Kent Clothier (03:58):

Watched the late night infomercial, a guy talking about you could get in and buy and sell houses without having any money, which was great for me being that I just lost every dollar I’d ever earned. Went down, checked it out. West Palm Beach, Florida, down at the Embassy Suites in the downtown there. One thing led to another, the young lady at the front of the room was talking about wholesaling, and I’d never even heard of that, but I gravitated to it based on what I’ve been doing in my previous life, arbitrage business, you’re sitting there really buying an asset from one other place, playing in the in-between there, not really producing anything, you’re just playing on the spreads.

Kent Clothier (04:31):

And so I figured out that I could probably go do this, and made an investment in a course. Fast forward, about 18 months later, I’d already flipped about 90 houses, made over a million dollars. Needless to say, I was hooked, I felt like I was back. And then started putting systems and processes and people and leverage in place. And before you knew it, I turned it into a business that was doing several hundred deals a year, right through the recession, which ultimately caught a lot of people’s attention because they were like, “Everybody else is going out of business, how is this guy just crushing the game?”

Kent Clothier (05:02):

This is between 2008, 2010. What I had done is I’d come up with a unique strategy that I’d used in arbitrage business called reverse wholesaling. It sounds unique when you’re speaking in an industry that was stale and not fresh and didn’t have any good new ideas coming to the table, but effectively, just starting with the end in mind. I was going out and talking to all the cash buyers in my market, finding out exactly what they wanted to buy, where they wanted to buy it, how much they wanted to pay for it, how much money they had to spend. I would effectively go shopping.

Kent Clothier (05:29):

I would figure out that, if I created deals in the exact areas that these guys wanted to buy at some price less than what they wanted to pay for it, I can create a very, very predictable outcome over and over and over. And that put me on the map. Before I knew it, we’d started a software company that was doing all of that heavy lifting for people in a market where people were struggling, back in the recession, they were struggling because everybody thought that they needed banks and he was a guy that was talking to them about, “I’ll just show you who all the cash buyers are.” And that hit.

Kent Clothier (05:59):

And before I knew it, we turned it into what is now called Real Estate Worldwide. I have about 60,000 subscribers, 60,000 people who have bought all of our software and services over the years. I guess we are in our 14th year of doing that. So we have a really successful software and education company. And on the flip side, my family owns and operates REI Nation, which took our investing business and turned it into something big over there that still flips about 800 properties a year, based right out of Memphis, Tennessee. So, been a hell of a journey.

Robert Leonard (06:27):

If someone wants to get started in wholesaling today, is it still a viable strategy in today’s market, or is it too saturated?

Kent Clothier (06:35):

I would argue probably the most viable it’s ever been. The reality of it is that, in 2020 alone, over $200 billion was spent on just single family homes, all cash. So you have this voracious appetite of cash buyers that are sitting out there and they have no good outlets, they have no good way to get to deal flow unless they’re investing their own money in marketing, which the vast majority of them are not. They’re stuck dealing with mom-and-pop realtor, a friend of a friend, my aunt, my uncle, my son, my brother-in-law, who has no idea how to go and create opportunities.

Kent Clothier (07:08):

So as a wholesaler, if you have access to the tools and the systems and the data out there, you can easily go into any market. Now, think about it today, you can sit at your home and analyze a market, Las Vegas, New Orleans, Orlando, Florida, New York City, these markets that have just been pummeled, and the cash bars are flooding into those markets, trying to buy up all of these distressed assets as fast as they can, because they’re going to ride the wave all the way up. Knowing that kind of information, when I got started in this business, one, it would’ve been almost impossible to know that information. Two, it would have been even more impossible to get connected quickly to all of the cash buyers in those markets.

Kent Clothier (07:44):

And three, you couldn’t really manage that entire business virtually, the tools just didn’t exist. The data didn’t exist, the technology didn’t exist, the connectivity didn’t exist. Now, we live in a world in COVID where people buy and sell houses virtually through a wholesaling operation all day. It is the norm now to sit there and be sitting where I am, in San Diego, California, and looking at markets around the country and quickly, with a press of a button, know who all the cash buyers are, with a press of another button, quickly go and create campaigns that are generating phone calls right into my office.

Kent Clothier (08:15):

Now sellers are much more likely to sell you their house or accept an offer directly over the phone, sending people to go take some pictures real quick and flipping that deal to a cash buyer, it’s never been easier, ever than easier than right now.

Robert Leonard (08:28):

Yeah. I actually talk about how technology is really changing real estate here on the show, because my long distance rentals use technology to buy them. I live in the Boston market and I invest mostly in Texas. I’ve never been to these markets, I’ve never seen the houses, never done anything like that, yet I use technology to be able to do that.

Kent Clothier (08:46):

Yeah, that’s the world we live in. We’re all walking around with a computer in our pocket that has connected us to the entire world, and it has changed the landscape of real estate investing, whether it’s at the rental level, whether it’s at the seller finance level, whether it’s at the rehab level or at the wholesale, it has changed it forever. We can analyze deals, create marketing campaigns, evaluate properties, closed properties, all right from our laptop.

