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Shiloh Lundahl has a good portfolio mix of multifamilies, mobile home parks, and single families with lease options. As a child and family therapist, he’s only been serious about real estate investing since 2017, but he’s been able to scale up rapidly with some pretty incredible strategies. After his first few deals, his mentor warned him, “You’re going to run out of money, so you need to learn to use other people’s money”.

How many banks are too many banks to work with? That’s a legitimate question you should ask yourself. Every bank can have different lending requirements, so at a bare minimum, you should work with two banks at the same time. That way, if one of them rejects your loan, then you haven’t wasted several months of effort.

Right now, Shiloh has a pool of investors that he works with, and a system in place that lets him keep the money coming in. He purchases the home with a hard money lender and a private money lender. Then he takes the deal to a bank after they’ve been seasoned to refinance them. His investors are kept in the loop constantly by his WhatsApp messages, and his encouragement for them to network with each other has really strengthened how well they all work together.

You’ve heard about the BRRRR method; Buy, rehab, rent, refinance and repeat. But have you heard about the BRRRRLO method? It’s Shiloh’s special wholesaling spin that you are going to love. Because of the way he’s structured these deals, his lease option properties take a quarter of the time and effort it takes to manage a normal property. Sign up for Shiloh’s YouTube and make his day. He’s got creative content coming at you consistently, and cool projects in the works.

Watch and Learn:

Listen and learn:

What’s inside:

  • How Shiloh uses What’s App to talk about his deals with his investors.
  • Shiloh takes the BRRRR method and adds something a little special to it that yields him significantly more money.
  • We talk banks, funding, and the trouble with relying on one bank for all of your needs.
  • What a Nuisance Clause is and why you are going to want one in all of your lease options from here on out.

Mentioned in this episode:

Transcription:

Download episode transcript in PDF format here…

Joe: Welcome. This is the Real Estate Investing Mastery podcast. What's going on, guys, Joe McCall, Real Estate Investing Mastery podcast. I hope you're doing well. This is going to be a good episode. We're going to be talking to a friend of mine, Shiloh Lundahl, who has over eight, I'm sorry. One hundred and sixty. I bet he wishes. Maybe he doesn't. I don't know. One hundred and sixty doors. And we're going to be talking about most of them are single family homes. And here's the cool thing about what he's doing is he's selling these houses on lease options and so are going to be talking about that. If you remember back, I did Episode nine ninety seven. It was a podcast called Set Your Rent with Lease Options with a guy I interviewed named Adam Zach.

Joe: And Adam recommended Shiloh to me. He said, you got to talk to this guy, Shiloh. He's a real good guy. He's one of the good guys. He has integrity. He's doing good things for good people. So I called him up. We talked to him like, yeah, this is great. Let's get you on the podcast. Let's talk about what you're doing. So it's going to be good. I'm going I'm looking forward to talking to Shiloh, introducing you all to him and finding out what he's doing. And he's got a cool private practice that he's doing as well. We're going to talk about. And he's got five kids, which I think is the coolest thing of all. He's got happily married to a beautiful wife and he's got five kids. Anybody that has more than one kid, I guess I was going to say more than four kids because I have four that can be on my podcast. But the more kids you have, the better. If you want to be on my show and you want to talk about how you're doing real estate while you have kids and you're being a dad and a mom and all that stuff, I would love to talk to you and get you on the show.

Joe: Hey, first, before we bring Shiloh on, I want to let you all know of a couple of things. We are doing this live right now on the YouTube's in the Facebook. And so if you're watching right now on YouTube or Facebook, please say hi. Tell us where you're from. Type your questions and comments in the chat, whether you're on Facebook or YouTube, and they will pop up here, say hi. And I would love to get the feedback in the interaction. Give us a thumbs up like the channel if you're listening on audio for the podcast, Real Estate Investing Mastery. I'm really glad you're here. You guys been listening to this podcast for ten years. This coming in a couple of months. It'll be ten years. I've done over a thousand episodes and just, you know, what's kept me going with this? The first couple of years, I didn't even know what my stats were in is. Probably I didn't know how to look up how many people were listening or not. And that's probably a good thing that I didn't know how to look that up. But you guys listening on the audio podcasting world, you are my best friends. I love you guys because that is that's my heart and soul and why I do this thing. I just kind of happened to do it on YouTube live. But my real intent and purpose of this is to get it out there into an audio podcast because that's where like seventy-five eighty five percent of my listeners are.

Joe:  So if you are watching this on YouTube and Facebook, I say hello, tell us where you're from, type any questions that you have in the chat? OK, we've already got a few of them right here. What's up, Brutus? What's going on in Aronoff? How are you doing? And all we got here, the Fifth SEAL Ministry's Lake Charles, Louisiana and Gulf Coast. Nice. I was doing a webinar yesterday and we had people from Spain, people from Israel and people from somewhere in South America on my webinar. So I love how people from all over the world are listening in and watching this right now. All right. So final thing to housecleaning stuff here. This podcast is brought to you by my brand new offer, software. If you go to PartnerWithJoe.net, I have this new software that's free where it will help you create offers. And I have a light version that you get for free. There's a premium version that's just seven bucks. But if you go to partner with Joe Dot Net, you'll get the free calculator and we'll give you a little training on how to use it. And I'm going to show you an opportunity where you can actually partner with me on deals. Not only will I partner with you, I will lend you money on your deals. So I'm excited about this new project I just started, PartnerWithJoe.net. If you go there, you get the calculator for free.

Joe:  And then I'm going to tell you a little bit about my seven dollar a month Partner with Joe program. It's a new 30 dollar 30 day course that's only seven bucks, but it's 30 day course that teaches you how to get your first deal as quick as possible. It's amazing the amount of value that I'm putting into this because I want to partner with you all on some deals and I will partner with you and also lend you money on the deals if you want, if you're looking for a lender on your deals. So check that out. PartnerWithJoe.net. I think that's enough introduction and housecleaning stuff. Let's bring Shiloh on. What do you guys say? Shiloh Lundahl, how are you?

Shiloh: I'm doing great. Thank you for the intro. I just want to I want to correct just a few things about that intro. One is we actually are close up to about two hundred units, but only about 60 of them are lease options and then about four. Now we have about six small mobile home parks. We have a twelve plex, a six plex, and then the rest are single families that we are selling all these options.

Joe: OK, all right, cool. That's still a lot. That's awesome. Good for you. The video is a little choppy. I'm not sure if it's me or you. Am I choppy on your end or not?

Shiloh: You look great. Do I look choppy?

Joe: A little bit, but don't worry about it. Don't worry about it. We can still hear you just fine. All right. Shiloh's. So where are you? Where are you from? Where do you live?

Shiloh: So I'm in Mesa, Arizona, and I've been here for the last about thirteen years. But there was a four-year stint where I moved my family to Burbank, California, because one of my daughters actually does an acting in California. And so we moved out there to give her. Some opportunities to do some acting, and then my family just moved back to Arizona last year.

Joe: OK, so you're in Mesa, Arizona right now. How long you been in the real estate game?

Shiloh: So I bought my first single family home in 2010, and then I didn't do anything else until 2014 when the building that I have my therapy practice out of came up for sale. And then I worked towards purchasing this building. And then that's what kind of sparked the idea that I'd like to do some more real estate investing. Then I partnered with a buddy of mine and then in twenty fifteen is really where I started to do more real estate investing.

Joe: All right. Well, let's talk about your practice. What do you do? And I think this is really cool.

Shiloh: So I'm a child and family therapist, and so I focus primarily on helping. I do like marital counseling and individual counseling, but I focus primarily on helping parents with their children. And so that's like my niche. And I do a lot of work with adoptive well, with parents and adopted children and just parents of biological kids. That's kind of my niche.

Joe: Oh, that's fantastic. Good for you. But it's got to be hard being a parent and having kids that know that you do that. Right. Do your kids ever call you to the carpet and say, hey, you know, you practice what you preach? That would be my biggest fear.

