If you’re looking to learn how to find real estate deals from any lead list, no matter what turns the economy takes in 2022, this episode is a must-watch.
Multifamily real estate investor and BiggerPockets podcast host Henry Washington joins Chad Corbett to discuss real estate investment strategy, mindset, and marketing-musts.
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Where to Stream: Finding real estate deals in 2022 with BiggerPockets Henry Washington
Ask The Expert Segments: Finding real estate deals in 2022 with BiggerPockets Henry Washington
0:00 Introduction: Real Estate Investing Mindset with Henry Washington
1:41 Using Community Banks, HELOC, BRRRR strategy to fund deals
5:30 How to find real estate investment deals: Think like a wholesaler.
7:23 The snowball effect of marketing in real estate
8:39 Wealth through real estate investing vs. wholesaling for cash now
13:25 Free and clear properties from tired landlords with portfolios
14:48 Real estate coaching: The fear of getting started
18:14 How to market to motivated seller leads and find deals from any list
20:18 Tired landlord script example: How to buy portfolios
29:20 Finding real estate deals in 2022 as the economy shifts
38:38 How to pitch sub2 financing in 2022: Creative Financing USP
46:39 Can you retire through real estate investing at age 40?
TRANSCRIPT for Finding real estate deals in 2022 with BiggerPockets Henry Washington
Henry Washington and Real Estate Investing Advice for New Investors
[00:00:00] Introduction: Real Estate Investing Mindset with Henry Washington
Chad Corbett: Hey guys, Chad Corbett from probate mastery here. Listen, I just finished doing an amazing, had amazing conversation with Henry Washington, a real estate investor who’s now 41 years old. Started at 36 years old with a thousand dollars bad credit and no experience in real estate. I missed the whole part of the conversation.
Thanks to zoom, actually locking up and crashing. Um, I was lucky enough to catch the second part of it, but I wanted to make this intro. You’re gonna jump into this conversation after we’ve already talked about his first deal. How they leveraged his wife’s 401k because he was not credit worthy enough to even buy a primary residence with a conventional loan or an FHA loan.
So Henry was smart enough to think outside of the box, instead of going too hard money, he went to his wife’s 401k, and borrowed it. They made that money back plus interest got into the first home. Got it leased up. And then he, he discovered that you could walk into community banks and get loans off the commercial side.
You’ve heard me talk before about DSCR debt, service coverage ratio, and loans that you can get on the commercial side of community banks. So that’s a poor summary of the first probably 15 minutes of a great conversation. Um, but it got better. So I wanted to make this intro apologize for losing, the front of that.
And, uh, Henry, sorry about that. Uh, you know, technology is technology never had that happen with zoom before, but it happened today. So guys I’m gonna, I’m gonna shut up and let you jump right in. It was a great conversation. I hope you learn a ton from it. leave some comments, and let us know what you think about it.
And, uh, let us know what you would like to have Henry back to talk about next time. Enjoy.
[00:01:41] Community Banks, HELOC, BRRRR strategy
Chad Corbett: So you did the impossible, you, you, uh,
stepped into real estate with no money, no credit used creative financing, and then went straight to community banks.
Nobody believes that story!
Henry Washington: [Laughs]
Chad Corbett: we, we all have our, our sweet spots. I mean, as I said, I focus on those $1 billion to $3 billion banks.
you’re a billion or below, but now we’re both going business with the same bank. That’s huge on a balance sheet but still acts like a community bank.
This house that I’m standing in, I just finished. The replacement cost was probably 165. I bought it for 25.
Henry Washington: Hey !!
Chad Corbett: Yeah.
And, uh, I was going to use a line of credit, like this thing is every inch of this house is custom-built, every single inch.
but I don’t have a dime in it.
I took home an equity line of credit through the first citizens’ bank off of another probate house I had.
And I paired that with, I was in the lobby at first citizens and they had this poster for a home improvement loan. I’m like what’s that?
And they’re like, oh, that’s for, you know, uh, $50,000 loan at 3.49% unsecured, no underwriting.
And I’m like, What, can I get that for my LLC? And she’s like, no, that’s for homeowners. And I’m like, great. I’ll be right back. I went to the attorney’s office. I quitclaimed the damn house out of an LLC to myself.
And so I had a home equity line of credit on another probate house. And then I, I quit claim this to myself and.
Put that money together. So I did like a full custom rebuild. It was a concrete house and we took it completely down to the concrete and started over. but you can get creative even with community banks and the commercial side of banks. So I always like to underscore that with the few investors who figured out how to play the mainstream finance game instead chase chasing around hard money, private money.
I love being the lender on hard money loans, but being the borrower sucks. I mean you’re saying you’re paying two to four points and 10 to 18% interest. Like it sucks. It’s fun on the lending side Cause it’s like a payment.
So from there, uh, have you, are you using the BRRRR method? Like what LTV are you putting on these?
Henry Washington: Yeah, man. I don’t quite BRRRR because when I hit the refinance portion, I’ll typically just leave the money in and, and grab a line of credit on the equity.
I don’t like selling my equity unless for some reason I need to.
Chad Corbett: Dude we’re on the do the same thing. So I, I BRRH with a
Henry Washington: Yeah exactly
Chad Corbett: So I like having equity It looks like I like having on a balance sheet, but I also like having liquidity. So as soon as I get a project finished and I know I can get a ridiculous appraisal on it, then I’ll set up a home equity line.
If you’re not doing HELOCs with first citizens, they’ll take you to 89.9% at prime plus one and a quarter. well, there’s a caveat. If your credit score’s over 750, I believe it is.
Henry Washington: Yep. Yep. That’s amazing.
Chad Corbett: So I’ve got 89.9% HELOCs on every property they’ll give me one on, because why not have strike capital? I mean, that’s a great example.
I was like, wow, I, I have the cash, but why the hell spends it at 3.29% or whatever it was.
