BIll Ham: Episode 612

Transcript

[0:00:28] DA: Think you can afford to invest in multi-family real estate? Now you can. In his new book, Creative Cash, real estate investor Bill Ham allows readers to discover two creative, effective financing strategies that other investors don’t want you to know about. Master lease options and seller financing. He talks about he used these strategies to buy his first 400 property units without ever stepping into a bank or qualifying for a loan and how you can too. With this book, Bill aims to show you how to close your next deal with little to no money down, using the hottest strategies in real estate, leveraging other people’s money to come out ahead. Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Bill Ham, author of Creative Cash: The Complete Guide to Master Lease Options and Seller Financing for Investing in Real Estate. Bill, thank you for joining, welcome to The Author Hour Podcast.

[0:01:22] BIll Ham: Thanks, thanks for having me Drew.

[0:01:23] DA: Bill, let’s kick this off. Can you give us a rundown of your professional background?

[0:01:28] BIll Ham: Yeah, sure. I’m in commercial real estate. I have been in the commercial real estate/apartment multi-family world for about 15 years now. I started my career in ‘05. Started off with a duplex, give a little further color. I bought my first two units in ‘05 and I received seller financing for that, from the seller and that kind of kick started my career into real estate, traditionally and by trade, I’m a pilot. I flew airplanes up until ‘05 from, what is my early 20s up till about 28 years old when I walked away from the aviation career with that first deal. I bought a duplex, it was making about $300 positive revenue a month and I had $10,000 saved up and I thought, “Well, I’m smarter than the average bear,” and so I walked away from aviation and went into real estate, only to find out I was not as smart as I thought — but did stick the business out and did well and it just took me a little time to get going.

[0:02:32] DA: Now, why was now the time to write this book? Did you have an inspirational moment, an “Ah-ha” moment or did you just have some extra time on your hands due to the world situation where –

[0:02:44] BIll Ham: Good question, it’s sort of all of the above I would say. No, the “aha” moment actually was a friend and a personal coach of mine. I was out giving a lecture, I teach real estate and I was giving a presentation to a few hundred people and I had given a presentation, sort of on how to use creativity to get real estate deals funded when a lender may not want to fund that same deal. Basically, we’re talking about some sort of distressed asset is what we call it the business. My mentor-friend kind of came up with after and said, “You should write that down.” And I said “Okay.” She said, “No, really, you should write a book.” “Okay,” so I set out to write the book. Now, a better answer to “Why now.” The “Why now” is because real estate just like our economy goes through cycles, ups and downs and ups and downs and when we go into a recession cycle which I believe current events would dictate, we’re sort of heading into. What we see in the real estate world is that lenders sort of pull back. They have what we call flight to quality. They really get nervous, they stop lending, they stop putting out as much money, they lend on quality assets, things of that nature and therefore, that leaves a lot of sort of real estate in the world, it’s tough to get funding on. I know that we’re about to go into that recession cycle because I’ve been through this already, and so I thought, “Now is the time to go ahead and bring this material out.” Because over the next two years, I think it’s going to be very prevalent and the techniques that are in this book are really going to serve a lot of buyers over the next two years as the traditional lending gets a little bit tougher. You can use some of my creative techniques to still get deals done.

[0:04:33] DA: Now, when you were writing the book, you’re clearly – you’re very successful, you’re a professional in this space but while you were writing the book, did you have any learnings or major breakthroughs and did you find anything new or maybe was just looking at your deals at the past or by doing some research?

[0:04:49] BIll Ham: Yeah, I did. I developed some techniques that I kind of put in to the book. Largely, I think would be negotiating techniques. New things that I learned, you know, I always – I’ve been teaching real estate for a long time and I’ve always kind of said that you learn the most through teaching. I believe by writing the book and teaching, I was able to sort of review and re-polish some of my old techniques, if you want to call it that. For example, I have what we call a S.P.Y technique. It’s an acronym, it stands for seller, property, you. It’s basically a way in which to identify and negotiate with a seller so that you're making an offer that solves a problem. That’s kind of the crux of the book is how to go out and find a person in the world that has a problem but at the same time, it has what it is you want, you know, their real estate. How do we get that person to trade with us if there’s not available money to just buy the property? That’s kind of a lot of what I developed and developed further for this book. Things like the S.P.Y technique, showing you how to negotiate and how to go out and identify assets and then to make offers that are problem-solving, value creating offers. If you can do that, then money kind of takes a back seat. It’s not as big of a hurdle to overcome as people think, you know? A lot of people think, “Gosh, I don’t have any money, therefore I can’t buy real estate.” I’m here to prove that that’s not true because that started with no money and no experience and I got out on the street and learned how to do it and here’s the book on what I learned.

