Win Win in Real Estate Investing

Mike: Hey everybody, welcome back to the show. Today, I’m here with my buddy Ben Fredricks. We’re actually from the same kind of hometown, Quad Cities area and up in Illinois and Iowa. And we’ve been friends for a while now and Ben has a real unique model compared to what I’ve done in the past. So he does a lot of owner financing and still buys from banks. And so what we’re really going to talk about today is his model, how everybody wins and specifically, you know, how you can create win-win situations in your business.
Professional real estate investors know that it’s not really about the real estate. In fact, real estate is just a vehicle to freedom. A group of over 100 of the nation’s leading real estate investors from across the country meet several 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 for all of those around us. On today’s show, we’re going to continue our conversation of fueling our businesses and fueling our lives. I’m glad you’re here.
Hey, Ben, welcome to the show.
Ben: Hey, Mike. Good to see you, man. Always good to be here.
Mike: Good to see you. Good to see you. I sometimes forget that we’re from the same kind of hometown and then we talk and I was like, you know, how am I going to drop the Whitey’s joke in there or, you know, talk about something that’s unique to our hometown.
So it’s interesting and there’s, you know, I know three or four people that are heavy-hitter real estate investors all from our hometown and that’s kind of unusual because it’s a relatively kind of small area I think.
Ben: It must be in the water. The fine [tasting 00:01:46] water.
Mike: That wasn’t mixed in with the mercury, I think. But, anyway, so glad to have you here, man. Great to see you.
Ben: It’s my pleasure, man. Good to see you.
Mike: Yeah, it’s been good getting to know you over the last couple of years. So can you maybe tell a little bit about your background and I know, you know, just like me and a lot of folks we have on the show here, a lot of our friends, they found their way to real estate investing but didn’t start there. It was just like we just fell into it eventually after being disappointed somewhere else. So maybe a share a little bit of your backstory.
Ben: Yeah, I probably have had more jobs than I actually care to remember. So, but yeah, I found my way to real estate after spending almost a decade in financial services which I absolutely hated every single day.
But I worked for Lehman Brothers in the glory days of, you know, before the financial crisis and then shifted over to the financial services just because I thought I had to but I always had a love for real estate ever since I was a little kid. My grandmother owned a duplex across the street, so I always got the see like her putting in that sweat equity and collecting the rent and all that. So it always was really interesting to me and I’m glad I made it this direction. So I love what I do now. It’s just a game. It’s fun.
Mike: Yeah. Yeah, it is interesting. It’s like, I mean, I don’t know, sometimes I struggle with like why I love it, but I know what I really love is kind of like our buddy Matt Andrew says real estate is not the thing. It’s the thing that gets you the thing. And I think for enterprising people that are entrepreneurs, you just want to get paid. You want to make money based off of your effort. Like if you’re a hard worker, I mean, you and I grew up in the same hometown, like there’s a lot of hard workers there, right?
Like not necessarily. When I grew up, I didn’t know a lot of entrepreneurs. I didn’t know any entrepreneurs. It was all just a bunch of really hard workers and so you develop this work ethic and then, you know, my story is getting fired from a couple of jobs or losing jobs because they’re filing for bankruptcy or whatever. And it’s like, man, I work so hard and this is what I get. And just kind of got to the point where you’re like, I know I’m always going to be a hard worker, why am I not working hard for myself?
Ben: Yeah. I think you and I come from the same background and much like you, I didn’t know any entrepreneurs either. It was not a thing. I’m so jealous of younger people today that they have all of the amazing resources that are available to entrepreneurs that we just never had. Equal opportunity.
Mike: Yeah, yeah, yeah. Yeah. So I want you to share a little bit about your business model and kind of what you do. And you know, it’s awesome because and I think all real estate investors should be this way if they’re not, you know, is to structure of your business in a way to where you see a need in the marketplace and if you can fulfill that need, that person wins and you win too. And I think there’s a lot of people that try to structure stuff in a way to where, you know, they want to win but they don’t really care what happens to the other person. I think that’s not really sustainable, which is we know, but just to share a little bit about kind of how your model is structured.
Ben: Yeah. When I first kind of, I just stumbled upon this really like it was kind of an accident. It all kind of happened because of Craigslist, believe it or not, but I came across it in, when it was described to me what it was, I was blown away. I was like, wow, this is amazing. You have an opportunity to not only make money but really make an impact on others.
