Kent Ritter

Mitch Stephen has been a self-employed RE investor for 25+ years. His real estate investing career started at the age of 23 when he read “Nothing Down” by Robert Allen.

Mitch Stephen has purchased well over 2,000 houses in and around his hometown of San Antonio, TX. A high school graduate, who never stopped learning. Books, CDs, seminars and webinars were his classroom.

Today he specializes in owner financing properties to individuals left behind by traditional lending institutions and giving new life to properties that scar the neighborhoods.

He has perfected a method of achieving cash flow without having to be a landlord and without having to rehab properties. He’s mastered the art of raising private money and the classic “Nothing Down” deal.

He has pioneered the idea that you don’t have to give discounts to sell your notes.

A passionate speaker who delivers the message of integrity first and profits second; an expert at keeping it simple and explaining, in plain English, the theories that made him financially independent. He is always an inspiration to those around him.

Mitch has been interviewing for his podcast for over 3 years and has more than 400 great guests.  Link here: www.1000houses.com

Key Points From The Episode: 

• How Mitch Stephen stumbled into real estate investing. Buying 45 houses his first year.
• Seeing opportunities everywhere as an entrepreneur.
• Buying his first 100 houses with credit cards.
• Owning multiple other businesses allowed him to invest in real estate.
• How to develop partnerships with other individuals.
• Developing “Cash Forever” strategies.
• The advantages of using seller financing.
• Doing on average 100 deals per month.
• Why buying properties undervalue is essential.
• Money is made on the buying of a property, not the selling.
• Loaning money to other real estate investors.

Books mentioned:

• The Bible
• Think & Grow Rich By Napoleon Hill
• Nothing Down By Robert Allen

Transcript:

[00:00] MS:

You can go do what we do. But it’s not a passive, you know, it’s a full-time job. So, we’re here for the middle, you can sit there and do nothing or you can do you can gamble on the stock market and don’t know God knows what’s going to happen. Or you can put yourself into a hard tangible asset that you can that an average person is more likely to be able to figure out what’s going to happen, you know, or at least make an educated guess as to this is a good deal. For all the reasons that you can find. 

[00:00:29] KR: Intro 

Welcome to Ritter on Real Estate, the show about how to passively invest like a pro. On each episode, I interview real estate experts who give their top investing advice, strategies, and tools that break down the insights into practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real Estate, and I’m your host, Kent Ritter.

Hello fellow investors. Welcome to another episode of Renner on real estate where I teach you how to passively invest like a pro. Today, my guest is Mitch Stephen and Mitch has been a real estate investor for 27 years. In that time, he’s raised 26 million in private money and he buys a four to five houses a week. So, he’s built up a robust strategy to support that endeavor and he’s got and he’s built up a fairly sophisticated model, where he’s got a few different layers of real estate investing and so excited to dig into all this and understand what Mitch is doing a day. Mitch, thank you so much for being on the show. 

[00:01:30] MS:

Hey, man, thank you so much for having me the show. It’s been It’s a pleasure to be here. 

[00:01:36] KR: 

Yeah, absolutely. So, before we dig in to, to everything that you have going on, tell the folks a little bit about who you are and how you got to be where you are today. 

[00:01:45] MS:

Well, you know, I had a high school education, I went to a couple of semesters of college, it wasn’t for me, got cut from the football team in about 30 seconds and didn’t know where to go after that. It’s been about 14 years, 15 years, wandering around trying to figure out where I belonged in the planet and about age 34. I stumbled into house flipping back in 1996, you know, and I did 45 houses my first year I did 65 houses my second year, I did 150 houses exactly my third year and I bought about four to five houses every week for over two decades, like it has never stopped. I started talking about and learning about real estate one day and I never the conversation never ended. I’ve had conversations. every waking moment about real estate, I don’t know why I’m passionate about it. No one in my family was ever passionate. No one in my family was even an entrepreneur. I don’t know where it came from. But I found where I belong and along the way, I would find other opportunities, which is almost the curse of an entrepreneur, right Because we see opportunity and everything and you can’t do everything. I learned all that the hard way I learned everything the hard way. I wrote a book about it called my life and 1000 houses failing forward to financial freedom. It’s really should be now my life in to 2500 houses. But you know, I wrote the book a little while ago, and I haven’t changed the title. So, I’m just an average guy with a lot of common sense, who seeks pleasure and tries to avoid pain and every time something happens to me good, I try to figure out how to make it more off make it happen to me more often and every time something happens to me bad, I try to figure out how to make that never happen again and I got good at it. 

