Transcription
A lot of people think that this stuff is just situations that have multiple heirs, multiple owners. And while that is true the majority of the time, as you well know, there are plenty of situations where we are dealing with the owner of record who is still alive. But there is some other aspect that they are dealing with that prevents the property that they would like to sell from being sold. Bad decisions that they make in life, where it's not paying taxes—not just property taxes, but actual income taxes to the IRS—and maybe there's some child support stuff going on. Any judgments or liens that are in excess value of the property itself, to where they think that they are upside down, and a lot of times they are. Most of the time there is a multiple-owner aspect of what we deal with each day, or we're trying to locate these properties that cannot be sold through a title company. There's either multiple owners, judgments and liens, or a combination thereof.
What would you say the top three problems that cause real estate to not be able to be sold the traditional way? What were those top three? Definitely deceased owners.
The Dirty Deeds podcast with Logan Fulmer. Here we talk about distressed real estate and curative title work and how to make a living doing it, the tips and tricks of the trade. Today I have a special guest, Kyle Westbrook. He's a business partner of mine. Um, and we're going to talk about his background, how he got here, and what his uh operation looks like today.
Morning, Kyle. Welcome. How's it going?
Good. I just saw you five minutes ago in the hall. So, I know these intros are a little awkward because you already had them this morning at 8 a.m.
Yeah. Got to make them official, though.
Well, thanks for coming today.
Yeah. You and I don't get to talk on this level. Usually, we just we have our normal day-to-day, "what's hot, what's going on" stuff. But we don't talk about like the details like this very or the high level like this very often.
Yeah.
Yeah. This would be interesting.
Yeah, it's fun. Some days I don't get to talk to you at all. Literally pass by you and we're too too busy. So, yeah.
So, why don't you tell the listeners, you and I run a real estate business together. Um, why don't you tell the listeners about what your kind of life looks like up to real estate?
Oh, man. That's a good one. Up to real estate. You know, I kind of had a feeling very early on, like later in high school through early college, that I just had this—now, did I know I was going to be in real estate? No. I had this personality for sales and just just interacting with people. So, I kind of figured I would be something in that space where I was either selling something or people interacting. Uh, but I had zero clue, zero clue what I wanted to do. Bounced around from thing to thing.
Were you a good student or a terrible student?
I was terrible at the execution but really good at the attempt.
Okay. All right. um, for what it's worth.
So man, all I can all all I really remember about my journey leading into real estate was bouncing around from kind of customer service role, sales role, bunch of jobs that I held for at the maximum like six months.
Oh damn. You were that guy who I hate to look at his resume for sure. Like to a tea, like why?
Uh, I think I was bored. I got bored. I would, you know, it sounds conceited, but like I would get into the job, learn the role, quickly become one of the top salespeople, and then I get kind of bored. I'm like, "All right, I like the money I'm making now, but there's got to be more. I like I like the success I'm having now, but there's got to be more to this. This was too easy." Uh, so I would want to look around for more, and that would have squirrel syndrome where I was like, "Oh, this looks nice. Let's try this new job."
You're looking for like the next deal high in a way. You just didn't know that's what it was.
That's ex That's the best way to describe it.
Am I capable of that job? It's better than this one. Let me go see if I can get it.
Exactly. Exactly.
Man, I even had at one point a not a construction job, but a I think it was like a janitorial job to be honest, looking back on it now at a construction site.
At what age?
Uh, this was college, so I think this was two or three years into college, so early 20s.
Um, the money was decent, so I was like, "Oh my gosh, this is great." But um, yeah, I was probably there for less than a month.
Oh my god. Just sweeping behind a construction site.
Yeah, that'd get old.
Yeah, I did.
So, when you grew up, tell me about your socioeconomic like financial situation with family.
Little bit of money. Yeah. Middle America, rich or poor.
So, it's funny. I think a lot of people with these stories, they look back and they don't they really don't know what money is at a young age or the lack of it even. And I would definitely say that we came or I came from little to nothing. I mean, I remember uh first of all, parents split very early and uh had to kind of figure stuff out that way. It was just less than traditional household.
Yeah.
So having a uh kind of a factory workeresque dad who had a blue-collar low-income job, but you know when you're little you don't realize those things. It's it's got parents talk about money.
No.
No. Well, the parents weren't in the same household. So
Well, at least they weren't like complaining about it like, you know, "we can't have that. You don't have any money."
So you didn't really know what it was yet, right?
I had no idea what it was. So it's interesting now you look at at myself today, you know, having some money, it's I don't look at it as this thing that I want to accumulate in order to spend to to get things because I didn't have things when I was younger. So it's more of a goal I guess maybe is a better way to put it. But just just how many how much higher can you take it or I think there's a for guys probably like us I think there's a threshold of "I'm good enough," and once you get to the point where you prove yourself that the dollars are like a measuring stick and you prove you're good enough, but beyond that you also came from probably, you know, not a lot of huge resources or financial education. So at this point you say, "I don't want to blow it." So I've proved I'm good enough. Now I want to make sure to preserve it. And it's not a lot of people for the jet or extra Porsches or whatever the hell it is, right?
Preserving it is like you couldn't hit the hit the nail any better.
I mean, I feel that's a fear-based reaction to "I don't want to run out."
It's fear.
It's fear. Really is. And I didn't realize that. It's crazy you even asked that because like thinking back, I have to almost remind myself now like that's what it is because coming from little to nothing and then you have something when you get older, you're like, "I I got to keep this. I have to keep it." It's it's an interesting mentality.
So then what made you head towards real estate? Was it the money thing or was it chance?
It was a little bit of chance. Uh, but when I figured out what that chance was and why I gravitated towards it, it was like a light bulb had finally gone off. So later in my college career, um I stumbled upon a um leasing job at a property management company for the apartment complex that I lived at. I I assume these people got free rent. I was like, surely this is what I need to do so I can have free rent, lower my expenses.
Um, I was wrong. They did not get free rent, but they paid okay, so it was it was a win-win.
Um, I I learned that I liked showing uh cuz I was leasing, we would we would walk the property and and show pro to prospective tenants um the units that we'd have, the property amenities, etc.
Gotcha.
And I I really like the combination of describing a property, the real estate aspect, all the bells and whistles that something has, but also talking to somebody and convincing them this is the place to be, even though there's probably two or three, maybe even four better places in town.
