. You're like, "Oh shit!"

David: That's like 8 months’ rent.

Jimmy: It might not take a lot of time but -- a lot of emotion right there.

Mike: By passive and active -- I guess I meant passive on your tax return. I don't necessarily mean being a landlord is a passive investment. I just mean --

Jimmy: It's still a long term --

David: Yeah, but it is still passive return on your guys' tax return too though. Because -- they don't sell the deal until the options execute. Can you guys give us a couple of books -- and [01:59:23.20 - inaudible] on how we can educate ourselves on not only lease options, but -- the insurance business. I mentioned -- my girlfriend bought me on called 'Bank on yourself' I read it, and quite honestly -- I didn’t really understand it, so I just threw it in the back of --

Bob: When you read it, it takes a little bit of time --

Jimmy: I think Nelson Nash breaks it down --

Bob: He does really good.

David: Put it in the show notes -- Nelson Nash.

Bob: One of the best books -- in my opinion on it is the 'Perpetual Wealth System’; I don't remember who the author is.

Jimmy: John Jamison.

Bob: John Jamison. We did a YouTube video on his book, but he combines life insurance with real estate, and shows you how both of them combined --

David: John Jamison?

Jimmy: Yeah, he's in Detroit.

Bob: Its one of the best --

David: The perpetual wealth system?

Bob: The perpetual wealth system.

David: Love it, got to add that to the list.

Mike: It's in there man, i am doing it now.

David: So he actually mixes them both. He talks about -- real estate as well as the life insurance game and how to use those two tools together.

Jimmy: On our YouTube Channel we have videos, and if it doesn't explain it right well enough, leave a comment, we will answer the question or make another video.

David: Awesome, what is the channel again?

Jimmy: Joint op properties.

Mike: It's in the show notes.

David: So what other books guys, you mentioned that one and -- is there anything else you would highly recommend to the listeners and viewers?

Bob: We have been really into following [02:00:46.02 - inaudible], we just hired him as a mentor. We love the lease option game but we also want to add basically a part of our portfolio that we can go straight to owner financing people. A lot of people think the owner finance game is dead after Dodd Frank. Who knows if that will be re-appealed --?

David: Or not.

Bob: Exactly, so there is still ways to owner finance properties, we do some creative, we are all creative real estate investors, but -- owner financing allows you to -- basically do all the advantages that we talked about with these options; but you can get a bigger down payment. Typically 10-15% of the value of the house upfront. You really truly are completely hands off.

David: So you guys are actually closing on the property and carrying a note?

Jimmy: Yes exactly.

David: So they can't call you because you are not the landlord.

Jimmy: I don't call my bank when my toilet doesn’t work.

David: I love that. What is that one called?

Bob: 'The art of owner financing'. He's got three books. The first one is great, just from an entrepreneurial perspective -- the guy tried like 15 plus businesses --

David: He's like us.

Jimmy: This dude is the most creative thinking regular dude -- I have ever met.

David: What's his name?

Jimmy: Mitch Stephen. I think the other thing is, if you are talking about the beginning of a real estate investor -- I know when I started I was like oh no I am not going to pay these guys for coaching, I will figure out myself.

David: We all did that, we all spend 3-6 months wasting our time.

Jimmy: All I know is, the better I get at this game, the more I spend on coaching.

David: That's one of the things I really wanted to touch one.

Jimmy: We are paying three coaches right now?

Bob: Yeah.

Jimmy: We pay Joe Fearless for marketing --

Mike: That's awesome.

Jimmy: We pay Mitch Stephen for owner finance and creative mind thought. And then we pay your guy; Joe McCall for more marketing.

David: So Joe --

Bob: We are also a part of a real estate mastermind collective genius -- [02:02:44.22 - inaudible] group.

Jimmy: Which is coaching -- the more money you make, the more money you will spend on coaching, so -- the other thing after you read 'Rich Dad Poor Dad', they don’t put any [02:02:53.20 - inaudible] on the spreadsheet for coaching.

David: They don't.

Jimmy: I think -- you need to start -- the more money you make the more money you will spend on coaching.

David: I love this conversation because -- I won't hire a coach -- that doesn't have a coach.

Jimmy: Right.

David: And I would totally --

Jimmy: Our coaches’ have coaches.

David: Absolutely. I wouldn't recommend anybody hire a coach if you are a newbie -- Mike and I offer coaching and I am sure you guys offer coaching -- that -- doesn't have a coach. I have a coach, Mike has a coach, and you guys have 3 coaches. So coaching is a staple in this business --

Jimmy: For some reason --

Mike: Not only do we personally have coaches but our business -- we have a board. So we have -- again you have to have --

Jimmy: For some reason teachings --like if you are in a 4 walled school and you go there from 8 till 3, so what? From 6 to 22? But once you are 22 and -- someone wants money for teaching you, it's somehow a bad idea.

David: You have outgrown the system.

