Making $100k/Deal Using Other People’s Money, Time & Experience with Cory Nemoto

This is the BiggerPockets Podcast show 302.

With those investors we consider them partners. So it’s good because they’re not just in it for the interest but they’re vested in the deal. So they want to make sure we hit our marks and they’re our extra eyes on the deal because they’re vested in it.

Like I love when other people around me are vested in the same thing that I am, because we’re all on the same mission.

You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online.

Brandon: What’s going on everyone? This is Brandon Turner, host of the BiggerPockets Podcast here with my co-host Mr, David Greene. How are you doing David?

David: I’m doing great Brandon. I’m here with you, I’m looking at Hawaii in the background and it kind of distracts me from your oddly shaped face. So something better to look at than you when I’m recording this thing.

Brandon: Yeah that’s why I do that. I got to make it not so scary for the children out there. But speaking of Hawaii today we have a guest actually from the island of Oahu here in Hawaii. He’s a guy that David and I met a while back when David and I were hanging out in Oahu. And we were instantly blown away by this guy.

Cory Nemoto, Nemato I hope I’m not butchering his last name. Super good investor, flipper, getting into multifamily and some other stuff in the future, he tells that whole story today. It’s really good. And he’s got so many good points today. I mean like first of all you guys are going to be blown away with the fact that he makes like their target on a flip, like when I do a flip I’m like, “I’ll make 20 grand I’m happy.”

They don’t do a flip if they can’t make 100 grand per flip. And they’re doing like dozens a year which is fantastic. But anyway just so many good things like how they make their thing, how they keep their pipeline full. He talks a lot about that. How they get deals continually. I also thought he’s- you guys will his discussion on like we’re marketing versus relationship and getting deals.

And I thought that was fascinating and then don’t miss when he talks about debt-quity. I’m not going to say anything more about that. Debt-quity is fantastic, something I’ve never heard before on this show but I’m totally going to start implementing this into my own investing. So with that said, we got a couple of house cleaning, housekeeping things to take care of.

I don’t know we call it that, including today’s quick tip. Alright today’s quick tip is very simple. In the show later on you’ll hear us talking about books. We talk a lot about some of the books that have impacted our lives a lot. And Cory makes his point where like when read the book he shares during the Famous Four, he said when he read that it like totally resonated.

Because he knew that was like true and he didn’t have words for it. Now I feel the same way when I read Rich Dad Poor Dad it was like it put words to what I was feeling. And I know David you said the same thing about So Good They Can’t Ignore You, right. So the quick tip today is very simple, read books like real estate, business, personal development books.

And when you find a book that is like, yes that is what my soul has been doing, like pay attention to that. It means that that is where your strengths lie, right. Anything you want to add to that David?

David: That’s exactly right. Most people don’t know where their strengths are. They’re just frustrated because this isn’t going as good as they thought, they’re not hitting their rhythm. Well this is a way to like speed up that process. You kind of tool around, you read every book you can and when you find the one you’re like, “That guy gets it I like that.”

That’s you, right. That’s absolutely where you found your spirit book basically. Like this book is expressing what’s been in my spirit. That’s where you know this is your wheelhouse and that’s where you should put your attention towards like improving in that area. Like you always say Brandon you got to double down on your strengths not improve your weaknesses.

Brandon: I say that. I don’t know if I’ve ever said that in my life.

David: Yeah that’s all you say, all the time. Because every time I tell you that you could do better with something you’re like, “No, I’m just going to double down on my strengths and no improve at everything.”

Brandon: I don’t say that like concretely and nicely. You’re better with the words than I is. See what I did there? Alright let’s get to today’s show sponsor.

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Brandon: Alright let’s get on with today’s show. Today’s show like we said is Cory Nemoto, super legit, awesome very intelligent, very smart and very savvy real estate investor who’s doing flips both in Hawaii as well as in Seattle. And you hear about that a little bit later. The last thing I’ll say before we jump into the show is I’m going to be hosting another live webinar this upcoming week.

So I want you to come. Go to biggerpockets.com/webinar to see I guess this week’s webinar or future webinar if you’re watching this in future I won’t specifically say what this week’s is because you might not listen to this for months. Who knows? But anyway I do a lot of webinars and I teach different topics and this week I think you’ll like it so biggerpockets.com/webinar. And with that let’s get to today’s show.

Hi Cory, welcome to the BiggerPockets Podcast. Good to have you here.

Cory: Good to be here thanks guys. It’s honestly a huge honour to be on the show and all.

Brandon: Thanks.

Cory: I guess before we get into it I have an important question for you Brandon. How and when are we going to get David to move to the island with us?

Brandon: I know. He comes out-

Cory: I mean it just happened or what?

Brandon: Well he’s like the creepy uncle that like lays on your couch and stays for like months and he hasn’t left yet. Okay he finally left but he could be like the adopted Hawaiian pretty soon. Is that right David? He’s just ignoring it.

Cory: I’ll take it.

David: It probably depends on if I’m referred to as the adopted Hawaiian or the creepy uncle as far as maybe I’ll move in with Cory and he and I will take over the world. And you can have your couch to yourself Brandon.

Brandon: Alright not a creepy uncle, a loving uncle that sleeps on my couch. No, you got your own bed here, it’s good. Alright we will get David over here to the island but as you said, Cory here is a Hawaiian house flipper but also flipping in other areas as well, at least ironically mild stomping ground. So we’re going to talk about that today and kind of how you got into that. But before we get there why don’t we just go to the very beginning. Like how did you get into real estate?

Cory: Oh it’s a long story but I’ll try to keep it condensed because I think it’s the first time I’ve ever really thought about it recently of how I really got started. And it’s a pretty interesting story. I basically read Rich Dad Poor Dad, and that book changed my life. And my dad has been telling me to read it for the longest time.

And I was basically telling him like I hated to read at that time, this was probably like around 2011, late 2011. And finally I picked it up, I read it and that book hit me like right straight in the feelings. Because every word that was coming out of that book was exactly how I was feeling. So I closed the book and I basically was like I called my dad, “Hey I read the book.

I read Rich Dad Poor Dad.” And he was like, “Oh good.” And I said, “Yeah so I’m done with school. This is like my last year in college.” And he was like, “Oh whoa, finish it up’. And after taking his advice I decided I’ll just finish the last year in school.

But in the book he recommends just going to the local REIA club and kind of meeting people, that’s how you just get started. Just go and just start talking to people even if you don’t know anything. I was in Riverside California at the time so Southern California. It was May 2011, so I met two investors out there.

And they basically were like, “Hey you want to learn how to do this?” and I was like, “Yeah.” And they said, “Okay well we’re looking for a few hungry people.” He asked for my business card of course I didn’t have one, so I kind of just scribbled on a piece of paper. I gave him my number not knowing that he’d call me back. But he did.

So when he called me back, it was a week later, they invited me to go to Starbucks the normal meeting grounds for investors. And I met with them and the first thing he asked me was why real estate? And I didn’t know how to answer that question because at the time I read a book and I didn’t want to tell them, “Oh I’ve just read this book and it told me to go to this event.”

So I basically couldn’t answer them. And he was basically telling me, he told me if it’s for- it was pretty dramatic now that I think about it. But he wrote down on a piece of paper and he was like, “If it’s for these two reasons, then this conversation is over. And we’ll part as friends but we won’t do business together.”

And the two words were basically money was the first one and the second one was kind of like for the image like the notoriety of being an investor. So for the image I didn’t care, I was like I’m not here for the image but I’m here to make money. That’s why I picked up the book and I got all excited is I want to make money.

So I couldn’t answer his question and he saw me struggling, so what I realized is that was the first time somebody was asking me like what’s my why.

Brandon: Yeah.

Cory: And I never had someone ask me that before. So it was basically he told me to go home, I’ll think about it and send him an email. And if it’s good enough he’ll call me back. So I did that and I gave it a hard thought because I thought this is a great opportunity. And he called me back and he decided to give me a shot.

And the shot was basically me door knocking for a year for these guys. And door knocking I mean if anyone of you guys out there have door knocked before it’s kind of like the worst.

