← The Code To Winning
The Code To Winning
STRATEGIES TO GET YOUR FIRST PROPERTY IN REAL ESTATE || ERIC CHEN || EPISODE 053
00:55:20
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- [00:00]
A
I'm just a regular person. I graduated from UCI, so University of California, Irvine. I didn't know what I wanted to do. I was actually working at a restaurant called Ding Tai Fung. So it's actually a really well known franchise dumpling restaurant. So I was a server there, you know, made good money, but I didn't know what I want to do in life. And then one of my agent friends told me that, hey Eric, you should actually get into real estate. This is actually the best way to make money.
- [00:24]
B
Did you always have a great credit score? Because I think it's very important. I don't know, we're going to talk about, but do you always have a great credit score?
- [00:28]
A
Yeah. So especially in Asian cultures recon, you get a slap in your ass if you had debt. You know, like people are so afraid of debt. And then I, I do it all, you know, consultation with Asian clients. They don't have no, no debt at all. This score is always 780 above. So I literally just flip a property in West Covina. I bought it for a 790, so obviously I need to put 10 down.
- [00:50]
B
Right.
- [00:50]
A
So it's like 790k 79, 000 which I could liquidate from my credit card. I put 100k into renovation. I convinced my contractor I'll pay everything with credit card. Obviously I'm not going to dispute that. Right. So owing cost for me, 200k on my credit card and I was able to make 100k from that after I flipped the property and it took me around four months.
- [01:10]
B
And then what was the first amount that was given to you that you qualified for in terms of that 0% business credit card.
- [01:16]
A
So that is a topic that is where you got to really dig deep.
- [01:20]
B
The code to winning insights you need today to seize the world tomorrow. If you are curious and interested in learning a lot about real estate, Airbnb, house flipping, being a real estate investor, also scaling your portfolio with 0% business credit card. This is the episode for you. I have a guest in today who is an expert in all those fields that I just mentioned right now. And we're going to just dive in deep and learning a bit about Airbnb, the arbitrage method we're going to be learning about. I think it's B R R R R R R R R. But we'll talk a bit more about all these strategies, the things that have made him very successful, how he built a portfolio in a seven figure as well. So without further ado, our amazing guest in the studio right here in the Golden State and the City of Angels. Welcome Eric Chen. How you doing brother?
- [02:16]
A
Hey, thanks for having me today.
- [02:17]
B
Awesome stuff, man. I, I, I'm, I'm grateful, grateful to that because I think you in the the field right now where people are very curious in all those three so that I kind of mentioned Airbnb, upscaling, 0% business credit card, all these different hacks that are very, very important. But before we start, can you just tell us a bit about you and what actually pursued this journey for you to start in real estate?
- [02:39]
A
Yeah, absolutely. So honestly, I'm just a regular person. I graduated from UCI, so University of California, Irvine. I didn't know what I wanted to do, you know, most of it. I was actually working at a restaurant called Ding Tai Phone. So it's actually a really well known franchise dumpling restaurant. So I was a server there, you know, make good money, but I didn't know what I want to do in life. And then one of my agent friend told me that hey Eric, you should actually get into real estate. This is actually the best way to make money. And obviously that was before COVID time where money was constantly coming in from overseas. You know, that was when there was not really a lot of strict tightening tension between China and the usa. People will bring so much money to the state and that's where we make the most money. People will start buying a whole entire street and then you make a commission with that. That's kind of like how I started doing real estate, building relationship with my Ding Typhoon clients. Because you know, we have a lot of clients coming all the time and they always ask me what I want to do for my life. And when I got out of that job, I'm like, hey, hey John, this is Eric. I'm actually in real estate now. Are you looking to buy real estate? And that's kind of how I got this. All these client based out all the data that I have from all these client that I serve at the restaurant industry.
- [03:54]
B
Wow, awesome stuff. And that was pre Covid, right?
- [03:58]
A
Yes.
- [03:58]
B
When the market was a bit more reasonable than what it is right now. Correct. And so did you always have a great credit score? Because I think it's very important. I know we're going to talk about, but did you always have a great credit score?
- [04:09]
A
Yeah. So especially in Asian cultures, we can't you get a slap in your ass if you had debt? You know, like people are so afraid of debt. And then I do it all consultation with Asian clients. They don't have no debt at all. Their score is always 780 above, which is good. But they got to understand how to leverage that. Right. So that's something we're going to be talking about later. By having a good credit score, you could tap into so much opportunity and so much more money in this industry.
- [04:40]
B
And I want to just go straight into it. I want to try and figure out obviously you've scaled the seven figure real estate portfolio, how did you end up using 0% business credit cards? Can you talk a bit about that whole journey as well? I'm curious.
- [04:53]
A
Absolutely. So it's funny enough, this is a fun fact. This USA and also that's another country are the only country that actually provides 0% APR credit card. And that is 12 months 0% interest, right. Obviously the bank's gonna make money by every transaction that you swipe like 3%, obviously go to the merchant and then they al also make money from people that default on the credit cards. Right. With a lot of interest. But if you know what you're doing, any advantage that the bank is trying to take from you, you could make that into a, you know, into a cash cow making machine and then using that money to make more money. Right. So basically zero percent interest. We could stack multiple credit card, different banks. Because when you apply for a credit card, the other bank doesn't know you have to apply for a credit card. So we could basically stack it correctly. So Experian, Transunion and Equifax, if we layered it correctly, we could get up to 150k, up to like maybe like 250k or 0% working capital for you. And a lot of people, they think, okay, I have 200k, I'm going to stop buying, you know, nice car watch, you know, just spend that money. But imagine if you have 200k worth of money and then you have the right knowledge, which is real estate, which we're going to talk about later, that can turn to a very, very good cash flow business. So I literally just flip a property in West Covina. I bought it for a 790. So obviously I need to put 10% down, right? So there's like 790k, $79,000 which I could liquidate from my credit card. I put 100k into the renovation. I convinced my contractor I'll pay everything with a credit card. Obviously I'm not going to dispute that. Right. So owing cost for me is around like 200k on my credit card and I was able to make 100k from that after I flipped the property and it took me around four months. Right. So that's only four months. So now I have all that money back, I could pay back that credit card and then rinse and repeat and do another flip project. So you see how powerful this is. I'm not really getting more lending on the bank side. That would charge a lot of interest, especially if you're hard money loan 9%.
