Small Operation – Big Money! With Todd Smith
In real estate, you don’t need to start out with some huge, multi-million operation to get things going. That’s not how real estate investment success is always measured. Even in a smaller operation, there’s big money to be made, and you’ve come to just the right place to begin your journey. Todd Smith, a successful real estate investor based in Columbus, OH, joins Mitch Stephen to chat about how to maximize your company’s profits without having to immediately bring out the big bucks. At every level, real estate investment success is possible, so it’s time to get started!
I’m here with Todd Smith. He’s out of Columbus, Ohio. He’s no stranger to real estate and he’s going to give away a free course on how to buy, sell, rent and make money and create a real estate without any money or without any of your own money. With no further ado, how are you doing, Todd?
I’m doing fantastic. Thanks for the opportunity to be on the show.
Can you give us a little bit about your background, the bullet points because I really want to get to the good stuff? Don’t run us all the way down the trail, but give us the highlights, the overview of Todd Smith.
When I got started, I didn’t know anything about real estate. I had no prior experience. I was literally a broke sophomore in college. I bought my first investment property when I bought my first home to live in. Since then, I bought over 100 houses and never using any of my own money. I’ve taught tens of thousands of other people how to buy houses without cash or credit.
That’s pretty impressive. How old are you if I may ask?
I’m a lot older than what I look. I don’t like to say that publicly because I’m not married yet.
How long have you been doing business?
I’ve been doing it for over twenty years, as I always say, I started in kindergarten.
You said you are not using your own money, which is probably one of the biggest keys to real estate ever in the world because if you had to start with your own money, no one would have ever got started because everyone started broke. Do you know people who started rich? Because I don’t.
No, I don’t.
The ones that started rich ended up going broke and then had to figure out being broke. Describe your first deal.
I found my first deal through a realtor and it was a creative financing deal, which I had to be because I was broke. My plan on my first deal was to buy a land contract and to sell it on a land contract. I got the down payment from my Visa card. They send all these applications for credit cards in the mail. Unlike most students, I never used my credit cards for consumer purchases. I started collecting credit cards to use to buy a property.
We have a lot in common, Todd. I bought my first 100 houses on credit cards many years ago starting out because no one would give me. Back in the day, when I was writing on stone tablets when you had good credit, every credit card company in the world would send you one and they all had $10,000, $15,000, $20,000 cash advance limits. No one was regulating the fact that maybe you might get $400,000 to $600,000 on your kitchen table and go to Mexico, which something you didn’t do. I didn’t. We don’t want to live that way but some people did. They started adjusting people’s credit scores based on how much cash or availability they had non-secured and we got to a new credit scoring. I would buy, like, “Here’s $10,000 on this card and $10,000 on this card. I would buy a house and here’s $10,000 I need for the rehab.” I would glue those credit cards into the following. You couldn’t go mingle them or you’d get all jacked up.
I’ve done that many times.
Thinking out of the box, doing what you have to do to get the first deal, how much money did you make on that first deal?
In my first deal, I didn’t make a dime. That’s important for your audience to know because they might think that guys like me and you go out here and everything works for us but that didn’t happen at all. Honestly, I tell people in my seminars, “Thank God I didn’t get discouraged on that first deal.”
Thank God you didn’t get discouraged and thank God you didn’t make $100,000 on the first one. I have seen a lot of people get lucky and hit it big on the first one and screws them up horribly. They’ll lose it over the next five deals because they think they’ve got some gift that they don’t have. You have a 90-minute free online course or you can go to REInvestorSummit.com/tsmithfree90. You’ve got a free 90-minute online training. It’s basically how to buy, sell, rent or whatever with little to no money out of your pocket and make some money and create a real estate investing.
It’s basically how to buy, sell and rent houses without cash or credit.
One thing, you’re like what I call a house whisperer. You like to lean your ear up into the house, to the side of the house, the back door or the chimney. You let the house tell you, “I need to be wholesaled or I need you to take me subject to or seller financing.” These houses can talk. If you learn to read, they’ll tell you what to do. He’ll make money anyway the house wants it. We’ll let him make money the easiest way. You can wholesale it. You can lease option it. You can get it its subject to and you could sell or finance it. He could wrap a wrap. He doesn’t care how he makes money as long as it makes money. What’s your favorite one? Wholesale?
I don’t have a favorite one because as one of my old school mentors said, “I’m only in it for the money.”
I thought you were going to say my favorite one was the last one I got a check from.
You touched on the four things that I do cover in the free training. I use real deals with examples and they’ll get to hear me talking to sellers and everything in the free training. Wholesaling, lease options, taking over payments, subject to and then the last one is seller financing. Those are my four favorite methods.
