Today I’m interviewing my buddy, Paul Lizell. Paul started investing almost 20 years ago and has done way over a thousand deals at this point. He’s mostly a virtual investor and has been investing all over the country. Paul has been through market cycles before and like myself, we kind of cut our teeth in a serious way during the last downturn in the market. So guys like us have been looking forward to a down market. Nobody knew it would happen the way that it has, so today, we are going to talk about the lessons learned through investing in a down market and the opportunities that it presents.

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[00:00:00] Mike: [00:00:00] Hey everybody. Welcome back to the show. Today I’m interviewing my buddy Paul Ezell. He’s actually a virtual investor mostly now. He’s been investing all over the country. I think he is a done deal in like 40 States at this point. Um, and we’ve been friends for a number of years. He’s a member of my investor fuel mastermind.

He’s done over a thousand deals way over a thousand deals at this point, and he started investing almost 20 years ago and has been through some market cycles before. In fact, kind of like Paul, like myself. We really kind of cut our teeth in a serious way during the last downturn in the market. So guys like us, I’ve been kind of looking forward to a downmarket.

Nobody knew what happened the way that it has, but today we’re going to talk about kind of lessons learned through investing in a down market and the opportunities that presents.

Professional real estate investors know that it’s not really about the real estate. That real estate is just a vehicle to freedom.

A group of over a hundred of a nation’s leading. Real estate investors from  across the country meet  several [00:01:00] times a year at the investor fuel real estate mastermind to share ideas on how to strengthen each other’s businesses, but also to come together as friends and build more fulfilling lives or all of those around us.

On today’s show, we’re going to continue our conversation of fueling our businesses and our lives. I’m glad you’re here.

Hey, Paul, welcome to the show, buddy.

Paul: [00:01:30] Hey, Mike. Thanks for having me. I appreciate it. Yeah,

Mike: [00:01:31] good to see you. So for those of you that are not watching right now, Paul is, uh, at the beach. You can see the Palm trees behind them there. So, uh, yeah, not quite. We know that’s a backdrop, but it, it makes you, it makes it feel like you’re a little less, uh.

Lockdown, right now. Right,

Paul: [00:01:47] exactly. That’s why I have a man. It keeps me going. Keeps me going.

Mike: [00:01:51] Yeah. So, um, so Paul, uh, you, you started investing in, uh, 2001. So, you know, almost 20 years ago, [00:02:00] and I know you kind of ramped up, everybody starts a little bit slow and that ramps up. But, um, you know, I thought it was kind of good to talk to somebody that’s been through a down cycle before and to talk about the lessons learned.

Cause you know, you can apply a lot of what we’ve learned during other downmarkets to now. The truth is, is at the time, at the time we’re recording this, I would not call this a down market yet, but I think we’re anticipating that it probably will start to shift that way. Right. Yeah.

Paul: [00:02:27] And the realization hasn’t hit people yet.

You know what, just what’s going on, just how many people are unemployed. Just, you know how many less buyers they’re going to be out there,

Mike: [00:02:35] right? Yeah. Retail buyers, for sure. Yeah, for sure. And then of course, when, whenever the market is, whenever there’s so many unknowns, the financing kind of dries up because they don’t know what’s going to happen yet either.

So everything is still actually moving pretty good at this point, but there’s just a lot of wait and see what’s going on going on.

Paul: [00:02:53] There is, it’s a, I call this the great pause because  what’s happening.

Mike: [00:02:58] Yeah. Yeah. I refer to [00:03:00] her the other day and I got to say, I stole this from somebody else. I remember who I saw from.

It was referring to it as the great suppression.

I like that analogy better.

Yeah. So, um, maybe before we jump in and talk, tell us about your background and kind of how you found your way into real estate.

Paul: [00:03:15] Sure. So I started investing back in December. I bought my first deal back in December of 2001 but my kind of my four foray into real estate investing was before that and nineties working for my uncle.

I was doing contracting work for him while I was in college during the summers and during off times. And he would buy these multiunit buildings. We’d fix them up, renovate them, and he would run them out. So that kind of got me interested in real estate from John, how you could buy property cheap, fix it up, rent it out, and make cashflow off of it.

So had my interest, but my interest was as much in that as was to fix up and resell for the meaty cash. I wanted a big bang. You know, you’re broke when you’re in college.

Mike: [00:03:56] Yeah.

Paul: [00:03:57] So I add a college and I [00:04:00] started, I had a job in banking, work for a small community. Banco is a business development officer for, um, I guess four years there.

I was an underwriter for one year and then a sales guy for four years. And while I was doing the sales, I bought a fix and flip. Obviously that first one aired ended in 2001 and I bought a couple more, 2000, two, 2003 I did probably about three to four flips a year and was making more money doing those and I was doing my job.

Of course right. And built that up, did occasional wholesale deal, and then we, of course, we hit the crash in 2007 eight time time period there where I pivoted. My business pivoted from doing fix and flips to mostly wholesale.

Mike: [00:04:43] Okay. All right. Let’s say

Paul: [00:04:45] that we’ll sale 10 fix and flip.

Mike: [00:04:47] Pardon me? You shifted to wholesaling before the last downturn or right after, yeah.

Yeah.

