Helping Entrepreneurs Buy Homes

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Shane Perkins – Ultimate Strategy

 

Podcast Overview:

00:00 Issues with current mortgage system
05:36 Helping families become homeowners
08:58 Understanding mortgage pre-approval vs. approval
12:45 Real estate deals in different states
13:21 Working in your local market
18:39 Discussing home loan qualification criteria
20:11 Discussing home loan options
24:35 Benefits of refinancing a mortgage
26:57 Real estate investment strategy
29:52 Housing affordability concerns
34:22 How mortgage payments are managed
36:41 Investor strategies for real estate students
41:23 Discussing payment reminders with clients
43:56 Passion for helping people in real estate
47:03 Maximizing returns on home equity
51:38 The value of entrepreneurship

Podcast Transcription:

Shane Perkins [00:00:00]:
I’ve created a strategy that helps people get into homes that don’t qualify for traditional mortgage. I just realized that the demand is so high that I can’t help everybody. So I’m creating an army of folks that want to go out there and help people become homeowners. If someone’s looking for a real estate investment strategy, there’s nothing better out there. It’s consistent. Couple deals a month, two, three deals a month, every single month. There’s always a demand for it.

James Kademan [00:00:33]:
You have found Authentic Business Adventures, the business program that brings you the struggle stories and triumphant successes of business owners across the land. Downloadable audio episodes can be found on the podcast link found@drawincustomers.com we are locally underwritten by the bank of Sun Prairie Calls On Call, Extraordinary Answering Service, the Bold Business Book, as well as Live Switch. And today we’re welcoming, preparing to learn from Shane Perkins of the ultimate strategy. So, Shane, how is it going today?

Shane Perkins [00:01:02]:
It is going great. How are you doing? Do you have a good Mother’s Day? Yeah.

James Kademan [00:01:06]:
Oh, yeah, yeah. That was. It just came and went. Yeah, it’s so funny. My kids in sports, so any day, Mother’s Day, Father’s Day, whatever, Memorial Day, Labor Day, they’re all. You’re just traveling to some different grassy field where he’s playing some sport. So, yeah, I imagine that’s what a lot of parents are doing. Let’s start with the ultimate strategy.

James Kademan [00:01:29]:
Shane, what is the ultimate strategy?

Shane Perkins [00:01:31]:
Well, I have been a real estate investor for 29 years, and I’ve created a strategy that helps people get into homes that don’t qualify for traditional mortgage. And I didn’t start that until 2001. And so I’ve been doing that for about 25 years.

James Kademan [00:01:49]:
Wow.

Shane Perkins [00:01:49]:
And so I call it the ultimate strategy. And I did it myself for many, many years. And. And now that my kids are grown and gone, and I’ve decided that I need to empower other people to help more people get into homes. So I teach other people how to do the ultimate strategy, and they use that strategy to go and help other people get into homes.

James Kademan [00:02:15]:
Right on. And is it the property that has the challenge getting lending happening, or is it the borrower, the people trying to get into the home?

Shane Perkins [00:02:23]:
You know, James, I say that we have a broken mortgage system. You know, they’ve been using the same system for 30 years and they’re, you know, people change jobs, people start businesses. Business owners are notoriously turned down for mortgages because they are taught, as all of us entrepreneurs are to minimize their taxes. Right. Well, that means writing off everything that you can. And there’s many things that you can write off. And at the end of the day, your tax return says that you don’t make enough money to pay for a house, but you’re sitting there paying $3,000 a month in rent. And so we know that these people can pay.

Shane Perkins [00:03:01]:
We know how to record their income in a manner that will finance them on a house. And when I say finance, we get them into a house. We are not lenders, so we use creative financing strategies, real estate investment strategies that have been around for, you know, a hundred years. And so that’s what we do. We help people get into homes.

James Kademan [00:03:26]:
Right on. You know, it’s interesting you mentioned the small business thing, because I remember the last house that I bought with my wife. We, the lender straight up told us, let’s just put her W2 on there and just ignore your income. And if we get challenged by it, then we’ll come back and figure something out. But it’s better just to not even use the word entrepreneur or self employed.

Shane Perkins [00:03:49]:
It is.

James Kademan [00:03:51]:
I’m like, I’m pretty sure I make more money than her, but whatever makes.

Shane Perkins [00:03:56]:
But that’s the way it works. And it is, it’s a broken system. And I, you know, what I’ve figured out over 25 years of doing this program is that there’s three components that make people pay for their home. And the first one is the most important one. And that’s in that they’re in the home of their choice. You know, there are owner finance programs out there on specific houses, but if that’s not what you want, what’s, you know, what’s, you know, what’s the factor there? Yeah, you can call yourself an owner, but it’s in something that you’re having to settle for. And so that’s the first factor. The second one is that they must have equity.

Shane Perkins [00:04:35]:
And so we do require down payment. You know, it’s similar to the older old school. Right. 20% down. We do some 15% down deals, but you got to have some skin in the game. So you got to, you know, save for a down payment. And that and the fact that you have income is the third thing. But documenting that income for a bank is far different than documenting that income for what we do.

James Kademan [00:05:01]:
Right on. So are people coming to you or are you having a cold call and reach out to people?

Shane Perkins [00:05:07]:
No, once, once you get this program up and running, people seek you out. You know, there’s a statistic that I heard, and I can’t verify if it’s true or not because they’re pretty close. Close lipped on their. And I’ve tried to verify it, but I had a friend of mine tell me that, that, that actually works with Zillow very closely. That said 7,000 people a day are turned down that have a 20% down payment on Zillow. And I don’t discredit it. I believe that that’s true. I just can’t prove it.

Shane Perkins [00:05:36]:
But that’s a lot of people. And they don’t want to rent again, you know, that, you know, renting is. It’s great when you need it, but when you have kids and you have a family, you don’t want to be at someone else’s mercy to just raise your payment or, hey, I want somebody else to move into there, you know, or we’re going to sell or something like that. You want to give your kids roots, you want to give them a home. You want to be able to build a tree house or paint your girl’s bedroom pink and your boy’s bedroom blue or what have you, you know, you want to call it yours. And so we’ve recognized what it takes to be able to help people get into homes. And now I just realized that the demand is so high that I can’t help everybody. So I’m creating an army of folks that want to go out there and help people become homeowners.

