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Lease Options Turnkey Investing with Jimmy Vreeland
In today's show, Larry talked with Jimmy Vreeland from St. Louis, Missouri. Jimmy is a former military and now a full-time real estate investor. He specialises in turnkey and lease options. He is also the co-founder of Cashflow Tactics and the principal of Joint Ops Properties.
They discussed why you should consider lease options among many others so don’t forget to tune in!
Who Jimmy Vreeland is
Their business model
Finding their out-of-state investors
What their typical deal looks like
The kind of return their investors are getting
How he got into real estate investing
How daily content on Youtube helped them
Secrets to keeping good crews
Strategy on raising private money
His past job experience
Why he chose to do lease options
The typical lease option deal
Qualifying your lease option tenants
How a rent guarantee premium works
The level of repairs they do
The kind of volume he is doing
Marketing and finding lease option tenants
His business structure
The CRM he is using
"Real estate has been the greatest wealth producer in this country."
"The easiest part has always been finding the person who wants to move in into the house."
Larry: Welcome to the Brain-Pick-A-Pro show live from Lake Wylie, South Carolina and somewhere on the side of the road in front of a vacant house somewhere in the St. Louis vicinity is Jim Vreeland. What's going on, buddy?
Jimmy: Hi Larry. How are you doing, man?
Larry: Man, I am good. How about yourself?
Jimmy: Just grinding in and out. Trying to sell these turnkeys.
Larry: Having fun and making money, right?
Larry: That's awesome. That's awesome. Now, for those of you that don't know, Jim is a friend of mine. He's got a business partner. He's going to tell you all about it. But, he's a real estate investor full time, mover and shaker, doing deals. He's in my collective genius mastermind with me. Well it's not mine. It's Jason's, but we're in a mastermind together and he's just a mover and a shaker. I wanted to get him on to share with you guys what he's doing. So, Jim, tell them a little bit about yourself.
Jimmy: My name is Jimmy Vreeland. I'm from St. Louis, Missouri. Married with four beautiful children. I specialize in lease options. We've had so much demand that we specialize in TurnKey lease options to other investors.
Larry: That's awesome. I'm going to grab something to write on because I'm going to take a lot of notes. How long have you been doing real estate?
Jimmy: I used to be in the military so when I was overseas, I was sending all my money back to my brother and my aunt to pick up houses, so I probably bought my first rental twelve years ago.
Larry: Wow, that's huge, man. I love it.
Jimmy: Yeah, full time three years.
Larry: I love it, man. That's great. That's great. Now, what's the name of your company?
Jimmy: Joint Ops Properties.
Larry: Joint Ops Properties. I love that name. That's great, man.
Jimmy: Joint Ops and then cashflow tactics is the turnkeying company.
Larry: Cashflow tactics. Man, that's a great name. I never knew that name before. That's really cool. Now, tell us what is your model. What are you doing?
Jimmy: We are finding distressed properties. We're putting in a rehab. We do do a few rentals but we prefer lease options because we feel it's a better type, more invested tenant, and then I'll keep some houses for myself, but I will also turnkey them to outer estate investors who are looking for cashflow.
Larry: That's really cool. Now, how do you find your outer estate investors?
Jimmy: Through cashflow tactics. It's an information company but we specialize and show people how to use their whole life policies as their personal bank and store all their liquidity inside life insurance policies and then use down payments from the life insurance for the downpayment on a rental property.
Larry: Oh, that's really cool. What does a typical deal look like?
Jimmy: Let's call it for round numbers, we'll say you buy the house from me for 100 down payment, with closing cost is around 25,000. Generally, most of our people have 50-60 inside their whole life policy, so they borrow against the whole life policy and then they use that whole life policy as a bank and all the cash flow from the house goes back into the policy. You have to pay for new premiums or you pay the whole life loan on.
Larry: That's cool. So if they have 50-60, the typical person is probably going to buy two houses for me to start out.
Larry: That's really cool. Those houses' cashflow, what kind of return is your investor getting?
Jimmy: We say, you've got to put 10% of the rent aside for vacancy and maintenance and so between 10% and 15% cash in cash return after that set aside.
Larry: I bet you have investors line up to buy those deals don't you?
Jimmy: I mean, that's why I'm out on the streets right now.
Larry: I mean you're active. You're in the trenches, right?
Jimmy: Right. I mean it's an interesting problem to have more demand than supply but it's something I'm trying to figure out.
Larry: That's a great thing. Now, where are you getting more of your deals?
Jimmy: From wholesalers and the MLS.
