Private Money Lending (Don’t Get Scammed!)

Steve Trang: Everybody. Thank you for joining us for today's episode of real estate disruptors. Today we've got Blake Selby with Selby Enterprises. He flew in from Davenport, Iowa to talk about how he built a 300 plus unit portfolio and turned that into $2,000,000 liquid and the lessons you learn along the way to avoid getting scammed when you're lending. If this is your first time tuning in, I'm Steve Trang, sales trainer for some of the top wholesalers in the country, and I'm on a mission to create 100 millionaires.

Question I get all the time is how to become one of the 100 millionaires. The information on this podcast alone is enough for you to become a millionaire in the next five to seven years. If you will take consistent action, you will become one. If you wanna get there faster, send me a DM on Instagram, and we'll see if we can help you. If you get value out of the show today, please tag your friend below.

Share this episode right now. That way we can all grow together. And this is a live show, so please ask your questions for Blake to answer. You ready?

Blake Selby: I'm ready. Let's do it.

Steve: Alright. So first question is what got you into real estate?

Blake: Yeah. So short answer is I just didn't see another path. And so I think it's always been in my blood. My great grandfather owned a Chevrolet dealership. My grandfather was the head real estate buyer from Ford Motor Company, all of it.

And, and then my father was in business as well. So it's just kind of always been in my blood. I knew I needed to do something like that. So

Steve: The head buyer Yep. For Ford Motor Company.

Blake: Yep. Global real estate buyer.

Steve: Global, not even national. Yep. Global. Yep. Alright.

Maybe, just to help enlighten everybody else, can you explain what it means to be a buyer? Because I don't think everyone knows what a buyer is.

Blake: So he would negotiate any dealership opening for Ford. He would source the properties and things like that, and then he had his own, you know, real estate, empire as well.

Steve: So he would go and negotiate on behalf of Ford? Correct. And then Ford would sell that to the dealership?

Blake: I think that they would either sell it to the dealership. I'm not sure exactly what the disposition process was for that, but I know that he was the person who would identify the properties.

Steve: Or did they, like, they maybe had a McDonald's model where, like, they just buy the land, put a McDonald's on it, and then just lease it to you?

Blake: That would be a good model. I'm not sure if that's what they did. But Okay. Yeah.

Steve: Alright. And then you said that your father was also in the real estate or in the industry. So what do

Blake: you mean? Business. So my my father's in business. He, did something completely different than real estate. He did, like, a piano company, grand pianos, deliveries, sales, things like that.

So

Steve: So is that more of the entrepreneurial component?

Blake: I think so. That's in my opinion.

Steve: Real estate that was in your blood. It was the entrepreneurial sphere was in your blood. Exactly. Okay. So then did you go to college?

Blake: I did. I graduated from Michigan State, University and got a degree in something completely unrelated. So I got degree in kinesiology, which is essentially exercise science.

Steve: Mhmm.

Blake: So then straight out of college, I went and opened up a gym, which I thought was a good idea at the time.

Steve: So you got your degree in kinesiology. Right. And then you immediately opened a gym.

Blake: Opened a gym. Yep.

Steve: A lease, I imagine. Yep. Who approved a lease?

Blake: Yeah. I got really, you know, fortunate to have met a lot of good people, in Iowa. So I moved, kinda here for that opportunity and, opened up the gym and, you know, did really well with it. But I could kinda see the writing on the wall that the money that was coming from the gym, it was very linear growth. I wasn't gonna be able to I had to be there every day from five in the morning until, you know, whatever time at night to keep that running and, doing a lot of personal training at the time and things that I was doing in college.

And so, I did that for about three years. And just as things were going, I didn't see another path other than something like a real estate to give me, like, more of an exponential growth curve, to where I could actually make some serious money.

Steve: So when do I when did you graduate college? 2012. 2012. And then you, you're from Davenport, or you moved there?

Blake: I'm actually from Michigan, so I I kinda figured out this opportunity in Davenport with the gym situation.

Steve: So you moved to another state Yep. To open a gym Correct. With no

Blake: I didn't know a single person. So here's what I did. This is nice.

Steve: Very Yeah. Out there as far as risk.

Blake: Yeah. It was huge risk. Looking back, I don't know what I was thinking, but I'm glad I did it. Yeah.

Steve: For sure.

Blake: But I actually got a phone book at the time, and I called every single number in the phone book and

Steve: offered them

Blake: impressive. Offered them a free personal training session and a free gym membership, at the time. And, you know, that's how kinda how I built the business.

Steve: So Okay. So you got

Blake: this, Jim. Yep.

Steve: And it's profitable? It was profitable. Yep. Day one. Okay.

So profitable from day one. So that's impressive. And the fact that you called the phone book, I mean, that's a lot a lot of a lot of us at wholesalers are doing. Yep. It's more or less for calling.

We call it high equity list, but it's basically you're calling the phone book.

Blake: And I was 22. I mean, I didn't know what I was doing. You know? I would just try you know, just What clear

Steve: are you doing? What was working?

Blake: Sure.

Steve: So alright. So you you open your gym, and you said there was a linear growth. Yep. What does that mean?

Blake: I just got to the point where I could only train so many clients in a day. I could only teach so many classes in a day. There was only so much space for memberships, and, I've seen guys try to open more than one gym, and they just completely, you know, get too dispersed. They can't, you know, focus hard enough on one. I'm sure there are models that work because there's chains of gyms.

Mhmm. But at the time, I was young. I didn't have the expertise to really franchise out, so I wound up selling it, actually.

Steve: Got it. Okay. So you end up selling your gym, and then

Blake: why money off it.

Steve: Oh, really?

Blake: Oh, yeah. Doubled up. Because of the SaaS model,

Steve: or it's just, like, people are the current model?

Blake: Yeah. I mean, the sale of the gym gave me a lump sum Mhmm. To use, and I actually I don't wanna get too into detail, but, basically, they were tearing down the gym building. Mhmm. And so the new, buyer of the gym wanted me to source a location for them.

There wasn't anything to really rent, so I wound up finding a strip mall that I could only buy. So I used the money from the, you know, proceeds from the sale of the gym toward the down payment on the strip mall. And then I figured out, woah. The strip mall actually makes some money. Like, this is good.

And, the rest was history. I was like, how many of these things can I get? So I kinda started there.

Steve: Right. But the I think one of the interesting things about the gym model, right, is that, it's a lot like we talk about subscription as a service Right. Or software as a service, whatever. And it's you got this recurring monthly fee. Right.

And the great thing is that you can sell on a multiplier offer of a recurring fee, and that's what you guys did. Yep. And what's really cool as a gym is that people don't quit because it's to quit a gym is to imply you're quitting on yourself. Yep. So people just never cancel except for, like, when they're the once in a while, they're looking at the credit cards or they change their credit cards.

Right.

Blake: There's a big statistic. I can't remember what the number is, but it's the percentage of folks that cannot enter the gym in order for you need to be to be profitable. Mhmm. And, you know, Planet Fitness is a prime example of that. I'm sure only a small fraction of their members are regulars.

Steve: Right. No. They it's it's crazy. Yeah. The gym the the gym model.

Okay. So you bought this strip mall, and then that's what opened your eyes to real estate.

Blake: It opened my eyes immediately. I was like, wow. I was kind of a rebel without a cause because I had, for the first time in my life, a pretty significant cash sum, and I was like, wow. But I had no income, I mean, other than personal training clients, and that's not enough for me. So I was like, wow.

I need to you know, I really need to put some thought into this. This was probably late twenty fifteen at this time. I was 25 years old at the time this happened. So, felt like I was floundering. What am I gonna do now?

And, I decided I was I met with a a guy at a local bank who happened to be a member of my gym and had seen the growth, and all my financials were screwed up. I didn't know, you know, what a p and l was. I didn't have anything. And he said, you know, we we do in house loans, which are called portfolio loans. Mhmm.

And he said, I'm gonna take a chance on you. Gave me a million dollars. The banker gave you a portfolio. Yep.

Steve: Line of line of credit.

Blake: Straight up. He said go buy go pick out a million dollars. A

Steve: million dollars Yep. Wired into your account.

Blake: Yep. Go pick out properties. Yep.

Steve: Okay. Cool. Alright. So you did that. So we

Blake: were term loans. Yep.

Steve: So what did you do with a million dollars?

Blake: So I bought a whole bunch of apartment buildings. I I think one thing I always did right even when I didn't know what I was doing is that, I would always buy things low. I would always just haggle as much as I could, get the price low, which I'm sure annoyed the the heck out of people at the time. But here's my little 25 year old self running around, making offers on apartment buildings, some of which I still own. And I just I saw that as the as the way, and then I just kinda kept building off of that until I had over 300 units.

And then I was

Steve: like, holy moly. Well, it's awesome you're doing this back in 2015 and later, like because it's been a craze really for the last three years. Everyone's getting into apartment investing, apartment investing, and so on. So it's been a craze for a while now.

Blake: Yep. I got lucky on the timing.

Steve: So you started before the craze. Yep. So you're buying things. Like, what kind of cap rates are you were you buying back back then?

Blake: Some of the stuff was probably in the twenties, man. Really? I know I know fours and fives are happening right now. I mean Yeah.

Steve: Fours and fives are normally here. Yeah. What is it right now in Iowa? What's the cap rate? Higher.

Blake: It's it's gonna be higher than that. I don't know what it is exactly. It's probably a few digit higher. But Yeah. Yeah.

I mean, I just remember, you know, picking up entire you know, I picked up, like, a 10 plex one time for god. It was, like, probably less than 10 a unit. You know? Wow.

Steve: Yeah. So for the people that are listening, can you explain what a cap rate is?

Blake: So a cap rate is, it's called a capitalization rate. So it's basically the net operating income divided by the, property's cost.

Steve: Mhmm.

Blake: And so it's what would you be making on this property if there were no loans on it? Be on your

Steve: free and clear.

Blake: Right. Right.

Steve: What is your return on investment? Yep.

Blake: So that's and cap rates are one of the factors that I use in determining a property's worth. Obviously, it goes into the soup that is the worth determination. But I don't look at any one, like, statistic and say, oh, this well, it's it's capping at a 30 cap, so, like, therefore, it's an amazing deal. Like, no. There's other things that have to be looked at, like Area turnover.

