← Owner Financing & Note Investing Podcast with Dawn Rickabaugh
Owner Financing & Note Investing Podcast with Dawn Rickabaugh
How Jay Davis Bought 3 Duplexes with Owner Financing
00:24:20
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- [00:01]
A
It was almost $700,000. And so we, we put a hundred down. After we made payments for about six months, we met with her again and she saw what we were doing, how we were renovating the properties and how it was really turning out to be much better than she anticipated because it had been in her family for many years and her, her dad had on the property. So, so we had a conversation and I explained to her how we could make this. Because there's three duplexes together, we could make this part of a revitalization and actually put her dad's name on the building as, as, as he was that. So she was, she was so appreciative of that that she wanted to know if she could just stay with interest only on, on the property. She'll take just a little bit of money every year to pay her taxes and she's, she's in it to it for, for income.
- [01:15]
B
All right, well, welcome everybody. My name is Dawn Ricobaugh. This is Property and Paper Live. I can't believe we're at the third week in June or I mean May already. I mean we're already almost to of the year is gone. I don't know what happened. It was like, just like that. But you know, today this is where we talk about real estate owner financing and note investing because they're, they're all connected, right? So when we understand the discounted market for notes, the amount of solutions we can create and the investments that we can provide ourselves and others with just magnify incredibly. And today I have kind of a special guest who Jay Davis from Georgia. And we've been dialoguing you a bit. And he's been in real estate for a very long time and I asked him to come on and if he would just share his experience and then a little bit of how we're. We're pounding out. We're talking about how we can do some sort of a joint venture that helps everybody involved. So. But I don't want to waste any more time. Jay, would you just go ahead and come on and hopefully your audio is nice and strong and just tell us about yourself. And you have a rich background and kind of where you're at where you were where you're at now. And what charges you up for continuing to go forward?
- [02:48]
A
Well, thanks, Don. It's. You and I have been connected for seven or eight years. I think maybe it was pre covet ever how long ago that was. And then I've lived in 11 states. I was never the smartest guy in the room. But now I'm always almost the oldest person in the room. So I, my first real estate deal was in 1986. That was also the year I got my license and my first, the first time I got a license, I owned rental properties, small commercial buildings. Did some primarily focused on investment and commercial real estate for, for a few years. And then other people have had jobs. I changed careers. So I've, I've done everything from financial services work, worked for a major brokerage company, worked for a major insurance company, worked as a financial planner and always have been interested in real estate. And my wife and I had a portfolio of rental properties and we liquidated that and, and retired and we both keep failing at retirement. So that's it in a nutshell. Yeah.
- [04:12]
B
So are you still licensed?
- [04:16]
A
I am. And I was, I'm debating whether to renew this year because it, it's continuing. It is a hassle. And in Georgia you, you don't grandfather out, so I'm gonna have to keep doing it. But I. Last year, 2025, I was a key part of 11 transactions for a portfolio I'm helping someone do. So I'm probably going to hang in for maybe for another year and a half or so. I'm about a year and a half away from a zero birthday. So, you know, that's the only ones that count now.
- [04:59]
B
So we'll, we'll see up over the rest. Yeah. So basically you've been doing real estate a long time. Right now it sounds like you're helping someone who's wanting to position in real estate and you're helping them build their portfolio. Why is it that. And also you're helping a younger real estate agent. Sounds like get started over there as well. What is it about the conversation where we started talking? What, what about this seller financing and not investing aspect? I think people would kind of want to hear why you want to focus on that some more.
