Table of Contents - Increasing Success Rate of Rent to Own with Scott Ulmer
Dave Debeau [00:00:09] Later on, this is Dave Debeau with another episode of the Property Profits Real Estate podcast. Today, it is my pleasure to be chatting with Scott Almar, who is calling in all the way from beautiful sunny Florida. And at the time of this recording, I think you guys just finished getting bashed up by a hurricane, if I'm not mistaken. So glad to see the lights are on in here in one piece, my friend.
Scott Ulmer [00:00:31] Thank you. Glad to be in one piece.
Dave Debeau [00:00:34] So Scott's been investing in real estate for quite a few years, I believe. Twenty three years. He's worked directly with one of my old mentors, Ron Lagrand. These coached and taught a lot of very, very successful real estate entrepreneurs, including Chris Perry, Fontaine. And Scott's big, big focus these days is on a slightly unique twist to the old rent to own strategy. So, Scott, it's great to have you on the call today.
Scott Ulmer [00:01:06] Thank you for having me.
Dave Debeau [00:01:07] My pleasure. First of all, first things first. How did you get involved in the whole crazy world of real estate in the first place?
Scott Ulmer [00:01:14] Well, I had the distinct pleasure of being a kind of a real estate kid, my father. It's kind of a neat story and I'll condense it for the purpose of this podcast. But back in, I think nineteen eighty three, there was a book, How to take the Financial Genius Inside of You by Mark Herold's. And I don't know if you remember that. It's a good title. It's a great title. And as the story goes, you could send in a check for ten dollars. They would not cash it. Of course, this is a newspaper article for those that remember what those look like, but they would send you the check back after 30 days if you sent the book back and didn't like it. So at the time my father was coaching football and teaching phys ed. My mother was a science teacher. Both came from humble beginnings, very humble beginnings, and they want a better life for their kids. Have a younger brother. So my dad wrote a book on wholesaling, Send It Back because he didn't have ten dollars in a checking account. And that is a true story. He did ultimately send ten dollars after he did his first wholesale deal. But he started just from that, literally from reading a book, kind of became a lightning rod. And I had the privilege of really coming up, watching him cleaning out houses when I was 10 years old and doing the different facets of renovation and then ultimately through high school and started doing some deals all throughout college, then I actually I want to drop out of college and I like making money and very thankful my parents wouldn't let me. So I they forced me to graduate. But right out of school, I was able to kind of jump in full time. So I come from a real estate family and I've done it and it pretty much my whole life.
Dave Debeau [00:02:37] All right. Well, that is a great story. And Scott, nowadays you're focused primarily on rent to own for those folks that aren't super familiar with it. Can you give us a big thirty thousand foot perspective of what is rental and real estate investing?
Scott Ulmer [00:02:50] Sure, absolutely. It was kind of funny as we were speaking somewhere and we had a gentleman who had been forty one years in real estate investing, also happened to be a lawyer and a CPA. Kind of a triple whammy there. But he came and saw us. We got three days, which we are honored by. But he said, Scott looks to me like you've taken an old strategy. You spit, shine it, printed it up and put a bow around it. And I said, you know, that's probably not inaccurate. So at the end of the day, we didn't create this. I would even say that we're pioneers. These strategies have been around for a long time. But I will say with full candor that we've made about every mistake in the book. And I think that that's how you learn that you find out what works and what doesn't, obviously through trial and error. So a lot of trial and error went home from a thirty thousand foot perspective. I would define it as this. There is a gap in the real estate world, folks that can walk into a bank and qualify for traditional mortgage today and those that cannot. There's really no middle ground in there, certainly not a national presence that really has the intent of seeing the homeowner become excuse me, the tenant become a successful homeowner. And so what it is very simply, we work with folks who can afford a mortgage, who can afford a down payment, but for a multitude of reasons, may not be able to walk into the bank and qualify today for a traditional loan. We work with those folks. We will get them into a home. They will put a down payment, which is nonrefundable. They'll make payments for a period of time and ultimately will be responsible for obtaining a traditional mortgage within that window of time. So thirty thousand foot view, that's really the simple answer is just kind of they're making payments until such time they can qualify for a traditional mortgage. We have a couple of distinctions there that make us different, I think. And but as a whole, that's really the thirty thousand foot view.
Dave Debeau [00:04:28] All right. So back in the day when I learned about Rent Own for the first time, which was from our mutual friend Ron Legrand, it was a bit of a well, it's still has kind of a sleazy reputation because there are a lot of rip off artists in the business, unfortunately. So a big challenge in the past. And nowadays sometimes, as well as you get the rental entrepreneur or the real estate investor, as it were, and they get somebody into a house on a rental basis. And whether the person makes it or not, they don't really care, because if that person doesn't make it, they get kicked out and they bring somebody else. Into the deal and just kind of rinse and repeat and there's been a lot of bad press about Rentoul because of that. So I know you guys do something different. That's what you're really pride yourself on. Tell us a little bit about what you do that's different than what those sleazy red zone operators have done in the past.
