Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Steve Earl. How are you doing, my friend?
Steve Earl: I’m doing very well, thanks for having me today.
Joe Fairless: Yeah, nice to have you on the show. A little bit about Steve – he is the CEO at Done For You Real Estate USA, which is a full-service real estate team. They identify and sell investment properties to their clients, i.e. real estate investors. They’ve done that over 3,000 times with 3,000 properties. They have over 2,000 units currently under management, and they’ve got clients basically in every state – 40+ states.
A little bit more about Steve on a personal note – he served in the Boy Scouts for 20+ years, and he’s been married to his sweetheart for 26 years, so congratulations on that. Based in Orem, Utah. With that being said, Steve, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Steve Earl: Yeah, you bet, maybe from a real estate standpoint. I started out like a lot of people, and I bought my very first investment property with my own primary residence. Then I bought my first investment property a few years later, actually for about $235,000, I fixed it up, I flipped it, it took me nearly six months, and my total profit was actually less than $100. So I had one of those experiences to kind of get me off the ground there.
But then I did a few more and I just really fell in love with real estate investing. Since then, I’ve bought multifamily housing, some commercial, I developed some land… I then sold a company that I owned at that time, in order to create more time and more money so that I could do this full-time. That was my goal – to become a full-time real estate investor.
Once I got going, I then decided I’d get my real estate license. As I really got into this, I learned that I didn’t have enough money and credit to actually buy all the good deals I was finding, so I started helping my friends and my family to do the same thing. Then I decided to create a more formal and organized system to buy single-family rental properties and to help others do the same thing.
Since then, I’ve been able to help our clients buy and successfully manage nearly 3,500 properties in six different markets. So that’s kind of my background in real estate.
Joe Fairless: Six different markets – are they all in Utah, or are they spread out over the country?
Steve Earl: Actually, Arizona and Nevada – this is where we started out. It was right after the crash in 2008. We helped our clients buy nearly 1,500 homes out in just those two markets, and then as that market recovered, we expanded into a few other markets that were more cashflow-centric. So we’re in Indiana, Tennessee, Florida, and we’re in the process of opening Charlotte, North Carolina at the moment.
Joe Fairless: How do you set up your systems, because I noticed you didn’t say Salt Lake City or Orem, Utah, or anywhere where you’re located, so how do you set up your systems from a management standpoint to make sure you’re on top of things?
Steve Earl: That really is the key to the whole thing, because we’re corporately based in Utah, but for example I have a client in New York who’s buying properties in Florida… And we’ve set up a system where each of our clients are assigned a project manager, and that project manager works with our client in New York. We have boots on the ground in each of these states, because about 70% of the time we as a company buy the property first at an auction, we rehab it, get it all fixed up, place the tenant, and then we resell that property to our client. Our affiliated property management company in that particular state, in that market then manages the property.
What we have found is that it’s absolutely critical to have what we call boots on the ground in each of the states to ensure that we have proper compliant representation for our clients when they’re purchasing the property, and so that we have knowledgeable, experienced people in that particular market to ensure that they’re getting the best possible property management service, and that really is key. Once the property is turned over and you have a manager managing that property, you now have the confidence that they’re managing it properly, and really, the proof is in the pudding, meaning what’s your return on investment, is the cashflow that’s projected actually happening, are the properties getting rented as projected? That kind of thing.
We have kind of a formula that we follow and we don’t step outside that box very often. We basically state inside this box, which is we purchase basically three-bed, two-bath, two-car garage type homes, middle-income neighborhoods at the median home price, and what we have found is that that’s kind of like the biggest pool of responsible renters, and that’s where ultimately two, three, four, five years down the road that’s the largest group of people for a resell.
So we’ve just identified that little niche, and that’s what we’re really good at finding and buying and then managing.
Joe Fairless: Do you also personally own properties in these markets?
Steve Earl: As an organization, we buy on average 20-30 properties. After we’ve purchased them and then resell them, I would like to get the company to the point where we’re holding on to more of the properties, but at this point the capital that we have available to us to turn the properties, to deliver them to our clients – we’re just turning them over to our clients.
But here’s the interesting thing, and this is where a lot of the accountability comes into play… For example, last year more than 50% of our business was repeat customers, meaning our customer is coming back to buy more and more properties. Our goal once a client comes in the doors is to keep them for life and to help them execute what we call a game plan.
We’ve been in business now for almost ten years, and when a new client comes onboard with us, the very first thing that we do is we help them create a plan with a goal based on their current resources, where they would like to own, let’s say, 10 properties free and clear at some point, where that cashflow can replace their current income.