James Kademan [00:06:26]:
Right on. Let’s talk about this army. Is this army people that are just looking to start their own business in this space, or is this other people that are already in the mortgage industry and they’re looking for.

Shane Perkins [00:06:37]:
It’s a little bit of both. Yeah, it’s a little bit of both. So, you know, real estate investing, there’s a lot of people that want to get into it, you know, and there’s all these programs out there, and I don’t, you know, wholesaling and fix and flip and burr methods, you know, buy, repair, rent and repeat and all of these different methods. And they’re all good strategies, but they’re a lot more competitive nowadays because there’s so many people getting. Getting into it. So it takes you, you know, you have to go through quite a few cold calls. And the things that loi blaster, where they. You blast out letters of intent, agent outreach, door knocking, foreclosure list, there’s all these different strategies.

Shane Perkins [00:07:22]:
And again, it’s very competitive, and very few people actually have results doing that because it’s. I Mean, it’s time consuming and when you’re new, you got to know what you’re doing, you know, or the people that know what they’re doing are going to beat you out. And so it’s a little difficult to get started in. But when you have a, here’s the way I put it, everybody else is fishing in a tiny pond, right? Looking for motivated sellers. Where my clients are fishing is in a gigantic ocean that, that’s full of fish that nobody’s fishing in, right? Nobody’s going out and helping these folks right off the bat. They find properties, right? And then they want to sell those properties and they’ll offer the seller financing. But it’s far easier to start with that buyer. I know my buyer’s budget, I know their down payment, their monthly payment.

Shane Perkins [00:08:17]:
I know the area, the school district, how many bedrooms, bathrooms, what they can afford. And now I have a specific property that I need to go and get for my client. And it’s far easier. And I know my guidelines and my parameters that I have to work within to get them that home because I know what they can afford. So to me it’s just a lot better system. And if you work the system, you’ll have success. And like I said earlier, you’re not going to be cold calling all the time. People come to you when they realize and when realtors, mortgage brokers, title clerks in your area recognize that you’re the person to go to for people like that.

Shane Perkins [00:08:58]:
Deals are kicked out of closing all the time at the last minute because a pre approval on a mortgage is not an approval, right? There’s two underwritings that happen on a mortgage and you mentioned that you’d just gone through this with your wife and they wanted to just put her income on there because it’s simpler, it’s an easier process, right? And if she makes the money and the debt to income ratio’s in line, no harm, no foul, just go on down the road and do it the easy way. But people get pre approved because it’s really just a credit score pull. And what you claim that you make in income, it’s a very soft process to get a pre approval. But once you go put a contract on a home and they start underwriting you, well, some of that income may be from a business or there may be some judgments or different things like that that just arise. And it’s like if you don’t take care of these things, you’re going to have to, you know, they’ll turn you down. And so the Other underwriting is obviously on the property. And that’s the question that you asked first. And so that’s really the appraisal.

Shane Perkins [00:10:09]:
Sometimes a survey, different things like that, where that lender is making sure that that property is, is worth what they’re willing to lend on it. So. But deals fall out of finance all the time. And we, we had a realtor that was moving to Denver from California. I forget which city. And he’d been a realtor for like 26 years in California. Great credit. Putting down $350,000 on a $700,000 home.

Shane Perkins [00:10:44]:
So 50% down, pre approved, no problem. Puts the contract on the house after they sell theirs. They’ve got all their stuff in a moving truck coming to Colorado. They, they as the underwriter digs into that. Oh, you’re moving. Well, yeah, but I’ve been a realtor for 26 years. Yeah, but you haven’t been a realtor in Colorado. You’ve been a realtor in California.

Shane Perkins [00:11:07]:
Yeah, but I’ve got 50% down. We don’t care. We’re not going to do the loan. And I mean these people are panicking. Everything’s in a moving truck. You know, they’re, they’re in a hotel expecting this close to happen. It happens a couple of days before we got them in their house. We closed in three days.

Shane Perkins [00:11:24]:
And that’s a fairly typical story. I mean that kind of stuff happens all the time.

James Kademan [00:11:31]:
Sure. So if I hear you right, it sounds like you’re almost a mortgage lender of some kind as well as a real estate agent in that you’re finding properties that fit what your borrower wants. Is that right?

Shane Perkins [00:11:45]:
It’s close. I am not a real estate agent. I am not a mortgage broker. I had a mortgage company at one point and I was, I sold that in 2007 and it was a good time. Yeah, it, yeah, that’s a story in itself, but. Yeah, yeah, right.

James Kademan [00:12:01]:
Dodged a bullet there.

Shane Perkins [00:12:02]:
Yeah, but that was a. So I’m not a lender. I’m not. We go and we purchase the house and we sell it to our buyers with seller financing. That’s pretty much how it works.

James Kademan [00:12:15]:
Gotcha. So, so help. Okay, that makes sense. So let’s just say I got a small business. I’m like, hey, Shane, I need to get a place. And the typical banks that I go to are all telling me no because I don’t have a W2. I’m a self employed guy, perfect candidate. Help me out.

James Kademan [00:12:32]:
I tell you, I’m looking at a place in let’s just say Madison, Wisconsin. Right. I’m looking at Madison. You are way west of me. So how do you know the market? I guess that I.

Shane Perkins [00:12:45]:
Well, see that’s the other thing too is that I. As I told you before the podcast, I split time between Texas and Colorado. And so I do deals primarily in Texas and Colorado. I’ve done a couple in North Carolina, one in Virginia, one in Maryland one time. I’ll never do that again. Nothing against Maryland people, but there’s transfer taxes, you know, and it. Because it’s. And they’re very expensive and I have to pay transfer tax to buy it and transfer tax to sell it when really it’s kind of one transaction.

Shane Perkins [00:13:21]:
But it cost my borrower and it was a lot of work anyway, that’s neither here nor there. I recommend that the students and the people that I work with work in their local market. They know that market. I’m not going to come up there and do a deal in Madison, Wisconsin. I say that, but I might. But I don’t get referrals. And people from that area, you know, but, but a real estate entrepreneur, a real estate investor that’s trying all of these other strategies from that area, I would hope that they would find me, learn the ultimate strategy. And we teach them everything from A to Z so they can help folks in that area.