Brandon: It’s horrible, yeah absolutely horrible.

Cory: Yeah it’s not fun. I mean I love dogs but during that year I hated dogs. Every time I ring the doorbell I mean they were like my worst enemy. But so I door knocked for them for a year, they were doing this pretty unique shot at just actually pretty advanced it’s called, I see you guys refer to it as Back Flipping on the forums, so I kind of researched it.

But it’s basically they were flipping jumble loans, so non-conforming loans. At the time it was 2012, so the market was still recovering. There was a lot of people upside down with jumble loans. And in Riverside I think anything over $475,000 was considered a jumble non-conforming loan. So what they would do is they would have me go and knock on all of these- they had a list.

Right so I knew these people were upside down. And it was sad I mean they don’t want to see me. I’m the last person they want to see but once they taught me what they were doing, I realised the value I can bring to these homeowners. Because what they were doing was they were going after homeowners who were upside down on their mortgage.

They had jumbled loans, they had to have been current with their payments and then they had to have wanted to stay in the house. So basically they would go the homeowner’s bank, negotiate with the bank, to buy the note at a huge discount. And the reason why the banks at the time would want to sell at a big discount is because it’s a jumbled loan so they can’t sell it through Fanny May.

They can’t sell it in the secondary market, so they’re stuck with this toxic asset. So they would negotiate with the banks to buy the note at a discount. And then they would have the homeowner go and refinance, get another loan. And that’s the reason why they have to be current with their payments is because they could get another loan to re-fi.

So like if the property was worth a million dollars or like they owed 1.2, the investor may go in and buy the note for like 800. And then go have the homeowner re-fi like 850 maybe even nine. So now the homeowner they’re not upside down anymore in fact they may have equity, right. And the investor got to make a decent profit and the banks got to liquidate a toxic asset, so everybody won.

Brandon: That’s cool.

Cory: When I saw that, I thought in real estate investing it was just buy and you rent, you’re just a landlord, at the time. And when I got out of that portion, as horrible as it was door knocking for them, what I got from it was that investing like these strategies can be so powerful. Like everybody won in that deal, even the bank.

At the time nobody cared about the bank whether they won or not but they did. So I realised what I can bring to other people with that strategy. So after I graduated, moved back home I knew I needed more training so I went to more meetup groups, got some mentors. And it’s kind of pushed me to where I am today I guess. It’s been a long road.

Brandon: Yeah.

Cory: And I started from the very bottom I didn’t know anything.

Brandon: Well what I like about what you’re saying is it’s so true and I think people look at investing like we’re a bunch of sharks oftentimes, coming in to just like make money, despite and nobody else is going to make anything. But like at the end of the day a lot of investing is really like about trying to help make sure we have win-wins and helping everybody.

The bank needed to get out of that loan, you needed to learn how to invest in real estate, the investors needed to make some money, the homeowner needed to not end up in trouble and end up losing their property eventually. So it’s kind of that helps everybody kind of thing, and that’s kind of the ideal form of investing.

So tell me how you got from that to I guess working in the house flipping industry. What was it like? Maybe I even backtrack to like what came next? I mean what was your first deal that you did on your own outside of those guys?

Cory: So after that I started researching all the different strategies in investing. And I actually started wholesaling. I chose wholesaling because to me it seemed something that I could scale, something that didn’t require a lot of capital which I didn’t have at the time. So started wholesaling. I wholesaled my first three deals to my partner Jonah and he is a developer and house flipper here in Hawaii as well.

And he’s like a mentor to me and I’m partner with him on deals even to this day. But my first deal when I wholesaled it to him I kind of asked him I said, “Hey do you mind if I worked the project with you? I’d love to see how you do it.” And I mean of course he was like, oh free labour, yeah absolutely. So I worked the project with him and I learned so much.

Just from even that first because it was a Subject-To deal actually and I didn’t know how to close a Subject-To deal at the time. So Jonah was luckily there by my side and I met him at the meetup group like our local meetup group. He was the one talking about how to structure a subject to deal. And I was like, “I have a subject to deal like in the pipeline right now.”

So he was the first guy I called and then he helped me close it. We rode down and through and I just kept blasting out my mailers, my marketing. We did three wholesale deals, kind of like mini flips for me because I gained experience from those.

Brandon: I actually love way of wholesaling as well. And by the way for those who don’t know what wholesaling is you’re basically finding good deals and you’re not working on them yourselves, you’re flipping them to a flipper usually and a flipper goes and does the work, right. And you make kind of a fee in between.

And won’t go into deep specifics on how it’s done but lots of information on BiggerPockets about it. But yeah I love that idea of taking like yeah wholesalers can make decent money. But what you did is you said, I don’t want to just be a wholesaler I want to learn, I want to grow I want to get experience.

So hey, can I follow you along? I absolutely love that strategy. I think it’s fantastic. Because what you did is you went and found a deal, you brought value. You weren’t just going up to the guy and be like, “Teach me everything you know and take every Saturday from now unto eternity to spend time with me.”

And you were like, “No I got this deal here, I brought you value now you teach me. And like it’s such a good regime. What I’m noticing about the beginning of your story is just like relationship, relationship, relationship. I mean like you started right with that last you went to a meetup right. And you met those people and you got connected with them and started learning how to do it there.

And you went to a meetup in Hawaii and met this guy and started learning there. I actually want to throw a point out there to everybody it’s like BiggerPockets and real estate is cool online like we all hang out, people on the forums listening to the podcasts. But like there’s nothing like getting out there in real life, sitting down for a meal or a drink or whatever and talking with real life investors like networking.

Like you learn so much and you’ll grow so much in those experiences because it stretches you because people are kind of afraid to get out there and network. So Cory do you have any advice for people who are listening to this maybe they haven’t been to a local meetup or a real estate club or anything like that. What should they do that first time? How should the approach people?

Well I think like you said it’s super vital to kind of get out there in the community. I feel it’s the only way if you really want to take this serious because your network is so important in whatever market you’re in. and I was talking to David earlier but it’s like when you go to a meetup, it doesn’t matter how much experience you have.

Like you have something to offer somebody whether it’s your time. Like when I first started I didn’t have anything to offer except sweat equity and my hustle. But that was worth a lot to somebody and I did well for them and I think that the thing for someone who’s new and may be intimidated about going to these events is that you got to know that you do have something to offer.

And you just go to find the right person that is looking for what you got. Whether maybe you do have some cash lying around and you’re willing to pay to play. Or maybe you don’t have cash but you’re willing to put in the hustle for somebody to learn like I did. So there’s something that you can give to someone else and someone is there most likely to receive that.

David: Cory I want to take your point and expand on that a little bit. But before I do, we need a little bit of background on you. How many houses are you guys going to flip this year? What are you track for?

Cory: So right now we have 13 in progress, we have five in Escrow, year’s closing I think this year we’ll probably hit maybe 25.

David: That’s awesome. And what is your minimum profit you want per house?

Cory: So we don’t do a deal unless it’s six-figure profit or more. We look at two things. It’s the net profit and then the ROI. So in Hawaii especially we won’t do a deal unless it’s a six figure profit. But at the same time we’re still keeping the eye on the return on investment right the cash on cash return. Because if we’re tying up a million dollars and we’re making 100 grand I mean yeah it’s a good deal we’re making 100 grand.

But we could have took that million and we could have done-

David: Have done three deals.

Cory: Three deals exactly. We could have done three deals and made 300,000 tripled the return on the same amount of money. So a lot of time we leverage everything. So like we’re responsible to our investors as well. That we want to get the most return for their money.

David: Yeah. So here’s the point I want to make because we were just talking about relationships and how you’ve formed relationships and how you started at meetups, and I just know for those who don’t know Cory, Brandon and I met him and immediately we were just like, “Dude I just like and trust that guy.” Like five minutes into knowing Cory and you’re just like he’s either a professional conman or just a genuine dude who makes you think that he is, right.

