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HIGHLIGHTS FROM THE PODCAST:

00:34 – Ian Mendelson tells us how he got into Real Estate

8:47 – Partnership advice Ian learned over the years that will save you a lot of time and energy

12:30 – Lessons Ian learned through recession that investors can apply today

16:40 – Ian’s most memorable deals

21:15 – Real Estate Investor Buying/Selling tips

27:55 – Ian tells future investors how to get started in the investing business; tips & tricks

33:41 – Common mistakes investors can avoid in a new market

FULL TRANSCRIPT OF THE PODCAST AUDIO

Spencer Sutton:
Hi, everyone. Welcome to this episode of the Atlanta Real Estate Investor. I’m one of your hosts, Spencer Sutton. I’ve got Matthew Whitaker here with me. Hey, we’re excited to have Ian Mendelson with us. So Ian, man thanks so much for being on the show.

Ian Mendelson:
Sure. Happy to be here. Thanks for having me.

Matthew Whitaker:
I’ve known Ian for a long time. He and I were in a mastermind together. We’ve talked a lot about buying houses together, so super excited that you’re one of our first Atlanta guests.

Ian Mendelson:
Glad I could help you out, man. Anyway I can.

Matthew Whitaker:
So tell us how you got into real estate and tell the audience how you got into real estate and why real estate.

Ian Mendelson:
Sure. Well, I moved to Atlanta in 2002 from California, and I moved here to be part of a small pharmaceutical startup company. Did that for about two and a half years. Didn’t go the way I had planned it, so I left that abruptly and I was like, “Well, what else am I going to do here?” I figured I would get into real estate, but I didn’t know too much about it.

Ian Mendelson:
It was something that people were talking about at the time. And when we grew up, my dad had two rental properties and we’d manage those. We always had to go over there and fix things here and there. It wasn’t all that glamorous, but I thought, you know what, I still liked it. So, I figured if I was going to get into buying and selling houses, I wanted to know as much as I could about it.

Ian Mendelson:
So I became a home inspector at first, to learn how to look at a house, did that for several months. I wouldn’t do it to earn an income necessarily, but just get as much experience as possible, so I took the course and ran a business, doing that for a little bit. And then I started getting my real estate license. And then when I started doing that is when I met a woman who introduced me to my former business partner who owned a HomeVestors franchise at the time.

Ian Mendelson:
He had bought the franchise, he realized it wasn’t for his personality, so he we went back to being a corporate attorney. So then he had this franchise that was fumbling along. And back then, there was a minimum advertising requirement, so he was just pumping money into this thing.

Spencer Sutton:
When was this? What year was this?

Ian Mendelson:
2005.

Spencer Sutton:
Okay.

Ian Mendelson:
In May, of 2005. So I met him, we met over lunch. We struck an agreement where I would basically just run his business for him. He understood I didn’t have a lot of background, but I was a home inspector, I knew how to do that part and he was okay with me learning on the job. And I’d say that was… In May, I went to training in Dallas with HomeVestors.

Ian Mendelson:
They teach you as much as they can, but it’s not really something you could teach in a classroom setting. And then by August, I was buying and selling enough houses to pay for the advertising and keep us afloat. And then come January of 2006 is when things just started clicking and I was buying and selling houses on the regular. So we did that.

Ian Mendelson:
And then, I’d say maybe a year or so later, he made me a full fledged partner. Within a couple of years after that, I just wanted to buying him out. And when his franchise came up for renewal, I stepped on and he stepped off or something like that, I don’t remember exactly how it worked, but I’ve been doing it ever since 2005.

Matthew Whitaker:
So I’d be curious. I’m going to unpack all this history. You said that your father owned a couple of rental properties. Is there anything you’ve learned from your dad that you’ve instituted in your business today?

Ian Mendelson:
Yeah. My dad is a retired physician now, but he was a very hands on guy. So, I got to see a lot of the inner workings of the houses. And anytime they called for repair, he didn’t send anyone out there, he went out there and would bring, usually myself along and we would have to go over there and fix it up and take care of it all.

Ian Mendelson:
So I learned how to be very hands on. Sometimes to my detriment, I try to be a little too hands on these days, so anyone who knows me here is like, “Yeah, look at this trucky.” I looked like a maintenance man driving around his home. If locks need to be changed, I’ll do that. If there’s a roof leak, I’ll go on the roof and take a look at it.

Ian Mendelson:
Whereas some of my colleagues, they won’t step near a screwdriver, won’t get near a ladder or anything along those lines.

Spencer Sutton:
That was me when I was buying and selling houses, I couldn’t do anything.

Ian Mendelson:
Yeah. Oh really?

Matthew Whitaker:
Yeah. Yeah. I was about to say I thought you were saying you were like Ian-

Spencer Sutton:
No, no, no, no.

Spencer Sutton:
I was like, you’re the furthest from Ian, you can’t do anything.

Spencer Sutton:
I was looking for anybody to fix my houses. I definitely couldn’t do anything.

Ian Mendelson:
I get stuck waiting for the guy to show up, so I just start tinkering and start messing around with it. It’s a terrible use of my time, but it happens.

Matthew Whitaker:
Well, but you’ve been successful with it, hard to snub your nose at success. Tell us a little bit about how you think being a home inspector has helped.

Ian Mendelson:
Sure. That was probably one of the best things I did getting into real estate, is because no one can fool you. Like when you’re walking through a crawl space… One of the best ones was learning all about foundation problems and what to spot, what’s an actual foundation problem, what’s not a real foundation problem. When you’re buying houses at a discount the way we do, you have to be able to explain to people, “No, no, that horizontal crack is not just nothing, it’s actually something, because when I go to sell it, someone’s going to be asking questions about it.”