Steve: Yeah. So what was tell me about the first apartment that you bought.

Blake: Yeah. So the first apartment was, it's called Selby Manor, believe it or not, because I thought that was a good idea, '25 or whatever. You bought it, and

Steve: it was named that.

Blake: I named it that. You named it. Yes. I put I put, like, a, like, a total 20 five year old. I put, the letter sell.

I still have it. I still own it. I put Selby Manor on the front. It was an orphanage, prior and, you know, converted it into apartments and, just really cleaned it up, made it a lot nicer. And I still own that today.

I'll probably never sell it. So

Steve: What was your first one? Yeah. In the Selby Manor?

Blake: Yeah. If I do sell it, I'm gonna get a good price for it. That's for sure.

Steve: So how did you find that?

Blake: You know, it was just off market. So everything I bought, back in 2015, 2016, it was all off market stuff that I I hardly ever shopped on the MLS for stuff, even back then, which I'm kicking myself now. I probably should have bought everything from the MLS. But, you know, after seeing after seeing some of the off market pricing, I was like, okay. I know I need to get stuff way cheaper than the MLS so that I can't screw this up.

I'm gonna get the prices really low, and that's in in the end, that's what made me profitable later.

Steve: But how did you find this specific property?

Blake: This specific one? I don't remember how I met the guy. I remember sitting down at a Panera with the guy. He's just a young a young guy that bought it. It was completely mismanaged and just in total chaos when I got it.

He's another young guy?

Steve: What's that? He was another young guy?

Blake: Another young guy. Yeah. Yeah. And he it was, like, one of his first ones, and, you know, he had let somebody, you know, stay there, and they weren't paying. They just they hacked into his coin laundry with a crowbar.

I took all his quarters out, something like that. So I was like, wow. You know? Got a great price on it. You know?

I think it was it's probably worth, like, $35,400 right now, and it's a smaller apartment building. It's probably worth, like, $35,400. I think I scooped it up for 100 and something back then.

Steve: So Did you

Blake: buy

Steve: it for a 100? Yeah. Did you have to re renovate it? Oh, yeah. We did

Blake: some work. What did he

Steve: have to do?

Blake: It wasn't huge on that one. I was I was lucky. It was mostly cosmetic stuff, and even a lot of the cosmetics were in pretty good shape. It's just the people that he had in there. You had

Steve: to get to turn over the tent?

Blake: Oh, yeah. Any anybody that was in there, and some of the units weren't even inhabitable. I mean, it was yeah.

Steve: So let's talk about it.

Blake: Yeah. So basically, the the tent I'm on the news talking about this, and there's some article you can find if you look hard enough, but, there was a prostitution ring down in the basement unit going on, and we we had to kick all them out. I think they were the ones crowbarring out the coin laundry, so Sounds consistent. Yeah. Yeah.

That's one thing about apartments. I mean, it's, there's there's definitely some advantages, but I think people don't realize if you're not in an a class, you know, neighborhood right on the in the beginning of your investing, you're gonna have to deal with some of these real problems that Yeah.

Steve: Are apartment investing. So So that was the biggest nightmare, was the prostitution ring?

Blake: At that at that building, it was.

Steve: So what is it like in Iowa to have to evict somebody? Because it's it seems to be different in every state. It is. So what was it like to evict somebody?

Blake: I mean, I'm on the border of Illinois, and you know the differences between Illinois and Iowa, you know, red state, blue state. Yeah. You know? But, Iowa, it's quick. And even the moratorium in Iowa wasn't nearly what the Illinois moratorium was.

The Illinois moratorium is, you know, for all intents and purposes, still going on. Yeah. I mean, I I've seen tenants that haven't paid rent since, you know, 2019 that are still in, in Illinois. But in Iowa, it's quick. You know?

You can get people out in a few weeks if you're if you know what you're doing.

Steve: So So you had to get rid of the I mean, when you say prostitution, I mean, were you talking about, like, there are multiple tenants

Blake: Oh, yeah. Oh, yeah. That we're servicing? Yeah. There were this is this is documented somewhere, and I this is gonna be so unprofessional.

There's a, there was a gal, named Strawberry that was down there, running a whole bunch of people. Name her Strawberry. Yeah. Of course. And she's on on we saw her in the inmate listing.

That's really her name. And I was like, oh, wow. If she's late, you're listening. I'm sorry for dropping your name here. So

Steve: okay. So you had to evict her. Yeah. I mean, was was the pimp there too?

Blake: He was there.

Steve: Yep. Okay. Yep. So you had to get him evicted as well?

Blake: Yep.

Steve: So then what was the process like after you evicted everybody?

Blake: The unit was trashed. I mean, it was, all the cosmetics were just mangled and destroyed. So we had to go in and, you know, just I was doing most of the work myself at that time. I couldn't afford you know, I had to wear all the hats. So I was attempting maintenance and attempting things.

You don't want me doing maintenance. I mean, I'm like a solid three out of town on maintenance at best. So

Steve: Alright. So you're turning it over Mhmm. And now is rented out. Yep. How much do you do you have ballpark?

How much do you spend as far as renovating that apartment complex?

Blake: You know, I probably wound up spending, like, $3. Most of it was materials. You know? That's not my goal. I was doing most of the work.

So

Steve: Alright. So you buy this thing for, like, 100 something. What was it? Yeah.

Blake: I suppose it's probably, like, a buck 50. Alright. So you

Steve: buy it for 150. Yeah. How many units?

Blake: I think there's five in there. Yep. Okay.

Steve: Five units. And then you you turn it over, and now it's it's up and running. Oh, yeah. Yep. How'd you buy your second one?

Blake: So I bought that one about a week before I bought my second one. So what I did is I just went all in. He said, here's a million bucks. I said, okay. I just you know, let's let's buy it all.

Yeah. So, I went ahead and just went went head first, and a lot of times, I was buying stuff using seller finance too. Like, people would seller finance to me. Mhmm. So I wanted to stretch that money as far as it could go.

So, I mean, I was picking up I think I went from, like, one strip mall to, like, 80 units within, like, a year. I have to look back on my Facebook and see there was a post when I said, oh, wow. I have 80 units. You know? And, you know, that was, like, in year one.

But, wow. A lot of growing pains.

Steve: So going back into I mean, it's the second one. Right? Like, how did you find that one?

Blake: That one, I think it was actually a realtor friend of mine that did hook me up on that one, early in the early in on, but it was a, a guy that I had kind of known. He had a six unit apartment complex in, North Davenport, and it was just in complete shambles. I mean, the tenant the rents were probably $200 a month too low at least. You know, the tenants weren't, you know, paying or paying on time. They were, you know, throwing grease down the drains.

They were, you know, baby wipes and if feminine products were getting so there was this backup. I'll never forget this. There was this, like, sewer backup valve, and it would every, every so often, it would just flood the whole basement. Both basement units would just get flooded. And with something in a sewer main, I was gonna have to spend $30,000 to to renovate it, or I could kind of hobble it along.

So we did that forever. And, yeah, I mean, my first year in real estate was just a complete nightmare.

Steve: Alright. So but you're sourcing these deals. Yeah. You You got a million to burn. Yep.

So you have to burn it, so you have to use it. Yep. You're using creative financing.

Blake: Yep.

Steve: Where did you get the wherewithal or the competency to start doing seller financing?

Blake: So I just threw my head against the wall and just tried to learn as much as possible. In the early days, I didn't have any formal, like, business training or knowledge. And I think I just must have seen it in a book or an article or something, and I was like, wow. You know, I can have somebody else that already owns the property, and I can just buy it on contract? That's great.

I bought some stuff with no money down back in those days. You can't do that anymore, I don't think, or on anything meaningful. But I mean, I remember doing that and just being amazed by it. I was like, oh, wow. I can just get a thousand units.

You know? I didn't see all the pitfalls involved, but yeah.

Steve: But how were you presenting it Yeah. If you were kinda, like, new at it? Yeah. Like, were these, like, savvy investors that understood it well? No.

I mean, I think was just, like, the blind leading the blind.

Blake: Yeah. So, like, one of them I picked up in Peoria, Illinois, which is a big area that I invest in as well. It was a five unit apartment complex. Everything on and running, get this, $17. Seller financed.

Yeah. Seller financed the 17.

Steve: They financed the 17. Yes. It wasn't 17,000 down to finance the rest.

Blake: I know. I know. Alright. Yeah. Of course, it needed a bunch of work, but, you know, we'll end up fixing that up, you know, selling it for 6 figures, you know, getting that that done.

So

Steve: Who is documenting all this? Who is creating the notes and the Yeah.

Blake: So we had attorney one thing I always did was I always went through attorneys the whole way through and Alright. Thankfully thankfully because that saved me on more than one occasion. Yeah. But, yeah. I mean, one thing I did horrifically in the first year, two years was accounting and bookkeeping.

Mhmm. I mean, forget about it. I didn't have QuickBooks. I didn't know what I was doing. Yeah.

And it cost me. I wound up I made it through two IRS audits, full audits. So I got through them. I mean, I did fine. Passed them.

Steve: Passed them.

Blake: Yep. What did you have to do to pass them? I had to go through some serious paperwork. I think we probably filled maybe eight, nine bankers boxes full of paperwork. I had to, you know, within a very short window of time, relearn how to do bookkeeping.

I had to read a whole bunch of books on taxes, see, oh, this isn't a write off. Oh, I thought this would be a write off. No, it isn't. Here's what you have to do to get it to be a write off. And that's why I always tell people when they're so it seems like in real estate, everyone's so focused on tax savings all the time.

They say, oh, well, that's a write off. Well, yeah, it is. But if you do the proper documentation to make it so Mhmm. And you have to have it's not just having QuickBooks. You have to have the right controller to be able to put that in.

Same with property management software. Yeah. You can get AppFolio or one of these softwares, but if you don't have somebody behind the keyboard that knows what they're doing, you're screwed.

Steve: Yeah. So you have an accountant now? Oh, yeah. Alright.

Blake: Accounting, bookkeepers, the whole nine.

Steve: Okay. So what are some other lessons you learned from that audit? Two audits.

Blake: Yeah. So the audits are documentation, documentation, document. I can't say it enough. Mhmm. I mean, we have giant filing cabinets full of stuff.

