Tim Krause is someone I've been paying attention to for the past couple of years.
I got to know him after he started posting some vlog-style videos about his land investing business in our Facebook Group.
Tim is a guy who seems to defy all odds with the growth he's seen in his land business. He has clearly found his competitive edge and he's going to explain how he's done it in this fascinating conversation.
Links and Resources
- Who Not How by Dan Sullivan and Benjamin Hardy
- The Gap and the Gain by Dan Sullivan
- What is Hypothecation?
- REI Pebble Review: What Can This CRM Do for Land Investors?
- 119: How Jesse Finds the Best Options for Buying Vacant Land
Seth: Hey, everybody, how's it going? This is Seth and Jaren and you're listening to the REtipster podcast. Today, we're talking with my friend, Tim Krause. Tim is somebody I got to know after he started posting these vlog-style videos about his land investing business on Facebook over the past couple of years in hanging out and our Facebook group.
Tim also got this background in video production in his previous business, and he's been able to offer me some really helpful advice on the video projects that I'm always working on with REtipster. So, we've been able to scratch each other's backs figuratively. Not literally because that would be weird. We're also on another side of the country, so that's impossible.
But Tim is another one of these guys who seems to defy all odds with this astounding growth in his land business. When I look at how far he's come since he started, he strikes me as somebody who hasn't dipped his toes in the water, he's dove in headfirst and he hasn't looked back and the results really tell the story. I mean, it's just amazing to see what has happened.
And for a while, I've wanted to get him on the show just so we can talk about what he is doing and how is he making this work. Because I'm sure there's probably been highs and probably some lows. I just want to figure out what's been happening behind the curtain. How has he been making this work? So, Tim, welcome to the show. How are you doing?
Tim Krause: Hey, thanks for having me, Seth. Good to see you guys.
Seth: Why don't we just start with a little bit about your story? Why don't you tell us about your background? What did you do prior to the land business? How did you hear about the land business and how long have you been working in the land business?
Tim Krause: Yeah, to bring it back to my background, we'll go back to really quickly when I was 13. My Opa or my grandpa had a bunch of apartments and when I was 13, I lost an expensive retainer for my braces at the time. And so, I had to pay it off. I went to my Opa, he gave me the money. He gave the money to my parents and then he said, "You work for me now."
I worked for him part-time at like three bucks an hour for a long time. And just got into a little bit of the real estate department side then. Fast forward, several years to when I was in 2005, my parents are flipping houses. So, they flipped houses from 2005 to 2008. In 2007, I actually got my license. I do not have my license right now.
And then I sold, I think it was two or three houses. But they were all my parents' houses. The plan was to save money for the family. And that was the goal. And then when that all fell apart, I just fell out of it and said “I'm not going to do real estate ever again. I want to do something that's my passion.”
Then I did 11 jobs from the ages of 18 to 29. I did 11 different jobs over 11 years. I was a mechanic, handyman, and worked in a computer lab. I was an EMT for three years, working in an ambulance. I did a whole bunch of different stuff, worked at a lumber mill, a bunch of different jobs. A handful of them were seasonal. And then also I do get bored quite easily. A handful of them I did just move on to something else.
I had a video business on the side for years because that was my passion and what I enjoyed doing. Then eventually when I was 29, I got hurt again. I got hurt in the ambulance job. I got an injury in my back and then I quit the ambulance job and went and did carpet cleaning for a little while. And then that re-aggravated the injury.
So, then I couldn't do anything. This is important here, I had $6,000 saved up. And for those first eight years of my marriage or so, we didn't save anything. We spent everything we had. We didn't make a whole lot, but we didn't have a whole lot of expenses and we spent it all.
And we finally figured out the last two years before my back injury, how to not spend absolutely everything that we made. Because if you can't get that right, you have so much less opportunity to go to something else. So that $6,000 was us not spending our tax return money for two years.We didn't save anything during the whole of two years, except that we got a tax return check for $3,000 and we just didn't spend it. And the previous years we spent it. So, I quit my job and said, "Hey, I'm going to try this video business thing and it's not going to work. So, I'm going to learn how to make websites.” I was part of a networking group. I started doing video and the video just shot off.
I was making $500 a month before then on average. And then when I went full-time and actually gave it my all on video, the next month I made $5,000. And went about that level for a while and did that for three years. I flew around the world a few times to Iceland and Bosnia. I flew around the country to California, several times, Texas, New York, Denver.
And after doing that for a couple of years, I was getting disheartened with the video. Because creative stuff is fun, but it's hard. A lot of people do it for fun, so the supply and demand as far as compensation can be very challenging.
Two things happened. One, I went to a networking group or I was hired to go film a mastermind in California. And we were at this dinner and there are guys my age, but they're killing it in real estate and we're buying just a thousand dollars dinner there. And they paid for my dinner because I was like, I don't make very much.
And then I'm like, "Man, I wish I could do real estate, but it's not my passion." And one guy goes, "Real estate is not my passion. What does that have to do with anything? I'm just good at it." It's a means to an end for him in that situation. So, I was like, okay. And then I went to a job in Colorado where I went down with a commercial property investor, a very, very, very smart guy. And we were talking about different forms of real estate and that's when I started researching alternative forms of real estate. Not just flips because I saw how dangerous those were, but I was still not a fan.
And then, I went back and I started following a guy who did mobile homes. Because I was looking at mobile home parks for $7 million or whatever. I eventually then ran across the land niche and I was like, “What the heck is this?” And the first time I heard about it, I laughed about it. This sounds like the dumbest thing ever because I was super in the real estate world. I filmed the largest real estate conference for the Pacific Northwest for two years. And so, there were multiple stages and we were filming all of them at the same time. I was watching all the footage. I got a ridiculous amount of real estate education from that. And I was like, I've never heard of this land stuff ever. No one's ever mentioned a word about it.
And then started 2020 basically. I then put together my first little mailer for Arizona and I sent it off and I was like, “This isn't going to do anything.” Again, kind of like with video. And then people started responding and I was shocked. I was blown away that people actually talked back to me and then I eventually bought my first deal for $1,800.
Started from rambling a little bit, but that's my background. I have a lot of real estate in my background. And then I've gone from there.
Seth: What was the date when you sent out your first mailer, Tim? Just to get a feel for when you officially jumped into this business?
Tim Krause: It was either December 2019 or January 2020. It was either at the very end of December or the beginning, middle of January. Those are my first emails that officially went out. I think it was 1,100 pieces to Arizona.
Seth: Okay. We're recording this January of 2022. You've been into this about two years right now. That's a decent amount of time, but not long. It's not like you're a super seasoned veteran, but you've been through the wringer, you've seen a thing or two, you have a good handle on how this business works. But I think as we get a little further and hear more about where you've been, a lot of people will agree, you've done and seen and accomplished a lot so far. So maybe we just jump into that.
How many deals have you done? What are some typical size deals that you're working on right now?
Tim Krause: As far as bought and sold, we've done 48, and we have three that are going to be pending here. So that'll get us to a little bit over 51 as far as it is bought and sold. So that's both sides.
I'm moving around my price point right now. Right now, I'm buying in the $20,000 to $30,000 range, and then I'm trying to more or less get rid of them in the $40,000 to $60,000 range. So usually aiming for double. Of course, as the price points go higher, that's not going to be possible. I do have actually my most expensive property under contract right now to buy, which is $115,000, and knock on wood.
Seth: That's the purchase price?
Tim Krause: That's the purchase price. The numbers I'm looking at for the hopeful sales price are around $190,000.
Seth: Do you mess around with super cheap stuff at all? It sounds like you just go after the pretty meaty deals with lots of profit on the bone. Is that accurate?
Tim Krause: That's definitely accurate for now. When I started, my first deal was $1,300 bucks, sold for $3,000. Then I did a few “buy for $2,000 sell for $5,000.” I did a few of those, but then I really quickly wanted to get away from those because I wanted to do title and escrow with everything.
