 Hey, this is Keena Nisley with team K squared of Keller Williams, and I am doing life of the land is in its real estate. My guest today is CJ Collio from W, W, W, oh sorry W, N, N properties. He's going to talk to us about the burr. So CJ, if you want to go ahead and tell us a little bit about yourself. Thank you, Keena, for having me. I'm CJ Collio, owner of WNN properties, I work with investors and clients utilizing strategies like the burr, which we'll be discussing today to create passive income through investing in real estate. Also consult and mentor those who are looking for more of a hands-on experience. So today we're going to be talking about the strategy that I utilize. It's the burr strategy. It's an acronym. It stands for buy rehab. Refinance and repeat. So great. So can you tell us how do you do a burr? I need that you told the acronym, but exactly can you can you step us through that process? Sure. So the burr is a strategy, like I said, basically you would want to look at it as if you were trying to buy a fixer up or similar to like flippers, but the end goal would not be to sell it, it would be to keep it. So we're looking for houses in distress that we're going to buy all cash. We're also going to look for houses that need repair, possibly not livable at this current state, which seems as buying it at a lower price. Then we're going to add forced appreciation through the rehab process by renovating it, making it livable and in a state where a tenant would want to come in and rent it, which then we would try to rent it at fair market value. The second to the last step would be to refinance. So basically pull out all our cash we've infused in it by carrying a mortgage and then repeat the process all over again. So with the market today, we do see with this coronavirus, we do see a little bit of fear. We see maybe the market is changing. Are you going to change the way you are investing? Yes and no. So with this whole Corona thing and the market shifting, the way I analyze my deals with the birth strategy is always an ultra conservative approach. So I analyze my numbers as if a market shift were to happen while I'm in the deal. So in a sense of my numbers, they don't necessarily change because I've already accounted for that. And yes, I will change with the market when the market shifts will have to shift with it. I find myself looking at investment properties that are more in my price point as opposed to say two or three months ago prior to the virus where it was a seller's market, to be honest. And you as a realtor, you would agree with that, right, right, Kena? Yes. Yes. We have definitely shifted from a seller's market. We're even and then we definitely went into a buyer's market. So we're hoping we come out of this again at an even point, right, right. So are you changing the way you're searching for properties now, how you're putting in your offers, what you're exactly looking for? Yes, I believe I'm getting a lot more streams of opportunity from multiple sources prior to the market shifting in my area. I was primarily getting deals from sellers directly or through off-market transactions, which are run by wholesalers. Very few of my transactions or deals that I would lock up on were from MLS. Now with the market shifting from a buyer's market, a seller's market to a buyer's market, I'm actually getting more MLS listings showing that sellers are becoming more motivated even though it's on MLS and they were asking for higher retail value on a property I didn't feel was valued at that. Okay. So for people that don't really know what is a wholesaler, you talk about getting a property from a wholesaler, the MLS is you use a real estate agent, but how is the process of getting a property from a wholesaler? How does that work? That's a good question. A wholesaler in my opinion is similar to what an agent is except you're not licensed. So they work directly for the seller, lock it up with the seller and then turn around and try to sell the contract or the right to purchase the property to an end buyer, which would be someone like me. So they're in a way brokering a transaction just not as a licensed agent. Okay. So are you doing advertising to find these wholesalers or to find these deals? How do they know to bring these deals to you? Oh, yes. So I don't advertise directly to sellers per se as much as maybe a wholesaler or a realtor would, but I market towards the wholesalers and realtors directly by giving them my buying criteria. So my capital ability to close on a deal or purchase price or some sort or area of interest in my market that I'm investing in would be one of the points that I would highlight to a wholesaler or a realtor that, hey, I'm looking for a three bedroom two bath house in Raytown and I would give them my buying parameters. I'm looking for something that needs to be a fixer up or maybe something that's close to a pterodon where I can value add through renovation and rehabbing. And I'm also looking at areas where it would rent because my play is passive income. I'm not looking to flip. I need something that I can infuse my capital in, force appreciate through the rehab process and then finally rent it out at top market dollar so I can then pull out a mortgage on it and take that capital back out and repeat the process over again. Oh, you doing that here on Island or are you doing this other places? Not doing it in Hawaii. You know, I focus primarily in Kansas City and Kansas City, Missouri. The numbers just don't work for me here in Hawaii. Okay, well, can you can you kind of walk us through how you analyze your numbers? I know people are probably wondering how does he make this work? Great, so the first strategy utilizes limited capital, so to speak, to compound your portfolio creation through that strategy. So with simple math terms, what I like to use as an example would be, let's say I'm looking to buy a house that needs repair and I have say $100,000 cash to work with. Well, I'm going to go and look for maybe a property that needs work that's vacant at a price point of maybe $50,000. With the anticipation and understanding that I can infuse $20,000 to $25,000 into that property. Now, that would take about $75,000 out of my $100,000 capital available. That $75,000 would be my all in price before I rent it. Now, I would look for a property that obviously isn't worth $75,000 when I'm done. I'm looking for this property to be valued at $100,000 if not more when I'm done infusing the force appreciation to renovation. And I'm also looking at rents at about $1,000 for this $100,000 property. So when the bank does lend to me and I am able to refinance out and carry a mortgage on this property, my 75% loan to value, which is pretty typical for investor mortgages on single-family properties, would