Scott Ulmer [00:05:27] Sure appreciate that. What's interesting is we will always retain local council, any market that we're in and legal counsel and attorney. And one of the very first things I tell them is that any real estate firm has been around the block, has seen a scenario like that where you have an investor that will take a down payment from a buyer and at the first sign of trouble, do everything they can to kick them out so they can rinse and repeat. Now, there are theories around that and certainly not my place to judge. The difference in our world is this, Dave. We really want our buyers to become the homeowner. And so our approach with them is distinctly different from how we qualify. So right up front, we're working with folks again. They have to have down payment requirements. We require five to 10 percent of the asking price of the home. We do have a minimum ten thousand dollars. Now we're working in price ranges in Jacksonville, Florida, as an example, two hundred to five hundred thousand, maybe one fifty to five hundred. We've done them lower. We've done them higher. But we've identified that is really the sweet spot. Those are folks that have significant down payments. That's how we get paid ultimately. And ultimately, their success rate is greater than those. Maybe that would be on a lower end of the spectrum as far as price point. But what we do with our buyers is we take them through an underwriting process that's about identical to Bank of America, Wells Fargo. We're looking at two years worth of tax returns, bank statements, paystubs, income verification. They're factoring that to income ratio, debt ratio, pulling scores, identifying Metzker all of the things that go into the qualification of a traditional borrower to Bank of America. The big difference is we're not looking to see if they're going to be qualified today. Back for 2008 eight. You can have folks that told you have we got terrible credit and no credentials and they're qualified for one hundred twenty five percent of the value of the home part of why we got in trouble in 2008. Those days are a
Dave Debeau [00:07:10] big part of why you got in trouble in
Scott Ulmer [00:07:12] 2008, big time stated income and all the other crazy things that still perplexed me when I think about them today. But we want to make sure that we are looking very closely at our buyers not to see if they're qualified, but why they're not qualified. What are the reasons you can't get a mortgage, number one? And number two, what are the exact steps you need to take and in what timeframe should you be able to achieve those items? So from this call, which we pay a few hundred dollars for, and I happen to think that's expensive because it's a one hour phone call that takes place. We have a specific company we work with, but they put a roadmap together, a blueprint. And so now we know why you can't get a mortgage. You know exactly what it's going to take for you to do so. And the window of time, which you will wrap our agreement around that time frame, and we will require our buyers to work with a third party who will actually work with a mortgage lender to write the loan. So not only do we have a what we call a vetting phone call underwriting take place, that's usually a one hour call with this third party company. Once we have the report date, we then will have an interview with them anywhere from 30 to 60 minutes. Big believer in education, making sure that your expectations are clear when people understand what's expected of them. They have the roadmap in front of them and they know that the end game is to become a successful homeowner. And they have skin in the game, which is big important for us. There's nothing that mitigates risk better than skin in the game. Most of our deals succeed because of that. And so, again, with our intent being wanting to create a homeowner, those are the steps that we take to get them there. And that time up front has made a real big difference in our success rate.
Dave Debeau [00:08:43] Yeah, that makes sense. So, again, my familiarity with a lot of other rental operators, they're not the kind of shady side of the businesses. They don't you can fog a mirror and you got to get into the house. But you're definitely looking for people that can you know, they are going to qualify right now. But if they follow the plan within two or three years, they will. OK, so that's one side of the equation. You've got the the buyer. The other side of the equation is the property. So how does that look? So let's say you get a buyer that looks really good. Do you have a whole bunch of properties already lined up ready to go, or do you go shopping for a property with them? How do you how do you find them, the house of their dreams?