And also, the cost difference. In 2021, my average letters per deal was 2,200. So, 2,200 letters per deal was average. And I had some big, big losing mailers in there, but still, that was my average. That's not bad.
Jaren: I have noticed that the higher you go in price within the land business, it does seem to give some pretty hardcore competitive advantages in my opinion. The ROI percentage is smaller compared to buying property for $500 and selling it for $1,500 or $3,000 or whatever. But in terms of pure dollar amount, it's pretty amazing what you can see happen when you are buying north of $25,000.
I actually encourage a lot of people that I either coach or have conversations with to make it a goal to start moving toward the direction of doing more expensive property. Because I just feel like proof is in the pudding. I think most people as a rule of thumb shoot for at least one multiplier in terms of list price. So, if you buy a property for $25,000 grand, you list it for $50,000. And scale up and down from there.But I feel like you're not going to see that dollar amount where you can make $20,000 on a property buying at like a $5,000 price. But I mean, sometimes you can. I've had some outliers. I think I bought a property one time for $2,500 and sold it for like $19,000 or something. But by and large, it's pretty amazing that you can, if you have the capital, you can be buying and making $20,000 a pop pretty easily once you're in the higher price point. So, I encourage the listeners, if you can go that direction.
I think there's also less competition too. The bell curve of activities is south of $15,000. So, you can be in a really busy market and be in a very noisy pool within a busy market.
Seth: I don't know if I was connecting the dots right, but did you say you started with $6,000 when you were going to this business?
Tim Krause: $6,000 was the video business. I had $11,000 when I started this business, because my video business didn't make that much. And I put $2,000 of that into letters. So, it brought me down to about $9,000 because I was super pissed. When COVID happened, the video business was tanked off. I thought this was a repeat of 2008, which everyone did, but I was like, I got my real estate license in 2007. 2008 happened. I started land in January 2020, COVID happened. But I filmed a lot of real estate professionals during my video business. And some of them started in 2007, like I did, but they're super successful. And one of the main things they said they did is they just didn't quit. They showed up and they just did whatever they had to do to get it done. So that was my big takeaway. And I was like, “You know what? I'm not going to quit this.” And I even ran the numbers and I was like, “Okay, if I go work at Amazon, I make enough just to pay the mortgage and nothing else. So that's not an option.” So, I got up. That's when I bought a bigger package of letters after my first little one. Because to be fair, my first letters I went out, I only bought one deal from it and the other ones I killed because I was afraid. I bought that first deal because I think either it was already bought or it was just in the process, but I had some other deals in that pipeline that I killed when COVID happened.
Jaren: Well, I've been following you. I know Seth mentioned that he's been following your story too, but both of us have been following your story for pretty much since I met you at The Best Ever Conference and you started getting into the land space. And something that is really striking about your growth is you talk about in the very beginning, having some bad mindsets or some fear and stuff, but from the outside looking in, I haven't seen a lot of that.
At some point you must have had some revelation or some principle that did something, man, because you are growing at a pace and your approach to things seems to have the confidence and aggressiveness as somebody who's very experienced. And maybe it's because your parents have a background in real estate. I don't know, but I'd love to figure that out. Because I feel like there'd be some gold there.
Do you think there was an epiphany or there was anything that you could point to say, okay, this was the tipping point where all of a sudden, I was just like, you know what? Let's grow hard. Because you've grown pretty quickly.Tim Krause: That's very true. Yeah. There's still more that I would like to do of course, and there's still more that I want to push for. One big part of it, in general, I hit like 80% of my goals. Which means whatever I set my goal for in general, I'm going to get about 80% of it. So, if my goal is just to make barely enough money, I would make a portion of that.
And I don’t know, the numbers just started flowing. I started thinking about it really, really, really like a business. I used a ton of private money. I have $400,000 in private money loans right now in my business. I almost bought zero properties with my own cash.
Seth: Has it always been that way for you? When did you start deploying private money so seriously? Was it after those first few deals or when did you decide like this is going to be the way forward?
Tim Krause: Yeah, it was probably after deal five, deal four or five. It just made sense. Also, you just got to weigh the pros and cons. People are looking for places to put money like crazy right now. So that's an opportunity. You just got to look at the opportunities that are out there and try to go hard on them and then do them. I don't know, as far as what made me push really far, but I just see the potential to grow and grow and grow. And I keep on having enough money to put that into my own mail.
Jaren: Was it the fact that you had proof of concept in the land businesses? Because it sounds too good to be true, but then when you actually do a handful of deals and you see the opportunities that are here, it's incredible. So, was it just the fact that you're like, “Oh my goodness, I'm finally in a bucket that metaphorically is good soil, so I'm just going to sow as hard as possible?”
I know you said you don't have one specific principle, but it's shocking to me that you share that at first. You intentionally didn't go after deals because you were intimidated or afraid because out of the people who have come up in the last two years, somebody who I think of as a case study of who's been successful in land and has been really going after, it's you, man.
So, if there are any tips or tricks that you can share with our audience on how do you overcome those beginning fear-based limiting belief mindsets?
Tim Krause: Yeah. One thing that I didn't realize when I first started is that people would actually need our service or want our service. And in the beginning, it's very easy to think no one wants it. You disqualify yourself before you let other people give you the chance. But then at the same point, I remember back to my family and when my Opa was much older and they were selling their apartment complex, a nine-unit small apartment complex, they sold it to someone on seller financing because it needed work because the need was there.
So, it's like the need exists. There are very, very few people who actually have the need or the desire to sell to us. But there are three ways to sell your property with an agent, by yourself, or to an investor. Most of them will go with an agent. A few will do it by themselves. And very few will go with an investor. But those people still would prefer an investor.
And then also doing my numbers. I do a lot of numbers. I make a lot of calculators and a lot of my own tools so that I could evaluate things quickly. And I put a lot of money right back in the mail because the land business doesn’t mean nothing till there's mail in the box.
That's all the time blood flows into this company or into the business is when you're actually putting that mail on the front end. We just had over the past two days, it's condensed because of what time of the year it is, about 7,000 letters hit. And yesterday we had four contracts come in to sign and we signed another property to sell today.
The numbers work and it scales linearly pretty much. So don't be worried about “Oh man, 500 letters for deal” or whatever, or this and this for a deal. If it pans out right, I can spend $1,000 or $1,100 and get a deal that I'm going to make $10,000 to $20,000 to $30,000 on, then why wouldn't you just do that as much as you can? Now I'm at bandwidth with a team, not fully at bandwidth, but now I have a team and everything.
Seth: Tell us a little bit about your team, who's working for you, what do they do? How do they come on board? Let's explore that a little bit.Tim Krause: Yeah. My team. You can hire a team however you like. I'm not saying this is my recommendation for my team, but I have an acquisition person, actually my mother-in-law who actually has been doing really well. That's been good. She used to work in customer service way, way back when she worked at Safeway for a long-time deal with angry people. So, she actually answers my phone. I don't have an answering service anymore. She actually answers the angry calls, which is amazing.
Then I have a transaction coordinator who is my sister-in-law, who helps me with the escrow part. She's very, very detail-oriented. And then a buddy of mine who we've been friends with since high school, who's interested in land and doing some himself as well, he's actually my sales guy. He is answering dozens of Facebook messages and dealing with all that stuff.
And then in all the cracks of that, I use LandMasters. I use their VA service. I have one VA that works for me all the time, who I use a lot. He even prepares contracts for me, like in DocuSign. I have him call the county for me to do a search. I have him call a bunch of photographers and get prices and availability. And then he hires the photographers. And then I also have about seven or eight different tasks that I have assigned to different VAs. In my video business, I learned how to use virtual assistance. I had them as editors and now I have a lot, lot, lot more. And I like it.