Shane Perkins [00:14:03]:
And you know, and so you can. That’s pretty much how it works. And so that’s the stage that I’m in right now is teaching other people how to do this.

James Kademan [00:14:12]:
Gotcha. I want to run down the rabbit hole of the transferred tax or just the transfer itself. Could you. Or do you purchase the property in an LLC and then just sell the LLC to the buyer?

Shane Perkins [00:14:27]:
No, there’s people that do strategies like that. I’ve never done that. You know, I think I did actually on one deal. I ended up purchasing a fix and flip that somebody couldn’t complete and I just bought the llc. And that’s been some years ago. But no, no. So that is a strateg strategy. No, I wouldn’t say avoid it, but part of people want a deed in their name, right? Most people, Some people don’t.

James Kademan [00:14:54]:
I don’t know.

Shane Perkins [00:14:55]:
Yeah, but. Well, that’s the thing. I mean there’s lease purchase and things like that. But a lease purchase is not really a secure transaction either. You know, if you’re underlying seller, if you will, and you give a down payment and do a lease purchase, you know what happens if they pass away and their family, you know, the Heirs don’t want to be cooperative. What happens if they file bankruptcy? And, you know, you got to go through that process. What happens if they’re. If you’re making your payments, but they’re not making their payments on the underlying mortgage or something like that? And so I actually sell against lease options.

Shane Perkins [00:15:30]:
I think there’s a place for them, but I think they’re risky transactions for the person purchasing. There’s really not a lot of security in that.

James Kademan [00:15:40]:
All right, what about moving the property into a trust?

Shane Perkins [00:15:43]:
And then I use land trusts. I use land trusts all the time. There are strategies. And there was a period during back in Texas, and I forget the year. It was early 2000s. They made lease purchase illegal, and they made contract for deed illegal. And so for a period of time, we were placing properties into a land trust and. And selling a beneficial interest in the land trust and maintaining a portion of that beneficial interest.

Shane Perkins [00:16:14]:
So that was a strategy that I did for several years and never got in trouble. Nothing wrong with it. We just figured out that, you know, what we call a wraparound mortgage? Putting somebody on the deed, that was just a better structure, more protection for everybody. You didn’t have to explain why somebody owned 97% beneficial interest and another party earned 3% and all of that kind of stuff. It’s real simple. You know, you wraparound mortgage, the deed goes in your name, and if you don’t pay, you don’t stay.

James Kademan [00:16:49]:
Right.

Shane Perkins [00:16:49]:
If you pay, you stay, and it’s your house.

James Kademan [00:16:52]:
Sure. Tell me. So help me with that. Then the deed is in the buyer’s name at closing, or the deed becomes in the buyer’s name once they pay the loan off.

Shane Perkins [00:17:05]:
Depends on the state. Right. But for the most part, the deed is in the purchaser’s name.

James Kademan [00:17:11]:
Okay.

Shane Perkins [00:17:11]:
Yep. The deed is in the purchaser’s name. Sometimes there’s someone that’s got, you know, like a large IRS lien or some, you know, a judgment or a lien against them or something like that. And they don’t want to put property in their name. So sometimes we, you know, and they need time to be able to settle that matter, but they want to be a homeowner now. And so there are instances where we don’t put the deed in someone’s name, but that’s usually the buyer’s choice.

James Kademan [00:17:36]:
Okay, tell me a story about how you qualify a buyer. The banks are typically saying, no, we don’t want to spend more than 10 minutes on paperwork because we’re bankers. And that’s just what we do or don’t do. So how do you figure out if a business owner is making money or cash flowing enough for you to invest in them essentially?

Shane Perkins [00:17:56]:
Well, we take income proof in multiple ways. Sometimes people are running two or three businesses, you know, bank statements, different things like that. We will look at tax returns and look at the write offs and things like that. But for the most part, if somebody has a 20% down payment, which is our requirement and like I said earlier, we will go down to 15%. But there’s a, you know, that’s a specific situation. But if you’ve got 20% down on a property, to me that is your credit. You know, if you, if you’ve saved and you know, in Texas, median house, a home price 400, 450,000. Colorado, it’s closer to 600,000.

Shane Perkins [00:18:39]:
And so if you’ve got, you know, 100, you know, 80 to $120,000 down, you’re not going to miss your payments. You know, remember that second component of equity? You know, you’re getting the home of your choice and if you have that kind of equity and you’ve worked and you’ve saved that down payment, then there’s nothing telling me that you’re not going to make your payments. You know, now we have to do debt to income ratios. We, you know, we do not want to put somebody in a position where they can fail. So you know, we have to jump through all the compliance hoops with Dodd Frank and financial Reform act and we use a RMLO residential mortgage loan officer on every single deal so that all the state and, and federal guidelines and is in full compliance. So. But that’s a good question. We take income in multiple ways.

Shane Perkins [00:19:33]:
If somebody has got a down payment and they’ve got some bank statements and they simply sign an affidavit that they make this much money, that’s under penalty of perjury. And I’ve used that for years and I’ve never had to take a house back from somebody because they lied about their income.

James Kademan [00:19:56]:
Right on. Tell me a story about the, I guess how much investigating are you doing and the type of business that they have. Is there a certain industry or that you stay away from or businesses where you’re like, hey, intense, not gonna exist? Okay.

Shane Perkins [00:20:11]:
No, not really. You know, we do charge it a little bit higher interest rate than the market rates and we do a 30 year fix. So if they want to make that payment, you know, for 30 years, that’s perfectly fine. We don’t have an issue with that. There’s no balloon payments, no adjustable rates or anything like that. But every single one of our clients are financeable with time, whether that’s filing different tax returns and taking different write offs, whether that’s, you know, just getting caught up on taxes. I mean, a lot of business owners are four or five years behind on taxes. Wow.

Shane Perkins [00:20:45]:
It’s very common.