We've got Google Drive. We pay for extra storage on there just to store all the stuff. You just have to make sure that you're really meticulous. For example, I'll give you one really obvious thing, like, coming out here for this trip. If I wanna document, my flight for this, I have to say what it was for, and I have to remember the dates.

There's certain dates you can use. So if I come out two days early, that might not show up as a write off. So I might only be able to to write off the day that I came out here. Right? So but you have to actually split off your trip on what's business and what's pleasure.

Steve: Mhmm.

Blake: Like, I'm going out to, you know, Mount Lemmon after this, to go hiking with my friend, and, I'm gonna stay there for probably three, four days, but I can't write that off.

Steve: Oh, you can't. So So you learned some painful lessons.

Blake: Painful.

Steve: So, one thing you you touched on a moment ago is that we all hear about all the amazing things about owning an apartment complex Mhmm.

Blake: But no

Steve: one talks about the challenges. So you already shared one. Right? Prostitution ring. Yep.

What are some other nightmares?

Blake: I've nicknamed it the the UGGs. Okay? So bugs? Bugs, thugs, and drugs. Those are the three.

Bugs? Bugs, drugs, and thugs.

Steve: Bugs, drugs,

Blake: and thugs. Yep. And, bed bugs. I know nobody wants to hear about those, but that's a very real thing. And this is so much different from what I do now.

I mean, now my business is way different. But starting out, I mean, I was doing everything trying to figure all this out. When you get bed bugs in one unit, they spread. They spread real quick, and it's expensive to get rid of them. It could be $34,000 if you don't know what you're doing, and you hire somebody to heat the entire building up with these big, you know, bands essentially to, pump hot air in, to hopefully treat and kill the bed bugs.

Mhmm. But you have to do all the units. You can't just do one unit. So if you've got an apartment building Mhmm. Yeah, it's great because everything's under one roof and you get the scalability, but that's a double edged sword because now one problem in one unit and or one unruly tenant in one unit, now you're disrupting all the tenants in the building.

So that's a How many times

Steve: have you gone through bed bugs, remediation?

Blake: I'm sure I've spent probably 50,000 on bed bugs over the course of my career at least, and that was probably a gift. It could have been more. Yeah.

Steve: Alright. So bed bugs?

Blake: Yep. Drugs? Yep. So, I mean, just you walk into a place and these are not class a neighborhoods. Right?

So when I was starting out, I was class c and below.

Steve: Before we get into that

Blake: Yeah.

Steve: Class a, b, and c. You wanna elaborate what that means?

Blake: Class a is gonna be, you know, golf course areas where you're gonna find, you know, most not really rental neighborhoods per se. They're not known for that. I would say class b is like one step down, kinda your residential neighborhoods, you know, good decent schools. Class c is when you get into, like, rental neighborhoods, neighborhoods where you might live, but you might not choose that one to live in. And I don't know if those are the textbook definitions, but that's I think everyone

Steve: has their own definition.

Blake: So I was in the c and below when I first started because that's all I could afford. Yeah. Man, it's all that made sense to me from a cap rate and cash flow standpoint, but with class c comes class c problems. And so what looks amazing on paper, high caps, everything like that, when you get in the thick of it, you're like, oh my gosh. Like, wow.

All these expenses are massive. You get, you know, people, you know, doing math in your units, and you've got, you know, people beating each other, you know, into submission inside your common hallways and literally stealing your coin laundry machines out of your building. Yeah. Cutting your camera cords. I mean, it's I've seen it all.

Think of the wireless. Well, yeah. True. Yeah. They'll they'll probably take the cameras.

Yeah.

Steve: Yeah. Alright. So, I mean, any crazy stories?

Blake: Yeah. I got a couple. You wanna hear them? Let's hear them. Okay.

Steve: So people know what they're getting into.

Blake: So I, so I I heard I got a phone call from some old, you know, some old lady somehow got my number in one of the neighborhoods, and it was one of my complexes. And she said, are you excuse me, sir. Are you aware it's at 09:00 at night. Are you aware that there's a man from one of your buildings chasing another man through the street with a chainsaw? And we got it on camera.

Of course, he got arrested, you know, police. But, you know, just reasonable explanation. It must have been. Yeah. But I got a lot of weird phone calls like that, you know, and that's one of the reasons that I'm so glad that I have done all of that because now I understand, as a private lender, like, what to look for and, you know, all the things that don't show up on the, you know, on on the cash flow sheet.

Steve: Well, I also do the pro form a, and is the true. Yep. So alright. So chainsaw? Yep.

What other?

Blake: Boy, there's so many of them. I had a guy, I think it was the same guy with the chainsaw. He put a ladder up to the 2nd Story apartment and just sort of, like, one night appeared in this in this girl's apartment. You know? We had to call cops and, you know, the whole nine.

So, yeah, there's just I probably have, like, a 100 of those, but yeah.

Steve: Yeah. So I should try and make a book on that.

Blake: That would be fun.

Steve: Yeah. Alright. And then the the third one was drugs.

Blake: Yeah. So with the with the drugs, you've got, you know, once you get one unit that's got some usually, it's meth going on. You sort of have this revolving door where there's, like, people coming in and out all the time, and then all of a sudden your common areas start getting, you know, really disgusting. Your other tenants start wanting to leave. You've got a lot of police calls, and there's something called the nuisance abatement.

When you get too many police calls on a unit, they will sometimes condemn your building even though it's not your fault, and I've seen that happen before. It hasn't happened to me. I got close a couple times in the early years. But, yeah, if you if you do, too many, have too many police calls at a unit, the the government says, hey. This unit is a problem.

And so for some reason, you know, we're getting all those police calls. It needs to stop. And if it doesn't stop, they'll condemn the building. So So any interesting stories? As far as The drugs?

You know, walking into units after we've booted somebody out and finding, like, a whole, you know, gang of needles, you know, just finding all kinds of paraphernalia and things. You know, it was a little shocking to me the first few times. Yeah. Yeah.

Steve: Alright. So those are things to learn that you learn. Yeah. It's not all rainbows and and unicorns when when you own apartment complexes.

Blake: Nope. You can still make a lot of money. You just have to know those things going in that, look, everything that you you hear, all these positive stories, because nobody wants to talk about the negatives. I'll talk about the negatives all day long, you know, because I wanna shine a light on all sides of it. So

Steve: So what can one what could someone do? Right? They're listening to this podcast, and they're like, oh, man. I wanna buy an apartment complex. Yeah.

What could they do to prevent, maybe not the bag of that situation, but the the chainsaw situation Yeah. And the meth situation, what could they do to prevent that?

Blake: I hate to say this, but sometimes, you're not gonna get a class a tenant in a class c neighborhood. It's not gonna happen. Right? Yeah. So I would say you need to start with a good neighborhood first.

If you're if you've never done any investing, try to go into a place that's a little more turnkey, a little bit more of a nice neighborhood that you could see yourself living in. You're gonna automatically attract the better tenants, and you're not gonna have to be forced to choose between a bad tenant and a worst tenant. So I would say that's a good stepping stone for that.

Steve: But the exchange for that is the cap rate and the cash flow.

Blake: Yep. It can be. It can be. Now, what I had tried to do over the years was, hey. Let's let's you know, after year one of getting completely just, you know, taking it in the short I still made profit through that period, but at the expense of my sanity, and I probably put on £30 doing it.

You know what I mean? From stress eating. But after that first year, once I got into twenty seventeen, I started to get a little smarter. And I said, okay. Let me see if I can jump up into these b neighborhoods and get them for c prices, which I was doing pretty effectively.

So really once 2017 started, I I got away from the the class c stuff more, and I jumped up into the higher classes, and that helped a lot.

Steve: Were you keeping in touch with the banker the whole time

Blake: this time period? Yep. I never missed a payment.

Steve: What was no. I mean, like, does he know these stories? Does he realize what's going on with the money? Yeah.

Blake: We always laughed about it. Okay. He's chatted. He's hilarious. Alright.

Good guy.

Steve: So then you're moving up to to the b class, properties. Again, the the question I have, and I think for the people that are listening is Mhmm. How are you sourcing these properties?

Blake: Yeah. So I would say my and this is gonna frustrate a lot of people. My strongest sourcing at the time and I don't do that anymore. Right? So I'm not acquiring units right now.

But back when I was, word-of-mouth was like 80% of it. I just got my name out there so much with with everybody, and I would Blake

Steve: will buy anything.

Blake: Blake will buy it. Hey. I know a guy. I know a guy. I remember I posted one of my and I think I took it down just to be a little more professional at the time, but we had some craziness happen at one of the buildings, and it was very entertaining.

And I posted it up, got, like, 10,000 views in an hour or whatever, you know, so in my local area. So that was, you know, my name got out there pretty quick for better or worse. And I think people were just like, hey. We know Blake's in the in buy mode. Let's let's go to him, you know, and let's see what he'll offer us.

And, you know, I had to look at a lot of properties before I

Steve: could get through that. Was it kinda like a We

Blake: Buy Ugly Apartments? Kind of. Yeah. I mean, I didn't have, I think one of your other guests referenced a book called, by Mitch Stephen. I can't remember the name of it now, but My Life in a Thousand Houses.

Mhmm. That was a great book. And he's got pizza box signs on his cars and all kinds of other craziness. I never went to that extreme, but I was doing what I could, guerrilla marketing wise, to get my name out there and Got it.

Steve: And then at some point, he said, you know what? Apartments isn't for me.

Blake: No. Nope. When did that happen? That was right after that first year. And I just said, you know, let me just move toward, more towards single family houses.

Steve: But you got to, like, a 100 units. Yep.

Blake: In that first probably in that first, you know, maybe year and a few months, I got up to over it was 80 in the first year, and then I think I started moving up into the mid one hundreds, that next year.

Steve: Alright. But then at some point, you got up to three 100.

Blake: Yep. It was, like, $3.20 somewhere in there.

Steve: So you were still buying apartments?

Blake: So I was actually I started buying single family packages. Massive packages of single family. So I went in and I was I I remember I went to Peoria, and, like, within, like, a month or two, I scooped up, like, 80 houses.

Steve: Wow.

