Monetizing Every Real Estate Lead

Mike Hambright (00:00.782)
Hey, everyone. Welcome back to the show. Today I’m here with Jon Iannotti and we’re going to be talking about how to monetize every every lead. Try to monetize every lead. And Jon is a deal architect. And that’s what he teaches and that’s what he practices. We’re going to talk about a lot of different ways of monetize leads that you might not be using right now. A little side note, Jon was on my Flip Nerd podcast a long time ago. I always my admin prepare some show notes for me. So it was almost 11 years ago. Hard to believe we’re running the podcast for, guess, coming up on 13 years. So

JON IANNOTTI (00:20.111)
Crazy.

Mike Hambright (00:30.198)
as a long time ago. A lot of things have happened in the world since since that last time.

JON IANNOTTI (00:31.661)
Man it’s…

JON IANNOTTI (00:35.823)
It seems like yesterday, you know, I mean, it’s crazy. When you told me the date, I’m like, what? But thanks for having me on.

Mike Hambright (00:38.189)
Yeah.

Mike Hambright (00:42.262)
Yeah, yeah. Yeah, good to see you. So I’m excited to talk about the show today. I’m always intrigued by creative acquisitions and using creative strategies for making deals happen. And before we jump in though, Jon, you’ve got a rich history. Maybe tell us about your background a little bit.

JON IANNOTTI (01:04.001)
wow, I’ve had several lives. I started out years ago as a policeman, worked my way up to chief of police and I loved what I did. I loved it. But I had two little kids, wife, and I was making very little money, very little. In fact, a wholesale deal today could probably double my salary, what I made as a policeman.

Mike Hambright (01:06.904)
Hahaha

JON IANNOTTI (01:33.103)
I got out of that, went into a steel mill in Western Pennsylvania and spent about 24 years in there. I hated every single day of it. I enjoyed the people, but I didn’t like being there. It wasn’t me. And I felt I needed to be doing something. Well, it just so happened.

Mike Hambright (01:53.511)
And was that to make more money essentially or?

JON IANNOTTI (01:56.717)
Well, I went into the mill to make more money. I mean, pushing a broom in the mill, made two and a half times what I was making as a policeman. So it was crazy. But again, I loved what I did as a policeman and I give all my support to police today. I mean, it’s just, I would have loved to have continued that, but I needed more income with the young family. So we went into the mill and then

Mike Hambright (02:04.364)
Wow. Yeah.

JON IANNOTTI (02:25.474)
Yeah, I just, like I said, I didn’t care for being there. So I felt like I needed to be doing something that I would help some people like I was with policing. So I actually got one of those late night infomercials, you know, and I bought the program and, that was old Carlton sheets. And they were seat, no, they were cassettes, cassettes.

Mike Hambright (02:46.214)
Who was it back then?

Okay. Yep.

Mm-hmm. Yeah.

JON IANNOTTI (02:54.594)
and I actually wore the cassettes out listening to them and finally did a deal his way and I said, there’s got to be something different. And then I heard about a RIA in Pittsburgh. So I went to the Pittsburgh RIA and those guys, said, you got to go to Columbus, Ohio. There’s this big convention coming up in two weeks. so my wife and I said, let’s go.

So we went there, they had 11 national speakers and we came home with 11 programs. We bought everything. We were information sponges. We wanted to learn everything we could about real estate. So it took me about three, four months to get through the materials and I tweaked a few things and used a little bit of this, a little bit of that and did a deal.

Mike Hambright (03:26.306)
Wow.

JON IANNOTTI (03:47.437)
And I think I made like $30,000 on that first deal. And it’s like, whoa, hey, this is pretty cool. So then it just started getting better and better. Every day I’d get out of work, I’d go talk to sellers and show properties and what have you. And before you know it, I was telling my wife, said, you know what? It’s costing us money, me going to work every day. And she said, well, quit. Well, she only had to say that one time.

Mike Hambright (04:14.562)
Hahaha.

JON IANNOTTI (04:16.75)
I immediately got in my vehicle, went down to the mill and I said, guys, I’m done. See you later by. They said, ah, you’ll be back. And I said, I don’t think so. My first week out of the steel mill, I made, I had three closings. made, uh, 35,000, 38,000 and 32,000. And I’m like, I think we’ll be okay. Yeah, I’ll be okay. So from there, it just kept getting bigger and bigger. We keep, keep going to, uh,

Mike Hambright (04:38.648)
Yeah.

