How to Get Top Brokers to Actually Send You Creative Finance Deals

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0:00 Hello and welcome back to the own reading podcast by multif family strategy. I'm Christian your host joined
0:05 today by my friend Eric Bubell. He is one of the best brokers in the greater Seattle area. He's also a phenomenal
0:12 investor. We're going to talk about both these things. How he balances the two. Some crazy stories from the field and
0:18 most importantly what you need to do as an investor to work with a top broker
0:24 like Eric. Eric, welcome to the channel. Thank you. That's some high praise, man. Appreciate it,
0:30 dude. Eric is Eric is pretty humble, but he he does a lot of transactions. He is a top earning broker. You're currently
0:37 with the Compass Group. Now, what is your your subgroup of Compass called? The investment sales group over at
0:43 Compass Commercial. There we go. I wear the hat almost every day. So, there we go. Free branding for
0:50 Eric. You guys check him out if you guys are investors and buying cool stuff in
0:55 Seattle. Ignore my hair. I wear a hat every day for a reason. Eric, rocking
1:01 the gear. I love it, dude. Always. Literally always. It's the best hat that
1:06 I've ever had. I need to make my branded version of the same hat. You actually sent it to me, so I have to get that done.
1:12 How long have you been a broker? Yep. So, I've been a broker for I'm in
1:19 my 12th year now. 12 years. What did you do before that? Yeah. So after college, I went to school
1:26 as a marketing major with a minor in professional golf management. So I uh
1:32 that gave me my class A license and I can run any aspect of the golf industry and I chose to go into teaching.
1:39 So for a couple years after college, I I taught golf. So you went into golf.
1:44 How do you make the transition into real estate? Yeah, that's uh that was a tricky one.
1:50 So, you know, I was I was a golf instructor for about three and a half
1:55 years, and I would say at the close to the end of year three, I was looking at
2:02 how many hours I was working, which was about 70 to 74 hours a week, 6 days a
2:07 week, and how much money I was making. And I realized pretty quick that I just
2:13 couldn't support a family on that income. It was just going to be a dead-end job for me and I was pretty
2:20 much going to be capped out at that at that income for what was going to feel
2:25 like forever. Industry just is not as lucrative as maybe commercial real estate is. So, I
2:32 knew I didn't want to go back to school and I was deciding what what to go into next. And a sales position is probably
2:40 something that I was looking into, whether it be maybe insurance or real estate. And then I had a really great
2:48 client that was in commercial real estate, had his own brokerage, and he ultimately just said, "Hey, if you want
2:54 to make money, you do what I do." And he had a couple other guys at his brokerage
3:01 who were younger, they were a team, and they were one foot in brokerage, one foot out the door in syndication. And I
3:08 basically met them one day, asked them if they'd take a chance on me, and I was off to the races with about 14,000 bucks
3:16 in my bank account. Well, that's the fun of the owner meeting podcast. That's exactly how you get pretty much everywhere, right? You
3:22 meet someone who is doing something that you want to do. Take the chance. It's a relationship game, which is, I'm
3:29 guessing, how the rest of the story goes with building your career. So, 12 years in, how did the first year of brokerage
3:34 go? first year brokerage I would say you know commercial brokerage when you get into it it's it's a 24month process you
3:42 know it can take that long to really start making money but um let's see I the first year ended up
3:51 being a good year you know I ended up getting a lot of deals done but I implemented that 70 to 74h hour work
3:57 week and to just dial in for dollars you know I would make anywhere from 75 to
4:04 120 calls a Okay. And you can build a book a business pretty quick if you if
4:09 you're determined. And I was broke and determined. So there we go. That and that is that is
4:15 any sales job there. But if you are broke and determined, you will likely out compete everyone around you. So you put the uh you took the hours from golf
4:21 and you turned that into a more lucrative career. You got the right connection to do it. You started taking
4:26 off. As you're building your brokerage career, when did you start investing
4:32 yourself? Yeah. So, I didn't buy my first deal until my third year in the business. You
4:38 know, I'm pretty good at learning from other people or also other people's mistakes. And the biggest piece of
4:45 advice that I was given and it was told to me over and over again was like, hey,
4:51 you need to start investing in deals or buying deals. That was either from the
4:56 people who taught me the business or clients that I I was calling and working with like you need to start buying
5:02 deals. Trust me, it'll work out. Like you need to build your retirement. So the more I thought about it and what
5:09 I wanted to do, the easiest path to get into real estate was to owner occupy a multif family property and I was
5:15 specializing in multi multifamily. So, there was a one deal in the third year
5:21 where I cold called this triplex owner in Everett and I was actually calling them
5:27 for a client who wanted to buy it. She had a specific price in mind. I think it was 450 at the time and the clients that
5:35 I was repping couldn't get anywhere north of 400,000.
5:41 So, some time had passed. Those clients ended up buying a different deal. Um, I
5:46 reached back out to that owner and
5:51 asked her if she wanted to do a deal direct and she was an old retired broker. I was like, "No commissions. I
5:57 can get to the 450 price." And that's kind of where I got my start was to owner occupy. How long did you owner occupy?
6:03 That one I was in that deal for about a year, a year and a half.
6:09 Perfect. Yep. The ideal amount of time for the house hack. You get a little over a year, you
6:14 find the next thing. Was your next project Did you move to a house or did you do another house hack after that?
6:20 Yeah. So, the next project kind of I fell upon it. I was It was a 4un in Ron.
6:25 I went to meet some clients for a listing appointment. We were literally at the table.
6:32 Two brothers ready to just get out of this property that they inherited from their parents quite a few years back.
