Real estate can be the perfect way to escape the nine to five rat race and become financially free. But how do you decipher what’s real from what you’ve seen on TV? Not only that, but what kind of expectation should you have before you start doing this work? You need a roadmap to real estate that’s applicable, digestible, and written by an expert with years of experience. That’s exactly the book that Kent Clothier has written. His new book, This Sh*t Works, lays out three proven strategies for consistently generating income in today’s real estate market.
It deals with quickly flipping properties for fast profit without using your cash, acquiring cashflow properties in a pain-free environment where all you do is write the check, acting as a private lender working with real estate investors, and earning a sizable return. If you’re broke after reading this book, he says, that’s your choice.
Drew Applebaum: Hey listeners, my name is Drew Applebaum. I’m excited to be here today with Kent Clothier, author of This Sh*t Works. Kent, I’m excited you’re here, welcome to the Author Hour podcast.
Kent Clothier: It’s my pleasure, thanks for having me.
Drew Applebaum: First, can you fill us in a little bit about your professional background?
Kent Clothier: Sure, I got started in business when I was 17 years old. I started a business and was very successful in that business, buying and flipping truckloads of groceries, believe it or not, and helped to build one of the largest companies in the industry back in the day, doing almost two billion dollars a year by the time I was 30.
I was really fortunate looking back in that I got a little too big for my britches, as I say, and kind of had to eat some humble pie. I got in a run-in with my partners, ultimately ended up getting run out of that business, and I spent a couple of years just trying to figure out where I was going to go, what I was going to do, and how I was going to get there.
Ultimately, I landed in real estate and started flipping houses, back in 2002. And I’ve been doing it ever since. Since then, my family and I built a substantial real estate investment organization that still flips 800 properties a year in several states, in seven markets. And we’ve gone on and now educate people on how to do the exact same thing.
My personal passion is that for the last 12 years, I’ve spent all of my time dedicated to showing other people all over the country how to do the exact same thing that we do using very straightforward principles–how to find properties at a discount and quickly go and flip those properties to waiting investors that are sitting in the wings and getting in and out very quickly. Then ultimately, as that becomes a real business, turning around and beginning to acquire properties for passive income.
Again, not only am I doing it every day but I’m extremely passionate about showing others how to do it.
Drew Applebaum: Now Kent, who should read this book? Do you have to be a millionaire to get the lessons contained inside?
Kent Clothier: No, just the opposite, I would tell you that anybody that has spent more than half an hour of their life sitting in front of the TV and watching any of those HGTV’s or A&E shows and that’s fallen in love with the romanticized version of Chip and Joanna sitting there, flipping houses.
If anybody’s ever had a thought, “I wonder what it would be like to get into real estate and potentially flip houses.” Whether you were doing it as a part-time gig or maybe even building a business around it or just buying them for investment, maybe you love what you’re doing but just want to buy properties for investment and build a portfolio. Anybody that has ever entertained any of those thoughts, this book is going to be really valuable.
Drew Applebaum: Now the book has a lot going on in it and you start out by asking, “Why listen to Kent?” I’ll ask you that question. Why are we listening to Kent?
Kent Clothier: I think probably the easiest answer is, sitting where I am today and why I wrote the book is that, after being in business for as long as I have, I’ve learned a ton of life and business lessons. Some of them have been a lot harder to learn than others but I think that people walk around every day believing that success or becoming an entrepreneur is a lot more challenging than it has to be.
I think my unique perspective, and being a guy that hardly graduated from high school, literally had nothing to offer as related to college and I went out and started a business at a very young age, became successful beyond anything that most anybody could ever imagine, and then experiencing the downfall of losing all of that and having to build it all back in a completely different industry. Going through that process and now understanding that I could do it in a way where, all the mistakes I made as a young man, I could correct them.
I could create really simple processes that anybody could follow which allowed me to gain the one thing that I’m really passionate about, which is my time. I want to have it all, I’m the guy that believes I can not only create the business and create the big life, but I can do it on my terms and I can spend as much time as I want with my family.
I have a very unique kind of raw and uncut perspective and a very uncensored way of looking at this in delivering my message. I think there’s a lot of people that make life in business a lot harder than it has to be. So, when you’re listening to me, I’m somebody who is going to tell you like it is and make it really simple and straightforward, not easy by the way, but simple and straightforward. Easy to digest and simple to begin applying.
