[00:00:00] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.
And now your host, Whitney Sewell.
[00:00:24] WS: This is your daily Real Estate Syndication Show. I’m your host, Whitney Sewell. Today, our guest is James Wise. Thanks for being on the show, James.
[00:00:32] JW: Hey, Whitney. Thanks for having me on, brother.
[00:00:34] WS: Yeah. I’m honored to have you on the show. Before we get into James, I want to remind the listeners to go to lifebridgecapital.com. I hope you’ve gone to the ‘contact us’ page and signed up where you can put in your information just really simple, and then you will get a email from me and a way that we can schedule a call. I’m happy to help you any way I can. I hope you’re going to the Real Estate Syndication Show Facebook group. In that way, you can provide feedback for the show and questions that you can lay for me to ask these amazing guests like James.
So, a little about James, he’s the co-founder and CEO of Holton-Wise. As CEO, James’ main focus is the strategic vision of Holton-Wise and driving the overall growth of the company. He oversees and sells immediate apartments at Holton-Wise, while also posting several popular shows on Holton Wise TV. He’s regularly ranked as the number one selling realtor in rental property in the Cleveland, Ohio market and has also co-founded several other real estate related businesses, including the Hawk Insurance Agency and Black Tie Title.
So, James, thank you again so much for your time today. Give the listeners a little more about who you are.
[00:01:39] JW: I mean, that pretty much sums it up. What we do at Holton-Wise the primary function Holton-Wise is to allow investors the opportunity to learn about real estate investing. Then if they want, they could take what we teach them and they could apply it to other investments, whether they want to own property on their own, self-manage, whether they want to buy into some large syndicates or whether they want to invest with those directly in the Cleveland market and have my company step in and do the property management. That’s what led to the founding of the insurance agency and the title agency.
For anybody that wanted to utilize our services from top to bottom, we really wanted to set up a business infrastructure that investor could be listening to you and I talk right now. That investor could be in Los Angeles, California, have no clue how to do any of this, and he just likes the vision that I’ve put forth about my company about investing. And he’s like, “You know what? I want to invest in real estate. I want to grow my net worth.” One phone call to us, we’re able to take him from just a bystander sitting there right now on his couch to being able to invest without having to reach out to other people to help him do that.
So, that’s like really in a nutshell, the vision behind my company and all my other various sub companies to handle all that. And again, if somebody doesn’t want to do all that, our biggest focus is really just providing people transparency and education on the industry itself now.
[00:03:06] WS: I like how you all are able to do any aspect of the business and make that happen for that investor. That’s unique. Not everybody can do that. You all have though a neat show that you were telling me a little bit about, Holton Wise TV. Your bio says numerous or several popular shows on Holton Wise TV. But one you were telling me about was about bad tenants. I know as much as you all are in the real estate business and able to do, you all are expert in management and taking care of tenants that are also slightly unique or extra unique?
[00:03:34] JW: You don’t got to say slightly unique, Whitney. I mean, those people are damn savages. Let’s just call it like we see it, man. It’s tough. It’s a tough industry.
[00:03:43] WS: So, I’d love to hear some of those stories, some of the worst evictions, and things like that. I think you had a very popular show recently about that. Tell us some of those stories and how you all handled them?
[00:03:53] JW: Yeah, man. Look. Guys, here’s the deal. A lot of people like to dance around the issue of how difficult it is to be a property manager to actually invest in real estate. Because various folks, brokers, straight. I’m a broker as well, brokers want to sell properties. Brokers want broker deals, syndicators. They want to sell their sponsorships. So, don’t get me wrong. I do too.
I’ve sold $150 million with the rental real estate in the last few years here, and I run a large portfolio top to bottom, like I already mentioned in the show. It’s one of the reasons I come on shows like this. I want to sell more real estate. I want to do that stuff. But I don’t like to dance around the topics. We don’t have to call some of these people unique, man. Some of these people are freaking savages. That’s where the idea for my show, one of my shows on Holton Wise TV. This is probably the most popular show. It’s called the Tenants From Hell Show.