James Kademan [00:20:47]:
It’s out there every six months. I was just chatting with a buddy of mine I was just chatting with a buddy of mine about corporate taxes, how the due date is March 15, but the paperwork doesn’t have to show up until the end of February. So I’m like, you’re essentially asking your accountant to put together everyone’s returns in two weeks, which I don’t even think that’s physically possible. So we’re all there. We are filing extensions. Like everyone’s filing extensions because it’s not even feasible what we’re being asked to do.

Shane Perkins [00:21:20]:
Yeah.

James Kademan [00:21:20]:
So, like, it’s months out. Whatever. You don’t even think twice about it, but years. Wow, that’s.

Shane Perkins [00:21:25]:
There’s a. You’d be. You’d be surprised.

James Kademan [00:21:28]:
I was.

Shane Perkins [00:21:28]:
I couldn’t believe it. Yeah.

James Kademan [00:21:31]:
So a person comes up to you and they’re like, hey, Shane, I need a loan for this house. And you do some digging, find out that they’re five years behind and even filing their taxes. Is that a red flag or you’re just like, yeah, we got the money. You’re the money?

Shane Perkins [00:21:47]:
Yeah. It’s not a red flag to us because we, you know, that’s between them and the irs. You know, like I said, if they’ve got the down payment, and remember you said something there, that we’re going to finance them. We’re not going to finance them. We’re going to buy the house and sell it to them with seller financing and use their down payment as a down payment. So.

James Kademan [00:22:09]:
Okay, that’s you. So is that transact or those two transactions happening at the same time at the same table?

Shane Perkins [00:22:17]:
Yes.

James Kademan [00:22:18]:
Title company.

Shane Perkins [00:22:19]:
Yes. Yes.

James Kademan [00:22:20]:
So we’re here, going there.

Shane Perkins [00:22:22]:
Yeah. So we’re not lenders. Right. We’re not licensed as lenders. We’re, you know, we’re not lending money. We’re simply buying a home and selling it with seller financing attached to it.

James Kademan [00:22:33]:
Gotcha. But you being the seller, essentially, I

Shane Perkins [00:22:37]:
am the seller to my buyer. That’s correct.

James Kademan [00:22:39]:
Okay, Right on.

Shane Perkins [00:22:40]:
Yes.

James Kademan [00:22:42]:
So, yeah, so you would have to do some homework to figure out what you believe. Like, hey, can they make the payment, whatever that payment is?

Shane Perkins [00:22:48]:
Yes, 100%. You have to have it in the file, you cannot go out. And if somebody makes $60,000 a year and put them in a, you know, million dollar home, it’s, it’s not going to work. They may make 60,000. It’s not going to work very long. That’s exactly right. So, yeah, so we have to, according to the financial reform act, we have to make sure and have a debt to income ratio calculation in our file. We have to make sure that we’re putting somebody in a position where they can succeed and not a position to fail.

Shane Perkins [00:23:22]:
Now the guidelines are, they don’t tell you what you have to have in the file, but you, you have to have a complete file. And so that’s, you know, that’s part of using an RMLO on every single deal is we make sure that our files are compliant with the state, federal and local regulations in some cases.

James Kademan [00:23:44]:
Right on. Tell me a story about interest rate. You said it was a little bit higher, which makes sense because you’re supplying.

Shane Perkins [00:23:51]:
Yeah. And so it does depend on the deal for the entire 25 years. Even when interest rates are 2 and 3%, we charge a 9.9% flat 30 year fixed rate. So you can see when interest rates are low, people have an incentive to go in there and refinance because if you, you know, if you’re in a 9.9% rate, you’re, you’re highly motivated to get refinanced on your home because that payment’s going to drop in half. You get a 3% mortgage, I mean, or close to half. Right. I personally believe that I’m doing folks a favor by charging them a high interest rate. There’s benefits to it.

Shane Perkins [00:24:35]:
They get to deduct it from their taxes. Right. The interest. The second thing is, is they’re highly motivated to get refinanced and drop that payment in half. But if I’ve given somebody a debt to income ratio and put them at a higher interest rate when they go and refinance, to me they’re living life better than most people because most people buy as much house as they possibly can and if something comes up, they’re struggling. But if you pay a high interest rate and usually my average client refinances in about 24 to 30 months, we will help them through that situation and guide them. We don’t do the refinance for them. They can go anywhere they want.

Shane Perkins [00:25:17]:
But we know what it takes to refinance. And by the way, a refinance is far easier to get than, than a new purchase Loan and especially when you’re in a high equity position. Right. Because here recently, you know, two, two and a half years worth, the equity buildup just from appreciation across the country has been astronomical. We’re a little bit in a flat area right now, but you and I both know that as soon as interest rates drop, the market is going to go crazy again and values are going to, you know, skyrocket again.

James Kademan [00:25:52]:
You know, it’s interesting looking at the graphs of real estate valuations, how, I mean, the past, what are we talking Covid time? So past five, six years, it’s almost been a 45 degree incline, which is surreal.

Shane Perkins [00:26:07]:
It is.

James Kademan [00:26:08]:
How can you either maintain that or the value of the dollar just diminished to the point that that graph looks good, but the dollar, what you’re making, all that kind of stuff doesn’t exactly align with that.

Shane Perkins [00:26:18]:
Right. Yeah.

James Kademan [00:26:19]:
That’s a whole nother podcast.

Shane Perkins [00:26:21]:
It is a whole nother situation and there’s a ton of opinions on that. But at the end of the day, they, you know, they printed a lot of dollars and if you, if you have a little bit of something, it’s worth more. And when you have a lot of something, it devalues it. So.

James Kademan [00:26:35]:
Right.

Shane Perkins [00:26:35]:
You know.

James Kademan [00:26:36]:
Right. I guess my point there is interesting. When we look at real estate, we’re like, look how much it’s grown. We’re like, well, the value of the dollar has shrunk. So you have to keep that in mind as well.

Shane Perkins [00:26:45]:
Yeah, there’s a lot of graphs there. Yeah. You can really look back over history and it doesn’t matter what 10 period, 10 year period. You look at real estate’s increased in value. Right?

James Kademan [00:26:57]:
Absolutely.

