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Real Estate Investing School Podcast
156. REAL DEAL: The Art of Creating Win-Win Deals with Alex Mashburn
00:27:26
Welcome back to the Real Estate Investing School Podcast! In this episode, incredible investor and Real Estate Investing School coach Alex Mashburn joins the pod. In today's conversation, Alex and Brody go over the details on a property that Alex...
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- [00:00]
A
What everyone's missing out on, I think the biggest mess is creating the deal, because creating the deal is going to create way more cash flow. If you can have a deal that's supposed to be 10 grand a month, and instead it's five, you just created so much more margin instead of, like, trying to figure out a way to make five grand more a month on a property. That's way harder.
- [00:24]
B
What's up, everybody? Welcome back to the Real Estate Investing School podcast. This is your host, Brody Fawcett. And this is a real Deal series, which means it's a real. Real estate deal with actual numbers and the ins and outs of it and what happens so you can learn about it so that you can learn from it and you can go take some action and apply the principles. Today's kind of cool because if you guys caught last week's episode with Blake, he talked about a specific deal that he partnered on, and in that episode, we're like, hey, it'd be cool to actually bring on your partner that you partnered on this next week for the next real Deal. So that's what we have today. And what's unique about this one is with this partnership, you have someone who it's two different roles, really. One's more the capital side of things as the investor, and the other one's more of the put the deal together, find it, put all the pieces together, and bring it, present it to the capital investors so you might find yourself on one side or the other. And so that's why we wanted to just dive in and get all of that. But today's extra special because this isn't the first or probably even the second. This might even be the third time we've had Alex Mashburn in the house. So what's up, Alex? How are you, dude?
- [01:44]
A
Let's go. Thanks for having me on, dude.
- [01:46]
B
Yeah, dude, thanks for being here. You're about to. You have 50 people coming to a little real estate event that you're doing here in the next hour. So you jumped on before. So thanks for doing this, man.
- [01:59]
A
Let's do it. Let's run it.
- [02:01]
B
And I think a lot of people know you by now. If they don't, they're going to know you a little more after this show. But, yeah, dude, you're like the real estate investing school poster child. Absolutely crushed it. Taken action on pretty much everything that. That we like, eat, sleep, and preach. And you coach now for Real Estate Investing school, which is super fun because you're one of the very, very first people that I ever coached. However many years ago.
- [02:33]
A
Yeah, four. Almost three and a half. Yeah, a long time ago.
- [02:38]
B
Yeah. Crazy. So I can take all the credit for your success. It's great.
- [02:41]
A
You should. You should.
- [02:43]
B
No, no, definitely not, dude. Definitely not. Well, it's fun because I've said this before, but, like, a lot of the stuff that I feel like step by step, that's kind of like taking me like, okay, here's the next level. Here's the next level. It's been fun because I've watched kind of those same things with you, especially when it gets into, like, this partnering side of things. You and I have done it very similar, which is cool to see. You know, how it's worked out for you and how it's worked out for me and. And how people can kind of learn from that, I hope. But with that being said, dude, welcome. And yeah, you know what deal we're going to dive into and talk about, so maybe before we get into a lot of the details, just tell us a little about the deal from your words as opposed to from just hearing about it from Blake.
- [03:31]
A
Yeah. So, yeah, from my. My whole day to day is like, how many deals can we find that are owned free and clear? We don't have to deal with a bank and they'll sell or finance it to us for 10% down or less and 4% interest or less. And they're hard. I mean, they're pretty hard. It's a slim. Slim pickings. You know, when you add. You add all those filters in, it's got. Yeah. Anyway.
- [04:02]
B
Why is that important? Like, people. I mean, maybe it seems obvious, but why do you look for that right off the bat? Like, why do you want those things?
- [04:11]
A
Yeah. So one is risk, to be honest with you. Like, when. When you don't have to throw down 20% down on a. On a deal and then possibly not have payments for three, six, 12 months, you kind of can. You can build up a reserve and you have a good relationship with that lender.
- [04:34]
B
Right.
- [04:35]
A
Or that's the seller. And the. The other beneficial thing about it is, like, you don't have to deal with whatever interest rate government or anybody else says that you need to do. It's just literally between you and them and you're negotiating it. Right. So there's. There's a bunch of pros, and a lot of people are going to ask what. What it going to be? Is it going to be beneficial for the seller? And it is because they can get the purchase price they want. You know, if you do a regular normal 30 year amortization schedule, they're going to get a lot more interest those first couple of years. That's how the banks make all their, all their money. I think an interest rate is just like camouflage, like it's just kind of, it's covering up the more important stuff.