Larry: Okay. Wholesalers and the MLS. Okay, good. Yeah, because it's tough out there to go and do direct mail and pay per click and all that stuff and generating a bunch of leads, but if you're actually doing the rehab and then sell them on turnkey, you can just have wholesalers bring them to you, right?
Jimmy: Right. I talked to collective genius, I talked to Memphis Invest guys, they wok with wholesalers and they're leaders in this industry. When they do it, I don't really feel like reinventing the wholesaler wheel.
Larry: There you go. I don't blame you. Now, you were wholesaling there for a while, right?
Jimmy: No. I mean, I came from the military and then I came from corporate America. I looked at rentals as a way to just build up, passive income. I've never really trusted the stock market.
Jimmy: And then I bought 20 houses and then I bought 60 houses, and I was like, Oh-oh, I can potentially leave my job and do this. We got up to as many as 150 but I sold off 50 to turnkey buyers.
Jimmy: To answer your question, I kind of got into this as a passive investment but loved it so much that it's addicting getting down this rabbit hole.
Larry: It is. I love it, man. Now, you have a show also, right? Don't you have a podcast or do you have a YouTube channel or something like that? Do you have people heck out what you guys are doing?
Jimmy: Yeah. We've been able to raise a lot of our purchase capital from YouTube, silly YouTube videos. Daily content has really helped us a lot.
Larry: That's awesome. That's really good. You probably do content like you go out to a house or something, you show the house you're working on, or show projects you're doing or stuff like that, right?
Jimmy: Yeah. And to explain the life insurance and the privatize banking like it takes a long time to really grasp it so that required a ton of videos and showing numbers and how it works.
Larry: Yeah. That’s cool. So you’re buying a lot of your deals from the MLS and wholesalers. What is your market? How far out do you go or you’re just right in St. Louis?
Jimmy: We are North County, St. Louis and then South County St. Louis. We go 20 miles outside the city.
Larry: Oh, okay. That’s good. Tell us what is the secret to keeping good crews. I have sworn off of rehabbing. Okay? I hate rehabs and I’m a general contractor. I heard somebody say one time, what’s the first three letters in contractor? Right? I heard somebody say that one time.
Jimmy: Oh, do you?
Larry: That’s my experience. Right? So, tell us the secret.
Jimmy: I don’t know the secret, man. I’m going to listen to more of your podcasts. Your guest spitting out secret.
Larry: I hear you. It’s tough, isn’t it?
Jimmy: I mean, you got kids, right?
Larry: Yeah. I got grandkids.
Jimmy: So, you know it’s like my 7-year-old daughter, she’s awesome, smart as a whip, right? She would never lie to me but I always trust but I verify.
Larry: Right. There you go.
Jimmy: You know this house I just left. I had to go to the contractor and like, dude. The argument, the inspector is going to be here in an hour, right? We had to get on and be like, dude, this is in the scope. Fix this; like in the next hour, let’s go.
Larry: Man! It’s tough dealing with contractors, right?
Larry: So if your turnkey model, are you able to find a turnkey buyer for that property before you ever had it rehab or before you have a tenant in it or do you buy it, close on it, rehab it, get and put a tenant in it, and then find a buyer?
Jimmy: Generally, I can find most buyers lined up that I just put under contract and I show them. Videos have really helped us. I showed them the pre-walkthrough video that we went through when we are thinking about buying it. My project manager is calling out the improvements we needs to make. I tried to give them all the information that I have, but I’m like, this is the house. Here is the projected rent. We’ll have this rehab done in two weeks and you’ll own this house in four.
Larry: Well that’s cool. That’s really good. Now, do you use private money to buy them?
Larry: Okay. So tell us some secret strategies, some of the secret source of raising private money because I know that’s one thing that everybody likes to hear.
Jimmy: Right. I mean you just got to, well me, I like studying the market. I study like an habit, like I had a 401(k). I know all the pitfalls of investing in Wall Street. Essentially cashflow tactics is a course. We spend the first three hours in course just telling you why it’s a myth that disqualified plans work.
Jimmy: Any way you slice it, real estate has been the greatest wealth producer in this country. It’s a little known secret that life insurance has been it’s like cousin. If you read Kiyosaki, he talks about how things went crazy after we went off the gold standard. The Wall Street that used to not let the pikers in. They wouldn’t allow regular people in, but soon as we went off the gold standard, there was an appreciation of assets through inflation and so they said, Hey we’re making money here. Everybody come in. It’s my contention that most of the middle class does not belong inside Wall Street.