A Lesson about Time
Drew Applebaum: You mentioned your time a bunch in that previous statement. I can’t help but go back to an early story you have in the book about one of our uncles. Do you want to tell us that story?
Kent Clothier: My own experiences have been very profound in my life and one of them in particular was, that I was very fortunate that my uncle played a significant role in my life. He was a big mentor for me. I watched him build a very successful career in the travel industry and was one of the most respected executives in the entire industry. Whether it was airlines, cruises, everybody knew who he was, and the fact that he took a lot of time with me to help shape me as a young man meant a lot to me.
I also watched him do that at the expense of his family, at least in my humble opinion. In that industry it was having to travel the world, spending a great deal of time away from his family, and he would secretly share with me that was one of his big things that, if he had regret, that was a regret. I watched him retire and walk away from that industry, as a very successful man with a lot of wealth. As fate would have it, it wasn’t very long after that, he got diagnosed with cancer at 60 years old and before we knew it, he was on his deathbed and was asking for me. I was extremely humbled that I got the opportunity to get in my car and drive as fast as I could from Delray Beach, Florida to Daytona Beach, Florida, and go to his hospital room.
He’s all hooked up to all these machines and couldn’t really talk, but he did write on a little whiteboard right there, next to us and said, “Celebrate my life,” and the next thing he wrote was, “I just wish I had more time.” And then he held my hand and shortly thereafter, passed away.
It had a really huge impact on me because as a young man in business–I think a lot of people fall victim to this a lot, we get chasing after money. We believe this is always about money and, “I’ve got to make a million dollars,” or whatever the dumb thing is that we tell ourselves and con ourselves. We sacrifice a lot from our family and friends and cut corners and do all these things to try to get to that elusive thing. What I’ve definitely come to appreciate is that this is not about money, this is about time.
This is about freedom, this is about getting to the result as fast as you can get there so that you ultimately get the opportunity to spend the rest of your days the way you want to spend them. To see that he was there, at that moment, and regardless of how much money he had in his bank account, it couldn’t buy him the one thing he wanted, which was more time. That was a kick to the throat, that definitely rocked my world and helped me to understand that as I began rebuilding myself and reshaping myself and building my career in a new industry, I had the opportunity to do it right and to get focused on the right things, not the wrong things. It’s been like I said, a driving force in everything I do.
Drew Applebaum: Yeah, that story’s extremely powerful. Continuing on about time, you talked in the book about readers, and that they’re not actually going to finish the whole book because you start a lot of books and you don’t finish them. So, you went ahead and created videos. Can you talk about these videos, where to find them, and are they only available for folks who purchased the book?
Kent Clothier: Basically, I’m just like everybody else I know, I start a lot of books and definitely don’t finish as many as I start. The idea was that for somebody that wants to move quickly and digest a lot of information in a short period of time, we’ve created an entire resources page. I don’t have the URL in front of me, I apologize but it’s in the book, where there are video tips step-by-steps on basically how to do this, and that go through some of these processes that we’ve laid out here.
Again, the idea being is that, in my experience, there’s a lot of money to be made by keeping concepts, especially in the real estate industry, just out of the reach of the reader. Meaning well, if you give me a little more money, I’ll tell you this, a little more money, I’ll tell you that. My entire point of this was, I’m not doing that, right? This is how you get it done, and it works.
If the readers want to go and just grab these videos and watch these videos and consume and get to the results faster, I made a point of making sure that can happen.
Drew Applebaum: Do you have any fear that somebody might watch all of these videos, theoretically if I watch all of these videos that I’ll be your main competitor tomorrow?
Kent Clothier: None. The reason is, I mean, it’s a great question and I get asked it often because one of the companies that I own is a software company that effectively supplies the industry at large with leads. Leads for sellers, leads for buyers, leads for lenders, and that is a really scary thing for me to do because not only am I training my competition but I’m leading my competition directly to my customers.
I have definitely found through mentors and through others that a scarcity mentality just doesn’t serve me. That’s just not who I am. I am definitely of an abundance mind. There’s more opportunity in this market that even on my best day, I couldn’t even begin to scratch the surface. There’s plenty for everybody.
