Mike Cantu Joins Bruce Norris on the Real Estate Radio Show #361

Norris Bruce

Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder and money partner.

Norris Bruce
December 20, 2013
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Bruce Norris is joined this week by Mike Cantu. Mike is an entrepreneur who made his fortune buying homes below market value. He would either hold them as rentals or flip them as profit. He also works out of his home and keeps everything simple.

Bruce and Mike talked in the first segment about the accomplishments that have happened in the year. There was an era where one was building and creating building lots, then the music stopped and you did not have the right inventory. You had some challenges for a while. This is another one of those lessons in life regarding the best laid plans. He was introduced to the concept of timing when he worked in the market, and up to that point it did not really hit home. When he realized the economy dropped off a cliff, the music had stopped and he had more projects in place than he ever had in his life. This included three large development projects, a big sub-division, two condo projects, a dozen lot splits, and half a dozen spec homes. This all happened back in 1989.

Bruce wondered how long it took him to manage his way through everything. Mike said from the beginning of the downfall to the time he had officially cleaned up was almost 18 months. Every day he got up and was in mess cleaning-up mode. During 9 months out of the 19 he worked at a real estate type office where he had one of his large projects. He had to sell his stuff and could not count on anybody else. He figured any human who walked in would look at something he owned.

Mike once made a quote about a guy with money who talked about his unavailability of funds. Mike said what this referred to is as an agent, they are all assigned to a farm area. Mike had a very large farm area, and this guy owned about 80% of the farm. Mike wondered how he was able to amass this much land. He used to stop in the office all the time to mooch free coffee. Every time he came in, Mike would try to get him to list one of his parcels with him. He would always tell him he could not do it because all his money was tied up in cash. The last thing he needed was more cash.

There are times in the market when it is not a bad idea to not participate. This was especially true during the year when land was not so hot. Bruce asked Mike what he learned about himself during those 18 months that has held him in good stead. Mike said he learned what he was capable of doing. Things were overwhelming at the beginning, and the person who finished it was not the same person who started it. He found out what he was capable of, and conscious came into play too. He realized that a lot of people had entrusted him with their hard-earned money in hopes of return both of and on their principal as well as a better tomorrow. This was a big burden on him to make the people hold. It is very heavy to hold other people’s money, and Mike still has a big risk aversion to it to this day.

When you survived a downturn, you have a good memory for the next one and a whole new appreciation for other people’s money. When this one hit, lots of people had the opportunity to stick it out and either make it through or bail, rent out properties and not worry about the debt. Bruce asked Mike if he saw some of each of these sides play out where people did amazing things and stuck with it. Mike actually wondered if he was the Lone Ranger and questioned why he was even doing it. He saw lots of people walk away very early, and it was surprising. Nick Blackwell had an interesting statement regarding how he had pulled out a deed of trust, and on it was something about a promise to pay. Back in their development when things went downhill, he had asked Nick if they should file bankruptcy. This was when Mike got lectured and Nick got the verbiage on the promissory note about the promise to pay. Mike got the lecture about people’s hard-earned money being entrusted to them in hopes for a better tomorrow for them. This was the end of that discussion, and they cleaned up the mess.

Bruce asked Mike how important Nick Blackwell has been to his life. Mike said unbelievably important from many aspects. He was blessed to cross paths with him, although it was not on good terms when they first met. You can read and hear about a lot of things, but seeing and witnessing is an entirely different story. He witnessed first-hand sitting on the passenger seat of his old pickup truck his life and what he had accomplished. The main things he got was seeing part of it and getting him to explain how he did it. Mike had a role model walking in front of him, and he found out early on that he made $1,000 a day from his apartments. When Mike first heard this, at first he was shocked that he still worked. He wanted to get to know the guy better and duplicate what he did. The $1,000 was not easy today, but at the same time $1,000 a day was a lot at the time. Mike was working for $5 an hour and making $40 while he was making $1,000 before he even started working. At the time Mike was working half days, and it really didn’t matter whether he worked the first or second half.

After having first met on bad terms, Mike ran into Nick a year later at Connely’s and Nick asked Mike what he had been up to recently. Mike told him he was working in real estate, and Nick said he wanted to talk with him about it. Mike had a goal of free and clear, and Nick had a different opinion of that at the time. Mike said he loves the great umbrella of real estate because there are so many benefits under that umbrella as well as game plans and niches that you can do. Nick’s philosophy was that you always get long-term fixed rates advertising financing and you let complete strangers known as tenants pay these things off for you. There is nothing wrong with this program, but Mike wanted to expedite the program. Not only did he want the amortization, but he wanted everything and every extra dollar that came into his life to be applied to his debt. He wanted the debt gone because he wanted the benefit of the free and clear houses.

