Stick to your fundamentals in real estate investing

Mike: Welcome to the FlipNerd.com Podcast. This is your host, Mike Hambright, and on this show I will introduce you to VIPs in the real estate investing industry, as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week, which are available in the iTunes Store, or by visiting FlipNerd.com. So without further adieu let’s get started.

Hey, it’s Mike Hambright of FlipNerd.com. Welcome back for another exciting VIP interview where I interview some of the most successful real estate investing experts and entrepreneurs in our industry to help you learn and grow. Today I’m joined by Coach Collard. He’s a real estate investor, a trader, and a coach, and he teaches others how to successfully invest in real estate. His focus is teaching others how to succeed through building relationships and networking, which is something we can all always learn from; and how to teach others to stick to their fundamentals. It’s an interesting topic, because at this time the market is hot in a lot of areas right now, which is pushing up prices, and it’s forcing a lot of real estate investors to either move away from their fundamentals and overpay for houses, or maybe lose out. So I don’t have a good answer as to where you should go there, but Coach does. So we’re going to talk about that today. Before we get started though, let’s take a moment to recognize our featured sponsors.

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Hey, Coach, welcome to the show.

Coach Collard: Thank you, Mike, I appreciate it. I’m glad to be here.

Mike: Yeah, I’m happy to talk to you about a couple of really important topics. But before we get started talking about the importance of networking and building relationships, and before we talk about the fundamentals, and how to really survive in a market where you’re kind of being potentially pushed away from your fundamentals, why don’t you tell us a little bit about yourself; your background, and how you got into real estate, and where you spend your time these days?

Coach Collard: I started May 7, 1999. I moved from Phoenix, and it was right after my Dad had passed away, and I was just looking for a change. I wanted to go learn the mortgage business and play golf, so I ended up in Scottsdale, Arizona. And sure enough, in learning the mortgage business I had the unique opportunity to learn for six months, to get all the mortgage business in me so to speak. And as I was working on a sub-prime refi I ran across my first transaction. So I was studying Carlton Sheets on the side, and it just started making sense to me. And I would say to this day I believe my finance knowledge and being able to see through the trustee-sell process in most states, gave me a competitive advantage. That’s really what made me a lot of money.

Mike: Okay, yeah, there are a lot of folks that definitely don’t, they do deals and do transactions, but they’re not really grounded in financial fundamentals. They are just kind of flying by the seat of their pants.

Coach Collard: Right. I had a background, and I had a unique experience as well. I happened to be a Spanish major from the University of Texas, so I speak fully bilingual Spanish. And I served as a volunteer Spanish pastor for five years.

Mike: Wow!

Coach Collard: So I kind of, have a biblical perspective and view on real estate as well. Like you know, “In the beginning God created the Heavens” and real estate; stuff like that.

Mike: Yeah.

Coach Collard: So that really roots me into the fundamentals, and I stick to those, because it’s easy to get off chasing stuff.

Mike: Yeah, well we’re going to listen to some of your sermon today.

Coach Collard: Let’s do it.

Mike: And we talk a little bit about your business today? What you primarily focus on and where your structure is; and I know you teach and educate others. Just give us a little bit of a backdrop on that as well.

Coach Collard: Absolutely. You know, I’ve made mistakes just like everybody else, and so I had train wreck in my marriage and business and things down in Phoenix. So I actually got divorced at the end of 2010, and took a little time for myself to regroup and study me and evaluate me, and get me right again. So I was out of balance fundamental-wise. And as I did that, I realized the intense and immense knowledge that I had. So I evaluated that and as circumstance would have it I just ended up here in Las Vegas. I didn’t see it coming. I wasn’t planning on being here. And sure enough it didn’t take me three months to establish my network and the opportunities started flying at me. So I’ll talk a little bit about that if you like, but that’s how I ended up here.

Mike: Okay.