Larry: It sounds like you were in the financial markets. You said you were in corporate America before, were you in the financial markets or in the insurance industry? What did you do there?
Jimmy: Now, I told them that I need hip replacements.
Larry: Oh wow. Totally different, huh?
Jimmy: I mean I made good money but I only cap 60% of it. I was stressed out. I was working 80 hours a week. I was rude. I use a stronger word but I think this is a family podcast but I was rude to my wife. I come home. I had three drinks, and I was up to get to the hospital. The first case is at 7, so I’d be up at 6, out of the house most days and get home at 9, wouldn’t see my kids, wouldn’t see my wife for like 2 weeks at a time.
Larry: That’s brutal. She didn’t like that and I’m sure you didn’t either.
Jimmy: Right. Like I knew it is time to go. I have longer hair, right? I would be in the surgeries with the surgeons because what I did is like, to do a knee replacement is like going to Home Depot and somebody came with you and showed you how to use the tools, right?
Jimmy: So I would be in the surgery. I knew it was time to go. I would have hairnets in my long hair but I have wireless headphones in and I’d be listening to podcast about real estate. Because the surgeon only really needed me for 20 minutes but I had to stand there for an hour?
Jimmy: So I have my phone and then when you talk to me, I put it on pause and be like, yeah doc. That’s great. Great work. And then hit play again, keep listening and educating myself on real estate and economics.
Larry: Oh, that’s hilarious. So you’re actually in surgery listening to real estate podcasts.
Larry: Hopefully it didn’t blurt out any things like, can you hand me that short sale.
Jimmy: It never went that, but then I give my check at the end of the month and I’d be like, dude. I’m like sacrificing my whole life for 60% of the fruit, like this isn’t going to work.
Larry: Especially when you break it down to hourly if you left at six and you got home at nine, right?
Larry: That’s exactly right. Now, why did you choose to do lease options instead of straight rentals or land contracts.
Jimmy: My first 10 houses were rentals and I just got destroyed by tenants.
Larry: Man, I hate that. Tenants will ruin your feelings toward rental properties, right?
Jimmy: Yeah, and like we’ll still do a few rentals. Our first choice is always lease option. I’ve been in and out for three years, I’ve gotten hammered by lease option tenants as well but at least I had a bigger down payment to protect me.
Larry: That’s right so tell us what is the typical lease option deal look like. Now if you’re selling that property for 100,000 and you’re going to have the lease option tenant, what is going to be their strike price and their downpayment and monthly rent?
Jimmy: 110 to 115.
Larry: Okay. So it’s always probably 10% or 15% higher that what we’re selling at turnkey.
Jimmy: I make that deal with my turnkey buyers. Hey dude, you and I both know a lot of these lease options don’t convert through.
Larry: That’s very, very important and that’s true.
Jimmy: I’d start the conversation with that. I am just like, look, do not get excited about depreciation. If it does happen, it happens. This is the cash flow and a tax file.
Larry: Right. That’s so true. So they’re going to put how much down your tenant is going to put? How much option, consideration down typically?
Jimmy: 5% is the value of the house.
Larry: Okay so 100,000 or 110 or 115, they’re going to put about five grand down
Larry: Okay. Okay and the rent is going to probably be 900 or 1000 or something like that, right?
Jimmy: Probably 110.
Larry: Oh, okay cool. That’s good. Now, how do you make your lease options good for? Twelve, twenty four, twenty six.
Jimmy: Two years.
Larry: Okay two years. Real, that’s good. That is really good. I like that. So tell us what you do to qualify your lease option tenant?
Jimmy: We work with the company in St. Louis that actually gives us, we pay a premium, rent guarantee premium where he got his screening I love but his rental insurance is so-so. Of course, we check Casenet first and then we send it to the rental insurance company to do their credit checks and what not.
Larry: Right. A rent guarantee premium. How does that rent guarantee premium work?
Jimmy: We pay him $200 and then if we do have to evict and get a judgement, then we hand him over the judgement, and he pays us $3,500 over the rent.
Jimmy: If we're on top of it for evictions, we break even.
Larry: Yeah. Okay. Okay. It's better than losing money.
Larry: Now, option consideration that your lease option tenant pays down, does joint ops keep that or does your turnkey buyer get any of that money?
Jimmy: The first one I get for rehabing, marketing, and getting the tenant in there, but even tenant after that, we split option deposit.
Larry: Okay. So you're managing it.
Larry: Good. Do you give them any rent credit or anything?
Jimmy: Dude, we stop that because of CG, because it just runs into too much Dodd-Frank.