- [05:23]
B
So it works really well for a lot of people. Camouflages them from a lot. Oh yeah, no, I, it's funny because like you just, you bring that up because a lot of people obviously are always saying that like, oh, how is that fair for the seller? Why would anybody want to sell or finance it to you? That doesn't make sense. Don't they want the money, all these things. And we're talking about this a little bit earlier today, but it's, it's interesting how a time and a situation in your life, like there's going to be different strategies that are more appealing to you. You know, like there's, there's a handful of properties that I wouldn't buy now, but I would have like been all over them six years ago because they're amazing returns, high cash on cash returns. But they take a little bit more time and energy and like nowadays my time and energy is, is worth more than it was six years ago. Right. So for me, I'm, I'm not as interested but for somebody else in a different scenario, they're all over and vice versa with like seller financing. Like, yeah, we've been on this other side of we want to go buy these deals and own them. But to your point, the, the exact opposite at a different stage in life, like I'm going to be all over, like I actually would want to sell or finance handful of properties for all these different reasons. And one of them being what you just said, like so much of that interest. People don't realize with amortization rates, like you're collecting so much money up front as the seller that's going usually straight to interest and you're getting a lot of your risk back right up right at the beginning, you know.
- [06:55]
A
Yeah, yeah, it was funny. We did a deal in Provo, it was like a Provo, Utah. It's a duplex seller finance owned outright. And they were wanted, like they would not budge like a 6 or 7% interest rate. And I was like, no, we're not doing it. But I was like, hey listen, you want a two grand payment for this? We'll give you a two grand payment for this. But we're throwing the normal amortization schedule out the Window. And the seller was like, okay, sounds good. You know, like they were totally fine with us doing 50, 50 or 60 principal, 40, you know, interest from day one for those, for those couple years on the balloon because they just really needed that 2 grand because that was their current house payment and they didn't want to sell or finance that property unless it was paying for their house. So it's just like, it's just like a mind thing. Right. And so even if you did a 40 year am at 6% interest, it would be 2 grand a month on that deal. Instead we got 30 year 50. 50. So literally right off the bat, you know, no payments for three months to build up a reserve. And, and then right after that, only 12 grand a year is going to print to interest instead of, you know, your first. Dude, your first five to seven years is like 75% interest. It's kind of wild. So. Yeah, yeah. So anyway, that one over five years, 60 grand will be paid off in principal instead of. Normally it would be like 13 grand would have been paid off over five years. Yeah, it's like 5x.
- [08:34]
B
Yeah, yeah. And hopefully that didn't go over too many people's heads. But like, it's, it's literally, it's. You're creating a win win. You know, you're dissecting the situation. Like, okay, you find out it's actually really not about the interest rate. Like it's about the money that you're collecting. Like, that's what it's about. You know what I'm saying? And so I think to your, to your camouflage point, it's just, I mean that's, that's real estate. Like, what do you want? What do you need? What do I want? What do I need? How do we like find this middle ground and get creative to make it happen? That's what you're really, really good at. Without getting too like in the weeds on too many other things or deals with this deal specifically you did with Blake that you partnered on, you kind of set the stage for it really well of just kind of diving into like what you're looking for, why that's important. The, the only question I have with finding it is now that you know what you're looking for, which I think is really good, and that's like a boom, huge nugget right there on, on how you even force the deal is you had your buy box clear. You know, hey, I'm looking for properties like this, this and this. And, and just knowing already, like the way that you work in the way that you do your, your deals. Because it's the same way for me, you know that if you can go find that, then finding a capital partner is going to be really easy because it's appealing to them because it's a higher cash on cash return because it's less cash down. Right. They don't have to jump through the hoops of getting a loan through the bank. So they're more interested that way because their credit's not on the line, whatever. All these different things that are appealing. So it makes it way easier to get a partner. But once you know that and you know what you're looking for, how do you go find it?
- [10:16]
A
Yeah.
- [10:17]
B
Or how did you find this deal?
