He’s been investing for 13 years, since 2013 he’s been making 6 figures in the business. He has a couple interesting strategies and tales from previous deals we can all learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Jason Buzi Real Estate Background:
-Real estate investor and developer
-Gained worldwide publicity as the founder of Hidden Cash, which set up scavenger hunts worldwide
-Regularly do double closings for 6 figure profits in a competitive market.
-Began in 2005 with no money, focused on wholesaling until 2010, has been making six figures since 2013
-Buys, builds, and fixes up houses throughout the San Francisco Bay Area.
-Say hi to him at info@areacodeseo.com
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
I hope you’re having a best ever weekend, first and foremost, and because today is Saturday, we’ve got a special segment for you with a returning guest. You know what the segment is – on Saturdays, we do Situation Saturday. Our returning guest is Jason Buzi. How are you doing, Jason?
Jason Buzi: Good, how are you?
Joe Fairless: I am doing well, and nice to have you back, my friend. Best Ever listeners, with situation Saturday what we do is our guest Jason is gonna talk about some challenging situations and deals that he’s been in recently, and how they’ve turned out. He’s gonna talk through that…
A little bit about Jason — by the way, you can hear his other episode where he gave his best ever advice; it’s episode 443, and it’s titled How To Focus On Off-Market Deals For One Million Dollars Plus a Year. He is a real estate investor in San Francisco, California. We’ll give you his e-mail address, it’s info@areacodeseo.com (that will be in the show notes), so you can e-mail him afterwards if you’d like to talk to him.
With that being said, Jason, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Jason Buzi: Yeah, absolutely. First of all, thanks for having me back on, it’s an honor and a pleasure. I do mostly high-end deals, partly because of the nature of the market that I’m in, which is the San Francisco, Bay Area where home prices are well in excess of one million dollars… And I say that if you’re not making a million dollars a year minimum in a market like this, you’re probably doing something wrong.
For years, I was doing something wrong – I limited myself to wholesaling. Wholesaling is great, but when I started out in 2005 I was wholesaling, and I made about 250k in my first year. I was very happy with that, but I was still doing the same thing five years later, and that was a mistake. What got me out of it was the opportunity to joint venture with family members. Basically, they convinced me to partner with them on a deal, and we made 400k, which was a lot more than the wholesaler assignment fee that I had always gotten.
That kind of created a mental shift in me where I looked at each property and sought to maximize my profit on it. There have been multiple properties where I’ve made 300k, 400k, 500k, either by rehabbing the property, by partnering on new construction, or by using my favorite method, which is wholetailing (or double-closing; people use different terminology for that). That just means you take title to the property, you don’t do a full rehab on it – we do little to nothing on it – throw it back on the market or sell it to a buyer, whether it’s a retail buyer or an investor, and make a large profit, hopefully. So again, you’re just buying, you’re closing, you’re taking title in your name, and then immediately reselling it. So it’s similar to wholesaling, it’s sort of a hybrid between wholesaling and rehabbing, with sort of the best of both; you get the upside that you can get in rehabbing without having to do the work, and you get to do it really quick, like wholesaling, where you get to recapture your profits very quickly. So that’s sort of my preferred method, and I actually have a story about one that we did recently that I think you’re gonna like.
Joe Fairless: We will dive into the stories of the ones you’ve done recently… I know when we were talking before we started recording you gave me the e-mail address and it’s areacodeseo, so clearly you’re involved in some sort of search engine optimization business. How does that align with wholetailing, what’s the crossover?
Jason Buzi: Well, I’ve been looking for a long time to improve my internet marketing presence; I’ve done a lot of direct mail, I’ve done a lot of networking, but I was kind of weak with the online marketing. Then I met a guy in this market which is very competitive, here in the San Francisco area, who is just crushing it with internet market. So we got together, and I said “I see that you’re ranking in the top five and you haven’t even been doing it that long, for a lot of keywords”, and he said “Yeah, I’m getting leads, I’m getting deals from it, I’m getting constant leads from it…” I said, “Is this something you can do for me?” and he said “Yeah.”
Then I came to him with a proposal and I said, “Well, what if I invest some money and we partner? Is this something that you can offer other people? Because I have a lot of people asking me about it.”
Search engine optimization, for those who don’t know, is a way to get your site basically ranked higher in Google when people search for common words like “We buy houses” or “Sell my house fast” or “Cash for my house.” He was able to get a very high ranking in this very competitive market for keywords. I said, “Can you do this nationally?” and he said “Yes”, and he showed me how he was doing it.
