Posted on: September 17, 2020
WI 517 | Being The Bank

 

In the fascinating world of real estate and wholesaling, anything is possible and there is no such thing as too far-fetched. The real estate journey of today’s awesome guest is solid proof!

Jorie Aulston has come full circle and in this episode, he shared how he made it all happen. Jorie is the founder of The Aulston Group, a real estate company that specializes in notes, contracts, rentals, fix and flips, and REOs. He also has a vast knowledge of several investment strategies, thanks to his over 10 years of real estate experience.

In this episode, Jorie shared his unbelievable progression and the many insights and lessons he has learned along the way. This is one inspirational and engrossing episode you can’t afford to miss!

From Realtor to Wholesaler to Being the Bank! And Everything in Between With Jorie Aulston

Episode Transcription

We are here with a classic story. We were coming full circle in the unbelievable progression of starting as a real estate agent, then becoming a wholesaler, and now has become the bank. We were talking from Miami, Florida, to Mr. Jorie Aulston. How are you?

I’m doing good, Brent.

I’m excited to have you here.

I’m happy to be here.

You started your real estate journey in 2007, right?

I got my license in ’07 in Michigan. I got into real estate to get my license to do flips and didn’t have to pay commissions. We all want to be able to do that without paying commissions. A year later, the market crashed and I was lucky to be working with the number one REO broker or a foreclosure broker in Michigan. I became his buyer’s agent. I started selling 100 to 150 homes a year, foreclosures to investors. I did that from 2007 to 2014.

I did the same thing. I joined the number one REO team in 2010 and 2011. All I did was run around all the time with all these buyers trying to put together these little tiny deals because they were all foreclosures.

The commissions were $1,000 to $1,500. We had to sell a lot of them to make any money.

Is it a family thing? Was your family in real estate? Did you read a book or did you see something on the late-night TV? What brought you into, “I want to flip houses so I will get my license.” What was your origin story?

None of my family is in real estate. I was living in Miami in ‘04 and ’05. I read Rich Dad Poor Dad and it sparked my mind to want to get into real estate. I started reading books in real estate for two years straight. I knew I wanted to get into real estate as an investor. My real dad, who I didn’t even know that well, was in real estate in ‘03 and ‘04 in DC doing condo conversions. We started talking in 2003. I was 22 or 23 years old. He started talking to me about real estate. Him saying it to me sparked into my mind, so I took off on that path. I and my wife got married then we moved to Michigan. I studied for two years in Michigan until I got my real estate license.

How do you find the beautiful world of wholesaling real estate? There are agents that I talked to that had been in the business for 5, 10, 20, 25, or 30 years that have no idea what wholesaling real estate is.

They have no clue and they are also the hardest people to work with. When you talk to them, they are like, “What are you doing? This is illegal.” I started wholesaling by necessity. I was selling the REO properties and that was good. 2011 and 2012 hit, the hedge funds started buying all the properties. I couldn’t even get my local investors anything because this hedge fund from somewhere else would bid it up to $10,000 to $15,000. Nobody local would buy that stuff and the hedge fund started buying everything. My money dried up. I had to start finding deals off-market by necessity to keep making my income.

The key to wholesaling is consistency.

The first time I wholesaled, it was by accident. One of the investors I worked with was like, “Any deal you find, you bring it to me first and I will give you $5,000 on top of your commission.” I was wholesaling at an assignment fee to bring him these deals first. After I was doing that for a little while, I had to find off-market deals. From 2013 to 2014, the market and the banks dried up. You could not get a loan for a home. The banks were done. They would not loan you any credit. I started doing wholesaling for land contracts because the best way to find deals was through seller financing.

Explain that. What is a land contract?

Let’s say I have a house and I am selling it to you. A land contract or contract for deed is the same thing. If I sell you the house for $50,000, you give me $5,000 down. I say, “Pay me $500 for 10 years.” That is 10% interest. That is when I became the bank because I realized how you could become the bank. It is like a rental.

Do you have to own these free and clear?

You could do it free and clear or you can do a sub-to. You can buy a house with sub-to. The way that we do financing with sub-to is we sell a land contract because the deed doesn’t transfer until it’s paid off, which is a difference.

If you have a distressed property owner and you approach them, is it because they don’t have enough equity or do they want more for the property? Why don’t you just give them a cash contract and wholesale it?

It doesn’t matter what seller I have, free and clear, or no equity. I ask every seller if they are open to seller financing because that allows me to buy more deals without using the cash that I have on the side to use. If I can get a seller to sell me their house with $5,000 down instead of paying them $50,000, I’m going to take that. Every seller I talk to, I ask that question. It is a numbers game.