JON IANNOTTI (04:45.687)
trainings we still go to trainings because you never know what you might learn you know

Mike Hambright (04:52.11)
Yeah, you’ve got to be a lifelong student in this business, right? Really, in any business.

JON IANNOTTI (04:54.754)
Yeah. yeah. I mean, we were just at one probably a month ago and it was like, hmm, this is different. We like this stuff. So we’re going to implement some of that into what we’re teaching as well. But, yeah, that’s the background. you know, I was the dog and pony show for 15 years for one of the big gurus out there.

because we were doing deals where other people weren’t. over the years, we’ve probably, and I bought my first place in 1978, I think it was. Since then, we’ve several thousand properties over the years. In fact, the number is so big, I don’t even like to say it because it doesn’t sound real, but we’ve done a ton of deals.

JON IANNOTTI (05:55.159)
In 2014, we actually were approached to go out and start teaching. Well, we have been approached since 2003, and we kept saying, nah, we don’t want to do that. We’re doing deals. We don’t want to teach. And we kind of saw what was going on with the speaking industry, and it just wasn’t us. It just didn’t sit right. 2014…

They asked again and I said to my wife Stephanie, said, look, if we’re to do this, we’re going to do it our way, not the typical guru way. And so we created a system. I originally created a system that I gave to my mentor. It was called ACT and that’s agreeable contract terms. That was for

motivated sellers. And then 2014, the market changed again, which we know everything is cyclical. And we created what we call React, which is reverse engineered agreeable contract terms. And we did that for probably seven years, eight, maybe eight. And then,

we decided let’s marry the two programs together, ACT and REACT, and now we call it CATS, which is Complete Agreeable Terms System. You know, it just, we give everybody everything that we have, that we’ve learned over the years. In our system, the main complaint I have about our system, there’s way too much information in here.

And it’s like, well, it’s, you know, 30, 40 years. Yeah. That’s it. And again, as the markets change, we change and we’ll put that into the system and they get it. They don’t have to pay extra. Like right now we’ve spent the past year, year and a half building our short sale component to the system. And we’re in the process now of putting in our

Mike Hambright (07:47.766)
It’s complete. The first letter is C, complete.

JON IANNOTTI (08:14.774)
note buying component to the system. So, and they’ll get that. They don’t have to pay anything extra. They’re not going to pay an astronomical price to get into the system. I mean, we could, we could charge that, but you know, we’re, we’re to the point that give back, you know, it’s, it’s not all take. You got to give back once in a while. So we made our system complete. We made it.

inexpensive compared to other systems and it’s lifetime. Another thing they get is a once a month call with me and we do a big zoom call and everybody gets on we discuss what’s going on what we’re seeing what we’re doing if they have deals they’re working and what they what they want to discuss you know any questions they may have they have

Email access to me, probably 98 out of 100 of the emails that are answered by us is by me. If it’s not, if I’m on a plane or something, then my assistant will pick up in the slack. But it’s, can email me anytime and I usually get back to them within half an hour to an hour at the most. And, you know, we’re very, very hands on with our members.

Mike Hambright (09:37.208)
Yeah.

Mike Hambright (09:42.05)
Yeah, so let’s talk about some of the creative, some of the things you do to basically monetize every lead that you either practice and preach. So let’s kind of jump into some creative strategies that you use in your business.

JON IANNOTTI (09:56.559)
Well, some the, some of the ones that we’re using today, which we’re starting to see more creative terms coming back in again, is of course taking over subject to, least if the, if they don’t want to give up the deed, then we do maybe a lease option with them and then sandwich lease option at backup. we’ll do seller. They’ll do, we’ll get them to do seller financing. on, the free and clears and

They have made, it’s free and clear, they’ve, they want the cash. What we’ll do is we’ll get them with one of our mortgage brokers and get them a new loan on the property. They get the cash, we get the house and the payments on the new loan. So that.

Mike Hambright (10:44.194)
Hmm. And does that work? So let’s maybe jump into each of those. So with like lease options, maybe just share kind of high level. We’ll go through a little bit of a mini training or maybe like how that typically works for you. Like what the structure of a lease option.

JON IANNOTTI (10:55.598)
Mm-hmm.

Well, of course with a lease option, I’m going to try and structure it that I can stay in the middle. Okay, so I’m going to make the numbers work for me. If my seller wants more and more of that monthly spread or they want more, maybe a shorter term, whatever, then I’m going to have to possibly back out of being in the middle and then I’ll just sandwich it out to somebody else.

that they can take over the lease with the option to buy it. I always try to get my seller taken care of first. Okay, if they’re happy, the deal is going to go smooth. So we always try to get the seller taken care of first. If we can make money in the middle by staying in the middle, great. If we can only make money by maybe taking an option release fee, we’ll do that.

and let somebody else go into agreement with the seller. So it just depends on the numbers. It all comes down to numbers with this business.