Shane Perkins [00:26:57]:
You know, so anytime you look at that, any 10 year period, it doesn’t matter, you know what that it’s always gone up. And that’s the thing that is part of our home buyer presentation. Because if you get told no on a mortgage and you have to wait two or three years, or would you rather pay a higher interest rate for two or three years and lock in your price now to get that start on that equity build? Right. Because I can tell you right now, other than like the crash, 2008 to about 2010, 2011, maybe that period of time. But even if you start at 2007 to 2017 or you know, 1998 to 2008, that 10 year period real estate still went up. So yes, there’s ebbs and flows, but wouldn’t you rather be an owner today? Even though we don’t know when interest Rates are going to go down. We don’t know how long that this flat real estate market’s going to last. But you know how many people are out there that want to sell their home right now and they’re, they’re going to stay where they’re at because they’re in a 2 or 3 or 4% mortgage.

Shane Perkins [00:28:16]:
And why would they sell their house even if they need to downsize, upsize, whatever the case may be, to go buy another house at 8%, 8 and a half percent. Right. It doesn’t make any sense. So as soon as rates go down and there’s just as many buyers. Right. That are waiting on those rates to go down too. So, you know, there’s a lot of things happening with the Fed right now. And so we’ll see for sure.

Shane Perkins [00:28:41]:
But as soon as growing up in the air.

James Kademan [00:28:44]:
Yeah, and it’s interesting you mentioned that my parents in law, I guess we’re looking to downsize and they’ve been in their house forever, so it’s paid for or whatever. And they were looking like for us to get into a house that’s half the size, it would cost more, almost double than what they’re paying with taxes and all that kind of stuff. Here they’re like, it makes more sense to stay in a bigger house that doesn’t like why, why is it like that? But that’s just the market forces said it is. Patio homes and all that kind of stuff are worth whatever. Well, I guess some people are paying for it.

Shane Perkins [00:29:19]:
You know, we could, you could definitely, like you say, another podcast, another show. But it’s not just the mortgage system that’s broken. Right. You know, really the entire housing situation, I would say, is unsustainable.

James Kademan [00:29:33]:
It’s a little bizarre. Yeah, agreed. So it’ll be interesting to see, I guess, the next 10 or 20 years how many people can even afford to be in a house. And we maintain the trajectories that we’re on now with real estate prices going up, wages going up, and not nearly at the same rate.

Shane Perkins [00:29:52]:
You know, it, it baffles me because you look at, to me, it’s a pretty simple calculation. If you take any geographic area, Madison, Wisconsin, Denver, Colorado, Austin, Texas, whatever, and you take the median income and you apply to that, the median or the average interest rate, and even if you say everybody has 20% down, which they don’t, I mean, you know, FHA and all that stuff, USDA is 2% down and you calculate a debt to income ratio, assuming that nobody has any other debt and the home price and the payment on that, with a 20% down payment, which everybody doesn’t have, and with no debt, which everybody has debt, then the home prices don’t equal the median income for the areas that they’re in. And so you wonder who these, you know, who are these people buying these homes?

James Kademan [00:30:48]:
Right.

Shane Perkins [00:30:49]:
I mean you look at it, but I’ve been saying that for 10 years, you know, and it’s, it still keeps going up. So it’s, it is a little bit baffling. And I’ve been in real estate for 30 years.

James Kademan [00:31:03]:
30 years. You’ve seen a couple rocky markets then.

Shane Perkins [00:31:06]:
Yeah, for sure.

James Kademan [00:31:07]:
Talking early 2000s, we’re talking the whole 2008 thing, I mean 11 thing. Yeah, there’s. Yeah, all of many spots.

Shane Perkins [00:31:16]:
Well, and that’s the thing. I started using the ultimate strategy in 2001 and I learned it from a gentleman that because I was struggling like other real estate investors, you know, going and finding houses. There’s formulas for fix and flip. There’s formulas for wholesaling, there’s, you know, again, there’s formulas for renting properties and all of this stuff. And it’s. And I was having success. But I’ll tell you this, I was working my butt off. You know, we, I was working 60 hour weeks and my kids were young, they’re at home.

Shane Perkins [00:31:50]:
And I didn’t want to be that dad. I wanted to have more of a life. And so really I. And that’s why I quit my job and went into real estate investing. I was really seeking freedom. I made good money at my job. I began to make good money in real estate. But it began to eat all my time.

Shane Perkins [00:32:08]:
And I was introduced to a program at the time. It was called Gap, the guaranteed approval program. And it was the same premise. You start with the buyer first and then when you understand what that buyer needs, what they can afford and how much down and you create this system to where these buyers just come to you. I don’t market. I mean it’s all referral and it takes a little time before you start getting there. There’s a little marketing in the beginning, but at the end of the day when you’re that go to person that realtors and professional people know in your area and other business owners. I mean you say birds of a feather, right? Business owners hang out with business owners usually.

Shane Perkins [00:32:52]:
So that word of mouth gets you business and you just sit down with someone. I show them the program. It’s a home buyer presentation that I give. I show them the program, there’s no surprises. Every deal is pretty much cookie cutter. And so from an investor standpoint, it made my life easier because I’m looking for a specific property that fits specific parameters in a specific area with a specific budget. In other words, and here’s the other thing. When you buy a house as a real estate investor, 90 days, 120 days, 6 months of holding expenses, your profit’s gone, especially if you’re using hard money.

Shane Perkins [00:33:34]:
But, I mean, taxes are accruing, insurance. In the winter, there’s snow removal in some parts of the country. In the summer, there’s lawn maintenance and. And you just sit there and you’re just begging for somebody to buy your house. There’s price drops and everything else, and it’s stress. I mean, it’s a mountain of stress. But when you start with that buyer first, you’re. There is zero holding cost.

Shane Perkins [00:33:58]:
I close the exact same day my buyer closes, so I have no holding costs. And the monthly payments start coming in the very next month. Right. So it’s just a. It just makes your life easier. Less stress, more money. People pay more to own than they do to rent. So there’s cash flow on these deals, and so the cash flows more than rental property.

Shane Perkins [00:34:22]:
If a tree branch falls through the roof, they’re not going to be calling you, right? You’re, you know, you’re just the place that, that receives the payment. We use servicing companies for all the payments. So every single one of our deals, a client can set up on auto draft, they can make a phone payment, they can make a web payment, there’s a web portal, and everything is there for them, just like any other mortgage. I mean, most mortgage companies and mortgage lenders use servicing companies, so it’s no different for us. Right. And so from a, from an income standpoint, it really is true mailbox money every single month that we’re not collecting. If there’s late fees, we’re not hounding anybody. If there’s repairs, we’re not getting the calls.