Paul: [00:04:53] In response to, so it hit me so hard. I was at like, I’m selling properties for losses just to pay back private [00:05:00] lenders you want to share. I make them them whole and get rid of all this stuff. That was just the drag and then decided to switch to wholesaling. Fell in love with it. You know, the first couple of deals did during, you know, during downturns, there’s also great opportunities and it was actually the best opportunity.

That was a massive downturn. Picking up properties that were listed for two 2230 picking them up for 90 grand, 110 grand seldom and make a $50,000 wholesale fees on them.

Mike: [00:05:25] Yeah. Yeah. It’s like that’s what’s going on right now. I think people are, are, and this is what we’re advising people to, um, whether they’re coaching students in our investor fuel mastermind, uh, that we talk about is you gotta do stuff that has a quicker cash cycle, right?

Like, don’t take on huge rehabs that take six months to rehab or whatever, like wholesale, wholesale more do stuff that the cashflow moves much faster. That’s, that’s a pretty typical, like that’d be some pretty typical guidance you would give your students right?

Paul: [00:05:51] Totally the velocity money, move it quick, get rid of it, make 20 K on it as compared to fix and flip it and make 40 or 50 right.

Get rid of it and turn it over.

[00:06:00] Mike: [00:05:59] Yeah, yeah, that’s right. So yeah. So, um, so what are some of the big, let’s kind of get into some of the lessons learned kind of during the last downturn, which is when I started, I started in Oh eight, so I didn’t know. You know, there’s pros and cons of a, when you started, like when we didn’t plan it, people thought we were crazy for getting in at that time.

At the time we were like, naive or like, what are you talking about? You know, this, this works. And so we didn’t know. Um, but the truth is, is, uh, it was actually a great time to get in and, uh, if some of it is, we didn’t have baggage. We didn’t have old habits. We didn’t have legacy inventory that was upside down or anything like that.

We kind of came in and knew nothing. And learn from there. Right. And so whether you’re in that situation kind of starting today, or whether you’ve been around for awhile, you know, I think our lessons, some of our lessons learned between the two of us that we can share with people today would be helpful.

So let’s, let’s maybe start with, with Legion, like what happens during a market like this. So

Paul: [00:06:55] this is great opportunity for people and for you at that time when you [00:07:00] started, it was great opportunity, right? And we’re going to be a similar type of thing. It may not be as bad, right? It may be worse. We don’t know yet, which is really don’t know what’s

Mike: [00:07:07] coming.

Right. Right.

Paul: [00:07:08] But what what’s going to happen is there’s, instead of people getting in a with 2030 postcards on different property, they might only get four or five. Now. So now you have way less competition out there and you have some people that will just fall off too. So you want to be constantly sending your mail out, right?

But getting their face all the time to be branding yourself is great time to brand yourself. Right? So I think for, for the direct mail, that’s, that’s your modus operandi there. And then there’s also great opportunity coming, and actually. In most markets. Not yet. Right. You don’t have on the MLS and abundance of properties yet.

You definitely don’t in your Dallas market at all. Right. You still got a shortage,

Mike: [00:07:46] you’re saying distressed stuff. Yeah,

Paul: [00:07:48] correct. The distress stuff, we’re not getting that locally in ours yet. I don’t anticipate that. So maybe the fall or the winter when people start putting properties back on the market.

Um, but if you do have to get rid of properties now, I [00:08:00] think a good time to get rid of them. Because people have realized just what’s going on yet. Um, but there’s going to be great opportunity in the, on the MLS, buying on online auctions by an HUD, you know, all these different properties. When I first started in this business, I can go on HUD home store and buy a property every week locally around me.

Literally buy a property, a good deal every week that could either fix to flip or potentially wholesale. Now that we have nothing like that now. Right, right, right. Dig and I’m going into more rural areas to find my deals, but it’s going to be, there’s going to be an abundance of deals coming up in the near future.

So now if you’re just getting started right now. Great opportunity to get in, right? Learn, get a good mentor, and then you’re going to be in a good position. If I get a good cash position, get some good lenders and private lenders and you’ll be a great position.

Mike: [00:08:47] Yeah. It’s, there’s a couple of things that you shared there that are, that are insightful for sure.

Um, is that . A lot of the competition goes away. We’ve already seen this. Our buddy Todd swagger, you’ve seen it cause he runs a huge mail house. We actually have an [00:09:00] agency now called the investor machine where we advertise for people. So we see what we see and what Todd sees, what everybody’s kind of seen is like newer investors that were not really committed to the business are now on the sidelines.

They’re like, yeah. I’m out, you know, without, without really knowing what they’re stepping away from. Veteran investors are licking their chops, saying, Hey, all the newbies are getting out of the way. Now let’s, let’s let the professionals handle this. Right? And so that’s one of the things that I didn’t realize in Oh eight, um, I didn’t quite realize I didn’t have the, uh, the hindsight ability to have a look back and see, here’s why that happened, or here’s what I’ll do.

But I started to think about it in the context of what I’ll do next time. So it was like, um. I started, we started in the summer of Oh eight and kind of early Oh nine. Um, a lot of people that I looked up to or that I known in the business, uh, were either gotten, you know, wiped out and moved to the sidelines or whatever.