Like he’s got that strength. And that strength has translated for Cory into flipping an average of two houses per month which is really good but is not like overwhelmingly busy, right. And then he’s saying we’re also leveraging out a lot of what we’re doing. So that’s even less work he’s doing, but he’s averaging $100,000 or more on every single deal. So you can do the math and see 25 deals a year what that’s turning into right.

That is how valuable relationships are. Cory has figured out I don’t need to be the one swinging the hammer, I don’t need to be the one raising the money, I don’t need to be the one doing hardly any of this. I need to be the one who’s developing relationships with the people that find deals, and that’s where 25 deals I mean $100,000 a deal like 2.5million in gross profit before it gets splits up. So just let that sink in.

And then Cory what I want to ask you is for those who’re like, “Okay David shut up I get it, relationships matter. What the hell do I go do now to form them? Like how do I build relationships?” Can you share a little bit with us of like how you got started and what tactics you’re using to build relationships and knowing who you need to build them with?

Cory: Right. Well I guess first before I go into it I mean in my deep core I’m an introvert. Like I really am. And after a networking event or a big networking event like it takes all my energy. And I guess I call myself like a functioning introvert like I can function at an extrovert level but it wipes me out. And I get it, I get the introvert mind set where it’s intimidating or you’re unsure about talking to somebody or initiating conversation.

But what I found helpful is just showing up is half the battle. So whether it’s a meetup group or maybe you’re hosting your own meetup group, that actually believe it or not takes the pressure off of you a little bit because you can put it on someone else, but you’re controlling it. So I mean that’s a great way to build a network.

Another way that I kind of gave as a recommendation to a group was that any time when there’s a big event whether it’s one of those large training companies that come in through town, I would go and not to be sold necessarily on the products but to be there like kind of looking at who’s hungry and who’s somebody I think I can work with.

Because everybody there, most of them are new, they’re not seasoned yet but they’re hungry they’re there for a reason. Like those are the perfect people to start building relationships with where and maybe you’re on the same level. But it’s a little bit easier coming from the same level to build your confidence and building some sort of network.

When I was wholesaling my goal was to build a big buyers’ list and obviously market for deals. So our huge strategy was building a network of other wholesalers to co-wholesale deals with, or tap into each other’s buyers’ list or tap into each other’s deal flow. And I met a lot of those people at those types of events. Like I’ve been to hundreds.

I would still go. I don’t have enough time now but I would still go to those events if I ever felt that my pipeline was getting a little dry, I would go there. And kind of I don’t want to use the word recruit but that’s kind of I’m looking for somebody to help. And of course when they’re by my side I give them everything. All my working materials, I give them like every strategy that I use, the lists that I pull. And it’s because I want them to do well.

And I don’t make them sign any non-compete or first right of refusal. Like I just trust that and if they can take down the deal themselves I’m happy for them. But if they can’t I know that I’ll be at least on the top three call back list hopefully.

Brandon: I love that attitude of just giving like if you help other people, what’s that Zig Ziegler quote right if you help other people get what they want you’ll get anything you want or something like that.

Cory: I love that quote.

Brandon: Yeah like you’ll get everything you want if you just help everyone else get what they want. And you mentioned this idea, first of all I think that’s fantastic. It’s finding people who are new, who may be going to these real estate events whether it’s- you guys if you’re listening to this everybody go to biggerpockets.com/events. And you can find a list of local events all around the country happening, just from BiggerPockets members.

Just like, “Hey let’s meet at this bar or this restaurant, at this Starbucks and let’s get together and talk.” In fact, I did one last week at a beach down here in Maui, like just hanging out with cool BiggerPockets people. And yes check it out, start going to those things. But then you mentioned pipeline and you said if your pipeline started to dry up, you would start networking again in that way.

So I’m assuming that you’re using this networking skill to find deals. Can we spend some time on that because I mean yeah finding deals where you can make six figures on a flip is really hard, right. Like I mean most people I know are like happy with 20 grand right. So first of all finding those deals is tough, so you must have a really good pipeline and it sounds like you’re using these people and relationships for that. So let’s go there next, so how are you finding deals today?

Cory: Yeah I mean that’s absolutely it because for me I was actually invited to speak at women’s investing network where it’s all women. So they ask all smart questions. It could be a little intimidating. But the first time they invited me to talk, they asked me to talk about deal flow because we did have a strong deal flow. So I knew exactly like what the secret is.

And I know everybody is looking for the secret to how do you build such a big pipeline. And I mean there really is no secret but if there is any it’s building your network. And let me explain because I know it’s going to sound- people want something tangible and indeed it’s true, the group wanted something tangible. So I gave them the parable of like I don’t even know if I told it right.

But of the two guys who were in the village and they’re tasked to go fetch water at the top of the hill. And one guy would lag buckets every day take it back to the town and sell his buckets and he’d make money every day. While the other guy would spend his time digging a trench right, so that one day he would tap into the well and all the flow would be his, right.

So the guy lagging buckets, that’s like marketing. Like if you market enough you’re going to get deals. It’s just a numbers game. But the moment you stop marketing or the moment you stop lagging buckets is the moment your deal flow shuts off. So to me it’s proven in Seattle as well which a new market for us, but what you want to do is spend time teaching others.

And giving them all your resources and everything you can for them to succeed. And that’s just one more person that will be out there, shopping deals for you. And when they get a deal, you’re going to be the first one they call because you gave them time and the energy to teach them. Right, and even if they don’t, it’s all the better for them.

It’s good on them and so I mean that’s how you truly and you’d be surprised how fast you can build that pipeline. So I know it seems like it could take years and I’ve been doing it for years so I have built so many relationships and that’s why it can’t shut off. And in fact I don’t really market anymore. I get off market deals, like pocket listings.

And even MLS I mean MLS is constant of course. But if ever my deal flow started to slow down, I would go to those training events and as soon as they drop the $30,000 or $50,000 price tag and you see the hungry motivated people they’re ready to go but they just can’t because they can’t afford it, that’s when you come in and help them. And say, “Okay I’ll teach you everything I know for free.”

Brandon: That’s cool.

David: That’s really smart.

Cory: Yeah like that’s what I told the group because they wanted something tangible and I get it like they want the secret list or the secret marketing piece, and there is no secret marketing piece believe it or not. And there’s no secret list, right I mean it’s all a numbers game on the marketing side. But something tangible on building your pipeline or your network is just that.

Finding, going next time there’s a big event or something, go there and as soon as they drop the price tag, you come in and just help the people who can’t afford to do it. And then it’ll pay off, you’re going to donate your time, and some people will take advantage of your time but those people don’t last long in your circle.

Brandon: It’s something that I learned from I think it was Toral. Actually you and I both know Toral right in Seattle.

Cory: Yeah thanks to you man.

Brandon: That’s right I connected you guys. I totally forgot about that.

David: Oh yeah you put him… Toral man.

Brandon: That’s’ funny.

Cory: He’s a good friend though. Him and his wife Grace like I love those guys.

Brandon: Yeah they’re fantastic people, that’s funny. Alright anyway so yeah Toral does that up in Seattle where they have like meetups on Saturday morning where they bring out like wannabe up and coming investors. And they teach them everything that they know about finding deals. And then of course these people go out and find deals and who they bring them to? To Toral like it’s just that same relational thing. I love that.

Cory: He gets it.

Brandon: Yeah he gets it. And now I know why you guys are good friends like that makes sense because you guys both have that same relational thing. So let’s go back, what are you teaching these up and comers to do to go find deals? Like what are they doing to bring you deals?

Cory: So what I teach them is the marketing side. And I’ll give them all my resources, I’ll give the spreadsheet I use to run the numbers, the websites I use to pull comps, even if they need a realtor resource, I will refer them to a realtor who I trust that if they find a deal like I will close with that realtor. So I give them all the resources that I would have if I was in that position that I need to find deals.

I don’t hold anything back I’ll give my marketing the postcards I’ve used, the lists, where to go. Even the spreadsheet that we use to run the numbers like I give them all the resources and then I’m also there to help with questions and stuff. Because things come up like if they get angry phone calls and I like I always give them the warning.

