Show Summary

This is episode #329 – and I’d like to start by saying Happy Holidays! Hope you have a happy and safe holiday season surrounded by loved ones, and getting ready to take the new year by storm!

My guest today is Steve Carlson, a San Antonio-based real estate investor with over 18 years of experience. There tends to be a lot of discussion in social media circles about specific “exit strategies” like wholesaling, fix and flipping, and even rentals, but maybe not enough discussion on what the right exit strategy mix might be for you.

To be a successful real estate investor, you truly need to have multiple ‘exit strategies’, or tools in your tool belt, to maximize your business and profits. That’s exactly what we discuss today – how to engineer your business to maximize profits.

This is a great topic, aimed at helping you most – please help me welcome Steve Carlson to the show.

Highlights of this show

  • Meet Steve Carlson, veteran San Antonio based real estate investor.
  • Learn Steve’s exit strategies, why it makes sense for him, and how you can determine the best mix for your real estate investing business.
  • Learn Steve’s opinion on the biggest mistake new investors make, and how to overcome it.
  • Listen in as we discuss the importance of having multiple exit strategies, and how those may change during market cycles.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: This is the Flipnerd.com Expert Real Estate Investing Show, the show for real estate investors whether you’re a veteran or brand new. I’m your host Mike Hambright and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is episode number 329 and I’d like to start by saying, happy holidays. Hope you have a happy and safe holiday season surrounded by friends and loved ones and hopefully you’re getting ready to take the new year by storm. My guest today is Steve Carlson, a San Antonio based real estate investor with over 18 years of experience. He’s learned a few things along the way which he’s going to share with you today. There tends to be a lot of discussion online, on social media circles, Facebook groups, that talk about specific extra strategies like wholesaling, fix and flipping, rentals. But very few kind of bring it all together which is how the real word works. Not enough discussion on what the right exit strategy mix might before you.
Now, to be a successful real estate investor, you truly need to have multiple exit strategies or to use a little bit of a cheesy cliché, tools in your tool belt to maximize your business and your profits, and even minimize risks. That’s exactly what we’re going to talk about today, how to engineer your business through extra strategies to maximize your profits. It’s a great topic aimed at helping you most and helping set you up for the new year, give you a change to think about these things. So please help me welcome Steve Carlson to the show. Steve, welcome to the show.

Steve: Hey, Mike, good to see you again, man.

Mike: Yeah, yeah. How are you doing?

Steve: I’m doing great. It’s been a good week for us, a good month for us. Well, man, November was a good month for us I should say. So looking forward to a good December as well.

Mike: That’s great, that’s great. Well, you’re just down the road from us in San Antonio, so I know you and I are in a group together. We’re about to go out to Colorado which I’m looking forward to other than the temperature.

Steve: Yeah, yeah, me too.

Mike: I think you look to it.

Steve: I got my little beard going, maybe it’ll protecting me a little bit. At least it looks good. That’s what my wife said.

Mike: I haven’t been shaving my legs in kind of anticipation of this trip.

Steve: Good thing. It’s going to slow you down on the slopes.

Mike: Cool, man. Well, hey, I’m excited to talk about extra strategies today and learn a little bit more about your model and how folks that are listening to this can apply different extra strategies. Because, you know, a lot of newer folks, maybe a lot of people listening to the show or even some veteran folks that we probably know like, there are 100% of wholesaling or 100% rehab and I’ve never really understood that. I know you have to have different exit strategies based on things like, if it fits your rental model or if it’s too low level or too high level, you probably don’t want to rehab it and take on that risk. So there’s a lot of different reasons. So let’s just talk about kind of exit strategies mix and really how to make the most out of your business and how to monetize more deals. So it’s going to be a good conversation.

Steve: Yes, it is. It’ll be a lot fun stuff.

Mike: Steve, before we kind of get started, can you tell us more about you and your background? I know you’ve been investing for, I think you said about 18 years, which is awesome. So tell us about your background and how you got started and a little bit more about you.

