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Is taking a relationship-based approach to working with off-market Sellers just a strategy to feel good and know we are being thoughtful? No, it’s also a hugely important strategy for negotiating BETTER deals for ourselves (and giving our Sellers better outcomes). In this episode, Jeff interviews long-time successful real estate investor Gabriel Hamel, who has built an incredible portfolio using the power of relationship to buy a wide range of properties with Seller Financing. In this conversation, Jeff and Gabriel discuss the practical benefits of a relationship-driven approach, why Seller Financing is superior even when bank loan options are available, why investors should consider themselves fortunate to NOT have more cash to work with, and the changing role of Seller Financing in the new economy.
Episode Transcript
And I’d say a lot of times, for a seller, it’s usually one of those things. Sometimes it’s more of, it’s usually one of those things that are most important. It’s rarely all those things. So it’s usually like they’re really stuck on interest rate, or maybe they’re stuck on price. And sometimes it’s a completely different aspects of the deal like and that’s where it really goes to the relationship like really finding out what’s important to the seller because I think real estate, a lot of people think of it as transactional. And I know that we talked offline about relationships and how important that is.
Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.
Hey, thank you for joining me for another episode of Racking Up Rentals. Show notes for this episode, including a transcript of the interview you’re about to hear, can be found at thoughtfulre.com/e180. Please do us a HUGE favor by hitting the subscribe or follow button in your podcast app. It really does help fellow thoughtful real estate entrepreneurs to find this show, and of course, make sure that you don’t miss any episodes coming up either. Onward with today’s episode.
In today’s episode, I’m so excited to share with you a conversation and an interview I recently conducted with Gabriel Hamel. So I had been hearing Gabe’s name for a while now and actually connected with him through the power of the internet and Facebook. But as I got to see more about what he is all about, and I got to hear a little bit more of his story, and I heard several people say Jeff, you and Gabe are really very much on the same page in terms of how you do things, I thought, we have to do an interview here and he was gracious enough to jump in. And in this interview, we’re going to talk about the core ideas of relationship-based negotiation for seller financing, why seller financing is such an incredibly powerful tool, and all sorts of other things that are going to feel very familiar and very relevant to you as a listener of this show and a member of this school of thought. So without further ado, I’m really, really excited to bring you this interview with Gabriel Hamel.
Jeff Stephens
Gabriel, thanks so much for hanging out with me today. I really, really appreciate it.
Gabriel Hamel
Yeah, thanks for having me.
Jeff Stephens
Yeah, I’ve been seeing your name around for quite a while now, and popping up on another podcast I listened to, and I realized we have lots of common connections. So I know you’ve been a guest on a lot of shows before, but by way of a little bit of an introduction, tell us how do you get to be the guy who gets to be interviewed on all these podcasts? What kind of stuff are you doing? And where did you come from to get to this spot?
Gabriel Hamel
Yeah, usually I’ll be invited onto a podcast to talk about seller financing. That’s kind of how I started investing in real estate and really started building my portfolio that way, because I started with no money and had to find a creative way to buy real estate. And then, how I ended up on a bunch of podcasts really is I’ve never tried to get on a podcast. The very first podcast I ever did was the Bigger Pockets Podcast. And you know, Brandon Turner and I are in a mastermind together, Go Abundance. And so we met there, ended up on his podcast and because of that, enter the real estate podcasts or listened to bigger pockets be the number one real estate podcast in the world. I ended up getting invited on a lot of podcasts. And it seemed like a lot of listeners were intrigued by the fact that you could actually buy real estate with no money down and low money down. And that’s really how I got started. So I think that resonated with a lot of people going hey, I want to build a real estate portfolio. I don’t really know how and I don’t have I don’t have money. You know, I’m never selling anything; I don’t have a book, I don’t have a course that you know when I go to a podcast. Really what I’m trying to do is just give as much value as possible. And if I can say one thing that will make a difference in someone’s life, then great; that’s why I do it really – just to give back in a way that maybe someone will hear something that didn’t click before, they didn’t hear before, that will help them on their on their real estate journey or their life journey. I love talking about life to another things outside of real estate.
Jeff Stephens
That is awesome. I was saying, before we hit record, in so many words, I guess I feel like you know the world, the real estate investor same world, just massive, you know, and then you kind of siphon over here like, oh, well maybe seller financing. And then a subset of that is off market seller financing. And a subset of that is like really relationship focused off market seller financing. And so it’s rare and it’s a special treat for me to get to talk to somebody who’s like, in this niche in a niche in a niche, in some ways. And to really be able to speak the language with somebody is a rare treat there. So when you got started with buying properties with seller financing, my understanding is it was a little bit out of necessity; I’d love to find out what you’re doing now, now that it’s not so much out of necessity. But tell us a little bit about how those first experiences happened when you said, where you ended up doing seller financing for the first time?
Gabriel Hamel
Yeah, well, even before so my first three deals I mentioned offline. So in 05 is when I bought my first house. And this is when banks were giving money to anybody. So I literally had no job, no money, no income, and, and the bank said, hey, we’ll give you 100% Finance love. Prior to that, I was deployed over to Iraq and Kuwait for a year in the military. And I decided that I was like, I’m gonna come back, I’m going to buy a property, you know, and so I come back to the bank, and they said, Hey, you’re approved, I’m like, this is this is easy. I’m gonna run out to the rooms, essentially, house acted before house hacking was released called House hacking, and I just, it just made financial sense.