Coach Collard: So just going off that a little bit, when I got here in September, 2011, I was involved with the Keller Williams Office, a realty office, and I was talking to them about productivity coaching and that type of thing. And all I did was use their facility and started having a training event, and established a few relationships. The next thing you know opportunities started coming to me. So I’m a big promoter of investing in other people, and I actually have a value proposition called that, Investor in man and land, and in that order. So your experience of me, Mike, or you, or anybody I’m talking to that’s watching us, is going to be I’m committed to appreciating you and increasing you in value, regardless of whether we transact with real estate. And what I’ve found from a fundamentals place is that when I sow into other people, they are willing and able to sow back to me. So they bring me opportunities. They want to call me. They want to establish relationships. We’ll go offline and have cocktails and have dinner together and get to know each other. And it just makes business that much easier.

Mike: Yeah. One of the things, just to tell people offline, we talked about beforehand, it’s at this point that I’ve done over 130 shows. I have to think about the content of the show, and try to not talk about things that we’ve talked about too many times before. And we have lately talked about the importance of networking. But I think that is something that is so fundamental to all of our businesses, that you can never talk about that too much. And I think with sellers, you know, from aspect of our business, when we’re talking with sellers, they are often in a situation where they need to talk to somebody that they can trust. Or if they don’t make their decision today, which often is in my experience, because often we get a lot of stuff in the follow up process, but if you didn’t do a good job of building a relationship with that person, you’re never going to get that deal. You’re never going to get them to refer you to somebody else that might need our help. And then from every aspect, the people that you coach or mentor, or vendors, everybody that you work with, everybody wants to work with people that they like and they trust and they would recommend to other people.

Coach Collard: That’s absolutely true. And I have a little more to add to that, if you’re okay with it.

Mike: Yeah.

Coach Collard: One of the things…

Mike: [inaudible 00:07:15].

Coach Collard: Okay, you know, one of the things that we’ve all experienced since 2007 in the [inaudible 00:07:22] crisis that happened is that things started to shift, and there was a disconnect between people and reality. Everybody still had the same mind set, but the markets had changed and people were running into new circumstances, and short sales became popular, and it hadn’t previously been popular, and that type of thing. What I found is that whether you’re marketing to get the phone to ring for a fix-and-flip opportunity, or whether you’re establishing a network to bring in people to you, the key conversation is to be able to relate to people, and communicate on their level. That’s having sensitivity to their emotional circumstance is a big piece, and that takes networking and relationship to a different level. These individuals, from my point of view, are distressed, motivated, and flexible. I like to call it [inaudible 00:08:03]. And in that there are some tough conversations, and the more sensitive and tools you are to that to be able to have real conversations with them, honest conversations, [inaudible 00:08:13] really opens up doors. And I’ve been able to get opportunities and close deals that other people couldn’t get because they didn’t have that relationship ability.

Mike: Absolutely.

Coach Collard: And I think that’s huge.

Mike: And a lot of us face competitive situations, and if nothing else. What I like to say is you’re going to get a second swing at the ball sometimes. So somebody may say, look, I got a better offer from this other guy, or from four other people, and I like you the best of all of them, but these are their offers. The money is important to me, too. And at least they’ll tell you that sometimes. You’ll get another shot to get a deal; where if they don’t like you, they’re not even going to tell you. They’re not going to give you another chance at the ball.

Coach Collard: Right.

Mike: First off, your offer wasn’t the highest. And they didn’t like you, so you’re just off the list at that point.

Coach Collard: In our business here we quite seldom ever have that happen. It does happen, but quite seldom, because of the relationship that we have. So we’ve already rooted out their needs at a deep level. We’ve already established that connection. We’ve been kind of, I don’t want to say a pastor to them, but we’ve been a confidante to connect to them, to answer questions. And we’re always completely above board and forthright with everything. And we also don’t chase. I’ll never put anybody under pressure to sign the deal. I let them do it on their own time.

