John is the co-founder of Investor Agent where they have done 2,800 rentals and flips. He started at 19 in the military by picking up real estate courses where he could barely understand the terminology but through perseverance and hard work he now manages over 470 cash flow rentals.
John Chin Real Estate Background:
- John is the co-founder of Investor Agent
- You’ve done 2,800 rentals and flip properties (mostly short sales, foreclosures, and REOs)
- Closed over $260 Million residential investments
- Currently manage over 470 cash flow rentals
- Based in Orlando, FL
- Say hi to him at: www.investoragent.com
- Best Ever Book: Power vs Force
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Best Ever Tweet:
“Start working with investors, one investor client will change the trajectory of your future” – John Chin
Theo Hicks: Hello, Best Ever listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today we’ll be speaking with John Chin.
John, how are you doing today?
John Chin: I’m doing good, man. Thanks for having me.
Theo Hicks: Absolutely. Thanks for joining us. Looking forward to our conversation. A little bit about John. He’s the co-founder of Investor Agent. They’ve done 2,800 rentals and flip properties, mostly distressed residential properties. They’ve closed over $260 million worth of residential investment and they currently manage over 470 cash flowing rentals. He is based in Orlando, Florida, and his website is www.investoragent.com.
So John, do you mind telling us some more about your background and what you’re focused on today?
John Chin: Yeah, man. So we have a traditional brokerage background. I’ve been doing traditional residential sales for a long time. I started when I was 19 years old while I was in the military, serving in the Air Force, didn’t like turning wrenches that much, didn’t see myself doing that forever… Although it was a good experience, I wanted to get into real estate investing.
So I think a lot of us — to kind of date me a little bit… A lot of the listeners know Carleton Sheets and picked up that ‘No Money Down’ course; it was when it was like a three-inch thick package of audio cassette tapes. And I couldn’t get past the first chapter, because I didn’t know the language as a 19-year-old; I’d never bought or sold the house. So I got my real estate license to learn the course. And then started accidentally selling houses to my military friends.
Then had kind of a fortuitous pivotal moment when I sold a house to an investor who had multiple rental properties. And he kind of took me under his wing and that kind of changed the trajectory of my career in real estate, which is now about 25 years. And I just focused at that point forward on residential real estate properties.
So you fast-forward to today and now we work with licensed agents who want to get into the residential investment space, so that they can do more closings with clients who want to buy rental properties or flips and that sort of thing.
Theo Hicks: So you said that you want to help them work with investors, or you want to help them invest themselves?
John Chin: We helped them to work with investors first, and as a byproduct of working with investor clients and being in that space — it’s kind of like being in the commercial world, but in a residential space… Then as a byproduct of that, you pick up key relationships with investors who then you do JVs with, and you start investing yourself; capital doesn’t become an issue anymore, you have unlimited funding, essentially, with your deals…
And so licensed agents, typically who have an interest in real estate investing will, in our opinion, do it the wrong way. So they start trying to learn how to invest in properties, do coaching programs… You could spend 20 $40,000 pretty easily trying to learn how to invest in real estate and not ever make a penny.
Well, our view is, if you’re a licensed agent, you have access to the MLS, and we teach you how to hack the MLS to find deals; then you work with investors first. You learn as you go, you’re making money as you learn, and then you keep the cherries along the way. So it’s like joining the military, you get to make money while you learn a trade, and then you get out, as opposed to going to college, where you’re paying to learn, and then you’re trying to make money after you graduate. It’s a little bit of a paradigm shift.
Theo Hicks: Yeah. I was actually talking to someone earlier this week who has a corporate job. She caught the real estate bug, she wants to get out of that job, and her thought is to become an agent, start up being an agent in order to generate income from selling homes in order to make enough money so she can quit her job, and then ultimately start investing. It sounds like you work with people who are already agents, but would you recommend that if someone is in that position, if someone wants to get started in real estate and they have no experience whatsoever, they’re working a job and they want to get their feet wet – do you recommend their first step being getting their license?