But even that meal, 2005 was a hot market. And that’s where I realized real quick like, where relationships come in. So I started working with his real estate agent. And I looked at all these homes, and I was getting beat out by all these cash offers and all these offers above asking, and the realtor took me to a house that was a friend of a friend’s son that was rehabbing this house. And I’m the only person that knows it’s for sale. And I know that the neighbor across the street just sold their house for $20,000 more than what the seller would sell it to me for. And so I’m thinking nobody else knows this is for sale. And this was because of the relationship I had with the agent and the relationship he had with the seller. So I bought that.
And then the second home, I literally need business cards after I own one homes. And I’m an investor because in my mind, I had already decided I’m an investor. And I gave that card to a guy at the gym and I was working out with and again, it was a it was an off market deal. It was a friend of his dad that had this rental didn’t want to clean it up and ended up selling it to me same thing hot market, nobody knew was for sale. So I really wrote quickly, like the more open my mouth and told people what I was looking for, the more deals would naturally come. So that’s how I found those first couple deals, and then actually answering your question that you asked, about the seller financing.
So I did that in 05,06, 07. And I’m thinking like, this is easier than the books, I’m just gonna go to the bank. Once a year, 20 years all 20 homes like this is easy, no money down. As long as you know, the property will cash flow more than what my rent for more than what my payment is. I’ll just do this for 20 years. And then Oh wait, I went I went back to the bank and they just said hey, sorry, guidelines have changed you don’t qualify, you actually have to have an income, a down payment, a job, you do not qualify for a loan, and I’m sitting there going well, I’ve made payments every month on time, I’ve done what I said I’m gonna do, I bought the home last three years, they’re like too bad, it’s not like that anymore.
And so I had to get creative and I the only way I knew of was hard money, private money and seller financing and I knew nobody with money, I wasn’t comfortable asking for hard money. And at the time, I felt like that was mostly for flippers, which isn’t what I was looking to do. And so I thought seller finance would be would be my route. And so I got on Craigslist every night for about a year and just started talking to sellers just started having those conversations and learning the language and finding out what sellers really wanted. And after about a year, in 2009, I put together a seller finance deal. It was four units and it was to two duplexes side by side and at the time I was working a minimum wage job less than full time and that four plex and a little bit of cash flow from the other three properties replaced that income and I decided to stop working right then and so I was tactically financially free but I was still poor and just focus my time and energy and put more seller finance you’ll see.
Jeff Stephens
Yeah, that’s amazing. So if we fast forward, you know you said 2005 was your first one like what is that 18 years ago now? You’re infinitely more experienced right? A totally different life, financial situation, everything. So if seller financing kind of came from a point of necessity to begin with, tell us why; I’m guessing, you tell me if I’m wrong, but I’m guessing that still seller financing is a real preference for you today. The economy’s different, everything about your life and your portfolio of business is different. Why is it still your preference today?
Gabriel Hamel
Yeah, I like seller financing. I got spoiled. And I was really, really fortunate to not have any money. And I say fortunate to not have money because it forced me to get creative. And what it what I realized more than anything is just the power of leverage now, like, like real estate is the most leverageable asset on the planet, like financially speaking. And so, back then my only criteria was, hey, it had to be cashflow positive. So I was 100% leveraged in these assets. In fact, my entire portfolio sits at probably 50% LTV, but everything I’ve ever bought is like 90 to 100%, LTV, my only focus was it had to be cashflow positive. So cash flow first was always my focus. And so really out of necessity, I wasn’t afraid of that leverage as long as it cash flowed. And so it forced me to, you know, even when I started building up some equity, and even when I started having stronger cash flow, and some liquidity events, I really looked at how can I stretch this dollar as much as possible, can I put, if I’m going to put money down, I’d rather put 10% down on five properties and 50% down on one property to not only increase the cash flow, but that long term wealth, which is what real estate can do for you.
And so I’ve just kind of taken those, those lessons from those early days of investing with no money down and do the same thing with these larger with these larger assets. I mean, a lot of the liquidity that I have come from those initial properties or those early properties that I bought. So I’m really just like recycling those properties into bigger, bigger, larger deals.
Jeff Stephens
Yeah, that’s awesome. And I love what you just said – I wrote it down – that you’re fortunate to not have money. When I talk to people who are kind of in the mainstream real estate investing space, a lot of them seem to really prefer bank financing. And I think my observation or my theory has been really that it’s because they can get it that they feel like, oh, it’s not necessary to learn about seller finance, so that that’s something you do if you don’t have better options, but I’ve really come to see that the seller financing loans can be preferable and superior in actually in lots of ways. And so back to your point of like, it was actually a gift for you to have that constraint, I feel like constraints are some of the best gifts we can have, because they inspire and they necessitate innovation like that.
