In this episode, Sterling Garns, Co-Founder of Garns Holdings LLC and a successful investor, joins Don Costa to talk about his real estate journey and share the keys to his success. He explores how he forged a virtual real estate partnership despite living in different states, which has led to great achievements for them both. Sterling shares how they complement each other’s strengths and what makes a strong and healthy business partnership. He also touches on off-market deals and offers advice to those struggling with it. Tune in as we explore Sterling’s incredible journey to help you succeed in building the right partnerships.

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How To Build A Fruitful Real Estate Partnership With Sterling Garns

We got some cool stuff to talk about. Before I get into that, I want you to be directed over to the FlipTalk.com. We have some amazing things going on there. You can check out The Inner Circle Mastermind community. We have some mentorship and some coaching. Make sure you check out the menu link and you’ll be able to find what you’re looking for there. There are all kinds of amazing things and content. We’re always doing something new and cool. With that said, I have my guest, Sterling. How are you doing?

I’m doing awesome. How are you doing?

I’m very good. Let’s talk about a few things here. First and foremost, you operate in multiple markets, but you live in San Diego and then you have a business partner that lives in Utah.

He was in Utah when we started. He’s moved to Wyoming and lives there.

You have somewhat of a virtual partnership. I want to get into later in the discussion of how that dynamic works. I wanted to throw that out there. Let’s talk about how you get started. For people who don’t know who you are, talk about who you are and how you got started in real estate investing.

 

 

I got started a little mortgage brokerage back in about 2004. I always wanted to invest in real estate. I don’t know that I even knew what that meant. I thought it seemed cool. I was doing the mortgages. I paid a guy in LA to some coaching program to show me how to flip. I did a couple of houses with him and I lost a bunch of money, which was hard to do back then because things were going up so fast. I didn’t know what I was doing. I didn’t know the market. I learned a little bit as I went. I came back a year or two later. I found a house out of the MLS that had come back on the market. It was a probate deal and I got it for a good price. It’s in South Central LA and I felt good about that deal.

I found a crew to help me rehab it. In the meantime, I picked up two more houses, then the market started crashing. I remember that first house, we had it under contract once or twice where we were going to make a lot of money. It was a good deal that the first house but loan programs went from a core 0% down to then you needed 5% down for a pretty short period of time. Quickly, it got 10% down.

We finally sold that first house with a 10% down loan and between me and my partner that lent me the money, we made $30,000. I split $15,000 apiece with him. That was great to at least get out of the property. The market was sliding fast. Every day, you could feel it hitting these new lows. Loan programs are changing. Banks are going out of business. I about broke even on the second one and I lost a ton on the third one. It was ugly. That wiped me out for a bit. I lost some confidence.

I got a job. I did a number of different things. I got back into real estate a little bit. I ended up moving to Salt Lake and flipped houses for a year with a friend in about 2012. We were finding deals right out of the MLS still. There was this elusive idea of finding off-market deals. I didn’t understand. I heard about it and I believed it was real, but I had never seen one. It was Bigfoot. It seemed like he is out there, but I couldn’t quite find him.

We did stuff right out of the MLS. We flipped a bunch of houses that year, but at the end of the year, there was not a ton of profit. I was working a ton and there was a lot of stress. I said, “I can work less with less stress and make more money in the mortgage business.” I went back to the mortgage business. I did that for a few years. I did a couple of things in the meantime. Long story short, I found a course with a group that you were a part of at that time and paid some money to go learn how to do wholesaling, which I had never understood.

That was the first time where I heard people talking about off-market deals. I remember being on some coaching calls where you were on there. I’m listening to what you were doing and what other people were doing. It was a nerve-wracking time and I didn’t have a ton of savings but I bought a list. I sent out some mail here in San Diego, then I got nervous about what it would take to try to get deals in a competitive market. Right or wrong, that was my thinking at the time. I ended up going to work for a guy that did wholesale in San Diego.

