[00:02:43] Patrick Donley: As I mentioned, I started following you on Twitter. One of the questions somebody asked was, what was the most impactful book on your life? A lot of people gave some of the typical responses like Rich Dad, Poor Dad, and Think and Grow Rich. You said the most impactful book for you was Introduction to Real Estate Options Strategies.

[00:02:59] Patrick Donley: I’m a big reader. That is a title that is completely new to me. Why was that book so impactful for you?

[00:03:06] Casey Mericle: Honestly, it’s made me a ton of money. You’ll probably notice I’m direct. It’s made me a bunch of money, but that’s not really everything. So that book is chopped full with hundreds of ideas and it’s kind of a course with like a workbook with it and an audio recording, and there’s two parts to it in it, there’s hundreds of ideas regarding real estate options, their applications.

[00:03:33] Casey Mericle: And options are really one of my favorite things to do in real estate. If I’ve got a deal to put together, I’d like to have an option. And quite frankly, I just, I steal a lot of stuff from Jack Miller and I repurpose it on Twitter.

[00:03:48] Patrick Donley: I wanted to do a deeper dive into options. I understand how they work in the equity markets with puts and calls, but explain to us a little more in depth on how they work in the real estate market.

[00:03:59] Casey Mericle: So one of the cool things about options, especially in the equity markets is, is there’s a ton of rules and case laws about options, right? And so that is helpful. A lot of those rules apply to real estate as. That’s one parallel, if you will, but options. Let’s go down the rabbit hole. So options, what is it?

[00:04:19] Casey Mericle: Right? It’s a unilateral, one-sided contract, right? Where you have the right, but not the obligation to buy. And if you think about this, it’s not unlike an MLS purchase and sale agreement just for a house or commercial purchase and sale agreement, okay? And either one of those. You’ll find that typically, not always, but typically you’ll find a contingency of some sort.

[00:04:47] Casey Mericle: Now, a contingency might be financing that’s a common one, or inspection that’s probably even more common, but there’s plenty of other contingencies you can have. When you think about options and the parallels to a regular purchase and sale agreement. Really the difference is unilateral versus bilateral.

[00:05:07] Casey Mericle: A purchase and sale agreement has an earnest money deposit. So let’s say your earnest money deposit is, I don’t know, $20,000. That’s quite similar to an options consideration. So for the listeners that don’t know options, if they’re done right and done well, the buyer will put up something called option consideration.

[00:05:29] Casey Mericle: Typically, that’s money. Doesn’t have to be money, but you can kind of think of it as a non-refundable earnest money deposit. Patrick, if I’m buying property from you, And I give you $20,000 option consideration, and you give me 60 days to close and I don’t come back. You keep that money that is similar to earnest money, right?

[00:05:54] Casey Mericle: But in earnest money, you can get the deposit back and option consideration. You don’t. The dynamics of an option as opposed to your regular PSA is it’s unilateral, so only really the buyer has the power. The buyer might say, Hey, this option is contingent upon inspection or whatever.

[00:06:14] Patrick Donley: Can we walk through an example of an options deal that you’ve done recently?

[00:06:18] Casey Mericle: Most wholesaler deals are options if they’re done correctly, right? A wholesaler, which is probably the bane of some real estate people’s existence, right? But most wholesalers, if they do it right and are smart, will say, Hey, seller, I’m going to give you money and if I don’t come back, you keep the money and you sell the house or sell the building again, but you keep my money.

[00:06:40] Casey Mericle: And then the wholesaler goes and tries to find a buyer at a higher price than he purchased for, right. And makes a spread. So that’s a really simple option agreement. But the, you know, the difference really is in between an earnest money deposit, which is refundable, and option consideration, which isn’t.

[00:06:57] Casey Mericle: I’ll give you another example that’s longer term that I think you’ll like a little. I did a couple years ago. I did something that I, I’d like to call an option loan, a free and clear property owner gets ahold of me because they’re struggling guys out of work. Kid is needing college money and said, child just wrecked both of his vehicles.

[00:07:20] Casey Mericle: He’s got a free and clear property. What I did was I lent him some money. I lent him the money he asked for against his property. I lent him less than, far, less than his property was worth. The cool thing about this option loan is, is it didn’t have a payment schedule. He’s not making me monthly payments.