- [06:57]
B
Right.
- [06:57]
A
Maybe up to like 12%. I'm using straight out the bank's money and then able to make money from that.
- [07:03]
B
And so the first home that you flipped, you made $100,000 profit from that.
- [07:10]
A
Oh, that was the most recent one I flipped. I started house flipping back in 2019.
- [07:15]
B
Okay.
- [07:16]
A
Yeah.
- [07:16]
B
Awesome. And what's the quick turnover in house flipping regarding that? Because I know you mentioned that right now, did you use it all the time when you're using the 0% credit? Because it's 0% for 12 months. So that's what people don't understand. Like it's after then there's obviously a fee that gets in, but you can utilize, start leveraging as much as possible throughout the process, right?
- [07:34]
A
Yes. So obviously I usually max it out because there's no interest on this. So it didn't really matter. And I know for a fact within that 12 months I'm not going to really going to apply for new credit cards. So it wouldn't really matter to me. And on top of the bonus for that is, for example, like I'm working on this third project and I only have two months left on the 0% APR. Right. Because I have real estate, I have equity from all these property that I bought from back in the days. Every single property that I have is a bank of its own. I could do a HELOC on it. I could do a cash out refi on it, take that money out, pay down the credit card. Once my DTI is 0 again on the banks, when I apply for a new credit card, they're going to say, oh Eric, I'll approve you again. So I'll get a new 0% APR, credit cards and whatever balance or limit I have at 100k. Did you know that you could actually transfer the whole entire limit to a new credit card, which is 0% APR again. So what I just did, I just transferred the whole entire 150k or 0% interest credit card to a new credit card. That's 12 months, 0% APR again. I could use that money to invest and then buy more houses. So I'm technically Not really using, you know, like the traditional route of investing right now.
- [08:40]
B
And then what was the first amount that was given to you that you qualified for in terms of that 0% business credit card.
- [08:46]
A
So that is the topic that is very. You got to really dive deep. Right. So let's just. For example, somebody opened up a brand new LLC and they have no cash flow, no nothing on it. How is the banks going to qualify you to determine how much money they could prove you for? They go check your personal profile. So that's why it's so crucial and important if you want to invest into anything right now, invest into your credit score and actually building it up to the right optimized profile. So when the banks see it, when you apply for a credit card, they give you instant approval. So personal credit optimized will equal to a lot of business funding. Yes.
- [09:23]
B
Okay, all right. Because I feel like it is true, but in your situation, like was it more than six figures that you got approved for the first time around?
- [09:32]
A
Yeah. So for Chase, we, we have a relationship with Chase with a lot of the relationship managers. So one credit card I could get approved for 75K.
- [09:40]
B
Okay. And how many credit cards do you have right now?
- [09:43]
A
Oh, I don't even know. I like 40, 50 credit cards.
- [09:47]
B
Yeah. Leverage bro.
- [09:49]
A
I have a whole booklet of credit cards and then every time I Finish using a 0% APR, I don't close it, I just leave it there and I'll open a new one and just transfer that limit over. So it's every year I get to, if you really think about it, every year I get to use 200k worth of credit card. That is 0% interest, which with the knowledge that we have right now, investing in real estate, man, it's basically free money. And you get the travel point that, you know, Chase Amex, if you learn how to do travel hack, you transfer the, you know, points around 5 business class. It's just so much fun.
- [10:21]
B
It's a hex, man.
- [10:22]
A
Everything through credit.
- [10:23]
B
Why are people doing this though?
- [10:25]
A
People don't really understand it, you know. And then I, I heard I would do a lot of consulting for a lot of like investors, real estate investors, or like just people that want to get some money for, to start investing in Airbnb, know E commerce, all that stuff. They think 0% APR is good and then they didn't know that they will put every single credit card on the personal side. So there's 0% APR credit card on the personal side as well. Right. So people will start maxing those out. But they didn't, they don't know that if you max out your personal credit card, it's going to affect your whole entire credit score. But if you max out your credit card on the business side, it doesn't show up on your personal credit. So what I do is I'm hiding all my debt on the business side. So my credit on my personal is always clean, always 820, 830. And when I need more money, I use my HELOC paid out the credit card and then reapply and use the same money. And my personal profile is always going to be 820. I'm not going to touch it. I'm never going to touch my credit profile again after I optimize it. Right. So a lot of people don't understand that. So started running a business. They apply for a credit card on the personal side and they max it out. Now their income to debt ratio is too high. The credit go down. You can't do anything. You can't, you can't, you can't get approved for any credit cards after that because it's too high. You consider a high risk for the bank.
- [11:41]
B
And I also heard this, that business credit does not affect your personal credit unless you default. Is that accurate?
- [11:48]
A
Correct. So business, technically you're, you're still a personal guarantee on the business. So when you apply, there's an inquiry, right, that's going to be showing on your personal profile. And if you stop, if you don't pay it for like two months straight consecutively, then it will show up on your personal profile only after two months. So, you know, obviously you're going to make sure you use that money wisely.
- [12:10]
B
Right.
- [12:10]
A
So that's kind of like, you know, what we do.
- [12:13]
B
I mean, I know you did mention earlier on, I understand the discipline that's implemented in Asian communities. However, what if you're getting a client, an American guy that's here, and maybe they were in college, they, they didn't like really take care of their credit card. Do you have systems on helping them to try and like at least get their credit card or their credit score like cleaned out and better and fixed as well?
- [12:38]
A
Yeah. So we actually, my company, we actually also do credit repair as well. So we could actually help them fix their credit, kind of get them back on track. And while they're fixing their credit, they could actually go ahead and get on secure, I mean, secure credit card, right? So like Discover Secure credit card or like Chase, they have like a flex, I believe. So you Put money into it, and that's your credit limit. And that's how you start building out your credit age. So your credit, like the. The oldest credit card you have, please never close it because that's like the strongest point. That is something where as a credit guru or a credit specialist, that's something we can change this, the credit age. So please don't close on any credit card that you have, you know, that you have, like a Macy or Victoria Secret credit card you opened up eight years ago, don't close it. Make sure you use it, you know, and don't close it out because that's how you borrow your credit.
- [13:24]
B
And how. So is it. Is it called credit age?
- [13:27]
A
Yes. So.
- [13:28]
B
So what it is, it's like that last. Like, like, it's almost like a LinkedIn for credit cards to try and show. It's like the blueprint. Try and say, listen, this way it started and it has like the historical data for the time frame of how long you've had the credit card, right?
