14: How to Flip Houses With Minimal Risk

Nathan Cron

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Show Notes

Nathan Cron is the broker at New Western in San Antonio and Austin.

They did 370 deals last year!

Nathan is also a good friend of mine and we have done a lot of business together. He is one of my ‘go-to’ guys whenever I wholesale a deal.

In this episode, Nathan shares how he got started in this business by answering a newspaper ad after college. He credits his success to being blessed to get started with that company and getting the proper training. He now gives back by helping people get started through New Western.

He shares the stories of a couple of deals where he bought them, fixed them up and then rented them out for incredible cash flow.

Nathan shares my belief that it’s important to buy conservatively (cheap) and try to stay as debt free as possible. We talk for a while about how the market is always cyclical and if you want to be successful throughout each cycle, you have to be somewhat conservative.

Nathan’s strategy for attaining his goal of $10,000 month in passive income is just plain smart. He waits until he has the cash to buy the house without a loan. This way he gets incredible cash flow, tax benefits and security. He’s also a little different in that he rehabs these houses as if he is going to sell them. Most landlords do lesser rehabs for rentals to save money. He doesn’t want to have calls about broken toilets and clogged drains so he makes sure his rentals will be as maintenance free as possible. This also does wonders with attracting the “right” tenants. The tenants that won’t make your life miserable.

We also talk about how being resourceful is what separates those that succeed at real estate investing from those that do not.

Recommended Books

Think and Grow Rich: The Landmark Bestseller - Now Revised and Updated for the 21st Century

The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change

links

NewWestern.com

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Episode Transcription

Danny Johnson: My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivation to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.

Danny Johnson: All right. Today I’ve got my good friend Nathan Cron on the show. Nathan is the broker for New Western in San Antonio and Austin Texas and they did over 370 deals last year. I’ve saw a lot of houses to Nathan – incredible buyer. He’s quick makes decisions fast and pays fair prices, so he’s been a good friend of mine over the years and I’m super excited to have him on the show to share all of his knowledge with all of us. So does is it going Nathan?

Nathan Cron: Oh, it’s doing great. Thanks for having me Danny. Thanks for all the flipping junkies out there listening to us as well.

Danny Johnson: Awesome. So you want to tell us a little bit about your background story? Why you got started flipping houses and how you got started flipping houses?

Nathan Cron: Yeah sure. So I’ve always been extremely passionate about investing in real estate residential specifically. So right out of college back in 2003, I was fortunate enough to lead into the right mentorship, which is really what I think is most important when investing in real estate is who you surround yourself with. And I was fortunate enough right out of college to surround myself with the right the people. And I just never lost it from there. My passion for real estate kept me going. I’ve actually travelled across the nation. I started off in Cincinnati Ohio and then started chasing the real estate market a little bit and that’s what landed me in Texas. My first thought was Dallas Texas. I spent five years there mainly running the wholesale practice and from there I branched out to San Antonio. That’s when I became the broker of New Western in San Antonio and ran the practice there for five years. And now I’m located up in the Austin location doing the same thing. I’ve never really been in corporate USA before. I don’t think too many people can say that, but I’m a real estate guy through and through and it’s just something that I really enjoy learning and don’t plan on stopping.

Danny Johnson: Awesome. So when you surrounded yourself with the right people, what do you mean by that? How did you find or who was it that you may be, I mean, you’re not to share names if you don’t want to, but how did you end up in that spot where you had those correct people surrounding you? What sparked the interest in real estate investing?

Nathan Cron: Sure. So one thing that the flipping junkies are going to find out is real estate is all about relationships and one relationship can throw a good chunk of change in your pocket as long as you can treat that client well. Relationships I found out early on was what I needed to focus on and that’s when I surrounded myself with guys that were really doing similar stuff that I wanted to do. They were investing in real estate. They were using private funds. They were young. I just kind of saw myself in them at that time and that kind of has what led into it from there. Okay Danny, so I got started in the real estate back in 2003 and real funny I actually thought I was going to come out of college and not have a boss and not work for anybody. I was just going to buy real estate, rehab it and resell it. And I was 23 at the time and I came to find out that you actually needed money to be able to do that. So that’s when I started exploring some other options. I answered an ad in the newspaper and said it was for real estate investing apprentice and I went in and talked with them and it was a blessing. It was it was a dream come true. It was everything I was looking for. I got to invest in real estate. I got to use other people’s money. We were a quick transactional company, so I wasn’t actually doing the rehabs but what I was doing was going out and acquiring and analyzing the deals for real estate investors. So that was really right up my alley. I would say that’s what led to me being an expert in just analyzing deal, cash flow equity position, ROI, that kind of where everything started to lead to my future roles.