Jaren: Yeah. I'm very strongly thinking about bringing on an acquisition manager. It would have to be the right fit, but I'm toying with the idea of saying, "Hey, it's going to be a straight commission, but instead of paying me for coaching, like a lot of people do, I'll pay you, but you can't leave for like a year. I can fire you, but you can't leave me for at least a year."
Seth: Sounds fair. I actually had a similar conversation to Jesse Marchand about this in episode 119, because he also was doing a very similar thing with the acquisitions manager and sales manager. How do you compensate these people? Is there an hourly rate or is it a per deal basis? How does that work?
Tim Krause: Yeah. There are a lot of different ways to do it. Right now, I'm doing a commission with a floor. So, if nothing sells, they'll make X amount, and then it's commissioned so we can go up from there. That's how I've made a good balance. You have to find the right person for that. Also, some people, a few of them, I just pay by the hour. But as far as the acquisitions and the salesperson or the acquisitions and dispositions, I pay those both a certain percentage rate based on the gross profit of the deal minus marketing expenses.
Seth: So, there is no hourly rate. It's just, you get a cut out of this if and whenever something happens.
Tim Krause: Yeah. Basically, like we buy a property for $20,000, we sell it for $40,000. The business has a $20,000 profit there. I'm not counting all the closing costs and everything, but then let's say that a certain amount was in marketing costs that month for photographers. Because anything that they're pretty much spending money on, I want to make sure that they are motivated to try to get a good price. So, the cheaper they can get a photographer, the more money in their commission. But then we still got to get a good photographer to get good photos so we could sell it and make more money from having good photos.
So, there's the tension there. And I let them handle that. I haven't chosen a photographer in the past 15, 20 properties we've bought, nor have I talked to them. I don't talk to buyers or sellers or photographers. I barely talk to the county. I talk to escrow and I talk to my money people all the time. Those are my main two ones.
Jaren: Talking to private money investors can be a full-time job. You wouldn't think about it. But just yesterday I called one person to talk about a particular deal and you end up talking to him for 45 minutes, and you have to because you have to build rapport and you have to be cordial and all that stuff. But it's easy when you're a one-man show to be like, “I got leads to follow up on. I got this to do.” But as you scale, I totally am with you, man. Those different departments are essential. There's no way that I'm going to be able to continue scaling the way that I am and not bring on somebody.
Do you have any pro tips on how to hire a good fit? Especially working with VAs, I'm sure you have a ton of experience on having to figure out the art of vetting people very quickly because onboarding is expensive. Training is expensive. So, what are your tips and tricks, man? What can you share there?
Tim Krause: Two things with that, one with VAs, I use a ton of videos. I have 125 or 130 maybe now, short five-minute videos in my company. And most of them are divided up in tasks. So, if they don't know how to do something, they can click two buttons and then watch a short video because I use my VAs for things that don't require typically independent decision-making.
And so, having really clear expectations is super important, because again, I'm part of a few different coaching groups as far as helping me and making me a better manager or better real estate investor or what have you.
And one of the coaching groups I'm part of with Brian Harding, friend of mine, he talks about, there's usually only two reasons why people don't do what you want them to do. One, they don't know what the ultimate goal is. And number two, they don't know how to actually do it. I've given some instructions where they've come back and given me a result, I'm like, what the heck? So, I went and watched my own video on that and I'm like, I totally could see how they interpreted it that way. I didn't interpret it that way, but that doesn't mean that it can't be interpreted that way.
Especially in the smaller business world, because you can still make good money just being a one-man show, a lot of people I see don't want to put the effort into training people because it's hard to do that, to build out the systems and to build out the structure.
The hardest part of hiring someone is knowing exactly what you want them to do. That, for me, is the most challenging part. Once I get that, I could back into the systems and all that stuff.
And as far as acquisitions manager, I would be hesitant of hiring people who eventually want to get into land. I would hire someone who has customer service experience and someone who is used to handling people who complain at them and are not cordial with them on a consistent basis and have been able to keep the job.
Jaren: So, you don't have your acquisition manager make the offers. You would have them just essentially screen the lead and then you figure out. Do you call back and personally make the offers or do you just give it to them and they present it?
Tim Krause: Well, yeah. I do blind offers, so my offers are upfront. The amount of sales is less than when you're doing neutral letters or arranged offers. So, I do a bunch of blind offers and then I just let them handle a conversation, even for negotiations. And it works out really good for negotiations like a counteroffer back because she could just blame it on me. I tell her, throw me under the bus all the time. So, you won a contract for $25,000. Hey, I got to be at $20,000 to make it work. She does that all the time. Like, "Hey I was pulling for you, but sorry, Tim says it has to be for $20,000. I'm sorry about that." "Oh, dang Tim and all this type of stuff." And it gets it done a lot of the time.
Also, because when I had to do my own counteroffers, oftentimes I was too nervous to make the counteroffer lower. And that's why I would get into something that was a little bit too tight because they didn't want to upset the person because now, I had a relationship with them versus now like in the card, I do my numbers and I'm like, “Hey, I have to be here.”
We just did this to a person. $38,000 was the original offer price in the letter. And it came back, look at the property I'm like, "Hey, we can't do that. We got to do $20,000. And she gave them the news. They first said no, but then they came back and they're like, “Okay, we're moving forward.” So hopefully we should get a contract from them today or tomorrow.
Seth: There is this book I picked up a couple of days ago. I have not gotten far in it yet, but I read something really interesting in it. The book is called “Who Not How” by Dan Sullivan. Have you heard of this, Tim? I see you nodding.
Tim Krause: Yeah. I read it about six months ago.
Seth: You probably know way more than I do, but I got probably like 10 pages into it and something blew me away. I'm really captivated by this book. It's really getting my attention and I'm really enjoying reading it. And this is not verbatim what it said, but something to the effect of “This book by Dan Sullivan was not written by Dan Sullivan. He did not write a single word of this book, but Dan Sullivan would agree that it is going to be written better than he could have written it because he's found people who are smarter than he is.” Something like that.
But anyway, it's just like, wow, just that idea that that's possible. That a book could be written better than the person himself, just because he's able to find the talent and find people who can do things better. I don’t know, in my mind, that's impossible. I didn't even think that was something that could be done. When you outsource enough things, you just have to sacrifice quality. And when I saw it, it was like, “Whoa, this just opens up a lot of doors.” I have to now entertain that possibility.
Jaren: The pushback though, that I would give, Seth, you and me both have struggled.
Seth: Yeah, for sure.
Jaren: Trying to find this infamous somebody who is super high quality that we can outsource our life to and I've never found him. So that's the thing. I'm Debbie Downer over here, I guess, because I don't know. I hear on paper, like you said, in books and other people say that you can find super high-quality ghost-writers and whatever. But when it comes to getting from what's inside my head out into the world, whether it's a video or article or whatever, even though I'm not the greatest writer in the world, it still ends up being better when I first establish the foundation and then have it be edited by a professional editor.
Seth: Presumably this book explains how this is done and then I'm sure he's got a course in coaching and all kinds of stuff to say too, but.
Jaren: $30,000, I'll teach you everything I know.
Seth: I do think what he's saying is possible, but guess what? It's going to take hundreds of hours of you pouring yourself into other people so that they can do it too. This is not something you snap your fingers and find these people on some website with a click of a button. But I'm sure it is possible if you find people and nurture them and all this stuff.
Jaren: It sounds like Tim's solution, at least to a large degree is to have everything already created through video and to have a really good system. What I keep hearing Tim talk about in regards to his business is that you've just created a ridiculously amazing system and continue to work on that system so that it continues to produce results. Because if you have 150 videos already made, then if your VA quits or doesn't work out after 60 days or whatever, you can easily find a replacement and just be like, "For your first three days, you do nothing but watch these videos. And then if you have questions, ask me." Am I assessing your situation right there?
Tim Krause: Yeah. Pretty close. Again, with “Who Not How," I think part of it is definitely, hard to find people, but also part of it is that most of us don't put any energy or effort into becoming someone who other people can work for. Anyways, that's a side note there, but yes, I do a lot of videos.
