Our guest is doing many types of deals, but he does them with a partner makes up for his weaknesses. If you have any weaknesses, which I'm sure you do, you need someone there to compensate for your loss and leverage what you can't or shouldn't do, get a partner!
Best Ever Tweet:
Travis Daggett Real Estate Background:
- Owner at CornerstonePropsCo, a Premiere Real Estate Redevelopment & Renovation Company
- Full-time real estate investor for five years
- Made 5 figures on his first wholesale deal..correction: 4 figures...you'll hear about it in the interview ;)
- Married 19 years and has three amazing kids
- Based in Eugene, Oregon
- Best Ever Book: Visioneering
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Joe Fairless: Best Ever listeners, 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 fluff.
With us today, Travis Daggett. How are you doing, Travis?
Travis Daggett: Doing great, thanks Joe!
Joe Fairless: Nice to have you on the show, my friend. Travis is the owner at CornerstonePropsCo, a premier real estate redevelopment and renovation company. He's been a full-time real estate investor for five years. He made five figures on his first wholesale deal. He's married 19 years and has three amazing kids, and he's based in Eugene, Oregon. With that being said, Travis, do you wanna give the best ever listeners a little bit more about your background and your focus?
Travis Daggett: Yes, sure. Well, the five figures doesn't really sound that impressive... However, I did start with literally no money, so that was a deal where I think I had an earnest money deposit in the deal, and I netted $7,000+. So it was a little better... That could be a $1,000, that's no big deal, but for my first deal, it was alright.
Joe Fairless: Well, five figures would be $10,000+, because that would be five numbers.
Travis Daggett: Yeah, see...? This is the truth, that you don't have to be a genius to be a real estate investor. [laughter] There's a lot smarter people doing all kinds of things, but they're not necessarily making more money, and sometimes they're too smart for their own good.
Joe Fairless: [laughs] Alright, so you made 7,000 on your first... Let's start there, how about that? Let's start with your first wholesale deal. You made $7,000 on it. Can you tell us the story about that a little bit more?
Travis Daggett: Before this I was a sales trainer for an insurance company, and I was traveling all over... They've laid off about a quarter of the staff, so that was the blessing in disguise. I just started learning everything I could. I had a couple of rentals before, and that was about the extent of my real estate investing experience. I started learning about wholesaling, specifically HUD properties. This was 2011 when there were a lot of HUDs, and there was just a little loophole where you could make bids every single day on HUD properties, and you really could do it yourself. You could just find an agent that was sympathetic, I guess, and get their login information, essentially, work with them as their assistant if you needed to be an unlicensed assistant, and make bids every single day... So that's what I did.
I got a property under contract, and then I found the buyer and did a back-to-back closing, because the HUD won't allow assignments. So I bought it for seven and sold it for seventeen. All I had was the earnest money deposit out of pocket, which I think was $500; I had some closing costs, and type of a thing, so I think I netted over seven.
Joe Fairless: Alright, that was your first wholesale deal. Catch us up to speed, from then until what you're doing now.
Travis Daggett: Well, 2012 was great, because there were a lot of HUDs, and I started thinking (mistakenly) that I was in the real estate investing business. At that point I really wasn't in the real estate investing business, I was more in a tech business and real light on the real estate investing. That lead me to think I knew more than I knew, and started buying at the auction... Which, of course, was okay and I did alright, but then I thought I could get into rehabbing without really understanding it.
2013 is when I bought a property or two wrong - when I say "bought wrong", I made the first and maybe the most deadly mistake in real estate investing, which is just buying for too much. It's really hard or impossible to overcome that mistake.
So I made some mistakes along the way, and then HUD dried up, as a lot of people probably know. Auction properties dried up - by that I mean the supply went down, competition went up, so I needed to learn to source my own deals directly from sellers. I started doing that in 2014, and it's been a rollercoaster, both results-wise, and when you're self-employed, it's an emotional rollercoaster too, but I've been really fortunate to partner with somebody that knows more than me and learned from him for the past couple of years.
We haven't bought off the MLS since 2013, I think, and we sourced our own deals for the last two or three years.
