BiggerPockets Real Estate Podcast

BiggerPockets Podcast 344: “No Money” Real Estate Investing with Gabriel Hamel

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Over 25 seller financed deals in a few short years! Today’s guest, former service member (and diamond pushup world record holder) Gabriel Hamel, sits down with Brandon and David to share how he built a portfolio of over 140 units (in an expensive market) using creative methods and seller financing to make deals where other investors miss them!

Gabriel shares how he started investing in a tough market and used sub-prime lending (successfully) to house hack his first few properties. He gives some awesome advice on approaching sellers with seller financing proposals, structuring the offers, and showing them how it’s a win-win. He also gives great advice on finding gentrifying markets, walking away from closings with money in his pocket, and applying a mindset to real estate investing that helps him succeed in all aspects of life! Gabriel has very practical, down-to-earth, useful advice and shares it willingly.

This is an episode for both newbies and experienced investors to download today!

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Read the Transcript Here

Brandon: This is the BiggerPockets podcast show number 344.

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Gabriel: It was building that relationship and letting people know, “Hey, here’s what I’m looking for.” They would have no idea had I not told them. And same with the seller financing. It’s going in there and really trying to find out, hey, what is it that these people want a need and trying to create a deal, giving them what they want and really creating that win-win scenario with such a relationship business.

Speaker 3: 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 today’s BiggerPockets podcast, the top real estate investing show in the world. We’re here with my cohost David Greene. What’s up David Greene?

David: Not much, bro. It’s been a really good weekend. I was on the phone with several different lenders trying to find someone that can help me finance properties so I can start looking again. I’m a couple weeks away from training with a multifamily. I’ve got a partner I’m going to start looking at deals with and I’m going to try to copy your model that you’re doing with Mobile Home Parks with some multifamily residential housing.

Brandon: That’s awesome dude. Very, very cool. Yeah. I’m excited to see where you and your buddy, I don’t know if it’s public yet, but your buddy that you guys are working with, I’m excited to see where that’s going to go. So yeah, you guys are going to do good stuff. But yeah, I just got back from a whirlwind world tour, Midwest 2019, I’m calling it, I don’t have a name for it. But yeah, Ryan Murdock and I went around and drove around the entire several different States. We went to Ohio, North Carolina, Illinois, everywhere.

David: Yeah. Your Instagram page is popping. You had some good stuff on there. You guys, if you’re not falling, Brandon, you got to, use beardybrandon. That was some really good stuff you put up. How many different places did you visit?

Brandon: We went to seven … Well, total including like layover is like seven states in six days, but actual States was, yeah, three full states where we rented cars, got hotels, drove around, got a bunch of stuff under contract.

David: Oh, you had that [crosstalk 00:02:04]Camaro that you were driving around.

Brandon: Yeah. And it was a Dodge Challenger just for fun.

David: Oh, sorry.

Brandon: Well, thank you @DavidGreen24 on Instagram. Thank you. All right. With that said, let’s get into today’s show. Today’s show is unbelievably good, really good advice about getting into real estate, especially if you don’t have a lot of cash. Our guest today, his name is Gabriel Hamel. He is a real estate investor down in the Oregon area, who lives in a slightly more expensive market. So, it’s not like he’s living in the … you buy a house for $6, I mean, he’s got a price for your market, but he’s able to make that happen. He was able to build this portfolio largely using no money of his own, using seller financing, and he’s really, really go with seller financing. We talk a lot today about seller financing, how do you talk with sellers? How do you encourage them to sell to you for no money down? Things like that.

Brandon: In fact, one of the firearm questions he specifically says, “Here’s what I would do if I only had 500 bucks,” which is kind of cool. Oh, not firearm, but speaking of the end of the show, the famous for, we go really dark and disturbing for a second, so make sure you guys stay tuned for that in the book recommendations section. And I don’t know, it’s just such a fantastic episode. He’s also one of the most fit people I’ve ever known. He’s just super in shape and he actually broke a world record. Stay tuned for that as well, and you’ll learn how that mindset transfers to real estates and that everybody here can apply. But before we bring in Gabriel on today’s show, let’s get today’s quick tip.

David: Quick tip.

Brandon: All right. Today’s quick tip. Hey, do you guys ever listen to David and I here, or is it me and David, David and I, I don’t know, whatever, and think, “I could do that. Like I can do that”? Well look, if you or anyone else who has a great idea for a new BiggerPockets podcast and you have what it takes to host it, because what makes BiggerPockets really like such a special community is just that, it’s a community, and in a community, the most valuable asset is you guys, the users. And so I know you have a lot of ideas, you think a cool idea for a show or maybe you want to host a show or something and you’ve had this idea for a while, well, we’re going to give you a place to pitch our producer for launching a new show. And we got the three right now, but we want to have more.

Brandon: So, just keep this in mind. It’s got to be something new, some different. So, bring your crazy idea. If you just think you’d be better than David or me, like you might be, you might actually be way better than us on a show, but what we’re looking for is not just somebody else who can host a real estate show, but a different topic or format, something that BP could do differently or better than anyone else. So, if you’ve got an idea, here’s what you got to do, go to biggerpockets.com/pitch, P-I-T-C-H, and fill out the form there. And we will not be able to reply to everybody, I’m sure, but we will look at every application. And this is really an awesome opportunity and I’m super pumped to see kind of what comes out of it. So anyway, again, biggerpockets.com/pitch, we’ll see you there. And with that, let’s get to today’s show sponsor.

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Brandon: All right, thanks to our sponsors as always. And I think it’s time to get to the show. Like I said, today’s show is going to be fantastic. It’s with Gabriel Hamel. You’ll love it. And take notes because this stuff can apply to your business no matter if you’re on your first deal or 50th deal or 1,000 deal, it doesn’t matter. This stuff is solid. Without further ado, let’s get into the interview.

Brandon: Hi, Gabriel. Welcome to the BiggerPockets podcast, man. Good to have you here.

Gabriel: Thank you. Excited to be here.

Brandon: Yeah, so let’s go into your story and figure out how you got into real estate. Where did that begin? What were you doing before and how did you decide that you want to be a real estate investor?

Gabriel: Yeah. I was a freshly out of high school, about a year out. I had had had some different low paying minimum wage jobs and I picked up Rich Dad, Poor Dad. It was first book that I ever read in my life cover to cover, word for word. I couldn’t put it down. And so right then and there I had it in my mind that this was what I was going to do.

Brandon: That’s awesome. When was that?

Gabriel: That was in 2001. And in 2003 to 2004, I was deployed to Iraq. I came back 2005, bought my first single family home, right, right in the middle of the subprime market. Bought my first three properties, 2005, 2006, 2007. You always hear the bad stories of people buying in the subprime, I had no job and was able to get approved for a property I bought well in 2005, 6, 7. I still own those properties. And then as 2008 hit, I got into a lot of seller financing deals and built up a large portion of my portfolio doing seller financing deals in 2009, ’10, ’11, ’12, and continued to buy a multifamily and closed on my first mobile home park recently.

Brandon: Oh, that’s awesome. I did not know that. That’s very cool. All right, so let’s unpack all that. So, first of all, we’ll get to an ending. Where are you right now? How many units do you have? How many tenants do you have? That kind of thing.

Gabriel: Yeah, I have a 140 units right now.

Brandon: So just getting started?

Gabriel: Yup, yup.

Brandon: That’s awesome dude.

Gabriel: And it’s a mix. It’s a mix of single family, small multifamily, and as the years have gone on, have moved to more medium size and larger multifamily.

Brandon: Okay, very nice. So, let’s go back then to the beginning. So, you bought these properties in ’05, ’06, ’07. Because we’re in a similar market, I think a lot of people feel today, right? Today the market is crazy competitive just like back in ’05, ‘6, and ‘7, and people are worried, “Well, should I just sit around and do nothing and just sit it out until the market comes back?” Based on your experience now, how would you advise those people?

Gabriel: I think it’s always a great time to buy, it’s a more of a matter of how you buy the property. I started off with almost no money and so I had to get creative, and the fact that a bank would qualify me, I didn’t go out there and buy the biggest home that I could possibly get financed on, I went and bought a three bedroom, two bath home. I house hacked the house … before I knew what house hacking was, bought the house, rented two of the rooms out, was living cheaper than I could’ve lived anywhere else, and it just made good financial sense, and so then I did the same thing with my second one. These were 80/20 style loans, but I was able to come in with no money down.

Brandon: Can you explain what that is for those who don’t know because my very first home was the same thing.

Gabriel: Yeah. So, the banks would say instead of 20% down, you can go get a second mortgage for that 20% down. So, instead of having one loan on a house, 80% of the loan or 80% of the purchase price covered the property and the other 20% you would get as a second lien or a second mortgage.

