Investing Made Easy Using Creative Financing Strategies with Bailey Kramer

Bailey Kramer is a real estate investor, entrepreneur, and podcast host. He uncovered his passion for real estate investing when he was 19 years old after reading Rich Dad Poor Dad in his college dorm. Since then, he has focused on acquiring properties using creative financing strategies. He also co-founded an off-market real estate lead generation company that serves investors across the nation called Property Dogs. In his free time, he enjoys traveling, playing sports, and eating delicious food.

Bailey Kramer’s good real estate resource is Bigger pockets, he started listening to their podcasts and was just consuming information. He then began networking with people in the industry. He was interested in syndications initially. He would go on bigger pockets and look at everybody who had the title syndication in their bio. Fast forward, he started a podcast, a meetup group to expand his network further and share what he was learning. He also joined a mastermind group, to get a stronger network and a better learning experience and increase his education even more. Six months later, he partnered up with somebody he met through the mastermind group, and they began hunting for off-market deals. And that’s where they are today where they acquired eight properties in the last couple of months, focusing on creative financing strategies and the fix and flip strategy as well.

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Investing Made Easy Using Creative Financing Strategies with Bailey Kramer

Brett:

I’m excited about our next guest. He is out of the great state of Florida. In fact, he was just in Orlando yesterday touring some properties. We were laughing about that because we’re meeting for the first time today where I’m back in California. But our next guest is a real estate investor, entrepreneur, and podcast host. He uncovered his passion for real estate investing when he was 19 years old after reading Rich Dad Poor Dad in his college dorm. Since then, he has focused on acquiring properties using creative financing strategies. He also co-founded an off-market real estate lead generation company that serves investors across the nation called Property Dogs. In his free time, he enjoys traveling, playing sports, and eating delicious food. Please welcome to show me, Bailey Kramer. How are you doing today?

Bailey:

Hey, I’m doing super well. Thank you so much for having me on the show. Super excited to do it.

Brett:

Excellent. And you can learn more about Bailey Kramer at baileykramer.com. All right, Bailey, for our listeners getting to know you for the first time, can you tell us a little bit more about your story and your current focus?

Bailey:

Yeah, absolutely. So growing up, I always knew I want to do something business, something entrepreneurial. I just didn’t know what that was gonna be. So I’m still in college now. But last year in college I chose a major, it was a business degree. I didn’t exactly know what I wanted to do with it. So you know, sitting in my dorm, I said, Alright, I’ve always been hungry to learn. So I look up on the internet top business books, top personal finance books. And the one book that came up over and over again, was Rich Dad, Poor Dad. So that’s a classic for a lot of people that get started in real estate. But something that I read, and it jumped out right away. So read the book, I was super inspired by it. And my next thought from there was hopping on bigger pockets, which is another really good real estate resource, especially for those just getting started. So jumped on bigger pockets, started listening to their podcasts, literally in class before class after class. I was just consuming information. And after months of that, I then began networking with people in the industry. So you know, something I was interested in initially was syndications. So I would go on bigger pockets, and look at everybody who had the title syndication in their bio. And I just start networking calls and just learning and growing my network that way. Fast forward a little bit. I ended up starting a podcast, a meetup group to kind of expand my network further and share what I was learning with my network. And then I also joined a mastermind group, to then get even stronger of a network and a better learning experience and increase my education even more. So then, fast forward, obviously, this is the short story. But you know, about six months later, I partnered up with somebody I met through the mastermind group, and we began hunting for off-market deals. And that’s where we’re at today is we required eight properties in the last couple of months, focusing on creative financing strategies and the fix and flip strategy as well.

Brett:

Amazing, man, I love that you’re taking action. I love it. You’re still in college, and you’re getting a real education while you’re in college. We’re calling this episode getting a real education in commercial real estate with Bailey Kramer, not to say that you’re not getting a good education, what you’re talking about, but you’re getting hands-on, which we’re talking about here in a minute. That being said, Bailey, before we go there I believe we’ve all been given certain gifts in this life. And these gifts have been given to us to be a blessing help to others. So I want you to go back to your freshman year, your high school days, maybe the junior high days, and I want you to focus maybe on strength or gift that you believe you were given, and what is that gift or two and how does that help how you help and bless people today?