Joe Fairless: And what type of volume are you doing on a monthly or annual basis?
Travis Daggett: Nothing crazy... I used to think that was the goal, to do more deals, but now I'd rather do less deals that are more profitable. Probably the average is a deal a month, but we did have one deal that was over six figures, and we had a wholesale deal that was almost $50,000, so we've been able to get some more profitable deals, and focus on that instead of volume.
Joe Fairless: And since you are selective with the properties that you end up working on, what is your criteria that you look at for a property to pass the test?
Travis Daggett: Well, we have two main targets or lists that we're going after, because most of our deals come from direct mail... So the first one is properties where we've actually driven through neighborhoods, seen the property, wrote down the address, looked up the owner information, sent him a letter... That's really the most valuable and valuable list that you can have - at least we believe - because we don't have to guess at whether the property is a property that we wanna buy. When we've marketed to the absentee owner list in the past, we got people calling, they have a move-in ready house, and really that's not good for them, not good for us. There's really no way for us to create value or margin in a transaction like that, because we're not real estate agents looking for listings.
So the first target is residential properties, mostly single-family, and we just call it our "driving for dollars" or our neighborhood list. The second is foreclosures, when the bank has filed either a notice of default for non-judicial foreclosure, or a lis pendens for a judicial foreclosure, because in Oregon we have both.
We've gotten a number of deals that way, targeting that list. That's a lot more labor-intensive for each transaction.
Joe Fairless: Will you walk us through the process for how that works, and your role, and what data resources you need to have access to?
Travis Daggett: When I started in 2011 on HUD properties, again, it was real admin-heavy, it was really more of a tech business, and thankfully that's an area where I'm stronger... So I started using virtual assistants, and I couldn't have done what I did then without them, and I couldn't do it now. We use virtual assistants to do a lot of the scrubbing on our lists. We'll go out and drive through a neighborhood... Let's say we take a day and we come up with a few hundred addresses, and then the VAs - they're usually overseas, they're in India or the Philippines - during the night (over here), they'll use Property Radar (or whatever other site we need for that county) to find the owner's names and their mailing address, because they may be different, and that completes our list.
With the foreclosure properties, we just get those from the title company, that's free. There's scrubbing involved there though as far as prioritizing the properties that we're gonna go after more heavily in the beginning. Equity, for sure, a property with a good interest rate in case we wanna assume the mortgage or purchase it subject to the existing mortgage, that type of thing.
Joe Fairless: Will you tell us about the last deal you did? Give us the numbers and tell us which one of these paths allowed you to find it.
Travis Daggett: Yeah, sure. The final numbers aren't in on that, but that's fine, we can go through the process pretty well. The property that was on the foreclosure list, it was non-judicial foreclosure. We always have to have a cooperative seller, of course, or a cooperative homeowner. We wanna help them, they have to want the help, and it's really a win for the bank too, if you understand negotiating for the bank. They're not in the business of property restoration, or property management, or really anything to do with properties, so it's a win for them.
So there were two loans on the property, we went through a number of rounds at the bank of negotiating, and we were able to postpone the sale a couple times, which helps us. In this case, we actually worked successful in negotiating a discount with the first lender, but we knew even if we purchased it for the amount of the first mortgage and the second it'd still be a deal, so we went ahead and paid off the first - they were the ones foreclosing - and then we continued to negotiate with the second, even though they really had no reason to negotiate with us... But we thought we'd just give it a shot, and ended up getting it for the amounts in the first and the second. But it was still a deal, especially when you consider the market here, where it's less than two months of inventory, so it's very competitive.
Prices are going up -- we're not buying for speculation, but were all in on our purchase I think at 140, and as it sat, it's probably worth in the upper hundred, and then with a renovation of probably 30,000 (nothing major), it'd be worth in the low two-hundreds, and we'll probably rent it out for 1,500/month, I would guess.
Our aim high is definitely a 1% rent-to-cost ratio. In that Eugene area we also have appreciation, so we'll go anywhere from 0.75 to 0.8%, up to 1% rent-to-cost ratio.
Joe Fairless: Is your goal to buy and hold these properties?
