Our guest for today has done it all in the industry. He is the author of the new book Creative Cash, COO of Bradwell Property Group, and had built a large multifamily portfolio over the last 15 years!
Let’s dive right in and learn from Bill Ham and learn how to weather the different market cycles!
[00:01 – 06:34] Opening Segment
- We introduce our guest, Bill Ham
- Bill talks about his background
- What’s their worst investing advice?
[06:35 – 13:54] Chasing Tertiary Markets
- Bill shares his views on the current market
- He talks about aging assets and infrastructure
- Discovering how great deals are found
[13:54 – 20:27] Finding Value Through Operations
- Asking HOW?
- Checking on fluctuating expenses when analyzing
[20:28 – 32:34] Why You Need To Be Creative
- Lender made terms
- What classes to be looking out for
- SPY = Seller, Property, You
- Don’t get the messenger killed
[32:35 – 34:50] Closing Segment
Bill’s book recommendations:
Connect with………….! See the links below.
Final thoughts
Tweetable Quotes:
“not only have I experienced all of the market cycles, but I’ve also survived and information is only passed on by those who survive.” – Bill Ham
“You create value when you buy. You make money when you exit profitably.” – Bill Ham
“take-offs are optional, landings are mandatory.” – Bill Ham
“find valuations through operation, not renovation. Let’s go find some assets that are just mismanaged.” – Bill Ham
Resources Mentioned:
Email: Bill@GoBroadwell.com Go to his LinkedIn, Facebook, and Instagram pages to connect with BIll. Visit his Website
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Bill Ham
Dan Krueger: [00:00:14] Welcome to Multi-family Investing Made Simple, the podcast that takes the complexity out of real estate investing so that you can get started. Today, I’m Dan Krueger, joined as always by Anthony Ticino. How are you doing today, Mr. Anthony?
Anthony Vicino: [00:00:27] I’m good. I’m just over here taking pictures of the screen as we are sitting down with a legend. This after this morning. I was going to the afternoon, but I’m losing track of my time here, so I’m pretty excited about today’s podcast.
Anthony Vicino: [00:00:39] And per usual, you’re taking those screenshots when Bill and I are looking not our best and you look fancy right now smiling.
Anthony Vicino: [00:00:46] You will notice that I told you after I took the picture that I was taking the picture. So for you, listeners at home to want to see this candid shot of Bill and Dan looking great and me totally not posing for this picture, go check it out on Instagram. Yeah.
Dan Krueger: [00:01:01] So if you guys can pick up on the clue there already we’ve got somebody else on the show today. Mr. Bill Hamm is joining us. This guy has done it all in the industry. He’s a wealth of knowledge. So we’re excited to dig into just kind of give you the bullet points of this guy’s resume. He is the author of the new book Creative Cash, which is a book that is focusing on creative financing for real estate, which is very valuable. There’s not a ton of content out there on that. So excited to dig into that as the CEO of Bradwell Property Group. And he has built a large multifamily portfolio over the last 15 years.
Dan Krueger: [00:01:34] So you’ve seen multiple market cycles already.
Anthony Vicino: [00:01:38] Wait, wait. So that kind of implies you were in business during the financial crisis and you didn’t get wiped out? I thought everybody got wiped out, correct?
Bill Ham: [00:01:45] No, I just got beat up really bad.
Bill Ham: [00:01:49] But now I found bloodied, but not I got a T-shirt and started to go it. Yeah.
Dan Krueger: [00:01:56] Well, welcome, Bill. Thanks for coming on. We’ve known you for a while, but we’re excited to kind of do a deep dive on, you know, what’s bumping around in your head. Save the market nowhere. That’s what you’ve been up to lately.
Bill Ham: [00:02:08] Well, you know, Anthony kind of hit right on it there. I have been in business for upwards of almost six years now, and I have seen all of the different market cycles, the up, down, left, right.
Bill Ham: [00:02:19] And not only have I experienced all of the market cycles, but I’ve also survived and information is only passed on by those who survive.
Bill Ham: [00:02:28] Because you’re right, Anthony, everybody else that had a way of doing it and got wiped out. Yeah, we’re not talking about them, are we? They’re not on your show, are they? So the only reason that I am here is that I survived it.
Bill Ham: [00:02:38] And that speaks to the information and the things that I bring to students. The moment is not very it’s not made up. I read in the book it’s something that I’ve practiced and put in place and have had success with personally in real life, in real-life scenarios because it’s all tried and true and tested information because I’m still here. And only those who survive to pass on their information. So. Yeah, yeah.