Henry Washington: Right. I’m not, I’m not living off my real estate money. And so I don’t need to refinance it so that I can have it in my bank account. I’d rather just get the line of credit, leverage that if I need it, keep my equity, keep my cash flow higher because I’m not refining at a higher price, and it’s cheaper money, right?
Cuz when you refi your interest is front-loaded on those new mortgages for the first five years. And so it’s much cheaper money to just go ahead and HELOC it.
Chad Corbett: Yeah. The way I look at it is I’ll pay interest on that money when I need it. I don’t pay interest on cash sitting in a bank account. That’s not. That’s not that smart.
[00:05:30] To find real estate deals, think like a wholesaler.
Chad Corbett: So we’re a few properties in now. let’s talk about scale. That’s where a lot of people can do one deal or two deals.
Tell us about some of those hurdles that it took from a couple of deals to doing deals at scale and being able to comfortably walk away from a six-figure job in technology.
Henry Washington: Yeah. So, looking back, I’ve kind of been able to discern how we got there. You know, there’s always, there are two hurdles with real estate, right? There’s deal flow, right. And money flow. And if you can solve deal flow and money flow, then you can scale as quickly as you want to,
as long as your processes and systems will allow you to do so.
when I first started researching, as I told you, I spent that 90 days before I did my deal researching here’s the thing that. The thing that caught my attention. As I surrounded myself with investors who were taking action,
every one of them would always say,
I’m always looking for a deal.
It’s hard to find deals. It’s hard to find deals, right?
Even the ones that were crushing
and then all the ones that weren’t crushing it and hadn’t done the deal would use the, I can’t find a deal as an excuse.
And so I figured, all right, well, worst-case scenario,
that’s a problem people need help solving,
WHO was solving that problem?
And what I learned about who in the industry was solving that problem, was that wholesalers were the ones providing deals.
And I said, well, what the heck are these wholesalers doing?
And that’s when I dove into all the direct-to-seller marketing methods.
And I was like, cool – I’ll just operate a business like a wholesaler, except I’ll just keep it all.
And then if I want to get rid of some, I’ve got a room full of investors who keep screaming about, they can’t find a deal,
I’ll just sell it to them. And so it was like a comforting strategy to me to know that like,
I’ll solve the deal flow problem, and then sell all the ones that I don’t like, and then still be able to make money on them.
And so, pretty much from day one, I operated as a direct-to-seller marketer,
kind of like a wholesaler, but I never really wholesaled anything.
And the lessons I learned there,
[00:07:16] The snowball effect of marketing
Henry Washington: Well, the first hard lesson I learned was, that marketing for deals is like a snowball. It’s hard to get it going, but once you get it’s going, you get this momentum.
And so my first year in the business, I would get a deal, stop marketing, focus on my deal, and monetize it.
Then I’d start marketing again, and it would take forever and I’d get a deal. Like it was just kicking my butt. And so then I had to learn to just be relentlessly consistent with your marketing.
Um, cuz I was operating still. I knew I could sell deals to people, but there was still that fear, that scarcity mindset in the back of my mind. That’s like, well, you don’t want to get too many deals. What if you –
No, man. Now, I tell my students too. I’m like
When you’re hitting a point where you feel like your marketing is kind of stagnant or you’re just not getting that deal, spend more money and more time instead of less money and less time, because that snowball’s gonna start paying off. And before you know it, you’re gonna be trying to figure out how to make all this money with all these deals you’ve got on your plate.
And so now we just never, ever stop. It forced me to put processes in place to make sure that
a) you’ve gotta be able to honor the leads that you get.
cuz it doesn’t matter how good you are at finding deals. If you can’t handle the lead flow, then you’re wasting money, you’re wasting people’s time.
and b) then we solved the money problem by the commercial banks were just ready to give me money because I kept bringing them such stellar deals.
And so it allowed me to scale at whatever pace I wanted to scale at.
My strategy for the past three years is to market, market, market. We sell the singles and keep the multis.
[00:08:39] Wealth through real estate investing vs. wholesaling for cash now
Chad Corbett: So how old are you now henry
Henry Washington: 41.
Chad Corbett: 41. So at 36 years old, you started this with a thousand dollars
and insufficient credit to get a primary mortgage. And you guys know that that’s a low bar.
He still had the presence of mind because, after 90 days of research,
he had the presence of mind to resist the instant gratification of a wholesale check to pursue long-term wealth.
This is something, that you guys have heard me talk about before.
Like, wholesaling has its place. I’ve done it.
you know, and I almost regret every single wholesale deal I ever did. Because I’ll tell you the very first deal I wholesaled, it was a probate house.
Norris drive. I still remember. I can see it.
I put it under contract sub two. It was a smoking deal. I was picking it up at 36. It was, you know, as is, 86 on it.
I got nervous. I thought, man, wouldn’t it be nice to just pocket 15? So I think it was 16 grand in cash
I just blew it out in a day, assigned my contract, got to the closing table,
John who later became, a friend of mine.
And, and he’s a great investor,
but John walked away with the house with all that equity and a $36,000 check from a community bank because they looked at it as a DSCR loan. They knew the neighborhood, they knew what it would rent for. They saw my photos.
And you know, coming from conventional real estate, I’m like, that’s illegal. You can’t walk away from the clear closing table with checks.
No, I looked at the title company and I’m like… What just happened is he doing that? Like, how did he make more than I did? And he gets the house, like I lost the house and, and they’re like, ah, he works with the community bank.
So you can guess where my next stop was.
Within two hours. I was sitting in front of the president of what was then my hometown bank.
And I was like, Peter,
we need to build the same relationship you have with John. What, do I need to do here? He’s like,
Nothing just proves to me that you’ve got a good plan, you’re capable.