Robert Leonard (09:10):

What’s the first step someone takes today to get started as a wholesaler?

Kent Clothier (09:14):

The first step is that you definitely need to understand what is going on in any particular market. Again, going back to my methodology, I’m extremely risk averse, I have no interest in guessing at anything. We have a saying in my office that hope is not a strategy. We don’t hope for an outcome, we predict the outcome and we predict it very, very reliably. The way we do that, we just simply go in to these tools, our software right now, and I can look very quickly and understand how many cash transactions are happening in a metropolitan area, and more specifically, exactly what zip code they’re happening in, just through public data. We’re taking public data.

Kent Clothier (09:54):

Anytime a real estate transaction is closed, it becomes a matter of public record. I can know instantly who all the cash buyers are in any market. I can know exactly what zip codes they’re buying in. I can immediately get those people through a marketing campaign to pick up the phone and start calling me, start building and nurturing those relationships. And the moment I have that, I control the money. And when I control the money and I control the demand, then I get to control the outcome. That’s the first step, is, go look in the market, find out exactly where all the cash buyers are buying, what those zip codes are, and engage those buyers immediately. Build a stable of people who have money and have demand.

Robert Leonard (10:30):

What are you looking for? What tool or resource, other than just your software, are you using to find out who the cash buyers are? You said it’s public record, what are we looking for?

Kent Clothier (10:39):

Well, first off, I don’t use any tool except ours, but if somebody were to go do this manually, the way I got started, you have to keep in mind that… So, back up to 2008, before any of this technology existed, before we had gone out and created it. What I was doing manually is I was going down to the county clerk’s office where the transactions are being recorded. And all I was looking for was two very simple things, “Show me every real estate transaction in the previous week. I want to see the deeds.” Now, mind you, you can do a lot of this now online, but back then, you really couldn’t. I want to see every deed transfer last week on single family homes. And then I want to look at every mortgage that was recorded against those transfers.

Kent Clothier (11:17):

And if there was no mortgage recorded, then by default, you can assume they paid cash. Then it’s that simple. So there’s your cash buyer. If Kent Clothier bought 1234 Main Street last week, and it’s a matter of public record, but there was no mortgage recorded against that transaction, then clearly I paid cash for it. So go and record my name, record my mailing address, and get a piece of mail in the mail to me immediately, saying, “Hey, my name is Sam Smith, I have access to additional properties in the area, and I would love to talk to you about adding you to my buyer’s list.”

Robert Leonard (11:50):

So, are you making an assumption when you do that that they have more cash, that they’re ready to invest, or are we hoping to nurture that relationship so that when they’re ready to buy eventually in the future or if they sell that property that we’re top of mind?

Kent Clothier (12:03):

What we definitely know, statistically speaking, is that cash buyers are investors, period. People very rarely pay cash for their primary residence, it’s not the easiest loans to get if you have… So that liquidity that they are pushing into the market, 90%-plus of the cases indicates that they are indeed a cash buyer. And yes, we are banking on the fact that if they are buying properties, especially if they’re buying multiple properties over the course of the last 90 days, that we are hoping, we are strategically positioning ourselves through that letter, that indeed they want to do more of that.

Kent Clothier (12:36):

Here’s the beauty of it, when you send that piece of direct mail to them that says effectively what I just said, the only people that will ever respond to that piece of direct mail, the only people that are going to pick up the phone and call you are going to get people that have money and want to spend it. Everybody else is just going to ignore you. But the average cash buyer is buying two and a half deals a year. The average wholesale fee is 10 grand. So that one phone call is very realistically worth $25,000 to you over the course of the next year. You want to make a quarter of a million dollars? Well, you need 10 people just like that, so go mail 1,000 of them, you get a 1% response rate, there’s 10 people. It’s that simple.

Kent Clothier (13:14):

Everybody loves to make this business very, very complex, and it’s just not, this is a simple, simple, simple process. People who need your help, if they have any idea that you exist and that you are reaching out to them in a methodical proven methodology, then they will respond, and you only need a handful of them to respond to just change your life.

Robert Leonard (13:32):

Does this have to be in a major metro or could it be in a more suburban area too?

Kent Clothier (13:36):

100% could be in a suburban area, but the reality is that the truth is in the data. Just think about it, again, I say this a lot in our organization that it’s all math, the math never lies. And so if I’m looking at, let’s just say Greenville, South Carolina, just pick any random city, and I go in and in the last six months there were 1,000 cash transactions. Let us just make it easy, let’s just call it 1,800 cash transactions. Effectively, 300 cash transactions every single month. Well, again, back to my example, if I can do 20 transactions in a year affectively, if I can do two a month, then it changes my life. Two a month creates a quarter of a million dollars for me if I’m brand new.