In the meantime, my mailer hit. I did end up getting a good deal out of that mailer funny enough that I did it through him. I worked for him for the next year. That’s when Garrett called me. You mentioned my partner in Wyoming. He had gone to work for a team up in Salt Lake and was doing acquisitions for their group. He called me when we were both figuring out what the next step was. That’s when he said, “We should do this together. It’s a remote idea.” I told him he was nuts. He eventually convinced me and here we are. It’s a long route to get here. The key for me was figuring that part out how to work with sellers directly and find off-market deals. That was the part that was elusive to me for a long time.

It’d be elusive to you now that that’s something you do on a regular basis. What advice would you give somebody that feels that they’re struggling with it or that they’re they don’t understand? If you were to go back in time and talk to yourself a few years ago, what advice would you give yourself about dealing with off-market deals? What was the a-ha moment?

The first key is that they do exist. For a long time, I worked as a real estate agent when I had my mortgage business as well. You don’t hear about that a lot in the real estate brokerage world because you’re working out of the MLS. It was a different world to me. It was this creative finance side and off-market deals were a different world. The first thing I would say is they do exist. Depending on the market, they can be tougher to find, but they’re still there.

The second is then getting into, “How do you find those deals.” We’ve ended up doing it for better or worse. A lot of direct mail is our primary source. Funny enough, I tried direct mail back in 2012 with my friend in Salt Lake, and nothing materialized. Although we did get one lead, that was a short sale. It took so long for that deal to come together. I had gone back to the mortgage business by then, but he stayed in touch and work that lead.

He ends up buying that deal. It didn’t end up being one of the most profitable deals that we had done together. Even back then, I see the fruits of it. What I needed to know was we needed to keep going. We needed to keep working in that vein and mail again the next month and the month after if direct mail was what we were going to do. You’ve got to find something, an approach that you can work with, and then be consistent at it.

In real estate, you need to keep going. You need to find an approach that you can work with and be consistent at it. Click To Tweet

What I kept hearing when I went through that course a few years ago was, “You’ve got to have some staying power. You’ve got to stay at whether it is direct mail or door knocking. You can get deals door knocking or making phone calls. You can do pay-per-click.” There are a lot of different ways to find leads and sellers that need to sell a house and don’t want to go through the traditional process. Pick an avenue and be consistent at it. That’s probably what I would tell myself. Number 1) They exist. Number 2) Find a way to market to them. Keep at it and figure out how to make that avenue work over time, but they’re there.

Consistency is very important no matter what marketing channel you’re in, and understanding that it is a process that you have to implement and put in place regularly. Fast forward, you and Garrett are having these conversations. How does that partnership dynamic work? You guys are part of our Inner Circle community. You guys are very different personality-wise in how you approach things in general. How is that a benefit and a challenge and how do you make it work?

We are in a unique situation. If I was doing a coaching program or trying to help people get into this business, the last thing I would do is tell them to do anything that we have done. I feel like everything we’ve done is somewhat unorthodox. I’m not convinced at all it’s the best way to do it. It’s what we’ve ended up with. Garrett and I are very different. Garrett called me and said, “We should do this together and we should do it in certain areas in Colorado.”

I’m thinking to myself, “That is the dumbest idea I’ve ever heard. I live in San Diego. You live in Utah, and you want to figure out how to flip houses or wholesale in a totally different state.” That was super foreign to me. I thought it was nuts. For three months, I told him that. We were good friends and worked together. We’re cousins-in-law as well. I can be honest with him. I told him, “That is crazy. That is dumb.” He kept bugging me. In fact, at one point, I thought I had gotten him off of the idea because he told me he had a friend that had some money that would invest with us.