Gabriel Hamel
It forced me to be creative. I think seller financing as a whole is way more creative than bank financing. So other than when you get into like commercial, kind of like larger commercial loans, where the banks will have some flexibility and willingness to be creative, depending on who you are as the buyer and the asset. You know, traditional financing, usually you’re going into the bank, and they tell you, they tell you, here’s what you need to qualify, here’s what a down payment is, here’s what the interest rate is, like they tell you the terms of the loan, and you either qualify or not. So I think one of the biggest advantages of seller financing is you can actually be as creative as you and the seller can get there is no restraints along I mean, the interest rate, the price, the down payments negotiable. You know, I’ve done interest only loans, I’ve done direct principal loans, I’ve done seller finance deals for payments, don’t start for six months. You know, a lot of those like, like we said before, with no money down or low money down deals where most banks aren’t going to say they’re not going to give you a thumbs up on that. And so just the ability to be creative in and of itself, I think you have so much more leverage and opportunity on properties that maybe wouldn’t pencil very well with traditional financing. But you find a way to make them pencil with seller finance.
Jeff Stephens
Yeah, yeah, absolutely. I always tell people that I have this visual in my head of like, a mixing board or like an audio studio, like a sound studio. And there’s an audio engineer there, playing with all these little dials. I always say like those dials and there’s like dozens, hundreds of dials there. It’s like all the different things that you could negotiate and fine tune in a seller finance transaction, like you just said, you know, like, oh, maybe interest. Here’s the one that says like, when does interest begin accruing? Okay, and then the one next to it says, well, when did the payments begin happening, which is probably connected to when the interest begins accruing, and the down payment, the interest rate and the amortization or lack thereof, and all these different things, there are so many, so many different things that you can that you can negotiate.
Gabriel Hamel
And I’d say a lot of times, for a seller, it’s usually one of those things, sometimes it’s more of, it’s usually one of those things that are most important. It’s rarely all those things. So it’s usually like they’re really stuck on interest rate, or maybe they’re stuck on price. And sometimes it’s a completely different aspects of the deal like and that’s where it really goes to relationships, like really finding out what’s important to the seller because I think real estate, a lot of people think of it as transactional. And I know that we talked offline about relationships and how important it is. But I have a great example of on a property where the broker had listed this thing as a development project and the guy was getting the seller was getting some really strong cash offers even close to asking, he just kept rejecting these offers. And when the listing expired, I had the opportunity to speak to him. And he was an older gentleman that said, Hey, I don’t have any family. I said, Hey, you know, I’d asked him like, I know you got some good offers on this property, this portfolio of commercial buildings and like seven multifamily properties. And I said, Why didn’t it sell? And he said, Well, I really didn’t want to be cashed out. And he said, I’m 75, I don’t have any family, he goes I just want income for the next 15 years. I share this story a lot, because I think it’s so important, you know, that income for the next 15 years. And if I were to pass away, I really want this payment to go to this nonprofit organization that’s really near and dear to his heart.
And so what I found when talking to him for maybe 30 minutes is not even his own broker really found out what it was that he wanted. So they listed this thing as a development project, all these cash offers came in, he didn’t want the taxable income of being cashed out, he didn’t want to do a 1031 and actively go have to invest. And he didn’t want to go put that money in the stock market. And so for this guy, for this seller, he was flexible on price, down payment and interest rate. What he wanted to know is that he’s going to be taken care of for the next 15 years. And if he passed away during that time, that those payments would continue to this organization that was near and dear to his heart. Nobody knew what he wanted. Nobody asked him, including his agent. So every offer that that came his way, it was all transactional. They all they were making these cash offers thinking about what they think he wanted, but no one actually knew what he wanted. 30 minutes goes by find out what the guy wants. And I was able to negotiate, not even negotiate, I was able to write up a deal with everything that he said was important to him and still make the deal work for me. And it was that true win-win. And that’s the magic of seller finance.
Jeff Stephens
Yeah, that is such a beautiful, perfect, perfect story. I think we talk about on this podcast all the time, about how you have to solve the person before you can solve the deal. You’re never going to know what the best possible deal is that you could put together that meets their needs as well as possible and meets your needs, if you don’t take the time to do that. And what’s so amazing is that you just said you know, maybe it’s a 30 minute conversation, I’m willing to invest lots of meetings and time and stuff with people. But it doesn’t always require a ton of time. It actually probably required more of asking the right questions, listening to the answers and maybe asking a good follow up question or something. But everybody else like you said, including the broker, they’re bringing their own assumptions about what the seller wants. They’re bringing massive generalizations about like, oh, well, this all sellers want XY and Z. And you completely unlock that through asking a better question, listening and then focusing on that relationship. I think it’s a perfect story.