Bailey:

Yeah, definitely. I think one of the biggest gifts that I’ve been given is, I think one of my biggest strengths as well as being able to take a situation that I’ve gone through or also looking at other people’s situations, and taking what I really like and what I would want for me out of that situation, and then looking at what the negatives or something that I don’t really like about that situation is and kind of removing it from my life or you know, trying to avoid it going forward. So for example, there were certain things that I loved, there are certain things that maybe when I have a family, I would do different family reports, they’ve always been supportive of me, I’ve always had their support, they were always there. For me, the one thing that maybe I would change, and this is kind of what drove me towards entrepreneurship, and then the real estate was, I wanted to be in control of my time. So being able to have my own business, although, of course, it’s a ton of work on the front end, being able to build those systems, whereas when I have a family and you know, down the road, I’ll have more time freedom, and that’s something that I really seek out. So kind of, I guess, the power of being able to look at a situation and seeing what you like about it, and being able to actually implement that in your life. And then things that you know, you wish you could change is get a headset on that earlier sooner than later. That way, you’ll have a better chance of success.

Brett:

Yeah, I love it. That’s great. Those are great gifts, right, learning from others’ mistakes, but also learning from others’ successes, gleaning the wisdom from it, and then taking action. Is that a fair summary?

Bailey:

Very accurate.

Brett:

Okay, awesome. So let’s talk about those eight deals, this is really cool. Before we get there, I want to dive into the plan words in getting a real education in commercial real estate, right? So you’re studying, you’re in your dorm room, you’re reading the Rich Dad, Poor Dad, you get excited, you’re like, bigger pockets, tons of wisdom, actual people doing deals. And so you start taking action, right? And you, you get educated you get the mastermind, you just keep growing and learning. And so tell us about that first property that you did. What was the deal? What was it like? And what was the biggest thing you had overcome?

Bailey:

Yeah, absolutely. Great question. So that first deal was actually back in February of this year, my partner and I bought a property, our plan was to fix and flip it. We bought it for 85,000, we’re putting 30,000 into it. And we’re looking to sell it for around 170. So those are kind of just the numbers on the broad scope of things. So then how the actual deal came about as I mentioned before, all of our deals, except actually one have come off-market. So you know, there are tons of different ways we get into the off-market world of things, that’s a whole nother conversation. But we found a deal off-market. And there was a super motivated seller, the property is vacant, and he just wanted cash and to move on with his life with the property. So we’re able to raise funds for the full purchase price because we bought the place cash, and then we’re able to raise money as well through again, through the mastermind group, for the rehab cost. So that was kind of just the front end of the deal. Having those obviously the capital, super important on the front end, especially when you’re buying place cash, and you’re gonna fix it up, you need capital. So we had those boxes checked. And again, those were through networking, through the mastermind. And then I would say the biggest challenge with this one, but also the biggest learning experience was actually putting in some sweat equity and doing some of the work ourselves. So we did a few things ourselves on this project, the most challenging. Also, the biggest learning for myself, was we actually put insulation in the walls, the pink foam we spent a good full day and a half doing that throughout the whole house. And a huge learning experience. I’m not gonna lie, the inspector came the next day, we were there for inspection. Inspector was like, yeah, this is not gonna cut it. This is just not up to code basically. So just kind of having that learning experience of the key in. Luckily, he kind of walked us through you did this instead do this. So we had a big learning experience from that. And then also at the same time is we had the drywall, our drywall guys scheduled for not the next day, but the following day, so two days later, it was a super crunch time, because we had something scheduled if we didn’t have the installation done and that checked off, we wouldn’t have been able to push the drywaller back, which pushes everything back. So huge learning experience and just put in that sweat equity.

Brett:

That’s awesome. I absolutely love that you took action. He raised the funds, he bought it cash and use your mastermind or he worked with your mastermind to raise the rest for the rehab. And then you actually got hands-on you know my fault. The first deals that I bought, same thing, like we were literally like pounding walls with hammers if they break down a wall and redo the flooring, or do the countertops or do the bathrooms and but it’s this, there’s nothing like actually doing yourself to a appreciate it and then be able to know what to look for in the future. Or even in those pitfalls or you know that, like you’re saying, give yourself enough time in between the drywall are coming in versus, versus getting the code getting all checked off. So that is cool. All right. So you’re getting a real education there. Now compare that to sitting in a classroom, and you’re here, you’re a professor not that they’re doing this not doing this, or but there are even just even a webinar someone is telling me about it. How is doing it yourself? Maybe it’s pretty obvious getting a real education versus just hearing somebody talk about it.