John Chin: Yeah, 100%. It’s funny, there’s two schools of thought about that. A lot of estate investors don’t like to get their license, because they like to operate in what I call the gray, where they don’t want to be liable or be in front of a judge saying that, “Oh, you’re taking advantage of the public, you’re a licensed professional,” and they don’t want to deal with the disclosures, and all that kind of stuff. But our school of thought around that is that if you’re a licensed agent, you have that kind of educational base and all the tools to access inventory, like the MLS and you have a broker to guide you and keep everything compliant… That’s, in our perception, a good foundation to start from.
And then if you’re doing investing the right way anyway, then you shouldn’t be afraid of disclosures and investing in real estate as a professional. So that’s our take on that. And if you start that way, with the intention of doing residential sales, but then focus on working with investor clients and—there are cash investors right now that are closing multiple transactions a month on almost every MLS in the whole country. So if you find out how to identify those people, why not work with less clients, do more transactions, not have to deal with buyers and sellers who have finance contingencies and a lot of the hiccups that you deal with emotional buyers and sellers? …that by the way, they’re only purchasing every 7 to 15 years, right? When you think about somebody who’s buying or selling a home.
And if you’re a licensed agent, you’re lucky if you get both of those transactions, the buy and the sale. So why not work with cash investors who are buying a lot of times sight unseen, that don’t have any finance contingencies and they’re closing multiple transactions a month? So we try to accelerate somebody’s success and their money-making opportunity by working with investors, as opposed to your traditional retail client is what we call that.
Theo Hicks: Sure. So you said two things there. One, was identifying the cash buyers, and then two was – you said this earlier, I think, about hacking the MLS. Let’s talk about the ID and the cash buyers first. I kind of got two questions there, answer both or whatever… But the first one is, from an agent’s perspective, how am I finding these types of cash buyers? And obviously, that’s going to apply to wholesalers or anyone who needs to find cash buyers in general.
John Chin: Yeah. Yeah.
Theo Hicks: But then secondly, kind of flipping it around. If I’m an investor and I want to work with an investor-friendly agent, what types of things are agents looking for in their ideal investor client? Will they take anyone who says, “Hey, I want to invest”, or are they looking for a specific person with a specific background and specific ability before they begin to work with them and give them access to their hacked deals?
John Chin: It’s interesting… I think the second question is a lot easier and faster to answer. And the answer there is to anybody who’s been on floor time as a licensed agent who got a call from a “investor”, you want to run the other direction, because most of them are tire kickers. They have you on this wild goose chase and you’re sending them MLS listings and you have no idea, number one, what to look for. You don’t know how to qualify them. But if you know how to qualify an investor right – it’s basically just two things. They have a track record and a history of closing on deals. If they have a track record and history – that’s the first thing we’re asking them on the phone – and they have realistic criteria on what they’re looking for, then yeah, they’re worth working with. But we’d rather work with someone we don’t have to qualify.
That comes back to your first question, is how do you identify these cash investors that are buying multiple properties? Well, on any MLS search, you can do a search for cash transactions. If you know how to on the MLS pull up all the cash transactions within a certain window – we like to go back like 60 days, 90 days – and then you then append that information with absentee owners, so where the mailing address is different than the property address, and you see someone doing that three and four times the same party, then you know they’re an active cash investor in most cases. Unless you’re in a place like the mountains of Tennessee or in Orlando, for example, or maybe Vegas… Chances are those aren’t vacation rentals. Those are probably long-term rentals and they’re building a portfolio. So then it’s just a matter of contacting those folks, finding out what their criteria is.
And here’s the thing. The number one turn-off with investor clients for licensed real estate agents is that they have unrealistic expectations and they want huge discounts, which as you know, today’s competitive environment seller’s climate, you’re not going to find those kinds of discounts.
