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Lou Brown is a highly influential figure in the real estate investing industry, as well as founding president of the National Real Estate Investors Association. Since dropping out of college and buying his first house at 18, Lou has been determined to succeed as a real estate investor through economic shifts and crashes by “becoming the bank.”

In this podcast, Lou explains how, in 2009, following the recession, he decided he needed to change the way he did business if he wanted to survive the tumultuous economy. He decided the seller should become the bank and maintain control over their entire future and that they should go out and finding the buyers first and resource a property for them. This way, he wouldn’t have to rely on banks or qualify for loans and his finances would remain much more stable, and he recommends that you become your own bank as well.

I ask Lou a range of questions about best practices for financing, wholesaling REO properties, subject to’s, trusts, and more, and he provides insightful answers as a veteran of the industry, having been a real estate investor for over 40 years and dealing with all of these issues. Lou talks about his certified affordable housing initiative, which gives people from all different backgrounds the opportunity to become a Certified Affordable Housing Provider through his training workshop. Lou discusses the weight of that title and the doors it will open for you in the real estate industry.

If you want to become a Certified Affordable Housing Provider and take your business to the next level or take control of your life, time, and money, Lou Brown’s training courses will bring countless benefits to your real estate career. He is also giving away his new book for free! Doing Good While Doing Well details how to help families achieve their homeownership dreams while simultaneously building independence and wealth.

Watch and Learn:




Listen and learn:

What’s inside:

  • Lou recounts his journey in the real estate industry, from buying his first house at 18 to becoming the founding president of the National Real Estate Investors Association and a successful and influential real estate investor
  • Lou and I discuss best practices for financing, wholesaling REO properties, subject to’s, trusts, and more.
  • I ask Lou about his certified affordable housing initiative and how you can have the opportunity to become a Certified Affordable Housing Provider.

Mentioned in this episode:

Transcription:

Download episode transcript in PDF format here…

Joe: Welcome. This is the real estate investing mastery podcast. All right. Welcome everybody. This is Joe McCall. This is the Real Estate Investing Mastery podcast. I'm really glad you're here and this, yeah, you're in for a treat because we've got the one and only the ultimate Street Smart investor, Lou Brown. Yeah, baby.

Lou: Yeah, baby. How you doing, Joe?

Joe: Good. Guys, Lou is a legend and I got him here on the podcast, so glad that you're here Lou, but let me just do a couple of housecleaning things real quick here guys. This is the real estate investing mastery podcast, and so if you're listening to this on iTunes, please subscribe to the show, leave a review, let us know what you think of the show and subscribe, leave a review, really appreciate it. I was hanging out with Lou a couple of days ago in Florida and he was telling me some amazing stories of people that are multi, multi, multimillionaires doing deals that have never given him a testimonial, never even said hello to him, Lou didn't even know they existed, and they're like one of the biggest house buyers in the entire country and they come to Lou. How long ago was this last guy, Lou?

Lou: Oh, this was this year. I was at an event, in fact it was a trade show and this guy walks up to me and I'm thinking, okay, he wants to talk to the vendor that I'm talking to now. He wanted to talk to me and he said, ‘Hey Lou, I just want to let you know, my name's Steven Seal, I'm from Florida,' he says, ‘I want to let you know because of your system, because of your Whole Enchilada system, I bought it 20 years ago,' he said, ‘we're now the 13th largest owner of single family homes in the United States and we own 11,000 single family or, excuse me, and pieces of land lots and we've done it all with your system, with your trust, with your owner, financing, with your lease options. I said, yeah, baby. That's good stuff. Unfortunately, I hadn't seen him for 20 years, but that was uh, that was a great story. And it's exciting, you know, just to know that people can take the ball and run with it, you know, people can make things happen in their life. It's just amazing how quickly things can occur. He said he was a young guy, he said his wife didn't want to hear that he had spent any money on real estate investing and training tools and things like that. And he said he sure is glad that he did it. And you know, that just excites me when we see people just grow that quickly and really make things happen. That's, that's pretty much what I live for.

Joe: Oh man. And if you don't know who Lou is, okay. I'm going to ask him to introduce himself, tell us a little bit about him. And Lou's been in the business a long, long, long time. And there's a reason why he calls his program Street Smart; it's because Lou has the street smarts. And not only has he done a ton of deals, he's coached tens of thousands of people to do deals as well. And so it's a real honor and a privilege to have you here, Lou. I appreciate it. We were hanging out a week or two weeks ago in Tampa. I've seen you around before, but I've never really had a chance to talk to you. And those courses right there above your head have changed countless, countless lives. Mine is one of them. Yes. I had one of your courses. I don't remember which one. I, it must have been The Whole Enchilada where you were talking about trusts and when I was first getting started, you made it such uh, this complicated thing down to simple, easy to understand, your paperwork on trusts was amazing, and so thanks.

Lou: Oh, thank you. Thank you for saying that, Joe. I really appreciate it. I'm just thrilled to be part of your audience and your team and just to spend some time with you today because it's always exciting. I hear so many good things about you and your podcast and just a lot of people they get turned on and get a lot of great information from you, so I appreciate what you do as well.

Joe: Thank you. Alright, so can we rewind way back? Lou, when did you get started in real estate?

Lou: Well, if you go all the way back, I bought my first house when I was 18 years old. I was able to put it under contract and then right after my birthday I closed on it. So officially I owned it at 19 years old, but it's the first house I ever lived in. I was raised by my mom. She was a war bride. She came over on the Queen Mary. She had met her American trooper husband. Everything was going to be fantastic. Then she got here to America and she found out he was an alcoholic and he was an abuser and she was strong enough to get out of that relationship and say, you know what? You? Goodbye. So she was here by herself and then she met my father, I jokingly say her second mistake, also. So it ended up just being the two of us. And you imagine being in this country, she was from Scotland, her whole family was over there, nobody was over here, she didn't have money. Back then you had to pay for international telephone calls and it was very expensive. So she wasn't able to really even connect. I mean, it was letters back and forth to Edinburgh, Scotland and pretty much she was here by herself. And it was just a struggle, we didn't have any money at all. I make a joke about our, our dining table was a Samsonite card table that we bought with S and H green stamps from the S and H green stamps store, and that's how we, our apartment, so I've definitely lived both sides of the equation of, from not having money to having money, and I just like to say that rich is better. Okay. And so I was able to buy my first house because I had a prod. It was one of her friends, I called her Aunt Mabel, and what Aunt Mabel did was she had bought the duplex that she lived in. I was eight years old, and she essentially was telling me that the people on the other side were paying enough money to cover the mortgage on a property, which meant that she was living for free, and that's when I learned about parallel universes. I learned out, learned that we were hiding out from the rent man and she was living for free. And I said, man, I got to learn what she's up to. But of course I'm eight years old, I don't know what's, what's going on. And then she told me she bought the duplex a year later, next door, and the people on one side were paying enough money to cover the mortgage and the other money was theirs, and they had a great lifestyle, went to the steak house every night, went on cruises. They just had a great life, and I realized that they were getting free using real estate. And so that was an eye opener. And then she told me at 18 years old, she says, ‘You need to buy a house.' And I'm thinking, wow, Aunt Mabel, you go to banks and qualify for loans. How in the world could I buy a house? But she turned me onto her friend, Realtor Sue, Realtor Sue took me around, showed me properties, and I was able to put a property under contract by taking over the existing financing on the property.