Bailey:

Yeah, it’s a whole overworld different, because the thing is, with real estate like, for example, the installation issue we ran into there, I haven’t looked, so I can’t tell you factually, but I don’t know if there’s a book that walks you step by step on how to do the installation. Yeah, I’m sure there’s YouTube, I guarantee there are YouTube videos, I guarantee there are people I could we could have asked, but as far as a webinar, or a book, or a podcast, no one’s really walking you through how to do the installation especially you know, sitting in a classroom, you’re definitely not going to learn that. What I’d like to say is the webinars, the podcast, the books are super important to have that base foundation. And I didn’t even start really networking too much with people until I had that solid foundation. And I felt like I had a pretty solid foundation, after just podcast after podcast, book after book, because what I realized is at the end, at the end of the day, real estate, obviously, there’s a lot of complexities with it. But on the surface is not that complicated. As far as something you can read from a book you read, you read a book on a rental property, they’re talking about you buy a place, you make sure it’s clean, and then you rent it out to a tenant, all that you can really understand after you read the book, but then those things that come from actually doing it. That’s the stuff that you can’t read, you just have to do it. And either figure it out yourself or partner with someone who’s already been there, done that, and learn from them.

Brett:

Love it. Yeah, very well said. And it’s inspiring, right? So when people see you, you’re only in college. Bailey, you’re so young, 20 years old, right? There’s no excuse, right? I mean, if you can do a wire while you’re in college, and start a podcast during a pandemic, and do your fixed first fix and flip, but you’ve got what you went on to do seven. And so are those other seven, by the way. Similar fix and flip cover deals.

Bailey:

Yeah. So out of the eight total, the one we mentioned before, and then there’s one more that’s the fix and flip. The other six are actually rentals.

Brett:

Okay, cool. So you bought them, fix them up, then just rented them? Is that a fair summary?

Bailey:

Yeah, yep. And all using creative financing strategies.

Brett:

So let’s talk about that now. That’s cool. So let’s talk about creative financing. So what’s the most creative way you’ve financed one of those deals?

Bailey:

Yeah, so, and just to tell the listeners to create finance, it sounds like a big scary word like, wow, what is that, in the simplest form? Is it seller financing, if you don’t know seller financing is basically instead of buying a property and going to get a mortgage from the bank, instead of going to the bank and having them check your credit score and all that good stuff. If the seller in the simplest form has already paid off the property, they can become the bank. And instead of you going to the bank, getting the loan, and going through that process, the actual seller becomes your, basically your bank, you can give them a down payment, and you can pay it down monthly. So that’s just kind of how it works in the broad sense. And then to get into a specific deal that we did. So we actually bought two properties off of one seller, which was kind of interesting. One, we’re doing a fix and flip on one we’re doing a rental on and how that worked in a seller finance situation. And again, all this is negotiable. With seller finance. There’s no standard, really, it’s all how good of a negotiator Are you that’s what you’ll get. So, and my buying partner is a good negotiator. That’s how we got the good terms on it. But basically, our agreement for these two properties was we’ll put down a $500 earnest deposit, which was really our downpayment and we get a three and a half percent interest rate on each house. So for one of them, we’re doing a fix and flip on. And for one of them, we’re fixing it up a little bit and we’re renting it out. But all that we had to really come out of pocket for On the flip was that $500 earnest deposit, and then we’re gonna bring investor money to fund the rehab. And then for the rental that all we had to come out with was $500 for the earnest money deposit, and which is also the downpayment, and then it cost us about six grand to fix it up and then rent it out.

Investing Made Easy Using Creative Financing Strategies: “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” – Warren Buffett

Brett:

Okay, what was the purchase price on that? What was the sales price?

Bailey:

I personally get more excited about the fix and flip one, just because the numbers are just better on that one. So we bought that one for $68,000.

Brett:

Okay. 60,000, you put $500 down, so he basically carried 99% of it. You carry back paper 99% at a three-and-a-half percent interest rate? And then when was it due and payable?

Bailey:

So the note for the fix and flip is due in two years. And typically, we don’t like to do anything. We prefer it for 10 years or more. But when you’re negotiating with sellers, and the terms are super good. Sometimes we get down to five for this particular scenario. We were willing to go down to two years, just because we know we’re gonna, well, obviously never know what’s going to happen. But our plan, of course, is to flip it as soon as possible. It’s not too big of a job. So we know we can get in and out in and not too much time.