What that is, man, we give you guys real-life situations that have happened to us or have happened to other investors. So, if anyone out there is listening to us right now and you’re interested in being on that show, just shoot me an email. Google us, and I’m sure you’ll be able to find us. Let us know your story. We might have you on the show.
But like some of the worst of the worst, Whitney. You touched on the evictions. When we evict people – I evict probably a hundred people a year. I run a large portfolio. That’s part of the business, guys. If you’re investing in real estate, it doesn’t matter if you’re investing with Grant Cardone, [inaudible 00:05:17], Holton-Wise. You’re buying stuff off of RoofStock, whatever. Nobody in the world has figured out how to run around a real estate without doing evictions. That’s part of the game, y’all.
So, what I like to do, we like to film our evictions. We do about a hundred evictions a year. We film them, and the best ones we got, we put that on the show. We do that live. One episode, we had a hoarder. A lot of people, they don’t understand what exactly it’s like to go through an eviction or what is actually going to happen. Like a small little apartment, Whitney. It was like, I don’t know, 600 square feet and this thing rented for like probably 600 bucks a month.
I can’t remember off the top of my head, but we had to get an entire crew in there. I probably had on-site in that video. You see all the guys in the video, working, emptying out this apartment. I probably had three bailiffs and like a total of nine guys. They’re all day emptying out this little 600 square foot apartment. You think you’ve seen some rough stuff, guys. This ended up being a total bill to get that apartment completely emptied out, renovated, and ready to run again for 600 bucks a month. The total cost ended up being like 15 or 16,000 dollars.
And that’s the part of the business that nobody really ever wants to talk about. But these things happen. When we’re doing our analytics on our rental properties, we need to put this type of stuff in our proformas because this is stuff that’s going to happen. That’s what the Tenants From Hell Show is all about, man. That’s what we like to do. We want to show people that, so nobody goes into investing with a blindfold or blinders on.
[00:06:43] WS: How are you all keeping from renting to more people like that? I mean, I know it’s going to happen. That many units, it’s going to happen. Like you said, a hundred evictions year. It’s part of the business. But how do you start to minimize that?
[00:06:54] JW: There’s a few ways. The standard boilerplate answer to that question that you’ll see most people give is, “Oh, you go to do proper tenant screening,” which is absolutely true. We could talk about tenant screening, but I don’t want to talk about that first. What I first want to talk about is the very first thing that screens your tenants, and that is the neighborhood. That is the class of asset. Let’s not pretend that every little neighborhood in the United States of America is Mayberry. It’s just not how it works. You have what I like to call A class neighborhoods, which is primarily your owner-occupied neighborhoods, where your wealthy folks in that metro, major metro live.
Not a lot of rental property investors are gravitated towards that, because the cash flow numbers typically don’t pencil out. It’s just where the owner occupants live. But then you get into like B class neighborhoods, which is your suburbs where you start to see a little bit of rentals tapered in there. So, it’s kind of like 70, 80% owner-occupied, but then like 20% rental properties. And then you get into your C class stuff, which is like a nice mix. It’s probably half-and-half rentals versus owner-occupied. And then you get lower in the D and F class where you start to see all rentals and you start to get into rougher, tougher areas, ghettos, hoods, things of that nature.
So, depending on the type of investment you buy, that’s going to be the biggest determining factor in the amount of bad tenants you’re going to run into. No matter how nice your property is, if it’s smack dab in the middle of the hood, you’re not going to get high-quality folks to live there. High-quality folks just – They’re going to choose to go to areas with nicer schools. The rest of the neighborhood keeps it up nicer. The property values are higher. Things of that nature.
So, when we’re running our proformas and things of that nature, we need to factor this type of stuff in. And you really got to match the property you’re going to buy with your risk tolerance. The flip side of that coin is in a B class neighborhood, what we do, we do a lot of like small multifamily. That’s what we do here in Cleveland, and people are blown away by the pricing. In a C class neighborhood, a very typical sale of ours would be we will sell an investor a duplex that’s going to rent for probably $750 a unit. So, it’s going to be $1,500 a month in a C class neighborhood, and that is only going to cost that investor probably $85,000.