Travis Daggett: Right, so my partner has a property management company, and that's our partnership: I find the properties, so I'm in charge of the marketing and finding the deals, and then at that point he really takes over as far as the property management side. That's what we've done on all but one; we've wholesaled one, but everything in the last couple of years, we've held on to through this property management company.
Joe Fairless: And do you just split the costs 50/50?
Travis Daggett: Well, cost of the marketing -- again, I was really fortunate to find a guy that really knows this stuff and he's honest. We met at a real estate investing REIA group (Real Estate Investors Association). So yeah, we basically split the costs upfront for the marketing, and then since we're not cashing out the property so to speak, we just did an appraisal on the property, because usually we're gonna finance out of it with a bank loan... So now we have an appraisal, we know what we're all into it, so we have our equity in the property.
At that point, I can either say, "Well, okay, I'll take the equity as a payout right now" or I can say "Well, I'll stay in the property and we'll just split the cash flow."
Joe Fairless: Oh, okay. Alright. Either one of you have the flexibility to cash out your equity at closing and be done with that property, and the other person holds on to it, or you both have ownership and enjoy the cash flow and appreciation...
Travis Daggett: Yeah. I mean, it's really more of his choice than mine. I'm fine with that, of course, because he's got the property management company. But it's just one of those -- I'm sure people have been in bad partnerships (and good ones) and it's probably pretty rare (I'm thankful for that) that there hasn't been that tension when we feel like we're on opposite sides of the table. For the most part, we feel like we're on the same side of the table; we're not negotiating against each other, so it's been a good situation.
Joe Fairless: Yeah, it's refreshing when you have a business partner like that. Just for point of clarification, you said it's really up to him on that... I don't understand that point. Can you elaborate?
Travis Daggett: We have different ways of looking at who controls a deal, and whose it is, so to speak, who owns it. So since I'm finding most of the deals, I could say "Okay, these are my deals." However, early on, just because of the nature of our partnership and relationship, we both just agreed all the deals we just throw into the pot.
We were in a situation where I was saying, "Okay, here's the deal. How much do you want for it?" It's a traditional wholesaler type of attitude. I said, "Here's the deal, let's see what we can do with it?" A part of it is he has access to a lot more capital than I do (at better rates, at least), so he's funding the deals, so I'm happy to give him a lot of the decision-making that way, too.
Joe Fairless: That makes sense.
Travis Daggett: Yeah, we're both in agreement. It's not like I'm saying, "Hey, we should flip this thing because we're gonna make six figures just after doing floor and paint" and he's saying "No, I wanna hold to this." Most of them it's pretty clear when we buy it it's gonna be a rental.
For example, we purchased one for a few hundred thousand in Eugene, so that one we know it's gonna be a flip when we're done with the rehab.
Joe Fairless: Okay. The point I had missed was that he was financing them and you were finding them. Once you said that, it made a lot of sense.
If you partner were to move away - for whatever reason - and you had to find a new partner, how would you qualify that new partner so that you would attempt to have the same caliber or partner that you have now?
Travis Daggett: Tough question. In partnerships in business, and I'm sure just generally in life, it's usually (from my experience) more of the intangibles or the character issues that damage partnerships or damage businesses, as opposed to people's aptitudes. I think we all know really smart, skilled people that can self-destruct and destroy partnerships.
In the case of my partner, I was able to thankfully observe him for a couple of years just through the REIA and just through some acquaintances, and watching him and his business, and seeing that he was someone that did what they said they were gonna do. He had a track record of success in partnering with other people... Without that knowledge, it'd be really tough to find a partner or to choose a partner.
I'd have to start with somebody that plays to my weaknesses... Kind of like a marriage - if you have the same strengths and weaknesses, that can be a little bit of a challenge. So it should be somebody that is strong where I'm weak, and maybe where they're weak, I'm strong. In our partnership now, I'm certainly not strong in negotiating and funding. I've gotten pretty strong in admin and stronger in marketing... So I'd say somebody that's strong in the funding side and the construction side, that's who I'd look for.
Joe Fairless: What is your best real estate investing advice ever?