If you do enough mailings you’re going to get the crazy callers. You’re going to get the people who’re like they’re just in a bad mood. And just warning them to not get intimidated by that because that’s what happens when you do direct mailing. You get people upset for some reason about you sending them a mailer yeah.

Brandon: I know people are very touchy on that. But sometimes like yeah you sent me a piece of paper in the mail, you’ve ruined my day.” I’m like, “Come on buddy, there’s people who didn’t eat dinner.”

Cory: I don’t see you calling Dominos all mad right I mean Dominos would-

Brandon: Yeah.

David: But here’s something to think about when it comes to that right because I have quite a few properties now across the country and they’re all out of state. So I show up on everybody’s out of state absentee owner list. And I get so much mail that if I don’t check it for four or five days like the post office will stop sending it to me because my mailbox backs up.

It’s like I’m drowning in it. So if you think that your letter is going to be the perfect font or style to catch my attention in the middle of that, you’re insane because it’s all going to the garbage and I’m probably going to be casting you out of my head like what you guys are talking about right. However, if I know you and I like you and when I think of real estate or ugly houses or messed up houses I immediately think of Cory, who do you think I’m going to call?

Right, there’s something to be said for why those relationships are so important. Direct mail is what you do when you don’t know anybody, it’s better than nothing, right. But you’re way better pouring you time into relationships you already have with people you already know, pumping those people and saying, “Hey when you hear of someone who there’s a death or you have a hoarder house or you just see a nasty ugly house, think of me.”

Right, like pounding it in their brain. That when you see nasty house you think Cory Nemoto or you think Brandon Turner, because that’s what’s going to get you that phone call. And I bet most of us like I learned this with real estate, right. If everybody listening right now thinks of like if you had to sell your house today, who’s the first person you would call?

Everybody has somebody that will come to mind. Like very few people have no one at all and those people are the ones who’re going to go google someone. So all these realtors that are out there chasing like SEO and putting marketing dollars into finding strangers, you’re going after a very small percentage of people. The people who know me, they’re going to call me. They’re not going to find your SEO staff.

And that’s like where like Cory you hit it right on the head. You know you’re introverted but you didn’t let that stop you finding a way to bring value. You just created an atmosphere where an introvert can thrive. Like what you said is when you host your meetup there’s no pressure on you. I don’t have to walk around introducing myself to people and feeling awkward and like where am I going to sit and what do I do with my hands?

I don’t know, right. They come to you. They’re like, “Oh you’re hosting it,” you’re like, “Yeah, what’s up? Who are you? What’s your name?” and you get to take control of that conversation which is what every introvert needs, right. Because this might be a surprise but Brandon and I pretty introverted too. We turn it on for the podcast and we come alive and when we have to meet people we do.

But just like Cory said, when we’re done it’s like collapse on the couch and like oh I’m so glad that is over. It felt like a workout. So what we do is we create environments where our personalities will do well in that situation. Brandon always talks about like he’s created this image for himself where he just goes and stand against the wall and people are like, “You’re Brandon Turner, right?”

And they come talk to him and he doesn’t have to do anything but answer their questions. It’s perfect. So whoever you are like-

Brandon: What do I do with my hands in the corner?

David: Yes that’s Brandon. I don’t know what you can make of that. Instead of making excuses and saying, “I can’t do this I’m not an extrovert,” you say, “What would I need in order to be able to do it? How can I do this? And then how can I work towards creating that environment to thrive in?

Cory: Exactly, yeah.

Brandon: So Cory I have a question, I want to move to you mentioned Seattle is now another market you’re working in. so first of all you live on the island of Oahu still, correct?

Cory: Correct, yeah.

Brandon: Yeah you’re flipping houses now also in Seattle which is I mean yeah it’s like the closest plane ride probably but it’s still thousands of miles. Like you’re not local, right. So a lot of the people listening to the show right now are going, “I want to invest in real estate or I want to flip houses, I want to wholesale I want to whatever, but I live in an expensive market.

Like I don’t think you can get more expensive than Hawaii. Like I mean it’s just maybe like some areas like the Bay Area or New York City. But it’s crazy expensive. So all those people who say they can’t do it and they have some excuse on why they can’t you’re proving them wrong every minute of every day. So how are you doing it? How are you investing not only in your own market but in another super competitive expensive market that you don’t even live in?

Cory: Right. I mean that’s a good question. And I mean I think people’s mouths would drop if they saw what we pay for a tear down here in Hawaii. Like a million dollars does not go far I’ll tell you that in Hawaii. If you’re a millionaire in Hawaii it’s like that doesn’t mean nothing. But Seattle is just as expensive, it’s close. It’s a high price point market, very competitive.

And to be honest it’s all about leverage for me. And I mean I bring out the three points and it’s basically OPM Other People’s Money, OPT Other People’s Time and OPE Other People’s Experience and Expertise. And because I can’t be everywhere all the time and we got even on the island alone we have a bunch of flips in various stages.

They all need to be checked regularly. Things do sift through the cracks no matter what. I mean flipping houses is a dynamic thing. It’s so dynamic and complex. Like you’d be shocked at some of the fires that you have to put out in some days. So in order for me to still keep the focus on the big picture in pushing the company forward but still making sure it’s thriving, I have to leverage other people. And that’s a huge thing.

I wouldn’t be able to do this without other people, all my team, partners, other investors. So we took the same thing we’re doing in Hawaii which is we built a crew that we trust. It’s taken years to build trust with them. And we’ve built a team of other investors who want to help on the projects just to see how like we do things but also some of them they bring money to the table too.

And of course then they’re partner. Right, we’ll do maybe an equity split or we’ll give them interest or we even do what we refer to as Debt-equity. So we’ll give them debt and equity. So we might give them I don’t know 10 to 12% interest or maybe 20% or 30% even of the equity of the net profit depending on how much they bring to the table.

And whatever is higher at the end of the deal is what they will get. Whether it’s the interest or if the deal runs long, they get paid their interest share. If their interest becomes worth more than what their equity is, they’ll get their interest. So they’re kind of safe either way.

Brandon: That’s awesome I’ve never heard anybody doing that before, Debt-equity I’m going to footnote that word.

Cory: Yeah, we’re doing that a lot actually and it’s working out really great because we have investors who they’re not just lenders. They don’t want to be passive lenders, they’re like don’t even talk to me until it’s done and we’re ready to sign docs or whatever. And there’s investors who want to participate and they want to be in the mix with us, because it is fun. It really is fun.

So with those investors we consider them partners and it’s good because they’re not just in it for the interest but they’re vested in the deal. So they want to make sure we hit our marks and they’re our extra eyes on the deal because they’re vested in it. I like I love when other people around me are vested in the same thing that I am because we’re all on the same mission.

We use that a lot but back to the main point we took that model from Hawaii and we’re using that in Seattle as well. So the only difference is my partner Kikoa he’s managing everything pretty much up there. And he’s good on like more of the design side and the operations side. I get my jollies off of like the deal. Closing the deal, putting the pieces together, funding it, finding it.

And he does too and I still enjoy the operations side too but I know where my strengths are he knows where his strengths. And we actually own the construction company out there now. So he’s been GCing all the projects but he has project managers that he has under him. Whereas here in Hawaii we have a GC and he hires out and I just manage the contracting team.

So I manage the general contractors. That’s the only real difference. But the way we approach basically entering the market is the same how I would do in any market. And actually whether you believe it or not Brandon you were a huge role in us getting established in Seattle because you put in touch with Toral.

Brandon: That’s awesome.

Cory: And you probably don’t remember this but I messaged you I was like, “Hey dude do you know anybody who’s a player who’s out in Seattle?” and you were like, “I know just the guy.” And you set me up with Toral and I met with him up there and it was like right away we hit it off, because I mean Toral’s huge. He does a lot of flips and just like us.

So the very first meeting I’ll never forget this, we met he just came back from like a flight or something and he took the meeting. So I was very grateful. But all of his issues that he was talking about because he has so many deals, were the same issues that we deal with. So right away I was like hey man I know exactly where you’re at. And I knew and he’s so generous, him and Grace his wife.