Create Passive Income Effectively
Drew Applebaum: Now, you’ve effectively written three books in one year. Can you tell us what each book covers?
Kent Clothier: Sure, there are three. The idea behind the book is that I wanted to share three different strategies about how to create passive income effectively. A lot of people look at real estate and again, if they’re watching those shows, they see a lot of people swinging hammers and spending their own money and doing a lot of things that quite frankly are the furthest thing from passive.
The segments of the books are arranged where the very first thing I talk about is a concept called wholesaling, where using just a few hours each month, you can easily go and find distressed properties, distressed assets, put them under contract, and quickly flip them to buyers that are just waiting in the wings. They are all over the country, there are millions of them, and we show you exactly how to get them.
The second concept is we talk about investing in out-of-state income-producing properties. Because it’s very reasonable to assume that anybody reading the book and they look out their back door and they may not be in the best market to produce income-producing or to acquire income-producing properties. I live in California, I can tell you it is extremely difficult to get a property, a rental property to cash flow out there.
It doesn’t mean they don’t exist, and it doesn’t mean that there are not ways to get that done. In fact, that’s what our company called REI Nation specializes in. That’s the reason I talk about this. When we’re flipping 800 houses a year, we’re flipping them to very passive investors from all over the world, and we manage now over 6,000 properties for our investors. What that means is that, believe it or not, you can be anywhere in the world and own rental properties in great cash flowing markets and basically get all of the great stuff about owning real estate without any of the bad stuff.
You can own rental properties where somebody else is managing, and they’re just sending you checks every single month. They’re in great markets that are moving well and are properties you’ll be very proud to own.
The last thing is, most people that I’ve talked to, and I’ve been doing this a long time, have zero concept that the secondary market for real estate is driven by private investors, people just like you and me.
They have money sitting in retirement accounts, self-directed IRAs, or 401(k)s. That money is an asset and can be lent to investors all over the country to fund their real estate deals and they are very secure transactions because what is happening is, you are effectively becoming the bank.
Think about our home today. If you stopped paying your mortgage today, what would happen? Well, the bank would come and take your house. They are sitting in the first lien position and they are absolute, they have rights. If you don’t pay them, they’re coming. Well, imagine if you have the opportunity to be the bank and loaning somebody 50, 100, $250,000 for their project. Again, if you drive up and down the street in your neighborhood or in your city, you’ll see all kinds of different projects going on where people are fixing up these houses.
Well, all of those projects are being funded by private investors just like what I am talking about right now. Largely speaking, the banks do not fund those projects. So, millions of Americans right now fund those projects. They put the money out there and they are sitting as the bank in the first lien position. They are highly secured, and they are insured on the property so if the entire project burns to the ground, they are still going to get paid, and they’re going to make a hefty return.
They are going to make a 10, 12, 14% return on their money in less than a year. So, I talk about all three of those strategies. Because depending on what your appetite is, they are all three great ways to make money in real estate. Some are more passive than others, but if you’re acting as a private lender you’re completely passive. If you are wholesaling, you are going to spend a few hours every month but you’re going to make a lot of money as well.
Drew Applebaum: Can you talk to us about one of the early failures you had while flipping and any lessons that you took from it?
Kent Clothier: Sure. In the 2008 recession, I was flipping a lot of houses. But then I started taking them down, meaning that I was actually deciding I was going to be the rehabber, just like what you see. So, we call it rehabbing the house, fixing the house up. I was going to take the risk on myself and I remember very well, 6121 Eagle Drive, exactly where that house is, I took it down and paid $264,000 for it. I invested $62,000 in it and I 100% believed that I was going to make a $100,000 profit on the back end of it.
I was a very experienced real estate investor wholesaler. I had flipped a lot of houses at that point but I had done very few what we call fix and flips, rehabs where I was actually just putting my own money in it. Sure enough, the market turned and it turned in real time. This was in South Florida where the epicenter of the mortgage meltdown was taking place. And in a matter of months, my little $325,000 investment that I had sitting over there that I thought was going to be worth $435,000, I looked up and it was quickly worth about $300,000 and falling.
I ended up having to ultimately take almost a $100,000 hit on that house. I will never forget it–how painful that was, and it is one of the huge risks that we try to avoid. It is the exact reason I do not talk about fixing and flipping in this book because for the novice investor that is not a strategy I would put out there that anybody needs to do. There are much easier ways to get involved and be profitable with much, much less risk.