Gabriel Hamel
It’s 100% listen to what their what their needs are. Because I do get asked a lot, you know, I mean, even on podcasts, it’s, Hey, what’s your pitch? How do you, you know, and the other thing is, how do you convince a seller to carry financing and the truth is I’ve never, I’ve never pitched a deal to someone. I’ve never convinced the seller into carrying finance; I’ve found sellers that already want to carry financing. And they already understand the advantage. I asked them really basic questions. And this actually, I actually found this because I just didn’t know anything starting off. So all those conversations I had for a year straight before I bought my first deal was because I didn’t know so I would just ask a seller like, oh, what kind of interest rate are you looking for? What kind of down payment you know, some of them say, Oh, 50% down and some would say, you know, down payment is not very important. And so, you know, starting off because I didn’t know I just out of curiosity would ask these questions. And I found that sellers just naturally talked about what was important to them. And I’m just sitting back listening. And so even to this day, if I want to find out what a seller’s needs are, I just ask them what, why they’re selling what they’re, you know, what kind of terms they’d be interested in. And then I listen, and then I just take the information they give me and say, based on the information they gave me, can I put a deal together that gives them what they want? And still works for me as a buyer, sometimes does and sometimes it doesn’t.
Jeff Stephens
It’s so funny, that question of how do you convince somebody, that comes up all the time. And it’s so interesting, just the upstream of that question, is this assumption that you have to convince people.
Gabriel Hamel
I’ve never.
Jeff Stephens
No, me neither. And to me, that actually wouldn’t feel, that would feel a little bit on the gross side.
So I have I have my own theory, or I have my own answer to this question. But I’m curious what you’re, you probably meet a lot of people who are like, man, Gabriel, geez, I’ve been dude, I’ve been trying to do seller financing. I’ve made a lot of offers. I’ve talked to a lot of people, nobody will take me up on this. I just don’t think it’s that common in my market things along those lines. What do you think is sort of the main maybe mistake tactically or strategically that people are making, that’s sort of leading them to hit this brick wall over and over again?
Gabriel Hamel
Yeah, I mean, I think some of that goes back to what we were just talking about, I think thinking, thinking in terms of what you want as a buyer, rather than really find out what the seller wants. I mean, I was told the same thing. Everything I bought in 09 to 13 was no money down, seller financing. Everything. And people told me the same thing. Any agent I talked to was like, oh sellers don’t seller finance deals anymore. That’s not a thing anymore. That was common in the 70s. It’s common the like, that’s what used to happen in the early 1900s. Now, what agents and brokers I found really early aren’t investors themselves. So they’re not looking at it through the eyes of an investor. So I think for one of those that say, it’s, it’s just not a thing anymore. Sellers don’t want to want to do it. I don’t think they’ve had conversations with maybe the right, the right sellers.
And you have to just not look at it through the lens of what do I want, it’s building a genuine relationship. Like when I when I meet a seller, I don’t, I don’t care if they’re selling the property or not, I’m not trying to convince them to sell me the property, if they’re interested in selling. And they know like, and trust me, and I don’t care if they want to sell me that property tomorrow, or next week, or next month, or maybe 10 years from now, or maybe 10 years from now, I’m not buying that asset class, but at least I’m on the, you know, forefront of their mind when I think about, hey, maybe Gabe’s interested in buying this. And so I don’t leave it I’m not this guy that comes in and says, Take it or leave it. Here’s, here’s my offer. And I know people that do that. They’re like, here’s the cash offer, here’s what you would, all the interest, you’d make seller financing, and they’re showing up with contracts in hand.
Don’t do that. In fact, a lot of my early stuff, it was all it was all just verbal confirmation that was, and I’m not advising this is the best way to go. But I never had anyone back out of a deal. Just because it was on a handshake and not on a not on paper. And so it just it’s just keeping the human the human aspect to it, it’s just keeping it very human, very relational.
Jeff Stephens
Yeah, absolutely. Man, well, this is validating for me that we’re totally speaking the same language because I mean, so many, like almost word for word, some of the things you just said, are the things I’m beating my listeners and my coaching clients over the head with; like, this is not a take it or leave it situation. And my belief is exactly what you just said: it doesn’t go well for a lot of investors who are trying to buy with seller financing, because they’re just making it all about them. In fact, they might as well like walk into the room wearing a t-shirt that says I want to buy your property with seller financing, because that’s what’s best for me. And it’s like gosh, if you just hide the t-shirt and even though that’s true, you do want to buy their property with seller financing, take a few more minutes to kind of come back around to it and you probably help the seller realize that that’s kind of what they want, even as well.
Gabriel Hamel
Absolutely. And I think too, I think a lot of times, I don’t know if it’s at the mindset of newer investors not thinking they can buy larger properties. But I think a lot of people think, okay, single family homes, so they’re thinking that maybe they are trying to talk to a, like an older couple out of their home, right. And so I’ve never bought a property that was someone’s personal residence. In fact, every seller who’s ever cared financing for me, they’re investors themselves. So not always, but it’s usually been men and women in their 60s or 70s, who own multiple assets, who have built up a significant level of wealth and to some to some amount, and they’re already experienced there. So the reason that they are already familiar with seller financing, they probably bought that way, or they sold that way before. And so these, these are investors, and so to me, it’s a lot easier to, to talk to, you know, a man or woman who they’re investors, they, they own the asset, they own the asset for years, and they’re just tired. Like they don’t, they don’t want to cash out, they, a lot of times the sellers have self-managed and they’re just burned out, they’ve been the landlord, they’ve been the maintenance person, and they’re just ready to have a new level of passivity. And for a lot of these sellers, seller financing is that way for them to have that level of passivity without the without the headache of the property. And I think a lot of new investors are thinking single family homes, and that they are trying, and they think they’re not only are they thinking they have to convince someone that they need to convince someone to sell their personal property or get them out of their homes somewhat. And that’s just not the approach that I’ve ever taken. And I’ve never bought anyone’s personal property.
