Episode #213 – Mastering Foreclosures and Pre-Foreclosures with Marty Boardman, Part 2

You're listening to the REI marketing nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett

(0:41) Hey guys, welcome back. You're listening to the second part of last week's episode. Let's jump back in. Okay, so let's talk about why foreclosures now brace for like we are in the middle of a, you know, I always say like, I don't I don't want to you know, there's a danger when you're when you're on a podcast like this, right? If I'm hosting a podcast, I can say things that make me sound like more of an expert than I am right. So I always want to say like, I am not an economic expert, I will say that my layman's opinion, working with investors every day, is that as of right now, as we're recording this, we are in the middle of what feels like a market correction. And who knows, we may go all the way down into the deep dark depths, right, or it may not be a big deal. But I think it's fair to say that most inventor most investors feel that the market now is a much harder market than we were dealing with a year ago or a year before that. Okay. So in that kind of situation, you know, you you have sort of made these inroads into foreclosures and and really kind of use this new week and called going all the way back to in 2008, where you first were kind of pivoting and everything. So if an investor comes to you and says, Hey, you know, I know I need to do something different with my investing business. I've been doing motivated seller type stuff, fixing flips, fine holds whatever it is, you know, I've interested in foreclosures, adding that to my kind of Lead Pipeline, but I'm not convinced, what would you say to them? Like, what are the benefits of doing what you do in a market like the one that we're in today?

(2:24) So first thing I'll say is there's always foreclosures, it doesn't matter how good or bad the housing market is, or the economy, there will always be foreclosures, because there are always unfortunate situations and circumstances where somebody is having a hard time they either lost their job, or their spouse lost their job, or their some big medical expense that came up that they had to pay for, or they're going through a divorce life happens. And I have been buying pre foreclosures and Trustee sales for 20 years, and I've done it in good markets and bad. I mean, I usually kind of pivot in and out of pre foreclosures and and or sheriff sales or trustee sales, just depending upon what's going on the market. But there there are opportunities in both, both acquisition strategies both, you know, ways to acquire properties doing that. I mean, I've been buying sheriff sale properties for the last six years in five, six years in Wisconsin, and not so much here in Arizona, but been doing pre foreclosures here now, in Phoenix for 20 years. I mean, I obviously when the housing market crash, and people were underwater, from 2009 to 2012 13, you couldn't do it. But as soon as we started, the economy started to turn around. It was it was a great acquisition strategy once again. So I will say this. I don't feel personally like after living through a housing market crash, I don't feel like we're going to see another housing market crash. I mean, some say we were in a recession now. And some safe, we're not we're going to be in 2023 recessions always create, whether it's a housing market crash. Well, there's a big difference between a housing market crash and a job loss recession, which is what I think most people agree is happening. It's a job loss recession, not a housing market crash, but there's really four reasons why we won't see a crash crash and that's because 2007 2008 There was stated income wire loans. So, you know, there was very loose underwriting criteria. That has not been the case the last decade. Yeah. Number two, we had, you know, in you know, zero like no money down type loans, right. So people could, you know, so that no one had any skin in the game. And number three, they were Adjustable Rate Mortgages, interest only mortgages, so people weren't paying down any principal prior to the housing market crash. And then lastly, mostly the housing market then was dominated by Investor Buyers who were either buying homes to rent out or speculate, hoping banking on appreciation and most of our buyers the last 10 years have been owner occupied It's so if you compare the circumstances back then to now, most people have equity. Most people have locked in principle, interest taxes, insurance payments at very low rates. So I mean, I don't think there's any way for the market to trend but downward right now, because of high interest rates. That's the only reason. If the Fed decided to just back down rates in a fight, I think you'd start to see how prices go back right back up again, because and we'd have a short division shortage of inventory, which we still have right now. So yeah, anyway, all that said, I still think regardless of what's going on the economy, foreclosure, pre foreclosure and or auction strategy is my favorite. And it's predominantly how I've been able to acquire houses that I've been fixing and flipping for the last 20 years and or acquire as rentals. And the reason I like it so much is because I know without without, beyond a shadow of a doubt, I know, when I talk to somebody who's in foreclosure, they're motivated. Whereas if I'm using a strategy of, you know, text blasting people, or direct mailing, it's just like, you're casting is wide, wide net. And you're getting all these fish in, you know, dolphins and all these different species that stuck in your net, that you're not supposed