Anthony Vicino: [00:03:03] And I’m excited to dive into the market dynamics because this is something that we haven’t talked a lot about on the show. But I think it’s something for our audience who’s primarily passive investors they need to be aware of as well. And so I’m really looking forward to diving into that. But before we get there, because, you know, a lot of people got wiped out in the financial crisis and we’re not talking about those people who didn’t make it through. And you have the survivor bias here. What is your bad investing advice? What can you point to that? You know, a lot of people, they were they went wrong because they employed this investing advice.
Bill Ham: [00:03:34] You make money when you buy.
Bill Ham: [00:03:37] Super simple. That’s probably the worst. We hear that everywhere.
Bill Ham: [00:03:41] Probably the absolute worst piece of real estate advice or comment or concept that anyone can possibly have in real estate. You make money when you buy, you know the hell you do not. You create value when you buy. You make money when you exit profitably.
Bill Ham: [00:04:02] And so by saying I make money when I buy is completely mitigating the value in the importance of an exit strategy. Ask anybody that went into foreclosure if they made money when they bought, they did not. I love it all about an exit strategy.
Dan Krueger: [00:04:19] Now, I think that implies that’s something that I see with a lot of our investors where they think that the work is finding the deal and getting to the closing table when in reality, that’s when the work starts, right?
Dan Krueger: [00:04:32] Exactly. You present yourself or you might create an opportunity for yourself when you buy, but then you’ve actually got to do the work to capture that value.
Bill Ham: [00:04:40] That’s like saying, well, look, all we have to do is close and you’re guaranteed to make money. You just clothes and well, for some operators running on fees, that might be true well, for the moment. So we can market all of that last year with those guys the last time around. Yeah.
Bill Ham: [00:04:56] You know, it’s just not how it works. It’s the best advice.
Bill Ham: [00:05:01] It’s a sound bite taken out of thin air from someone who is probably selling something, probably trying to motivate people to run to the back of the room and get their credit card and take action and all this kind of guru nonsense. It’s just not true. It’s horrible business advice. It’s a great way to get yourself hurt running around and saying I make money when I buy that. And that’s a ludicrous comment. If you actually stop and think about it, it’s like saying, well, I have to buy stock and I’ll make money because I know what that’s so stupid.
Bill Ham: [00:05:30] You know, I’m from aviation. I fly airplanes and corporate pilots for our real estate. And I remember the very first day I ever took a solo flight. My flight instructor, as he was getting out of the airplane, by the way, didn’t tell me he was going to get out and kind of just got out. Oh, by the way, you’re on your own. Enjoy yourself.
Bill Ham: [00:05:45] And the last thing he said to me, and I’ll never forget it, he said, take-offs are optional, landings are mandatory. You walked away. And of course, you don’t think much about it.
Bill Ham: [00:05:54] But now as I get in the business, I go on years later. Hey, hold on. You know, take-off is optional. A closing is optional. An exit is mandatory. I mean, if I take that airplane off, I’m going to put it back on the ground, wings up or wheels up or however that plane is going back on the ground somewhere. Sometimes, somehow.
Bill Ham: [00:06:14] Yeah. Before we take off, let’s do all our homework. Let’s do our analysis. Let’s do our flight plan. Let’s make sure we know we’re going. Because once you’re up there, there are no time-outs. Once you close, you will exit one way or the other. You’re going to come out of that deal profitably or not. You’re going to exit that deal. That’s why I kind of hate people saying, oh, I make money when I buy.
Bill Ham: [00:06:35] You’re like lightning. I’m a backup. I’m waiting for lightning to strike in time.
Anthony Vicino: [00:06:39] I hear that we talk about this all the time. It reminds me of what the seal in the Navy SEALs says is. Now I know how you’re getting out before you go in. You know, you’re either leaving in a body bag or through the front door, through the back door. But you need to know what the options are.
Anthony Vicino: [00:06:52] And if you don’t, then you’re going to find yourself in a really hard situation, which I find really interesting right now is a lot of people right now, we would say the market is at a place where it’s it can be hard to find a deal. And so what a lot of people are doing is they’re starting to look in stranger and stranger places for the money. They’re looking underneath the cushions of the couch, so to speak, and tertiary markets where maybe it’s not so competitive to find a deal. You can actually get something locked down. But then the question you have to be asking yourself is, OK, well, if it’s less competitive there, who are you going to sell to in five, six, seven years? Right. Like if there’s nobody buying and that’s great for you to get on, get in. But how are you going to get out? And I don’t think a lot of people ask that question.