Kent Clothier (14:17):

For most people that are over here, this quarter a million dollars in the next year or the next 12 months would be life-changing money for them. Well, that’s two transactions a month. If 300 cash transactions are happening every month, what’s the feasibility that you can squeeze in and get two of them? Pretty damn good. And that’s what it looks like. And so it isn’t about really the size of the market per se, from a major metropolitan area or some outlier city, what it is more about how many cash transactions are happening, period. And if it’s 100 or more a month, then you’re probably in a market where you’re going to have some success, because going and grabbing one or 2% of the market, again, one or two deals a month, with really good marketing and really good data is not that difficult to do in any market.

Kent Clothier (15:05):

Now, if you were going to go try to do 50 a month, that’s something considerably different. But most of the people that will hear this, like I said, 25 deals a year is 250 grand, that’s the bread and butter. That’s how you put food on the table and make a difference in your life.

Robert Leonard (15:19):

We’re talking about finding people to actually buy the deals once you have them, but how do we actually get those deals? How do we find a property that we can wholesale?

Kent Clothier (15:27):

Same methodology, through the data, the data doesn’t lie. You go right back into these systems, ours and others that are out there, and you can immediately go back into those zip codes where all of the cash buyers are concentrating. And between that data and the data that you are extracting from your cash buyers, effectively your customers telling you what they want, you can easily go in there and identify every vacant property, which we know is a precursor to distress. So instantly, same day, I go back in there and say, “Show me every vacant property. Now, show me every foreclosure. Show me every pre-foreclosure. Show me every bankruptcy. Show me every divorce. Show me every property that’s owned by somebody over the age of 60. Show me every expired listing in the MLS. Show me every tax default.”

Kent Clothier (16:10):

You’re going to see there’s hundreds and hundreds and hundreds of these properties that fall into these categories in each zip code, by the way. And when you start data stacking, stacking that they on top of each other, so in other words, very effective list is to go market to somebody who owns a vacant property, but they are out of state. Think about the distress, you’re you’re investing in Texas, you’re in Boston, property goes vacant in Texas, there’s a certain level of anxiety that creeps up, period. I own properties all over the country, I can tell you anytime one of my properties goes vacant in another market, then yeah, there’s a certain amount of me that if I was hit at the right time with a piece that said, “Listen, I’ll make you an all-cash offer. Get out of this headache, move on, whatever.”

Kent Clothier (16:50):

You hit me right, I’m highly likely that I would entertain that type of offer. And so, when you use the data, you will find that distress is everywhere. For everybody that’s listening, you have to keep in mind that number one, people sell their house for discounts every single day. This is a fact of life, this is nothing that we are creating, this is no myth, it just happens. Now, why do they do that? Well, distress happens every day. Take COVID out of the equation, COVID only exasperates the situation, but distress happens every single day. There’s definitely no shortage of divorce, bankruptcy, loss of job, of unforeseen medical expenses.

Kent Clothier (17:32):

We all have the exact same affliction, death. Death absolutely happens. It happens every single day, and those properties are inherited or they go into probate, whatever the case may be. Those are distressful situations to a lot of people. And in those situations, think about it, you just inherited a property and it’s sitting in the middle of nowhere and somebody comes along and says, “Listen, I’ll pay you all cash for the property. 150 grand, the problem goes away. You never even have to come here, I’ll move over everything out of it.” People do it every day. In fact, I will tell you that this past year alone, on average, there were 113,000 cash transactions done every single month.

Kent Clothier (18:06):

And when people pay cash, I’ve got new for you, they buy at a discount, period. End of story. And so this has happened putting 1.3 million times a year. And remember, if you can just get 25, it’ll change your life, but it’s happening at 1.3 million times a year.

Robert Leonard (18:23):

What level of education does somebody need to have to get started? So if we’re calling all these cash buyers who are investors and they are going to know their stuff, how educated does somebody need to be in the real estate space, whether it be terminology, concepts, just overall strategies, before they’re able to confidently have a conversation with these people?

Kent Clothier (18:41):

Depending on of course you take, clearly, I’m in the education space, I’m going to be a little biased here, but we pour a lot of effort and energy into educating people. We have a course that takes them through 21 days of intensive training to make sure that they understand how to do it. Now, I’ve seen a lot of people in the world that are really over-educated broke people. Education in and of itself is not going to solve any of the problems, you actually have to get in the game. And so yes, you can get a ton of information, a ton of good training out there, but the best training you’re ever going to get is to take that information and apply it quickly, get in the game.

Kent Clothier (19:18):

You’re going to need to have those buyer conversations, you’re going to need to have those seller conversations, you’re going to need to understand the nuance of those conversations. You’re going to need to understand how to create winning ideas and influence people over into those ideas. Inside of our particular education, I can tell you, we spend a great deal of time on that. The Xs and Os, that’s the easy part of it, where all the magic happens, and I’ll just correct you on one thing you just said, I would never call a cash buyer, just using that as an example, we never call a cash buyer. The reason is because exactly what I’m talking about, I’m trying to influence, I’m looking for a positioning.