6:38 They were it was a rundown four unit mismanaged really low rents and we're
6:44 about to put on the market and sign the listing papers at the at the meeting
6:50 table and right before their signing they're like hey you know do you do you believe in this value I said absolutely
6:56 like this is a deal I would buy and they said okay well would you actually buy
7:02 this and then that led to a conversation on how I can buy it and they were willing
7:07 to do seller financing. And from that point, I came up with $40,000 down.
7:14 That's the disposable income I had at the time. And we did a we bought the
7:20 property for like 675 after inspection. And ended up selling that four years
7:28 later pretty much at the peak with a lot of luck. when interest rates started to go up, when they made their first tick
7:34 up, sold it for 1.1 million and then made my next not bad. So, so one deal, how many how
7:41 many years of golf coaching would that one one deal have have made
7:48 you? Uh, yeah, eight years would have taken eight years of Holy That's awesome, dude. That's
7:55 awesome. We were just uh funny enough, Eric and I are doing a deal right now and we don't count it until it
8:00 officially closes, but if everything goes through the way that it's contracted, it would be about 3 years of
8:06 my wife's teaching is what we'd make on one little deal that we bought 100%
8:11 actually 200% financed uh in Mason County. When you have a little bit of creative finance, you buy at the right
8:17 price, it is amazing. Even when the projects are hard, if you look at your time per hour that you can make
8:23 investing in some of these deals, it is absolutely insane. Yeah. Even just doing a deal in
8:30 brokerage, you know, one commission check from selling a property is as much as I used to make as a golf instructor
8:37 for a whole year of work, 74 hours a, you know, a week. Yeah, it's hard work. But if you look at
8:42 the total hours, the dollars per hour can be absolutely crazy. Yeah. How do you differentiate a deal
8:50 for yourself or your client? There's there's that inherent kind of conflict
8:55 of interest if you have all these clients who are looking for deals and you're also looking for deals. How do
9:01 you determine when it's appropriate for the deal to be one that you want to take down verse a deal that you're going to
9:06 go ahead and bring a client into? Yeah. I think from from the conflict of interest standpoint, um it's tough. You
9:14 have to balance that. So, you know, if I'm going to do somewhere between, call
9:20 it 20 and 30 transactions, I'll only take one of those transactions.
9:25 So, the percentage is is very low. And, you know, the only goal I have is to try
9:30 and acquire at least one deal a year. Sometimes that changes when you sell another deal and you have to be in a
9:36 1031 exchange. M but you know building the connections you know some of the deals that I
9:42 purchased were actually brought by another broker so I was never in touch with the landlord or anything like that.
9:49 Awesome. That makes it clear uh clear and easy. Yeah. Absolutely.
9:55 When you're finding clients for those who don't know I met Eric it was pouring
10:00 down rain in Dallas. This is way before I moved to Dallas. I just happened to be speaking at a event for Michael Blancc.
10:06 And so I'm at a syndication event. This was four years before I syndicated anything.
10:12 I just started this creative finance journey. And we bought of the whole portfolio I had in Moses Lake. We had
10:17 about 100 units at the time. We bought the crappiest, tiniest triplex in the
10:23 entire city of Moses Lake. And Eric calls, goes, "Hey, I saw you just bought this building. I have a seller
10:29 financable 10plex. Just came on market." What Eric didn't know yet is that I also
10:34 owned the 12plex built the year before by the same builder. Like I was a a
10:39 great buyer for it. Eric called me on like the lamest purchase I'd ever made. I mean, it was great price, but the
10:46 tiniest purchase I've ever made. Eric, how are you is that how you find a lot of clients? You're just like, "Hey,
10:51 who's active in this area?" or how are you finding clients when you're reaching out for
10:57 buyers? Yeah. So, I mean, when you're making cold calls, it's really tough to it's a
11:04 tough cold call to make when you don't have a property to talk with somebody about. You know, if you call them out of
11:09 blue, be like, "Hey, you know, love to talk with you about your property and you know, would you sell?" That's that's a tough one. But if you call and you're
11:16 like, "Hey, I recently sold this one." Or, "Hey, I've got a property available. Are you a buyer?" And then that can turn
11:21 into, "No, I'm not a buyer, but I'm a seller." So, when I've got a deal off market,
11:27 there's a lot of ways that you can really reach anybody in your in your market, wherever you are. You know,
11:33 Washington's great. The Secretary of State, the looking up an LLC is really easy. It doesn't cost any money. So, you
11:41 can find, call it a four unit that's next door to where you live that you see all the time, and you can look up on
11:48 county records who the owner is. Most likely it'll probably be under an LLC all the time. But if it's under an LLC,
11:55 you can just type it in literally into the Secretary of State and go down to the annual reports and then click each
12:03 annual report back in history until you find either an email or a phone number. That's a great way, great cost effective
12:10 way. Other than that, I spend a bunch of money for to know everybody's numbers. Yes, there's always the paid way, but if
12:16 you're going one by one, that's basically how I did it. You go to open corporates, which that's what that site does. It searches all the annual
12:21 reports. It tells you what it thinks the owner is. And same exact process. Uh if
12:26 you go Secretary of State, as you mentioned, the nice thing is it's really easy to go through some of the historical data until you find did they
12:33 ever use their own phone number? Did they ever use their own email to log this? You find the person, you give them
12:38 a call. If you missed it, Eric said it so casually. It's hard to get people to
12:44 want to sell real estate. If I come to you and everyone gets beat up for it all the time. So if you're an owner of real
12:52 estate and you get the 15th broker who's reached out said, "Hey, you you looking at selling this? I'm great at selling
12:57 prop." My defenses are here. I'm like, "Nope, not interested." Even if I am kind of interested, I already have a
13:03 guy. I already I have a million smokeokesc screen. I'm going to throw up all my guards. If you're asking me if
13:09 I'm buying real estate, I am instantly interested. When I ran the call center in Tacoma, we
13:15 did this whole data project. That was our entire script. So, we're reaching out to people. We'd gathered data about
13:21 their multif family properties. And the last phrase in the entire call is, "Hey,
13:26 we're going to be calling about 100 other owners. If you're looking to expand your portfolio and you're buying,
13:31 is there anything we should be looking out for?" If they're selling, it's intuitive that, well, no, I'm not
13:38 buying, but I am actually interested in selling this. You're going to call a hundred other owners. You should tell them that I have this thing for sale.