Ian Mendelson:
So you need to be able to identify what you’re looking at, know if it’s something that you need to get a second pair of eyes on, or if it’s something you can figure out. Especially with foundation issues, mold issues, that kind of stuff, you just learn to look at the houses and figure out, what’s just normal wear and tear of what’s actually your problem. So I think that’s the biggest thing that’s helped me.

Spencer Sutton:
Yeah. I think that’s important because I know that when I first started buying houses, I owned a HomeVestor franchise starting in December of 2003. So, me and my partner, roled decent, we were literally guessing at what needed to be repaired, and so we would just, “Yeah, this is going to be $20,000 a wall.” We really didn’t know.

Matthew Whitaker:
And Spencer and them were hiring out everything and all they were doing is looking at for new cars and trucks. That was back in the day when, what’s the quote you always say, Spencer? Don’t confuse a… What is it?

Spencer Sutton:
Yeah, “don’t confuse a bull market for brains”.

Matthew Whitaker:
That’s what I did.

Ian Mendelson:
I was lucky to have learned the business back then. Because it was, it was hard to make a mistake. In 2005 to the beginning of 2007. Even if you bought the house wrong, it was okay because the market was appreciating, there was someone else there to buy it. They weren’t always like the best buyers and whatnot, but looking back, that’s where I think I got the luckiest for sure that there wasn’t as much competition as there is now from the larger buyers.

Ian Mendelson:
And it was just hard to make a mistake. Even if you didn’t factor in all the repairs, it was still okay.

Spencer Sutton:
Yeah. I agree with that.

Matthew Whitaker:
We’ve all been HomeVestors franchisees. I’ve been a HomeVestors franchisee two different times. Ian’s always been one. And Spencer had his stent before the great blow out of-

Spencer Sutton:
It ended in 2008.

Matthew Whitaker:
2007 – 2008.

Matthew Whitaker:
One of the things they focused on is buying numbers. But one of the things you’ve always been very thoughtful, Ian, about buying quality, not quantity. Talk a little bit about that and being a patient buyer.

Ian Mendelson:
One of the nice things about HomeVestors is when you get together for the annual convention, you get to see what works and what doesn’t work with other offices throughout the country. And it was amazing that you’d see one guy on stage winning all these awards one year, and then he’s gone the next year. So it was really interesting to see how that would happen and how they ran their business because everyone gets the same types of leads, but how they manage the leads and what they do with them all change as soon as you go on that appointment.

Ian Mendelson:
To me it’s always been about making sure you buy right and buy a good deal versus a lot of deals. A lot of people say, “Oh, I bought 10 houses a month.” I don’t care about one house this month or two houses. The numbers don’t mean anything to me in terms of how many, it’s all about my buying a good deal. Is it a safe investment? Do I think I’m going to have a decent return on it, and then how to get more of those.

Ian Mendelson:
But I’ve never want to chase a bunch of houses and to get caught up in going on stage or having any praise by the peers and standing out, that’s just slow and steady. That’s what’s worked for me over the years and I’m just going to stick to it.

Matthew Whitaker:
I think that’s a lesson for new people that get in. I think the perception is that is success. And one of the things that I’ve learned over the years of going to, whether it’s a HomeVestor conference or going to a property manager conference, which we go to a lot now is knowing the credible people went to smell out somebody that’s credible that has good information to give you. And somebody that’s basically just telling a story that’s not real.

Ian Mendelson:
And it’s usually the guys who are like, “Oh, I bought this many houses or that mean a lot.” Let me tell you about these deals and that deal. Like the loudest people are usually the ones that are most full of it.

Matthew Whitaker:
Yeah, you want to be talking-

Spencer Sutton:
I was just going to say those are the ones that HomeVestors really wants to put up on stage because they want to pump everybody out.

Ian Mendelson:
That makes it a theater.

Spencer Sutton:
Yeah, that’s right, definitely makes for good theater.

Ian Mendelson:
Some of those guys really know what they’re doing others, others not as much. And if you’re a volume shop and you want to feed the machine, then you have to do a lot of deals, fine, as long as that’s your business and that’s your skillset to run an office that has high volume, lower profits, but higher volume. I’d much rather run smaller volume, higher profits, solid deals. That kind of thing.

Matthew Whitaker:
Talk a little bit about your partnership. I mean, what are the things you learned? A lot of people when they get into real estate partner with somebody and maybe the business is going good or the businesses going bad. And then you have these partnership issues. What are some lessons you learned through your partnership?

Ian Mendelson:
I was partners with Allen back then for probably three or four years or so, but he was pretty much a silent partner, which is one of the best partners you could have. One of the things that worked best was the roles and responsibilities were clearly delineated and there was no overlap. So if there’s one decision maker on this part of the project, or what have you, there’s one decision maker.

Ian Mendelson:
And that’s how it works right now because I have a lot of partners on rental properties or financing or capital partners. I’ll call them, they’ll loan me money, whether they’re friends or family or strangers. Their roles and responsibilities are very compartmentalized and defined. And that way, there’s very little overlap.

Ian Mendelson:
I have one partner who there’s a little bit of overlap still because it’s a partnership that’s left over from a long time ago. We get along fine. But that little overlap at times, it’s like, “Well, wait, who’s responsible for this?” I hate that. I hate saying this. I have this person called like, no, it’s either going to be him or it’s going to be me. And that’s it.

Matthew Whitaker:
So having clearly defined roles and responsibilities. And I totally agree with that. This is probably a great time to do it. Do it day one. Don’t wait until you’re already in the throws of it or when things get stressful.

Ian Mendelson:
And put it in writing.

Matthew Whitaker:
Yes.