[00:07:37] Casey Mericle: He’s outta work. That doesn’t solve his problem. Instead, the option just compounds and accrues against basically a strike price or an exercise price, which is something we probably should have talked about in options, but essentially a strike price or an exercise price is the price that buyer and seller agree to.

[00:07:57] Casey Mericle: For when an option is exercised in the future that you can purchase for. So let’s say in this case it’s half a million dollars and I give him a hundred thousand dollars. That a hundred thousand dollars, instead of him making payments, that a hundred thousand dollars accrue at $20,000 a year. The longer it goes, the bigger my equity or yield would be, and at some point I own the property out.

[00:08:22] Casey Mericle: What’s interesting about that option loan is that property was like a $700,000 property right now, if I go to that guy and try to buy that property for 20 ish percent off, he’s going to laugh at me and I’m not going to get the deal done, especially in the last five years, like nobody’s giving a discount in a hot.

[00:08:44] Casey Mericle: But what’s interesting is when you try to do something different and

[00:08:47] Casey Mericle: I just lend him money, I got a 20% discount baked in automatically, because any bank would get 80% loan to value. And then as the payments compounded and accrued, I’m getting a bigger discount on that property all the time. So it ended up being half off for me if I wanted to.

[00:09:08] Casey Mericle: Now that gentleman did cash me out. He refied, but I wasn’t unhappy to take a, a yield that was in a good double digit yield. It was 20 or 30% yield probably, and I didn’t own it. And he’s happy. You’re happy. Right. He’s happy because no bank would lend the money. I’m happy because I got a great yield on my money.

[00:09:30] Casey Mericle: It’s super safe because I’m at the beginning, I’m buying at 80% ltv, but it’s going, it went down to 50% loan of value. If I have to own it, I wouldn’t be unhappy owning it. The longer it goes, the better it gets. I’m not taxed on it. I don’t need a partner to do it.

[00:09:48] Patrick Donley: Ideally, do you want to own it in the end?

[00:09:51] Casey Mericle: I think it depends on the property.

[00:09:52] Casey Mericle: Like would I be upset with owning that property? No, not, not at all. I wouldn’t be upset, but I never lend money unless I’m happy owning the property. That’s like a golden rule of mine. If you’re going to put your money into any property, you better make sure you want to own it. Because one day you might.

[00:10:10] Patrick Donley: I want to circle back to the objections and the pushback that you get.

[00:10:14] Casey Mericle: Common objections to an option are, Hey, you’re going to tie me up. I need to sell tomorrow. I don’t want to mess with anything other than a sale. Or they’re super savvy and they know other ways to make the deal. That’s it. But education is big. Language is huge. The way you say things is just critically important.

[00:10:35] Casey Mericle: Patrick, if I come to you and I say, Hey, why don’t you owner finance, you’re going to say to yourself, Oh, well. Casey’s asking me for a loan. Casey wants a loan. I don’t know Casey, that’s a hard sell. It’s really difficult to get, have people get on board with that. Now, if I say to you, Patrick, how would you like to open up a new income stream?

[00:10:58] Casey Mericle: That sounds like I’m getting a check in the mail with no work. How much do you like paying Taxe? Do you like paying taxes or not paying taxes? Because options have a big tax advantage in that you’re not taxed until you exercise, right? So if the seller sells, then they aren’t taxed until they hit their basis, and they might not hit their basis until they exercise.

[00:11:20] Casey Mericle: It’s how you frame things. You’ve gotta educate. The thing is, and you’ll see this on Twitter, like I talk about a lot of different things, but this stuff only works part of the time. And people will blow me up about it. Like, oh no, I never do that. Well, that’s right, but listen, it doesn’t have to work a lot for you to do really well.

[00:11:40] Casey Mericle: It only has to work once or twice. One deal can set your life free.

[00:11:44] Patrick Donley: What are the biggest drawbacks or the risks when you enter into an options strategy or an agreement with a seller? What’s your downside?

[00:11:53] Casey Mericle: Probably the biggest is understanding or confusing, and I’m guilty as charged of this. The moment that you confuse another party in a negotiation, the answer is no.