Shiloh: Is that you do this in therapy, too, huh? Yes. But no, they don't say that. So now it's interesting. I really enjoy I like having five kids because I've had several different personalities that I've had to learn how to work with. And so that's given me a great, I guess, wealth of experience, of working with my kids to help other people work with their kids, even though every kid is a little bit different. Just all of the experience that I've had over the years of working with so many kids, you start to see patterns of behaviors. You start to see the underlying needs that kids have, those needs of security, knowing that the relationship is secure between the parent, the child. And then when that happens and the parent can kind of help their kids be able to organize their emotions and work through difficult things, their behaviors tend to go down. And so that's what I work with a lot, is helping parents be able to regulate themselves emotionally so they can help their kids regulate themselves emotionally and then they can correct their kid's behavior a lot easier. So it's kind of the process that I use.

Joe: Have you ever done this smell the roses, blow out the candles?

Shiloh: No, I have not done that specific technique.

Joe: But I guess I got that the other day from a parenting magazine. There's a magazine called Focus on the Family and their Christian ministry or whatever, and they have a magazine. And that was one of the things that they tell you to teach your kids when they when they need to calm down, smell the roses and blow out the candles. I love it.

Shiloh: Here's a different technique that works pretty well. It's called the whoa, whoa, whoa technique. You have a kid that starts flipping out, so you go, whoa, whoa, whoa, hey, hey, hey, what's going on? That's helpful. It's the basically the kids kind of going all over the place like, whoa, whoa, hey, hey, buddy, buddy, buddy. Tell me what's going on. Let me help you. Let me see if I can help you. Tell me what's going on.

Joe: I bet you're great to right when you're talking to sellers.

Shiloh: You know, I actually don't do a lot of talking to sellers specifically. I get most of my deals from wholesalers, from the MLS or my partner does some advertising. So I don't do any direct to seller marketing. I have talked with a few sellers, but not many.

Joe:  I've had to acquisition managers and they were both pastors, former pastors, and I didn't do that on purpose just by accident. But I love these guys because they were so personal. When you were talking to them, they were listening. They're like really intently listening. And I remember and they were just wanting some extra money. They were still kind of doing ministry part time, but just wanting some extra money. Man, these guys would be so good. They're not going to be the slick hardcore salesman that kind of like try to trick you into saying yes or using NLP tricks or whatever. But they're just like they were really good listeners and they connected really well. And I did tons and tons of deals with these guys. And they're both involved in real estate, doing both really, really well. Even though we don't work together anymore. There's something powerful with just having listening skills.

Shiloh: Well the idea is, if you can listen well, the goal of listening is to understand what's this person feeling because their behavior is stemming from what it is that they're feeling. And so if I can hear them, I need to look past some of the details of what they're saying to understand more what they're feeling than what I can understand what they're feeling. Then I can also understand what it is that they need when we can find out what people need, what our kids need, what our spouse needs, and we can meet that need and help them get that need met. Their emotions start to shift and then their behaviors start to shift. So that's a lot of what I do. I help my clients learn as this kind of formula. You slow down, you connect, before you correct. Slow down, connect before you connect. And that works really, really well in helping kids with their emotions, helps parents know how to help their kids. And so but I mean, that's the same thing with basic human nature and working with people. Slow it down. Listen to what they're saying, because they're feeling something, understanding what that feeling is coming from will help you understand the needs that they have and people have for basic needs that start with the letter s. So one is they need to feel safe. And then next one is secure. And the next one is they need support. And the last one is they need to feel less stress. So those are the needs that you're kind of looking for. Which one is it? Which one is generating all of this emotion? Is it about they need safety is about they need that security or support or is it they're feeling stressed out. They just need you to help them with that.

Joe: You know, reminds me of a podcast I did with a guy. I did this in October 2020. And he was this guy. Hold on here. This is so good. Oh yeah. He measures this was an interview I did with a good friend of mine, Phillip Vincent. Episode nine twenty-two. He was talking about how he he's really got a niche in the probate industry where he's helping people, not even probate, but like before a senior citizen goes into living care or whatever assisted living, and he measure success by how many hugs that he gets in a day. It's not about getting the best deal with the most equity or the biggest discount. It's about whether he measures success by how many hugs he gets in a deal. You know what to do. It wasn't him because I'm looking at my never mind, but Phillip Vincent does do that a lot. If any of you all know Phillip Vincent hug. I wish I could remember what episode that was. I'll find it later. Oh, I talked about it in October. It's Episode five fifty-one, October twenty seventeen, episode five fifty-one. You measure success by a hug. All right. Anyway, your kids, you have five kids, right. And did you adopt any of your kids. Nope.

Shiloh: They're all biological. All from one wife. All right. And you're still married. I'm still married.

Joe: That's awesome. How long are you married?

Shiloh: We've been married coming up on eighteen years.

Joe: Nice. How old are your kids?

Shiloh: The oldest. They can be eighteen years maybe. Coming up on seventeen years. So my oldest is fifteen. So she came about one year after we were married and so she'll be sixteen here in July. And then we have a fourteen-year-old, aneleven-year-old who doesthe acting in California. And then we have a six-year-old and a two-year-old.

Joe: Wow. So you actually moved to California because of the acting that she was involved?

Shiloh: OK, cool.

Joe: You're pretty busy, Family Guy. You got a pretty successful, busy practice. How do you find time to do real estate?

Shiloh:  So, you know, I have been working a lot and so I'm just now kind of actually backing off on the number of hours that I spend doing therapy. So rather than doing like thirty sessions a week, I'll do twenty sessions a week now. And so basically the way that I do real estate is a lot in the in between time. So basically in between this and in between that that I have to be at, I do realize that in between that and so I have different systems set up that allows me to do it to where it's active, but also semi passive. In other words, I don't go to the properties very often. I have an assistant that helps me with everything and so it allows me to have my job and still get a lot done. So that was one thing that I learned. I did actually have a real estate coach back in 2016 that said two things that were really profound and he drilled those into me. And one was you need to learn how to use other people's money because you're going to run out of money.

Shiloh: And then the second was you need to hire an assistant. So those were the two things that he pounded in over and over and over again. And those are two things that I learned how to do. And I got an assistant and the first one, the first assistant that I had was she was OK. But also she had a lot of personal family things that were very difficult for her. And so when I give her a call to ask her to go do something and say, hey, how was your day, then she just fell apart and stuff like that therapy side of me that wants to go and be a support and understand and things like that. But then there's the business side of me that says, I called you because I need you to go to this property and do this task. And so it was it was difficult because what I really needed was I needed an assistant that was it, a good place emotionally and with family and everything that could be able to accomplish the tasks that I needed to accomplish.

Joe: That opens up a huge can of worms. Doesn't it? Because, like, I don't allow my team to have any drama in my business. Right. Zero drama. I'm not paying you to give me any drama. And if you don't if you don't shut up. I don't say that.

Shiloh: OK, good.

Joe: You're fired. Like, I just can't handle that. I have enough drama at home. Yeah. So, yeah. How do you deal with that.

Shiloh: Especially you've heard the phrase hire slow. Fire fast. Yeah I did the opposite. I hired fast and I fired slow. Right. And so basically I needed somebody as she was a referral from somebody else. And so I got her start working for me. The thing is, there was a lot of things I need to try to do that she didn't have that skill level in doing OK. So I really wanted her to. And so I was kind of trying to carry her along, thinking eventually she'd get it. And then my partner and I, my business partner and I, we went and had lunch. With this lady that had had, she brought a deal to Zillow as kind of a bird dog, she was working with a was that she was working with another investor. And so when we got this deal, we thought, why don't we just reach out to her and maybe she can find some deals for us. And so we had lunch with her and she was really sharp. She spoke both English and Spanish. And we have a lot of rentals that have some Spanish speakers in there. We thought this would be really nice. And so we asked her if we gave her a task or two here and there to do if she'd be willing to do it. Sure. And so we gave her a couple of tasks. And within a few hours they were done. And then we gave her a couple more and then they were done. And we're like, wow, this lady is like super-efficient and she's awesome. She has a great attitude and she's just a pleasant person.

