Greg started with only three agents and grew his real estate firm to over 4000 agents. Greg had an interesting strategy for investing when he started out that had a lot of success. He’s had a different path to his success than you might typically hear, a story we can all learn from. Greg also has a new website aimed at taking down Zillow. Hear about his new project and the motivation behind it. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Greg Hague Real Estate Background:
- Founder of the most talked about topic in real estate today, the viral-hot Stop Zillow campaign.
- Nationally acclaimed real estate speaker, broker, attorney and Huffington Post writer
- His real estate strategies have been featured in Forbes, The Wall Street Journal, U.S. News and over 300 major publications worldwide
- Starting with three agents, he built a 122 office, 4000 agent real estate firm.
- Then founded what became the number one Christie’s Luxury Home Brokerage in the Southwest
- Based in Scottsdale, Arizona
- Say hi to him at http://realestatemavericks.com/ NEW WEBSITE http://buyerhunt.com Email: firstname.lastname@example.org
- Best Ever Book: How to Win Friends and Influence People
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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. With us today, Greg Hague. How are you doing, Greg?
Greg Hague: I am doing fantastic, Joe. My pleasure to be on your show, thank you.
Joe Fairless: Well, I’m so grateful that you are on the show! A little bit about Greg – he started with three agents and built a 122-office, 4,000-agent real estate firm (holy cow!), then founded what became the number one Christie’s Luxury Home Brokerage in the Southwest. He is an attorney, he also is an investor, and we’re gonna be talking all about his background and the tactics that he uses as an investor. He has a very particular way that he invests, the type of properties he invests in, and we’ll talk about that.
With that being said, Greg, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Greg Hague: Yes. I grew up in the business, my dad was a realtor… Actually, I have a fun little thing – my dad was a realtor, my mom was a realtor, my uncle was a realtor, kind of thing… My wife is a realtor, my kids are realtors… [laughs] So I grew up in the business, Cincinnati, Ohio, moved to Scottsdale, Arizona in 1981, I started that company that you referenced, and some good investment advice is that if you wanna be a savvy investor, you will not start a real estate firm that grows to 4,000 agents, because you have no time to focus in investing.
In any case, I sold that, then did start a luxury home brokerage, and the focus of my investing – I have one major rule that I follow in my investing, is I don’t invest with other people; when I say “with other people”, I do not let other people manage my money. I figured that I am the one who will care most about my money, but also realize that with respect to investing, there are only certain areas that I know and other areas that I don’t… So my thinking was to figure out one investment model that I could learn and know meticulously (I call it “with meticulosity”) and then execute on that model. That’s what I’ve done, and I’ll be glad to share that with you today.
Joe Fairless: Oh, I love that approach – just focusing on one thing and doing it at a very high proficiency, and then maximizing the results that way… So please, share your approach with us.
Greg Hague: I grew up, as I say, in the real estate business, and that’s the residential real estate business, so I am not a commercial real estate expert. I would say that I’m a residential real estate expert, having been in it – I hate to even say this – for 50 years. This is my 50th year; I was licensed in 1967.
After I was fortunate enough to be successful, obtain a reasonable net worth, I did start investing because I realized that passive income is a true way to escape and be free… And my focus was on residential real estate, so let’s start there – number one.
Number two – I loved the idea of renting homes; that’s pretty simple – buy and rent homes. But I actually liked better the idea of renting homes in a way that I could sell those homes at maximum price, and actually, let’s say, even at more than retail price, where I was accomplishing (in my view) two really commendable goals. Goal number one was to rent homes and get cashflow, and goal number two was to actually sell those homes at a price that was above market, so that at the end of the rental term I ended up with a closing and a big profit on the home. So I got both cashflow and profit.
The bottom line is that I developed what I developed a lease purchase program where I would buy lower to medium price homes, where there’s a lot of lease demand and they’re very affordable, I would fix them up – not fix them up as much for resale, as much as fix them up for rental… But I wouldn’t just rent them. Every single one was never available for rent, and actually it was never available for a cash sale; so I would not sell it to a cash buyer and I would not rent it to only a renter. I would only [unintelligible [00:06:20].11] to someone who wanted to both lease and then purchase and close on the home in two years. That’s the model I established and that’s all that I did.
The benefits of that are, number one, people who are lease-purchasing homes are generally people who can’t purchase a home, that is get financing now; maybe people just don’t have a good credit at the point, got hurt in a bad economy, some such thing… So the real benefits there are number one, at least in Arizona and in most of the states there is a restriction on the amount of lease deposit you can take… But if you’re doing lease in conjunction with purchase, you can take a larger deposit because you can take a deposit with respect to the purchase. So I would get a larger deposit because these buyers can’t buy for cash or they can’t get financing at this particular time. They’re willing to pay a little bit more, let’s say 5%-10% more for a home closing in two years, so I did maximize my sale price. They would put up a generally reasonable deposit, let’s say 5%-10% as opposed to lease deposits.