That was the sales part of the role.
That was the sales part.
Yep.
So then after that, from what I recall about your story, you started researching a little bit, trying to figure out like kind of an idea that you could do outside of that job.
Yeah.
Yeah. So, I I was in real est or real estate. I was in property management for a while. Um, and I did that worked my all the way up into like management and corporate.
Um, enjoyed it. I really did. But they're there.
What was your salary roughly around then?
Um, the last salary I had in corporate America was just shy of 100,000 a year, which was I think it was 94ish.
The good income. You're beyond the like "I might be missing meals or I don't know how I'm going to pay my rent next month."
Yep.
Yeah. No, it was a it was a a really interesting time because it was one of those decisions I had to make was, okay, am I ready to really be in real estate, which I'll tell you how I stumbled upon it. It was it was a few years of doing both at the same time.
Um, but yeah, it was a tough decision. It was one of those where it's like, "I have this money coming in. Do I can I really sustain doing this full-time?" So, it was it was just kind of scary. But yeah, I I remember waking up one day thinking, "I am I am working for somebody else. Do I want to do this for the rest of my life, pay their bills?"
Um, I know I can do this on my own. Do I want to go into apartments like what I was working for at the time? Do I want to do something else?
So, for some reason, I just decided I'm gonna get this audio book, The Gary Keller's Millionaire Real Estate Investor.
Yeah.
For whatever reason, I picked that book as my first book.
Um, listened to that on the long boring drive between San Antonio and Corpus Christi.
And I don't know, that was the
And was your mind made up when you got to Corpus Christie?
Something's got to change.
It was I remember getting to Corpus, did my job, but I had to do at the apartment complex there that day. That night I got to my hotel, signed up for Bigger Pockets at that time, and just
Bigger Pockets part of like everybody. I don't know how it ends up being the first thing, but it is. Their marketing is good. You fast forget about it, but that's like everybody's been through bigger parts.
Yep.
Exactly. Yeah. And it was just I mean it was a snowball from there. It was like learning this strategy, this thing, and then just implementing. It was like
So, how did you end up in your very first deal? Was that with a partner or was that by that was by yourself?
That was a house flip.
Yeah, it was it was a house flip in Khen.
In Khen. Exactly.
So, at the time I was living in Leander, Texas, which is a suburb north of Austin.
Mhm.
Uh, so Leander wasn't too terribly far away from clean. But I figured at the time, even with the research I had done, that if you wanted to get in real estate, you had to be a house flipper, which is what they show on TV. I figured that had to be it. So I found this company. It turned out to be New Western. Had no idea. Like these guys are selling deals, so I'm going to buy one. Had no money in my account at the time. Very little savings, but figured out they hooked you up with a hard money lender that you only had to have 15 grand down. They they did they did they hooked me up uh scraped by enough of my savings plus the hard money loan to buy the property and then just somehow figured out how to find other money along the way to to uh do the rehab. So it was probably double the time it should have taken to do the deal.
Uh, and I'll never forget this is what really snowballed after I finally sold that deal. I was so defeated. Even though I did okay, I was so defeated how long that took and how mentally I'll never get rich at this rate.
I'll never get rich at this rate. I said, "There's so many people in this. There has to be another way." I found wholesaling and on YouTube on YouTube and watched a few few uh videos of that. My first wholesale deal was from finding about the concept of wholesaling to doing my first deal and getting under contract, which probably about 30 to 45 days. I made more money on that wholesale deal than I did on my flip.
Oh man.
And a light went off.
A light went off. First deal, flip a house, make a little money, took forever. Second was a wholesale, light went off and you're like, "Oh man, this is what I'm going to do."
Now you wind up with a business partner in not not too long of a time, right?
Right.
Yeah. We uh so I think my second wholesale deal I ended up actually selling to what what ended up being my business partner at the time.
[ __ ]
That's how you met him?
That's how I met him.
Weird.
Yeah, it it really was weird. But we we talked and we we had a similar background in property management and so we kind of clicked and one thing led to another and then we started doing deals together. So yeah, it was it was interesting how we met.
That's interesting because I know the business partner you met on the next deal you did later on.
Yeah, he's all right guys.
So, how many deals did y'all get through during that partnership? Over how much time?
So, the the partnership wasn't too terribly long. Um, somewhere a little little more than a year, I think it what it was. So, in that span of time, I probably have this exact data somewhere, uh, but I'm going to go off top of my head. I think we probably did 60 to 75 somewhere in that range deals. I mean, we were just
That's a huge amount of deals for your first year. Your partner's probably already been doing it. You jump in and join him. It just grows.
Yeah. I mean, I we a little bit, you know, the market at the time it was hot. And then the other part of it was just sheer effort. I mean, just just grinding it out every day.
So, you went from 100K in corporate and you left your job at that point?
No, I was still [ __ ]
Yeah, I did those deals while still tag teaming my my corporate America job.
Okay.
So, 100K comes in from that. Hundreds of thousands come in from this other deal.
Yeah.
So, you're I don't know 2 three 400,000 in your income for this 12-month period.
Right.
So, now it's like things are really happening. So, now then the part of the story where I intersect is I recall you had a project in Austin that had a whole bunch of owners and some title issues. I remember us connecting there from social media and we talked about it and said, "You know what? This this looks like our brand deal." But where it went sideways is I remember this number for some reason. 25 people. I don't know why. I remember thinking they're like 25 people in the deal. When it was all said and done, we ended up with like 65 or 63 or something.
Yeah, it was wrong with that. I don't know that I really want to admit this at the time because I didn't want you to think like I was the Bush League, which that would be unfair to say, but every time we kept adding airs, I remember thinking, "Fuck, this is the most we've ever had." And the next week there'd be more. And the whole time I was like, "Oh my gosh, like where is this going?"
Y I started getting a little bit nervous, but I'm like, "We're pregnant. We're having this baby. Let's keep rolling. Let's just see where it goes."
So when you saw when you started to find those problems with it once you got a contract on it, did you actively go look on the internet for someone to try to help or had you just stumbled across our marketing and say, "Oh, maybe I'll call those guys."