13:45 But you're asking if you're a buyer. It is that question has bought me so much real estate. I do the same thing as an
13:51 owner. I reach out to other owners. Hey, I just bought the property next to you. We're property neighbors. You're
13:57 expanding. I'm expanding. Let's grab coffee. Let's talk about the market. Let's see what's working and not working. It's implied that I'm a buyer
14:04 because I am buying. I don't have to ask them to sell their property.
14:09 that is seems to be as a broker and an owner. That's that's really the secret to getting in the door is
14:15 who's active and coming in that was a great way to to start the relationship. It was helpful for me because you
14:21 actually had a 10plex when you called me and I happened to know that 10plex and
14:27 between us I would have paid $100,000 more for it than uh than was suggested.
14:33 You're like yeah 900,000. I was like, I pegged that thing at 100 a door that I would have paid for. Seller financed 5%
14:40 interest. It's a fantastic fantastic deal. Yeah, that's awesome. When you're doing when
14:45 you're getting into creative finance with an owner, this is Mhm. A lot of people want to know this. I
14:51 have done one, two, three. I've done four
14:56 creatively financed deals with you. One private money, three seller financed. Yep. All of them. We had to get pretty
15:04 darn creative with the seller. Even the hard money one. We had to we had to work that equation to get that RV park
15:10 closed. That was a project. Yeah, that was a fun one for sure. How do you enter into that conversation
15:18 with an owner to figure out the creative finance side? Cuz so many brokers don't
15:23 understand how to put it together. They don't understand how to ask. You seem to find these opportunities
15:29 more often than many. How do you enter into that? Yeah. So, you know, I have more data
15:36 than a lot of other people because I pay for these services. So, I can see a lot what the debt is on this asset or this
15:42 parcel. And it's not always accurate, right? You're always fighting that. But when you're making the call and you're talking with somebody and you know, I'll
15:49 talk from a broker standpoint, but you can take this, you know, your viewers can take this and use it for if they're
15:56 trying to call for themselves. So you call somebody up, they you get
16:01 them on the phone, kind of get past the initial talks and they start talking about their building. Well, if you're
16:07 getting the rents, you understand how many units it is, then you can start to ask about the debt product casually. Be
16:13 like, "So, you know, do you still have a loan on this deal?" And they'll say, "Yeah, I do." Be like, "Okay." Or
16:20 they'll they'll say, "Yeah, I do, but it's like, you know, 20,000 bucks or $100,000." And let's say it's a $2
16:26 million deal. Well, that tells me that there's such a small amount of a loan
16:31 that hey, they could possibly be a candidate for seller financing. Mhm.
16:36 And then it you can also talk with them and understand their age most likely over the phone. And if you can sense
16:43 that they're a bit older, then it's like, hey, you know, do you still want income if you were to sell this deal?
16:50 Like does is income still important? Because honestly, you're a great candidate for seller financing. you
16:55 might be able to get a little bit higher price because of it and you can get a down payment that you know still gets
17:01 you flush with cash in the meantime while still making you know interestonly
17:06 payments or principal and interest payments and that so ultimately it comes down to you're just asking the questions
17:12 to map out their goals like you you know where the pieces are and that helps but ultimately what you're doing is you're
17:17 just mapping out what is it that matters to you as a seller. Is it, you know, are you after the maximum price with the
17:24 position you're in? Here's the options that you have. It's a it's a fairly passive approach.
17:29 Yeah, it is. I mean, they're going to tell you, "Yeah, I've got a loan." You know, if it's a $2 million deal and they're like, "Yeah, you know, I've got
17:35 my loan's still 1.5 million." You know, most likely they're not going to be able to cash that out themselves. So, you're
17:42 going to have to do it with a new bank, right? So, it's like as soon as they tell you and you know the numbers, it's
17:47 going to lead to that that conversation. Like, you know, I get called on my properties all the time by people
17:53 wanting to buy it, right? Mhm. And everybody wants to do seller financing. And the first words out of my
18:00 mouth are like, "Hey, I'm open to looking at an offer, but I need to be cashed out cuz I got a I have a loan on
18:05 this." And then they'll come back two weeks later and, you know, talk with me about doing a seller finance deal. I was
18:12 like, "No, I I can't do it. I wish I had enough equity to do it, but I can't do
18:17 it." Well, this ties really well into so so for investors who are listening to this, you know, hey, how do I work with
18:24 top brokers like Eric, what how do I move up the list? I see a lot of people aggressively asking their brokers, hey,
18:31 I'm interested in buying things seller finance. It's like, well, yeah, you and everyone else. Of course, everyone's
18:36 interested in buying something with no debt qualifications and custom debt, right? That's that's implied.