So they really helped us get established because I mean I didn’t know how to fix a chimney, how much a chimney costs for a fireplace. We don’t have those over here right it’s we don’t even insulate our houses because you don’t really need to. So all that little stuff, he’s helped Kikoa a lot there because there is differences. But we do the same model of finding deals.

Like Kikoa is out there networking he’s meeting all types of new people and now I mean he’s well established. A lot of people know him out there, I think they wonder like where does this guy come from, this guy from Hawaii because we are doing a few deals out there. And I’ve gotten to know a lot of great people just from basically embedding yourself in the market.

David: Yeah that’s awesome.

Cory: And that means going to groups and meeting new people.

David: That’s cool. I thought I was supposed to spend $50,000 on a course that would teach me how to have all this stuff magically fall into place so I didn’t have to go meet people and make friends and put on pants.

Brandon: I still don’t put on pants. But we’re Hawaiian and in Hawaii you don’t wear pants.

Cory: Right.

Brandon: I don’t know if I can claim to be Hawaiian yet, I’m what do they call me, a Hali, that’s okay. I’ll tell you why a Hali.

Cory: I’m here.

Brandon: I’m here yeah, I’m here it counts. Alright so if people want to listen to episode by the way with we’ve been talking a lot about Toral and Toral is awesome and his wife yeah very awesome couple, love those guys. Listen to the show, we interviewed Toral on 189 I think it is.

So biggerpockets.com/show189. In that one actually he talks a lot about networking as well. So very good episode of the podcast. But with that we’re going to shift gears here and head over to the next segment of our show, The Deal Deep Dive.

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Brandon: Alright let’s get to the Deal Deep Dive. These are the questions that dive deep into one specific deal. So Cory, you got a deal in mind?

Cory: Yeah.

Brandon: Okay first of all before I go I’m going to have like seven or eight specific questions. But just overarching like what is this? Is it a house? Is it a flip or what’s the deal?

Cory: It’s a single family flip that we did earlier in the year. And it was interesting because we almost didn’t want to do it. And I’ll lead you to why.

Brandon: Yeah okay. Why don’t- I’ll see if we can bring it in these questions. But I’ll ask the first one. How did you find-no let’s go, why did you not want to do it? Let’s go there first. Why did you not want to do it?

Cory: Okay. Well for one the projecting net profit was like 80,000 so it didn’t hit our mark, right. We were shooting for a six figure deal and that one didn’t. And that was the first one and it wasn’t an easy flip. It wasn’t like we can get in and out, it’s a lipstick. It was a full gut type of flip and those take time and we were going to leverage hard money on it. So we were bleeding I think it was like $129 a day, like I count it by the day even Sunday.

When the guys aren’t working we’re losing money. So that’s why we almost didn’t do it. We almost wholesaled it we were going to wholesale it but we brought a couple of our guys down they were like no, it’s too tight I don’t want to do it. So we were like, don’t worry if you don’t want to take it we’re going to charge forward and we’re going to take it down. But I was kind of like iffy about it.

Brandon: Okay. Alright so how did you find the deal?

Cory: So it was actually my partner Kikoa, it was his friend. So his friend was facing foreclosure. So that was another kind of reason an extra push for us to get in there and help him out. So he was able to talk to the bank and have them agree to a short sale. So it was a short sale, somewhat of a pocket listing because it probably would have went on the market maybe as an REO, we don’t know.

But what’s interesting is it took basically we put in the offer and for sale approval took like seven months. So we didn’t hear back till the next year so this year. And finally the bank’s like, “Hey we accept the offer only if you can close in 14 days.” And we were like, “Oh what offer is this?” like really we know we make hundreds of offers and like 14 days, who made that deal?

Because we never do, I mean we can close that fast but we always try to shoot for at least 20 days and just to give us cushion. So when it came up like hey they accepted your offer but you got to close in 14 days, you’re like, “Well who wrote that offer?” but it turned out it was the one we wrote like half a year ago.

Brandon: Yeah. I remember on one of the episodes of the podcast we had long time ago, I think it was Ernst & Young his first time on. He talked about the short sale time machine. And he said a short sale time machine is basically when you put an offer in and it just goes, like you don’t hear from it for months maybe even years.

And then all of a sudden it comes back and if they take your offer, the property has probably risen in price dramatically in that time. But it’s like you could always say never mind at that point, but yeah I remember that being a really funny episode.

David: It’s like a stock option basically.

Brandon: Yeah you’re buying an option-

David: You can go with it.

Cory: That’s hilarious yeah. Short sale time machine I’ve never heard that but it’s so true.

Brandon: Yeah. Alright so how much was it? How did they want? How much did they want? How much did you pay for it? What were the numbers there?

Cory: So they wanted 45 but that was even more too tight but we took it down to 475. It was a three bed two bath about 1,100sqft on the tax records. But we had our guy go in and measure the entire house and it was actually 1,300sqft. So we were able to list it at 1,300 but we just disclosed that it does not match the tax records.

Brandon: Was that in Hawaii or where was this property located?

Cory: It was just in Hawaii. It was in Makakilo. So it’s kind of like the west side which is actually booming right now. Like it’s being more developed, if you’re willing to put up with the traffic.

Brandon: Yeah the traffic is horrible. How’s that light rail coming?

Cory: Yeah I know, right.

Brandon: If you guys want to hear a great story, just look up the information on the Oahu I don’t know- they call it light rail whatever that is, like the monorail light rail whatever.

Cory: The rail project.

Brandon: Yeah the rail project in Oahu is the most depressing story. It’s like if you drive through Oahu there’s this gigantic rail built from one side, from Honolulu it goes way out west and it just never got finished. And they’re still working on it many years later.

Cory: And it actually affected us a little bit. I don’t know if it was this year or in the last year because there was a shortage of light concrete because they were throwing it all on the rail. So the prices just went up and then there was no supply because a lot of it has to get shipped in and stuff.

David: That’s fascinating.

Cory: Yeah it hit us a little bit on that even more I mean when you say rail out here it’s just a nightmare.

Brandon: Yeah people get very angry about it. Anyway so check it out go to Wikipedia or something. How did you negotiate it? You kind of already told us it was a short sale. Any other negotiating things in there or should I move on to the next question of this?

Cory: That was pretty much it. I mean the bank kind of just told us, said, “Hey, close in 14 days or we’re moving on to the next buyer.”

Brandon: Alright, how did you fund the deal? 475 plus the rehab?

Cory: Right so we funded this hard money and then we brought in our equity partner. So hard money and basically private money and on this deal it was funny because we had a short closing time, like a shorter closing time. And we knew right the guys we wanted to partner with his name is Jason, he’s a great guy, he’s an up and coming investor.

I mean he’s already been doing this for a while, he has investments in the mainland. So Kikoa called him up and said, “Hey,” because we already talking about doing a deal with the other. And he said, “Hey we have a flip coming up it’s just a small raise it was like about 75 grand that we needed to raise.

And he said, “Oh yeah I can do that,” but he was actually on vacation in Cancun at the time. So it was like okay we need funds in like now. So he was scrambling trying to get stuff notarized, trying to figure out how he can wire it. And he ended up having, he couldn’t do it from over there, he tried but we ended up having to wire the money as soon as he landed.

And we just made closing, and it went fine but everybody was kind of sweaty for a little while. It was like I don’t know if we’re going to even get this deal before we can close this thing. But yeah we used had money and private money.

Brandon: Okay so basically this Jason guy brought 75k and then you used hard money for the rest of it, correct? Pretty much is how-

Cory: Correct.

Brandon: Okay, awesome. What did you do with it? Like it was a flip, correct? Like if that’s a short easy question, you flipped it.

Cory: Yeah so we had to do pretty much everything. I think the only think we didn’t really replace was the windows. We left it with jalousie windows. I don’t know you probably see that a lot in Hawaii now right, the jalousie windows?

Brandon: Is that like the slats that open up?

Cory: Yeah, the slats.

Brandon: Yeah I got those in my basement. I’m ripping them all out here next week.