Now, a lot of people are probably like, “Whoa. Whoa.” They’re probably like grabbing calculators out right now, running the numbers like, “Oh, those are really good numbers.” Now, same thing. You can get 750 bucks a month in rent out of a duplex in Cleveland in like a D class neighborhood for even less. You can get that for like $40,000. But now, you’re in the ghetto. That’s going to come with varying levels of difficulty.
So, with the C class property, maybe your average tenancy is two, two and a half years. Whereas you go to the D class, maybe it’s less than a year. So, you got to factor in those costs. Or if you want super stable tenants, college-degreed, dual-income, maybe try to get that $1,500 of rent in the B class. But instead of paying 40,000 like in the D or 85 in the C, you’re willing to pay like 150,000 now just to maintain that lower-risk tolerance.
So that right there, that’s going to be the first thing. That’s how you screen your tenants. No property manager in the world, no matter how good they are – I would like to say, Whitney, I’m pretty damn good at being a property manager. This ain’t my first rodeo. But no matter how good I am or how good Holton-Wise is, we’re not going to be able to put B tenants that are attracted to B class neighborhoods. We aren’t going to be able to put them in your D class properties, guys. It’s just not possible. Those people have earned the right to live in nicer neighborhoods. Why would they go back? There ain’t nothing I can do. You know what I’m saying?
[00:10:23] WS: I really appreciate you talking about the neighborhood and how that’s part of the screening process. Long before you ever talked to the tenant, I mean, you’ve limited the class of tenant that you can get in there. Most people are going to jump right to the screening process. But, yeah, you’re exactly right. You’re not going to bring the person who’s used to living in the B class property or better to the C or D, let’s say C minus or D or a worse area.
[00:10:45] JW: Absolutely. And then once you’ve established that, you figure out what your risk tolerance is. That’s another thing the Tenants From Hell Show helps investors. You could be a first-time investor listening to the show and you’re like, “I could deal with the rough stuff. Let me handle the tough stuff, man. I want that cash flow. James said I can get $1,500 in rent for 40 grand.” All right, brother. Pump them brakes. That’s cool, man. I have a lot of properties in the ghettos. The ghettos made me a wealthy guy. But if you’re brand-new, I don’t want you going into this with blinders up. So that’s why that show is there.
So, you might be thinking, “Ah, dude. How bad could it really be?” Is it tough? A guy like me, I deal with this every day. We evict a hundred people a year. I could deal with it. I can understand it. But, dude, you got to have the right stomach for it. So that’s what the show is for. It really gives investors a real look at this. I told you about the eviction, right? $16,000 turnover cost, but that doesn’t really paint all the stuff that really happens. So, before you even get into screening, if I may, I just wanted to just talk about a couple other wild stories just briefly.
[00:11:44] WS: Yeah.
[00:11:43] JW: I don’t want to bore you guys. If you guys want to see the whole story, obviously watch the show. But just stuff we got to deal with. At one point, the house that I personally live in, it’s not titled in my own name. At one point, I had a tenant who looked up where I had actually lived with my wife. We don’t have any kids at that time, thank God. But he had looked up where I lived and threatened my maintenance team members every time they were over at his apartment building that he would threaten them, tell them where – He would read off my address to them, telling them that he would be coming to my house one day and setting on fire. So, I had to take the precaution of moving from that home and actually titling the home I currently live in in a completely different name to remain semi-anonymous.
If you have a lot of properties in just rough neighborhoods, well, who do you think lives in rough neighborhoods, guys? Rough people, dangerous people. So, there is that. That’s messed up story a lot of people would think stuff like that happens.
We had one woman. It was around Thanksgiving one year, Whitney, and it was storming like crazy. The day she kept calling the office, we had voicemail after voicemail of this poor woman. She lived in the second floor of an apartment building of ours, and she’s just calling in the middle of this rainstorm upset because water is coming into her dining room because a couch got thrown through her dining room window.
