What is going on everyone? Investors Dr. nation this is the Payneless Wholesaling pPdcast where we bring experts from the real estate industry so we can learn from their experiences. So you don’t have to go through the pain of doing this all yourself. We’re trying to make it painless for you. So we got Scott, Jilin Jellinek, you got it. Jellinek, what is going on? Will you please introduce yourself? Let the listeners know what you want to be talking about today.
How you Thank you for having me on. Nathan, I, you know, I do wholesaling. I’ve been wholesaling since 1994. But something we’ve transitioned into we still wholesale, but I do a thing called Slow flips. And for those of you who don’t know what slow flips are, it’s a process that’s separate from the wholesaling. It’s a process where we buy lower end housing on short term financing five year mortgages, and we simultaneously sell them on long term financing. We sell them on 30 year mortgages, and we just operate like the bank, we no longer are landlords, we’re not fixing toilets, we don’t do any of the stuff we used to do we operate exactly like a bank, and we just collect payments, we don’t make money off first five years, and then we make money, it’s pure profit for the next 25. After that.
Where are you getting these five, five year loans,
so private lenders, so 100% through private lenders, so you know, I know, we were limited on time. So I’m not going to go through my whole story, but I can give you the short version, I got crushed during the bust, I started buying, you know, 9094, and I did everything everyone taught through the burr method, you know, refiling and pulling stuff out and putting all the money back in. And in 2007, I got crushed, then prices started coming down shortly after the bust as well recovering. But now I also had no credit and no money left. And so I had to figure it out. And what I figured out was the prices have come down. But yet I couldn’t use a bank, I was dead to banks and banks want a loan for 30 years. So these houses got cheap enough where I was like, if I can borrow private money, I can get them done in five years. And instead of the chaos I went through previous to the bust, where I’m over leveraged, and every month making payments, now we only make payments for five years. And then we own them free and clear. I currently have 178 of them, and 79 of them are already free and clear. But they’ll all be free and clear within within the five years, the next upcoming five years.
That’s amazing. So how are you getting if you’re selling them to like end buyers, right, like people are gonna live in them.
So the bulk of our business is actually two investors. Ironically, there are two investors who do exactly what I used to do prior to the bust. Most of the you know, prior to the bust, I would buy anything I could that somebody would finance me and I can make a spread on to $300 a month. And so now I almost sell to my exact avatar who I was prior to the bus, which is the bulk of investors out there who are just buying anything they can with financing. And so we’ll finance them with three grand down or five grand down, they’ll pay us a monthly and then they fix it up and they rent it out. And then they make the spread. So it mostly its investors, we do sell to some homeowners, where are you getting
the private money to do the five to pay everything off within five years. I’m a little confused about that
So we raised we raised from private individuals, and you know, when I teach a lot about raising money, and it’s funny because some people have this concept in their head of private money, that it’s a private lending company. And there are companies there’s even one called Private lender.com, or something, in my opinion of a private lender is not a person who’s in the business of lending. It is a person who just has money in their account, and you cultivated them to be a lender and they are private to you. They are only lending to you. They’re not in the lending business. To me, those people are lenders, they’re not private lenders were not when I’m cultivating a lender, they’re private. Nobody knows them, except me. And so that’s it, we go through a whole series, I actually trained on this, and I’m sure you do it as well, on cultivating lenders and raising their money is out there. I mean, everybody, that’s one of the big stumbling blocks people have is they have this belief in their head that yeah, that’s easy for you. I don’t know anybody with money, right? Everybody believes that. And the reality is they’re wrong, the money’s out there. And we have a whole process for doing it to where you don’t have that fear of rejection. So people can go through the raising money without having to worry about being rejected, because that’s what stops people from asking you in the first place, of course.
So for my listeners, I think we it’s pretty simple in the sense of with private money, you you find it but I’m curious about the five years, I’m still trying to understand how you’re able to pay that off.