Joe: What year was this, Lou?

Lou: Yeah baby. That was, what year was that? That was 1976, uh first property. And um, and uh it was just fantastic so, uh oh, you found The Whole Enchilada?

Joe: No this is, this is something different, I'm sure he's a friend of yours, Robert Allen.

Lou: Of course. Yeah, absolutely

Joe: Right? ‘Nothing Down.'

Lou: ‘Nothing Down,' Robert Allen. Yes.

Joe: ‘Only revised for the 80's'.

Lou: That's right. I own that book, Joe.

Joe: The new revised edition. So you were doing this before Robert Allen.

Lou: Yeah baby. I was able to take over the existing financing. It was an awesome thing. I didn't have to go to the bank. I didn't have to qualify for a loan. And that was really kind of my first lesson in real estate that I realized that I could buy a home at 18 years old. I could do it by taking over existing financing. It didn't matter what my credit looked like. Didn't matter how much money I had in the bank, didn't have to qualify for a loan, I didn't have to do any of the traditional things in real estate. And that was kind of an ‘aha' moment for me that pretty much geared my entire existence in real estate because I realized just because says that's the way it is, doesn't mean that's the way it is. And so I learned some unique twists on how to do our business. And as a result, fast forward over 40 years, I've never been to the bank. I've never qualified for a loan on a single family or a small multifamily property because I learned something amazing. Everybody take a note on this, the seller is the bank, the seller is the bank. And when you learn what to say and how to say it, Joe, it's just amazing. People will do amazing things. When you've got the magic words and you've got the right attitude and you've got the attitude of support and help and service for the other person, it's amazing what they're willing to do to help you.

Joe: That's really good. So, you know, you started doing deals when you're 18. What was after that? What was your journey kind of into becoming a full time real estate investor?

Lou: You know, it's an interesting thing. So I was working, I got a job and of course I went to college a whole year and uh, I was, it was a scholarship that I got to go to central Piedmont community college in Charlotte, North Carolina. And through, I got the scholarship through junior achievement. It was awesome, but I realized when I was in school that they weren't teaching me anything that I could really apply to life, you know? And since I'd had a life of hard knocks already, I really didn't want to waste any time. So I had to break the news to my mom and all of her friends and just say, you know what? I think I'm gonna sit out a year and see what I could do and then if that doesn't work out, I'm going to go back. And I, I'll say fortunately I never went back and I just got into this game early and realized, you know, working for the other guy wasn't such a cool gig and that if I instead found a way to work for myself, I would be a lot more wealthy and successful and free. And so that's pretty much how I geared my life. I was working for another company, they moved me from Charlotte, North Carolina to Atlanta, Georgia. And what happened was they said, we're going to bribe you.' Basically, they didn't say those words, but they said, ‘if you sell your house in Charlotte, we're going to pay the closing costs. And if you buy another house in Atlanta, we're going to pay the closing costs and we're going to move you and we're going to put things on the truck and, and ship it down there and pay for everything and give you a company car and all expenses.' I said, ‘yeah, baby count me in.' And so that's exactly what happened. I'd sold that house in Charlotte and I moved, and for 37% profit by the way, in just less than two years. And so I realized, you know, that was a good thing. That was a good thing, but I was working for the man. And so I had to do what they told me to do and, but the bribe was that they would pay my closing costs. Well, I couldn't turn that down. That was worth thousands of dollars. So sure enough, I went to Atlanta. I told the real estate agent, ‘Hey, I want to buy a house. Just like I bought the last house, taking over the existing financing on the property, go for it. And when I come down on the weekend, I want you to show me a whole bunch of houses that are just like that.' Sure enough, she did. And I was able to buy that second home. And that's where I married my wife and raised a couple of kids for a couple of years anyway. And then we bought our first duplex, we got that from Aunt Mabel, and I did that by taking over the existing financing, and back then, Joe, it was 1980. I don't know if you remember what was happening in 1980, but interest rates were 21%. So 21% interest. Just imagine, everybody on here, just imagine the interest rates were 21% in this country, this country right here. Thank you, Jimmy Carter. And so what happened was I was able to get the seller to carry back financing. So that's how I got into sellers.

Joe: What was the seller's interest rate?

Lou: Well, a seller's interest rate was 12 and a half percent, but that was a bargain. And, and the, the thing was that my cashflow on that one property was $6 and 67 cents per month. And you say, why in the world would anybody buy something with such a low interest rate? I mean, such a low cashflow? Well the answer is because that was at the time that Ronald Reagan came into power and introduced a tax bill where you could double the depreciation on a property. So because I was working for another company and I was getting such great tax benefits, the, the net gain on that deal was significant because of the tax benefits. And back then the taxes were rather high. And so it was no brainer really for me to buy some real estate, get the depreciation, get the double depreciation on the property and get the seller to carry back financing and take over the seller's existing loan. And sure enough that worked out great. And then as time progressed I was able to build a business and left my job and went and actually bought a business. Guess what? With owner financing, I got the owner carry back financing on the business, on the business inventory and then was able to parlay that into my real estate career and went full time in 1983.

Joe: Full time. 1983.

Lou: Yeah, baby.

Joe: So, was your, how were you making the money to live on? Was it from the cashflow? Was it from flipping deals? What was-?

