Why Seller Financing Still Wins in Land Investing and Note Deals | Dave Franecki

DAVE (00:00)
At this point in time in my career, I’m buying larger pieces of land in the Phoenix area or whatever makes sense on paper. I’m subdividing them and then reselling off, in this case, acre lots. My typical buyer is Hispanic, a migrant. They want to a piece of America. I’m selling, I’m offering the individual lots with seller financing.

Michelle Kesil (02:00)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, David Franecki, who is a real estate investor focusing on land and note investing. So really excited to have you here today, David.

DAVE (02:18)
Thank you. How are you?

Michelle Kesil (02:20)
Great, thank you so much. So let’s dive in. First off, for those not yet familiar with you and your work, can you share what your main focus is?

DAVE (02:30)
At this point in time in my career, I’m buying larger pieces of land in the Phoenix area or whatever makes sense on paper. I’m subdividing them and then reselling off, in this case, acre lots. My typical buyer is Hispanic, a migrant. They want to a piece of America. I’m selling, I’m offering the individual lots with seller financing.

So I’m taking back paper.

I’m getting a third down.

offering the seller financing, then I’ve got somebody in place available right away to buy that note. So in effect, within 30 days, I’m cashing out at par at the note value. It’s just rinse and repeat, rinse and repeat. Additionally, ⁓ what I’m finding is that, because I’m also a member of ASRIA, which is the Arizona Real Estate Investors Association.

And a lot of people were hurt, including myself in 08 with the crash. And there’s going to be a crash coming. It’s there. And with that, I’m helping people to get set up so they’ve got some strong asset protection. And then also to learn about investing, because everything I’m doing, I’m doing my Roth IRA right now. So it’s all tax free. people can rinse and repeat and do the same process in their Roth IRA using trusts and that type of thing.

Michelle Kesil (04:00)
Awesome. And so how did you get started with the land portion of your business?

DAVE (04:09)
That started back in the early 80s. I moved to Portland, Maine from Cincinnati. I found, you know, I was getting into agency and looking for a place to live from myself and my family. I found an old New England cape with a barn on 18 acres. I really didn’t have anything right to buy it, but I just negotiated that. So I got the owner to split up the parcel.

to the house, to an acre, acre and a quarter with the house and the barn, to close in six months with FHA. And then they took back paper on the balance. I split that up and eventually I got 17, 18 lots out of it and brokered those and it net window of time in 19, in the mid $80. I gross, or I netted $300,000 as a young guy.

So that was, and I just worked it through, rinse and repeat.

ended up working with other builders there, other developers, helping them with the same process and kept doing that until 1991 when the economy crashed. And then as far as the note portion, I was building and developing here in the early 2000s, I put up 30 or so homes in Tonopah, Arizona, and everything crashed, including me, and I became an REO agent and from that,

I was looking for a place to move to and I got into notes. So I bought into a program and I ended up buying and selling seller finance notes around the country. Also running a meetup and would get 50 or 60 people a month. People would come and listen to me every month. And I was teaching, coaching people on buying notes. We partnered and we bought notes around the country and then resold them.

So it’s pretty much just rinse and repeat in that same process. And with what’s coming up in the marketplace, seller financing, foreclosures, that type of thing is gonna be a strong element in the real estate market. ⁓ It’s gonna create a lot of hurt and a lot of opportunity, a ton of opportunity with seller financing.

Michelle Kesil (07:15)
Yeah. And how do you find the lands that you’re developing or selling?

DAVE (07:23)
Well, I’ve late, I’ve just been going into the multiple and looking for properties that have high days on market and make offers. So I’m looking for sellers that are motivated. The challenge that I’m having now is that a lot of the sellers are still of the mind. They have no clue of what’s happening. So if I can’t buy it, where it’s a really a motivated seller where if you pay a dollar,

for let’s say, then you gotta be able to sell it for two. If you can’t do that, it won’t work on paper. So that’s my challenge right now. The mailings are very, very expensive. Mostly you need slide dial to do dropping email messages or text messages in voicemails.