Steve: Yeah, I got started . . . actually, I bought my first house in 1992. I graduated from college in ’90, I think. And within six weeks of being on that job with a whole bunch of smart, smart engineers, I realized I’m not going to do this the rest of my life. And my boss pulled me aside. He said, “Steve, you’re going to have nervous breakdown if you don’t change your attitude or your outlook.” And one of my cube mates gave me a book called, “The Magic of Thinking Big,” and that changed my life. And I started reading other big classics like that, and they all had a real estate undertone. So I guess in ’92, I bought my first house. Being an engineer, it took me a year and a half to pull the trigger.

Mike: Is that because you were an engineer? You overanalyzed it?

Steve: I’m sure. Absolutely, absolutely. You’ve got to know everything before you start, was my attitude and how crazy that is. That’s just not a good attitude to have, I don’t think. You’ve got to know some stuff but you don’t have to know everything.
So we did a little bit in the ’90s. I got, kind of, sidetracked with the entrepreneur bug. I thought I’d do this and do that and none of those really worked. So in ’98 I got back on track. I still had a fulltime job. We started buying and flipping about five to ten houses a year starting in ’98. And I realized after a couple of years of doing that with the fulltime job that this is just another dang job. And I didn’t want another job. I wanted to get out of the job I had but I couldn’t at the time for lots of different reasons.
So I started buying some rentals too. And then when I started buying those rentals, we leveraged them. We put debt on them and it didn’t take me long to realize that those rentals didn’t cash flow a lot, were dead on them. There was not a lot of cash flow. So after talking around with some other folks, we started realizing that cash flow is in owner financed houses. So we kind of morphed the model over a period of time. Then I quit my job in 2009 and just did amazing amount of business for the next bunch of years.

Mike: Yeah. When you were, not to get too personal, but when you were considering quitting your job, I mean, were you still in that mentality, the engineer mentality, which is probably that you could do it better than anybody else and you kind of get in your own way a little bit, probably relative to where you are now?

Steve: Yeah. That’s a good question. I realized at that time, when I was ready to quit my job, I could pull a switch on marketing and get the leads in. So I was 100% confident that if I just spent more money on marketing, I could make more money in real estate. And I had a very, very supportive spouse. And the economy downturn, I had to just got to parachute from my job, six months of pay, and I knew I could make it happen.

Mike: Yeah, good. Well, we’re talking about exit strategies today. So the traditional ones are kind of wholesaling, rehabbing, fix and flipping, keeping houses as rentals. I know you do some seller financing and a lot of folks do seller financing. Let’s talk a little bit about, kind of, your mix.
And I think that, like I said, a lot of people will get started and are like, “I’m going to wholesale everything.” But you and I both know that, I think you made a comment before the show [inaudible 00:06:50], “I don’t know many rich wholesalers,” which is a good way to started. It’s a less risky way to get started. But it’s true. If you’re not keeping some houses as rentals or finding a way to make two or three times on some deals that make sense in other ways, then you’re missing out probably. But let’s talk about kind of your model, your exit strategy mix and then maybe we’ll talk about how that’s evolved over time.

Steve: Yeah. So basically if the house, Mike, is worth less than $80,000, I’m going to sell it on payments. I’m going to sell it with owner financing model. You know, Mitch Stephen, he’s been on your show.

Mike: Yeah, Mitch has been on before, yeah.

Steve: I’ve learned a lot, excuse me.

Mike: In your backyard too.

Steve: Yeah, absolutely yes. I learned a lot from Mitch, and I learned from some of Mitch’s partners and some of Mitch’s mentors. I’ll tell you, the richest guys I know in real estate all sell houses on payments. Every one of them, of the riches that I hang out with, I should say, they sell houses on payments. For me, those houses, when you’re selling them on payments, excuse me, that income eventually goes away, because those houses pay off. So what are you going to do when they pay off? You’ve got to go to sell more houses. You’ve got to keep working.
So if the house is worth between $80,000 and $120,000, at least in my market in San Antonio, much of San Antonio, I mean Texas, and a whole lot of other parts of the country, that’s a perfect niche, perfect sweet spot for rentals. Because people will pay, your tenants will pay and they’ll stay. We’ve got some 15-year tenants. I mean, it’s amazing how long some tenants can stay. So they stay, they can afford the payment obviously. But the margins are great. You buy $100,000 house and rent it for $1,100 or $1,200 a month, that’s excellent margin. And on that note, if the house is less than $80,000, we’re owner financing it because I don’t want to deal with that subset of tenants. I’ve had them, man. I’ve had $50,000 duplexes and ahh . . .