[00:12:05] Casey Mericle: You’ve gotta be super careful, and that’s where language is helpful and how you say things is helpful. Why I like options so much is because there’s very little downside. I don’t need partners necessarily, and sometimes I want partners, sometimes I don’t. There’s very little risk. Typically, if you’re doing an option deal, your consideration is probably 10% or less of purchase price.

[00:12:30] Casey Mericle: I mean, it might bump up to 20% or less if you think of doing an option deal as opposed to doing a commercial real estate. So in a commercial real estate deal, you’re typically putting 20% down. You’re probably going to a bank or a lender. It might be Cmmb S, it might be a Life Co, and they’re going to have their lawyers draft up a promissory note that’s not so favorable to you.

[00:12:58] Casey Mericle: If you don’t do what you say you’re going to do exactly by those 30 pages of legal lease, you’re going to be in big trouble. So my preference is to write the option. So I’m writing what the legal lease is. And that’s not to say I’m going to try to take advantage of anybody, but like there are loan covenants that I’ve seen that are frankly preposterous and you would never see those, like in an option agreement.

[00:13:23] Casey Mericle: Having to explain to someone is probably the hardest part, but you’re taking less risk. I’ve gotten option agreements for a thousand dollars now. I’ve got option agreements for several hundred thousand dollars. But it’s scalable. Usually I’m paying less than 10%, which is better than you can get at a bank, right?

[00:13:42] Casey Mericle: So that’s important. I’m taking less risk because if it goes wrong, then I, I lose that money. But it wasn’t that much money to begin with. I’m typically don’t have partners. If I’m doing an option agreement, I can, if I can’t raise the consideration. Or if it’s a big heavy value add rehab kind of project or development project and it’s, it’s crazy tax efficient.

[00:14:04] Casey Mericle: So there’s hardly anything that I think is a drawback, solves all kinds of timing issues. It solves seller issues. I mean, there’s very little downside. The downside is covered. That’s why you should learn more about.

[00:14:17] Patrick Donley: And all that is covered in the options book, introduction to Real Estate Strategies that you said was your most impactful?

[00:14:22] Casey Mericle: It’s in there. So what I would say is that is not a beginner level book. If you aren’t familiar with real estate options, then I wouldn’t suggest go see, go get that course right away. That’s like step two or three. I’ve got some other guys that I would give you to kind of start and figure it out. If I had to rank some guys that put together some amazing stuff, Jack Miller is my favorite, and these guys all hung out with each other in South Florida, I don’t know, in the seventies, eighties, nineties.

[00:14:52] Casey Mericle: A few of ’em are still alive. Jack Shaa is a mentor and a friend of mine and actually has a website you can check out. Let’s see. Jack Miller is on a website called Cashflow Depot. John Shab, if you’re going to start anywhere. John Shab is alive. I think he lives in Sarasota, Florida. He’s the introduction guy.

[00:15:10] Casey Mericle: He’s got a website. His stuff is cheap. It’s amazing and it’s simplified and it’s easy to start with him. Jimmy Napier and Pete Fortune Auto, Pete Fortune Auto’s still alive, but Pete Fortune Auto is, he’s Advanced. Advanced. And then Jimmy Napier May one of the best negotiation guys I’ve, I’ve ever heard.

[00:15:29] Casey Mericle: And he’s got, he’s got a website too.

[00:15:31] Patrick Donley: I’ve taken one real estate course in my career, and it was with John Shab. He’s the gentleman that wrote How to Build Wealth One House at a Time.

[00:15:37] Casey Mericle: Correct. Absolutely. Great.

[00:15:40] Patrick Donley: He was there and Peter Fornado, and it was a really great course that I took, but that’s the only one I’ve taken actually.

[00:15:46] Patrick Donley: It sounds like you’ve spent a fair amount of money and time on going to courses, conventions, things like that. We interviewed Moses Kagan recently who organized a, an event called reconvene, which I think was in LA and it sounds like you attended it. I’m really curious about that. I’ve been watching some of the videos and some of the interviews from it and they, you know, have been.

[00:16:06] Patrick Donley: want to hear a little bit about your experience there and what some of your biggest lessons were from, from being.

[00:16:12] Casey Mericle: What I would say to anyone who is thinking about going, that’s a gp, an lp, you should go. Best conference I’ve ever been to hands down, and it’s not close. I am a big Moses Kagan guy, although I would’ve liked to talk to him more, but the conference is great.