Now, I don’t know if you caught that, brother, but she lives on the second floor. Okay? So, this poor woman lives on the second floor of this apartment building. It turns out the freaking yahoos that live a floor above her found out that they had bedbugs, which is another thing that’s super common when you get into the low-income stuff. If you guys want to see some wild bedbug stories, you bet your asses I got those on the show with actual footage, some freaking dime-size bedbugs, y’all.
But anyway, so this poor woman, she’s got water coming into her dining room from the window that’s got a couch through it on the second floor, because these folks above her, they found they had bedbugs on their couch. Of course, to them in their drunken stupor, they said, “Oh, we got bedbugs. Of course, naturally, the solution is to right now, in the middle of the night and in the middle of this rainstorm, open our third floor window and just chuck the couch out the window.” That made sense to them. Just other stuff.
I own a really large building, a huge building. It’s like 40,000 square feet. It’s nicknamed the sex motel. And the reason it’s nicknamed the sex motel is because it’s in the C class neighborhood. But it’s probably by far an F class asset. This thing sat for probably 25 years in a C class neighborhood of Cleveland. It was probably the sore spot of the neighborhood. The rest of the neighborhood is pretty decent, but I would say this was the building that was bringing the neighborhood down.
The owner of said property, he just rent it as a motel, and it’s not nice. It’s not like Days Inn or Ritz-Carlton or even – It’s not even really like a Motel 6. Lower quality. Essentially, the guy was renting rooms by the hour for about 20 years. So, prostitutes, drug addicts, that’s the only type of people. Just transient, rough, tough, nasty, gross people. Those are the only type of people that would patronize this motel. A huge motel, it would be like 38,000 square feet.
So, I’m a broker. The guy hires me to sell the building. I can’t sell this building, man. I tried for a year and a half, and I’m a damn good broker, man. I am the number one seller of rental property in the Cleveland market. I’m good at what I do. I couldn’t sell this thing. We would get people in there, and they would try to buy it, and then they would just back out last minute. The building was old. It was rough. It was tough. I couldn’t really finance it, because the guy is doing cash business, renting rooms by the hour. You go there, and there’s actual prostitutes wandering around. Looks like zombies from The Walking Dead, man, drug addicts. It’s rough, dude. It’s nasty. It’s called the sex motel.
So, I couldn’t sell this thing, man. So, I’m like, “Screw this. I got to do something here.” I’m like vested in this project. In this neighborhood, I owned a large apartment building across the street actually. So, I’m like, “Blah, blah, blah, blah, blah.” I decided we dropped listing. I buy the property from the guy. I removed the entire motel business from this thing like, “No motel. Get rid of that.” In the process of redeveloping this thing, turning it into apartments, we had in the motel, there is like I think 38 motel rooms. But there was also 10 apartments where he had people living.
So, we didn’t kick all of them out. We wanted to keep some folks still in there. We got rid of the motel business, got rid of the prostitutes, all that type of jazz. You need to keep some type of bodies in there, because you can’t just leave these buildings empty, guys. People will break in, and you’ll have to evict them, and they’ll strip the building down. You can’t just leave it totally empty. So, you need bodies. Even if they’re not the best bodies, sometimes bodies will help protect your asset. It’s a different ballgame, man. It’s a different ballgame when you’re in these rough neighborhoods.
But anyhoo, let’s try to put a bow on this. Long story short, a couple of the bodies that were in the building got into an argument with each other. I believe there’s a monetary dispute. I believe it was for a sum somewhere in the ballpark of $20, and one guy was slighted by the other guy. So, the other guy decided as a means to get even with him for the $20 being stolen from him, he was going to set his car on fire. The only thing he knew about the other guy’s car though was that it was a gold car. Problem was there is actually two gold cars in the parking lot. Apparently, two of our tenants had gold cars. So, what do you think happened to both of those cars, Whitney? Boom! Both cars up in smoke.
That’s the type of stuff, that happens. So, it’s not a simple and clean as people pay rent, they don’t pay rent, you evict them, you pay a little bit of money, and you move on. These are real people. They have real lives, real stories, and not all of them are going to run the straight and narrow. So that is why I like to do the Tenants From Hell Show. That’s why like to present this. That’s why I come out. I’m rough. I’m uncensored. I’m not PG. It’s a rated R business. I’m a rated R dude. I want to present to you guys exactly what’s happening.