Yeah, I I actually remember it vividly. I um I I was diving into the deal enough to the point where I knew there had to be a resource out there beyond an attorney and beyond a title company because I tried those two routes and I got shot down and I knew that there had to be another resource. I didn't know what it was, a company, a person, something of somebody who knew how to do this stuff. My my thought process was there's no way that these sort of deals just literally get thrown to into the trash 100% of the time. I just something in my gut told me that. So I I can't remember what I googled but it was googling and it was Texas-based like curative title maybe that's what it was something and obviously there's not very much that just comes up on the Google searches when you do that but somehow or another your Facebook page had had popped up and something about asset resolution partners had came up with it and I I Facebook creeped your page for a little while noticed that you were putting out content on this topic and that's how I reached out.
Yeah, that means our marketing works. I'm glad it does.
So, the next section of the story is we do that deal together. After that, I specifically was like, "Man, this dude's sharp. He's hardworking. Like, I don't know what he's got going on, but he's like the kind of people that we need in this group." So, I remember talking to you several times throughout that deal. Dave was working with you a little bit more on that deal than me. But, yeah, I remember actively saying, "I need to touch base with him every couple weeks and just see what's going on." And it was almost like like you meet some girl in your science class and you don't want to like, you know, look too thirsty, but you still want to like kind of, you know, keep your hat in the
Yeah.
in the ring there. So, I remember kind of that just touch and go, saying, "Hey, let's let's go hook up. Let's talk and keep an eye on it." And I remember having a conversation specifically saying, "What's your current operation look like?" And I wanted to figure that out.
Yep.
And what I was looking for is, "Do you really love your current boyfriend?" That's what I wanted to know.
Yeah.
Yeah, I remember I remember that very well. As a matter of fact, you the timing couldn't have been better because things were I was starting to have a little bit of resentment there at that time um with my old business partner just because of the workload that I thought that I was doing and and what I was bringing to the table. I mean, I was basically I was acquisitions. He was dispoing some of it. But I mean, if you if anybody who's listening to this recalls the market in 2020 and early 2021, it you all you had to do is just raise your hand and say, "I got a deal that is $2 below market value and it's it's selling." There wasn't much.
You had a harder job easily.
Easily.
So, and I remember you said you had about a third of the split. So, you say, "Gosh, I'm doing more of the work and I have a much smaller split."
Ah, yeah.
Yeah. It it was there the dynamics of that were an interesting one, but I was so new and fresh to real estate. You know, I I took at the time what what should have been or was a lesser than desirable split on all of our deals, but you know, I'm thankful I did it because I still I made a lot of money. I got a lot of experience, but it was time by the time that our paths crossed, it was time to be open to other options. So, it was it was really good timing.
That deal was insane.
But yeah, it was it was good.
So, so the readers or the viewers know what we're up against here. That deal had about 62 or 65 owners.
Yeah.
We were all in for about 250,000ish.
Mhm.
Maybe 50 or 80 was tax lawsuit money, right? And then
The balance was seller proceeds. I remember calling every, like, every couple of days; there'd be a new round of people that they're owners, too.
Yeah. And attorneys putting deeds together. We're looking people up, calling them, saying, "Go here and close." There's like these clusters of closing all around San Antonio in our office, Austin, just all these different towns. People spread out.
Yep. And we're like tallying with this spreadsheet. We're like 32%, 41%, 44%. It was like tallying up.
Crazy.
I know. And I remember thinking, whoa. Like there was a time where I'm like, I don't know how we're going to finish this. And then there was also a time where we started coming down the hill on the other side. I remember thinking, oh, this is going to work. We did. We sold it for a million one, million two. There was about a million dollar net in there.
Yep. And that was your last deal or that was at that time you'd already moved over and started working with us. We paid you out under your old split and then a new thing happened. So why don't you tell people what your business looks like today? Because you've been through a rendition of wholesaling commercial, which I don't want to talk about that. I want to focus on like your baby today is cured a tile distress.
Yeah. How would you explain that business to someone who's never heard or seen it before?
Yeah, so the, the way the best way I can describe it to break it down and it's most simple form is identifying properties. A lot of, let me back up. A lot of people think that this stuff is just situations that have multiple heirs, multiple owners. And while that is true the majority of the time, as you well know, there are plenty of situations where we are dealing with the owner of record who is still alive. But there is some other aspect that they are dealing with that prevents the property that they would like to sell from being from being sold, such as bad decisions that they make in life where it's just not paying taxes. Um, not just property taxes but actual, um, um income taxes to the IRS and maybe there's some child support stuff going on. Any, any judgments or leans that are in excess value of the property itself to where they think that they are upside down, and a lot of times they are, um, but most of the time there is a multiple owner aspect of what we deal with. So what we do in my team each day or we're trying to locate these properties that cannot be sold through a title company. There's either multiple owners, judgments and leans or a combination thereof.
What would you say the top three problems that cause real estate to not be able to be sold the traditional way? What would those top three be?
Definitely deceased owners. Um, but as a one caveat, you know, one a I would say deceased owners where the current day heirs just don't get along. They don't get along. It's, it's family problems. It's one thing to have multiple owners, but another to have multiple owners and then they just don't get along. Is we could be brothers and we'd be the only two super easy.
Relationship problems. It's relationship problems.
Yeah, that's that's a lot of it. So, locating heirs that people don't know who they are, relationship problems amongst heirs and judgments that are just so hefty that people don't know what to do with them. They think if they even do sell, they're not walking away with a penny.
So, it sounds like most of your inventory is probably ownership disputes, lack of equity, and problems.
Yep. That I mean the 90% of those things folks, it's not worth their time anyway, right? And I think they only transact to a professional that can create equity by resolving these issues and clearing them out. Otherwise, these are things that end up going to tax sale, uh, mortgage foreclosure, whatever, or they're stuck without a tax sale being perfected, literally in limbo for 10, 20 years.
Yeah.
Yeah. It's a long time. I mean, we've we've we've seen lawsuits, tax lawsuits that are as short as 4 to 6 months. And for those listening that usually deal with mortgage foreclosures, that seems like a long time. But in the tax foreclosure world, that's actually pretty quick. Um, and there's there's other ones that like you said, they can go as long as six years plus.
So, when the average person drives around, they don't see a house that has a big sign in the yard that says lots of judgments behind on a bunch of taxes. How do you know they exist?
That is a great question. Sometimes we don't, sometimes they surprise us. Um, no, the the the answer to that is there there's no easy way. There's really no easy way to just know. um you have to kind of start with some of the more common problems and then kind of start peeling back layers and just seeing what those extra issues are.