[00:16:28] Casey Mericle: And it’s not really run like a conference. It’s run like a hangout or a get together. They’ve got a keynote speaker and they’ve got several sessions where everybody packs into a small venue and the whole three, four days was tastefully done and meeting some of the people I met was. Oh, that was just the tremendous part.

[00:16:48] Casey Mericle: I mean, there’s more real estate brain power per square foot in that room than you probably will find anywhere. And there’s people that are great at finding deals, and there’s people that have money that want to find those people that are great at finding deals. All of that to say, I would highly recommend it if you’re a GP or an lp, or if you’re just like, if you’re already doing a ton of real estate, it could do nothing but help you.

[00:17:14] Casey Mericle: Who was your favorite? I liked them all. They were amazing. The Keynote by Weather Holtz, Eric Holts was just Chef’s Kiss. But my favorite was Shiloh Bear. And you probably haven’t seen hers yet. I don’t know if it’s been released. Shiloh is like a, a new up and coming gp. She’s in the San Francisco area.

[00:17:37] Casey Mericle: And she’s basically trying to raise money for basically to buy some properties, some industrial properties in San Francisco. What I didn’t realize is I was walking to the conference because the hotel is a little ways away from the conference. I don’t know, couple blocks. So I’m walking to the conference to, you know, go listen to the speakers and I’m chatting up Shiloh on the way there, and nobody knows really who the speakers are ahead of time.

[00:18:04] Casey Mericle: I go and sit down and Shiloh walks up there and I, I don’t know that she heard anything I said on the way over here, but the cool thing about what, what the Kagans do is they highlighted up and comers this year and I found, I still feel like I’m an up and coming gp. I’m pretty new to syndication. But that really tugs up my heartstrings because there’s so many people that are just starting out and maybe you don’t want to give them money, but maybe you can give them advice or maybe you can point them in the right direction or maybe you can connect them.

[00:18:35] Casey Mericle: And the spark of just one of those things can ignite a career. I think that’s awesome.

[00:18:41] Patrick Donley: Totally awesome. I would love to go next year to the event. I mean, I’ve loved watching those. The videos that they have, you know, introduced or let out on the, on YouTube have been amazing.

[00:18:52] Casey Mericle: Which one did you like the best so far?

[00:18:54] Patrick Donley: I really liked Nick Huber.

[00:18:57] Casey Mericle: I got to meet Nick. He’s a good dude, but yes, he loves to stir up, which is, I like to stir up a little bit, but man, he likes to stir up a lot.

[00:19:06] Patrick Donley: He definitely does stir the pot. I wanted to go into some other creative deals that you’ve done. It sounds like you’ve done a lot of different asset classes.

[00:19:14] Patrick Donley: I think you’ve been at it almost 20 years, and so you explained a little how options work. What are some of the other creative strategies that you really like to use that probably the average investor might not even be aware of?

[00:19:25] Casey Mericle: I think I wrote a tweet about this a couple days ago and we touched on it earlier, like, I like doing different stuff.

[00:19:32] Casey Mericle: Foreclosure invest. The problem with foreclosure investments is, is that everybody shows up on the courthouse step and they’ve probably got more money than you, and it’s probably cash, and they’re bidding against each other. And one of my least favorite things in life is buying in an auction. I don’t like it.

[00:19:52] Casey Mericle: I don’t like paying more than I have. I’d much rather be one-on-one and I’d much rather not have to compete with anyone. What should foreclosure people do that’s different? Buy the note. Buy the note from the lender ahead of time. If there’s an auction, if you can buy the note ahead of time, you probably can make a spread.

[00:20:11] Casey Mericle: If it’s a good deal and there’s equity, you can probably make a nice spread in between what you can buy the note for and what the place sells for, and it’s a note you don’t own the property. There’s no liability, and if you do that, you are going to beat all the sharks to the auction. I think that makes a lot of sense.

[00:20:29] Casey Mericle: So there’s one that I talked about, hard money lending, right? So most hard money lenders, they’re like, they put up a website, Hey, I’m lending money. Come see me. Or they might sponsor a conference or they might go to a RIA or. Hard money lending. I’ve been, I’m a hard money lender. I used to call, we buy houses signs.