- [13:41]
A
Yeah. So the bank want to see you have a very big history on when you started your credit journey, basically. So if they see you have this credit card for 10 years ago, you've been paying on time for the whole time, they trust you more and they'll give you a higher limit.
- [13:55]
B
Fascinating. Fascinating. Oh, man. Then. Now let's get straight into Airbnb. You know what I'm saying? I can't believe. Because I like the credit card thing, and I think that's when you were in the Airbnb. Isn't that also a place that your credit cards helped fund that as well? But one last thing, so you can max it out, but there's also a certain amount that you have to at least pay that, like, for that. So let's say you max out 50,000. Maybe they might say you just need to pay 2,000 for that month. That's what you still do. Right. But you don't have to pay out the whole thing.
- [14:24]
A
Yes. So it's called minimum payment. So if you spend 50k, you max it out. Every single month, you have to pay 1% of that.
- [14:30]
B
So.
- [14:31]
A
Which is $500. Really? And the next month, obviously, you pay for 100. You're now at 49,500. Then the next month you pay 4,900. $495. Because every. Every. Every month is 1%. Until the very last month, you pay everything off for everything.
- [14:49]
B
For all the. Or is it just the one you.
- [14:51]
A
Have every single credit card. It's usually 1%.
- [14:53]
B
Okay?
- [14:54]
A
That's a minimum payment. And then you still get that privilege of a 0% APR credit interest.
- [15:00]
B
Man, that's. That's a bargain. Because the beauty about this whole thing is the fact that you don't need an outside investor. You can pursue your own dreams. You can be a solo tropenier, you can be an entrepreneur. You can do what you got to do. And you also, depending on how the structure of the business has been set out, you know that the funds are going to still be coming in, and you can end up paying the thing out because by the 12th month is when they want that 50,000 back. Right. And then this new cycle begins again.
- [15:25]
A
Correct.
- [15:26]
B
Unbelievable, man. This is on, like, people should teach this more. You know what I'm saying? I mean, I know it's out there. You've got your students and all that, but this is such valuable information, you know? Know. So. And that's what you started funding for your Airbnb when you did Arbitrage. You did Arbitrage here in California?
- [15:43]
A
Yes. So I started doing arbitrage back in 2021. That was right after the COVID kind of lifted. And everybody's like, you know, fomo on traveling. So I got in on a good time. And obviously I was. You know, I'm actually a real estate agent. So the first thing I did without, you know, paying for a mentorship on how to do Airbnb, I figured out myself. Like, I asked all my clients, like, hey, can I just rent out one of your property? Let's try it out as Airbnb. So I did that. I put really, really bad furniture inside. And we're still making good money now. Right now you can't do that anymore, right? The competition is being very, very. It's a lot more competitive right now. But back in the day, it was so much, so easy to make money. You literally just had to put a mattress in there. You make money. That's how it is before, but you always had to adapt. And then, you know, a lot of people are. Actually, 2022 is the time when Airbnb arbitrage start becoming so popular. Like, everybody's doing it, right? So, like, we kind of have to understand what does the client want, what does the guest want? And if you could provide those amenities, that's actually where you're going to make the money, because everybody's doing it. What made you stand out?
- [16:44]
B
Do you still do it right now?
- [16:45]
A
Yes, I still do it. I still have a few opportunities.
- [16:48]
B
How many companies do you have?
- [16:50]
A
Last year I have 55. Yes. And then we have 35 management deals. So I sold most of my arbitrage deal to my students because my main focus right now is actually buying, acquiring real estate. Because I see the longer kind of future for that. Like just for example, if I do an arbitrage, I need to find a specific house that had the right amenities and they had to be renovated really, really well.
- [17:15]
B
Right.
- [17:16]
A
And then where can you find that kind of houses? It's really hard. And if you could work out to find it, there's other student out there that's also trying to find that property as well. Everybody is pitching a landlord. Hey, I'm a corporate housing company, right. Everybody's doing the same thing. Like how do you stand out? Obviously if you get to talk to a landlord, you build that wrapper, you know, obviously my rent it out to you. But it's so competitive and you have no control over anything. Right. So I'm like I'm just going to buy a distressed property. I'm going to buy from wholesaler or like off market deals which if it's cost, if it cost me $1 million to buy the property, I'll get at 750. So when I buy that property, I'm already in the greens. And then because I'm already in the greens and I use a business credit card to renovate that property, I could, I could make this wall really, really nice. And that's the selling point for a property. I could renovate, renovate the backyard, put a jacuzzi in there and that's going to add another $100 to $200 month daily on my rental property. I get to control what I want to do on the property, you know, the design, everything I do on myself. But if I do arbitrage, I need to rent out a house and whatever that property feature has, I'm stuck with that. I can't really do anything to it. I'm not going to renovate the property for a landlord. And later on how to send the money, you know, return the house back to them.
- [18:32]
B
Right.
- [18:33]
A
It doesn't make sense. So that's the difference between an arbor charge and also a buying this one. I have more control and I own the property. And because I buy a distress, I'm always in the green. Right. And I could do a cash out refi and then take all that money out, go buy another property and just rinse and repeat.
- [18:49]
B
Can you explain for our views if those are honest? What do you mean in distress?
- [18:53]
A
So property that's off market. That's completely like, you need to gut everything out. The property is full of shit. You know, it's just really, really bad property that, you know, the seller can't handle anymore and they're just in distress. And obviously you talk to Rudy, right? So wholesaling, so they have cold callers that actually call all these bunch of sellers. They gain the contract and us as the investors, we buy those contracts and we buy it for like 20k, 30k extra on top. And then we also obviously we could either flip the house or I could convert into an Airbnb myself and then do a cash out refi on it.
- [19:28]
B
Okay. And you currently have like investment properties that you own that are Airbnb, correct?
- [19:33]
A
Yes.
- [19:33]
B
Okay. And all In California? Yes, SoCal. Nothing in Northern California or anything?
- [19:38]
A
No, everything in SoCal. And then I'm very, very bullish on Orange County. I don't really like LA as much.