I said, “That’s great. Call that friend up. He’s got one thing that I don’t have, which is money. You should partner with him and go do this. You don’t need me. Get the guy with the money.” The next day, he called me back and my wife, Amy, says, “I can’t work with that guy.” I thought, “Here we are. We’re back to square one. I thought it was done.” It seemed to work. I said, “I don’t know how we’re going to do this.” He said, “I’ll do the driving and go on the appointments. You handle everything else.” For Garrett, that worked because he doesn’t want to know about anything else that is involved in the business. He doesn’t care. That’s never been his strength. He’s not necessarily, at least at that time, was not any kind of a real estate expert or anything of the sort.

Garrett knows how to deal with people. He knows how to sell, convince somebody, do something, and more than that, he knows how to listen to. Garrett’s greatest strength is he’s okay to have awkward conversations. To be able to allow a conversation to get awkward, maybe with some awkward silence, and let somebody else talk first, he’s good at those situations. He said, “I’m willing to drive. Helped me with marketing. I’ll go to the appointments, close the deals, and then you handle the rest.”

 

I thought, “I’m not going to be the one driving to Colorado.” I can handle the rest. I understand the moving parts. I said, “Let’s give this a shot.” We sent out some marketing. We ended up getting a couple of deals, and then we kept doing more of that. It worked. There are many times when I say, “This is still nuts. This is still crazy that we’re driving this much. I don’t know that anybody else would do it this way.” Garrett loves driving. He’s brought on a couple of other buyers as well that he’s trained and they drive as well to appointments.

You mentioned us working well together and we do seem to be a good fit. I’m happy to handle the back end. I like dispositions. I like dealing with the buyers on that end. I don’t know professional sales on the back end of people that I’m going to continue to have relationships with. I feel like I do well with that. Garret will often say he’s not sure that he would like to do that. He doesn’t see that being his strength, but going and meeting with sellers, he’s one of the best. Though I can do a seller appointment, I’m not the best at it. I’m not as good as he is in most of those situations.

He’s very creative and positive. He’s great at recruiting people. He’s brought some good people into our organization. He’s good at believing in himself and others and selling that dream. I’m pretty good at keeping all the pieces together, managing a bunch of different moving parts, and executing to get things done. I don’t know whether I can say it’s worked well or not, but it’s working for us at the moment and we’re grateful to be working together.

A lot of people do belly-to-belly appointments and physical appointments. You’re talking about a 15, 20, or 30-minute drive on average. From the audience’s perspective, when you say drive, what’s the average drive for Garrett in his appointments?

Let’s say he stays overnight a lot. I’ll bet the average drive is six hours.

He’s driving about six hours to an appointment. I’m assuming he’s probably stalking a couple of appointments in the same area.

We usually try to do that. We’ll try to get a couple of 2 or 3. Sometimes if we’ve had a good enough conversation on the phone and it’s one appointment, then he’ll go. Certainly, if we can put 2, 3, or 4 together, that’s a lot better. He drives. There are some areas we work in where it’s only a couple of hours for him. Once in a while, he gets an appointment that’s maybe an hour away. A lot of them are 2, 3, 4, 5, 6. He’s done a couple of times where we’ve gone further out and he’s gone 8 or 9 hours driving. Between him, Rob, his brother, and another friend of ours, Dan, that does some as well, they all drive in that range of a good 4 t 6 hours for an appointment on average.

To put it in perspective, you guys are doing fairly well. It’s not like you’re doing all that driving to make a couple of $100,000 a year. You’re in the seven-figure plus business range.

The business as a whole is generating in the seven figures. You could chalk it up to our own weaknesses. We have not done super well in overly competitive, larger demographic areas. We’ve continued to try to play in these more tertiary markets, smaller markets where there’s not as heavy marketing pressure. That’s part of why we’re driving. We seem to be able to get a little better response on our marketing and spreads on the deals. For us, at least for now, it’s made that worth it revenue-wise.

Why drive so far and not closed over the phone? Why not transition? What’s the barrier there?