So let me give you some real numbers. And before Nathan, what part of the country are you in Salt Lake City, Utah, okay, so your great example. So for someone like you who’s in Salt Lake, the first thing you’re gonna think when I give you these numbers is you’re out of your mind. houses don’t exist in that price range, right. And I hear that all the time. Angle. What’s that?
Is it the Midwest?
Well, a lot. I do a lot in Virginia, but now we’re buying a lot in the Midwest, right? And so on average, we will buy houses for you sitting down for $30,000 $30,000 We pay 12% interest $30,000 at 12% interest on a 60 month mortgage is 667 33 a month, we simultaneously sell them on average for 89,000 and we sell them on a 30 year mortgage with them paying us 875 a month. So now for the first five years, we really don’t make any money because even though there’s a little bit of spread, it goes to taxes and insurance. So we don’t really make any money for the first five years. But once we hit that 61st payment, it’s all ours. And it’s beautiful because we don’t use any money to buy them. And you know, you don’t make any money for five years. But then once you do, you’re free. And my whole premise is not on making people rich. I’m always like, Nope, you want Lamborghinis and yachts to go somewhere else. The people that I train, it’s just training you to be free.
Yeah, it’s very interesting. So So I actually, I’ve wholesale I wholesale nationwide. I live in Salt Lake City. So I come across these deals all the time that are like, you know, 15 I got one. That was one like $9,000. And I got it for so yeah, they’re very cheap. Now, are these $30,000 properties? Are they distressed? Are they good to go and you just rent them out.
So it depends on I buy in four different states. So it depends on the state you’re in. Like in my in my state, I live in Virginia and I buy a lot in Hampton Roads, the bulk of my properties are here, typically on those price ranges will get a more distressed in my area, but they have higher ARV, when we buy out Midwest, they really don’t have much in the way of an ARV. That’s it, they’re just low priced, and they stay low priced. And so a lot of those are not distressed at all, like I look at some of them. And I’m like, How was this house? 20 grand? How was this house? 25 grand, it’s insane to me.
But that’s that’s what it is the demand, right? They want to live out here in Calgary, they want to live in Calgary, or they want to New York or wherever they got to pay a little bit more. But in the Midwest, you can find some good deals out there. So curious, when you talk to your private money lenders, you tell them, hey, five years, you I’m gonna pay, I need your money for five years, and then I’ll pay it’ll be paid off. And then is that the expectation you’re setting with him?
Correct. It’s not a balloon payment. We’re not paying interest only we’re amortized. So I though and again, this is how I teach to but I give them our program. I don’t ask what would you like to lend? Or how much what terms do you want, we borrow specifically, I do 30 and 50k loans, but we’d borrow 30,000 for 60 months at 12% interest? And that’s the opportunity we’re presenting to the lender to make that return. It’s not a question of what do they want? What do they want as a return on what term they want? Because if they don’t want to fit into our model, then they’re just not our lender.
And that’s not interest only it’s 12% amortized over over the five years in directory, and then you just say, Give me 2030? Or was the other 150?
Yeah, 30 to 50. At $50,000. That comes out to $1,112.22. And that’s 60 payments, and again, then you owe nothing it’s paid off.
Um, let’s say you find a property for 20,000. Your lender? Do you still ask for 30 from them? Are you are you willing to just ask for whatever you need?
Well, we have one lender that just lends to my people in my program, and that one does the amount they need. But barring that our private lenders, we always borrow 30 or 50. The reason we do that is because of confusion, if I changed it to the amount each time it would cause a problem because sometimes you get a smokin unbelievable deal, right? And it’s 20 grand. And then if your next deal was just your normal average deal, and it was 30, they’re gonna be like, Well, I don’t want to loan 30 on that I only loan 20 on that one. And so then they start comparing the deals. And so to get away from that we borrow the exact same on every house. Now if I buy a house for 35, I’ll bring the five grand to closing. And if I buy it for 25, you’ll get five back. So I always buy all my payments are exactly the same. They’re either 667 33 or 1100 1222. I borrow the exact same for every single one for a five year loan.