Shiloh: And so basically what happened is we started to give less and less tasks to the assistant that I had and more and more tasks to her until eventually we stopped giving my other assistant tasks and now they were employees. There were ten ninety-nine contract employees basically. And so it worked out really well. We just kind of lessons the ones tasks and increase the other ones tasks. And so then it was so interesting. As soon as we got her, our business just took off and we Yeah. I mean last year. So she came and started working for us I think sometime in twenty, eighteen, twenty, twenty last year we purchased one hundred and ten properties. Well you just in 2020 we increased our portfolio from about eighty to one ninety and a lot had to do with her. So just because she was so efficient and she worked really hard and did a fantastic job.

Shiloh: And so it was really, really cool was we recognized her value and we gave her a raise and then we were talking with our accountant just recently and we're restructuring our company so that we're going to be bringing her on as a two percent owner of our company. And so now she has ownership of a portion of the company. And so it's also because our company's valued at probably about four to five million now in assets in equity. And so now she was able to just get that as a bonus. And then everything we build moving forward, she's going to get two percent of that. And so we're really excited over the next ten years or our plan is to help her become a millionaire. So I love it.

Joe: We've got some good comments in here. We've got Danielle, what's going on from Ohio? And you know Brandon Simmons. Yeah, no good guy. I love Brandon. Known Brandon for a long time. Fifth SEAL Ministries. What's your name, by the way? Just curious. Louisiana already showed that one Ivanoff are up. Aronoff is asking nationwide. I'm not sure where are all your properties? Shiloh.

Shiloh: So most of my properties are in Arizona. And when I say Arizona, you have the the Phoenix area and then you have what's called the East Valley. The East Valley is just everything kind of east of Phoenix and Scottsdale.

Joe: You know, Brandon, because he sold you deals. Is that how you know him?

Shiloh: And I think I think I bought a deal from before. I mean, again, we have a lot of deals. And so I've worked with a lot of those. You got to be careful with it. I think we probably bought a deal from them in the East Valley of Arizona. You have Gilbert, which is where I live in Gilbert is a nice it's a nice area. And I don't own any other properties in Gilbert because the price to rent ratio is just not great, in my opinion, in order to own rental properties there. But I have several in Mesa. And then you go farther out. I have a bunch in Apache Junction, then you go to the south and then I have the smaller cities. So Florence, Coolidge and Casa Grand is where I own the majority. And then just last year we went down to Tucson, bought a twelve plex and then two mobile home parks. And so we own about fifty to sixty properties down there.

Joe: Excellent. So how are you buying these? Are you using your own cash, are you getting bank financing for each of them? When did you, answer that first then I have another question.

Shiloh: So when I bought the building that I have my practice in, I opened up a equity line of credit on my home. I was able to get a two hundred-thousand-dollar equity line and then that was helpful to kind of get me started in real estate investment. And so I had that. I was able to do some of my own deals with that money. But then again, as my coach said, you're going to run out of money if you're just using your own money, you need to learn how to use other money. So then I looked at, OK, what are some other options? And in this real estate program that I did, they talk about other money resources such as business, lines of credit, personal lines of credit, credit cards and things like that. And so over the next year, I worked really hard with banks and other institutions in order to increase my credit limits. And I was able to increase them to about eight hundred thousand dollars, including like two hundred and fifty thousand of available on credit cards. I had probably one hundred and fifty in business lines of credit at one hundred or so in personal lines.

Shiloh: And then I had my HELOC on my home. So that was kind of where I was able to use that in order to buy properties basically. So that was really helped. That kind of gave me the start, but then I bought a bunch of properties and then I went to go and refinance them and at the beginning they'd say, well, we're only going to refinance you about 70 percent of your purchase or 80 percent of your purchase plus rehab, as long as that's less than 70 percent of cost or something like that. And so basically, I was living in a lot of money into these rehabs. And then I went to lunch one day with a guy and he said, why don't you just use seconds on the back end? I'm like, what are you talking about? So, you know, the first is the bank or the hard money lender and then just bring on a private money lender in a second position, small second, and then you can pull out money that way. And I thought, well, that's brilliant. And so I started trying to create the second position notes.

Shiloh: But at the time, this is back in two thousand seventeen, the beginning of twenty seventeen. Nobody wanted to give me seconds. And, you know, they didn't a lot of people didn't know me really well. And so I knew that as soon as I sold one second that I'd be able to sell 10 of them. And so basically what I was doing is like, let's say I have a property that was worth one hundred and I had a loan on it for 70. I was trying to sell a second for ten thousand would be paying between eight and 10 percent on that second, depending on the length of time we have, whether it was one, two or three years. Right. And so as soon as I did sell one within the same week, I sold two more. And then people started to feel comfortable with me. And then as soon as I sold it, my entire what would you call it? My energy around that changed my countenance, my confidence. And I was able to talk about it, having done it successfully. People felt that and then they were willing to lend me money and then posta lot on bigger pockets.

Shiloh: And a lot of people see my post and they'll comment on them or the like my posts, and then they'll read my bio and then they'll see that I do some coaching and other things like that. They might reach out to me and talk about they're doing a deal with me or or lending to me. I'm one of my deals with doing coaching with me or whatever. And so that's kind of where I got a lot of a lot of money is people reaching out to me saying that they want to lend to me on my deals. And then we put them on our WhatsApp group. And our WhatsApp group is kind of this mini-WhatsApp group. I've never heard of that. Yeah. So WhatsApp is just an app that you get and it's kind of like a texting video, texting app. A lot of people outside of the United States use it because you can do free calling on it. And so you don't have to pay for international calls when you use WhatsApp using your data rather than the phone lines. And so a lot of people outside the US use it. And so I was just kind of as people would lend to me, we would put them on this WhatsApp group and then we would do these like little trainings and we'd answer questions and other people on the group would answer questions. And so just kind of became this little mini-investing community.

Joe: Sorry, just unclear. WhatsApp group is like, is it voice messaging or just text or is it or group people.

Shiloh: Yeah. So you put everybody to it. It's kind of like this group text and well, there's this group and then you can either text them, you can send pictures, you can send video and you can send and you can call people with it.

Joe: How did you start the group and how did you get people into it?

Shiloh: Say I'm part of this kind of leadership program and the leadership program used WhatsApp all the time. And so I saw what they were doing and how they were doing it. And it was also like, wow, this is really effective to communicate with the entire group. And so this leadership group was doing a lot of leadership training and things like that and using the WhatsApp to do it. And so I saw what they were doing and how they were doing it. And I thought, this is really great. What if I were to use this as part of my investor group? And so that's kind of how we got started with it. And it works really great.

Joe: How many people do you have in it?

Shiloh: We have about 60. So 60 people that have lent to us one form or another like ten thousand to one hundred thousand. And then what's also been really cool real quick is that as we've been doing some of these trainings, I reached out earlier this year and kind of since the video saying, hey, guys, just want to let you know about this new mastermind group that I'm a part of. And I talked about it and said it's really great. And I said, a lot of you guys might want to reach out to each other and start some mastermind groups. And so there's been two mastermind groups started just among this group of people, you know, where they get together and like every week or every other week and they talk about the challenges or the wins and what their goals are with investing. And so that is really, really effective, having these little mini mastermind groups that they make. And then it just kind of creates more of a cohesive group. And it's just been really, really neat.

Joe: I have never heard of that before. I mean, I've heard of WhatsApp, but like, I think it's such a cool idea. What a great communication tool. When you have that many people in it, though, does it do you does it get pretty overwhelming with like so many people responding to or is it's just one conversation thread, right?

