Mitch Stephen has been investing in real estate for decades. He has bought rentals, flipped houses, and built his business so large that in one year he bought 150 houses. Mitch was able to start with almost none of his own money using credit cards. Although Mitch has tried many different real estate strategies, he loves to owner finance deals. He is buying 50 to 100 homes a year, and creating massive amounts of cash flow without spending money on repairs. We talk about how he does this and much more on this episode of the InvestFourMore Podcast.
How did Mitch get started in real estate?
Mitch started a pavement marking company in his early 20’s. At one point he was worth a lot of money on paper, but was also owed a lot of money from work he had done. When the recession hit, his clients could not pay and he almost went bankrupt. Mitch learned that business is not easy, even when things are going great on paper. Mitch was introduced to real estate and felt that was a much more stable business. He could buy a real asset that would always have value, even in a recession. Mitch bought a couple of rental properties, and ended up selling them for a nice profit. He knew there was more to real estate investing and spent the next few years learning as much as he could.
How did Mitch start buying a lot of houses without his own money?
Mitch as many books as he could for years, before he figured out he could buy a lot of houses without a lot of his own money. Mitch decided to use credit cards to buy houses, and it worked great. He had over 45 credit cards at one time and would use low or no interest balance transfers to keep his fees and interest payments low. He was able to buy 45 houses the first year he used this strategy, then 65, and finally 150 houses. When he bought 150 houses he was not using just credit cards, but he had his own money and other investor money as well. He admits that buying 150 houses in one year may not have been the smartest business decision. He was working non-stop and leaving a lot of money on the table, because he could not keep track of everything.
How was Mitch selling the houses he bought?
In the beginning of his real estate investing career, Mitch would fix up his houses and sell them. However, it was a nightmare fixing up 100 houses a year. Mitch decided to buy fewer houses, but focus on making more money per deal. He was buying in San Antonio Texas and figured out to get the most profit and cash flow. He would owner finance the houses to people who could not get a loan from a bank. Mitch buys the most affordable houses in his area so he is not spending a lot of money on each home. Because he owner finances the houses he also does not have to fix them up. There is no bank requiring a home be in good condition before they lend on it. He can provide affordable houses that homeowners can fix up while they live in them. Mitch requires a 10 percent down payment on the houses he sells and usually offers a 10 percent interest loan amortized over 30 years. Mitch can create about $500 a month in cash flow on each home he sells with owner financing.
If you are wondering about using owner financing after Dodd Frank legislation was passed you should. Mitch has to use a mortgage originator to sign off on all of his loans, because of that legislation.
How does Mitch find his properties?
Mitch has been buying cheap houses for years and used many strategies to find great deals. At one point bandit signs worked very well for him, but now he feels there is too much competition for them to work. Back before the internet he would search the classified ads in the paper and find amazing deals. The paper is not longer a good source for deals and Mitch uses mailing campaigns to find many of his houses. He even has a private investigator who can help him find hard to find homeowners who have vacated a house. He also buys houses from the MLS like I do.
How can you get in touch with Mitch or learn more?
Mitch has written a few books about his real estate investing. The My Life and 1,000 Houses are great books that detail his strategies. Mitch has a course meant to help people learn to use his owner financing techniques as well. If you want to hear Mitch’s podcast you can find that here: http://reinvestorsummit.com
[0:00:58.9] MF: Hey everyone, it’s Mark Ferguson with Invest Four More. Welcome to another episode of the Invest Four More Real Estate Podcast. I have a very cool guest on for today’s show, Mitch Stephen who’s had over a 1,000 real estate transactions, has written numerous books kind of in a series. My Life In 1,000 Houses with different topics about how to buy houses, how to finance them, and his story. I’m really excited to talk to Mitch.
Mitch, how are you doing today? Thank you for being on the show.
[00:01:22] MS: I’m doing great Mark. Man, thanks for having me.
[00:01:24] MF: Yeah, no I appreciate it. I’m interested to hear more about your story as I’m sure many of my listeners are as well. Can we start from the beginning? What first got you into the real estate business?
[00:01:35] MS: I failed at everything else. It was the only thing left. Honestly, I tried all kinds of stuff and I tried business where I performed services and at a young age I was striping parking lots. I sold my drum set for $750, I brought a striping machine and started putting stripes down on parking lots. You know, those white and yellow lines that you park between and drive between?