- [05:36]
A
Well, I started focusing on seller financing in the 90s because I was trying to buy properties and one of my good deals that I got was I was, I was working for a major insurance company as, as an agent. I had, I had been in management and one of my guys retired. So I, so I bought his, his agency and I found an office building that I wanted and I asked the, the seller if, or the, the owner if he would consider selling it. And he says, well, I was just talking to my wife about that last night and I said, well, let's, let's talk. And so I asked him if, if he would consider seller financing if, if I was able to get 10% of the money as a down payment. And he said yes. It just so happened that he was on the board of directors for a local bank. And I went to the local bank and said, I'd like to have a 10%, you know, I'd like to borrow enough money to, to buy this property. And we went through all the paperwork and the assistant vice president, you know, banks have all these different titles. So he said, but you're not bringing any money to this. And I said, I said, he's on your board of directors. I said, I, it's up to you if you wanted to question that. And bottom line, he didn't want to question that. So I was able to get a six unit office building that was five units rented or no money down.
- [07:12]
B
Wow. So the same bank that the guy was president of or whatever loaned you the, the money for the down payment?
- [07:20]
A
Yes.
- [07:21]
B
That's fantastic. You know, that's similar to me where my, my first owner finance deal was a little commercial building where now, honey, I know you want this property, but we are not going to take cash. Just so you know, we don't plan to pay those capital gains. We need this for retirement. But that's fantastic. And then more recently, Jay, you and I have talked on the phone a couple of times and describe your experience. Like talking, you're calling these owners of investment properties. So let's just go there and repeat that.
- [07:57]
A
Yeah, so what, what I try to do now is find people that are out of town or don't want us for or in end of lifers or what, whatever the. The current phrase is, and find ways to help help them get what they want. The most recent deal that, that we did was a person had a duplex for sale on mls. And I looked and noticed that, that this owner had two more duplexes. And so I made an offer on all three. The agent did not want to give us. She kept, she kept telling me that my offer was too low. And I finally said, you know, you really, it really would help if you just went ahead and gave them the offer. And they said no. So we waited about four months and, and they kept reducing the one that they had on mls. And I finally came back to the agent and I said it would really be helpful if we had a conversation. I said, I'm not trying to steal your client. I just want to be able to talk to them and explain why I can't pay what they're asking, but how I can really get them maybe more money than, than they anticipate. So we had a conversation with the seller and I explained, you know, how we were acquiring some properties where if she would be willing to sell her finance and we would give her a small a six figure down payment. And, and once we did that, it was almost $700,000. And so we, we put 100 down. After we made payments for about six months, we met with her again and she saw what we were doing, how we were renovating the properties and how it was really turning out to be much better than she anticipated because it had been in her family for many years and her, her dad had owned the property. So, so we had a conversation and I explained to her how we could make this. Because there's three duplexes together, we could make this part of a revitalization and actually put her dad's name on the building as, as he was that. So she was, she was so appreciative of that that she wanted to know if she could just stay with interest only on, on the property. She'll take just a little bit of money every year to pay her taxes and she's, she's in it to it for, for income. She, she just wants to have the interest only and eventually in maybe four or five years, we'll eventually pay it off. So.
- [10:42]
B
Got it. That 700,000 for all three?
- [10:46]
A
That is correct, yes.
- [10:47]
B
Okay, got it. And so she, you gave her 100,000 down on all three and interest only. So the.
- [10:56]
A
With a 30 year amortization.
- [10:58]
B
30 year. Well, is it interest only or a 30 year.
- [11:03]
A
Well, well, we started off with, with a 30 year amortization and she converted to interest only.
- [11:10]
B
Okay. Because she wants the income. She wants to reduce the taxable. Yes, you know, consequence and because you were rehabbing it and doing justice to the legacy basically that of her father left her or grandfather.
- [11:27]
A
Her father father.
- [11:30]
B
So then you, she just. I bet she, if she would have had any more properties, she would have thrown them at you gladly.
- [11:36]
A
She, she definitely would. In fact. And then for us we took. They were duplexes and upper, upper and lower with two bedroom, two bath. As they have become vacant, we converted them to three bedroom, two bathrooms. And so the rents are a lot higher than she was getting and it's cash flowing extremely well. And when she's ready to cash out, we'll be able to rebuy and life goes on.