Mike: I’ve got them now. So the significance of $80,000 and under a year owner financing, rather than renting, and then kind of $80,000 to $120,000, you’re keeping them as rentals. So let’s talk about that kind of break there. I guess some of it is the maintenance on houses at that level is probably more significant because it’s an older house, usually. And then the quality of the tenants, as you’re just saying . . . I mean, I don’t know how to say it, besides just to say it. That’s just probably a lower quality tenant that’s going to cause more drama for you?

Steve: Well, that’s the deal. I mean, you get a nice return on your investment. The tenants stay and they pay. The material cost for rehabbing are pretty low because we’re not pimping it out to granite countertops new backsplashes. And the biggest thing though is it’s long-term wealth. This is your forever cash, as I think I heard somebody say one time. I don’t remember who it was.

Mike: Probably Jack Bosch, sounds like Jack’s book.

Steve: Yeah.

Mike: So you’re saying with rentals, or with seller finance?

Steve: I’m sorry. Repeat the question.

Mike: You’re kind of referring to, like that’s your forever cash. You’re saying more with your rentals or with the seller finance?

Steve: Absolutely. No, the seller finance stuff pays off.

Mike: Right.

Steve: The forever cash is the rentals. That’s your long-term. That’s the end game. That’s the retirement.

Mike: Yep. I agree. I think you’re right. I think when you said, you realized that your rentals don’t, especially earlier on, they don’t generate a lot of cash. But for me, rentals have always been a long-term play. I guess it’s my ultimate exit strategy, strategy exit from whatever it is that I don’t like to do anymore.

Steve: Yeah, no one’s moved out. When we sell a house on payments, my average income is about $375 a month, even leveraged if we sell it on payments. If we rent a house, my average income is about $150 a month. So my rental portfolio doesn’t make a lot, but my owner finance portfolio, we really love that one as far as cash flow goes. But when all the rentals have paid off, then we’re done.

Mike: Okay. And you did some rehabbing too. So let’s talk about . . . Above a certain point, houses just don’t cash . . . They cash flow even worse, right? You don’t want a half-a-million dollar house because your rent is going to be less than your payment probably. So talk about that break for you, where that’s at.
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Steve: For me it’s a 120 in our market and lots of other places because above 120, you have buyers that can qualify for loans. They generally don’t have huge credit issues. So you’ve got to . . . and you have a huge buyer pool. So they can get loans. Banks like to lend on houses worth $100,000 or $120,000 or more. So banks like them. And you get good buyers and the rental margins start squeezing down above $120,000 because you’re not going to rent out a $150,000 house for $2,000 a month generally. So the margins for renting are not there. So there’s a big demand for buyers, even first time buyers, and move up buyers. So huge buyer pool for the $120,000 houses.

Mike: Yeah. And how about what you do? What do you cap out at, because historically, this isn’t the case for me anymore, but for many, many years, I never really wanted to rehab? I tried to stay under $200,000, then I crept up to $400,000. And I’ve bought some houses a little bit higher than that. We’re in Texas. I mean, there’s plenty of houses that are multimillion dollar houses here, but they don’t usually call us. So we get a crack at some high end deals every once in a while but is there a point that you just won’t go past because it does get more risky, right?

Steve: It absolutely does especially in this environment, I think, Mike. You know, I’m hearing a lot of news about the higher end houses being slow, slow to sales. As a matter of fact, I had a guy call me three times trying to sell his $800,000 house. He was practically begging me to buy his house but he wouldn’t give it to me for $400,000. So my max is about $350,000 [inaudible 00:13:54]. That’s where I like to be. I did a $550,000 house a couple of years ago. Lost money on it, and I will never do it again.

Mike: Yeah, there’s a lot of assumptions from newer people that like, the higher the value of the house, the more money you could make in. That’s just an academic view because when you start to realize that your materials costs are going to be so much higher, it’s going to be put through the ringer with inspections and . . . Because people at that level, they want the house to be perfect, unless you’re selling it at a discount. And most people that are buying those move-up houses, second, third house, they’re trying to leave a problem. They left a house that was imperfect and they want one that’s perfect right now. And you’re competing with new-builds and stuff like that where they expect it to be like a new building. If it’s older house, it’s never going to be a new building, right?