Ian Mendelson:
I do it all the time. Even if it’s an email, “Hey, this is what we’ve agreed to.” I’ve got a guy I partner with now on deals where the whole deal is done on a handshake because we’ve done a lot of deals like this, but we still, even to this day exchange emails. “This is what we’ve agreed to. I’m going to do this. You’re going to do that. I’m bringing this to the table.”

Ian Mendelson:
It’s usually me bringing the deal to the table. He’s going to help bring the financing. Then we’ll split the work one way or another and I’ll sell it. But it’s very clearly defined, and we have little problems with that. And since he’s running the rehab, I’ll want to give my two cents sometimes here and there. Sometimes they’ll ask for it. But I know at the end of the day, I’m like, “Hey, that’s his baby. If I don’t like his choice of color for this or that. I’m like, “Hey, I just got to keep my mouth shut and just move on.”

Matthew Whitaker:
Another thing I always tell people is to plan the divorce before the marriage. So what does having a good buy-sell agreement or understanding what dissolution looks like? Because everybody’s excited when you’re about to get married and go on this journey of making all this money and then-

Ian Mendelson:
You never see the end.

Matthew Whitaker:
Yeah, nobody thinks about what the end looks like. And I think a lot of wise people will think about the end when they get started.

Ian Mendelson:
In fact, I have a story for that one because there was a guy who I was partners with on a rental property. And then we had a falling out. And we had everything in writing, this agreement was probably one of the best agreements I ever wrote up at the time when things were still fine. It was super detailed. In the event of this, this happened. I haven’t gone to that level of specificity since then, but it worked out for this guy because we had a falling out, but we were still joined at the hip.

Ian Mendelson:
And if we wanted to sell that property, we had to do X, Y, and Z or ABC. And that was it. We both agreed to it in writing and we just wound up sticking with it, and then we reconciled three or four years later and we’re on good terms again now. And we still own that property together and everything’s fine, but that really good agreement was signed by both parties. That’s the most important part.

Ian Mendelson:
It was signed, not just the emails, it was signed. It was no like, “Oh, you tested we agreed to this by not responding to my email on that. You think we didn’t go down any of those rabbit holes, it was black and white and that’s what saved that property. It’s saved that relationship later on. So.

Matthew Whitaker:
And you got through it, and that’s the whole point. Everything’s not going to go perfect in business, certainly not in owning rental property.

Ian Mendelson:
No, definitely not.

Matthew Whitaker:
Talk about… You fared as well as anybody through the 2007 through call it 2010 recession. What do you think led to that? I mean, I kind of feel like we’re headed to another recession or we’re in another recession. What can people learn from you going through the last recession that they can apply today?

Ian Mendelson:
Sure. There’s a couple of things there. First, whatever we may or may not experience over the next two to three to five years or so, I don’t think we’ll ever be as bad or in our lifetime I should even say, will ever be as bad as what we experienced in seven, eight, nine, to 10.

Matthew Whitaker:
It was brutal man.

Spencer Sutton:
It was horrible.

Matthew Whitaker:
I was going to bed every night, crying. It was so bad.

Ian Mendelson:
We’ve lifted that one time, just like the great depression we lived through that. And people knew what to look out for. And they were able to not repeat that, they were able to not repeat the stagflation from the seventies. All the devils were there for what became 2007 to 2010. And we don’t have those problems anymore. I mean, there were people, as everyone knows, there was lots of mortgage fraud.

Ian Mendelson:
People buying houses with no doc loans-

Spencer Sutton:
Couldn’t afford.

Ian Mendelson:
Couldn’t afford, and the first thing they let go and they’re not doing those sorts of things right now. People that I’m seeing buying houses, those people are fairly liquid. They’re making sure they have the down payments every once in a while, I’ll see a down payment assistant type of thing pop up here and there, but not like it was before.

Ian Mendelson:
I mean, it was ramping mortgage fraud. I mean, it was nuts. I was able to get through it because I would keep my head down. I keep my mouth shut. I just kept buying houses. And I would explain to people as the market goes down, I’m not going to buy here where we are right now. I’m going to buy two steps ahead where the market’s going to be in a month or two.

Ian Mendelson:
And I don’t know where that’s going to be. So, I’ll flat out tell him I’m going to be conservative when I buy this thing. But they wanted to sell it so badly that they were fine with it because they just wanted to be done with it. The media, everything was all about panic and sell. You have to be done with it. And there was always a buyer out there.

Ian Mendelson:
So, I’d buy these houses and I’d collect… That’s where I started collecting a bunch of the rental properties because when I buy a house for $10 or $20,000, when it got into this business in 2005, I buy a house from someone for like 70 or $80,000. And I’d look at the tax record, be like, “Holy cow, you paid $15,000 for this house in 1951?” It was mind blowing how little they paid for houses.

Ian Mendelson:
And I just, I couldn’t get my head around it. And then all of a sudden, in 2009 – 10, I’m buying that same house or less than what the guy paid for it in the fifties. They got paid like 10 or 15 grand. I paid $8,000 for that thing. So it wasn’t a huge market to sell it. We probably could have sold it for another five or $10,000 markups. So I said, forget it. I’ll just fix it up, hold it as a rental. And even if I never make a dime off this thing, I mean, it’s going to cashflow like a monster. So I just started that’s when I really started buying the rental property.

Spencer Sutton:
And those were good houses, right?

Ian Mendelson:
Oh yeah. Solid houses.

Spencer Sutton:
Even really solid, great houses were like fire sale. These areas.

Ian Mendelson:
Oh yeah.

Spencer Sutton:
That was amazing.

Ian Mendelson:
I mean, people were just panicking. I had people on the phone just like, “You have to buy this house.” And I would tell them flat out, “No, I don’t want to buy your house. It’s not in an area I want.” “No, you have to make me an offer.” This actually happened to a guy, super nice guy from Florida. He was an investor, bought a house in East point Atlanta.