So what’s nice about working with people who have tons of transactions and a history of cash deals on the MLS is you’re talking about inventory that’s on the MLS. You don’t have to be a specialist at finding off-market deals, which my partner Ron and I have a lot of experience with that.
Ron’s background is wholesaling, where him and his group – they were closing 50 to 60 transactions per month wholesaling, right? So that’s his background. You complement that with my background, taking possession of properties and full-cycle flipping them, and funding them and so forth… All of the stuff that we’ve done in the past has been a mix of off-market and on-market MLS deals. But when we’re working with licensed agents, we’re helping them utilize a tool that they already pay for, the MLS, to find those investors and find the deals already buying that’s on the MLS.
Theo Hicks: So let’s transition into that… You told me how to find the investors… How do I find the deals now on the MLS?
John Chin: It’s easy. Literally, if you do the first part – we call it our investor launchpad sequence. Picture that a rocket ship is taking off. You’re newly licensed and you want to work with investors, you don’t know where to start. I’d tell you to start by looking at the MLS, doing the search I just described; that surfaces the active cash investors that are buying multiple properties. Well, by virtue of those search results, you see the kind of properties they’re buying. So if you contact those investors and find out that, okay, these are the addresses they bought, that translates usually to a yield requirement they have.
So if you look at what they paid for the properties, and you can easily research what they rent for, those are the same assumptions that these guys are making to get to their yield requirement… And you know that, okay, they’re looking for at 12% gross yield, for example. That’s kind of a rule of thumb to start your search.
There’s a misconception that a lot of agents have – it’s that to work with these private equity firms and companies that are doing these transactions, you have to be very sophisticated with analysis. You don’t. Because they have all their own people that crunch the numbers, right? All you have to do is find the addresses that meets at most a gross yield, which to you and me, we don’t think a term of gross yield; we think cap rate or net income, right? Or cash on cash return if we’re doing a leveraged purchase and financing. But these guys think in terms of, “Look, the only burn I’m going to put on that agent is you just research a realistic [unintelligible [00:13:14].10] number and an address and a price that meets a certain rent multiplier. Send that to us. We’ll do number crunching and get granular with it and then we’ll give you a yes or no.
Theo Hicks: So I’m just trying to make sure I’m getting this right. So I search all these cash buyers, I find the types of properties that they’re buying, and then from that, I know what yield they want. So what’s the next step from there? Going through the MLS and looking for properties that match that criteria? Is that what you’re saying?
John Chin: Exactly. So they’ll have some input process or a team that will take the addresses that you want to send them and then they’ll do further analysis on them. And then they’ll tell you yes or no, and then you represent them on the transaction on that buy.
It’s so overly simple that it’s mind-boggling that agents aren’t doing more of this, right? So if you don’t know what their yield requirement is, you will literally just put an address in, and then you’ll have some sense of what they’re looking for, based on what they’ll tell you their gross yield requirement is… And most institutional investors today are going to be anywhere between the 12%, maybe 15% gross, and then they’ll have some geographic criteria they’ll have on where they won’t buy. Usually, it’s exclusionary. They won’t tell you where they will, but they’ll tell you where they won’t.
So based on that geographic criteria, usually they’ll tell you their requirements on the specs of the house; maybe minimum three bedroom, they’ll have a vintage or a year built requirement. They won’t go back more than 15 years. They won’t do heavy rehabs maybe. They’ll have their exclusionary geographic criteria, but they’ll tell you what that criteria is. And because there are so few agents who know how to work with them, for you to be able to approach somebody like that and say, “Look, I’m a licensed agent. I want to work with you. I can help you find these properties,” they’ll send you their template or their “buy box”.
Theo Hicks: So essentially how that works – you search MLS, cash transactions, absentee owner, multiple transactions. I call them, say, “I’m an agent,” say, “I want to work with you, what’s your criteria?” They send me their criteria and then I search the MLS, I find a list of all the properties that I think meet their criteria, send them an Excel spreadsheet and then it kind of goes from there?