Mike: Yeah, and that’s great. So tell us a little bit more about the topic of the day, which we’re going to talk about, just the importance of building relationships. We’ve been talking about it here for a little bit about sellers. But talk about it in the context of just other people that you work with. It could be other investors. It could be vendors, or contactors that you work with in your business. In real estate investing we all have a massive network of people that are usually helping our business. Even if you don’t to a lot of volume, you’ve probably got a bunch of contractors that you are in and around, or in and around your space. Just talk about how important that is to most people’s business.

Coach Collard: Certainly, well from [inaudible 00:10:20] cornerstone of our business relationships with everything. So we span that out to what we call our network or our key. And with all of our professionals we meet with them face to face. We interview them, and we establish a win/win place on how we can work with them and how they operate. We also want to know how we can refer them business, and we set that expectation up front when we first meet. So I’m going to say to you, looking you in the eye, what can I do to help you grow your business, as an oh by the way before we end our conversation, so that they know that I’m interested in helping them grow as well. We make our entire power team available to other people that we work with and have relationships with. So if I have somebody that could serve you, I’ll let you know who they are and introduce you. But I always come from an empowered place that you may not like my contractor. He may be great for me, but you may not like him. So I’ll make the referral, but the expectation is that you’re going to establish your own relationship.

Mike: Yeah.

Coach Collard: Or not, and that’s okay too. But what we’ve found in doing that is that making our resources available to people, it takes some intimidation out, so they are more willing to call us regularly and talk to us. They also refer us opportunities or deals, as well. So that has been the power or crux of what we do. It’s the relationships bring us opportunities. And in a place like Vegas, when the market shifts, you’d better believe it gets super competitive. So as soon as the market softened here, everybody starts jumping ship and saying, hey, there’s no opportunity these days. But we still have them coming, because we have such a big network referring to us.

Mike: Yeah. And how do you think, this day and age when a lot of people seem to feel more comfortable sitting behind a computer and doing deals virtually over the computer, it’s hard to build those relationships. So can you talk about just some general trends of where things are going, or how those folks, you know, obviously are missing out in some regard. Just talk about that kind of general trend of people hiding behind a computer or a cell phone.

Coach Collard: I certainly wouldn’t disagree with anybody that might be able to make a high-level, high-volume business work online. It’s cool. Knock yourself out [inaudible 00:12:20] of leverage, go ahead. There is with it a disconnect in the people part of it, because even though you and I could see each other really well and we seem to be connecting, that we can’t see each other’s body language at the same level. And there’s something to be said when you’re sitting in front of somebody to really relate to them; whether it be sellers or vendor professionals, buyers, or anybody you’re working with, it’s really important. I think the reason that it’s important is because people still have a human need to connect.

Mike: Yeah.

Coach Collard: And I don’t want to say this pompously, but I have a strong ability to connect to people, so when it’s necessary to do things online or via Skype and that type of thing, I can make that connection. But I’ve also worked on it. I spent a lot of time working on my communication, my ability to read people, things like that. And that’s a big piece of my business, I would say. If you’re going to play online, you need to develop that. That would be a big piece.

Mike: Yeah, I’d say; and not that we’re here to necessarily talk about me, but with the show that I do here, a lot of people have asked. There are a lot of folks I’ve had on the show that are like, I’ve been on several other podcasts, but they are all audio podcasts. And actually all of the top guys are my friends. I know all of these guys. And a lot of them are audio podcasts, which there is nothing wrong with, but I do this for a few different reasons. One of them is to network, because I understand the value of it. And it’s just hard for me to build a relationship with somebody unless I can see them. It’s not the same as if you’re sitting across the table from me, but at least I got to see what you look like, and talk about it, and some facial features. And in all honesty, we actually get far more audio downloads of our podcasts than video views, but because people listen to them on the go and things like that. But in terms of me doing this, and enjoying it and doing as many show as I’ve done, and I’m excited about what the future holds, it’s all because I got to see and talk to people and I just think it’s easier to meet them. So get what you’re saying, yeah.