I said, “Okay, well let’s partner on this and we can offer it to people”, and everybody gets one area code — to be clear, not a zip code. So 415 if you’re in San Francisco, 202 if you’re in Washington DC, 214 if you’re in Dallas… You get that entire area exclusively, not sharing with anybody, and search engine optimization is done to get your site ranked highly. So if you’re interested in that, please send an e-mail to info@areacodeseo.com. Again, it’s a business (I wanna disclose) I’m a partner and I have equity in. It’s sort of a side-business of mine, but I believe in it, I see what he’s done. It’s info@areacodeseo.com.
Joe Fairless: Any of the deals you’re gonna talk about – did you get those deals from SEO?
Jason Buzi: Yeah, one of them recently was from it.
Joe Fairless: Perfect segue then. Do you wanna tell us about it?
Jason Buzi: That one was a rehab, not as exciting as the double-close deal that I’ve mentioned to you. Let me tell you about the double-closing, because that was kind of a unique, challenging type of situation. A guy that I know that lives in San Francisco, he was driving by and he saw some firetrucks and he referred me to this lead. And I said, “Okay, sounds good. Let me follow up on it.”
It turned out that they already had an agent; the agent was enlisted for 800k, and that seemed like a really good deal for a duplex in San Francisco. The value was at least two million. And I said, “Okay, we can do it for 800k.” So the first challenge was he said “No, that’s not 800k that we’re willing to sell it for. That was just kind of the teaser price”, because what they do here very often is they deliberately underprice properties with the hope and the expectation that it’s gonna sell for way over.
So we said, “Well, okay, how much do you want in order to sell it now without going on the market?” and he said 900k. I said, “Okay, let’s do that.” We got in contract for 900k. Now, this property was fire damaged; there had been a pretty serious fire. I mean, it wasn’t burnt down to the ground, but there was visible fire damage and everybody had to leave the building. So that was the first challenge – it was hard to comp what it’s worth; it’s not like your standard rehab. There was some major stuff that could be structural, could be electrical, plumbing probably that you had to replace.
I know the ARV, but I don’t know what the property is worth today, because this is not my regular type of paint and flooring deal. So that was the first challenge, how much is it really worth in its present condition. It’s gonna take us a lot of time, a lot of money to fix it up.
The second challenge was being San Francisco, even though the tenants left, there are very strict tenant protection laws, very anti-landlord, so all those tenants – it had three of them; it was a duplex, but one of the two units had been ilegally divided into another two units, so…
Joe Fairless: Oh, man…
Jason Buzi: …it was basically three tenants. So we have an illegal extra unit; it really should have been a duplex. We have tenants that are below market rent and they have a right to come back, or you have to buy them out. We talked with an attorney, and there’s a lot of rights protecting the tenants and not a lot protecting the landlord, so you could spend all this money, fix up the place, and your tenants could still come back, so that was the second challenge. We had to buy them out.
Well, long story short, I said “Why don’t we just try to sell it as is? Put some teaser price out there and see if there’s buyers.” So I put it out there for like 1.1, 1.2, and we were pretty confident that if we got interest at that price – go ahead and close. We got interest at that price, we kind of blasted it out while we were still in escrow before closing. So I went ahead and closed on it for 900k, and then just didn’t put it on the MLS because I thought it would be good for an investor. I put it all over Facebook and Craigslist, and any agent in that area that had done a deal and any agent that specialized in that type of property in San Francisco (duplexes).
We got a lot of interest, but a lot of people didn’t want it, mostly because of the tenant situation. They were actually more concerned about that than about the fire. But finally we got somebody to buy it that didn’t mind. We got a 1.35, so 450k more in about two weeks after buying it. 450k spread.
Basically, I had to push them really hard to get the payoff in time because it was such a fast split that I don’t think they’d even gotten the loan over to their servicing department; they got a private loan on that. So 450k was the difference. The profit was slightly less, because we paid a little bit of commisison, so we made about 400k in two weeks, not doing anything to it. Just buying it and selling it. That basically came from being creative and saying, “Okay, I may not wanna deal with the tenant situation, but there’s somebody out there that doesn’t mind. There’s somebody out there that’s willing to take over a problem that I may not wanna do.” That’s a very important lesson in this.
Joe Fairless: Where did the lead come from that eventually closed? Was it through a broker?