[0:06:20] DA: That was actually my next question. Is this book for – do you need a million dollars to read this book and get started?

[0:06:26] BIll Ham: No, not at all, quite the opposite. Yeah, quite the opposite. This book is created for two groups. People that are – or I should say, two groups will get different things out of the book. If you’re new to business and you’re new to real estate. This is going to show you a different way of looking at deals, a nontraditional way of looking at deals that will help you broaden your perspective on what is a good deal. If you’re already in the business and you’ve already got some experience, this book will give you some new techniques and some new ways to do some old types of business but with some new tricks. Either type or either group is going to get something out of it. If you're brand new, read the book, you're going to learn how to get started without having a lot of cash and hey, if you already have a lot of cash, this book’s going to show you how to keep more of it in your pocket.

[0:07:14] DA: Now, what does this book bring to the table that other books on real estate do not?

[0:07:19] BIll Ham: I think the shortest answer there is, focus on seller financing and master lease options. Seller financing is pretty self-explanatory, that kind of you know, where the seller is acting as the lender. But master lease options are a subject that is not that well understood and what this book brings is information that’s very actually hard to come by in the market right now. If you do a search for master lease options in creative financing, there’s not a lot of definitive material that pulls up on it. You can read some blogs and you can find some posts here and there but there isn’t a solid go-to spot where this information is condensed and here it is, you know? That’s why I’m bringing this out, this is going to stop you from having to crawl around the web and read a hundred different articles and a hundred different websites to piece together the information. It’s all right here and there’s very little information out there, it’s a moment on this subject. I really feel like that’s what’s going to bring a lot of value to readers.

[0:08:18] DA: I love that you say you boil it down being successful in real estate to just one sentence. That sentence is, “Know the values of the assets in your market and analyze more deals than anyone else.” Can you talk about that line and maybe kind of how you got there?

[0:08:35] BIll Ham: Yeah, absolutely. I always tell everybody, I can tell you everything you need to know about real estate in one sentence and it’s that sentence right there. Basically, what I’m saying is look, you need to know what the values of the assets of the properties in the market that you’re looking at, you got to know what the values are. Because if you don’t know what something’s worth, how do you know if it’s a good deal or not? You won’t. Step one is just know what things are worth, that way, when you encounter something, you will have a reference for it being a good deal or bad deal, is it overpriced or underpriced, am I overpaying or not. It’s, understand the values in the area and then just outpace the next person, just work a little bit harder than the next, your competition, that’s it. You know, just look at more deals than the next person in the room and that’s almost any business, right? We just got to apply ourselves a little bit more than our competition. It’s really a simple concept just understand what it is you’re trying to buy, just look at more deals than the next person and you’ll be all right.

[0:09:38] DA: Now, what factors go into the financing of a home in a – let’s say a traditional purchase and what is your creative financing formula?

[0:09:49] BIll Ham: Okay, traditionally speaking, you know, we’re talking anywhere from houses sort of up to commercial real estate. Lenders have a very specific number that they’re after and it’s what we call the debt service ratio. I won’t bore too much with factual stuff but debt service ratio basically is saying, “Hey, if this property makes money, how does that service the loan?” Does the money that this property make, does it break even with the loan? Does it make more money than the loan or less money than the loan? So a lender, a traditional lender, is going to look at that number and say, “We don’t want a property that breaks even with our loan, that’s not good enough. We want a property that makes money.” We typically – a lender is going to want to see a property that has what we call a debt ratio of about 1.2. All right? If it were 1.0, that would mean, the thing’s breaking even with its loan, you’re not making money. A lender wants to see 1.2. Well, what happens when the lenders pull back in a recession as we see Fannie and Freddie and a lot of the lenders doing right now. You come across a property; it was just mismanaged. It’s good real estate, there’s nothing wrong with it, it’s just the owner didn’t really manage it very well. Hey, and that number’s not quite at 1.2, you're not going to get a loan, what do you do? Create a financing. That’s where I come in and show you how to use techniques like seller financing and lease option. It’s not just the function of understanding the paperwork. Anybody can go out online and print off a contract for a lease or you know, something like that or seller financing, that’s easy. It’s getting the seller to accept it. That’s the magic and that’s what this book does. It shows you how to make that offer more than just paperwork. It’s how to make that offer something that creates value for a seller in exchange for your lack of money and that’s what the book is about and showing you how to use that creativity to solve problems when traditional lending may not be the way.

