082: Creating Massive Cash Flow through Owner Financed Deals with Mitch Stephen

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: https://reinvestorsummit.com