- [10:19]
A
This is on Zillow. Just on Zillow. Like I, I have Utah mls, I'm an agent as well. But Zillow's just, I don't know what it is about it. That's why they're so good. It's just clean. It's just fun. It's like fun to, you know, to scroll on there. But yeah, it was just on Zillow. Been for sale for a while. If you download and use Prop stream, you can see if people own the property outright. Like you don't even have to ask them, you know. But the first question that's got it, you know, hey, would you sell a finance with a, with a big down payment or a decent down payment? And what I found is like when I asked that question first, they, they kind of like open up to it, right? Because usually people are saying, hey, what, what's the minimum down you would do for a seller? Finance, you know, but it was like, hey, would you sell it? Finance was like a big down payment or like a decent down payment. You got to understand like people's, people's perspectives of like big is just like different. Like there was this, there was this million dollar deal that hey, with a, with a pretty big down payment would you guys have? And you know what, Like a hundred grand was a lot to them. And so like that's 10% down. I mean usually you're 20 or 25% down buying investment properties, right? And so to be able to pick up a deal at 10 down, it's pretty good for your cash on cash return and everything like that. So it's just kind of, yeah, Zillow just we'll, we'll text, text and call people all the time. Hey, would you sell the finance with a decent down payment and make sure usually they own it outright or really Close. I'm fine with all the sub 2 and subject to and the wraps. I'm fine with that. But like, I just don't deal with it because there's a lot more margin when you do a bigger deal. You know, when you do, when there's more equity or when it's on frame clear.
- [12:13]
B
So yeah, yeah, 100%. Cool. Okay. So. So you reached out to him. You're like, hey, would you do this with the larger down payment? And I just touching on that, like, I love that and I like doing that as well. Just because you want those first yeses right off the bat, right. You don't want to start it out with like a no, you know, or like, like you said, most people, like, oh, they need a minimum down payment or they want to buy it with the least amount down. Right. So it just turns off the seller from the get go. Like start. Start with the yes. Right. Like, hey, if we could work something out hypothetically, you know, would you be open to this? If it was like, I'll even throw stuff out there, like, credible. Great. Have great credit. You know, if we ever work something out where you're getting what you want out of the house and it was a good, a good, good size down payment that you needed, are you open to it? You know, like, that's all we're looking for. Like, hypothetically, would you be open to it? Yes. Cool. Now let's dive into the nitty gritty. And that's when, like, the negotiation starts, which I think is one thing that you're really good at.
- [13:19]
A
Yeah, well, sometimes you can get a seller saying, you know, let's say it's a $500,000 property. And they're like, yeah, with $250,000 down. Right. 50% say, I'm not going to do that. But when you get that, sometimes we're like, oh, like, we can totally do that, you know, and they're just like caught off guard. It's like, yeah, we can totally do that. It'd probably be closer to $400,000 purchase price. But if you can come down on that down payment, you know, a decent amount, like, we can get that purchase price back to where you want it or even above, you know, if it's, if it's less down. And they're just like all of a sudden like, oh, like these guys know what they're talking about. Or like, these guys, if, if they have that laying around, you know, sometimes they'll just give it to you at 400 grand.
- [14:03]
B
Yeah.
- [14:03]
A
And then I Usually just give that to somebody else and you know, almost wholesale it if I wanted to. Right. But like, sometimes they'll do that. You can kind of see where people are at. It's like they're just kind of throwing something out there that they think is ridiculous. And then when you're like, yeah, I can do that. Yeah, but you're just getting. Yes. I really like how you said that you're just getting more yeses. Sales is in everything. Right.
- [14:26]
B
Well, I think too, like figuring out like what's, what's important that way or like, you know, like follow up questions like, yeah, like what? For sure. Like that's something, you know, we could probably be open to. But what's more important to you, like interest rate or, you know, a payment amount of money you're collecting each month or the down payment or the purchase price, you know, and then it's like, cool, now you're starting to understand. Or, you know, and, and yeah, so.
- [14:53]
A
You give me one term. You give me one term, I'll give you another one. Right. It's kind of. Yeah, there's, there's a bunch of ways to make it a win win. You just got to be patient with them because most people have never done it before.
- [15:05]
B
Yeah.
- [15:05]
A
So. But for this specific deal that I did with Blake, it was pretty easy because it had been on the market a little while longer. If you notice that it's been on the market for more than 100 days and they own it free and clear, it's a lot more likely that you're going to get them to sell their finance to you for at least a few years rather than it's been on the market for a week. But this one, it was already a short term rental. A short term rental zones. I knew the area and yeah, they, they agreed to 10 down. Kind of talked them down a little bit on purchase price too because their main thing was they wanted to, they wanted to close quick. They just didn't want to deal with it anymore. They were trying, I think they were trying to manage it a little bit themselves. Short term rentals. And anyway, so we got a 1.4, 1.5 million dollar property for 1.4 with, with 150 down, which is about 11% and then 3% interest rate for two years and then it goes to 4% and then it goes to 5% and then it goes to 6%, which is just when we refinance, probably before then anyway. So.
- [16:15]
B
Cool.