be $75,000 if the house appraised at $100. Then the strategy would be complete, where I pull out my $70,000. And I get it ready to re-infuse into the next deal similar to that. So how many times have you made this process work? Little over 30. Okay. And how many rentals are you holding on the mainland now? Between me and my wife and our portfolio, we're about 70 plus with a few commercial building. So, wow, that's really impressive. So you're talking about the refinance. So with the market and what we're going through right now, are we seeing the re-finance process? And is it, I'm sorry, Keena, I didn't catch that question. Is the re-finance process getting more difficult with what we're going through right now? Are we seeing delays or? Yes, yes and no. So I say, yes, it's delaying. So I say, yes, it's delayed a little bit. If your credit score isn't as high, I would say maybe 680 is where it starts to get challenging for people who have a credit score of 680 or below. So your DTI, your debt to income takes a play into this all. For the most part, they're well qualified. I personally, between myself and my clients that I work with, haven't seen a lag in refinances. We do see a lag in closing on the buying side due to the whole virus and inability for us to properly transact through escrow can get our documents signed going through inspection and so forth. So yeah, we are seeing some similar delays. They're still moving. It's a little different with home inspections of their wanting to be virtual and stuff. So we're seeing kind of the same thing here on the island. So is there anything you're going to start doing differently now that the market is shifting? Well, like I was saying about the buying side, I'm starting to see people be more willing to accept my lower cash offer on properties that I'm looking to purchase on, especially on MLS. So my buying strategy is to be a little bit more selective and patient, knowing that in my opinion, this is the beginning of correction or market shift, so to speak, where if I'm patient and I trust in this strategy and the process that I've known to be that known to work, I can find some really good deals as long as I crunch my numbers and take them into account for the extra holding time like you were talking about. So my buying strategy does change a lot. Okay. So is there any ice that you would give to somebody if they wanted to start investing and buying rentals and creating passive income? I guess my first tip of advice I would give somebody would be to make sure that you one, have a market that you've identified to understand the numbers that you're looking to achieve and how to property calculate and three, to have an idea of a team without a team being that I'm in Hawaii and doing this from afar, I wouldn't be able to rehab it myself or to walk in few properties or find properties by myself without a credible team that I can trust. So I guess that would be three things I would suggest new investors that are looking to do the birth strategy not in Hawaii but in a market that makes sense for them would be to do, to identify the market, to know how to run your numbers and what makes sense for you and then to create relationships, network, have that solid team in place where you can rely on them to properly represent you when you do find properties that meet your buying criteria. So you talk about a team, so just so our viewers know who's on your team, what kind of people do you need on a team if you are going to do this from why you live in Hawaii and you're investing on the mainland? That's a good question. Team members vary I guess on your perspective and the feel of need to have certain types of members on your team. I like to rely on realtors. Relators are one of my important team members because they can and understand the market that I'm investing in. They also are able to pull up information via the MLS like you have, can pull up comps, can pull up recent souls, can pull up property data that I may have a lot harder time to get by searching the web or might be spending a lot more time rather than simply asking an agent who's licensed, skilled, and professional in their practice to pull up the information I might need. Secondly would be to find a GC. To me, the general contractor, the GC is my golden goose, the one that when you find a good one, you don't want to let that one go. Without them, they may or may not make your numbers work. And they also have that experience and knowledge being that I'm not present to analyze the property in the state it's in and to give me fair numbers on how much it costs to renovate it. And then another team member I would suggest is having a property manager. Obviously, I'm not looking to resell this property. I'm looking to rent it and hold onto it for a long period of time. I would need someone that can property rent represent me as a property manager to put in the proper tenants, to collect rent, to upkeep the property, to follow all the guidelines and rules that that state that I'm in might have as a landlord. Also, a lawyer would be very important to have on your team, someone that can help you read and draft up contracts. Insurance agents are very important. You always want to make sure you're covered from liability. Those are my five main ones I like to reference as an important team or what would define my team. Okay, so are you able to communicate with them? How do you contact with which team? Yeah, I'm sorry, Kina, you broke up again. Were you asking me how do I contact my team? How often do you communicate with them to keep moving? Are you in weekly contact? Yeah, so contact with my team varies. In my opinion, it's off of how many deals or transactions I'm doing at the moment, who I might be conversating with and how often my primary calls for the day are towards more real estate agents or realtors, as well as wholesalers who are acting or brokering transactions off of MLS. And the reason for that is that's where the deal starts. And for me to lock up deals then gives my other parts of my team the opportunity to have business and to create income as well to be transaction. All right, so let's go back to rents. So we know it's now the first of the month. Are you worried that there's going to be rents not paid and you have a lot of rentals on the mainland? Are you worried about that and how have you prepared for that? I can't say it doesn't bother me. At the same time, like I was sharing in the beginning about knowing the numbers and how do you run your numbers. For me and how I've run my numbers, I've always run them as if like I said this market correction were to happen. So I have put aside for like a rainy day fund with the expectation that something like this is inevitable to happen being that the market goes through cycles. I'm not