[00:01:57] MF: Right.
[00:01:57] MF: I started doing pavement markings. At 22 I was owed $350,000 in my accounts receivable. I didn’t owe anybody anything because I paid as I went. I had a bartending job at night that I kept my bills paid. Then the mid-1980’s recession hit and everybody filed bankruptcy and I didn’t collect one penny. So I decided I didn’t really like that business because I couldn’t get my stripes off the ground, I couldn’t take back my work.
And somehow I bought some rent houses because I heard that was cool and you could make some money from rent houses and one day I decided I was going to sell both those rent houses and I made way more money than I did working the whole year. So I decided I’d better look into real estate a little bit heavier because I didn’t spend that much time buying those two rent houses.
[00:02:38] MF: Right.
[00:02:39] MS: And that’s how I started, really.
[00:02:40] MF: How did you find those houses? Were those just houses for sale? Or was there any unique ways you got ahold of them?
[00:02:46] MS: Well at the time I was just bartending and I wanted a place to live and someone told me that they were owner financing their condos so I owner financed the condo and then someone else had a house they wanted to sell me, but I couldn’t live in both of them so I bought the other one and I rented it out. That was like, I wasn’t trying to find the houses. Really I was trying to find a house to live, I wasn’t looking for investments. It’s much more sophisticated these days because there’s a lot of competition out there for investment houses.
[00:03:10] MF: Right, right. So once you figured out that real estate had some opportunities in it, what was your next step? What did you do after that?
[00:03:17] MS: Well that was about 20 years ago so the internet wasn’t what it was, so I was reading books like Nothing Down by Robert Allen, trying to absorb the fact that I didn’t have to have money or credit to get involve in the creative real estate investing game, which for people to tell you that, their lips to tell you that you don’t need money and your ears to hear it is one thing. But to own the concept in your heart, that took some five years to actually understand why I didn’t need money and how you functioned without money.
[00:03:44] MF: Were you still working during that time or were you just focused on real estate? What was going on during that five years?
[00:03:50] MS: I was bartending, just keeping my head above water. I took a lot of different jobs during the day and I just tried to get educated as much as I could. It never dawned on me to find a mentor. I wish it would have earlier in my career. It would’ve saved me tons of headaches but I just didn’t even know — that wasn’t even my vocabulary, the word “mentor” or “coach” for that kind of thing. So I went about it all by myself and I like to tell people I’ve graduated from La Calle U. You know any Spanish, Mark?
[00:04:19] MF: Very little.
[00:04:20] MS: “La calle” means “the street” in Spanish.
[00:04:24] MF: Okay. That makes sense.
[00:04:25] MS: I paid the street instead of paying a coach, and I paid the street a lot more than I’ve ever paid a coach but I didn’t know better.
[00:04:31] MF: Yeah. No, I did the first thing — as an agent when I first started out I thought I was smart enough to do it on my own and didn’t need help. It takes a lot longer and you spend a lot more money and make a lot less money doing it that way, that’s for sure.
[00:04:42] MS: Yeah, so I started buying houses. I started buying houses on credit cards and back in that day, and now it’s coming back around, there are companies that can help you do it. But I did it by myself. I collected 45 credit cards with 0% interest or 1 or 2% interest introductory offers for six months, 12 months, 18 month and I would go down and I would get — I had about $400,000 of unsecured credit I could get off my credit cards.
It would take me about three days if I wanted to get $400,000 on my dining room table, but I could get $400,000 on my dining room table by going up to banks and asking them for the full cash advance on the card, $10,000, $15,000, $20,000, some of them $30,000, and I bought my first 100 deals on credit cards.
[00:05:24] MF: When you were buying those deals, were you keeping them? Were you selling them? What was the exit strategy?
[00:05:29] MS: I couldn’t keep them because the introductory offer for the credit card was only six months or 12 months or 18 months. Now you could roll them over. The idea was to buy one, dusty it up a little bit — there’s a Texas word for you. Dusty it up a little bit, and then sell it and get enough money to pay your credit card and then have some leftover, like $10,000 or $20,000 leftover, a true flip.
So I would borrow the money with no interest and I would buy the house and I’d get another card and I’d borrow $10,000 to do the rehab and then I’d get that done and then I’d sell the house. And when I sold it I’d go to the title company and they would give me all the money for the house because the credit card debt didn’t show up on the house. So I had to be very disciplined and anytime I used the credit card for a house I would tape the credit card to the inside of that house folder.