And a lot of it was driven by their financing and their, their lines of credit went away or they were stuck with a bunch of inventory that they were struggling with or whatever. What a lot of them stopped advertising. And so [00:10:00] there was this month where we went, I don’t remember the exact numbers, I think we were spending like 5,000 a month on advertising.

And, uh, we went from one month to the next, we went to like 22,000. We just like, just throttled it up and we crushed it. We just crushed it. And the next year we bought like 70 houses. Um. And it was because all in DFW, and it was because, you know, we just stepped into the void that was less competition marketing to customers.

And so that’s coming right now. A lot of people have move with the sidelines. I don’t know if you get a bunch of mailers and stuff on your rentals or other properties. Other people are marketing. Like my PO box is a lot less full than it normally is because a lot of those, a newbie type folks that were hitting me before aren’t anymore.

Paul: [00:10:43] Yeah, I’m seeing this act, same thing. Postcards used to be an abundance. Now I’m getting very feel of them. It really has dropped off over the past two or three weeks

Mike: [00:10:51] for sure. Yeah, and arguably a time when you know more people will be motivated to sell like that than they are right now. I think there’s so many uncertainties right [00:11:00] now as we’re recording this, but you know, if you’re a landlord.

Most landlords, this is one thing that a lot of people don’t quite understand, is that most landlords in America own a couple properties. It’s not like huge companies or hedge funds that own like thousands or tens of thousands that happens, but the majority of rentals are somebody that owns one or two and um, you know, something, they go through something like this, don’t collect a month rent for a couple of months, and you’re like.

This is like a hobby and I don’t want to play this game anymore. Right?

Paul: [00:11:29] Yeah. They want to get rid of it at that point. And they’re yet frustrated and totally understandable and what they just don’t know what’s going on here.

Mike: [00:11:36] Yeah. Yup, yup. Yeah. So you, and an interesting thing is when did you move from a direct to seller marketing?

And obviously you moved into doing a lot of online auction stuff, a lot of online Oreos, which is how you’ve been able to buy properties in over 40 States. Right? So when did you make that move where you went into mostly online auctions?

Paul: [00:11:55] So I pivoted. I’m 100% in 2013 and in [00:12:00] 2013. Oh, in away from, um, the direct mail, I was doing them in unison.

I was buying bank owned and MLS stuff and doing direct mail, doing both. Right now, obviously you’re going to get a little bit better spreads on those direct mails. Right. Then you are going to, going to get mostly from the banks or online stuff there. Um, however, I just started to look in different markets.

For me, I was just buying in different markets, so I didn’t need to do direct mail locally for me anymore. I was getting enough inventory by buying all over the country by opening up the whole country, um, to my inventory, basically more or less. So that’s when I stopped. I did do some, I used to do, um. Not billboard advertising.

There was a company I use. Those third party felt they were out of Dallas, as a matter of fact, and when leads come in, they would divvy, they would allow like two or three people in a certain area and leads would come, phone calls would come in and you’d be answering that. That was one one marketing resource I had.

Right. Besides direct mail. We had that one, and of course, um, MLS and and Oreos, and it wasn’t only [00:13:00] auction.com was just being built out at that point, I want to say in around 2006, eight, somewhere in that timeframe, they started to really come out and grow and, and other ones came out from there.

Mike: [00:13:11] Yeah. So the interesting thing about that model is I, and I think a, I might hopefully I don’t miss say this, as you moved, you were doing both and you said, Hey there, it’s easier to buy these houses on auction cause you’re, you opened up your world to the whole country

Paul: [00:13:24] effect

Mike: [00:13:24] probably minus a couple of States like California and some other States that, you know were not the most business friendly maybe.

Right. So I know, I know you did that, it was easier to buy, but all along it’s always been. A little harder to sell that way, right? Because you’re getting off in more rural areas. So the interesting thing is, you know, one of the, one of the things we can move into is talking about exit strategies and dispositions, because that is getting harder again, for people because a lot of, you know, would be buyers are going away.

But you made that shift a long time ago into, into a model that was . A little bit easier to buy and harder to sell, right?

Paul: [00:13:57] Yes. It’s always been harder [00:14:00] for us to sell our properties just because more of them are in rural areas. Right. So we had to be much more creative with a marketing besides just using Craigslist or Backpage or some of these other sources.

We started doing direct mailers. To, um, to cash buyers list. And then we started doing newspaper ads, right? We actually use newspaper ads and believe it or not, they work. They work for old landlords. They work for, um, places where there’s not great wifi, right? And we have an older population and it works unbelievably well.

It’s not, it’s super cheap. You know, some of these things that are 60 or a hundred bucks per for a newspaper ad for a week or two. But, um, we sell properties off of that. So that’s something that probably very few people. Do and

Mike: [00:14:42] yeah,

Paul: [00:14:44] any compensation with that sets a big advantage, but that’s usually in a more rural areas.

But doing that, that may be important to do here in a future penny penny power could be a good one right

Mike: [00:14:52] now. There’s some great lessons to learn from that because you know, just to extrapolate on, on just knowing you and your model, like for folks to understand, this [00:15:00] is when you buy houses all over the whole country and they’re in rural areas, like it’s probably been super common for, it’s probably uncommon for you to buy multiple houses in the same market.