So when you say you if it was 25, you’ll give five back
What do you know, it would be a loan for 30. But I only I wouldn’t give it back I’d get it back. So if if I if I buy a house for 25 and the loan is for 30, then I actually get get money at closing.
So that five what do you do with that since you’re paying it’s not into the house and you’re you’re paying interest on that five.
So the way I teach my people is to keep all the money in the account until it’s paid off. And even overages from the you know, the payment that comes in and your payments, they might be 100 $200 A month positive people hate when I say this, and I don’t know what your method are with your holds. But I you know, I tell people, you don’t deserve to make $1 off your properties until they’re free and clear. And I know the world hates free and clear, right? Everybody’s like, oh, it’s dead money and you know, burn, use leverage and all that’s great. And it works until it doesn’t and and you know, anybody who started in 2009, or later has only seen this. And so it everybody, you know, I talked to hundreds of people and everybody has this finite vision of the way the world is. And they’re right. And it has been that way for a lot. I talk about the bus like it was three weeks ago. And people a friend of mine just recently is like Scott, you know, that was 15 years, right? And I’m like, Oh, I feel like it was just yesterday because, you know, it was a rough time. But people that got in, you know, in the last 15 years, you’ve only seen one way and it might stay that way for another 1520 years in which case there right the people who are using the leverage did good and they’re right problem is is I’m too old to start over. And so if it doesn’t stay that way, I’m not taking a chance on having to do this all over again. That’s why I’m all about free and clear.
Now anything that cause you to choose the 35 years How come not foreign and you know, anything like so
what exactly what I started the slow flip model in 2011 and there’s two sides to the slow flip model. There’s the buy side and the sell side right so the buy side what what made us die lien on 30 Is it was the most we can borrow and still have it paid off in five years with the amount of money that it brings in. Because on average those properties we’re bringing in 875. So 30 was the most we can borrow. Now these last few years, we’ve had a run up in rents as well as in pricing, but which is why now we got these ones that we borrow 50, but we’re getting 1275 on payments, 1100 12. So it still works out, when you start getting into higher dollar properties, even, I mean, I say high dollar, they’re still cheap. Like, if you’re talking $100,000 house, for instance, the numbers just don’t work. Because in my market anyway, $100,000 house might bring in $1,600 a month, but my payment would be $2,400. So it just wouldn’t work because we don’t tolerate zero negative cash flow. So that’s why we structure the numbers the way we do because it has to be able to support itself.
So let’s talk about you’re saying you don’t you want your people you’re saying, Hey, don’t make any money until it’s free and clear what happens with that surplus. If there’s money do you just keep it in the account in case for expenses and issues and leave it in the account.
And the reason I do is because you know, defaults happen. And so if a default happens, I don’t want it to be an added stress on these people that are buying them, I don’t want them to have that added stress to where now they have to come up with money to pay that lender. And so I’m like, listen, we always get three to five grand down, I’m like, just leave it in the account. And now if the default happens, or if you have more of COVID happens, right? We have nobody paying for a little bit, you have that money sitting there. So you don’t have this added stress where you have to come up with money to pay your lender.
And when you say default, are you saying that the renter defaults and doesn’t pay? Well, for us?
They’re not renters? They’re their buyers? Because we resell, right? So yes, you know, if they were to default and not pay us, and we had to go through either an eviction, it’s good to have that money so that we can sustain it
because I had my mind you were renting this or sublease not suddenly some renting or doing a lease option, but you’re not doing any that you’re selling these on on an
agreement for deed, we’re selling on an agreement for deed, some some states call it a land contract or contract for deed, same thing.
And these properties. They’re they’re free and clear in the sense that they your private money lender bought it completely. You’re not like doing a rap on any of these right?
No reps, no sub twos. I mean, I do sub twos also. But that’s not for the slow flip purposes. They’re not free and clear. They have a loan against them for the 30 Grand they’re free and clear on the 61st payment. Once that’s when they’re free and clear. Correct.