When you say seller financing though, let’s be clear. I have a book called The Art of Owner Financing, but I might’ve needed to be a little more specific because people sometimes ask me, “Are you talking about the seller owner financing you? Are you talking about you owner financing your buyer?” Which one is this seller financing? Is it a seller financing you or you seller financing your buyer?
I cover both. As I’m sure, you’re well-acquainted with so we can get the seller instead of us having to go to the bank, which a bank is a four-letter word. It’s like a curse word. Instead of us going to the bank to get money, we convince or ask the seller to finance us and set up a payment plan with the seller. Once we do that, we’re free to set up a payment plan with our buyer to make it easier for somebody else to buy. As you know, Mitch, we’re not in the business of taking advantage of people. We’re in the business of giving people the best solution that works for them and also gives us, it’s got to be win-win for us and the seller.
It’s usually the best solution that works to them given their limitations because if they have an 850 credit score, they could do a lot of things on a different level. In my business, I charge 10% for 30 years fixed, no anything. Some short-sided people will go, “Were you ripping these people off?” You can get mortgage rates at 4.5% or 5% or whatever. You’re assuming that they have that job reputation and although they can fill in all those blanks and get that loan, we’ll never get that loan. The next best thing is do you want to rent with fixed payment or with a payment that’s going to go up every year for the rest of your life? Do you want to get a 30-year fixed-rate mortgage and have the appreciation, the pride, and the ability to make improvements in force appreciation? It’s an easy answer to the solution. People who don’t understand the business very well don’t understand that the solutions are different for different people.
That’s a good point, especially for your audience. That’s why they need the knowledge that we’re sharing to get into real estate investing because renting is an infinite interest rate. No matter how much you could pay on that rent for 1,000 years, you’ll never own that house or that apartment.
I like to say though, I took a long way, but that’s why I love doing these shows because I learn things from people every day. People think that I’m doing the podcast to bestow my knowledge upon them. I get to interview a smart person three times a week for the last several years. Believe me, it’s great to have a show. I tell people, the realtors usually, if a buyer comes in with a realtor, they tell me I’m ripping them off because I’m charging 10%. I go, “I’m not ripping them off. The landlord is ripping them off. What will the rent be five years from now? What will the rent be ten years from now?” I said, “No, give me a number. I need a number for 15 years and 20 years.” They start hemming and hawing around, I said, “No, give me a number. What do you think the least amount of rent will be in twenty years on this house?” Over here, my 10% is still the same. It’s fixed. At the end of the day, what will the rent be in 30 years? You say, “This guy went to zero. He’s done.” Todd, let’s do this. You have some tips to get to financial freedom. Let’s talk about those five tips.
I have five steps to financial freedom with real estate investing that I want to share with your audience. If they’re taking notes, they can write down this acronym, EDDIM formula. E stands for Education. If you want to get to financial freedom in real estate investing, as Mitch and I have done, you need to get the right specialized knowledge. Nothing beats education. After you get educated, you need to go to the D in that formula, which is Domination. By domination, you have to practice. I’ve got a little saying that I’ve developed, “Private practice produces pristine public performance.” What I mean by that is people like Mitch and I have talked to thousands of sellers. We know what they’re going to say before they say it. We can give you scripts to handle that, but if you don’t practice those scripts and you think, “I’m going to read this through,” that’s almost the same thing as we need. We know exactly what we’re going to say before we even get on the phone call or before we get in person to the seller. That’s the domination part of it. You have to practice it on your own before you go out into the field.
The next D in that formula is Documentation. You’ve got to have the right documents and getting documents from top people like me and Mitch. We’ve been out in the field. We’ve tested our documents. They’ve been court-tested in battle and field-tested and they’re going to be way better than any document you can get from an attorney because, in my seminars, you have to pay an attorney by the hour. He can give you crap documents, but you paid him $300 per hour for the five hours that it took him to go on and work and print that document out in five minutes. You paid them five hours at $300 per hour. His documents may or may not work for you because it’s not field-tested and they don’t buy and sell and rent houses for a living. People like me and Mitch do.
The next thing in that formula is Implementation. You have to take action. If you don’t take action, you’re going to be a professional seminar junkie. I’m sure everybody out there knows a professional seminar junkie. They bought this course and that course and half the courses they bought are still in the plastic wrap, sitting on the shelf, getting dust and they still haven’t bought a house. Maybe you’ve been doing this for twenty years and you’ve only bought two houses and you haven’t bought anymore because fear crept in. The last thing I want to say is Modification. After you’ve got the right education, you’ve practiced all your scripts, you’ve got the right documentation and then you went out and started taking action. The reality is that you need to make adjustments. That’s what I mean by modification based on the trial and error that you experience out in the field. No matter how much knowledge you gain from me and Mitch, you’re going to take care of it because maybe you didn’t understand exactly what we said or you’ve been objected your own flavor into it and that didn’t work. You’re going to make adjustments. That’s how everybody has to succeed is by doing these five steps.