Steve: Yeah. And, you know, our margins for these, for the lower price, for the $120,000 and $150,000 houses are pretty nice and there are really, good margins on those. Buying a house for $40,000 and fixing up and sell it for $120,000. We’ve got $40,000 into it and $45,000 or $50,000 sometimes but those numbers work. On the $350,000 houses, you’re buying them for $200,000 and putting another $75,000 into those. The margins get skinnier. They’re more expensive than these.

Mike: Yeah, you’d rather do two or three other smaller deals for sure, yeah, that are more predictable.

Steve: Any bigger the weak.

Mike: Yeah, we have a guy. Just this week, we were looking at a house. Somebody called us but we never even went out there. It’s out in the sticks. So it’s like way outside town. It’s an 8,000 square foot house. It’s ridiculous. And we’re like, it’s the biggest house in the whole like 15-mile radius by far. It’s only . . .

Steve: Tag on a $20 square foot rehab onto that and where are you?

Mike: Yeah, exactly. So they have an appraisal at $1.5 million. But if you look at the comps, like everything that’s on around there is like $130,000. Like there’s nothing even anywhere close to this because they’re much smaller houses. It just sticks out like a sore thumb and they’re trying to tell us how unique it is. And we’re like, “We actually don’t like unique. We want something that’s predictable. We don’t want to be the first of anything. We don’t want to be a pacesetter. We want to be a follower in this business.”

Steve: Yeah, for sure. We were just talking about stuff the other day.

Mike: How have your extra strategies changed over time and what’s kind of cause those changes? Because I’m sure, as you mature as real estate investor, you kind of hone in on what makes more sense for you. Like some people that do more wholesaling ultimately learn that I can make more money doing this. So you learned that if I sell and finance more houses versus keeping them as rentals, then there’s some reasons why I should do that more often. So how has that changed over time and why?

Steve: I grew up in a small town. I grew my investing career in a very small town, and I had a couple of significant competitors in this small town. And so every transaction that came to me, I had to make it work. I had to figure out a way. How can I make this transaction work? How can I help this seller?
And so, we were just doing almost anything that came in front . . . We were just trying to get creative. And I didn’t want to wholesale anything because I didn’t know much about wholesaling in ’98. There wasn’t a bunch of wholesale. There was no corporate wholesalers for sure. And so I didn’t . . . I could sell them to my competitor but I didn’t want to sell them to my friendly competitor. So wholesaling wasn’t ever a significant part of my business model. Today we do three or four wholesale deals a year but that’s . . .

Mike: I think it’s generally, it’s harder in a small town to wholesale because there’s not a robust eco . . . So like in San Antonio metro area is, like, 3 million people. When you get in a bigger metro area, there’s every layer of real estate investor. There’s a whole ecosystem that kind of feeds each other. But when you’re in a small town, if there’s investors that generally or probably buy more off the MLS and just using the traditional model because there’s not that kind of underground ecosystem, right?

Steve: Yeah. Let me get back to your question about how it evolved. I really just wanted to flip. In the beginning, I was just trying to flip everything that I could. And ’98, ’99, 2000, we could sell houses with a new loan for $40,000 or $50,000. So we did. We did it all quite a bit. And then like I told you, I was flipping everything and I had no cash flow. So it was a big time job. So rather than just cashing out anything, I wanted to keep some rentals.
And when I realized that those rentals didn’t make a lot of money, I started hanging out with my friendly competitor who was doing really good. After three years of him and I doing this business together, we came on the scene at the same time, he was free and I was far from free. But what he did, like I said, he owner-financed houses. It was just . . . Knowing what he did and how he got free helped me change what I wanted to do and how I saw the end game. So we had some market changes which forced me from flipping, fix and flipping $50,000 houses. You couldn’t do it. And then just my financial position changed as well. I didn’t want another job. I wanted more passive income.