And then here’s the thing – they make lease payments, and sometimes, let’s say if a lease payment is going to be $1,500/month but they can afford $2,000/month, we’d make the lease payment $2,000/month, but we would attribute $500 against principal, so they were building equity during the course of the lease.
The good news is at the end of the lease term, if people are able to close, that’s great. If they’re not able to close, I don’t kick them out, and I don’t even want them to forfeit their money. I will renew it again for another two years, we’ll take a look at the price and might adjust the price up a little bit, because homes in these price ranges are appreciating, and we’ll just keep them in the home and let them continue to accumulate equity on two-year rolling lease purchases until they are able to purchase the home, or in the unfortunate event that they can’t/don’t wanna leave etc., they would be the ones to decide to walk away, never me playing hardball and kicking them out.
So a very win/win relationship where I give people two-year options or lease-purchase arrangements that they could roll and continue to roll as long as we were fair in adjusting the price. That has worked out very well for me, Joe.
Joe Fairless: After the two years and they aren’t able to purchase, do they then need to provide another deposit?
Greg Hague: Absolutely not. We let the deposit they previously provided – we let that apply and continue forward. The only adjustment we would make – we might make an adjustment in rent if rentals have gone up; we might make an adjustment in purchase price, but only to the extent (percentage-wise) that homes in that price range have gone up. So very fair, because remember, I have sold the home to them in the beginning at a price that might be 5%-10% above market, and they know that and that’s just a premium one pays because I’m giving them these lease purchase terms and they’re not having to qualify for a loan. But it’s a really nice lease-purchase arrangement because it’s one where as long as the (we’ll call it) tenant buyer stays in the game, continues to make payments and be a good tenant, be a good buyer, they can just stay with me until they’re able to buy that home.
Joe Fairless: On the expiration of one two-year lease, has the rent or the purchase price ever decreased?
Greg Hague: I wasn’t really doing this actively back when the market crashed, in ’07, ’08, ’09, so the answer is no, but when the market declined back in ’08, ’09, I would expect that would have been a scenario where had I been doing this, at that point I would have had to reduce prices and reduce rent payments.
Joe Fairless: What type of attorney are you?
Greg Hague: Well, after I graduated from law school, I went into real estate, so I don’t really practice anymore, but I guess if you were going to say what kind of attorney am I, I’d be more of a contract/commercial attorney; I taught contract law at the law school here, and actually, I was proud to win professor of the year…
Joe Fairless: Wow, congrats.
Greg Hague: So I would say my expertise is in real estate and contracts, certainly not in anything like personal injury or criminal lawyer kind of thing.
Joe Fairless: What law school did you teach at?
Greg Hague: I taught down here at Summit. It was previously Phoenix School of Law in Arizona, and then they changed it to Summit Law School. My story there is I passed my original first bar exam back in Ohio in 1974, but never really practiced. I worked with my dad in his real estate firm, then started my own firms…
Then when the market crashed out here in Arizona in ’08-’09 I thought “Well, there’s nothing to sell in real estate”, so I decided to take the Arizona Bar at 60 years old, which was kind of crazy… I hadn’t been to law school in 35 years. I went ahead and not only passed the Arizona Bar, but got the top score in the state when I took the bar exam. That got a lot of publicity, because 60-year-old guys aren’t supposed to do that. I did practice commercial law for about a year and a half, and quite frankly, I got tired of driving downtown and working in an office all day, so I went back into real estate.
Joe Fairless: With your background as an attorney, was it less daunting for you to put together the lease purchase program, versus someone who doesn’t have the legal background?
Greg Hague: I’d say that’s a fair statement, because I’m very comfortable with contracts and comfortable with real estate, I would probably be more comfortable than most in doing this… Although the principles – you don’t have to be an attorney to really understand the principles of what I’m doing and understand the kind of contractual terms that you need.
I think a really good advice for someone who likes the kind of model I describe is in the beginning to work with an attorney, just to make sure you get your documents and your processes all dialed in, and at that point keep the attorney there if you have questions, but I think you could just move forward on your own at that point, as long as you get good advice upfront.
Joe Fairless: And is the question you ask the attorney when you’re screening which attorney to work with simply “Have you worked on contracts that are lease-purchases?”
Greg Hague: I think that’d be a great question to ask. There’s a website, avvo.com, that has attorneys go in — you can actually ask questions on Avvo; there are various attorneys who are looking for business in there. That’s what I’d recommend – look at attorneys that have commercial real estate background and ask them some questions about lease purchases… Have they done that? Have they represented people who have? And more than that, just actually ask them the kinds of questions that you might have if you’re thinking about getting into that line of investment and see how they answer those questions. That is a great way to determine whether somebody might be right for you.