If you guys can watch that stuff and after that stuff and after that, you’re like, “Hell, yeah, man. I’m still all systems are go,” then let’s get you into those D class assets, because you’re going to roll with us when those things are going to happen.
But if after the stories, you’re like, “Whoa. Whoa. I want nothing to do with that. That sounds terrible. There’s easier ways to make money,” now it makes sense why folks are paying $150,000 for a relatively similar amount of rent to avoid dealing with individuals like that.” You ain’t setting cars on fire in a B class neighborhood. You know what I’m saying?
[00:17:48] WS: Right. One thing I wanted to ask you about though, I hate that a tenant was like threatening your home and those things.
[00:17:54] JW: Yeah. Me too. So does my wife.
[00:17:56] WS: Yeah. I can imagine and just the fear in your house then, especially if you had kids as well and now you’re having to leave or traveling or something like that. But tell us again how did you keep your name off that next title from people? They may never find it again.
[00:18:10] JW: Well, I can’t tell you that, Whitney, because then you’ll be able to find me.
[00:18:13] WS: Well, I’m not asking to be able to find you, but I just want –
[00:18:16] JW: Well, what I can tell you is look, if you are a real estate investor and you are interested in investing in these lower-class neighborhoods, but that story shook you, it’s very easy for you to completely remain in the background. Like myself. First of all, thousands of tenants. I’ve dealt with thousands of tenants. I don’t want to scare anyone into a false panic here that that’s like incredibly common. It’s happened to me one time, and I’ve literally managed thousands of tenants. On top of that, I had several real estate related shows. I’m more or less one of the more prominent public figures in the Cleveland real estate scene.
So, if you are watching this as a regular Joe’s who’s going to have six rental units or six tenants, I would say your odds of that happening are very, very low. But if you want to make sure that you can prevent that 100% of the time and you never have to do it, the simple thing to do guys is just hire a property management firm or invest in the syndicate. My name, Holton-Wise, that’s my company. I’m James Wise. My name is on everything. So, we’re running a very large portfolio. We have hundreds of clients who are the owners. These tenants would have no idea who you are, because they look at Holton-Wise. Holton-Wise is who they deal with.
So that is a nice thing. If you’re investing in real estate, and you want to remain completely passive. You guys could go ahead and insert yourself a property manager that will be a lightning rod for all of the negative backlash that could potentially come, especially if you’re going to invest in higher-risk neighborhoods.
[00:19:45] WS: All right, James, I want to deviate just a little bit. I got a few questions for you before we run out of time, though. What’s a way that you’ve recently improved your business that we can all apply to ours?
[00:19:55] JW: Recently improve my business that you can apply to yours? Well, that’s kind of a little curveball, but I guess what I could say is automation, man. It’s 2019., We used to actually have our office hours open Monday through Saturday, 10:00 AM to 8:00 PM, but we started doing a lot more things online and really automated the rental payment, rental application process. I’m actually pretty happy. Early this year, we’re able to reduce those hours down to 1 to 5 days a week, as opposed to 10 to 8, 6 days a week.
So just don’t be afraid of technology, guys. That’s another thing. You guys are listening to this show. It’s 2019. You now have the ability to invest in neighborhoods like Cleveland, Ohio where you can get duplexes for 80 grand even if you live in Los Angeles, California, Portland, Oregon. We have shows like Whitney’s show out there, providing guests with the information. Don’t run from tech, guys. Tech is here, and utilize it to grow your businesses, whatever they may be.
[00:20:49] WS: What’s your best advice for taking care of investors?
[00:20:51] JW: My best advice is transparency, man. It’s transparency. I think I’ve demonstrated in the last 20 minutes with you that I don’t hold anything back. If you’re out there and you’re trying to grab investors, get them to purchase your product. Get them to invest. You need to explain to them the full risks. At the end of the day, there’s a lot of risks involved with the rental real estate business. But I think we can all agree the business has legs, and a lot of people have made a lot of money in the industry.