If I put one dollar on that credit card it was taped inside that folder because I never co-mingled cards with different houses. It was one card, one house. So when I got paid off at the title company and I sold the house and I had all that money sitting on the table, I would go open up the file, pull out all the credit cards, call them all and ask them what the balances were and I’d write a check for them right then and whatever was leftover was mine. I did it 100 times in a row.
I did it 45 times my first year, 65 times my second year, and then my third year I didn’t need to use credit cards anymore. I bought 150 houses and I sold 97 exactly.
[00:06:47] MF: Wow. That’s pretty fast rise there in your first three years.
[00:06:51] MS: It was very busy. Just like when you talked about, I’ve done 1,000 deals, it’s probably like more up to — when I started that book series in 2008 and so it’s probably more like 1,500 transactions but it’s not the size of the transactions. It’s not trying to impress anybody, just trying to impress upon people that I’ve been down the road enough and had my share of mistakes made, probably more than my share because I’m a slow learner. And just like the 150 houses in one year, it sounds really great but I would’ve been so much better off to have done 75 houses and been in control and also had a life because I was working 18 hours a day.
It didn’t seem like work to me because it was fun and it was my passion and I had finally found myself. I finally found out what Mitch Stephen was supposed to do for his life, and I don’t know why but since the very first time I sold a house and collected a check, I’ve been learning about it, talking about it, reading about it, watching webinars or making webinars for 20 years. And I don’t know why, but I never get tired of it.
[00:07:46] MF: Nope. I could understand that. I like to say I’m addicted to buying houses.
[00:07:50] MS: Yeah, I think I’m a junkie is what it is. I’m a deal junkie.
[00:07:54] MF: Yep. When you’re doing that many houses a year, I mean one of my biggest issues is getting them fixed and rehabbed. How did you manage the rehab? Were you rehabbing all of them? Or were some of them kind of you’re wholesaling without fixing them up?
[00:08:05] MS: Well a lot of them were wholesaled, especially in the beginning with the credit cards because that was part of the problem when I did 150 houses. I was rehabbing almost all of them and the reason why I said I would’ve been better off to do half as many, as fast as the money was coming in the front door, the contractors and people were just killing me with money going out the back door that I wasn’t an experienced enough businessman at the time to learn how to set up systems to regulate it. So I bought and sold 150 houses but I made what I would’ve made if I had just been in control of 75 houses.
[00:08:35] MF: Yeah, it can get out of control quickly trying to deal with contractors.
[00:08:39] MS: Now today, the best business model on the planet is — this is my strategy of choice. I don’t always do it this way, but it’s buy it, do not fix it, owner-finance it for double plus a down payment and watch the person who you finance the house to go over budget making repairs to your collateral. That is the greatest strategy on the planet as far as Mitch Stephen is concerned. Buy it, don’t touch it, owner finance it for double, and watch the guy who bought it go over budget fixing up your collateral.
[00:09:07] MF: Right. Are you still doing that in Texas? Where are you doing that at?
[00:09:11] MS: I do it all in my home town of San Antonio.
[00:09:13] MF: Okay.
[00:09:14] MS: Last year I bought just under 100 houses, I probably wholesaled 40%, I retailed 10%, and I owner financed 50%. I average about $535 per month positive cash flow on my owner financed deals. So in 2015 my spreads are $50,000 a month and in 2016, I added another 50 houses, owner-financed. So that puts right around $100,000 per month in positive cash flow. But look, I’m a professional. I’ve been doing it for 20 years. Not only did I do those numbers, I never saw one of the houses and I never saw the buyers, ever and I never went to a closing. I run the infrastructure, and I run my business like a CEO from the top down and I never touch houses, walk in houses, rarely ever see them.
[00:10:03] MF: Okay, nice. Are you in the lower price range mostly when you’re buying those?
[00:10:06] MS: I’m in the half price range, Mark. I’m in the half price range. I understand what you’re saying though. I don’t deal in free houses, I like to deal in Walmart houses for Walmart people. Little three-two’s, three-one’s, two-two’s, two-one’s. Everything for a price. If you can’t live in my houses, then you can’t live in an apartment. If you can’t live in my house, you’re under a bridge. Because I’ve got the most affordable houses in the world and the core belief of my only finance strategy is that a person paying $1,000 a month rent would rather pay $1,000 to own. Can you believe that, Mark?