Bruce asked Mike how many people he flips to in a year. Mike said he needed to look back over the current year since he did not think he had hit the five mark. Mike said it is usually three or four people, and it is not always the same people. When he looks back at 2005, the guy who bought most of the wholesale deals had both hands raised and took most of everything. He has been out of the business since 2008. Bruce wondered how somebody makes the cut. Mike said there is a lot of criteria, but first and foremost is performance and your word. We don’t need a bunch of paperwork, you just give it or take it. From there it is performance, and you have to perform. You also have to make it easy and convenient for the person to do business with you.

Bruce then asked how people got off the list. Mike said you get off the list by not performing. This includes saying you will take it then changing your mind at the last minute. It could also include saying you will take it, then coming back for a different price and trying to better the price. In addition, it could include them saying they will take it, then attempting to sell it to somebody afterwards or substitute in another buyer for themselves. There are quite a few things that could go wrong there. Bruce asked if they can get back on once they have been taken off the list. Mike said there has only been one person put in the ice box who managed to thaw out and be put back on the list.

Bruce asked if finding properties in 2014 will be different than 2013. Mike said not for him since he did not do a single deal in 2013 out of the multiple listing. He did one deal last year out of the multiple listings, so that is certainly not where his deal source is. He said therefore it is back to the private party arena. Mike said his strategy will involve a lot of direct mail, typically involving absentee owners. He loves a good niche list, but he explained to his daughter that we can categorize everybody who owns a house into one or two categories. It is either owner occupied or non-owner occupied. From there you go down into the niche list, and it is the same thing. Each niche list is either owner-occupied or non-owner-occupied. Niche list primarily refers to a code enforcement list. You go down this list, and if they are non-owner occupied and on the code enforcement list they have already received the letter. However, it may be a timelier letter with a different message on it.

Bruce asked Mike how many renditions of this letter he has right now. Mike said he uses three different letters, but they are for different arenas. Bruce also wondered how different this letter is from five years ago. Mike said he has actually shortened it down, and he also helped a good friend of his get into the direct mail business. In his previous life, he was a journalist. Mike received copies of a man named Richard’s letters up in the Bay area, and he had some very good material in his where he hijacked a few sentences and paragraph. Right now there is about one basic letter on white paper per absentee market. The only change he made to it was dropping his email address since he never bought a house by way of email. What he noticed the most about the email responses was that they were either rude or wanted to be taken off the list. Mike saw they could hide behind a rude email rather than pick up the phone and say what is on their mind.

Mike does not usually answer calls live. They will normally go to his professional-sounding recorder. It used to just say to leave a message at the beep; then ten years ago he really cleaned it up. Now it says, “Please leave a message at the beep.” At this stage he does not have to capture every deal since he is not concerned about it to that extent. His attitude has always been that as long as he has projects going, then is perfectly content. He does not care what the rest of the world is doing. He is more concerned about his day to day pipeline of deals and keeping some contractors going. Mike said this game has changed tremendously over the years. The internet really changed everything.

Mike had a conversation the other day about values. They then got a little bit more specific until they talked about the high and low sales. Mike would say the street name, and he would throw out the addresses. The other guy had done his homework. People can look at Zillow and figure out a value, and Bruce wondered how hard it is to negotiate with somebody who is looking at a number and saying it is like an appraisal. Mike said in this guy’s case, he grabbed onto the Zillow that was a 183; and Mike was on multiple-listing value maps at 113. Mike told him he needed to compare notes with him. He suggested a couple other sites to him since the value map on Zillow was way off the map. Mike explained that Zillow can be your friend, or it can be your enemy. When it is his enemy, he refers to it as Guessow since they are pretty much guessing and not taking the lot size, historical value, quality, or construction into consideration. It is basically a square foot evaluation. This works for track homes but not in a custom home neighborhood.
Bruce asked Mike when he answers a phone call live, how often he makes an offer to the person. Mike said it depends, although this year it was most likely one out of ten calls. With the other nine, there is no indication of any flexibility. They either owe more than he is interested in or their opinion of value is way out in right field. Mike’s whole game is to take you to the same place a realtor would in a lot less time and have a small margin for surprise. When he gets the call from the person who is trying to save the commission, picking out the very top dollar is not going to work. He gets these calls from time to time, even receiving one the previous day. Another call was in regards to a first and second that was in a good neighborhood. Mike thought it was a $250 house, but rather it was a $270 first and a $30 second.

