Subject-To Deals, Pre-Foreclosures & 40% ROI with Kevin M. & Bill B.|Real Estate Investing Pros Show

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In this conversation, Bill and Kevin highlight the importance of networking and mentorship in real estate investing. They share personal experiences where connections with other investors led to successful deals, demonstrating how learning from others and seeking guidance can help navigate the complexities of investing and avoid costly mistakes.

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Kevin Mills (00:00)
don’t have time to get into the specifics right now, but I would encourage anybody, okay, open up their cell phone or open up their laptop, find a compound interest calculator. Okay, there’s a good app, it’s called The Calculator Store. Go into a compound interest calculator and like I said, Bill and I, get a 40 % return on our investments and

When people like 40 % that’s crazy. There’s no way. if you break it down, imagine you’re doing fix and flips. if you’re doing just a 20 % profit on a fix and flip and you’re doing five of them a year, okay, you’re making well over 40%.

Michelle Kesil (02:15)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by Kevin Mills and Bill Barnett, who I’m really excited to have on the show today, who are working on real estate investments, real estate development, and yeah, really excited to dive in with you guys.

Kevin Mills (02:40)
Thank you, we’re excited to be here.

Bill (02:40)
We’re the old timers.

Michelle Kesil (02:43)
Absolutely. I think our listeners are really going to take something away from how you’re approaching, understanding deals, working on sub two projects, what you’re doing with development and resorts. So yeah, we have a lot we can dive into.

Kevin Mills (02:57)
Thank

All right. So let’s talk about subject two, because everybody likes subject two. Even if you are a seasoned investor, a subject two deal is going to be one that’s going to be enticing for you. They are not necessarily that easy to come by. let’s start with really, since Bill’s loving them right now, let’s start with how, Bill, how do you start looking for subject twos as far as running that

through a filter to where they’re falling into your lap. Because one of the things that we talked about before you got on was if there was some sort of a system that could just establish the properties that we’re interested in and dump them into our lap and then, you know, aggregate them. Do you have a system that you’re using for that?

Bill (03:44)
Sure. Every county around the country, especially if you live in any kind of metropolitan area whatsoever, will have somebody that is selling foreclosure and pre-foreclosure lists that will go to the courthouse and gather that information and then electronically redistribute it. And so I like buying those to look for pre-foreclosure because sub two is really a pre-foreclosure.

strategy is not a foreclosure strategy, it’s a pre-foreclosure strategy. So I’m always looking for properties in the pre-foreclosure environment because Sub2 is such a great way to move forward in the game. So that’s where I fish, if you will, or farm that market is in pre-foreclosure. It’s been about 50 bucks, 60 bucks a month for my counting, for my home counting. So I’ve seen them up to about $100, but that’s

That’s pretty small peanuts when you get one deal out of it. And as Kevin said, they are ⁓ fewer and farther between. So it’s a lot more legwork in it, but it’s there typically very good deals if you structure them correctly.

Kevin Mills (05:43)
And a lot of it has to do with the market, what we’re looking at in the market at any given time. So myself, I like to just put the word out there. People bring deals to real estate investors if they know you’re a real estate investor. Hey, I know so-and-so they’re having an issue with this or I know so-and-so they’d really like to do that. ⁓ And prior to 2007-2008, I actually ran ads in Craigslist, newspapers, everywhere else, coast to coast, letting people know that if they were interested in

getting rid of their property, stepping out of their property, stepping out of the liability, you know, and walking away from it to give me a call. And I would put together subject to and subject to basically means subject to the underlying loan staying in place until we decide to either flip it to another owner or to flip it to ourselves and put it in our name. So during that period of time, 2007, 2008, as you can imagine, I had a lot of people contacting me. We bought

houses and condos in Boston, here in South Florida and in California, all over the place, tons of them in Texas for that matter. ⁓ I have a house in Frisco that I still have that we acquired subject to. And we basically worked with the homeowner, the person who was on the lien, sorry, the person who was on the title for the property, and then worked with the lien holder, which is the bank who has the note, to back then we were modifying mortgages.

so that we were able to stay in there. So we’re modifying the margin of getting it caught up. Now that’s an important, an important aspect here. You need to get it caught up and it has to make sense for you. You have to get it caught up with the lender in order for them to have any kind of motivation to start discussing anything with you. Okay. But you have to keep in mind a lot of these people, they’ve found these houses for 10, 15 years. All right. They have equity in them. They may not be able to make those monthly payments.

Bill (07:27)
you

What?