What do you specifically ask them? What is the secret combination of words?

The first thing is there are keywords where you will know if the seller wants to sell on seller financing. If you hear them say, “I’m tired of tenants. Too many repairs.” A big one is, “I’m going to sell a couple of homes a year because I don’t want to pay a lot of taxes.” Those are keywords to me to say, “This is perfect for seller financing.” I can offer them a way to still get monthly cashflow to not have to pay a huge tax bill where they can still get the cash but not manage the property. A lot of sellers and investors love getting cashflow, but they just don’t know how to manage the property. If I hear those keywords, my next question will be, “What if I show you a way that you can get some monthly income still but we will own and manage the property? You will become the bank.

Also, I have a podcast, Shut Up and Invest. I did an episode where I said that new investors should invest in seller finance notes before rentals. What is the main thing if you were a new investor? He buys a duplex or a single-family house. He thinks he is getting $250 a month of cashflow but the furnace goes out and a leaky faucet. At the end of the year, he made zero or negative cashflow. He doesn’t have enough reserves on the side to manage the property. He ends up losing the property so he sells it for cheap and never wants to do it again.

WI 517 | Being The Bank

Being The Bank: A land contract is where you sell a house for let’s say $50,000. The buyer then gives 5,000 down. But you say, $500 for 10 years, so that’s when you became the bank.

 

When you are the bank, I get that same cashflow without any worries of fixing anything. I don’t pay the insurance and taxes. That homeowner I sell the house to handles all that. I’m like Chase. I get principal and interest per month. You never call Chase or Wells Fargo to fix your roof. You don’t even know who they are. New investors should look into notes first because it can help them last longer in the game.

Let’s break it down simply then. We have a distressed property owner and for whatever reason, they have raised their hands through some lead generation, so you have either called them, texted them, or mailed them. What do you prefer?

We do texts and direct mail.

You get these calls coming in and they say that they want to sell. You start pre-qualifying them a little bit and you ask them if they would be open to seller financing. If they are but it is still a smoking wholesale deal, what do you think?

Before, I would have wholesale that deal. I was wholesaling everything but I changed my model. Now I probably wholesale 20% of what I get. We keep 80% and wholesale 20%. If it is a smoking deal like we had one house that needed a lot of work,  I will try to wholesale it first. I do seller finance my homes. I am selling them as a land contract that does need work. Everything I sell on a land contract is as-is. We don’t touch them. Nowadays, if that deal is smoking and needs a lot of work, I will probably wholesale it off. I still have to wholesale a couple of homes a month to keep the monthly income coming in.

What is the average wholesale deal that you make?

About $8,000.

You do a couple of them and you are at $16,000 a month. You can live well off of that.

I do a couple of those per month. I get the down payments from what we sell the land contract and that is income. It is not a security deposit, but that is the income that comes into our account.

We got a distressed property and they say that they would be open to seller financing. You go, you put it down into a deposit, and you give them monthly amounts. Now you own it but they hold the note or it is a subject to situation. If you want to watch this, check it out on Brent Daniels – Real Estate YouTube channel. You have got this property and they are ready. You own it now but it needs repairs, utilities on it and all these things. What do you do?

Every house that I get, I look at three ways. Let’s say I get the house in the seller financing terms. I can then wholesale that. You can wholesale seller financing terms. Let’s say they said, “Jorie, you can get it for $5,000 down for the same $50,000 house at 0% interest.” Pace does it at 0% interest. I wholesaled that to another buyer for $75,000, which is $10,000 down and 10% interest, then I wrapped it to another buyer. I stayed in the middle of that part or I can wholesale it to you and say, “Here are the terms. If you pay me a $5,000 assignment fee, you get the property.” If it needs a lot of work, I will either sell it to an investor on seller financing while I will be the bank or I will wholesale it to another investor with a fee.

Half of the homes that we sell in seller financing are to other investors. These are homes in neighborhoods where the banks don’t loan under $50,000. Conventional financing doesn’t cover some houses or some repairs. Also, investors can only do so many conventional deals. With a lot of our deals, we are the bank to other investors. We use our skills to tie it up and then we sell it to them on seller financing terms for 10- or 15-year terms and get all that cashflow.

Remember that every negotiation that you get in comes down to three things. It comes down to price, terms and you, whether or not they trust you to get it done. Every house can be a deal if it is either price or terms. If somebody wants $1 million for their $100,000 house, you can do it if it is the right terms, a 1,000-year loan, a few hundred dollars a month, or something. You can do some exciting things with the terms, which sounds like what you are doing.