Danny Johnson: Awesome. So whenever you answered that ad in the newspaper, how did that all start out, I mean, what did they start training you on and how did how did the training go?

Nathan Cron:  It was it was a slow process. When you enter into the real estate game, you really have a lot to learn. You have the industry to learn. It’s important to know who the players are, the guys around town that are doing majority of the business, you want to connect with those people. So that was exciting at that time and that’s kind of what ___ [0:05:21] and kept me going.

Danny Johnson:  Yeah. So did they tell you, “Hey, okay. So here’s the first thing.” It’s going to be determining who are the real players and building relationships with them was that sort of like, if you could sort, not every single step, but what are some of the initial steps that they had you take to get going?

Nathan Cron: Yeah. There’s really two I would say. Two important aspects Danny, when it comes to just getting started, and that’s number one, finding a buyers list and accumulating a buyers list. What that entails is simply just meeting the right individuals in your market. You want to meet other investors that are purchasing. Sit down with them. Really understand what they’re looking for, what their goals and strategies are. Once you start building a buyers list, then you can actively go out and start pursuing property. There are several different ways to do that. Of course if you’re a real estate agent, you can use the multiple listing service. That’s where a lot of the foreclosures are listed and a lot of like the candyman specials, the fixer upper type houses are located on there. That’s a good first stop for you. If you’re not an agent, then you can pair up with an agent. That can help you out, but those two combinations – the acquiring a distressed real estate and then building a healthy buyers list, but once you have those to established you can kind of start playing the matching game from there and start connecting people with the deals.

Danny Johnson: Awesome. So your advice because there is always that that conversation to be whether it’s better to build a buyers list first or find the deals first and build the buyer’s list from that so you have something to bring to people. So would you say that you’re more on the side of going out there and meeting people first and building up that buyers list and then finding deals based on the criteria that those serious buyers are telling you they want?

Nathan Cron: I think that’s a good option Danny. I think that’s probably a wise option for most people because as you’re meeting these investors a couple things are going to happen, you’re going to learn the market. You’re going to understand where people need to buy, what investors are looking for, what scares them, what gets them excited, what part of town they like and this is all going to lead to you going out and finding a better deal. With that being said, I wouldn’t dilly dally too all too long with the buyers list though because I’m a firm believer in if you have a good house, if you can actually go out and acquire a good house, had good numbers, you can find a buyer for it. There is a buyer out there for it. So I think it’s good to be educated on both sides of it.

Danny Johnson: Yeah. I completely agree. So like you said, don’t dilly dally – so don’t you know use that as an excuse to not get started trying to find deals. A lot of people do that. They get out there start trying to build a buyers list and it’s never big enough. They never feel like they have enough people and it’s easier because it doesn’t force them out of their comfort zone. Building a buyers list doesn’t, I mean, for some people that is going out of your comfort zone but I think talking to motivated sales or chasing deals and making offers is even more so and it’s more scary so people are afraid to actually do it.

Nathan Cron: And Danny also just to add to that, that is true and the buyers that you’re building does not need to be 2,000 people long. I think that’s important to realize. I think some people go out and they just try to build this massive list. But what they lack to do is really understand the intentions of their clients and their investors. You can go meet 3,000 people and send out updates to them via email and just kind of see what sticks on the wall at that time. But really understanding your client is going to ensure their success in the project. When they’re successful, they’re going to come back to your door more frequently. So you’re really going to retain a client at that time.

Danny Johnson: Oh, that’s great because not enough people say that and I think you hit the nail on the head really with you have to have a huge buyer’s list. You should have a buyers list that has serious buyers on it and then to take it even a step further, like you said, understand exactly what they’re looking for. That way when you find something so specific to them, they’re going to be really itching to buy it and then you’ve got your buyer right away. So yeah, I think not enough people understand clearly enough exactly what it is that their buyers want. To take that steps a step further, could you even say get serious buyers that have different criteria, so it kind of covers the whole spectrum of the types of leads that you could get.

Nathan Cron: Yeah that’s a great point Danny. What you’re doing is your kind of just widening net at that time. You want to have the rental investor in your back pocket. You want the buy-fix-sell guy. You want a guy that’s going to buy cheap $30,000 houses. You want the guy that’s looking for the $500,000 house. If you can just get a buyer for every type of opportunity and house out there, then it’s going to increase the chances of you pairing up that with an investor.

Danny Johnson:  Yeah. And knowing what you know now, how would you – if you didn’t have a buyers list at all and you just went to Austin recently and you sort of dealt with this and you don’t have a buyers list at all, what do you do knowing now what you know to quickly build that buyers list?