Brett:

Cool. Is there a prepay on that? Or he’s no prepay?

Bailey:

No, no-prepayment?

Brett:

Excellent. So, you got basically two years to make this thing happen. You throw in 500 bucks, you put in about $6,000 worth of rehab costs. So now you’re in for about $60,500.

Bailey:

So we’re kind of confusing the two. So for the fix and flip one, we put down that $500, the purchase price was $68,000. But we’re actually using investor money to put in $50,000 for rehab.

Brett:

Got it? 50,000. Okay, great. And then what do you want to sell for?

Bailey:

We’re comfortable, we know we’re going to get at least 185 for it. But with the market the way it is with some comps in the area, where we think we can get to do to get it to 200 based on other comps, and we’re really we stretched our budget to to to do nicer finishes and whatnot. I personally think we’ll go 200 but we’re kind of we’re saying 185, 190. But if the market still hot and a month and a half, we should be in good shape.

Brett:

That’s awesome. Bailey. Absolutely love it. I love it. You guys have been created with the financing and even the seller carry-back and you’re asking in the fact that you can get them to carry that much paper and have that much trusting you guys to write that speaks highly to your negotiation skills, for sure. So fantastic. All right. So anything else to add to that?

Bailey:

No, that’s pretty much it on that deal right now.

Brett:

Cool. Excellent. And what’s the biggest obstacle to finding an off-market deal that you found a good solution for?

Bailey:

Well, finding off-market deals, there’s so much I could say about that. Like I said, my partner and I, have our own off-market lead generation company. So we kind of have tested a lot of things out and have seen what’s worked for us. So as far as challenges go, I would start with time. So, we do outbound marketing. So basically, we’re calling sellers, we’re texting sellers, you can do mailers, you can email sellers, and then there’s also inbound. So you could run Pay Per Click ads, where they’re actually calling you and contacting you. We’ve chosen the outbound strategy where we’re actively seeking. So we do is texting and calling. And it takes a lot of time. That’s kind of probably the biggest hurdle is the time it takes we have for our personal campaigns that we’re doing we have a full team behind it, managing it eight hours a day. Outbound can definitely be a full-time job, especially doing it yourself. But I guess the solutions we found for it is again, building those systems, building the team. And then honestly just repetition with testing out different templates and different things to say to the owner, whether it’s texting, calling different approaches, and that’s what we’ve kind of found is just repetition and building the systems.

Brett:

Excellent. Love it. And by the way, he tried like a ringless reach where you just looked like the voicemail that shows up. Are you like trying to get everyone live on the phone?

Bailey:

Yeah, so we haven’t tried the ringless voicemail yet, it’s not another picture. We honestly haven’t tried ringless voicemail. Because we were the first one to vote one or two strategies and ringless voicemail? Well, I think it’s a, I think it can be very effective. It’s, I don’t see it as like the only strategy. So it has to be kind of paired with something. And we want to go with the texting route, we want to go the calling route. So I guess our next step in that could be the ringless voicemails, but for now, we’re just sticking with texting and calling.

Brett:

Yeah. Well, it’s something that you’ve done eight deals with in less than a year. Right? It’s working for you guys. So that’s really cool.

Bailey:

Yeah, I’ll just say, we’re not actually doing cold calling, I want to make a point there. We’re basically using the text to warm up the seller, to introduce ourselves to get them comfortable, and knowing that they’re going to receive a call. And then we’re using the call to get that build rapport, talk to them over the phone because no one’s selling. Well, first of all, no one’s closing a deal over text. You’re not gonna you’re probably not from my experience, you’re not going to close a deal on the phone. But that’s just a stepping stone to get them in person. And to then go from there.

Brett:

Makes perfect sense. Absolutely love it. That being said, Bailey, are you ready for the lightning round?

Bailey:

Let’s do it.

Brett:

All right, knowing what you know now if you go back to your 16-year-old self, what’s the one Golden Nugget you’d make sure you tell yourself to do?

Bailey:

Yeah, if I was 16 years old, I would definitely read Rich Dad Poor Dad, then I would definitely just start getting more educated about your finances, reading the books listening to the podcast. You know, I would just shift my learning a little bit earlier. 16 years old.

Brett:

Cool. Excellent. Well, and what’s the one book besides Rich Dad, Poor Dad that you would recommend or gift to somebody this year?