[00:20:49] Casey Mericle: You want some customers, you want to win some money? Call. We buy houses signs. Those guys need money all the time. They got, they got deal more deals than they have money. Flip that on its head. Call them. I’ve made a ton of hard money loans from calling. We buy houses, signs, single family water shutoffs. Most people are sending out letters, spending thousands of dollars and getting a 1% response.

[00:21:11] Casey Mericle: That kills me. There’s probably people better at it than me, because I used to do it when I was a kid, but I’ve probably spent $50,000 and I don’t know if I got one deal from that water shutoffs. Go to your local utility, find out who’s got their electricity and water shutoff and go find them and make a deal.

[00:21:30] Casey Mericle: They’re not using that property. That’s perfect for you. And then lastly, multi-family, but it doesn’t have to be just multi-family. Could be anything with property management. Okay. Let’s say, Patrick, that the market has been frothy for the last five or 10 years, and let’s say that some gps made some bad decisions they bought wrong.

[00:21:51] Casey Mericle: They underwrote poorly. They couldn’t figure out that their taxes were going up. All of you, three capers. You can come give me a hug after this. What is a person that wants to buy an apartment building do Or it can be any kind of bigger building with property management. Well, they’re hurting or they’re distressed.

[00:22:11] Casey Mericle: They’re doing what they call those cash in refis, right? Gps are calling their LPs and saying, give me more money so we don’t lose this asset. But instead of that, a savvy property manager that already had property management in place in that area might say, Hey, I’ll go manage your properties for no out of pocket expense for.

[00:22:36] Casey Mericle: That might be, I don’t know, an eight to 12% savings for them, but I want an option to buy, or I want a mortgage and maybe you secure the option. Buy a mortgage, a second mortgage, right. And you can do the same kind of thing as I did in that option loan. Like you might cut yourself in on some equity on the deal.

[00:22:55] Casey Mericle: You might cut yourself in on some cash flow, some appreciation. Like you could say, oh, you bought this property for 5 million, but anything over 7 million I get you might even trade. Let’s say one of their properties is doing really poorly and you say, Hey, we’ll just let my 10% property management fee compound and accrue.

[00:23:18] Casey Mericle: But instead of compounding and accruing for an option on this property, you’ve got another apartment building down the street with more equity and no cash flow problems, and give me an option on that or give me some equity on that. Give me some appreciation on that. All of those things, Having that differentiated lens, it can make you a deal when nobody else can make a deal.

[00:23:43] Casey Mericle: And so that’s one thing that I’m really like gung-ho about right now is everybody that I see on Retwit has interest rate fever right. And can’t make a deal. And I’m crying in my, in my soup about that. But they can’t make a deal because they do the same damn thing everybody else does. They offer, they counter offer, they offer, they counter offer.

[00:24:05] Casey Mericle: They go get traditional financing and they don’t do anything differently than anybody else, but they expect a different outcome and that’s not how the world works. There are outliers and outliers. Figure out how to make a deal when nobody else can. That’s what I try to do. I try to make a deal when nobody else.

[00:24:24] Patrick Donley: One thing that I really notice on Twitter following you is you like, you’re really open and honest and transparent, and I, I appreciate that. And you’re right openly about your mistakes, you know, kind of in the hopes that other people will learn from them or avoid them altogether. But you wrote recently about a 1 million self-storage mistake that you made, and I’m just really curious about that, how it happened, how it unfolded, maybe what you would’ve done differently.

[00:24:47] Casey Mericle: Here’s the thing I would say about that, Patrick. You’ve made a million dollar mistake too. You just don’t know it yet, and so is everybody else. Something to think about. Food for thought. Everyone’s made a million dollar mistake, and what I mean by that is let’s say you made a $230 mistake. $230 isn’t much right.

[00:25:06] Casey Mericle: You might have made a mistake that big in real estate, a $230 mistake. Well, that’s a loss, okay? That’s a loss of compounding. So if you take a $230 mistake at 6% for 10 years, That’s a million dollars. Making small mistakes can be huge. The time value of money is important, and it’s something that people don’t really think about is a time value of money.

[00:25:29] Casey Mericle: But small mistakes can have huge consequences. But back to my mistake, and I’ve made so many mistakes, and I’ll probably continue to make mistakes. I d I don’t do them purposely of course, but I purchased a storage facility and I did all of the things I normally do to check out, said storage. But what was different about this was I got the seller’s financials like I normally do, right?