We’ve had this conversation many times within the group. It is plain and simple. In the end, it’s our buyers that prefer to work face-to-face. That’s the long and short answer. We could do the same thing over the phone, and it would be more efficient. I’ve had this conversation with Garrett many times. We’ve had the conversation within the group many times but the whole group is telling us we’re crazy. I laugh and agree with them that they’re probably right. The whole business began as a crazy idea. I don’t know what to tell him but Garrett is great in person. That’s the fact.

He’s great in person and he does not love to sell on the phone. If you ask him, he enjoys driving for the most part. It is his personality. There’s a bit of freedom. He worked in Corporate America for twenty years, in an office every day, 7:00 to 7:00, and managing large sales teams. For him, the ability to get out, drive, do his thing, have that freedom, and go knock out a couple of appointments and come home, take a day off and then go do a couple of more, believe it or not, it’s not what I would do, he’s happy doing it.

He loves doing it and he would rather do that than be on a phone for 5 or 6 hours trying to find people and go that route. In the end, it’s his preference. That’s why we do it. We negotiate a little better deal sometimes being in person, but there are times when we talk numbers with somebody on the phone and we press him a little, we were at a certain point. When we get to the face-to-face appointment, we learn a little bit more about the situation. We’re able to understand better what they need and we’re able to put together a better deal. I do think there are some face-to-face advantages. In the end, it’s Garrett’s choice.

If it’s not broken, don’t fix it. At the end of the day, I do know Garrett well enough to know that it is the freedom that he cherishes even more than money. My second question is when it comes to tertiary markets where there’s not as much competition and essentially not as much demand, how are you finding buyers for those markets? I know some of the readers are going, “I’m in a small market, how do I find a buyer?” What are some of the tricks you’re doing to find buyers?

Every time we go into a new market, we have to figure that out. There are a few different answers. Number one is sometimes we struggle to find buyers, especially at a wholesale level. We close on them and retail or wholetail them. Our preference is to wholetail. We used to do this a little more and we’re trying to do less of this now, but on occasion, we have done some improvements to a property. We’ve made some big mistakes doing that. As you can imagine trying to hire contractors and manage things remotely is a recipe for disaster in my opinion.

Hiring contractors to make improvements on a property then managing things remotely is a recipe for disaster. Click To Tweet

We’ve made a mess of it quite a bit. I keep trying to remind Garrett and our team, we are far from a rehabbing company. Even when we do it, we’re bad at it and we shouldn’t be trying to do that very much. Our costs are higher and our timelines are longer. Nothing is done. A rehabber would and could do it. If we’re struggling in an area to find wholesale buyers, it can make sense to go in and make some simple repairs, carpet, paint and do some basic things to get a house to where it’s a little more retail ready and put it on the market that way.

I’ve found that working with the right agents is for us the key. When we go into an area, I look for an agent that potentially has some contacts with good contractors that they trust. In areas where we’ve been doing this for a while, that’s been the key. I’ve got 3 or 4 areas where I have a lot of confidence in my agents and the contractors they work with because they’ve delivered every time now.

I know we’re not operating like a great rehabber, but it’s good enough. At least we trust the people and I’ve got an agent there that can be my boots on the ground to make sure it gets done right and good enough for him to sell it. That seems to work. As we’ve done this remotely, finding agents with good contacts have been the key. As I’ve done this, for somebody that may be crazy enough to try to attempt this to some point, I have found that I like to look for agents that broker real estate, but also maybe do some property management. If they’re doing property management, they tend to have some relationships ongoing with contractors because they’re constantly doing upkeep on their properties.

Those agents that do some of both have historically been good for us. They have good contacts and understand some of the processes of fixing up a house. They’ve done well for it. That’s something that I look for and more. Back to your question. Number one, if we can’t find a buyer, we’ll look at the opportunity to retail. Wholetailing is ideal. We’ll close on the thing. We’ll put it on the market as is and hopefully get what we need out of it.