So, do you have any regions that you like to peel the layers back on specifically? Regions of the state like, yeah. Is it Maine? Is it Texas?
Yeah, I mean we we we like Texas. Uh and we like the big metropolitan areas. I mean, if if anybody wants to, you know, look at this and start uh poking around to see if they can find some of this stuff themselves. the counties with the um or the larger counties that have the more robust websites are going to be the easier to navigate. So, we'll we'll try to see if an owner is deceased. It's it's the one that's going to be the easiest indicator of issues. From there, we'll look up the current day owners and say or the deceased owners for that matter. We'll run their name through the county clerk and we'll see, okay, any judgments or leans that are attached besides the taxes, are there any?
Got it. So if it's multiple owners, you say, "That's not enough to be a problem for me." They'll probably figure it out, right? If it's multiple owners plus this, plus this. Oh, that's enough of a web. That's a good indicator.
Yeah.
Got it.
Yep.
Yep. So, we'll start reaching out once we kind of have that basis of understanding this problem, this problem, and that problem. We'll start finding who the current day people are. Make phone calls.
How did, so it's interesting that I've actually watched this process happen. Um, how much time would you say from the moment you identify something and until the time you're on the phone, how much time would elapse on average?
On average is probably 15 to 20 minutes.
That's fast. There are some folks who will sit around researching for days and people send me messages. I heard about this. Yeah. You're like quick. Why are you so quick instead of spending all the time to get all the information? Why are you so quick to the phone? You can't you you cannot research and research and research. If you're going to do this business, the key word is business. If you want to have a hobby and research people's issues and resolve those, you got a great hobby. Dive deep. See, that's for the private investigators. That's for the bakers.
Yep.
Yeah, that's exactly. And they're great at it. U But as a business owner, we got to make quick decisions. And you know, as the saying goes, time is money. We can't spend our entire day researching a file that might go nowhere. Once we make a call, we don't need to know the whole fact pattern. We just need to know a high level. So, okay. So, once you get that first person on the phone, are you starting to get feedback from them saying, "Yes, there are other owners or I'm the only owner. Yes, I acknowledge these problems." You starting to lay it out? Are you like hard charging on that? Are you soft on it? What's your delivery look like there?
So, that's also a good question. The the it's really interesting in this model. The soft delivery is the hard and fast delivery if you do it right. Because by coming in and telling them, hey, I think these are some of the problems you might be going through and oh by the way, I know how to resolve those. They immediately are, oh my gosh, this is incredible. And then all that other research that you didn't do on purpose, now that you know that they're willing to listen to you, they willingly tell, well they willingly tell you all the other stuff that they have going on that you would have found during your research, but now you know it.
Yeah, it's interesting from the early days. So like I've not actually like looked all the way through your process, although they talked about it. I spent far more time doing research because I want to get it right. Yeah. And I remember at one point after about six months, I would stay up late at night like just digging in the office. And I remember thinking, "This is just too much work, but I still need to do these deals." And I remember saying, "Fuck it. I'm just going to call these people." And I got to the point where I would literally do no research. I would find that there were one or multiple owners, and if it was behind on taxes, I'd just call them. And I quit looking for anything. It was like speed delete.
Yeah. And that was after about six months of just flat out being worn out and not liking it anymore. But we both got to the same point, just different way.
Yeah.
Yeah. And a lot of it comes with experience and a little bit of confidence, too. I mean, because once you once you've seen enough of these issues, you you kind of have the ideology of like, I can probably clear the vast majority of these things, whether I know about it in advance or not. You just really want to look for the big major things that you know would destroy your deal. If you can eliminate those from the get-go, the rest of the stuff usually takes care of itself.
You know, it's interesting because in the beginning, I would our processes have changed over time. I got a contract and got lots of option, so that I could go figure out how to solve these issues. And there became a point where I almost found I felt lazy and like I was explaining to one of the other partners.
Yeah.
It'll be fine. It'll be fine. And I remember he's a nervous knee and he's like, "Will it? You don't know?" And my argument was, "Dude, our purchase price five grand. Who cares?"
Yeah.
Who cares? You're 2500. I'm 2500. Who cares? But I just remember knowing we've been able to solve a hundred of these in a row, right? It'll be fine. It's almost like a walk by faith situation.
Yep.
So you also came to that same conclusion at some point.
Yeah.
Yeah. I think a lot of it's because of the volume that we do. You know, we came to that fairly quick, but we've seen a lot. I mean, we have seen a lot of different scenarios and because of that, we've seen a lot of the commonalities. You know what you're going to encounter the vast majority of the time, and you deal with the one-offs as they come.
If you were to pick, let's pick two deals for like short case studies that are currently in the hopper. Don't say the address or the owner's name. Pick two of them right now. Let's talk about those two. So, what's what's the the the top one right now?
Top, okay, I'm going to I'm going to I'm going to throw this back at you. Top T top in the sense of possible profitability or just struggle your highest priority. Like, okay, you know, you got your high priorities like that's at the top of my list. What's at the top of your list?
You know, I'm going to say there's a there's this deal that really was at the top top of my list a couple weeks ago. It is slowly went down simply because I've got it at a point where there's nothing else I can do. It's in the hands of our attorney who is kind of doing the last few things on it, but boy am I excited about it once it's done. It's a package deal of 14 or 15 properties and there is a component of it um that's got an owner in another country.
Oh yeah. Which has been part of the reason why it's drugg out a little bit. But the the aspect of the 14 to 15 properties there is there's major major potential in this package deal.
If you had to just roughly guess round it to the nearest half million dollars, what do you think the packages were?
Uh 2.5.
What do you think judgments and leans and debts and all collectively roughly? Everything all together, taxes, judgments, leans, uh payouts to heirs, and estimated payouts to the remaining heirs, if I had to guess, um will probably settle somewhere around the 250 mark.
So, there could potentially be after commissions, legal fees, whatever, possibly 2 million on the table.
Yes.
What do you think about this specific situation that causes folks that might have 2 million collectively worth of equity to sell for a fraction of that? The hurdle must be really high otherwise they're going to keep trying longer.
Yeah. It's it's um it it boils back down to family problems. It really does. And the way that and every state has the same problem. When when somebody dies in test state, which is when somebody dies without a will, their their ownership in properties will go to people based on whatever their family situation was like at the time of their death. Kids, no kids, uh, siblings, no siblings. Are my parents still alive? Are they not? Am I married? Is it community property? All those things matter and in some cases it's a the ownership goes in some really unique funky directions where might be deceased people.