[00:03:49] KR: 

Now I appreciate that. I mean, I similarly just share passion with real estate. I don’t know exactly where it came from. But it just makes a lot of sense to me and something I’ve fallen in love with over the past six or so years and bad, now do full time on my own. So, I totally get bad, the path and you know, similarly I didn’t I didn’t grow up in an entrepreneurial family grew up. It’s kind of very blue-collar family and yeah, just got hit with a bug though and I understand from an entrepreneur standpoint, it’s like once you get out there and once you start looking at everything, you know, there are just so many opportunities, opportunities abound, right and you start you start to have to be selective. 

[00:04:29] MS:

The thing was, I stumbled into some money by accident and I did nothing down deal and then that’s when it dawned on me. You know, that’s what the hell Robert Allen’s talking about, you know, you can read all you want to but until you get a concept in your heart, you don’t really own it, right and so, I will read these concepts and then I’ll accidentally or find myself in a position to actually do one and that’s when you learn it like Okay, I understand I bought my first 100 houses on credit cards. Oh 100% 0% interest No, no, no, no, no, no origination or anything, maybe a little bit because I charge $50 for the credit card check. In my town, San Antonio, Texas in 1996, there were houses, I’m sorry, I was headed to the ranch. So let me get this off. There were houses all up and down the lesser parts of town, South Side, West Side, East Side, beyond the middle of the city line, middle who city 8000 10,000 12,000 $15,000, $20,000,25 or 30,000 was a big deal for me. So, I figured out early that I could get credit cards. Because I had good credit in back in a different era. If you remember, you may not remember, because you might be too young to remember, but, but if you had good credit, and you apply for credit card, they gave you the card, and they give you all the cash, advance limits and everything and you can just keep applying, I had 50 credit cards that all had 10 to $15,000 cash advances, if not 20, or 30,000, cash advance limits and so, I would just put 10,000 on this card and 10,000 on this card and buy the house, and then 10,000 on this card to rehab it. It was 0% introductory offer money and I didn’t have any payments to make for six months or a year or 18 months depending on the card and I would fix all these houses up and I would sell or finance them and I would sell the notes all within, you know, 60 days and I did it 100 times in a row until I didn’t need to do that anymore. 

 [00:05:49] KR: 

Yeah, I mean, that’s fascinating that that’s a heck of a way to get started, you kind of kick it off with a bang. 

[00:06:40] MS:

But what alerted me was first I accidentally made some money; the money was the lower. But as I got into the game, I love the game so much because this game of creative real estate investing has is such a wide big game with so many opportunities and so many angles in so many choices that you know, good and bad. But there’s so many good choices that I just got intrigued with the game like wow, what a game you think parcheesi is good. You want to try this man; this is a game. You can win big. 

[00:07:14] KR: 

Yeah, it’s addicting, right It’s definitely addicting and so, so let’s take a step back. So that’s kind of how you got started. But you know, you’ve, you’ve developed quite a bit since then, right You’ve gone in many different directions; you’re doing a lot of different things. But as we were talking about previously at the heart of it, it seems to me you’ve kind of got this kind of two phase strategy right where you’ve got this this very active business or businesses that are going on and then that’s funding more of what you call it your forever money strategy, which we can talk about too and talk about how you’re funding your long term investments through because active business you’ve created so can you outline for us kind of the two and maybe there’s more than two but the different components and then kind of how they fit together and your thought process as you were putting this this plan into place? 

[00:08:05] MS:

Yeah, well, there’s at least eight businesses and sometimes I can’t recite them all to you. I’m not a detail guy. I’m a I’m a I’m a throw all this crap on the wall, see what sticks as directions; the dust is settling, you’ll see me exiting and I’ll be handing it over to the inference with Okay, now no go leases all this up or go sell all these or whatever. I don’t hang around long and I don’t I understand details as we’re making the decisions. I gotta clear my slate for the next thing. I don’t have enough ram you know I need some more RAM. But like you put information in this here and some of some falls out this out. So um, so I’m going through town I’m buying all these houses and I’m seller financing them. It’s like a sawmill. If you if you own a sawmill and your job is to make big long trees into boards, you know into lumber at the sawmill, then you’re going to be left with a stack of sawdust. Now you can pay truckers and people to shovel it in a truck and go throw it away. Or you can figure out how to make a product and sell that sawdust. You already got the sawdust for free What can you make out of sawdust? Can you add some glue and make a four by eight board? A press boards? Or boards can you poison it and put it in bags and call it an poising that you sprinkle around and piles. What can you do with a solid desk because you have an abundance of it? It’s the same way with the businesses that I originated. I was having to collect notes, hundreds of notes a month I needed a $25,000 software. I needed to spend $5,000 to train the people to work with software. I’m $30,000 in however, the 500 notes that I have now are no challenge because this thing is so automated, it’s easy. I can pick up 5000 notes now and this thing will run it with not a ton of maintenance. So how do I get the note company to pay me back and then pay me more I start servicing other people’s notes beside mine. So now I have a, another servicing company in Texas called moat note services, like a moat around the castle. We do all your reporting, you know, it’s a business, when that business gets to about 4000 notes, it’s sellable for 10 million, you know, think that I get my 30,000 back, you know, um, you know, it makes about 15 to $18,000 a month, right now profit, how long does it take to get my 30,000 back, I got people running, working, that I owe salaries to now that company funds my those of people that run them in my notes kind of get taken care of for free. I don’t have to pay any servicing, right. That’s how I that’s how all these businesses are. They were, they were like, I made a business out of the exhaust that was coming out of my tailpipe, because it was a lot of it and so that’s the problem is with the entrepreneur and I haven’t said many things that people have coded, but someone latched on to this that I said, and it’s kind of been one of one of two quotes that I have, you know, the hardest thing an entrepreneur will ever do, is have one great idea and finish big. You know, that’s the hardest thing for an entrepreneur to do. There are too many ideas, and everything’s kind of half assed and they none of them really make it to the pinnacle. None of the ideas really make it to the pinnacle. So how to avoid that. How do you how do you how do you finish big Mitch with eight deals, I have partners and every one of those, and their sole function is to run that company. I provide the sawdust. You sir, know how to make boards, you’re in charge of the board manufacturing, don’t ever call me about it again. I’m shipping sawdust to you every morning. That’s what my job and I want 50% of this business and that’s how it works for me, because there is someone in that chair that’s only looking and watching over the board making business. 

[00:12:03] KR: 

Gotcha. Gotcha. So, you develop this portfolio companies, those don’t company, you’ve partnered with folks to run the day to day that’s feeding, you know, feeding this money back to you and then you have the next evolution of strategy, which is what do you what are you doing with it? Long term? 

[00:12:20] MS:

Yeah, so company I read a book by jack Vaughn and I always like to give him credit. He’s a good guy. He’s a friend of mine. I met him at a mastermind many years ago and he wrote a book called forever cash, you know, this guy comes from Germany doesn’t even know the language ends up being a multi-millionaire in the real estate, business, you know, a challenge, way bigger than I ever had to face. You know, I was born in this country, and I knew the language, you know, I can’t imagine these immigrants are to something you need to make note of. 

So, he says there’s one time cash events, temporary cash events, and forever cash events. So, the temporary I mean, the one-time cash events are like whole sales and flips, right You buy a property, you sell it one time, you get one check, it’s over. Gotta get another one. Kind of, like creating yourself a job and then then there’s, then there’s temporary cash, which is like me, I buy houses for 50,000. I own you know, just given an example. Follow the theory, I buy houses for 50, I seller financing for 100,000 with 10%, down, and I carry the 90,000 at 10% for 30 years fixed, no balloon, I am a mortgage collecting machine. I am the bank, I am not a landlord, I get payments on the house, but their principal payments and interest payments, they’re not rent payments. Okay. So, if the air conditioner breaks, it’s not my house, I sold it to the person who lives in it, who’s making me a mortgage payment. So, I don’t get any phone calls. I when the money gets in my bank account short of a foreclosure, there’s no reason for it to ever leave, because I don’t have any liabilities. I’m the bank. I’m the mortgage company. But that’s temporary, because notes expired. You know, I get 10,000 upfront and I borrow I borrow the 50,000, 100% from my private lenders, I borrow whatever the rehab is, in addition, whatever the closing cost, I don’t have one penny in these houses. But I never let my private lenders in over 65% of what I’m going to sell our financing for and I average only letting my private lenders in at 58%. Okay, but this 65 is the most I’ll ever let my lenders in of what I can sell or finance that house for and so, I’m getting $10,000 up front to run my household to pay my car payment or whatever and if I do that, eight times a month, which I averaged about 100 deals a year for the last 20 years. That’s 80,000 and down payments, enough to run your household, right and then all the payments on getting, let’s say, today I have 300 mortgage payments, I owe 350, they owe me 850, I average clearing $500 a month, per note, positive cash flow with no liabilities. So, if you have 300 houses for easy math, that means I’m collecting 150,000 a month in positive cash flow with no liabilities. Plus, I’m picking up a million dollars in down payments to get there. You know, to get to create those 300 notes. So, so but those notes will expire. So, it’s temporary cash. So, you have to take all the money that you make from those one-time cash events and the temporary cash advance and so, you can work yourself out of a job and buy your time, we’ve already figured out how to get rich, the next step is how do I buy my time back, I have to get into a forever cash strategy that allows me to be free, I put all my money into Self Storage is you would put all your money into apartments, then you hire a department manager or a Storage Manager, and then you go on vacation for the rest of your life. It’s not it’s not completely passive, because you have to watch department managers and storage managers because if you don’t watch them, they’ll steal all your crap and they’ll run your business in the ground. But you know what I’m saying you can run your business, an hour or so a day or watching out of the corner of your eye. Or if you don’t even want to do that you hire a CFO, and you give up a few of the $2 million you’re making a year you give up a couple of 100 grand and you don’t even worry about that. 