Mike: Right. Yeah, one of the challenges with keeping rentals early on too, as you probably sensed, is that you have costs you have to cover. So if you keep everything as rental, you’re not ringing the register to pay for your advertising, to pay for that ad man or whatever you need. So it’s hard to . . . I know a lot of people that get started in this business, they’re like, “Well, I’m going to keep everything as a rental.” It’s like, they don’t cash flow much early on. You’re not getting huge down payments like you do with seller finance. So how are you going to cover your machine if you want to keep doing that, right?

Steve: Right. And that’s why you’ve got to have a mix. You know, I don’t suggest that everybody start off with a mix. But I do suggest, much like Charlie Munger suggests, is that . . . Let me get to this quote that I wrote down here below my screen. But Charlie Munger, you know, he’s Warren Buffet’s right hand. He said, his key philosophy was, and mine is, “Stay within your circle of competence,” which is real estate, “but constantly strive to widen it.”
So that’s a pretty wise piece of information. You just wholesale your whole life, you’re going to . . . Maybe you have a business at the end of it, but it’s going to be a big business with a lot of moving parts and pretty complicated that you could possible sell, but it’s just this transaction thing. If you just have a flipping business, again, same thing. It’s just a transaction business. So you can never really retire unless you make billions or millions and millions and millions.

Mike: So you need more than a billion to retire, is that what you’re saying?

Steve: No, that’s kind of slender, [inaudible 00:20:58].

Mike: I’m going to have to come down and visit you. I don’t know what’s going on down there.

Steve: Remarketing.

Mike: Yeah. And markets change too. I know, for example, the last couple of years, we haven’t been keeping a whole lot of rentals in Dallas because I’d have to pay two to three times for houses I have on the same street that I paid two or three times less for, even three, five years ago. So we’re doing more wholesaling and more fix and flipping. And then I think, if the market dips back down, I don’t if that’s going to happen or not. It feels like it’s never going to happen in Texas, right? But if it does dip back down, then we’ll kind of lean back into rentals a little bit more again.

Steve: When opportunity knocks.

Mike: Yeah. I say that all the time. We’re in the opportunity business. You’ve got to find ways to monetize those deals anyway you can.

Steve: It’s ever changing. It’s a slow changing machine sometimes. But sometimes it’s quick.

Mike: Yeah. But hey, Steve, real first, I’ve got kind of a question of the week that I want to ask you. So the question is, what is the biggest mistake that you see new investors make? With the experience that you have, what’s the biggest mistake you see new investors make today?

Steve: Well, I think a lot of people get started in the business and all they want . . . They hear about wholesaling. They hear about these massive checks from wholesaling. So I think getting stuck into the mindset of making $50,000 on a wholesale deal is a reality. In my market, it’s not. In other markets, you talk about San Diego and the East Coast, West Coast, there’s, okay, possibility. But in the Rust Belt, so to speak, those big checks are not going to be there. So it’s going to be a lot of effort.
This business is simple but it’s not easy. It takes effort to make this thing work. I remember, when I was just getting started, I would get stress headaches on Saturday if I wasn’t working. And I had this conversation with my wife the other day. it’s like, “Man, I wish some more people would be that way because it really . . .” When I realized that’s what going on, I get a headache on Saturday and it’s because I’m watching football, but I know I need to be out driving for dollars or something like that. It takes effort. So maybe that’s probably the biggest lesson. It’s simple, doesn’t take a complicated individual or super smart guy to get it done, but it does take effort.

Mike: And did that evolve over time? Are you saying that it takes that fire in your belly or that fire under your ass, I guess, to keep you going?

Steve: Yeah. No, that didn’t evolve for me. I mean, it was there after six months of being an engineer, I realized, crap. “I’m not doing this man. I’m surrounded by a bunch of super smart guys. I’m not as smart as they are.” At least I didn’t feel like I was. Now I know I’m way wealthier than 90% of those guys are and I’m free. You know, I can go to the office when I want and work 50 hours a week or work 20 hours a week. It just depends on how much I want to make.

Mike: Yeah. Well, Steve, let’s talk a little bit about, in terms of exit strategies, let’s talk a little bit about, for folks listening here, that are in San Antonio, they’re on the East Coast or the West Coast or somewhere that’s a more expensive market where it doesn’t make sense to keep rentals, maybe probably doesn’t make sense to owner finance as much as it would be in the Midwest or Southeast or Texas, let’s talk about kind of the rule that geography and maybe even like access to capital . . . because obviously, if you’re owner financing, you’re probably borrowing that money from somebody else. And so just access to capital and geography, and some other things that might play a role in extra strategies, help people kind of think through what that might mean for them if they’re in different parts of the country.