Kent Clothier (19:51):

And so I know if I’m marketing to a cash buyer and they will pick up the phone and call me… I mean, let me think about this for just a second, for those that don’t see the video but are just listening to it, we all check our male the exact same way, we have three piles, we have a pile that we know are bills, we have the that’s a little interesting, and then we all have the pile that is called the trash can, whether it’s at the kitchen counter or it’s at the desk, whatever the case may be. So you know when you send a piece of direct mail to a cash buyer, that’s definitely not going to land in the bills, so you’re hoping, number one, it lands in the interesting pile.

Kent Clothier (20:23):

But number two, you hope that they open this letter, they read this letter, and they’re so compelled by this letter that they actually pick up the phone and they call you. Now, I would ask you, when is the last time you ever got a letter in the mail, opened it, number one, and number two, read it, and it was so intriguing that you actually called somebody, a perfect stranger? And I would venture to say that most people listening to this, including myself, and probably you, maybe have never done that if ever. And so the fact that this cash buyer is picking up the phone and calling me is an extraordinary action in and of itself, it’s something I have never done.

Kent Clothier (20:56):

So right there, I have power. If I’m on the receiving end of that call, I know this person wants me, so I’ve marketed to somebody who’s paying cash for houses, they’ve picked up the phone and call me, I want to control that conversation and create the outcome that I’m looking for. And the outcome is, ultimately, I want them to tell me everything about what they want to buy, where they want to buy it, the neighborhoods, the way the house looks, the price points they want to pay, how many they can buy it for all cash in the next 30 days, all the way down the line. And so you don’t have to be experienced. You have to have some working knowledge, you need to understand the bones of this, but what you really need to be is highly motivated to change your life.

Kent Clothier (21:31):

And if you get in there and really pour yourself into understanding the nuance, just a normal conversation, basically sales techniques, let’s just call it that, and the power of pre-framing somebody and then framing the conversation correctly and saying the right things at the right time, that’s where all the magic happens, man. Again, the Xs and Os, as you know in real estate is fundamentally hasn’t changed in 100 years. It is what it is, but the great ones, understanding how to get on the phone and help somebody create the outcome they’re looking for, whether that’s a buyer or a seller, and that’s again, where for the third here, where all the magic happens.

Robert Leonard (22:08):

So if you’re sending a letter to somebody that just paid cash for a property, correct me if I’m wrong, but I’m assuming you’re not sending that letter to the property that was just purchased, because if that person is buying the property cash, they’re probably not going to live there, you mentioned that, it’s probably not their home. So, when we look on the deed or in the public records, is there a way to get their mailing address where they actually live that we can send them a letter?

Kent Clothier (22:29):

Great question. Inside of every deed transfer, you have property address and then you have the owner’s mailing address where they’re going to send the tax bill. So wherever they’re sending the tax bill, you want to be sending your direct mail.

Robert Leonard (22:42):

You don’t send it to both, you just send it to that one place where their tax bill is going to go?

Kent Clothier (22:46):

You got it. I do not send it to the property, I send it to wherever the tax bill is going.

Robert Leonard (22:50):

Per your education, you probably work with quite a few new wholesalers, what are some of the major pitfalls or mistakes that you see those new wholesalers making, and how can we avoid them?

Kent Clothier (23:00):

Another great question. Very simple, and I’ll go back to my answer earlier. It’s a frightening statistic and heartbreaking statistic, but it is true, just of human nature. So this is not specific to wholesaling, this is not specific to real estate education. This is specific to every single person who has ever bought something online, whether that is training, or whether that is some fitness piece of equipment or P90X or any kind of that stuff. The vast majority of people that buy programs like this, making no money in it, zero. In fact, less than zero because they have the investment in the course.

Kent Clothier (23:34):

And the reason why that is, is because life gets in the way or whatever the hell is going on, we’re all guilty of some point of buying, maybe it’s a gym membership or buying, like I said, P90X or some DVD back in the day, and it just sits on the shelf. And the mistake I see is not applying themselves and caring enough about the outcome to actually do the work. The people that are successful in this, it is not a matter of whether they are smarter, and it is not a matter of whether they’re better educated, it is not a matter of whether they, anything, what it is a matter of is they are more driven.

Kent Clothier (24:06):

They have more ambitious, they are more intentional, they are more deliberate, they’re motivated to create change. And when that’s the characteristic you can’t give to anybody, you can’t put that in somebody. I can tell you all day long how to buy and sell houses, I can tell you all day long how to influence people, how to have amazing sales conversations and how to convert leads, I can tell you all that, but the reality of it is that if you don’t care enough to do the work, none of it matters. And the vast majority of people out there don’t care enough, it’s not big enough for them. They haven’t felt the pain.

