On the show today we talk… An Accumulation of Small Advantages with Kevin Kolinski!
Listen on: Apple Podcasts | Stitcher | Spotify
Show Links:
– Peter Fortunato – peterfortunato.com – Structured Real Estate Transactions
– John Schaub – johnschaub.com – They best teacher of concepts to new investors
– Dyches Boddiford – assets101.com – Entities, Tax Law, Lending
– David Tilney – davidtilney.com. Best property management class & Master Leasing
– Jimmy Napier: https://garyjohnston.com/registration-and-products/invest-in-debt-2/ – This is his book: Invest in Debt – How to Structure Notes
– Jack Miller: cashflowdepot.com – One of the all time greats
– Credit Building Tips (and Inspection Tips) with Troy Fisher – Ep. 76
Show notes for An Accumulation of Small Advantages with Kevin Kolinski!
The Vantastic Life is…
– is in Coos Bay OR!
Julie
The timing of today’s podcast couldn’t be any better. There are some big opportunities coming down the pipeline in the next few months. And the best investors are getting ready!
This podcast will make you aware of creative deal structuring so you can put it into your real estate investing game. Most people have no experience with creative deal structuring.
This will allow you to compete and beat other cash buyers.
Today we are going to talk with Keven Kolinski, and I’m super excited to have a guest co-host Troy Fisher!
Welcome to the podcast guys!
You guys can thank Troy today for this podcast, thank Troy! The best inspector in the whole PNW!!!
Kevin
Thank you all for having me!
On the term expert. My friends will derive fun from my new found status for years. Many of the investors in my area you will have never heard of, that are some of the all time great investors. People that have changed peoples lives in how they’ve invested and taught others.
Being in this area gives me a tremendous opportunity to be around these people. So maybe in the next 20 years I will be able to take on this badge.
The other term is creative financing. The term used to have meaning that online real estate coaches have tainted the term creative real estate financing by trying to lure new students into their programs.
There’s a difference from being an active investor and an investor that actually makes all of their money from real estate and not real estate education.
Troy
I’m moving to Tampa!
Let’s load up Joe’s van with Seattle real estate investors and head to Florida!
Joe
Kevin we’d LOVE to hear your background and how that got you into real estate?
Kevin
I grew up playing basketball, got a scholarship to play basketball but realized that I didn’t like basketball anymore. After college I started my entrepreneurial career, and I was about to learn from
What I learned was that the real estate office I was learning from wasn’t that creative.
This is how I leaned real estate and acquired a few properties.
Then my life changed and I moved to Tampa where all of these real estate ledgens are living.
Julie
Why do you think that all of these real estate investing greats live in Tampa?
Kevin
Just like Seattle has Starbucks and Amazon… you go to where the great people are. There’s also no income tax in Florida.
Troy
It’s all about the people that take action on the info that you give them, and when they take action that shows you that they area willing to do what it takes.
Kevin
I have nothing to sell you or offer coaching or mentoring. That may be surprising to you, but the reason I like to teach is simply because that’s how I learned and can pay it forward.
The relationships are what I seek because you can create a huge amount of income in a very short amount of time with about 6 other people.
Look to create alias!
I just started a relationship with someone over mineral rights up in the PNW.
Troy
Just the other day I was asking on SIC if anyone knew anything about mineral rights.
I met Kevin about a year ago when I was searching the deep dark areas of the internet where things are actually getting done. And I met Kevin. I’m always grateful for the wealth of knowledge that Kevin has.
Julie
Let’s see if we can peal back the onion a bit.
You come into contact with a seller… what is the first thing you’re looking at?
Kevin
When you first talk to Kevin it sounds a little goofy, but once you think about it, it really starts to make sense.
To answer your question.
Creative deals, deal structuring, most people teach it from the aspect of technique. And that’s not how I was taught. You hear people talk about how to find deals, buy you create deals. And let’s talk about a civilian seller (not an investor). The first thing you do is care about them, and why they want to sell their house. You ask them why, why are you selling a house like this. And in most cases they will tell you why. Sometimes you’ll find someone that will hem and haw, but in 14 years I’ve had all but 1 person tell me why. That’s step one.