- [19:44]
B
Orange county is beautiful, man. Yeah, it's beautiful. It's a good area. It's like families as well. It's very like laid back. It isn't as, as packed and it's such a nice area. And like just I always see the communities down there. I'm like, gosh dang, like if LA could implement this form of like field because, you know, so. Yeah, but they're so expensive though. So I've seen homes going like a normal three bedroom for like millions of dollars, you know what I'm saying? So when you do the investments and you said you still implement the same strategies that you use for a credit card to buy or like invest in those properties. Right. Is it just for down payment or for the full payments?
- [20:21]
A
No, so it's down payment. So usually, for example, if I want to buy a property at $1 million, that's the distress, you know, price I need to put 100k over the down payment. Right. So obviously there's two ways to do it. Right? Actually there's three ways to do it. First way is you liquidate that money out. You know, there's a lot ways to liquidate it, but we could talk about that in the future. So liquidate the money out of the credit cards, use as a down payment and the remaining, every single month you got to calculate what is your interest with the harmony loan. Right. How much more extra are you paying every single month. So you had to take into account on that as well. So it's 100k plus maybe 30 or 40k of holding costs. So that's how much you actually need to you know, to hold on to the property for at least three to four months. Right? And also the renovation cost, which you don't have to liquidate. You could just put on the credit card because only the down payment had to be cash, right. When you put into escrow. So owing cost like 200, 250k for me to flip a property using the, you know, the credit card side. The second way is obviously your own money, right? I have 100k, I put it inside, and then the remaining of the interest and stuff. I also have the money that's like people that have more, you know, money to invest. And the third way is actually through investors. So right now, constantly, every single day, I have wholesaler that's sending me a bunch of deals every single day. Eric, I have this. I have this. I'm not. I can't take on all of them. You know, there's no way I could take on all these projects at once. But what I learned is when you're in social media or if you're really good at what you're doing, you attract a lot of people that's interested in you.
- [21:49]
B
I couldn't agree more. 100%.
- [21:51]
A
So now I have a bunch of investors waiting in line with me. Say, hey, Eric, I'll put in all the money for the down payment and the renovation costs, and then we could do a 40, 60 split. So I take 40% of the profit after we flip the house, and they take 60%, and I don't put in any money at all. So that's what I'm doing right now for a lot of my project. But obviously, the very, very good project, I'll just take it on myself because there's no. I don't need investors.
- [22:16]
B
Right?
- [22:16]
A
So.
- [22:17]
B
And how do you get investors? How was it when you first pitched that first investor? Did they come to you?
- [22:20]
A
They come to me.
- [22:21]
B
Okay.
- [22:22]
A
I didn't really. I wasn't really thinking about having investors because every deal, I want to take it because it's such a good. Such a good spread, you know, but you don't have that much money, you know, so eventually, like, you know what? I need to start leveraging. And it's also good for me as well, because if I'm doing multiple projects, I want to think about the social media, right? I don't have to go to the job site every single day, but I go there just to do some video. So all my audience know, Eric is still doing these kind of stuff, even though I don't have to be there. It built up that, you know, that personal branding, it builds that trust that. Oh, Eric is actually into it. He's always at a construction site, you know, talking about all these kind of detail stuff. That's where you get more people into you, interested in you. So when, if I post right now, like you know, I need 150k, I'll give you 10 interest or 15 interest, somebody will come and then they will put that money down onto me because they know I'm doing this every single day.
- [23:16]
B
Wow. And I think that that's so important, like rapport is everything because the fact that you end up building that presence and you, you experience in the market and people know you, they're actually the ones waiting for you to get that deal. And I've seen it with a lot of like big time investors. Angel. I've seen it with like people that are crowdfunding as well. They have already built that, you know, Grant Cardone raised I think a billion dollars in terms of like all these real estate deals. But I also see local people as well in Utah that end up doing like commercial real estate and, and all that kind of stuff. And I want to kind of. I know you used to do that a bit. Do you want to. Can we talk a bit about commercial real estate? Are you okay with that?
- [23:56]
A
I'm not really into the commercial side.
- [23:57]
B
Okay.
- [23:58]
A
Yeah. So only do residential right now, but eventually that's something I want to get into.
- [24:02]
B
Okay. Okay. No, and, and so how do you find the best deals though? Because I know the off the market deals. Everyone talks about how amazing off the market is because there's no competition or like, you know, you approach it. But how do you end up finding those deals?
- [24:15]
A
Again, it's building relationship with wholesaler and agents. So there's a bunch of wholesaler groups or there's like new westerns, all these kind of wholesale company, they send out a bunch of deals every single day. Right. But honestly those deals are so bad.
- [24:30]
B
Right?
- [24:31]
A
You have people, there's different type of people. There are investor that wait for the right opportunity. You have people that have just recently got into flip house flipping and they get FOMO because they, they can't find deals. They will get into crappy deals. And these kind of big companies, they send out deal with really, really bad spread. But people got, it's like I already pay for this mentorship or whatever it is. They got into a bad deal and lose money. So obviously that's how wholesaler make money. Right. They send out a bunch of deal volume wise and they make a good spread. But for us, we wait for the right deals, and then the only way you can do that is actually building that relationship with that wholesaler agent. So for me, I like to go to, like, a real estate event to actually talk to the person, talk to the person in front of, you know, talk to them in, you know, in person. Because we build that rapper, we build that trust. If there's everything just through phone calls, like, if they have a really, really good deal, I want them to think of me right away. First, Eric, Eric, right away, right? I don't want him to send it to everybody and blast it out. When you blast it out, even it's still on market, you still have a lot of buyer that's trying to buy him. So how do you differentiate yourself by building that relationship, treating that wholesaler correctly. Say, hey, hey, Rudy, you know, if you found a good property that is in my buy box, do you mind sending to me 30 minutes before anybody else? Not 30 minutes. All I need to get to lock in a good deal. I'll send the EMD right away and we'll close on the deal, Right? So. And you also have to that your wholesaler agent know that Eric is a performer. So he will close no matter what. Because you have these people that, you know, gain the contract and they cancel escrow. But for any deals that people, they sent to me, they know for a fact I will close. So they're willing to send it to me over other people. Right? So that's kind of like how I've been doing it just pretty by building trust, you know, just throwing a bunch of, you know, connection with all these agents, and then that's how it works.
- [26:25]
B
You're just playing chess, man.
- [26:26]
A
Pretty much, yeah.
- [26:28]
B
And so another thing, because you also have, like, you being a real estate agent, it also gives you a bit of the leverage and advantage because when you do listings, have you ever had a listing that you're like, oh, my gosh, I actually like this. Let me buy for myself. Have you ever had that case before?