Jeff Stephens
Yeah, absolutely. 100% same. Well, and the other thing too, obviously, about the absentee owners is their capital gains tax situation is going to be a huge motivator that’s different than, you know, would be the case for most owner occupants, as well. Yeah, gosh, okay. I love it. So one of the points I guess, I think we’ve hit on it well, but I just want to like make it really clear for everybody, is this idea that like this relationship focus, I have a feeling that you are probably like me in the sense that like the relationship focus actually just sort of feels better, feels more authentic, more natural, more human. But then there is this really practical side of it too, which is that when you focus on the relationship oriented approach, it’s not just that you’re being more ethical and warmer and fuzzier, which all of that is true, too, but it actually really creates a lot of like, you will create better deals for yourself by unlocking them in that in that way, too. I mean, do you agree with that, too, that there’s a real practical side to this as well?
Gabriel Hamel
Yeah, absolutely. I think finding, you know, what works for your personality or your lifestyle, you know, I do have a lot of friends that invest in real estate, you know, and they’re very successful. And I, you know, I know some that every deal they ever bought in this from a wholesaler, or others, maybe the mass mailers or the auto texts, or the auto calls, and I’m not saying it’s right or wrong, that’s just not how I’ve chosen to network or, or build my relationships. For me, my personality, for my lifestyle, I like a lot more of kind of an organic, holistic approach, it feels, I do good in kind of that free flow state versus like, systematic, you have to send X amount of mailers to X amount of people every single month. I know people that are very successful with those kinds of with those kinds of campaigns, it’s just, it doesn’t feel it doesn’t feel like a good fit for my lifestyle, and the way that I try to build the build my business. And so I’m not saying that you can’t be successful doing that. For me, I just want to be on top of mind when people think about him think about selling these properties. And that’s, and that’s where every deal that I’ve ever done has come from is just a very organic relationship. And sometimes they’re not deals that I even end up pursuing. But I’m the first one who gets the call to say, Hey, are you interested in this deal? And it’s because they know that I invest in real estate. And so they’re, and they know, they’re not going to be I’m not going to sell them on something.
I mean, I had someone reach out that I went to high school with and hadn’t talked to in years, we weren’t super close. And he said, Hey, I know you own a lot of real estate in the area. Our family’s thinking about selling these, these apartments, would you be interested? And so and I didn’t end up buying these, we just couldn’t come to terms. But the fact that he thought about me first, before they went to go list it. And he knew that I wasn’t going to I’m not an agent and broker so he knows I’m not going to try to get a listing from them. He knows that I’m not going to go try to like flip these properties to someone else. It was just a genuine like, Hey, I know you buy real estate, is this something you’re interested in? And even though that particular deal didn’t work out, many have and a lot of it’s because people feel comfortable saying, Hey, I know you invest. Do you want to check this out? And that’s, and that’s to me what fits and works really well for my business.
Jeff Stephens
Yeah, I love that. You just got me thinking about relationships. One thing I like to think about myself is like relationship is like a form of currency. You know, so you talked before about like, no money down. So I always think that there’s like five currencies, you know, there’s money, time, knowledge, expertise, energy, and then relationship. And so, to me, when I hear somebody say no money down, it’s like, it’s like saying, I’m structuring a deal without a lot of the currency of cash or capital. But I’m using other types of capital, like, like relationship currency, the fact that you even had that opportunity was a fact, it’s like you had made a bunch of sort of deposits directly or indirectly, in like the relationship capital, piggy bank, really, that that created that opportunity for you and then create some of these no money down deals that you have done in the past or even continue to do today.
Gabriel Hamel
Yeah, absolutely. I mean, one of the first seller finance deals I did, I used to hand deliver, I used to handle over the mortgage payment every single month, the woman that sold me the property, also to brick and mortar business in town, and I used to just hand deliver that mortgage payment just to have that face time. And so her and her husband owned multiple properties. So then when they wanted to sell another one, who do you think they called? We had that trust, we had that relationship, and so they didn’t want to market this thing to someone else. They didn’t wanna go hire an agent. They said, Hey, are you interested in this one, too? And it’s like, yeah, of course. And you know, interestingly enough, I share this story a lot, is six years later, when I went and refinanced those properties, she became my first private money lender. So I did a big refi, I refied out all these seller finance deals, and she said, Hey, what am I going to do with all this money, and I had never borrowed private money, and I said, hey, you can lend it back to me. And she kind of thought I was joking. And a couple months later, I had a property on contract, and I was gonna get a hard money loan on it. And she calls and says, Hey, were you serious about, you know, borrowing this money? And I said, Absolutely, I can put that money to work. And so she became my first private money lender. But a lot of that is because we had that six years of trust, six years of me making a mortgage payment on time, every single month. And so again, it was the relationship, not so much the transaction. We already had that trust. She knew that I was going to make that payment every month on time and it’s a win-win. She gets to kick back and get mailbox money, and I got to take some of that liquidity that she had and go put it to work and buy more real estate.