I have a video on the standardization of communication. I have written out expected response times for each form of communication and how they should be responded to. I have written out an Excel spreadsheet with the normal forms of paperwork that are inside of a transaction, what the normal order is, how important they are, where they should be recorded and a video on each one of those styles of paperwork.
So, it sounds really boring until you have to deal with stuff like that. One thing that used to bug me a lot with my team was that I would make a post on something and then they would just go and do it, but they wouldn't notify me at all that they read it. And so, now we have the standard of communication built there and we know that, “Hey, if we comment or do something before 3:00 PM, it has to be responded to the next day. If we do it afterwards, it can be responded to in the morning.” And then I have that for email, for phone, and for text, and for our CRM.
It's a lot of work to do all that stuff. But again, you have to think of, for that other person, are they just not skilled at what it is? And that's a tough one to measure, but more likely than not, they don't know exactly what you want. And really more likely than not that I have found for myself is I don't know exactly what I want. And therefore, they're trying to hit a target that seems blurry to them because it's blurry to me.
That's some of the stuff I've been learning about in one of the business coaching things that I'm in. It’s trying to get better at making that vision clear to the team. And there's still problems, I have problems all the time. But making that vision clear to the team so we're all going in the same direction.
Seth: I was just going to say that thing you're saying about “It's blurry to them because it's blurry to me.” That's a big one and sometimes it's hard to even identify if it's blurry to me. I know what I want, but the “how” is I don't even really know how, so how do I expect them to know how? And it's very lazy for me to just be like “Figure it out.” But how can I expect them to do it if I don't really get it myself? What were you going to say, Jaren?
Jaren: Yeah. I was just going to say that's a huge insight there. I think most people too, at least in the context of employer-employee dynamics, a lot of employees don't care enough, or they don't know how to figure it out. I think there's a handful of people in the world that are more self-starters or self-initiators and you can be like, "Hey, I want this done." And then you just let them go. And that's me. I do not do well in an environment where I have protocols up the wazoo and I have to do things a particular way. Like you would probably fire me or I'd probably quit if I worked for you, Tim, based on how things are. But if you were to be like, “Hey, I need this done, go figure it out.” I work way better in that environment.
But I think I'm the exception to the rule. And I've had to learn that I can't project that level of expectation for people to figure it out when I work with other people. Because most people, I don't know if it's school, I don't know if it's just personality. I don't know what goes into it. But most people, they need literally everything spelled out step by step and like you said, they don't have to make any decisions. They don't have to think. They literally just plug and play.
I keep coming back in my mind to the systems thing, man. I think you embody the whole notion of, instead of setting hardcore, hard and fast goals of, I want to make X amount of deals or X amount of revenue, some people say it's better just to focus on building an incredible system that will consistently output deals and get results. And then you can scale your system once it's established. Systems, I feel like, are really the key to long-term success. Because if you have a system that is streamlined and works, it's going to eventually hit a tipping point where it's almost on autopilot and it makes deals whether you like it or not. So, it seems like that's what you're building, man.
Tim Krause: It's getting there for sure. With my mailers too, I just choose where we're going and I do the data poll and then I have VAs that scrub every item. I have VAs that format it. I have someone I train who does my pricing. And then I just review it, and then I give them the go or no-go.
I'm trying to outsource mostly tasks, which is good, but eventually I'll learn how to outsource more decisions. So, this is up to a certain level. Because again, the whole saying, “What got you here won't get you there.” If you think about a hill or a mountain, when you just start, you just need boots, just hike. But then eventually you need gloves and a little bit of rope. And then eventually, you need the full setup of everything.
And it's just the progression of how things go and how you want them to go. I don't want to have a huge team, but I want my team to be able to do really good work. And now we're able to handle 10,000, 12,000 letters a month, pretty much, going out there and able to flow decently well. And I'm also in the process right now, very painful of changing my CRMs to a different one.
Seth: What were you using and what are you changing to?
Tim Krause: From Trello to Follow Up Boss. With Follow Up Boss, because this business, in my opinion, is 80% relationship, 20% the property. And Trello is much more like the opposite of that, 80% the property, 20% is on the relationship follow-up piece. Follow Up Boss is a little bit too much on the relationship. So, I'm having to modify it to make it a little bit more about the property just a little bit.
But the ability to have aggregated all of the phone calls, all of the emails, all of the texts in regards to one property in one spot will help me with all my goals for the year, which is to make my business less fragile. Because right now I don't want to have an extra staff member who just sits around and just waits for someone to get sick or go on vacation. I would much rather have, “Hey, so and so is going to leave for a week. Okay. Where are they at in the conversation? When did they text the seller last? Oh, they sent them a text on Tuesday, then we can pick it up right from there. We can continue the conversation.”
It's not cheap. It's going to be about $5,000 for the year, which isn't terrible, but I think it'll drastically help the team. Also, we'll be able to really easily build a buyer's list, which will be very cool.
Seth: How far down the road are you on that?
Tim Krause: I was on a call with my employees at 7:00 this morning getting that moved over. I'm feeling pretty close. My goal is to go live with that February 1st, which is in 11 days just for time. I figured out how to do checklists, which they call action plans. I figured out how to make them automatic, which is a whole little automation system. And I figured out some other things. Me and a friend of mine, we're both in the land space and he's doing his different and I'm doing mine, my way.
But I think it'll help a lot once we get to that point where we can have all the emails, all the phone calls all in one spot. Because right now Trello is great, but we have to have all these separate systems. And if someone was to leave, we would've no idea where they're essentially at. I have a 70-75 point checklist going through all the normal stuff to buy and sell a property. There's room for improvement so that's what I'm doing.
Seth: I just ask because Jaren just put together a pretty sweet review of Pebble. It might be worth checking out, but if you're already halfway down the road, maybe not. But I can send you a video if you want to take a look at it.
Tim Krause: Sure.
Seth: Tim, I know we talked a little bit about how deal funding from outside investors is a big part of what you do. So, let's get into that a little bit. How do you do that? What does the typical structure look like? Is there some profit split going on or are you paying interest to somebody? Tell us how that works and who are these people? Where are you finding these outside investors?
Tim Krause: Yeah. Deal funding is very, very, very, very important. Absolutely critical to your land business. The deal funder, you have to think about it from their perspective. The deal funder will charge you more, the more risk they see. The more risk they perceive, the more they will charge you. The more you can do to lower that risk, the better rate you can get.
I started off my first deal 50/50. Then I went 35/65, or I got 65%, they got 35%. And then I sat at 25%, where they got 25%, I got 75% for a long time. And then I did a few loans on property interest only.
What I'm doing now is I'm doing a two-step thing that I'll be trying out that I learned from another one of the mastermind groups that I'm paid to be a part of coaching groups with Mitch Stevens. He talks about deal funding, and he talks about a lot of private money. He has $26 million in private money loans. But what I'm doing now is, basically, an asset-backed loan, where I have an asset that I own that's worth X amount of dollars and I own it free and clear or mostly. I then get a loan for that equity position. And then I use that loaned money over and over again in my business.
I'm not getting a loan on each individual property because part of the reason is, one, is a hassle when you're doing five properties a month in and out to get a loan on every single one. It could be a hassle. Number two is it'll save me money and paperwork. And number three, is that if I could flip the money quickly, then it'll save me money.
But if it doesn't, I at least allow my investor or my money partner to have a couple hundred thousand dollars invested at one time instead of having $20,000 here, $15,000 here, $12,000 here, $25,000, $35,000 in all these little itty-bitty ones. Their percentage return doing those itty-bitty ones may be a little bit higher, but instead we could have this loan to where I just give them properties collateral, and then they give me a bigger loan and then they're making their return on that bigger amount of money the whole time.