Joe Fairless: Thanks for sharing that, I was not aware of that website, and that will be a resource, I imagine, that will be helpful for a lot of people.
Greg Hague: With the approach you’re taking, the lease purchase – you’re getting the rent, so you’re getting cashflow, and you’re also getting a premium for the house within two years, assuming they live up to their side of the bargain… And certainly there’s some benefits for you if they don’t, and it kind of still benefits them because of how you structured it – you’re letting them renew it, it’s up to them. The question I have about this, because I imagine some Best Ever listeners are thinking this – this is a glorified flip (two years you’re in and out) and you make money, assuming things go well, on both sides, but you’re only in it for two years and then you’ve gotta go find something else, and you’re just constantly recycling… Versus the long-term buy and hold, put a resident in there, pay down the mortgage, make a little bit of money along the way and build your portfolio over time so it’s more and more units – what would you say to that?
Greg Hague: I would say it is. However, the real benefit to it is that if you look at home appreciation, which has been significant over the last few years, because lease purchasers are willing to pay more for property, because they have to, because there aren’t that many available for lease purchase, so there’s a lot more demand than supply… Because they’re willing to pay more, you maximize your return; so while you might call it a glorified lease purchase, I would think of it as more this model that I believe in. I would think of it as more of just a way to maximize your return on the properties you’re investing in. If you hold them, you’ll get normal appreciation; if you lease purchase them, you’ll get normal appreciation plus a premium.
Joe Fairless: How active are you in your business with the lease purchase program? I’m trying to get a sense of how much time does it take you to spend on this and how many do you have going on at one time?
Greg Hague: Well, the truth is I’m not at all active in it right now, because I am so busy with another project… I don’t know if your listeners have read, but I am launching a website on February 19th that will be a competitor to Zillow, and I have thousands of realtors across the country who have supported me in this, we have almost 1,000 realtors who have contributed to our crowdfunding campaign at StopZillow.com…
Joe Fairless: How much have you raised for it?
Greg Hague: I think if you look on there today, it’s almost $300,000; over $290,000, I believe.
Joe Fairless: Wow, that’s impressive.
Greg Hague: So that has been my absolute, total focus over the past year. Also, I own a luxury home brokerage here in Scottsdale, Paradise Valley area and we’re extremely busy… So I’ve had zero time to do it myself. My money is sitting in the bank right now, I’m one of the worst investors in the world; it’s sitting in the bank right now, earning like, I don’t know, half a percent, if even that, so… [laughs] So don’t look at me right now as being one who is the savvy investor, who is doing what he preaches. I am not doing what I preach.
Joe Fairless: Yeah, but you did it for how many years?
Greg Hague: Oh, I did it. Going back many years, I did it for years and years. I found it to be fun. That was back when I had time to do it, and this requires a little bit more involvement than just like a passive investment. So I really enjoyed it, but I just haven’t had time to do it recently. I don’t do what I preach, unfortunately…
Joe Fairless: Well, but you did, and that’s what’s most important. But approximately, how many of those did you see through from start to finish? Just roughly. Two? Twenty? Three hundred? Just a rough estimate.
Greg Hague: I just couldn’t — like, back in Cincinnati, when I started in Cincinnati, I remember we started doing it with townhomes, then my dad developed subdivisions and we actually did it with his firm, Hague Realtors, in Cincinnati… He would develop subdivisions of 20, 30, 40 homes, and a portion of those we would do lease purchases on… So just a lot.
Joe Fairless: Let’s say 100, just for — or 200. I don’t know what a lot is.
Greg Hague: I don’t either, because remember, this goes back — I started doing this back in the 1970’s with my father, so…
Joe Fairless: Got it. Alright, then I have a question that ties into this, that’s why I was trying to get a rough number. Can we conservatively assume that you did at least 100?
Greg Hague: If you look at the ones that I have started doing back in Cincinnati with my father and his [unintelligible [00:17:16].04] and all that, I would say that we could assume that it was 100.
Joe Fairless: Okay, cool.
Greg Hague: But again, this goes way back, just FYI.
Joe Fairless: That’s fine, that’s fine. So my question is, now that you aren’t actively doing it, money isn’t coming into your bank account from that strategy, so my question is if you could now choose between the approach you took with those 100+ properties, or have 10% of those properties, so approximately 10 homes in your portfolio, making you money, that have since had the principal paid down, which would you choose?