[0:11:42] DA: Can you tell us a few examples from your experience like why are we trusting Bill Ham right now for this invest?

[0:11:50] BIll Ham: I’m still here, that’s why. Honestly, you know? I’ve been in the business for 15 years and let me tell you. Information is only passed on by those that survive. If you didn’t make it, we’re not listening to you right now are we? I understand that’s a bit of a forward comment but that’s the truth. I survived the last recession. I crafted these techniques through the last recession, not only survived but thrived and made a living in a great portfolio in the last recession and in any down-cycle, which we are going into again. I’m kind of like the scout that’s been there before, you know, I’ve gone through this, I’ve been through this and I survived it and now I’m bringing those techniques to you and that’s why me, to answer that question directly is I’ve been through it, I’ve done it and these are not theories. These are tried and true tested techniques that I have personally – and a lot of my students by the way, have also made a lot of money using it.

[0:12:50] DA: Now, can you guarantee results after reading the book? Or, do your – just odds of closing increase?

[0:12:59] BIll Ham: I can guarantee your odds of closing increase. I can’t guarantee success, because no one can guarantee that someone else will go and put in the effort that someone else will go in and put in the time and energy that it takes. What I can guarantee is that your probability of success will increase. Real estate and finding a good deal is a numbers game. It’s kind of like sales or anything else. You know, if you make enough attempts, you eventually kind of get won out of X. It’s a numbers game. Well, in real estate finding a good deal is the same way and so what I’m doing is, let me say, what I have found from my own experience is if the average person will close about one in 80 deals that they go out and look at and I say look at meaning sort of analyze or crunch the numbers on, this sort of thing. You’re round about one out of 80. With the techniques in this book, we can just simply increase that number. We can increase maybe five out 80, you know and so that’s what this does is this book gives you the ability to take deals that through a traditional method may not work. You may look at it through the traditional methods and say, “That’s a bad deal.” Well, I’m saying, “Hold on, before you throw that deal in the garbage and say bad deal and walk away, pull it back out, read my book, apply some of these techniques.” If it is still a bad deal, then it’s truly a bad deal, move on. My book will guarantee that you’ll increase your probability but I could never actually honestly guarantee anyone’s success. That would probably be not a responsible thing for me to do.

[0:14:29] DA: I mean that’s on them right?

[0:14:30] BIll Ham: Absolutely.

[0:14:31] DA: What would you say to someone who is really trying to understand the fundamental pillars of real estate and specifically around the strategies of debt?

[0:14:42] BIll Ham: Yeah, one of the things that you have to understand, one, in this book I talk about – you’ve kind of hit on this, I talk about the three pillars of real estate and that is debt, market cycle, and exit strategy. Those are the three. You have to kind of align all three of those things up. You got to know what you’re trying to do with the property, you have to know where the market is going and you have to kind of get the right debt that matches that. What I kind of warn people on the debt aspect as you’ve asked here, twofold. One, you have to qualify for the loan and that can be difficult when people are new to the business. Something a lot of people don’t understand is when you go out for a commercial loan, it’s very different than just the house. If you’re going to my house to live in, for small real estate they typically look at your W2 money. They look at your income and say, “How much income do you make at your job?” “Okay, you can qualify for this amount of real estate because you make this amount of money at work.” When we start talking about larger properties, the function kind of shifts and they don’t really look at your paycheck anymore. They look at your net worth and they say, “Okay, if you want to borrow X amount of dollars, we just need to see that you already have X amount of net worth.” For example, if I want to borrow a million dollars to buy commercial real estate, I need to be worth a million dollars. That can be a big barrier to entry for a lot of people trying to break into the business and so this book kind of shows you some ways to leverage that seller to where you may not have to walk into a bank and qualify for a loan especially if you are loan qualifications are not that strong as mine certainly were not when – you know, I own 10 grand and the duplex. I was next to worthless. Well, I was worth 10 grand, so these techniques work, you know? That’s on the debt side, I think that’s a lot of the value that I bring. It’s showing people that are new how to get real estate done even when you may not qualify for that big giant commercial loan.