Bob: You are going to pay for it either way. Either in a deal you didn't take down that you could have made $10,000 wholesaling, so missed opportunities, or a major screw up where you didn't analyze the deal correctly and you took down something you shouldn't have, you are going to lose money in holding costs or sell it at a loss. You are either going to pay for it through the school of hard knocks, or by getting the --

Jimmy: Once again --

David: So the second part or the third part of this episode into a second podcast for us here guys.

Jimmy: You might want to break this up into 20 videos.

David: That's fine. I really want to emphasize, re-emphasize the coaching part of this because -- so -- let me ask a question to the group real quick, then we will hop back into the conversation. But -- when I first started real estate, I did -- I had been an investor for 9 years give or take. I bought off the MLS for the first -- 7 and a half to 8 years. I paid retail, I went and got a conventional loan, then I put down 20-30% and -- I cashed flowed very minimal. Because I had to put down a bunch of money, because I was buying a property at if, not above market rate. I didn't know any better. Then I decided 15 or 16 months ago I wanted to be a real estate investor full time and -- I bought a couple of courses online and I started to wholesale. I didn't do a deal for probably 3 months maybe 4. I hired a coach after 2 and half months and that was Joe, okay? I love Joe, he is a great guy, we are going to have him on an episode here in the next week or 2.

Jimmy: That guy's brain is crazy.

David: It is crazy, he is a great guy. But Joe -- to me and this is what we are doing to our listeners and viewers and -- soon to be students. Is that we are teaching people, and this is what he taught me; you are not in the real estate business, you are in the marketing business, if you want to be a wholesaler. It doesn’t matter if you wholesale or real estate, or wholesale, lease options --

Jimmy: You're a money maker. You provide liquidity to the market.

David: Right, so my point is this. Once I hired Joe, I did my first deal in 2 weeks -- and I probably did 4 deals in a month. Month number two I probably did 6 deals. Okay? Right off the bat. However, it took me -- 3 entire months of spinning my wheels in analysis paralysis mode -- to figure out that I couldn’t do this without a coach. So my question to you Mike and Jimmy and to Bob is -- when you first started, how long did it take you to hire your coach?

Mike: Probably about 3 or 4 months. Then again, I think -- my personal story was, I quit my job -- and it took me 6 months to do a deal.

David: 6 months to do a deal? So you were in analysis paralysis mode for 6 months.

Mike: I was working, I was trying stuff, but it didn't work. So --

David: Right, then you hired your coach I am assuming?

Mike: Absolutely. You guys? I mean what's your story?

Jimmy: I paid for 'Rich dad' then I thought this sucks, so I took 7 years off from hiring a coach. But Joe Fearless and his podcast is very good.

Mike: It is very good.

Jimmy: We were probably year and a half into the business but you had already hired -- I benefited from all the --

David: So he had already got a coach and you were piggy backing?

Bob: Yeah, I read -- 'Rich dad Poor dad', and 'Creating Wealth' by Robert Allan -- that got me into the real estate bug and then I did Rich dad coaching and tried them, started got to REIA's as a result and -- I've bought courses every year and tried different --

David: Continuing to educate, and right now you guys' have 3 coaches? I love that.

Jimmy: We paid Mitch on Friday -- maybe it was power of attraction or whatever shit you want to call it.

David: Right.

Jimmy: We paid Mitch on Friday for 15 grand; we got a 15 grand down payment on a deal 10 days later.

David: So it paid for itself?

Mike: It's Karma, man. That's what it is.

Jimmy: What is that book you had me read?

Bob: Oh, 'Law of attraction'.

David: That's a good book.

Mike: What is that -- there is a movie on Netflix for anyone who’s listening --

David: The secret.

Mike: The secret. Yeah, law of attraction.

Bob: If you want a really good Napoleon Hill book, I highly, highly recommend, ' Grow right with peace of mind.' He -- the -- what is the one everyone talks about?

David: 'Thinking grows rich.'

Bob: So he wrote 'Thinking grows rich' as a really young guy, just kind of starting out. But 'Grow right with peace of mind' is like his last book he wrote at like 65-70 years old. So he has all the experience in his lifetime. I highly recommend it.

David: He has one that I probably -- I have read most of his books, not all of them but most of them. My favorite Napoleon Hill book is -- it's about the Devil I can't think of the name. It is not about the Devil -- but it's -- I can't think of it. I have to think of it in a second, actually hold on -- it's a great book, and I am all about audio books. I got all my -- if I can drive and read it's a great thing for me.

Mike: Because in our business we are doing a lot of driving, spending way too much time behind the wheel.

Jimmy: So how do you guys divide up like -- who goes and looks at the property?