You know so. So before ever cash strategy I looked into I was buying some storage just turns out, I already had a forever cast strategy in mind. I didn’t even know that that’s what I had. But when I started to see people were liability lawyers and attorneys were going well. You need to put some stuff in some different buckets, what’s your highest risk? I don’t like all these stories and put them in this bucket. I said, well, I’m flipping these houses. Let’s got a different kind of risk. Put it in this house. You got any rentals? Yeah, that’s a houses Yeah, put them on a different bucket. So, I started saying I started seeing these different categories. I thought Damn, this is my favorite. This is the one I never sell. This is the one that pays me forever. I love one day, I always just kind of thrown my So, money over to a storage, I’d buy a mom and pop out around the lake where I lived. I couldn’t afford (triple A, Class A) I didn’t want to borrow money; I was scared of debt that I had to sign my name to at the time. I’m guaranteed you know, personally guarantee because I wasn’t sure of myself early on 27 years ago, I would borrow private money, collateral only money, you know, with where they had good collateral way above whatever I was borrowing so that it would never not work out for them even if I failed, because my reputation is very important to me. But um, but you know, I was thrown, I was throwing my money over there and I would go flip houses one day I looked up and I had over 1000 units and it was it was netting 800, it was netting 800,000 a year with that I still owed now this debt had gone down to only five years left or seven years left, but I’m still making payments like the first day you know, so I turned around and said, this is a business. I never sell until I’m just too old to police it and then I should have enough to take me to the end of my days. Um, I don’t really plan on selling because my daughter has been in the middle of my business for 27 years closing every deal and out and she understands how to run these things. So, you know, it should just be passed on to her. But that’s you got to move to a forever cash strategy, which is some kind of business that you rent, or it’s a business that you own, that you don’t work in that you operate as the owner, not even the CFO because the CFO has a job or the CEO, they have a job. You’re above them, the owner, you know what I mean? So 

[00:19:17] KR: 

Right yeah. So, you’ve got this, you’ve got this active strategy that you’re working in, right and developing and then you’ve developed now this this mindset, this forever strategy, which I think is great. I think a lot of people that listen to this show, or you know, folks that I that will invest with me or others can passively be kind of doing. I think in that same way their job may be different their job may not be real estate, but they understand that that idea of creating this something they can invest in long term that’s going to continue to build their wealth and generate cash flow. Right. So, kind of a I think a lot of our listeners really understand the same concept. So, what you’re talking about maybe So, not as advanced and not as large but this idea of taking So, your job Where you’re trading time for money, right And then taking that money and putting that money into something that’s passive, much more passive, right So that continue to grow without you and you can put that money to work, right, that’s ultimately the idea, very simply stated of what you’ve implemented, you’ve got these active strategies, and then you’re taking that money and not let that money just sit on the sidelines, you’re putting that money to work as well for you and self-storage, right and that continues to grow in value, and you’re getting cash flow off that and then you’ve just got this, this ecosystem, that’s all working together, right, and ultimately building you, like you said, a strategy where we’re, you know, you, you can be much more passive in that you can, like you said, manage an hour a day or hour a week or so, but starts to tick off 

[00:20:50] MS:

Or you can come in and you’ve got all that that you’ve got this a lot of different ways to do it. The deal is, it takes a lot of good people around you, a lot of good people, if you’re going to be free and not pulling your hair out, not go crazy. Here’s the thing, I have gone into my private lenders, before doctors and lawyers or whatever, and showed them my strategy, you know that the reason why I have $26 million, I didn’t start out with $26 million, I started out with $50,000 from my dad, you know, and then it kind of went on from there. Recently, I have $26 million. I never missed a payment anybody. So far knock-on wood, you know what I mean by the grace of God, and a lot of self-Policing, a lot of self-policing, like, I don’t go over 65% if I want to buy a property to have to pay 70% of what is worth, then I got to put the other 5% out of my pocket. I mean, I never leave my investors with the mean, they have a lot of room. Barring something just catastrophic. Like, off the charts, everything’s gonna be fine. I mean, you never can, you never can do anything that’s going to solve the problem. If a meteor, you know, smashes downtown San Antonio and wipes it off the face of the earth, I mean, what are you gonna do about it? So, you know, I’m a, I can solve the problems without losing money 99.9% of the time, myself, and I never have to even bother them. I mean, I’m not gonna bother them, you know what I mean? The whole point of them loan is we used to be passive, and not have to hear, you know, my house burns down and, and it wasn’t insured. Because, you know, I bought it at the auction that night, or that evening, and then the people that they kicked out the house burned it down that morning, before my policy got in place. I mean, you know, that’s not my not my lenders problem, that’s my problem, they’ll never hear about it, I take care of my problem, you know and so, 26 million bucks, you know, before COVID, he was all out, I my money is not like flipping money. It’s not like, it doesn’t go in and out, I need money for 10 years, 15 years that I can wrap because my buyer owes me money for 30 years. So, a million bucks goes pretty fast when you’re getting out 150,000 or 120,000 or 200,000 at a time, and then it’s got to be out for 10 or 15 years, I got to keep getting more money. You know, now, I add about 300 notes, you can’t you can’t get more notes than that, because I my goal was to have 500 notes. But every once I hit about 300, I’ll put in like 10 notes into the pile to have 310. But eight people will pay me off that month, because my homeowners have the right to pay off their loans, sell their houses and call me and, and so it’s really hard to get the 500 because you keep putting houses in, but all you’re doing is just replenishing to stay at 300 Now, every time someone pays me off, it’s a windfall. A huge windfall, like I pick up 30,40 50,000, 100,000 you know, depending on the spreads in these houses, but um, but people, when I talk to my investors, I tell them exactly how I do everything. You know, this is what I do. This is my formula and then I got to show them how much you know, I show them how they’re protected and then I show them how I make my money and how much money I made and usually at that point, some people have Why been you doing that? I said, well, how are they supposed to have confidence I can pay them back if they don’t see how lucrative My business is for me and when they see how lucrative it is then they understandable Damn, he should have no problem paying me back if he’s not a crook and he really hasn’t the heart to pay me back. There’s no reason why you shouldn’t be able to, you know, so. So, at that point, they always say, well, why don’t I just do what you do and make all the money that you’re making? You know, because I show him the secret sauce? I show him exactly. 

And then I look at him and say, well, hell don’t do what I do. Just do what Tom Brady does. I mean, that guy makes 32 million a year, do what he does and then you’re like, well, I can’t. That’s it. Yeah, no, no, you can’t do this. It’s taking me 27 years to get here, you aren’t gonna, you know, turn from being a doctor or a house flipper. You know, if we want you, I’ll help you, I’ll try to help you. But you know, they’re not gonna do it. So, the point is, doctors and lawyers and other people out there, they have money, they either like what they do, or they run their dammit. But they don’t want another job, they can’t handle another job, or they’re done working, you know, it’s time for them to vacation or travel or play golf and so, you people like you and I are a choice for them. You can go do what we do. But it’s not a passive, you know, it’s a full-time job. So, we’re here for the middle, you can sit there and do nothing, or you can do you can gamble on the stock market and don’t know God knows what’s going to happen. Or you can put yourself into a hard tangible asset that you can that an average person is more likely to be able to figure out what’s going to happen, you know, or at least make an educated guess as to this is a good deal. For all the reasons that you can find. You know, and so, you can have a passive income with some with some peace of mind, there’s no investment with no with no risk, it’s actually against the law to guarantee that there’s, you know, there’s anything’s guaranteed, you can’t guarantee anything, it’s against the law, really, because, because the truth of it is, we don’t even know who we are. You know? 

[00:26:39] KR: 

That is right, that that is right. But it sounds like the, you know, the way you’re setting things up. I mean, it’s definitely an interesting strategy and how did you, you know, as you’re looking at, you know, you’re whether you’re buying houses, you’re looking at storage, to evaluate, I mean, how are you evaluating the so markets that you’re in? What are things that you’re looking for when you’re looking to make an investment? I mean, are there certain key indicators.