Steve: Again, East Coast, West Coast, owner financed house it doesn’t make as much sense. You can still do it and maybe get close to some margins but it’s going to be pretty rare. If you’re willing to travel a little bit or do stuff in Indiana, for example, not San Antonio, then you could be a remote investor. So in those markets, I would just focus more on flipping and maybe even some quick cash and some wholesale deals because I know there’s wholesalers making $10,000, $20,000, probably averaging $20,000 or $30,000 a deal out in the East and West Coast houses. But, they’re going to make a lot more doing flips but then you have to have the access to capital. And without the access to capital, it does have to be more quick transaction type of business.
But let me tell you, capital right now, Mike, and you know this, there is so much capital out there if you will just get out there and flap your lips. There’s a ton of money at the Quest, the IRA mixtures, and Equity Trust mixtures in there and I’m sure there’s a whole lot more that I don’t know about. But all these IRA administrators, they’re out there drumming up more business at their own events and they’re attracting people with money.

Mike: The missing link is the investor that wants to borrow that, right?

Steve: Yes, often times it is. I mean, right now, I have more money on the sidelines from private investors than I can put to work right now. It’s a crazy thing. I have them coming to me and asking me, “When is your next deal coming?” Or, hey, I had a guy call me the other day that I haven’t talked to, used to work with him. He called me. He said he’s got a huge tax bill every month because he’s making so much money in the oil business right now and so he needs to put money to work. And so I really think there’s plenty of access to capital if you’ll give it out there and do a concerted effort to get it. It’s not just going to come find you. You’ve got to put in effort to go find it. But it’s not difficult. It’s that simple. It just takes effort.

Mike: Yeah. I know we don’t have time to talk about today or exactly what your model is but we had a couple of different episodes with Mitch. For those of you that are leaving, Mitch Stephen who Steve knows well, on the show before, where he talks . . . In fact we talked . . . Mitch is the only person that I had on the show and half way through the show I realized we have more than a half of the show left. And it was so good. I literally just hit pause and I said, “Hey Mitch, we’re going to turn this into a two-part show, all right.” So we just kept going.

Steve: Were you talking real estate or were you talking hunting?

Mike: No, that was real estate. If we had added in some of his other obvious, it would have been a four-part show. But anyway, for those of you that are listening and that want to learn more about seller finance, Mitch trains a lot of people and has a coaching program and has done I think around 1,500 properties or something like that now, not that they’re all seller financed but he’s done a lot. But he shares a lot of tips on seller financing and raising private money and he has a couple of books out too which are good books.

Steve: They are. They are fantastic. So great.

Mike: Well, where do you think the market is going from here?

Steve: You know, what I’m hearing, I don’t study the market so much, but what I’m hearing, I study other people that study the markets, is that the high end stuff right now, the expensive stuff, and I’ve confirmed this locally, is slowing down. So you’ve got your high end houses slowing down. I don’t how that’s going to trickle down to the average priced or medium priced house. So I really don’t know, I don’t have that feeling in the short term. But we know the high end stuff has dropped at least days on market and probably prices.
So, I’m a little a bit nervous about that. I do believe that we’re going to be . . . I personally am prepping for a 2020 downturn or a 2021 downturn. That’s when I’ve . . . From everything that I’m hearing is a possibility of it happening then because real estate goes in cycles of course. And in Texas, we’re relatively insulated from the big drops and the big increases but the Coasts, I think, are going to see a big drop, downturn around 2020 or 2022. That’s just what I’m hearing. And it’s going to trickle down to the low end stuff at that time, I think.

Mike: Yeah, the interesting thing about . . . So this isn’t just Texas, but the low end stuff that you’re talking about, I mean, everybody knows, I don’t care what the government says, there’s inflation going on. In basic materials and things like that. No doubt about it. You’ve seen in your business. I mean, I talk to my contractors. They’re like, “You know, we used to pay this for a two-by-four and now we’re paying this,” and it’s incredible really. Now, technology and your iPad and stuff like that, that stuff keeps coming down, but well, that’s not the business we are in.