Dan Krueger: [00:07:33] A lot of people are chasing yield out of the secondary and tertiary markets. Chasing yield is a mistake because when the tide pulls back, those are the properties that are left on the ground first. And I’m not saying that can’t be some good yields in small towns, but I would definitely be careful on the exit strategy comment there. Yep, that’s.
Anthony Vicino: [00:07:52] So what do you think right now, that in terms of twenty covid the big move away from urban density and moving towards those tertiary markets, is this a long-term play? Is that something that will kind of ebb and flow and cycle back to the urban environment? Like what do you think’s going to happen there?
Bill Ham: [00:08:08] It’s always an ebb and flow. It’s always a cycle too and from. You know, the trends have been towards towns forever. They’re going to trend out towards the suburbs. That’s fine. As long as working from home in all. And there are no commutes in this kind of stuff. But when we get back into having to work physically in a place, if we do fuel costs and things like that are going to make it harder to live further and further out. So I think the wealthier people who could move and had the money to move did. I think there’s a larger demographic that we’re just not talking about. They just were not financially able to just go live in the country next to the golf course because they felt like it. So I think that’s an outlier set of data that I don’t think we should be overly concerned with. I think there are bigger problems in the world. You know, we talk about covid no offense to anybody that’s been sick or had any issue with Covid. I think it’s a micro issue in the grand scheme of real estate. I would tell you, I think something is a whole lot bigger of an issue and nobody is talking about it is the aging assets in our multifamily space and are just real estate in general infrastructure in America in general. But apartment complexes that were built in the 60s and 70s are now the bulk of our affordable housing product.
Bill Ham: [00:09:20] They’re aging out. Those buildings are getting beyond repair. They’re getting too expensive to fix up. What happens when those things really just completely collapse? Do you think we’ve got affordable housing crisis now? Give it another five to seven years. Let these properties, all the plumbing collapse, and the rot and the wood rot and the roofs. And none of that is going to be a hell of a lot more of a problem than it ever was as far as housing and real estate are concerned.
Dan Krueger: [00:09:43] Well, it could be a problem or it could be a tailwind that helps those operators who do take care of their properties. I see that as potentially just eliminating competition. Some of those guys who don’t keep up with the CapEx, their buildings become dilapidated. They lose their certificate of occupancy. And also there are all these renters that still need a place to go. So could be an opportunity as well.
Bill Ham: [00:10:03] Could be you do it, you know, that’s an opportunity at someone else’s loss. So whoever owned the building at the time is going to have to cycle out as the owner. And that may not be a profitable cycle. Outback to my comment about an exit strategy. So if you let that property get too far into disrepair and code enforcement runs you out, that’s not good. That’s not good for the economy.
Dan Krueger: [00:10:22] It’s no. No, it’s not good for that is good for me. It has got a building next door that’s going to brand new roof and is ready to roll.
Bill Ham: [00:10:27] So that’s kind of one of the market shifts I’m seeing in kind of cautioning everybody is, hey, let’s be careful as we kind of go into maybe a recessionary downslide in the market and values may soften over the future. Let’s not be the tip of that spear, which I believe is going to be the 60s and 70s product, which what I call CAPEX dunam your capital expense tsunami.
Bill Ham: [00:10:46] I think it’s coming in. It’s going to hit hard in the next seven to 10 years, five, five to seven years, I think going to hit really hard. And I’m concerned about the value in the C space completely collapsing.
Bill Ham: [00:10:57] So if you have a lot of listeners here who are passive investors, I would recommend you be cautious about investing with the syndicator who is in the Value-Add space unless they’re very skilled at it. They’ve got a long resume at it.
Bill Ham: [00:11:11] They got a really good plan for that property. Everybody right now is trying to whitewash the overpricing in the market by saying that’s OK.
Bill Ham: [00:11:20] Well, just raising rates through careful, careful. You know, right now with recession, rents are flattening out. Some cities are having rent growth, some are having rent decline.
Bill Ham: [00:11:29] But everybody will tell you the rents below market.
Bill Ham: [00:11:31] It’s a nonsense sales pitch to justify a three percent cap rate or something like that. So, you know, as an LP, if you’re getting into these deals with super low cap rates and your syndicate is telling you, oh, that’s OK, we’re just going to blow the rents up 10 percent this year, next year, and then we’re all going to make a ton of money. Careful. I think right now it’s a very high-risk strategy.