18:43 Yeah. What is the ideal client when someone comes to you and they're looking to buy
18:48 real estate? What makes someone a client where you're like, "Hey, I am going to spend time and energy finding this
18:54 person a deal above and beyond, you know, the random person who calls you and says, "Hey, I'm looking for seller
19:00 financing and I have no credit." Yeah. Yeah. I think that's that's a good
19:05 point. So, God, it's a tough question to answer. So, I think if you're you like if I was
19:12 to go to a new market, right? Let's say I'm going to go buy deals in Michigan,
19:18 I would take the approach on really having a firm buy box
19:24 because when you call a broker and you're trying to get your first deal or
19:29 whatever and you're saying, "Hey, you know, I'd like to buy 10 units. I'd like to get seller financing,
19:36 but I only have call it $100,000." Well, most likely that broker has a lot of
19:41 other clients and options that they can call that can close this out very
19:46 quickly and they have a lot of cash reserves to work with. So, I think you
19:52 have to make yourself enticing from a buyer standpoint for also someone to work with. And that's just the truth.
19:58 So, for example, if you're newer, if you come to me and tell me that,
20:04 yeah, you want a value ad deal, you want something you can put some sweat equity into, or maybe even own or occupy and
20:10 jump into, you know, your first deal that's a 4 unit, but you tell me that you want a 7 cap with value ad that's
20:18 trending to a 12 cap. Yeah, everybody wants those deals. So, it's it's also
20:25 understanding the reality of where the market's at. And, you know, if you're a buyer and you see the the long-term play
20:32 in just owning real estate versus just trying to get a home run deal every time
20:37 you buy, you're never going to buy. You know, it's you have to look in the current market, the situation, what's
20:44 going on, where rates are at, where cap rates are at, what you see typically on
20:49 the market, and have a very tight buy box. You know, you might have to buy a 4 and 1/2 cap deal, but if it's trending
20:56 to a seven and call it one or two years, like that's a great deal. That's a
21:01 fantastic deal in this market. But if you think you're going to buy an A cap day one, sure it's possible. Well,
21:08 what are the actual percentages of getting that? It's pretty low. And in my experience, those deals when those home
21:15 run deals come up, they're going to get passed to the clients that you've already done transactions with. The
21:20 people who did the base hits or the, you know, they hit a double with you. Yep. It's the people who've already
21:26 transacted. You already know they can transact. You know what they're like to work with. You have an existing relationship. So, when these best deals
21:32 come up, you're calling your clients who you already know can close. And that's just a sensible thing to do. Like that's
21:38 usually your first call as the most likely buyer. You're not going to call the random guy who called you three
21:44 months ago saying like, "Hey, can I have a unicorn deal?" When the unicorn comes up, it's the guys who have already
21:50 transacted. I'm not saying do a bad deal, but I absolutely agree. You don't
21:56 have to just only do home run deals. It's one of my least favorite things that I hear on podcast or when people
22:01 are like, "Yeah, they're like, "Oh, I just I rip every dollar out of every deal." deal. And I'm like, "No, do good deals, but do deals
22:09 that move you forward. If it adds to your income and it's cash flow on day one, like that's my buy box. If I have
22:16 day one cash flow here and I can add something to the management structure to improve the property from how it's
22:22 working right now, I'm interested because when I close this thing, my income goes up for the rest of my life."
22:27 You know, that's that's phenomenal. I I like making more money. That is generally a good thing to do for my
22:32 family. So, we buy good deals and sometimes they turn into great deals.
22:38 Yeah. And that's one I think one other point that would be helpful to your viewers is when you're talking with the
22:44 broker that you want to work with, it's important to go over, hey, how do you you know, this is how I underwrite
22:50 deals. How do you underwrite deals? you know, and we're let's just talk about the expense load on the property because
22:56 if you're trying to be ultraconervative on every level and have way higher
23:02 expenses than are realistic to a building that's called underwriting yourself out of a deal.
23:09 So, you know, there might be a great opportunity where, let's call it, it's a six cap on current numbers,
23:16 but because of how conservative and how nervous you are to buy your first deal,
23:21 you're adding so many extra expenses in there just just in case of precaution
23:27 that all of a sudden that six cap in your eyes looks like a 5.25 two five cap
23:33 rate or a five and a half cap when it that in reality is not the case. You
23:39 know, sure there's the natural expenses you should have, but you have to be careful about how many expenses you're underwriting in the deal because you
23:45 will you will end up not buying a deal or making it harder for you to find one. And you're going to see all these good
23:51 deals pass your pass by and you'll see them sell for a ton later. So, that's
23:56 another big mistake I see newer newer investors jump into. Well, and the way they usually do this math in my
24:03 experience is because I I'm all for conservative underwriting. I absolutely do that. But they they do a conservative
24:10 adjustment to every line item. So they go, "Yes, you're like, "Well, what if vacancy is higher?" Well, that's a good
24:16 thing to factor for. What if my interest rate's a little higher than today's interest rate? What if they what if they
24:21 tick up a half point? Okay, that's a good thing to account for. What if my maintenance cost is 15% more than it
24:28 was? That's a good thing to factor for, but if you do that on every single line item, you end up with this horrible
24:34 looking property because you underwrote it to everything just went wrong. Yeah, exactly.
24:39 You will have stuff that goes wrong, but you usually don't have something go wrong to every line item. You usually don't lose all your rent
24:46 and have your maintenance cost go up and have your insurance rate go through the roof and have your tax get adjusted
24:52 twice as much as you expected all in the same go. It that almost never happened. And so you've underwrote to a
24:59 unrealistically conservative scenario. That's almost always how it happens though. It's the people who go in line
25:04 by line. Yeah. Do the math where it is and then just make a conservative adjustment to it. If
25:10 you want to make a a 10% or whatever adjustment to like, hey, let's leave room for error.