Kent Clothier (24:37):

What made me successful in this is that I was at rock bottom. The pain was very real for me. I had lost everything. And so for me, I was done being broke, I was done feeling sorry for myself, I was done feeling suicidal, I was done wallowing in my misery, I wanted out. I saw something that I had never done before and I gravitated to it, and once I got a little taste, I was hooked. And I think an element of that needs to be inside of everybody. And again, regardless of what you go into, I don’t care if you go into real estate, or if you go into ecommerce, or you go into crypto, or you go into getting fit, or quit smoking, whatever it is, there has to be something down deep inside of you that is just burning.

Kent Clothier (25:21):

That’s telling you, I’m not going to give up, I’m not going to stop, I will not ever stop. When that ingredient is put in place, man, it is an amazing, amazing thing to witness because that’s where just average ordinary people create amazing, amazing results.

Robert Leonard (25:39):

The motivation that you just talked about might be the answer to my next question, but I’m curious to hear if there’s something else, but what was the biggest lesson that you learned from starting the business that ultimately failed and how did you apply what you learned from that experience to what you’ve built now with your other businesses?

Kent Clothier (25:55):

The single biggest lesson I learned is blind ambition is one of the most reckless things you can do with your life. I was a 17-year-old kid when I started that business and I was very successful the entire time. So basically from 17 to 30, I built a $1.8 billion year company, until I was 23, we were doing $50 million, when I was 26, we were doing 90 million, 27, we’re doing 800 million. When I was 30, we were doing 1.8 billion and built the seventh largest privately held company in the State of Florida. I was hooked and the company was me at all costs. I was the guy that got there at 5:30 in the morning, I did not leave till eight or nine o’clock at night.

Kent Clothier (26:37):

I wore the badge of honor that I would outwork anybody, I would do whatever it took and did not matter. And so I did that at the expense of friends, of relationships, of personal connection, of all the things that really matter in life. I did that at the expense of creating an impact in the world, making a difference in the world, doing stuff that actually matter. And so losing everything and that entire meltdown, you want to figure out who your real friends are, just stop making money. And I figured out real quick that I was a very shallow person that was not providing any value to anybody except myself, every relationship I had, including my young son, including my first wife and I was so in it that I couldn’t see it.

Kent Clothier (27:17):

And so as I escaped and got some distance from it and got humble, and humiliated down to a place that basically got all the way down. And again, keep in mind, there was no drugs, there was no alcohol, I was addicted to my business. That’s all it was. I wasn’t addicted to anything else. When I got down to a place where I had nothing left, I truly had nothing left, nobody cared about me at all. When I was on top, I was the golden boy, when I was down at the bottom, nobody cared. So building it all back up, getting back on top, very simple, that I am here to collect moments, I am not here to collect crap.

Kent Clothier (27:53):

I want to have as many amazing moments with my friends, and my family, my two young girls, my son, everybody around me. I want to create as many opportunities for everybody around me to achieve amazing results, I want to make a difference in the world. We just built a $250,000 village, four 50 families in Haiti. I want to have matter. And when I did it before, I didn’t matter, I wasn’t making a difference, I didn’t matter at all. And now I’ve designed and built a company that serves me and it’s not the other way around. I’m not a slave to this business in any way, shape or form.

Kent Clothier (28:28):

I’m here to provide as much value as I can, to create as much impact as I can, but it will be on my terms. And my family comes 100% first. I get the opportunity, walk my little girls to school, my office is 500 yards away from my house. I get to walk to my office every day, I get to live directly on the Pacific Ocean. I’ve designed a life that’s much better, much more suited for who I am today than who I was back then.

Robert Leonard (28:52):

I get asked a lot how people balance exactly what you just talked about, so how do you on a day-to-day basis think about being ambitious, spending as much time as you can, building your business. Let’s go back a little bit to when you were getting started, say somebody is more at the beginning stages and they’re trying to balance this dynamic of live for now, live in the moment now versus invest in my future and put in the time and money versus buying the things that I want now, how do you manage that on a day-to-day basis?

Kent Clothier (29:19):

I’ll give you a multi-part answer here. Number one, there are phases to being an entrepreneur. You have to go through the hustler phase, you don’t get the opportunity to skip the step. So you have to go through the phase of, I am the business, I have to build everything, I have to do everything, I have to make some money, I have to get my feet up underneath him. There’s no getting around that. That’s the good stuff. The irony of that is that as quickly as that person is going and operating, if you want to get to the next level, where ultimately real success starts to come into play, meaning I want to own my time, I want to be able to do the things I want to do, I want to able to afford the things I want to afford, I want to be able to travel the world and do all the things I was just talking about, that requires leverage.

Kent Clothier (29:58):

That requires people, that requires resources, which means you have to actually evolve and become a different person. That’s the irony. The hustler has to die. It sucks. The very thing that got you there will not get you to the next level, and in fact, it will actually hold you back. As long as you keep thinking that, “Well, I’ll just do it myself,” or, “Nobody’s going to do it as well as I do it.” Or, “If I have to slow down and invest in systems and processes and people and all these things, then I’m not making money.” Well, then you will be a slave to your business forever, period. There is no two ways about it. You have to slow down, you have no choice.