Like right. So you buy hundreds of hundreds of individual houses in a market that you’ve never bought anything there again. So you had to go find a way to sell that, dispose of that in a market where you had no buyers lists, you had nothing. It’s like you know you, but you had a process for, here’s how we dispo houses in far off lands that we’ve never been to before.

Right.

Paul: [00:15:28] Yeah, no, no, absolutely. And we’ll do things, even a deeper type. We’ll do things like go and Craigslist, find wholesalers and call the wholesalers or call guys who are advertising. We buy houses. Find out if they’re legit or not. You know, kind of kick the tires with them to see if they’ve got experience.

If they don’t want an imposter with them, kg, do some joint ventures with them. But yeah, you got to really be creative. If we’re in a lot of these markets, like we did one in Coarsegold, California, first deal I ever did in California. And we, um, we didn’t list that on the MLS or anything. We just went listed on, on [00:16:00] Craigslist among other sources and mailed to cash buyers.

I think we sold it to somebody.

Mike: [00:16:03] It was a cash buyers list

Paul: [00:16:05] actually happens to be a big buyer in California in that area. Yeah, we did well with that, but that, you

Mike: [00:16:10] know, they, they, they don’t buy probably on an online auction. So they did, they never saw that deal. Right. Yeah.

Paul: [00:16:15] Right. They don’t, most of these players don’t do that.

That it just. Most people just aren’t comfortable with it. And there’s also big deposits, you know, they want either 2,503 grand down for each property, so it can get pretty close. You can have a lot of money out on the street and just deposits depending on how many deals you got going on.

Mike: [00:16:32] Right, right. But yeah, the key is, but I get into a lot of detail, is how to, how to go get creative and find buyers.

Like, and some of it’s probably property specific, right? If it’s really rough, it’s like a, this segment of buyer potential buyers probably wouldn’t be interested in that. Has a tenant in it already that probably needs to be moved out, but it’s probably kind of rental ready or closer to it. Like, yeah, let’s call some local property management companies.

Let’s like look for, for a, [00:17:00] for rent a ads on Craigslist or marketplace and just say, Hey, let’s assume that they’re a landlord and let’s assume that they’re always in the business of buying more, right?

Paul: [00:17:10] Yeah, no, absolutely. We’ve, we have a guy in, in Shreveport, Louisiana, Roger mere, this guy has gotta be like 83 years old now.

And he just keeps buying. So we get anything in around the area he’s buying and his son is actually buying too. They’re probably together on that, but if I find a deal, boom, I don’t even for him, it’s great for when you have people like that and these different markets, you could just pick up the phone and say, here’s, here’s the property, here’s the lockbox.

Go check it out. Tell me what you think. But until you build those relationships, it’s like you’re in a new market. You’re just starting for brand new. It’s like, I’m a new investor again, but I know how to market to these different areas. Yeah. We learned how to do that. All of our marketing is disposition marketing, which is way cheaper than the acquisition side

Mike: [00:17:49] market.

Yeah. And I think you just ask yourself like, who? Who would buy this house? Like, who is my potential customer and where are they right now? Like some of them are, um, [00:18:00] using a property management company to manage that. Some of them are posting ads to buy, like they’re trying to buy their, they might also be a

Um, they, they could potentially buy from you. Right. And so it was just, just to think about like where I think about this all the time with our business. I’m like, where, where are my customers at right now? Where are they hanging out at? Who they w who they talking to, like, um, and uh, that’s, that’s how we target some of our marketing for online stuff is like what group are they in right now?

Who, who’s other training programs are they a part of right now? You know? And just think about that for a real estate as well.

Paul: [00:18:30] It’s tactical marketing, right? You’re trying to target start, you want certain types of customers or that are gonna match with USI or just target marketing them. Right? I mean, that’s the smartest kind of marketing to get the best results with that.

Mike: [00:18:41] Yeah. Yeah. And sometimes it’s through agents too, right? I know you can get local agents and just say, Hey, do you know anybody that’s buying? And you find a way to work with them as well.

Paul: [00:18:49] Absolutely. Ends. A lot of these, most of these properties we get are listed. Most of them, not all of them, but most of them are listed.

So that listing agent gives me great information that like, let’s say the [00:19:00] property is listed for 89 and I’m picking up for 49 and he said, well, we had cash offers for 62,000 on his property before. I’m like, all right. Find out they’re interested. We utilize them, pay them commission, and just sell it. And we never had to do any kind of marketing whatsoever.

They did a forest, they get paid a commission on it and

Mike: [00:19:15] are happy. Yup. Yup. So some lessons learned during the last downturn that you can apply now or that people can apply now in regards to financing.

Paul: [00:19:24] Oh yeah. Financing. So we’re in a different world than we weren’t 2000 we didn’t have the abundance of financing possibilities in 2008, nine, 10 timeframe.

Right? A lot of them have come aboard now, but a lot of them are pulling back now too. So I’m like a Lima one capital who I use to do rental financing or, um, a lending one. Right. They’ve stopped now. They’ve stopped doing anything, even even on the acquisition side for fix and flips because they just don’t know what’s going on.

But all of the platforms that did rentals, almost all of them are pulling back. There’s still a few guys out there that are doing it. So I’m going to actually reach out to a couple of [00:20:00] them this week and find out if they’re still lending in my state where I’m looking to do it. But, um, so getting back to your questionnaire about the financing private lenders, right?