Coach Collard: Great, that’s great.

Mike: You know, one of the things that’s interesting is before we got started today you were talking about teaching people to stick to their fundamentals of real estate investing. And I think we’re preaching from the same book, if you will. We have kind of a theme going on here, because I always teach people to stick to their guns. But there’s no doubt, in a market like today where the market is really hot, the retail market is hot. Everybody and their brother is an investor. And they are pushing prices up, outside of a comfort zone for most people that want to stick to their fundamentals.

Coach Collard: Right.

Mike: So what is one to do if they want to stick to their fundamentals, but they need to keep, you know, they want to keep their business going?

Coach Collard: Okay, I think I have a couple of answers for that. One, I’m going to encourage everybody to put their business plan or their model on how they invest onto paper, so that it’s very clear; so that when they’re out there on the streets in the market and they are working on a transaction or an opportunity, or a deal, that they’re not tempted to compromise what their fundamentals are just because the numbers sound good. So they have something, a baseline if you will, to say, hey, does that fit what I’m looking for?

Mike: Right.

Coach Collard: That’s one issue. And then secondly, when the market shifts and you’re looking at something and you feel, gosh, the market’s super competitive and things are getting out of hand, I’ve passed on the last four transactions, because they don’t fit my model; but I feel like I’m getting lost and I’m not going to do any deals. So I can understand that, but the fundamentals don’t go away. If you change your model to support a market shift, which we did last year; we adjusted our maximum allowable offer on fix and flip, In the summer of 2013 we went from 70% to 80%, but we also had a year prior of 25-31% appreciation across the market here in Vegas. So it was very strategic to do so. So I would say the power play in being able to adjust to competition is to fundamentally be a market specialist. If you can read the market and really understand, then you can fudge, if you will, or change your model to support what the market’s doing to stay in the game.

Mike: Yeah, I think even in my business, as I’ve seen over the years. I think it’s really important for real estate investors to be able to shift their exit strategy based on what’s going on in the market. Several years back we kept more houses as rentals, and now we tend to be retailing more. It’s because it’s harder to buy them deep and wholesale, and I make more money retailing, so fundamentally we could almost do half the volume we were doing because we’re retailing them and making more money on each one. And so I think it’s important to be able to kind of ebb and flow, because at the end of the day you don’t want to get knocked out because the market changed and you couldn’t.

Coach Collard: I agree. And I would add to that, in shifting with the ebb and flow of the markets your fundamentals allow you to do more than a single, what I call a one-trick pony. So a person might have done 100 fix and flips in the last two years, but he’s passed on some seller finance or creative opportunities, because he doesn’t see [inaudible 00:17:19]. You know, learning to be a robust person for me is a fundamental. That way I don’t get stuck in markets.

Mike: Yeah.

Coach Collard: Does that make sense?

Mike: Absolutely.

Coach Collard: I have multiple options, if you will.

Mike: Yeah. Talk a little bit about some of your creative solutions that you use. I’ve really been intrigued lately by some of the seller finance folks that I know, and I’ve always known. That’s a strong model, but it’s just not something that I have really done. I mean, sure, I sit here today and I have a rental portfolio that I’m thinking of just seller financing the whole thing, because there’s a lot of appeal to that versus dealing with all the maintenance issues that I’ve been dealing with lately. But just talk a little bit about some of the creative options that as the market kind of gets hotter here that might allow people to do more deals.