Kevin Mills (07:41)
but we can go in and we can pull equity out of that property. Oftentimes, you know, refinance it on a better loan and work something out with the bank to where they’re able to write off a loss. So we’ve acquired a property with very little money into, we’re not putting 20 % down on these properties. We’re putting thousands of dollars into these properties. And then while that process is happening,

We have control over that property due to a subject to agreement that we put together with the owners of that property. Finding the properties though, that’s, that’s the challenge and Bill likes Bill likes foreclosures and that is what, is, what is working best for everybody. But I have literally had people bring houses to me because they thought they were haunted. I’ve had people bring houses to me because they inherited them and they, weren’t in that, they weren’t in that area. They just weren’t interested in doing it. You know, they inherited the house, but they also inherited the payments.

They don’t want the payments, you know, they’d rather walk away from the payments with a few thousand dollars in their pocket than have to figure out what they’re going to do with this house on the other side of the country. So there are all kinds of different opportunities out there. The best thing is to put yourself out there. So people are bringing deals to you. And then if you want to work in a specific market, like Bill works in his market where he is, he’s in the Dallas Fort Worth area. He’s buying, he’s buying those leads from, ⁓

Dallas County and from Tarrant County so that he knows what’s going on because every time somebody goes into default for a foreclosure, they have to file that with the county because it’s a a legal action. So they have to file that with the county. So the county knows that somebody aggregates those lists on a weekly basis and they deliver to Bill’s email and he sits there and he flips through and looks for ones that make sense. There are also sites, foreclosures.com and other sites that you can, you can

Bill (09:27)
Mm-hmm.

Kevin Mills (09:35)
get a membership for and you can choose different counties, different cities for that. And they not only provide a list for you, they actually have notifications that will pop up for things that you normally look at. So if you’re looking at, say, condos in Glendale, California, when condo in Glendale, California comes up, that notification will come up and let you know that it’s there.

Michelle Kesil (10:32)
Amazing. Thank you for sharing that. That’s a really helpful strategy. You just mentioned that there’s a piece of people coming to you and bringing the deals to you. What’s your like networking strategy or marketing strategy in order to get to that space?

Kevin Mills (10:50)
Well, as Bill and I can both unfortunately attest, we’ve been in this business for a long time. So a lot of people know us. I used to have a real estate club that I set up back in the nineties. It was called DREP, the Directed Real Estate Professionals. And when I would travel giving educational seminars, different places, I would let people know about DREP and help them set up a DREP club in whatever city they were in. So prior to COVID, we had DREP clubs all across the country.

During COVID, people weren’t allowed to meet in person. People weren’t allowed to. Some of them went online and did it. Some of them decided to just take it offline and then go back again after COVID. After COVID, I was involved in other projects and I didn’t get back into it. I didn’t develop any more DREP clubs. But one of the things that I would do when I would travel is I would try to make a time to go and meet with the people who were in that DREP club.

for those particular cities. So a lot of people had my face as, hey, you know what? Let me see if Kevin can do it. And it’s the same thing. When you’re out there, what’s that?

Bill (11:57)
scary thought.

scary thought.

Kevin Mills (12:02)
I know. Imagine my face in your mind. A lot of times when we talk to real estate agents and we talk to people who are out there in the community in this business, they remember, they keep that card and you may give somebody a card and may not hear from them for three or four or five years and all of you get a phone call. Hey, do you remember me? I’m so and so. I showed you such and such property five years ago. I have somebody who, whatever the situation is. ⁓

usually related to whatever we told them. So everybody that you speak to in the real estate industry at all agents, brokers, ⁓ bankers, mortgage, anybody, let them know my name is Kevin. My name is whatever it is I’m interested in. And then don’t have a laundry list. Don’t have a grocery list of different things that you’re interested in. Have three different things that you want to focus on. I am interested in low income residential properties. I am interested in

vacation properties. I am interested in anybody who is in a situation that they need to get out of that they need help to get out of. Let them know. Write that on the back of your card. Put that on the front of your business card. Leave it with every single agent that you talk to. I’ve talked to agents at restaurants and I’ll give them my card and I’ll tell them that. I’ve talked to agents waiting in line at the grocery store and I’ll give them my card and I’ll tell them that. And no, I send out

a hundred carbs and I may get responses from three of them, but that’s still a good response. You know, and if, as Bill said, if somebody’s calling you and they’re saying, Hey, I have something that I might think would be a deal, you know, then it’s paid off. The effort is paid off. The time is paid off. And then I make sure that I take care of that person because that person maybe didn’t give it a second thought until like, you know what? I’m to call this guy because he said this. And I can’t tell you how many times people just didn’t even know who I was.

but I gave them a car. They’re a real estate agent. And then they called and I got a deal done. And then all of sudden a pipeline opened up. They’re like, you know what? This guy’s paying me. I’m going go out and I’m going to start looking for these types of deals that I can send to him because I know that if the criteria is this, this, and this, he’s going to do the deal. So now you’ve got this army of people who are working out there that get paid on, on performance that are out there doing your bidding.