Jeff Stephens
Yeah, that’s awesome. That reminds me of something that I feel like I need to need to remember this a little bit myself. That when we can get the seller involved in the financing, even if it’s a small amount, like let’s say they’re gonna like carry back 10% or something like that, we’re gonna go get a bank loan for the majority of it, put a little bit down and they’re only going to carry back 10%, I think a lot of people would look at that and say, What’s the point? It’s only 10%? But I think what you just said illustrates one of the main reasons why that’s still a very valuable thing, because now you’ve established a relationship with this person on in that context, because you already had a relationship with her as the seller. But in this case, you have now this relationship with her where she’s the lender, you have the opportunity to be in touch with her literally on a monthly basis for years. And she becomes your best candidate next time you have a new opportunity for someone to fund something you can give her a call back. And so I hope that’s encouraging people to pursue seller financing, even if it’s not the whole deal.
Gabriel Hamel
Yeah, no, absolutely. Absolutely.
Jeff Stephens
So just to pivot for a second into, like, where we are today. You know, like, as we’re recording this right now, I think, maybe just to step back. I think everything we’re talking about here is totally timeless; in some ways, it’s hilarious, sometimes I think what I preach now is like exactly what could have worked for my grandparents as well. But, of course, we’re a little bit, you know, we always have to be in the context of what’s happening right now. So as we’re recording this right now, we’re what eight or nine months into kind of a dramatic shift in the marketplace. It went from being sort of that extreme seller’s market to going a little bit more in the other direction, interest rates are higher. So how do you feel about seller financing as it sort of contextually applies to right now in what is sort of a changing market? And maybe even in the context of like, are your own plans, strategies, or anything evolving a little bit?
Gabriel Hamel
Yeah, I think it’s a good question. I think I personally it’s always a good time to buy, and only the fundamentals of real estate investing change. I think there’s investing and there’s speculating. People made a lot of money speculating but speculating is you buy at this price and values go up and even though I built a lot of wealth through appreciation and that long term equity, that’s not why I invest. I invest for the cash flow and so I still make sure to this day that the deal works when I when I buy it. So, I’ll buy in any market: down, up, sideways market, as long as the deal makes sense. I closed on a property two weeks ago and I made more purchases in 2022 than I had in any other previous year. As far as seller financing, I think because of where interest rates are going and because of banks tightening up, there’s gonna be more opportunities to buy with seller financing. I get emails every single day for the last six months of motivated seller, possible seller financing. I think we’re at a weird time where buyers still want this incredible crazy discount and sellers want top dollar. And so I think it’s gonna take some time for that to settle. But, it still, again, goes to relationships and conversations. I sold several properties last year with seller financing; it was the first property that I sold with seller financing. I sold it because I got the price I wanted, I gave the buyers really great terms and they’re buyers that I know, like, and trust. And they’re buyers that can go in there and do to these properties what is not my best use of time and money and energy, so I can go put larger deals together. They take over these properties, and in two years, I have a good payday but it’s a win-win. You know, that deal’s gonna make this couple millionaires and you know, so yes, it’s a good time to buy or sell with seller financing.
Jeff Stephens
That’s awesome.
Gabriel Hamel
I think I answered your question there, I’m sorry, I kind of went on a tangent there.
Jeff Stephens
No, absolutely it does. It does. I find that it’s like so many people in real estate investing who I guess who haven’t done much in seller financing yet, they bring this mentality that says sellers only sell with seller financing when they don’t have any other options, right? It’s like last resort kind of a thing. And thus, they feel like this last chapter of say, seven or eight years or whatever it was, it was a seller’s market, so they were thinking, oh, there was no seller financing. But obviously you know that that’s not true. And I know that’s not true, because there were always sellers who wanted to have a continued income stream from the property, didn’t want to have to buy a replacement property in exchange, but wanted to defer capital gains, all of those types of things. But then, now there might be this sort of added second layer too, which is, it actually might be harder for them to sell some of their properties or to sell them for the prices they want to. So in my mind, it’s like, there’s maybe all the reasons are available right now, or here in the near future, for why seller refinancing will be a really great, great tool for everybody involved.
Gabriel Hamel
Absolutely. And I think it also depends on where the buyer and seller are at in their investing journey. So like the property I sold, they’re great properties; in fact, I have low interest fixed debt on them. And so they’re not properties I have to sell; it’s just I’m 17 years in on my investing journey, and so I look at my portfolio as a whole and these particular properties I’m looking at going, you know, over the next few years, these are going to have quite a bit of deferred maintenance that needs to be taken care of. But I also have a lot of equity in those properties. And that’s really not the best use of my money to sink into these small multifamily properties, the best use of my money is go putting that into larger deals. Now, it’s still a win for the buyers, because the buyers only have a couple of properties. And so for them, this is changing the entire landscape of their investing journey, because they were able to go in it was 4 properties, 13 units, they had the skill set to go in there, rehab them, clean them up, maximize rents, so it’s a true win for them. And it’s a true win for me, and I’ll have a great payday in a couple years, I don’t need that money right now. And so I got what I want out of the deal, and they got what they wanted. And it’s a true win-win. And I think we’ll see more people, like I will potentially be selling more properties that way, just because it doesn’t, it’s really just taking the equity and putting it into another deal. And so if I can maximize the sale that way, and help someone else get into that property. it’s a win for them, it’s a win for me.