And from that day on, I had 85 LTV money I could get, they didn’t do draws. I could, I could pick up wholesale deals from other guys
and walk away from the closing table with thousands of dollars in cash to do the rehab. You could buy no money down through banks closing inside of 30 days.
If you’re wholesaling, because you say, well, I wanna raise cash to get into real estate. I need cash for my deals, bullshit.
Henry Washington: Bullshit.
Chad Corbett: You need more education.
Like you need to, you’re listening to the wrong damn people. You’ve chosen the wrong mentor. You don’t have, a mentor. This is living proof.
And we’ve both got these stories, but I regret wholesaling more than anything I’ve ever done in real estate because I paid higher taxes and everyone else made all the damn money.
So, if you can help it do not wholesale deals, try to find a way to stay in them. Even if you have to bring a JV partner in.
Just what you save an income tax alone, by spreading it out, you’re gonna build wealth so much faster.
Better off to have equity on a balance sheet than cash that gets eaten up by taxes and has a little bit left in your bank account.
So that’s impressive that you saw that so early on and you dared to proceed with building a balance sheet versus trying to build a checking account. That’s awesome, man.
Henry Washington: Yeah, man. Then, the goal was always to buy rentals, but I remember my wife and I wrote our original goals down before we did that first deal and it was to buy one house a year for the next five years. And then after we bought that first one and the bank gave us the line of credit and I was like, oh wait, I don’t need to use this as a strategy to supplement my retirement. I need to use this as a strategy to retire in the next five years. Like, and so we just went, I did five deals that the first month like we went all in man. But you’re exactly right, like, I tell people when they reach out to me when they’re looking for me to mentor them and I ask them, well, what is it that they wanna do?
And they say, well, you know, I want a wholesale to generate some capital so that I can…
And I’m like, well, that’s not what I asked you. I said, what do you want? And they’ll say, well, I wanna buy and hold. And I say, well, that’s what you should be doing. Right.
You can start exactly there. You think you have to go the wholesale path because that’s what the people online tell you to do.
And because it’s attractive too. Right. You know, no money, no credit. And I can just, I can do, I can make thousands of dollars?
You can start with any strategy. There is a way to do it. If you haven’t figured out how to start in the strategy that you want, you net it out right on the edge yet.
It’s just that you have to educate yourself until you figure it out. Because I know a guy he did, his first deal was a 20-some-odd unit apartment building. And I said, well, what made you just jump into real estate and your first deal be an apartment building.
And he was like, well, I didn’t, I didn’t know people didn’t do that. You know because that’s what happens.
We get jaded. People say this is the path you have to follow. You gotta buy a single and then you buy a duplex and then you buy a triplex and then you buy an apartment building and then you go into commercial…
You could do whatever you want.
[00:13:25] Free and clear properties from tired landlords with portfolios
Henry Washington: He said, the people around me were buying apartments. I just thought that that’s what you do. And so I bought an apartment building right Like you can do this, you can do whatever strategy you want. There’s a way to do it.
Chad Corbett: Yep. And in every town, almost every town in America, there’s an 80-year-old man who built the portfolio, holding it free and clear.
You can, if you can find those people, you can buy one or you can buy them all and he’ll owner finance every damn one of them.
Henry Washington: I have a marketing strategy to find exactly those people
That’s so, especially like, you know, I’m in middle America, there’s always the old Mr. Johnson
and Mr. Johnson’s got, you know, 50 units and he’s probably not ready to sell yet, but even if he isn’t, Mr. Johnson knows, oh, Mr. Randy, down the road and Mr. Randy’s probably looking to dump some of his properties. I just had coffee with him yesterday, right?
Those guys are mine for deals.
Chad Corbett: And he is got that aluminum-sided clipboard in the back seat of his pickup truck. And you’re like, can I see your rent rolls? He said, oh, let me, let me go. And coffee cups fall out his own 91 Ford pickup door and he throws it on the hood and he is like, all right. So I got that’s Sadie. She’s been there for 11 years.
She real nice. She goes to church right over there.
Henry Washington: She pays me on the 16th in cash. Right?
Chad Corbett: and you underwrite the deal on a freaking truck hood, like in pen and paper in your so yep. One in every town.
Henry Washington: That’s right.
[00:14:48] Real estate coaching: The fear of getting started
Chad Corbett: You do coaching too, right?
Henry Washington: Yep. Mm-hmm
Chad Corbett: So, where do you start people?
Like when they say that I want to get into real estate and the excuses are common. I don’t have money. I don’t have cash. I work full time.
How do you start people out? What’s the best advice you’ve learned as a coach and as a practitioner, like, what’s the best way to beat that little voice in your head that holds you back.
And, makes this take years for most people instead of months, like it, did you.
Henry Washington: Yep.
I try to help my students put the blinders on
and focus on the things that matter the most and that matter right now.
What I love about real estate. And I think what we all love is cuz kind of what you and I have been talking about. There are so many ways to get stuff done and get stuff done creatively and like it’s fun.
Like you and I have been having a ball just talking about this stuff because we enjoy it so much.
But when you’re new, like. That’s super overwhelming, cuz you’re like, I just need to figure out one way to get it done. Right? Like it’s, it’s super confusing.
People try, they try to have all their ducks in a row before they take any action.
They want to know who’s gonna finance their deals. They want to know who’s gonna rehab ’em. They want to know how they’re gonna find those people. Who’s the title company. Right. And so I tell people, look, I want my students to put the blinders on.
There are two things you need now to get started.
That is you need to learn what a good deal looks like in the market that you’re gonna be investing in. Cause
every market’s a little different. Yes. There are 70% rules in all those things. And some of those make sense and some markets and some they don’t.