Larry: I agree. We used to give them some real credit, but we don't do that anymore either.
Jimmy: Yeah, you and me had that conversation about a year ago.
Larry: That's right. Because if anything happens, a judge could come up and say, you know, if you give them rent credit, they could say they have an equitable interest in the property. Now, did you comply with Dodd-Frank if you did more than three of them in the last year, right?
Jimmy: Yeah. We looked into owner financing and like I couldn't get me a lawyer to get me a clear answer on anything about this.
Larry: Yeah. The answer is always it depends, right?
Jimmy: Right. And then there was a talk that Trump will get rid of Dodd-Frank. I don't like basing decisions off what a politician might do. So after that conversation, we knew we don't do rent credit and we tell them like, we can't give you rent credit because of our legal liability.
Larry: Right. That's a good point. Do you make them responsible for any repairs?
Jimmy: We get it to pass occupancy and then we get about 30-day warranty period and we take care of any repairs over 500 bucks, but for the two years, they're responsible for the maintenance. That is another reason I do like the lease option.
Larry: Yeah. The other thing is you don't have to worry about like being a sale. When you're doing a lease option, it's not really a sale. You still own the property. Now, I know you're selling some of them turnkey which is fine. You're cashing out at a higher level, right? Which is fine so you're cashing out right away but if you create a land contract and you do enough of them, then you're a dealer and you're going to have to pay taxes on that spread from what you have in it versus what you sold it for even though you didn't collect any money, right? So I like the lease options for that as well.
Jimmy: Right. Yeah.
Larry: What kind of level of repairs do you do on them. I mean, you don't fix them at tip-top shape, like you're going to retail the house. Your main thing I'm assuming and maybe you can elaborate on this a little bit is to get them fit and safe.
Jimmy: Yeah. So the other thing we've instituted last four months is we get limited use appraisals on them, before I buy it, right? I get the value the house as is. I get the value of the house when it passes occupancy and then I get the value of the house if I were to put granite countertops everywhere, right?
Larry: Uh huh.
Jimmy: So, we judge our scope and what rehab we do to really end up in between those last two numbers.
Larry: That's good.
Jimmy: So it's like I can say to the tenant buyer, hey dude, when you do some repairs here, like you're going to walk in to equity and the house. TurnKey buyer, you're walking into equity and the house.
Larry: That's cool. That really means a lot too.
Jimmy: Right. and I go into the turnkey buyer and like, hey dude, I can go put granite countertops and new kitchens in all these houses if you want but you just won't have any cash flow.
Larry: Right. That makes really good sense. That makes good sense. Man, you got a good little model going on there. I love that model.
Jimmy: Dude it’s because solving problems that create more problems.
Larry: So where’s your partner out today? Is he out looking another houses too?
Jimmy: Oh, you know me and Bob, I bought him out in January.
Larry: Oh, really? I didn’t know that.
Jimmy: Yeah, he wanted to move to California so I was like, Oh, let me just buy you out.
Larry: Alright. Listen. I mean, I know you guys are great friends and gone through a lot. I know that was tough but it is what it is, right?
Jimmy: Right. I’d be lying to you if I said I didn’t like just being the man.
Larry: I hear you.
Jimmy: You know, making decisions and making things happen.
Larry: Doing it yourself.
Larry: That’s good. What kind of volume are you doing?
Jimmy: Buying and selling about eight to ten a month.
Larry: That’s huge. You get all of them after MLS and from wholesalers.
Jimmy: Yeah. I mean, wholesalers know like we definitely have special deals with some wholesalers like we get to first write a refusal.
Larry: That’s good because they know you close quick, right?
Larry: That’s really good.
Jimmy: And then, you know I’ll have certain conversations if we’re looking at a house and then we can’t agree and then their assignment is about up and they come back to me. It’s like, I’m pretty rough at that point on price.
Larry: I hear you. What is your average turn time on a deal?
Jimmy: When I buy it and turnkey it?
Larry: Yeah, but only when you buy it and you cash out.
Jimmy: More to six weeks.
Larry: That’s not bad. That’s not bad at all.
Jimmy: Like last year, it was 90 days.
Jimmy: So we’ve got them with our lenders in really refined systems and processes.
Jimmy: Yeah, I mean, I spent the first quarter, we hired a transaction coordinator and just ironing out that process.
Larry: That’s really good. So, I’m assuming, probably the easiest part of what you do is finding the lease option tenant.
Larry: Tell us why that is and how you market to find them.