(6:19) to get the dolphins by the way, I think that's exactly right. Yeah. So you're getting all this stuff you don't want and I don't want I, when I get on the phone with somebody, I want to know, they are motivated, they have to sell so. And there may not be as many. But that's great, right? I mean, like I talked to people who are doing text message blasts, and they're getting hundreds of leads, you know, a week a, you know, a month, and they're just sifting, they're hiring vas, and they're sifting through all this stuff. Yeah, again, people on the phone who want full market value or more for their house, because they're just hoping you're the guy on the other end, who's a sucker and I'll just give you more than what your home's worth. And I don't want to deal with those kinds of people, I'd rather talk to one or two highly motivated sellers and want to have real equity in their homes. Like I'm working with somebody right now, in Castle grand, which is about an hour from Phoenix, this guy's house going to auction in a week. And I was able to get a hold of them. And you know, because most people give up people who are who are marketing to homeowners and foreclosure, when it gets a week or two away from the sale, they just give up because they don't know how to put a deal together. They don't want to stop the foreclosure. They don't know how to, you know, make, you know, make it all right, so they can get the house before it sells at auction. And that's, that's where I come in. Right? That's I, when it's two weeks or less, that's the opportune time. And there aren't a lot of people that get to that point. But the ones that do, there's not very many people who know how to help them like I do. So, you know, guy owes 75. He owes 75 grand and his house was worth 250. Right? So there's a huge margin there. And no one's really, no one's going to talk to him because they can't help this. There's not enough time, actually the sales next Tuesday. So you know, I know this is recorded. So basically, I have a week to put the deal together separate. Yeah.

(8:03) So yeah, if you're listening to this, by the time you're listening to this, this deal is over. So don't go looking for this deal. But But yeah, so. Okay, you know, you just said something that I find really interesting, right? Which I never, I never really thought about which which is the time limit element to foreclosures. Because you're exactly right, there is literally a death. Unlike everybody else who is just kind of maybe interested in what their house might go for, in some, some form or another that you mentioned that like your skill set. And I think this is one of the things that makes you clearly like really good at what you do. He is your ability to handle these deals and are coming very close to the wire. And I know you talked about this stuff in the book, which again, if people want to go check it out, you can get this book for at foreclosure secrets.net. You can go check this out, you only have to pay shipping and handling. So go check that out right now. But if you are going to give people some advice, or if they're saying like, look, I'm I'm interested in foreclosure deals or pre foreclosures, but I keep running into this issue where I'm hitting the time limit, and I just I can't figure out how to make things work, or what are some tips for people to kind of better navigate that space. So they can actually get the deal under contract without it kind of just going straight into auction, like I said,

(9:23) so. I mean, obviously you've got to at least have some rapport with the owner of the house it because there's a process you have to go through to buy it. And even when I closed the deal, I closed deals all the time where I mean, we're literally hours away from the auction taking place. So really, the process is number one, you have to have a seller who's willing to sign a contract to sell the house to you. And then the second step is and this is a big one as you need them to sign a loan authorization form, which gives you permission to go Hold their bank. So you can get what you need from the bank to survive the auction. By the way, if you go to foreclosure secrets on that, and you buy my book, I give that form away for free, as well as the contract I use. So you need those two things. And if you get my book, you get those two things for free as part of some of the bonus content in the book. So then the next step is you've got a signed contract with the seller of the property, and you've got a loan authorization form, which gives you permission to contact the bank, then you've got to get the bank to let you know, as soon as possible, one of two things, or both, you want to know how much it's going to take to bring the loan current, which is called a reinstatement figure, or the payoff on the mortgage, so you can pay off the loan, because the only way to stop the foreclosure is to bring the loan current, or to pay the loan off, I'd much rather just reinstate the loan and bring it current, then what I can do is I can just do a subject to deal with the seller in foreclosure, which is my favorite strategy of all time, it's I call it the Pre Foreclosure plus subject to strategy. So all you have to do at that point, once you have that reinstatement figure is send the lender the money that is owed to them to bring the mortgage current boom, the auction is stopped, you have the content out again, you gotta get the order, right, you get the contract, signed by the seller of the house, you get the loan authorization form. Once you know how much you have to send the bank to bring the loan current, okay, then you can get meet the seller again. And this is again, a kitchen table of closing you, you meet them at their house with a mobile notary, or you meet them at a bank where there's a notary, and you get them to sign the deed of the house over to you or your LLC, and any other forms that your state may require be recorded as well to officially convey title from that seller to you. Then, the next step is, you're probably promised, hopefully, you promised the seller some money, they're not gonna want to do this unless you promised him some money right there. So if you're at your bank, you get a cashier's check for five grand 10 grand whatever it is, then you hustle on down to your county recorders office or your county, record the deed. So now you're the owner of it, right. So you got the you got the you got the title, the property, you own it, then you wire the bank their money. And they as soon as they get that reinstatement figure and when they give you that reinstatement figure they're going to tell you where to wire it to, they're going to give you a reference number and you'll get a receipt. So boom, that's when officially the foreclosure stops. And if you can put all that together, sometimes I've done it and matter of hours, like you know, I tell the story in the book. On the morning, my my daughter just turned 18 The morning she was born. She was born at 630 in the morning, by two I got a call that morning from a seller who was in foreclosure. And I got in the postpartum room on the phone with a bank while my wife was there holding my little newborn baby. I got the reinstatement figure. Then I went and met with the seller and got a mobile notary to sign the deed and I went straight to the county recorders office recorded the deed. Then I went to the bank and got a cashier's check. And actually in this particular case, I had to go to the courthouse steps and give the reinstatement figure to the auctioneer. And then he looked at the cheque verified it was certified. He called the lender and they canceled the sale. And it was funny. That was really fun. Because I show up with the cheque and there's all these other guys there to bid on the house. Right? They want to buy it. And they're like what's which they they're asking me, you know, what's the T S number, which is the trustee sale number and I tell them and they're like, What do you do? And I'm like, Oh, we're bringing the loan current. They're like,