Bill Ham: [00:11:48] So I would caution everybody about that. I like looking at deals that I say fine valuations through operation, not renovation. Let’s go find some assets that are just mismanaged. Why you got to raise around everybody, you know that. What does that give that give it a break. Let’s just be better operators. Well, that takes little skill, doesn’t it? Yeah, that’s why I’m still here. And that’s why some of us survived and some of us don’t. The people that can only make money when everybody else makes money or can only make money by impoverishing the tenant base by extremely raising the rent, you know, the last will be the biggest shift in your strategy.
Anthony Vicino: [00:12:21] Yeah, I think that aligns a lot with what we’ve been doing lately and the deals that we’ve been finding have been the result of years of relationships that have been developed. And that’s why we’re getting price points that work. And so that’s something that I think a lot of newer people don’t understand that, yeah, there are guys out there finding deals, but it’s because they’ve been in this business for five-plus years and they’re the first call and they’re not buying stuff that’s on the market.
Bill Ham: [00:12:44] So for very good deals, don’t stay on the market long. Great deals never come to market. And that’s exactly what you’re saying in the trade relationship shortlist. I’ve about several deals that you never had a chance because of the relationship we never even saw.
Dan Krueger: [00:13:03] And then something else before we kind of leave this topic, I just want to circle back to the net migration in and out of urban areas. And a lot of people are talking about that right now. And we’ve seen this kind of flight to the suburbs because everyone’s just working from home on some calls. But something I think a lot of people are missing there is that the vast majority of jobs out there cannot be done remotely. So there are some corporate jobs where people are going to have the option to stay at home. But the vast majority of the labor force can’t work from home. Like if you’re a doctor, surgeon, a dentist working at a distribution center, if you work at McDonald’s, you can’t these jobs can’t be done from home. And that’s the vast majority of people.
Bill Ham: [00:13:43] So the butcher baker candlestick maker doesn’t get to phone in their job. I’m with you on that. Absolutely.
Dan Krueger: [00:13:48] Yeah. So, again, I see it as kind of a short-term reaction, but not a long-term trend. It just doesn’t make sense to me in that.
Anthony Vicino: [00:13:55] But, yeah, I want to circle back to something Bill just said there a little bit ago about finding value through operations, not through renovations. And it’s interesting because as you look at a lot of operators underwriting, a lot of times what they’ll do is you’ll look at in-place expenses and say, OK, we can do better. So right now, let’s say the crane operator is operating at like a 45 percent expense ratio. We’re like, OK, we can do that. Thirty-five percent. And what people fail to realize is that it’s really difficult to make operational improvements. To your point, Bill, it takes skill, right? Like, it’s not just as simple as going in there and say, I’m going to slash utilities, I’m going to charge that back to the tenants, and I’m going to also charge less for my property management like these things. Yes. The most valuable business lesson I ever learned was that a dollar saved is worth more than a dollar earned because that dollar earned is always on a margin. So a dollar saved is pure profit right back into a pocket. But it’s also very difficult to go and realize those improvements. So how do we do that from a passive investor’s perspective? How do they know that they’re getting into bed with an operator who actually has the ability to make the operational improvements that they’re suggesting verses they’re just throwing down a number and hoping for the best?
Bill Ham: [00:15:11] That’s a great question and a tough one to answer. I would probably my knee-jerk reaction would be, you know, I would want to see that your syndicator has a track record of doing it. If your syndicator does not have a track record of doing, then I would want to see a very detailed plan oriented around the execution of this business model. Don’t hand me a bunch of stuff. You’re just slashed. Hey, we’re going to get this going because I would find that really have.
Bill Ham: [00:15:38] Tell me about the timing of this. Talk about how I would really want to know-how. And that’s how I’m always asking a question. Great idea.
Bill Ham: [00:15:44] How, you know, so there’s anything we could go into a whole afternoon on just discussing that one concept of what we call OpEx or OpEx ratio. That’s one thing. When you talk about your expense ratio to income, you’re forty-five.
Bill Ham: [00:15:57] Fifty percent. That’s not enough information. You’ve got to stop and look at the OpEx number. What is your operating cost per draw per year? So you can’t you can drop your ratio, but you can’t really go far below that OpEx number.