- [26:41]
A
Yes. I don't really buy on market, but if I do want to buy something on market, I just let the agent double in. I'm like, you know what? I don't even want to represent myself. Give me that deal. You know, you know what the number is. Give me that deal. I'll pay you extra on the site. I don't care. Give me that house. Because I see the value in it, right? So, like, this is also something I talk about a lot. Like a Good deal, A deal, a cycle, somebody sends you a wholesale deal, it might not be good for somebody, but it might be good for somebody else because the way they're investing, right? So this house, if the spread is not that great for some of the flippers, they're not going to buy it. But for some people, like me, for example, investing like a city that actually allow Airbnb, I don't care about the spread as much anymore because I can make sure I could cash flow from this property.
- [27:27]
B
Right?
- [27:28]
A
And yeah, people that actually want to buy property for co living, people who want to buy probably for senior living or sober living, right. So everybody had different way of investing into different deals. So there's like a specific buy box that I do when I buy houses and then always have wholesalers send it to me because they know like other people, they're not going to buy it because the spread is a little bit thinner. But for me, I like it because that's the exact property that I want.
- [27:53]
B
Solid, man. For somebody out there right now watching this episode and they have not started like they're making cash flow about like 90 to 100,000. Decent credits go about like just 700. What advice would you give them right now if they want to jump into real estate investment?
- [28:10]
A
So what type of real estate though? Like Airbnb?
- [28:12]
B
No, no, just like residential, like investing, like what you're currently doing right now.
- [28:16]
A
So if you have both. But like, yeah, absolutely. So if you have a good income, right, if you make over like 100, 120, like you're probably paying the IRS like 34, 40 of that, right? So the best way to do is actually having good income is to buy a property. You could do house hack. So basically buy it with the lowest down payment possible, you know, 3.5% down, and then subdivide this room into more rooms. It would be better if you could buy a near like a school or something and then just rent it out individually and that should be able to cover your mortgage monthly and you live in there for free.
- [28:49]
B
So an FHA loan, pretty much, if.
- [28:51]
A
You can qualify for it. I know right now the interest is kind of on a higher side, but you're just gonna, you know, grind through it. Like buy it now because when the rate drop, the price is going to go out more. Right? So I'd rather have people kind of grind it out, you know, be uncomfortable for a little bit. Buy a property, sublease all the, the rooms out and in, hope when the rate drop, the price went up, they get equity on the property. And that's the easiest way and I think the safest way to invest in real estate right now if we have a really, really stable high income.
- [29:22]
B
And would you say then duplexes and triplexes are better in that?
- [29:28]
A
Yes, because you could qualify for a lot more higher. Right. Because of the rental income. It adds to your DTI basically.
- [29:36]
B
And what's crazy about this whole thing, people always complain about the California real estate market, but people are constantly buying homes every day in California and people are complaining about California's inflation, but people are still moving to California and staying in California. So what's a big myth and misconception with the real estate market in California?
- [29:55]
A
I think a lot of people are going to get out of it. Obviously those are the people that can't afford it. But you got to think about it. California and Florida is the most travel visit place in the usa and that's where people get the most attention, right? So if these places are getting so much attention, California, sunshine, palm tree, all that stuff, you're going to have a lot of international people coming over here, right? And then when you talk about international people, there are usually the top 10% of their country. So you can, people are still going to coming, you're going to have people that's going to be, you know, eliminated, they're going to move out to Arizona, all these kind of places, they can't afford the price. But you're going to have a lot of international people coming into to buy these properties, right? Because California, everybody know California, there's no country out there that's in no California. So you're still going to have people going out. It's still a cycle. So the people that's getting wealthier and wealthier and that are comfortable paying a price of California, they're still going to come in and it just keep, it's going to keep going up, right? Because every time you have a transaction, you know you sold a price for 1 million, somebody's going to try to comp that you sell this. They sold it for 1 million, I'm going to sell for 1.1. And when you have more transaction, that's how, that's how the pricing of California market keep going up, right? And obviously inflation, every year inflation rates around 4% right now. So just by having that and you know, having a bunch of international people coming over, the price is going to eventually keep going up because at the.
- [31:22]
B
End of the day it's not even how much money you're making. It's Also purchasing power is such an underrated thing because yeah, I know you've been in Taiwan and I'm from South Africa. But even when traveling back to South Africa, because the dollar has been so strong for the last eight years, it's not how much money you make, but it's how much money you can buy with a dollar that you have as well. And, and what inflation has been doing, it's been taking away that purchasing power by keeping wage at a certain amount. But prices, you know, just seem to be increasing as well. And like you just elaborated it perfectly, which kind of segues to what I'm going to right now. If people are not making enough and wouldn't necessarily qualify for those investment of, of buying a home, would you then recommend they start with an arbitrage form of method?
- [32:14]
A
Yeah, absolutely. So, you know, this is something that my mentor always tell me like if you have money, actually real estate is not the right thing for you right away. The first thing for you to do is actually invest into yourself with knowledge that can make you generate money for you. So if I have 20k right now, I'll put, I'll put 10k into somebody that I trust. That's going to teach me the step by step of how they make money from in the past. Right. Not going through mistakes. Yeah. You sure? You could go into Airbnb yourself and then you don't know the contract, you don't know how to talk to the landlord. You know, you get, you probably went to the city that is Airbnb and you put all these furniture inside. You don't know how to buy the right furniture. You're spending so much thousand of dollars figuring out yourself when you could actually pay somebody that has done it over and over again for the last three, two, three years. And when you run to a mistake, they tell you exactly how to fix the mistake. Right. So anything in life, this is two thing. Invest into your credit score, understand how credit system work. And then once you're ready with the knowledge that you know people are teaching you or like you're investing, use that. That's like a very, very big power tool to get 100k to 250k of business funding. And then the other one is just basically invest into yourself on income generated knowledge that you know that could help you out. And then once you have both of that, that's when you can think about buying properties, I think.
- [33:32]
B
And then do you have a mentorship or discord or telegram group or like things when you're consulting with People as well. Do you have that currently?
- [33:39]
A
I used to do that on Airbnb coaching, but it just goes too saturated. And I, I'm an ethical person. I don't want to coach people on something that I don't sing. Makes as much sense as before back in the day is good. You make good money. My student all do really, really well. But right now, everybody's pitching corporate housing. Corporate housing. You know, there's only one landlord. There's like 20 students from different coaches trying to pitch the same thing. Like, how do you stand? How do you stand out? You know?