And that’s really kind of what I was seeking. I didn’t feel like, you know, financial services, you get to feel the impact maybe a couple of times depending upon how long you stayed in business. If you stay in it long enough, you’re really going to feel it because people will die and you’ll deliver death benefits. And I got to do that a couple of times and that was impactful, but I make an impact every day what I do now. So it really sticks and I feel it, you know?
So, but our business model is we’re buying properties in bulk from banks and auction around the country and we’re either selling those to investors that we work with or owner financing them to people that just want an opportunity to own a home. They’re tired of paying rent and you know, maybe they’ve never had homeownership in their family and it just gives them the opportunity. So that part I feel really good about.
And then with our investors, again, you said make it a win-win situation. Like our friend Beyond Wynn says, and it’s really awesome because if we do that, our investors continue to come back to us and buy more deals. So we’ve always looked at it as, hey, let’s hit singles. We don’t have to hit home runs every time to win a World Series. We can hit [singles 00:06:21] and develop amazing relationships that people will come back and buy and buy and buy.
Mike: Yeah. That’s great insight about hitting singles. And I’ve said that too, like real estate investing is a game of base hits. I’ve kind of said that a few times or which is true, it was like if your whole business is based on a couple of home runs a year, or you in your life or whatever. Like the truth is you can’t systematize that. You don’t want a business . . .
This is already a kind of say a lumpy business anyway with lots of ups and downs. The more you can smooth out your activity, it’s just easier on your life and your health and your cash flow and everything if you’re not constantly worrying about the next time to eat because you’re constantly worried about the famine.
Ben: Yeah. I mean if somebody comes in and they know how to throw a knuckleball and all you’re used to doing is hit fastballs, you’re screwed. Like you really got to be prepared to see anything that’s coming at you. And if you can hit the occasional home run, it’s amazing. Those opportunities do come up and you get that great feeling but the singles they add up and it’s . . .
Mike: Yeah. Yeah. I kind of say like, I think what I’ve said is that the base hits and you know, the singles and the doubles are the types of ones that make it a good business. They make it worth being in it. And then, you know, if you play the game enough, you, you hit some triples and some home runs, but your underlying business is kind of just the basic blocking and tackling. Like, you know, at the end of the day, the more boring your business is, probably the more stable it is.
Ben:Exactly, yeah.
Mike:So that’s why HGTV doesn’t really present the real reality of this because it’s really quite boring if you’re doing it right.
Ben: Yeah. Wouldn’t it be fascinating if they did?
Mike: Yeah. Yeah. Well, so let’s talk a little bit about how the seller wins. And I say the seller, maybe that’s selling to you, you have a couple of sellers in your scenario, but I think a lot of people are maybe a little surprised if they talk to you. Sometimes they hear you and they don’t think that REOs and foreclosures are still really much of a thing. But I mean, you’re doing a couple hundred deals a year this way. So talk a little bit about kind of the reality of that REOs are still available and how those sellers that you buy from are winning by working with you.
Ben: Yeah, I mean, they’re totally still available. I mean, there’s more inventory than we could even buy. So it’s a tremendous opportunity still. It’s a different class of property now for sure. It’s not like it was in 2010 where you could go and buy a house. It was once worth half a million dollars for $250,000. It’s not quite like that anymore. Those kinds of properties, the market has really come back on, but what we’re doing is we’re solving a problem for the bank, for the auction company. They’ve had these assets, they just can’t seem to get rid of them, you know, and we come in and solve that problem.
I mean, I think that any entrepreneur that’s worth their salt will know that that’s what entrepreneurism is. It’s solving a problem for somebody else and then getting paid for it. So that’s essentially what we’re doing and we’re going in and we’re solving that problem. And then what happens is the bank recognizes us as that problem solver and those opportunities just continue to come in.
Mike: And you’re primarily buying, so you’re buying for the most part nationally, you’re buying in lots of markets or you’re primarily buying in small towns, right?
Ben: Yeah, for the most part. There are definitely smaller markets, but we get the occasional, you know, Jacksonville, Palm Beach here in Florida, than, you know, Indianapolis and bigger towns in Ohio. But it’s from Texas to the East Coast for the most part. [inaudible 00:09:52] we’re not seeing anything.
Mike: So, yeah. And I think one of the benefits that you offer the seller and one of the benefits in your business model is that you are virtual. So you have the ability, like if the market shifts or it’s like, hey, stuff’s dried up in this state but there’s something else happening somewhere else.
I think, you know, that’s one of the beauties of, and I’m not a virtual investor myself so I’ve pretty much done everything here in the DFW area. But one of the beauties of being virtual is you can kind of pick up your ball and go play somewhere else, like almost the next day if you had to.