Cory: Right. So over here I mean since we’re not really subject to the harsh weather like in Washington, it’s common to have these older houses with jalousie windows. And so we decided to keep those windows in, but we did all new flooring, full gut of the kitchen. We redesigned the kitchen actually and did our exterior work.

It was a lot more than what we wanted it to be. We knew it was going to be a gut but it was extensive.

Brandon: Okay so how much did you totally spend on it? Do you remember?

Cory: We spent 85,000 which it could have been more. But we were really tight on it. So in Makakilo you don’t necessarily have to go all out with the rehabs like we definitely wanted to make sure we didn’t over-rehab the project. Because you want to put out a product obviously that’s desirable. But you’re also keeping an eye on the bottom line right.

So we didn’t use our normal high end like laminate that we would us or the waterproof vinyl flooring that we use. We used like a standard laminate which is thinner. But it still looked nice and it was definite we put out a great product. And the biggest thing for this deal is that we needed to get it done quick because it was a tight margin.

Right it was the margin that we probably wouldn’t have done given several different attributes. If we weren’t getting pressured by the bank, if we didn’t have Kikoa’s friend kind of counting on us, we may not have done it. But since we did decide okay let’s charge forward, now it’s like okay we really have to keep eyes on the timeline, the budget. And we hit our marks and we were able to get the rehab done in 30 days which is fast here.

Brandon: Yeah.

Cory: At the end of the day it was a three month closing to closing. So that’s also a fast flip, I don’t know really what it is like in some other markets. But for our here, it’s pretty fast.

Brandon: Yeah it’s awesome.

David: How did you feel about the outcome?

Cory: Actually after it was done I was satisfied. In fact it did teach me a lesson just like just because the profit’s small, it doesn’t mean it’s not a good deal. Because if you can get in and out, like I think what I have to put more weight onto is the velocity of the money. So if we can turn it quick then actually it’s not just that all the while in that deal. But it’s a little bit extra, has bonus because you’re turning back their money faster.

David: What did you end up making on it?

Cory: Our gross profit was $154,000 so we sold it for $703,000. Our gross was 154 and that was at closing. And then we paid out Jason’s 75. So we made about 78, 900- something. so that was like a gross return if you’re looking at the entire amount if you count hard money the gross ROI was like 13.5%. And for me that’s garbage.

Basically we would pay a 12% lender just as much but we do all the work. So like but we don’t value it on the gross ROI, we value it on the private money ROI or the net cash on cash. So basically Jason’s 75,000 that he tied up which we could have used as a gap funding for another project, that’s what’s really limited.

Because in our situation since we built up a good credit with our hard money lenders, they opened the books to us so it’s unlimited capita. And they have unlimited capital. So that’s not what we should value our ROI on because ROI is a metric just to let you know whether you’re getting the most out of your money.

Right, so when we look at the net cash on cash, it’s 105% return. We tied up 75 grand of Jason’s money which we could have used on another deal, but we made 78,900. So it is a great ROI, when you look at it from the private money ROI cash on cash return.

Brandon: Yeah that makes sense. I mean there’s return and there’s cash on cash return. And the fact that you made 100% return over in three months which if you were to extrapolate that to an annual, you got 400% on your money like on an annual basis. It’s crazy. Now how did you split that with Jason at the end of the day? What percentage did he own? Or was he just getting interest or how did you structure that?

Cory: So this one he was equity and this one we split 50/50 with Jason. Normally we wouldn’t go 50/50. I think we’ve only done that one other time. And that was because one of our partners brought in all the money to do the deal, we didn’t even pull hard money. But with Jason’s situation, at the time, actually this is some back story that probably will make sense of the deal, is Kikoa and I were in the middle of a huge capital raise.

So I think we had to raise $500,000 in three weeks for I think it was two separate deals other than this one in Makakilo. So I mean we could have closed this deal in Makakilo but for one, it wasn’t at the top of our priority list because it was smaller than what we usually do. But at the same time if we could still use our cash on those deals which we did, then we still have Jason that wants to partner with us.

And if he puts in like all the gap funding within that short amount of time plus we needed it, to me it’s worth 50%. And plus he was helping project manage the job as went through it. And because Kikoa and I were actually travelling in the middle of that project too. So by the time we came back the deal was like almost done because it was a 30-day renovation.

And Jason really pulled weight with that. So for us I mean yes we signed on for the hard money but he brought the money to close the deal, he brought 100% of the gap and then he also managed it. So it was only fair to go 50/50 with him in that situation. But that’s very unique we usually don’t do 50/50 yeah unless-

David: Have you done deals with Jason since then Cory?

Cory: I was just talking to him the other day and we’re looking at other deals. He has one or he did have one in Kalihi that he was- I don’t know if you guys know where that is. But it’s kind of like downtown. It was an off market deal I got to ask him about it to see if it’s still on the hook. I think he was a probate at the time. But yeah we’re definitely going to do another deal.

David: So that’s why I’m asking because if you get caught up in thinking well I don’t need to give away 50% for the money, I can borrow it cheaper, that’s true you might be able to, right. But you’re cutting yourself off from all the rest of the deals that that relationship could bring you. So that’s a variable you need to throw into the equation when thinking about like that comes up with me.

People say, “Why did you give that person so much?” or “Why are you doing that for this person when you didn’t do it for them?” because I know that person is going to benefit me in other ways, so it makes sense to butter their bread. Where the person who comes to me and all they’re saying is, “I got the money and I want half the deal and they’re not giving anything else, we’re probably not going to do it.

Cory: Exactly. And there’s so much truth to that, what you said. I mean because that’s exactly how I feel too, is like if you’re bringing more to the table, every deal is different right I mean like this deal was different because we had to do a pretty big capital raise for two other deals in short period of time. So we couldn’t really do all three unless we dipped into our real personal pocket.

And we could do that but we prefer not to. We prefer to raise money and partner with other people. So we bring it all together and we’re in the journey together. And in fact it sounds so corny if you say it that it’s like it really isn’t for me I kind of really. But I mean I think I can speak for Kikoa as well, it’s not really about the money.

Like when that first mentor of mine and investor sat me down at Starbucks and told me like, “If you’re in it for the money and if you’re in it for the image then you’re not going to make it and we’re not going to do business together.” That’s true. I feel that is true and for me it’s like of course I’m in it for the money, I want to make good money and build a legacy.

But it’s more than that and part of that is the journey of it. And I’ve had so much cool experiences with other investors. I’ve learned so much just from working with them and how they do things, that I wouldn’t trade it for a few extra dollars.

Brandon: Yeah I love that. It’s like that phrase that I say a lot right, like 50% of a great deal is better than 100% of no deal. So like you said, hey we may not have been able to do this deal if it wasn’t for giving away part of the profit. And it’s just that same thing we’ve been reiterating over and over in the show is like relationships matter.

Working with other people, not being a loner like getting out talking with people working together deals that’s what it’s all about if you want to be successful in this business. Now before we move on to the next segment of the show, I’m curious like what do you see for your future? Do you want to continue flipping? Are you guys going to end up different things, rental anything like that?

Cory: Yeah actually so for the house flipping side, we’re actually a little lower than what we would normally be I feel. And well we’re kind of downsizing a little on the house flipping side because we’re going to be moving more towards acquiring multifamily assets. And also we’re starting a hard money fund of our own which we’ll have running soon.

So we’re moving more towards passive and more predictable income for cash flow. But I mean we’ll always flip houses I mean we love flipping houses that’s the bread and butter. And I think we’re at the time in our company that we’re ready to expand to acquire more passive income.

Brandon: Yeah that’s awesome. Very cool. Alright well let’s shift gears now and head over to the next segment of the show called our Fire Round.

It’s time for the Fire Round.

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Brandon: Alright let’s get to the Fire Round. These are the questions that we pulled direct out of the BiggerPockets forums and we’re going to fire them at you for some quick back and forth here Cory. Number one, let’s see prices have gone so high in real estate.

I’m trying to figure out where the best locations are for higher profit margins when it comes to buying, renovating and reselling. Would it better to buy high rent properties in good locations? Or would it better to invest in these smaller, cheaper properties? What do you think?