Lou: You know, that's a great question because of the fact that I had built this business, I was able to sell that business on owner financing for a two-year note, got an income stream on a monthly basis. I used that as my cashflow so I could get my real estate business going and I did everything I could do, I went to every seminar, I bought every book. I mean, I was into the education side of it and learned as much as I could. And then I started really doing it as a business. And it, just been fantastic ever since.

Joe: So even back then, what was the education industry like in the 80s?

Lou: Well, it was Robert Allen, ‘Nothing Down.' RAND, you know, they started the RAND groups around the country and they've since evolved into RIAS, real estate investor associations. But he was the one that really kind of started it even before him was Albert Lowery and started the Lowery Nickerson groups and then they were kind of competitors of RAND and then I think Lowery turned them over to Robert Allen. And so that was kind of my foundation and-

Joe: When did Carlton Sheets come onto the scene?

Lou: He was definitely around at that time for sure. And in fact I know Carlton, he's a really great guy and he, in fact, we led a bus tour uh back in the early nineties in, in Las Vegas and had a good time with that,

Joe: By the way, when we're offline. Would you mind putting me in touch with Carlton Sheets? I'd love to get him on the podcast. You think he'd be open to that?

Lou: Absolutely.

Joe: Yeah baby.

Lou: It's contagious. Don't worry. People don't forget it.

Joe: All right. So, Lou you started going full time in the mid 80s, doing real estate. Did you just keep on buying homes? Is that your strategy?

Lou: Joe? I, I, I'm that kinda guy that really, I look at an asset and if that asset can produce income, why sell it? And so I've been a buyer and holder of real estate since the early, early days and still believe in it to this day. You know, when I look at my ROIs, when I compare it to apartment buildings, when I compare it to commercial properties, when I compare it to any other type of investment out there, I'm just shocked and amazed with the amount of control that we have over our properties and the usability of it, the transferability of it, the access to the marketplace, the demand. I mean, there's just, I can't find a better investment than single family and small multifamily properties.

Joe: Well, I agree. It's not changed in the last 40 years has it?

Lou: Nope. It's only gotten better, frankly, it's only gotten better.

Joe: It's not going to change in the next 40 years either.

Lou: Everybody’s gotta have a place to live.

Joe: You know what I heard one time?

Lou: That's a great business to be in.

Joe: If you look at the population trend growth in the United States, I don't remember where I heard this. I wish I could verify it. Somebody verify it for me. It was something like along the lines of in the U.S. The population in the United States is going to double in the next 50 years. Yup. You're talking in 19 in 2070. Is that right? Wow.

Lou: Yeah. I can give you some statistics, statistics to support that just by going backwards and seeing how it's doubled over the last decades. And in fact we have 10,800 people born every day and only 7,600 die. So that's a net gain of 3,600 people every single day just in births. And those are the legal ones. So you throw in the illegal and you're throwing the 1 million that we add to our population every year legally, that go through normal avenues of, of access to the United States. So we got a million extra people every year. Plus we got 3,600 people a day that are going to ripen, you know, in the next 20-30 years and they're gonna want housing. And so it's just a snowball that is not going to stop rolling for sure.

Joe: People always need a roof over their heads. Right. Okay. So Lou, come into the nineties, you know, you saw the dot-com bubble go up. Great time to buy houses and things kind of had a bump, you know, in the late nineties, early two thousands, right?

Lou: Oh yeah. Well if we go in the 80s, you know, that was back in the days of the RTC, Resolution Trust Corporation. That's when, when they imploded the savings and loan industry on purpose. And when they did that, it created a huge amount of assets. It was all taken into a corporation that is run by the federal government called the Resolution Trust Corporation. And it was very, very good to me. I will tell you, it was so we were able to go in where we were able to buy notes. We were able to buy homes at pennies on the dollar. It was great. I still have some of those properties to this day. And that was a great time. And then so one thing you want to know about real estate is it is cyclical, right? It comes and goes. Why does it come and go? It's because of household formations, it's because of generations. And as the generations produce babies, they produce these bubbles of demand and supply, lack of supply, higher demand. And so these bubbles are always going to happen. I'm on, I'm going into my fifth real estate cycle now. So I've seen it come and go. I know exactly what it looks like. And it's fun. It's neat. It's neat in that you can buy equities for pennies on the dollar. And it's neat in that you can make a lot of cashflow off of those equities forever. So I kind of looked at that as I was building my business and I said, you know, what can I do to even things out? What can I do? No matter what the economy does, no matter how challenging it gets, what is it that I can do with my business that shifts me into a different direction, that handles a lot of the issues that we do face as real estate investors and that's when I happened upon the concept of really deep diving into being the bank for my customers. So I say the seller is the bank. I really mean that in two ways. The seller's the bank when you're buying and the seller of the bank's you when you are selling and you learn that you are much better off when you are in the finance business than the real estate business. So the real estate business to me is real estate is just the commodity to get to the financing side of things. And when I can actually provide financing for my customers, well there's a reason that those banks have those tall buildings and marble floors and drive-thru windows and all those employees. They are using the miracle of compounding as Ben Franklin says.

Joe: So, if you had a single-family home, $100,000 single family home in the Midwest, would you rather rent it out or sell it with owner financing for 30 years?

Lou: Oh, 40 years and you know, we do, we do 40-year financing, I would much rather sell it. Well, first of all, think about the transference that's just occurred. You know, people kind of, I'd say enslave themselves into a thing called landlording. And I tried that. I've been there and done that. I'm a veteran of over a thousand Section 8 contracts, for example. So I know what landlording looks like. And I realized that if I could just be a conduit, if I could provide a commodity to the public, and if I could be a conduit for that, and if I could finance it for them, I would be far better off. And they would too, by the way, in having for themselves and their family a place that they can raise their kids and nobody's breathing down their neck about the dog running around in the backyard or anything like that. And I realized, you know, I never call my mortgage company about my water heater. Never call them about the roof on the house, never call them about anything that's the toilet being stuffed up. That's not the mortgage company's problem. They'd say, ‘that sounds like a personal problem to me' and slam down the phone and I said, yeah baby, that sounds like a plan. How do I get on that side of the game? So sure enough, I started gearing my whole business towards helping people to end up with home ownership. We call it the path to home ownership and in fact I wrote a book, I'll show it to you: ‘Never Pay Rent Again: The Path to Home Ownership.' And the idea was really to help people to learn just how easy it is to get home ownership when you've got someone like myself in your local community that will actually be the bank for you instead of having to qualify for loans that are traditional bank.