So figure out what a good deal looks like. The best way to figure out what a good deal looks like is to go be around people who are doing deals in your market. And ask them questions. You know you go to meetups, and people, come and talk to you. They come and talk to me just like we’re doing, we’ll start talking. Yeah. I’ll tell you about a deal. Oh yeah, man. Oh, I did this deal. Oh, down on. Oh, what’s the name and, and they start talking about it. And when you do that, you’re building this relationship with somebody who’s a mover and a shaker, but you’re also learning where they’re buying deals. What they’re buying them for, how much they put into ’em, what kind of money they’re making on ’em, what they’re renting. ’em for. Like, start to glean all that information. That’s one, just one free way to get market-specific.
But learn what a good deal looks like in your market, and then learn how you’re gonna find your deals.
Some markets are still in the place where you can go grab a duplex of the MLS and its cash flows, but in most markets in America, you’re gonna have to do some sort of off-market. You know, you teach probates, uh, you know, there’s, there’s a bajillion way.
So figure out a way that makes sense for your personality and your budget,
cuz if it doesn’t fit your personality, and you’re new. Like, I don’t care. Like you can say, well, I’m gonna make 50 cold calls a day until I find a deal. But if that’s not who you are, A) you’re gonna suck at it. B) you’re not gonna make 50 phone calls a day. Cuz you know, old, Jim, Bob’s gonna curse you out the second time, the second phone call you make and then your day’s ruined, then you don’t wanna call anybody else.
Right. So. For me, that’s why I picked direct mail and I just went harder at it.
So, picked a strategy I knew I could stick with consistently. I stuck to a strategy I knew I could afford. Right. Cause if you can’t fund your marketing strategy appropriately, you’re just throwing money down a drain.
So I get my students heavily focused on: let’s figure out what good deals look like in your market and let’s figure out how you’re gonna go find those good deals. And then you’re gonna do that every month, again and again, at the right volume until you land your deal.
And once you land your deal, you will be so motivated to go figure out who’s gonna finance it.
And people are gonna throw money at you.
You’re gonna be so motivated to find that contractor and all the, like all the crap that doesn’t matter until you get a deal, you will get that crap done.
When you got that first good deal on the hook. Oh man, they knock that stuff out.
So we just, I try to get ’em to put their blinders on, figure out what a good deal looks like.
Go find yourself a good deal. Don’t do anything else until you do that.
[00:18:15] How to market to motivated seller leads from ANY list to find deals
Chad Corbett: Hey, I’m gonna point out there’s this list that has 1.3 million properties a year that are held, 67% of them are held free and clear. And most of them sell at 80 cents on the dollar. Just a reminder, like.
Henry Washington: do, do like this.
Chad Corbett: you got, yeah, you’ve got some more direct, some more direct mail, direct mail to order this week.
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seriously, man, like this list, like work in probate was I, I got into, I’ve got a similar story and got into this. I worked with every lead type I could find.
because I wanted to know like, which, which one’s the right one. I worked in inheritance list, vacant, code enforcement,
I mean, you name it. I had the door-to-door, meet salesman
on 500, $500 bonuses.
If, if I closed on a deal, they got 500 bucks. I would follow mail carriers down the damn street and offer them 500 bucks for every vacant house lead that I closed on.
Firefighters. Like I tried it all.
Where I ended up finding enough business to completely build the brokerage side and the investment side and hit financial independence by 38 was in probate.
And what I learned about it was if you approach it as a community service, not like when you’re on the phone, you’re not a real estate investor you’re a service provider. Like you’re benevolently looking for ways to help them.
The damn business just falls into your lap. Like the deals there, you have no competition when you use that approach.
So for anyone who’s publicly watching this and you’re not familiar with, with me or, or what we do here, that’s pretty much what we teach is from my story.
I tried all the lists. The PPC and
all kinds of different marketing. And, you know, I fell for the skip trace and calls and text messages and all that bullshit.
You can burn through a lot of cash, spread yourself thin and distract yourself.
What worked best for me day in and day out was consistent, direct mail to a probate list with an actual offer. Something valuable to them.
And it’s the same for anything else, whether it’s pre-foreclosure, whether it’s divorce, whether it’s, you know, you name it, even tired, landlords. Offer them something of value.
[00:20:18] Tired landlord script example: How to buy portfolios
Chad Corbett: Mr. Johnson, we were talking about earlier,
Henry Washington: mm-hmm
Chad Corbett: he’s got a few ways out of his portfolio.
A lot of those ways come with heavy taxes, depreciation, recapture, and whatnot. If you can get him to owner finance it until he dies, then his family gets a step-up basis.
His legacy money goes untaxed. And if you know to be able to market to people and say, here’s how working with me can benefit you, then you don’t have any competition. It’s your deal every time.
Like you show up in the mailbox and say, Hey, I’m looking to acquire a portfolio and I’ve done the research on yours.
I’d like to help you minimize taxation and build legacy money. So. Let’s get together and I’ll show you how a way out of your portfolio, where your family gets a step-up basis and you keep 30 to 40% more of your wealth because you don’t suffer depreciation recapture as well as capital gains tax.
That’s what I mean by crafting a valuable offer. It can be something as simple as that. Offer an old man the ability to save 30, 40% on what took him a lifetime to build
Do you think anyone else is marketing that way?
So think outside of the box, like when you’re, when whatever marketing list you choose, whatever strategy you choose, be empathetic to who that person is, what their situation is, and what actually might be valuable to them.
Chances are they’re very different than you, that’s why you’re trying to buy their house for pennies on the dollar, right. Or with, with terms.
but I find that a lot of education in the real estate space is pretty selfish and it’s pretty one-sided.
And it’s like, you know, they got your money in their pocket! Go get that money.
Henry Washington: Oh yeah.
Chad Corbett: And it’s, it’s a bunch of bullshit. It’s like pushing boulders up a mountain when you do it that way.
You learned some valuable lessons very quickly. You’re surrounded by some, some smart folks. It seems I didn’t pick it up as quickly as you did.
I don’t think it took me a year of banging my head against the wall until I got smart.