Yeah, exactly. It's it's I I would I would believe that most of the time the deceased parties wouldn't hope that the things would get to the point that they usually do.
Oh my gosh.
Yeah. Yeah. But um yeah, it's it's usually because ownership doesn't just go straight down to kids all the time. Sometimes it does. But when you have situations like what happened here, it was a married couple who both had kids from prior marriages.
Oh, that makes it way worse.
And share split all directions. They split all directions. Uh most people think that the first deceased party, their ownership would go just straight to the surviving spouse because they it's community property and that's not the case. So what what an added layer of complexity to this one is the first person who passed away, their kids didn't really know their parent for all intents and purposes.
Way worse.
They were they they I think they met their father at birth, which is not really meeting them.
Way worse.
They were they they I think they met their father at birth, which is not really meeting them.
You don't remember?
Yeah. You don't meet them. I remember that day, Dad.
Yeah. And uh they were raised by their mom, so they didn't even know really who their dad were. They knew of him, but they didn't know him.
Wow.
So then what was what was the tone of your first couple phone calls like on this one?
It was it was very gentle because when you call somebody, especially in that situation, and tell them why you're calling and how they're connected to it, it's pretty shocking. Um, and we had to go through some that's very private, very personal, very intimate, very private. And we are very aware of that. and we we enter these conversations being very gentle and almost apologetic that we're having to talk about some of these things, but otherwise we have no way to kind of prove up why we're we're calling.
Yeah. So, it's very intimate and not many people know this fact pattern. And by you calling out of the blue, they would think this must be a scammer or something. But by you having information that's that intimate from your research, right, it probably lowers the um the hurdles like the the barrier their walls walls.
You know, it's interesting that we get that their guard is lowered quickly. Yeah. We get it about half the time where people will say, "Is this a scam? This seems almost too good to be true." Because once they hear the pitch, it's like, "You're offering me money for something I didn't even know I had ownership in." or I don't believe I have ownership in. They might know about the property, but because they don't know how the law works, they think that so- and so has the ownership, not me. And when you tell them otherwise, they're like, "This is a scam." But once you start telling them who their family members are, how they're connected, it lowers their guard because they're like, "Okay, if this is a scam, this is a highly researched scam. This is a better scam than I've seen in the past."
If it is.
Yeah. So, if you wouldn't have called these folks, let's say you or no one like you ever called these folks, what would happen to the property?
For sure, they would go to tax auction and some investors show up with a fistful of cash and buy it for less than it's worth and all those owners would never even know and it's done.
They would never know, never know, and just go to tax auction like it never happened.
Has anybody else called these particular owners that you know of? Have they been trying to deal do this deal before?
On the particular one that we're talking about, no, nobody has contacted them.
Gotcha. Okay. So, there's no competition in this case. Is that because you were calling folks that weren't easily connected to it?
Yeah. For the research? This one is above average in complexity. Not not because of the fact pattern, just because the the two people that we contacted at first had zero connection to their father. Almost no documentation. We accidentally stumbled across how these kids were connected because we called a cousin of the deceased who said, "I think he had kids." And then that led us to a rabbit hole of finally contacting them, but the average person wouldn't have seen their information on a list anywhere.
Yeah, that's pretty like deep. So you find you found these folks, you get a hold of them, you realize it would have gone to probably the tax sale otherwise. Um, what do you think that so another so I know like folks who are investors or potential investors look at certain things here. If they're thinking, if they're smart, one of the next things they would be thinking is how long does it take to do a deal like this because if if you're only going to invest possibly a couple hundred thousand dollars, investor's mind is turning, I got to borrow two 300 grand to flip a house. I can get that money. Well, they're there, right? What's the next deal? How long they have to carry this until they can actually get paid?
So, that that is a loaded question as you as you probably know. Maybe that's why I asked it. Um, I would like to say they're very quick. Um, some are uh we just for some reason choose some of the ones that take a little bit longer. But if you are selective with your deals and you don't go after ones that you inherently know, at least in the beginning until you get experienced that you know have like 15 20 errors, even double digit errors. Um, you can do these deals in as quick as 30 to 45 days. I'm talking to get 100% ownership and then and yeah, everything is done. paperwork is done, I am ready to put it on the market as if I just went through three to four months of rehab and a flip and then put it on the market then. So then you got market exposure. So on a minimum on on the fastest you're going to get a month, month and a half. Then you got to have a marketing window, a couple of weeks, maybe a month at most and you got a month to close. So one, two, three months, 90 days on the early end.
Yeah. So on the long end, the long end, what's our longest been?
Two, two and a half years.
Yeah, it's been three year range. They can go they can go a long time. Some of those some of the some of the reasons why they go longer strategically, we pivot to other projects. Um, sometimes it's the legal system that just takes longer. It depends on the situation, but yeah, they can go a while. I'm thinking across other balance sheets and asking myself, what's the longest? And I think around that threeyear mark is about where things start to end. And I've noticed, you know, we've gotten to the point at sometimes where it's just not worth the time or the effort to fix it or some people are so canankerous or the fact pattern is just no fun and forget it. We just let it go to the tax sale, right? I think we have one selling this next week at the tax sale. And it's strange. You have the ability to pay the bills, but we choose not to. And that sheriff auction can solve pretty much all the title problems there are. So if you sit back and say other owner wants to be a knucklehead and they want to let it go to the tax sale and they're telling us that
Well, then let's just let them do it. Right. Right. And then you go get your money on your excess proceeds. Right.
So you know it's going to sell for a little less, sometimes a lot less, than it would if it were just going to market with a realtor and had clear title. But you're done. But at the end of the day, you're done. You don't have to keep messing with it, and it's over with. And in business, you, if you can hit home runs 90% of the time, yep, dude, you're the king.
So, I think maybe that's why the three-year backs stop ends up being like your, yeah, kind of your termination point, maybe.
Yeah, absolutely. And you're you're exactly right. I mean, there there's sometimes you just don't know what you're getting into, as well prepared as you could possibly be. There's always going to be some unforeseen. And ironically, some of the better deals that we do are due to the family issues, are the same knuckleheads that prevent us from being able to do what we need to do when we get involved. And that's what makes us drag out to that two to three-year mark where eventually, sometimes we just say, "County, finish the job for us." Let's go this direction anyway. I just took people out along the way. Merry Christmas, y'all.