That’s education, domination, documents, implementation and modification. I couldn’t have put it better because one of the keys, they’re all important, but the education part, how do you talk to people about mentors? It’s tricky because you’re in the mentoring business, right off the bat, people think you’re trying to sell yourself. That’s not the case. I don’t think Todd doesn’t care who you pick. If we don’t suit you, get somebody who will take all your money. You’re going to learn how to take everything. How do you talk to people about mentoring?
Definitely, it’s needed. I had mentors and I once paid a guy $5,000 to spend eight hours with me. I believe in mentors.
Was it worth it? Did you pay $5,000 for eight hours?
It’s some of the best money I’ve ever spent. I’ve never regretted a dime that I’ve spent on my real estate education. I don’t know if you know, but my background is electrical engineering. My plan was to work in Corporate America for five years and then retire and focus on my real estate business, which I started in college. Fortunately, I was blessed that things worked out that way and I made millions of dollars in real estate investing. I’ve never made millions of dollars as an engineer. I could’ve made $1 million as an engineer, but it would take a lot longer than it did it in real estate.
What do you say to people out there that spent some money on a program and they don’t feel they got what they wanted? They don’t know if they got their money’s worth.
The truth is nine times out of ten when that happens is because they didn’t implement it and they didn’t follow the five steps that I outlined. The truth is, if you’ve got a program that didn’t work, you probably didn’t implement it. The truth is there are a lot of courses out there with gaps and sometimes you need somebody to hold your hand and maybe that’s when it’s time to look at paying for a mentor.
That’s where the modification comes in. If it’s not quite, what does that modify? Hire someone to fill in that specific gap. They’ve got to know that they didn’t teach me how to write a contract. I need someone to do it. You must pay for that little piece. Get what you need. Nothing’s a waste of your time if you’re studying it. The guy is not a complete yay that sold you a course. Most of it, there is nothing going on. The other thing is maybe they didn’t do enough research to see if what they thought they were going to get is what they’re going to get. I have heard somebody buy my book one time say, “This thing doesn’t teach you how to buy real estate.” I said, “Where does it say that? It says, ‘My Life & 1,000 Houses The Art of Failing Forward.’ Where did it ever say that I was going to teach you anything?” Take us a little further. Todd, talk to us about some of your growing pains. I’m going to guess you started out as a one-man show.
I definitely started out as a one-man show.
Are you a one-man show the whole time?
No. There was a time that I had about four assistants. I had a couple of assistants. I had a bookkeeper. I had about 4 or 5 people working for me. My main bookkeeper started stealing from me so everybody got fired. I’ve been doing this for a while and things are on autopilot, which is why I have time to be on your program. I operate with one part-time assistant. She does pretty much all my stuff and everything’s on autopilot.
Is that person in town or virtual?
Both. They’re in town but I travel a lot. I spend a good portion of my time traveling. That’s when she becomes virtual.
It’s a new world that we live in and a lot of things are possible that weren’t even possible a number of years ago.
To say it differently, I’m virtual but she’s not.
You’re the virtual boss. Do you have lots of people that you mentor in your hometown? Do you mentor people across the nation?
I mentor people across the nation. I’ve had students from Miami to Seattle, pretty much across the nation.
What does your perfect student look like? What’s their profile?
My perfect student honestly is somebody who’s willing to learn, who dedicates the necessary time and doesn’t make excuses and preferably is not computer challenge. Most of my students are computer challenged and it’s tough to deal with, but I tried to tell them, “I don’t want to waste time telling you how to use Microsoft Word and Excel. I want to spend my time teaching you how to create money, how to turn houses into gold and how to put more money in your bank account.”
What do you seem to do the most of out of the wholesale, lease options, subject to and seller financing? Which strategy do you use the most?
I would say probably, wholesaling, maybe 50% and then the other strategies make up the other 50%. It’s a good question because you can use the strategies to bounce off of each other. Basically, my job is to present the seller with all of their possible solutions that I’m going to offer them. When they walk into a restaurant, the restaurant gives them a menu. I’m going to give them a menu and then they pick what they want. “Do you want me to wholesale your house? Do you want a lower price for cash?” They say, “No, that price is too low.” I say, “If I was you, I wouldn’t do that either. I wouldn’t take a low price like that either. Let me offer you a higher price on a lease option or a subject to or seller financing.” They say, “No, I want cash.” “If I was you, I wouldn’t take those deals either. Let’s go back to that wholesaling offer.”
There you go. Do you do a lot of repairs?
No, I used to. I don’t anymore.
You modify. You use to rebuild, why?