(13:46) Oh, yeah, so right there day. Yeah, you're like, oh, it also I just had a baby girl, just pass out cigars or whatever. I didn't think about that. I should have done that. That's that's just amazing, man. So again, and all that information is absolutely amazing, right? So again, if you guys want to get more of Marty's book here, it's a foreclosure secrets.net Can you can go check that out, like you said, 10 bucks, get the entire thing. I think even just the forms of that sort of contracts and stuff that you have in there alone, make it worthwhile. I want to I want to shift gears a little bit. And I want to take you back to 2008 which I'm sure it's something you love to do in your head all the time. But you mentioned you had this, this sort of real estate portfolio $60 million on paper and went to negative 2 million. And I'm curious about that experience. I think for people. There are a lot of investors right now, who have never really invested through the type of market So in 2008, right, they weren't they weren't in business, then, you know, they're too young, whatever it was. And I think we're, you know, whether it's political stuff, or it's COVID, or it's the housing market, there's a lot of uncertainty in the air. And I think a lot of people are wondering, you know, if things get really bad, am I going to be one of the ones that figures out a way to make it through and pivot and do all this stuff? Or the stuff that I need to do to keep my business afloat? Right, so can you take us back to that period in your life, you've got this negative net worth now? What was it like for you sort of emotionally, what was going through your head? And then how did you figure out what to do from then on? How did you start the process of rebuilding?

(15:47) So we I had a mentor at that time? And he Well, not at that time, he went through exactly the same thing I did. He was my mentor, post housing market crash, right. And him and I would get together, I lost. I think I lost, you know, two mil, you know, basically walk, you know, ended up losing about 2 million, I was underwater by 2 million. And he was underwater by like, 20 million. So I was like, Well, I feel better. You know, you're 10 times. We're just a relatively it's not too bad. You know? Yeah. But,