Nathan Cron: Well, I’ll tell you I’ve done it three different times now. I threw my whole network away in Cincinnati to go to Dallas and then I threw my Dallas network away to go to San Antonio and then I threw that network away to come to Austin. I’m getting pretty good at it, but I would say if I could recommend anything, it’s just spending more time with you’re the client and truly understanding what their focuses are. I can say since I’ve been in Austin in the last 45 days that I’ve made some connections that it might take some other people six months to make. I’ve sat with some builders here in town. I sat with some property management companies that are really good. I’ve met some other guys like me that are coming across distressed opportunities. It’s a slow process. You really need to be patient with it, but understanding that the small wins equal the big wins at the end of the day. I come into work and I’m focused and I know what I need to accomplish. I have a schedule right now in front of me and I don’t go home until that’s done.

Danny Johnson: Awesome. So how did you figure out who to contact? How did you contact and meet with them? You talked about the builders and some of the management companies. How did you determine who you were going to try to talk to and build relationships with?

Nathan Cron: There’s a lot of different techniques out there to do this. There are two different approaches I would say, one is more of a shotgun approach and then there’s like a sniper approach. So the shotgun approach to me would be like doing a posting on Craigslist. You’re putting it out there for the masses and you’re kind of waiting for somebody to call you based on you on your on your head. With a sniper approach, you’re actually going into Deed Recorder or going into MLS and you’re identifying investors that purchased properties cash in the last six months and then you have to be just very resourceful at that time. You have to know how to track these people down whether that means getting their phone number, connecting with them on LinkedIn, showing up at their house they just purchased. There are several different techniques from there, but I would say a reverse searching and sniping investors is one of my favorite techniques. So I do think that you have to be good at all of them. There’s a lot of different websites out there Danny that people can go to. It’s basically real estate forums where a lot of information is exchanged and it’s good to establish a presence on these websites. You’re establishing yourself as the professional in the investment niche in your market and that’s something that’s important. If it doesn’t lead to direct sales, it still establishes you as a pro and then people are going to listen to you at that time.

Danny Johnson: Awesome. I like the idea of looking for some people, I think you said on LinkedIn right?

Nathan Cron: LinkedIn is an extremely powerful tool. It’s Google for finding people. People can look at my LinkedIn page and they can see, I mean, I have over 2,000 connections. But I will say the connections I have, they’re solid connections. They’re not people in China that I’m never going to do business with. They’re local real estate agents and investors and title companies and lenders and have really done a good job of kind of networking with all those individuals within my industry.

Danny Johnson: That’s a great point though. You’re finding on the MLS, you’re finding – and for people that don’t have access on the MLS, you could always develop a relationship with an agent that can do the research for you to find the cash buyers that bought within the last six months like you had suggested. And then, like you said, going to the house that they bought it to find them, that’s fantastic because if you can’t find them elsewhere, obviously they just bought the house you could go there. If they’re not there, you can leave a note and then say, “Would you like to buy more houses?” And just have them call you and then – but that’s proving, they’ve already proved that they can make a decision and are capable of buying the house because they bought one already.

Nathan Cron:  You’re right Danny and that’s why I like that type of person because I’m not trying to figure out if they’re an investor or not. I know they’re an investor. I see what they bought. I see what house they bought. Maybe what they bought it for and you’re right if they purchased a medium to large a rehab within the last three months, you can bet that they’re over there working on the property. It just takes a little bit hustle on your part to go out and actually track these people down.

Danny Johnson: Right. And you’ve done a really good job in San Antonio building a buyers list because I have wholesaled a lot of houses to you and then you of course wholesale the house as well, so you’re able to build in enough profit for me to be able to make a profit and then yourself to make a profit, so obviously you’re doing something right.

Nathan Cron: Yeah. And this relates back to what we were talking about earlier as well, your buyers list doesn’t need to be 5,000 people long because – I think me and you is a good example Danny. You’re out acquiring property, but you’ve also just been bringing them right in my door and kind of letting me do the backend work while you go out looking for more property. I’d like to think that I’m a pretty big asset and I bring value to myself on that end. I know you have confidence me. When you bring a property my way, you know I’m going to be there, I’m closing it for you. I believe I’m a hundred percent with you, right?

Danny Johnson: Oh absolutely. Yeah, yeah. Any time that I’ve ever called and offered a deal to you and you said yes I never ever even once for a split second had any doubt that you were going to close. You’ve always and you always will close. It’s just been my experience over doing probably dozens of deals already.

Nathan Cron: Yeah, sure.

Danny Johnson: If we could maybe go back a little bit more, I like to ask people about their first deal, do you remember your first deal and what had happened with that?