Bill Ham: [00:16:11] So what I found is the average property and this is for your listeners, the average property out there, see to be minus runs at about forty-two to forty-seven hundred dollars per year in operating costs, not more, just normal operating costs. So if you say, oh, look, this person’s at a 70 percent expense ratio. Yeah. From that point of view, you go, gosh, you should be at 50. We’ll just cut that. Great. Yeah, but hold on. If you cross verify that data and you say there to 70 percent expense ratio and you look over it and they’re running the property of forty-three hundred dollars door per year. Your income is too low. See, there’s the problem with that expense ratio, remember, half of a ratio is the other side.
Bill Ham: [00:16:49] The income you might be in aviation, what we call getting behind the power curve. It’s when you’re you’re letting your airplane sink in, in you don’t have enough throttle to actually take off and you’re sinking. As the property reaches beyond its bell curve and age, what will happen is the property will age to a point and it is now affordable. Housing in your rents is low in ratio to the expenses that that building is now starting to consume. That’s where you have to look. You can’t look only at the ratio. You got to look over at the door. No, because again, if you see that, that probably run into forty thousand dollars or more and that’s a 70 percent expense ratio. Your rents are just too low. They’re too low for the age of the building. And you’re never going to make money on that asset. You’re behind the CapEx curve.
Dan Krueger: [00:17:33] Quick question for you on that. Now you’re located down in Georgia, Atlanta, and I can’t remember what’s up ahead. Do you primarily do the bulk of your investing there or are you in other parts of southeastern region? Have you done any research into other markets around the US to see how that CapEx per door per year changes?
Dan Krueger: [00:17:56] Yes, and I have hundreds of students, and so I’m analyzing deals from all over the country, either from my own or for people that I’m working with. So I’m very, very tight and it’s a relatively static number. What will change most readily around the country is labor, taxes, utilities, because your biggest it’ll fluctuate something in heating costs in the winter.
Dan Krueger: [00:18:14] Right now, it’s 12 degrees in Minnesota here, correct? It is, yeah.
Bill Ham: [00:18:18] So that’s the reverse like we have we have air conditioning in the summer and winter and you may have no air because, you know, kind of washes out kind of what will fluctuate the most in taxes. You’ve got to check that every single county because they can be wildly different utilities can swing pretty heavily as well, especially water. And then the last one that insurance can vary depending on if you’re in a coastal market, hurricanes, blah, blah, you have labor. But really, if you walk into a hardware store and buy a toilet or some carpet, California to Georgia, that’s pretty much the same cost. They are screws and nuts and bolts are pretty much cost the same. So you’re only a few things that largely vary, but it’s relatively static, regardless of what my rule of thumb is. What other listeners have to do is go out and do research in your own market and verify the data, but you’ll find that somewhere around that number.
Dan Krueger: [00:19:09] Yeah, that’s cool that’s a very good tip for those passive investors who are starting to look at potential deals. So I’ll just get to read it real quick. They’re a good thing to check when you’re looking at the pro forma for potential deals, per Mr. Billiam. Here is the OpEx per unit per year. We’re looking for an average of forty-two to forty-seven hundred bucks per unit per year. If it’s outside of that, there are probably some questions that need to be answered.
Bill Ham: [00:19:34] There’s a lot lower there. Either not doing repairs over the line either is bad and if it’s a whole lot higher, they might be doing a whole lot of repairs, which may also not be good, you know, and so it’s just hard to say.
Bill Ham: [00:19:46] Yeah. And it’s tricky also just for those who are a little bit more active, there’s a lot of operators out there who tend to run a lot of expenses and just in an effort to keep their taxes down. So sometimes you might have to back some stuff out to get the real true OpEx for putting CapEx we call CapEx above the line. So it places the roof when they call it operating repair and maintenance, it’s off is not so that they do love it.
Dan Krueger: [00:20:09] That was a lot of very valuable information therefore for those individual individuals out there looking at these types of deals for the first time, you just get me warmed up. I love it. And did you have some cute up there? I was going to jump into now you lead the way, man.
Anthony Vicino: [00:20:26] Ok, you’re in your lead in the breach.
Bill Ham: [00:20:28] I’m curious, curious to hear what you’re doing to Broadwell now. You’ve been active for over 15 years now. And I’m curious, I think if I remember correctly, from your post on social media, you and Broadwell teaming up happened sometime in the last 12 months.