John Chin: Yeah, they’ll usually have one point of contact that you’re working with, somebody on the ground, and sometimes it’s even another agent; or maybe it’s somebody internal, at their ivory tower. And they’re never, by the way, local. Maybe if you live in Phoenix, you’ll be working with them locally or something like that. But usually, there’s five investors that have probably purchased 30% of — we’re in Central Florida, right? So in central Florida MLS, we have about 30,000 property listings; of all the cash transactions, they’re probably purchasing between 25 and 30 percent of all these cash transactions, five different buyers. And they all operate very similarly to what we’re describing right now.
Theo Hicks: And then at what point as an agent — how long they do this for until I start to transition into doing my own deals?
John Chin: If you are into wholesaling — and I have to kind of switch hats for a second here. I’m so into working with licensed agents who are working on the MLS and they have to conform with the brokers requirements and that kind of stuff… But if I’m starting with an investor’s perspective, somebody who’s potentially wholesaling deals and they know that game, then a lot of times it’s a matter of you just contracting the properties yourself. And a lot of times, these buyers – they don’t care how they get them, they just want to get their yield requirements. So if you have to do an assignment or a double closing, they’re fine with that, because they’re paying cash, there’s no underwriting requirements… It’s a pretty easy game. You just have to make sure that their rehab numbers aren’t out of this world and they meet what you expect them to look like.
So if you’re a wholesaler, to answer your question, if you want to get into doing your own deals, what ends up happening is you come across in this exercise of serving that investor and making commission’s on them, you start coming across cherries that you end up wanting to keep yourself. What also will surface is your mid-tier investor clients and your Mom-and-Pop investors who also want to play that game, but not to that scale, that you’ll end up serving and finding deals for as well.
So in our experience, when you’re working with those Mom-and-Pops and those mid-tier folks, they end up becoming JV partners on deals… Our own flips – we never fund or put any money into our own flips. We never even do hard money loans. By virtue of working with these investors that trust us, and they know we have contractors and property management operations in place, and we have all the mechanisms on the assembly line to take that residential property and to monetize it as a flip or rental property, they want to fund our deals.
So we get 100% funding, we typically offer these investors—because think about it, you’re a cash buyer and you’re looking to build a rental portfolio. And let’s say today, a good cap rate might be 7% or 8%, if you’re in a decent area. Do I want to do that and make 7% or 8% on my cash at the end of the year, or can I give Theo, an investor agent, some of my cash for him to fund a flip? Maybe be exposed to 80% of the ARV so I’m pretty safe, I have some margin of safety there. But I give you 100% funding and you give me in return — our typical term is about 8% interest preferred return on my money, and maybe a 15% clip on the profit beyond that. So it’s kind of like a CD with a lottery ticket attached to it as a little bonus, right? Profit kicker.
And then now if you make me 10% in a six-month span, and you can do that for me twice in a year, I’m at 20% return on my cash. Why won’t I just keep doing that and be completely liquid after every transaction? So it’s very easy then for you to graduate from being an investor agent – good credit, bad credit, no money, maybe you have some money, but to convert a lot of these investors into private money.
Theo Hicks: Alright, John, what is your best real estate investing advice ever?
John Chin: It’s easy. One investor client will change the trajectory of your future because of what they teach you, the access to resources and how they shorten your learning curve. So if you’re working with investors, you make friends, and one or two of those friends are going to become your mentor. So just start working with investor clients. Don’t worry, everything else will take care of itself.
Theo Hicks: Alright, John, are you ready for the best ever lightning round?
John Chin: Yeah, let’s do it.
Theo Hicks: Alright.
Theo Hicks: Okay, John, what is the best ever book you’ve recently read?
John Chin: That’s easy. David Hawkins, he wrote the book Power vs. Force. The more recent book is The Pathway of Surrender: Letting Go, by David Hawkins. It could be the most important book you could ever read and the only book you ever need.
Theo Hicks: If your business were to collapse today, what would you do next?