[00:25:54] Casey Mericle: I got rent roles like I normally do. I requested and got bank statements like I normally do. And all of those things are typically required by a lender anyway, right? So it’s not, it’s not a big ask. But what the issue was is that the seller mixed multiple businesses in the same account. And so I purchased this property thinking it was full because I was led to believe it was full, but I should have checked harder.

[00:26:22] Casey Mericle: When you look at different locks on all the units, when you’re looking at bank statements and tax returns that have big enough numbers in them, but they have mixed businesses in them, you really have no idea what you’re buying. And I knew that before we purchased. But I continued and purchased because the deal was good enough, regardless of like I’ve done many storage facility acquisitions over the years.

[00:26:51] Casey Mericle: The deal was good enough that I thought, okay, even if he’s not telling me the truth, this is still a deal. But day one, we open everything up and find that the facility that was allegedly a hundred percent full was 60% full. And as you know, 60% can put quite a damper on things, right? What I would’ve done is probably negotiated about a hundred or a million dollar discount on said property, but I didn’t, and I didn’t want anybody else to have to go through.

[00:27:25] Casey Mericle: Every time I make a mistake, I say to myself, well, one, I say, you’re an idiot. And then two, I say, okay, how can I set this up to where I never make this mistake again? And that’s where I talk about later on, I should have done a performance lease with this person, performance lease with an option to buy. I leased the property for say, 12 months, 12 to 24 months.

[00:27:47] Casey Mericle: We agree on a price, but that price might fluctuate up or down based on the performance of the. And then after 12 or 24 months, then the option would allow me to purchase at the value that made sense. Based on the occupancy. I paid a million dollars more than I should. Now I have an LP in that deal. He knows about it.

[00:28:09] Casey Mericle: The first thing is you gotta be honest with your LPs, but he’s not upset with me. And the reason why is, is because that property after a year is, it’s not totally full, but it’s 80% full and the asset is worth, you know, 50% more than we paid for it, even though cap rates are expanding. So if cap rates weren’t expanding, it’d probably be double.

[00:28:32] Casey Mericle: The other lesson learned is if you buy savagely right? And. It can overcome many of your dumb mistakes, and by your dumb mistakes I, I mean my dumb mistakes. I feel like the mistakes that you find out in books and on Twitter and through courses are so much more important sometimes in the lessons that they’re teaching you, right?

[00:28:55] Casey Mericle: When I talk to people, I want to know about their mistakes, and I know that’s like probably not the first thing I should ask them, but I think that’s some of the most valuable content you can.

[00:29:04] Patrick Donley: I want to talk a little bit about self-directed IRAs. I know you’re a really big fan of ’em. We’ve got examples of like Peter Thiel, Ted Weschler from Berkshire Hathaway who’ve turned their Roth IRA into like massive amounts of money.

[00:29:17] Patrick Donley: Explain to us a little bit about how a self-directed IRA works and how you’ve been using them to compound your money.

[00:29:23] Casey Mericle: So I am a fan of self-directed IRAs. I’ve got one, I’ve got a solo K as well. I like that a little better. And there’s differences. So self-directed ira, smaller, I think you can only contribute maybe $6,000 a year, something like that.

[00:29:40] Casey Mericle: And quite frankly, if you mess up your self-directed ira, and this is important, you’ve gotta gotta know the rules. So important they can take the whole thing away from you. Whereas a solo K, I think the contribution limits are 50, $60,000, something like that. I haven’t looked in a long time cause I haven’t contributed.

[00:29:59] Casey Mericle: And if you mess up a deal, they penalize you, but they don’t take away your whole retirement account, which is good. I love those accounts. I think they get spa on in real estate Twitter because most people are looking at the opportunity cost and most people are saying, oh, well real estate is already really tax advantaged.

[00:30:19] Casey Mericle: Why would I go do that? But what I would say to you is my self-directed ira, I changed jobs. It had like $14,000 in it. I’ve never contributed to it and it’s much, much larger. I rothed it that 14, you know, I had to pay what, six grand out of my pocket that wasn’t converted to the Roth and now it’s substantial and it’s a snowball rolling down a.