Nathan Cron: Do I remember my first deal? Absolutely. I think everybody’s first deal is quite a learning experience. Mine definitely was and you can think of real estate investing like baseball. I think that’s a better way to look at it as opposed to some of these shows that people are watching on the A&E and on TV now. It’s like baseball. You’re going to hit a lot of singles and you’re going to get a double every now and then. You’ll hit a triple and sometimes you’ll hit a homerun. But having the right expectations going into it is extremely important. My first deal was back in Cincinnati. It was buy-fix-sell that I did and I guess one tip I would have is for what year build you buy them. My first rehab ever was an 1892 build. Needless to say, I touched every square inch of that place with drywall and lay out changes. I pretty much did everything to it, so I learned a lot about the construction of the house. I learned how important it is to have good general contractors and good people on your team. I was profitable on the deal. There was nothing to brag about or write home about, but it was a it was an expense. It was basically a college experience. I paid a lot of money and I learned a lot. I happened to make a little money at the end, but it really wasn’t all about the profit on the first deal. It was just about diving in and taking the plunge. I’m sure you’ve heard Danny there are these courses out there. People offer $25,000 for a weekend course and you can go to California and listen to somebody speak. I just find that to be a lot of money. If you bring $25,000 down to our San Antonio location, you’re going to have a good chance to make money with it and it’s just going to be boots on the ground, hands-on experience for you, not just reading over listening to some DVDs.

Danny Johnson: Yeah. I completely agree with you getting the actual experience of going around looking at properties because there is a disconnect I think if you’re always doing the studying on a computer or flipping through a binder. There’s a disconnect there because it’s more of a theory and you might see some numbers and hear some stories but actually getting out there with somebody that knows where you are out there looking at the house and you have a question, that question may not have come to your mind had you not been out there actually looking at a house or going through the neighborhood. So yeah, I agree completely.

Nathan Cron: There’s something to be said for just getting out there down and dirty and you’re going to learn a lot more just by diving in to your own project. If you’re smart at that, if you can keep your risk somewhat minimal just by maybe purchasing at a low price point or making sure that the rehab isn’t something that’s going to be over your head. Maybe just like a kitchen update, a couple of baths update and some carpet paint, maybe foundation, roof or ___ [0:20:18] any of the big ticket items like that. One thing we really preach is getting your team together and what we mean by that is you really need to establish people that are on your team that are going to work for you. Who are the contractors you’re going to use on the project? Who’s your back and the listing agent going to be? Where are you going to source your deals from? Do you have the cash or do you need to go get private funding from somewhere? So all of that is building your team together and deal by deal your team will get stronger and stronger. By the time you’re on deal number five, you should be oiled up and running really smooth at that time.

Danny Johnson: Right. And you guys actually – you had mentioned, bring $25,000 down on our San Antonio office, you’re not talking about a sort of training course kind of thing, right? I mean, you guys basically help people get started and find the deal and then help them put their team together to get it done. Is that a paid thing that you guys offer?

Nathan Cron:  Oh no, it is not. People can come in and sit down for a free consultation today and they can just get a hold of one of the New Western members in San Antonio or the Austin location. Essentially the reason why I said $25,000 is this is real estate investing, which means you have to have some cash reserves on the sideline. We’re not playing with the money that you need to make your monthly bills with. So with $25,000 you can meet a private lender or we also have some financing options for you as well where you can enter into the real estate investing game. But I wouldn’t recommend investing if you have below the $25,000 cash reserves to apply towards it.

Danny Johnson: Right. Great. I just wanted to clarify that because I didn’t want anybody to think that that was sort of an offer to come in and pay you guys that much for training. You guys actually provide the training and get people the deal and you just say $25,000 just because that’s a good reserve amount to be able to get you into getting financing for a property—
[Crosstalk]

Nathan Cron: That’s right, yeah. We’re investing mentors. What you go to the course and learn that costs you $25,000 over a weekend, I mean, we will literally hold your hand and just babysit you throughout the transaction. Open up all the doors for our contacts and really just be there for you throughout the whole process to make sure you can exit out efficiently. Our main goal is to get you back in the door for the second time.

Danny Johnson: Awesome. So can you tell us about a deal that you’ve done recently? Walk us through every single sort of detail about how you got the lead, how you got the property and analysis of it and sort of all the details.

Nathan Cron: Sure. I’ve done a couple recently. I guess my most recent one was located in Universal City and this is in the northwest area of San Antonio. This lead, I actually sourced from a radio commercial that I had and they called me up off of the radio and we got to just talking about their house a little bit and come to find out the wife had a custom new build picked out and the husband was interested and taken his to-do list all the way down to zero. So he thought this was a good option too. So they wanted somebody that could come in cash. Their house needed some update work. More importantly they just had their eyes on the price and that was this new house that they want to live in. So I was able to come in and negotiate an offer for them. I actually purchased the property for $75,000. I did pay cash for it. I put $20,000 into the property. So I rehabbed a couple things. I got rid of an above ground pool, framed the bathroom in, put new appliances in and kind of just did a cosmetic job – painted and updated some doors. That property is worth $150. That house would sell on the market for $150. So I got some good equity in that one, but more importantly is the cash flow side of it. I am a buy, fix and hold investor. So I’m currently building a rental portfolio. I’m interested in passive income monthly and this one I just rented out. I have it rented out for $1,400 and I have taxes and insurance going out at $300, so this is about a positive $1,100 cash flow for me on this deal. And keep in mind that’s because I purchased cash. If I was to leverage myself, I’d see a lot less cash flow than that.