You need to be solution oriented and not technique oriented.
Julie
Do you find that there’s somewhat of a common denominator of reasons?
Kevin
Most people say they want dollars, but nobody wants dollars. People want dollars for one reason only, what they can trade it for. Long story short, people want the exchangeability of dollars for something else.
When you can get people to understand that they don’t really want dollars, they want what those dollars will get them. That leads to the opportunity where you can convey the benefits of what the seller is looking for.
Real estate is a collection of benefits.
Price is not absolute, so a house that an appraiser says is worth $100k, can be worth $120k for people that bid it up.
There are a TON of benefits that real estate can deliver. So when you listen to a seller, you can find the things that a seller really wants from the sale of the house. For example you can tell a seller that wants to sell a rental property because they don’t want to be a property manager anymore that you can take care of the property management for a share in the income of the property.
Julie
I have an appointment coming up this weekend with 3-4 properties. The seller doesn’t want to do any seller financing, and wants to avoid taxes.
What would you do with this situation?
Kevin
Something that I never do and got from Leon Johnson. He said you never want to ask for seller financing but you can talk with someone about an installment sale. The IRS has a great document about installment sales. You can’t force seller financing on someone that doesn’t want to do it.
Julie
Maybe my technique is wrong and that’s great that I’m talking with you today.
I always ask for seller financing and I can hear in their voice if they know what it is or not.
For this seller, he doesn’t know what seller financing is.
What would you do here?
Kevin
One of the best things I’ve learned is to speak in hypotheticals.
In this sellers case I’d be asking for more information. Like when you stop managing these properties what are you going to do with your time? If he says that he’s going to take a $10k cruise around the world… then I’ll try to get him that $10k that will fit his circumstances.
Julie
One thing that I don’t think a lot of real estate investors look at is… their age, tax bracket, etc. but I don’t think people know what to ask. We are telling people to not focus on the property and to focus on the person. Someone who’s 51 years old with twin girls is different than someone in their 30’s. This is actually what we need to be looking at and caring about.
These people/investors actually don’t know what questions to ask without being offensive and being under the radar.
Kevin
If you’re speaking with a seller that has twins and they find out that they are pregnant with twins again… that little 2/1 house doesn’t work anymore. People’s circumstances change.
I certainly have a couple case studies that could help out.
People are more emotional that rational, we are just big dumb animals. More of us than others.
You can learn more from your no’s than your yes’s, and I’ve had people that I didn’t do business with who have referred me to people.
Julie
I’ve had that as well.
Seller personalities is one of the best things that I’ve ever learned about!
Kevin
The good news is this Segways into a case study. Miss Annie. The lead came from a handyman. I’m always surprised when people say they can’t find leads. You should be telling all the tradesmen that you know, that you’ll take all of their leads. When they refer you, their credibility is essentially loaned to you.
I don’t advertise at all, people are referred to me. And as such, when I suggest a solution, I already have 3rd party credibility.
Miss Annie had an extra house that was a 4 bedroom block home between Tampa and Orlando. She built the house and raised her kids in it, and it got too big. Then there were 6 people (including her grand daughter) that asked if they could move in for $300/month. They paid the rent one month then stopped paying and started tearing apart the house.
Miss Annie was done.
I asked whey she hadn’t evicted her grand daughter. And it was that being the bad guy of evicting them was more pain than seeing the house torn apart.
She also didn’t want to keep the house.
I asked what she thought the house was worth. The tax assessor said it was worth $70k. And there are some damages.
Then I asked if she needed any money, and she said no.
So, I told her that I rented out houses for my living. And explained how I make money after all the rent, taxes, insurance, and asked if it was fair if I made money. And she said yes.
This is where I can get some push back.
Is seller financing a loan? Or selling a house on payments?