Michelle Kesil (08:10)
What would you say have been some of the main keys that have allowed your business to be able to grow and run successfully?

DAVE (08:19)
just staying with it and treating it like a business. That’s it. And I call it guerrilla marketing. I also work with an agent. We have a great arrangement, Wayne Hyatt. I’ll give him, I said, Wayne, I’ll give you 10%. And he looked at me like, you’re crazy. Why would you do that? But I said, so my comment is, well, I was an agent for 35 years.

So I know more than most agents, you be the listing agent, I’ll find the buyers and you co-broke with me. So Wayne is in effect doing his listing stuff. I’m doing all the running around, but it’s really just a matter of just staying with it. There’s no magic formula. It’s just rinse and repeat and just the experience.

Michelle Kesil (09:13)
And how do you find like the clients and the buyers?

DAVE (09:17)
Right now it’s been, I put up yellow and black signs, know, yellow background, black lettering, and I’ll just put them, the buyers are driving around the area, so they’ll see my name and they’ll call me. And I just work it through and just treat them like human beings. There’s enough magic formula here, just a matter of, I’ve always been a workaholic and just keep doing and keep doing and keep doing over and over and over again. There’s nothing magic about it.

Michelle Kesil (09:50)
All right. And so what are you most focused on solving or scaling to right now?

DAVE (09:59)
I want to keep it simple. At my age, I’m 76.

I’m not looking to be ⁓ a big dynamic developer or builder out there. I just want to keep it simple and just keep buying and selling lots, or buying larger parcels and subdividing them. Nothing fancy.

Michelle Kesil (10:53)
Yeah, and what have been some of the biggest obstacles or challenges that you see in this role.

DAVE (11:02)
The challenge now is just finding product that makes sense on paper. If I can find product as I find paper that makes sense on paper, it’s just, just, the surveyor is your best friend, you find out what goes on, what’s viable in that area, implement those strategies and just work them through. Again, it’s nothing fancy at all.

But you know, I could do cold calling and I’ve done door knocking and whatever else, but that’s not where I’m at. It’s keeping it simple. I could take it to planning boards and take larger parcels and break them up. I don’t want to go there. I just want to keep it very, very simple.

Michelle Kesil (11:44)
Yeah, absolutely. And why do you feel like the land and the notes are the area that you want to be focusing in?

DAVE (11:54)
Why? Because it’s simple. It’s straightforward.

Again, I can go into building homes, where the economy is going, there’s going be a crash. And this is not the time to be in debt. So I’m doing this all out of cash or with a partner. Doing it through trusts, doing it through my Roth IRA, mitigating my exposure.

Michelle Kesil (12:34)
Are there specific like creative solutions that you work with when people buy these lands or notes from you?

DAVE (12:43)
It’s just, again, it’s a function of, okay, Mr. Buyer, Mrs. Buyer, if you’re gonna buy this, are you gonna be paying cash? Or do you need, I’m almost offering seller financing. We like seller financing, okay. So the lots are selling for 30 or $40,000. Do you have 30 % to put down? Yes, okay. So they look at the house, I’m sorry, they look at the land, they like it.

They make their offer. The offer is going to be at list price because I’m offering seller financing.

They do their due diligence, whatever that is, and we close.

It’s very simple. There’s no outside loan officer. I’ve done loan officer work. I’m handling it all throughout the whole situation.

Michelle Kesil (13:40)
Yeah, amazing. And so what do you feel are the opportunities that you’re looking for right now? Are you looking to expand in other markets or just stay within the Arizona region?