We use private lenders like crazy. We still use them a lot. Now it’s harder to find longterm lending with private lenders. But maybe with this change in the market, people will want to lock in for a little longer term. Maybe you can get a two year arm or five year on some of these different properties that at a decent rate there.

Um, but there’s going to be still be other property or other financing sources available and new things pop up as soon as this Copa 19 is going away and things open up again. I think these lenders would be back out there a little more active again too. It’s just the uncertainty. I get why they’re pausing because they’re, if they’re lending now in today’s values.

And three months down the road, the value’s dropped 20 30% in these different markets. They don’t want to be caught like that. Right. So they’re going to pull back everything.

Mike: [00:20:52] Yeah. And some of the big national lenders, you know, they make loans and then they immediately resell them or they package them up and resell them.

And so I think that whole kind of supply chain, [00:21:00] if any piece of it slows down or stops, yeah. Then the whole thing stops. And that’s, that’s kinda what’s going on. As the time we’re recording this, you know, that’s what’s going on. That could change. Like I know a, we know several of the big hard money lenders and they’ve made drastic changes from one day to the next over the past couple of weeks.

So you know, that could loosen up today or tomorrow, like just because they have more clarity of that whole supply chain. So you never know.

Paul: [00:21:24] You never know any of it until, you know, until we have some kind of certainty out there in a market, we’re going to, it’s going

Mike: [00:21:29] to be like this for a little while.

Yeah. The good thing about private money lenders that we’ve talked to, you know, April is April across the, who’s a investor fuel member as well, has, she talks a lot about private raising private money, and I’ve had her on this FlipNerd segment that we’re doing a live here three times a week right now, and she shared it a few times, is that, you know, there’s a lot of private money lenders that.

Are more interested now because they just got hammered in the stock market. Yes. They’re like, Hey, you know, maybe, maybe in my mind I was getting higher returns on the stock market, [00:22:00] but look how unstable that was. So six or 8% sounds pretty good to me right now.

Paul: [00:22:05] I think we’re gonna be able to find a lot of private money now over the next few months, you’re going to find a lot because people need to shift their money into something and want to leave it in the bank and earn it.

A quarter percent or a 3% right. So why not earn six or 8% is something a little more stable. Right. Backed by something here. So I think, I think people will be, I think that’s going to be a big opportunity for us. It’s something I’m going to be attacking more of the next month or so as well.

Mike: [00:22:25] Yeah, yeah.

Yeah. That’s another thing is I know you use private money in sometimes without getting too personal here, you know, sometimes you have to question like, Hey, I’m glad I have private money. You have to look at your base of lenders and say. Am I diversified enough? Like maybe I need more of them. Cause if it’s, we’ve all had this issue where a lot of people have this issue where they have all their eggs and very few baskets and if like one lender, one main lender like decides to pull out or sit on the sidelines, then it’s like, you know, what’ll happen to you then what?

How will you respond to that? And so it’s kind of important to get out in front of it, right? And say, okay, I have a risk point here [00:23:00] because I’m super reliant upon one person. And if that, if they change their mind, which you have no control over. That could impact your business in a negative way.

Paul: [00:23:09] Hugely, hugely.

And I do have, luckily, I’m fortunate enough, I have a few private lenders, but I still need more because I did have one of them pull back a little bit. The other ones, they’re so comfortable with me, they’re still, if I’ve got deals and they’re low dollar amounts to a lot of these that they don’t mind still doing them.

And I’m being  as I tell them, I reassure them I’m being even more conservative now than I was two weeks ago. Right. The deal, it’s gotta be a great deal or I’m just not interested in it at this point just because of the uncertainty going on. But you need to continue growing your, your pro, your private lenders.

Right. And finding other sources out there there. Cause there’s still some cheap capital sources out there and there’s still going to be guys that are active even during this time, especially in different parts of the country that aren’t . Hugely effected, like you guys are not as affected as bad in other parts of the Midwest.

Not fact. That is bad.

Mike: [00:23:56] Right, right. And I think, I don’t know the details behind this yet, but. [00:24:00] Sometimes local banks. So I borrow for most of our rental financing is through a local community bank, and they and I have not talked to them. I need to actually put a call in and talk to the I, as I say, talk to the president of the good thing about smaller banks as you get to talk to the president, right?

And so you can get some insights to the people that are actually making decisions. But depending on your market, and I know like this, this specific bank that I use, they don’t sell their loans. They keep them in house. So they’re not, they’re not worried about. Can I package these and sell these? They’re more worried about the underlying collateral, right?

Like if something going to happen there. And so given that, I think, you know. Don’t, don’t quote me on all this stuff, but I think banks are lending it like  a quarter percent of interest from the fed or something like that right now. Like if they’re still lending at five and a half, 6% like community bank, their spreads actually widened right now.

So the question is, is are, are they, how risk averse are they right.

Paul: [00:24:54] Yeah. And that’s the truth. But yeah, that community banks are great for that. And like I said, I first started working for creative bank and [00:25:00] we did, we held everything in house. You know, we did it only if we’re doing big deals with big businesses.

We just did a syndication and joined with another bigger bank to help offset some of that risk there. So for, um, for the rentals, I think that’s what you’re doing. The community bank is probably the best way to do it.