Scott Ulmer [00:09:22] Yeah, absolutely. Well, I think to your point earlier about the slime factor, a sleazy operator there, we try to target homes that we consider executive level. It's a moniker that we've kind of put on that. And certainly that could mean several things, depending on where you live in different price ranges. But we're trying to deal in an area in areas that that are going to attract a decent clientele and again, those that ultimately can qualify at some point in the near term. So as far as the sellers are concerned, what's great about the Internet, and it sounds silly talking about that today in our date, but is that most of the leads we generate come for free online? Now we have campaigns that we do off market to attract different types of sellers, but we're targeting essentially what I would consider a retail based type of seller. They're not necessarily distressed. Don't get me wrong. We like them on the. Distressed and motivated, but we're finding our leads online and we have a very distinct script, it's very transparent, very soft. We have a very soft approach. We're not hard line folks, but this is for some folks and it's not for others. And we kind of put it on the table. So how we're finding the seller ultimately is through those online means. We have parallel tracks as most real estate investors do. We're constantly churning up leads for sellers and turning up leads for buyers, certainly in a perfect scenario. And that's happened more times than I'll remember where we have a house and we put in our buyers list and a buyer loves it. And we go from there, put them together and they live happily ever after. So we hope but what we find in most cases is that the individual house and the individual market for that house is usually what attracts that buyer. So somebody in the neighborhood they've been renting, they want to live there. We stick a sign in the yard, have some Bannatyne zero signs, and all of a sudden we've peak their interest and so many cases that is going to be our buyer. So and the other thing is and we do talk about this internally here we have a house under contract in, say, an area called Middelburg, which is a kind of a place in Jacksonville, a little west of town, a little more land, not on top of each other, a very desirable for people to live out there. So we didn't know people want to live in Middleburg until we started doing deals when we found out the interest level. Well, now we absolutely will reverse engineer our marketing and our leads to be targeting that area. So certainly a combination of that. It goes into it. But I think in our world we say we never want to stop the buying machine. That's one thing my dad taught me a long time ago. So for those listening, you always have to have consistent leads. In fact, I'm wearing a tie today because we have a training. I don't normally wear a tie, but we have folks in town this week training him. I was sharing with them this morning. We had outsourced for a period of time most of our leads that we generated to a virtual assistant service so they would have the criteria we're looking for and they would furnish us leads, did a pretty good job and we still recommend them to people to this day. But our primary gal that was calling took a vacation from a Wednesday to a Wednesday. Don't ask why people do that. You're missing two whole weeks of work. I don't understand the logic there, but we literally lost two weeks of leads. You don't feel it today. You don't feel the next week. Thirty days later, we hit a wall because our inventory dried up and our lead pipe line had really dried up as well. So we always have to keep the machine going no matter what that looks like. And you have to be touching at least an hour or 15 to 20 different sellers every week if you want to maintain consistency and build the pipeline simultaneous or marketing for buyers just nonstop as well. Once you have inventory and you have homes, you start marketing them. It's amazing the buyers that will come from just marketing from one home. And so at this point, we have those parallel tracks. And but again, once we identify areas, we then we'll certainly try to market partner in there for other embittering opportunities.
Dave Debeau [00:12:51] Makes a lot of sense without giving away our secrets. Scott, are you focusing on as one of your tracks, focusing on expired listings or you just read fizbo is for sale by owners? Yeah, listed properties. What do you what do you.
Scott Ulmer [00:13:05] Yeah. So expired. And one of my favorites, number one, that is a great demographic. And you think about a typical listing. Most are six months and by the time they get to six months, they've had at least one, sometimes two, sometimes more price reduction. So not only that, but when they're listed, the seller is basically telling you, I'm willing to take 10 percent less than what I'm asking. I've got six percent for commissions. More likely than not, the buyer is going to ask me to contribute to their closing costs, which rule of thumb is three percent? And I probably could take an offer. So when I see them listed, obviously we're kind of thinking that same thing. One of the things that Ronald Grant taught me is when you're dealing with expired listings, it's important to catch them at the right time. So the problem with expires is people wait until they're expired, then they get a list and then they mail them something. And it could be we did a campaign at one point a couple of years ago, only to realize that we were mailing to expired that have been expired for ninety to one hundred and twenty days. Well, they probably made a different direction or a different move at that point. So that campaign really fell flat. Ideally, you can catch them about three days before they're going to expire. Now, as a realtor, you cannot touch those folks because there's a code and ethics and that somebody else is listing. But if you're not a licensed agent and this is a little bit of a fine line here, I know some folks that actually contact those people, sellers that are in their listing agreement and they're very clear they do not cancel unless they cancel. I just want you to know I'm out here if there's another option you want to explore. So they're very soft about it. Tortious interference, tort law. We want to be very careful not to interfere with other people's contracts, but expires our great demographic for us. I will tell you, one of my favorites is Craigslist for rent by owner. Most folks that have a four hundred thousand dollar home or three thousand on our home didn't buy it to rent it. They might be a default landlord, a landlord by default. They have their reasons. Don't want to sell at face value. Oh, too much like the cash flow, may not want to be a landlord. So we approach them with this hybrid option where you can still generate the cash flow in the payments, but you have an exit strategy at the end. So we're going to cash out at a full retail price. And you don't have to be a landlord anymore because they're responsible for upkeep and repairs, and so that's been a good one for us as well. Certainly Zillow and online sources and Craigslist also. And we have several other kind of secondary technique's fliers on door to door, still work really well, which puts a smile on my face because that's from like 20, 30 years ago, even before my time. But we still do that to some degree, but we do obviously find most of our leads online.