[00:10:38] MF: Yes.
[00:10:38] MS: Well, that’s my market. Now, it’s not everybody. It’s probably around 83% of the market. There’s some people that don’t want to own, there’s people that can’t own for reasons, they’re going to be transferred or something. And there’s people that quite frankly don’t deserve to own. So the other 83% is my market and it’s my job to go out and let them know that it is possible for them to own a home because I’m going to finance them.
See, what I’ve done is I’ve taken the bank out of the equation. Both on the buying end and on the selling end. So when the recession hit it’s like, boom, I don’t need their money to buy and I don’t need their money to sell. And by the way, in the recession when the banks clam up, if you solve the buying problem how are you going to sell houses to people if they can’t borrow money from a bank? Because the banks clammed up because that’s what banks do in recession.
[00:11:18] MF: Right.
[00:11:19] MS: So I solved it on both ends. I got private money to buy the houses, I pay 6 to 8% depending and I pay interest only and I give them a first lien and that’s how I buy all my houses, and then I sell with owner financing. So there are no banks in my equation.
[00:11:32] MF: How long of terms do you do with the owner financing and the private money you’re borrowing?
[00:11:37] MS: Typically five years, interest only. Then the question arises, “Well, you’re selling these houses at 10.5% for 30 years or 10% now with Dodd Frank. 10% for 30 years, there’s a train wreck here in five years, what happens? So I wrote about five pages on the exit strategies on my blog, 1000Houses.com, look up the article Why I Borrow At the Terms I Do.
[00:12:09] MF: And I’m assuming, I’ve talked to another person who does kind of a similar strategy, but you can sell those notes?
[00:12:16] MS: You can, but it’s counter — in your early days you might need to to get a nay-sayer spouse or family member or someone off your back. You might need to sell a couple of notes to put a couple of chunks of money in the bank. We call it “hush money”. It’s like, “Okay, honey, I just put $30,000 in the bank, that’s more than you make all year, now hush. Leave me alone.”
[00:12:35] MF: Right.
[00:12:36] MS: So you might do it for that, or you might want to do it to catch up on some debt or to pay down a school loan or get something out of the way that just bothers the heck out of you. But after that it’s counterintuitive to sell notes because what we’re trying to do is build cash flow. But here’s the thing about it, you shouldn’t have to need cash per month because you’re collecting down payments. That’s why I don’t like the rental game. Have you ever collected a $20,000 down payment on a three bedroom, two bath, 1,200 square foot house in a “Regular-ville” city, USA? No, you can’t get $15,000 non-refundable down. But you can get $15, $20, $30,000 down in down payments. You’ll have days when it happens.
More often than not you’re right around 10% of the sales price, 6, 7, or 8,000 in the houses that I deal in. If I do two of those houses a month and I collected $6,000 down only, times two that’s $12,000 a month. A lot of people could live pretty well off $12,000 a month, couldn’t they?
[00:13:24] MF: Right. Yeah, for sure.
[00:13:27] MS: Then every time you do that you’re increasing your cash flow by 3, 4, $500 a month and you’re not a landlord. So when the check comes in, it’s your money. You see, when the rent comes in you don’t know if it’s your money because when the rent comes in you might even have to hold that money for 3, 4 , or 5 months because if the air conditioner breaks, it’s the air conditioner man’s money. It wasn’t yours. But when you owner finance houses, it’s not your air conditioner. It’s not your faucet, toilet, water heater, roof, doors, window, grass, driveway, garage door. None of that stuff is yours. You’re just the lien holder. You’re the bank, which by the way is the name of my mentorship, Be The Bank.
[00:14:02] MF: Right. So, I’m curious, when you’re doing these owner financing, obviously it’s not your property. But I imagine that you do have some default. How often do you see that where they default on a loan and you have to take the property back?
[00:14:13] MS: In the good times, right now it’s about 3%. But like I said, I’m a professional. I’ve made all the mistakes. I know how to vet my people, I know when to tell them, “I don’t think we’re a right fit.” I know I how to size them up very well, but also we’re in a time of prosperity, so to speak. Things are moving along all right right now. If we hit another recession, which I’m still certain we’re in for — I’ve been thinking that way for a while, but it just keeps getting pushed out. But there has to be. There’s always cycles. It doesn’t matter who’s president or whatever. They’re cycles, right? They’re just cycles. It’s just like nature.