- [16:15]
A
But that's, that's kind of the breakdown of the deal. It's about a five thousand dollar payment and we'll do about ten to twelve grand a month average on revenue. And then obviously you have all your expenses, but it's. It's not like a crazy cash cow. But if you're gonna buy vacation house, it's just sick on the golf course. You know, LPGA has the tournaments. Yeah. New. Like, if you're gonna buy, you know, a vacation home instead of like it just being, you know, paid for and that's it. To actually make a little bit of money on it and be able to have a sick place to go is the best way to do it, right?
- [16:53]
B
Yeah. Yeah. 100, dude. Well, I think. I think in your shoes too, and this is why it's fun having the other side of it. Like in. In Blake shoes, we went through it. Like, yeah, he's getting a good return. Like, he's into it. Less money. He doesn't have to qualify through a bank. Right. He didn't have to find the deal or stress about it and negotiate it or even take care of managing it or any of that. And then on top of that, he gets to have a cool spot that he, you know, owns half of it and gets to use it for events. Different things like that. Right. On your side of it. Which is always so funny because so many people hear about partnerships with a capital partner and they're like, oh, well, that's lame. Like, why would you put in all the money? And then you wouldn't put in anything and you guys are splitting it 50. Like, that's not fair. And they get so caught up in like, you're coming in with no money, you're coming in with all the money, but then we split it 50, 50. And so they say no to stuff like that as opposed to understanding the deal. It's almost like, well, how much money are you making? Even if the other person's made, it doesn't matter. They're more caught up in. In what's in it for you instead of what's in it for them. And I think that hurts people. But to the flip side of this one, like, you had different incentives for you and you created a win win.
- [18:10]
A
Yeah, I'm also, because I'm a real estate agent, I brought them down a ton in that purchase price because I brought that agent commission for the buyer way down. Right. And that's kind of how I was able to get even better terms because it's. They didn't have to pay some random person 40 grand, you know, to drop the paperwork. Right. And so, like, there's a lot of. There's a lot of value there. And even if the capital partner wanted to think of that as, like. But just. Just creating the deal is probably just as valuable as someone who's bringing all the money. Right? Because if you went and bought that on the normal loan, you're going to put about $300,000 down, and you're gonna have nine grand a month instead of five.
- [19:00]
B
Right.
- [19:01]
A
So it's like those five years, you're making up way more than what the initial down payment was. And that's why I had 10 people that were okay doing it. They're ready to go, you know? Yeah, but it's. Those are fun. That was a fun one.
- [19:16]
B
So, yeah, no, I agree with. I agree with all that. And then. And then for you, obviously, like, this is why I think it's fun people hearing both dynamics because they might find themselves in Blake's shoes. They might find themselves in. In your shoes, right? Where, you know, Blake's maybe more a spot right now where, like, he doesn't have as much time, but he has more money than time. Right. And. And you're at a spot where, like, hey, dude, I'm. I'm hustling right now, and if I have this skill set, I might as well maximize and get the highest return from it. And so people on. On your end of it, like, what advice do you have for someone that's like, hey, I don't have maybe a ton of capital right now, or maybe they do have the capital, but they want higher because you're getting the highest cash on cash return. Like, if we're looking at the percentage that way, you're getting the highest cash on cash. You might not get the highest, you know, cash return on your time or your money or your energy. Blake's winning in that category. His return's way higher. Right. But for somebody that's like, hey, I need a high cash on cash return, I need to build my passive income using the least amount of, like, money resources as possible. How does someone go replicate what you've been doing?
- [20:26]
A
Yeah, I think too many people get caught up on the interest rate. Too many people get caught up on the deals that are actually listed for sale already. And too many people are like, oh, like, if this Airbnb and I add a hot tub and I do this and I do that, like, maybe I can get another 50 bucks a month or 50 bucks per booking or whatever. Right?
- [20:52]
B
Yeah.