Ian Mendelson:
He was into the thing for way too much. He’s just like, “I’m over it.” I was like, “No, I can’t do anything for you. I’m sorry.” And I just kept, it was very Sandler sales in that, I kept telling him no, and he just kept coming back. But I told him man to man, “I don’t want to buy your house. I don’t want to buy your house.” I’m like, because he was such a nice guy and he was caught in a bind. I’ll do a $10,000 option for you where I’ll buy for 10,000 anything I can mark up over 10. I get to keep, and I’ll pitch it to some investors I know.”

Ian Mendelson:
He’s like, “No, I just want you to buy it.” If you were going to give me a number, what would you pay for right now?” “I’ll give you a thousand bucks for the thing.” And he was into it for over a hundred grand. And he’s like, “Fine, I’ll take a thousand.” I’m like, “No, no, no. I was just kind of throwing a number out.” “No, you said a thousand, so used to buy for a thousand.” So.

Matthew Whitaker:
It’s a contract.

Ian Mendelson:
Yeah. So he came to town. He sold it to me for 1000. He actually wound up bringing money to closing, cause there was some back taxes. I owner financed it to an investor for 14 grand. Now the thing’s worth like a small fortune, but I was just happy to get rid of it for 14 at the time.

Matthew Whitaker:
Well, that brings up another question. Tell us about your most memorable deal.

Ian Mendelson:
Memorable deals. Wow. There’s been, I’ve done hundreds and hundreds of deals not to toot my own horn because every time someone talks about how… Oh, I’ve done-

Spencer Sutton:
I’ve done a thousand houses.

Ian Mendelson:
Yeah, thousands. I immediately tune those people out. But I’ve been doing it since 2005, 15 plus years later it’s has to be hundreds or I wont do what I’m doing. I mean, there’ve been several, I bought a lot of cat pee and dog pee houses. Bought a lot of those. That was very memorable because I learned a really important lesson.

Ian Mendelson:
It was in my first year of doing this, I bought a cat pee house in Lilburn. And I sold it to another investor right away. And I said, “What are you going to do with all like with all this stuff, it’s things.” And I was so new, I really didn’t know what to do. She said, “Come by tomorrow…” Cause I had to pull the lockbox off and whatnot.

Ian Mendelson:
So I say, come by tomorrow, I’ll show you what to do. I went by the house, she brought a lawn chair and a sign and the sign said, ‘Everything in this house is free’ and she put it outside and put one on the corner, sat in the lawn, chair, drank a cup of coffee. And all of a sudden everyone came out and they cleared that house out.

Ian Mendelson:
And it stunk so bad, I wouldn’t even go in there, but they cleared it out, cause free is the magic word. And I’ve used that so many times since then. If I buy a house like grandma’s house, no one wants to take the older stuff. I put it on Craigslist or whatever it is and say, “Everything in this house is free.” I get rid of as long as it’s decent stuff and not even the best, but people take… Hell, I did this two months ago, people took VHS tapes from Dean Martins, Celebrity Roast.

Ian Mendelson:
Who even has a VHS player?

Spencer Sutton:
Right, right.

Ian Mendelson:
They take everything, it’s great. In those houses, I don’t even factor in cleaning it out like a cleaning outfit cause I know it’ll go away for free. There was houses where I fell through floors. There have been houses where here’s one, I bought a house in Decatur and this is in my early days, and I was still a home inspector.

Ian Mendelson:
I was wearing my overalls. I was like crawling around on the crawlspace, cause I want to check out every nook and cranny, my appointments back then were like two hours. I was over analyzing the house for sellers.

Matthew Whitaker:
How long does it take now?

Ian Mendelson:
Seriously. An hour tops. And they probably don’t even think I’m doing anything cause I barely take notes at this point. Cause after a while, you know what you’re looking at. Back then, I was taking detailed notes and measurements. These poor people. I was in the crawl space on my hands and knees and the house was a ranch on a crawlspace shaped like an L, and it came around the corner and I put my flashlight up and there was a mannequin like staring back at me.

Ian Mendelson:
And it was the scariest thing. I popped up smashed my head. Like I was seeing stars like, oh man, that was very, very memorable. Very memorable. I bought a house up in Cartersville that was apparently owned by members of the KKK back in the day. That was pretty interesting. It was pretty nuts. But another one was another house where the entire first floor and I’m talking the entire first floor was covered in dog poop.

Ian Mendelson:
I mean, it was unbelievable. So, I don’t remember the deals where I made the most necessarily. I remember the ones that stand out from the perspective of not being that normal kind of house where you could just go in Walton and figure and paint the flooring. And that’s that.

Spencer Sutton:
I think from my experience back in those days, what you were looking for was that needle in the haystack and you were really looking for the person with deep motivation. Like they just wanted to get rid of that thing. And there was a number of reasons why they did, we bought a number of dog and cat stuff all over the place. And it’s just amazing. Like people, when they get to a certain point, they’re ready to just get rid of it.

Ian Mendelson:
I’ll let you know too. You don’t have to do a hard sell on those yet. They will sit down, they’ll sell you.

Spencer Sutton:
That’s right.

Ian Mendelson:
I would never in any of these deals ever what they told me, because I always sit down and talk with these people ahead of time to better understand it. So I mean, when people are buying houses that are listed, it’s very different. But when you’re getting called to go into a house, look at it. I mean, I’ll sit the first thing I’ll do.

Ian Mendelson:
I’ll sit down and talk to them just to make sure I’m the right kind of buyer for them. Cause if they give me any indication that they’re not a real prospect for selling a house at a discount, I’ll be the first one to recognize it. And I’ll tell them, “You don’t need to sell to me. You don’t need sell anyone like me. You need to fix it up or you need to run it out again.”