Steve: No.

Mike: But the things about these low end houses like this, and this is one of the things I love about it for rentals or even owner financed, I don’t do any owner financing but there are days when I work and I want to owner finance my whole rental portfolio. I’m like, “We’re going to get out of there.” We’re in these houses for well below build price.

Steve: Yeah, look at these margins.

Mike: Those houses, the rents are not going down. The prices are not going down because they are well below the build price. Unless there’s massive deflation, which I don’t think there’s going to be, we’re pretty safe.

Steve: Two things on that point. Probably the most successful long-term realtor I’ve ever worked with, I asked him one time. I said, “Joe, why are you always working these $80,000 to $100,000 houses even cheaper,” and he said, “Because the market never declines for those.” For the cheap houses. The market is always . . . Excuse me. That’s my money phone ringing, dang it. The market is always good for the low end stuff. And think about it. We are buying these houses for $30,000, $40,000 and selling them for $60,000 to $80,000. So there’s not a lot of downturn to go. If it goes down 10% or 15%, so what?

Mike: Yeah. And if you’re owner financing or if you’re renting, it’s not even going to impact you. I mean, your financing is probably locked in. I was worried a few years ago because a lot of our rental financing, even for most people I guess, is variable rates. So the rates adjust in five years. We’ve had a number of properties adjusting over the past couple of years. The rates are adjusting down.

Steve: Mine too. I’ve got some soft balloons that happen every five years and they keep going down.

Mike: Yeah. Awesome.

Steve: I don’t think we’re going far with rates. I don’t think rates are going to change for quite some time.

Mike: Yeah. Well, Steve, thanks for sharing all your insights with us today. If folks wanted to learn more about you and they want to get a hold of you, I know you have, this is not going to look good on camera, if anybody’s watching, but I have . . . Steve has this report here on exit strategies and how to think through that stuff. And I think he said that folks wanted to get access to it, you tell them how to do that. And then just tell where they would go to learn more about you or your business.

Steve: You know, I’m not a marketer. I don’t have a product. I’m not going to spam people with a bunch of stuff but I put together this report because I may start a coaching programs here shortly, Mike. It could be a couple of months, three months. So I kind of put that together to explain what I do. But they can go to my rep website, sarealestatedeals.com

Mike: SA for San Antonio, yeah, okay.

Steve: Yeah. And slide down to the bottom of that page and put your information in and you’ll get a copy of that free report. I think it’s really, really a good report. It’s basic but it outlines what makes sense.

Mike: Yeah, I think it’s important for everybody to realize . . . And out of nowhere here in my building here there’s a saw behind me. I don’t know what’s going on. I can see some guys are doing some work on the second floor. But you really need to have a mix of exit strategies with what you do with houses. You need to have, “Okay to use,” kind of a cheesy cliché but you have to have multiple tools in your tool belt in this business, right?

Steve: I don’t think that is cheesy at all. I think that ought to be on your wall. Have multiple exit strategies for doing deals. If you just want to get locked in to one thing, that’s fine. Like Mitch, I know he does more than owner financing but he does mainly owner financing. And I know a lot of other guys that are niched out and doing well. But I’m telling you, the opportunity is for being creative and figuring out how to make this deal, this $30,000 deal or this $190,000 deal work. I think that’s where the opportunity is.

Mike: Yeah, absolutely, absolutely. Awesome, Steve. Well, hey thanks for spending time with us today. Definitely appreciate it.

Steve: I enjoyed visiting with you.

Mike: Yeah, and everybody thanks for listening in. If you’re listening to this show as it was published, we’ll basically say, I hope you have a merry Christmas here because Christmas is just a couple of days. No matter when you listen, we appreciate you. Thanks for joining us today with Steve Carlson, episode number 329. Everybody have a great day.
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I'm the content manager here at FlipNerd.com and have a passion for real estate investing and have a background in writing and business. I focus on providing content that is aimed for newer real estate investors and those who have the drive to become a full-time real estate investor. With so many strategies to utilize within the real estate investing industry, I aim to break down any barriers and showcase that real estate investing is obtainable and can truly bring financial freedom.

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