How to Build a 7-Figure Real Estate Business in Under 2 Years
Hosts Brandon Hall and Thomas Castelli interview Chris Cammack of Cammack Estates. Chris is a 28-year-old self-made millionaire, serial entrepreneur, public speaker, business coach, and father from Fort Wayne, Indiana. In this episode, Chris lays out the secrets for how he built a profitable real estate business under today’s difficult market conditions.
Chris got his start in the real estate business in an unconventional way. Unlike most who start by flipping houses or wholesaling, Chris purchased a rental under contract by putting $10,000 down and seller-financed the rest. He paid the house off in just 6 months and purchased a flip-house, earning Chris a whopping $100,000 on his first project. He used the earnings to scale his business from there.
Chris’s strategy was simple. He would flip a house and use the profits to purchase another rental, and then another, and then another. Eventually, Chris was able to purchase a highly profitable 15-unit multi-family property. With this solid and profitable foundation, Chris’s business quickly snowballed into the 7-figure company it is today.
A Hands-On Approach to Real Estate
Chirs has now branched out into new-construction rentals, which provides a good deal of equity. Perhaps most impressively, Chris has been self-taught through this entire process. In fact, Chris went through no formal real-estate program, had no mentors, and yet he was able to build his business from the ground up with “sweat equity” and ingenuity alone. He learned in a very hands-on fashion, researching electrical wiring, woodworking, plumbing, and more.
Soon, Chris had an idea, he would attempt to increase the value of his own home by adding an addition by hand. This would be a test for him and an incredible learning experience that would ultimately give Chris the knowledge he would need to grow his business. After this hands-on experience, Chris was able to do most of the handiwork himself, saving tens of thousands of dollars by avoiding outsourcing. What’s more, Chris now had enough knowledge that he felt confident he could never be taken advantage of or overcharged.
After the successful completion of his home’s addition, Chris built a team and secured a COO, Joe Berghoff. Joe runs most of the company’s daily operations, including financials, budgeting, and reports, while Chris spends most of his time in the field. Building a strong team has been the foundation for success for Cammack Estates. With an all-hands-on-deck approach, much more can be accomplished than by tackling projects alone.
The Value of New Construction Rentals
When asked why he branched out into new construction projects, Chris says, “One: I’ve always been one to challenge myself. And two: I aim to differentiate myself from the competition.” Most people in the market today have a strong focus on wholesaling. However, Chris feels that exclusively wholesaling in today’s market is a mistake, because the market is too saturated. By
learning the ins and outs of new construction, Chris was able to not only stand out in the market but also secure generational wealth for his family.
Chris has come to prefer new constructions because it eliminates the risk for costly maintenance issues like replacing faulty furnaces, air conditioning units, or major appliances for at least ten years. He would rather build the units himself, thus establishing ultimate equity and preventing unexpected maintenance issues.
What’s more, Chris has never sold a new-construction. At the end of the day, true value comes in building large-scale rental portfolios. “We’re in this for generational wealth and legacy,” he says. “We are in this for longevity, not quick cash. There are so many advantages to holding onto the property. I have to be honest with you. If it were built on numbers, I’d probably be done already. I hit my financial goal (or what I thought it was at the time) within a couple of months of being in the industry. I never expected to be in the position I’m in now. So now it’s all about the end goal: generational wealth and legacy. But also, I want to impact other people’s lives by educating them on the possibilities in doing this.”
The Effects of Covid on the Real Estate Industry
Considering the strong foundation that Cammack Estates was built on, it should come as no surprise that Covid-19 had little to no effect on their company’s profitability. This is also due to the fact that Cammack Estates is mindful of portfolio diversification. They diversify their rental portfolios the way investors diversify stocks. Because of this, renters that may have taken advantage of Cammack Estates by refusing to pay their rent during Covid were the vast minority.
Portfolio diversification means many things to Chris and his team. They accept private payers, families on government subsidies, as well as people who have rent partly paid by government vouchers and partly out of pocket. This covers a lot of ground and ensures that rental payments will come in, no matter what economic circumstances arise. Additionally, Chris leveraged Covid as an opportunity to invest in land adjacent to a college. He plans to build student housing on this land, further diversifying his rental portfolio and further increasing profitability for Cammack Estates.
“But how do you know if a property is a good deal vs. a bad deal at this point?” queried Brandon Hall. “Well, we’ve got it pretty much all automated at this point. We plug everything into a dual analyzer, and if the numbers don’t make sense, we don’t try to force it whatsoever. A lot of our deals come to us off referrals and relationships. We hadn’t done any advertising at all before wholesaling. We did no commercials, mailers, or anything like that. We’ve been blessed in that aspect as well. We’ve been able to build a really great rapport in this small town. People realize we do good business and we do clean business. And we get the deals done.”
For anyone out there that might be interested in getting into the real-estate business, Chris has some helpful tips for you.