Danny Johnson:  Right. So that’s pretty awesome and I agree with you on buying houses. It seems like you’re buying houses on a – it’s pretty much like the rehab fix and flips sort of buying criteria and then you rent them out and have a huge cash flow. Because I see a lot of people that go out to get rentals and they justify paying way more for these properties and being happy with maybe like $50 a month cash flow. I would never be happy with $50 a month cash flow. It’s not worth the headache and you probably won’t even end up with cash flow on the positive side when you go after that. Is that sort of whenever you buy these buy and holds, what’s the criteria are you using? Are you using just sort of the fix and flip percentage of ARV or do you have a different criteria for them?

Nathan Cron: Well, I may be different than some of the listeners and some of the some of the people out there. I have a little bit of a unique strategy. So I really take my time. I’m not one of these investors that are leveraged and needs to do three deals at a time. I basically wait till I’m in a cash position where I can afford to purchase my next rental and then I buy it and then rehab and then I get it rented out and then I start scouting out for my next one. I’m pretty just one at a time. I just find that to be easier for myself and there’s no need to dive to ten of these overextend and over leverage myself. But when I am looking at the purchase price, obviously I I want the best deal I can. I want it to be a win-win for everybody. But you mentioned something that I definitely do. When I purchase these houses, I’m going into it and I’m basically doing the whole remodel. What I mean by that is, I’m getting it ready for the resale even though I’m renting it out. And the reason why I’m doing that is I’m buying at such a discount to where I can afford to do that and also I’m not the type of landlord that wants calls every day about the toilet being clogged up or plumbing. So I go in there and I fix them up really nice and then and then I just rent them out. In that way, the tenant’s really happy with the place they’re in and I’m not receiving a bunch of calls as a landlord for me to go over there and fix little things on the property.

Danny Johnson: All right. That’s a fantastic idea and then I think you probably end up with a lot better quality tenants because you have a nicer place and so you don’t have the hassle of people not paying you on time or at least probably less likely to not pay you on time.

Nathan Cron: That’s right Danny. I’m knocking on wood right now, but you’re exactly right about that. There are a couple different types of landlords. I’m sure you’ve heard of the slum lord before. That’s the guy that owns a bunch of $20,000 and doesn’t care what type of condition they’re in. I’m pretty much the opposite of that. Every house I buy I’m pretty prideful about. I like the house, I like the area, I like owning it, so I kind of look at it from that point of view. If I feel comfortable over in the area, then I’ll consider it. But if I go to the house and for some reason, I feel uncomfortable then I would just pass on that opportunity and wait for the next one.

Danny Johnson: Yeah, absolutely. And yeah, there’s so much that can be said about that because I think a lot of people go to training and see these numbers on paper for rentals and they say well you can buy this piece of junk over here and slap some paint on it and put a tenant in there and it makes so much cash flow. That looks awesome on paper, but man as soon as you start getting some of those tenants and just the hassles that they create and the problems that they create in your life is just not even worth it.

Nathan Cron: Absolutely. Let me try to explain this to the listeners Danny, just the difference between buy-fix-sell and buy-fix-rent and this is my point of view on it, obviously there are people may think differently but buy-fix-sell is a short term job. That’s where you work X amount of days for X amount of dollars. Where a rental property is a true investment vehicle that’s where you place your money and that money continues to work for you until you don’t want it to anymore. And you got to think on the rental side you’re going with Uncle Sam, you have a lot of deductions. If you buy-fix-sell, you’re going against Uncle Sam. You actually pay capital gains on the monies that you earn when you resell. And then if you look at the rehab, the rehab on a rental property is a lot easier than a rehab on a re-sell property. You can use maybe lower grade material and just get through it a lot more efficient. If you look at the exit strategy on them though, I can speak in San Antonio on this for sure that, it’s a lot easier to rent a property than it is to resell the property. So all of these reasons combined kind of make me the rental investor. I just think it makes more sense. My goal is to achieve $10,000 a month in passive income off of my rental properties. That what I’m shooting for.