Ian Mendelson:
Cause sometimes people are just fishing or they just don’t know any better. So they’ll just call you. And if it’s not the right solution, I mean, there’s no deal that’s worth trying to pull a fast one on somebody or have bad karma and you like that. It’s just not worth it. So, and what’ll happen is you do that, and that person will refer you another deal down the road or something along those lines.

Ian Mendelson:
And so there’s no deal worth trying to do a slight of hand kind of thing with them.

Matthew Whitaker:
Well, that’s the thing about real estate that you see a bunch of people get into this business and they kind of blow it right off the bat, trying to get too quick of success and taking advantage of people. And even in a place like Atlanta is too small. Like this community is too small. Word gets out way too fast. And if you want to build a longterm career in real estate, the first thing you don’t do is start screwing people or taking advantage of people. You know, you build real estate on the back of reputation.

Ian Mendelson:
I completely agree. And that’s actually one of the things I’m seeing now with the competition that’s out there. We’ve got the on the corporate buyers that are out there and then you’ve got the lots of independents that are out there right now. And a lot of these independent guys, they’ll go to a weekend course or two. And they might mean well, but they might be following what this guru told them, but you’ll listen to some people say, just get it under contract you can drop the price later, that type of thing.

Ian Mendelson:
Just get them to contact, have the stipulations in there and take these people. Essentially. You’re taking them for a ride, because you know, you’re going to drop a price on them later and you’re not going to close in. “Oh, I’m just bringing my inspectors through, you never know, there are other buyers. Tell these people what you’re doing. Cause they’re ruining it. They’re kind of ruining some of these deals for everybody. And they’re putting these sellers really, really awkward positions.

Ian Mendelson:
And they’ll just wear them down. Well, I know I offered 85 before, but I didn’t notice that crack over there. And my finance guy said this, and now I’m going to offer you 79, and then they just keep whittling them down. And yeah, I know that’s a tactic that some people will use. I would never ever do that. I just think it’s so disingenuous.

Matthew Whitaker:
Yeah, it’s dishonest. I mean, you know you’re going to go down and so you’re not even having a real conversation with them on the front end.

Ian Mendelson:
Yeah, exactly. When I make my offers, I use a lot of earnest money to separate myself out for those types of people. I know what I’m looking at. So I don’t need contingencies or anything along those lines. And if my numbers 10, 20, $30,000 less, I’ll explain why. And it’s much harder to buy it at a much lower number. The other guys were like, “No, I’ll just give him 30 grand more. And then I’ll just try and wear him down.”

Matthew Whitaker:
Yeah, bring it down.

Ian Mendelson:
Yeah.

Matthew Whitaker:
We see property management companies do that all the time. So we’ll go out to a listing appointment and some other property manager promises them the world and we give them a more realistic idea of what it’ll rent for, or even over the phone, an idea of what will rent for. And they’re already kind of sold on the bigger price, just so they can get their sign in the yard. And they know they’re just going to drop the price down to what market value is. There’s nothing online that tells you that it’s going to rent for that price.

Ian Mendelson:
It is hard to unring that bell. Cause these people will set expectations that are just unrealistic. And then I’ll go in there and try and explain to them what’s actually going on and what the actual now pull out the console, show them everything and they understand it intuitively, but then emotionally they’re still like, “Yeah, but then other offers 20 grand.”

Spencer Sutton:
They don’t want to believe it. They want to believe the other number.

Ian Mendelson:
Yeah. They’ll roll the dice. Well, and they’ll say flat well I’ll give this guy a shot and then see what happens. And if it doesn’t work out, I’ll call you.” I’m like, well that’s if I’m interested in your house at that time.

Spencer Sutton:
Hey, you’ve talked a lot about how things have changed. I mean, we went through the recession, ’07, ’08, all the way through 2010 when Matthew and I were in HomeVestors, we were actively buying… Things were a lot different. I mean, literally we had billboards around town. We would get sometimes around a hundred calls a month. We’d make some offers. We bought some houses, but I mean, there’s so much more competition. Talk to us a little bit about what it’s like in Atlanta now, trying to find these deals because we all have a whole lot of stories about these great deals.

Spencer Sutton:
What’s it like now, trying to find those deals and what are the most successful investors doing today?

Ian Mendelson:
Sure. Well, I can only speak to what I do on my side in terms of… cause with HomeVestors we’re still doing lots of mail. I believe we’re on TV. We do billboards, still that type of stuff. Lots of internet. What I see competitors doing is we have a pretty decent size rental portfolio. They’ll just see who owns it. I probably get between 20 and 30 at least postcards or letters per week from investors.

Ian Mendelson:
And some of these things are pretty nice. I set them aside like, “Hey, if I ever want to send out postcards, this is a nice postcard.”

Spencer Sutton:
I’m on a copy of that one.

Ian Mendelson:
Yeah. And other times there are absolutely dreadful spelling mistakes. I mean, you could just see where someone was just taken for a ride at a seminar of some sort to send out this junk letter. I get lots of phone calls and texts. We don’t do that at HomeVestors but I got lots of those. And I’ve heard that those can work pretty well. Although I think a lot of the low hanging fruit in that those has gone by now.

Matthew Whitaker:
I’ve gotten no less than a hundred of those texts. In fact, I got one today. It has to, because it has to work the first time because somebody needs to really think that somebody’s texting them, at this point. You know, it’s some sort of automated bot that’s sent out a bunch of text.

Ian Mendelson:
Yeah. If you text back, stop, it’ll come back. Like, oh, you’ve unsubscribed. Then once in a while you get stopped and someone actually texts you back and say, “No, no, no, this is a real part.” I’m like, “Well, I’m still not interested in selling. With those texts and the phone calls seem to work. But I mean, it’s fewer and farther between.