[00:27:07] MS:

I’m, looking for, share this price on the way in first, because, you know, the old saying is, you make your money when you buy, right. But this is the second quote that that I know for worse. You make your money when you buy, but you lose it in the rehab. So, you know, if you’re an investor, you know what I mean, it was a great deal on paper, and I bought it, I bought it. Well, I mean, I was a grand prize winner, when I bought it, I bought it at a steep discount, it just got messed up and the rehab, the rehab got out of control, something happened. You know, so I’m always looking. But there are some things that once you get mass, like once you have 12, or 15 storage facilities, you know, if there’s one that comes up for sale right next to you, you can pay more and not have to have such great spreads and get closer to market, if even pay market. Because you’re eliminating some competition, and you have the business to overflow to it, or you don’t want I mean, there’s, there’s, there’s, um, there’s synergy in mass and this is one of the things I like to say, if you’re going to do something, do a lot of it don’t do a little this, I used to do that. I had some commercial buildings, I had some storage is I had some No, it’s two things, man, I flip houses and manipulate houses and seller financing, and I put it into storage is that’s the two things. Okay, I have these other businesses, but I got partners, and they run those and they just, you know, send me a spreadsheet or a financial statement every month and we have a meeting when we need to those people aren’t my partners, because I didn’t know them and love them and like them. You know, I like all my partners are my friends and I trust them with everything I got and vice versa. I don’t, I don’t pick partners lightly. You know, I’m a very good partner picker. I’ve had many, many partners, most of them go over 10 years. Some of them are going on 15 years, 20 years. I’m a good partner and I’m a good partner picker.

[00:29:23] KR: 

So how so tell me more about luck, because I think that’s something that that I see in the industry a lot. I see a lot of partnerships pop up; I see partnerships that will just pop up overnight. It’s like you know, people meet and all of a sudden there’s five, six people partner together.

[00:29:47] MS:

I’ve always been more the opinion like a land on the development side will split 50/50 that scares the living hell out of me because there’s a lot of weird people out there and they don’t like you think, you know I’m not maybe up; they’re not right. Maybe they’re not wrong. Maybe I’m not Right, maybe I’m not wrong, we just don’t understand each other, you know what I mean? And so, I see people do that all the time, but they are usually they would have to be and if they’re not, then they have this real danger, but they have to, they would have to be very tightly drawn legal dots in it very tightly covered and extraordinarily well covered. So that any debate there was among two was solved by the by the piece of paper that was written, that everybody signed that went into the deal and that there would be a lawsuit that couldn’t be won. If someone didn’t, didn’t so, apply, you know, it didn’t comply, but it’s too much drain Bramlage for me, you know, it usually starts grass roots, you know, if you want to how do you find a contractor that’s going to be your contractor for the rest of your life, you go out and you hire six or seven contractors, you give a job to this, you know, job to this guy, judge this guy, job to this guy, job to this guy. But here’s what I say, don’t even give them the whole job, tell them to write the job up and then say, what’s the first step in this job? Well, I got to do the foundation, Okay, I’m gonna let you the foundation part, I’m not giving you the rest of the house really contracting for the foundation, however they perform on that foundation is how the whole house was gonna go. If it took them two months to get the foundation done, which is way too damn long, then the whole house would have been months and months and months and months out, fire the guy get another person and give them the next job, which was the fix the roof. You know, if he fixes the roof, like, wow, that guy fixed. He told me yesterday, he’d be on the job, he was on the job today, he finished the job in two days, you charge a fair price, okay, let’s give this guy another piece of the job. So that we do that on a couple of houses, till we know them, then we give them one house. Then after he’s done six, or seven or eight or nine, ten houses, and he’s still holding true to how I know he is or how I think he is. Now I’m giving him three or four houses and then he finally becomes my whole guy. You know, but I never go partner or give the job the title untold job to anybody until I learned who they are and how they are under pressure when things don’t go well on one particular facet of a tiny job and I think why I’m a good that works out. Because when we align with someone business gets really easy. You can almost answer each other sentences, hey, I had to make a judgment call. Tell me what you would have done. I had a choice A or B and I would have done this. I said I want to do it. He says okay, that’s what I did. I just wanted to make sure. You know, and I need decision makers. I don’t need them to call me on every damn thing. That’s why I have them. If they start to call me too much. I say, look, you make the decision. We’ll talk about whether I agree later, I need to get you used to making decisions on your own without having to call me all the time. Do what you would do if it was your house? You know whether you know it is your business, you own 50% of it. No, unless it’s just some extraordinary amount of money make a decision, then let’s talk about it. If it wasn’t the right decision, we won’t do it again the same way next time. But I can’t, I can’t, I can’t be answering the phone that much, you know. 