Coach Collard: Absolutely. One of the things that I have a lot of new investors share with me is that they never have enough cash to write the big check. Right? And I said, well if your numbers work, somebody will always write the check for you, or if you’re really in tune with the DMF, the Distressed Motivation Flexibility of a seller, you might be able to meet their needs differently and be able to communicate that. And I’ll give you a perfect example. Last summer, right at the end of our market upswing, if you will, a gentleman was moving off to Washington State, and we saw him on Craigslist. It was just a for sale by owner. And it said in the ad that he was leaving something on the table for us. So we point blanked, told him we were investors; told him we were looking to make money. We told him that we’re leverage guys. And he connected to us, we connected to him. We had a great relationship initially, and he said, “Well, I think I’m leaving enough on the table for somebody, but my concern is I need to get out of here in 30 days.” So we were really in tune with that. And I said, “Well, I’m willing and able to get you out of there in 30 days. I think the numbers work for us. But my one question is; I don’t want to write a check for $95K; I’d like to just buy your equity and take over your mortgage. Would you be open to that?” And he says, “Absolutely, if we can talk about a net figure to me and I can get it in 30 days.” And so rather than write a $95,000 check, we took his property subject to, and basically purchased his equity for the difference. He netted $20,000, and we accounted for a couple of grand in closing costs. He said he owed $73,000. When we ordered the payoff he only owned $71,000 and change, so I made an extra $1,600 off his payoff. And we turned and flipped the property in less than 28 days and made a really, really nice return. So in that scenario, answering your question, it’s not so much about the strategies; it’s separating them into acquisition and then exit.

Mike: Okay.

Coach Collard: And so the acquisition, we used our own cash, but we only purchased the equity and took the property subject to, and then we turned around and sold it as a flip. We put maybe $648 into the whole property.

Mike: Yeah.

Coach Collard: So it was really nice. And so do you see the combination technique there?

Mike: Yeah.

Coach Collard: Creative finance on the front side, but fix and flip on the back side. It’s effectively the same thing, but we just didn’t write as big a check.

Mike: Yeah. Why don’t you share a little bit, just based on the example that you gave and kind of back to the importance of relationships and networking. Why don’t you give some of your general advice on how to think about solving the seller’s problem, more so than trying to solve your problem?

Coach Collard: Okay. Again, I mentioned this at the beginning of our interview here, is that my competitive edge that I feel that I have is my finance knowledge. So I’m always looking to analyze existing finance. And to use a term from a guy out of Colorado, Bill Bronchick; he calls it fixing the financing. So actually look to fix people’s financing instead of their circumstance, because their circumstance is driven from their finance.

Mike: Yeah.

Coach Collard: I actually look for seller finance options or for a leverage point, because the seller ultimately could be your best partner, and so I’m not interested in what I can bring to the table. I’m listening to their needs and then as I identify their needs I suggest it to them. Hey, are you looking for a certain dollar amount? Or are you open to this? And when they say that they are, I suggest what it might look like without describing it; because they’re going to have some intimidation. In this particular case this gentleman had his wife sit with us as well, and she had been in the title business before and immediately her walls went up. And she said, “That sounds like it’s a non-title transaction.” I said, “Well, I can understand why you would say that, but we’re glad to go through a title company and do everything above board the standard way. It’s just we’re not going to pay your loan off until we sell the property.” And she said, “If we go through title, I’m good.” So it’s really just listening to people’s needs and my knowledge, my ability to go in and out helps me support that with a solution so that I’m not giving them an idea without support, so to speak.

Mike: Yeah, that makes sense. And along the lines of sticking to fundamentals, being able to survive, and not just survive, but maybe thrive when markets change, one of the things that I’ve personally felt bless for over the past year or so is the market has kind of shifted here where I’m at. I’ve taken the time over the past several years to build up a rental portfolio, other cash flowing assets, and things that help me weather the storm, or help me get through those times. It’s an insurance policy if nothing else. And there are a lot of folks who are just wholesaling, transactional deal to deal, or fix and flipping houses deal to deal. And they haven’t built that up. Just maybe share some of your experiences for folks who are in that situation, find themselves in that situation, what they can do to kind of build up those other income-generating businesses or activities so that they have an insurance policy there.

Coach Collard: Absolutely. You know, I’m going to reference somebody in this if it’s okay.

Mike: Yeah.