[00:22:13] How to turn junk leads into the best real estate investment deals
Chad Corbett: I wanna talk about junk leads now
I have a methodology to monetize every real estate conversation.
So if I market to a list of motivated sellers and I can get one on the phone and I can get face to face.
I’ll come out with a signed contract of some kind. It might be the brokerage. It might be an investment. It might be a contract for deed. It may just be an option without even, not even a lease, just an option,
but I can solve a problem for them.
And that was because I, I felt like a full in my first year of investing because I had these junk leads.
And ultimately came around. I don’t know. Are you familiar with the 100 zero principles?
So it’s the, it’s simple, it was, there’s like a little coffee table book. You can read in 10 minutes. But the simple principle is that if you wanna live a fulfilling life, hold yourself a hundred percent accountable all the time.
And the other party is 0% accountable because the one thing you can control is how you react and the stories you create for every situation.
What you can’t control is how other people act and, and their side of the story.
So if you can accept a hundred percent accountability in any situation, this is good marriage advice, too.
If you can accept a hundred percent accountability and expect a 0% accountability from the other party, then that just forces you to become. And a better person, right. To do better at that.
So what I found is I had my, victim glasses on
and I’m like, oh, these leads suck. These are bad leads. These aren’t very good.
Nine out of 10 don’t want to sell at the price that I can buy at.
By using the 100-zero principle, I challenged myself. I said you’re accountable to find a way to help them. Like you, you’re trying to force people to sell a house at a discount price.
How fricking selfish is that? Right?
So with that, I issued a challenge, like sit down with a glass of Cabernet and I said, how can I make sure there are no junk leads? How can I help every person who’s willing to have a conversation with me at their house?
And that’s what led me into creative financing.
So I used a combination of probably 15 different strategies.
And from there I had, you know, you could think of it almost as, as you know, if you hand somebody a, I don’t know, let me think of like cheesecake factory has one of the most overwhelming menus I’ve ever seen in my life. Right. It’s like 2000 items.
Almost anyone can walk into the cheesecake factory and say, Hmm, that sounds pretty good.
And if you, if you give a seller, a menu of options like that, it’s damn near impossible for them not to go. Ooh, that one sounds pretty good.
So that’s what I’ve been using since my first year. And I found that real estate became fun and easy from there because I had to focus on the relationship.
I wasn’t pigeonholed into a single strategy and a single way to do it.
And, I quit calling myself an investor.
I went ahead and got my fourth real estate license and had a Virginia license.
So I knew, regardless of when I walked in that front door, I was coming out with a piece of signed paper and I had a prefilled purchase agreement, option agreement, and a listing agreement, almost always for that property.
We both got to the more advanced things early in our investing careers.
That’s not meant ever to intimidate you guys, if anything, it’s to inspire you to show that there is a different way. The mainstream talk of real estate investing is well, you gotta get started wholesaling. So get out there and buy the absentee list and hammer the hell out of it. Just call, call, call, call, call, call, and you’ll eventually get a deal.
And that’s true. A blind squirrel finds a nut every once in a while, but there are far easier ways into real estate where you can get that four and five-year retirement result.
so I, when I was interviewing these buyers, I’d say what’s the deal. And almost every one of them had a different answer.
Some would say, well, I use a gross rent multiplier, some would say, well, I use a cap rate. Some would say, well, I don’t know, just bring them to me.
I know a good one. When I see ’em! And some would be like anything in 24018! Like some would just, they would pay whatever, as long as it was in that zip code and that school zone. And I was shocked at how they didn’t have like a, known criteria.
And what I ultimately learned is they didn’t have a P and L they didn’t have a balance sheet. They were keeping stuff in notebooks. They thought they were making money and they were. They were barely making any, any kind of a return.
Uh, a lot of those guys were in low-income housing.
They would brag about 24 to 30 cap rentals and I’m like,
yeah, that’s gross scheduled rent, divided into the wholesale price. Now let’s talk about your repairs.
Now let’s talk about your vacancy and credit loss and the six-month eviction and collecting rent with a fricking Glock three different days in one week to get a third of the rent.
Let’s talk about that. Let’s talk about the time value of money. What’s your hourly rate when you’re risking your life to pick up a rent check. And they were just like, well, I, I, they didn’t, they weren’t accounting for it. Some of these guys held a hundred doors and they had no clue. But if you would’ve if you pulled their real numbers into a P and L, they were losing their assets, and a lot of them were spending money on their portfolio.
And I helped them sell it later. Like I sold blocks of like 60, 70 houses for some of these guys because they were underwater and didn’t even know it until it was too late.
So the bigger point in that is, is be careful who you take advice from.
Like if they haven’t achieved the result you’re trying
Henry Washington: Right.
Chad Corbett: Keep looking
Henry Washington: That’s right.
Chad Corbett: In today’s age, there are an impressive amount of people who are generously sharing information.
Henry Washington: Yeah.
Chad Corbett: And the other thing I will say is in my very first REI meeting,
I didn’t know it at the time. I didn’t know it until a couple of weeks later, but a very, the most seasoned wholesaler and flipper in the room was trying to trip me up because I stood up and said, hi, my name’s Chad, I’ve got 125,000 either for acquisition or I’ll entertain private lending opportunities.
They smelled stupid in the water. So of course I was taken to a HUD house that these, to this day, the moldiest house I’ve ever seen, this one was locked up for six and a half years with over 200 leaks in the metal roof.
They tell me to buy it. Tell me that, just spray some peroxide on it. You can, you can, your rehab budget should be around 15 grand.
The demo for the mold was $18,000. The rest of the rehab would’ve been probably around 60.
The floors run even termite damage foundation issues, and they tried to walk me into a trap because they wanted to take me outta the game. Right.
Just because they’re in a meetup or an REI doesn’t mean they have good intentions, like be, be, be prudent as you’re deciding who to take advice from.