Wholesaling is still a hustle. Passive cash flow is the name of the game.

That is the key. People look at price first always. Terms are more important than price to me. They might be stuck in a price that makes no sense for a wholesale deal. If I can create a note with that, it makes sense for me. When you are doing some creative financing, we probably closed double the deals of the average wholesaler because they are only looking at, “What can I wholesale it for?” There is only one tool in their toolbox.

That is how I run my businesses, one tool in the toolbox. That is why I love having these conversations and trying to break them down not only for the audience but for myself as well. It is a powerful way to build wealth, first of all, and being the bank is the preferred position of wealthy people. Individually wealthy people become the bank and understand that the interest that you get year after year is high without all of the risk and all of the hassle.

That is what it comes down to because you have got five kids. You are a football coach all fall for high school. You have got a full life. You have 25 notes that you own that are paying you now as opposed to 25 renters that could call you at a moment’s notice and tell you things are wrong with the plumbing, the roof, the windows, or the landscaping. You are getting code violations because somebody is not doing things quickly enough. It gives you such an advantage to live the life that you want because you are the bank. The interest works 24/7.

I live in Miami but my homes are not even in Miami. My homes are mostly in the Midwest. Let’s say a lot of guys are in areas where they say the market is too high to wholesale or buy rentals. Let’s say California. You could be in California and have notes across the country without having to worry about a management company. The risk is if they don’t pay, you have to foreclose and get the house back. You do it all over again. That is the risk but you are not worried about those phone calls and everything else. You can manage the notes and you can hire a servicing company and pay them $15 a month for the notes to service your notes for you.

Let’s say we have got the distressed property and the terms. You now own it and you are going to sell this to somebody else. Are you going to sell it to somebody that wants to live there, an investor, or whatever?

It depends. Of course, for every house we get, we don’t get in seller financing terms. We either use seller financing terms or we use private money. We raise a lot of private money with private investors. The guy who has $250,000 in a 401(k) or a lady who has $50,000 in an account, we tell them how they can get an interest on their money more than they get in the stock market and more than the bank because the bank pays zero interest if they loan it to us. We show them our whole model. We say, “You loan us for 10% interest, we go and buy these homes and then we sell them instead of financing to our end buyers.”

WI 517 | Being The Bank

Being The Bank: Here are some keywords for seller financing. “I’m tired of tenants”, “Too many repairs”, and “I’m going to sell a couple of homes a year because I don’t want to pay a lot of taxes.”

 

How do the numbers work out? There has to be some formula or equation that says, “This is what I can give the seller. This is what I have to pay my investor. This is what I can get from a tenant-buyer.” You make sure that that is all in line. What do you average per property on cashflow to you? Are there minimums?

We try to be $200 per property. Most of our cashflow is around $200 because we were trying to pay down our debt. If I get a house with my private investor’s funds as five years to pay him back and I sell it to you in a 30-year term, I’m paying that debt off in 5 years, so I have 25 years of free cashflow. I’m looking down the future right now. I’m trying to build a portfolio of notes that are going to be free and clear cashflow in 30, 40, and 50 years down the road.

Do you do that if it is owner financing as well? Are you trying to get rid of that owner financing as quickly as possible?

As fast as I can. We had two homes that we bought on owner financing and we were negative cash. We bought two from one lady. We were negative $80 a month, but we paid them off in a year. Now they are free and clear.

Now you have got somebody paying you on a 30-year mortgage.

We paid for that already.

It is all done. How much cashflow does that end up having?

Those two properties are two that we kept as rentals. Our average cashflow on those is about $1,000 a month after we pay our taxes and such.

Is that your main goal? Is passive cashflow the name of the game? That is like Robert Kiyosaki. We were sitting there playing the cashflow game and trying to get all our passive to cover expenses.

Cashflow is the game. Remember, I was a realtor and a buyer’s agent so I know how much you have to go out there and hustle every day to get commissions. Our machines go on full circle. We were getting calls coming in from direct mail and texting them. The calls come in totally all the time but wholesaling still is a hustle. You got to go out there and keep doing it. I got five kids. I coach football. I got a beautiful wife. In a few years, I want to be able to relax knowing the cashflow is coming in. I want wholesale but not have to wholesale to pay all the bills. My goal is cashflow.

How many markets are you in?

We were in West Michigan, Pennsylvania, Pittsburgh, Harrisburg, and Philly. We picked a house up in Baltimore. We were in Florida and any market in America. If the numbers make sense, we will look at the deal. I’m looking at a deal in Kansas City and one in Ohio. There are a lot of people who come to us and say, “I have a deal. Can you help me structure this on seller financing terms?” I will tell them how to structure it with the seller, how to structure it for a buyer, and then we will buy the deal from them. They will wholesale us to deal and we will buy it from them. We were probably in 4 or 5 markets.