25:17 Do it globally as opposed to line by line. I noticed that you get a much more realistic conservative estimate that
25:23 way. You can go conservative on everything. Your numbers look crazy. Yeah, absolutely. And it's also the, you
25:29 know, the biggest one too is, you know, someone will want to put professional management in two to four
25:36 unit buildings. That that that'll kill a deal real quick. That's tough. So, as long as you It's
25:42 fine to do it, but as long as you know that instead of uh self-managing and
25:48 having a cash on cash return that might be 5%. You're looking at a 3% cash on
25:53 cash return or 2 and a.5%. So, just know that your numbers are going to be thinner and two to four units typically
25:59 don't ever support professional management from like having heavy cash flow. You're okay with having zero cash flow?
26:06 Professional management all day. Yeah. Well, especially, you know, you're in the the greater Seattle area. I know
26:11 you broker all over the state, but Yep. It's a it's a tighter market. It's a higher appreciation market or one of the
26:18 tech markets. So, you have these long-term holds where you can make a crazy amount of money if you're not
26:24 bleeding. For a lot of people, that's their underwriting and that's what you're competing with. They're like, "If I'm if I am parked at break even, I'll
26:32 buy the deal." And that's what you're competing with in a lot of these core markets on the West Coast.
26:38 It's true. If you add in that professional management, I absolutely agree. I'm also a huge fan of self-management. I don't
26:44 think that should be your long-term goal. You want to turn your business into a business, but if you're on the front end of your career, Eric, how many
26:50 units would you say make sense to self-manage before it's time to really
26:55 look at a professional manager in your opinion? Yeah, I think when you're looking at
27:01 eight units and higher, that's when you can start to underwrite professional management.
27:06 It's just the cost of it. you know that five if we're talking about in core Seattle you can underwrite to a 5% management
27:13 fee five or six somewhere in that range but yeah usually we start to implement
27:19 that eight units and higher okay and if your portfolio it's very similar to me I it's very easy to
27:26 self-manage a dozen units it just personal experience it is not that much
27:31 work at all absolutely I did not have a whole lot of struggle up till we got a little over 30 units
27:38 where I was like, I need to start adding people to that. Yeah. And you become an unbelievably
27:44 better manager when you've actually managed before. There's stuff that you just need to know how to look for. I am a huge advocate for if you're buying
27:50 smaller or you're getting started or even you buy your first commercial property. Mhm. Do the math. So, so say you buy that
27:57 8-unit, do the math so your deal works if you had professional management. But for eight units, self-manage your first
28:04 eightplex. You'll be a better investor on every other deal you do. For sure. And when as you start to grow
28:10 your portfolio because you self-managed or know what it's like to communicate with tenants,
28:16 you can pretty much know how the current management company is communicating with
28:21 tenants or give them advice on how to communicate with them to keep them in there longer or keep them or get them to
28:27 agree to a rent increase. It's all about how you communicate and how you talk to them. Absolutely agree. Now, 12 years, that's
28:33 a long time to be a broker. I'm imagining you have seen some crazy things. Do you have any stories that
28:39 stand out as like this is the wildest thing that's ever happened to you as a broker? Yeah. Yeah. There's like I mean there
28:45 there's a few stories. So I sold uh long-term clients of mine. Sold them I
28:51 think two years ago now a 16 unit in Ballard. Mhm. And we went under contract,
28:59 whole bidding process, right? Went under contract, had their inspection period, and we knew that there was an eviction
29:06 tenant, kind of a hold over eviction tenant for hasn't been evicted in two years. Same old story with Seattle,
29:13 right? So, after my clients waved feasibility,
29:20 they their earnest money was non-refundable. And right after that happened, we were
29:25 probably, I don't know, a month out from closing at this point.
29:31 They finally got the eviction to go through on this one tenant. So, the sheriff showed up to the door.
29:38 It didn't go well. They were the tenant barricaded themselves in there. They had to break in. Shots were fired.
29:45 Sheriff ended in critical condition. The tenant passed away in the property because of the shooting. And then this
29:53 building made national news. So it's like, you know, talking with my clients,
29:58 it's like, hey, you know, here's the situation and,
30:03 you know, if you guys want to get out of this, I'll I'll find a way to get you out of this by, you know, whatever
30:10 financing not working out, whatever. And luckily, you know, it was such a good it was a good enough deal that they decided
30:16 to continue pursuing. So that was that's probably the wildest
30:22 story. Can you imagine being the seller of that building midtransaction and that's when this all goes down? That has to be the
30:28 most stress. You got to be kidding me. Yeah. Almost got rid of this building. That one tenant.
30:34 Yeah. Surprised my clients continued forward. But you know, it was a good
30:39 deal. It still is. By the way, I I am a advocate for a balance between tenant laws and landlord
30:44 laws. I I don't think that states that are excessively landlord friendly are necessarily a good thing. I think there
30:50 is an actual balance for protecting owners, protecting tenants. The eviction laws, specifically on the West Coast, I
30:56 think it's horrible for everyone. You get situations like this where you can have a dangerous violent criminal and
31:02 you cannot get them out of the property. You can't make your own building safe. I think it's one of the worst things about
31:08 Washington State, Oregon, and California is they call it tenant friendly. And
31:14 tenant friendly means you can be forced to live next to a violent criminal for an extended period of time because your
31:20 landlord cannot make the property safe and it's not their fault. So frustrating. I know I had So to be
31:28 clear, Eric has made me a lot of money. A lot lot lot of money. We've actually partnered together on a deal. Uh so I've
31:34 been with him on the investor side. I've worked with him on the broker side many times. We had one deal that was the
31:40 craziest legal that's happened to my whole portfolio. And I will say Eric's handled it super well. We did a 60 unit
31:47 in Walaw Wala. We went under contract and it was it the timing was weird, but
31:53 we wrote two contracts. A seller financed contract for a section of the portfolio
32:00 and a conventionally financed contract for the other half. What happened to us
32:05 mid-transaction is this was about a 90-day process and in those 90 days that
32:11 was the 90 days where rates skyrocketed. So we went under contract and bank rates
32:16 were about 5%. By the time we were coming to close they were already at 7
32:21 12%. That changes your math astronomically.