And when you do that for five years, 10 years, 30 plus years in Bill and I’s case, you’ve got a pretty big army.

Bill (15:11)
which is really helpful with the new real estate laws with the relationship you have to have if you’re dealing with an MLS agent, you literally are tied to that agent for a specific period of time anywhere in that market. I was going to Washington DC to do some property here a few weeks ago and I jumped on realtor.com to find an agent to work with and they responded to me, you already have an agent.

Kevin Mills (15:11)
you

Bill (15:40)
I’m like, no, that agent was in Sacramento, California. And I’m pretty certain they don’t want to hop on a plane to fly to DC to show me property there in a state they’re not licensed with anyway. it’s a really, ⁓ the market changed when the law changed on our relationship with real estate agents. So it makes that networking even way more important than it has been in the past. So when you’re new,

you’re gonna have to do a lot more work. You gotta do a lot more leg work when you’re new to get your name, get your face out there and just let people know this is what I do. I give everybody you meet period a business card that lets them know you’re an investor and that’s gonna help a ton.

Kevin Mills (16:27)
Yeah. Don’t be afraid to do the work, but by the same token, learn how to work smart, because if you’re working smart, you’re not having to work harder. So one of the things that bothers me, Grant Cardone’s book 10X, okay. He tells you to go out there and work 10 times harder, do everything 10 times harder, do everything 10 times more. I disagree. I say, do everything 10 times smarter and you don’t have to work 10 times harder. If you find the smart way to do it,

And it may, it may take you some hard work to figure that out. Okay. But work smarter, have processes. We talked about processes before we, you know, while we were just talking before the show, have processes and it could be anything. It could be something that you use for your own digestion and an Excel sheet. can be, I always speak with so-and-so mentor before I do this type of a deal. And Bill and I are really big on having mentors.

You don’t have to have just one mentor. You can have a mentor who’s really strong in say, multifamily residential, and you can have another mentor who’s strong in say commercial. Talk to those people, get their thoughts. A lot of times you’ll find once you’ve done this, they’re in full agreement with you. And that gives you even more confidence. When you talk to somebody who’s been in the business 20 years longer than you, and they’re like, I love that deal. That’s an awesome deal. If you don’t want to do that, I’ll take it. Okay.

That gives you a lot of peace of mind and a lot of confidence and you go out there and you jump into this deal because you know somebody else would do it. Or you buy a lot of times you’ll have a partner. If you don’t for sure know what you’re doing, partner with one of those mentors. Partner with somebody else who’s done that before. If you’ve got a good deal, that is money in the bank. If you don’t do that deal, you don’t get that money and neither does somebody who that you partner with.

Michelle Kesil (18:16)
Yeah, I love that advice. Can you share an example of when in your business you worked smarter, not harder? Like what does that actually look like?

Kevin Mills (18:25)
Bill, you want to go first?

Bill (18:27)
Sure. ⁓ If you get to know other investors, you’re going to find that one of the things that will happen is they will come to you if they get in over their head, which happens a lot, especially with people that are relatively new in the business. They jump out and want to do something on their own instead of getting proper training. And then they get in over their head on the deal and they’ll pick the phone up and say, Hey, you want to take a look at this? ⁓ And the last

Gosh, six or seven deals that I’ve done, four of them came out of just that right there. So I picked up property where somebody didn’t want to get educated. And of course they got educated by the market. They didn’t want to spend the time and the money to do, get the education themselves. And so they ended up doing wrong things, overpaying for property and had to sell it off to be able to keep them getting in.

I’m going bankruptcy and so I ended up buying those properties from them. So that happened from a network though. That’s how you end up getting deals like that is making sure that you get out to the real estate investment clubs, say hello. Every major city, shoot, minor cities ⁓ got a real estate investment club. Find out where it is. Get out there, get your face, your name out, meet some people, meet other investors and you’ll find some things that help shortcut.

being able to do properties.