That's what I'm doing now. And also, one thing I'm going to be trying to do is that when I sell properties on seller financing, which most of them I sell cash, but I see the need for seller financing becoming more prevalent as we start to recover here in the economy. I'm also doing where I'm selling with seller financing. I will sell it for seller financing, get a note. Let's say, hypothetical, buy a property for $40,000, sell it for $80,000. Let's say in this hypothetical scenario got zero down. So, I have a note for $80,000 and I have $40,000 of my cash that's in it or of the loan cash that's in it.
Then I will go to someone else and say, “Hey, this property, this situation is already nice and safe. There's not much risk here. Will you give me $50,000 at 8% or 9%?” And then if I don't pay you back that $50,000, you get this loan for $80,000. You stand to make a huge upside and your risk is very limited. I would get $50,000. And then I would get my $40,000 back in cash plus a little bit more for profit and then be able to move on. My big takeaway with lenders is to think of situations that will benefit them and also ask more than one lender. I will send a letter to 2,000 people and buy one property. I should be willing to talk to more than a dozen lenders and all 12 of them tell me “No” to try to find the one that says “Yes."
I think there's in the land space, which makes sense, because it should be very profitable for investors and I'm not knocking investors that do 50/50 splits or 35/65 splits. I've seen some of the deals. I have a couple investors who are like, "Hey, Tim." They lend to other people too. And they send me deals. "What do you think of this deal?" And I've seen some of the stuff that some of these land investors, "try to get funded on." And some of them are really bad.
I understand having to deal with the more risk, but I've never lost an investor's money. I've had a dealer or two of mine that haven't gone well, and I've taken the hit. I've written the check, but I've never lost an investor's money on all of my deals that I've done and I don't plan on it. That's what I'm doing, and I hope that makes sense.
Seth: What does that typical arrangement look like? I have a certain percentage to the investor versus you? That’s like a line of credit, it sounds like what you were talking about. Can you paint the picture a little bit more?
Tim Krause: Yeah. It's similar to a line of credit. Basically, I would be like, hey, I own this property, this is worth X amount that I'm holding. There are two acquisitions and then the more safe one. And then from there, I'll be like, hey, this property's worth $200,000. I would like to get a loan for $150,000 and I'll pay you 8%, 10%, 12%, whatever number we agree on interest-only for three or five years. And then they'll agree. I'll write up a note deed of trust recorded against the property. They'll get a lien against the property. I will get the money. There's of course escrowing a lot of fun stuff in there and then we'll move forward from there.
But now I have $150,000 that yes, I'm paying interest on every month if I don't use it. If you're not doing business, this is a really bad idea. But if I'm doing business consistently, I'm able to flip that money multiple times. And I don't got to pitch it to land investors anymore because they're secured against that other property. If I do something stupid with the money and don't pay them back, they're secured against that property, then they could take from me. That way I lower their risk on their side.
And then the other thing where I have a loan and then get someone else at a lower percentage because it is less risky, I'm figuring out the paperwork with that. That's either a pledge loan or hypothecation, or some other fancy things that I talked with my lawyer yesterday about. And we're working that through.Seth: That's awesome, man. That's a really smart way to do it. And I'm really glad you said the word hypothecation, because I finally have a reason to link to our hypothecation terms article that I wrote three years ago and nobody has ever seemed to care about that. So, thank you. I appreciate that.
Tim Krause: It's really powerful.
Seth: I know you had mentioned before we started this whole conversation, you've done some interesting deals. Actually, just a couple minutes ago, you were talking about how there were some deals where you had to write the check. Sounds like some deals may have gone bad. Maybe you were in the middle of a deal that might go bad, which is something that I don't hear a whole lot from land investors. Usually deals don't go bad or they don't lose money.
It sounds like you're a little bit more cavalier in the sense that you're willing to offer more. You're willing to take more risk. Can you tell us a little bit about that? What happens when a deal goes bad with a land deal? Why does it go bad? What went wrong? Was there something you could have done to fix that or avoid that?
Tim Krause: Yeah. I'll talk about two. One, I only have one deal that I've ever really lost money on. I've had some that I break even on. One that I broke even on, I bought it in the HOA community. And then right after I bought it, the HOA is like you have to trim the bushes for $2,000. And then for some reason, I had to sell it for 40% less than any other place in the HOA, it wasn't selling for months. That one, I pretty much broke even on.
But the one of them I lost money on was in Shelton, Washington, which is near where I live. It had a sewer line going in front of it. It's like, hey, this property has a sewer. We're set. It has a water sewer power. Good, done deal. It turns out, even though I had a builder check it out, who did a great job. He did exactly what I wanted him to do. The sewer line that went down that street, its capacity was maxed out. So, the only way you would know that is if you were putting in an application to connect to the sewer. So, you're not going to see that on normal due diligence.
Seth: That's crazy.
Tim Krause: Yeah. The sewer cost was going to be an additional $30,000. I ended up only writing a check for $9,000, but still, that took my profit and just crushed it. It crushed it right down because it had a sewer line in front of it, it had a manhole, all this stuff. But the pipes diameter there was only enough for the certain houses that were on there and they couldn't add anymore, which is what it is.
Seth: Could they not do it like a septic tank?
Tim Krause: With that one they could have, but it would've been a tough one because of the slope of the property. But you saw a sewer in front of it, the property to the left and to the right, both had sewers. The property across the street had a sewer. Every single property around it had a sewer, but this one, it was a capacity there because of the line it was hooked up to.
Seth: That's a perfect example of the ugly side of land investing where any reasonable person would've thought that that's fine. And with a house that never would've happened. You wouldn't even have to ask a question, but that's just one of those “gotchas” that can happen with land. It's a bummer.
Jaren: I would just chime in there though. For the audience that are hearing that, here's the reality. It's going to cost money to make money and it's going to cost money to learn. I don't want anybody to be excessively risky, just flippantly. You want to try to hedge your risk when you can, but you also have to be okay with the fact that if you're going to actually grow and you're going to learn how to do this successfully, you're going to lose money or you're going to make mistakes. You're going to have some bumps and bruises along the way.
And it's okay. It's expected. If you have a long-term perspective on this thing. People will literally take the equivalence of a mortgage out for their college education and they're perfectly fine paying back their student loans. Nobody ever complains about that. But for whatever reason, we get super emotionally, all caught up in losing $1,000 on a deal here or there.
Not that you want to make a habit of that. I haven't lost money on a deal for two or three years or something, but one thing again that I like about Tim and the way that he approaches this business is he really approaches it like it's a business and it's going to take risks and it's okay. And if you have to write a check to an investor to keep your integrity in check and move on to the next deal, then do it. Don't let the fact that you have risk keep you away from making things happen.
Tim Krause: If the possibility of having some risk in a business makes you not want to do it, you're not made to run a business. You're just not. It's just not possible. And then I can go to the other deal that I'm currently dealing with that we will see what happens if you'd like.
Seth: Yeah, what's that all about?
Tim Krause: This one story is not finished yet. I’m definitely, definitely, definitely in the middle of it, trying to figure out how to get through it. It is a property in Nevada County, California. And one thing I did not know about this property. It's 34 acres, so a million square feet, and just to the north of it by like a mile or so, there is Empire Mine State Park. Really pretty property, I took out a photographer. I have a photographer go to every one of my properties as part of the due diligence. I have a due diligence checklist that's done from top to bottom. We called the county and asked them about the ability to split the property. They said, hey, everything looks good from our end, we get title insurance. We do a lot of things. And then in the legal description, it mentions a mine. The court's mine or something. But legal descriptions, if you've looked at a lot of them. Legal descriptions sometimes refer to really, really old things that aren't there anymore or that have been dealt with. At the Empire Mine State mine, or the mine right here, which is a state park, now has houses around this area. And then my property was down here, farther away than these houses.