32:27 We were willing to still close out the seller finance portion. we were willing to adjust the pricing or move around
32:34 pieces on the conventional. Seller said no. We went okay. We got to the closing
32:40 table signed. Seller doesn't sign. They made the decision. I've never seen this
32:45 happen before. And this is note for your uh for your non- landlord friendly states.
32:53 Legal process tends to be very long in blue states. They decided the earnest money is
32:59 contingent on closing both deals. That was not in our contract.
33:04 Yep. We had an over one-year lawsuit over it was $135,000
33:10 of earnest money. Mhm. Thank God I didn't raise that. That was that was our money. But that was the
33:17 first time in my investing career I had my own 135. And the worst thing that could happen,
33:23 a legal dispute over something that is very clearly laid out in the contract. We have two transactions. We want to
33:30 close one and cancel the other. I'm so surprised. Have you ever seen escrow just hold funds like that on a
33:37 transaction where there's two separate transactions and they they hold the money over both?
33:43 I'm still trying to figure out how it was legal for escrow to pull that off. Yeah. You know, that one was unique and
33:49 it's I know it's been a while. Good thing you had a broker that had a position to be able to apply pressure to
33:54 that seller. So, yeah, that's that was a tricky
33:59 situation. I think the earnest money escrow if you go under contract and no
34:06 one, you know, one party doesn't sign at the end, you know, that's ultimately specific performance. And if it's not
34:13 stating the contract that escrow like is to immediately release earnest money,
34:19 escrow is kind of in this gray area. They can't do anything unless both buyer and seller sign off on where the earnest
34:25 money is going to go to. And if one party doesn't sign off on it, they just hold it and it gets held and the seller
34:31 of that building can't go under contract with anybody else during that point in time.
34:36 So they're it's like almost a lean almost on the property. Yeah. It's called a a list pendance.
34:43 Yep. Where you go ahead and you Yeah, it basically is you come in, you say, "Hey, um, we're under dispute on who has the
34:49 rights to own this property." What I did not know, investors, this good to know for Washington state, it's about a year
34:57 and a half to two years to get a court date for specific performance. So, while we filed immediately, I
35:03 believe we settled with them for a slight loss, but we settled with them what, 18 months into that process. Wild.
35:13 That was my wildest transaction. I will say if we didn't have a broker who could help us handle that, that would have
35:19 been unbelievably more difficult. Like, unbelievably, Eric was extremely
35:24 helpful in that was the most stressful situation you can have. We like we wrote good contract. We have a breach of
35:30 contract. We have two or three different proposals that I think were really favorable to
35:35 the seller on like, hey, we have a unique situation. Eric navigated that. Fantastic. How do you
35:41 as a broker handle the stress of those things? I found when it's my money, I definitely
35:48 care, but it's not nearly as stressful. If we have something happening to my partners or when I was a broker,
35:54 something goes wrong for a client that eats at me. How do you manage the stress
36:00 of you're doing like multiple transactions a month, big commercial deals, and as we illustrated, while they
36:06 usually work out, sometimes stuff goes crazy wrong unforeseeably.
36:11 How do you handle that as a broker? Yeah. You know, I think the the stress is there for sure. I mean, you feel
36:17 horrible for your client you're representing. If it's, you know, let's say they wanted to list their
36:23 property and they're under contract, everybody's waved and they changed their mind. It's like there's nothing you can
36:28 do for them. They agreed to the contract. They have to move forward and it's you're kind of heartbroken for them
36:35 cuz you're literally watching them not get their way, right? And there's
36:41 nothing you can do. So, it's tough, you know, it just that's for a broker if it
36:47 ever ever goes in that situation, it kind of gets handed off and then they
36:52 have to speak with attorneys and that's way beyond the realm of what a broker does.
36:57 So yeah, it's it's uh it's stressful. You know, I think you try every way
37:03 possible to help them like your situation in that one. You know, because
37:08 they didn't come to the table, I was owed a commission on that. And then that allowed me to apply pressure for the
37:14 commission. And then ultimately, you know, that that made the sellers come to the table and do a deal cuz they would
37:21 owe me a commission regardless. So it's like having you know having a broker too who has the knowledge in deals and
37:27 understands contract language and you know how to apply pressure points is huge.
37:33 Yes. Which is a another reason why the uh random person who has a license at your church is not your go-to agent.
37:41 That seems to be the common issue I remember from my broker days. Like oh I got a buddy who's like
37:48 your buddy is not your broker. Your broker should be someone who knows how to do transaction, who's versed in law,
37:53 who has experience. Preferably for me, one of my biggest requirements is I like to work with brokers who own real estate
37:58 themselves. The fact that Eric can separate being an owner and being a broker really
38:06 helps me feel good about the way that he's underwriting, the way that he's going to recommend deals. Cuz you've been on both sides of it. You understand
38:12 the expenses. You understand when projects go to plan. You understand when projects don't go to plan. That means
38:18 more to me as an investor talking to a broker than your transaction history. Yeah, I think that's a good way to look
38:24 at it and true. It's like you want to work with a broker who specializes in in
38:29 what you're looking for. You know, if you're looking for a house, I am the last person you should hire. Don't don't
38:36 buy have me buy your house or represent you on buying a house. It just it's not not the realm I work in.