Bill Ham: [00:20:43] It is. But here it goes. Better if I guess, you know, December 13 months ago, Tony Morgan, who is the CEO of Broadwell, we kind of met and he approached me and he had exited a very successful and very profitable tech company that he sold was quite liquid and said, hey, I need somebody who knows what they’re doing. I want to transition into multifamily. So Broadwell Property Group and hired me as the chief operating officer.
Bill Ham: [00:21:08] And together we have and are creating Broadwell Property Group and you can find us at Broadwell property, go Broadwell Dotcom. Everybody wants to look at more information. Go Broadwell dot com.
Dan Krueger: [00:21:21] Now, since you’ve been in the business for so long and we’ve got this looming Capex tsunami and there are all these things that people are doing that are implying there’s a misperception of the risk out there. What are you guys doing? Post covid. Twenty, twenty-one. What are you targeting? What types of assets have you changed direction or have.
Bill Ham: [00:21:39] Yeah. So at the moment I don’t believe it’s a good time to be doing renovations. So if you’re looking at a value add or increase in revenue, I would strongly suggest you do it without spending money. If you truly believe there is a supply and demand issue, then you shouldn’t need to spend money to refinance. I think that’s sort of one of the reasons that we can apply to do so in our office. We’re flight to quality. We’re I think the sea space should be avoided for a little while, for a year or two until we can start getting creative financing. So at the moment we’re looking at be space, Neisser assets, flight quality, looking at stabilized properties, going to get long term debt. I believe we need to jump back into the value market in about two to three years to year, somewhere around that range when that market falls apart a little bit more. And we can start using some creativity to go in there and mitigate some of the risk, some of these older buildings that we’re talking about, that makes a lot of sense and that aligns with what we’ve been doing lately, the flight to quality.
Dan Krueger: [00:22:39] And I’m going to reiterate something that’s come up with a lot of investment on our investor calls lately is is kind of differentiating between a good value add opportunity that’s stabilized and running well versus what I think a lot of people picture when you say value add, which is a distressed asset. Right. So there’s going to be good be quality assets out there that are still, quote-unquote value add not because they’re war zones, but because of some of the things which Shadowville about operational inefficiencies, things like that.
Bill Ham: [00:23:07] So I always make the joke it’s on the upcycle. We call it value add. And then when we go on to the downside, we call it the stress test.
Bill Ham: [00:23:15] All of those are limited. Who do you think started that cylinder? So when they want to lend, they say, oh, it’s a value-added when they want to pull back lending and they move away from the distressed assets. These are lender-based terms. And the lenders retreating always signals the downturn of the market because it causes the downturn of the market. So if you ever want to know what market psychology, lending, and as of today, the lending is headed for the hills, we’re seeing a lot of restrictions and requirements. Fannie, Freddie really throwing up roadblocks. We’re seeing people syndicators have to have a lot more experience, a lot more credibility right now. A resume is huge if you’re trying to borrow an agency. So these are all signals from the lenders that they’re expecting the recession. They’re bracing for impact, which causes the recession.
Dan Krueger: [00:24:04] So I would say that that’s actually all a good sign that that we’re seeing these things implemented before defaults actually increase because defaults aren’t all right. The default is really what kills things. Right? So if people tighten up and they actually do prevent people from over leveraging and getting themselves in trouble, I see that these precautions are actually something that’s good, that’s going to help sustain it in the long term.
Bill Ham: [00:24:25] Yes. What it can do in the short term is to cause people to want it today. They have bought in the last market cycle, maybe they overpaid or maybe their operations didn’t go exactly as planned and they weren’t able to raise the rents on Atlanta and now they need to get out of the deal. Oh, yeah, but the lenders have to go back, and now that value add is called a strike. Now what?
Bill Ham: [00:24:46] That’s why I wrote the book that I wrote Creative Cash. That’s why I’m saying, hey, let’s all sit tight perspective on some of these assets until we can mitigate some of that risk by sharing the risk through creative financing, using seller financing, using a master lease option, using some of these kinds of things. Because when the lenders back off these these deals, these distressed assets and the seller needs to sell how you close the deal, you’re either you’re really to bring in a lot of cash to the table via a low loan to value or you’re going to go in there and do some sort of creativity. And that’s what I’m. That’s why I brought the book out now, is because I’ve been through these market cycles. I know what’s coming up. I’ve been through this already. I’ve watched all the signposts. Yeah. Is there racism by now? I’m going, oh, yeah. Here we go. This is it all over again. So I know where we’re headed. And that’s why I’m reading out this material that would be very applicable, very useful in the next two years.