We bought the property with investors' money for $92,000 or something like that. And based on the comps that I saw should be able to sell for about $200,000 to $250,000, somewhere in there. Or the possibility of splitting it and then selling nine lots of like $70,000 per piece. So, everything was looking hunky-dory from there. And also, I knew that I could exit it as a whole lot or as a split lot and both ways were fine. I didn't really dig into the ability to split it before I bought it because I knew either way, I'm fine. We'll just figure it out afterwards. That way we don't have anyone poking around and asking questions, because this looks like a really, really crazy deal. Looks like a really good deal.
I bought the property, talked to some surveyors. They say, I'm sure you know there are a lot of problems with old mine shafts in this area. Nevada County, California, which is Northeast California has had hundreds of mine shafts across it. It turns out my property has two or three of them on the Southern part of the property, which is a hazardous waste thing because now we have mine shafts but also, we have potential.It hasn't been tested I don't think. Our concerns were that it was a golden court mine. So now we're going down a list of things to do. We have it posted for sale in a few places for breakeven. Worst-case scenario, I'll write my lender a check for $108,000. Because that's what we agreed upon as far as in his return plus his prepayment penalty.
But I'm still going through the process. There are still several steps here. I'm researching the title to see because the title report didn't show any of this stuff, but it wasn't a different department at the government that had this problem. Because we talked to the planning and zoning, and planning and zoning said, "It looks good for me," but the environmental department said, "No, it doesn't look good."
Seth: Why is it a bad thing to have a gold mine, a literal gold mine on your property? I'll take one of those.
Tim Krause: Yeah. A little gold mine versus an actual one. So, you can't build on the property right now. It's 34 acres and the county will not let you build on it, even though the gold mines are at the Southern portion of the property. And there's the Northern portion of the property, which is further away from the gold mines than there are actually other houses that are built, but they're on a different parcel.
And also splitting in California or at least Nevada County is ridiculous. I've never heard of so many requirements for splitting a parcel in my life. Perk test on every single lot you're going to do, and then you have to drill a well on 50% of the lots. We were going to have to drill five wells if we wanted to split it.
Anyways, we're going through the process. It's not over with it yet, but Sharif is a commercial property investor. And he says one mistake happens, you obviously do things to adjust it. So now like every property we buy, we call six different departments in the county. When we ask them all individual questions, because everything is siloed. And we ask sellers about hazardous waste, which we didn't use to do. Because how often are you going to come across hazardous waste? Very, very rarely obviously, but not rare enough.
You have to think about it and be like, “Okay, how can this be the best thing that happens to me?” So, it's tough to do. And I'm thinking about it from the positive like, okay, now I know I need to fix all these things. I'm going to learn a lot about this process. It's going to be an expensive education. At the end of the day, who knows? I may donate it and just take it as a tax right off or I might try to sell it to the park or I might try to sell it to the conservancy department or see if there's some tribe that wants their land back.
I have no idea. There are different options, but I'll get through it. I'll work it through and I'll keep on going. And I've made my systems better now because of that.
Seth: Speaking of options, did you happen to hear episode 119 with Jesse Marchand?
Tim Krause: I did not hear that one. Sorry.
Seth: What he does is he puts options on properties like this, where it's like, I don't have to buy this from you, but I can. It's a similar thing to us signing a contract. He just puts an option on it instead. But I wonder if that might be a maneuver with this thing. Like if there's any doubt or even if you are confident about it, put an option on it instead and give yourself six months to see if you can, because then if you uncover something like this, it's not your property or your problem. So, you can just walk away from it. But I guess the drawback is the seller might want to unload the thing and they're not going to agree to that. I don’t know.
Tim Krause: Yeah. Everything has a give and take. And with more risk, comes typically more awards. I'm risking more by taking on more properties, and people are willing to wait 28 days for our closing versus six months. I just got to get better at due diligence and I'm still doing a lot more than that with my team. So still got more to learn.
Seth: You mentioned to me that you have an oyster farm, which was part of a bigger package of properties that you bought. Tell me about that. Was that like a package of 10 properties or something? Definite that a little bit for me.
Tim Krause: Yeah. There were about 10 properties I bought in my first year in business. I got lucky. I always tell people like you can't control the timing for people because you got to be in the right place at the right time. The right place is in someone's hand as a letter and the right time you can't control. So, I sent a letter to this one guy and he wanted to sell his property and he had two land properties. We couldn't come to a price on the first one. I was like, "Hey, what about the second one?" So, we talked about the second property. And then I saw in an old listing that he had offered seller financing on the first property because most people won't offer that. I was like, "Hey, what if we do a seller financing deal?" And he's an older guy. We've had lunch since I bought his properties. We talk occasionally, really nice guy. And he's like, "Well, what if I sell you all my remaining properties for X amount of dollars, zero down over 10 years seller financing." And I was like, okay, well, let's stick into this.
And I saw the tideland properties because you'll see a map. And then you'll see the beach and the waterfront house and the beach. And then there's a partial right over here and it is water. And what the heck do you want to do with it? Those are typically tidelands. So, if you have any of those under contract and if they're in the Washington area, let me know.
Basically, I had no idea what to do with them. I could find zero comps on the MLS. I could find zero comps anywhere. I had two, had only changed hands in the whole area where they are in the past year. But with the price, I knew I could sell both pieces of, they're called upland. When you're talking about tidelands, normal dirt, like we call it, is uplands.
I knew I could sell those two and basically break even. I'm like, “Hey, it's worth the risk. Let's roll the dice.” And then I bought it. I sold those two. I basically paid off all the loans. I kept a little bit of money for myself. I still owe the guy a little bit of money, but I do that honestly mainly just to keep the lines of communication open. So, I have a touchpoint with him all the time. And then I ended up leasing it to an oyster farmer and I'm actually going to meet them. I haven't met the oyster farmer in a year. We met and made an agreement and then we're going to meet here in a couple weeks. We're going to go over the oyster fields. So, I own roughly 30 acres of oyster fields that had about roughly half a million oysters on it. Now it has only about a quarter-million and then he's going to finish harvesting the rest of them. We're having to deal with some crap with the department of health because there's a whole thing with that that I've been dealing with. But hey, it's just dealing with problems. It's not a big deal.
So now we're in oyster fields and they'll harvest them and then they'll reseed them. And three years later they'll harvest them again and then reseed them. And three years later, harvest seed and then harvest seed and harvest seed and harvest. And then my oysters go down to California and get on some fancy plates down there.
Seth: You're going to keep this thing last long term and just make revenue from it? That's the plan?
Tim Krause: That's the plan. I'm using it honestly as one of my first collateral sources for my private money loan. It's worth X amount of hundreds of thousands of dollars. I then can get a loan against that, against the oyster fields. And then I could use that money over and over again. But yeah, the plan right now is to keep it.
Jaren: As I'm thinking through our conversation, man, I just want to let you know, I'm pretty impressed. I think that the way that you've approached the business somehow or another, it just clicked and you made the right choices and had the right mindset about it.
But for all of us, regardless of how successful we are, we definitely hit roadblocks. We hit snares on our path along the journey. What I wanted to ask you is what's been the hardest part of this business so far? Because we've talked a lot about the highlights. We've talked about some losing money and some issues, but for you, what's the hardest aspect of this business?
Tim Krause: This is going to seem weird, I guess maybe the answer. One hard part about this business is that the emotional success and the financial success are so far spread apart. You will have a deal accepted and you see it's for $20,000 and you already see $45,000. And the emotional success of that once it gets bought, it's huge. But now you don't really care. Then it's pending for sale and then you get a big rush of, “Ah, yeah, this is great.” But then it's an escrow process. It might take 30 or 45 days. And then finally when you get the wire, you're like, “Oh whatever, just keep it going.”