Brandon: Yeah, that was cool. Yeah, my very first property was that way. And even my house I bought right now in Maui, like I got 80/10/10 loan, so it was an 80% first, 10% second, 10% down payment. And so I don’t usually see the 80/20s anymore, but I do see the 80/10/10s occasionally.

David: The reason you want to do an 80/10/10 is because you’re avoiding the PMI on that first loan. If you don’t have 20% to put down, most banks will hit you with the PMI. So if you do an 80/10/10 you’re doing 80% so no PMI, 10% second loan. Often they do it like a HELOC, because that what they do with you Brandon-

Brandon: Yeah, that’s what it is.

David: … yeah, and then 10% down.

Brandon: Yeah, there you go. So, all right. So, you said you got these properties, then the market crashed. So, what did you do during that time? You were still buying, right? Like did you sit out or were you nervous? How did that work?

Gabriel: Yeah, so it was actually interesting. So, I had the three properties, they were all cashflow positive essentially but only by a couple $100 a month. I had a small nutrition store at the time that it made money, but again, some months were a couple $100 a month. And so I’m sitting here thinking I have to buy a lot of single family homes in order to cash flow enough to be financially free. And so I’m just doing the math. And so the more I learned and the more I read, I realized seller financing has so much more flexibility, and so I really started looking for seller financing deals. And I was scouring Craigslist, I was knocking on doors, I was making phone calls, and that’s where I really was able to build up a large portion of the portfolio was 2009, ’10, ’11, ’12, I found a lot of sellers that were interested in selling. These are really good people that just didn’t love managing property. A lot of them were busy with their own business or another job.

Gabriel: The three things that I really looked for were properties that were under-rented, deferred maintenance and had some upside potential. And that’s where I was able to come in and create a real win-win scenario with myself and the seller. I was able to offer them something that would be beneficial to them as well have that upside for me.

Brandon: You mentioned that you were finding a lot of your deals off Craigslist and kind of off market stuff. And what I’m going to guess is because you weren’t on the MLS using agents, you had options to communicate directly with the seller, which led to seller financing conversations. That usually doesn’t happen once you have agents involved in the houses on the market. Can you explain what seller financing is and how you made the transition into having those talks?

Gabriel: Yeah. So, seller financing is rather than going and getting a bank loan, you have the sellers carry the financing. And typically, this would be done on a property that they own free and clear, there’s ways to do it if they don’t, but the first several properties I did, these were sellers who had bought the properties in the 1970s and they’d had the homes paid off. And so I I structured deals where instead of getting the bank financing, they carried the mortgage, and so there was so much more flexibility there. A bank will say, “We want this much down. Here’s your interest rate. Here’s the terms.” And being able to sit down directly with a seller and finding out what’s important to them, some sellers, it was the down payment that was important, some sellers, it was the interest rates, some sellers, it was the price.

Gabriel: And for me, I didn’t have any money to start, so I had to negotiate, “Hey, I’ll do a no money down or low money down deal, but I’ll give you the price you want or I’ll give you the interest rate you want.” And it created a lot of flexibility there. They were happy because they weren’t dealing with tenants, they weren’t dealing with the turnover, or the maintenance and the repair, they were able to get a check from me. That was my mortgage payment to them. They were happy. I had the upside of, “Hey, these properties typically had not the best tenants, deferred maintenance, so I could clean those properties up, get better tenants, get better rents, and in the meantime, the seller was collecting a check every month and happy as can be not having to deal with all the maintenance and the tenants.”

Brandon: Yeah, that’s the neat thing about seller financing is that you really can create a good win-win kind of solution here. And by the way, if anybody is still confused about it, this is the way I like to explain it if you were like, “Explain to me like I’m five.” Imagine you owned a car and you sold your car to your brother, right? But your brother didn’t have any money. And so you sell the car to him, it’s his car now, but instead of him paying you $2,000 today, he just pays you $200 every month for the next couple of years. And so it’s just like that but with a house. They don’t have all the money, they just pay you, it’s still their house legally, you actually do transfer the title, but you actually sign the same paperwork that you would sign with a bank, you just sign it between two people. And most title companies can take care of that with no problem, it’s pretty simple, or attorneys if you’re on the East Coast and they use attorneys in that state. So anyway, yeah, pretty simple concept.

Brandon: By the way, does that sound pretty good definition?

Gabriel: Yeah, absolutely. And one thing I was going to say too is I never had to convince a seller of carrying the financing. And it took years, kind of reflecting back to all the seller financing deals I’d done and was like, “Hey, what worked?” And I realized that every seller that carried the financing on a property, they already wanted to. These were sellers that already understood the benefit of essentially being the bank. They didn’t want some lump sum of cash because they would have to pay that huge capital gain on that money, they wanted a paycheck every month. And so these sellers, they were happy being the bank, they were happy collecting interest, they wanted to do this.

David: So, my understanding of how seller financing works in this case from a tax perspective is there’s massive benefits to the seller themselves. So, where they just sell you a house for 500 or a property that they paid 300 for, they’d have a $200,000 gain minus whatever they could write off from it, but they’d get taxed on it right away. So, let’s say that they walk away-

Brandon: Yeah. Plus they would capture depreciation, which is a much more in-depth thing, but that could add another couple $100,000 of taxes onto them.

Gabriel: Yeah, exactly.

Brandon: So they might end up with a four or $500,000 tax.

David: So, let’s say that’s the case. So, they had a $200,000 gain, but they only walked away with like 50 grand or a 100 grand that they got to keep, right? Now they take that 50 or 100 and they go invest it with somebody else and they get a six or seven or 8% return, but it’s on half the money or less than half the money that they made. Were they to do it with you, they get to get a percentage that you’re paying them on the seller financing but they get it on the full sale. They don’t lose it in taxes right away. The taxes they pay is only on the interest that they’re making. Is that a good understanding of how that works from a tax perspective?

Gabriel: As far as my understanding, absolutely. Yeah.

David: And sellers don’t often know that. They don’t realize when they sell to you for that price, because that’s kind of what we all … “Oh, I made this much money,” they’re not looking at the big picture, they’re not considering taxes. And even if they think they could get a better return somewhere else, they’re getting it on a smaller chunk of capital because they had to pay so much in taxes. So, it’s a benefit to us when we’re trying to use seller financing to buy it, if we can explain that.

Brandon: Yeah, that’s a great point.

Gabriel: And another thing I would say with seller financing, even the first three properties, even though I worked with an agent on those first three properties, it’s such a relationship business. The first property, it was a hot market, and I bought a house from a friend of the realtors who had bought it, renovated it, and was flipping it essentially, but I’m standing there going, “Hey, I have no competition. Nobody knows this is for sale except for me and my agent.” And so it’s such relationship business.

Gabriel: And the second property, same thing. I owned one house and decided, “Hey, I’m a real estate investor.” I made business cards. I’m passing these things out to everybody. And the second house, the guy I met at the gym, he’s like, “Hey, my friend’s dad is selling this house.” And it was in the neighborhood I was looking for. So again, even in that hot market, it was building that relationship and letting people know, “Hey, here’s what I’m looking for.” They would have no idea had I not told them.” And same with the seller financing. It’s such a relationship business, going in there and really trying to find out, “Hey, what is it that these people want and need,” and trying to create a deal giving them what they want and really creating that win-win scenario with such a relationship business.

Brandon: Did you also land these seller finance deals once you got into the larger, the small and then medium size, did you also get seller financing or have you shifted over away from that?

Gabriel: So, I did a lot of seller financing, and then in 2014 I refinanced a lot of the seller financing deals into longterm fixed mortgages, and I did that because rates hit 4%, and so I was able to take a lot of these seller financing deals … Now, I invested in for cash flow. Every deal I did, I made sure I was cashflow positive. I was not in a position where I had a bunch of capital to be cashflow negative. And so I always focused on cashflow first and I looked at appreciation as a bonus. Now, I bought in areas that I felt strongly that appreciation would happen but I focused on cash flow.

Gabriel: So, in 2014, a lot of these homes that I bought in 2009, ’10, ’11, ’12, they appraised out, all of them appraised out 70% loan to value. And so again, I’m doing the math going, “Gosh, if I would’ve had to put 30% down on every single one of these properties,” which was not a possibility at that time, “we’re talking a lot of money.” But because the properties, I was able to get better tenants, increased rents, and go to the bank, these properties now made sense for those 30 year fixed mortgages.

Gabriel: And so in 2014 was kind of the first time since 2007 that I went back to bank financing, but I still hadn’t done any more purchases using bank financing. And I continue use seller financing to this day. I mean, I do work with banks and some private money now, but I like the seller financing because of the flexibility. There’s just so much more flexibility, so many more options for the seller and for the buyer.