Mike Hambright (11:59.438)
Mm-hmm.

Mike Hambright (12:05.346)
Yep, yep. Let’s talk about seller financing a little bit, how you typically structure those deals.

JON IANNOTTI (12:11.916)
Well, there’s two ways I do it. Number one is if I’m planning, if I like the property and I’m going to keep the property, then of course I want to try to always get my payment down to where it’s doable for me to put some, put a tenant buyer in the property and still make money on the deal. The other way is if we don’t really care for the property, we don’t want to keep it for our own portfolio.

then we’ll structure the note to where a note buyer will buy the note and pay them off. You know, it’s both ways, know, seller financing. Now again, I don’t care, I always say I don’t care what I pay for the property. I need to make the total PITI doable.

either for me or for my tenant buyer on the back end. If I can give somebody, let’s say they just round numbers, they want $100,000 for the house. And we come in and we say, hmm, well, I can maybe do that. I like the house. I want to keep the house. But

you know what, how about if I give you 110,000? And of course they’ll look at me like, I got three heads. And they’re like, yeah, we’ll do 110. And I’m like, well, if you do it my way, I’ll give you 110,000. And then they’ll say, well, what is that? Well, then what it is is I structure the seller financing as principle only payments. So that’s a zero.

Mike Hambright (13:51.787)
Mm-hmm.

JON IANNOTTI (14:05.226)
interest loan, giving them 10,000 more than what they wanted so that basically that’s the interest. But if it’s a principal only loan, you know as well as I do that if you’re paying principal, it pays down quickly. See, so I like to do that.

Mike Hambright (14:12.119)
Right.

Mike Hambright (14:20.526)
Sure, yeah. And that’s over a term. And then what are you typically doing with those? You’re wrapping them or you’re, is that what you’re typically doing is wrapping it and reselling it somebody else?

JON IANNOTTI (14:30.891)
It depends on the locality. It could be a wrap. It could be a lease option, sandwich lease.

Mike Hambright (14:41.39)
Let’s talk about, for those that don’t know, talk about what a sandwich lease is, by the way.

JON IANNOTTI (14:46.958)
Well, a sandwich lease would be you’re selling your house and you will lease option it to me for this price and then I will lease option it back out to somebody else at a higher price, know, purchase price and monthly so that I can make a spread on it. So I can stay in the middle, make a spread, get the non-refundable option consideration upfront and then get the back end profit whenever they do cash us out.

Mike Hambright (14:59.095)
Right.

Mike Hambright (15:14.242)
Yeah, yeah. Okay. And then how about sub two? Like what are you doing from a sub two perspective? And obviously there’s a lot of a lot of mortgages out there with low interest rates that maybe makes this maybe more appealing than other other periods in the real estate cycle. But talk a little bit about what you’re doing with sub twos.

JON IANNOTTI (15:25.198)
Mm-hmm.

JON IANNOTTI (15:34.351)
You know, it was probably right around 2015 or so I kept saying, boy, I can’t wait for that next downturn because there’s going to be some beautiful low interest loans that we can take subject to. And that’s we have taken several at like 2.7 or something like that, three, three and a half. And, you know, for whatever reason,

you know, if it’s a divorce or job loss, whatever, they need to get out and they need to get out now. Then we take over the underlying loan on that as far as the payments. The loan stays in their name. We get the deed and we own the property. It’s, you know, I remember, I mean, well, you remember too, taking subject twos of nine, nine and a half percent. I mean,

back in the day when it was, that’s what it was, you know, and today even at seven or six and a half, seven people were complaining about that. And I’m like, dang, that’s still low. But yeah, if I can take over payments on a property, I’ve got no problem doing that whatsoever. Now you might be able to, most of them we take over, we just take over the loans, the payments.

Mike Hambright (16:46.114)
Right.

JON IANNOTTI (17:00.226)
We don’t have to give the seller anything. They just want done. But they may want something. Well, if they do want something, then we can structure that. We can maybe give them the cash upfront, where we can maybe make payments to them, or maybe they agree to take payments when the property sells. It’s all negotiable and depends on the property and the sellers.