[00:30:45] Casey Mericle: I’m not advocating to put every deal in a self-directed IRA or at one of these account types, but you can do, if you can put a few juicy deals in them by the time you’re 59 and a half and you and convert it to Roth, please convert it to Roth, then you’d never have to pay taxes again. If you’re good at, at real estate, you’ll probably be able to double your money on some deals, and it’s all tax free.

[00:31:12] Casey Mericle: And there’s enough deals in my life where I make a fine living without doing anything in my ira. But when I get the opportunity and there’s something big, then I like to put it in there. But you gotta be careful. I don’t really like owning assets. I don’t like owning hard real estate in my IRA that much.

[00:31:31] Casey Mericle: I much prefer doing hard money loans. That’s usually typically what I do in, in my retirement accounts as hard money loans. They’re safer.

[00:31:40] Patrick Donley: Another thing that I saw you write on Twitter, and we may have touched on this, I, I just kind of want to confirm, but you wrote, real estate is real easy, capital R, capital E, capital A, capital L, real easy when you don’t, one, don’t own it.

[00:31:52] Patrick Donley: Two aren’t liable for it. Three, haven’t personally guaranteed it. Four, don’t manage it. Five have no expenses. Six aren’t taxed on it. Seven, have no debt on it and eight, still get to control it and get dollars. This sounds kinda like when I read that, I was like, what’s he talking about here? And can you go into that?

[00:32:09] Patrick Donley: What you meant by that statement that you wrote?

[00:32:12] Casey Mericle: There’s two trains of thought for that. Options are exactly that. Now, some will say options have debt on them, no options, don’t have debt on them. Property has debt, but the option does not have debt. Okay, so that’s, there’s a delineation there, right? So for instance, I’ve got an option agreement on a storage facility right now, and it’s, I don’t know, two, 300 units, something like that.

[00:32:36] Casey Mericle: All of those things you listed in that list are true. I don’t own. I don’t do any of that. It’s a piece of paper that’s recorded, but I get what they call, I control it, right? So the proceeds and avails the rinse come to me, but if there’s a problem, I don’t own it. That’s the fun of options. If somebody’s liable, it’s not me.

[00:32:59] Casey Mericle: I don’t own it. I didn’t have to personally guarantee a note for it. I just got an option to buy it. That’s one. Right? So options do. The other thing to do is anything that’s like an encumbrance or a tidal cloud, you can get the same impact or effect, maybe not quite as great with an option. You might get income monthly, but with an encumbrance, and that might be a, a lien of some sort, a tidal cloud, an easement, something that’s gotta be cleared when a owner sells or refinances.

[00:33:33] Casey Mericle: You basically get a, a one-time payment for release of those kinds of things. What’s funny about real estate is everybody scrambles to like class A buildings and they, you know, they want this big shiny tower or whatever. But the people that are really making some money have figured out, Hey, if I just have a piece of paper or a recorded piece of paper, I can make just as much money, then nobody can come after me.

[00:33:58] Casey Mericle: Nobody knows who I am. I still get the money. It’s tax advantaged. I mean, there’s, there’s just all of those things you listed.

[00:34:06] Patrick Donley: You know, we’ve talked about a ton of stuff, the options, self-directed IRAs, hard money loans, things like that. For somebody like a smart, super driven college student or just somebody right outta college, what kind of advice would you give to them?

[00:34:19] Casey Mericle: If they want to get involved in real estate, I would say don’t pay more than a thousand dollars for a course, because you can learn what you need to learn mostly for free. Twitter’s free, bigger pockets is free. I feel like Twitter’s the more advanced version of bigger pockets as far as real estate goes.

[00:34:38] Casey Mericle: Some of the books we talked about, maybe a couple hundred bucks at most. I mean, invest in Debt is an amazing book, and you can buy it for like 30 bucks. It’ll blow your hair back. It might bore you, but it, it’ll make you so much money. It’s sick, right? Don’t spend a ton of money on your education, because you can learn a lot of that stuff for pretty cheap.

[00:34:59] Casey Mericle: And then I would say make little mistakes. Don’t make big mistakes. I think Grant Cardone is a hack. And I think 10 Xing is an awful idea for somebody who’s new. You know, start small. If you mess up, it’s not the end of the world. You start it small. But if you 10 x in the beginning, and God forbid you have a wife in 10 x, you may never live to hear the end of it.