(16:20) I mean, and he would say he would say, we didn't do anything wrong, you know, they changed the rules, right? I mean, they changed the rules on us. And that's essentially what's going on now. I mean, the Federal Reserve just decided on their own, the best way to curb inflation is to double interest more than double interest rates in six months. That's all. I mean, if they would even just, I feel like incrementally increased rates up to where we're on now over, say, 24 months? I think it'd be okay. Like, we wouldn't have people kind of, you know, screaming, the sky is falling, right? It would be a, you know, what, and even if they only raised rates to five, five and a half, I still think you'd see a very healthy, appreciating housing market versus prices dropping, you know, here in Phoenix, I think, since rates initially climbed, I mean, we're down 10 15%. So yeah, I mean, I think it's created all of this, and it was back then. And it is now created by external forces, right, that the rules change. And then, as investors, and really just as home primary homeowners, these rules change that drastically affects our net worth. It affects, you know, just the, you know, everything, you know, our financial statements, all of those things, so, but I will say this, the lesson I learned coming out of the crash was, and, you know, my, you know, my mentor taught me this too, it's like, if you can avoid being in a situation where these assets or negative cash flowing, he doesn't really matter. And this is more if you're cut on the buy and hold side, right, but like I made, I mean, I owned 65 houses, and only maybe 10, out of the 65 were actually cashflow, the rest were breakeven or losing money every month. Because at that point, I didn't really care because the market was appreciating was going up, I'm like, I can afford to lose 100 bucks here, 200 bucks here, 300 bucks here, but when values plummet, and so what I would have to do, Dan is in order to, you know, with 65 of these things, what I'd have to do is, I'd have to sell one off every other month, right? Just to cover the negative cash flow. But I didn't care because I had so many of them, and I and they were going up in value, but when the housing market crashed, you know, the values dropped, you know, overall in Phoenix by 55%, so I couldn't sell them anymore, cover the negative cash flow. And it got to a point where I couldn't sell them anymore, and even make a profit every time I sold when I lost 20,000 or $50,000. So it was just a horrible business model based almost solely on appreciation. Right? So and it's funny because I read Robert Kiyosaki his book, Rich Dad, Poor Dad, and he talks about why, how stupid that is to do it. And I did it anyway. Just because, you know, I felt like, you know, I was in an appreciating market. So if I had assets I can sell, kind of buy and sell to cover it. Who cares? Right? Well, it was just kind of a perfect storm. So you know, you know, in today's housing market, I mean, if you if you are careful, and you're being disciplined, and you're buying only assets at cash flow, it doesn't matter. Like I've got a nice portfolio of rentals in Wisconsin, and the bill, the least net cash flow producing property, I have the lowest cash flow producing property I have it's like 547 bucks a month. So and the house is at the peak of the market, and housing values haven't really decreased. They're like they have here it's a much smaller percentage, but maybe it's time I bought it or at the peak. I could have sold it for 190. Now it's maybe 178 180 But I would never sell it because it's generating Almost $600 a month, a little three bedroom, one and a half bath house in Green Bay, Wisconsin, I'm like, so there's really never a wrong time to buy real estate only a wrong way. I had another mentor say that to me once. So cash flow is where it's at. And he and I tell people all the time, when the housing market prior to the housing market crash, I had considered selling, if I would have sold about, I could have sold over 90% of my real estate portfolio had enough cash. Now this is when the market was before the market crashed. And this is what I should have done. And I think about this all the time, still, to this day, by the soul at 90% of the portfolio, I didn't have enough cash to pay off 10 or 12 of my rentals on them free and clear. And each one of them was renting between 12 and 1500 a month. So that alone would have generated about $18,000 a month in cash flow, no debt, right, I'd had enough money to pay off the mortgage on my personal residence. I had a second home and Flagstaff could have paid that off. could have paid off my $100,000 Mercedes, you know, and my truck and my boat. And you and I wouldn't be sitting here right now. I just didn't know. That was going, Hey, I got 18 grand a month coming in and zero debt. Right? It wouldn't have mattered that the value of that real estate portfolio dropped by 55% because it was still generating $18,000 a month in cash. Right. So all I would say to people today Well, first of all, I'm not nearly as worried about housing market. Crash, I do think there's gonna be a lot opportunity there's gonna be more foreclosures, pre foreclosures, auction properties, because when people lose their jobs, that's that's a disruptive cashflow event. Yep. And their view Google that the number one disruptive event is job loss. And there's going to be job loss. I have friends in the tech industry who work here in Phoenix, and high up friends and they're having to lay people off. It's sad. I mean, yeah, there's gonna be a lot of that. So there's gonna be opportunity, a lot more opportunity than there was. But you know, you're talking about saying, like, with my favorite foreclosure subject to strategy, you got someone in foreclosure, and you can take their loan subject to and the interest rates, three 4%, you can't lose. And I'll even if you were putting a deal together with somebody who had no equity, right, I mean, houses in my area where I live. I mean, if somebody was in foreclosure, and they had zero equity, I'd give them 510 grand just to take their loan subject to because their mortgage, their their their payment is so low, I could buy it and rent it out. Cash flow, or I could Airbnb VRBO, or whatever, right? Because they're, they're locked in. It's such a low rate. I mean, it's crazy. So to me, it's a great time to use, you know, the Pre Foreclosure strategy for acquisition, whether it's an acquisition strategy want for fixing flips, or buying holds, or wholesale, right. But I think your initial question was, you know, what, you know, how do you juxta poto? Just post the easy for me to say, how do you compare, let's use an easier word. Compare that to what we're going through today. And I think the only the only risk, I think, the big risk for real estate investors, for example, me I my primary source of revenue, and fix and flip, and you just got to be really cautious and forecast out a decline, right? You want to forecast out, look at what's going on in your market, what selling today versus what was selling six months ago? And you figure out, Okay, what's the difference? Is it 10 15% difference, like lower, because somebody who could buy at the same house in February, you know, is, you know, now you, you figure it's the end of 2022 and the beginning of 2023, middle of 2023. It's like, what were houses selling for when rates were 3% versus when rates were at seven. And you take you know, use those comps, on houses that sold in the 3% range, look at comps for houses that sold in the 7% range. And that's those are your values. That's, that's your ARV. And then maybe you take 5% off that just for a little more decline. And then you factor in instead of like I was factoring in the house factoring in on some of my fix and flips, like 90 days of holding time, because there's just, I mean, I could get it. If I could get the house done in 60 days and rehabbed. I knew it's gone in 30 days, and the day I put it on the market as a day goes under contract, right? Yeah. So instead of 90 days, the holding costs now it's it's at least six months, right? Maybe eight months, but you can plug those numbers in and use those numbers and I still think you're going to be okay. You're not going to lose money if you're fixing and flipping. But it's the same thing with a wholesaler. If you're wholesaling these things, just know that if I'm buying it from you, you're wholesaling it to me I got to factor in. I'm not going to use your stupid comps that you send me from six months ago because that's when rates were at three I need comps From win rates where it's 7%, or whatever the case is so and I'm gonna factor in longer holding costs. So if you're a wholesaler, you better figure that that fix and flip investors thinking, worst case scenario, and I talked to wholesalers all the time, and that's what they're doing. They're like we got we can't move stuff. I'm like, Well, yeah, because you were when you bought the deal you made with the seller, right? The numbers you used. Were back in the good old days.