38:42 Mine is strictly investment properties. So, that's that's another thing. And
38:47 that's where you see a lot of what you were just talking about, like, hey, you know, my buddy's got his license and, you know, I want to buy this commercial
38:54 property. It's like, yeah, well, your buddy only sells homes, so, you know, he
38:59 might get in trouble contractwise or how to negotiate the deal. So, it's important to make sure you grab the
39:05 right broker that way. Yes. If you're looking for single family, Eric's wife, Jackie, sold the crap out of my rented
39:11 house. That's right. Fantastic job. Got the right stager in there. got that marketed and we got
39:17 exactly what we asked for for it and pretty quickly that was uh but finding the right person on the team. Eric just
39:24 happens to be married to another amazing agent and uh that's right and wife. Now you have two kids now
39:32 which is wild. You've been at this for 12 years. You started with a 72hour work
39:38 week and you said you're doing what 30 transactions a year I would say.
39:45 Yeah, somewhere between 15 and 20. You know, they'll be big deals wrapped up
39:50 with small deals. Okay. So, so you're doing you're you're doing pretty darn decent volume and
39:56 you're doing sizable deals. So, I mean commercial I mean doing 20 deals in a year is the substantial
40:03 as you've moved through. You're married, you have kids, you've actually hit a lot
40:08 of the financial goals I think a lot of people would aspire to as a broker. You're 12 years in.
40:14 Two questions. one, what keeps you motivated? Yeah. Well, having little kids, having a
40:19 mortgage, that keeps you motivated, you know. Yeah. You look at your expenses and then, you know, I'm a competitive
40:26 person at heart. You know, it just how I'm driven and I grew up working kind of
40:31 at an early age with family restaurant and everything. So, it's just it's
40:36 ingrained to work. You know, it's funny when you meet with different people, especially like the individual who's
40:43 buying our RV park. You know, everybody has these goals like, man, you know, I I really want to replace my income. And that's
40:49 phenomenal. That's a great goal, but you and that was my goal, too. But the closer you reach
40:56 to that quote unquote financial freedom, it's like, well, you know, you're also
41:02 I'll be 40 in a in a few years. what else am I going to do? So, I'm
41:08 going to keep working, you know, just keep stacking the money, keep stacking the properties and grow that even more.
41:15 And another thing, too, is what I've found out after owning these all these properties, right? Is that cash flow
41:24 varies. It's not a steady deal where you can, you know, oh, okay, I've got these eight
41:29 properties. I'm making whatever 200,000 whatever number you want to throw to it. 200,000 in in income. I've
41:37 replaced my income. I can now just sit on the beach and relax. Well, cuz this
41:43 one property needs a new roof this year. That's $100,000. Y So in that year, you're only making 100.
41:49 So it's like you do need to keep kind of pushing the limits and taking each
41:54 property, getting it to its max value, and then exchanging to the next one. and
42:00 go from there. So the next value add after next value ad. In real estate, it's not so cash flow is
42:05 king. That's what's going to keep you alive. Yeah. But there's three types of money in real estate. There's cash flow, there's
42:12 liquidity, and there's equity. You haven't made it. If your goal is, I want
42:17 to replace my income and I want to own all of my time. You have to hold all three of those in balance at the same
42:23 time. you have the cash flow to retire and you probably need about 150% of your
42:28 income because like you said it's going to vary. Yeah. I had I had a building that has
42:33 been 100% occupied for two years. Same month it went to 60% occupancy. It's the
42:38 act is the 10lex that you sold me. We had four tenants move out. Two of them broke their lease. Two of them just was an organic move outable.
42:46 A 40% loss of income. If you were banking on that, that sucks. Yeah. So really, if you're used to
42:52 making, let's say, $10,000 a month, you're setting your baseline at a steady
42:58 $15,000 a month, and you have to have the liquidity to put on that new roof to
43:04 keep up with one-time payments, and you have to have enough money in equity because over time, that's what actually
43:11 makes you very wealthy. That's what grows over time. That's what your family inherits.
43:16 You need to keep all of those in balance. You can trade those for each other to get them in balance. But if
43:22 your goal, you're going in saying, "Hey, I want to make $10,000 a month." You really want to make $15,000 a month,
43:28 have a couple hundred,000 in reserve at all times, and keep your LTVs probably
43:34 stabilized around 60%. Realistically,
43:40 you can do it. It's not as uh it's not as cut and dry as I need more cash flow.
43:46 Let's go buy some deals. And I think every investor who's gone after this journey, myself included, has found it's
43:52 not get-rich quick. It's you can make a lot of money relatively quickly, but there is a lot of work that goes in. How
43:59 many hours do you think that you work now compared to the beginning? Is it still the same? Are you just holding
44:05 that 72-hour thing? You have two kids now. You have a lot going on. Yeah. No, I mean, you can't you've got
44:11 to balance it. So, you know, now with kids and older and
44:16 that's really early on in brokerage that you you need to put in the hours, you know, call it 80 hour weeks really. You
44:22 just have to or else you're not going to make any money. But now it's, you know,
44:28 call it I'll get into the office between 8 and 9 and I'll head out maybe pick up my son most days from school at 4:00.
44:36 So, you know, you get more efficient as you get older and, you know, longer in this business. You've got steady client
44:42 flow. You got more people calling you versus having to go, you know, scring and get those deals, right? That is a
44:50 great place to be. And the cash flow from the investment properties, of course, it does help. Unfortunately, you
44:55 know, it's it's not enough to go sit on that beach and chill all day long, but
45:01 you know, it's it's always very helpful. The beach is fun for about 10 days.