The hardest part to me and I know that house flipping has been glorified and all this HDTV and stuff and that’s great. I like the best glorified because I can show people a better way. I’ve made a lot of money in rehabbing houses. First of all, I’m not handy. I’m an engineer. I make plans and decisions. I don’t physically do manual labor, but I’ve worked with a lot of contractors and honestly, Mitch, I’ve found that’s the hardest part of this business is working with contractors.
That’s what we call the risk is too.
To me, working with contractors is the hardest part of the business in the end. There are great contractors out there, don’t get that twisted. I’ve made a ton of money working with contractors, but I prefer not to. I want to get in, get out and get paid as fast as possible.
Time is money.
Time is life more important than money because when you don’t have any more time, you’re done.
What you’re saying is you need to think about what you want to do with your time. Do you want to spend it chasing contractors and taking them 45 days to finish the job? Would you like to buy a house and put it up for sale? It’s those things to delegate. A lot of things can go wrong. It’s easier to get automated if you cut certain things out.
I’d much more prefer to make $5,000, $10,000 or $20,000 in a couple of weeks or a few days, a couple of hours. I would flip them with contractors for 45 days to make $40,000 or $50,000.
What is your worst and best deal? Let’s start out with your worst deal. What was your biggest nightmare in this creative real estate business?
My worst deal was a property that I was involved in a precedent-setting case because I had a lease option for this property for $200,000. The property should have been worth based on what the appraisal said, $400,000. I spent $40,000 rehabbing this house that I didn’t own and with the intention of selling it for $400,000. When I put it on the market, it was only worth $200,000 but I had a lease option to it. It was because the house had functional obsolescence. It was modified and built by a bachelor who had no concept of family living. That’s why, even though it was in his neighborhood of these multimillion-dollar houses, nobody wanted it. What happened was the appraiser appraised it wrong. I won a precedent-setting case where we sued the appraiser and I won that lawsuit. I didn’t make a dime on the house. That was my worst deal, spending $40,000.
I paid this professional to give me value so I’d not be wrong on my calculations then I was wrong in my calculations because they must’ve plugged in the numbers and we’re going shotgun. It didn’t come out and look the house was functionally obsolescent or obsolete for today’s families. That’s not really functional obsolescence. That’s just built stupid. You can have a 4,000 square-foot house based on the average sales price of the neighborhood come up with a number, but if that house is all out of whack and doesn’t flow and has low ceilings or whatever, you’re going to miss the number.
My best deals are too complex to explain. My best deal would be the properties that I bought with seller financing or subject to and kept long-term because of the value of holding and financing. You can make hundreds of thousands of dollars on one house over a lifetime.
The money is in the financing.
What’s been glorified as this wholesaling and house flipping and all that stuff and quick cash, but what allows people like us to travel and go on vacation and set up all our payments on auto-pay and all that stuff are these financing deals. Anyway, one of the deals I talk about in a free training is, one of my students and I made $40,000 in 49 days on a house and our competition was a billionaire investor that was also interested in that same house. I’ll give a little teaser on that and they can find out more about that in the free training.
You go to REInvestorSummit.com/tsmithfree90, you’re going to get your free 90-minute online training. He covered a lot of material on that, but to be more specific, talking about wholesaling, lease options, subject to and seller financing. I want to thank you for taking the time to be on with me, Todd.
Thanks. It was a real pleasure.
Any last words you want to say to maybe that person who’s trapped in a job they hate and they’re contemplating going out into this business, creative real estate investing?
Real estate is the best in business investment in the world. Everybody has to live somewhere, even dead people have to live somewhere. Dead people live in a cemetery. A cemetery is a real estate. That’s number one. Number two is you can do it. Mitch and I aren’t geniuses necessarily. I’m judging by the hat. I’m guessing.
I was the first one to tell you that I am not smart. I didn’t do all that well in school. I have a high school education, but I had a whole lot of common sense. I have an aversion to pain and I’m drawn to pleasure. I go in that theme, full speed and 100% all day long.
Anybody can do this. You can do this and it doesn’t take money or credit. I don’t care if you’ve been bankrupt or whatever. You can do this. You need the right knowledge and the belief in yourself because millions of people have done it before you. There’s no reason why you can’t do it too.
When you’re broke, you trade time and expertise in lieu of writing checks. That’s what you do. Here you are trying to get some expertise. You’re in the right place. I like to thank Todd Smith for stopping by. Check out TaxFreeFuture.com. If you don’t have a tax-deferred or tax-free retirement plan with Checkbook Control, then check out the 37 little video vignettes at the website. You can find out about this amazing tool that you’re missing out of your tool belt. You won’t believe what your financial advisors aren’t telling you. We’re going to tell you what they’re not telling you. We’re going to tell you why they’re not telling you. It will all make perfect sense and there will be a brighter future out there for you. Thank you very much.
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