as worried as maybe someone who hasn't put away something for a market shift. It's my, what are my tougher questions I have to answer to clients when they ask me what should I do? And I give them more of a question back like how are you running your numbers? Are you preparing for a market correction? And as you all know or as you know, we didn't expect the virus to be this traumatic or to affect us in that type of way where it would cause this potential shift in the market that we're seeing today. So for me, I always revert back to putting away and practicing very conservative numbers to prepare for things like this. Great. So where do you think it's going to go after the virus after we're let out on April 30th, hopefully, where do you think the investments are going to go? Where do you think we're going to end up? I don't like to make predictions rather I'm preparing to do a lot of buying let's just say. I'm analyzing and preparing that within the next two to three quarters or second or third quarter, I'm sorry, second and third quarter, I might see a lot more opportunity in the type of properties that I'm looking to partake in and locked out. I'm also preparing to have longer hold times, longer rehab times due to materials being out of stock or restrictions that my team members might have to comply with in order for me to complete my transaction and finish off the strategy of the Burr. And obviously with the lending banks, if they do decide to tighten up the grains a little bit more, I have to anticipate for that. Okay. So also, do you have any advice for somebody who is just getting into this? What advice would you give somebody who wanted to start doing the Burr process? That's like a million dollar question right there. Advice would be is to figure out if passive income is your strategy and why. There's so many different ways to invest in real estate and I just practice a little sliver of it. So if passive income or the Burr strategy might appeal to you, that's kind of where I would suggest seeking out advice or counsel if you haven't done it with an experienced person. Okay. So what made you go in the passive income in the Burr direction? So what was it? What made you go? What drew me in was the ability to replace my W2 jobs income. It brought a sense of comfort knowing that I could create cash for passive income through investing in real estate where it could replace my job if I were to say leave it or possibly lose it, which in a time like this, this is kind of exactly why I took up this strategy. I get to rely on and live off of my income as opposed to possibly being furloughed or laid off due to the circumstances. And a big part of it is to just be freed up in time to be able to spend it with those I love and do what I love. And I found that real estate investing is something I really love to do. So those were kind of my things. So were you able to walk away from your W2 job? Yes. I was able to walk away last summer in June of 2019. I was able to leave my position at UPS as a driver for the past 17 years. Yeah. It was different. It was challenging, but exciting. And all the hard work I put in over the past five years have finally paid off. Yeah. You needed to start with that because that's huge. So that's that you've been able to build this and into what your dream was. So if someone else has a dream, is there something that you can offer them? Maybe help them to obtain this dream? Yes. Like I said, I do some mentorship and consulting. I try to work with clients who have this passion or maybe goal or vision of possibly exiting their job a lot sooner than say a retirement age, but don't quite know or understand how to achieve it. And I will bring my experience and knowledge and educate them on how to properly do this so that they can repeat this process and do it themselves and create this type of passive income to reach whatever dream or goal they might have. And how would they get more information on your mentorship program? They could contact me on my cell phone number or email me directly requesting to have a meetup. I like to have one-on-one personal meetups with somebody so we can have a discussion and see and feel if this would be a partnership or relationship of some sort that could be fruitful for both. So in this market now, would you recommend it something they start doing now? It could be. If you're properly prepared and have the education and drive and willingness to take these steps of faith, so to speak, on a strategy that I have no works, you would be setting yourself up in a good position for the long haul. This is something that we've been waiting for, not the virus, but the market shift for a couple years now. And we're excited for the opportunities that it will bring us in our ventures that we're looking for taking. So yes, because what we do see come down eventually goes back up. So is there, yes. So we tend to like it as investors when it is down for it to go back up. And you also host a monthly meetup. So I'd like you to share a little bit about that because I know there's people that might be interested in coming out and learning about that also. So can you share a little more about your monthly meetup? Sure. So we hold a meetup at on the west side. We're out on the west side and we noticed that there's a lot of meetups in town, but nothing on the west side. So we created a meetup about three years ago me and my wife and we hosted out in Makakito. Unfortunately, due to the virus, we are unable to hold it in person. We are preparing to have our meeting go virtual in April. So we do have a Facebook page, the West Side Real Estate Meetup Group. If you can check us out there. If not, I can give out a different email where we send out reminders and dates and times of topics and speaking engagements we have for real estate investors that want to stay on the west side. And that'll be something I can share and we can post up on the website if ThinkTech will allow us. That's great. All right. Thank you for being with us today and thank you viewers for being patient with our virtual in and so I am a real estate agent and a real estate investor. That's how I know CJ and I love to work with investors. So I do have a lot of investors. So if you're interested in any of our listings, please let us know. Next, my next show, I will have the owner of Keller Williams, Honolulu Maui come speak to us about where the market is right now. I know the fear with the virus is where's the market going to go. What are we doing? I will tell you we are still working. We are still seeing escrows open. We're still seeing listings come on the market. So the real estate world on Oahu is still alive and well. So we'll see in a couple weeks where we are. And I thank you and I will see you guys in a couple weeks. Thanks. Thanks CJ.