 

Doing a little bit of work and getting more retail ready is sometimes an option. We’ve looked at that. Finding wholesale buyers in smaller markets, I’m no expert at this. I know that there are people that focus full-time on dispositions, and they are phenomenal at marketing to these buyers sending out mail, calling, and doing all kinds of stuff. I know you can pull up cash sales in an area and start to trace back to who was the buyer, do some skip tracing, and find those people.

Maybe I’m too lazy. I haven’t done a lot of that. The very first deal that we ever did, I did do some of that and I did find a buyer that way. Honestly, a lot of what I do is go out and market the property for sale. Our contract says specifically that we have the ability to market the property while it’s under contract, and I go do that. I’ll put it online in a number of different places I’m not supposed to.

I’ll put it up on Craigslist. I’ve also listed properties on Zillow before. Based on the idea that I have an equitable interest and have it in my contract that I can do that, I’ve put properties on Zillow and listed them. Honestly, that’s been a good way. If I have 2 or 3 properties at a similar time in an area, I will always get better prices on the 2nd and 3rd properties. As I start to market and build a list of buyers for the first one, and then they find out they didn’t get the first one, they’re suddenly willing to pay whatever for the 2nd and 3rd one. It’s interesting.

I’ve been able to build a pretty good buyer list that way. I’m marketing properties and people calls. I find out what they’re looking for. If they’re looking for houses for themselves, I’m typically not putting them on my list. If they are investor buyers, they go on my list. I keep them and then I continue marketing to them building that list as I market more properties. Getting out and marketing the properties for sale is how we have built our lists.

Getting out and marketing properties for sale is the best way for a real estate investor to build a buyers list. Click To Tweet

In distress, you’re marketing the property and the contract. Essentially, there’s some straddling of the different states that you’re in. I want to advise the readers to make sure that what your state’s requirements are for how to assign property in your state.

I’ll explain exactly what we do and tell them, “We can either assign this contract to you as the buyer, or we will close on it and then resell it to you.” We do have the ability at any time to do either one. We’ll do whichever way we need to make the deal work. There are certain states where we pretty much always close on the property first because it’s too hard to assign a contract. It’s too cumbersome. To other states, it works pretty easily.

For the record, when you’re assigning, you want to market the contract, not the property. When you own the property, you’re welcome to market the property. It’s very cool. What does your company look like right now? You’ve evolved since we met each other. Who are the players on your team? What does it look like?

There’s Garrett and I. Garrett handles acquisitions and I handle everything else. I handle marketing on the front end then once we get a contract, I’m working the property at that point. I’m talking to agents and potential contractors if we’re going to go that route. I’m potentially marketing the property for sale, working with the title company, and getting it sold. I handle that part of the process. On the acquisition side, we hired a girl, Angela, to take inbound calls from direct mail and other lead sources.

We both know her from previous jobs, but Garrett has worked with her closely for a number of years and knows her well. She was doing well. We hired her daughter to take phone calls. Now we’ve transitioned Angela into a manager for the lead managers. This idea of the details and the end of the business is not Garrett’s thing.

When we first started, I was taking all the phone calls and sending the leads to Garrett then he was going on the appointments. As we got busy, I couldn’t take phone calls anymore. Continuing to try to manage that side is too much for me. It’s not something Garrett wants to be involved in. We finally decided, “Let’s have Angela do that.” She’s working with her daughter, then we brought on another VA from the Philippines. We did it through Rocket Station. We’ll see how that goes. We’re probably going to put her on inbound calls. We’re trying to start to build a little bit of a team.

The biggest room for improvement for us is right there in that space. I know that we miss deals sometimes on the front end of taking the call, whether we’re missing things that we don’t hear the seller saying. For whatever reason, we’re not getting them to the buyers quickly enough. We’re not having the urgency when we’re missing certain opportunities. We’ve both talked about the fact that we think that’s the biggest opportunity for improvement along with follow-up. We’ve talked about follow-up a lot.