- [20:52]
A
But what everyone's missing out on, I think their biggest miss is creating the deal. Because creating the deal is going to create way more cash flow. You know, like if you can have a deal that's supposed to be ten grand a month and instead it's five, like you just created so much more margin instead of like trying to figure out a way to make five grand more a month on a property. Like, that's way harder than, you know, bringing, bringing down what the payment on the property is. So just like if, if you say 5% would be fine, or 6% interest would be fine, or, or this payment, it's like if you're so set on, if you're not set on, hey, I, I don't do a deal unless it's 4% interest or below, right? Or I don't do a deal unless it's 15% down or less or whatever, right? Then like, you're, it's kind of like the whole, what was it? Like the whole yellow brick road or whatever, right? You just don't know where you're going. Like, you're just going to go wherever it takes you. Oh, yeah, Market rent, market rate is 8%. Yeah, I could do this seller finance at 7%. I'm not saying that's a bad thing. I'm just saying, like, you know, because it depends on purchase price and a million other things. But, like, where your focus goes, your energy flows. So just focus on the things that are the most valuable and therefore you're going to create the most value for yourself. And other people will see that. Like, other people will come to you, hey, let me know when we can do a deal. Hey, let me know. You know, hey, you got a million here. Hey, you got 500k here, because they want, they're, they're buying you, right? And I just think that you got to focus more on creating value of yourself. And you don't do that by finding normal deals or mediocre deals.
- [22:46]
B
Makes sense. Yeah, you got to force them. You got to force them. So that sounds cool, Alex, but how do I do that? How do you learn that stuff? How do you. Like, I'm trying to figure it out. I'm trying to do this. But how do you actually go in, get creative on these things and learn how to structure deals and stuff?
- [23:08]
A
You, you go to real estate investing school? No, you do need, you just need to be around other people that are doing it. At the end of the day, if you, if you're not doing it, you have two options. You have one actually go buy one and go through it all and go through the Process or write up a bunch of offers and just understand the process and go through all the hard stuff and learn from it, and then you're gonna. You'll be fine. Or. Which I think is easier, personally. Be around other people that are already doing it right. Because they're gonna show you all the hard stuff that they already went through, hopefully that you don't have to. But I. It's tough because there's not just like one thing and you know this. It's like, hey, hey, just do this and you'll be good. It's just like, it's. It's your whole, like, how, how you live and who you're around, I think. But just join the school or, or go. Or. Or go. Go do it on your own. I, I would. I. We probably throw offers on at least five to 10 properties a week, and most, you know, probably 90% of them don't stick, but just keep it in practice and knowing how to write that up and knowing how to talk to somebody and really help their needs. If you're helping somebody, they're like, I don't want to deal with this property anymore, but I can't just give it to you for free. And I would like a higher purchase price. Like, you're going to be able to help them if you can just focus on helping them. Like, the whole secret to living is giving. If you can give them what they need, but it still works for you and your little box, your little buy box. Like, it's gonna be. It's gonna be fun.
- [24:48]
B
Yeah. Yeah, dude. Love that. So good. It's kind of like, it's. It's like learning how to fish as opposed to going to the supermarket and, and buying fish. You know, like, like you're. You can take, you know, your, your 50 bucks and go buy a handful of fish, but that's it. Or you can take your 50 bucks and go buy a fishing pole and you. You can feed yourself the rest of your life. And I totally agree with that. And I think that that's the value and that's the stuff that. 1. Education's free. You know, people listening to this podcast, you're learning. You're getting educated for free. Yeah. If you want to accelerate that process and, you know, mitigate the most amount of risk, for sure. Like, you need a, you need a coach. You need to join real estate investing school because that's. It's personalized coaching, and you're learning that faster, but you need to learn it. You can't hide from that. Go through the process. Learn it. And once you learn all these things and pick up on them, they just go in your quiver of arrows, and then you're able to understand and take down more deals and just understand how the game works, which is cool. It's what you're doing every single day, which is fun.
- [26:02]
A
Yeah, no, and I definitely. I definitely could not have done it without going through some hard stuff and then also being around the right people, so.
- [26:14]
B
Yeah.
- [26:14]
A
So I feel like once you do it. Once you do it with some little deals, then you start getting excited because then you're like, I could do this with a really big deal, but there's. There's just a lot different stuff goes into different types of properties. So.
- [26:28]
B
Yeah, no, bro, that's good stuff. Yeah, it's. It's a good. Good dynamic from here in Blake's side here and hearing your side and just the. The interesting strategies behind all of it. With that being said, dude, if people want to reach out to you, connect with you, get on your. Your list. I know you're always blasting out seller finance deals and whatnot. What's the best way to kind of connect with you? Alex?
- [26:50]
A
Yeah, just Instagram's probably the best right now. So. Alex. Dot. Mashburn. Just how it sounds.
- [26:57]
B
Mashburn, man. Mash burn. Who. Who put in a mile for every day of the month Last. Last month.
- [27:08]
A
Never again.
- [27:11]
B
Impressive. All right, brother. Okay. Much love. Thanks for taking the time. Go. Go have fun at your event, and we'll catch you guys on the next one.
- [27:19]
A
Go. Always appreciate you, Brody. See you.