Ben: Yeah, that’s exactly right. I mean, you have to have the ability to adapt and adjust. So if all the opportunities dry up in Dallas and you’re like, well, what am I going to do? You got to figure out something else to do. We get to diversify in that, you know? So if something happens in one particular market, which, you know, we saw in the recession, it didn’t get bad everywhere, right? Like, where we’re from, it wasn’t that impacted but if we’re diversified in a bunch of different places and it’s like owning a mutual fund that’s invested in a bunch of different things.
Mike: Yeah, you’re going to shift. Yup. Yup. So talk about your buyer and how they win. So one of the things is, you know, you’re offering seller financing so usually the people that can’t get financing otherwise but talk about that a little bit.
Ben: Yeah. So I mean, everybody’s still has to qualify. They go through a certain process but our standards are definitely a little bit more lenient than the bank but because of the rules that the government has, you know, we do have to make sure that their debt ratio is good and all that. But when we first buy a deal, we’ll look at it from an owner finance perspective and say, okay, can this person go in and buy this property from us on owner financing and still have built-in equity into the deal and pay less than they’re used to paying rent?
That makes it, you know, even with taxes and insurance, that makes it a great win-win situation. And really it’s like at the end of the day, if they screw it up, where are they going to go that’s ever going to be cheaper? And we try to make it that way. So ultimately, we just want to give people a shot. And you know, the great thing about it is I’ve had people, we’ve been doing this long enough now to where I’ve had people that bought a house from us, they moved in, they fixed it up, and now they’re renting it out and coming back to us to buy another property. So they are starting to build their own portfolios, which is really exciting to see. So that’s the fun part.
Mike: Yeah. Yeah. And some of your buyers too is you, we just talked about kind of homeowners for the most part, but you also sell to investors that might seller finance them and keep them as rentals as well, right?
Ben: Definitely, yes. That’s actually a lot easier.
Mike: I mean, yeah, because it’s a B2B transaction and yeah, it’s based more on the structure of the deal. Like basically how it’s going to cash flow and how it’s going to work out versus somebody really wants to be in this neighborhood per se.
Ben: Exactly. Yeah. And we’ve had a lot of young investors really take advantage of that. They’re able to springboard into it. They might not have a lot of money or maybe they’ve got a little bit of private money where they could go in and do the rehab piece and then, you know, move on to the next deal.
Mike: And so there’s obviously a lot of models in our industry, wholesaling and assigning, rehabbing, keeping houses as rentals. How do you win in your model?
Ben: Yeah, the owner financing pieces, you know, there’s great benefits to rentals and owner financing. I mean, there’s great tax advantages for rentals, notes. The advantages are there. I don’t have to deal with any tenants or toilets or any repairs or taxes or insurance, none of that so it’s just different things.
But with the notes, we can create an asset that we can actually take to the market and sell. So we’ve got paper that we can sell. So I’m not selling the property, but I’ve got this piece of paper that’s tied to it that I can take to the market and sell it or even sell a portion of which partials are a lot of fun. But yeah, that’s the big advantage to us is, you know, it’s just you have a multiple exit strategy or we can hold it for the remainder of the time. It’s really up to us.
Mike: Yeah. The beauty of, you know, when you’re wholesaling, you’ve got to sell it at a deep discount and you got to buy it at an even deeper discount, which is, you know, that’s how I’ve operated my business for 12 years but that’s hard. I mean, not every house is worthy of that.
In the seller finance model, it’s a little different because you can sell at market value or sometimes even a little bit above because the traditional market, MLS comps and stuff like that are not as important as say, how would their payments compare to rent or something like that. So, so you don’t have as many limitations on like, you know, when you’re wholesaling, you’re B2B so then there has to be enough skin in the game for the next guy too, right? That opens up opportunities for you.
Ben: Yeah. I mean that’s the conundrum with wholesaling is you’re always trying to make sure you have a good enough deal for your backend person.
Mike: So what are some lessons you’ve learned over your time doing this? And you know, we all have lots of . . . that’s why I say the thing I love about entrepreneurs and you know, my network is really real estate investors is we have so many like arrow wounds in our back and scars and stuff from . . . because we just, we will run right into a fire and figure it out on the way in.
And so the bad part is, is you know, we’ve got scars. The good part is, is those scars came with lessons, right? So you learn things of how to get better and pivot, improve along the way. And then other people that are, you know, watching us today or listening in can learn from those two. So what are some big lessons you’ve learned?