[00:35:21] Casey Mericle: Yeah, so start small. It’s okay to start small because you’re going to make mistakes. I made a million dollar mistake. We just talked about it, and I’m, I’m going to continue to make some mistakes. Not on purpose, but I mean, Buffett’s made mistakes, right? Mungers made mistakes. It’s part of life. Learn from it.

[00:35:38] Casey Mericle: The good deals will pay for the bad deals two or three times over, and you won’t have to worry about it. It’s fine. Find a partner that will give you grace.

[00:35:47] Patrick Donley: How about conventional advice that you think, you know, that same driven person should just completely ignore and disregard?

[00:35:54] Casey Mericle: I posted this today and I don’t know how it’s gone, but like, or that you disagree with?

[00:35:58] Casey Mericle: Yeah, so something I disagree with is basis is forever. I think that’s crap now in the institutional world basis probably is forever, right? But anything sub-in institutional, I don’t think it’s forever. And that’s the, the middle market is where I play and sub-in institutional is where I. All of you institutional people, after you watch or listen to this, you can find me on Twitter, but basis isn’t forever.

[00:36:22] Casey Mericle: Here’s why. You can sell. Get an option to buy it back whenever you want. You can raise or lower your basis as a at a moment’s notice. You just need somebody that will buy and give you an option to buy back. If we think about this in an example, right? Let’s say I bought a property and it’s basis, I bought it for $2 million and I didn’t touch it and I.

[00:36:43] Casey Mericle: Patrick. I want you to come and let’s say fair market value was 4 million, but I got a smoking deal. And you’re probably thinking, oh, that never happens. But yeah, actually it does happen for somebody. That’s really good. Fair market value is 4 million. I bought it for two. Let’s say I found a distressed seller and I want to sell it to you for three.

[00:37:02] Casey Mericle: You’re not unhappy to buy something at 25% off fair market value. That’s that cash flows well, and you probably wouldn’t be opposed to giving me an option to buy it back for $3 million since I did the solid for you of giving it to you for 3 million, right? Let’s say you buy it from me and I get an option to buy it back from you in 10 years at $3 million.

[00:37:28] Casey Mericle: What happens then? Right? I get to come back in and buy something that might be worth 7 million for 3 million and my basis isn’t forever because my basis was 2 million, but now it’s more taxable at 3 million. Yeah. I don’t think basis is forever, but you’ll hear that from everybody else now. What happened to you in the meantime for 10 years?

[00:37:50] Casey Mericle: Okay, you got to buy something. You got to buy a great deal. You got to cash flow amazingly well for 10 years, so you’re not necessarily unhappy with the deal. You still made a ton of money. You just, you’re just outta the asset. After 10 years, you and me are probably now friends, and maybe it happens again, or maybe you do it for somebody else, but basis isn’t forever.

[00:38:14] Patrick Donley: Casey, this has been great. I really appreciate your time today. You know, all these kind of more advanced stuff that are available to real estate investors. If you had to kind of summarize or just list one big takeaway that you’d want our listeners to walk away from, what would that be?

[00:38:28] Casey Mericle: Do something different.

[00:38:29] Casey Mericle: Don’t do the same thing as everybody else. No competition that way. No competition. If you do something different, nobody’s going to do that stuff. Nobody’s going to make an option loan. You know, nobody’s going to call the We buy Houses guy, do something. I love it.

[00:38:43] Patrick Donley: So for our listeners that want to learn more about you, maybe get in touch with you, what’s the best way for them to do?

[00:38:49] Casey Mericle: Yeah, Twitter at Casey Mericle, so that’s C A S E Y M E R I C L E. You want to hit me up? Just post something, DM me. You know, we can talk about investment deal structuring. I’m happy to help you with that. If you’ve got a distress problem, hit me up there. I might, I might be able to have a, I might have a strategy that could save you.

[00:39:10] Casey Mericle: Might not, but I might. Feel free to reach out.

[00:39:13] Patrick Donley: Awesome, Casey, thank you so much for your time. I really enjoyed today.

[00:39:16] Casey Mericle: Thanks Patrick. I appreciate talking to you.

[00:39:19] Patrick Donley: Okay guys, that’s all I have for Real Estate 101. I hope you really enjoyed that episode and I’ll see you back here next week.

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