Shiloh: It’s not broken up. It's just one conversation thread. And you can always just turn off your notifications so that you don't get notified when people are responding. So it doesn't like constantly bugs or whatever. But what I find is like every day I would say there's just a handful of texts, if that's so, maybe about 20 or 30 a week. So not a whole like it isn't bombarding you. But like, for instance, somebody reached out today and said, hey. Would it be a good idea to create a partnership on my first or second, do I wait until later on like fifth or tenth deal? And so a couple of people reached out and commented on that. And then I did a little video that I didn't have a chance to post yet because we're doing this podcast. But after this podcast, I'm going to post it just kind of this video that I did of me kind of talking and doing this explanation and everything like that. So that's what's really great, is you can do these little videos where you can kind of teach and then send them out and then so people learn quite a bit from that.

Joe: Wow. I'm looking at WhatsApp now and you can do this on your iPhone, Android or even your computer, right?

Shiloh: Yeah. The great thing is when we saw my partner and I, my partner and I have kind of this contest going to see who can get a thousand subscribers on YouTube first. And so we'll post our little videos on the WhatsApp group so people can click on there and then go over to YouTube and watch our little YouTube trainings that we're doing and stuff like that. Our videos that we're making

Joe: With WhatsApp, do they are you giving them your cell phone number?

Shiloh: Yeah, like everybody in the group has my cell phone number. Yeah, they yeah. So they've lent money to me. And so we have a relationship. And so my WhatsApp is connected to my personal cell phone number, but you can connect it to it doesn't have to be your personal number. You can connect it to a actually I don't know how, I don't know exactly how that works with WhatsApp group with your number, but I'm OK with it because again, all of these people are able to give me a call because they've lent me money and I and they can go and ask me questions and things like that. But it's just more effective for them to do it through the group because then they may have a question that may be able to go out to everyone on the group.

Joe: I love that idea. WhatsApp definitely is used all around the world more than I think it might be, the number one of the number two messaging app in the entire world, right? I think so, yeah. And it doesn't matter. So, yeah, my private investors have my cell phone number, but I love the idea of being able to communicate and you can control the notifications to see your phone's not just going crazy. Right. You can sit down like once a day or twice a day and just look at messages and respond.

Shiloh: Yeah. And it just kind of has like a number next to it. So, you know, how many people have, like, sent things. And so then you just kind of open up when you get a chance and then you kind of go through the threat and answer things that you need to add.

Joe: And you can answer by text, by writing or voice or video, right? Yep. What do you normally do?

Shiloh: I usually just do a text, but if it's like something that I am going to kind of talk about because it's a more complicated thing, then I'll do a video of me kind of explaining something and then you can post like up to five-minute videos. So I'll do hopefully I can explain the concept in five minutes. If I can't, then I'll do five minute and then I pause it and then I'll do a second segment in the second. And then every Friday they just started this couple weeks ago. But I do update Friday. And so I'll talk about, okay, this is everything that went on with our real estate this week. We were able to rent this place out. We just finished this property. We were able to acquire this one. We're closing on this one. And so we go over everything that we're doing so that people know that when people lend us money or when we're doing teaching, we're actually actively involved in what we're teaching. Does that make sense? Yeah, they can see us. Then they can ask questions specifically about a specific property that we did, or they can ask us about what we're thinking about the market right now or how we were able to acquire that specific property, whatever it was or is we're able to talk about.

Shiloh: And another thing that I'm enjoying doing is I'm giving them updates about my pool in our update Friday, because my pool is being built right now. And it's a nice pool. It's very large, nice pool with like a cave rock feature. Oh, yeah. So that's really been fun. And it's been taking it's taken about four months so far to build. And so it should be done by the end of May. And then we're going to have kind of a pool opening party for people on that in our investor group and everything like that to come over that are in town, because I would say about half of the people are in Arizona, the other half are outside of Arizona. So your liver's close enough. You're welcome to come and enjoy the pool.

Joe: That's so cool. I'm jealous because I'm trying to figure out how we're going to build a pool and what size we want and getting a real nice one here. All right.

Shiloh: So some pictures of our pool. My wife kind of designed it.

Joe: Awesome. Well, that's cool. I love what you're doing here with what's WhatsApp and connecting you private investors with that. And that's such a great idea.

Shiloh: So those ones were actually like private lenders, and that was because we didn't want to go afoul of the SEC or anything like that, because what we would do is we just take one and put them on the back end of one of our properties in a second. And we were able to do that because we're just like one person per property. We weren't commingling funds or anything like that. But now we've actually built up we just finished a fund that we created in order to now we can have investors come in and invest a lot of the money and then do a lot of deals. And so we just finished that this last week. And that's something I'm super excited about.

Joe: So are you still getting individual loans on each of your properties, as you guys, they come in, are you getting big commercial loans now, are you packaging them together and stuff like that?

Shiloh: We're packaging them together now. Yeah. So we were doing the individual and then we built up several individual loans and then we packaged them all, put them in a portfolio, and then they were in a portfolio for like a year and a half. And then appreciation happened so much. And the terms of that portfolio weren't great and it was hard to remove one property. And like in case somebody were to exercise a lease option, we wanted to be able to take out one property without different penalties and stuff like that. So then we refinanced that portfolio with another bank that allows us to do that, where we can take out one, it'll lower the payment and the whole loan and things like that and without any penalty. And so that's why we refinanced it recently. So we're doing a lot of portfolio loans. We still get these little loans here and there on some of our properties, but they're all mostly commercial now. So that's how we're doing that.

Joe: Now, that sounds intimidating to somebody who's kind of new to the business and just getting started. So can you talk to them a little bit? Like, can you explain it's not well, was it intimidating to you when you were first getting your first loans and then looking at getting bigger commercial loans? And was it that hard to transition from that?

Shiloh: You know, it wasn't intimidating to me. I think that I walked into it with overconfidence. I thought, hey, there's going to be great. You know, they're going to see that I do. Well, therapist and then I have these properties are just going to give you money. And so that was my thought. And so I went in there and it's like going in to get a loan as an investor is almost like going in a boxing match or an MMA.

Joe: You're supposed to be not intimidating. Well, I think you're not only it's fine.

Shiloh: I mean, it really is. You're going in there. They're going to ask for a bunch of stuff like, I don't know why that's relevant. OK, let me get you that. But this is the thing that's important. Keep fighting, fighting until it's done. And then this is another thing that's also really important. There are certain standards and guidelines. Learn those, learn the Fannie Mae and Freddie Mac standards and guidelines also understand what it is that they change like they changed recently. Understand that and then work towards meeting those guidelines. But at the same time, each bank can be a little bit different. So I encourage people to work with at least two banks at the same time all the time when they're getting loans. And the reason being is because you can have one bank that plays a great game and says, hey, everything's going to be great, we're going to take you and it's going to be awesome. We're going get you that finish line. Everything's going to be great. And then they take you 90 percent of the way and then you get a call and they say, I'm sorry. Our underwriters said that he didn't like this. We're not going to be able to do this for you.

Shiloh: And so you're left there after two months of working with this person, like two or three times a week. And now you're like, what do I do now? Now start this process all over again. Yeah, but when you work with another bank at the same time, then you're able to say, OK, well, that one stopped. Then I just finish up with this bank, you know what I mean? Or if both Olin get to the finish line, then you say, OK, so now let me know your rate and everything like this. OK, this other bank is ready to close with me as well, and they're giving me a little bit better rate. And so I would much I like to go with you, but this is what I'm going to need to see. Are you able to do that if not going to have to go with the other bank? Now, they may be upset by that, but then you can ask them this question. What about this is upsetting you? Why did all of this work? I know that you did all of that work and I appreciate that. And these are the things that I like about your bank. And but these are the other things that I need in a bank. And so I'm not going to get all of my needs met with one bank. Now that I understand how you work more, I'm going to bring these types of deals to you because you would you lend better on these types of deals. And I'm going to take these types of deals to them. Does that make sense? Because a lot of banks are funny that way. They think, hey, we want you to they call it the relationship.