Brandon: Yeah. So true. So I’m wondering, what do you say to somebody who is like, “I’ve asked a couple of people about seller financing, they’ve all rejected me. This doesn’t work. How do you find those people?” What do you say to them?

Gabriel: I’d say they haven’t asked enough people or told enough people. Some of it is a numbers game and really it’s just putting the word out there. I’ve met with a lot of people and a lot of sellers that initially maybe seller financing isn’t an option, but I make sure the conversation’s open and I go in there with no expectation and it’s just an open ended conversation like, “Hey, if that changes, give me a call,” and that has happened. I had a woman who we would compete on deals together and then she called me and was like, “Hey, I’m tired of competing on deals. Can I finance a deal for you?” And I had met her 10 years before that. So, just having that open dialogue and going in there genuinely with, “Hey, it’s a relationship.”

David: How many seller financing deals have you done, Gabriel?

Gabriel: Oh gosh.

David: Approximately.

Gabriel: Approximately, maybe 25 seller financing deals.

David: Oh wow. Okay. Let’s do a little exercise. We’re going to role play here. I’ll be the seller, you be you. Let’s go through how you would broach this conversation and how you would maybe like set the tone for what it’s going to look like later.

Gabriel: Sure.

David: All right. So, I have a 12 unit multifamily property and you got in touch with me. We’ve been talking about buying it.

Gabriel: Yeah. How long have you had the property?

David: I’ve held it for about 35 years or so. We’ve got it all paid off now.

Gabriel: Okay. Okay. How come you’re interested in selling it?

David: Well, it needs some work. We’ve been living off the cash flow. We don’t really have any money saved up. I don’t really want to put money back into it, but at the same time, this is my income, so I don’t really have money coming from anywhere else.

Gabriel: Okay. And do you own anything on the property now or do you have it free and clear?

David: No, we own it free and clear. There’s no loan on it.

Gabriel: Okay. So, would you be interested in carrying financing if you could continue to get a check every month without having to deal with the tenants and repairs? Is that something that would be interesting to you?

David: Well, it probably depends on how much money it would be and then how much I could sell it for to somebody else. I’m not looking to just give it away.

Gabriel: Yeah. What do you think the property is worth?

David: We think we could get about 1.3 for it.

Gabriel: 1.3. Okay. Yeah, I mean, I could potentially give you the price you want. Is there a down payment you need? Is it the cash, the down payment that you want or are you looking more to just have that monthly payment?

David: Well, we’re a little bit older. I think we’d like a little bit of money in the bank. It feels good to have you a little bit set aside, maybe you want to take a vacation here. I haven’t taken my wife out in 20 years, so she’s due for something. But really, I guess all we really needed some cashflow. If we’re not going to have this, we need money coming from somewhere.

Gabriel: Yeah, let me think about it, look over everything and get back to you.

David: Okay. See, that’s great because you didn’t try to offer on the very first conversation, “Let me buy your house right now. Sign on the dotted line,” to a person you didn’t know you. You asked the questions of them, which I think most people don’t do good enough. We talk about this on my real estate team all the time is you have to ask questions of the other person to see what’s in their head, what they’re thinking, and if they say no, the very next thing needs to be why? I come back from a weekend of showing homes, and looking at offers, and talking to clients and, and the very first question that I have to do, or the first thing I have to do is start asking questions of everybody who’s involved.

David: So, they want to write an offer on the house, they’re not pre-approved for as much. We need to call the lender and say, “What do we have to do to get pre-approved for more?” Do we have to touch it for a lender? Do we have to use a different loan package? And so many people they fail, the minute that they hear someone say, “You can’t do it.” “Okay.” They give up and they move on to the next thing. But you hang out with Brandon Turner for long enough and you stop doing that. I just ask him like, “How do we do this in any regard?”

Gabriel: I never want a seller to feel forced to sell me a property at all and I truly want to give them what they want, whether it’s the price, and they’re usually stuck on one thing. It is the price or it is the down payment or it is the interest rate. And sometimes it’s something so crazy that it probably won’t make sense. They say, “Oh, I want 50% down, or 75% down,” and in that case I could go get better financing at a bank. But in a lot of cases, you’re able to give the seller one of those things that they want, one of those, “Hey, I’ll give you that interest rate you want, but are you a little more flexible on the down payment?” And then I never make offers right away just because I want that time to also go over the numbers and really come up with something that would be beneficial to both parties.

Brandon: What’s something that you learned doing this a few times that you wish you had known when you first started about how to approach people with seller financing opportunity?

Gabriel: I think starting off, I understood that it was relationship but I focused more on the numbers and the deal. But I think starting off, if there was one thing, I think I would look at more properties and try to find more sellers that were in a position to carry financing. So, my first seller financing deal I was almost surprised. I’m looking at the numbers going, “Okay, this makes sense. What am I missing? This makes sense. What am I missing?” And there were probably other opportunities out there that I don’t know if my mindset at the time was big enough yet. I was so excited about, “Hey, these two duplexes, they’re going to seller financing, carry the financing on. I’m so stoked about that.” Maybe I missed an opportunity to do another seller financing deal.

Brandon: So you would have stacked your funnel harder?

Gabriel: A little bit, a little bit, yeah. I mean, I went after it, I went after it, but I think there was some opportunities that I didn’t take advantage of, sure.

David: Can you walk us through what happened … I mean, you bought these single family houses, it sounds like, and then you started getting a little bit larger. What size are we talking about when you said you got larger? What’s your largest property and what’s a typical property that you buy today?

Gabriel: Yeah, the mobile home park I closed on recently was 43 units.

David: Okay. Where’s that at?

Gabriel: It’s about an hour South of me. So I’m in Eugene, Oregon and it’s about an hour South of me in Roseburg. Almost all my other properties are within 10 minutes of where I live.

David: Really? And Eugene is not like Portland, but it’s not like a super cheap market either. Is it? Like what’s a typical price right now?

Gabriel: Yeah. Like medium home price is in the mid three hundreds. It’s a college town, so around the campus area, it’s kind of its own little ecosystem, its own little bubble, but there’s different parts of town. I think it’s really important to know your sub-market too. I know Eugene very well. I didn’t plan on necessarily only investing in this market, but as I started buying and as I started building my network, it was just kind of this organic growth, and knowing that sub-market, whether you invest in your own town or another town, those sub-markets are so important because there’s parts of town that I wouldn’t invest in or it would be unlikely to invest in, and there’s parts that I absolutely know are desirable areas or up and coming areas.

Brandon: Yeah. That’s such a gold piece of advice to just understand that market. Because like you go a block over sometimes in a market and just it’s ridiculous, so you got to understand it, or as David argues in his book, Long Distance Real Estate Investing, like either you got to understand it or you got to have some trusted advisors who completely understand it. Where a lot of people are just like, “Oh, it sounds great to buy in whatever, the Midwest or a college town or something, like a cheaper priced area, just go by there because the numbers are so much less than what they assumed.” But I mean, some of my worst deals I’ve ever done have been at my lowest priced properties because they were cheap but they were in the wrong neighborhoods, wrong areas, so yeah, really understanding that.

Brandon: Do you have any advice for people who are listening to this who are like, “Well, how do I get to know that market? I mean, how do I pick a market first of all, and then how do I understand those dynamics and what road was better than what road?”

Gabriel: Yeah. I think you nailed it with what David … you said David talks about in his book is either you know the market, you either have some time there and really know that market or you have someone that you really trust or a team of people that you really trust in a market if it’s not in your local market. I would absolutely invest in other markets if I had a team or new people or had people that I trusted to give me the information that I needed. So, I think having that, just that knowledge, either some boots on the ground or a strong relationship with someone.

Brandon: Yeah, that’s great.

David: One of the things I see you did was you look for gentrifying areas where you buy your duplexes. And then we don’t talk about it a lot because it kind of broaches into this appreciation thing and we don’t want people buying properties just because they’re going to appreciate, but it’s foolish not to consider that when you’re looking at where you’re going to invest, right? You don’t buy stocks in a company that you don’t think is going to sell more than it did before, right? Tell us what are some signs that you looked for that made you feel good about this area that you bought into and how you went about gathering that information and then executing?