Dan Krueger: [00:25:42] That’s huge. We’ve always wanted to get more creative with our financing to date. We’ve just done standard debt on properties and we’ve always kind of struggled a little bit trying to sell the sellers on the concept of some of those things you just mentioned there.
Bill Ham: [00:25:55] So I’d love it if you hit it. That is. So I need your book, you’re saying? Yeah, absolutely. I’ll tell you, this is written for the magic right here. And this is what I call the Spy. It’s an acronym that stands for Seller Property You. That is the order in which must analyze and you must create a problem-solving offer. And maybe that’s what you guys were falling short with some of that. So you sit down and you say, what’s wrong with the seller? What’s what are the seller’s needs? OK, what does the property need last? Lastly, what do I mean by your offer? Must spell must create value and bring value through solving those problems. All right. The reason most people fail at creative financing is that they say, what do I want? What do I need? What’s good for me? Oh, OK. Wait, the property needs to work. Oh, there’s a seller involved. What’s the seller got to do, you know, and it’s just like secondary thought. Well, when you 80, 90 percent of a good deal is a seller with 10, 15 percent might actually look without it, without a willing seller. Doesn’t matter what the real estate is, you’ve got nothing. But you must start with the spice seller property. You solve that problem. What do you need? What’s going on? What can I do for you? What’s the problem? How do we solve this? OK, now what’s wrong with the property? Is deferred maintenance, is it occupancy? What’s going on here? Now I’m making an offer that solves those. That is how you and your listeners can go out. That would tip you can accelerate your business.
Dan Krueger: [00:27:31] You know, that’s that’s our approach. Always where we run into trouble, I guess, in our unique situation is when we’ve tried this in the past, there’s always been a broker in between us just screwing up the message now.
Bill Ham: [00:27:43] Yeah, I love working with brokers. I got a whole chapter on how to work. I need that chapter because that’s where we have real implications. Yeah, no, it’s really a function of of the same problem. Same thing. When working with the realtor, you you’ve got to explain why the two things has to be the most creative financing. The first thing that realtors might as well. I’m not going to say yes, you are step one. Yes, you put them at ease. All right. How are we going to pay the realtor? We take that into account. We show you how to do it. So it’s a function of getting in by the realtor. I would sit down with the realtor. It’s a got a problem. Your seller wants this. That doesn’t work because of these reasons. And by the way, those reasons are not personal. Every buyer, the walks in the door, it’s good to have that same problem. So you’re not getting away from this.
Bill Ham: [00:28:34] All right. Here’s what I recommend. This, this, and this. What do you think? What do you suggest? So I’m ending it with that right there, getting buy-in from that realtor. Now, would your seller what do you think? What can we do to get this done? You know, what I’m not doing is killing the messenger. Hey, Realtor, here’s an offer. Go Turnitin.
Bill Ham: [00:28:53] Well, no, hold on. That can get that realtor in trouble. That realtor was hired to bring a sale, not a creative offer. And so what you don’t want to do is to have that realtor go turn in an offer that they don’t recommend. A realtor has a fiduciary responsibility to turn in an offer. They have no responsibility to recommend it. So you’ve got to make that realtor your your champion. That realtor has to sell that deal for you. So the big aspect of getting a realtor involved to work with realtors and creative financing is to know the art so well that A, you can kind of educate the seller or a realtor and then have them even help create the offer.
Bill Ham: [00:29:31] Once someone helps create a negotiation to create an offer, they have bought it automatically. And then now you’ve got them on your site. Now they’ll go to that seller and say, hey, I know this isn’t exactly what you wanted, but let me explain why it’s a good deal as opposed to, hey, Bill turned in this offer.
Bill Ham: [00:29:45] Here it is. I think it’s a terrible deal. But, you know, a job done here is the offer. I’m out of here.
Bill Ham: [00:29:49] I feel like that’s what’s happened. I’ll get the message killed. You might be making your realtor look bad. Yeah, this creative offer. And that will damage the relationship between you and the realtor. So it’s it is it is art. It’s some science. And it’s a hell of a lot of art. That’s why I wrote the book Getting Creative Cash and Creative Cash.
Anthony Vicino: [00:30:08] And you can learn there’s something else that you mentioned there, which is that you’re going into this and you’re presenting trying to understand the seller’s difficulty than the property and then yourself. Right. So we’re going to that spy technique. But one of the. Issues that we’ve had with the creative cash.