Bruce asked how often he gets calls from other investors. At this point he is like a clearing house. Mike said it is usually a couple times a month he receives a call saying what someone has for him. Mike even called Bruce himself regarding a middle man deal, and he said he would take it. Mike enjoys playing middle man, and he really gets a kick out of putting two good people together. He had a deal earlier this year with a student and his friend Jeff. The deal started getting skinny, and he just stepped out of it and made sure the two of them did business. When all the best settled, he said they each owed him lunch. He was thrilled since before he had run into a few problems, including title challenges. When everything settled, he was happy to see two good people do business.

Mike said occasionally someone will bring him something where either the numbers are not right or it is such a strange property that he has to be honest and tell them he cannot do anything with it. Going back a few years, Bruce said he remembered getting a phone call from Mike that he was asked to speak at the Jack Miller seminar. After the talk, Mike had a pretty cool response from the audience. After he received a standing ovation, he brought Bruce up to the stage with him. This was a major for him to get in front of 200 people for a few hours. He heard this is the number one fear for the American public and that more people would rather burn to death than do a speech. Mike said he would rather be the one doing the eulogy at a funeral than the one in the coffin. Once he got through his speech, he realized from a confidence level that this was a huge one. To this day, he still gets nervous speaking in front of people.

Bruce said when he hears Mike speak, more information per minute comes from him than any other speaker. Bruce thinks it is because he is still uncomfortable in a sense because he is funny and has lots of stories. Mike is an education fanatic, so when he is sitting in the audience the last thing he wants to hear is somebody winging it and making things up. It is not an hour he is taking up, but rather a cumulative hour with a whole lot of people. When you add all the hours per person, it could be four hundred hours if there are two hundred people there and you are there for two hours. For four hundred hours of the human race being used up, he wanted to deliver something good. Therefore, he is very conscious about what he says in public. Bruce wondered how many times he spoke in the past year, to which Mike said was zero.

He made a conscious effort to take the year off from doing any public speaking only because we were in his favorite market. It was a recovering market on the rise, and he thought he had deals to do. He also made the commitment that he was only going to work part time this year. Bruce said they were going to have a millionaire-maker this year, so Bruce hoped Mike could be one of the speakers at the event.

Bruce asked Mike if he still attends seminars, which he said he absolutely does. He went to two of Bruce’s as well as a couple of John Schaub’s. He is very picky on the education since there are a lot of people out there teaching. He really likes to learn from the real deal, somebody who teaches what they do through experience and had done it their entire life. He is picky, but his education is always a top goal.

Mike said his favorite trainer ever is Jack Miller. He sadly passed away four years ago, but Mike learned more from him than anyone. He went to his home office, looked at his Jack Miller library, and he felt very fortunate that he had 51 Jack Miller notebooks. He went to 51 of his seminars as well as heard him speak many more times. These were such a huge influence with life-changing information. Mike feels the same responsibility when he speaks, so Jack gave the industry the best shot that he could. One time he was looking at tax law in midnight at his son’s house. He thought there was a burglar in the house and went downstairs only to find his dad in his recliner with a sheet over him and a flashlight reading up on the tax code.

Mike has hundreds of books. In his home office alone he has what he calls the A Library, which includes around 500 books. In the garage is B Library, and in his garage is the C Library. The books that really influenced him included Richest Man in Babylon. This book talks about the rules of the gold and the laws of money. One of the first books that he read was Think and Grow Rich. He has been given several nice copies of it since then and has read it a dozen times. Every time he reads it, new things come out. From the real estate arena, he recommends one that really motivated him since he can relate to the man’s lifestyle and as a human. The book was Think Like a Tycoon by Bill Greene, which came out in the late 70s.

In the modern day world one of his favorite real estate books is The Millionaire Real Estate Investor by Gary Keller. This book covers retailing and wholesaling. In one chapter titled “Harvest A Million,” he knew this was where you sell everything and head off into the sunset. When he got to this chapter, it really floored him that it was about all the people who harvest $1 million in net rents every year. He discarded this chapter, and this was a game changer. Usually there are only a few people who you want to hang around with in the sense of having influence on your career. Mike has been one of those people for Bruce, and he is honored to be one of those people for him. We are all looking for the knowledge, but what Mike is really looking for at this point in the game is the wisdom.