Gabriel: Sure. Yeah. Again, it was just that local market knowledge of growing up here. There was an area near downtown where I live, and as kids it was, “Hey, you don’t go down there. Don’t go down there, don’t go down there.” A lot of drugs, lots of transient traffic. Then I started noticing a lot of businesses started coming down there. We had a big brewery come down here, a lot of shops were opening up, restaurants were opening up, and it was a lot of really cool big old houses that were really neat and people wanted to be down there by the breweries and the shops and such. And again, not just banking on the appreciation, I made sure these properties were cash flow positive. Never one of these deals that I go in saying, “Hey, I’m buying this because it’s going to double in value.” I bought them for the cashflow but knowing, “Hey, appreciation is probably going to happen. If I’m wrong I’m still going to be okay because this property cash flows.”

David: That makes sense.

Gabriel: And then you started seeing people coming into this part of the market and cleaning up house by house, street by street. I wasn’t the only one doing it. I’d buy a property and clean it up and a block away, someone would be buying a property, cleaned it up, you had a lot more owner occupants coming into this neighborhood.

Brandon: Yeah. Back on the show a long time ago. I don’t remember who it was that said it but it was a couple of years ago, they were talking about how when a market gentrifies … and by the way, if those aren’t what we’re talking about, there’s like, it’s becoming from a crap scary neighborhood to like the hipster neighborhood essentially, there’s like this movement, right?

Gabriel: Yup

Brandon: And it doesn’t always mean hipster and doesn’t always mean really crap, it just means you’re dramatically improve in a certain area and it’s getting a lot more expensive and rents are rising and everything. So, what they had suggested is, I think it was something like they don’t want to be in the first 20% in, right? There’s this famous quote that says something like the pioneers are the ones with the arrows in their back or whatever, like they’re the ones that get hurt first because they might have guessed wrong.

Brandon: But you don’t want to be in the last 30% or 50% maybe even either because you missed the big run up. So, the idea is how do you get in that? It’s already a 30% gentrified. 30% of the houses on the block have increased or 25, 30% have increased, that’s a good time to jump into those neighborhoods rather than, “Hey, this was a great … I mean, look all these prices went up.” This is what people do all the time, right? “Prices went up like 400 grand in this neighborhood in the last five years. It’s crazy. You can’t find a house anywhere here. Let’s invest there.” Like, that’s this logic that people have, the same thing they do is, “Look how high Bitcoin got. You guys look, look. It’s at an all time high. It’s crazy expensive. Let’s get in now.” But it’s like this completely absurd logic that so many people do because we look historically. So anyway, I liked that like 20, 30% kind of rule.

Gabriel: Yeah, no, absolutely. And the other thing is I wouldn’t speculate on the rents either. So, just like I wouldn’t speculate on the appreciation, I always base my numbers on what was currently happening there. So, even though I said, “Hey, this property could go up at market rent $500 more than what it’s being rented at,” I always base my numbers with those seller financing deals on what was actually going on at that time. And a good example was a six unit place that I bought where the rents were 650 a month in a part of town were $1,000 a month was market rent. But I based my financing on that 650 a month because if I was wrong I want to make sure the property was still going to work with the current numbers and the historic last couple of years. And so I think that’s really important for listeners to know too is, hey, don’t speculate on appreciation but also don’t speculate on rent either.

Brandon: I think part of the problem is this argument gets divided into a divisive, should you invest for cashflow or appreciation, and then it becomes an argument between the two sides. What I tell our clients that are looking to buy out here is you should invest for cashflow and appreciation. So, it’s actually really simple. You look at all the parts of town that you can buy a place that will cashflow and then you pick the one you think is going to appreciate the most, and you’re not taking a risk, and you’re also improving your odds of getting upside, and you can really satisfy both sides of how investors make money. Because cashflow is so that you don’t lose a property. A lot of people need to understand you’re not going to make massive money very quickly with cash flow right away because with single-family investing, it’s just so unreliable. One tenant having a leak can wipe out six months of cashflow.

Brandon: So, a lot of investors make their money with appreciation, but if you gamble on appreciation then you get nothing because then you lose the property. You want to be able to find both. I love that what you said was, “Hey, I noticed that this was happening so I wanted to buy there, and then rents did go up and appreciation did happen, but I didn’t need it to. I would have been fine defensively if that was the case.”

Brandon: One thing I want to ask you, Gabriel, is I know you served in the armed forces, I believe in Iraq, and I’m sure you learned things in that environment that made real estate investing easier for you than it may have been for some other people. So, just as far as mindset, can you share some of the stuff that you gained from that experience that made it, so taking action was easier for you than maybe some of the people who want to be where you’re at but they’re having a hard time getting over this mental hurdle can benefit from.

Gabriel: Yeah. There was definitely some mindset stuff I learned, but I’ll tell you more than anything, the biggest thing I learned in the military for myself was I didn’t want a boss. I didn’t want someone telling me what to do. And I knew that at a pretty young age, but then going over to where you have someone telling you what to do 24/7, and I had just finished Rich Dad, Poor Dad shortly before I went over there. And so I’m telling everybody over there, “I’m going to come back and I’m going to buy real estate.” And they’re like, “You’re crazy, man. You didn’t go to college and you’ve never had like a real, real job. What are you talking about?” And I was like, “That doesn’t matter. I’m coming back.”

Gabriel: But I think that’s probably the biggest thing was just that I knew I didn’t want to have a boss, I knew I wanted to work for myself. As far as the mental toughness, the military and also I wrestled through high school and I coached wrestling and I feel like there was a lot of parallels there that I was able to take into the real estate world. And some of that was just, hey, know what you want, know what you want and then find a way to get there. I knew that I was going to invest in real estate, I knew what my dream was before I knew how to execute it. And then once you get after it, you figure it out, you talk to enough people, you take action, you learn, you learn how to do it as you go.

Brandon: A question on that note, because a lot of people … I mean, you and I are exactly on that note. I think we even talked about this when we were hanging out in Breck, but like a lot of people have so much trouble knowing what they want, right? Once you really have clarity on what you want in life it’s not that hard to go after it, if you really are clear on it. But people are just like, “Well, I don’t know what I want, and I can do this, and there’s 100 things, I don’t know.” What’s your advice for those people?

Gabriel: Yeah. I think taking time to really think about what it is you want. I think that it’s important to take time, whether it’s meditating or you’re on a walk and just reflecting on what it is you want. For me personally, I knew I wanted to be in business in some way, and I always pictured that in an office in this nice suit, and that’s not me, that’s not me at all. And starting off it was, when I’m young, “I want to be rich. I want to be rich, I want to make all this money in real estate.” But when I took some time to really think about what my why was, it really wasn’t the money I was after, it was the freedom. I really wanted time freedom. I wanted freedom to do what I wanted when I wanted. When I had kids, and I have kids now, I wanted to be able to spend time with them and I’m able to do that. I’m able to focus on my health. I’m able to build wealth in a fun way on my terms.

Gabriel: And so I think not just getting clear on what you want but why you really want it. Because I think we hear a lot of talk about financial freedom, but when you dig deeper, it’s usually the time freedom that people really want, whether it’s with their family, or a hobby, or something that they’re very passionate about. So, I think time is very valuable.

Brandon: Yeah, I love that you bring that up. Because yeah, it’s like, great, you got financial freedom, but why do you want that? What’s the purpose? And I think time freedom is what most people are thinking of and they just haven’t really identified that. So then what they do is they get into real estate and work 100 hours a week for their entire life, and then they’re like, “Wait a second. Something broke here.” Just exactly what you said.

Gabriel: Yeah. And I’m not judging in the sense like I know some people love, like truly love that grind, they love that. And I’m willing to work hard, but I also very much value my time to go travel, and be with my family, take my kids to school, pick them up, go to their events, spend time with my wife. And so nothing wrong with the person that truly loves those 100 hour weeks, that’s just not me. And so I think getting really crystal clear on what it is you want in life, because it is easy to build … and I’ve watched people do this, where they’ve built a large portfolio of properties and they could be financially free, but then they’ve actually turned into a lot more work. And that’s really something I try to take … any decision that I make, I really think about how will this affect my overall time? How will this activity or this purchase effect my time?

David: You know, I know that you were a state champion wrestler in high school. You mentioned you coach wrestling, but you were really good at it. And one thing that I’ve found about anybody who’s really good at anything is they can get the same results with less time and less effort, right?

Gabriel: Absolutely. Absolutely.

David: So, you could go in there and if you’re going to wrestle a guy who’s your way and he doesn’t have any experience wrestling, he’s going to be pinned very quickly, he’s not going to enjoy that experience nearly as much as you are, as opposed to that same person that you could beat very quickly, he goes against someone with a similar level of no experience, and they’re going to both exert an insane amount of energy to finally get the results. And so when Brandon and I talk about financial freedom through real estate, it’s not through just blindly throwing the bait into the water and hoping some fish bites, it’s about study where fish are biting and what kind of lure you should be using and what part of the lake you should be fishing in.