David: It is called 'Outwitting the Devil', I just looked it up. 'Outwitting the Devil' is one of my favorite books that I have probably listened to/ read the book -- at least 4 books. I love the book because I like the Audio version of it -- because it talks about -- and I am actually not a religious person at all; but this book is awesome because it talks about outwitting the Devil, and what I mean by that is that two characters in the audio book -- there is a soft spoken guy who is your normal individual. And then there is your deep, hard spoken individual who is considered to be the Devil. In this book there are two characters. Your regular individual and then there is the Devil. The whole book is actually just a conversation between these 2 individuals. It is an awesome book, and the Devil talks about all the things that make you normal, that make your ordinary. The other individual who is your entrepreneur and your -- self help individual for the most part, talks about all the things the Devil wants you to do to be normal will kill you. Make you normal and -- that is not what we want as entrepreneurs. We want to grow, we want to continue to learn, educate and build. If you haven't read that book I highly encourage it. 'Outwitting the Devil'. Listen to the audio version of it.

[02:10:51.25 - cross talking]

Jimmy: His whole thing is resistance. We call the Devil our resistance but --

David: Right.

Jimmy: Military guy because he wrote some great book about the Spartans so --

David: Right. It is kind of more -- you know what? I listened to another book just recently called, 'The Rhinoceros success' it's a really corny book, in the opening they say, this book is kind of corny, it's actually kind of funny. But it is very similar to 'Outwitting the Devil' because it's like -- you know what? If you are scared of taking a risk and failing, you will never be successful. Whereas the 'The Rhinoceros success' is like -- head down, charge.

Mike: Guys, we are talking about way too many books. Is it [02:11:27.23 - inaudible]?

Jimmy: Steven Pressfield.

Mike: Steven Pressfield, okay.

Jimmy: 'The art of war', that's where he talks about resistance. The concept of resistance, not the Devil.

Mike: Alright so that's kind of the go to one. Trying to take notes and put them in the show notes for everybody, so at least we put them down there for you guys.

David: Let's wrap up guys, we have gone on for almost 2 hours now.

Jimmy: Who's still listening?

David: I want to encourage you guys to check out -- it's okay we are going to cut it down. I want to encourage you guys to check out Jimmy and Bob's courses. Let's reiterate these URL's here.

Bob: Cashflowtactics.com if you are interested in the infinite banking concept, which is another name for the cash value life insurance we talked about. Strategies about how to combine that with real estate. If you want to do -- buy turnkey properties in St Louis, one of the best markets in the country. Or if you are interested in private lending opportunities you go to Jointopsproperties.com. If you want to learn specifically about lease options and how to make money in 4 separate ways on real estate deals, go to autopilot assets.com.

David: Awesome, awesome.

Bob: And our YouTube channel, I forgot about that. Jointopsproperties.com.

David: You guys put out a ton of content.

Bob: 20 videos a week or a month is our goal.

David: 20 videos a month. That's almost per day, nearly every working day, I like it. Guys, if you are still watching -

Mike: Of course they are still watching, it’s a podcast.

David: Discountpropertyinvestor.com, check us out if you are looking for deals in St Louis, Missouri. Subscribe to the website, get our deals. Don't forget, we always are going to pitch this in every episode --

Mike: Absolutely.

David: But it has so much power, so much value. Thefreewholesalecourse.com. Mike and I have spent -- tons of time and money building this course out. We are getting a lot of slack, I was saying in the last episode; we are getting a lot of slack from all the other wholesalers and -- what we call "Guru's" in the market place. These guys are not even doing deals anymore, they are strictly selling education. They are asking me they are sending me messages, I am getting 1 or 2 a week. Why are you giving away all of this information that I am selling --

Jimmy: There is no such secrets in this new economy.

David: No secrets.

Jimmy: There is an abundance mindset.

David: That's right.

Jimmy: No such secret, ever.

David: I am getting Facebook messages from these other gurus saying, "David, why are you giving away all the information that I am selling for 997, maybe even 2 grand --"

Jimmy: Sounds like he has a marketing issue.

David: My response is, you know what? I am going to create more value than you. Am I selling additional courses that have a price tag, and or coaching? Absolutely. But my pitch, my intro, my gift to you guys is not going to be a free calculator or some free little stupid thing that is --

Mike: It's the whole course.

David: It's the entire course, freewholesalecourse.com.

Jimmy: -- hey wholesalers, put real numbers like -- on your e-mails.

David: On your e-mails.

Jimmy: Assholes like me and him, real numbers that really work -- to pull the trigger it is very simple for us

Bob: Provide information like -- I don't know how many times like -- there is not an address, or square footage or any of the features of the house, or shitty pictures.

Jimmy: The most transparent wholesaler will make the most money in my opinion.

David: Absolutely. So guys check it out, thefreewholesalecourse.com.

Jimmy: [02:15:00.07 - inaudible] like me, this guy -- he will crush you.

Mike: If only we had met you two years ago.

[02:15:09.23 - cross talking]

Mike: -- we could have sold so many properties.

David: Guys, check out Jimmy and Bob's courses, please check out their YouTube channel, check out freewholesalecourse.com. Mike, close us out with our quote.

Mike: Our closing quote for today is, "If you are born poor it's not your mistake. But if you die poor, it's your mistake."

David: Love it. Thanks for listening guys.