Henry Washington: 100%, man. It’s, you know, there are teachers and there are doers and there are doers that teach, right? Like I live and breathe this business. If I had to pick, teach it, or do it, I’m gonna pick do it every day. Right? Like the, I love it. I love this business. Right. And I do teach it because I feel an obligation to share this life-changing information with people, don’t get it twisted.
I’m a real estate investor that also teaches people. I am not a teacher who has done some real estate investing.
[00:29:19] The market shift and real estate mindset for 2022
Chad Corbett: Yep. Yep. Well, teacher, I wanna close out with, the fun question, maybe, maybe a, a risk one, but, I saw the market turn about nine, nine weeks ago is when I first saw the market turn. When I saw buyer demands begin to soften, I saw homes sit on the market for more than a few days. I saw price reductions.
It’s finally hit the news cycle and the sky’s falling and, you know, real estate’s going to zero! It’s interesting, like 50% of the brokerage camp still thinks it’s 2007 and Prices are gonna increase at 18% annualized for the rest of their life. And every year’s gonna be like the last two, the other 50% are, you know, convinced that it real estate values are gonna drop 99%.
I fall in the middle I’m quite bearish macroeconomically across the world. I do believe in NAR and, and a lot of the other brokerage side of the conversation, everybody likes to point at the record high equity levels at, at the, you know, the credit standards that it’s not like 2008.
And that’s true. Real estate is an asset class that is probably healthier than it’s ever been, in any recession. Because of the de-leveraging, we had in 2008, 9, 10, 11, 12. The problem is we didn’t, de-leverage the rest of the economy. We didn’t, de-leverage the largest parts of the economy. We kept leveraging up.
And if you want to go look at this, anyone can go to the St. Louis federal reserve database. Some charts’ll show you in 2016, I was getting nervous because of the fed, every time they would try to taper bond purchasing. You know, quantitative, quantitative tightening. As we see how they would collapse markets and they were collapsing the overnight lending markets and they had to reverse course every time.
So I felt like we had a coming liquidity crisis in 2016 and it just, they, we kept kicking the can down the road. It seems now it’s time to pay the Piper. And now we’ve got a fed chairman who’s acting like Paul Volker was a hero. He was just, he, he was the fool that got stuck with the job.
In my opinion, the central bank cannot increase well. They, don’t typically increase production. What they’re going to do is crush demand by raising interest rates that they shouldn’t have lowered so low if they were gonna print money. So my opinion of this, is I think we have a damn long way to the bottom of real estate.
And I think we have a damn long way to climb out of it because different than in 2012 unless the fed changes course what we know about their intentions right now, is they don’t intend to lower rates. They intend to raise rates to try to squash demand. And when that demand collapses, that’s when prices collapsed.
I think we’re probably still 60 days from that. I mean, we see softening, we see price reductions. The thing that makes me extremely nervous is we had record high consumer savings rates coming out of COVID out of the first lockdown, the true lockdown. And that has steadily declined to almost zero.
While in the same period, revolving consumer revolving debt has skyrocketed by almost $16 trillion to record highs. So what I see as, as a leading indicator, that the average, the average homeowner, um, is. Out of cash and living on credit because of the inflation, they’re not gonna be able to refinance, uh, they’re it’s gonna cost them money.
They bought a payment, not a price. So there, they’re not going to be able to just throw the house on the market and sell it. Their equity is going to dissolve as other desperate sellers come to market and, and chase the price downward and catch that falling knife. The comparison model will set their home value based accordingly.
So I think we have a huge crisis, a de-leveraging a liquidity crisis of what that will result in finally, maybe de-leveraging the economy. And that’s gonna look pretty dark. If you’re on the brokerage side of things, things are gonna freeze up for a bit. There’s gonna be a. Either way, even on the investment side, if you’re a single strategy investor, you damn well better start to understand creative financing because when the market’s not moving terms will move the market and you can step up and save people’s ass.
You can save their credit while you collect free assets. So I’m really curious like that’s kind of my take on this. I think we’re headed into. Probably a five to 10-year period before we’re ever back in this price territory with this kind of rate. If we ever see these rates again. I think most assets are going to deleverage and we’re very likely to find ourselves in a deflationary spiral where GDP is, is continuing to drop at all rates, and the cost of goods and commodities are continuing to rise.
And when people get scared and it freezes, then the desperate sellers, the ones whose marriage sucked when they had money and they were taking vacations. They’re now in a divorce and the divorce is the home is tied up in that divorce.
So I’m curious about what you are preparing for and, how you’re preparing your students to weather the market ahead. Do you disagree with anything? I said, do you see it? Do you think that’s too severe of a hypothesis and how are you preparing your students, to dig their well before they’re thirsty?
Henry Washington: Yeah, man. That’s, that’s a phenomenal question. I, I don’t fully like, I don’t, I think you’re on you’re onto something for…
Um, I don’t know if I’m thinking it’s gonna be as dark as you’re saying, but there is absolutely a shift in the market. You can see it, you can feel it, you can look on the MLS right now and see all the price reductions just in my market.
I think it’s gonna be fairly market-specific, especially here in the beginning. Right? I think there are several markets where prices have increased, 20%, 30%, and 40% above the norm.
And those markets are either staying flat or declining in population growth.
And I think as you start to see super high prices, population growth is going down.
I think you’re gonna see big drops in the cost of real estate in those markets starting.
And then I think that’ll move across the country.
What I’m telling my students and, and what I’ve, what I’ve been talking about is either we’re either gonna be starved for deals, but money’s widely available
…or you’re starved for money and deals are hard to come by.
Or deals are widely available and I think – we’re moving as investors. We buy situations that tend to have a house that comes with them.
Right. And an economy like we’re seeing now is gonna create even more situations.
And so, yes, I think deal flow is gonna be there, but access to money is gonna be different.
And what we’re talking about with my students is being able
to lean harder into some of the creative financing and owner financing, just like you’re talking about, we want to create options.