Mike: [00:25:15] Yeah. Yeah. I think for, I’ll tell you, during the last downturn, what happened is we built relationships with two local banks.

And they weren’t lending to anybody else. They would regularly tell us like, we don’t let, we’re not lending to any other investors right now, but we’re going to lend to you. So in one instance, it was through a friend of a friend, like we knew somebody there that got us in the door to talk to them. And then we had a, you know, Brandon Smith, who’s an investor fuel as well.

He’s taught us a few times on this idea of the bankers Bible. So like create this book, this binder of you all the deals you’ve done, pictures, your financial information, like kind of show your portfolio to say, this is what I do. And this is how we can be partners. Like I’m a legitimate, it’s like your, it’s like your resume, which it is.

So we had something like that way before I ever even knew Brandon. [00:26:00] Uh, it was a little more simple than what he has shared, but it was like, here’s our last, you know, 20 deals or last 50 deals, whatever, or the P and L’s forum, here’s before and after pictures. And it’s so unique that somebody does that.

That’s how we got that. That’s how we got our foot in the door is they were like. Nobody’s ever done this before. And, and, uh, you know, you just differentiate yourself by saying, look, I’m not as risky as you think I am. Here’s, here’s my business. You know? Hey, make sure I was the one that was one and I’ll give you guys, so without getting into tremendous details here, if you guys are listening right now, um, that’s one way to get your foot in the door.

When banks say they’re not lending right now, or they’re slowing down and you know, they’re gonna be more selective on who they partner with. Like. Do something like that, like that really separates, that separates you. Right. So it kind of gets you on the stat, on the top of the stack of people that are considering for sure.

The other thing we did was, um, I can’t remember who told me this, but usually people would call a bank and like, Hey, you guys would have to be lending right now. And they’re like, no, we’re not lending right now. Call us back in [00:27:00] six months. Or, you know, whatever. We don’t lend to real estate investors anymore.

We were kind of hearing all that. And somebody who’s like, you know what, go to this one bank, because they do work with real estate investors. They’re apparently not taking on new customers right now. And I like just go put like. 10 or $20,000 on deposit, just like literally just open an account and put it in there and then asked to talk to the president and we did it and was like, yeah, you’re a new customer.

Why wouldn’t they talk to you? Right, right. And so then we started to explain what we do and without necessarily asking like, Hey, I just did that so I can get alone. Just starting the conversation. And, uh, they were really intrigued, you know, at that point, you’re a customer, so they’re going to listen to you.

And, uh, you know, if it didn’t work out, you could just go take it out of there a week ago to try the next bank. But, um, you know, it gets their attention. It’s like, how do you imagine you’re like an actor or a, you’re trying to get in front of somebody that has a stack of resumes. Like in federal, I’m like this, how do you get yours on top?

That’s the question. How do you get noticed, right? Yeah. That’s

Paul: [00:27:54] the key. Differentiate yourself, right? You created diet, basically, you did your own credit report, almost what [00:28:00] you did. Look at my history and look at what I’ve done here. Cause that’s, you know, credit report is looking at your history, your payments, everything.

And this is looking at a history of what you’ve done. You’ve proven what you’ve done, proven it over and over again and yet

Mike: [00:28:10] lower risk. Yep. So Paul, what are you going to do differently, extra strategy wise then, um, then you’ve done in the past? Like anything, you’re, I mean, you’ve kind of shifted to you.

You’ve never, uh, you don’t really do. In those virtual markets, you don’t really do a lot of big rehabs, right? You’re more of like holds hailing or way or sometimes sell seller financing. Right.

Paul: [00:28:31] Yeah, we’ll do some seller financing for the lower level, lower price point ones, some wholesaling. The only place I’ve done a big rehabs is in Tucson, Arizona cause I have boots on the ground there.

Really good agent who has good contractors. But otherwise I just, you know, keep it basic, keep it simple. I want to turn them as quick as possible. So I’m just going to try to find better deals. Now, right now the auction platforms do have an increase of inventory. So I’m hoping, I find and hopefully more motivation to get rid of these properties.

[00:29:00] And hopefully I’ll find good deals, move them and just continue doing that and building off of that. So I’m going to continue doing a lot of the same stuff, but we’re going to be doing more of a focus. We went almost look ahead. If we’re going to be targeting different markets, like I don’t know that we will be, but if we say we’re going to target st Louis, Missouri, we’ll really start peppering them with, um, to find more cash buyers there and, and just do more mailers and advertise.

I think that’s going to be our biggest focus. More on building a bigger buyers list.

Mike: [00:29:26] Don’t move forward. Yeah. That’s what happens in it. When you move to a, uh, a buyer’s market where buyers have more control, you have to find those buyers, right? When it’s a sell the past, like really the past, certainly six or eight years, maybe, you know, where you’re at in the country has been a total sellers market.

Like you. You could rehab properties, put them out at the top of the market, maybe ask for a little bit, even above market, you know, and people are offering more than list value. Like that’s what’s been happening in the seller’s market. You shift to a buyer’s market and you just, dispositions gets harder.

So you need to put more emphasis on finding those buyers who, who [00:30:00] wants to really buy your property.