Joe: Even when, and I get this question a lot, sometimes Lou, like even when financing is easy, like it was back before the last crash. Even when financing is easy (if you could fog a mirror, you could get a financing loan), why do, why does they, what can we as investors bring to the table when it is so easy to get financing?

Lou: You mean from the bank? From a traditional lender.

Joe: Yeah, from a traditional lender.

Lou: Well my advice is of course, like I said, street smart, the street-smart way to do things is don't go to the bank and don't qualify for loans. Learn what to say and how to say it to get sellers to be the bank for you. Take over their existing financing. If they have equity, have them carry back that financing and don't go to the bank. First of all, banks are fickle, but when times get bad or when they even think times are going to be bad, they can call loans. Many investors end up with things called blanket loans where they, they blanket all over all of your assets and then they can just merely look, wake up one day and say, you know what? We feel that we're insolvent today. We feel that your assets are not worth what we have them on the books for, so therefore pay off your loan. And I've seen people over the decades lose their entire life's work over that nonsense. So my advice, Joe, is stay out of the banks. Do not trust them. They are not trustworthy. They merge, they shift, they change. Whoever you're talking to might not be there next week. Never mind. Just don't do it.

Joe: Become the bank.

Lou: Become the bank and now you have control over your entire future.

Joe: That's really good. Let's talk about the last bubble real quick. In 2006, started kind of in 2008. What were you doing at that time and what got you through it?

Lou: You know, I used to do a lot of renovations. Big, big, big, they used to call me Mr. Kirkwood here in Atlanta because I did 26 houses in one neighborhood at one time. And so, so I used to just go from property to property cause my kids were actually in a school not far from there. And so I would drop them off in the morning and go from property to property and pick them up in the afternoon and go home. But so, so I kind of filled my time by becoming Mr. Kirkwood. And, and the funny thing was that I was doing all these renovations, of course that's when you used to buy, fix up, and sell. And that was kind of my, in addition to the buy and hold philosophy, I was making some really good money, really gentrifying neighborhoods, taking older homes, restoring them, making them spectacular columns and granite and beautiful bathrooms and the whole nine. And then once it was restored, selling it and taking that cash, parlaying it into other properties and just kept the ball rolling that way. But just like we were talking about cycles before, it's like musical chairs. And so basically you might be left standing and right there at the end of 2008, that's exactly what happened to me. I had 10 properties. I bought them right, I bought them cheap, I fixed them up beautifully. They were on the market. People were raising their hand, they were loving it. I had bought them at auction. They were terrific deals and they were signing contracts and all of a sudden the bank said, ‘no, no, no, no, no, no, no, no.' And so all of those contracts fell through. I was not able to get them sold. I started, you know, thinking, wow, what is it about the economy? You know, here we go. We're going another cycle. Now what could I have done differently? And that's when in January of 2009, I made a decision and I said, you know, I'm going to change the entire way that I do my business. I realized that my problems in real estate have never come from the buying side. I was always able to buy houses, right, buy them cheap, buy them with seller financing, zero interest, take over existing loans. There was so many ways I could buy properties, that was not my problem. My problem was always the selling side when I was dependent upon the marketplace and dependent upon people coming through and qualifying for loans and all the issues with credit and everything else. And I said, you know, what if I shifted and changed everything I'm doing and what if I went and found my buyers first? What if I went ahead and got them qualified first. I found out exactly what their credit looked like, how much down payment they have, how much they can afford on a monthly basis, what number of bedrooms they want, what number of bathrooms they want, where do they want to live, and I actually go and resource a property for them. And then aha, aha, aha! So, so then I'm designing an entire marketing campaign around attracting those kinds of people. And then when they come into our world, we're able to actually cipher them. You know, we're able to actually identify who they are and what they're up to and where they're at in their life, and then determine exactly what would work for them. And then we can go resource a property for them. I can owner finance it for them, I can buy it right and buy it cheap and take over existing financing. Then I can be the bank for them on the sales side. I can make a spread in between. They can be happy, they can raise their kids there. They can choose the paint colors, they can choose the carpet colors, they can fix up the house at their leisure. I can give them credit towards their down payment for doing some or all of the repairs. And so that was the big shift, Joe, that I, I came to when I came to that, that timeframe. It's funny that you had mentioned that.

Joe: Yeah. So these were deals that you would stay in the middle of, right? So you found a buyer who's got 10, 15 grand to put down on a house. You know, they need an area house in this area. You go find it to them and you wouldn't just wholesale it back to them, right? You would, you would find a way to buy It, turn it around, buy with owner financing or some kind of creative financing and you turn around and sell it to that end buyer, but stay in the middle, right?

Lou: Yeah, baby. That's exactly right. Be the bank for them. And that doesn't mean that they're ready today for that process. So that might mean they only had 1% for a move in fee or, or 3.7-5% or an option fee, or they might have 10%, now they've moved into what are called the owner finance or in-house financing arena. So then when they get into the in-house financing arena, that's when we provide them with what we call an agreement for deed. And we give them the agreement to get the deed at some later date when they pay us off. So they, during that process, they can actually get qualified, they can improve their credit to the point that they can now qualify for a traditional loan from a bank. And that's when you get your, your chunks of money. I call it bits and pieces and hunks and chunks. So that's when you get your chunk of money. So start out with bits and pieces and then we get hunks of money when they move in and we get chunks of money when they cash us out.

Joe: Okay. Can I go through and ask, ask you some of these questions here?

Lou: Absolutely.

Joe: And then I want to talk to you about trusts and I want to talk to you about certified, your certified affordable housing program, because this is really important. It's really needed in the industry. So I want to talk to you about that.

Lou: Thank you.

Joe: Thoughts on wholesaling REO properties? Have you ever done that? You wholesale the property that a bank owns?

Lou: Right. So it's definitely an opportunity and usually the reason you're not buying that is because you don't have the cash to buy that. I would say let me teach you how to go find that money because I've funded those kinds of deals with private funds where I don't have to wholesale the properties. I actually purchased those properties. Listen, you're paying pennies on the dollar. You're giving somebody like me a great opportunity. By the way, I love wholesalers. Put me on your wholesale list. I do buy from wholesalers throughout the month. We love wholesalers and I also beg wholesalers to come to my class and that's it. You don't know what you're giving away. I'll make 30, 40, 50, $100,000 on this one property. Let me show you how you could do that too.