Kent Clothier (30:30):

You have to decide what matters most to you. Does it matter most to you just chase money the rest of your life and just be a cash machine? Or does it matter most to you to have everything in life, to evolve to the ultimate entrepreneur, and basically be able to say that I have the money, but I also have the time, and I also have the influence, and I also have the relationships, and I can do everything I want to do? If then that’s what you’re really looking for, which is most people are, if they are honest with themselves, then that requires you to play by a different set of rules.

Kent Clothier (30:59):

You have to put all of those things in place, people, processes, systems, leverage in order to accomplish those things. And there’s no shortcuts, you’re going to have to slow down. You’re going to have to pull back and you’re going to have to evolve in order to get that done. But that is the good stuff, like the sign says behind me, the time is now, there are no shortcuts to this, and there is no reason to put that off. If that’s what you want out of life, then start taking the steps to make that happen as quickly as you possibly can. And once you understand that you can create a predictable outcome, that you can create money on demand, then you need to start putting the processes in place where that can happen without…

Kent Clothier (31:30):

A mentor told me a long time ago, your job quickly evolves into firing yourself as often as you can, that’s where freedom happens. Until then, there is no freedom.

Robert Leonard (31:40):

I want to shift gears a little bit and talk about another strategy that I know you have your hands in, and that a lot of people listening to the show are really interested in, and that’s turnkey properties. Can you tell us what they are and how they work?

Kent Clothier (31:54):

Turnkey properties are where… Well, let me take you to the evolution and then that’ll probably help. As our wholesaling business started to evolve, we started to see that there were these markets where a lot of investors wanted to buy-in. So we can wholesale them properties and cashflow markets like Memphis, Tennessee, Dallas, Texas, Houston, Texas, these markets where you’re sitting in California, you’re sitting in New York, Chicago, Florida, somebody tells you, “Hey, I can sell you $100,000 house, $120,000 house,” what kind of buy for $120,000 in California? Nothing.

Kent Clothier (32:25):

And so suddenly you realize that in these markets, you can buy $120,000 house, and it’s a three bedroom, two bath, built in the last 15 years, it’s 1,500 square feet, it’s a beautiful house, etc, etc, animal cashflow every month. But as we were selling these properties to these people, we realized that they immediately had a problem, out of state bars were buying the houses there, but they didn’t have any of the resources. And I’m not talking about money, I’m talking about, they didn’t have the context, they didn’t have what they needed to facilitate the transaction. They needed somebody to come in and potentially rehab the property, fix it up a little bit.

Kent Clothier (32:57):

They needed somebody to find a tenant, they needed somebody to do property maintenance, they needed somebody to do property management. They didn’t have any of that kind of stuff. And so that put us squarely in those businesses. We wanted to keep our buyers buying, very self-serving. We wanted to make sure that they can buy from us over and over and over again. And the easiest way to do that is to make sure that we were solving problems for them. So we started putting things in place, “Hey, we will do the rehab. Hey, we will do the property management. Hey, we will do the property maintenance.”

Kent Clothier (33:24):

And before it, we’re offering a full suite of services. Now, fast forward to now, we flip 800 turnkey properties a year. And what does that mean? It means that we go and buy a house, we use our own money. We completely rehab the property, making it the most beautiful property on the street. And then we turn around and put a tenant in place that we have professionally screened, we’ve run the background checks, we’ve done everything. We put them there on a two-year lease, and now it’s a performing asset. And so I go and sell those assets to people all over the world, and all over the country, the investors that want to play in the game passively.

Kent Clothier (33:57):

They don’t want any of the headaches, they just want the paycheck. And so we sell them this asset, there’s a renter in place, we’ve rehabbed the property, it’s beautiful, we warranty everything. I’m going to sell you this entire thing, and oh by the way, after I sell it to you, I’ll stay in place and I’ll property manage it for you. And so we manage 6,500 properties right now in multiple states for all of our investors. And we call it turnkey investing because it’s truly turnkey for them. They do nothing. They collect a check, get the paycheck every month, but they don’t have to lift a finger to do one thing.

Robert Leonard (34:27):

What do you charge for a fee for your property management services?

Kent Clothier (34:31):

10%.

Robert Leonard (34:33):

And why a two-year lease?

Kent Clothier (34:35):

Because it makes for a better tenant.

Robert Leonard (34:37):

Is that because lower quality tenants are typically not willing to sign a longer term lease?

Kent Clothier (34:43):

Our average tenants stay in a property for four and a half years. So through careful, again, treating it like a business by carefully screening tenants, making sure that we’re putting the best tenant in there, making them sign a two-year lease, protecting the property in and of itself for our landlord owners, we found from an efficiency standpoint, that if we go into a two-year lease, it’s a deterrent to people that are more transient. We want the people that want to be there, want to treat it like a home, want it to be something, low maintenance cost, etc, etc.