Shiloh: Basically what that means is we want you to bring all of your money over to our bank. If we're going to give you a loan, OK, we'll do that as long as you need. All of my needs. All of my needs. Why do you expect me to be one hundred percent faithful for you towards you as a bank if you're not going to help me get all of the things done that I need to do with all of my properties? Yeah. So there's only a couple of people that I have one hundred percent faithful to, and that's my wife and my kids. Those are the only people that I have to be completely faithful to everybody else. As long as this relationship works for both you and me, then we're going to continue to move forward with it. When this doesn't work well for either of us, then it's OK. We're not married to each other. We'll move on and it'll be OK. We'll do things that we're but good for the both of us. Now, that's my feel.

Joe: Well, that's a good attitude to have going into it. You know, you're not their slave. You're not going to be. Don't get me started on that.

Shiloh: Very frustrating. You've had some feelings towards things, I guess.

Joe: Yes. Yeah. They promise you the moon, I will do this, all this great stuff for you and they get you right to the end of the finish line. And it's like, yeah, it's not going to work, all because of one stupid little thing.

Shiloh: And it's right that if they told you two months ago, you could have fixed it.

Joe: Yes.

Shiloh:  It's like I had ten thousand in this account. I could have put it in this account two months ago. But now that we're two months away, you say, oh, because I didn't have ten thousand more on this account, then it's a problem. And I can't just put it in there now, because then we have to wait two more months and then we're outside of the period of time when we're supposed to get it done and then we have to restart everything again.

Joe: Yeah, it's the whole left hand isn't talking to the right hand and. Yeah. And nobody knows.

Shiloh: What's going on. So when. When you understand that really, really well, then it becomes less frustrating because this is what I understood with things and I was really frustrated. Thanks for long time, but when I understood this, that banks get their money from somewhere. Imagine how they get their money. A lot of times, big, big and wealthy investors, fundings, wealthy investors say this is what I want. I'm going to create a box that says these are the these are the type of loans I want to do, OK? And then I'll create a box just a little bit outside of that box saying these are loans that I might do as long as these stipulation. Those are the only loans I want to do anything outside of those two boxes. No, it's my money. And so I can choose who I who I loan it to. And I don't want to. Once I realized that, I started taking it a lot less personal when I wasn't fitting in their box and I started asking better questions like describe what your box looks like and describe to me what kind of people get loans, what are the things that I need to look out for? What are the things that would commonly disqualify me from that type of loan? So I get all this information. I then restructure my finances and my business to look like that. And then I go and I apply for the loan and I usually get the loan.

Joe: And what kind of banks do you like to work with? Are they the regional banks, local banks, national, you know what I mean? Credit unions.

Shiloh: And to be honest, I work with lots of banks, like I've had accounts like seven different banks. Now it's cumbersome and it's frustrating, especially to my accountant. But I do that because some banks will lend me hey, here's fifty thousand dollars. Great. But you don't have any other products that are going to help me. So I'm going to take that fifty thousand and I'm just going to pay you back. But I'd like that fifty thousand because I can take that. You're giving it to me at six percent. I can take that and I can create several hundred dollars cash flow over and above what I pay you and more equity and stuff. And then there's banks like I like Chase Bank for two things. It's convenient and has a great online system. I don't like it for almost anything else. When you call that help, they say, OK, give me your name, OK, identify yourself and then they'll ask you some questions. Where did you open up this account? I don't know. What do you mean? I have 60 different accounts with you. I have no idea where I opened up that one specific account. Yeah, OK. Well, you failed the ID. It's me.

Shiloh: Yeah, that's frustrating with the big banks because it's very impersonal. But I like working with some smaller banks with regard to getting some of my real estate loans from them. But I built relationships with specific bankers, less about banks and more about bankers. And if my bankers leave the banks that they're in, it's likely I will be taking my business and following them to the general interest just because it's more about the relationship that I have with that specific banker and what they can do for me than it is about their institution, because without them, nobody else. If nobody else knows me then and I say, hey, will you do this for me? Can you do that for me? You know, I'm busy with other things. You seem like your high needs. I'm going to go and do all of these other things. Yeah, yeah. You know what I mean. All right.

Joe: So you got almost two hundred doors, about 70 single family homes, right? Yes. And so you're seven you're 70 single family homes. Those are the ones you put your lease option tenant buyers in, right? Yes. Right. So you're buying them with bank financing and you're selling them on a lease option.

Shiloh: I'll walk you through that process. So we buy them usually with hard money because we usually buy them off market, OK? And so when we buy them off market, we buy them with hard money. And then I'll usually bring in a second to help with the rehab. So most of our deals, most of them, we don't have a lot of our own money into them. So I'll have a hard money lender that I'm private money lender. And then when we're finished with the rehab, then we go and we get refinanced. And, you know, getting on the bank might depend on the amount of time for seasoning and other things like that. And if we can find ways around seasoning, then we do. But then what we do is we will get a refinanced pay off the first and the second, and then when they come in with their option fee and their option fee is usually about thirty-nine hundred usually, sometimes it's a little bit more if it's a higher price. But property that you know, four or five thousand will help us usually get almost the rest of our money out of the deal. So now we have close to none of our own money into the deal. They're into the property. We're able to rent it for one hundred dollars, usually on average, higher than the rent. But then what we also do is we rent it for one hundred dollars more than that. So two hundred more than the rent, the average rent. And then what we do is we have a nuisance clause that basically says that if they don't bother us asking us to fix anything or anything like that, if they just take care of the house because they're living in it in order to be able to qualify for a loan so they can buy it, if they just take care of it, then they get one hundred dollar discount off of the rent. So we increase it two hundred and then we give them one hundred back. So our net is one hundred higher than your average rent,

Joe: You give them that credit if and when they buy the house right?

Shiloh: Now that's just off of their rent. So basically they pay a hundred miles. Let's say the house would rent for two. For twelve hundred. We charge them fourteen hundred because it's with the option just because we charge a higher charge, a premium rent for option. And then we give them a discount of one hundred dollars from there. So basically it's net one hundred dollars higher in rent for us. Does that make sense?

Joe: I love it. So it's like if you leave me alone, I'll knock one hundred dollars off your rent every month. Yes.

Shiloh: Not like exactly like that, but yes, it is. It's basically like that.

Joe: Man, can you send me a copy of that nuisance clause. Is that what you call a nuisance clause?

Shiloh: It's just a small paragraph in our in our lease agreement. And it works really, really well because I would say our lease auction properties are probably less than a third of the time that it takes us to manage any of our rentals. Oh, yeah. So I would say probably even a quarter of the time and effort it takes. Oh yeah. So I mean, you say you want to build up to one hundred or one hundred property rental portfolio and the amount of time that that takes that same amount of time, you can manage a four hundred property lease option for the same amount of time.

Joe: All right. So what's your typical cash flow then? What do you net cash flow on these deals?

Shiloh: That is a good question, because we haven't been taking out cash flow for so long because we've been since we started it. I mean, we just started like the last month or two, taking out some money in cash flow. But for the first three or four years, we were just building the company and reinvesting that cash flow into more deals and more deals. And so, like, according to my spreadsheet, we get about one hundred and eighteen thousand dollars a month in rent payments. OK, and then again, according to my spreadsheet, we keep about thirty-five to forty thousand a month in cash flow because what it shows. But that's not exactly accurate because we keep buying and so we're buying and we're doing other things and things like that. And then sometimes there might be something that comes up in a rental where a man needs a new AC unit or something like that. And so there goes five thousand of what was going to be that cash flow. But with our lease auction properties, they take care of the maintenance majority of everything, except if it's like big things, like if there's a roof leak, let us know. And then if there's a roof leak, we might renegotiate maybe that that final price that we had determined was going to be the purchase price. We might increase that because we put on a new roof or something like that, or if

Joe: Or if they fix it themselves, maybe. Right.