Mike Hambright (17:25.218)
Yeah. So how do you, a couple questions for you. Like how do you decide which of these avenues to go down? I know it.

depends a lot on the seller situation and what they’re looking for. And then how do you, as the owner of a business, like, it’s hard, it’s sometimes hard to teach people that work for you all these different things, like where they can get creative. Like I found in my mind, you know, for me, my ultimate goal is always a cash buy. We buy for cash and we buy deep. And then we put on our creative hat if we have to, but it’s always been hard to teach one of my acquisitions people the way to go out and

JON IANNOTTI (17:45.774)
in my mind you know cash

Mm-hmm.

Mike Hambright (18:01.402)
and do that.

JON IANNOTTI (18:05.93)
I bought, my best acquisitionists have been.

they have a sales background. Okay, so whether it be in mortgages, I had one who was doing gas and oil leases in the past, so he was very good. You know, it just, if they have a sales background, then they can talk to people, because this is a people business. As much as people try to do this business behind a computer, you can’t, I mean.

You’ve got to, it’s a people business. You have to have a rapport with that seller. You have to be able to talk to the potential buyers. And, you know, I like the idea of doing everything virtually and all that kind of stuff. But in reality, I prefer to reach out and touch the people and let them know that we are real. We’re not.

somebody from California and they’re we’re trying to buy a place in New Jersey. mean, it’s just, you know, I mean, it just in my book and my success, we’ve we’ve said, you got to it’s a people business, you got to get out there and build that rapport with people.

Mike Hambright (19:14.616)
Right.

Mike Hambright (19:27.724)
Right. Yep. Yep. So let’s talk about note buying. So how you kind of what those deals typically look like.

JON IANNOTTI (19:38.743)
Well, we market for people who have or are holding mortgages and then we’ll talk to those people. We’ll figure out what their needs are. Maybe we’ll buy the whole note or we may buy a part of the note, maybe so many payments. It depends on what their need is.

Let’s say we buy a note that is, let’s say.

Let’s say one is 10 % out there interest. So we’ll buy it at the 10%, but then we’ll get another person to come in and buy from us and maybe two or 3 % higher, which they will do. You know, mean, they prefer, you know, people prefer the low mortgages, but if they can’t get a mortgage,

then they’ll pay. My golden rule is I like to keep payments on anything at or very near what the total PITI would be. And total PITI is principal interest, taxes, insurance, HOA fees, anything else that might attach to the property as a monthly.

cost. So that’s the total PITI. And I want to keep it at or near that amount. And then I can take it up a little bit more to my end user or end buyer. But if we can keep it close and I want that that to also be near market rent. So if the market rent is $1,500 a month and my total PITI is say

Mike Hambright (21:29.239)
Right.

Mike Hambright (21:37.675)
Right, right, right.

JON IANNOTTI (21:43.598)
$1,200 a month, then I’ve got a $300 a month spread at least.

Mike Hambright (21:49.08)
Yep, yep, okay. And let’s talk about short sales. So those are back, I guess. I’m curious to see how you’re feeling, what that looks like, kind of outlook-wise, and how you’re typically, what that looks like these days.

JON IANNOTTI (22:08.152)
Well, here’s the thing with the shorts. The mortgages that are in default right now, there’s more of them than there was in 2008. So are the banks, you know, bringing those in? No, they can’t because every time they take one back, then that goes as a negative on their balance sheet and they can’t loan that amount plus or times 10. So

Mike Hambright (22:17.411)
Wow.

JON IANNOTTI (22:36.334)
They’re not taking them back right at the moment, but they are in, there’s lots of them out there in default right now. I think we have probably in the neighborhood of around 40 to 50 that we’re working right now around the country. And what we’ve done is we went out and we’ve created our own negotiating team and our negotiators actually were loss mitigators.

vice presidents of two of the top three banks in the country. And they’ve done over 5,000 short sales for the banks. So now they’re working for us. And the nice thing about that, Mike, is you don’t have to put all that paperwork together anymore because these guys know how to get right to the decision makers and they bypass all that garbage.

Mike Hambright (23:18.477)
Okay, wow.

Mike Hambright (23:34.717)
wow. Yeah.

JON IANNOTTI (23:35.648)
So that’s one of the components now that’s part of our CATS system. And it’s picking up. We’re starting to see more and more members submitting short sales to us. And I think that’s going to be a big deal for us and our members here in the very near future.

Mike Hambright (23:49.229)
Yeah.

Mike Hambright (23:57.656)
So if a homeowner is in default and they kind of get the sense that the bank’s not going to foreclose on them for the reasons you said, what’s their motivation to not just park it and stay there for as long as they can? What’s the motivation there?