Bailey:

Yeah, The Miracle Morning by Hal Elrod, basically all about jumpstart your day and all about just crushing it in the morning and how that kind of snowballs to the rest of your day.

Brett:

Yep. I love that book and highly recommend that to the next question. What’s the one maybe leadership quote or theme that you strive to live by?

Bailey:

Wow, leadership quote or theme? I actually have a lot hanging on the wall. One thing I’m looking at right now is, you can ever attain greatness following the opinions of the majority. So you know, just creating your own thoughts, being around people that have you know, those strong thoughts, and not just kind of following the crowd. I think that’s kind of what entrepreneurship and I think it’s important real estate too is, you can’t just be laying back just here, whatever else is doing, and then react and you really got to be on the forefront, and be the one making the action.

Brett:

Love it. The next question is this, what do you most curious about right now?

Bailey:

Something I’m most curious about? Something I’ve always wanted to get into since I’ve kind of started learning about real estate is Airbnb. So that’s something that I’m curious about learning more about, I know that there are tons of different nuances to it as compared to just a long-term rental. So that’s something I’m learning about slowly and something I’m curious about.

Brett:

Next question, what’s your biggest frustration with capital gains tax deferral, and or the 1031 exchange?

Bailey:

Yeah, I think the biggest frustration, and I haven’t done a 1031 exchange just yet, but something that’s kind of I’m always like, that’s kind of interesting, is the timeline restrictions that you have to actually do the 1031 exchange. That’s something that is frustrating. And I sometimes see myself saying if I saw this property, and then kind of see where the markets keep kind of fluctuating, just thinking, that’s probably gonna be a frustrating or something I need to really get on about.Brett:

Yeah, we call it the shotgun wedding, right? You got to get engaged in 45 days, married within 180. And then you’re running around may be making bad decisions and overpaying for the property. If that time is squeezing you or that pressure of that tax, we actually have a solution for that. It’s called a deferred sales trust. It can save a failed 1031 exchange. In fact, we just did a deal. In Georgia, it was a 128 unit multifamily complex. We saved this failed 1031 exchange. And then he was able to move the funds invested with some passive syndicators like Ashcroft Capital, Joe Fairless, and a few others and so it’s a powerful way to raise capital as well as a powerful way to defer capital gains tax, you can learn more about that at capitalgainstaxsolutions.com. Alright, so our last question is this Bailey, after helping people with investing with your partners and you know, 20 years on this world and learning about real estate? How do you stay centered in your values? And how do you stay encouraged to reach for new heights?

Bailey:

I think that comes with my number one value and something that is most important to me and my family. So they’re always motivating me, number one, but also, just having more reason. It’s not just for me, it’s not just for the money. There’s more peace involved, and the family is probably the biggest motivator and something that I’m working towards, because like I was saying before, I’m having that time freedom is something that I know is possible, and something that I want, not just for me, but also for my family. So that’s something huge that that keeps me going every single day.

Brett:

Love it. We’ve been talking with Bailey Kramer, talking about getting a real education in commercial real estate. He’s getting a great education. It was at the University of Central Florida. He’s loving that but he’s also getting a real education in commercial real estate by being hands-on buying getting educated reading books and doing deals in creative financing. Bailey, it’s been a pleasure getting to know you, for our listeners who want to get in touch with you would you remind them one last time, what’s the best place for them to connect with you?

Bailey:

Either my website baileykramer.com or connect with me on Instagram, Bailey Kramer. Love to chat and network with any of your listeners.

Brett:

Amazing. Thanks for being on the show. I want to encourage you to keep using the gifts of taking situations looking for the pros and cons and gleaning the wisdom and taking action to help yourself and your family and your partners. With that, I also want to thank our listeners for listening to another episode of the Capital Gains Tax Solutions Podcast as always, we believe most high net worth individuals and those who help them they struggle with clarifying their capital gains tax deferral options not having a clear plan is the enemy and using the deferred sales trust to exit your highly appreciated cryptocurrency, primary home, business, real estate, save a failed 1031 exchange is the best way for you to defer capital gains tax you can go to capitalgainstaxsolutions.com. Thanks so much for watching this video or listening to it on iTunes or Spotify or wherever you partake in the podcast. We appreciate you, please rate, review, subscribe, it would mean the world to us. It can help a lot of people out there get some inspiration from folks like Bailey Kramer, thanks so much. Bye.