Shiloh: Well, I mean, if they fix it themselves and they get a new roof with the property, now they have, you know what I mean? And so there's that value that that comes along with it. So we allow them to do a lot of cool stuff to the properties. They can paint it the colors that they want, as long as it's like not like crazy colors. They can paint it as long as it's a relatively normal color. But we've had people put in like driveways and they put in fences and landscaped the whole thing. And they've done a lot of really cool stuff because there's pride of ownership there. There's, hey, I'm planning on buying this property. And the people that usually do a lot of that stuff do end up exercising the option. So we've had five people exercise the option. One of them switched over to seller financing. So we're doing that financing for them. But then we've got just four people get loans on the properties and buy them and they've all been able to buy them well under market value. And so they walked into a lot of equity and they were really happy. And a lot of that's because the market has just gone crazy.

Joe: And you're not trying to gouge them out of that out of their equity by charging a super high price.

Shiloh: No, so usually we're switching up a couple of things right now. But what we were doing historically is we would take the property. We would we would increase the purchase price by about seven to 10 percent over a three-year period of time. Because if you think historically, if it goes up three percent per year after three years, it should be 10 percent higher than what you bought it for. Just unfortunately or fortunately, with the last three years, I mean, I'd say the market's gone up like 30 percent or whatever. And so people are able to walk into like thirty fifty one hundred thousand dollars in equity. And so they're really happy about it. Oh, yeah, yeah. And so what we've done a little bit about is kind of started toying with the idea of switching up some of the model.

Shiloh: So when people give us that 4000 or 5000 option fee, we say is you can buy the property within the next three years for what it appraises for at that time and reach out to us. And we choose the appraiser, the appraiser appraised of the property. You can under contract for that amount. And then the bank will then order another appraisal on the property. And then what we will do is we will give you back your options that you can use to buy the property at that price. And then but we put a floor on it as long as it appraisals for this amount or higher. And this is what we'll do. And so that's what we've done because we have like we've lost out on like one property. We lost out on one hundred and seventy-five thousand dollar increase in equity. I mean, we like the guy. We're happy that he was able to go get that property. He loves the property. It's a beautiful property in the city that he grew up in. And so he's really happy with it. But we're like, wow, that was a big, big increase for him.

Joe: All right. So then why don't you walk through a typical example deal and you use one hundred thousand dollars for round numbers. You're spending more than that, obviously, on a deal. What are you trying to buy it at? And then after. Are your fixed costs, what are you all in it for on average, and then what are you selling it for?

Shiloh: So this is what we would do for a deal that would have an ARV of one hundred. We would usually try to buy that at around 60. We bring we probably put about 15 into it, so about seventy-five and then we'd probably get a loan for 70. We probably have a lease option buyer come in, give us support thousand other option fee or maybe a three thousand if it's a lower price point. But the three- or four-thousand-dollar option fee. So we're really into it about two to five thousand dollars and then they're going to be renting it. We're probably going to cash out two or three hundred dollars on that one. And so and then you would sell it to that. Then we want to in that property for about one ten.

Joe: Yeah. So just rough number to sell it for one ten, but you'd be in it for

Shiloh:  80, 70, 70.

Joe: That's a nice forty thousand dollars spread. Yep.

Shiloh: So you take that when you times that by 70 and all of a sudden that 40 thousand becomes a lot more. Yeah. Becomes significant.

Joe: And the cool thing too is you're just reinvesting your cash flow into the business, buying more deals. Right. And so what's your endgame? What are you what is your big goal with this?

Shiloh: So that's a great question. And that kind of goes to a life purpose and things like that, you know what I mean? And I think that a lot of people have different purposes in life. And, you know, I was talking with a buddy of mine and one of our mastermind groups, I think was just yesterday is to you know, what drives why is it that I'm going so, so far and so quickly? Because my goal over the next ten years before I'm 50 is to own one hundred million dollars’ worth of real estate. And basically and I've done some calculations and according to what I think, it's going to be about twelve hundred properties. So I need to increase by about a thousand more properties over the next ten years. And so the question is, how am I going to do that and what is it going to require me to do that? You know what I mean? So there's changes that I'm going to need to make in order to get to that level. But the question that you had is why? And so one thing that I really enjoy doing is I love watching high level wrestling and I'm not talking about WWE or anything like that. I'm talking about, of course, the real wrestling like Olympic level or college level. They just finished the was at the NCAA wrestling tournament. And I am a Penn State fan. They've won eight out of the last ten national championships. So I don't know if you follow wrestling.

Joe: Not much. But I'm a good friends with Russell Brunson, who's a huge wrestler.

Shiloh: Yeah. Yeah. And so Cael Sanderson is the coach of Penn State, and he, in my opinion, is probably the greatest athlete for his. Well, the greatest athlete.

Joe: You wrestlers, you think you're the best athletes in the world.

Shiloh: Let me explain why. Not just because wrestling is about I'm not talking about the best athlete for his sport compared to anybody else, for their own sport. Let me explain why. So he went through high school, was, I think, a four time state champion. He then went to college and he never lost a match ever in college. There's no there never, ever been another wrestler who's gone through all of college without losing a single match was like one hundred and fifty-nine and zero. And then he goes to the Olympics and he takes gold and then he comes and he starts coaching. And he's won eight of the last nine or eight of the last ten national championships. So I mean, this last time he took second in nationals, but four out of the ten weight divisions were his wrestlers who took first place. So that's how to create a winning mindset that you then just attract winners to you, you know what I mean? So the question that you had is, you know why? And so I look at somebody like him and I would ask, well, why is he so great? His potential was to become so great. What if he had stopped? What if you had said, you know what, I did great in high school, I think I'm done and a lot of people do. And there's nothing wrong with that. You know, you do your thing and then you move on.

Shiloh: But he had potential to do greater things. And so he went to college. He was great, but he didn't stop there. He went to the Olympics and was great and then he didn't stop there. You then came and became to Penn State and became an amazing coach, creating a dynasty, you know what I mean? And a lot of his wrestlers go on to compete at Olympic levels. So, I mean, it's incredible. And so for me, I've done I've gotten up to two hundred. But what is my potential? And I love Jim Brown, who says, how tall does a tree grow? And the answer is, well, it grows as tall as it possibly can. It doesn't limit its potential.

Shiloh: Only we as humans often limit our potential. And so if I can continue to grow and maintain a good relationship with my wife and my kids and with and with good friends, if I can continue to grow and do more and build and I can maintain my integrity and all of those things, then I'm going to do that. I'm going to try to live to the my greatest potential possible and then I can I can do a lot of good things with the money that comes to me. I mean, I employ a lot of people to help me with my rehabs and all of those things. And so I'm able to help a lot of people and supporting their families and other things like that. And so I like to do that. I like to gather people around me. And, you know, my wife and I have strong spiritual beliefs and things like that. And we like to help people feel loved and help be good examples and things like that. And so all of those things really motivate me to do well so that I can also be an example in several other areas of life. I love it.

Joe: I'm just looking here at your bigger pocket's profile. You got a lot of good articles, forum posts, and you just wrote one recently. By the way, I'd encourage you to go to bigger pockets if you're not a member already to begin with. What's wrong with you? Bigger pockets is a great resource for just networking meeting people. You don't go there to raise private money, but once you start networking and contributing and showing a lot of value, you can raise private money on there and you can sell your deals. It's just a great way to it's a great place to go get resources and education and networking, I think is the biggest value out of it. So bigger pockets, you can look up Shiloh's profile here or just look up Shiloh Lundahl. You wrote an article recently and it's called Better Than BRRRR They are introducing the BRRRLO models. Talk about the BRRRLO method. I love this.

Shiloh: So basically the BRRRR strategy is, you know, in many of the listeners know is the phrase was coined by Brandon Turner, who basically it's that you buy, you rehab, you rent, you refinance and then you repeat the process. Right. That's how you burn a property. And as you do that, you're able to recycle your money and really grow a good portfolio. And so the BRRRRLO model is basically the BRRRR. But then rather than just the idea of renting it out, you bring in a lease option tenant. And that, in my opinion, is better because what happens is if you keep a property long term, you may experience appreciation and you may have the debt pay down and then you get that money and then that's fine. But what I like about the BRRRLO model is you get a higher rent. You don't have to worry about maintenance costs or turnover or management.