David: And what I’m getting at here is the better you are at whatever you do, the more you’ve earned the right to spend less time doing it but to get more results. Real estate investing is not a thing you do so that you don’t have to be good at something, it’s something you do so that as you become good at it, it gives you so much more back. I always tell people, you cannot out-give real estate. The more you put into your business and your properties and your knowledge, it comes back in spades towards you, whereas, you can’t really say that about every job you could ever have. You might be a cubicle worker and you just dump into your company, you’re not going to get any back, right. Law enforcement was like that for me. I could just be the best cop that there ever is to be. I’m never going to get more money. The government’s not going to pay me more. They’re not going to take care of me as much as I take care of them.

David: So, I think you’re a great example of you can have amazing results with 10, 20 hours of work a week if you get really good at what you do. And that’s why we interview people like you and learn from you from how you did it.

David: I know that you mentioned that a lot of your deals have come from brokers, right? Commercial brokers, residential brokers. You also mentioned the relationship side. Tell us some of the things that you’ve done to build relationships with these and maybe how you recognize who it’s worth building relationship with?

Gabriel: Yeah. Starting out, I did work with different brokers and I was always really honest and open just saying, “Hey, I’m going to work with multiple brokers and multiple agents because I didn’t know what they knew as far as investing goes.” A lot of agents out there don’t have a strong knowledge of investment properties, and I wanted to be very clear with any agent I worked with that, “Hey, I’m going to work with different agents and really try to see who would be the best fit for me.” And that’s kind of changed throughout the years. I stopped working with agents quite a bit when I was doing the seller financing deals but I still kept those relationships going. And I think it’s important to find an agent and there’s not a ton out there, as you guys have said many times on this show, that really understand investment property. And fortunately over the years, and it took a long time, I found agents that did understand investment properties and I think it’s important that they know what you’re looking for and why you’re looking for it, and then that helps on the negotiation side as well.

Brandon: Yeah. That’s good. That’s really good.

David: Hey, I hope you enjoyed today’s show, but before we go any further, I did want to bring in today’s show sponsor, so stay tuned and we’ll be back to the interview in just a moment.

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Brandon: I’m going to shift a one more topic before we kind of move on to like the deal deep dive and stuff. I mean, most people aren’t watching this on YouTube, but if you are, great, and if you’re not, just FYI, we push these on YouTube as well. And maybe I haven’t met you in person, which David and I have, but you’re like a super in shape guy. Like you passed the world record for like diamond pushups, right?

Gabriel: Yeah, I did. Yeah. I’ve done it a few times. I have to resubmit to Guinness for the official approval. They have some there some pretty strict guidelines and so yeah, I’ll resubmit.

Brandon: No. But you’re like legit in shape. So, here’s what I’m wondering. On that journey of being somebody who is like … because you have to have some self control to be a really in shape person, like super, or you value that health and fitness side of your life. I’m wondering how that, in your head, translates to success in other areas. Because you’re just a rock star when it comes to that, and you’re a rockstar and a lot of ways, but what mindset gets you there in fitness that could apply to people in other areas like relationships or real estate investing or things like that?

Gabriel: Sure. For me, I’m kind of an all or nothing guy. If I’m going to do it, I’m going to do it. So, if I’m going to push myself in the gym when I’m doing high intensity body weight training, I’m going to go all out. And I took on real estate investing that same way. I mean, it starts in the mind. You got to want it and know why and then you just get after it.

Gabriel: And I think health plays a role in … if I’m not healthy physically and mentally and emotionally, that’s going to affect my business decisions ultimately. And the things really in life that are important to me, I think about how will this affect my family, my health, my wealth? How do these decisions affect the community? So, when I make a decision, I think of all those things, and I think they’re all tied in, they’re not just separate. I don’t want to just be a real estate investor. I don’t want to just be healthy. You meet different people where they’re really strong in one area, and I want to get after it and all areas of life. I mean, this is my life. I want to get after it.

Brandon: Yeah. I really liked that you said that, because a lot of people do, they focus so tremendously on one thing at a time, one thing, period. And obviously, it’s hard to focus on like 50 goals at one time and trying to do everything, but a practice that a lot of us have probably done, but I like doing it. It’s called … they have a lot of names for it, wheel of life or spoke of life, I don’t know. Basically, you take this like paper and you kind of like draw almost like a pie, like eight little slices. And then each of those slices is a certain thing, like your fitness, your relationships, your faith, your finances, and there’s a few more there. You guys can look up online. just like wheel of life goals or something like that. I’m sure you’ll find it on Google. But anyway, and then you shade in starting from the center point of each a slice of pie, you shade in going outward towards the edge of the pie how good you are in that field.

Brandon: And so by doing that, you take a look at this whole pie and you see that maybe you’re just really heavy on the right side, I mean, your shading goes all the way out to the crust. But on the other side, you realize your faith, or your fitness, or your relationships, your family, your friends, whatever, is only shaded a little bit, and you’re like, “Okay, well, yeah. I’m not very well rounded.” I think a big part of my life and I think is what you’re saying is you want to be well rounded. I think we call that like a whole life millionaire. It’s not just like a rich millionaire, but you’re like, you’re successful in all those areas. Does that sound about right?

Gabriel: Yeah. You nailed it. You nailed it. And there was a period of time where it was a little out of whack. I realized that I had spent so much time only studying wealth, and only studying business, and only study finances, and I’m going, “Man, I haven’t read a book on marriage. I haven’t read a book on parenting, personal growth.” And that’s really when I got into starting to study like personal development and going, “Hey, I don’t want to just be wealthy, I need to take care of my …” exactly what you said, “a whole self millionaire.” And so I started spending a lot of time in personal development and reading about how to be a better husband and a better dad. And it completes you.

Brandon: Yeah. You said something I haven’t quite thought about in this term before, but I really liked the way that like this is going. It’s going to be a blog post at some point here. But basically, everybody’s awesome at something. This is what I’m thinking. Everybody has something, like you for example, you might be like, hey, you’re awesome at diamond pushups, right? Or at fitness, right? You’re amazing at that. Somebody else might be, “Hey, I’m a really good father. I’m just awesome at it, right?” Or, “I’m a really good dad, or I mean, a husband or wife, or I am awesome at real estate,” right? If you were to look at that and say, why are you awesome at that one thing, you can almost guarantee there’s a pattern of education, a pattern of practice, a pattern of time, like a long length of time, right?

Brandon: So then when people complain, and this is going to be my go-to from now on whenever people say like they’re struggling in any part of their life, well, why don’t you treat it like you treated that other thing that you’re awesome at, right? Like you didn’t get in shape on accident, you didn’t buy that real estate on accident. So like when people are like, “I’m really struggling with this.” It’s like, turn it around. I mean, if you’re struggling, people listen to this, if you’re struggling with anything right now in your life, look at like what did you do in the other areas of your life that you’re awesome at and how can you apply that same methodology to your life right now?

Gabriel: Yeah. That is so spot on. So true. So true. And that takes time to reflect and think about, hey, where do you spend your time? I use that practice all the time. Where have I spent my time? Where do I need to put more of my energy? Because if it’s in one place, of course, that particular place will grow, but what about all the other parts of your life?

David: Yeah. There’s a saying we have in real estate sales that what you focus on, expands, right? If you focus on this part of your life, you will find success in it. And there’s also a principle I’ve noticed that success from one area of life, if you take Brandon’s as approach, will bleed into the others. So, even though may be you spend less time on your real estate investing business, you end up having more success with it because you’re learning stuff in other areas of life that are bleeding over into that. So, I know Brandon decided he was going to do a triathlon, right? He committed. He won’t talk about this, that’s why I have to do it. He had eight weeks to train, and Brandon is really not what you’d consider like a killer athlete, right? He probably does not enjoy workout. He’s really good like healthy diet-wise, but as far as sports and stuff go, not really, always been his thing.

David: I think on one old podcast before I was hosting, I heard you call it like a unit basket goal thing, one time referring-

Brandon: Yeah, that’s what it is. I used to a unit basket goal thing.

David: Very, very fast way to know this guy does not like sports. So, he trains for this triathlon, he goes out there with eight weeks of training, he completes it with a smile on his face, and a month later he’s got a mobile home park under contract, and two weeks after that he’s got like four of them under contract, right? You could not convince me that his efforts into focusing on training for this triathlon did not bleed over into how he ran that business and how he approached those goals. The same discipline, the same focus, the same way he looked at it. “Okay, I have to do this. I got to break the biking part down. It’s riding 20 miles a day. Okay, I have to learn how to swim. I hire a coach, I read about swimming, I practice swimming every day.” All those same pieces, he just started doing the same thing in his mobile home park goal, boom, same results.