Joe: So, what you're talking about right now is like if you're a wholesaler, you're, most wholesalers only have one offer to give to sellers, right? Cash. You're, you can teach them how to make different offers and maybe buy a deal that the seller wouldn't take your offer at 70 cents on the dollar. Right?

Lou: Amen. In fact, that's one of the things I tell wholesalers is, look, if you've got a deal that's, you know you're having troubles with, it's not working out. Let me know about that. I probably have a solution for that. I love bad titles. I love troubled properties. I love all that kind of stuff because there's such a narrow number of folks that actually know what to do with that stuff. It's a great opportunity. And so when, when I'm talking to a wholesaler, I say, listen, does that home have any existing financing on it? And they say, ‘Well gee, I don't know.' Well, they didn't know because they don't know. They don't know that that's actually an opportunity. And so I say, okay, well go back and find out if he's got any existing financing. So sure enough they'll come back and say, ‘yeah, it's got a loan.' How much is that loan? What's the interest rate? What's the term? What's the payment? How much longer do they have on the loan? ‘I don't know.' Well go back and find that out. So they come back to me and I'll say, okay, here's what I want you to do. And then have them go back to their seller and actually restructure that deal so that we can take over the existing financing on the property and I can actually pay the wholesaler more for that kind of property than I can on just an REO property. So yes, we do buy REO properties and yes, I would be willing to wholesale them if I had to.

Joe: Okay, good. When you buy a property, are you actually taking time to do it or are you doing a contract for deed with the seller?

Lou: So, when I'm taking title to a property, it always depends on what the existing financing is. Typically, if, you know, back in the day I would consider doing lease options and agreement for deed with a seller. Pretty much I don't have to anymore with my credibility with what we do and how we do it. The sellers are just willing to give me the deed to the property. I bought one this morning, subject to the existing loan. And it's just great. So once you learn the magic words, they will allow you to take over the existing financing on a property. And was that, did that cover your question?

Joe: Yes. Define ‘subject to,' it's when you buy a house subject to the existing mortgage, right?

Lou: Right. So if there's existing financing on the property, I want to know all about it. I want to know what the interest rate is, what the term is, what the payment is, because that's financing, that's money that I don't have to raise from another source. That's points that I don't have to pay to raise that money. That's payments that are baked into that deal that I can just take over and make those payments and I can start right away. I don't have to wait 30 days or 60 days until I qualify for a loan from a lender. Heck, I can just take over that existing financing right now. That's the way to go, baby.

Joe: Okay, good. So what's the hardest subject to you've ever done?

Lou: I bought an apartment complex one time and I'm that guy that doesn't want to qualify for loans with banks, right? And, and so the seller of the property had this wonderful $900,000 loan on the property. And I went, yeah, baby count me in. I wanted to take over those existing financing, but I was also aware that that was a commercial transaction and I knew that I couldn't get away with in a commercial deal what I can get away with in a single family deal. So I said, I've gotta be careful about this. So I, in my contract said that that's the way I was buying that property is taking over the existing financing. Well, of course we had to get lender approval. A lender says, ‘Oh yeah, we'll be glad to. We're going to underwrite you, we're going to qualify you, give us all your basic information, your underwear size, and your grandmother's maiden name and everything else. And of course, that's not me. So I said, what if, what if I just paid you? What if I just give you a point on this deal and then I'll take over the existing financing and you've got a wonderful property and it's got significant equity so you know that you're not going to get hurt on this deal. Well, sure enough, they agreed to do that. I would say that was my most difficult subject to. I've had some interesting other ones. I had one that bought from a paralegal that worked in a law firm here in Atlanta, the largest law firm in the South, and she worked on the 42nd story or whatever, and she was in the litigation department and I figured it was soon as I found that out when I'm sitting there going over my cost to sell worksheet and everything with her and, and, you know, making nice and finding out, oh, she works, oh, she works for a law firm. Oh, how interesting. Oh, she's a paralegal. Oh, how interesting. Wait til she hears how I want to buy her house. Well, not only did she sell me the house, she let me take over her first mortgage and her home equity line of credit, and she let me take the house with all the furniture in it that she didn't want. And she, let's see, she carried the loan for several months and made the payments until we got control of the property. So it was just a wonderful transaction. We made the deal in September and she moved in December. It worked out great. That was in fact, last year.

Joe: What can go wrong in a subject to? Drawbacks or things?

Lou: Well, absolutely one of the things that can go wrong is that the seller runs their mouth to the lender and tells them that they sold the house. The lender has the right in the due upon sale clause in the mortgage, they have the right to call that loan due and so that is a prerogative that they have. It doesn't say they will or shall call the loan due, it says they may call the loan due. Well that says they may not as well and so that's kind of the premise that I work under. However, you've got to warn yourself not to tell the lender or the lender can actually, and, in fact, is required under their pooling and servicing agreement to do that. I mean it's not their loan, they're typically servicing the loan for someone else so you go running your mouth, they run their mouth. All of a sudden they have to live up to the terms of the agreement that they've entered into and trigger that due upon sale clause. So that's one thing that can go wrong, Joe. And another thing that can go wrong as you don't make your payments. Now that's something that is sacrosanct, that's sacred, and it's absolutely what I teach. Listen, you don't make your own payment on your own house before you don't make that payment. I mean, it's a gift from God when somebody lets you take over their existing financing and they let you take, make the payments and the loan is remaining on their credit report. Listen, that is your responsibility. If you can't make those payments, something happens in your life, then you bring in another investor, you bring in somebody else who's gonna make sure that those payments are made no matter what. Or you get that house sold and you get that loan paid off because you face that person and you said you were going to make those payments, you better darn well make sure you do that.

Joe: So, a lot of people ask, okay, so what if the bank does call the loan due? And I want to ask you about trust because that helps prevent a lot of that.