Blake: Yeah. That was nuts. Okay. So

Steve: So alright. So you're because you're buying all these houses Yep. You still have these apartments? Or you say you have Lake Manor?

Blake: I've got a few apartments. Yeah. I've still got Subway Manor and a few buildings. I think my apartments now is probably less than 5% of my portfolio.

Steve: Okay. So then what so you you you go to single family Yeah. Less stressful?

Blake: Way less. Way less. Still has still has a lot of headaches, but way less stressful than the apartments.

Steve: Got it. Yeah. And then at some point, you decide to liquidate.

Blake: Yep. So I I said, you know, and this like I said, that timing when I bought most of it in '15 and '16 and, you know, parts of '17, I got lucky because the economy has only gone up from then. So when I decided to liquidate, it was kind of the tail end of 2019, right before COVID, thankfully. Yeah. And I said, you know, I said, prices are they're starting to rise a lot.

And I think, what if I just sell off, like, 200 of these things? Mhmm. So I did that. I mean, and some of it was in some huge sales where I sold off, like, you know, I think one time I sold off, like, 74 houses in one, you know, shot. But, you know, I sold 200 of them off at such a profit that I was able to pay off the remaining 100, and I think I have, like, 104 left, and then still have 7 figures cash in the bank Yeah.

And and pay off all my bank loans. So it was like, yeah. It's a no brainer. I mean, you know, I can I I don't need to be I'm not super fancy? You don't see me in, like, yachts or, like, private planes.

I see some guys, they're all, you know, showing off their private planes, more power to them, but that's just not who I am. I'm just a little more simple than that.

Steve: Selling 74 and a block. Yep. Must have had to pay a discount.

Blake: No. Not at all. Not at all.

Steve: Really?

Blake: No. I mean, I I I crushed it. Actually, sometimes I think it's easier to sell them in a block, especially if you're selling them on contract. I think that particular one, I did sell on contract, and then I sold the note. Mhmm.

So that leads me to how I got into my actual business that I do now.

Steve: Got it. What about the the capital gains implications?

Blake: Yeah. There are. And I I will be probably very opposite of most of your guests when it comes to taxes. I don't even think about them. Yeah.

So I know that sounds It's tons

Steve: of doing business.

Blake: I mean, I I've been through two audits. I know, you know, I'm not doing frivolous things to purposely, you know, get taxes. But if I have an opportunity to make a large sum of money, I'm gonna take it regardless of what tax bracket it puts me in. Last year, I think I paid, like, a quarter million in taxes. I had to write that check, you know, to the IRS.

That was painful. I looked at it, and I cried a little inside.

Steve: You know? But This is the year when you liquidated or before?

Blake: No. This is just last year.

Steve: Okay. It was the year when you liquidate your portfolio.

Blake: Oh, I'm sure it was even more. Yeah.

Steve: Yeah. Yeah.

Blake: I don't remember what that figure was, but it was yeah. It's just it was an upsetting figure. Right. Yeah. But at the same time, I think about it.

I'm way happier now. You know, I'm in such a better spot. I mean, I'm a smaller fish, but I'm a very healthy fish. Yeah. Whereas before, I was this, you know, monster, but I was, you know, bloated and, you know, wasn't healthy.

Leveraged. You

Steve: leveraged. Yeah.

Blake: Leveraged to the gills. I had

Steve: millions in loans.

Blake: I mean, millions in loans, private and, you know, conventional. And

Steve: And you're debt free today.

Blake: Debt free.

Steve: Yep. Yeah. So And that's what the the big thing for you is you're debt free.

Blake: Yep. Debt free and with, you know, I've I've I've gotten, you know, a lot of money loaned out to people. Now people pay me. So that's what

Steve: I like. So you sell your portfolio on the contract, seller finance.

Blake: Some of it. I I would say two thirds of it, I sold outright.

Steve: Okay.

Blake: And then the other, maybe third, I did on seller finance.

Steve: And then with the seller finance, you sold the note. The note. Yep. So tell me about selling that note.

Blake: Yeah. So I remember I was just, I was just, like, working out one day, and I was like, wow. You know? I just the thought popped in my head. I was like, I've sold these things on seller financing.

Can I just get my cash out of this and sell the note to somebody? And in my back of my mind, I was like, no. Probably not. Like, who would buy your note? Right?

So I just did what I always do and just attack it. And, I made a whole list of every single note buyer that I could find. And I there's probably hundreds of them that I made, and I called every single one. And I said, here's what I've got. Here's what I've got.

Here's what I've got. A lot of people tell me, oh, you'll never sell. Oh, you know, nobody will give you a good price.

Steve: So you love just cold calling people?

Blake: Apparently, I I must. I I don't hate it. I don't hate it.

Steve: So, let's take a step back. For the people listening, what is a note?

Blake: So note is a a mortgage or a promissory note, you know, on a property. So, typically, when you're when people say note, what they're referring to is the debt on the property, which is, usually two components, a mortgage and a promissory note or a contract for deed arrangement. Yeah. Or sometimes there can be an option, but that's very obscure.

Steve: Basically, if you have a mortgage on your home

Blake: Yeah.

Steve: Bank of America, Chase Bank, Wells Fargo

Blake: Yep.

Steve: However, they're holding your note.

Blake: Yep. Alright. Yep. Or sometimes they sell it off to a a third party and bundle it up into a, you know, RM, you know, residential mortgage backed security and RMBS. And they have CMBSs too, which are like commercial sorry.

I'm like, digressing here.

Steve: So go on a little bit of a tangent. Alright. So so that's what a note is. What's a no buyer?

Blake: So a no buyer is somebody who looks to buy the already existing debt on a property, and usually they want a haircut on it for doing so. So I'll buy notes sometimes.

Steve: What is a haircut?

Blake: A haircut depends. A lot of them want 25% off, which is huge. Right. And I'll never, you know, probably sell my stuff at that.

Steve: So if you had a promissory note for a 100,000 on a $150,000 property Right. They wanna buy that mortgage from you for 75,000.

Blake: Right. Typically. And that's that's the big, you know, institutional note buyers. That's what they're looking to do. I mean, they they've got a whole processes and procedures, but then you've got private note buyers Mhmm.

Which is kinda what I specialize in working with, these folks who will not all generate a note. Maybe it's, you know, a $100,000, let's just say. And then somebody's, you know, comes to me and they say, you know, hey, Blake, you have anything that you wanna sell me? I said, yeah. You can, you know, buy this note I have for, you know, it's a $100,000 note.

You know, I'll I'll make sure that I sell it to you so that it works out to where you have a, you know, 7%, you know, guaranteed return pretty much on the note unless they default. But it in that case, my notes are very safe. So if you if they default, they'd probably make more money. But, so I'm kind of like a note matchmaker sometimes, but then I use my own money to buy them too. So

Steve: So how are you finding note buyers?

Blake: Yeah. Finding note buyers isn't that hard. I mean, it's literally just reaching out to people, and it it doesn't have what's nice about a note buyer is it doesn't have to be someone who's in the industry, because buying a note is a 100% passive. I mean, you're literally you you know, you kinda set it and forget it. You can even if you wanna take it one step further, you can hire a servicing company Mhmm.

Which I don't do, but you can. We service all our own, you know, loans. But you can hire a servicing company to do that for you. So if somebody's, you know, basically buying one of my notes that I own, if I'm selling it directly to them, you know, typically, there's not much servicing that needs done. So I'm sure you'll talk about this with me later, but I usually don't make people do monthly payments, which is one of the really unique things about me.

Steve: That's really odd.

Blake: Yep. Yep. So there's no servicing to be done. Right? That's why I don't do it, because I don't wanna deal with it.

Steve: So but, like, how did you I mean, is there a directory, a software? Like, how do you find the people that are buying notes in your market?

Blake: Institutionally, if you wanna find, if you wanna you know, what I did is I want I know it sounds archaic. I just went at Google and, like, looked at the first, like, 40 pages on Google, and I made my own directory of everyone who I ever would see to buy note. There are some exchanges, like, where you can

Steve: So you're saying these are people that are saying they're advertising to

Blake: buy notes? Yep. They're advertising it. Now if you wanna take it one step further, you can go into these note, buying and selling exchanges. Now I I've not worked too much in that space because I haven't had the need to.

I've already have enough leads. But there are some exchanges you can go into and post your note for sale. I'm sure that they take a commission off of it. I don't know how that works. I'm sure

Steve: they do. But I also think that if they're not advertising on Google, they might be able to pay more than 75%.

Blake: I agree. I agree. And a lot of people will pay a lot more than that. You just have to find, you know, find the right person. So

Steve: Right. Okay. So you start selling notes, and then this is what opens the door on you becoming a private lender. Yep. So before you had you sold your note Yep.

Private lending was that well, I guess you had to because you were liquid.

Blake: Right.

Steve: So you were thinking about it. Yeah. And then the the selling note kinda created more opportunities.

Blake: It pushed me over the edge. I said, wow. You know, I can consistently sell these things. So these things I wanted it to be liquid. Whatever I moved into next, I wanted it to be completely liquid, something I could get out of it anytime that I wanted to.

What I found with real estate is that it's so illiquid, and I kind of have a rule for myself nowadays that I call it the 50% rule. So no more than 50% of my portfolio can be made up of assets that can cash flow less than zero. Mhmm. Wanna say that again? Yeah.

Okay. No more than 50% of my portfolio can be made up of assets that can cash flow less than zero.

Steve: Okay.

Blake: So I don't want something

Steve: that can be vacant. You don't want it.

Blake: Yep. I I don't want something that can take me up, take me negative, right, for more than half of my portfolio. So I looked at private lending, and I said, hey. Worst case scenario, you know, I'm just the mortgage guy. Right?

I'm not gonna go negative on this thing. You know? Worst case scenario, I'll just be tied up in it for a few years. But in the interim, I don't have code violations, lawsuits, you know, all these other things that could happen even with a vacant property. Yeah.

So

Steve: Okay. So you get into lending, and what what happened next?

Blake: Yeah. I I just I got into lending, and I said, look. Could I loan at a two to one collateral spread where the property is, let's say, a $200,000 property? Could I do a loan on that property? Would somebody ever want a loan from me for just a 100,000 on that?

Because that's really safe. You can't lose. Right? Right. Especially if the property is assessed at 200,000 and it's in similar condition.