Like there are indicators to me when I’m talking to somebody where I know, like, I know owner financing is best for you. I just have to educate you so that YOU know, owner financing is best for you. Right.
Or I know that subject to is probably the best strategy here. It’s just gonna take some sort of education so that we understand how to do that or so that I can help you see the benefit to you.
And so I think, as we move into this, we need to be opening our minds to more than one type of lending. Cause hard money is expensive. Now, wait till you see it. When rates continue to rise and. And community banks are tightening up. My, my, the one I deal with mostly sent me an email yesterday just with, with the new rates and terms that they’re, they’re trying to go with.
And there, they’re trying to slow down how much money we borrow with them because they feel like it’s 2008 all over again. You know, a lot of these banks lost their shirt back then. And so they’re, they’re, they’ve got a little PTSD. Um,
Chad Corbett: they have a lot of outstanding corporate debt, too. Record
levels of outstanding corporate debt.
And that’s what like, the metrics within the real estate industry. Or asset class, they don’t make me nervous at all. I think it looks if you isolate it, if you put blinders on and act like it’s an isolated part of the economy, great. Like, it looks like everything’s going great. Rents are ripping. Prices are ripping. Like we’ve got the most credit-worthy buyers we’ve ever had in this country. But when you pan the camera out and you look at the level of distress, you know, I mean, there are over a dozen companies in the S&P 500 that should have died two years ago.
They’ve been propped up by the fed by the central bank, and they’re not gonna be able to stand on their own when you, when you, when they’re let go, they’re let go.
You’ve got three of the largest corporations in the S&P 500 posting more than 50% loss. Quarter over quarter, 50% reductions in profit.
One of those will surprise you. It’s Amazon, heard of it? So like we, we have, we, we have a crisis like the leading indicators to a massive corporate debt problem. And that’s what makes me the most nervous because it’s going to hit the banks and it’s going to hit the people with jobs.
And when, when banks won’t lend money and when people with jobs can’t borrow money, then your demand shuts off like a switch. So sellers will then demand that, you know, they’re not gonna lower their price and their motivation as their motivation becomes higher, their price becomes lower. You can sit there and starve the death for six to nine months until that happens.
[00:38:38] How to pitch sub2 financing: Simple script example
Chad Corbett: Or you can be the one that educates them. So just like Henry said, like, you know, when a sub2 deal is the right thing, you need to learn to translate that into layman’s terms. How about “ where you guys think if, if you had to move today, where would you go? All right. Well, how about you go ahead and do that and I’ll build your credit while you’re gone and I’ll take this problem off your back.”
I’ll go ahead and bring the payments current today. How’s that sound?”
“well, what, what do you mean that, that I can’t do that. That sounds like a scam to me.” Yeah, it’s interesting you say that..” And just start the conversation. But like, just get into a conversation with them and explain it. They don’t understand real estate finance.
It’s your job to do that.
Henry Washington: Yep.
Chad Corbett: You can get deals in a frozen market when everyone else says they’re starving to death, you can create your own deals.
Henry Washington: And, and what I wanna say there too, is a part of the reason why that conversation is successful for someone like you or someone like myself is the thing we mentioned at the beginning is that you figured out early that you need to have multiple options because you felt a responsibility to help the people whose homes you walk into, right?
And part of that responsibility is knowing enough to know what all of their options are, so you can educate them. I learned early on to stop walking into houses and seeing it as I need to close this deal, how do I close this deal?
And I started walking into houses, thinking. How can I help the person across from me if I’m truly in the business of buying situations, then there’s a problem here. And if I can genuinely, like, if it’s a genuine response to want to help you, they feel that. And they see that. And so then. When you start having conversations around creative finance, subject to owner financing, it doesn’t sound like a scam to them because you’ve built rapport and trust with someone because you walk, people know, like they know if you walk in the door and you’re just a salesy guy trying to close a deal versus someone who’s genuinely gonna help me. Right. I’ve walked into homes and. Walked out of that home, didn’t buy the deal, but still spent either my time or my money to help the person in that room. Right. And that’s, that’s valuable. Right. And because even though I didn’t get that deal, I promise you when their neighbor or their friend or their cousin or their aunt or their sister needs.
Or is in a similar situation, they’re gonna tell them to call you, right. And this is a small community, right? You’d be surprised. Um, how well, how that, how that pays off for you in the long term, if you genuinely care about people, then pitching these ideas for creative finance works even better because they know you’re there to help them.
Chad Corbett: It was probably my sixth or seventh appointment. When I was calling myself an investor early in.
I saw myself as this hotshot wholesaler that was, you know, a financial expert and way smarter than they were.
And this, you know, this poor person made some stupid damn decisions I’m gonna go in and bail ’em out on what I’m doing, the world needs!
And I really, really believe my bullshit. And what changed it for me is I walked into a lady’s house and I was, you know, wearing a shirt and a sports coat. And I was professional. I was too damn professional.
I walked in there like I was trying to buy a house for a damn hedge fund.
Like I walked in there like it was my house and she was in my way, she was an inconvenience and I got exactly what I deserved. She sat down at the kitchen table. I threw my offer out and that woman bawled her eyes out. And I felt like I was that fucking tall.
And that was one of the worst, probably the worst feeling I’ve ever had in business.
What are you thinking, making someone cry in their own home!
I had set it up like I was her only option and that, that she better take this offer.
And I was damn ashamed of myself, but… the first time I’ve ever told that story to anyone, but it changed everything for me.
Like I never walked into another house with arrogance thinking, oh, this is my house. I just need to figure out how the hell I’m gonna get it from them!
From that day forward. I walked in.
I need to understand their problems, then I’ll choose a solution and let them know what piece of paper we’re writing it on.
Everything changed for me.