Jimmy: We’ve had a lot of fun on Facebook. To be honest with you, we were doing pixeling and targeting and I’m like, gah! That’s too expensive.
Larry: It’s not cheap.
Jimmy: Yeah. So we started with that and then now we just, my leasing agents, it’s called STLRTO-ing. What they do, they do a weekly walkthroughs Friday the same time everywhere. We have a big Facebook following and of course referrals and you know, what everybody else does, Zillow, Craigslist and all that stuff.
Larry: That’s awesome, man. That’s good. That is good. This business, the easiest part is always been finding the person that wants to move into the house, right?
Jimmy: Right. When I first started, I couldn’t believe it but it’s like there’s tenants everywhere.
Larry: That’s exactly right. They have $3,000, $4,000, $5,000, $7,000 to put down too, right?
Jimmy: Right. Honestly, when they do end up buying the house, we all feel good.
Larry: Yeah. That’s really cool.
Jimmy: When they put repairs into the house and it works out, because I’m always trying to create a win-win-win. A win for me. A win for the turnkey buyer. A win for the tenant.
Larry: Yeah. You managed the property for your turnkey buyer. That’s like a whole another business. A management company, right?
Jimmy: Right. Yeah.
Larry: So how many employees do you have and what does your whole business structure look like?
Jimmy: I have seven full time employees. It’s myself, it’s my CEO integrator, and then I got two leasing agents that are commission only, I got a property manager, a transaction coordinator, and then a bookkeeper.
Larry: That’s good. That is good. So your leasing agents, they’re commission only so I would imagine they get a percentage of the option consideration. How does that work?
Jimmy: Right. They get 25% of the option deposit.
Larry: Oh, okay. That is good. Having them on commission only is sweet.
Larry: I love it. I love it. That’s awesome. So let’s see. If they get $5,000 down, they put $1,250 in their pocket.
Larry: Yeah. That’s awesome. I really like that. I like that.
Jimmy: And then if it’s a regular lease, they get one month’s rent.
Larry: Okay. Which is going to be close.
Larry: Yeah. That’s good, man. Now, what kind of CRM do you use to keep track of all these stuff?
Jimmy: We started on, it’s the one that works…
Larry: Oh, is it InvestorFuse or Podio or something?
Jimmy: Yeah, we tried Podio and it was a mess.
Larry: Yeah, I hear you. I’ve gone through like two different Podio systems and working on my third right now.
Jimmy: Yeah. So I brought my wife on in the beginning of the year two, one because not having a business partner, but if anything happened to me, I don’t want to be like, Okay honey. Here’s this business, right?
Larry: Right, so she’ll know what to do.
Jimmy: Yeah. She helps with the marketing to the tenants and she figures out the CRMs and all that stuff.
Larry: That’s good. That’s good. It doesn’t sound like the model you have, you don’t really have a lot of property management duties. You’re just kind of making sure the money gets collected.
Jimmy: Yeah. That’s the majority of it. We will take a few maintenance calls. We will do some maintenance to protect the asset. If there’s a hole in the roof, I’m not going to be like, Okay dude, this is on you.
Larry: Right. I get it. That’s what we would do too if it’s something major like a roof or HVAC or water heater or something like that. We’re going to take care of it. That’s exactly right.
Jimmy: At that point, you’ve got to protect the asset.
Larry: Right. Now do you charge much for your property management to your turnkey?
Jimmy: Yeah, 10% of the rent.
Larry: 10%? That’s good. That’s a whole another little model right there. I love it. That’s awesome. Good. What’s next for you? Where do you go from here? I mean I know you’re turning and burning, you’re rocking and rolling.
Jimmy: Yeah, I do. I’m drinking from the fire hose. I’m here right now. I’m a ten quick star duty. Usually I’m chasing squirrels but if I found what I love doing. I found what makes me happy, it’s time to just focus and refine systems and processes.
Larry: That’s awesome, man. I love it. I love it. That’s great. Well, if anybody wanted to reach out for you, what do you need? What can our listeners help you with and how would they reach you?
Jimmy: If you’re looking for turnkey property, I’d love for them to give us a look. I would love for them to go to cashflowtactics.com if they’re curious on how to use the privatized banking with real estate, if they want to get their money out to the market. So, cashflowtactics.com or jointopsproperties.com
Larry: That’s awesome, man. Listen, I really appreciate you being on. It’s been really, really informative, really good stuff, and I love what you’re doing. It’s a great model. I love that model.
Jimmy: Thanks, Larry.
Larry: Awesome, man. Let me know if there’s anything I can do for you.