Cory: Yeah I think it’s a tough question because every market is different in their own market cycle. So I mean even if maybe the country as a whole is trending down, it doesn’t mean that every market in the United State is a down market. Some may be booming. So it’s hard to answer that question but what I would say I guess to know the fundamentals of your market like where you are, and when I say your market I mean like your close market.

Like I’m on Oahu, I’m not talking about Maui is a different market. Honolulu County is kind of my zone right now. And if I’m looking at deciding on what I should buy here, right now Honolulu has softened I feel. So I’m a little bit more conscious in the luxury space. We do have a couple of luxury flips that we’re going to be hitting the market.

And I’m trying to wrap them up quick because I know it’s softening a little bit. And so I would say if you’re feeling iffy about it, then do a flip more in the manageable range. More where there’s a bigger buyer pool if you’re nervous about where your market is at. Because once you go to the higher end flips and you’re trying to do a luxury rehab or development, you’re automatically limiting your buyer pool.

Right, because it becomes the threshold and even like the million dollar mark is like a psychological barrier. So once you start hitting those higher ends you just got to know that your buyer pool is going to be smaller and you got to plan on longer days on market. And if the numbers still work I mean whether you’re in a down or not, I mean as long as you’re budgeting for the length of time and you’re very conservative, then I mean pull the trigger.

Brandon: Alright, love it. Alright next question.

David: I really like this next question I want to see how you’ll answer it as a relationships guy. So this is someone who wants to hold a contractor open house. I’m thinking of inviting multiple contractors to a flip property to walk everyone through at the same time, as well as explain some of the scope of work I need.

Seems like it could be efficient and makes sure everyone is bidding the same and maybe create some competition for better pricing. Anyone see any drawbacks to this approach?

Cory: Well yeah. I mean I could be the perfect guy to ask that question or the worst guy to ask that question because for me, I could bid out projects if I wanted to. And I honestly know I would get a cheaper price from other contractors because I’m embedded in the community, I ask my colleagues how much their renovation cost, who they use.

And so I know I can get it cheaper. But to me the trust that I have with my General contractor, it’s hard to match that value in my opinion. And when you kind of bid it out like that, I feel that it diminishes, you’re just that guy who bids it out. And you’re not someone that a contractor might see as a long term client who’s going to want to put all his effort into making sure that you’re happy.

Right because if he knows that you guys are building a relationship and maybe the first couple flips or jobs you’re going to pay full price. You might pay full price for that. But then you can start talking down and say, “Look I got other jobs right so are we in this together or not? Because if you’re not then that’s okay.

I totally understand, you have a business to run I got business to run but I’m here to build a long term relationship. And the beauty about building a long term relationship for me is that I trust my team. So I can focus on other things, and there are hiccups. I mean believe me, there’s hiccups no matter what.

Sometimes things slip through the crack, but whenever we have those tough conversations it’s never out of haste. Because I know that our general contractor, he has my best interest at hear. And I’m the same way, like I want him to make good money on the deals. And he shows me his bottom line like when he prices it out in the cost analysis it has all the actual cost of construction and the materials and the labour.

And then he puts his percent like this is what I want to make on this job and he trusts me to show me that number. A lot of contractors don’t want to show you how much they’re going to make on that. But that’s because we have the right relationship and the benefit of us having that now is we can cost engineer projects better.

Because I don’t know where he’s sticking his profit right. Like who knows maybe he frontloaded all of his profit on the demo. And then I tell him, “Okay well the demo seems high I’m going to do the demo myself and save this much money.” And then he’s like, “No I can’t do that,” because he hid his profit in there.

When you build a relationship with a general contractor enough to where he’s willing to show his profit and keep his money on the outside of the cost, now you have a little bit of an advantage because you can cost engineer the project in a way that most people who don’t have that relationship can’t.

Brandon: Yeah I love that.

Cory: So relationship is huge for me. I know like there’s totally conflicting ideas and that’s fine with me. So I guess see what works for you but I think if you want something sustainable and long term if that’s what you’re trying to build then it’s worth investing in people and relationships. Otherwise maybe you’re only going to do a couple of house flips and you’re going to get that reputation of you only hire the cheapest guy.

David: Yeah there you go. That’s such a good answer. I liked it. So what you understand Cory is an amateur would look at how much is it going to cost me, how cheap can I get it? Right which is why I love this question there’s nothing wrong with the person asking it. That’s a good idea like, “Well I could bring them all in, I can walk them through and save some me time.

“It forces them to bid themselves down.” But what you’re going to end up from that, is a contractor that is desperate for the most business and that is willing to take the worst deal right. They’re going to have resentment and you’re going to go to the back of the line whenever they get busy because they’re making the least money out on your deal.

You won the battle and lost the war. Where what Cory understands is I live in Hawaii everybody wants to surf and go to the beach. It’s hard to get someone to even show up to do this job, right. I’m paying more money because I know that he’s going to get his dudes to show up and work on my deal and I get my house fixed up in half the time you do.

Because when you beat them up on the price they’re not going to ever hit their deadline, they’re not going to do good work, they’re going to cut corners because you did that to them, right so you really can’t even complain about it.

And you’re going to pay twice as much in carrying costs so you’re going to lose the money because you’re going to hold the house longer. You get that Cory and that’s why I love that you’re the person I asked that question to because sometimes we get very near sighted and all we’re looking at is our side rather than how do I make it a win-win for both people.

Cory: Right yeah.

Brandon: Cool. Our next question comes from Kimberly and Kimberly asks where who and how can I connect? Basically Kimberly is asking-let me just read it. Hope everyone’s writing as well. I’m writing to you because I’m finding myself getting stuck in my own head about beginning to invest. I’m working on credit and debt and I’m getting overwhelmed with the idea that I have to wait before I can start investing.

I know there’s other people’s money, OPM but I don’t know how to start that conversation with someone. And I love that like how do you when you’re new to real estate, how do you even start that conversation of can I use your money, private money, hard money whatever. So how would you respond to Kim?

Cory: Well that’s always the toughest part. I feel getting started, it’s all about momentum I feel and there is something to it. And I was telling one of our- he’s a partner now with us on a deal but his name is Richie out here. And the deal that we’re doing was his first deal. And I told him like get ready because after we close this you’re going to get it’s momentum.

Things are going to start happening, it’s going to get easier to talk to people, it’s going to be easier to raise money because you have experience, even though we’re not even closed out yet on the first one. And sure enough he’s got two more deals and he’s raised the money for those deals, he’s closed them on his own he doesn’t need me.

And that’s what I tell them and pretty much any partner who partners with me is if it’s their first deal, the goal is that after this deal you don’t need me anymore. But you still want me hopefully right. But for him he doesn’t need me anymore, he can close deals on his own he knows exactly what to do even though we haven’t even finished the first one.

But he did need the momentum. And in order to create the moment you got to just get moving whether it’s sending a mailer out and stumbling over your words when the phone calls come in, you’re moving. You got to just move and maybe it’s you’re birddogging a deal to an investor and you just, “Hey can I tag along? Can I just ride the flip route with you?”

And starting somewhere everybody has something to offer. Again I’m circling back to that again but it’s like you have something to offer. Even if she goes to an event, she has her time or her energy and her motivation to give to somebody. And maybe they make her do what I had to do, door knocking. Then you got to really ask yourself how bad you want it.

But you’re building relationship and then if you get a deal hopefully if that investor is a relationship type of guy, he’ll let you just help out and ride the deal through and use that as credibility. But in order to even start to be able to start talking to people about borrowing their money and even having the confidence to ask, because that’s the hardest part is just asking.

And just kind of maybe pitching a deal or understanding what the deal looks like and putting it together like that can be very intimidating and hard. But in order to even get to that point where it’s your first time asking for money, like you have to just get moving, whether send mailers, dive for dollars, network. There’s no real clear tangible answer to that other than to just get going.

Brandon: No I think that’s perfect, like you said just get going, get moving. The answer is how do you talk to somebody, you open your mouth and start talking and then you figure it out. You build the moment and yeah it’s got to start by that. So I love it.