John Chin: I’d throw a dart at the map, and as long as I had a phone and a laptop computer, I’d probably go out there, start finding some cash buyers and then start finding deals for them and reverse wholesale.
Theo Hicks: Is there a time that you or a client you work with lost money on a deal? How much did they lose and what lesson did you learn?
John Chin: Many times, actually, including myself. The most recent one I’m thinking of is about $80,000 on one flip that we’re still contending with right now, because after the transfer of the title – because we purchased the property subject to – the IRS filed a tax lien even though there wasn’t one in place and we’re still contending with that, with an IRS that’s shut down right now, in some of the departments. So anyway, we do it all the time.
And the lesson you learn from it is, in every single case, the common denominator on losing money on a flip is because I put too much trust in somebody and never validated. And I didn’t control it and micromanage that deal with somebody maybe that I haven’t done business with before. Almost every case, whether it’s contractors who messed up, competence or character-wise, or it’s somebody who was overseeing a rehab… It always comes down to someone who in many cases are well-intended, but incompetent.
Theo Hicks: On the flip side, what about the best ever deal you’ve done, either monetarily or some other reason why it was the best deal?
John Chin: The best deal I’ve ever done was probably — we love lease option sandwiches, just controlling an asset and not having to deal with the rehab; we do quite a few of those. None of them stand out. One of them where we made about $80,000 when you combine the option money that we got up front, the spread and the cash flow for the year and a half we had it, and then the amount of money we made on the sale price between our buy and the sale… That one comes to mind. It wasn’t the most money we made on a deal, but it was so easy. So those are the ones that kind of stand out.
Theo Hicks: What is the best ever way you like to give back?
John Chin: Well, Ron and I, we both are coaches, youth coaches, that is. I coach the lacrosse, ron coaches football and soccer… And both have young kids. And number two is we kind of take our coaching to a level that [unintelligible [00:22:16].26] just the games and things like that. So we kind of serve as mentors of the kids that we coach and love.
Theo Hicks: And then lastly, what’s the best ever place to reach you?
John Chin: The easiest place to find us is https://www.investoragent.com/ because we’re offering credentials, the content and the tools and the community to support to a licensed agent who wants to get their foot in the investment world.
Theo Hicks: John, I really appreciate you coming on the show today and walking us through this very simple but very effective step by step process for new agents to not only grow their real estate agent business, but also ultimately transition into doing deals themselves.
And essentially, the process is that you go to the MLS, you look up the cash transactions with an absentee owner, so they don’t live at the property they bought, and they’ve done multiple other transactions in a month or in a year. And then you reach out to that person, because you assume that they’re an investor, confirm they’re an investor, determine what their criteria is, and then go through the MLS and find deals that meet their criteria, send them the address, send them the price, and send them the rent you’ve done, and they’ll take it from there.
And if you do this process enough, you’ll start to build up relationships with people, you’ll start to learn what a good deal is, and then eventually you can start to cherry-pick those deals yourself or start to partner with people, start to have people invest the capital into your deals, assuming you’ve kind of got the relationships with the contractors and the lenders and the property managers. And it is that simply, you said.
And you said that if your business were to collapse today, you would just throw a dart at a place on the map and just do that there.
John Chin: Pretty much. I would say too another way of saying what you just said – because that was a very good summary – is focus on the who, the investors. The what and the how – that comes as a by-product of just serving investors. It’s very simple.
Theo Hicks: And then your best ever advice was to, as you mentioned, focus on the client. And that one client, one mentor can change the trajectory of your future. Like for you, that person can be your one mentor, two mentors, three mentors that guide you towards whatever your investing goals are.
So thanks, John, for joining us and sharing this fantastic strategy with us. I’ll definitely tell the person I talked to listen to this episode. Perfect timing. This is exactly what she was looking for. So I can just say, “Hey, listen to John’s episode.” And anyone else who wants to do the same thing, who wants to get started in real estate, can just listen to John’s episode.
So thanks again, John, for joining us. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.
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