Seller financing is not a loan, you are having an agreement to exchange the equity in the house. When purchase the equity you’re using a purchase money note and a purchase money mortgage. Very different than a promissory note. Please do your due diligence on this.
Troy
Sometimes you have to educate your CPA on things like this, or get a new CPA. The same with a lawyer. No one is going to care more about this than you. And you need to be able to educate people about this.
Kevin
This is very important. First, we see so many people on social that clam to be great investors. Real estate investing allows you to create the life that you want.
Most people, if they can acquire just 10 single family homes in their life time they will have a 6 figure income.
Going back to taxes and legal factors. Most people aren’t creative like this because they’ve never heard this info before. So you have to educate them or find someone better.
So, Miss Annie took the deal and thought it was wonderful. She didn’t want all cash for the deal because her family didn’t have a lot and she wanted to avoid the appearance of getting a lot of cash.
We did the deal, and we talk about how value changes.
Something in my life changed and I didn’t want to own real estate more than 20 mins from my front door. I learned that I was having a child.
Once you acquire properties people usually think that they sit on that for 30 years. But value is personal. For me it was not about having a house 45 mins from my front door.
So, I began looking for the deal beyond the deal. I put on the call to my investor friends. Does anyone want to have a nice home in the area that I could take back terms on.
There were all kinds of solutions depending on what the person that we were selling to wanted.
You want the ability to be able to sell the property subject to and the opportunity to substitute collateral.
I agreed to sell this to an investor to one of the best mobile home investors I know.
The original deal on paper looked like this.
$105k sale price
I owned $45k
$5k wholesale fee
Take back 25k 2nd position note
When I paid Miss Annie off I would’ve have $35k cash in hand sale.
But Miss Annie didn’t want to have all that cash.
Learn to control that money and continue the relationship.
Ask if you can keep the money working.
I asked Miss Annie, I have this parenting event, and she understood. And she still didn’t want family to know that she had cash. I told her I could move the $45k that I owed her to another property that I owned and keep paying her.
By moving that money ($45k) to another one of the properties that I owned I put that money into my pocket when I sold Miss Annies house.
Julie
When you’re moving substitution of collateral around, do you have to pay attention to what position they are in?
Kevin
Talking with Miss Annie, I learned that she wanted to be in a 1st position loan.
But if I was working with Troy or another investor I could explain how a 2nd or 3rd or 4th can be more secure.
Julie
But the key is understanding the loan to value of the property…?
Kevin
In most cases, yes. But if I have a friend that asks me… It could be more weighted on the relationship. And it’s a personal decision.
Julie
When you are writing up the purchase money notes… do you just put it in there or explain with them that you could transfer the note.
Kevin
I absolutely discuss it with them upfront! I tell them to go seek legal counsel before signing anything.
Julie
We are of the mindset of not being predatory. Does that clause give you the automatic right to do this without their permission?
Kevin
If someone was unethical and they had that clause in the note, they showed up and said they are selling the property and moving their money to another property.
Yes, there should be language that the collateral should be acceptable to the original seller.
Let’s say we are dealing with a investor and you all of a sudden pay them off, that could cause a tax event. So moving the note to another property can avoid the tax event because they won’t get any cash.
Julie
We are going to talk offline because I have a deal that I’m working on.
What about sellers that don’t want to be paid off and how do you protect them… we can go down that rabbit hole.
This is one of the best podcasts we’ve ever done.
Kevin
Back to Miss Annie, we move to the deal beyond the deal.
The deal beyond the deal…
Listen in to get the details!
I move the currency to a deal that I liked better to a house that was closer to my home.
From the proceeds of the sale I went into another master lease of a new property, and increased cash reserves. This allowed me to have more cash for the first year of my Childs life.
So, I bettered my position, the original sellers position, and create a relationship with the new buyer that I’ve done further deals with.
Miss Annie is still receiving money from me.
Troy
You know that I have to draw diagrams every time we talk. How do you track what all the notes and everything looks like?
Kevin
This is going to sound terrible. For the longest time I just kept it all in my head. My better half heard someone say that Kevin is an idiot savant. I’m very absent minded in other parts of my life. But this is terrible. No one could have untangled all of this.