Having that large gap makes it sometimes hard to judge what you should be doing because the gap is deceiving and this is why you should never slow down a mailer. You should never in general, unless you're doing it for particular reasons, like I don't have mail in December for my own reasons, but you should never, “Oh, I'm so busy. I'm going to lower the mailer.” Because the lag is so long that by the time your smaller mailer hits, you've already figured out how to run at a faster speed. You've already figured out how to operate at 5,000 letters. Then now you're at 2,000. Now you're doing this stupid yoyo game to where now you're pushing up even higher and then you're going to get freaked out and then drop back down.
It's because the gaps are so long. You could have a property, like I say, from a contract to me making money is at the closest, typically four months. I got to be looking out for four, six months.
And so, that's one of the tough parts. It makes it for you to make decisions because your decisions have to be so far in the future. That has been my thing that's been challenging, it’s thinking further ahead so that I don't make stupid decisions that I'm dealing with two months from now. Like, oh, why the heck did I do this two months ago? And it's because at that time I was feeling this way. Oh, at that time I was out of money or felt like nothing was happening or felt like I was offering too much. And then I offered nothing. And now I make too big of an adjustment.
Just like with me buying this property that could be a huge loser for me, potentially. I need to make probably a 5% course correction. I don't need to go 50%. I need to go 5%. I need to slightly move over and then I should be okay.
Seth: Yeah. It's like steering a cruise ship or starting a locomotive or something like that. It doesn't take these massive changes. You just have to slowly incrementally, and you don't just hit the brakes and stop things. It's like, just keep it going, keep it going. You're not going to see the changes immediately. It's going to happen long term. So, it makes a ton of sense, man.
It sounds like just with your past, with all the different jobs you've done, with your family's history, with 2008, has there ever been a time in this business when you're like, you thought you weren't going to make it? Where it's like, “Man, this thing's going to fail. Me and my family are going to be out on the streets. We're going to go homeless.” Have you ever had any tragic nightmarish moments like that? Sometimes I think that way. But did you ever go there mentally or not really?
Tim Krause: I've had two, I guess really. One of them was actually one of the videos I posted on REtipster after that. I'll go into that one. After my first year, coming into December, I mailed a ton in December and some people do great in December, and good for them. I got nothing. I was literally upping my mail into the fall, increasing my volume, spending more money. And I just got a whole lot of nothing.
I had some good deals in the pipeline. Don't get me wrong. I wasn't starving or nothing, but I was like, “This is so depressing. All of a sudden there's just nothing here.” Because we can't control people's responses. We're just trying to play the numbers ultimately, as far as finding enough people who are interested in it. If all of a sudden, the letters stop coming back, it's like, “Oh wow. This is scary.”
That was definitely a tough time when I was like, “Do I really believe that direct mail is a good way to communicate with people? Do I really believe that people will sell their land to me if I make it very convenient? Do I believe that people will still buy land?”Again, going on those beliefs, because a crazy smart business dude, a business owner grows based on the ladder of character traits, beliefs, and skills across the middle. That makes the ladder. And the hard part is that you have to keep on building your ladder, because you could see another business somewhere else, drop shipping, whatever the other business is. I'm not saying land's only way. But then you could see that other business and it has its own little ladder that you've already built because that's the only stuff you're comfortable with.
A lot of this, at least for me, has been sticking to one thing for a while and then seeing how I can use that same vein or stay in the vertical instead of going over to something else. Because I did a lot of random little businesses when I was younger that have nothing to do with pretty much what I'm doing now.
Seth: Where do you see the future of this going for you? Do you think you're going to just keep plowing away at the land flipping business forever? Where do you want this to be 5 years from now? 10 years from now?
Tim Krause: Yeah. That's a good question. I play with that all the time. I do once a month now, the whole sensory deprivation tank thing, just because I'm so hooked into everything and I work a lot. So just to unhook for a little bit. And one of the things I thought about in there was, I do want to know a destination, but it's not as important right now. I'm in my mid-thirties. And so, I just need direction.
The direction I'm going to be going, I don't know the exact destination, I want to grow as a business owner. I want to be able to be a better manager, a better leader for my team. So, my team could do very, very well. And I also want to learn more about real estate. In the land space specifically, I have a goal of doing 10,000 to 12,000 letters a month for this next year or this year we're currently in and doing X amount of revenue potentially based off that, based on our numbers. And then I am also playing around with the idea of dipping my toes into commercial real estate a little bit. And it's interesting you brought up the book “Who Not How” by Dan Sullivan. I'm taking one of those big elements because I'm going to try, because I've read a few books now on commercial property due diligence, and adding value for commercial property. And it's a whole different animal, 100%. It's just totally different.
I've also watched a lot of videos, a handful of videos by Beth Azor on leasing. But what I want to do or try is to partner with a few different people who know how to lease, know how to operate, know how to do due diligence, know how to do construction. And then I want to try to be part of their deal acquisition arm, because again, in commercial real estate, especially under a million-dollar purchase price, but really under $5 million purchase price, that's the smaller, because again, in land why we work is because we deal with the small properties. I'm not flipping million-dollar pieces of land. Now, I'm going maybe $100,000. That's where the limit is, but $50,000 is good because agents don't want it. What do commercial agents not want? They don't want the small little commercial deals either. Then those commercial owners, especially if the property is distressed, those commercial owners are running in the exact same similar situation that we run into. The agents who deal with them on those lower price points typically don't give the greatest service because they're not very welcome and compensated and they don't really care.
For those agents, it's not a destination, it's a starting point. So, you get a lot of the beginners. That gives us an opportunity to come in and potentially talk with those property owners and make a deal happen. I am in the process of working out, potentially sending blind offers or neutral letters or something to commercial property owners and then partnering with actual operators who I like to potentially run the deals than me to do the marketing arm.
But we'll see. That is very much in the beta stage. That's one of the other mastermind groups that I joined. I'm in three really mastermind groups that I pay for. And then one that I do with other land investors every once in a while, that's like best practices in the land business type stuff.
Seth: That's fascinating, man. I never thought about that, but that makes total sense. The smaller commercial deals that brokers don't want to mess with. I don't have any data to prove that that's accurate, but it sure seems accurate. I can totally see why that would be true. I'm curious to see if that's the case.
Tim Krause: Yeah. Especially because if it's under a million dollars, it's really hard to finance, or if it's distressed, then it's also really hard to finance as well. So, you're going to have less people interested. The buyer pools are going to get smaller, but there's other things you can do. Mass releases, lease options, some other financing.
Again, it's the same person. They just have a different asset. We service that person. The asset they have is immaterial. Whether it is a car, a fricking fidget spinner, a commercial property, what have you, the asset is immaterial. The person that we're trying to help is the main thing that we do, which is why I'm also moving to Follow Up Boss because it's super relationship-based.
Seth: Dude, we should start a new business contacting people with fidget spinners, and start acquiring those things for pennies on the dollar or fractions of pennies on the penny. That's what we should do. Brilliant.
Tim Krause: That's right.
Seth: Never thought of that. I want to get to these last three questions, because I'm curious to hear what your answers are. At the end of a lot of these episodes, not all the time, but when we have time, and it sounds like we do have time here, I would like to ask these last three questions just to find out more about our guests and what makes them tick and their motivations and why they do what they do. So, Tim, what is your biggest fear?
Tim Krause: Really regression, not progressing. I know I have a hard time, at least right now, with downtime. A fear would be, it's definitely frustrating when I miss things in due diligence. That's a fear. Well, ultimately what my biggest fear is that I mess up so badly that I'm not willing to pick risks anymore. That would be awful.
Seth: There's this pastor, he's got scandalous past. His name is Mark Driskell and he has some history in Seattle. Anyway, I won't get into all his history, but he said one thing that I thought was very accurate. He said that a young man is like a truck where they drive straighter when there's weight in the bed. I don't even know if that's technically accurate, but the point being, give a man responsibility, put more on his plate and he's going to do better in life. He's going to stick to the path. He's going to do more. Give him marriage, give him kids, give him a Jag, give him something to do, give him something to work on instead of just sitting around and floundering and doing nothing with his life.