- [34:04]
B
Yeah, I heard Airbnb was like, back then, it was like you throw something, it just stuck. Like they said after Covid, it was like a honey, like, you know, a beehive. It was just so darn good. That Airbnb, any. Anyone who's making profit, like people not losing. Yeah. And. And is. It's a dying industry, would you say?
- [34:22]
A
No, I don't, I won't say it's a dying industry. Again, just like any industry out there, right. You have people that is doing the. Let's just say it like this. Like in Airbnb, let's just say city of Santa Ana, that's right next to Disneyland, right. So you have a hundred properties. I'm going to break it down simply. I. Out of those 100 property, you're going to have around 40 to 50% of them is more on the lower side. Like, you know, okay, Airbnb, because there's different clienteles, right? People that's going to Disneyland. We have the very, very ultra wealthy people that's willing to spend $800,000 a day. You have people that's okay, middle class, they're spending 300, 400 a day. And you have people that just want to go to Disneyland and save some money on the living expense on the rental, you know, daily. Right.
- [35:10]
B
So.
- [35:10]
A
So these are the type of people you have. Most of the people are here on the very lower one. They're spending $100, maybe 50 bucks a day on Airbnb because they can't afford it. Or they, you know, for some circumstances, you have people, middle classes traveling from out of state that want Airbnb. They want to pay 200 to $300. And then you have the ultra luxury people that want to go on Airbnb. Let me just ask, like if you have these three kind of category people, which one would you want to serve more?
- [35:40]
B
The third one.
- [35:41]
A
The third one, Exactly.
- [35:42]
B
The luxury ones.
- [35:43]
A
And guess what? A lot of people don't understand how to do luxury. Airbnb people think Airbnb just, you just rent the property, you furnish it and then you start making money. That's not how it works. I want to get out of this category. I want to do this because If I'm here, 100 property, right? Only 10 property is luxury property and maybe like 30 or like 25 is middle class and the rest is trash, right? So you don't even want to compete with any of these. So if you can stand out and be the top 10%, you know, which is 10 property, you're only competing with 10 competitors. And you could charge 800 or $1,000 a day on your property. If you do it the right way, right. The property are probably not going to cost that much different. But just the way you furnish it, the amenity that you provide, the rich people, they will always, they're not going to book these two. So when they come book these two, they only have 10 property they can choose from. So you just had to compete with 10 people and you're charging 800 to a thousand dollars per night, right? Especially July or like December time, you could charge 2k, 3k potentially on one day stay. And that's how you differentiate yourself from other people. So that's, that's my theory. Like, you know, if you want to serve somebody like for like real estate as well. Why would I want to show houses to par pop to somebody that only want to buy 600, 600k house when I can make 2% commission as $12,000. It takes me probably like 2 to 3 weeks to convince them to buy a property. Their mindset is not right. They're buying 600k property, right? And how to convince them to up in price? Because if you don't up in price, you're not going to be able to bid on that property. And you have the investor side or the luxury people. Like I want this $3 million house, okay, what help me get it. No matter what you decide on the price. So these are the type of clientele and that's the difference. So I'd rather serve the $3 million client. That could still make me. I'm putting the same time and effort into helping people buying a property. 1,600k, 13 million. This one I make $12,000, 2% commission. But for this one I make $60,000. So which one would you want to choose? You got to pick your, you know your battles, right? Like which one would you want to serve more? So I'd rather go with the $3 million people and then they will generate more cash flow in the future because you build that relationship with them and they'll refer the client to you. And then, you know, that's kind of like how basically service we're basing the service industry.
- [37:55]
B
And I've noticed though, I feel like the, the luxury real estate market has. Isn't it becoming a bit more saturated as well? Because I've seen a lot of luxury real estate like, like, not necessarily like agents on my social media. And I've seen it in like five different cities. Salt Lake, Nevada, California, Orange Counties. I, you see it more and more. Obviously you see a lot of like your usual like aged as well. But I've seen people that just focus on luxury and they just seem to be killing it, like making listings of like 5 million, 3 million and they selling. I'm like, who are these people that are buying? But I think they crack the code and they have a, you know, a different form of like lead base. They have a different form of like a way of how they generate in these people as well. And it seems like it's a quick turnover as well.
- [38:41]
A
Yeah. So it's hard to get into the real, to like the luxury side because you're going to know the people. Right. So my mentor once told me that I, this is actually my secret sauce. My mentor told me back in the days, you know, there's like a shopping center called South School Plaza right here, Right. That's like one of the biggest luxury shopping mall right here. Every single week, me and my mentor, we actually go there and we'll shop around, talk to these sales people, asking them what is the newest trend right now? What's coming in? What is Bottega having the new collection? What is LV gonna have for the new collection? What is, what kind of Patek watch is coming out? What kind of AP watch is coming out? What is the new series of the Rolex? We go there, we talk to them. You know, they tell us all these details and guess what? When you actually talk to somebody of that high level, you don't want to be somebody that's driving a Toyota, you know, talking to somebody that's driving a roll race. They will, they will talk down on you, they will look down on you. But if you have all these knowledge and I mean even if you're not there, if you could somehow stay at the same level as them, talking about the same stuff they like about golf, you know, horse racing, Patek, ap. When you're at that Level with them, they will treat you a lot more better and then they will trust you more. Right. Because real estate action is a very, very big purchase. Why would they trust somebody that's driving a Toyota or somebody that doesn't understand or dress well, not at that level. Or you want somebody that is maybe not at that level, but you guys are talking at the same time, you know, same wavelength, when you can do that. That's how I think that's how real estate agent, luxury agent kind of present themselves and then that's how they make money. Yeah, I think that's the secret sauce.