Coach Collard: He’s actually out at Dallas, and his name is Jim McKissick. He is an owner of a Keller Williams Office with his wife, and in several offices in fact. But he focuses full time on investing. And one of the most powerful things he ever said to me, that I say to everybody else as well and I watch it all the time and it happens. It’s is that the reason most people do just wholesaling or fix and flips is because they can’t manage their money to the place where they actually have income, and so they are planning from a place of almost broke. And so they need that big paycheck. And the first thing he said is, you know, “I’m going to recommend to you that you learn how to manage debts.” And for those of you who don’t know how to manage debt, go to a Dave Ramsey course and learn about getting out of debt first. Then go and invest. And what I did was I broke that down and I realized there were a lot of people buying properties and they would never be able to hold a property as a rental because they play in their life broke. They may own real estate, but the minute a toilet breaks or they have responsibilities to write a check, it causes them difficulty. So they’d rather just unload the wealth-building opportunity up front for a big chunk rather than wait for the smaller cash flows that come. Does that make sense?

Mike: Yeah.

Coach Collard: So the [inaudible 00:24:05] is that we have to incorporate money management in our financial capacities as an underlying foundation for wealth building; otherwise it’s counter intuitive to what you’re doing.

Mike: Yeah, awesome.

Coach Collard: That would be my take on it.

Mike: Yeah. We’re coming close to only a few minutes left here on our time, but why don’t you share some general insights, kind of summarize what you think about the importance of building networks and relationships, and kind of sticking to your fundamentals and being able to shift when markets change; all the things we’ve talked about today. Why don’t you give us an overall summary of guidance you give people?

Coach Collard: Got it, and I would just say it like this. All markets shift and no man is an island to withstand all market shifts. So you need to consider what other options you have, but focus on your primary wheelhouse, if you will. If you’re a fast ball pitcher, be a fast ball pitcher. But have some other options available. Whatever market you work in, master that market; don’t worry about whether it’s going up or down or sideways, but be willing to shift your strategy. And have a very strong fundamentally sound power team to help you shift. There will be guys that you won’t talk to or use in six months, but I’m going to encourage you to talk to them every two months to make sure that that relationship is hot and warm so that you are a priority when you do call. Or maybe they call you and there’s an opportunity for you to work together.

Mike: Yeah.

Coach Collard: All markets shift, and we just have to be ready for that.

Mike: Absolutely. That’s great advice. If folks want to learn more about you and some of the things you’re working on, where should they go?

Coach Collard: Well I’d love to send you to a phenomenal website, but I just don’t do that much anymore. So I would just ask them to call me or email me. I can give you tons of resources and things like that, but I like to connect to people and know who I’m sharing information with. If you really want some material you can find me on YouTube. Just look under Coach [inaudible 00:25:58] and I have plenty of videos as well.

Mike: Okay, we’ll add any contact information you share down below the video here for folks.

Coach Collard: Sure. Okay, and I can share it now if that’s okay.

Mike: Okay, for those who are listening..

Coach Collard: Yeah, so you can text me or call me direct at 702-625-2107, or you can always email me at [email protected]. And it’s collard, like collard greens.

Mike: Awesome. I’m writing a note here; sorry for the pause. So hey, Coach, thanks so much for joining us today. I definitely appreciate your insights and I think people got a lot out of it. And I think with the market where it is now, I think people realize the importance of networking and I think a lot of people look back and they say, I wish I had done things differently over the past year or two in terms of maintaining those relationships. And if this is resonating with you and you’re hearing that, you know, it’s never too late to start doing that. Just make sure you do it differently from here on out.

Coach Collard: Well said. I appreciate you having me on today. It was a lot of fun.

Mike: Thanks for joining us, Coach. We’ll talk to you soon, okay?

Coach Collard: Okay.

Mike: All right. Thanks for joining us on today’s FlipNerd.com Podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes Store. You can also watch the video versions of our shows by visiting us at FlipNerd.com.