[00:33:17] KR: 

Yeah. So, it sounds like partner and your strategy, you know, enter it into it slowly. Like you said, it starts grassroots partner in small ways, right Don’t So, give the whole project at first, you know, test it out, make sure it’s gonna work understand how they’re going to perform, how they perform on the small thing, kind of extrapolate that largely how they’re gonna perform 

[00:33:38] MS:

My private money, the problems I had before COVID, I had so much money, I couldn’t get it all out. So, I started a hard money loan business to keep these people’s money occupied, and to keep them getting a rate of return until I needed it. You know, I was I was given the money to flippers, this is another one of the, you know, side businesses I have and in a guy who was 15 years with Coopers and Lybrand, and ran the Austin office for 15 years, with his name on the door, he was a managing partner, who was my partner in this loan business, okay. You know, he was way smarter than me. The thing was, I knew how to connect with the industry and get the loans that he needed, which we liked to loan 50% LTV only, or 35 and I knew how to find those people and, and so I’m loaning out that money, but those people were flipping houses, that money’s out for six months, and then back in and then if I needed it, I took it, you know, I just needed to occupy it, we’re gonna move on and I was gonna lose my opportunity to work with them. Because my rule is, I have underwriting that I buy houses by and just because I have a shit pot full of money doesn’t mean I start buying crappy deals, the rules, the underwriting guidelines that I function under and buy houses under, they never change doesn’t matter how much money I have. So, if I So, can only buy at three houses and COVID that I only buy at three, you know, if there’s money sitting on the sidelines there is. So that’s another example and we only went one or two loans at a time, we set up the office, people would pay us back in the first two years, we didn’t do a whole lot of business, we were feeling each other out, then. Same thing with the people that we lent the money to, we only build it up, hey, I want to borrow money. They all want to borrow money on seven to a mass. scale it right. Okay, here’s on a second one. Let’s see how you do. Okay, I’m going to give you two houses at a time now. Now we’ve done four houses. Now I’m going to give you three houses at a time. Okay, how many houses you want to do because I know you now you want to do 10 houses, I give you money for 10 houses? 

[00:36:05] KR: 

Well, I think that’s great advice on know how to partner how to approach it slowly, how to build it up over time, and how to find folks that you can really just continue to scale through your own partnership right through by creating these partnerships, you’ve been able to create a ton of scale and doing that I think that’s a really interesting model. Appreciate that. So that advice. As we round down the show here, I like to ask everybody a few questions at the end. It’s called our keys to success round. So, the first question I want to ask you is, maybe you’re thinking about this from, you know, as one of your private lenders, but the question is, if someone’s going to invest money, with you, or with anyone else, what is the one question they should be asking the person sponsoring the deal?

[00:36:52] MS:

Some of them, some of them have been loaning me their money for 30 years, you know, I take a random swath of those people with a little paragraph about how I met them and how long they’ve been with me, you know, and their phone number and their email, I want you to follow up on my references, because I don’t want you laying awake at night having any anxiety over this because no matter what rate of return you’re making, if it’s if you’re anxious at night, wondering what Mitch Stevens real motive is, then it didn’t work, this investment isn’t worth it, because there’s no investment worth that kind of worry and you don’t have to have that kind of worry. So please call my lying references, all lying the ones I give you, if you want more, I’ll give you more. But I want you to call my references. 

[00:37:42] KR: 

So, check lying the references is a great way to start with somebody who you’re going to invest with, I think that’s great advice. Second question, what are you most proud of in your career?

[00:37:52] MS:

And was able to get rid of alcohol and cigarettes, and there was no drugs and were I handled all the pressures and let it drive me closer to God and further away from my vices instead of because a lot of times, these triple A personalities that we have to get here will get everything that we dreamed or exceed our goals but will end up alcoholics or drug abusers or where greed has taken us over, or there’s a lot of pitfalls to be in to being wealthy and being successful. A lot of pitfalls, and I’m probably the proudest that I have been able to eliminate advices along the way and, and, and that it in all of at the end of the day, it’s not all about the money. I mean, now at this career, I’m happy to do things at a higher, for a higher reason I’m on I’m helping with my success, I’m able to help a lot of other people accomplish a lot of things that they might not have ever been able to do. I’m changing people’s lives in a lot of ways all around me, from my customer who where was a renter, who would never be a buyer to my daughter who in my family members who maybe never would have found a niche, but they have a niche now two investors across the country who I have helped break through the bondage of having a job and the reason why that’s important is to become financially free at even the most modest level is because say like your job pays you $3500 a month. Well, if you can get $3500 a month coming in passive income into your mailbox, you can quit your job, and that frees up 2600 hours a year for so you can really learn who you are become who you’re supposed to be and become good at what you’re supposed to be good at in this life and maybe you’ll go up to help another 1000 or 5000 or 10,000 people so my goodness kind of has a ripple of you know, my good intentions have a ripple effect way beyond what I could probably even measure. There’s a lot of them. It depends on the Phase of where you’re at, right Of course, the number one best seller of all times the Bible and it really, it really gives us a master, you know, what we should be doing? all the all the self-help books in the world are just recapping the 10 commandments and what self-help that says, I’m not really a preacher. But when people ask me about what’s the best book in the world, that’s the number one after that, you know, I read thinking Grow Rich, which let me know, you know, I didn’t have a college degree, it let me know that some of the wealthiest people in the world didn’t even get out of high school, they didn’t have a choice, but to figure out how to make money and then when they figured out how to make more money, they were the 100%, recipient of the increase. So, nothing down by Robert Allen, how to function in the world, when you don’t have any money. When you don’t have any money. You’re a professional deal finder, and you get paid or can become a partner because you found the deal and it’s your deal and you say how the deals gonna go, you want 50% of that deal. Then, say I want 50% someone else has to add to bring the money and we split, you want 60% or you want 40%, whatever you want, but you’re in control. But when you have no money, you can make yourself extremely wealthy by just being a professional deal Finder. Contract writer upper was that a word? Contract writer upper? You know what I mean? work ethic and integrity. I mean, I don’t know which one comes first, I guess I suppose integrity has to come first. Because without integrity 

[00:41:33] KR: 

And lastly, what is your number one key to success.

[00:41:35] MS:

You know, you, you have to, I don’t know how I’m not, I don’t like to tell people how they have to live. But this is how I have to live; I look in the mirror and this is how I have to live, you know, I don’t mind losing my money. I’m gonna be dead before I lose yours. I’m gonna be dead. You know, or you may see me dying and you may let me know, because I will make it up another way or something, but I’m going to be dead. I want to be dead. I spent 27 years I mean; I spent the first years trying to build a reputation I was gonna die before I didn’t get it. Now that I got the reputation. The work I know when I died a lot of times along the way. I mean, I really had some problems and I really, you know, one of the one of the reasons it took me 15 years to find my place was I would start businesses and I’d have to borrow some money or I owe people money and when they failed, I wouldn’t start the next business until I worked my bartending job till, I paid these people back. You know, and it took two or three years, sometimes they get that done in so you know some of us are okay and they start the next business and yeah, I might have been able to be successful seven years earlier, if I wouldn’t have spent all these years, paying people back but I like the idea of not paying people back.

[00:43:00] KR: 

Yeah. Well, I think there’s a lot of integrity in that right, like we said, well, man, we’re wrapping things up here, but thank you so much for being on the show today. Thank you for sharing so much value and just a really, wealth as an entrepreneur and how to turn your, your active job into passive forever strategy. Thanks for coming on and shares with us

[00:43:39] MS:

Hey I am an author of 3 books my strategy for the right interface for coming on and open houses 200 Plus ways to find bargain properties and last of my 1000 houses, the art of owner financing, about how I finance hundreds of hundreds of houses on 30-year mortgages of people. You can read all about it, see my podcasts, see my 10-minute YouTube segments I put out every weekday at 1000 houses.com, you can go to one house, Calm 1000houses.com, and go there and get so sick of me it won’t be funny, because it’s all about me and everything I’ve gotten done than anything that I’ve ever touched so you want to get real tired of Mitch Stephen. Go to that website and see what there is, There’s a ton of free stuff there too. I have been chat, right, beyond chastise because everyone says I give everything away and I say, if someone needs a coach. They know how to find me if they can do it on their own. God bless them. Most people figure out that you know you got to pay the street or you got to pay a coach, in this case will be a lot more expensive so the ones I want to work with figure that out on their own. 

[00:44:46] KR: 

Thanks for listening to another great episode of Ritter on Real Estate. Hit the subscribe button to make sure you don’t miss out on the content that will make you a better investor. Also visit kentritter.com for articles, videos and tools curated just for passive investors from next time. This is Kent Ritter with Ritter on Real Estate and go out and invest like a pro.