Ian Mendelson:
I think for a good year or two that was working because no one else was doing it. Now, everyone in their grandmother and then their grandmother’s neighbors friends are doing it too. So it’s so I don’t think it works nearly as well. Lots of letters and postcards. And then of course, internet advertising where anyone can look as good or as bad as they want to be online.

Matthew Whitaker:
Spencer, used to tell the story, when HomeVestors figured out direct mail, they were getting so many. That was the first group that figured out direct mail to buy houses. And Spencer tells the story and maybe I should just let him tell him. Why don’t you tell him the story about how many calls y’all were getting.

Spencer Sutton:
Well, what was interesting was Roland and I were kind of struggling like, these billboards are doing okay, they’re bringing in these calls, but what are these guys in Atlanta doing? And I wish I could remember. You probably know the guys that we came over and we sat with, we spent a day, I’ll never forget it. And they just said, “This is what we’re doing. We’re doing direct mail.”

Spencer Sutton:
And we’re like, “That’s it?” And they were like, “Yes, that’s it.” So we went back and this is before HomeVestors was doing any direct mail. And we put together our own direct mail. We found the most incredible cursive handwriting. I’m telling you, it fooled me. It was so good. And we just targeted one zip code. And man, we got so many calls. I mean, it was amazing. So that was probably 2005, 2006.

Ian Mendelson:
The cost lead back then was minimal. Minimal.

Spencer Sutton:
It was nothing. Yeah, it was incredibble.

Matthew Whitaker:
Spencer used to tell everybody I got so many calls. I would just answer the phone, “What’s your address and how much do you owe?”

Spencer Sutton:
That’s right.

Matthew Whitaker:
Yeah. Well, you didn’t even say hi.

Spencer Sutton:
Yeah. When you’re getting a hundred calls a month, you were just trying to get down to the people who are really motivated.

Matthew Whitaker:
But it’s really competitive today. I mean the cost per lead is through the roof. It sounds like. So finding good deals is really hard to do. Let’s pretend I’m a new investor and I come to you, Ian, we’re having lunch. And I say, how do I get started? What are some things I can do to get started in this business? What would be your advice for them?

Ian Mendelson:
My advice to them has never really… It’s funny, I’ve had this conversation with so many people over the years and I would always say, “I’m going to tell you the same thing I would tell my brother.” And then literally last month, my brother called me to ask me this question. And I started out the same way. I’m going to tell you exactly what I tell my brothers.

Ian Mendelson:
What? I would tell newbies to focus on a small part of town that they know, or they want to invest in and learn it really, really, really well. Whether that’s a zip code, whether that’s a city. And after they start learning about it, they don’t like it. They want to go somewhere else, go somewhere else. But learn it. Just go there, drive it, get a real estate.

Ian Mendelson:
If you’re a real estate agent, obviously you can go onto the MLS. But if you get a friend who lets you run searches for them or searches for you, just look at those areas, know what things are selling for and just start inspecting and looking at the houses yourself, just to get idea, you don’t have to buy a damn thing because you know, the education part is free. You’re not going to lose any money you just learn and get out there.

Ian Mendelson:
And once you start getting a really good grasp of what things are selling for what level of finish and price points and this and that, then as deals pop up, you’ll know immediately, if that’s a good deal or not. And you can then spend your time wisely picking that house say, “Okay, well, hang on a second. That’s a little better. And you know, a better than other people who are just buying blanket houses all over the place.

Ian Mendelson:
Cause a lot of houses I buy, I will turn around and either fix them up. Let me take a step. So to put this all in context, when I buy houses, I will first and foremost, if I can keep it as a rental, I’ll keep it as a rental. If I can’t, I will look to see if I can wholesale it. And by wholesaling mean, I’m going to put it on MLS. Although I’m an agent, I’ll list it on MLS, or FMLS here in Atlanta, I will list it and I will sell it because a lot of those houses right now with what’s going on in the market, it’s supplying demand is really what’s dictating the prices more than anything else.

Ian Mendelson:
Back in the day, 2005 to 2008, there was so many shenanigans going on that you didn’t know what was really dictating those prices, whether it be mortgage fraud or Lord knows what. But right now, it’s truly supply and demand. Cause you can the areas where there’s very little inventory. And when you put a house on there, it’ll just get bid up beyond asking price and then you’ll have your hands smacked by the appraiser who comes and says, “Hey, it’s not worth that.”

Ian Mendelson:
I mean, this has happened three times over the past month. If it’s a decent enough house where at Haniel homeowner combined, I’ll put it out there and they’ll sell it to me, them over an investor. Or I’ll just, If I have the bandwidth, I’ll fix it up and I’ll turn around and sell it that way. But what’ll happen is when I put these houses on the market, let’s say it’s an Nazis house, I’m selling.

Ian Mendelson:
The investors who know the areas really well. They will spend the time, they’ll go out there and they’ll take a look at it really fast and they’ll make an offer with really great terms and a very reasonable price. And I prefer to work with them versus the people who will make blind offers. Hey, give me a one day due diligence, but I haven’t seen it.

Ian Mendelson:
I’ll go. And I’ll check the super logs to see if someone’s I actually looked at a house because if someone’s made a blind offer, I mean, I’ll put it in the listing. Like don’t even bother sending it to me. There’s no shortage of buyers out there right now. And I want a legitimate person who knows what they’re doing. If they want to go out there and take a look at it.

Ian Mendelson:
And they still wanted very small due diligence, I’ll be very specific. I’ll ask them like, “What specifically about the house do you need to know more about?” I mean, “Oh, I don’t know if the heat and air is working.” Okay, fine. No problem. Cause I know if it’s working or not and if it’s not, I’ll tell them flat out, it’s not working, so factor that into your number and get back to me.