Maybe its list price is even higher. So that's what I started doing. That was my rule. I said, you know what? I'm gonna see how many folks would allow me to do these really low LTV loans.

And that's what I started doing. I said, wow. Let me just get in so I'm super safe. So if we have another 2,008 scenario, I'm not up a creek. Mhmm.

And I thought it would just be a few, you know, here and there. I have so many of these things coming across my desk per day. It is mostly flippers, you know, that wanna use me short term. I can't even fund them all. I mean, not that not not that I I mean, I'm not gonna tie up all my cash.

I mean, I'm very liquid. But I have I have ones that are so I I cherry pick the ones. Right? So if they're like a plus loans, I'm picking those for myself. But there's all these a loans that I would recommend to anybody all day.

And, unfortunately, a lot of them, I just have to say, I'm sorry. I can't find your deal. So I'm watching them just nothing happen. So that's what got me the idea of I wonder if there's some people out there that would like to buy these and then just give me, like, a a matchmaker fee, if you will, and just they can just buy them themselves. I'll just tell them about them.

Like, here, talk to this guy, and then, you know, cut me a check if you want to. If you don't cut me a check, you're not getting another lead from me. So gentleman's agreement. But so that's, what I've done. And a lot of people are buying these notes and making, you know, seven to 10% passive.

I mean, just passive returns. They don't have to do anything. I don't have to mess with anything in the short term because most of my loans are one year or less. So it's perfect for a flipper.

Steve: So for flippers, it makes sense. If you're not a flipper.

Blake: If you're not a flipper, it doesn't make as much sense. I still have guys that they want to use me just for acquisitions to be able to get the property done, when they have a sweetheart deal that they can't pass up and the bank's too slow Yeah. Or they don't they're not bankable, but they will be bankable soon. So they'll hit me up and say, hey, Blake. I had a guy in Missouri.

He had me grab seven houses for him. Right? They're all rentals, but he said, hey. Let's let me buy these with you. I'll refi you out later when I get around to it.

Steve: So you have, like, transactional funding?

Blake: I know what transactional funding is. I don't do transactional funding per se, but what I'll do is I'll do a really short term loan Mhmm. If I have to. The reason I don't do transactional funding is because it's so dependent upon the title company and the attorney being good at their jobs. Mhmm.

Not that a lot of more, but it's there's so many nuances to that that so many things can go wrong. So I try not to do specific transactional funding. But what I will do is a very short term loan to allow them to acquire the properties Mhmm. At least. So And then what's your minimum?

I'm not doing it. I'm not getting out of bed for less than 12%. It's not doing

Steve: it. Points?

Blake: I don't do any points. So here's the nice thing. So, yeah, everyone's like, oh, 12% that's high. Okay. Well, it was high until you factor in the the the fact that I have no upfront fees at all, not even appraisals, not even origination, nothing.

I don't charge any points at all. So So you know what you're getting with me. 100% a month. Yeah. And that's, you know, that's if I really like the deal.

If if if I'm not as keen on the deal but I still think I might do it, I might charge a little more than that depending on the risk factor. But Got it. If it's a really straightforward deal like I just mentioned, typically, I'll just do, like, 12.

Steve: And then, one thing that, we were talking about before was the scamming Yeah. Or scamming components. Can you can you talk about what that is? Absolutely.

Blake: So I can't tell you how many phone calls I get from people that are like, Blake, I, I just lost $5,000. I sent it to some guy for an upfront fee. He needed it for appraisal points, all these things on a on a loan. They send their money, you know, in good faith. Guy disappears.

They have no recourse. So

Steve: can you give me an example?

Blake: Yeah. So there's a there's a guy out of Wisconsin. I can't remember his name, but he went around, and I heard from a few of his clients. He went around and basically gave people these, all these promises that they were gonna get funded. But they had to to wire him in or send him in a check of x amount of money, whether it was for the appraisal or the origination or all the other fees that maybe we'll talk about later.

But, these poor people send in all this money. And

Steve: They're sending that money to get

Blake: him direct.

Steve: To get a loan.

Blake: To get a loan. Yes. Thinking that they have oh, it's like, oh, these are points. These are things that people hear about, so they think it must be legitimate. And they send in all these fees for appraisals points and all the other fees that there are, that people make up.

Outside of close? Outside of closing. Yep. Got it. And they you know, it's escrow wire fraud, essentially, if you think about it.

Steve: It sounds like the guy should be in prison.

Blake: It sounds like it. But, unfortunately, too often, these people don't have the legal means or the wherewithal to go after. And I'm sure karma always comes around, so it's always gonna nip you. But Yeah. There's some I've read some pretty crazy stories and have heard a lot of people that have, you know, gotten screwed over.

So it's it's very, very scary.

Steve: So if someone's not careful, what are some of the things you talking about, you know, you've read these things. Like, what are some things that can happen if you're not careful Yep. In causing you to get scams?

Blake: Well, the first thing that can happen is just what I said. I mean, you you're sending, you know, money for upfront fees to somebody. That's called the upfront fee or, the fee collector lender scam is what it's commonly known as. Basically, that's probably the first thing, but there's a lot of things you can do to warn against that. I mean, you you don't check these people out.

I mean, look into them a little bit. Obviously, Steve, you've got a a tremendous social media presence. You've got a reputation. So somebody like yourself is gonna be more legitimate with a website and all these other things. If you get ahold of somebody and, you know, you're looking at their profile and they have, like, two friends and it looks I mean, just use your judgment.

I mean, there's all these indicators, but use some common sense.

Steve: Yep. Okay. So what so the worst of it is is losing 5,000 or maybe more if they're wire if it's a wire fraud situation.

Blake: That can be bad. There's also something called the bait and switch scam, which is basically where a lender will give you terms. You guys agree to it. You send the money, and they are legitimate. But then at the last second, they're like, oh, hey.

Guess what? Yeah. Actually, I'm gonna charge you double what I said. And, oh, your deal needs to close tomorrow? Oh, yeah.

That's too bad. You know? Really? So it happens all the time. Yep.

Steve: Really? It's all

Blake: the bait and switch. Yep. The reason I know so much about this is because, you know, I kinda figured you guys were gonna ask me a lot of this stuff, so I ran a meta analysis of, like, 30 articles and videos on the subject, and I kind of came up with, like, common themes. I read all about these people's stories and everything like that. So, but, yeah, there's names for these scams that are really

Steve: So what are some common themes for, you know, for the people who are listening that are thinking about wholesale or flipping houses. Yep. What are some things they need to look out for when they're borrowing?

Blake: If somebody needs upfront fees from you, you should really think twice. Because a great lender, like somebody who's actually with it, why do they need fees from you? It's an amazing deal. They what? They can't front the, you know, the little, you know, due diligence on their own?

Come on now. Like, that's not a real in my opinion, that's not a real, problem.

Steve: With you on that because when you brought this up just now, I have never heard of anyone ever paying outside of escrow. You always pay through escrow.

Blake: I recommend it. The lender

Steve: fronts it Yep. And it gets reimbursed at closing.

Blake: Yep. And that's why with me, I would tell people, like, look. I don't need any money from you at all. Like, I don't even need monthly payments. Yeah.

So, you know, is it oh, is this a scam? No. Yeah. You're not paying me any money. How am I if if it's a scam, that's a really bad scam for me.

You know?

Steve: It's a terrible scam. Yeah. Alright. So that's the first thing. If they're sending money outside of close.

Blake: Yep. What else? Obviously, the second thing is gonna be the terms too good, which kinda ties in with the bait and switch. So terms too good, based on all the articles I read, the average private lending percentage that people charge in the industry is between 615%. Mhmm.

And people say, oh, no. I got a guy who can do it for 2.9. Oh, okay. You know? And then the other thing is is, like, these long term loans, you gotta watch out for that.

So the term length. If you see somebody offering you a twenty or thirty year loan, you know, at at three, four, 5%, chances are it's a scam. They're gonna want money from you upfront, and they might not be the guy with the money. That's the other thing you gotta watch out for is there's nothing wrong with a broker. I mean, we our whole industry runs off of brokers in one way or another, but you have to be really careful that the person that you're dealing with has the decision, making ability.

Yeah. And they're not just some underling that, you know, is just hoping to basically tally you up onto their roster to get some, you know, some some fees and some things. And they wind up doing an appraisal origination fees. And then they say, oh, yeah. We we checked it out.

Sorry. We don't like your deal. Then you're out all this money. And to a mom and pop investor, somebody who's just getting going, you know, a thousand bucks might not seem a lot like, you know, for you and I to to to shell out, but these people, that's a huge percentage of their net worth.

Steve: Right. You know,

Blake: they're shelling out. I feel terrible for them.

Steve: So, you bring up junk fees. Yep. What are some junk fees that people need to look up?

Blake: Glad you asked. So I went ahead and brought a note card with, I feel like I'm in, grade school again. Got my note cards out. So you ready? I'm gonna go through the list here.

Yeah. Application fee, origination fee, legal fee, administrative fee, environmental fee, due diligence fee, documentation fee, underwriting fee, appraisal fee, inspection fee, life insurance fee, title fee, trust fee, loan insurance fee, transaction fee, closing fees, point fees, financial guarantee, surety, bond, certificate fee. It's a catastrophe.

Steve: So so Life insurance fee. I haven't heard that one.

Blake: Yeah. Basically, what they'll do is they'll make people take out a policy on themselves, you know, in the event that they, you

Steve: know Yeah. You know, I get it all

Blake: the time. I've just never heard that. Hit by a bus. These are just, you know, all the fees that I've heard specifically people talk about having to to deal with and pay. I don't think that there's a a lender or a fee collector lender out there that would have all of those on a sheet.

I don't think there's a lot.

Steve: Yeah. I didn't hear one fee, PETA fee.

Blake: Okay. Yeah. I'm not I'm not sure that I'm familiar with that one.

Steve: So there's a story. I was telling Ryan about this other day. So there's a a case, right, where someone charged a PETA fee.

Blake: Okay.

Steve: And the guy is like, what is this fee? And he's like, I don't wanna tell you. He's like, no. You have to tell me. He's like, no.