Lou: Oh yeah, baby, trust. Well, first of all, you got to plan ahead. You got to plan for the possibility that that could happen. And one of the things you gotta do is when you purchase that property, it must absolutely, positively must be bought in trust. Now I teach a thing called land trusts and what happens with a land trust, I've been using land trusts since 1984 and been teaching them since 1986 and it's the best thing since sliced bread, man. It is awesome. It not only allows you to buy property subject to, but there's about 30 other benefits of trusts that you cannot get with any other entity, not a corporation, not an LLC, not a limited partnership. You can only get it with a trust. So I love, love, love trusts for not only what they can do to allow us to make money, but also the protection, the privacy, the probate avoidance. There's just so many good things that trusts bring to the table, but most people don't know about them. And the good news from a deal standpoint is that the lender is prohibited from calling the loan due when the property is placed in trust. When you do it the right way, with the right paperwork, following the appropriate steps, the lender cannot call the loan due.

Joe: Right. And so that's super important. So let's talk about trust some more. What is a trust and how does it work?

Lou: Okay, sure thing. So what a trust is, is a contract. It's a contract between the trustee and the beneficiary. So what happens is that in that contract, and it's such a great thing that it actually outlines who's responsible for what. So the trustee holds the deed to the property, they hold the title to the property, they hold the control over the property, the beneficiary is, gets all the benefits of the property. So tax benefits, income benefits, all those things come to the beneficiary. So it's a really great thing to be a beneficiary. And then what a trust does is actually holds the title to the property for the benefit of the beneficiary or the beneficiaries, if there's multiple beneficiaries and then their heirs. So inside the trust you can also outline who is going to be the beneficiary of the trust. Now not only a beneficiary of the trust, but the beneficiary of the beneficiary, so what we call successor beneficiaries. So the assets, the income, the tax benefits, everything come down to the beneficiary. Then below that, if that beneficiary is no longer living, then it immediately goes to their heirs. And there's no probate, there's no attorneys, there's no costs, there's no delay, there's no aggravation, breaking up families, all that nonsense that typically happens inside of the probate process can all be avoided just using trusts. So that's one of the very big reasons that every single person should get a trust. Every single person. If you own real estate, if you own vehicles, stocks, bonds, mutual funds, bank accounts, CDs, SeaDoos, mobile homes, motor homes, gun collections, coin collections, every single thing in your life can be in individual trusts. I also teach something called personal property trust. So if it is not real estate, it goes into a personal property trust. And then you've got certain paperwork that does the job to, number one, pass those assets as you require as you state inside the trust so that they go to the heirs that you want to see get each of those assets, and then the income and so on can just be passed down from generation to generation.

Joe: Yeah, that's good. So, Larry, I'm sorry, Lou, when you're doing these deals, do you get a local title, company, an attorney to help you with it, keep it above board? You know, setting up these trusts, as some people get really intimidated by that and you teach how to do it, but do you also recommend getting a local attorney or title company to help you with it?

Lou: Sure. it's important you start with a foundation. They're going to charge you a fortune if they're creating it from nothing. And so what I use is documents that I've gotten approved by the American Probate Council. Using the laws of all 50 states, we designed special documentation that does exactly that. And then I say, hey, now, and I've got a link for people to be able to get a legal shield through me. And, and then I have a legal shield attorney sign off on the documents for their state. So what happens is now they're able to, you know, have something in their file that says they're state compliant as well. You know, there's some unique things here and there. It's not a big deal. You've still got the foundation of things far cheaper to start with a foundation, have somebody review it than it is to actually have them create it from scratch. And one of the biggest issues, Joe, is that an attorney, they can tell you the legal side of things, but they don't always focus on the strategic side of things. And there's many, many benefits and strategies of privacy that can come from the use of trusts that attorneys don't know. They don't advise you on because maybe you didn't ask that question, but also because they just don't know themselves.

Joe: Yeah, so you know on your personal deals, do you still use a title company to help you close these?

Lou: Absolutely, so we close part of it in terms of the trust side of it and then the title company does the title search and then they do the HUD-1 closing statement and they do the seller acknowledgements and things like that. That's what the closing attorney does.

Joe: Nice. Okay, good. When you, you teach us all over the country, do you teach students to find a good investor-friendly title company or escrow company, whatever in there, right?

Lou: Absolutely. You've got to have a team member that understands what you're doing. Yeah. If they, if you don't have a good team member, see often when you're purchasing a property in the contract, they'll say it's to be closed at Dewey Cheatem and Howe law firm, whatever, and I say, that's nice. However, under RESPA, Real Estate Settlement Procedures Act, he who pays the closing costs is the one that gets to choose the closing attorney. So since we're typically paying the closing costs on the purchase side, we get to choose our attorney regardless of what the contract says. So that's coming back to your point of yes, you want a team member that understands what you're doing, understands how you do it. And then we put in our contracts when we're selling a property or purchasing a property, we have the leverage to do so. We always put our title company's name in that contract so that they know us, they like us, they love us, we're bringing them a lot of business, we're referring business to them, and so they're going to go the extra mile to make sure that that closes and closes the right way and then they're going to be there for you if there's a problem later. That's another key element to this whole thing. Lawyers make mistakes all the time. Title companies and their staff make mistakes all the time. Things don't get filed. They don't get filed right. There's just all kinds of issues with paperwork that ought to not be that way, but it's that way. And so when you've got a team member and you have a problem like that, they'll step up and they'll make sure that that gets taken care of.

Joe: What do you recommend with, or what do you teach when it comes to the insurance? It is a trust become an additional insured. The owner stays the primary insured?

Lou: No, no. We definitely changed the insurance to the name of the trust. And we put it in care of because we become the manager of the property. And so there's and in fact that's legitimate. There's a management agreement. The trustee of the trust hires you to be the manager of the property. So I have a management agreement on my system. And then because of that, you're able to have yourself named on that policy as well. So it's the name of the trust name of the trust and trustee are named as the insured. The additional insured is you as their interests may appear.

Joe: Good and so the banks, they just want to make sure that this house is insured.

Lou: That's right. And that's what we want to see. Now when it's a situation where it's a subject to transaction, we have to be careful about that because there's a trigger there that the lender sees, wait a minute, this is not something that we do. So we are definitely careful about that process and often we'll leave the insurance in place as it is, but also get our own insurance with ourselves named as the insured on the secondary insurance that we get. Not that we can collect on two policies, we can't, but we're gonna definitely file under our insurance instead of that other insurance, not rock the boat with the lender at all.

Joe: Yeah, that's what I used to do. I would keep that existing insurance in place and it was always usually escrowed anyways, so I just keep on paying it.