And I think there's a lot to be said for that. Just staying busy with something, staying productive. Man, what a blessing to find something that you don't just stay busy with, but something that works. Something that actually makes money and you can see really cool results with. How lucky are we that we've able to find something like that? There are tons of people who stay busy with stuff, that just gets them nowhere. And it's just frustrating. I guess that's worth something. It's better to stay busy than not, but to do something that's actually fun and you can make progress in life with, that's an amazing thing.
Question number two. What are you most proud of?
Tim Krause: Again, all these sound braggy because they kind of are, but I'm quite proud of the systems I've been able to put together and my team. Especially when you buy and sell your first property, you don't talk to the seller, you don't talk to the buyer. And then you get a review from the seller that your team did a great job. I love that. That's awesome.
Because one hard part people have when they start growing a team is they think that no one will be able to do it as good as them or I have to take care of my sellers or my buyers or what-have-you. I'm also quite proud that I'm able to actually do this real estate thing. With real estate being in my family for a long time, I've had the ideas of this for a while. Actually, being able to do it, being able to help my investors make money as well, has been just very cool to see them doing well. And just the progression. There's a book that I heard Brandon Turner talk about, I haven't read it yet, book called, “The Gap and The Gain." There's always a gap between where you are now and where you want to be. That's human nature, that will never stop no matter how high you get that will never stop. You look at celebrities and that's just what it is.
But when you look at the gain of where I've come from, again with tax and stuff, CPAs and real estate can be interesting, but it depends on how you count how much money I made this last year. But I made as much as I made in all three years of my video business and then plus a little bit more. So, I've gained a lot. Not even the financial aspect, which is fine, which is good, which is great. But now I've moved a little bit to where it's feeling like a game now. Like all right, cool. I’m going to buy this thing. It's going to cost X amount of thousands of dollars. That's fine. Boom, done deal. Because it's for the business and it's to play the game better.
But then other things I have a really hard time spending money on because I'm like, “I don't get much from that.” I still have the same car I had two years ago that I bought for $1,000 six years before that. And eventually, I'll get a new one. The fan is starting to die and has no cruise control, but I'm not in any hurry to do that because that won't help me with the game at all. And I really enjoy the game.
Seth: I still drive a 2003 Buick Rendezvous, so I'm right there with you. No shame, man. Cool, man. That's awesome. I got to check out that book. I've not heard of that.
Last question. Suppose you just got $100 million wired to your bank account and you're not allowed to stay on your current career path. So, the land business is out. Forget about it. But you can do anything else you want for the rest of your life. What are you going to do?
Tim Krause: The hard part I have with questions like this is that I enjoy the game of business so far. The fun answer, I’d ride dirt bikes with my dad and I fly some FPV drones because I haven't told you yet, but I got the goggles and I have the one you could fly all manual and stuff. That's a lot of fun.
Seth: Oh, really?
Tim Krause: Yeah. Yeah.
Seth: That's awesome, man. That's really cool. Are those hard to fly? It seems like they're really hard to fly.
Tim Krause: You have to get a simulator and spend about 10 hours in the simulator and you'll be good to go for basics. I'm not advanced. I'm not crazy. But realistically, I would look for an opportunity that I'd be able to grow with because the growth of being a business owner so far is one of the most enjoyable things that I do. I don't watch sports. I don't drink. I don't drink coffee. I don't do celebrities.
There are so many things I don't do because I have zero interest in them. But the business progression stuff I've always enjoyed, ever since I was a kid. When I was 13 years old, my Opa was showing me eviction contracts and leasing contracts on his front porch. I just grew up in that progression. So, I would do something business-related where I could invest or use a lot of those funds to then do more down that path. I know that's a weird answer, not specific at all, but I don't know. I'm currently not shopping for $100 million opportunities. So, I don't know what those exactly would be.
Seth: I'm with him, man. I'm a similar person where I would also have a really hard time figuring out what to do. I’d probably do something like alleviating poverty in third world countries or something like that, but I'm similar in that I really enjoy the business and just money-making, building wealth, that kind of stuff. And this idea that you don't have to do that anymore. It's like what? It just feels deflating, like taking the wind out of my sails. Like what do I do with it? I don't get it.
I think when I really peel back the onion, I try to figure out why that feels deflating. And this is just talking about myself. I can't speak to you, but I think what it goes back to is the whole reason I do have a passion for this stuff. I'm being a self-therapist here, but I think it's because back in my college years. I had this sort of insecurity, like “I'm not going to have enough. I'm not going to be okay. I got to figure out how to make lots and lots of money. I got to figure this out so this is never going to be a problem.”
But I didn't know what to do. I didn't know what business it was going to be. Eventually I landed on real estate and that's when I started getting into that. And so, really, real state is a means to an end. It's not like I necessarily love it. It's just, it works and I get it and I can make it work.
So, I don't know. I think it's sort of born out of this weird insecurity thing and it is sort of my security blanket that I have used all these years. And when you hit the reset button on that, I have a hard time computing and figuring out how to think differently. But I think if I had enough time, I could probably figure out different passions and different ways to go about it.
But anyway, I didn't mean to make this about me. I say all this just because I understand what you mean. I start to have a hard time too.
Tim Krause: Absolutely. I turned my passion for video into a business that I did successfully, full-time, and my wife stayed home. I had an assistant blah, blah, blah, blah, blah. And as far as doing it as a business, which again, if you had $100 million, you could just do exactly whatever you want.
But 5% of the time I did what I wanted to do in that business. Most of it was this just became the thing that I did for the people. I sent videos to clients and then I sent what I thought was the best video to the client. They sent me back the video for notes. I almost never felt their notes made it better, but it made it better for them because it's subjective. It's an art.
There are two extremes. One is to follow your passion no matter what. Another one is to screw your passion. I'm not passionate about land, but there are things in the land business that I'm passionate about. I really enjoy systems and making structures to be able to work and work efficiently. I really enjoy those things and I enjoy working with my team.
But you start with the opportunity, then within the opportunity, within real estate, who are you going to serve? What smaller opportunity do you see? And then start going down that path and then you will find typically some sort of passion inside of there, some sort of thing that makes it tick for you because doing your passion or your hobby all the time, or especially doing it for money for goodness’s sakes, if it is a creative thing, it's really hard. I still have a friend of mine who does video, and sure, he's doing video all the time, video is his passion, but he's done one passion project in a couple of years. It's a balance of purpose and where that good feeling comes from. Active work is not a bad thing. There's a huge push for passive income, which is what it is. But we weren't made to be passive. I wish we were. We like the idea of being passive in a clean room sense. The idea of it sounds great, but ultimately, with the human condition that we have, it doesn't work well, it works really poorly.
Seth: I think there's a lot of truth to that.
Tim Krause: Yeah. With our human self, this is working actively in something that you enjoy and something that you could find meaning at and help other people and help yourself is about as good as I think it gets.
Seth: Yeah. I think that sweet spot, most people are probably looking for whether they realize it or not is to work, not out of desperation, but out of the joy of it. But to just not work or do anything, period, feels unhealthy. At least in my opinion, it sort of feels like it. I know people who do that and I don't know, they don't seem that happy at the end of the day. It doesn't seem like that's what they were made to do.
Thank you, Tim, for coming out. If people want to connect with you, I know you're on our Facebook group. You post videos from time to time just talking about what's going on in your business, which it was really entertaining. I appreciate you doing that. If people want to connect with you in any other way, anything you want to offer up?
Tim Krause: Sure. My email is a good one to talk to me on that one. It's email@example.com.
Seth: And if you guys are listening on your phones, you can text the word “FREE” to the number 33777. If you guys are watching this on YouTube, you can feel free to like and subscribe to it. I'll leave that after to you. And yeah, thanks again, Tim, for coming out. It was awesome to talk with you and hopefully, we can stay in touch. Thanks again, everybody.
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