Kevin Mills (19:57)
Yeah, without a doubt, building network, networks are very important. And for myself personally, I’ve been investing in low income multifamily for decades. So in the markets where I invest, I have agents who I work with on a regular basis. have property managers that I work with on a regular basis. They contact me all the time and they let me know, hey, there’s a property such and such, you know, that might make sense to you. Remember we’re talking about processes.

they actually know what I’m looking for. So they’ll call me and they’ll say, Hey, Kevin, this property is grossing, whatever, or this property could gross because it’s not being managed. It’s got a lot of vacancies and there’s no reason for it. know? So having that type of network is great. As far as me as a person, I rely on that. As far as my business goes, I have multiple different, I’ve got more than 10 different people, but to just use a scenario, I have 10 different people who are involved in 10 different types of pursuits for real estate.

So instead of me having to do everything in land development, instead of me having to do everything for golf courses, instead of me having to do everything for hospitality, I have different department heads that do each one of those. I interface with them. So my job is to interface with 10 different people who are interfacing with 20, 30 different moving parts. So instead of me having to deal with 2000 moving parts across those 10 people, I’m able to deal with 10 people. ⁓

Bill (21:19)
the airport.

Kevin Mills (21:22)
When you first start out, you’re not able to do that, which is why I tell people, don’t just put together a laundry list of things that you want to do. Make that part of your goals. Make that a goal by such and such time I want to be doing commercial, by such and such time I want to be doing whatever. Don’t just go out and say, I’m a real estate investor. If it makes sense, I’ll do it. Because you know what? If you don’t know what you’re doing, it’s going to eat your lunch. Find one thing and get good at it. And then if you want to expand your wings, go ahead and do that from there.

Find one thing that you’re good at. So once you’ve done that and you start getting money from that, then you can go ahead and you can pay somebody to start doing what you need to do. Property management. I could, I could talk property management inside and out. can tell you what you need to do, what you shouldn’t do, but you know what? I hate it. I hate property management. I would rather pay somebody to do property management than do it myself. It is worth the up to 10 % of gross rents.

that it’s going to cost for me to pay somebody so I don’t have to deal with it. Think about what we just talked about with having 10 different department heads to deal with. Imagine I’ve got 30, 40, 50 different buildings and we have more than that, but we have 50 different buildings and I’ve got just 10 residents in each one of them. Now I’m dealing with 5,000 residents who maybe laid on the rent or maybe have a leak in their roof or their tub isn’t working or whatever else it is.

I don’t have the time for that. It is worth it for me to take that off my plate by paying somebody to do that. It is worth it for me to pay a department head to be in charge of a different strategy and bring those strategies into the company. Because you know what, if they’re not performing, they’re not getting paid. They get a base salary, but they get bonuses. But you know what, if they’re not performing, they’re not even going to get that base salary because they’re going to get replaced with somebody else who can. So

start having a system, start having a support network, whether it’s people that you’re tapping into organically, like through real estate clubs, or whether it’s people you’re bringing onto your team to help you accomplish what you want to accomplish. I know there’s a lot of people who bring deals to me. Okay. They actually use the virtual assistance like that you can get out of the Philippines and out of the other, know, and they have them doing cold calls. They’re cold calling.

on expired listings. They’re cold calling a certain demographic that they’re trying to find properties for. And it’s costing like $7 an hour or $8 an hour. If you do one deal and you’ve done that for a month, you’re still making your money back plus a profit. And you’re not having to do all that cold calling. Somebody else is doing that cold calling. They’re happy to have that job. Meanwhile, you can do something else that’s going to be a better value added.

task for helping you accomplish what you want to accomplish.

Michelle Kesil (24:21)
Yeah, thank you so much for sharing that. think that’s really good advice and allows people to stay in their zone of genius while still getting those tasks done that need to get done.

Kevin Mills (24:22)
Yeah.

Absolutely. Anything to add,

Bill (24:38)
Hey, if you’re to get started,

I think you need to learn the basics of fix and flip because it can teach you whether you want to do wholesale, whatever else you want to in the business. If you understand the basics of this fix and flip, you’ve got a solid foundation to build your business on.

Kevin Mills (24:59)
We

don’t have time to get into the specifics right now, but I would encourage anybody, okay, open up their cell phone or open up their laptop, find a compound interest calculator. Okay, there’s a good app, it’s called The Calculator Store. Go into a compound interest calculator and like I said, Bill and I, get a 40 % return on our investments and

When people like 40 % that’s crazy. There’s no way. if you break it down, imagine you’re doing fix and flips. if you’re doing just a 20 % profit on a fix and flip and you’re doing five of them a year, okay, you’re making well over 40%.