So if you’re taking advice from one of those, they got your money in, in their pocket, or it’s a numbers game, or just go in there and get the deal. Make 50 offers a day.
like, hopefully, you feel that feeling before you do it too many times.
But when you, when you proceed with empathy and you see this, like I view my company as a social enterprise like I’m doing a favor to the neighborhood, a favor to the seller, a service, and it hardly ever comes with just a house.
Henry Washington: Right.
Chad Corbett: I’ll take the house and all of the shit in it. And then the neighbor next door and
Henry Washington: Right! [Laughs]
Chad Corbett: and the termites, like, I’ll take all that on.
Henry Washington: yeah.
Chad Corbett: and, and so
Henry Washington: Yeah.
Chad Corbett: you’re doing, you know, true service and in most cases,
But think about it that way, you know, just as, as Henry had said, but … that appointment told me what I was not going to do from that point forward.
Henry Washington: Yeah, man, what self-awareness though? Cuz most people would’ve just said, well, she screwed up. She missed out. I’m gonna go on to the next one. And that, and that self-awareness it sounds like changed your life and your business.
Chad Corbett: The problem was I had one strategy in mind. I was looking for 60 cents on, you know, 70% minus repair times, ARV minus repairs, minus my commission or my, my wholesale profit.
And what I should have done is just offered her an as-is value on the house, and turned it into a long-term rental. It was in a good school system. It was in a good district. Like I could have easily made her an offer that she would’ve taken on the spot and she would’ve cried at, you know, this house. I.
Like I said 160 $570,000 replacement cost. I offered 25. She wrapped me in a hug and cried and she’s like, I am so happy to sell this house to you. I can’t wait.
Henry Washington: Yeah.
Chad Corbett: Like the next time she comes, I’m gonna leave my house and give it to her. She’s a guest in my home
Henry Washington: Yep.
Chad Corbett: like, but she was, she was so grateful to sell this house to me, even though I bought it at 15 cents on the damn dollar
Henry Washington: Yep.
Chad Corbett: she calls and checks in, she’s like, how’s it going?
I can’t wait to see it. Don’t send me pictures till it’s done.
Well, listen, man. We’re, we’re running over time. I wanna be respectful of yours. You’re a coach and a practitioner. So I wanna let you run. Thanks so much for being transparent, and sharing your story.
Henry Washington: Uh, happy to.
Chad Corbett: we’ll drop, uh, drop your social links and the show notes. anything you wanna say in closing, if you wanna introduce people to, you know, to find your communities or, or where they can connect with you.
Henry Washington: Oh, yeah. The best place to find me is on Instagram. I’m at the Henry Washington on Instagram and you can click my link in my bio and it’s got all kinds of stuff, free books, and whatnot. So all that’s in there. Um, and I gave tons of free information away on Instagram.
[00:45:39] Best advice for new real estate investors
Henry Washington: And I’ll, and I’ll just tell people, you know, I,
I want people to know that, like, this is a people business, you know, it’s a real estate business second.
And the sooner you realize you are in the business of taking care of people, the more deals are gonna come your way. I’d venture to say after you had that epiphany and you changed your strategy, you haven’t had to worry about, are you gonna get a deal or not?
Chad Corbett: No, my marketing budget went from thousands and thousands of dollars to hundreds of dollars.
Henry Washington: Absolutely. Don’t be afraid to help people.
That’s what we’re in this business for. Even if you helping them means you don’t get that house, right. Like you can be of service to people. And I try not to just make money on a community if I’m not being of service to that community.
And so just keep people in mind. Keep people your focus. Focus on finding good deals, and marketing for good deals.
You’d be surprised. You’ll look back in a year and you’ll be in a whole nother stratosphere with the success you’re gonna see.
[00:46:38] Can you retire through real estate investing at age 40?
Chad Corbett: Yep. All right. I do have one last closing question. So you’ve hit financial independence around. Was it 40 or 41 where you hit, hit your number?
Henry Washington: Uh, 40 right at 40 on my 40th birthday.
Chad Corbett: Awesome. So do you think you’re capable of retiring?
Henry Washington: Yeah. Well, I, I, I can’t, no, no like financially. Yes, but I can’t, I can’t. No, man, I love, I love this though.
38, man. I share. I’ve done the deals taught, taught what I can teach.
I can, I don’t know that I have it in me.
Henry Washington: I learned also early on that, like, none of this is for me, like none of this wealth is for me, none of this information that I’ve gained to obtain this wealth is for me like it was given to me so that I can share it and give it to others and help other people get there. And the fact that I’m able to retire, like, I feel like all that has come.
So that I can do more of the sharing and giving, like, we have to be good stewards of this information and this money or else, like I’m a believer in God. Like, he’ll take it away from you. Like, so you gotta be a good steward. Like you get to reap the benefits of it while it’s in your possession. Don’t get me wrong.
Like, I live a good life. I enjoy myself, but it’s not for me. That’s the purpose of it isn’t for me. And so, as long as you keep that in mind that like, yes, you can rip the benefits of it while you have it, but make sure you’re being a good steward of it and giving it away. You’ll be blessed with so much abundance.
Chad Corbett: Dude, we’ve definitely got to have a beer sometime!
Henry Washington: Let’s do it! Yeah.
Chad Corbett: Alright, thank you!
Henry Washington: Thank you.
Henry Washington: BiggerPockets podcast host, multifamily real estate investor, and real estate coach.
Henry Washington is an author, entrepreneur, and real estate investor with more than 65 rental units and dozens of house flips under his belt. Henry built his rental portfolio in just 3 and a half years, allowing him to achieve his goal of financial freedom. Henry has been featured in numerous online and television publications like FOX Business Morning Show FBN: AM, Yahoo Finance, Business Insider, NBC, CBS, CourseMethod & BiggerPockets – where he enjoys showing others the power of real estate investing and financial freedom. Henry and his wife Jessica and their 2 daughters live and invest in Northwest Arkansas.
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