I'm not gonna tell you what the fee is. And, the guy actually took him to court Wow. And won. And the court and the judge was like, you have to tell him what a PDA fee is. And basically, what PDA fee is a pain in the ass fee.

Blake: Okay. I got you. Alright.

Steve: And, of course, the guy was definitely a PDA fee Yeah. Because he took it all the way to court. Definitely a pain in the butt. Yeah. Okay.

So obviously, there's a lot of junk fees in there. Well, there's other ones I've never heard of before, so it's crazy. So

Blake: you're very passionate about lending. Absolutely.

Steve: And so explain to me why you don't collect payments. That part is weird to me.

Blake: I wanted to be different. So when I started private lending, I said, okay. I I really want to I mean, obviously, I've still got, my company. I've got employees, and we we run a whole operation out in Davenport. So we're doing you know, we were controlling something like 400 units.

I mean, not all of them are mine, but, you know, we're I have financial interest in in in them in some way so that we can, you know, manage them. But, basically, I wanted to be unique and carve out a niche in the space.

Steve: That's unique.

Blake: Yep, and so I said, what does everybody want? You know what they want? They want no upfront fees, and they don't want any monthly fees either. So all these flippers were coming to me, and they're like, man, how do I get one of those? Because they don't care, because they're gonna make so much profit on the deal that my nominal okay.

If I'm 3% higher than the next guy, but I don't have the fees that he has, isn't it a wash? Right. You know? And then you don't have the holding cost, so you can plow all your you can, you know, maximize your, your your money to put it into the flip. And then what I find is I don't have to charge crazy, crazy amounts because most people that, you know, they're able to get the flip done.

I charge them for a year. Right? Because I don't want anybody to you know, if I do a three month loan or something, I don't want somebody to have to get foreclosed on on month four or something, you know, because they didn't get it done. I give everybody a year and, you know, if they pay me early, that's just a benefit for me because I charge them a flat amount of money for the year. Right?

So I'm not just doing a percentage basis. I'm saying, hey. If you want a $100,000 loan, I'm making $12 minimum Mhmm. For the one year. Hey.

If you pay me off in nine months, great for me. You know? I made a higher percentage. But the thing is is I don't want, I don't want you to I I don't wanna set you up to fail. You know?

I'm not in the business of foreclosing on people. I never wanna do a foreclosure. You know? I'm I'm familiar with the process. I have done, you know, them in the past.

It's not something that I wanna do. So

Steve: Got it. So Nathan Hurt wants to know, how long it take to build a big portfolio?

Blake: Yeah. I mean, a solid probably year and a half, two years of just grinding it out. I mean, just every day. I mean, that's I woke up in the morning, thought about, okay, how do I get units? How do I get units?

You know? At any cost. So, I don't recommend necessarily that other people do it that way. It worked out for me. But, again, I also had a rising economy on my side, and I was in an area where the cash flows made sense.

You know, I don't know if that would work in, like, Miami or something.

Steve: So Right. Yeah. But I think the key here is that you're more or less obsessed with it. Right. And that's one of the keys I see in a lot of different other people that come on the show is, well, how are they able to able to accomplish what they've accomplished is because they're obsessed Right.

With what they're trying to accomplish. So for better or for worse, your obsession is to get units. Yep. Alright. And then, what's a few keys to building cash flow?

Blake: So I would say, like, my 50% rule where you don't want more than half of your portfolio to be able to take you down negatively cash flowing every month. Okay? So you need your solid investments, which in my opinion could be, you know, something similar to a bond. But the problem is is that if you go on Google and type in what's an average triple a bond yield, it's like 2.6. And that's for a corporate average bond yield.

I don't know if you get out of bed for 2.6, but I don't. So, that's kind of I look at my, you know, my my private lending as that stable force. You know? Hey. I'm not gonna go negative.

But there's other things. I mean, my way is not the only way. But I just found I said, I want something safe that has good returns, that's passive, and consistent. And so that's what I chose. If somebody else wants cash flow, yes.

Do flips work? Of course, they do. They've worked for, you know, you know, decades. But the problem is is with flips, again, it can take you down cost overruns, contractors skipping out on you. There's just so many problems that can go on with flips.

Steve: A lot to manage.

Blake: Man you know, management. And the nice thing is you need some part of your portfolio that isn't eating all your time. Yeah. So that was a thing that happened with me is I was just waking up, rolling out of bed, work. You know?

And then, oh, it's super dark and I'm exhausted. Bed. You know? And that was my day for, like, years. So it's only more recently, that I, you know, completely, you know, got all of my stuff, you know, what I would say, unleveraged that I was able to, you know, really start enjoying life again and finding some kind of a balance.

And, I'm better at the the small amount of things that I do now because I I have so much room for creativity and thought and other things.

Steve: Yeah. Well, and you're kinda living the life that you dreamed of

Blake: Yep.

Steve: When you first started.

Blake: Yep. And I'm glad I did that stuff because it makes me a way better lender to have done gone through, slogged through all of building it because I can relate to these people more. Flippers, and I was doing tons of flips along the way too. I can relate to flippers, and other people know their pains, and I can predict with a little more accuracy what is this loan's true risk.

Steve: Yeah. You know, and guys, I forgot. We do have our sales training event. So if you guys are interested in our sales training event, September 25, send me a DM Instagram, on sales training, and then we'll be sure to plug you in, if you guys are interested in that. On Instagram, Ingrid Hernandez wants to know, do you do construction loans?

Blake: Yes. So I actually just got done doing one up in Wisconsin. Basically, the guy had a house, probably half $1,000,000 house, and he he had it paid off. Like, he had the property bought and partially built. So he had already built this thing up pretty, solidly.

Beautiful house, all custom. He did it himself. He's a he's a great builder. And so what I said is I said, okay. How much do you need to finish this thing?

He needed to run a $100 to get the thing done. So I just went ahead and kicked him alone, you know, for a $100, but I used the property as collateral. So he had collateral that at the time, even in the current state that it was in, was already built. It just needed finished. So I felt safe that it was a two to one collateral spread where I felt like, okay.

Worst case scenario, the economy, COVID round two happens, whatever whatever. I'm still gonna recoup and more if this thing goes south. Right.

Steve: He has every reason to make sure you're whole. Absolutely.

Blake: Yeah. And it's good for him too because he didn't have to it's tough for banks. They don't like to do construction loans as frequently because it's just not as straightforward. So sometimes in the amount of time somebody's waiting to get approved for a bank, they could have got a loan for me. I can fund in three hours as long as the lawyers have done their jobs.

Right? So, you know, I require people to work with a an attorney in the area where the property is because I wanna be make sure I'm complying with all the state lending laws wherever I'm lending at. And so the attorneys make sure that I'm in compliance with everything, and I let them do their job. So I tell people, I can't control the speed of an local attorney in your area, but what I can control is how quickly I can send a wire, and that's three hours.

Steve: Gotcha. So you you keep saying, you know, two to one collateralized. Right? I'm more used to the term 50% LTV.

Blake: LTV. Sure. So it's it's essentially, it's the same thing.

Steve: Is there another community that you're a part of that has a different conversation as far as, like, lending notes and so on?

Blake: Yeah. So the reason that I say collateral spread is because when I say LTV, it assumes that the value is the metric and that usually, when people are determining determining value, they're looking at ARVs or things like that. I don't look at that. I look at assessed values from the county, assuming that the property is in similar condition to those. So I say two to one collateral spread because I don't wanna be misleading and say, hey.

It's a 50% LTV. Because then somebody brings me an appraisal and they said, okay. Where's my 50%? I don't want them to, you know, feel like they've been misled. No.

I'm telling them, hey. I'm gonna determine what the value of this thing is. Mhmm. And so I want the collateral, you know, the spread to be 50% of where I'm into. So that's why I say that.

Is there a community? I'm sure that there is. I need to find it. But I don't think that there's as many private lenders that do it full time as as you would think or at least individual private lenders. I've come across a lot of, the card money lenders and things like that, but people that are way over here in left field like I am, you know, doing all these, like, no, monthly payments and no upfront fees, being really, you know, I guess, client friendly, I haven't seen a lot of that.

Steve: So No. You're definitely a unique breed.

Blake: I try to be.

Steve: And then, Raylan White wants to know what are you doing to screen tenants in class c areas? And I know you're not really buying them anymore, but if you were, what would you do?

Blake: So in class c areas, it's tough. There are some neighborhoods, like in Peoria, Illinois, for example. It's It's it's a very, like, the South Side there is an extremely rough area. Crime rate's huge. Unemployment, you know, is is pretty big there.

But with those areas, you can cash flow like crazy. So for screening, the number one thing we do is we always require a full rent and a full deposit. Okay? I know that sounds like, duh, like, why wouldn't you? But in those areas, it's sometimes just tough to even get that.

So I would much rather have somebody bring more money to the table, so we kinda financially will screen them out, that way. Obviously, we're checking to see if they have, like, evictions on their background because we don't wanna have somebody that just got evicted hop into one of our units. But am I gonna get a 700 credit score person to go move into the hood? No. Not gonna happen.

So

Steve: Yeah. And then, Cas one Will on Instagram wants to know, do you do home equity lines of credit?

Blake: We do I guess so. I think the answer would be yes in that, you know, if you have a a home or a a project and you come to me and you say, hey, Blake. I need a loan. You know? I need to extract some cash out of my house.

It's the same process. So absolutely, I would.

Steve: As long as there's equity.

Blake: As long as there's equity there. Yeah. And that's what I did. I told you about the guy in Missouri. I picked up seven houses for him there.

Mhmm. He put up his personal home as, you know, collateral for that because there wasn't quite enough collateral on the deal. So, yeah, if you bring additional collateral to my deals, that still counts for the two to one collateral spread. Yeah. So as long as you have as long as I'm covered, I'm good.

So

Steve: And then, Alizette Zapido wants to know, how did you find a good CPA?

Blake: Yeah. So I got fortunate enough to have been a part of, like, similar to, like, a BNI group that I was in. And back in, 2017, right around the time I started getting my stuff together, he just happened to be there, real straight laced guy. Just I could tell he was ultra good at his job. He was not aggressive with the accounting, which is one of the reasons that I did so well in my audits, because we weren't going out there and taking a whole bunch of accounting risks.