Danny Johnson: Nice, great, cool. Each one that you’re doing you’re paying cash, waiting until you can pay cash and it’s a lot safer. So if you get a ___ [0:30:36] in the market where things change rents change, you’re not screaming or crying and wondering what the heck you’re going to do.

Nathan Cron: Danny, that’s an extremely important point. I had a very wise real estate gentleman told me recently is that it’s really a lot of positioning yourself and then that music is going to stop one day and it stopped in our lifetimes before and it’s going to continue to stop then it’s about where your position is when the music stops. So are you highly leveraged when the music stops or you get free. Do you have a bunch of clean houses that are freshly rehabbed or do you have a bunch of houses that need rehab work with unhappy tenants. So I mean positioning is really everything. You have to be ready for some type of downturn because historically real estate is cyclical. There are plenty of books out there that you can read on that. We kind of know where we’re at in the cycle right now. So I just think being prepared and being positioned well is going to help you sleep at night.

Danny Johnson:  Yes. It’s super important and not enough people stress that because yeah you’re right, it absolutely is going to change and right now we’re sort of on the uptake, so we’re doing really well like, the properties are selling really fast and maybe a little bit harder to buy them. But the market is great in most places and we’ve seen the change in what happens whenever things change of a sudden.

Nathan Cron:  Oh yeah.

Danny Johnson: The competition dies and the competition dies because people go out of business. People that were buying like, leveraging way too much are changing their buying criteria so that they could buy more at lower margins. Well, you know things can happen pretty quick and the market can change pretty quick and then you’re left scratching your head wondering what happened. It sounds like you know you’re keeping an eye on things and even if it does change it’s not going to stress you out because you’re prepared for it.

Nathan Cron: It’s hard to go wrong when you own cash rental properties. Even in a downtick in the market, you know you don’t have that mortgage hanging over you, as long as you can keep it rented out, which I think you should be able to if you bought in the right area and did the right rehab work to it, then I think you’re going to be pretty comfortable.

Danny Johnson: Great. Hey would you mind sharing us, maybe you have a deal that you consider to be one of your best deals that you’ve ever done that you could share with us.

Nathan Cron: Oh man, my best deal I’ve ever done to date, that one’s pretty easy. That was a duplex that I purchased in San Antonio and I paid $32,000 for the house and it was two-one on each side, it was about fourteen hundred square feet. And $32,000 and I did $20,000 in rehab work on that one. I put a new roof in. I did all new age back in it, replaced a few things in the kitchens, replaced a few things in the bathrooms and then just lay down some nice flooring with some landscape work. And that one I currently rent out for $650 on one side and $675 on the other side. I own that one cash as well, so I’m into that one for about $55,000. It’s worth about $90,000 to $100,000. But it’s a duplex so I don’t really look at the equity play too much of that was. This one’s more about cash flow for me. So I got $1,375coming in the door and I have taxes and insurance at $300 going out the door.

Danny Johnson: Wow.

Nathan Cron: So this is another thousand dollar monthly play for me and I have some pretty good equity position at it and I did that all with a $55,000 investment.

Danny Johnson: Yeah. That brings home the point of your goal and some people might have thought, “Well heck, he’s waiting until he’s got cash to buy these properties. It’s going to take him forever to do this stuff.” But consider this, you’ve just talked about two deals where you’re basically cash flowing over a thousand dollars a month and your goal is $10,000. So how many of those do you need?

Nathan Cron: At the time you know ten of them, you’ve got $10,000 come in a month. But you got to keep in mind that you purchased all these cash and that they should be appreciating as well. So you know you should own over a million dollars in real estate and cash flow $10,000 dollars a month and I think anybody can live off of $120,000 a year.

Danny Johnson: Absolutely, especially when you don’t have a lot of debt too. I’m sure you’ll probably live for the most part debt free as well if you’re investment criteria’s the same way.

Nathan Cron: I pretty much do and I know some people get me flack on that. They say, “Hey, now’s the time to leverage. The interest rates are so low right now. What don’t you leverage in so you can do more.” I hear that a lot, but if I can sleep better at night knowing I don’t have all that debt hanging over me, then that’s just the way I’m going to go with it, so I mainly do it just because it makes me feel comfortable.

Danny Johnson: Now I agree with you a hundred percent. That’s the way we try to be as well because any time you take on debt, you’re selling off that chunk of your life. You’ve got to pay the debt, you can’t just not pay it. If you ever want to make it toward you don’t have to work one day, you can do it a lot sooner if you live a little bit more frugal lifestyle.

Nathan Cron: That’s right. That’s right. And Danny, you know too that if you want to look good on paper, if you ever get a loan for a house or a loan for a car or any type of loan, they look at your debt, your income ratio, they look at your credit score, I mean all of that stuff is extremely important if you’re going to be a real estate investor. You have to have great credit. You have to have the bank connections and you just got to be really good looking on paper and having low debt or no debt really helps that situation now.