Shane Perkins [00:35:06]:
And so from a real estate investment standpoint, it’s just a far better system. And obviously I’m biased, but there’s a reason why I’ve been using it for 25 years, and I’ve done a few fix and flips here when something falls in my lap over the years. I don’t like being a landlord, so I don’t have any rental properties and I don’t desire to. You know, I teach my investors that the more moving parts in an investment, the higher the risk. And to Me, when I look at a property, the yard, the paint, the carpet, the roof, the electrical, the plumbing, to me, that’s just a massive number of moving parts. Windows and floor covering, I’m just everything. Right. It’s all increases the risk.

Shane Perkins [00:35:52]:
You know, get, get a house and make $500 a month in cash flow and that’s, that would be a great rental from a landlord perspective. But three years down the road, if you need a roof, there goes all that, you know, so, and in, and in, in these transactions that I do and I. What I call my students is, you know, what they’re becoming is transaction engineers. They are. There’s one moving part and that’s the note. You know, it’s real simple. So it eliminates risk.

James Kademan [00:36:24]:
Sure. Let’s talk about the note. The money that you are getting to purchase these places, is that coming from investors? Is that your bag of money or is that some outside lender?

Shane Perkins [00:36:36]:
So it’s a little bit of both. Right.

James Kademan [00:36:39]:
So

Shane Perkins [00:36:41]:
obviously the down payments coming from the buyer, and they have that to the title company in advance, you know, 48 hours in advance as part of the home buyer presentation. So they’re prepared for that. And the second side of it is investors, sometimes my money or the investors money. But for the most part, for the students that I teach, most of them don’t have, you know, they don’t have a bunch of money setting aside where they can, you know, go buy property and sell it with seller financing. So that’s really the magic of this system and that’s the secret sauce, if you will. But yeah, there’s tons of money out there and tons of investments. Um, and we match people up with, you know, with those strategies and those connections to be able to do that. And so none of my students come to their, come to the closing table with any of their own money.

Shane Perkins [00:37:31]:
And I didn’t for years. Right. I do. And, and, and, and really, for the most part, I don’t really anymore here and there, you know, sometimes. But for the most part, you don’t have to use any of your own money. You don’t have to have good credit or anything like that. So it really is. If someone’s looking for a real estate, there’s nothing better out there.

Shane Perkins [00:37:53]:
It’s consistent. A couple deals a month, two, three deals a month every single month. There’s always a demand for it. And like you mentioned, all the different cycles, I don’t care if we’re in a boom cycle or a famine cycle, there are always people that have a down Payment that want to buy a home and it doesn’t matter what the market is, they’re always there. And so we teach you how to attract those people and you have deals coming to you instead of going out chasing all the time.

James Kademan [00:38:27]:
Right on. So when you are teaching the ultimate strategy to students, is there a tax benefit that they will receive even if they’re owning this property for what equates to seconds or minutes or anything like that? Curiosity question. I don’t know if it’s

Shane Perkins [00:38:44]:
so I can’t give tax advice and I don’t do that. I know that and I try not to keep up with it that much. I will say that owning properties, rental properties, storage buildings, different things like that can eliminate your taxes. But do recognize that every single bit of the income that we received or receive in these transactions is interest income. So. And what we’re also paying is interest. So there’s an offset there. But at the end of the day interest income is just like rental income as far as taxing goes.

Shane Perkins [00:39:23]:
It’s K1 income, it’s business owner income, things like that. So you’re not having to pay your self employment tax which is 15.3% on any of these transactions unless you’re paying yourself a salary or your spouse or your kids and in that case, you know, again, talk to your tax person. But this income is not wages. It’s not taxed the same way. And self employment tax for, for business owners is a surprise to new business owners and us that you know that have been around the block a few times. We try to minimize that as much as we can and this, this strategy absolutely does that. So it will minimize your taxes.

James Kademan [00:40:07]:
Yeah. Self employment tax is crazy.

Shane Perkins [00:40:10]:
15.3%.

James Kademan [00:40:11]:
Yeah. It’s insane right off the top.

Shane Perkins [00:40:13]:
It is insane right off the top. Then you can pay, then you pay your income tax.

James Kademan [00:40:16]:
Then we pay federal and state and blah blah, blah, blah, blah, blah blah blah. Yeah. Everybody run out and start their own business. Yay. Yeah.

Shane Perkins [00:40:23]:
Learn about it.

James Kademan [00:40:23]:
Right, right, right. Tell me a story about the, the buyers and if they, let’s just say their business fails, they can’t make the payment. What happens? Because then you’re on the hook for that. Right?

Shane Perkins [00:40:38]:
True. I’ve had that happen obviously. I imagine with enough hundreds of transactions and so when Hurricane Ike hit Houston, and I tell this story frequently because it’s one of the few failures that I’ve had is both the husband and the wife, the home wasn’t damaged at all, but I’m on top of the payments Right. Servicing company. If they’re late 10 days, I get a text and an email. So do they, that the payment hadn’t been made. And so I just simply take that text and copy it and paste it and forward it to my clients with a question mark and I wait an hour and then I’ll send another question mark. In other words, I want to know what’s going on.

Shane Perkins [00:41:23]:
I have the conversation with them pre close and let them know that, guys, you know, we have investors that. And it is required that payments are made. And if something happens in your life and you can’t make payments, we need to know about it as soon as possible. So I’m, you know, and I tell them this exact conversation. I’m going to forward you a text and I need an answer. And most of the time you, oh, you know, hey, Shane, sorry about that. Been out of town or hey, I have a client that didn’t pay me and I should, you know, because at the end of the day, from a mortgage standpoint or even a rent standpoint, if somebody owes me 2500 dollars and we’re halfway through the month, I need to know that they’re going to have five grand in two weeks. Right.