Jeff Stephens
Absolutely. So as we begin to wrap it up, I’ve got one final question for you. But before that even I’m just curious. So today, in terms of where you are in your whole journey, it’s my understanding you have good variety of different sort of types of properties and even locations and things like that. How are you these days defining what your target criteria is? Or what are the common denominators, even maybe across some of the diversity of the things that you are currently buying and owning today?
Gabriel Hamel
Yeah, you know, it’s shifted through the years. So in 2019, I really focused in the mobile home park space. And a lot of that was I really was going to shift into multifamily and I just felt like the returns, the cap rates were getting convinced out of nothing. And so originally was just looking for better return. But it was the same model of you know, I wanted the high cash on cash. There was it was cashflow first. Now a lot of these, I’d had the opportunity, especially mobile home park space, you know, get the expenses down and the revenue, often been able to create a lot of value, a lot of value there. But I don’t I don’t singularly focus on one asset class, I kind of go through like micro times where that is my focus. Like when I was buying mobile home parks, I stopped looking at all single family, all small multifamily, and it was, you know, just mobile home parks.
But since then, I’ve shifted into commercial industrial type properties. I really liked that asset class, and I don’t think one asset class is better than another. And I don’t think you have to specialize. You know, I don’t raise capital. I don’t I’m not a syndicator. I think for the syndicators, you know, they need to specialize in the sense of, if you’re putting your money into someone else’s deal. Let’s say it’s self-storage, you want them to be the best and know the most about self-storage. But when I’m investing for myself, I’m investing in assets. That makes sense. I mean, I know people that are kicking off every single asset class. And so for me, it’s more about being an opportunist and finding opportunities that may be different than my current assets now, and so I liked the industrial space, I like having strong commercial tenants, they’re busy, you know, these commercial tenants or business owners, and a lot of them are doing crazy amounts of revenue, or they’ve been in business for a lot of years. And they’re signing leases. So a lot of the strength of the deal is based on the tenant, the base stuff and based on how strong the leases are. And some of that is, you know, I feel like I’m at a place where I again, can I can sell a property or use some of the equity in the property or someliquidity to do these larger deals that maybe you know, 10 years ago, I didn’t mentally have the capacity or maybe the know how to put together. I don’t think the bigger deals are that much harder than the smaller deals. And so my focus today is still the same: high cash on cash return, strongest asset that’s going to produce cashflow.
Jeff Stephens
That’s awesome. That is very cool. And I think that one of those last points you made, there’s something we all need to remind ourselves of more. And I’m definitely speaking to myself when I say that, is the idea that the bigger deals don’t necessarily take a lot more work or necessarily harder. I’m always trying to balance personally this idea of, I think I know my sweet spot in terms of what part of this whole business am I best at, and I want to try to do more of that and less of the other stuff, right. But then there’s this healthy tension between that and then kind of thinking bigger or doing bigger things too. I don’t know if you’ve experienced any of that kind of deciding just the healthy tension between sort of specialization in a sense, and spreading your wings to different things.
Gabriel Hamel
Yeah, I know a lot of people that specialize. And it makes sense for certain people in certain arenas within real estate, I mean, if you’re building a business around flipping houses, like flipping single family homes, then you should probably be the best at knowing single family homes or the Self-Storage scenario if you’re the guy that’s raising hundreds of millions of dollars for self-storage, you better be the guy that specializes in that. I haven’t put money in other people’s deals before. But if I was going to put my money into someone’s deal, and they’re a self-storage person, or they’re multifamily, I would want to know that they are the best at multifamily, the best at self-storage.
When I’m investing for myself, I want to feel comfortable with the deal. But I’m not feeling like I have to know every single thing about that asset class. Every asset class works, in every asset class you can be successful investing in that class;, a lot of it’s just math and intuition. I like to have a variety, I like to have my assets spreading out into different states, I want different asset classes; I love my mobile home parks. And there’s that balance of my first single family deal gave me the confidence and experience in the next one. That first seller finance deal gave me the experience and competence for the next one; the first mobile home park deal, the confidence to do the next one. And so there’s this balance of experience and competence. And when I go into a larger deal, or larger asset class, if I’m not just a little bit uncomfortable, then I don’t like that, you know; I don’t want to be comfortable. I like to do big deals where I’m like, Alright, this is the largest deal I’ve ever done. Or this is a new asset class, it should be a little bit uncomfortable. And I’ve never bought a property that I regret buying. I mean, every property I’ve bought has had a certain level of yes, it’s performing. Yes, they’re performing well. And I have to learn stuff as I go. There was a lot of stuff in the mobile home park space that I didn’t know, there’s a lot of stuff in the industrial space I didn’t know. Now, I know now, I feel comfortable going into that next property and that asset class.