Travis Daggett: I kind of alluded to it earlier... I'd say don't be confused about what business you're in and what your strengths actually are, because I think pride and arrogance and blindness in that area can really destroy you.
Joe Fairless: Now, are you ready for the Best Ever Lightning Round?
Travis Daggett: I'm ready!
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Break: [00:18:26.14] to [00:19:07.24]
Joe Fairless: Best ever book you've read?
Travis Daggett: Visioneering, by Andy Stanley.
Joe Fairless: Best ever deal you've done.
Travis Daggett: A deal in Eugene... It was a short sale, over six figures in profit.
Joe Fairless: Now, is that six figures, is that seven, or is that five or four or three? I have to ask you now a second time.
Travis Daggett: I got it straight now, this is tax season. [laughter] I gotta nail it.
Joe Fairless: Best ever way you like to give back?
Travis Daggett: I think it's just the lifestyle, it's really plan. All of us can give emotionally when we see the kid on TV with the belly sticking out, but I think giving is really a lifestyle, so it's planned. We plan that we're gonna give a certain amount, we're not just surprised at the end of the year when we do our taxes.
Joe Fairless: What's the biggest mistake you've made on a deal?
Travis Daggett: Well, I think I talked about this one earlier, but I'll relive that painful memory again... Bought at auction, so of course, it's done, paid cash; trusted a partner who unintentionally -- he just was outside of his area of expertise as well... Then we made it worse by over-rehabbing it by about double, then we made it worse still by selling with seller financing -- not that that's a bad strategy in general, but just delaying our misery... And then ended up taking the loss I think two years after we bought it. We should have just swallowed the poison a couple of years earlier and taken a loss.
Joe Fairless: Tell us about the six-figure profit that you made. Tell us the numbers on that one.
Travis Daggett: Really desirable area near [unintelligible 00:20:41.28]. It took over a year to finish it, to close on it. When we first shot - short sale, direct mail marketing, they called us... As soon as we looked at it, even online, looked at comps and stuff, we knew that it was a great area property, we really wanted to have it. Even before we looked at it, we said "If we can get this anywhere near 300,000, it's a deal." So we met with the sellers, they were very cooperative - he was actually a patents attorney, so he knew a little bit about the legal process. It took a long time, a lot of handholding - I don't mean that in a condescending way - just walking him through the process and negotiating with the banks, meeting the VPO agent there, dealing with all kinds of liens that popped up with credit cards, and just going through that whole process.
We ended up buying it for 244,000 I think, so just right out of the gate we had probably 50,000 in equity, and then it was a light rehab... Of course, over the years, from when we started to when we finished, that area went through the roof even in property values; it probably went up double digits, so we ended up with over a hundred thousand dollars in equity when we ended up closing on it, finished rehabbing and then appraised.
Joe Fairless: That's great. How much did you put into the rehab?
Travis Daggett: About 30. Maybe less. Maybe 25.
Joe Fairless: And what did you sell it for?
Travis Daggett: No, we held on to this one, because it's a hot campus rental area. I really don't know off the top of my head what we rent it for, but I would have to guess it's in the twos. I couldn't see it renting for less than 2,000/month.
Joe Fairless: Yeah, sounds like a great buy and hold, that's for sure. Where can the Best Ever listeners get in touch with you?
Travis Daggett: The e-mail address is firstname.lastname@example.org. That's my business, Cornerstone Properties Eugene is the name of the business.
Joe Fairless: Travis, thank you for being on the show, and talking about the deals that you've done, how you're getting those deals, the hundred-thousand dollar in equity that you have as a buy and hold, how you found it and the short sale process... Along with the partnership stuff, because that's really important. Real estate really is a partnership and team environment, and we have to be careful who we partner with.
I love the approach that you take. It is really about having someone who plays to your weaknesses, and I found out the same thing with my partners that worked out - they are strong where I'm not, and I'm strong where they're not, and it makes for the best partnership.
Thanks so much for being on the show. I hope you have a best ever day, and we'll talk to you soon!
Travis Daggett: You're welcome. Thanks, Joe!
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