If you have buy and hold strategies and vacation properties, I have vacation properties that are earning 200 % on my annual return on investment. Remember, I’m not paying cash for these. I’m putting

20 % down on these properties. I’m leveraging these properties to acquire them, but take what you think ideally you can get as your return on investment. Put that as your interest, put a term of 10 years, put a term of 15 years. Okay. And it’ll break it down how much you’re making every single year on principal, how much you’re making every single year on interest. I think you’d be surprised. You can invest as little as $50,000 and have

millions of dollars in profit at 11 years with the 40 % return on investment. So that means you could build a portfolio over 10 years and never do anything else. Only take, only take your payments from those investments in your portfolio. And you’re making over a million dollars from year 11 on without doing anything else. And that’s not calculating.

⁓ increases in rents, that’s not calculating increases in equity, that’s not calculating any of that, that’s just a bare bones compound interest. This is what you’re going to make. And in order for that to work, you have to reinvest your, your income back into that strategy. But if you need to have money to live on, do that, do one strategy where you’re reinvesting and another strategy where you’re living day to day. Okay. That one strategy where you’re reinvesting your money back into

Again, will turn into it’s well over a million dollars that you’re going to have cash in your pocket, pre-tax cash in your pocket every single year, just from what your portfolio is delivering back to you. Think about the people who, I mean, we’re investors, we’re individual investors, but think about the businesses that get into the business of real estate investing. It’s hedge funds. It’s companies like Zillow, you know, it’s the Murdochs, you know.

It’s Bill Gates. Bill Gates has bought up billions of dollars worth of real estate. Okay. Would these people be doing it if it didn’t make sense? Now? Yes, we know real estate’s a good return on investment, but how you manage your portfolio, how you manage those investments is key. One of the things that most of us start off doing flips and I started off doing flips too. One of the things I realized though, from doing a flip was

If I want another paycheck, as soon as I sell that property, I got to be out there looking for another flip and I got to be out there looking for another flip and another flip. If you like doing that, and I know Bill loves doing that, and I like doing it every once in a while too. If you like doing that, make that part of your strategy, but start looking at it. Bill does this as well. Building portfolio. Okay. It’s we call it mailbox money. Okay. It’s money in, in the mailbox or now it’s direct deposit, but back when Bill and I started, it was mailbox money. ⁓

It’s money in direct deposit that’s coming to you every single month and rents don’t go down rents go up. So if I’m doing a deal and I’m cash flowing, I put that deal together. 10 years later, I’m making even more 20 years later, I’m making even more. And again, that’s the value of having a portfolio as well. You can have one set.

Bill (28:50)
you

you

Kevin Mills (29:08)
of strategies that you do as a portfolio and another set that you do is fix and flips. Fix and flips make great money. We just talked about it. If you’re making a 20 % return on your investment and you’re doing five in a year, which you could easily do on that same money, you’re making a nice investment, a nice profit. Sorry.

Michelle Kesil (29:26)
Yeah, amazing. Thank you so much for sharing that. think that’s really good advice for people to get started. So before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

Bill (29:40)
Go ahead, Tim.

Kevin Mills (29:41)
Bill?

Well, let me tell you real quick. Bill and I did a podcast. We’re talking about maybe doing it again. It was called the Investor Guys Podcast. You can find it at theinvestorguyspodcast.com. There’s 200 plus episodes there now. Just like this, we talked about real estate. ⁓ If you guys want to reach out to me, ⁓ can send, check out, best thing is just check out ⁓ my website. It is reallykevin.com. That’s reallykevin.com or you can go to

kevinmillsnow.com. Contact information is there and bill.

Bill (30:15)
Best way to get a hold of me is jump on the site 40, the number 40, 40 ROI, return on investment, 40ROI.com.

Michelle Kesil (30:25)
Well, I appreciate your time, your story, and your perspective. Thank you guys for being here.

Bill (30:31)
Thanks, Michelle.

Kevin Mills (30:32)
Thank you, Michelle. You have a great day. Thanks.

Michelle Kesil (30:33)
Of course. Of course.

Bill (30:35)
See you then.

Michelle Kesil (30:36)
And for the listeners tuning in, if you got value, make sure you’ve subscribed. We’ve got more conversations coming with operators that are building real businesses. We’ll see you on our next episode.

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Subject-To Deals, Pre-Foreclosures & 40% ROI with Kevin M. & Bill B.|Real Estate Investing Pros Show

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