Ian Mendelson:
Cause a lot of people are being taught to make blind offers on things, and then just walking away and you just waste so much time and you burn so many bridges. Like I’ve got a black, black ball list agents who I won’t work with anymore. Because I flat out, ask them like, “Is this a blind offer?” “No, no, no. I looked at it. I looked at it with my client and then a day later, right. They go out there or two days later they’ll pull her off. I’m like, “Well, what was it? Oh, the rehab was too big. And you couldn’t tell that when you first went there.

Ian Mendelson:
I mean, and that just drives me up the wall. So to come full circle to your question, would I tell somebody don’t be that guy, be the person who understands values and the neighborhood, the cost of repairs, that type of stuff. Even running through houses that you have no intention of making an offer on. You can still go through and say, “Okay, if I was going to rehab this house, what would I do to it?”

Ian Mendelson:
How do I analyze this deal? Does it make sense as a non makes sense? If it starts to sit in the market longer, then you can maybe revisit it later and say, “Hey, look, I remember this house from before. I can make you an offer like this and had that offer really separated itself. So, and you do that by focusing on one or two small parts of town, knowing them, understanding them.

Ian Mendelson:
That way you can also, you can do letters to those neighborhoods, and it won’t cost you a small fortune. And when you’re talking to those sellers, when you’re talking to the sellers, they’ll they’ll know if you know the neighborhood. You can’t just say, “Oh yeah, I bought a house on main street over there.” Like when you start talking about the neighborhood, they’ll know, cause they lived there. They’ve been there for a long time.

Ian Mendelson:
So you can ingratiate yourself with them that way. And then when the time comes to sell the houses, as everyone knows there’s lots of agents who work the same neighborhoods over and over again. So you can establish relationships there. So that would be my advice. Find an area that you like, or, or maybe just two areas.

Ian Mendelson:
Cause I know some people and I’ll do it to where I buy certain houses for appreciation and other houses for cashflow. And I just kind of offset the portfolio and balanced the portfolio. That way I’ll look at a house and be like, you know what? I’m a kind of cashflow much, but man in 10 years, this area is going to be great. So I’m okay earning a $100 or $200 a month. Whereas in a worst part, it’s kind of wouldn’t touch a house cash showing that based on the other opportunities I could find.

Matthew Whitaker:
And this maybe just the inverse of what you just said, but what are some mistakes you see new investors make that are pretty easy to avoid?

Ian Mendelson:
To me, it’s not to belabor the point, but it’s those blind offers. And knowing that you’re going to just try and drop the price later, you just wind up pissing off a lot of people. I just got a house last week where I know I was $20,000 below the next offer, but my terms are so much better. He flat out told me, he’s like, “Look, you’re at this number. Can you come up? You have any wiggle room?”

Ian Mendelson:
And I really didn’t because my terms were zero due diligence. None. I knew what I was looking at. I knew the values. I knew what I was doing and the seller was a more sophisticated seller. So he understood the value of the terms that I was offering. And he had to explain that to his clients, if it’s a completely newbie agent or a newbie seller, they might not understand how valuable good terms are.

Ian Mendelson:
No due diligence, no financing, no inspection contingency, no, no appraisal kit, nothing just come in with a decent amount of money.

Matthew Whitaker:
It’s a done deal.

Ian Mendelson:
What’s that?

Matthew Whitaker:
It’s a done deal.

Ian Mendelson:
Yeah, exactly, exactly. I mean, is it a killer home run deal for me? No, but it’s a solid deal. But my number was my number. I stuck to it, I couldn’t come up and he understood the value there and he made the deal happen.

Matthew Whitaker:
So how many houses do you look at a week?

Ian Mendelson:
Right now not a tremendous amount cause I’ve got an employee who does a lot of that. Right now, I’m working on kind of managing the rehabs and trying to turn the rentals as much as I can cause I wear two hats. The flipping rehab hat, and then the rental manager hat as well.

Matthew Whitaker:
And changing locks, you also do.

Ian Mendelson:
Yeah. I have friends that just make fun of me because of it. I’m like, “All right, fine. Whatever.”

Matthew Whitaker:
Do you still drive the red truck?

Ian Mendelson:
No. I had a bus full of old people pulling in front of me on a rainy day, and I hit the side of it. So, that was a couple of years ago. It wasn’t my fault. It was rainy and they just literally just pulled right in front of me. A guy said, “Yeah, I saw you. I didn’t even know what I was doing, but I did it anyway.” I had a Toyota Tacoma. I actually just want him getting a new one finally. New truck.

Matthew Whitaker:
Nice. We deal with a lot of out of state investors. Are there some areas that you would say, hey, these are kind of areas that I would target if I’m an out of state investor, whether that’s somebody buying a turnkey home or somebody looking to invest in an area and think rental property too, most out of state investors want rental homes.

Ian Mendelson:
I mean, I’m pretty bullish on Atlanta in general. There’s pretty much.

Matthew Whitaker:
Why?

Ian Mendelson:
Why, because I think it’s got a lot of potential. It’s a growing state that I think is run fairly well. Lots of people are moving here. Lots of businesses and large companies have relocated to Atlanta and reestablish their headquarters and whatnot. So, it’s definitely a growing city and it just sprawls out. I mean, it’s a good question. There’s no part of town, honestly. There’s no part of town I would not buy houses in and rent them out. But I’m not your average landlord either.