Having Angela there to help manage and improve that team is going to be a good part of our growth going forward. We’ve got Angela managing, her daughter, and another VA taking calls. On the appointment on the buyer side, we’ve got Garrett who goes on some appointments still, but he does go a lot also with our other two buyers, Rob and Dan. He manages them and goes on appointments often with them. He is continuing to help, develop and train them. We’ve got, by extension, the agents that we work with in each of our areas to become an important part of our team since we’re doing it remotely.

What advice would you give somebody starting out?

I don’t know that I’d ever advise anybody to do exactly what we’ve done. I still think it’s crazy. Sometimes I’m blown away that it’s worked this long. The first question is, “What are you good at? What are you going to do in your business? How do you fill the gaps where you’re not great?” We discussed the fact of how Garrett and I work well together. Finding partners or people or somebody you can work with to match your strengths is key, whether it’s a partner or people you hire to fill those gaps.

If you are phenomenal at sales, then you can get this rolling on your own to start with. You’ll quickly need some back-office support once you get deals going. If you’re the sales guy, you can probably get this going on your own. If you’re not, you’re going to want somebody that’s good with people pretty quickly, especially in a competitive market. If you go out and do the marketing, the first thing is to pick your lane as far as marketing, and then be consistent at it.

You’ve got to stick with it and figure out how to make it work. If you’re not great with the people in the business, you can potentially spend a lot of money on marketing and not make a lot of progress because the market is competitive. There are probably less of those deals that fall into your lap like they did a few years ago. They still exist. We still see them, but less often. In competitive markets, you’re getting calls. They’re talking to other buyers and are pretty educated. You’ve got to be good at what you’re doing. Having the right team, or at least the right person or two to help you get started, or if you’ve got that experience in sales ability, great. Being consistent in your marketing and then getting the right person or two into their spots initially to keep things going are key.

Anything that I didn’t ask that you feel like needs to be said?

Not specifically. It can be a great business. It’s been a real blessing for Garrett and I and our families. We’re super grateful to be in this business. We’re grateful to be a part of Inner Circle Elite. Don, you’ve been part of my progress, almost without knowing it a little bit, but from the beginning, you were involved in that initial group. I followed a lot of what you were doing. You’ve been a real help to us along with Inner Circle Elite Group. It has been awesome.

I tried to go at this alone for many years before the crash. For me, becoming a part of a group and being able to be mentored by other people that knew what they were doing and were doing this well was what made the difference. When I finally was able to step out, they say, “These are the simple small steps they take to go do business.” I said, “I can take those steps. I see a path. I can go do that.” That’s what made the difference for me.

That’s what I would say to somebody who is looking to get into this or learn more progress. Somehow, someway, go find people, a group, or somebody that’s doing this at a higher level and learns from them. In the end, that’s what we’ve done. It’s been a real blessing for us. We’ve been able to help a lot of other people that were in difficult situations. We’ve been happy with it. Find somebody that can show you the path.

 

That is fantastic advice. We appreciate you two being part of the community and all that you bring to it as well. Tell everybody how to get ahold of you if they wanted to reach out and find out more about what you’re doing and maybe do some business with you.

If you have any questions, the best way is to call or text my cell phone, (801) 360-9079. You can shoot me an email at Sterling.Garns@gmail.com. Those are the quickest ways or become a part of Inner Circle Elite. We’re constantly communicating and talking through the group. Any of those ways works.

If you’re getting value from this show, make sure you’re liking and subscribing. Share it with as many people as you can because the more people read this, the more lives we get to change. Make sure you check out FlipTalk.com. You can find out more about the coaching opportunities as well as the Inner Circle Elite. You can shortcut to BeInThisRoom.com to find out more about the Inner Circle Elite. Sterling, I appreciate you being with me.

Thanks. I appreciate it. It was great talking with you. Take care.

Thank you.

 

Important Links

• The Inner Circle Mastermind
• Sterling Garns – LinkedIn
• Sterling.Garns@gmail.com