I have gone through great effort with other investors on how to track and get organized.
Troy
How do you organize of the motivations of the sellers?
Kevin
I learned this from an older investor. I take a yellow legal pad with me and ask the sellers to write down what is important to them in order of importance. That way I have it in their writing. I tell them that my handwriting is terrible, which it is, and want it to be in record in their words.
Julie
As we are talking I’m learning more about the seller that we talked about earlier. This is so good!
Are we done with Annie and can you make a master lease comment?
Kevin
We are done with Annie and I’m happy to send you an outline of the deal. And if I can help out in any way, I’m glad to do so.
Julie
If you are listening to this podcast we want to reward you. Shoot julie@seattleinvestorsclub.com to get Kevin’s docs.
Kevin
If someone says something… challenge everyone!!! Create discourse and discussions with people.
Robert Kim Midlands REIA group in South Carolina. In SC a lease with option to purchase, they will tell you no, you have to foreclose on this person. So they use Subject to’s to get around this.
Pete Fortinado is one of the absolute masters, but if he tells me something I go do research it on my own. So, I encourage your listeners to challenge people and ask them to back it up.
A lease and an option should never be combined.
An option is at the right to purchase a property in a specified period of time.
Julie
When you are doing a separate lease and a separate option…. You can actually setup lease options as a broker. Does the purchase and sale agreement need to be signed…
Kevin
This is a GREAT questions! I have some GREAT old timers that would be great for your podcast!
Back to your question.
When I acquire a property on a lease with option to purchase. There is the lease itself then the option to buy the property, I do want a purchase and sale agreement on the house. Here’s why… I want the purchase and sales contract. Let’s say the person passes away and doesn’t want to execute the agreement. I now have a P&S that I can execute the agreement on. That being said, I would update the P&S if I could.
Julie
Why?
Kevin
For the people that don’t understand it.
Julie
Do you have that P&S notarized?
Kevin
I do.
You want to keep in line with what’s going on in your state.
If I entered into a P&S with someone who wanted to back out before the closing, I would let them. If it was someone’s kids after a passing, I would sit down and talk with them to understand them.
Troy
Can you explain what you mean by mortgage?
Kevin
A mortgage is a security instrument. When you create a mortgage you are securing an option. We could have a whole different question on this.
Troy
Around here we talk about recording the option against the title at the courthouse, correct.
Kevin
Correct. An option is just the right to buy the property. You need to be in the title search.
Julie
We could do this all day. This has been my favorite podcast EVER! For real! This is the real deal right here! So great to have you on today, and I can’t thank you enough for your time.
Anything else that we should circle up here on as we are wrapping up?
Troy
Kevin dropped a lot of names and if you look up the names… most of their books are out of print. And anything you can learn about these people, there’s so much knowledge and they weren’t trying to sell big Trump University programs.
Julie
We had the opportunity to listen to Pete Fortinado and John Schwab all day on Saturday. You need to listen to us when we say to listen in on thing like this.
I feel like my world got brighter.
Kevin
Learn about these people.
Peter Fortunato – peterfortunato.com – Structured Real Estate Transactions
– John Schaub – johnschaub.com – They best teacher of concepts to new investors
– Dyches Boddiford – assets101.com – Entities, Tax Law, Lending
– David Tilney – davidtilney.com. Best property management class & Master Leasing
– Jimmy Napier: https://garyjohnston.com/registration-and-products/invest-in-debt-2/ – This is his book: Invest in Debt – How to Structure Notes
– Jack Miller: cashflowdepot.com – One of the all time greats
Real estate investing is about small advantages. You can learn it matrix style, and jack it into your head. This is an accumulations of small advantages. Learn a technique and then learn another technique. That will differentiate you from the other 99.9% of investors out there.
Once you have become successful turn to paying it back to others as much as you can.
Julie
Mic drop! I don’t know what to say!
We are going to talk with Kevin again and to share more information and resources.
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