So, if you’re a person who’s trying to shield people from the negatives and only demonstrate the positives, you’re only hurting yourself. You’re only hurting your brand, because you’re going to get a lot of people that have felt like they were given the bait and switch. That’s not how you build a long-term business. So, present everything you can in the most transparent way possible. Give people the pros but also give them the cons and let them realize they have all the information at their disposal. Let them determine if that’s the right investment for them.
[00:21:41] WS: So, James, I really like your mindset and your drive and being able to just – Whatever is thrown at you, you were going to take care of it, especially being known for dealing and taking care of that class or property. It’s incredible. But what is the one thing that’s contributed to your success if you could pick one thing?
[00:21:57] JW: Well, I would say probably the ability to take a beating and get back up. You get a lot of folks that they’ll experience some of these things for the first time and they’re like, “Woof! All right. I’m done. Throw in the towel.” But we like a challenge. We really like a challenge. If you get punched in the face a few times, it’s almost like it becomes a personal challenge to try to outsmart the problem and like, “Okay, here’s an issue. How can we fix that?”
So, the ability just to face adversity and just keep pushing forward. Believe in what you’re doing. Believe that it’s going to work and have faith in yourself and your company that you can do it.
[00:22:33] WS: Great answer. And before we have to go though, tell the listeners how you like to give back.
[00:22:37] JW: I like to give back through education. Through education, guys. That’s what Holton Wise TV is all about. That’s what these shows are about. The Tenants From Hell Show is just one show on Holton Wise TV. We have several other shows. We have a show called the Investment Properties For Sale Show, where we will sell you guys properties right there on the show. But like anything we do, not only are we going to give you the pros, we’re also going to give you the cons. So, when we’re asking you to buy a property from us, we’re going to tell you things that are wrong with that property.
On top of that, we have another show. It’s called Ask James Wise. It’s a very popular show. What that is, is you just ask me a question. You ask me a question. I’ll make a video answering it. It’s totally free. You guys don’t have to pay for it. Anything about real estate, whatsoever guys. I’m an open book. You guys give me a question. I will answer that question. Educating investors, creating a better, smarter class of investor. All these products and all these shows and all this education, it’s out there for everyone. Please come watch the shows. They’re free to watch, of course. Then if you never buy a property through us, that’s totally fine with us. We want to help give you guys the tools and help make you guys better investors.
[00:23:37] WS: I appreciate you very much, James. Most of the guest that we have on the show are not showing that type of picture of the tenants that you’re having to deal with, and it’s definitely a big part of the business that people need to know about. I’m appreciative that folks like yourself that have really jumped in there and almost mastered working with that type of tenant class and class of property as well.
So, I appreciate you elaborating on numerous things like that and even elaborating on just the location and how that’s the first part of the screening process and how automation has helped you all improve. But tell the listeners, most importantly, how they can get in touch with you.
[00:24:08] JW: Yeah, guys. Easy way to get in touch with us. Of course, obviously subscribe to Holton Wise TV. You can find Holton Wise TV on YouTube. On top of that, you guys go to holtonwise.com. You can get on our daily email list. If you are interested in investing with us, you’d like to see our offerings, you can go ahead and subscribe to our mailing list in every single day at 1 PM Eastern Standard Time. We will email an offering with a full video episode of that property to you along with the ways that you can purchase that property and property management pricing and things of that nature thereafter.
[00:24:40] WS: Awesome. Thanks, James.
[00:24:42] JW: Hey, man. No problem.
[END OF INTERVIEW]
[00:24:43] WS: Don’t go yet. Thank you for listening to today’s episode. I would love it if you would go to iTunes right now and leave a rating and written review. I want to hear your feedback. It makes a big difference in getting the podcast out there. You can also go to the Real Estate Syndication Show on Facebook, so you can connect with me and we can also receive feedback and your questions there that you want me to answer on the show. Subscribe too, so you can get the latest episodes. Lastly, I want to keep you updated. So, head over to lifebridgecapital.com and sign up for the newsletter. If you’re interested in partnering with me, sign up on the contact us page, so you can talk to me directly. Have a blessed day, and I will talk to you tomorrow.
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