- [40:22]
B
That's, that's amazing. And, and I realized one thing. It's with all these people that seem to be in the luxury real estate, they go above and beyond. They don't just do like your normal like Sunday, Saturday listing. They out there in the networking events. They out there with the clients. They, they building rapport. They're getting dinner with them. They go into this event, they're meeting with this person, they're getting that connection. They're jumping on that podc. They do. It's all like, it's, it's like a, a crazy schedule because that one sale is going to bring about like four or five times more than a normal sale would because it's a luxury one because of the percentage you're in. And that report that like one referral just ends up like building. Because that's what I think I realized as well in solar, what I did. I did it for like a few years, but I was like, hang on, if I'm making between 5,000 to like 15,000, one of my biggest one is actually a woman from Taiwan. The commission of that one I think was 24, 000. It was a big, I think it was like close to 80 panels in her house in cappuccino, close to the Apple headquarters. But again with hers was just a report thing. Somebody referred to me too. We went for her for dinner, she was chatting up, trying to pitch us insurance. And what she was doing with this, like, oh, yeah, I think I do need solar. I have a big bill right now. Let's get this thing done. And then it was one of those easiest sales. But my point in getting in this is the fact that rapport, building that customer service and like going above and beyond is so important in getting the right deals and also building the connections. Can you stress a bit more about that? I know you love that topic a lot.
- [41:55]
A
Yeah, it just basically you just had to build trust, you know, and also like in real estate market as well. A lot of people, when they get the commission, they keep that commission, they don't want to spend it. But real estate is you got to treat as a business. The only, the reason why people are not making money as a real estate agent is because they don't treat it as a business, they treat it as a deal, like a job, a transaction. So when they get their transaction 20k, they keep that. They don't invest into, you know, everyday direct mail, they don't invest into social media ads, they don't invest into giving a. Buying a gift for your clients, right? So a lot of people, they don't understand and they're afraid to spend money because they don't know. They're afraid that if they spend that money, they're not going to get their money back. So that's the mindset as well, like how to actually run a business. So if I could make 60k for my client, the first thing I would do is I'll buy a gift for them, right? And I have this hack I used before. I always go to LV and buy the cheapest stuff, but that have the biggest box. The reason why I say that is because I could buy a scarf, you know, like an LV scarf, but it looks really, really big when you put it in the box. So when you bring it to your client, they say, oh, this is nice, it's a big present. You know, it show, it's a lot better. You show like a little small gift, right? So that's kind of like, like a hack. And I will kind of figure it out. And we buy a bunch of these and every time when it's like Chinese New Year's, we'll just like each scarf is like 350 or 500. I don't mind spending it because every single year I'm reminding them, hey, Eric is still here, he's still doing business.
- [43:30]
B
I love that, right?
- [43:32]
A
And then when they think about you, the next thing they did, they're gonna, you know, refer the client over.
- [43:37]
B
And I did the same thing. Like I, I start giving them between 500 to a thousand, depending on how big the system was. But like if I'm gonna be making like 6,000 and you get me like a referral, I'll give you a thousand bucks, like a 500 when they sign and then 500 when they close. And I get paid as well, right? And I think if you start having that mentality of dollars over pennies because you end up spending pennies to get the Dollars. It's such a good concept because I've used it as well where I'd get like a bunch of sales. But yes, you may think you're losing that amount. And I think they end up implementing a new thing where you couldn't end up giving actual physical cash. So by doing stuff like buying a new iPhone or doing different stuff, because now you're giving a customer a referral amount, you're thinking outside the box, knowing that they're going to build the report, you just go close the deal. But then because they trust you and it's an incentivized, like, way and transaction for them as well. So definitely there's just so many different stuff people can do rather than just doing the basic thing of like, knock, knock, knock, listen, I'm selling so and so, you know, so I like that quickly about flipping, though. How quick is the turnover on flipping?
- [44:38]
A
If you don't mind running through the process really depends. You know, depending on the market, depend. You got to understand the demographic, who is buying that area, and then what kind of renovation design I need to, you know, acquire for them. Right. So typically for a turnaround for me is probably three to four months for one flip. So obviously it probably take around two months for the renovation. Obvious. Depending on how much work need to be done. So usually around two months, it will take me around two to three weeks to get the house under contract and then obviously a month to close escrow. Right. So three to four months around the turnaround. Turnaround time for us.
- [45:17]
B
That's quick.
- [45:18]
A
Yeah, that's pretty quick. Obviously, you know, just in every. Just in every. Every single business, if you're gonna go through with permit and stuff, obviously that's gonna take a while more. So you're gonna have to play your battles and understand the hacks on, like, you know, just applying for permit for third and stuff. So the city knows that you're applying with permit, but the rest of us saw you do it without permit. But obviously you still have to be, you know, a licensed contractor. So there's a lot of ways you could get around stuff, but you obviously don't want to overdo it. But, you know, that's kind of like how we've been playing it.
- [45:49]
B
And then would you say then doing multiple of flipping deals is the best way to make money, or is it good to focus on one and jump onto the next and jump on the next as well?
- [45:58]
A
I mean, obviously, if you were to start out right away, I would start with one. You'll get your feet Wet and actually really understand what kind of, you know, what kind of difficulty is going to challenge going to face. And once you say this is actually easy then you can start replicating that and getting more deals because usually people can only start with one as well. You don't want to over leverage yourself.
- [46:20]
B
And have you built a team? Do they do cold calling and stuff like that or what does your team do?
- [46:26]
A
So I'm more like the end buyer, I'm like an investor so I understand every single business. They're good at what they're doing. So I'm not going to start a wholesale company right away myself.
- [46:40]
B
Right.
- [46:40]
A
So I'm just gonna let the professional do their job. They make money, I make money. So I'll just have people send me deals. So I don't like do only any of the cocos. So people send me deals if I think it's good, I give an assignment fee for the wholesale deals, they make money and I make money on the flip side or the buy on the whole side.
- [46:57]
B
And I think dude, that concept is so amazing. People don't really understand like collaboration is so important because some people are just experts in certain things. You know I looked at like and one of my things when I was in a rush to try and get one of my podcasts edited and like somebody like I watched a YouTube thing and my, my editor gave me like a thing and I'm like what am I doing? Like I wanted to try and see this thing up but like no, it doesn't work that way. Some people are experts in their field. People are very expert whether you're an audio or sound engineer, whether you're this thing, whether you're that thing. But that's the purpose of having people that are experts in their fields that it makes it convenience for once and it saves time and you can actually like progress and focus on what you're doing as well. So that whole concept of like you deal with the wholesaler, you do with that thing, they are the experts in that thing. We both make money. Win win scenarios are so underrated. People want to do everything all by themselves and then it burns them out and before you know what they knocked out, they're not making enough money, then it's a downward trajectory and everyone like loses as well.
- [47:55]
A
Exactly.