You know, we were looking at it and saying, hey. We're not trying to get away, get one over on the IRS or anything like that. We were just, hey. Let's be in compliance. And, I feel like the super aggressive CPAs, you really wanna watch out for that because you're gonna get flagged for an audit quickly.

Steve: Yep. And Nathan Hurst says that you just did a hotel. You just did a hotel transaction?

Blake: So there was a a hotel that I was looking at. I actually know Nathan. He's a great cat great guy. I've worked with him. He actually, I think I, financed him on three two or three houses, here recently.

There was a big hotel project that I was looking at, in Illinois. I went out there to check it out. I think I was telling him about it the day I was going out there. And I ended up going out there to check it out, and the guy had these pictures that he had sent me. Well, these pictures were, like, ten years old.

And I went out there, and he had allowed the roof to leak for, like, three years straight. Just let it leak into the hotel. So by the time I got there, it was like a Days Inn type hotel. The time I get there, I walk in, I just get hit with mold, black mold all through the property. And I was like, yeah.

I'm good, dude. But, yeah, that was, that was the hotel transaction that I was really interested in, was that one there. Yeah. Because had the pictures been relevant, I mean, I could've scooped a I think it was, like, a a 160 unit hotel for, you know, low 6 figures. So Yeah.

Wow.

Steve: Yeah. And then Gabriel o wants to know, do you lend on land? Sometimes.

Blake: In very rare instances, I will. If there's a ton of equity in it, I will. I just need to make sure that there's a buyer for that land. That's the issue. So land is tough.

If you're not in a, you know, in a good enough area, if you're just, you know, kind of in a class c neighborhood and you have a a strip of land, sometimes it's hard to source a buyer for that. Yeah. So if I got stuck with it, had to do a foreclosure, I really don't have anything to, you know, I I can't be liquid anymore. So

Steve: one thing that, we talked about before we started was that you also, where your focus is on lending. Yeah. So when you wholesale or flip, it's kinda like things that kinda fall in your lap.

Blake: It is. So, like, I was telling you yesterday, I accidentally made 20,000 on a on a wholesale fee. I didn't I you know, it's just happened. It just kinda fell in my lap. So, I think I've made, like, 6 figures this year off of just wholesale fees, and I wasn't even trying to.

Like, it just kinda happened because I meet so many sellers and buyers with doing the loans that, of course, like, there's gonna be some synergy there, and I'm gonna occasionally get a property, you know, back or, you know, and I'll wind up flipping it because why wouldn't I? It's right there. You know? So, I call those, like, accidental wholesales, accidental flips. So I have this other these other revenue streams that I don't actively pursue them, but if they happen along the way, I just wanna be good in my one lane.

And I also the reason I just do lending is because I don't want my lending clients to think that I'm competing with them for deals. So I don't want them to say, hey. I found this great deal and then be worried about me taking the deal. So that's why I don't do any acquisitions anymore, unless it's an extreme case. Right?

So I'm not actively pursuing acquisitions myself for that reason.

Steve: And then, just expand on this again. What are you doing today to market your lending business?

Blake: Yeah. So in addition to word-of-mouth, which has been going great, I found that in the online social media communities, there's a lot of demand for these loans. And so I've got employees and VAs and things that are going into these groups and, you know, making comments. Sometimes I'll even go in and do it myself. I haven't done it for a little while now.

But, I'll go in and, you know, if I see somebody, hey. And post in the Facebook group, hey. I need a loan on this. You know? May I'll have one of my employees just go in there and say, hey.

You know? Tell me tell us about the loan. We have a deal submission form on our website, selbyrentals.com, which is on my hat here, where you can go in and just fill out everything, go through our little checklist, and submit a deal to us. And Yeah. Then we just get back to you and say, hey.

This is a this is a go or this is a no. So

Steve: and then to run your business with everything you got going on, what is your monthly overhead?

Blake: So I'll give my employees a little shout out. Kristen and Savannah are my two office employees that are actually working my office direct. So you have a huge operation here. My operation is tiny compared to yours. So, we are lean and mean.

Kristen and Savannah have been with me for years. They do a fantastic job just basically handling all of the, you know, the loan docs, so to speak, and working with the attorneys and pushing things forward. I'm more or less, you know, acquiring the the leads and things like that. I've also got two VAs, which are full time for me too. So I've got four full time employees.

And the VAs, I was watching an episode of this, that you did with a gentleman. He was talking about The Philippines with VAs and their minimum wage being about a buck 50, over there. And I've got two amazing VAs from The Philippines, Jan and Jonalyn, who do just a bang up job for me, and they go in and do, a lot of the repetitive sort of data entry and data sorting type tasks that, we could do, but I want my, you know, my office, gals doing things that are more, that only they can do, so to speak.

Steve: Right. So all in all, put all together, what are you spending per month?

Blake: Probably between 10 and 20. So not

Steve: very much?

Blake: No. Not very much. No. My my old overhead was about 80 or 90 a month. So And you

Steve: had all the apartments that were there?

Blake: Yeah. It was huge. Some what I like about this model that I have now is my overhead's so low. You know, we just make sure that, most of it's just employees. I mean, the employee cost, we don't really spend a ton on marketing or anything like that.

So, most of what we're doing is, like, word-of-mouth and, you know, just posting in groups and and so.

Steve: So you have a very unique business model. What's gonna happen to you if you if the market takes a dip?

Blake: I actually think we would see a surge if the market took a dip. I think we'd do better if it took a dip because I would have the pick of the litter on loans because Yeah. No one would be able to get funding. The other thing too is because I'm loaning, and this is why I do that two to one collateral spread Mhmm. Because if, you know, if the market tanks by 50%, I haven't lost money yet.

Steve: Right.

Blake: So the the market can literally crash up to half like it did in o eight or, you know, simple close to that, And I haven't lost a penny yet. So it's only when it gets lower than half, but remember, my loans are mostly a year or less. Yeah. So I have time to pivot and react. That means that any given time, you know, half of all of my holdings are coming boomeranging back to me in six months or less.

So by the time that happens, I mean, I don't think it would happen overnight. And if it did, I think I'd have some time to react and pivot. So

Steve: Yeah. So the systems and processes have been dialed in.

Blake: Yep.

Steve: And you're living the good life. You're doing

Blake: private The good life.

Steve: You're doing private lending. That's twelve months. No payments, so there's no stress. You're not even having to do collections. Nope.

Every once in a while, you might have to foreclose. That's about it.

Blake: Once in a blue moon.

Steve: What do you do with all your free time?

Blake: Yeah. So I read a ton. I love reading. I actually I love listening and watching, you know, podcasts and all Yeah. I just wanna soak up as much knowledge.

I feel like the more that I progress in my career, the more I realize I don't know. And I just wanna absorb, like, an just an amoeba, just absorbing knowledge every everywhere I can. So

Steve: So and what is your what is your why?

Blake: Yeah. I mean, I think it's that I have some big shoes to fill, I would say. That's if that's if that's a why, if that's a a reason or a purpose to keep driving on. You know, I look back in my family line and, you know, everybody has done something significant, you know, above me. And so I think about it, and I'm like, well, you know, my parents were, you know, great growing up, really supportive, you know, encouraging me to, you know, be the best I could be.

So I don't wanna let people down. And, also, just personally, I'll know, you know, if I didn't live up to my potential, I just feel like, you know, I I don't wanna be a waste of potential.

Steve: So Yeah. Unfulfilled potential. Yeah. You know, I I I love that part where you don't feel like you wanna be a waste of potential. Because I actually had someone in high school.

One of my high school teachers told me that, She's like, Steve, you're a waste of potential. She's like, oh, wow. Okay. Thank you.

Blake: Wow. You guys talk still?

Steve: Yeah. Still. No. We're actually Facebook friends. No kidding.

It was the push that I needed. Yeah. What is your biggest struggle right now?

Blake: My biggest struggle is probably educating people on why they because I think there's there's this thing called, Tina. I don't know if you ever heard somebody talk about it, but it's there is no alternative, t I n a, Tina. And it's educating people on the fact that you don't just have to do flips or rentals or BRRRR or any of these things. You can do other things, and you can invest in debt. I mean, you can buy debt on places.

And I think it's just reeducating people who aren't in the industry and just saying, look. Like, you guys should be looking at this as an asset class to, you know, diversify your portfolio with. Get some property debt that's in, you know, that's in, you know, a safe space. And so I think for me, it's just sourcing enough end buyers because I have so many loans coming my way. Yes.

I have the ability to fund all the, you know, a plus plus ones, but there's some a's and a plus loans that, you know, people would be so smart to get. But I have to just tell these people no sometimes because I don't have the bandwidth to fund, you know, $10,000,000 of loans a month. I mean, I just can't do it. So

Steve: So what are you doing to educate more people besides this podcast?

Blake: Besides being on this podcast? Yeah. You know, I I think that, the biggest thing is I've just tried to tell everybody that I can. Like, look. Like, when the when the economy does take a dump, you don't want all your stuff in, you know, volatile items.

Like, you don't want it all in stuff that could go less than zero. So I just try to tell as many people that I that I can, like, hey. Look. Like, you should be in something a little bit more passive and a little bit more safe that almost acts like a bond, but it's backed by real estate.

Steve: Mhmm.

Blake: And that's debt. Right? And so, I I would say, like, that ties in with my biggest struggle is just how do I source the that part of the community to come in and say, hey. Let's look at this as an asset class, similar to what we do at real estate. You know why?

I think it's too abstract. I think it's not sexy. It's not sexy.

Steve: It's not sexy. I mean, it's kinda like on Instagram. You can show your cashier's checks. Yeah. You can show your watch, your car, but no one shows, like, here's the rental deposit I got today.

Yeah. No one shows that.

Blake: Yeah. And they don't and and they don't they're not gonna say, oh, hey. Here's me getting paid back on a loan. Like, nobody cares. You know?

Steve: But even, like, if you were to have a note. Right? Right. Not your style where it's no payments. But even if you were having a regular note and you're collecting monthly payments, like Right.

Okay. Hey, guys. I got a check today for $600. Like, no

Blake: one cares. No one cares. Yeah. No one cares. And so I think, it being a little less sexy of an investment, it makes the barrier to entry so much more, and it puts a lot more pressure on me to be a good educator about it in in the space.