David: So, for those people that are stuck in that rut, like, “How do I get out of this?” Do exactly what Brandon said. Ask yourself where you are having success and then say, “How do I treat this like that?” And you’ll get the same results.

Gabriel: I couldn’t agree more. I mean, it almost always bleeds over. When my focus got away from the money and was focused on developing myself as a person, and I’ve seen this in so many other people’s lives, so many other people, the wealth and the deals started flowing too, and it’s because you have all these other things that you’re growing in. Yeah, amazing stuff. Amazing stuff.

Brandon: Yeah. Well, thank you. That’s awesome. And yeah, I 100% agree. I when I was younger, I used to think of people who are millionaires and some people who are super wealthy as like so one sided. Like the guy at the gym, right? That has like a huge upper body and then like this [crosstalk 00:53:40]legs, right?

David: Skips leg day, right. Yeah.

Brandon: Yeah. But that’s actually not what I see more often. I think that’s often time a judgment we make because it makes us feel better, like, “Oh well, they’re rich so I bet they’re a crappy husband.” But no, what I actually see more often is people who are really successful in one area … like most millionaires I know have a six pack, and it’s like the best way I know how to explain it, is the most millionaires I know either have a six pack or close to it. Most millionaires I know are really actually pretty good husbands. Most people I know who are just really good fathers are also really good at business. It’s because yeah, they do bleed over, and I think the evidence is out there, and often, I think Hollywood makes us think that it’s like you have to pick one. There’s a danger of that. But I think, yeah, the bleeding over is huge. So, very cool.

Brandon: Right. Gabriel, we got to move this thing on. This is fantastic. So, let’s move over to the next segment of our show, it’s called the deal deep dive.

David: Deal deep dive.

Brandon: Hey, it’s Brandon. I want to take a quick break from this week’s podcast to invite you to this week’s webinar, which is how to buy your first, second, or third rental property. Look, investing in real estate is like a moving train, right? A big locomotive. The most difficult part is getting it started, it’s a lot of energy, but once you get going, it’s kind of hard to stop, right? That’s why in this free online class I’m going to be walking you through exactly how to get that train moving, how to buy your first, second, or third or and third rental property so you can get that going, a life of financial independence.

Brandon: So, what are we going to be covering? Things like how to get funding for your first deal if you don’t have a lot of cash. Three steps for finding great deals. Three actionable strategies for finding deals that are hiding in plain sight and a very simple step by step process that you need to be focusing on right now to get more deals. Now, this is going to be awesome, but it’s also limited, so go to biggerpockets.com/123webinar, it’s biggerpockets.com/123webinar to sign up and get your spot. See you there.

Brandon: All right. The deal deep dive is the part of the show where we dive deep into one particular deal that you’ve recently accomplished, or maybe not so recently, it could be a good one, could be a bad one, but we just want to go real deep into that. So, Gabriel, do you have a deal in mind that we can pick apart in here and get numbers on?

Gabriel: Yeah. I’m going to actually talk about a deal, it’s a single family home that I purchased with seller financing, and this was actually, gosh, probably 10 years ago but I think it’ll be beneficial to the listeners.

Brandon: Perfect. All right. Well, so the first question I have is usually what kind of property it is. You said single family, but where was this located at?

Gabriel: This was located Eugene, Oregon and it was near campus. So, it was in a neighborhood that has also demanded campus rents, which it was not getting when I purchased it.

David: All right. And how did you find this deal?

Gabriel: I found this, I had purchased a couple other properties from the seller.

David: Okay. Very cool.

Brandon: Let me pause here. That’s something we don’t talk about very often on this show is that if somebody sells you one property, especially with seller financing, like what a great opportunity to get more. Like they’re like your ideal customer. It’s like this popular business thing, like, I mean, this is like famous business advice, right? It’s like it’s 10 times easier to sell more to an existing customer than to find a new customer, it’s the same thing applies to seller finance deals as well.

Gabriel: Yeah. I’ve had multiple sellers say, “Oh yeah, this is my last one,” and then they call me and say, “Hey, I have another property. Are you interested?” “Yes, I am.”

Brandon: That’s funny.

David: Because they see you have a track record of making your payment on time here, man. I mean, that’s the biggest concern most sellers have is if I do this, how do I know I’m not going to foreclose on you and take it back? It’s the same thing with real estate agent sales, there’s all these programs and sales gurus that are saying, “Buy this thing and we’ll help you find clients.” And you’ve got all these agents from around looking for new clients, they never talked to the people that already bought a house.

Gabriel: Yeah, you’re so right.

Brandon: So true.

David: Just talk to the guy that bought a house from you four years ago, he’s got all these friends that he could send your way. I don’t know why we don’t think like that, but it’s a very good point.

David: All right. Next question. How much did you pay for this house?

Gabriel: I paid 255.

Brandon: 255K. And how did you negotiate? What was the negotiation process look like and how did that work into the seller finance?

Gabriel: Yes. So, for this deal, it was one of those examples where the price was fair, it was a decent price, but I knew the property was under-rented. And so I was willing to give them the price they wanted with the terms that I needed to make it happen. So, for this particular deal, I did no money down. In fact, I made $2,500 at closing, actually a little more than that from collecting the prorated rents, deposits and such. And that’s something that I don’t think is talked about a lot either, is there’s multiple deals where I’ve been able to actually walk away from closing with cash in hand from the prorated rent and deposits. So, for this particular property, it was somewhere between 2,500, $3,000, but essentially a no money down deal.

Brandon: Okay. I was going to ask how you funded it, but did you fund it completely with seller financing?

Gabriel: 100% seller financing.

Brandon: Okay. So then we’ll skip to, what did you do with this? Was this a flip? Was it a rental?

Gabriel: Yeah. So, this was a rental, and when I bought it, there were tenants living in there. As I said, it was near the college. They were only paying 1255 a month for rent, which was below market rent. So, the deal that I negotiated, my payment to the seller was 1125 a month. And so it essentially broke even with the current tenants after you factored in property taxes and insurance and such. But I knew this was under-rented, and so when they moved out, and there were some deferred maintenance, so when they moved out, which was a couple months later, I got tenants in there at 1600 a month. And I use this example, and this example, not all the seller financing deals are this easy. So, they move out, I get new tenants in there at 1600 a month and now I’m cash flowing a little bit. They’re in there a year. They move out. I do a very light renovation. I needed some flooring, some paint, some cleanup. I put probably $4,000 into the property and now it’s running for 2250 a month.

Gabriel: And so here’s a property that was running for 1255, was able to create $1,000 a month in cashflow just from knowing the market, knowing the location and knowing that this property was under-rented. The seller was still happy as can be because they were getting their monthly payment of 1125 and they’re still not dealing with tenants, and turnover, and repairs. So, everybody walked away happy from this deal.

Brandon: That’s so cool. That’s so cool. You still have it today, right?

Gabriel: I still have that today. I had since re-fied out of the seller financing and I have a longterm fixed loan on that property.

Brandon: Very cool. So final question. What lessons did you learn from this deal?

Gabriel: That if you can find hidden value in a property and you know the market, you can create a lot of value with not a lot of money. It did not take a lot of money to get this property up and running to where market rents should be, it just took knowledge of the market and of the property.

Brandon: Perfect. Fantastic.

David: If someone’s listening to this podcast, that’s the way that I feel like BiggerPockets gives you a competitive advantage over people that are not, is you’re learning the creative ways people use to make money in deals or make deals work. So, if we’re in a market like 2010 where there’s just deals everywhere you look, it’s like hitting water if you fall out of a boat, educating yourself isn’t as important because you just have to have access to the MLS, you can find a deal.

David: But in today’s market when people complain, that’s where this kind of information is the best. We just interviewed, I think it was James Steiner about the Seattle investor, he blew me away with some of the ways that they look at deals. Buying something, like taking a several houses on one plot of land, dividing it up, selling off two of them, keeping the third one, he’s in with no money. The very same, similar to what you’re saying, Gabriel. You could make a deal work that everyone else is complaining they can’t make work because they need traditional financing and you’re using seller financing. All of a sudden it opens up doors. And I think that that’s just brilliant.

David: This deal you’re describing, you’re not talking about something that just no one could ever find. It was such a great, amazing deal. You bought it at 50% of ARV or something. It just sounds like kind of a standard house, but the way you creatively structured it made it a really big win for you. I love it.