Danny Johnson: Yeah absolutely. So do you have any other goals currently in the business? You talked about your passive income goal that you have, do you have any other goals that you have that you’re working towards, maybe some of the wholesale flips or something like that?

Nathan Cron: Yeah. I have a couple things. One thing I’m trying to do as a real estate investor is become a little bit more diverse. I think that there’s a lot of opportunities out there that you can take advantage of if you’re just smart and resourceful and know the right type of transaction. I recently have done an owner finance deal. That’s something that I enjoy. I would consider doing more of those, but I’m really trying to become more diverse with my personal investments. In regards to New Western and the wholesale practice, San Antonio I would say it’s pretty oiled right now. We’re putting out a little over 20 properties per month at that location. I’m focusing on the Austin office right now and then eventually I’d like to get down to the New Braunfels, San Marco area. Open up a small satellite location there and hopefully be able to provide about ten more opportunities a month for local real estate investors in that area. At that, that would kind of lock down the 35 corridor for me between San Antonio and Austin. So that’s kind of my long term, I’d say two to three year vision.

Danny Johnson: Wow, cool. Yeah. And some people might say well, you’re in Danny’s neighborhood too. We’re in San Antonio and a lot of these areas as well and you might look at that as, “Well, he’s your competition.” But I never do because we help each other. I’ve got deals that I can sell to you and I don’t have to worry about trying to find a buyer and there are plenty of deals out there. So it’s always best to build the relationships and not look at it like it’s competition that you want to crush.

Nathan Cron: Yeah, yeah. I mean there are two ways to look at it. Yeah. You can say, “Hey, I want to crush the competition” or you can say “I want to work with the competition” and I think it goes both ways really. I mean there are some people that you don’t want to be involved with just due to their business practices maybe you don’t agree with, but there’s other people like yourself out there Danny that you know you can form great relationships with and just have a lot of fun working with each other. I think that that’s the name of the game at the end of the day.  We’ve done that. We connected with you and several other people like you and we hope that we’re treating you well and you’re treating us well and you enjoy working with us and that’s a good example of just how you could view somebody as competition, but really they’re an asset to your network.

Danny Johnson: Yeah, absolutely. I wanted to touch on one thing that we had talked about a little bit earlier just to maybe get a little bit more information where you’re talking about how you’re buying properties off the MLS. If you wholesale those properties, some people often ask you know how do you wholesale properties off the MLS? Do you mind sharing sort of a process for getting a house on a contract on MLS and then being able to wholesale without the seller shutting down the deal or not being wanting to do the deal because you’re wholesaling it instead of—

Nathan Cron: Yeah. Often times, I wouldn’t say the seller necessarily has a very clear picture that I’m going to buy this house and then hours later resell it. I think what’s most important to the seller at that time is that I show up with my money on the day that I said I was going show up and close the deal down. Now whatever I do with that house prior after that first closing, I think is my business at that point. So the seller isn’t necessarily fully aware of the whole backend transaction of you reselling the house. With that being said, we do disclose in our contracts that we have the right to resell the property at any time. So we are disclosing that to the seller, but at the end of the day, all the seller cares about is that you show up with your money, you’re there on the close date and they sell their house.

Danny Johnson: All right. And so you do that by doing a double close then, so you have two transactions.

Nathan Cron: Yeah we have transactions. We independently fund all our transactions. So just as a rough example, I’ll buy a house from say, Bank of America a foreclosure for $50,000 and then that same day I’ll sell it to a real estate investor for say $53,000. That three thousand dollars that I make right there goes towards the company and that’s how we keep the doors open.

Danny Johnson: Right. And so in that closing take place at the same title accompanying with the same closer for both transactions?

Nathan Cron: It does, it does. And that way they’re just fully aware of the type of transaction that’s taking place. And I’ve heard this Danny, have you ever heard investors say, “Oh, don’t bring me any that are on MLS.” Have you heard that?

Danny Johnson: Oh yeah.

Nathan Cron: Okay. For some of the junkies that are listening right now, they might come across that in the future and I will say that you definitely bring a lot of value to your Investor network, your buyers list, when you can present them with off-marketed opportunities, stuff that you went out and found with your own marketing dollars. With that being said, MLS is a very large source of discount distressed real estate and it shouldn’t be overlooked. I have an example here in Austin right now where we just got a property $110,000 off the list price. At the end of the day, if the number makes sense, I don’t think it should matter exactly where it came from. If you’re questioning, “How did we bring value with that?” Well, we were able to go in, talk to the agent, negotiate that down under $110,000 ___ [0:42:55] makes sense for somebody now. If you’re a real estate investor out there, I wouldn’t completely discount MLS. There are still great deals to be had out there and it’s just really about negotiating power.