Drew Applebaum: Now, we’re not only here to hear your failures, but we are also here to hype you up a little bit. So, tell us a little bit about one of your more successful endeavors.
Kent Clothier: I would say at large, our family organization would be, without question, one of the things I am most proud of. We started flipping houses, like I said, to investors in several different markets. Then we came, this is me, my brother and my father, we were in three separate markets flipping houses and we came together in 2006, 2005, and decided that Memphis, Tennessee is a great cash flow market where you can easily buy a house for $100,000.
So, you make money on it all day long and it will be a house that was built after 2000, 1,200 square feet in a great neighborhood. It is just a very, very affordable market. So we came up with the idea that maybe we should try to take some of the buyers that my brother and I had in Florida and in Denver, where we were both living, and start bringing them to Memphis, Tennessee and see if we could sell out of state buyers into this cash flow market.
That was the genesis of how REI Nation was born. Before we knew it, we were flipping hundreds of properties a year to out of state investors and ultimately, buying these houses, rehabbing these houses, fixing these houses up, turning around, and turning them into really good performing assets, and putting investors in there in a very investor-friendly way. Providing all of the services for them and you fast forward now to many years later as I said, we’ve got an operation that’s managing 6,000 plus houses.
We are still doing 800 houses a year in seven markets. That was a really cool process to watch something that is a simple idea, and it just germinates and turns into something that is now easily one of the recognized leaders in the country. That’s all because we decided that this is something that the industry needed that wasn’t being provided. I am really proud of that. That and also being able to help some of the other people over in our education business.
You know it is something that again, I became extremely excited about. When I realized what I was doing, that we had simplified it and automated it and made it really easy for people to digest the information, that I could take concepts and sit in front of somebody in a matter of a few hours and could help them to get excited and ultimately involved into a business that I knew would change their life if they wanted it to.
I came from an entrepreneurial family and so for me, I recognize today how big of a gift that really is. I also understand, after speaking on hundreds of stages around the world, that most people sitting in those audiences were not raised the way I was. They were sold the American dream, go to college, go work for somebody else, get your pension, get your 401(k), all of that good stuff. I was never sold that. I was always told, “You are completely unemployable and it is up to you.”
Good isn’t good when great is expected, it was what I was told my whole life and so I got that entrepreneurial bug very, very early in my life and it was a huge gift. Realizing that I have the ability to give that gift to somebody else and that they can do this and that their kids are going to be watching them–mom or dad building a business and that their kids are going to think differently about the world, that is pretty exciting to me.
Drew Applebaum: Yeah, that really is special. You actually just mentioned 2008 when the market had crashed and I imagine in five years, ten years, maybe in two years, we are going to be talking about what the world was like in 2020. Can you tell us, has anything changed in the real estate world or in your business due to the COVID situation?
Kent Clothier: The timing of the book–I have spent almost two years writing this book and it is just now getting released. But it could not have been released at a timelier point in our history. Because yes, to your point, there are drastic changes on the horizon. This is a little different than 2008–2008 was a finance-driven, credit-driven crisis. The credit markets melted down. When they melted down, the economy melted down.
This is different and this is a manufactured crisis, from the pandemic surely, and then the economy getting shut down on us. Our government was quick to react and pumped billions and billions of dollars into the economy. But at some point, the check is going to come due. That money is going to dry up. When that happens, distressed sellers are going to need to sell their properties. You cannot have tens of millions of people out of work and not able to make their mortgage or their rent payments without that having an impact on the housing market.
We are already starting to see some of that as the court system starts opening back up. And some of these forbearance agreements going out of the way and some of the rent abatements going out of the way. As those things start to expire, people are going to need to sell. And when they need to sell, they need a quick solution. These are people that, if they can’t afford to make their mortgage payment, they certainly cannot afford to sit there and pay high real estate commissions or make expensive repairs to their homes.
Whatever it is, those are just not options for them. And so therein lies the opportunity. There is an opportunity, you need to go out there and help people get out from underneath these houses quickly. You effectively become the middleman. You sit there and once you get properties like that under contract and everybody’s created a win-win situation, there are millions of cash buyers with billions of dollars sitting on the sidelines that want to participate in this market.