Joe: Now, you still manage properties, obviously. Right. But you don't have to you don't have to have a dedicated property manager. You can have an assistant do it.

Shiloh: Exactly. So my assistant actually manages the majority of our properties. And because we've grown so much, she actually has two assistants under her to help manage some properties as well. So and those are a lot for the rentals that we have. But again, for a lease option, property's very low maintenance, very low management. So basically, you cut out a lot of the costs, a lot of that. There's very little turnover, there's low maintenance, there's no management fees, a larger deposit, exact larger upfront deposit. And so that makes it so the cash flow is greater. And then what's also great is that if you can take this and then sell it in three years, if they go to exercise the option, what's happening is you don't have to use a realtor to sell it because the person that came in is planning on buying it. And then also in our option agreement shows that they pay a lot of the closing costs. So basically, when you sell a property, you're usually giving away seven to nine percent of the of the proceeds in closing costs here we give away one percent. And so that's an additional six to eight percent that goes to us. And so that's great.

Shiloh: And then what happens is, you know, there's something called return on equity. And I know this, but some of your listeners might not know it. Basically, it means how much equity do I have in this property? And if I take that equity and I do a calculation, how much money, what's my cash flow? And according to my cash flow, how much of a return on the equity am I making on this property? Is it five percent? Is it six, seven, eight? Is it ten is at 20 percent. And so what happens is the longer you pay down the property, the more depreciates, the lower your return on your equity is. So you can take properties and you can trade them up. That's where you really build a lot of momentum. Is this idea of trading them up when you buy and hold it? It's good, but it's also slow. I like to trade things up and I learned this from the game. Cash flow from the game. Can you try to get out of the rat race and you get these little rentals and you're trying to get your passive income greater than your expenses. And then as soon as you do that, you're out of the rat race. And so I had a lot of these properties and I wasn't selling any of them. I was getting two hundred a month. And for me to get out of the rat race took a lot longer than if I had traded it, got a chunk of money and then bought bigger deals. So that's what we've learned is starting to trade up. And so like recently, I posted a video on my YouTube channel aboutthis ten thirty one exchange that we did.

Shiloh: So we just go over the numbers real quick. We bought a property in Casa Grande for fifty-seven thousand dollars. It was a two bedroom actually. It was a one bedroom, one bath, twelve hundred square foot home. When you think of that square footage and. You think of one bedroom, one bath. What do you think of an apartment? OK. Yes, but also there's got to be room in there to add another bedroom. Sure. And so we added another bedroom. Now, we made it a two one. We were then able to rent it out for like seven didn't I think was about eight hundred dollars a month. And then it continued to appreciate and then appreciated. Now we're able to sell it for like two thirty-eight, I think thirty five to thirty eight. We sold it. And then rather than having the money come to us we 1031 exchange like fifty thousand dollars into buying this small eight-unit mobile home park that was right close to another mobile home park that we had and we got that on. It was a seller finance deal where they were going to hold two hundred and thirty. We bought it for two seventy-five so that fifty thousand went to that property. Right. And then we now have this property that now is going to be cash flow. I think it's probably going to cash like twelve hundred to fifteen hundred dollars, this little mobile home park. Right. So we went from making two hundred dollars to making fifteen hundred dollars and then we were able to get a second lender in on that deal for fifty thousand and I was able to pull out my fifty thousand and, and that deals probably to be worth about for about four fifty.

Shiloh: So I mean that's the power of trading up. So it's neat as these lease options start to come up in 2022. So next year is going to be a huge year for us because we have so many of these lease options come up where we are going to be able to sell them or we're going or they exercise them or we trade them up and if we sell them or we just lease auction them again at a higher amount. So there's so forgive the redundancy, but with lease auctions, there's so many options. Yeah, you know what I mean. Just fantastic.

Joe: This is really good. It reminds me of a book that I read when I was first getting started. I have it right over there. It's called Buy Low Rent Smart Sell High. It's a great book written in twenty-four or five. Twenty-six by low rent smart sell high. You guys can get it on Amazon. You should really check it out. And it's all about this subject here. We're getting some good questions from people in here. Do you mind if I ask you real quick, Daniel, saying what is the one percent closing cost? Where is the one percent closing costs going to go into the title company? That's just closing costs you're paying?

Shiloh: Yeah. So like, for instance, when you close on a property, there's going to be some sometimes there's some taxes or there's some other things that need to be paid. And so the seller or the buyer pays a lot of the closing costs. But there's still just a little bit that the that's usually the seller's responsibility to make sure that they get paid so well.

Joe: There's also guys I'm going to post here in the comments. I'm not sure if you're going to see it, guys, if you are listening to this later, if you just got a Bigger pockets and do a search for better than BRRRR introducing the BRRRRLO method or just look up Shiloh Lundahl articles here, you'll see this article and you do a real good job here of breaking down into a table. All the numbers. One column is traditional BRRRR strategy. In the next column is adding the lease option on their right, your real good job. And you show here your total profit after three years minus original investment is much higher using a lease option in the end. But it also is your internal rate of return. Right, which is just massive. Right.

Shiloh: And that's really what it is. So like everybody knows cash on cash return is how much should I put in, how much do I get out? What's my rate? Is it a 12 percent or 15 percent return? When you take the IRR, where you add up all of your return from the property and then you divide it by the number of years, that's really the important number. And what we usually get, our IRR is usually well over one hundred percent, sometimes in the thousands.

Joe: Oh yeah. I get a question here from Bill. How long is your typical lease option period? Do you have a credit repair program? What percentage of your tenants are able to exercise the option?

Shiloh: Those are all awesome questions. So let me answer each of those. How long is our typical lease option? We started with five years and then we went to four and then we went to three. The reason we start with five is because we were getting commercial loans that were five years long. We wanted to make sure that the option period ended before our loan was up for renewal. OK, so that's what we started with five. But then we lowered it because we wanted twenty, twenty-two to have all of these coming up about the same time so we could trade them into larger deals, maybe apartment complexes or other things like that. And now we just customarily have them for about three years. And so that's kind of what we kind of settled on. And then do we have a credit repair program? We don't have a program for that. But what we do what we do is we will anybody that says, hey, I want to start working towards buying the property, we will then connect them with one of the banks that we use with a banker. And then the banker says, this is what you need and then starts working with them over the next six months to help them get to the place where they can buy the property, as I said. So it's a it's a period of time because they need to get their credit. Where it needs to be. They have to do is start working with the banker saying, hey, I'm looking to buy this house, what do I need?

Shiloh: And then just do the things that the banker tells them to do. So. And then the next one, what percentage of your tenant's. Exercise less options, so I think historically they'll say about 15 percent exercise less options. I think the hours are going to be higher for a couple of reasons. One is because the remarks appreciated so much that so many people are going to be able to walk into so much more equity that I think that the drive to exercise it is just going to be greater. And then two, we've worked with good tenants, good screening so that we have good tenants in there. And I think that there we don't put a tenant in there that we think is not going to be able to buy the property. So all of our tenants need to make at least three times the purchase price. And that's about when you go to get theloan, you need to show, hey, I earn enough to be able to buy this property.

Joe: Or the rent needs to be their income needs to be three times the rent.

Shiloh: Yes, yes. Yeah. I'm sorry. Yeah, that's what I meant to say. And when they go to get the loan, they're going to need to qualify that way anyway. So we bring people in that if they can work through repairing the credit, they will likely be able to buy the property. So my guess is that ours is probably going to be upwards of twenty five, maybe a little bit higher percent is my guess.

Joe: So tell me again the type of house that you typically do this with, what price range, what class or whatever you want to call?