Dave Debeau [00:15:32] Very cool. Well, thanks very much for sharing some of that. Now, I know, Scott, with your business, which we'll talk about in a second here, a little pink houses. Look, thousands of Americans I want to call. Yeah, you're working with people across the states and Canada, actually. So just out of curiosity, I mean, I understand in Florida you've got a huge population base. Does this kind of stuff work in smaller markets to what do you find and in smaller markets in order for somebody to have a decent business out of this?
Scott Ulmer [00:16:01] Yeah, you know, what's amazing is that we find the smaller markets are, in many cases, much more lucrative than the big markets, and they're probably second less competition. Yeah, I would just say there's a couple of reasons for less competition. And we've got a couple of other thoughts that are around that. But it definitely works in small markets as well as big markets. There's no question about that. And so what I've learned today is that in every market there are folks that can afford a mortgage and a down payment may not be able to walk into the bank and qualify. So there are buyers everywhere that fit that. I also say this because I don't know that people always know that I'm in a training today. So I shared this this morning. But in Jacksonville and this is a statistics within the last six months, one out of every four deals written by a realtor fall apart at or before the closing because of financing really out of one hundred buyers. Twenty five of them fall through with traditional MLS deals in Jacksonville within the last six months. That's a statistic. So to me, that's staggering. I mean, maybe it's par for the course, but those two out of one hundred deals written by realtors. Twenty five fall apart. Those twenty five for our buyers. That's perfect. These are folks that had enough hutzpah, if you will, to get a preapproval, get to the point where they're in the car driving around with a realtor, finding a house. They like negotiating and offering it contingent on financing and ultimately getting denied for their permanence. So they had enough of the right stuff to get there, but obviously fell a little short. That really is for us in Las Vegas right now. It's four out of every 10 and 40 out of one hundred. Again, staggering to me, but those are real time statistics. And so having said that, there are buyers everywhere. The key is the marketing. Most folks don't know that this option exists. They don't know it exists in nice areas. They have that preconceived notion that it's either for lower price point homes or lower end junker type deals. And that just couldn't be further from the truth, at least in our world. So there are buyers in every market. And if you're in a small market listening to it, there's no question that there's some great opportunities there.
Dave Debeau [00:17:58] Some Scott? Well, unfortunately, my friend, our time is running low. So before we wrap up, if people want to find out more about you, Scott, and what you're up to and and that sort of thing, what should they do?
Scott Ulmer [00:18:09] So we've got two websites. Our business website is Little Pink Houses of America dot com, and that's a mouthful. I know a little Pincus's of America dot com. That's our primary site. And then if anyone that's interested in finding out more about us and some of the opportunities we offer, it's pink affiliates, dot com pink affiliates. That's plural dot com. We're in the process of becoming a franchise, by the way. It's something we're really excited about. And so we'll work with folks all over the country. And we do have three folks up in Canada and the different provinces that working with and if you want to check us out, those be the sites to find us, OK?
Dave Debeau [00:18:41] Dumb question. How did you come up with the name Little Girls of America?
Scott Ulmer [00:18:45] Hey, no such thing as a dumb question. So I actually just hear that this morning. And so I'll make a very long story short. Back in two thousand and four, I had the distinct pleasure and privilege of meeting with a franchise lawyer, and I was going to say lawyer joke and I caught myself there. But franchise law is I was told at the time and have come to realize today still is a very specific niche of law that is not very prevalent, if you will. So there's not a lot of franchise lawyers running around. He had put this seed in the back of my mind that our business model could be replicated in other markets around the country. So 15 years later, here we are kind of launching that. But little pink houses of America, we actually decided our theme color was going to be pink. And don't ask me why. I had an assistant that said, hey, we're going to be pink and said, oh, my goodness, pink. I mean, I'm a guy. How is that going to work? But the female is the decision maker when it comes to buying homes. I wanted to make sure we targeted that. If I was in the training room here, get bright pink signs were even a pick lock box. I mean, we're obnoxious over here. I got to tell you, we're obnoxious. But we also knew that breast cancer was something that had affected us. People that started this with me, we wanted to make sure that we were a company that gave back. And so we designated a breast cancer charity. The pink kind of coincided. And then the final nail in the coffin, there's a John Cougar Mellencamp song from the eighties that talks about Ain't that America for you and me and talks about owning your little slice of. Of home ownership, your little pink house, and so our interpretation of that chorus was it was really about what we were doing here, and that's about everybody owning their own little slice of America, their own little slice of Canada, a little slice of of a home. And so that became kind of our our theme song, of course, but also kind of the company names a little pink houses of America excess, kind of the back story of Scott.
Dave Debeau [00:20:30] Thank you very much for your time today. Thank you for sharing some some very cool tips and ideas as well about, you know, where to be finding these these motivated sellers and then a bunch of process donors and something. I've got a fair bit of experience with myself, so it's always interesting to chat about that as well. So thank you very much. Thank you for having me, Dave. All right, everybody, take care. Tune in and we'll see you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast. And you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.