Robert Leonard (35:10):

So who is it turnkey property good for as a buyer, and who might it not be so good for?

Kent Clothier (35:16):

Turnkey properties are good for literally anybody that is looking for passive income. If you’re looking to park money, you’ve got money sitting in a self-directed IRA, some kind of retirement account from an old former employer, whatever the case it may be, putting money into a self-directed IRA, or you got cash sitting around, you’re looking for a good return protected by real estate, these are who we do this for, anybody that is entrepreneur that knows and understands that real estate is how you build wealth, but doesn’t have the time to go and learn.

Kent Clothier (35:44):

They can’t go and dedicate the time and energy into actually learning a new skill, well, now you have a complete plug and play opportunity there where you can come in and get in the game. And as we say in the South, get the baby without going through the labor. That’s what it looks like. You can sit there and again, understand you can own 10 or 20 rentals and never lift a finger, never had to go find them, never had to talk to a tenant, never had to go lease them, never had to do any maintenance on them, nothing. That’s a pretty good, attractive opportunity for a lot of people, regardless of what you’re doing.

Kent Clothier (36:15):

We have plenty of real estate investors right now that are active wholesalers doing deals every single day, but they just simply don’t want to manage the rentals, they don’t want to buy them, they don’t want to do all that work. They know if they buy property in their backyard that they’re inevitably going to go do that. So they just come to us and say, “Hey, I just want to put all my passive money to work over there because it’s far enough away from me where I won’t be tempted to get involved.”

Robert Leonard (36:36):

You mentioned SDIRAs, so I want to learn how people can use money in a retirement account to act as a private lender, do real estate investors, or to buy turnkey properties.

Kent Clothier (36:48):

Well, self-direct IRAs are an amazing vehicle, whether you’re using a Roth or conditional IRA, bottom line is your money can grow and these accounts either tax free or tax deferred way. That money is sitting there and you can’t touch it till you’re 65 anyway, and as Einstein said, one of the greatest eighth wonder of the world is compounding interest. So to sit there and allow money to grow in a tax free or tax deferred environment is an amazing, amazing opportunity. Most people are never told anything about self-directed IRAs, but if you do have an IRA account from a former employer, or any retirement account, you can easily move those over into a self-directed format.

Kent Clothier (37:26):

What does that mean? When self-directed, you are in control, and I’m not talking about your employer coming in and telling you, “Hey, here’s 10 stocks you can pick from.” I’m talking about you are in complete control of the money. You can invest in businesses, you can invest in crypto, you can invest in metals, you can invest in real estate, you can invest in on and on and on and on and on. And as long as all the proceeds from those investments come back into the retirement account, then you’re doing great. So a lot of people will take that retirement money and put it into real estate, cash flow in real estate or into private lending, as you mentioned, because they’re creating healthy returns.

Kent Clothier (38:01):

Now, if you invest specifically in rentals in the way we’re talking about here, you’re creating anywhere from an eight to 12% return, maybe higher if you put leverage in place using lenders that will lend money even if you use a self-directed IRA. So you use a self-directed IRA for your down payment and then you use a lender for the balance. Those returns that are coming back in, again, they’re coming right back into the retirement account, every single day, you can’t access that money anyway, so you’re just building your future right there. And in real estate, those investments are protected because it’s real estate, it’s not going anywhere, it’s a hard asset.

Kent Clothier (38:36):

If the house burns down, ours is insured. It’s all sitting there in a very protected way, and it’s one of the few investments where the bank will actually loan you a sizeable portion of your investment. So you have the ability to stretch a dollar and create healthy, healthy returns in a really protected way, safer than most is a very, very attractive way to use those retirement accounts. Private lending is the same thing. A lot of people don’t realize that the investment real estate world in a lot of cases, functions out of private investors putting money to work, acting like the bank.

Kent Clothier (39:08):

So if I was to loan you, you’ve got a deal for 150 grand and you’re willing to put $30,000 in, well, I can act like the bank team and I will give you the $120,000. And you’re going to pay me 2% origination and 9% interest money effectively. If you keep the money for a year, I’m going to earn it on you. But as the bank, I’m sitting in first lien position, my loan to value is 80%, worst case. And in a lot of cases, if you’re going to do rehab on the property, it’ll be significantly lower than that. Equally, if the house burns down, I’m one of the insurer. So I can’t lose that way either. So acting as a private lender is a really, really smart way to put money to work as well.

Robert Leonard (39:45):

Going back to when you were just getting started, what was a piece of advice you received that still impacts you to this day and really helped you get to where you are?