But but in the sense like the least of the the lender owns it outright, right? Because they bought it with their no the lender just loaned against it.
Just like Bank of America doesn’t own your house, you own it, but they have a lien against it. Same Same difference. We own our properties, but the lender just has a loan against it.
Got it. Okay, and you’re paying them. I’m sorry, correct? Yep. That’s interesting. So you did this model just because you’re like, Hey, I’m not trying to start over again, if something crazy happens. So let me on these free and clear, I’m not trying to drive or show people, the Lamborghini people that want to get rich quick right
So basically, what happened is, I came to the realization that we all you know, we chase money, I make a lot of money now. And I made a lot of money then. But in between, it was a tough time. And we always are chasing dollars. But what I’ve came to the realization after the bust is that wasn’t the money that we were really after its freedom. And everybody talks a good game with freedom. But the reality is, and I go through a process with the guys in my program that I’m like, I’m like if you put a number on it, and I make them go through an exercise that how much does it cost for you to actually be free, we call it freedom number, right? And it’s usually not always, but usually it’s about $10,000 a month, which is so easy to achieve $10,000 a month, we can do that with 1213 Slow flips, and I can get anybody there in five to seven years. So people don’t want to wait five to seven. In other programs. They’re like, No, I want to make money next month. And I’m like, Listen, you can, you know, I’m saying I’m always saying is you can do what’s easy, and life will be hard, or you can do what’s hard, and life will be easy. And so I try and push them I said just take the hard road, which is you know, plow through for five years, but then you’re free for the rest of your life. And people don’t appreciate it until you’re actually free. And it was tough on me as well. I started this in 2011 2013 14 I kept you know, am I doing the right thing, I’m buying all these properties and I’m not making any money 2016 All of a sudden they started getting paid off and I was like this was great. Now all the money comes in and I get to keep it and it’s been a straight up hill ever since.
I love it. No, I agree with you. I think the quick fast way to do it is not sustainable. Like even wholesaling, which I think is a great strategy, exit strategy. It’s a good way to do certain deals. It’s not something I think anyone can do long term and be able to just continue.
I love wholesaling too, so don’t get me wrong, I’ve been wholesaler for a long time and I just did one and I’m going to tell you I know we’re talking about slow flips today my biggest one of my life was last month $250,000 assignment fee and and I’ve been doing this a long time and that’s my biggest I had a 200,000 years ago but 250,000 was insane on multi unit or what oh it was a it was a it was actually out of the area about two hours away from me and I don’t buy out of the area. But my wife answered the call and the seller was from out of town and and everything lined up. It was distressed it was inherited and free and clear. And I was like let’s go for the drive. And we did and it was yeah, that’s, that’s amazing.
Well, so how can my listeners if They’re like, look, I wholesaling but I kind of want to try to slow flipping how can they reach out to you to learn more.
So I’m gonna tell you in a second, but let me tell you if you like wholesaling, I’m a fan of doing both, even me even I do both. And the reason is you’re wholesaling. You make money today and you make money and I’m big on the slow flips, like what you don’t make money for five years, well, you’re not going to sit around and not eat for five years, right. So that’s why I say you do both You Wholesale. And that’s how you make your living now, and you probably still wholesale forever, because wholesaling is fun and but slow flips is what sets you free, so you don’t have to anymore. So the easiest way to get a hold of me actually, I wrote a book that just came out called The Art of the slow flip. And I think I was telling you earlier, I’m gonna give a free copy to your listeners. So all they got to do is just go to slow flip.com Slo W F Li p.com. And fill it out, I have 250 copies printed and just pay the shipping. I think it’s $7.95. And I’m gonna send it right on out to you. And it goes I held nothing back in there. So I went through detail step by step from start to finish. How long did it take you to read your book? That’s actually my second book. And it takes a while my first book, I’m embarrassed to say, but it took me about five years because you know, I just I’m not a writer. So I didn’t just sit down and write and it took a while this one I got done quicker because I had a more methodical process. But it’s a it’s challenging.