DAVE (13:53)
I’ll go to other markets, but I’ve got to be careful because I’m not familiar with what the variables are in those other markets. I’ve got to be very, this is not a time to be overly aggressive. So right now I know Arizona and what’s there and I just, I’ll just work it here. Arizona is a big enough market. It’ll be, it’s fine. Again, it’s just a matter of finding people now that have a, are strongly motivated. If they don’t have motivation, there’s probably nothing to work with.

because they’re going to be working at elevated expectations of what their properties are worth and I’m not going to pay that.

So again, it’s very, very straightforward, very basic. It’s really real estate 101.

Michelle Kesil (14:32)
Right.

Yeah. What advice would you give to someone that’s earlier on in their career or just looking to get started in real estate?

DAVE (14:51)
Join the local RIA, network, network, network, partner with other seasoned investors. Get into their brain. When I got started in Portland, Maine,

in this case it was an agent, there was a bullpen, and there might have been 15 other agents there. It just so happened that all the people around me were all other old folks just like myself. I got into their brain.

I wanted their experience and their knowledge. And then I went out and did my own thing and worked it through. And if I had challenges, I would go to them and ask for their help. Same thing now. I met recently at the RIA on Monday at Asriya, I met with a former software executive. He used to run a company of $150 million company, 100 employees. He got fired.

He called me from my podcast that I had on Asria. He liked what I was saying. So he wanted to find out what I was doing. Basically the same thing that you and I are doing right now. And he’s working with another land development firm. He’s networking with people. He wants to get educated. It’s all about being educated, not being overly aggressive right now. And then finding a motivated sellers, partner with people that have

⁓ the money, the resources that you can can joint JV with and work from there. I asked him do you have a Roth IRA? He said, yep I do. Said then you’re all set, that’s all you gotta do.

Michelle Kesil (17:17)
Can you expand on that, how people can use their Roth IRA?

DAVE (17:21)
Sure. ⁓ Back in the day, was a member of note school and there was an attorney, ⁓ Jeff Watson, and now he’s just focusing in Roth IRAs. So you set up a Roth IRA.

You go through an IRA company.

In my case, I followed what he recommended. I set up a personal property trust, and then the personal property trust buys the land, and we put it into a title holding trust, and just work it through. And have my trustees, they manage everything for me, and we just take it through. It’s just A, B, C, D, pretty straightforward. I’m not gonna go into details online about how that’s all done, but if people should call me,

to get, if they want more information, go over it with them.

But it’s really, but using trust in your business, if you own things that where you don’t have any debt on them, make sure you put some debt on them, just some kind of lien to protect yourself. And just, cause with FinCEN that’s out there and probably coming back, again, it’s just protecting yourself. CYA, CYA. ⁓

Michelle Kesil (18:50)
Yeah, do you find that there’s a lot of misconceptions in the way that people need to protect their assets?

DAVE (18:58)
You’re ignorant. Yes. It’s just the function, it’s not a function of just having an LLC or using a Wyoming LLC. If not, you should be. Other attorneys like the idea of doing series LLCs where you stack everything up. The idea is to separate your assets under different ownership so that if there is any lawsuits that are coming out of it or you get into trouble, they can only go after one area. can’t pierce other pieces of your net worth.

Michelle Kesil (19:29)
Right? That makes sense. Is that something that you are educating and supporting people through?

DAVE (19:36)
I am, yes, yeah, I can help people with that, for sure.

Michelle Kesil (19:41)
What does that process look like? What does that process look like if someone comes to you for that support?

DAVE (19:42)
I’m sorry.

It all depends

upon the individual. First off, it’s a function of just having a conversation and see if we’re a good match. And other than that, there’d be monthly fees or joint venturing. Again, it’s something that would be discussed privately. It’s really all about jump on the phone, not doing a lot of texting, have the identification that way, working with people one-on-one.

and going that way. It’s no different than with ⁓ my meetup. didn’t do Zoom calls. We had personal interaction. That’s been lost in the marketplace. You can’t do business just with technology. It’s just not possible. Not the way I grew up.

Michelle Kesil (20:40)
Yeah, absolutely.