45:07 Exactly. I think that's the max. I actually peak around eight and then my wife can do a
45:13 couple more. So I I call it 10. Whenever we've tried to relax for two weeks, the
45:19 back end of that after day eight, I'm like, I'm just ready to like let's just go back to work. Let's go build something new.
45:25 Yep. I start freaking out after about day four. We need to get back to work and do
45:30 something. Oh, that's amazing. What uh I I I have two more questions and we'll we'll wrap here. What is it about you that has been
45:39 the most helpful in building your business as a broker? Like what what thing is unique to Eric or at least most
45:45 helpful about yourself that has driven you to the level of success you had? Because there's a lot
45:51 of brokers who make no money, who have all the all the same
45:56 motivations. They have a family. They're they're they're somewhat hungry to make money.
46:02 What's the difference between Eric and your off the street anyone else.
46:08 Yeah. And I think it's I think you can wrap this into your group too of people
46:13 looking and making calls themselves, but it's really easy for brokers to get sidetracked and kind of look at other
46:22 other ways to try and get deals done. And I I respect that, right? Maybe different marketing approaches,
46:27 whatever. But plain and simple, you need to call the person directly and you need
46:33 to get in touch with them. And that's all you need to do all day long because not only will you, you know, build
46:41 long-term relationships and have them in your database and just touch base with them. That can come to fruition in a
46:48 couple years or maybe even six years down the road. But you'll also get the lowhanging fruit where you call that one
46:53 person, they're like, you know, I'm glad you did. I'm glad you did call me. I actually been thinking about
46:59 selling. So, you know, do you want to make me an offer? or in my case, you know, do you have a client that would
47:04 buy this? Here are the numbers. And then that's but staying on track is the biggest one.
47:11 And talking with the person directly is all you need to focus on. Especially, it
47:16 doesn't matter if you're residential or you're commercial. Pick up the phone, get in touch with
47:22 that owner of that property, and talk with them about selling, what it looks like. I love that. And the question that
47:28 I ask in every podcast, the stupid tax, whenever you're new to something and you're 12 years into something, whenever
47:35 you're new, there's always a cost. It could be opportunity cost, it could be a relationship, it could be straight up
47:40 monetary. What has been the most expensive lesson to Eric that you have learned over your
47:46 12- year? Man, it's a really good question. I think I've learned it from other people
47:52 and especially in the last three years on people buying properties and you
47:58 can't always bank on the property appreciating in value. If you're going to buy an asset, you
48:05 have to look and you have to buy a deal that still has some cash flow in the
48:10 beginning or can get to a cash flow standpoint very quickly. Too many groups
48:15 bought with low interest rates, really low cap rates, had unrealistic projections on rents, and they got hit
48:23 really hard, either themselves or losing investors money. So, I think that for
48:29 sure most valuable lesson that I can agree with. The only deals that I have wished that I hadn't bought were the
48:36 ones that didn't cash flow day one. I started a whole community around buy
48:41 deals that cash flow and you'll never lose them. Every time it's like, man, there's
48:46 there's so much upside. We can't not do this. It's lowered my cash flow. It's slowed me down. I could have just kept
48:53 going faster and adding to my income. Every time there's an exciting project,
48:58 it's the only times where I'm like, man, maybe that's not the project I should have done. I could have done I could
49:04 have done 15 base hits in the time it took me to do two of these value ad projects.
49:09 Yeah. And with the value ad too, it's if you can get there real quick. Tenants are monthtomonth. You can implement
49:16 increases. They're there within, you know, 6 months and you got to plan for vacancy. You know, I've got self-
49:22 storage facilities. That's a much faster, more dynamic pricing really quick.
49:28 So, but you can you can do it. You can buy a deal that doesn't cash flow day
49:33 one, but just know you need to have a very short quick plan to get there.
49:39 Or else you're banking on just appreciation and that's that's a bit scary. That's that's a a little bit more
49:45 risky. Mhm. That that I definitely agree with. But excellent lesson and a a core
49:52 principle of the owner meeting and multif family strategy as a as a whole. Everyone, this has been the owner
49:57 meeting. goal here is to meet with as many people as possible so that you don't have to. You can listen to this
50:03 from your car, meet as many awesome people who are excelling at business. If you are a if you are an investor and you
50:09 are looking to work with elite brokers, my takeaway here is don't make it about
50:15 hitting a home run. Be specific on what you are looking for. Communicate,
50:20 communicate clearly. Don't blow them up, but follow up regularly. Just clearly know what you are looking
50:27 for and find the brokers or agents who are actively selling the properties that
50:32 fit that box. That's all you're looking for. If you wanted to find the right
50:38 broker for you, look on a LoopNet or Crexy at who is listing the property
50:43 that looks exactly like what you want. Don't worry about the price. You don't have to buy that deal. You want the
50:48 relationship with the guy or gal who represents those properties. Communicate
50:53 what you're trying to do. even if that deal doesn't work. Great way to find the people who are transacting in the stuff
50:59 that you want to transact in. You guys want want to meet people like Eric and you guys want to expand your portfolio.
51:06 Keep it that simple. Eric, for someone who doesn't want to just call you and
51:11 say, "Hey, uh, do you have any zero down creative finance deals?" For someone who legitimately is ready to
51:18 buy real estate in Washington, how would they best get in contact with you?
51:24 Yeah, I mean, you know, my cell phone's easy. 206399-3285.
51:29 Call me direct. I always pick up my phone. Um, happy to have an initial conversation. You know, you can't get
51:35 anywhere if you don't make yourself known. So, and then my email, ericinvestmentsalesgrp.com.
51:42 So, love to help you out. Give me a call. There we go. Contact info in the show notes. We will see you guys on the next