Ian Mendelson:
What I see move the fastest and move the best are the ones with good schools. I mean, that’s nothing new. A lot of people know that. And it also, again, it also depends if you’re going for appreciation or cashflow, like I was talking about before. There’s definitely some stuff on the South side of town that’s very blue collar. Some of my best rentals are down there that I’ve probably had these people for 10 years in these houses that would bend over backwards to do anything for them.

Ian Mendelson:
They say flat out, “We never want to move.” Great. Any problem you have, I will take care of. And well, that house appreciate more than what I paid for. Not a tremendous amount, but man, that’s going to cashflow really well. Whereas another house that I just bought, I was talking about, I know it’s not going to cash out, but it’s a longer term appreciation play.

Ian Mendelson:
The super popular parts of town, when people are saying, “Hey, everyone’s buying over here.” I’ve seen that not work out a lot well. This has not worked out well for a lot of people only because things just tend to get bid up in those parts of town, and you wind up paying more than you really should. And you just have to be very disciplined and not overpay for certain things. Just because you want to get a house, just be patient there will always be plenty of houses.

Ian Mendelson:
Trust the numbers, whether you’re doing a rental analysis or the property managers doing the rental analysis. I mean there’s parts of town where I can’t quite figure out what’s going on. So, I’ll call a couple of friends who have properties there. Run property management company, and I’ll say, “Tell me about this area. What do you know, what kind of rent can I actually expect?”

Ian Mendelson:
And if they tell me like no… There’s one area, it was a neighborhood where one side of the street was just that much better than the other. It was the elementary school, same high school. So when I looked online, it was like same high school, but it was a different elementary school. And that made all the difference in this one neighborhood.

Ian Mendelson:
I didn’t even think of looking at that at the time, but Patrick’s like, “No, no, I know this neighborhood. Do not pay this because you’re not going to get that kind of rent. People will pay more to be in this neighborhood.” And if you ever looked at a district for elementary schools, they’re very, very strange. They’re not like rectangular blocks on a map. It’s very, very strange. If you don’t know exactly what you’re looking at. You can forget it. So definitely seek the advice of someone who knows what they’re looking at. And it was pretty seasoned at that time, I still can figure it out.

Matthew Whitaker:
Well, that gets back to being an expert in one area, right? So you would know where the elementary school stops and starts. We’ve made a lot of mistakes around high schools and we made one that comes to mind all the time where we have two houses, we were trying to rent. Like the whole neighborhood was in one, but this little half side of one street was in some other, which was the less desirable area. And then all of a sudden we got into some trouble just because we assumed. That gets back to your thoughts on being an expert in one specific area. So, you know those types of things.

Ian Mendelson:
And another thing I almost started going down this path. When I first joined, HomeVestors started becoming a real estate investor and I’ve seen a lot of people do it over the years, which is, they start like chasing after the shiny things and like, “Well, hey, have you heard of tax deeds?” Or what about this? What about I think, and they just said, wow, that’s you seems the grass is so much greener, so much easier. What I could buy probate, I could do that.

Ian Mendelson:
And then just start chasing after different things. And they never mastered one of them and they just want to chasing their tails and wasting so much time, so much time doing that. And so when I first started for the first bunch of years, all I did was buy and sell just to learn and get down the mechanics of learning, how to buy and sell cause you could do so many things, right? You can buy it, right. You can value it. You can manage your property, right.

Ian Mendelson:
You can manage the rehab right. Or whatever it is. But if you can’t sell it right, or you don’t know what value, there’s just so many things that you have to do correctly, that if you don’t do them all right, then you’re not making a lot of money on that thing. So you just have to do and churn a lot of deals to learn the mechanics of that type of stuff.

Ian Mendelson:
And I learned in the beginning, I mean, there’s just a bunch of different ways to skin a cat. And there are certain deals, if you didn’t have that skill set of how to figure out how to make it work, you weren’t going to make any money. Although there is something to be said for in the first handful of deals. If you make no money, you’ve made money, because you didn’t only lose it, but you just got a free education. And I can tell you how valuable that is.

Ian Mendelson:
I mean, people will tell you don’t rehab your way out of a bad buy. You know, I learned that mistake and man, that was a very, very expensive mistake.

Matthew Whitaker:
Well, I’ve heard of a great strategy getting in, is to find a seasoned investor like you, I’m not offering your services up, but if I find the house and I have the money and I basically run it by you and then splitting the profit with you, I mean, that’s something that a lot of seasons investors will do, basically just use the knowledge. You found the house, you’re supplying the money to buy that house. And then you’re getting the education and a seasoned investor is going to save you as much money as they make on that deal.

Ian Mendelson:
Yeah. I’ve done deals like that. And I still do that with other investors where I come across a deal and I know, yes, I could do this myself, but I don’t have the bandwidth for it. So instead of doing multiple things, half-assed I just like to do a couple of things, half-assed. So, I can’t do a lot of things half-assed, so I will maturely say, “I can’t take it on, but I know there’s something there.”

Ian Mendelson:
So I will bring the deal to another investor and I’ll partner with them on it. I still do that. And people will bring me deals and I’ll, especially newer investors. I’ve done that several times with new investors and I’ll walk them through, I’ll show them my paperwork, I’ll show them all that stuff and how I do it.

Matthew Whitaker:
That’s awesome. I think that’s a great place to wrap it up. Ian, this has been great. It’s great to connect with you. I know people are going to enjoy getting to learn from one of the masters in Atlanta. So, thanks so much for spending the time with us.

Ian Mendelson:
Sure. I appreciate you guys having me on today.

Matthew Whitaker:
All right everybody, this wraps up this episode of the Atlanta Real Estate Investor. If you haven’t already, go ahead and subscribe to our channel. So, we’ll be releasing episodes probably about every two weeks. So look forward to new episodes coming.

Spencer Sutton:
And give us an honest review.

Matthew Whitaker:
Yes, please. All right.