Paul: [00:30:01] Yeah. It’s going to be much more focused on finding buyers. That’s going to be,

Mike: [00:30:05] and by the way, acquisitions is easier, right? Because you’d have, as we talked about, you don’t have as many comp competitors, so we always talk about the deal flow.

An investor full,

Paul: [00:30:13] everybody’s worried about deal flow, right? Finding more deals. Now we’re in  disposition finding more buyers. Right? And that’s going to be the focus

Mike: [00:30:20] of

Paul: [00:30:20] everybody’s a job is to find more buyers. At this point, that’s what’s

Mike: [00:30:23] going to be

Paul: [00:30:24] moving forward, I think for a little while anyway, until the market

Mike: [00:30:27] settles.

That’s how it works. I mean, you know, you, you, uh, I know you, you follow the stock market a lot and stuff too. Um. That’s how it works. People. Then when the market runs up, some people sit on the sidelines, they moved to stuff that’s a little less risky, right? Most seasoned investors just keep shifting and they’re like, I’m going to move out of these investments.

I’m going to move into bonds right now, or whatever, and they based on based on market cycles, real estate investors, it’s the same thing. You’re just shifting between more focused on buying activities, more focused on selling activities.

Paul: [00:30:54] Yup. And that’s the guys who stay in this business for a long time.

They see stuff coming, anticipate and just start [00:31:00] shifting. Maybe shift a little bit ahead, or maybe you shift right with it, but if you don’t shift, you’re gone. You’re a dinosaur, right? So you’ve got to continue to make changes. I mean, this business, like any business, you’ve got to constantly be willing to change and see what’s going on.

We look at our business quarterly, I look at it. Each quarter I do a little short dive, what’s working, what’s not, and then come June go and halfway through I really look, it’s what’s worked, what markets have been good, what markets have not, what are the profit margins to when here there, all right, I’m going to ignore this area, these areas, and try to sell to these areas.

Mike: [00:31:33] So yup.

Paul: [00:31:34] We shift, got to shift.

Mike: [00:31:36] It’s the shift, the shift. Hey Paul, so you’ve been a, you’re a founding member of investor fuel. You and I’ve been friends for, I don’t even know, probably five, five, six years probably. Anyway. And, uh, you were, we, you were actually a founding member. You were at the very first meeting when we first started.

And so we’ve been asked, we’re coming up on, uh, somewhere a little bit under three years now, I think two and. Three quarter years or something like that, an investor fuel. And so, um, [00:32:00] you know, what are your, would you mind sharing kind of a testimonial? You’ve been in the group for a long time. I know you’ve been a part of other groups in the past before.

Just what are your thoughts on, uh, investor fuel and how it’s maybe impacted your business. A

Paul: [00:32:09] vest or fuel has been great. I have a lot of, obviously they have a lot of great friends. There’s friends that you and I have known before, investor fuel and a new friends we’ve made from investor fuel, and I tell you what, the group keeps growing, keeps getting better.

You’re getting higher level people in there and people. It’s great to see guys. Go in there and they’re at one level and then explode to the next level. A couple of meetings later, right after they started implementing the ACE thing. So it’s been huge for that. You’ve been a great resource for me for the information marketing side.

Here are what we’re getting into with our educational business here too. So I mean, it’s just been tremendous and you cannot underestimate the power of M. These mastermind meetings and investor kills top-notch. You’re one, Mike, you no doubt run the best one or one of the best ones out there, and I haven’t been all of them.

Right. But it is awesome. You’re honest all the time. You [00:33:00] constantly do updates. It’s just tremendous. I can’t, I can’t speak highly enough about it.

Mike: [00:33:04] Awesome, man. Thank you for that. Yeah, it’s interesting. Uh, you know, we’ve had a number of members when the market turned down here, uh, or you know, all this uncertainty started at roughly a month ago.

I think we were a little bit worried about, we’re worried about our members. And then from our standpoint too, we were worried about our membership. Like, are we going to lose members because of this? We’ve actually grown over the past month, which is highly unusual. Um, or we thought, we think it’s unusual.

And because people said, you know. Hey, it’s been great getting together every quarter. Like we love that. But the knowledge that’s inside of here, the way people support one another, like we need that support are more now than ever. People that are coming in, we never even knew before. They’re like, you know, I would think about joining for a year and I need this now more than ever.

So if you’re not part of a mastermind, of course, we would love for you to check out investor fuel. Uh, if you’re not, we actually have another meeting coming up here in just a few weeks. Um. But, uh, you really need to surround yourself with people that have your best interests in mind, and you can find ways to collaborate with or share information with for sure.

[00:34:00] And, um, you know, there’s other other groups out there, but, uh, uh, you know, we like ours.  investor feels great.

Paul: [00:34:06] I’m Tanya at the business. We do so much business within investor fuel, right? I mean, with each other joint venture stuff, different ideas. I mean, it’s just tremendous. It’s imperative. You must join a faster fuel.

Mike: [00:34:21] Hey, thanks Paul. We appreciate that. So if folks want to, you do have, by the way, you do have an education program. I should point out that Paul. Um, you know, you’ve heard about some of the shift here. He shifted to doing more stuff through online auctions and, uh, that, you know, all these things go through cycles.

Right. So I know that you said one thing that was really interesting is that a bunch of inventory has come on the market. Yes. In side of these online auction sites. The reality is, is there’s really been a moratorium on foreclosures for a lot of, uh, PR pretty much every state probably at this point. So, um.