Greg Hague: I’m more of an active investor. I liked to be hands-on. How can I say this the right way…? I like action and I like involvement; I like to play poker. So having a home that would sit – I presume this is what you’re saying… We’d kept ten of those homes back from Cincinnati and they were all paid off by now, which they certainly would be, and I’d been receiving rent, would I prefer that? The answer is no, but that doesn’t mean it wouldn’t have been a smart move. It’s just not my personality. I like to be hands-on, I like to work my money. So it wouldn’t have been that it wouldn’t have been smart, it’s just not me. That’s the best way I know how to answer that.
Joe Fairless: Cool. Fair enough. Going back to the website you’re launching – what’s the URL? If you could share that, so that we know where to go to check that out.
Greg Hague: Yes, we’ll unveil the URL on February 17th at the website launch party at my home, and if you would like to see what that party’s about, go to websitelaunchparty.com. But if you’d like to see what the website is about, you could go to StopZillow.com, or same place you’ll go if you go to plantosaverealestate.com. That’s where you’ll see our crowdfunding campaign, you’ll see my videos up there, and you’ll see what this is really all about. And the whole idea – if I could just talk about it for a minute, would that be okay?
Joe Fairless: Sure, please.
Greg Hague: It’s that I believe it doesn’t make sense that we as a profession, the real estate profession – a profession that sells homes – doesn’t have its own website to market those homes. We’re dependent on third-party websites like Zillow and like Trulia, and like even Realtor.com. The NAR – I presume your listeners know, maybe they don’t – National Association of Realtors sold Realtor.com a few years ago to Rupert Murdoch for 950 million dollars. We do not even own our own branded website, and it’s just insane. No other industry that sells a product doesn’t have its own website to market that product, and yet we as a profession don’t. We are handcuffed into using a website like Zillow, and if you go into Zillow, you’ll see that they do things that at least from a realtor’s perspective we find objectionable – at least I do, and a lot of realtors I know do. For example, a home that you would buy for investment and then you go to sell and you list with a realtor, and let’s say you’re selling it for $450,000, Zillow may well post a Zestimate value right below your asking price that’s $50,000 below your asking price. Well, you’re up the creek; no buyer’s gonna pay your asking price when they see that Zestimate, and those Zestimates have been proven to be inaccurate.
I’m not gonna make this about that, other than to say that that is the project, to launch this website, and the goal is over the next few years to turn it into the first-ever realtor-owned, realtor-managed website, an official website for the real estate profession, and you can read about it and watch my videos; they’re at StopZillow.com. If you believe in the mission and you wanna contribute, you can contribute as little as $25 and you’ll get access to our smartphone app, website, how to use this, on February 19th (that’s a Monday). You’ll get access and become one of our supporters and also one of the first in the country to demo it.
Joe Fairless: You do like to be where the action is, don’t you?
Greg Hague: Yes, I do. That’s what I meant. The idea of buying a home and renting it and just letting the mortgage pay down over time – it’s a great concept, and it’s so right for so many people, it just ain’t me.
Joe Fairless: Fair enough, fair enough. What is your best real estate investing advice ever?
Greg Hague: I think this is not going to be a watershed, I’m sure your listeners have heard it many times, but the money is made when you buy, not when you sell.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Greg Hague: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: What’s the best ever book you’ve read?
Greg Hague: Best ever book I read was How To Win Friends And Influence People by Dale Carnegie, by far.
Joe Fairless: Best ever deal you’ve done?
Greg Hague: Best ever deal I did was I helped a friend of mine sell a casino in Las Vegas. That was totally fun and made a lot of money.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Greg Hague: A mistake I’ve made on a transaction… Gosh, there’s so many. I’ll just give you one of the minor ones – I bought many people refrigerators and washer and dryers because back in the old days (I’ve gotten better) I forgot to exclude or include, or whatever… [laughter] So I’ve written a lot of checks for refrigerators and washer and dryers, how’s that?
Joe Fairless: Best ever way you like to give back?
Greg Hague: The best ever way I like to give back is I believe that in this country it is just so wrong that everybody doesn’t have some form of a home, some form of shelter, so for many years I have been a supporter of the homeless with Phoenix Rescue Mission, and now with my wife we’re getting involved with an organization called Homeward Bound. I believe that, because I’ve grown in real estate, it’d be appropriate for me to try to help everybody have a roof over their head.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Greg Hague: They can reach me at Greg@realestatemavericks.com, or call my office at 480-998-9900.
Joe Fairless: Greg, I’m grateful you were on the show, talking to us about your newest venture and project that you have. It’s very impressive that you’ve got about 300k worth of crowdfunding already pledged towards it, as well as your singular focus when you were investing on the lease purchase program, talking to us about how to do it, benefits, pros, cons. Also, you and I talked about more of a long-term play and what type of personality and approach this would be best for.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Greg Hague: Thank you, Joe. My pleasure.