[0:16:35] DA: What are some tips and tricks on the top of your mind when somebody says, “Bill, help me find deals or the right deals?”

[0:16:43] BIll Ham: Yeah, I say you’ve got to be out looking all the time. If you’re looking at smaller deals, you’re typically going to try and go directly to the owner and if you’re dealing with larger deals and I am kind of saying larger as in multi-unit larger properties, you’re probably dealing with a realtor. You really want to kind of split your business model. Small stuff from houses, maybe up to 30 or 40 apartments, you can all – the best trick is to try and go directly to the owner. Try to get their contact information, give them a call, write them a letter, you know, do these things. When you get over about 40 or 50 units, you really are in the commercial realtor space and I always kind of make the joke. I say, “Look, have you ever driven by this 200-unit apartment complex and seen a “for sale by owner” sign scribbled on a piece of cardboard and stuck out by the front road?” No, you know when we’re talking large commercial properties, those are sold through realtors. When finding deals, it’s really kind of a question of what are you looking for. If you are looking for big property, it is going to be through realtors. If you are looking through small properties, if you are looking for small properties, it will be through direct contact with owners. Either way, the techniques of creating the offer are the same regardless to whether you’re working with a realtor or not working with a realtor, going to be a little bit more difficult because the first thing the realtor is going to be concerned is, “Hey, am I getting paid?” “You know, am I even getting a commission check here? If they do some creative financing, am I going to get my money?” I show you how to sort of overcome that objection and how to create offers that deal with all of that.

[0:18:18] DA: Now, did you follow a system when you started or did you have a mentor?

[0:18:22] BIll Ham: I did not. No systems, no mentors, no nothing. I got out on the street and just beat the business to death with blood, sweat and tears. I ran the gauntlet every day and it was hard and it was tough and it did not take me long to figure out — I can practice or I can get a mentor and practice accurately. It didn’t take me but a couple of years to figure out that I needed a coach, I needed some help and I did wind up spending some money on my education. Getting a professional mentor that helped me kind of go forward in the business and I took a lot of the raw techniques and tricks that I had going on and refined them with some professional help. Yes, eventually I did get my own mentoring.

[0:19:04] DA: You actually have a really awesome step-by-step instructions towards the end of the book, which make the theories you talk about in the book like uber-digestible, specifically in the due diligence step-by-step, which I found very, very thorough. What steps would you find are the most important?

[0:19:24] BIll Ham: Probably deal analysis, that’s where I would really say is a very important step-by-step process and we cover that, I think it’s chapter four. We cover that pretty heavily in the book and it is how to value a deal and that’s kind of like I said, the first half of that sentence, knowing the value in your market. That’s easier said than done. I know I make light in that sentence of just, “Hey, know the values.” Well, it’s not that easy. You really have to get into a lot of techniques and tricks such as the income approach and comparable sale approach, things of this nature to truly understand the value of the property you’re looking at and is it worth what the seller is asking. I think step-by-step that would probably one of the best areas that we really cover is deal analysis and knowing what you’re looking at.

[0:20:09] DA: Now, continuing education is also key here. Where do you suggest folks find more resources on some of the techniques you talk about?

[0:20:18] BIll Ham: Self-serving answer, they can go to creativeapartmentdeals.com and that is our website that supports the book. We also and I say we, Gino, Jake and Gino, the sort of sponsors of my book here, we have a master class on that website and so not to really turn this into a giant sales pitch or anything but you can certainly go to creativeapartmentdeals.com and we have more information there from free information all the way up to the master class that you can download. Outside of that, you really are going to have to kind of piece-meal it together and that was my point earlier. There is not a lot of one-stop-shop area for this type of information. I think that is the case because there is just not that many people that have gone out and done what I’ve done. That are also teachers, there’s plenty of people that have done creative financing. There is just not plenty of people who have done creative financing that are also good at teaching like myself. I believe that is why we don’t have a lot of formal material on the subject.

[0:21:16] DA: Now, you’re talking to someone on the street. They have $10,000. What do you suggest they get started and a separate question but like how much is the time resources load on something like taking care of some of these real estate deals because you at one point had hundreds of properties?