What’s interesting though is we’ve all known, there’s always this kind of shadow inventory out there. So what’s happening is [00:35:00] banks are anticipating, Hey, we’re going to be taking some stuff back again. Let’s clear out of this other stuff that we’ve been sitting on right there for one reason. Why would they be sitting on it?

Who knows? Right? They’re shaking loose like some of the, some of the older stuff right now. So it’s actually interesting that you said you just got served up like a ton of inventory that’s hitting right now that I w I w I was, I was surprised by that, but it’s the shadow inventory that’s coming around.

Paul: [00:35:21] Totally. It’s definitely the sh it’s been talked about for years and years and they let it out and I get why they do that, right? Because they don’t want to release all the inventory wants and you’re going to have too much inventory and the prices will be reduced. They’re letting it go and go as well.

The markets continued to increase and they’re hoping to increase their profits over time and just sitting on it for a little while longer. For instance, zone from two weeks ago was 3,500 was their inventory and they generally hover between 3,340 100 per month. They went from 3,500. Two weeks later to 5,800 I have not seen 5,800 from zone since they’ve been in existence, so this is a lot of inventory for them.

I’m curious to see what Hudson Marshall, I know hubs, zoo.com just increased [00:36:00] theirs as well and I’m sure auction.com as well. I think it’s going to fall along the same line. We’re teaching people how to do that through REO auction academy.com. Um, so that’s something that’s, I think could continue to grow.

And it’s virtual, virtual wholesaling, virtual investing will continue to grow.

Mike: [00:36:15] There’s a lot more inventory that’s gonna, you know, we know that there’s going to be a shakeout of people, or this is going to call it. There’s going to be a lot of foreclosure activity. It might be a moratorium on it for the short, for the short term, but eventually that’s gonna that’s gonna work its way through the system.

Right.

Paul: [00:36:27] Yeah. I think he’s in the spring of next year. Maybe the summer next year. You’ll start to see that inventory increase as they’ve let loose the moratorium. You know, it takes three to six, nine months, depending on what state you’re in to foreclose, uh, whether it’s judicial or nonjudicial state. So what we’re going to see that increase for sure.

Mike: [00:36:44] Yeah. So Paul, you obviously teach people how to buy at auction. You’ve got a podcast, you’ve got a number of things out there. How can folks learn more about you and what you do and what you’ve got going on.

Paul: [00:36:55] If they want to listen to the podcast, it’s either Paul lyocell.com or [00:37:00] the virtual investor dot C O and four.

If they want to learn more about REO auction Academy and what we do there, it’s REO auction academy.com.

Mike: [00:37:11] Awesome. We’ll add some notes down below for everybody to find that out. And um, and you’ve done, I know you’ve done, you know well over a thousand houses, so yes. Yeah. Oh, Paul’s got a ton of experience doing this.

The interesting thing. About you as you’ve done so much volume and you, you work out of a bedroom in your house, right? It’s exactly right. The

Paul: [00:37:28] best thing about, about this being virtual was I literally work out of my home office, right? I have one full time VA, my disposition guy, and he has one part-time VA, so we do this pretty now.

Pretty controlled, pretty easy, and low cost,

Mike: [00:37:43] which is the last part. Yeah. Yeah. Awesome. So we’ll add those links down below. If you guys want to go check out Paul’s podcast to learn more about his education stuff about how to buy a virtually, it’s interesting time to kind of really start preparing yourself for the this next market cycle, this new market cycle we’re going to enter.

So it’s [00:38:00] amazing time to use some of this extra time you have on your hands right now to educate yourself and, and prepare. We’re actually. Yeah. I purchased some education, uh, education program this week, and my wife, Lindsay, is about to purchase one, a pretty expensive one, actually, because we know, Hey, this is the time, like, let’s go back to school right now and prepare ourselves for whatever’s next.

A good time to do that.

Paul: [00:38:19] I think we’re always doing, I’m Mike, I’m always buying different products out there. See some that can work and add to my business. I’m going to add it. Yeah. I think it’s smart guy to always kind of

Mike: [00:38:27] educate yourself. Yeah. Once you’re, once you’re, once you’re. In business, it’s an investment where I’m constantly investing in things that will bring me a return.

Right. And so you gotta look at it. Totally. Well, Paul, thanks for joining us today, my friend.

Paul: [00:38:40] Thanks for having me, Mike.

Mike: [00:38:42] I always can see you to catch up some more soon. Uh, everybody hit. Thanks for joining us for today’s show. Hope you got some value here. You know, this is not the time to sit on the sidelines.

This is the time to start gearing up and preparing for whatever’s next. I could tell you guys, honestly, I don’t know if this is, I’m not bragging about this, but I’ve probably been working more and [00:39:00] harder over the past month than I have in recent months. Just because we’re going through a transition. I’m not going to sit on the sidelines and wait to see what happens.

I’m going to basically prepare myself. To lean into and take advantage of, benefit from and help those around me benefit from whatever happens next. So I’d encourage you guys to do the same. If you haven’t had subscribed to this show, you can get access to all of our shows by visiting investor fuel.com and you can also find all of our shows on iTunes, Stitcher radio, Google play, YouTube, wherever you might be.

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