How do you manage it? What does your company look like? Is it just you?

My main two markets are Michigan and Pennsylvania. I have a partner in Michigan where we do the stuff 50/50. I have two other partners in Pennsylvania and then we split it up right there. My whole thing is I’m in Miami and I still answer a lot of phone calls. I still negotiate with the sellers. I don’t talk to the seller until we have seen an appointment has already been set and the pics are in. I will then call the seller and negotiate the deal.

I have 3 or 4 guys that text for me. They are my football players who graduated high school or are still in high school. They can use Batch Lead Stacker. They go in there and text and it is not hard for them to do. They text me full-time all the time. I have a marketing guy who does all our marketing. I’m usually the one closing the deal as far as negotiation. I have a partner who has boots on the ground in each market, but it is a small company. Between both markets, we were probably about seven people. I like to be lean.

Me, too. This is the Wholesaling Inc. and we talk about wholesaling but all wholesaling is sourcing real estate opportunities. Throw the word wholesaling away. What Jorie is talking about is it is not all about just doing cash deals.

If you hit your finance list hard, you’re going to find a lot of deals.

It all starts with wholesaling. People say, “How do I get my leads?” I’m marketing for wholesale deals. There are a couple of niche lists that I do to find these seller financing buyers. There is a list like the tired landlord list that Batch has. I have been hitting that list up for years. If you find an investor who bought a house in the ‘80s, he or she knows seller financing.

The interest rates were 18% to 20% in the early-‘80s. They were buying homes on terms. A lot of them might own 5 or 10 homes where they still want that cashflow but they are tired of being a landlord. If you hit that list hard, you are going to find a lot of seller finance deals in that list because those people are open to selling you a house instead of financing terms.

A lot of people are starting this out. They have a 9:00 to 5:00 job, in the military, nurses, fire people, or police. They are doing all these other jobs and they want to replace their incomes, but they need that income. You can still lock up these opportunities, put them in a nice little package, and wholesale that to a buy and hold investor. You could put all that in without putting any money in. You can have it all structured and look pretty. I assume that is what your podcast helps people walkthrough.

In our podcast, we talk a lot about wholesaling. It is not my number one option but I still wholesale a lot of houses. We talk about the wholesaling part in our podcast. We also talk about being your own bank. We make a mission to try to show people how you can invest in homes with zero money out of your pocket and create cashflow.

Is this anybody?

Anybody. Think about it. These homes that I’m getting and seller financing, I’m wholesaling it and being the bank in one deal. That down payment is still income. Let’s say you do 2 or 3 deals a month where you get an average of $5,000 down. You are making $15,000 income per month and you are creating cashflow instantly by holding the note. It is the best of both worlds if you ask me.

To mention some of the resources, BatchLeads.io. Use the TTP code. For $1, you get 500 free texts, so check it out. You, me, Pace Morby, and Jamil Damji use it. The top people around the country use it. It is phenomenal. Do you remember your first wholesale deal? Do you remember what the motivation of the seller was?

WI 517 | Being The Bank

Being The Bank: You might need to have one guy who does the creative things. Because that is a skill that is hard to teach and duplicate.

 

I was somebody’s acquisition manager. That investor was from Phoenix, Arizona. He wanted to wholesale in Michigan. This was when I was still a realtor. Someone said, “You should have Jorie be your acquisition manager because he finds deals for us as investors all the time.” I partnered with this guy. He was paying 10% of the actual assignment fee to go out there and wholesale. The first deal we got was a guy who wanted to move to Northern Michigan. It was a crazy deal because his requirement was he wanted $15,000 and an RV.

He wanted to live in an RV. We locked the deal up because I knew I could sell this house for probably $30,000. The deal was locked up but the issue was finding the RV. We had to go find an RV and buy an RV. I had to go pick this RV up and drive this RV to his house. He lived in one of these little hallway houses. I’m driving this RV down to his house, we closed on the house and I gave him the keys. The next day, he packs the RV up and leaves. We wholesale the house for $30,000 and we made a $15,000 spread on my first deal.

How much did you pay? Did he want $15,000?

We got the RV for $3,500. That was the first deal and it became easy. The key to wholesaling is consistency. You have to have a marketing plan. You have to hit that plan consistently. It is not rocket science. Hit the plan. Hit the leads. Bring the numbers in.