- [47:56]
B
Yeah. I couldn't agree more man. I'm grateful for all of these. I know that it's so crazy. Like I, I had these lists that I wanted to ask you but the competition was so good. Now I gotta start from scratch.
- [48:08]
A
I'LL keep going.
- [48:12]
B
But yeah, no, we, we're gonna close on time right now. But I know, I wanted to ask something right now, but you, man, it was a great convo that time flew by. I can't believe we have five minutes left. But yeah, I think it's this one year. When you're e re, when you're evaluating a new deal, how do you decide if it's best suited for a flip? Long term rental or Airbnb? I like that question.
- [48:35]
A
All right, so this is something that I've actually been thinking a lot as well. I could buy a property and make a quick flip and make 100k. Or I could buy and hold it and make a thousand to two thousand dollar profit, obviously by running as Airbnb. Which one makes more sense? So that's actually something I'm actually keep asking myself. So I have a property that I want to hold, but I also want to flip. I'm like complicating between that. So I think it depends on your, your stage of life. I think for me, I'm 31 right now. I think the long term holding game is the best way. But for people that are younger, you know, they want to like expand their business, I will flip the house. So I think that's kind of like where I'm contemplating against like make 100k up front or 1000, $2000 passively and then waiting for the whole entire equity to kind of grow. Because really think about it from, you know, the long term span, you really only need $5 million of asset that can invest into any, you know, bonds or yield for 10%, you could live pretty much for free. I mean, pretty well off, right? That's, you could literally $5 million worth of asset is what you actually need to retire. You know, if you invest 10%, you know, return every single, every single year. So that's kind of like my goal right now maybe just to get to that level and just travel because, you know, throughout my 20s I have been just been working my ass off. No travel, no nothing. But I feel like, you know, once you actually start making money, we're going to enjoy my, my life more. So maybe, I don't know yet. You know what that house, maybe I'll flip and make 100k and just go, go travel. I don't know yet. But.
- [50:16]
B
Well, you know what, in the next five years, once we do this interview again, that's the first question I'm going to ask you about. Like, what did you do with that home that you were Contemplating about. So for sure we will know by then. Definitely. And so are your plans to go to commercial right now at the latest stage or what's your future plans?
- [50:33]
A
So my future plan is we actually bought some like lands in like Arkansas. We're actually building like a cabin, like a 30 unit cabin right now. Well, like go for treat. So that's in development right now. So Morgan to motels and then also like land development. But something I really want to get into is actually like, like motel flipping. So basically, you know, motel and Airbnb is the same thing, right? Kind of like traditional company that's, you know, painting company and then people that's doing a com, like more creatively. So I want to buy stuff that's already existing, that the owner is probably like on the older side, they don't know how to run their business. Doing like a creative kind of deal, buying like part of the equity, renovating it to. Exactly. I know how to make money. They're kind of like, you know, people flip houses, right? We flip motel. We'll just change the paint, you know, change the bed, you know, put some accent wool onto it. You could potentially sell for like 100 extra, right? And when you can sell 100, 100 extra, you build that, that entire business generate will, you know, increase by 1 million to 2 million just by doing that. So I think that's something I want to really get into. Just doing creative deals with motels, renovating it for them, and then either try to flip it or hold on to it and then still give them some equity on the side so they could just retire and we keep the operational kind of in house, basically.
- [52:03]
B
Awesome, man. Yeah. And then the second last question I wanted to ask, what's the most challenging or difficult part about being an entrepreneur?
- [52:11]
A
You always want more. That's the best answer yet.
- [52:16]
B
It's true. It's a blessing and a curse because it's just never enough. You're like, oh my gosh, I've accomplished that and you realize your potential. If I can do that, let's try that. If I can do that, let's try that. But then it started as a blessing, but before you know it, you're in the spiral thing. You know, when you draw the line, Sorry, you.
- [52:34]
A
I have this house right now. It's on the escrow right now today. I need to remove the contingency. But I'm like, do I really want to overstretch myself and invest into that deal? You know, like I said, I need to decide that later on today. But yeah, I think it's just more about just there's so much new, there's so much opportunity out there, and then you just have to make sure you pick the right one and not overshoot yourself. That's what it is.
- [52:59]
B
Love it. Love it, brother. The code to winning is it's known for insights you need today to seize the world tomorrow. I ask all my guests this thing towards the end of the thing, because everyone has a different definition of what winning actually is for them. In your definition for Eric Chen, what does the term winning mean for you?
- [53:18]
A
For me, winning is, you know, being able to, I mean, my parents, everybody, you know, my wife, everybody sacrificed a lot for me. You know, I'm here because of them. So I think right now, for me in my 30s, my winning is actually basically just retiring my family and, you know, retire my wife and just travel and then having a bunch of passive income coming in. And also eventually we have kids, you know, having the right education for my kids, basically.
- [53:48]
B
Love that, brother. Love that, brother. If you could look at the camera. Yeah. And just let our guests know where they could get a hold of you if they want to, like, get a mentorship call or understand or follow what you've been doing. What are the best social media platforms? Website. And like, you know, just let us know as well.
- [54:01]
A
Yeah, absolutely. So you can actually find me on Instagram. I'm very, very active up there. My Instagram handle is E, C C H N. So Eric Chen, that's a very, very common Chinese name or Asian name. And I happen to have that handle. So you can find me very, very easily. Eric Chen.
- [54:18]
B
You know what's crazy? I was going to ask you that because I was like, how did you get Eric Chen in one word? Because I was like, he probably had Instagram when it downloaded it back in 2010, because sometimes people go, how many did you get Instagram? If you know what I mean? Asking.
- [54:31]
A
I bought a, I bought it from the person that had that handle.
- [54:35]
B
That explains that. I was going to say, man, Eric Chen, what are the chances we now first saw it? I'm like, no ways, man. Like, either. You had to have been among the first 100 people to get Instagram because Eric Chen is. Yeah, that's, that's impressive.
- [54:48]
A
Yeah, I, I, I, I pay a good money, a lot of money for it. But I believe that if people see somebody's name with Eric Chen, that's a very, very believable handle. And then it's incentivizing to follow me. Right. It's more legitimate. I got a blue tag. You know, everything just okay. Follow. It's all marketing.
- [55:09]
B
The code to winning. Insights you need today to seize the world tomorrow. Eric Chen, thank you so much, brother.
- [55:14]
A
Thanks for having me.