Gabriel: Yeah. And it was an okay price, but there was upside potential. And this was actually the first house I had turned over to property management as well. I managed my own properties for the first four years, and then when I got to about 17 units, it was 10 o’clock at night and I’m fixing a toilet, and I have little ones at home, and I was spending my time, and then I had to call a plumber anyway because I was handy but not that handy. So, now I’m spending my time, and then I’m spending my money. And so I had already made the decision to turn my properties over, and I did it unit by unit. It was a slow process to property management, but this actually was the first property that I gave to property management. When I had that 1600 a month, it was a conversation with the property manager at the time then saying, “Hey, that’s below market rent,” and I’m stoked because I just went from 1255 to 1600, and he said, “No, let’s get this two,” and it ended up being 2250.

Brandon: Yeah. That’s so cool. I love that story. That was a fantastic deal deep dive. And now, let’s get onto the next segment of the show. This is our Fire round.

Speaker 3: It’s time for the fire round.

Brandon: When it comes down to it, we as real estate investors, we’re really in the information business. Who owns the land? When was that house last sold? How big is that lot? I mean, you can spend countless hours tracking down the kind of information that leads to a great deal, so why not have LandGlide do it for you? LandGlide is a smartphone app that gives you the comprehensive data you need to value a piece of land. LandGlide pinpoints your location using GPS and lets you explore maps and get access to 150 million records covering more than like 95% of the US population. So, you see guys, this thing is awesome. I use it to hover over a property to view the owner, boundaries, parcel ID, sales price, school district and more. Everything I need right here at my fingertips. And oh yeah, if you are in a bad service area, you can still access parcel data using offline mode. Super cool.

Brandon: So, download the app today and try it for free for a week by visiting landglide.com/biggerpockets. Get fast property data, accurate everywhere. Again, and go to landglide.com/biggerpockets to get started today.

Brandon: All right. This is the fire round. These questions come direct out of the bigger pockets forums and we’re going to fire them right at you, Gabe. So number one, let’s go. That’s a good question. So, IR [Reavis 01:04:45], I’m a relatively new investor and I was talking to some buddies and they basically told me to avoid single family homes like the plague because if one person leaves, you’re at 100% vacancy. I’ve also heard Grant Cardone say things like that. What do you think? I mean, I’ve got 30 grand I’m comfortable investing, and I mean, I can buy a single family house with that. What would you do?

Gabriel: Yeah. It’s a good question, and I truly think everyone’s investment philosophy is different, and I don’t think it’s always this cut and dry, right and wrong. I started in single family and a lot of people do start in single family because I think that’s where the mindset is. It seems easier, it’s where we’re comfortable, but I’ve also watched people start in multifamily and syndicate large deals. I don’t think there’s a right or wrong. You could take that 30,000 and put it in a single family home, you can put it into someone else’s deal or you could put it in your own deal and other money in. I really try to take a holistic approach. Any property I buy, any property I look at and go, “What do I want this property to do for me?” I try not to just only create one metric that I look at. I wish I had a, “Hey, this is what you do,” but it really comes down to personal investment philosophy.

Brandon: Yeah. That’s great. By the way, I love the … I was going to say the argument … you’re probably going to go here too David, but the argument of like, yes, if you own only one single family house and the tenant leaves you’re at 100% vacancy. That’s true. But nobody owns one single family house longterm. It’s like if you own 10 single family houses and one person leaves, you’re at 10%. If you have a 10 unit apartment and one person leaves, you’re at 10%. It’s really the exact same thing. I mean, in fact, if you went to multifamily, you jumped right into that and you weren’t prepared, you might have 10 vacant units and a whole lot more money out of your pocket every month that you’re losing. So, like you said, there’s not one right way.

Gabriel: I don’t like the logic that if you’re at 100% vacancy, you shouldn’t do it. I feel like you should be able to afford a couple months of no tenant in there. If you don’t have enough money to go two or three months without rent, you shouldn’t be buying real estate yet. You should have more money in reserves.

Brandon: Yeah. That’s a great point.

Gabriel: So, I’m not saying you have to invest the single family, but don’t use that logic that if you’re at 100% that that’s the reasons and not to do it. I don’t like that.

Brandon: Yeah. Go ahead. Go ahead.

Gabriel: I was just going to say, and you can create it, like use it as a multifamily. You guys talk about how house hacking all the time. I mean, my first two houses, I just rented out the other two rooms. So, if it became vacant, it’s, I’m still living for way less. So dependent on the person’s situation, if you’re willing to be flexible and creative, you can almost use a single family home as more of a multifamily, if you look at the bedroom count.

Brandon: Very, very true. Very true. All right, next question here. This is from Season Price in Arizona. I was sitting around with a few members of a meetup group I’m in, and the question was asked, if you only had $500 to start your real estate investing, how would you use the money? What do you think Gabriel?

Gabriel: Yeah. I think a lot of people would say invest that in education. I would say that’s one possibility, I’d also say go find a no money down or low money down deal, because it is absolutely possible. I even believe in this market to do no money down deals. I’ve done deals for less than $500. You’re going to have to put the work in, but you can spend a lot of time driving for dollars, you can spend a lot of time on Craigslist, you can spend a lot of time meeting people and telling people what you’re looking for without spending any money. I’d probably buy some books and download some podcasts, which that’s free too.

Brandon: Yeah, there you go. That’s a great answer. Number three, Sean Cody asks, hey, I’m in the Indianapolis area looking to buy my first single family property and I want to BRRRR it in the next six months. So, my question is, what is reasonable to expect from a real estate agent when you’re searching for a house to BRRRR? Should they provide comps and or ARV with every potential deal they offer, should they know and recommend good areas to invest? Should they actively present me deals as they arise or do they expect me to sift through my own daily search updates, get automatically emailed to myself for deals? And I’d be curious, David, your opinion on this as well after a Gabriel. But what should we expect in an a real estate agent?

Gabriel: I try to generally not have a lot of expectations, especially starting off, until you really have a relationship with that agent and know what kind of value they can bring. So starting off, I would do a lot … I mean, I still analyze my own deals, and I want to find my own comps, and I want to be comfortable and I wouldn’t rely on just one person’s opinion of a property ever until I have built a strong enough relationship with them and know what they’re saying and what they’re presenting to me is true and that there’s some knowledge and experience to back that.

Brandon: Yeah, that’s great.

David: Such a good question here, and this comes up all the time because I’m a real estate agent and we are looking for investors to help them find properties. So, this is something that comes into my world constantly. What I’ve learned that I have to do is I have to ask the client first, because you never know what their expectations are. Some people are thinking every time I send them a house, it’s going to come with a full breakdown of comps of other houses and a full rehab budget, and it be perfectly happy for me to drive to every house with a contractor and pay them out of my pocket to give them a rehab budget, and they’ll sit there and go, “Hmm, yeah, that’s interesting. Let me think about that,” and never buy a house, right? And then there’s other agents that do nothing. They just send you a drip of an email, say, “Do you want to write an offer?” And that’s all that they’re offering the client.

David: What I like to do is ask the client in the beginning, “What are your expectations? What do you need from me in order to make this happen? Our goal is to get you a property, what do you need?” And I let them tell me, “Well, I would be comps. I would need help finding a contractor. I would need help figuring out what the rent would be and I’d want you to look at the deal and make sure that I’m not missing anything.” That’s totally reasonable. In which case I’ll explain to them, “Well, here’s how that process is going to work. I’m going to send you houses on a search that looks like this. You’re going to look at the houses and you’re going to ask me questions about specific homes with specific questions. I don’t want, ‘What do you think about this?'” Don’t ever say that to an agent or anyone else, we don’t know what you’re asking.

David: What do you think this house would rent for? What do you think the rehab budget would be on something? Then we’re going to see if we can actually get it in contract, and when it’s in contract, that’s when the rest of the due diligence is going to start. That’s when you get your rehab guy out there to tell you a very specific budget you can work with. That’s where we find out work needs to be done. A lot of investors make the mistake of wanting everything done upfront before they ever write the offer. And the good contractor is not going to go give you a bid on a house you haven’t even written an offer on. So, you’d just be driving around nonstop, never making money.

David: And this is so good you brought it up because a lot of investors that work with agents need to hear. There’s a due diligence period when it’s in contract for you to get that information and back out if you don’t like it. So, the first thing that Mr, Cody here should do is talk to an agent and say, “Here’s what I need from you. Can I expect that from you?” And the agent can say, “Well no, I’m not going to send you comps when I email you a house. But if we get to a point where we’ve written an offer and we’re looking into the inspection period, that’s where we’re going to make sure we get comps.” So like with me, I talk to an appraiser on every deal I’m representing for a client and I say, “Here’s what I’m looking at for the ARV, is that the same thing you’re seeing?” But I wouldn’t do that for just every random house they found on Redfin and sent over to me.

Brandon: Great answer.

David: Very good. Thanks. Okay.

Brandon: All right. Number four.