- [12:07]
B
That's fantastic. If there's anyone who wants to ask Jay questions and it's not noisy in your Background. Go ahead and unmute or chat. Jay, can you expand a little bit on how you talked? I mean, that's pretty, that's pretty difficult to get through an agent. Who's the gatekeeper, who, I mean, it's their okay, agents. It's your freaking job to submit offers. Don't do this. Right? I mean, it's your job to submit offers. Yes, but then you were very delicate about it. But I think if you could expand on the language you used with the agent as well as the seller.
- [12:49]
A
Well, the, the agent I had met many years ago, but we did not have a close relationship. And so what I had to do was to be able to convince this is a husband and wife team, that I really did have the interest, best interest of their client. I was not going to try to browbeat their client and say, you know, this is, there's no way you're going to get the money. What I want, what I always tell the seller is I want to be able to get you as much as, as possible. If, and, but if it's not something that, that we can make money on, I'm not going to come and tell you you've got to reduce it. I'm just going to tell you that it's not going to work for us. So it might work for someone else. But in the meantime, if I can help you do whatever it takes to get as much as you want, as well as maybe more because of the income involved or paying less taxes, would you be interested in discussing this brother? And 8 out of 10 times there, they do want to talk about it more.
- [13:57]
B
And how long was she on the market?
- [14:01]
A
Probably about seven months. Between six and seven months on that one unit. And, and she, she didn't have the other two units on the market. And so I was, I really wanted all three. I told her, I don't want just one, I want all three. So we.
- [14:17]
B
What, what did she have the one listed at?
- [14:20]
A
It was listed. She started at 295. We wound up paying about 2, 250 for that one. The others were. And it, it had a partial rehab. That was one word definition, atrocious. And so we, we still rehab that. But then it's when we started on the others that we were able to, to make the value go up. And so they, you know what, that's
- [14:53]
B
pretty close to asking. It's not much of a discount. And then with the interest and the tax savings or, you know, her being able to stretch her tax savings, she actually came out ahead. Right.
- [15:06]
A
She's she's very happy that, that we met. And you're right, if she had other properties, we, we would be in line to get them.
- [15:15]
B
Yeah. So it's so important the type of person you are. And then, you know, you get people basically eating out of the palm of your hand. Please buy this other one with income. They want people to trust. It's. It's what they need. Right. But they're not going to some that they don't trust. Did you end up developing a better relationship with the agent?
- [15:37]
A
Oh, yes, we do. And in fact, I have a meeting scheduled early next month to just go sit down with them and say, you know, this lady is very happy. Who else do you have that, that you know, I want to make you a lot of money.
- [15:56]
B
Right. Yeah. Let me earn you more commissions. Get, get better outcomes for your clients and you earn, you know, better commissions.
- [16:04]
A
Yes.
- [16:05]
B
You want to market it for the next six months. Another six months. You want to market it for six months.
- [16:10]
A
And, and they are not, they own a little bit of rental property, but they are not wanting to continue working as hard. They, they've been on a couple cruises, one to Europe, one to the Caribbean this year. Well, late last year and this year. And so, you know, work is not high on their priority list. So I want to be able to. Work's always high on my priority list.
- [16:37]
B
Yeah. Well, I don't know. For some of us who live on the island of misfit toys, this is fun for us. It's not really work.
- [16:45]
A
Exactly.
- [16:47]
B
You know, we're. You can be a freak like that. Right. Like I don't even know what retirement means. Clearly you don't. We've already said that you failed miserably several times. Yes. At retiring.
- [16:59]
A
But I have one other thing that, that I'd like to. I, I think you have talked about this in the past. You have a Roth IRA or other types of IRAs that you're putting rental properties and notes in.
- [17:13]
B
I, I would say the notes go in there, but not the rental properties for me.
- [17:18]
A
Oh, okay. All right. Because we've done that. We, we put rental properties and notes in inside IRAs and 401ks and I mean, maybe the people on the call know, but if you have a solo 401k, if you have a rental property in it and you decide that you get a loan on it, a non recourse loan, you do not pay UBIT on that the same way that you do on an Iraq that, that can really exponentially grow a 401.