[00:14:44] MF: Right.
[00:14:45] MS: So in that time it’ll probably be around 10% but that’s where we recapture that appreciation that we lost because we weren’t a landlord or a buy and hold guy. So we’ll recapture the appreciation on about 10% of the houses in the bad times, 3% good times.
[00:15:01] MF: Okay, that makes sense. Then I imagine one benefit of being in Texas is, are you foreclosing on these properties if they default? Are you trying to do a deed in lieu? What’s your strategy for getting those properties back? I know Texas has a pretty simple foreclosure process.
[00:15:12] MS: You know, we have one of the fastest foreclosure processes on the planet. Us and Georgia, and I think Alabama. It’s about 45 days from beginning to end, which is usually at least 60 days because you don’t normally have the grace to fall — send your first notice on exactly the right day. You have to give 21 days notice and we only have an auction on the first Tuesday of each month. So if you miss the 21 days, there’s 20 days right there. So the process becomes 65 days instead of 45 days because you’re one day behind schedule and you missed the deadline, and it won’t roll around again for another 30 days.
[00:15:45] MF: That’s still pretty quick.
[00:15:46] MS: Pretty easy. I do a lot of cash for keys, lien foreclosures and stuff. But I don’t like to get into conflict with people and usually if people can’t make their payment I can go over to them. I like to talk to people from a position of love and Christianity and find out what the problem is and see if I can help and see if there’s a way to do it. I mean, if they lost their job for a couple of months and now they have a job that’s even better than the other one, I’ll just take the payments and put it on the back end. I don’t want to take anyone’s house. I never want to take anyone’s house. All that crap about when they fail you just kick them out and sell it to someone else, it’s a losing proposition for everybody, generally. I mean no one’s really making any money off it, most of the time.
[00:16:20] MF: Right. Yeah, very true.
[00:16:22] MS: They’re just glorifying a myth. I mean, it doesn’t really happen.
[00:16:25] MF: Yeah. Even though it’s an easier process in texas to foreclose, that doesn’t mean it’s the best option. But it’s, worst case scenario, it makes it a little easier.
[00:16:36] MS: It’s as good as it gets in Texas as far as I’m concerned.
[00:16:38] MF: Right. Now, we’ve gone over the owner financing and your strategy. One thing I really want to cover is one of your books is about finding deals. What are some of your top ways to find deals right now?
[00:16:48] MS: Well, right now so many of the way have been worn out. But it’s probably different in different markets. So what works for me may not work for you or may not work at this time for you. But I used to buy everything for Bandit Signs. I used to be able to put up Bandit Signs all over and I’d just buy houses all day long. Before that I could get in the classifieds back when there was a classified section in the newspaper that anybody ready. I could get in the classifieds, I could find a house any day I wanted to and sometimes if I screwed up I’d find two houses in one day. If I wanted a house, I’d just pick up the classifieds, started dialing, and I went and bought a house and it would work.
Then I went to Bandit Signs for about, I don’t know. A long time. 10 years, 12 years. It was a really good source. But the competition got so great that people started, I think, just ignoring the signs because there were so many non-professional people out there trying to negotiate deals and I think the yellow plastic signs “I Buy Houses For Cash” kind of got a bad rap on who’s behind them. So now, we do the mass mailings. People don’t normally call me from the postcard as often as I’d like, but what I’m interesting in is the return postcard. Because if they’re not getting my postcard, they’re not getting anybody else’s, they’re not there.
Now I track these people down and I’m more of a detective, Dog the Bounty Hunter, than I am a house real estate agent. I’m a professional skip freight, person locator. I can find just about anybody in the world. I was just hot on the trails of Bin Laden before they got him.
[00:18:08] MF: That’s a great strategy because obviously you’re sending the mailings to people who are most-likely distressed in some way, and then if they’re not there then yeah, that’s a pretty hot lead if you can find them.