Kent Clothier (39:53):

There’s only one way to coast and that’s downhill, keep peddling, out of a mentor, somebody I had a long time ago. And then I had another mentor who would tell me, a great piece of advice was, if you’re not sitting at the table, your ass is on the menu. And I’ll never forget that that if you’re not putting yourself in the right rooms, if you’re not surrounding yourself with the right people, and you don’t have a seat at the table, well, you can rest assured that your demise is being planned.

Robert Leonard (40:15):

The pandemic that we’re experiencing is causing some people to use the spare time that they have to be lazy. And then it’s causing some other people to really put in some work and better themselves. So I’m curious, what have you learned during this time? What are you doing to better yourself?

Kent Clothier (40:29):

We haven’t really slowed down at all during the pandemic. To your point. I know a lot of people have, but the reality of it is that smart business people pivot and they pivot early. I have a saying that I tell a lot of people, a lesson I learned a long time ago, is that there’s an ocean of mediocrity out there. The average business person, the average business out there is in the business of mediocrity. And you don’t have to look very hard and just go look at the airline industry, go look at any of the hospitality industry, go look at the banking industry. Wells Fargo a couple of years ago, I think they just had to pay a billion dollar fine for screwing over their customers.

Kent Clothier (41:01):

It is the world we live in, businesses are trying to extract as much money as they can out of people and deliver as little value as they can. And that is the norm, not the exception. And in that world, it is not hard to be amazing. Think about it. If everybody around you was playing the game small and playing the game trying to beat people up, just by taking care of people, just by leaning in, just by standing up, just by holding yourself accountable, just by doing the small things, you look like a rockstar. It’s not hard to look great right now. And so I tell people this again, back to the saying is that, anytime I come into hard times, anytime I come into difficult situations like the pandemic, I just remind myself that this is where my competition will stop.

Kent Clothier (41:46):

This is where their mediocrity will come in, this is where they will give up, this is where they’ll panic, this is where they’ll retreat, this is where they’re going to pull back, this is when they’re going to stop marketing. This is when they’re going to look at their expenses and say, “Oh my God, we don’t know what’s going to go on in the housing market, we’re going to stop spending money on marketing and immediately pull the plug.” And that’s a clear indication right then that I need to push ahead. And I would advise anybody to take that advice, that you can count on your competition’s mediocrity, what you have to ask yourself is can you count on yourself leaning in, knowing that?

Kent Clothier (42:16):

And so when the pandemic hit, we doubled down all of our efforts, spend more money on market, rush into the fire. In March, I immediately got all of the best experts that I knew, all of my peers, at my leg, Jesse Itzler and many others on the phone, did a multi-day live presentation to thousands and thousands of people trying to help them to get through that. That’s what it looks like to step into it, be a leader, stop the panic, help people get ahead, help people understand that in every difficult situation, there’s opportunity. Clearly, millions of people are suffering, but go quickly do a Google search and do a quick look up on how many businesses have exploded record growth during the pandemic.

Kent Clothier (42:58):

You don’t have to look very hard, Tesla’s up what? 700% this year, Amazon, Zoom, Jordache, just because things are tough for you, it doesn’t mean things were tough for everybody. And if you take that approach, things don’t have to be tough for you. There’s a lot of gym owners out there that got hit in the teeth and they couldn’t do what they needed to do, and they didn’t pivot hard enough. And then there’s others that within days moved their classes and moved sessions, creating online training courses, never really lost these things. Real good friend of mine, Bedros Keuilian who owns Body Boot Camp, within 48 hours, they had filmed weeks and weeks’ worth of content, online training.

Kent Clothier (43:35):

So all of their members, thousands of people all over the world would stay engaged and keep paying, keep going. They knew that if the gyms are closed, people were going to work out from the house. And then I have other friends that basically crawled up in a hole and died and said, “Poor pitiful me, my local gym here, they won’t let me open it up, and somebody feels sorry for me. And I’m going to go out of business.” You’ll find whatever you’re looking for, I promise you. You’ll have to decide the leader you want to be.

Robert Leonard (43:57):

You mentioned, Jesse Itzler in that last response, and we actually had him back on episode 12 as a guesting. I love how Jesse thinks, I love a lot of his philosophies and how he approaches life. So if you’re interested in listening to more about Jesse, go back and check out MI012 episode 12. Kent, thanks so much for joining me tonight. I really appreciate your time. For those listening that are interested in learning more about you and wholesaling, turnkey properties, everything you got going on, where’s the best place for them to go?

Kent Clothier (44:29):

The easiest place to find me is on social, just go to our Instagram and it’s @KentClothier or on Facebook at Kent Clothier. And make sure you look for the blue check marks, every once in a while somebody tries to hijack my name, but if you see that blue check mark, you got me. I’d love to connect with you guys there.

Robert Leonard (44:44):

I’ll be sure to put a link to that in the show notes below so you guys can go connect with him there. You can also look through people I follow on Instagram, you’ll see Kent there as well. Kent, thanks so much.

Kent Clothier (44:54):

Absolutely, brother. My pleasure.

Robert Leonard (44:56):

All right guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (45:01):

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