Would you go back? Or would you go in for read another book using chat GPT to like, have it right or you like like,
I probably wouldn’t, but I can’t say I wouldn’t without actually trying it first to see like, Try A Chapter and see what it sounded like. If it sounds like your voice and it sounds like what you would have said, I don’t know that it could but I guess the technology is evolving so fast that it probably could.
I think books are great lead magnets. I think they’re great things to give away for value. So that’s amazing. So flow flip slow. flip.com Slow. flip.com.
Yep.
That’s a great domain name to great job. Like that, like a lot of people would look that up. Yeah. Wow. Yeah, I think it’s awesome. So hey, Scott, thanks for coming. Do you have any other things you’d like to share with my viewers or anyone that will listen to this?
You know, just one of my one of my things I always like to share when I close out my meetings with people in my group always with it is you know, and it’s as a basis of slow flips, is do something today that your future self is going to thank you for we always focused on making money right now and making money today. But I’m like, if you start thinking in terms of what are we in 2023, if you start thinking in terms of 2028 version of yourself, or 2030 version of yourself and do things today that aren’t for you, but they’re for him, you’ll you’ll be surprised on how far you can get when you’re keeping that person in mind. And that person is you. But it’s you in 2028. And so I’m always telling them do something today that your future self is going to thank you for so good.
That’s it. That’s really good. Because a lot of people don’t they want that instant gratification. Right? They want that the results right now. So that’s good to think about, you know, how you’re gonna benefit in the future. I do actually have one last question for private money lenders, usually, when I talk to, you know, hard money lenders that use that those people that you’re trying to find, they usually can sometimes get like 678 percent, you’re getting 12 Is that because it is not interest only. So it all equals out or
Yeah, so when I started in 2011, I went the when I originally started, my thought process was let me offer a super high interest rate so that I can start raising money. And then as I started having more lenders than I have deals, I’ll start to lower it. But what happened is all of my lenders are still my lenders to this day, and all of my new lenders have stemmed off of my old lenders. So I didn’t want to make it like oh, you’re getting a percent, he’s getting 10. He’s getting 12. So I just left it alone. And the way I looked at it is I’m not paying it anyway, my buyers are paying it paying it off in five years, and it’s covered in the whole thing. So I’m one of those when when when people so I’m like my my lenders are happy, my buyers are happy, I’m happy, let everybody make money. And so I never want to try and chase them down just to save a buck.
Okay, that makes sense. Now, one last one last thing because I this not just came up, if you sell it on to seller and you’re selling it on technically on a land, right land contract, are you trying to get as much down as possible, or typically
get three to $5,000 down depending on the condition if it’s in good condition, I’ll usually go for five if it’s a handyman special needs work will go for three. So it’s generally three to $5,000 down,
because the more you get down, the faster gets paid off, correct?
Not not for them. We’re still a 30 year mortgage. So they’re paying it on a 30 year mortgage, I have a vision and I know we’re out of time. So I gotta go, you gotta go. But man, I have a vision in my head. I always tell people I say you go to any city in the country, right? And you look at the tall buildings, and they got the bank names on the side. And that’s because we as regular conventional landlords or homeowners were running around and do all the work. We do the pain carpet, put out the signs, rent them out, fix the air conditioner, do all this stuff, collect the money, and then we send the bulk of it up to that building. And they’re sitting up there waiting. Well with the slow flip model, we pretty much turned it all on its head where we’re the one that just sits there waiting and on the first of the month. Everyone else is running around doing all that work we used to do and they’re just mailing us the check. So we kind of twisted the whole thing around now too. We just operate like a bank now.
Let’s do it. All right. Thank you, Scott. Appreciate it and reach out slow flip.com If you want to learn more
thanks Nathan had a great time
yeah me too thanks