Shane Perkins [00:42:07]:
I mean, at the end that. That’s pretty much what it is. So you have to know what’s going on. But anyway, this particular couple, she was, she owned a, a daycare and he was an employee at a mechanic’s shop. And this was in Houston. Well, like I said, the house wasn’t damaged, but both of their places of employment were. They moved to this house to get in a certain school district for their kids. But the places that they worked were near each other and they went without power and they expected time period for them to get power back on these.

Shane Perkins [00:42:47]:
At both of their places, employment was six months. Yeah. And so she didn’t own the building where her daycare was at. He was an employee at this, at this auto mechanic shop. And you know, Houston was in disarray at that time and so he needed to go get another job. She tried to make, you know, her lease payments on the building and keep that business up. But people need a place to bring their kids, but not without power. And I started communicating with them and they said, shane, we’re going to have to, you know, we got to leave.

Shane Perkins [00:43:24]:
And you know, the market was kind of down at the time this. And so they just said, we’re just going to move. And I said, you know what, I’m going to help you guys move. I think I paid them $4,000 to clean up the house, mow the yard. We’ll sign paperwork, signed deed in lieu of foreclosure. And it wasn’t. A year and a half later they had saved up again and came. Shane, would you be willing to do this? I said, absolutely, I will help you guys get in another house and help them get into another home.

Shane Perkins [00:43:56]:
So it’s one of those things that I’ve had to foreclose on one house in 26 years, and that was simply because the client moved out and we couldn’t find them anywhere. And we had to go through that formal process of foreclosure to get the deed back so that we could then go sell the house so it can happen. But deed in lieu of foreclosure. I want to help people, right? I mean, at the end of the day, I make good money in this business, and so does everybody that I teach how to do it. But if you don’t have a passion to help people, you probably shouldn’t be in this business. Yes, we all, you know, we make good money on these deals, but if that’s what it’s about to you, then really, I don’t even, to be honest, I don’t even really want you as a student. I want people that care about people and want to help them in their situation, and that means everything. And once you get started in this program and you realize the power that you have to be able to help people get in, you know, to get into homes, I can’t tell you how many tears have been shed at the closing table and, you know, and, and drive by and say hi to somebody or something like that.

Shane Perkins [00:45:12]:
And, and it’s just they’re so thankful to be able to be in a home. And it’s heartwarming. It. I mean, I’ve shed tears, too. I’m kind of a softy when it comes to that. And so it, you know, it, it touches my heartstrings. And to me, that’s what it’s about. I mean, you can’t do it for free, right? We have to make something.

Shane Perkins [00:45:31]:
But at the end of the day, the money is secondary.

James Kademan [00:45:34]:
Right. On is the investors that are bringing money to you. You’re only charging nine some percent. Nine. Nine, I think you said. What is the margin that you’re giving them?

Shane Perkins [00:45:47]:
Well, again, it depends.

James Kademan [00:45:50]:
Right? It always depends. Right?

Shane Perkins [00:45:52]:
It always depends because there’s, there’s credit investors. Right. And so in other words, it’s not just cash that’s out there. You know, there’s people that use their credit for credit lines or mortgages or what have you. And we just wrap those mortgages. So that’s one way that we do it. The other way is a lot of times we’ll turn the sellers on these properties into two lien holders. Right.

Shane Perkins [00:46:18]:
So in other words, we can approach a seller and make them a lien holder on that property through creative financing, through wrapping their mortgage. And I would say that’s the majority of the deals right now. Because one of the other things that I do is I educate the investors themselves. And like I said earlier, that the moving parts scenario. Right. On rental properties, if somebody selling their house, you know, we’re taught that our, that our home is our number one investment. And there’s a lot of different opinions on that. Well, if it is an investment and you need to go sell it, is just selling it and paying a 6% commission and taking your equity and going on down the road.

Shane Perkins [00:47:03]:
Is that really, has it really been an investment for you? Is there a way to maximize those dollars that you can get out of that house? If you got a 2% mortgage and you owe $300,000, what if I could give you 6% on that mortgage and your equity, you’re making a full 6% on your, on all of your equity. You get some money up front, but at the end of the day, you’re making 4% on that $300,000 that the mortgage that the bank has. If you’ve got a 2% loan and they’re everywhere out there. Well, 4% is a lot of money over a year’s time. I mean, if you think about on a $300,000 mortgage, that’s $1,000 a month in free money that they’re getting. Or they can go and sell that house for half a million dollars and Pay, you know, $30,000 in realtors commissions.

James Kademan [00:47:55]:
Right.

Shane Perkins [00:47:57]:
You know, it is a whole nother podcast because 6%, it’s crazy, but, you know, when houses were, when I first started doing this, my average deal was a hundred thousand dollars.

James Kademan [00:48:09]:
Okay.

Shane Perkins [00:48:10]:
Every single deal down in Texas years ago.

James Kademan [00:48:13]:
Yeah.

Shane Perkins [00:48:14]:
I mean, we rarely did deals that were above 150, you know, and now the average transaction is $450,000. Well, $6,000 commission 20 years ago was a lot of money to those folks back then as well.

James Kademan [00:48:35]:
I mean, so difficult to unlock a door and turn on a light switch though.

Shane Perkins [00:48:42]:
Yeah. Again, another podcast. Right. Yeah, right, right. These are the folks that I work with every day, so.

James Kademan [00:48:48]:
Right, right.

Shane Perkins [00:48:48]:
I don’t. Yeah. So I’m not saying negative that there

James Kademan [00:48:52]:
aren’t some talented people in that industry, but I would say 90% of them from my experience are not 10% all day long.

Shane Perkins [00:48:59]:
Absolutely. I’ll tell you what I’ve discovered. Your realtors that are making the, you know, the top 5% of realtors are making 90% of the money and everybody else is share in that difference. If you have to work with a realtor, find that 5%. Find those people. They’re pros, man. They’re good at what they do and they know what they’re doing and they earn their money.

James Kademan [00:49:25]:
Fair. Yeah, true. Totally agree, totally agree. Those, the people that are, I’m going to call them the business people. The business style real estate agent all day long. Great.

Shane Perkins [00:49:36]:
Exactly.

James Kademan [00:49:38]:
The order takers. Get out of here.