[00:18:19] MS: Yeah. But it takes a certain level of sophistication to be able to find them and you have to set up for it. You just don’t get on your computer and find them. It’s not remotely possible. And then there are people that, if you get lucky enough, you find a person that I don’t know what they did in the previous life because they told me if they ever told me what they did they’d have to kill me. But whenever I just absolutely can’t find someone, I call this guy and I pay him $200 and he drives me right to their front door.
[00:18:47] MF: Nice.
[00:18:49] MS: I still don’t know what he ever did or how he does it, but it doesn’t matter to me but I’m curious. I suppose he’s CIA or something high tech up in the government or something, but he has something that no one else has. I don’t know what it is.
[00:19:00] MF: Do you ever buy at the monthly foreclosure sales?
[00:19:03] MS: If I want to get in a bidding war, I’ll go there. There are too many people paying too much money down there. You know what, can I tell you something? I’m going to tell you something. I went down there one time, I was trying to see if this one house was going to go under the radar for a certain [inaudible]. So I went there to maybe bid on that one house, that one property and I saw the prices of the houses going on this street and that street, and I know all those streets.
I’ve had a street — it’s hard to drive down the highway and rattle off the streets in my town when I’ve owned a house on that street and what I saw what they were paying for houses, I took two of my problem houses, I foreclosed on myself, I took those houses to the auction and I sold my houses for more money than I thought I could ever sell them for at that auction. That’s how I sell my problem houses. I foreclose on myself and let those yay who’s at the auctions pay way too much. You get your money in 48 hours.
[00:19:49] MF: That’s kind of become the same way here where it’s crazy what people are paying at the foreclosure auctions just because the inventory’s dried up, they don’t know how to get properties any other way so they just keep paying more and more for them.
[00:19:59] MS: The out of the box thinking is what I’m trying to point out. When you see people paying too much some place, get your houses over there to sell them. Well, how do I get my house in the foreclosure auction? Well I guess I’ll put it in an entity and I’ll foreclose on it. So I put it in an entity, I foreclosed on it, I hired a trustee, shipped my house down there, boom. Had my money in 48 hours, more than I thought I’d ever get for that piece of junk.
[00:20:17] MF: That’s great. I think I know the answer to this question already, but do you ever buy from the MLS at all? Houses that are just for sale?
[00:20:22] MS: Yeah, I have five people that buy houses from me, that are looking for houses everyday and what I do is I try to keep them in their own lane. I’m not a believer in the MLS system right now because the markets are so hot that I don’t think that there are deals in there. But this guy keeps proving me wrong every month. But he was enthusiastic about doing MLS and finding houses there. He understood the MLS, he knows how to do it, and so no one else out of the five guys can work MLS. I’ve put everyone in their own lane so they’re not competing against myself.
One guy liked to do auction sites. We put the auction sites on the board that he does. No one get on this site bid because this guy’s doing it right here. I don’t want to bid against myself. One guy’s doing tax liens and maybe he’s doing tax liens and residential code violations, two or three other things and no one else in the group can go there. That’s his lane, you know? He works those lanes. So I have four or five people, that’s why I never see the houses I buy. I see the data on the houses I buy, I see a picture of it, I know what street it’s on, and I probably know the street as good as anybody in town because I’ve been driving these streets for 20 years. I know these neighborhoods.
What’s funny is though, I did start to get out some this year because the neighborhoods were changing so much I couldn’t — they were telling me the prices they were buying these houses for and I was going, “That’s too much for that neighborhood.” They said, “You ought to see the neighborhood, man.” Then I think to myself, “I haven’t seen it in six years.” So I drove down there and it’s like, “Oh my gosh. No wonder they’re charging this.”
[00:21:41] MF: It’s completely different area.
[00:21:43] MS: Well it’s being re-gentrified, you know? The yuppies were moving in, or whatever you want to call them. I mean it was going through a change, a major change. So I did decide this year I’m going to start driving a few more of the neighborhoods because I think my data in my head is outdated.
[00:21:57] MF: Right. That makes sense. So, how many houses do you think you’re buying a month right now?
[00:22:00] MS: This year I’ll do 77. So what is that? 9 houses a month?
[00:22:06] MF: Okay. All right. So, we learned about sourcing deals, financing them, how you’re doing your business. What made you want to write your books about this whole process and kind of share what you’ve learned?