They didn’t get the chance in the 2008 financial meltdown to go and pick up rental properties at a discount that they could just ride on the way up. They are not going to miss this time. So, you have a ton of demand that is highly liquid on one side and you have a lot of supply that is coming on the market and will come on the market starting, in my opinion, right after the first of the year.
It is going to last for at least a couple of years. Look, there is never a shortage of crisis in real estate, period. Crisis happens every day whether it is divorce, bankruptcy, foreclosure, unwanted rental properties, unforeseen medical bills, whatever it is, somebody needs to sell a house quickly. Figuring out to connect those two dots where you can play in the middle and help somebody get out of that situation, while also helping these investors get into these properties and get them fixed back up and get them back on the market, to me that is a noble place to play.
Drew Applebaum: Now you talk a lot in the book about a lot of cash transactions, a lot of finding cash buyers. The Fed just announced today that they are leaving interest rates near zero through at least 2023. How does that affect your model, or does it not affect it all?
Kent Clothier: It doesn’t affect it at all. The liquidity that we speak to, that is, in 2020 alone there will be somewhere between $162 billion and $297 billion spent, all cash, for single-family homes. These are people just like you and me. There are really three tiers. You have the mom and pop business owner, entrepreneur, the executive who is well-funded. They’ve got money sitting like I said, in an IRA and a bank account. They want to deploy that and earn returns where they are, again, in their retirement account or just earn a return period. And so that’s kind of the bottom tier.
Then you have this second tier of all cash buyers, which are guys like my business, like REI Nation. This is a business for them, they buy and sell houses every single day, hundreds of them a month, and they are cash paying investors. They are, again, well-funded but they write checks for houses. They never go to a bank.
Then you have the top tier, which is hedge funds, and all the institutional buyers that are now in the industry called I-buyers, which are people like Offerpad and Opendoor and Zillow and many others that play at a whole other level.
So, these all make up this spectrum, if you will, of cash buyers that want to get their money into the market as fast as they can. They don’t want to, and in a lot of cases, can’t get bank financing for these deals.
A lot of these houses are, as I said, are in disrepair with the bank, where they would never get a loan, period. So, the only option they have is paying cash. And in a lot of other cases, the borrowers are just not bankable. Because the interest rates have been dropped, the pool of who the mortgage industry will write loans for has shrunk by 35%, just since COVID. So, interest rates are low but who is what we call bankable?
If you line up 100 people here that were all people that could absolutely qualify for a mortgage, especially on an investment property, in March, today, 35 of them could not. The restrictions have gotten tighter. So, these cash buyers represent a real opportunity. There is a huge, huge pool of them and billions and billions of dollars. The best thing about cash buyers, quite frankly, is that they are investors.
When I am operating in my market in this segment of the industry, I want to deal with people that want to buy a lot of houses and they know exactly what they want, and they want to do a lot of it. That’s my kind of customer. That’s the kind of business that I want to be in, somebody I can sell over and over and over again. I don’t want to be your normal real estate agent that gets one bite at the apple and gets to sell one house to some first-time homebuyer and then never hear from them again for another 10 years. That is not a business to me. So, this is the reason why it is exciting.
Drew Applebaum: Well Kent, you mentioned earlier it took you two years to write this book and you finished, so congratulations.
Kent Clothier: I appreciate it, man. Thank you very much.
Drew Applebaum: If readers could take away just one thing from your book, what would it be?
Kent Clothier: I think the title says it all, this shit works. Just get in the game, like I do now, do not sit around, do not wait, do not think about it. There are so many actionable steps inside of this book that anybody can apply, regardless of your income situation, regardless of your age, none of it matters. There are real solutions inside of that book–get involved.
Drew Applebaum: Kent, thank you so much. This has been a pleasure and I am really excited for people to check out the book. Everyone, the book is called, This Sh*t Works, and you can find it on Amazon. Kent, besides checking out the book, where can people find you?
Kent Clothier: I am easy to find. You can go to kentclothier.com or I am on social media under the same handle, Kent Clothier on Instagram or Kent Clothier on Facebook.
Drew Applebaum: Great. Kent, thanks for coming on the podcast today.
Kent Clothier: Thanks for having me, Drew.