Danny Johnson: Yeah, absolutely. And I think, because I’ve said it before “don’t bring me MLS deals” to different people but what I meant by that was don’t bring me ones that you don’t have under a contract for a good price. So maybe that part needs to be spelled out. I mean obviously if you got it under a contract even if it’s on MLS but it’s at a great price, I could care less that it came from the MLS. But yeah, awesome, so there’s a lot of good information about that. So obviously with the company and everything and everything that you’ve done, you guys have dealt with a lot of investors new and experienced. Is there something with the new investors, the newer investors, that you’ve noticed where some people end up doing real really well in this business because they have a certain character trait or something that the ones that didn’t do so well maybe were lacking?

Nathan Cron: That’s a good question Danny. I can’t say that. I can’t say that I’ve identified maybe an exact character trait, but I will say this, the people that are resourceful I find out just end up doing well on projects. What I mean by resourceful is just that they have the intelligence and the general knowledge. They know the transaction well enough to maybe market it better on the backend or find better or contractors or find a better deal upfront just being a resourceful person is really essential in real estate investing. I guess another trait that I do see too Danny is that you have to be somewhat hands on. I mean, if you’re a real estate investor and you don’t think you ever need to go to your project, you’re never going to need to fix anything over there, that’s absurd. You have to be somewhat of a hands-on person and be able to take care of your own problems that you have. I would just say being resourceful is extremely important and being hands-on on your project I think this is really good.

Danny Johnson: Yeah it’s awesome. It’s a good answer. I don’t think I could have said it any better. The amount of things that that come up with every kind of deal, I guess it’s the people that maybe look at things instead of saying, “Oh, man I can’t believe this happened” and then get upset and sort of take the rest of the day off. They say, “Okay well, this happened. That sucks but what can I do?” It’s just immediately clicking in their head like, “What can I do take care of this and move on?” That’s just the way we’ve got to be. Is there a book that you’ve read – do you read a lot of books? Is there a book that you’ve read recently that you could recommend ?

Nathan Cron: I can recommend two books. To me, these are just the top two books that really anybody should read. If you could only buy two books, I would take up these books and just read them over and over. And that is, “Think and Grow Rich” by Napoleon Hill and then “7 Habits of Highly Effective People” by Steve Covey. I would buy those books. You can get the audiobooks if you like, but I would just listen to those over and over. I mean, it’s the essential just basic elements of this business and how to treat people. And we started this conversation off about talking about how important relationships are and that’s really what real estate is. It’s all about relationships and people want to work with you. Reading those books will not only improve your business life, it’ll improve your personal life as well. It’ll come full circle.

Danny Johnson: Great. I like those books a lot. And your point about re-reading them is very important. I don’t know how many times I’ve read a book again and found different things that either I forgot or just didn’t speak to me at that point in my life and then later when you read again then you’re at a different point, things mean different things. That’s pretty cool. So is there a way that the people out there, our listeners can find you.

Nathan Cron:  Yeah. I’m out there on the web and I can give everybody my email address and that’s [email protected] – that’s N-A-T-H-A-N dot C-R-O- “N” as in “Nancy” at New Western dot com. But you can also find me on my LinkedIn profile as well or you can just go to newwestern.com and you can register on there to start seeing our available properties and come in and sit down and have a consultation. I’d be happy to meet with anybody.

Danny Johnson: Awesome and I highly recommend that too because Nathan knows this business inside and out and everybody he works with, so I would highly recommend that. And of course, we always have the show notes on Flipping Junkie, if you go to Flipping Junkie dot com slash Nathan Cron and that’s N-A-T-H-A-N-C-R-O-N, so flippingjunkie.com/nathancron. We’ll have links that he just mentioned, a link to his LinkedIn profile and then for the books that he recommended and the important things from this episode to a review so that you can go through the key items if you want to. Hey Nathan, I really appreciate you joining me on the show. You shared a lot of great info and we’re really grateful thank you.

Nathan Cron: Thanks Danny. I appreciate you having me on.

Danny Johnson: All right. Have a great day.

Nathan Cron: Thank you. You too.

I really enjoyed doing that episode with Nathan. I hope you enjoyed the show. The message here that’s very important is just to stay conservative and some people try to grow too fast or do too many deals instead of trying to do deals that make big profits, so just be careful with that. Be sure to subscribe on iTunes and leave a rating and review for the show. I really appreciate that. You can also visit facebook.com/flippingjunkie to leave any questions or feedback or anything you want on the Facebook group and I’ll try to answer everything from there. And then for the show notes for this episode please visit flippingjunkie.com/14, that’s flipping junkie dot com slash one four. We’ll see you next week.