And, of course, I'm like a matchmaker for these things, which is nice. So I can say, hey. You know, somebody comes to me and says, hey. I I'd really like to get into this, and I want to, you know, I wanna invest in debt. And I say, okay.

Do you wanna reinvent the wheel, or do you just wanna pick up some some of the $1,010,000,000 dollars a month in loans that I have coming my way? You wanna just throw a few your way, and you could pay me a little fee for doing so. Yeah. So, I think that, it's up to that person to decide. But I think for me, it's less about pushing, you know, having you know, investing in the loans that I do and more about, let's get people interested in the space as a whole.

And I'm sure some of those people will think of me when they do want to do that. Right.

Steve: So, and then how do you stay motivated when you're facing adversity?

Blake: Yeah. That's a great question. I would say it comes back to the wasted potential thing. I just in I'm not gonna lie. Some days, I just I just screw around.

You know? Because, like, you have to You're

Steve: in a good spot.

Blake: Yeah. I mean but there's what's nice about that is that by clearing my head certain days, I can come back and be really sharp when I need to be. So, I'm not necessarily a workaholic from five in the morning until, you know, twelve in in the evening. But the times that I am working, I'm doing a lot of good, you know, sharp stuff that needs to happen. And my employees, you know, they lift a lot of the burden for me.

So I've got great employees. I can't say enough about them. So

Steve: Got it. And on Instagram, time, I'm gonna guess, is his name. What if you were 18 years old and he had 10,000 to your name? What would Blake do?

Blake: That's a great question. Knowing what I know now in this specific economy, I would actually look at buying some mortgage, you know, mortgage, securities or get some kind of debt on a property where it's super safe. But I would also keep a lot of because if all you have is $10. Right? You need some some, emergency money.

So I would honestly keep half of that in cash just for a what if scenario. The other thing I would do, that's for investing that money. Right? But with $10,000, the idea that you can just live off of a $10,000 seed, I don't think so. I think you need a high income skill at some point where you need to figure out how to obtain a monthly income.

So, yeah, the 10,000 is great. Put 5,000 of it into something that's making money. Keep the other 5,000 in case of emergencies, and maybe try to grow both of those amounts over time. But, as an 18 year old, I think you need to learn a ton. So, that doesn't necessarily mean paying $40,000 for, you know, a a course every weekend.

But, you know, you can learn a lot by going to the library and just checking out some books and, you know, and and and just trying to educate yourself, surround yourself with people that know what they're talking about. Absorb information. And, you know, as you go along, I mean, just watch people that are doing what you wanna do, you know, and watch and watch the Real Estate Disruptors podcast too.

Steve: So Appreciate that. Yeah.

Blake: Of course.

Steve: So they're going to the library. They're picking up some books. What books do you recommend at the library?

Blake: First thing I would probably look at is basics on a few different topics. So basics about LLCs, you know, basics on real estate law, basics on bookkeeping, accounting for dummies. So, you know, any of those basic books that are gonna give you just kind of a bird's eye on that topic, anything you could imagine yourself having to deal with in real estate, basics on social media marketing. They've got good books on there for that. Mhmm.

I know you guys are great at that. Much better than me, by the way. I need to brush up in that area, but, you know, I would just get kind of an overview of everything, and there's so much wealth of information that could be found in, in those type of books. Actually, this is kind of nerdy, but I love to go to garage sales. And I have found some amazing books, hardcover books.

I do like to read those too for, like, you know, less than a dollar. And some of the books that were made pre Internet are so good because they had to be. Because you couldn't you know, you weren't able to publish an article easily. It was hard. Yeah.

And so your book had to be amazing. So I go back sometimes, and I'll find, I found this, like, raising capital book from, like, pre Internet.

Steve: Mhmm.

Blake: And I found some really good nuggets in there. I of course, I won't remember him for this interview. But Yeah.

Steve: Well, I'm glad you brought that up because I'm going through a book right now. I'm I'm, like, two thirds through. It's a book. It's how I raised myself from failure to success through selling. Right?

And it was and the guy talks about, like, you know, he was celebrating on a day if he had a $100 sale. Yeah. So you can see he's really dating himself. Yeah. Right?

So I mean, he started, his business or his career in sales in the nineteen twenties. Wow. Right? But I'm listening to the book, like, wow. There's so many great principles here.

I wish I'd picked this book up when I first started real estate, but I didn't. But, yeah. I mean, that book was so I was looking at it. Like, okay. I mean, the guy celebrating $100 sales.

When was this book published? It was published in 1950.

Blake: And they people discount those books because they say, oh, they're too old. But I you know, I just go back to it and, like, these are grind lessons that these guys didn't have the luxuries of some of the easy Internet social media stuff

Steve: we have today. Yeah. Yeah. I know. So that that was I've been blown away by that book.

And then let's see. Larry is asking, what are some ideas of good debt? I don't really understand that question.

Blake: Ideas of good debt? Like, good debt versus bad debt? So, like, bad debt in my mind is a house is assessed at a 100,000, and I'm loaning a 100,000. Like, that's bad debt. Because if things go wrong, I'm of a creek.

If I have to do a foreclosure, what am I making? Am I might am I gonna benefit from, you know, the no. I'm gonna go negative.

Steve: Right.

Blake: So I might wind up worse than where I started. So especially if the economy crashes, then you're you're toast.

Steve: So You're you're upside down Yeah. Not the borrower.

Blake: Exactly.

Steve: So Kenny Lewis wants to know what's the minimum loan amount that you would do on a house? I do

Blake: really small loans. I I go down, like, into, like, the 10,000 range. I mean

Steve: Well, I mean, your business model. Yeah. Right? Like, you don't have, employees for brokering or underwriting or anything

Blake: like that.

Steve: You just look at yourself.

Blake: Yeah. And you know what we do for appraisals? You're gonna laugh. I actually have people just put me on Facebook, like Facebook video, you know, video call, whatever you call it. FaceTime.

That's terrible. I sound like an old head. But anyways, you're basic I just have them walk through, the house with That's

Steve: your underwriting.

Blake: Yeah. That's my underwriting. Yeah. That's it. So instead of charging these four people an appraisal fee, let's just go on video chat.

If you can't you know, if I'm not satisfied with, you know, the the video, maybe I'll go out there myself. I went to, check out a house in Wisconsin. I just went there. You know what I mean? I just personally went there.

I was like, I wanna see this. I just wanted to meet the person and check out the the the property. I'm not gonna do that with most deals, but Right. You know?

Steve: That's funny. What is your superpower?

Blake: I would say probably, like, empathy. Like, being able to understand somebody that's in a in a in a spot. Right? Trying to recognize what they're going through, and then that will sometimes motivate me to get really creative on deal structure to make something work that couldn't that I wouldn't have maybe thought of Mhmm. Another way.

I'm trying to think of a good example of that because I feel like I just did one like that. But, of course, I won't remember it for this interview. So Yeah.

Steve: Well, but the great thing is because of your experience, you can do all the creative deal making. Right. Yeah. What's the greatest lesson you've learned?

Blake: Don't use the numbers that are on paper as your as your golden standard. I mean, don't go off of pro form a. Just understand there's gonna be

Steve: rookie mistake.

Blake: Yeah. There's gonna be an element of chaos in in if you're doing real estate. So

Steve: And what's the favorite best or most interesting failure?

Blake: My most interesting failure. It was probably one of the early, flips that I did. I had a contractor, and I wasn't watching him because I was busy doing other things. And he just botched this house more than I've ever seen a house botched. I had to redo everything in this house.

It was so sad. And I I made, like, negative 5,000 on the flip.

Steve: So What what did he botch?

Blake: He got this beautiful real hardwood floor and then installed it wrong, so it all had to be torn out, which was really sad. He did these plaster walls, which he did them wrong somehow. I don't know how he did that wrong, but he did it wrong. I I kinda just he's like, oh, you know, let me go get this carpet. So he goes and buys all this carpet, puts it in, and, of course, I wasn't, you know, paying attention because this was, like, 2016.

I had so much going on. And, he puts in I've never seen such ugly carpet in my life, and it literally ruined the house sale. I mean, he put, like, this turquoise, like, something out of the little mermaid he put in the house. I was like, what are you doing, man? He probably got it on a discount roll somewhere.

So

Steve: I mean, he made his money.

Blake: He did. Yeah. I I I still paid him, but, it was terrible.

Steve: Alright. So I want you to think about what you wanna leave the listeners with while I make a couple of quick announcements. Alright. Guys, if you get value today, please like, subscribe, share, comment. It helps the algorithm, which in turn helps us reach more people.

And then we do have our all day sales training on September 24. Check it out. Disruptors.com/salestraining. And we got Mark Stuber coming out next week. You may not recognize the name.

He's Cody Hallfine's business partner, and they're gonna be talking about their business in Salt Lake. So what are some last thoughts you wanna leave a little

Blake: Only deal with honest people. So if you feel like you have to put somebody in a contract or if you feel like, you know, somebody could be shady, don't deal with that person ever. Just cut the loss, cut the tie early. Don't make bad hires. Don't hire bad employees.

You know, cut the those types of things. So to make sure the people you surround yourself are, with are genuine and honest.

Steve: How do you do that?

Blake: I guess some of it's gut feel. Some of it is, you know, maybe give them a small, opportunity to show who you know, what their true character is. I don't know how you do that, but I try to do it when I'm close. In your gut? I go with my gut.

Nine nine nine times out of 10. So Yeah.

Steve: Yeah. That's funny. Right? Because, like, we tend to, like, try to ignore our gut or try to justify.

Blake: Every time I've done that, I've gotten spanked.

Steve: Yeah. Our gut is really accurate Yeah.

Blake: It is.

Steve: For whatever reason.

Blake: Yeah.

Steve: Yeah. And if someone wants to get ahold of you, how would they do that?

Blake: They could just go to selbyrentals.com. That's the, website that's on my hat. Everybody misspells my name. It's s e l b y. Everyone wants to say Shelby like the car, but it's Really?

Selbyrentals,uh,.com. On there, you're gonna find a way to get ahold of me. So

Steve: Alright. Perfect. Well, thank you very much.

Blake: Absolutely, Steve. It was a lot of fun. Thanks so much.

Steve: Thank you guys for watching. See you all next week.