DAVE (20:41)
you

I’m not your age, so I’m not fluent, if you will, in the digital technology, but it’s still one on one. You sell by looking at people. So when I was doing the meetup, when COVID came out, everybody’s all paranoid, you got to wear a mask. And I thought, I’m not going to wear a mask. And the audience is wearing a mask. like, you cannot sell. I’m not going to talk. You can’t talk through a mask.

You can’t work with other people. If you can’t read their face, you can’t sell. Selling is interaction, getting into the head, making sure there’s something, there’s some commonality. That’s everything.

Michelle Kesil (21:27)
Absolutely. Is there somewhere that you learned these skills or was it mostly from your own experience?

DAVE (21:35)
Just going and doing and making mistakes, interacting with other people, other people like myself. I’ve got a website, Capstone Capital USA, it’s got a lot of that on that, a lot of this information on there. There’s another website, seller-cary.com that gets into seller financing. It’s got a lot of the links to my YouTube from the meetup. There’s five minute pieces in there.

But again, there’s no magic bullet. You just gotta go out and do it and get your hands dirty and make mistakes.

And at this point in time, I’m not doing larger deals. I’m keeping them small. Again, to keep my exposure low because of what’s coming in the economic scenario. The economy is going to crash, not just locally or nationally, internationally. The money system is going to crash. You’ve got to be protected and ready to go.

Get out of debt.

Very simple, partner with other people, maybe partner with somebody else as you’ve developed a relationship with, and they’re the funder. So that, again, that’s all individual. There’s no magic pill, it’s just doing it.

Michelle Kesil (23:02)
Yeah. Absolutely. Thank you for sharing.

DAVE (23:05)
What have you found with

other people you’ve interviewed? What’s their formula?

Michelle Kesil (23:10)
Everyone has a different story. It depends on the type of investments that they do. But yeah, the general pillars of taking action and networking are definitely a part of everyone’s story.

DAVE (23:21)
Yep,

yep. You gotta do it. It’s all the interaction. That’s everything.

Michelle Kesil (23:27)
Absolutely.

DAVE (23:30)
and just keep your exposure low.

That’s so important. And, you know, with the other, in 91, when everything crashed, there was no internet to speak of at that time. You weren’t aware of what was going on internationally. So you got caught short. But in 91, there was, the phone didn’t ring for a full year. So if you got debt, how are you gonna service that if you have no income? You can’t, right?

Michelle Kesil (23:34)
Awesome. Yep.

DAVE (24:03)
In 08, I got caught. There were 10 foreclosures behind me. I was more focused on building than watching the other things. Everything just stopped.

literally just stop.

So I became an REO agent. My primary provider of assets was Fannie Mae. And I sold 700 houses. But I did it by interacting with the asset managers, treating them professionally with respect and dignity.

I did very little as a buyer’s agent. As an agent, that’s a waste of time. It was always focusing on, if you want a magic pill, it’s focus on the product. Get the asset under control and have other people come to you.

Michelle Kesil (24:57)
Yeah, absolutely. Thank you for sharing. And before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

DAVE (25:07)
They can call me. I do pick up my phone. I mean, I don’t let it go to, I pick up every call. My phone number is 480-232-

5477 or they can email me at Dave@DaveFranecki FRANECKI .com ([email protected]) I’d recommend you go to my websites capstonecapitalUSA.com or seller-carry.com there’s a lot of information there you can you can you know go into the the the contact button if you will either way but but again call me

Like I said, I answered the phone. I’m in Phoenix, Arizona, so we’re running California time out here, because we don’t change. But it’s all a matter of interaction and calling. That’s everything.

Michelle Kesil (26:04)
Perfect, we’ll appreciate your time and your story. Thank you for being here.

DAVE (26:08)
Okay, all right, thank you, take care.

Michelle Kesil (26:11)
Of course, thank you. And for those tuning into the show, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Dave who are building real businesses. We’ll see you on our next episode.