Over the course of time, we help them execute this plan, and as they come back time and time again to buy additional properties or to sell a current property that they have, take those gains, 1031 them into two properties… It’s to help them build that portfolio, and that repeat business really is part of our sustainability model with the company.
Having clients that are assigned to one of our project managers, who are constantly in communication with us, on their properties – that’s one of the keys. We don’t sell them a property and then they disappear or we disappear. We stay in their real estate investing life, so to speak, for the long-term.
Joe Fairless: Got it. So you knew the reason why I was asking that question, because that’s a typical question that an investor would ask you, and I know clearly you’ve come across it. And the reason why, Best Ever listeners, just for some context – the theory is if the turnkey provider owns properties in the same neighborhood they’re selling, then they’re happy with the neighborhood, so therefore you should be happy too, if they’re happy and they’re putting their own money in.
In this case, you’re not at that point from a business yet, but you are planning on getting there and you have other ways of aligning the interest. And do investors do appraisals on the properties before they buy them?
Steve Earl: Yes, every single property has a third-party appraiser. I would say more than 80% of our buyers are getting loans on these properties, and their average purchase price is about $150,000, so the lender, the bank, they hire a third-party appraiser because the bank wants to protect their interest in the property. So every single property has a third-party appraisal done on it.
Joe Fairless: And then what type of financing is available for the client?
Steve Earl: Almost exclusively we recommend a 30-year loan, and the reason for that is we don’t try and time the market, we don’t try and game the market and just go after an equity play. Our principal plan is to create cashflow. To create that stability, we encourage our clients to get a 30-year fixed loan, and in the current environment loans are relatively inexpensive, which really helps produce a good cashflow.
So the 30-year conventional fixed mortgage is what we recommend, and I’d say 99.9% of the time that’s what our clients who are getting loans actually do.
Joe Fairless: And just to pique behind the curtains and just have an understanding of how you’re able to work with the management partners – there are third-party companies that you’ve vetted and approved personally, right? Is that basically the thing? They’re not your company, but they’re partners of yours?
Steve Earl: Yeah, we own a local real estate brokerage, but where we are [unintelligible [00:11:00].08] outside of the state of Utah, yes, the lender is a third-party lender. Then as far as our property managers, we own a property management company, but we do not own the property management companies in the states where we work. They become an affiliate partner of ours, so correct, it’s a third-party in the individual states where we’re buying the properties.
Joe Fairless: Okay, that makes sense. So are these management companies licensed, and what are their monthly fees?
Steve Earl: 100% of the time they are licensed. That’s one of the things that we’re super concerned about, and how we transact real estate is that we’re 100% compliant with all of the rules and laws of lending and the division of real estate and so on.
The third-party property management companies that we work with – their fees range anywhere from 6% to 10%. The most typical scenario is our clients are paying about that 8% mark in property management fees.
Joe Fairless: Well, it seems about par for a course. Steve, what has been the biggest challenge that you’ve had with building a business, and how long since you’ve established Done For Your Real Estate?
Steve Earl: We’ve been doing this for nearly ten years. We started out here in Utah, and we were here exclusively in Utah for the first couple of years. In late 2009, early 2010 is when we expanded into the Arizona market. Then about a year later we expanded into the Nevada market. So we have nearly that 10 years experience running this model.
Of course, you learn as you go. There was a lot of trial and error, and one of the hardest things was just figuring out – okay, real estate is one of those things that’s very geographically centered, and the big question is how do you confidently and efficiently find, purchase, rehab and then manage a property from a distance?
When we went out to Arizona, we literally sent some of our corporate people out there to establish the relationships and to put things together, and what we found is that relationships are the key, and the vetting of those relationships, and then holding people accountable in those markets. And one of the benefits that we bring to the cable as a company is because of the volume of business that we do, our local rehab companies and our local buyers at the auctions, and then of course our local property management companies – there’s a lot of accountability because so much of their business comes from us. So we have a lot of leverage with them.
If we have a client who calls us up and has an issue that hasn’t been resolved to their satisfaction with the property management company, we’re able to give them a call and kind of [unintelligible [00:13:33].24] the other side of the story and find out what’s going on. What’s great about having that power of leverage in this relationship is that the companies that we work with are very eager to make sure that we’re happy with them and that we feel like they’re taking good care of our clients.