Ben: Yeah, I don’t know if we have time for all of them.
Mike: Did I tell you it’s a four-hour show today.
Ben: Yeah. No, I mean, I think the biggest lessons I’ve learned, you know, in starting a business of any kind is one, you know, you got to constantly be developing your leadership skills because you’re going to be not only leading yourself but eventually if you’re going to scale and grow, you’re going to have to lead people and that is probably, I think one of the bigger challenges of business at all is the human resources aspect of it.
The second is not getting complacent. Like you just can’t get complacent on one particular thing. You have to be able to see what’s coming down the road and have a vision of what’s going to happen. And I’ve made that mistake most certainly. I mean, you and I were just talking before we started, you know, where I’ve taken my eye off the ball in terms of raising money.
So, you know, it should be an ongoing process and it’s hard because you get so focused on doing one particular thing and you forget about this other ball that you also need to be pushing down the road and you know, it’s a learning experience, you learn it and the good thing I’ve started to do is really kind of journal the things that I’m learning.
So that way I can go back to that journal and say, okay, this situation’s come up. How did that happen last time because my memory sucks sometimes? I don’t remember everything. So it’s part of getting older I guess, but you know, just so I can remember how I dealt with it and then was it positive or what did I learn that I could’ve dealt with it better. So those are probably two big things I’ve learned just over the last yea, but over the last several years the list is long and distinguished.
Mike: Yeah. And I think one of the key things you said there is, you know, you kind of said over the last few several months, you just have to be prepared to pivot. Like things happen and you have to shift. I mean it doesn’t mean, you know, I think at the end of the day, like you said, if you’re serving a need in the marketplace, people that maybe don’t have the best credit or they some credit challenges or they just don’t have established credit or whatever it might be, that doesn’t mean they’re bad people. It doesn’t mean they don’t have cash, it doesn’t mean they can’t make payments, but they have a need that government-subsidized financing is not available for them, which is a lot of people. I mean it’s a bigger audience than what anybody thinks.
And same thing on the sales side sale to you is like if you can solve a problem or somebody that’s like, hey these guys take our hard to sell ones because they figured out how to deal with it. Like once you figure that out that you’re a problem solver, the opportunity is not going to go away. It’s just going to shift but you have to be prepared to shift with it.
Ben: Yeah, exactly right.
Mike: Yeah. Yeah. Cool. So what would you say for people that are kind of wholesaling and rehabbing now or they’re doing kind of more traditional model and they’re interested in doing more creative financing and seller financing of things? How do people kind of shift a little bit and start to dip their toe in the water on that? How do they make that transition?
Ben: Yeah, it’s just going to come down to educating yourself. So learning that the owner financing piece which if anybody ever has questions about that, you know, Mike will cover at the end how to get reach out to me. I’m glad to answer any of those questions. It’s just educating yourself really.
I mean, I think a lot of wholesalers probably leave money on the table in terms of, you know, how they structure their transactions. I know a particular wholesaler in the Ohio market where instead of taking a full assignment fee, he’s creating notes out of his assignment fee. So where he’s going in a second lien position on the property. So he’s got cash flow that’s coming in and he’s definitely getting a piece of it upfront but he’s deferring some of it to create cashflow for himself.
So there’s all these little tricks that you can learn but probably the best thing you could do is just, you know, is really get good at networking, get yourself in, this is going to be self-promotion for Investor Fuel, but get yourself in a good mastermind group because you will learn things from people around the country that are doing things. And you’re like, yeah, Mike, why didn’t I think about that?
Sometimes it’s right in front of your face, but you can’t see it until you see it through somebody else’s eyes. So the biggest piece is just education, but you can educate yourself all you want, but unless you are willing to take the action on it, you know, it’s pointless.
Mike: Yeah. Right now we shouldn’t have to tie our goals to January 1st, but considering we are right at the end of the year here, off to start the new year, it’s a good time to maybe set some goals to like, hey, I’m going to try to do a couple of different deals that are structured like this in the next year or the first quarter or whatever it is to start a start to just kind of say, you know, just kind of throw down the gauntlet and say I’m going to do this. I’ve been thinking about it for years and I’m going to figure out how to do it now.
Ben: Yeah, just jump in. I mean, that’s all I did. I mean, I was just so eager to do something with real estate that was exciting. And you know, that I just jumped in with both feet and I was like, you know what, I’ll figure it out and it did. But certainly, you make mistakes along the way but I would rather continue to make mistakes and sit on the sidelines being too scared not to do anything.