Jason Buzi: It was through an agent. What listeners need to understand is – and I say this many times when I do public speaking ocasionally; I have a book out which I don’t think was out yet when we last spoke, but it’s called Smash Your Alarm Clock. If you go to Amazon.com and look up Smash Your Alarm Clock, or look up Jason Buzi, you’ll see my book. And I talk about this… If you’re in this business — and I know we have kind of a love/hate with real estate agents as investors, but if you are not utilizing agents to your advantage, you’re leaving a lot of money on the table, because they want the deal to happen. At the end of the day, a real estate agent is compensated only when a transaction takes place, so you can use them to find new deals, you can use them to comp your deals, and you can use them to find your buyers.
In this case, a real estate agent was able to bring a buyer, persuade them to pay our price, and they got a commission, and we got our profit, and everybody’s happy. That buyer is willing to spend the time and do the work that I would not be willing to do. So utilize real estate agents in this business if you’re an investor. I know that some of the best deals come directly from sellers, but if you’re not utilizing agents in these three capacities – finding you deals, bringing you buyers and helping you evaluate properties and tell you what’s going on in the marketplace – I think you’re putting yourself at a disadvantage.
Joe Fairless: Do you know what the buyer was planning on doing with the property?
Jason Buzi: They had something called the Ellis Act, which is an exception to having the tenants back in. You’re basically signing a guarantee that you will live in the property and not rent it out for 3-5 years. If you do that, then you don’t have to let the tenants back in. That’s the exception, and it’s called Ellis Act. So I think they’re gonna do that, and then fix it up and then live in there. They may have family members living there… They’re looking long-term, and they’re just looking at it as an asset to buy and hold on to.
So the lesson here is just because I wouldn’t do the deal, that doesn’t mean somebody else wouldn’t do the deal. I’ve passed up deals that I’ve been able to sell to others, and sometimes they’ve done very well on them.
Last night I was hanging out with somebody who I’d sold properties to that’s a builder, and they’ve made almost two million dollars on a property that I thought was basically a “dog.” It was a busy road, it was across from a church… It’s in a high-end area, but I didn’t like the location. But you know what? They bought the house, and they sold it for 4.3 million dollars. I got it to them for 1.7.
I’ve worked with a lot of developers, so this was sort of a luxury home. Even though it was on a busy street, they had no problem selling it. So just because something doesn’t appeal to me personally… I’ve learned to say, “Look, just because it’s not for me, that doesn’t mean there’s not a right buyer for that out there.”
Joe Fairless: Yeah, especially with the wholetail approach. It’s one thing if you are putting it into your own portfolio… Then there’s reasons why you have the different filters. But if you’re wholetailing it or wholesaling it even, there’s no harm, no foul, assuming all parties are aware of what’s going on. You send it out to your list, and then if it works, it works; if not, then it didn’t work, and you move on.
Jason Buzi: Correct. And I wanna say, we did lose buyers because of that tenant situation. There were buyers that backed up, but we ended up finding one who said, “Okay, I’ll deal with it.” And we’d have lost buyers on the busy road as well, but it still worked out for the buyer that I did find. So even though it’s a challenging property sometimes, if the numbers make sense, a lot of times you can find a buyer for it.
Joe Fairless: Quickly, is there another deal that you wanted to talk about, or was that the one?
Jason Buzi: Yeah, I’ve got a lot of deals I could talk about. Recently I just got kind of red-tagged by the city because the previous owner who sold me the house left the garbage on the side of the house; I kept asking when they were gonna take it, and it was the next day, the next day, and finally they took it away… A day later I get a call from the city that “Oh, your garage has been converted illegally.” I said, “How did they even find out about that?” and that was done by the previous owner. They said, “Well, one of the neighbors complained, because you’ve got all this garbage stacked up, and we went to see what’s going on with the house, and we saw this illegal garage [unintelligible [00:16:24].17]
So that was something that never happened before and wasn’t very pleasant, but now I’m gonna make sure that we don’t have a bunch of garbage sitting out there, because we’ve got these nosy neighbors that can complain. Also, a bunch of people were gonna see the house while it was in escrow, so just… That was kind of a rude awakening there.
My favorite type of deal these deals is really just the example of the San Francisco duplex, where I can buy it, I know there’s enough value there that I can sell it and not necessarily have to do a lot of work, but I’m also working on entitlement projects, where it’s gonna be a much longer horizon. I have a friend that bought a car wash and got it permitted to build about 40 condos, and made a lot of money selling that to developers. So I’m working on deals like that right now, but I don’t have one completed yet to talk to you about.