From the standpoint of an individual person wanting to do this on their own, and going out and doing all these things on their own – yes, it can be done, but when you’re just one individual who owns one or two properties, for a property management company, to be just really honest, you’re not as important to them, and it’s hard a lot of times to get the response that you need from them when you’re just a small entity that doesn’t generate a lot of revenue from them and you live 1,000 miles away, as opposed to a company like us. We’re generating a lot of business for them, we have tight relationships with them, we’re visiting them on a regular basis, we’re on the phone with them almost daily, and they tend to jump when the phone rings and it’s from Done For You Real Estate.
So that’s been one of the biggest keys in how we’ve been able to put this together and to create what I like to call a machine, where it runs very well. Now, I will say very quickly that the system isn’t perfect. Real estate, as you know and as your listeners most likely know – when you invest in real estate there’s always some pain that comes along with it. What we do is we’re very good at reducing the amount of pain that you feel when you’re investing in real estate.
We help facilitate the ability of people to take advantage of what I think is the best way to prepare for retirement, the best way to generate cashflow of any investment out there, in my opinion. Because we take a lot of the heavy lifting out of it in terms of how much time you have to spend on it, in terms of being an expert in any particular market where you want to invest…
And then this is one of the biggest things when I talk about geography – for instance, you mentioned we don’t really help our clients by here in Utah where we’re at, and that seems kind of odd. But here’s the issue – here in Utah, the median home price for a three-bed, two-bath, two-car garage home is nearly $300,000, and the rent that you’re gonna collect on that property is about $1,200-$1,300.
Well, I can go to Memphis and I can buy that same square-footage home, three-bed, two-bath, two-car garage – the median price is about $150,000, so it’s about half the price, but the rents I can collect on that property is pretty much the same; it’s right around that $1,200/month mark. So I basically just doubled my return on investment, and my total out of pocket costs are half what they would be here in Utah.
Now, if you extrapolate that out to somebody who lives in New York, just multiply that by like six, and what it does is it opens up the door for regular, ordinary mom-and-pop type investors to now take advantage of some of the more feasible markets, the markets that have good cashflow, lower entry points and lower total out of pocket… And that’s one of the biggest benefits that we bring to the table.
Joe Fairless: Yeah, it makes sense. Certain markets definitely make more sense to invest in than not from a cashflow standpoint.
I gotta come back to a question I asked earlier, because when you were talking about – and you have such a conviction when you say this, so I know you hold it near and dear to your heart, how the properties that you’re doing are one of the best ways to plan for retirement… You’ve got the single-family homes, you buy them, they cash-flow, you hold on to them for the long run, and now you’ve got a portfolio, right? So you’ve been doing it for ten years… I’m going back to the original question – ten years, how come you’re not picking off one out of every ten deals and just building your own portfolio?
Steve Earl: That’s actually a really good question. Just so you know, I do have my own personal portfolio as an individual, and many of my staff who work here also have their own personal portfolios and they’re doing the exact same thing that our clients are doing. I could give you a specific — like, any of our project managers, the individuals who work with our clients individually, they’ll be able to tell you and show you their personal portfolios. I can give you the name of our project managers – his name is Kurt Cummings… He’s in his early ’60s now and he started working here about five years ago; he didn’t own any real estate investment properties. He now owns six investment properties himself.
Roddy [unintelligible [00:17:56].05] who is another one of our project managers, he has been with us almost from the very beginning; he’s been a project manager now for between eight and nine years now, he’s been here for a long time – he has his own personal portfolio and he has done the exact same thing. I could go down the list with other project managers; our general managers – the same thing. Myself, my partners, we all do this, and before we started this company, my partner and I, this is what we did – we are real estate investors first and foremost, and we do what we preach.
Now, what I was referring to is as a company, our goal is to begin holding on to more properties as a company. But when you’re buying properties at the auction and you literally have to show up check in hand, and pay for the property in cash, you have to be fairly liquid. So as a company, we’ve been growing — the number of properties that we’re delivering to our clients has been growing incrementally year-over-year, and in order to maintain that model, you have to have quite a bit of cash on hand in order to turn those properties and deliver them to our clients.
Now, what I’ll state is once we get to a certain number of properties, our goal isn’t to take over the world and literally change the way people invest in real estate by delivering properties to everybody this way; we’re more boutique in nature. I look at it as kind of like maybe a medical practice where once we reach a certain point, we may have to say “Hey, we’re not gonna be able to deliver more than X number of properties per month, and we’re gonna kind of hold steady here.” As we hit that mark and then our cash needs are a little bit more fixed, then as a company we can feel confident in tying up more capital and keeping our own properties as a company and generating that cashflow as a company from properties that we’re actually holding. So that’s kind of the long answer to your question.
Joe Fairless: That makes sense, thanks for the explanation. What is your best real estate investing advice ever?