Lou: Totally agree with that.

Joe: Lou, we talk about the certified affordable housing program that you have. What is that?

Lou: Well, you know, it's a thing, it's an interesting thing over the years you know, I'm founding president of national radio back in the day, before that it was Real Estate Leadership Association of America, I was vice president of that. And then I took that organization, transformed it into national RIA. This is back in 1993 and one of the things that I knew at that time and certainly have seen ever since then is that real estate investors have a bad name. You know, when somebody out in the public, hears the term real estate investor, they don't have the warm and fuzzies. Let's face it, they think you're lying. Cheating and stealing money, grew up a good-for-nothing. Welcome to your industry. So, so I say, you know, if, if we could actually get credit for who we are and what we do, you see what we do is we buy dilapidated properties, rundown properties we restore them by hiring people locally, buying supplies locally. We restore, we pay back taxes. We, the schools, our local schools, are increased by the number of folks that we move into the properties and enrolling in those schools. The entire community is enhanced by our work, but we get no credit for that. So I realized that a magic word out there in the world is affordable housing. And what is it that we do? Affordable housing. That's exactly who we are. That's exactly what we do. And in fact, we don't even sell properties or rent properties to people that can't afford them. So affordable housing is not the price of the home, it's what the person can afford. And so by our methodology of actually attracting the person first, discovering who they are, how much they have to put down, how much they can afford on a monthly basis, then we provide affordable housing for them. We go purchase the right price, the right house in the right neighborhood for them. They approve it, we go ahead and close on it, they move in and they've moved into our affordable housing program. So we call it the path to home ownership. And so what I do is certify people in offering that program locally. It's called the path to home ownership. And through my program they become certified affordable housing providers. There's six days of training, there's some steps in the process, there's testing and then as a result of that they have the right to use the brand called certified affordable housing provider. They get the name badge, they get a certificate certification. They, a lot of my licensees have wrapped their vans, wrap their vehicles, trucks, cars, everything else they've got, you know, some of them have grown to have offices now. They've got teams, they, they're just doing amazing things in their local communities and I get very, very excited about it because I'm just seeing transformations happen all over the country. We're helping people to end up with home ownership that otherwise would not have had an opportunity to do so and our local certified affordable housing providers are doing that and they're making a very nice living as well.

Joe: Yeah. The cool thing I love about it is finding the buyers first because like in any type of real estate that I've ever done, the easiest deals are always the ones where I have the buyers first. It's like, it's so much easier to shop for what buyers want than to sell them what you have. Isn't it? Like, yeah, I heard this analogy once, it's like taking a bowl of spaghetti, walking down the street and trying to sell this bowl of spaghetti to people. They're going to think you're weird. But if you go out and you say, Hey, listen, what would you like for dinner? I'm going to go buy it for you or order it for you. Whatever they tell you, ‘I'll have a burrito,' and you go, I'll have a, I'll have a whole enchilada. So, and I'll go make them a whole enchilada and I give it to them and they like, they buy it. So it's, it just makes it so much easier doesn't it? When you can do that. And the cool thing about the program that you have is it kind of gives a certified stamp of approval. Like this is somebody who's been trained, who knows what they're doing and it helps even if you have a license now, a real estate license, cause then it even gives you that much more credibility.

Lou: In fact one of the things that we do is when we go talk with a seller or lender, we have a book called ‘Doing Good While Doing Well' and we actually present this book to our seller and it's loaded with stories of people throughout the country that are doing exactly what we're doing. And so as a result of that, there's a lot of credibility that comes to in front of the seller at that time. You know, I say, listen, if you expect to be able to take over someone's existing financing or you expect them to carry back financing, which are two of my favorite things, I already told you, 40 years in the business, I've never been to the bank and qualified for a loan. Well, if, if you expect that to happen, you better have a lot of credibility there. There'd better be some really good reasons for people to give you that opportunity. And so that's one of the reasons that we give all of our potential sellers and our potential lenders, we always give them the book to underscore that credibility and to have them have something in their hand that they can look over and realize, okay, this guy or this gal, they're part of a nationwide network of affordable housing providers. They're not just out there by themselves, kind of hanging on a string and maybe they might make the payments and maybe they might not make the payments. These people have gone through training, they've gone through certification and it's like that comfort level that people get when they talk to a real estate agent or a mortgage broker. You know, they've got some experience and some background and some training, so it definitely helps.

Joe: Nice. People are asking for the link. Just give me the link already, right? How do I get it?

Lou: Yeah baby. Well, you can, there's actually several different links. There's certifiedaffordablehousingprovider.com.

Joe: Certifiedaffordablehousingprovider.com, there we go. There's one of them.

Lou: Would you like me to give your folks a book?

Joe: ‘Doing Good'? Yeah. Doing Good While Doing Well.' How do we?

Lou: Okay. Getdoinggoodbook.com.

Joe: Getdoinggoodbook.com. I love it.

Lou: That's a beautiful thing. And so you guys can get the digital version or we'll ship you a book as well and yeah, you can get that for free.

Joe: Cause I was just on Amazon, it's $25 on Amazon. I don't want that. I don't want to get it for free. What are you talking about?

Lou: Oh, you don't? Oh gosh. Yeah. You know I just like to give stuff away. And you know, the fun thing is that when people see what this is, they get very excited about it so I enjoy the process of teaching and training people to build amazing businesses and we've, we've certainly had some great success with that over the years in our world that we've helped a lot of people to build multimillion dollar businesses. It's a, it's a fun process to see people build what we do locally. I just tell them, look, I'm going to teach you what we do and you're just going to Xerox copy exactly what we do and we're going to be there to support you through the process of building this business. And it's a legacy as well. So you get a name in the community, you're helping people, the mayor's office, the city council, the county commission, everybody gets excited about who you are and what you're doing to help you know it, it also is great for PR. I encourage my people to get in touch with the newspaper or the local media, get on the morning shows, all of that sort of thing and really get your name, usually we're running from all those people, right? I want to run to all those people and let them know that we're a different kind of real estate person in the community. And then we have a three-day training and we call it Millionaire Jumpstart. So if you want to give him that one, that's millionairejumpstart.com and that's where I'm able to show people from stem to stern, soup to nuts, kind of our entire business model. And so what happens is that I'm teaching you all of our buying tricks of not going to banks and not qualifying for loans. We have a presentation process that we do with the seller. So, I teach that during the class, you learn about how we hold the properties for long term and maximum profits. We have about 25 different profit centers over and above the difference between the mortgage and the rental amount. There's, you know, that's the typical spread for a landlord, but ours is 25 more profit centers above that. And so I teach that during that training and also teach about trust there, so they get a special manual and it's got forms in it and we take everybody through the process.