Shiloh: I really like the B minus to the C properties with lease options for several reasons, but that's what I like the most. And the reason being or some of the reasons are the higher price points. The cash flow tends to be lower. And if something does go wrong and maybe you didn't see that there was an issue with the roof, I'm going to have to come in and take care of that. It's probably going to be much more than if it's on a little bit cheaper of a property. OK, now there might be more appreciation, but if we lock in the appreciation price already, then we don't get to enjoy all of the extra appreciation that happens. Oh, yeah, I like working with people that are just really grateful to get a property. So somebody that's been wanting to buy, but they have had a hard time being able to buy or their credit's not in a good, good enough place or they just started their own business and the bank won't lend them money. I like working with those people because they go in their working class and they'll look at a property and they're willing to accept the little nuances with the property. That's not perfect.

Shiloh:  And so a lot of our properties are not perfect. Very rarely do we have a property that's fully rehabbed. Right. And we market most of our properties as either light fixtures or fixer uppers so that when they come in, they have the mindset of, oh, I need to go in and put my own personal touch to this. I might need to paint here. I might need to put in new floors or whatever, and we'll allow somebody to come in and they can put in the floors that they want to put in. And then if they don't exercise the option, we just say, hey, keep your receipt on the upgrade that you did. As long as you got it OK with us, we'll pay you back here. The cost of the materials that you put in, not the labor, but the materials will will replace that so they can go they can customize the house. And so that's what we're doing. And I think I might have even forgot the question. I think I was going off all over the place with that one.

Joe: Sorry, but we're talking about the class or the style.

Shiloh: Yeah. So the class. I really like the C, the the C to the B minus because I think the price points are better there for cash flow and you get a tenant that usually is less entitled. I have an issue with entitlements. That's a good point. We've only had one tenant that was like super entitled, sort of two hundred one tenant actually I would say to now two out of two hundred to one out of one hundred. I think that's pretty good. Right, yeah. I have an issue with entitled Entitlement and so I like people that look into it. They say, hey, there's this thing wrong with it, nothing wrong, but I can go and I can fix those things. Yeah, that's awesome. Fix those things. Because that's what you would do if it was your property, you wouldn't go to the bank and say, hey, look, I know you gave me a loan for the property, but, you know, somebody came in through a window. It threw a rock at the window, appropriately commonplace. I'm going to say no. It should probably replace.

Joe: A lot of these buyers. They want to do that work themselves. They want to pick their own carpet. They want to pick their own color, their own flooring, their own cabinets and countertops.

Shiloh:  And a lot of them have like a brother or a cousin that does flooring in Arizona. It seems like everybody has a family member that does something with the house. Oh, yeah. So they come in and they'll help him out for a weekend. And hey, you got cool floors, you know, and then they're happy and things like that. Right.

Joe: Just a couple more questions here. This is from Bill. You work with the mortgage broker to make sure the tenants are capable of obtaining financing. So you work with the same mortgage broker that's financing these houses for you, right?

Shiloh: So, yes, we've done that before. But because bank policies change and stuff, I work with a lot of different bankers because, you know, one year one banker helps me a time and then something changes with the bank. And now, like, I'm not going to bring people to you anymore. I have to go to another bank. So the answer is yes. We don't do that when we get someone in there if at the beginning. But as soon as they've been in there for a while and they reach out and say, hey, I want to work towards buying the property, then we say, great, this here's two or three bankers you can reach out to and start working with them on getting loan a loan for the property.

Joe: Yeah, very good. One final question here. I guess the big advantage to selling a lease option rather than a wrap is that you can use the depreciation. Is that the case? Did you understand that?

Shiloh: I didn't understand. All right, so what I would say so basically the question is, will we see it over time? The advantage of doing the lease option rather than wrap around the lease option? Because when it comes to doing a wrap mortgage, when you close on that mortgage, that buyer will there's a couple of reasons that buyer now has the mortgage around your mortgage. And if they stop paying, you need to foreclose on them. And that's a process. And then if you foreclose on them, then you need to evict them. The whole thing is a process. We did that once and then we decided, I don't like this so much. Let's just go ahead and do the lease options. They're easier if they stop paying. They they're more likely to just move because they haven't closed on it and we can evict them. Now, most of our lease option people do pay. Very rarely do does one stop paying rent. And so and even in the the whole eviction moratorium and the pandemic, the majority of our of our lease option people were paying, there was only one that stopped paying. And she actually had issues well before the pandemic. And then just use the pandemic as an opportunity for her to stay in the property for an extra 11 months, which is frustrating. So that's why we do it, is because it's a much more difficult process of getting them out of the property. And so that's basically.

Joe: Now the depreciation, though. Do you lose the depreciation when you're selling it on a ramp?

Shiloh: That's a good question. I have to ask my accountant, my accountant is the one that takes care of all of those questions.

Joe: And when you look at your and on this article in particular in bigger pockets and you're looking at your numbers, are you counting in depreciation, depreciation in here as well?

Shiloh: No, I don't think those numbers are accounting for depreciation, because also, from what I understand is when you sell the property, you have to do the…

Joe: You have to recapture it.

Shiloh: So unless you 1031 exchange it. And so that's why I didn't count it there is because you might get it, because you might have to give it back.

Joe: All right. Very cool. This has been awesome. Shyla, I sure appreciate having you on the show. It's been way longer than I expected, so I apologize for holding you so long, but it's been really good. How can people get a hold of you if they have questions? Maybe they want to partner with you on some deals or they want to talk to you about what you do and what you do. What's the best way to do?

Shiloh: A couple of ways they can get a hold of me. You can connect with me on Bigger Pockets. That's one way you can have a website, Blue Equities dot com. And I explained my coaching on that website. So you got to blue equities, dot com coaching, talk about their

Joe: Blue equities dotcom

Shiloh: Yep. And then also I'm trying to build my YouTube channel so I can beat my buddy in the first one to a thousand subscribers because whoever wins is going to the company will then pay for them and their family to go on a vacation up to six thousand dollars.

Joe: Where are you guys at? How many subscribers do you both have?

Shiloh: He has two hundred and I have one hundred forty three, OK, as of this morning. So but I you know, it's so interesting with YouTube and everything, you think that you're going to create this awesome video that's going to go awesome and you put it out there and then it's a dud and then you create another video that was just like, OK, and it does really well. So, you know, all of those things you never really know. But I put a lot of effort into this like Monopoly video that I did recently, and it just didn't do as well as I thought. So it really kind of killed my motivation. So I posted in like a week or so. I'm going to get back to that. But yeah, that's another way that you can connect with me is through YouTube. I will probably respond more there, more quickly. Go ahead.

Joe: It looks like your channel is called Improve Channel on Real Estate Investing, is that right? Yes. Nice. Well, I just subscribed. I have one hundred and forty-four.

Shiloh: OK, and then if you promise to not subscribe to my buddy until I get a thousand subscribers, then you can subscribe to his.

Joe: All right. Bill is going to subscribe to you as well. And this is Kenneth.All right. Very good. So guys, go check out just do a search for Shiloh Lundahlin the YouTube world and you'll see his channel. And it's called Improve Channel on Real Estate Investing. Looks like you got some pictures of some of the little houses.

Shiloh: Tiny houses.

Joe: Tiny houses. Thank you.

Shiloh: So, yeah, that's one that's one thing that we're really excited about is building this tiny house community down in Florence, Arizona. We didn't get to that, but that's awesome. And then also the Costa Rican house that we're going to buy. We didn't talk about that, but that's super cool.

Joe: All right. So thank you, Shiloh, for being on the show. Appreciate you very much. Best of luck to you and best of luck to your family and your and your business ventures.

Shiloh: So we'll see you guys later. Yeah. Thanks. Thanks so much for letting me be on your show and for this talk. It was awesome. Appreciate it.

Joe: Look, you got four more subscribers here. Here's the deal. And here's Daniel. I subscribe to dutiful. Thanks, guys. Take care everybody.

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