- [17:54]
B
Yes, it certainly can. I think for me, the things I have in Roth's solo 401k in particular are notes, some precious metals and, and crypto, my crypto holdings. Because I don't want to pay taxes.
- [18:13]
A
Right.
- [18:14]
B
Okay. So yeah, I don't want to pay taxes. I don't know. So anyhow, now, you know, I was telling you, Jay, when we were on the phone and I've been putting together some materials and just when I did then I engaged some coaching people that are helping me re refine my, my messaging to owners of investment property and your quintessential tired landlord. And after, at the last half of this call, if we have time and people are interested, I'll share some of the market research that I came up with. And you guys know, only the first half of these calls now go out on the Internets and only people in the citizens of the realm community can watch the back. So I'm going to save some of that juicy stuff that I paid and take some money to get dialed in because I want to figure out, you know, better how, how I can get people to understand because it, it sort of seems like. And tell me what you think, Jay or anyone else want to jump in on the call. It's like either sellers came from an era where they still remember that it was just the most natural thing in the world to go from a real estate portfolio to a paper portfolio to sell or carry out of their position. Some just already know that, like it was just in their blood and they're aware and other people, they like the idea of what it could represent, but they never heard of such a thing in their entire life and they're not going to hear it from any professionals in their, their, in their cadre of trusted in advisors. So Jay, you had talked about that you were trying to call these investment owners and it seemed like there was some resistance in talking to you and, and like, oh, you're a broker, we don't want to talk to you. We already know what you're about. You know, and you thought maybe if I talk about that and why you, you said, hey Don, let's do this thing where I'm, you send me materials when you get done noodling forever trying to get it perfect. I'm going to send these out and just talk about that a little bit.
- [20:33]
A
Sure. Well, as you can see, I'm from a generation where we used to call people on the phone all the time. One of the things that I did in the insurance business was train agents to call people. And so I'm, I, I love dialing for dollars. The way our society has changed now with, with cell phones and with social media, people are trying to withdraw from, from actually answering the phone. So it, we don't get as many people answering and then they don't respond to text like they do. And as, as a property owner, I was bombarded with constant text about we want to buy your house, we want to buy your property. And they didn't know anything about it. I want to make an offer so people don't really know what's real and what's not. And so in the event I do get to speak with someone, I can just say, hey, I know I'm a, I'm a real estate broker. You can either hang up or you could spend a few minutes talking to me. What would you like to do? And so they do have an interest at that point because, and I can say, you know, if you want to sell your property, I have an agent that I work with and she can take care of that or if you're interested in selling it and maybe carrying a note, I have a buyer that would be interested or I might be interested. So I said it's, it's not that I'm going to get a commission off of it, it's just going to be more money in your pocket. And so when I do get that, what I would love to have from you is a document that says I am the queen of real estate notes and I would love to tell you how to get the most money out of your house. And so when they don't answer the phone, I could just mail them that document and let them respond to that. Because all of a sudden it's not some, some broker in Georgia, it's some lady in Nevada saying I know how to, you can make money on this house. And so, you know, it's, it's just a way of getting another voice involved that is non confrontational. It's not one of these people that says, I mean it's amazing the number of people from foreign countries that are telephone marketing for real estate. And so sellers are just turned off by that, right?
- [23:10]
B
Yeah. So you're figuring it would be a soft way to maybe shake through either some more leads for this guy that you're helping put together a real estate portfolio, possibly if it's good enough yourself. And thirdly, to give help this agent you've taken under your wing to get more, more listings.
- [23:30]
A
Well, she is a thank you for
- [23:33]
B
engaging with my content. If you'd like to hear the rest of the replay, please go over to citizensoftherealm.com and join our free community. If you'd like to participate live, be sure to subscribe@notequeen.com and if you have a situation where you could use some one on one help, check out notequeandeepdive.com and schedule a private consultation. I guarantee that one hour with me will either make or save you thousands. Take this information and go out there and create financial solutions. Just one mom and pop to another. See you next time. Take care everybody.