[00:22:17] MS: It was never on my radar to do that. I never wanted to write a book. I didn’t do well in English. I also didn’t do well in math, by the way, from high school. I didn’t go to college. I had a tragedy happen in my life and I found out later that it’s a natural response to a tragedy to sit down and want to categorize your life and life in general. That’s how I sat down to categorize my life was I started writing. I was told many years later, it was explained to me why I wrote the book because everyone asked me, “What inspired the book?” Everyone, in the interview, all the time.
I was saying things that weren’t true, and I finally asked my doctor who was a long time investor of mine and who was also a published author who gets paid like $150,000 cash advance to write a book. I mean, a real writer with a real publisher. And he said, “When you had your tragedy you sat down to catalogue your life and you came out with this book and that’s what it is.” Then I also told them I thought it was very narcissistic of me. Why was I being narcissistic and who wants to know about Mitch Stephen? Who cares? Why am I writing this book? I’m not special. I’m not Donald Trump. I’m nothing.
I’m where a lot of people would like to be, but I’m certainly not famous. There’s always a bigger gun down the street, or a faster gun. 1,500 houses is not the most houses anybody ever did in a year. I can guarantee you. I know people who do 1,500 houses in a quarter, you know? So that’s when he explained to me why I wrote it. And because the response to the book was so good and the questions kept coming the same questions over and over, like, “How do you find so many houses?” That’s when I decided I would write the second book and then everyone wanted to know about owner financing because hardly anyone teaches about it and most of the people that teach it, don’t do it. They just are teaching a theory, and here I was a guy that was doing it all the time and that’s really my passion. So I decided to write my third book about that passion of owner financing.
[00:24:01] MF: I need to ask one question here on owner financing, which you touched on briefly but I know it’s something that I’ve thought about. Has Dodd Frank completely changed the way you do owner financing? Or is it not that big of a deal?
[00:24:12] MS: Yeah, it completely eliminated my competition because everybody ran away and didn’t take time to figure it out. Dodd Frank’s real simple. It’s not simple in some places. Like Pennsylvania and some other places, I don’t know what to tell you. I’ll tell you what, if I was in Pennsylvania I’d figure it out, but it’s not been important for me to figure out Pennsylvania. But in Texas we’re allowed to either be an RMLO ourselves, go get a license — a residential mortgage loan originator. Or we can hire one to keep us compliant.
So here’s how Dodd Frank affected me: I had to pay an RMLO to keep me compliant on every deal and so that’s what I do. I hire an RMLO, I run the paperwork through him, he stands between me and my buyer for the first small period of time when we’re getting together, my buyer and I. And then I just do what he says and I go buy houses and I go sell houses.
[00:25:02] MF: Okay, that’s good to know that it’s not the end of the world for owner financing.
[00:25:06] MS: It’s probably going to go away with the new administration. I think it’s on the list to be drastically reduced or probably won’t affect people like us anymore, if not wiped out all together.
[00:25:15] MF: I saw that.
[00:25:16] MS: But they figured out, they did this knee-jerk reaction to the banks and what they figured out, without people like me and you out there owner financing the inner city houses to inner city people, that whole inner city’s going rot. Those houses will sit. I’m buying houses in inner city for 15, 20, $30,000. Banks don’t even want to loan on something less than $50,000 in my neighborhood. So what’s going to happen? First of all, the middle class will never be able to buy a house.
They move the credit score up to 680. There are hoards and hoards of people that don’t have a 680 credit score and then these houses that are dilapidated and falling down in the inner city. You buy them for chump change. And who’s going to buy them if they regulate us out of business? They finally figured out that the inner city’s going to die if they don’t let capitalists and small entrepreneurs take over. And they’re also making it impossible for middle class America to own a home. A huge number of them.
[00:26:07] MF: Right. That makes sense. So tell us, what’s the best way to find your books, to get in touch with you if someone wants to learn more about what you’re doing and get in contact with you?
[00:26:15] MS: Well, as you can see, I have a ton of free stuff at 1000houses.com. I think it says “free stuff” on it, and if you scroll down far enough, you start to get to the things that cost $10, and $50, and then it just goes up from free. But you can get the first 100 pages of my books free, all kinds of stuff there. It’s 1000houses.com and you can buy my books there. It says, “Buy Mitch’s book”. I even have a bundle there, a Christmas bundle special for all three books. My books are expensive, but there’s a reason for it. I mean, The Art of Owner Financing is close to $50. It’s over $50 at Amazon. That book’s worth a fortune. If you can’t figure out how to make an extra $50 after reading that book, maybe you need to pick a different business.