David: Last question for you here, Gabriel, from Amy W. All of my tenants habitually pay on time except for one. I’ve had her as a tenant for nine months now and she has only paid on time twice. The weird thing is when I give her notice on the 6th, she pays the rent along with the late fee that very same day. Should I renew her lease and just increase the late fee? It’s about 4% of the rent right now.

Gabriel: Yeah. If she’s always paid and paid the late fee, I’d probably have my property management company renew the lease. And stuff like that was a big reason I chose to turn my properties over to property management because I love people, absolutely love people, but I don’t want to be that guy. I’ve had really great tenants, they’re good people and then they don’t pay their rent or they bail out. And I don’t like having to be that guy. Whether you manage your own properties or not, that’s a personal decision, but as far as if they’re paying and they’re always paying the late fee … I have a tenant like that now, and I’ve told my property manager, “Hey, just keep him there. He pays rent every month.”

Brandon: Yeah, and that late fee is extra money. Yeah.

Gabriel: It’s extra money, so everyone’s happy.

David: Might be a sign of an unorganized tenant, not necessarily like a bad tenant.

Gabriel: Yeah, there you go.

David: Because I can be that way. I need to be reminded all the time of what’s coming up. I can be late on something and you bring it to my attention, “Oh shoot, here. Here’s your money right now.” They might be the same way.

Brandon: Yeah. I had a conversation the other day, the one thing to add a piece in there is we were talking about … I can’t remember who it was, but a buddy of mine, Ryan Murdoch and somebody else, we were talking … maybe Blake. Anyway, we were talking about the fact that if you treat tenants differently, you can get hit with like discrimination stuff.

Brandon: So, I would just add that I would not go raise the late fee on that person and all the other tenants are at another late fee. Like if you’re charging them, you’re like, “Well, I’m going to charge you $50 a month for late fee, but everybody else is 25,” like you could potentially get hit with a discrimination later on. They say, “Well, it’s because I’m, whatever, disabled, or this minority, or I’m a woman, or I’m a man, or whatever.” You just don’t want to deal with that stuff, right. “I’ve got kids.” So, I would probably keep that the same, but anyway.

David: Cool.

Brandon: All right. Well, good answers there on the fire round. Let’s head over to the last segment of the show. It’s our famous four.

Brandon: Famous for, these are the same four questions that we ask every guest every week here on the podcast. So Gabriel, I know you’ve heard it before, but we’re going to throw them at you. Number one, favorite real estate investing related book.

Gabriel: Yeah, I probably alluded to this before, but I have to say Rich Dad, Poor Dad, and I know nobody’s probably ever said it on the podcast ever.

Brandon: Yeah, I know. Never.

Gabriel: That book, it changed my life. It completely changed the direction of my life. So, I have to say Rich Dad, Poor Dad, and really, everything in that series.

Brandon: That’s good. If you had to say a second, what would you say? I’m going to start asking that question I think more often because then we’ll get more book recommendations. Yeah. Well, if you had to chose a second one, what would you choose?

Gabriel: Advanced Guide to Real Estate by Ken McElroy.

Brandon: Fantastic.

Gabriel: One of the Rich Dad advisors, but also Think And Grow Rich was an amazing book.

Brandon: Very cool. Sorry, David, you do it. I’m going to take your question.

David: It’s too late. Too late Brandon. Go ahead.

Brandon: All right. Favorite business book?

Gabriel: Yeah. I would have to say a Dale Carnegie, How to Win Friends and Influence People. And it’s a business book, but it’s also just a life book and how to treat people good book. Like how to just be good to people book. Yeah, it should be a must read.

David: What I was going to say about that book is the thing I love about it is it’s basically how to be likable, and there’s this understanding I think most people have that you’re either likable or you’re not, that’s just a thing you can do. He actually breaks it down into a process of how you can become likable just like a bunch of other stuff. And I don’t know that there’s really any other books written with a similar, this is how to become popular.

Brandon: There’s a book out there called How To Get People To Like You in 30 Seconds or Less, my brothers read it, I haven’t, but he said it was fantastic, and I like my brother so it worked.

Gabriel: Well, and the thing with this book is it’s a genuine too. It’s not like, “Hey, how do you trick people?” It’s like how do you genuinely show interest in others?

Brandon: On that note, let me kill the vibe here but make a really good point at the same time. I was reading this article yesterday about Charles Manson, killer, psychopath. Do you know how he learned how to trick all these people into following him and murdered all these people? It was that book. I read that yesterday. I was like, “Whoa.” Clearly it works. Clearly it works.

David: That’s what I was going to say, like you can’t doubt the content if it’ll work for a guy that wants to kill people.

Brandon: Yeah. You can’t doubt, yeah. And here is what was messed up, but everyone loved him and like they would kill for him because he knew the principles in that book. So, if you want to get people to kill for you … I’m just kidding.

Gabriel: I do not want to be responsible for recommending his book anymore.

David: Well, let me get like a little side note, right? I’ll drop a little fortune cookie thing here. There is a very big difference in my opinion, between nice people and good people and we often mix that up together, right? “You’re such a nice guy.” And I will tell people that does not mean he’s a good person. Charles Manson was a very nice guy, he was charismatic, he got people to fall for him. Hitler was extremely charismatic. He got a lot of people to follow his vision. So, just being nice doesn’t matter. So, when I’m looking for agents or people to be in business with, all this stuff investors look for, I don’t really care on the phone if you’re really nice to me, I care about what’s your track record? Are you a good person? Are you honest? Do you have a lot of integrity? And sometimes they’re introverted or weirdos, but that’s okay. You can’t just go by niceness. That’s a great point. Thank you for bringing that up Brandon.

Brandon: Sorry for killing the vibe there.

David: Very dark.

Brandon: All right. No, yeah. Very dark. Number three.

David: All right. When you’re not breaking the world record for diamond pushups or becoming the state champion in wrestling, what are some of your hobbies?

Gabriel: Yeah. I love anything to do with spending time with my family. We love to travel, we love to camp. Anything family, anything related to health. I love investing in real estate, obviously, that’s why I’m on your show, and I love contributing to the community. Love giving back.

David: Very cool. I love that too. And I’ve been following your Instagram and you do a good job of like hanging out with the family and showing that like you value that time freedom.

Gabriel: It’s important. It’s important stuff.

David: Yeah, it is, definitely.

Brandon: Well, my last question is, what do you think sets apart successful real estate investors from all of those who give up, fail or never get started?

Gabriel: I think it comes down to desire, but also execution. You got to want it and then you got to go for it. So, desire and execution.

Brandon: Perfect. Perfect.

David: Great answer. All right. Tell us, Gabriel, where can people find out more about you?

Gabriel: Yeah. I think the best way if you want to connect is on Instagram or Facebook, but Instagram would be my go-to. All right.

Brandon: All right. What’s your Instagram?

Gabriel: You’ll find me if you search Gabriel Hamel, H-A-M-E-L, or Gabriel R Hamel.

Brandon: Perfect. All right, dude. Well, this has been awesome. Really, really fun. Good getting to know you a little better. Again, we hung out a little bit there at the GoBundance event in a Breckenridge, but yeah, this was really good to dig into your story and hear it. So, thank you for joining us today. Looking forward to hanging out with you again in the future.

Gabriel: Yeah. Thanks you guys. I had a great time. Appreciate it very much.

David: All right, well thank you. This is David Green for Brandon. Don’t be a serial killer Turner. Signing off.

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In This Episode We Cover:

  • Started with sub-prime lending and it worked out
  • House hacked his first and second home
  • Owns 140 units now
  • How he got started buying properties in a scary market from 2009-2012
  • Why he began with seller financing
  • How he found his first off-market deals
  • Seller financing wizardry
  • What he looks for in improving neighborhoods
  • How he’s been able to walk away with cash at closing—better than no money
  • Why he focuses more on terms than just price
  • His advice for having a success mindset in ALL areas of life
  • What he looks for in a deal
  • How he scaled to over 100 units
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Seller financing is a relationship business.” (Tweet This!)
  • “I would invest in any market as long as I have a team that I trust.” (Tweet This!)
  • “Time is very valuable.” (Tweet This!)
  • “Everyone’s investment philosophy is different.” (Tweet This!)

Connect with Gabriel

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
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    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 10 months ago
    Great podcast Gabe! How many other high school wrestling teams have had two people on the BP podcast?
    Michael Cohen Rental Property Investor from Burlington, VT
    Replied 7 months ago
    Really loved the podcast. Thank you for your time and for sharing your story. I'm very interested in the seller financing option. When you opted for traditional loans when interest rates dropped, what did you do with the existing loans and payment plans already established with the seller? Also when going back to the traditional bank route, are the loans that exist through seller financing part of your debt to income reported? Thanks, Michael