Jeff Stephens
I think that learning new things keeps it interesting for us. And if we’re being honest with ourselves, entrepreneurs need to stay interested, or else bad things can happen if we get bored, or we start to check out mentally. So I think that’s pretty cool, learning new things.
All right, cool. So just to put a bow on this, before we sign off for today, I think it’s safe to say that if someone’s listening to this show at all, and especially, you know, this episode, they want to be buying properties off market with seller financing, relationship focused approach. And a lot of the folks listening are probably like on the early-ish part of that journey. So I guess I would just ask you, like really broadly open ended: when you find when you get the opportunity to talk to somebody in that spot, that’s what they want to do, what’s the number one encouraging thing that you would like to leave them thinking as you sign off today?
Gabriel Hamel
Yeah, usually what I tell people, I tell them they need to have as many conversations as they possibly can. I have to let people know what they’re looking to do. And a lot of people, the truth is a lot of people won’t, they’ll either intimidated to say, Hey, I’m gonna invest in real estate, but I can’t tell you almost anyone that’s actually taking that advice and gone out and told people, they’ve started having conversations, I’ve had so many he’ll come back, like, oh my gosh, I had no idea my next door neighbor had, I’ve known my neighbor for 10 years, I had no idea they buy rental properties. But once they once they’re on a walk and told them, hey, I’m gonna start investing real estate, you know, then their neighbor says really? Oh, that’s interesting. I have five rental properties, right? So it’s, the more conversations you can have, you’re going to naturally find that and the example I use is like I had nobody in my circle. Nobody that had money that invested in real estate that was in business. But as I started speaking, that it as I started putting that into the universe, like it naturally came back, like I attracted those kinds of conversations where I feel like then I don’t even focus a conversation on investing in real estate.
And a lot of times it naturally goes there. Because people say, I hate the question of what do you do, right? But people ask, Well, what do you do? And usually I say, I just live my life to the fullest or something along those. And then that creates a very interesting conversation. Well, how do you make your money? I invest in real estate. And so the more people you can tell, the more opportunities you’re going to have. It’s very unlikely someone’s going to say, hey, here’s the property instead of buying it if they have no idea that you invest in real estate, and so you have to start, I can’t stress that enough. And I, I’ve watched people do it, like two days where like, Oh, my God, I started telling people that, that I’m gonna invest in real estate and this person I’ve worked with, and this neighbor, and you know, my mom’s neighbors, Fred, like, it’s just crazy. How once you open your mouth, those conversations kind of organically happen. And then that’s how you create, you know, being on someone’s mind. You know, oh, hey, well, I’m thinking about selling a property. Maybe this person is interested, but if you do not open your mouth, they’re not going to know you’re interested. They’re not going to just say, Oh, here’s a property. I think you want to invest in real estate. Yeah, you got to let people know.
Jeff Stephens
Beautiful advice. Beautiful advice. Thank you so much for that. And thank you for being here, just in general. I think being a guest on a podcast is like an act of generosity, you contributing so much of your own hard fought experience and time and everything; there’s so many other things you could be doing today.
Gabriel Hamel
Happy to do it!
Jeff Stephens
Well thank you, thank you. If people want to keep up with what you’re doing and hear other shows you’ve been on or anything else you’re up to, what’s the best way to keep in touch or follow you or whatever?
Gabriel Hamel
Yeah, Instagram is the best way; just @GabrielRHamel. I’m not often on active on there, but I’m on there. So if I do a podcast or something, I’ll throw it throw it on Instagram, and that’s the best way to reach me.
Jeff Stephens
Okay, fantastic. Well, thanks again, so much for being here today. I know. I mean, I personally got a ton out of this, I can only imagine how much all of our listeners are gonna get, so thank you so much for that.
Gabriel Hamel
Absolutely; happy to do it.
Well, there you have it. That was my interview with Gabriel Hamel, I think that you’ll find he is definitely a member of our school of thought. And it’s really interesting to hear how he has applied these tools to build an amazing portfolio and lead an incredible life. And I know that one of the things that he really likes to talk about as much as real estate itself is having more of a lifestyle orientation to business and really using real estate as a way to not just focus on real estate, but to focus on having the life you want.
So that’s it for today’s episode of Racking Up Rentals. Again, Show Notes, including a transcript here, can be found at thoughtfulre.com/e180. Please do us a big ol favor by hitting that subscribe or follow button in your podcast app, and an even bigger favor, it is so appreciated, I swear I see every single one of these, is a rating and review in your podcast platform. We so appreciate that. It really helps grow the show for us. So thank you so much for doing that.
Did you know that we have a Facebook group for Thoughtful Real Estate Entrepreneurs as well? Yep, it’s true. It’s called Rental Portfolio Wealth Builders and we’d love to have you join us there. Just go to group.thoughtfulre.com and we’ll make sure that the magic of the internet takes you right to that page in Facebook and you can join us. If you liked this episode, please take a screenshot of it on your phone, post it to Instagram and tag us; we are @thoughtfulrealestate all spelled out. All right, I will see you in the next episode. Thanks so much for being here. Again, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off.
Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers. Remember: solve the person to unlock the deal and solve the financing to unlock the profits.
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