We talked about it and it comes down to three parts, lead generation, conversion, and exit strategy or disposition. You are talking about it in this show. That is why I thought it was so valuable to have you in here, which has been great. There are different exit strategies that you can have. Don’t throw away every lead because they don’t have equity or want to sell at the price that you want them to sell.

There can be motivation there. You can still solve the problems of the sellers if you can get creative. It takes a little bit of change in your brain from cash only to doing these creative things, but we are starting to do it. Maybe you can help me get past this. My fear is if my acquisition managers know other options, everything is going to turn into those other options. We average $27,000 a deal. These are nice deals we do and it rolls. I am certain that there are opportunities that we were missing out on every single week, for sure.

Think about it this way, too. I also wholesale notes, not just wholesale to the cash buyer. I can get a deal locked up that doesn’t make sense for a wholesale deal, but I can sell it to an end land contract tenant-buyer, create that note and then go find a note buyer because there are note buyers out there. I will wholesale that deal to a note buyer who will pay me the assignment fee plus I keep the down payment.

There are multiple options. Maybe have one guy who does creative. He comes in on your team and he does creative stuff. It is a skill that is hard to teach. It is hard to duplicate what I do. Even in my company, the guys with me every day still don’t know how to do all the terms and stuff the way we do it. Maybe you have one person who is like, “You are the creative guy.”

If I will send them to you in Miami for a couple of weeks but not during football season, how do people get ahold of you if they are going to read this and they are going to resonate with you?

On Instagram, it is @TheAulstonGroup. On Facebook, @JorieAulston. We have a Facebook group, @ShutUpAndInvest. We have a YouTube channel, Shut Up and Invest. Our podcast is on all the audio platforms and YouTube.

Suppose somebody is brand new and has never done a deal, whether it be creative or wholesaling. What advice would you give them to start?

Sign up for Batch Leads. Get a good list. Don’t pay for a huge list that is going to cost you $500 to $1,000 for skip trace and go after those tired landlords. If you get that list, text that list. Be consistent. I see a lot of people who get discouraged, like, “I haven’t got a deal yet. It is now a month.” Do you know how long it takes us to get this machine going and get deals? Don’t expect to get a deal right away. I got a deal the first week I did it but you might not but don’t be discouraged. Keep working on the plan and the deals will come. There are so many deals out there. We have done more deals during the Coronavirus pandemic. We doubled our income. The deals are there, just be consistent and believe in yourself. You can do it.

It is important to understand that if you can understand that you can get energy, enthusiasm, and a lot of positivity out of the process and not necessarily just the check, you are unstoppable. If it energizes you and keeps you going, you get excited. That excitement bounces all around. Now, everybody is getting excited and special things to happen. It had nothing to do with the end result. It had to do with the process of getting to the process.

It is like a game, a sport, or a competition. This is a competition for me. I love the whole process. You lose some and you win some. I love doing all the steps. Some people just want the money. If you are in this business, it is way more about the money. We are solving people’s problems. I had a text from a lady that we bought her house. Her text was like, “Thank you so much. You don’t know how much of help you were to me.” That is what we were doing. We were solving complex problems and we were dealing with people. It is not the house or the price. You got to love people, problems, and solve them. If you don’t, hire someone who does. If you don’t like doing that, you are not going to succeed as a business.

Thank you for being on here. Everybody out there reading, thank you so much. If your mind is racing right now, check out Shut Up and Invest. Check the show, all the groups and join that. If you are interested in joining the most proactive group in real estate investing, it is the TTP family, and it is the TTP program. Go to WholesalingInc.com/TTP. Check it out. If it feels good in your gut, sign up for a call. I look forward to working with you personally. Thank you. It was awesome. From Miami to Phoenix, here we go. To everybody out there, I encourage you always talk to people. See you and love you.

Important Links:

About Brent Daniels

Brent Daniels is a multi-million dollar wholesaler in Phoenix, Arizona… and the creator of “Talk To People” — a simple, low cost, and incredibly effective telephone marketing program…

Also known as “TTP”… it helps wholesalers do more, bigger, and more profitable deals by replacing traditional paid advertising (postcards, yellow letters, bandit signs, and PPC) with being proactive and taking action every single day!

Brent has personally coached over 1,000 wholesalers enrolled in his “Cold Calling Mastery” training, and helped 10,000’s of others who listen to him host the Wholesaling Inc. podcast, watch his YouTube channel, and attend his live events…

A natural leader, Brent combines his passion for helping others with his high energy, “don’t-wait-around-for-business” attitude to help you CRUSH your wholesaling goals as quickly and easily as possible!

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