Cory: And it can start with a relationship too, like if you do build a relationship with somebody who is credible and you’re probably asked to the dirty work, paperwork, take phone calls, whatever you got to do to provide value to that person, then with their permission they’re a partner. So if you do find a deal and your partner or your mentor likes the deal and wants to take it down, now you can use that like hey I have a partner.

I’ve brought this deal I got to raise money deal are you in? This is how it’s going to work. You kind of got to ride the coattail sometimes. But not for free. Maybe if you get lucky but I’d say always provide but I wouldn’t want anything for free. And I hope everybody listening is the same way. Why would you want something for free?

Like I don’t ever want to win the lottery. If I win the lottery I’d be so depressed because I don’t want to think that if I ever get to the top or if there ever is such a thing, that when you are there that people say you just got lucky.

Brandon: Yeah I want to earn my keep, right I want to earn my way. Earn my keep be here for real yeah I love it. Alright well dude we got to go to the last segment of the show which we lovingly refer to as our Famous Four. Let’s get to the famous four the same four questions we ask every guest every week. Number one, favourite real estate book.

Cory: This is a tough one. I’ve read a gazillion real estate books and I can’t recall all of them. But two that stick out to me is actually Jay Scott’s book.

Brandon: Oh yeah. Book on flipping houses yeah.

Cory: That he did a long time ago. Yeah I think I was like one of the first buyers I think of that book because when it came out I was like, “Alright I’m buying that.” And I got so much out of that and I don’t know if it’s just because I was new so everything was content to me. But I really took a lot out from that.

And I think it was those book where he has like typos in the book, I loved that.

Brandon: Yeah that first version was very raw.

Cory: Okay did you guys do another version or something.

Brandon: Yeah we’ve updated a few times since.

Cory: Oh okay I liked the one with the typos because then I was like this is real to me. This is like a house flipper, a real investor writing a book.

David: He doesn’t know how to spell.

Cory: Shut up I read a book about him.

Brandon: That’s hilarious.

Cory: Yeah I love that. That was great real estate book for me. I saw him out on Toral’s event actually.

Brandon: Oh yeah that’s awesome.

Cory: And I didn’t get to say hi or anything but I’m in a picture with him and I was like, “That was him. It’s the guy that wrote the book that I enjoy.”

Brandon: That’s funny. Well you have to meet Jay Scott someday. He’s a super good dude in fact we’re actually releasing- I don’t know if I’m supposed to announce this. But I’m going to. We’re actually releasing a second edition of that book coming up here this coming winter.

Cory: Nice.

Brandon: Yeah so there’s added content kind of flipping in today’s market how it’s changed a little bit. But we’re really excited for that launch. But anyway if I’m not supposed to announce that everyone just pretend you didn’t hear that. Put your earmuffs on. Alright moving on, question number two.

David: Cory, what is your favourite business book?

Cory: I have so many favourite business books. But I mean other than the hundreds that’s been already mentioned and actually I know this book has been mentioned already. But The Goal Giver has been a huge influence on me. And it’s funny because I just read it this year but it’s been a huge influence on me because I kind of always felt that that was the right way to do business. And the right way to approach business.

And just reading it from the book it was just like the experience I had when I first read Rich Dad Poor Dad, is like it was everything I was already feeling. But somebody else was telling it to me. So I took so much from that book and I believe in the teachings in that book 100%.

Brandon: That’s cool.

Cory: And to give without expecting and things happen.

David: I had a very similar experience when I read So Good They Can’t Ignore You. I was like, “This is what I’ve been doing all the time. Somebody else is doing the same thing I’d never talked to them. I’m on the right path.” So it’s cool whenever you find that like your spirit book. This accompanies the spirit that I have.

For Brandon there’s like 100 books like that because he’s read every single book in existence.

Brandon: I don’t think. No but always say when I read Rich Dad Poor Dad it like put words to what I’ve been like feeling in my soul.

Cory: Exactly.

Brandon: Exactly alright moving on.

David: Alright you live in Hawaii so what are some of your hobbies?

Cory: Believe it or not so one of my main hobbies that I don’t have much time for anymore but I got to make time for it is Brazilian jujitsu. I love the sport.

David: BJ Penn has a facility out there in Oahu, right?

Cory: Yeah I think he has like two or three now.

David: Have you met him?

Cory: I’ve never met BJ Penn. No I’ve never met him.

David: Never?

Cory: No. yeah he’s from Hilo so he’s from the big island. But he does come to Oahu a bunch but I haven’t met him before.

David: I plan to get into that so you have to show me your ways someday.

Cory: Oh yeah totally. You got to be careful because you can get hooked.

David: Good.

Cory: I’m telling you. Just like surfing.

David: Brandon is going to fight like Dorsum in Street Fighter II that’s going to be his style. Like he stretches his arm all the way across the entire screen to hit you. Yoga.

Brandon: That’s how you do it.

David: Alright next question.

Brandon: Alright my last question today. What do you think separates successful investors from those who give up fail or never get started?

Cory: I think the biggest thing that I could say is kind of drastic but I would say the biggest difference that I see is the people who basically burnt their ships if you know that saying, the people who had that moment where they’re 100% committed and there’s no turning back because there is no back, those are the guys that make it to be honest.

Because you have to make it. I mean I’m not saying to be reckless about it. I mean if you got a family and all that, you got to be responsible. But at the same time, you live once, right. So there’s going to be a moment where you have to make that decision. And whenever that decision is least risky I guess, then take the leap.

And you got to make sure that there is no one foot in one foot out. And then just go 100% forward because we default to comfort. And even if there’s any slight chance of retreat then you’re going to take it when things get tough. But when you eliminate all that and you burn your ships officially, then those are the people who I see that make it.

David: That’s great.

Brandon: That’s really insightful.

David: Cool. Well Cory this has been amazing I love talking to you and I love you sharing some of your skills here. Can you tell us where can people find out more about you?

Cory: Well unfortunately our website has been saying coming soon for like almost the whole year now.

David: Your websites on Hawaiian time?

Cory: Yeah. People are always like hounding me and they’re saying, where is the website. It’s almost up but for now I mean I’m on BiggerPockets but I’m also big on Instagram now. I’m trying to be more, and I love Instagram because it’s pictures. Facebook is kind of like I’m just spammed on there. But I mean I go on Facebook a lot too.

But Instagram feel free to message me. I always try to get back to everybody as much as I can. I know you guys’ show is massive so I might not get to that-

Brandon: Yeah you might not get to everyone.

Cory: But try, is what I’m saying.

Brandon: And you’re at cory.nemoto N-E-M-O-T-O correct?

Cory: Correct, Cory, C-O-R-Y. N-E-M-O-T-O.

Brandon: Perfect yeah.

Cory: Instagram.

Brandon: Yeah go follow Cory let’s build him up on followers, you got 849 right now we’re going to get him to 10,000.

Cory: Okay alright.

Brandon: Alright dude, well this was fantastic like David said we love talking to you. You and I got to connect here soon maybe we’ll go do some Brazilian jujitsu when I’m in Oahu in a few weeks. So yeah we’ll hang out.

Cory: Yeah let’s do a deal too.

Brandon: I think that would be fun we’ll flip a Maui house that will be fun. Alright dude.

Cory: Yeah that’s be fun.

Brandon: This was fun so thank you very much and we’ll love to see you around. For everybody else thank you for listening to the show today. If you have not yet left us a rating or review please do so iTunes and Sticher and Google Play and all that. It helps us a lot. And if you’re not a part the BiggerPockets social network, go create a free account biggerpockets.com.

And you get all goodies when you sign up. And by goodies I mean I think there’s like a free eBook or something cool like that. Alright that’s it. So without further ado Cory you want to take us out, just say for the BiggerPockets Podcast my name is Cory signing off. That’s all you got to do.

Cory: for the BiggerPockets Podcast my name is Cory signing out.

Brandon: Yes that’s good.

Cory: Aloha.

Brandon: Aloha.

Cory: Thanks guys.

You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com; your home for real estate investing online.

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