Firstly, make sure you implement systems and delegate tasks as you go along. Many people get so far along in their business that it becomes difficult for them to go back and document how their system works and what it looks like. Systematizing a business is key. You can’t just have a bunch of random tasks thrown together. It simply doesn’t work that way.
Secondly, take your time. Everybody wants instant gratification. This is exasperated by social media. It’s hard to see everyone flaunting their fancy cars and exotic vacations. However, none of these folks are showing what it takes to get there. And in reality, it takes a lot of hard work.
Thirdly, come up with your “why” and your “purpose”. Ask yourself two questions. What truly drives you? And what are you trying to accomplish? When you focus on your why and your purpose, the numbers will simply fall in line.
Based on the incredible success of Chris’s endeavors, it should come as no surprise that he’s done some research. His favorite audiobook when he needs some inspiration is “It’s All in Your Head” by rapper/artist, Russ. The book is about mindset and manifesting your ideal life through positivity and the law of attraction.
“I manifested all the things I have in my life right now 5 and 10 years ago. That brings me back to instant gratification. People want instant gratification, but you’ve got to put in the work for your dreams to come true.”
Tax Strategies for Real Estate Businesses:
1031 Exchange offers many benefits. As Chris explains, “For example, if you flip a $1,000,000 building, you don’t want to have to pay the capital gains tax on that, right? So let me go find something that’s cash flowing, and then turn around and roll it into that. In fact, the possibilities of the tax strategies that are available are simply unbelievable.” The Depreciation Schedule offers many benefits as well, along with Real-Estate Professional status, which helps to avoid any passive activity losses.
Inventory and forbearance are both very low right now due to Covid. Millions of people have been affected and, assuming they can’t pay their mortgages, they will be forced to put their houses up for sale. Subsequent foreclosures are expected to hit the market as soon as late 2021 or early 2022. With that said, Chris does not expect that this sudden increase in inventory will negatively affect his business.
Effects of Covid on Real Estate Markets
Because of Cammack Estate’s focus on rentals, their company will likely remain stable through these uncertain economic times. Furthermore, when people lose their houses, they often have no choice but to rent. So if anything, the upcoming inventory increase will likely be beneficial for rental companies - so much so that it’s likely the rental market will become extremely competitive. Experts have advised investing in rental properties in Q3 & Q4 of 2021. This is because of expected price increases in the rental market in 2022 that renters can take advantage of.
However, this positive impact will likely not be seen in the house-flipping market. This is why Chris only invests in properties with a good deal of equity. “Don’t shoot for the stars on the first deal,” Chris warns. “Don’t believe everything you hear on social media. Unfortunately, there are going to be a lot of people who are unprepared for the necessary adjustments when banks start foreclosing on those properties.”
“Things are getting out of control,” claims Chris. “The banks are lending too easy. I mean, they’re not taking this thing as seriously (in my opinion) as it’s going to be. I don’t think it’s going to be an ‘07-’08. And in fact, I wish I wasn’t just 28 years old. Because if I would have lived through that, I would have been buying anything I could get my hands on. I hope it doesn’t get that bad. But I think it’s going to definitely be a wake-up call the way Covid was. It’s like, okay, we really need to take our time. There is more to buying properties and rentals than watching a couple of YouTube videos.”
Appraisals Are Getting Cut
Recently, appraisals have been coming in as much as $20,000 less than expected. This bodes the question, are appraisers beginning to do this to protect themselves? Chris explains, “I think it all boils down to a lack of education. I think they’re also trying to adjust the market. I’ve learned that when someone is dealing with hard money loans and they don’t have private lending or the capital for themselves, or it’s not traditionally financed through a bank, they are more eager to take an offer if they get stuck in a deal.”
“Never be the first person to come into a neighborhood and try to make changes. I’ve been that guy. I’ve had an appraisal cut because I was the first one. They claimed they didn’t see my vision. But I’m like, look, I’ve got seven or eight other lots on this street, and I’m going to do the same exact thing. So no... I wouldn’t do that again.”
The Long Term Strength of Rental Investments
If your long-term goal is to buy and hold, a diverse rental portfolio is your best friend. In reality, markets may shift and prices may fluctuate, but as long as you are not over-leveraged -- as long as you can pay your mortgage at the end of the day, you’re safe. The only real deal-breaker for renters is over-leveraging, which can cause countless problems including forced refinancing, and sometimes even forced sales.
“Yes, so often people get overleveraged,” Chris comments. “Because they buy a rental property or a flip, and then they turn around and refinance it out. I think the bank lets you take out between 70%-80%. And I’m like, how are you cash-flowing? Well, you might cash-flow in today’s market, but during a downturn, you can’t cash-flow that way. So we absolutely never do that.
Want to Work With Chris Cammack? Here’s How to Contact Him:
Website: https://www.cammackestates.com
Email: contact@cammackestates.com
Instagram: @mr.cammack
TikTok: @TwoHacks
Facebook: https://www.facebook.com/CammackEstates/
YouTube: https://www.youtube.com/channel/UCZnRkNAfcqhRbjE5sTkmtEA