Anthony Vicino: [00:30:24] You know, program here in the last year, let’s say, is that we discovered things, the pain point to the seller or the property, and we say, OK, is going to be an issue for every buyer. But there’s been a rational, irrational exuberance in the marketplace where there’s still buyers who are willing to overlook those things. And it makes all the sellers and a lot of the brokers, know that they go, yeah, you’re right. But we can find this person over here who will pay it, who will do this, and we don’t have to deal with this issue. And so what you pointed out there is that we’re entering into this part of the market cycle now where I think we’re going to see sellers and brokers more open to the creative option, because like when you look back in 2007, 2008, a lot of people look at that and they say, hey, that would be a great time to be buying, right? Yeah. You want to be buying at that moment when there’s blood in the street. But the issue is, where do you get that money?
Anthony Vicino: [00:31:13] There’s no money to buy. There’s no money. And right now we have it. Right now we have a surplus of money, but no deals. And so it’s like it’s a reverse issue. So you’ve got to be able to marry those two, correct?
Bill Ham: [00:31:22] I go to a whole section. Exactly what you said back then. There were deals, no money. Now there’s money, no deal. You’re kind of floating. But, yeah, you get on the solid ground eventually. Yes. In the catch with seller finance, creative financing is it works better in certain markets. If it’s about solving problems, we’ll have people who had real estate problems over the last three to five years, really.
Bill Ham: [00:31:45] You know, if there’s some kind of problem, they just go to the market, sell it before I even get above the asking price. Oh, yeah, that works until it doesn’t. And when it doesn’t, it really does. And that’s what I’m saying. Can’t look over the last three to five years and think this will be the next three to five years. Wrong.
Bill Ham: [00:32:02] Not how this works, but that means right now the realtors are going to remember the last couple of years, and yes, as of today, early twenty, twenty-one, there are still enough buyers out there that enough dumb buyers with dumb money. Yes. They are kind of making this a little bit harder. And that’s why I keep saying, hey, give it over the next two over next one year to three years, four years. And that window is when you’re going to see a lot more creative financing. So it’s not something that everybody is going to have been doing for a long time unless you’re really good at it. But you’re going to see a whole lot more of it going forward.
Anthony Vicino: [00:32:35] I absolutely agree. So this has been a fantastic conversation so far, like diving into the market cycles. I’m really excited to check out Creative Catch when it comes out. I think it’s coming out next month or so. February 9th. Yeah. Seemed to be going for us. Yeah. So in time for this episode, this episode probably coming out late February for you listeners at home, this book is already out there. You have no excuse not to go get it right now. Before we let you go, Bill, give us your book recommendation and it can’t be your own book.
Bill Ham: [00:33:00] Just read the last book that I read that I really liked is By Christmas, Never Split the difference of a popular book out there right now. I strongly recommend that Chris Wallace is an amazing educator and he was a professional FBI negotiator. And he really teaches negotiation in a way it’s extremely applicable to real estate. And if you’ll read his book on negotiation and my book on creative techniques for finance and you put the two together, I think you’re going to have a really pretty powerful combination of an upcoming market cycle that is not going to look like the market cycle. Most people that are in the business have seen. You’ve been in the business less than ten years.
Bill Ham: [00:33:41] You haven’t been tested yet. You’re about to be.
Anthony Vicino: [00:33:45] I love it. So go check it. I would recommend this book as well. I’ve read this in a couple of the other big negotiating books in the space like start or get to. Yes, right. That’s the other kind of antithesis of never split the difference going to different schools. And I think I lean a little bit more towards Chris Voss on this good recommendation there. Now, Bill, before we let you out of the cage, let you go about your day where different people get a hold of you. Absolutely. And pick your brain because you are a wealth of knowledge if they want to work with you.
Bill Ham: [00:34:12] Yeah. If you want to work with me and my partner, Tony, you can find us at Broadwell Property Group Dotcom or go to Broadwell. Broadwell Property Group is the company you we have a spot on there. You can fill out your information. Reach out to us. My email is Bill Go Broadwell dot com so you can email me if you have any questions or anything you want to discuss. The book is Creative Cash that’s available on Amazon Kindle and Orrible. So you can get those three versions there. And then there is a master class. I have an actual downloadable full by about 10 hours or so class on creative apartment deals, dot com.
Anthony Vicino: [00:34:50] So if you want to get the book and or the master class, you can also go to creative apartment deals, dot com download. That’s a and less of it. So go check that out. You, dear listeners, we appreciate you taking the time to join us today and we’ll catch you next week.