(25:23) Yeah, I have heard more than a few clients complaining about wholesalers, who are trying to sell a deal for more than the house is worth. And it's like, yeah, you're the middle dude. I mean, like, you're the one that you know, or is the spread there, man. So dude, there's been so much good information here. We have talked about the book. The book is called foreclosure secrets, you can get it at foreclosure secrets.net. Where else do you want people to look you up? Or learn more about your due to social media? What should people do if they're interested in learning more about you?

(25:56) Sure. Yeah, I mean, if you want to follow me on Instagram, it's instagram.com/fix. And flip hub. So and fix and flip hub is my coaching company. And that's, I started in 2016. And that's where I teach and coach people how to fix and flip houses, how to scale fix and flip business. And so that's my instagram handle, I wasn't gonna create a new one for the book. But what happened is I was I realized, after starting my fix, and flip coaching business in 2016, that you have to have a solid acquisition strategy to, you know, buy houses and have no margin in them to fix and flip them. And I started reflecting actually was about, but summer of 2021, I started thinking about, you know, I don't have a real training program, or a manual, if you will, or kind of step by step on how I acquire my fix and flips. And it's always been foreclosures, I mean, I'd say 90% of every house I've ever fixed and flipped, or kept as a rental was a foreclosure, either a pre foreclosure an auction deal, or an REO. And I am just like, I don't have any real training or information that I share with people. I mean, when they get into my fixin flip program, I will take them through that process, you know, because I do group coaching calls every week. And so, but I didn't really have anything specific, you know, with kind of a nuts and bolts A to Z, somebody, you know, I gotta write this book, you know, because I've got all these crazy stories and these different things and happened to me over the years and, you know, precautionary tails, if you will. So I'm like, I gotta write this book. So anyway, instagram.com/fix and flip hop, I talked about everything, anything related to real estate investing, buy and hold fix and flips, but mostly now about foreclosures, so you can get and I'm doing more stuff on there now. Now that I've, you know, finished the book and can focus on it, you know, just, you know, the reels and you know, I also have a YouTube channel youtube.com/fixin Flip pub. So, alright, so fix

(28:05) and flip hub on Instagram and YouTube will have links to that, obviously at Edward Stewart's dot com slash podcast. You can find this episode and all our best episodes, but for closure secrets is the book. You can get it for free, you just pay for the shipping, it's foreclosure. secrets.net go and check it out. Marty Boardman. Thank you so much, man, this has been a super deep dive on something I honestly didn't know a ton about in. I really want to thank you, man. This has been really really useful. My pleasure. I appreciate you having me. That is it. That's week's episode of the REI marketing nerds podcast. Look, if you listen to this show, it would mean a lot to me. If you could leave us a review. Wherever you get this podcast just takes a minute but it really really helps other people find the show. I read every single review and I take all feedback very seriously. So if you could leave us a review I'd really appreciate it as always. I appreciate you listening. It really means a lot. I will see you next week. Cheers.

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