I like the bigger deals. I saw somebody asking online “How many deals did you do? 100, 200, 150?” I’m not the guy trying to do hundreds of deals; I’m trying to make a few million bucks a year, but I don’t think I need to do 100 or 200 deals to do that. I’m looking to do big deals. 300k, 400k, 500k, a million dollar profit deals.
Joe Fairless: On the entitlement projects – I know you haven’t completed one yet, but I also know based on what I know about you that you’ve thought through the business plan already. With your wholetailing, you don’t have skin in the game. Are you able to structure it similarly with entitlements, since you’re gonna likely be having it under contract for a much longer period of time?
Jason Buzi: Yeah, I could structure it that way when I get one, which I’m working on a couple potential ones now… I’ll kind of decide, “Okay, how much of my own money do I wanna put in?” Honestly, I have people that wanna invest with me, so I’m sure that I could structure it with no skin in the game. And how much I wanna put in, I haven’t decided yet. My bank account fluctuates between deals. I may put in 100k or 200k of my own money.
I’ve met a guy recently who rehabs and puts none of his own money and does like 100 deals a year rehabbing, and puts none of his own money; private money funds 100%. I could probably get that easily if I wanted to, because of just contacts that I have, but I’m not sure yet how I will structure that. But that’s a much longer horizon type deal; we’re talking about a year or so.
Joe Fairless: Jason, how can the Best Ever listeners get in touch with you?
Jason Buzi: They can send me an e-mail at info@areacodeseo.com. You can put Jason in the subject line if you have a question for me. If it’s about the SEO, you can just say “SEO.” I also have a Facebook group called Living The Dream; it’s the one with a picture of a smashed alarm clock. I know there’s quite a few groups with similar names, Living The Dream. We have about 12k or 13k members now I think, and it’s just a picture of a smashed alarm clock.
And get my book. I don’t really make any money from it. It is on ly $11 on Amazon, but it’s called Smash Your Alarm Clock. I give a lot of my tidbits away, that we can’t capture them all obviously in this brief time… But can I leave your listeners with some final thoughts?
Joe Fairless: Sure thing.
Jason Buzi: I just wanna say always be growing and learning. I’ll be depressed if in five years from now I’m doing exactly the same things I’m doing today. This business of real estate is infinite, with infinite possibilities, and you just wanna keep learning and growing and improving your skills. My biggest regret in this business is that I didn’t move on from wholesaler for almost six years. Literally, I left millions of dollars on the table. There were deals that I could have made ten times what I did; where I made 30k, I could have made 300k or 400k.
And in around 2010 or 2011 – I think it was 2011 – I said “Okay, I’m not a wholesaler, I’m a real estate investor. Wholesaling is a tool, it’s a skill, it’s one of the things I wanna keep using, but that’s not what defines me. I’m a real estate investor.” And going forward from there, it was only about a year later that I had my first seven figure year, where I broke a million dollars net, and I attribute it all to changing that mindset, first of all, and then strategy following that. Okay, I’m gonna maximize my profit on the deal, I’ll rehab when it makes sense, I’ll double-close when it makes sense, and I’ll wholesale when it makes sense.
For me, the rule is if I’m confident that I can net 100k or more — and again, sometimes I miss the mark… But if going into it I think after all the expenses and closing costs I’m gonna net 100k or more, then I’m going to close on it. I may rehab it, I may resell it right away, but I’m not gonna wholesale it. It just gives me more leverage and more power and more ability to make money.
Every year I have several deals that I make 250k or more, so that at the end of the year it’s a really nice seven-figure year, and this year it’s no exception.
Joe Fairless: Well, thanks for sharing some of the case study examples of actual deals that you’re closing on, in particular the fire-damaged house. And I also enjoyed the part where it was 800k, and then you said “Okay, fine, let’s do 800k”, and then they said “Well, we just did that to generate interest.” “Okay, fine, now what do you want?” “900k.” “Okay, fine, we’ll buy it for 900k.” Just that little piece of info right there, to know what we might come across in situations like that…
And then obviously the property itself, with the challenges – the illegal unit, the three tenants, the favorable landlord tenant laws towards tenants, and the fire damage. And as you said, just because you wouldn’t do the deal doesn’t mean others wouldn’t, so you got it under contract, made it happen, and later about $400,000 was the profit.
Thanks for being on the show. I hope you have a best ever weeked, Jason, and we’ll talk to you soon.
Jason Buzi: Thank you, Joe. I appreciate it.