Yep. A lot of folks don't realize how much legal involvement is probably here in this space. And in the beginning, there's not there's not as much, but as you get better, more experience and learn how it works, it's more.
What would you estimate your legal fees are monthly right now? Woo. More than what I like to admit. Um, it is probably on average, at the moment, somewhere between $20 and $25,000 a month. So that's $250, maybe $300,000 a year.
Yeah, on average. But if you have like a big specific perform performance lawsuit where we'll spend multiple six figures, you add that to your standard spend is two or three hundred, you might tack one to 200 on. So in, I mean that could wind up from 200 to 400 annually easily.
Yeah, it's a lot. I know that that might sound intimidating, but a lot to a lot of folks, but when you break it down to units in process right now, your inventory is somewhere around 100 properties.
Yeah. When you start to spread that across properties, let's say you spend $500,000 a year across 100 properties, that's what, is that $5,000 per file average?
Yeah. I was I was that's the number I was going to throw out. I mean, I think you're somewhere in the ballpark of five grand per file just on like normal legal stuff. Less than a lot of realtor fees.
Yeah. I mean, it's a for us, it's a no-brainer to get legal involved sooner than later. Yeah. Don't like the things that necessarily snowball because you get legal involved, but it definitely moves things down the track.
Yeah, that makes a lot of sense. Okay, so that's your your your hot button property. So, what's the second hot button project right now?
Uh, let me think about this. The Okay, I got a good one. We have one that's going on the market. Should be today. Um, that's the goal at least. If not today, it would be tomorrow morning. Everything's done. Uh, we have a deal that is in Bastrop County. That's uh I think roughly 10 acres that was going to auction next week, as a matter of fact. And we got into this deal I think three weeks ago, maybe three weeks ago. This is a This is one of Yeah, this is one of the better ones where
But you're letting it go to the sale. No, no, no, no. It was It was going to the sale and we got it stopped. Um, this is one of the better stories on timelines. So, like I said, we got in, we knew of the deal about three weeks ago. Same day we found it, we did the research, made the call. uh, ends up being one owner. It's a
Oh, that's simple. Yeah, super easy. I didn't even know we had any of those right now.
Yeah, they're rare, but they're there. Um, but it was it was a deceased owner situation. It just so happened to be one owner, one kid that ended up being the owner.
Okay. And uh, he lived in uh currently lives in Vegas, the Vegas area. uh, deceased father who never lived in Texas was uh based in I guess I think somewhere in California at some point. I don't know why he bought
Dad inherited land or he bought here. No, dad bought here. Dad bought here. Again, I have no idea why he chose to buy.
Kid didn't even know this existed, did he? Mm-Wow. No idea.
So, we called the kid up, and of course, he's like ecstatic when we tell him he's getting money out of nowhere. Uh, ended up paying like $30,000. I mean, we g paid him a good chunk. I mean, it's above it's above average for us on a per acre payout. But since it was a single owner, we could pay a little bit more. We didn't mind it. That's one of the reasons I like a little larger size deals as opposed to like the tiny deals. Y even though you're buying at extreme discount because of all the risk and all the things that come along with it, you can still pay out material dollars. Somebody calls me and says, "Hey, Logan, I need you to come do all this stuff and I'm going to give you 1,500 bucks." I'm like, "Ah, [ __ ] it. I ain't getting out of bed for that." Y but when someone says, "I'm going to give you 30 grand," they might be taking a big discount, but that's real money. That's money that can change a life right now.
Yep. Agreed. That makes it that makes your pitch more compelling. Yeah. So, we we contracted with that guy actually beyond contract. We did the full closing package with him within 48 hours of talking to the guy. So, we learned about
What's his age? Um, if you had to guess. Yeah. Upper 20s. Upper 20s. Okay. Yeah. Um, [ __ ] Call me in my upper 20s and tell me you got 30 grand. What do you mean out of the blue? Yeah. That's amazing. And he he would have never known about this. It was going to go to, you know, next Tuesday. Poof, it's gone forever. Um, so yeah, I mean, this deal's I'm still just like, wow, we just get lucky sometimes. So, we we get this ownership in 48 hours. I mean, the the closing package is done. I mean, we own it. So, $30 to him. How much to the tax office? Uh, right around 20. So, we're I mean, we're 50 all in. You had to roughly
What's it worth? That's the fun part. So, we've already got survey. We've got everything. We got a clean commitment even. We already got commitment back. It's ours. It's clean. Comps say that it's worth in the 340ish range all day long. So, let's say you sell it for a little less than market plus realtor fees off 275 300 net on a 50 spin. That's 250 net.
Yep. Yep. I was basing numbers on 250 just to be safe. Safe safe. And on your quick timeline, too. So, where did you find that deal? That was an upcoming tax foreclosure.
Got it. So the order of sale had already happened. The judicial foreclosure was already executed. Sheriff was going to sell this thing in 21 days, and you showed up before, right? Do you have any pushback with that child seller person? Did they negotiate with you or was this your number out of the gate? What'd that look like?
Um, if I remember right, this was one of this was Mauricio's deal. So I didn't have the conversation, but I was right there for it the whole time. I don't think he had much um negotiation on price, and we wanted to present a number where we because we knew he was the guy. We wanted to make it enticing enough to where he wanted to take it compelling. But it w we did have a decently long conversation with him from the get-go just to prove up who we were, how he's involved. It was more of trust building rather than numbers negotiating.
That makes sense. That's why sometimes I noticed a lot of like small and midcap investors. They're cheap almost to their own detriment. And a lot of guys would still offer 5,000 over payoff. Yeah. And you're wise in that. That could be a real problem. If they walk away, you missed a relatively clean smoking deal by being cheap. Pay them 30, pay them 50, who cares? It's still a great deal.