Shane Perkins [00:49:41]:
Yeah, well, you know, you, you can really say that about anything. You know, there’s good cops, most of them and there’s a few of them that are not. And school teachers and bankers and doesn’t matter what, what profession we’re talking about, there’s always a few of them that

James Kademan [00:49:56]:
try to no doubt, no doubt bend the rules. So choose my real estate agent though. I don’t care. That’s true.

Shane Perkins [00:50:03]:
Or your kid’s school teacher in many cases.

James Kademan [00:50:05]:
Right.

Shane Perkins [00:50:06]:
So. But yeah, you’re right.

James Kademan [00:50:07]:
Yeah.

Shane Perkins [00:50:07]:
And choose those top performers.

James Kademan [00:50:10]:
Yeah.

Shane Perkins [00:50:10]:
You know, they have teams and they work hard.

James Kademan [00:50:12]:
So especially when you’re talking about that kind of money, the difference between good and great can be many thousands of dollars.

Shane Perkins [00:50:20]:
It sure can. Absolutely. It can. It’s a big deal for sure.

James Kademan [00:50:23]:
Shane, where can people find you?

Shane Perkins [00:50:26]:
The best place to find me is the https://TheUltimateStrategy.com and simple email address Shane@theUltimateStrategy.com so pretty simple there. Email me direct. I’d love to create more transaction engineers and people that we can teach how to do this, how to do this program in their communities. It’s pretty much turnkey. We teach you what to do from beginning to end. We coach all the way through the entire program every single week. So we want people to have success. I’m not just out here selling courses to somebody that, you know, here’s, here’s a website portal.

Shane Perkins [00:51:05]:
Log in and learn it. Good luck. Right. We’re on your team. We want you to succeed. We want you to close deals and get people into homes and, and you’ll make money while you’re doing it. You’ll shed tears with your home buyers as well. And, and it’s just, it’s a community of Folks that want to help other folks and, and want to be real estate investor without, you know, having your own money and without the, you know, constant cold calling and door knocking and all the other things that a lot of these folks do.

James Kademan [00:51:34]:
So I love it. Shane, thank you so much for being on the show.

Shane Perkins [00:51:38]:
Well, James, I appreciate you inviting me on the show. Love to come on anytime and speak to people about, you know, not just the ultimate strategy, but I know you do a lot of business owner stuff and I’ve been a business owner since 1997 and you talk a little bit about taxes and. But you know, I believe that entrepreneurship is what’s going to dig this country out of. I don’t know, I just think entrepreneurship, there’s a place for it and more people need to learn how to become entrepreneurs, learn how to own businesses, learn how to take care of themselves instead of relying on employers. And I had one mentor of mine tell me something about being a business owner. He goes, you know, most W2 people, and this kind of fits into the mortgage thing as well. But he says most W2 people, they make money, they pay taxes, they spend money, they spend what’s left. He goes, entrepreneurs make money, spend money and pay taxes on what’s left.

Shane Perkins [00:52:39]:
And that’s what we’re kind of talking about a little bit in that mortgage in the beginning. But once people understand that even if they have a business that doesn’t make money for a couple of years, they get some write offs and use their W2 and, and I love that conversation. I love for people to take that leap and go get in business for themselves and learn these things. And so I support it.

James Kademan [00:53:03]:
You know, it’s interesting. I always feel that people should start their own business and they should also continue to work a few hours. Not that they would choose this, but I feel like we should govern it that they work a few hours at minimum wage each week because then they’ll understand one minimum wage isn’t that much whatever, but more the type of jobs that are there for minimum wage. The servers of some kind and you’re having to deal with the general public. I feel like that would help you be nicer to people. And then the business side, you would be nicer to business owners and learn like, oh, not everything is as clear as an hourly rate. There’s way more going on, way more going on.

Shane Perkins [00:53:42]:
I mean, you know, they’re always talking about the millionaires and billionaires, right? There’s a lot of risk in becoming an entrepreneur and employing people and being that person that’s willing to step out there on that ledge and to be honest with you, from a percentage of income, I think people that are willing to take those risks and help other people by employing them and things like that, I believe that there should be some breaks available for those people to incentivize more people to go do that. It’s not cut and dry that, you know, living wage and all these talking points. Right. You’re exactly right, 100%. And we as entrepreneurs, I think, should help spread that word and empower more people to become business owners. I believe in it wholeheartedly.

James Kademan [00:54:29]:
I agree, I agree. Some people have that perception that once you start a business, you just get to pick out which yacht you want.

Shane Perkins [00:54:34]:
But yeah, well, guess what, that’s not, that’s not quite that cut and dry. It’s not that way. No. There’s a lot of get rich quick and different things out there like that. And the truth is, is there’s many programs out there I’m sure that’ll work for. If they work, you know, buying a course or spending money on a course or spending time on personal development and things like that, it is an investment. It’s not, you know, write a check and the money’s going to start rolling in. It’s not a.

Shane Perkins [00:55:03]:
No, it’s not a light source. Not at all.

James Kademan [00:55:06]:
Cool. Shane, I appreciate your time.

Shane Perkins [00:55:09]:
You have a great day, James. I look forward to meeting you sometime, hopefully.

James Kademan [00:55:13]:
Yeah, absolutely. This has been Authentic Business Adventures, the business program that brings you the struggle stories and triumphant successes of business owners across the land. My name is James Kademan and Authentic Business Adventures is brought to you by Calls On Call, offering call answering and receptionist services for service businesses across the country. On the web https://callsoncall.com and of course, the Bold Business Book, a book for the entrepreneur and all of us available wherever fine books are sold. And what else we got here with live Switch liveswitch, you can take live videos with your clients to save you time and money. Check them out https://liveswitch.com if you’re listening or watching this on the web. If you could do us a huge favor, give us a big old thumbs up, subscribe and of course share it with your entrepreneurial friends and those friends that may want to get into real estate investing. Which sounds to me, Shane, I think it’s safe to say this is a little bit of the less messy side of real estate investing versus being a landlord or something of that nature.

James Kademan [00:56:09]:
Is that safe to say. Easier or. Yeah, less messy, less annoying. Not the 3am phone calls that’s the best. Past episodes can be found morning, noon and night at the Podcast link found at https://drawincustomers.com thank you for joining us. We will see you next week. I want you to stay awesome and if you do nothing else, enjoy your business.