Steve Earl: My best advice ever that I can think of for your audience is to get into real estate with a plan. There are so many people who get into real estate and when they have success, more often than not when they succeeded they did it by accident. They either happen to time the market right, or maybe they did something that worked out but they’re not really even sure how it worked. So my advice is to take the time to create a plan, and do a little bit of research.
You don’t have to spend months and years researching, that kind of a thing, but take the time to take a look at the different types of real estate and what makes the most sense for you, and then to invest on purpose. Even take the time to listen to podcasts like this one, to read some good books by other individuals who actually have experience and have succeeded at doing real estate – not just talking about it, but actually doing it and having that success, talking to them and understanding it just a little bit, so that you go into it with an actual plan and a purpose.
Ask yourself “What’s my purpose? Is it just to generate a bunch of cash right now because I need cash now, or is this more for my retirement?” or is this to accomplish whatever goal that you might have.
One of my pieces of advice as well along this line of reasoning is to maybe consider this – consider letting your real estate pay for everything, and in the end, if that’s your ultimate goal, then it’s all about the cashflow. It’s not about just making a quick dollar here or a quick dollar there, it’s about having a plan over the course of five, ten, fifteen, even twenty plus years.
Joe Fairless: I like it – always should, and I agree that I think we need to have a thoughtful approach to where we’re going now, and then also in the future. Are you ready for the Best Ever Lightning Round, Steve?
Steve Earl: You’ve got it.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:21:40].01] to [00:22:38].21]
Joe Fairless: The best ever book you’ve read?
Steve Earl: Think and Grow Rich.
Joe Fairless: Best ever deal you’ve done?
Steve Earl: This is a deal I did about six years ago. It actually was a lease option, and it was with a young single mother. After the two-year period had expired on her lease option, she was struggling to figure out how to get long-term financing, and I really worked with her and took the time and we actually got the deal done.
It wasn’t a deal that made me the most money, but it really was fulfilling to see this young single mother take those steps that really helped her regain some self-confidence that she had lost, and to regain some self-esteem. That was by far one of the best deals I ever did.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Steve Earl: Man, where do I start? I’ve made many mistakes on transactions. I would say back in the day when the market saw a massive downturn, I got caught up in kind of what the crowd was doing… And typically, investing can be very counter-intuitive, almost counter-cyclical; instead of buying high, you buy low and you sell high, right? And I kind of got caught up in this whole buying [unintelligible [00:23:49].06] and I ended up buying a few hundred properties that just turned into a disaster in terms of what the properties were, in terms of where they were situated, the actual shape that they were in, and not doing enough due diligence in. That was by far my worst mistake.
Joe Fairless: What’s the best ever way you like to give back?
Steve Earl: I really like to give back to young people. I’ve got a saying, and it’s “If I knew then what I know today, I’d be that much further ahead.” As you’ve mentioned, I’ve worked in the Boy Scouts of America for about 20 years and I like to work with young people, I love to see they’re excited about life and about their potential, and as they get to that age where maybe they’re starting to head off to college and they’re starting careers and so on, I just feel really strongly that if they have some good knowledge about investing in general, but specifically about real estate investing, that even as a young person and even with very little capital, there are things that you can do to get into that first property.
I’ve had the opportunity to help a number of young people start that process, and to see them now just actually even finishing up school and owning several investment properties in really great equity positions, and not having student debt and all these things that young people get caught up in, to where they can be so much further ahead in life. So I really like to give back in terms of sharing my knowledge and my expertise and excitement about real estate investing with young people.
Joe Fairless: How can the Best Ever listeners get in touch with you, Steve?
Steve Earl: The best way to get in touch with me is just go to our website, which is www.dfy-realestate.com, or if you’d like to contact me directly, I’d be more than happy to respond to any and every e-mail that you might wanna send me, or questions that you might wanna ask me, you can e-mail me at Steve@doneforyourealestateusa.com
Joe Fairless: Steve, I’ve really enjoyed learning the business model behind the turnkey company, the questions that you’re asked by investors and your responses to them. I’m sure none of the questions that I asked you today were original questions that you’ve never been asked, and that’s why I thought it was important just to talk to you as though I was a potential client. That way, Best Ever listeners, whether you talk to Steve or someone else at a turnkey company, you know the types of questions that you should be asking, in addition to others, as well.
Thanks for talking through all those different aspects of how you work with different companies, management partners across the different markets that you’re in, and your overall approach to the business. I’m really grateful we were able to interview you.
Thanks for spending some time with us, Steve. I hope you have a best ever day, and we’ll talk to you soon.
Steve Earl: It was my pleasure, thank you very much.