Yep. Yep. So, all right. So, go back to that kid whose parents just split up, living in not the sexiest house on the block or the greatest neighborhood at all. I think I'm good enough. I'm gonna get there one day. I don't really know. Lower esteem, probably. Lower confidence, lower socioeconomic Yeah. totem pole. What would you tell that kid about your place today? This deal. It just I mean, yeah. How do you tell yourself about that in that place? That is that is a a really interesting conversation to have if I could have it. What would you say? Like, man, just hold on. Is you go through this just crap when you're younger in those sort of situations when you're bouncing around from household to household and you don't really have like a true place to call home. And as you get a little bit older into your teenage years or pre-teen age years for me, it's like, okay, I'm starting to understand we don't have a whole lot, you know, and you think this is how it is because that's how you're raised. And then you get into the big world and like, oh [ __ ] I'm [ __ ] poor. I'm poor and I'm not good enough and I hope I can be, you know, and the and I think I am, but until you do it, you just don't know. You don't know. And thank God I had this thing in my heads for some reason that just said, "There's something better to this. There's something better than this. There's something better than this." And the next step of the conversation to that little kid is this ain't one deal. This is one of 103 in my pipeline. Right? For some people, I think it's like, you know, they do a deal like this, they watch a YouTube video and they make a little bit of money and then they coast because they want to live on that, they want to blow it. And for me, it was like proof of concept, and then it's just off to the freaking races. It was
But what what's the goal on that? You're off to the races. What's the goal? I don't know. You know, right now I I just have a I enjoy what I'm doing. I like the thrill of the chase. I like the thrill of the chase more than I like the the income. I think you know that. Yeah. Um, I like the thrill of the chase. I like the hunt. I like resolving problems. I like having these conversations with people. I fix it. I won. I fixed it. I won, and I'm helping people along the way too, you know. So, it's it's really it's the best of a lot of worlds. So, you know, I I think a goal for me right now is I've achieved a lot of them, but you know, just stability. Stability and keep keeping that stability in my life for my family, for me, for the people who are closest to me, my partners, my employees, uh friends, family, and keeping a consistent business really because it's such an up and down world, you never know where it's going to go. So, the biggest thing for me is not the income. That's great. That's a great second component, but having to do all this and do it consistently.
Yeah, that's a part that when folks are new in business early on, they're just trying to get a deal done. They're trying to get the next deal done. They're really putting it together. And there becomes a time where you're beyond that specific deal. You're beyond your pipeline. Now you've got an administrative person, some salespeople, a finance guy. Like you have like a group here. Now you're running a business. So while you're in the deal flow often, you're also like running this operation at times, right? That's a whole new thing. I realized I remember when I got to that point, I remember thinking I have to think about things differently. I have to look at things differently, and I always started to think in longer time horizons. Yeah. 12 months, 24 months, 5 years, 10 years. What do these decisions affect then? So that was like a different look.
Yeah. Yeah. It's really it's interesting, man. I mean, you get to that point where the income it's great. It is great, but you you start your goals really start to change, and your motivations change, and it's not about the dollar even though that is why we all show up. I get it first day. That's why you came. That's that's why you came. But you your goals start to shift more like, for example, how can I make processes better for my employees? How can I make uh JV partners uh life easier? How can I mentor them to where they can find deals better? It's it's conveying knowledge, and for me putting things into place where people can do it easier become Yeah. that it's it's a different set of goals in a different like place.
So where do you see this business that you're running in, let's say five years from today? Wait, let me back up. I didn't ask. Yeah. So you've got two sales folks, you an administrative person. Yep. Um, so it's a four-person team. Where do you see it in five years?
You know, five years. I want to have some more sales guys. I don't want to have this big corporation of a company. You know, that's not my goal. That's not my desire. And frankly, I think I would go crazy trying to run it. Um, it's a lot. It's a lot. But, you know, I want to I want to expand what we're currently doing. Um, I have some goals of getting into some other states more consistently. Um, one other state at some point in the next, you know, year and a half, two years would be would be nice. Um, I don't know, man. It's a when you're in the when you're in the grind every day, it's I don't look up very often, and goals and and and different motivations just kind of for me just kind of happen and happen along the way. They happen along the way. I know that's not a great answer, but it's I just keep my head down and keep keep going.
I feel the same. I had a lot of people at times in the career saying, "Well, what if you're tell me about your goals? If you don't have goals, you'll never hit them." And I'm like, "Fuck, dude. I just made a million bucks on a deal." Like, get the [ __ ] out of my face about goals.
Yeah. Just I don't operate like you do doesn't mean I'm not going somewhere. Right. Right. And people would always say, "You have to set goals if you're ever going to hit them." I'm like, "Well, then I'm just not going to set a goal I'm not going to hit, but I'm going to keep going."
Yeah. Yep. Yeah. For me, it was a little different. And I just wanted to show up and do as much as I could that day as possible that I'm capable of and do the most. And yeah, the whole day-to-day concept, it's so cliche, but that that's that's literally how I operate. I've I've I've coached people on saying set goals and stuff, but I, you know, I'm a little bit of a hypocrite with that because I I don't have these big aspirations. They just uh I wake up one day after doing a bunch of deals and I got some money in the bank account and my family's taken care of. Those are all really good.
Yeah. Okay. So, you told me about two hot button like good deals. Tell me about a bad deal. What's one you got right now that you're like, "I wish I didn't have that." Well, cuz they have I probably have more than what I'd like to admit on that. Um, let me think. How'd that happen? Uh, you know, some of the inventory is is some older inventory that's a little stagnant. And, um, we've learned a lot of lessons over the last 18ish months. And some of our regrettable deals that we still have are probably from the earlier end of that uh of that 18. That means your process is improving along the way, but because it's a longer sales cycle or conversion cycle on some of those messier ones, it takes time to work through the backlog.
Absolutely. Absolutely. Yeah. So, we have one that I can I can recall right now. It's just it's nothing major. It's not like we got we sunk a ton of money into it. It's just on the balance sheet. It's a vacant lot that hindsight we we got excited about getting into it because it was so cheap. Cheap. I think it might set the for me personally I think it might set the record for the cheapest acquisition. It was uh $750. So I was like, "Why not," you know, real estate for $750 deal. $750. Um, now we had to pay some taxes on top of that, which was like it was less than 10 grand. I can't remember the number, but it was still cheap. Uh, but the the acre payout which was 100% earn was uh $750. Cheap. Still cheap. So even with the 10 grand in tax unit for 11 grand.