[0:21:36] BIll Ham: Correct and I built my own management company as well. I managed myself in the beginning but then I turned it over to staff, so I kind of created my own management company. I would believe the real time is in identifying the deals and finding the deals not so much in the day-to-day operations unless you want to be a landlord. You know, it pays well but it’s a lot of work. Most people do not want to be landlords and so I don’t necessarily recommend that you do that and I recommend you’d be an investor not a landlord. Yeah, I think the majority of time is in sourcing the deals and building the business not so much the aftereffect of dealing with them and I’m sorry, what was the first question was?

[0:22:16] DA: $10,000 in your pocket.

[0:22:18] BIll Ham: $10,000 right, what do you do with it?

[0:22:19] DA: I want to do real estate, what do I do?

[0:22:22] BIll Ham: Yeah, I would take the 10 grand and stick it under your mattress, forget that exists, start with nothing. You only have one direction to go and I would start with your education. I would start with the low cost education and I am a teacher but I’ll tell you, the first person to tell you buy the book first before you go sign up for some big fancy class and you spend, you know, these classes and mentoring can be tens of thousands of dollars. It can be a very real number and so I strongly recommend people to get as much cheap and low-cost education as you absolutely can. Hey, my book is a couple of dollars. Read the book, you know? Read other people’s books. There are a lot of online stuff, YouTube videos, there are a lot of websites and forums where you can gather a lot of these data and I recommend that students spend as much time as they can studying. Then go out there on average what we find just to kind of give you a reference of timeframe is people that are brand new to real estate usually close their first deal within 12 to 18 months, so don’t be in a hurry. It could take you years, so get out there and find your first deal. It took me a little over a year to find my first deal, so I would say start with education and patience.

[0:23:31] DA: Bill, writing a book especially like this one, which is so helpful because you really did breakdown a major industry and I think something that piques so many people’s interest and you broke it down into a pretty digestible way with those step-by-step instructions and it’s no small feat. I want to say congratulations on finishing the book and for publishing.

[0:23:51] BIll Ham: Excellent, thank you. Hey, I appreciate you guys giving me the help. Yeah, it’s been a great process, I really enjoyed it. I like teaching. I’ve been teaching for a long time, it’s just something I would, you know, I always say, don’t tell the boss I do it for free but yeah, I enjoy it. I like doing it and this is really been a great venting process for me. You know it has helped me get a lot of pressure off my own head. You know, write this stuff down and I encourage anybody out there, if you’ve got something on your mind, write it down. Write a book, it’s really good for you and I’ve really enjoyed the process.

[0:24:23] DA: Now, here’s the hot seat question and last question. If readers could takeaway only one thing from the book, what would you want it to be?

[0:24:33] BIll Ham: I would go back to the S.P.Y. technique and the reason that I say that and I know I didn’t completely explain how to use that, of course, you have to read the book to get all of the information but the reason that I go back to that one specific concept is it is applicable across all levels of life. It’s a way to be valuable to people and how to sort of exchange through value and that’s something that we can apply to anything from our work to dealing with family, maybe children. It’s not just about real estate at all. I happen to base the concept around real estate but once you understand what I am telling you about how to interact with other people and how to identify value and create value yourself, it’s a technique that spans all markets and all businesses. I think that is probably one of the most important techniques that I have in the book.

[0:25:25] DA: This has been a pleasure and I am so excited for people to check out this book. Everyone, the book is called Creative Cash and you could find it on Amazon. Bill, besides checking out the book, where can people connect with you?

[0:25:35] BIll Ham: They can connect with us as we said, connect with me at creativeapartmentdeals.com and you can also come to my company website, which is broadwellpropertygroup.com and if they want to connect with me directly, it is bill@broadwellpropertygroup.com.

[0:25:53] DA: Well, thank you so much for coming on the show today and best of luck with your new book.

[0:25:56] BIll Ham: Thank you, it was a pleasure. Thanks for having me.

[0:25:58] DA: Thanks for joining us for this episode of Author Hour. You can get Bill Ham’s new book, Creative Cash, on Amazon. Also, you can also find a transcript of this episode and all of our other episodes on our website at authorhour.co. For more Author Hour, subscribe to this podcast on your favorite subscription service. Thank you for joining us, we’ll see you next time. Same place, different author.