JON IANNOTTI (24:13.314)
Well, you know, we can go talk to the sellers. We let them know that, look, right now you have late payments on your credit. That’s bad, but it’s not that bad. If the bank decides to foreclose, now you’re going to have a foreclosure. That’s a lot worse. So what we can do is we’ll negotiate with the banks and get them to get it.

paid is agreed and they’ll take their discount. We’ll make our money to our, selling it to our end buyer. And the other thing is, you know, a lot of agents, they’ll market properties as short sales on the MLS, but they’re not doing short sales. They’re doing what’s called a short payoff. So once they get somebody interested in the property and they get an offer, they submit that to the bank.

Mike Hambright (25:00.15)
Okay. yeah.

JON IANNOTTI (25:11.598)
Hey, I’m an agent, I’ve got this amount from this buyer. Will you accept it? If they say yes, then it closes. But here’s the negative to that. It’s called a deficiency judgment. So let’s say the loan was for 200. The bank will take 100,000 instead of 200. Well, that extra 100,000 that they took a loss on, they’ll send the seller, the homeowner,

$1099 on that and they’ll have to pay on that $100,000 that they… Yeah. So, mean, so what we do is our negotiators get that wiped out. So we get the lenders to accept it as paid as agreed with no deficiency judgment. And that’s how we sell it to them.

Mike Hambright (25:47.724)
It’s counted as income. Yeah.

Mike Hambright (26:01.538)
Yeah, yeah. Yeah. So, Jon, mean, the types of stuff that you do is, the interesting thing about that is you have different tools to use in any market or for really any sort of situation. And so I’m gonna ask you about your outlook. You may not really care ultimately because you’ve got a tool for wherever we end up at, but what is your outlook for the real estate market here for investors over even the next year or two, let’s say?

JON IANNOTTI (26:30.114)
Well, I think in the near future, things are going to be a little slow as far as being able to get people to buy. As far as getting the sellers, I think they’re going to be very prevalent. We’re going to have a of sellers. think I’m in southwest Florida, and we went from a three-day MLS market to we’re over 99.

So things have slowed. But the thing is, when the market slows like that, that’s when people get a little bit more motivated if they want to sell. Now we’re seeing a lot of sellers that don’t want to sell because they got the nice low interest loans, which totally understand. But if they want out, if they were moving somewhere else, they lost their job, they’re getting divorced, whatever.

then we can help them get out from under that mortgage. It doesn’t matter.

Yeah, I would imagine this year’s gonna be kind of slow, next year I’m thinking things are gonna pick up and we’re gonna be booming again with more retail stuff. But at the moment for the rest of this year, I do believe it’s gonna be a little slow. And of course, you know, there’s a wild card out there as to what’s gonna happen with the economy.

Mike Hambright (28:03.126)
No doubt.

JON IANNOTTI (28:03.886)
But I think it’s all going to work out to the good. I think everybody’s going to come out on top. It’s just going to take a little time here. It doesn’t happen overnight. Yeah.

Mike Hambright (28:13.41)
Might be a bumpy road, yeah. Well, Jon, thanks for sharing with us today. If folks want to learn more about you or connect in any way, like where can they go?

JON IANNOTTI (28:22.222)
Well, I’ll give you two websites. They can go to buy and that’s B-U-Y, catsnow.com, or they can go to catsrei.com. Either one of those will get you into our, our, sales system and they can learn more. there’s some videos there they can watch, that we’ve done. And I think it’s, they’re pretty, pretty well, educational.

as to how we’re doing things. And the great thing is, like I said, we can do any lead that comes in. There’s potential, I always say there’s potential profit on every single lead. We don’t throw leads away. And if we can make a couple thousand on something, why not? I mean, that buys the wife a couple more pairs of shoes.

Mike Hambright (29:17.304)
Yeah. Yeah. Awesome. Well, Jon, thanks again for joining me today. Good to see you.

JON IANNOTTI (29:23.608)
Good to see you. Let’s not make it so long this time.

Mike Hambright (29:25.836)
Yeah, doesn’t need to be in another 11 years. Yeah, will be in. Yeah. Time flies when you’re having fun, I guess. Yeah. Everybody, hope you got some good value today. Sometimes you gotta get creative to make those deals happen. So, appreciate you joining us and we’ll see you on the next show.

JON IANNOTTI (29:28.426)
Unbelievable, I still can’t believe that.

Yeah, for sure.

JON IANNOTTI (29:39.202)
Definitely.

Thanks for having me, Mike. Take care.