Yeah. So we get into the deal and um come to find out there is uh and we knew this going into it, but we still chose to do it. There was some issues that are kind of some unforeseen on the original plot of the area of where these lots are at. This is uh in Fort Bend County. If anybody's looking to pick up lots in that area, just be careful. There's a certain neighborhood that uh
Wait a second. Is this the one that the house was built on the wrong lot? Yep, that's the one. Okay, keep going. That's the one. So we can't decisively say where the boundary lines are. Even after getting a survey, even after getting a survey, the surveyor has one opinion. the county has a completely different opinion, and they are even telling us, "Oh, we know that survey, we're working with that survey company and others that basically the documentation in the land records that the survey company is using to make their survey for some reason the county is claiming it to be inaccurate or it's something is wrong." I don't know; it's the most confusing thing I've ever been a part of, but they are adamant that it's not correct. What we should do probably is my next question is, "Okay, then point to the one that's mine." Okay, I'll take that. Well, they can't. We've tried to ask them that. They they this is one of those times where we should force the issue from a legal standpoint and just say, "What is ours?" But it the the the sales price and what the potential income is so low. It's so low. It so quickly fell to the bottom of our priority list, and then here we are probably about a year later talking about it. Gosh.
So, do you let it go to the tax sale? That's a consideration because we didn't actually end up paying those taxes in because we didn't have to intentionally, and they actually are trying to get it to a tax sale. They are. So, what's a lot worth over there if it didn't have any title issues or or locationational issues? Yeah. What do you think it'd be worth roughly? Uh, $25-30K.
Okay. So, if you let it if you're in it for 10, 11, 12 and let's say $5,000 in taxes, if it sells and it sells for half of what it's worth, you'll actually get your money back and make a couple bucks.
Yep. And pass this problem on to the next dude. Right. From what I know about tax sales, not enough diligence is done. Someone's gonna buy that, and someone's gonna take you out of your trouble, right?
Yeah. That's what that's what we're thinking of doing at this point. A lot of people would say, "Oh my gosh, $11,000 into a deal and it's stuck." That's like scary, but it's easy when you're looking at a business from making business decision to say, "Ah, I get the money back in a couple months or maybe a year or two. I won't lose any money, and I can move on to something else." Right? Even if you're going to go fix it all, if you can't fix it simply, it's not worth it if you only make 20 grand. So, I'm done with that, right?
Yeah, that makes total sense. What kind of technical advice would you give to folks? Because what you're talking about is a very high level, and I know about a 20% of our listener base is relatively new and kind of feeling around in this. What technical advice would you give them?
Man, I'm going to give you some advice that maybe
Other people in this space would give, maybe they wouldn't. I don't know. But I'm a I'm very much a "act first, think later" to some degree. I mean, you've got to do some research on this stuff ahead of time. But my advice would be to don't overthink it. Don't overthink it. You can you can become such an expert that you'll never do a deal. You'll become such an expert that you will never do a deal. You'd be so smart, but you can't pay your bills.
Exactly. Where would you tell them to go find their first deal? I would tell them the tax delinquent list. Not even the tax foreclosure list. Not the tax lawsuit list because there's layers there. You're you're delinquent. Then they file a lawsuit and then after so long of the lawsuit, then you get to the tax foreclosure list. Those are three different lists more or less that you can buy more or less. And I'm saying go to the bottom of the barrel, tax delinquent, because there's so much more opportunity there. And by the time it gets to the tax foreclosure, yeah, it's it's the lowest hanging fruit of like priority timewise. But the the juicier deals, somebody's already picked them off along the way, or somebody's paid it off because there's been so much time they figured it out. If you get earlier on, you can you can get to the deal sooner. You're kind of first pig to the trough. Plus, you have some time.
So, I would look at it as the folks have the least experience, go for the ones that have the least deadlines, like the tax delinquent.
Yes. And then as your experience builds and you start to build capitalization, you really know what you're doing. Then you start like inching your way up the chain until a 21-day tax sale notice, like get and go, right?
Yep. That's that's that's exactly what I would do because the time restraints are going to make you feel like you got to make decisions that are probably not wise. You're spending too much money or doing paperwork wrong or doing making a judgment call that probably isn't the best because you feel like you have to make a decision. You're rushed. You don't know what to do. It's like when they're sneaking on the quarterback like, "uhoh."
Yeah. The best decisions aren't made by the quarterback in times like that.
Exactly. All right, we're we're wrapping up here. Um, getting towards the end. If you were to give some advice to anybody who's out there outside of how to get your first deal, they're sniffing around this, they kind of think they want to take a stab at it, what kind of advice would you tell them outside of don't overthink it? Um, if you're want to do a deal like this and you're you're hungry and you're starting to look stuff up, but maybe the confidence level there isn't there or um maybe the capital isn't there, you know, I would say don't be afraid to reach out to somebody who's in the space. And this isn't a pitch for a JV per se, but I will say seriously, we we have done a lot of deals with people who are dipping their toes in this business model and they have learned a lot just by working alongside us. So, I'd say gain some exposure through somebody who's already doing it.
So, if they see a property down the street from their house that's tax delinquent, should they send you the address? No, I wouldn't say that. I wouldn't say that. So, you made a really good comparison recently, and I'll use this. There's a major difference between a prospect and a lead. A prospect is what you just described. It's an address. This is delinquent. It's a this this 123 Main Street owes $5,000. Do you want to do the deal together? Like, not really. I have no idea anything about it. Do you know anything about it? Um, preferably somebody who would bring us something, has made a phone call, made some sort of effort. You ain't got to have it right per se, but some sort of effort to try to understand the fact pattern. Is the owner deceased? Did you contact the owner or maybe a kid or a spouse of an owner? And preferably, you've had a conversation. You've had a conversation. You don't want prospects. You want a lead. You want to know, do they want to sell or not? What's that kind of look like? Give me some basics.
Yeah. Exactly. Exactly. Some sort of feedback to go on other than us just doing all the research and doing it for you in the dark.
So, if they want to get a hold of you once they've got a prospect converted into a lead, how should they get a hold of you? Best way to get in touch with me is going to be an email. Um, I I can't even get back to people on text these days. Uh, my email is kyle@ararpusa.com. That's going to be the best way.
Got it. All right, Kyle. Thanks for coming on today, man. I enjoyed it.
Yeah, man. This has been good. I'm really excited for your podcast to take off. I think it's going to do really, really well. My commitment to you is to deliver the most interesting, messy, and profitable real estate deals on earth. And in exchange for that, I only ask that you subscribe to this podcast and share it with a friend who can benefit.