Joe: I know a lot of people are interested in that Lou. MillionaireJumpStart.com Hopefully I spelled it right there.

Lou: Yeah, baby.

Joe: That's a four-day workshop. Is that what you said?

Lou: That's three days. Three days workshop training.

Joe: You do a workshop, a training almost every month, right?

Lou: Yup.

Joe: I have heard, I have not been to one yet. I'd love to come to one.

Lou: Ay ay ay ay ay! Well this one's coming up December 6, 7, and 8 in Atlanta, December 6, 7, and 8 in Atlanta. And you're welcome to come, love for you to see it. And bring a herd of folks.

Joe: I can't come then. I have heard, seriously I've heard so many people speak so highly of your workshops and just get tremendous amount of value, learn a ton. And so I'd really recommend you guys check this out. Go to MillionaireJumpStart.com. Cool.

Lou: I sure appreciate that Joe. And absolutely. You know, it's, it's a fun process when people learn that this is transferrable, you know, that they can learn the information, they can take it, they can use it, and then they realize, you know, when they make money with it, they say, ‘aha.' You know, that's kind of, that's something I didn't have before. That's not an approach that I was making in the past. And so you think back on all the deals that you didn't make because you didn't have that information and you go, ‘ay ay ay!' if I had just had that information, I would have been able to do all these other deals and made all that other money as well.

Joe: Oh yeah. You know, especially with the whole thing, affordable housing in the news almost every day, you can't get away from it. Being able to talk about being a certified, affordable housing provider is going to open up so many more doors, so many more doors and opportunities and it puts yourself in a better light, right? I'm with the public. When you can present yourself like this. I love that concept. It's really,

Lou: And it's not like you're making something up. It's actually being who you are, right? And so when you're being who you are, you're very authentic and people really respect it. They appreciate it. That's why we require people to go through the training because this is not something to be taken lightly. It's something, if not done correctly, it could damage other certified affordable housing providers. So we want to make sure people are trained correctly and that they're offering the path to home ownership in a way that really is authentic and really does help the community, really does help the folks that can end up with home ownership and, in fact, take them down the path, just as I'm describing, take them down the path to end up with home ownership.

Joe: So, any final parting words, Lou, before we end this? I appreciate your time, too. We've already gone to half hour over what I-

Lou: My how time flies when you're having fun. Yeah. You know, the, my parting words are that if you have an entrepreneurial mindset, if you have an entrepreneurial spirit, you enjoy making a difference in the lives of others, this is an amazing business for that purpose. I love people. I love being able to talk to sellers and listen to them in a consultative way and really discover what their issues are. What, what, what's your, tell me what's, in fact, we have this, this on my seller questionnaire we say, what's happening? You know, tell me what's happening. And then we just shut up and let them talk. And so then we discover what their true issues are and then we can actually put together an offer that can make sense to them and make sense to us too. So we go through a process of presentation process to do that. And I would just say that there is a great way that you can approach this business. We call it the Street Smart way of doing business. You don't have to go to banks, you don't have to qualify for loans. There's 37 different ways you can structure the deal so you don't have to leave when they don't take your one offer. You, you know, there's 37 different options you can make and so when you discover that there's more to the story then we just love to help people learn that process. And I would just encourage all of you that it's available for everyone. You know, sometimes in life we kind of say, well that's them over there and because they had this education or because they had that benefit, or whatever the story was, that they have a, an opportunity to do something I can't do. Well that's not true because I definitely was a kid from the other side of the tracks, definitely didn't have any money, didn't have a father, didn't have any relatives in this country, there were no programs back then to tap into and have the government pay for us. I mean, there was nothing, and I was able to come from there to here. And I will tell you that you can absolutely duplicate everything that I'm doing. We have the most diverse group of folks that are doing our program. You will be shocked and amazed just who's involved in my program. I mean, they are from every walk of life, every kind of handicap. I mean, it's just amazing. And it just proves that it's completely duplicatable for every single person. So I would just inspire everyone. Don't ever take no for an answer. Don't stop. Get in there. Stay in there. It's the best gig ever. It's the best gig I've ever found.

Joe: Oh, that's awesome. All right, so good. I'm going to give you guys one more time, the three links that Lou just gave away, CertifiedAffordableHousingProvider.com, right? And by the way, you can get all these links on the show notes at RealEstateInvestingMastery.com or just Google real estate investing mastery or Joe McCall podcast and you can find this episode. You're going to get a transcript of the episode, you'll get the video of it and you get all the show notes which include the link. So if you're driving, don't try to go on your phone right now and type in certified affordable housing provider because you're going to screw it up. We don't want anybody to ever wreck on your phone, so go check the show notes out. But that's going to give you more information on how to become a certified affordable housing provider. Also, Lou's going to give away his free book getting, ‘Doing Good by Doing Well.' Yes.

Lou: ‘Doing Good by Doing Well,' right.

Joe: For free. Or you can go to Amazon and spend 25 bucks for it. GetDoingGoodBook.com, GetDoingGoodBook.com, and nobody does events and workshops better than Lou. Go to MillionaireJumpstart.com to check that out. Thank you so much Mr. Lou for being on the show. This has been good. Thank you. Very excellent.

Lou: Well thank you, Joe. I appreciate the opportunity and guys, just thank Joe tons and tons for what he does. He really brings you some great information from everywhere and so much good stuff. You got to stay tuned and just thank you again, Joe, for having me on board.

Joe: Thank you Lou. Lou, hold on one second as I end this podcast here, don't go anywhere, but guys, thanks again. Go check out the show notes at RealEstateInvestingMastery.com. If you liked this podcast, leave us a review on iTunes. Please share this podcast cause there's a lot of people out there that need to hear this stuff and, um, appreciate it all very much. Thank you guys. We'll talk to you soon. Bye. Bye.

Lou: Yeah, baby!

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    1. It depends on if you cloud the title or not – in the county public records. Talk to a local title company / attorney. – Joe

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