[00:26:57] MF: Right. No, that makes sense. That’s very valuable information.
[00:27:01] MS: You know, not to be crass, but I’m just saying. The book’s not all that long and it’s got a strategy and a way of thinking in it that if you can apply it, my gosh, $50 is not even a penny. Nothing.
[00:27:13] MF: Right. I agree with that. You definitely have to be willing to pay for knowledge and there are a lot of people out there who want everything for free and it’s no surprise that they never get very far because tey’re not willing to…
[00:27:24] MS: It was kind of a gate. If you didn’t want to pay $50 for the book, then please, stay out of the business, because you’re muddying up the water. So I have a podcast, REinvestorsummit.com. I do three podcasts a week and I interview different people about what’s going on in the business and different strategies and all that. I’m a busy guy, Mark. Just like the rest of the world. We’re all busy.
[00:27:45] MF: Yep. There’s always something to do, that’s for sure. Mitch, well thank you for being on the show. Before we head out of here, do you have one piece of advice for someone who’s just trying to get started in real estate investing? What should they focus on if they want to be successful in the future?
[00:27:59] MS: I think that success begins when your belief system concludes that it’s possible. I think that success begins when your belief system comes to the conclusion that this strategy is possible for me to make a lot of money. When you finally find a strategy and you say, “I believe that strategy,” and you believe it all the way, you know it. You know it works, in your heart. Then it’s not that easy to make it manifest. Until then, if you’re really unsure then you need to get in front of people or ride with people who are doing it to see that it’s not just smoke and mirrors.
The infomercials make it look easy, but I have no doubt that they’re cashing those checks that they say they are. I have no doubt that they are because I see those checks too. But when you’re watching a commercial it’s one thing. If you get up next to someone and you see him buy the house and then you go to closing with him and you see the sale, and then you see the check, it’s a whole different looking check because you saw it from beginning to end. You saw it when there was not even a remote chance of getting a check from that house and then you saw the check manifest itself. So if you don’t believe that you can make a million dollars, then you’ve got to get some place that changes your belief system.
[00:29:01] MF: That’s a great piece of advice and something I believe in strongly myself. If you don’t believe you’re going to do it, you’re never going to get there.
[00:29:07] MS: It was like the money thing when I first started. I thought I needed money, and for five years I always thought, “Well I’ve got to have money. You’ve got to have money. How do you not have money? That’s just ridiculous. You have to have money.” Then all of a sudden the lightbulb went off. Something happened. I just got access to a credit card and I just got money and I bought a house. I didn’t have money and I bought a house. In my bank account I had resources and the better deal you make, the easier the money will come to the deal. Because it’s not about you. It’s about the deal. The money comes to the deal.
You could be in jail and you could get the warden to loan you the money. You could be in jail for mass murder and you could still get the warden on the other side of a jail gate to loan you the money. If you place $100,000 house and all you need was $30,000 or $40,000 or $50,000. Because there’s only two choices. You’re either going to pay the warden or the warden’s going to get your house, and the warden would love to have your house for $50,000, your $100,000 house. So when that lightbulb went off, I became a believer that it was possible and then once I believed it was possible I went out and tore the world up.
[00:30:05] MF: Right.
[00:30:06] MS: I set it on fire. I did it over and over and over again as fast as I could because I thought I was going to run out. I’ve calmed down, slowed down, and I know it’s not going to end. There’s always going to be a need for a three bedroom, two bathroom house in Walmart-ville, USA.
[00:30:21] MF: Well, Mith, thank you so much for being on the show. I really appreciate your time and insight. I’ll have show notes written up for your website, your podcast, where to find your books and yeah, really appreciate it. Hopefully you enjoyed the show as well.
[00:30:34] MS: Yeah, I had a blast, Mark. Thanks for having me. I hope maybe I made some sense to some people out there and hopefully we did a little spark that maybe will change some people’s lives.
[00:30:42] MF: Yeah, I think so. You’ve got an unique strategy and some unique ways of finding properties, so I think those are always good insights. Yeah, I appreciate you being on. Thank you.
[00:30:50] MS: Hey, it was great man. I appreciate you.
[00:30:52] MF: All right, thank you. Take care.