Mike: No doubt. Well, Ben, you’ve been a member of Investor Fuel for a while now and you just kind of alluded to it, but would you mind just kind of sharing your thoughts on how it’s changed your business or how being a part of the network has maybe impacted you personally?
Ben: Yeah, it hasn’t changed our business much in terms of like, there’s a lot of diversity in the group in terms of wholesalers and there’s even people that do what we do, which is awesome to bounce ideas off of each other. But that’s the biggest thing is like getting together and you know, it’s almost like this family-style environment where I can go to you and say, Mike, my God, this is going horrible and you can give me a better view of it or you can redirect my attention towards the positive.
So my favorite thing about the last meeting that I was at was doing my presentation and saying, this is where I’m struggling. This is where I’m having a problem and ideas are just being thrown at me and stuff again. I said, you just don’t think of, you’re too close to it. You can’t see otherwise. Or those people went through the same thing and they’ve learned how to navigate it.
So it’s just, it’s shortening the distance to success when you have so many great people that are goal-oriented, want to win, want to see others when they’re willing to give to make that happen. It’s invaluable.
Mike: Yeah. Awesome. Thank you for that. Yeah, it’s, you know, they say, I don’t know if they say this, I say it, 100 heads are better than one. You put your hands together. And sometimes it’s, you know, one of the things that’s interesting about when you’re in a group like Investor Fuel is sometimes, it’s not even what somebody said, but they said something that made it just triggered something in your mind and make you think a different direction and you’re like, I just had this huge epiphany. It’s not even what they said. It just struck a chord somehow and made you shift.
So, you know, I think when they operate at the level that you operate at a group like ours, it doesn’t take much for a couple of little nuggets here and there to really kind of move the needle and help you up be kind of advance.
Ben: Yeah. I came to that group thinking, all right, I’m really doing something, and then you get in that room and you’re like, damn, I’m not even close to potential. And that was what I was looking for. I’m like, all right, if I’m getting comfortable, that means it’s got to go up a level. I got to get around people that are going to make me uncomfortable because they’re performing at a much higher level and I can talk to them and say, how are you doing that? I want to know more.
Mike: Yup. Yup. Awesome, Ben. Well, if folks want to reach out to you, learn more about what you’re doing, potentially even buy houses from you because you sell them to other investors. Where can they go to learn more?
Ben: Yeah. So all of our social and website is all the same. It’s just odellbarnesreo.com. That’s O-D-E-L-L-B-A-R-N-E-S reo.com. Odell is like our Yoda for lack of a better word and I’m the Mandalorian if you want to get Star Wars. So, but yeah, that’s Facebook, Instagram, website, all that good stuff. That’s definitely how you can reach out.
And if you want to learn more about notes, we are part of a note conference called NoteWorthy, so you can go to noteworthysummit.com and we’re going to be having a conference in February. So if you want to come out and learn more about notes and how you can get into owner financing or maybe use your self-directed IRA in a better fashion, come out and we’d be glad to help educate you and teach you some of that stuff.
Mike: That’s awesome. You said that event’s in Anaheim the next one?
Ben: Anaheim is going to be February.
Mike: Yeah. Well, we’ll add the so noteworthysummit.com. We’ll add links down below for all this stuff too, so hey man, thanks for spending some time with us today.
Ben: It’s my pleasure man.
Mike: Always good to see you.
Ben: Great holidays.
Mike: Yeah. Yeah. Everybody, thanks for joining us. I hope you got some valuable information out of this. The truth is, we didn’t talk about this much during the show, but I think, you know, as the market tightens up and we kind of shift forward and no matter what market you’re in, well, maybe if you’re in high dollar markets is a little more challenging to do some of the stuff we talked about here.
But for most markets around the country, I think that if you’re not doing creative financing type deals, then you’re leaving money on the table. You’re missing out on deals. Like this is really an evolution. I mean, it’s not like it hasn’t been around for a long time, but as the market shifts in this cycle, it’s kind of prime to start to shift some of your business in this direction again. So should definitely get to know Ben a little bit better. We appreciate you joining us. If you haven’t already, subscribe to us on iTunes, Stitcher Radio, Google Play, YouTube, anywhere where you could possibly watch this, that we’d love it if you subscribe, leave a positive review if you got some value today. And until the next show, have a great week.
Are you an active real estate investor? If so and you want to latch onto the power of surrounding yourself with over 100 of the nation’s leading real estate investors all committed to building stronger businesses and living richer, fuller lives, you should jump on a call with us to learn more about Investor Fuel. Simply visit investorfuel.com to get started.